July 3: Canbank Mutual fund has decided to offer repurchase facility at NAV related price in Canbonus from August 3, 1998. The repurchase option has ceiling with 100 per cent repurchase for unitholders holding up to 500 units per folio and 10 per cent of the holding for unitholders holding more than 500 units per folio with a ceiling of 500 units. Besides the repurchase option, Canbank Mutual Fund plans to convert Canbonus into an open end fund from May 3, 1999.Canbonus seeks capital appreciation. The scheme was offered exclusively to all shareholders of Canbank Mutual Fund schemes. There is no provision for dividend payout and the surplus distributable income, if any, is distributed only by way of bonus units. The fund has given bonus till date in January 1994 in the ratio of 1:5 and in March 1996 in the ratio 1:4. LV Murlidhar manages Canbonus. The fund manager also manages Canexpo.
Canbonus has a large-mid cap orientation. It follows a buy and hold strategy. Top industry exposure include FMCG, auto,power and pharma. The fund has a number of small holdings. It is spread across 118 stocks with top twenty accounting for 61 per cent of the total equity exposure. The bottom sixty five account for just 10 per cent. Most of these stocks are small cap. The fund has not been in a hurry to move of these.
The fund has been inactively managed through out its tenure. It has been unsuccessful in moving its investment from companies where the financial health of the company has turned bad. The fund is stuck with several junk investments for the past few years despite a sustained decline in their fortune.
Deep discount to the net asset value has been a constant feature of the market price of Canbonus. The deep discount on Canbonus is the fallout of the poor performance and absence of cash payout. There in not much hope from Canbonus unless it changes its way. The fund's large-mid-cap orientation holds great promise only if it very actively managed. This, however, is presently not the case. Canbonus is expected tohave a substantial cash exposure in the coming months. The fund has recently announced commencement of repurchase from August, 1998 onwards.
Further, the fund is being converted into an open end fund. Investors should utilise the facility to exit the fund. The timing does not augur well for the fund since it would divest in a rapidly falling market to finance redemptions which are likely to be very high after seven years of unattractive liquidity. The fund can be worth investment only after there is a visible focus in portfolio after conversion into an open-end fund from May, 1999.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
