The fund's asset management company (AMC) is learnt to be reviewing the need for yet another assured return scheme in the light of the promise-shortfall gap experienced in similar schemes in the past.

Though no decision has been taken on this issue, the MMIS '98 (II) launch is pending clearance from the sponsor, State Bank of India. Meanwhile, SBIMF is planning to launch an open-ended debt scheme sometime in September.

Christened Magnum Income Scheme, the tentative date for the launch is September 15. This will be the first open-ended debt scheme from SBIMF's stable.

In the past, the shortfall in assured return schemes has been made good by SBI. However, a couple of more such schemes are likely to face similar problems -- the top on the list being Magnum Triple Plus which is coming up for redemption in May,1999. With a corpus of Rs 300 crore and redemption at Rs 300 per unit, the scheme faces a shortfall of approximately Rs 356 crore based on the latest net asset value (NAV) of Rs 181.05. Since the AMC has a net worth of only Rs 45 crore, a bailout by SBI is imminent.

Alternatively, the NAV has to increase by 65 per cent in less than one year. Early this year, the AMC had pumped in Rs 9 crore to shore up the NAV of the Magnum Bond Fund above par value.

A similar case is that of MMIS '91, which was rolled over last year till 2000 with an assured return of 15 per cent per annum. However, Rs 31 crore had to be pumped into the scheme to fill the gap of Rs 22 per unit.

However, despite the rollover, a number of unitholders redeemed their holdings in the fund, which has a current corpus of Rs 70 crore. One year after the roll-over, the NAV has again dropped to Rs 89.38. "Unless there is an improvement in the performance of the scheme, the AMC or the sponsor will have to chip in for the assured return or makethe income payout from the scheme, which will lead to a further decline in NAV," says an analyst. This will again lead to a shortfall, when the scheme comes up for redemption at Rs 100 per unit in 2000. "At some point of time, the shareholders of SBI will raise the question of this bailout of the AMC by the bank. SBI earned a net profit of Rs 1,329 crore for 1997-98 and imagine Rs 300-odd crore flowing out for bridging the gap in Magnum Triple. Questions are bound to be asked," says a fund manager.

It may be recalled that SBIMF, UTI and LICMF had planned the launch of their respective monthly income plans. While MIP and Dhanavarsha 13 have already been launched, MMIS '98 (II) was expected to hit the market in August with assured returns in the range of 11 per cent to 13 per cent. The earlier scheme, MMIS 98 (I), had assured a return of 12.5 per cent.

On the other hand, the open-ended debt scheme from SBIMF will be close on the heels of the UTI Bond Fund, which mobilised close to Rs 130 crore during theinitial offer period. "The launch of an open-ended debt fund gives credence to the fact that public sector AMCs are realising the advantages with open-ended income funds," says a Mumbai-based fund manager.

Once launched, SBIMF will have all the funds under its stable, barring a money-market mutual fund. The AMC has set a minimum mobilisation target of Rs 10 crore. The scheme will also have growth and dividend plans. With a face value of Rs 10, the minimum investment in the fund is Rs 2,000. The fund will offer systematic investment and withdrawal plans. With no initial expenses charged to the corpus, the NAV will start from Rs 10. The AMC will not charge any entry load while exit load is a nominal 0.5 per cent for redemptions within six months of investment. Besides switchover between the two plans, the AMC offers switchover to Magnum Open Fund '95, MMS 1990 and MMS 1993 at NAV-related prices.