|May 3 - 16, 1999|
With the redemption just acouple of months away,the Cantriple Plus scheme of the public sector Canbank Mutual Fund is set to terminate with returns much below the targets. Though the scheme's objective, as its name suggests, is to triple the NAV in 90 months, and thereby yield a return of over 14.90% pa to investors, the actual performance is nowhere near it.
Launched in Nov.'91, Cantriple's performance after 7 years is insipid with its NAV of Rs 15.45 (Apr. 22,'99). The scheme has a large exposure to PSU and commodity stocks, mainly in the refinery and telecom sectors (see box : Top holdings of Cantriple). And investors' agony because of these stocks in the recent years is well known.
Cantriple's performance has been bogged down further due to a large provision of Rs 31.04 cr (till Mar. 31,'98) with respect to its investment in bonds of Powergrid Corporation of India which is under litigation. The face value of the investment in these bonds is Rs 48 cr.
Though the fund manager insists that it is not an assured return scheme, Securities and Exchange Board of India (SEBI) seems to think otherwise. 'SEBI's stand on assured return schemes is well known,' says Ashok Kacker, executive director, SEBI.
A number of assured return schemes launched in the late '80s and early '90s by mutual funds sponsored by a few public sector banks and insurance companies have had a substantial shortfall in their returns. This is largely due to the lack of active fund management but the sponsors and asset management companies (AMCs) had to bear the brunt. SEBI has forced mutual funds to honour commitments made in assured return schemes. And sponsors/AMCs of mutual funds have put in a staggering Rs 1,300 cr to bail out the ailing schemes (see table: Bail out).
In fact, Canara Bank alone contributed a staggering Rs 972 cr to buy out units of its ailing Canstar scheme. A number of assured return schemes are still to be redeemed and a huge shortfall in expected when they mature in the coming years
Recently, the Deepak Parekh Committee's report on Unit Trust of India's ailing US-64 came out strongly against the scheme's dividend distribution policy which made it a quasi-assured return scheme. The committee, in fact, recommended the scrapping of the concept of a assured return scheme by the mutual fund industry.
There is another cause for trouble for assured return schemes. Budget 1999- 2000 imposed a 10% distribution tax on income distributed by mutual funds, for the first time.
The Cantriple scheme, nevertheless, is witnessing some action on the bourses (it is listed on both the BSE and NSE); it has moved up to Rs 19 from Rs 15 in Oct.'98. However, with the scheme's NAV remaining sluggish at Rs 15.45, the hefty premium to its NAV reflected in its price on the bourses could be attributed to hopes that the redemption, which is round the corner, will be at the targeted price of Rs 30. The scheme's NAV has, in fact, declined in the last couple of years, from Rs 17.06 on Mar.31,'97 to Rs 16.24 on Mar.31,'99. A major rise in its NAV in the remaining months is ruled out with the scheme increasing its exposure to debt-related instruments as it approaches redemption.
==================================================================== Bail out Contributions made to honour commitments of assured return schemes ==================================================================== Scheme Fund Contribution by Sponsor/AMC (Rs cr) ==================================================================== Festival Boinanza Growth Scheme BOI Mutual Fund 1.38 Canstar Canbank Mutual Fund 972 GIC Big Value GIC Mutual Fund 46.88 Premium Plus 91 PNB Mutual Fund 2.8 Ind Jyoti Indian Bank Mutual Fund 23.18 Magnum Bond Fund SBI Mutual Fund 12.29 MMIS 91 SBI Mutual Fund 34.25 Dhanvarsha (3) LIC Mutual Fund 12.4 Dhanvarsha (4) LIC Mutual Fund 136.92 Dhanvarsha (5) LIC Mutual Fund 53.34 Dhanshree 89 LIC Mutual Fund 7.5 ==================================================================== =========================================== Top holdings of Cantriple PSU & commodity stocks dominate =========================================== Amount % of Total (Rs cr)* Equity Investment* =========================================== VSNL 37.70 16.96 HPCL 36.92 16.60 MTNL 13.31 5.99 ONGC 8.51 3.83 Hind.Zinc 8.41 3.78 SBI 8.07 3.63 Reliance 6.76 3.04 Glaxo 6.03 2.71 ICICI 6.16 2.77 Nalco 5.68 2.55 =========================================== * As on 31 Mar.'98 =========================================== ============================================================================= Terms of offer of guaranteed return schemes ============================================================================= Scheme Assurances (initial) regarding rate of income and/or redemption prices ============================================================================= Double Sq. + Plan A - Income Option: Annual income not less than 14.75% in any year n Plan B - Capital Gains Benefit Option: No declaration of annual income n Facility for repurchase in both plans: After 5 years - Two times the face value of units; After 8 years - Not less than three times the face value of units; Redemption after 10 years, at a minimum of 4 times the face value. RMI 60 R.O. 13.25% pa payable monthly for the FY Canstar Minimum repurchase price for 1000 Canstars on completion of :- 3 years - Rs. 15,150; 4 years - Rs 17,400; 5 years - Rs 20,000; 6 years: Rs 23,000; 7 years - Rs 26,500; 8 years - Rs 30,500; 9 years - Rs 35,000; 10 years - Rs 40,000 n Option on completion of 10 years: Receive monthly income @ 12.5% pa calculated on accumulated amount Cantriple + On termination, a Cantriple Plus unitholder shall get at least thrice the amount of face value of each Cantriple Plus unit held. GIC RISE 91 Option 1 :- Rising Monthly Income Scheme: First 36 months - @ 13% pa; Next 36 months - @ 13.5% pa; Next 24 months - @ 13.75% pa; Last 24 months - @ 14% pa n Option 2 :- Cumulative Bonus Scheme : Ratio of bonus units declared at the end of:- 5 years - 1:1; 8 years - 1:2; 10 years - 1:3 GIC RISE II Option 1 :- Monthly Income Scheme : 14.75% pa payable monthly n Option 2 :- Cumulative Bonus Scheme : Ratio of bonus units for original investment of 5000 units on:- 30/9/94 - 2500 for every 5000 units held; 30/9/96 - 2500 for every 7500 units held; 31/3/99 - 5000 for every 10000 units held GIC Suraksha Minimum target return for the FY - 14.5% pa; Monthly Income & Appreciation Options Ind Prakash Plan A :- 1st 10 months : 15.00% pa * 2nd year : 15.25% pa * 3rd year : 15.50% pa * 4th year : 15.75% pa * 5th year: 16.00% pa * 6th year : 16.25% pa * 7th year : 16.50% pa * Last 8 months : 17.00% pa * Plan B :- CO : Returns same as above Swarnapushpa R.O. MIO: 13% pa payable monthly for the FY(1/2/96-31/1/97) * YIO : 13.8% pa for the FY KP Guaranteed Inc. MIO:15% pa payable monthly for the FY * YIO : 16% pa for the FY Dhanavarsha (1) R.O. Return of 14% pa payable monthly, assured for the FY Dhanavarsha (2) R.O. MIO : 14.5% pa payable monthly, assured for the FY * YIO : 15.5% pa. payable yearly, assured for the FY Dhanavarsha (8) MIO : 15% pa payable monthly, assured for the FY * YIO : 16.1% pa payable yearly, assured for the FY * CO : 16.1% pa, assured for the FY Dhanavarsha (9) MIO : 15% pa payable monthly, assured for the FY * YIO : 16.1% pa payable yearly, assured for the FY * CO : 16.1% pa, assured for the FY Dhanavarsha (10) MIO : 13.2% pa payable monthly, assured for the FY * YIO : 14.25% pa payable yearly, assured for the FY * CO : 14.25% pa, assured for the FY Dhanavarsha (11) MIO : 11.88% pa payable monthly, assured for the FY * YIO : 12.5% pa payable yearly, assured for the FY Dhanavarsha (12) MIO : 12.5% pa payable monthly, assured for the FY * YIO : 13.5% pa payable yearly, assured for the FY Dhanavarsha (13) MIO : 12.5% pa payable monthly, assured for the FY * YIO : 13.25% pa payable yearly, assured for the FY PNB Premium Plus Assured Bonus : 50% at the end of the third year. Redemption at par. PNB RIPS 90 R.O. 12.5% pa payable yearly Magnum Bond Fund Yearly income of 12% pa Magnum Triple Plus Redemption Option : Redemption amount equal to thrice the sum originally investedn Repurchase Option : Repurchase price of initial investment of Rs 1000 on completion of :- 3 years - Rs 1520; 4 years - Rs 1750; 5 years - Rs. 2020; 6 years - Rs 2330; 7 years - Rs 2700 MMIS 1988 (I) MIO : 12.5% pa payable monthly n QIO : 12.64% pa payable quarterly n YIO : 13.24% pa payable annually * Cumulative Growth Option : Rs 1000 in 5 years becomes Rs 1862 MMIS 97 Guaranteed return of 15% pa for the FY MMIS (II) 91 Fixed return of 13% pa payable monthly, mid-scheme bonus of 1% and end of scheme bonus of at least 1% DIP 91 Quarterly Option : 15% pa payable quarterly (assured for the FY) * Deferred Income Option : 28% pa payable quarterly in the third year (dividend for subsequent years would be declared later) n Capital Growth Option: No distribution of income, income generated would be reinvested IISFUS 97 Assured dividend @ 15% pa payable annually for all the five years IISFUS 97 (II) Assured income of 12.75% pa payable annually for all the five years IISFUS 98 Assured income of 13.5% pa payable annually Index Equity Fund Safety Net : Option to repurchase at par up to 5000 units per investor from 1/8/98 to 31/8/98 MIP 94 (III) MIO - 12% pa payable monthly, assured for the FY, CO available MIP 97 MIO - 14% pa payable monthly * CO - 14.93% pa MIP 97 (II) MIO - 14% pa payable monthly * CO - 14.93% pa MIP 97 (III) MIO - 13% pa payable monthly * CO - 13.8% pa MIP 97 (IV) MIO - 12.5% pa payable monthly * CO - 13.24% pa MIP 97 (V) MIO - 11.75% pa payable monthly * YIO - 12.4% pa * CO - 12.4% pa MIP 98 MIO - 12.5% pa payable monthly * YIO - 13.24% pa * CO - 13.24% pa MIP 98 (II) MIO - 12.5% pa payable monthly * YIO - 13.25% pa * CO - 13.25% pa MIP 98 (III) MIO - 12.5% pa payable monthly * YIO - 13.25% pa * CO - 13.25% pa NRI Fund YIO - 13.5% pa payable annually * CO : Rs 25,000 will become at least Rs 50,166 on maturity MIP 98 (IV) MIO - 12.5% pa payable monthly * YIO - 13.25% pa * CO - 13.25% pa IISFUS 98 (II) YIO - 14% pa payable annually * CO - 14% pa ============================================================================= FY - First year; MIO- Monthly income option; QIO- Quarterly income option; YIO- Yearly income option; CO- Cumulative option * Open-ended and special purpose schemes have been excluded Source: Credence India =============================================================================