Bank of India AMC pays up to meet Boinanza redemption shortfall
Our Market Bureau
MUMBAI, January 4: BOI Asset Management Company Ltd, the investment manager for Bank of India mutual fund, is stepping in to meet a shortfall of Rs 1.38 crore in the redemption of the BOI Festival Boinanza Growth Scheme-1991.The scheme stands redeemed as on December 10, 1997. As per the offer document, holders of Plan B were entitled to receive the entire face value of each Boinanza together with the distributable surplus. However, at the time of redemption, the Net Asset Value of the scheme was below face value at Rs 7.86. The board of trustees have, however, decided that the promise to the unitholders will be met and so the investors will be paid the face value of Rs 10 per Boinanza. The difference between the face value and the NAV of Plan B at Rs 2.14 (totalling Rs 1,38,73,476) is being borne by BOI Asset Management Company. BOI Festival Boinanza was a close-ended scheme launched in December 1991 to help investors plan for their festival needs. The scheme offered two plans to the investor -- Growth
Plan (Plan A-capital gains benefit) and Income Plan (Plan B-80L benefit). As per a press release, the scheme performed very well in the first four years, but its performance was affected in the last two years because of turmoil in the economy and in the capital markets as well. Under Plan B, for the first four years an annual dividend was paid at the rate of 12 per cent, 16 per cent, 25 per cent and 26 per cent. However, no dividend was declared for the last two years because of the sluggishness in the stockmarket. In fact, the duration of the scheme as per the offer document was to be five years, upto December 1996, extendable at the discretion of the board of trustees for another year. Since the market conditions were not good then, it was decided to extend the scheme for another year while giving investors the opportunity to exit at NAV, if they so wanted. At the time of redemption, the unit capital under Plan A was Rs 31.51 crore and under Plan B it was Rs 6.48 crore. The NAV of Plan A was better
at Rs 11.58 and units are being redeemed at that price. The past year has seen several AMCs/sponsors stepping in to meet shortfalls at the time of redemption. The list includes GIC, LIC, SBI and Canbank mutual fund.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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