Zurich India Prudence Fund will retain the basic structure and investment policies of Centurion Prudence. The fundŐs objective will be to provide periodic returns and capital appreciation through a judicious mix of equity and debt investments.

Under normal circumstances, it is envisaged that the debt, equity mix will vary between 60:40 and 40:60, respectively. Centurion Prudence paid a dividend of 19 per cent and 12 per cent in 1995 and 1998, respectively.Centurion Prudence kicked off very well with its launch just before the 1994-market boom. After a successful run for an year, the fund paid its maiden payout of 19 per cent. Buoyed by its initial success, the fundsharply deviated from its stated objective and took an aggressive position in equities.

With its equity holdings mainly in the riskier small-cap stocks, which it gathered from the primary market, the fund suffered in the bearish market that followed. The NAV touched a low of Rs 7.92 in October, 1996.

Subsequent to Zurich Insurance taking over the AMC, the fund was revamped completely and its equity portfolio churned in favour of large-mid cap liquid stocks, particularly in stocks which enjoy market fancy.

The fund took aggressive positions in software stocks and gained significantly riding on the infotech boom. The debt exposure was also beefed up to align the composition with the objective of the fund.

Following the restructuring exercise, there was an improvement in the fundŐs performance. The fund was consistently the top performing closed-end balanced fund in 1997 and 1998. For the period ending December 31, 1998, the fund has been the top performer across all time periods. In the past one year,i.e in calendar 1998, Centurion Prudence has posted a return of 14.02 per cent, while the average annual return from closed-end balanced funds was far below at -1.53 per cent.

With the fund very close to conversion, the fund manager has downsized the equity element, booking profits on select counters. The debt portfolio has been kept intact. Currently, the fund has a 20:80 equity-debt mix. The Rs 5 crore equity portfolio is spread over 21 stocks.

Top sectoral exposures include consumer products, printing & publishing and infotech, besides automobiles and oil. The three consumer goods stocks, Smithkline-Beecham Consumer, Pidilite industries and Vikas WSP and the three infotech stocks - NIIT, Satyam Computers and BFL software constitute nearly 40 per cent of the equity portfolio.

The only publishing scrip in the portfolio, Macmillan India, accounts for 19 per cent of equities or Rs 95 lakh.

On the other hand, the Rs 20 crore fixed-income portfolio is an assortment of good quality debt instruments ofcorporates and bonds from financial institutions which should provide adequate stabilty to the fund. The fund also holds a couple of commercial papers to enable easy liquidity to meet redemptions. The net asset value of the fund as on January 27 was Rs 11.06. This translates into a total return of 42 per cent since inception.

Considering that the equity market is almost at the same level now as it was five years back or at the time of the fundŐs launch, with extreme turbulence in course of its tenure, the fundŐs performance is appreciable. In lieu of its performance track record, investors should consider staying with the fund favourably.

Centurion Prudence holds high potential for growth in the medium to long term. Also, since the fund has a lower than warranted equity exposure currently, it may have to pick some stocks to maintain the stated allocation, in case there is not much outflow.

The opportunity to pick up stocks at the current low valuations should enhance the performance of the fund.

Moreover, it has been indicated that investors staying with the fund will not be subject to any exit load on their original investments even if the fund introduces an exit load in its open-end avatar. So investors will have nothing to lose even if they get their units redeemed after the fund goes open-ended.

The balanced fund segment is still small with very few fund offerings. Out of the nine open-end balanced funds, just four have posted positive returns in the past one year.

When compared to other open-end balanced funds available today, Zurich Prudence figures among the top three performers, which makes the fund a superior alternative.

Investors opting for conversion must ensure that the option exercise letter reaches the registrar, or the various investor service centers on or before 31st of this month, failing which the unit holdings will be considered for redemption based on the NAV of January 31, 1999. The scheme will be open for repurchase and resale on or before April 1, 1999. --Value Research