BoI Asset Management Company has decided to convert BOINEG into an open-end fund with effect from April 15. The scheme was due for redemption on April 21 this year. The fund has a current unit capital of Rs 42 crore and with the NAV below par, the corpus stands at Rs 32 crore. While redemption of units will be at NAV, the fund will charge an entry load of three per cent on fresh investments. In its closed-end avatar, the fund offered liquidity through repurchase at a five per cent discount to NAV and listing on stock exchanges. The units of the scheme were last traded on October 30, 1998 at a price of Rs 3 on the Mumbai Stock Exchange.

According to officials ofthe AMC, the fund currently holds around Rs 5-6 crore in cash and short-term securities to take care of redemption requests once the fund goes open-end. The rest is deployed in equity instruments. Upon its conversion to an open-end fund, BOINEG units will be delisted from stock exchanges. Launched as a closed-end growth fund in 1995, BOINEG mobilised Rs 53.5 crore from 27000 investors during the initial offer.

Since launch, the fund has been a non-performer with the NAV of the fund failing to touch the par value. Thus, the fund has failed to achieve its aim of providing long-term capital growth to investors. At the March 31 NAV of Rs 7.18, investors of the fund will have to exit at a 28.2 per cent discount to their original investment of Rs 10.

The Rs 32 crore fund is spread over 72 stocks with as many as 12 stocks hardly traded on the bourses. These include scrips like Auroma Cake, Manjushree Extrusions, Mohindra Fastners, Sudev Industries and Givo Ltd. BOINEG holds 1 lakh shares each in scrips like DeepDiamonds, Premier Polyfilm and Sandur Laminates which are seldom traded.

The bulk of investments are in the core sector and junk stocks with only a sprinkling of growth stocks like Glaxo, ITC, HLL, Smithkline Beecham Consumer and Dr Reddy's Labs. Surprisingly, the fund holds only NIIT from the IT sector with a small investment of 3,750 shares. The software stocks have delivered spectacular returns in the past and have proved to be the panacea for growth and balanced funds. At present, the portfolio of the fund looks uninspiring and requires extensive restructuring. Unfortunately, any major redemption pressure will force the fund to liquidate its holdings in the growth stocks to extract the best price or sell its core sector holdings at a loss, which will further bring down the NAV. Investors should exit the fund at the earliest since redemption is being offered at NAV.