Pnb Mutual Dipping Into Fund Corpus To Pay Dividend

PNB Mutual Fund's decision to pay dividend on its regular income plus scheme 1990 (RIPS) has made the fund dip into its reserves and also a carryforward loss.

The scheme has a carryforward loss of Rs 23.42 lakh after making provision of Rs 720.13 lakh for the proposed dividend. The scheme ended the year with a surplus of Rs 254.65 lakh. How-ever, to pay dividend, PNB had to bring forward last year's carried forward profit of Rs 442.06 lakh.

The other major schemes of the fund ended the year in losses varying from Rs 1.74 crore in its equity growth fund 96 (EGF96) to Rs 10.29 crore in the premium plus 91 (PP-91) scheme. None of the other schemes of the fund have proposed any income distribution.

 

The fund has made an aggregate provision of Rs 59.8 crore on its various schemes on account of depreciation in value of investments. The fund says the main cause for problems is because a majority of investments of the fund are in the form of equity of various companies, which are not doing too well.

The auditors note on accounts draws attention to the fact that in the RIPS scheme, redemptions are taking place at par (Rs 100 per unit) whereas the net asset value (NAV) of the scheme amounts to Rs 98.63 as on March 31, 1997. This places the difference squarely on the fund itself as the above losses will not be borne by the asset management company, namely PNB Asset Management Company.

The other scheme where this is observed is the PP-91, where redemptions are at par whereas the net asset value of the scheme is Rs 7.7 for cumulative scheme and Rs 7.73 for non-cumulative scheme. Says an analyst: "The redemptions at above the net asset value indicates that PNB Mutual is dipping into the corpus of the fund, which will hurt the interest of the investors who plan to hold on to their investments in the fund."

The mutual fund also faces an erosion of capital of its various schemes, in particular the RIPS, which saw a reduction of unit capital and reserves from Rs 62.35 crore as on March 31, 1996 to Rs 16.83 crore as on March 31, 1997.