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Fund pick: UGS 10000

Value Research

Background

UGS 10000, a growth fund invests predominantly in the stocks of Multinational Companies (MNCs) especially in the FMCG and Pharmaceutical sectors. Structured as an Interval Fund, UGS 10000 opens for sale and repurchase for a week on the first Monday of every month.

The fund follows historic pricing. Earlier, the sale and repurchase price during the weeks's offer period was based on previous Wednesday's. However, from May 3, 1999 the NAV of UGS 10000 is being computed every day and the sale and repurchase price is based on two-day previous NAV. The pricing system is still faulty, however, the long-term investor in the fund is relatively less vulnerable to the actions of short-term investors, after the changed pricing system.

Performance

UGS 10000 has been a significant gainer since its launch in May 1998. The latest NAV of the fund as on September 1, 1999 stands at Rs 16.30, an annualised gain of 47.36% since launch, against a 23.80 percent gain in Sensex, during the same period.

The fund took a severe beating in April 1999 on account of its faulty pricing. Post budget, the market gained significantly and the fund opened for subscription on first Monday for a week in March. The fund was sold through the week based on based on previous Wednesday NAV, which was pre-budget NAV. This lead to a significant inflow in the fund at old NAV which moved out the next month leading to severe losses for the fund. After this, the pricing method was changed to dealing based on two day previous NAV.

Based on the latest available portfolio as of July 29, 1999, 80% of the fund was invested in leading companies in industries like Consumer Goods, Pharmaceutical and Information Technology. Consumer Goods stocks accounted for over 55% of the portfolio, Pharmaceutical sector accounted for 18% and Software and training 9%. The fund is very actively managed. In July '99, the fund booked profits in Pfizer, SmithKline Consumer Healthcare and Carrier Aircon and increased its exposure to engineering stocks, like Siemens and ABB and added Atlas Copco and Indian Aluminium.

Outlook

With its defined equity focus, the portfolio of the fund is largely into companies with very strong professional management with a long track record of enhancing shareholder value. The fund is expected to deliver superior returns over the long term.

Mutual Funds

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