The Hindu Business Line : UTI fixes redemption price at Rs 10.1167 for MIP 99 (II)

THE Specified Undertaking of Unit Trust of India has decided to fix a redemption price of Rs 10.1167 per unit for holders of annual and cumulative options in MIP 99 (II), the monthly income plan that is being foreclosed.

The redemption value being paid to investors will include income for the first four months of the current year ending July 2004, unit holders have been informed. Investors who had chosen the monthly income option will be paid Rs 10 per unit, the par value at which the plan was offered when it was launched in 1999.

The Administrator of the specified undertaking has recently decided to foreclose the scheme with effect from August 1. MIP 99 (II) was introduced by the then UTI in line with its strategy to offer a series of monthly income plans. The certificates will now be cancelled automatically.

The idea was to protect the capital and set the rate of annual distribution of income - on the basis of its earning potential and actual performance in the market. Capital protection was a feature that was inherent in the scheme.

It may be mentioned here that in the first few years, the scheme managed to dole out income at reasonable high rates - 10.5 per cent on a monthly basis in the first year (ended October, 2000). Subsequently, the rate was scaled down progressively and investors had to remain satisfied with 9.25 per cent and nine per cent respectively for the next two periods.

UTI has referred to changes in the country's economic scenario and fall in interest rates, two factors that led to a decline in the income generated by the scheme. These also resulted in lower rates of distribution - five per cent in 2002-03 and three per cent in 2003-04.

There was nevertheless a slight improvement during the April-July period, when the rate was increased to 3.5 per cent.