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New UTI scheme for MIP '97 unit holders

Nilanjan Dey

KOLKATA, April 10

THE controversy over its monthly income plans notwithstanding, the Unit Trust of India has gone ahead with a proposal to introduce a special fund aimed at unit holders who are willing to roll over their maturity proceeds from MIP 1997. Caveats are not too far away either. One, there are no guaranteed returns this time around. Two, only high-rated debt securities and liquid stocks from MIP 97 will be transferred to the proposed fund.

The proposed `UTI Income Scheme 2002' will be launched as a normal, open-ended debt scheme, provided SEBI agrees to the idea. The proposalcomes amidst controversy over UTI's commitments towards investors in assured-return MIPs.

To the extent of rollover from MIP 97, only well-rated debt securities — that is, ratings that are `AA' and higher — that form part of the MIP's portfolio will be transferred to the new scheme. Similarly, only listed and liquid equities will be considered for the transfer.

Investors in MIP 97 can opt for the rollover subject to the minimum investment level; under the income plan, this minimum has been pegged at Rs 20,000, while the same for the growth plan is Rs 5,000.

The existing unit holders will be given an option to exit at the prevailing NAV without paying any exit load. Such arrangements, incidentally, are not too uncommon in the realm of MFs. UTI itself in the recent past made serious attempts to retain unit holders of MIP 96 (IV) in its fold.

For rollover optees, the proposed scheme will be available at par between May 1 and May 10. Fresh sales will be allowed from the next day (May 11) at a price that will not exceed 101 per cent of the NAV. In fact, there will be daily declaration of valuation from May 1.

Under the income plan, the first distribution of surplus, if any, will be made after three months — that is, after July 31. All repurchase made within three months from the date of investment will be allowed at a price not less than 98 per cent of the NAV. Afterwards, such repurchase will be at a price not below 99 per cent of the NAV.

Importantly, as UTI has explicitly pointed out, no non-performing asset will be transferred from MIP 97 to the proposed income scheme. And for fresh investments, the fund managers will consider securities that are rated at least `AA'.

The proposed scheme will try to distribute income that may be generated from time to time under its income option. Gains under the growth option will be ploughed back as usual, which will be reflected in its net asset value.

A minimum 90 per cent of the assets will be put in debt, including corporate paper, G-Secs and money market instruments. The rest (a maximum 10 per cent) will be allocated to equities and related instruments. A provision for systematic withdrawal may be introduced later.

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