The Hindu Business Line : Deadline to realise MIP 95 assets of UTI extended

THE Administrator of the Specified Undertaking of the Unit Trust of India has proposed to extend the two-year deadline it had fixed earlier for realising assets lying in MIP 95.

The Administrator, which has recently announced the third instalment for distribution of recovery proceeds under MIP 95, has referred to the progress recorded by its asset realisation strategy. The pace of the exercise has prompted it to extend the time period up to December 31. The move will enable it to realise further amounts, it is expected.

As for MIP 95, which was redeemed on June 30, 2002, the Administrator has specifically indicated that a "small portion" of the assets is now left unrealised.

"It is our endeavour to complete the recovery process in respect of the residual assets by December 31 so that the amount realised till that time, if material, will be distributed amongst the unit holders," investors of the schemes have been informed.

The Administrator had underlined the fact that it had initially retained the unrealised assets for two years; the progress of realisation is now said to be "encouraging".

Incidentally (as on May 31, 2002) UTI had earlier stated that debt assets worth Rs 184 crore were held up. Also, the scheme was deprived of income to the extent of Rs 58 crore. The impact of these assets on a scheme with a capital base of about Rs 460 crore was quite evident.

Some of the reasons affecting the scheme's performance were fall in overall interest rates, decline in the equity market and imposition of distribution tax, UTI had mentioned. It was also pointed out that an exposure to UTI Bond Fund could perhaps be considered by MIP 95 unit holders, adding that the monthly withdrawal option allowed to UTI Bond Fund's investors would cater to their needs.

New distribution rate

THE distribution of the third instalment has come at the rate of Rs 1.06 per unit under the monthly income option and Rs 2.60 per unit under the cumulative option. With this, the cumulative amount paid under the scheme translates into Rs 8.51 per unit and Rs 20.80 per unit respectively under the two options.

The terminal values of the MIP 95 units were Rs 6.46 (for monthly option) and Rs 15.77 (cumulative option) respectively. It may be mentioned here that the rate of income distribution was reset each year after the scheme opened for repurchase in July 1996. The first year's rate was 13 per cent per annum - no repurchase was allowed during the initial year.

The rate, in fact, declined successively after the payment of 13 per cent, 14 per cent and 14 per cent respectively during the first three years. The subsequent rates were 12.5 per cent, 10.75 per cent, nine per cent and five per cent.

The key reason for the decline in the rate of distribution was the non-realisation of a relatively high proportion of debt investments in various companies, UTI had pointed out, adding that there were recessionary conditions prevailing in industry and delays in implementation of projects by some companies.

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