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UTI sales up 18 per cent, announces 13.5 per cent tax-free income for US-64 investors

The Unit Trust of India, posting an impressive 18 per cent increase in sales during 1998-99, today announced 13.5 per cent tax-free income distribUTIon under Unit Scheme-64 (US-64), which is however 6.5 per cent lower than last year, when it was fully taxable.

Addressing the annual media conference, UTI chairman P S Subramanyam today described the rate as reasonable as it was fixed keeping in view the lower interest rates of the banks and market situation.

The income distribUTIon is being paid entirely out of the income of Rs 21.79 billion earned during the year which works out to more than 16 per cent earning on the outstanding unit capital.

Subramanyam said on a tax-adjusted basis, the rate of income distribUTIon implied a yield of 14.90 per cent on July 1999 sales price for an investor in the 33 per cent tax bracket, as compared with a yield of 14.29 percent last year.

It implied an yield of ten per cent for those not falling in the tax bracket. During the year, UTI has not only succeeded in increasing the net asset value or NAV by generating adequate income for distribUTIon but also by wiping out negative balance of Rs 10.98 billion in US-64 reserves as on June 30, 1998.

As on June 30,1999, the reserves had turned positive.

The new sale and repurchase prices of US-64 units for July 1999 are Rs 13.50 and Rs 13.20 respectively, he said.

He said US-64 continued to be the most popular investment avenue for inverstors. Nearly 500,000 fresh subscriptions were received in US-64 during the year 1998-99. Sales under the scheme were of the order of Rs 45.96 billion, as compared to Rs 46.37 billion sales in the previous year. US-64 alone accounted for 30 per cent of the total sales of UTI during the year, Subramanyam said.

He said UTI has been making continuous efforts to improve the product and return to the investors and this was reflected in the investors' sustained interest in its schemes.

As per the recommendation of the high-level expert committee, special unit scheme 1999 (SUS-99) had been created by UTI. The committee had recommended investment of Rs 48 billion by government. However, the size of SUS-99 was restricted by UTI to a lower amount of rs 33 billion, thus reducing the contribution by the government, following improved stock price performance of some public sector undertakings.

UTI registered an impressive sales collection of Rs 155.05 billion during the year 1998-99, which was an increase of 18 per cent over the previous year's sale. About 1.8 million fresh subscriptions came from investors. Despite the large redemptions and repurchase of Rs 149.30 billion, UTI's investible funds stood at Rs 610 billion as on June 30,1999, around the same level achieved at the end of last year.

This speaks of inherent strength of UTI as a strong and responsive organisation, and of its unique brand image among a large section of the investing community, he said.

Subramanyam said UTI continued to retain a dominant 65 per cent share of the sales mobilisation by the mutual fund industry during 1998-99. UTI's share of the investible funds of the mutual fund industry stood at more than 81 per cent. This was achieved through continued emphasis on launching products that meet investor needs, he said.

The four monthly income plans or MIPs and one institutional investors special fund unit scheme launched during 1998-99 to cater to the investors' demand for regular income, mobilised Rs 68.63 billion, which was 34 per cent higher than Rs 51.20 billion collected under four monthly income plans and two institutional investors special fund unit schemes last year.

The MIP-99, which was launched in April 1999 with a lower income distribution rate of 10.75 per cent per annum, raised Rs 27.17 billion from 168,000 investors. This was the highest ever initial subscription to an income scheme in the history of the Indian mutual fund industry, he said.

More than 160,000 new investors joined the Unit Linked Insurance Plan or ULIP which collected Rs 10.76 billion. About 213,000 fresh subscriptions were made under the three children segment schemes namely, Children Gift Growth Fund, Rajlakshmi Plan and Children's College and Career Fund.

These schemes collected Rs 5.86 billion. The open-ended UTI-bond fund collected Rs 4.94 billion, while the equity schemes collected Rs 4.01 billion. Rs 730 million was mobilised under the growth sectors fund, a sector specific fund comprising of five funds namely Brand Value Fund, Pharma and Healthcare Fund, Software Fund, Petro Fund and Services Sector Fund. The offshore funds mobilised Rs 870 million, he said.

He said most of the equity-oriented growth schemes of UTI turned out satisfactory performance in the face of declining stock price trend during the major part of the year. Seventeen out of 22 equity schemes had outperformed the Sensex and 21 had outperformed the Bombay Stock Exchange national index since inception.

The trust met its commitment of income distribution under all the 18 schemes with assured rates of return ranging from 12.5 per cent to 15 per cent. Four income schemes were redeemed during the year aggregating to Rs 37.46 billion. All these schemes paid the assured rates of return.

The India Debt Fund had shown an appreciation of 10.48 per cent in the current year. Under the India IT Fund for the period July 1, 1998 to May 27, 1999, the rupee net asset value and dollar net asset value appreciated by 117.7 per cent and 113.5 per cent respectively, as compared to an appreciation of 18.8 per cent and 118.8 per cent in BSE Sensex and CNX IT Index respectively.

The India public sector fund recorded lower depreciation of 13.79 per cent as against 23.05 per cent depreciation in CRISIL PSE Index.

He said UTI initiated a number of measures during the year to provide more efficient service to investors. New franchisee offices were opened at Satna, Sangli and south Goa under western zone, Ferozpur and Aligarh under northern zone, Shillong under eastern zone and Rajahmundry under southern zone.

The number of franchisee offices thus rose to 52 from 44. Also, the collection centres had increased to 213 from 198. In order to increase its penetration to rural areas, UTI appointed 57 chief agents at various potential taluka places.

To boost marketing and servicing activity overseas, a representative office had been set up in Dubai which became fully operational from December 1998.

The trust had implemented online system for servicing US-64 unit-holders at all the branch offices. The system has resulted in efficient maintenance of the unit-holders master file as well as done away with voluminous paper-based unit-holders registers.

The trust has developed its Website on the Internet to provide information in respect of UTI schemes including NAV, sale and repurchases prices. The Website would be gradually upgraded over time to provide investment facilities to investors directly through the Website.

The trust also proposed to introduce interactive voice response system at metros to enable investors access information on account status directly through telephone. Electronic clearing service facility is now available at all 51 branches across the country, he said.

He said the trust had already implemented nine of the 19 major recommendations of the high level committee on US-64 appointed under the chairmanship of Deepak Parekh. Others had been taken up for implementation.

The trust had also reconstituted the three asset management committees separately for US-64, equity schemes and debt schemes. Each committee now has seven members comprising five outside professionals and two senior officials of the trust.

UTI has targetted to double its investible funds over the next three to four years. The focus will be on strengthening the foundations on which UTI's competitiveness lies. The marketing plan for 1999-2000 envisaged sales of Rs 170 billion from both existing and new products, he said.

UNI

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