After garnering around Rs 1200 crore in its Monthly Income Plan '97, which closed for subscription on April 5, UTI launched MIP '97 (II) on April 24. Despite superior features like easy liquidity, better investor servicing and a similar asset profile, six open-end income funds launched around the same time as MIP '97 could collect only a fraction of what UTI did. UTI is expected to raise higher collections through Income funds in 1997 than its previous year's mobilisation.

UTI had collected around Rs 1804 crore in the four Monthly Income Plans in 1996. Besides the DIP '91 switch over, the success of UTI in attracting heavy subscription in MIP '97 could be attributed to the clearance from the SE BI to use the Development Reserve fund for guaranteeing returns for the entire tenure. The Rs 300 crore Development Reserve fund had been created for developmental research and promotional activities of UTI. In 1995 and 1996, UTI was allowed to promise returns only for the first year.

Besides the distribution strength and a well entrenched network of UTI, other funds lack the financial muscle to returns for durations as long as UTI. Thus, despite promising upto 16 per cent p.a. for the first year, other funds are unable to match UTI's collections.

UTI had offered an income of 14 per cent p.a., payable monthly for five years in Monthly Income Plan 1997. Under the growth option, an investment of Rs 2000 is to grow to Rs 4012 at redemption.

Though UTI's success in attracting investors can be attributed to a host of reasons other than performance, the main factor behind mobilisation of such huge corpus is its consistent track record in the monthly income funds. UTI has never defaulted on its committment and in most of the cases paid more than it had promised.

Even in funds where it was allowed to promise returns for just one year, UTI has either maintained the payout or increased the same in subsequent years. UTI's income payouts for the year 1997-98 in its various monthly income schemes are higher than 1996-97 payouts. A 13 per cent payout has been declared in MIP '94 (III), 13.5 per cent in MIP '93, 14 per cent payout in MIP '94, MIP '94 (II), MIP '95, MIP '95 (II) and MIP '95(III), a 14.5 per cent income distribution in MIP '96 while a 15 per cent payout has been declared in MIP '96 (II), MIP '96 (III) and MIP '96 (IV). Except for MIP '94 (III), where payouts have been made through capital, NAV of most of its income plans are above par.

Other income funds from PNB Mutual Fund, LIC Mutual Fund, GIC Mutual Fund, Indbank Mutual Fund and SBI mutual Fund have been paying promised income through investor's capital. UTI has promised similar returns in MIP '97 (II) as those promised in MIP '97. This, coupled with falling interest rates should translate into a healthy subscription to the scheme.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.