NEW DELHI, Dec 23: LIC Mutual Fund will launch its regular income scheme, Dhanvarsha 11, on January 7 and closes for subscription on February 20, 1998. The five-year close ended scheme will open for repurchase after one year at NAV-based price. The fund plans to `assure' returns for the entire tenure of the scheme.

``We have got SEBI approval for promising assured returns for five years but the assured return will vary from year-to-year, depending on the interest rate scenario,'' said a senior official of the company, adding that ``income for the subsequent year will be declared before the close of the preceding year and paid through post-dated cheques.''

However, market analysts point out that assured returns makes no difference. ``The word `assured' has been added to merely lure investors. The fund can declare an income in the scheme, depending on the interest rate outlook in the next year. The fund has been following a similar practice in other Dhanvarsha schemes. It is just that the fund now cannot skip declaration of income although it has the flexibility to decide on the extent of payout,'' an analyst pointed out.

The scheme has assured a minimum return of 11.88 per cent, payable monthly or 12.5 per cent, payable yearly. Thus, for instance, if interest rates start rising towards the end of 1998, the fund will assure a higher return for 1999.

Last year, the market regulator had debarred funds form promising assured returns, prompted by the Canstar fiasco.

Subsequently, however, Unit Trust of India was allowed to assure returns till redemption, while other asset management companies were permitted to assure returns for the first year only.

The minimum amount of subscription under Dhanvarsha 11 is Rs 10,000 under the monthly income plan, Rs 5,000 under the yearly income option and Rs 2000 for the cumulative option. The scheme offers tax exemption under section 54EA.

In its previous scheme, Dhanvarsha 10, the fund collected close to Rs 44 crore since it offered 14.35 per cent, payable yearly in a falling interest rate scenario.

In fact, the sale of units had to be suspended before the official closing date on account of heavy subscription.

Meanwhile, the fund has declared an income of 13.5 per cent (monthly) and 14.5 per cent (yearly) for two of its schemes, Dhanvarsha 8 (October 1, 1997 and September 30, 1998) and Dhanvarsha 9 (January 1 to December 31, 1998).

The current net asset value for the monthly options in Dhanvarsha 8 and Dhanvarsha 9 is Rs 10.47 and 10.40, respectively.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.