This depreciation was primarily due to bad market conditions and after adjusting the surplus that was generated in the scheme the amount of Rs 1098.49 crore was shown as a negative balance in the accounts of US-64 scheme.

Speaking to The Financial Express, the chairman UTI, PS Subramanyam said: "According to our latest valuation of US-64 the negative balance in the US-64 has come down to Rs 150 crore. This has been made possible due to accretion in the scheme i.e., investors are still flocking to the scheme. Less repurchases in the scheme and much improved market conditions. Shuffling of the US-64 portfolio has made it possible to book capital gains in the scheme and thedividends which were due to the scheme have accrued to the portfolio of US-64".

"The figure of Rs 1,098.49 crore which was shown as a negative balance was actually an accounting entry", said Subramanyam. In this event, he said that, the Board of Trustees of UTI had two routes in front of them.

"Either the board of trustees could have taken this as an extraordinary event like in the year 1982 when the trust had faced a depreciation of Rs 26 crore and had taken it as an extraordinary event. The other option was to take the route that we have opted for i.e., to observe the prudential norms and debit the accounts to the extent reserves can be absorbed and let there be a negative balance in the reserve account. The net effect was that as on June 30, 1998 we had a negative balance of Rs 1,098.49 crore. This was on a particular date and does not tantamount to the fact that UTI has depleted its reserves and is in a bad shape. We will still pay the same dividends next year", said Subramanyam.

He said that UTIcould not treat this as an extraordinary event this year because the amount of depreciation this time was huge.

The last time UTI had done the valuation of US-64 on May 5 there was a neutral stand in the scheme i.e., no appreciation or depreciation. Then on May 11 the nuclear explosions were done and then on May 15 the US Sanctions came about which brought the market crashing down. This lead to a sudden depreciation in the portfolio of US-64. Thus, when the markets revive the scheme will see an appreciation", he said.

"The portfolio of US-64 has scrips like MTNL, VSNL, SBI, IDBI and other stock which have still not discovered their correct market price. These are strategic investments which would make good value in the long term. Our non-equity portfolio of US-64, 36 per cent of US-64 is in non-equity, has hidden assets like real estate, debentures, bonds and others whose value would be quite high if a valuation is done. It was just that this year, the market crashed just before the financial closure.Things are back to normal and as such there is no need to panic at all", said Subramanyam.

He said that US-64 has a lot of companies which are a takeover target and the trust has not assigned value to these companies and if the trust does that then the value of US-64 would be much higher. "As and when the market goes up further this negative balance would be completely wiped out with surplus in the scheme", he said.

The dividend of 20 per cent which was paid under the US-64 scheme this year had seen an outgo of Rs 3,000 crore. This was paid out through the income accretion in the scheme and after paying the dividend there was still a surplus in the scheme of Rs 250 crore, he pointed out.

Subramanyam said that the loans of UTI given to corporates are classified as non-performing assets (NPAs) on the same lines as prescribed by RBI. The current level of NPAs in the US-64 is at 4.8 per cent of the total corpus of the scheme, he said.