The Unit Trust of India (UTI), the country's largest mutual fund, has slashed the dividend on its flagship US-64 scheme to 13.5 per cent in 1998-99 from 20 per cent in the previous year.
The effective yield to investors, based on the Rs 14 sale price in July last year, works out to 9.64 per cent, which is tax free. Last year, the dividend yield worked out to 14.28 per cent on a pre-tax basis.
UTI chairman P S Subramanyam said the negative reserves of Rs 1,098 crore last year have been wiped out and the reserves have turned positive, albeit marginally.
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He said the entire dividend outgo of Rs 1,800 crore was paid from income earned during the year.
"We earned Rs 2,200 crore as income, which was enough to pay a dividend of 16.2 per cent. But the board of trustees wanted to be conservative, in line with the Parekh Committee recommendations. We have kept the yield in line with other similar instruments like fixed deposits and bonds," he said.
The new sale and repurchase prices of US-64 units have also been reduced to Rs 13.50 and Rs 13.20, respectively. The reduction in the sale price from Rs 14 to Rs 13.50 is also in accordance with the Parekh Committee recommendation to bring the prices in line with the scheme's net asset value (NAV).
The UTI chairman refused to release the exact NAV of the scheme, though he confirmed that it was above the par value of Rs 10. However, he said that the UTI would abide by the three-year time frame set by the Parekh Committee to make the scheme NAV-related.
In a tough year, the US-64 corpus fell by Rs 3,843 crore to Rs 16,100 crore from Rs 19,568 crore. This was because at Rs 7,513 crore, redemptions outweighed fresh sales of Rs 4,596 crore.
Despite the outflow, the US-64 remained the most popular investment avenue for millions of investors, Subramanyam said. He added that five lakh fresh unit-holders were added to the investor base and 30 per cent of total fresh sales accrued to the scheme.
As on June 30, 55 per cent of unit-holders are non-individual consisting of corporates and charitable trusts, while retail investors comprised the rest.
UTI's total annual sales were up by a massive 18 per cent to Rs 15,505 crore and its total investible corpus stood practically unchanged from last year at Rs 61,000 crore despite large redemptions of Rs 14,930 crore during 1998-99.
"The UTI continues to retain a dominant 65 per cent share of sales mobilisation in the mutual fund industry during 1998-99, while its share of investible funds stands at over 81 per cent," Subramanyam said.