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Statistical profile of the Unit Trust of India

Indian financial markets were jolted by the resignation of Unit Trust of India chairman P S Subramanyam following UTI's announcement that it had suspended for the remainder of the year redemptions from its biggest fund.

A statistical profile of the state-run UTI, the single largest investor in Indian markets, follows:

UTI manages Rs 600 billion in assets -- about two-thirds of the mutual fund industry's total assets.

It services 41 million investor accounts through 54 branch offices, 266 chief representatives, 119 chief agents and over 67,000 agents who sell the fund's schemes door-to-door in a country with a population of one billion.

It offers domestic and non-resident Indian investors 87 schemes covering a gamut of investment options. Of these, 46 of are income or debt schemes.

Since its inception, UTI has launched 147 schemes, mobilised over Rs 1,500 billion, returned Rs 200 billion to investors by redeeming 60 schemes and distributed over Rs 530 billion in dividends.

For the past year to June, its total redemptions stood at Rs 119.59 billion and sales in all schemes totaled Rs 101.43 billion.

UTI was created in 1964 through an act of parliament to channel small savings of citizens both to speed up the country's industrial growth and offer citizens better returns than other investment options.

It enjoys a special status since, unlike other mutual fund schemes, UTI's schemes launched before 1994 are not required by law to follow the market watchdog's regulations. All schemes launched after that, however, must comply with the regulations.

Except US-64, however, UTI has voluntarily made all other pre-1994 schemes compliant with the Securities and Exchange Board of India's rules, the main ones are as follows:

• All schemes must periodically declare the net asset value of their units. The NAV represents the current market value of the unit's investment portfolio. Closed-ended funds need to report their NAV once a week and open-ended must do so every day.
• No mutual fund scheme can own more than 10 per cent of any firm's paid-up capital which carries voting rights.
• No mutual fund can invest more than 10 per cent of its net assets in equity shares or equity-related instruments. Index and industry-specific funds are exempt from this limit.
• An open-ended scheme cannot invest more 5 five per cent and a close-ended scheme not more than 10 per cent of its net assets in unlisted equity shares or equity-related instruments.

Unit Scheme-64

By far UTI's most popular and the biggest fund, US-64 accounts for about 25 per cent of UTI's assets and close to a fourth of the domestic industry's assets.

The fund has about 20 million unit holders.

This flagship fund was set up in 1964 and mobilised Rs 190 million that year. The first year's dividend was 6.1 per cent compared with the then bank deposit rates of between 3.75-to-6.0 per cent.

US-64's initial Rs 50-million capital was subscribed to by India's central bank, other domestic financial institutions and the State Bank of India, India's largest commercial bank.

US-64 enjoys the longest history of uninterrupted dividend payout in the domestic fund industry. Dividends rose continuously since inception to peak at 26 per cent growth in 1993, which was maintained for two years.

But for the past year to June, the funds' performance has reflected the decline in global and domestic equity prices.

As a result, US-64 redeemed units worth Rs 59.62 billion in the past year to June -- including Rs 41.51 billion in April and May alone -- compared with yearly sales of Rs 26.61 billion, which were 26 per cent of all total sales.

To stem the rising redemption tide, UTI on July 2 banned sales and repurchases from the US-64 fund until December 31.

The fund also slashed its dividend to 10 per cent from 13.75 per cent the previous year, as its income plunged 41.3 per cent to Rs 15.24 billion.

US-64's unit capital as of June 30, 2001 stood at Rs 127.78 billion, down 15.6 per cent from Rs 151.46 billion last year.

US-64 is not benchmarked against any index as the fund does not declare its net asset value.

During the same period the 30-issue benchmark Bombay Stock Exchange index slumped 28.65 per cent and the wider 500-share S&P CNX 500 plunged 33.78 per cent.

At the start of each month US-64 announces a monthly sale and repurchase price. Both values showed a small increase each month until the end of UTI's financial year to June 30.

Its repurchase price for May 2001 was Rs 14.25 and the sale price stood at Rs 14.55. For July 2000, US-64's repurchase price was Rs 13.20 and the sale price was Rs 13.50.

Of the fund's equity portfolio, 88.29 per cent has been invested in old economy stocks this year. Of these, 28.44 per cent are invested in petrochemical firms, 15.79 per cent in consumer non-durable companies and 12.13 per cent in refinery stocks.

US-64 also slashed its exposure to the software industry to 7.41 per cent of its equity portfolio from 21.70 per cent the previous year.

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