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October 12, 2002 | 1115 IST
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US-2002 to have asset base of Rs 480 crore

Rakesh P Sharma & Janaki Krishnan in Mumbai

Carved out of US-64, the Unit Trust of India's Unit Scheme 2002 (US-2002) will have an asset base of Rs 480 crore (Rs 4.8 billion) when it is formally launched on November 15.

The Securities and Exchange Board of India approved the UTI plan to split US-64 into two on Thursday.

US-64 units purchased after June 30, 2001 from the secondary market, units paid as dividend for the year 2000-2001 and those forming part of fresh sales from January 1, 2002, when the scheme re-opened for sales, would be brought under US-2002.

On September 30, 2002, fresh sales were to the tune of Rs 118 crore (Rs 1.18 billion) with an underlying unit capital of Rs 181 crore (based on a face value of Rs 10 per unit).

The fixed assets, non-performing assets and term loan portion of US-64, amounting to around Rs 1,000 crore (Rs 10 billion), would be kept out of both the schemes.

Existing unit-holders of the scheme will be given the option to exit before the new schemes take off, as per Sebi regulations. The notices, giving three weeks to investors to decide on whether they would like to stay with the new scheme or pull out, will go out tomorrow to unit-holders.

A K Sridhar, UTIs president in charge of equity funds management, said that exit would be at no load. In fact, exit on a no load basis would be available to unit-holders right until the end of December 2002. The scheme would have book closure between November 2 and November 14, 2002.

The portfolio split in the undivided US-64 would take place proportionately so that on November 15, when the new scheme takes effect, both would have the same net asset value. The assets -- or the holdings in each of the various instruments -- would be split vertically based on the asset value.

"This is to provide a level platform for the unit-holders of both the schemes so that neither feels that they are starting at a disadvantage," Sridhar said.

Once the division is formalised, both the schemes will function separately -- with the NAV-based scheme being totally Sebi-compliant while the other --with assets of around Rs 11,000 crore (Rs 110 billion) -- will continue to exist on an administered price basis.

US 2002 would emerge as the biggest balanced fund in the mutual fund industry and the portfolio rebalancing, according to the original plan under US-64, would go on until the desired debt-equity mix is achieved.

UTI has capped investments in equity at maximum of 55 per cent. Investment in debt is capped at 75 per cent. Of this, at least 7.5 per cent would be invested in central government securities.

A new statement of accounts for the new scheme will be prepared and Sridhar said that accounts will be completed by December 10, 2002.

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