Update of UTI's Children College and Career Fund (CCF)

Unit Trust of India has claimed that nearly 12 per cent or 1.5 lakh investors have opted for a trans


Unit Trust of India has claimed that nearly 12 per cent or 1.5 lakh investors have opted for a transfer of their investments from Rajlakshmi Unit Plan '92 (RUS '92) to Children's Career Plan (CCP). RUS '92 has a base of 12.5 lakh investors. Further, as many as three lakh investor have responded to UTI's letter, which asked them to shift their investments to CCP. RUS '92 will be terminated on September 30 after the Trust found it could not sustain the assured payout of 16.5 per cent when the current interest rates are hovering around 11.5 per cent.

RUS '92, which mobilised Rs 500 Crore in 1992, had assured that investments under the scheme would grow 21 times in 20 years. This implied an assured return of 16.44 %. The decision to terminate RUS '92 has lead to a much hue and cry from over 12.5 lakh investors and justifiably so since these investors had put their savings in the fund for a secure future of their daughters. However, the silver lining is the country's largest mutual fund has finally realised that assured returns are virtually impossible in a dynamic market.

On the other hand, Formally Children's College and Career Fund, CCF does not assure returns and seeks to provide for the cost of higher education of a child through payment of scholarship on yearly / half-yearly basis. A conservative balanced fund with maximum exposure of 40 per cent to equities, CCF had an asset base of Rs 168.47 crore on September 20 with its NAV at Rs 13.20. As on August 31, 2000, the fund had 62 per cent of its assets in debt while the rest was invested in equity instruments. The top holding of the fund is the non-convertible debenture from Reliance Petroleum, which has a weight of 8.41 per cent in the portfolio. Among the top equity holdings, financial institution, ICICI has a weight of 7.98 per cent followed by Infosys at 6.5 per cent. Reliance Industries also accounts for nearly 6 per cent of the portfolio. While the fund has as many as 85 holdings, the top 20 account for nearly 67 per cent of the total portfolio and hence, most of the investments are thinly spread.

The Plan offers two options - scholarship option and growth option to investors. Under the scholarship option, after the child completes 18 years of age, the scholarship will be paid by effecting repurchase of required number of units at NAV, depending upon the number of installments and mode of payment. Under growth option, the member (the beneficiary child) can repurchase his/her holding partially or fully any time after he/she attains the age of 18 years. The scholarship amount will be totally tax-free.

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