The current repurchase price is Rs 14.6 per unit. Hence, if you choose to exit from the scheme, this is what you get to invest elsewhere. Now, considering that like most other US-64 investors, you too are likely to be risk-averse, you would prefer to invest your proceeds in relatively safe fixed-income avenues like bank fixed deposits or in bonds floated by financial institutions. These securities would typically promise returns ranging from 12-14 per cent per annum for a five-year period. If the investment is made in a cumulative scheme which compounds your interest on a quarterly basis, annualised yields could range from 12.55-14.75 per cent. Your principal of Rs 14.6 would grow to an amount rangingfrom Rs 26.37 to Rs 29.05. However, if you need to encash before maturity, it would mean a lower rate of return. Besides, these investments would not give you an annual income. If you need the annual income, your yield would be lower.

If you choose to stay invested in US-64 and it continues to pay you an annual dividend of Rs 2 per unit, your annualised yield could range from 14.52 per cent to 15.18 per cent depending upon the repurchase price prevailing five years hence. If the repurchase price is Rs 14.30, the yield would be 14.52 per cent. If it is Rs 14.60, the yield would be 14.85 per cent, and if the repurchase price is Rs 14.90, the yield would be 15.18 per cent. Hence, by staying invested in the scheme, you could earn not only a higher return, you would also have an easy exit option in case you need to have your money before the end of five years. There is, however, a downside to this strategy. Though in the current scenario it appears unlikely that UTI will cut dividends, sustained unsatisfactoryperformance may force the trust to prune annual payouts. In such an eventuality, you could end up as a loser. The upside, of course, is that the fund could show an improved performance and dividends could increase. But this too appears unlikely.

In the event that you still decide to exit from the scheme, where would you invest? ICICI's forthcoming bond issue? Possibly. The offering has several innovative features. The issue, however, seems to be targeted at the retail investor, and is unlikely to attract institutions. It is, therefore, likely that there will be little liquidity in the bonds. Investors should realise that the yield-to-maturity mentioned in the issue prospectus (except for the deep-discount and the money-multiplier bonds) is meaningless. This is because investors may not be able to invest their coupon receipts at rates ranging from 13-14 per cent, and reinvestment at lower rates will reduce the actual realised yield.

Nevertheless, the issue offers attractive investment options. Let us startwith the encash bond issue. With the gradual increase in the coupon rate over the five years, the bond offers encashment once every year at the face value. Even if the investor invests his coupon proceeds at a rate of 10 per cent, his return works out to 13 per cent per annum. A State Bank fixed deposit, on the other hand, would yield 10.5 per cent. For the tax-saving bond, the realised yield (under the safe assumption that coupons can be reinvested at 10 per cent) for the first and the third options works out to 20.5 per cent. In comparison, the realised yield for an investment in the National Savings Certificate is only 16 per cent. For option II in the tax-saving bonds, the realised yield is 20.6 per cent.

If an investor opts for the money-multiplier bond, he could realise a yield of 13.9 per cent. But one would be better off investing in post-office deposits where the investment doubles in the same period. The easy instalment scheme is better left untouched for the 11.5 per cent yield is the same asthat offered by the State Bank for an identical period. The same is true for regular income bonds, which could yield 10.6 per cent, lower than the SBI deposit rate.