Unit Scheme '64 has also been able to wipe out the negative balance of Rs 1,098 crore in its reserves as on June 30, 1998. As on June 30, 1999, the reserves were positive. The sale and repurchase prices for US-64 for July 1999 are Rs 13.50 and Rs 13.20, respectively.

US '64, a balanced fund and the oldest scheme, aims at providing annual dividend with a modest capital appreciation. Launched in July 1964, US '64 does not follow any stated asset allocation. Historically, it had a strong orientation to debt. UTI also indulged in term lending from the scheme.With its term-lending operation, the scheme often invested in equities on exercise of the convertibility clause in itslending agreements. So, in over two decades, an equity position was built into US' 64.

In the early 1990s, UTI turned aggressive with its fund mobilisation. So, the fund marginally diluted its equity holdings to increase its annual dividend. The fund attracted huge subscriptions because of its attractive dividend yield and through a series of concessional rights offer.

However, the annual yield based on its post dividend July price has been on a consistent decline since 1992. With the drastic cut in dividend in 1999, it has hit its lowest yield since 1992. As the fund has said that it would follow a conservative dividend policy in the future, the 13.5 per cent dividend is likely to be sustained in coming years without any significant increase.

As things stand today, the road ahead for Unit Scheme' 64 investors will remain turbulent. With the fund's current equity-debt allocation at 2:1, in the short-term, performance will depend on the broad equity market. Hence, it is unreasonable to expect asustained rise in income from US '64 based on its current asset allocation - its charm in the past. Besides, the current annual yield of 10 per cent is unattractive. Also, the return offered is not an adequate compensation to investors, given the risk profile of the fund (with its high equity allocation).

Over the next three years, fund will implement the various recommendations of the Parekh committee. The key change will be to make US '64 NAV-based over the next three years and realign the US-64 asset allocation, at present oriented towards debt.

These are significant changes given its size and will require changes in the UTI Act. At present, the fund's investment in real estate will have to be transferred to the development reserve fund and term loans from US '64 will have to phased out to facilitate NAV computation. Consequent to these changes, investors will have to get used to a volatile repurchase and sale price.

US '64 will undergo a transformation. The fund is about to lose its key features,i.e., a rising repurchase and sale price throughout the year and a handsome dividend yield. The fund's repurchase and sale price has to be revised downwards to realign it with the NAV. All logical rationale implies that an investor should exit from the fund now. If you are emotionally attached to your oldest investment, get your astrologer's view.

Dhirendra Kumar -- Value Research