The latest MIP will close for subscription on October 30. According to UTI chairman, PS Subramanyam, MIP-1999 (II) is expected to get an encouraging response, as the rate of distribution is attractive at 10.5 per cent (monthly) and 11 per cent (annual) for the first year.

However, analysts do not share the optimism of the UTI chief. ``The overwhelming response to MIP(I) was primarily because it was the last scheme to assure returns for the entire tenure. Now, open-ended debt plans with high liquidity and relatively high returns will be attractive vis-a-vis MIP,'' said an analyst.

The dividend will be tax-free in the hands of investors, though UTI will have to pay 11 per cent dividend tax. Thus, the fund manager will have to earn at least 13.25 per cent after accounting for the dividend tax and investment management fee of 1 per cent.

The dividend distribtuion rate of 10.5 per cent will be applicable for the next one year up to October, 2000. For the period between November 2000 and March 2001, the rate of distribution will be announced in March 2000. For subsequent financial years, (April to March till 2004), the rate of payout will be announced in March every year.

Besides monthly and annual options, MIP offers cumulative option. The closed-ended plan will open for repurchase at NAV-based prices after three years in November, 2002. The units of the plan will be listed on the wholesale debt segment of NSE by April next year. UTI guarantees capital protection on maturity and if the NAV is below par (Rs 10), the Development Reserve Fund will bridge the shortfall. The DRF was valued at Rs 850 crore as on June 30, 1999.