While UTI charged 6 per cent of the initial expenses to the scheme, the rest was borne by the Development Reserve Fund. Under the Sebi guidelines, asset management companies can charge a maximum of 6 per cent from the funds mobilised as initial issue expenses while the rest has to be borne by the AMCs. Thus, for every Rs 100 invested by an investor, an AMC can deduct a maximum of Rs 6 for expenses while the rest goes to the fund for investments. ``The expenses in percentage terms of the total mobilisation was high since the collection was not much. While the expenditure was more or less in line with the expenses incurred in the previous MEPs, collections dropped to low levels. In the past, we have seen decent inflows by incurring similar issue expenses,'' said a UTI official. Some of the key components involved in the sale of a mutual fund IPO include printing & postage, publicity, marketing & sales promotion, registrars charges, bank charges and stamp fees. For all other funds launched by UTI in 1998-99,expenses were within the specified limit of 6 per cent. For instance, in MIP '98, the initial issue expenses was 2.81 per cent while in the case of MIP '98 (IV), it was 2.95 per cent. In IISFUS 98 (II), expenses incurred were a mere 0.14 per cent as institutional funds do not require an aggressive selling. Even in the Growth Sectors Funds dedicated to pharma, software, petro and service, expenses were less than 5 per cent.

``The MEP series of UTI has seen a constant fall in collections over the past few years and 1999 was no different. While UTI failed to garner decent collections despite an excellent branch network, it failed to anticipate the lack of investor interest in MEP and thereby cut down expenses,'' says an analyst. For investors who locked their investments in MEP '99, the net asset value began at Rs 9.40. ``Initial & recurring expenses and loads have emerged as one of the key factors in determining invetsments in mutual funds. Funds are cutting down on initial expenses to avoid any charges to the fund's corpus and also recurring expenses to generate better returns for investors,'' points out a fund manager.

UTI holds a combined corpus in excess of Rs 2200 crore under the MEP series as on June 30, 1999. Initial collections have fallen from Rs 196 crore in 1996 to current levels. There have also been heavy redemptions from those schemes where the 3-year lock-in is over. The combined outflow from these tax savers in 1998-99 was Rs 564 crore.