UTI &Investment Trust Co's

7/29/2019 UTI &Investment Trust Co's

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INVESTMENT TRUSTCOMPANIES


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Introduction

An investment company is a company whose main business is holding securities ofother companies purely for investment purposes. The investment company invests

money on behalf of its shareholders who in turn share in the profits and losses.

Investors' money is pooled together from the sale of a fixed number of shares atrust issues when it launches. The board will typically delegate responsibility to a

professional fund manager to invest in the stocks and shares of a wide range ofcompanies (more than most people could practically invest in themselves). Theinvestment trust often has no employees, only a board of directors comprising onlynon-executive directors.


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History of investment trust

companies The first investment trust was started in 1868 by F&C (Foreign &

Colonial Investment Trust).

Investment trusts are common in the UK and well establishedwithin legal and regulatory frameworks.


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UNIT TRUST OF INDIA(UTI)


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INTRODUCTION

The basic objective is to encourage investment and participation inthe income, profits and gains accruing to the corporation from theacquisition, holding, management of securities.

In 1963, the government undertook aggressive programmes tomobilize the long term savings of the people and direct theminto productive channels with a view to fostering industrial growthin the country.

The trust commenced its operations from July 1, 1964, with aninitial capital of Rs. 5 crores which was raised from the ReserveBank of India, LIC, SBI and its subsidiaries, scheduled banks andother financial institutions.

It is managed and controlled by Board of Trustees, which isheaded by a chairman appointed by the Government of India. 4trustees and the Executive Trustee are appointed by IDBI.

Remaining trustees are nominated by the other contributors to theinitial capital.


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Objectives of UTI

To mobilize savings of the community by offering savers the triple

benefits of safety, liquidity and profitability on investments.

To channelize the pooled savings into productive outlets.

To give every one a chance to indirectly own shares and securities

in a large number of select companies and to enable the investorsto share in the widening prosperity consequent on industrialgrowth.


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Structure of UTI

The fund manager runs the trust for profit.

The trustees ensure the fund manager keeps to the fund's investmentobjective and safeguards the trust assets.

The unit holders have the rights to the trust assets.

The distributors allow the unit holders to transact in the fund manager's

unit trusts The registrars are usually engaged by the fund manager and generally

acts as a middleman between the fund manager and various otherstakeholders


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Mobilisation of savings by UTI

Unit Schemes of UTI

Open ended schemes Close - ended schemes

Monthly Income Growing IncomeGrowing monthly incomesDeferred Income Growth Schemes Income cum Growth Off shore funds Venture capital


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Subsidiaries to UTI

The UTI Bank Ltd.

UTI Investor Services Ltd.

UTI Securities Exchange LTD. (UTI - SEL).

UTI Investment Advisory Services.

UTI Institute of Capital Markets (UTI - ICM).


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Pricing policy of US 64 scheme

It is the first and largest unit scheme introduced by UTI.

It lays down the formula for determining the sale and repurchase prices. There are three

elements of it: Net Asset Value per unit.

Income received or accrued from investments from beginning of the year.

Incidental charges.

All these values are added up to get the value.

Causes of negative reserve of US 64

Heavy investment in equities and higher depreciation in their market prices was directlyresponsible for the reduction in the schemes earnings and widening gap between NAV and thesale and repurchase prices.

The policy of following a stable price irrespective of market fluctuations has contributed to theinvestor perception that safety of capital was assured to the investors.

The policy of distributing dividends irrespective of the income contributed to the negativereserves leading to the crisis of 1998.

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UTI &Investment Trust Co's