Magazine Cover Stories Special Features May 2000

US-64 : The Right Choice

Mutual Funds - the most sought after investment avenue today is fast becoming the epicenter of all investment speculations and decisions. Since the beginning of this millennium, Mutual Funds have been creating waves. They have, more or less unanimously been declared the "investment vehicle" for their flexibility. Their capacity to earn those "extra few per cent returns" made them favourite of all in no time.

But, it is time to take certain necessary notes for those who have already invested their money into mutual funds, and also for those who are planning to go for this instrument.

The first Budget of this millennium has made a significant announcement and changes in the "tax relief structure" which specifically can affect your mutual fund portfolio. It is the increase in dividend distribution tax from the existing 11% to 22%. It indicates clear cut doubling of this tax amount which is applicable only on debt-based funds like Income, Gilt and Money Market fund. This implies the urgency to shift your portfolio from a debt-based fund to balanced funds which have been giving excellent tax free returns in the last few years.

As you know, the balanced funds aim to have a portfolio mix of both debt and equity to keep the risk of fluctuating market conditions under check. Generally, these funds invest 60% of the money in equities and the remaining 40% in to debt market instrument to give a balanced blend of safety and returns. However, the above proportion can be changed to 70:30 or 50:50 as per the market conditions assessed by the AMC.

While the equity component promotes the growth of the fund, the debt component provides the required stability and hence the investor gets a perfect blend of safety and returns.

US-64, one of the oldest existing balance funds, stands especially relevant under the given conditions. Launched in 1964 and trusted by over two crore unit holders all over the world, US-64 can be an ideal avenue for your investments in Mutual Funds. It is a package of multiple benefits.

It has a history of consistent attractive income. The objective of the scheme is to provide a regular income to the investors. In addition, there is scope for appreciation of capital invested in the scheme. The income is generally distributed in July every year.

The investors have the option to reinvest the income into units under the re-investment plan option (RIP), thus cumulating the returns, which is generally at a discount to the July price. The scheme offers easy liquidity by way of re-purchase which is open through out the year except during book closure.

The scheme is attractive for investment by both individual as well as institutions. US-64 has declared 13.5% tax free dividend last year which on the face value is worth 11% tax free for investors. The fund invests only in quality stocks and debt of leading companies to ensure growth and steady returns to investors and continuous balancing of the scheme portfolio keeps it in tune with the market.

US-64 in other way is also your ultimate and final chance to save long term capital gains tax as you can still avail the exemption of capital gains tax on your property's sale proceeds earned before March 31, 2000 under Sections 54EA and 54EB by investing your money in this scheme.

Also, you can earn totally tax free returns on the amount invested in US-64, as the scheme is totally exempted from income distribution tax for the next two years.