By Leilanie G. Adriano
LAOAG CITY, April 20 (PNA) — In line with the thrust of the Bangko Sentral ng Pilipinas (BSP) to institute reforms for the benefit of the investing public, the Monetary Board in its meeting held recently, approved an amendment of the Unit Investment Trust Fund (UITF) regulations, allowing for a unit-paying feature that will provide non-guaranteed stream of income to participants.
The BSP said the unit paying UITS will invest in various income-generating securities and upon determination of the trust entity shall give out the income in its equivalent units, for automatic redemption.
The income distribution shall come from cash dividends or coupon or interest earned and received from these investment outlets. However, income distributions are not guaranteed and will be determined by the trust entity in accordance with the plan rules. In addition, income distribution will decrease the net asset value of the fund, and consequently, a decline in the net asset value per unit (NAVPu) similar to the effect of dividend declaration on stock prices.
Previous to this, UITF regulations do not allow for the distribution of income to participants, as income earned is automatically reverted back to the fund and the same may only be realized by the investors upon redemption of their participations to the UITF.
According to the BSP, this new initiative offers several advantages to investors and the UITF market. In particular, the unit paying UITF will enable an investor to enjoy the fruits of his investment without actually the need to redeem his actual principal investment. Also, the same is expected to expand the investment choices of the investor and allow him more opportunities to diversify investment and mitigate risks.(PNA)