According to sources, though UTI planned to retain a return of 12.5 per cent for MIP-III in line with the recently closed MIP-II, the trust is said to be playing it safe as expectations of a rise in short-term rates have not died down as yet. This is despite the Reserve Bank of India's attempt to keep interest rates under check. With the rupee coming under pressure the markets have been expecting a rise in interest rates.

UTI has set a minimum target of Rs 400 crore to be raised from MIP-III, while the maximum amount is Rs 1,200 crore. In the event of undersubscription (less than Rs 400 crore) UTI will refund the entire amount.MIP-III is an income-oriented plan, which aims at meeting the needs of investors by providing regular income on a monthly/annual basis orcumulation of income over a period of five years. The plan offers three options -- monthly income option, annual income option and cumulative option. The minimum amount of investment will be Rs 10,000 under the monthly and annual income options and Rs 5,000 under the cumulative option.

The tax benefits include Section 80L and Sections 48 & 112 of Income Tax Act, 1961, on income distributed and capital gains from capital appreciation and capital gains tax exemption under section 54EA of the Income Tax Act, 1961, subject to lock-in of three years from the date of acceptance.

The assurance of returns under the scheme is given on the basis of the guarantee provided by the Development Reserve Fund (DRF) of the trust. The size of the DRF as on December 31, 1997, was Rs 574.41 crore as against investible funds of Rs 5,378.69 crore under eight schemes that have assured returns with the guarantee of DRF.

About 62 per cent of the DRF's assets are in equities while 26 per cent of the assets are in money marketinstruments and the balance in debt instruments.

The units issued under the scheme will be listed on the wholesale debt segment of the National Stock Exchange within six months from the date of closure of subscription.