In a relatively dull mutual fund market, the Kotak Mahindra Mutual Fund (KMMF) will offer two open-ended schemes to investors, one of which offers totally risk-free returns. These are `K-Gilt Continuous Offer' (two plans) and `K-30 Continuous Offer'. The K-30 is a pure equity growth scheme aimed at investments in any of the 30 scrips of over 6,000 available across the country's bourses and not necessarily that form the BSE's sensitive index.These schemes will open on December 11 and closes on December 21, 1998. Earliest opening of K-Gilt will be on December 29 and latest opening on January 25, 1999. The earliest opening of K-30 will be on January 13 and latest opening on January 25, 1999.

The minimum purchase and redemption amount for each of the twoschemes/plans is Rs 10,000 (after initial offer to existing investors -- additions allowed of Rs 1000 each and purchases, thereafter, may be in multiples of Rs 1). Redemption from existing unit accounts -- Rs 1000 or 100 units and any redemptions thereafter may be in multiples of Re 1 or one unit.Safety is the key word chanted these days by fund investors all across --safety of principal and of the promised return, if promised by the fund promoters. And, therefore, the niche product exclusively targets gilt products -- safest of the safe investments.

A majority of income funds has exposure to the gilts markets, in addition to bonds and fixed income instruments for relatively safer and steadier income stream. But it is for the first time that the KMMF offers an exclusively gilt scheme aimed at luring retail to medium range investors to the vibrant multi-billion gilts market.

However, because of it Rs 5-crore as the minimum entry level for investment, the domestic gilts market is almost controlled by biginstitutional players like banks, financial institutions, corporates and to a lesser extent mutual funds and entry to this market, though safe in current times, is not available to the retail investors.

Given its proposed exposure in `safest of the safe' investments exclusively in government paper, the K-Gilt plans to offer an approximate (not assured) annual return of around 12 per cent. The offer document, however, says investments are subject to market risks and there is no assurance or guarantee that the objectives of the scheme will be achieved.

However, recently, the Reserve Bank of India has offered on tap a 20-year paper with an annual return of 12.5 per cent. Even the earlier floated gilts have a long-term tenure of around 12 years.

KMMF aims to attract a section of investors who have locked their funds in banks' savings schemes, which offers almost negligible returns despite announcing 4-5 per cent annual return. The catch is invisible to lay investors, as the banks usually calculate interestpayable on the minimum balance lying in the depositor's account during 10 to 30th of each month. It is during this period, majority of bank depositors has almost minimum balance in their account after withdrawing their pay-cheques. By paying the claimed 4-5 per cent on the minimum balance during this period, the banks end up paying a negligible 1-1.5 per cent and not 4-5 per cent as announced.

The K-Gilt will be offered in two plans: Plan A (Savings Plan) is aimed at investors with a short time horizon, investments under his plan will be made in Government Securities with days to maturity of less than one year. A smaller part of the investment may be in longer maturity.

Plan B (Investment Plan) is aimed at investors with longer time horizon, investments will be made in Government of India securities with days to maturity of more than one year. A smaller part of the investment may be in maturity less than one year. Investors are free to choose any of these two plans and will be allowed to enter and exitfrom them either partly or full at the scheme's NAV after 30 days of the opening of the scheme. Instead, the returns accrued will be recouped in the investor's kitty which will be paid at a later stage.