Under Section 88, investments not exceeding Rs 10,000 would be eligible for deduction from income-tax to the tune of 20 per cent of the amount subscribed and the deduction would be 25 per cent for some specified sections under the IT Act. Keeping this in mind, the minimum application amount was kept at Rs 500 and further investment in multiples of the amount, he said adding there would not be any load (charges) applicable on the scheme till March 2001. The initial offer would be at a price of Rs 10 per unit for cash at par.

"The offer document has already been filed with the Securities and Exchange Board of India (Sebi). It may take two to three weeks to grant clearance and the scheme is likely to be launched in the first week of next month," Mr Barve said.

"But we would ensure that all the investors are allotted units before next March-end against applications received during the initial offer, to ensure that they get tax benefit this year," he added. Recent relaxation of MFs' initial offer rules also makes it possible.

The primary objective of the scheme was to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity-related instruments, HDFCMF said in its offer document. The scheme also provides for investment in derivatives to the tune of 20 per cent of the total assets, mainly for the purpose of hedging. Thus, this becomes one of the first few schemes to propose investment in derivatives.

The scheme would invest 80 per cent (indicative) of its net assets in equity, equity-related instruments and debt securities and money market instruments, while the remaining 20 per cent be in the form of cash and/or invested in call money market, the MF said.

However, all the equity related MF schemes carry a minimum of three-years lock-in period on investments for getting tax benefits.

The scheme offers two broad options to investors - dividend plan and growth plan. Annual dividend would be paid subject to availability of distributable profits under the former, while the dividend would be reflected in the NAV of the growth plan.

Other features of the scheme include no tax deduction at source on redemption, irrespective of the amount redeemed, and repatriation benefits available to non-resident Indians (NRIs), overseas corporate bodies (OCBs) and foreign institutional investors, but with some conditions. The scheme would also facilitate sale and repurchase of units at net asset value (NAV) based prices within a month of closure of the issue, Mr Barve added.