Giving the example of US-64, Subramanyam said the 10 per cent current yield on a sale price of Rs 13.50 in July was a reasonable rate of return under the circumstances, considering its tax-free status. This return also compared favourably with the 10.5 per cent taxable return on its latest series of one-year Encashment Bonds, he added.

``Even in 1998-99, our returns on investible funds in US-64 worked out to 16 per cent of our outstanding unit capital but we preferred to pay only 13.5 per cent to rebuild our reserves. Significantly, we have moved from a negative to a positive balance of reserves,'' Subramanyam said.

As for retaining small investors who do not fall in the tax bracket,Subramanyam said these investors would prefer US-64 because of its inherent safety and liquidity.

``Although PPF and postal deposits offer higher returns of 12 per cent and above they cannot match the liquidity of US-64,'' he asserted.

Subramanyam said that, in the six months to June 30, 1999, nearly 91 per cent of UTI's equity schemes had outperformed the National Index while 67 per cent had outperformed the Bombay Stock Exchange 30-share sensitive index.

Interestingly, some of UTI's laggards like Primary Equity Fund (PEF), MEP'94, MEP'95 and MEP'97 have turned around and reported positive NAVs in July this year. PEF, which has an infotech sector weightage of nearly 45 per cent, has improved its NAV to Rs 14.40 on July 15,1999.

On the phenomenon of redemption pressures on mutual funds (which is as high as 40 per cent annualised) in the country, Subramanyam said this only showed the resilience of UTI which had been able to retain investible funds and also maintain its 80 per cent market share ofassets under management in the industry.

``Our capital markets are in a stage of transition and both the debt and equity markets are yet to attain the depth and breadth of mature markets like the US where redemptions are much lower at 10-15 per cent,'' he added.

In the current year, UTI hopes to mobilise Rs 17,000 crore from fresh sales against Rs 15,505 crore in the year ended June 30, 1998. On the other hand, it has committed redemptions of Rs 1400 crore on account of MIP'94 (III) and Mastergrowth.

He added that the board is yet to take a decision on Mastergrowth which has net assets of Rs 700 crore and a unit capital of Rs 450 crore. The close ended scheme matures on April 1, 2000 and the scheme is likely to go open-end like Mastergain, Masterplus and Grandmaster although the UTI chief remained non-committal.