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UTI Mastershare declares 16% dividend

Aabhas Pandya

In a smart move, the Unit Trust of India has declared a 16 per cent dividend (Rs 1.60 per unit) in Mastershare to avoid the 22 per cent dividend tax on close-ended funds, which comes into effect from June 1, 2000. The Trust normally declares the Mastershare payout every October. The record date for dividend purpose is May 20, 2000.

It may be recalled that the 2000-01 Budget had hiked the dividend tax on close-ended funds and open-ended funds with less than 50 per cent equity exposure to 22 per cent from the previous year's 11 per cent. Based on the fund's unit capital of Rs 9.127 trillion, the dividend payout will entail a total outflow of Rs 1.620 trillion, including Rs 160 million (at 11 per cent) on account of the dividend tax. At 22 per cent, this would have resulted in a tax outgo of Rs 320 million. Since the tax also flows out from the assets managed by the fund, UTI has saved Rs 160 million for Mastershare investors.

The first equity fund in the country, Mastershare has assets worth Rs 17 trillion under management on its current net asset value of Rs 18.64. One of the few close-ended funds, Mastershare units are actively traded on bourses. Mastershare closed at Rs 15 on Friday on the BSE, which translates into a dividend yield of 10.66 per cent. The units trade at a healthy discount of 19.52 per cent to the NAV.

This is the 14th uninterrupted annual dividend from Mastershare since its inception in September 1986. Besides, there have been three bonus issues and two rights issues in its 14-year history. If one were to re-invest the bonus, rights and dividend payouts, the fund's NAV stands at Rs 179.23. This translates into an annualised return of over 24.07 per cent!

Source: Value Research

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