Due for redemption in March, 1999, Masterplus had gone open-ended in October last year. With the fund heavily loaded in favour of cyclical stocks, the net asset value has catapulted by around 20 per cent from Rs 19.67 to Rs 23.48 in the last one month.

The dividend, which will be paid only in July, will enable investors to earn 100 per cent tax-free income. On a unit price of Rs 10, the payout of 12 per cent will translate into an income realisation of Rs 1.20.

In the past, UTI has paid a dividend when its equity funds have gone open-ended. In the case of Mastergain '92, the mutual fund behemoth had declared a dividend of 12 per cent in 1997, just before the fund went open-ended. The other equity fund, Grandmaster, had paid adividend of 12 per cent immediately after the fund went open-ended in 1996.

"Although none of the equity funds have a provision for dividend, UTI has made a payout around the time the funds have gone open-ended. A dividend was long expected from Masterplus since it has one of the healthiest NAVs in the equity fund category," said an analyst. "With a healthy NAV and a tax-free dividend, Masterplus is an ideal candidate for a dividend payout," added a sector observer.

With a unit capital of Rs 732.86 crore, the open-ended growth fund has a current corpus of Rs 1,721 crore, which makes it the second largest equity fund in the UTI stable after Mastergain '92. The dividend of 12 per cent will result in an outflow of roughly Rs 88 crore from Masterplus. Although Materplus units are traded on the bourses, there has been no sudden change in the market price as the fund is open-ended.