Most investors would have been distressed on hearing the news that UTI-I had decided to declare a lower dividend for its closed-end MIPs for the period April 1, 2003 to March 31, 2004 (see UTI Monthly Income Plans: At a Glance). Barring MIP 2000, the dividend announced for other MIP schemes is even lower than what was given out last year. However, looking at the net asset value (NAV) of these schemes (which are languishing at below par), one should be pleased with the dividend amount. Had UTI-I been under the purview of the market regulator, the Securities & Exchange Board of India, these schemes could not have declared any dividend because as per SEBI guidelines, funds have to pay dividend out of the accrued income and this means NAV above par.
However, there is one discrepancy that you cannot overlook. Both cumulative and dividend plans will be redeemed at Rs 10 or NAV, whichever is higher at maturity. Thus, an investor who has opted for cumulative option would be regretting not choosing the dividend plan. But that's in hindsight. The bottomline clearly is that low dividend doesn't mean much for an investor as protection of capital is assured here.