The activity at the counter has picked up after Morgan Stanley managing director, Vinod Sethi said that the mutual fund was exploring various options to reward its unitholders. ``We are in the business of giving returns to unitholders and we are exploring various options including dividend to do the same,'' Vinod Sethi had told The Financial Express.

With the spurt in market price, the discount to NAVhas narrowed from 47 per cent to 34 per cent. The fund had a NAV of Rs 12.56 on May 28. ``Investors have been buying at the counter in hope of the fund turning open-end and then, declaring a dividend. While MSGF is an equity scheme, there will be no tax on the dividend declared by the fund if it goes open-end,'' said a market source.

Although dividend has been expected from Morgan Stanley for quite some time now, the performance of the fund and budgetary sops have further fuelled the speculation at the counter. For the year ended March 31, 1998, NAV of the fund was below par and any dividend declaration would have further pulled it down. For the year ended March 31, 1999, the NAV of the fund rose by 46.55 per cent to an all-time high of Rs 13.41 with aggressive restructuring of the portfolio paying off. At the current NAV of Rs 12.56, the fund can declare a dividend of as high as 25 per cent, with its dividend adjusted NAV staying above par.

For the year ended March 31, 1999, the fund made a profit of Rs127.23 crore on sale of investments against a loss of Rs 123 crore in the previous year. The reserves of the fund have also shot up from a (-) Rs 68 crore to Rs 259 crore. This includes the unit premium reserve of Rs 55.23 crore since Morgan Stanley has been buying units from the market at discount to the par value.

For the year ended March 31, 1999, Morgan Stanley bought back 4.21 crore units from the market at an average price of Rs 6.16 which translates into a discount of Rs 3.84 to the par value of Rs 10. This added Rs 16.16 crore to the unit premium reserve.