``We had plans to launch a new tax saver and also received Sebi's approval to the same but now we have decided to make the existing tax saver open-end, given its impressive track record,'' said Ajai Kaul, country head, Alliance Mutual Fund.

Alliance Capital Tax Relief, which has a current NAV of Rs 36.20, will open for repurchase in April this year. ``We expect some redemptions to take place since the NAV is currently very healthy but we haven't figured out the extent of redemption,'' Kaul added.

In three years, the fund has given a capital appreciation of Rs 26.20 or 262 per cent! The AMC is considering a few options to bring down the NAV to reasonable levels since not many investors will be willing to investat such high levels. ``Most investors may not like to enter when the NAV is so high since they will have doubts on further capital appreciation,'' said an analyst.

Currently, Alliance Mutual Fund has two options. One, to declare a dividend of 260 per cent and pay Rs 26 per unit (assuming the current NAV of Rs 36.20) and bring down the NAV to Rs 10. ``That is a way to go but it may lead to investors expecting such high dividends from us in future,'' pointed out Kaul. Even if Alliance plans to declare a hefty dividend, it will first have to go open-end since dividend payout from a closed-end equity fund will attract a 10 per cent dividend tax.

``Payout of such high dividend will put unecessary pressure on the fund managers in future although a tax-free dividend of 260 per cent is just fantastic,'' said an industry observer.

The other option being explored by Alliance is to split units or in other words, issue bonus units. ``We will split the units and issue fresh units to our investors in the tax-planner.This will increase the unit capital and consequently, bring down the net asset value,'' Kaul said. At the current NAV of Rs 36, the fund can give 2.6 units in bonus for every one unit and bring down the NAV to par value.

Yet another way out is to give a mix of bonus and dividend. ``Alliance can issue a 2:1 bonus and give a 60 per cent or Rs 6 as dividend which adds upto the current NAV of Rs 36. Thus, investors will also get tax-free dividend,'' said an analyst.

An investor, who had put in Rs 10,000 in ACTR '96, has seen his investments grow to Rs 36,200 in less than three years. The fund has a current corpus of Rs 4.65 crore. The top five holdings, as on September 30, 1998 are Infosys, Bata, BFL Software, Ponds and Indian Shaving Products.

``A unitholder can redeem the money over and above his initial investment and let his Rs 10,000 stay invested in ACTR '96 which will work for him for the next three years. Besides, he will now have to pay only 10 per cent aas long-term capital gains against 20 percent earlier,'' said an analyst.