The Education Ministry and the Fiscal Policy Office joined a recent discussion with the Securities and Exchange Commission, the Association of Investment Management Companies (AIMC) and the Revenue Department to discuss progress in establishing the fund.

The Revenue Department has held off on proffering tax breaks, claiming it already allows deductions for charitable donations to education.

The fund, initiated by the SEC and the AIMC, was structured like provident or long-term equity funds (LTFs). It would be another long-term investment fund, in which donors would buy units for specific students. Investors, as discussed by the SEC and AIMC, would be attracted to donate by a tax break, similar to the tax privileges given to LTF investors.

The Revenue Department allows taxpayers to deduct up to Bt300,000 a year of their combined new investments in LTF and retirement mutual funds (RMFs), depending on the amount invested and the rate of income tax applicable to the individual investor.

Duangmon Chuengsatiansup, director of the SEC's investment management supervision department, warned RMF investors to stick with the original purpose of RMFs and not to redeem their RMF holdings now.

Earlier, confusion spread

about the RMF's conditions. The Revenue Department recently announced that money invested in RMFs could be redeemed after five fiscal years.

Duangmon said the purpose of the RMF was to save over time for retirement. That is why those who invest in an RMF must contribute at least Bt5,000 a year every year and can't redeem their units until they turn 55. Those who follow the regulations can take a personal income-tax deduction.

Meanwhile, the fast and enormous growth of SCB Asset Management (SCBAM)'s SCB Savings Fixed Income Open-end Fund (SCBFF) - which has swollen by more than Bt60 billion so far this year to Bt146.29 billion and helped lift the company to become the country's largest mutual-fund player - has raised some concerns about the mutual fund's fixed-income portfolio.

Back in late 2003, Ayudhya JF Asset Management faced a huge redemption run in one day, which threatened to crash the bond market. Bank of Ayudhya, its major shareholder, had to come to its rescue.

Duangmon said the SEC was well aware of the concern. After monitoring SCBAM, the SEC found that its SCBFF was highly secured.

"Around 58.2 per cent of SCBFF's portfolio is invested in bank products, 31 per cent is in government bonds and the rest in AAA-rated corporate debentures. Portfolios like this are not alarming. Also, Siam Commercial Bank, SCBAM's parent, is a very strong bank and has thrown full support to its asset-management unit," she said.

Piyarat Setthasiriphaiboon

The Nation