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Sebi churning rule fells JM scheme

BS Markets Bureau

The fickle stockmarket has claimed yet another mutual fund scheme.

JM Mutual Fund has announced a premature winding up of its scheme JM Tax Cover 1996 -- a closed-end tax-saving scheme which was due to be redeemed on March 31, 2006. The scheme was launched in 1996.

According to an announcement, the board of trustees of the fund has decided to wind up the scheme prematurely and unitholders will be repaid the redemption proceeds at the net asset value as on August 14, 2001, which has been set as the record date for the purpose.

The net asset value will be computed after taking into account all the expenses connected with the winding up of the scheme. The fund has also applied to the National Stock Exchange for de-listing the scheme from the exchange.

Incidentally the scheme which has a dividend option and a growth option has a corpus of around Rs 240 million, while its performance has been in the negative zone in terms of returns.

Officials in the fund said they found themselves unable to comply with the strict Securities and Exchange Board of India regulations on investment and diversification (or churning of the portfolio). "It was almost impossible to comply with this."

Combined with the low corpus of the scheme the fund managers were not able to manoeuvre within the narrow restrictions imposed by Sebi and give adequate returns to the investors.

The dividend plan has a net asset value of Rs 7.15 while that of the growth plan is higher at Rs 12. During the last three months the dividend plan has given a negative return of around 4 per cent while on a one-year time frame the return is a negative 50 per cent.

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