Return
to Story Page
To print: Select File and then Print from your
browser's menu
Vivek Law
MUMBAI, Oct 1: UTI chairman PS Subramanyam has, in a letter to finance minister Yashwant Sinha, said that "a major part" of the trust's US-64 portfolio depreciation was caused by investments in PSU stocks like ONGC, Indian Oil Corporation, State Bank of India, Bharat Earth Movers, Shipping Corporation, IDBI and Sail.
According to Subramanyam, these companies, along with other blue-chips, represent long-term and strategic investments and hence it would not be right to declare the net asset value under the scheme.
The UTI chief has assured the finance minister that the development reserve fund, which has been created in the books of UTI, has not been touched for income distribution under US-64. The DRF continues to be a sort of safety net for the Trust's assured income schemes, he has pointed out. The current corpus of the DRF is about Rs 800 crore, said UTI sources.
Subramanyam's letter follows the recent controversy kicked up by the disclosure that the US-64 scheme had a negative reserves position ofover Rs 1,000 crore as on June 30, 1998, due to a depreciation in its equity investments.
Explaining the rationale for distributing hefty dividends to US-64 investors on June 29, Subramanyam told the finance minister that the income distribution of 20 per cent amounted to Rs 3,125 crore and this was fully covered by the availability of net income of Rs 3,222 crore earned during the year.
Mutual funds are permitted to make income distribution from the net income earned while depreciation in the value of investments is debited to the reserves directly. This accounting policy has the approval of the board of trustees and UTI's statutory auditors.
Meanwhile, Subramanyam has also responded in a similar vein to Sebi chairman DR Mehta's letter regarding US-64. Mehta told The Financial Express that his letter of enquiry was to merely place on record his earlier discussions with the Trust chairman. "They (UTI) have assured us that everything is under control and we have left it to them to deal with the matter",said Mehta. Sebi sources said that legally Sebi has no jurisdiction to dictate terms to UTI on its US-64 scheme as UTI has been created under a separate Act of Parliament. "However, there has been an informal understanding (that UTI will submit its post-1994 schemes for Sebi approval) and that is what is being followed in this case", said a source.
Subramanyam has also told Mehta that the Trust has not dipped into the DRF for income distribution or adjusted it against depreciation in the US-64 portfolio.
"The figure of Rs 1,098 crore of negative balance in the reserve account is an accounting entry. It is so especially in the sense that it partly represents the unrealised (notional) depreciation in the value of investments as has been explained", Subramanyam has informed the Sebi chief.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
------------------------------------------------------------
This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
------------------------------------------------------------