Mutual Funds
JPMorgan US Growth Equity Offshore Fund: Another US fund-of-fund scheme

Schemes investing in US markets seem to be the flavour of the season and now JP Morgan, not wanting to be left behind, has joined in

Franklin Templeton MF recently launched a scheme—Franklin US Opportunities Fund and soon, Reliance Mutual Fund and DSP BlackRock Mutual Fund followed suit and filed offer documents to launch Reliance US Dollar Fund and DSP BlackRock US Flexible Equity Fund respectively. JP Morgan which has launched three offshore equity funds in the past, recently, filed an offer document with the Securities and Exchange Board of India (SEBI) to launch another fund-of-fund (FoF)— US Growth Equity Offshore Fund. The other FoF schemes are: JPMorgan JF ASEAN Equity Off-shore Fund, JPMorgan JF Greater China Equity Off-shore Fund and JPMorgan Emerging Europe Middle East and Africa Equity Off shore Fund. JP Morgan is probably looking to give investors a varied option of offshore funds to invest in and competition to DSP BlackRock MF, another fund house, which has a wide array of foreign funds. The asset management company filed a couple of offer documents last year to launch JP Morgan America Large Cap Equity Offshore Fund and JP Morgan Global Financial Equity Offshore Fund, these schemes, however, are yet to be launched.

According to the offer document, JPMorgan US Growth Equity Offshore Fund, will invest 95% to 100% of its assets in JPMorgan Funds—US Growth Fund. The rest would be kept in money market instruments, liquid schemes, cash and cash equivalents. The foreign fund which was launched in October 2000 has an objective to invest  in companies  that  have  the ability  to  deliver  significantly  higher  growth  than  market   expectations  over  the  next  three to five  years. At least 67% of the assets of the underlying scheme will be invested in a growth style based portfolio of equity securities of companies that are domiciled in US or carrying out the main part of their economic activity in the US. The underlying scheme may also invest in Canadian companies. The scheme performance will be benchmarked to the INR equivalent Russell 1000 Growth Index (Total Return Net).

The underlying scheme, priced in US dollars, has returned 17.25% year-to-date, as on 30 April 2012. The benchmark returned 14.36% and the Sensex returned 5.86% in the same period. However, in the last three-year, five-year and 10-year period where it returned, 20.45%, 0.72%, and 2.18% respectively, it failed to outperform the benchmark which returned 20.85%, 3.61% and 4.73% in the respective periods. The top holdings of the fund are: Apple, Mastercard, Biogen Idec, IBM and Intuitive Surgical. More than half of the assets of the fund are invested in the technology and consumer products sectprs.

This being a FoF scheme you will not get any long-term tax benefit you would have got had you invested in any domestic equity scheme. A better option for the investors would be to rely on a systematic investment plan (SIP). Which scheme to choose? A good equity diversified scheme would do the trick. Namdev Chougule will be the fund manager of the scheme.

Additional Scheme Details
Minimum Investment amount: Rs5,000 and in multiple of Re1 thereof
Additional Investment amount: Rs1,000 and in multiple of Re1 thereof

Annual scheme recurring expenses: 1.650% p.a. of average daily net assets
Exit load if switched before one year: 1%, and nil after one year
Taxation: Investors would be subject to long-term and short-term tax on capital gains.


Axis Bank ties up with Bahrain's bank for remittance

Any person having an account with Ahli United Bank would be able to wire money to a bank account holder in India using the Internet banking platform

Mumbai: India's third largest private sector lender Axis Bank on Monday said it partnered with Bahrain's Ahli United Bank for inward remittances, reports PTI.

Under the tie-up, any person having an account with Ahli United Bank would be able to wire money to a bank account holder in India using the Internet banking platform, Axis Bank said in a release.

If the beneficiary account holder is an Axis customer, the amount will be credited the same day but if the account is in any other bank branch covered under the NEFT network, it can take up to two days, it said.

Customers can initiate transactions of up to BHD 5,000 a day using the service at present, it added.



Economy & Nation Exclusive
Maharashtra State Co-Op Bank omits key information from its annual report

The Maharashtra State Co-Operative Bank has left out the Audit Memorandum and the annexure from its 2011 Annual Report which has left the stakeholders in the dark about its true condition

A close look at last year’s annual report of Maharashtra State Co-Operative Bank (MSCB) reveals that important pages are missing from the auditor’s report—namely the Audit Memorandum and annexure (Part A, B and C). This is how companies hide crucial information from the stakeholders and keeps them in the dark. Obtaining even a single piece of information, the stakeholder is made to run from pillar to post, as always.

According to Page 54 of the 2011 MSCB Annual Report, the auditors, Batliboi & Purohit had mentioned;

“In our opinion and to the best of our information and according to explanations given to us, the said accounts, read together with the Significant Accounting Policies in schedule No XI and Notes forming part of accounts in schedule No XII and our Comments and Observations in the Audit Memorandum (Part A, B and C) of the even date, gives the information required by the Maharashtra Co-operative Societies Act, 1960 the Rules 1961 made there under and Banking Regulation Act, 1949 (as applicable to Co-operative Bank), in the manner so required, give a true and fair view.”

attempt to locate the Audit Memorandum or its comments and observations, especially Part A, B and C (the annexure) of the memorandum, which is material and important for stakeholders and depositors, drew a blank.

We sent an email was sent to Batliboi & Purohit’s partner, Raman Hangekar, who signed off the Audit Report, requesting copies of the same. However, he sent a terse reply that said, “Please refer to Maharashtra State Cooperative Bank”. That’s right—a one liner. Thereafter, a mail and letter was sent to MSCB requesting the same. No email reply has been received so far.

We are now in the process of writing to the Institute of Chartered Accountants of India (ICAI), the body that regulates the accounting profession, to take action and ensure that MSCB’s Audit Memorandum and its annexures are duly disclosed.

Moneylife had earlier written a piece on Maharashtra State Co-Operative Bank  and cited that it was in deep financial trouble due to its suspicious loan distribution to some of its favoured co-operative banks as well as some loss-making sugar co-operative factories. The very next year, a press note was issued, from its administrators, stating, “The liquidity position of the bank is adequate to meet its demands towards deposits.” This is despite its negative net worth of Rs144.22 crore for the 2009-10 fiscal.

In the 2010-11 fiscal, according to the annual report, it is pertinent to note that the company was imposed a penalty of Rs5 lakh, for non-compliance of Reserve Bank of India (RBI) directions issued u/s 35A of the Banking Regulation Act, 1949 (The Act). According to Section 35A of the Act, it gives RBI the powers to give directions to a bank, in the interest of depositors and to safeguard their interests.

Furthermore several deviations were noted in the annual report and stated in verbatim, below:

1) Deferred Tax Asset of Rs112.92 crore has been accounted in the books of account based on the management representation that sufficient future taxable income will be generated against which deferred tax asset will be adjusted.
2) As per AS-22, “Accounting for Taxes on Income”, the deferred tax asset of Rs112.92 crore has been accounted in the books of accounts. The bank does not have deferred tax liability but an amount of Rs56.16 crore has been shown as deferred tax liability under the head of other liabilities due to wrong accounting which should have been transferred to the reserves. Accordingly, other liabilities have been overstated and reserve fund and other reserves understate to that extent.
3) The balance sheet shows NPA (non-performing assets) interest receivable of Rs542.55 crore up to 2007 under the head interest receivable account instead of non-performing interest receivable account (as per contra). Therefore NPA interest receivable account is understated and interest receivable account is overstated to that extent.
4) The paid up capital shows 20 shares of Rs50 each, which is not in commensurate with the authorised capital of Rs1,000 per share, and the capital is not shown correctly to that extent.
5) The bank has not complied with Accounting Standard-3, “Cash-Flow Statements”, Accounting Standard-17, “Segment Reporting” and Accounting Standard-19, “Leases” issued by ICAI.

Given the above irregularities, as well as its past reputation, the bank could be holding back crucial information that could be materially adverse for depositors and stakeholders alike. Will ICAI take action? Will the stakeholders get the information they seek?



nagesh kini

4 years ago

I doubt if there is any improvement at all since you last wrote. It'll have only worsened.
Suggest mail your report and readers' comments to MSCB HO, RBI and ICAI asking for their views.

Rahul Shivshankar

4 years ago

Hi want to know If one can file a RTI at ICAI seeking information on a Particular Certification of a Audit Report of a Balance Sheet , and If the ICAI can confirm there has no error in the Balance Sheet and Profit of Accounts as per the SEBI and ICAI Guidlines


nagesh kini

In Reply to Rahul Shivshankar 4 years ago

Yes, I think so!

Nagesh Kini

5 years ago

The Statutory Auditors of the bank need to explain why they have attested the Accounts by saying that "the said accounts... give a true and fair view" despite the adverse notes and qualifications i to v which are mandatorily required to be quantified and the total impact also stated in the same audit report.
Will the ICAI wake up let the stakeholders know what steps it has taken for violations?

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