‘Zero’ dividend for Mahapola Fund in 2011, against Rs.60.5 mln in 2010, AG reveals
View(s):The Auditor General (AG), in another alarming revelation, has said that no dividend income was received for the Mahapola Fund (MF) from its fund management unit in 2011 compared to Rs. 60.5 million received in the previous year.
This comes at a time when the Government has pledged to double the ‘scholarship (payment per student)’ to Rs. 5,000 from Rs.2,500 now but the MF is unable to do so due to financial constraints, senior government sources pointed out. In his 2011 report, the AG revealed that “any dividend whatsoever had not been received for (the) Rs. 200 million invested by the fund as initial capital for 5 years from 2003 to 2007 (while) a dividend amounting to Rs. 5 million, Rs.4.8 million and Rs. 60.5 million had been received for the years 2008, 2009 and 2010, respectively”.
The AG’s report clearly states that no dividend was received from 2003 to 2007 while a dividend was received from 2008 to 2010.
All the 11,500 Mahapola scholarship recipients receive their monthly payments arising out of dividend or interest income from MF investments through Natwealth management of the funds.
These disclosures come in the wake of the recent stir created by the AG’s comments in the 2011 Employees Provident Fund report where it was observed that the value of share investments in 58 companies had ‘diminished’ by over Rs. 11 billion. The Central Bank countered media reportage of these comments saying these are only ‘unrealised losses’, meaning that such a loss would have been felt only if the shares were sold at lower than the original purchased price.
Referring to the MF, the sources said that National Wealth Corporation Ltd and NatWealth Securities Ltd set up as limited liability companies and MF subsidiaries to manage and enhance the return on its investments had failed in its role. These are not independent companies but controlled by the MF.
The AG’s report said according to the MF Trust Board paper No 52/09 of the year 2011, the profit of the company as at December 31, 2011 was Rs. 74,161,271 but no dividend whatsoever had been received.
The AG also said that “(since) the above company had become inoperative after 2004, a lesser interest than the competitive interest rates had been received by the fund as the company was in operation without competitiveness”.
However, by 2004 the management functions changed when NatWealth set up a separate primary dealership unit to trade in treasury bills and government securities.