EPF says profits in five years 2009 to 2013 exceed Rs. 558 b

Wednesday, 23 April 2014 00:00 - - {{hitsCtrl.values.hits}}

In a statement the Employees’ Provident Fund (EPF) said yesterday that as a result of prudent investments and sound management, it has been able to declare impressive rates of return of 13.75% in 2009, 12.5% in 2010, 11.5% in 2011, 11.5% in 2012 and 11% in 2013 out of profits earned by the Fund. “Such rates of return were substantially above the interest rates applicable to normal deposits in the financial market during the respective periods. "Unrealised losses fluctuate widely as is evident from the peak of Rs. 20.7 billion unrealised gains on 14 February 2011, when the All Share Price Index was at its all time high, to Rs. 9 billion unrealised losses at end 2013. Such unrealised losses have now reduced to Rs. 4.4 billion by 21 April 2014, or 51%, while the ASPI has increased only by 4.46% during the same period." In absolute terms, the Fund has made profits of Rs. 101.7 billion, Rs. 111.5 billion, Rs. 107.5 billion, Rs. 111.8 billion and Rs.125.6 billion in the years 2009, 2010, 2011, 2012 and 2013 respectively, for its members,” the EPF said. The statement from EPF comes hot on the heels of reports that the EPF has made billions of losses in investing in the stock market. EPF claimed such reports are “misleading and erroneous”. “Such losses reported by some media and politicians are not realised losses, but are marked-to-market unrealised losses, arising from variations in marker prices of stocks. Therefore these unrealised losses/gains do not increase or decrease the benefits distributed to the members,” they said. “Such unrealised losses fluctuate widely as is evident from the peak of Rs. 20.7 billion unrealised gains on 14 February 2011, when the All Share Price Index was at its all time high, to Rs. 9 billion unrealised losses at end 2013. Such unrealised losses have now reduced to Rs. 4.4 billion by 21 April 2014, or 51%, while the ASPI has increased only by 4.46% during the same period. This confirms the fact that the EPF’s equity portfolio has been managed prudently so that performance of the portfolio has well out-performed the market trends,” the EPF statement added. It also said the EPF has invested around 92% of its funds in government securities, and around 6% in the stock market. The balance 2% has been invested in corporate debentures and short-term government securities. The investments in the stock market have been made with a long term focus to generate profit and enhance the Fund’s capital base over the longer term. In that exercise, the EPF considers, inter alia, the intrinsic value of shares of companies and their longer term outlook, the possible enhancement of share value in the medium to long term, the company’s governing structures and future plans, the quantity of shares available of such companies, the viability and growth potential of the relevant industry and the possible impact of the growing economy on the company. Further, as is practiced by many large long term funds all over the world, the EPF maintains its equity portfolio as a pool of diversified investments. In the case of equity investments, it must be noted that the performance of different companies and the market values of the shares of companies within the portfolio at different times, depend on global, economic, political, financial, sector-specific and company-specific, factors. In that background, companies as well as the entire share market does not perform uniformly, nor does the market prices of shares continue to rise at all times. In recent times, the Colombo Stock Exchange had experienced a bearish trend, where prices of a majority of the shares have been trading at lower rates than those that prevailed previously. This is not an unusual phenomenon today, with many stock markets all over the world experiencing slow growth on downturns. In such situations, it is natural to have unrealised losses in some shares on a marked-to-market basis, but such losses would be realised only if such shares are sold at losses. Accordingly, there have been no realised losses to the EPF, and in any event, most shares are expected to record reasonable increases in value of the Fund over the longer term. “Therefore, the EPF regrets the attempts of certain persons to mislead the general public and its members by erroneous and sometimes mischievous media reports,” the statement added.

Harsha promises to bring culprits to book over shady EPF investments

UNP MP and Economic Affairs Spokesperson Dr. Harsha de Silva yesterday vowed to bring culprits to book over what he described as shady investments by EPF, causing loss of billions based on findings by the Auditor General. Following is the full text of the UNP MP: Leaked 2011 audited accounts of the Employees’ Provident Fund (EPF) published in media says that the EPF had lost close to Rs. 12 billion in share value in the Colombo Stock Exchange (CSE) during the year, leading to a fall in the return to all its members. On inquiry from Parliament today I was informed that the EPF accounts for 2011 had yet not been tabled by the Minister of Labour even though seriously delayed. This is notwithstanding the numerous statements by the Central Bank, which manages the EPF, that certain Opposition politicians are spreading falsehoods that the said accounts had not yet been submitted and not to be ‘misled’ by such statements. This is to reiterate that the last set of audited accounts of the EPF available in Parliament, by law, is for 2010 and even in that case the investments of the fund had not been sufficiently audited giving more emphasis to the administrative functions of the fund. It is only from 2011 the fund proper was to be audited, which the Legislature is yet to see. Based on this report, we would decide on the future course of action with respect to the previous audits. The leaked document provides sketchy information on several questionable transactions where the exclusively Central Bank-managed fund has lost huge amounts of money belonging to the millions of private sector employees. For instance, the Auditor General (AG) has pointed out massive investments in serial loss-making finance companies and hotels at inflated prices where the EPF had naturally ended up with big losses. The AG questions the basis of investment decisions to purchase shares of technically-bankrupt companies with the full knowledge the investments will not be profitable. We will get to the bottom of what looks like massive fraud in certain EPF transactions in the CSE in order to bring the culprits to book who seem to have enriched themselves by robbing the pension of millions of hardworking private sector employees.