In terms of Section 5 (1) e. of the EPF Act, Monetary Board may invest such of the moneys of the Fund as are not immediately required for the purposes of this Act in such securities as the Board may consider fit and may sell such securities. Accordingly, on behalf of the Monetary Board EPF Department of the Central Bank of Sri Lanka manages EPF funds with the view of providing maximum retirement benefits to members through prudent and innovative management of the fund.

Fund Management

The investment policy of the Fund continued its focus on providing a long-term positive real rate of return to the members while ensuring the safety of the Fund and maintaining a sufficient level of liquidity to meet refund payments and other expenses of the Fund. In 2018, EPF Department continued to invest its funds specially in long term Treasury Bonds and Corporate instruments. The total investment portfolio (book value) of the Fund grew by 15.4 per cent to Rs. 2,298.8 billion as at end 2018 from Rs. 1,992.4 billion recorded as end 2017 (Table 1).

Investment Portfolio

Type of Investment

End 2017

End 2018

Amount (Rs.bn.)

Share (%)

Amount (Rs.bn.)

Share (%)

Treasury Bonds &Bills

1,818.6

91.3

      2,119.2

92.2

Equity

84.3

4.2

74.9

3.3

Corporate Debts

41.5

2.1

44.8

1.9

Fixed Deposits

48.0

2.4

 33.6

1.5

Reverse Repos

-

-

26.4  

1.1

Total

1,992.4

100.0

2,298.8

100.0

Table 1

During 2018, the total investment income of the Fund amounted to Rs. 222.4 billion, recording a decrease of 0.1 per cent over the previous year (Table 2). Interest income was the major source of income to the Fund and it grew by 4.47 per cent to Rs.229.4 billion in 2018 from Rs. 219.6 billion in 2017. The dividend income realised from equity portfolio increased by 29.9 per cent to Rs. 3,887.6 million in 2018, compared to Rs. 2,993.6 million earned in 2017. Further, purchase of Treasury Bonds from the secondary market was resumed in 2018. Overall, return on investments of the Fund has recorded 10.4 per cent in 2018 compared to 11.8 per cent recorded in 2017.

Income on Investments

Source of Income

2017

2018

Amount (Rs.mn.)

Share (%)

Amount (Rs.mn.)

Share (%)

Interest with amortization gains

219,635.3

98.7

229,446.0

103.1

Capital gains from Government Securities

-

-

-

-

Marked to market gain/loss from Government Securities

1,640.2

0.7

-

-

Marked to market gain/loss from Equity

(163.4)

(0.1)

(10,901.3)

(4.9)

Capital gains from Equity

-

-

7.2

-

Dividends

2,993.6

1.3

3,887.6

1.7

Impairment of Financial Assets

(1,502.1)

(0.7)

0.6

-

Total

222,603.7

100.0

222,440.1

100.0

Table 2

As at end 2018, the investment portfolio consisted of 92.2 per cent in government securities, 3.3 per cent in equity, 1.9 per cent in corporate debentures and trust certificates, 1.5 per cent in fixed deposits and the remaining 1.1 per cent in reverse repurchase agreements. The maturity profile of the government securities portfolio together with yield rates as at end 2018 are given in Table 3.

Maturity Profile of Government Securities Portfolio

Maturity

Maturity ValueAmount (Rs.mn)

Share
(%)

Weighted Average Yield (%)

Less than 1 year

124,096.4

5.8

9.90

1-2 years

182,944.5

8.5

11.26

3-4 years

269,016.6

12.5

10.50

More than 5 years

1,571,118.8

73.2

11.37

Total

2,147,176.2

100.0

11.16

Table 3

Overall Return of the Fund

The Fund earned a total gross income of Rs. 222.8 billion in 2018, recording a decrease of 0.2 percent compared with the previous year (Table 4). EPF was able to earn 10.4 per cent return on investment in 2018 while maintaining operating expenses to gross income ratio at 0.68 percent in 2018. With the introduction of the new Inland Revenue Act, No.24 of 2017, which was effective from 01.04.2018, the income tax rate applicable for the Fund increased from 10 per cent to 14 per cent, which resulted in an increase of Rs. 12 billion. in the tax expenditure when compared with the previous year. Furthermore, the Withholding Tax (WHT) of 10 per cent paid on Treasury bond interest income which had been recognized as part of gross income under the previous tax regulations has been abolished with effect from 01.04.2018. Also, the adoption of Sri Lanka Financial Reporting Standards (SLFRS 09), the Accounting Standard applicable for classification and measurement of Financial Instruments, where listed equity instruments were measured at fair value and under the prevailed market conditions, a marked to market loss of Rs. 10.9 billion was charged against the profit for the year 2018. Due to these reasons the profit available for distribution decreased by Rs. 10.0 billion or 4.9 per cent compared to 2017. However, EPF has taken measures to declare an interest rate of 9.5 per cent on member balances in 2018 partly utilizing the funds in the Profit Equalization Reserve.


Five Year Summary of Key Performance of EPF

Item

Rs. million

2014

2015

2016

2017

2018*

Interest and Amortization gains

153,395.26

169,645.90

193,656.31

219,635.33

229,446.03

Dividend Income

3,321.38

3,512.42

4,262.61

2,993.59

3,887.58

Realized Capital Gains / (Loss)

6,359.39

1,724.31

1,063.97

-

7.22

Net gain / (loss) from FS at FVTPL

89.38

(394.00)

(842.11)

1,476.85

(10,901.29)

Impairment of Financial Assets

-

(2,956.64)

(5,231.64)

(1,502.11)

0.59

Investment Income

163,165.40

171,531.99

192,909.13

222,603.66

222,440.12

Other Income

708.09

323.31

162.26

588.82

402.98

Total Gross Income

163,873.49

171,855.30

193,071.40

223,192.48

222,843.10

Operating Expenditure

(1,042.89)

(1,190.62)

(1,487.24)

(1,348.67)

(1,505.34)

Income Tax

(12,168.69)

(13,727.40)

(15,657.19)

(18,897.05)

(30,720.36)

Profit for the Year

150,661.91

156,937.28

175,926.97

202,946.76

190,617.40

Retained Profit b/f

140.73

311.30

215.58

189.34

2,470.95

Profit available for distribution

150,802.64

157,248.57

176,142.54

203,136.10

193,088.35

Return on Investment (%)

12.11

11.28

11.43

11.8

10.4

Interest Rate Declared (%)

10.50

10.50

10.50

10.50

9.50

(a) Provisional
Table 4

Risk Management

During the year 2018, number of steps have been taken for improving the overall risk management framework of the EPF, with a view of enhancing the accountability and transparency of the investment activities. As a result, New Investment Policy Statement and Investment Guidelines have been developed incorporating these requirements. While EPF is in the overall risk management framework of the CBSL several initiatives were taken to strengthen the governance structure of the EPF risk management. This includes the establishment of EPF Investment Oversight Committee (EIOC) to oversee the investment activities of the EPF by providing strategic and policy guidance for the management of the Fund and the EIOC delegates its duties and powers with respect to the day-to-day decision-making function of the EPF fund management activities to a departmental level committee called EPF Investment Committee (EIC). Further, Risk Management Department of CBSL as the second line of defence carries out the risk oversight activities of the EPF and reports to the Monetary Board through the Board Risk Oversight Committee of the CBSL on a regular basis. Therefore, risk mitigation activities which address both financial and non-financial risks of the Fund and the actions pertaining to strengthen the internal controls relating to operational activities have been continued throughout the year.

Members / Employees
Employers

When leaving service on reaching age of retirement.

  • 1) Males - 55 years
  • 2) Females - 50 years

When leaving service on grounds of marriage in the following context
(For female Employees)

  • 1) If married within 3 months of leaving service
  • 2) Have left service within 5 years of marriage
A certified photocopy of the Marriage Certificate certified by the Registrar who registered the marriage or a marriage certificate issued by the Additional District Registrar should be submitted along with the above forms.

When migrating to another country on a permanent Visa

  • 1) The permanent Visa and a photocopy
  • 2) The Original of the passport and a photocopy along with the above forms should be submitted to the Head Office of the Labour Department

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