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(i) Government Securities
The overall rates of return from Treasury Bills, Treasury Bonds and Rupee Loans were 16.41 per cent, 12.63 per cent and 13.1 per cent respectively. The Weighted Average Return on government securities for the year 2008 was 13.9 per cent and yield varied between 10.4 per cent and 15.3 percent depending on the maturity as at the end of 2008. Since 97.07 per cent of the funds were invested in government securities at different interest rates in the past, the total return on investment was highly correlated with maturity profile of government securities portfolio.
The declining trend in Government securities yield rates which prevailed in the first half of 2008 offered limited opportunities to the Fund to engage in secondary market activities. As a result, the Fund realized Rs. 36 million
through secondary market activities, which is a six fold increase compared to the Rs.5.1 million capital gains earned in 2007.
(ii) Corporate Debt Instruments
EPF has invested in highly credit worthy corporate debt instruments which includes, Corporate Debentures, Listed Preference Shares, Pass-through Certificates, Trust Certificates and Mortgage Backed Securities. Average return from these corporate debt instruments was 16.77 per cent per annum.
(iii) Equity Investments
Amidst the bear market conditions prevailed in 2008, the capital gains and dividends realized from equity portfolio declined significantly by 48 per cent to Rs. 235 million in 2008 from Rs. 434 million in 2007. Accordingly, the rate of return on the average equity portfolio stood at 2.71 per cent as against 8.3 per cent in 2007.
EPF has diversified its equity investment portfolio to unlisted equities during 2007. Accordingly, 24.3 per cent of the equity of Kerawalapitiya Power Project was acquired by the EPF by investing Rs. 2975 million as at end 2008. This power plant has the capacity to generate 300 MW and to contribute 12 per cent of the annual total power generation in the country.
The Project commenced its commercial operations in October 2008 and EPF expects to generate 24 per cent annual return on this investment.
(iv) Repurchase Agreements
The investment in Repurchase Agreements (Repo) was made in order to maintain a sound liquidity position in the Fund. Although only 0.57 per cent of the Investments represented Repurchase Agreements, the average rate of return on these investments was 17.98 per cent per annum.
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 Members’ Wealth
The Fund paid an annual interest rate of 13.2 per cent on total member balances. This rate is 200 basis points higher than the interest rate of 11.2 per cent paid in 2007. However, since interest is paid on the year-end balance for the full year without considering the holding period of monthly member contributions, the Effective Rate of Interest (EIR) is estimated at 13.4 per cent. |
Member Balances and Members’ Return
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Collection of Member Contributions
At present, the mandatory EPF contribution rate stands at 20 per cent of the gross earnings of the member. The employee is required to contribute 8 per cent from his/her gross salary whereas the employer is obliged to contribute 12 per cent of the same.
The total contributions for the year 2008 stood at Rs. 45,951 million reflecting a 13.3 per cent increase compared to the Rs. 40,574 million in 2007. In the year under review, the net contributions, i.e. contributions less refund of benefits, increased to Rs. 20,020 million compared with the Rs. 18,822 million in 2007.
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Contributions, Refunds & Net Contributions
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Return on Investments
During 2008, the total income from the investments of the Fund was Rs. 79.16 billion recording a 33.6 per cent increase compared to Rs. 59.26 billion income in 2007. The rate of return on average total portfolio increased to 13.8 per cent in 2008 from 12.7 per cent in 2007. As in the past, the interest income including amortization gain was the major income stream of the Fund. The discounted bonds in the government securities portfolio were the key source of interest income. |
Total Investments and Return on Investments
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