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 2019, EPF Department continued to invest its funds in long term Treasury Bonds and Corporate instruments. The total investment portfolio (book value) of the Fund grew by 10.9 per cent to Rs. 2,548.7 billion as at end 2019 from Rs. 2,298.8 billion recorded as end 2018 (Table 1).

Investment Portfolio

Type of Investment

End 2018

End 2019

Amount (Rs.bn.)

Share (%)

Amount (Rs.bn.)

Share (%)

Treasury Bonds &Bills

      2,119.2

92.2

2,390.4

93.8

Equity

74.9

3.3

75.4

3.0

Corporate Debts

44.8

1.9

42.2

1.7

Fixed Deposits

 33.6

1.5

25.0

0.9

Reverse Repos

26.4  

1.1

15.6  

0.6

Total

2,298.8

100.0

2,548.7

100.0

Table 1

During 2019, the total investment income of the Fund amounted to Rs. 259.0 billion, recording an increase of 16.5 per cent over the previous year (Table 2) Interest income was the major source of income to the Fund and it grew by 11.0 per cent to Rs. 254.7 billion in 2019 from Rs. 229.4 billion in 2018. The dividend income realised from equity portfolio increased by 60.7 per cent to Rs. 6,247.5 million in 2019, compared to Rs. 3,887.6 million earned in 2018. Overall, return on investments of the Fund recorded 10.7 per cent in 2019 compared to 10.4 per cent recorded in 2018.

Income on Investments

Source of Income

2018

2019

Amount (Rs.mn.)

Share (%)

Amount (Rs.mn.)

Share (%)

Interest with amortization gains

229,446.0

103.1

254,681.0

98.3

Marked to market gain/loss from Equity

(10,901.3)

(4.9)

(1,890.0)

(0.7)

Capital gains from Equity

7.2

-

-

-

Capital gains from Government Securities

-

-

0.1

-

Dividends

3,887.6

1.7

6,247.5

2.4

Impairment of Financial Assets

0.6

-

0.3

-

Total

222,440.1

100.0

259,038.8

100.0

Table 2

As at end 2019, the investment portfolio consisted of 93.8 per cent in government securities, 3.0 per cent in equity, 1.7 per cent in corporate debentures and trust certificates, 0.9 per cent in fixed deposits and the remaining 0.6 per cent in reverse repurchase agreements. The maturity profile of the government securities portfolio together with yield rates as at end 2019 is given in Table 3.

Maturity Profile of Government Securities Portfolio

Maturity

Maturity ValueAmount (Rs.mn)

Share
(%)

Weighted Average Yield (%)

Less than 1 year

117,804.5

4.9

7.96

1-2 years

174,652.7

7.3

8.74

3-4 years

293,388.2

12.3

9.52

More than 5 years

1,804,331.7

75.5

10.09

Total

2,390,177.1

100.0

9.82

Table 3

Overall Return of the Fund

The Fund earned a total gross income of Rs. 259.3 billion in 2019, recording an increase of 16.4 per cent compared to the previous year (Table 4). After adjusting for operating expenditure and tax expenditure, the net profit for the year 2019 was Rs. 222.8 billion which is an increase of 16.9 per cent compared to that of 2018. The EPF was able to earn a 10.7 per cent Return on Average Investment in 2019 while maintaining operating expenses to a gross income ratio of 0.6 per cent in 2019. With the introduction of the new Inland Revenue Act, No.24 of 2017, which was effective from 01 April 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. 4.2 billion in the tax expenditure when compared with the previous year. Furthermore, the Withholding Tax (WHT) of 10.0 per cent paid on Treasury bond interest income which had been recognised as part of gross income under the previous tax regulations has been abolished with effect from 01 April 2018. Also, the adoption of SLFRS 09, the Accounting Standard applicable for classification and measurement of Financial Instruments, where listed equity instruments are measured at a fair value and under the prevailed market conditions, a marked to market loss of Rs. 1.9 billion was charged against the profit for the year 2019. Accordingly, the EPF has taken measures to declare an interest rate of 9.25 per cent on member balances in 2019 after transferring Rs. 7.7 billion to the Profit Equalisation Reserve..


Five Year Summary of Key Performance of EPF

Item

Rs. million

2015

2016

2017

2018

2019(a)

Interest and Amortization gains

169,645.90

193,656.31

219,635.33

229,446.03

254,681.0

Dividend Income

3,512.42

4,262.61

2,993.59

3,887.58

6,247.5

Realized Capital Gains / (Loss)

1,724.31

1,063.97

-

7.22

0.1

Net gain / (loss) from FS at FVTPL

(394.00)

(842.11)

1,476.85

(10,901.29)

(1,890.0)

Impairment of Financial Assets

(2,956.64)

(5,231.64)

(1,502.11)

0.59

0.3

Investment Income

171,531.99

192,909.13

222,603.66

222,440.12

259,038.9

Other Income

323.31

162.26

588.82

402.98

283.8

Total Gross Income

171,855.30

193,071.40

223,192.48

222,843.10

259,322.7

Operating Expenditure

(1,190.62)

(1,487.24)

(1,348.67)

(1,505.34)

(1,581.8)

Income Tax

(13,727.40)

(15,657.19)

(18,897.05)

(30,720.36)

(34,964.6)

Profit for the Year

156,937.28

175,926.97

202,946.76

190,617.40

222,776.4

Retained Profit b/f

311.30

215.58

189.34

2,470.95

159.5

Capital Gain on Disposal of Unlisted Equity

-

-

-

-

90.0

Profit available for distribution

157,248.57

176,142.54

203,136.10

193,088.35

223,025.8

Return on Investment (%)

11.28

11.43

11.8

10.4

10.7

Interest Rate Declared (%)

10.50

10.50

10.50

9.50

9.25

(a) Provisional
Table 4

Risk Management

The existing risk management framework of the investment activities was further strengthened in 2019 with a view of enhancing the accountability and transparency of such activities. Accordingly, the Investment Policy Statement and Investment Guideline with Strategic Asset Allocations were revised and updated to be in line with updated market requirements, to improve the existing work procedures and to provide greater independence over the investment decision making process while maintaining an adequate level of internal controls. In addition, a comprehensive risk assessment was carried out by a team of World Bank risk experts to identify and cater to the prominent financial and non-financial risk aspects of the EPF Department with the guidance of the Risk Management Department of the Central Bank of Sri Lanka. The reporting of financial and operational risk of the EPF department to the management through respective reporting lines are stipulated in relevant guidelines.

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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