Investments in shares: EPF loses billions

22 April 2014 01:56 am - 11     - {{hitsCtrl.values.hits}}

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Auditor General H.A.S. Smaraweera in his review of the 2011 annual report of the Employees Provident Fund (EPF) said Sri Lanka’s main social security fund had lost nearly Rs.11.7 billion through investments in 58 private institutions.

He said these losses had resulted in a 1 % decrease on benefits payable to 2.5 million EPF members in 2011.

“There has been a 1% decrease on the benefits payable to the members in 2011 as compared with 2010. This is a decrease on investment income of Rs.5,049.303,683 in 2011,” Mr. Samaraweera stated in his audit review of October 10, 2013.

Out of the long term and short term investments amounting to Rs.63,169,398,923 made by the EPF  in 76 companies in the share market by January 15,  2013, the value of investments made in 58 companies amounting to Rs.54,006,955,606 had diminished by Rs.ll,737,841,979.

“Some 500 million rupees invested in 1,863,676 units of an airline company in 2010 had not yielded any income to the fund since the date of investment. In its response, the Central Bank said it was confident of future profits from the companies with the losses decreasing gradually,” the Auditor General’s report noted.

Commenting on unsound or risky investments in private company equities, the Auditor General pointed out that Rs.2,975 million invested in 29,750,000 units of an electricity generating company from April 2007 to November 2008 had not yielded any income to the Fund in 2008, 2009 and 2010 while Rs,540,909,091 had been received twice in the year 2011 as dividend income Nearly Rs.205,489,613 was used to purchase 5,091,200 shares in a Finance Company from February 23, February 2011 to November l, 2011 and the loss of Rs.4,285,937,284 as revealed in the last published accounts of the Company had not been taken into consideration and at the time it was decided to invest in this finance company.

Even during the year under review this company had lost Rs.3,830,135,175. The company shares had been purchased at an average price of Rs.40.36 a share when the market price of a share was Rs.24. The Fund had not received any income from the investment since the date of investment.

The auditor General’s report states that fund had invested a sum of Rs.680,232,419 in 20,942,989 shares of a communications company and the share of that company had not been offered for sale in the stock market since 2009. As such the Fund could not earn capital profits even though dividends amounting to 3.39 per cent in 2008 and 2009 and 0.81 per cent in 2010 and 1.67 per cent in 2011 had been received during the period of investment such income was not commensurate with the investment. In this connection, the Central Bank of Sri Lanka informed that as the communication field would further develop in Sri Lanka it is believed that the dividends and the capital profits receivable by the Fund from the company would increase.

‘The EPF has not received any income whatsoever for the investment of Rs.3,555,864,821 in the year ending  December 31 2011 from the shares of 11 companies,” Mr. Samaraweera said.

In keeping with Central Bank’s Monetary Board instructions to increase the investments in the Hotels and Transport Sectors, investment of Rs.3,882,771,148 in 18 Hotels as at December 31 2010 and Rs,7,219,711,548 in 16 Hotels as at December 31 2011 had been made. An income of Rs.50,807,109 or 1.31% had been received in 2011 on the investment made as at December 31 2010 while Rs.173,616,783 or 2.4%  was received in the 2012 for the investment made as at December 31, 2011.

In keeping with the decision of the Monetary Board, Rs.810,321,610 was invested by 31 May 2010 in a Hotel Company which had incurred losses amounting to Rs.520.49 million, Rs,405,38 million, Rs.298.85 million and Rs.147,02 million in 2007, 2008, 2009 and 2010 respectively and had unfavourable earnings ratios of 3.15, 3.45, 1.09 and 0.13 during the respective years. The loans payable by this Company by that date amounted to Rs.6.28 billion (approximately). The Fund had not received any income whatsoever since then.

Out of the 16 Hotel Companies referred to above, in which the Fund had invested Rs,7,560,267,157 as at June 30, 2012, the market value of the shares of 13 companies had decreased by Rs,1,605,197,185 and the Fund faced the risk in earning capital gains by the sale of the shares of those companies. In this connection, the Central Bank of Sri Lanka said looking at the progress in the tourism industry, an increase of the prices of shares of all Hotel Companies can be expected along with the share market reaching normalcy, the AG’s report said. (Sandun A.Jayasekera)
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  Comments - 11

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  • KANE Wednesday, 23 April 2014 07:44 AM

    Thank you Sri Lanka for reviving the Dk's stock market

    mack Tuesday, 22 April 2014 11:25 AM

    when I retire will have so called EPF left for me to spend my retirement or have to work till I die??? via DM Android App

    komi buwa Tuesday, 22 April 2014 11:35 AM

    God bless director general for his review, God bless us for our future. via DM Android App

    V Tuesday, 22 April 2014 10:03 AM

    You shouldn't be messing with people's money like this. Hope its not a cover story for someone stealing the money. If you guys know what I mean. via DM Android App

    Dilshan De Silva Tuesday, 22 April 2014 04:37 AM

    kabaraya lal & godasundara eating away our hard earned money... shame . it is high time for RP to RIP. but this is democracy , where majority counts even if it is bouch of fools raising hands to SAY yes this is Asscharya...

    GC Tuesday, 22 April 2014 07:31 AM

    Whose money was it and who took those decisions in relation to them?

    Jagath Leanage Tuesday, 22 April 2014 07:41 AM

    Head of Provident Fund had to purchase shares wimps and fancies of that one.

    dalubanda Tuesday, 22 April 2014 10:37 AM

    It is interesting to know, the net earning / losses. (Total income - total losses)

    Nihal Amarasekera Tuesday, 22 April 2014 04:58 AM

    Investment of funds is a necessity, is Good , Bad & Ugly.

    Hula Tuesday, 22 April 2014 04:58 AM

    there are some many hidden "miracles" like this
    &
    lot to come

    Dayan Tuesday, 22 April 2014 10:52 AM

    Now, we can understand why AG didn't make these disclosures prior to WESTERN and SOUTHERN elections


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