Profits from 2009 to 2013 exceed Rs 558b:

EPF refutes allegations of losses in investments

The Employees’ Provident Fund (EPF) refutes political and media allegations about losses incurred by the EPF as erroneous and misleading and stated that such losses are not realised losses, but are marked-to-market unrealised losses, arising from variations in market prices of stocks.

The Central Bank in a release said that the unrealised losses or gains do not increase or decrease the benefits to members.

The Auditor General's review of 2011 annual report of the EPF said that the Fund had lost around Rs. 11.76 billion through investments in 58 private institutions.

It said that the losses had resulted in one percent decrease in benefits payable to 2.5 EPF members. An investment of Rs. 73,948,947,927 was made by the EPF as at December 31, 2011 on long term and short-term basis in 74 companies listed on the stock exchange.

The Central Bank's release stated that such unrealised losses fluctuate widely as is evident from the peak of Rs. 20.7 billion unrealised gains on February 14, 2011, when the All Share Price Index was at its all time high to Rs. 9.0 billion unrealised losses at end 2013. Such unrealised losses have now reduced to Rs. 4.4 billion by April 21, 2014, or 51 percent, while the ASPI has increased only by 4.46 percent. This confirms the fact that the EPF’s equity portfolio has been managed prudently so that performance of the portfolio has well out-performed market trends.

The release said that as a result of EPF’s prudent investment and sound management, it declared impressive returns of 13.75 percent in 2009, 12.5 percent in 2010, 11.5 percent in 2011, 11.5 percent in 2012 and 11 percent 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.

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 2009, 2010, 2011, 2012 and 2013. The EPF has invested around 92 percent of its funds in Government securities and around 6 percent in the stock market.

The balance two percent 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 long 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 practised by many large long term funds all over the world, the EPF maintains its equity portfolio as a pool of diversified investments.