Investment in The Finance comes under spotlight at COPA
By Dharisha Bastians
The Rs. 1 trillion-rich Employees Provident Fund’s (EPF) listed equity investment portfolio worth Rs. 74 billion has lost Rs. 12 billion in value it has been revealed.
In a report on the EPF’s present situation and operational activities to the Committee on Public Accounts (COPA) last week, the Auditor General’s Department has said that as of 15 January 2013, Rs. 54 billion worth of EPF investments in relation to 57 listed companies had lost Rs. 11.7 billion of their value.
The EPF had invested in 76 listed companies at a total value of Rs. 63.16 billion as at 15 January 2013, the special report said.
Officials of the Central Bank overseeing the EPF which is a State-controlled pension fund of private citizens appeared before the COPA in Parliament last week. The AG Department report makes several observations about Rs. 74 billion worth of total long and short term investments the EPF had made in 78 companies listed in the Colombo Stock Exchange as of 31 December 2011. The investment of Rs. 205.4 million to buy over five million shares in 2011 without considering the fact that the Company’s last published accounts revealed it had incurred a loss of Rs. 4.2 billion was also raised by the Auditor General’s Department during a parliamentary oversight committee on public finances.
The shares had subsequently lost 40.5% of its value in the stock market by 31 July 2012 and the fund had received no return since the date of investment, according to the Auditor General.
The committee is chaired by Deputy Finance Minister Sarath Amunugama and includes 10 Government MPs and four opposition MPs.
“In July 2010 Rs. 500 million was spent to purchase 1,863,676 shares of an airline company. Up to 30 June 2012, no income has been earned since the date of investment,” the report states.
Addressing a media briefing last week UNP MP R. Yogarajan said that although the Auditor General’s report does not indicate the name of the finance company, the EPF divulged it was a transaction pertaining to The Finance when COPA queried the officials.
“At the time the decision to invest in these shares was made it had not been taken into consideration that the last published accounts of the company had revealed a loss of Rs. 4.28 billion. In the preceding year as well the company had incurred a loss of Rs. 3.83 billion. A share had been purchased at the price of Rs. 40.36 whereas as of 31 July 2012, the value of one of these shares at the Stock Exchange was Rs. 24. From the date this investment was made no income has been earned for the fund,” the Auditor General’s Department Report to COPA says.
Yogarajan said that while COPA was questioning Central Bank Governor Ajith Nivard Cabraal about the The Finance share purchase, Minister Amunugama abruptly called off the proceedings at 5:45 p.m. claiming the Parliament staff had to leave.
However, UNP National List MP Dr. Harsha De Silva told the Daily FT that the Chamber sat on Wednesday until 7:10 p.m. He said Wednesday’s meeting had been crucial because this was the first time the EPF’s investments had ever been audited.
According to The Finance Company’s latest annual report, the company had been found to be in violation of regulations of the Finance Business Act, De Silva told the Daily FT.
The Rs. 500 million investment in SriLankan Airlines and other such investments in Galadari Hotels and LAUGFS will also be queried when the officials are summoned before COPA again, Dr. De Silva told the Daily FT.
“The EPF is a private citizens’ pension fund,” he said, adding that the EPF’s role was not to bail out loss-making Government companies.
The National List MP alleged that the Central Bank was using the EPF to buy leverage in certain private banks and companies, in order to wrest control of the financial system.
The Monetary Board of the Central Bank controls the fund’s Rs. 1 trillion plus portfolio of investments. The Monetary Board is chaired by the Central Bank Governor Cabraal, while its Secretary is the Treasury Secretary Dr. P.B. Jayasundera.