The Employees’ Provident Fund (EPF/the Fund) wishes to inform its members that as an eligible participant and with the approval of the Monetary Board of the Central Bank of Sri Lanka, it has submitted an offer to exchange the portfolio of Treasury Bonds of the EPF under the Domestic Debt Optimization (DDO) programme in terms of the invitation made by the Ministry of Finance, Economic Stabilisation and National Policies (MOF) following a Resolution adopted by Parliament.
Accordingly, the following are brought to the notice of the members:
a. On 04 July 2023, MOF announced the Government’s policy on domestic public debt optimization strategy, which was approved by the Parliament by a Resolution on 01 July 2023.
b. As per the announcement, MOF has identified, inter-alia, the conversion/exchange of existing Treasury bonds of superannuation funds into new Treasury bonds to constitute the DDO, to avoid superannuation funds incurring a substantially higher tax of 30% on taxable income from Treasury bond investments. This tax will be applied from 01 October 2023, as per the Inland Revenue (Amendment) Act, No. 14 of 2023. At present, the tax rate applicable to the income of the EPF including the income from Treasury bonds is 14% and the continuation of a concessionary tax rate of 14% beyond 30 September 2023 is contingent upon the effective participation of the EPF in the DDO as defined in the Act.
c. The Exchange Memorandum dated 04 July 2023 and subsequent amendments issued by MOF contained comprehensive details of the debt conversion/exchange. Further, the MOF held an investor presentation on 07 July 2023, outlining the proposed terms of the debt exchange and its implications, and subsequently issued clarifications to questions raised following this presentation. As per the Exchange Memorandum, eligible holders were required to analyse the implications of making or not making an offer by reference to the legal, tax, financial, regulatory, accounting and related aspects of the DDO. All communications in this regard can be accessed through https://treasury.gov.lk/web/ddo.
d. In this regard, a presentation was made to the Cabinet of Ministers on 28 June 2023, titled “Debt Restructuring in Sri Lanka” prepared by the MOF in consultation with CBSL. On 29 and 30 June 2023, the Committee on Public Finance (COPF) has been informed regarding the expected impact of DDO on EPF through a presentation, followed by extensive discussions. Further, the COPF at its meeting held on 07 September 2023 discussed the impact of the proposed amendments to the Inland Revenue Act on the superannuation funds.
e. As per the Exchange Memorandum, the following two options were available for EPF under DDO programme.
i. Exchange Option: EPF can exchange a minimum required amount of existing Treasury bonds with 12 new Treasury bond series that mature from 2027 to 2038. These new bonds are offered with a coupon rate of 12% per annum until 2026 and 9% per annum thereafter.
The EPF would continue to pay income tax at 14% per annum on its taxable income attributable from its Treasury bond portfolio.
ii. Non-Exchange Option: If EPF decides not to exchange the existing Treasury bonds a 30% tax rate would apply to the taxable income of Treasury bond portfolio of the EPF.
f. The Monetary Board has carefully examined how the DDO could affect the Fund under the above two scenarios. Accordingly, to assist the Monetary Board to ascertain the possible impact of the DDO on the Fund, the internal staff of CBSL has conducted relevant analyses.
Such assessments have been carried out on the basis of several prudent and realistic assumptions and further taking into consideration the legal, tax, financial, regulatory, accounting and related aspects of the DDO.
The summary of the expected returns of the EPF
Treasury bond portfolio under the two scenarios is given in the Chart below. At present Treasury bond portfolio consists of 88% of the total Fund and a larger portion of the remainder is in Treasury bills. Treasury bills portfolio and new funds can be invested at prevailing market rates so that total return of the Fund portfolio would be higher than the likely returns of the Treasury bond portfolio under both scenarios shown in the Chart below.
g. The main factors and assumptions taken into due consideration in arriving at the above annual rate of return of the Treasury bond portfolio are given below.
i. The face value of the Treasury bond portfolio of EPF is Rs. 3,220 bn. In order to fulfill the minimum participation requirement, 78% of the face value of the Treasury bond portfolio on face value basis had to be exchanged.
ii. The government will service all obligations relating to Treasury bonds including the new Treasury bonds issued under the Debt Exchange as they fall due in a timely manner.
iii. Cash receipts due from above mentioned maturities and coupons will be reinvested in sixyear Treasury Bonds at rates of 13.50% for 2023, 12.00% for 2024, 10.50% for 2025 and 10% for 2026 and onwards. (Expected returns were also been computed under different reinvestment rate scenarios of which the pattern of the returns remains the same).
iv. If EPF participated in the Exchange Option, the current tax rate of 14% will be applied.
However, if EPF did not participate in the Debt Exchange, the tax rate applicable on the taxable income of Treasury bonds will be increased to 30% which is more than double the applicable post exchange tax rate. It was further assumed that these tax rates will remain unchanged until 2038. (CBSL)
Opposition law makers’ critical comments check CSE’s morning momentum
By Hiran H. Senewiratne
The stock market yesterday kicked- off on a positive note during the first session but the momentum did not sustain due to opposition law makers’ negative remarks on the current negotiation process with external creditors, market analysts said.
President Ranil Wickremesinghe had discussed debt restructuring and economic reforms with International Monetary Fund Managing Director Kristalina Georgieva, a President’s media division statement said.
“In their discussion, they focused on the ongoing reforms in the financial sector and the significant advancements in debt restructuring efforts, the statement said.
Amid those developments, both indices moved downwards. The All- Share Price Index went down by 71.76 points while the S and P SL20 declined by 14 points. Turnover stood at Rs 1.19 billion with four crossings.
Those crossings were reported in Windforce, which crossed 11 million shares to the tune of Rs 209 million; its shares traded at Rs 90, RIL Properties 20 million shares crossed for Rs 130 million and its shares traded at Rs 6.50, Hayleys Fabrics 500,000 shares crossed to the tune of Rs 23.1 million and its shares fetched Rs 46.20 and Laugfs 630,000 shares crossed for Rs 22 million; its shares traded at Rs 35.
In the retail market top seven companies that mainly contributed to the turnover were; JKH Rs 180 million (970,000 shares traded), CIC Holdings Rs 51.5 million (686,000 shares traded), Lanka IOC Rs 47.6 million (415,000 shares traded), Capital Alliance Rs 37.4 million (491,000 shares traded), HNB Rs 35.6 million (210,000 shares traded), Aitken Spence Hotels Rs 32.8 million (411,000 shares traded) and Softlogic Capital Rs 23.3 million (1.9 million shares traded). During the day 61.4 million share value changed hands in 9000 transactions.
Yesterday, the rupee opened at Rs 325/15 to the US dollar after closing the previous day at Rs 324.75/325.00 to the US dollar, dealers said.
Bond yields were up. A bond maturing on 01.08.2026 was quoted up at 14.80/15.20 percent from 14.50/70.A bond maturing on 15.09.2027 was quoted up at 14.60/15.20 percent from 14.35/50 percent. A bond maturing on 01.05.2028 was quoted up at 14.10/50 from 13.70/14.00 percent.
Robocash Sri Lanka’s ESG commitment shines on International Coastal Cleanup Day at Dehiwala Beach
Robocash Sri Lanka marked International Coastal Cleanup Day by furthering its “Robocash EcoSplash: Beach Cleanup and Beyond” initiative, which took place on September 17th, at Dehiwala Beach, Sri Lanka.
This environmentally-conscious initiative was a testament to the company’s unwavering commitment to environmental sustainability, community engagement, and responsible corporate citizenship, all of which are in alignment with the Environmental, Social, and Corporate Governance (ESG) principles.
ESG gained significant prominence in recent years as a guiding framework for responsible investment. It takes into account a company’s environmental impact, social responsibility, and governance practices, aligning them with the broader goals of sustainability and societal well-being. Robocash Sri Lanka recognizes the critical importance of ESG values in today’s world and is dedicated to integrating them into its operations and initiatives.
The “Robocash EcoSplash: Beach Cleanup and Beyond” program was a collaborative effort with the company’s internal team, showcasing the dedication of Robocash Sri Lanka’s employees to make a positive impact on their local environment and community.
Konstantin Bereutsyn, Country Manager of Robocash Sri Lanka, addressed the team at the event, saying, “Our commitment to environmental sustainability and community engagement goes beyond business as usual. We believe that being a responsible corporate citizen involves actively participating in initiatives that benefit society and the environment. This beach cleanup event is just one of the many ways we intend to contribute to a cleaner, greener, and more sustainable future for Sri Lanka.”
The program ensured that all necessary permits and permissions for the beach-cleaning activity were obtained, and strict adherence to government health guidelines was maintained throughout the event to prioritize the safety and well-being of all participants.
Ceylinco Life opens up the world once again for policyholders with ‘Family Savari 17’
The world is opening up once again for Ceylinco Life policyholders with the return of overseas holidays for the family as the main loyalty reward under the life insurance market leader’s ‘Family Savari’ mega promotion, the largest initiative of its kind in the local life insurance sector.
The 17th edition of Family Savari announced this week will provide overseas holidays for 15 policyholder families in 2024 – to Türkiye for five families and to Malaysia for another 10 families – reverting to the original theme of the promotion.
Another 250 policyholder families comprising of 1,000 people will get to spend a fun-filled day at the Pearl Bay Water Park at Bandaragama, a new location for the local segment of the Family Savari.
“The Family Savari promotion has always been about the importance of quality family time and creating memories of a lifetime for our policyholders and their loved ones,” Ceylinco Life’s Deputy Chief Operating Officer Mr Samitha Hemachandra said. “Unfortunately, the pandemic made overseas travel inadvisable, but we are now delighted to be able to reward our loyal policyholders and their families with holidays to some of the world’s most popular destinations.”
With the beginning of the Covid-19 pandemic in 2020, Ceylinco Life’s Family Savari opted to reward winners initially with gold instead of the overseas holidays and local excursions, and subsequently with cash rewards to the full value of the prize purse, and thereafter with family vacations in leading local hotels as health concerns began to ease.
At this year’s Family Savari promotion, a total of 265 policyholders will be selected at two draws that will take place in November 2023 and January 2024 to reward them and their family members, numbering 1,060 people in all, for their loyalty to Ceylinco Life. The mega promotion has to date rewarded more than 35,000 people in this manner.
To be eligible to win overseas holidays or the local excursion at the Family Savari draws, Ceylinco Life policyholders are simply required to continue their existing policies with the Company or maintain a minimum account balance in their retirement plans during the promotion period, 1st September to 31st December 2023.
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