NMMF Distributes 37 cents per unit

DEBENTURES: The NAMAL Money Market Fund announced a quarterly dividend distribution of 37cents per unit for the quarter ended June 30.

NMMF, the first money market fund in Sri Lanka, was launched in September 2004 to provide short-term cash management opportunities to corporate and institutional investors.

The purpose of the Fund is to invest in short-term corporate debt and Government securities and pass-on these returns to investors by way of quarterly dividends. These returns are tax free in the hands of investors.

“Unlike individuals, corporate entities are required to pay 35% tax on interest income earned. When companies invest in fixed deposits and other interest bearing instruments, they tend to focus on the quoted or “gross” interest rate and most often do not evaluate yields on an after-tax basis” Chief Executive Officer, NMMF, S.Jeyavarman said.

“For example, a 3-month Fixed Deposit offering 19% looks attractive until evaluated on an after-tax basis, which works out to 12.35%. These returns are further eroded when adjusted for the impact of debit tax, which is charged on the capital when funds are transferred,” he added.

“However, when evaluating investment returns on an after-tax basis, a corporate investing in the Fund would benefit by way of higher after-tax return. This return is further enhanced by the fact the investments in the Fund are exempted from debit tax. Apart from this, NMMF provides excellent liquidity to investors enabling them to withdraw funds at very short notice,” he said.

The objectives of the Fund are to maximise current income, offer liquidity to investors and preserve capital. The rising interest rate environment has helped NMMF obtain increasingly higher yields on both corporate debt and government securities. The Fund is well positioned to take advantage of any further rise in interest rates.