EPF - Employees PROVIDING the Fundings

EPF

EPF records higher gross income

The Employees Provident Fund (EPF) recorded a gross income of RM11.8bil last year, 7.1% higher than the RM11bil in 2003. EPF chairman Tan Sri Abdul Halim Ali said in a statement that the fund's investments last year had also increased by RM20.1bil, or 9.2%, to RM237.1bil, compared with RM217bil in 2003.

He said Malaysian Government Securities remained the EPF's major choice of investment, with RM92.5bil, or 39%, of its total investments, followed by loans and bonds (RM74.4bil), equities (RM47.4bil), money market instruments (RM21.3bil) and properties (RM1.5bil).

“In line with the prudent and effective investment strategies adopted, the EPF declared a dividend of 4.75% last year compared with 4.5% in 2003,” he added.

Abdul Halim said the EPF undertook several initiatives last year to improve its investment management, including outsourcing funds to fund managers, championing corporate governance and minority shareholder activism, diversifying into the property and private equities market, and establishing a Risk Management Department to guide investment decisions.

He added that the number of active members in the fund stood at 5.1 million as of Dec 31 last year. The number of employers increased by 17,500, or 4.9%, to 372,700 last year, against 355,200 in the previous year. “Of the number, only 2.9% are defaulting employers. This is testimony to the EPF’s strong enforcement stand to track down errant employers,” he added.

Abdul Halim also said the EPF’s total assets increased from RM220.2bil in 2003 to RM240.4bil last year. “The total contributions collected by the EPF last year increased by 8.5% to RM21.9bil compared with RM20.1bil in 2003,” he said, adding that RM12.7bil was withdrawn under various schemes last year, an increase of 16.8% over the RM10.9bil in the previous year.

ANALYSIS

“In line with the prudent and effective investment strategies adopted, the EPF declared a dividend of 4.75% last year compared with 4.5% in 2003,” EPF chairman Tan Sri Abdul Halim Ali BOASTED.

Declaring 4.75% dividend is due to PRUDENT & EFFECTIVE investment strategies?

So, when Templeton Fund and Berkshire Hathaway declared 35% dividend, what shall we call it?

At the rate of dividend, employees (mainly lower and middle income earners) shall not have a retirement fund. By the time an employee retires at 55, their savings in EPF will be able to survive them for only a few years and they will then have to become beggers, or pray that their children (if they had any) will contribute to pay their living expenses and medical expenses.

Of course, we should also thank EPF management too. Why? At least they did not squandered the money like Amanah Saham Johor and Amanah Saham Sabah (for every dollar of investment in ASS and ASJ, the NTA value is less than ten cents now). For this reason, we should be thankful to Abdul Halim and EPF management as they had manage to keep the employees savings intact; just like the parable jesus says about a father who gave the son a dime and the son hid it in the ground.

But 4.5% dividend is prudent and effective? Consider that Risk-Free Return is 3.4%, EPF is doing 1.1% better than fixed deposit, and that's because of prudent and effective investment strategies? Oh, Allahmak!!!

We cannot dispute the fact that EPF has to invest in government securities which gives a low rate of return but is fully guaranteed by the government. But the investment in government securities is only 39%.

But then, EPF had also loan monies to public listed corporations at 4% chargeable interest (rate of return). YTL Corp, Time Engineering, etc, etc, they had borrowed hundreds of millions from EPF at an interest rate of 4%; and EPF pays us 4.75% dividend - that's definitely super, isn't it?

EPF invested in bond funds of up to 30%. I have invested in RHB bond funds and the dividend is 8% p.a., and plus other bonuses.

Abdul Halim said the EPF undertook several initiatives last year to improve its investment management, including outsourcing funds to fund managers, championing corporate governance and minority shareholder activism, diversifying into the property and private equities market, and establishing a Risk Management Department to guide investment decisions.

Excellent, Tan Sri, but that statement you made said EPF had undertook several initiatives last year. Does it mean over the last 10 and 20 years, EPF did not do that? And yet EPF paid 8% during those years. So, last year, EPF had taken several initiatives to improve investment; can we expect EPF to give 8% dividend or more next year? If not, then the statement is fallacious.