Global meltdown hurt performance, says EPF

This article is from The New Straits Times. The lower rate of dividends declared will cause the amount at retirement of contributors to be reduced.

This dividend rate is however better than most other saving institutions but not as good as those declared by some other investment vehicles such as PNB and government bonds. Contributors who moved their EPF savings into Unit Trusts suffer paper losses instead of getting any dividend.

KUALA LUMPUR: The Employees Provident Fund (EPF) has declared a dividend of 4.5 per cent for 2008, its lowest since 2003, and warned members not to expect more than that for this year.

The EPF's dividend was 5.8 per cent for 2007, 5.15 per cent in 2006, five per cent in 2005, 4.75 per cent in 2004 and 4.50 per cent in 2003.

"Up until September last year, the EPF was doing well in equities. However, with the global financial meltdown, our performance in equity investments recorded a drop of less than 20 per cent, which impacted our dividend pay-out.

"This, however, compares better with that of the Kuala Lumpur Composite Index, which was down approximately 40 per cent from the end of December 2007 to December 2008," EPF chairman Tan Sri Samsudin Osman said in a statement.

Net income for the year was RM14.26 billion, after deducting allowances for the diminution in value of equities and doubtful debts, dividends for withdrawals, investment expenses, operational expenses, and death and incapacitation benefit payments. This represented a decrease of 15.47 per cent over 2007's net income of RM16.87 billion.

EPF made allowances of RM4.69 billion for the diminution in value of both overseas and local equities, compared to only RM520 million in 2007. Of the 2008 provision, RM3.20 billion was allocated for overseas equities.

"The fundamentals of the companies we invested in remain strong and we are confident that this provision will be written back once recovery takes place," said Samsudin.

As at Dec 31 2008, the EPF's total investment funds had grown by RM28.99 billion to RM342 billion compared to RM313.01 billion a year ago.

The three main contributors to EPF's record gross income of RM20 billion in 2008 were loans and bonds (RM6.78 billion), equities (RM6.67 billion), and Malaysian Government Securities (RM4.94 billion).

Dividends will be credited to members' accounts on March 23.

"We are bracing ourselves for a tough year ahead as the effects of the global financial crisis continue to be felt.

"However, we believe that in every crisis, there is opportunity to be seized. The key is to remain vigilant and continue delivering results for the benefit of our members through our prudent investment strategy."