EPF Declares 4.50 Pct Dividend For 2008

KUALA LUMPUR, March 16 (Bernama) -- The Employees Provident Fund (EPF) has declared a dividend of 4.50 percent for 2008, lower than the 5.8 percent in 2007.

The lower dividend rate is due to the increase in investment provisioning resulting from the sharp decline in global equity prices brought about by the worldwide financial crisis, the pension fund said in a statement here Monday.

Despite the financial meltdown, the EPF recorded the highest ever earnings of RM20 billion in gross income for 2008, an increase of 9.36 percent over the previous year's gross income of RM18.29 billion.

"While the year 2008 was challenging due to the unprecedented global financial crisis that has impacted economies worldwide, EPF's investment portfolio for the year performed better at the gross income level compared to 2007. However, due to the sharp decline in the equity markets, a large provision had to be made resulting in a marked reduction in net income," its chairman Tan Sri Samsudin Osman said.

Net income for the year was recorded at RM14.26 billion after deducting allowances for diminution in value of equities and doubtful debts, dividends for withdrawals, investment expenses, operational expenses, and death and incapacitation benefit payments.

Equities remained as one of the major contributors to the EPF's returns in 2008, representing 34.82 percent of the EPF's total gross investment income.

The EPF earned RM6.67 billion from equities which was the second largest contributor to income in 2008 compared to RM5.37 billion in 2007.

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

"This, however, compares better with that of the Kuala Lumpur Composite Index (KLCI) which was down approximately 40 percent from end of December 2007 to December 2008," said Samsudin.

As a result of the sharp fall in global equity prices and following a conservative provisioning policy in accordance with accounting best practices, the EPF made allowances of RM4.69 billion for diminution in value of both overseas and local equities, compared to only RM0.52 billion in 2007.

Out of the 2008 provision, RM3.20 billion was allocated for overseas equities.

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

Loans and bonds was the biggest contributor to gross income in 2008, recording a return of RM6.78 billion compared to RM5.91 billion in the previous year, while Malaysian Government Securities, the third biggest income contributor, brought in RM4.94 billion compared to RM4.88 billion in 2007.

As at Dec 31, 2008, the EPF's total investment funds grew by RM28.99 billion to RM342.00 billion compared to RM313.01 billion a year ago.

For 2008, the EPF required RM3.18 billion to pay a one per cent dividend compared to only RM2.89 billion in 2007, due to the larger membership base.

This means that the EPF needed to earn 9.71 per cent more in order to declare a one percent dividend in 2008 compared to the previous year.

Dividends will be credited to members' accounts on March 23, 2009.

"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," Samsudin said.

-- BERNAMA