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Friday September 4, 2009 EPF investment income up 17% on equities
By LEONG HUNG YEE
PETALING JAYA: The Employees Provident Fund (EPF) has recorded a 17.1% increase in investment income to an unaudited RM4.8bil for the second quarter ended June 30 from RM4.09bil a year earlier.
Compared with the preceding quarter, the investment income achieved represented a 46.64% improvement over the RM3.27bil charted in the first quarter of this year, EPF said in a statement yesterday.
The higher investment income was due to improved performance from investments in equities for the second quarter.
Equities, which was among the highest income contributors in the second quarter, contributed RM1.74bil, seven times higher than the RM239.55mil earned in the first quarter.
Of the funds invested in the equities market, 37.55% was in trade and services-related equities while 33.88% was in financial equities.
Chief executive officer Tan Sri Azlan Zainol said despite the instability of the global economy, EPF had managed to meet expectations and delivered better investment results in the quarter under review.
“This reflects the value of our disciplined approach in managing risks and returns for our members.
“Although higher returns are desirable, we must not lose sight of our priority to provide capital preservation and stability of returns,” he said, adding that the second quarter had seen signs of recovery in major global equity indices, especially in the countries that EPF invested in.
“While we cannot say that the worst is over, should this trend continue or at least maintains at the current levels, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year,” he said.
The highest income contributor in the second quarter was loans and bonds, which contributed RM1.81bil to EPF’s total investment income compared with RM1.78bil attained in the previous quarter.
The EPF maintained a low-risk profile by continuing with its policy of having the majority of its loans and bonds in high-grade companies with credit ratings of AAA or AA, it said.
As at June 30, a total of 33.66% of loans and bonds investments was in companies with AAA credit ratings and 49.4% in companies with AA ratings.
According to the EPF, its investments in Malaysian Government Securities (MGS), another major contributor to its total investment income, rose marginally by RM830,000 to RM1.11bil compared with the preceding quarter.
Meanwhile, contributions from money market instruments dropped 21.5% to RM94.27mil in the second quarter from RM120.11mil in the first quarter.
Properties contributed RM20.8mil to EPF’s income in the second quarter, a slight increase from the RM20.6mil in the first quarter.
The EPF’s total fund currently stands at RM353.9bil, up 1.61% from RM348.3bil in the first quarter.
Azlan said while there were signs of stabilisation in the global markets, it was too early to see how this would affect EPF for the remainder of the year.
“Nevertheless, as a long-term investor and custodian of more than RM350bil in retirement fund, we will continue to take proactive measures to enhance the value of our members’ savings in these trying times while still upholding our prudent approach,” he added.
EPF’s 2Q investment income up 47%
Written by Yong Yen Nie
Friday, 04 September 2009 11:59
KUALA LUMPUR: The Employees Provident Fund’s (EPF) investment income for the second quarter (2Q09) rose 46.6% to RM4.8 billion from RM3.27 billion in the previous quarter, mainly due to improved performance in its equities portfolio.
In a statement here yesterday, EPF said earnings from equity investment grew seven times to RM1.74 billion in 2Q09 from RM239.55 million in 1Q09. As at 2Q09, EPF had invested RM93.9 billion in equities, representing 26.53% of its total fund size.
EPF said improving global stock markets, as well as Bursa Malaysia, had contributed to the surge in income from equities in 2Q09.
Commenting on EPF’s higher investment income, its chief executive officer Tan Sri Azlan Zainol said: “The second quarter of 2009 showed signs of recovery in major global equity indices, especially in the countries that EPF invests in.
“While we cannot say that the worst is over, should this trend continue, or at least maintain at the current level, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year.”
EPF’s total fund size stood at RM353.93 billion, up 1.61% from RM348.31 billion in 1Q09.
During 2Q, loans and bonds were the highest earners, with RM1.81 billion compared with RM1.78 billion in the previous quarter. EPF’s largest investment was in loans and bonds, with 41.18% of its total fund size, or RM145.75 billion, invested in the two asset classes.
EPF said it had maintained a low-risk loans and bonds profile by investing mostly in high-grade companies with AAA or AA ratings.
Income from Malaysian government securities (MGS) rose marginally by RM830,000 to RM1.11 billion in 2Q09 from the previous quarter. EPF allocated RM97.46 billion for investing in MGS, which is about 27.54% of its total fund size.
Azlan said despite the instability of the global economy, the EPF had managed to meet expectations and deliver better investment results in 2Q09.
“This reflects the value of our disciplined approach in managing risks and returns for our members. Although higher returns are desirable, we must not lose sight of our priority to provide capital preservation and stability of returns,” he said.
Income from money market instruments fell 21.5% to RM94.3 million from RM120.11 million in 1Q09. Investment in PROPERTIES [] contributed RM20.81 million to its income in 2Q09 compared with RM20.63 million in the previous quarter.
The fund had invested RM15.2 billion or 4.29% of its total funds in money market instruments, as well as RM1.62 billion in properties.
Azlan said: “While there are signs of stabilisation in the global markets, it is too early to see how this will affect us for the remainder of the year.
“Bear in mind that things can take a different turn at any time and any decision making must be exercised with care for the best interest of EPF contributors.”
Nevertheless, as a long-term investor and custodian of a more than RM350 billion retirement fund, EPF would continue to take proactive measures to enhance the value of its members’ savings in these trying times while still upholding a prudent approach, he said.
This article appeared in The Edge Financial Daily, September 4, 2009.
Friday October 16, 2009 Higher EPF dividend likely By YAP LENG KUEN
CEO: It’s possible provided no market disruption in next 3 months
PETALING JAYA: A higher dividend may be expected from the Employees Provident Fund (EPF) this year as it recovers the bulk of its investments overseas after a 14% year-to-date improvement in the Dow Jones Industrial Average, which closed above 10,000 points on Wednesday.
“With the Dow Jones recovering to the 9,000-plus level since July, our equity investments in the overseas markets are now above our costs,’’ EPF CEO Tan Sri Azlan Zainol told StarBiz.
“As a result, a higher dividend for 2009 compared with the previous year can be expected, provided that the markets do not experience any erratic disruptions in the next three months.”
He said “in relation to our equity investments, we will continue to remain vigilant on the development of the global and local markets.’’
Last year, the EPF declared a dividend of 4.5% compared with 5.8% in 2007, mainly due to the increase in provisioning resulting from the sharp decline in global equity prices.
In a statement issued on March 16, the EPF had said that in accordance with accounting best practices, it had made allowances of RM4.69bil for diminution in value of overseas and local equities (of which RM3.2bil was allocated for overseas stocks) compared with RM520mil the year before.
“Our policy is to provide in full for every diminution in value in our investments overseas,’’ Azlan had told StarBiz then.
An analysis of the EPF dividend over the last five years, split into equity and fixed income, had revealed that without making any provisions, the dividend could be much higher.
The EPF had invested RM16bil on a staggered basis in five major markets – the United States, Britain, Australia, Singapore and Japan.
As at the end of 2008, the fund had invested RM87.9bil in equities, which was 25.7% higher than the previous year.
Since the beginning of this year, the FTSE 100 index has gone up by 18.3%; Nikkei 225 (15.6%); S&P/ASX 200 (30.6%) and Straits Times (54%) while the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) has improved 42.2%.
In sharp contrast, the figures at the end of last year showed that the fund’s overseas investments had deteriorated by 19.5% and by 18.4% domestically.
This was triggered by the 39% drop in the FBM KLCI; Dow Jones (-34%); FTSE 100 (-31%); Nikkei (-42%) and Singapore (-49%).
“It (this year’s dividend) will be definitely better than last year’s,’’ said UOB Kay Hian (M) Holdings Sdn Bhd head of research Vincent Khoo.
“But the biggest exposure is in fixed income where yields are low. So (the dividend) is probably less than 6%,’’ he said, adding that a good year to compare with would be 2007 when equity markets were very strong.
Choong Khuat Hock, head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd, said “gains from domestic investments are more important in determining how much dividend the EPF can pay.’’
“This is because the EPF invests a much larger proportion of its funds in domestic rather than international equities,’’ he noted.
Second-quarter results already showed a 46.64% increase in income to RM4.8bil.
Equities were among the highest income contributors in the second quarter, growing to RM1.74bil, representing seven times the income earned in the first quarter.
“The second quarter of 2009 has shown signs of recovery in major global equity indices especially in the countries that EPF invests in,’’ Azlan had said in his second quarter statement.
“While we cannot say that the worst is over, should this trend continue, or at least maintain at the current level, we are positive that we can reverse the bulk of the allowances for diminution in value of equity investments that we made last year.’’
The Employees Provident Fund (EPF) may have been asked to pay RM520 million for a slice of Maxis Bhd, Malaysia's biggest mobile operator that is set to be among Southeast Asia's biggest initial public offering (IPO) this year.
Sources said the pension fund was offered about 100 million shares, or 1.3 per cent, of Maxis at RM5.20 a share.
Before the mobile operator was delisted two years ago, EPF had over 114 million shares of Maxis Communications Bhd. Maxis Communications is the parent of Maxis Bhd.
Fund managers said the book-building process is expected to be done in two methods for institutional investors.
Typically, big investors will bid for the amount of shares and the price at which they are willing to pay under the book-building. This will officially start tomorrow.
The other way is that selected institutional funds will be offered a block of shares, about 50-100 million shares, at RM5.20 each or lower.
"If the strike price is higher than RM5.20, the selected funds will be paying RM5.20. But if the strike price is below RM5.20, they will pay the lower price.
"The offer is usually given to loyal and long-term investors like EPF. Other funds will have to go through the conventional way," said a fund manager.
The strike price is the price at which the IPO is finally set, at the end of the book-building process.
Sources also revealed that five other institutional funds, two local and three foreign funds including a Middle East fund, were offered shares at a similar price.
Although the official book-building process is expected to start tomorrow, rumour has it that an investment bank has already opened its book to orders from yesterday, with the bid starting at RM4.80 a share.
CIMB Investment Bank Bhd is the principal adviser for the IPO while Credit Suisse and Goldman Sachs are joint global coordinators and book-runners.
Meanwhile, Bloomberg News reported that Malaysian funds, which included the EPF, will buy almost half of the shares on offer.
Maxis Communications has offered 2.25 billion existing shares, or 30 per cent, of Maxis Bhd under the IPO. Some 92 per cent of that have been reserved for institutional investors.
Maxis Bhd's final prospectus is expected to be out on October 28.
The Employees Provident Fund (EPF) has appointed Shahril Ridza Ridzuan as its new deputy chief executive officer in charge of investment, effective December 1.
Shahril, 39, will succeed Johari Muid, who is now in charge of the pension fund's strategic planning unit.
The outgoing chief of property group Malaysian Resources Corp Bhd has vast experience in corporate finance, restructuring, mergers and acquisitions, as well as property development, the EPF said in a statement.
Shahril also serves as a non-executive director on the boards of Media Prima Bhd, The New Straits Times Press (Malaysia) Bhd and Pengurusan Danaharta Nasional Bhd.
EPF retirement withdrawals total RM1.97b in 3Q
Written by The Edge Financial Daily
Thursday, 26 November 2009 00:02
KUALA LUMPUR: Retirees withdrew a total of RM1.97 billion from the Employees Provident Fund (EPF) in the third quarter of 2009 (3Q09), a 20% rise from RM1.64 billion in the previous corresponding quarter.
In a statement yesterday, EPF said a total of RM1.41 billion (2Q09: RM1.81 billion) was withdrawn as lump sum age 55 withdrawal, representing an increase of 14.22% from a year earlier. Total applications approved under this category rose to 32,446 (2Q09: 39,901) from 29,054 previously.
The remaining RM557.05 million (2Q09: RM705.89 million) was withdrawn under flexible age 55 withdrawal which rose by 38% from RM403.51 million in 3Q08.
"Increasing member interest in flexible age 55 withdrawals underscores members' confidence in the EPF in earning dividends for their savings," said EPF chief executive officer Tan Sri Azlan Zainol.
"Nonetheless, 72% of retirement withdrawals still consist of lump sum withdrawals. We hope to see this amount decrease over time as more members become increasingly aware that lump sum withdrawal will likely lead to income inadequacy during retirement."
Azlan said the trend of stretching the retirement ringgit was also reflected in the applications for members' investment withdrawal that continued upwards, albeit marginally, by 3.58% compared with 3Q08.
In 3Q09, a total of 111,418 applications (2Q09: 114,268) were approved with withdrawals amounting to RM872.89 million (2Q09: RM906.8 million) compared with 107,564 approved applications and RM808.53 million withdrawn a year earlier.
EPF said members, however, exercised greater prudence and care in making withdrawals for housing as shown in a significant annual decrease in 3Q09, due to the adverse economic conditions.
It said with many purchasers adopting a "wait and see" attitude, approved applications for housing withdrawals in 3Q09 fell 20.18% to 86,664 from 108,573 in 3Q08 (2Q09: 104,951 applications). The amount withdrawn fell 30.75% to RM1.1 billion from RM1.58 billion a year earlier (2Q09: RM1.32 billion).
As at end-September 2009, EPF membership grew 2.4% to 12.28 million compared with 12.211 million in 2Q09 and 11.99 million in 3Q08. The total number of active members rose to 5.73 million from 5.6 million in 3Q08 (2Q09: 5.72 million). The number of registered employers rose 2.44% from 440,603 in 3Q08 to 451,399 in 3Q09 (2Q09: 447,119).
