KUALA LUMPUR: As a result of its long-term investment strategy and prudent approach, the Employees Provident Fund (EPF) Board, with the approval of the Minister of Finance, yesterday declared a dividend rate of 6.15 per cent for the financial year ended Dec 31, 2012.
The dividend rate, an increase of 15 basis points over the 6.00 per cent rate paid out in 2011, translates to a record-breaking total of RM27.45 billion being distributed to its members, an increase of 12.20 per cent over RM24.47 billion paid out in the previous year.
"Notwithstanding the increasingly complex investment environment, the EPF maintained its steady upwards momentum to post its strongest set of results since the turn of the millennium, underpinning the effectiveness of its long-term investment strategy as well as its disciplined and prudent approach," said EPF chairman Tan Sri Samsudin Osman in a statement.
In 2012, the EPF posted its highest gross investment income to date of RM31.02 billion, up 13.91 per cent from 2011.
The highest-ever dividend payout of RM27.45 billion was derived after deducting investment expenses, operating expenditures, statutory charges and net impairment allowance on financial assets.
The EPF's main objective is the protection of members' capital by generating a return that beats the rate of inflation, Samsudin said.
"We continue to fulfil this commitment year-on-year through our Strategic Asset Allocation (SAA) which seeks consistent returns in the long term within tolerable risk limits for each asset class," he said.
Consistent with its SAA, the bulk of the fund's investment assets continue to be in stable and traditional low risk fixed income instruments.
Equities made up 38.77 per cent of total investment assets for the year, while the remaining 3.59 per cent and 2.42 per cent were allocated for Money Market Instruments and Real Estate and Infrastructure asset classes, respectively.
"Despite being a diversified fund predominantly invested in low risk fixed income instruments, EPF's annual return on investment (ROI) has topped six per cent for the third year running," he said.
Samsudin explained that equities generated a double digit ROI of 10.06 per cent while returns from fixed income instruments exceeded 5.50 per cent in spite of the current low interest rate conditions.
Due to a number of one-off capital market transactions undertaken, Loans and Bonds showed the highest increase in year-on-year income.
Investment in this asset class contributed RM9.68 billion to gross investment income, up 33.62 per cent or RM2.44 billion compared to 2011.
In view of the prevailing low interest rate environment, Samsudin said EPF had gradually decreased its exposure in traditional and conventional fixed income assets and had shifted maturing assets into higher yielding assets in the form of equities and real estate but within the tolerable risk limits.
On the back of a steady growth seen in both domestic and global equity markets in 2012, equities contributed RM13.91 billion in income representing 44.84 per cent of gross investment income, he said.
Investments in Malaysian Government Securities and Equivalents, Real Estate and Infrastructure and Money Market Instruments earned RM6.26 billion, RM595.63 million and RM574.91 million respectively.
EPF total investment assets as at Dec 31, 2012, stood at RM526.75 billion surpassing the half a trillion mark, up 12.31 per cent from RM469.04 billion recorded in the previous year.
This increase was largely contributed by the positive net annual contributions from members and employers as well as consistent and encouraging investment performance across all asset classes.
As a result of the increase in membership base, the EPF requires RM4.46 billion to pay every one per cent dividend rate for 2012.
This represents a 9.34 per cent increase over RM4.08 billion paid for every one per cent dividend rate for 2011. The amount needed to pay a one per cent dividend rate will continue to rise eight to nine per cent annually.
One of the notable transactions in 2012 was the fund's expansion of its property investments, both overseas and locally, which included the Battersea Power Station project in London, UK, and the finalising of the purchase of 932ha of Rubber Research Institute land in Sungai Buloh for RM2.28 billion to be developed into a new township.