Update - EPF declares 6.35% dividend for 2013, record dividend payout of RM31.2 billion

KUALA LUMPUR (Feb 16): The Employees Provident Fund (EPF) Board has declared a dividend of 6.35% for the financial year ending Dec 31, 2013, representing the biggest ever dividend payout of RM31.20 billion to its members, up 13.66% over the RM27.45 billion paid in 2012.

In a statement Sunday, EPF Chairman Tan Sri Samsudin Osman said the fund’s performance had been consistently stable, especially in the past five years. 

“Over the years, we have been diversifying our portfolio, thereby spreading out the scope of our assets to manage market risks and generate consistent returns,” he said. 

Samsudin pointed out that since the 2008 global financial crisis, the EPF had declared compounded dividends of more than RM120 billion for its members. 

“Including the net annual contributions, our investment asset size had recorded a strong rise; from RM342.01 billion in 2008 to RM586.66 billion at the end of 2013,” he said.

He said the dividend rate was declared on the back of a record gross investment income of RM35.00 billion, a 12.81% rise from the RM31.02 billion gross investment income recorded in 2012.  

Samsudin said the 2013 dividend payout was derived after deducting the net impairment allowance on financial assets, investment expenses, operating expenditures, statutory charges as well as dividend on withdrawals.

He said as the EPF membership rose to more than 13 million, a total of RM4.91 billion was required to pay every 1% dividend rate for 2013. 

He said this was 10.06% higher compared with RM4.46 billion paid for every 1% dividend rate for 2012, adding that the amount needed to pay a 1% dividend would continue to grow between 8% and 9% annually.

"The investment performance has led the EPF to achieve an annual return on investment (ROI) of 6.97%, a rise of 10 basis points from 2012. 

“This is a manifestation of our sound investment principles and diversified portfolio across different markets and sectors," said Samsudin.

He said equities emerged as the largest contributor to the EPF's gross investment income in 2013, generating RM19.52 billion of income, a significant increase of 40.39% compared with RM13.90 billion recorded in 2012.

EPF's equities portfolio generated double digit realised returns, exceeding the performance of other similar funds, he said.

Samsudin said the strong performance in EPF’s equity portfolio was helped by the local and global indices reaching new highs. 

“This was attributable to investors' confidence in the stability and fundamental economic strength of our domestic market with the conclusion of the 13th General Election. 

“The market-driven liquidities that followed had also facilitated us to lock in large capital gains.  The global equity environment has shown much improvement, with many global indices exceeding the pre-2008 crisis level," he said.

Samsudin said the EPF’s achievements reflected the effectiveness of a balanced and diversified fund.

He said 2013 was a very good year for its equity investments while the year before that showed the EPF faring better in the fixed income portfolios. 

“By having a diversified portfolio across many markets, we are able to take opportunities when they arise and reduce the overall risk to the fund.

“However, we remain cautious for the coming year as volatility in interest rates may possibly affect our returns, given that EPF funds are predominantly invested in low risk fixed income instruments. Additionally, we anticipate substantial volatility in emerging markets as liquidity tightens globally," he added.

The Fund's total overseas exposure constituted 20.97 per cent of its total investment assets based on book value as at end December 2013, registering a rise from 16.98 per cent the year before. During the year under review, the EPF had outsourced USD2.20 billion to the external fund managers for global equity mandates, while a total of RM2.25 billion and RM850 million were injected  into domestic fixed income and equity mandates respectively.

Samsudin said managing a large fund was a great challenge, which necessitated the EPF to employ a dynamic diversification programme. 

“To secure a stable long-term yield and manage risks, we continue to expand our reach overseas and broaden our outsourced asset management. 

“The success of this strategy was reflected in the second half of 2013 as gains in developed markets offset the weaknesses in emerging markets.

“Given the global economic slowdown and financial uncertainties, we remain steadfast and our achievements are testament to the EPF management's continuous efforts and initiatives to maintain long-term financial stability," he said.

Written by Surin Murugiah of theedgemalaysia.com