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EPF Declares RM48.13 Billion Dividend Payout for 2017

KUALA LUMPUR, 10 February 2018: The Employees Provident Fund (EPF), with the approval of the Minister of Finance, today declared a dividend rate of 6.90 per cent for Simpanan Konvensional 2017, with payout amounting to RM44.15 billion; and 6.40 per cent for Simpanan Shariah 2017, with payout amounting to RM3.98 billion. In total, the payout for 2017 amounts to RM48.13 billion, an increase of 29.8 per cent from 2016.

Chairman Tan Sri Samsudin Osman said, “We are very pleased with the overall performance in 2017, which is also a landmark year for the EPF as we are now managing two savings schemes and declaring two dividend rates.

“Simpanan Shariah has shown a strong performance considering that this is its first dividend declaration. This reaffirms the strength and health of EPF’s shariah asset and should come as good news to our members who have switched to Simpanan Shariah. As for Simpanan Konvensional, the 6.90 per cent was the highest rate ever announced since 1997.”

The dividend payout for each account was derived from total gross realised income for the year after deducting the net impairment on financial assets, unrealised losses due to foreign exchange rate and derivative prices, investment expenses, operating expenditures, statutory charges as well as dividend on withdrawals.

Simpanan Shariah derived its income solely from its portion of Shariah assets while for Simpanan Konvensional, a total of 38 per cent of the income was generated by its share of Shariah assets and 62 per cent from non-Shariah assets.

Gross investment income for 2017 was RM53.14 billion, the highest since the EPF’s establishment in 1951. Of the amount, a total of RM4.60 billion was attributed to Simpanan Shariah, proportionate to its share of total Shariah assets while RM48.54 billion was attributed to Simpanan Konvensional. The returns for Simpanan Konvensional were enhanced by the income generated from non-Shariah investments following the outperformance of global banking stocks, while Simpanan Shariah does not include conventional banking stocks due to their non-Shariah compliant status. In addition, equity impairments from Shariah-compliant stocks, particularly the oil and gas, and telecommunication counters, lowered the income of the EPF’s Shariah portfolio.

Tan Sri Samsudin said, “There will always be a deviation in Simpanan Shariah returns from Simpanan Konvensional in the short-term, however, the returns are expected to be similar over the long-term as both share the same investment objectives and strategies.

“As a retirement fund, our objective is to preserve and enhance the value of our members’ retirement savings and this can be measured by looking at our declared dividend rates against Malaysia’s inflation rate. For 2017, the dividend rates declared for Simpanan Shariah and Simpanan Konvensional were 2.61 per cent and 3.11 per cent respectively over inflation rate of 3.79 per cent. For the past three years, the EPF has declared a rolling three-year real dividend of 3.51 per cent and 3.67 per cent respectively, which exceeded our strategic target of two (2) per cent real dividend.”

On the RM48.13 billion dividend 2017 payout, Tan Sri Samsudin said the amount needed to pay one (1) per cent dividend was RM7.02 billion, in tandem with the annualised growth of members’ savings of 10.98 per cent since 1990. As at 31 December 2017, total members savings amounted to RM768.51 billion, of which RM67.76 billion was under Simpanan Shariah and RM700.75 billion under Simpanan Konvensional.

“This is a challenge that goes into managing a large fund like the EPF as we need to generate consistent and sustainable returns for the long run. This is partly the reason why we need to diversify into overseas markets as the increase in global asset value helps us realise sizeable gains from different markets and asset classes, which contributed to the overall performance,” said Tan Sri Samsudin. 

The RM53.14 billion in 2017 gross investment income increased 14.13 per cent from RM46.56 billion in 2016. The amount has been growing annually at 11.90 per cent since 2007, and is equivalent to a gross return on investment (ROI) of 7.30 per cent.

Tan Sri Samsudin said the EPF’s investments had been delivering a three-year annualised ROI of 7.30 per cent, which was commendable given the EPF’s nature as a balanced fund with exposure in fixed income instruments of about 50 per cent.

“On that note, I would like to congratulate the EPF team for this outstanding performance to ensure that our assets grow at healthy levels in line with EPF’s vision to help members achieve a better future and their savings and interest are continuously safeguarded.”

The crediting of the 2017 Dividend will be made on Sunday, 11 February 2018, and members can check online via EPF website at www.kwsp.gov.my or through i-Akaun mobile app. The i-Akaun mobile app is available for download via the Google Play Store or Apple App Store.

Members who wish to switch to Simpanan Shariah 2019 may do so by registering before 24 December 2018.

Refer to Appendix 1 for details on asset class and dividend performance, and a list of suggested external fund managers familiar with EPF’s investment portfolio.

 

About the Employees Provident Fund (EPF)

The Employees Provident Fund (EPF) is Malaysia’s premier retirement savings fund to help its members achieve adequate savings for a comfortable retirement. This is in line with EPF’s vision to help members achieve a better future and the mission to safeguard members’ savings and deliver excellent services. The EPF has evolved significantly from transaction-centric to a professional fund management organisation with a strong focus on retirement security. The EPF is guided by a robust and professional governance framework when making investment decisions. It continues to play a catalytic role in the nation’s economic growth and seeks to cultivate a savings and investment culture among its members to improve the country’s financial literacy level.

 

 

APPENDIX 1

 

1.     EPF ASSET CLASS PERFORMANCE AS AT 31 DECEMBER 2017

 

The Employees Provident Fund (EPF) saw improved market conditions across both global and domestic markets in 2017. The two rate hikes by the US Central Bank and anticipation of tax reform in the US fueled the global market indices rally as it signaled investors’ positive outlook on the economy and increasing corporate profits going forward. Other factors that played a key role include increasing oil prices and strengthening of the ringgit.

 

During the year under review, Equities, which made up 42.23 per cent of the EPF’s total investment assets, remained the largest contributor to the investment income at RM31.47 billion, representing 59.23 per cent of total income. This was mainly driven by the strong rally in the global listed equities, particularly in developed markets such as the US and North Asia. The non-Shariah stocks, especially conventional banking stocks, delivered higher return that was driven by both major global and domestic banks, which have been the outperformers during the year.

Conversely, higher listed equity impairments from Shariah-compliant stocks, particularly the oil and gas, and telecommunication counters, lowered the income of the EPF’s Shariah portfolio. Impairment recognition is in accordance with the Malaysian Financial Reporting Standard (MFRS) 139 adopted since 2010.

The EPF’s Equity portfolio has been delivering a one, three, and five-year annualised return on investment (ROI) of 11.46, 10.90, and 11.06 per cent respectively. This is a premium of 6.77, 5.90 and 6.15 per cent over other asset classes respectively, and has been one of the main factors that enable the EPF to continuously provide healthy spread towards the country’s inflation rate and over the market yield of fixed income instruments. 

The EPF’s investments in fixed income instruments, comprising Malaysian Government Securities & Equivalent and Loans & Bonds, in total contributed 32.84 per cent, or RM17.45 billion, of the RM53.14 billion investment income for the year. Real Estate & Infrastructure contributed RM2.97 billion in investment income in 2017 with an annual growth of 19.62 per cent, compared with 2016; while Money Market Instruments contributed RM1.24 billion of income during the year.

The EPF’s prudent approach to managing expenses is indicated by the consistency in its key financial ratios, including the cost to asset under management (AUM). In 2017, the cost to AUM was at 0.26 per cent (2016: 0.25 per cent), cost to gross income of 2.53 per cent (2016: 2.56 per cent) and cost to total asset of 0.17 per cent (2016: 0.16 per cent).

The EPF’s overseas investments, which made up about 28 per cent of total investment assets as at 31 December 2017, contributed about 41.45 per cent to the EPF’s gross investment income for the year, thus enhancing the overall returns to the EPF’s investment portfolio by 1.22 per cent.

The diversification into global assets in various countries and currencies has enabled the EPF to realise sizeable gains from different markets and asset classes, which help to boost overall performance. The EPF’s overseas portfolio has been recording a one, three and five-year annualised ROI of 10.83, 11.14, and 10.43 per cent respectively. 

 

 

2.     DIVIDEND PERFORMANCE CHARTS

 

CHART 1: HISTORICAL EPF DIVIDEND RATES VS FIXED DEPOSIT (12-MONTH) AND INFLATION

CHART 2: DIVIDEND, REAL DIVIDEND, ROLLING 3 YEARS DIVIDEND & CPI                                                                       

CHART 3: AMOUNT NEEDED TO PAY EACH 1% DIVIDEND RATE (RM MIL)

                  

TABLE 1: EPF DIVIDEND RATE AND DISTRIBUTED AMOUNT (2000 – 2017)

YEAR

Dividend Rate

Income Distributed

(%)

RM mil

2000

6.00

9,748

2001

5.00

8,374

2002

4.25

7,742

2003

4.50

8,963

2004

4.75

10,286

2005

5.00

11,876

2006

5.15

13,424

2007

5.80

16,787

2008

4.50

14,288

2009

5.65

19,372

2010

5.80

21,610

2011

6.00

24,466

2012

6.15

27,451

2013

6.35

31,200

2014

6.75

36,656

2015

6.40

38,243

2016

5.70

37,076

SK 2017

6.90

44,151

SS 2017

6.40

3,979

 

 

 

 

 

Note to Editors,

Below is the list of suggested external fund managers and brokers who are familiar with EPF’s investment portfolio for your journalists to follow up with for market commentary report.

 

EXTERNAL FUND MANAGERS

 

NAME

COMPANY

PHONE NO.

EMAIL

Mr Gerald Ambrose

Chief Executive Officer

Aberdeen Islamic Asset Management Sdn. Bhd.

012-3029536

gerald.ambrose@aberdeen-asset.com

Pn Munirah Khairuddin

Chief Executive Officer

CIMB Principal Asset Management Sdn. Bhd.

017-3305691

munirah.khairuddin@cimb.com

Mr Teng Chee Wai

Managing Director

Affin Hwang Asset Management Berhad

019-3173976

cheewai.teng@affinhwangam.com

Pn Sharizad Juma'at

Principal Officer

RHB Islamic International Asset Management Berhad

012-2836973

sharizat.jumaat@rhbgroup.com

 

 

BROKERS

 

NAME

COMPANY

PHONE NO.

EMAIL

Mr Stephen Hagger

Country Head, Malaysia

Credit Suisse Sec. (M)
Sdn. Bhd.

03-27232088

stephen.hagger@credit-suisse.com

En Nik Hadi Nik Mahmood

Head of Equities, Malaysia

Macquarie Capital Securities (M) Sdn. Bhd.

03-20598897
012-3397529

nik.hadi@macquarie.com

YM Tengku Dato’ Zafrul Aziz Tengku Abdul Aziz

Group CEO

CIMB Investment Bank Berhad

03-22618664

zafrul.aziz@cimb.com

Datuk Abdul Farid Alias

Group President and CEO

Maybank Investment Bank Berhad

03-20747788

afarid.a@maybank.com.my

Dr Arup Raha

Chief Economist and Head of Research

RHB Banking Group

017-8523315

arup.raha@rhbgroup.com

 

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