KUALA LUMPUR, 16 February 2019: The Employees Provident Fund (EPF), with the approval of the Minister of Finance, today declared a dividend rate of 6.15% for Simpanan Konvensional 2018, with payout amounting to RM43.00 billion; and 5.90% for Simpanan Shariah 2018, with payout amounting to RM4.32 billion. In total, the payout for 2018 amounts to RM47.31 billion, a marginal decrease of 1.70% from 2017.
With a real dividend of 3.93% for Simpanan Konvensional and 3.68% for Simpanan Shariah on a rolling three-year basis respectively, the EPF has exceeded its mandate of delivering a dividend of at least 2.50% on a yearly basis and at least 2.00% real dividend on a rolling three-year basis.
Chairman Tan Sri Samsudin Osman said, “We are very grateful and pleased that we have been able to consistently meet our two strategic investment targets. Beyond the anticipated nominal dividends, more importantly is that we consistently deliver above-inflation returns so that we are able to preserve and enhance the value of our members’ savings over the long term and help them achieve a better retirement future.
“This is despite 2018 being a difficult year, marked by volatility and a downward trend in global markets, due to the long-standing US-China trade war and four rounds of US interest rate hikes in the year alone. Nonetheless, we remained focused on our long term strategy and our portfolio diversification has provided resiliency and delivered commendable returns to our members.”
Gross investment income for 2018 was RM50.88 billion, out of which a total of RM4.62 billion was attributed to Simpanan Shariah, proportionate to its share of total Shariah assets; while RM46.26 billion was attributed to Simpanan Konvensional. The lower income for EPF’s Shariah portfolio in 2018 was due to the underperformance of the telecommunications, construction and oil and gas sectors in the domestic portfolio.
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 gains or losses from intercompany transactions, investment expenses, operating expenditures, statutory charges as well as dividend on withdrawals. The payout amount required for each 1.00% of the dividend in 2018 was RM7.72 billion, higher compared with RM7.02 billion in 2017.
In accordance with the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9), which came into effect beginning 1 January 2018, capital gains on disposal of equity amounting to RM18.21 billion for 2018 will flow directly to Retained Earnings from the Statement of Other Comprehensive Income, instead of the Statement of Profit and Loss as under the previous MFRS 139. In addition, under MFRS 9, the EPF will no longer recognise any impairment on its listed equity holdings.
Drawing comparison to the market uptrend in 2017, Tan Sri Samsudin said the 2018 financial year was a stark contrast where all stock market indices ended the year in the red. The FBMKLCI closed 6.00% lower, while global equity indices closed lower from between 9.00% to 16.00%.
During the year under review, Equities continued to be the main contributor of income with 57.55% amounting to RM29.28 billion, despite recording a slight decline of 6.96%, compared with RM31.47 billion in 2017. This asset class remains integral in providing return enhancement to the EPF’s portfolio.
The EPF’s investments in fixed income instruments, comprising Malaysian Government Securities & Equivalent and Loans & Bonds, in total contributed 36.13%, or RM18.38 billion, of the RM50.88 billion investment income for the year. Loans and bonds continued to provide stable income through scheduled coupon payments, although capital gains from this asset class declined as a result of rising yields in a volatile market environment.
Real Estate & Infrastructure contributed RM2.10 billion in investment income in 2018 with a decline in annual growth of 29.29%, compared with 2017, while Money Market Instruments contributed RM1.12 billion in investment income during the year. Real estate and infrastructure recorded a lower ROI due to the high base effect in 2017 where a one-time transaction took place. The asset class continued to deliver over 8.00% return annually for the past five years, a premium of 3.29% over fixed income instruments.
Foreign investments across asset classes contributed 37.52% to EPF’s gross investment income, lower compared with previous years due to the decline in global and regional equity prices and volatility in foreign exchange rates. Foreign investments in 2018, nonetheless, added value to the EPF’s overall portfolio by enhancing returns and cushioned some of the market volatility seen throughout the year.
Meanwhile, the EPF remains prudent in its expenses as indicated by the consistency in its key financial ratios, including the cost to asset under management (AUM) of 0.27%, cost to gross income of 4.24% and cost to average total asset of 0.17%.
Commenting on the investment outlook, Tan Sri Samsudin said, “The volatility in the global markets is likely to persist over the long-standing trade dispute between the US and China. We are also bracing ourselves for other external factors such as the impending Brexit deadline, slowdown in global growth and further US interest rate hikes.
“Nonetheless, we remain committed to our long-term global diversification as guided by our Strategic Asset Allocation. This has time and again served us well, especially during times of market uncertainties, and equipped us with the ability to withstand short-term volatilities.”
Members can check their EPF account statement for the crediting of the 2018 dividend starting Sunday, 17 February 2019, through i-Akaun or via the myEPF website at new.epf.gov.my. The i-Akaun mobile application is available for download via Google Play Store or Apple App Store.
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.