EPF Investments Highlights

EPF Declares 5.65% Dividend For 2009

Highest Total Dividend Paid Out of RM19.63 billion The Employees Provident Fund (EPF) Board, with the approval of the Minister of Finance, has declared a dividend rate of 5.65 per cent for the financial year ended 31 December 2009. The dividend rate was declared on the back of the highest ever net income achieved of RM19.63 billion. The net income represents an increase of 34.82 per cent compared to RM14.56 billion recorded in 2008 while the dividend rate for 2009 is a significant improvement of 115 basis points over the rate of 4.50 per cent paid out for 2008. In a statement issued today, EPF Chairman Tan Sri Samsudin Osman said, “2009 was a significant year for the EPF as it rode out the impact of the global financial crisis. While the EPF continues to be challenged by the fragile economic environment, our investments nonetheless delivered a sound performance for the year.” During the year under review, a total of 72.53 per cent of investments were devoted to Fixed Income Instruments in line with EPF’s prudent approach to investment, while 27.05 per cent was in Equities, and the remaining in Property. As at 31 December 2009, EPF’s investment portfolio grew 8.55 per cent or RM29.25 billion to RM371.26 billion compared to RM342.01 billion in 2008. These were invested in instruments detailed in the following table: EPF’S INVESTMENTS IN 2009 AND 2008 Asset Class Investments up to 31 December 2009 Investments up to 31 December 2008 Increase/ (Decrease) (RM billion) (RM billion) % (RM billion) % Malaysian Government Securities 93.11 25.08 96.16 28.12 (3.05) Loans & Bonds 152.96 41.20 137.25 40.13 15.71 Equities 100.43 27.05 87.95 25.72 12.48 Money Market Instruments 23.21 6.25 19.03 5.56 4.18 Property 1.55 0.42 1.62 0.47 (0.07) Total 371.26 100.00 342.01 100.00 29.25 For the 2009 dividend payout, the EPF requires RM3.43 billion to pay a one per cent dividend rate as a result of a larger membership base. This represents a 7.86 per cent increase over the amount of RM3.18 billion per one per cent dividend rate for 2008. Members can check their EPF Account Statement for the crediting of the 2009 dividend from Monday, 8 March 2010 onwards. “Barring any unforeseen circumstances, prospects for 2010 are greatly dependent on the economic performance of the country and internationally. Globally, financial markets continue to be volatile and this may have an impact on the price performance of our investments and future income. EPF will continue to focus on our key goals of preserving the capital of our contributors and ensuring a satisfactory real rate of return,” concluded Tan Sri Samsudin. About the Employees Provident Fund (EPF) The Employees Provident Fund (EPF) is Malaysia’s premier pension fund, providing basic financial security for retirement. The Fund is committed to preserving and growing the savings of its members in accordance with best practices in investment and corporate governance. It will always be guided by prudence in its investment decisions. As a customer-focused organization, the EPF delivers efficient and reliable services for the convenience of its members and registered employers. The EPF continues to play a catalytic role in the nation’s economic growth, consistent with its position as a leading savings institution in Malaysia. Date : 5 March 2010

Bullish views on unit trust in H1

By LAALITHA HUNT

INVESTORS may want to put their money in unit trusts this year especially in equity-linked funds, given its strong performance in 2009 and expectations that it will continue to perform well.

MAAKL Mutual Bhd chief executive officer Wong Boon Choy believes that following last year’s performance, fully invested equity funds will outperform in the first half of 2010, due to the continued improving macro economic indicators, positive corporate earnings momentum and ample liquidity supporting robust capital inflows.

As for the second half of 2010, more defensive equity funds such as those with stable dividend payouts or with flexible asset allocation are likely to fare better, Wong opines.

“This is because, we believe that the second half of 2010 will be a more challenging period with possible withdrawal of fiscal and monetary support worldwide, hence putting downside risks to corporate earnings especially those in cyclical sectors,” Wong says.

Wong Boon Choy ... ‘We believe the second half of 2010 will be a more challenging period.’

Meanwhile, Asia-Pacific funds are expected to outperform pure Malaysian-centric funds this year given the more visible earnings growth drivers favouring the former, Wong adds.

In terms of themes, Pacific Mutual Fund Bhd general manager (business development and marketing) Gary Gan says that funds investing in commodities, agriculture, technology, metals with linkage to emerging markets led by the BRIC nations with China at the forefront are expected to do well.

“We are also seeing signs of US stocks gaining interest again as many expect the United States to lead the developed world out of its slump,” Gan adds.

Morningstar Asia Ltd senior research analyst Y.T. Kum concurs, saying that investors prefer the strong recovery theme in Asia, namely Singapore and China and this trend is not expected to reverse.

Kum adds that the Malaysian economy has not been as resilient as other Asian countries over the past year.

“The speed of loan growth and capital market pickup in Malaysia is not as fast as other Asian countries such as China and Singapore. The pick-up of property market in Malaysia is also quite slow – the mediocre occupancy rate of offices does not point to a strong recovery. As a result, although the equity market gained on the back of improving corporate earnings, it failed to outperform other Asian markets over the year,” Kum adds.

However, MyFP Services Sdn Bhd financial planner and managing director Robert Foo advises against thematic unit trust funds because they may be trying to capitalise on a trend which may not be sustainable throughout the course of one’s investment time horizon which should be at least five years or more.

“Thematic funds appeal to investors who are affected by the herd instinct, which is not the wisest way to invest,” Foo opines.

Equity funds in Malaysia provided 36.36% in average returns last year (versus -33.16% in 2008) while mixed asset balanced funds registered 23.61% (-22.33% in 2008).

Meanwhile, bond and money market funds in Malaysia recorded 6.84% (-0.15% in 2008) and 2.09% (2.96% in 2008) respectively for 2009.

However, HwangDBS Investment Management Bhd head of equities Gan Eng Peng cautions that it would be a tougher year in 2010 to reap windfall returns.

Gan says that while growth prospects is expected to improve this year, implying higher corporate earnings and better stock market performance, the withdrawal of stimulus tools by governments as the economic conditions improve, will have a negative counter-balancing effect.

“This basically means, the natural upward bias of the markets will continue, but the upside will be limited on the back of less money chasing it,” Gan adds.

Gan shares that there will be a rise in demand for unit trusts this year from the public given the strong overall performance last year.

“This could prompt more equity funds being launched, especially in the first half of this year as the consensus outlook is weaker for the second half of 2010,” Gan says.

Meanwhile, last year’s best sellers like fixed income structures and protected funds are expected to continue to do well into at least the first half of 2010 for risk averse investors and institutions looking for better than fixed deposit returns.

Jeremy Tan, a licensed financial adviser with Standard Financial Planner Sdn Bhd says that although outlook for unit trusts were bright this year, it is not possible to match last year’s exceptional returns.

“At best, the returns on equity-linked funds would be a lower tiered double-digit percentage of over 10%. However, we should always look at unit trust investment on a longer horizon of at least three years and above, instead of on a year-to-year basis,” Tan adds