AG General Reports Year 2013: AG raises alarm over EPF’s overseas investments

Kuala Lumpur: While the Auditor-General (AG) commended the Employees Provident Fund (EPF) for the wise management of its foreign property investments in 2013, the AG has also requested assistance from the Public Accounts Committee (PAC) to check on the fund’s escalating overseas real estate investments.

PAC chairman Datuk Nur Jazlan Mohamed, after a briefing by the AG at Parliament House yesterday on the performance of government departments and agencies, said the AG had voiced concerns that the EPF had chalked up RM6.46 billion in overseas real estate investments last year.

This was higher than the RM5.28 billion invested in 2012 and RM5.55 billion in 2011.

“The AG wants to know what the investments are for and how they are derived, and whether they are risky or not and if we can get our money back,” said Nur Jazlan, adding that it is crucial for both the AG and PAC to obtain the necessary feedback from the EPF.

Nur Jazlan said since it involves overseas investments, the AG does not have jurisdiction over the retrieval of information especially from foreign banks and financial consultants.

“There must be justification to invest overseas, because once these investments leave the country, we do not have the liberty to recover the money,” he said, noting that there must be a “check and balance” system especially when it comes to government-linked companies.

In the Auditor-General’s report 2013, the AG commended the EPF for surpassing last year’s income target for its real estate and infrastructure investments in Malaysia and overseas.

The EPF received an income of RM1.4 billion or 7.9% of the RM14.36 billion invested in local and foreign properties and infrastructure last year. The income target for the year was RM930 million.

“In our opinion, the EPF’s property investment in 2013 was good because it received an investment income that was above the target,” the AG said in the report.

The provident fund invested RM6.46 billion of the RM14.36 billion in foreign real estate properties and infrastructure, while another RM4.92 billion was invested locally. It also invested RM2.98 billion in infrastructure last year.

The EPF’s foreign property investments were concentrated in the United Kingdom (RM4.06 billion), Australia (RM1.55 billion), Singapore (RM546.4 million) and other European countries (RM306.47 million).

The AG said its audit carried out from August to October 2013 found that the EPF’s management of its Australian investments was good. The investments were carried out via a fund manager, a joint venture and a co-investment.

Among the investments, which were made since 2010, were office buildings in Melbourne, Brisbane and Canberra as well as warehouses in Sydney and Melbourne. The AG said the EPF’s Australian investments netted RM66.28 million in income for 2013, or 4.3% of the total investments of RM1.55 billion.

Among factors that contributed to the EPF’s good performance were lower risks and volatility in Australia’s property and logistics sectors, and the use of the structured Managed Investment Trust method which attracts a lower tax rate of 15% instead of 30%.

The AG said the RM1.55 billion investment in Australia is below the RM2.02 billion authorised to be invested in that country by the EPF investment panel.

According to the report, out of the RM586.66 billion invested by the EPF last year, RM252.14 billion was invested in equities, RM154.19 billion in loans and bonds, RM152.91 billion in Malaysian Government Securities, RM14.36 billion in properties and infrastructure and RM13.06 billion in money market instruments.

The EPF’s investments in properties and infrastructure last year were higher than 2012’s RM13.05 billion and 2011’s RM9.87 billion. The investment income increased to RM1.14 billion in 2013, from RM596 million in 2012 and RM310 million in 2011.

Last year, the EPF declared a dividend of 6.35%, representing the biggest ever dividend payout of RM31.2 billion to its over 13 million contributors.


This article first appeared in The Edge Financial Daily, on April 8, 2014.


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