The Employees Provident Fund (EPF) has declared a dividend rate of five percent for 2005, an increase over the previous year's 4.75 percent.

According to a Bernama report, its chairperson Abdul Halim Ali described the dividend rate as "good, given the challenging global economic environment and the low domestic interest rate".

Gross income from investments showed improvement across all asset classes to reach RM13.11 billion, an increase of RM1.35 billion from RM11.76 billion a year ago.

The EPF's net income for the year was RM11.89 billion, after deducting dividends for withdrawals, operating expenses, payment of death and incapacitation benefits, and provisions for diminution in value for investment.

For 2005, the EPF needed to earn RM2.37 billion to pay a one percent dividend, compared to RM2.16 billion in 2004. This translated to RM210 million or 9.0 percent more to declare a one percent dividend in 2005 compared to 2004.

More income

The EPF has to generate more income every year just to declare a one percent dividend and this amount will continue to go up as the size of its fund increases, Abdul Halim said in a statement issued Thursday.

As at Dec 31, 2005, the EPF had a total of RM259.88 billion invested in the Malaysian Government Securities (MGS), loans and bonds, equity, money market instruments, and property.

A total of RM97.77 billion was invested in MGS, followed closely by RM94.36 billion in loans and bonds, RM49.58 billion in equity, RM16.58 billion in money market instruments and RM1.59 billion in property.

Compared to a year ago, the EPF invested more funds in these instruments with the exception of money market instruments.

The asset allocation in 2005 saw two significant changes from the allocation of 2004, the EPF said.

Loans and bonds increased by RM19.97 billion to RM94.36 billion in 2005 from 74.39 billion in 2004 while the money market instruments showed a decrease of RM4.58 billion, reflecting the prevailing low interest rate.

Other options

Investment income generated in 2005 in all these asset classes registered increases, compared to the income generated in 2004.

Income generated from loans and bonds and equity showed marked improvements, according to the EPF.

Loans and bonds rose RM900.90 million to RM4.449 billion from RM3.548 billion previously.

Equities increased RM329.76 million to RM2.910 billion in 2005 from RM2.580 billion in 2004.

Abdul Halim said the EPF would continue to explore other investment options to maximise returns on members' savings without exposing the fund to high risk.