ANNUAL REPORT 2016

ACHIEVING A BETTER FUTURE

Facts at a Glance2016

14,806,595members

6,882,983of whom are actively contributing

540,833employers contributing to the EPF

in annual contribution, from employees and employers

RM61,594.29 million

million

million

million

billion

million

+=

EMPLOYEESEMPLOYERS

in total withdrawals in 2016

RM46,804.68in total investment assets, up

RM731,111.78

incr

ease

incr

ease

dividend payout

dividend rate

RM37.08

in total gross income, up

RM46,557.22

million

from

RM44,234.03in 2015

TOTAL WITHDRAWALS

Number of Acceptance Number of ApprovalTotal Withdrawals

2,360,076 2,267,723RM46.80

billion

Sources:1. ExecutiveInformationSystem(EIS)forNumberofMembersandEmployers2. DataWarehouseforTotalWithdrawals(NumberofAcceptanceandApproval)

www.kwsp.gov.my

in 2015RM684,526.44from

5.70%

5.25%

6.81%

Vision of a

Comfortable RetirementThe three main components of a comfortable retirement are Financial Security, Good Health and a Happy and Meaningful Life.

EPF’s aspirations in the next five years

The aspiration for a Comfortable Retirement is aligned with the EPF’s Vision of Helping Members Achieve a Better Future and its Mission to Safeguard Members’ Savings and Deliver Excellent Services.

At least half of our members meeting the minimum basic savings according to age band.

Members are empowered to make informed financial decisions and choices that are aligned to their lifestyle and values.

Members can rely on multiple income sources and protection, to mitigate against longevity risks, to supplement EPF’s retirement savings, resulting in a sustainable retirement for life.

Strong and sustainable social protection for the elderly in place, for members to achieve retirement well-being.

Understanding and determining our Desires, Wants and Needs form the foundation towards achieving a robust and healthy financial standing.

Aiming to create a better retirement future

Desires

Wants Needs

Percentage of income going into savings

Sustainability of ‘Rainy Day’ Funds

Replacement Rate of Last Drawn Salary*

Information

• Consistent and secure income for life• Medical and life insurance coverage• Debt-free• Having a decent place to call home

• Mentally and physically healthy and active

• Independent and mobile• Healthy lifestyle

(leading to lower medical expenses)

• Strong bond with family, relatives and friends

• Family and Community support to care in times of need

• Stay engaged and productive in the community

• Access to elderly-friendly facilities

Financially Secure

01

Healthy 02 Happy,

Meaningful Life

03

WHAT DOES IT MEAN TO BE FINANCIALLY HEALTHY?

30% 6 >60%months

*Dependent on lifestyle, affordability and goals

OPEN

Facts at a Glance2016

14,806,595members

6,882,983of whom are actively contributing

540,833employers contributing to the EPF

in annual contribution, from employees and employers

RM61,594.29 million

million

million

million

billion

million

+=

EMPLOYEESEMPLOYERS

in total withdrawals in 2016

RM46,804.68in total investment assets, up

RM731,111.78

incr

ease

incr

ease

dividend payout

dividend rate

RM37.08

in total gross income, up

RM46,557.22

million

from

RM44,234.03in 2015

TOTAL WITHDRAWALS

Number of Acceptance Number of ApprovalTotal Withdrawals

2,360,076 2,267,723RM46.80

billion

Sources:1. ExecutiveInformationSystem(EIS)forNumberofMembersandEmployers2. DataWarehouseforTotalWithdrawals(NumberofAcceptanceandApproval)

www.kwsp.gov.my

in 2015RM684,526.44from

5.70%

5.25%

6.81%

Current Retirement Scenario in MalaysiaMore than half of Malaysian households have no financial assets; one in three Malaysians do not have a savings account.

No Financial Assets * Households with Zero Savings(Financial Asset is an intangible asset where value is derived from a contractual claim, such as bank deposits, bonds and stocks.)

44%Indian

45%Chinese

55%Malay

57%Non-Malay Bumiputera

Bank DepositsStocks Property Car Others

Source: The Malaysia Human Development Report 2013, United Nations Development Programme (UNDP).

Rural household

Urban household

90%

86%

Malaysians need to be empowered and take charge of their own financial decisions according to their life stages.

FINANCIAL LIFE CYCLE

OPTIONS TO DIVERSIFY YOUR NEST EGG

FINANCIAL REALITY OF AN AVERAGE MALAYSIAN LONGEVITY RISK

• EPF Savings• Private Retirement Scheme• Personal Savings• Fixed Deposits• Others

• Life• General• Medical• Annuity• Education• Estate Planning

• Unit Trust• Securities • Bonds• Commodities• Real Estate

• Phased withdrawals (EPF and personal savings)• Annuity payments• Protected by healthcare/other insurance• Bequests

Savings Protection Investment

Malaysia is fast heading towards becoming an Aged Nation by 2030, whereby 14% of the population will be aged 60 and above.

Projection of the elderly population in Malaysia

Malaysians are living longerAgeing rate in Malaysia against other countries

0 50 100 150

United States

Malaysia

China

Japan

United Kingdom

Sweden

France

293.

639

5.1

604.

5

757.

3 947.

81,

485.

7

1,71

9.9 2,

098.

02,

805.

9

3,200

(,000)

2,800

2,400

2,000

1,600

1,200

800

400

0Young-Old

60-69Middle-Old

70-79Old-Old

802015 1990 1950Year

Long

er re

tirem

ent p

erio

d

0

10

20

30

40

505560

70

80

90

• The elderly group will double/triple within 15 years (2015-2030)

• The interval in which the percentage of population aged 65 and above doubles from 7 to 14 per cent

• Malaysia is ageing faster than other countries

• Average life expectancy is approximately 75 years old*

• Retirement savings withdrawal is still at age 55 since 1952

*Source: United Nations Population DivisionSource: National Institute of Aging, USA, “Why Population Aging Matters: A Global Perspective” (2011)

Source: Department of Statistics, Malaysia, “Population Projection 2010-2040” (2012)

There is an urgent need to establish a holistic Social Security Framework and Infrastructure to streamline all the social security programmes in Malaysia.

FRAGMENTED MALAYSIAN SOCIAL SECURITY INFRASTRUCTURE

Base or social pension

Public pension plans that are publicly managed

Occupational/personal pension plans

Voluntary personal pension schemes

Non-financial arrangements/ informal support

• 1Malaysia Book Voucher• Karisma, Jabatan

Kebajikan Masyarakat Malaysia

• BR1M 4.0, Bantuan Rakyat 1Malaysia

• Public Service Department• Social Security

Organisation (SOCSO)• Employees Provident

Fund Board (EPF)• Armed Forces Fund Board

(LTAT)

• Private Retirement Schemes (PRS)

• Ministry of Education Malaysia

• Klinik 1Malaysia

• None

State MandatoryMandatory Voluntary Voluntary

World Bank’s Pension Conceptual Framework

A holistic approach is urgently required

2015 Female2020 Male2030

25

26

26

45

69

85

115

77.4

72.5 72.3

68.2

47

50

Start Retirement LifeVery minimal amount

Moderate amount but gradually increasing

Increasing rapidly (compounding effect and higher contribution)

Growth of EPF Savings

EPF savings gradually reducing

EPF savings used up completely

Retirement Phase (Decumulation of Wealth Phase)

Mature Workforce25-45

Start a family/Buy house or car/Family protection/Pay debt/Wealth accumulation

Age

Experienced Workforce40-60

Children’s education/Wealth accumulation/Wealth protection/Retirement planning

Age

Young Workforce18-30

Young and single/Education loan/House rental

Age

1 2 3

Working Phase (Accumulation of Wealth Phase)

456

Active Ageing55-70

Change lifestyle/ Debt-free/Travel

Age

Passive Ageing65-80

Change lifestyle/Debt-free/Travel/Medical cost/ Elderly care

Age

Frail Old90+

Debt-free/Medical cost/Elderly care

Age

Employees Provident Fund Board - Annual Report 2016 2

THE ESSENCE OF THE EPF SONG

The song expresses the dedication and commitment of EPF staff to give their very best as part of our promise to maintain an excellent service delivery to members and employers.

We realise our mandate to safeguard members’ savings must always remain a top priority.

Every day is about giving our very best; now and into the future.

Cover RationaleACHIEVING A BETTER FUTURE

We continue our journey to become a premier retirement savings organisation, trusted by members and across generations. Today we are able to offer innovative and first of its kind products such as Simpanan Shariah and Retirement Advisory Service (RAS), as well as a wide variety of other world-class products and services. Our future is you: we will ensure our members receive a positive experience, irrespective of the channel - be it kiosks, online, phone, face-to-face, or through traditional mail.

We strive for expediency, accuracy and reliability. It’s our new brand; the new way we think - in line with our ambition of continuously improving, our resolve to be steadfast in meeting customer’s expectation, teamwork and all the while upholding the highest integrity - to achieve a better future across all demographics of our members.

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Safeguard Members’ Savings and Deliver Excellent Services

Mission

Helping Members Achieve a Better Future

VisionKWSP

Kami komitedKami sedia berbakti

Visi dan misiTerus dihayati

Di mata dunia harapan kami

KWSP

Kami berikrarNilai murni dijagaTelus dan integritiAmalan bersama

Kualiti perkhidmatanTetap diutama

CHORUS:

Kepada ahliKepada majikan

Janji kamiAnda diutamakan

Berkorban pastiIkhlas menabur bakti

Bersatu hatiDemimu KWSP

Yakin kami melangkahMenuju wawasan yang cemerlang

Demi simpanan hari tua andaDan pembangunan negaraDemi KWSP yang tercinta

Annual Report 2016 - Employees Provident Fund Board 3

CONTENTS• Facts at a Glance 2016• Vision of a Comfortable

Retirement• Current Retirement Scenario in

Malaysia

THE GUARDIAN OF RETIREMENT

4 Corporate Overview5 Awards6 Five-Year Financial Highlights8 Corporate Diary 201610 Chairman’s Statement14 Chief Executive Officer’s

Statement

GOVERNANCE

18 Members of the Board29 Alternate Members of the Board

– Government Representatives30 Members of the Investment

Panel35 Newly Appointed Board

Members, Alternate Board Members and Investment Panel

35 Outgoing Board Members, Alternate Board Members and Investment Panel

36 Board and Investment Panel Committees

37 Shariah Advisory Committee Members 2016-2018

38 Organisation Structure39 EPF Deputy Chief Executive

Officers40 Senior Management46 Statement on Corporate

Governance52 Risk Management 58 Statement of Risk Management

and Internal Control61 Board Audit Committee Report63 Statement on Internal Audit65 Statement on Investment Risk

Management

GIVING VALUE BACK

Dividend Rates Contribution Rates & Active

Members’ Profile by Age Group and Gender as at 31 December 2016

68 Investment Division Withdrawal by Schemes Active Members’ Profile by

Savings Range and Gender as at 31 December 2016

76 Operations Division Active Members’ Average

Savings at Age 54 by Gender & Members’ Average Savings at Age 54

List of Top 30 Equity Holdings by Percentage of Issued Shares as at 31 December 2016

84 Strategy Division

THE FINANCIALS

90 Group Corporate Structure91 Financial Overview and Analysis93 Financial Statements235 EPF Properties in Malaysia

ADDITIONAL INFORMATION

236 Glossary238 EPF Over the Years (1951-2016)240 67 Branch Networks Across

Malaysia

Corporate Diary 2016

Chairman's Statement

Chief Executive Officer’s Statement

Page 8

Page 10

Page 14

Financial Statements

Page 93