EPF chairman Abdul Halim Ali should not deceive the Malaysian general public by telling them that the year 2003 was a good one for the EPF due to the country's stable and strengthening economy.

In actual fact, EPF's 2003 return on investment (ROI) across the board dropped from 5.307% to 5.089%. If we were to use its 2002 performance as a yardstick, EPF is worse off by RM473 million.

The reality of the figures reveal that EPF's 2003 financial results are the worst recorded since 1996.

The deterioration began in 2001 when EPF became involved in bailing out a number of politically-linked companies such as Malaysia Building Society Berhad , MAS , Renong and Time dotCom . This saw a drastic drop in EPF's equity portfolio to way below the KLSE standard performance mark

The overpriced acquisition of MAS had an immediate impact of a RM900-million paper loss, while MBSB's recapitalisation undertaking took away another RM2.2 billion from the fund. The further bailout of Time dotCom created a damage of more than RM250 million.

There are also substantial doubts on Islamic Bond investment which exposes EPF to a high-risk portfolio with a very low return on dividend yield.

Since 2001, the return on investment (ROI) of EPF has deteriorated due to lack of prudent and professional fund management. Until today, EPF is still running its investment portfolio without a risk management division that should provide strategic input for investment with regards to the risk factors.

It is questionable why EPF has ignored the importance of such a division although they are entrusted with RM217 billion in investment assets belonging to 10.4 million workers in Malaysia.

Not only has the quality of EPF investments deteriorated, they also involve too many portfolios that have give rise to conflict of interests among EPF's board of directors and investment panelists.

There seems to be no sense of urgency at all within EPF's board even though the fund's ROI the has dropped from 6.556% (1999) to 5.089% (2003). This means that EPF had lost 1.467% in investment performance since 1999. As per current year performance, EPF investment management has caused its member to receive RM437 million lesser.

EPF's equity investment portfolio has been very disappointing; RM47.089 billion has only resulted in a miserable RM321 million (4.72% ROI) even though the 2003 stock market capitalisation increased by 34% (or RM161.02 billion) while the composite index improved by 158.79 points (or 25.23%).

EPF's equity portfolio fund management must be made answerable to these irregularities that cost EPF members their rightful equity capital gain.

The Public Audit Commission should seriously probe irregularities in EPF's RM47 billion investment portfolio and the missing capital gain from equity investment.

There must substantial irregularities involved for EPF's equity investment to actually shrink from 22.01% to 21.70% despite of the expansion of the market's capitalisation values. There must have been very substantial equity investments from the politically-linked companies at exorbitant price.

(MAS 29.2% acquisition caused the EPF to pay RM900 million higher than the fair market price while MBSB's 63.02% share absorbed more than RM2.2 billion in share value shrinkage. Time dotCom's debt to equity decision cost the EPF RM250 million).

The performance of the EPF's bond and loan portfolio has also been on a declining trend.

Almost 29.32% of it is exposed to the high-risk Renong-related bonds while 23.21% is exposed to Syed Mokhtar Syed Bukhari-related companies. This is a very significant risk exposure as Renong's business operation has been recording operational losses since 1996.

EPF's bond investment panelists should be questioned for the drastic decline of the bonds ROI from 7.17% (2001) to 5.79% (2003) or a drastic drop of 1.38%, which translates into a decrease of RM86.35 million in bond income for the year 2003.

Questionable bond rating and abuses of Islamic bond loopholes can be two main causes of exploitation by certain EPF panelists that have a direct interest in the bond underwriting business.

EPF property portfolio's ROI, meanwhile, yielded only 1.49% last year. The quality of the property assets EPF invested in are either in the form of debt swap or bad investment practices.

Why is EPF's 63.02%-owned company, MBSB, diversifying out of its core business of giving housing loans to now become a hotel investor? The price for its new hotel is tentatively fixed at RM110 million.

This is based on the loans balance due from the vendor as at March 31, 2001, after waiving 50 percent of the penalty interest due. Why did MBSB lend such a large sum to Westmont Leisure to build The Golden Legacy Hotel in Malacca?

EPF has been burdened with increasing operations cost despite computerisation and many productivity enhancement training programmess. In 2003, operating cost per staff skyrocketed to RM114,000 per person per year; at least 300%- 500% higher than any other financial institution in Malaysia.

EPF's operational auditors have chosen to ignore this RM541.0 million in operating costs and not explain it to EPF members.

A most disappointing fact is that Senator Zainal Rampak who represents workers and the MTUC on the EPF board, the EPF audit committee, and the EPF finance and development committee, has failed to highlight these shortcomings in the fund's management.

EPF members also have to seriously consider making recommendations to the prime minister for the removal of Halim as the chairman of EPF in respect to Malakoff , the fund's biggest borrower. Halim had attended and chaired all the EPF's investment panel's 13 meetings, but abstained from voting when Malakoff's bond investment came up.

It is very unethical for Halim to stay put as EPF chairman while also serving as Malakoff chairman.

If Hong Kong or Singapore securities law applied to Malaysia, EPF board members and investment panelists would have been by now subjected to a thorough investigation process.

But in Malaysia, panelists and members with conflicting interests still reign supreme with parliament's Public Accounts Committee being kept away from directly investigating.

If the situation in EPF is allowed to continue, it is doubtful that majority of EPF members will get to enjoy their old-age funds. The current EPF management will accelerate the fund depletion - faster than it earns.

EPF's management has to be investigated before the fund collapses during the next economic downturn. It's time Pak Lah does something to justify his crusade against corruption - why not start with the EPF?