KUALA LUMPUR – The Armed Forces Fund Board (LTAT) reserves have consistently remained negative since 2020, amounting to RM376 million in 2020, RM285 million in 2021, and RM338 million in 2022, revealed the 2022 Auditor-General’s (A-G) Report.
As of December 31, 2022, there are still 41 old stock portfolios with an unrealised loss of RM662 million that have not yet been addressed, contributing to the overall negative reserve balance.
The report also noted that in 2022, LTAT invested RM5.288 billion in 13 subsidiaries, including RM2.550 billion in Boustead Holdings Bhd (BHB) and RM0.106 billion in Pharmaniaga Bhd.
However, LTAT did not account for impairments in these investments, totalling RM0.812 billion, which overstated the net profit and investment in subsidiaries.
BHB is a wholly-owned subsidiary of LTAT. Pharmaniaga is a subsidiary of BHB that was established in 1994.
It was previously reported that Pharmaniaga had fallen into the PN17 category, having recorded a net loss of RM607.32 million for the financial year ending December 31, 2022.
This is in stark contrast to the net profit of RM172.15 million reported in the preceding year, attributed to reduced demand from the government for the procurement of Covid-19 vaccines.
The pharmaceutical company also saw the resignation of its chief executive officer, Datuk Zulkarnain Md Eusope, in March last year.
In May the same year, Pharmaniaga reported to Bursa Malaysia that its profits for the first quarter ending March 31, 2023, had slumped to RM2.65 million, a significant decrease compared to the RM27.73 million recorded in the previous year’s corresponding quarter.
According to reports, earnings were also reduced by 8.5% to RM880.45 million from RM962.17 million previously, most of which was due to low customer demand in the concession segment and Indonesia.
Former defence minister Datuk Seri Mohamad Hasan had also previously revealed that almost 50% of LTAT’s investment funds were “trapped” in Boustead, and its performance is almost “entirely dependent” on BHB’s financial position.
The A-G’s Report also stated that the revenue of LTAT in 2022 amounted to RM653 million, reflecting an increase of RM139 million, or 27.0%, compared to 2021 (RM514 million).
“LTAT’s net profit also saw a rise of RM0.050 billion (13.1%), increasing from RM0.383 billion in 2021 to RM0.433 billion in 2022.
“In 2022, LTAT distributed a dividend payment to contributors, totalling RM0.476 billion (5%), utilising both the net profit and accumulated profit,” it said, adding that LTAT also recorded a non-cash profit of RM0.189 billion, which is used as the basis for dividend payments in 2022.
In light of these shortfalls, the audit also recommended LTAT review and restructure its investment strategy by diversifying investments and not concentrating on investments in subsidiaries to mitigate the investment risk and income dependency.
“LTAT should improve the governance of investment management by way of improving investment policies to address the issue of shares with prolonged losses.
“As well as ensuring the dividend declaration is made based on realised gain to make sure it does not affect the ability of payout to the eligible contributors in the future.”
LTAT has been embroiled in controversy with several key resignations. Last month, it witnessed the resignation of three leadership members.
They were chief executive Datuk Ahmad Nazim Abd Rahman, chairman Tan Sri Raja Mohamed Affandi Raja Mohamed Noor and senior director of strategy Dayana Rogayah Omar.
The Defence Ministry recently announced that several individuals have been appointed to fill the recently vacated positions on LTAT while it finalises credible candidates for the roles.
It was reported that Defence Minister Datuk Seri Mohamed Khaled Nordin had expressed intent to investigate these resignations and brief the cabinet on the matter. – March 6, 2024