KUALA LUMPUR, March 8 — The Armed Forces Fund Board (LTAT) said today the low reserves highlighted in the latest Auditor-General report doesn’t reflect its finances.
“We wish to clarify that the negative Reserve of LTAT duly highlighted, is the Other Comprehensive Income (“OCI”) Reserve, which is just one facet of the Combined Reserve,” the fund said in a statement issued in response to growing questions about the matter.
“LTAT’s combined reserve is composed of three components, namely, Retained Earnings, Reserve Fund, and OCI Reserve, which, in combination reflects our financial stability.”
The board’s Reserve Fund remains constant, set at 2 per cent of contributors’ account balance, it added, claiming this underscored financial stability.
The OCI Reserve comprises the accumulated unrealised gains or losses of assets tagged as FVTOCI (Fair Value Through Other Comprehensive Income) that the fund said reflected market fluctuations and asset performance.
“Despite the OCI Reserve showing a deficit, the Combined Reserve at the end of financial year 2022 amounts to a net positive balance of RM160 million, representing an improvement from the preceding year,” the board said in the statement.
“The unaudited post-dividend Combined Reserve for FY2023 will see further improvement, reflecting LTAT’s commitment to its transformation journey towards strengthening its financial position.”
The net positive reserve position leads to a book value solvency of above 100 per cent which makes its net asset at book value more than total contribution by members, the fund said.
LTAT’s reserves have been in deficit since 2020, the AG said, in its 2022 audit report of federal agencies released on Tuesday, which was widely reported. Reserves stood at a negative RM376 million in 2020, RM258 million in 2021, and RM338 million in 2022.
The audit report also highlighted 41 old stock portfolios with an unrealised loss of RM662 million as of December 31, 2022, contributing to the deficit.
LTAT was also reported to have omitted impairment for investments in Boustead Holdings and Pharmaniaga, resulting in an overstatement of net profit and subsidiary investments by RM0.812 billion.
The fund recorded a non-cash profit of RM189 million which formed the basis for dividend payment in 2022, The Edge reported on Wednesday.
“In regard to the issue of non-cash profit contributing to our income for FY22, the exclusion of it still maintains a solvency position above the threshold required within our dividend policy,” the fund said.
“As a retirement fund, our dividends when declared are non-cash in nature and are credited to members’ accounts. Thus, LTAT’s liquidity position remains stable, ensuring we can fulfil all commitments as they arise.”
