KUALA LUMPUR (March 6): The Armed Forces Fund Board (LTAT) has consistently reported a deficit in its reserves since 2020, according to the Auditor General's Report on Federal Agencies for 2022.
As outlined in the AG's Report, LTAT's reserve stood at a negative RM376 million in 2020, RM258 million in 2021, and RM338 million in 2022.
Notably, the report highlighted 41 old stock portfolios with an unrealised loss of RM662 million as of Dec 31, 2022, contributing to the deficit.
The AG's Report also disclosed that LTAT's 2022 investment in 13 subsidiaries amounted to RM5.29 billion, including investments of RM2.55 billion in Boustead Holdings Bhd and RM106 million in Pharmaniaga Bhd.
However, the report revealed impairment of investments amounting to RM768 million in Boustead Holdings and RM44 million in Pharmaniaga.
"LTAT did not provide impairment for investments in Boustead Holdings and Pharmaniaga, resulting in an overstatement of net profit and subsidiary investments by RM0.812 billion," stated the AG's Report.
Additionally, the report found that LTAT divested its holdings in Perumahan Kinrara Bhd and Tanah Sutera Development Sdn Bhd, selling them for a total of RM43 million to Perbadanan Perwira Harta Sdn Bhd (PPHSB). In return, LTAT received PPHSB shares valued at RM232 million.
From this transaction, LTAT recorded a non-cash profit of RM189 million, forming the basis for dividend payment in 2022.
In light of these findings, LTAT is advised to reassess and revamp its investment strategy by diversifying its portfolio, avoiding excessive reliance on subsidiaries to mitigate risk and income dependence.
The AG's Report also recommends improving the governance of investment management, refining policies to address shares with prolonged losses.
Additionally, it suggests basing dividend declarations on realised gains to ensure the ability to distribute payouts to eligible contributors in the future.
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