KUALA LUMPUR (Feb 27): The Employees Provident Fund’s (EPF) subsidiaries incurred losses in 2023, as highlighted in the Auditor General’s Report, due to the exclusion of returns in the form of tax-efficient interest, said Finance Minister II Datuk Seri Amir Hamzah Azizan.

The selection of appropriate assets and a suitable capital structure, including shareholder loans to subsidiaries, are key factors in the EPF’s investment strategy, Amir Hamzah said when winding up the debate on the AG's Report in the Dewan Rakyat on Thursday.

"Through shareholder loans provided to subsidiaries, the EPF can gain investment returns in the form of tax-efficient interest," he said. "However, since profits are calculated after interest costs, this has caused the subsidiaries to record losses in 2023."

The AG's Report, released on Monday, revealed that nine EPF subsidiary companies suffered total losses of RM224.21 million in 2023.

Amir Hanzah said five of the subsidiaries — Kwasa Europe S.à.r.l, Naungan Sentosa Sdn Bhd, Kwasa Utama Sdn Bhd, Kwasa Singapore Duo Pte Ltd, and Common Icon Sdn Bhd — recorded losses due to the exclusion of tax-efficient interest returns.  

He added that despite the losses, Kwasa Europe’s asset value stood at €2.75 billion (RM12.8 billion), which was 26% higher than its acquisition cost of €2.18 billion (RM10.15 billion). Similarly, Kwasa Utama's property value of RM433.13 million exceeded the investment cost of RM370.20 million.

As for Kwasa Singapore Duo, the EPF recorded a return of RM16.28 million through interest and RM19.16 million in dividends, the ministry said.

Amir Hamzah did not provide the reasons for the losses registered by the other four subsidiaries, namely Ameen Direct Equity I, LP, KWASA Europe I S.à.r.l, YTR Harta Sdn Bhd, and PPNK-Harta Sdn Bhd.

The minister also commented on the AG's Report's disclosure that seven subsidiaries of the Retirement Fund (Incorporated) or KWAP recorded total losses of RM80 million in 2023.

He said five of these subsidiaries — Prima Harta 3 (Lux) S.à.r.l, Prima Harta U (Jersey) Ltd, Prima Harta 4 (Jersey) Ltd, Prima Harta 5 (Jersey) Ltd, and Prima Harta 6 (Jersey) Ltd — suffered losses due to their capital structure, particularly shareholder loan interest payments.

Additionally, the declining value of 100 Cheapside, a commercial property in the UK, impacted Prima Harta 5 (Jersey) Unit Trust (PH5) and Prima Harta 5 (Jersey) Ltd due to rising interest rates between 2021 and 2023.

However, Amir Hamzah noted that Prima Harta 5 (Jersey) had shown financial recovery, with occupancy reaching 99.6% and recording a profit in 2024.

He also noted that Capsquare Tower Sdn Bhd faced losses due to low occupancy at Menara Capsquare in Kuala Lumpur.

Despite this, he said the building’s valuation had risen to RM505 million in 2024, an 8% increase from its RM466.8 million purchase price, following KWAP’s aggressive marketing strategy.

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