It has never been easy to decipher what goes on behind the workings of the Armed Forces Fund Board or better known as LTAT.
The returns, which comprise a cash portion and a special dividend in the form of units in a unit trust, have been consistently fair. It has on average paid out 11.3% per annum in its 45-year history to its members who are serving the forces.
The cash portion is generally between 6% and 7% and the rest of the payout is in the form of unit trusts.
What astonishes the fund management industry is that even when the markets are bad, the returns are superior compared to other funds.
For instance, in the years 1998 and 1999 when the stock market crashed and rebounded, LTAT declared a total payout of 13.5% and 15%, respectively. Many will remember 1998 as the time when most investors and funds were wiped out following the meltdown of the stock exchange.
In 2008, LTAT paid out 16% when the global markets were roiling under the weight of a financial crunch in the United States that had spread to the rest of the world.
Under the previous government, LTAT took on corporate transactions that other government funds such as Khazanah Nasional Bhd would shy away from. For instance, LTAT, together with Boustead Holdings Bhd , acquired two companies running the automated traffic enforcement system (AES) in 2015.
Both companies were associated with the Barisan Nasional government, particularly, the-then Prime Minister Datuk Seri Najib Razak.
The deal was done through Irat Properties Sdn Bhd, a subsidiary of LTAT. The purchase price was never disclosed in detail until there was a change in government in May last year.
In August last year, details of the deal that was transacted at RM555mil came out after the government said it was taking over the companies. According to the former chairman of LTAT, Tan Sri Mohd Anwar Mohd Nor, LTAT was told by the Cabinet to take over the two companies.
And it was promised that the government would buy the two companies – ATES Sdn Bhd and Beta Tegap Sdn Bhd – at a 12% return per annum. The new government is only prepared to fork out RM555mil to take over the AES.
In 2013, LTAT’s 60% subsidiary, Boustead Holdings, paid RM130mil to a private company to purchase three parcels of land in Klang after a controversy broke out between two personalities linked to Umno and Najib. The two are former Selangor Wanita Umno leader Raja Datuk Ropiaah Raja Abdullah and Deepak Jaikishan, who was aligned to Najib’s family.
The head honcho of LTAT, Tan Sri Lodin Wok Kamaruddin, was a Najib loyalist. He stood with the former Prime Minister and was the chairman of the board of the scandal-plagued 1Malaysia Development Bhd.
On Thursday, the Auditor-General revealed a black mark in the financial track record of LTAT. It had overstated its profit for the year ended Dec 31, 2017 by RM291.61mil.
This is because LTAT booked in profits from an incomplete disposal and did not provide adequate diminution in value for shares.
The net effect on its accounts is that LTAT’s profit for 2018 is down to RM370.56mil compared to RM662.17mil previously. The accumulated profits of LTAT went into a deficit position of RM31.6mil.
Prudence is paramount when one finalises the accounts of funds. In this case, the Auditor-General is right to say the profits would be lower, so be it. The previous management and the board should accept the fact.
Lodin has resigned from all positions in LTAT and has been replaced by Nik Amlizan Mohamed. Apart from Lodin, board members who had passed the accounts for the period ending December 2017 are also responsible. Those still serving on the board of LTAT should resign.
The bigger question is whether there are more skeletons in the closet within the group of companies that LTAT controls.
The umbrella holding company for LTAT is Boustead Holdings, which, in turn, controls several companies including Boustead Plantations Bhd , Affin Holdings Bhd and Pharmaniaga Bhd .
For 2018, Boustead Holdings swung into a loss of RM469.2mil due to the poor performance of its subsidiaries that are involved in ship repair and maintenance works and the plantation segment. It was the first time Boustead Holdings has recorded a loss since 2001.
Will Boustead Holdings and its subsidiaries record more losses? Are there provisions to be made for transactions done in the previous years? The company has also proposed changes to its constitution to shareholders.
In a 41-page document, Boustead Holdings has proposed a litany of changes, including limiting the term of the managing directors, tightening share options to directors and terms of financing.
It is easy to fathom why Boustead Holdings’ constitution needs to be changed. The company was under the leadership of Lodin for more than 36 years. It is far too long a time for one person to be helming a company.
Boustead Holdings is not as badly mismanaged as Felda and FGV Holdings Bhd. But with a new team at the helm of LTAT and Boustead Holdings, it is the best time to reveal all the shocks and surprises.