Santiago Principles Self-Assessment

Khazanah Nasional Berhad

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  • Pillar 1: Legal
  • Pillar 2: Institutional
  • Pillar 3: Investment
Principle 1

1. The legal framework for the SWF should be sound and support its effective operation and the achievement of its stated objective(s).

1.1. The legal framework for the SWF should ensure legal soundness of the SWF and its transactions.

1.2. The key features of the SWF’s legal basis and structure, as well as the legal relationship between the SWF and other state bodies, should be publicly disclosed.

Khazanah Nasional Berhad (“Khazanah”) was incorporated under the Malaysian Companies Act 1965 (now Companies Act 2016) on 3 September 1993 as a public limited company. Except for one share owned by the Federal Lands Commissioner (Incorporated), all the share capital of Khazanah is owned by the Minister of Finance Incorporated, a body incorporated pursuant to the Ministry of Finance (Incorporation) Act 1957. 

Khazanah is governed by Malaysian Companies Act and other applicable laws, and various internal governance and accountability frameworks that establishes a clear structure of responsibility, delegated authority and accountability. 

Khazanah’s legal relationship with the Government of Malaysia is disclosed on our website.

Principle 6

6. The governance framework for the SWF should be sound and establish a clear and effective division of roles and responsibilities in order to facilitate accountability and operational independence in the management of the SWF to pursue its objectives.

The Board of Directors (Board) governs our operations and is ultimately accountable and responsible for Khazanah’s overall governance – this includes both performance and conformance matters.

A Board Charter sets out the roles and responsibilities of the Board in overseeing the management of Khazanah, and the Framework of Integrity, Governance and Risk Management (FIGR) includes a Schedule of Matters for the Board (SMB), Limits of Authority (LOA) for Management, a Code of Conduct and other relevant matters.

The Board is assisted by three subcommittees – the Executive Committee (EXCO), the Audit and Risk Committee (ARC) and the Nomination and Remuneration Committee (NRC).

At the management-level, a Management

Committee (MC), and Investments Committee

(IC) are in place to oversee the operational &

investment-related matters.

Principle 18

18. The SWF’s investment policy should be clear and consistent with its defined objectives, risk tolerance, and investment strategy, as set by the owner or the governing body(ies), and be based on sound portfolio management principles.

18.1. The investment policy should guide the SWF’s financial risk exposures and the possible use of leverage.

18.2. The investment policy should address the extent to which internal and/or external investment managers are used, the range of their activities and authority, and the process by which they are selected and their performance monitored.

18.3. A description of the investment policy of the SWF should be publicly disclosed.

The Investment Policy Statement (IPS) clearly outlines our Investment mandate, objectives and principles. 

Khazanah’s mandate is investing to deliver sustainable value for Malaysians. The mandate is to be achieved by pursuing commercial investments to preserve and grow long-term value of our assets, as well as undertaking investments that deliver economic or societal returns for the nation.

Khazanah pursues its overall mandate through the following investment reporting structure:

Investments Portfolio – intergenerational portfolio that seeks to generate risk-adjusted returns on a long-term basis

Dana Impak Portfolio – invests in increasing Malaysia’s economic competitiveness and in building national resilience while delivering socioeconomic impact for Malaysians

Developmental Assets – intended to deliver high economic impact through long-term developmental investments

Special Situation Assets – assets that require turn-arounds in terms of profitability and sustaining operating cash flows

Our risk appetite is articulated through a set of Risk Appetite Statements for key material risks identified under the investment mandate, which is approved by the Board Audit and Risk Committee. 

The large majority of our investments are conducted using in-house capabilities. Where we do engage external managers, the selection and monitoring processes and policies are included in the respective asset classes’ Investment & Divestment and Management & Monitoring manuals. 

The IPS is in our annual report and available in our website