KUALA LUMPUR: Khazanah Nasional Bhd says an article by The Straits Times of Singapore gave an inaccurate and misleading picture of its financial performance.
This was mainly due to its selective focus on a narrow and incomplete set of indicators of financial performance, Khazanah said in a statement.
The article on November 29 said Khazanah was under pressure to show higher returns to boost government coffers, with senior state officials lobbying for changes to its management and investment strategy.
Khazanah said the most representative measure of its financial performance is to refer to total returns that take into account realised and unrealised returns, as well as distribution of returns through dividends.
“In Khazanah’s case, total return is represented by the growth in the net value of our portfolio, that is its NWA or net worth adjusted value.
“As previously reported, the NWA value of the portfolio grew 3.1 times or 207 per cent from RM33.3 billion to RM102.1 billion from May 2004 to December 2016, reflecting the period since the start of the revamp of Khazanah and government-linked companies,” it said.
This translates into an annual compounded return of 9.3 per cent per annum over the 13-year period, rather than just the one per cent or 2.6 per cent return as is implied by the article.
Its audited shareholders funds grew to RM37.8 billion as at December 31, 2016 from RM13.2 billion as at December 31, 2004, up RM24.6 billion over the period, it added.
Khazanah clarified that the rate of total return as represented by NWA growth is in line with relevant benchmarks, in particular with the FBM KLCI which posted a total shareholder return of 9.4 per cent per annum during the same period.
“Khazanah has a multi-pronged mandate that includes investing for growth and commercial returns – domestically and internationally – while also undertaking developmental and national initiatives.
“The latter include the development of regional economic corridors, reforms of the education sector and the restructuring and catalysing of various economic sectors and national companies.
“The range of returns of these initiatives vary widely from low or even negative returns for more developmental activities, to significantly higher returns for our commercial and international operations, averaging at the said 9.3 per cent per annum NWA return,” it said.
Given that Khazanah’s mandate does not involve receiving any regular capital injections, and its need to reinvest for growth and national initiatives, Khazanah said the bulk of its returns are primarily channeled into reinvestments rather than to dividends.
“As Khazanah does not receive regular capital injections unlike most sovereign and sovereign-linked funds, it needs to ensure that its returns are achieved with an appropriate level of risk undertaken.
On its leadership succession, Khazanah reiterated that it has a well-established and orderly succession process.
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