Temasek Review 2015 Selected Questions & Answers

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Selected Questions & Answers from the Temasek Review Media Conference 2015

The following is an edited transcript of questions and answers at the Temasek Review 2015 Media Conference.

It has been edited to remove extraneous material and duplicated questions, as well as grammatical edits to aid readability.  Questions are not necessarily listed in the order in which they were asked, but have been grouped by subject.

Slides and charts have been added from the Temasek Review 2015 where they were included in the presentation, or where they contain material helpful to the reader in providing detail to supplement the answer.

Click here to read the transcript of the preceding presentation and accompanying slides.

1.      Financials, Returns and Portfolio

a.      Total Shareholder Return (TSR)

b.      Investments and Divestments

c.      Portfolio by Geography

d.      Real Estate

e.      Expected Returns

f.       Standard Chartered Bank

2.      Economic and/or Country Outlook

a.      Economic outlook and Fed normalisation

b.      China

c.      India

d.      Mexico

e.      Japan

f.       Indonesia

3.      Other Issues

a.      Community Contributions and Building Businesses

b.      Bonds

c.      CEO Sabbatical and Succession

d.      Urban Development

e.      IPOs

f.       Net Investment Return Framework

g.      Capital Injection

h.      Investment Banking services and capabilities

i.       Mandai

Question on Total Shareholder Return

QUESTION: Just a question about this year's total shareholder return, which seems like one of the highest ever. Could you say a bit more about what accounts for this?

PNG CHIN YEE: I guess, let's take a step back, right. We look at our returns over the long term and we're a long‑term investor. So we invest for the long term.  As we've said, our year‑to‑year returns may be volatile due to market movements and last year we've actually benefitted from the equity markets across the world, but a large part of the portfolio was also in Singapore and China, and those two markets did well last year.  So we also did well in that context. But again, I draw you back to our longer term performance as a measure of our performance.

Questions on Investments and Divestments

QUESTION: I have two questions. Firstly among the $30 billion of new investment which country was the biggest in terms of the capital allocation? Was that China or the percentage of the fund has been increased significantly or any other countries?

PNG CHIN YEE: I'll take the first question. You know, most of our investments, a large part of our investment this year was in Asia and it's very hard for us to break down exactly which part of Asia because someone like Watsons, for example, has businesses in Asia and Europe. So I think broadly in Asia and the other countries also contributed quite significantly. 

WU YIBING: Just to add to your question on China. Our increase in our exposure to China, both our active investment as well as increase in our market value of our investments.

Question on Portfolio by Geography

QUESTION: Allocation of your portfolio now, China comes to a very close second after Singapore. I understand that you don't decide investment by the country, but will you if China exceeds the amount portfolio in Singapore, will you be comfortable? Would it be likely in the very near future?

WU YIBING: As you mentioned, we don't have a preset limit, any country or any sector and one more factor I want to point out is in addition to the China exposure, we're also increasing our exposure in North America and Europe, and that is actually significantly increased. So as we're actively seeking investment opportunities around the world and as we're also building our capabilities around the world… For example, last year we have opened the London and US offices. So we will be exposed to more investment opportunities around the world and we will look for the best commercial opportunity that will give us the best return.

NEIL MCGREGOR: Future valuations are driven by growth opportunities, and if your largest growth opportunities are in developing economies, such as China or India, then obviously if you want to catch a fish, you go to where the fish are, if you pick up my analogy. So that's essentially why we're represented or what some people may see overrepresentation. But we don't have portfolio allocation.

Question on Real Estate

QUESTION: I have a question on the real estate asset portfolio. So there are two stakes in properties in London. Is this new for you and how big is your real estate asset portfolio right now and how strong is it expected to feature going forward? And also because GIC is also doing property in London, so how do you make sure there's no overlap and competition in that space? Thank you.

RAVI LAMBAH: So real estate again fits, you know, it's a sector that fits our themes and when our themes tell us that ‑ guide us we will be guided by them to invest in real estate and in London that you talked about, in the UK. It fits our investment objective so we invested. We, like I said before, we don't have any preconceived notions on whether we should be in a particular sector or not. It has to fit our themes and our return requirements and we don't have any targets; whether we will increase or decrease. We will be totally driven bottom up based on opportunities.

LEONG WAI LENG: Maybe I will just take the GIC question. I think you're referring to the hard asset investments that we have made. The hard asset market is a very large market and I think there are lots of opportunities and I think each of us we have to make our own decisions based on our own requirements and our, you know, the returns that we expect.

Question on Expected Returns

QUESTION: I have a question regarding your simulation model where you said that you're expected return will be reduced by almost 2% in the China credit stress scenario. So I would like to understand how do you arrive at this number? And what are your assumptions and the likelihood of this happening and how's it different from your prediction last year?

LEONG WAI LENG: I think you're referring to the model that we have built to simulate expected returns going forward. And what happens is that we have built this model that actually allows us to simulate Temasek's return based on different portfolio mixes as well as different economic scenarios. This is, you know, an outlook of what the expected returns are. And in looking at besides the central scenario we also have looked at other scenarios, including the China credit scenario. So what happens is that you basically look at the different economic assumptions, based on interest rates, based on moving down all the way into what you expect equity returns to be under such a scenario and based on that we look at the characteristics of the Temasek portfolio and we simulate that. So, you know, that is, I think, is the result of the tool that we have built, the model we've built to look at the range of expected returns based on different scenarios as well as different portfolio mix. In this case it's the Temasek portfolio under the China credit stress scenario versus the central scenario.

WU YIBING: The central scenario is our base case so the China credit scenario, you can view it as one of the simulation, or call it the stress test. So it's not our base case, we don't see the high likelihood that would happen.

Question on Standard Chartered Bank

QUESTION: My question is about Standard Chartered. I understand the new CEO was here and met up with yourselves, I think, last month. Temasek's known to be an activist shareholder so, you know, have you told him what you would like to see him do in Stan Chart?  Also as the largest shareholder in Stan Chart and also in DBS would you like to see the two merge?

PNG CHIN YEE: I think, you know, we typically don't talk about our engagement with our portfolio companies, I know you respect that it would not be appropriate. Suffice to say that where we have views we will share them with board and management and that's what we do, you know, across all our portfolios so this will be no different from that.

WU YIBING: I'd also like to clarify we're not activist shareholder, we're active shareholder which means that we base our intrinsic value test, make our decision to invest, divest or hold our positions.  So we're not an activist.

RAVI LAMBAH: And we actively engage with our portfolio companies through the boards. So we are very ‘active’ in that way. We're certainly not activist.

QUESTION: Still related to Standard Chartered... Was Standard Chartered, you know, the biggest drag on your portfolio returns for the year?

PNG CHIN YEE: So I think on your first question we prefer to look at our returns on the portfolio basis. We have a portfolio of blue chip companies for that precise reason, so that we can actually look at the performance as a whole. So I don't think it's appropriate for me or fair for me to comment on Stan Chart specifically.

Question on Economic Outlook and Fed normalisation

QUESTION: I wanted to ask you a question about Fed normalisation. As and when it happens, number 1, what's your base case scenario? And number 2, what's the base case scenario in terms of the impact on your assets especially in the emerging market space and particularly if the impact is felt through the currency markets, through currency depreciation, again in the Asian region and in emerging markets more broadly?

RAVI LAMBAH: Sure, why don't I take a first crack at that and address the issue on how we look at it from our perspective when we think about our investment exposure. So, you know, we are obviously an investor for the long term and we have the ability to hold assets for the long term as well. Therefore when it comes to market volatility on a quarter‑by‑quarter or year‑by‑year basis, it's not something that we are as concerned as we look at returns over the long term but obviously we are very actively managing our portfolio.

We look at these events as closely as necessary to determine what might be the impact and based on, you know, various intrinsic value tests that we have in order to determine whether we should buy or sell, we will take those decisions during the course of the year.

So I think the Fed rates that you talk about, and there are many other similar sort of, you know, possible events around the world every year that happen and we look at all of them together and we determine our intrinsic value accordingly for all of our investments.

Question on Economic Outlook and Fed normalisation

QUESTION: If I can press you, Ravi, do you have a base case on when you think Temasek ‑ I'm sure you've modelled this internally, when the Fed will hike?

PNG CHIN YEE: I guess our base case for rate hikes is that it can happen any time after September. We do expect it to be a gradual process, data driven so we don't expect rates to go up a lot in a very short period of time, so I think it will be a measured process.

LEONG WAI LENG: Maybe I should just pick up the point of currency.  We actually factor, when evaluating investments, we factor in our forward view of currency and we would put that into our models and we expect the investment return to also cover potential currency depreciation.

NEIL MCGREGOR: I think it's not just about normalisation. Our investing style is also adapting. We're adapting to the future, the digital economy, technology changes in the economy are driving changes in business models, and so we are taking a slightly different approach and that's one of the reasons that the Enterprise Development Group was formed a couple of years ago - to look at new forms of investment. Instead of investing in equities for growth, we grow businesses instead across all stages of the economic cycle. And all stages of business from incubation, early stage, right through to transformations of existing platforms, which we spoke about earlier on, to in‑filling gaps in our portfolio where we have never had businesses in the past where we can help add liquidity to an economy but also to businesses that we own or part own over a period of time. So it's a much bigger strategy that we're looking at here.

Question on Economic Outlook and Fed normalisation

QUESTION: A bit of a follow up to the question on the expected US rate move. When I talk with asset owners or pension funds these days, there's a lot of concern that global markets have been elevated by quantitative easing. It can't go on forever. And there's a lot of concern about what happens in the next two or three years. In describing your new investments this year, you wrote that you have a benign view of global markets in the next few years. Are you simply more confident about the coming policy changes or is it just simply that you don't expect those changes to happen in the next few years?

RAVI LAMBAH: Changes … clearly there will be change in that and that ‑ whenever that changes it will bring about impacts which will be felt globally across many economies, both the developed and the developing. But the way we look at it is that when we invest, we do our diligence and in our diligence we have many factors that we take into account and amongst those are exactly events like you talk about which could be either interest rate movements, they could be capital flows, they could be capital markets related events. So all of those are factored into our base case when we invest and because our investment thesis preordains that we will look towards owning this asset for the long term, these events, because they're factored in, don't generally change our view in near term.

So we look at it year by year, we look at it at first when we make the investment, we monitor very closely and when we are ready to exist based on intrinsic value we will exit and in the midst of all of that many things could happen. The global financial crisis could have happened, the Fed may raise rates, the Fed may cut rates, you know, China may go through some, you know, as Yibing talked about, some credit stress, Europe has gone through some easing in the credit. So all of those, even though we can't predict but we do factor in to the best we can when we make the investment. So we made our call and we stick with it.

WU YIBING: If I add to it, I think an important distinction between Temasek and many others is we're a bottom‑up investor.  As Ravi mentioned, we looked at investment cases one by one and based on our fundamental view of intrinsic value we don't do top‑down allocation and nor do we benchmark. I think that's an important distinction between us and many of our peers.

Question on Economic Outlook and Fed normalisation

QUESTION: Could you share your outlook for the second half and maybe through the first quarter of 2016.  What do you see as tailwinds and what do you see as the biggest headwinds in Temasek investments?

PNG CHIN YEE: I guess on the point on outlook, you know, we look at long term, we look at long‑term trends and we invest on that basis. So we tend not to focus too much on the near‑term volatility that you can see from sort of time to time and we invest in accordance with our guiding themes, which Ravi has talked about. So that would be the focus of our investment, the search for investment opportunities in the next sort of year or so. 

Question on China

QUESTION: Ravi, within [your] presentation you mentioned that China's  … basically you are see slow growth but sustainable growth in China.  Could you also highlight some of the risks that China could face and what does that mean for your investments in China, for your existing portfolio in China such as your large banking investment?

WU YIBING: Sure [I’ll take this]. We remain confident in the long‑term prospect of the Chinese economy and we are very comfortable with the prospect of the Chinese banking prospect as well. In terms of the risks we know it's been highlighted about the credit risk China's facing, and of course the slowing economy. In our view it's such that the Chinese economy's entering into a slower growing stage, however it's more sustainable.

In terms of the credit risk we believe Chinese Government has ample tools and means to address the credit concerns in the financial system. And we actually, the last year probably those concerns were the highest and also it's reflected in the public market. I remember we had this conversation last year here and we actually not only stuck to our position and increased our position in the Chinese banking system and we believe that has paid off. 

Question on China

QUESTION: Again about China, I mean what's going on with the  stock market at the moment, is Temasek concerned about that and maybe you can elaborate a bit on your opinion or your assessment of the current measures by the China Government to stop the slump in the stock market? And you talked a bit about China banks: is it right that you are just in the process of, how do I say, diversify a bit away from China banks, in China in general, so you want to broaden the exposure of Temasek in China, is that correct?

WU YIBING: China, the two‑part question, the first about the capital market. We believe Chinese capital market is prone to growth and the Chinese Government is determined to foster the Chinese capital market into one of the most important capital market in the world and we believe in that as well as Chinese economy will become one of the most important economy in the world.

We are actively building our position in the Chinese capital market as well. The short‑term correction, we believe, is volatility in the long‑term growth of the capital market and we actually view the volatility may present a good opportunity for us to invest as well.

In terms of your second part of the question, a broader view of the Chinese investment, it is true that we started our investment in China using Chinese banks as a proxy, and it's worth reminding when we invested in Chinese banks in 2005 we had no team on the ground and now we have a very strong team. We have two offices in Beijing and in Shanghai. We have the ability now to look deeper and broader into Chinese economy. Yes, you are right, so now gaining more broader exposure directly into many of the growing sectors which we think will be a beneficiary of the reform and will benefit from the transforming economy. Those sectors would include TMT so you've seen an example in Alibaba, and we include consumer because believe in Chinese raising middle income class  will continue phenomenon and third will be including life sciences and the agriculture.  And those also fit our themes in terms of raising middle income and also you can even see we're moving into the emerging champions in the Chinese companies so we actually start to invest in some of the leading Chinese technology companies in the earlier stage, so we really are broadening and getting direct exposure to a broad cluster, sorry, broad spectrum of the Chinese economy.

Question on India

QUESTION: You said that one of your target countries for the next year along with China was India and Mexico. I just wanted to hear your outlook for India. It's been a little over a year for the new Narendra Modi‑led new government and you've been pretty active in India over the last one year, and about 4% of your portfolio currently is in India. Do you have any percentage figures, how much do you see this increasing by, and also your take on the Modi‑led government and one year of the Modi‑led government?

RAVI LAMBAH: Sure, thank you. So we don't have any ‑ the second part of your question, I'll answer that first. We don't have any preconceived notions on allocation either by country or by sector or where a certain country should be in terms of our exposure or where a certain sector should be. So, you know, we maintain full flexibility to deploy capital. So the answer to that is, in India, or any other country, we have no target in terms of percentage increase or percentage holding. It's entirely bottom‑up based. That's the first part.

And the second part, you're right, we have been very active in India last year. I think India last year like the whole of Temasek as well in India was probably amongst our most active areas of investment and we have been looking at the potential for investing in the country from a long‑term perspective and we are, you know, we remain optimistic that India will deliver returns over the long term, that we look for returns beyond our risk‑adjusted cost of capital.

And from the Government perspective, obviously the Government is ‑ it's been about a year since they've been in power. You know, it's a large country and they have taken some steps that ‑ several steps with a few that we have found to be quite positive. So, for example, you know, this whole direct  ‑ the ability to connect millions, 160 million‑odd people who were not banked, now they've got bank accounts so the Government can actually go out and put subsidies directly without any leakage and that's a great development from that side. So there are developments that we are watching and I think we continue to be focused in India for the long term. 

Question on Mexico

QUESTION: What is it about the Mexico outlook that you find attractive?

RAVI LAMBAH: I think on Mexico, and as I mentioned in our presentation, we're looking at countries that are undergoing structural reform and when we see structural reform, then you will see that it results in a framework where you can look for investments that would not necessarily have been there before the reforms took place and I think when we look at reforms we look at the impact of reforms and we find certain opportunities arising.

So, you know, as an example the Mexican Government liberalised their telecom sector last year and that has resulted in a change in that market. Now, we have made an investment in a company called Virgin Mobile in Latin America which looks at telecom services in many different countries including Mexico and, you know, the structural reform has created an environment where you can put capital to work, and that's one example.

PNG CHIN YEE: I think to add, given Mexico's trading and proximity to the US it's also a good play on the US recovery.

Question on Japan

QUESTION: My question is about Japan. Last year you have mentioned that Japan is not in the area of focus. Has your view changed in any way? Have you made any investment through ‑ directly or through any funds that you own and what is the future view on Japan market?

RAVI LAMBAH: Yes, I think on Japan, you know, we continue to look at Japan, at opportunities in Japan. We stay very well connected with all our counterparts there. We meet people in Japan often, both business leaders and, you know, our counterparts there in the financial world. And we are looking for opportunities in Japan. We continue to look.  Japan fits many of our themes from an investment perspective. So we are, yes, go ahead, Yibing. 

Question on Japan

QUESTION: Just the implication with my colleague's question about Japan. I was kind of slightly disappointed and surprised how small that your money is placed on Japan. Mr Abe claims that Japan is back and I thought Japan is back but seems like still not strong enough to attract your interest. I just want to ask your broad view of how you look at the Japanese market just broadly?

RAVI LAMBAH: OK, maybe I'll take one more crack at that. We are looking actively at many markets across the world. You know, we invest globally and Japan, in that sense, fits well in some of our investment themes. I think for us to make an investment it has to fit the criteria and what we look at and in some cases we are more successful in certain places to have found an investment and in some cases we look and we hope to be able to invest. I think so we are ‑ suffice to say we're looking actively at all markets, including Japan. I hope one day we will make an investment there and then we will talk about it.

Question on Indonesia

QUESTION: I was surprised that you didn't include Indonesia in those countries that you believed were pushing ahead with structural reforms. You've mentioned China, India and Mexico. Does that suggest that Mr Jokowi is not quite hitting the mark in terms of his reforms agenda?

RAVI LAMBAH: I think if you go back to my script, I said “including” Mexico, China and India. I did not list all the countries that were executing social reforms! And we continue to have a substantial exposure to Indonesia. We look at Indonesia as a destination of our capital. It meets a lot of our investment themes and, you know, we look at opportunities in Indonesia every week!

Question on Indonesia

QUESTION: Sorry, if I can press you, do you think that Mr Jokowi is hitting the mark with the reform agenda, is he making progress or backsliding? Because the markets in the early part of this year seem to suggest some perceived backsliding associated with the reform process. How do you see it?

RAVI LAMBAH: I think in any particular country, including Indonesia, from our perspective, we're really looking at the long‑term impact of whatever is happening in each country. I talked about Mexico, for example: it's structural reforms, we talked a bit about India where the government is making some changes. I think Indonesia is no different. I think we will look at every investment based on bottom‑up evaluation and to the extent reforms are happening slower or faster, we will build them into our base case. I don't think it's appropriate for me to talk about any particular situation in absence of anything specific.

But yes, I think, like I said before, we are focused on Indonesia and approximately, I think, about 3% of our exposure of our entire portfolio sits in Indonesia today so it is a substantial destination for our capital.

Question on Community Contributions and Building Businesses

QUESTION: This year's presentation seems to have increased, or new emphasis, on your support to local businesses, local institutions and social stewardship. Can you elaborate the thinking behind that, for example, what sort of value proposition do you see from Temasek perspective or is it that Temasek's looking to be more of an activist, to borrow what was mentioned?

NEIL MCGREGOR: No, we're entirely driven by commercial principles. We're an investment company and basically we look at our portfolio each year and we're looking for ways that we can scale our investments over time and we do that in conjunction with the boards. The boards also independently assess their own position. But when you look at our portfolio actually our roots started with the operational companies like Singtel, like Singapore International Airlines, Sembcorp, Keppel, etc. So we've been in operating businesses for a long period of time.

A number of those businesses have become international but some have not over time, and so we're looking at those value chains and we're looking at ways that those businesses and the investments can be improved over time but we're doing so in conjunction with the boards and with management.

PNG CHIN YEE: I think to add, we've always been involved in the community, we've always been focused on building people, building communities, building lives and so, you know, this is very much what we've always done. We've just chosen to communicate it to you for this year. 

Question on Community Contributions and Building Businesses

QUESTION: But do you make these decisions knowing that, as mentioned, some of these are not actually very good investment propositions? Do you make that compromise in making these decisions?

PNG CHIN YEE: The endowments are actually funded through the profits that we have generated.

LEONG WAI LENG: I think there are two questions here, or two matters that's been referred to. Maybe I just clarify and let me get, you know. I think in terms of community engagement programs, or the endowments, we have been doing it, you know, for a long time and that is funded by what value, you know, we generate above our costs of capital. We put aside part of that to fund those initiatives and that, you know, and we have shared that through the TR for several years right now.

I think your other question is about growing businesses, which you mentioned. And I think when we talk about growing businesses we look at it with the same commercial kind of lens, or evaluation process.

RAVI LAMBAH: If I may just add, we have full flexibility to deploy capital, even if it's at an early stage, a greenfield, could be a mature business, could be a growth business, could be, you know, there could be a listed company, unlisted company.  We have full flexibility and therefore at every time before we enter we do our diligence and model for returns in excess of our cost of capital. It may not be some projects in some companies may yield it in three to five years, some may be in 10 to 20 years but we are a long‑term investor and we have the ability to hold long term and that's how we make our investments.

WU YIBING: And that flexibility is precisely our strength.

NEIL MCGREGOR: And that's completely right. Long gestation periods, an expectation of better returns.

Question on Bonds

QUESTION: It's been a long time since Temasek has issued bonds so do you have any plan to do so, particularly in the Singapore retail bond market?

LEONG WAI LENG: You know that we issue bonds really as a public marker of our credit and they also give us many more funding optionalities and expand our stakeholder base.  We are always open to potential… monitoring the market as well as our capital structure and we're very open to on doing various issuance depending on our needs as well as the market conditions.

The bond issue is a very long subject. You know that we have ‑ right now we have got 13 bonds and except now only sold to sophisticated investor and institutional investor. We've been exploring, for a little while now, measures to make it practicable for us to issue bonds that retail investors could participate. So when such measures are available we will be very open to invite retail investors to participate in our bond issuance. 

Question on Bonds

QUESTION: When you mentioned that Temasek is looking or exploring an opportunity for retail bonds market, why is that?

LEONG WAI LENG: Maybe I just first clarify the first question. When I said with respect to retail bonds is that for several years right now, we have been exploring measures that make it practical for us to issue retail bonds to allow for retail investor participation. So when those measures are available we would certainly be very open to invite retail investors to participate in our bond issuance.

Question on CEO Sabbatical and Succession

QUESTION: Since Ms Ho Ching has gone on sabbatical, could you update us in terms of whether she is returning as expected mid July and also a broader question is that she has been with Temasek since 2002 and been CEO now for 11 years. What's her long‑term plan with Temasek? Thank you.

NEIL MCGREGOR: Perhaps I will take the second question. Ho Ching will return at the end of her sabbatical and I ….

RAVI LAMBAH: In fact, we see her in the office every now and then. She drops by when we least expect it!

WU YIBING: And email as well.

LEONG WAI LENG: And Facebook as well that keeps all our iPhones buzzing!

NEIL MCGREGOR: Absolutely. I think the third part of your question was succession. The board looks at succession every year and it looks at individuals right across the board, internally, externally.  So it's a process that the company goes through and it's not only about CEO succession but it's also senior management succession, so on and so forth. That is planned each year and I see no reason for that to change in the future.

Question on Urban Development

QUESTION: I have a question about the integrated platform for urban development. I felt like that was quite a bold move to merge multiple entities [inaudible] just launched with an announcement of two new acquisitions. So I'm wondering how will Temasek back up the merged entities in terms of capital and further M&As and also will there ‑ are we expecting ‑ can we expect to see more sort of active engagement from Temasek in terms of making urban development and infrastructure a key export for Singapore?

NEIL MCGREGOR: Let me start with what's driving urban development from the first part. Between now and the next decade there's expected to be at least 25 more new cities in China and similarly in India.  So this is a new growth area and we have orientated this platform to address that market for the future. We expect the development to be self‑funding but nonetheless as a shareholder, there might be from time to time on a case‑by‑case basis a need to inject capital. We will consider that on a merits basis. 

Question on IPOs

QUESTION: There has been a lot of calls for more heavyweight IPOs in Singapore, for example, Mapletree and PSA. Has Temasek given it some thought? Is there any evaluation going on?

NEIL MCGREGOR: Well we continually assess our portfolio to look at consolidation where it makes sense. I wouldn't like to give any guidance in how we look at those companies in the future. But I think it's suffice to say that we're always looking at our portfolio from time to time on a value basis and what makes sense.

PNG CHIN YEE: Just to go back to your first question around listing of companies. I think that's a decision really for the board and management of those companies to make and I'm sure they take into consideration market conditions, their own needs and how much value they're creating for shareholders.

LEONG WAI LENG: For us we would look at it from whether it enhances value for us as a shareholder.

Question on Net Investment Return Framework

QUESTION: This year's Singapore Budget has brought Temasek under the Net Investment Returns Framework. I just wanted to understand what is going to be the operational implication of this? Then in that case does it then men that if you are going to be earning the 8% cost of capital on a $266 billion portfolio, then 4% of that is going to be your contribution - assuming that you expect to earn that money over the course of the year - that 4% is going to be your contribution to the Singapore budget? And is that going to be significantly more than what you are contributing at present before this new framework sort of kicked in? So just wanted to understand operationally what it means in terms of your contribution to Singapore's Budget?

LEONG WAI LENG: The Net Investment Return Framework that you mentioned simply sets out rules of which the Singapore Government can spend on this budget. So it has got no impact, it does not impact Temasek's dividend policy and, you know, the basis of which Temasek declares dividend to its shareholder. So the short answer to your question is that it has no impact. It also does not have any impact or change the way we operate as an investment company and as a long‑term investor. 

Question on Net Investment Return Framework

QUESTION: So you don't have to divest in order to meet a cash call?

LEONG WAI LENG: No, not at all. So our cash flow, right, would continue to be determined by the dividend policy and, you know, which determines how we actually declare dividend to the shareholder and does does not change. It is not impacted by the inclusion.

Question on Net Investment Return Framework

QUESTION: If there's no impact whatsoever, why this change? It must mean something?

LEONG WAI LENG: As I explained, the NIR framework sets out principles, on how the Singapore Government can spend for its own Budget. So the cash flow between Temasek and the shareholder will continue to be guided by the dividend policy and that does not change.

Question on Capital Injection

QUESTION: One very practical question, there was a capital injection by the Government last year. Has there been an injection or a withdrawal by the Government this year?

LEONG WAI LENG: The decisions to make capital injections are entirely at the discretion of the shareholder and they make the decisions and we definitely do not plan on the assumption that the shareholder would inject capital into us. And this year, there is no net capital injection.

Question on Capital Injection

QUESTION: So no withdrawal as well, I think that could happen as well just to be sure it's unaffected by Government injection or withdrawal?

LEONG WAI LENG: As I said, we don't plan for it, this is entirely their discretion, no decisions according to asset allocation but you're asking whether there was any injection this year, there's no [net] injection for the year just ended March '15, that's what I mean.

Question on Investment Banking services and capabilities

QUESTION: There were reports, you know, last year and that Temasek has been doing the investment banking in house when you do acquisitions. How much in fees, you know, could you estimate that you have saved by doing it in house and is that also, you know, your preferred way of doing mergers and acquisitions going forward?       

RAVI LAMBAH: I think on [this question] I don't think we ever thought about how much fees we saved, but from our perspective we are building capabilities that we need.  And as the portfolio is growing, as our transactions are growing and we're doing ‑ we did $30 billion in new investments and $19 billion of divestments. That's almost $50 billion of transactions. So in order to do those transactions, in order to make sure they're staffed or resourced properly we use a combination of internal and external help and where we see the need for external help we seek it. So I don't think there's any ‑ there's certainly no math on saving fees, I think it's more about building the right capabilities so we can execute our strategy properly and of course look after our investments which are, you know, several, and they're spread across the world.

Question on Mandai

QUESTION: Can you give more details on the Mandai project?

NEIL MCGREGOR: On Mandai, this is a partnership with the Singapore Government. The rejuvenation of Mandai doesn't affect the nature reserves that are presently there in Mandai. This is actually a site that takes over an area which used to be the old orchid farm and also an abandoned kampong area. So this is going to be an adjacency to the current nature parks that are there, the wildlife reserves. But what we're looking to do is to integrate that whole platform into a visitor experience for both Singaporeans and for visitors to Singapore, and it's in its early stages of execution. So we're still developing this up, but we're certainly through the first stage of execution. Physical work on the ground is something yet to be discussed and to be put out to the public.

Investment Themes

Investment Themes

Our investment activities continue to be guided by four investment themes and the long term trends they represent.

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VALUES

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