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FAQs

Why was Temasek established?

Temasek was incorporated under the Singapore Companies Act in 1974 to own and commercially manage investments and assets previously held by the Singapore Government. This allowed the Ministry of Finance to focus on its core role of policymaking and regulations, while Temasek would own and manage these investments on a commercial basis.

Where did Temasek’s original portfolio come from?

The initial portfolio of S$354 million comprised shares in companies, start-ups and joint ventures previously held by the Singapore Government. They included a bird park, a hotel, a shoe maker, a detergent producer, naval yards converted into a ship repair business, a start-up airline, and an iron and steel mill.

For further information on the list of companies in Temasek’s initial portfolio, please see Temasek Portfolio since Inception in the Temasek Review 2017.
 

Is Temasek a statutory board or a government agency?

Temasek is a Singapore incorporated company, and operates under the provisions of the Singapore Companies Act. Temasek is neither a statutory board nor a government agency.

Like any other commercial companies, Temasek has its own Board of Directors and a professional management team. It pays taxes to tax authorities, and distributes dividends to its shareholder.

In addition, as a key institution in Singapore, Temasek is also designated a Fifth Schedule entity1 under the Singapore Constitution, with certain safeguards to protect its past reserves. For instance, any transaction which is likely to result in a draw of Temasek’s past reserves2 is also subject to the approval of the President. The right to appoint, terminate or renew board members is subject to the concurrence of the President of Singapore.

Other than specific safeguards to protect the integrity of Temasek board appointments and its past reserves, Temasek continues to operate independently on a commercial basis.

Footnotes:

1 Under the Singapore Constitution, the concurrence of the elected President of Singapore is required over certain governance matters concerning Fifth Schedule entities. These include the appointment and removal of board members and the CEO, and the drawdown of past reserves built up by the entity before the term of the current Government. Other Fifth Schedule entities include the Central Provident Fund Board, Government of Singapore Investment Corporation Pte Ltd, and the Monetary Authority of Singapore.

2 Reserves accumulated by Temasek before the term of the current Government form Temasek’s past reserves. Current reserves are primarily profits accumulated after a newly elected government is sworn into power. The swearing-in of the new Cabinet on 1 October 2015 after the Singapore Parliamentary General Election marked the start of a new term of government.

 

Is Temasek required to pay tax?

Temasek pays the required taxes to the tax authorities, and separately declares dividends to its shareholder, as a commercial investment holding company.

Does Temasek disclose its financial results? How can I find out more about Temasek?

As an exempt private company, Temasek is not required to disclose financial information.

However, since 2004, Temasek has published its annual Temasek Review, which serves as a public scoreboard of its business and performance.

The Temasek Review forms part of Temasek’s annual disclosure exercise, which also include an online version of the Temasek Review, international media engagement, and advertising.

Temasek has also established a presence on digital platforms Twitter, Facebook, Instagram, LinkedIn, and Youtube to reach out and further engage the public.

Through these channels, Temasek provides updates on its performance, activities, and topics of interest. We hope to build communities with whom we engage more directly, as we share Temasek’s story over time.

Temasek’s annual report exceeds the standards of disclosure under the Santiago Principles, a set of best practices adopted by sovereign investors in collaboration with the IMF and various governments, including Australia, Canada, Norway and the USA.

Please refer to www.temasekreview.com.sg for the latest Temasek Review and to www.iwg-swf.org/pubs/gapplist.htm to read more about the Santiago Principles.
 

Is Temasek credit rated?

Temasek has an overall corporate credit rating of AAA/Aaa by S&P Global Ratings and Moody's Investors Services respectively.

Temasek’s Global Medium Term Note (MTN) and Euro-commercial Paper programmes are rated, as well as each Temasek Bond.

Temasek’s MTN Offering Circulars and Reports by international credit ratings agencies are published on the bond section on Temasek’s website.
 

Who is Temasek's shareholder?

Temasek's sole shareholder is the Singapore Minister for Finance1.

Footnotes:

1Under the Singapore Minister for Finance (Incorporation) Act (Chapter 183), the Minister for Finance is a body corporate.

Does Temasek manage Central Provident Fund (CPF) savings or Singapore’s foreign reserves?

Temasek does not manage CPF savings (which are managed by the Board of the Central Provident Fund), Government surpluses, or Singapore’s Official Foreign Reserves (which are managed by the Monetary Authority of Singapore).

More information on the management of Singapore’s reserves is available by visiting the Singapore Ministry of Finance website, http://app.mof.gov.sg, which has an 'Ask MOF' section on the management of reserves.

Are Temasek and the Government of Singapore Investment Corp (GIC) the same organisation?

There are 3 key financial institutions in Singapore, which are linked to the Singapore Government.

The Monetary Authority of Singapore (MAS) was formed in 1971, and acts as the central bank of Singapore. It manages the foreign reserves of Singapore. It is a statutory board.

Temasek is an investment holding company incorporated in 1974 in the early years of Singapore‘s independence to own and manage its assets and investments on a commercial basis.

GIC or the Government of Singapore Investment Corporation is wholly owned by the Singapore Minister for Finance1 and manages Government reserves, including surpluses accumulated and built up since independence.

They are separate entities with distinct roles and mandates, and distinct management teams.

Temasek is an investment company with a global portfolio, and manages its investments in accordance with its Charter. Temasek owns the assets it manages, is credit rated and issues international bonds.

As an active shareholder, Temasek encourages a culture of excellence and meritocracy, thoughtful leadership and sound governance in its portfolio companies. As an active investor, it has flexible investment horizons and aims to maximise long term returns from its investments.

You can obtain more information about GIC at www.gic.com.sg, and more information about the MAS at www.mas.gov.sg.

Footnotes:

1Under the Singapore Minister for Finance (Incorporation) Act (Chapter 183), the Minister for Finance is a body corporate.

Is the Singapore Government or the President involved in Temasek’s business decisions?

The Singapore Government is not involved in Temasek’s investment, divestment, or any other business or operational decisions. Its role as shareholder in respect of Board appointments is subject to the concurrence of the President in order to protect the integrity of the Board of Temasek as a Fifth Schedule Company.

The President of Singapore is not involved in Temasek’s investment, divestment or any other business or corporate decisions, except in relation to his custodial role1 in the protection of Temasek’s past reserves.

Further information on the President’s involvement is covered comprehensively in the Singapore Ministry of Finance FAQ on their website, http://app.mof.gov.sg.

Footnotes:

1 Under the Singapore Constitution, the concurrence of the elected President of Singapore is required over certain governance matters concerning Fifth Schedule entities. These include the appointment and removal of board members and the CEO, and the drawdown of past reserves built up by the entity before the term of the current Government. Other Fifth Schedule entities include the Central Provident Fund Board, Government of Singapore Investment Corporation Pte Ltd, and the Monetary Authority of Singapore.

How is the President involved in the protection of Temasek’s past reserves?

The President of the Republic of Singapore has an independent custodial role to safeguard Singapore’s critical assets and past reserves.

As a key institution under the Singapore Constitution, Temasek is required by the Singapore Constitution to seek the President’s approval before a draw occurs on Temasek’s past reserves.

Temasek’s Chairman and CEO also certify the Statement of Reserves and Statement of Past Reserves to the President at prescribed intervals.

Further information on the President’s involvement is covered comprehensively in the Singapore Ministry of Finance FAQ on their website, http://app.mof.gov.sg.

Is an investment loss considered a draw on past reserves?

A draw on past reserves occurs when total reserves are less than past reserves.

So if total reserves equal or exceed past reserves, there is no draw.

We then have to look at what is meant by investment loss.

When we invest in a portfolio of shares, there are constant changes in market values. Such changes happen for instance to the value of our shares during the global financial crisis, where we saw our portfolio value fall 30%, only to rebound 43% one year later. Such falls in the market value of shares are not a draw.

When investing to maximise long term returns, we may have realised gains or losses on disposal of shares. We may realise losses in our investments, either because the investment has gone bad, or we decided to exit in order to redeploy our funds to more attractive opportunities.

We may exit at a high or a low, depending on our views of the potential returns compared to putting the same dollar to work elsewhere.

Our Board has a responsibility to ensure that every disposal of investment is transacted at fair market value.

A realised loss would not constitute a draw on past reserves, so long as the disposal is done at fair market value (i.e., based on a price agreed between a willing buyer and a willing seller on an arm’s length basis).

The final test is whether total reserves are less than past reserves, after taking the divestment loss into consideration.

Further information is covered comprehensively in the Singapore Ministry of Finance FAQ on their website, http://app.mof.gov.sg.

Is a fall in the share price of Temasek’s investments considered a draw on past reserves?

When we invest in a portfolio of shares, there are constant changes in market values. Such changes happen for instance to the value of our shares during the global financial crisis, where we saw our portfolio value fall 30%, only to rebound 43% one year later. Such falls in the market value of shares are not a draw.

We will also test if total reserves are less than past reserves, after taking the fall in market value into consideration. A draw on past reserves happens when total reserves are less than past reserves. There is no draw if total reserves equal or exceed past reserves.

Let’s take an example. Assume Temasek owns five shares worth $10 today. But one year later, the same five shares are worth $8. These share price changes (mark to market declines) on existing investments do not constitute a draw on Temasek's past reserves. 

Further information is covered comprehensively in the Singapore Ministry of Finance FAQ on their website, http://app.mof.gov.sg.

How is the President involved with the Board of Temasek?

To safeguard the integrity of those involved in managing Temasek’s reserves, the President’s concurrence is required for the appointment, renewal or removal of Board members by its shareholder, the Singapore Minister for Finance1, and the appointment or removal of the CEO by the Board.

Further to its normal fiduciary duties to the Company, the Board and CEO are accountable to the President to ensure that every disposal of investment is transacted at fair market value.

Over time, Temasek has assembled a Board and management team made up of people from broad backgrounds, across various industries, in both public and private sectors, from Singapore and overseas. The majority of Temasek’s Board of Directors are independent.

Further information on the President’s involvement is covered comprehensively in the Ministry of Finance FAQ on their website, http://app.mof.gov.sg.

Footnotes:

1Under the Singapore Minister for Finance (Incorporation) Act (Chapter 183), the Minister for Finance is a body corporate.

What are the companies in Temasek’s portfolio? How many are listed and what is the market capitalisation of these companies?

A list of some of Temasek’s portfolio companies as at 31 March 2017 is provided in the Temasek Review 2017.

For further information on Temasek’s portfolio companies, please see Temasek Major Investments in the Temasek Review 2017.

How does Temasek work with its portfolio companies?

Temasek manages its portfolio as an active investor increasing, decreasing, or holding our investments to enhance our risk-adjusted returns for the long term.

Temasek promotes sound corporate governance in its portfolio companies. This includes supporting the formation of high calibre, experienced and diverse boards to guide and complement management leadership.

Companies in Temasek’s portfolio are guided and managed by their respective boards and management. Temasek does not direct their business decisions or operations.

Temasek advocates that boards be independent of management in order to provide effective oversight and supervision of management. This includes having mostly non-executive members on boards with the independence and experience to oversee management. Similarly, Temasek advocates that the Chairman and CEO roles be held by separate persons, independent of each other.

Temasek  is prepared to exercise its shareholder rights to protect its commercial interests.

Does Temasek request representation on the boards of companies in which it invests?

In general, Temasek is not represented on the boards of its portfolio companies.

Temasek promotes sound corporate governance in its portfolio companies by supporting high calibre, experienced and diverse boards to complement management leadership. By leveraging its wide network of contacts, Temasek can suggest qualified individuals for consideration by the respective boards.

Temasek employees on boards would be appointed in their personal capacity, and are expected to meet their fiduciary responsibilities as directors of companies.

How does Temasek fund its investments?

Temasek investments are financed using dividends and other cash distributions it receives from its portfolio companies and other investments, divestment proceeds from sale of its investments, and borrowings and debt financing sources such as the Temasek Bonds and Euro-commercial Paper Programme.

Further information on Temasek’s Ins & Outs is available here.

What is Temasek's divestment schedule?

Temasek does not have a divestment schedule.

Temasek is an active investor and rebalances its portfolio from time to time. Decisions to invest, divest or hold its investment positions are based on Temasek’s intrinsic value test.

How else does Temasek engage the community?

We support philanthropic programmes that focus on building people, building communities, building capabilities and rebuilding lives. Temasek has established 17 endowments since its inception, for community, philanthropic and public good causes, as part of our support for the wider communities in Singapore, Asia and beyond. Since 2004, we have been setting aside part of our  net returns above our risk-adjusted cost of capital for community contributions.

In 2007, Temasek established Temasek Trust to provide financial oversight and governance of Temasek’s endowment gifts. The Trust oversees the financial management and sustainable disbursements of Temasek’s endowment gifts to the six Foundations, based on prudent sustainability and sound governance.

In 2016, we regrouped our 17 endowments under a structure of six Temasek Foundations, which are guided by their respective strategic thrusts and mandates to drive their community programmes.

You can read more about Temasek’s community engagement here and more about Temasek Trust at www.temasektrust.org.sg.
 

Will the application of the Net Investment Returns (NIR) framework to Temasek’s expected returns result in any impact on Temasek?

The NIR framework provides rules for determining how much the Government can spend on its Budget, based on the expected long term real rate of returns of the investment entities in the framework.

The inclusion of Temasek’s expected long term returns in the NIR framework does not affect, change or impact:

–             Temasek’s dividend policy;

–             Temasek’s strategies and operations as a long term investor; and

–             Temasek’s special responsibility under the Singapore Constitution to protect Temasek’s past reserves.

The NIR framework does not determine the amount of dividends that Temasek distributes to our shareholder.

The Government has a variety of sources of liquidity and cash flows that enable the Government to manage its liquidity needs independent of the strategies of Temasek, MAS and GIC.

Temasek will continue to declare dividends annually based on the profit we earn, in accordance with our Board-approved dividend policy. The dividend policy balances the sustainable distribution of profits as dividends to our shareholder, with the retention of profits for re-investment and future returns. The policy also takes into account the constitutional requirement to independently protect Temasek’s past reserves.

For further information, please see the 'Ask MOF' section of the Singapore Ministry of Finance website: http://app.mof.gov.sg.
 

Will the application of the Net Investment Returns (NIR) framework to Temasek’s expected returns require Temasek to pay more cash to the Singapore Government?

The NIR framework does not require Temasek to pay more dividends or cash to the Singapore Government.

The NIR framework provides rules for determining how much the Government can spend on its Budget, based on the expected long term real rate of returns of the investment entities in the framework.

The inclusion of Temasek’s expected long term returns in the NIR framework does not affect, change or impact:

– Temasek’s dividend policy;

– Temasek’s strategies and operations as a long term investor; and

– Temasek’s special responsibility under the Singapore Constitution to protect Temasek’s past reserves.

The NIR framework does not determine the amount of dividends that Temasek distributes to our shareholder.

The Government has a variety of sources of liquidity and cash flows that enable the Government to manage its liquidity needs independent of the strategies of Temasek, MAS and GIC.

Temasek will continue to declare dividends annually based on the profit we earn, in accordance with our Board-approved dividend policy. The dividend policy balances the sustainable distribution of profits as dividends to our shareholder, with the retention of profits for re-investment and future returns. The policy also takes into account the constitutional requirement to independently protect Temasek’s past reserves.

For further information, please see the 'Ask MOF' section of the Singapore Ministry of Finance website: http://app.mof.gov.sg.
 

Will the application of the Net Investment Returns (NIR) framework to Temasek’s expected returns result in any changes in Temasek’s investment strategy?

Including Temasek’s expected returns in the NIR framework does not change Temasek’s investment strategy as a long term investor, and has no impact on Temasek’s ability to buy, sell or hold assets.

The NIR framework provides rules for determining how much the Government can spend on its Budget, based on the expected long term real rate of returns of the investment entities in the framework.

The inclusion of Temasek’s long term returns in the NIR framework does not affect, change or impact:

– Temasek’s dividend policy;
– Temasek’s strategies and operations as a long term investor; and
– Temasek’s special responsibility under the Singapore Constitution to protect Temasek’s past reserves.

Any changes to Temasek’s strategies or portfolio composition will affect our expected long term returns.

Temasek’s investment strategy is the responsibility of Temasek’s Board and management. Investment and divestment decisions will continue to be based on our intrinsic value tests.

Temasek will continue to focus on delivering sustainable returns over the long term.

The Singapore Government is not involved in the investment, divestment or other business decisions of Temasek.

For further information, please see the 'Ask MOF' section of the Singapore Ministry of Finance website: http://app.mof.gov.sg.
 

Why does Temasek issue bonds?

We issue Temasek Bonds as public markers of our credit quality. They increase our funding flexibility and expand our stakeholder base.

What were the proceeds of Temasek’s bond issues used for?

The proceeds were used to fund the ordinary course of business of Temasek and our investment holding companies.

How many bonds has Temasek issued under the Medium Term Note Programme?

Since 2005, Temasek has issued 15 Temasek Bonds in Singapore dollars, US dollars, British pounds sterling and the euro, with debt maturity up to 2050.

On 21 September 2015, our maiden T2015-US$ bond matured.

On 1 March 2016, we issued our inaugural euro Temasek Bonds, (i) T2022-€ comprising €600 million of 6-year bonds with 0.5% coupon and (ii) T2028-€ comprising €500 million of 12-year bonds with 1.5% coupon.

As at 31 March 2017, the total amount of our 14 outstanding Temasek Bonds totalled S$11.6 (US$8.3) billion, with a weighted average maturity of over 12 years.

Why did Temasek establish a Euro-commercial Paper Programme?

Our US$5 billion Euro-commercial Paper (ECP) Programme was established in February 2011 to complement the longer dated Temasek Bonds under our Guaranteed Global Medium Term Note Programme. Together, these debt issuance programmes form the major building blocks of our financing framework, providing a flexible balance between long and short term funding.

Our ECP Programme has the highest short term ratings of A-1+/P-1 by S&P and Moody's respectively.

As at 31 March 2017, the total amount of our outstanding ECP Programme totalled S$1.2 (US$0.9) billion, with a weighted average maturity of over one month.

Does Temasek have any benchmarks or targets for gearing and other credit ratios?

Our Board sets our overall debt limit, taking into account our shareholder funds, cash flow and credit profile. Temasek has a conservative gearing stance, and closed the financial year ended 31 March 2017 in a net cash position as an investment company.

Does Temasek pay dividends to its shareholder?

Temasek declares dividends annually, based on the profit we earn, in accordance with our dividend policy.

Our Board ensures that our dividend policy balances the sustainable distribution of profits as dividends to our shareholder with the retention of profits for reinvestment to generate future returns. The policy also takes into account our constitutional responsibility to protect Temasek's past reserves. Our Board recommends the dividends for our shareholder's consideration at the annual general meeting.

How will the Net Investment Returns (NIR) framework affect Temasek?

Under the NIR framework, the Government is permitted to spend up to 50% of the expected long term real rates of return of GIC, the Monetary Authority of Singapore and Temasek.

The NIR framework does not affect, change or impact Temasek’s dividend policy, strategies and operations as a long term investor, and our responsibility to protect Temasek’s past reserves.

Please click here for further information. 

Does the shareholder inject capital into Temasek?

Our shareholder has injected capital into Temasek from time-to-time as part of their asset allocation decision.

Do the financials in the Temasek Review and Offering Circular reflect Temasek’s performance as an investment company?

The Credit Profile section of our Temasek Review and Business of Temasek section of our Offering Circular include key credit parameters based on the financials of Temasek as an investment company1 . Our Credit Profile provides a quantitative snapshot of our credit quality and the strength of Temasek’s financial position. Temasek’s overall performance as an investment company is also highlighted in our Temasek Review and Offering Circular, through measures such as total shareholder returns over various time periods.

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1Based on the financial information of Temasek as an investment company, namely, Temasek Holdings (Private) Limited (THPL) and its Investment Holding Companies (IHCs). IHCs are defined as THPL’s direct and indirect wholly owned subsidiaries, whose boards of directors or equivalent governing bodies comprise employees or nominees of THPL, wholly owned Temasek Pte. Ltd. (TPL), and/or TPL’s wholly owned subsidiaries. The principal activities of THPL and its IHCs are that of investment holding, financing, and/or the provision of investment advisory and consultancy services.

Does Temasek guarantee its portfolio companies’ debts?

As a policy, Temasek does not issue any financial guarantees for the obligations of our portfolio companies.

How do I apply for a position at Temasek?

Please submit your details via Taleo under the respective application links. For further queries, please contact us at career@temasek.com.sg.

What happens after I submit my resume and how will I know if I am selected to participate in the interview process?

We will notify you if your qualifications and experience are relevant to the requirements of a currently available position. If you are selected to proceed in the process, you will be contacted directly by the Human Resources team.

What are your selection criteria when reviewing a candidate’s suitability?

We will broadly consider a candidate based on the following:

  • Competency
  • Relevant experience
  • Values
  • Leadership qualities (for experienced hires)

Selected Questions & Answers from the Temasek Review Media Conference 2017

The following is an edited transcript of questions and answers at the Temasek Review 2017 Media Conference.

It has been edited with grammatical edits to aid readability.  Questions are not necessarily listed in the order in which they were asked, but have been grouped by subject to aid readability.

Slides and charts have been added from the Temasek Review 2017 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, and here to see all of the key financial metrics and diagrams in Temasek Review 2017.

Question on Net Divestment Position

QUESTION: I have a question regarding the net divestment position. Do you think this trend will continue with the rise in market valuation and what are you going to do with the extra cash? Thank you.

CHIA SONG HWEE: We didn't start off the year with the plan of having a net divestment year. As you know we are a bottom‑up investor and we look at investment opportunity just based on that lens and it so happened that, given the market environment and high valuations, we see less investment opportunity because we just find that, generally speaking, the market pricing is too high.

But on the flip side, it allowed us to exit some of our positions, or sell part of our stake, given the valuation may be trading close to our intrinsic value. So, it's quite situational, and we could not use that as a way to think about our future.

Question on Ten year Return

QUESTION: Your ten year return of 4% is the lowest in the years, is it inevitable that you are increasing unlisted assets to get higher returns?

ROHIT SIPAHIMALANI: Firstly, on the 10‑ and 20‑year returns, with 60% of our portfolio being listed, our performance can never be completely divorced from the markets, and if you look at the last 10 years and the last 20 years, market returns have been quite low over this period, primarily because of the Global Financial Crisis which you could argue was a once‑in‑a‑lifetime event. Now because of those low returns, I mean that also impacted our returns, which was lower than our cost of capital over this period but you would have seen from Sulian's presentation that we outperformed almost every market index during this period which should make us feel good.

Having said that, we set for ourselves an even higher bar because for us it's not just a question about just exceeding market returns, we have to exceed our cost of capital over the longer term, which is why we started reshaping our portfolio in 2011 towards those areas which we think can give us those long‑term sustainable returns which would include both public and private investments. So that's really the strategy and I would say we've been very pleased with the results in the last six years and we think the continued execution of that strategy will allow us to meet our objectives in the longer term.

Question on Pace of Investments

QUESTION: It's a follow‑up question to Song Hwee's earlier comment on the slowing down, relative slow down to the new investment on the back of high valuation. The situation seems to be continuing, so will this slow down, relatively lower new investment and divestment continue this year as well, do you think, and further on next year?

CHIA SONG HWEE: I will say something and maybe Dilhan can add to that. We can only say that if the backdrop doesn't change, then we will remain cautious and our pace of investment will be quite disciplined, as you have seen [from] what we have done last year. But some of this could be influenced by the size of the transaction. For example, we may come across a very attractive private situation that requires us to deploy a lot more capital. So that might change the number. So, it's really hard for us to kind of predict what will the number be for the coming year. But the disciplined approach will continue.

DILHAN PILLAY: So just to add to that, as we look at the pipeline, the pipeline is a robust pipeline of opportunities, which are being evaluated in all the markets that we are in and all the sectors that we are focussed on. The issue is converting that pipeline into actionable opportunities for which we can invest at the return requirements that we have.  And of course we have to bear in mind, as we've spoken before, that there is a lot of competition out there, so we just have to try to be much more competitive if it makes sense for us.  Frankly, we've been proactive sourcing transactions for many years, that will continue. So, I don't think the pace of investment is linked to opportunities which are available.  It's really linked to getting the returns that we want.

Question on Capital Injections

QUESTION: Am I right in assuming, looking at your numbers, that there have been no capital injections from the Government? 

ROHIT SIPAHIMALANI: Well, there have been no net capital injections during the last year.

Question on Valuations

QUESTION: Talking about valuations going forward, I mean how do you see valuations going and, you know, over the short term and over the long term as well?

MICHAEL BUCHANAN: It's going to be driven, of course, partly by our generally constructive outlook on economic growth. So that will provide the underpinnings for earnings, so that's encouraging. But of course, if the starting point for valuations is relatively high, and we have a very gradual move from central banks to reduce the amount of accommodation, then you'd expect those valuations to edge down. So, it's interplay between the earnings which are improving, and valuations which are edging down.

Question on Investment Horizon

QUESTION: Are you able to provide some colour on what has changed in the investment horizon from last year? Were you cautious even last year, I mean the year before, when you talked about it or in the recently concluded year, what has really changed? Is it just valuations or is there a fight for deals which makes valuations more stretched? Thanks.

CHIA SONG HWEE: I will attempt to answer that and [others] please jump in. There are many variables come to play as we look at investment opportunities. The two years preceding March 2017, you see we actually have strong investment momentum.  We invested S$30 billion in each of the years. But given the valuation considerations, as well as perhaps more competition for transactions, you have seen that we reduced our pace of investment quite a fair bit.

Now, we did not really change in terms of our investment stance. We always have been disciplined, but with the valuations as we saw it, we think that the upside may be limited and it may not meet our return requirements and therefore we have to slow down the pace. 

ROHIT SIPAHIMALANI: As Mike pointed out, actually the economic environment is actually looking better today than it looked in the last couple of years. You know, the growth outlook is much better. So, what's really changed is, one, valuations have got more stretched, that's one, and then secondly, we are now approaching a point where in the next couple of years you will see central banks reversing their easy monetary policy and as you have rate increases that will have an impact on market multiples. So, I think that's what influences our cautious stance but, you know, as again, Mike mentioned, it's got to be an interplay between to what extent earnings growth can offset those multiples and that will really determine the future market outlook.

Question on China

QUESTION: A question about China because I notice where US is still your largest market for investment but is China likely to surpass US in the next few years and how about other new markets in South‑East Asia region for your new investment?

CHIA SONG HWEE: China remains our key investment destination. It still accounts for 25% of our portfolio value. Even though it may look flattish at 25% year on year, but the absolute dollar amount has increased, actually.

From the allocation of investment in terms of geography, it's not so much that we have a pre-conceived idea of where we want to invest country-wise but it's still very much driven by our investment themes, direction, and the bottom‑up investment opportunities. As you can see, in the past six years we've been emphasising on certain subsectors like technology, life sciences and I will say US is actually a pretty good place for us to look for those opportunities.

Question on Japan

QUESTION: Japan was earlier mentioned as a mature economy and we think it's kind-of shrinking.  Do you have any kind of strategy or plan for Japanese portfolio or market?

MICHAEL BUCHANAN: Maybe I can start on the general outlook for Japan. We think it's actually very well placed to benefit from that improvement in the global growth environment that I described earlier and so in that sense the fundamentals for Japan are very good. In addition, you have relatively accommodative monetary policy continuing by the BOJ [Bank of Japan] and that will become more of a differentiating factor going forward compared to the Fed [Federal Reserve] and eventually to the ECB (European Central Bank]. And so any currency implications from that will also help Japan so. The outlook for Japan, we think, is quite constructive and we've been looking at opportunities there. We've stepped up a little bit but it's still relatively early days for us there.

Question on South East Asia

QUESTION: Are you able to share some ‑ give some details about opportunities in closer to home South‑East Asia? How is that shaping up? Obviously, the drivers of valuation that you see, or at least the reasons, are a bit different here compared to the US and other places. So, in these emerging markets do you see opportunities? How's the pipeline and can we expect an increase in investments based on the potential opportunities? Thanks.

MICHAEL BUCHANAN:   Starting with just the general backdrop, the way we'd look at a lot of the emerging markets. If you think global growth is going to be relatively decent but you've got tighter liquidity coming, you've always got political shocks on the horizon, what you want is economies that have the ability to respond so they need to be moving in the right direction in terms of their structural reform agenda and they need to have policy space, meaning that they could ease fiscal, monetary, exchange rate policy as appropriate. And so in the region, Indonesia, Philippines and as I mentioned earlier, you know, also India stand out for us as having that sort of room. Vietnam is also one of the countries that we would look at there.

So that's sort of the broader picture for how we would think around the region. Dilhan, do you want to jump in in terms of the individual investments?

DILHAN PILLAY: So I think we're very mindful of the fact that we are in a region that has positive signs out there and we are looking for those opportunities that can give us those risk‑adjusted returns that we need. Temasek and Google published a report last year that said that the Internet economy [in the region] could be as large as $200 billion by 2025, and the e‑commerce piece could be as large as $89 billion, $90 billion. So clearly, we see the opportunities in that space as well. And it's something that we're focussed on, it's something our venture capital group, Vertex, is focussed on, for example.  They've just raised a South East Asia fund that is double the size of the previous fund. So, we're going to be looking at these opportunities, and not just standing by and letting the region go by us.

ROHIT SIPAHIMALANI: You can see the example of Lazada where Alibaba just now bought out a lot of the other early shareholders.  We’re the only shareholders that continue remain in partnership with them and it's reflecting the point that the Dilhan made, the option that we see.

Question on Brexit, Protectionism

QUESTION: Thanks for that. Mike, if I can come back to you on the future risks. I believe this time last year we were quite concerned about Brexit. Is that still a concern from your perspective considering the durational aspect of the multiyear negotiation process?  And if I could also ask you whether you believe perceptions of rising protectionism, especially emanating from the US Administration, are a risk for global growth and therefore for global equity markets as well that are perhaps underappreciated?

MICHAEL BUCHANAN: Well, the outcome of the Brexit talks is, of course, unclear and we wouldn't want to be investing just on the specific outcome of those Brexit talks. What we would expect, though, is that so far, the UK economy has benefitted from the currency depreciation that has come about because of the referendum on Brexit, but as we move forward, you'd expect to see domestic demand, including perhaps capex being impacted by the forthcoming actual Brexit. So that would sort of inform our broader view of investments in the UK.

QUESTION: And to the issue of the rise in protectionism, do you classify that as a risk and how big a risk is it for the future?

MICHAEL BUCHANAN: Clearly, it's a risk and it's one of the things we looked at in our [Temasek Geometric Return Model] TGEM work which is in the annual report. It's one of the downside scenarios. It's certainly not the most likely scenario but it's a risk that we've looked at. When you look at some of the elections in Europe they haven't all gone one way and France, in particular, stands out as an election that is giving rise to sort of a more reformist agenda and a pro‑European agenda. So, it's not all going in one way but clearly those risks are things that we're cognisant of.

Question on US Protectionism

QUESTION: Can I ask you again to elaborate a bit on your stance on the US Administration and possible concerns regarding protectionism?  Thank you. 

ROHIT SIPAHIMALANI:   We see protectionism in some form will probably [happen] ‑ you're going to have some sort of tariffs, right, that is what we all expect. But I think compared to expectations at the beginning of the year, when there were strong concerns that people had about a broad‑based broad adjustment tax, etc, those risks really seem to have gone down. So as Mike said it's clearly a risk, if it happened, would have an impact on the global economy and markets but it's something we see as a tail risk and not a base case event.

Question on Non-Bank Financial Services

QUESTION: You mentioned that for non-bank financial services, the return has been higher than average [across the portfolio]. What is the outlook for this year? Do you have a plan to increase [exposure to] this sector? Thank you.

CHIA SONG HWEE: We're actually not in a position to predict how each sector will perform. We invest based on the secular trend, what we believe a particular company can generate into returns in a sustainable way and [over] the longer term. But this is a high-growth area and it is also having this backdrop of digitisation and the digital economy.

So we believe that the growth potential is actually quite high and we will continue to look for investment opportunities in that space. Maybe Rohit can talk a little bit about even the emerging markets, like India, the opportunities over there.

ROHIT SIPAHIMALANI: Yes, apart from banks, take India, for example, I mean you have digitisation proceeding at a pace where you have a lot of companies … we ourselves are invested in a payment infrastructure company called BillDesk out there … and then outside that, as savings are increasing, you have areas like asset management, insurance, which are again nonbank areas which are looking very attractive. We invested in ICICI Prudential the previous year, in the most recent year we invested in SBI Life. So we see attractive opportunities in the space and we will continue to look for them.

Question on Chinese Banks

QUESTION: A related question on China. As one of the biggest investors in Chinese commercial banks, what's your outlook for the Chinese banks?

CHIA SONG HWEE: We remain comfortable with our investment in the Chinese banks. There are many concerns about issues relating to credit but the banks that we have invested in, we believe that they are well positioned to manage their credit risk. The banks are also adjusting the way that they have been doing business and earning their income, with the transition of the Chinese economy from one of investment-led to consumption- and service‑led, and you can clearly see the change in their loan portfolio moving in that direction. So, we remain comfortable with our bank exposure in China.

Question on Technology Investments

QUESTION: Talking about your investments in tech, I mean how does this affect the overall portfolio in terms of risk and the traditional categories that we see? Are they still relevant, because I mean tech is kind of in everything now?

CHIA SONG HWEE: As you can see from the presentation, the tech portion is still quite a small part of our TMT overall portfolio, and with the technology evolution, the fast‑changing adoption of technology, we believe that there's a lot more head room to grow.

Having said that, our traditional investments in telcos remain relevant. If you look at how we communicate with each other today, how business communicates with each other, the backbone infrastructure is still very relevant. In fact, the next generation change to 5G will have to be supported by the telcos. So it will remain as a key part of our portfolio going forward.

Question on Energy & Resources

QUESTION: You list energy and resources as a longer-term investment opportunity still. Would you be a buyer of Saudi Aramco shares when they do come to market or is fossil fuels looking increasingly old hat in this era of decarbonisation and you do put an emphasis on renewable energy? I'm just curious.

SULIAN TAY: We don't comment on individual investment plans prospectively. But we do see energy and resources as critical to the global economy and to societies as they raise hundreds of millions of people out of poverty into the middle class. And so, we also expect demand overall for energy and electricity to continue to grow. Expectations are anywhere between 40 and 60% over the next 25 years, growth in electricity demand. And to meet that demand you need both fossil fuels as well as new energy sources. So we look across the entire spectrum. We have investments in oil and gas companies, but we also have investments in renewable companies as well.

Question on Investments in Travel & Tourism

QUESTION: A lot of your investments are travel and tourism related, like Singapore Airlines and Ctrip. Are you concerned that things like the travel ban and, of course, protectionism is going to impact those investments?

CHIA SONG HWEE: My colleagues have talked about protectionism, trade barriers, huge risks when it comes to the global economy, it's not just our investments but we still see it as kind of a tail risk event. But if you look at the positive side, tourism is growing at 4 to 5% every year and if you were to go down to the next level of details, outbound travel from China is just beginning so there's a huge potential for this sector to grow much more significantly, and innovation is also taking place in that sub-segment. Today the younger generation, the way they travel is very different from maybe how I would travel. So you actually open up quite a bit of innovation, new business models and perhaps even high growth that we have not experienced so far.

Question on IPOs

QUESTION: You see Netlink did an IPO recently, can we see anything from Mapletree or PSA, or your unlisted holdings?

CHIA SONG HWEE: That is really up to the deliberations of the board and the management. We actually have no control or oversight over that.

Question on SMRT

QUESTION: The question I had was on is SMRT now that it's gone private, what are the plans for that company?  Are you looking to sell it, or what are the plans of that company?

CHIA SONG HWEE: With regard to SMRT we were pretty explicit as to why we wanted to take SMRT private at the time. With the change in [rail financing] regime, we believe that it is better for SMRT to operate as a private company, focussing on improving service quality and rail reliability and not be distracted by the short‑term capital market requirements, and the requirements of being a publicly-listed company. So, they have been privatised just a few months back. I think there's still a long way for them to go through the transition and work on the service and reliability challenges.

Question on Cautious Outlook

QUESTION: Throughout the presentation today you have used the word cautious quite many times. If pressed, what do you ‑ what is the biggest caution that you have, particularly when it comes to Asia? Thank you.

MICHAEL BUCHANAN: I guess I just come back to the point that I made earlier, which is the underlying economies are relatively resilient and it's more the things that would go to impact valuations. So your starting point for valuations is relatively high, global liquidity is going to edge towards tightening: I mean, we're not talking about a very dramatic tightening from central banks but that's the direction it's going and of course you have politics as well. And so it's the interplay of those things that would make us cautious.

QUESTION: But for Asia, is that the same?

MICHAEL BUCHANAN: I think for Asia, some of those issues around the tightening of global liquidity are certainly relevant to how we would look at valuations going forward.

Question on Unlisted Equities

QUESTION: Just wanted to make sure I understand something Sulian said. She said that the non‑listed portion of the portfolio is carried at book, not mark to market, yes? Does that mean the 13% return you report is simply the return powered by the 60% publicly listed investment?

CHIA SONG HWEE: That also includes the profitability of the non‑listed assets which, you basically book the profits to the accounts, right, so that increase will be reflected as the increase in our portfolio value as well.

QUESTION: But not the capital gains on ‑

CHIA SONG HWEE: No, we do not mark it to any kind of valuation. It's just the profit that it generates.

Question on Private Equity Investments

QUESTION: I just have a question about your private equity investments. Are you seeing more competition in the private equity space and how you're making sure that Temasek gets the best deals?

DILHAN PILLAY: So are you talking about direct investments?  If it's direct investments and mostly growth investments we see a lot of competition now. Whether it's in US, China, India, Europe, there's a lot more competition and it comes from even new sources of capital. It's not just, you know, growth equity firms or PE firms or sovereign wealth funds or pension funds but now we're seeing family officers coming into the space we've traditionally played in. So, it's a competitive environment. There's lots of liquidity there and we just have to make sure that we add to the tools that we have and try to think creatively about how to approach some of these opportunities to get the returns that we want to have from them.

Question on Private & Negotiated Transactions

QUESTION: Can you explain private and negotiated opportunities, is it the same thing as private equity?

ROHIT SIPAHIMALANI: Well, it's really private negotiated deals meaning investing in private companies. By definition they're negotiated transactions. They could be minority stakes, they could be majority stakes but they are sort-of like private deals, more like what you would call private equity, yes.

Question on Unlisted Assets

QUESTION: Song Hwee, I was a bit surprised when you said you might do investments in non‑listed assets on an opportunistic basis. Over the past years you have constantly increased those investments. Did I get that right or are you saying you want to increase the share of non‑listed investments in the portfolio further?

CHIA SONG HWEE: We don't set targets as to what is our mix of unlisted versus listed. If we do our job right, eventually some of our unlisted companies will be listed, right? Otherwise we will not have liquidity events. So, it is really hard for us to put a number to it. The basic fundamental of unlisted investment is still whether or not we can generate returns. Of course, if a company that we invest in is unlisted, we will expect a so‑called illiquidity premium, right? In other words, we do expect to earn somewhat higher returns compared to listed assets. But the underlying basis of us looking at an investment is the same. No difference.

ROHIT SIPAHIMALANI: If I can just add, it's a question of market cycles. So today, because we see public market valuations are expensive, we have done more private investments and part of it is basically we manage to get them at acceptable values because of an edge we may have because the value that the investor sees or the company sees in us.

But take 2013 during the taper tantrum. That was a time when a lot of emerging market stocks had sort of fallen precipitously and you had blue chip companies available very cheap in the public markets. So at that time we invested heavily in the public markets, because it was attractive to do so and today, when the public markets are very expensive, we've veered more towards the private side. So ultimately, we will look to see where we get value and, you know, look to invest accordingly.

QUESTION: One very simple question that partly touches on what you just said, Rohit. So we're seeing more opportunities at the moment, given the valuations in the public market, you're seeing more opportunity in private markets?

ROHIT SIPAHIMALANI: That meet our criteria, yes, that's right.

Question on Private Equity Deal Flows

QUESTION: I just wanted to check, in terms of the dry powder that's available with private equity firms it's at record highs. With such amounts of dry powder how difficult or how competitive is it in terms of deal flows because private equity firms need to spend too?

DILHAN PILLAY: So it's the same thing you raised last year as well, it's there.  It's not just a dry powder that PE funds have. It's a dry powder that sovereign wealth funds have, pension funds have, family offices have, there's a lot of dry powder out there and everyone is chasing yield as well and so the amount that's been allocated to private equity has significantly gone up and not just in the funds but directly as well. It's definitely a challenge to get returns with that sort of competition.

So, we just have to make sure that we source the deals that we feel can give us long‑term sustainable returns. And so far, I think we have been quite happy with the deals we've managed to source to date.  And the record that we've shown since 2011 in areas of technology bears that out. So as long as we continue to be firmly focussed on the areas that we want to invest in and we have feet on the ground and good sourcing capabilities, we think they will do alright.

CHIA SONG HWEE: Maybe I just add that although the level of liquidity is something that we never seen in history, but asset cycles of this nature happened before, it's nothing new but of course now there are a lot more players and liquidity drivers a lot higher, but it's the same thing. What we learn from previous lesson is to stay disciplined.  We really need to know and understand why we're investing and how we can make our returns, and be disciplined about it.

ROHIT SIPAHIMALANI: The most importantly for us in this environment is to be able to demonstrate to the companies we're looking to invest in, the value that we can add to them and we find that particularly if you look at companies in the US and Europe, our networks in Asia and our strong presence on the ground in key markets and our history of investing here for, you know, well over a decade, I think is value where they see.

So, I think if you look at it, a lot of the investments that we've done in the last year in the US and Europe, we almost never win at an auction, we're very bad at auctions! A lot of these have been really, you know, privately one‑on‑one negotiated deals and why would someone do that?  In all these cases, the big value add they've seen from us is, one as a patient longer term investor that doesn't have a fund life so that we sometimes time horizon we can offer is different from traditional private equity firm, but we found that a big value-add they see is really the value, the benefits we can bring them through our networks in Asia, how we can help them in that area.

DILHAN PILLAY: The other thing we do have is we built up the main capability in the ten sectors that we're in, over a decade, and now we've also built up good market experience as well with the teams we have on the ground. We also have the domain expertise of our portfolio companies that we have significant interest in. So that hopefully will help us as we navigate the investment world that's out there.

Question on Succession

QUESTION: Can you talk a little bit about the succession planning, the CEO, Ms Ho, if there has been anything, has there been any change since last year, acceleration, new consideration or is it just still the same?

DILHAN PILLAY: So as I said last year, I get to answer that question every time it's asked when I'm here!  As I said before, the board has a succession planning exercise, it's put in place for a number of years and continues to do so. In 2015, Lee Theng Kiat took over all the investment activities of Temasek, while Ho Ching focussed on the institutional elements of our company or our group and as well as the stewardship aspects of it. That continues and so, you know, that's where we are today.