Temasek Review 2018

From Our Chairman

The elevated equities markets of 2017 softened in early 2018.

We are generally positive on the global economy. Political risks and the late cycle expansion do, however, pose some downside pressure in the short term.

Medium term risks include rising trade and geopolitical tensions, plus monetary and financial stresses in some key economies. These may dampen the potential for global growth.

We are tempering our investment pace in the year ahead, but remain open to intrinsically investable opportunities, including counter-cyclical ones.

We have full flexibility to increase, decrease or hold our investments based on their respective intrinsic values, and the opportunities or challenges that present.

Portfolio Performance

We invested S$29 billion and divested S$16 billion during the year.

As at 31 March 2018, our net portfolio value passed the S$300 billion mark for the first time. It is now almost three times the dotcom peak of just over S$100 billion at the turn of the millennium.

This record net portfolio value of S$308 billion was up S$33 billion from last year, bolstered by good global economic momentum and buoyant equity markets.


Net investment
for the year

We delivered a one-year Total Shareholder Return (TSR) of 12.19%, with three-year TSR at 4.99%. Longer term 10-year and 20-year TSRs were 5% and 7% respectively, coming off the relative highs of 2008 and 1998. TSR since inception in 1974 was 15%.

Our Wealth Added, or total dollar return above the risk-adjusted cost of capital aggregated across our portfolio, was S$14.0 billion.


Net portfolio value
as at 31 March 2018

We received dividends of S$9 billion from our portfolio.

Last year was our 11th year ending in a net cash position. Our cash and bank balances, together with our short term investments, were a robust four times the S$8.5 billion debt we have due over the next decade.

Building for the Future

As we reinvent ourselves, and reshape our portfolio for tomorrow, Agility, Alignment and Accountability remain our watchwords.

We expect global growth to moderate this year.

Looking ahead, we remain optimistic on China’s medium term trajectory, and expect policymakers to transition their economy towards a more sustainable growth path.


since inception

We expect the US Federal Reserve to continue its tightening policy amid resilient consumer demand. Beyond this year, expansionary fiscal policy in the late cycle may risk a cyclical recession in the US.

Europe continues to generate above-trend growth. Employment is improving and inflation expectations increasing. We anticipate that the European Central Bank will normalise monetary policy gradually, and remain watchful of political risks to the steady growth.


Dividend income
for the year

Singapore continues to benefit from global growth. Given the Government’s ongoing efforts to boost productivity, we expect growth to hold firm and inflation to move slightly higher.

Our investment theses for a better, smarter and more connected world remain relevant. These ride on trends driven by transformational technologies, demographic shifts and changing consumption patterns.

In June this year, our wholly owned subsidiary Azalea Asset Management launched Astrea IV Bonds, totalling some US$500 million. These are backed by cash flows from a well diversified portfolio of private equity funds.

For the first time in Singapore, a retail tranche was offered. This was priced off an equivalent Singapore dollar placement tranche for institutional and other investors outside the US. The Astrea IV retail tranche of S$121 million was more than seven times subscribed by some 25,600 applicants.

In 2017, we established an office in Washington, D.C., to track policy developments that may affect us. This complements our New York and San Francisco offices for investments, bringing our total office locations to 11 around the world.

We share our perspectives of the world with our portfolio companies and partners. Critically, we continue to emphasise integrity and good governance to our portfolio companies.

Do Well, Do Right, Do Good

We aim to do well as an investor, do right as an institution, and do good as a steward.

Doing well provides us the capacity to fuel our new investments; creates opportunities to grow our portfolio for the future; and gives us the means to care for our communities.

Doing right shapes our values and ethos in Temasek. In this age of likely economic disruption, we need to reskill and upskill our people to be future ready, and prepare them with the skills to contribute to the wider community beyond Temasek.

We continue to emphasise integrity and good governance to our portfolio companies.

Doing good drives our philanthropic investments in the broader community, based on the twin pillars of sustainability and good governance. We do this primarily through 18 endowments to build people, communities and capabilities, and rebuild lives, particularly in Singapore and Asia.

To succeed as an investor is not an end in itself. Ultimately, that success must be translated into a better and more sustainable world, with more opportunities, and a kinder place for people and communities.

Contributing to an ABC World

The United Nations (UN) Sustainable Development Goals (SDGs) are ambitious. They represent the ideals of an ABC World of Active economies, Beautiful societies and a Clean Earth. Singapore and 192 other UN members have signed up to deliver these laudable goals by 2030 – just 12 years away.

These UN SDGs are in line with our advocacy for prosperity, to go hand in hand with a treasured ecology. We coined this aspiration as Ecosperity.

Our fifth Ecosperity conference was held on 5 June 2018, the UN World Environment Day. Following the 2017 conference focus on Active economies, the 2018 theme moved to elements of a Beautiful society. Specific topics included food, education and healthcare for a growing global population.

We also partnered UNLEASH, a global innovation initiative, to gather some 1,000 young talents from around the world to co-create solutions to address the UN SDGs.

Platforms like Ecosperity and UNLEASH help bring global stakeholders a step closer to translating the SDGs into reality.

We are committed to sharing returns we make above our risk-adjusted cost of capital with the community. In 2017, we gifted a new endowment for the Stewardship Asia Centre as part of our commitment to stewardship and good governance across Asia.

In Appreciation

Temasek is 44 years old this year.

I am almost certain that Temasek has grown and transformed beyond the expectations of its founders.

For this, I thank the many generations of Boards, management and staff, past and present. I greatly value their dedication to shape tomorrow as an investor, institution and steward.

I deeply appreciate my colleagues on the Temasek Board for their thoughtful contributions. They have openly shared their wide ranging experiences and invaluable perspectives, over the course of the year. I wish to give special thanks to Michael Lien, who retired from our Board in June 2018, after over eight years of active service. His insights and perspectives have enriched our deliberations.

I am grateful to our international and regional advisors for adding depth to our deliberations in these changing times. In June 2018, we warmly welcomed Indra Nooyi to our Temasek International Panel. We are pleased that Indra, who previously served on our Americas Advisory Panel, will continue to be part of our larger family.

Finally, I thank our shareholder, bondholders, co-investors, partners, regulators, philanthropic organisations, and the public, for their continued trust, support and encouragement.

Our journey as a generational investor is one that we take with a deep sense of purpose and responsibility, to do well, do right, and do good. I am energised by the goodwill for Temasek as we forge ahead to shape a better and more sustainable tomorrow for this and future generations.


Lim Boon Heng


July 2018

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