TEMASEK REVIEW 2008 TEMASEK Risks & Opportunities TEMASEK REVIEW 2008 Risks & Opportunities www.temasek.com.sg Raising the giant ‘cheena vala’ fishing nets skilfully in Kochi, INDIA Reportedly introduced by Chinese explorer Zheng He during his epic voyages between AD1405 and 1433, this huge system of nets continues to deliver bountiful catch through the centuries, guided by generations of fishermen with their deft teamwork and their keen sense of the marine environment. ‘Mandala’ is a Sanskrit word variously interpreted as ‘essence’, ‘circle’ or ‘completeness’. Modern day mandalas are symmetrical geometric patterns often used to represent the microcosm of the universe and the connectivities of life. We too see ourselves as individuals and an institution operating not in isolation, but as part of a bigger whole. We are mindful that risks and opportunities are interlinked – we plan to mitigate the pain of one, and work to realise the rewards of the other. Temasek Review 2008 1 2 Temasek Review 2008 Risks & Opportunities Time and again, we have seen the risks of globalisation and the pain of fi nancial crises searing across the regional and global landscape. Yet, globalisation and the free fl ow of capital, investment and trade have also brought hope and opportunities for hundreds of millions to better their lives and build a future for their children. We continue to build our institution to weather the unpredictable cycles. The principle of managing for sustainable returns also remains a constant for us amidst these ebbs and fl ows of risks and opportunities. Our success will give us the wherewithal to remain relevant to our stakeholders. Our sense of responsibility and commitment for the long term have also guided us to focus and anchor our future in a developing Asia, to grow and prosper with Asia, the same way we had grown and prospered with Singapore, turning risks into opportunities. Temasek Review 2008 3 Lighting up the lobby elegantly at Temasek Holdings, SINGAPORE 4 Temasek Review 2008 Contents Institutional Overview 6 Year in Summary 8 Portfolio Highlights 10 To My Fellow Stakeholders 18 Group Financial Summary 24 Investments 34 Shaping the Institution 44 Engaging the World 68 Extending Pathways 74 Major Portfolio Investments 84 Our Reach 114 Temasek Review 2008 5 Institutional Overview Headquartered in Singapore, Temasek Holdings is an Asia investment house with a 350-strong international team. Formed in the tumultuous era of high oil further afield – Singapore Telecommunications, prices and spiralling food costs in the 1970s, Singapore Power and PSA International. the midwives at our birth were risks and opportunities. In the intervening years, Asia faced many challenges – some originating within Asia, We inherited a portfolio of some 30 state others seeded by the US recessions of the venture investments laden with emerging 1970s and 1980s, or the oil shocks emanating market risks – a shoe manufacturer, naval and from OPEC decisions. The late 1990s saw the port dockyards turned into commercial ship destructive force of the Asian financial crisis repair companies, a joint venture to produce ricocheting to Russia and elsewhere in the bottled chicken consommé, a budding airline world, and setting back the Asia economic on an island state, smaller than New York City, miracle. But it was Asia’s deep undercurrent less than half the size of London and one tenth of transformation through better governance the size of Shanghai. But Temasek was also an to bring hope and opportunities to its billions, opportunity in 1974 for a commercially which emboldened us to embed Temasek disciplined and independent investment in the larger canvas of a fast changing and mandate to achieve sustainable long-term developing Asia. returns. This freed the Singapore government to focus on the economy as a whole. Growing with our blue chip companies and our direct investment activities, Temasek now owns a net portfolio of about S$185 billion or Our mission is to create and maximise US$134 billion, weighted towards Singapore long-term shareholder value as an and Asia. We are an active shareholder and investor in diverse industries covering banking active investor and shareholder of & financial services, real estate, transportation successful enterprises. & logistics, infrastructure, telecommunications & media, bioscience & healthcare, education, consumer & lifestyle, energy & resources, When Singapore policymakers decided to engineering as well as technology. liberalise the provision of basic services in the early 1990s, additional state-owned assets As an active shareholder, we encourage were transferred to Temasek. Risks and a culture of excellence and meritocracy, opportunities again – risks of becoming thoughtful leadership and sound governance irrelevant as markets opened up, and in our portfolio companies. These form the opportunities to grow beyond an island of foundation for developing people and building under four million people. Today, these outstanding and lasting businesses. corporatised assets have become household names in the infrastructure of Singapore and 6 Temasek Review 2008 As an active investor, we seek to optimise shareholder. Additionally, provisions in the our long-term returns within our risk-reward Singapore Constitution grant the elected framework. We have flexible investment President of Singapore a veto right over certain horizons and have the option of taking governance matters including the appointment concentrated positions or remaining in cash. and removal of our Board members or CEO, and the protection of reserves built up in Our investments are centred on four themes: Temasek over the years. • Transforming economies • Growing middle class • Deepening comparative advantages ”Temasek’s investments are commercial • Emerging champions decisions, taken independently of Government. We do not direct or influence Temasek has a corporate credit rating of individual investments by Temasek. AAA/Aaa by Standard & Poor’s and Moody’s The investments are the prerogative respectively. Our investments are funded of Temasek’s Board and management.” through dividends we receive from our Tharman Shanmugaratnam, Minister for Finance portfolio companies, our divestment proceeds, Replying to a query in the Singapore Parliament commercial borrowings, a maiden Yankee 14 November 2006 bond issue in 2005 and occasional asset injections from our shareholder, the Minister for Finance (Incorporated). As a long-term investor, we have a stake in the lives and well-being of our fellow men. We recognise that social, environmental and governance factors can impact the 18% larger community as well as the long-term Compounded annually sustainability of companies and businesses. Total Shareholder Return since inception We actualise our commitment as a responsible corporate citizen by supporting efforts that build people and communities through We have a dividend policy which pays education, healthcare and research; build dividends to our shareholder regularly, and bridges between peoples through deeper like other commercial companies, we pay understanding and friendship; build better taxes wherever we operate. Inclusive of governance through a culture of integrity and dividends we distribute, and net of any excellence; and rebuild lives and livelihoods new capital, our Total Shareholder Return devastated by major natural disasters. We is more than 18% compounded annually have committed almost S$1 billion over the since inception. last decade to fund research institutions, scholarships and other public good Our investment, divestment and other beneficiaries, of which S$500 million was operational decisions are made by our Board endowed to the Temasek Trust in May 2007. and management, independent of our Temasek Review 2008 7 Year in Summary In a year marked by a severe credit squeeze and nervous volatility in the global fi nancial markets, we remained focused on delivering shareholder returns. We actively rebalanced our portfolio, continued to build our institution, and expanded our engagement with communities in and outside Asia. In this review: Portfolio Value Shareholder Return Beyond Asia Our portfolio grew 13% Since inception, our Total For the fi rst time, our annual to S$185 billion as at Shareholder Return (TSR) is net investments outside Asia 31 March 2008. 18% compounded annually by exceeded net investments market value (MV), and 17% by in Asia. shareholder funds (SHF). Portfolio Value (S$b) One-year TSR (%) For the year: (As at 31 Mar) 185 (For year ended 31 Mar) • S$32 billion of new investments; 164 S$17 billion in Asia 7 08 17 129 • S$17 billion of divestments; 27 07 25 103 S$5 billion outside Asia 90 24 06 28 • S$10 billion net new 16 05 12 investments outside Asia; S$5 billion net new investments 46 04 15 in Asia 04 05 06 07 08 ■ By MV ■ By SHF S$185b 17% S$10b Portfolio up 13% One-year TSR Net investments outside Asia by shareholder funds See page 12 See page 15 See page 19 8 Temasek Review 2008 Group Financial Summary International Team Responsible Citizenship We saw healthy divestment Our partnership culture We are committed to gains plus strong operating promotes inclusion, ownership, the sustainable progress performance by our blue chip and opportunities to learn and and success of Asia portfolio companies. grow as a multinational team. through building people and capabilities. (S$b) Staff Origin (%) • The Temasek Trust was endowed (As at 31 Mar) with S$500 million in May 2007 819273134 Revenue 83.3 • The Temasek Foundation, Profi