2015 was a challenging year for the global economy, reflecting fears over policy ineffectiveness after a long period of quantitative easing since the 2008/09 Global Financial Crisis and heightened concerns over leverage in China.

Real global growth last year was just 3.1%, the slowest rate of expansion since the Crisis. Increased volatility in the global equity markets, depressed commodities prices and rising uncertainty around policy toolkits and their effectiveness added to the muted outlook.

Notwithstanding the headwinds, we in Temasek remain committed to our mission to generate sustainable returns beyond our present generation; to make a difference, where we can, by fostering development and progress for our wider communities across generations.

Portfolio Performance

As at 31 March 2016, our net portfolio value was S$242 billion, down S$24 billion from last year, largely due to the fall in market values of our listed holdings.

One-year Total Shareholder Return (TSR) was negative 9.02% in Singapore dollar terms, in tandem with the share price declines for our listed investments. Longer term 10-year and 20-year TSRs were both 6%, and TSR since inception in 1974 was 15%.

Our Wealth Added was negative S$44.7 billion for the year.

Dividend income from our portfolio was a steady S$8 billion, or about 18 times our interest expense for the year ended 31 March 2016.

We invested S$30 billion and divested S$28 billion last year, as we continued to rebalance our portfolio towards longer term or emerging trends, such as the needs of the growing middle income populations and the internet-enabled sharing economy.

We ended the year in a net cash position. In liquidity terms, our cash and bank balances, together with our short term investments, were three times our S$8 billion debt due over the next decade.

Post March 2016 year end, we tendered our shares in Neptune Orient Lines (NOL) as part of the Voluntary General Offer made by CMA CGM in December 2015. As a member of the pioneer management of NOL, I viewed this development with regret, but I am confident that the combination of NOL and CMA CGM will create a leading company that can best hold its own to deliver reliable and efficient service to customers.

Economic Outlook

We remain cautiously optimistic about the next few years.

The US economic recovery is largely on track, while we expect China to transit successfully to a more sustainable growth path in the medium term. Monetary policy is likely to remain accommodative across most of the major economies, including additional easing in Europe and Japan, though that may aggravate risks further down the road.

In Singapore, our open economic structure will keep us vulnerable to shifts in the global economy. This is mitigated by the ongoing domestic restructuring to help unlock stronger productivity growth for the future.

Overall, we see positive underlying fundamentals in both mature and growth markets, though equity markets remain susceptible to bouts of volatility. China will grow more slowly but more sustainably, while energy prices are likely to be range bound.

Our Institution

Our focus on sustainability anchors our philosophy of generational investing. It encompasses sound and sustainable governance, values and a culture of integrity and excellence as an organisation, and an abiding respect for our larger community and the world in which we live.

Even as we invest for our future generations, we are also mindful of a changing world, and the need to ceaselessly adapt and transform to remain relevant – no different from what drove us in our founding years.

In 2011, we formed Temasek International (TI) as the wholly owned management arm of Temasek Holdings, anticipating the capabilities and bandwidth to manage a growing and increasingly global portfolio.

In October 2015, Lee Theng Kiat was appointed Executive Director and Chief Executive Officer of TI, to helm Temasek’s role as an active investor and shareholder.

Ho Ching remains Executive Director and Chief Executive Officer of Temasek Holdings to oversee our stewardship role, including our constitutional responsibility to protect the Company’s past reserves.

Ho Ching and Theng Kiat will play complementary roles to oversee and strengthen Temasek’s foundation as a forward looking institution.

Post March 2016, we were happy to welcome Theng Kiat to the Board of Temasek Holdings.

In May 2016, Theng Kiat re-organised Temasek management, as we continue to evolve with our changing needs. Our sector and market investment teams were regrouped together under a single Investment Group, while a new Portfolio Strategy & Risk Group will strengthen our focus on long term portfolio resilience and risks, and help to proactively shape our portfolio to capitalise on major global trends.

To provide focus for our diverse efforts to foster ideas and programmes for sustainability and stewardship, we have regrouped various units into a new Sustainability & Stewardship Group.

Together with the Enterprise Development, Portfolio Management, and Corporate Development Groups, as well as our international network of offices, we should be better organised to address immediate as well as longer term priorities.

6%

20-year TSR

S$242b

Net portfolio value

S$8b

Dividend income

18x

Dividend income over interest expense

Our Temasek Review, Credit Profile and Temasek Bonds serve as public markers to instil and foster long term discipline. They also facilitate our engagement with the wider community, and broaden our stakeholder base to lay the foundation for a disciplined institution for the future.

On the international front, we were very pleased to extend a warm welcome to the distinguished members of our Temasek European Advisory Panel and Temasek Americas Advisory Panel, formed this January and June respectively. They complement the Temasek International Panel, to address trends and issues relevant to our key markets.

Our Temasek Review, Credit Profile and Temasek Bonds serve as public markers to instil and foster long term discipline.

Our Communities

We were deeply saddened by the tragic loss of young lives during the Sabah earthquake in June last year. The ‘Sabah Earthquake Fund’ was established later that month, for the dependents of Singaporeans who lost their lives, as well as for the trainers and guides in Sabah whose livelihoods had been affected, and to support the families of those who perished.

Managed by the Ministry of Education and Temasek Foundation, the Fund saw generous contributions from individual and corporate well-wishers, raising almost S$1 million, including Temasek’s dollar-for-dollar matching of our own staff’s donations.

Our staff also helped to structure the donations into endowments to provide ongoing financial support for dependents of the brave teachers and guide who died on the mountain protecting the students: the late Mr Mohammad Ghazi Bin Mohamed, Mr Terrence Loo and Mr Muhammad Daanish Bin Amran.

The only certified N95 masks sized for children, the AIR+ Smart Masks, commissioned earlier by Temasek, proved timely. They helped mitigate some of the worst effects of the prolonged haze from extensive forest burning in Indonesia that affected the region, including Singapore, last year.

In November 2015, Temasek Cares and SMRT Taxis launched the SMRT-Temasek Cares AED on Wheels programme in Singapore. This three-year pilot programme equipped 100 SMRT taxis with Automated External Defibrillators, boosting the community’s emergency preparedness.

We will continue supporting community programmes that focus on building people, building communities, building capabilities and rebuilding lives in Singapore and beyond.

We continue supporting community programmes that build people, build communities, build capabilities, and rebuild lives.

In Appreciation

I would like to thank our shareholder, bondholders, portfolio companies, co-investors, regulators, philanthropic organisations, and the broader public, for their continued trust in us over the years. I would also like to thank my Board colleagues for their guidance, and the Temasek management and staff for their unwavering commitment and dedication.

As we continue our journey of generational investing, we look forward to working together, to growing collectively, and to making a difference in everything we do.

Lim Boon Heng
Chairman
July 2016
The Temasek Charter

The Temasek Charter

Temasek is an active investor and shareholder, a forward looking institution, and a trusted steward.

Ten-year Performance Overview

Ten-year Performance Overview

Temasek's net portfolio value almost doubled over the last 10 years.

Portfolio Highlights

Portfolio Highlights

Temasek's net portfolio value was $242b, with a 60:40 underlying exposure to mature economies and growth regions.