Temasek Review 2021
Steward

A Trusted Steward

We do things today with tomorrow clearly in our mind, always aspiring to do right, do well, and do good, for today’s and future generations.

Our Temasek Charter defines who we are and what we do as an investor, institution and steward.

We are governed by the Singapore Companies Act and the Singapore Constitution.

Temasek is an exempt private company under the Singapore Companies Act. Our Board has a fiduciary duty towards Temasek as a Company, with the full discretion and flexibility to guide the management of our portfolio as an active investor and owner, a forward looking institution and a trusted steward.

Under the Singapore Constitution, Temasek is a Fifth Schedule entity with a constitutional responsibility to safeguard our Company’s past reserves.

Temasek has a constitutional responsibility to safeguard its own past reserves.

Temasek does not manage Singapore’s Central Provident Fund savings, or the budget surpluses or foreign exchange reserves of Singapore. Neither does Temasek manage the reserves of any other Fifth Schedule entity: these are independently managed by the relevant Fifth Schedule entities themselves.

Temasek’s past reserves are those accumulated by the Company before the current term of Government.

Temasek does not manage Singapore’s Central Provident Fund savings.

Neither the President of Singapore nor the Singapore Government is involved in our investment or other business decisions, except in relation to the protection of our past reserves.

Our annual statutory financial statements are audited by a major international audit firm.

Temasek does not manage Singapore’s Central Provident Fund savings.

Relating to the President of Singapore

The Board and CEO of Temasek have the responsibility under the Singapore Constitution to protect our Company’s past reserves.

The Board and CEO of Temasek have a duty to seek the President’s approval before any draw occurs on our past reserves. There is no draw on our past reserves if our total reserves equal or exceed our past reserves. Mark to market declines on existing investments are not a draw on past reserves. We have a duty to ensure every disposal of investment is transacted at fair market value. A realised loss arising from such disposals at fair market value is not a draw on past reserves.

We have a duty to ensure every disposal of investment is transacted at fair market value.

Protection of Temasek's Past Reserves

Under the Singapore Constitution, Temasek’s past reserves are those Temasek accumulated before the current term of Government. Temasek’s current reserves are those Temasek accumulates during the current term of Government.

Relating to Our Shareholder

Incorporated on 25 June 1974, Temasek is wholly owned by the Singapore Minister for Finance. As a commercial investment company, we are the owner of our assets — we are not a fund manager on behalf of our shareholder.

Our shareholder’s right under the Singapore Companies Act to appoint, reappoint or remove our Board members is subject to the President’s concurrence. The Board’s appointment or removal of the CEO is also subject to the President’s concurrence. These constraints are part of the “second key” concept, to safeguard the integrity of our Board and CEO in protecting Temasek’s past reserves.

Temasek declares dividends annually in accordance with our dividend policy. Our Board sets our dividend policy, balancing 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 dividend payout for our shareholder’s acceptance at the annual general meeting.

We are the owner of our assets, not a fund manager on behalf of our shareholder.

Under the Net Investment Returns (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.

Relating to Our Portfolio Companies

We manage our portfolio as an active investor and asset owner. We increase, decrease or hold our investment positions based on our views on intrinsic values, to enhance our risk-adjusted returns over the long term.

The day-to-day management and business decisions of companies in our portfolio are the responsibility of their respective boards and management. Temasek does not direct their business decisions or operations. Just as the Singapore Government does not issue financial guarantees for our obligations, we do not issue financial guarantees for the obligations of our portfolio companies.

We expect companies to abide by sound corporate governance and codes of conduct and ethics.

We hold the boards and management accountable for the activities of their companies. We expect companies to abide by sound corporate governance and codes of conduct and ethics. Boards should set the tone — to effectively oversee management and ensure robust governance and compliance systems and processes are in place. These must be constantly reviewed and refreshed to ensure relevance.

We advocate that boards be independent of management in order to provide effective oversight and supervision of management.

We support the formation of high calibre, experienced and diverse boards to guide and complement management leadership. This includes encouraging the boards of portfolio companies to identify and consider potential directors with relevant backgrounds and experience, and to conduct annual reviews of their succession plans.

Board directors have a fiduciary duty to safeguard the interests of their respective companies.

We advocate that boards be independent of management in order to provide effective oversight and supervision of management.

Accordingly, we advocate that boards be independent of management in order to provide effective oversight and supervision of management. This includes having mostly non-executive board members with the independence and experience to oversee management.

Temasek does not direct the business decisions or operations of our portfolio companies.

We advocate that the Chairman and CEO roles be held by separate persons, independent of each other. This is to ensure a healthy balance of power for independent decision making, and a greater capacity for management supervision by the board.

We keep abreast of industry developments that impact our portfolio companies, and track their performance. We regularly engage their boards and management, to better understand their strategies and responses to changing operating environments, and longer term trends.

We protect our interests by exercising our shareholder rights, including voting at shareholders’ meetings.

We comply with our obligations under Singapore laws and regulations, as well as those of the jurisdictions where we have investments or operations.

Likewise, we expect our portfolio companies to comply with their obligations under the laws and regulations of jurisdictions in which they have investments or operations.

We hold the boards and management accountable for the activities of their companies.

Relating to Our Communities

As a Singapore exempt private company, Temasek is exempted from disclosing its financial information publicly. We have nonetheless published our Group Financial Summary and portfolio performance in our annual Temasek Review since 2004.

We gift philanthropic funds to Temasek Trust to support community initiatives. These are funded by a share of our net positive returns above our overall risk-adjusted cost of capital.

These philanthropic gifts enable Temasek Foundation and other non-profit entities to support programmes on a sustainable basis, to connect people, uplift communities, protect our planet and advance capabilities.

At Temasek Foundation, their outcome-focused programmes aim to strengthen social resilience at home, foster mutual exchanges in the region and advance science and nature globally.

Other initiatives seek sustainable long term solutions, or enhance social policies by supporting pilot programmes to provide evidence-based results.

We gift philanthropic funds to Temasek Trust to support community initiatives.

The skills required for the financial management of endowment funds are very different from those for developing and delivering community and social programmes. This was why Temasek Trust was established in 2007 — to oversee the financial management and distribution of philanthropic gifts from Temasek. These donations and gifts have been earmarked for social and community programmes to be developed or delivered by Temasek's non-profit ecosystem which includes Temasek Foundation, Mandai Nature Fund, Stewardship Asia Centre, and Temasek Life Sciences Laboratory.

This governance model separates the financial management of philanthropic assets by Temasek Trust, from the programme design and delivery by Temasek’s non-profit ecosystem. This enables the respective entities to develop clear focus and capabilities. Over time, we expect Temasek Trust not just to be a trusted and professional manager of philanthropic financial assets to enable sustainable source of support for various communities. In time to come, Temasek Trust could evolve as a not-for-profit stakeholder for Temasek’s interest and capacity to contribute and share returns with the larger community.

In time to come, Temasek Trust could evolve as a not-for-profit stakeholder for Temasek’s interest and capacity to contribute and share returns with the larger community.

Alongside the work of Temasek’s non-profit ecosystem, our staff volunteers play an active role in contributing to their communities. Through our staff-driven volunteer T-Touch initiative, our employees commit ideas, time and money to support their chosen charities and community projects, and pursue philanthropic and public good causes.

In time to come, Temasek Trust could evolve as a not-for-profit stakeholder for Temasek’s interest and capacity to contribute and share returns with the larger community.

We follow developments in international investment and trade agreements, and engage with thought leaders and authorities. We also aim to promote a better understanding of how we operate based on commercial principles, independent of government interference and subsidies. An example is our active participation in support of the International Monetary Fund, to develop best practices for responsible investing for investors and host countries, under the Santiago Principles for sovereign investments.

Temasek exceeds the applicable standards of disclosure and other guidelines under the Santiago Principles.

From time to time, we may seed institutions to develop capabilities that promote good governance and community stewardship. In addition, we collaborate with like-minded partners, such as universities and multilateral agencies, to build these institutions.