Temasek Holdings: 14 pages of ads but what’s missing?

By Leong Sze Hian

When I woke up this morning – TGIF (Thank God its Friday) – the sky was bright, clear and sunny. So, my first thought was – great, no haze today.

However, when the morning newspapers were delivered – a different kind of “haze” arrived.

14 pages of full colour ads?

There were an unprecedented 4 full-colour full page advertisements in the Straits Times and Zao Bao, and a 2-page one in My Paper (Today also have 4 pages or not?) by Temasek Holdings, regarding its annual review which was released yesterday.

What’s missing?

As I read the above and all the news reports – I got the naggy feeling as to – is something important or very significant missing (which is often the norm rather than the exception when you read the news in Singapore).

Lo and behold – I found it – Gotcha! – a different of “haze”

I refer to the article “Temasek Holdings portfolio value up 8.6% to S$215b” (Channel NewsAsia, Jul 4).

16 % p.a. return since 1974?

It states that “Their three-year Total Shareholder Return (TSR) was 4.94 per cent. Longer term TSRs for 10, 20 and 30 years were 13 per cent, 14 per cent and 15 per cent respectively. The TSR since inception was 16 per cent.”

Clarifying the return on the Reserves?

According to the Ministry of Finance’s (MOF) “Section I: What comprises the reserves and who manages them?”

– “Q12. Has the Government transferred funds to Temasek or GIC to show better performance?

No, the Government has not and does not transfer funds to Temasek or GIC to improve their performance figures.

In the case of Temasek, the Government is its sole shareholder. The Government injects capital into Temasek from time-to-time as part of the Government’s allocation of fresh flows of funds, and to allow Temasek to plan its future investment strategies. These capital injections are reflected in Temasek’s accounts and are made public.

An occasional misperception is that capital injections can be used to improve the reported returns performance of Temasek. Capital injections can increase the size of the portfolio but do not improve the investment returns⁷ . Temasek’s reported returns figure follows the widely accepted practice of computing returns, which is to deduct any capital injections from (and withdrawals by) the Government in making such calculations. Temasek’s returns figure is reviewed and regularly published in its annual report. Further information on the calculation of Temasek’s investment returns and sources of funding can be found here.

In the case of GIC, the Government may also allocate fresh flow of funds to be managed by GIC. Such allocations also cannot improve GIC’s investment performance figures.

Q13. What factors have contributed to Temasek’s performance over time? Has Temasek’s performance benefited from the “transfer of Government’s assets” such as Singtel to its balance sheet?

Temasek’s Total Shareholder Return since inception (1974) was 17% p.a. in SGD terms.  This performance returns benefited from the transfer of Government companies such as SingTel to Temasek and the subsequent listing of these assets.  Such effects aside, Temasek’s portfolio had also done well due to:

(a) Performance of Temasek’s post-2002 investments:

• It became an active investor in Asia and other markets as part of its strategy to reshape its portfolio for the longer term.

• Its investments in external markets on a diversified basis since 2002 have provided a significant boost to Temasek’s long-term returns. This portfolio of post-2002 Temasek investments has delivered an annualised return of 18% in SGD terms over the 10-year period from 31 Mar 2002 to 31 Mar 2012 (See Chart 5 in Q8).

(b) Performance of its pre-2002 investments, included assets transferred from the Government to Temasek, such as SingTel which was subsequently listed through an Initial Public Offering (IPO).

• The pre-2002 portfolio of Temasek companies benefited from, as well as contributed to, Singapore’s transformation and growth in the earlier years. Companies like SingTel and PSA help to provide competitive and efficient infrastructure for the Singapore economy.  Through Temasek’s stewardship and management of these assets, the Government has been able to unlock and grow their value.

• The transfer of Government companies such as SingTel to Temasek ‒ and the subsequent listing of these assets ‒ had also contributed to Temasek’s total shareholder returns by market value.

• From 2002 onwards, the performance of this portfolio of earlier Temasek assets is free from the “boost” afforded by such listings and continued to perform well relative to the markets, showing annualised returns of 11% in SGD terms from 31 March 2002 to 31 Mar 2012.”

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Began with $354m in 1974?

In this connection, according to Temasek’s web site – “Value since Inception – Formed in 1974, Temasek began with a portfolio of S$354 million”.

If you compound $354 million for 39 years at 16 %, you get about $116 billion. So, to get to Temasek’s portfolio value now of $215 billion, there were capital injections and “boost” to valuation from listings due to the market valuation of some pre 2002 assets..

With (without data) capital injections & “boost” valuations – how can citizens calculate the return of 16%?

But, here’s where the puzzle or confusion may begin. Since  ”The Government injects capital into Temasek from time-to-time as part of the Government’s allocation of fresh flows of funds, and to allow Temasek to plan its future investment strategies” – how can we calculate and analyse the annualised return since inception of 16 % without more information on the capital injections and “boost” valuations?

Why didn’t just give the “capital injections” data?

As if to add to the jigsaw puzzle – the above does not tell you how much these capital injections were? Maybe they are buried somewhere in the last 10 years’ annual reports. As a citizen, or for that matter – no one should have to try to crack his head and try to figure out how much and when the capital injections were made?

To put it simply and bluntly – why didn’t the above just give the “capital injections” data?

$10b capital injection in 2008?

Anyway – since you don’t give, I try to google. For example, in FY2008 – “The increase in portfolio size was partly due to a new capital injection of S$10 billion by the Minister for Finance (Incorporated)”.

$30b capital injection from inception to 2008?

According to a Speech by S Dhanabalan, Chairman (of Temasek), at The Indus Entrepreneurs event on 21 August 2008 – “Since inception, we have received a total injection of a little less than S$30 billion in assets and cash”.

Yet another capital injection?

“Temasek’s stakes in our joint ventures with Khazanah were funded by a capital injection from the Singapore Government” (Temasek Review 2012, Jul 4, 2012).

Capital injections excluded?

In this connection, according to Temasek’s web site

– “Capital Injection Excluded from Calculation of Temasek’s Performance

A well-recognised performance measure for an investor is the Total Shareholder Return (TSR). This measures returns to a shareholder, as if the shareholder held an investment portfolio directly. It includes changes in the portfolio value and dividends paid to the shareholder, but excludes capital injections from the shareholder.

Capital injections are not regarded as a return, and hence do not “boost” investment returns for Temasek. Instead, any capital injection would simply enlarge the asset base over which Temasek must invest to generate the desired returns.”

What was the return with “boost” assets?

Also, with regard to “From 2002 onwards, the performance of this portfolio of earlier Temasek assets is free from the “boost” afforded by such listings and continued to perform well relative to the markets, showing annualised returns of 11% in SGD terms from 31 March 2002 to 31 Mar 2012″ – why isn’t the annualised return (after adjusting for this “boost”) given, so that one can have a better understanding of what the 16 % annualised return would be reduced to without the “boost”?

“F” grade for English – To clarify or cause even greater doubt?

I don’t know which school the authors went to learn English – but it is akin to saying a lot with a lot of words – but it misses and omits the key information that arguably most Singaporeans would want to know. Arguably, instead of enhancing clarity, it may in effect fuel greater doubt.

Moreover, given that the implied objective of these lengthy clarifications seems to be to debunk speculation on – “Has the Government transferred funds to Temasek or GIC to show better performance? – No, the Government has not and does not transfer funds to Temasek or GIC to improve their performance figures” – I think my English teacher may have given a “F” grade in this regard.

Uniquely Singapore!

No wonder our press freedom ranking is at our record low of 149!