Our Temasek Charter espouses who we are and what we do as a commercial investment company, and a corporate member of the wider community.
We are the owner and manager of our assets and portfolio. We are governed by the Singapore Companies Act and the Singapore Constitution. Our annual statutory financial statements are audited by a major international audit firm.
Under the Singapore Companies Act, Temasek is an exempt private company with our own Board.
Temasek’s past reserves are those accumulated by the Company before the current term of Government.
Neither the President of the Republic of Singapore nor the Singapore Government, our shareholder, is involved in our investment, divestment or other business decisions, except in relation to the protection of Temasek’s own past reserves.
Temasek does not manage Central Provident Fund (CPF) savings, Government surpluses, the foreign exchange reserves of Singapore, or the reserves of any other Fifth Schedule entity. These are independently managed by the relevant Fifth Schedule entities such as the CPF Board and the Monetary Authority of Singapore. Each Fifth Schedule entity is separately accountable for the protection of its own past reserves.
Relating to the President of Singapore
Our Board and CEO have a responsibility under the Singapore Constitution to protect our Company’s past reserves.
Our Board and CEO have a duty to seek approval from the President before any draw occurs on our Company’s 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 would not be a draw on past reserves.
Duties to protect our past reserves include ensuring that every disposal of investment is transacted at fair market value. A realised loss arising from such disposals at fair market value would not be a draw on past reserves.
Protection of Temasek's Past Reserves
Relating to Our Shareholder
Incorporated on 25 June 1974, Temasek is wholly owned by the Singapore Minister for Finance. We own and manage our own assets as an investment company, and not as an asset managing agent 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 appointment or removal of the CEO by our Board is also subject to the concurrence of the President. These constraints are part of the “second key” concept to safeguard the integrity of our Board and CEO in protecting Temasek’s past reserves.
Since 2001, the Singapore Government is permitted to spend up to 50% of Temasek’s dividends under the Net Investment Income framework. During the Budget Speech on 23 February 2015, the Minister for Finance proposed that Temasek be included in the Net Investment Returns (NIR) framework. The spending rule under the NIR framework allows the Government to spend up to 50% of the expected long term real rate of return of the investment entities in the framework.
The inclusion of Temasek in the NIR framework does not determine the amount of dividends that Temasek distributes to our shareholder. Temasek will continue to declare dividends annually, based on the profit we earn, in accordance with our Board-approved dividend policy. The dividend policy balances 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 independently protect Temasek’s past reserves.
The NIR framework also does not affect, change or impact Temasek’s strategies and operations as a long term investor, and Temasek’s special responsibility under the Singapore Constitution to protect Temasek’s past reserves.
Relating to Our Portfolio Companies
We manage our portfolio as an active investor and owner. We increase, decrease or hold our investment holdings to enhance our risk-adjusted returns for 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.
As an active and engaged shareholder, we promote sound corporate governance in our portfolio companies.
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 conduct annual reviews of their succession plans.
Board directors have a fiduciary duty to safeguard the interests of their respective companies. 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.
We advocate that the Chairman and CEO roles be held by separate persons, independent of each other, to ensure a healthy balance of power for independent decision making, and a greater capacity for management supervision by the board.
Companies in our portfolio are guided and managed by their respective boards and management. Temasek does not direct their business decisions or operations.
We protect our interests by exercising our shareholder rights, including voting at shareholders’ meetings.
Relating to Our Communities
While we are a Singapore exempt private company, exempted from disclosing any financial information publicly, we have chosen to publish our Group Financial Summary and portfolio performance in our annual Temasek Review since 2004. As a trusted steward, our engagement with our communities in Singapore and around the world is based on the twin pillars of sustainability and good governance.
We support community programmes that focus on building people, building communities, building capabilities and rebuilding lives. These programmes enable individuals, families and communities to have sustainable improvements and progress in their lives.
More than a decade ago, we instituted a policy of setting aside a share of our excess returns for community contributions in each year that we exceed our risk-adjusted hurdle. This policy is founded on the concept of sustainable and responsible contributions.
The skills and capabilities for the management of endowment funds and for the development and management of community and social programmes are very different. This was why we established Temasek Trust in 2007 to oversee the management and distribution of endowments and gifts from Temasek, which have been earmarked for specific non-profit philanthropic organisations (NPPOs).
The governance model separates the financial management of endowments from the NPPOs. This enables them to focus on what they do best – developing programmes for the community, with the peace of mind that their endowments would be professionally managed to give them a sustainable source of support over the years.
We comply with all obligations under Singapore laws and regulations, as well as those of the jurisdictions where we have investments or operations.
We follow developments in international investment and trade agreements, and engage with thought leaders and authorities. We aim to promote a better understanding of how state owned entities like ourselves operate based on commercial principles, independent of government interference.
An example is our active participation with the International Monetary Fund and various sovereign investors from around the world to develop best practices under the Santiago Principles for sovereign investments. Temasek exceeds the applicable standards of disclosure and other guidelines under the Santiago Principles.