Temasek Report 2010

Relating to Our Shareholder

Incorporated on 25 June 1974, Temasek is a Singapore exempt private company ¹ wholly owned by the Minister for Finance (Incorporated). Subject to the President’s concurrence, our shareholder has the right to appoint, remove or renew Board members at shareholder meetings.

We operate under the purview of the Singapore Companies Act and all other applicable laws and regulations governing companies incorporated in Singapore. Within this regulatory framework, Temasek operates with full commercial discretion and flexibility, under the direction of our Board.

We provide annual statutory financial statements audited by an international audit firm, as well as periodic updates to our shareholder. While not required to release any financial information publicly as an exempt private company, we have published our Group Financial Summary based on the audited statutory consolidated financial statements in our annual reports since 2004.

We declare dividends annually to our shareholder, balancing cash returns to our shareholder against reinvestments to sustain future returns.

Relating to the President

Under the Singapore Constitution, the President of the Republic of Singapore has an independent role as the elected Head of State to safeguard Singapore’s critical assets and past reserves.

Likewise, Temasek is designated a Fifth Schedule Company ² under the Singapore Constitution with a special responsibility to safeguard our past reserves. Reserves in Temasek are categorised as current or past reserves, depending on when these have been accumulated.

Profits accumulated before the term of the current Government, and any government asset transfers, form our past reserves. Current reserves are primarily profits accumulated after a newly elected government is sworn into power.

If our total reserves are less than our past reserves, or if our current reserves are negative, this will be considered a draw on our past reserves. We will need to seek the President’s approval before a draw on past reserves.

Our Chairman and CEO are required to certify our Statement of Reserves and Statement of Past Reserves to the President on a half-yearly basis as part of our governance discipline.

Thus, the President acts as a check under a ‘two-key’ concept to safeguard Temasek’s past reserves ³ as a Fifth Schedule Company.

The President’s concurrence is required for the appointment, renewal or removal of our Board members. The appointment or removal of our CEO by our Board is also subject to the concurrence of the President. This is to safeguard the integrity of these key appointments involved in directing and managing Temasek’s reserves.

Apart from its normal fiduciary duties to the Company, our Board is also accountable to the President to ensure that every disposal of investment is transacted at fair market value.

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Relating to Our Portfolio Companies

Companies in our portfolio are managed by their respective management, and guided and supervised by their respective boards. Temasek does not direct the commercial or operational decisions of its portfolio companies.

We exercise our shareholder rights fully, including voting at shareholders’ meetings, to protect our commercial interests.

We promote sound corporate governance in our portfolio companies. We support the formation of high calibre, commercially experienced and diverse boards to complement and guide management leadership.

We advocate that the Chairman and CEO in a company should be separate persons, independent of each other, to ensure an appropriate balance of power, increased accountability, and greater capacity of the board for independent decision making.

Relating to the Wider Community

We exercise our corporate citizenship in two aspects.

Firstly, we put in place a framework for contributing to the wider community on the twin pillars of sustainability and independent governance.

In 2003, we began setting aside a share of our Wealth Added for community contributions each year we achieved returns in excess of our risk-adjusted hurdle.

We established Temasek Trust in 2007 to independently oversee the management of endowments and gifts, and the distribution of funding to specific non-profit philanthropic organisations. These independent beneficiaries of Temasek Trust, such as the Singapore Millennium Foundation and the Temasek Life Sciences Laboratory, are responsible for the development and delivery of the programmes within their respective mandates. Newer beneficiaries such as Temasek Foundation and Temasek Cares were set up with specific mandates for communities in Asia and Singapore respectively. The promotion of governance and ethics is also within the mandate of Temasek Foundation.

These non-profit philanthropic organisations are an additional group of independent stakeholders with an interest in the continued success of Temasek.

The second aspect of our corporate citizenship is to be a proactive participant in dialogues with regulators, multilateral agencies and other market participants on governance and other regulatory issues to help promote fair and practical market oversight, and to keep abreast of governance issues and trends.

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Temasek Board and Committees

Our Board comprises 11 members, a majority of whom are non-executive independent private sector business leaders.

They bring a wealth of experience from the private sector and industry to our deliberations.

During the year, Michael Lien joined the Board on 2 January 2010. We also welcomed Hsieh Fu Hua on board on 1 February 2010.

Our Board provides overall guidance and policy directions to our management. Each year, the Board is scheduled to meet on a quarterly basis for sessions of 1.5 days each, but meets more often when necessary. Seven Board meetings were held during the year ended 31 March 2010.

Certain specific authority has been delegated to various Board committees:

• Executive Committee (EXCO)
• Audit Committee (AC)
• Leadership Development & Compensation Committee (LDCC)

Each committee is chaired by an independent, non-executive Director. Members of the AC are not members of the Executive Committee.

On the recommendation of the AC, our Board approves the annual audited statutory accounts prior to submission to the shareholder for adoption at the Annual General Meeting.

During the year, the AC approved refinements to the Valuation Policy and the Impairment Review process, as well as amendments to the Whistle Blowing Policy.

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Board and Committee Decisions

Board members may participate in meetings via telephone or videoconference. Decisions at Board and Committee meetings are based on a simple majority of the votes. In the case of a tied vote, the Chairman has a second or casting vote. Where a Board resolution is obtained via circulation, the resolution becomes effective upon approval by at least two-thirds of the directors.

Board members with interests that may conflict with specific Temasek interests are recused from the relevant information flow, deliberations and decisions.

Quarterly Board meetings include Executive Sessions for the non-executive Directors to meet without the presence of management. The annual CEO succession review is part of these deliberations.

Temasek Management

The governance role of Temasek management is to ensure that we comply with the rules and regulations of the jurisdictions where we have investments or operations. We have robust systems and processes in place to assist us in such compliance.

Our systems and processes are continually updated and refined, in particular for new markets and new asset classes, or to incorporate new technology platforms or capabilities.

Board Committee Membership

	Board	EXCO	AC	LDCC
S Dhanabalan	Chairman	Chairman		Chairman
Kwa Chong Seng	Deputy Chairman	Deputy Chairman		Member
Kua Hong Pak	Member		Chairman
Koh Boon Hwee	Member	Member
Ho Ching	Executive Director & CEO	Member		Member
Hsieh Fu Hua	Member	Member		Member
Goh Yew Lin	Member		Member	Member
Simon Israel	Executive Director	Member
Michael Lien	Member		Member	Member
Teo Ming Kian	Member	Member
Marcus Wallenberg	Member

1. 1 Under the Singapore Companies Act (Chapter 50), an exempt private company has no more than 20 shareholders and no corporate shareholder, and is exempted from filing its audited financials with the public registry.
2. 2 Other Fifth Schedule entities include Government of Singapore Investment Corporation Pte Ltd (GIC), which manages the reserves of the Singapore Government, and statutory boards involved in managing critical assets, such as the Central Provident Fund Board and the Monetary Authority of Singapore.
3. 3 Temasek does not manage the foreign exchange reserves of Singapore, or the reserves of any other Fifth Schedule entity. Each Fifth Schedule entity is managed independently, and is separately accountable to the President through its own Board and CEO for the protection of its own past reserves.

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