One afternoon in late March 2006 we became aware of a document that erroneously had been sent by Temasek itself to a few journalists in Asia. As noted in the original introduction to the story below, the document included a "guide" on how to answer potential questions related to the firm's acquisition of a stake in Standard Chartered. Our editor at the time, Steven Irvine, decided within minutes that we should publish the entire document on our website. It ended up being our most read story that year.
A Temasek document, entitled "2006-03 Taurus Q&As" -- which was designed to help its executives answer media enquiries on its 12% stake in Standard Chartered -- was yesterday sent as an email attachment to some journalists instead of another file. The document contains 59 questions and answers and was prepared by staff to anticipate questions that might arise from the acquisition. Given that Temasek has rarely done Q&As with the media, the exercise represents a somewhat unique insight into what the Singapore state investment agency currently perceives its perceptional issues are and its own stance on these issues. In what follows we have reproduced the entire Q&A section. It is unedited, except to state in square brackets where answers were left blank:
Q&As
On rationale for investment and plans for Standard Chartered
1. Why have you invested [x] % stake in Standard Chartered? What is Temasek's ultimate objective?
Investing in Standard Chartered is consistent with our focus on Asia and on its financial services sector. Standard Chartered will add to our portfolio of investments, and will be an important part of our portfolio.
We are also impressed with Standard Chartered' Board and professional management team. They have successfully developed a distinctive strategy, delivered a growth record and created shareholder value.
2. How much did you pay for the [x]% stake?
The terms of this transaction are private.
3. Why did you take a [x]% stake and not less?
We evaluate each opportunity on its merits. We are prepared to buy, sell or hold, depending on the relative merits of the various investments and opportunities.
4. Do you intend to take over Standard Chartered/ make a bid?
[Answer left blank]
5. Does Temasek intend to increase its stake in Standard Chartered?
It is not appropriate for us to comment on this. As a financial investor, we keep all our options open and will evaluate each opportunity on its merits.
6. Standard Chartered has always been a potential takeover target. Do you think Temasek's investment in Standard Chartered would trigger a competitive bid for Standard Chartered?
That possibility is a matter for others to evaluate (the merits of a competitive bid).
It is not appropriate for us to comment on this. As a financial investor, we keep all our options open and will evaluate each opportunity on its merits.
7. Do you intend to counter bid if there is a bid by another party?
It is not appropriate for us to comment on this. As a financial investor, we keep all our options open and will evaluate each opportunity on its merits.
8. We understand that you have gotten in touch with Standard Chartered Board and management. Was that a preliminary approach to the company on a possible bid?
It was a simple matter of courtesy to inform the Board and management of our investment.
9. Why is Standard Chartered not under Asia Financial Holdings, which you have said is your financial services investment holding company?
Decisions regarding structuring of our investments are internal arrangements.
10. DBS has not been very successful in its overseas acquisitions, and so far Temasek has not been able to take significant controlling stakes in banks outside Singapore. Are you investing in Standard Chartered with the intention of merging it with DBS?
Both DBS and Standard Chartered are listed companies with significant minority interests. All investment and business decisions of either of the banks are taken independently by their respective Board and management with the aim of maximizing value for all shareholders. We play no part in their investment decisions or commercial operations. If investments are such that shareholders approvals are required, then the banks will have to convene a shareholders' general meeting. In such a situation, we will exercise our shareholder's rights according to the commercial merits of the case from a shareholder perspective.
As for the Standard Chartered investment, it is consistent with our interest and focus on Asia and the emerging markets.
It has an outstanding management team who are best positioned to continue to drive growth and deliver shareholder value, as they have done the last few years.
11. How about merging Standard Chartered with any of your other banking investments in Asia to form a pan-Asian bank?
[Answer left blank]
12. Do you plan to break up Standard Chartered and merge parts of it with your existing banking investments?
This is not an appropriate question. The future of Standard Chartered is in the hands of its Board and management.
We do not involve ourselves in the investment or commercial decisions of our portfolio companies, including Standard Chartered, unless it is an issue in which shareholder approval is specifically required under The Company's Act.
13. You have invested in many financial institutions across Asia. Would this hamper Standard Chartered's ability to expand or continue with its business in some countries?
We do not see this as a problem.
All the companies in our portfolio, including Standard Chartered, are independently managed with responsibilities to their respective board and shareholders. They are each run by capable management teams.
We do not involve ourselves in the investment or commercial decisions of the companies, unless it is an issue in which shareholder approval is specifically required under The Company's Act.
On Role of Temasek
14. Temasek has always positioned itself as an active shareholder and investor. How will Temasek support Standard Chartered's growth?
[Answer left blank]
15. Standard Chartered is already doing very well. How else can Temasek value add to Standard Chartered?
Should Standard Chartered require our support, we will be happy to discuss this matter with the Board and management with an open mind, at the appropriate time.
On the board and management of Standard Chartered
16. Did Temasek discuss this purchase with the board and management of Standard Chartered prior to the investment? If not, why not?
No, it was not appropriate for us to do so prior to the investment.
We informed key members of Standard Chartered's board and management shortly before we made our announcement.
17. Would Temasek seek any representation on Standard Chartered' board?
This is something that we will discuss with the board and management of Standard Chartered when it is appropriate and useful to the company.
18. Do you plan to make any changes to the management of Standard Chartered?
This is for their Board to decide.
Having said that, the management team of Standard Chartered has been instrumental in its success today. We admire their strong capability and keen sense of business.
19. What is Temasek's assessment of the reaction of the management of Standard Chartered to Temasek's purchase of its stake in Standard Chartered?
This question is better answered by Standard Chartered.
20. Standard Chartered' board and management have on many occasions commented publicly that they would like to remain an independent company. What is your reaction to this?
We see ourselves as a stable shareholder, committed to supporting Standard Chartered's continued growth as a unique franchise.
On regulatory approvals
21. Has Temasek consulted the FSA on the purchase of its stake?
We have initiated the process of consultation with the FSA and other regulators to seek the relevant approvals and support.
22. Does Temasek foresee any problems with regulatory approvals in some of the markets which Standard Chartered operate in?
We have taken appropriate advice and will fully cooperate with the relevant authorities to comply with the regulations.
23. When will the conditions be satisfied/ when will you obtain the necessary regulatory approvals?
Timing is for the regulators but we will fully cooperate with them to comply with the regulations and obtain the necessary approvals.
On Funding
24. How is Temasek funding this investment?
We have the necessary funding for this investment.
25. Does Temasek have sufficient funds? Were the proceeds in the recent sale of SingTel shares used to fund this acquisition?
We have the necessary funding for this investment.
26. Does Temasek need to issue another global bond soon to fund its acquisitions?
[Answer left blank]
27. Will you be selling down more stakes in your portfolio to fund your acquisitions?
We are satisfied with our liquidity situation.
Others
28. You have invested in many banks in the region. Do you foresee any conflict of interests with Standard Chartered? How do you manage that?
All the companies in our portfolio, including Standard Chartered, are independently managed with responsibilities to their own board and shareholders. They are each run by capable management teams. We are not involved in their commercial decisions or day-to-day operations.
In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
29. There is a rise of nationalistic sentiments in some of the recent investments like DPW's acquisition in P&O, and your own investment in Thailand's Shin Corp. How does Temasek plan to minimize the impact of such sentiments on its investments? Are you concerned that Temasek's investment in Standard Chartered will spark off similar sentiments?
Every investment opportunity comes with its own set of risk-reward trade-offs. There may be country, market, political, operational, regulatory, financial or execution risks.
Whether in investments or divestments, we are mindful that there can be social or political sensitivities.
We will do our best to address the various stakeholder concerns where we can, and mitigate these risks appropriately.
[For UK audience - We are just a modest shareholder in Standard Chartered and will play our role as a stable shareholder, committed to supporting Standard Chartered's continued growth as a unique franchise. We have also enjoyed strong relationships between the people of Singapore and UK at many levels, including those between businesses, friends and students in both countries. UK is Singapore's largest investor, with S$45.7 billion from 2000 companies at the end of 2004.]
30. Does Temasek coordinate its investments with GIC?
We operate completely independently from GIC.
We are a shareholder of a globally diversified portfolio of companies, while GIC is a fund management company with focus on the capital markets.
31. The Singapore Government is Temasek's only shareholder. How can Temasek make investments based purely on commercial principles? Surely the shareholder can and do impose its non-commercial agenda onto Temasek?
All our investment and business decisions are taken independently by our own board and management, based on commercial considerations. The Singapore Government is not involved.
A majority of our board members are prominent business leaders from the private sector. We have one nominee director from our shareholder on our Board. He is one amongst a group of very experienced, steady, and thoughtful directors.
All Board decisions are made on a commercial basis.
32. Is this part of Singapore's strategy to extend its influence to UK and globally?
The Singapore Government, as a shareholder, is not involved in our investment decisions and business operations.
All our investment and business decisions are taken independently by our own board and management, based on commercial considerations.
We are guided by an independent board, of which a majority of our board members are prominent business leaders from the private sector.
33. Your CEO is also the PM's wife. The PM is also the Minister for Finance, heading MOF which is your shareholder. Is her appointment politically motivated? Wouldn't there be conflicts of interest?
We are not here to discuss politics since we are not politicians or a political organization.
Our CEO is accountable to the Board of Directors, who is headed by an independent Chairman, just like any other commercial organisation.
Country specific questions
34. What are some of the regulatory issues in each market that you have encountered? How are you dealing with it?
As a Singapore institution, we seek to comply with the applicable laws and regulations in all our investment activities in each of the markets.
We abide by each country's laws and regulations at all times.
35. Do you intend to change any branding of Standard Chartered's companies in overseas markets, or their products and services?
We think Standard Chartered is a great brand, but this question should rightly be addressed to their board and management and is not appropriate for us to answer.
36. Would this investment affect any of the operations of your existing banks under your portfolio?
All the companies in our portfolio are independently managed with responsibilities to their respective board and shareholders. They are each run by capable management teams. We are not involved in their commercial decisions or day-to-day operations.
37. Please prove to us that the BODs [Boards of directors] of your portfolio companies are independent.
All directors on boards are fully aware of their fiduciary duties.
Out of our 34 significant TLCs, our management staff constitutes only 4% of all directors on the boards of these companies, as of 31 March 2005. Our management nominees are expected to fulfill their fiduciary duty to act in the best interest of their respective companies and all shareholders.
The members on these boards are men and women of experience, integrity and considerable reputation, including 26% who are non-Singaporeans. These would include outstanding business leaders such as Sir Brian Pitman, the former chairman of Lloyds Bank and Mr John Ross, formerly of the Bank of New York and also Deutsche Bank. 68% of these board members are independent.
[As at Mar 2005, the overall composition of directors on these boards was as follows -
Independent - 68%
Non-Singaporean - 26%
Female - 7%
Temasek Management - 4%]
38. Please prove to us that the BODs of your portfolio companies in the banking sector are independent.
Appointments to our portfolio companies in the banking sector are governed by the regulatory requirements of the respective jurisdictions.
[To refer to Director list of TH Investee Banks ]
UK/Hong Kong/Australia
39. The Standard Chartered management has indicated that Temasek's investment could pose problems for some of Standard Chartered's operations in Asia, which could impact on Standard Chartered' financial health going forward. What's Temasek's response to that?
We will work closely with our advisors and the relevant authorities to comply with the laws and regulations in the markets where we have investments. We abide by each country's laws and regulations at all times.
As a financially stable AAA shareholder, we can be a reliable institutional investor for our portfolio companies.
All the companies in our portfolio are independently managed with responsibilities to their respective board and shareholders. They are also each run by capable management teams and we endeavour to protect commercial secrecy at all times.
40. Temasek's investment in Standard Chartered will effectively turn Standard Chartered into a Singapore government-owned/linked entity. This is not something that is desirable from our perspective. What is Temasek's comment on this?
The Singapore Government, as a shareholder, is not involved in our investment decisions and business operations, much less in the businesses of our portfolio companies
We are guided by an independent board, of which a majority of our board members are prominent business leaders from the private sector. We have one nominee director from our shareholder. He is one amongst a group of very experienced, steady and thoughtful directors.
We are an Asia investment house, with a responsibility of delivering sustainable long term value. About [49]% of our portfolio value is invested in Singapore, with [30]% in the developed or OCED economies, and the balance of [21]% in the rest of Asia and the emerging economies.
About 20% of our staff are non-Singaporeans, coming from countries like Canada, China, India, Indonesia, Lebanon, Malaysia, South Africa, UK, US and Vietnam.
Our investment in Standard Chartered will not change its position as a unique franchise in Asia and the developing economies.
From Temasek Review 2005, pg 42, 43:
Likewise, our companies are managed by their respective management teams and supervised by their boards. We do not involve ourselves in their commercial or operational decisions.
Our key effort to add value to our portfolio companies is to promote good corporate governance by supporting and constituting high quality, commercially experienced, diverse and international boards to complement outstanding business leadership and dedicated staff.
We generally refrain from appointing our management staff onto the boards of our portfolio companies. Instead, we work actively with our companies to identify suitable independent board candidates from a wide variety of backgrounds and nationalities to complement, rejuvenate or expand board capability and quality. Where appropriate, such candidates are introduced to the respective nominating committees of boards for their consideration and decision.
On 31 Mar 2005, our direct and deemed shareholdings in 34 significant Temasek-linked companies ranged from 17% to 100%. The overall composition of directors on these boards was:
Independent - 68%
Non-Singaporean - 26%
Female - 7%
Temasek management - 4%
China
41. Would your investment help Standard Chartered expand further into the China market, especially with your existing relationship with the regulators?
This is not an appropriate question. The future of Standard Chartered is in the hands of its Board and management.
We will support the board and management as a stable shareholder.
42. As part of China's banking reforms, its banks are actively looking at attracting foreign investors. Do you have plans to introduce Standard Chartered to be a strategic investor to the other 3 Chinese banks that you currently have invested?
This is for the Board and management of Standard Chartered to decide.
We will support the board and management as a stable shareholder.
43. How do you plan for Standard Chartered and the 3 banks that you've invested in to leverage on each other's network, knowledge, products?
This will be up to the respective banks to decide if there is value for them to work together.
We do not involve ourselves in the commercial decisions or day-to-day management or operation of the companies.
As with the companies under our portfolio, we will leave it to each company to determine if there are areas of strategic cooperation which may be value-enhancing for the companies involved. All the investment and business decisions are taken independently by the companies' respective boards and management.
44. You have invested in 3 of China's main banks, and now a foreign bank operating in China. Would there be conflicts of interests?
We are a professional and institutional shareholder interested in sustainable returns.
All the companies in our portfolio, including Standard Chartered, are independently managed with responsibilities to their respective boards and shareholders. They are each run by capable management teams.
We are not involved in their commercial or day-to-day operations. In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
45. By taking a stake in Standard Chartered, Temasek would indirectly own another Chinese bank, in addition to Standard Chartered's operations in China. Previously there have been concerns raised that Temasek could threaten China's financial security. What is Temasek's reaction to this and what do you intend to do?
The Chinese government continues to hold significant controlling stakes in the banks in China. We are a small minority shareholder along with other such shareholders in the banks with no commercial conflicts of interest.
Thailand
46. Your investment in Shin Corp is still very much discussed in Thailand and there are still talks about boycotting Singapore companies and goods. Are you concerned that this investment will further fuel criticisms?
Our investment in Shin Corp reflected our confidence in Thailand's long-term growth. Similarly for Standard Chartered, the investment reflects our confidence in Standard Chartered, and Asia as a whole.
47. With your investment in Shin Corp, you are already controlling a strategic asset in telecommunications. Now with Standard Chartered, you are seen as taking over Thailand's financial services sector as well. Isn't this politically motivated?
Our investment in Shin Corp reflected our confidence in Thailand's long-term growth. Similarly for Standard Chartered, the investment reflects our confidence in Standard Chartered, and Asia as a whole.
48. What other sectors are you interested in investing in Thailand?
As an active investor, we are open and will evaluate each opportunity on its merits.
49. Under the Financial Master Plan, which stipulated the "Single Presence Rule" to be observed by foreign banks and foreign investors who own stakes in Thai banks, you are violating the rule given your stake in Standard Chartered and its shareholding in a Thai bank (SCN) and your shareholding in DBS, which has a 16% stake in Thai Military Bank (TMB). Please comment.
We have entered into an agreement to acquire equity in an overseas listed and incorporated entity. We have taken appropriate advice and will fully co-operate with the relevant authorities to comply with the regulations.
Both Standard Chartered and DBS are managed independently and as separate entities, which are the responsibilities of their own boards and management.
Under each entity, they only have one Thai banking operation. In addition, DBS only owns 16% of TMB, a public listed company, and does not have significant influence or control of the bank.
We will work closely with our advisors and the relevant authorities to comply with the laws and regulations in the markets where we have investments.
We abide by each country's laws and regulations at all times and our investment will be subjected to the necessary regulatory approvals.
Indonesia
50. You are already a majority shareholder in 2 major banks in Indonesia. What is your intention with the country's financial services sector, now with your expanded network of banks?
As with our other investments, we will continue to support the board and management as a stable shareholder. At the same time, we hope to participate and contribute to the growth and development of the economy through the financial services sector.
In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
51. As controlling shareholders of Danamon and BII, would this investment affect what you are currently doing in these 2 banks? Would you be restricted and scaling down on your current partnerships in these 2 banks? If not, would there be conflict of interests?
We will work closely with our advisors and the relevant authorities to comply with the laws and regulations in the markets where we have investments.
All the companies in our portfolio are independently managed with responsibilities to their respective boards and shareholders. They are each run by capable management teams.
We are not involved in their commercial decisions or day-to-day operations. In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
We will continue to play our role as a stable shareholder. As with our other investments, we will support the board and management as they seek further growth.
52. The Indonesian government has announced that it plans to implement a "single presence policy" where a foreign investor cannot own substantial stakes in more than one Indonesian bank. What are your comments to this? Do you foresee any problems with your investment in Standard Chartered?
It is not appropriate for us to comment on the proposed "single presence policy" as the details have not been announced.
We will work with our advisors and the relevant authorities to comply with the applicable laws and regulations in the various markets where we have investments.
All the companies in our portfolio, including Standard Chartered, are independently managed with responsibilities to their respective boards and shareholders. They are each run by capable management teams.
We are not involved in their commercial decisions or day-to-day operations. In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
Korea
53. Would this investment hamper either your own or your TLCs' efforts to acquire other financial institutions in Korea?
We will work with our advisors and the relevant authorities to comply with the applicable laws and regulations in the various markets where we have investments.
All the companies in our portfolio are independently managed with responsibilities to their own board and shareholders. They are each run by capable management teams.
We are not involved in their commercial decisions or day-to-day operations.
54. The Financial Supervisory Commission in Korea has said that Temasek is classified as a non-banking group in Korea which means its ownership in any domestic bank is limited to 10%. You already own close to 10% in Hana Bank. Won't this be a problem for Temasek in Korea? Does Temasek need to seek the Korean regulator's approval to invest in Standard Chartered?
We will work with our advisors and the relevant authorities to comply with the applicable laws and regulations in the various markets for all our investment activities.
As a shareholder, we are not involved in the commercial decisions or day-to-day operations of our companies. They are independent entities guided by their respective boards and management.
55. Temasek is considered an industrial group. According to Korean regulations, "Chaebols" or industrial groups are not allowed to own more than 30% in banks. Do you see a problem arising in future for Temasek?
There are three points we wish to highlight:
i) We are taking a direct minority stake in a PLC (UK) company, which in turn owns the Korean asset. We do not have a direct stake in the Korean asset.
ii) We do not have any board and management influence in Standard Chartered, as well as in the Korean asset.
iii) Our shareholding is below the 30% level stipulated for "Chaebols" or industrial groups under the regulations.
Further, we have always worked with our advisors and the relevant authorities to comply with the applicable laws and regulations in the various markets in all our investment activities.
We abide by each country's laws and regulations at all times and our investment will be subjected to the necessary regulatory approvals. We will fully co-operate with the relevant authorities to comply with the regulations.
56. Are you merging Hana with Standard Chartered's Korean assets?
We do not have any board and management influence in Hana.
Hana is independently managed with responsibilities to their own board and shareholders. The bank is run by a capable management team and we are not involved in the day-to-day operations.
Malaysia
57. Given your existing investment in Alliance bank, are you planning to merge the operations of Alliance bank with Standard Chartered. If not, how would you address any conflict of interests?
As a shareholder, we are not involved in the day-to-day operations of our companies. They are independent entities guided by their own boards and management. Both are public-listed entities and are accountable to all shareholders. Any decision will be made subject to the board's recommendation and shareholders' approval.
In instances where we have stakes and board representatives in two or more competing entities, we will ensure that the commercial confidentiality between the entities is preserved.
58. According to BAFIA, approval from Bank Negara is required to commence negotiations for any takeover of a Malaysian bank. Have you obtained approval to proceed?
We have entered into an agreement to acquire equity in an overseas listed and incorporated entity. We have taken appropriate advice and will fully co-operate with the relevant authorities to comply with the regulations.
We will work with our advisors and the relevant authorities to comply with the applicable laws and regulations in the various markets where we have investments.
We abide by each country's laws and regulations at all times and our investment will be subjected to the necessary regulatory approvals.
India
59. You already have an investment in ICICI Bank. Your subsidiary AFH has invested in the majority of the equity of a non Bank Finance Company - First India Credit (formerly Dove Finance). Will these not present any conflict vis a vis Standard Chartered investment?
We are a passive portfolio investor in ICICI Bank, under the FII guidelines of Govt of India. We are not involved in the day-to-day operations of Standard Chartered. We expect Standard Chartered to be governed by its Board and management. We do not see any conflict here with our investment in Standard Chartered.
