WHAT GIC DOES NOT REVEAL RAISE ALARMS AND RED FLAGS
Dr Tony Tan has been with GIC since its inception. It reveals nominal returns but not ABSOLUTE returns. Nominal returns only apply well to closed end funds. GIC gets fresh capital very often from budget surpluses and net inflow of Singaporeans' hard earned Central Provident Funds. Hence, absolute returns ought to be revealed because nominal returns can mislead and hide unpleasant or even ugly truths.
Allow me to provide a simple illustration. Closed End Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. In year two, the fund went down by 50 percent. He ended year two with $1.5 billion. Nominal returns says that the closed end fund had 50 percent returns over two years or 20-odd percent annualized returns per annum. His absolute returns over two years is half a billion dollars. The nominal returns is reliable because there was no fresh inflow of capital from third parties.
Super Marketing Fund Manager started year one with $1 billion. The fund went up 200 percent. He ended year one with $3 billion. However, due to his great marketing skills and the millions of middle class people and poor folks who entrust him with more money, he started year two with $100 billion to manage. In year two, the fund went down by 50 percent. He ended year two with $50 billion. He has LOST $50 billion in year two. Yet, nominal returns says that Super Marketing Fund Manager also had 50 percent returns over two years or 20-odd percent annualized returns per annum. However, his absolute returns over two years is $2 billion minus $50 billion. In other words, he lost $48 billions. Yet, his nominal returns gives the impression that he has a remarkable track record.
For the above reasons, GIC must declare its absolute returns before the upcoming Presidential Elections. This is especially so because bank tycoon Dr Tony Tan's purchase of two foreign banks has caused Singaporeans to lose many billions dollars.
http://singaporereserves.blogspot.com
RE: DID TEMASEK MISRECORD INVESTMENT PROFITS BY $40 BILLION OR MORE?
For years, I assumed that Temasek Holding’s summary data on its investment profits are beyond human error. However, when I finally looked up the annual reports, many questions arise that call for superurgent review by the Singapore Government.
Our Government has won global praises and respect by being willing to identify and admit even the mistakes of organizations under its oversight. On this basis, can the Singapore Government please examine evidences that Temasek Holdings may have misrecorded its investment profits by $40 billion or more?
Will the reputation of Singapore and the pride of many Singaporeans be damaged if such a GIGANTIC mistake is allowed to persist?
Page 22 of the 2010 Temasek Holdings Report and page 16 of the 2006 Report both show a sharp rise in Temasek market value in 1993 from less than $20 billion to more than $60 billion. This is attributed to the listing of SINGTEL. Was this rise of more than $40 billion misrecorded as investment profits? Was SINGTEL transfered to Temasek in the same year 1993 at an extremely low book value before listing rather than at fair market value? Isn’t “inherited money” supposed to be recorded as capital infusions instead?
What was the precise amount that might be misrecorded? Was it $41 billion, $48 billion, $53 billion or $61 billion?
To see why certain accounting is questionable, let us look at a hypothetical AAA fund manager with a wealthy uncle called Sam. Mr. AAA inherited a GIFTEL company in 1993 from Uncle Sam with a market value of $60 billion. However, the historical book value of GIFTEL was only $20 billion. Hence, GIFTEL was transfered into Mr. AAA’s portfolio at the historical value of only $20 billion. In the same year 1993, GIFTEL was listed on the stock exchange with a market value of $60 billion. Mr. AAA delightfully attributed the $40 billion rise in value of his portfolio from $20 billion to $60 billion to his supreme fund management skill.
Is it morally right or wrong for Mr. AAA to treat the inherited money of $40 billion as performance profits? If it is wrong for Mr. AAA to do so, why should it be alright for Temasek to do the same? Isn’t it necessary for Mr. AAA to treat the $40 billion rise in value as capital infusion rather than performance profits? Why did Temasek fail to treat the $40 billion or higher rise in value during listing as capital infusions also? This is especially so when SINGTEL was transfered to Temasek only in 1993 – the same year SINGTEL was listed. (Page 98 of 2008 Temasek Report)
The above illustrates that inherited money must never be recorded as performance profits. Moreover, SINGTEL did not rise in multi-billion dollars value within one single year. It took many years of toil, sweat, tears and intelligence of many people for this to happen. Has Temasek taken over the credit that belongs to the tough work and smart work of many other people by a mere accounting stroke?
Are there any other companies besides SINGTEL that might have boosted Temasek’s performance record in a controversial manner? Shouldn’t Temasek revamp its accounting to take away the effects of the many billion dollars worth of “inherited money” on its portfolio performance?
http://singaporereserves.blogspot.com
ENDNOTES:
1) The chart in page 22 of the 2010 Temasek report only allow readers an estimation as it is too small. A similar chart in page 16 of the 2006 Temasek report is much clearer. While more information is desirable to get a clearer picture, the current information is sufficient to deduce questionable accounting as it involves tens of billions of dollars. The overstatement from SINGTEL alone may be about $40 billion to about $60 billion.
