Temasek Holdings, one of two investment arms of the Singapore government (along with the Government Investment Corporation), reports its assets under management have exceeded $100 billion for the first time.

Its annual report states the organisationÆs AUM reached S$164 billion ($108 billion) as of March 31, up from S$129 billion ($80 billion) last year. Of that gain, S$23 billion is credited to economic profit, including S$7 billion from its activities as an investor. It defines economic profit as excess shareholder return by market value above a risk-adjusted aggregate cost of capital.

But group net profit actually declined to S$9 billion, compared to S$13 a year earlier. This is due to lower divestment gains: the firm took less off the table this year. And it suffered losses from its ill-starred investment in ThailandÆs Shin Corporation, an asset of deposed prime minister Thaksin Shinawatra; his sale of it to Temasek engendered heated protests in Bangkok and presaged the military coup that ousted him.

Temasek began as the governmentÆs holding company for stakes in leading Singaporean corporations. It was founded in 1974 with S$350 million of government seed capital. Since then, total shareholder return has achieved 18% on an annualised basis by market value and 17% by shareholder funds, and the organisation has grown solely on the strength of its own investments.

Since 2002 it has branched out to invest in a variety of companies regionally and in developed markets worldwide. Its portfolioÆs exposure to Asia ex-Singapore and ex-Japan rose last year from 34% to 40%, which accounts for much of its investment gains this year. It also boosted its exposure to Singapore investments in absolute terms to S$62 billion, or 38% of the portfolio, although in terms of portfolio share it is actually down from 44% last year.

The portfolio has been diversified as well, with no investment larger than 20% of the net portfolio value, compared to 30% a year ago. Following acquisitions of stakes in banks around the region, financial services now is the largest part of its portfolio at 38%, followed by telecommunications/media at 23%.

The organisation reports returning 27% by market value to its shareholder, the government of Singapore.

During the 2006 fiscal year, Temasek pursued fewer transactions than in previous years. It invested almost S$16 billion and monetised (ie divested) S$5 billion in assets. Its highest profile move was increasing its stake in Standard Chartered Bank to 13% from market purchases.

It also packaged together a fund from its portfolio of private equity and venture capital into a tradable special-purpose vehicle, Astrea, to generate a liquid structure for these assets. And it launched CitySpring, which it calls AsiaÆs first infrastructure business trust.