Message From Chairman

Dear Shareholders,

“Despite a turbulent 2018, we remain bullish on the long-term growth prospects of the Indonesian economy, and Saratoga continues to strive relentlessly to solidify our position a a leading investment holding company in Indonesia – Poised for Growth.”

 The world has gone through a fair amount of challenges in 2018. Confrontational international politics, trade wars, volatile global commodity prices, and a tightening US monetary policy all combined to create a challenging global economic environment, especially felt by the emerging market economies as their currencies buckled under capital fight and the might of the US dollar.

Indonesia was no exception. The currency weakened against the USD dollar throughout the year and the interest rate increased from 4.25% to 6%. However, Indonesia’s economic fundamentals showed its resilience and endured the challenges with a 5.17% GDP growth at the end of the year. The fact that Indonesia has been able to sustain stable economic growth over the past decade is in no small part a measure of the nation’s strength. Going forward, with improved infrastructures and systems in energy, transportation, logistics, telecommunications, healthcare and many other sectors, Indonesia could sustain even higher economic growth in decades to come.

Saratoga has been committed to Indonesia since the inception and has been investing in all parts of the economy ever since. Our goal of the investment is to support the country and government policies and be able to capitalize on the opportunities at the same time. Looking back to the two decades of running Saratoga, I think we have achieved what we set out to do in the beginning, and I imagine we will continue to do so for the decades to come. None of our achievement would have been successful without a great country that is full of abundant resources and opportunities, a smart government that inspires to be better and stronger every day, a young population that brings innovation and creativity, and a great team as I have been blessed with to walk the journey with me in the past two decades.

Saratoga’s Performance in 2018

Overall, I am pleased with how the performance of our investment faired in 2018. Here are some highlights of the year under review:

  • Saratoga posted record dividend amounts of approximately Rp900 billion from six portfolio companies.
  • However due to the market volatility and the new accounting treatment adapted in 2017, Saratoga posted a net loss of approximately Rp6.2 trillion, driven primarily by the decline of the market valuation of PT Adaro Energy Tbk. and PT Tower Bersama Infrastructure Tbk. shares. It is worth pointing out the loss is unrealized and will rebound once the share prices move in our favor. In fact, the loss was lessened as stock prices on the Indonesia Stock Exchange – including those of our portfolio companies – have climbed back since the start of 2019.
  • At the Saratoga holding level, we made one new investment (PT Aneka Gas Industri Tbk.) and divested PT Batu Hitam Perkasa (Shareholder of Paiton Energy) during the year.
  • We also increased our exposure to the technology sector by investing in funds managed by Provident Capital and Skystar Capital.
  • Throughout the year, we invested in time and efforts to strengthen the businesses of our portfolio companies. The following report of the Board of Directors will highlight these efforts.

Strengthening Corporate Governance

Against increasing uncertainties in both the global and domestic economic environment, it is prudent to pay more attention to good corporate governance. As such, we have strengthened our governance framework with more robust checks and balances, while also increasing the roles of governance committees as we continue to be cautious and measured in achieving our goals through our investment portfolio. Reflecting our cautious approach especially in these turbulent times, we spent most of our time and resources at improving the quality of our investment portfolio. The Board of Directors has done a fine job and performed beyond my expectation In 2018. The Board of Commissioners met on 6 occasions, and jointly 5 times with the Board of Directors to examine and review the company’s performance. The Board of Commissioners also reviewed the work of the Audit Committee and Nomination and Remuneration Committee and a full account of the work of the governance committees is included in this report.

Human Capital Remains Key to Growth

In this unfolding age of robotics and Artificial Intelligence, people smarts and know-how will remain crucial even as machines will take over many of society’s menial labors. This means that we will have to equip our youth entering into the workforce, as well as retrain millions of people, with the new sets of skills that will enable them to thrive in the digital world. It is a tall challenge for any emerging economies such as Indonesia, but one that must be surmounted. Technology waits for no one. Saratoga has always placed a strong emphasis on the continuous development of its people, instilling them with skills and leadership values that keep them motivated to excel. We are also active in sharing and imparting these skills among the people we work with in our investee companies. Outside of Saratoga, we have made education a cornerstone of our corporate social responsibility programs, in recognition of the crucial role that education plays in promulgating sustainable development and long-term economic growth of a nation.

Looking Ahead

We remain optimistic about Indonesia’s economic future. Notwithstanding the outcome of the presidential and legislative election in April 2019, Indonesia should capitalize on its strong momentum of growth, which includes a strong demographic profile of 260 million people of whom more than half are below 35 years of age – only approaching their peak productive years; the largest economy in ASEAN, one of the fastest growing regions of the world; and largely untapped natural resources of which Indonesia could add significant value to, going forward. And so I am pleased to close my report by reiterating the fact that there is not a better time to invest in Indonesia than today. We stand ready to support your investment goals with our in-depth knowledge of Indonesia, its markets and business landscapes. We thank the Management and employees of Saratoga and our investee companies, all of who have done reasonably well under the challenging conditions of 2018. We also thank our shareholders and all other stakeholders for their continuing trust and support. May God bless us all as we look ahead to a bright future for the world, for Indonesia and Saratoga.