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SIA ENGINEERINGCOMPANY FIRSTIN A NEW ERA

Annual Report 2005/06 Annual Report2005/06

SIA ENGINEERING COMPANY

31 Airline Road Singapore 819831 E-mail: [email protected] Website: www.siaec.com.sg Tel: (65) 6542 3333 Fax: (65) 6546 0679 Company Registration No. 198201025C

Contact Persons: Devika Rani Davar Company Secretary/Vice-President Corporate E-mail: [email protected] Tel: (65) 6541 5151

Chia Peck Yong Senior Manager Public Affairs E-mail: [email protected] Tel: (65) 6541 5134 Amidst the usual maintenance buzz in the hangars, a renewed spirit of work dynamism was injected in FY2005/06 as the Company embraced new leading-edge technologies to launch new service offerings – A380, B777-300ER and B747-400 Passenger to Freighter conversion. Indeed, we are taking off into a new era of aviation technology.

CONTENTS

A Meta Fusion Design Annual Report 2005/06 1

MISSION STATEMENT CORPORATE PROFILE

SIA ENGINEERING COMPANY As a leading maintenance, repair and overhaul (MRO) company with a reputation for technical and operational IS ENGAGED IN PROVIDING excellence, SIA Engineering Company offers TOTAL SUPPORT solutions to an expanding client base of AVIATION ENGINEERING SERVICES international air carriers. OF THE HIGHEST QUALITY, Coupled with the specialised expertise that it has developed AT COMPETITIVE PRICES FOR over the years, SIA Engineering Company offers its customers a high level of service and commitment, as well as faster CUSTOMERS AND A PROFIT turnaround and better cost efficiencies.

TO THE COMPANY. The Company also actively seeks alliances and partnerships with industry specialists and original equipment manufacturers to extend the breadth and depth of its services in Singapore and beyond.

Certified a “People Developer” by Spring Singapore, SIA Engineering Company places a very high priority on attracting, developing, motivating and retaining its human capital. The Company holds certifications from 23 airworthiness authorities worldwide, such as Civil Aviation Authority of Singapore, Federal Aviation Administration and European Aviation Safety Agency. 2 SIA Engineering Company

First in A new era

The arrival of the revolutionary Airbus A380, the world’s largest commercial airliner, signals the dawn of a new era in global air travel. SIA Engineering Company has been gearing up to be the first in the world to service this most advanced aircraft. The Company will also be among the first to service one of Boeing’s latest aircraft, B777-300ER, and to undertake B747 Passenger to Freighter conversions. 2 SIA Engineering Company

First in A new era

FIRST IN A NEW ERA

FY2005/06 was a year of breakthroughs for SIA Engineering composites and advanced metal materials. A notable innovation Company. on the A380 is the use of GLARE. It is an extremely tough laminate constructed from alternate layers of aluminium and It was the year that the Company raised its technological bar strong fiberglass, used in the upper fuselage shell of the aircraft. and leaped to greater heights in the MRO industry. Laser beam welding replaces the traditional riveting techniques to attach the stringers of the lower fuselage shell. SIA Engineering Company embraced the challenge to be the first in the world to service the most technologically advanced Powered by the world’s most advanced engines, this technology- aircraft, the Airbus A380, as well as one of Boeing’s latest aircraft laden aviation marvel will also lift the MRO business to a higher types, the Boeing B777-300ER. It also geared itself to be among technology platform. The launch of the A380 by Singapore the first to carry out B747-400 Passenger-to-Freighter conversion. Airlines (SIA) in late 2006 gives SIA Engineering Company the distinct, enviable edge to be the pioneer to acquire the new capabilities in servicing this aircraft.

GETTING READY

Our preparation work for this new aircraft began as early as 2004 after SIA announced its order. As an engineering partner to our major customer, we ensure that our licensed aircraft engineers, technicians and workshop personnel will be well- equipped and trained to handle the world’s largest, most- advanced commercial airliner when it enters into service.

Tripartite efforts were synergised in the preparation for A380 entry-into-service (EIS). There was immense coordination among Airbus, SIA and SIA Engineering Company to ensure a smooth A380 EIS. Multiple committees were formed in each of the organisation to ensure that all aspects of the A380 EIS are well taken care of.

A NEW CHALLENGE – FIRST TO SERVICE THE AIRBUS A380 Airbus initiated the Airbus A380 EIS Customer Focus Groups (CFG) in which airline customers come together to give feedback The arrival of the revolutionary Airbus A380, the world’s largest on what they hope to have on the A380. Airbus also shared commercial airliner, signals the dawn of a new era in global air on how they could provide support. Our Company’s Productivity travel. Always at the forefront of aviation technologies, SIA and Engineering Training (PET) Division and SIA’s Engineering Engineering Company is the first MRO organisation in the Division (SIAED), overseeing the needs of Flight Operations, world to service this most advanced aircraft. Maintenance and Cabin Crew in the A380 project, have been participating actively in the Training CFG to define the training The A380 is the first commercial airliner to feature a carbon requirements. SIA Engineering Company also participated in fibre central wingbox. Its fin box, rudder, elevators, upper-deck other CFGs like the Towing CFG and the Network Server floor beams and rear pressure bulkhead are also made from System/Onboard Information System CFG in which technical carbon fibre reinforced plastic (CFRP), which makes them and information systems requirements of the A380 were extremely strong, durable and lightweight. Up to 40% of the discussed. A380’s structure and components is manufactured using carbon 4 SIA Engineering Company Annual Report 2005/06 5

FIRST IN A NEW ERA

GETTING READY

FIRST IN A NEW ERA

Airbus also organised other meetings that include Technical In SIA Engineering Company, we also set up an Airbus A380 Progress Reviews, Maintainability Reviews and Maturity Readiness Committee. The committee handles the complex Workshops. These meetings discussed the possible technical network of preparation work to be done for the A380 EIS and engineering issues that might arise with the new aircraft. among the different divisions. The areas of readiness to be The discussion areas include towing, ground handling, worked on include Line Maintenance readiness, airframe services maintenance training, aircraft recovery, network server systems, readiness, Line/Base/Workshops tooling, A380 training, MRO and aircraft and cabin systems. network for A380 capability and hangar facilities. Target timelines are in place to ensure that we are on track to service Working groups were then developed to tackle the issues raised. the A380 when it starts flying. We also participated in the During working group meetings, Airbus would introduce its Initial Provisioning meetings on toolings and ground support tooling and equipment requirements, maintenance schedule, equipment with Airbus and Rolls-Royce. new technologies, maintenance training policy, course structure, training media, course development and delivery timeline. SIA The Company also facilitated an A380 seminar on New Training Engineering Company, together with SIAED, has been working Concepts in July 2004. Airbus presented the concepts to very closely with Airbus in the working groups to resolve participants from our operational and support divisions, as well potential EIS issues. This is especially crucial as we will be the as SIAED and CAAS. first to service the A380. In the midst of working with the aircraft manufacturer and the airline, we also played an active role in the discussions with CAAS on the ramp handling of the A380 at Changi Airport. This was especially so when the A380 came to Changi for its test flight in November 2005 and for the Asian Aerospace in February 2006. Our Company’s PET Division also held meetings with CAAS in 2004 and 2005 to map out the requirements for A380 training, in view of the new SAR-66 licensing regulations introduced by CAAS in early 2006. After successfully completing the EASA approved training conducted by Airbus in 2006, the A380 engineers will be licensed by CAAS under the new SAR- 66 regulations. This license will allow our engineers to certify the A380.

TRAINING AND INTERNAL PREPARATION FOR A380

In August 2004, the Company’s PET Division worked with Line Maintenance, Base Maintenance, Quality and Human In addition to active participation in Airbus’ initiatives, we are Resource divisions, to select suitable Licensed Aircraft Engineers also highly involved in the A380 EIS Engineering Steering for A380 training. This was done through a stringent selection Committee set up by SIAED, as well as the various Working exercise. A training needs analysis was also conducted Groups formed from the Steering Committee. The Steering throughout the Company. Committee and Working Groups identify and resolve A380 EIS issues pertaining specifically to the airline and SIA The A380 training was organised in three phases – the first two Engineering Company. Over bilateral meetings with the aircraft were held in Singapore in the Company, while the third phase manufacturer and the airline, issues such as ground support was conducted at the Airbus Training Centre in Toulouse, equipment tooling, training curriculum, schedule and quality- France. This involved visits to the aircraft production areas monitoring programme were mapped. and task-based training using synthetic training devices called 6 SIA Engineering Company Annual Report 2005/06 7

FIRST IN A NEW ERA

TRAINING AND INTERNAL PREPARATION FOR A380

FIRST IN A NEW ERA

the Maintenance/Flight Training Devices (MFTD). MFTD As a significant portion of the A380 fuselage is made up of incorporates training software similar to the Full Flight Simulator composite materials, specialised diagnostic equipment and and allows interactive task training in and around a virtual aircraft techniques are required to scan for structural integrity and – operating aircraft system controls from the cockpit, performing strength in the material. Hence, we have upgraded and expanded servicing routines, and identifying aircraft and engine components. our composite testing capabilities in the Non-Destructive Test This complements the practical training on the actual aircraft. Unit. Operations staff from both the Composite and Sheet Metal workshops will be trained on GLARE, thermoplastic, The first phase of the training commenced in December 2005. welded panels, as well as the A380 Selectively Strippable Paint It focused on familiarisation with the aircraft’s fully integrated, System. high-technology systems and troubleshooting techniques. A total of 112 staff has been trained in phase one of the A380 To provide the best technical attention to A380, new Service training programme and another 96 will commence their training Bulletins from Airbus and vendors are also constantly reviewed. in September 2006. Engineers were trained overseas and locally to certify the new aircraft types and equipment purchased. A total of 208 licensed aircraft maintenance engineers, technicians and engineering support personnel from SIA Engineering Company, SIA Engineering Division and CAAS are expected to be trained up in a series of courses from December 2005 to February 2007.

In addition, we are looking at constructing an A380-sized hangar to handle the ‘C’ checks that will come in a year or two, and the heavier ‘D’ checks a few years later. A total of about $60 million has been planned for investment in the hangar, equipment and training.

A NEW PRODUCT IN THE HANGARS – B777-300 EXTENDED RANGE

Another new aircraft coming into our hangar this year is the Boeing B777-300 Extended Range (ER).

The arrival of the A380 will also push our component capabilities As the name suggests, the B777-300ER encompasses an extension up several notches. Thus far, we have firmed up several of the B777 family's span of capabilities. Together with a design capabilities to support and maintain the A380. We are also that reduces drag and aircraft weight, the B777-300ER’s twin- actively evaluating more than 900 components for tools and engine efficiency and reliability will further increase the standard equipment readiness. Besides enhancing our component of the long-range market. The aircraft can carry 365 passengers capabilities in preparation for this revolutionary aircraft, we have up to 7,880 nautical miles (14,594 kilometers). embarked on a series of training programmes for our staff in specialty areas of thermoplastics, airframe composite repair, As the Company has been maintaining the B777 series of aircraft, hydraulics, flight controls, landing gear and simulators. the primary focus in the training of the Extended Range model would be the new GE90-115B engine. Training was coordinated with Boeing and General Electric to support the Extended Twin Engine Operations (ETOPS) EIS readiness for B777-300ER. 8 SIA Engineering Company Annual Report 2005/06 9

FIRST IN A NEW ERA

A NEW PRODUCT IN THE HANGARS – B777-300 EXTENDED RANGE

Another new aircraft coming into our hangar this year is the Boeing B777-300 Extended Range (ER).

FIRST IN A NEW ERA

In September 2005, a training conference was held to finalise The global air cargo industry is one of the fastest growing the training curriculum. It was decided that the theory would segments of the aviation market. The Boeing World Air Cargo be conducted in Singapore, while the practical module will be Forecast 2004/05 projected that the air cargo industry would conducted in the United States. A total of 230 engineers and grow at an average annual rate of 6.2 percent, significantly support staff from the Company will be trained to handle the higher than the projected passenger traffic rates. Cargo traffic B777-300ER. growth of more than 7% is projected for Asian routes – the largest increase in the world over the next 20 years. (Boeing A NEW BUSINESS – B747-400 FREIGHTER CONVERSIONS press release, 22 March 2006)

The Boeing B747-400 aircraft once dominated the skies as the The B747-400 freighter is the largest commercial cargo transport largest commercial airliner capable of carrying the most in service now. No other cargo airplanes can match its lowest passengers across long distances of near to 14,000 kilometres. ton-mile cost in the industry. With its ability to carry 113,000 kg of cargo up to 8,240 km, the B747-400 freighter carries twice as much cargo at double the distance as compared to the leading freighter of its competitors.

SIA Engineering Company, having an extensive track record in servicing the B747-400 passenger airplane, will be among the first MROs in the world to establish the capability of converting these passenger planes into freighters.

Implementing a Passenger-to-Freighter (PTF) conversion is far more than manual labour on the aircraft. Engineers and technicians are to possess not only technical skills, but also analytical skills to interpret aircraft drawings and to have a good grasp of production knowledge.

Knowledge transfer is underway with Boeing conducting a series of training programmes for us. These cover enhanced practical skills, documentation, engineering and work process planning. A total of 156 engineers and technicians have been trained so far.

It is commonly known as the Jumbo Jet and is one of the most Our PET Division has also recommended a series of special recognisable modern airliner for the past 35 years since its first skills required for PTF by tapping on our experience and expertise commercial flight in 1970. The B747-400 is the first to adopt gained from the maintenance of B747-400. With regualr a two-deck configuration and is characterised by the hump – consultation and train-the-trainers sessions conducted by Boeing a highly recognisable icon of modern-day air travel. in its Everett plant in the USA, PET has further developed a series of training modules. These focused on enhanced Now, the B747-400 has taken a new twist in air transport. mechanical structures and practical avionics skills. SIA Besides being a passenger plane, it is increasingly seen as a Engineering Company will be fully geared up to meet the first valuable freighter, carving a niche for itself in air cargo transport. challenge come this August 2006 when the first PTF commences. 10 SIA Engineering Company Annual Report 2005/06 11

FIRST IN A NEW ERA

Dear Shareholders,

A new era dawns for the aviation maintenance, repair and usher in a new era in global air travel. Steadfast in staying at overhaul (MRO) industry in the Asia-Pacific. Growth for the the forefront of aviation technology, SIA Engineering Company MRO industry has been gaining momentum as the industry is set to be the first in the world to service this technologically recovers from the crises of recent years. Resilient economic revolutionary aircraft. recovery in the region, together with the fast-growing aviation sectors of China, India and the Middle East, will spearhead OUR PERFORMANCE IN FY2005/06 growth in the Asia-Pacific. MRO output is expected to climb in tandem with expanding airline networks, increasing air During FY2005/06, the Group’s revenue gained 18.8% to $959.1 liberalisation and growth of low-cost carriers. million, boosted by higher airframe and component overhaul workload, more flights handled by line maintenance, and growth A NEW ERA FOR MRO in fleet management work.

In 2005, international passenger traffic in Asia grew 7.6 per Group expenditure increased 16.7% to $824.4 million, in line cent and freight traffic rose by 3.2 per cent. These are expected with the higher volume of workload, which resulted in higher to grow annually by 6.8 and 8.5 per cent respectively right up subcontract, material and overtime costs. to 2009, outstripping the global forecasts of 5.6 and 6.3 per cent for the same period. Indeed, about a third of the new As a result, the Group posted a net profit of $230.6 million, an aircraft orders clinched by Airbus and Boeing last year were improvement of 35.3% over the previous year. from Asia. CHAIRMAN’S STATEMENT In FY2005/06, with flight movements at Changi Airport Much of this growth in aircraft orders stems from consumers continuing to rise, our line maintenance revenue increased by With our readiness to handle newer aircraft types giving us “first-mover” demanding safer, more comfortable air transportation, and 8.4% to $300.8 million. advantage, SIA Engineering Company is ready to face new challenges. airlines renewing fleets to leverage on technological advances Indeed, 2006 will be a milestone year as the Group prepares for the arrival and higher fuel efficiency. Revenue from airframe and component overhaul improved by 22.7% to $612.4 million due to a pick up in workload in Base of the world’s biggest commercial airliner, the Airbus A380. This aircraft With our readiness to handle newer aircraft types giving us Maintenance and our 22 Workshops. The commissioning of marvel will usher in a new era in global air travel. Steadfast in staying at the “first-mover” advantage, SIA Engineering Company is ready to two new hangars in 2005 provided the increased capacity to forefront of aviation technology, SIA Engineering Company is set to be the face new challenges. Indeed, 2006 will be a milestone year as take on more heavy maintenance work. Fleet management work, first in the world to service this technologically revolutionary aircraft. the Group prepares for the arrival of the world’s biggest a fast-growing new business segment, contributed $45.9 million commercial airliner, the Airbus A380. This aircraft marvel will in revenue, a rise of 48.5 per cent from the previous year. 12 SIA Engineering Company Annual Report 2005/06 13

Dear Shareholders,

Our 15 joint ventures and associated companies operating in STAFF COMMUNICATION Singapore and overseas performed well and contributed $105.6 million or 40.1% of the Group’s pre-tax profits. The Company places a high emphasis on staff communication. We have communicated the challenges ahead and sought the DIVIDENDS partnership of our people to remain resilient and strong. Appropriate responses to these challenges will involve change The Directors have recommended a special dividend of 20 on the part of staff and management, which may be painful in cents per share and an ordinary dividend of 6 cents per share, the short term, but inevitable for the long-term viability of the which together with the interim dividend of 4 cents per share Company and the employability of our people. paid earlier, bring the total dividend for FY2005/06 to 30 cents per share. This translates to a gross dividend yield of 9.6 per AWARD cent (based on the closing price of $3.12 on 31 March 2006), resulting in a payout ratio of 134.7 per cent for this year. We are pleased to be named "The Best-Managed Large Cap Firm in Singapore" in 2006 by the Hong Kong-based financial BUSINESS OUTLOOK publication Asiamoney, following its annual poll of a wide spectrum of companies in Asia, involving investors and analysts With the strengthening of the aviation hub at Changi, the in the region. It is a testimony of the commitment and diligence Company and its 13 local subsidiaries, joint ventures and of our people to adopt best practices in financial discipline and associates, which are forged with the world’s leading original corporate governance. The Board extends a warm welcome to Mr Koh Kheng Siong, equipment manufacturers, would benefit from the robust growth who joined the Board on 1 September 2005. in the Singapore aerospace environment. ACKNOWLEDGEMENTS Finally, I would like to thank my colleagues on the Board for All said and done, we cannot rest on our laurels, as the path On 31 December 2005, former Chairman, Mr Koh Boon Hwee, their relentless commitment and support, and our management, ahead is not without challenges. With the bright prospects of retired from the Board as Director and Chairman. The Group staff and unions for their hard work and dedication. the Asia-Pacific aviation market beckoning global players, we is deeply grateful to Mr Koh for his outstanding leadership and are seeing the emergence of financially strong new entrants, guidance, especially in steering the Group through the armed with high aspirations. Airlines, confronted with soaring unprecedented industry crises of recent years. fuel prices and high operating costs, are constantly seeking lower-cost solutions. To meet the intensifying competition, The Board would also like to express its appreciation to Mr it is critical that we restructure our costs and raise productivity Chew Leng Seng, who stepped down as Director on 25 July Stephen Lee Ching Yen significantly. 2005 and Mr Wong Ngit Liong, who will be leaving the Board Chairman at the close of the Company’s AGM on 21 July 2006. 14 SIA Engineering Company Annual Report 2005/06 15

Statistical highlights CORPORATE CALENDAR

2005-06 2004-05 % Change (Restated*) 11 May 2005 Announcement of FY2004/05 results FINANCIAL STATISTICS R1 Group ($ million) Revenue 959.1 807.5 +18.8 12 May 2005 Analyst/media briefing on FY2004/05 results Expenditure 824.4 706.7 +16.7 Operating profit 134.7 100.8 +33.6 10 Jun 2005 Despatch of FY2004/05 Summary Financial Statement to shareholders Exceptional item - 9.0 - Profit before taxation 263.3 194.3 +35.5 Profit attributable to equity holders of the Company 230.6 170.4 +35.3 1 Jul 2005 Despatch of FY2004/05 Annual Report to shareholders Share capital 163.1 101.8 +60.2 Reserves 25 Jul 2005 23rd Annual General Meeting & Extraordinary General Meeting General reserve 885.5 741.0 +19.5 Notes: Share-based compensation reserve 11.9 5.6 +112.5 R1 SIA Engineering Company’s Foreign currency translation reserve (21.7) (15.5) +40.0 29 Jul 2005 Announcement of FY2005/06 first quarter results financial year is from 1 April Share premium - 25.6 - to 31 March. Throughout this report, all financial Equity attributable to equity holders of the Company 1,038.8 858.5 +21.0 10 Aug 2005 Payment of FY2004/05 final dividend figures are in Singapore R2 dollars, unless stated Return on shareholders' funds (%) 24.3 19.1 +5.2points otherwise. R2 Return on shareholders' funds Total assets 1,327.6 1,100.4 +20.6 27 Oct 2005 Announcement of FY2005/06 second quarter results is profit attributable to equity Net liquid assets R3 497.6 325.2 +53.0 holders of the Company expressed as a percentage of Value added 670.8 577.0 +16.3 28 Oct 2005 Analyst/media briefing on FY2005/06 second quarter results the average equity attributable to equity holders Per Share Data (cents) Earnings before tax 25.6 19.2 +33.3 of the Company. 2 Feb 2006 Announcement of FY2005/06 third quarter results R3 Net liquid assets is derived Earnings after tax – basic R4 22.5 16.9 +33.2 by offsetting current loans – diluted R5 22.1 16.7 +32.3 against liquid assets. Net asset value R6 100.2 84.4 +18.7 R4 Earnings after tax per share 9 May 2006 Announcement of FY2005/06 results (basic) is computed by Dividends (cents per share) dividing the profit Interim dividend 4.0 3.0 +33.3 attributable to equity holders 10 May 2006 Analyst/media briefing on FY2005/06 results of the Company by the Proposed final dividend – ordinary 6.0 4.5 +33.3 weighted average number of – special 20.0 - - ordinary shares in issue. R5 Earnings after tax per share Company ($ million) 12 Jun 2006 Despatch of FY2005/06 Summary Financial Statement to shareholders (diluted) is computed by Revenue 940.0 802.8 +17.1 dividing the profit Expenditure 806.1 702.7 +14.7 attributable to equity holders 29 Jun 2006 Despatch of FY2005/06 Annual Report to shareholders of the Company by the Operating profit 133.9 100.1 +33.8 weighted average number of Exceptional item - 9.3 - ordinary shares in issue after Profit before taxation 219.7 150.5 +46.0 21 Jul 2006 24th Annual General Meeting & Extraordinary General Meeting adjusting for the dilutive Profit after taxation 189.3 131.7 +43.7 effect on the exercise of all outstanding share options Value added 615.5 532.4 +15.6 granted to employees. 1 Aug 2006 Announcement of FY2006/07 first quarter results R6 Net asset value per share is computed by dividing the PRODUCTIVITY AND EMPLOYEE DATA equity attributable to equity 8 Aug 2006 Payment of FY2005/06 final and special dividends holders of the Company by Employee Productivity - Company the number of ordinary Average number of employees 4,789 4,525 +5.8 shares in issue at 31 March. Revenue per employee ($) 196,281 177,404 +10.6 Value added per employee ($) 128,522 117,652 +9.2 * The comparative figures for the financial year ended 31 March Employee Productivity - Group 2005 have been restated to take into Average number of employees 5,133 4,663 +10.1 account the retrospective adjustments relating to FRS 102 – Share-based Revenue per employee ($) 186,857 173,173 +7.9 Payment. Value added per employee ($) 130,690 123,751 +5.6 16 SIA Engineering Company Annual Report 2005/06 17

Statistical highlights CORPORATE CALENDAR

LT GEN (RET) BOARD OF DIRECTORS MR WONG NANG JANG BEY SOO KHIANG MR WONG NGIT LIONG DR THIO SU MIEN

MR CHEW CHOON SENG Deputy Chairman

MR STEPHEN LEE CHING YEN MR KOH BOON HWEE (Chairman from 1 January 2006) (Chairman until 31 December 2005)

MR CHEW LENG SENG DR N VARAPRASAD MR TAN BIAN EE MR KOH KHENG SIONG (until 25 July 2005) (from 1 September 2005) 18 SIA Engineering Company Annual Report 2005/06 19

LT GEN (RET) BOARD OF DIRECTORS MR WONG NANG JANG BEY SOO KHIANG MR WONG NGIT LIONG DR THIO SU MIEN

MR CHEW CHOON SENG Deputy Chairman

MR STEPHEN LEE CHING YEN MR KOH BOON HWEE (Chairman from 1 January 2006) (Chairman until 31 December 2005)

MR CHEW LENG SENG DR N VARAPRASAD MR TAN BIAN EE MR KOH KHENG SIONG (until 25 July 2005) (from 1 September 2005) 20 SIA Engineering Company Annual Report 2005/06 21

MR STEPHEN LEE CHING YEN MR KOH BOON HWEE and served on the Boards of Innovalues MR CHEW CHOON SENG LT-GEN (RET) BEY SOO KHIANG earned a Master of Public Administration Chairman (from 1 January 2006) Chairman (until 31 December 2005) Precision Ltd, Norelco UMS Holdings Deputy Chairman degree from Harvard University. Prior Ltd, QAD Inc, USA, BroadVision, USA Lt-Gen (Ret) Bey was appointed a to assuming his appointment in SIA, Lt- Mr Lee was appointed a Director of SIA Mr Koh was appointed Chairman of SIA and Intelsat Ltd, Bermuda, among others. Mr Chew was appointed a Director and Director of SIA Engineering Company Gen (Ret) Bey attended the Advanced Engineering Company on 1 December Engineering Company with effect from Deputy Chairman of SIA Engineering on 1 March 2000. Management Programme at the Harvard 2005 and Chairman with effect from 22 May 2003 until his retirement from Mr Koh holds a degree in Mechanical Company with effect from 22 May 2003. Business School in Spring 2000. 1 January 2006. the Board on 31 December 2005. Engineering (First Class Honours) from He is the Senior Executive Vice-President the Imperial College of Science and Mr Chew is the CEO and a Director of (Operations & Services) of Singapore He is the Managing Director of both He is the Executive Director of Technology, University of London, and Singapore Airlines, which he joined in Airlines (SIA) from 19 April 2004. He MR CHEW LENG SENG Great Malaysia Textile Manufacturing MediaRing Limited, and Chairman and a Master of Business Administration 1972. He is the Chairman of Singapore was Senior Executive Vice-President Deputy Chairman (until 25 July 2005) Company Private Limited and Shanghai CEO of Sunningdale Tech Ltd (formerly degree (Distinction) from the Harvard Aircraft Leasing Enterprise, the Deputy (Technical and Human Resources) on 1 Commercial & Savings Bank (Taiwan). known as Tech Group Asia Limited). Mr Business School. Chairman of Singapore Airport Terminal April 2002 and Executive Vice-President Mr Chew was on the Board of SIA Koh was formerly Managing Director of Services Limited and a Director of the (Technical) on 1 July 2000. Prior to Engineering until 25 July 2005. He is also Chairman of Singapore Airlines Hewlett Packard in Singapore from 1985- Singapore Exchange. joining SIA, he was the Chief of Defence as well as the Singapore Business 1990 and Executive Chairman of the Force in the Ministry of Defence from He was Executive Vice President Federation. Mr Lee serves as a Director Wuthelam Group from 1991-2000. He graduated with a first degree in 1995 to 2000 and the Chief of Air Force (Technical) of Singapore Airlines prior on the Boards of Shanghai Commercial Mechanical Engineering from the from 1992 to 1995. to his appointment as CEO of SIA Bank Limited (Hong Kong), Fraser & Mr Koh currently serves as the Chairman University of Singapore, and a Masters Engineering Company on 1 April 2000. Neave Limited, Singapore Labour of DBS Group. He is also a Director of in Operations Research and Management Lt-Gen (Ret) Bey is also the Chairman On 1 May 2001, Mr Chew retired as the Foundation and Kidney Dialysis Temasek Holdings (Pte) Ltd, Chairman Studies from Imperial College, University of SilkAir (Singapore) Private Limited, Company's CEO. Foundation. of the Board of Trustees of Nanyang of London. Singapore Flying College Pte Ltd and Technological University, Director of SIA Properties (Pte) Ltd and is a Director Previously, Mr Lee was the Chairman of Agilent Technologies Inc, AAC in All Good Gifts Ministries Ltd. PSA International, the President of the Technologies Holdings Ltd and Four Soft Singapore National Employers’ Ltd. He also serves on the boards of He was previously the Chairman of SATS Federation since 1988 and a Council several private companies, including Airport Services, a Director of Virgin Member of the Singapore National Infiniti Solutions Private Limited and Atlantic Limited, Virgin Atlantic Airways Wages Council. 800Buy.com Ltd. He is a Council Limited and Virgin Travel Group Member of the Singapore Business Limited. He was a Nominated Member of Federation. Parliament from 1994 till 1997 and was Lt-Gen (Ret) Bey graduated with a awarded the Public Service Star in the He was previously the Chairman of Bachelor of Arts (First Class Honours) National Day Awards in 1998. Singapore Airlines (2001-2005), degree in Engineering and has a Master Chairman of Singapore of Arts degree in Engineering from the Mr Stephen Lee graduated from Telecommunications Ltd and its University of Cambridge. In 1988, he Northwestern University, Illinois, USA predecessor organisation (1986-2001), in 1973 with a Master of Business Administration. 20 SIA Engineering Company Annual Report 2005/06 21

MR KOH KHENG SIONG DR N VARAPRASAD MR TAN BIAN EE DR THIO SU MIEN MR WONG NANG JANG MR WONG NGIT LIONG (from 1 September 2005) Dr Varaprasad was appointed a Director Mr Tan was appointed a Director of SIA Dr Thio was appointed to the Board of Mr Wong was appointed a Director of Mr Wong was appointed a Director of Mr Koh was appointed a Director of SIA of SIA Engineering Company on Engineering Company with effect from Directors of SIA Engineering Company SIA Engineering Company on 24 March SIA Engineering Company on 1 March Engineering Company on 1 September 1 March 2000. 15 April 2004. Limited in 2000. 2000. 2000. 2005. He is the Chief Executive of the National He is the President (Asia) of Avago Dr Thio is an Advocate and Solicitor of He is the Chairman for SIA Engineering He is the Chairman & CEO of Venture He is also a non-executive, independent Library Board, Singapore. Prior to that, Technologies and President of Avago the Supreme Court of Singapore and is Company’s audit committee. Mr Wong Group. Mr Wong is also a Director of Director of SMRT Corporation Ltd. he was Deputy President of the National Technologies’ Electronic Components currently a Senior Executive Director of is also the Chairman of WBL Corporation DBS Bank Ltd, DBS Group Holdings Ltd Mr Koh held a number of senior University of Singapore and Business Unit (ECBU) and Worldwide TSMP Law Corporation. Limited, Banking Computer Services and Royal Philips Electronics. He is also management positions in Singapore and Principal/CEO of Temasek Polytechnic. Order Fulfillment Operations. Private Limited and BCS Information the Chairman of the National University the U.S.A. during his career in He also sits on the Singapore Advisory She also holds various directorships Systems Pte Ltd. of Singapore Board of Trustees. Mr Tan was a Director of Singapore ExxonMobil, and was Financial Council of the Singapore HR Institute. including MobileOne Limited, Manulife Workforce Development Agency under Controller of ExxonMobil Asia Pacific (Singapore) Pte Ltd and Jasper He also holds directorships in Oversea- He was previously on the Boards of the Singapore Ministry of Manpower Pte Ltd prior to his retirement in August Dr Varaprasad currently serves on the Investments Limited. Chinese Banking Corporation Limited, Singapore Exchange Limited, the from 2004 to 2005. He is also a council 2005. He also held the positions of Health Promotion Board and chairs its Bank of Singapore Limited, PacificMas Economic Development Board and member in the Industrial Coordination Manager, Financial Planning and Audit Committee. He also serves on the Previously Dean of the Faculty of Law Berhad and Singapore Symphonia International Enterprise Singapore. Council under the Ministry of Operations, and Manager, Downstream Civil Service College Board of Directors at the University of Singapore, Dr Thio Company Ltd. International Trade & Industry of Financial Reporting in Exxon Company as well as on the Board of Trustees of held various positions in professional Mr Wong graduated with a First Class Malaysia since 2000. He was also the International, U.S.A. He was previously SIM University. Northern Region Chairman for Young bodies and institutions, and sat on the Mr Wong graduated from the University Honours degree in Electrical Engineering Treasurer, Esso Singapore Pte Ltd. Enterprise (2003-2004), a community boards of subsidiaries of multinational of Singapore with an Honours degree in from the University of Malaya and earned He has previously served on various educational programme under the corporations in Singapore. She served Economics. a Master of Science Electrical Engineering Mr Koh has an Honours degree in statutory boards as well as professional auspices of the American Malaysian on the Board of Legal Education; chaired degree from the University of California Economics from the University of and social organisations. Chamber of Commerce and a founder one of the Disciplinary Committees set at Berkeley, where he was a Fulbright London. He subsequently earned a member of Penang Skills Development up by the Chief Justice; was an Scholar. He gained an additional Master Master of Business Administration degree Dr Varaprasad graduated with a Bachelor Corporation. Accredited Arbitrator at the Singapore of Business Administration degree from in Finance from the University of of Engineering (1st class Honours) in International Arbitration Centre; and McGill University under the Canadian Chicago Graduate School of Business. Mechanical Engineering from the Mr Tan holds a Diploma in Medical served as Judge and Senior Vice-President Commonwealth Fellowship. University of Canterbury (NZ), earned Laboratory Technology and Management of the World Bank Administrative a Master in Engineering (First Class) from Studies, as well as a Master of Business Tribunal. She was also a member of the University of Auckland and a PhD Administration degree (Distinction) from the Asian Development Bank in Transport Studies from the Cranfield the Golden Gate University. Administrative Tribunal. Institute of Technology, UK. He attended the Stanford Executive He was awarded the Pingat Kelakuan Programme in 1998. Tertinggi (Exemplary Leadership Award), Darjah Johan Negeri (DJN – Second He received the Public Administration Highest State Award) and the Darjah Award (Gold) in 1996. Setia Pangkuan Negeri which carries the title Dato’ (DSPN) in 1991, 1995 and 1999 respectively from the State Government of Penang, Malaysia. 22 SIA Engineering Company Annual Report 2005/06 23

MR KOH KHENG SIONG DR N VARAPRASAD MR TAN BIAN EE DR THIO SU MIEN MR WONG NANG JANG MR WONG NGIT LIONG (from 1 September 2006) Dr Varaprasad was appointed a Director Mr Tan was appointed a Director of SIA Dr Thio was appointed to the Board of Mr Wong was appointed a Director of Mr Wong was appointed a Director of Mr Koh was appointed a Director of SIA of SIA Engineering Company on Engineering Company with effect from Directors of SIA Engineering Company SIA Engineering Company on 24 March SIA Engineering Company on 1 March Engineering Company on 1 September 1 March 2000. 15 April 2004. Limited in 2000. 2000. 2000. 2005. He is the Chief Executive of the National He is the President (Asia) of Avago Dr Thio is an Advocate and Solicitor of He is the Chairman for SIA Engineering He is the Chairman & CEO of Venture He is also a non-executive, independent Library Board, Singapore. Prior to that, Technologies and President of Avago the Supreme Court of Singapore and is Company’s audit committee. Mr Wong Group. Mr Wong is also a Director of Director of SMRT Corporation Ltd. he was Deputy President of the National Technologies’ Electronic Components currently a Senior Executive Director of is also the Chairman of WBL Corporation DBS Bank Ltd, DBS Group Holdings Ltd Mr Koh held a number of senior University of Singapore and Business Unit (ECBU) and Worldwide TSMP Law Corporation. Limited, Banking Computer Services and Royal Philips Electronics. He is also management positions in Singapore and Principal/CEO of Temasek Polytechnic. Order Fulfillment Operations. Private Limited and BCS Information the Chairman of the National University the U.S.A. during his career in He also sits on the Singapore Advisory She also holds various directorships Systems Pte Ltd. of Singapore Board of Trustees. Mr Tan was a Director of Singapore ExxonMobil, and was Financial Council of the Singapore HR Institute. including MobileOne Limited, Manulife Workforce Development Agency under Controller of ExxonMobil Asia Pacific (Singapore) Pte Ltd and Jasper He also holds directorships in Oversea- He was previously on the Boards of the Singapore Ministry of Manpower Pte Ltd prior to his retirement in August Dr Varaprasad currently serves on the Investments Limited. Chinese Banking Corporation Limited, Singapore Exchange Limited, the from 2004 to 2005. He is also a council 2005. He also held the positions of Health Promotion Board and chairs its Bank of Singapore Limited, PacificMas Economic Development Board and member in the Industrial Coordination Manager, Financial Planning and Audit Committee. He also serves on the Previously Dean of the Faculty of Law Berhad and Singapore Symphonia International Enterprise Singapore. Council under the Ministry of Operations, and Manager, Downstream Civil Service College Board of Directors at the University of Singapore, Dr Thio Company Ltd. International Trade & Industry of Financial Reporting in Exxon Company as well as on the Board of Trustees of Malaysia since 2000. He was also the held various positions in professional Mr Wong graduated with a First Class International, U.S.A. He was previously SIM University. Northern Region Chairman for Young bodies and institutions, and sat on the Mr Wong graduated from the University Honours degree in Electrical Engineering Treasurer, Esso Singapore Pte Ltd. Enterprise (2003-2004), a community boards of subsidiaries of multinational of Singapore with an Honours degree in from the University of Malaya and earned He has previously served on various educational programme under the corporations in Singapore. She served Economics. a Master of Science Electrical Engineering Mr Koh has an Honours degree in statutory boards as well as professional auspices of the American Malaysian on the Board of Legal Education; chaired degree from the University of California Economics from the University of and social organisations. Chamber of Commerce and a founder one of the Disciplinary Committees set at Berkeley, where he was a Fulbright London. He subsequently earned a member of Penang Skills Development up by the Chief Justice; was an Scholar. He gained an additional Master Master of Business Administration degree Dr Varaprasad graduated with a Bachelor Corporation. Accredited Arbitrator at the Singapore of Business Administration degree from in Finance from the University of of Engineering (1st class Honours) in International Arbitration Centre; and McGill University under the Canadian Chicago Graduate School of Business. Mechanical Engineering from the Mr Tan holds a Diploma in Medical served as Judge and Senior Vice-President Commonwealth Fellowship. University of Canterbury (NZ), earned Laboratory Technology and Management of the World Bank Administrative a Master in Engineering (First Class) from Studies, as well as a Master of Business Tribunal. She was also a member of the University of Auckland and a PhD Administration degree (Distinction) from the Asian Development Bank in Transport Studies from the Cranfield the Golden Gate University. Administrative Tribunal. Institute of Technology, UK. He attended the Stanford Executive He was awarded the Pingat Kelakuan Programme in 1998. Tertinggi (Exemplary Leadership Award), Darjah Johan Negeri (DJN – Second He received the Public Administration Highest State Award) and the Darjah Award (Gold) in 1996. Setia Pangkuan Negeri which carries the title Dato’ (DSPN) in 1991, 1995 and 1999 respectively from the State Government of Penang, Malaysia. 24 SIA Engineering Company Annual Report 2005/06 25

corporate data BOARD OF DIRECTORS Members EXECUTIVE MANAGEMENT Chairman Chew Choon Seng Stephen Lee Ching Yen Tan Bian Ee (from 1 January 2006) Wong Nang Jang Koh Boon Hwee (until 31 December 2005) COMPENSATION & HR COMMITTEE Chairman Deputy Chairman N Varaprasad Chew Choon Seng Members Directors Chew Choon Seng Bey Soo Khiang Wong Ngit Liong Chew Leng Seng (until 25 July 2005) BOARD COMMITTEE Koh Kheng Siong Members (from 1 September 2005) Bey Soo Khiang WILLAM TAN SENG KOON OH WEE KHOON PNG KIM CHIANG JACK KOH CHAN SENG YONG N Varaprasad Chew Choon Seng President & Senior Vice President Senior Vice President Senior Vice President Senior Vice President Tan Bian Ee Chew Leng Seng Chief Executive Officer (Aircraft Services and (Commerical) (Line Maintenance and (Services) Business Development) Materials) Thio Su Mien (until 25 July 2005) Wong Nang Jang Wong Ngit Liong Alternate EXECUTIVE MANAGEMENT REGISTERED OFFICE Contact Persons Thio Su Mien President & Chief Executive Officer SIA Engineering Company Limited Devika Rani Davar Company Secretary William Tan Seng Koon 31 Airline Road Company Secretary/Vice-President Devika Rani Davar REGISTRAR Singapore 819831 Corporate M&C Services Pte Ltd Senior Vice President (Aircraft Services E-mail: [email protected] E-mail: [email protected] AUDIT COMMITTEE 138 Robinson Road & Business Development) Website: www.siaec.com.sg Tel : (65) 6541 5151 Chairman #17-00 Oh Wee Khoon Tel: (65) 6542 3333 Fax : (65) 6546 0679 Wong Nang Jang The Corporate Office Fax: (65) 6546 0679 Singapore 068906 Senior Vice President (Commercial) Members Chia Peck Yong Png Kim Chiang Senior Manager Public Affairs Koh Kheng Siong AUDITORS E-mail: [email protected] N Varaprasad Ernst & Young Senior Vice President (Line Tel : (65) 6541 5134 Tan Bian Ee Certified Public Accountants Maintenance & Materials) Fax : (65) 6546 0679 Thio Su Mien 10 Collyer Quay Jack Koh Chew Leng Seng #21-01 Ocean Building (until 25 July 2005) Singapore 049315 Senior Vice President (Services) Chan Seng Yong NOMINATING COMMITTEE Audit Partner Chairman Mak Keat Meng Chief Financial Officer Wong Ngit Liong (with effect from financial year beginning 1 Kwok Puay Nee April 2005) 24 SIA Engineering Company Annual Report 2005/06 25

The Global MRO Industry Report

The global MRO industry radiated growth in 2005 as the airline industry continued its recovery. High fuel prices continue to push airlines to adopt advanced aircraft that give higher fuel efficiencies. The MRO industry will need to be constantly upgraded to support the newest fleets. 26 SIA Engineering Company

The Global MRO Industry Report

THE GLOBAL MRO INDUSTRY REPORT

The global MRO industry basked in Middle East led the way of international black. The impact of low-cost carriers Boeing, both posted record numbers of sunnier climes as it radiated steady passenger traffic increase with a 13.1% has helped in part to maintain this steady orders. Leading players in the MRO growth in 2005. The recovery in the jump, followed by Latin America, which improvement in performance in spite of industry are also gearing up in terms of airline industry that built up during 2004 grew by 11.4%. In the Asia-Pacific the cost pressures relating to fuel. With technical capability to take delivery of continued its momentum in 2005 at an region, it raised by 6.3% with Europe, fuel prices reaching an all-time high, it the next generation Airbus A380 and encouraging pace. Africa and North America achieving was estimated that for the period 2000 Boeing 787 into its hangers. respective increases of 6.4%, 9.9% and to 2005, the industry reached about Passenger and freight traffic, as well as 8.9%. US$40 billion in losses4. Airbus recorded net orders of 1,055 in worldwide aircraft sales, improved as 2005, worth almost US$96 billion5, confidence in the industry returned. The The transportation of cargo by scheduled A GLOBAL AIRCRAFT MARKET while Boeing reported net orders of 1,031 regional economy also performed well. airfreight carriers improved by 3.2% in for the same period. Many of these However, the triple threat of high fuel 2005 to nearly 40 million tonnes. Some Airlines’ active move to upgrade their orders were from Asia and the Middle costs, terrorism and Avian Flu continue regions fared better than others, with fleet to win consumers, coupled with East, with a significant proportion coming to loom overhead. Middle East registering the highest buoyant leasing and replacement markets, from China and India as deregulation growth of 14.6%, followed by Asia have caused the demand for newer and takes effect. The introduction of low A RECORD YEAR FOR PASSENGERS; Pacific at 4.2% and North America at more advanced aircraft to grow cost carriers also boosts access to air STRONG FREIGHT GROWTH 0.4%3. continually. The two largest aircraft travel in these burgeoning economies. manufacturers in the world, Airbus and 2005 proved to be a resilient year as Despite this growth, the airline industry passengers returned to the skies, airlines as a whole lost US$6 billion in 2005. expanded their fleets and freight traffic US airlines haemorrhaged US$10 billion, steadily rebounded. while European carriers made a profit of US$1.3 billion and Asian carriers pushed In the year of 2005, international and earnings up to US$1.5 billion in the domestic passenger traffic handled in worldwide airports broke the 4 billion mark1. US Federal Aviation Administration (FAA) stated that for the first time, passenger numbers exceeded pre-September 11 levels by 5.9%2.

For international passenger traffic, the International Air Transport Association (IATA) statistics showed that there was a 7.6% increase globally. While this is lower than the 15.3% achieved in 2004, it remains above the historical growth 3 rate of 6%. Load factors also improved IATA International Air Traffic Statistics, January 2006 1 Airports Council International, February 2006 4 Business Times, 6 March 2006 year on year by 0.9% to 75.1%. 2 Business Times, 6 March 2006 5 Airbus ‘Annual Review 2005 28 SIA Engineering Company Annual Report 2005/06 29

THE GLOBAL MRO INDUSTRY REPORT

For international passenger traffic, the International Air Transport Association (IATA) statistics showed that there was a 7.6% increase globally. While this is lower than the 15.3% achieved in 2004, it remains above the historical growth 3 rate of 6%. Load factors also improved IATA International Air Traffic Statistics, January 2006 1 Airports Council International, February 2006 4 Business Times, 6 March 2006 year on year by 0.9% to 75.1%. 2 Business Times, 6 March 2006 5 Airbus ‘Annual Review 2005 30 SIA Engineering Company Annual Report 2005/06 31

THE GLOBAL MRO INDUSTRY REPORT

AIR TRAFFIC EXPANDS AT CHANGI one of the most comprehensive aerospace expand operations here. There are over also serves as the regional headquarters AIRPORT MRO hubs in the Asia-Pacific, offering 100 aerospace companies set up in for FAA and IATA, among others. a full range of MRO services, including Singapore, including established multi- The award winning Changi Airport plays airframe maintenance, engine overhaul, national corporations such Honeywell, Rolls-Royce opened a regional a crucial role in Singapore’s aviation hub. engine component repair, structural Messier-Dowty, Hamilton Sundstrand, procurement centre in Singapore in In 2005, the airport handled a record system repair and avionics system repair. Parker Aerospace and JAMCO Japan9, January 2006. They backed up their 32.4 million passengers and 1.83 million In 2005, Singapore’s share of the Asia and they employ over 14,000 people . choice by stating that Singapore has well- tonnes of air cargo. It now has 83 airlines market and global market stands at developed aerospace infrastructure, skills operating over 4,000 weekly scheduled approximately 25% and 6% respectively8. Matsushita Avionics Systems and Boeing and access to key markets and customers. flights to 180 cities in 57 countries, a pursue high-level engineering and design growth of approximately 7% from 20047. Singapore has been successful in activities here and Singapore is a regional differentiating itself in terms of technical base for the world’s top three aero-engine The new terminal for budget carriers makers – Rolls-Royce, Pratt & Whitney know-how and engineering capability, 8 EDB Website - www.edb.gov.sg opened in March 2006 and Terminal 3 hence attracting companies to set up and and GE Aviation Services. Singapore 9 The Straits Times, 20 February 2006 will commence operation in 2008. Both these additions will further enhance Singapore's role as a leading aerospace hub in the region. Industry forecasts suggest that demand efficiency gains. Today’s aircraft are 70% in the next 20 years will be around 20,000 more fuel-efficient than they were 40 THE MRO INDUSTRY IN SINGAPORE airliners and this will be worth years ago. Next generation aircraft, such – A GLOBAL AEROSPACE HUB approximately US$2 trillion in sales. as the Airbus A380 and Boeing 787, have In addition to this figure, the global cargo been designed to give efficiency gains Singapore's aerospace industry hit a total fleet is expected to add a further 2,900 which translate into usage of less than output record of S$5.2 billion, a 17% freighters to its ranks and many of these 3 litres per 100-passenger kilometre. increase from 2004, after a 15.4% rise will be sourced via conversions of This is 0.5 litres lesser than other aircraft from 2003. MRO contributes 90% to Passenger-to-Freighter (PTF) aircraft6. and hence gives cost savings for the the total output. The last 15 years have airlines. MRO companies will need to seen the aerospace industry produce a TECHNOLOGY AND FUEL ECONOMY constantly upgrade themselves and be at compounded annual growth rate of more the forefront of aviation technology to than 12%. IATA data suggests that the rise in oil support the airlines’ newest fleet. prices and additional premiums for jet Singapore’s Logistics and Transport fuel have increased the cost of fuel for Other technological advances are the Engineering sector is a vital part of the the airline industry to US$97 billion in PW6000 engines, which will be a big nation’s economy and the island-nation 2005; a rise of US$53 billion from 2003. leap forward for the MRO industry. has strategically positioned itself as a According to Pratt and Whitney, the new leading global aviation hub in Asia. The Airlines, constantly faced with high fuel engine has four fewer MRO stages and Singapore Aerospace Hub is currently prices and the limit of jet fuel production, 900 fewer blades. It is designed to reduce will now look to aircraft with the most maintenance costs by as much as 30% as 6 advanced technology to give them fuel blades can account for up to 60% of costs Airbus ‘Annual Review 2005’ & Boeing ‘Current Market Outlook 2005’ on a typical overhaul. 7 Civil Aviation Authority - www.caas.gov.sg 30 SIA Engineering Company Annual Report 2005/06 31

THE GLOBAL MRO INDUSTRY REPORT

In February 2006, SIA Engineering 110 aircraft per annum will be needed to To address this issue, Singapore’s Training the aerospace industry Company and Parker Hannifin be converted into freighters for the next Nanyang Technological University workforce in Singapore to meet the Corporation opened ACE Services, a 20 years so as to keep up with such (NTU) has introduced an undergraduate needs and challenges of the global joint venture for the repair and overhaul demand11. SIA Engineering Company’s programme in Aerospace Engineering. aviation industry is key to maintaining of hydraulic components capable of newly opened hangar facilities are well In addition, in the first quarter of 2006, a competitive advantage and supporting the next generation of placed to capture the growing PTF the Institute of Technical Education encouraging inward investment. commercial aircraft, namely the Airbus conversion business. launched a National Institute of Companies such as Boeing, Rolls-Royce A380 and Boeing 787 Dreamliner. Technical Education Certificate and Thales also recognised the STRIVING FOR EXCELLENCE (NITEC) in Aircraft Maintenance advantages of a global R&D programme Also in February 2006, Alteon, a unit of (Mechanical). These programmes and using lower-cost talent. Each Boeing, announced a S$100M Besides attracting aerospace augment the diploma in aerospace company has entered into partnerships investment in a pilot training centre. In manufacturing projects, Singapore is engineering programmes offered by with Singapore institutions to research order to meet the demand for qualified further developing two other areas, Singapore Polytechnic and Ngee Ann areas such as advanced materials, repair personnel, the centre will be training research and development (R&D) and Polytechnic. Also launched was the technologies and predictive more than 6,000 pilots and flight education and training. Career Transition Scheme sponsored by maintenance. attendants, and will be one of 21 such the Economic Development Board and centres worldwide10. A recent survey of the MRO industry in Civil Aviation Authority of Singapore. OUTLOOK FOR THE MRO AND Singapore conducted by Aerostrategy The Scheme facilitates the training and AIRLINE INDUSTRY There will be more competition as In 2006, SIA Engineering Company will Management Consulting revealed that transition of existing Republic of outsourced contracts continue to grow be among the first in the world to approximately 16,200 new employees Singapore Air Force (RSAF) technicians Over the next five years, Asia-Pacific in complexity and size. Some low-cost undertake Passenger-To-Freighter (PTF) need to be introduced into the workforce into the commercial aerospace industry. has the strongest regional growth carriers require total support from simple conversions on B747-400. The growth by 2014, in order for the aerospace forecast, with an annual average growth checks to more thorough D checks. The in freight traffic and the need for more industry to grow at the predicted annual rate (AAGR) of 6.7% for passenger trend is to develop technological efficient freighters is driving demand for rate of 5.9%. traffic and 8.5% for freight growth. 10 Dow Jones Newswires - February 2006 capability rather than simply rely on low such conversions. On average, about 11 www.boeing.com/commercial/cargo/index/html This compares favourably with the five- labour costs. India and China, as well as year forecasts for global traffic, which Dubai in the Middle East, are ramping shows an AAGR of 5.6% for passengers up MRO capability as a result. The and 6.3% for freight13. It is projected ability to offer competitive pricing, high that Asian carriers would increase their quality and total solutions across the full 2005 profit of US$1.5 billion to US$2 spectrum of the MRO value chain – billion in 2006. airframes, engines and components, on the latest generation of aircraft/engines, As a result of this expected increase in will be a key success factor for MRO traffic, Asia’s MRO industry is set for a players. new burst of growth. Within the next ten years, the MRO industry in Asia is expected to reach $12.2 billion and this will account for approximately 24% of 12 IATA Global Press Briefing - December 2005 13 IATA Passenger and Freight Forecast 2005 - 2009 the global market14. 14 Industry Prospects - www.aviationnow.com 32 SIA Engineering Company Annual Report 2005/06 33

THE GLOBAL MRO INDUSTRY REPORT

operations review

Increased number of flights operating through Changi, additional capacity from two new hangars and growth in Fleet Management Programme contributed to the Company’s excellent report card in FY2005/06. 34 SIA Engineering Company

operations review

OPERATIONS REVIEW

SIA Engineering Company has been we are well positioned to optimise cost We benefited from the surge in arrivals preventive maintenance on advanced Shenzhen Airlines, Royal Khmer, Atlas Number of Flights Serviced leveraging on its unique competitive efficiencies and deliver the fastest and departures through Singapore cabin management systems and feature- Air and South Pacific Islands Airways. 85,959 advantage of early access to the most turnaround times. Changi Airport. Changi achieved a laden seat modules. This is of utmost modern aircraft technologies, such as record 4,000 weekly scheduled flights importance with the growing emphasis In addition, Line Maintenance provided the B777, the A340-500 and the A380. LINE MAINTANENCE during the Northern Winter Season from on cabin comfort and systems. New- support services such as light 78,600 30 October 2005 to 25 March 2006. generation aircraft such as the A380 also maintenance, aircraft certification and 90 000 Our capabilities in the latest aircraft types The Line Maintenance team of licensed This is an increase of about 100 flights boasts of greater comfort and interactive defect rectifications to our overseas Fleet 80 000 enable us to offer comprehensive services aircraft engineers and technicians provide compared to the same period a year ago. inflight entertainment for passengers in Management customers, including 70 000 in our core activities – Line Maintenance, aircraft certification and ground handling A total of 83 airlines now operate into its cabins. Hence, our preventive Dragonair from Hong Kong and Go Air 60 000 50 000 Airframe Maintenance, Component services. We ensure high despatch Singapore, which is another record high maintenance services would offer airline from India. 40 000 Overhaul, Engine Overhaul, Conversions reliability for aircraft on transit or night- for Changi. customers a higher level of technical 30 000 FY2005/06 stop at Changi Airport and we serve an and Modifications. expertise to ensure smooth functioning SIA Engineering Company has three Line 20 000 international client base of more than With the increasing number of flights of their cabin systems. Maintenance joint ventures overseas, 10 000 FY2004/05

In addition, the Company provides total 60 airlines in Singapore Changi Airport. operating through Changi and the covering 21 airports. They are Aviation 0 support services to customers through development of a hub for low-cost During the year in review, Line Partnership (Philippines) Corporation in its Fleet Management Programme. During the year in review, Line carriers in Singapore, SIA Engineering Maintenance secured six new customers. the Philippines, PT. JAS Aero- Combining our capabilities in the Maintenance serviced a total of 85,959 Company strives to look for even more They are Jet Airways, Air Sahara, Engineering Services in Indonesia and different core activities and our holistic flights, a 9.4% rise from the previous year. innovative ways to improve its operating Pan Asia Pacific Aviation Services in approach to servicing airline customers, Its revenue rose by 8.4% to $300.8 million. efficiencies. Hong Kong.

We implemented a computerised system for manpower allocation, known as the Dynamic Resource Assignment Module (DRAM) in August 2005. With DRAM, Line Maintenance is able to present the flight and manpower allocation plan on a central display system called the Flight and Resource Information Display System (FRIDS). This gives everyone, including units in different locations, clear visibility of resource allocation. It helps us to effectively pre-plan our resources and efficiently reallocate manpower when the need arises.

Besides improving operating efficiencies, we are also adding new products initiatives, which includes increasing 36 SIA Engineering Company Annual Report 2005/06 37

OPERATIONS REVIEW

Besides improving operating efficiencies, we are also adding new products initiatives, which includes increasing 38 SIA Engineering Company Annual Report 2005/06 39

OPERATIONS REVIEW

AIRFRAME MAINTENANCE Our 9th operational line in Hangar 5 opened in June 2005, bringing the overall All aircraft have to undergo scheduled hangar capacity to 43,200 square metres. checks to maintain their airworthiness certifications with international regulatory We performed a record 47 D checks in bodies such as the Civil Aviation FY2005/06. This is attributable to the Authority of Singapore (CAAS), the additional capacity from the two new Federal Aviation Administration from hangars commissioned in January and United States (FAA) and European June 2005. Aviation Safety Agency from the European Union (EASA). Each hangar has its specialised functions: Hangar 1 – B747 heavy maintenance Scheduled A to D checks are carried out and modifications by our Base Maintenance Division at the Hangar 2 – Airbus and narrow-bodied five hangars in Changi. Base Maintenance Boeing aircraft heavy also provides airframe structural repair maintenance and modification, cabin overhaul and Hangar 3 – B777 heavy maintenance refurbishment, and retrofitting of major Hangar 4 – B747 Passenger-to-Freighter avionics systems. In addition, we deliver (PTF) conversions essential engineering services, such as Hangar 5 – B747 heavy maintenance emergency aircraft-on-ground (AOG) and modifications support at airports around the world. In FY2005/06, Airframe Number of Checks Performed 04/05 05/06 A Checks During the year, our relentless pursuit in 561 Maintenance and - required after every 2,400 offering total support solutions brought flying hours (about 4 months)* 382 388 in 11 new contracts from new and long Component Overhaul 527 C Checks term customers such as Northwest - required after every 7,500 achieved a revenue of 600 Airlines, Dubai Air Wing, Air India, flying hours (about 1 year)* 118 126 Martinair, Asiana Airlines, Atlas Air, $612.4M, accounting for 500 D Checks Garuda Indonesia, Air Canada, Japan - required after every 37,500 400 Airlines, Iberworld and Air Atlanta 64% of the Group’s flying hours (about 5 years)* 27 47 300 Icelandic. Other long-standing customers revenue. * for a typical Boeing aircraft including Polar Air and Federal Express 200 05/06 continued to make SIA Engineering 100 Company their preferred MRO partner 04/05 for their scheduled maintenance checks 0 and major rectification works. 38 SIA Engineering Company Annual Report 2005/06 39

OPERATIONS REVIEW

AIRFRAME MAINTENANCE Our 9th operational line in Hangar 5 opened in June 2005, bringing the overall All aircraft have to undergo scheduled hangar capacity to 43,200 square metres. checks to maintain their airworthiness certifications with international regulatory We performed a record 47 D checks in bodies such as the Civil Aviation FY2005/06. This is attributable to the Authority of Singapore (CAAS), the additional capacity from the two new Federal Aviation Administration from hangars commissioned in January and United States (FAA) and European June 2005. Aviation Safety Agency from the European Union (EASA). Each hangar has its specialised functions: Hangar 1 – B747 heavy maintenance Scheduled A to D checks are carried out and modifications by our Base Maintenance Division at the Hangar 2 – Airbus and narrow-bodied five hangars in Changi. Base Maintenance Boeing aircraft heavy also provides airframe structural repair maintenance and modification, cabin overhaul and Hangar 3 – B777 heavy maintenance refurbishment, and retrofitting of major Hangar 4 – B747 Passenger-to-Freighter avionics systems. In addition, we deliver (PTF) conversions essential engineering services, such as Hangar 5 – B747 heavy maintenance emergency aircraft-on-ground (AOG) and modifications support at airports around the world. In FY2005/06, Airframe Number of Checks Performed 04/05 05/06 A Checks During the year, our relentless pursuit in 561 Maintenance and - required after every 2,400 offering total support solutions brought flying hours (about 4 months)* 382 388 in 11 new contracts from new and long Component Overhaul 527 C Checks term customers such as Northwest - required after every 7,500 achieved a revenue of 600 Airlines, Dubai Air Wing, Air India, flying hours (about 1 year)* 118 126 Martinair, Asiana Airlines, Atlas Air, $612.4M, accounting for 500 D Checks Garuda Indonesia, Air Canada, Japan - required after every 37,500 400 Airlines, Iberworld and Air Atlanta 64% of the Group’s flying hours (about 5 years)* 27 47 300 Icelandic. Other long-standing customers revenue. * for a typical Boeing aircraft including Polar Air and Federal Express 200 05/06 continued to make SIA Engineering 100 Company their preferred MRO partner 04/05 for their scheduled maintenance checks 0 and major rectification works. 40 SIA Engineering Company Annual Report 2005/06 41

OPERATIONS REVIEW

COMPONENT OVERHAUL CONVERSIONS & MODIFICATIONS Corporation called JAMCO Aero Design repair and overhaul of components, & Engineering Pte Ltd (JADE) in 2004. supply of consumables and all associated Our 22 in-house workshops are equipped This year, SIA Engineering Company JADE provides turnkey aircraft interior logistics to support our customers. We with state-of-the-art equipment to repair will be among the first MRO in the world modifications work for our customers ensure the highest possible spares and overhaul more than 11,000 to convert B747-400 passenger aircraft and this enables us to tap the growing fulfillment to meet our customers’ components. We have the ability to into freighters. To date, we have orders aircraft cabin retrofit and reconfiguration requirements on a 24 by 7 basis. Through overhaul up to 90% of B747-400 aircraft for a total of seven B747-400 conversions. market. our proven capabilities in inventory and components in our workshops. This supply chain management, we provide makes us one of the few MRO companies Passenger-to-Freighter (PTF) conversion JADE was awarded the Design our customers an integrated total solution in the world with the highest in-house is different from the usual heavy Organisation Approver (DOA) by CAAS that satisfies their operational needs, component overhaul capability for B747- maintenance work handled by Base in April 2006. With this status, JADE hence enabling them to focus on their 400 aircraft. Maintenance. It involves the removal of can perform design changes related to core airline business. In addition, we also the entire interior including seats and cabin interior for commercial aircraft, provide turnkey solutions to assist start- galleys. In addition, the existing floor including the application of Supplemental up airlines in their entry-into-service Besides overhaul, our workshops provide structures must be replaced with a new Type Certificate from CAAS. JADE’s preparation. This includes establishment inspection, repair, modification and floor design to take on heavier cargo customers include EVA Air and of infrastructure such as warehousing, testing services for various modern maintenance, repair and overhaul services ENGINE OVERHAUL loads. All windows are plugged, obsolete Guggenheim Aviation Partners. provisioning of on-site spares, and all commercial airliners. of hydro-mechanical equipment for aircraft systems are removed and cargo other necessary logistical set-up. aircraft such as the Boeing B747-400 and The engine is one of the most complex door and cargo loading systems are FLEET MANAGEMENT PROGRAMME In FY2005/06, the Workshop Division B777, and the Airbus A320, A330 and and critical part of an aircraft. It is installed. Heavy maintenance In the year under review, we extended was reorganised and renamed as the A340. It is the first non-original therefore strategic that nine of our 19 rectification and modifications are usually Fleet Management Programme (FMP) is our FMP contract with Hong Kong based Component Services Division. Four equipment manufacturer hydraulic service joint ventures are forged with the world’s performed on the aircraft during a PTF a relatively new and fast-growing sector Dragonair with the addition of five B747- business units were being set up: centre in the world capable of handling leading engine and engine component conversion programme as well. of our business. It is an all-encompassing 400. GO Air, a new carrier based in 1. Avionics Component Services (ACS) hydraulic pressures of up to 5,000 psi, makers, such as Rolls-Royce and Pratt & programme that provides both fleet and Mumbai, was added to our growing 2. Mechanical Component Services enabling it to support the state-of-the- Whitney. PTF conversions require engineers and inventory technical management services customer base. We will be managing (MCS) art Airbus A380 and new Boeing 787 technicians to interpret detailed aircraft to our customers. GO Air’s fleet of nine A320s. The total 3. Aircraft Maintenance Services (AMS) Dreamliner. Six of the nine engine and engine drawings and possess production value of the two new contracts is $132 4. Interior Maintenance Services (IMS) component overhaul joint ventures are knowledge. As such, SIA Engineering In fleet technical management, we plan million. and manage maintenance and SIA Engineering Company has six based in Singapore. They are Asian is partnering Boeing in training our This is part of an exercise to further technical teams in the lead-up to our first modification programmes. We also component overhaul joint ventures based Surface Technologies, Combustor We now offer FMP services to seven enhance efficiency and quicken customer PTF conversion project commencing in oversee aircraft operations on a 24 by 7 airlines, namely Dragonair, SilkAir, in Singapore to reduce turnaround time. Airmotive Services, Eagle Services Asia, response times. August 2006. basis to ensure high despatch reliability Air Pacific, Air Atlanta Icelandic, Tiger They are ACE Services, Fuel Accessory International Engine Component for the customer’s fleet. Additionally, Airways, Cebu Pacific Air and GO Air. Service Technologies, International Overhaul, Singapore Aero Engine We have also merged our Hydraulics Our foray into the major modifications the performance of the aircraft, systems We cover a fleet of 36 aircraft, comprising Aerospace Tubes - Asia, Messier Services Services Limited and Turbine Coating shop with our newest joint venture market such as PTF will also help us to and engines are closely monitored so that B747, A319 and A320. Asia, Goodrich Aerostructures Service Services. The three based overseas are Aerospace Component Engineering attract post-modification maintenance predictive maintenance is carried out to Center-Asia and Singapore JAMCO. Asian Compressor Technology Services Services (ACE Services) during the year work and cabin refurbishment. ensure minimum technical delays. in Taiwan, Hong Kong Aero Engine in review. ACE Services provides Services Limited in Hong Kong and To venture into aircraft modifications Under inventory technical management, PWA International in Ireland. work, we formed a joint venture with our team manages aircraft spares pooling JAMCO America and JAMCO and support. This includes sourcing, 40 SIA Engineering Company Annual Report 2005/06 41

OPERATIONS REVIEW

support infrastructure

Our support infrastructure continues to strengthen to ensure efficiencies and smooth operations. The internal synergy plays a crucial role to propel the Company forward into the new era in aviation. Using IT, training and motivating our people, working effectively with trade unions and caring for the environment – all these form the foundation of the Company’s success. 42 SIA Engineering Company

support infrastructure

SUPPORT INFRASTRUCTURE

The new IT system, Dynamic Resource HUMAN RESOURCES implementing initiatives to encourage aids, computer-based instruction and Assignment Module (DRAM) that was technical, administrative and other resources to handle in-house implemented in Line Maintenance in As a leader in the global MRO industry, management staff to upgrade their skills. training schemes for aircraft engineers August 2005, has enabled Line SIA Engineering Company continually During 2005, 4,895 training man-days and technicians, covering ab-initio to Maintenance Division to be more upgrades the skills of its licensed aircraft were devoted to the area of management aircraft type training. efficient and provided better control engineers, technicians and support teams skills development and 46,455 training over deployment of manpower resources to stay abreast of the latest technological man-days were spent on technical In FY2005/06, the Group invested a total to customer flights. advances in the aviation industry. We training programmes. of $9 million in training and developing build a dynamic corporate culture where its people. Each staff in the Company In late 2006, A380 and B777-300ER will our people are constantly developing Engineering training programmes take received an average of 73 training hours. enter into service. In these two new new skills. place throughout the year at our aircraft types, E-logbooks that are Engineering Training Department (ETD). integrated with the aircraft wireless data As a People Developer certified by Spring ETD is well-equipped with facilities such transmission system onboard will replace Singapore since 1999, we are always as specialised classrooms, modern training the hardcopy logbooks. With the E- logbook, aircraft and cabin defects can be transmitted to the ground stations in real time. We have been working closely with SIA for the required IT set-up to

INFORMATION TECHNOLOGY facilitate such information transmission. With this capability, our engineers and The implementation of the SAP system technicians at ground stations would be in December 2004 has since provided able to analyse and troubleshoot defects SIA Engineering Company management in advance. This will help them to be with close visibility of operational status, better prepared for aircraft defects such as material consumption and resolution and spares requirements. manhour expended against maintenance work done. Through SAP, the billing progress upon job completion can be also tracked closely. We will be embarking on the SAP system upgrade in early 2007 to keep ourselves abreast with software technological advancement. 44 SIA Engineering Company Annual Report 2005/06 45

SUPPORT INFRASTRUCTURE

NEW RECRUITMENT INITIATIVES an accelerated rate and improved our cost 2) Attachment Programmes efficiencies. The Training and Attachment In the financial year under review, Programme (TAP) is an initiative by the SIA Engineering Company implemented The 21/2 year AAME scheme for Economic Development Board (EDB) to three new recruitment initiatives. graduates with a Diploma in Aeronautical support companies in training engineers Engineering was launched in June 2005. and professionals in new technologies 1) Accelerated Training Schemes The first batch commenced their training and capabilities. Two new Apprentice Aircraft in July 2005. The scheme for ex-RSAF Maintenance Engineer (AAME) schemes Senior Technicians was launched in A total of six TAP trainees commenced were launched in 2005 – a 21/2 year December 2005 and the first batch started their training programme with us in 2005. accelerated scheme for graduates with a training in March 2006. The AAME Upon completion of the TAP Diploma in Aeronautical Engineering and scheme for ex-RSAF Senior Technicians is programme, they will join the respective a 2-year programme for ex-RSAF supported by the Association of Aerospace divisions to serve a two-year bond. technicians. The two new schemes helped Industries (Singapore) (AAIS) scholarship to expand our pool of technical staff at programme. 3) Study Grant Scheme The SIA Engineering Company Study Grant Scheme was launched in January 2005 to attract outstanding polytechnic students in Aeronautical Engineering EMPLOYEE COMMUNICATION ENHANCED HR SYSTEM course to join the Company’s pool of Licensed Aircraft Engineers via the Communicating with our employees is In FY2005/06, the SAP Enterprise accelerated AAME scheme. In 2005, a critical component of maintaining a Portal 6 (EP6) was launched. The new eight students were awarded these grants. cohesive and inclusive workforce. e-portal allows greater flexibility and self- management by employees with regard The study grant scheme reinforces the Besides our bi-monthly Company to Company benefits and entitlements. standards and quality of the AAME publication, Precision, which provides Its new design layout and interface cohort as the grants are only awarded to useful information to our staff, we ensures a user-friendly approach and easy outstanding students from qualifying undertook an Organisation Climate navigation of the system. polytechnics. Survey (OCS) in May 2005 and a Managers’ Perception Survey (MPS) in INDUSTRIAL RELATIONS October 2005. The objective of both surveys was to seek useful feedback from At SIA Engineering Company we strive our employees and management staff, to maintain a healthy relationship with on various areas relating to the work the three unions that represent our environment. This has resulted in various employees. Regular dialogue is a key initiatives to enhance employee feature of this relationship. engagement in the organisation. Communication sessions are held regularly with the unions. 46 SIA Engineering Company Annual Report 2005/06 47

SUPPORT INFRASTRUCTURE

QUALITY, SAFETY & SECURITY accepted standard for occupational safety ENVIRONMENT MANAGEMENT ISO14001:2004 standard. Environmental and health, in April 2002. The main action programmes set up include In the last financial year, we underwent objective of the OHS management system SIA Engineering Company implemented segregation, collection and disposal of 92 internal audits and 107 external audits. is to integrate safety awareness into our ISO14001 Environmental Management fuel and toxic wastes, monitoring of trade Constant review of our work procedures daily work and improve the Company’s System in 1997. ISO14001 is an effluent discharge to public sewers, and ensures that a high standard of service performance. The management system internationally recognised environmental feasibility study on building of new is maintained. As a testament to the provided a systematic and cost effective management system that is focused on effluent treatment plant. Base Company’s high quality of work, we way of managing occupational safety and continual improvement of environmental Maintenance has standardised the bins currently hold regulatory approvals from health risk, reducing accidents, as well as performance. It uses environmental for the segregation of wastes at the 23 national aviation authorities and 20 introducing a safety culture. With the audits, action programmes, targets and Temporary Oil Storage Areas (TOSA) airlines (as of April 2006). These include OHS management system in place, our reviews to propel a company’s and will be building a new effluent the FAA, EASA, Japan Civil Aviation work environment is continually reviewed. environmental performance forward. treatment plant for Hangar 2. Bureau (JCAB), Emirates Airlines and The main focus over the past 12 months Qantas Airways. As a result of the Company’s conscientious has been the revision to the efforts to improve safety in the workplace, Over the past years, our safety record our reportable accident rate was has improved significantly through significantly reduced by 50% from the various safety programmes, such as previous year. The Company also ESTHER 2 (Enhanced Safety Through achieved zero reportable accident for the Human Error Reduction). The month of November 2005. In addition, programme focuses on behavioral-based Workshops Division attained an safety as well as safety leadership, with impressive milestone by having two Shell’s "Winning Hearts and Minds" million man-hours with zero reportable safety initiatives as the foundation. accidents. Strong support from Training for management and staff were management and staff in implementing conducted from June 2005 to March the various safety initiatives made these 2006. About 650 staff had been trained achievements possible. on the tools and methods. Besides safety measures, security measures In addition, to achieve zero accident, it were also heightened. The Company’s is essential to develop a safety culture in security system was enhanced with new the Company. The Occupational Health features. These include improved CCTV & Safety (OHS) management system was network, electro-magnetic time-lock implemented in December 2001. doors, “smart” card for hangar access, It was certified to OHSAS 18001 security turnstiles, speed gates and rising specification, which is an internationally kerbs. The Quality and Safety Division has also undertaken the in-house manufacture of the “smart” hangar passes. 48 SIA Engineering Company Annual Report 2005/06 49

SUPPORT INFRASTRUCTURE

joint ventures

Our 19 strategic joint ventures with world-renowned engine makers, equipment manufacturers and OEMs in Singapore and overseas enable us to continually sharpen our technological edge. They also contribute strong earnings to the Group. 50 SIA Engineering Company

joint ventures

JOINT VENTURES

JOINT VENTURES BASED IN Much emphasis has also been given to by Singapore’s position as a regional hub Resource Conservation Award for SINGAPORE the health and welfare of its employees. for MRO services, as well as its access to reducing energy consumption and In 2005, CAS received a Singapore Pratt & Whitney’s full range of expertise. Improvement Team Award at the Aerospace Component Engineering Health Award Silver Level from National Innovation and Quality Circle Services Pte Ltd Singapore Health Promotion Board for Employing approximately 850 staff at its Convention. SIA Engineering Company: 51% its company-wide health programme 3 million square feet facility, ESA operates Parker Aerospace Group: 49% efforts. two engine test cells with engines test Fuel Accessory Service Technologies capability of up to 75,000 pound thrust. Incorporated on 22 April 2005, Pte Ltd In the relentless pursuit of enhancing its Aerospace Component Engineering Eagle Services Asia Pte Ltd SIA Engineering Company: 49% competitiveness and service offerings, Hamilton Sundstrand (United Technologies Services Pte Ltd (ACE Services) is the SIA Engineering Company: 49% Pratt & Whitney (United Technologies ESA maintains a strong focus on Group): 51% first facility in the region to provide Group): 51% improving its capabilities through its original equipment MRO support of Achieving Competitive Excellence (ACE) Fuel Accessory Service Technologies Pte Parker’s components and systems. The AST uses cutting-edge technology, such Eagle Services Asia Pte Ltd (ESA) programme. Ltd (FAST) was set up to provide the joint venture provides maintenance, as Praxair’s proprietary D-gun processes, combines the technology of a world- best quality jet fuel control and engine repair and overhaul services for hydro- for its coating services. It has approvals renowned OEM with the extensive ESA is the only engine overhaul centre accessory repair services to airlines and mechanical equipment on Airbus A320, from CAAS in Singapore, Federal capabilities of an airline-linked MRO in Pratt & Whitney to be awarded the other customers in the Asia-Pacific region. A330 and A340, and Boeing B747-400 Aviation Administration (FAA) in the company. ESA repairs and overhauls United Technologies Corporation and B777. U.S. and European Aviation Safety Agency (EASA) in Europe. AST is large commercial engines built by Pratt (UTC) ACE Site Silver. Other awards FAST’s state-of-the-art facility offers & Whitney (JT9D and PW4000), CFM that ESA has won include Helping complete repair, overhaul and ACE Services is equipped with state-of- AS9100 registered, Nadcap accredited, International (CFM56-5C) and Employees Achieve Lifetime Health modification capabilities for a wide range the-art facilities capable of handling and is an approved source for all major International Aero Engines (V2500-A5). (H.E.A.L.T.H) Bronze Award, UTC of Hamilton Sundstrand and other OEM hydraulic pressures of up to 5,000 psi. aviation Original Equipment ESA’s competitive advantage is enhanced Environmental Award for Natural fuel components installed on large This enables it to repair hydro- Manufacturers (OEMs). extensive capabilities have enabled CAS commercial engines and auxiliary power mechanical components of new to provide its customers with high quality units. Supported by a team of OEM- generation aircraft, such as the Airbus Combustor Airmotive Services Pte Ltd SIA Engineering Company: 49% repairs, fast turnaround times and trained technicians and engineers, FAST A380 and Boeing 787 Dreamliner. Pratt & Whitney (United Technologies competitive pricing. is Hamilton Sundstrand’s appointed repair Group): 51% station in the Asia-Pacific for APS3200 Asian Surface Technologies Pte Ltd The entire workforce, from shop-floor APU fuel accessories. SIA Engineering Company: 29% Combustor Airmotive Services Pte Ltd Praxair Surface Technologies: 51% technicians to engineers and Pratt & Whitney (United Technologies (CAS) is a world-class combustor and management team, has helped to ensure FAST entered into a Maintenance Service Group): 20% fuel nozzle repair and overhaul centre. the successful rollout of the Achieving Agreement with Parker Aerospace during Its capabilities include complete overhaul, Competitive Excellence (ACE) Strategies the year in review to include warranty Asian Surface Technologies Pte Ltd repair and modification of PW4000, and Tools for all key processes. ACE repairs of Parker’s proprietary fuel (AST) repairs and overhauls fan blades JT9D, JT8D, V2500, CFM56 and CF6 has greatly contributed to the success components in the Asia-Pacific region. for JT9D and PW4000 series engines. combustion chambers, fuel nozzles and of the organisation and the The agreement marked a significant It also provides thermal coating and PW4000 Low Pressure Turbine (LPT) improvements have propelled CAS to milestone for FAST as it enabled the finishing services for aerospace and duct assemblies. In 2005, CAS added become a world-class repair and overhaul company to enhance its value-add to industrial engineering products in the PW4000 High Pressure Turbine (HPT) centre. customers. Asia-Pacific region. Stage 1 repair to its capability list. Its 52 SIA Engineering Company Annual Report 2005/06 53

JOINT VENTURES

Goodrich Aerostructures Service Center February 2002 and specialises in the repair JAMCO Aero Design Engineering solutions for product improvements; Messier Services Asia Pte Ltd - Asia Pte Ltd of aircraft and engine tubes, ducts and Pte Ltd development of technical specifications; SIA Engineering Company: 40% SIA Engineering Company: 40% manifolds for customers in the Asia-Pacific SIA Engineering Company: 45% equipment selection; interior arrangement Messier Services Pte Ltd (a subsidiary of SAFRAN Group): 60% Goodrich Aerostructures Group: 60% region. JAMCO America: 50% layout (Lay Out Passenger JAMCO Corporation: 5% Accommodations - “LOPAS”); Messier Services Asia Pte Ltd (MSA) Goodrich Aerostructures Service Center IAT-Asia has approvals from CAAS, FAA, preliminary structural and electrical operates one of the most comprehensive - Asia Pte Ltd (GASCA), formerly known EASA, General Administration of Civil JAMCO Aero Design Engineering Pte analysis; supplier management for landing gear repair and overhaul facilities as Rohr Aero Services Asia (RASA), Aviation of China (CAAC) and Ltd (JADE) provides total solutions in technical integration; supply of aircraft in the world. It is also the largest in the specialises in the maintenance, repair and Department of Civil Aviation Malaysia areas like aircraft cabin modifications, modification kits and/or materials; and Asia-Pacific. MSA houses a Landing overhaul of both nacelle system (DCA Malaysia) for the repair of aircraft configuration retrofit and programme on-site engineering and certification Gear Service Centre that has repair and components and airframe composite metal conduits. integration. It also provides consultation liaison support. overhaul capabilities for the entire range components for airlines in the Asia-Pacific to airlines in the Asia-Pacific region. of Boeing and Airbus airliners as well as region. The range of repair capabilities include Together with JAMCO America, JADE With the technological know-how and many regional and commuter aircraft. various modular tubes on the PW4000- provides solutions and services to extensive experience of JAMCO America It also owns a Component & Accessory Operating out of its state-of-the-art 94”/100”/112”, JT9D-7R4 and V2500- Singapore Airlines, SIA Engineering in cabin design, coupled with the high Service Centre that provides component facility in Changi North, GASCA’s A1/A5/D5, engine diffuser case, Company, Thai Airways International, quality standards of SIA Engineering overhaul services to support a wide range capability extends to virtually all intermediate case and turbine exhaust JAMCO America and Singapore Company, JADE is poised to be the of commercial aircraft. commercial aircraft models today and case, as well as tubes from other OEMs, turnaround times and more efficient use JAMCO. JADE also works on getting Centre of Excellence for aircraft interior serves more than 62 airline customers in such as Boeing, Goodrich and Rolls- of resources and materials. regulatory design approvals and technical work in the Asia-Pacific region. With sophisticated engineering the Asia-Pacific region. A significant Royce. Repair capabilities for CFM56 workshops, state-of-the-art technology, milestone for GASCA was the and CF6 engine tubes will be added in IECO is currently developing repair highly-skilled technical personnel, an development and implementation of a September 2006. capabilities for Trent 500, as well as the experienced management team and a supply chain management programme Trent 900 engines that will power the dedication to total quality, MSA has with Boeing, involving nacelle systems International Engine Component A380 aircraft. obtained official endorsements from a designed and manufactured by Boeing. Overhaul Pte Ltd large number of national and international Leveraging on this, it signed a unique SIA Engineering Company: 50% IECO achieved the Gold standard for airworthiness authorities. In addition, repair support agreement with Hurel Rolls-Royce: 50% the Rolls-Royce Component MSA has won many accolades and Hispano to service the A340-500/600 Refurbishment Centre of Excellence commendations from its customers for nacelle system, which can later be International Engine Component (CoE) for both the compressor stator its dedication to excellence in customer expanded to include the A380 aircraft. Overhaul Pte Ltd (IECO) focuses on the and the nozzle guide vane cells in service, quality, reliability and repair and overhaul of engine November 2005. The Gold CoE competitive pricing. International Aerospace Tubes-Asia components, such as nozzle guide vanes accreditation testifies that IECO has Pte Ltd and compressor stators. IECO, an OEM- achieved world-class performance SIA Engineering Company: 33.33% linked shop with access to Rolls-Royce’s through the implementation of best International Aerospace Tubes (a joint repair schemes, sales network and venture between Tube Processing Company practices and aggressive improvement resources, has strong links to airlines and Pratt & Whitney): 66.67% plans. IECO’s ultimate aim is to deliver through SIA Engineering Company. excellent service to all stakeholders. International Aerospace Tubes-Asia Pte IECO has continuously improved its Ltd (IAT-Asia) was incorporated in product repair processes for faster 54 SIA Engineering Company Annual Report 2005/06 55

JOINT VENTURES

During the financial year, MSA entered days for a full engine overhaul. SAESL repairs, as well as cabin maintenance JOINT VENTURES BASED OVERSEAS (DCA Malaysia). ACTS was also into a long term agreement with Boeing plans to increase its engine overhaul services at Changi Airport. Singapore awarded the Achieving Competitive on spares support. Being the only site in capabilities to include the Trent 900, JAMCO has the expertise to service a TAIWAN Excellence (ACE) gold award by the Asia to have the Approved Supplier Status which powers the A380 aircraft. In wide spectrum of airline customers and United Technologies Corporation/ Pratt accredited by Boeing, MSA is able to December 2005, SAESL commissioned MRO companies on a wide range of Asian Compressor Technology Services & Whitney (UTC/P&W) ACE assessment carry out the overhaul of landing gears a high-tech fan blade repair and overhaul cabin-related work due to its link to SIA Engineering Company: 24.5% team following their site visit this year. Pratt & Whitney (United Technologies and components on Boeing's wide range cell for the Trent 800. SAESL was also JAMCO Corporation, a renowned Group): 51% of aircraft. For the Boeing B777 landing certified to perform the repair of Trent aircraft interior design and manufacturing China Airlines: 24.5% THE PHILIPPINES gear overhaul market, besides fully 500 fan blades in May 2006. company. supporting Singapore Airlines' Asian Compressor Technology Services Aviation Partnership (Philippines) requirements, MSA also won contracts In November 2005, SAESL and HAESL Singapore JAMCO is aggressively (ACTS) specialises in the repair and Corporation SIA Engineering Company: 51% from Malaysian Airlines and Thai Airways signed a three-year maintenance growing its engineering capability to overhaul of High Pressure Compressor to provide landing gear exchange agreement worth US$600 million with meet the rising demands of the cabin Cebu Pacific Air: 49% Turbine Coating Services Pte Ltd (HPC) stators and shrouds. These are overhaul for their B777 fleets. Emirates. More recently, the Ministry retrofit market. used in a variety of large commercial SIA Engineering Company: 24.5% Aviation Partnership (Philippines) of Manpower awarded the Occupational Pratt & Whitney (United Technologies engines. With ACTS’ prior experience Corporation (A+ Philippines) is SIA MSA's facility extension aims to complete Health Best Practices Excellence Awards The company is currently in discussions Group): 51% in repairing PW4000 94” and 100” HPC Engineering Company’s third line in October 2006 and when ready, it will to SAESL. with several OEMs to provide Singapore Technologies Aerospace: 24.5% stators, it has expanded its product range maintenance joint venture outside be able to fully support the Airbus A380. maintenance support for the A380 to include PW4000 94”, 100” and 112” Singapore. The joint venture provides Singapore JAMCO Pte Ltd aircraft when it enters commercial Turbine Coating Services Pte Ltd (TCS) variable vane inner shrouds (VVIS), line maintenance, light aircraft checks Singapore Aero Engine Services Pte Ltd SIA Engineering Company: 65% service. focuses on acquiring new technologies PW2000/F117 VVIS, PW4000 100" and JAMCO Corporation: 30% and technical ramp handling to Cebu SIA Engineering Company: 50% and providing quality service to keep 112" honeycomb shroud guides, PW4000 Rolls-Royce: 30% Itochu Singapore: 5% Pacific Air and third-party airline ahead of its competitors. Apart from HPC outer air seals, as well as CF6 and Hong Kong Aero Engine Services Ltd possessing the Electron Beam Physical customers at three major international (HAESL): 20% Singapore JAMCO Pte Ltd, with its CFM56 shroud and seal repairs. Recently, Vapour Deposition coating technology, airports, namely, Manila, Cebu and facility located in the Loyang aviation it also developed repairs for TCS has also obtained the export license Davao, as well as up to 11 domestic Singapore Aero Engine Services Pte Ltd hub, specialises in the design, PW2000/F117 LPC stators and initiated from the US government for advanced airports in the Philippines. (SAESL) is Rolls-Royce’s Centre of manufacture, maintenance and repair of repair development work in support of technology, giving TCS the new Excellence in the Asia-Pacific for the aircraft interior furnishings and the Taiwan Air Force (Republic of China capability on 1/2K thermal barrier A+ Philippines was formed on 24 May repair and overhaul of Rolls-Royce Trent equipment. Products designed and Air Force). coating. 2005 and became operational on 1 July engines. Its excellent state-of-the art manufactured by the company include 2005. It has accreditations from Republic facilities have consistently been galley complexes, closets, cabin partitions, ACTS received ISO 9002 certification TCS core business is in PW4000 high- of Philippines Air Transport Office showcased as a model of operating meal carts and service trolleys. in 1998 and became an ISO14000 pressure turbine blade repairs, with (ATO) to serve Cebu Pacific Air. On efficiency and productivity in the certified shop at the end of 2003. Other commercial airlines and MRO providers 29 August 2005, the ATO approved A+ Singapore MRO industry. The company’s maintenance and repair Air Agency Certifications acquired as their customers. In 2005, TCS Philippines’ application for Airbus services include galley repairs and include authorisations from the FAA, delivered in excess of 20,000 parts, Goodrich Wheel Repair and Overhaul SAESL commenced operations in early modifications, galley equipment repairs, EASA, Civil Aeronautics Administration, gaining the reputation to be highly capability. 2002 and aims to reach a capacity of 200 overhead bin repairs, seat repairs and General Administration of Civil Aviation reliable in providing quality service and engines annually within the next few modifications, upholstery work and of China (CAAC), CAAS and achieving delivery turnaround time of years. It has a turnaround time of 59 Aircraft Unit Loading Devices (AULD) Department of Civil Aviation Malaysia less than 35 days. 56 SIA Engineering Company Annual Report 2005/06 57

JOINT VENTURES

PAPAS offers a full suite of line PT JAE, an Associate Member of maintenance services at four airports in International Airlines Technical Pool China. Our services include aircraft (IATP) since 2004, has been providing certification, defect rectification, premium quality line maintenance technical ramp handling, aircraft interior services to IATP member airlines under and exterior cleaning, as well as aircraft the IATP international requirements, as monthly checks. well as the International Air Transport Association Standard Ground Handling PAPAS continues to explore new Agreement (IATA SGHA). opportunities to enhance its service offerings both within and outside Hong The company has acquired several Kong. international aviation authorities and customer airlines approvals and aims to INDONESIA obtain the 145 approvals from EASA and 145 Repair Station Approvals from IRELAND PT JAS Aero-Engineering Services Federal Aviation Regulations (FAR) in PWA International SIA Engineering Company: 49% the near future. Cardig International: 51% SIA Engineering Company: 49% Pratt & Whitney (United Technologies PT JAE has expanded its services beyond Group): 51% HONG KONG HAESL possesses significant component Having commenced operations on 1 normal line maintenance activities to repair capability for both in-house and December 2003, PT JAS Aero- include 500-hour maintenance checks PWA International (PWAI) specialises Hong Kong Aero Engine Services third party work. In 2005, two of Engineering Services (PT JAE) provides and cabin sweeps. In addition, the in the overhaul and repair of large Limited HAESL’s component repair centres aircraft line maintenance release company is looking to provide additional commercial jet engine cases. Based in SIA Engineering Company: 10% achieved gold accreditation under the certification, technical ramp handling Hong Kong Aero Engine Company services like aircraft exterior cleaning, Dublin, PWAI is committed to provide Rolls-Royce Centre of Excellence (CoE) services and ground support equipment (HAECO): 45% and cabin and cargo deep cleaning for its customers with customised and Programme. at 10 major Indonesian airports, including Rolls-Royce: 45% aircraft on overnight stops. dependable solutions. It strives to offer Cengkareng (Jakarta), Surabaya, the highest level of quality, with Pan Asia Pacific Aviation Services Denpasar (Bali) and Medan. PT JAE is Hong Kong Aero Engine Services PT JAE’ technical staff are trained at competitive turnaround times and pricing SIA Engineering Company: 47.06% our second joint venture to offer line Limited (HAESL) is an engine repair and internationally approved aviation and through a combination of continuous Malaysian Airline System: 23.53% maintenance services outside Singapore overhaul facility equipped with full PT Garuda Indonesia: 17.65% customer airline training schools, improvement, value-added approach, and has a combined clientele base of capabilities in the repair and overhaul of Royal Brunei Airlines: 11.76% including SIA Engineering Company, modern technology and a highly more than 28 international airlines and Rolls-Royce Trent and RB211 series Emirates, Kuwait Airways, Gulf Air, EVA motivated workforce. engines. Located in Tseung Kwan O Pan Asia Pacific Aviation Services cargo operators, including SIA, SilkAir, Air and Royal Brunei Training Schools. SIA Cargo, EVA Air, Royal Brunei Industrial Estate in Hong Kong, this joint (PAPAS) has been our line maintenance They are competent in servicing A320, PWAI takes pride in its ability to offer Airlines, Lufthansa, Gulf Air, Qatar venture leverages on Rolls-Royce’s joint venture based in Hong Kong since A330, A340 series and B777. Currently, unique repairs for all JT9D, PW2000, Airways, Emirates, Kuwait Airways, strength as an OEM and HAECO’s more 1998. With accreditation from major plans are underway to train staff to handle PW4000 and V2500 engine cases. than 20 years of expertise on Rolls-Royce airworthiness authorities, including FedEx, Cathay Pacific, Saudia, Yemenia B777-300ER/GE90-115 and B737NG. engines, in offering high quality and CAAS, EASA and Civil Aviation and Qantas. comprehensive services to their Department of Hong Kong (HKCAD), customers. 58 SIA Engineering Company Annual Report 2005/06 59

JOINT VENTURES

PAPAS offers a full suite of line PT JAE, an Associate Member of maintenance services at four airports in International Airlines Technical Pool China. Our services include aircraft (IATP) since 2004, has been providing certification, defect rectification, premium quality line maintenance technical ramp handling, aircraft interior services to IATP member airlines under and exterior cleaning, as well as aircraft the IATP international requirements, as monthly checks. well as the International Air Transport Association Standard Ground Handling PAPAS continues to explore new Agreement (IATA SGHA). opportunities to enhance its service offerings both within and outside Hong The company has acquired several Kong. international aviation authorities and customer airlines approvals and aims to INDONESIA obtain the 145 approvals from EASA and 145 Repair Station Approvals from IRELAND PT JAS Aero-Engineering Services Federal Aviation Regulations (FAR) in PWA International SIA Engineering Company: 49% the near future. Cardig International: 51% SIA Engineering Company: 49% Pratt & Whitney (United Technologies PT JAE has expanded its services beyond Group): 51% HONG KONG HAESL possesses significant component Having commenced operations on 1 normal line maintenance activities to repair capability for both in-house and December 2003, PT JAS Aero- include 500-hour maintenance checks PWA International (PWAI) specialises Hong Kong Aero Engine Services third party work. In 2005, two of Engineering Services (PT JAE) provides and cabin sweeps. In addition, the in the overhaul and repair of large Limited HAESL’s component repair centres aircraft line maintenance release company is looking to provide additional commercial jet engine cases. Based in SIA Engineering Company: 10% achieved gold accreditation under the certification, technical ramp handling Hong Kong Aero Engine Company services like aircraft exterior cleaning, Dublin, PWAI is committed to provide Rolls-Royce Centre of Excellence (CoE) services and ground support equipment (HAECO): 45% and cabin and cargo deep cleaning for its customers with customised and Programme. at 10 major Indonesian airports, including Rolls-Royce: 45% aircraft on overnight stops. dependable solutions. It strives to offer Cengkareng (Jakarta), Surabaya, the highest level of quality, with Pan Asia Pacific Aviation Services Denpasar (Bali) and Medan. PT JAE is Hong Kong Aero Engine Services PT JAE’ technical staff are trained at competitive turnaround times and pricing SIA Engineering Company: 47.06% our second joint venture to offer line Limited (HAESL) is an engine repair and internationally approved aviation and through a combination of continuous Malaysian Airline System: 23.53% maintenance services outside Singapore overhaul facility equipped with full PT Garuda Indonesia: 17.65% customer airline training schools, improvement, value-added approach, and has a combined clientele base of capabilities in the repair and overhaul of Royal Brunei Airlines: 11.76% including SIA Engineering Company, modern technology and a highly more than 28 international airlines and Rolls-Royce Trent and RB211 series Emirates, Kuwait Airways, Gulf Air, EVA motivated workforce. engines. Located in Tseung Kwan O Pan Asia Pacific Aviation Services cargo operators, including SIA, SilkAir, Air and Royal Brunei Training Schools. SIA Cargo, EVA Air, Royal Brunei Industrial Estate in Hong Kong, this joint (PAPAS) has been our line maintenance They are competent in servicing A320, PWAI takes pride in its ability to offer Airlines, Lufthansa, Gulf Air, Qatar venture leverages on Rolls-Royce’s joint venture based in Hong Kong since A330, A340 series and B777. Currently, unique repairs for all JT9D, PW2000, Airways, Emirates, Kuwait Airways, strength as an OEM and HAECO’s more 1998. With accreditation from major plans are underway to train staff to handle PW4000 and V2500 engine cases. than 20 years of expertise on Rolls-Royce airworthiness authorities, including FedEx, Cathay Pacific, Saudia, Yemenia B777-300ER/GE90-115 and B737NG. engines, in offering high quality and CAAS, EASA and Civil Aviation and Qantas. comprehensive services to their Department of Hong Kong (HKCAD), customers. 60 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 61

CORPORATE GOVERNANCE

SIA Engineering Company Limited (“the Company”) has in At the 24th AGM to be held on 21 July 2006, Bey Soo Khiang, ongoing training of Directors, the Company organises Nominating Committee and Board Committee. At all times, place structures and corporate governance processes aimed at Thio Su Mien and Wong Ngit Liong will retire under Article presentations or seminars by external advisers on changes to the Board has independent access to the Chief Executive Officer, achieving sustained value creation for the benefit of shareholders. 83, and Stephen Lee Ching Yen and Koh Kheng Siong will laws and regulations. other members of Senior Management and the Company In essence, these structures and processes reflect the principles retire under Article 90. Save for Wong Ngit Liong, who will Secretary. Board procedures also enable Directors, either and spirit of the Code of Corporate Governance (the “Code”) relinquish his directorship at the close of the 2006 AGM, Bey The contributions of the Directors are especially visible in the individually or as a group, to seek independent professional established by the Singapore Corporate Governance Committee. Soo Khiang, Thio Su Mien, Stephen Lee Ching Yen and Koh four Board Committees, for which each Director is carefully advice at the Company’s expense, if necessary, in furtherance Kheng Siong will offer themselves for re-election pursuant to chosen to serve in an area of his/her core competencies. These of their duties. The processes described above are represented Articles 84 and 90 respectively. are the Audit Committee, Compensation and HR Committee, in the diagram as follows: THE BOARD, IT’S CONDUCT OF AFFAIRS, COMPOSITION AND BALANCE The Board provides entrepreneurial and strategic stewardship (Principles 1, 2, 3, 6 and 10) to the Management of the Company and confers with them regularly. With a focus on good corporate governance, strategic BOARD OF DIRECTORS During FY05/06, Koh Kheng Siong and Stephen Lee Ching growth and prudent financial management, the Board reviews Yen were appointed as Directors on 1 September 2005 and 1 and approves major transactions of the Company. Detailed December 2005 respectively. Koh Boon Hwee stepped down papers are submitted by the Management to the Board in a as Chairman and Director on 31 December 2005, and Stephen timely manner, providing information on the background and Lee Ching Yen was elected as Chairman on 1 January 2006. justifications for each proposal or mandate sought, including Audit Committee Wong Nang Jang Compensation and Nominating Committee Board Committee where applicable, relevant budgets, forecasts and projections. N Varaprasad HR Committee Wong Ngit Liong Chew Choon Seng The Board consists of nine non-executive Directors who have Thio Su Mien N Varaprasad Chew Choon Seng Bey Soo Khiang Information papers are also submitted to the Board to inform Tan Bian Ee Chew Choon Seng Wong Nang Jang (appointed on 26 July 2005) (appointed on 1 June 2005) Wong Ngit Liong Tan Bian Ee (Alternate: Thio Su Mien) a broad range of experience in the fields of business, aviation, them of material developments or issues being dealt with by Koh Kheng Siong (appointed on 1 February 2006) (appointed on 1 January 2006) finance, legal, management, industrial relations and education. the Management. Monthly management accounts of the The Board comprises six independent Directors: Wong Nang Company are also circulated for information. Jang, N Varaprasad, Wong Ngit Liong, Thio Su Mien, Tan Bian Ee and Koh Kheng Siong. The remaining three Directors, The Board meets at least 4 times a year to review and approve, Corporate Office with aviation industry background, are: Stephen Lee Ching inter alia, the quarterly financial results of the Company. Yen, Chew Choon Seng and Bey Soo Khiang. Matters requiring the Board’s attention between meetings are dealt with by circulation. The Board also meets informally, in In line with both Principle 4 of the Code and Article 83 of the the absence of Management, prior to each Board Meeting. Management Committee Company’s Articles of Association, the nearest one third of the Board is retired each year. Retiring Directors are usually those Newly appointed Directors are briefed by the Management to who have been longest in office since their last election, and familiarise them on the Company’s business and strategic are eligible for re-election under Article 84. Directors appointed directions, and are given a tour of key facilities. Directors are, subsequent to the last Annual General Meeting (“AGM”) are from time to time, updated at Board meetings on relevant new also retired and are eligible for re-election at the next AGM, laws, regulations and changing commercial risks. As part of in accordance with Article 90. 60 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 61

CORPORATE GOVERNANCE

SIA Engineering Company Limited (“the Company”) has in At the 24th AGM to be held on 21 July 2006, Bey Soo Khiang, ongoing training of Directors, the Company organises Nominating Committee and Board Committee. At all times, place structures and corporate governance processes aimed at Thio Su Mien and Wong Ngit Liong will retire under Article presentations or seminars by external advisers on changes to the Board has independent access to the Chief Executive Officer, achieving sustained value creation for the benefit of shareholders. 83, and Stephen Lee Ching Yen and Koh Kheng Siong will laws and regulations. other members of Senior Management and the Company In essence, these structures and processes reflect the principles retire under Article 90. Save for Wong Ngit Liong, who will Secretary. Board procedures also enable Directors, either and spirit of the Code of Corporate Governance (the “Code”) relinquish his directorship at the close of the 2006 AGM, Bey The contributions of the Directors are especially visible in the individually or as a group, to seek independent professional established by the Singapore Corporate Governance Committee. Soo Khiang, Thio Su Mien, Stephen Lee Ching Yen and Koh four Board Committees, for which each Director is carefully advice at the Company’s expense, if necessary, in furtherance Kheng Siong will offer themselves for re-election pursuant to chosen to serve in an area of his/her core competencies. These of their duties. The processes described above are represented Articles 84 and 90 respectively. are the Audit Committee, Compensation and HR Committee, in the diagram as follows: THE BOARD, IT’S CONDUCT OF AFFAIRS, COMPOSITION AND BALANCE The Board provides entrepreneurial and strategic stewardship (Principles 1, 2, 3, 6 and 10) to the Management of the Company and confers with them regularly. With a focus on good corporate governance, strategic BOARD OF DIRECTORS During FY05/06, Koh Kheng Siong and Stephen Lee Ching growth and prudent financial management, the Board reviews Yen were appointed as Directors on 1 September 2005 and 1 and approves major transactions of the Company. Detailed December 2005 respectively. Koh Boon Hwee stepped down papers are submitted by the Management to the Board in a as Chairman and Director on 31 December 2005, and Stephen timely manner, providing information on the background and Lee Ching Yen was elected as Chairman on 1 January 2006. justifications for each proposal or mandate sought, including Audit Committee Wong Nang Jang Compensation and Nominating Committee Board Committee where applicable, relevant budgets, forecasts and projections. N Varaprasad HR Committee Wong Ngit Liong Chew Choon Seng The Board consists of nine non-executive Directors who have Thio Su Mien N Varaprasad Chew Choon Seng Bey Soo Khiang Information papers are also submitted to the Board to inform Tan Bian Ee Chew Choon Seng Wong Nang Jang (appointed on 26 July 2005) (appointed on 1 June 2005) Wong Ngit Liong Tan Bian Ee (Alternate: Thio Su Mien) a broad range of experience in the fields of business, aviation, them of material developments or issues being dealt with by Koh Kheng Siong (appointed on 1 February 2006) (appointed on 1 January 2006) finance, legal, management, industrial relations and education. the Management. Monthly management accounts of the The Board comprises six independent Directors: Wong Nang Company are also circulated for information. Jang, N Varaprasad, Wong Ngit Liong, Thio Su Mien, Tan Bian Ee and Koh Kheng Siong. The remaining three Directors, The Board meets at least 4 times a year to review and approve, Corporate Office with aviation industry background, are: Stephen Lee Ching inter alia, the quarterly financial results of the Company. Yen, Chew Choon Seng and Bey Soo Khiang. Matters requiring the Board’s attention between meetings are dealt with by circulation. The Board also meets informally, in In line with both Principle 4 of the Code and Article 83 of the the absence of Management, prior to each Board Meeting. Management Committee Company’s Articles of Association, the nearest one third of the Board is retired each year. Retiring Directors are usually those Newly appointed Directors are briefed by the Management to who have been longest in office since their last election, and familiarise them on the Company’s business and strategic are eligible for re-election under Article 84. Directors appointed directions, and are given a tour of key facilities. Directors are, subsequent to the last Annual General Meeting (“AGM”) are from time to time, updated at Board meetings on relevant new also retired and are eligible for re-election at the next AGM, laws, regulations and changing commercial risks. As part of in accordance with Article 90. 62 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 63

CORPORATE GOVERNANCE

MAIN BOARD AUDIT NOMINATING COMPENSATION BOARD There is a clear demarcation of responsibilities between the (d) reviewed the quarterly and full-year announcements of COMMITTEE COMMITTEE AND HR COMMITTEE COMMITTEE Board and the Management, and the Board does not interfere results and annual financial statements and the external in the day-to-day administration of the Chief Executive Officer auditors’ report thereon before their submission to the Name Status Position Att. Position Att. Position Att. Position Att. Position Att. and the Management. Board; Stephen Lee Ching Yen Non- Chairman 1/1 (e) reviewed the independence of the external auditors and (first appointed on 1 Dec 2005) Independent (from 1 Jan The Chief Executive Officer is responsible for the daily the nature and extent of non-audit services provided by 2006 operations of the Company and is not a Board member. He them; Chew Choon Seng Non- Deputy 4/4 Member 2/2 Member 4/4 Member – chairs the Management Committee, comprising senior executives (f) nominated the external auditors of the Company for (last re-appointed on 25 Jul 2005, Independent Chairman of the Company. The Management Committee meets weekly reappointment and recommended the auditors’ first appointed on 22 May 2003) to discuss both policy and operational issues, and to implement remuneration for the Board's approval; Wong Nang Jang Independent Member 4/4 Chairman 4/4 Member 2/2 key decisions of the Board. (g) reviewed the adequacy and effectiveness of the internal (last re-appointed on 26 Jul 2004, audit function; first appointed on 24 Mar 2000) (h) reviewed interested person transactions; and AUDIT COMMITTEE N Varaprasad Independent Member 3/4 Member 4/4 Chairman 4/4 (i) reviewed the process established by the Company whereby (last re-appointed on 25 Jul 2005, (Principles 11 and 12) staff may, in confidence, raise concerns or lodge complaints first appointed on 1 Mar 2000) about possible wrongdoings and improprieties. The Audit Committee comprises five non-executive Directors, Wong Ngit Liong Independent Member 3/4 Chairman 2/2 Member 4/4 (last re-appointed on 26 Jul 2004, all of whom are independent. The members of the Audit The Committee has full access to and co-operation of the first appointed on 1 Mar 2000) Committee at the date of this report are: Management. The Committee also has full discretion to invite any Director or executive officer to attend the meetings, and Bey Soo Khiang Non- Member 4/4 Member Chairman Wong Nang Jang has been given reasonable resources to enable it to discharge (last re-appointed on 12 Jul 2003, Independent (from first appointed on 1 Mar 2000) 26 Jul 2005) Members N Varaprasad its functions. Thio Su Mien Thio Su Mien Independent Member 4/4 Member 4/4 Alternate – Tan Bian Ee (appointed on 1 June 2005) During the year, the Committee also met with the internal and (last re-appointed on 12 Jul 2003, Koh Kheng Siong (appointed on 1 January 2006) first appointed on 1 Mar 2000) external auditors without the presence of the Management.

Tan Bian Ee Independent Member 4/4 Member 3/3 Member – The Committee met four times during the year with the The Audit Committee has undertaken a review of the fees paid (last re-appointed on 26 Jul 2004, (from (from Management and the internal and external auditors of the to the external auditors, including fees paid for non-audit first appointed on 15 April 2004) 1 Jun 2005) 1 Feb 2006) Company. The attendance of individual Directors at these services during the year and is of the opinion that the auditor's Koh Kheng Siong Independent Member 2/2 Member 1/1 meetings is shown above. In the course of the year, the independence has not been compromised. (first appointed on 1 Sep 2005) (from Committee performed the following functions: 1 Jan 2006) Minutes of the Committee’s meetings are circulated to the Koh Boon Hwee Non- Chairman 2/2 (a) reviewed the audit plans of the internal and external Directors of the Company by the Company Secretary. (stepped down on 31 Dec 2005, Independent auditors of the Company, the results of the auditors’ last re-appointed on 12 Jul 2003, examination of the Company’s material internal financial, The review of the adequacy of operational controls and risk first appointed on 22 May 2003) accounting and compliance controls and the co-operation management polices is undertaken directly by the Board, and Chew Leng Seng Non- Member 1/1 Member 2/2 Member – given by the Company’s officers to the auditors; accordingly, these functions do not come under the purview (retired on 25 July 2005, Independent b) reviewed the Company’s risk management framework and of the Audit Committee. The Directors are of the opinion that last re-appointed on 12 Jul 2003, first appointed on 16 Mar 1982) processes and provided oversight to the work of the Risk the Company has complied with the Code of Corporate Management Committee in respect of financial risks; Governance. Total Number of Meetings Held in FY 05/06 4 4 2 4 - (c) reviewed the significant financial reporting issues and

Notes: judgements so as to ensure the integrity of the financial i) “Att.” refers to the number of meetings attended by respective Directors for the period served in FY05/06. statements; ii) The Board does not consist of any Executive Director. iii) The Board Committee does not conduct physical meetings as described further below. 62 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 63

CORPORATE GOVERNANCE

Notes: judgements so as to ensure the integrity of the financial i) “Att.” refers to the number of meetings attended by respective Directors for the period served in FY05/06. statements; ii) The Board does not consist of any Executive Director. iii) The Board Committee does not conduct physical meetings as described further below. 64 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 65

CORPORATE GOVERNANCE

COMPENSATION & HR COMMITTEE (i) reviewed the manpower recruitment and retention strategies At the 2006 AGM, Bey Soo Khiang and Thio Su Mien will BOARD COMMITTEE (Principles 7 and 8) for the Company; retire. In noting Wong Ngit Liong's request to retire as Director (j) reviewed the proposed Flexible Technical Employment at the close of the same AGM, the Nominating Committee The Board Committee deputises for the Board on routine The Compensation & HR Committee comprises three non- Scheme; had recommended Bey Soo Khiang and Thio Su Mien’s re- matters to facilitate day-to-day administration and to expedite executive Directors, two of whom (including the Chairman) (k) reviewed the compensation philosophy and framework for election, after assessing their respective contributions, including decisions thereon, including opening of bank accounts, affixing are independent. The members of the Committee for FY05/06 senior staff; their attendance, preparedness and participation at Board the Company’s seal on documents requiring the Company’s were: (l) reviewed the remuneration payable to Company Directors meetings. seal, and authorising specific officers to sign pertinent documents for FY05/06; on behalf of the Company. The Board Committee also approves Chairman N Varaprasad (m) reviewed the findings and specific action plans derived The Nominating Committee initiated a formal Board evaluation capital expenditures from $1.5 million to $5 million, and Members Chew Choon Seng from the Organisation Climate Survey and the Managers’ process in FY02/03 by engaging a consultant to assist the investments in joint ventures of up to $5 million. Approvals Wong Ngit Liong Perception Survey; and Committee in assessing the efficacy of the Board as a whole. of values below the base level of $1.5 million, except for (n) conducted a competency profiling exercise for senior staff. The assessment was expanded in FY03/04 to include an investments in joint ventures, are referred to the Senior The Committee, guided by the principles of the Code, regularly assessment of the performance of individual Directors. The Management Committee. For FY05/06, the Committee reviews the recruitment, appointment, development and * There have been no awards under the RSP or the PSP since the adoption of the RSP same evaluation process and evaluation criteria used in past comprised: compensation of senior staff with reference to market data and the PSP. years’ assessment of the Board and Directors’ performances provided by recognised surveys of comparative groups in the were used for FY05/06, to ensure consistency in evaluation. Members Chew Choon Seng aerospace and other related sectors. The Committee also Bey Soo Khiang (appointed on 26 July 2005) NOMINATING COMMITTEE considers and approves the fees payable to Directors serving Alternate Thio Su Mien (Principles 4 and 5) The Nominating Committee and the Board are committed to on the Board and Board Committees. The Committee is also conduct the annual formal assessment of the Board and Directors responsible for reviewing the eligibility, guidelines, allotment The Board Committee does not conduct physical meetings. Four non-executive Directors, three of whom are independent as a means to take stock, monitor performance, and make and awards of the Company’s Employee Share Option Plan In practice, resolutions are passed by the Board Committee by (including the Chairman), make up the Nominating Committee. continuous improvements at the Board level, based on the (“ESOP”), the Restricted Share Plan (”RSP”) and the Performance circulation in writing. Resolutions approved by the Board The members of the Nominating Committee for FY05/06 were: feedback received. Share Plan (”PSP”). Details on the RSP and PSP were set out Committee are reported to the Board at the Board meeting in the Circular To Shareholders dated 1 July 2005. following the circulation. Chairman Wong Ngit Liong With due regard given to Principles 4 and 5 of the Code, the Members Chew Choon Seng Nominating Committee also performed, inter alia, the following During FY05/06, the Committee held four meetings and The Board Committee has been useful in relieving the Board Wong Nang Jang functions over two meetings in FY05/06: performed, inter alia, the following main functions: on routine day-to-day matters that require Board approval. Tan Bian Ee (appointed on 1 February 2006) (a) recommended the appointment of Tan Bian Ee as an The swiftness of their deliberation and decision-making enables (a) reviewed and decided the allotment for the 7th ESOP the Company to be more efficient in its daily operations. The Nominating Committee considered the need to appoint additional member of the Audit Committee with effect Grant; additional Directors, preferably independent Directors, to from 1 June 2005 and an additional member of the (b) determined the eligibility and guidelines of the 7th ESOP maintain a strong element of independence in the Board’s Nominating Committee with effect from 1 February 2006; Grant; COMPANY SECRETARY composition. The Committee shortlisted and recommended (b) recommended the appointment of Koh Kheng Siong as (c) conducted the annual salary review and promotion exercise to the Board new Directors for appointment, based on a stringent Director with effect from 1 September 2005 and as an of senior staff; The Directors have separate and independent access to the set of criteria established in 2001 that seeks to augment the additional member of the Audit Committee with effect (d) reviewed and approved the appointments of senior staff; Company Secretary. The role of the Company Secretary has collective experience, expertise and qualifications of existing from 1 January 2006; (e) determined the Profit Sharing Bonus Formula (including been defined by the Board to include: Directors. (c) recommended the appointment of Stephen Lee Ching Yen the identification of Company-specific Key Performance as Director with effect from 1 December 2005 and as Indicators) for senior staff; a) supervising, monitoring and advising on compliance by Since the Company’s listing, the Board has selected candidates Chairman with effect from 1 January 2006; (f) reviewed and approved the implementation of the RSP the Company with its Memorandum and Articles of who have met these high and exacting standards. The (d) determined the independence/non-independence of and the PSP with effect from FY06/07*; Association, laws and regulations applicable in Singapore, Nominating Committee believes that the Board has an optimal Directors based on individual Director’s declaration; and (g) reviewed and updated the succession plan for key positions and the Listing Manual of the SGX-ST; mix of experience and expertise to guide the Company in (e) considered and recommended Directors to retire by rotation in the Company; achieving its business objectives. and seek re-election at the AGM for 2006. (h) reviewed the progress and status of the Collective Agreements between the Company and its Unions; 64 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 65

CORPORATE GOVERNANCE

COMPENSATION & HR COMMITTEE (i) reviewed the manpower recruitment and retention strategies At the 2006 AGM, Bey Soo Khiang and Thio Su Mien will BOARD COMMITTEE (Principles 7 and 8) for the Company; retire. In noting Wong Ngit Liong's request to retire as Director (j) reviewed the proposed Flexible Technical Employment at the close of the same AGM, the Nominating Committee The Board Committee deputises for the Board on routine The Compensation & HR Committee comprises three non- Scheme; had recommended Bey Soo Khiang and Thio Su Mien’s re- matters to facilitate day-to-day administration and to expedite executive Directors, two of whom (including the Chairman) (k) reviewed the compensation philosophy and framework for election, after assessing their respective contributions, including decisions thereon, including opening of bank accounts, affixing are independent. The members of the Committee for FY05/06 senior staff; their attendance, preparedness and participation at Board the Company’s seal on documents requiring the Company’s were: (l) reviewed the remuneration payable to Company Directors meetings. seal, and authorising specific officers to sign pertinent documents for FY05/06; on behalf of the Company. The Board Committee also approves Chairman N Varaprasad (m) reviewed the findings and specific action plans derived The Nominating Committee initiated a formal Board evaluation capital expenditures from $1.5 million to $5 million, and Members Chew Choon Seng from the Organisation Climate Survey and the Managers’ process in FY02/03 by engaging a consultant to assist the investments in joint ventures of up to $5 million. Approvals Wong Ngit Liong Perception Survey; and Committee in assessing the efficacy of the Board as a whole. of values below the base level of $1.5 million, except for (n) conducted a competency profiling exercise for senior staff. The assessment was expanded in FY03/04 to include an investments in joint ventures, are referred to the Senior The Committee, guided by the principles of the Code, regularly assessment of the performance of individual Directors. The Management Committee. For FY05/06, the Committee reviews the recruitment, appointment, development and * There have been no awards under the RSP or the PSP since the adoption of the RSP same evaluation process and evaluation criteria used in past comprised: compensation of senior staff with reference to market data and the PSP. years’ assessment of the Board and Directors’ performances provided by recognised surveys of comparative groups in the were used for FY05/06, to ensure consistency in evaluation. Members Chew Choon Seng aerospace and other related sectors. The Committee also Bey Soo Khiang (appointed on 26 July 2005) NOMINATING COMMITTEE considers and approves the fees payable to Directors serving Alternate Thio Su Mien (Principles 4 and 5) The Nominating Committee and the Board are committed to on the Board and Board Committees. The Committee is also conduct the annual formal assessment of the Board and Directors responsible for reviewing the eligibility, guidelines, allotment The Board Committee does not conduct physical meetings. Four non-executive Directors, three of whom are independent as a means to take stock, monitor performance, and make and awards of the Company’s Employee Share Option Plan In practice, resolutions are passed by the Board Committee by (including the Chairman), make up the Nominating Committee. continuous improvements at the Board level, based on the (“ESOP”), the Restricted Share Plan (”RSP”) and the Performance circulation in writing. Resolutions approved by the Board The members of the Nominating Committee for FY05/06 were: feedback received. Share Plan (”PSP”). Details on the RSP and PSP were set out Committee are reported to the Board at the Board meeting in the Circular To Shareholders dated 1 July 2005. following the circulation. Chairman Wong Ngit Liong With due regard given to Principles 4 and 5 of the Code, the Members Chew Choon Seng Nominating Committee also performed, inter alia, the following During FY05/06, the Committee held four meetings and The Board Committee has been useful in relieving the Board Wong Nang Jang functions over two meetings in FY05/06: performed, inter alia, the following main functions: on routine day-to-day matters that require Board approval. Tan Bian Ee (appointed on 1 February 2006) (a) recommended the appointment of Tan Bian Ee as an The swiftness of their deliberation and decision-making enables (a) reviewed and decided the allotment for the 7th ESOP the Company to be more efficient in its daily operations. The Nominating Committee considered the need to appoint additional member of the Audit Committee with effect Grant; additional Directors, preferably independent Directors, to from 1 June 2005 and an additional member of the (b) determined the eligibility and guidelines of the 7th ESOP maintain a strong element of independence in the Board’s Nominating Committee with effect from 1 February 2006; Grant; COMPANY SECRETARY composition. The Committee shortlisted and recommended (b) recommended the appointment of Koh Kheng Siong as (c) conducted the annual salary review and promotion exercise to the Board new Directors for appointment, based on a stringent Director with effect from 1 September 2005 and as an of senior staff; The Directors have separate and independent access to the set of criteria established in 2001 that seeks to augment the additional member of the Audit Committee with effect (d) reviewed and approved the appointments of senior staff; Company Secretary. The role of the Company Secretary has collective experience, expertise and qualifications of existing from 1 January 2006; (e) determined the Profit Sharing Bonus Formula (including been defined by the Board to include: Directors. (c) recommended the appointment of Stephen Lee Ching Yen the identification of Company-specific Key Performance as Director with effect from 1 December 2005 and as Indicators) for senior staff; a) supervising, monitoring and advising on compliance by Since the Company’s listing, the Board has selected candidates Chairman with effect from 1 January 2006; (f) reviewed and approved the implementation of the RSP the Company with its Memorandum and Articles of who have met these high and exacting standards. The (d) determined the independence/non-independence of and the PSP with effect from FY06/07*; Association, laws and regulations applicable in Singapore, Nominating Committee believes that the Board has an optimal Directors based on individual Director’s declaration; and (g) reviewed and updated the succession plan for key positions and the Listing Manual of the SGX-ST; mix of experience and expertise to guide the Company in (e) considered and recommended Directors to retire by rotation in the Company; achieving its business objectives. and seek re-election at the AGM for 2006. (h) reviewed the progress and status of the Collective Agreements between the Company and its Unions; 66 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 67

CORPORATE GOVERNANCE

b) ensuring an open and regular flow of communication of Association of the Company, or as are required by the The remuneration of each Director for FY05/06 is as shown in the table below: between the Company and the SGX-ST, the Accounting Chairman of the Board or the Chairman of any Board Committee & Corporate Regulatory Authority and both institutional or the Directors (or any of them), as the case may be. Name of Director Fees Received ($) and individual shareholders; and Stephen Lee Ching Yen 1 19,425 c) updating and informing the Board on the principles and Chew Choon Seng 84,000 best practices of corporate governance. REMUNERATION REPORT N Varaprasad 64,000 (Principle 9) Wong Nang Jang 72,000 The Company Secretary also performs such other duties of a Wong Ngit Liong 60,000 1 Mr Stephen Lee was appointed as Director on 1 December 2005 and Directors’ remuneration for FY05/06, comprising fees and company secretary as are required under the laws and regulations Bey Soo Khiang 45,458 elected Chairman on 1 January 2006. allowances, amounts to $542,404 ($569,702 in FY04/05) and 2 or as are specified in the SGX-ST Listing Manual or the Articles Thio Su Mien 52,000 Mr Koh Kheng Siong was appointed as Director on 1 September 2005. is derived using the following rates: 3 Mr Koh Boon Hwee stepped down as Chairman and Director on 31 Tan Bian Ee 51,288 December 2005. 2 Koh Kheng Siong 26,192 4 Mr Chew Leng Seng retired at the AGM on 25 July 2005. 3 Type of Appointment Fees per Annum Koh Boon Hwee 48,973 5 The fees due to Chew Choon Seng and Bey Soo Khiang are paid to 4 Board of Directors Chew Leng Seng 19,068 Singapore Airlines Limited while the fees due to N Varaprasad and Wong Ngit Liong are paid to the Directorship and Consultancy Member’s Fees (“Basic Fee”) 1 X Basic Fee = $40,000 Total 542,404 Appointments Council and Venture Corporation respectively. Chairman’s Allowance 0.625 X Basic Fee = $25,000 Deputy Chairman’s Allowance 0.5 X Basic Fee = $20,000 The annual remuneration report for the Company’s top 5 executives is as follows: Board Committee Member’s Allowance 0.20 X Basic Fee = $8,000 Remuneration Bands & Salary Bonus Benefits Total Stock options granted Top 5 Executives (%) (%) (%) during the year Fixed Variable# (on 1 July 2005) Audit Committee (%) (%) Member’s Allowance 0.30 X Basic Fee = $12,000 Number Exercise Price Chairman’s Allowance 0.60 X Basic Fee = $24,000 $500,001 - $750,000 William Tan Seng Koon 48 4 36 12 100 225,000 $2.45 Other Board Committees Chief Executive Officer

Member’s Allowance 0.20 X Basic Fee = $8,000 $250,001 - $500,000 Chairman’s Allowance 0.30 X Basic Fee = $12,000 Chan Seng Yong 64 5 26 5 100 96,000 $2.45 Senior Vice President (Services) Note: Subject to Shareholders’ approval, every Director will be entitled to receive the full Basic Fee Oh Wee Khoon 63 6 26 5 100 114,000 $2.45 as shown in the table above for FY05/06. In addition, he will be entitled to receive the Senior Vice President (Aircraft Services & Business Development) Chairman’s allowance if he is Chairman of the Board as well as the relevant allowances (depending on whether he is Chairman or a Member of the relevant Board Committee) for Png Kim Chiang 63 6 25 6 100 132,000 $2.45 each position he holds on a Board Committee. If the Director occupied a position for part Senior Vice President (Commercial) of FY05/06, the fee or allowance payable will be pro-rated accordingly. The same rates used to compute Directors’ remuneration for FY04/05 were used for FY05/06. Below $250,000 Jack Koh Swee Lim 53 8 33 6 100 – – Senior Vice President (Line Maintenance & Materials) (joined on 1 September 2005)

The remuneration bands above do not include the value of the share options granted. # Includes profit-sharing bonus determined on an accrual basis for the financial year ended 31 March 2006.

Details of the Company’s Employee Share Option Scheme can be found in the Report by the Board of Directors. 66 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 67

CORPORATE GOVERNANCE

The remuneration bands above do not include the value of the share options granted. # Includes profit-sharing bonus determined on an accrual basis for the financial year ended 31 March 2006.

Details of the Company’s Employee Share Option Scheme can be found in the Report by the Board of Directors. 68 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 69

CORPORATE GOVERNANCE

SENIOR EXECUTIVES’ PROFILE University of Manchester Institute of Science and Technology Senior Vice President (Line Maintenance and Materials) - The reporting structure within the Company’s risk management with a First Class Honours degree in Mechanical Engineering Mr Jack Koh Swee Lim, 53, holds a Bachelor of Business from framework, which was formalised in 2003, is as follows: President & Chief Executive Officer - Mr William Tan, 53, and holds a Master Degree in Business Administration from Curtin University (Australia) and a Master of Business was appointed President & Chief Executive Officer of SIA the National University of Singapore. Administration from Monash University (Australia). Engineering Company in May 2001. Board of Directors Mr Oh joined SIA in 1975 and was transferred to SIA Mr Koh joined SIA in 1971. He served as Vice President Mr Tan joined SIA, the Airline, in 1978 and served in various Engineering Company in 1993. Mr Oh served in various Technical Projects in 1999 and was appointed Divisional Vice Reviews the positions in the Engineering Division of SIA, rising to become Reports to the Board on: management positions in SIA and SIA Engineering Company. President Engineering in 2001. Mr Koh was appointed Senior i) Business Risks effectiveness of the risk management the Senior Vice President of Engineering in 1999. Mr Tan He was appointed as Senior Vice President (Commercial) on Vice President (Line Maintenance and Materials) in SIA ii) Strategic Risks iii) Operational Risks structure and process holds a Bachelor of Science (Engineering) degree from the 1 April 2000, responsible for Business Development, Partnership Engineering Company in September 2005. University of Singapore and a Diploma in Business Management, Marketing and Sales, as well as Facilities Audit Committee Administration from the National University of Singapore Development Divisions. On 1 September 2005, Mr Oh was He is a Director of SIA Cargo Pte Ltd, Messier Services Asia (AC) (NUS). appointed as Senior Vice President (Aircraft Services and Pte Ltd, International Engine Component Overhaul Pte Ltd Risk Management Business Development). His responsibilities now include and PT JAS Aero-Engineering Services. Reports on Financial Committee (RMC) Mr Tan is the non-executive Chairman of JAMCO Aero Design Risks to the Board strategy planning and overseeing the activities of Base through the Audit & Engineering Pte Ltd and Singapore JAMCO Pte Ltd, Deputy Maintenance, Workshops and Business Development Divisions. Committee Chairman of Eagle Services Asia Pte Ltd, Deputy Chairman of INTERNAL CONTROLS Singapore Aero Engine Services Limited, a Director on the Mr Oh is the Chairman of Fuel Accessory Service Technologies (Principle 12) Risk Co-ordinators Boards of Singapore Aircraft Leasing Enterprise Pte Ltd and Pte Ltd and Aviation Partnership (Philippines) Corporation. SIAEC Global Pte Ltd. He is also a Director of Eagle Services Asia Pte Ltd and SIAEC The Board believes that, in the absence of evidence to the Global Pte Ltd. Mr Oh has been the President of the Association contrary, the system of internal controls maintained by the Senior Vice President (Services) - Mr Chan Seng Yong, 58, of Aerospace Industries (Singapore) since December 2002. Company’s Management and that was in place throughout the Division Heads joined the Engineering Division of SIA in 1968. In 1997, he financial year and up to the date of this report provides (Risk Owners) was appointed Vice-President Engineering Planning. In April Senior Vice President (Commercial) - Mr Png Kim Chiang, reasonable, but not absolute, assurance against material financial 2000, Mr Chan was transferred to SIA Engineering Company 47, holds a Bachelor of Science degree in Computation (First misstatements or loss, and include the safeguarding of assets, and was appointed Senior Vice President (Operations) Class Honours) from the University of Manchester Institute of the maintenance of proper accounting records, the reliability RISK PROCESSES AND ACTIVITIES responsible for all operational divisions. On 1 September 2005, Science and Technology as well as a Master in Business of financial information, compliance with appropriate legislation, In the preceding year, the following processes and activities he became the Senior Vice President (Services) and he now Administration from the National University of Singapore. regulation and best practice, and the identification and were carried out to enhance the Company’s oversight of risk oversees the Facilities Development, Engineering and containment of enterprise risk. The Board notes that no system management: Information Technology, Productivity and Engineering Training Mr Png joined SIA in 1975 and has served in various departments of internal control could provide absolute assurance against Divisions. of the Engineering Division of SIA. He was appointed Vice the occurrence of material errors, poor judgment in decision- a) Control Self Assessment (‘CSA’) for Process Risks President Engineering Supplies in 1998. In April 2001, Mr Png making, human error, losses, fraud or other irregularities. Line departments tested their compliance with established In addition to aircraft maintenance qualifications, Mr Chan was transferred to SIA Engineering Company as its Senior Vice processes during the CSA validation exercise. The holds a Bachelor of Business (Business Administration for President (Services). On 1 September 2005, he was appointed programme provides a structured framework for line Information Technology) from the Royal Melbourne Institute as Senior Vice President (Commercial) and is currently RISK MANAGEMENT management to assess themselves against key controls of Technology, Australia. responsible for Marketing and Sales, Fleet Management and (Principle 12) identified to mitigate risks within the processes. Major Partnership Management Divisions. process risks identified in the exercise have been escalated Mr Chan is a Director on the Boards of Combustor Airmotive The Risk Management Committee (“RMC”), chaired by the for further review by the RMC. Services Pte Ltd, Asian Surface Technologies Pte Ltd and Mr Png is the Chairman of Aerospace Component Engineering Chief Executive Officer and comprising members from Senior Messier Services Asia Pte Ltd. Services Pte Ltd and Pan Asia Pacific Aviation Services Limited, Management, assists the Audit Committee and the Board in b) Annual Risk Refresh Deputy Chairman of Goodrich Aerostructures Service Centre- driving risk management activities within the Company. The Company carried out the Annual Risk Refresh Exercise Senior Vice President (Aircraft Services and Business Asia Pte Ltd, and a Director of Singapore Aero Engine Services from January to February 2006, using the standardised 5- Development) - Mr Oh Wee Khoon, 47, graduated from Ltd and Tiger Airways Pte Ltd. step risk management process to identify, evaluate, prioritise, reduce and review risks at all levels of risk ownership. Risks at departmental levels were evaluated at divisional levels before being consolidated for review by the RMC. 68 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 69

CORPORATE GOVERNANCE

SENIOR EXECUTIVES’ PROFILE University of Manchester Institute of Science and Technology Senior Vice President (Line Maintenance and Materials) - The reporting structure within the Company’s risk management with a First Class Honours degree in Mechanical Engineering Mr Jack Koh Swee Lim, 53, holds a Bachelor of Business from framework, which was formalised in 2003, is as follows: President & Chief Executive Officer - Mr William Tan, 53, and holds a Master Degree in Business Administration from Curtin University (Australia) and a Master of Business was appointed President & Chief Executive Officer of SIA the National University of Singapore. Administration from Monash University (Australia). Engineering Company in May 2001. Board of Directors Mr Oh joined SIA in 1975 and was transferred to SIA Mr Koh joined SIA in 1971. He served as Vice President Mr Tan joined SIA, the Airline, in 1978 and served in various Engineering Company in 1993. Mr Oh served in various Technical Projects in 1999 and was appointed Divisional Vice Reviews the positions in the Engineering Division of SIA, rising to become Reports to the Board on: management positions in SIA and SIA Engineering Company. President Engineering in 2001. Mr Koh was appointed Senior i) Business Risks effectiveness of the risk management the Senior Vice President of Engineering in 1999. Mr Tan He was appointed as Senior Vice President (Commercial) on Vice President (Line Maintenance and Materials) in SIA ii) Strategic Risks iii) Operational Risks structure and process holds a Bachelor of Science (Engineering) degree from the 1 April 2000, responsible for Business Development, Partnership Engineering Company in September 2005. University of Singapore and a Diploma in Business Management, Marketing and Sales, as well as Facilities Audit Committee Administration from the National University of Singapore Development Divisions. On 1 September 2005, Mr Oh was He is a Director of SIA Cargo Pte Ltd, Messier Services Asia (AC) (NUS). appointed as Senior Vice President (Aircraft Services and Pte Ltd, International Engine Component Overhaul Pte Ltd Risk Management Business Development). His responsibilities now include and PT JAS Aero-Engineering Services. Reports on Financial Committee (RMC) Mr Tan is the non-executive Chairman of JAMCO Aero Design Risks to the Board strategy planning and overseeing the activities of Base through the Audit & Engineering Pte Ltd and Singapore JAMCO Pte Ltd, Deputy Maintenance, Workshops and Business Development Divisions. Committee Chairman of Eagle Services Asia Pte Ltd, Deputy Chairman of INTERNAL CONTROLS Singapore Aero Engine Services Limited, a Director on the Mr Oh is the Chairman of Fuel Accessory Service Technologies (Principle 12) Risk Co-ordinators Boards of Singapore Aircraft Leasing Enterprise Pte Ltd and Pte Ltd and Aviation Partnership (Philippines) Corporation. SIAEC Global Pte Ltd. He is also a Director of Eagle Services Asia Pte Ltd and SIAEC The Board believes that, in the absence of evidence to the Global Pte Ltd. Mr Oh has been the President of the Association contrary, the system of internal controls maintained by the Senior Vice President (Services) - Mr Chan Seng Yong, 58, of Aerospace Industries (Singapore) since December 2002. Company’s Management and that was in place throughout the Division Heads joined the Engineering Division of SIA in 1968. In 1997, he financial year and up to the date of this report provides (Risk Owners) was appointed Vice-President Engineering Planning. In April Senior Vice President (Commercial) - Mr Png Kim Chiang, reasonable, but not absolute, assurance against material financial 2000, Mr Chan was transferred to SIA Engineering Company 47, holds a Bachelor of Science degree in Computation (First misstatements or loss, and include the safeguarding of assets, and was appointed Senior Vice President (Operations) Class Honours) from the University of Manchester Institute of the maintenance of proper accounting records, the reliability RISK PROCESSES AND ACTIVITIES responsible for all operational divisions. On 1 September 2005, Science and Technology as well as a Master in Business of financial information, compliance with appropriate legislation, In the preceding year, the following processes and activities he became the Senior Vice President (Services) and he now Administration from the National University of Singapore. regulation and best practice, and the identification and were carried out to enhance the Company’s oversight of risk oversees the Facilities Development, Engineering and containment of enterprise risk. The Board notes that no system management: Information Technology, Productivity and Engineering Training Mr Png joined SIA in 1975 and has served in various departments of internal control could provide absolute assurance against Divisions. of the Engineering Division of SIA. He was appointed Vice the occurrence of material errors, poor judgment in decision- a) Control Self Assessment (‘CSA’) for Process Risks President Engineering Supplies in 1998. In April 2001, Mr Png making, human error, losses, fraud or other irregularities. Line departments tested their compliance with established In addition to aircraft maintenance qualifications, Mr Chan was transferred to SIA Engineering Company as its Senior Vice processes during the CSA validation exercise. The holds a Bachelor of Business (Business Administration for President (Services). On 1 September 2005, he was appointed programme provides a structured framework for line Information Technology) from the Royal Melbourne Institute as Senior Vice President (Commercial) and is currently RISK MANAGEMENT management to assess themselves against key controls of Technology, Australia. responsible for Marketing and Sales, Fleet Management and (Principle 12) identified to mitigate risks within the processes. Major Partnership Management Divisions. process risks identified in the exercise have been escalated Mr Chan is a Director on the Boards of Combustor Airmotive The Risk Management Committee (“RMC”), chaired by the for further review by the RMC. Services Pte Ltd, Asian Surface Technologies Pte Ltd and Mr Png is the Chairman of Aerospace Component Engineering Chief Executive Officer and comprising members from Senior Messier Services Asia Pte Ltd. Services Pte Ltd and Pan Asia Pacific Aviation Services Limited, Management, assists the Audit Committee and the Board in b) Annual Risk Refresh Deputy Chairman of Goodrich Aerostructures Service Centre- driving risk management activities within the Company. The Company carried out the Annual Risk Refresh Exercise Senior Vice President (Aircraft Services and Business Asia Pte Ltd, and a Director of Singapore Aero Engine Services from January to February 2006, using the standardised 5- Development) - Mr Oh Wee Khoon, 47, graduated from Ltd and Tiger Airways Pte Ltd. step risk management process to identify, evaluate, prioritise, reduce and review risks at all levels of risk ownership. Risks at departmental levels were evaluated at divisional levels before being consolidated for review by the RMC. 70 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 71

CORPORATE GOVERNANCE

c) Formalisation of SIAEC’s Second-Tier Risks detection, reporting and investigation for fraud within the MANAGEMENT COMMITTEES e-mail or fax. The Company will consider implementing the Further to the Company’s top risks, the RMC formalised Company. A Whistle-Blowing Committee has been set relevant amendment to its Articles of Association if the Board a list of second-tier risks in October 2005 to expand its up to handle investigations. The Company has Management Committees which provide is of the view that there is a demand for the same, and after oversight of risks, and progressively review the same. The an intermediate and objective avenue for reviewing the the Company has evaluated and put in place the necessary Company’s Risk Register is constantly updated and refined c) Corporate Policies on Banking and Borrowing Activities Company’s policies and procedures. More importantly, these measures to facilitate absentia voting and protection against through this process. Corporate policies in relation to banking and borrowing Committees enable the Management to closely monitor the errors, fraud and other irregularities. activities were reviewed by the SIA Group. Lenders to entire expanse of the Company’s business and operations. Each d) Business Continuity Plans SIAEC are to note that all bank transactions undertaken Management Committee is tasked to oversee very specific areas The Chairmen of the Audit Committee, Nominating Committee Changes to the operating climate are monitored closely by the Company must be properly authorised, including that affect the operations of the Company. These Committees and Compensation & HR Committee, and members of the and Business Continuity Plans (“BCPs”) have been developed the opening of new bank accounts and any proposed credit hold meetings with varying frequency, from daily, weekly, bi- respective Committees, as well as the external auditors, plan for identified events that may cause disruptions to facilities. The Company has its own approval limits and weekly to monthly. to be in attendance at the Company’s General Meeting to operations. An example is the risk of a flu pandemic in procedures for every banking transaction, having regard address questions from Shareholders. Singapore. The BCPs outline the procedures and processes to the nature of the transaction concerned. These approval The functions of the various Committees include reviewing for the Business Units to resume and recover the disrupted limits and procedures are updated from time to time. operational efficiency and effectiveness; managing operational business functions. risks and maintaining internal controls; recommending and SECURITIES TRANSACTIONS COMMENTS BY THE BOARD OF DIRECTORS approving capital expenditures; evaluating IT system projects; e) Risk Oversight and Audit Having reviewed the risk management practices and activities ensuring occupational safety and health; reviewing staff As recommended by the SGX-ST’s Best Practices Guide, the Good risk management practices require the establishment of the Company, the Board of Directors believe that, in the development and progression; developing investor relations Company has a set of Policy and Guidelines for dealings in the of oversight and audit controls to ensure compliance. SIA absence of evidence to the contrary, a satisfactory system of strategies; approving tender exercises and tender awards; and Company’s securities, which has been disseminated to employees Internal Audit carried out an independent review in March internal controls and risk management is maintained by the addressing issues relating to service standards, quality and of the Company and Directors. The Policy and Guidelines 2006 to evaluate the effectiveness of the Company’s risk Company’s Management. productivity. restrict certain employees from trading in the Company’s management processes. In addition to the Company’s securities during the period two weeks prior to the announcement procedural manuals, risk mitigation plans were also tested of corporate results for the first three quarters of the financial for compliance. The auditors were satisfied that the INTERNAL AUDIT COMMUNICATIONS WITH SHAREHOLDERS year, and one month prior to the announcement of full-year Company’s risk management processes are consistently (Principle 13) (Principle 14 and 15) results, and ending on the date of announcement of the results. applied at all levels. These employees include all Administrative Officers and above, The Company has an internal audit function, which is undertaken The Company strives to convey to Shareholders pertinent regardless of department or division; and certain other employees ENHANCEMENT OF RISK POLICIES by the Internal Audit Department of Singapore Airlines Limited information in a clear, detailed and timely manner and on a in departments which are likely to be privy to confidential The Company has also introduced new risk policies and updated (SIA Internal Audit Department), the Company’s holding regular basis. The Company holds analyst briefings of its price-sensitive information, including the Offices of the Chief existing ones to ensure that the overall control environment company. It is designed to provide reasonable assurance about second-quarter and full-year results. These results are published Executive Officer and Senior Vice Presidents, Finance, remains relevant in the current operating environment: the effectiveness and efficiency of operations, reliability of through SGXNET, press releases and the Company’s website. Corporate, Business Development, Partnership Management, financial information and compliance with the Company’s Since July 2003, the Company has been releasing quarterly Marketing & Sales Divisions, and any other staff and/or a) Guidelines on Managing Risks of Outsourcing policies and procedures, applicable laws and regulations. The reports of its corporate results. divisions/departments to be notified from time to time. The trend of increasing outsourcing of non-core activities internal auditors report directly to the Company’s Audit The Policy and Guidelines also remind employees and Directors to stay competitive has resulted in increased dependency Committee. In situations where the audit work to be carried The Company’s Investor Relations Department communicates to be mindful of the insider trading prohibitions under the on external parties for our success. In view of the above, out by SIA Internal Audit Department could give rise to potential with analysts regularly and monitors the dissemination of Securities and Futures Act 2001 whenever trading in the guidelines on managing such risks arising from outsourcing conflicts of interest, such as audit work relating to transactions material information to ensure that it is disclosed to the market Company’s or any other corporation’s securities. of these activities and functions were formalised and issued between the Company and Singapore Airlines Limited, the in a timely manner and on a non-selective basis. in June 2005. Audit Committee may authorise such audit work to be carried out by an independent third party as it deems appropriate. While Shareholders have a right to appoint proxies to attend b) Fraud Management/Whistle-Blowing Procedures The Company’s internal audit function meets the standards set and vote at General Meetings on their behalf, the Company’s In October 2005, the Company set out its policy and by the Institute of Internal Auditors. Articles of Association currently do not provide for Shareholders procedures on fraud. The procedures provide guidance on to vote at General Meetings in absentia, such as by mail, 70 SIA Engineering Company • Annual Report 2005/06 SIA Engineering Company • Annual Report 2005/06 71

CORPORATE GOVERNANCE

c) Formalisation of SIAEC’s Second-Tier Risks detection, reporting and investigation for fraud within the MANAGEMENT COMMITTEES e-mail or fax. The Company will consider implementing the Further to the Company’s top risks, the RMC formalised Company. A Whistle-Blowing Committee has been set relevant amendment to its Articles of Association if the Board a list of second-tier risks in October 2005 to expand its up to handle investigations. The Company has Management Committees which provide is of the view that there is a demand for the same, and after oversight of risks, and progressively review the same. The an intermediate and objective avenue for reviewing the the Company has evaluated and put in place the necessary Company’s Risk Register is constantly updated and refined c) Corporate Policies on Banking and Borrowing Activities Company’s policies and procedures. More importantly, these measures to facilitate absentia voting and protection against through this process. Corporate policies in relation to banking and borrowing Committees enable the Management to closely monitor the errors, fraud and other irregularities. activities were reviewed by the SIA Group. Lenders to entire expanse of the Company’s business and operations. Each d) Business Continuity Plans SIAEC are to note that all bank transactions undertaken Management Committee is tasked to oversee very specific areas The Chairmen of the Audit Committee, Nominating Committee Changes to the operating climate are monitored closely by the Company must be properly authorised, including that affect the operations of the Company. These Committees and Compensation & HR Committee, and members of the and Business Continuity Plans (“BCPs”) have been developed the opening of new bank accounts and any proposed credit hold meetings with varying frequency, from daily, weekly, bi- respective Committees, as well as the external auditors, plan for identified events that may cause disruptions to facilities. The Company has its own approval limits and weekly to monthly. to be in attendance at the Company’s General Meeting to operations. An example is the risk of a flu pandemic in procedures for every banking transaction, having regard address questions from Shareholders. Singapore. The BCPs outline the procedures and processes to the nature of the transaction concerned. These approval The functions of the various Committees include reviewing for the Business Units to resume and recover the disrupted limits and procedures are updated from time to time. operational efficiency and effectiveness; managing operational business functions. risks and maintaining internal controls; recommending and SECURITIES TRANSACTIONS COMMENTS BY THE BOARD OF DIRECTORS approving capital expenditures; evaluating IT system projects; e) Risk Oversight and Audit Having reviewed the risk management practices and activities ensuring occupational safety and health; reviewing staff As recommended by the SGX-ST’s Best Practices Guide, the Good risk management practices require the establishment of the Company, the Board of Directors believe that, in the development and progression; developing investor relations Company has a set of Policy and Guidelines for dealings in the of oversight and audit controls to ensure compliance. SIA absence of evidence to the contrary, a satisfactory system of strategies; approving tender exercises and tender awards; and Company’s securities, which has been disseminated to employees Internal Audit carried out an independent review in March internal controls and risk management is maintained by the addressing issues relating to service standards, quality and of the Company and Directors. The Policy and Guidelines 2006 to evaluate the effectiveness of the Company’s risk Company’s Management. productivity. restrict certain employees from trading in the Company’s management processes. In addition to the Company’s securities during the period two weeks prior to the announcement procedural manuals, risk mitigation plans were also tested of corporate results for the first three quarters of the financial for compliance. The auditors were satisfied that the INTERNAL AUDIT COMMUNICATIONS WITH SHAREHOLDERS year, and one month prior to the announcement of full-year Company’s risk management processes are consistently (Principle 13) (Principle 14 and 15) results, and ending on the date of announcement of the results. applied at all levels. These employees include all Administrative Officers and above, The Company has an internal audit function, which is undertaken The Company strives to convey to Shareholders pertinent regardless of department or division; and certain other employees ENHANCEMENT OF RISK POLICIES by the Internal Audit Department of Singapore Airlines Limited information in a clear, detailed and timely manner and on a in departments which are likely to be privy to confidential The Company has also introduced new risk policies and updated (SIA Internal Audit Department), the Company’s holding regular basis. The Company holds analyst briefings of its price-sensitive information, including the Offices of the Chief existing ones to ensure that the overall control environment company. It is designed to provide reasonable assurance about second-quarter and full-year results. These results are published Executive Officer and Senior Vice Presidents, Finance, remains relevant in the current operating environment: the effectiveness and efficiency of operations, reliability of through SGXNET, press releases and the Company’s website. Corporate, Business Development, Partnership Management, financial information and compliance with the Company’s Since July 2003, the Company has been releasing quarterly Marketing & Sales Divisions, and any other staff and/or a) Guidelines on Managing Risks of Outsourcing policies and procedures, applicable laws and regulations. The reports of its corporate results. divisions/departments to be notified from time to time. The trend of increasing outsourcing of non-core activities internal auditors report directly to the Company’s Audit The Policy and Guidelines also remind employees and Directors to stay competitive has resulted in increased dependency Committee. In situations where the audit work to be carried The Company’s Investor Relations Department communicates to be mindful of the insider trading prohibitions under the on external parties for our success. In view of the above, out by SIA Internal Audit Department could give rise to potential with analysts regularly and monitors the dissemination of Securities and Futures Act 2001 whenever trading in the guidelines on managing such risks arising from outsourcing conflicts of interest, such as audit work relating to transactions material information to ensure that it is disclosed to the market Company’s or any other corporation’s securities. of these activities and functions were formalised and issued between the Company and Singapore Airlines Limited, the in a timely manner and on a non-selective basis. in June 2005. Audit Committee may authorise such audit work to be carried out by an independent third party as it deems appropriate. While Shareholders have a right to appoint proxies to attend b) Fraud Management/Whistle-Blowing Procedures The Company’s internal audit function meets the standards set and vote at General Meetings on their behalf, the Company’s In October 2005, the Company set out its policy and by the Institute of Internal Auditors. Articles of Association currently do not provide for Shareholders procedures on fraud. The procedures provide guidance on to vote at General Meetings in absentia, such as by mail, 72 SIA Engineering Company • Annual Report 2005/06

CORPORATE GOVERNANCE

financials Code Principal Compliance

1. Every company should be headed by an effective Board to lead and control the company. The Board ✓ is collectively responsible for the success of the company. The Board works with the Management to achieve this and the Management remains accountable to the Board.

2. There should be a strong and independent element on the Board, which is able to exercise objective ✓ judgement on corporate affairs independently, in particular, from the Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

3. There should be a clear division of responsibilities at the top of the company – the working of the ✓ Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

4. There should be a formal and transparent process for the appointment of new Directors to the Board. ✓

5. There should be a formal assessment of the effectiveness of the Board as a whole and the contribution ✓ by each Director to the effectiveness of the Board.

6. In order to fulfil their responsibilities, Board Members should be provided with complete, adequate ✓ and timely information prior to Board meetings and on an on-going basis.

7. There should be a formal and transparent procedure for developing policy on executive remuneration ✓ and for fixing the remuneration packages of individual Directors. No Director should be involved in deciding his own remuneration.

8. The level of remuneration should be appropriate to attract, retain and motivate the directors needed ✓ to run the company successfully but companies should avoid paying more for this purpose. A significant proportion of executive Directors’ remuneration should be linked to performance.

9. Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, ✓ and the procedure for setting remuneration, in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to Directors and key executives, and performance.

10. The Board should present a balanced and understandable assessment of the Company’s performance, ✓ position and prospects.

11. The Board should establish an Audit Committee with written terms of reference, which clearly set ✓ out its authority and duties.

12. The Board should ensure that the Management maintains a sound system of internal controls to ✓ safeguard the shareholders’ investments and the company’s assets.

13. The company should establish an internal audit function that is independent of the activities it audits. ✓

14. Companies should engage in regular, effective and fair communication with shareholders. ✓

15. Companies should encourage greater shareholder participation at AGMs, and allow shareholders the ✓ opportunity to communicate their views on various matters affecting the company. 72 SIA Engineering Company • Annual Report 2005/06