Think Ahead. ANNUAL REPORT 2009 REPORT ANNUAL

Think Think Ahead .

SINGAPORE TECHNOLOGIES ENGINEERING LTD LTD ENGINEERING TECHNOLOGIES SINGAPORE Think Ahead. ANNUAL REPORT 2009 REPORT ANNUAL

SINGAPORE TECHNOLOGIES ENGINEERING LTD 51 Cuppage Road #09-08 StarHub Centre Singapore 229469 ANNUAL REPORT 2009 Tel : (65) 6722 1818 • Fax : (65) 6720 2293 www.stengg.com

(Regn. No.: 199706274H) Think Ahead 01 Organisation Chart 30 Investor Relations 48 Letter to Shareholders 10 Corporate Governance 32 Awards 50

Financial Highlights 16 Human Resource 44 Operating Financial Review 53 Board of Directors 22 Corporate Social Responsibility 46 Financial Report 85 Senior Management 28 Environment, Health and Safety 47

This annual report has been certified by the Forest Stewardship Council as an example of environmentally responsible forestry print production: • From the forest, to the paper mill and printer, each step of this annual report’s production is certified according to FSC standards. • The paper material, Eco-Frontier, is an environmentally friendly paper that is FSC Certified, with the added endorsement of the Singapore Green Labelling Scheme (SGLS). Comprising 51% recycled and 49% virgin pulp, this paper is produced using steam and electrical energy, effectively lowering the level of emissions emitted during its manufacture. • The paper’s local distributor, RJ Paper, is a recipient of the National Environment Agency’s Green Leaf Award, and is FSC Certified; whilst the printer for this report, AlsoDominie Press, is similarly FSC Certified. Think Ahead.

Staying ahead means thinking ahead. Spotting trends, anticipating needs, creating new uses for technology. With our innovative ideas and inventions, ST Engineering leads the pack. The thinking never stops, even in challenging times. Learning from the past, we make ourselves smarter and stronger for the future. And by getting people – partners, stakeholders, employees – to think with us, we build the kind of synergy that turns challenges into opportunities. We think, therefore we are. 2

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Strategic. 4

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Creative. 6

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Innovation. 8

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Synergy. The ST Engineering Group We are confident that we has weathered the storm well. have a winning business We continue to show strong model, which we continually operating performance and strengthen, that will see continue to deliver good results. us through any economic Peter SEAH Lim Huat situation and allow us to seize Chairman opportunities.

TAN Pheng Hock President & CEO Singapore Technologies Engineering Ltd Think Ahead. 11 Annual Report 2009 Letter to Shareholders

Every crisis presents opportunities. Throughout the year, ST Engineering has consistently won new contracts, proving the resilience of our business model.

ear Shareholders Seizing opportunities DAs we write this review, the economic outlook has brightened considerably from a year ago. Every crisis presents opportunities. Throughout Globally, signs of recovery are showing and most the year, ST Engineering has consistently won new governments and businesses are cautiously optimistic contracts, proving the resilience of our business model. that the recovery is sustainable and economies are At the end of 2009, our order book at $10.3b was slowly getting back on their feet. about twice our revenue, a robust level which provides good revenue visibility. Yet, for a good part of 2009, many countries were reporting much lower or even negative growth, as While the order book size reflects our sales efforts, the the global economic crisis that started in late 2008 diversity of contracts we won reflects the breadth and continued into the year. Increases in job losses in depth of our capabilities and our market reputation. many countries forced most governments to introduce Significantly, many of these contracts were for measures to stimulate the economy. The outlook was government-related projects, both local and overseas, highly uncertain and challenging, and many businesses both defence and commercial, providing a stabilising faced a tough operating environment. balance to our workload.

Against this backdrop, the ST Engineering Group While all four sectors benefited from government or has weathered the storm well. We continue to show government-related projects, many of these projects strong operating performance and continue to deliver were the result of our dual use technology approach good results. The Group registered 4% growth in its where defence technology is used in commercial turnover to $5.55b with commercial sales constituting applications and vice versa. Key ones included the 62% or $3.4b of the Group’s turnover. Profit before Advanced Combat Man System for the Singapore tax increased slightly to $546.6m while profit after tax Armed Forces, Expressway Monitoring & Advisory and minority interests was lower by 6% at $443.9m. System for the Land Transport Authority, command Earnings per share was 14.78 cents and the Group’s and control systems for the Singapore Civil Defence return on equity remained respectable at 28.3%. Force and the Singapore Police Force, training services to the Republic of Singapore Navy and security-enhancement services for the Central Bank Rewarding our shareholders of Oman. The Land Systems sector continued to win overseas contracts for its 40mm ammunition, To reward our loyal shareholders, the Board of and has started delivery on the UK MOD Warthog Directors has recommended a final dividend of 10.28 contract announced in 2008. Our US subsidiary, cents per share, comprising an ordinary dividend VT Miltope, won a US$500m contract to supply its of 4.00 cents and a special dividend of 6.28 cents. MSD-V3 system comprising laptops, test equipment Together with the interim ordinary dividend of 3.00 and instrument to the US Army. VT Miltope had been cents per share paid in September 2009, the total supplying its MSD-V2 system to the US Army over five dividend payout for the year will be 13.28 cents per years from 2004. This new contract affirms the quality share. This is subject to shareholders’ approval at our of our system in providing US Army soldiers in the AGM in April 2010. field with robust computing capabilities that work in the toughest tactical environment. At the close of the year, the Marine sector secured a contract to build an 12 LETTER TO SHAREHOLDERS

enhanced version of a T-AGS 60 Class oceanographic through the crisis better than most other MRO service survey ship for the US Navy. These contracts underscore providers, precisely because of its diverse customer our commitment to research and development and base and a flexible business model that suits the specific our ability to constantly create innovative products and needs of each customer. With a comprehensive offering systems that meet customers’ evolving needs. and customers including legacy, regional and low cost airlines as well as defence forces, the sector has On the commercial front, the Aerospace sector managed to maintain a comparable turnover despite the continued to win new customers and had particular turbulence in the aviation industry. success with its Maintenance-By-the-Hour solution, adding customers such as Cimber Sterling, Jeju Air, Our exposure to defence and other government projects Primera Air and Shanghai Airlines. For its ongoing has always provided the Group with a stable baseload, 87-unit Passenger-To-Freighter conversion project and such work again provided stability through the last for FedEx, 13 units were redelivered in the year, on year. Having a global presence and a wide customer schedule. The sector also secured a three-year contract, base have also been critical, as it means that we are with an option to extend for another two years, to better able to spread our risks and also act quickly on provide airframe maintenance services for a major US various opportunities in each market. airline and renewed its maintenance contract with US Airways for another three years. These two contracts We exercised prudent liquidity management, recognising and various other successes reinforce our position as a it is key to maintaining a strong financial position. During preferred supplier of MRO services. The Marine sector the past year, we tightened our credit controls, and also won several contracts including two from OSG Ship worked hard to manage payments and credit terms. Management to outfit and commission two articulated During the year, we generated a healthy operating cash tug barge units. flow of $932m.

During the year, we expanded our global presence and Our established Enterprise Risk Management achieved breakthroughs in new markets. The Electronics Framework makes certain that we periodically review sector secured a contract to install a Tower Simulator our business risks and identify and manage new risks. for the Tanzania Civil Aviation Authority, its first project We had in place a Business Continuity Plan earlier in the in Tanzania. We also broadened our scope of services year to address the H1N1 scare, including drawing up under the Marine sector. It won a logistics management split teams and off-site operations in the event that the contract from the Republic of Singapore Navy. The health situation worsened. Land System sector’s US specialty vehicle subsidiary, VT Leeboy, made inroads into the US military market when it won a contract to supply its bituminous paver Thinking ahead: ready for the upturn to the US Army. All these accomplishments resonate with our strategy to gain new market access, build new Our diversification model has equipped us well to capabilities as well as cross leverage our defence and prepare for the future. We continue to enhance our commercial opportunities. capabilities, while constantly anticipating trends, introducing new solutions and exploring new market opportunities, so that we are able to maintain our A time for reflection leading position.

While the worst of the storm may be over, it is important In the Aerospace sector, we are increasing our airframe to learn from the crisis, and review how well our maintenance capacity in our key markets. Our Pudong business model has served us, and how we can improve hangar in Shanghai, which can accommodate the A380, further for the future. is expected to be ready in the first half of this year. We expect to commission our fourth hangar at our Panama The Group’s steady results did not come about by facility this year and are adding a two-bay hangar at chance. Over the years, we have built a well-diversified our San Antonio facility. Furthermore, as an integrated global portfolio across four key sectors, with operations aerospace services provider, we continue to build up our in 24 countries and customers in over 80 countries, capabilities in engines and components MRO. spanning defence, non-defence government and During the year, we signed a 20-year agreement to serve commercial work. Our diversification strategy ensures as a GE-approved On-Wing support provider for the resilience to cope with varying economic landscapes GEnx-1B and -2B engines, and added capabilities such as our business is not subject to the fortunes of any as the CFM56-5B engine. Our new Xiamen engine MRO single market. Our Aerospace sector for example, came facility is on track to commence operations this year. Singapore Technologies Engineering Ltd Think Ahead. 13 Annual Report 2009

The Electronics sector has progressively developed factors may derail the recovery. But we cannot afford to new capabilities and new solutions leveraging dual wait and watch. We need to think and plan ahead, as we use technology in its applications as well as seeking have always done. new markets in its growth strategy. In September, it won contracts from China’s Changchun Rolling Stock We are confident that we have a winning business model, Company for projects in Saudi Arabia and China. This is which we continually strengthen, that will see us through an important new step in terms of marketing efforts. By any cycle or economic situation, and allow us to seize working directly with the train makers whose trains are opportunities in a timely way. sold internationally, we hope to capture a bigger slice of the pie. We are also making progress in interactive digital media, creating the Virtual World for the inaugural Appreciation Singapore 2010 Youth Olympic Games, a showcase of our technology to a worldwide audience, as well as a On behalf of the Group, we would like to express our platform to grow in this fast moving industry. In addition, appreciation to our Board Directors for their wise counsel the satellite communications (satcoms) business has and guidance. We thank Dr Philip Pillai, who resigned expanded its facilities through the rental of a building in from the Board at the end of September, to take up Paya Lebar to house the entire satcoms team. appointment as Judicial Commissioner of the Supreme Court of Singapore. Dr Pillai had been a Director since Two new products were delivered to the Singapore Armed April 2000 and we are deeply grateful for his invaluable Forces by the Land Systems sector: the Terrex 8x8 Infantry contributions during his tenure. We welcome Dr Stanley Carrier Vehicle unveiled at the 2009 Army Open House, Lai, who was appointed Independent Director in October. and the Trailblazer Countermine Vehicle. The sector’s He has been appointed a Member of the Nominating commercial vehicles business has seen strong demand Committee, Audit Committee and Executive Resource in China, and it has strengthened its presence and and Compensation Committee. Effective 31 March this offerings there by acquiring Zhenjiang Huachen Huatong year, LG Desmond Kuek Bak Chye and COL Chia Choon Road Machinery Co., Ltd. and Zhenjiang Huatong Aran Hoong will resign from the Board, we take this opportunity Machinery Co., Ltd. To meet market needs for eco-friendly to thank them for their guidance. We also look forward to vehicles, the sector launched Singapore’s first commercial welcoming MG Neo Kian Hong as non-executive Director diesel-electric hybrid bus and the world’s first hybrid and COL Ong Ann Kiat as his Alternate Director. hydraulic drive enhanced port prime mover. We wish to thank our staff for their loyalty and unwavering In the Marine sector, we will be enhancing the facilities commitment to the Group these past years, and for their at our US yards, including adding a fabrication shop to sacrifices made during the year. During the worst of the support the construction of our previously announced financial crisis, the Group took a prudent approach and Fast Missile Craft project. In addition, the sector has made implemented pay cuts for senior management and senior advances in its environmental engineering business and executives, and pay freeze for all other staff. has secured initial success in the Middle East and China markets. We expect the needs for innovative environmental We are grateful to our Board of Directors for volunteering engineering solutions to grow globally as we progressively to accept a reduction in directors’ retainer fees for 2009, grow this new thrust. in tandem with the senior executives’ pay cut.

The recent financial crisis has taught us the importance Finally, we thank our shareholders, stakeholders and of financial prudence and liquidity. Thus, we have added business partners for their continued confidence in financial strength by establishing a US$1.2b multi- the Group. currency Medium Term Note (MTN) programme. The MTN programme provides us with additional funding options We remain focused on strengthening our foundation and also ensures that we can raise funds quickly to to enable our Group to create and deliver long term capitalise on opportunities in the future. Taking advantage sustainable value for all our shareholders and stakeholders. of favourable market conditions, we issued a US$500m 10-year bond under the programme.

Conclusion The year ahead is still plagued with challenges and Peter SEAH Lim Huat TAN Pheng Hock Chairman President & CEO uncertainties, as the global economic pick-up is expected to happen at a subdued pace, and even then, many 3 March 2010 14 LETTER TO SHAREHOLDERS (CHINESE)

各位股东：载车。我们在美国的子公司VT Miltope，赢得了一份5亿美元的合当我们在写这份报告时，这一年来的经济情况已经大为好转。约，向美国陆军提供MSD-V3系统，包括笔记本电脑、测试装备和全球性的经济复苏迹象已经显现，大多数政府和商业机构对经济仪器。VT Miltope自2004年起，已经连续5年向美国陆军提供其研的持续复苏持谨慎的乐观态度。他们认为，虽然当前经济发展仍发的MSD-V2系统。该系统能在最为艰难的作战环境中，令美军发然缓慢，但复苏的脚步已然迈开。挥强有力的计算机运作能力。这份新合约是对我们研发产品与系统质量的充分肯定。在海事业务方面，今年末，我们与美国海军签定即便如此，始于2008年末的全球性经济危机导致许多国家在2009 了一份合约，为其建造一艘升级版的T-AGS 60深海地质勘探船。这年的大部分时间出现了经济低速发展，甚至负增长的现象。失业些合约展现了我们的研发能力，不断开发出创新性的产品和率的上升迫使许多政府采取相关措施以刺激经济发展。当时，系统，以满足客户不断变化的需求。经济发展的前景难以预测，且充满挑战性。许多商业机构仍然面临着艰难的运作环境。在商业业务方面，宇航业务得益于成功的“包修飞机维修按固定飞行小时收费”的服务计划，使我们不断赢得新客户，包括辛伯航空在这样的背景下，新科工程集团成功经受住了金融风暴的冲击。公司、济州航空公司、西甲航空公司和上海航空公司。我们也正在我们仍然表现出强大的运作能力，继续收获成果。集团的营业额将联邦快递公司的87架客运机改为货运机，其中13架已按计划交付增长了4%，达到了55.5亿元，其中商业销售额占了总营业额的使用。该业务获得了为一间美国主要航空公司提供飞机机体维修服 62%，即34亿元。税前利润小幅度增长至5.466亿元；税后净营业务的三年合约，并可选择延长两年；美国航空公司与我们的合约也利润及小数股东权益低6％，为4.439亿元。每股盈利14.78分，延长了三年。这两项合约以及其它各项业务的成功，巩固了我们在股本回报率仍然可观，保持在28.3%。维护、修理及操作方面作为首选供应商的地位。在海事业务方面，我们也签订了几份新合约，包括从美国的海外船舶控股集团获得的两份订单，以装备两套顶推船铰接装置。回报股东为回报广大忠实的股东，董事会提议将年终股息定为每股10.28 一年来，我们不断扩大全球业务，开拓新市场。在电子业务方面，分，由普通股息每股4.00分和特别股息每股6.28分组成。加上我们与坦桑尼亚民用航空局签订合约，为其建造模拟航空塔台。 2009年9月所支付的每股3.00分中期普通股息，2009财年分发的这是我们在坦桑尼亚开展的第一个项目。我们也在海事业务方面不总股息为每股13.28分。这一提议将在2010年4月的年度股东大会断拓宽服务领域。集团与新加坡海军签订了一份后勤管理合约。上征求股东们的同意。 VT Leeboy，是陆路业务设在美国的专用车生产子公司，赢得了一份为美国陆军提供沥青混凝土摊铺机的合约，成功进入美国军贸市场。这些成绩的取得，是我们采取开拓新市场、发展新能力、平衡把握机遇利用国防与商业机遇等策略的结果。在每次危机中其实都存在着商机。一年来，新科工程不断获得各种新合约，这充分说明了我们商业模式在面临危机时强有力的恢复力与灵活性。截至2009年底，我们的订单总额达到103亿元，反思相当于年营业额的大约两倍。这一稳健的水平提供了良好的营业尽管金融风暴最严重的时期可能已经过去，但是，吸取经济危机额能见度。过程的教训、审视我们的经营模式何以在危机中生存，以及将来如何进一步改善，均是当下我们需要思考的重点。大规模订单量是我们销售努力的结果，而合约的多样化则体现了我们能力的广度和深度及良好的市场声誉。值得注意的是，这些集团这一系列成果的取得并非偶然。针对我们的四项业务领域，合约很多是与政府相关的项目，既有本地的，也有海外的；既有集团已经在全球建立起多元发展的档案，在24个国家和与来自80 国防的，也有商业的——都有利地平衡了我们的工作量。多个国家的客户在国防、非国防政府和商业等领域展开合作。我们的业务发展不会仅仅依靠某一个市场的盛衰而起伏，这种经营模式我们的宇航、电子、路陆、海事这四方面业务都受惠于政府或政府多样化的策略确保我们在面临不同经济境况时可以应付自如。以宇相关的项目，很多项目是我们“军民两用技术”使用的结果，即将航业务为例，我们之所以能够比其他进行维护、修理及操作的供应国防技术应用于商业用途，或将商业技术应用于国防用途。其中一商更为顺利地渡过经济危机，关键在于公司客户源的多元化，及弹些重要的项目有为新加坡武装部队提供的“先进战士系统”，为陆性化经营模式的实施，因此可以满足每个客户的特别需求。尽管在路交通管理局提供的“路况提示系统”，为新加坡民防部队和警经济危机的影响下，整个航空业的发展呈现动荡局面，但由于我们察部队提供的指挥控制系统，为新加坡海军部队提供的训练服务项所具备的全方位供应能力，以及拥有老牌航空公司、区域性航空公目，及为阿曼中央银行提供保安升级项目。在陆路业务方面，我们司、廉价航空公司及国防部队等不同客户群，和去年相比，公司在不断赢得生产40毫米弹药的海外订单。根据我们与英国国防部在航空业务方面保持了相对不错的营业额。 2008年签订的合约，我们已经开始向其提供 WARTHOG 全地形运 Singapore Technologies Engineering Ltd Think Ahead. 15 Annual Report 2009

一直以来，国防与其它政府项目是集团业务稳定发展的基础，取得了初步成功。我们期望随着全球对创新性环境工程解决方案也确保了我们平稳渡过去年的经济危机。在全球范围内开展业务需求的增长，集团在这一方面的业务也能随之得以发展。合作以及拥有广泛的客户群也是关键因素，因为这意味着我们可以更好地分散风险，以及在单一市场中，针对各种机遇迅速采这次金融危机告诉我们，审慎理财及资产流动的重要性。因此，取行动。我们通过建立一个12亿美元的多币种的中期票据方案来改善融资模式。这一方案为我们提供了额外的筹资办式，使我们确保可以我们认识到，采取稳健的资产流动管理是保持公司良好财政状况在未来把握机会、迅速筹集资金。根据该方案，我们在有利的的关键。过去的一年中，我们采取了谨慎的信用政策，努力控制市场条件下，发行了价值5亿美元的10年期债券。好支付和信贷条款的实施。截至2009年底，我们的经营业务现金流量为9.32亿元。总结我们建立了企业风险管理综合框架，以确保我们可以定期检讨业根据预测，经济复苏的脚步将十分缓慢，甚至不排除一些可能破务风险，确定和应对新风险。今年早些时候，针对H1N1带来的恐坏经济复苏的因素存在。因此，未来的一年仍然充满挑战和诸多慌，我们制定了业务连续性计划，针对万一出现的健康状况恶化不确定因素。但是，我们不能驻足旁观，我们需要一如既往地先的病例，实施团队分组和非现场操作的运作方式。行一步，思考和规划未来。

我们相信，我们拥有一个成功且不断加以改善的商业模式，它使展望未来：为经济好转做好准备得我们得以洞察任何经济周期或经济状况，及时把握商机。集团多元化的经营模式使我们得以更好地应对未来挑战。我们将继续加强自身能力，同时不断预测发展趋势，推出新的解决方案，探索新的市场机会，继续保持我们的领先地位。致谢借此机会，我们愿代表整个集团，向董事会成员表示感谢，感谢在宇航业务方面，针对主要市场，我们将继续增强机身维修他们明智的建议和领导。感谢 Philip Pillai 博士，他已于9月底辞能力。可以容纳A380飞机的浦东机库预计将在今年上半年建成。去了董事职务，转而担任新加坡最高法院司法委员。Philip Pillai 我们希望在今年内将巴拿马的第四个机库投产。在圣安东尼奥也博士自2000年4月担任董事，我们对他任职期间的宝贵贡献深表将新添一个双机位机库。此外，作为一个综合性的航空服务供应感谢。我们也欢迎于10月份被委任为独立董事的黎智昌博士。他商，我们将继续加强在维护、修理及操作发动机和零部件的能已经被委任为提名委员会委员，审计委员会委员和资源及薪酬委力。在2009 年，我们签署了一份长达20年的协议，为GEnx-1B 员会的委员。我们要借此机会，感谢将于今年3月31日从董事会和 -2B两款发动机提供在翼支援，同时我们也具备了CFM56-5B发离职的郭木财中将和谢俊雄上校。也期待着对即将出任非执行董动机维护等方面的能力。我们在厦门的新发动机维修设施也有望事的梁建鸿少将及其替代董事王安傑上校表示欢迎。于今年开始运作。我们要感谢员工们这些年来的忠诚和奉献，以及过去的一年里，电子业务方面，通过“军民两用技术”的运用及寻求新市场的增他们所做出的牺牲。在金融危机最严重的时刻，集团采取了审慎长策略的实施，我们逐步具备了一些新能力。9月份，我们赢得了的态度，对高级管理人员和执行人员实行减薪，并冻结了其他所长春轨道客车股份有限公司在沙特阿拉伯和中国一些项目中的合有员工的工资。约。这标志着我们在市场营销方面迈出了重要一步。通过与在全世界销售机车的机车制造商的直接合作，我们希望获得更大的市在对高级执行人员实行减薪的同时，董事会成员也自愿减少2009 场份额。我们在互动数字媒介方面的业务也取得了发展，为即将年董事聘用费，我们对此表示感谢。开幕的新加坡2010年青年奥运会创造“虚拟世界”，在这个平台上将我们的技术展示给全世界观众，并使我们在这一快速发展的最后，我们感谢各位股东、利益相关者和业务合作伙伴一直以来行业中迅速成长。此外，我们为整个卫星通信团队的工作租用了对集团发展的坚定信心。位于巴耶利峇的一幢大楼，以拓展设施。我们将继续加强基础建设，以使集团能为广大股东和利益相关者陆路业务已向新加坡武装部队提供了两样新产品，即在2009年创造和提供长久的可持续发展的价值。陆军开放日上展示的Terrex 8x8步兵输送车和 Trailblazer 扫雷车。中国市场也对我们的商用车产生了强烈需求。通过收购镇江华晨华通路面机械有限公司和镇江华通阿伦机械有限公司，公司在这方面的业务得以扩展。为满足市场对环保汽车的需求，我们推出了新加坡首个混联混合动力公交车以及世界上第一款港口液压混合动力牵引车。佘林发陈平福主席总裁及首席执行官海事业务方面，我们将加强我们在美国船厂的设施，包括增加一个配件制造车间，以支持我们先前宣布的导弹快艇工程。除此之 2010年3月3日外，我们在环境工程业务方面也取得了进展，在中东和中国市场 16

Financial Highlights

Amidst the challenging financial and economic environment of 2009, ST Engineering delivered 4% growth in its turnover to $5.55b and PBT increased slightly to $546.6m. PATMI was lower by 6% at $443.9m with ROE at 28.3%. The Group continued to win orders in 2009 and ended the year with a healthy order book of $10.3b. The Board is proposing to pay shareholders a total of 13.28 cents per share as dividends for FY2009.

TURNOVER BY SECTOR PROFIT BEFORE TAX BY PROFIT AFTER TAX AND ($m) SECTOR ($m) MINORITY INTERESTS BY SECTOR ($m)

6,000 700 600

600 5,000 500

500 4,000 400

400

3,000 300

300

2,000 200 200

1,000 100 100

0 0 0 05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 FY FY FY

Aerospace Electronics Land Systems Marine Others Singapore Technologies Engineering Ltd Think Ahead. 17 Annual Report 2009 Key Financial Data

TURNOVER BY SECTOR ($m)

2009 2008 2007 2006 2005

GROUP 5,548 100% 5,345 100% 5,051 100% 4,486 100% 3,338 100%

AEROSPACE 1,872 34% 1,938 36% 1,835 36% 1,673 37% 1,236 37%

ELECTRONICS 1,371 25% 1,143 21% 1,023 20% 951 21% 701 21%

LAND SYSTEMS 1,167 21% 1,274 24% 1,178 23% 1,002 22% 600 18%

MARINE 949 17% 822 15% 863 17% 702 16% 660 20%

OTHERS 189 3% 168 4% 152 4% 158 4% 141 4%

PROFIT BEFORE TAX BY SECTOR ($m)

2009 2008 2007 2006 2005

GROUP 546.6 100% 540.7 100% 638.1 100% 564.3 100% 503.2 100%

AEROSPACE 228.3 42% 272.1 50% 341.2 53% 305.3 54% 255.4 51%

ELECTRONICS 115.3 21% 93.9 17% 115.3 18% 104.6 19% 76.0 15%

LAND SYSTEMS 95.4 17% 84.7 16% 80.0 13% 70.0 12% 65.0 13%

MARINE 102.3 19% 75.2 14% 96.6 15% 79.5 14% 87.9 17%

OTHERS 5.3 1% 14.8 3% 5.0 1% 4.9 1% 18.9 4%

PROFIT AFTER TAX AND MINORITY INTERESTS BY SECTOR ($m)

2009 2008 2007 2006 2005

GROUP 443.9 100% 473.6 100% 503.5 100% 445.1 100% 396.3 100%

AEROSPACE 185.7 42% 225.7 48% 270.5 54% 255.0 57% 210.3 53%

ELECTRONICS 90.8 20% 68.1 14% 88.2 17% 76.3 17% 58.0 15%

LAND SYSTEMS 82.3 19% 79.9 17% 70.8 14% 51.9 12% 49.0 12%

MARINE 81.8 18% 74.5 16% 75.3 15% 67.8 15% 70.3 18%

OTHERS 3.3 1% 25.4 5% (1.3) - (5.9) (1%) 8.7 2% 18 KEY FINANCIAL DATA

2009 2008 2007 2006 2005

EBITDA ($m) 649.2 667.9 684.4 593.4 470.1

EBIT ($m) 486.4 509.1 550.3 457.6 389.5

Shareholders’ funds ($m) 1,568 1,580 1,633 1,565 1,493

Total assets ($m) 6,884 5,993 6,050 5,578 4,566

Net assets ($m) 1,676 1,677 1,780 1,687 1,542

Capital expenditure ($m) 277 191 172 197 123

Gross dividend per share (cents) 13.28 15.80 16.88 15.11 13.60

Dividend yield (%) 4.72 5.16 4.94 5.09 5.24

Dividend cover 1.11 1.00 1.00 1.00 1.00

Earnings per share (cents) 14.78 15.82 16.95 15.15 13.64

Return on sales (%) 8.2 9.1 10.4 10.2 12.3

Return on equity (%) 28.3 30.0 30.8 28.4 26.5

Return on total assets (%) 6.6 8.2 8.7 8.2 9.0

Net asset value per share (cents) 52.09 52.71 54.72 53.13 51.22

EBITDA & EBIT SHAREHOLDERS’ CAPITAL EXPENDITURE ($m) FUNDS ($m) ($m)

750 1,800 330

300 700 1,700

270 650 1,600 240 600 1,500 210 550 1,400 180 500 150 1,300 450 120 1,200 400 90

1,100 350 60

300 1,000 30

05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 FY FY FY EBIDTA EBIT Singapore Technologies Engineering Ltd Think Ahead. 19 Annual Report 2009 Productivity Data

2009 2008 2007 2006 2005

Average staff strength 20,079 18,703 17,750 15,912 13,099

Sales per employee ($) 276,298 285,757 284,570 281,910 254,821

Profit after tax per employee ($) 22,109 25,324 28,367 27,974 30,255

Employment costs ($m) 1,462.5 1,422.8 1,360.3 1,243.0 899.9

Employment costs per $ of turnover ($) 0.26 0.27 0.27 0.28 0.27

Economic Value Added ($m) 304.8 357.9 388.8 327.8 290.6

Economic Value Added spread (%) 9.4 11.8 13.2 12.3 16.2

Economic Value Added per employee ($) 15,181 19,138 21,904 20,598 22,187

Value added ($m) 2,266.6 2,203.7 2,190.8 1,990.8 1,500.6

Value added per employee ($) 112,882 117,824 123,432 125,112 114,559

Value added per $ of employment costs ($) 1.55 1.55 1.61 1.60 1.67

Value added per $ of gross property, plant and equipment ($) 0.91 0.97 1.00 0.98 1.02

Value added per $ of turnover ($) 0.41 0.41 0.43 0.44 0.45

PROFIT AFTER TAX ECONOMIC VALUE ADDED VALUE ADDED PER EMPLOYEE ($’000) PER EMPLOYEE ($’000) PER EMPLOYEE ($’000)

33 24 127

30 22 122

20 117 27

18 112 24

16 107 21 14 102 18 12 97 15 10 92

12 8 87

9 6 82

6 4 77

3 2 72

05 06 07 08 09 05 06 07 08 09 05 06 07 08 09 FY FY FY 20

Group Economic Value Added Statement

($m) 2009 2008 2007 2006 2005

Net profit before tax 507.7 501.8 591.5 512.8 457.3

Adjust for:

Share of results of associated companies and joint ventures 38.9 38.9 46.6 51.5 45.9

Interest expense 59.9 67.4 53.2 45.1 10.4

Others 18.5 21.3 10.3 11.6 2.2

Adjusted profit before interest and tax 625.0 629.4 701.6 621.0 515.8

Cash operating taxes (Note 1) (116.3) (81.8) (112.4) (112.8) (99.3)

Net operating profit after tax (NOPAT) – (a) 508.7 547.6 589.2 508.2 416.5

Average capital employed (Note 2) 3,286.7 3,034.4 2,988.5 2,691.9 1,865.4

Weighted Average Cost of Capital (Note 3) (%) 6.1 6.2 6.5 6.6 6.1

Capital charge – (b) (200.5) (188.1) (194.3) (177.7) (113.8)

Economic Value Added (EVA) – [(a) – (b)] 308.2 359.5 394.9 330.5 302.7

Minority share of EVA (3.4) (1.6) (6.1) (2.7) (12.1)

EVA attributable to ordinary shareholders 304.8 357.9 388.8 327.8 290.6

Unusual items (UI) (gains)/losses (Note 4) 1.3 (0.1) (10.8) (30.7) (7.0)

EVA attributable to ordinary shareholders (exclude UI) 306.1 357.8 378.0 297.1 283.6 Singapore Technologies Engineering Ltd Think Ahead. 21 Annual Report 2009

Note 1: The reported current tax is adjusted for the statutory tax impact of interest expense. Note 2: Monthly average share capital plus interest bearing liabilities, timing provision, intangible assets impaired/ amortised, and present value of operating leases. Major Capital Components:

$m Long term debt 953.1 Short term debt 231.4 Equity 1,758.2 Others 344.0 3,286.7

Note 3: The Weighted Average Cost of Capital is calculated in accordance to ST Engineering Group EVA Policy as follows: i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2008 @ 6.0%); ii) Risk-free rate of 2.08% (2008 @ 2.74%) based on yield-to-maturity of Singapore Government 10 years Bonds; iii) Ungeared beta at 0.69 (2008 @ 0.67) based on ST Engineering risk categorisation; and iv) Cost of Debt rate at 4.17% using actual cost of debt of the borrowings in the US, Europe and Singapore (2008 @ 3.23%: based on 5-year Singapore dollar Swap Offer Rate plus 25 basis points).

Note 4: UI refer to divestment of investment properties, subsidiaries and associated companies, long term investments and disposal of major property, plant and equipment.

ECONOMIC VALUE ADDED ($m)

0 35 70 105 140 175 210 245 280 315 350 385 420 Board of Directors

The Board with its wealth of knowledge and experience in diverse fields is an asset to ST Engineering.

The names of the directors holding office at the date of this report are set out below together with details of their academic and professional qualifications, age, date of first appointment as Director, date of last re-election as Director, as well as directorships in listed companies.

Mr Peter SEAH Lim Huat (Chairman) Mr Peter Seah Lim Huat, 63, was appointed non-executive Chairman on 15 April 2002 and was last re-elected as Director on 22 April 2009. He is a member of the Temasek Holdings Advisory Panel. Mr Seah was a banker for 33 years before retiring as Vice Chairman and CEO of the former Overseas Union Bank in 2001. He then joined Singapore Technologies Pte Ltd as President and CEO and held this position until 31 December 2004. Mr Seah is the Chairman of SembCorp Industries Limited* and sits on the Boards of Bank of China Limited^, CapitaLand Limited*, DBS Group Holdings Ltd* and Government of Singapore Investment Corporation. Mr Seah is also Deputy Chairman of Global Crossing Limited. His other appointments include being Chairman of LaSalle Foundation Limited and Singapore Health Services Pte Ltd and a member of the Defence Science & Technology Agency (DSTA). Mr Seah was awarded the Public Service Star (Bintang Bakti Masyarakat) in 1999 and made a Justice of the Peace in 2003. He graduated from the former University of Singapore in 1968 with an honours degree in Business Administration.

Mr TAN Pheng Hock Mr Tan Pheng Hock, 52, is the President & CEO of ST Engineering and an executive Director. He was appointed Director on 1 May 2001 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. Mr Tan sits on the Boards of SembCorp Marine Ltd* and Neptune Orient Lines Limited*. He is Chairman of the Singapore Airshow & Events Pte. Ltd., Nanyang Polytechnic International Private Limited, Singapore Workforce Development Agency, Nanyang Polytechnic Board of Governors and the Lifelong Learning Endowment Fund Advisory Council. Mr Tan is also Deputy Chairman of the Singapore Quality Award Governing Council. He began his career with the Group as an engineer in ST Marine in 1981. Mr Tan held various senior appointments in the Group including that of Executive Vice President of ST Marine, President of ST Kinetics, President and Chief Operating Officer of ST Engineering and ST Engineering Group President. He holds a Bachelor of Science (First Class Honours) in Marine Engineering from the University of Surrey, UK and a Master of Science in Management from Stanford University, USA. Singapore Technologies Engineering Ltd Think Ahead. 23 Annual Report 2009

Mr KOH Beng Seng Mr Koh Beng Seng, 59, is the CEO of Octagon Advisors Pte. Ltd. He was appointed an independent non-executive Director on 15 September 2003 and was last re-elected as Director on 22 April 2009. Mr Koh was Deputy President of United Overseas Bank Ltd from June 2000 to 31 January 2005. Prior to this, Mr Koh was Senior Advisor to Asia Pulp & Paper Co Ltd, and Advisor to Bank of China and the International Monetary Fund. Mr Koh has extensive experience in the financial services sector. He was with the Monetary Authority of Singapore from 1973 to 1998, where he served as Deputy Managing Director from 1988 to 1998. Mr Koh is a Director of Bank of China (Hong Kong) Limited^, BOC Hong Kong (Holdings) Limited, Fraser & Neave Ltd*, Sing-Han International Financial Services Limited, Japan Wealth Management Securities Inc, and Great Eastern Holdings Limited*. Mr Koh holds a Bachelor of Commerce (First Class Honours) from the former Nanyang University, Singapore, and a Master of Business Administration from Columbia University, USA.

The Think Tank

Lieutenant-General Desmond KUEK Bak Chye LG Desmond Kuek Bak Chye, 46, is Chief of the Defence Force. He was appointed a non-executive Director on 27 April 2007. He joined the Singapore Armed Forces (SAF) in 1982 and was awarded the SAF Overseas Scholarship in 1982, SAF Postgraduate Scholarship (General Development) in 1997 and The Public Administration Medal (Gold) in 2002. In the course of his military career, he has held various key command and staff positions in the Ministry of Defence (MINDEF). LG Kuek is a Board member of the Jurong Town Corporation and a Member of the DSTA Board. He holds a Bachelor of Arts (Hons) (Engineering Science) and a Master of Arts (Engineering Science) from the University of Oxford, UK, as well as a Masters in Public Administration from Harvard University, USA. 24 BOARD OF DIRECTORS

The Think Tank

Dr TAN Kim Siew Dr Tan Kim Siew, 56, is Permanent Secretary (Defence Development), MINDEF. He was appointed a non-executive Director on 15 December 2003 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. Prior to his present appointment with MINDEF, he was the Deputy Secretary (Policy) with the Ministry of Finance. He was formerly the CEO and Chief Planner of the Urban Redevelopment Authority from 1996 to 2001. Dr Tan is Chairman of the DSTA and DSO National Laboratories, and is also a Director of Singapore Technologies Holdings Pte Ltd. Dr Tan holds a Bachelor of Arts in Engineering Tripos and a PhD in Engineering from the University of Cambridge, UK.

Mr QUEK Tong Boon Mr Quek Tong Boon, 54, is Chief Defence Scientist and Chief Research & Technology Officer in MINDEF. He was appointed a non-executive Director on 1 March 2008 and was last re- elected as Director on 25 April 2008. He joined the Defence Science Organisation of MINDEF in 1980 and in the course of his career, has held various key appointments, including that of Deputy Secretary (Technology and Transformation) of MINDEF and CEO of the DSO National Laboratories. Mr Quek’s current chairmanship includes that of the Intellectual Property Office of Singapore (IPOS) Board, the Temasek Laboratories@NUS Board, the Temasek Laboratories@ NTU Board and the Temasek Defence Systems Institute Board. He is a member of the DSO National Laboratories Board, the DSTA Board, the Agency for Science, Technology & Research Board, and the Singapore University of Technology and Design Board of Trustees. He is also an Adjunct Professor at the Department of Electrical & Computer Engineering of the National University of Singapore (NUS). He holds a Bachelor of Arts (Honours) (Engineering) from the University of Cambridge, UK, and a Master of Science (Electrical Engineering) from NUS. Singapore Technologies Engineering Ltd Think Ahead. 25 Annual Report 2009

Mr Winston TAN Tien Hin Mr Winston Tan Tien Hin, 61, is the Managing Director of Corporate Brokers International Pte Ltd. Mr Tan was a banker for 24 years having spent over 16 years with Citibank and over seven years with Deutsche Bank; his last position was that of General Manager for the Singapore Branch. He was appointed an independent non-executive Director on 1 October 1997 and was last re-elected as Director on 22 April 2009. Mr Tan is a Business Angel investor and Director of several small and medium sized enterprises, including Roxy-Pacific Holdings Limited*. Mr Tan is also a member of the Salvation Army Advisory Board. He holds a Bachelor of Science in Physics from the former University of Singapore.

Dr Philip PILLAI Dr Philip Pillai, 62, was appointed an independent non-executive Director on 1 April 2000 and relinquished this position on 30 September 2009. In October 2009, he was appointed Judicial Commissioner of the Supreme Court of Singapore.

Mr QUEK Poh Huat Mr Quek Poh Huat, 63, is Group CEO of Singapore Power Limited. He was appointed a non-executive Director on 15 April 2002 and was last re-elected as Director on 22 April 2009. Mr Quek is a Director of Singapore Power Limited, SP PowerAssets Limited, PowerGas Limited and SP Services Limited. He is also Chairman of SP PowerGrid Limited, SPI Management Services Pty Ltd, SPI (Australia) Assets Pty Ltd and Enterprise Business Services (Australia) Pty Ltd. Mr Quek is Singapore’s non-resident Ambassador to Sweden. He was awarded the Public Service Star in August 1994. Mr Quek obtained a Bachelor of Science in Chemical Engineering from the University of Leeds, UK, and a Master of Science in Management from the Naval Postgraduate School, USA. 26 BOARD OF DIRECTORS

Mr Venkatachalam KRISHNAKUMAR Mr Venkatachalam Krishnakumar, 60, is Chairman of Oracle Financial Services Software Pte Ltd. Prior to this, he was a Senior Advisor to Oracle Financial Services Software Pte Ltd, Group Technology and Operation, DBS Bank Ltd and McKinsey and Company, Barclays Bank PLC, Global Retail and Commercial Banking. He was Chief Operating Officer and Chief Financial Officer for the Asia Pacific Consumer Bank of Citigroup until his retirement on 28 February 2005, after a 31-year career with the group. During his career with Citigroup, he held several senior appointments in India, Singapore and New York. He was appointed an independent non-executive Director on 15 April 2002 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. He holds a Bachelor of Engineering and Master of Business Administration from the Indian Institute of Management, India.

The Think Tank

Mr Davinder SINGH Mr Davinder Singh, 52, is CEO of Drew & Napier LLC. He was appointed an independent non-executive Director on 1 August 2007 and was last re-elected as Director on 25 April 2008. Mr Davinder Singh has been in legal practice for more than 20 years. He was appointed Senior Counsel in 1997, the first batch of Senior Counsels to be so appointed in Singapore. Mr Singh holds an LLB (Honours) from the former University of Singapore. Singapore Technologies Engineering Ltd Think Ahead. 27 Annual Report 2009

Dr Stanley LAI Tze Chang Dr Stanley Lai Tze Chang, 42, is Head of the Intellectual Property & Technology Department, Allen and Gledhill LLP. He was appointed an independent non-executive Director on 8 October 2009 and will be due for re-election at this coming AGM under Article 104 of the Company’s Articles of Association. Dr Lai was appointed Senior Counsel at the Opening of the Legal Year 2010. He obtained his law degree from the University of Leicester (UK) in 1992 and qualified to practise as a Barrister in England and Wales in 1993. Dr Lai is a member of Lincoln’s Inn. He was called to the Singapore bar in 1995. Dr Lai also holds a Master and Doctorate (Ph.D) in law from the University of Cambridge, UK.

Colonel CHIA Choon Hoong COL Chia Choon Hoong, 38, is Assistant Chief of General Staff (Plans) in MINDEF. He was appointed Alternate Director to LG Desmond Kuek Bak Chye on 1 August 2007. COL Chia joined the SAF in 1991. He was awarded the SAF Overseas Scholarship in 1991, and the SAF Postgraduate Scholarship (General Development) in 2006. He has held various positions in MINDEF over the last 18 years and assumed his present office in 2009. COL Chia holds a Master of Engineering (First Class Honours) (Electrical & Electronic Engineering) from the University College London-UOL, UK, and a Master in Business Administration from the Massachusetts Institute of Technology, USA.

PAST DIRECTORSHIPS IN THE LAST THREE YEARS

Mr Peter SEAH Lim Huat Mr QUEK Poh Huat Chartered Semiconductor Manufacturing Ltd PowerGas Limited Chinese Chamber Realty Private Limited SP Australia Networks (Distribution) Ltd EDB Investments Pte Ltd SP Australia Networks (RE) Ltd PT Bank Internasional Indonesia Tbk SP Australia Networks (Transmission) Ltd PT Indosat Tbk Temasek Management Services Pte Ltd SCS Computer Systems Pte. Ltd. Siam Commercial Bank Public Company Limited Mr Venkatachalam KRISHNAKUMAR The National Kidney Foundation SCS Computer Systems Pte. Ltd. Singapore Land Authority Mr TAN Pheng Hock The Central Depository (Pte) Limited ST Synthesis Pte Ltd Mr Davinder SINGH Lieutenant-General Desmond KUEK Bak Chye Freshfields Drew & Napier Pte Ltd Singapore Technologies Kinetics Ltd Singapore Airlines Limited Zagro Asia Limited

* listed on the SGX-ST ^ listed on the Stock Exchange of Hong Kong Senior Management

Standing, left to right: TAY Kok Khiang, LEE Fook Sun, Gen (Ret) John G COBURN, CHANG Cheow Teck and Eleana TAN Ai Ching. Seated, left to right: SEAH Moon Ming, SEW Chee Jhuen and TAN Pheng Hock. Singapore Technologies Engineering Ltd Think Ahead. 29 Annual Report 2009

With combined expertise covering all aspects of operations, the Senior Management team exemplifies the competence, commitment and cooperation needed to steer the Group.

Mr TAN Pheng Hock is President & to his current appointment. Mr Tay holds a a Bachelor of Mechanical Engineering CEO of ST Engineering and a Director of Bachelor of Engineering (Honours) and a (First Class Honours) from the National the ST Engineering Board. (Mr Tan’s profile Master of Science in Industrial Engineering University of Singapore and attended is on page 22) from the National University of Singapore. Harvard University’s Management Development Program. Mr SEAH Moon Ming, Mr LEE Fook Sun, 53, was re-designated as Deputy CEO 53, was appointed President of General (Retired) and President, Defence Business of ST Electronics in August 2009. Prior to John G COBURN, ST Engineering in August 2009, his appointment, Mr Lee was Deputy 67, was appointed Chairman and CEO of overseeing the Aerospace, Electronics, President (Operations), ST Electronics ST Engineering’s US subsidiary, Land Systems and Marine sectors. Prior since 2005. He joined ST Electronics VT Systems, in December 2001. Gen (Ret) to this, he was Deputy CEO (Electronics in 2000 as President of Defence and Coburn joined the Group after an illustrious & Kinetics) & President, International International Business. Mr Lee is a 39-year career with the US Department of Business, ST Engineering from May 2004 member of Singapore-Zhejiang Economic Defense. Prior to taking up this position, to August 2009 and President, & Trade Council. He holds a Bachelor he was Commanding General of the ST Electronics, a position he held from of Arts (Honours) and a Master of Arts US Army Materiel Command, one of July 1997 to August 2009. Mr Seah was (Engineering Science) from the University the largest commands in the army with General Manager of CET Technologies of Oxford, UK. 60,000 employees, an annual budget of from July 1994 to July 1997. He serves US$40b and activities in 42 states and as Chairman of the Board of Governors of Mr SEW Chee Jhuen, 28 foreign countries. Gen (Ret) Coburn Temasek Polytechnic, Vice Chairman of 46, was appointed President of holds a Juris Doctor from the University Trek 2000 International Ltd*, and Director ST Kinetics in September 2006. of Missouri, USA, a Doctor’s Degree from of DSO National Laboratories, Infocomm Prior to this, Mr Sew was Deputy Eastern Michigan University and many Development Authority of Singapore, President (Operations) and President other degrees. He is also a noted author, International Enterprise Singapore and Defence Business of ST Kinetics. He speaker and a member of the Supreme Alexandra Health Pte Ltd. He is a Fellow joined ST Aerospace as an aeronautical Court of the United States. of the Institution of Engineers Singapore engineer in 1988, and has held many and a senior member of IEEE. He was senior management appointments before Ms Eleana TAN Ai Ching, awarded the 2007 International Manager becoming Deputy President (Operations). 47, was appointed Chief Financial Officer Action Award in Singapore, 2007 Top Mr Sew serves as a Member of the Board of ST Engineering in March 2008. Ten Financial and Intelligent Persons of Governors of Singapore Polytechnic. Ms Tan was previously Managing Director, Award in China and IES/IEEE Joint Medal He holds a Bachelor of Science Finance, Temasek Holdings (Private) of Excellence 2008. Mr Seah holds a (Distinction) in Aeronautical Engineering Limited (Temasek). Prior to that, Master of Science (Distinction) in Electrical and Mechanics from the University of she was Director Finance at Singapore Engineering from the Naval Postgraduate Minnesota, and a Master in Business Technologies Pte Ltd (STPL) from August School, USA. Administration from Stanford University, 2003 until December 2004, when STPL USA. was restructured and its assets transferred Mr TAY Kok Khiang, to Temasek. Prior to 2003, Ms Tan had 61, was appointed President of Mr CHANG Cheow Teck, held various key finance positions in the ST Aerospace in July 2001. As President 49, was appointed President, ST Marine in ST Engineering Group over a period of of ST Aerospace, Mr Tay is responsible for March 2008. Prior to this, Mr Chang was 13 years and last held the position of growing the Aerospace sector business President, Special Projects in Group Financial Controller of as well as its financial and operational ST Engineering. He has been with the ST Engineering. Ms Tan holds a Bachelor performance. He joined ST Aerospace as Group since 1990 and held various of Accountancy (Honours) from the Vice President/General Manager of senior management appointments within National University of Singapore and is ST Aerospace Engineering Pte Ltd the Group before assuming his current a member of the Institute of Certified in 1993, and has held many senior position, including that of EVP Commercial Public Accountants of Singapore and management appointments before Business, ST Aerospace; President, the Association of Chartered Certified becoming President. He was Deputy VT Systems; and President, Defence Accountants. President & Chief Operating Officer prior Business of ST Kinetics. Mr Chang holds

* listed on the SGX-ST 30

Organisation Chart

TAN Pheng Hock President & CEO

Eleana TAN Chief Financial Officer

INTERNAL AUDIT FINANCE Grace KWOK Raphael CHIN Senior Vice President Senior Vice President/ (Reports to Audit Committee) Group Financial Controller

INTERNATIONAL TECHNOLOGY MERGERS & MARKETING ACQUISITIONS FONG Saik Hay Patrick CHOY Chief Technology Officer Steven CHEONG Executive Vice President Senior Vice President

HUMAN RESOURCE LEGAL INFORMATION TECHNOLOGY TAN Nga Kok LOW Meng Wai Senior Vice President/Director Vice President/Director TAN Hock Hai Chief Information Officer

STRATEGIC PLANS RISK MANAGEMENT DEFENCE BUSINESS Robin THEVATHASAN Alice CHUA LOW Yee Kah Senior Vice President Senior Vice President Senior Vice President

CORPORATE BUSINESS EXCELLENCE PROCUREMENT COMMUNICATIONS Harnek SINGH GOH Bak Nguan Sharolyn CHOY Vice President/Director Chief Procurement Officer Senior Vice President

SPECIAL PROJECTS SYSTEM ENGINEER HAN Yew Kwang GAN Boon Jin Executive Vice President Chief System Engineer Singapore Technologies Engineering Ltd Think Ahead. 31 Annual Report 2009

Think Organisation

SEAH Moon Ming Deputy CEO & President, Defence Business

AEROSPACE ELECTRONICS LAND SYSTEMS MARINE

TAY Kok Khiang LEE Fook Sun SEW Chee Jhuen CHANG Cheow Teck President President President President

HO Yuen Sang NG Chong Khim GAN Boon Jin NG Sing Chan Deputy President, Deputy President, Deputy President, Operations & Deputy President & Operations/ Corporate Services President, Defence Business President, Defence Business Chief Operating Officer & and Marketing President, Defence Business Parmesh SINGH Jeremy CHAN LAU Thiam Beng President, Marketing & President, Business Development Deputy President, Defence Business Marketing & Total Aviation Support

US OPERATIONS EUROPE OPERATIONS John G COBURN Augustine SYN Chairman & CEO Senior Vice President

ADVANCED INTEGRATED SERVICES ENGINEERING CENTRE GOH Lik Kok FONG Saik Hay Vice President/General Manager President

Singapore Technologies Engineering Ltd Think Ahead. 33 Annual Report 2009 Corporate Governance

The Board is accountable to shareholders for ST Engineering’s performance. It is committed to ensuring that a transparent system is in place where good governance is not only practised at the Board level of the holding company but is embraced throughout the organisation as part of its culture.

This report sets out ST Engineering’s corporate Board members receive monthly consolidated governance processes, practices and activities in management reports on the financial performance 2009 with specific reference to the guidelines of the of each business sector, capital commitments and Singapore Corporate Governance Code 2005 (Code). significant operational highlights.

A formal letter is sent to a director upon BOARD MATTERS his appointment setting out his duties and responsibilities. A new director is also given a Board’s Conduct of its Affairs briefing by the President & Chief Executive Officer (Principle 1) on the strategic direction and performance of the The Board is responsible to shareholders for Company and its key subsidiaries as well as an overseeing the management of the business in the introduction to the senior management team. interest of the Company. To this end, the Board relies on the integrity and due diligence of its senior The Board is routinely updated on the relevant management and its external advisors and auditors. laws, continuing listing obligations and accounting standards requiring compliance, and their In addition to its statutory responsibilities, the Board implications for the Group. specifically performs the following governance roles: The Board convenes scheduled meetings on a • approves and guides the Group’s overall long quarterly basis to coincide with the announcement term strategic objectives; of the Group’s quarterly results. Ad-hoc meetings • establishes a proper risk management system are convened as and when necessary to review the to ensure that key potential risks faced by the Group’s performance, and to deliberate on specific Group are properly identified and managed; issues. To facilitate the Board’s decision-making • monitors the Group’s performance; process, the Company’s Articles of Association provides for Directors to participate in Board • assesses and approves annual budgets, major meetings by teleconference or video conference. funding proposals, investment and divestment The Chairman has a second or casting vote. proposals; Decisions of the Board and Board committees may • approves the appointment of the Chief Executive also be obtained via circulation. Officer, Board changes and appointments on Board committees; and The Board monitors the performance of the Group • approves the unaudited quarterly, half-yearly and through its Board committees. full year audited results prior to their release. The number of Board and Board committee In the discharge of its functions, the Board is meetings held during the year is tabulated on the supported by nine Board committees to which it following page. delegates specific areas of responsibilities for review and decision making, and the Executive Office. The Executive Office comprises the President & Chief Executive Officer; Deputy Chief Executive Officer; and the Chief Financial Officer (CFO). 34 CORPORATE GOVERNANCE

Type of Meeting No. of Meetings Attendance Average (%)

Board 7 82%

Audit Committee 7 95%

Business Investment and Divestment Committee 1 80%

Executive Resource and Compensation Committee 3 100%

Nominating Committee 3 100%

Senior Human Resource Committee 1 75%

Risk Review Committee 4 75%

Budget and Finance Committee 2 100%

Research, Development and Technology Committee 3 67%

Tenders Committee * *

* Decisions were made via circular resolution. Minutes of the Board Committee meetings are made available to all Board members.

Board Composition and Guidance directors are Mr Koh Beng Seng, Mr Venkatachalam (Principle 2) Krishnakumar, Mr Winston Tan, Mr Davinder Singh The Board comprises 11 directors and an alternate and Dr Stanley Lai. director. The Board consists of members with established track record in finance, banking, The Board has, at all times exercised independent technology, legal and management skills. Each non- judgment in decision making, using its collective executive director brings to the Board an independent wisdom and experience to act in the best interests of perspective based on his training and expertise to the Company. make balanced and well considered decisions. The Board held a total of seven meetings during the The Chairman of the Board is Mr Peter Seah, year, to consider among other things, the approval of a non-executive director. Mr Seah was appointed to the FY2008 results and release of 1Q2009, 2Q2009 the Board on 15 April 2002 as Chairman. and 3Q2009 results.

As a non-executive director, Mr Seah is free from any relationship with the executive management Chairman and Chief Executive Officer of the Company that could materially interfere with (Principle 3) the exercise of his independent judgment. He is a The Chairman and CEO roles and responsibilities are Member of the Temasek Advisory Panel in Temasek kept separate in order to maintain effective oversight. Holdings, the Company’s major shareholder. No individual or small group of individuals dominates the Board’s decision making process. The CEO and The President & Chief Executive Officer (CEO) is senior management regularly consult with individual Mr Tan Pheng Hock, who is an executive director. Board members and seek the advice of members of Save for Mr Tan Pheng Hock, the remaining ten the Board committees through meetings, telephone directors are non-executive directors. calls as well as by electronic mail.

The Board has five independent directors. According The Chairman, who is non-executive, is responsible to the Code, an independent director is one who for the proper functioning of the Board and acts has no relationship with the Company, its related independently in the best interests of the Company companies or its officers that could interfere, or be and its shareholders. The Chairman facilitates reasonably perceived to interfere with the exercise of the relationship between the Board, CEO and the director’s independent business judgment. The management, engaging them in constructive independence of each director is reviewed annually discussions over various matters, including strategic by the Nominating Committee (NC). The independent issues and business planning processes. Singapore Technologies Engineering Ltd Think Ahead. 35 Annual Report 2009

During the year, the NC conducted an informal The NC is also responsible for renewal and succession assessment of the directors’ performance by to ensure Board continuity. At each AGM, one third taking into account their collective and individual of the directors with the longest term in office since contributions to the Board and Board committees they his last re-election is required to retire. A retiring were appointed on. The Committee was fully satisfied director may submit himself for re-election. Under this with the performance of the Board. provision, Mr Tan Pheng Hock, Dr Tan Kim Siew and Mr Venkatachalam Krishnakumar will retire. The CEO is accountable to the Board for the conduct Dr Stanley Lai, who is newly appointed, will hold office and performance of the Group. The CEO is supported until the forthcoming AGM of the Company. in his work by the Deputy CEO, Mr Seah Moon Ming In addition, MG Neo Kian Hong, who will be appointed and the CFO, Ms Eleana Tan Ai Ching in the Executive as non-executive director of the Company on Office. During the year, Mr Wee Siew Kim, who was 31 March 2010, will also hold office until the one of 2 Deputy CEOs resigned to pursue other career forthcoming AGM of the Company. The retiring opportunities. Mr Wee was in charge of the Aerospace directors, being eligible, have offered themselves and Marine sectors. Mr Seah now oversees all the for re-election. 4 business sectors comprising Aerospace, Electronics, Land Systems and Marine. The NC recommends that each of the retiring Directors be re-elected at the Company’s forthcoming AGM.

Board Membership and Supporting the Board are the following Board Evaluation of Performance Committees: (Principles 4 and 5) The NC is responsible for reviewing the composition • Audit Committee of the Board and identifying and selecting suitable • Business Investment and Divestment Committee candidates to the Board. The Committee also reviews • Executive Resource and Compensation Committee the retirement and re-election of directors. • Nominating Committee • Budget and Finance Committee The NC comprises three directors. Mr Venkatachalam • Research, Development and Technology Committee Krishnakumar is the Chairman of the NC. He was • Senior Human Resource Committee appointed Chairman of the NC on 1 October 2009 • Risk Review Committee following the resignation of Dr Philip Pillai who has • Tenders Committee been appointed Judicial Commissioner of the Supreme Court. The other members are Mr Peter Seah and Dr Stanley Lai. Dr Lai was appointed NC member upon joining the Board on 8 October 2009. Both Mr Krishnakumar and Dr Lai are independent non-executive directors.

The NC is charged with the responsibility of ensuring that the Company’s Board and its subsidiaries comprise individuals who are able to discharge their responsibilities as directors. The NC identifies suitable candidates for appointment to the boards of the Group, in particular, candidates who can value add to the management through contribution of their skills, knowledge and experience.

The NC reviewed and affirmed the independence of the Company’s independent directors and the composition of the Board and the profile of Board members in relation to the needs of the ST Engineering Board. The NC recommended to the Board the appointment of Dr Stanley Lai as non executive independent Director. Dr Stanley Lai was appointed Director on 8 October 2009. 36 + Alternate director to LG Desmond KUEK Bak Chye Bak KUEK Desmond LG to director Alternate + M C DENOTES: The composition of the Board committees as at 31 December 2009 is tabulated below: tabulated is 2009 December 31 at as committees Board the of composition The COL CHIA Choon Hoong Choon CHIA COL Chang Tze LAI Stanley Dr Mr Davinder SINGH Davinder Mr Mr Venkatachalam KRISHNAKUMAR Venkatachalam Mr Huat Poh QUEK Mr Mr Winston TAN Tien Hin Tien TAN Winston Mr Tong QUEK Boon Mr Siew TAN Kim Dr Chye Bak KUEK Desmond LG Seng Beng KOH Mr Mr TAN Pheng Hock TAN Pheng Mr Mr Peter SEAH Lim Huat Lim SEAH Peter Mr Board Member Board – Chairman – – Member – CORPORATE GOVERNANCE CORPORATE

M M C Audit Committee (established on 15/1/1998) to be adequately prepared for the meeting. the for prepared adequately be to directors for order in meetings to prior days three least at directors to sent are papers board rule, general a As necessary. if advice professional independent seek also may Board The team. management risk the and auditors external and internal the as well as Secretary Company the and management CFO, the CEO, the to access unrestricted has also Board The analysis. financial and activities operational key on updates providing reports, management monthly with members Board furnishes management The 6) (Principle Information to Access M M M M C Business Investment and Divestment Committee (established on 8/9/1997) M M C Executive Resource and Compensation Committee (established on 6/12/1997) M M C Nominating Committee (established on 4/12/2002) M M M C Budget and Finance Committee (established on 5/1/1998) M M C Research, Development and Technology Committee (established on 1/8/2003) M M M C Senior Human Resource Committee (established on 16/1/1998) M M M M C Risk Review Committee (established on 7/12/1998)

Rolling list of any 3 Board Directors Tenders Committee (established on 5/1/1998) Singapore Technologies Engineering Ltd Think Ahead. 37 Annual Report 2009

REMUNERATION MATTERS The existing share plans expire in November 2010. During the year, the ERCC recommended to the Board Procedures for Developing Remuneration the adoption of new PSP and RSP share incentive Policies (Principle 7) plans, on the same terms as the existing share plans Level and Mix of Remuneration (Principle 8) but with a lower cap of 8% over the 10-year Disclosure on Remuneration (Principle 9) life of the share plans (existing Plan has a cap of The Executive Resource and Compensation 15%). The cap of 8% applies to both the PSP and Committee (ERCC) performs the role of the RSP awards as a consolidated limit. The Board has remuneration committee. The Committee comprises accepted the ERCC’s recommendations. The Board Mr Peter Seah as Chairman, Mr Venkatachalam will not be seeking a new mandate for the Company’s Krishnakumar and Dr Stanley Lai. The majority of share option plan. The grant of share options was members of the ERCC have held senior positions in discontinued in 2007. The new share incentive plans large organisations and are experienced in the area of will be proposed to shareholders for approval at the executive remuneration policies and trends. forthcoming Extraordinary General Meeting of the Company. All the ERCC members are non-executive directors. Apart from Mr Peter Seah, the other members of the The Board has delegated authority to the ERCC to ERCC are independent directors. determine the remuneration of the CEO and the senior management. The remuneration package for non- All decisions at any meeting of the ERCC shall executive directors is reviewed by the Board annually be decided by a majority of votes of the ERCC and the fees to be paid to Board members are subject members present and voting (the decision of the to approval at the AGM. The Directors’ Fee policy is ERCC shall at all times exclude the vote, approval or tabulated in the following page. recommendation of any member who has a conflict of interest in the subject matter under consideration). For FY2009, non-executive directors have volunteered to accept a reduction in directors’ retainer fees for The ERCC’s role is to assist the Board to carry out the 2009 in tandem with the senior executives’ pay cuts. following key duties and responsibilities: The Group has tabulated a summary compensation • Review and establish executive remuneration table for key executives for the year ended policy 31 December 2009. This table is found on page 40. • Approve the remuneration package and service terms for senior executives The Senior Human Resource Committee, chaired by • Set targets for senior executives and approve Mr Peter Seah, comprises Mr Tan Pheng Hock, LG equity-based incentive share awards Desmond Kuek Bak Chye and Dr Tan Kim Siew. The Committee reviewed the talent management and • Approve non-executive director remuneration leadership development initiatives to build a leadership structure pipeline for the Group. By supporting and directing the Group’s talent management and leadership initiatives, The ERCC met three times in 2009. Its key activities the Committee has helped to enhance the process were centred on the assessment and development of identification and development of talents to be of the senior management team, target setting, and groomed for senior positions. The Committee has also the determination of their compensation and incentive reviewed the succession plans for key management awards. In determining the overall remuneration positions in the Group. package, the ERCC assesses executives’ contributions to the Group relative to preset targets, the performance of the Group, and the compensation and employment conditions of various industries, including global remuneration benchmarking.

The ERCC reviewed and decided on conditional performance share awards under ST Engineering’s approved share plans as well as Economic Value Added-based incentives for senior executives. The ERCC also made a determination of the achievement factor for the final award of shares to participants under the approved Performance Share Plan (PSP) and Restricted Stock Plan (RSP). 38 CORPORATE GOVERNANCE

DIRECTORS’ FEE POLICY

The Directors’ fees payable in respect of financial year 2009 amounts to $847,158 (financial year 2008 : $893,166) and are based on the following rates:

From Private Sector From Public Sector^ Basic Retainer $ $ Director 50,000 7,500

Additional/Committee Fees From Private Sector From Public Sector

Board Chairman 50,000 30,000

Board Deputy Chairman / Audit Committee Chairman / Executive Committee Chairman 35,000 22,500

Other Committee Chairman / Audit Committee Member / Executive Committee Member 20,000 15,000

Other Committee Member 10,000 7,500

Attendance Fees

Per Board Meeting 2,000 –

Per Board Committee Meeting 1,000 –

^ Fees to directors from the public sector follow the Directorship & Consultancy Appointments Council (DCAC)’s guidelines. For services rendered by a public sector director on the Board and concurrently on Board committees, only one set of fee based on the highest rate shall be payable to the DCAC.

ACCOUNTABILITY AND release to SGX. Should there be any The directors’ interests in shares of AUDIT significant adverse issue(s) raised by the ST Engineering and its related companies Audit Committee (AC) or Board member during the year are found on pages 86 Accountability which may affect the results in a material to 98 of this Report. (Principle 10) way, the scheduled date of the results The Board is responsible for providing a announcement will be postponed to allow Audit Committee balanced assessment of the Company’s time for investigation or further review. (Principle 11) performance, position and prospects. In The appointment of auditors is subject The AC is supported in its work by the presenting the annual financial statements to approval at each AGM. In making its audit committees of the four business and quarterly results announcements to recommendations to shareholders on sectors. The respective chairmen of the shareholders promptly, it is the aim of the appointment and re-appointment of audit committees of the four business the Board to provide the shareholders auditors, the Board relies on the review sectors are invited to attend the AC with a detailed analysis, explanation and and recommendations of the AC. meetings of ST Engineering so as to have assessment of the Group’s performance, a clear understanding of policies made at position and prospects. Directors and key senior executives of the holding company level and to share the Group are prohibited from dealing in any feedback or raise any issue that the Following SGX’s introduction in ST Engineering shares two weeks before sectors’ audit committees may have. September 2006 of a new requirement the announcement of ST Engineering’s for directors to issue a Negative first quarter, second quarter, third quarter The AC has full authority to commission Assurance Statement to accompany its and full year results up to the date of the and review findings of internal interim financial results announcement, announcement of the results. Additionally, investigations into matters where it certain internal procedures have been all directors of the Group and employees is alerted of any suspected fraud or put in place to enable each member of are reminded not to trade in situations irregularity or failure of internal controls or the Board reviewing the interim financial where the insider trading laws and rules infringement of any law likely to have a statements to immediately raise any would prohibit trading. material impact on the Group’s operating material information known to him which results. It can investigate any matter within may render the interim financial results its terms of reference and with the full to be false or misleading prior to their cooperation of management. Singapore Technologies Engineering Ltd Think Ahead. 39 Annual Report 2009

SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED 31 DECEMBER 2009 (GROUP):

6. Taxable Income from exercise of 4. Directors’ 5. Share-based share options in 1. Salary 2. Variable 3. Benefits Fees Compensation Total 2009 Name of Director $ $ $ $ $ $ $

Peter SEAH Lim Huat – – – 187,000 57,550 239,550 7,231

TAN Pheng Hock 838,676 828,500 164,566 (a) 576,579 2,408,321 1,500

KOH Beng Seng – – – 99,000 29,247 128,247 13,065

LG Desmond KUEK Bak Chye – – – 15,000(b) – 15,000 –

Dr TAN Kim Siew – – – 15,000(b) – 15,000 –

QUEK Tong Boon – – – 19,167(b)(c) – 19,167 –

Winston TAN Tien Hin – – – 147,000(c) 41,512 188,512 13,095

Dr Philip Nalliah PILLAI – – – 102,750(c)(d) 29,638(d) 132,388 23,250

QUEK Poh Huat – – – 132,000(c) 34,908 166,908 22,440

Venkatachalam KRISHNAKUMAR – – – 127,500 34,908 162,408 37,875

Davinder SINGH s/o Amar Singh – – – 82,000 27,360 109,360 –

Dr Stanley LAI Tze Chang – – – 52,408(c)(e) 9,435 61,843 –

COL CHIA Choon Hoong (Alternate – – – – – – – to LG Desmond KUEK Bak Chye)

838,676 828,500 164,566 978,825 841,137 3,646,704 118,456

1. Salary includes base salary and employer CPF for the financial year ended 31 December 2009. 2. Variable includes AWS, Performance Target Bonus paid & EVA earned* for the financial year ended 31 December 2009. * The EVA earned for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1/3 of the total is paid out, with the balance 2/3 carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have had individual EVA Bank since the late 1990s. See next page for Individual EVA Bank as at 31 December 2009. 3. Benefits provided for employees are comparable with local market practices. These include medical, insurances, car, transport, etc. 4. In February 2009, ST Engineering Board endorsed the recommendation of the Executive Resource and Compensation Committee to accept a 10% reduction in the retainer portion of the Directors’ fees for FY2009 for private sector directors. 5. Based on the fair values of PSP and RSP Contingent shares granted in 2009, using Monte Carlo simulation model. Contingent shares granted are subject to key performance indicators (KPIs) being met over the performance period. The performance period for PSP is 2009-2011 and for RSP, it is 2009-2010 for TAN Pheng Hock and FY2009 for the Directors. The final number of shares awarded will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP. 6. Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to the income statement. (a) Fees payable to TAN Pheng Hock of $163,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd. (b) Fees for public sector directors are payable to a government agency, the DCAC. (c) Includes fees for directorship in subsidiary(ies). (d) Pro-rated. Dr Philip Nalliah PILLAI resigned as Director on 30 September 2009. (e) Pro-rated. Dr Stanley LAI Tze Chang was appointed Director on 8 October 2009.

The following information relates to remuneration of directors of ST Engineering:

Number of Directors in Remuneration Bands 2009 2008

Remuneration Band

$500,000 and above 1 1

$250,000 to $499,999 – 1

Below $250,000 11 10

Total 12 12 40

SUMMARY COMPENSATION TABLE FOR KEY EXECUTIVES FOR THE YEAR ENDED 31 DECEMBER 2009 (GROUP)

5. Taxable Income from exercise of 4. Share-based share options Fee 1. Salary 2. Variable 3. Benefits Compensation Total in 2009 $ % % % % % $

Between $2,000,000 and $2,250,000

Seah Moon Ming 30% 45% 7% 18% 100% 0.00

Between $1,750,000 and $2,000,000

Chang Cheow Teck 25% 59% 4% 12% 100% 0.00

Between $1,000,000 and $1,250,000

Lee Fook Sun 32% 49% 6% 13% 100% 8,625

Tay Kok Khiang 54% 15% 8% 23% 100% 0.00

Between $750,000 and $1,000,000

Sew Chee Jhuen 44% 15% 12% 29% 100% 0.00 Singapore Technologies Engineering Ltd Think Ahead. 41 Annual Report 2009

Individual EVA Banks as at 31 December 2008 Individual EVA Banks as at 31 December 2009

Between $4,000,000 and $4,250,000 Between $3,000,000 and $3,250,000

Tan Pheng Hock Tan Pheng Hock

Between $2,500,000 and $2,750,000 Between $2,000,000 and $2,250,000 Seah Moon Ming Seah Moon Ming

Between $2,250,000 and $2,500,000 Between $1,500,000 and $1,750,000 Tay Kok Khiang Tay Kok Khiang

Between $1,750,000 and $2,000,000 Between $1,250,000 and $1,500,000 Sew Chee Jhuen Sew Chee Jhuen

Between $1,500,000 and $1,750,000 Between $1,750,000 and $2,000,000 Chang Cheow Teck Chang Cheow Teck

Between $1,000,000 and $1,250,000 Between $750,000 and $1,000,000 Lee Fook Sun Lee Fook Sun

3. Benefits provided for employees are comparable with local market practices. These include medical, insurances, car, transport, etc. 4. Based on the fair values of PSP and RSP Contingent shares granted in 2009, using the Monte Carlo simulation model. Contingent shares granted are subject to key performance indicators (KPIs) being met over the performance period of 2009-2011 for PSP and 2009-2010 for RSP. The final number of shares awarded will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP. 5. Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to the income statement. 42 CORPORATE GOVERNANCE

The Company has put in place a Whistle- an audit review exercise. A request for to the AC for deliberation with copies Blowing framework, endorsed by the proposal exercise was carried out with of these reports extended to the Board, where staff may, in confidence and all the major auditing firms including relevant senior management, for prompt without fear of retaliation, raise concerns the incumbent external auditors. After corrective actions, as recommended. of incidents of possible wrongdoing or due evaluation by the AC, the Board Furthermore, IA’s summary of findings, breach of applicable laws, regulations accepted the AC’s recommendations for recommendations and updates on or policies to the respective chairmen a change of auditors for FY2010 which management’s actions taken are of the audit committees in the Group. will be proposed to shareholders for discussed at the quarterly AC meetings. As ST Engineering has become a global approval at the forthcoming AGM. company with a presence in many During the year, IA worked with countries, it is aware of the need to Management to align newly acquired apply international corporate governance Internal Control (Principle 12) companies to the Group’s internal standards wherever it operates. It Internal Audit (Principle 13) control environment and compliance takes a serious view of all reports of The AC oversees and appraises the standards in order to strengthen the self- violations received by initiating thorough quality of the Company’s IA function. regulating checks and balances. investigations into each matter. IA also made periodic visits to overseas The Board is ultimately responsible subsidiaries to review their operations The AC comprises Mr Koh Beng for ensuring that a sound system of to ensure compliance with the internal Seng as Chairman, Mr Venkatachalam internal controls is in place. The Board, controls framework. An external Krishnakumar and Dr Stanley Lai (from through the AC, the President and accounting firm was engaged to assist 8 October 2009). All the members of the CEO and the CFO, considers that the IA. In accordance with its plan, surprise AC are independent directors. Group’s framework of internal controls audits were conducted in the course and procedures is adequate to provide of the year on selected areas including The AC held seven meetings during the reasonable assurance of the integrity, treasury activities and reviewing of year. In the meeting in February 2009, AC confidentiality and availability of critical dormant bank accounts against bank had private sessions with the external and information, and the effectiveness and mandates, bank statements, balances, etc. There were no material issues internal auditors, without management, efficiency of operations, safeguarding of highlighted following the surprise audits. before commencement of the meeting. assets and compliance with applicable

During the year, the AC reviewed and rules and regulations. It is also satisfied There were no significant control issues recommended to the Board the release that problems are identified on a timely highlighted by IA in 2009. of the 2008 full year, 1Q2009, 2Q2009 basis and there is in place a process for and 3Q2009 financial statements, and best practices and follow up actions to be The IA continued with its system considered and approved the 2009 Audit taken promptly to minimise unnecessary of rating a company at the end of Plan and the 2009 Internal Audit (IA) Plan. lapses and for the identification and an internal audit for the purpose of It also reviewed the adequacy of internal containment of business risks. differentiating the high risk issues which control procedures including IT security require immediate attention. issues, Interested Person transactions The IA supports the AC in reviewing and the issues raised in IA reports. the adequacy of the Company’s Risk Review Committee internal controls system. Staffed by The Risk Review Committee, chaired by The AC reviewed the level of non audit qualified auditors, IA has unrestricted Mr Winston Tan, comprises services performed by its external direct access to the AC. The Head of LG Desmond Kuek Bak Chye, auditors to satisfy itself that non audit IA’s primary line of reporting is to the Mr Davinder Singh, Mr Venkatachalam services performed by the auditors did Chairman of the AC, although she Krishnakumar and Mr Tan Pheng Hock. not compromise their independence reports administratively to the CFO of under regulatory requirements. the Company. The Committee maintains oversight of the Enterprise Risk Management The AC also reviewed the performance IA plans its internal audit schedules in Framework. of the incumbent external auditors. The consultation with, but independently of, AC had expressed satisfaction with the management. The IA Plan is submitted The Committee met four times during standard of audit, independence and to the AC for approval at the beginning the year to review key business risks, objectivity of the incumbent auditors. of each year. The AC also meets with IA sector level trends, major events and As the external audit firm has been at least once a year without the presence emerging issues and worked with engaged with the Group for 8 years of management to gather feedback the management to ensure that the since 2002, in the spirit of good on management’s level of cooperation Group had adequately prioritised and corporate governance, the AC with the and other matters that warrant AC’s addressed risk management issues agreement of the Board, embarked on attention. All audit reports are submitted within the Group. Singapore Technologies Engineering Ltd Think Ahead. 43 Annual Report 2009

During the year, the Board adopted ST Engineering maintains a regularly a Fraud Risk Management policy to updated website which provides the latest provide guidance to employees on SGX announcements, news releases and managing the risk of fraud. highlights of corporate events of each sector and its capabilities. Budget and Finance Committee Chaired by Mr Davinder Singh, the In 2009, ST Engineering’s investor relations Budget and Finance Committee team held more than 300 face-to-face members include Mr Tan Pheng Hock, investor meetings and conference calls, Mr Quek Poh Huat and Dr Tan Kim Siew. and participated in investor conferences in Singapore and Hong Kong. Budgets prepared by the respective subsidiaries are consolidated at the ST Engineering is committed to timely ST Engineering level and presented to disclosures to ensure that the investing the Budget and Finance Committee community receives a balanced for review and recommendation to the and updated view of the Group’s Board for approval. performance and businesses.

During the year, the Budget and Finance Board members attended the AGM Committee held two meetings to review and EGM in 2009 where shareholders the FY2009 budget assumptions present were given an opportunity to and 5-year forecast. The Committee seek clarification or question the Board also met to review the 2010 Plan and on issues pertaining to the resolutions recommended to the Board for approval. proposed before they were voted on. The external auditors were also present Business Investment and Divestment at the AGM to assist the directors in Committee answering questions on audit related The Business Investment and Divestment matters from shareholders. The Group Committee comprises Mr Peter Seah as fully supports the Code’s principle Chairman, Mr Tan Pheng Hock, to encourage active shareholder LG Desmond Kuek Bak Chye, participation. More on Investor Relations Mr Winston Tan and Mr Quek Poh Huat. can be found on pages 48 to 49.

During the year, the Business Investment Financial and other information are and Divestment Committee held one made available on the Company’s meeting to consider an investment by website at www.stengg.com and these the Group. are regularly updated.

COMMUNICATION WITH SHAREHOLDERS

(Principles 14 and 15) The Company enters into regular and timely communication with shareholders as part of the Group’s effort to help shareholders better understand its businesses and to obtain feedback on the views and concerns of shareholders.

The Group has a comprehensive investor relations programme aimed at providing existing and potential investors with comprehensive and prompt information, to enable them to have a better understanding of the Group’s businesses, direction and performance. 44

Human Resource

Participants at one of our leadership development programmes.

ST Engineering encourages employees to take ownership of Preparing leaders for future their own personal and career development. In line with this, challenges. LEAP includes a learning resource guide to help employees draw up their Personal Development Action Plans based on preferred learning styles and individual needs. ST Engineering places great importance on people excellence because it is critical to the Group’s success. The differing abilities and aspirations of employees are Over the years, a wide suite of programmes has been taken into account when assigning tasks and put in place to help every employee realise his or her responsibilities, as well as in their development plans. fullest potential. As the Group expands in an increasingly competitive business environment, it faces various challenges. The Group has identified eight leadership competencies Assigning the right challenges to the right people is another that are essential for its employees to be effective deliberate strategy to bring out the best in employees while in their current as well as future roles. Each of these serving the best interests of the business. competencies is mapped across four effectiveness levels to convey proficiency targets for the four management As ST Engineering continues to enlarge its global footprint, levels: junior, middle, senior and top management. building a pool of global managers who are effective across The set of behavioural indicators for each level clearly cultures is a priority. With this in mind, the Group exposes illustrates the competency “in action”. In addition, an employees to other cultures through overseas postings and online assessment tool, the Leadership EnhAncement projects. Executive programmes conducted by renowned Portal (LEAP), allows employees to assess themselves universities abroad are added opportunities, not only to on the eight competencies. learn executive skills, but also to network and gain the insights and experiences necessary for leading culturally diverse teams. Singapore Technologies Engineering Ltd Think Ahead. 45 Annual Report 2009

HUMAN RESOURCE STATISTICS AS AT 31 DECEMBER 2009

SECTOR

Aerospace (7,334) 35% Electronics (4,823) 23% Land Systems (6,314) 30% Marine (1,853) 9% Others (including ST Synthesis and ST Dynamics) (682) 3% Total (21,006) 100%

JOB GROUP

Managerial (1,160) 5% Engineering (6,267) 30% Corporate Function/Admin (3,538) 17% Sales & Marketing (482) 2% Technical & Others (9,559) 46% Total (21,006) 100%

EDUCATIONAL QUALIFICATION

Degree & Equivalent (6,037) 29% Diploma & Equivalent (5,259) 25% “O”/“A” Levels & Equivalent (3,427) 16% Secondary Level & Lower (1,593) 8% Trade Certificates (4,690) 22% Total (21,006) 100%

NATIONALITY

Singaporean/PR (12,033) 57% American (3,364) 16% PRC/Hong Kong (3,365) 16% Danish (409) 2% Indian (246) 1% Malaysian (226) 1% Swedish (188) 1% Others (1,175) 6% Total (21,006) 100% 46

Corporate Social Responsibility

Volunteers shaved off their crowning glory for the Children’s Cancer Foundation.

Caring for the environment and Staff also pitched in to do their bit for activities and fundraising benefiting the community the environment. Over 100 employees more than 30 charity organisations in spent two separate weekends cleaning Singapore. Six ST Engineering employees ST Engineering is guided by a up the Sungei Buloh Wetland Reserve donated more than money when they commitment to conduct its business and Pulau Ubin’s Chek Jawa, two nature participated in “Hair for Hope”. This responsibly and a desire to share its reserves in Singapore known for their rich event organised by the Children’s Cancer strengths for the common good. Efforts in biodiversity. As a result, 46 mangrove Foundation invites members of the public these respects focus on two areas: caring saplings were planted and about 65kg of to shave their heads to show support for for the environment and the community. rubbish was cleared. children with cancer.

During the year, the Group implemented Similarly, the Group’s employees led The Group continued to make workplace several energy saving initiatives. These efforts to serve the community. They safety a priority, and sought to raise include installing motion sensors in visited adopted homes and other charities, awareness of its importance throughout common areas such as washrooms, as well as organised tours, outings and the wider community. For the fifth year, using energy saving light emitting diode activities for residents. The charitable ST Engineering partnered the Workplace (LED) lights, fitting water taps with spray organisations ST Engineering supports Safety & Health Council of Singapore thimbles to reduce water usage, and a include Chen Su Lan Methodist Children’s and Singapore’s Ministry of Manpower pilot project to harness solar power to Home, Children’s Aid Society, Christalite to run the annual Safety@Work Creative generate electricity. ST Engineering’s Methodist Home, The Moral Home for the Awards. In addition to spreading the aerospace facility in San Antonio also Disabled, Spastic Children’s Association safety message, the Awards are a participated in a “Lean, Clean, and School and Canossaville Children’s Home. national platform for students of tertiary Energy Review” to use less energy institutions to showcase their creativity. to power the lights in its hangars. Staff also gave generously to charitable This was a joint effort with the Texas causes. ST Engineering is a strong Manufacturing Assistance Centre/ supporter of The President’s Challenge, Southwest Research Institute. an annual series of community based Singapore Technologies Engineering Ltd Think Ahead. 47 Annual Report 2009 Environment, Health & Safety

We at ST Engineering are committed to “Safety Before Profit”. We believe that “Safety Starts With Me” and hence we pledge to abide by all safety rules, stop all unsafe practices and watch out for our co-workers’ safety. We shall through our diligence and continuous improvement efforts achieve our goal of “Zero Accidents”.

Safety pledge.

Making the workplace cleaner, 18001, while ST Marine was certified to improvement projects under Safety healthier and safer DNV’s ISRS (International Safety Rating Improvement Teams, Kaizen Teams System) Level 8, which is the equivalent and others. As we strengthen our business excellence standard for the marine industry. practices, ST Engineering takes extra The Group believes in promoting a safe efforts to move up the mark towards The Group complies with the Workplace and healthy lifestyle for its employees. excellence in Environment, Health Safety and Health Act and the Singapore During the year, regular health screenings and Safety (EHS). The Group adheres Standard Codes of Practice, and practises and talks were conducted. To encourage strictly to EHS standards throughout Behavioural Based Safety. ST Aerospace active lifestyles, sports and recreational the organisation. The ST Engineering has put in place the Framework for activities were organised in every sector, EHS Statement was introduced in 2009 Human Factors (CAAS, EASA and FAA). such as ST Aerospace’s yearly coastal to reinforce our commitment to protect run, ST Marine’s regular Tools Down Day the environment, health and safety of The business sectors have received and inter-subsidiary competitions. our customers, employees and the their fair share of awards and accolades. communities in which we operate. These include Ministry of Manpower’s Looking ahead, the Group is working WSH Practices Awards – Outstanding towards enhancing its implementation of To fulfill this commitment, all sectors Achievement awarded to ST Kinetics; System Safety Frameworks by promoting, have implemented the Environment Singapore Police Force and Civil Defence sharing and aligning System Safety Management System certified to National Safety and Security Watch practices in our Group. Our System Safety ISO 14001:2004. The sectors pursue Group Award to ST Electronics; and Certifications are governed by the Mil-Std- various environmental initiatives, relevant Association of Marine Industries WSH 882D, International Maritime Organization to the nature of their business activities. Award to ST Marine. (IMO), Standard & Classification Society The initiatives include waste minimisation, Rules for ST Marine; Safety Engineering reduction in toxicity or volume of All sectors were recognised as bizSAFE (Railways System and Equipment) for hazardous waste, energy conservation, partners in 2009 and have their ST Electronics; Fuze Safety (Mil-Std-1316) design or use of environmentally friendly respective safety programmes, which for ST Kinetics; and the Safety Engineering products and packaging and the adoption include Safety and Quality Briefing Notes, (Civil Airborne Systems), ARP 4754 & ARP of clean production technology. Hazards and Near-Miss Reporting, 4761 Commercial Standards for ST Kinetics’ Lean Behavioural Based ST Aerospace. As part of the Group’s efforts to promote Safety and ST Marine’s Target Zero Occupational Safety and Health, programme. The Group conducts regular ST Aerospace, ST Kinetics and cross-sector safety assessments, while ST Electronics were certified to OHSAS the sectors organise specific safety 48

Investor Relations

Analysts visiting ST Electronics’ 3D theatre.

Continual Engagement ST Engineering takes a During the year, the Group’s investor relations team proactive approach in held about 337 face-to-face investor meetings and conference calls, and participated in nine investor our investor relations, conferences in Singapore and Hong Kong. Such efforts keep our institutional shareholders updated on our constantly engaging the business, and promote continued interest in the stock. investment community to ST Engineering is well-covered by 18 sell-side analysts keep them abreast of the and the Group is committed to enhancing their understanding of our business and strategies. Besides Group’s developments. quarterly results briefings and regular meetings, we organised facility visits to our aerospace, electronics, As part of our outreach to retail investors, land systems and marine facilities for analysts during ST Engineering participated in the inaugural Asian the year. These visits provided the analysts with Investment Conference & Exhibition in Singapore, and additional insights into our operations. remains a proud sponsor of the Securities Investors

Association (Singapore) (SIAS) Investor Education Programme. Singapore Technologies Engineering Ltd Think Ahead. 49 Annual Report 2009

In line with ST Engineering’s belief in providing timely • Post results investor lunch disclosures to all investors, all our SGX releases are • Payment of final ordinary dividend of 4.0 cents per promptly posted on our website. Our quarterly results share and a special dividend of 8.8 cents per share briefings are webcast live, with a channel for viewers to for the year ended 31 December 2008 post questions online. The results presentation slides • CLSA Corporate Access Forum Singapore are also made available on our website. • Macquarie ASEAN Conference Singapore • UBS Asian Transport Conference Singapore ST Engineering’s commitment to transparency has won us a Hall of Fame award from SIAS. 3rd Quarter 2009 • Nomura Asian Equity Forum Singapore Investor Relations Calendar Highlights 2009 • SIAS Asian Investment Conference & Exhibition • Live webcast of 2Q2009 results briefing 1st Quarter 2009 • Post results investor lunch • DBS Vickers Pulse-of-Asia Conference Singapore • Citi ASEAN Investor Conference Singapore • Live webcast of FY2008 results briefing • Payment of interim ordinary dividend of 3.0 cents • Post results investor lunch per share for first half ended 30 June 2009 • Deutsche Bank Access Singapore Corporate Day • CLSA Investor Forum Hong Kong • Analysts’ visit to ST Aerospace 4th Quarter 2009 2nd Quarter 2009 • Fund managers’ visit to ST Aerospace and ST Electronics • Analysts’ visit to ST Electronics, ST Kinetics • Live webcast of 3Q2009 results briefing and ST Marine • Post results investor lunch • 12th Annual General Meeting • Morgan Stanley Asia Pacific Summit Singapore • Live webcast of 1Q2009 results briefing

ST Engineering Average Share Price and Trading Volume 2009

Trading Volume Share Price (millions) ($) 28 Apr 2009 90 Ex-date for the payment 3.40 of 2008 final dividend of 19 Aug 2009 80 12.8 cents per share Ex-date for the payment of 3.20 2009 interim dividend of 3.0 70 cents per share 3.00 60

50 2.80

40 2.60 30 2.40 20 2.20 10

0 2.00

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Price Volume Source: Bloomberg

ST Engineering Share Price History

2009 2008 2007 2006 2005

High $3.25 $3.66 $3.98 $3.30 $2.86

Low $2.06 $1.99 $3.10 $2.62 $2.33

Average* $2.61 $2.90 $3.59 $2.95 $2.52

*Defined as the average closing prices of active trading days for the year 50

Awards

ST Engineering President & CEO, Tan Pheng Hock, receiving the Finalist award from Mr Arin Jira, Chairman of ASEAN Business Advisory Council at the ASEAN-BIS Gala Dinner on 27 February 2009 in Bangkok.

ST Engineering is a market leader in many ways, earning plaudits from industry experts, the investment community and the public sector. The Group continued its winning ways in 2009, garnering numerous awards.

Quality

ASEAN Business Awards 2008 Finalist in the IES Prestigious Engineering Achievement Awards Innovation Category for Larger Size Companies 2009 – awarded to ST Electronics (Info-Comm Systems) by the ASEAN Business Advisory Council – for for various breakthroughs in mobile platform design contributions to the growth of the ASEAN economy. and system integration in its Expandable Mobile Command Hub. Asia Talent Management of the Year – awarded to President & CEO, Mr Tan Pheng Hock, at the 8th Aerospace Industry Excellence Award 2009 by CNBC Asian Business Leaders Awards for his personal the Association of Aerospace Industries (Singapore) involvement in nurturing leadership within the company. – awarded to ST Aerospace in recognition of its outstanding performance in meeting exacting requirements of all stakeholders including customers, authorities, investors, suppliers and partners. Singapore Technologies Engineering Ltd Think Ahead. 51 Annual Report 2009

Aerospace Supplier Excellence Award 2009 (Gold Standard) by the Association of Aerospace Industries (Singapore) – awarded to ST Electronics (Info-Software Systems) in recognition of its strategy and efforts to meet the requirements of the aerospace industry.

Aerospace Innovation Leadership Award 2009 (Silver Standard) by the Association of Aerospace Industries (Singapore) – awarded to ST Electronics (Info-Software Systems), in recognition of its innovative strategies to enhance the aerospace industry.

Product Excellence

ShipPax Award 2009 – awarded to ST Marine for Outstanding Concept in the RoRo category. The award recognises the innovative combination of functions that allows the City of Hamburg to transport airframe assemblies for the Airbus A380 airliner, and at other times to carry up to 800 cars.

Mr Tan Pheng Hock receiving the Asia Talent Management of the Year Award at the 8th CNBC Asian Business Innovations 2010 Design and Engineering Leaders Awards. Award (Computer Peripherals Product Category), at the International Consumer Electronics Showcase (CES) – awarded to ST Electronics (Info-Security) for its DiskCrypt Mobile DCM300-128.

New Zealand Defence Industry Award of Excellence – awarded to ST Aerospace for its innovative and adaptive engineering design in the first-of-its-kind multi-role combination solution developed for a fleet of two Boeing 757-200 aircraft that belonged to the Royal New Zealand Air Force.

Defence Technology Prize by Singapore’s Ministry of Defence (MINDEF) – for Trailblazer, a mine clearing vehicle developed jointly by ST Kinetics, Defence Science & Technology Agency (DSTA) and the Singapore Armed Forces. ST Aerospace received the same award for Skyblade III, a mini unmanned aerial vehicle developed jointly by ST Aerospace, DSO National Laboratories, DSTA and the Army.

Mr Tan Guong Ching, Chairman of ST Aerospace, receiving the New Zealand Defence Industry Award of Excellence from New Zealand’s Minister of Defence, Mr Wayne Mapp, for exceptional service to the New Zealand Defence Force. 52 AWARDS

Corporate Social Responsibility People

Total Defence Awards 2009 by Singapore’s MINDEF 12th Convention for Workplace Safety and Health – ST Marine was one of ten employers conferred the Innovations in Marine Industry (Silver Award) – Minister for Defence Awards 2009. Five ST Electronics awarded to ST Marine for its well-designed jig that subsidiaries, as well as ST Kinetics and four of its greatly reduces safety hazards and lessens cycle time subsidiaries, were presented the Distinguished in the hull fabrication process. Defence Partner Awards. ST Marine, ST Aerospace subsidiaries – ST Aerospace Services Co and Workplace Safety & Health Innovation Awards by ST Aerospace Engines, and ST Electronics the Ministry of Manpower – awarded to (Info-Software Systems) received the Meritorious ST Kinetics and its subsidiary, Ordnance Development Defence Partner Award. & Engineering Company of Singapore (1996).

Meritorious Home Team Partner Award by the POSB Everyday Champions Award 2009 – in Ministry of Home Affairs – awarded to ST Electronics recognition of ST Electronics’ efforts in building a (Info-Software Systems), ST Aerospace and its sports culture at work for its employees. subsidiary, ST Aerospace Services Co, as well as ST Kinetics and two of its subsidiaries, for their support and contribution towards National Service, Communications and national safety and security. The Group’s 2008 Annual Report “Engaging National Safety and Security Watch Group Award, Ideas, Delivering Promises” received accolades for Individual and Cluster Awards by the Singapore outstanding design and editorial. The report picked Police Force (SPF) and the Singapore Civil Defence up two international awards - the Hermes Creative Force (SCDF) – awarded to ST Electronics for its Awards (Platinum Award) and the Gold Award at efforts in taking ownership of its safety and security the 2009 International ARC Awards Competition concerns at its premises, and working closely with (Multi-industry – Products & Services). the Home Team to raise the emergency preparedness level of its staff. ST Marine also received the Most Transparent Company – Hall of Fame Award Cluster Award. – by Securities Investors Association (Singapore), since 2005. Community Chest SHARE Awards 2009 (Platinum) – The Group received ten Platinum awards, six Gold 2009 WebAward for Outstanding Achievement in and four Silver awards for its contribution to and Web Development by the Web Marketing Association participation in the SHARE programme. ST Electronics – awarded to US subsidiary, iDirect, for its website in (Info-Comm Systems) also received the 5-Year the category of “B2B Standard of Excellence”. Outstanding SHARE Award 2009.

Associate of the Arts Awards by the National Arts Council, Singapore – awarded to ST Engineering in recognition of its valuable contributions towards the promotion and organisation of arts activities in Singapore.

Operating Financial Review

Group Overview 54 Staying on Course 55 Performance of the Group 56 Aerospace Sector 62 Electronics Sector 66 Land Systems Sector 70 Marine Sector 74 Dynamics and Risk 78 54

Group Overview

Group Vision, Mission, Objectives & Thrusts

GROUP VISION Be a global defence and engineering group

GROUP MISSION KEY PERFORMANCE INDICATORS Bring value to our customers and partners by delivering total integrated quality solutions and • Customer Satisfaction support • Customer Acceptance Rate • Turnaround Time Compliance • Employee Satisfaction • Innovations / New Products, 4 STRATEGIC OBJECTIVES Services or Capabilities • Enlarge Strategic Capabilities • Sales and Profit Growth • Expand Global Networks • Embrace Partnerships • Return on Equity • Enhance Business Excellence • Economic Value Added

6 STRATEGIC THRUSTS • Customer Focus • Safety & Quality First • People Excellence • Technology Edge • Operational Excellence • Financial Strength

The ST Engineering Group was established in Headquartered in Singapore, ST Engineering 1997 with the amalgamation of four public listed has grown its staff strength to over 20,000 and companies – ST Aerospace, ST Electronics, has more than 100 companies and associated ST Automotive and ST Marine. In 2000, with the companies spanning 24 countries and 42 cities. acquisition of Chartered Industries of Singapore, ST Automotive merged with the acquired group of companies to form ST Kinetics.

Building on the substantial capabilities and experience of each of the four sectors, ST Engineering has since leveraged synergies, critical mass and cross-marketing to expand its presence. Today, ST Engineering is recognised as a significant player in the global marketplace, and provides integrated defence and commercial engineering solutions and services to its extensive international customer base. Singapore Technologies Engineering Ltd Think Ahead. 55 Annual Report 2009 Staying On Course

Amidst the challenging environment resulting from the global financial crisis, ST Engineering put in a steady performance.

The Group’s healthy financial position, The Group was also successful in winning the year, particularly for its Maintenance- multi-market exposure and diversified overseas government-related projects. By-the-Hour (MBHTM) solution. Its growth capabilities allowed it to consolidate its The Electronics sector strengthened plans remained on track, with its Pudong strengths while seizing opportunities along its foothold in the China rail system hangars in Shanghai ready by early 2010, the way. business, winning contracts to provide an and the fourth of its Panama hangars to Integrated Supervisory Control System be commissioned in 2010. Its Xiamen and Platform Screen Doors for China’s engine facility is also expected to be ready Visibility from Strong Guangzhou-Foshan Line. It will also by 2010. Order Book provide a Container Terminal Management System and a Management Information The Land System sector’s specialty The Group continues to build on its order System to the Chittagong Port Authority of vehicles segment continued to feel the book momentum, which at the end of Bangladesh, and Security Enhancement effects of the crisis as the US housing 2009 stood at $10.3b. Such strong Services to the Central Bank of Oman. market has yet to recover. It looks to other showing signals continuing strength in The Land Systems sector continued to markets to grow sales, and has formed winning contracts and, with typically 60- win contracts for its 40mm ammunition, a joint venture to extend its reach into 70% of each year’s revenue derived from including with the UK Ministry of Defence Latin America. It seized opportunities its order book, provides good visibility for (MOD) and the Swedish Defence Materiel in non-housing related markets, and its its stakeholders. Administration. The Group’s US subsidiary, US subsidiary, VT SVC, scored its single VT Miltope, won a US$500m contract to largest order of 248 units of its innovative supply its MSD-V3 system to the hybrid refrigerated truck bodies. China’s Stability from Government- US Army. specialty vehicles market has continued Related Projects to show strong demand and the sector The Group’s overseas successes also strengthened its presence there with included achieving new market access. the acquisitions of Zhenjiang Huachen Significant among the contract wins in The Electronics sector secured a contract Huatong Road Machinery Co., Ltd. and 2009 were the multitude and diversity of to install a Tower Simulator for the Zhenjiang Huatong Aran Machinery Co., local and overseas government-related Tanzania Civil Aviation Authority, its first Ltd. Looking to green vehicles for future projects, providing added resilience to the project in Tanzania, while the Land System growth, the sector launched the world’s Group’s performance. sector’s US specialty vehicles subsidiary, first hybrid hydraulic drive enhanced port VT Leeboy, won a contract to supply its prime mover as well as Singapore’s first In Singapore, the Electronics sector will bituminous paver to the US Army, its first commercial diesel-electric hybrid bus. provide the Singapore Armed Forces (SAF) ever military contract. with the Advanced Combat Man System, The Group made small but strategic provide the Expressway Monitoring & acquisitions during the year, further Advisory System on major arterial roads to addressing gaps and building the Land Transport Authority (LTA), create Improving and Readying for capabilities. The Group’s US subsidiary, and operate the first Virtual World for the the Future VT iDirect, acquired Parallel Limited inaugural Singapore 2010 Youth Olympic and the remaining 51% equity stake in Games for the Infocomm Development Although certain segments of the Group’s Ximaera Technologies Canada, Inc. The Authority (IDA), transform Singapore business were slightly more affected by acquisitions provide iDirect additional Civil Defence Force’s (SCDF) emergency the crisis, their continuing innovation resources to develop and integrate new call-taking system into a new-generation and relentless pursuit of new business technologies. The Aerospace sector command and control system, and mitigated the impact. acquired Precision Products Singapore provide the Singapore Police Force (SPF) Pte Ltd, which manufactures casting and with a 3rd Generation command and The Aerospace sector turned in a mould toolings, to support ST Aerospace’s control system. The Marine sector will respectable performance, considering business. The Group also acquired a 33% provide logistics management of Republic the turmoil in the aviation industry and the interest in Singapore Airshow & Events of Singapore Navy’s (RSN) warehouses initial learning curve for its 87-unit FedEx Pte Ltd and became its single largest at Changi and Tuas Naval Bases, and Passenger-to-Freighter (PTF) contract shareholder, further aligning the Airshow’s the Group’s subsidiary, ST Synthesis, which impacted results in the first half of interests with that of the Group, the will provide maintenance services on the the year. The sector continued to expand Airshow’s anchor exhibitor. electrical and mechanical systems of the its suite of offerings that include capability Kallang-Paya Lebar Expressway (KPE). for CFM56-5B engines and signing a The Group closed the year on a positive During the year, the Land Systems sector 20-year agreement to serve as a GE- note, continuing to prove its resilience and delivered the Terrex 8x8 Infantry Carrier approved On-Wing Support provider for diligently planning for growth ahead. Vehicles and Trailblazer Countermine the GEnx-1B and GEnx-2B engines. The Vehicles to the SAF. sector won many new customers during 56 OPERATING FINANCIAL REVIEW

Performance Of The Group

a) Half yearly performance

2009 2008

In $m Except Per Share Amounts 1H 2H FY 1H 2H FY

Turnover 2,727 2,821 5,548 2,616 2,729 5,345

EBITDA 292.7 356.5 649.2 358.9 309.0 667.9

EBIT 214.6 271.8 486.4 284.0 225.1 509.1

Profit before tax 250.6 296.0 546.6 307.5 233.2 540.7

Profit after tax and minority interests 193.9 250.0 443.9 242.5 231.1 473.6

Basic earnings per share (cents) 6.46 8.32 14.78 8.12 7.70 15.82

Net asset value per share (cents) 46.69 52.09 52.09 47.04 52.71 52.71

Note: The half yearly figures are unaudited

The Group turnover for 2H2009 of $2,821m was The Group Profit Before Tax (PBT) for 2H2009 increased comparable to that achieved in the first half. Land Systems by 18% or $45.4m over the first half. All sectors recorded sector reported higher turnover, Electronics and Marine higher PBT in 2H2009 compared to 1H2009. sectors had comparable turnover while Aerospace sector had lower turnover vis-à-vis 1H2009.

HALF YEARLY TURNOVER ($m) HALF YEARLY PROFIT BEFORE TAX ($m) 307.5 296.0 2,821 2,729 2,727 2,616 250.6 233.2

1H08 2H08 1H09 2H09 1H08 2H08 1H09 2H09 Singapore Technologies Engineering Ltd Think Ahead. 57 Annual Report 2009

b) Full year performance

Turnover by Sector Turnover by Geographical Areas The Group turnover of $5,548m for FY2009 was A review of the Group turnover by geographical areas comparable to that of FY2008. Both Electronics and is as follows: Marine sectors reported higher turnover, Aerospace sector had comparable turnover, while Land Systems sector had lower turnover vis-à-vis FY2008. $m

6,000 5,345 5,548 17% 5,051 3% 5,000 21% 4,486 4,000 3,338 3,000

2,000

34% 1,000

25% 0 05 06 07 08 09

FY Aerospace Electronics Land Systems Marine Others Asia USA Europe Others

Profit Before Tax by Sector Earnings Per Share (EPS) Group PBT for FY2009 of $546.6m was comparable The Group’s basic and diluted EPS for FY2009 were to that of FY2008. Except for the Aerospace sector, 14.78 cents and 14.74 cents respectively (FY2008: all sectors recorded higher PBT compared to 15.82 cents and 15.74 cents respectively). The lower FY2008. EPS was a result of lower profit after tax for FY2009.

cents 1% 19% 18 16.95 15.82 15.15 13.64 14.78 17% 15

42% 6

21% 3

Aerospace Electronics Land Systems 05 06 07 08 09 Marine Others FY 58 OPERATING FINANCIAL REVIEW

Economic Value Added (EVA) The Group EVA for FY2009 was $304.8m, a decrease of 15% or $53.1m over FY2008. The Weighted Average Cost of Capital was 6.1% for 2009 (2008: 6.2%).

FY2009 EVA CONTRIBUTION BY SECTOR (%)

48%

22%

13%

22%

(5%)

Aerospace Electronics Land Systems Marine Others

Capital Expenditure The Group incurred capital expenditure of $277m in FY2009 (FY2008: $191m). The bulk of the capital expenditure incurred was on the Jalan Boon Lay facilities redevelopment in the Land Systems sector, as well as build up of Xiamen facility, purchase of spare engines and programme-related purchases, including rotable components to support existing and new customers for MBHTM programmes in the Aerospace sector. The details are shown in Note 12 to the Financial Statements.

CAPITAL EXPENDITURE ($m)

09 277

08 191

0 40 80 120 160 200 240 280 320

Aerospace Electronics Land Systems Marine Others Singapore Technologies Engineering Ltd Think Ahead. 59 Annual Report 2009

Total Assets As at end December 2009, total assets of the Group grew 15% to $6.89b compared to $5.99b as at end December 2008. The deployment of assets is as follows:

TOTAL ASSETS DEPLOYMENT ($m)

8,000 Bank Balance, Funds under 6,884 Management and Short-Term 5,578 6,050 5,993 Investments 6,000 4,566 Debtors, Deposits & Prepayments 4,000 Stocks & WIP

2,000 Intangibles & Other Assets

Property, Plant & Equipment 0

05 06 07 08 09 FY

Total Liabilities and Shareholders’ Funds (Capital Employed) Capital employed as at the end of 2009 was $6.89b, an increase of $892m over 2008. Details of capital employed are as follows:

TOTAL LIABILITIES OWED AND CAPITAL INVESTED ($m)

8,000 6,884 6,050 5,993 Bank & Other Borrowings 6,000 5,578 4,566 Other Liabilities 4,000 Creditors and Accruals

2,000 Advance Payments from Customers

Equity 0

05 06 07 08 09

FY 60 OPERATING FINANCIAL REVIEW

Shareholder Return RETURN ON EQUITY (%) Return On Equity Compared to 2008, the Return On Equity was lower by 40 1.7 percentage point to 28.3% in FY2009, as a result of 30.8 30.0 lower profit after tax and minority interests. 28.4 28.3 30 26.5

Dividend, Dividend Per Share (DPS) and Earnings Per 20 Share (EPS) The proposed dividend for FY2009 of $399.5m 10 (which includes the interim dividend of $90.1m paid in September 2009) is lower than the FY2008 dividend of $474.3m. The recommended FY2009 dividend took into 0 consideration the Group’s present cash position, positive 05 06 07 08 09 cash flow generated from operations, and projected FY capital requirements. Payment of the dividend is subject to the approval of the shareholders of the Company at the coming AGM. The proposed 2009 dividend of $399.5m DIVIDEND / EARNINGS PER SHARE (cents) represents 90% of the earnings for FY2009.

20 Total Shareholder Return for ST Engineering Shares 16.95 15.82 ST Engineering paid an interim ordinary dividend of 15.15 14.78 15 13.64 16.88 15.80 3.00 cents per share to shareholders in September 2009 15.11 and declared a FY2009 final dividend of 10.28 cents per 13.60 13.28 share. The dividend per share amounts to 13.28 cents. 10

To maximise shareholder value, management will continue 5 its policy of paying a high level of dividend to return excess cash generated from its operations, provided 0 the cash is not required for major investments in the 05 06 07 08 09 future. These investments may include potential mergers FY and acquisitions and the building of new facilities and EPS DPS capabilities to expand the existing operations.

ST Engineering share price ended the year at $3.25, 37.1% above the share price a year ago. Over the same TOTAL SHAREHOLDER RETURN (%) period, the STI Index surged 64.5%. For 2009, ST Engineering shares generated a total shareholder 60 return of 41.8% for its shareholders. This consists of 4.7%

of dividend yield and 37.1% of capital gain. 40 4.7 37.1 20 5.2 4.9 22.7 21.8 5.1 0 7.7 5.2 (36.8)

(20)

(40)

05 06 07 08 09 FY Capital Gain Dividend Yield Singapore Technologies Engineering Ltd Think Ahead. 61 Annual Report 2009

Prospects For 2010 Boeing 787 aircraft, and continuing to extend its Total Aviation Support offerings to airlines globally. The Following the most severe global economic downturn capabilities and capacities build up is a continuing in recent history, the global economy staged a gradual process to strengthen the foundation for growth of the recovery from the second half of 2009, resulting in a Aerospace sector. global economic contraction of -0.8% for 2009 (Source: International Monetary Fund [IMF]). In its 26 January In 2010, the Electronics sector will focus on delivering the 2010 World Economic Outlook Update, the IMF revised various projects in its order book. Key contracts include its 2010 world growth forecast to 3.9%, up from its the Circle Line MRT project in Singapore, Taiwan and forecast of 3.1% made in October 2009. However, the China MRT projects, a software system project, and IMF cautioned that recovery is still very much based on a managed services project. The sector will continue government stimulus policies and that countries risk a to sharpen its core capabilities, focus on growing its return to recession if anti-crisis measures are withdrawn ‘Services’ revenue, and tap the new market opportunities too soon. We believe that there are other factors that in e-Government, satellite communications and interactive may potentially derail the economic recovery, including digital media. the flaring up of geo-political tensions in the Middle East, terrorism and the level of oil prices, which in 2009 climbed The Land Systems sector will continue deliveries of the from USD40’s to USD70’s per barrel. Warthog to the UK MOD, the Terrex to the Singapore Army, as well as other munitions, weapons and specialty The Group continued to secure contracts and ended vehicles in 2010. The Warthog project is significant in 2009 with an order book of $10.3b, reflecting its positioning the Land Systems sector as a key player in operational resilience supported by its diversity in the global defence marketplace. Building on its success business, geographies as well as the customer in markets like the UK and Gulf States, the sector will base of both government agencies and commercial continue to develop and pursue new opportunities. For its companies. A healthy order book affords the Group the non-defence business, the sector will continue to review operating leverage to weather uncertainties. Although its commercial specialty vehicles business operations, many countries were out of the recession by the end diversify into new markets and product segments while of 2009, downside risk remains as most governments leveraging global sources of supplies to lower its cost. are expected to remove stimulus packages and tighten monetary policies in 2010. Barring unforeseen The Marine sector continued to secure various circumstances, the Group expects to achieve a higher newbuilding contracts in 2009. The healthy order book turnover and comparable PBT for FY2010 compared to will keep the yards in Singapore and the US busy in 2010. FY2009. The sector will continue to pursue business opportunities in the naval and government industries and concurrently The lower fuel prices in 2009 compared to 2008 gave focus on delivering its commitments to the customers. a life-line to many of the airlines that were on the verge For shiprepair in Singapore yards, we expect the subdued of bankruptcies, and reports point to expectations of a shiprepair market to continue into 2010 following the recovery of the industry in 2010. We believe that Low softening of the global shipping market in 2009. Cost Carriers’ business model of low capital expenditure, as well as increasing cost pressures experienced by the In 2010, the Group will intensify its efforts in search of legacy airlines, will continue to drive the MRO outsourcing suitable acquisition opportunities and seek collaborations trend. In 2010, the Aerospace sector will continue to with partners and OEMs to better position the Group focus on airframe heavy maintenance and modification to take advantage of the current gradual recovery work, delivering the Passenger-To-Freighter conversion and expected future growth in the global economy. and military contracts, commencing airframe MRO Concurrently, the Group will work closely with customers operations at Pudong International Airport in Shanghai, to address their changing needs in order to stay relevant developing an engine facility in Xiamen, China to expand in the current economic climate. its MRO capacity in CFM56 engines, developing GEnx On-Wing Support services utilising GE material and GE-approved repair processes for its global customers from its facilities in Singapore and the US for the 62

AEROSPACE The Aerospace sector enhanced its global MRO network of airframe, component and engine services to serve customers better.

STEADY PERFORMANCE DURING CHALLENGING TIMES

Revenue for the Aerospace sector was comparable to 2008 despite the global economic and aviation downturn. This resulted from a strong and diversified customer base, new and wide spectrum of capabilities, as well as competitive and integrated service offerings.

ST Aerospace enjoyed continued support from the world’s largest airlines and air freight operators, and won new customers such as Aero República, Air Seychelles, Air Transat, Airbridge Cargo, Apollo Aviation, Arrow Cargo, Asiana Airlines, Avborne Component Repair Services, Kingfisher Airlines, Shanghai Airlines Cargo, SpiceJet and Worldwide Holdings. Many customers expanded the scope of their relationship with ST Aerospace. For example, Juneyao Airlines, a customer on the component MBH™ programme, added airframe maintenance and pilot training services.

Strengthening its position as an integrated services provider, ST Aerospace added significant new capabilities including CFM56-5B engines as a new product range for its engines business and to complement services for Airbus A320 customers. Likewise, new components repair and overhaul capabilities enhanced the level of service to customers on MBH™ programmes, while landing gear capabilities were broadened to include Airbus landing gears. Singapore Technologies Engineering Ltd Think Ahead. 63 Annual Report 2009

Business interests in commercial and military aviation enable ST Aerospace to leverage dual use competencies and technologies, and the ability to offer a wide range of products and services. ST Aerospace continues to enhance its global maintenance, repair and overhaul (MRO) network to serve customers better, and invest in the training of new and existing employees to assure its quality of service to customers as it grows.

Aircraft Maintenance & Modification

ST Aerospace’s mainstay facilities in China, Panama, Singapore, Mobile (Alabama) and San Antonio in the US supported major airframe customers – large and small – All Nippon Airways (ANA), Delta Airlines, FedEx Express, Japan Airlines, UPS, US Airways and many other airlines.

It signed its second contract with Copa Airlines, covering a fleet of 28 Boeing 737NG, 15 Embraer E190 aircraft, and another 11 E190 aircraft from Copa-owned Aero República in Columbia. The fourth hangar is expected to be commissioned by early 2010.

Left to right: ST Aerospace continued to enhance its integrated ST Aerospace enjoyed continued support service offerings. from the world’s largest airlines and air Redelivery of the 100th L382 aircraft to Lynden Air Cargo. freight operators.

ST Aerospace in Madrid redelivered 30 landing gears in its first year of operations. 64 AEROSPACE

Ongoing enhancement of ST Aerospace’s global MRO network involves expanding into cost efficient locations to serve customers better.

In April, ST Aerospace celebrated Ongoing enhancement of the group’s GEnx-1B and GEnx-2B engines that power redelivery of its 100th L382 aircraft to global MRO network involves expanding Boeing 787 and 747-8 aircraft. Preparations Lynden Air Cargo, an Alaskan air into cost efficient locations to serve for the On-Wing Support service are cargo charter and transport company customers better. Its new hangar at underway, and require ST Aerospace that operates a fleet of six Hercules Pudong International Airport in Shanghai, to invest in the set up of capabilities, aircraft. This milestone demonstrates the China, is expected to be ready for leveraging its global MRO network and value that ST Aerospace places on all aircraft induction by first half of 2010. close relationships with many airlines that its customers. have ordered GEnx-powered aircraft.

Showing the same dedication to defence Component & Engine In its components business, ST Aerospace customers, ST Aerospace increased Total Support added about 400 new repair capabilities support for the outsourcing needs of to support its MBH™ programmes for the the Republic of Singapore Air Force With the newly launched CFM56-5B Boeing 737NG, 757, Airbus A320 as well (RSAF). It also refurbished two (of four product line, ST Aerospace now has the as for A330 and military aircraft. It also built contracted) C130 aircraft from the full spectrum of -3, -5B and -7B engines new test facilities for the newer generation Indonesian Air Force. that power the Airbus A320 and Boeing of aircraft. 737 aircraft. ST Aerospace received recognition from In March, Boeing Integrated Defense the Defence Industry Committee of New It also broke ground for its second Systems recognised ST Aerospace as Zealand for its innovative and adaptive engine facility near Xiamen Gaoqi a Boeing MRO centre for the CH47 engineering design, winning ST Aerospace International Airport in Xiamen, China. Chinook engine transmission. the Defence Industry Award of Excellence. The new facility is scheduled to This positions ST Aerospace to The work involved a quick-change, multi- commence operations in 2010, providing undertake more work for other role freighter conversion and avionics MRO and integrated engine services for Boeing military aircraft components. modifications programme for RNZAF on the CFM56-5B and CFM56-7B engines. Its military service capability on the two Boeing 757-200 aircraft. Chinook transmission will be part of the Balancing its portfolio for commercial capabilities Boeing can tap to support The year saw ST Aerospace complete engine services with a mix of matured, users of its Chinook helicopters. a system full-flight acceptance test new and future engine lines, for an Unmanned Aerial Vehicle ST Aerospace continues to seek To enhance its integrated service (UAV) programme and satellite strategic cooperation with Original offerings, ST Aerospace continued to communications on the Super Puma Equipment Manufacturers (OEM) and add more service centres and other for the RSAF. In addition, ST Aerospace airlines to develop new competencies collaborative agreements with various beefed up its capability for more military and increase value creation through components and aircraft OEMs platforms such as the Chinook, Apache parts and accessories repair. on military and commercial and F15 Eagle aircraft. During the year, it embarked on a 20-year agreement with GE to serve as a GE- approved On-Wing Support provider for the

ST Aerospace in Panama successfully redelivered its first E190 and expanded its contract with Copa Airlines. Singapore Technologies Engineering Ltd Think Ahead. 65 Annual Report 2009

Left to right: Groundbreaking for a second engine facility in Xiamen, China.

ST Aerospace completed the quick-change Boeing 757-200 combi conversion programme for RNZAF.

products. Agreements were signed with lower compared to 1H2009. This was of investment income, but these were Amfuel, Astronautics, DAe, Eaton, Moog, due to lower turnover in the Aircraft partially offset by more 757 freighter MRO Aerospace, Revue Thommen, Maintenance & Modification (AMM) and conversion redeliveries. Rockwell Collins, Ruag Aerospace and the Component/Engine Repair & Overhaul Thales, among others. (CERO) business groups, partially offset Acquisitions & Divestments by higher turnover in Engineering & Since commencing operations in Madrid Materials Services (EMS) business group. The acquisition of Precision Products in late 2008, ST Aerospace has seen its The reduction in AMM turnover was Singapore Pte Ltd was completed in May landing gear component business take mainly due to lower redeliveries in the to support ST Aerospace’s business. off. Having inducted its first Airbus A320 US operations, which was partially offset Precision Products Singapore is a player landing gear inputs and secured the by higher redeliveries in the Singapore in the precision investment casting Spanish DGAC and EASA certifications operations. Despite higher components industry and manufactures casting and in its first year, it successfully delivered 10 sales in 2H2009, CERO’s turnover in mould toolings. shipsets of landing gears in 2009 alone. 2H2009 was lower than 1H2009 due to It also secured its first external airline high engines inputs in 1H2009. In EMS, customer, SriLankan Airlines. It is now all the companies contributed to the Major Projects embarking on building capabilities for the turnover increase. 2009 saw more redeliveries of PBT for 2H2009 at $127.6m was higher ST Aerospace’s freighter conversion ST Aerospace’s than that in 1H2009 by 27% or $27.0m programmes. mainly due to improved profit on the 757 innovative and freighter conversion programme and lower The programme for FedEx, with four adaptive engineering allowance for doubtful debts. conversion lines − three in Mobile, US, and one in Singapore − is producing aircraft design won it the to meet contracted deliveries. Thirteen Full Year Performance aircraft were redelivered in 2009. defense industry Aerospace sector’s FY2009 turnover Two converted Boeing 767-300 aircraft award of excellence. of $1,872m was comparable to that of were redelivered to ANA during the year, FY2008. The lower turnover in AMM and bringing the total to four of the seven A330/340 landing gears, complementing CERO was largely offset by higher turnover ordered for ANA’s fleet. Backlog includes its MRO offering for A320 landing gears. in EMS. AMM’s lower turnover was due to another ten firm orders from Boeing Its components and engines MBH™ the redeliveries of two high value multi-role for Q-Aviation. support programmes continue to grow 757-200 aircraft to Royal New Zealand Air in popularity among operators of the Force (RNZAF) in FY2008 and fewer MD11 Two MD11s were redelivered, as this Boeing 737 and Airbus A320 family freighter conversion redeliveries in FY2009, successful programme draws to a of aircraft. Initially tailored for start-up but these were partially offset by more gradual close, having converted most airlines and low cost carriers, the MBH™ 757 freighter conversion redeliveries. MD11 aircraft in operation. solution achieved some success with Reduced components sales, partially traditional airlines too. Over the year, offset by higher engines sales, accounted Major milestones for ST Aerospace ST Aerospace clinched new contracts for the lower turnover in CERO. All the commercial pilot training were the with Cimber Sterling, Jeju Air, Primera Air companies in EMS contributed to the graduation of its first cohort of 16 cadet and Shanghai Airlines. higher turnover. pilots from launch customer Shenzhen Airlines, and the launch of a beta trial PBT of the Aerospace sector in FY2009 of its Multi-crew Pilot Licence (MPL) Half Yearly Performance of $228.3m was lower than FY2008 by curriculum with Tiger Airways. 16% or $43.8m. The lower PBT was Turnover of the Aerospace sector in mainly due to fewer MD11 freighter 2H2009 of $916m was 4% or $40m conversion redeliveries and absence 66

ELECTRONICS The Electronics sector grew its business internationally, winning e-Government, rail electronics, communications and simulation projects around the world.

SEIZING OPPORTUNITIES TO EXPAND GLOBAL REACH

ST Electronics continues to grow its global reach, providing its solutions to customers in more than 80 countries worldwide.

The company made inroads into new markets, winning contracts in Bangladesh and Tanzania. Its three business groups were awarded contracts in the areas of rail electronics, intelligent transportation and interactive digital media.

Large-Scale Systems Group

Building on its strong track record in rail projects, the Large-Scale Systems Group (LSG) secured several Mass Rapid Transit (MRT) contracts including an Automatic Fare Collection System and Passenger Information Display System in Thailand; a train-borne Communication System in Hong Kong; and Integrated Supervisory Control and Platform Screen Door Systems worth about $23.7m for China’s Guangzhou-Foshan Line.

In Singapore, ST Electronics’ mechanical and electrical systems including Communications, Integrated Supervisory Control and Platform Screen Door systems went live when part of the Circle Line was opened in May 2009. New MRT lines planned for the Thomson and Eastern regions will present new opportunities.

Artist’s impression of the Singapore 2010 Youth Olympic Games Virtual World. The actual design may differ from illustration. Singapore Technologies Engineering Ltd Think Ahead. 67 Annual Report 2009

LSG continued to win contracts to provide security and monitoring solutions. These included an Integrated Security Management System for the new Khoo Teck Puat Hospital and a pre-paid card system for the Nanyang Technological University’s Halls of Residence.

A contract was also secured to supply a Meteorological Weather Radar system to the National Environment Agency.

A model of ST Electronics’ Venus, an advanced Unmanned Surface Vehicle, was unveiled at the International Maritime Exhibition (IMDEX) Asia in May. The full-sized 9-metre long Venus was showcased at the Singapore Airshow 2010.

LSG continues to target new markets such as Vietnam, India and the Gulf States while strengthening its presence in China and Singapore for its transportation and intelligent building businesses.

Left to right: Advanced Combat Man System for the Singapore ST Electronics continued to grow its Armed Forces. global reach, PROVIDING Its solutions TO The 11-metre Ku-Band Antenna System at SingTel’s Seletar Earth Station in Singapore. OVER 80 countries worldwide. 68 ELECTRONICS

The Company made inroads into new markets, winning contracts in bangladesh and tanzania

Communication & Sensor AT&T implemented a revolutionary Software Systems Group Systems Group technology from ST Electronics that enables continuous reception of The Software Systems Group (SSG) Through Telematics Wireless, video services on-the-move for in-car continued to grow its interactive ST Electronics strengthened its entertainment in the US. media, simulation and e-Supply Chain capabilities in traffic management, wireless Management solutions. data communication and sensor networks iDirect, ST Electronics’ satcoms for wireless transmission of information for company in the US, upgraded its In June, the IDA awarded ST Electronics a remote monitoring and control. Evolution operating software, unveiling contract to provide a virtual world, the first iDX 2.0 with several advances in of its kind, to be used for the inaugural The Communication & Sensor Systems performance, efficiency and flexibility. Singapore 2010 Youth Olympic Games. Group (CSG) won a $6.8m contract iDirect and Panasonic Avionics to provide Integrated Security, IT developed in-flight broadband, SSG secured its first project in Tanzania Infrastructure and Carpark Guidance eXconnect, and through Lufthansa, for the installation of a Tower Simulator for and Payment Systems to Resorts World now offer broadband connectivity to the Tanzania Civil Aviation Authority. Sentosa, bringing its total involvement in 50 aircraft. The Chittagong Port Authority of the project to $92.8m. Bangladesh awarded ST Electronics an In June, iDirect Government e-Supply Chain Management project for Meeting the growing demand for urban Technologies successfully demonstrated Container Terminal Management and transportation, CSG secured a $40m the capabilities of several military-grade Management Information Systems. contract from Singapore’s LTA to extend satcoms technologies at the US Joint the Expressway Monitoring & Advisory User Interoperability Communications ST Electronics will also be implementing System to six major arterial roads that Exercise at Fort Monmouth, New Jersey. for the Singapore Land Authority, serve as alternative routes to expressways. a Singapore Titles Automated iDirect Asia won a contract from Registration System that will facilitate In the area of satellite communications China National Petroleum Corporation more efficient searches, lodgements (satcoms), the company’s 11-metre to provide a satellite-based Internet and registration of properties. SSG was Ku-Band antenna system was Protocol communications network to awarded a project to provide the RSN successfully commissioned by SingTel cover remote sites across China. with education and training services and at its Seletar Earth Station in June. The a training ship. system monitors and carries commercial traffic on SingTel satellites. The company’s US simulation arm, VT MÄK (MÄK), won the US Army Program Executive Office for Simulation, Training and Instrumentation’s Omnibus Contract in July to provide simulation, training and instrumentation products and services for the warfighter. It also launched its VR-Vantage product for the development of out-the-window 3D views, for after-action review of scenarios, or to create customised applications.

Yview, a customisable Cave™-like virtual reality system from Antycip Simulation. Singapore Technologies Engineering Ltd Think Ahead. 69 Annual Report 2009

Left to right: Rail electronics system for Bangkok, Thailand

e-Supply Chain Management project for Chittagong Port Authority, Bangladesh

Antycip Simulation, ST Electronics’ completions for the Circle Line project Major Projects European subsidiary, won a contract in from the LTA, half height platform April from VTI, the Swedish National screen doors project, and MRT projects The SAF awarded ST Electronics a Road and Transport Research Institute, in Taiwan, Guangzhou and Bangkok. contract worth about $100m to provide to upgrade an existing driving simulator CSG’s higher turnover was the result of the Advanced Combat Man System projection system. In May, Antycip milestone completions for the Integrated (ACMS). The 3rd Generation Networked Resort project and a communication Simulation launched MyModels, a ACMS is expected to be completed project, as well as sales of satcoms configurable high fidelity modelling toolkit by 2012. that allows the quick generation of high products and electro-optics equipment. Turnover in SSG was higher with the fidelity models in simulation applications. In China, ST Electronics won contracts to milestone completions of a software MyModels is integrated with MÄK’s provide Passenger Information Systems system project, simulator projects and VR-Forces and can be integrated managed services sales. (PIS) for an MRT line and a PIS and with other Computer Generated Security Monitoring Systems which will Forces software. PBT of the Electronics sector in FY2009 be exported to Saudi Arabia for the Saudi of $115.3m was higher than FY2008 Mashaaer MRT Line. by 23% or $21.4m. The higher PBT Half Yearly Performance was mainly due to higher turnover and For mission critical solutions, it won a the impact of an impairment in value $34m project to transform the SCDF The 2H2009 turnover of $687m recorded of quoted investments in FY2008 of 995 emergency call-taking, resource by the Electronics sector was comparable $18.7m. These were partially offset by despatching and incident monitoring to that of 1H2009. The increase in sales higher operating expenses. system in its Operations Centre into a came largely from LSG which was offset new generation command and control by lower sales in CSG. system. The new system will leverage Acquisitions & Divestments latest technologies that will enable the PBT of $60.7m for 2H2009 was SCDF to increase its efficiency and higher than that of 1H2009 by 11% or Ripple Systems Pty Ltd was liquidated effectiveness in responding to 995 $6.1m. The increase in PBT was mainly as a result of an ongoing business emergency calls. contributed by CSG and SSG, but this review to streamline capabilities and optimise resources. The liquidation was was partially offset by lower PBT in LSG. ST Electronics will implement a $44m, completed in September. While operating expenses for 2H2009 3rd Generation Command and Control was higher, CSG recorded higher PBT (C2) System for the SPF by the first ST Electronics acquired additional in the same period due to favourable quarter of 2012. Applying state-of- equity stakes in MÄK and DataMark sales mix. SSG’s higher profit was mainly the-art technologies, the system will Technologies Pte Ltd (DataMark). It took due to favourable sales mix and share of an additional 10% stake in MÄK and enhance the SPF’s operational efficiency higher profit from associated companies. 38.88% in DataMark, bringing its total and responsiveness to incidents and LSG‘s lower PBT was mainly due to shareholdings in the companies to 90% emergencies. Operators will benefit from higher operating expenses. and 100% respectively. quick report creation functions, automatic routing to the appropriate officers and iDirect has, through its wholly owned enhanced resource allocation based on Full Year Performance subsidiary, iDirect UK Limited, acquired the type of incident involved. 100% of Parallel Limited (Parallel). Both FY2009 turnover of $1,371m for the companies share product synergies and Electronics sector was higher than a common market focus, and Parallel’s FY2008 by 20% or $228m. All three products will become part of the iDirect business groups achieved higher product portfolio. turnover for the period. LSG recorded higher turnover with milestone 70

LAND SYSTEMS

A stream of innovative products enabled the Land Systems sector to secure breakthrough contracts in both the defence and commercial arenas.

DEMONSTRATING RESILIENCE AND READINESS FOR THE UPTURN

With customers in over 30 countries worldwide, ST Kinetics is the leading land systems company in Southeast Asia. Its capabilities cover the entire value chain, including the design, development, production, operation and through-life support of specialised land systems equipment and specialty vehicles.

As the economic downturn persisted, the impact was felt particularly in the specialty vehicles market, notably in the US. Several countries introduced stimulus packages during the year, but the effects in related industries only began to materialise towards the latter half of 2009. Nevertheless, ST Kinetics demonstrated its resilience in weathering these poor market conditions, with VT LeeBoy announcing a breakthrough contract for the supply of pavers to the US Army, and VT SVC receiving several significant orders for its Ultra Temp hybrid refrigerated bodies.

Highlights of the year included the commencement of delivery to the UK MOD of the Warthog all terrain vehicles, a variant of the highly successful Bronco All Terrain Tracked Carriers. In addition, ST Kinetics delivered the Terrex 8x8 Infantry Carrier Vehicles and Trailblazer Countermine Vehicles to the SAF. Three ammunition supply contracts were also announced: two for the UK MOD and one for the Swedish Defence Materiel Administration, Försvarets Materielverk. Singapore Technologies Engineering Ltd Think Ahead. 71 Annual Report 2009

Land Systems & Solutions Besides the Bronco and Total 40mm Solutions, ST Kinetics displayed small arms and the Building on the momentum of the Warthog HMX 1100 transmission at IDEX. A wide range contract win in December 2008, participation of solutions was also exhibited at Armoured in various exhibitions and conferences further Vehicles Asia 2009, a conference held in raised the company’s profile. Singapore. These included the Warthog, Terrex, Trailblazer, Spider LSV, Total 40mm Solutions, There was heightened interest in the 120mm SRAMS and small arms such as the Bronco and Total 40mm Solutions after SAR21, Ultimax 100 and CPW. ST Kinetics showcased them in February at the International Defence Exhibition & Conference (IDEX) in Abu Dhabi, UAE. They were similarly Specialty Vehicles & Services well received at UK exhibitions Defence Vehicle Dynamics and Defence System and Equipment The Land Systems sector furthered its International, followed by two exhibitions in efforts to grow sales of specialty vehicles the US, namely Modern Day Marine 2009 to the construction and related industries, and the Association of the US Army Annual strengthening its market reach internationally. Meeting and Exposition. Throughout the year, In April, ST Kinetics extended its operations to the Bronco was showcased at the Forum Mexico, with the formation of a joint venture Entreprises Defense in Versailles, France; the company, GFM Maquinaria, S.A.P.I. de C.V. Armoured Combat Mobility Conference in The joint venture gains ST Kinetics a London, UK; and Armoured Vehicles Australia beachhead in the Latin American market and in Canberra, Australia. is the Group’s second collaboration with

Left to right: ST Kinetics demonstrated resilience in poor The delivery of Warthog to the UK MOD commenced at year’s end. market conditions, with VT LeeBoy announcing Trailblazer – the only armoured countermine a contract for the supply of pavers to the US vehicle in its weight class. Army, and VT SVC receiving significant orders The Terrex ICV is one of the world’s most for its Ultra Temp hybrid refrigerated bodies. advanced 8x8 armoured vehicles. 72 LAND SYSTEMS

ST Kinetics achieved milestones in the green vehicles arena when it launched Singapore’s first commercial diesel- electric hybrid bus and the world’s first hybrid hydraulic drive enhanced port prime mover.

Grupo Ferrominero, S.A. de C.V., a operator, Brickston Transport Service, its-kind vehicle repair training academy Mexican company with diverse interests. and port operator, PSA Singapore in collaboration with Car-O-Liner Terminals, inked memoranda of (collision repair systems), DuPont (spray The following month, ST Kinetics understanding on their intent to testbed painting solutions) and the Institute of added to its presence in China with a fleet of the hybrid bus and hybrid Technical Education. the acquisition of Zhenjiang Huachen hydraulic drive prime mover respectively. Huatong Road Machinery Co., Ltd. and ST Kinetics also grew its vehicle Zhenjiang Huatong Aran Machinery inspection business in 2009. Building on Co., Ltd. Both companies are leading Total Support & Services the success of the inspection centres at players in China’s road construction and Sin Ming and Ayer Rajah, the company maintenance equipment market, and Leveraging the rising demand for launched a third centre at Jalan Boon export their products to more than reliable, value-for-money automotive Lay. Besides the full range of independent 20 countries. services during the economic downturn, vehicle inspection services, the centre ST Kinetics expanded its automotive provides insurance quotations from a Guizhou Jonyang Kinetics and Beijing services with the April opening of number of insurers, road tax renewal Zhonghuan Kinetics showcased their STAR Ubi, a new mega service centre and other related services, making it a construction equipment at the 10th in the eastern part of Singapore. Among one-stop shop for motorists. Beijing International Construction its comprehensive service brands are Machinery Exhibition & Seminar STAR BLACK and STAR J, high quality in November. and competitively priced services catering Acquisitions to premium German marques and ST Kinetics achieved two significant Japanese cars respectively. ST Kinetics completed its acquisitions milestones in the green vehicles arena of Zhenjiang Huachen Huatong Road when, in collaboration with its strategic In December, the company’s third and Machinery Co., Ltd. and Zhenjiang partners, it launched Singapore’s first largest vehicle servicing and accident Huatong Aran Machinery Co., commercial diesel-electric hybrid bus repair complex in Singapore opened Ltd. in April. To align them with ST and the world’s first hybrid hydraulic at Jalan Boon Lay. This location offers Kinetics’ branding, the companies drive enhanced port prime mover. Its convenience to motorists, fleet operators were subsequently renamed Jiangsu environmentally friendly and emission and commercial vehicle owners in the Huatong Kinetics Co., Ltd. and responsible hybrid solutions received western part of the island. In addition, Jiangsu Huaran Kinetics Co., Ltd. Their strong endorsement when local transport STAR Jalan Boon Lay features a first-of- acquisitions are joint ventures with Singapore Technologies Engineering Ltd Think Ahead. 73 Annual Report 2009

Left to right: Market leading products from Jiangsu Huatong Kinetics include the asphalt paver and road milling machine.

Jiangsu Huatong Machinery Co., Ltd., The company also won a contract worth Compared to 1H2009, 2H2009 PBT a subsidiary of Zhenjiang State-owned over US$11m (about $15.8m) from the increased by 19% or $8.1m to $51.8m. Assets Supervision and Administration US Army Contracting Command for the The higher PBT was mainly attributable to Commission. supply of asphalt paving equipment over higher turnover, but this was partially offset a five-year timeframe beginning in 2010. by higher operating expenses mainly from the subsidiaries acquired. Major Projects The year ended with commencement of delivery of the Warthog to the UK MOD. During the year, ST Kinetics delivered This is part of the £150m order made in Full Year Performance specialised truck bodies and trailers, December 2008 for over 100 Warthogs, road construction and maintenance the first sale of a Singapore designed and Land Systems sector’s FY2009 turnover equipment, off-road dump trucks and produced armoured vehicle to one of the of $1,167m was lower than that achieved excavators to commercial customers. world’s leading defence forces. in FY2008 by 8% or $107m, attributable The company received its single largest mainly to lower sales from the Auto order for its Ultra Temp hybrid refrigerated business group’s US operations. truck bodies. The contract from Idealease Compared to Inc., on behalf of its client Schwan Food Compared to FY2008, Land Systems Company, is for 248 units of the energy- FY2008, Land sector’s PBT of $95.4m for FY2009 was efficient and environmentally friendly Systems sector’s higher by 13% or $10.7m. Despite lower hybrid refrigerated truck bodies. turnover, PBT was higher due mainly to PBT of $95.4m for better product mix, but this was partially In the areas of defence and homeland offset by higher other operating expenses security, ST Kinetics delivered the FY2009 was higher mainly from the subsidiaries acquired. Pegasus, 120mm SRAMS and various by 13% or $10.7m. There was an impairment in value of a munitions products as well as the Bionix II, quoted investment in FY2008. Trailblazer and Terrex. ST Kinetics was awarded three contracts to supply Half Yearly Performance 40mm ammunition to defence forces, comprising an €8m (about $15.6m) Turnover of the Land Systems sector in contract with the Swedish FMV, and two 2H2009 of $652m was 27% or $137m contracts worth £9.5m (about $20.7m) higher than that achieved in 1H2009, due and £2.8m (about $6.6m) respectively mainly to higher munitions sales. with the UK MOD.

Left to right: Significant orders were secured for the Ultra Temp hybrid refrigerated body.

New “green” fuel saving and emission responsible products launched included the Hybrid Diesel-Electric Bus and Hybrid Hydraulic Drive enhanced port prime mover. 74

MARINE

The Marine sector rose above odds to achieve significant milestones and turned in a steady performance with $949m of revenue in 2009.

REAPING RESULTS AND Earning RECOGNITION

2009 saw the Marine sector grow its revenue by 15% and profit before tax by 36%. Overall backlog continues to be healthy with new contracts secured.

Among the new contracts signed during the year were two contracts from OSG Ship Management (OSG) for the outfitting and commissioning of two 350,000 barrel Articulated Tug Barge (ATB) units. The sector also secured a contract worth US$87m (about $121m) to build an enhanced version of a T-AGS 60 Class Oceanographic Survey Ship for the US Navy. Construction of the new ship, T-AGS 66, will begin at Halter Moss Point in mid 2010 with delivery scheduled in 2013. The Marine sector grew the scope of its services for the RSN, landing a $108m contract for the logistics management of the RSN’s warehouses at its Changi and Tuas Naval Bases.

The Marine sector also commenced a Public Private Partnership support contract providing Submarine Support and Rescue Services to the RSN. During the year, the sector completed and delivered to its customers a Platform Supply Vessel (PSV), an Anchor Handling Tug Supply Vessel (AHTS), three ATBs and two Fishery Survey Vessels (FSV).

The sector was also successful in obtaining a grant from the United States Maritime Administration Singapore Technologies Engineering Ltd Think Ahead. 75 Annual Report 2009

to develop shipyard infrastructure. These funds, along with a Mississippi state grant, will be used to enhance its US operations’ production facilities, including the construction of a 40,000 sq ft fabrication shop to support the Fast Missile Craft project as the programme enters production phase. The Marine sector participated in major industry exhibitions during the year, including IMDEX Asia, Brunei International Defence Exhibition, Nor-Shipping, the International WorkBoat Show, and the Connecticut Maritime Association’s 24th Annual Shipping Conference and Exhibition.

ST Marine garnered its first ShipPax Award at the prestigious 2009 event for its first Roll-on Roll-off vessel (RoRo), City of Hamburg, in the RoRo concept category. This is also a first for a Singapore- based shipbuilding company in the category. The award recognises ST Marine’s detailed design and innovative engineering capabilities and reaffirms its standing in the global RoRo marketplace.

Left to right: ST Marine won a ShipPax Award for its first RoRo vessel, ST Marine continued to build on its strong City of Hamburg. position in dredgers, seismic vessels, pipe The 20-year operations contract for the Submarine Support and Rescue Vessel commenced. laying vessels and support vessels in the Major lengthening and upgrading work on Java Constructor was delivered on schedule with over 1.25 million manhours offshore and infrastructure markets. free of Lost Time Injury and Medical Treatment Injury. 76 MARINE By securing an equal mix of commercial and government contracts, the order book for the Marine sector’s US operations grew to its largest ever.

Ship Design and Building Shiprepair and Services lengthening and upgrading work on the derrick pipe lay barge. Its pipe lay The Marine sector achieved several ST Marine continued to build on its system was upgraded and its crane milestones in shipbuilding during the year. strong position in dredgers, seismic capacity was increased from 400 to 900 vessels, pipe laying vessels and support tons. During the upgrading, ST Marine In Singapore, it successfully delivered vessels in the offshore and infrastructure and Clough Offshore achieved over 1.25 an AHTS for Lewek Shipping. It also markets. Among the projects undertaken million manhours free of Lost Time Injury completed the Submarine Support and successfully during the year was the and Medical Treatment Injury. Rescue Vessel with the commencement 100th Stolt-Nielsen vessel, marking of a 20-year operations contract for RSN a decade-long partnership. This In addition, modification and upgrading with its partner James Fisher Marine exemplifies the kind of long term work was done on pipe laying vessel, Services. A milestone was achieved when partnership the Marine sector strives Semac1 from Saipem, Portugal and ST Marine launched Singapore’s first Roll- to nurture with all its customers. research vessel Geo Natuna from Swire on Roll-off Passenger (Ropax) ferry for Pacific Offshore, Singapore. Other Louis Dreyfus Armateurs. The Ropax was The sector completed several significant major upgrading works were carried also the largest vessel to be launched conversion and modification projects. out on: dredger Goryo Ho from Hyundai from the new permanent launchway. In These included the complete outfitting of Engineering, Korea; container vessel addition, it keel laid a Seismic Survey Geowave Voyager, a seismic vessel from Pacific Osprey from Uniteam, Germany; Vessel for Swire Pacific Offshore, a Norwegian company Wavefield Inseis. livestock carrier Al Messilah from Landing Platform Dock for a regional In April, Java Constructor, from Clough Livestock Transport and Trading, Kuwait; navy, and a Diving Support Vessel (DSV). Java Offshore, Australia, was delivered and geotechnical vessel Bluestone Topaz on schedule after the completion of from Bluestone Offshore, Singapore. In Mississippi, the US operations delivered its largest ever ATB and PSV to Major upgrading works in progress OSG and Hornbeck Offshore respectively. include upgrading of accommodation It also delivered two FSVs for the National and outfitting work on pipe laying Oceanic and Atmospheric Administration vessel Castoro 10 from Saipem and and two ATBs to Crowley Maritime dredger Volvox Asia from Van Oord ACZ, Corporation’s Vessel Management Netherlands. Services.

The Marine sector is poised to deliver on schedule the Ropax, Seismic Survey The AHTS was delivered ahead of schedule to Lewek Shipping. Vessel, DSV, PSV, the remaining 330,000 and 350,000 barrel ATBs for Crowley and OSG respectively, the TAGM-25 Missile Instrumentation Ship and the Egyptian Fast Missile Craft. Singapore Technologies Engineering Ltd Think Ahead. 77 Annual Report 2009

Left to right: One of two ATBs delivered to Crowley Maritime.

ST Marine completed the 100th vessel for Stolt-Nielsen over a decade-long partnership.

Environmental Engineering and PBT of the Marine Full Year Performance Services sector in FY2009 of Turnover of the Marine sector in FY2009 In August, ST Marine’s wholly owned $102.3m was higher of $949m was higher than FY2008 by subsidiary STSE Engineering Services 15% or $127m. The higher Shipbuilding Pte Ltd (STSE) signed an MOU with than that achieved turnover resulting from favourable sales Sino-Singapore Tianjin Eco-City mix in both the local and US operations Investment & Development Co., Ltd to in FY2008 by 36% or was partially offset by lower Shiprepair explore collaboration in the provision of $27.1m. turnover arising from fewer conversion Pneumatic Waste Collection Systems jobs. Engineering turnover was higher in Tianjin Eco City’s business park and by $4m. several residential developments. Half Yearly Performance PBT of the Marine sector in FY2009 of STSE’s subsidiary in China, The Marine sector’s turnover for $102.3m was higher than that achieved ST Environmental Services & Technologies 2H2009 at $470m was comparable to in FY2008 by 36% or $27.1m. The Co. Ltd (STE&T), made a breakthrough that of 1H2009. higher PBT was attributable mainly to in the Chinese market within its first year, higher turnover and lower distribution scoring a contract to design, build and PBT for 2H2009 at $57.3m was higher and selling expenses due to lower deliver a Materials Recovery Facility in than 1H2009 by 27% or $12.3m as a allowance for doubtful debts. Beijing. In December, STE&T also won result of favourable sales mix. a contract worth about RMB33m (about $6.5m) in Wuhan, China for the design, build and delivery of a Waste Transfer Station in Donghu Newtech Zone. The project has commenced and is expected to be completed by the third quarter of 2010.

First Ropax built in Singapore, Norman Leader, at its launch. 78 OPERATING FINANCIAL REPORT

Dynamics And Risk

Industry Review Group’s customers in the Aerospace sector, and this may in turn impact the Group’s performance. However, such The global financial crisis hit most economies hard, an environment of high costs could present opportunities especially in the earlier part of the year. Businesses for third-party MRO providers like ST Aerospace, as worldwide suffered setbacks, both from shrinking demand airlines outsource more MRO work in an effort to contain as well as the tightening of credit. After a few recessionary costs. quarters, global economies are showing signs of stabilising and gradual recovery. However, growth is expected to be Interest Rates subdued and may not reach pre-crisis levels soon. Changes in interest rates affect the cost of business for the Group. Financial markets were volatile in the earlier ST Engineering’s well-diversified portfolio – core part of the year, and credit and borrowing terms were businesses in four different segments, and a global tightened. The markets are now stabilising. As a triple-A customer base in both the commercial and defence rated corporate, ST Engineering’s access to funding was sectors – has provided it with some level of resilience relatively unaffected. through the crisis. In particular, it benefited from governments’ stimulus spending in defence, infrastructure As an added precautionary measure to ensure available and other projects. funding, the Group established a multi-currency Medium- Term Note (MTN) programme, under which it issued a However, the Group is subject to its operating and US$500m 10-year note during the year. This provides the economic environment, and changes to external factors Group the ability to pursue opportunities quickly when the not within its control could impact its performance. Some need arises. of these key factors are discussed below. Labour Supply World Economy The Group continues to harness the global talent pool for According to the IMF, major economies have stabilised its workforce. There remains a shortage of skilled labour and modest growth is expected in 2010. However, the globally. ST Engineering continues to work with local rebound is mainly due to government stimulus plans. authorities in markets where it operates, and leverages There is a risk that when the spending stops, economies training, retention schemes, scholarships as well as may slow down again. alternative sources for hire to sustain its growth.

Not unlike other MNCs, ST Engineering’s performance Defence Spending and Government Budgets could be impacted by the effects of any resulting A substantial portion of the Group’s business comes from slowdown. government agencies, including the military.

Currency Fluctuations While several countries have cut their defence budgets, As the Group has substantive business operations in the some, such as Singapore and the US, have maintained US and international sales, a weaker USD would have an theirs. Singapore’s defence spending, typically about unfavourable revenue and earnings impact on the Group’s a quarter of the total government spending budget, results. This negative impact would be partially cushioned corresponds to GDP growth. It is expected that the by the lower cost of materials and parts imports in USD. Singapore government will continue to invest in defence solutions and systems that will give its armed forces The Group’s diversified business portfolio provides technological superiority as it continues developing its some room for offsets. With operating units located 3rd Generation SAF. Locally, homeland security remains in different countries, the currency risk is partially a key focus. ST Engineering looks forward to continue its mitigated. ST Engineering also hedges its foreign partnering role in national security. exchange risks to mitigate anticipated impact. In the US, the proposed defence budget for 2010 is Oil Prices higher than that enacted for 2009, to support the US’ Oil prices have been on the uptrend since the beginning ongoing fight against global terrorism, and the need for of the year and was around US$70 at year’s close. enhanced homeland security. The Group’s operations High oil prices would have a negative impact on the in both the US and Singapore continue to look for Singapore Technologies Engineering Ltd Think Ahead. 79 Annual Report 2009

partnership opportunities with the respective authorities. Management reviews and discusses key business During the financial crisis, governments in many risks, and the potential impact brought on by business countries increased spending to stimulate their respective trends, major events and emerging issues with the economies, and the Group has benefited from such RRC at regular intervals. spending through project wins. To promote a strong culture in risk management, risk The Singapore, China, Taiwan and Gulf States management discipline is integrated into the main Governments are placing increasing priority on enhancing business lines and devolved to the operating level so Information Communications Technologies (ICT) that risks are managed by all managers. Through applications and infrastructure development, boding well a system of Dashboard Reporting that has been for ST Electronics in areas relating to e-Government, developed and cascaded down to the business units, education, transport and subway systems. risks and opportunities are periodically reviewed, to respond to the constantly changing business Emerging markets landscape, both locally and globally. Diversification into new emerging markets such as Africa, Central Asia and the Gulf States region will help the Group To support the risk management practices within expand revenue streams, strengthen its market standing, the Group, policies, guidelines and methodologies and manage costs. are constantly being developed and improved upon. Investments are made in our people, to enhance The Group conscientiously monitors market conditions their risk management competencies, as well as in and will take advantage of new market opportunities information technology to better facilitate the risk wherever possible. management process.

Disasters (a) Strategic and Operational Risk Some of the Group’s operations are in regions subject to The Group operates in 24 countries across the globe. natural occurrences such as hurricanes which could affect As part of the Group’s plan to grow its business the Group’s operations. A pandemic outbreak such as internationally, it will continue to focus on increasing its H1N1 may have a negative impact on global economies operating activities and presence in Europe, Greater and ST Engineering would not be insulated. The Group China and the US. In 2009, 18% of the Group’s assets has in place disaster preparedness and business were in the US (2004: 10%). Revenue from customers continuity plans and these are continually reviewed. located outside Asia increased from 33% of the Group’s revenue in 2004 to 44% in 2009.

Risk Management % 60 The Group’s enterprise risk management framework aims to provide reasonable assurance to the Board of 44% Directors that risks are understood and being actively 40 33% managed within the Group. The framework seeks to achieve downside protection against negative 18% surprises, while at the same time maximising its upside 20 potential when faced with opportunities. 10%

0 The Group’s Risk Review Committee (RRC) maintains Assets located in US Revenue from customers oversight of the framework and works with the located outside Asia management to ensure that the Group has adequately 2004 2009 prioritised and addressed risk management issues within the Group.

The Group’s risk appetite and strategies are regularly reviewed to ensure alignment with its objectives. 80 OPERATING FINANCIAL REPORT

As part of its business strategy, the Group seeks to has various other financial assets and liabilities such as increase the proportion of its international business trade receivables and trade payables, which arise directly and customers, thereby achieving greater geographical from its operations. diversification. Likewise, the Group takes the initiative to raise the proportion of its commercial business while It is the Group’s policy not to engage in FX and/or maintaining strong support towards the local defence derivatives speculation. The purpose of engaging in business. The commercial business helps to bring treasury transactions is solely for hedging. The Group’s commercially available technology and practices into treasury mandates allow only FX spot, forward or non- the defence business, thereby allowing for more cost deliverable forward, FX swap, cross currency swap, effective systems and solutions. A more diversified purchase of FX call, put or collar option, forward rate base of commercial and military customers will reduce agreement, interest rate swap, purchase of interest rate the risk of customer concentration. cap, floor or collar option (“Permitted Transactions”). These instruments are generic in nature with no (b) Investment Risk embedded or leverage features. Any deviation from these The Group seeks to grow its businesses on three fronts, instruments and any other derivative transactions would through: organic growth of its existing capabilities require specific approval from the Board of Directors. and capacities; development of new capabilities; and acquisitions of business entities and operating assets or The main financial risks arising from the Group’s joint ventures. operations and the use of financial instruments are interest rate, FX, market, liquidity and credit risks. The Investment activities, ranging from the identification policies for managing each of these risks are broadly of targets to conducting due diligence, are supported summarised below: by a dedicated team of investment professionals and augmented by external professionals for specialised (i) Interest Rate Risk services. The business proposals are guided by a given The Group has cash balances placed with reputable set of internal investment criteria, evaluated by senior banks and financial institutions. The Group manages management and endorsed by a Business Investment its interest rate risks on its interest income by placing and Divestment Committee before seeking final Board the cash balances in varying maturities and interest of Directors’ approval. rate terms with due consideration to operating cash flow requirements and optimising yield. (c) Financial Risks and Derivative Financial Instrument Risk The Group’s debts includes 10-year bonds issued, The Group is exposed to financial risks arising from its long and short term bank borrowings and lease operations and the use of financial instruments. The commitments. The Group seeks to minimise its Group’s principal financial instruments, other than foreign interest expense exposure through tapping different exchange (FX) contracts and derivatives, comprise sources of funds to refinance the debt instruments in bankers’ guarantees, performance bonds, bank loans different tenors and/or enter into interest rate swaps, and overdrafts, finance leases and hire purchase where appropriate. contracts, investments, cash and short term deposits. All financial transactions with the banks are governed by The impact on the Group’s annual interest income banking facilities duly accepted with Board of Directors’ and interest expense based on a one percentage resolutions, with banking mandates, which define the point movement in the effective fixed deposit rate permitted financial instruments and facilities limits. All and borrowing rate are estimated at $15m and $2m financial transactions require dual signatories. The Group respectively. Singapore Technologies Engineering Ltd Think Ahead. 81 Annual Report 2009

INTEREST RATE (%)

0 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Oct 05 Oct 06 Oct 07 Oct 08 Oct 09 Jan 10

USD SIBOR 3 mths SGD SIBOR 3 mths Source: Bloomberg

(ii) Foreign Exchange Risk Group enters mainly into forward currency contracts The Group’s FX risk arises both from its subsidiaries to hedge against its FX risk resulting from anticipated operating in foreign countries, generating revenue sale and purchase transactions denominated in and incurring cost denominated in foreign currencies, foreign currencies in accordance with the Group’s and from operations of its local subsidiaries which hedging policy. The Group also enters into cross are transacted in foreign currencies. The Group’s FX currency swap to hedge the FX risk of its loans exposures are primarily from USD and Euro, and the denominated in foreign currencies.

FOREIGN EXCHANGE

1.80

1.75

1.70

1.65

1.60

1.55

1.50

1.45

1.40

1.35

1.30 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Apr 05 Apr 06 Apr 07 Apr 08 Apr 09 Jan 05 Oct 05 Jan 06 Oct 06 Jan 07 Oct 07 Jan 08 Oct 08 Jan 09 Oct 09 Jan 10

USD / SGD Source: Bloomberg

82 OPERATING FINANCIAL REPORT

(iii) Market Risk Besides incorporating force majeure clauses in all The Group has strategic investments in quoted contracts to mitigate risk from Acts of God, the Group equity shares. The market value of these also has in place a comprehensive insurance programme investments will fluctuate with market conditions. aimed at mitigating financial losses that might arise from Management reviews the market value of these such risks. investments regularly. (e) Legal and/or Political Risk (iv) Liquidity Risk Due to the nature of the Group’s business, legal risk can To manage liquidity risk, the Group monitors its net arise from the non-enforceability of material contracts, operating cash flows closely, maintains an adequate and the violation of rules, regulations, laws and business level of cash and cash equivalents, secured practices. additional funding facilities from more financial institutions, and diversified the source of funding As part of the enterprise risk management framework, with a US$1.2b MTN programme ready to tap the legal and compliance risks are identified and reviewed debt capital market when needs arise. periodically.

(v) Credit Risk Policies and practices to manage contract risks include Credit risk, or the risk of counterparties defaulting, is requiring all contracts of material values to be reviewed by managed through the application of credit approvals, legal counsels, and adhering to pre-approved standard credit limits and monitoring procedures. Where contract terms and conditions. Significant deviations from appropriate, the Company or its subsidiaries obtain these standard terms are explained and highlighted, and collateral from customers or arrange master netting the rationale reviewed and approved by higher levels of agreements. Cash terms, advance payments and management. letters of credit or bankers’ guarantees are required for customers of lower credit standing. Compliance risk may arise from the violation of laws and regulations by which the Group is bound. Significant laws (d) Acts of God and/or War Risk and regulations include the FAA rules and regulations in The Group recognises that quick recovery and the Group’s Aerospace business, the Strategic Export resumption of business operations after a disruption Control Act, and relevant Security laws and regulations in are critical to minimising financial, operational and the Group’s defence business. reputation impact. Practices to manage compliance risks are integrated into Accordingly, it has in place a Business Continuity the core business processes, to enable these risks to be Management Framework (“BCM Framework”), which managed holistically. embodies enterprise-wide planning and arrangements of key resources and procedures that enable the (f) Reputation Risk Group to respond and continue to operate critical The damage to the Group’s reputation may result business functions across a broad spectrum of from any risk event the Group is confronted with. The interruptions to the business, arising from internal or damage may also be directly linked to how the Group external events. manages and deals with that risk event. The Group’s reputation can be ruined overnight, if the risk event is The BCM Framework sets out the business continuity not managed well, and it results in a crisis. methodology which requires business units within the Group to identify and assess the impact of Hence, the Group recognises that the key to managing potential threats that could severely interrupt business reputation risk is not only sound risk management, but operations, develop and continuously maintain also good communication with our stakeholders. business continuity strategies and plans to manage the risks of major disruptions. The Group’s existing enterprise risk management framework is aimed at building business resilience The key threats identified by the Group include severe through sound risk management practices. It also weather (such as hurricanes and storms), loss of ensures that a structured group-wide corporate properties resulting from fire and/or acts of terror, and communications programme is developed to facilitate pandemic flu outbreak. effective communication with our stakeholders. Business continuity plans have been developed for scenarios arising from these threats, and the plans are tested and updated at periodic intervals. Singapore Technologies Engineering Ltd Think Ahead. 83 Annual Report 2009

Cash Flow Capital Structure And Treasury Management

Operating Activities The Group strives to maintain a strong balance sheet In 2009, net cash generated from operating activities and an efficient capital structure to ensure a strong credit amounted to $932m, $421m higher than the $511m rating and healthy capital ratios in order to support its in FY2008. This was mainly due to favourable business and maximise shareholder value. To maintain working capital movements with positive variances in or adjust the capital structure, the Group may adjust trade debtors, advance payments to suppliers, other the dividend payment to shareholders, return capital to debtors, deposits and prepayments as well as advance shareholders or issue new shares. payments from customers, but these were partially offset by the negative variances in progress billings in Funding and Borrowings excess of work-in-progress and trade creditors. The Group funds its investments and operations through a mixture of shareholders’ funds, advance payments Investing Activities from customers, and borrowings. On an ongoing basis, The Group’s net cash used in investing activities of the Group reviews its cash flow, debt maturity profile and $484m in FY2009 was higher than FY2008 by $287m, overall liquidity position. In addition to bilateral borrowing mainly due to increase in purchase of investments facilities with the banks, the Group established a US$1.2b and property, plant and equipment, as well as lower MTN programme in July 2009 as part of the Group’s proceeds from sale and maturity of investments, but financing strategy to diversify its funding sources. The these were partially offset by lower cash outflow for the Group issued US$500m of bonds at a fixed coupon of acquisition of subsidiaries and acquisition of additional 4.8% in July 2009 for the purpose of funding new capital interest in subsidiaries. expenditures, merger and acquisitions and other general corporate purposes. Financing Activities The Group had a net cash from financing activities As at end of 2009, Group borrowings amounted to of $19m in FY2009 compared to a net cash used in $1,439m, which is about 86% of its shareholders’ funds financing activities of $543m in FY2008. The higher including minority interests. 94% or $1,353m of total cash inflow was attributable to proceeds from the borrowings are long term borrowings and the balance issue of bonds net of repayment of bank loans. is of a short term nature. The long term borrowings comprised US$500m bonds (10-year) and other term Cash and Cash Equivalents loans largely denominated in USD and Euro, while short As at 31 December 2009, the Group’s cash and cash term loans are mainly denominated in USD and Chinese equivalents stood at $1.51b, $465m higher than Yuan. 90% of total borrowings is on fixed interest rate that of FY2008. The cash and cash equivalents are basis while the balance is on floating rate basis. managed by the Group’s centralised Treasury Unit and the majority of the funds were invested in liquid assets The Group’s interest cover stays at a healthy 10 times, such as fixed deposits. The cash and cash equivalents with a gross debt-to-equity ratio of 85.8%. The Group is as at yearend are adequate to fund the committed and in a net cash position (see details in Note 52 in the Notes planned capital expenditure, as well as to service the to the Financial Statements). Group’s borrowings.

CASH FLOW ($m) MATURITY PROFILE OF BORROWINGS $1,439m 1,200 932 800 511 400 49% 19 0 25% (197) 20% (400) (484) (543) 6% (800) Operating Investing Financing Within 1 year Within 2 to Within 4 to After 5 years Total Activities Activities Activities 3 years 5 years 2008 2009 84 OPERATING FINANCIAL REPORT

Cash Management In the coming EGM, the Company will again seek The Group’s centralised Treasury Unit seeks to minimise shareholders’ approval to renew the Share Purchase the Group’s financial risk, to ensure sufficient liquidity Mandate for the purchase of up to 10% of the number to meet day-to-day operational needs, and to invest of ordinary shares in the capital of the Company. The the cash and cash equivalents within the guidelines share purchase can be effected either through market approved by the Board of Directors. purchases or off market purchases. The financial impacts of various share purchase scenarios will be The Group adopts the strategy of centralised cash presented in a circular to shareholders. management, where the excess cash of its business entities are pooled and managed through a cash Insurance management system. The aim of the centralised cash Where appropriate, the Group manages its insurance management strategy is to maximise the returns of the risks on a group basis to leverage its position with Group’s cash resources and minimise associated risks the general insurance market. and costs. The Group reviews its insurable risk profile Foreign Exchange Management continually and makes the necessary adjustments The aim of the Group’s FX management strategies is on risk retention to optimise the coverage and to minimise FX exposures and associated costs. The cost. This is done with advice and support from most common financial instruments used to manage selected insurance brokers. Major group insurance the FX exposures are spot, forward FX contracts, as policies include Industrial Special Risk, Liabilities well as cross currency swap. and Workmen Compensation, designed to protect the Group against properties risk, liabilities for its The Group’s centralised Treasury Unit (“Unit”) products and services, and workplace accidents facilitates material intra-group FX transactions respectively. The aviation and marine businesses within the Group to net-off the FX exposures before have specialised insurance programmes. proceeding to transact the hedge with banks. The Unit executes the Group’s material FX transactions The Group adopts a proactive strategy with advice with proper segregation of duties between authorised and recommendations from insurance brokers dealers and back office. Only authorised dealers to manage the insurance risk with specific risk can transact with the counterparties on behalf of the management programmes covering the prevention Group, with back office confirming and settling the of fire and the adoption of behaviour based safety trades. The dealers’ limits and permitted treasury practices, among others. instruments in the form of an authorisation matrix and mandates are communicated to all counterparties. Accounting Policies The Group’s significant accounting policies are In accordance with the Group’s counterparties risk presented in Notes to the Financial Statements, management policy, the Group established banking Note 2 (pages 112 to 133). The Group has applied facilities including FX facility with a wide panel of local the same accounting policies and methods of and foreign banks. computation in the preparation of the financial statements for the current reporting period compared Share Purchase Mandate with the audited financial statements as at 31 The purpose of the Share Purchase Mandate is to December 2008, except for the adoption of all the new give the Company the flexibility to undertake the and revised Financial Reporting Standards (FRS), that share purchase exercise expeditiously. The Share are mandatory for financial years beginning on or after Purchase Mandate provides the Company an 1 January 2009. The adoption of these FRS has no alternate avenue to reward shareholders apart from significant impact on the financial statements, except the traditional dividend payment route as well as for FRS 1, FRS 107 and FRS 108 as indicated on acts as a tool for the Company to manage its pages 129 and 130. capital structure. Financial Report

Directors’ Report 86 Statement by Directors 100 Independent Auditors’ Report 101

FINANCIAL STATEMENTS Consolidated Income Statement 102 Consolidated Statement of Comprehensive Income 103 Balance Sheets 104 Statements of Changes in Equity 106 Consolidated Statement of Cash Flows 108 Notes to the Financial Statements 112 SGX Listing Manual Requirements 228 Sectoral Financial Review 230 Group Structure 246 Corporate Directory 251 Corporate Information 261 Shareholding Statistics 262 86

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2009.

Directors

The directors of the Company in office at the date of this report are as follows:

Peter Seah Lim Huat (Chairman) Tan Pheng Hock (President and Chief Executive Officer) Koh Beng Seng LG Desmond Kuek Bak Chye Dr Tan Kim Siew Quek Tong Boon Winston Tan Tien Hin Quek Poh Huat Venkatachalam Krishnakumar Davinder Singh s/o Amar Singh Dr Stanley Lai Tze Chang (Appointed on 8 October 2009) COL Chia Choon Hoong (Alternate Director to LG Desmond Kuek Bak Chye)

Arrangements to enable directors to acquire shares or debentures

Except for the Singapore Technologies Engineering Executives’ Share Option Scheme, Singapore Technologies Engineering Share Option Plan, Singapore Technologies Engineering Performance Share Plan and Singapore Technologies Engineering Restricted Stock Plan (collectively the “ST Engineering Share Plans”), neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interests in shares or debentures

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning (or date of appointment, if later) or at the end of the financial year or between the end of the financial year and on 21 January 2010. Singapore Technologies Engineering Ltd Think Ahead. 87 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars of interests of directors who held office at the end of the financial year in shares or debentures in the Company and its related corporations were as follows:

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

The Company Ordinary Shares

Peter Seah Lim Huat 307,500 335,108 Tan Pheng Hock 868,689 1,052,264 Koh Beng Seng – 41,723 Winston Tan Tien Hin 476,500 *1 528,864 *1 Quek Poh Huat 874,228 943,478 Davinder Singh s/o Amar Singh – 2,547 Venkatachalam Krishnakumar – 53,750 Dr Stanley Lai Tze Chang 3,878 3,878 COL Chia Choon Hoong 7,000 7,000

Related Corporations Chartered Semiconductor Manufacturing Ltd Ordinary Shares

Peter Seah Lim Huat 6,730 N.A. @ Tan Pheng Hock 7,000 N.A. @ Koh Beng Seng 44,074 N.A. @ Winston Tan Tien Hin 377,000 *2 N.A. @

Global Crossing Limited Common Stock of US$0.01 each

Peter Seah Lim Huat 13,532 21,618

Mapletree Logistics Trust Management Ltd Unit holdings in Mapletree Logistics Trust

Quek Tong Boon 2,000 2,000

Neptune Orient Lines Limited Ordinary Shares

COL Chia Choon Hoong 2,000 2,000

Singapore Airlines Limited Ordinary Shares

Venkatachalam Krishnakumar 3,733 3,733 COL Chia Choon Hoong 1,870 1,870 88

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

Singapore Telecommunications Limited Ordinary Shares

Peter Seah Lim Huat 3,040 3,040 Tan Pheng Hock 3,350 3,350 Koh Beng Seng 1,520 1,520 LG Desmond Kuek Bak Chye 2,230 2,230 Dr Tan Kim Siew 12,850 52,850 Quek Tong Boon 2,030 2,030 Winston Tan Tien Hin 4,980 54,980 *3 Quek Poh Huat 5,210 35,210 Davinder Singh s/o Amar Singh 3,170 3,170 COL Chia Choon Hoong 4,610 9,610

SMRT Corporation Ltd Ordinary Shares

Quek Tong Boon 4,000 4,000 Quek Poh Huat 8,000 8,000

SP AusNet Stapled Securities

Quek Poh Huat 206,000 256,000

StarHub Ltd Ordinary Shares

Peter Seah Lim Huat 447,560 470,710 Tan Pheng Hock 25,150 25,150 Winston Tan Tien Hin – 30,000 *2 Venkatachalam Krishnakumar 15,716 15,716

STATS ChipPAC Ltd. Ordinary Shares

Peter Seah Lim Huat 6,900 6,900 Koh Beng Seng 45,000 45,000

TeleChoice International Limited Ordinary Shares

Peter Seah Lim Huat 50,000 50,000 Tan Pheng Hock 30,000 30,000 Singapore Technologies Engineering Ltd Think Ahead. 89 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

Vertex Investment (II) Ltd Ordinary Shares

Davinder Singh s/o Amar Singh 50 50

Vertex Technology Fund Ltd Ordinary Shares

Winston Tan Tien Hin 10 10

Vertex Technology Fund (II) Ltd Ordinary Shares

Koh Beng Seng 15 15 Winston Tan Tien Hin 20 20 Davinder Singh s/o Amar Singh 500 500

Redeemable Preference Shares

Koh Beng Seng 15 15 Winston Tan Tien Hin 19 19 Davinder Singh s/o Amar Singh 500 500

1 January 2009 or date of appointment if later 31 December 2009 Exercise price Exercisable period $

The Company Options to Subscribe for Ordinary Shares

Peter Seah Lim Huat 11,125 – 2.09 10.2.2005 to 9.2.2009 11,125 – 2.12 11.8.2005 to 10.8.2009 22,250 22,250 2.37 8.2.2006 to 7.2.2010 22,250 22,250 2.57 11.8.2006 to 10.8.2010 33,375 33,375 3.01 10.2.2007 to 9.2.2011 33,375 33,375 2.84 11.8.2007 to 10.8.2011 44,500 44,500 3.23 16.3.2008 to 15.3.2012 44,500 44,500 3.61 11.8.2008 to 10.8.2012 90

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

1 January 2009 or date of appointment if later 31 December 2009 Exercise price Exercisable period $

The Company Options to Subscribe for Ordinary Shares

Tan Pheng Hock 5,000 – 2.00 11.8.2001 to 10.8.2009 300,000 300,000 2.26 10.2.2002 to 9.2.2010 225,000 225,000 2.72 20.2.2002 to 19.2.2011 227,500 227,500 2.68 11.8.2002 to 10.8.2011 175,000 175,000 2.29 8.2.2003 to 7.2.2012 175,000 175,000 1.92 13.8.2003 to 12.8.2012 200,000 200,000 1.79 7.2.2004 to 6.2.2013 200,000 200,000 1.86 12.8.2004 to 11.8.2013 200,000 200,000 2.09 10.2.2005 to 9.2.2014 200,000 200,000 2.12 11.8.2005 to 10.8.2014 200,000 200,000 2.37 8.2.2006 to 7.2.2015 200,000 200,000 2.57 11.8.2006 to 10.8.2015 200,000 200,000 3.01 10.2.2007 to 9.2.2016 200,000 200,000 2.84 11.8.2007 to 10.8.2016 200,000 200,000 3.23 16.3.2008 to 15.3.2017

Koh Beng Seng 19,500 – 2.09 10.2.2005 to 9.2.2009 19,500 – 2.12 11.8.2005 to 10.8.2009 27,500 27,500 2.37 8.2.2006 to 7.2.2010 27,500 27,500 2.57 11.8.2006 to 10.8.2010 27,500 27,500 3.01 10.2.2007 to 9.2.2011 27,500 27,500 2.84 11.8.2007 to 10.8.2011 27,500 27,500 3.23 16.3.2008 to 15.3.2012 27,500 27,500 3.61 11.8.2008 to 10.8.2012

Winston Tan Tien Hin 48,500 – 2.09 10.2.2005 to 9.2.2009 37,000 37,000 2.37 8.2.2006 to 7.2.2010 37,000 37,000 2.57 11.8.2006 to 10.8.2010 37,000 37,000 3.01 10.2.2007 to 9.2.2011 37,000 37,000 2.84 11.8.2007 to 10.8.2011 37,000 37,000 3.23 16.3.2008 to 15.3.2012 37,000 37,000 3.61 11.8.2008 to 10.8.2012

Quek Poh Huat 33,000 – 2.09 10.2.2005 to 9.2.2009 33,000 – 2.12 11.8.2005 to 10.8.2009 33,000 33,000 2.37 8.2.2006 to 7.2.2010 33,000 33,000 2.57 11.8.2006 to 10.8.2010 33,000 33,000 3.01 10.2.2007 to 9.2.2011 33,000 33,000 2.84 11.8.2007 to 10.8.2011 33,000 33,000 3.23 16.3.2008 to 15.3.2012 33,000 33,000 3.61 11.8.2008 to 10.8.2012 Singapore Technologies Engineering Ltd Think Ahead. 91 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

1 January 2009 or date of appointment if later 31 December 2009 Exercise price Exercisable period $

The Company Options to Subscribe for Ordinary Shares

Venkatachalam Krishnakumar 25,250 – 2.37 8.2.2006 to 7.2.2010 25,250 – 2.57 11.8.2006 to 10.8.2010 25,500 25,500 3.01 10.2.2007 to 9.2.2011 25,500 25,500 2.84 11.8.2007 to 10.8.2011 25,500 25,500 3.23 16.3.2008 to 15.3.2012 25,500 25,500 3.61 11.8.2008 to 10.8.2012

Related Corporations Chartered Semiconductor Manufacturing Ltd Options to Subscribe for Ordinary Shares

Peter Seah Lim Huat 85,000 N.A. @ 1.70 27.2.2005 to 27.2.2009 85,000 N.A. @ 1.16 26.8.2006 to 26.8.2010 95,000 N.A. @ 1.21 25.8.2007 to 25.8.2011 47,500 N.A. @ 1.07 31.8.2008 to 31.8.2012

Global Crossing Limited Options to Purchase Common Shares of US$0.01 each

Peter Seah Lim Huat 40,000 40,000 10.16 12.1.2005 to 12.1.2014

StarHub Ltd Options to Subscribe for Ordinary Shares

Peter Seah Lim Huat 6,250 – 0.985 27.11.2005 to 26.11.2009 8,500 – 1.52 31.5.2006 to 30.5.2010

STATS ChipPAC Ltd. Options to Subscribe for Ordinary Shares

Peter Seah Lim Huat 70,000 70,000 1.99 6.8.2004 to 5.8.2013 35,000 35,000 1.91 17.2.2005 to 16.2.2014

Koh Beng Seng 25,000 – 1.91 17.2.2005 to 16.2.2009

Global Crossing Limited Restricted Stock Units of Common Stock of US$0.01 each

Peter Seah Lim Huat 2,250 – 8.3.2005 to 8.3.2009 4,176 – 24.6.2009 – 2,345 4.6.2010 92

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

The Company

Conditional Award of 250,000 Performance Shares to be delivered after 2008

Tan Pheng Hock 0 to 375,000 #1 – ^

Conditional Award of 200,000 Performance Shares to be delivered after 2009

Tan Pheng Hock 0 to 300,000 #1 0 to 300,000 #1

Conditional Award of 250,000 Performance Shares to be delivered after 2010

Tan Pheng Hock 0 to 375,000 #1 0 to 375,000 #1

Conditional Award of 250,000 Performance Shares to be delivered after 2011

Tan Pheng Hock – 0 to 425,000 #2

Conditional Award of Restricted Shares to be delivered after 2008

Peter Seah Lim Huat (30,500 shares) 0 to 45,750 #3 10,716 #5 Tan Pheng Hock (45,000 shares) 0 to 67,500 #4 17,325 #5 Koh Beng Seng (15,500 shares) 0 to 23,250 #3 5,446 #5 Winston Tan Tien Hin (22,000 shares) 0 to 33,000 #3 7,730 #5 Quek Poh Huat (18,500 shares) 0 to 27,750 #3 6,500 #5 Venkatachalam Krishnakumar (18,500 shares) 0 to 27,750 #3 6,500 #5 Davinder Singh s/o Amar Singh (14,500 shares) 0 to 21,750 #3 5,095 #5 Dr Stanley Lai Tze Chang (5,000 shares) 1,757 #5 1,757 #5 Singapore Technologies Engineering Ltd Think Ahead. 93 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

The Company Conditional Award of Restricted Shares to be delivered after 2009

Peter Seah Lim Huat (30,500 shares) – 0 to 45,750 #6 Tan Pheng Hock (96,000 shares) 0 to 144,000 #6 0 to 144,000 #6 Koh Beng Seng (15,500 shares) – 0 to 23,250 #6 Winston Tan Tien Hin (22,000 shares) – 0 to 33,000 #6 Quek Poh Huat (18,500 shares) – 0 to 27,750 #6 Venkatachalam Krishnakumar (18,500 shares) – 0 to 27,750 #6 Davinder Singh s/o Amar Singh (14,500 shares) – 0 to 21,750 #6 Dr Stanley Lai Tze Chang (5,000 shares) 0 to 7,500 #6 0 to 7,500 #6

Conditional Award of 96,000 Restricted Shares to be delivered after 2010

Tan Pheng Hock – 0 to 144,000 #6

Related Corporations Chartered Semiconductor Manufacturing Ltd Conditional Award of Restricted Share Units to be delivered after 2008

Peter Seah Lim Huat 13,460 #7 N.A. @

Conditional Award of Restricted Share Units to be delivered after 2009

Peter Seah Lim Huat 35,110 #7 N.A. @

STATS ChipPAC Ltd. Conditional Award of Restricted Share Units to be delivered after 2008

Peter Seah Lim Huat 13,800 #7 6,900 #7 94

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

Holdings in the name of the director, spouse or infant children 1 January 2009 or date of appointment if later 31 December 2009

Related Corporations StarHub Ltd Conditional Award of Restricted Shares to be delivered after 2008

Peter Seah Lim Huat 17,200 #8 –

Unvested Restricted Shares (Performance period from 01/01/2007 to 31/12/2008)

Peter Seah Lim Huat – 16,712 #5

Conditional Award of Restricted Shares to be delivered after 2009

Peter Seah Lim Huat 19,000 #9 19,000 #9

Conditional Award of Restricted Shares to be delivered after 2010

Peter Seah Lim Huat – 19,000 #10

*1 Includes deemed interest in 200,000 shares in Singapore Technologies Engineering Ltd, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

*2 Held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

*3 Includes deemed interest in 10,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

@ Ceased to be a related corporation of Temasek Holdings (Private) Limited during the financial year.

^ During the financial year, 131,250 shares were released to Mr Tan Pheng Hock.

#1 A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to be released is capped at 150% of the conditional award.

#2 A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to be released is capped at 170% of the conditional award. Singapore Technologies Engineering Ltd Think Ahead. 95 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

#3 For this period, Messrs Peter Seah Lim Huat, Koh Beng Seng, Winston Tan Tien Hin, Quek Poh Huat, Venkatachalam Krishnakumar and Davinder Singh s/o Amar Singh were awarded 16,074, 8,169, 11,594, 9,750, 9,750 and 7,642 new shares on 26 March 2009 respectively upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2008 to 31 December 2008 has thus lapsed.

#4 For this period, Mr Tan Pheng Hock was awarded 34,650 new shares on 26 March 2009 upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2007 to 31 December 2008 has thus lapsed.

#5 Balance of unvested restricted shares to be released according to the stipulated vesting periods.

#6 A minimum threshold performance over a one-year or two-year period is required for any restricted shares to be released. A specified number of restricted shares to be released will depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.

#7 The restricted share units will vest over a period of three years starting from the first anniversary of grant.

#8 The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the company over a two-year period from 1 January 2007 to 31 December 2008. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. For this period, 25,112 new shares were awarded on 19 March 2009 upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2007 to 31 December 2008 has thus lapsed.

#9 The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the company over a two-year period from 1 January 2008 to 31 December 2009. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. Shares will be delivered in phases according to the stipulated vesting periods.

#10 The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the company over a two-year period from 1 January 2009 to 31 December 2010. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. Shares will be delivered in phases according to the stipulated vesting periods.

Between the end of the financial year and 21 January 2010, the following Directors’ interests in the Company had increased as follows:

(a) Mr Peter Seah Lim Huat – increased to 357,358 (b) Mr Tan Pheng Hock – increased to 1,352,264 (c) Mr Koh Beng Seng – increased to 69,223 (d) Mr Quek Poh Huat – increased to 976,478

Directors’ interests in contracts

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a full- time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from related corporations and share options granted pursuant to the ST Engineering Share Plans) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except for professional fees paid to a firm of which a director is a member as shown in the financial statements. 96

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Share plans

The Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”) (collectively “Share Plans”).

The Committee members are Mr Peter Seah Lim Huat (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang who was appointed on 8 October 2009. He replaces Dr Philip Nalliah who was a Committee member until 30 September 2009.

Following approval of the new Share Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore Technologies Engineering Executives’ Share Option Scheme (“ESOS”), the predecessor to the ESOP, was terminated.

As at 31 December 2009, no options and conditional awards have been granted to controlling shareholders of the Company or associates of the Company and no employees have received 5% or more of the total options and conditional awards available under the Share Plans.

The aggregate number of new shares issued pursuant to the Share Plans did not exceed 15% of the issued share capital of the Company.

During the financial year, except as disclosed below, there were no options granted and no shares awarded by the Company to any person to take up unissued shares of the Company.

(a) ESOS/ESOP

(i) The options granted under the ESOS/ESOP are as follows:

Aggregate options Aggregate options granted and exercised/ accepted since lapsed since Options granted commencement of commencement of Aggregate options and accepted ESOS/ESOP to end ESOS/ESOP to end outstanding as at during the financial of financial of financial end of financial Name of participant year under review year under review year under review year under review

Director of the Company ESOS Tan Pheng Hock – 1,699,864 1,399,864 300,000

ESOP Peter Seah Lim Huat – 530,000 329,750 200,250 Tan Pheng Hock – 2,602,500 – 2,602,500 Koh Beng Seng – 204,000 39,000 165,000 Winston Tan Tien Hin – 593,500 371,500 222,000 Quek Poh Huat – 375,000 177,000 198,000 Venkatachalam Krishnakumar – 152,500 50,500 102,000

Non-Executive Directors of subsidiaries (including former directors) – 3,550,566 2,506,523 1,044,043

Group Executives (excluding Tan Pheng Hock) – 191,115,358 91,372,537 99,742,821

Parent Group Executives and others – 187,320 107,890 79,430 Singapore Technologies Engineering Ltd Think Ahead. 97 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Share plans (continued)

(a) ESOS/ESOP (continued)

(ii) The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.

(iii) During the financial year, 10,215,827 ordinary shares in the Company were issued pursuant to the exercise of options to take up unissued shares of the Company.

(b) PSP

The PSP is established with the objective of motivating senior management staff to strive for sustained long-term growth and performance in ST Engineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are granted conditional on performance targets set based on the ST Engineering Group corporate objectives.

Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribed to be a three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period. A specified number of performance shares shall be released by the ERCC to the recipient and the actual number of performance shares will depend on the achievement of set targets over the respective performance period. A minimum threshold performance is required for any performance share to be released and the actual number of performance shares to be released is capped at 150% to 170% of the conditional award.

In addition to PSP performance targets being met, the ERCC has decided that the final award for PSP going forward is conditional upon the performance targets for RSP that has the same end of performance period being met. This is to create alignment between senior management and other employees. As an example, the final award for PSP 2009 is therefore conditional on the performance targets for RSP 2010, which has the same end of performance period in December 2011, being met.

Known as the plan trigger condition, this will apply to all PSP contingent awards from financial year 2009 onwards.

With effect from financial year 2007, the performance measures used in PSP grants are Wealth Added and ST Engineering Group TSR against the MSCI Asia Pacific ex Japan Industrial Index.

The awards granted under the PSP are as follows:

Aggregate conditional awards Aggregate awards granted since released since Aggregate Conditional awards commencement commencement conditional awards granted during the Awards released of PSP to end of of PSP to end of not released as at financial year under during the financial financial year under financial year under end of financial year Name of participant review year under review review review under review

Director of the Company Tan Pheng Hock 0 to 425,000 131,250 0 to 3,770,000 360,075 0 to 1,100,000

Group Executives 0 to 2,867,900 1,158,500 0 to 30,568,400 3,087,719 0 to 6,619,736 98

Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Share plans (continued)

The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and superior performance in ST Engineering Group. It also aims to foster a share ownership culture among staff within the ST Engineering Group and to better align staff’s incentive scheme with shareholders’ interest.

Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribed to be a two-year performance period. The actual number of restricted shares delivered will depend on the achievement of set targets over the respective performance period. This will be determined by the ERCC at the end of the qualifying performance period and released to the recipient over a three-year vesting period in the ratio of 50%, 25% and 25% consecutively.

A minimum threshold performance is required for any restricted share to be released while the maximum number of restricted shares to be delivered is capped at 150% of the conditional award.

The medium-term stretched targets measured over a two-year performance period are set based on ST Engineering Group corporate objectives. The performance measures used for the two-year performance period are ST Engineering Group EVA Spread and EBITDA Margin.

During the year, conditional share awards were also granted to non-executive directors (excluding those from the public sector) of ST Engineering, ST Aerospace, ST Electronics, ST Kinetics and ST Marine. Although the performance measures, namely, ST Engineering Group EVA Spread and EBITDA Margin, used are the same as those for key executives and managerial staff, the performance period is limited to one year. Depending on the actual performance, the total release of awards will range from zero to a maximum capped at 150% of the conditional award, over a three-year vesting 1 period at 33 /3% per year.

The awards granted under the RSP are as follows:

Aggregate Aggregate Awards conditional awards awards Aggregate released granted since released since awards not Aggregate Conditional awards during the commencement commencement released conditional awards granted during the financial of RSP to end of of RSP to end as at end not released as at financial year under year under financial year of financial year of financial end of financial Name of participant review review under review under review year year under review

Director of the Company Peter Seah Lim Huat 0 to 45,750 5,358 0 to 91,500 5,358 10,716 0 to 45,750 Tan Pheng Hock 0 to 144,000 17,325 0 to 355,500 17,325 17,325 0 to 288,000 Koh Beng Seng 0 to 23,250 2,723 0 to 46,500 2,723 5,446 0 to 23,250 Winston Tan Tien Hin 0 to 33,000 3,864 0 to 66,000 3,864 7,730 0 to 33,000 Quek Poh Huat 0 to 27,750 3,250 0 to 55,500 3,250 6,500 0 to 27,750 Venkatachalam Krishnakumar 0 to 27,750 3,250 0 to 55,500 3,250 6,500 0 to 27,750 Davinder Singh s/o Amar Singh 0 to 21,750 2,547 0 to 43,500 2,547 5,095 0 to 21,750 Dr Stanley Lai Tze Chang 0 to 7,500 878 0 to 15,000 878 1,757 0 to 7,500

Non-Executive Directors of the Company and its subsidiaries 0 to 315,750 43,912 0 to 641,250 43,912 65,709 0 to 307,811

Group Executives 0 to 12,430,338 434,732 0 to 25,480,613 434,732 524,901 0 to 22,457,495 Singapore Technologies Engineering Ltd Think Ahead. 99 Annual Report 2009 Directors’ Report as at 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

Audit Committee

The Audit Committee comprises three independent non-executive directors, one of whom is also the Chairman of the Committee. The members of the Audit Committee at the date of this report are as follows:

Koh Beng Seng (Chairman) Venkatachalam Krishnakumar Dr Stanley Lai Tze Chang

The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50. The Audit Committee met during the year to review the scope of the internal audit functions and the scope of work of the statutory auditors, and the results arising therefrom, including their evaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company’s officers to the auditors. The consolidated financial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submission to the directors of the Company for adoption.

In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions, reviewed the procedures set up by the Group and the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions.

The Audit Committee has received the requisite information from Ernst & Young LLP (“E&Y”) and has considered the financial, business and professional relationship between E&Y and the Group. It is of the view that such relationship is compatible with maintaining E&Y’s independence.

Auditors

Ernst & Young LLP will not be seeking re-election and KPMG LLP has been nominated to be the auditors for the ensuing year. The appointment is subject to shareholders’ approval at the Annual General Meeting on 21 April 2010.

On behalf of the Board of Directors

Peter Seah Lim Huat Tan Pheng Hock Director Director

Singapore 18 February 2010 100

Statement by Directors

We, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion of the Directors:

(a) the accompanying balance sheets, consolidated income statement, consolidated statement of comprehensive income, statements of changes in equity, and consolidated statement of cash flows together with notes thereto set out on pages 102 to 227 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009, and changes in equity of the Company and of the Group, the results of the business and cash flows of the Group for the year ended on that date; and

(b) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

Peter Seah Lim Huat Tan Pheng Hock Director Director

Singapore 18 February 2010 Singapore Technologies Engineering Ltd Think Ahead. 101 Annual Report 2009 Independent Auditors’ Report to the Members of Singapore Technologies Engineering Ltd

We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its subsidiary companies (collectively the “Group”) set out on pages 102 to 227, which comprise the balance sheets of the Group and the Company as at 31 December 2009, the statements of changes in equity of the Group and the Company, and the consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair income statement and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion,

(a) the consolidated financial statements of the Group and the balance sheet and statements of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and changes in equity of the Group and of the Company, the results and cash flows of the Group for the financial year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiary companies incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLP Public Accountants and Certified Public Accountants

Singapore 18 February 2010 102

Consolidated Income Statement for the year ended 31 December 2009 (Currency - Singapore dollars)

Group Note 2009 2008 $’000 $’000

Turnover 3 5,547,787 5,344,515 Cost of sales (4,397,582) (4,188,323) Gross profit 1,150,205 1,156,192

Other operating income, net 4 21,413 26,973 Distribution and selling expenses (182,174) (189,893) Administrative expenses (397,011) (381,413) Other operating expenses (84,607) (75,866) Profit from operations before taxation, other income and financial expenses 5 507,826 535,993 Other income, net 8 55,974 8,459 Financial expenses 9 (56,120) (42,687) 507,680 501,765 Share of results of associated companies and joint ventures 38,879 38,937 Profit from operations before taxation 546,559 540,702 Taxation 10 (90,162) (51,939)

Profit from operations after taxation 456,397 488,763

Attributable to: Shareholders of the Company 443,930 473,636 Minority interests 12,467 15,127

456,397 488,763

Earnings per share (cents) 11 Basic 14.78 15.82 Diluted 14.74 15.74

The accompanying notes are an integral part of the financial statements. Singapore Technologies Engineering Ltd Think Ahead. 103 Annual Report 2009

Consolidated Statement of Comprehensive Income for the year ended 31 December 2009 (Currency - Singapore dollars)

Group 2009 2008 $’000 $’000

Profit from operations after taxation 456,397 488,763

Other comprehensive income: Net fair value changes on available-for-sale financial assets 8,251 (26,330) Net fair value changes on cash flow hedges (4,214) (2,642) Foreign currency translation (27,500) (8,758) Other comprehensive income for the year, net of tax (23,463) (37,730)

Total comprehensive income for the year 432,934 451,033

Total comprehensive income attributable to: Shareholders of the Company 422,464 433,579 Minority interests 10,470 17,454

432,934 451,033

The accompanying notes are an integral part of the financial statements. 104

Balance Sheets as at 31 December 2009 (Currency - Singapore dollars)

Group Company Note 2009 2008 2009 2008 $’000 $’000 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 12 1,166,677 1,019,084 711 1,016 Subsidiaries 13 – – 588,477 574,453 Associated companies and joint ventures 14 273,379 263,078 17,707 50 Investments 15 21,464 53,416 – – Intangible assets 16 642,784 641,090 – – Investment properties 17 2,009 17,371 – – Long-term receivables, non-current 18 36,800 451 – – Finance lease receivables, non-current 19 5,227 4,793 – – Derivative financial instruments 51 18,742 16,374 – – Deferred tax assets 20 127,196 138,128 – –

2,294,278 2,153,785 606,895 575,519

Current assets Stocks and work-in-progress 21 1,364,296 1,286,331 – – Trade debtors 22 1,062,227 1,108,229 – – Due from related corporations 23 4,082 234,078 29 139,198 Advances and other debtors 24 388,226 379,086 340,096 340,196 Long-term receivables, current 18 7,637 700 90 180 Finance lease receivables, current 19 14,386 11,057 – – Short-term investments 25 235,825 580 – – Bank balances and other liquid funds 26 1,513,610 818,925 241,984 231,195

4,590,289 3,838,986 582,199 710,769

TOTAL ASSETS 6,884,567 5,992,771 1,189,094 1,286,288

EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 655,669 490,014 – – Creditors and accruals 29 1,392,392 1,406,169 41,650 56,855 Provisions 30 211,851 185,415 – – Progress billings in excess of work-in-progress 21 557,329 475,746 – – Provision for taxation 178,734 177,647 5,204 5,927 Short-term bank loans 31 83,510 322,773 – 25,300 Lease obligations, current 32 1,822 1,726 – – Long-term bank loans, current 36 – 261,989 – – Other loans, current 37 240 240 – – Bank overdrafts 1 19 – –

3,081,548 3,321,738 46,854 88,082

NET CURRENT ASSETS 1,508,741 517,248 535,345 622,687 Singapore Technologies Engineering Ltd Think Ahead. 105 Annual Report 2009 Balance Sheets as at 31 December 2009 (Currency - Singapore dollars)

Group Company Note 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Non-current liabilities Advance payments from customers, non-current 682,025 601,626 – – Deferred income 34 14,546 11,496 – – Deferred tax liabilities 35 58,297 62,602 205 201 Lease obligations, non-current 32 3,730 5,419 – – Long-term bank loans, non-current 36 648,854 287,642 – – Bonds 38 698,462 – – – Other loans, non-current 37 2,088 1,607 – – Other long-term payables, non-current 39 1,453 – – – Derivative financial instruments 51 17,368 23,525 – – Due to a subsidiary 40 – – 54,000 54,000

2,126,823 993,917 54,205 54,201

Total liabilities 5,208,371 4,315,655 101,059 142,283 Net assets 1,676,196 1,677,116 1,088,035 1,144,005

Share capital and reserves Share capital 41 611,808 586,614 611,808 586,614 Capital reserves 42 116,323 116,323 – – Other reserves 43 (22,793) (16,216) 61,790 46,779 Retained earnings 44 862,764 893,719 414,437 510,612 1,568,102 1,580,440 1,088,035 1,144,005 Minority interests 108,094 96,676 – –

1,676,196 1,677,116 1,088,035 1,144,005

Total equity and liabilities 6,884,567 5,992,771 1,189,094 1,286,288

The accompanying notes are an integral part of the financial statements. 106

Statements of Changes in Equity for the year ended 31 December 2009 (Currency - Singapore dollars)

Share Capital Other Retained Minority Total Note capital reserves reserves earnings Total interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2008 554,888 115,948 5,419 956,255 1,632,510 147,183 1,779,693 Net profit for the year – – – 473,636 473,636 15,127 488,763 Other comprehensive income for the year – – (40,057) – (40,057) 2,327 (37,730) Total comprehensive income for the year – – (40,057) 473,636 433,579 17,454 451,033 Issue of shares 31,726 – – – 31,726 – 31,726 Acquisition of a subsidiary – – – – – 1,489 1,489 Acquisition of additional interest in subsidiaries – – – – – (61,110) (61,110) Capital contribution – – – – – 2,836 2,836 Cost of share-based payment – – 17,940 – 17,940 168 18,108 Dividends 45 – – – (535,690) (535,690) (11,594) (547,284) Excess capital contribution from minority shareholders – 375 – – 375 250 625 Transfer from unappropriated profit to statutory reserve – – 482 (482) – – –

At 31.12.2008 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116

At 1.1.2009 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116 Net profit for the year – – – 443,930 443,930 12,467 456,397 Other comprehensive income for the year – – (21,466) – (21,466) (1,997) (23,463) Total comprehensive income for the year – – (21,466) 443,930 422,464 10,470 432,934 Issue of shares 25,194 – – – 25,194 – 25,194 Acquisition of subsidiaries – – – – – 9,756 9,756 Acquisition of additional interest in subsidiaries – – – – – (1,075) (1,075) Capital contribution – – – – – 5,092 5,092 Cost of share-based payment – – 14,559 – 14,559 157 14,716 Dividends 45 – – – (474,555) (474,555) (12,982) (487,537) Transfer from unappropriated profit to statutory reserve – – 330 (330) – – –

At 31.12.2009 611,808 116,323 (22,793) 862,764 1,568,102 108,094 1,676,196 Singapore Technologies Engineering Ltd Think Ahead. 107 Annual Report 2009 Statements of Changes in Equity for the year ended 31 December 2009 (Currency - Singapore dollars)

Share-based Share payment Retained Note capital reserve earnings Total $’000 $’000 $’000 $’000

The Company

At 1.1.2008 554,888 28,246 565,743 1,148,877 Net profit for the year – – 480,559 480,559 Total comprehensive income for the year – – 480,559 480,559 Issue of shares 31,726 – – 31,726 Cost of share-based payment – 18,533 – 18,533 Dividends 45 – – (535,690) (535,690)

At 31.12.2008 586,614 46,779 510,612 1,144,005

At 1.1.2009 586,614 46,779 510,612 1,144,005 Net profit for the year – – 378,380 378,380 Total comprehensive income for the year – – 378,380 378,380 Issue of shares 25,194 – – 25,194 Cost of share-based payment – 15,011 – 15,011 Dividends 45 – – (474,555) (474,555)

At 31.12.2009 611,808 61,790 414,437 1,088,035

The accompanying notes are an integral part of the financial statements. 108

Consolidated Statement of Cash Flows for the year ended 31 December 2009 (Currency - Singapore dollars)

2009 2008 $’000 $’000

Cash flows from operating activities Profit before taxation including share of results of associated companies and joint ventures 546,559 540,702 Adjustments: Share of results of associated companies and joint ventures (38,879) (38,937) Depreciation charge 150,985 148,590 Impairment in value of investments 1,060 25,943 Property, plant and equipment written off 10,948 12,117 Write-back of impairment of property, plant and equipment (42) (102) Gain on disposal of property, plant and equipment (1,255) (4,364) Gain on disposal of an investment property (447) – Gain on disposal of investments (690) (650) Loss on disposal of subsidiaries 83 – Gain on disposal of associated companies – (803) Long-term loan from a minority shareholder forgiven – (194) Profit on maturity of amounts under fund management – (19,586) Negative goodwill written off (427) – Goodwill written off 1,599 – Share-based payment expense 17,702 19,357 Changes in fair value of financial instruments and hedged items (812) 1,415 Financial expenses 56,120 42,687 Interest income (12,688) (21,151) Dividends from investments (181) (222) Amortisation of other intangible assets 11,773 10,203 Impairment of other intangible assets 397 2 Operating profit before working capital changes 741,805 715,007 (Increase)/decrease in: Stocks and work-in-progress (57,866) (55,296) Progress billings in excess of work-in-progress 81,583 106,989 Trade debtors 74,312 (157,254) Advance payments to suppliers (21,706) (60,332) Other debtors, deposits and prepayments 38,608 (33,266) Holding company and related corporations balances (520) 771 Associated companies 1,089 5,397 Joint ventures (11,033) 1,787 Trade creditors (46,526) 65,207 Advance payments from customers 242,899 29,538 Other creditors, accruals and provisions 11,328 (57,596) Loans to staff and third parties, net of repayments (35,975) 392 Cash generated from operations 1,017,998 561,344 Interest received 9,230 23,925 Income tax paid (87,830) (92,011) Deferred income 1,540 4,417 Exchange difference on operating activities (9,429) 13,683

Net cash from operating activities 931,509 511,358 Singapore Technologies Engineering Ltd Think Ahead. 109 Annual Report 2009 Consolidated Statement of Cash Flows for the year ended 31 December 2009 (Currency - Singapore dollars)

2009 2008 $’000 $’000

Cash flows from investing activities Proceeds from sale of property, plant and equipment 5,045 11,272 Proceeds from sale of an investment property 1,800 – Proceeds from sale of associated companies – 803 Dividends from associated companies and joint ventures 44,505 42,247 Dividends from investments 181 222 Proceeds from sale and maturity of investments 1,154 131,492 Purchase of property, plant and equipment (276,525) (191,291) Purchase of investments (195,399) – Additional investment/acquisition of associated companies and joint ventures (19,803) (2,795) Acquisition of other intangible assets (6,696) (4,556) Acquisition of subsidiaries (38,923) (121,629) Acquisition of additional interest in subsidiaries (2,562) (62,930) Exchange difference on investing activities 3,601 74

Net cash used in investing activities (483,622) (197,091)

Cash flows from financing activities Capital contribution from minority shareholders of subsidiaries 5,092 2,836 Proceeds from issue of shares 22,208 30,477 Proceeds from issue of bonds 716,653 – Loan from a minority shareholder 757 – Loan to associated companies and joint ventures (6,820) (360) Repayment of other loans, net (234) (252) Repayment of lease obligations, net (1,692) (1,409) (Repayment)/proceeds of bank loans, net (151,442) 33,990 Dividends paid to shareholders of the Company (474,555) (535,690) Dividends paid to minority shareholders of subsidiaries (12,982) (11,594) Interest paid (42,902) (42,239) Exchange difference on financing activities (34,902) (18,838)

Net cash from/(used in) financing activities 19,181 (543,079)

Net increase/(decrease) in cash and cash equivalents 467,068 (228,812) Cash and cash equivalents at beginning of the year 1,049,094 1,282,724 Exchange difference on cash and cash equivalents at beginning of the year (2,553) (4,818)

Cash and cash equivalents at end of the year (Note 47) 1,513,609 1,049,094 110

Consolidated Statement of Cash Flows for the year ended 31 December 2009 (Currency - Singapore dollars)

Summary of effect on acquisition of interest in subsidiaries

In 2009, the fair value of the identifiable assets and liabilities of the subsidiaries acquired (as disclosed in Note 13) and the effect thereof as at the dates of acquisitions were as follows:

Carrying Recognised on amount before acquisition combination $’000 $’000

Property, plant and equipment 30,550 23,283 Associated company 180 180 Intangible assets 5,244 – Deferred tax assets 251 – Stocks and work-in-progress 18,749 18,749 Trade and other debtors 48,162 48,254 Cash and cash equivalents 15,235 15,235 Other non-current assets 18 18 118,389 105,719

Creditors and accruals (40,258) (40,214) Advance payments from customers (3,155) (3,155) Provision for warranty (226) (226) Provision for taxation (1,041) (1,041) Bank loans (20,532) (20,532) Deferred tax liabilities (1,849) (147) Deferred income (1,510) (1,510) (68,571) (66,825)

Net identifiable assets 49,818 38,894

Goodwill arising on consolidation 14,844 64,662 Minority interests (9,756) Total purchase consideration 54,906

Cost of acquisitions: Cash to be paid in subsequent year 35 Reclassification from investment in an associated company 713 Cash paid in current year 54,158 54,906

Cash outflow on acquisitions: Cost of acquisitions (54,158) Net cash acquired with the subsidiaries 15,235

Net cash outflow on acquisition (38,923) Singapore Technologies Engineering Ltd Think Ahead. 111 Annual Report 2009 Consolidated Statement of Cash Flows for the year ended 31 December 2009 (Currency - Singapore dollars)

Summary of effect on acquisition of interest in subsidiaries (continued)

Included in the carrying amount before combination are the assets and liabilities of Precision Products Singapore Pte Ltd, Parallel Limited, VT iDirect Canada, Inc. (formerly known as Ximaera Technologies Canada Inc.), Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd. The purchase price allocation of Precision Products Singapore Pte Ltd, Parallel Limited and VT iDirect Canada, Inc. to goodwill, intangible assets (excluding goodwill) and other assets and liabilities is currently being assessed and is expected to be finalised within 12 months from the date of acquisition (as disclosed in Note 13).

From the dates of acquisitions, the acquired subsidiaries have contributed $2.8 million in profits to the net profit after tax and minority interests of the Group.

If the acquisition had taken place at the beginning of the year, the turnover and net profit after tax and minority interests of the Group would have been $5.6 billion and $445.2 million respectively.

The accompanying notes are an integral part of the financial statements. 112

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1. general

The Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principal place of business is 51 Cuppage Road #09-08, StarHub Centre, Singapore 229469.

The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated in Singapore.

The principal activities of the Company, are those of an investment holding company and the provision of engineering and related services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements.

The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Technologies Engineering Ltd and its subsidiaries as at 31 December 2009 and for the year then ended were authorised and approved by the Board of Directors for issuance on 18 February 2010.

2. summary of significant accounting policies

(a) Basis of financial statements preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below.

The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

The accounting policies have been consistently applied by the Company and the Group and except for changes in accounting policies discussed in Note 2(y), are consistent with those used in the previous year.

(b) Basis of consolidation

(i) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of the directors.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses. Singapore Technologies Engineering Ltd Think Ahead. 113 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(b) Basis of consolidation (continued)

(ii) The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end of the financial year. The financial statements of the subsidiaries used in the presentation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances. The results of subsidiaries acquired or disposed of during the financial year are included from the effective date of acquisition or up to the effective date of disposal. All significant inter-company balances and transactions are eliminated on consolidation.

In the consolidated financial statements, subsidiaries are accounted for using the purchase method, except for the Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred to as the “Scheme Companies”) which resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter 50 in 1997.

As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has been adopted in the preparation of the consolidated financial statements in connection with the amalgamation.

Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded at their existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired is recorded as merger reserve. The merger reserve had been utilised in prior years to partially write off the goodwill on acquisition of Founders Industries Pte Ltd and its subsidiaries.

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in the consolidated income statement. Transactions with minority interests are accounted for using the parent entity extension method, whereby, on acquisition of minority interests, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in the income statement.

(iii) The Group adopts the equity method to account for its interests in associated companies and joint ventures.

The Group’s share of the post-acquisition results of associated companies and joint ventures is included in the consolidated income statement. The Group’s share of the post-acquisition accumulated profits and reserves of associated companies and joint ventures is included in the carrying value of the investments in the consolidated balance sheet.

For this purpose, the audited financial statements of the associated companies and joint ventures are used. Where audited financial statements are not available, the share of results is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting period.

(iv) Goodwill or reserve on consolidation represents the excess or deficiency of the purchase consideration over the fair value (assigned by the directors) of the underlying net assets of the subsidiaries, associated companies and joint ventures at the date of acquisition. The accounting policy for goodwill is set out in Note 2(q).

Any excess of the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in the income statement on the date of acquisition. 114

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(b) Basis of consolidation (continued)

(v) In the preparation of the consolidated financial statements, the balance sheets of foreign subsidiaries, associated companies and joint ventures are translated into Singapore dollars at rates of exchange ruling at the balance sheet date except for share capital and reserves, which are translated at historical rates of exchange. Operating results are translated at average rates of exchange for the year. Translation differences are taken to other comprehensive income.

Goodwill and fair value adjustments arising from the acquisition of a foreign subsidiary are treated as assets or liabilities and translated at exchange rates ruling at the balance sheet date.

The Group’s investment in its associated companies and joint ventures is accounted for under the equity method of accounting.

An associated company is a company not being a subsidiary or joint venture, in which the Group has a substantial interest of not less than 20% of the equity and in whose financial and operating policy decisions the Group exercises significant influence.

A joint venture is a company, not being a subsidiary or associated company, in which the Group has a long-term interest of not more than 50% of the equity and has joint control over the investee company’s financial and operating policies.

Under the equity method, the investment in the associated company/joint venture is carried in the balance sheet at cost plus post- acquisition changes in the Group’s share of net assets of the associated company/joint venture. Goodwill relating to an associated company is included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associated company/ joint venture. The income statement reflects the share of the results of operations of the associated company/joint venture. Where there has been a change recognised directly in the equity of the associated company/joint venture, the Group recognises its share of any changes and discloses this, where applicable, in the statement of changes in equity.

The reporting dates of the associated company/joint venture and the Group are identical and the accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

(d) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset. Singapore Technologies Engineering Ltd Think Ahead. 115 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(d) Impairment of non-financial assets (continued)

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charged is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

The Group does not reverse in a subsequent period any impairment loss recognised for goodwill.

(e) Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

(i) Financial assets at fair value through profit or loss

Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in the income statement.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Trade and other debtors are classified as loans and receivables under FRS 39. An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect the debt. Known bad debts are written off. Further details on the accounting policy for impairment of financial assets are stated in Note 2(j).

(iii) Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the held-to-maturity investments are derecognised or impaired, and through the amortisation process. 116

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(e) Financial assets (continued)

(iv) Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value with gains or losses being recognised in other comprehensive income until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the income statement. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to income statement as a reclassification adjustment when the financial asset is derecognised.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis and option pricing models.

For investments where there is no active market and where fair value cannot be reliably measured, they are measured at cost.

(f) Property, plant and equipment and depreciation

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Subsequent to recognition, property, plant and equipment are stated at cost or valuation, net of depreciation and any impairment loss. Depreciation is provided on the straight-line basis so as to write off the cost of these assets over their estimated useful lives as follows:

Buildings - 15 to 30 years Leasehold land - Over the period of the lease of between 5 to 60 years Improvements to premises - 3 to 30 years Wharves and slipways - 10 to 16 years Syncrolift and floating docks - 5 to 10 years Boats and barges - 5 years Plant and machinery - 2 to 20 years Production tools and equipment - 3 to 10 years Furniture, fittings, office equipment and computers - 2 to 5 years Transportation equipment and vehicles - 5 years Aircraft and aircraft engines - 5 to 20 years

Freehold land has unlimited useful life and therefore is not depreciated.

Construction-in-progress is not depreciated until each stage of development is completed and becomes operational.

Assets purchased specifically for projects are depreciated over the useful life of the class of assets or the duration of the project, whichever is shorter.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Singapore Technologies Engineering Ltd Think Ahead. 117 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(f) Property, plant and equipment and depreciation (continued)

The residual value, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

(g) Investment properties

Investment properties are stated at cost, net of depreciation and any impairment loss. Depreciation is provided on the straight-line basis so as to write-off the cost of the investment properties over their estimated useful lives of 15 - 50 years.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the carrying value at the date of change in use. For a transfer from owner occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 2(f) up to the date of change in use.

(h) Stocks and work-in-progress

Stocks are stated at the lower of cost (principally on the first-in, first-out basis) and net realisable value. Allowance is made for deteriorated, damaged, obsolete and slow-moving stocks.

Work-in-progress is valued at cost less progress payments received and receivable. Cost includes all direct material and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses. Provision for foreseeable losses on uncompleted contracts is made in the year in which such losses are determined.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(i) Cash and cash equivalents

Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalents are short-term, highly liquid investments and short-term loans to related corporations that are readily convertible to known amounts of cash and that are subject to insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management. 118

Notes to the Financial Statements 1 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(j) Impairment of financial assets

The Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

(i) Assets carried at amortised costs

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss shall be recognised in the income statement.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the assets is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Assets carried at costs

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The loss recognised is not reversed in future periods.

(iii) Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, andthe disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Reversals in respect of equity instruments classified as available-for-sale are not recognised in the income statement. Reversals of impairment losses on debt instruments are reversed through the income statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement. Singapore Technologies Engineering Ltd Think Ahead. 119 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(k) Financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, except for derivatives, which are measured at fair value.

Trade and other creditors are financial liabilities initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings are financial liabilities initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Borrowing costs are recognised as expenses using the effective interest method except for those that are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

(l) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(i) Warranties

The warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date. The provision is based on past experience and industry averages for defective products. The majority of the costs is expected to be incurred over the applicable warranty periods.

(ii) Liquidated damages

Provision for liquidated damages is made in respect of anticipated claims from customers on contracts of which deadlines are overdue or not expected to be completed on time in accordance with contractual obligations. The utilisation of provisions is dependent on the timing of claims. 120

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(m) Income taxes

(i) Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current taxes are recognised in the income statement except to the extent that the tax relates to items recognised outside the income statement, either in other comprehensive income or directly in equity.

(ii) Deferred tax

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, associated companies and interests in joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.

At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised.

Deferred income tax relating to items recognised outside profit or loss is recognised outside the income statement. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. Singapore Technologies Engineering Ltd Think Ahead. 121 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(n) Employee benefits

(i) Employee equity compensation benefits

• Share Option Plan

Pursuant to the ST Engineering Share Option Plan, certain directors and employees are granted non-transferable options to purchase the Company’s shares. The fair value of options granted is determined using a binomial model and is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. In valuing the share option, no account is taken of any performance condition, other than market conditions, if any. The cumulative expense recognised for share options at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of share options that will ultimately vest. The charge or credit to the income statement for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

The proceeds received are credited to share capital when the options are exercised.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

• Performance Share Plan

Pursuant to the ST Engineering Performance Share Plan, the Company’s shares can be awarded to certain employees and directors of the Group. The details of the Performance Share Plan are described in Note 41.

The performance shares cost is amortised and recognised in the income statement on a straight-line basis over the three-year performance period. The fair value of the performance shares is determined at conditional grant date using the Monte Carlo simulation model, which takes into account the market conditions and non-market conditions.

• Restricted Stock Plan

Pursuant to the ST Engineering Restricted Stock Plan, the Company’s shares can be awarded to certain employees and directors of the Group. The details of the Restricted Stock Plan are described in Note 41.

The restricted shares cost is amortised and recognised in the income statement over the vesting period. The fair value of the restricted shares is determined on conditional grant date using the Monte Carlo simulation model.

(ii) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed. 122

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(o) Income recognition

Income is recognised to the extent that it is probable that the economic benefits will flow to the Group and the income can be reliably measured. Income is measured at the fair value of consideration received or receivable.

Income is recognised using the following methods:

(i) Income from sale of goods and services rendered is recognised upon delivery of goods/services and acceptance by customers.

(ii) Income from long-term contracts is recognised by reference to stage of completion, which is measured by either:

(a) the percentage of costs incurred to estimated total costs to complete the contracts; or (b) when goods and services, representing part of a contract, are delivered; or (c) upon completion of designated phases of a contract.

Provision for foreseeable losses on uncompleted contracts is made as soon as such losses are determinable.

(iii) Dividend income is recognised when the shareholder’s rights to receive payment is established.

(iv) Management fee income is recognised on an accrual basis upon which management services are rendered.

(v) For certain subsidiaries, the first 15% of the total commission receivable for each contract is treated as downpayment and is deferred and taken up in the income statement only upon the discharge of specified contractual obligations. Commission income in respect of each contract in excess of the first 15% of the total amount receivable is taken up in the income statement as and when it is billed. For certain back to back contracts, commission income is recognised upon delivery of goods and services.

(vi) Interest income, including income arising from finance leases and other financial instruments, is recognised on an accrual basis using the effective interest method.

(vii) Rental income arising from investment properties is accounted for on a straight-line basis over the lease terms.

(p) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiary companies, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity and recognised in the consolidated income statement on disposal of the subsidiary. In the Company’s separate financial statements, such exchange differences are recognised in the income statement. Singapore Technologies Engineering Ltd Think Ahead. 123 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(p) Foreign currency (continued)

(i) Foreign currency transactions (continued)

Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are also taken directly to other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in the other comprehensive income.

(ii) Foreign currency translation

The results and financial position of foreign subsidiary companies are translated into Singapore dollars using the following procedures:

• Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; and

• Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.

All resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of foreign subsidiaries on or after 1 January 2005 are treated as assets and liabilities of the foreign subsidiaries and are recorded in the functional currency of the foreign subsidiaries and translated at the closing rate at the balance sheet date.

On disposal of a foreign subsidiary, the cumulative amount of exchange differences deferred in equity relating to that foreign subsidiary is recognised in the income statement as a component of the gain or loss on disposal.

(q) Intangible assets

(i) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• is not larger than a segment based on the Group’s reporting format determined in accordance with FRS 108 Operating Segments. 124

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(q) Intangible assets (continued)

(i) Goodwill (continued)

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. Impairment losses recognised in respect of cash-generating unit (group of cash-generating units) are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating unit (group of cash-generating units) and then, to reduce the carrying amount of the other assets in the cash-generating unit (group of cash- generating units) on a pro-rata basis.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.

(ii) Other intangible assets

Intangible assets acquired separately are measured on initial recognition at costs. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are not capitalised and the expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the economic useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible asset with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

• Research and development expenditure

Research expenditure is charged to the income statement as and when incurred. Deferred development costs arising from development expenditure on an individual project are recognised when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Deferred development costs have a finite useful life and are amortised over the period of expected sales from the related project (5 years) on a straight-line basis. Singapore Technologies Engineering Ltd Think Ahead. 125 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(q) Intangible assets (continued)

(ii) Other intangible assets (continued)

• Film cost inventory

Film production costs are capitalised as film cost inventory. The film cost inventory is amortised using the individual- film-forecast computation method which amortises the film costs in the same ratio that current gross revenue bear to anticipated total gross income for the film. However, should this result in a book value for a film which exceed the estimated net realisable value, then a corresponding reduction to its estimated net realisable value is to be made on a film-by-film basis. Amortisation is to commence when each film begins to earn revenue.

• Commercial and intellectual property rights

Costs relating to intellectual property rights, which are acquired are capitalised and amortised on a straight-line basis over its estimated economic useful lives of 2 - 16 years.

• Brands

Costs relating to brands, which are acquired are capitalised and amortised on a straight-line basis over their estimated economic useful lives of 20 - 70 years.

• Dealer network

Costs relating to dealer network, which are acquired are capitalised and amortised on a straight-line basis over their estimated economic useful life of 7 years.

(r) Hire purchase

Assets acquired on hire purchase arrangements are capitalised in the financial statements and the corresponding obligations treated as a liability. The total interest, being the difference between the total instalments payable and the capitalised amount, is charged to the income statement over the period of such hire purchase arrangements in equal monthly instalments to produce a constant rate of charge on the balance of capital repayments outstanding. Assets acquired on hire purchase arrangements are depreciated in accordance with the policy set out in Note 2(f) above.

(s) Finance leases

(i) As lessee

Finance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the lease items. Assets financed under such leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Assets acquired on finance lease arrangements are depreciated in accordance with the policy set out in Note 2(f) above. 126

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(s) Finance leases (continued)

(ii) As lessor

Leases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, are classified as finance lease.

The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs for negotiating and arranging the lease) is recognised on the balance sheet. The difference between the gross receivables and the present value of the lease receivables is recognised as unearned finance income.

Each lease payment received is applied against the gross investment in the finance lease receivables to reduce both the principal and the unearned finance income. The finance income is recognised in the income statement on a basis that reflects a constant periodic rate of return on the net investment in the finance lease receivables.

Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance lease receivables and recognised as an expense in the income statement over the lease term on the same basis as the leased income.

(t) Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight- line basis.

(u) Government grants

Grants in recognition of specific expenses are taken to income in the same year as the relevant expenses. Grants related to depreciable assets are deferred and allocated to income over the period in which such assets are depreciated and used in the projects subsidised by the grants.

(v) Derivative financial instruments and hedging

The Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to the income statement for the year.

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivatives are not closely related, a separate instrument with the same terms as the embedded derivatives would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss. Singapore Technologies Engineering Ltd Think Ahead. 127 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(v) Derivative financial instruments and hedging (continued)

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap and cross currency swap contracts is determined by reference to market values for similar instruments.

The Group uses cash from time to time as a hedging instrument to hedge its risk associated with foreign currency fluctuations.

For the purpose of hedge accounting, hedges are classified either as fair value hedge or cash flow hedge.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedge item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:

(i) Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged, the hedging instrument is remeasured at fair value and gains and losses from both are taken to the income statement.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through profit or loss over the remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used is amortised in the income statement.

Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in the income statement. The changes in the fair value of the hedging instrument are also recognised in the income statement.

The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used is amortised in the income statement. Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. 128

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(v) Derivative financial instruments and hedging (continued)

(ii) Cash flow hedges

For cash flow hedges the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects the income statement, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken to the income statement.

(iii) Hedge of net investment in foreign operations

The Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investment hedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translation differences on the financial liabilities relating to the effective portion of the hedge are recognised in the currency translation reserve in the consolidated financial statements and transferred to the income statement as part of the gain or loss on disposal of the foreign operations. The currency translation differences relating to the ineffective portion of the hedge are recognised immediately in the income statement.

(w) Segments

For management purposes, the Group is organised on a worldwide basis into four major operating segments. The Management of the Company reviewed the segments’ operating results regularly in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these operating segments are shown in Note 49, including the factors used to identify the reportable segments and the measurement basis of segment information.

(x) Derecognition of financial assets and liabilities

(i) Financial assets

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• The contractual rights to receive cash flows from the asset have expired;

• The Group retains the contractual rights to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. Singapore Technologies Engineering Ltd Think Ahead. 129 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(x) Derecognition of financial assets and liabilities (continued)

(i) Financial assets (continued)

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised in other comprehensive income is recognised in the income statement.

(ii) Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

(y) Changes in accounting policies

(i) Adoption of new and revised FRS

With effect from 1 January 2009, the Group has adopted all the new and revised FRS and INT FRS that are mandatory for financial years beginning on or after 1 January 2009. The adoption of these FRS and INT FRS has no significant impact to the Group, except for FRS 1, FRS 107 and FRS 108 as indicated below:

FRS 1 Presentation of Financial Statements – Revised presentation

The revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented in the statement of other comprehensive income. In addition, the Standard introduces the statement of comprehensive income which presents income and expense recognised in the period. This statement may be presented in one single statement, or two linked statements. The Group is presenting the statement of comprehensive income in two statements. 130

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(y) Changes in accounting policies (continued)

(i) Adoption of new and revised FRS (continued)

Amendments to FRS 107 Financial Instruments: Disclosures

The amendments to FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, reconciliation between the beginning and ending balance for Level 3 fair value measurements is now required, as well as significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures. The fair value measurement disclosures and liquidity risk disclosures are presented in Note 50 and Note 51 to the financial statements respectively.

FRS 108 Operating Segments

FRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determine primary and secondary reporting segments of the Group. The Group determined that the reportable operating segments are the same as the business segments previously identified under FRS 14 Segment Reporting. Additional disclosures about each of the segments are shown in Note 49, including the revised comparative information.

(ii) Future changes in accounting policies

The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:

Effective for annual periods beginning on or after

FRS 27 : Consolidated and Separate Financial Statements – Amendments Relating to 1 July 2009 Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate FRS 39 : Financial Instruments: Recognition and Measurement – Amendments 1 July 2009 Relating to Eligible Hedged Items FRS 101 : First-Time Adoption of Financial Reporting Standards – Amendments 1 January 2010 Relating to Additional Exemptions for First-time Adopters FRS 102 : Share-based Payment – Amendments Relating to Group Cash-settled 1 January 2010 Share-based Payment Transactions FRS 103 : Business Combinations 1 July 2009 FRS 105 : Non-current Assets Held for Sale and Discontinued Operations 1 July 2009 INT FRS 117 : Distributions of Non-cash Assets to Owners 1 July 2009 Singapore Technologies Engineering Ltd Think Ahead. 131 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(y) Changes in accounting policies (continued)

(ii) Future changes in accounting policies (continued)

Effective for annual periods beginning on or after

Improvements to FRSs issued in 2009 FRS 38 : Intangible Assets 1 July 2009 FRS 102 : Share-based Payment 1 July 2009 FRS 108 : Operating Segments 1 July 2009 INT FRS 109 : Reassessment of Embedded Derivatives 1 July 2009 INT FRS 116 : Hedges of a Net Investment in a Foreign Operation 1 July 2009 FRS 1 : Presentation of Financial Statements 1 January 2010 FRS 7 : Statement of Cash Flows 1 January 2010 FRS 17 : Leases 1 January 2010 FRS 36 : Impairment of Assets 1 January 2010 FRS 39 : Financial Instruments: Recognition and Measurement 1 January 2010 FRS 105 : Non-current Assets Held for Sale and Discontinued Operations 1 January 2010 FRS 108 : Operating Segments 1 January 2010

The Group expects that the adoption of the above pronouncements will not have a significant impact on the financial statements in the period of initial application, except for FRS 103 and FRS 27 as indicated below.

FRS 103 Business Combinations and Amendments to FRS 27 Consolidated and Separate Financial Statements

The revised FRS 103 introduces a number of changes in the accounting for business combinations occurring after 1 July 2009. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The Amendments to FRS 27 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. Other consequential amendments were made to FRS 7 Statement of Cash Flows, FRS 12 Income Taxes, FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interests in Joint Ventures. The changes from revised FRS 103 and Amendments to FRS 27 will affect future acquisitions or loss of control and transactions with minority interest. The standards may be early applied. However, the Group does not intend to early adopt.

(z) Significant accounting estimates and judgements

Estimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. 132

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(z) Significant accounting estimates and judgements (continued)

(i) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

• Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

When value-in-use calculations are undertaken, Management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the key assumptions applied in the impairment assessment of goodwill and other intangible assets, are given in Note 16 to the financial statements.

• Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 51 to the financial statements.

• Depreciation charge

Property, plant and equipment and investment properties are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment and investment properties to be within 2 to 60 years. The carrying amount of the Group’s property, plant and equipment and investment properties at 31 December 2009 was $1,168,686,000 (2008: $1,036,455,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these property, plant and equipment and investment properties, therefore future depreciation charges could be revised. Singapore Technologies Engineering Ltd Think Ahead. 133 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(z) Significant accounting estimates and judgements (continued)

(ii) Critical judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, Management has made certain judgements, apart from those involving estimations, which have significant effect on the amounts recognised in the financial statements.

• Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s deferred tax assets was $127,196,000 (2008: $138,128,000), tax payables was $178,734,000 (2008: $177,647,000) and deferred tax liabilities was $58,297,000 (2008: $62,602,000) at 31 December 2009.

3. turnover

Turnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:

Group 2009 2008 $’000 $’000

Sale of goods 2,966,111 2,907,967 Service income 2,581,676 2,436,548

5,547,787 5,344,515 134

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

4. other operating income, net

Group Note 2009 2008 $’000 $’000

Commission income 371 746 Dividend income - quoted equity investments 118 99 - unquoted equity investments 63 123 Interest income - related corporations 1,823 10,731 - bank deposits 5,731 9,097 - staff loans 12 12 - finance lease 625 456 - bonds 3,202 160 - others 1,295 695 Impairment in value of investments - quoted investments 15 (313) (25,580) - unquoted investments 15 (747) (363) Gain/(loss) on disposal of - subsidiary companies (83) – - associated companies – 803 - investments 690 650 Profit on maturity of amounts under fund management – 19,586 Gain/(loss) on fair value changes of held for trading investments 421 (9) Fair value changes of financial instruments - gain/(loss) on forward currency contract designated as hedging instrument in fair value hedges 996 (3,308) - ineffective portion of forward currency contract designated as hedging instrument in cash flow hedges (15) (69) Fair value of hedged items (590) 1,971 Others 7,814 11,173

21,413 26,973 Singapore Technologies Engineering Ltd Think Ahead. 135 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

5. profit from operations

Profit from operations is arrived at:

Group Note 2009 2008 $’000 $’000

After charging

Auditors’ remuneration - auditors of the Company 1,782 1,891 - other auditors 2,979 3,479 Non-audit fees - auditors of the Company 484 537 - other auditors 1,190 1,528 Fees and remuneration of directors 3,810 5,042 Fees paid to a firm of which a director is a member 269 109 Personnel expenses 6 1,470,638 1,430,643 Depreciation charge 12, 17 150,985 148,590 Allowance for - Stock obsolescence 48,726 22,515 - Doubtful debts (trade) 22 28,084 28,775 - Unbilled receivables (trade) 22 1,854 – - Loan receivables 18 – 435 - Doubtful lease receivables 19 1,138 877 Provision/(write-back of provision) for - Foreseeable losses 4,966 4,867 - Liquidated damages 30 2,901 (5,257) - Warranties 30 34,903 5,164 Property, plant and equipment written off 10,948 12,117 Research, design and development expenses incurred 82,238 75,204 Operating lease expenses 36,464 28,491 Amortisation of other intangible assets 16 11,773 10,203 Write-back of impairment of property, plant and equipment 12 (42) (102) Impairment in value of other intangible assets 16 397 2

And crediting

Grants and subsidies received 2,494 2,122 Deferred income recognised 34 2,259 3,784 136

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

6. personnel expenses

Group 2009 2008 $’000 $’000

Wages and salaries * 1,219,616 1,187,800 Pension contributions 86,600 79,075 Share-based payments 17,702 19,357 Other personnel expenses 146,720 144,411

1,470,638 1,430,643

* Includes directors’ remuneration of $1,667,176 (2008: $3,841,576).

7. Key management personnel compensation

Group 2009 2008 $’000 $’000

Short-term employee benefits 34,382 41,650 Pension contributions 432 464 Other long-term benefits 5 7 Share-based payments 4,138 7,007

38,957 49,128

8. other income, net

Group 2009 2008 $’000 $’000

Gain on disposal of property, plant and equipment and investment property 1,702 4,364 Grant income from Jobs Credit Scheme 39,118 – Proceeds received/receivable from insurers (Hurricane Katrina) – 144 Exchange loss, net (3,495) (10,841) Rental income 5,774 5,269 Long-term loan from a minority shareholder forgiven – 194 Others 12,875 9,329

55,974 8,459

During the financial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit scheme (“Scheme”). Under this Scheme, the Group received a 12% cash grant on the first $2,500 of each month’s wages for each employee on their Central Provident Fund payroll. The Group received its grant income of $39,118,000 (2008: $nil) in four receipts in March, June, September and December 2009. Singapore Technologies Engineering Ltd Think Ahead. 137 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

9. financial expenses

Group 2009 2008 $’000 $’000

Interest expenses: Bank loans and overdrafts 39,653 41,606 Bonds 15,586 – Finance lease 375 506 Others 506 575

56,120 42,687

10. tAxation

Group 2009 2008 $’000 $’000

Current income tax Current year 107,490 119,773 Overprovision in respect of prior years (17,112) (37,396) Associated companies and joint ventures (307) 4,441 90,071 86,818 Deferred income tax Current year (7,271) (17,395) Underprovision/(overprovision) in respect of prior years 4,951 (17,484) Effect of reduction in tax rate 2,411 –

90,162 51,939

Deferred income tax related to items charged or credited directly to other comprehensive income:

Net change in fair value of available-for-sale financial assets 243 (1,096) Net change in fair value of derivative financial instruments designated in cash flow hedges 160 (3,947) Effect of reduction in tax rate (152) –

251 (5,043) 138

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

10. tAxation (continued)

The Group

Unrecognised tax losses

As at 31 December 2009, subsidiaries of the Group have potential tax benefits of approximately $20,885,000 (2008: $15,271,000) arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. These tax benefits have not been recognised in the financial statements due to the uncertainty of its recoverability. The use of these potential tax benefits is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate.

Unrecognised temporary differences relating to investments in subsidiaries

At the balance sheet date, no deferred tax liability (2008: $nil) has been recognised for taxes that would be payable on the undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that the undistributed profits of some of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organic growth and acquisitions.

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended 31 December is as follows:

Group 2009 2008 $’000 $’000

Profit from operations before taxation 546,559 540,702

Taxation at statutory tax rate of 17% (2008: 18%) 92,915 97,326 Adjustments: Income not subject to tax (8,751) (1,344) Expenses not deductible for tax purposes 10,749 12,540 Higher effective tax rates of other countries 4,003 1,368 Overprovision in prior years, net (12,161) (54,880) Effect of change in tax rates 2,411 – Lower effective tax rates of associated companies (6,064) (1,316) Deferred tax assets not recognised 10,368 1,746 Deferred tax assets previously not recognised now recognised (997) (814) Others (2,311) (2,687)

Current financial year’s taxation charge 90,162 51,939

The corporate income tax rate applicable to Singapore companies of the Group was reduced to 17% for the year of assessment 2010 onwards from 18% for year of assessment 2009. Singapore Technologies Engineering Ltd Think Ahead. 139 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

11. eArnings per share

Basic earnings per share

The calculation for basic earnings per share is based on:

Group 2009 2008 $’000 $’000

Consolidated profit after taxation and minority interests 443,930 473,636

The weighted average number of ordinary shares is arrived at as follows:

Group 2009 2008

Number of shares (’000)

Issued ordinary shares at beginning of the year 2,998,603 2,983,550 Weighted average number of ordinary shares issued during the year 5,466 11,049

Weighted average number of ordinary shares 3,004,069 2,994,599

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOS/ESOP and their exercise prices are set out in Note 41. The average fair value of one ordinary share during the financial year ended 31 December 2009 was $2.63 (2008: $2.89) per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows:

Group 2009 2008

Number of shares (’000)

Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,004,069 2,994,599 Weighted average number of unissued shares under option 54,150 73,190 Number of shares that would have been issued at fair value (46,168) (59,130)

Weighted average number of ordinary shares (diluted) 3,012,051 3,008,659

63,870,596 (2008: 55,495,102) of share options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented. 140

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment

Valuation/Cost Arising from acquisition As at of interest in Reclassi- Translation As at 1.1.2008 Additions Disposals subsidiaries fications difference 31.12.2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

At Valuation Leasehold land and buildings 1,919 – – – – – 1,919 Wharves and slipways 1,490 – – – – – 1,490 Syncrolift and floating docks 4,603 – – – – – 4,603 Plant and machinery 1,694 – – – – – 1,694 Furniture, fittings, office equipment and computers 279 – – – – – 279

At Cost Freehold land and buildings 59,843 394 (615) – 35 (322) 59,335 Leasehold land and buildings 509,181 10,138 (111) – 31,542 1,288 552,038 Improvements to premises 45,482 9,168 (1,048) – (252) (545) 52,805 Wharves and slipways 27,368 919 – – 4,222 (13) 32,496 Syncrolift and floating docks 68,782 394 (240) – – – 68,936 Boats and barges 5,167 – – – – (10) 5,157 Plant and machinery 952,161 95,065 (51,134) – 2,206 (24,305) 973,993 Production tools and equipment 194,753 20,954 (1,810) – 81 (976) 213,002 Furniture, fittings, office equipment and computers 157,223 21,808 (10,661) 31 119 (586) 167,934 Transportation equipment and vehicles 14,582 1,390 (1,120) – – 45 14,897 Aircraft and aircraft engines 78,051 2,013 (8,111) – – – 71,953 Construction-in-progress 25,412 29,048 (148) – (37,953) (34) 16,325

2,147,990 191,291 (74,998) 31 – (25,458) 2,238,856 Singapore Technologies Engineering Ltd Think Ahead. 141 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

Valuation/Cost Arising from Transfer acquisition from As at of interest in Reclassi- investment Translation As at 1.1.2009 Additions Disposals subsidiaries fications properties difference 31.12.2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 (Note 17)

The Group

At Valuation Leasehold land and buildings 1,919 – – – – – – 1,919 Wharves and slipways 1,490 – – – – – – 1,490 Syncrolift and floating docks 4,603 – – – – – – 4,603 Plant and machinery 1,694 – – – – – – 1,694 Furniture, fittings, office equipment and computers 279 – – – – – – 279

At Cost Freehold land and buildings 59,335 484 – – – – (1,397) 58,422 Leasehold land and buildings 552,038 34,211 (2,677) 24,856 2,085 28,217 (3,732) 634,998 Improvements to premises 52,805 2,674 (420) 94 (218) – (691) 54,244 Wharves and slipways 32,496 382 – – – – (160) 32,718 Syncrolift and floating docks 68,936 – – – – – – 68,936 Boats and barges 5,157 – – – – – (44) 5,113 Plant and machinery 973,993 85,932 (41,266) 3,375 2,067 – (5,987) 1,018,114 Production tools and equipment 213,002 19,803 (1,641) 599 142 – (890) 231,015 Furniture, fittings, office equipment and computers 167,934 23,995 (14,866) 188 25 – (756) 176,520 Transportation equipment and vehicles 14,897 2,251 (548) 1,198 – – (144) 17,654 Aircraft and aircraft engines 71,953 38,254 – – – – – 110,207 Construction-in-progress 16,325 68,539 (17) 240 (4,101) – (67) 80,919

2,238,856 276,525 (61,435) 30,550 – 28,217 (13,868) 2,498,845

 Additions during the year included property, plant and equipment of $7,780,000 contributed by minority shareholders as part of capital injection. 142

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

Accumulated depreciation Depreciation Write- As at charge back of Reclassi- Translation As at 1.1.2008 for the year impairment Disposals fications difference 31.12.2008 $’000 $’000 $’000 $’000 $’000 $’000 $’000 (Note 5) (Note 5)

The Group

At Cost Freehold land and buildings 18,555 1,129 – (545) – (77) 19,062 Leasehold land and buildings 283,040 19,964 – (12) 16 30 303,038 Improvements to premises 23,044 6,192 – (1,036) (16) (197) 27,987 Wharves and slipways 18,340 2,020 – – – 6 20,366 Syncrolift and floating docks 68,242 512 – (240) – – 68,514 Boats and barges 4,790 37 – – – (8) 4,819 Plant and machinery 376,956 74,880 (102) (35,009) – (3,821) 412,904 Production tools and equipment 152,421 19,703 – (1,545) – (547) 170,032 Furniture, fittings, office equipment and computers 130,573 17,395 – (10,545) – (364) 137,059 Transportation equipment and vehicles 9,517 1,662 – (943) – 21 10,257 Aircraft and aircraft engines 37,904 3,943 – (6,098) – – 35,749

1,133,367 147,437 (102) (55,973) – (4,957) 1,219,772 Singapore Technologies Engineering Ltd Think Ahead. 143 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

Accumulated depreciation Transfer Depreciation Impairment/ from As at charge (write-back of Reclassi- investment Translation As at 1.1.2009 for the year impairment) Disposals fications properties difference 31.12.2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 (Note 5) (Note 5) (Note 17)

The Group

At Cost Freehold land and buildings 19,062 1,157 – – – – (468) 19,751 Leasehold land and buildings 303,038 23,426 – (2,545) – 14,617 (1,013) 337,523 Improvements to premises 27,987 5,568 – (364) 16 – (425) 32,782 Wharves and slipways 20,366 2,136 – – – – (32) 22,470 Syncrolift and floating docks 68,514 47 – – – – – 68,561 Boats and barges 4,819 342 – – – – (48) 5,113 Plant and machinery 412,904 69,806 (84) (27,380) – – (2,466) 452,780 Production tools and equipment 170,032 21,698 – (1,597) – – (806) 189,327 Furniture, fittings, office equipment and computers 137,059 19,872 42 (14,414) (16) (773) 141,770 Transportation equipment and vehicles 10,257 2,178 – (397) – – (68) 11,970 Aircraft and aircraft engines 35,749 4,387 – – – – – 40,136

1,219,772 150,617 (42) (46,697) – 14,617 (6,099) 1,332,168 144

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

Net book value 2009 2008 $’000 $’000

The Group

At Valuation Leasehold land and buildings – – Wharves and slipways – – Syncrolift and floating docks – – Plant and machinery – – Furniture, fittings, office equipment and computers – –

At Cost Freehold land and buildings 38,671 40,273 Leasehold land and buildings * 297,475 249,000 Improvements to premises 21,462 24,818 Wharves and slipways 10,248 12,130 Syncrolift and floating docks 375 422 Boats and barges – 338 Plant and machinery 565,334 561,089 Production tools and equipment 41,688 42,970 Furniture, fittings, office equipment and computers 34,750 30,875 Transportation equipment and vehicles 5,684 4,640 Aircraft and aircraft engines 70,071 36,204 Construction-in-progress 80,919 16,325

1,166,677 1,019,084

* The net book value of leasehold land and buildings amounting to $13,600,000 (2008: $nil) was reclassified from investment properties following the change in a subsidiary’s occupation in the property during the year. Singapore Technologies Engineering Ltd Think Ahead. 145 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

Furniture, fittings, office Transportation equipment equipment and computers and vehicles Total $’000 $’000 $’000

The Company

Cost As at 1.1.2008 1,801 331 2,132 Additions 696 – 696 Disposals (115) – (115) As at 31.12.2008 and 1.1.2009 2,382 331 2,713 Additions 311 – 311 Disposals (204) – (204)

As at 31.12.2009 2,489 331 2,820

Accumulated depreciation As at 1.1.2008 1,272 17 1,289 Depreciation charge for the year 456 66 522 Disposals (114) – (114) As at 31.12.2008 and 1.1.2009 1,614 83 1,697 Depreciation charge for the year 548 66 614 Disposals (202) – (202)

As at 31.12.2009 1,960 149 2,109

Net book value As at 31.12.2009 529 182 711

As at 31.12.2008 768 248 1,016 146

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

The Group

(a) Property, plant and equipment at valuation

Property, plant and equipment, which are shown at valuation are stated at values arrived at by an independent firm of professional valuers on 30 November 1972, on the basis of open market value for existing use. There is no fixed frequency of revaluation. Revaluation will be performed as and when deemed appropriate by the Directors. These property, plant and equipment are fully depreciated as at 31 December 2009 and 2008.

(b) Property, plant and equipment pledged as security

Freehold and leasehold land and buildings with a carrying value of $45,623,000 (2008: $3,952,000) are pledged as security for short-term and long-term loans.

In the prior year, plant and machinery of a subsidiary with a carrying value of $426,914,000 were subject to a floating charge of Euro 210 million to secure two of the subsidiary’s bank loans.

Included in the above are property, plant and equipment acquired under lease obligations with a net book value of:

Group 2009 2008 $’000 $’000

Leasehold land and buildings 1,335 1,813 Transportation equipment and vehicles 364 191

1,699 2,004 Singapore Technologies Engineering Ltd Think Ahead. 147 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

(d) The major properties of the Group comprise:

(i) Freehold land and buildings

Land Net book value Location Description area 2009 2008 (sq. m.) $’000 $’000

USA

47889 South K Street Industrial buildings 88,949 2,487 2,544 Tulare, California

13442 Emerson Road Industrial buildings 68,351 1,317 1,403 Kidron, Ohio

300 Hackney Ave, Industrial buildings 117,358 1,784 1,898 Independence, Kansas

400 Hackney Ave, Industrial buildings 39,942 1,952 2,050 Washington, North Carolina

914 Saegers Station Drive, Industrial buildings 122,659 3,841 3,949 Montgomery, Pennsylvania

7801 Trinity Drive, Shipyard and buildings 839,564 4,434 4,552 Escatawpa, Mississippi

5801 Elder Ferry Road, Shipyard and buildings 227,151 4,142 4,266 Moss Point, Mississippi

900 Bayou Casotte Parkway, Shipyard and buildings 331,803 14,329 14,858 Pascagoula, Mississippi

3800 Richardson Road South, Production facility 8,361 3,378 3,661 Hope Hull, Alabama 148

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

(d) The major properties of the Group comprise (continued)

(ii) Leasehold land, buildings and improvements

Land Net book value Location Description Tenure area 2009 2008 (sq. m.) $’000 $’000

Singapore

501 Airport Road Factory and office building 20 years from 1.6.1993 23,899 3,792 2,315

503 Airport Road Factory and office building 20 years from 1.6.1993 7,175 546 626

505 Airport Road Lots Jet engine test cell 3 years from 17.4.2007 5,317 19,171 20,237 087066, 087M, 0870C and 99703 MK22

540 Airport Road Warehouse and office building 30 years from 15.8.1985 5,850 891 1,045

Hangar and office building 30 years from 1.1.1984 18,918 2,411 2,918

8 Changi North Way Hangar and office building 30 years from 1.1.1992 75,713 29,834 32,320

Hangar and office building 22.5 years from 16.6.1999 14,860 2,884 3,124

Hangar and office building 16.3 years from 20.8.2005 9,764 12,011 13,012

540 Airport Road Hangars and office building 3 years lease from 48,882 24,052 25,598 1.7.2009 *

Seletar West Camp Hangars and office building Yearly * 15,670 17,058 17,476

Hangers and office building 3 years lease from 5,760 11,807 11,904 1.8.2007 *

24 Ang Mo Kio Street 65 Industrial and commercial 30 years from 1.12.1982, 23,970 8,263 9,262 buildings renewable to 2042

100 Jurong East Street 21 Industrial and commercial 30 years from 1.11.1988, 11,232 7,815 8,121 buildings renewable to 2048

70 Ubi Crescent Office building 60 years from 5.7.1997 730 1,229 1,255 Ubi Techpark #01-12

5 Portsdown Road Industrial and commercial 3.5 years from 1.4.2007 to 88,400 511 1,194 buildings 30.9.2010

5 Ubi Close ^ Car show room cum workshop 30 years from 1.8.1994 6,274 12,814 –

33 Tuas Avenue 2 Factory and office building 30 years from 1.4.1996 6,669 2,379 2,527

16 Benoi Crescent Industrial and commercial 30 years from 16.7.1989 6,981 2,574 2,845 buildings Singapore Technologies Engineering Ltd Think Ahead. 149 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

(d) The major properties of the Group comprise (continued)

(ii) Leasehold land, buildings and improvements (continued)

Land Net book value Location Description Tenure area 2009 2008 (sq. m.) $’000 $’000

Singapore

249 Jalan Boon Lay Industrial and commercial 27 years from 1.10.2001 to 148,091 32,714 5,230 buildings 31.12.2028, renewable to 10.10.2065

2D Ayer Rajah Crescent Industrial and commercial 3 years from 1.4.2007 29,404 309 721 buildings to 31.3.2010

16 Tuas Avenue 7 Industrial buildings 30 years from 16.8.1983 12,029 741 926

601 Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,168 1,117

15 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 39,640 2,847 3,234

16 Benoi Road Administrative offices 56 years from 1.6.1969 20,224 3,406 –

7 Benoi Road Buildings, foreshore and 56 years from 1.6.1969 103,802 14,122 15,369 workshops

60 Tuas Road Buildings, foreshore and 30 years from 1.12.1992 125,262 5,205 4,939 workshops

30/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 4,578 4,870

USA

2100 9th Street Hangar and office building 22 years from 1.1.1991 103,825 13,272 16,699 Brookley Complex, Mobile, Alabama

7 9800 John Saunders Road, Hangar and office building 16 /12 years from 1.6.2002 195,663 5,392 6,331 San Antonio, Texas

People’s Republic of China

2008Y03, North of Zhong Leasehold land for factory 50 years from 11.8.2008 38,618 5,436 5,669 Fang Road and East of Wu building Shi Road, Xiamen, Fujian

Guangzhou Airport Logistics Warehouse 1 year lease from 31.10.2009 # 100 32 34 Centre, Guangzhou Baiyun Aiport Logistics, Guangzhou 510890 150

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

12. property, plant and equipment (continued)

(d) The major properties of the Group comprise (continued)

(ii) Leasehold land, buildings and improvements (continued)

Land Net book value Location Description Tenure area 2009 2008 (sq. m.) $’000 $’000

People’s Republic of China

97 Zhong Cao Road Guiyang, Leasehold land, industrial and 50 years from 26.2.2008 242,662 22,190 23,252 Guizhou commercial buildings to 21.2.2058

613 Xin Jiao Dong Road, Industrial and commercial 15 years from 22.4.2005 9,751 1,219 1,358 Hai Zhu District, Guangzhou, buildings to 21.4.2020 Guangdong

No. 555 Kanghua Road, Leasehold land 50 years from 12.6.2003 15,898 854 911 Kangqiao Industrial Zone, to 27.7.2052 Shanghai

6 Kuang Ji Road, Leasehold land, industrial and 40 years from 21.5.2009 76,711 11,482 – Zhenjiang, Jiangsu commercial buildings to 21.3.2049

1 Ding Mao Wei San Road, Leasehold land, industrial and 46 years from 20.4.2006 55,883 10,573 – Zhenjiang, Jiangsu commercial buildings to 20.5.2052

Panama

Bryant Ave, Hangar and office building 20 years from 18.8.2006 36,278 2,258 3,085 Howard Balboa

* This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence on leases which are renewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost of the buildings is depreciated over 30 years.

# This relates to a warehouse constructed by a subsidiary on properties rented from the Authority on leases which are renewable yearly. In view of the relationship between the landlord and the subsidiary, the cost of the warehouse is depreciated over 20 years.

^ This property was reclassed from investment property to property, plant and equipment following the change in a subsidiary’s occupation in the property during the year. Singapore Technologies Engineering Ltd Think Ahead. 151 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries

Company 2009 2008 $’000 $’000

Unquoted shares, at cost: Singapore Technologies Aerospace Ltd 90,114 90,114 Singapore Technologies Electronics Limited 26,982 26,982 Singapore Technologies Kinetics Ltd 61,938 61,938 Singapore Technologies Marine Ltd 56,000 56,000 Vision Technologies Systems, Inc. 297,494 297,494 Singapore Technologies Dynamics Pte Ltd 6,000 6,000 ST Synthesis Pte Ltd 2,156 2,156 FusionTech Pte. Ltd. 1,000 1,000 Kaz-ST Engineering Bastau Limited Liability Partnership 578 578 ST Engineering Financial I Ltd. – * – 542,262 542,262 Impairment in subsidiaries (7,000) (7,000) Carrying amount after impairment in subsidiaries 535,262 535,262 Capital contribution in the form of share options, performance shares and restricted shares issued to employees of subsidiaries 53,215 39,191

588,477 574,453

* Amount less than $1,000 152

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Details of the subsidiaries are as follows:

Effective equity interest held by the Group 2009 2008 % %

(a) Singapore Technologies Aerospace Ltd and its subsidiaries 100 100

ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100 ST PAE Holdings Pty Ltd 100 100 Pacific Flight Services Pte Ltd 100 100 Pacific Flight Services Pty Ltd 100 100 ST Aerospace Training Academy Pte. Ltd. (formerly known as ST Aviation Training Academy Pte. Ltd.) and its subsidiary: 70 66 Aviation Training Academy Australia Pty Ltd and its subsidiary: 70 66 ST Aviation Training Academy (Australia) Pty Ltd 70 66 ST Aerospace Engines Pte Ltd and its subsidiary: 100 100 ST Aerospace Technologies (Xiamen) Company Limited 80 80 ST Aerospace Systems Pte Ltd 100 100 ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100 iShopAero Pte Ltd 100 100 ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd (formerly known as Guangzhou Aerospace Technologies and Engineering Company Limited) 100 100 ST Aerospace International Structures Pte Ltd 100 100 ST Aviation Resources Pte Ltd and its subsidiary: 100 100 ST Aviation Resources 1 Limited 100 100 ST Aerospace Services Co Pte. Ltd. (formerly known as ST Aviation Services Co Pte Ltd) 80 80 Singapore Technologies Engineering (Europe) Ltd 100 100 Singapore Aerospace Kabushiki Kaisha 100 100 Visiontech Investment Pte Ltd 100 100 Visiontech Engineering Pte Ltd 51 51 ST Airport Ground Services Pte Ltd 100 100 Bournemouth Aviation Services Company Limited ** – 81 Singapore British Engineering (Pte) Ltd 51 51 ST Aerospace Solutions (Europe) A/S and its subsidiary: 100 100 Airline Rotables (UK Holdings) Limited and its subsidiary: 100 100 Airline Rotables Limited 100 100 ST Aerospace Panama, Inc. (formerly known as Panama Aerospace Engineering Inc.) 100 100 Precision Products Singapore Pte Ltd 100 – Singapore Technologies Engineering Ltd Think Ahead. 153 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Effective equity interest held by the Group 2009 2008 % %

(b) Singapore Technologies Electronics Limited and its subsidiaries 100 100

SEEL Electronic & Engineering Sdn Bhd 100 100 ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100 INFA Systems Limited 100 100 ST Electronics (Software Services) Limited 100 100 ST Electronics (e-Services) Pte. Ltd. 100 100 PM-B Pte Ltd and its subsidiaries: 70 70 PMB Project Management Business Sdn Bhd 70 70 PT PM-B Indonesia 70 70 PM-B (China) Ltd 70 70 ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Digital Media) Pte. Ltd. 100 100 Antycip Simulation Limited and its subsidiary: 93 93 Antycip Simulation SAS 93 93 ST Education & Training Private Limited and its subsidiaries: 70 70 STET Homeland Security Services Pte. Ltd. (formerly known as STET Maritime Education Pte. Ltd.) 70 70 STET Maritime Pte. Ltd. 70 70 STET Institute Pte. Ltd. (formerly known as STET Centre Pte. Ltd.) 70 – Brightspot Interactive Learning Pte. Ltd. and its subsidiary: 51 51 Brightspot Interactive Learning Inc. 51 51 MERITS Technologies LLP 51 51 ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Info-Security) Pte. Ltd. and its subsidiary: 100 100 DataMark Technologies Pte Ltd 100 61.12 STELCOMMS Pte. Ltd. 51 51 Telematics Wireless Ltd. and its subsidiary: 95.04 93.93 Telematics Wireless USA Corp 95.04 93.93 ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Sichuan) Co., Ltd 100 100 iDirect Asia Pte. Ltd. 100 100 ST Electronics (Shanghai) Co., Ltd and its subsidiary: 100 100 ST Electronics-PCI Co., Ltd 51 51 iTS Technologies Pte Ltd 100 100 ST Electronics (Taiwan) Limited 100 100 Intelect Technologies, Incorporated 78.57 78.57 Ripple Systems Pty Ltd ^ – 100 STELOP Pte. Ltd. 50.05 50.05 TranSys Pte Ltd 100 100 154

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Effective equity interest held by the Group 2009 2008 % %

SDG Kinetics Pte. Ltd. (formerly known as Singapore Ordnance Engineering Pte. Ltd.) 100 100 Mobility Systems Pte Ltd and its subsidiaries: 100 100 Silvatech Global Systems Limited 100 100 Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100 Kinetics Drive Solutions Inc. 100 100 STA Inspection Pte Ltd 100 100 Singapore Commuter Private Limited 100 100 Securedge Pte. Ltd. 100 100 STA Investment Pte Ltd 100 100 ST Kinetics International Pte. Ltd. and its subsidiary: 100 100 VT Specialized Vehicles, S.A. de C.V. 100 100 STA Detroit Diesel-Allison (Singapore) Pte Ltd 100 100 ST Kinetics Integrated Engineering Pte. Ltd. 100 100 Singapore Test Services Private Limited 100 100 ST Kinetics Pte. Ltd. 100 100 Advanced Material Engineering Pte. Ltd. and its subsidiary: 100 100 Advanced Pyrotechnic Materials Private Limited 51 51 Unicorn International Pte Limited 100 100 Allied Ordnance of Singapore (Pte) Limited 100 100 Ordnance Development and Engineering Company of Singapore (1996) Private Limited 100 100 Autonomous Technology Pte Ltd and its subsidiary: 100 100 Guizhou Jonyang Kinetics Co., Ltd. 60 60 Kinetics Systems (Shanghai) Co., Ltd. 100 100 STAR Automotive Center (Zhejiang) Co., Ltd. 100 100 STAR Automotive Center (Guangzhou) Co., Ltd. 100 100 Jiangsu Huatong Kinetics Co., Ltd. 75.3 – Jiangsu Huaran Kinetics Co., Ltd. 75.3 –

(d) Singapore Technologies Marine Ltd and its subsidiary 100 100

STSE Engineering Services Pte Ltd and its subsidiary: 100 100 ST Environmental Services & Technologies Co. Ltd 100 100 Singapore Technologies Engineering Ltd Think Ahead. 155 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Effective equity interest held by the Group 2009 2008 % %

(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100

Singapore Technologies Engineering (USA) Inc. @ – 100 SA Supplies (USA) Inc. @ – 100 VT Systems, Inc. 100 100 Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100 ST Aerospace Mobile, Inc. (formerly known as ST Mobile Aerospace Engineering, Inc.) 100 100 DalFort Aerospace GP, Inc. 100 100 DalFort Aerospace, L.P. 100 100 San Antonio Aerospace GP, LLC 100 100 ST Aerospace San Antonio, L.P. (formerly known as San Antonio Aerospace LP) 100 100 Vision Technologies Electronics, Inc. and its subsidiary: 100 100 VT iDirect, Inc. and its subsidiaries: 100 100 iDirect Hong Kong Limited 100 100 iDirect UK Limited and its subsidiary: 100 100 Parallel Limited 100 – iDirect Italy srl 100 100 iDirect International Corporation and its subsidiary: 100 100 iDirect Singapore Pte. Ltd. α – 100 iDirect Government Technologies, Inc. 100 100 VT iDirect Canada, Inc. (formerly known as Ximaera Technologies Canada Inc.)  100 49 Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100 Miltope Corporation and its subsidiaries: 100 100 Miltope Business Products, Inc. 100 100 IV Phoenix Group, Inc. 95 95 MÄK Technologies, Inc. 90 80 Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100 VT Dimensions, Inc. 100 100 VT LeeBoy, Inc. and its subsidiary: 100 100 Rosco Manufacturing Company @ – 100 VT Specialized Vehicles Corporation 100 100 Vision Technologies Marine, Inc. and its subsidiary: 100 100 VT Halter Marine, Inc. 100 100

(f) Singapore Technologies Dynamics Pte Ltd 100 100

(g) ST Synthesis Pte Ltd 100 100

(h) FusionTech Pte. Ltd. 100 100

(i) Kaz-ST Engineering Bastau Limited Liability Partnership 51 51

(j) ST Engineering Financial I Ltd. 100 – 156

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

** This entity ceased operations in December 2006 and was dissolved in December 2009. ^ This entity had completed its liquidation during the year. @ These entities were dissolved during the year. α During the year, this entity was struck off from the Registrar of the Accounting and Corporate Regulatory Authority.  During the year, following an additional acquisition of equity interest, VT iDirect, Canada, Inc. (formerly known as Ximaera Technologies Canada Inc.) had become a subsidiary of the Group.

Further details of the subsidiaries are as follows:

Country of incorporation/ Name of subsidiary Principal activities place of business

Singapore Technologies Aerospace Ltd Investment holding and provision of engineering, Singapore marketing and engineering support services

ST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft Singapore

ST PAE Holdings Pty Ltd Investment holding Australia

Pacific Flight Services Pte Ltd Providing air transport services Singapore

Pacific Flight Services Pty Ltd Flight training school operation and aircraft management Australia

ST Aerospace Training Academy Pte. Ltd. (formerly Flight training school operation and aircraft management Singapore known as ST Aviation Training Academy Pte. Ltd.)

Aviation Training Academy Australia Pty Ltd Flight training school operation and aircraft management Australia

ST Aviation Training Academy (Australia) Pty Ltd Flight training school operation and aircraft management Australia

ST Aerospace Engines Pte Ltd Repair and overhaul of aircraft engines Singapore

ST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of aircraft engines People’s Republic of China

ST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components Singapore

ST Aerospace Supplies Pte Ltd Trading, Maintenance-By-The-Hour services for Singapore component and repair management and warehousing services for aircraft equipment, parts and components

iShopAero Pte Ltd Trading, e-commerce and information technology related Singapore services for the aerospace industry

ST Aerospace Guangzhou Aero-Technologies & Engineering Import/export for aircraft component leasing, repair, People’s Republic Co Ltd (formerly known as Guangzhou Aerospace exchange and trading, warehousing, packaging, of China Technologies and Engineering Company Limited) distribution and other related services

ST Aerospace International Structures Pte Ltd Designing, developing and manufacturing aircraft, engines, Singapore equipment, accessories, components and such other parts Singapore Technologies Engineering Ltd Think Ahead. 157 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

ST Aviation Resources Pte Ltd Investment holding Singapore

ST Aviation Resources 1 Limited # Investment holding and aircraft leasing business British Virgin Islands

ST Aerospace Services Co Pte. Ltd. (formerly Repair, maintenance, modification and servicing of Singapore known as ST Aviation Services Co Pte Ltd) commercial aircraft

Singapore Technologies Engineering (Europe) Ltd Providing marketing and investment services to the Group United Kingdom

Singapore Aerospace Kabushiki Kaisha # Providing marketing services to the Group Japan

Visiontech Investment Pte Ltd Investment holding and dealing Singapore

Visiontech Engineering Pte Ltd Provision of engineering services for the repair, maintenance Singapore and modification of aircraft, aircraft equipment and components

ST Airport Ground Services Pte Ltd * Dormant Singapore

Singapore British Engineering (Pte) Ltd Marketing and sale of a range of defence products and Singapore associated equipment and participating in the development of new products and systems

ST Aerospace Solutions (Europe) A/S Supply aircraft components, including purchase, maintenance Denmark and logistics services

Airline Rotables (UK Holdings) Limited Investment holding United Kingdom

Airline Rotables Limited Providing component management and support services United Kingdom for aircraft

ST Aerospace Panama, Inc. (formerly known Repair and maintenance of aircraft Republic of Panama as Panama Aerospace Engineering Inc.)

Precision Products Singapore Pte Ltd Manufacture and sale of investment castings, mould toolings Singapore and precision formings

Singapore Technologies Electronics Limited Design, development, supply, installation, integration and Singapore maintenance of transportation, intelligent building, defence electronic and communication systems

SEEL Electronic & Engineering Sdn Bhd Sales of electronic instruments and equipment, electronic Malaysia engineering and systems integration services and maintenance and calibration of electronic equipment

ST Electronics (Info-Software Systems) Pte. Ltd. Design, development and supply of real-time/mission critical Singapore systems and provision of related maintenance services 158

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

INFA Systems Limited Provision for services in consulting, designing and developing Hong Kong systems integration, the maintenance and support of operational and computer systems and sales and distribution of system equipment

ST Electronics (Software Services) Limited Providing IT outsourcing services, software applications People’s Republic development and turnkey solutions of China

ST Electronics (e-Services) Pte. Ltd. Providing shared services to government ministries, agencies Singapore and enterprises

PM-B Pte Ltd Relate to mechanical, electrical and engineering works to Singapore design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PMB Project Management Business Sdn Bhd Relate to mechanical, electrical and engineering works to Malaysia design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PT PM-B Indonesia Relate to mechanical, electrical and engineering works to Indonesia design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PM-B (China) Ltd  Dormant People’s Republic of China

ST Electronics (Training & Simulation Systems) Design, development, supply, integration and maintenance Singapore Pte. Ltd. of training and simulation systems, distribution of games, edutainment and animation programs and the sales and licensing of related products, merchandise and rights

ST Electronics (Digital Media) Pte. Ltd. Design, development and manufacture of computers and data Singapore processing systems, provision of services for the processing and maintenance of data and information, and production of animation pictures

Antycip Simulation Limited Investment holding United Kingdom

Antycip Simulation SAS A value added reseller/distributor of simulation products and France provision of simulation sub-system/components solutions

ST Education & Training Private Limited Provision of education and training, management and Singapore consultancy services for operational and technical domains of maritime, aerospace and land services and industries Singapore Technologies Engineering Ltd Think Ahead. 159 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

STET Homeland Security Pte. Ltd. (formerly Provision of security consultancy, solutions implementation Singapore known as STET Maritime Education Pte. Ltd.) and training

STET Maritime Pte. Ltd. Provision of marine audit, survey and consultancy services Singapore

STET Institute Pte. Ltd. (formerly known as Operate a school to provide academic and professional Singapore STET Centre Pte. Ltd.) education/training

Brightspot Interactive Learning Pte. Ltd. Investment holding Singapore

Brightspot Interactive Learning Inc. Provision of training services such as soft skills and People’s Republic management skills to corporations, and other courses of China to individuals

MERITS Technologies LLP # Marketing and sale of education and simulation products and Kazakhstan services. Installation and maintenance of solutions related to these products and services.

ST Electronics (Info-Comm Systems) Pte. Ltd. Design and development, systems integration, manufacturing Singapore and sale of communication equipment, GPS-based fleet management system, traffic management system, info appliances and defence electronics

ST Electronics (Info-Security) Pte. Ltd. Design, development, sale and provision of technical support Singapore for information security products, solutions and services

DataMark Technologies Pte Ltd Development and provision of digital water-marking and Singapore related solutions

STELCOMMS Pte. Ltd. To undertake design and integration of projects in the area of Singapore communications network and systems and to market and trade in communications related products and subsystems

Telematics Wireless Ltd. Development, manufacture, and marketing of products for Israel locating and directing vehicles, other mobile and stationary objects, people, equipment and merchandise, systems for managing vehicular fleets, systems for locating and thwarting car thefts, vehicular wireless equipment and communications for purposes of identification and provision of information, electronic toll-road systems, and electronic systems for reading water meters

Telematics Wireless USA Corp # Serves as sales arm for Telematics Wireless Ltd. in the USA and USA a local point of contact for Telematics’ customers for payments and Return Material Authorization support

ST Electronics (Satcom & Sensor Systems) Pte. Ltd. Manufacture of microwave components and sub-systems, Singapore system integration and provision of related repairs and maintenance for the telecommunications and defence electronics industries 160

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

ST Electronics (Sichuan) Co., Ltd Manufacturing and maintenance of communication and People’s Republic other related apparatus and consultant service of of China telecommunication technology

iDirect Asia Pte. Ltd. Marketing and sales, design, manufacture & engineering Singapore services for electronics and communication systems

ST Electronics (Shanghai) Co., Ltd Development and manufacturing of computer control and People’s Republic management systems, microwave control systems, simulation of China and training systems, security systems, MRT passenger information systems, MRT autofare collection system, MRT platform screen door system and related software. Provision of related technical consultation and aftersales services and sale of in-house products.

ST Electronics-PCI Co., Ltd Computer software and hardware R&D and manufacture, People’s Republic computer supervise and control management system, of China microwave system, simulation and training system, security management system and peripheral devices, selling in-house products, and offering relevant system integration and skill consultation and after-sales service. Electronic technologies, industry automatic equipment R&D, electronic consulting service, system integration and network engineering installation.

iTS Technologies Pte Ltd Investment holding Singapore

ST Electronics (Taiwan) Limited Provide integration for large-scale system projects in rail, Taiwan expressway and intelligent building management solutions

Intelect Technologies, Incorporated # Development and supply of a family of multi-access optical USA networking equipment

STELOP Pte. Ltd. Design and development, manufacturing, maintaining and sale Singapore of electro-optical products and systems and the provision of related services

TranSys Pte Ltd Design, development, distribution, maintenance and marketing Singapore of railway related products

Singapore Technologies Kinetics Ltd Provision of design and engineering services, manufacture, Singapore sales and knowhow transfer of military and commercial vehicles, automotive subsystems, armament, weapons, weapon systems, ammunition and explosives and the provision of engineering services for assembly, upgrading/ modifications, maintenance, repair and overhaul of vehicles and weapon systems, and trading in motor vehicles, equipment, vehicle spares and related accessories

SDG Kinetics Pte. Ltd. (formerly known as Investment holding Singapore Singapore Ordnance Engineering Pte. Ltd.) Singapore Technologies Engineering Ltd Think Ahead. 161 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

Mobility Systems Pte Ltd Investment holding Singapore

Silvatech Global Systems Limited #  Owns the intellectual property rights to electro-hydraulic British Virgin Islands drive, hydro-mechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives

Silvatech Systems Corporation Pte Ltd Designing, manufacturing, marketing and managing licences Singapore of technologies and products using electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions, and equipment powered by such drives, globally

Kinetics Drive Solutions Inc. #  Research and development, manufacturing and sales of electro- Canada hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives

STA Inspection Pte Ltd Inspection of heavy goods vehicles, light vehicles, motor cars, Singapore buses and motorcycles, provision of vehicle inspection project management as well as provision of independent damage assessment services

Singapore Commuter Private Limited Investment holding Singapore

Securedge Pte. Ltd. Provision of design and engineering services, manufacture Singapore and sales of security related products, and the provision of equipment maintenance services

STA Investment Pte Ltd Investment dealing Singapore

ST Kinetics International Pte. Ltd. Investment holding Singapore

VT Specialized Vehicles, S.A. de C.V. #  Manufacture and marketing of specialised aluminium drop- Mexico frame truck bodies and trailers

STA Detroit Diesel-Allison (Singapore) Pte Ltd Assembling and marketing of diesel engines and related Singapore products and the provision of technical services, field services, repair and maintenance services

ST Kinetics Integrated Engineering Pte. Ltd. Provision of customised solutions, products for defence and Singapore commercial markets

Singapore Test Services Private Limited Provision of professional engineering consultancy, tests, Singapore inspection, certification and related services

ST Kinetics Pte. Ltd. Trading and marketing Singapore 162

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

Advanced Material Engineering Pte. Ltd. Provision of design and engineering services, manufacture, Singapore sales, disposal and knowhow transfer of precision munitions, ammunition, armament, weapon systems, military equipment, explosives, hand-grenades, thunder-flashes, pyrotechnic products and gunpowder and the provision of engineering services for assembly, upgrading/ modifications, maintenance, repair and overhaul of ammunition and weapon systems, and related services

Advanced Pyrotechnic Materials Private Limited Manufacture and sale of pyrotechnic products Singapore

Unicorn International Pte Limited Trading and marketing Singapore

Allied Ordnance of Singapore (Pte) Limited Provision of design and engineering services, manufacture, Singapore sales and knowhow transfer of armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/ modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Ordnance Development and Engineering Company Provision of design and engineering services, manufacture, Singapore of Singapore (1996) Private Limited sales and knowhow transfer of armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/ modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Autonomous Technology Pte Ltd Investment holding Singapore

Guizhou Jonyang Kinetics Co., Ltd.  Design, manufacture, sale and service support of People’s Republic construction, engineering and industrial-related machinery of China and accessories, provide engineering consultancy services to engineering and manufacturing companies, provide rental of own-manufactured machinery and accessories

Kinetics Systems (Shanghai) Co., Ltd.  Manufacture and sale of vehicle drive systems, industrial drive People’s Republic motors and small external combustion engines of China

STAR Automotive Center (Zhejiang) Co., Ltd.  Provide automotive services, including automotive repair, People’s Republic maintenance, examination and beautifying and decorating, of China import, export and trading of automotive spare parts, training, technical consultancy and after sales support

STAR Automotive Center (Guangzhou) Co., Ltd.  Provide automotive services, including automotive repair, People’s Republic maintenance, examination and beautifying and decorating, of China import, export and trading of automotive spare parts, technical consultancy and after sales support Singapore Technologies Engineering Ltd Think Ahead. 163 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

Jiangsu Huatong Kinetics Co., Ltd.  Manufacture and sale of paving, mixing, road People’s Republic maintenance and compaction equipment and other road of China construction machineries

Jiangsu Huaran Kinetics Co., Ltd.  Manufacture and sale of engineering machinery People’s Republic and equipment of China

Singapore Technologies Marine Ltd Construction and repair of naval and commercial vessels, Singapore design, integration, fabrication, installation of military and commercial engineering equipment and the provision of engineering consultancy and technical management services

STSE Engineering Services Pte Ltd Design, manufacture, maintain and operate environmental Singapore infrastructures and provide planning, consultancy services in environmental and renewable energy management solutions

ST Environmental Services & Technologies Co. Ltd Design, development, manufacturing, sales, after-sales People’s Republic services and consulting services of equipments for of China environmental protection projects; wholesale, import and export and related business of similar products; consulting services for environmental projects information, consulting services for commercial information

Vision Technologies Systems, Inc. # Investment holding USA

VT Systems, Inc. # Investment holding and providing investment services USA to the Group

Vision Technologies Aerospace, Incorporated # Investment holding and providing investment services USA

ST Aerospace Mobile, Inc. (formerly known as Repair and maintenance of aircraft USA ST Mobile Aerospace Engineering, Inc.) # 

DalFort Aerospace GP, Inc. # Dormant USA

DalFort Aerospace, L.P. ++ # Dormant USA

San Antonio Aerospace GP, LLC # Investment holding USA

ST Aerospace San Antonio, L.P. (formerly known as Repair and maintenance of aircraft USA San Antonio Aerospace LP) # 

Vision Technologies Electronics, Inc. # Investment holding USA

VT iDirect, Inc. #  Design, develop and market two-way internet protocol- (IP) USA based broadband satellite networking solutions that deliver voice, data and video services to enterprise and government customer locations worldwide 164

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

iDirect Hong Kong Limited Markets two-way internet protocol – (IP) based broadband Hong Kong satellite networking solutions

iDirect UK Limited Markets two-way internet protocol – (IP) based broadband United Kingdom satellite networking solutions

Parallel Limited #  Software development and associated services; installation, United Kingdom configuration, consultancy and support

iDirect Italy srl # Markets two-way internet protocol – (IP) based broadband Italy satellite networking solutions

iDirect International Corporation #  Markets two-way internet protocol – (IP) based broadband USA satellite networking solutions

iDirect Government Technologies, Inc. #  Design, develop and market two-way internet protocol – (IP) USA based broadband satellite networking solutions that deliver voice, data and video services to government customers

VT iDirect Canada, Inc. (formerly known as Research and development Canada Ximaera Technologies Canada Inc.) # 

Vision Technologies Kinetics, Inc. # Investment holding USA

Miltope Corporation #  Development of computers and peripheral equipment for USA rugged and other specialized applications for military and commercial customers, both domestic and international

Miltope Business Products, Inc. # Dormant USA

IV Phoenix Group, Inc.# Dormant USA

MÄK Technologies, Inc. #  Develop and supply software products and services for USA Networked Synthetic Environments

Vision Technologies Land Systems, Inc. # Investment holding USA

VT Dimensions, Inc. # Investment holding and licensing of intellectual properties USA

VT LeeBoy, Inc. #  Manufacture of asphalt paving and road maintenance USA equipment including LeeBoy branded asphalt pavers, motor graders, compactors, force feed loaders, asphalt maintainers/ patchers, tack distributors, and Rosco branded asphalt distributors, street flushers, brooms and asphalt spray patchers

VT Specialized Vehicles Corporation #  Manufacture and marketing of specialised aluminium USA drop-frame truck bodies, trailers, refrigerated truck bodies and trailers and specialty vehicle cabs Singapore Technologies Engineering Ltd Think Ahead. 165 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Country of incorporation/ Name of subsidiary Principal activities place of business

Vision Technologies Marine, Inc. # Investment holding and providing investment services to the USA Marine sector

VT Halter Marine, Inc. #  Construction and repair of naval and commercial vessels, USA design, integration, fabrication, installation of engineering equipment and provision of engineering services

Singapore Technologies Dynamics Pte Ltd Technology development, advanced concept design and Singapore development and technology acquisition

ST Synthesis Pte Ltd Provision of one-stop total integrated logistic support services Singapore

FusionTech Pte. Ltd. Investment holding Singapore

Kaz-ST Engineering Bastau Limited Liability Provision of IT, engineering defence and related services Kazakhstan Partnership #

ST Engineering Financial I Ltd. Provision of financial and treasury services to related parties Singapore

# Not required to be audited under the law in the country of incorporation. * This entity was struck off from the Registrar of the Accounting and Corporate Regulatory Authority in February 2010.  This entity has commenced members’ voluntary liquidation in December 2009.  Audited by member firms of Ernst & Young International for consolidation purposes. ++ This entity ceased operations in October 2003.

All subsidiaries that are required to be audited under the law in the country of incorporation are audited by Ernst & Young LLP, Singapore, except for the following:

Name of subsidiary Name of accounting firm

Airline Rotables (UK Holdings) Limited Ernst & Young, Cambridge Airline Rotables Limited Ernst & Young, Cambridge Aviation Training Academy Australia Pty Ltd KPMG, Melbourne ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd (formerly known as Ernst & Young, Guangzhou Guangzhou Aerospace Technologies and Engineering Company Limited) Pacific Flight Services Pty Ltd Ernst & Young, Sydney Precision Products Singapore Pte Ltd KPMG LLP, Singapore ST PAE Holdings Pty Ltd Ernst & Young, Perth ST Aviation Training Academy (Australia) Pty Ltd KPMG, Melbourne ST Aerospace Panama, Inc. (formerly known as Panama Aerospace Engineering, Inc.) Ernst & Young, Panama ST Aerospace Solutions (Europe) A/S Ernst & Young, Copenhagen ST Aerospace Technologies (Xiamen) Company Limited Ernst & Young, Xiamen Singapore Technologies Engineering (Europe) Ltd Ernst & Young, Cambridge Antycip Simulation Limited Ernst & Young, Reading Antycip Simulation SAS Ernst & Young, Paris Brightspot Interactive Learning Inc. Ernst & Young, Beijing 166

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Name of subsidiary Name of accounting firm

iDirect Hong Kong Limited Baker Tilly HK Ltd iDirect UK Limited PKB Chartered Accountants INFA Systems Limited Ernst & Young, Hong Kong PMB Project Management Business Sdn Bhd Ernst & Young, Kuala Lumpur PT PM-B Indonesia Ernst & Young, Jakarta SEEL Electronic & Engineering Sdn Bhd Ernst & Young, Kuala Lumpur ST Electronics-PCI Co., Ltd Ernst & Young, Guangzhou ST Electronics (Sichuan) Co., Ltd Ernst & Young, Chengdu ST Electronics (Shanghai) Co., Ltd Ernst & Young, Shanghai ST Electronics (Software Services) Limited Ernst & Young, Shenzhen ST Electronics (Taiwan) Limited Ernst & Young, Taipei Telematics Wireless Ltd. Ernst & Young, Tel Aviv ST Environmental Services & Technologies Co. Ltd Ernst & Young, Shanghai Guizhou Jonyang Kinetics Co., Ltd. Ernst & Young, Guangzhou STAR Automotive Center (Zhejiang) Co., Ltd Zhejiang Zhejing Tiance Certified Public Accountants Co., Ltd STAR Automotive Center (Guangzhou) Co., Ltd Guangzhou Yuansheng Certified Public Accountants Kinetics Systems (Shanghai) Co., Ltd. Shanghai Jinrui Certified Public Accountants Jiangsu Huatong Kinetics Co., Ltd Jiangsu Suya Jincheng Certified Public Accountants Jiangsu Huaran Kinetics Co., Ltd Jiangsu Suya Jincheng Certified Public Accountants

(a) During the financial year, the Group incorporated the following companies:

Country of incorporation/ Equity interest Name of company place of business held Date of incorporation %

STET Institute Pte. Ltd. (formerly known as Singapore 70 3 February 2009 STET Centre Pte. Ltd.)

ST Engineering Financial I Ltd. Singapore 100 28 May 2009

(b) During the financial year, the Group acquired the following companies:

Net tangible Name of company Interest acquired Consideration assets acquired Date of acquisition % $’000 $’000

Precision Products Singapore Pte Ltd 100 8,281 4,683 18 May 2009

Jiangsu Huatong Kinetics Co., Ltd and 75.3 36,313 29,512 30 April 2009 Jiangsu Huaran Kinetics Co., Ltd

Parallel Limited 100 9,027 4,582 31 December 2009 Singapore Technologies Engineering Ltd Think Ahead. 167 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Interest after Net tangible Name of company Interest acquired acquisition Consideration assets acquired % % $’000 $’000

ST Aerospace Training Academy Pte. Ltd. (formerly 4 70 320 120 known as ST Aviation Training Academy Pte. Ltd.) and its subsidiaries

DataMark Technologies Pte Ltd 38.88 100 148 123

MÄK Technologies, Inc. 10 90 302 580

Telematics Wireless Ltd. 1.11 95.04 1,276 262

VT iDirect Canada, Inc. (formerly known as 51 100 1,285 1,285 Xiamera Technologies Canada Inc.)

(d) During the year, the Group made additional capital contributions of $18,462,000 in ST Aerospace Technologies (Xiamen) Company Limited. The effective equity interest held by the Group remains the same at 80%.

14. Associated companies and joint ventures

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Unquoted shares, at cost 195,703 175,831 17,707 50

Goodwill on acquisition written off, net (110) (234) Share of net assets acquired 195,593 175,597 Impairment in associated companies and joint ventures (1,218) (1,218) Share of post-acquisition: Profits 95,394 101,315 Reserves (16,390) (12,616)

273,379 263,078 168

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

Impairment in associated companies and joint ventures

Movements in impairment in associated companies and joint ventures during the year are as follows:

Group 2009 2008 $’000 $’000

At beginning of the year 1,218 5,441 Provision utilised – (4,113) Disposal of an associated company – (110)

At end of the year 1,218 1,218

Group 2009 2008 $’000 $’000

The summarised financial information of the associated companies is as follows:

Results Turnover 792,662 752,115

Net profit for the year 81,615 83,687

Assets and liabilities Non-current assets 385,802 311,918 Current assets 601,769 550,381 Current liabilities (261,600) (257,363) Non-current liabilities (41,310) (26,409)

684,661 578,527

The Group’s share of the joint ventures’ results, assets and liabilities are as follows:

Income and expenses Income 33,327 25,644

Expenses (32,080) (26,025)

Assets and liabilities Non-current assets 51,693 3,202 Current assets 36,420 43,919 Current liabilities (29,908) (37,640) Non-current liabilities (47,544) (843)

10,661 8,638 Singapore Technologies Engineering Ltd Think Ahead. 169 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

(a) Details of the associated companies are as follows:

Country of incorporation/place Effective equity interest Name of associated company Principal activities of business held by the Group 2009 2008 % %

Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia 50 50

Aerospace Engineering Services Pty Ltd Trustee of unit trust fund Australia 50 50 Unit Trust

1988 JV Pte. Ltd. ++ Dormant Singapore 50 50

Composite Technology International Repairing and rebuilding helicopter Singapore 33.33 33.33 Pte Ltd rotor blades

Eurocopter South East Asia Selling, maintaining and overhauling Singapore 25 25 Private Limited of helicopters

Madrid Aerospace Services S.L. Repair and overhaul of aircraft landing Spain 50 50 gears and its related components

Shanghai Technologies Aerospace Aircraft and component maintenance, People’s Republic 49 49 Company Limited repair, overhaul and other related of China maintenance business

Singapore Precision Repair and Repair and overhaul of aircraft and Singapore 50 50 Overhaul Pte Ltd helicopter landing gears and its related components

Turbine Coating Services Pte Ltd Repair, refurbishment and upgrading of Singapore 24.5 24.5 aircraft jet engine turbine blades and vanes

Turbine Overhaul Services Pte Ltd Repair and service of gas and steam Singapore 49 49 turbine components

COMAT Training Services Pte Ltd Operating of a computer training school, Singapore 45.47 45.47 providing training in computer software and applications

iWOW Technology Pte Ltd To carry out research and development, Singapore 21.74 21.74 consultancy services in telecommunication, electrical and related fields

Knowledge Alive Pte. Ltd. Offer technologically-driven learning and Singapore 45.47 45.47 knowledge solutions, products and services to corporate, tertiary and workforce markets 170

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

Country of incorporation/place Effective equity interest Name of associated company Principal activities of business held by the Group 2009 2008 % %

PM-B Project Management Business Relate to mechanical, electrical and Thailand 34.3 34.3 (Thailand) Ltd engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Prescient Systems & Technologies Business of developing, producing and Singapore 47.84 47.84 Pte. Ltd. marketing non-real time and real time instrumentation systems for defence and commercial applications; design and development of training centres and provision of managed services

Trusted Hub Ltd Provision of an integrated trusted Singapore 21.14 21.8 environment for secured transactions and e-commerce

WizVision Pte. Ltd. Providing information technology services Singapore 22.8 22.8 and trading of computer accessories

CityCab Pte Ltd Rental of taxis and provision of premier bus Singapore 46.5 46.5 service, charge card facilities and travel related services

Defence Electronics of Singapore Pte Ltd Manufacture of fuses Singapore 49 49

GFM Maquinaria, S.A.P.I. de C.V.  Sale of construction and mining machinery Mexico 40 – and equipment

Hualun International Trading Co., Ltd Import and export of commercial products, People’s Republic 40 – patents, licences and government-approved of China technologies

Nusantara Technologies Sdn. Bhd. Provision of non-destructive testing Malaysia 49 49 services, ultrasonic flaw detection and gauging survey and pressure gauge calibration

Timoney Holdings Limited Design and prototyping services and Republic of Ireland 25 25 component supply for the automotive and aerospace engineering sectors Singapore Technologies Engineering Ltd Think Ahead. 171 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

Country of incorporation/place Effective equity interest Name of associated company Principal activities of business held by the Group 2009 2008 % %

2006 JV Pte. Ltd. β Dormant Singapore 50 50

NanoScience Innovation Pte Ltd Research and development of ultra fine Singapore 27.06 27.06 structure, especially nano-scale, materials, devices, equipment and intellectual properties

Singapore Airshow & Events Pte. Ltd. Organising and management of Singapore 33 – conferences, exhibitions and other related activities, includes the biennial Singapore Airshow event

(b) Details of joint ventures are as follows:

Country of incorporation/place Effective equity interest Name of joint venture Principal activities of business held by the Group 2009 2008 % %

GFM Electronics S.A. de C.V. Distribution and sales of high technology Mexico 50 50 systems, services and products, in the communications area, as well as electronics systems, principally closed circuits and alarms for airports, malls, stadiums and highways

ATREC Pte. Ltd. Research and technology development in Singapore 50 50 advanced materials for both defence and commercial applications

Beijing Zhonghuan Kinetics Heavy Develop, manufacture and sale of People’s Republic 50 50 Vehicles Co. Ltd.  specialised heavy vehicles and sale of of China related spare parts and provision of relevant technical consultancy and after sale technical support services

SMART Systems Pte Ltd Life systems integration of weapon system Singapore 50 50

Takata CPI Singapore Pte Ltd Manufacture of pyrotechnic Singapore 49 49 components for seatbelts and air bags used in motor vehicles 172

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

Country of incorporation/place Effective equity interest Name of joint venture Principal activities of business held by the Group 2009 2008 % %

First Response Marine Pte. Ltd. Ship and boat leasing with operator Singapore 50 50 (including chartering)

Halter-Bollinger Joint Venture LLC § To bid and secure US boat fabrication USA 50 50 contracts for its shareholders

Joint Shipyard Management Services Construction and managing workers’ Singapore 30 30 Pte Ltd dormitories

++ This entity is under members’ voluntary liquidation. § Not required to be audited under the law in the country of incorporation.  This entity was newly incorporated during the year and was not required to be audited as at the date of this report. β This entity was dissolved in January 2010.  Audited by member firms of Ernst & Young International for consolidation purposes.

All associated companies and joint ventures that are required to be audited under the law in the country of incorporation, are audited by Ernst & Young LLP, Singapore, except for the following:

Name of associated company/joint venture Name of accounting firm

Aerospace Engineering Services Pty Ltd Ernst & Young, Australia Aerospace Engineering Services Pty Ltd Unit Trust Ernst & Young, Australia Composite Technology International Pte Ltd Deloitte and Touche LLP, Singapore Eurocopter South East Asia Private Limited KPMG LLP, Singapore Madrid Aerospace Services S.L. Deloitte S.L. Shanghai Technologies Aerospace Company Limited Ernst & Young, Shanghai Turbine Coating Services Pte Ltd PricewaterhouseCoopers LLP, Singapore Turbine Overhaul Services Pte Ltd PricewaterhouseCoopers LLP, Singapore COMAT Training Services Pte Ltd BDO Raffles GFM Electronics S.A. de C.V. PricewaterhouseCoopers, Mexico iWOW Technology Pte Ltd LW Ong & Co Knowledge Alive Pte. Ltd. BDO Raffles PM-B Project Management Business (Thailand) Ltd Mazars Limited Trusted Hub Ltd KPMG LLP, Singapore WizVision Pte. Ltd. BF Teo Associates Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd. Guofu Haohua Certified Public Accountants Co., Ltd Singapore Technologies Engineering Ltd Think Ahead. 173 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

Name of associated company/joint venture Name of accounting firm

CityCab Pte Ltd Deloitte and Touche LLP, Singapore Hualun International Trading Co., Ltd Jiangsu Suya Jincheng Certified Public Accountants Nusantara Technologies Sdn. Bhd. Deloitte Kassimchan, Malaysia Timoney Holdings Limited KPMG, Ireland Joint Shipyard Management Services Pte Ltd KPMG LLP, Singapore NanoScience Innovation Pte Ltd NSC & Associates Singapore Airshow & Events Pte. Ltd. KPMG LLP, Singapore

15. investments

Group 2009 2008 $’000 $’000

Quoted investments Equity shares, at fair value (Available-for-sale) Non-related corporations 46,001 37,955 Impairment in value of quoted investments (28,900) (28,587)

17,101 9,368

Unquoted investments Equity shares (Available-for-sale) Related corporations, at cost 629 630 Non-related corporations, at cost 23,339 23,379 Non-related corporations, at fair value – 181

23,968 24,190

Bonds, at amortised cost (Held-to-maturity) from 2.02% to 3.10% per annum due from 30.9.2010 to 1.11.2010 – 38,352

Venture capital funds and limited partnership, at fair value 1,745 2,167 Convertible loan, at amortised cost * 486 462 Convertible loan to non-related corporations # 700 700 Loan to a related corporation 4,387 4,392

7,318 7,721

Total unquoted investments 31,286 70,263 Impairment in value of unquoted investments (26,923) (26,215)

4,363 44,048

Total investments 21,464 53,416 174

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

15. investments (continued)

* A subsidiary extended an interest-free convertible loan to an investee company at a nominal value of US$300,000. The subsidiary is entitled to convert it within 5 years from the date of disbursement of the loan to share equity of the investee company.

# Included in the convertible loan is an amount of $700,000 (2008: $700,000) extended by a subsidiary to an investee company at an interest rate of 1% (2008: 1%) above bank prime rate per annum. The subsidiary was granted an option by the investee company to be able to convert the loan into convertible redeemable preference shares in the investee company.

For those unquoted investments where it is not practicable to determine the fair value, the Group has no intention to dispose such investments at the balance sheet date.

Impairment in value of quoted investments

During the financial year, the Group recognised an impairment loss of $313,000 (2008: $25,580,000) pertaining to quoted investments reflecting the write-down in the carrying value of the investments with a significant and prolonged decline in the market price.

Movements in impairment in value of quoted investments during the year are as follows:

Group Note 2009 2008 $’000 $’000

At beginning of the year 28,587 3,007 Charge to income statement 4 313 25,580

At end of the year 28,900 28,587

Impairment in value of unquoted investments

Movements in impairment in value of unquoted investments during the year are as follows:

Group Note 2009 2008 $’000 $’000

At beginning of the year 26,215 25,861 Charge to income statement 4 747 363 Translation difference (39) (9)

At end of the year 26,923 26,215 Singapore Technologies Engineering Ltd Think Ahead. 175 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

16. intangible assets

(a) Goodwill

Group 2009 2008 $’000 $’000

Cost At beginning of the year 503,692 504,808 Acquisition of subsidiaries 14,844 3,128 Acquisition of additional interest in subsidiaries 1,239 2,336 Finalisation of purchase price allocation @ 60 – Goodwill written off (1,599) (2,415) Translation difference (11,510) (4,165)

At end of the year 506,726 503,692

Impairment At beginning of the year 15,544 18,637 Impairment written off – (2,415) Translation difference (54) (678)

At end of the year 15,490 15,544

Net book value 491,236 488,148

@ During the year, the purchase price allocation to goodwill and other net assets relating to the acquisition of ST Aviation Training Academy (Australia) Pty Ltd has been finalised and the effect of $60,000 has been adjusted in the current year.

During the year, the Group wrote-off goodwill amounting to $1,599,000 for a subsidiary due to closure of a plant.

In the prior year, the Group wrote-off goodwill amounting to $2,415,000 for a subsidiary, which had ceased business activities in October 2008 and had commenced members’ voluntary liquidation. 176

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

16. intangible assets (continued)

(b) Other intangible assets

Commercial Dealer Deferred and intellectual Film cost Note network expenditure property rights inventory Brands Others Total $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

Cost At 1.1.2008 9,395 2,941 67,659 9,202 83,110 1,345 173,652 Additions – 3,332 – 1,048 – 176 4,556 Acquisition of subsidiaries – – 1,315 – 2,702 – 4,017 Write-off – – (608) – – (25) (633) Translation difference (51) 68 (626) – (968) (38) (1,615) At 31.12.2008 and at 1.1.2009 9,344 6,341 67,740 10,250 84,844 1,458 179,977 Additions – 4,629 – 1,333 – 2,126 8,088 Acquisition of subsidiaries – 2,032 1,669 – 143 1,400 5,244 Translation difference (212) (27) (1,359) – (1,748) 37 (3,309)

At 31.12.2009 9,132 12,975 68,050 11,583 83,239 5,021 190,000

Accumulated amortisation At 1.1.2008 2,129 1,318 11,714 – 1,187 1,039 17,387 Amortisation for the year 5 1,311 273 6,805 524 1,265 25 10,203 Impairment loss 5 – – – – – 2 2 Write-off – – (608) – – (25) (633) Translation difference 14 7 54 – 1 – 76

At 31.12.2008 and 1.1.2009 3,454 1,598 17,965 524 2,453 1,041 27,035 Amortisation for the year 5 1,352 350 7,101 220 1,323 1,427 11,773 Impairment loss 5 – 397 – – – – 397 Translation difference (123) (19) (522) – (89) – (753)

At 31.12.2009 4,683 2,326 24,544 744 3,687 2,468 38,452 Net book value At 31.12.2009 4,449 10,649 43,506 10,839 79,552 2,553 151,548

At 31.12.2008 5,890 4,743 49,775 9,726 82,391 417 152,942 Singapore Technologies Engineering Ltd Think Ahead. 177 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

16. intangible assets (continued)

Group 2009 2008 $’000 $’000

Net book value 642,784 641,090

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to the Group’s cash-generating units (“CGU”) identified according to each individual business unit, for impairment testing. Goodwill in relation to Precision Products Singapore Pte Ltd and Parallel Limited has been determined provisionally and has not been allocated for impairment testing.

Carrying amount of goodwill allocated to each of the CGU:

ST Aerospace Solutions (Europe) A/S 2,194 2,204 ST Aerospace Training Academy Pte Ltd and its subsidiaries 200 – ST Aviation Training Academy (Australia) Pty Ltd 207 147 Pacific Flight Services Pty Ltd 701 701 Precision Products Singapore Pte Ltd * 3,598 – Antycip Simulation Limited and its subsidiary 3,158 2,902 Brightspot Interactive Learning Pte. Ltd. and its subsidiary 2,245 2,222 DataMark Technologies Pte Ltd 149 124 VT iDirect, Inc. 167,882 171,766 MÄK Technologies, Inc. 24,271 25,189 Parallel Limited * 4,445 – PM-B Pte Ltd and its subsidiaries 11,665 11,696 STELCOMMS Pte. Ltd. 5 5 STELOP Pte. Ltd. 1,732 1,732 Telematics Wireless Ltd. and its subsidiary 84,383 85,353 Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd 6,002 – STAR Automotive Center (Zhejiang) Co., Ltd. 982 1,004 STAR Automotive Center (Guangzhou) Co., Ltd. 498 510 VT LeeBoy, Inc. 102,945 105,327 VT Specialized Vehicles Corporation 37,714 40,167 Miltope Corporation 36,260 37,099

491,236 488,148

* The purchase price allocation to goodwill, intangible assets (excluding goodwill) and other assets and liabilities is currently being assessed and is expected to be finalised within 12 months from the date of acquisition (as disclosed in Note 13).

The recoverable amounts of the CGUs are determined based on value-in-use calculations, except for Precision Products Singapore Pte Ltd and Parallel Limited as described above. 178

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

16. intangible assets (continued)

The value-in-use calculations use cash flow projections based on financial budgets approved by Management. Management have considered and determined the factors applied in these financial budgets which include budgeted gross margins and average growth rates. The budgeted gross margins are based on past performance and its expectation of market development. Average growth rates used are consistent with forecasts included in industry reports. The discount rate applied is assumed at 6.1% (2008: 6.2%) for value-in-use calculations, which is also the Group’s weighted average cost of capital.

17. investment properties

Group Note 2009 2008 $’000 $’000

At cost At beginning of the year 33,722 33,490 Disposal (2,178) – Translation difference (83) 232 Transfer to property, plant and equipment 12 (28,217) –

At end of the year 3,244 33,722

Accumulated depreciation At beginning of the year 16,351 15,111 Depreciation charge for the year 5 368 1,153 Translation difference (42) 87 Disposal (825) – Transfer to property, plant and equipment 12 (14,617) –

At end of the year 1,235 16,351

Net book value 2,009 17,371

The property rental income of the Group for the year ended 31 December 2009 from its investment properties, which are leased out under operating leases, amounted to $330,000 (2008: $1,529,000). Direct operating expenses (including repairs and maintenance) arising from the rental-earning investment properties amounted to $60,000 (2008: $174,000).

The fair value of the investment properties as at 31 December 2009 of $7,867,000 (2008: $18,912,000) are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

During the year, the Group

(a) transferred one property that was held as investment property to property, plant and equipment following part of the building having been retained for the Group’s internal use; and

(b) disposed of an investment property for a cash consideration of $1,800,000. In the prior year, the said property with a carrying amount of $1,389,000 was pledged as security for long-term loan. Singapore Technologies Engineering Ltd Think Ahead. 179 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

17. investment properties (continued)

The investment property held by the Group as at end of the year is as follows:

Location Existing Use Tenure Land area (sq. m.)

People’s Republic of China

No. 555 Kanghua Road, Kangqiao Industrial Zone, Industrial building 50 years from 12.6.2003 to 27.2.2052 15,898 Shanghai

18. long-term receivables

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Housing and car loans and advances to staff 998 1,147 90 180 Other receivables *1 1,987 4 – – Loans to: Associated company *2 3,022 – – – Joint ventures *3 5,874 1,620 – – Allowance for doubtful debts (1,583) (1,620) – – 4,291 – – – Third parties *4 43,154 9,031 – – Allowance for doubtful loans (9,015) (9,031) – – 34,139 – – –

44,437 1,151 90 180

Receivable: Within 1 year 7,637 700 90 180 After 1 year 36,800 451 – –

44,437 1,151 90 180

Loans and receivables are carried at amortised cost and are subject to impairment.

*1 Other receivables relate to government grants that would be received upon compliance with the conditions indicated in a non-cancellable lease agreement entered into by a subsidiary. Under the agreement, the future rental payable is to be paid from the eleventh year onwards, when the subsidiary had invested a total of US$10,000,000 for the first 10 years. The government grant is recognised on the account that there is reasonable assurance that the subsidiary will comply with the conditions. As at 31 December 2009, the subsidiary has invested US$8,949,000. 180

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

18. long-term receivables (continued)

*2 The loan to an associated company is unsecured and repayable in 2019. The interest on this loan is EURIBOR +1.0% per annum. In 2009, the interest rates range from 1.76% to 2.58% per annum, which are also the effective interest rates.

*3 Included in loans to joint ventures are:

(a) a loan amounting to $1,583,000 (2008: $1,620,000) and bears interest at 4% (2008: 4%) per annum. The loan is unsecured and has been fully impaired during the year; and

(b) loans amounting to $4,291,000 (2008: $nil) and bear interest at rates ranging from 4.57% to 5.07% per annum. The loans are unsecured and repayable within 20 years.

Movements in allowance for doubtful loans to joint ventures are as follows:

Group Note 2009 2008 $’000 $’000

At beginning of the year 1,620 – Charge to income statement 5 – 1,556 Translation difference (37) 64

At end of the year 1,583 1,620

*4 Included in the loans to third parties are:

(a) an amount of approximately $8,312,000 (2008: $8,312,000) secured by intellectual property rights is not expected to be repaid within the next 12 months. Interest is repriced every month and chargeable at the US dollar prime rate plus 2% (2008: 2%) per annum, which is also the effective interest rate. The loan is convertible to shares of that entity, subject to certain terms and conditions. In the prior year, a notice was given to that entity to convert the loan to shares of that entity but the conversion has not been effected as at the end of the year. The loan is fully impaired at the balance sheet date.

No interest income has been accrued for this financial year for the loans stated due to the uncertainty over the collectibility of the interest income.

(b) a bridging loan of $702,500 (US$$500,000) (2008: $718,750 (US$500,000)) extended to a third party. The bridging loan is secured by way of a Deed of Debenture, which creates a floating charge over the assets of the third party. This loan is treated as a net investment in the third party and is not expected to be repaid. The loan is stated at cost and has been fully provided for since financial year 2004 due to uncertainty of collectibility. Therefore, it is not practicable to determine its fair value.

(c) an amount of $34,139,000 (2008: $nil) relating to instalment payment plans granted to customers. These loans are repayable over a period of 3.5 years to 6.5 years from 2009. The interest rates on these loans are LIBOR with margins ranging from 0.5% to 0.63% per annum. In 2009, the interest rates range from 1.11% to 1.86% per annum, which are also the effective interest rates. Singapore Technologies Engineering Ltd Think Ahead. 181 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

18. long-term receivables (continued)

Movements in allowance for doubtful loans to third parties are as follows:

Group Note 2009 2008 $’000 $’000

At beginning of the year 9,031 10,156 Write-back to income statement 5 – (1,121) Translation difference (16) (4)

At end of the year 9,015 9,031

19. finance lease receivables

The Group entered into finance lease arrangements with customers with terms ranging from 1 year to 10 years (2008: 1 year to 10 years) and effective interest rate of 1.42% to 19.96% (2008: 2.2% to 29.8%) per annum. In the prior year, lease receivables of $149,000 were secured by standby letters of credit.

Group 2009 2008 $’000 $’000

Gross investment in finance lease Not later than 1 year 17,779 13,424 1 year through 5 years 4,360 3,330 Later than 5 years 1,639 2,509

23,778 19,263

Unearned interest Not later than 1 year 577 606 1 year through 5 years 615 746 Later than 5 years 157 300

1,349 1,652

Present value of minimum lease receivables Not later than 1 year 17,202 12,818 1 year through 5 years 3,745 2,584 Later than 5 years 1,482 2,209

22,429 17,611 182

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

19. finance lease receivables (continued)

Group Note 2009 2008 $’000 $’000

Allowance for doubtful lease receivables Not later than 1 year (2,816) (1,761)

Net investment in finance lease Not later than 1 year 14,386 11,057 1 year through 5 years 3,745 2,584 Later than 5 years 1,482 2,209

19,613 15,850

Not past due and not impaired 15,535 11,657 Past due and not impaired 4,078 4,193

19,613 15,850

Individually assessed Doubtful lease receivables 2,816 1,761 Allowance for doubtful lease receivables (2,816) (1,761)

– –

19,613 15,850

Movements in allowance for doubtful lease receivables are as follows:

At beginning of the year 1,761 810 Charge to income statement 5 1,138 877 Provision utilised (8) (6) Translation difference (75) 80

At end of the year 2,816 1,761

Finance leases that are individually assessed to be impaired relate to customers who have defaulted on payments.

Ageing of net investment in minimum lease receivables that are past due but not impaired:

1 - 90 days 1,260 868 91 - 180 days 964 1,314 181 - 360 days 888 1,285 >360 days 966 726

4,078 4,193 Singapore Technologies Engineering Ltd Think Ahead. 183 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

20. Deferred tax assets

Group 2009 2008 $’000 $’000

At beginning of the year 138,128 112,718 Recognised in income statement 1,442 30,619 Effect of reduction in tax rate (2,236) – Acquisition of subsidiaries 251 – Disposal of a subsidiary (6) – Translation difference (954) (938) Transfer to provision for taxation (7,465) (11,680) Changes in fair value of available-for-sale financial assets (243) 1,096 Changes in fair value of derivative financial instruments designated in cash flow hedges (1,721) 6,313

At end of the year 127,196 138,128

The deferred tax assets arise as a result of:

Unabsorbed capital allowances and unutilised tax losses 41,277 37,886 Allowance for doubtful debts and stock obsolescence 15,788 21,115 Provision for warranties 38,721 36,524 Provision for liquidated damages 1,568 1,101 Provision for foreseeable losses 5,469 6,307 Intangible assets (54) (652) Other temporary differences 19,048 28,349 Changes in fair value of available-for-sale financial assets 51 294 Changes in fair value of derivative financial instruments designated in cash flow hedges 5,328 7,204

127,196 138,128 184

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

21. stocks and work-in-progress

Group 2009 2008 $’000 $’000

Stocks of equipment and spares 509,342 508,152 Work-in-progress in excess of progress billings Work-in-progress, including profits recognised 2,600,296 2,279,093 Progress billings (1,745,342) (1,500,914) 854,954 778,179

Total stocks and work-in-progress at lower of cost and net realisable value 1,364,296 1,286,331

Progress billings in excess of work-in-progress Work-in-progress, including profits recognised 2,304,408 1,948,251 Progress billings (2,861,737) (2,423,997)

(557,329) (475,746)

Stocks are stated after allowance for stock obsolescence of $191,860,000 (2008: $158,112,000) and work-in-progress in excess of progress billings are stated after provision for foreseeable losses of $14,517,000 (2008: $23,073,000).

22. trade debtors

Group 2009 2008 $’000 $’000

Not past due and not impaired 527,214 485,007 Past due and not impaired 360,236 457,281 887,450 942,288 Collectively assessed Impaired receivable (Gross) 34,667 41,448 Allowance for doubtful debts (7,786) (21,075) 26,881 20,373 Individually assessed Impaired receivable (Gross) 111,183 66,771 Allowance for doubtful debts (98,542) (60,757) 12,641 6,014

Unbilled receivables 137,109 139,554 Allowance for unbilled receivables (1,854) –

Trade debtors, net 1,062,227 1,108,229 Singapore Technologies Engineering Ltd Think Ahead. 185 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

22. trade debtors (continued)

Trade debtors denominated in currencies other than the functional currencies as at 31 December 2009 are as follows:

• $189,707,000 (2008: $260,615,000) denominated in US dollars • $11,060,000 (2008: $11,505,000) denominated in Euro

Group Note 2009 2008 $’000 $’000

Movements in allowance for doubtful debts are as follows:

At beginning of the year 81,832 55,608 Charge to income statement 5 28,084 28,775 Bad debts written off against allowance (10,430) (1,265) Acquisition of subsidiaries 8,384 – Translation difference (1,542) (1,286)

At end of the year 106,328 81,832

Movements in allowance for unbilled receivables are as follows:

At beginning of the year – – Charge to income statement 5 1,854 –

At end of the year 1,854 –

Ageing of receivables that are past due but not impaired:

1 - 90 days 243,766 259,211 91 - 180 days 47,278 88,524 181 - 360 days 36,338 54,521 >360 days 32,854 55,025

360,236 457,281

Trade debtors that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent or in financial difficulties or who have significant delay or defaulted in payments.

At the balance sheet date, trade debtors with balances amounting to approximately $8,097,000 (2008: $nil) are partially secured by shares held in moratorium of the guarantor company amounting to $978,000.

Trade debtors amounting to $20,050,000 (2008: $20,907,000) are arranged to settle via letters of credit issued by reputable banks. 186

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

23. Due from related corporations

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Due from related corporations 4,082 234,078 29 139,198

Included in the amount due from related corporations in the prior year were loans amounting to $230,188,000 and $139,169,000 extended from the Group and the Company respectively. These loans guaranteed by Fullerton Management Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private) Limited were repaid during the year. The loans matured on varying periods within 2 months from 2008 and bore interest rates ranging from 0.50% to 5.33% per annum, which were also the effective interest rates.

24. Advances and other debtors

Group Company Note 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Advance payments to suppliers 259,231 234,736 – – Other debtors, deposits and prepayments 27 98,435 123,519 4,615 909 Due from: Subsidiaries – – 335,481 339,287 Associated companies 28 6,792 7,338 – – Joint ventures 13,229 3,355 – – Derivative financial instruments 51 10,539 10,138 – –

388,226 379,086 340,096 340,196 Singapore Technologies Engineering Ltd Think Ahead. 187 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

25. short-term investments

Group 2009 2008 $’000 $’000

Quoted investments Equity shares, at fair value Non-related corporation (Fair value through profit or loss) 1,710 369 Non-related corporation (Available-for-sale) – 211

1,710 580

Unquoted investments Bonds, at fair value (Available-for-sale) from 4.25% to 5.875% per annum due from 4.11.2013 to 18.11.2019 195,541 – Bonds, at amortised cost value (Held-to-maturity) from 2.02% to 3.10% per annum due from 30.09.2010 to 1.11.2010 38,574 –

234,115 –

235,825 580

26. bAnk balances and other liquid funds

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Fixed deposits with financial institutions 1,006,528 601,382 194,073 226,569 Cash and bank balances 507,082 217,543 47,911 4,626

1,513,610 818,925 241,984 231,195

Fixed deposits with financial institutions mature at varying periods within 8 months (2008: 3 months) from the financial year end. Interest rates range from 0.03% to 5.12% (2008: 0.06% to 8.1%) per annum, which are also the effective interest rates.

Cash and bank balances of $1,681,000 (2008: $265,000) have been placed with banks as security for letters of credit issued to third parties. 188

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

27. other debtors, deposits and prepayments

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Deposits 15,542 13,346 501 492 Prepayments 25,765 26,755 439 93 Interest receivables 4,301 1,434 220 95 Other recoverables 19,259 17,504 3,352 92 Non-trade debtors 33,568 64,480 103 137

98,435 123,519 4,615 909

28. Due from associated companies

Group 2009 2008 $’000 $’000

Trade balances 6,785 6,828 Non-trade balances 248 751 Allowance for doubtful debts – trade (241) (241)

6,792 7,338

29. creditors and accruals

Group Company Note 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Trade creditors 599,313 616,940 – – Other creditors and accruals 33 780,978 775,404 40,002 55,328 Other long-term payables, current 39 2,904 – – – Due to: Subsidiaries – – 1,648 1,527 Related corporations 1,348 1,606 – – Associated companies 3,175 2,139 – – Joint ventures 556 1,712 – – Derivative financial instruments 51 4,118 8,368 – –

1,392,392 1,406,169 41,650 56,855

Trade creditors denominated in currencies other than the functional currencies as at 31 December 2009 are as follows:

• $65,293,000 (2008: $65,056,000) denominated in US dollars • $26,578,000 (2008: $18,134,000) denominated in Euro Singapore Technologies Engineering Ltd Think Ahead. 189 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

30. provisions

Group Note 2009 2008 $’000 $’000

Provision for: Warranties 189,740 170,313 Liquidated damages 8,643 5,983 Foreseeable losses 13,468 9,119

211,851 185,415

(a) Movements in provision for warranties are as follows:

At beginning of the year 170,313 179,962 Charge to income statement 5 34,903 5,164 Provision utilised (14,546) (15,062) Translation difference (1,156) 249 Acquisition of subsidiaries 226 –

At end of the year 189,740 170,313

(b) Movements in provision for liquidated damages are as follows:

At beginning of the year 5,983 11,257 Charge/(write-back) to income statement 5 2,901 (5,257) Provision utilised (160) (16) Translation difference (81) (1)

At end of the year 8,643 5,983

At beginning of the year 9,119 541 Charge to income statement 4,392 9,009 Provision utilised – (352) Translation difference (43) (79)

At end of the year 13,468 9,119 190

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

31. short-term bank loans

Effective Group Company interest rate Maturity 2009 2008 2009 2008 % $’000 $’000 $’000 $’000

Bank loans 1.78% to 5.84% Within 1 year 83,510 322,773 – 25,300

The bank loans are denominated in Singapore dollars, US dollars and Chinese Yuan (2008: Singapore dollars, US dollars, Euro and Chinese Yuan).

Included in short-term bank loans are:

(a) loans amounting to $68,478,000 (2008: $270,208,000) which are unsecured;

(b) loan amounting to $1,030,000 (2008 $7,890,000) which is guaranteed by a standby letter of credit;

(c) loans amounting to $4,736,000 (2008: $nil) which are guaranteed by Zhenjiang State-owned Assets Investment Management Co., Ltd. and secured by a subsidiary’s buildings; and

(d) loans amounting to $9,266,000 which are secured by a subsidiary’s land and buildings.

In the prior year, a loan amounting to $44,675,000 secured by a floating charge over a subsidiary’s plant and machinery was repaid during the year.

32. lease obligations

(a) A subsidiary leases certain land, buildings, and equipment from a foreign Airport Authority (the “Authority”) under a capital lease related to industrial revenue bonds issued by the Authority. Assets being leased are pledged as collateral against the bonds. The bonds have staggered maturity dates and the lease payments have been structured to coincide with the staggered maturities of the bonds with the final payment due on 1 November 2012, the expiration date of the lease.

In connection with the bond issue, the subsidiary entered into a letter of credit agreement for approximately US$10,969,000, which is used to guarantee payments on the bonds in the event that the subsidiary is unable to make required lease payments. The letter of credit expires on 3 April 2012.

The subsidiary also leases certain land, buildings, and equipment from the Authority under an operating lease. The lease term coincides with the term of the capital lease.

(b) During the year, a subsidiary entered into finance leases for transportation equipment and vehicles with term ranging from 2 to 4 years and effective interest rates ranging from 6.88% to 16.52% per annum. Singapore Technologies Engineering Ltd Think Ahead. 191 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

32. lease obligations (continued)

The obligations under the finance lease to be paid by the subsidiaries are as follows:

Minimum lease Present value payment Interest of payments $’000 $’000 $’000

2009

1 to 5 years 6,211 (659) 5,552

Repayable: Within 1 year 1,822 After 1 year 3,730

5,552

2008

1 to 5 years 8,098 (953) 7,145

Repayable: Within 1 year 1,726 After 1 year 5,419

7,145

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

33. other creditors and accruals

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Non-trade creditors 41,987 68,701 1,521 5,321 Purchase of property, plant and equipment 2,699 118 – – Accrued operating expenses 714,408 697,365 38,481 49,978 Accrued interest payable 19,388 6,704 – 29 Employee benefit liabilities 2,496 2,516 – –

780,978 775,404 40,002 55,328 192

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

34. Deferred income

Group Note 2009 2008 $’000 $’000

At beginning of the year 21,656 13,455 Additions 4,082 8,002 Acquisition of subsidiaries 1,510 – Translation difference (275) 199 26,973 21,656 Deferred income recognised to-date (12,427) (10,160)

At end of the year 14,546 11,496

Movements in deferred income recognised to-date are as follows:

At beginning of the year 10,160 6,376 Recognised in income statement 5 2,259 3,784 Translation difference 8 –

At end of the year 12,427 10,160

35. Deferred tax liabilities

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

At beginning of the year 62,602 45,818 201 372 Recognised in income statement (878) (4,260) 15 (171) Effect of reduction in tax rate 175 – (11) – Translation difference (1,101) (575) – – Transfer to provision for taxation (2,637) 18,048 – – Acquisition of subsidiaries 1,849 1,205 – – Changes in fair value of derivative financial instruments designated in cash flow hedges (1,713) 2,366 – –

At end of the year 58,297 62,602 205 201 Singapore Technologies Engineering Ltd Think Ahead. 193 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

35. Deferred tax liabilities (continued)

Group Company 2009 2008 2009 2008 $’000 $’000 $’000 $’000

The deferred tax liabilities arise as a result of:

Excess of net book value over tax written down value of property, plant and equipment 19,828 5,961 69 118 Allowance for doubtful debts and stock obsolescence (9,227) (5,456) – – Other temporary differences 2,417 19,520 136 83 Changes in fair value of derivative financial instruments designated in cash flow hedges 1,387 3,100 – – Intangible assets 43,892 39,477 – –

58,297 62,602 205 201

36. long-term bank loans

Effective Group interest rate Maturity 2009 2008 % $’000 $’000

Bank loans 0.58% to 5.76% Up to 2013 648,854 549,631

Repayable: Within 1 year – 261,989 After 1 year 648,854 287,642

648,854 549,631

The bank loans are denominated in US dollars, Euro and Chinese Yuan. (2008: Singapore dollars, US dollars and Euro).

Included in the long-term bank loans is a loan amounting to $7,412,000 (RMB36,000,000) (2008: $nil) at 5.76% per annum and secured by a subsidiary’s land and guaranteed by a standby letter of credit.

In the prior year, a loan amounting to $261,870,000 at EURIBOR with margin ranging from 0.5% to 1.1% per annum was secured by a floating charge over a subsidiary’s plant and machinery. The Group had since re-structured the bank loans in 2009 and the bank loans had been fully repaid. 194

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

37. other loans

(a) Included in other loans are:

(i) US dollar denominated term notes of $1.1 million (US$0.8 million) (2008: $1.2 million (US$0.9 million)) and $0.2 million (US$0.2 million) (2008: $0.3 million (US$0.2 million)) owing to the Pennsylvania Industrial Development Authority and the Industrial Properties Corporation, respectively, by a US entity of the Group. These notes are secured by land and buildings of the entity and bear interest, respectively, at 2.75% and 4.0% (2008: 2.75% and 4.0%) per annum, which are also the effective interest rates, and are payable through 1 July 2019 and 28 June 2019, respectively.

(ii) Another US dollar denominated term note of $0.2 million (US$0.2 million) (2008: $0.3 million (US$0.2 million)) is owed by the same entity to the Pennsylvania Department of Community and Economic Development. This note is unsecured, bears interest of 2.75% (2008: 2.75%) per annum, which is also the effective interest rate, and is payable through 1 February 2012.

(b) an amount of $0.8 million (2008: $nil) relating to long-term loans from a minority shareholder of a subsidiary. The loans are unsecured with interest rates ranging from 3.85% to 4.36% per annum, which are also the effective interest rates, and are payable in 2014.

38. bonds

Group 2009 $’000

Principal 702,500 Unamortised discount (4,038)

698,462

Unamortised discount: Additions 4,297 Amortisation for the year (150) Translation difference (109)

4,038

The Group issued US$500,000,000 4.80% Notes due 2019 under its US$1.2 billion Multicurrency Medium Term Note Programme on 16 July 2009. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable every 6 months from the date of issue. The bonds are unconditionally and irrevocably guaranteed by the Company.

39. other long-term payables

During the year, a subsidiary entered into an arrangement with an external supplier for deferment of payment relating to purchase of equipment. The amount payable is unsecured, bears interest of 1.45% per annum, and is not expected to be repaid within the next 12 months. Singapore Technologies Engineering Ltd Think Ahead. 195 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

40. Due to a subsidiary

Amount due to a subsidiary of the Company is unsecured, interest-free and is not repayable in the foreseeable future.

41. share capital

Group and Company 2009 2008 $’000 $’000

Issued and fully paid At beginning of the year 2,998,603,162 (2008: 2,983,550,387) ordinary shares 586,614 554,888 Issued during the year 11,852,971 (2008: 15,052,775) ordinary shares 25,194 31,726 At end of the year 3,010,456,133 (2008: 2,998,603,162) ordinary shares 611,808 586,614

Included in share capital is a special share issued to the Minister for Finance (Incorporated). The special share enjoys all the rights attached to the ordinary shares. In addition, the special share carries the right to approve any resolution to be passed by the Company, either in general meeting or by its Board of Directors, on certain matters specified in the Company’s Articles of Association. The special share may be converted at any time into an ordinary share.

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.

The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”) of the Company were approved by its members at an Extraordinary General Meeting held on 23 November 2000. The ESOP, PSP and RSP are administered by the Executive Resource and Compensation Committee (“ERCC”) comprising three directors, Mr Peter Seah Lim Huat, Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang. Following approval of the new Share Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore Technologies Engineering Executive’s Share Option Scheme (“ESOS”), the predecessor to the ESOP, was terminated.

Singapore Technologies Engineering Share Option Plan (“ESOP”)

Information regarding ESOP is as follows:

(a) The exercise price of the options is equal to volume-weighted average price for the shares on the Singapore Exchange over the three consecutive trading days immediately preceding the date of grant.

(b) The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to be determined by ERCC and are settled in cash.

(c) The options granted expire after five years for non-executive directors, and 10 years for the employees of the Company and its subsidiaries. 196

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

During the financial year, the Company issued 10,215,827 (2008: 14,075,736) ordinary shares for cash at the respective price per share upon the exercise of options granted by the Company under ESOS and ESOP.

Grant no. No. of ordinary shares issued Price per ordinary share $

99R1 1,066,460 1.418 9902 258,000 2.000 2001 2,914,978 2.260 2002 55,500 1.808 2003 45,000 2.390 0102N 149,380 2.720 0108N 157,265 2.680 0202N 319,631 2.290 0208N 213,977 1.920 0302N 243,873 1.790 0308N 349,356 1.860 0402N 745,111 2.090 0402ND 228,875 2.090 0408N 982,764 2.120 0408ND 190,875 2.120 0502N 980,651 2.370 0502ND 54,625 2.370 0508N 872,465 2.570 0508ND 25,250 2.570 0602N 80,797 3.010 0608N 276,509 2.840 0703N 4,485 3.230 Singapore Technologies Engineering Ltd Think Ahead. 197 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and directors of the Company are as follows:

(i) Options outstanding under the ESOS/ESOP

Number of shares 2009 2008

ESOS At beginning of the year 12,196,551 16,289,332 Exercised (4,339,938) (3,752,621) Lapsed (504,510) (340,160)

At end of the year 7,352,103 12,196,551

Exercisable at end of the year 7,352,103 12,196,551

ESOP At beginning of the year 112,205,701 125,291,506 Exercised (5,875,889) (10,323,115) Lapsed (1,973,768) (2,762,690)

At end of the year 104,356,044 112,205,701

Exercisable at end of the year 87,883,347 67,141,259

(ii) Details of share options

2009

Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:

Balance Balance No. of Date of as at Options Options as at holders at Exercise grant 1.1.2009 lapsed exercised 31.12.2009 31.12.2009 price Exercisable period $

9.2.1999 1,334,060 267,600 1,066,460 – – 1.418 10.2.2001 to 9.2.2009 10.8.1999 464,910 206,910 258,000 – – 2.000 11.8.2001 to 10.8.2009 9.2.2000 9,244,291 30,000 2,914,978 6,299,313 135 * 2.260 10.2.2002 to 9.2.2010 9.2.2000 711,625 – 55,500 656,125 22 1.808 10.2.2002 to 9.2.2010 6.9.2000 441,665 – 45,000 396,665 18 2.390 7.9.2002 to 6.9.2010

Total 12,196,551 504,510 4,339,938 7,352,103 198

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

(ii) Details of share options (continued)

2009

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Balance Balance No. of Date of as at Options Options as at holders at Exercise grant 1.1.2009 lapsed exercised 31.12.2009 31.12.2009 price Exercisable period $

19.2.2001 4,571,626 31,537 149,380 4,390,709 374 * 2.720 20.2.2002 to 19.2.2011 10.8.2001 6,045,717 71,556 157,265 5,816,896 398 * 2.680 11.8.2002 to 10.8.2011 7.2.2002 4,435,553 35,339 319,631 4,080,583 308 * 2.290 8.2.2003 to 7.2.2012 12.8.2002 2,406,349 14,866 213,977 2,177,506 221 * 1.920 13.8.2003 to 12.8.2012 6.2.2003 2,522,817 – 243,873 2,278,944 244 * 1.790 7.2.2004 to 6.2.2013 6.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.2013 11.8.2003 3,518,273 1,981 349,356 3,166,936 384 * 1.860 12.8.2004 to 11.8.2013 11.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.2013 9.2.2004 5,183,441 16,482 745,111 4,421,848 528 * 2.090 10.2.2005 to 9.2.2014 9.2.2004 228,875 – 228,875 – – 2.090 10.2.2005 to 9.2.2009 9.2.2004 11,426 – – 11,426 1 2.090 10.2.2005 to 9.2.2014 10.8.2004 7,112,644 30,980 982,764 6,098,900 729 * 2.120 11.8.2005 to 10.8.2014 10.8.2004 202,375 11,500 190,875 – – 2.120 11.8.2005 to 10.8.2009 10.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.2014 7.2.2005 8,807,062 92,002 980,651 7,734,409 839 * 2.370 8.2.2006 to 7.2.2015 7.2.2005 309,750 – 54,625 255,125 13 # 2.370 8.2.2006 to 7.2.2010 7.2.2005 16,426 – – 16,426 2 2.370 8.2.2006 to 7.2.2015 10.8.2005 10,987,644 197,205 872,465 9,917,974 995 * 2.570 11.8.2006 to 10.8.2015 10.8.2005 299,043 – 25,250 273,793 16 # 2.570 11.8.2006 to 10.8.2010 10.8.2005 21,426 – – 21,426 2 2.570 11.8.2006 to 10.8.2015 9.2.2006 11,771,022 278,424 80,797 11,411,801 1,201 * 3.010 10.2.2007 to 9.2.2016 9.2.2006 359,750 – – 359,750 18 # 3.010 10.2.2007 to 9.2.2011 10.8.2006 13,458,052 346,221 276,509 12,835,322 1,308 * 2.840 11.8.2007 to 10.8.2016 10.8.2006 355,625 – – 355,625 18 # 2.840 11.8.2007 to 10.8.2011 15.3.2007 14,821,331 388,697 4,485 14,428,149 1,408 * 3.230 16.3.2008 to 15.3.2017 15.3.2007 360,000 – – 360,000 18 # 3.230 16.3.2008 to 15.3.2012 10.8.2007 14,042,322 456,978 – 13,585,344 1,509 * 3.610 11.8.2008 to 10.8.2017 10.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.2012

Total 112,205,701 1,973,768 5,875,889 104,356,044

* Includes 1 executive Director of the Company # Includes Directors of the Company and its subsidiaries Singapore Technologies Engineering Ltd Think Ahead. 199 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

(ii) Details of share options (continued)

2008

Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:

Balance Balance No. of Date of as at Options Options as at holders at Exercise grant 1.1.2008 lapsed exercised 31.12.2008 31.12.2008 price Exercisable period $

29.4.1998 1,021,500 59,000 962,500 – – 1.390 30.4.2000 to 29.4.2008 7.8.1998 75,000 15,000 60,000 – – 1.290 8.8.2000 to 7.8.2008 9.2.1999 2,029,740 – 695,680 1,334,060 29 1.418 10.2.2001 to 9.2.2009 10.8.1999 567,910 10,000 93,000 464,910 78 * 2.000 11.8.2001 to 10.8.2009 9.2.2000 11,291,850 226,160 1,821,399 9,244,291 191 ** 2.260 10.2.2002 to 9.2.2010 9.2.2000 829,125 30,000 87,500 711,625 26 1.808 10.2.2002 to 9.2.2010 6.9.2000 474,207 – 32,542 441,665 20 2.390 7.9.2002 to 6.9.2010

Total 16,289,332 340,160 3,752,621 12,196,551 200

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

(ii) Details of share options (continued)

2008

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Balance Balance No. of Date of as at Options Options as at holders at Exercise grant 1.1.2008 lapsed exercised 31.12.2008 31.12.2008 price Exercisable period $

19.2.2001 5,099,273 52,812 474,835 4,571,626 395 ** 2.720 20.2.2002 to 19.2.2011 10.8.2001 6,833,358 61,304 726,337 6,045,717 416 ** 2.680 11.8.2002 to 10.8.2011 7.2.2002 4,919,653 31,438 452,662 4,435,553 343 ** 2.290 8.2.2003 to 7.2.2012 12.8.2002 3,062,714 10,000 646,365 2,406,349 250 ** 1.920 13.8.2003 to 12.8.2012 6.2.2003 3,161,835 – 639,018 2,522,817 280 ** 1.790 7.2.2004 to 6.2.2013 6.2.2003 227,750 33,375 194,375 – – 1.790 7.2.2004 to 6.2.2008 6.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.2013 11.8.2003 4,783,284 1,228 1,263,783 3,518,273 445 ** 1.860 12.8.2004 to 11.8.2013 11.8.2003 247,125 58,000 189,125 – – 1.860 12.8.2004 to 11.8.2008 11.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.2013 9.2.2004 6,751,941 26,356 1,542,144 5,183,441 653 ** 2.090 10.2.2005 to 9.2.2014 9.2.2004 271,300 – 42,425 228,875 11 # 2.090 10.2.2005 to 9.2.2009 9.2.2004 16,426 – 5,000 11,426 1 2.090 10.2.2005 to 9.2.2014 10.8.2004 8,227,271 91,952 1,022,675 7,112,644 953 ** 2.120 11.8.2005 to 10.8.2014 10.8.2004 239,425 – 37,050 202,375 13 # 2.120 11.8.2005 to 10.8.2009 10.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.2014 7.2.2005 10,039,234 92,132 1,140,040 8,807,062 1,041 ** 2.370 8.2.2006 to 7.2.2015 7.2.2005 321,625 – 11,875 309,750 17 # 2.370 8.2.2006 to 7.2.2010 7.2.2005 31,426 – 15,000 16,426 2 2.370 8.2.2006 to 7.2.2015 10.8.2005 11,824,329 186,029 650,656 10,987,644 1,157 ** 2.570 11.8.2006 to 10.8.2015 10.8.2005 309,166 – 10,123 299,043 17 # 2.570 11.8.2006 to 10.8.2010 10.8.2005 31,426 – 10,000 21,426 2 2.570 11.8.2006 to 10.8.2015 9.2.2006 12,708,952 294,108 643,822 11,771,022 1,245 ** 3.010 10.2.2007 to 9.2.2016 9.2.2006 361,625 – 1,875 359,750 18 # 3.010 10.2.2007 to 9.2.2011 10.8.2006 14,219,586 436,727 324,807 13,458,052 1,355 ** 2.840 11.8.2007 to 10.8.2016 10.8.2006 355,625 – – 355,625 18 # 2.840 11.8.2007 to 10.8.2011 15.3.2007 15,683,232 583,655 278,246 14,821,331 1,460 ** 3.230 16.3.2008 to 15.3.2017 15.3.2007 360,000 – – 360,000 18 # 3.230 16.3.2008 to 15.3.2012 10.8.2007 14,846,773 803,574 877 14,042,322 1,574 ** 3.610 11.8.2008 to 10.8.2017 10.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.2012

Total 125,291,506 2,762,690 10,323,115 112,205,701

* Includes 1 executive Director and 1 past Director of the Company ** Includes 1 executive Director of the Company # Includes Directors of the Company and its subsidiaries Singapore Technologies Engineering Ltd Think Ahead. 201 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

(iii) Details of share options exercised

Exercise Proceeds from No. of shares price share issue Share price $ $’000 $

2009 January to March 1,921,090 1.418 – 2.840 3,295 2.19 – 2.62 April to June 1,393,746 1.790 – 3.230 3,002 2.29 – 2.58 July to September 1,668,147 1.790 – 2.720 3,677 2.43 – 2.78 October to December 5,232,844 1.790 – 3.230 12,234 2.72 – 3.33

10,215,827

2008 January to March 8,183,482 1.290 – 3.230 17,681 3.17 – 3.74 April to June 3,978,667 1.290 – 3.230 9,128 2.72 – 3.52 July to September 973,564 1.290 – 3.610 2,058 2.54 – 2.88 October to December 940,023 1.418 – 2.840 1,610 2.04 – 2.67

14,075,736

The weighted average share price for options exercised during the year was $2.812 (2008: $3.285). The weighted average remaining contractual life for these options is 4.97 years (2008: 5.74 years).

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a binomial model, taking into account the terms and conditions upon which the options were granted. No options were granted for the year ended 31 December 2009 and 31 December 2008. 202

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

Singapore Technologies Engineering Performance Share Plan (“PSP”)

Performance shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period if the targets are met. The final number of performance shares awarded will depend on the level of achievement of those targets and can range from 0% to 170% of the conditional award of performance shares. In addition, the final award for performance shares is conditional upon the performance targets for restricted shares that has the same end of performance period being met.

Year of grant 2009 2008 2007 Total

Number of performance shares

At grant date 1,687,000 1,632,000 1,513,000 4,832,000 Lapsed (169,484) (210,091) (241,603) (621,178)

Outstanding as at 31.12.2009 1,517,516 1,421,909 1,271,397 4,210,822

During the year, performance shares amounting to 1,158,500 ordinary shares were awarded in respect of grant made in 2006.

The fair value of the performance shares is determined on conditional grant date using the Monte Carlo simulation model.

The significant inputs to the model used for the conditional grants in 2007 to 2009 are as follows:

Year of grant 2009 2008 2007

Market conditions Volatility of MSCI Index (%) 33.10 20.93 13.66 Volatility of the Company’s shares (%) 18.88 15.51 14.59 Correlation of volatility of MSCI vs the Company (%) 67.50 45.30 26.83 Risk-free rate (%) 1.03 1.11 2.43 Share price ($) 2.26 3.36 3.62 Cost of equity (%) 7.86 9.60 8.27 Dividend yield (-- Management’s forecast in line with dividend policy --) Singapore Technologies Engineering Ltd Think Ahead. 203 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

41. share capital (continued)

Singapore Technologies Engineering Restricted Stock Plan (“RSP”)

Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a two-year performance period. The restricted shares will only be released to the recipient at the end of the performance qualifying period if the targets are met. The final number of restricted shares awarded will depend on the level of achievement of those targets and range between 0% and 150% of the conditional award of the restricted shares and will be delivered to recipients over a three-year vesting period; half at the end of the performance qualifying period and the balance will vest equally over the subsequent two years.

For non-executive directors, depending on the achievement of pre-determined targets over a one-year performance period, the final number of restricted shares awarded can range from zero to a maximum capped at 150% of the conditional award and will be released over a three-year 1 vesting period at 33 ⁄3% per year.

Number of Number of Number of Balance Date of restricted shares as restricted shares restricted shares outstanding as at grant at grant date lapsed released 31.12.2009

26 July 2007 897,000 237,367 374,732 284,901 12 November 2007 300,000 – 60,000 240,000 24 March 2008 7,603,183 607,627 – 6,995,556 24 March 2008 217,000 107,379 43,912 65,709 18 March 2009 8,286,892 310,785 – 7,976,107 18 March 2009 210,500 5,293 – 205,207

Total 17,514,575 1,268,451 478,644 15,767,480

The fair value of the restricted shares is determined at conditional grant date using the Monte Carlo simulation model.

The significant inputs to the model used for the conditional grant in 2008 and 2009 are as follows:

Year of grant 2009 2008

Volatility of the Company’s shares (%) 18.88 15.51 Risk-free rate (%) 0.72 – 1.29 0.94 – 1.32 Share price ($) 2.26 3.36 Dividend yield (--Management’s forecast in line with dividend policy--)

42. cApital reserves

Included in capital reserves are:

(a) an amount relating to share premium of the respective pooled enterprises, namely Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd and Singapore Technologies Marine Ltd classified as capital reserve upon the pooling of interests during the financial year ended 31 December 1997; and

(b) an amount relating to an excess capital contribution from minority shareholders of a subsidiary in China following the additional capital injection in prior year. 204

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

43. other reserves

Foreign currency Share-based translation Statutory Fair value payment reserve reserve reserve reserve Total $’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2008 (60,464) 394 25,987 39,502 5,419 Other comprehensive income: Net fair value changes on available-for-sale financial assets – – (26,324) – (26,324) Net fair value changes on cash flow hedges – – (2,642) – (2,642) Foreign currency translation differences (11,093) – 2 – (11,091) Total comprehensive income for the year (11,093) – (28,964) – (40,057) Cost of share-based payment – – – 17,940 17,940 Transfer from unappropriated profit to statutory reserve – 482 – – 482

At 31.12.2008 (71,557) 876 (2,977) 57,442 (16,216)

At 1.1.2009 (71,557) 876 (2,977) 57,442 (16,216) Other comprehensive income: Net fair value changes on available-for-sale financial assets – – 8,245 – 8,245 Net fair value changes on cash flow hedges – – (4,218) – (4,218) Foreign currency translation differences (25,808) – 315 – (25,493) Total comprehensive income for the year (25,808) – 4,342 – (21,466) Cost of share-based payment – – – 14,559 14,559 Transfer from unappropriated profit to statutory reserve – 330 – – 330

At 31.12.2009 (97,365) 1,206 1,365 72,001 (22,793) Singapore Technologies Engineering Ltd Think Ahead. 205 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

43. other reserves (continued)

Group 2009 2008 $’000 $’000

Net fair value changes on available-for-sale financial assets: - Net gain/(loss) on fair value changes during the year 8,043 (16,459) - Recognised in income statement, in other operating income 202 (9,865)

8,245 (26,324)

Net fair value changes on cash flow hedges: - Net loss on fair value changes during the year (12,413) (5,302) - Recognised in income statement, in other operating income 8,195 2,660

(4,218) (2,642)

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries whose functional currencies are different from that of the Group’s presentation currency.

As at 31 December 2009, bonds amounting to $68.7 million (US$48.9 million) have been designated as a hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries and are being used to hedge the Group’s exposure to foreign exchange risk on this investment. Gains or losses on the retranslation of these bonds are transferred to equity to offset any gains or losses on translation on the net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year.

Statutory reserve

In accordance with foreign Enterprise Law application to the wholly-owned subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. Subject to approval from the relevant PRC authorities the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for standard distribution to shareholders.

In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment, appropriations from the net profits are made to the Reserve Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from prior years (if any), and before profit distributions to the investors. The percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by the Board of Directors of the China entities.

Fair value reserve

Fair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired as well as the portion of the fair value changes on the derivative financial instruments designated as hedging instruments in cash flow hedges that is determined to be an effective hedge. 206

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

43. other reserves (continued)

Share-based payment reserve

Share-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to employees and non- executive directors. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options, performance shares and restricted shares. The expense for services received will be recognised over the vesting period.

44. retained earnings

Group 2009 2008 $’000 $’000

Retained by: The Company 414,437 510,612 Subsidiaries 352,933 281,792 Associated companies and joint ventures 95,394 101,315

862,764 893,719

45. Dividends

Group and Company 2009 2008 $’000 $’000

Final dividend paid in respect of the previous financial year of 4.0 cents (2008: 4.0 cents) per share 119,944 119,342 Special dividend paid in respect of the previous financial year of 8.8 cents (2008: 10.88 cents) per share 263,877 324,610 Interim dividend paid in respect of the current financial year of 3.0 cents (2008: 3.0 cents) per share 90,130 89,922

473,951 533,874 Additional final dividend paid in respect of the previous financial year due to issue of shares under ESOS/ESOP before books closure date 604 1,816

474,555 535,690

The Directors propose a final dividend of 4.0 cents (2008: 4.0 cents) per share amounting to $120.4 million (2008: $119.9 million) and a special dividend of 6.28 cents (2008: 8.8 cents) per share amounting to $188.9 million (2008: $263.9 million), in respect of the financial year ended 31 December 2009. The dividends have not been recognised as a liability as at year end as it is subject to approval at the Annual General Meeting of the Company. Singapore Technologies Engineering Ltd Think Ahead. 207 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

46. related party information

In addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with fellow subsidiaries within Temasek Group on terms agreed between the parties as follows:

Group 2009 2008 $’000 $’000

Sales and services rendered 23,636 13,401 Purchases and services received 24,524 34,578 Property, plant and equipment purchases 461 123 Interest income 1,823 10,731 Dividend income 192 213 Rental income 3,102 380 Rental expenses 4,102 4,156

47. cAsh and cash equivalents

Group Note 2009 2008 $’000 $’000

Fixed deposits with financial institutions 26 1,006,528 601,382 Cash and bank balances 26 507,082 217,543 Short-term loans to a related corporation 23 – 230,188 Bank overdrafts (1) (19)

1,513,609 1,049,094

Cash and cash equivalents denominated in currencies other than the functional currencies as at 31 December are as follows:

US dollars 463,553 98,746 Euro 158,060 118,023 GBP 21,377 3,298 208

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

48. commitments

(a) Capital commitments

Group 2009 2008 $’000 $’000

Capital expenditure contracted but not provided for in the financial statements 180,940 260,995

(b) Leases

Future minimum lease payments under non-cancellable operating leases are as follows:

Group 2009 2008 $’000 $’000

Within 1 year 28,321 19,787 Within 2 to 5 years 86,479 71,504 After 5 years 133,884 131,638

248,684 222,929

The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. The leases for leasehold land and buildings and office premises contain renewal options but not purchase options. Certain leases contain escalation clauses but do not provide for contingent rents. Lease terms do not contain restrictions on the Group activities concerning dividends, additional debt or further leasing.

(i) The Group has entered into commercial leases on four of its aircraft engines. The non-cancellable leases have an average lease term of about 1 month to 5 years.

Future lease payment receivables under non-cancellable operating leases are as follows:

Group 2009 2008 $’000 $’000

Within 1 year 1,358 2,023 Within 2 to 5 years 981 3,606

2,339 5,629 Singapore Technologies Engineering Ltd Think Ahead. 209 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

48. commitments (continued)

(ii) The Group has entered into commercial leases on its aircraft. These non-cancellable leases have remaining lease terms of 17 years. The leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases at the balance sheet date are as follows:

Group 2009 2008 $’000 $’000

Within 1 year 611 587 Within 2 to 5 years 2,442 2,348 After 5 years 7,276 7,584

10,329 10,519

(d) Investments

(i) As at 31 December 2009, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.2 million (2008: $20.3 million) in subsidiaries.

(ii) As at 31 December 2009, in respect of investments in unquoted equity shares of venture capital fund companies, there is uncalled capital contribution amounting to $0.2 million (2008: $0.6 million) for the Group.

(iii) On 3 September 2007, ST Aerospace Engineering Pte Ltd (“STA Engineering”) signed an agreement with Aviation Training Academy (Singapore) Pte Ltd (“ATAS”) to set up a commercial pilot training academy in Singapore known as ST Aerospace Training Academy Pte Ltd (“STATA”) (formerly known as ST Aviation Training Academy Pte. Ltd.) with a 70% and 30% shareholding respectively.

Pursuant to the agreement, if STATA and its subsidiaries are able to achieve the agreed profit before tax excluding minority interests for the second and fifth financial years, STA Engineering will grant two independent options which will entitle ATAS to purchase STA Engineering’s shareholdings of STATA, amounting to 5% of the total share capital of STATA for each option on the date of the exercise of the option (“First Option” and “Second Option”). If ATAS does not exercise the First Option by the expiry date, the First Option shall lapse and will not be carried forward to the Second Option.

The First Option may be exercised at any time during a six-month period from the date of the audited financial statements of STATA for the second financial year, while the Second Option may be exercised at any time during a six-month period from the date of the audited financial statements of STATA for the fifth financial year.

The price for the shares of the First Option and Second Option shall be at fair values as determined by an appraiser to be jointly appointed by shareholders and the appraiser shall determine the fair value in accordance with the principles set out in the agreement.

As at 31 December 2009, STATA and its subsidiaries have not achieved the agreed profit before tax excluding minority interests for the second financial year. 210

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

48. commitments (continued)

(d) Investments (continued)

(iv) As at 31 December 2009, the Group has outstanding commitments in respect of production for digital media intellectual properties to the extent of $0.2 million (2008: $1.4 million).

(v) As at 31 December 2009, the Group has outstanding commitment in respect of uncalled capital to the extent of $2.3 million (2008: $nil) in an associated company, GFM Maquinaria, S.A.P.I. de C.V. and $2.2 million (2008: $2.4 million) in a joint venture.

Joint Venture Agreement

On 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF Utilities Limited to form an Equity Joint Venture Company in Pune, India. The joint venture company will have a registered capital of US$6 million to be contributed by each party in the proportion of 26% and 74% respectively, which is to be contributed over three years. To-date, the joint venture company has not been set up.

49. segment information

(a) Analysis by business segments

The Group is organised on a worldwide basis into four main operating segments, namely:

(i) Aerospace

Provides a spectrum of maintenance and engineering services that include airframe, engine and component maintenance, repair and overhaul; engineering design and technical services; and aviation materials and management services, including Total Aviation Support.

(ii) Electronics

Delivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. It specialises in the design, development and integration of advanced electronics and communications systems, such as broadband radio frequency and satellite communication, e-Government solutions, information communications technologies and IT, rail and traffic management, real-time command and control, modelling and simulation, interactive digital media, intelligent building management and information security.

(iii) Land Systems

Delivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security and commercial applications.

(iv) Marine

Provides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. In shipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition to detailed design, construction, on-board system installation and integration, testing, commissioning to through-life support. It has also established a track record in providing high engineering content shiprepair and ship conversion services for a worldwide clientele. Singapore Technologies Engineering Ltd Think Ahead. 211 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

49. segment information (continued)

(a) Analysis by business segments (continued)

Other operations include research and development, treasury, investment holding and provision of management, consultancy, integrated logistics management, integrated facilities management, warehousing and other support services. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2009 or 2008.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Inter-segment pricing is on an arm’s length basis.

Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2009 Turnover External sales 1,872,124 1,370,781 1,167,450 948,917 188,515 – 5,547,787 Inter-segment sales 3,101 22,575 34,601 7,035 25,670 (92,982) –

1,875,225 1,393,356 1,202,051 955,952 214,185 (92,982) 5,547,787

Segment results 216,607 120,376 98,929 97,816 381,927 (364,692) 550,963 Investment income, net 187 (970) 362 653 413 (496) 149 Interest income 2,029 1,636 1,693 4,580 26,342 (23,592) 12,688

Operating profit 218,823 121,042 100,984 103,049 408,682 (388,780) 563,800 Financial expenses (24,640) (6,677) (10,063) (1,577) (37,036) 23,873 (56,120) Share of results of associated companies and joint ventures 34,105 911 4,469 807 – (1,413) 38,879

Profit from operations before taxation 228,288 115,276 95,390 102,279 371,646 (366,320) 546,559 Taxation (33,688) (22,996) (10,981) (20,516) (2,352) 371 (90,162) Minority interests (8,900) (1,477) (2,111) – – 21 (12,467)

Net profit attributable to shareholders 185,700 90,803 82,298 81,763 369,294 (365,928) 443,930 212

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

49. segment information (continued)

(a) Analysis by business segments (continued)

Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2009 Other assets 1,977,189 1,466,308 1,675,386 722,728 2,960,721 (2,191,144) 6,611,188 Associated companies and joint ventures 125,601 11,560 115,504 1,914 19,092 (292) 273,379

Segment assets 2,102,790 1,477,868 1,790,890 724,642 2,979,813 (2,191,436) 6,884,567

Segment liabilities 1,645,392 1,349,932 1,616,055 622,141 1,519,116 (1,544,265) 5,208,371

Capital expenditure 141,805 27,821 108,827 20,590 5,218 (3,505) 300,756 Depreciation and amortisation 89,089 25,847 28,383 16,654 2,785 – 162,758 Impairment loss/(write-back of impairment) (44) 1,417 42 – 93 (93) 1,415 Other non-cash expenses 10,525 271 1,751 – – – 12,547

Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2008 Turnover External sales 1,938,411 1,142,728 1,274,093 821,681 167,602 – 5,344,515 Inter-segment sales 2,543 14,976 6,786 73 24,406 (48,784) –

1,940,954 1,157,704 1,280,879 821,754 192,008 (48,784) 5,344,515

Segment results 235,310 117,481 90,528 72,276 498,131 (485,734) 527,992 Investment income, net 21,001 (18,627) (6,690) (375) – – (4,691) Interest income 4,374 3,680 4,424 5,506 26,610 (23,443) 21,151

Operating profit 260,685 102,534 88,262 77,407 524,741 (509,177) 544,452 Financial expenses (21,434) (10,282) (8,003) (2,244) (22,800) 22,076 (42,687) Share of results of associated companies and joint ventures 32,869 1,688 4,469 40 – (129) 38,937

Profit from operations before taxation 272,120 93,940 84,728 75,203 501,941 (487,230) 540,702 Taxation (37,403) (22,817) (1,629) (703) 12,668 (2,055) (51,939) Minority interests (9,026) (3,012) (3,152) – – 63 (15,127)

Net profit attributable to shareholders 225,691 68,111 79,947 74,500 514,609 (489,222) 473,636 Singapore Technologies Engineering Ltd Think Ahead. 213 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

49. segment information (continued)

(a) Analysis by business segments (continued)

Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2008 Other assets 1,965,947 1,408,125 1,375,831 702,727 2,417,084 (2,140,021) 5,729,693 Associated companies and joint ventures 137,386 11,305 112,111 241 1,528 507 263,078

Total assets 2,103,333 1,419,430 1,487,942 702,968 2,418,612 (2,139,514) 5,992,771

Segment liabilities 1,687,352 1,317,479 1,317,131 607,695 892,814 (1,506,816) 4,315,655

Capital expenditure 104,343 39,835 32,412 21,711 2,754 – 201,055 Depreciation and amortisation 97,717 22,335 20,418 16,218 2,105 – 158,793 Impairment loss 263 18,688 6,892 – 118 (118) 25,843 Other non-cash expenses 11,934 90 92 – 1 – 12,117

(b) Analysis by country of incorporation

Turnover is based on the country of incorporation regardless of where the goods are produced or services rendered. Non-current assets, excluding derivative financial instruments and deferred tax assets, are based on the location of those assets.

Turnover Non-Current Assets 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Asia 3,790,209 3,490,238 1,001,044 815,877 USA 1,361,119 1,379,309 617,791 632,636 Europe 345,877 416,804 413,455 434,657 Others 50,582 58,164 116,050 116,113

5,547,787 5,344,515 2,148,340 1,999,283

Turnover is based on the location of customers regardless of where the goods are produced or services rendered.

Turnover 2009 2008 $’000 $’000

Asia 3,093,411 2,538,725 USA 1,430,243 1,522,881 Europe 710,974 743,130 Others 313,159 539,779

5,547,787 5,344,515 214

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

50. financial risk management objectives and policies

The Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and credit risks, arising from its operations and the use of financial instruments. The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bankers’ guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, cash and short-term deposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currency swap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor or collar option (“Permitted Transactions”). These instruments are generic in nature with no embedded or leverage features and any deviation from these instruments would require specific approval from the Board of Directors. The Group’s accounting policies in relation to derivatives are set out in Note 2.

The policies for managing each of these risks are broadly summarised below.

Interest rate risk

The Group has cash balances placed with reputable banks, financial institutions and a related corporation. The Group manages its interest rate risk on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flow requirements and optimising yield.

The Group’s debt includes bank borrowings and lease commitments. The Group seeks to minimise its interest exposure through options to refinance the debt instruments and/or enter into interest rate swaps, where appropriate, over the duration of its borrowings.

Movements in interest rates will therefore have an impact on the Group. A change of 200 basis points in interest rate at the reporting date would increase/decrease income statement by the amounts shown below. This analysis assumes that all other variables remain constant.

Income statement 200bp 200bp increase decrease $’000 $’000

The Group

2009 Bank loans and loans payable (1,224) 1,224 Loans receivable 829 (829)

2008 Bank loans (3,532) 3,532

Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings, investments and loan receivables, where applicable. Singapore Technologies Engineering Ltd Think Ahead. 215 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

50. financial risk management objectives and policies (continued)

Foreign exchange risk

The Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and incurring costs denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies. The Group’s foreign exchange exposures are primarily from US dollars and Euro and the Group enters mainly into forward currency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group’s hedging policy.

The Company’s centralised Treasury Unit facilitates intra-group foreign exchange transactions within the Group to net-off the foreign exchange exposures before proceeding to transact the hedge with banks.

The Company’s centralised Treasury Unit executes the Group’s material foreign exchange transactions. Foreign exchange transactions are executed with segregation of duties between authorised dealers and back office. Only authorised dealers can transact with the banks on behalf of the Group, with back office confirming the deals. The dealers’ limits and permitted treasury instruments in the form of an authorisation matrix and mandates are communicated to the banks for compliance.

Market risk

The Group has strategic investments in quoted equity shares. The market value of these investments will fluctuate with market conditions.

The table below summarises the impact to the Group’s fair value reserve in equity and income statement arising as a result of a 10% increase/ decrease in the fair value of the quoted investments. This analysis assumes that all other variables remain constant.

Equity Income statement 10% 10% 10% 10% increase decrease increase decrease $’000 $’000 $’000 $’000

The Group

2009 Quoted investments 1,710 (1,710) 171 (171)

2008 Quoted investments 958 (958) 37 (37) 216

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

50. financial risk management objectives and policies (continued)

Liquidity risk

To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capital requirements regularly.

The table below analyses the Group’s financial liabilities that will be settled on a net basis and certain derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows.

Within More than Total 1 year 2 to 5 years 5 years $’000 $’000 $’000 $’000

The Group

2009 Bank loans 732,364 83,510 648,854 – Bonds 702,500 – – 702,500 Other loans 2,328 240 1,461 627 Lease obligations 6,211 2,050 4,161 – Bank overdrafts 1 1 – – Other long-term payables 4,357 2,904 1,453 – Trade and other payables 1,382,874 1,382,874 – – Derivative financial instruments: • Forward currency contracts - gross payments 44,336 42,106 2,230 – • Forward currency contracts - gross receipts 434,134 423,675 10,459 – • Cross currency swap - gross receipts 300,000 – 300,000 – • Interest rate swaps - settled net 3,321 3,321 – –

2008 Bank loans 872,404 584,762 287,642 – Other loans 1,847 240 811 796 Lease obligations 8,098 2,025 6,073 – Bank overdrafts 19 19 – – Trade and other payables 1,395,285 1,395,285 – – Derivative financial instruments: • Forward currency contracts - gross payments 80,403 80,403 – – • Forward currency contracts - gross receipts 451,810 363,447 88,363 – • Interest rate swaps - settled net 6,252 6,252 – – Singapore Technologies Engineering Ltd Think Ahead. 217 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

50. financial risk management objectives and policies (continued)

Within More than No specific Total 1 year 2 to 5 years 5 years terms $’000 $’000 $’000 $’000 $’000

The Company

2009 Creditors and accruals 41,650 41,650 – – – Due to a subsidiary 54,000 – – – 54,000

2008 Creditors and accruals 56,855 56,855 – – – Due to a subsidiary 54,000 – – – 54,000

Credit risk

Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required for customers of lower credit standing.

Counterparties to financial instruments consist of prime financial institutions and related corporations, as disclosed in Notes 15 and 23.

As at 31 December 2009, there were no significant concentrations of credit risk, except for 37% (2008: 26%) of trade debts relating to three major customers of the respective subsidiaries. The table below analyses the trade debtors by the Group’s four main operating segments.

Group 2009 2008 $’000 $’000

Aerospace 280,300 412,235 Electronics 291,367 278,628 Land Systems 245,733 147,932 Marine 81,802 106,619 Others 27,770 23,261

926,972 968,675 218

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models as appropriate.

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.

Quoted prices in active Significant markets for other Significant identical observable unobservable instruments inputs inputs Note (Level 1) (Level 2) (Level 3) Total $’000 $’000 $’000 $’000

The Group

2009 Financial Assets

Available-for-sale - Equity investments (quoted) 15 17,101 – – 17,101 - Venture capital funds and limited partnership 15 – – 1,342 1,342 - Bonds (unquoted) 25 – 195,541 – 195,541 Fair value through profit and loss - Equity investments (quoted) 25 1,710 – – 1,710 Derivatives - Forward currency contracts – 6,958 – 6,958 - Cross currency swap – 6,405 – 6,405 - Embedded derivatives – 15,918 – 15,918

18,811 224,822 1,342 244,975

Financial Liabilities

Derivatives - Forward currency contracts – 3,820 – 3,820 - Interest rate swaps – 16,539 – 16,539 - Embedded derivatives – 1,127 – 1,127

– 21,486 – 21,486 Singapore Technologies Engineering Ltd Think Ahead. 219 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

Fair value hierarchy

The Group classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy have the following levels:

(a) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

(b) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

The following methods and assumptions are used to estimate the fair value of each class of financial instruments.

Bank balances, other liquid funds and short-term receivables

The carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.

Quoted and unquoted investments

The fair values of quoted investments are determined directly by reference to their quoted market prices for these investments as at balance sheet date. For unquoted investments, it is not practicable to determine the fair values because of the lack of quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. For unquoted bonds, the investments are valued using valuation models which uses observable data.

For unquoted investments in venture capital funds and limited partnerships as stated in Note 15, the fair value is determined by reference to valuation provided by non-related fund managers based on non-observable data. Changing one or more of the inputs to reasonable alternative assumptions is not expected to have a material impact on the changes in fair value. 220

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

Quoted and unquoted investments (continued)

Movements in level 3 financial instruments measured at fair value

The following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservable inputs (Level 3).

Equity instruments (unquoted) $’000

2009 Opening balance 1,804 Total gains or losses: - recognised in income statement, other operating income 103 - recognised in other comprehensive income (471) Purchases 57 Sales (151)

Closing balance 1,342

Total gains or losses for the year included in income statement (presented in other operating income) for assets held at 31 December 2009 103

Long-term receivables

The fair values of long-term receivables are estimated based on the expected cash flows discounted to present value.

Short-term borrowings and other current payables

The carrying amounts approximate fair values because of the short period to maturity of these instruments.

Derivatives

Forward currency contracts, interest rate swaps, cross currency swap and embedded derivatives are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.

Bonds

The fair value of the US$500 million bonds as at 31 December 2009 approximates $704.1 million and is determined by reference to market value. Singapore Technologies Engineering Ltd Think Ahead. 221 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

Set out below is a comparison by category of carrying amounts of all the Group’s financial instruments that are carried in the financial statements.

Classification of financial instruments

Fair value Liabilities Non- through Derivatives at financial Loans and profit or used for Available- Held-to- amortised assets/ receivables loss hedging for-sale maturity cost liabilities Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

2009 Assets Property, plant and equipment – – – – – – 1,166,677 1,166,677 Associated companies and joint ventures – – – – – – 273,379 273,379 Investments 1,186 – – 20,278 – – – 21,464 Intangible assets – – – – – – 642,784 642,784 Investment properties – – – – – – 2,009 2,009 Long-term receivables 44,437 – – – – – – 44,437 Finance lease receivables 19,613 – – – – – – 19,613 Derivative financial instruments – 4,234 14,508 – – – – 18,742 Deferred tax assets – – – – – – 127,196 127,196 Stocks and work-in-progress – – – – – – 1,364,296 1,364,296 Trade debtors 926,972 – – – – – 135,255 1,062,227 Due from related corporations 4,082 – – – – – – 4,082 Advances and other debtors 92,691 742 9,797 – – – 284,996 388,226 Short-term investments – 1,710 – 195,541 38,574 – – 235,825 Bank balances and other liquid funds 1,513,610 – – – – – – 1,513,610

2,602,591 6,686 24,305 215,819 38,574 – 3,996,592 6,884,567

Liabilities Advance payments from customers – – – – – – 1,337,694 1,337,694 Creditors and accruals – 485 3,633 – – 1,385,778 2,496 1,392,392 Provisions – – – – – – 211,851 211,851 Progress billings in excess of work-in-progress – – – – – – 557,329 557,329 Provision for taxation – – – – – – 178,734 178,734 Short-term bank loans – – – – – 83,510 – 83,510 Lease obligations – – – – – 5,552 – 5,552 Long-term bank loans – – – – – 648,854 – 648,854 Other loans – – – – – 2,328 – 2,328 Other payables – – – – – 1,453 – 1,453 Bonds – – – – – 698,462 – 698,462 Bank overdrafts – – – – – 1 – 1 Deferred income – – – – – – 14,546 14,546 Deferred tax liabilities – – – – – – 58,297 58,297 Derivative financial instruments – 309 17,059 – – – – 17,368

– 794 20,692 – – 2,825,938 2,360,947 5,208,371 222

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

The Group

2008 Assets Property, plant and equipment – – – – – – 1,019,084 1,019,084 Associated companies and joint ventures – – – – – – 263,078 263,078 Investments 1,162 – – 13,902 38,352 – – 53,416 Intangible assets – – – – – – 641,090 641,090 Investment properties – – – – – – 17,371 17,371 Long-term receivables 1,151 – – – – – – 1,151 Finance lease receivables 15,850 – – – – – – 15,850 Derivative financial instruments – 2,950 13,424 – – – – 16,374 Deferred tax assets – – – – – – 138,128 138,128 Stocks and work-in-progress – – – – – – 1,286,331 1,286,331 Trade debtors 968,675 – – – – – 139,554 1,108,229 Due from related corporations 234,078 – – – – – – 234,078 Advances and other debtors 107,457 253 9,885 – – – 261,491 379,086 Short-term investments – 369 – 211 – – – 580 Bank balances and other liquid funds 818,925 – – – – – – 818,925

2,147,298 3,572 23,309 14,113 38,352 – 3,766,127 5,992,771

Liabilities Advance payments from customers – – – – – – 1,091,640 1,091,640 Creditors and accruals – 866 7,502 – – 1,395,285 2,516 1,406,169 Provisions – – – – – – 185,415 185,415 Progress billings in excess of work-in-progress – – – – – – 475,746 475,746 Provision for taxation – – – – – – 177,647 177,647 Short-term bank loans – – – – – 322,773 – 322,773 Lease obligations – – – – – 7,145 – 7,145 Long-term bank loans – – – – – 549,631 – 549,631 Other loans – – – – – 1,847 – 1,847 Bank overdrafts – – – – – 19 – 19 Deferred income – – – – – – 11,496 11,496 Deferred tax liabilities – – – – – – 62,602 62,602 Derivative financial instruments – – 23,525 – – – – 23,525

– 866 31,027 – – 2,276,700 2,007,062 4,315,655 Singapore Technologies Engineering Ltd Think Ahead. 223 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

Liabilities Non-financial Loans and at amortised assets/ receivables cost liabilities Total $’000 $’000 $’000 $’000

The Company

2009 Assets Property, plant and equipment – – 711 711 Subsidiaries – – 588,477 588,477 Associated companies and joint ventures – – 17,707 17,707 Due from related corporations 29 – – 29 Advances and other debtors 339,657 – 439 340,096 Long-term receivables, current 90 – – 90 Bank balances and other liquid funds 241,984 – – 241,984

581,760 – 607,334 1,189,094

Liabilities Creditors and accruals – 41,650 – 41,650 Provision for taxation – – 5,204 5,204 Deferred tax liabilities – – 205 205 Due to a subsidiary – 54,000 – 54,000

– 95,650 5,409 101,059

2008 Assets Property, plant and equipment – – 1,016 1,016 Subsidiaries – – 574,453 574,453 Associated companies and joint ventures – – 50 50 Due from related corporations 139,198 – – 139,198 Advances and other debtors 340,103 – 93 340,196 Long-term receivables, current 180 – – 180 Bank balances and other liquid funds 231,195 – – 231,195

710,676 – 575,612 1,286,288

Liabilities Creditors and accruals – 56,855 – 56,855 Provision for taxation – – 5,927 5,927 Short-term bank loans – 25,300 – 25,300 Deferred tax liabilities – – 201 201 Due to a subsidiary – 54,000 – 54,000

– 136,155 6,128 142,283 224

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

Derivative financial instruments

2009 2008 Contractual/ Estimated fair value Contractual/ Estimated fair value notional notional Note amount Asset Liability amount Asset Liability $’000 $’000 $’000 $’000 $’000 $’000

Cash flow hedges Forward currency contracts: - to hedge confirmed sales in foreign currencies (a)(i) 186,931 2,497 (2,386) 282,136 10,555 (1,252) - to hedge firm purchase commitments in foreign currencies (a)(i) 39,930 414 (533) 72,175 1,681 (2,684) - to hedge accounts receivable commitments in foreign currencies (a)(i) 2,184 76 – – – – - to hedge accounts payable commitments in foreign currencies (a)(i) 381 56 – – – – Interest rate swaps (b) 581,000 – (16,539) 417,465 – (23,525) Cross currency swap (c) 300,000 6,405 – – – – Other derivatives - embedded derivatives (a)(i) 173,113 11,498 (818) 167,787 9,002 –

Fair value hedges Forward currency contracts: - to hedge confirmed sales in foreign currencies (a)(i) 118,241 1,774 (222) 122,232 498 (3,566) - to hedge accounts receivable in foreign currencies (a)(i) 62,387 1,585 (194) 31,824 1,573 –

Non-hedging instruments Forward currency contracts: - sales (a)(ii) 64,391 556 (383) 15,618 – (170) - purchases (a)(ii) 4,025 – (102) 8,228 253 (251) Other derivatives - embedded derivatives (a)(ii) 66,996 4,420 (309) 109,853 2,950 (445)

Total 29,281 (21,486) 26,512 (31,893) Less: Current portion (10,539) 4,118 (10,138) 8,368

Non-current portion 18,742 (17,368) 16,374 (23,525) Singapore Technologies Engineering Ltd Think Ahead. 225 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

51. fAir value of financial instruments (continued)

(a) Forward currency contracts

(i) As at 31 December 2009, the Group has forward currency contracts and embedded derivative separated from the foreign currency portion of a sales contract amounting to $583,167,000 (2008: $676,154,000) designated as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreign currencies, accounts receivable in foreign currencies and accounts payable in foreign currencies.

The maturity dates of the forward currency contracts and embedded derivative separated from the foreign currency portion of a sales contract approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods up to 5 years from the financial year end.

(ii) As at 31 December 2009, the Group has outstanding forward currency contracts and embedded derivatives separated from the foreign currency portion of sales contracts amounting to $135,412,000 (2008: $133,699,000), which are not designated as hedges of confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.

(b) Interest rate swaps

As at 31 December 2009, the Group has outstanding interest rate swaps amounting to $581,000,000 (2008: $417,465,000), which are designated as cash flow hedges.

The USD interest rate swaps are being used to hedge the exposure to changes in the fair value of the 100% unsecured USD long-term loans. Under the USD interest rate swaps, the Group pays fixed rates of interest of 3.68% to 3.86% (2008: 3.68% to 3.86%) per annum and receives variable rates of interest equal to the LIBOR on the notional amount. The USD interest rate swaps have the same maturity terms as the unsecured USD long-term loans.

The Euro interest rate swap is being used to hedge the exposure to changes in the fair value of the same unsecured long-term loan. Under the Euro interest rate swap, the Group pays a fixed rate of interest of 2.95% per annum and receives a variable rate of interest equal to the EURIBOR + 1.2% on the notional amount. The Euro interest rate swap has the same maturity terms as the unsecured long-term loan.

In 2008, the Euro interest rate swap is being used to hedge the exposure to changes in the fair value of the 50% secured Euro long-term loan. Under the Euro interest rate swap, the Group pays a fixed rate of interest of 3.96% per annum and receives a variable rate of interest equal to the EURIBOR on the notional amount. The Euro interest rate swap has the same maturity terms as the secured Euro long-term loan. Subsequent to 31 December 2008, the Euro interest rate swap was terminated at the prevailing market rate.

As at 31 December 2009, the Group has an outstanding cross currency swap amounting to $300,000,000 (2008: $nil), which is designated as cash flow hedge.

The SGD cross currency swap converts the SGD bank loan with floating SGD interest rate at SIBOR + 1.325% to an equivalent Euro bank loan (approximately Euro 145,300,000) with floating Euro interest at EURIBOR + 1.2%. 226

Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

52. cApital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustment to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2009 and 31 December 2008.

The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect.

Group 2009 2008 $’000 $’000

Gross debt Bank loans 732,364 872,404 Bonds 698,462 – Capitalised lease obligations 5,552 7,145 Other loans 2,328 1,847

1,438,706 881,396 Bank overdrafts 1 19

1,438,707 881,415

Shareholders’ funds Share capital 611,808 586,614 Other reserves 93,530 100,107 Retained earnings 862,764 893,719

1,568,102 1,580,440 Minority interests 108,094 96,676

1,676,196 1,677,116

Gross debt equity ratio 85.8% 52.6%

Cash and cash equivalents 1,513,609 1,049,094 Short-term investments 235,825 580

1,749,434 1,049,674 Gross debt (excluding bank overdrafts) (1,438,706) (881,396)

Net cash position 310,728 168,278 Singapore Technologies Engineering Ltd Think Ahead. 227 Annual Report 2009 Notes to the Financial Statements 31 December 2009 (Currency - Singapore dollars unless otherwise stated)

53. subsequent events

A subsidiary in the Group had entered into an agreement on 20 January 2010 to sell its 51% owned subsidiary, ST Electronics-PCI Co., Ltd for a cash consideration of $1.47 million (RMB7.14 million). 228

SGX Listing Manual Requirements 31 December 2009 (Currency - Singapore dollars)

Interested person transactions

Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:

Aggregate value of all transactions excluding transactions conducted Aggregate value of all transactions under a Shareholders’ Mandate conducted under a Shareholders’ pursuant to Rule 920 of the SGX Listing Mandate pursuant to Rule 920 of the Manual SGX Listing Manual 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Transactions for the Sale of Goods and Services

Keppel Corporation Ltd and its Associates – – – 6,058 SembCorp Industries Ltd and its Associates – – 160 151 SembCorp Marine Ltd and its Associates – – – 277 Singapore Airport Terminal Services Limited and its Associates – – 2,512 420 Singapore Computer Systems Limited and its Associates – – – 282 Singapore Telecommunications Limited and its Associates – – 272 2,393 SMRT Corporation Ltd and its Associates – – 1,625 – StarHub Ltd and its Associates – – – 430 Temasek Holdings (Private) Limited and its Associates – – 6,210 3,144

– – 10,779 13,155 Singapore Technologies Engineering Ltd Think Ahead. 229 Annual Report 2009 SGX Listing Manual Requirements 31 December 2009 (Currency - Singapore dollars)

Interested person transactions (continued)

Aggregate value of all transactions excluding transactions conducted Aggregate value of all transactions under a Shareholders’ Mandate conducted under a Shareholders’ pursuant to Rule 920 of the SGX Mandate pursuant to Rule 920 of Listing Manual the SGX Listing Manual 2009 2008 2009 2008 $’000 $’000 $’000 $’000

Transactions for the Purchase of Goods and Services

CapitaLand Limited and its Associates – – 1,733 597 SembCorp Industries Ltd and its Associates – – 190 – Singapore Airport Terminal Services Limited and its Associates – – 2,434 – Singapore Computer Systems Limited and its Associates – – – 2,395 Singapore Telecommunications Limited and its Associates – – 2,395 238 SMRT Corporation Ltd and its Associates – – 1,057 845 SNP Corporation Ltd – – – 161 StarHub Ltd and its Associates – – 433 322 Temasek Holdings (Private) Limited and its Associates – – 15,170 20,637

– – 23,412 25,195

Investment/Divestment/Leasing Transactions

SembCorp Industries Ltd and its Associates 1,529 – – –

Treasury Transactions

Temasek Holdings (Private) Limited and its Associates – – 652,130 796,872

Total Interested Person Transactions 1,529 – 686,321 835,222 230

Sectoral Financial Review - Aerospace

INCOME STATEMENT

2009 2008 $’000 $’000

Turnover 1,875,225 1,940,954 Cost of sales (1,556,683) (1,565,515) Gross profit 318,542 375,439

Other operating income, net 4,244 27,396 Distribution and selling expenses (11,929) (25,970) Administrative expenses (91,258) (98,863) Other operating expenses (15,506) (16,386) Profit from operations before taxation, other income and financial expenses 204,093 261,616 Other income/(expenses), net 14,730 (931) Financial expenses (24,640) (21,434) 194,183 239,251 Share of results of associated companies and joint ventures 34,105 32,869 Profit from operations before taxation 228,288 272,120 Taxation (33,688) (37,403) Profit from operations after taxation 194,600 234,717

Attributable to: Shareholder of the Company 185,700 225,691 Minority interests 8,900 9,026 194,600 234,717 Singapore Technologies Engineering Ltd Think Ahead. 231 Annual Report 2009 Sectoral Financial Review - Aerospace

BALANCE SHEET 2009 2008 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 770,076 742,433 Associated companies and joint ventures 125,601 137,386 Investments 1,342 1,804 Intangible assets 9,311 3,317 Long-term receivables, non-current 32,064 117 Derivative financial instruments 6,405 - Deferred tax assets 44,551 45,152 989,350 930,209 Current assets Stocks and work-in-progress 388,165 413,610 Trade debtors 363,844 503,565 Due from related corporations 4,244 27,804 Advances and other debtors 82,954 110,359 Long-term receivables, current 7,399 281 Short-term investments 91 83 Bank balances and other liquid funds 266,743 117,422 1,113,440 1,173,124 TOTAL ASSETS 2,102,790 2,103,333 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 110,602 92,594 Creditors and accruals 571,976 834,406 Provisions 63,271 57,264 Progress billing in excess of work-in-progress 95,622 86,202 Provision for taxation 81,107 64,105 Short-term bank loans - 51,863 Lease obligations, current 1,644 1,603 Long-term bank loans, current - 261,879 924,222 1,449,916 NET CURRENT ASSET/(CURRENT LIABILITIES) 189,218 (276,792) Non-current liabilities Advance payments from customers, non-current 287,884 159,866 Deferred income 2,199 295 Deferred tax liabilities 8,844 12,320 Lease obligations, non-current 3,583 5,347 Long-term bank loans, non-current 360,442 - Other loans, non-current 757 - Provision for pension benefits 2,496 2,516 Derivative financial instruments 1,916 4,043 Loans from related corporations 53,049 53,049 721,170 237,436 TOTAL LIABILITIES 1,645,392 1,687,352 NET ASSETS 457,398 415,981 Share capital and reserves 412,210 375,925 Minority interests 45,188 40,056 457,398 415,981 TOTAL EQUITY AND LIABILITIES 2,102,790 2,103,333 232

Sectoral Financial Review - Aerospace

STATEMENT OF CASH FLOWS

2009 2008 $’000 $’000

Net cash from operating activities 456,559 29,762

Net cash (used in)/from investing activities (86,844) 20,540 Proceeds from sale of property, plant and equipment 4,322 9,094 Dividends from associated companies 42,495 35,105 Dividends from investments 104 154 Proceeds from sale and maturity of investments 128 121,396 Purchase of property, plant and equipment (130,148) (103,213) Purchase of investments (57) - Additional investment in associated companies - (2,795) Acquisition of subsidiaries (7,248) (147) Acquisition of additional interest in subsidiaries (320) (60,259) Exchange difference on investment activities 3,880 21,205

Net cash used in financing activities (245,851) (90,037) Capital contribution from minority shareholders of a subsidiary 5,092 2,836 Loan to an associated company (3,022) - (Repayment of)/proceeds from inter-company loans, net (117,166) 168,996 Repayment of lease obligations, net (1,578) (1,513) Proceeds from long-term bank loans, net 358,815 - (Repayment of)/proceeds from short-term bank loans, net (313,742) 609 Dividends paid to shareholder (142,629) (213,816) Dividends paid to minority shareholders of subsidiaries (8,514) (10,293) Interest paid (24,589) (21,544) Exchange difference on financing activities 1,482 (15,312)

Net increase/(decrease) in cash and cash equivalents 123,864 (39,735) Cash and cash equivalents at beginning of the year 143,194 182,973 Exchange difference on cash and cash equivalents at beginning of the year (315) (44) Cash and cash equivalents at end of the year 266,743 143,194 Singapore Technologies Engineering Ltd Think Ahead. 233 Annual Report 2009 Sectoral Financial Review - Aerospace

FINANCIAL HIGHLIGHTS

2009 2008 2007 2006 2005 $’000 $’000 $’000 $’000 $’000

Turnover 1,875,225 1,940,954 1,837,769 1,675,493 1,235,911 EBITDA 288,938 331,937 381,857 321,464 233,582 EBIT 199,849 234,220 303,441 237,080 194,490 Profit before tax 228,288 272,120 341,162 305,280 255,443 Profit after tax and minority interests 185,700 225,691 270,479 255,036 210,294 Shareholders’ funds 412,210 375,925 409,977 417,680 463,024 Total assets 2,102,790 2,103,333 2,107,305 1,987,885 1,401,366 Net assets 457,398 415,981 507,284 512,220 497,982 Capital expenditure 130,148 103,213 111,091 158,373 86,973 Earnings per share (cents) 92.85 112.85 135.24 127.52 105.15 Return on sales (%) 10.4 12.1 15.6 15.6 18.1 Return on equity (%) 39.9 52.6 58.4 54.2 40.8 Return on total assets (%) 9.3 11.2 13.6 13.2 15.9 Net assets value per share (cents) 228.70 207.99 253.64 256.11 248.99

Productivity Data Average staff strength (number) 7,253 7,081 6,757 5,880 5,057 Sales per employee ($) 258,545 274,107 271,980 284,948 244,396 Profit after tax per employee ($) 25,603 31,873 40,029 43,373 41,585 Employment costs 594,184 639,900 605,220 589,440 438,163 Employment costs per $ of turnover ($) 0.32 0.33 0.33 0.35 0.35

Economic Value Added 146,146 198,653 235,931 194,390 175,200 Economic Value Added spread (%) 11.8 17.8 22.5 19.5 25.8 Economic Value Added per employee ($) 20,150 28,054 34,917 33,060 34,645

Value added 944,048 1,047,825 1,043,873 981,309 729,921 Value added per employee ($) 130,160 147,977 154,488 166,889 144,339 Value added per $ of employment costs ($) 1.59 1.64 1.72 1.66 1.67 Value added per $ of gross property, plant and equipment ($) 0.66 0.78 0.79 0.81 1.09 Value added per $ of turnover ($) 0.50 0.54 0.57 0.59 0.59 234

Sectoral Financial Review - Electronics

INCOME STATEMENT

2009 2008 $’000 $’000

Turnover 1,393,356 1,157,704 Cost of sales (1,002,368) (781,489) Gross profit 390,988 376,215

Other operating income/(loss), net 646 (14,905) Distribution and selling expenses (97,701) (89,745) Administrative expenses (132,228) (114,919) Other operating expenses (53,881) (53,500) Profit from operations before taxation, other income and financial expenses 107,824 103,146 Other income/(expenses), net 13,218 (612) Financial expenses (6,677) (10,282) 114,365 92,252 Share of results of associated companies and joint venture 911 1,688 Profit from operations before taxation 115,276 93,940 Taxation (22,996) (22,817) Profit from operations after taxation 92,280 71,123

Attributable to: Shareholder of the Company 90,803 68,111 Minority interests 1,477 3,012 92,280 71,123 Singapore Technologies Engineering Ltd Think Ahead. 235 Annual Report 2009 Sectoral Financial Review - Electronics

BALANCE SHEET 2009 2008 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 57,084 58,996 Investment property - 1,389 Associated companies and joint venture 11,560 11,305 Investments 16,792 12,425 Intangible assets 363,993 364,998 Long-term receivables - 4 Deferred tax assets 25,790 23,103 475,219 472,220 Current assets Stocks and work-in-progress 370,345 330,928 Trade debtors 314,256 309,126 Due from related corporations 9,699 44,231 Debtors, deposits and prepayments 22,880 23,559 Advance payments to suppliers 39,521 53,773 Short-term investments 978 211 Loan receivables, current 25 29 Bank balances and other liquid funds 244,945 185,353 1,002,649 947,210 TOTAL ASSETS 1,477,868 1,419,430 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 159,679 140,860 Creditors and accruals, current 329,183 308,903 Provisions 30,627 26,703 Progress billing in excess of work-in-progress 287,704 254,194 Provision for taxation 31,547 31,913 Short-term bank loans (unsecured) 10,000 9,000 Long-term bank loans, current - 110 Lease obligations, current 5 41 848,745 771,724 NET CURRENT ASSETS 153,904 175,486 Non-current liabilities Advance payments from customers, non-current 155,388 127,009 Creditor and accrual, non-current 1,453 - Deferred rent 3,203 3,911 Deferred tax liabilities 7,647 6,689 Loans from immediate holding company 30,000 115,416 Loans from related corporations 303,496 292,588 Long-term bank loans, non current - 142 501,187 545,755 TOTAL LIABILITIES 1,349,932 1,317,479 NET ASSETS 127,936 101,951

Share capital and reserves 111,253 85,042 Minority interests 16,683 16,909 127,936 101,951 TOTAL EQUITY AND LIABILITIES 1,477,868 1,419,430 236

Sectoral Financial Review - Electronics

STATEMENT OF CASH FLOWS

2009 2008 $’000 $’000

Net cash from operating activities 232,618 216,305

Net cash used in investing activities (24,478) (155,233) Proceeds from sale of property, plant and equipment 53 21 Proceed from sale of an investment property 1,800 - Proceed from sale of an associated company - 15 Proceed from sale of a quoted investment 368 - Dividends from associated companies 175 17 Dividends from other investments 6 46 Purchase of property, plant and equipment (16,375) (31,955) Acquisition of subsidiaries (8,263) (121,482) Acquisition of additional interest in subsidiaries (2,242) (1,895)

Net cash used in financing activities (186,227) (112,292) Repayment of inter-company loans, net (110,051) (33,265) Proceeds from/(repayment of) bank loans, net 748 (3,911) Repayment of loan by an associated company 493 - Loans to associated companies/joint venture - (942) Repayment of loan by a minority shareholder - 582 Repayment of lease obligations (36) (45) Dividends paid to shareholder (67,704) (65,923) Dividends paid to minority shareholders of a subsidiary (600) (1,056) Interest paid (9,077) (7,732)

Net increase/(decrease) in cash and cash equivalents 21,913 (51,220) Cash and cash equivalents at beginning of the year 223,667 275,583 Exchange difference on cash and cash equivalents at beginning of the year (635) (696) Cash and cash equivalents at end of the year 244,945 223,667 Singapore Technologies Engineering Ltd Think Ahead. 237 Annual Report 2009 Sectoral Financial Review - Electronics

FINANCIAL HIGHLIGHTS

2009 2008 2007 2006 2005 $’000 $’000 $’000 $’000 $’000

Turnover 1,393,356 1,157,704 1,038,284 965,757 712,223 EBITDA 133,025 140,386 101,272 106,602 81,164 EBIT 107,178 118,051 85,748 91,082 72,383 Profit before tax 115,276 93,940 115,336 104,650 76,022 Profit after tax and minority interests 90,803 68,111 88,223 76,318 58,008 Shareholders’ funds 111,253 85,042 75,611 103,488 137,282 Total assets 1,477,868 1,419,430 1,399,125 1,205,206 1,057,526 Net assets 127,936 101,951 90,490 114,097 141,025 Capital expenditure 16,375 31,955 13,627 12,006 7,125 Earnings per share (cents) 86.44 64.84 83.99 72.65 55.22 Return on sales (%) 6.6 6.1 8.7 8.1 8.4 Return on equity (%) 37.8 31.8 43.2 32.9 23.3 Return on total assets (%) 6.2 5.0 6.5 6.5 5.7 Net assets value per share (cents) 121.79 97.1 86.1 108.6 134.3

Productivity Data Average staff strength (number) 4,707 4,373 3,823 3,256 2,828 Sales per employee ($) 296,018 264,739 271,589 296,608 251,847 Profit after tax per employee ($) 19,291 15,575 23,077 23,439 20,512 Employment costs 394,582 350,801 306,468 270,901 187,664 Employment costs per $ of turnover ($) 0.28 0.30 0.30 0.28 0.26

Economic Value Added 66,275 59,967 64,997 67,295 47,378 Economic Value Added Spread (%) 10.8 9.4 11.3 12.7 26.5 Economic Value Added per employee ($) 14,080 13,713 17,002 20,668 16,753

Value added 561,439 482,469 450,242 407,234 273,439 Value added per employee ($) 119,277 110,329 117,772 125,072 96,690 Value added per $ of employment costs ($) 1.42 1.38 1.47 1.50 1.46 Value added per $ of gross property, plant and equipment ($) 3.11 2.78 3.06 2.99 2.00 Value added per $ of turnover ($) 0.40 0.42 0.43 0.42 0.38 238

Sectoral Financial Review - Land Systems

INCOME STATEMENT

2009 2008 $’000 $’000

Turnover 1,202,051 1,280,879 Cost of sales (940,190) (1,026,777) Gross profit 261,861 254,102

Other operating income/(loss), net 4,292 (1,188) Distribution and selling expenses (56,106) (52,977) Administrative expenses (96,690) (86,138) Other operating expenses (35,364) (32,799) Profit from operations before taxation, other income and financial expenses 77,993 81,000 Other income, net 22,991 7,262 Financial expenses (10,063) (8,003) 90,921 80,259 Share of results of associated companies and joint ventures 4,469 4,469 Profit from operations before taxation 95,390 84,728 Taxation (10,981) (1,629) Profit from operations after taxation 84,409 83,099

Attributable to: Shareholder of the Company 82,298 79,947 Minority interests 2,111 3,152 84,409 83,099

Singapore Technologies Engineering Ltd Think Ahead. 239 Annual Report 2009 Sectoral Financial Review - Land Systems

BALANCE SHEET 2009 2008 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 224,939 108,004 Associated companies and joint ventures 115,504 112,111 Long-term investments 3,311 635 Intangible assets 233,078 235,524 Investment properties 2,009 15,982 Long-term receivables, non-current 60,009 60,146 Finance lease receivables, non-current 5,227 4,793 Deferred tax assets 15,365 15,087 Derivative financial instruments 11,715 16,374 671,157 568,656 Current assets Stocks and work-in-progress 498,369 413,123 Trade debtors 269,366 161,538 Debtors and deposits 15,519 18,213 Advance payments to suppliers 117,349 112,704 Prepayments 5,160 6,564 Finance lease receivables, current 14,386 11,057 Bank balances and other liquid funds 172,096 159,132 Due from related corporations 19,967 28,356 Derivative financial instruments, current 7,521 8,599 1,119,733 919,286 TOTAL ASSETS 1,790,890 1,487,942 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 340,924 200,198 Advance payments from related corporations, current 6,064 7,201 Progress billings in excess of work-in-progress 16,044 10,294 Creditors and accruals 585,551 373,074 Provisions 67,622 53,921 Provision for taxation 30,498 31,594 Derivative financial instruments, current 3,260 3,673 Lease obligations, current 103 - Long-term loans, current 240 240 Short-term bank loans 15,032 11,572 Bank overdrafts 1 19 1,065,339 691,786 NET CURRENT ASSETS 54,394 227,500 Non-current liabilities Advance payments from customers, non-current 203,845 279,843 Advance payments from related corporations, non-current 2,683 735 Lease obligations, non-current 147 - Derivative financial instruments, non-current 738 - Loans from related corporations 284,487 292,674 Due to joint venture - 112 Long-term loans, non-current 1,331 1,607 Long-term bank loan 7,412 - Deferred income 9,144 7,290 Deferred tax liabilities 40,929 43,084 550,716 625,345 TOTAL LIABILITIES 1,616,055 1,317,131 NET ASSETS 174,835 170,811 Share capital and reserves 129,185 131,744 Minority interests 45,650 39,067 174,835 170,811 TOTAL EQUITY AND LIABILITIES 1,790,890 1,487,942 240

Sectoral Financial Review - Land Systems

STATEMENT OF CASH FLOWS

2009 2008 $’000 $’000

Net cash from operating activities 65,168 66,466

Net cash used in investing activities (123,862) (27,222) Distribution from funds under management 65 11 Proceeds from sale of property, plant and equipment 525 1,736 Distribution from unquoted long-term investment 241 170 Dividends from unquoted long-term investments 56 21 Dividends from associated companies 1,835 3,275 Purchase of property, plant and equipment (102,026) (31,658) Acquisition of additional interest in a subsidiary - (777) Acquisition of subsidiaries (23,412) - Investment in an associated company (1,146) -

Net cash from/(used in) financing activities 64,698 (15,328) (Repayment of)/proceeds from short-term related corporations loans (38,025) 31,417 Proceeds from short-term immediate holding company loans 209,000 45,000 Repayment of long-term related corporations loans (5,094) (2,386) Repayment of long-term loans (235) (252) Repayment of short-term bank loans (8,233) - Dividends paid to shareholder (78,800) (83,000) Dividends paid to minority shareholders of subsidiaries (3,868) (245) Interest paid (10,047) (5,862)

Net increase in cash and cash equivalents 6,004 23,916 Cash and cash equivalents at beginning of the year 167,037 147,042 Exchange difference on cash and cash equivalents at beginning of the year (946) (3,921) Cash and cash equivalents at end of the year 172,095 167,037 Singapore Technologies Engineering Ltd Think Ahead. 241 Annual Report 2009 Sectoral Financial Review - Land Systems

FINANCIAL HIGHLIGHTS

2009 2008 2007 2006 2005 $’000 $’000 $’000 $’000 $’000

Turnover 1,202,051 1,280,879 1,188,317 1,013,899 604,647 EBITDA 102,084 102,606 102,530 75,047 50,574 EBIT 73,701 82,188 81,620 57,811 39,113 Profit before tax 95,390 84,728 80,003 69,971 65,010 Profit after tax and minority interests 82,298 79,947 70,789 51,926 48,997 Shareholders’ funds 129,185 131,744 110,179 110,954 173,597 Total assets 1,790,890 1,487,942 1,395,284 1,252,835 1,004,039 Net assets 174,835 170,811 144,460 126,779 183,431 Capital expenditure 102,026 31,658 24,550 12,116 7,808 Return on sales (%) 7.0 6.5 6.1 5.3 8.1 Earnings per share (cents) 68.26 66.31 58.71 43.07 40.64 Return on equity (%) 29.9 28.8 27.6 20.2 22.9 Return on total assets (%) 4.7 5.6 5.2 4.3 4.9 Net assets value per share (cents) 145.01 141.68 119.82 105.15 152.14

Productivity data Average staff strength (number) 5,786 5,224 5,299 4,961 3,417 Sales per employee ($) 207,752 245,191 224,253 204,374 176,953 Profit after tax per employee ($) 14,224 15,304 13,359 10,467 14,339 Employment costs 262,552 243,506 259,424 224,828 125,030 Employment costs per $ of turnover ($) 0.22 0.19 0.22 0.22 0.21

Economic Value Added 40,277 51,690 50,593 32,994 34,087 Economic Value Added spread (%) 5.5 8.3 8.8 6.8 12.0 Economic Value Added per employee ($) 6,961 9,895 9,548 6,651 9,976

Value added 406,096 364,655 371,647 325,057 202,374 Value added per employee ($) 70,186 69,804 70,135 65,522 59,226 Value added per $ of employment costs ($) 1.55 1.50 1.43 1.45 1.62 Value added per $ of gross property, plant and equipment ($) 0.80 0.93 1.01 0.96 0.62 Value added per $ of turnover ($) 0.34 0.28 0.31 0.32 0.33 242

Sectoral Financial Review - Marine

INCOME STATEMENT

2009 2008 $’000 $’000

Turnover 955,952 821,754 Cost of sales (824,015) (713,318) Gross profit 131,937 108,436

Other operating income, net 9,627 12,221 Distribution and selling expenses (7,607) (12,640) Administrative expenses (27,916) (25,345) Other operating expenses (8,454) (7,845) Profit from operations before taxation, other income and financial expenses 97,587 74,827 Other income, net 5,462 2,580 Financial expenses (1,577) (2,244) 101,472 75,163 Share of results of joint ventures 807 40 Profit from operations before taxation 102,279 75,203 Taxation (20,516) (703) Profit from operations after taxation 81,763 74,500

Attributable to: Shareholder of the Company 81,763 74,500 Singapore Technologies Engineering Ltd Think Ahead. 243 Annual Report 2009 Sectoral Financial Review - Marine

BALANCE SHEET

2009 2008 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 102,388 99,255 Associated companies and joint ventures 1,914 241 Investments - 38,533 Intangible assets 142 152 Long-term receivables, non-current 4,736 330 Derivative financial instruments 622 - Deferred tax assets 21,678 36,400 131,480 174,911 Current assets Stocks and work-in-progress 61,030 83,881 Trade debtors 83,801 108,952 Due from related corporations 132,210 178,405 Other debtors, deposits and prepayments 15,702 7,703 Advance payments to suppliers 60,054 35,309 Long-term receivables, current 36 23 Short-term investments 39,215 286 Bank balances and other liquid funds 201,114 113,498 593,162 528,057

TOTAL ASSETS 724,642 702,968

EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 48,526 62,628 Creditors and accruals 283,918 278,571 Provisions 46,279 43,774 Progress billings in excess of work-in-progress 157,765 124,282 Provision for taxation 24,241 37,035 Lease obligations, current 70 82 560,799 546,372

NET CURRENT ASSETS/(LIABILITIES) 32,363 (18,315)

Non-current liabilities Advance payments from customers, non-current 34,908 34,908 Loan from related corporations 26,343 26,343 Derivative financial instruments 91 - Lease obligations, non-current - 72 61,342 61,323

TOTAL LIABILITIES 622,141 607,695 NET ASSETS 102,501 95,273

Share capital and reserves 102,501 95,273

TOTAL EQUITY AND LIABILITIES 724,642 702,968 244

Sectoral Financial Review - Marine

STATEMENT OF CASH FLOWS

2009 2008 $’000 $’000

Net cash from operating activities 145,535 151,742

Net cash used in investing activities (20,353) (10,448) Proceeds from sale of an associated company - 788 Dividend from a joint venture - 150 Investment in a joint venture (1,000) - Dividends from short-term investments 15 1 Proceeds from sale and maturity of investments 352 9,832 Purchase of short-term investments (68) - Proceeds from sale of property, plant and equipment 127 156 Purchase of property, plant and equipment (20,590) (21,711) Exchange difference on investing activities 811 336

Net cash used in financing activities (85,587) (134,617) Loans to a joint venture (4,291) - Repayment of inter-company loans, net (5,518) (28,105) Repayment of lease obligations, net (84) (79) Dividends paid to shareholder (74,009) (103,261) Interest paid (1,355) (2,211) Exchange difference on financing activities (330) (961)

Net increase in cash and cash equivalents 39,595 6,677 Cash and cash equivalents at beginning of the year 281,935 275,347 Exchange difference on cash and cash equivalents at beginning of the year (416) (89) Cash and cash equivalents at end of the year 321,114 281,935 Singapore Technologies Engineering Ltd Think Ahead. 245 Annual Report 2009 Sectoral Financial Review - Marine

FINANCIAL HIGHLIGHTS

2009 2008 2007 2006 2005 $’000 $’000 $’000 $’000 $’000

Turnover 955,952 821,754 864,594 702,868 659,847 EBITDA 104,614 78,824 90,304 84,738 97,563 EBIT 87,960 62,606 73,208 68,347 78,440 Profit before tax 102,279 75,203 96,567 79,500 87,932 Profit after tax and minority interests 81,763 74,500 75,264 67,823 70,267 Shareholders’ funds 102,501 95,273 122,767 124,345 111,992 Total assets 724,642 702,968 694,786 682,867 702,775 Net assets 102,501 95,273 122,767 124,345 111,992 Capital expenditure 20,590 21,711 20,687 11,845 18,473 Earnings per share (cents) 41.81 38.09 38.48 34.68 35.93 Return on sales (%) 8.6 9.1 8.7 9.6 10.6 Return on equity (%) 63.5 61.3 50.5 45.0 50.8 Return on total assets (%) 11.3 10.6 10.8 9.9 10.0 Net assets value per share (cents) 52.41 48.72 62.77 63.58 57.26

Productivity Data Average staff strength (number) 1,734 1,541 1,439 1,404 1,416 Sales per employee ($) 551,299 533,260 600,830 500,618 465,994 Profit after tax per employee ($) 47,153 48,345 52,303 48,307 49,624 Employment costs 153,019 126,053 134,252 106,086 104,448 Employment costs per $ of turnover ($) 0.16 0.15 0.16 0.15 0.16

Economic Value Added 68,023 59,597 60,453 49,903 49,061 Economic Value Added spread (%) 35.0 26.1 24.1 18.7 18.0 Economic Value Added per employee ($) 39,229 38,674 42,010 35,543 34,648

Value added 277,054 228,006 252,348 206,753 226,932 Value added per employee ($) 159,777 147,960 175,363 147,260 160,263 Value added per $ of employment costs ($) 1.81 1.81 1.88 1.95 2.17 Value added per $ of gross property, plant and equipment ($) 0.78 0.67 0.78 0.67 0.75 Value added per $ of turnover ($) 0.29 0.28 0.29 0.29 0.34 246 Group Structure Singapore Technologies Engineering Ltd

Subsidiaries and Associated Companies (as at 25 February 2010)

Singapore Technologies Aerospace Ltd (100%) Singapore Technologies Electronics Limited (100%) Singapore Technologies Kinetics Ltd (100%) Singapore Technologies Marine Ltd (100%) Singapore Technologies Dynamics Pte Ltd (100%) ST Synthesis Pte Ltd (100%) ST Engineering Financial I Ltd. (100%) FusionTech Pte. Ltd. NanoScience Innovation Pte Ltd (100%) (27.06%) Kaz-ST Engineering Bastau Limited Liability Partnership (51%) Singapore Airshow & Events Pte. Ltd. (33%) Vision Technologies Systems, Inc. (100%) Vision Technologies Aerospace, Incorporated San Antonio Aerospace GP, LLC (100%) (100%) ST Aerospace San Antonio, L.P. (formerly known as San Antonio Aerospace L.P.) (99%)** ST Aerospace Mobile, Inc. (formerly known as ST Mobile Aerospace Engineering, Inc.) (100%) DalFort Aerospace GP, Inc.+ (100%) iDirect UK Limited (100%) DalFort Aerospace, L.P.+ (99%)* Parallel Limited (100%) Vision Technologies Electronics, Inc. VT iDirect, Inc. (100%) (100%) iDirect Italy srl (100%) iDirect Hong Kong Limited (100%) iDirect Government Technologies, Inc. (100%) Ximaera Technologies Canada, Inc. (100%) iDirect International, Inc. (100%)

Vision Technologies Kinetics, Inc. Miltope Corporation IV Phoenix Group, Inc. (100%) (100%) (100%) MÄK Technologies, Inc. Miltope Business Products, Inc. (90%) (100%) Vision Technologies Marine, Inc. VT Halter Marine, Inc. (100%) (100%) VT Systems, Inc. Halter-Bollinger Joint Venture LLC (100%) (50%) Vision Technologies Land Systems, Inc. VT Dimensions, Inc. (100%) (100%) VT Specialized Vehicles Corporation (100%) VT LeeBoy, Inc. (100%)

+ Ceased operations in 2003 * Balance 1% held by DalFort Aerospace GP, Inc. ** Balance 1% held by San Antonio Aerospace GP, LLC Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held) Singapore Technologies Engineering Ltd Think Ahead. 247 Annual Report 2009 Group Structure Singapore Technologies Aerospace Ltd

Subsidiaries and Associated Companies (as at 25 February 2010)

ST Aerospace Engineering Pte Ltd ST Aerospace Training Academy Pte. Ltd. (formerly Aviation Training Academy Australia Pty Ltd (100%) known as ST Aviation Training Academy Pte. Ltd.) (100%) (70%) ST Aviation Training Academy (Australia) Pty Ltd Pacific Flight Services Pty Ltd (100%) (100%) Pacific Flight Services Pte Ltd Aerospace Engineering Services Pty Ltd Unit Trust (100%) (50%) ST PAE Holdings Pty Ltd Aerospace Engineering Services Pty Ltd (100%) (50%) Composite Technology International Pte Ltd (33.3%) Eurocopter South East Asia Private Limited (25%) ST Aerospace Engines Pte Ltd ST Aerospace Technologies (Xiamen) Company Limited (100%) (80%) ST Aerospace International Structures Pte Ltd (100%) ST Aerospace Systems Pte Ltd Singapore Precision Repair and Overhaul Pte Ltd (100%) (50%) ST Aerospace Supplies Pte Ltd iShopAero Pte Ltd (100%) (100%) ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd. (formerly known as Guangzhou Aerospace Technologies & Engineering Company Limited) (100%) ST Aviation Resource Pte Ltd ST Aviation Resources 1 Limited (100%) (100%) Visiontech Investment Pte Ltd (100%) Precision Products Singapore Pte Ltd (100%) ST Aerospace Panama, Inc. (formerly known as Panama Aerospace Engineering, Inc.) (100%) Singapore Aerospace Kabushiki Kaisha (100%) Singapore Technologies Engineering (Europe) Ltd (100%) ST Aerospace Solutions (Europe) A/S Airline Rotables (UK Holdings) Limited Airline Rotables Limited (100%) (100%) (100%) ST Aerospace Services Co Pte. Ltd. (formerly known as ST Aviation Services Co Pte Ltd) (80%) Singapore British Engineering (Pte) Ltd (51%) Visiontech Engineering Pte Ltd (51%) 1988 JV Pte. Ltd.* (50%) Madrid Aerospace Services S.L. (50%) Shanghai Technologies Aerospace Company Limited (49%) Turbine Overhaul Services Pte Ltd (49%) Turbine Coating Services Pte Ltd (24.5%)

* In members’ voluntary winding up Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held) 248 Group Structure Singapore Technologies Electronics Limited

Subsidiaries and Associated Companies (as at 25 February 2010)

ST Electronics (Satcom & Sensor Systems) Pte. Ltd. ST Electronics (Sichuan) Co., Ltd (100%) (100%) iDirect Asia Pte. Ltd. (100%) ST Electronics (Info-Comm Systems) Pte. Ltd. ST Electronics (Info-Security) Pte. Ltd. DataMark Technologies Pte Ltd (100%) (100%) (100%) Telematics Wireless Ltd Telematics Wireless USA Corp (95.04%) (100%) STELCOMMS Pte. Ltd. (51%) iWOW Technology Pte Ltd (21.74%) ST Electronics (Shanghai) Co., Ltd ST Electronics-PCI Co., Ltd (100%) (51%) iTS Technologies Pte Ltd Prescient Systems & Technologies Pte. Ltd. (100%) (47.84%) ST Electronics (Training & Simulation Systems) Pte. Ltd. ST Electronics (Digital Media) Pte. Ltd. (100%) (100%) ST Education & Training Private Limited STET Maritime Pte. Ltd. (70%) (100%) STET Homeland Security Services Pte. Ltd. (formerly known as STET Maritime Education Pte. Ltd.) (100%) STET Institute Pte. Ltd. (formerly known as STET Centre Pte. Ltd.) (100%) Antycip Simulation Limited Antycip Simulation SAS (93%) (100%) Brightspot Interactive Learning Pte. Ltd. Brightspot Interactive Learning Inc. (51%) (100%) Knowledge Alive Pte. Ltd. Comat Training Services Pte Ltd (45.47%) (100%) MERITS Technologies LLP (51%) ST Electronics (Taiwan) Limited (100%) SEEL Electronic & Engineering Sdn Bhd (100%) TranSys Pte Ltd (100%) ST Electronics (Info-Software Systems) Pte. Ltd. ST Electronics (Software Services) Limited (100%) (100%) ST Electronics (e-Services) Pte. Ltd. (100%) WizVision Pte. Ltd. (22.8%) INFA Systems Limited (100%) PM-B Pte Ltd PMB Project Management Business Sdn Bhd (70%) (100%) PT PM-B Indonesia Intelect Technologies, Incorporated (100%) (100%) PM-B (China) Ltd STELOP Pte. Ltd. (100%) (50.05%) PM-B Project Management Business (Thailand) Ltd GFM Electronics S.A. de C.V. (49%) (50%) Trusted Hub Ltd (21.14%)

In members’ voluntary winding up Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held) Singapore Technologies Engineering Ltd Think Ahead. 249 Annual Report 2009 Group Structure Singapore Technologies Kinetics Ltd

Subsidiaries and Associated Companies (as at 25 February 2010)

Advanced Material Engineering Pte. Ltd. Advanced Pyrotechnic Materials Private Limited (100%) (51%) SMART Systems Pte Ltd (50%) Takata CPI Singapore Pte Ltd (49%) Autonomous Technology Pte Ltd Guizhou Jonyang Kinetics Co., Ltd. (100%) (60%) Allied Ordnance of Singapore (Pte) Limited Defence Electronics of Singapore Pte Ltd (100%) (49%) ST Kinetics Integrated Engineering Pte. Ltd. (100%) Kinetics Systems (Shanghai) Co., Ltd. (100%) Mobility Systems Pte Ltd Silvatech Systems Corporation Pte Ltd Kinetics Drive Solutions Inc. (100%) (100%) (100%) Silvatech Global Systems Limited (100%) Ordnance Development and Engineering Company of Singapore (1996) Private Limited Timoney Holdings Limited (100%) (25%) SDG Kinetics Pte. Ltd. GFM Maquinaria, S.A.P.I. de C.V. (100%) (40%) Singapore Commuter Private Limited Jiangsu Huatong Kinetics Co., Ltd. Hualun International Trading Co., Ltd (100%) (75.3%) (40%) Jiangsu Huaran Kinetics Co., Ltd. (75.3%) Singapore Test Services Private Limited Nusantara Technologies Sdn. Bhd. (100%) (49%) ST Kinetics Pte. Ltd. (100%) Securedge Pte. Ltd. (100%) ST Kinetics International Pte. Ltd. VT Specialized Vehicles, S.A. de C.V. (100%) (99%)* STA Detroit Diesel-Allison (Singapore) Pte Ltd (100%) STA Inspection Pte Ltd (100%) STA Investment Pte Ltd (100%) Unicorn International Pte Limited (100%) STAR Automotive Center (Guangzhou) Co., Ltd. (100%) STAR Automotive Center (Zhejiang) Co., Ltd. (100%) ATREC Pte. Ltd. (50%) Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd. (50%) CityCab Pte Ltd (46.5%)

* Balance 1% held by Singapore Technologies Kinetics Ltd Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held) 250 Group Structure Singapore Technologies Marine Ltd

Subsidiaries and Associated Companies (as at 25 February 2010)

STSE Engineering Services Pte Ltd ST Environmental Services & Technologies Co. Ltd (100%) (100%) Joint Shipyard Management Services Pte Ltd (30%) First Response Marine Pte. Ltd. (50%) Hovertrans Solutions Pte. Ltd. (51%)

Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held) Singapore Technologies Engineering Ltd Think Ahead. 261 Annual Report 2009 Corporate Information

Board of Directors Principal Bankers Mr Peter SEAH Lim Huat (Chairman) Bank of America, N.A. Mr TAN Pheng Hock (President & CEO) 9 Raffles Place Mr KOH Beng Seng #18-00 Republic Plaza Tower 1 Lieutenant-General Desmond KUEK Bak Chye Singapore 048619 Dr TAN Kim Siew Mr QUEK Tong Boon Crédit Agricole Corporate and Investment Bank Mr Winston TAN Tien Hin 168 Robinson Road Mr QUEK Poh Huat #22-01 Capital Tower Mr Venkatachalam KRISHNAKUMAR Singapore 068912 Mr Davinder SINGH s/o Amar Singh Dr Stanley LAI Tze Chang Citibank N.A. Colonel CHIA Choon Hoong (Alternate Director to 3 Temasek Avenue Lieutenant-General Desmond KUEK Bak Chye) #17-00 Centennial Towers Singapore 039190 Company Secretary Mrs Chua Su Li DBS Bank Ltd 6 Shenton Way Registered Office DBS Building Tower One 51 Cuppage Road #09-08 Singapore 068809 StarHub Centre Singapore 229469 Oversea-Chinese Banking Corporation Limited Tel: (65) 67221818 65 Chulia Street Fax: (65) 67202293 #10-00 OCBC Centre http://www.stengg.com Singapore 049513

Share Registrar M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore 068906

Auditors Ernst & Young LLP One Raffles Quay North Tower, Level 18 Singapore 048583 Mr TAN Wee Khim (Partner-in-charge) (Date of Appointment: 01/07/2005) 262

Shareholding Statistics As at 17 February 2010

SHARE CAPITAL

Paid-Up Capital : S$630,943,412.8324 Class of Shares : Ordinary Shares One Special Share held by the Minister for Finance (Incorporated) Voting Rights : One vote per share

SHAREHOLDING HELD IN HANDS OF PUBLIC

Based on the information available to the Company as at 17 February 2010, 32.9245% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

ANALYSIS OF SHAREHOLDINGS

No. of No. of Range of Shareholdings Shareholders % Shares %

1 --- 999 1,761 5.80 513,953 0.02 1,000 --- 10,000 23,542 77.55 97,256,520 3.22 10,001 --- 1,000,000 5,023 16.55 194,072,728 6.43 1,000,001 and above 30 0.10 2,726,881,160 90.33 30,356 100.00 3,018,724,361 100.00

Number of Shares Direct Deemed Total Substantial Shareholder Interest Interest Interest %

Temasek Holdings (Private) Limited 1,509,419,764 16,352,840 (1) 1,525,772,604 50.5436 The Capital Group Companies, Inc. - 168,234,000 (2) 168,234,000 5.5730 Aberdeen Asset Management PLC - 315,949,491 (3) 315,949,491 10.4663 Aberdeen Asset Management Asia Limited - 308,305,071 (4) 308,305,071 10.2130 Aberdeen Asset Managers Limited - 183,415,420 (4) 183,415,420 6.0759 Credit Suisse Group AG - 327,567,045 (5) 327,567,045 10.8511 Credit Suisse AG - 327,515,045 (4) 327,515,045 10.8494 Singapore Technologies Engineering Ltd Think Ahead. 263 Annual Report 2009 Shareholding Statistics As at 17 February 2010

Notes:

(1) Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:

Name of Company No. of Shares

DBS Group Holdings Ltd 5,739,840 Keppel Corporation Limited 4,032,000 Fullerton Fund Management Company Ltd 6,581,000

(2) The Capital Group Companies, Inc. is deemed to have an interest in the following Shares held by:

Name of Company No. of Shares

Raffles Nominees (Pte) Ltd 168,234,000

(3) Includes interests held by Aberdeen Asset Management Asia Limited and Aberdeen Asset Managers Limited. (4) Details of their deemed interest are not available. (5) Includes interests held by Aberdeen Asset Management PLC and Credit Suisse Group AG’s entities.

MAJOR SHAREHOLDERS LIST – TOP 20

NO. NAME NO. OF SHARES HELD %

1 Temasek Holdings (Private) Limited 1,497,186,719 49.60 2 DBS Nominees Pte Ltd 312,492,246 10.35 3 Citibank Nominees Singapore Pte Ltd 273,799,938 9.07 4 DBSN Services Pte Ltd 240,741,078 7.98 5 HSBC (Singapore) Nominees Pte Ltd 119,688,003 3.96 6 BNP Paribas Secs Svcs Singapore Pte Ltd 116,444,811 3.86 7 United Overseas Bank Nominees Pte Ltd 76,639,115 2.54 8 Raffles Nominees (Pte) Ltd 21,801,213 0.72 9 Lee Pineapple Company Pte Ltd 12,500,000 0.41 10 UOB Kay Hian Pte Ltd 7,107,217 0.24 11 OCBC Securities Private Ltd 5,242,236 0.17 12 OCBC Nominees Singapore Pte Ltd 5,211,268 0.17 13 KI Investments (HK) Limited 4,032,000 0.13 14 Phillip Securities Pte Ltd 3,559,411 0.12 15 BNP Paribas Nominees Singapore Pte Ltd 3,472,543 0.12 16 TM Asia Life Singapore Ltd – Par Fund 3,238,000 0.11 17 Morgan Stanley Asia (Singapore) Pte Ltd 2,916,000 0.10 18 Merrill Lynch (Singapore) Pte Ltd 2,216,815 0.07 19 Kim Eng Securities Pte. Ltd. 2,215,963 0.07 20 Shanwood Development Pte Ltd 2,077,000 0.07 2,712,581,576 89.86 Think Think Ahead .

SINGAPORE TECHNOLOGIES ENGINEERING LTD LTD ENGINEERING TECHNOLOGIES SINGAPORE Think Ahead. ANNUAL REPORT 2009 REPORT ANNUAL

SINGAPORE TECHNOLOGIES ENGINEERING LTD 51 Cuppage Road #09-08 StarHub Centre Singapore 229469 ANNUAL REPORT 2009 Tel : (65) 6722 1818 • Fax : (65) 6720 2293 www.stengg.com

(Regn. No.: 199706274H)