Annual Report 2013 Always AHEAD | SINGAPORE Technologies Engineering Ltd Annual Report 2013

annual report 2013 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013

Vision Be a global defence and engineering group.

Mission Bring value to our customers and partners by delivering total integrated quality solutions and support.

core values Integrity, Value Creation, Courage, Commitment and Compassion Contents

Financial Highlights 08 Group OVERVIEW 10 Letter to Shareholders 12 BOARD OF DIRECTORS 18 CORPORATE INFORMATION 23 Senior Management 24 Organisation Chart 26 Operating & financial Review 28 aerospace 30 Electronics 34 land Systems 38 marine 42 FINANCIAL REVIEW 46 Sustainability 54 Innovation 56 Every decision makes a difference. At ST Engineering, Productivity 58 Workplace Safety & Health 60 we realise that what we do has an impact on our people, Environment 62 stakeholders and community. As we power ahead, customer Excellence 63 pEople Excellence 64 we are taking a holistic approach to pursuing excellence. community Relations 67 investor Relations 68 Corporate Governance 70 RISK MANAGEMENT 84 Awards & Commendations 88 Financial Report 90 Shareholding Statistics 242 CONTACT INFORMATION IBC

1 Ahead of the STRATEGIC ALLIANCES ST Aerospace became a member of  UTC Aerospace Systems’ Boeing 787 curve MRO supplier network.

The key to our success is our ability to anticipate, ST Kinetics and Australian Munitions  cooperating in Australia and innovate and initiate. We are relentless in seeking New Zealand to develop, manufacture fresh opportunities, developing cutting-edge and market ST Kinetics’ world-leading solutions and establishing meaningful partnerships. 40mm low velocity, extended range of air bursting ammunition.

ST Aerospace’s new ST Electronics added ST Marine leased Entering New Markets hangars in Changi, two new buildings additional land at Singapore commenced near its current Tuas Yard, Singapore to New Capability operations Ang Mo Kio location to facilitate the development New Offerings Destination: consolidate its facilities of our fabrication business VT Halter Marine has added ST Kinetics set up LeeBoy shiprepair capability, following Brazil Equipamentos + + + De Contrução Ltda. to the acquisition of a establish a manufacturing base in Brazil to grow the market presence of Expanded Capacity ST Kinetics’ LeeBoy brand of road construction to serve our customers mt equipment in Brazil and over time, throughout Floating Dry Dock South America. Aheadcompetition of the We constantly find new ways to delight our customers with cost savings, shorter turnaround % Achieved an % Achieved 98 average of 95 times, higher quality products and better service. Customer turnaround Satisfaction time compliance

Strict compliance to Customer workplace Excellence safe y SAVINGS approach generated Multiple Listening & standards through productivity efforts Learning Channels Aerospace, Electronics and Customer Engagement Land Systems operations certified to OHSAS: 18001 $ million Innovative, Value for Money Products Marine to Safety Management System certification Level 8 Exemplary Service singapore corporate Investment in Staff governance learning & Building award development merit award a Talent recipient $ SIAS 14.9million Pipeline Investors’ We award various ST Engineering Choice scholarships to outstanding students from top universities Awards 2013 who demonstrate strong leadership qualities. The Group also sponsors outstanding staff for undergraduate and postgraduate studies. Ahead of the

over game $ 8,500 While markets are all about the bottom line, we recognise 250,000 the importance of balancing profit with principles. light fixtures raised for This is demonstrated by our commitment to strong replaced with corporate governance, contributing to the community President’s more energy and developing our people to their fullest potential. Challenge efficient lighting Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Financial Highlights

Revenue Steady performance for FY2013 with Revenue by Sector $ billion % a record order book 6.63 +4.0 Aerospace 31% Aerospace 32% of $13.2 billion Electronics 25% Electronics 25% Land Systems 22% Land Systems 24% net profit Marine 19% Marine 16% ST Engineering delivered a resilient set Others 3% Others 3% of financial results amidst a challenging $ million % global economic environment in 2013. 2013 2012 + Group’s revenue grew 4% to $6.63b, 580.8 1.0 while Profit BeforeT ax (PBT) and Net Profit increased slightly to $729.7m 2013 2012 and $580.8m respectively. In line with $ billion $ billion operating cash flow PBT growth, the Group’s Earnings 6.63 6.38 Before Interest, Taxes, Depreciation and $ billion % Amortisation (EBITDA) increased to 0.93 -11.0 $815.2m, $20.2m higher than FY2012. The Group continued to generate strong ebitda by Sector Dividend Per Share operating cash flow, ending the year with cash and cash equivalent balance (including funds under management) of Aerospace 42% Aerospace 41% ¢ % $2.2b, an increase of $0.1b as compared Electronics 24% Electronics 23% 15.0 -11.0 to the year before. In addition, the Group Land Systems 16% Land Systems 18% continued to deliver positive Economic Marine 19% Marine 17% Others (1%) Others 1% Value Added of $413.8m. return on sales 2013 2012

% % 8.9 -0.3 pts 2013 2012 $815.2 million $795.0 million Earnings Per Share

¢ % 18.73 -0.2 net profit by Sector

order book Aerospace 45% Aerospace 44% Electronics 23% Electronics 21% Land Systems 16% Land Systems 15% $ billion % Marine 19% Marine 16% 13.2 +10.0 Others (3%) Others 4% 2013 2012

return on equity

2013 2012 % % $580.8 million $576.2 million 27.4 -3.0 pts

8 9 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Group Overview

ST Engineering is an integrated A leader in each of our core businesses, integration of advanced electronics, engineering group that provides ST Engineering leverages multi-sector ICT and communications systems for Revenue $6.63 billion innovative solutions and services in the capabilities to develop advanced government, defence, commercial and by business sector by customer type aerospace, electronics, land systems and solutions for commercial and defence industrial customers worldwide. marine sectors. customers across industries. Our land systems arm delivers integrated 31% Aerospace 62% Commercial Incorporated in 1997 and headquartered Our aerospace arm offers a wide land systems, specialty vehicles and their 25% Electronics 38% Defence in Singapore, we rank among the largest spectrum of aircraft maintenance, related through-life support for defence, 22% Land Systems 19% Marine companies listed on the Singapore engineering and training services for homeland security and commercial 3% Others Exchange, and are one of Asia’s leading both military and commercial aircraft applications. engineering groups. operators. These services include airframe, component and engine Our marine arm provides customised by location of customers by location of bUsiness entity Our global network of over 100 maintenance, repair and overhaul, shipbuilding, repair and conversion subsidiaries and associated companies, engineering design and development, services to both naval and commercial 58% Asia 72% Asia supported by a workforce of about materials support, asset management vessels, at our yards in Singapore 26% USA 25% USA 23,000, allows us to serve customers and pilot training. and US. We also provide a host of 6% Europe 2% Europe in the US, Europe, Asia and Oceania. environmental solutions through our 10% Others 1% Others Our electronics arm specialises environmental engineering subsidiary. in the design, development and

Oslo, Norway Stockholm, Sweden Berkshire, UK Copenhagen, Denmark County Meath, Ireland London, UK Dresden, Germany Langley, Canada Oxfordshire, UK Burlington, Washington, USA Argenteuil, France Ottawa, Canada

Montgomery, Wethersﬁeld, Connecticut, USA Independence, Kansas, USA Cazaux, France Pennsylvania, USA Alexandria, Virginia, USA Kidron, Ohio, USA Herndon, Virginia, USA Madrid, Spain Lincolnton, North Carolina, USA Cambridge, Massachusetts, USA Jiangsu, China Washington, North Carolina, USA Tianjin, China Tokyo, Japan Pascagoula, Mississippi, USA Wuxi, China Mobile, Alabama, USA Wuhan, China Shanghai, China San Antonio, Texas, USA Hope Hull, Alabama, USA Guiyang, China Xiamen, China Monterrey, Mexico Abu Dhabi, UAE Dubai, UAE Dhaka, Bangladesh Guangzhou, Taipei, ROC China Hong Kong Yangon, Myanmar

Bangalore, India SINGAPORE TECHNOLOGIES ENGINEERING LTD Bangkok, Thailand

100% Singapore Technologies Aerospace Ltd Kuala Lumpur, Malaysia Johor, Malaysia Singapore 100% Singapore Technologies Electronics Limited

100% Singapore Technologies Kinetics Ltd

Brasilia, Brazil 100% Singapore Technologies Marine Ltd Canoas, Brazil Gaborone, Botswana 100% Singapore Technologies Dynamics Pte Ltd Sao Paulo, Brazil

100% ST Synthesis Pte Ltd Sydney, Australia Ballarat, Australia 100% ST Engineering Financial I Ltd.

100% ST Engineering Financial II Pte. Ltd.

ST ENGINEERING’S MAIN FACILITIES AND OFFICES 100% Vision Technologies Systems, Inc. legend

(For complete group structure, please refer Aerospace Marine Others to www.stengg.com) Electronics Land Systems

10 11 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Letter to Shareholders

to, where the opportunities for expansion are and then working to make it happen. We cannot afford to take a myopic view ST Engineering is today Group revenue on near term developments and lose sight of the longer term and will need to a global company with billion continue to balance our efforts between a presence in 46 cities $ optimising our current businesses and across 24 countries. 6.63 growing future opportunities. To stay ahead in the In 2013, each of our business sectors technology and solutions net profit performed credibly in terms of contract race means we must wins, and, in parallel, carried out million initiatives that are designed to create expand and deepen $ springboards for their growth tomorrow. our presence in more 580.8 Here are a few highlights: countries and markets. Aerospace We also must invest to Our Aerospace sector continued with TOTAL dividend per share enhance our existing capacity expansion. The new hangar at its Changi facility in Singapore, which competencies and ¢ accommodates two narrow-body aircraft businesses for the future. 15.0 such as the Boeing 737 and Airbus A320, KWA Chong Seng TAN Pheng Hock will contribute an additional 200,000 Chairman President & CEO man-hours annually and extend a wider range of airframe MRO services. The aviation centre at Singapore’s Seletar Aerospace Park enables us to now offer a full suite of training and support facilities. Capability was strengthened Dear Shareholders ST Engineering closed the financial year in FY2012: 31% for the Aerospace sector, when it secured two long-term licensing ended 31 December 2013 (FY2013) 25% for the Electronics sector, 22% for portion of this was deployed towards share. Together with the Interim agreements with UTC Aerospace As we move into 2014, the world is with a Group revenue of $6.63b, against the Land Systems sector and 19% for the purchase of aircraft component Dividend of 3 cents per share paid to Systems for the Boeing 787 Dreamliner showing signs of renewed economic $6.38b posted for FY2012. Profit before the Marine sector. 62% of our Group rotables and the construction of a new you in September 2013, the total aircraft - one to provide maintenance, growth. We are seeing synchronised tax (PBT) was $729.7m against $715.4m revenue was from commercial business hangar as well as an aviation centre for dividend for the full year will amount repair and overhaul (MRO) services recovery in the developed markets – for FY2012, and net profit after tax and sales from defence customers made our Aerospace sector; the construction to 15 cents per share. This would give a on the nacelle systems for both the the US, Japan and the Eurozone – and (Net Profit) was $580.8m versus $576.2m up the remaining 38%. By geography of new buildings in Singapore for the dividend yield of 3.86%, computed using Rolls-Royce Trent 1000 and General a stabilising China economy. This broad for FY2012. of our entities, we had strong revenue Electronics sector; and the relocation of the average closing share price of the last Electric GEnx engines, and the other based growth is good news and will have contribution from Asia at 72% of Group a facility in China for our Land Systems trading day of 2013 and 2012. to provide component MRO services positive impact on the economies of Looking at the year-on-year performance revenue, and our US entities accounted sector’s specialty vehicle business. on Hamilton Sundstrand components. Asia. Some uncertainty understandably of our business sectors, we see that the for 25% of Group revenue. Our exposure Creating Springboards for This will allow ST Aerospace to leverage persists around the speed of the US Marine sector achieved a 23% increase to Eurozone remained low for the year. Our order book was $13.2b at end 2013, Growth UTC Aerospace Systems’ expertise to recovery, and the extent to which interest in revenue and ended the year at $1.24b a new high for us. Year-on-year, this At ST Engineering, we aim to always support the Boeing 787 operators. In the rates will adjust globally. from $1.01b. All our other sectors - Group cash and cash equivalents, represents a growth of 10% compared stay ahead in each of our businesses so passenger-to-freighter conversion (PTF) Aerospace, Electronics and Land Systems including funds under management, to the $12.1b at the close of FY2012. The as to meet the current and future needs segment, the sector is in the process of All this is in contrast to the volatility we - were stable and returned revenues of strengthened marginally to $2.2b for factors underpinning this increase were of our customers. An engineering group developing supplemental type certificate experienced in 2013. Sentiment through $2.08b, $1.65b and $1.47b respectively, FY2013 from $2.1b for FY2012. As at new customers, business from new like ours exists to create real-world for 757-200 aircraft with winglets, to this year was cautious if not depressed which are broadly similar to what they the close of FY2013, we were in a net markets, repeat orders or expanded solutions. These solutions could be for cater to a 15-pallet cargo configuration in many of the markets that we serve. reported for FY2012. Compared to cash position of $856m. work scope from existing customers. urban rail networks, complex aircraft with an additional pallet position. In the midst of that challenging global FY2012, all sectors improved their PBT We expect to deliver $4.3b of this order conversions or meeting security threats Engineering development for the Airbus economic environment, we are pleased of between 7% and 15%, except the In face of the volatility through the book in 2014. posed by land, sea or air or in the cyber A330P2F programme is on track. AERIA, to report a resilient set of financial results Land Systems sector which posted course of 2013, we successfully made space – we are solutions providers to our VIP interior completion business with a healthy in-flow of new businesses. a similar level of PBT to the year before. investments that will help us secure a Your Board of Directors has our many customers round the world. based in the US, made good progress These results underscore the importance sustainable competitive advantage as recommended a Final Dividend of in 2013, when it added a green aircraft of ensuring that we remain a trusted The make-up of our revenue in FY2013 in a Group. Our capital expenditure was 12 cents per share, consisting of an Being ahead is also about being prescient completion contract for a European- partner to our customers even under terms of business sector, customer type $90m higher at $326m for the year Ordinary Dividend of 4 cents per share, - to see what needs our customers will based VIP Boeing Business Jet to its such conditions. and geography was largely the same as compared to $236m for FY2012. A large and a Special Dividend of 8 cents per have in the future, where they are moving increasingly impressive track record.

12 13 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Letter to Shareholders

Electronics country advances into modernisation In planning our investments, we see growth, which in turn will further forward as we venture into new The Board acknowledged the Our Electronics business worked to and reform programmes. Similarly in most of our acquisitions being “bolt-ons” enhance the value of the Group. markets and competition intensifies as contributions by Mr Chan Yeng Kit grow the market share of its products Brazil, we formed a new subsidiary that will strengthen the competitiveness industries consolidate. Integrating sound and LG Neo Kian Hong who stepped and solutions. ST Electronics remains the to grow the LeeBoyTM brand of road of our existing businesses. An example The Relationships that Make principles governing business conduct down in 2013. We welcomed new board only company to offer a comprehensive construction equipment to capture of this is the acquisition of the assets the Difference as well as environmental, health and members, Mr Quek See Tiat who was suite of rail electronics solutions, and opportunities presented by the country’s of Turbo Mach in San Antonio, Texas, We work to build symbiotic relationships safety activities remain a key driver for appointed on the Audit Committee, and this competitive edge has enabled it commitment to invest in infrastructure a designer and manufacturer of with our customers. Our focus is to help the Group to operate sustainably and LG Ng Chee Meng who is also a member to gain new market entry and increase improvement. composite components and assemblies our customers be more effective, to be competitively, in an increasingly complex of the Risk Review Committee, Business market presence in existing cities for the aerospace industry. The ahead and rise to the top of what they business world. Investment and Divestment Committee where its solutions are already in use. Marine acquisition advanced the sector’s plan are doing. As our partnership deepens, and Senior HR Committee. We look In Toronto, Canada, ST Electronics’ Our proven expertise in shipbuilding, to develop its own manufacturing it increases the flow of projects that Beyond profits, we at TS Engineering forward to their guidance and insights platform screen doors are being used as well as shiprepair and conversion, and repair capabilities to support the fuel innovation and drive our business believe that it is part of sound business as they add depth to the collective by Merolinx Air Rail Link Spur Line. especially of sophisticated vessels current and next generation of aircraft, expansion. This has resulted in the practice to engage with society as an wisdom of the Board. Its Smartrip Ticket Dispensers have requiring high levels of engineering as well as provided the sector with meaningful careers for the 23,000 people active and responsible corporate citizen. already been implemented in the content, has enabled us to receive a added capabilities to enhance its MRO who work at ST Engineering. Apart from monetary contributions, In Appreciation US by the Washington Metro Transit steady flow of contracts from both naval competitiveness. our employees continue to do their part We want to record our thanks to our Authority. Meanwhile, San Francisco’s and commercial customers. Having a Our people and their skills are behind by spending time and effort to serve business partners, customers, and Bay Area Rapid Transit is in the midst roster of repeat customers like Bouchard As part of our growth strategy, we everything we do. The size and scale the communities in which they work. shareholders who have journeyed of implementing the digital trainborne Transportation Co., Inc and Crowley formed a joint venture in 2011 to go into of ST Engineering allows us to draw with us and supported us through passenger information system for Holdings, Inc speaks volumes a new business area: ST Electronics on the diversity, breadth and depth of Board renewal the challenges of 2013. We also thank activation in 2020. In Asia, we continue for the reputation that we have partnered with Nanyang Technological capabilities of our people. We are able As part of our board renewal, Mr Peter the management and employees of to deepen market presence with new built over the years. University and DSO National Laboratories to build upon this strength through Seah Lim Huat, our Chairman since ST Engineering for their contributions contracts in cities of China, Malaysia, to design and develop Singapore’s first nurturing our people and providing 2002, stepped down on 25 April 2013. towards yet another successful year. Taiwan and Thailand. During the year, our yards were busy with commercial earth observation satellite. the supporting processes so that they We wish to pay tribute to Peter for capacity expansion and acquiring new This has led in 2013 to the development become engaged stakeholders aligned guiding the Board and management Our US subsidiary, VT iDirect continued capability. Our US shipyard in Mississippi of the satellite now known as TeLEOS-1. with the interests of the Group. of ST Engineering over the past more to serve growing demand for broadband, now offers customers a wider range of When launched into orbit in 2015, than 10 years riding through some very cellular and mobile connectivity with services, with the launch of its shiprepair TeLEOS-1 will offer earth observation We continue to find ways to work difficult market conditions, and steering its solutions selling into Africa, Latin capability following the expansion of its services for businesses requiring images smarter. Business adaptability and ST Engineering on an even keel towards America and the Middle East. Pascagoula yard and the addition of a around the equatorial belt for many flexibility will be important moving growth and excellence. Sincerely, floating dry dock. We aim to grow our purposes including disaster monitoring Land Systems shiprepair business into a substantial and management, environmental The defence industry needs all the portion of the overall business of our monitoring, as well as maritime and expertise and experts it can get its US shipyard in the years to come. What coastal observation. hands on, yet very few players are able is important is that apart from providing to surmount the high barrier to entry revenue growth, the shiprepair business Beyond any particular expertise in in this segment. We certainly felt a complements our shipbuilding capability. developing products or solutions, there sense of accomplishment when is just a simple matter of establishing KWA Chong Seng TAN Pheng Hock ST Kinetics’ 40mm ammunition, known We are continuing our search for suitable trust through proximity to customers. Chairman President & CEO for its effectiveness and reliability, was yards outside Singapore to expand our To this end, we bought 90% equity selected for use in the Canadian Armed shipbuilding and shiprepair business. stake in a Brazilian company, Technicae Forces’ Tactical Armoured Patrol Vehicle Projetos e Serviços Automotivos Ltda programme and by the US Army. Extending our Growth into that provides automotive MRO services Australian Munitions partnered us to the Future to military customers. We believe that This is my first year as the Chairman of your company, and cooperate in Australia and New Zealand ST Engineering is today a global this development will help strengthen I am honoured to be part of a well managed Group with a to develop, manufacture and market company with a presence in 46 cities our competiveness in the defence clear vision, demonstrated by its solid growth over the years. the 40mm low velocity, extended range across 24 countries. To stay ahead in the business in Brazil and the rest of My congratulations to Pheng Hock, who was named 2013 Asia and air bursting ammunition. technology and solutions race means we South America. Business Leader of the Year at the 12th Asia Business Leaders must expand and deepen our presence Awards. He was selected from a group of top performers in Asia On the commercial business front, in more countries and markets. We also As we invest to strengthen capabilities we took steps to strengthen the sector’s must invest to enhance our existing and expand capacities of the Group and is the first Singaporean to have received this accolade since distribution network for specialty competencies and businesses for the globally, we have to weigh between the award started in 2001. As ST Engineering advances into its vehicles particularly in Africa and Asia. future. We need to build on our network competing uses of our cash. To this a personal note from next phase of growth, I look forward to sharing my perspectives, We set up an automotive and specialty and expand our reach to where our end, we are committed to plough back and working with the board of directors and management profits generated by our overseas vehicles subsidiary in Yangon, Myanmar, customers are today and where they to help guide the strategic directions of the Group. to be ready for opportunities as the will be tomorrow. operations to support their long term Kwa Chong Seng

14 15 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 致股东的信函

尊敬的各位股东：及新建一个机库和一个航空中心；为电子业务细分市场，目前正在为带翼尖小翼的波音去年，我们的造船厂积极开展产能建设，并通 2015年发射入轨，届时将为需要赤道影像将是我们下一步工作的重中之重。在这个日益在新加坡新建大楼；以及为陆路业务的专用车 757飞机开发附加型号合格证，通过外加一个过收购获得新的能力。设于美国密西西比州的企业提供地球观测服务以满足灾害监测复杂的商业世界，整合管理商业行为以及环 2014年伊始，世界经济呈现复苏迹象。美、辆部门迁移一个位于中国的设施。附加货盘位置来满足15货盘货物配置。空客的造船厂在完成帕斯卡古拉造船厂扩建及与管理、环境监测以及海事和海岸观测等安卫活动的合理原则，依然是本集团可持续日和欧元区等发达市场同步复苏，中国经济 A330P2F工程开发项目有序推进。美国AERIA 浮动干船坞增建后具备了修船能力，可向客户多方面用途的需要。经营、发挥竞争力的关键驱动因素。亦稳中前行。这一普遍增长态势委实令人 2013年底订单总额再创新高，达到132亿元，豪华机舱内饰业务2013年进展良好，获得提供更广泛的服务。我们的目标是在今后若欣慰，并将对亚洲各经济体产生积极影响。与2012财年结束时的121亿元相比，同比增长欧洲一架豪华波音商务喷气式飞机的裸机内干年内把修船业务发展成美国造船厂总体除产品或解决方案开发方面的特定专业技除了盈利之外，新科工程认为，以一个积极然而美国的复苏速度以及全球利率的调整 10%。促成这一增长的因素，包括我们赢得饰合同，在其愈加骄人的业绩簿上再添一笔。业务的重要组成部分。除了促进营业额增长术外，我们还通过一种简单的途径来建立且负责任的企业公民的身份参与社会活动，程度依然存在变数。的新客户、来自新市场的业务以及现有客户外，修船业务的重要之处在于对我们的造船信任，这就是接近客户。为此，我们购买了是良好经营方式的一部分。除经济贡献之外，的续订单或其工作范围的扩大。预计2014年电子能力构成补充。为军方客户提供维修修理服务的巴西公司我们的员工还不断投入时间和精力，为其工作所有这些都与我们2013年经历的动荡不定我们将从这定单交付43亿元。电子业务致力于提高产品和解决方案的市场 Technicae Projetos e Serviços Automotivos 所在的社区尽一份力。形成对比。在我们服务的许多市场，2013年份额。新科电子仍是唯一提供综合性成套我们正在新加坡境外继续寻找合适的造船厂， Ltda 90%的股权。我们认为，这一举动将有的市场情绪如果谈不上低迷，也是倍加谨慎。董事会已建议派发每股1毛2分的终期股息，捷运电子解决方案的公司，并凭借这一竞争以扩大我们的造船和修船业务。助于加强我们在巴西和其他南美国家军事董事会的更新但在这个充满挑战的全球经济环境中，我们这包含了每股4分的普通股息和每股8分的优势进入新的市场，同时在现已应用其解决订货的竞争力。 2002年担任主席的佘林发先生于2013年4月凭借新业务的不断流入，交出了一份漂亮的特别股息。连同 2013年9月派发的每股3分的方案的现有城市拓展市场。在加拿大多伦多，面向未来、扩大增长 25日卸任。在过去的十多年时间里，佘先生财务成绩单。这些财务成果表明，即使处境中期股息，本财年的总股息为每股1毛5分。新科电子的月台屏蔽门在Merolinx机场旅客如今，新科工程是一家全球化公司，在 24个在面向全球投资以强化实力并扩大产能的过引领新科工程董事会和管理层走过一些极其艰难，我们依然确保自己是客户最信赖的因此，根据 2013和2012年最后一个交易日的捷运系统支线上得到使用。公司的Smartrip 国家的46个城市开展业务。要在技术和解决程中，我们必须在各种相互冲突的用途之间权艰难的市场环境，指导新科工程平稳地行驶伙伴。平均收市价计算，股息收益率为3.86%。售票机目前已在美国华盛顿地铁得以实施。方案的竞赛中保持领先地位，就意味着我们衡使用现金。为此我们致力于海外业务的利润在通往成长与卓越的航程中。对此，我们谨向与此同时，将于 2020年投运的旧金山海湾区必须扩大并深化在更多国家和市场的存在。再投资，以促进海外业务的长期发展，从而进他表示崇高的敬意。在2013年12月31日结束的财政年度（ 2013财年）为增长创造条件捷运线路也正在实施数字列车乘客信息系我们还必须通过大力投入来强化现有的能力一步提高集团的价值。里，新科工程集团的营业额从2012财年的在新科工程，我们的目标是始终走在我们所统。在亚洲，我们在中国大陆、马来西亚、水平和业务，以满足未来的需要。我们需要于2013年卸任的还有陈英杰先生和梁建鸿 63.8亿元增至66.3亿元，税前利润（ PBT）经营之各个业务的前列，以满足客户当前和未台湾和泰国等诸多城市赢得新的合同，市场通过建立网络，将触角延伸到当前和未来产生重要影响的各种关系中将，董事会对他们的贡献也深表谢意。我们从2012财年的7.154亿元增至7.297亿元，税后来的需要。作为一家工程集团，我们存在的目地位继续巩固。的客户。我们努力与客户建立互惠互利的合作关系。迎来了新的董事会成员，其中包括在审计委净利（净利润）则从2012财年的5.762亿元的就是为全球的许多客户提供解决方案或创我们的着眼点就是协助客户成为其所在领员会任职的郭书实先生，以及同时担任风险增至5.808亿元。造实用的解决方案 —— 不论是在满足城市美国子公司VT iDirect继续向非洲、拉美和在投资规划方面，我们的大多数收购，都以域内更有效率且位居前沿的顶级机构。随着审查委员会、企业投资及撤资委员会和高级捷运网络和复杂飞机改装的需要方面，还是在中东销售解决方案，不断满足日渐增长的强化现有业务的竞争力为着眼点。其中一个我们之间的合作关系逐渐深化，项目数量不人力资源委员会委员的黄志明中将。他们的回顾集团各业务的年度同比业绩，我们的应对陆海空乃至网络空间的安全威胁方面。宽带、蜂窝和移动连接需求。例子就是对美国德克萨斯州圣安东尼奥市断增加，从而为创新和业务扩张提供了动力，到来将让董事会的集体智慧更具深度，我们海事业务收入取得了23%的增长，从 10.1亿元 Turbo Mach公司的资产收购。该公司从事宇进而为新科工程现有的23,000名员工开创了期待他们以自身的睿见卓识，为公司指明达飙升至12.4亿元。宇航、电子和陆路系统要保持走在前列，还需要预见未来——看清陆路航工业复合材料部件和总成的设计与制造有意义职业生涯。发展方向。业务均保持稳定，收入分别为 20.8亿元、客户的未来需要、客户的动向以及扩张的虽然国防工业需要专业技术和专门人才，业务。该收购促进了宇航业务部门为支持当前 16.5亿元和14.7亿元，与 2012财年基本相同。机遇所在，然后设法加以落实和实施。我们但只有少数几家厂商能够跨越高障碍进入和下一代飞机而开发其自身制造和维修能力我们的员工以其精湛的技艺支撑着我们的鸣谢税前利润与2012财年相比，除陆路业务与前无法承受只顾眼前不顾长远的短视行为，这一细分市场。新科动力的 40mm炮弹以其的计划，同时还让该业务部门更有能力来强化每一项工作。作为一家大型企业，新科工程我们希望借此机会感谢我们的业务伙伴、一年度大体持平外，其他所有业务的增长均而是要在优化当前业务与发展未来机遇之间效能和可靠性而著称。当我们得知它入选加自身的维修修理竞争力。为员工能力的多元化、广泛性及深度提供了客户和股东，感谢他们的鼎力支持，并与我们介于7%到15%之间。不断保持平衡。拿大陆军战术装甲巡逻车计划并被美国陆军用武之地。我们通过培养与扶助人才，让他们休戚与共，共同经历了 2013年的种种挑战。选中时，一种成就感便油然而生。此外，我们作为自身发展战略的一部分，我们在2011年成为爱岗敬业并与集团利益保持一致的利益我们还要感谢新科工程的管理层和全体 2013财年各业务、客户类型和地理位置的 2013年，各业务在赢得合同方面均可圈可点，还与Australian Munitions在澳大利亚和新西组建了一家合资公司进军一个新的业务领域：相关者，从而为企业的发展奠定坚实的基础。员工，感谢他们为我们再次走过成功的一年收入组合，与 2012财年大体相同：宇航业务占同时进行多项计划为明天的增长创造条件。兰合作开发、制造并销售 40mm系列爆弹。新科电子与南洋理工学院和DSO国家实验室做出了巨大贡献。 31%、电子业务占25%、陆路业务占 22%、海事这里重点论述以下几个方面：合作设计并开发新加坡第一个商用地球观测我们继续寻找更巧妙的工作方式。在我们向业务占19%。集团收入的 62%来自商业业务，在商用领域前沿，我们采取措施来强化陆路卫星。2013年，这一合作项目取得骄人成果，新市场挺进的过程中，随着产业整合过程中而来自国防业务的销售则构成剩余的38%。宇航业务的专用车辆经销网络，尤其是在非洲和完成了TeLEOS-1卫星的开发。TeLEOS-1将于竞争的加剧，业务的适应能力和灵活应变能力此致就本集团各单位的地理位置而言，亚洲的贡宇航业务继续扩大产能。在新加坡樟宜机场亚洲的网络。为抓住缅甸推进现代化和改革献颇丰，占集团收入的 72%，而美国各单位则新建一座可以容纳两架窄体飞机（如波音737 计划的良机，我们在缅甸仰光建立了汽车与占集团收入的25%。去年，本集团在欧元区的和空客A320）的机库。该机库每年将额外专用车辆子公司。类似地，我们在巴西成立了业务存在依然不大。贡献20万工时，并扩大机身维修大修服务一家新的子公司来发展LeeBoyTM品牌道路施柯宗盛陈平福范围。位于新加坡实里达航空园区的航空中工设备, 力图抓住巴西政府正在计划投资以主席总裁兼首席执行官集团现金及现金等价物，包括由基金经理心业已投运，可提供全套培训和支持设施。改善基础设施而带来的机遇。管理的各项基金，从 2012财年的21亿元略与美国UTC航空航天系统公司签订两项波音增至2013财年的22亿元。截至 2013财年末， 787梦幻客机长期特许协议，其中一项是为海事本集团现金净额为8.56亿元。 Rolls-Royce Trent 1000与General Electric 我们在船舶制造以及船舶维修和改装等这是我第一年担任贵公司主席。新科工程是一家管理出色并且具有明确愿发动机提供机舱系统维修大修服务， GEnx 领域，尤其是对那些要求高水平工程施工的景的企业，这一点在多年的坚实成长中得到了充分的体现。能够成为这样面对贯穿于整个2013年的动荡不定，我们通过另一项是为Hamilton Sundstrand部件提供复杂船只拥有经过实践检验的专业技术，成功地进行各项投资, 让集团获得可持续的竞维修大修服务，这进一步增强了本部门的实并以此为基础，从海军和商业客户赢得稳定一家公司的一部分，我深感荣幸。我也借此祝贺平福在第十二届亚洲商业争优势。该年度资本支出达 3.26亿元，与 2012 力。通过这两项协议，新科宇航可利用UTC 的合同。Bouchard Transportation Co., Inc 领袖奖评选中，从亚洲诸多顶级候选者中脱颖而出，荣获2013年亚洲年度财年的2.36亿元相比增长9,000万元。其中大航空航天系统公司的专业技术，为波音787 以及Crowley Holdings, Inc. 等一系列经常柯宗盛商业领袖称号。这也是自2001年该奖创办以来第一位获此殊荣的新加坡部分用于：为宇航业务购买飞机组件周转件以运营商提供支持。在客货机改装（PTF）客户就是我们多年来建立的声望的明证。人士。在新科工程步入下一成长阶段的时候，我将与董事会及管理层分寄语享观点、并肩合作，共同为集团的战略指引方向。

16 17 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Board of Directors

Profile of 1. Mr Kwa Chong seng Chairman Directors The names of the directors holding Mr Kwa Chong Seng, 67, was appointed an independent non- executive Director on 1 September 2012. He was appointed office at the date of this report are set Chairman on 25 April 2013. Mr Kwa was last re-elected Director out below together with details of their on 24 April 2013. He retired as Chairman & Managing Director of 1. MR KWA Chong Seng ExxonMobil Asia Pacific Pte. Ltd. in October 2011. A mechanical (Chairman) academic and professional qualifications, engineer by training, Mr Kwa joined Esso Singapore in 1969 and 2. mr TAN Pheng Hock age, date of first appointment as Director, 1 2 had held various roles in Logistics, Marketing, Supply, Trading date of last re-election as Director, as and Investment Planning. He also spent several years in Exxon well as other directorships and principal offices in the US and Hong Kong. Mr Kwa is currently the Chairman of Neptune Orient Lines Limited* and several of commitments. its key subsidiaries. He is also Chairman of Fullerton Fund Management Company Ltd., Deputy Chairman of the Public Service Commission, Singapore and is on the boards of Singapore Exchange Limited*, SeaTown Holdings Pte. Ltd., 3. MR KOH Beng Seng Delta Topco Limited and the Defence Science & Technology 4. LG NG Chee Meng Agency (DSTA). Mr Kwa graduated from the former University 5. MR QUEK Tong Boon of Singapore with a Mechanical Engineering degree. He was 3 4 5 awarded the Distinguished Engineering Alumni Award by the National University of Singapore (NUS) in 1994 and is a Fellow of the Academy of Engineering Singapore. In 1999, Mr Kwa was conferred the Honorary Ningbo Citizenship. He was awarded the Singapore Public Service Star in 2005.

6. MR QUEK Poh Huat 2. Mr TAN Pheng Hock 3. Mr KOH Beng Seng 7. MR Venkatachalam KRISHNAKUMAR

8. MR Davinder SINGH Mr Tan Pheng Hock, 56, is the President & CEO of ST Engineering Mr Koh Beng Seng, 63, is the CEO of Octagon Advisors Pte. Ltd. 6 7 8 and an executive Director. He was appointed Director on 1 May He was appointed an independent non-executive Director on 2001 and is due for re-election at the 2014 AGM under Article 15 September 2003 and was last re-elected Director on 98 of the Company’s Articles of Association. Mr Tan is Chairman 19 April 2012. Mr Koh was Deputy President of United Overseas of the Singapore Workforce Development Agency, Deputy Bank Limited from June 2000 to 31 January 2005. Prior to this, Chairman of the Singapore Quality Award Governing Council Mr Koh was Senior Advisor to Asia Pulp & Paper Company Ltd, and is on the board of the Singapore Economic Development and Advisor to Bank of China and the International Monetary Board. In 2013, Mr Tan was named Asia Business Leader of the Fund. Mr Koh has extensive experience in the financial services Year at the 12th CNBC Asia Business Leaders Awards. He was sector. He was with the Monetary Authority of Singapore from conferred the esteemed Honorary Fellowship by the ASEAN 1973 to 1998, where he served as Deputy Managing Director 9. Dr Stanley LAI Tze Chang Federation of Engineering Organisations for his contribution to from 1988 to 1998. Mr Koh is a Director of Bank of China (Hong 10. Mr KHOO Boon Hui the engineering profession. In 2012, Mr Tan was honoured as the Kong) Limited^, BOC Hong Kong (Holdings) Limited, Sing-Han 9 10 Best Chief Executive Officer (for companies with $1b and above International Financial Services Limited, Great Eastern Holdings in market capitalisation) by the Singapore Corporate Awards. Limited*, Hon Sui Sen Endowment CLG Limited and United He received the Public Service Medal in 2011. He began his Engineers Limited*. Mr Koh holds a Bachelor of Commerce career as an engineer in ST Marine in 1981. Over the last three (First Class Honours) from the former Nanyang University, decades, he has held numerous senior appointments in the Singapore, and a Master of Business Administration from Group including that of Executive Vice President of ST Marine, Columbia University, USA. President of ST Kinetics, President and Chief Operating Officer of ST Engineering and ST Engineering Group President. He 11. Mr QUEK See Tiat holds a Bachelor of Science (First Class Honours) in Marine

12. COL Alan GOH kim hua Engineering from the University of Surrey, UK and a Master of * listed on the SGX-ST 11 12 Science in Management from Stanford University, USA. ^ listed on the Stock Exchange of Hong Kong # listed on the Nasdaq Stock Market

18 19 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Board of Directors

4. Lieutenant-general NG Chee meng 6. Mr QUEK Poh Huat 8. Mr davinder singh 10. Mr KHOO Boon Hui

LG Ng Chee Meng, 45, is the Chief of Defence Force. He was Mr Quek Poh Huat, 67, is Senior Advisor of Singapore Power Mr Davinder Singh, 56, is the CEO of Drew & Napier LLC. Mr Khoo Boon Hui, 59, is the Senior Deputy Secretary of the appointed a non-executive Director on 25 April 2013 and is Limited (SingPower). Prior to this, he was the Group CEO of He was appointed an independent non-executive Director on Ministry of Home Affairs and concurrently Senior Fellow and due for re-election at the 2014 AGM under Article 104 of the SingPower until his retirement on 31 December 2011. Mr Quek 1 August 2007 and was last re-elected Director on 24 April 2013. Director, Institute of Leadership and Organisation Development, Company’s Articles of Association. Prior to this, LG Ng was the was appointed a non-executive Director on 15 April 2002 and Mr Davinder Singh has been in legal practice for more than Civil Service College. He was appointed an independent Chief of Air Force. He joined the Ministry of Defence (MINDEF) was last re-elected Director on 24 April 2013. He is Singapore's 30 years. He was in the first batch of Senior Counsel appointed non-executive Director on 1 September 2010 and is due for in 1986 and was awarded the SAF Postgraduate Scholarship non-resident Ambassador to Sweden. Mr Quek also serves as in 1997. He is a Director of the Singapore Exchange Limited*, re-election at the 2014 AGM under Article 98 of the Company’s (Specialist Development) in 2002 and the Public Administration Chairman of Aetos Security Management Pte. Ltd. Mr Quek Petra Foods Limited* and PSA International Pte Ltd. Articles of Association. Mr Khoo was appointed Commissioner of Medal (Gold) in 2011. LG Ng was conferred the “Most Exalted was conferred the Public Service Star Award by the Singapore Mr Davinder Singh is also a Member of the Board of Trustees of the Singapore Police Force (SPF) in July 1997, and relinquished Order of Paduka Keberanian Laila Terbilang – First Class” by the Government in 1994. In May 2012, he was awarded the May Day NUS. He holds an LLB (Honours) from the former University this post in January 2010 after serving 32 years in SPF. He Sultan of Brunei in 2013. In the course of his military career, Medal of Commendation (Gold) Award by the National Trades of Singapore. was also the President of INTERPOL from 2008 to 2012. Mr LG Ng has held various command positions in MINDEF since Union Congress. Mr Quek obtained a Bachelor of Science in Khoo is currently Chairman of the Paris-based Technology 1993, including Director of Joint Operations. He is Deputy Chemical Engineering from the University of Leeds, UK, and a Against Crime Association, alternate Chairman of Home Team Chairman of SRCC Pte Ltd and a member of DSTA and JTC Master of Science in Management from the Naval Postgraduate Academy Board of Governors, Deputy Chairman of Singapore Corporation. LG Ng holds a Bachelor of Science from the US Air School, USA. Island Country Club and Singapore Quality Award Governing Force Academy, and a Master of Arts from The Fletcher School Council and a Board Member of Singapore Health Services of Law and Diplomacy, Tufts University, USA. Pte Ltd and Temasek Foundation CLG Limited. He also sits on the advisory panels of the Qatar-based International Centre for Sports Security, the UK-based Independent Commission on the Future of Policing, the Cambridge University Police Executive Programme, and the Oxford University Journal of Policing. Mr Khoo holds a Bachelor of Arts (Engineering Science & Economics) degree from Oxford University and a Master in Public Administration from the Harvard Kennedy School of Government. He attended the Advanced Management Program at Wharton School of the University of Pennsylvania in 2002.

5. Mr QUEK Tong Boon 7. Mr Venkatachalam KRISHNAKUMAR 9. Dr Stanley LAI Tze Chang 11. Mr quek see tiat

Mr Quek Tong Boon, 58, is Chief Defence Scientist of MINDEF. Mr Venkatachalam Krishnakumar, 64, is Chairman of Oracle Dr Stanley Lai Tze Chang, 46, is Head of the Intellectual Property Mr Quek See Tiat, 59, is Chairman of the Building and Prior to this, he had concurrently held the position of Chief Financial Services Software Pte. Ltd. (Singapore). Prior to this, & Technology Department, Allen and Gledhill LLP. He was Construction Authority. He was appointed a non-executive Research & Technology Officer until 1 July 2013. Mr Quek was he had held senior advisory roles at McKinsey and Company, appointed an independent non-executive Director on 8 October Director on 1 July 2013 and is due for re-election at the 2014 appointed a non-executive Director on 1 March 2008 and is Barclays Bank PLC, Global Retail and Commercial Banking and 2009 and was last re-elected as Director on 24 April 2013. AGM under Article 104 of the Company’s Articles of Association. due for re-election at the 2014 AGM under Article 98 of the DBS Bank. He was Chief Operating Officer and Chief Financial Dr Lai was appointed Senior Counsel at the Opening of the He retired as Deputy Chairman of PricewaterhouseCoopers Company’s Articles of Association. He joined the Defence Officer for the Asia Pacific Consumer Bank of Citigroup when Legal Year 2010. He currently serves as Chairman of Intellectual Singapore in 2012, after a career in the firm that spanned Science Organisation of MINDEF in 1980 and in the course of he retired on 28 February 2005 (after a 31-year career with Property Office of Singapore (appointed on 1 April 2013). 31 years. Mr Quek is a board member of Singapore Press his career, has held various key appointments, including that of the group). During his career with Citigroup, he held several He obtained his law degree from the University of Leicester (UK) Holdings Ltd*, Neptune Orient Lines Limited*, the Energy Market Deputy Secretary (Technology and Transformation) of MINDEF senior appointments in India, Singapore and New York. He was in 1992 and qualified to practise as a Barrister in England and Authority and the Monetary Authority of Singapore. He holds and CEO of the DSO National Laboratories. Mr Quek is a board appointed an independent non-executive Director on 15 April Wales in 1993. Dr Lai is a member of Lincoln’s Inn. He was called a Bachelor of Science (Economics) Honours from the London member of the Public Utilities Board and an Adjunct Professor 2002 and was last re-elected Director on 19 April 2012. He is a to the Singapore bar in 1995. Dr Lai also holds a Masters in Law School of Economics and Political Science, and is a Fellow of the at the Department of Electrical & Computer Engineering in NUS. Director of Pactera Technology International Ltd#, MediaCorp (LLM) and Doctorate (Ph.D) in law from the University Institute of Chartered Accountants in England and Wales and a He holds a Bachelor of Arts (Honours) (Engineering) from the Pte. Ltd., Aspen Holdings Limited and CIMB Bank Berhad. of Cambridge, UK. member of the Institute of Singapore Chartered Accountants. University of Cambridge, UK, and a Master of Science (Electrical He holds a Bachelor of Engineering and Master of Business Engineering) from NUS. Administration from the Indian Institute of Management, India.

* listed on the SGX-ST ^ listed on the Stock Exchange of Hong Kong # listed on the Nasdaq Stock Market

20 21 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Board of Directors Corporate Information

PAST DIRECTORSHIPS IN 12. colonel alan goh kim hua (alternate director) THE LAST THREE YEARS Board Of Directors Auditors

COL Alan Goh Kim Hua, 37, is the Commanding Officer of the Mr KWA Chong Seng Mr KWA Chong Seng (Chairman) KPMG LLP Missile Corvette Squadron in the Republic of Singapore Navy DBS Bank Ltd 16 Raffles Quay #22-00 (RSN). He was appointed Alternate Director to LG Ng Chee DBS Group Holdings Ltd Mr TAN Pheng Hock (President & CEO) Meng on 25 April 2013. COL Goh joined the Singapore Armed Esso China Inc. Hong Leong Building Forces (SAF) in 1995 and has held various command and staff ExxonMobil Asia Pacific Pte. Ltd. Mr KOH Beng Seng Singapore 048581 positions in MINDEF / SAF since 1999, including Deputy Director, ExxonMobil Oil Singapore Pte Ltd Sinopec SenMei (Fujian) Petroleum Co. Ltd. Lieutenant-General NG Chee Meng Ms ANG Fung Fung (Partner-in-charge) Defence Policy Office and Head Naval Personnel, RSN. He Temasek Holdings (Private) Limited (Date of Appointment: 24/04/2013) was awarded the SAF Overseas Scholarship in 1995, the SAF Mr QUEK Tong Boon Mr TAN Pheng Hock Overseas Postgraduate Scholarship (General Development) Mr QUEK Poh Huat in 2011 and the Public Administration Medal (Bronze) in 2013. Cradance Services Pte Ltd Nanyang Polytechnic International Private Limited Mr Venkatachalam KRISHNAKUMAR COL Goh holds a Bachelor of Arts (Honours) (Mathematics) SembCorp Marine Ltd Principal Bankers from the University of Cambridge, UK, and a Master of Business Mr Davinder SINGH s/o Amar Singh Administration (Sloan Fellow) from the Sloan School of Mr KOH Beng Seng Bank of America, N.A. Management, Massachusetts Institute of Technology, USA. Fraser and Neave Limited Dr Stanley LAI Tze Chang Japan Wealth Management Securities Inc 50 Collyer Quay Mr KHOO Boon Hui #14-01 OUE Bayfront Lieutenant-General NG Chee Meng Singapore 049321 Experia Events Pte. Ltd. Mr QUEK See Tiat Singapore Technologies Aerospace Ltd Colonel Alan GOH Kim Hua (Alternate Director to Citibank N.A. Mr QUEK Poh Huat Lieutenant-General NG Chee Meng) 8 Marina View Aircraft Capital Trust Management Pte. Ltd. #21-01 Asia Square Tower 1 Enterprise Business Services (Australia) Pty Ltd Singapore 018960 PowerGas Limited Singapore Power Limited SP PowerAssets Limited DBS Bank Ltd SP PowerGrid Limited Company Secretary 12 Marina Boulevard SP Services Limited Level 45, MBFC Tower 3 SPI (Australia) Assets Pty Ltd Singapore 018982 SPI Management Services Pty Ltd Mrs CHUA Su Li Mr Venkatachalam KRISHNAKUMAR Oversea-Chinese Banking Corporation Limited Cypress Holdings Limited 65 Chulia Street HiSoft Technology International Ltd Registered Office #10-00 OCBC Centre Mr KHOO Boon Hui Singapore 049513 Singapore Technologies Kinetics Ltd ST Engineering Hub Mr QUEK See Tiat 1 Ang Mo Kio Electronics Park Road Pricewaterhousecoopers Advisory Services Pte. Ltd. #07-01 Pricewaterhousecoopers Asia Actuarial Services Singapore 567710 (Singapore) Pte. Ltd. Pricewaterhousecoopers Corporate Finance Pte. Ltd. Tel: (65) 6722 1818 Pricewaterhousecoopers LLP Fax: (65) 6720 2293 Pricewaterhousecoopers Services LLP www.stengg.com Pricewaterhousecoopers WMS Holdings Pte. Ltd. Pricewaterhousecoopers WMS Pte. Ltd. PWC International Assignment Services Holdings Pte. Ltd. PWC International Assignment Services LLP PWC International Assignment Services (Singapore) Pte. Ltd. Share Registrar

M & C Services Private Limited 112 Robinson Road #05-01 Singapore 068902 * listed on the SGX-ST ^ listed on the Stock Exchange of Hong Kong # listed on the Nasdaq Stock Market

22 23 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Senior Management

1. Mr Tan PHeng Hock 2. Mr CHANG Cheow Teck 3. Mr LEE Fook Sun 4. Mr SEW Chee Jhuen 5. Mr NG Sing Chan

Mr Tan Pheng Hock is President & CEO Mr Chang Cheow Teck, 53, was Mr Lee Fook Sun, 57, was appointed Mr Sew Chee Jhuen, 50, was appointed Mr Ng Sing Chan, 53, was appointed of ST Engineering and a Director of the appointed President, ST Aerospace in President of ST Electronics in August President of ST Kinetics in September President, ST Marine in May 2010. Prior ST Engineering Board. (Mr Tan’s profile May 2010. Prior to this, Mr Chang was 2009 and took on the role of President, 2006. Prior to this, Mr Sew was Deputy to this, Mr Ng was Deputy President is on page 19). President of ST Marine from 2008. He Defence Business of ST Engineering President (Operations) and President and President, Defence Business of has been with the Group since 1990 and in March 2013, driving the strategic Defence Business of ST Kinetics. He ST Marine. He joined ST Marine in 1987 has held several senior management relationship with the Group’s core joined ST Aerospace as an Aeronautical as an engineer. Mr Ng left in 1991 and appointments within the Group including defence customers. He joined Engineer in 1988, and has held many later became the Deputy General that of Executive Vice President, ST Electronics in 2000 as President senior management appointments Manager of Pan-United Shipyard Pte Ltd. Commercial Business, ST Aerospace; of Defence and International Business before becoming Deputy President He subsequently took on the positions President, Vision Technologies Systems, and was appointed the company’s (Operations). Mr Sew serves as a of President of Changshu Xinghua Inc.; and President, Defence Business, Deputy President (Operations) in 2005. Member of the Board of Governors of Changjiang Dev Co and Executive ST Kinetics. Mr Chang holds a Bachelor Mr Lee serves as Deputy Chairman of Singapore Polytechnic. He was awarded Director of Pan-United Marine Ltd (now of Mechanical Engineering (First Class Building and Construction Authority and the Medal of Commendation in the May known as DDW-PaxOcean Shipyard Pte. Honours) from NUS and attended the Director of DSO National Laboratories. Day Awards 2012 by the National Trades Ltd.). Mr Ng re-joined the Group in March Harvard University’s Management He holds a Bachelor of Arts (Honours) Union Congress. He holds a Bachelor of 2008 as Executive Vice President, Special Development Program. He is a Fellow of and a Master of Arts (Engineering Science (High Distinction) in Aeronautical Projects, ST Engineering and moved to The Institution of Engineers, Singapore. Science) from the University of Engineering and Mechanics from the ST Marine as Deputy President in April Oxford, UK and attended the Stanford University of Minnesota, and a Master of 2009. Mr Ng holds a Master of Business University’s Executive Program. Mr Lee is Business Administration from Stanford Administration (Finance & Banking) a Fellow of The Institution of Engineers, University, USA. Mr Sew is a Fellow of from the Nanyang Technological Singapore. The Institution of Engineers, Singapore. University, Singapore and a Masters in Engineering from the University of 1 Hamburg, Germany.

6. General (Retired) 7. Ms Eleana TAN Ai Ching John G COBURN Ms Eleana Tan Ai Ching, 51, was General (Retired) John G Coburn, appointed Chief Financial Officer of 72, was appointed Chairman and ST Engineering in March 2008. Ms Tan 3 CEO of ST Engineering’s US subsidiary, was previously Managing Director, VT Systems, in December 2001. Finance, Temasek Holdings (Private) 2 Gen (Ret) Coburn joined the Group Limited (Temasek). Prior to that, she after an illustrious 39-year career with was Director Finance at Singapore the US Department of Defense. Prior Technologies Pte Ltd (STPL) from 4 to taking up this position, he was August 2003 until December 2004, Commanding General of the US Army when STPL was restructured, and its Materiel Command, one of the largest assets transferred to Temasek. Prior commands in the army with 60,000 to 2003, Ms Tan had held various key employees with an annual budget of finance positions in the TS Engineering US$40b and activities in 42 states and Group over a period of 13 years and last 6 28 foreign countries. Gen (Ret) Coburn held the position of Group Financial holds a Juris Doctor from the University Controller of ST Engineering. Ms Tan of Missouri, USA, a Doctor’s Degree from holds a Bachelor of Accountancy Eastern Michigan University and many (Honours) from NUS and attended the other degrees. He is also a noted author, Harvard Business School’s Advanced speaker and a member of the Supreme Management Program in 2013. She is 5 Court of the United States. a member of the Institute of Singapore Chartered Accountants.

24 25 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Organisation Chart

TAN Pheng Hock President & CEO

Eleana TAN lee fook sun Chief Financial Officer President, Defence Business

internal audit Finance defence business

grace kwok Eve CHAN alex teo Senior Vice President Group Financial Controller Senior Vice President (Reports to Audit Committee)

Aerospace Electronics Land Systems Marine

International Marketing Technology Risk Management Chang cheow teck lee fook sun sew chee jhuen Ng Sing Chan Patrick choy fong saik hay Alice chua President President President President Executive Vice President Chief Technology Officer Senior Vice President (Joint reporting to Risk Review Committee)

Lim Serh Ghee Lau Thiam Beng gan boon jin Lim Nian Hua Chief Operating Officer Deputy President, Operations & Chief Operating Officer Senior Vice President / & President, Defence Business President, Defence Business & President, Defence Business Ag Chief Operating Officer Special Projects Legal Information Technology

Parmesh Singh Low Meng Wai Tan Hock Hai yong thiam chong Bernard Tan Kok Kiang Han Yew Kwang Executive Vice President Senior Vice President Chief Information Officer Deputy President, President, Executive Vice President, International Business Commercial Business Shipbuilding

Strategic plans Corporate Communications mergers & acquisitions

Robin Thevathasan Lina Poa steven cheong Senior Vice President Senior Vice President Senior Vice President

US operations Europe operations

Human Resource Business Excellence System engineer john g coburn Augustine SYN Chairman & CEO Senior Vice President tan nga kok1 Harnek singh gan boon jin Senior Vice President/Director Vice President / Director Chief System Engineer

Lim Jit Chek2 Senior Vice President

procurement advanceD engineering centre Integrated services

Goh bak nguan fong saik hay puah lian seng Chief Procurement Officer 1 Retired on 4 February 2014 President General Manager 2 effective 1 January 2014

26 27 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review

ST Engineering reported Record order book the Royal Navy of Oman, ten Offshore US, VT Halter Marine acquired a floating base of defence, government and & Integrated Supervisory Control With healthy contract wins from all Supply Vessels (OSVs) for Hornbeck dry dock, augmenting its entry into the commercial customers. Behind this, System, the Bangkok MRT, various a resilient set of results sectors throughout the year, the Group’s Offshore Services, LLC., two ATBs for shiprepair business. we also continue to build up our communication systems, the supply for FY2013. At the same time, order book hit an all-time high of $13.2b Bouchard Transportation Co, Inc and capabilities and extend the depth and of telematics systems, satellite the Group continued to build at the end of 2013. two container Roll-on/Roll-off (ConRo) Outlook for 2014 breadth of solutions for our customers. communication systems, and milestone vessels for Crowley Holdings, Inc. In its January 2014 World Economic These strategies ensure we are well- completions of a simulator project for the future, adding new In Aerospace, we secured new contracts Outlook update, the International positioned to ride the upswing in software system. We are also set to partnerships, capacity and across our business segments. These Expanding capacity, Monetary Fund predicted that the global demand when it comes. launch Singapore’s first commercial capabilities. included a passenger-to-freighter (PTF) enhancing capabilities economy would continue to strengthen earth observation satellite into orbit conversion contract for 17-units of During the year, the Aerospace sector in 2014, from 3% in 2013 to 3.7%, led For 2014, our Aerospace sector aims in the fourth quarter of 2015. 757-200, a multi-year line maintenance added capacity in key markets in primarily by the developed economies. to build on its market leadership support contract for Jetstar Asia, pilot anticipation of long-term demand On the other hand, this recovery is and secure more contracts in line While continuing to deliver military training contract with Qatar Airways, growth. Its new hangar in Changi not without downside risks given that maintenance, heavy maintenance, products and services, and pursuing interior modification contracts with commenced operation in May. early 2014 has been marked by signs of components and engines repair and key defence programmes in Singapore various customers, maintenance and slowing growth in the emerging markets overhaul, flight training, PTF and cabin and overseas, our Land Systems sector modernisation contract for Royal Air ST Aerospace completed its investment and market volatility. modification. At the same time, we plan will be looking to grow its market Force of Oman’s three C130 Hercules of 35% equity interest in Elbe to expand capacity and extend our presence for its specialty vehicles aircraft and an eight-year component Flugzeugwerke, thereby adding Dresden, Our Group has, over the long term, range of services and solutions. Our new business in new markets in Africa, Maintenance-By-the-Hour (MBHTM) Germany to its global airframe MRO proven resilient, and we are confident airframe hangar in Guangzhou, China, Latin America and Asia. contract with Spring Airlines Japan. network. For components, we further that we will weather the uncertainties of is expected to commence operations, strengthened our portfolio through the year ahead. Our resilience is built on as is our new setup for aircraft parting Our Marine sector is set to deliver the Our Electronics sector continued to the signing of two long-term repair two pillars – the first, financial strength: and green harvesting, Hondo Aerospace, last two of six AHTs, the TAGS-66 OSS, make headway into new markets. During licence agreements with UTC Aerospace a strong balance sheet, healthy level of in Texas, USA. the last two of four FMCs, eight of ten the year, ST Electronics won rail solutions Systems for MRO services on the Boeing cash and cash equivalents; and second, Super 320 Class OSVs and a car carrier. contracts in Malaysia, Canada, China, 787 aircraft. business stability: a robust order book, Our Electronics sector is on track to Taiwan, Thailand and the US. Meanwhile, which at $13.2b is about two times our recognise sales from a number of Barring unforeseen circumstances, the its satellite communication business Our Electronics sector consolidated annual revenue; a global footprint which projects, including Land Transport Group expects revenue and profit before expanded its presence in emerging various facilities into two new buildings reduces geographic risks, and a diverse Authority (LTA)’s Communications tax in FY2014 to be higher to that of markets. near its existing premises in Ang Mo Kio FY2013. in Singapore for better synergies. Outside In Land Systems, we further cemented of Singapore, to tap the growing demand our leading position in 40mm solutions in emerging markets for our solutions, we with international orders worth more set up two new subsidiaries, one in Wuxi, than US$30m. On the commercial China and one in Thailand. front, orders for our productive specialty The new ST Engineering Hub vehicles included a contract for 84 units Expanding its footprint into Brazil, our In October, ST Engineering moved of excavators from the Uzbekistan Land Systems sector acquired a 90% to a new home, ST Engineering government. equity interest in Technicae Projetose Hub, in Ang Mo Kio. The new Servicos Automotivos Ltda to expand building is owned by a business Our Marine sector added to its order its defence business into Brazil. unit of ST Electronics, and besides book, with newbuild contracts from ST Kinetics also expanded the ST Engineering, it houses the Republic of Singapore Navy for presence of its LeeBoy’s brand of ST Electronics’ Info-Software eight naval vessels, and two Articulated road construction equipment in Brazil Systems, Satcom & Sensor Tug Barges (ATBs) from Bouchard with the setting up of LeeBoy Brazil Systems and Data Centre Solutions Transportation. Equipamentos De Contrução Ltda to subsidiaries. establish a manufacturing base for the We have been progressing well and LeeBoy brand. on track for our current shipbuilding programmes like Swire Pacific Offshore In Marine, we increased capacity in Operations (Pte) Ltd to build six Anchor Tuas Yard in Singapore through land Handling Tug (AHT) supply vessels, the acquisition, which will allow further design and build of four patrol vessels for growth of our fabrication business. In the

28 29 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review

Revenue of $2,079m for FY2013 was comparable to that Aerospace of FY2012. The higher revenue in the Aircraft Maintenance & Modification business group and more project milestone Revenue completions in the Engineering & Material Services business Our continued capacity and capability investments, combined group were largely offset by lower sales in the components with an established global network and broad service offering 2013 1q 2q 3q 4q $2,079m division of the Component/Engine Repair & Overhaul 2012 1q 2q 3q 4q $2,019m business group. for airframes, components and engines, position us to deliver PBT for FY2013 was $319.4m, a growth of 7% or $2.6m over better value to customers worldwide. profit before tax (PBT) that of FY2012.

2013 1q 2q 3q 4q $319.4m The higher PBT was due mainly to higher gross profit, lower operating expenses and favourable foreign exchange impact, 2012 1q 2q 3q 4q $297.8m but these were partially offset by the absence of a one-off gain on disposal of a property and write-back of allowance for inventory obsolescence recognised in FY2012.

2013 REVIEW hangar commenced operations at our venture into green harvesting of aircraft Component Total Support (CTS) as Hamilton Sundstrand’s components venture continued to grow its customer The Aerospace sector demonstrated Changi facility in Singapore, welcoming parts, components and engines. ST Aerospace is well positioned for growth installed on the Boeing 787. base and capabilities. We expanded resilience while adapting to a challenging customers for base and line maintenance. as a component total support provider market reach with the addition of aviation landscape. We sustained growth During the year, we continued to secure On the military side of maintenance, as we continue to leverage existing OEM In addition to the expanded capabilities the International Aero Engines V2500 for another year, securing new orders new contracts, including a multi-year ST Aerospace continued to support the relationships, invest in new capabilities for newer generation aircraft, engines to the portfolio, at the same worth $2.3b in 2013. agreement to provide Jetstar Asia’s fleet Republic of Singapore Air Force (RSAF) and expand into new geographic markets. ST Aerospace’s component distribution time, grew its customer footprint of A320 with a full suite of round-the- through a Public-Private Partnership network continued to evolve to address in the Southeast Asian and Middle We remained well positioned with a clock line and base maintenance support arrangement. Following the roll-out Supporting close to 800 aircraft around the growing international demand for Eastern regions. balanced services portfolio to respond in Changi. of the first M346 aircraft, a full suite of the world, we continued to build our components. During the year, the new to evolving market needs, while support for RSAF’s Advanced Jet Trainer track record in component Maintenance- rotable asset leasing and management On engine capability development, the maintaining emphasis on productivity A six-year contract was also secured with programme covering engineering, By-the-Hour (MBHTM) support. During business added new offices and sector set up in-house engine part repair improvements and innovation. Deeply an existing Asian customer for a full suite maintenance, logistics and ground the year, ST Aerospace secured several inventory facilities in the Americas capabilities, and added on-wing support rooted in our mission ‘we keep aircraft of depot maintenance of its aircraft fleet. training commenced during the year. long-term exclusive component repair and Europe for improved customer capabilities for GEnx-1B and GEnx-2B flying safely’, a customised aviation Seven years into the 20-year rotary management MBHTM contracts with convenience. engines powering the Boeing 787 and behaviour based safety programme was In the US, VT Aerospace acquired wing course, the team achieved various airlines to support over 100 747-8 aircraft, as well as CFM56-7B introduced across the sector, to reinforce the assets of composite component 20,000 safe flight hours on RSAF’s narrow-body aircraft. An authorised supplier of component engines to enhance our engine total individual and collective behaviours designer and manufacturer Turbo Mach, fleet of helicopters. repair and overhaul services for over support value proposition. towards unfailing safety. LLC, to further develop composite In component repair and overhaul, 30 leading OEMs, further progress was manufacturing and repair capabilities The C130 Hercules modernisation our facilities in Singapore, Madrid and established with the appointment from On green engine aviation, VT Aerospace A new business structure was in the US. programme continues to be an important Scandinavia delivered a steady stream CEF Industries for components used on exercised a purchase option for implemented in 2013, enabling the platform for ST Aerospace’s avionics of 44,604 components and 251 landing commercial and military aircraft. the intellectual property assets of sector to better serve customers and Making headway in the VIP aircraft upgrades. In early 2013, the sector gears. EcoServices during the year. drive growth. completions market two years after its secured a contract to provide the Royal Engine Total Support (ETS) EcoServices will fully manage its launch, AERIA Luxury Interiors became Air Force of Oman with a full-scale As Boeing 787 Dreamliner deliveries With facilities in Singapore and China portfolio of intellectual property assets Aircraft Maintenance an approved Boeing Business Jet (BBJ) maintenance and modernisation solution gained momentum in the global catering to an annual capacity of more required to operate the environmentally & Modification (AMM) completion centre, at the same time for three of its C130 Hercules aircraft. The market, our component portfolio was than 500 engines, our repertoire of friendly engine wash business. The AMM business maintained its secured several interior modification first aircraft was inducted into the facility strengthened through the signing of two engine aftermarket services continued Additionally, EcoServices and partner leadership position as the world’s contracts, including its first green aircraft in July and redelivery is expected in the long-term repair licence agreements to grow. The ETS business completed Vector-Hawk Aerospace launched into largest airframe maintenance, repair completion project for a European- first quarter of 2014. with UTC Aerospace Systems for MRO 240 engines and over 10,000 EcoPower® a new market with a new version of the and overhaul (MRO) service provider, based VIP 737 BBJ customer. services on the Boeing 787 aircraft. With engine washes in 2013. EcoPower® engine wash system for achieving close to 12m airframe ST Aerospace has redelivered 101 these agreements, ST Aerospace became PT-6 engines. maintenance man-hours. In 2013, Other initiatives implemented during the 757-200SF converted freighters since a member of UTC Aerospace Systems’ Riding on an increasing trend for ST Aerospace redelivered 825 aircraft for year include the setting up of an aircraft 2001, which are now in service around Boeing 787 MRO supplier network, aircraft parting and spare engine Aviation & Training Services (ATS) airframe maintenance and modification leasing business to focus on mid-life to the world. An additional order of 17 aircraft through which we will provide nose- leasing, ST Aerospace grew our focus The ATS business continued to provide work, including freighter conversions. end-of-life aircraft for leasing, conversion was secured for an international airfreight to-tail services on the nacelle systems on engine parts and accessories repairs, a robust range of air charter, aircraft and part out; and the establishment of carrier, bringing to 139 the total number for both Rolls-Royce Trent 100 and on-wing support, leasing and engine leasing, technical and pilot training ST Aerospace made further progress Hondo Aerospace at the South Texas of aircraft contracted for the 757-200SF General Electric GEnx engines, as well parts trading. The engine leasing joint services to customers around the world. growing our airframe maintenance Regional Airport in Hondo, Texas to freighter conversion programme. business. A new two-bay narrow-body

30 31 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Aerospace

ST Aerospace’s commercial pilot training converted freighters, following the launch also expected to rise, as airlines compete ST Aerospace also continues to invest carriers and legacy airlines which are business received a five-year multi-crew of the 15-pallet cargo configuration for passengers’ wallets. ST Aerospace and scale our customised programme seeking financing diversification and pilot licence (MPL) training contract from development effort to enhance our will leverage our existing strengths in to support a strong customer fleet for fleet flexibility.T S Aerospace will be able Qatar Airways, making inroads into the current suite of 757-200SF conversion base maintenance and continue to build component MBH™. to value-add in mid-life and end-of-life Middle East. solutions. capabilities in high value modification aircraft leasing through our technical activities such as freighter conversions, In the area of engines repair and capability and capacity, which will allow During the year, a fixed-base Airbus 2013 saw the completion of the cabin retrofits and VIP completions. overhaul, ST Aerospace was the first us to minimise aircraft transition costs A320 FFT X™ – MPL was commissioned investment of 35% equity interest third-party MRO company to be awarded between leases. in Singapore to support phase two of in Elbe Flugzeugwerke, following Airfreight operators continue to face the TRUEngine provider status for the the MPL training programme, while receipt of regulatory approvals and flat growth as they struggle with the CFM56 family of engines. Going forward, Given the competitive landscape, additional six Cessna 172 single-engine fulfilment of customary conditions slowdown in world trade growth. ST Aerospace will continue to leverage the Aerospace sector will leverage training aircraft were acquired for our precedent. Following this, ST Aerospace A further contraction of 2.1% in cargo our partnerships with OEMs and airlines our diverse customer base, strong flying operations in Ballarat, Australia. commenced the Airbus A330P2F yields is expected in 2014 as capacity to build new capabilities for other engine geographic presence, capabilities in engineering development phase, thereby conditions remain challenging. types. We will also strengthen our defence and commercial business In the area of air charter capability raising the sector’s profile as a Centre of market competitiveness and technical segments, integrated solutions in development, ST Aerospace added Excellence in freighter conversions. Notwithstanding, Boeing predicts the capabilities to lower costs for our airframes, engines and components a Gulfstream G150 business jet to the freighter fleet to grow by more than customers, by providing the option of MRO, as well as engineering charter fleet. With this, the charter INDUSTRY REVIEW AND OUTLOOK half by 2032. Correspondingly, airfreight using approved overhauled and repaired development capabilities to stay ahead business now operates six aircraft for The global airline industry continues to operators will see stronger demand in parts on their engines. of competition. We will continue to invest global executive travel and air operate in a challenging environment, the mid- to long-term as the economy in new capabilities to extend the scope ambulance support. weighed down by tepid global picks up. Dedicated freighters will still Apart from investing in existing of our services and in new locations to economic growth and high jet fuel be required to meet the freight tonne businesses, ST Aerospace will continue improve our cost structure and Aerospace Engineering & prices. Nonetheless, according to the kilometre growth to keep pace with to establish new capabilities in our customer reach. Manufacturing (AEM) latest statistics by the International GDP growth over the long term. ‘total aviation support’ offering. Besides ST Aerospace is positioned through Air Transport Association, passenger expanding capabilities in engine and our global MRO network and one-stop demand growth has strengthened Additionally, some of the airfreight component leasing, a joint venture cabin retrofit service offerings to access compared to a year ago, thus providing operators’ fleets are due for renewal, was set-up to invest in mid-life and 1 ST Aerospace received a three year the growing cabin interiors market. some relief for airlines. which calls for the consideration of more end-of-life aircraft leasing. The aircraft contract to provide Jetstar Asia’s fleet of A320 with a full suite Gaining momentum, ST Aerospace fuel-efficient freighters. Arguably, the leasing industry was approximately of maintenance support in received contracts from four airlines on Despite the near term challenges faced Boeing 757 remains a choice candidate US$180b in asset value, with about 35% Changi, Singapore cabin reconfiguration solutions for by the airline industry, the mid- to long- for narrow-body conversions as it offers of the global fleet on operating lease a total of six Airbus A330-343 and term prospects for the MRO industry higher payload and range capabilities, in 2012. Aircraft leasing is expected to 2 ST Aerospace making headway in the VIP interior completions market 31 Boeing 767-300 aircraft. Of note, remains bright. According to consultancy while the mid-sized A330 and Boeing grow. The share of leased versus owned ST Aerospace was awarded a ICF SH&E, the global aircraft fleet is 767 are well considered for their fuel aircraft is predicted to grow to 50% by 3 ST Aerospace’s expanded footprint supplemental type certificate (STC) expected to grow by 950 aircraft a year, efficiency and heavier load capacity, 2020, driven by demand from low-cost in Seletar, Singapore by the European Aviation Safety Agency from 27,000 aircraft in 2013 to about especially suited for the Asian market. for the full cabin retrofit programme 35,600 aircraft in 2022. The MRO market The market has seen several Boeing involving six Airbus A330-343 aircraft, is expected to grow at a compounded 767-300 streaming in for conversions while STCs with approval from the annual growth rate of 4.1% from US$59.2b in 2013, with confidence that more US Federal Aviation Administration in 2013 to US$84.7b in 2022. Notably, will be available once the Boeing 787 will be developed for the other the Asia Pacific region including China, deliveries stabilise. In terms of A330P2F respective projects. is expected to account for the largest conversions, Airbus believes that the absolute increase in MRO spend over the A330P2F will provide a good solution in In terms of cabin interior capability next decade. ST Aerospace, with a strong the medium size freighter segment, with development, a new long-haul economy presence in this region, is well-positioned the market segment expected to grow to aircraft seat was co-developed with to address this growing regional market. 1,290 units by 2032. Japanese aircraft seat manufactuer, 1 Tenryu Aero Component Co. Ltd, as Growth prospects remain good for our Healthy growth is expected for our the sector extends into cabin interior aircraft maintenance and modification component and engine total support product manufacturing. segment, driven by an increase in segments, despite increasing competition demand for aircraft modification services. in the aftermarket from the OEMs. ST Aerospace believes that investments Boeing has forecasted that there would On new, technology-intensive aircraft in proprietary STCs will generate long be 2,300 freighter aircraft deliveries types, ST Aerospace continues to term growth value to our business. To over the next 20 years, out of which collaborate with OEMs for better this end, we received our first contract 63% would be converted aircraft. The customer support. for five 757-200SF (Special Freighter) demand for cabin interior upgrades is 2 3

32 33 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review

Electronics Revenue of $1,650m recorded in FY2013 was comparable to Revenue that of FY2012. Large-Scale Systems Group (LSG) recorded We continue to build and expand our market share with a higher revenue, while both Communication & Sensor Systems focus on three key business areas – satellite and broadband 2013 1q 2q 3q 4q $1,650m Group and Software Systems Group had comparable revenue. 2012 1q 2q 3q 4q $1,578m LSG’s higher revenue was mainly due to milestone completions communications; transportation systems and solutions; of the Land Transport Authority’s Downtown Line project, and advanced electronics and information communications profit before tax (PBT) the Chennai Metro Rail project and the MRT projects in Wuxi, Bangkok and Taipei. technologies solutions. 2013 1q 2q 3q 4q $170.3m PBT of $170.3m for FY2013 was higher than that of FY2012 2012 1q 2q 3q 4q $152.3m by 12% or $18.0m. The higher PBT was mainly attributable to lower impairment of intangible assets, gain on disposal of an investment as well as lower loss incurred by an associate.

2013 review Large-Scale Systems Group We made inroads into Canada with our developing our new Smart Street commercial remote sensing services to a Economic uncertainty in 2013 has We continue to strengthen our position platform screen doors for the Metrolinx Lighting solution that enables energy variety of industries when launched into resulted in more cautious spending by as a leader in providing comprehensive Air Rail Link Spur Line in Toronto. In agencies and operators to manage orbit in the fourth quarter of 2015. corporations and government agencies. integrated rail electronics solutions. the US, the Washington Metro Transit energy consumption, timing and In the same year, our rail electronics, Authority installed our Smartrip Ticket brightness of the lights. In the US, VT iDirect (iDirect) continues e-Government and systems businesses, We secured additional new contracts Dispensers, while San Francisco’s Bay to increase our satcom market presence faced intense competition from other for Mass Rapid Transit (MRT) Area Rapid Transit will be served by We established a Soldier Systems in the emerging economies of Africa, global players. projects overseas. In Malaysia, our our fully digital trainborne passenger Centre to engage the industry and Latin America and the Middle East. maintenance, passenger information information system by 2020. Our better understand the needs and system Elara Comunicaciones deployed iDirect Notwithstanding the challenging and platform screen door systems will Maintenance Management Solutions integration of the future warrior. To products to bring voice and broadband business environment, ST Electronics be implemented for Keretapi Tanah (MMS) are gaining acceptance as rail showcase our info-security solutions, we services to more than 2,000 cities and made headway into North America. Melayu Berhad’s Seremban Depot, the operators seek to drive productivity set up a DigiSAFE Cyber Security Centre villages in rural Mexico, while RigNet We continued to build and expand our Kelana Jaya Line and the Klang Valley and effectiveness in maintenance. The that includes a cyber test range and a expanded its iDirect infrastructure to market share with a focus on three key MRT respectively. In Thailand, Bangkok MMS will offer automated maintenance training and security laboratory. serve the growing energy and resources business areas – satellite and broadband Mass Transit System Public Company scheduling and other related processes industries in Latin America. In Africa, communications; transportation systems Limited’s SkyTrain is in the process in Beijing and Wuxi in China. We continue to support our local defence SkyVision, TDL Nigeria, K-NET and Tigo and solutions; and advanced electronics of being fitted with our half-height customers, and together with ST Marine, Ghana installed iDirect solutions to and information communications platform screen doors while the Mass Our security solutions including we are supplying the enhanced combat serve the growing demand from various technologies solutions. Rapid Transit Authority’s Purple Line access control and integrated security systems and integrated communications industries for broadband, cellular and will implement our communications, management systems ensure operational suite for the Republic of Singapore Navy mobile connectivity. In 2013, ST Electronics consolidated automatic fare collection and platform efficiency and safety at Singapore’s (RSN)’s new vessels. our facilities from different locations screen door systems. Commuters in Changi Airport and the Singapore Prison Software Systems Group and added two new buildings near Rio de Janeiro, Brazil, will enjoy our Service headquarters, as well as the In the area of communications We are helping our customers manage existing premises in Ang Mo Kio. These passenger information systems on Mauritius Melrose Prison. infrastructure, we were awarded a the increasingly large volume of data developments enable us to improve their metro. number of projects for communications available today. Our future e-Government synergy in operations and capability ST Electronics has set up an Unmanned network infrastructure and advanced / e-Enterprise solutions and managed development, raise productivity and In Taiwan, we implemented various Maritime Vehicle Centre with the aim to communications solutions. services as well as data centre services support long term business growth. solutions in MRT projects including: be a global centre of excellence for the and cloud computing solutions enable The larger of the two buildings, a seven on-train information display and airport development of unmanned surface and In February, Changi Airport Group our customers to manage and store storey 538,000 sq ft facility, known as access MRT systems for the Taoyuan autonomous underwater vehicles. commissioned our AgilFence Perimeter critical business data. In addition, our ST Engineering Hub, now houses International Airport MRT Line; electrical Intrusion Detection System. It is now business analytics and other sense- ST Electronics (Info-Software Systems), and mechanical engineering solutions Communication & deployed successfully to provide making solutions can evaluate such data ST Electronics (SatCom & Sensor for the Xinyi-Songshan Line; trainborne Sensor Systems Group fast detection and pinpointing of for appropriate use and action. Systems), ST Electronics (Data communications system for the Taipei In Smart Utilities, ST Electronics clinched fence disturbances. Centre Solutions), ST Electronics Rapid Transit Corporation Retrofit new contracts for the development Our Comprehensive Maritime Awareness (Satellite Systems), iDirect Asia, Project and platform screen doors for of a Customer Information System On the sensor front, we made progress Solution uses smart analytics to manage as well as ST Engineering. the Wurih-Wenxin Beitun Line. and Advanced Metering Infrastructure in developing TeLEOS-1, Singapore’s large amounts of maritime data for solution. We continue to deepen first indigenously designed commercial effective law enforcement at sea. iTAG, our domain expertise in this area by earth observation satellite. It will provide a device that stores critical data in a

34 35 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Electronics

small form factor, allows for easy retrieval The US Air Force selected VT MÄK’s As part of an ongoing review to streamline when required. Our Intelligent Airport (MÄK) interoperability products operations and optimise resources for 1 engineers working on the TeLEOS-1 commercial earth observation satellite solution, currently being developed for for its Air Force Modelling and our businesses, ST Electronics (Sichuan) Changi Airport Group, aims to help airport Simulation Training Toolkit programme Co., Ltd. in China was deregistered. 2 Half-height platform screen doors stakeholders collaborate for efficient to train senior commanders and staff Meanwhile ST Electronics (Software implemented in Bangkok, Thailand management of air traffic growth to for joint air warfare and operations. Services) Co., Ltd. in China and PMB deliver quality services to passengers. The US Naval Air Warfare Center Project Management Business Sdn Bhd 3 DigiSAFE Cyber Defence Security We have also implemented, and are Aircraft Division will use MÄK’s link, in Malaysia were placed under member’s Centre maintaining a satellite communications simulation, and visualisation voluntary liquidation. network for the Civil Aviation Authority products for its Human-Computer 4 Virtual Aerodrome Laboratory in of Singapore. Interaction Laboratory. In Asia, we set up a wholly owned Singapore’s Republic Polytechnic subsidiary in Thailand, ST Electronics Building on our simulation capabilities, In Europe, Antycip Simulation has (Thailand) Limited, to offer our we launched the Emulated Cyber Network implemented a four-sided CAVE transportation and advance electronics System at the Singapore Polytechnic solution for Techviz’s headquarters solutions there, while ST Electronics Cyber Wargame Centre for commercial in Paris that enables visualisation of (Tianjin) Co., Ltd. was set up in China training in cyber security. 3D models and applications. The to provide eco-enabling ICT solutions showroom will be available to customers to Tianjin Eco-City and the surrounding In a collaboration with Republic including businesses, universities region. 3 4 Polytechnic to equip students with and research centres. practical skills in aviation management, Wholly owned subsidiary, DataMark ST Electronics set up a Virtual Aerodrome Acquisitions & Divestments Technologies Pte Ltd, has been Laboratory, the first such facility for a ST Electronics set up a subsidiary, restructured and renamed OrisTel Systems Our Smart Utilities Suite supports multi- Satellite Communications Data Centres Singapore aims to be the data centre hub Singapore institute of higher learning. ST Electronics (Wuxi) Co. Ltd., in the Pte. Ltd. OrisTel will drive the expansion of utility network infrastructure for integrated Better connectivity and high definition for Asia Pacific, emphasising Green Data city of Wuxi in Jiangsu Province, telecommunication network infrastructure electricity, water and gas management, applications on-the-go are increasing Centres for improved energy efficiency We launched the Damage Control China. With the region’s vast business business for the sector. enabling better resource distribution and demand for more bandwidth and quality that mitigates environmental impact. Trainer at the IMDEX 2013 exhibition. opportunities and its comprehensive consumption management by utilities of service. Internet Protocol based satellite With the availability of large data and A multi-storeyed, shore-based trainer industry development plan, the Industry Review & Outlook providers. Metering and control systems systems have made these less expensive proliferation of mobile devices, end users constructed to resemble a ship, it is subsidiary will provide a healthy pool Intelligent Transportation also provide utilities usage insights that and more flexible, with carrier-class are more sophisticated and concerned the largest of its kind to be delivered in of resources within close proximity to Rapid urbanisation and growth of mega enable realtime updates on utilisation, quality and reliable connectivity that with quality of experience, better utility, Asia. It provides damage control and our customers, undertake joint R&D cities have put a strain on resources, giving building managers better control support multiple applications. services and ease of use. Data centres firefighting procedure training at various to create cost-effective, purpose-built infrastructure and the environment. over usage and fault identification. are no longer mere information levels from individuals, to team level solutions, and serve as a showcase for Cities are seeking solutions for sustainable The emergence of High-Throughput depositories but have become data integration. It has been delivered to our solutions. development, addressing economic, Cyber Security Satellites (HTS), a new breed of high- the RSN. social and environmental concerns. Our National security, critical installations, performance broadband satellites, will management hubs offering virtualisation intelligent road and rail transportation, financial systems and daily lives transform the satcom landscape. HTS and cloud computing. and traffic and fleet management depend on a secure and robust offers improved data speeds at lower solutions offer cities the ability to info-communications infrastructure. costs and higher reliability with the With years of systems integration implement efficient and safe modes Organisations are becoming more use of technologies such as DVB-S2 experience and technology development, of transportation. vulnerable to cyber attacks which with Adaptive Coding and Modulation we are able to provide comprehensive result in data loss. A growing awareness and adaptive return channels. This is solutions and services for Critical We offer a comprehensive suite of of cyber threats has generated a demand expected to accelerate satcom adoption Operations Environment (COE) such rail electronics solutions that include for cyber security infrastructure by governments, enterprises, energy and as data centres. Our COE are highly command, control and communications; and services. maritime users worldwide. Inmarsat is secure, threat vulnerability risk automatic fare collection; platform one of the operators that will launch its assessment compliant and highly screen doors; passenger information and Having started building our information Global Xpress HTS. iDirect is providing survivable, employing green and maintenance management systems. security capabilities in 1999, today the ground network infrastructure and eco-friendly solutions. We offer project we offer a complete suite of encryption core modules for the end users’ terminals, and facility management services to clients with customised requirement Smart Utilities products and cyber security solutions and our Agilis Ka-band compact VSAT Cities are also seeking to adopt more under the DigiSAFE brand. Our transceivers have been certified for use for high end, secured data centres. efficient energy management systems. DigiSAFE Cyber Security Centre on Inmarsat’s Global Xpress satellites. We also build and run our own data Integrated utilities infrastructure and offers advanced cyber defence training centre facilities and house data centre smart meters facilitate efficient resource courses that emulate real-world iDirect has secured a 62% satellite hub operators in co-locations. management, monitor consumption attacks on enterprise networks in a market share (COMSYS VSAT Report patterns and offer better utilisation of controlled environment. 12th Edition, 2011) and continues to lead ST Electronics continues to dedicate essential services such as electricity, in its field leveraging HTS and small cell resources to R&D, adopting the latest water and gas. technologies. technologies. As a result, our customers benefit from effective and efficient 1 2 solutions that enable them to meet their business objectives.

36 37 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review

Land Systems

Amid challenging conditions in 2013, the Land Systems sector Revenue Revenue for FY2013 of $1,475m was comparable to 2013 1q 2q 3q 4q $1,475m that of FY2012. Both Munitions & Weapon and Services, continued to consolidate its market position in niche product Trading & Others business groups recorded lower revenue, 2012 1q 2q 3q 4q $1,513m while Automotive business group came in with segments, and extended its footprint into emerging and comparable revenue. profit before tax (PBT) growth markets globally. PBT for FY2013 of $111.8m was comparable to FY2012. 2013 1q 2q 3q 4q $111.8m The impact of lower revenue and unfavourable product mix was largely offset by lower operating expenses and 2012 1q 2q 3q 4q $113.3m higher gain on disposal of property.

2013 Review export of parts and accessories for its brand to capitalise on the Brazilian In India, LeeBoy India strengthened family of infinitely variable transmissions Smart Defence Solutions predominantly military customers. demand for road construction equipment product lines with the 15 tonne 985 for heavy duty tracked vehicle ST Kinetics delivered the first batch of With Technicae, ST Kinetics is now able as well as its existing distribution and Motor Grader, 23 tonne 523 Crawler applications, while NexDrive™ introduces Light Strike Vehicle Mk IIs, which was to further our defence business in Brazil, supplier networks in Brazil and the rest of Excavator and 99 HP 699 Backhoe KDS’ intelligent multi-speed electric unveiled by the Singapore Armed Forces and thereafter to expand in the rest of South America. Loader, targeting new product segments transmission. Along with the launch of at Singapore’s National Day Parade 2013. South America. and new markets in the sub-continent. these product lines, KDS announced The Hackney brand pursued growth LeeBoy India continued to extend a collaboration with automotive drive On defence exports particularly Strengthening our capability in the beyond the US, seeing an increase in dealer and partner network beyond specialists UQM Technologies on full 40mm ammunition, there were several through-life support of remote weapon international sales through key contracts India, successfully partnering Sri Lanka’s electric drive systems for commercial developments that resulted in the systems, ST Kinetics and Australian in Canada, Chile, Colombia, Nigeria, Peru Diesel & Motor Engineering PLC, and electric vehicles. Providing the NexDrive™ strengthening of ST Kinetics’ position defence technology partner, Electro and Saudi Arabia for its truck bodies and launching the 699 Backhoe Loader to transmission for UQM’s electric drive as one of the world’s leading 40mm Optic Systems Pty Ltd, opened a trailers. the Sri Lankan market. LeeBoy India systems, the collaboration marks KDS’ solutions providers. We clinched over state-of-the-art remote weapon systems also expanded its dealer network into first steps in working with leading electric US$30m worth of international orders. centre, the STK-EOS Remote Weapon In China, Guizhou Jonyang Kinetics Bangladesh, Bhutan and Nepal. motor suppliers to provide electric drive These included the supply of 40mm High Station (RWS) Centre. The new Centre (GJK) clinched several significant export systems for medium-and heavy-duty Velocity ammunition for the Canadian strengthens ST Kinetics’ servicing and contracts for its range of excavators, In Singapore, the Land Systems sector vehicles. Armed Forces’ Tactical Armoured Patrol support capabilities for remote including the Uzbekistan Government’s secured significant orders for its Vehicle programme and the successful weapon systems. contract for 84 units of excavators. GJK customised ambulance solutions, which ST Kinetics successfully launched the selection of our 40mm Low Velocity Air expanded its line of excavators with included 18 units from the Singapore prototypes of our Automated Guided Bursting Munitions System by the US Productive Specialty Vehicles improved versions for mining, quarrying Civil Defence Force and other quantities Vehicles (AGVs) as part of the PSA Army for trials. ST Kinetics and Australian In 2013, the Land Systems sector applications and high altitude operations. from independent ambulance fleet Singapore Terminals (PSA) contract Munitions also signed an agreement to continued to consolidate and enhance On the R&D and innovation front, GJK operators. Delivery of the ambulances, secured in 2012. Incorporating cooperate in Australia and New Zealand the branding of our specialty vehicles, obtained 112 new patents from the China which are compliant with the ST Kinetics’ proprietary HyPower Hybrid for the development, manufacturing and introducing new product lines in key Patent Office. Australian AS4535/1999 and European Electric Drive System, the prototype marketing of ST Kinetics’ world-leading product segments. We also continued to Union CEN 1789:2007 standards for AGVs have begun trials at PSA’s 40mm low velocity, extended range, and invest in our specialty vehicles businesses Another Chinese subsidiary, JHK, ambulances, will continue into 2014, container terminals. air bursting ammunition. to position them for further growth, introduced the new LXH1000E Milling cementing ST Kinetics’ market injecting funds into Jiangsu Huatong Machine and ZJY5120TYH Road leadership in the emergency ambulance Services The Land Systems sector established a Kinetics (JHK) and LeeBoy India. Maintenance Vehicle, meeting the segment. To support the distribution of the MAN presence in Brazil by acquiring a 90% Chinese Government’s new requirements brand of trucks and buses in Myanmar, equity interest in Technicae Projetos e LeeBoy’s presence in Brazil expanded on emissions standards. JHK’s WBS700E Green Transport Solutions ST Kinetics set up Kinetics Automotive Serviços Automotivos Ltda (Technicae). with the setting up of LeeBoy Stabilised Soil Mixing Plant joined the Kinetics Drive Solutions (KDS), & Specialty Equipment Co., Ltd to Technicae provides automotive Brazil Equipamentos De Contrução ranks of the Top 50 Products of China ST Kinetics’ Canadian subsidiary, provide dealer support in the country. maintenance, repair and overhaul Ltda (LeeBoy Brazil) to establish a Construction Machinery 2013. Its SPSE90 successfully rebranded its innovative ST Kinetics is working with local dealers services including automotive platform manufacturing base for the LeeBoy Versatile Paver also won third place in transmissions as the InfiniDrive™ and to target the premium passenger bus and revitalisation and modernisation, brand of road construction equipment. Jiangsu Province’s Advanced Science NexDrive™ product lines in 2013. The commercial truck segment in Myanmar’s as well as related trade, import and LeeBoy Brazil will allow the LeeBoy and Technology Award. InfiniDrive™ is the new name for the HMX burgeoning private transportation and

38 39 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Land Systems

the medium protected armoured construction equipment sector. LeeBoy Demand for our testing, inspection and vehicles segment with our Bronco India will continue to strengthen the certification services from the aerospace and Terrex platforms. For countries sales of its products, like motor graders, and oil & gas sectors is expected to be with reduced defence budgets looking backhoe loaders and crawler excavators, sustained as these sectors continue to to upgrade existing inventory, which are expected to be in demand. be major contributors to Singapore’s we will continue to market our GDP. With the 30% increase in vehicle Upgrade & Reset solutions for their 2014 will see the elevation of LeeBoy inspection volume generated by the ageing platforms. into a global brand with the addition of upgraded Vehicle Inspection Centres, Brazil as its third manufacturing base after we aim to grow our market share in Specialty Vehicles the US and India. ST Kinetics will roadworthiness vehicle inspection As emerging markets and developing tap our global supply chain and develop services in 2014. economies are expected to drive our global dealership network as we infrastructure growth over the long- expand sales of LeeBoy construction 1 2 3 term, with more than 66% of global equipment globally. construction activity expected to take place in emerging markets by 2025*, In the US, the slow recovery is expected 1 the first batch of Light Strike logistics sector, and has secured orders in will spearhead innovation in the areas we will continue to focus on growing to translate into moderate growth for Vehicle Mk IIs were delivered to the the market. In Singapore, we continued of advanced powder metallurgy and Singapore Armed Forces in 2013 market presence in the emerging Hackney’s trucks and trailers. Hackney with the delivery of the MAN A22 city ceramic applications. economies of Africa, Latin America will continue to diversify outside of North buses to SMRT Buses Ltd, as well as 2 the STK-EOS RWS Centre is one of and Asia. America and grow its international sales, Asia’s most advanced support facility other MAN trucks and buses to private We also launched the RP-ST Kinetics targeting the food service, beverage, for remote weapon systems like transport operators. Green Energy Management Solutions In 2014, our Chinese subsidiaries will emergency support and contractor ST Kinetics’ ADDER family of remote Lab with Republic Polytechnic (RP), weapon stations continue to diversify beyond the service sectors in Africa, the Middle East Singapore Test Services, ST Kinetics’ aiming to carry out cutting-edge domestic market, growing their and Latin America. testing, inspection and certification research in the area of clean energy 3 ST Kinetics cemented our market export sales while improving their leadership in the emergency subsidiary, focused on growing the solutions, and develop environmentally product range. Services ambulance segment in the Singapore calibration and load-testing services friendly and commercially viable energy market with new orders for We expect to see continued demand in for the aerospace industry and acquiring solutions. customised ambulance solutions. In India, the Indian government’s Singapore for the MAN brand of trucks a firmer foothold in advanced Non- 12th Five Year Plan to invest almost and buses with the imposition of Destructive Testing capabilities for the Oil 4 84 units of excavators from GJK industry review and Outlook US$1t in infrastructure projects is Euro V emissions standards for new will be deployed for mining and & Gas sector. On the vehicle inspection The Land Systems sector enters 2014 expected to spur the medium to diesel vehicles, as well as the increase quarrying applications by the front, our STA Inspection arm upgraded with an enlarged global footprint in * Global Construction Perspectives and Oxford Uzbekistan government longer term growth prospects in the in public bus routes. Economics, Global Construction 2025, 2013 both our Vehicle Inspection Centres in both our defence and commercial 5 leeBoy India’s 99 HP 699 Backhoe Jalan Boon Lay and Sin Ming, increasing businesses. We seek to further grow Loader is geared to perform under vehicle inspection volume by 30%. our sales in selected emerging markets extreme duty cycles and tough while innovating to differentiate our environmental conditions ST Kinetics also injected capital into our offerings in niche product segments. 6 KDS’ NexDrive™ intelligent multi- engines and transmissions MRO business speed transmissions are designed subsidiary, SDDA, as part of the review of Defence for applications in electric city buses, the capital structure to allow it to bid for The defence business will continue to be specialty vehicles and commercial higher value contracts. a sizeable part of our business in 2014 trucks and beyond. Local defence sales will 7 the AGV prototype, powered by Collaborative Research & Development continue to constitute the main portion ST Kinetics’ HyPower Hybrid Electric 2013 saw more R&D collaborations with of our defence business and we will Drive System has been undergoing both local and international institutions. continue delivery of military platforms, trials at PSA’s container terminals In the area of composite technology ammunition and services. research, we signed an MOU with the 4 6 Technical University of Munich, Singapore For defence exports, we look to cement Polytechnic and nine other companies to our leadership in 40mm solutions by promote the development of composite expanding our offering of innovative technology and materials. solutions and growing orders.

Together with Singapore Polytechnic, We seek to penetrate new markets we launched Singapore’s first research and pursue tenders in countries centre for advanced materials. The where defence budgets have been Applied Materials Engineering Centre maintained or increased, targeting

5 7

40 41 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review

Marine

Revenue Revenue for FY2013 of $1,238m improved by 23% or $227m Despite the difficult operating environment, as compared to FY2012. 2013 1q 2q 3q 4q $1,238m 2013 marked another year of successful The higher revenue was mainly due to higher Shipbuilding 2012 1q 2q 3q 4q $1,011m activities from local operation, but partially offset by lower deliveries and contract wins. Engineering revenue due to lower environmental engineering profit before tax (PBT) activities.

2013 1q 2q 3q 4q $146.3m PBT grew by 15% or $18.7m to $146.3m for FY2013 as compared to FY2012. The higher PBT was mainly due to gross 2012 1q 2q 3q 4q $127.6m profit from higher revenue achieved, higher interest income and favourable change in the net fair value of embedded derivatives, financial instruments and hedged item.

2013 Review In an ongoing effort to build our brand In the naval market, we are progressing to build two ATBs for use in transporting Shiprepair and Engineering Services 2013 marked another year of successful in the global marketplace as a provider well with our largest ever naval export liquid petroleum. The delivery is expected Despite the difficult shipping market deliveries and contract wins for the of high quality defence and commercial shipbuilding contract, awarded by the to be in 2H2015. environment, our shiprepair segment Marine sector despite the difficult vessels, we continued to participate Ministry of Defence of the Sultanate performed well. We continued to ride operating environment. In the past year, in major exhibitions including the of Oman in April 2012. This included VT Halter Marine is the leading designer on the relatively active offshore oil and many shipping companies grappled International Maritime and Defence the design and build of four patrol and builder of specialised oceanographic gas sector and successfully delivered with depressed freight rates due to Exhibition (Singapore), Latin America vessels (PV) as well as the provision ships for the US Navy and is experienced various shiprepair projects including the overcapacity and tight margins caused Aerospace and Defence exhibition of associated logistics support for the in building the previous six ships of the upgrading of pipe-laying vessels by high fuel and manpower costs. Even (Rio de Janeiro, Brazil), Norshipping Royal Navy of Oman (RNO). The plate T-AGS 60 Class. The christening for USNS Castoro 10, Seven Seas and SEMAC 1, if the economy improves, slow growth (Oslo, Norway), MarineLog-Ferries cutting and keel laying for the first vessel MAURY (T-AGS 66) was held at our upgrading of cable-laying vessel BOA and low shipping rates are expected (Boston, MA), International Workboat took place in 2013 and the first ship is Halter Moss Point facility in March 2013. SUB C, upgrading of self-erecting tender to continue. The industry also faces Show (New Orleans, LA) and Offshore expected to be launched in 1Q2014 with Designed to perform acoustic, biological, drilling rig T-15, repairs for subsea support the continuing challenge of higher Patrol Vessels (Toulon, France). delivery in 2Q2015. The final vessel is physical and geographical surveys, vessel Lewek Antares, major repairs manpower costs and the shortage of scheduled for delivery in 3Q2016. The T-AGS 66 will provide the US military for trailing suction hopper dredgers skilled manpower. Ship Design and Shipbuilding contract to design and build eight new with essential information on the ocean such as Breydel and Volvox Terranova, as In Singapore, our newbuilding vessels to replace the RSN’s existing environment. The construction of T-AGS well as for cutter dredger Castor. We also However, persistent high demand for programme in the commercial segment Fearless-class PVs is proceeding on 66 began in September 2010, and its keel completed and delivered the fabrication energy and the proliferation of new included the contracts from Swire Pacific schedule and is currently at the design was laid in 2011, with delivery expected to of two units of 500-ton topside living offshore finds in natural resources Offshore Operations (Pte) Ltd (SPO), a phase. The first vessel is expected to be be in 1Q2014. quarters (LQ). Other projects in the allowed ST Marine and VT Halter Marine wholly owned subsidiary of Swire Pacific delivered in 2016 and beyond. pipeline are the fabrication of 1,800-ton to secure new shipbuilding contracts in Limited, appointing ST Marine to design, The programme for four Fast Missile Craft topside LQ, as well as major repairs and the commercial market. Commercially, build and outfit six 18,000bhp Anchor In the US, the programme for Hornbeck (FMC) under the Foreign Military Sales upgrades of dredgers and OSVs from the Offshore Support Vessel O( SV) Handling Tug Supply (AHTS) vessels. Offshore Services, LLC (Hornbeck), Programme has progressed well since regular customers. category is needed to support the Construction has been in progress to design and build ten 97.2m OSVs the contract commenced in 2007. The extraction of offshore resources, while since 2011, and vessels delivered in 2013 is progressing well. The order was FMC is able to perform coastal patrol, We leased more land at Tuas Yard in naval platforms are required to protect included the Pacific Diligenceand Pacific increased from the original eight vessels surveillance, interdiction, surface strike, Singapore, to facilitate the development such resources and fulfil their traditional Dolphin. Pacific Dove was delivered in to ten. Based on VT Halter Marine’s and naval battle group support well into of our fabrication business for topside role of maintaining the sovereignty early January 2014 and Pacific Duchessin Super 320 design which was also the 21st century. We have delivered three modules including the LQ. In the US, of nations. During the year, the sector March 2014. The remaining vessels in the developed earlier for Hornbeck, in the series of four, with the last vessel VT Halter Marine’s shiprepair offering secured new contracts to design series, Pacific Discovery, Pacific Dispatch these DP2 OSVs are designed to have expected to be delivered by 2H2014. is ready, following the commissioning and build eight naval vessels for the and Pacific Dragon, are scheduled for approximately 20,800bbl of liquid mud of a 12,000 MT Floating Dry Dock. Republic of Singapore Navy (RSN), delivery after 2014. The vessels will join carrying capacity, 1,136sqm of deck area These orders will keep us busy for the next This floating dock is part of an overall two Articulated Tug Barges (ATBs) SPO’s modern fleet supporting the and a fire-fighting class notation. All the few years as we continue to seek to serve expansion plan into ship repairs for the for Bouchard Transportation Co, Inc latest generation of semi-submersible OSVs will be constructed in our US yards our existing customers while engaging south yard in Pascagoula, Mississippi. (Bouchard) and two Container Roll-on/ rigs operating in deep water and harsh at Moss Point Marine and Halter Moss new customers with our portfolio of With this development, VT Halter Marine Roll-off (ConRo) vessels for Crowley environments. Point in Mississippi. In addition, VT Halter proven commercial and naval craft. will now have a similar business model Holdings, Inc. (Crowley). Marine was also contracted by Bouchard as our Singapore operations, having

42 43 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Marine

Mechanical and Biological Treatment (PSVs) which transport equipment The US - Gulf of Mexico region, is to protect their oil and gas reserves. (MBT) Plant. A MOU was endorsed on and personnel to and from offshore oil expected to experience the highest Another increasingly significant class of 4 September 2013 during the 10th China platforms and other offshore structures. revenue growth during the next five years. vessels is larger vessels that can support ASEAN Exhibition in Nanning, Guangxi. Other OSVs include dive support vessels, Our newly developed repair facilities in logistically challenging operations such The MOU included the feasibility study construction support vessels and cable- this region will capitalise on this and add as humanitarian assistance and disaster for this project as well as the investment laying vessels. The growth drivers in value to existing and new customers in relief, areas in which ST Marine and needed from design to construction of this market continue to be global oil the region. VT Halter Marine have proven the MBT plant in Wuzhou City. and gas demand, growing exploration competencies. and production activities, which result The global defence market is expected to STSE (Shanghai) Co. Ltd. had signed in an increase in the number of offshore see continued declines in revenue, mainly In summary, ST Marine and VT Halter a contract for the design, build and platforms. As a moderately developing due to defence budget reductions in the Marine offer a competitive range of installation of a Pneumatic Waste market with no available substitutes, US, UK and the rest of Europe, offset by products and unique capabilities in both Collection System (PWCS) system the OSV segment is the backbone of smaller aggregate increases in Brazil, the commercial and naval segments that for a mixed high-rise commercial and the offshore industry. Consequently, it China, India, Russia, Saudi Arabia and will allow us to grow our business to meet residential development in Xiaolan is expected to enjoy steady growth into the United Arab Emirates. the needs of our customers. Township, ZhongShan City, Guangzhou. the foreseeable future. We shall remain The property is a mixed high-rise focused in this segment in the years to Global economic challenges, revenue commercial and residential development come, capitalising on our strength in the gaps and cost pressures may result 1 which includes 21 residential blocks with design, construction, conversion and in shrinking revenue, lower returns levels between 23 to 31 storeys and street repairs of these OSVs. We also target to on invested capital, as well as margin side shops. Comprising a total build-up move into the higher value OSVs such contraction for many defence companies, 1 Displaying ST Marine’s total naval both shipbuilding and repair capabilities. area of 260,000 sqm, this development as dive-support and heavy construction creating pressure to consolidate. A solutions at IMDEX Asia 2013 – It will now be able to grow organically is designed for 1,208 households and vessels. Our recent wins in the segment notable trend is the rise in demand for a highly regarded international in the shiprepair business, adding a 3,867 residents. of designing and constructing PVs will PVs of various sizes and capabilities maritime defence exhibition and conference – in Singapore new stream of revenue to its existing augment our leadership and prepare us despite smaller defence budgets. This is shipbuilding business. The dock also INDUSTRY REVIEW AND OUTLOOK well to benefit from the growing demand due to the versatility and affordability of 2 pacific Diligence for Swire Pacific contributes to the shiprepair capability Despite the recent resolution of the moving forward. PVs, coupled with the need for countries Offshore at sea trial of the US Gulf Coast, as it is the newest fiscal cliff in the US and the recovery of 3 Hosmax 320 Commander built for addition to the facilities in the region. European sovereign bond yields which Hornbeck Offshore Services, LLC have seen some confidence restored In terms of defence-related repairs, to world markets, the global economic 4 upgrading of pipe-laying vessel, our various upgrading, logistic climate remains volatile and the maritime Castoro 10 management and maintenance industry faces continuing uncertainties. 5 the arrival of the floating dry dock programmes with the RSN are also The bright spark is that demand heralds our entry into the shiprepair progressing well. for energy in emerging economies business in the US market continues to rise with rising incomes In the same year, ST Marine invested a and population growth. 6 Major repair for trailing suction hopper dredger, Volvox Terranova 10% stake in Nova Star Cruises Limited with Quest Navigation Inc. to operate a The global oil and gas industry is cruise ferry service between Yarmouth expected to spend more than $335b (Nova Scotia, Canada) and Portland over the next five years, dominated by (Maine, USA). It will bareboat charter production services. Although the OSV from ST Marine the Roll-on/Roll-off market was severely impacted by the passenger (Ropax) vessel for the service. financial crisis, demand has recovered significantly, with utilisation levels Environmental Engineering improving from below 50% in 2009 to over 80% currently. The OSV market is and Services 2 3 Building on current environmental expected to reach $91.2b by 2018 with projects in China, STSE Engineering an anticipated firm annualised growth Services Pte Ltd (STSE) submitted an rate of 5.7% from 2013 to 2018. The two unsolicited proposal to Wuzhou City, most commonly used OSVs are AHTS Guangxi, for the design and construction vessels which tow and position rigs out of a 100 ton per day food waste at sea, and Platform Supply Vessels

4 5 6

44 45 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Financial Review

financial position Banking Facilities As at 31 December 2013, the Group’s total assets of $8,707m was total aSSetS deployment ($m) capital expenditure In FY2013, approximately $1.2b of new banking facilities, $676m or 8% higher than that of 31 December 2012. The higher including trade financing line for performance bonds and bank total assets were mainly due to increases in property, plant and By Sector guarantees, foreign exchange line, as well as loan facilities, was equipment, associates and jointly controlled entities, intangible 2013 added to support the Group’s business operations. Out of the Aerospace 35% $1.2b of new banking facilities, $0.9b was offered by Japanese assets, as well as higher cash, but these were partially offset Electronics 27% by a decrease in inventories and work-in-progress. 2012 Land Systems 19% banks. The Group has a total of $14.3b of bank facilities as at Marine 17% year end, of which $8.0b or 56% remained available for use. The increase in associates and jointly controlled entities 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Others 2% was mainly due to investment in Elbe Flugzeugwerke GmbH, Property, Plant & Equipment Inventories & Work-in-Progress 2013 while the increase in intangible assets was attributable to the & Investment Property Trade Receivables, Deposits & acquisition of intellectual property assets in EcoServices, LLC Intangibles & Other Assets Prepayments BanK FacilitIeS ($b) and the component licence agreements signed with Bank Balances and Other Liquid UTC Aerospace Systems in the Aerospace sector. Funds & Funds under Management Available Capital employed as at end 2013 was $4,072m. The increase over 2013

FY2012 was mainly attributable to higher shareholders’ funds total aSSetS By geography Utilised including non-controlling interests as well as higher borrowings. Aerospace 36% 2013 Electronics 20% Asia excluding China 70% Land Systems 21% Available During the year, the Group incurred capital expenditure of China 8% Marine 21% 2012 $326m (2012: $236m). About 79% or $259m of the total USA 17% Others 2% capital expenditure was investments in new capacity and Europe 3% Utilised 2012 2012 capability. Additional capital expenditure included purchases Others 2% TM of rotable components to support the growth in MBH 2013 0 2 4 6 8 10 12 14 programmes, investments in an aviation centre at Seletar Loans Foreign Exchange Aerospace Park and a transfer bay, upgrading of plant and Interest Rates Swaps & Trade Finance machinery and IT infrastructure, purchase and repair of a Cross Currency Swap dry dock and improvements to facilities to support the new shiprepair activities and new buildings in Singapore, as well as relocation of a China facility for the specialty vehicles business. BanK FacilitieS By nationality oF the BanKS By Geography TREASURY MANAGEMENT Asia excluding China 71% China 7% ST Engineering has an established set of policies and procedures Asia 74% Asia 56% USA 17% Europe 3% Europe 20% to manage our treasury activities, which are regularly reviewed Europe 3% USA 22% USA 15% and updated. Others 2% Others 1% Others 9%

2012 The Group takes an integrated approach to cash management 2013 2013 across our business units. Cash from our business units with surplus funds is lent to those units which may have funding requirements. Further unutilised cash of the Group is pooled and placed out as fixed deposits as well as managed through a portfolio of investment bonds by fund managers. As at 31 December 2013, ST Engineering’s cash and cash equivalents including funds under management was at $2.2b, compared to $2.1b as at 31 December 2012. capital employed ($m) Asia 70% Asia 54% Europe 4% Europe 26% USA 25% USA 17% Foreign Exchange Management Others 1% Others 3% The Group’s exposure to foreign exchange arises mainly from 2013 our receivables and payables denominated in foreign currencies. The net exposure to foreign currencies, predominantly in USD 2012 2012 2012 and EUR, is hedged through foreign exchange forward contracts. During the year, the Group transacted approximately $1.3b 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 equivalent of foreign exchange transactions. As at year end, Borrowings Equity Others* $1.7b remained as outstanding foreign exchange transactions.

* Others include adjustments for foreign currency translation, present value of leases, & etc.

46 47 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Financial Review

Borrowings Investing Activities total Shareholder return During the year, the Group increased its borrowings by $54m intereSt cover ratio The Group’s net cash used in investing activities of $258m in With strong cash flow generated from operating activities, the mainly to fund our operations in the US, China and India. In the FY2013 was higher than that of FY2012 by $85m. The higher cash Group ended the year with $2.2b of cash and cash equivalents US, we refinanced borrowings of US$98m which was borrowed $m outflow was mainly attributable to lower proceeds from sale and including funds under management. Management will continue by Vision Technologies Systems, Inc. 800 18x maturity of investments as well as higher cash outflow for new to recommend return of excess cash generated from its investments in Aerospace sector and purchase of property, plant operations to the shareholders. ST Engineering paid an interim 700 16x To retain a natural currency hedge of our operations, the Group’s and equipment, but these were partially offset by lower cash ordinary dividend of 3.0 cents per share to shareholders in 14x borrowings are funded predominantly in USD and Euro. As 600 outflow for the purchase of investments. September 2013 and would recommend to shareholders at the 12x at year end, the Group’s total borrowings was $1.4b. With the 500 forthcoming Annual General Meeting a final dividend of 12 cents US$200m bond liability previously swapped to SGD, the Group’s 10x Financing Activities per share. The total Dividend Per Share (DPS) for FY2013 will 400 The Group’s net cash used in financing activities of $470m amount to 15 cents. Based on the average share price of $3.89, USD and SGD borrowings accounted for approximately 92% of 8x the Group’s borrowings. 32% of the total Group’s borrowings 300 in FY2013 was lower than that of FY2012 by $39m, mainly the DPS of 15 cents translates to a dividend yield of 3.86%. were repayable within one year, 17% maturing in 2-5 years and 6x attributable to higher net proceeds from bank loans. 200 51% maturing beyond five years. 4x ST Engineering share price ended the year at $3.96, a 3.7%

100 2x The Group generated $672m of free cashflow in FY2013. increase in the share price compared to a year ago. Over In FY2013, the Group further entered into interest rate swaps the same period, the STI Index remained unchanged. With 0 0 to lock in US$175m borrowings on fixed interest rates, ranging 2011 2012 2013 Tax dividend yield at 3.86%, ST Engineering shares generated from 0.62% to 0.77% per annum. As at end of the year, the Group To attract foreign investments and encourage innovation and a total positive shareholder return of 7.6% for its shareholders. has 45% of our total debt remaining on floating interest rates. PBT before Associates/ Interest Interest productivity, governments in many countries offer incentives. Jointly Controlled Entities Expense Cover & Interest Expense For example, concessionary corporate income tax rate was interest cover ratio granted by Sino-Singapore Tianjin Eco-City Administrative The Group’s interest cover improved to 16.8 times. The Committee to the Group’s Electronics arm’s wholly owned total Shareholder return improvement in interest cover was the result of improved subsidiary in Sino-Singapore Tianjin Eco-City. The US profits as well as lower interest expense of $5.3m. government extended its research credit (up to December 50 2013) and Singapore government has proposed in its recent 47.2% The Group generated a strong operating cash flow of $930m CASH FLOWS ($m) Budget 2014 that its enhanced productivity and innovation credit 41.8% 5.2% 40 in FY2013, and continued to be in a net cash position as at the expiring in 2014 will be extended for another three years. While 4.7% 42.0% end of 2013. Compared to FY2012, operating cash flow decreased government offer incentives to eligible businesses, they take 37.1% Financing (470) by $111m and this was mainly attributable to unfavourable a stringent position on the compliance of documentation and 30 Activities (508) working capital movements. Gross debt/equity ratio remained eligibility requirements on the qualifying expenditure. at 0.6 times. 20 Investing (258) The Group continues to closely monitor our effective tax rate Activities (173) in two tax jurisdictions, namely Singapore and USA where 9.6% 2013 2012 2011 the Group has major operations. The effective tax rate of 10 7.6% 4.4% Singapore and US operating units were 12% (2012: 14%) and 3.9% 5.2% Operating 930 5.1% 3.7% Gross Debt/Equity Ratio 0.6 0.6 0.7 Activities 38.7% (2012: 38.5%) respectively. 0 1,041 (21.3%) Operating Cash Flow ($m) 930 1,041 586 significant accounting policies Free Cash Flow ($m) 672 868 189 (600) (400) (200) 0 200 400 600 800 1,000 1,200 (10) The Group’s significant accounting policies are presented in Net Cash ($m) 856 791 405 Notes to the Financial Statements, Note 3 (pages 117 to 138). 2013 2012 (20) The Group has applied the same accounting policies and (16.2%) CASH FLOWS methods of computation in the preparation of the financial Operating Activities statements for the current reporting period compared with (30) In FY2013, net cash from operating activities of $930m in the audited financial statements as at 31 December 2012 except 2009 2010 2011 2012 2013 FY2013 was lower by $111m. This was mainly due to unfavourable for the adoption of all the new and revised Singapore Financial working capital movements arising mainly from the negative Reporting Standards, that are mandatory for financial years Capital Gain Dividend Yield variances in advance payments from customers, progress billings beginning on or after 1 January 2013 as indicated on in excess of work-in-progress and trade receivables, but these page 135. were partially offset by positive variances in advance payments to suppliers, deferred income, inventories and work-in-progress and trade payables.

48 49 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Financial Review

economic value added (EVA) value added The Group generated yet another year of positive EVA. Group’s FY2013 EVA attributable to ordinary shareholders of $413.8m The Group’s total value added for FY2013 of $2,731.7m was comparable to that of FY2012. was 6% or $24.1m lower than that achieved in FY2012. The decreased EVA was mainly attributable to higher capital charge resulting from higher EVA Capital as well as an adjustment for an investment divested in the year. 2013 2012 Value Added Statement $m $m 2013 2012 EVA Statement $m $m Value added from: Revenue earned 6,633.2 6,379.9 Net profit before tax 698.6 682.4 Bought in materials and services (4,002.2) (3,776.3) Adjust for: 2,631.0 2,603.6 Share of results of associates and jointly controlled entities, net of tax 31.1 32.9 Interest expense 52.5 57.1 Other income 34.2 43.2 Others (5.4) 2.6 Finance income 68.9 48.4 Adjusted profit before interest and tax 775.0 776.8 Finance costs (exclude interest expenses) (33.5) (17.6) Cash operating taxes (Note 1) (149.7) (144.7) Share of results of associates and jointly controlled entities, net of tax 31.1 32.9 Net operating profit after taxation - (a) 627.1 630.3

Total value added 2,731.7 2,710.5 Average capital employed (Note 2) 4,072.0 3,620.5 Weighted Average Cost of Capital (Note 3) (%) 5.2 5.3 Distribution of total value added Capital charge - (b) (211.8) (191.9) To employees in wages, salaries and benefits 1,783.6 1,755.8 To government in taxes and levies 157.3 147.8 EVA - [(a) - (b)] 415.3 438.4 To providers of capital on: Non-controlling share of EVA (1.5) (0.5) • Interest paid on borrowings 44.2 49.5 EVA attributable to ordinary shareholders 413.8 437.9 • Dividends to shareholders 521.3 475.8 2,506.4 2,428.9 Unusual items (UI) gains (Note 4) (0.1) (8.1) EVA attributable to ordinary shareholders (exclude UI) 413.7 429.8 Balance retained in business Depreciation and amortisation 142.0 137.1 Note 1: the reported current tax is adjusted for the statutory tax impact of interest expense. Retained profits 62.8 113.8 Note 2: Monthly average equity plus interest bearing liabilities, timing provision and present value of operating leases. Non-controlling interests 10.7 8.4 Major Capital Components: $m 215.5 259.3 Borrowings 1,544.9 Equity 2,228.6 Non-production costs 9.8 22.3

Others 298.5

4,072.0 Total distribution 2,731.7 2,710.5

Note 3: he T Weightedverage A Cost of Capital is calculatedT inE ngineeringaccordance Group A toolicy P ESV as follows: i) Cost quityof E using Capital Asset Pricing Model with market risk premium at 5.0% (2012 @ 5.0%); ii) Risk-free rate of 1.55% (2012 @ 1.66%) based on yield-to-maturity of Singapore Government 10 years Bonds; iii) Ungeared beta at 0.74 (2012 @ 0.71) basedT E ngineeringon S risk categorisation; and iv) Cost of Debt at 3.42% (2012 @ 3.84%) using actual cost of debt of the borrowings in US, Europe, China and Singapore.

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

50 51 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Operating & Financial Review Financial Review

5-Year Key Financial Data 2013 2012 2011 2010 2009 performance of the group Income statement ($m) Revenue 6,633 6,380 5,991 5,985 5,548 Profit EBITDA 795.0 742.7 718.7 649.2 815.2 revenue by sector ($m) net profit by sector ($m) EBIT 673.2 658.0 607.7 586.7 486.4 PBT 729.7 715.4 655.2 627.5 546.6 Net Profit 580.8 576.2 527.5 491.0 443.9 2013 2013

Balance Sheet ($m) Property, plant and equipment, and investment property 1,520 1,213 1,358 1,303 1,168 2012 2012 Intangible and other assets 1,290 1,049 1,027 1,059 1,096 Inventories and work-in-progress 1,808 1,922 1,594 1,471 1,364 2011 2011 Trade receivables, deposits and prepayment 1,860 1,777 1,659 1,645 1,508 Bank balance and other liquid funds 2010 2010 and funds under management 2,229 2,070 1,769 1,790 1,749 Current liabilities 4,094 3,890 3,479 3,551 3,082 2009 2009 Non-current liabilities 2,353 2,128 2,052 1,990 2,127

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 (100) 0 100 200 300 400 500 600 Share capital 853 782 723 678 612 Capital and other reserves 71 (20) 10 (7) 94 Retained earnings 1,192 1,133 1,033 951 863 Aerospace Marine Aerospace Marine Non-controlling interests 144 118 110 105 108 Electroncs Others Electroncs Others Land Systems Land Systems Financial Indicators Earnings per share (cents) 18.73 18.76 17.28 16.21 14.78 Net assets value per share (cents) 68.14 61.51 57.79 53.38 52.09 Return on sales (%) 8.9 9.2 9.0 8.4 8.2 Return on equity (%) 27.4 30.4 29.9 30.3 28.3 Return on total assets (%) 6.8 7.3 7.3 6.9 6.6 Return on capital employed (%) 15.4 17.4 19.8 16.2 15.5 profit before tax by sector ($m) 10-year order book ($b) Dividend 15 Gross dividend per share (cents) 15.00 16.80 15.50 14.55 13.28 SARS Global Financial Dividend yield (%) 3.86 5.16 5.07 4.36 4.72 2013 Crisis $13.2b

Dividend cover 1.25 1.11 1.11 1.11 1.11 12 $10.6b 2012 Productivity Data 9 Average staff strength (numbers) 22,837 22,560 22,193 21,508 20,079 Revenue per employee ($) 290,456 282,795 269,944 278,244 276,298 2011 Net profit per employee ($) 25,434 25,540 23,771 22,829 22,109 6 $4.6b Employment costs ($m) 1,789.7 1,760.2 1,633.2 1,568.1 1,462.5 2010 Employment costs per $ of revenue ($) 0.27 0.28 0.27 0.26 0.26 3 2009

Economic Value Added ($m) 413.8 437.9 405.0 369.7 304.8 0 Economic Value Added spread (%) 10.2 12.1 12.0 10.5 9.4 (100) 0 100 200 300 400 500 600 700 800 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Economic Value Added per employee ($) 18,118 19,411 18,250 17,187 15,181

Aerospace Marine Value added ($m) 2,710.5 2,494.5 2,395.6 2,266.6 2,731.7 Electroncs Others Value added per employee ($) 119,616 120,149 112,398 111,382 112,882 Land Systems Value added per $ of employment costs ($) 1.53 1.54 1.53 1.53 1.55 Value added per $ of gross property, plant and equipment ($) 0.91 1.06 0.90 0.91 0.91 Value added per $ of revenue ($) 0.41 0.42 0.42 0.40 0.41

52 53 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability

At ST Engineering, we believe Sustainability is about the Planet The six component committees are: The Business Excellence Council We hold the environment in trust for 1. Business Foresight Committee in doing business responsibly future generations and are committed 2. Customer Excellence Committee and in a sustainable manner. to conducting our business in an 3. technology, IPR & Innovation environmentally friendly manner. Committee Chairman ST Engineering defines sustainability 4. people Excellence & Learning President & CEO in line with many of the world’s leading Sustainability is about Profit Organisation Committee ST Engineering corporations, and that of the UN’s A business cannot exist without creating 5. Environment, Health & Safety Brundtland Commission, namely that economic value. We create value for Committee the goal of sustainability is to “meet our shareholders through prudent risk 6. Corporate Social Responsibility Business Excellence the needs of the present without management and good governance Committee Secretariat compromising the ability of future practices. generations to meet their own needs.” A major goal of the BE Council Sustainability management is therefore is to ensure that the principles of Customer Excellence Committee ST Engineering believes that sustainability how we integrate the management of sustainability are incorporated within is about our performance on the triple economic, environmental and social business decision-making to achieve Business Foresight Committee 1. Foster a customer centric culture that bottom-line – People (Social), Planet performances with the goal of creating positive and sustainable outcomes for inculcates a ‘customer first’ mindset 1. Identify and analyse emerging risks and (Environment) and Profit (Economic). value for all stakeholders. all stakeholders including businesses, 2. establish and implement customer opportunities (including sustainability issues) that employees, unions, the environment excellence practices Sustainability is about People OUR APPROACH TO SUSTAINABILITY and the community at large. are material to the Group Our employees, customers and partners MANAGEMENT 2. review and update the Group’s vision and mission make up the People. Our employees In ST Engineering, we implement the The Council meets at least twice a statements, as well as its Core Values are our greatest resources. We foster Business Excellence Framework with year, while its component committees a committed and engaged workforce the aim of achieving our sustainability meet at least four times a year. The through continuous learning, an goals. ST Engineering’s Business committees are chaired by members People Excellence & Learning equitable recognition system and a Excellence (BE) Council was established of the senior management team, and Organisation Committee in early 2007 to provide direction and involve all management staff from all technology, ipr & innovation conducive culture that embraces our 1. Foster a committed and engaged workforce oversight on the Business Excellence business areas. Committee core values and appreciates resilience 2. Develop and maximise the potential of and innovation. Framework, and review the results of 1. Identify key technological trends, analyse our employees our sustainability performance. The The committees publish the results their impact on sustainable growth, and 3. Build a healthy pipeline of talent and leaders Our customers dictate our success. Council also regularly reviews the of their initiatives and performance, recommend new areas for business growth for sustainable growth We deliver high levels of satisfaction Framework to ensure its relevance. and share them at the BE seminar, an 2. promote and manage innovative and creative through value creation, quality products annual event attended by employees efforts within the Group and systems and exemplary services. The BE Council is chaired by the Group’s from across the Group. The BE Council’s President & CEO. Supported by its six leadership share what each committee component committees, the Council has achieved and what the plans Our partners help us extend our market Corporate Social Responsibility reach. We build positive and long term provides guidance, decides on new and targets for the coming years are. Committee relationships with our partners to ensure projects, and approves budget allocations. Employees who have made outstanding continual improvement in the delivery contributions in the areas of EHS, 1. review the impact of local and international of quality products and services to productivity or innovation, are also Environment, Health & Safety practices and trends on the Group’s our customers. recognised during this event. Committee corporate social responsibility and sustainability; and make recommendations 1. promote and share good practices in – to the Council regarding these matters a. managing and enhancing occupational 2. promote the awareness of the current health and safety performance at and future impact of our actions on the our workplace environment and community b. managing the environmental impact of 3. Develop and implement projects to our activities, products or services, and incorporate our ideals of sustainability into improving our environmental performance the business operations and the lives of c. implementing system safety into our our employees products and services 2. establish and implement frameworks for compliance with environmental, occupational health and safety laws, regulations, and

1 the annual Business Excellence industry / international standards (including Seminar attended by employees those relating to product system safety) from all sectors 1

54 55 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Innovation

SUSTAINABILITY THROUGH collector for a small aircraft or helicopter, • System Module Sterling is the The dual clutch technology provides an each pair is connected via a DC link. INNOVATION a patented EcoPower® engine wash command and control system for ultra-smooth drive experience allowing The incoming side of the converters Innovation efforts are spearheaded by manifold, and can optionally provide coastal surveillance. rapid shifts in under 400 milliseconds. consists of a diode front end and a filter the Technology, Intellectual Property and a hand lance for aircraft cleaning and module, which is in turn connected to the Innovation (TII) Committee, one of the application of de-icing fluid. • Smart Glance displays insights from The innovative combination of a dual vessel’s mains through a two-winding six Business Excellence committees. The the various sources, and can also clutch, intelligent controls and speed phase shift transformer to achieve a TII committee is chaired by our Group Uniquely, the SWU incorporates green incorporate realtime CCTV coverage. matching allows shifting to occur 12-pulse converter configuration. This Chief Technology Officer, with members technology, capturing engine waste heat more quickly compared to competing design helps to minimise the harmonic drawn from the various sectors to ensure to warm the wash fluid, reducing the Kinetics Drive Solutions’ NexDrive™ solutions. The technical advances built level on the main switchboard to meet sharing of technologies across the Group. energy required. As with all EcoPower® EV3- 850 Transmission into the EV3–850 increase powertrain classification requirements. engine washes, the process leaves The NexDrive™ EV3-850 transmission efficiency by up to 30%, allowing electric We solicit ideas and innovations both the engine cleaner and more efficient, is one of the lightest and most efficient vehicle manufacturers to build vehicles With hybrid propulsion, the vessel is externally and internally. The annual reducing fuel burnt and the CO2 solutions for medium and heavy duty with an extended driving range. capable of a cruising speed of 15 knots ST Engineering Idea Competition is one output of the engines, while protecting electric vehicles including buses, in E-mode and a top speed of at least of many platforms where employees the environment by recycling and commercial and utility trucks. It allows Fearless-75 Hybrid Patrol Vessel 25 knots in PTI-boost mode. Depending present their ideas for innovative purifying the wash effluent to be reused electric vehicles to take advantage of Premised on the indigenously designed on operation profile and the equipment products, services, new businesses and repeatedly. regenerative braking. Paired with the and built Fearless-55, the Fearless-75 configuration, significant savings in environmentally friendly solutions to 1 appropriate electric motor, vehicles easily Hybrid Patrol Vessel is capable of fuel can be achieved compared to a senior management. Winning ideas Vehicular Integrated Communication acquire the upfront torque to accelerate operating with different payloads. two-diesel engine configuration. The are nurtured by the relevant business System ST6800 from rest to achieve and maintain The vessel uses a hybrid propulsion Fearless-75 Hybrid also requires less units. The quantity and quality of entries The SuperneT™ Vehicular Integrated highway speeds. system such as the Siemens Eco Prop space for its engine room. received have grown steadily over Communication System (VICS) ST6800 hybrid system. the years. is a versatile, ruggedised and reliable interface requirements and Intelligent controls on the EV3-850 communication and network solution for configurations. It also provides system directly communicate with the vehicle The Eco Prop hybrid system consists To prepare for disruptive innovation, a military and para-military applications in configuration and monitoring, and control module to obtain the appropriate of two similar propulsion trains. Each Technology Management Committee, harsh tactical and mobile environments. supports radio control and management, information to conduct the unique train comprises a pair of compact reporting to the Group Chief Technology These include operating on wheeled or radio patching for rebroadcast and algorithm which matches motor speed permanent magnet electric motors Officer, discusses and identifies action tracked combat vehicles. interoperability. with a target gear before shifting. Speed connected in tandem and coupled plans for the Group. The committee matching reduces wear and strain on with one main diesel engine through also draws insights from emerging Leveraging Internet Protocol (IP) Comprehensive Maritime Awareness the gear train and improves component a gearbox. As each motor is driven technologies and trends, and shares technology, SuperneT™ VICS facilitates Solution reliability and longevity. by its respective frequency converter, them with the business units. the convergence of voice and The Comprehensive Maritime Awareness data (including video) services for Solution (CMAS) leverages terrestrial INNOVATION IN ACTION collaborative engagement in mission and celestial information to provide EcoPower® for small-sized aircraft critical operations. It serves as an a global view of waters and pinpoint EcoPower® Engine Wash Technology integrated and unified communication suspicious events as they unfold. CMAS is now available for small to mid-sized platform to provide interoperability pieces together the huge amounts of aircraft and helicopters. The new Small between heterogeneous communication data to enable timely, decisive action for Wash Unit (SWU), coupled with an systems (both IP and non-IP). maritime law enforcement. It comprises aircraft specific collection system and several modules: wash manifold, provides a fast, effective, SuperneT™ VICS provides gigabit closed-loop, environmentally friendly ethernet dual ring IP backbone consisting • The Marint Smart Maritime Analytics engine wash process using only pure, of crew units, radio interface units and module uses satellite-based data de-ionised, heated, atomised water. ethernet interface units designed for together with commercial and The patented system and process space constrained tactical platforms. It open-source databases to carry out 1 CMAS produces relevant and allows engine compressor washes to be enables integration and interoperability automatic behavioural analysis of all reliable insights for better informed 3 performed at any location. of various communication systems vessels worldwide. This enables the decision-making including radio such as combat net detection of anomalies and illegal 2 ecoServices launched a new version The new SWU has similar capabilities radio systems, UHF, VHF and HF radios, activities that occur beyond the of the EcoPower® engine wash system to the large EcoPower units; the unit software defined radio, high-speed data range of localised sensors. for PT6 engines can filter clean or engine wash waste radio and personal role radio, etc. water, heat water to temperature, 3 the NexDrive™ EV3-850 transmission’s • The Sense Making Module collates innovative design increases powertrain pressurise water for atomisation by the By adopting a scalable, modular and data from proprietary sources and efficiency by up to 30% wash manifold, and recycle the effluent. expandable system architecture, analyses it to produce relevant The system includes a specific effluent SuperneT™ VICS supports different insights. 4 the Fearless-75 Hybrid Patrol Vessel is capable of operating with different payloads 2 4

56 57 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Productivity

Leveraging Productivity for 3. Continual people development & skills The following are some examples of A better, lower cost component assembly, this reduced the work carried Sustainable Development enhancement – All our businesses productivity initiatives carried out in 2013. While working on a large scale project, out at the hull significantly. At ST Engineering, increasing are People Developers, and the ST Electronics team noted that the productivity is a continuous and provide learning and development Process improvements cut 19-inch Electromagnetic Compatibility This innovation reduced both the collective effort. opportunities for all levels of staff turnaround time (EMC) cabinets available in the market production lead time and man-hours to improve their effectiveness and For over 16 years, ST Aerospace has were costly, did not meet project by 30% while minimising welding We use various mechanisms and productivity. been using the Kaizen principles and requirements, and would not meet future distortions. platforms to effectively engage our methodologies to improve processes. EMC requirements arising from emerging people, such as Kaizen, EVA projects, 4. Organising work systems and An example is the upgrade programme technologies. The team decided to ST Kinetics also embarked on a EHS Awards, Idea and Innovation reviewing work processes – Effective for an international airline operator’s develop a better EMC cabinet, adopting partnership project with 11 of its suppliers competitions, Intellectual Property planning, structures and processes fleet of Boeing 747, 767 and Airbus the V-model development process, and to coach them in technology, automation Rights and Patents, the Team Excellence enable us to improve our turnaround A330 aircraft. Extensive aircraft interior working with an industrial partner to and mechanisation upgrading, to Convention and Think-Out sessions. time, expand our product offerings and avionics modifications required the shorten time-to-market and keep increase their quality, productivity and There is also a concerted effort to and capitalise on technology. complete removal of existing interiors costs low. efficiency levels. This was done under maintain harmonious relations between We achieved an average of 95% and the replacement with new systems. SPRING Singapore’s Partnerships for management and the unions, with turnaround time compliance in 2013. Aircraft floor structures were modified The project was completed two months Capability Transformation Programme. union representatives participating in to accommodate the new layouts and ahead of schedule. The new EMC productivity initiatives. 5. adopting Best Practices and seating arrangements. New avionics cabinet meets the targets of providing Faster, safer dredger repair Networking – By learning and hardware systems and wiring for shielding effectiveness ranging from About 14 dredgers call at ST Marine’s In 2013, our productivity efforts exchanging ideas and information in-flight entertainment equipment were 35 dB to 65 dB, and has minimum 35 dB Tuas Yard for maintenance and repair generated savings of some $70 million. with other businesses especially also installed. for frequency up to 6 GHz, making this every year. One task is the removal of Business Excellence Award a superior product that will stay relevant bottom doors (each weighing about Six Drivers of Productivity winners, we are able to access new A detailed review of all the processes for the next five years. The cabinets were 2 tons) for renewal of corroded steel The Group’s productivity agenda focuses technologies, improve our processes involved resulted in a 12% reduction in certified by an internationally recognised plates, door seals, and hinge pins. The on six drivers: and reduce the time and cost of doing the number of days required to modify organisation. conventional method requires erection business. the interior of each aircraft. This of staging and welding of eye-lugs for 1. leadership enabling a productive benefited the airline operator with each Modular hull fabrication lifting and lowering of the bottom doors work environment – The Business 6. Measuring what matters – Assessing aircraft returned ahead of schedule, For ST Kinetics, hull fabrication is a major using chain blocks. Given the limited Excellence Council takes a the value of our efforts and at the same time efficiently utilising activity in the manufacturing of our space between the hull and the floating hands-on approach to identifying productivity investments help us ST Aerospace’s manpower and armoured vehicle platforms. Hulls are first dock, this is both time consuming and new opportunities. Positive relations identify the solutions that yield the hangar resources. 1 refurbished aircraft cabin with new formed by fitting individual plates and risky to workers. between staff, managers and senior biggest improvements. flat bed seats parts together before welding processes management motivate our people take place. The whole process requires a The team came up with an innovative jig to ‘go the extra mile’. More than 90% 2 prototype of finalised design that long production lead time and extensive to facilitate removal and re-installation of our workforce participated in was manufactured, tested and work by welders in awkward positions. of the bottom doors. This averts the need EMC certified productivity improvement initiatives to erect staging and eliminates lifting in 2013. 3 ST Kinetics’ modular hull fabrication The team devised a method where operations. The new process is safer and innovation reduced production plates and welding attachments are improves overall cycle time for this task 2. Encouraging innovation and lead time and manhours by 30% prefabricated before assembly. As most by 65%. It also reduces the manpower leveraging technology – The Group 4 ST Marine designed an innovative jig of the fitting of the plates and welding required from five to three workers. promotes innovation as a key means for removal of dredger’s bottom door processes can now be done prior to of raising productivity. In particular, we foster innovation in the way we exploit technology.

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58 59 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Workplace Safety & Health

ST Engineering is committed to protecting of good practices in managing and is in compliance with local rules and The Group’s EHS Committee encourages as part of GRI G4 Specific Standard Both ST Aerospace and ST Electronics the environment and the health and enhancing occupational health and safety regulations. In Singapore, all our business workers at all levels within the Disclosures. The indicators include Injury started to evaluate software tools for Fault safety of our customers, employees and (OHS) performance at our workplace, units have systems to ensure compliance organisation to improve their workplace Numbers, Accident Frequency Rate, Tree Analyses. Meanwhile, ST Kinetics the communities where we operate. We managing the environmental impact of with the Workplace Safety and Health safety. Its activities include monitoring Accident Severity Rate, and Incident implemented Methodware software on fulfil this commitment by: our business, and implementing system (WSH) Act as well as OHSAS 18001 – performance data, collating feedback Rate. Safety indicators of all four business all hazard analyses to ensure that • complying, as a minimum, with existing safety in our products and services. 2008 standards. and providing advice on various safety sectors were well below industry average. products are safe for testing and use. environmental, health and safety (EHS) Benchmarking exercises are done so programmes. Each business sector also proactively laws and legislation in all our operations as to raise the bar for the respective In 2013, our Occupational Health Working with our unions identifies areas for improvement, for • integrating EHS into all our key business business sectors, especially in the area of programme focused on noise To ensure compliance with national The collective agreement between the example reviewing and updating their activities – design, development, OHS at the workplace. The Committee management, ergonomics and chemical laws, international industry standards Group and the trade union promotes a respective system safety framework, manufacturing, upgrading, engineering also encourages the Group’s businesses management. We carried out inter-SBA and the Group’s own EHS Charter, we safety culture. It covers the following: integrating their system safety services, integration, maintenance, to establish and implement common benchmarking, studies and sharing, and manage workplace safety by means of the • personal protective equipment programme with their customers’, and servicing, repairs, overhaul and support frameworks for compliance with relevant conducted industry visits to keep abreast following frameworks: • joint management-employee health training staff in system safety awareness. of our products and services EHS laws, regulations and standards. of best practices and mitigating measures – management systems and safety committees • conducting operations in the most in these focus areas. – continuous programmes (e.g. safety • participation of worker representatives To learn from and share with the energy efficient manner to reduce To encourage individuals and teams learning and sharing, improvement and in workplace safety inspection (e.g. international community, two environmental impact and to ensure from business sectors to find innovative Besides regular inspection of the work benchmarking projects) Aviation Based Behaviour Safety representatives from ST Kinetics that wastage of any form and pollutive solutions to problems and challenges, environment and improvement to – performance indicators practice), internal audits, and accident presented papers at the International emissions are cut to the minimum and to showcase our commitment and reduce health risks, we make it a point to – recognition events investigations System Safety Conference in Boston • promoting EHS consciousness and efforts, business sectors compete for issue protective equipment and remind – future plans • training and education (e.g. regular during the year. responsibility among our employees in rewards and recognition at the Group, employees to use them. We also conduct monthly human factors briefing) our workplace and the communities we industry as well as the national level. The occupational health risk assessments, These approaches closely adhere to • complaints mechanism Promoting Safety in the operate in Committee is responsible for organising identify staff who might be exposed to the Global Reporting Initiative (GRI) – • right to refuse unsafe work community • working with suppliers to comply with the ST Engineering BE EHS Excellence occupational health hazards and arrange Disclosure on Management Approach. • periodic inspections (e.g. audits) ST Engineering plays its part in raising all EHS regulations Awards, which recognises outstanding for medical examinations. Their medical • clear and large safety message awareness of workplace safety to the • seeking continuous improvement efforts in EHS innovation and helps raise test results are reviewed yearly. Affected In addition, to better prepare ourselves signboards at all facilities wider community. One such initiative is through proactive hazard and aspect the profile of EHS issues among our employees are re-deployed to a different for an unlikely event, we conduct annual the Safety@Work Creative Awards, which identification, elimination, control and employees. work environment. disaster exercises such as fire drills and SYSTEM SAFETY is jointly organised with the Workplace regular reviews chemical spill simulations. Our business System safety at ST Engineering steers all Safety and Health Council. Into its ninth • setting realistic and achievable For our performance and innovation in To raise awareness of occupational health sectors also share information with one businesses towards a culture of designing year, the design competition is open to EHS targets and monitoring our workplace safety and health, the Group hazards, we organise briefings for new another on successful safety initiatives and producing safe products and to tertiary students, and the winning posters performance against the targets so as won several awards during the year. employees, health talks and occupational and perform accident case studies. ensure continual improvements in system and animation clips are subsequently to enable continual improvement (Please refer to page 88 for details). health seminars, as well as toolbox safety practices. reproduced and made available to briefings for employees and contractors. Measuring Safety Performance industrial companies as resources Our workplace EHS efforts are steered Enhancing and Promoting OHS The Group measures safety performance During the year, ST Marine introduced for training. by the Business Excellence (BE) EHS The health and safety of all employees are Ensuring Workplace Safety in its varied work environment by using an initiative to implement E-stop , an Component Committee, which maps out vital to the success of any organisation. Worker safety is paramount in our several key indicators. Such indicators help emergency stop for capstan and winch the vision, objectives and key initiatives ST Engineering’s business sectors workplace. We recognise its impact on the management to map out initiatives operations, on Republic of Singapore for the Group’s business sectors to maintain an OHS management system increasing work effectiveness, employee to prevent and manage accidents, and Navy vessels, and began reviewing its adhere to. It facilitates the sharing to ensure that our OHS implementation morale and our company reputation while are presented to auditors for inspection implementation on all other vessels. minimising lost time and financial losses.

National Average* Performance Indicators (2013) ST Aerospace ST Electronics ST Kinetics ST Marine Marine Manufacturing Safety Indicators (2013) Industry industry ST Aerospace ST Electronics ST Kinetics ST Marine No. of Occupational Health Activities Organised 12 11 40 13 (target: >4) Accident Frequency Rate 1.3 2.5 1.2 0.2 0.8 0.6 Audiometric Examination 97.1% 100% 85% 100% Accident Severity Rate 149 130 24 6 11 13 (Percentage of staff attended out of those identified at risk) * National average data as at end 2012. Respiratory Protection Training 100% 100% 100% 100% (Percentage of staff attended out of those identified at risk) Occupational Diseases Rate 0 0 0 0 (No. of incidents per 100,000 employees) Noise Induced Deafness Incidence Rate 0 0 3 0 (No. of incidents per 100,000 employees)

60 61 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Sustainability Environment Customer Excellence

Sustainability practices more fuel than is necessary, we aim to forms of energy consumed are being ST Engineering’s focus is to 2. Multiple levels of customer be creative in improving service. Other pass the acceptance tests on the first monitored and substituted with energy engagement build trust, confidence courses include Emotional Quotient (EQ) are vital to the Group’s attempt as any repeat test will consume that generates lower greenhouse gas deliver high levels of customer and customer loyalty. By establishing Workshops that identify service staff’s long-term success, and more fuel and incur greater labour cost. emissions. Where feasible, electricity is satisfaction through value lasting relationships, our senior EQ strengths and weaknesses and impart we remain committed to purchased from a vendor that has the creation, quality products management acquires intimate EQ techniques to enhance customer Several different operations involve lowest greenhouse gas emissions or is knowledge of customer needs. At relationships. pursuing improvements in the consumption of industrial gases. taking considerable initiatives to lower and examplary service. working level, employees respond to energy consumption and Efficiency is gained and maintained by its carbon footprint. customer feedback to fulfil customer We also have customised courses to having properly maintained equipment, Our customer excellence efforts are requirements. Customer relationship enhance sales and marketing as well greenhouse gas emissions. efficient layout and process flow, We have begun the process of mapping steered by the Customer Excellence management activities include as project management to increase efficient process schedule and a skilled the carbon footprint of our 100% Committee, one of the six component meeting with customers, inviting the success rate in delivering complex committees of the Group’s Business Increasing energy efficiency labour force. owned facilities. On completion of this existing and potential customers to projects and to sharpen our competitive Excellence Council. The committee We continually seek ways to reduce exercise, we will extend such efforts to technology seminars, company visits edge. comprises members from ST Aerospace, energy consumption in all our Our businesses made progress in facilities in which we have a majority to showcase our innovations, and ST Electronics, ST Kinetics, ST Marine, operations. Being more energy efficient these areas in 2013. ST Aerospace share. We have been tracking and dialogue sessions. Customer Satisfaction ST Synthesis, ST Dynamics, Defence will help us reduce our impact on the initiated a three-year programme to recording the carbon footprint of all Customers are the ultimate judges Business Group, International Business, environment and cut operating costs. replace 7,000 light fixtures with energy our Singapore facilities since 2010. Our 3. Innovative, value for money products of performance and quality. We have efficient lighting and to upgrade all carbon emissions and carbon intensity CIO office and Business Excellence. and exemplary services enable us to identified multiple key performance We consume two main forms of energy: electrical transformers and compressors. for these facilities in the last four years delight our customers. indicators to monitor, evaluate and improve The Customer Excellence Committee electricity from the power grid and fuels Meanwhile, ST Electronics replaced have been trending upwards. One main customer satisfaction. The business sectors seeks to establish a framework to foster a and industrial gases that we purchase some 600 light fixtures with more contributing factor is our production Inculcating Customer conduct an annual customer satisfaction customer-centric culture that inculcates and use in our operations. energy efficient lighting and upgraded of a diverse product mix which may Centric Culture survey rating the quality, delivery, the piping and cooling tower of the require different sets of work processes a ‘customer first’ mindset and to promote We equip our employees with the skills responsiveness, service levels and value and share good practices in: In order to track our energy central chiller system at one of its sites. involving various levels of energy input. and knowledge to raise service levels. for money of products and services. consumption, we need to measure, ST Kinetics replaced 920 light fixtures, Because of this, the efficiency gains that Besides service excellence and ‘Go the • Learning and listening strategies analyse the data and determine upgraded two air handling units, we have made so far have not been able Extra Mile for Service (GEMS) training, In 2013, the Group achieved 98% • Customer relationship management the most feasible course of action. installed five hypermisers and replaced to compensate for the need for more we have introduced Edward de Bono’s customer satisfaction. • Benchmarking of performance An example is the installation of a furnace, while ST Marine upgraded energy in our production activities. Lateral Thinking course to help staff to internally and against industry leaders a significant number of electrical its plasma cutting machine for for continuous improvement meters at various locations in the higher efficiency. Meanwhile, our US facilities have • Customer satisfaction measurement facilities to gather data on our begun the journey of data collection, across business sectors. electrical consumption. Older high In order to achieve the energy efficiency monitoring and recording their carbon electrical consumption systems like to which we aspire in the longer footprint since late 2013. It will take air conditioners are being closely term, we need adequately trained some two to three years for all our Management Approach to Customer Satisfaction Trend from 2011 to 2013 monitored to gauge whether it is still energy managers on staff. Several wholly owned US facilities to achieve Customer Excellence The Group uses a three-pronged cost-effective to continue operating, of our employees have obtained the third-party assured carbon emissions or Target 95% Consistently better management approach to ensure than targets compared to newer, more energy necessary qualification, while others are environmental footprints. undergoing training. We are working customer satisfaction: efficient systems. We carried out 98 mid-life upgrades to our systems to towards adopting the ISO50001 energy Developing products with lower management system Group-wide to greenhouse gas emissions over their 1. Multiple listening and learning 98 obtain the required improvement, and 2013 strategies allow us to understand 99 in other cases we replaced older, less better manage our energy consumption. entire life cycle is another key area we customers’ current requirements efficient systems. are focusing on. Most of our products 96 Mitigating climate change offer a long service life, and as they and to anticipate future needs and In recent years we have focused on age they tend to generate substantially marketplace potential. Key learning We consume fuels when test running 99 and listening channels include the equipment we built, rebuilt, mitigating climate change, and the key more greenhouse gases than when participating in local and international 97 overhauled or repaired as part of area that we have concentrated on is first manufactured. Mid-life upgrades 2012 forums, exhibitions, trade shows, 99 the acceptance test determined our production activities. Production with state-of-the-art technology ensure conferences and other touch points. 100 by customers or prescribed by an activities that require any form of that the products continue to perform international standard or regulatory non-renewable energy are earmarked efficiently and with lower emissions body. To ensure that we do not consume and scheduled for review. The various than when they were first designed. 99 97 2011 97 ST Aerospace 100 ST Electronics ST Kinetics 0 20 40 60 80 100 ST Marine

62 63 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability People Excellence

We value our people Management approach In 2013, we awarded 28 scholarships to Employees’ Union in the Place and Train University of Singapore and the US Naval to work with their Singapore-based to human resource Singaporeans. In partnership with the Programmes for Technical Associates Postgraduate School, the programme colleagues and gain a better appreciation and strive to create an ST Engineering is committed to: Singapore Government, we also awarded and for Professionals, Managers and aims to build up a pool of systems of the work culture. environment that helps • investing in high performing teams by seven Singapore-Industry Scholarships Executives. Through these programmes, engineers. It equips participants with employees realise their providing continuous development to young Singaporeans who wish to ST Marine equips candidates with knowledge in key defence technologies, We regard our workers who are past opportunities to our people, and pursue undergraduate studies at the knowledge and skills to perform and provides a platform to network with retirement age as a valuable and stable full potential and allows nurturing and grooming leaders local universities. their jobs effectively and allows them colleagues in the defence ecosystem. resource, and we typically re-hire them the company to sustain its • providing continuous learning to progress in their career as marine on one-year renewable contracts. competitive advantage. and development opportunities To support our expansion in overseas technical associates, supervisors The Group believes in developing leaders to strengthen our technical and markets, we offer scholarships to and engineers. at all levels. The online self-assessment Health and Welfare leadership competencies students studying at top universities tool, Leadership Enhancement Portal In addition to incentives such as career • developing a workforce that promotes in China and India. Such scholars have Talent Management (LEAP), provides a database of learning development opportunities, employees innovation and entrepreneurship, the opportunity to intern at one We offer competitive remuneration, resource items that helps to develop a today increasingly seek a balance guided by our core values of the Group’s operations. In 2013, and reward individual contribution with Personal Development Action Plan between work and personal life. • rewarding excellence and encouraging 25 scholars from China and nine from performance-based pay and bonuses. based on an employee’s preferred work-life harmony. India participated in the internship We grant senior executives performance learning style. We provide a supportive work programme. shares with KPIs that drive efficiency, environment with a degree of We employ the Business Excellence productivity and profitability. The Group In addition, we send selected employees work schedule flexibility. A more Framework, of which one component To promote engineering as a career, also gives out awards to recognise for leadership development courses. formal framework for flexible work is the People Excellence and Learning the Group engages junior college deserving employees. These include leadership competency arrangements is being drawn up. Organisation (PELO). The PELO students through the Young Engineers assessments by Development In the meantime, the Sports & Committee looks into areas that the Programme (YEP). Launched in 2012, We continue to send employees for Dimensions International, Inc., the Senior Recreation Club of each sector Group can work on to enhance existing the YEP includes sharing by the CTOs, professional training and skills upgrading, Leadership Development Programme organises programmes catering to policies and processes to achieve visits to the facilities and internship investing S$14.9 million in learning and for senior management, and Executive the needs of different employee profiles. People Excellence. opportunities during school holidays. development during the year. As part Education Programmes in premier Activities include: sports like badminton, The students are assigned mentors and of its efforts to improve engineering overseas universities such as Harvard, soccer and bowling; customised As part of efforts to reinforce a positive buddies who guide them and share their capabilities, ST Kinetics developed an Stanford and INSEAD. wellness programmes ranging from organisational culture, ST Engineering experiences. 22 students were selected Advanced Technical Training Programme talks and annual health screenings signed the Employer’s Pledge of for the YEP in 2013. for engineers, comprising e-learning To sustain growth, it is important to to kickboxing, shiatsu and cardio Fair Employment Practices in 2008, modules, conferences, seminars, as well secure a pipeline of leaders to take up dance; and social activities such as showing our commitment to a fair and Besides scholarships, we offer internships as local and overseas engineering and key positions in the Group. Potential canteen sales, prawn-catching and unbiased approach in managing our to students at local polytechnics and technical training courses. successors to these positions are karaoke contests. human resources. universities. The internship allows these identified and groomed well in advance. young talents to know the Group better In addition to technical skills, we The Biennial Health Questionnaire has Attracting talent and consider a career with us. In 2013, are committed to developing the Employees not only have the opportunity proven useful, and ST Electronics has To identify and develop talent early, we offered internships to 600 students. management and soft skills of our to assume managerial roles and move built on this by conducting a Health 1 ST Marine employees at the Archery and to bolster our talent pipeline, employees. For example, ST Engineering up the general management track, and Lifestyle survey to identify suitable Fun Shoot ST Engineering awards various To attract Singapore citizens and launched the Building Interpersonal but the more technically-inclined also programmes to improve employee 2 Showcasing career opportunities at scholarships to outstanding students permanent residents from a non-marine Skills Programme in 2013. To enhance have the option to progress along the well-being. Nanyang Technological University’s who have demonstrated leadership background to join the marine industry, engineers’ ability to effectively engineering specialist path. These career fair qualities. The Group also participates ST Marine partnered the Employment communicate information to different two career tracks fulfil different career Employee Communication 3 the winning team of ST Electronics’ in scholarship fairs at junior colleges to and Employability Institute and audiences, ST Electronics rolled out two aspirations. Employees who are versatile Recognising the importance of inaugural futsal competition reach out to potential applicants. Shipbuilding and Marine Engineering writing courses – Technical Writing for may also move between tracks to gain communication, we utilise various Engineers and Business Writing Skills. more exposure. channels to engage our employees.

The Group also sponsors employees As the Group expands its global Essential information is conveyed in a for undergraduate or postgraduate footprint, a conscious effort is made to timely manner to the whole organisation studies. In 2013, 28 employees received equip our employees with the skills to to establish clear understanding and sponsorships, including nine who operate effectively in culturally diverse achieve buy-in. Such information includes were sent for the Master of Defence business units, for instance through policy and management changes, as well Technology and Systems Programme overseas assignments and postings. This as key messages relating to performance, (MDTS). This brings to more than year, seven executives from our overseas productivity, skills upgrading, building 70 the number of employees the business units participated in a two-week the capacity to change and adapt, Group has sponsored for MDTS since attachment programme in Singapore. globalisation and the challenges ahead. 2002. Jointly conducted by National During their stay, they had opportunities

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64 65 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Sustainability People Excellence Community Relations

Our Employee Information Portal is Social Responsibility group of employees participated in the Coastal Cleanup effort of Singapore, we the main platform to communicate ST Engineering is committed to being a Terry Fox Run to support the Singapore found environmentally friendly ways to the Group’s vision, mission, values and HUMAN RESOURCE STATISTICS good corporate citizen by participating Cancer Society’s research programme, help the less privileged during the year. business thrusts. Information on the as at 31 December 2013 actively in improving the well-being of while another group took part in Under the Rings for Lives campaign, our Total: 22,928 Company’s performance, directions communities where we operate, and Hair for Hope to show solidarity with staff collected 20,000 pull rings from and plans for the short and longer term where possible, utilising our expertise in young cancer victims and raise funds drink cans. These rings were sent to the is communicated through quarterly sector ways that would benefit lesser served for their families. Prostheses Foundation in Thailand to use dialogue / feedback sessions and twice- segments of society. in artificial limbs. We also collected and yearly forums by the sector Presidents. A significant effort in 2013 was the contributed used pens to Save That Pen, Aerospace 32% Electronics 25% Supporting charities and causes fundraising for Assisi Hospice, which an organisation that refills and distributes The Biennial Employee Opinion Survey, Land Systems 31% At the Group level, we contribute involved one of our employees, Mr Lim the pens to underprivileged children. e-Staff Suggestion Scheme, circulars or Marine 8% financially to various charities on a regular Wee Yin, cycling more than 5,000 km postings on notice boards, newsletters, Others 4% basis. In 2013, such contributions included from China to Singapore over 50 days. email broadcasts and pop-up screen approximately $250,000 to the President’s messages are other valuable sources Challenge. In addition to fundraising, our people of feedback and communication. also give of their time and effort, As a Group, we have a partnership with organising visits, outings and celebrations At the operational level, management Assumption Pathway School, which with the less fortunate in society, such as briefings and toolbox meetings address includes sponsoring academic awards, residents of homes for the aged, disabled day-to-day issues, while safety and an assistance scheme for needy students, and children. quality briefings highlight specific student attachments and an extra- issues and lessons learnt. We also have curricular engineering project where We also use our skill sets to support a grievance procedure that provides our staff mentor participates in building worthy causes. In 2013, a team of IT guidance to staff on who to seek geography professional grade remote-controlled experts helped the Thye Hua Kwan EIPIC assistance from. vehicles to race. Our sponsorship amounts (Early Intervention Programme for Infants to $30,000 annually. & Children) Centre repair their damaged Union Relations Singapore 65% computer networks. Americas 20% At regular Union-Management meetings, At the business sector level, we support a Asia-Pacific (ex-Singapore) 13% both parties discuss and resolve staff Europe 2% wide range of charitable and community Environmentally friendly efforts issues expeditiously, clarify policies and Others <1% causes. Employees raise funds for cancer Besides efforts such as observing Earth seek buy-in of new initiatives, improve causes, for instance. During the year, a Hour and volunteering for the International the management-employee relationship and generally enhance the working climate.

The Group also contributes to the Labour Movement by supporting initiatives to: a. create better jobs through re-employment, up-skilling or improving productivity or helping qualification to make the workplace more inclusive; and Degree & equivalent 33% b. increase the employment rate, Diploma & equivalent 24% reduce underemployment, develop Trade Certificates 18% “O” & “A” levels & equivalent 15% a more productive and better skilled Secondary level & lower 10% workforce, and create a more inclusive workforce by being supportive of women and family and workers who are past the retirement age.

1 lim Wee Yin, being welcomed back after cycling from China to Singapore to raise funds for the Assissi Hospice 1

66 67 Alw ays AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sustainability Investor Relations

We are committed to timely and briefings are open to the public via 2013 Investor Shareholding transparent communication with analysts real-time webcasts, and viewers may Relations Calendar Institutional investors held 84.2% of SHARE STRUCTURE and all our shareholders. We uphold pose questions to our management the Group’s shares as at end 2013, February with the rest held by retail and other our responsibility to provide them with team. – Live webcast of FY2012 results briefing shareholders. Temasek Holdings Singapore 64.69% timely, comprehensive and balanced – Post results investor lunch North America 14.96% remained our largest shareholder, Unidentified holdings & holdings 12.68%below threshold information on the Group’s performance, All news of financial results and UK 4.75% business developments and the important developments is announced with 50.1% of shares at end 2013. Asia Singapore) (ex 2.02% April Europe UK) (ex 0.48% challenges we face in conducting via SGX in a timely manner, at the earliest – Annual General Meeting Shareholders from Singapore held Rest of 0.42% World our business. feasible time. Our corporate website a total of 64.7%, followed by those also carries an archive of all SGX and May from North America at 15.0% and Regular communication is important. marketing announcements, presentation – Live webcast of 1Q2013 results briefing the UK at 4.8%. Throughout the cycle of a year, we materials and financial statements, as – HSBC Annual ASEAN Conference – organise platforms to give investors well as recordings of our results webcasts Singapore and analysts access to our senior for the past year to assist those studying – DB Access Asia Conference – Singapore (Based on Top 30 Share Register management through one-on-one or researching our company. Analysis as at 31 December 2013) meetings, conference calls, non-deal – US & Canada Non-Deal Roadshow roadshows, investor conferences As part of our ongoing outreach June and facility visits. These touch-points programme to retail investors, – Citi ASEAN Investor Conference – SHARE PRICE INFORMATION provide a deeper understanding of our ST Engineering is a sponsor of the Share Price Movement Singapore operations and business landscape, while Securities Investors Association ST Engineering shares closed ST Engineering Share Price & FSSTI (rebased) – Nomura Asian Equity Forum – at the same time allowing frank feedback of Singapore’s Investor Education at $3.96 at the end of 2013, 1.2 Singapore representing a gain of 4% for the from our investors. Over the course of Programme. 1.15 year. Market capitalisation was 2013, our Investor Relations team held July $12.3b at the end of the year. The 1.1 about 200 such meetings. In recognition of our IR practices, – Analysts’ visit to ST Kinetics average share price over the course 1.05 ST Engineering is in the Securities – Tokyo Non-Deal Roadshow Each quarter, our senior management Investors Association of Singapore’s Hall of the year was $4.11, with a high of 1 $4.56 and a low of $3.69. Average team presents ST Engineering’s financial of Fame for Most Transparent Company august 0.95 performance and outlook at combined Award, and picked up several accolades – Live webcast of 2Q2013 results briefing daily trading volume for the year 0.9 analyst and media briefings. These during the year (see Awards on page 88). – Post results investor lunch was 2.2m shares. 2 Jan 31 Dec – Analysts’ visit to VT Systems, $3.82 ST Engineering Share Price $3.96 VT iDirect, STA San Antonio & 3201.74 FSSTI 3167.43 VT Halter Marine 20M ST Engineering Share Trading Volume september 15M – Investors’ visit to ST Aerospace 10M 5M 0 november JAN feb MAR APR MAY jun jul aug sep oct nov DEC – Live webcast of 3Q2013 results briefing 2013 (Source: Bloomberg) – Morgan Stanley Summit – Singapore Dividend For 2013, the Board has proposed a final dividend of 12 cents per share. DIVIDEND INFORMATION Together with the interim dividend of 3 cents per share, this translates to a total of 15 cents per share and 2013 7.00 8.00 15.00 represents 80% of our net profit.

2012 7.00 9.80 16.80

2011 7.00 8.50 15.50

2010 7.00 7.55 14.55

2009 7.00 6.28 13.28 Special 1 Analysts on a visit to STA San Antonio Cents Ordinary in the US 0 5 10 15 20 1

68 69 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Corporate Governance

ST Engineering is committed to In the discharge of its functions, the and when necessary to consider urgent maintaining high standards of Board is supported by nine Board corporate actions, long term strategies Type of Meeting No. of Meetings Attendance Average (%) corporate governance. Our framework committees to which it delegates or specific issues of importance. Board 5 88% of corporate governance reflects an specific areas of responsibilities for institutional mindset of accountability review and decision making, and the To facilitate the Board’s decision-making Audit Committee 6 96% and transparency at all levels of the Executive Office.T he Executive Office process, the Company’s Articles of Business Investment and Divestment Committee 1 80% Group as good corporate governance comprises the President & CEO; and Association provides for Directors Executive Resource and Compensation Committee 3 89% is not only the Board’s responsibility, the Chief Financial Officer (CFO). Board to participate in Board meetings by but that of the entire organisation. members receive monthly consolidated teleconference or video conference. Nominating Committee 1 100% management reports on the financial Decisions of the Board and Board Senior Human Resource Committee 1 100% This Report sets out ST Engineering’s performance of each business sector, committees may also be obtained via Risk Review Committee 5 72% corporate governance processes, capital commitments and significant circulation. The Board monitors the practices and activities in 2013 with operational highlights. performance of the Group through Budget and Finance Committee 2 88% specific reference to the guidelines its Board committees. Research, Development and Technology Committee 3 67% of the Singapore Code of Corporate A formal letter is sent to a director upon Tenders Committee 1 100% Governance 2012 (the Code). his appointment setting out his duties At the end of every Board meeting, and responsibilities. A new director is the Chairman allocates time for its Minutes of the Board committee meetings are made available to all Board members. BOARD MATTERS also given a briefing by the President non-executive Directors to meet without Board’s Conduct of its Affairs & CEO on the strategic direction and the presence of Management. LG Ng Chee Meng was appointed legal and management. Each non- judgment in his deliberations at the (Principle 1) performance of the Company and its non-executive Director on 25 April 2013 executive director brings to the Board Audit Committee and Board level. The Board is accountable to key subsidiaries as well as the duties The number of Board and Board following the retirement of an independent perspective based The Board has, on the recommendation shareholders for overseeing the and obligations under the Companies committee meetings held during the LG Neo Kian Hong on 24 April 2013. on his training and expertise to make of the NC, determined that Mr Koh is effective management of the business. Act, Chapter 50, the relevant SGX listing year is tabulated on page 71. He is also a member of the Business balanced and well considered decisions. independent notwithstanding that he To this end, the Board relies on the rules and the Code. Investment and Divestment Committee, has served more than nine years on integrity and due diligence of its senior Board Composition and Guidance Senior Human Resource Committee and The President & CEO is Mr Tan Pheng the Board. As Chairman of the Audit management and its external advisors Visits to the Group’s facilities are also (Principle 2) Risk Review Committee. Hock, who is an executive director. Save Committee, Mr Koh continues to express and auditors. In addition to its statutory arranged for new directors to enable The Board comprises 11 directors and for Mr Tan, the remaining ten directors his independent views and challenges responsibilities, the Board reserves the them to develop a good understanding an alternate director. In LG Ng’s position as Chief of Defence are non-executive directors. management at Audit Committee following matters for its decision: of the Group’s business and operations Force, it may be necessary for him to be meetings. and the respective key managements. The Chairman of the Board is called away on urgent duty at times and The Board has seven independent • approval of the Group’s overall long The Board is routinely updated on Mr Kwa Chong Seng, an independent not be able to attend Board meetings. directors who represent more Mr Venkatachalam Krishnakumar term strategic objectives and ensuring the relevant laws, continuing listing non-executive director. He was appointed The Board has therefore agreed with than 60% of the Board. The Code was appointed independent non- that decisions made are consistent obligations and accounting standards to the Board on 1 September 2012 and LG Ng’s request to appoint Col Alan Goh requires the independent directors to executive Director on 15 April 2002. with these objectives; requiring compliance, and their became Chairman on 25 April 2013, Kim Hua as his Alternate Director. Col comprise at least half of the Board. Mr Krishnakumar has considerable implications for the Group, so as to succeeding Mr Peter Seah Lim Huat. Goh was appointed Alternate Director The independence of each director is financial and operations experience • approval of annual budgets, major enable each Director to properly As an independent director, Mr Kwa to LG Ng on 25 April 2013. Management determined upon appointment and having served as Chief Operating Officer funding proposals, investment and discharge his duties as Board and Board is free from any relationship with ensures that Col Goh is fully apprised reviewed annually by the Nominating and Chief Financial Officer for the divestment proposals in accordance committee member. Depending on the executive management of the of all Board matters, receives notices Committee (NC). The NC has affirmed Asia Pacific Consumer Bank of Citigroup with the approved delegation of their skillsets and background, directors Company that could materially interfere to attend Board meetings, receives that the independent directors are when he retired in February 2005. authority framework; are sponsored for relevant courses, with the exercise of his independent Board papers in time as well as board Mr Kwa Chong Seng, Mr Koh Beng Seng, Mr Krishnakumar’s knowledge of conferences and seminars in order that judgment. Mr Kwa serves on the boards resolutions by circulation. Mr Venkatachalam Krishnakumar, information technologies is an added • appointment of the President & CEO, they can be better equipped to fulfill of related corporations of Temasek Mr Davinder Singh, Dr Stanley Lai, advantage and enables him to Board changes and appointments on their governance role and to comply Holdings (Private) Limited (Temasek). Mr Quek See Tiat, who retired as Deputy Mr Khoo Boon Hui and Mr Quek See Tiat. contribute to various aspects of financial Board committees; and with directors’ obligations. Where there Temasek is a majority shareholder of Chairman of Price WaterhouseCoopers The Board agrees with NC’s assessment. and operational issues. Although are statutory and regulatory changes ST Engineering as at 31 December in 2012 was appointed independent Mr Krishnakumar has served as an • approval of the unaudited quarterly, that affect the obligations of directors, 2013. As he serves on these boards in non-executive director and member of Mr Koh Beng Seng was appointed independent director on the Board for half yearly and full year audited the Company will organise briefings by a non-executive capacity, the NC has the Audit Committee of the Company independent non-executive Director more than nine years, he continues to results prior to their release. external legal counsel. determined that he is independent in on 1 July 2013. on 15 September 2003. Mr Koh has exercise independence of judgment in character and exercises independence extensive experience in financial services Board deliberations. Besides monitoring the performance The Board convenes scheduled of judgment in board deliberations. Mr Chan Yeng Kit resigned from the and knowledge of financial regulations of the Group, the Board also provides meetings on a quarterly basis to He is also independent of the majority Board on 1 September 2013. which enables him to effectively lead Mr Davinder Singh is the Chief Executive guidance on sustainability issues such coincide with the announcement of shareholder. The Board has, on the the Audit Committee in providing Officer of Drew & Napier LLC (Drew & as environmental and social factors, the Group’s quarterly results. Special recommendation of NC, determined The Board consists of members with oversight on internal controls to support Napier). Although payments made by as part of the overall business strategy. Board meetings may be convened as that Mr Kwa is independent. established track record in defence, the Board. He has also demonstrated the Group to Drew & Napier during the business, finance, banking, technology, independence of character and year exceeded $200,000 in FY2013,

70 71 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Corporate Governance

the NC continues to regard Mr Singh as dominates the Board’s decision making iii. Mr Kwa has spent and continues to The composition of the Board committees as at 31 December 2013 is tabulated below: independent Director for the following process. The President & CEO and senior spend time in the Company and has reasons: management regularly consult with also involved himself in senior talent individual Board members and seek hires to strengthen the Company and • Mr Singh is an established lawyer the advice of members of the Board Group and to manage succession. from a leading and reputable law committees through meetings, telephone firm. Being a professional, he has calls as well as by electronic mail. The President & CEO is accountable demonstrated objectivity in his views to the Board for the conduct and and, in addition, has contributed The Chairman is responsible for performance of the Group. He has been valuable advice at Board deliberations. leading the Board and ensuring the delegated authority to make decisions effective functioning of the Board within certain financial limits authorised • The billings by the law firm to the to act in the best interests of the by the Board. He is supported in his Group constitute an insignificant Company and its shareholders. The work by the CFO, Ms Eleana Tan Ai Ching percentage of ST Engineering’s Chairman facilitates the relationship and the respective Presidents of the Board Member Committee Audit on 15/1/1998) (established Investment Business Committee and Divestment on 8/9/1997) (established Resource Executive Committee and Compensation on 6/12/1997) (established Committee Nominating on 4/12/2002) (established Committee and F inance Budget on 5/1/1998) (established Development Research, Committee and Technology on 1/8/2003) (established Senior Human Resource Committee on 16/1/1998) (established Committee Risk Review on 7/12/1998) (established Committee Tenders on 5/1/1998) (established expenses. In addition, the billings between the Board, President & CEO subsidiaries. represent a small percentage of the and management, engaging them in Mr KWA Chong Seng C C M C billing firm’s fees. constructive discussions over various Board Membership and Evaluation of Mr TAN Pheng Hock M M M M M matters, including strategic issues Performance The Board has, at all times, exercised and business planning processes. He (Principles 4 and 5) Mr KOH Beng Seng C independent judgment in decision ensures that discussions at the Board Supporting the Board are the following LG NG Chee Meng* M M M making, using its collective wisdom and level are conducted objectively and Board committees: Mr QUEK Tong Boon C experience to act in the best interests of professionally where all views are heard the Company. Any director who has an and key issues are debated in a fair • Nominating Committee Mr QUEK Poh Huat M M interest that may conflict with a subject and open manner. The Chairman also Mr Venkatachalam KRISHNAKUMAR M M C M • Audit Committee under discussion by the Board either ensures that adequate time is provided Mr Davinder SINGH C M recuses himself from the information for strategic issues. He represents the • Business Investment and Divestment Dr Stanley LAI Tze Chang M M M M flow and discussion of the subject views of the Board to the shareholders. Committee matter or declares his interest and Mr KHOO Boon Hui C

# Directors 3 Board of any olling list abstains from decision-making. The Board has concurred with the • Executive Resource and Mr QUEK See Tiat M R NC which, following a review involving Compensation Committee COL Alan GOH Kim Hua+ The Board, through the NC, reviews its external consultants, had recommended • Budget and Finance Committee size and composition from time to time that Mr Kwa be considered an active DENOTES: to ensure it has the right blend and Chairman on the basis of, among other C – Chairman • Research, Development and diversity of skills, expertise, experience things, the following considerations: M – Member and perspectives to enable the Board Technology Committee * appointed Member on 25 April 2013 # to effectively oversee TS Engineering. i. ST Engineering, as a global appointed Member on 1 July 2013 • Senior Human Resource Committee + appointed Alternate Director to LG NG Chee Meng on 25 April 2013 conglomerate, has reached a point The Board held a total of five meetings where rapid changes in technology, • Risk Review Committee during the year to consider, among the consolidation of the defence, The NC comprises three non executive of an active chairman, as set out under The NC has also noted the list of other other things, the approval of the FY2012 aerospace and engineering-related • Tenders Committee independent directors. Mr Venkatachalam Principle 3 above. directorships held by our directors results and release of the 1Q2013, industries and challenges of the Krishnakumar is the Chairman of the NC. taking into consideration their principal 2Q2013 and 3Q2013 results. The Board global economy have thrown up Nominating Committee (NC) The other members are Mr Kwa Chong The NC conducted a collective commitments. The NC is satisfied that reviewed the Group’s strategy plans to many challenges. Our ability to meet The NC is responsible for reviewing Seng and Dr Stanley Lai. assessment of the Board to gauge each of the directors is able to devote time ensure that the work of the Group is these challenges and at the same the composition of the Board and the effectiveness of the Board’s to his directorship role in the Company. aligned with its charter and corporate time, transform ourselves, is vital to identifying and selecting suitable During the year, the NC revised its performance, the adequacy of the objectives taking into account the major its sustainability; candidates to the Board, in particular, Terms of Reference to update its blend of skillsets and experience of the The Board has considered and agreed challenges in the global environment in candidates with the appropriate responsibilities under the Code. Board, and the quality and timeliness to defer the need to set guidelines which we operate. ii. to achieve this, we need an active qualifications, skillsets and experience During the year, the NC reviewed and of board and committee meeting for maximum directorships in a listed and experienced Chairman, with who are able to discharge their affirmed the independence of the agendas and papers submitted by the company that a director can hold. the right background and global responsibilities as directors. It is also Chairman and Chief Executive Officer Company’s independent directors and Management. The review was internally Before a director accepts an invitation experience; one who is willing to responsible for reviewing annually and (Principle 3) the composition and profile of Board undertaken with each Director being to join the Board, he is required to affirm The Chairman and President & CEO roles devote time and is committed to determining the independence of non- members in relation to the needs of asked to complete a questionnaire. Their that he is able to commit sufficient time and responsibilities are kept separate in leading the Board and engaging executive directors, conducting board the ST Engineering Board. feedback was collated and shared with to perform his role effectively. Annually, order to maintain effective oversight. No with and guiding the management performance evaluation, succession the Board. The review indicated that the an incumbent director is asked to individual or small group of individuals in strategic issues; and planning for CEO and director training The NC also reviewed the active Board continues to function effectively. affirm that he has adequate time to and development. chairmanship role and the attributes devote to his Board responsibilities.

72 73 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Corporate Governance

The ST Engineering Board members Board papers are sent to directors at Executive Remuneration General For financial year 2013, Carrots with the standard contractual notice The PTB Payout is capped at 2.5 times are selected on the basis of their least three days prior to meetings in Framework Consulting Pte Ltd was engaged as period termination payment. of monthly base salary based on the relevant skillsets, experience, calibre and order for directors to be adequately • Reviews and recommends to remuneration consultant (Remuneration Group and Company Performance for willingness to contribute. In addition, prepared for the meetings. the Board the Group’s general Consultant) to provide professional There were no employees who were the CEO and the Senior Management each Director is required to provide framework for determining advice on human resource matters. immediate family members of a Director Executives based on the assessment of an annual affirmation of commitment The Company Secretary attends all executive remuneration including The principal consultant providing such or the CEO, and whose remuneration the Individual Performance Scorecards to his Board responsibilities. With Board meetings and ensures that the remuneration of the Chief services is Mr Johan Grundlingh. Carrots exceeded $50,000, during financial at the end of a performance year. these considerations, the Board is board procedures are followed. The Executive Officer (CEO) and the key Consulting only provides remuneration year 2013. of the view that setting a maximum Company Secretary advises the Board management executives of the Group consulting services to the Group, and has EVA-based Incentive Scheme (EBIS) number of board representations on on governance matters including their Companies (Senior Management no other relationship with the Group. TOTAL EXECUTIVE REMUNERATION The EBIS rewards employees for listed companies becomes a matter of timely disclosure obligations. She Executives); STRUCTURE sustainable shareholder value creation formality and has deferred a decision also assists with the co-ordination of Under the Code, the compensation Remuneration benefits for key over the medium term achieved by on this for the time being. continuing training for board members Executive Director and Senior system shall take into account the risk executives comprise a fixed component, growing profits, deploying capital according to their needs, to keep up-to- Management policies of the Group, be symmetric a variable cash component, share-based efficiently and managing the risk profile The NC is also responsible for renewal date on corporate governance matters. • Reviews and recommends to the with risk outcomes and be sensitive component and benefits. and risk time horizon of the business. and succession plans to ensure Board Board the entire specific remuneration to the time horizon of risks. The ERCC A portion of the annual performance- continuity. At each AGM, one third of the REMUNERATION MATTERS package and service contract terms has conducted a Compensation Risk A. Fixed Compensation: related bonus of the CEO and Senior directors with the longest term in office Procedures for Developing for the CEO and Senior Management Assessment to review the various The fixed component comprises Management Executives is tied to since his last re-election is required to Remuneration Policies (Principle 7) Executives; compensation risks that may arise and the base salary and compulsory the EVA achieved by the Group in retire. A retiring director may submit Level and Mix of Remuneration introduce mitigating policies to better employer contribution to an the year. Under the plan, one-third of himself for re-election. Under this (Principle 8) Equity Based Plans manage risk exposures identified. The employee’s CPF. the accumulated EVA-based bonus, provision, Mr Khoo Boon Hui, Mr Quek Disclosure on Remuneration • Approves the design of equity based ERCC will undertake periodic reviews comprising the EVA declared in the Tong Boon and Mr Tan Pheng Hock (Principle 9) plans and reviews and administers of the compensation-related risks. B. Variable Cash Compensation: financial year and the balance of such will retire. LG Ng Chee Meng and such plans; and The variable component includes bonus brought forward from preceding Mr Quek See Tiat, who are newly ROLE OF ERCC In performing the duties as required the Monthly Performance Bonus years (which comprises multiple years appointed, will hold office until the The Executive Resource and Executive and Leadership Development under its Terms of Reference, the (which is 1/12 of the 13th month of incentive dollars retained in the EVA forthcoming AGM of the Company. Compensation Committee (ERCC) • Oversees the development of ERCC ensures that remuneration paid salary), Performance Target Bonus bank), is paid out in cash each year. The retiring directors, being eligible, performs the role of the remuneration management with the aim of a to the CEO and Senior Management and EVA-based Incentive Scheme. The remaining two-thirds are carried have offered themselves for re-election. committee. The ERCC comprises continual build up of talent and Executives is strongly linked to the forward in the individual executive’s Mr Kwa Chong Seng as Chairman, renewal of strong and sound achievement of business and individual Performance Target Bonus (PTB) EVA bank. Amounts in the EVA bank Each of the retiring non-executive Mr Venkatachalam Krishnakumar and leadership to ensure the continued performance targets. The performance The PTB is a cash-based incentive for key are at risk because negative EVA will directors has confirmed that he does Dr Stanley Lai. The members of the success of the Group and its targets as determined by the ERCC executives determined based on how result in a clawback of EVA accumulated not have any relationship with his fellow ERCC have held senior positions in large businesses. are set at realistic yet stretched levels well the individual has met the goals and in previous years. This mechanism directors nor with the Company and organisations and are experienced in the each year to motivate a high degree of individual key performance indicators, encourages senior management to work its substantial shareholders. area of executive remuneration policies • Approves appointments to Senior business performance with emphasis on which will vary depending on their for sustainable profitability and to adopt and trends. Management Executive positions in both short and long-term quantifiable job requirements. strategies that are aligned with the The Board, acting on the recommendation the Group Companies and reviews objectives. A Pay-for-Performance long-term interests of the Group. of the NC, proposes that each of the All the ERCC members are independent succession plans for key positions in Alignment study was conducted by the Individual performance objectives are retiring Directors, be re-elected at the non-executive directors. the Group Companies. Remuneration Consultant during the aligned to the overall strategic, financial The Group has clawback facility with Company’s forthcoming AGM. year and reviewed by ERCC and it was and operational goals of the Group respect to the EVA bank in the event The ERCC met three times during the The Senior Human Resource Committee, found that there was sufficient evidence and the Company which are set at the of a restatement of the financial Access to Information year. All decisions at any meeting of the chaired by Mr Kwa Chong Seng, indicating Pay-for-Performance beginning of each financial year and results of the Group subsequent to an (Principle 6) ERCC are decided by a majority of votes comprises LG Ng Chee Meng and Alignment for the Group in both are cascaded down to a select group earlier misstatement and provisions The Management furnishes Board of the ERCC members present and Mr Tan Pheng Hock. The Committee absolute and relative performance terms of key senior management staff using for the forfeiture of the remaining EVA members with monthly management voting (the decision of the ERCC shall at reviews the talent management and for the 3-year period including financial Individual Scorecards, creating alignment bank balance on termination due to reports, providing updates on key all times exclude the vote, approval or leadership development initiatives to year 2010 to financial year 2012. between the performance of the Group, misconduct or fraud resulting in any operational activities and financial recommendation of any member who build a leadership pipeline for the Group. Company and the individual. While these financial loss to the Group. analysis. The Board also has unrestricted has a conflict of interest in the subject During the year, there were no performance objectives are different for access to the President & CEO, the matter under consideration). By supporting and directing the Group’s termination, retirement and post- each executive, they are assessed on the During the year, based on the ERCC’s CFO, management and the Company talent management and leadership employment benefits granted to same principles across the following four assessment, the actual performance Secretary as well as the internal The ERCC performs the following duties initiatives, the Committee has helped Directors (other than as disclosed broad categories of targets: of the Group has partially met the and external auditors and the risk and responsibilities: to enhance the process of identification in page 78). There were also no pre-determined targets; the resulting management team. The Board may and development of talents to be termination, retirement and post- • Core Business annual payout under EBIS was adjusted also seek independent professional groomed for senior positions. employment benefits granted to the • People Development & Teambuilding accordingly. advice if necessary. CEO and the Senior Management • Organisation Development Executives other than in compliance • Self Development

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C. Share-based Compensation: the event of exceptional circumstances of restatement of the financial results shares’ component of the NEDs’ fees for financial year 2011 and award, and the two-year moratorium would apply even after his Yearly awards under the of restatement of the financial results of the Group subsequent to an earlier onwards; or (b) the number of shares of equivalent value to the retirement. Performance Share Plan and of the Group subsequent to an earlier misstatement, or of misconduct or prevailing annual basic retainer fee for a Director of the Group. Restricted Share Plan do not exceed misstatement, or of misconduct or fraud fraud resulting in any financial loss to Any balance shares can be disposed of. NED can dispose of all At Mr Kwa’s request, the Board has agreed not to implement the the internal annual limit of 1% of the resulting in any financial loss to the Group. the Group. his shares in the Company a year after he has left the Board. Active Chairman fee until FY2014 as he has been a Chairman for total number of issued shares of the less than a year. The Board has approved that the Chairman shall Company, set by the ERCC. During the year, based on the ERCC’s During the year, based on the ERCC’s The Board has decided that Mr Kwa Chong Seng’s contributions continue to be paid under the current directors’ fee structure for assessment, the actual performance assessment, the actual performance should be recognised by the payment of an all-in fee of $600k services rendered in FY2013, subject to shareholders’ approval. Performance Share Plan (PSP2010) of the Group has outperformed the of the Group has partially met the per annum (“Active Chairman fee”) prorated from 25 April 2013. The NEDs’ compensation payable in respect of financial year 2013 The Performance Share Plan (PSP) pre-determined targets; the resulting pre-determined targets; the resulting The Active Chairman fee is in lieu of all other board basic fees, is proposed to be $1,198,660 (FY 2012: $1,166,346), and comprises is established with the objective of annual payout under PSP was adjusted annual payout under RSP was adjusted Board committee fees and meeting attendance fees. The fee both the cash component of $889,260 (FY 2012: $844,446) and motivating senior management staff accordingly. accordingly. would be paid in a combination of cash (70%) and shares (30%). the shares component of $309,400 (FY 2012: $321,900). to strive for sustained growth and The share award, as part of the fee, would consist of fully-paid performance in the Group. Awards Restricted Share Plan (RSP2010) D. Market-Related Benefits: shares with no vesting period imposed. However, the shares The computation of the NEDs’ compensation is based on of performance shares are granted The RSP is established with the The benefits provided are comparable will have to be held for at least two years from the date of current fee policy rates. conditional on meeting performance objective of motivating managers and with local market practices. targets set based on the Group above to strive for sustained long-term corporate objectives. growth and superior performance in DIRECTORS’ FEE POLICY Directors’ fees are approved in arrears the Group. It also aims to foster a share Basic Retainer From Private Pursuant to the PSP, the ERCC has ownership culture among staff within by shareholders for services rendered Sector ($) decided to grant contingent awards on the Group and to better align staff’s the previous year. For services rendered Director 72,000 in 2013, a portion of the directors’ an annual basis, conditional on meeting incentive scheme with shareholders’ Chairman 155,000* targets set for a performance period, interests. compensation will be paid out to currently prescribed to be a 3-year certain non-executive directors (NEDs) performance period. The performance Pursuant to the RSP, the ERCC has in the form of restricted share awards Additional/Committee Fees shares will only be released to the decided to grant contingent awards on pursuant to the RSP2010, subject to recipient at the end of the performance an annual basis, conditional on targets shareholders’ approval at its AGM in Audit Committee: qualifying period. The actual number set for a performance period, currently April 2014. – Chairman 52,000 of performance shares to be released prescribed to be a 2-year performance – Member 29,000 to the recipient will depend on the period. The actual number of restricted These share awards are now directly Executive Resource and Compensation Committee and Risk Review Committee: achievement of set targets over the shares delivered will depend on the linked to, and form part of, directors’ – Chairman 35,000 performance period. A minimum achievement of set targets over the compensation which is subject to – Member 18,000 threshold performance is required for performance period. This will be shareholders’ approval annually. This Other Committee: any performance share to be released determined by the ERCC at the end of move provides greater transparency – Chairman 29,000 and the actual number of performance the qualifying performance period and and enables shareholders to have – Member 14,000 shares to be released is capped at 170% released to the recipient over a 3-year visibility and a greater say over the total of the conditional award. vesting period in the ratio of 50%, compensation of NEDs. Payment of part 25% and 25% consecutively. of the directors’ compensation in the Attendance Fees With effect from financial year 2010, form of shares aligns the interests of the performance measures used in A minimum threshold performance is our NEDs with that of our shareholders. Per Board Meeting 2,000 PSP grants under PSP2010 are the required for any restricted share to be Per Board Committee Meeting 1,000 Total Shareholder Return (TSR) against released while the maximum number As these are shares awarded in lieu Cost of Equity hurdles (i.e. measure of restricted shares to be delivered of directors’ compensation in cash, * Mr Kwa has requested for the Active Chairman fee not to be implemented until FY2014. of absolute Wealth Added) and the is capped at 150% of the conditional the shares will be awarded outright TSR against Defensive Stock Index, award. as fully paid shares and there will be Fees to directors who hold public sector appointments follow the Directorship & Consultancy Appointments Council (DCAC)’s the constituents of which are selected no vesting period for the shares. The guidelines as set out below. “defensive stock” companies that have The medium-term stretched targets ERCC has determined that 30% of a similar market risk as the Group and measured over a 2-year performance participating NED’s compensation From Public are listed on the Singapore Exchange period are set based on the Group shall be paid in the form of shares. The Sector ($) Securities Trading Limited (SGX). corporate objectives. The performance number of shares to be awarded to a measures used for the 2-year participating NED are governed by the Chairman 45,000 The final PSP award is conditional on the performance period are ST Engineering terms of the RSP2010. The share award Deputy Chairman / Chairman Executive Committee / Chairman Audit Committee 33,750 Restricted Share Plan (RSP) which has Group EVA Spread and EBITDA Margin. has a Moratorium on selling. Each NED Member Executive Committee / Member Audit Committee / Chairman of Other Board Committee(s) 22,500 the same performance end period. is required to hold a number of shares Director/Other Committee Member 11,250 The Group has clawback policies for in the Group based on the lower of: (a) The Group has clawback policies for the unvested components for RSP in the total number of shares in the Group NEDs who hold public sector appointments follow DCAC guidelines and will not be eligible for the shares component of the NEDs’ the unvested components for PSP in the event of exceptional circumstances awarded to such NED as payment of the compensation. 100% of their compensation in cash is payable to DCAC, where applicable.

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SUMMARY COMPENSATION TABLE FOR DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2013 (GROUP): The following information relates to remuneration of directors of Singapore Technologies Engineering Ltd:

Directors’ Total Fees *5 Number of Directors in Remuneration Bands 2013 2012 Share-based *1 *2 *3 *4 Salary Variable Benefit Compensation Cash-based Share-based Total $500,000 and above 2 1 Name of Director $ $ $ $ $ $ $ $250,000 to $499,999 0 1 Executive Director: TAN Pheng Hock 1,242,300 2,667,047 168,283 904,104 (a) N.A. 4,981,734 Below $250,000 12 11 Total 14 13 Directors’ Total Fees *5 Share-based Ex-gratia SUMMARY COMPENSATION TABLE FOR KEY EXECUTIVES FOR THE YEAR ENDED 31 DECEMBER 2013 (GROUP): Salary *1 Variable *2 Benefit *3 Compensation *4 Cash-based Share-based Payment *6 Total Name of Director $ $ $ $ $ $ $ $ Share-based Non-Executive Directors: Fees Salary *1 Variable *2 Benefits *3 Compensation *4 Total KWA Chong Seng – – – – 165,783 71,050 – 236,833 $ $ $ $ $ $ Peter SEAH Lim Huat Between $3,000,000 and $3,250,000 (Retired on 25 April 2013) – – – – 86,970 (b) – 500,000 586,970 Chang Cheow Teck 22% 64% 2% 12% 100% KOH Beng Seng – – – – 96,600 41,400 – 138,000 Between $2,750,000 and $3,000,000 LG NG Chee Meng Ng Sing Chan 15% 69% 3% 13% 100% (Appointed on 25 April 2013) – – – – 20,577 (c)(d)(g) – – 20,577 Between $2,500,000 and $2,750,000 LG NEO Kian Hong Lee Fook Sun 21% 62% 4% 13% 100% (Retired on 24 April 2013) – – – – 7,125 (c)(e) – – 7,125 CHAN Yeng Kit Between $2,250,000 and $2,500,000 (Resigned on 1 September 2013) – – – – 15,063 (c)(f) – – 15,063 John Coburn 41% 44% 1% 14% 100% QUEK Tong Boon – – – – 28,250 (c)(g) – – 28,250 Between $1,500,000 and $1,750,000 QUEK Poh Huat – – – – 132,300 (g) 56,700 – 189,000 Sew Chee Jhuen 32% 39% 5% 24% 100% Venkatachalam KRISHNAKUMAR – – – – 133,000 57,000 – 190,000 Davinder SINGH s/o Amar Singh – – – – 88,900 38,100 – 127,000 Total for Top 5 Key Executives $12,596,375 Dr Stanley LAI Tze Chang – – – – 147,700 (g) 63,300 – 211,000 KHOO Boon Hui – – – – 27,044 (c)(h) – – 27,044 *1 Salary includes base salary and employer CPF for the financial year ended 31 December 2013. QUEK See Tiat *2 Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or AWS paid over 12 months), Performance Target Bonus (Appointed on 1 July 2013) – – – – 41,650 (i) 17,850 – 59,500 paid & EVA declared* for the financial year ended 31 December 2013. COL Alan GOH Kim Hua * the EVA declared for the year is added to the balance carried 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 declared will result in a clawback of EVA declared in previous years. (j) (Alternate to LG NG Chee Meng) – – – – – – – – Key executives in the Group have had individual EVA Bank since the late 1990s. – – – – 990,962 345,400 500,000 1,836,362 *3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc. *4 Based on the fair values of PSP and RSP Contingent shares granted in 2013, using the Monte Carlo simulation model. *1 Salary includes base salary and employer CPF for the financial year ended 31 December 2013. *2 Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or AWS paid over 12 months), Performance Target Bonus paid & EVA declared* for the financial year ended 31 December 2013. * the EVA declared 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 declared will result in a clawback of EVA declared in previous years. Key executives in the Group have had individual EVA Bank since the late 1990s. *3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc. *4 Based on the fair values of PSP and RSP Contingent shares granted in 2013, using the Monte Carlo simulation model. *5 the directors’ cash fees and share awards will only be paid/granted upon approval by the shareholders at the forthcoming AGM of the Group. *6 onetime ex-gratia payment to ex-chairman for exceptional service rendered, over and above his ordinary duties as a chairman. (a) Fees payable to Tan Pheng Hock of $251,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd. (b) Pro-rated. Mr Peter Seah Lim Huat retired as Director on 25 April 2013. (c) Fees for public sector directors are payable to a government agency, the DCAC. (d) Pro-rated. LG Ng Chee Meng was appointed as Director on 25 April 2013. (e) Pro-rated. LG Neo Kian Hong retired as Director on 24 April 2013. (f) pro-rated. Mr Chan Yeng Kit resigned as Director on 1 September 2013. (g) Includes fees for directorship in subsidiary(ies)/associated company. (h) Fees for Mr Khoo Boon Hui are payable to Mr Khoo and DCAC in respect of services rendered for the period from 1 January 2013 to 20 January 2013 and from 21 January 2013 to 31 December 2013 respectively. (i) pro-rated. Mr Quek See Tiat was appointed as Director on 1 July 2013. (j) COL Alan Goh Kim Hua resigned as Alternate Director to LG Neo Kian Hong on 24 April 2013 and was appointed as Alternate Director to LG Ng Chee Meng on 25 April 2013.

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ACCOUNTABILITY AND AUDIT other auditing firms do not constitute IA plans its internal audit schedules in performed by Management and various 1) Aerospace Committee to facilitate communication Accountability a significant number. The names of consultation with, but independently of, Board Committees, the Board, with 2) Electronics and access of information between the (Principle 10) the auditing firms of our subsidiaries, management. The IA Plan is submitted the concurrence of the AC, is satisfied 3) land Systems two committees. The Board is responsible for providing associates and jointly controlled entities to the AC for approval at the beginning that the Group’s framework of internal 4) Marine a balanced assessment of the are disclosed at pages 168 and 174 of of each year. The AC also meets with controls and procedures is adequate b) Risk Aware Culture and Training Company’s performance, position and this Annual Report. IA at least once a year without the as at 31 December 2013 to provide The Head of GRMT reports to the Embedding the right culture throughout prospects. In presenting the annual presence of management to gather reasonable, but not absolute, assurance Chairman of the RRC and the organisation is important for financial statements and quarterly The Company has complied with Rules feedback on management’s level of of achieving its internal control ST Engineering’s President & CEO. effective risk management. The RRC results announcements to shareholders 712 and 715 of the SGX Listing Manual cooperation and other matters that objectives and addressing financial, The GRMT provides leadership in recognises good culture fosters promptly, it is the aim of the Board to in relation to the engagement of its warrant AC’s attention. All IA reports operational and compliance risks. the implementation of a Group-wide openness that will enable Management provide the shareholders with a detailed auditors. are submitted to the AC for deliberation Enterprise Risk Management (ERM) and staff to escalate concerns in a timely analysis, explanation and assessment with copies of these reports extended The Board is satisfied that problems framework that allows risks to be manner without fear, as well as promote of the Group’s performance, position, Directors and key senior executives of to the relevant senior management, are identified on a timely basis and identified, assessed, monitored and better judgment, which provides greater risk review and prospects. the Group are prohibited from dealing in for prompt corrective actions, as follow up actions are taken promptly managed by the business managers. comfort to the Board and Management. ST Engineering shares two weeks before recommended. Furthermore, IA’s to minimise unnecessary lapses. The Directors are required to issue a the announcement of ST Engineering’s summary of findings, recommendations Board, through the board committees, During the year, the Audit Committee at As part of the risk awareness and Negative Assurance Statement to first quarter, second quarter, third and updates on management actions is supported in these areas by the the respective Sectors was reorganised communication programme, annual accompany the Company’s interim quarter and full year results up to taken are discussed at the quarterly Internal Audit and Risk Management to become the RAC to allow the RAC risk management training plans covering financial results announcement. For this the date of the announcement of the AC meetings. teams of the Company. In this regard, to additionally take on the review of various risk topics are developed purpose, certain internal procedures results. Directors are discouraged from the Board also notes that no system risks and risk management systems and implemented by the respective have been put in place to enable trading on short term considerations. During the year, IA worked with can provide absolute assurance against and to assist in the discharge of the risk sectors, and the status of the training is each member of the Board reviewing Additionally, all directors of the Group Management to align companies to the the occurrence of material errors, poor oversight responsibilities at the Sector updated to the RRC and RAC at periodic the interim financial statements and employees are reminded not to Group’s internal control environment judgment in decision-making, human level. intervals. to immediately raise any material trade in situations where the insider and compliance standards in order to error, fraud or other irregularities. information known to him which may trading laws and rules would prohibit strengthen the self-regulating checks Administratively, the RACs are supported c) Risk Review Process render the interim financial results to be trading. and balances. IA also made periodic Risk Review Committee by the GRMT and the Sector Chief Risk Under the ERM framework, a risk false or misleading prior to their release visits to overseas subsidiaries to review The Risk Review Committee (RRC), Officers. The GRMT ensures that there dashboard of the top 15 business risks to SGX. Should there be any significant The directors’ interests in shares of their operations to ensure compliance chaired by Mr Khoo Boon Hui, comprises is general alignment in the quarterly risk (comprising the key inherent risks that adverse issue(s) raised by the Audit ST Engineering and its related with the internal controls framework. LG Ng Chee Meng, Mr Davinder Singh, agenda of the RAC meetings to that of may impact the business objectives) Committee (AC) or Board member companies during the year are found An external accounting firm, which Mr Venkatachalam Krishnakumar and the RRC. The annual risk work plan of is developed and maintained by each which may affect the results in a on pages 91 to 96 of this Report. is not the external auditors of the Mr Tan Pheng Hock. each sector is also aligned to the Group of the significant business units, rolling material way, the scheduled date of the Company, was engaged to assist IA. risk work plan before it is approved up into a summary dashboard for results announcement will be postponed Risk Management and Internal Control In accordance with its plan, surprise During the year, each Sector’s Audit by the respective RACs and further each of the four business sectors – to allow time for investigation or further (Principle 11) audits were conducted in the course Committee was revamped into Risk endorsed by the RRC. Aerospace, Electronics, Land Systems review. Internal Audit (Principle 13) of the year on selected areas including and Audit Committee (RAC) to and Marine. Once the top business The AC oversees and appraises the treasury activities. Dormant bank oversee the risk and audit aspects The RRC reviews the minutes of the risks are identified, measures will then The appointment of auditors is subject quality of the Company’s IA function. accounts were also reviewed against at the sector level. RAC meetings which are circulated to all be taken to develop and implement to approval at each AGM. In making its bank mandates, bank statements, members of the RRC. The RAC Chairman risk preventive and mitigation actions recommendations to shareholders on The Board, through the AC and the balances, etc. There were no material a) Risk Governance or a member of the RAC is invited to (collectively known as “controls”) and the appointment and re-appointment Risk Review Committee, is responsible issues highlighted following the surprise The RRC assists the Board in its risk attend the quarterly RRC meetings so as risk monitoring processes. The business of auditors, the Board relies on the for oversight of the risk management audits. governance responsibility. RRC’s role to have a clear understanding of group managers are required to periodically review and recommendations of the responsibilities, internal controls and is one of oversight of the responsibility risk policies and to share any feedback or review the effectiveness of the controls AC. KPMG LLP in Singapore audits governance processes delegated to There were no significant control issues delegated to Management to ensure raise any issue that the RACs may have. implemented, and initiate necessary Singapore incorporated subsidiaries that Management. highlighted by IA in 2013. that there is a system of controls in changes as the risk profile changes. are not exempt from audit under the place for identifying and managing In the respective Terms of Reference Singapore Companies Act. Subsidiaries The IA supports the AC in reviewing The IA continued with its system risks in order to safeguard stakeholders’ of the RRC and Audit Committee, the Quarterly, the Presidents and the Sector incorporated in countries outside the adequacy of the Company’s of rating a company at the end of interests and the Company’s assets. members of the RRC and the Audit Chief Risk Officers review, with the RRC Singapore that require an audit in their internal control system. Staffed by an internal audit for the purpose of Committee will come together at least and RAC, their respective dashboard of local jurisdictions are largely audited qualified auditors, IA has unrestricted differentiating the high risk issues which The RRC is supported by the Group Risk once a year to discuss significant risks top 15 business risks. At the meetings, by other independent member firms of direct access to the AC. The Head of require immediate attention. Management Team (GRMT), headed by and audit issues of the group. the Presidents and Sector Chief the KPMG network affiliated with KPMG IA’s primary line of reporting is to the SVP, Risk Management, working with Risk Officers would discuss the risk International Cooperative, a Swiss entity. Chairman of the AC, although she Based on the internal controls the Sector Chief Risk Officers from each There is at least a member on the RRC management action plans and measures Some of our overseas associates and reports administratively to the President established and maintained by the of the following Sectors: who is also a member of the Audit to address these top business risks. jointly controlled entities which engage & CEO of the Company. Group, work performed by the internal and external auditors, and reviews

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At the same time, the Presidents and System of Internal Control and Risk The AC’s key terms of reference include Mr Quek See Tiat. All the members of Finance Committee for review and releases are made available on the Sector Chief Risk Officers would also Management the following: the AC are independent directors. recommendation to the Board Company’s website at www.stengg.com. highlight the following for discussion: The Board receives, at regular intervals, for approval. updates from the Board committees • undertaking the statutory and The AC held six meetings during the In 2013, ST Engineering’s investor 1) emerging trends and issues in each on the key business risks, the material regulatory functions of an AC as are year. The AC also met twice with the During the year, the Budget and Finance relations team held over 200 face-to- business sector controls to manage these risks, and the prescribed by law from time to time; external auditors, without management, Committee held two meetings to review face investor meetings and conference 2) new risk or changes to existing risk internal audit reports on the operational at the beginning and middle of the year. the FY2013 budget assumptions and calls, as well as participated in investor profile effectiveness of the material controls. • reviewing the reports of the external The AC also met with the Risk Review 5-year forecast and to review the 2014 conferences in Singapore, and non-deal 3) new risk incident and internal auditors to provide Committee to review the significant Plan prior to submission to the Board roadshows in Hong Kong and the US. 4) major risk exposures The Board is satisfied with the risk a further layer of assurance of risks and related key controls. for approval. 5) risk management actions taken on management process in place, and, the integrity, confidentiality and ST Engineering is committed to timely previously identified risks in its opinion, that the effectiveness availability of critical information; During the year, the AC reviewed and Business Investment and Divestment and transparent disclosures to ensure and adequacy of the material controls recommended to the Board the release Committee that the investing community receives The Committee met five times during to manage the key risks have been • reviewing interested person of the 2012 full year, 1Q2013, 2Q2013 The Business Investment and a balanced and updated view of the the year. Under each of the RRC’s and appropriately reviewed through the transactions; and 3Q2013 financial statements, and Divestment Committee comprises Group’s performance and businesses. AC’s respective Terms of Reference, management self assurance process, considered and approved the 2013 Audit Mr Kwa Chong Seng as Chairman, a joint RRC and AC at the Group level as well as the independent assurance • evaluating the work of the external Plan and the 2013 Internal Audit (IA) LG Ng Chee Meng, Mr Quek Poh Huat Board members attended the AGM is held at least once a year to discuss provided by the Company’s IA Function. auditors to determine their Plan. In addition, the AC reviewed the and Mr Tan Pheng Hock. The Committee and EGM in 2013 where shareholders significant risks and related key controls. independence and recommending adequacy of internal control procedures is delegated authority by the Board to present were given an opportunity to Audit Committee to the Board their re-appointment including IT security issues, Interested consider investments and divestments seek clarification or question the Board d) Risk Management Self Assurance (Principle 12) and compensation on an annual Person transactions and the issues up to certain threshold values and to on issues pertaining to the resolutions Process The AC is supported in its work by the basis; and raised in IA reports. ensure that investments/divestments proposed before they were voted on. The Risk Management Self Assurance audit committees of the four business are in line with the Group’s strategy. The external auditors were also present is a process whereby the business risk sectors. The respective chairmen of • reviewing the level of non-audit The AC reviewed the level of non audit at the AGM to assist the directors in owners, together with the respective the RACs of the four business sectors services. services performed by its external During the year, the Business Investment answering questions on audit related control owners, evaluate and assess the are invited to attend the AC meetings auditors. For the full year 2013, and Divestment Committee held a matters from shareholders. operational effectiveness of the controls of ST Engineering so as to have a clear The Company has in place a Whistle- $2,630,000 was paid to the external meeting to approve an acquisition. established to manage the key risks that understanding of policies made at the Blowing framework, where staff may, auditors for audit and non audit services The Company fully supports the are reported in Sector Risk Dashboard. holding company level and to share in confidence and without fear of of the Group, of which $802,000 or 30% SHAREHOLDER RIGHTS AND Code’s principle to encourage any feedback or raise any issue that the retaliation, raise concerns of incidents were for non-audit services. The AC RESPONSIBILITIES active shareholder participation. For On the basis of this self assessment, Sectors’ RACs may have. As a guiding of possible wrongdoing or breach of was of the opinion that the non audit Shareholder Rights (Principle 14) transparency in the voting process, annually, the RACs and RRC will receive principle to provide check and balance, applicable laws, regulations or policies services performed by the auditors did Communication with Shareholders ST Engineering has, since 2010, adopted from the respective Sector Presidents a member of the AC should not also be to the respective chairmen of the not compromise their independence. (Principle 15) the use of electronic poll voting for all and Sector Group Financial Controllers a member of the Business Investment RACs in the Group. As ST Engineering Conduct of Shareholder Meetings the resolutions put to vote at its AGM written assurances on the adequacy and Divestment Committee. has become a global company with a The AC is routinely updated on the (Principle 16) and EGM. This is a fair and transparent and effectiveness of the system of risk presence in many countries, it is aware proposed and impending changes The Company enters into regular and way of voting based on the principle management and controls to manage The AC has full authority to commission of the need to apply international in accounting standards and their timely communication with shareholders of one share one vote. ST Engineering the significant risks. and review findings of internal corporate governance standards implications for the Group. as part of the Group’s effort to help will continue to use electronic poll investigations into matters where it wherever it operates. It takes a serious shareholders better understand its voting at the forthcoming AGM. More For more information on the Company’s is alerted of any suspected fraud or view of all reports of violations received Budget and Finance Committee businesses and to obtain feedback on on investor relations can be found on principal inherent risks, and risk irregularity or failure of internal controls and may commission investigations as Chaired by Mr Davinder Singh, the the views and concerns of shareholders. pages 68 to 69. management framework, please refer or infringement of any law likely to have a appropriate. Budget and Finance Committee to the “Risk Management Section” at material impact on the Group’s operating members include Mr Quek Poh Huat To keep the market abreast and page 84 of this Annual Report for more results. It can investigate any matter The AC comprises Mr Koh Beng Seng and Mr Tan Pheng Hock. Budgets updated of the Group’s developments, details. within its terms of reference and with the as Chairman, Mr Venkatachalam prepared by the respective subsidiaries presentation materials on financial full cooperation of management. Krishnakumar, Dr Stanley Lai and are consolidated at the ST Engineering results, as well as statutory level and presented to the Budget and announcements and marketing news

82 83 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Risk Management

ST Engineering believes FRAUD RISK MANAGEMENT under the whistle-blowing policy, During the year, the Board reviewed and revised the Group’s top inherent risks. Fraud is used to describe a dishonest a process has been established for that effective risk activity and comprises such acts as employees to raise a report of the management is critical deception, theft, conflict of interest, above concerns, which can also be Risk Area Inherent Risk Description to achieving the Group’s corruption and bribery. It could be costly done on an anonymous basis. Subject and detrimental to the Group, both to applicable laws, the identity of the The Group’s businesses are subject to competition from national and multi- strategic objectives and financially and collaterally in the form employees who raise any such reports national firms in the various markets it operates in, and many contracts are corporate governance goals. of a tarnished reputation. Hence, we are is kept in strict confidence and they obtained through a competitive bidding process. committed to proactively mitigate the are protected from any disciplinary or The Group’s ability to compete for contracts depends to a large extent on the ENTERPRISE RISK MANAGEMENT (ERM) risk of fraud. retaliatory action arising by reason of effectiveness and innovation of the solutions it offers, as well as its ability to FRAMEWORK their having made these reports. Strategic Competition offer better value-for-money solutions. The ST Engineering ERM Framework The Group’s fraud risk management As the Group seeks to strengthen its commercial business, speed to market is a discipline which the Group uses to framework comprises the following: 4. Responding to Fraud becomes ever more critical to success. identify, assess, control and monitor risks a process on how fraud and from six key areas: 1. promoting an Anti-Fraud Culture suspected fraud concerns raised The Group conscientiously monitors market conditions and continually seeks 1. Strategic the senior management sets the tone through the established reporting to innovate its processes and systems to better position itself in both local and 2. Operational and promotes an anti-fraud culture channels should be dealt with overseas markets. 3. Reputational throughout the Group, through our has been established. The Audit 4. Financial set of Core Values. Committee Chairman will be promptly The Group conducts business in a number of countries and, as a result, assumes 5. legal, Regulatory & Political notified of all fraud and suspected risks that are associated with operating in a global market. 6. acts of God & War all employees are also required to fraud cases received. The Audit These risks include: comply with the standards set out in Committee has the powers to take 1. changes to government regulations and administrative policies that may result The ERM framework sets out a consistent the ST Engineering Code of Conduct, prompt actions to inquire into the in restraints on the movement of capital, expropriation of the Group’s assets, definition of risk and risk tolerance limits as well as all company policies. concerns raised. new burdensome taxes or tariffs that could be introduced; to ensure that business units have a Risks inherent 2. political changes that could lead to changes in the business environment in common understanding when identifying 2. periodic Assessment of the 5. Monitoring and Evaluating Strategic and assessing risks. Risk of Fraud Effectiveness of Controls in operating in which the Group operates; the Group has, during the year, the self-assessment process a global market 3. economic downturns; To enable ERM practices throughout implemented a self-assessment mentioned in (2) above includes 4. political instability and civil disturbances that could disrupt the Group’s the Group, we invested in a software process for which the business a process for business owners to business activities application known as the GRC system to operations proactively identify fraud evaluate the design and operating capture risks and controls in electronic risk areas together with other key effectiveness of the controls designed The Group seeks to maintain a more balanced portfolio by spreading its business risk registers. The risk and control business risk areas and mitigate these to prevent and detect fraud. The operations across several markets. It continues to pursue new emerging markets owners periodically review and update risks through regular review and Internal Audit function also carries out such as Africa, Central Asia and the Gulf region to further expand and diversify the registers, regardless of where the scrutiny of their operations. regular audits where the operating its revenue streams. businesses are located geographically. effectiveness of these anti-fraud 3. process for reporting wrongdoings controls is independently evaluated. One of the avenues through which the Group seeks to grow its businesses is the As the Group diversifies further across an employee in the course of his or acquisition of business entities and operating assets or joint ventures. M&A risks multiple industries, sectors, geographies her work may come across any of include the under-performance or failure of acquired entities. and jurisdiction, it becomes more the following: M&A activities, ranging from the identification of targets to conducting due important than ever for the senior a. violations of the Code or company Strategic Merger & Acquisition diligence, are supported by a dedicated team of investment professionals and management team and the Board to policies, augmented by external professionals for specialised services. The business have visibility of key business risks. The b. violation of laws, rules or proposals are guided by a given set of internal investment criteria, evaluated by GRC system therefore provides the regulations, senior management and endorsed by a Business Investment and Divestment needed transparency on risks. c. any wrongdoing, or issues which Committee before seeking final Board of Directors’ approval. he or she believes may not have been managed or dealt with The Group’s foreign exchange risk arises both from its subsidiaries operating in properly. foreign countries, generating revenue and incurring cost 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 USD and Euro, and Financial Foreign Exchange 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 Group also enters into cross currency swap to hedge the foreign exchange risk of its loans denominated in foreign currencies.

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Risk Area Inherent Risk Description Risk Area Inherent Risk Description

Credit risk, or the risk of counterparties defaulting, is managed through the Post-sales support is essential to the Group’s overall strategy in promoting application of credit approvals, credit limits and monitoring procedures. Where customer excellence. It is often complex, as it involves high volume of work, appropriate, the Company or its subsidiaries obtain collateral from customers that is driven by intermittent and unpredictable events, in the countries where Financial Credit or arrange master netting agreements. Cash terms, advance payments and the customers are located. Operational Post-Sales Support letters of credit or bankers’ guarantees are required for customers of lower The Group makes investments into infrastructures, systems and processes to credit standing. support our customers in the use of the product or service post sales. This is critical to our customer retention, operational performance and competitive The main business activity of the Group relates to management and execution differentiation. of projects for defence and commercial customers. Risks relating to project management are therefore inherent in the business. These may include issues The Group is affected by changes to technology and industry business structures relating to project costs and schedules, as well as contractual and quality matters. and models. The Group has project review and quality assurance systems in place to mitigate Operational Project Management Operational Product Obsolescence To keep pace with these developments, the Group, through analysis of the key such risks. technological trends and their potential impact on sustainable growth, constantly All contracts of material value require review by legal counsel, and significant identifies new areas for business development and growth, promotes and deviations from pre-approved standard contract terms and conditions are to manages innovative and creative efforts and invests in R&D efforts. be highlighted and presented to higher levels of management for review and approval. Exports of ordnance products, which constitute a portion of the Group’s sales, are typically subject to export control regulations. Changes in these regulations The recruitment and retention of qualified and experienced personnel is critical to could have an impact on the Group’s sales, while non-compliance could result in Legal, Regulatory Export Controls achieving the Group’s strategic objectives. ST Engineering continues to work with financial penalties, suspension of projects or even restrictions on future export and Political local authorities in markets where it operates, and leverages training, retention business. The Group continues to place great emphasis on this area and has Operational Human Capital schemes, scholarships as well as alternative sources for hire to sustain its formal systems in place and designated personnel to ensure export control growth. Talent management programmes also help to create a pool of potential regulations are complied with. successors for key positions. The Group, with its operations in several parts of the world, is subject to The Group is dependent upon the delivery of key materials or components by applicable laws and regulations of various jurisdictions. These laws and suppliers and the performance by its subcontractors in a timely manner, and regulations include anti-corruption laws, aviation laws and regulations, export Operational Subcontractor in accordance to specifications. The respective sector procurement function controls, safety and environmental regulations, anti-competition laws, etc. Performance and is responsible for establishing and managing end-to-end integrated supplier Key Suppliers Legal, Regulatory Compliance with Failure by the Group to comply with these laws and regulations may result arrangements within each of their respective sectors. Supplier milestones and and Political Laws & Regulations in criminal liabilities such as fines and penalties, and / or the suspension or performance are reviewed periodically by the respective project teams. debarment of the Group from government contracts. The Group has in place a framework that proactively identifies applicable laws Customers expect products and services to perform their intended functions and regulatory obligations, and embeds compliance into the day to day satisfactorily, and not pose a risk to health and safety. The Group recognises that business processes. as systems become increasingly more complex, the impact on the surroundings increases. Efforts must be made to protect the safety of those who use the The Group recognises that quick recovery and resumption of business operations products. Accordingly, the Group has implemented system safety in all the after a disruption are critical to minimising financial, operational and reputational products since the 1990s. Operational Product Quality, impact. The Group embraces system safety with emphasis of safety at the design stage, Safety and Reliability Accordingly, it has in place a Business Continuity Management Framework carrying through to safety in use, and all the way to disposal. (BCM Framework), which embodies enterprise-wide planning and arrangements Acts of God Business Interruption The Group actively promotes awareness and a culture of system safety within its of key resources and procedures that enable the Group to respond and continue and / or War organisation and among its key suppliers. to operate critical business functions across a broad spectrum of interruptions to In addition, the Group has a comprehensive insurance programme for product the business, arising from internal or external events. and service liability. Besides incorporating force majeure clauses in all contracts to mitigate risk from Acts of God, the Group also has in place a comprehensive insurance programme aimed at mitigating financial losses that might arise from such risks.

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SAFETY & HEALTH

Asia Business Leader Workplace Safety & Health Performance Total Defence Awards 2013 Gold of the Year Award Award 2013 (Silver) – ST Engineering th by WSH Council Minister for Defence Award (Employers) – ST Marine at the 12 CNBC Asia – ST Electronics – advanced Material Engineering – SDDA Business Leaders Awards – ST Aerospace Systems – ST Electronics (Info-Comm Systems) – Singapore Test Services – Tan Pheng Hock, President & CEO, – STELCOMMS – ST Electronics (e-Services) ST Engineering Workplace Safety & Health Innovation – ST Electronics (Info-Comm Systems) Award 2013 Minister for Defence Award by WSH Council (Civil Resource Owners) Silver – ST Marine – advanced Material Engineering – ST Electronics (Training & Simulation Systems) Safety and Health Award Recognition MiDAs (Minister for Defence Awards) for Projects (SHARP) League - Honorary Member Bronze Tan Pheng Hock, the first Singaporean by WSH Council for six projects – ST Aerospace Engineering – ST Electronics (Satcom & Sensor to receive the Asia Business Leader – ST Electronics – ST Aerospace Systems Systems) of the Year Award

Safety and Security Watch Total Defence Award (Employers) 5-Year Outstanding Award Group Commendation Award Distinguished Defence Partner Award – ST Aerospace Supplies by Singapore Police Force (DDPA) – ST Marine – ST Marine 10-Year Outstanding Award BUSINESS EXCELLENCE 2013 Technology Company of the Year ATE&M Asia Best Airframe Service – ST Synthesis – ST Electronics (Info-Software Systems) and Social Media Company of the Year Provider of the Year SMF WSH Innovation Convention – allied Ordnance of Singapore ASEAN Federation of Engineering Excellence Awards by Aircraft Technology Engineering & Bronze – SDDA 15-Year Outstanding Award Organisations (AFEO) Honorary by Via Satellite Maintenance (ATE&M) – ST Aerospace – Singapore Test Services – ST Electronics Fellowship – VT iDirect – ST Aerospace – ST Kinetics – ST Aerospace Engines by the AFEO – ST Electronics (e-Services) NTUC May Day Awards 2013 (Individual) – Tan Pheng Hock, President & CEO, 2013 Frost & Sullivan Singapore Singapore Service Class (S-Class) ASMI WSH Innovation Convention – ST Electronics (Info-Security) – ng Sing Chan, President, ST Marine ST Engineering Datacenter Physical Infrastructure by Spring Singapore Bronze – ST Electronics (Training & Simulation Solutions System Integrator of the Year - ST Electronics (e-Services) – ST Marine Systems) – ST Electronics (Data Centre Solutions) – STELOP Gold Winner of WDA-SMF Productivity – unicorn International INVESTOR RELATIONS Jiangsu Province Advanced Science and and Innovation Award 2013 QUALITY & PRODUCT EXCELLENCE rd Technology Award (3 Prize Category) under WSQ CPI Manager Category CORPORATE CITIZENSHIP Total Defence Award (Employers) Silver Award for Best Investor Relations by Jiangsu Provincial Government by Workforce Development Agency & at the Singapore Corporate Awards 2013 Meritorious Defence Partner Award ASEAN Outstanding Engineering – Jiangsu Huatong Kinetics’ TRXBUILD Singapore Manufacturing Federation Ministry of Home Affairs Awards 2013 – ST Engineering (MDPA) Achievement Award 2013 SPSE90 Versatile Paver – ST Marine – ST Aerospace Services Co. by the AFEO Home Team National Service Awards – ST Aerospace Supplies Bronze Award for Best Annual Report – ST Electronics (Satcom & Sensor Top 50 Products of China Construction 3R Packaging Award (Distinction) (Minister’s Honours Roll, 2012-2016) – ST Electronics (Data Centre Solutions) for 2012 Annual Report Systems) Machinery Award at the Singapore Corporate Awards 2013 by Singapore’s National Environment – ST Electronics (Satcom & Sensor – ST Electronics (Info-Software Systems) by Chinese trade magazine, Construction Agency Systems) – ST Engineering IES Prestigious Engineering Equipment & Maintenance – ST Aerospace Engineering Community Chest SHARE Award 2013 Achievement Award 2013 – Jiangsu Huatong Kinetics’ TRXBUILD Merit Award Recipient, Singapore (Minister’s Honours Roll, 2011-2015) by The Institution of Engineers Singapore WBS700E Stabilised Soil Mixing Plant – ST Electronics (Info-Comm Systems) Corporate Governance Award 2013, Best Truck Sales 2013 Platinum – ST Electronics Best Improved Importer 2013 – ST Aerospace Big Cap Category – ST Electronics (Info-Comm Systems) Ranked first in the Top Ten Airframe at 14th SIAS Investors’ Choice Awards Best Importer 2013 Distinguished Home Team Partner Award – ST Electronics – ST Electronics (Satcom & Sensor MRO ranking – ST Engineering at the MAN Truck & Bus Asia Pacific – advanced Material Engineering – ST Kinetics Systems) by Aviation Week and Space Technology Importer Meeting 2013 – ST Electronics (Training & Simulation – advanced Material Engineering – ST Aerospace Most Organised Investor Relations – ST Kinetics Systems) – ST Aerospace Engineering 2013 VSAT Technology Innovation and Best Senior Management IR – ST Aerospace Engines of the Year award LIMA ASEAN MRO Service Provider Support Awards Meritorious Home Team Partner Award – ST Aerospace Services Co. – VT iDirect for its design of the X7 of the Year at the 3rd Annual Southeast Asia – ST Aerospace Services Co. – ST Aerospace Supplies remote to handle high data throughput at the Langkawi International Maritime Institutional Investor Corporate – ST Electronics (Info-Software Systems) – ST Aerospace Systems rates and enable inter-network roaming and Aerospace Exhibition Awards 2013 – ST Electronics (Info-Software Systems) for seamless global mobility. – ST Aerospace – ST Engineering

88 89 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report as at 31 December 2013 (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 2013.

Directors

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

Kwa Chong Seng (Chairman) Tan Pheng Hock (President and Chief Executive Officer) Koh Beng Seng LG Ng Chee Meng (Appointed on 25 April 2013) Quek Tong Boon Quek Poh Huat Venkatachalam Krishnakumar Davinder Singh s/o Amar Singh Dr Stanley Lai Tze Chang Khoo Boon Hui Quek See Tiat (Appointed on 1 July 2013) COL Alan Goh Kim Hua (Appointed Alternate Director to LG Ng Chee Meng on 25 April 2013)

Arrangements to enable directors to acquire shares or debentures

Except for the Singapore Technologies Engineering Share Option Plan (“ESOP”), Singapore Technologies Engineering Performance Share Plan (“PSP2000”), Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”), Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) and Singapore Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) (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

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 Contents Company or of related corporations either at the beginning or at the end of the financial year or as at 21 January 2014.

Financial Report Directors’ report 91 statement by directors 103 independent auditors’ report 104 Financial Statements consolidated income statement 105 consolidated statement of comprehensive income 106 balance sheets 107 statements of changes in equity 109 consolidated statement of cash flows 112 notes to the financial statements 117 sgX Listing manual requirements 225 sectoral financial review 226

91 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Directors’ Report as at 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

Directors’ interests (continued) Directors’ interests (continued)

According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars Holdings in the name of the director, of interests of directors who held office at the end of the financial year in shares, debentures, options and awards in the Company and its spouse or infant children related corporations were as follows: 1 January 2013 or date of appointment if later 31 December 2013 Holdings in the name of the director, spouse or infant children Mapletree Logistics Trust Management Ltd. 1 January 2013 or date of Perpetual Securities appointment if later 31 December 2013 Venkatachalam Krishnakumar 2,500 2,500 The Company Ordinary Shares Neptune Orient Lines Limited Ordinary Shares Kwa Chong Seng 500,000 503,200 Tan Pheng Hock 2,699,717 3,333,327 Kwa Chong Seng 400,000 400,000 Koh Beng Seng 192,205 201,705 Quek Poh Huat 1,125,637 1,148,637 S$400 million 4.25% Notes due 2017 Venkatachalam Krishnakumar 156,309 169,409 Davinder Singh s/o Amar Singh 40,537 49,337 Kwa Chong Seng $250,000 *1 $250,000 *1 Dr Stanley Lai Tze Chang 45,240 59,040

Singapore Airlines Limited Related Corporations Ordinary Shares Mapletree Commercial Trust Management Ltd. Unit holdings in Mapletree Commercial Trust LG Ng Chee Meng 20,000 20,000 Quek Poh Huat – 600 LG Ng Chee Meng 12,000 12,000 Venkatachalam Krishnakumar 3,733 3,733 Venkatachalam Krishnakumar 100,000 100,000

S$300 million 2.15% Bonds due 2015 Mapletree Greater China Commercial Trust Management Ltd. Unit holdings in Mapletree Greater China Commercial Trust Davinder Singh s/o Amar Singh $500,000 $500,000

Khoo Boon Hui N.A. 300,000 Singapore Telecommunications Limited Ordinary Shares Mapletree Industrial Trust Management Ltd. Unit holdings in Mapletree Industrial Trust Kwa Chong Seng 26,466 26,466 Tan Pheng Hock 3,350 3,350 Venkatachalam Krishnakumar 8,000 8,000 Koh Beng Seng 1,520 1,520 Quek Tong Boon 2,030 2,030 Mapletree Logistics Trust Management Ltd. Quek Poh Huat 35,210 42,938 Unit holdings in Mapletree Logistics Trust Venkatachalam Krishnakumar 34,000 34,000 Davinder Singh s/o Amar Singh 1,800 1,800 Quek Tong Boon 2,000 2,000 Khoo Boon Hui 3,087 3,087 Venkatachalam Krishnakumar – 100,000 Quek See Tiat 680 680

92 93 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Directors’ Report as at 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

Directors’ interests (continued) Directors’ interests (continued)

Holdings in the name of the director, Holdings in the name of the director, spouse or infant children spouse or infant children 1 January 2013 1 January 2013 or date of or date of appointment if later 31 December 2013 appointment if later 31 December 2013

SMRT Corporation Ltd The Company Ordinary Shares Conditional Award of 250,000 shares under PSP2000 for performance period 2010 to 2012 Quek Tong Boon 4,000 4,000 #1 #2 Quek Poh Huat 8,000 8,000 Tan Pheng Hock 0 to 425,000 –

SP AusNet Conditional Award of 250,000 shares under PSP2010 for performance period 2011 to 2013 Stapled Securities

Tan Pheng Hock 0 to 425,000 #1 0 to 425,000 #1 Quek Poh Huat 256,000 272,000

Conditional Award of 250,000 shares under PSP2010 StarHub Ltd for performance period 2012 to 2014 Ordinary Shares

Tan Pheng Hock 0 to 425,000 #1 0 to 425,000 #1 Tan Pheng Hock 25,150 25,150 Venkatachalam Krishnakumar 15,716 15,716 Conditional Award of 175,000 shares under PSP2010 Quek See Tiat 5,000 5,000 for performance period 2013 to 2015

TeleChoice International Limited Tan Pheng Hock – 0 to 297,500 #1 Ordinary Shares Unvested shares under RSP2000 arising from release Tan Pheng Hock 30,000 30,000 of Conditional Award of 96,000 Shares for performance period 2009 to 2010

1 January 2013 or date of Exercise Tan Pheng Hock 18,648 #3 – appointment if later 31 December 2013 price Exercisable period $ Unvested shares under RSP2000 arising from release The Company of Conditional Award of 96,000 Shares for performance period 2010 to 2011 Options to Subscribe for Ordinary Shares

Tan Pheng Hock 48,192 #3 24,096 #3 Tan Pheng Hock 200,000 – 1.79 7.2.2004 to 6.2.2013 200,000 – 1.86 12.8.2004 to 11.8.2013 200,000 200,000 2.09 10.2.2005 to 9.2.2014 Conditional Award of 96,000 Shares under RSP2010 for performance period 2011 to 2012 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 Tan Pheng Hock 0 to 144,000 #4 – #5 200,000 200,000 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

94 95 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Directors’ Report as at 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

Directors’ interests (continued) Directors’ interests in contracts

Holdings in the name of the director, 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 spouse or infant children fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, 1 January 2013 or any emoluments received from related corporations and share options/awards granted pursuant to the ST Engineering Share Plans) by or date of 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 appointment if later 31 December 2013 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. The Company Unvested shares under RSP2010 arising from release of Conditional Award of 96,000 Shares for performance period 2011 to 2012 Share Plans

The Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the ST Engineering Share Plans. Tan Pheng Hock – 47,616 #3 The Committee members are Mr Kwa Chong Seng (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang. Conditional Award of 96,000 Shares under RSP2010 for performance period 2012 to 2013 As at 31 December 2013, 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. Tan Pheng Hock 0 to 144,000 #4 0 to 144,000 #4 The aggregate number of new shares issued pursuant to the ESOP, RSP2000 and PSP2000 did not exceed 15% of the issued share capital of the Company and the aggregate number of new shares issued pursuant to the RSP2010 and PSP2010 did not exceed 8% of the issued Conditional Award of 86,000 Shares under RSP2010 for performance period 2013 to 2014 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 #4 Tan Pheng Hock – 0 to 129,000 to take up unissued shares of the Company. *1 Held in trust by a trustee company on behalf of the director.

#1 A minimum threshold performance over a 3-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.

#2 For this period, Mr Tan Pheng Hock was awarded 143,250 new shares upon partial achievement of targets set. The balance of the conditional award covering the period from 2010 to 2012 has thus lapsed.

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

#4 A minimum threshold performance over a 2-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.

#5 For this period, Mr Tan Pheng Hock was awarded 95,232 new shares upon partial achievement of targets set. The balance of the conditional award covering the period from 2011 to 2012 has thus lapsed.

There was no change in any of above-mentioned directors’ interest in the Company between the end of the financial year and 21 January 2014 except for Mr Tan Pheng Hock, whose interest has increased to 3,533,327 shares.

96 97 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Directors’ Report as at 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

Share Plans (continued) Share Plans (continued)

(a) ESOP (b) PSP2000 / PSP2010 (“PSP”)

(i) The options granted under the ESOP are as follows: 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 Aggregate options Aggregate options on performance targets set based on the ST Engineering Group corporate objectives. granted and exercised/ accepted since lapsed since Aggregate options Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, commencement commencement outstanding to end of to end of as at end of currently prescribed to be a 3-year performance period. The performance shares will only be released to the recipient at the end of financial year financial year financial year the performance qualifying period. A specified number of performance shares shall be released by the ERCC to the recipient and Participant under review under review under review 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 Directors of the Company shares to be released is capped at 170% of the conditional award.

Tan Pheng Hock 2,602,500 1,202,500 1,400,000 For the financial years from 2007 to 2009, the performance measures used in PSP grants under PSP2000 are Wealth Added and Koh Beng Seng 204,000 204,000 – ST Engineering Group Total Shareholder Return (“TSR”) against MSCI Asia Pacific ex Japan Industrial Index (“MSCI Index”). Quek Poh Huat 375,000 375,000 – Venkatachalam Krishnakumar 152,500 152,500 – In February 2010, the Committee reviewed the continued appropriateness of the two performance measures and decided to change the MSCI Index to a Defensive Stock Index, the constituents of which are selected “defensive stock” companies that have similar market risk as ST Engineering and are listed on Singapore Exchange Securities Trading Limited (“SGX”). Therefore, with Non-Executive Directors of the Company and effect from financial year 2010, the performance measures used in PSP grants are Wealth Added and ST Engineering Group TSR its subsidiaries (including current and former directors) 5,405,566 5,405,566 – against Defensive Stock Index.

In addition to PSP performance targets being met, the ERCC decided that commencing with the PSP contingent awards for financial Group Executives year 2009, the final award for PSP is conditional upon the performance targets for RSP that has the same end of performance period (including Tan Pheng Hock) 193,717,858 163,199,916 30,517,942 being met. Known as the plan trigger condition, this is to create alignment between senior management and other employees. As with PSP 2009 and PSP 2010, the final award for PSP 2011 is therefore conditional on the performance targets for RSP 2012, which Parent Group Executives and others 187,320 187,320 – has the same end of performance period in December 2013, being met. As the performance targets for RSP 2012 have been met, PSP 2011 which has also met its performance targets will be released. (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, ordinary shares in the Company were issued pursuant to the exercise of options to take up unissued shares of the Company.

98 99 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Directors’ Report as at 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

Share Plans (continued) Share Plans (continued)

(b) PSP2000 / PSP2010 (“PSP”) (continued) (c) RSP2000 / RSP2010 (“RSP”) (continued)

The awards granted under the PSP2000 / PSP2010 are as follows: The awards granted under the RSP2000 / RSP2010 are as follows:

Aggregate Aggregate Aggregate conditional awards awards Aggregate conditional Aggregate Aggregate Conditional granted since released since conditional awards Conditional awards/awards awards conditional awards granted Awards released commencement commencement not released awards/ Awards granted since released since Aggregate awards not during the during the to end of to end of as at end of awards granted released commencement commencement awards not released financial year financial year financial year financial year financial year during the during the to end of to end of released as at end of Participant under review under review under review under review under review financial year financial year financial year financial year as at end of financial year Participant under review under review under review under review financial year under review PSP2000 RSP2000 Director of the Company Directors of the Company

Tan Pheng Hock – 143,250 0 to 4,195,000 885,825 – Tan Pheng Hock – 42,744 0 to 499,500 222,522 24,096 – Koh Beng Seng – – 0 to 58,600 30,205 – – Group Executives Quek Poh Huat – – 0 to 69,800 35,909 – – (including Tan Pheng Hock) – 781,587 0 to 33,172,800 5,992,439 – Venkatachalam Krishnakumar – – 0 to 71,000 37,109 – – Davinder Singh s/o Amar Singh – – 0 to 54,800 28,237 – – PSP2010 Dr Stanley Lai Tze Chang – – 0 to 31,700 22,540 – –

Director of the Company Non-Executive Directors of the Company and its subsidiaries Tan Pheng Hock 0 to 297,500 – 0 to 1,147,500 – 0 to 1,147,500 (including current and former directors) – – 0 to 812,050 408,663 – –

Group Executives Group Executives (including Tan Pheng Hock) 0 to 1,763,070 – 0 to 7,084,170 – 0 to 6,507,882 (including Tan Pheng Hock) – 3,145,299 0 to 38,301,713 16,554,465 1,684,312 – (c) RSP2000 / RSP2010 (“RSP”) RSP2010 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 Directors of the Company and to better align staff’s incentive scheme with shareholders’ interest. Kwa Chong Seng 3,200 3,200 3,200 3,200 – – Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance Tan Pheng Hock 0 to 129,000 47,616 0 to 417,000 47,616 47,616 0 to 273,000 period, currently prescribed to be a 2-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 Koh Beng Seng 9,500 9,500 22,500 22,500 – – performance period and released to the recipient over a 3-year vesting period in the ratio of 50%, 25% and 25% consecutively. Quek Poh Huat 13,000 13,000 30,500 30,500 – – Venkatachalam Krishnakumar 13,100 13,100 30,800 30,800 – – A minimum threshold performance is required for any restricted share to be released while the maximum number of restricted Davinder Singh s/o Amar Singh 8,800 8,800 21,100 21,100 – – shares to be delivered is capped at 150% of the conditional award. Dr Stanley Lai Tze Chang 13,800 13,800 33,500 33,500 – –

The medium-term stretched targets measured over a 2-year performance period are set based on ST Engineering Group corporate objectives. The performance measures used for the 2-year performance period are ST Engineering Group EVA Spread and Non-Executive Directors of the Company and its subsidiaries EBITDA Margin. (including current and former directors) 138,200 138,200 324,200 324,200 – – Since 2011, except for Mr Tan Pheng Hock, the awards granted under the ST Engineering RSP2010 to the Non-Executive Directors are outright shares with no performance and vesting conditions but with a Moratorium on selling. These shares will form up to 30% Group Executives of their total compensation with the remaining 70% payable in cash. (including Tan Pheng Hock) 0 to 6,401,449 3,409,942 0 to 24,895,878 3,687,510 3,265,102 0 to 12,835,412

100 101 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Directors’ Report Statement by Directors as at 31 December 2013 (Currency - Singapore dollars unless otherwise stated)

Audit Committee We, Kwa Chong Seng and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion of the Directors: 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: (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 105 to 224 are Koh Beng Seng (Chairman) 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 2013, and Venkatachalam Krishnakumar changes in equity of the Company and of the Group, and the results of the business and cash flows of the Group for the year Dr Stanley Lai Tze Chang ended on that date; and Quek See Tiat (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 The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50. The Audit they fall due. 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. On behalf of the Board of Directors 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 recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

Auditors Kwa Chong Seng Tan Pheng Hock Director Director The Auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

Singapore 27 February 2014 On behalf of the Board of Directors

Kwa Chong Seng Tan Pheng Hock Director Director

Singapore 27 February 2014

102 103 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Independent Auditors’ Report Consolidated Income Statement Members Of The Company for the year ended 31 December 2013 Singapore Technologies Engineering Ltd (Currency - Singapore dollars)

Report on the financial statements Group 2013 2012 We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its subsidiaries Note $’000 $’000 (collectively the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2013, the statements (Restated) of changes in equity of the Group and the Company, the consolidated income statement, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting Revenue 4 6,633,152 6,379,866 policies and other explanatory information, as set out on pages 105 to 224. Cost of sales (5,201,083) (4,923,568) Gross profit 1,432,069 1,456,298

Management’s responsibility for the financial statements Distribution and selling expenses (175,908) (202,745) Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of Administrative expenses (466,598) (475,262) the Singapore Companies’ Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining Other operating expenses (116,348) (120,392) a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from Profit from operations 5 673,215 657,899 unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Other income, net 8 34,188 43,242

Auditors’ responsibility Finance income 68,911 48,387 Finance costs (77,704) (67,074) Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Finance costs, net 9 (8,793) (18,687) Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Share of results of associates and jointly controlled entities, net of tax 31,082 32,926 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Profit before taxation 729,692 715,380 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 Taxation 10 (138,145) (130,759) entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the Profit for the year 591,547 584,621 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. Attributable to: Shareholders of the Company 580,834 576,178 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Non-controlling interests 10,713 8,443 591,547 584,621

Opinion Earnings per share (cents) 11 In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Basic 18.73 18.76 Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a Diluted 18.67 18.71 true and fair view of the state of affairs of the Group and of the Company as at 31 December 2013, the changes in equity of the Group and of the Company, and the results and cash flows of the Group for the year ended on that date.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMG LLP Public Accountants and Chartered Accountants

Singapore 27 February 2014 The accompanying notes are an integral part of the financial statements.

104 105 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Consolidated Statement of Comprehensive Income Balance Sheets for the year ended 31 December 2013 as at 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars)

Group Group Company 2013 2012 2013 2012 2013 2012 Note $’000 $’000 Note $’000 $’000 $’000 $’000

Profit for the year 591,547 584,621 ASSETS

Non-current assets Other comprehensive income Net fair value changes on available-for-sale financial assets 37 (7,931) 9,427 Property, plant and equipment 12 1,520,404 1,202,366 1,434 1,310 Net fair value changes on cash flow hedges 48,592 11,518 Subsidiaries 13 – – 927,728 738,992 Foreign currency translation differences 45,993 (46,673) Associates and jointly controlled entities 14 462,139 306,116 17,657 17,657 Share of foreign currency translation differences of associates and jointly controlled entities 37 10,395 (8,680) Investments 15 166,033 344,996 – – Reclassification adjustment of foreign currency translation reserve to profit or loss arising Intangible assets 16 638,408 552,593 – – from disposal of foreign entities 37 (205) 84 Investment property 17 – 10,239 – – Other comprehensive income for the year, net of tax 96,844 (34,324) Long-term receivables, non-current 18 12,528 24,057 – – Finance lease receivables, non-current 19 2,679 10,379 – – Total comprehensive income for the year, net of tax 688,391 550,297 Deferred tax assets 20 95,634 110,288 7,200 570 Amounts due from related parties, non-current 23 7,430 7,232 258,874 364,192 Total comprehensive income attributable to: Derivative financial instruments, non-current 44 39,978 28,173 77 16 Shareholders of the Company 674,953 542,877 2,945,233 2,596,439 1,212,970 1,122,737 Non-controlling interests 13,438 7,420 Current assets 688,391 550,297 Inventories and work-in-progress 21 1,807,509 1,921,959 – – Trade receivables 22 1,221,937 1,158,582 – – Amounts due from related parties, current 23 40,076 23,928 504,498 415,088 Advances and other receivables 24 598,210 530,551 9,827 3,956 Long-term receivables, current 18 12,508 12,234 – – Finance lease receivables, current 19 16,447 23,775 – – Short-term investments 25 134,581 25,364 – – Bank balances and other liquid funds 26 1,930,140 1,712,191 470,124 448,034 Assets classified as held for sale 27 – 26,539 – – 5,761,408 5,435,123 984,449 867,078

Total assets 8,706,641 8,031,562 2,197,419 1,989,815

EQUITY AND LIABILITIES

Current liabilities

Advance payments from customers, current 878,895 800,171 – – Trade payables and accruals, current 28 1,604,740 1,694,415 25,017 45,191 Amounts due to related parties, current 29 24,953 19,953 98,946 44,854 Provisions 30 218,910 224,137 – – Progress billings in excess of work-in-progress 21 734,725 761,201 – – Provision for taxation 197,139 179,690 11,666 4,134 Short-term bank loans 31 139,842 89,158 – – Long-term bank loans, current 31 292,789 120,343 – – Lease obligations, current 31 1,321 232 – – Other loans, current 31 369 1,054 – – 4,093,683 3,890,354 135,629 94,179

Net current assets 1,667,725 1,544,769 848,820 772,899

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

106 107 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Balance Sheets Statements of Changes in Equity as at 31 December 2013 for the year ended 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars)

Group Company Share Capital Other Retained Non-controlling Total 2013 2012 2013 2012 capital reserves reserves earnings Total interests equity Note $’000 $’000 $’000 $’000 Note $’000 $’000 $’000 $’000 $’000 $’000 $’000

Non-current liabilities The Group

Advance payments from customers, non-current 857,496 917,572 – – At 1.1.2012 723,411 116,323 (106,552) 1,033,013 1,766,195 109,913 1,876,108 Trade payables and accruals, non-current 28 353,701 – 18,817 – Deferred tax liabilities 20 94,867 84,629 – – Total comprehensive income for the year Bonds 31 631,283 608,721 – – Profit for the year – – – 576,178 576,178 8,443 584,621 Long-term bank loans, non-current 31 288,867 459,001 – – Other comprehensive income Lease obligations, non-current 31 18,150 244 – – Net fair value changes on Other loans, non-current 31 564 677 – – available-for-sale financial assets 37 – – 9,427 – 9,427 – 9,427 Deferred income 32 83,695 31,448 – – Net fair value changes on cash flow hedges – – 9,842 – 9,842 1,676 11,518 Other long-term payables, non-current 33 1,500 2,000 – – Foreign currency translation differences 37 – – (43,974) – (43,974) (2,699) (46,673) Derivative financial instruments, non-current 44 22,515 21,373 – – Share of foreign currency translation Amounts due to related parties, non-current 29 2,961 495,625 406 553,192 differences of associates and 2,353,044 2,128,626 572,009 495,625 jointly controlled entities 37 – – (8,680) – (8,680) – (8,680) Reclassification adjustment of Total liabilities 6,446,727 6,018,980 707,638 589,804 foreign currency translation reserve to profit or loss arising from disposal of Net assets 2,259,914 2,012,582 1,489,781 1,400,011 foreign entities 37 – – 84 – 84 – 84

Share capital and reserves Other comprehensive income for the year, net of tax – – (33,301) – (33,301) (1,023) (34,324) Share capital 34 781,841 781,841 852,611 852,611 Total comprehensive income for the year, Capital reserves 36 116,323 116,323 – – net of tax – – (33,301) 576,178 542,877 7,420 550,297 Other reserves 37 (44,651) (136,121) 72,754 75,780 Transactions with owners of the Company, Retained earnings 38 1,191,958 1,132,644 564,416 542,390 recognised directly in equity Equity attributable to owners of the Company 2,116,241 1,894,687 1,489,781 1,400,011 Non-controlling interests 143,673 117,895 – – Contributions by and distributions to owners of the Company 2,259,914 2,012,582 1,489,781 1,400,011 Issue of shares 58,430 – (16,045) – 42,385 – 42,385 Capital contribution by Total equity and liabilities 8,706,641 8,031,562 2,197,419 1,989,815 non-controlling interests – – – – – 3,259 3,259 Cost of share-based payment – – 19,212 – 19,212 117 19,329 Return of capital by a subsidiary – – – – – (1,960) (1,960) Dividends paid 39 – – – (475,809) (475,809) – (475,809) Dividends paid to non-controlling interests – – – – – (14,061) (14,061) Total contributions by and distributions to owners of the Company 58,430 – 3,167 (475,809) (414,212) (12,645) (426,857)

Changes in ownership interests in subsidiaries Acquisition of non-controlling interests in subsidiaries representing total changes in ownership interests in subsidiaries that do not result in a loss of control – – (173) – (173) (1,362) (1,535) Acquisition of subsidiaries with non-controlling interests – – – – – 14,569 14,569 Total transactions with owners of the Company 58,430 – 2,994 (475,809) (414,385) 562 (413,823) Transfer from retained earnings to statutory reserve – – 738 (738) – – – At 31.12.2012 781,841 116,323 (136,121) 1,132,644 1,894,687 117,895 2,012,582

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

108 109 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Statements of Changes in Equity Statements of Changes in Equity for the year ended 31 December 2013 for the year ended 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars)

Share Capital Other Retained Non-controlling Total Share-based capital reserves reserves earnings Total interests equity Share payment Retained Note $’000 $’000 $’000 $’000 $’000 $’000 $’000 capital reserve earnings Total Note $’000 $’000 $’000 $’000 The Group The Company At 1.1.2013 781,841 116,323 (136,121) 1,132,644 1,894,687 117,895 2,012,582 At 1.1.2012 723,411 72,496 536,877 1,332,784 Total comprehensive income for the year Total comprehensive income for the year Profit for the year – – – 580,834 580,834 10,713 591,547 Profit for the year – – 481,322 481,322 Other comprehensive income Total comprehensive income for the year – – 481,322 481,322 Net fair value changes on available-for-sale financial assets 37 – – (7,931) – (7,931) – (7,931) Transactions with owners of the Company, Net fair value changes on recognised directly in equity cash flow hedges – – 49,401 – 49,401 (809) 48,592 Contributions by and distributions Foreign currency translation differences 37 – – 42,459 – 42,459 3,534 45,993 to owners of the Company Share of foreign currency translation Issue of shares 58,430 (16,045) – 42,385 differences of associates and jointly controlled entities 37 – – 10,395 – 10,395 – 10,395 Cost of share-based payment – 19,329 – 19,329 Reclassification adjustment of Dividends paid 39 – – (475,809) (475,809) foreign currency translation reserve to Total contributions by and distributions profit or loss arising from disposal of a to owners of the Company 58,430 3,284 (475,809) (414,095) foreign entity 37 – – (205) – (205) – (205) At 31.12.2012 781,841 75,780 542,390 1,400,011 Other comprehensive income for the year, net of tax – – 94,119 – 94,119 2,725 96,844 At 1.1.2013 781,841 75,780 542,390 1,400,011 Total comprehensive income for the year, net of tax – – 94,119 580,834 674,953 13,438 688,391 Total comprehensive income for the year Profit for the year – – 543,316 543,316 Transactions with owners of the Company, recognised directly in equity Total comprehensive income for the year – – 543,316 543,316

Contributions by and distributions Transactions with owners of the Company, to owners of the Company recognised directly in equity Issue of shares 70,770 – (18,624) – 52,146 – 52,146 Capital contribution by Contributions by and distributions non-controlling interests – – – – – 22,761 22,761 to owners of the Company Issue of shares 70,770 (18,624) – 52,146 Cost of share-based payment – – 15,490 – 15,490 108 15,598 Cost of share-based payment – 15,598 – 15,598 Return of capital by a subsidiary – – – – – (1,354) (1,354) Dividends paid 39 – – (521,290) (521,290) Dividends paid 39 – – – (521,290) (521,290) – (521,290) Total contributions by and distributions Dividends paid to non-controlling interests – – – – – (12,767) (12,767) to owners of the Company 70,770 (3,026) (521,290) (453,546) Loans forgiven by non-controlling interests – – – – – 483 483 At 31.12.2013 852,611 72,754 564,416 1,489,781 Total contributions by and distributions to owners of the Company 70,770 – (3,134) (521,290) (453,654) 9,231 (444,423)

Changes in ownership interests in subsidiaries Acquisition of subsidiaries with non-controlling interests – – – – – 3,109 3,109 Disposal of a subsidiary – – 255 – 255 – 255 Total transactions with owners of the Company 70,770 – (2,879) (521,290) (453,399) 12,340 (441,059) Transfer from retained earnings to statutory reserve – – 230 (230) – – – At 31.12.2013 852,611 116,323 (44,651) 1,191,958 2,116,241 143,673 2,259,914

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

110 111 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows for the year ended 31 December 2013 for the year ended 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars)

Group Group 2013 2012 2013 2012 $’000 $’000 Note $’000 $’000

Cash flows from operating activities Cash flows from investing activities

Profit before taxation 729,692 715,380 Proceeds from sale of property, plant and equipment 10,166 14,310 Adjustments: Proceeds from sale of an investment property – 3,908 Share of results of associates and jointly controlled entities, net of tax (31,082) (32,926) Proceeds from sale and maturity of investments 137,419 239,206 Depreciation charge 127,176 123,949 Proceeds from disposal of subsidiaries – 149 Property, plant and equipment written off 1,386 7,314 Proceeds from disposal of associates 1,200 1,620 Gain on disposal of property, plant and equipment (430) (11,980) Loan to a jointly controlled entity (3,136) – Gain on disposal of an investment property (12,548) (2,494) Dividends from associates and jointly controlled entities 39,596 33,269 Gain on disposal of investments (6,154) (3,907) Dividends from investments 1 12 Loss/(gain) on disposal of associates and jointly controlled entities 318 (2,631) Purchase of property, plant and equipment (282,121) (238,390) Loss on disposal of a subsidiary 50 – Purchase of investments (66,623) (197,207) Impairment losses on goodwill 2,141 12,351 Capital reduction in an associate – 5,560 Impairment losses on quoted and unquoted investments 624 2,054 Investments in associates (7,924) (735) Impairment losses on other intangible assets 312 802 Investments in jointly controlled entities (9,385) (2,996) Impairment losses on property, plant and equipment 690 251 Acquisition of other intangible assets (67,079) (2,935) Impairment losses on associates 5,539 – Acquisition of controlling interests in subsidiaries and business, net of cash acquired (9,877) (28,457) Share-based payment expense 15,598 19,329 Net cash used in investing activities (257,763) (172,686) Changes in fair value of financial instruments and hedged items (3,174) (563) Changes in fair value of financial instruments held for trading (107) (126) Cash flows from financing activities Interest expenses 44,240 49,504 Interest income (23,320) (26,146) Capital contribution from non-controlling interests of subsidiaries 22,761 3,259 Dividends from investments (1) (12) Loan from non-controlling shareholders – 329 Amortisation of other intangible assets 14,868 13,153 Repayment of other loans (335) (133) Operating profit before working capital changes 865,818 863,302 Repayment of bank loans (172,596) (97,440) (Increase)/decrease in: Repayment of lease obligations (726) (3,471) Inventories and work-in-progress 4,904 (117,442) Proceeds from issue of shares 52,146 42,385 Progress billings in excess of work-in-progress (26,476) 105,038 Proceeds of a loan from a jointly controlled entity 836 – Trade receivables (61,792) 34,567 Proceeds from bank loans 201,898 93,430 Advance payments to suppliers 26,292 (59,903) Payment to non-controlling interest for reduction of share capital (1,354) (1,960) Other receivables, deposits and prepayments 36,296 (49,119) Acquisition of non-controlling interests in subsidiaries – (1,198) Holding company and related corporations balances, net (14,457) 9,100 Dividends paid to shareholders of the Company (521,290) (475,809) Amount due from associates (7,385) (2,567) Dividends paid to non-controlling interests (12,767) (14,061) Amount due from jointly controlled entities 10,439 81 Interest paid (40,346) (50,125) Trade payables 105,060 (131,357) Deposits discharged/(pledged) 2,025 (3,778) Advance payments from customers 18,648 366,461 Net cash used in financing activities (469,748) (508,572) Other payables, accruals and provisions 8,777 72,160 Net increase in cash and cash equivalents 202,282 359,563 Loans to staff and third parties 11,735 13,798 Cash and cash equivalents at beginning of the year 1,700,950 1,358,989 Deferred income 35,432 4,366 Exchange difference on cash and cash equivalents at beginning of the year 17,692 (17,602) Foreign currency translation of foreign operations 6,885 (5,509) Cash and cash equivalents at end of the year 26 1,920,924 1,700,950 Cash generated from operations 1,020,176 1,102,976 Interest received 19,595 22,897 Income tax paid (109,978) (85,052) Net cash from operating activities 929,793 1,040,821

112 113 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows for the year ended 31 December 2013 for the year ended 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars)

Acquisitions of controlling interests in a subsidiary and business in 2013 Acquisitions of controlling interests in a subsidiary and business in 2013 (continued)

During the year, the Group acquired the following subsidiary and business: The acquisitions had the following effect on the Group’s assets and liabilities on acquisition date:

(i) On 22 July 2013, the Group acquired 90% of Technicae Projetos e Serviços Automotivos Ltda. (“Technicae”) for a cash consideration Carrying of $612,000. Recognised on amount before acquisition acquisition $’000 $’000 Technicae provides automotive maintenance, repair and overhaul services including automotive platforms revitalisation and modernisation projects, as well as related trade, import and export of parts and accessories. Property, plant and equipment 400 400 Intangible assets 5,705 5,705 From the date of acquisition, Technicae contributed revenue of $1 million and net loss of $0.8 million to the Group. If the acquisition had occurred on 1 January 2013, management estimates that the contributions to consolidated revenue and net loss would Inventories and work-in-progress 3 3 have been $1.1 million and $1 million respectively. In determining these amounts, management has assumed that the fair value Advances and other receivables 4 4 adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2013. Cash and cash equivalents 19 19 6,131 6,131 Subsequent to acquisition date, the Group further subscribed to additional share capital amounting to $2,203,000. The additional subscription is equivalent to the Group’s proportionate share on the new share capital issued by Technicae to their shareholders. Trade payables and accruals (132) (132) As such, there were no changes to the Group’s shareholdings in Technicae. Deferred tax liabilities (1,939) (1,939) (ii) On 27 December 2013, the Group acquired the manufacturing assets, intellectual property and relevant manufacturing expertise (2,071) (2,071) from Ticel Equipamentos Ltda, a Brazilian construction equipment company, for a total cash consideration of $9,284,000. Net identifiable assets 4,060 4,060 Management assessed that the acquisition of these assets did not contribute significantlyNon-controlling interests to the financial performance of the (11) Group in the current year. If the acquisition had occurred on 1 January 2013, management estimates that the contributions to Net identifiable assets, after non-controlling interests 4,049 consolidated revenue and net profit would have been $14.7 million and $0.9 million respectively. In determining these amounts, Goodwill arising on consolidation 5,847 management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the Total purchase consideration 9,896 acquisition had occurred on 1 January 2013. Cash outflow on acquisitions in 2013: The final allocation of the purchase price to the identifiable assets acquired, liabilities and contingent liabilities assumed in the Cost of acquisitions (9,896) business combination is currently being determined and has not been finalised. In the meantime, a provisional goodwill of $5.3 million, resulting from the difference between the purchase consideration and the adjusted carrying amounts of the assets Net cash acquired with the subsidiary and business 19 acquired and liabilities assumed, is reported under “intangible assets”. Net cash outflow on acquisition (9,877)

The Group incurred acquisition-related cost at $262,000 related to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in administrative expenses in the Group’s income statement.

The goodwill is attributable mainly to the synergies expected to be achieved from integrating the new capabilities of the acquired entities into the Group’s existing business.

114 115 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Consolidated Statement of Cash Flows Notes to the Financial Statements for the year ended 31 December 2013 31 December 2013 (Currency - Singapore dollars) (Currency - Singapore dollars unless otherwise stated)

Acquisitions of controlling interests in subsidiaries in 2012 These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

In the prior year, the Group acquired the following companies: 1. General

(i) On 1 April 2012, the Group acquired additional interest of 1% in a jointly controlled entity, TheSMART Company is Systemsa public limitedPte company Ltd domiciled (“SMART”) and incorporated for in Singapore. The address of the Company’s registered office a cash consideration of $170,000. and principal place of business is 1 Ang Mo Kio Electronics Park Road #07-01 ST Engineering Hub, Singapore 567710.

As a result of the additional interest acquired, the Group increased its equity Theinterest Company’s immediatein andSMART ultimate holdingfrom company50% is Temasekto Holdings51%. (Private) TheLimited, a Groupcompany incorporatedwas in deemed to have acquired control of SMART and accounted for the additional investment as a step-up acquisition of a subsidiary. Singapore.

(ii) On 17 May 2012, the Group acquired 50.1% of EcoServices, LLC (“EcoServices”) for a cash considerationThe principal activities of of the $24,820,000. Company are those of an investment holding company and the provision of engineering and related EcoServices specialises in the provision of engine wash services. services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements.

(iii) On 31 December 2012, the Group acquired 100% of Volant Aerospace, LLC (“Volant”) for a cash considerationThe financial statementsof $22,094,000. of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Volant provides new and refurbished interior parts and support services, as well as aircraft interior configuration services. Technologies Engineering Ltd and its subsidiaries (collectively referred to as the “Group”) as at 31 December 2013 and for the year then ended were authorised and approved by the Board of Directors for issuance on 27 February 2014. Following the completion of the final purchase price allocation during the financial year, the Group made adjustments to the provisional fair value originally recorded in the prior year. 2. Basis of financial statements preparation The effect of the adjustments made during the 12-month period from acquisition date (the “Window Period”) is set out below: The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

Fair values Fair values recognised Adjustments recognised The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below. on acquisition during Window on acquisition (provisional) Period (final) The financial statements are presented in Singapore dollars which is the Company’s functional currency. All values are rounded to the 2012 2013 2013 $’000 $’000 $’000 nearest thousand ($’000) except when otherwise indicated.

Property, plant and equipment 12,052 (532) 11,520 The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates and Intangible assets 19,250 7,064 26,314 assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses are disclosed in Note 3.20. Actual results may differ from these estimates. Inventories and work-in-progress 16,629 (432) 16,197 Advances and other receivables 70,954 1,567 72,521 Except for changes in accounting policies discussed in Note 3.21, the accounting policies set out below have been consistently Cash and cash equivalents 18,627 – 18,627 applied by the Company and the Group and are consistent with those used in the previous year. 137,512 7,667 145,179

Trade payables and accruals (91,930) (659) (92,589) 3. Summary of significant accounting policies Deferred income (387) – (387) Deferred tax liabilities (1,149) (3,002) (4,151) 3.1 Basis of consolidation (93,466) (3,661) (97,127) (i) Business combinations

Net identifiable assets 44,046 4,006 48,052 Business combinations are accounted for using the Business acquisition method in accordance with FRS 103 Non-controlling interests (14,569) (3,098) (17,667) Combination as at the acquisition date, which is the date on which control is transferred to the Group. Control is Net identifiable assets, after non-controlling interests 29,477 908 30,385 the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In Goodwill arising on consolidation 22,673 (908) 21,765 assessing control, the Group takes into consideration potential voting rights that are currently exercisable. Total purchase consideration 52,150 – 52,150 The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such Cash outflow on acquisitions: amounts are generally recognised in profit or loss. Cost of acquisitions (47,084) – (47,084) Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group Net cash acquired with the subsidiaries 18,627 – 18,627 incurs in connection with a business combination are expensed as incurred. Net cash outflow on acquisition (28,457) – (28,457) Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration Purchase price adjustments, which are non-cash in nature, made during the Window Period have not been applied retrospectively as these is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, any subsequent adjustments, which relate mainly to balance sheet effects and certain consequential income statement effects, are immaterial to the Group. changes to the fair value of the contingent consideration are recognised in profit or loss.

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

116 117 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.1 Basis of consolidation (continued) 3.1 Basis of consolidation (continued)

(ii) Subsidiaries (v) Investments in associates and jointly controlled entities (equity-accounted investees)

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the Associates are those entities in which the Group has significant influence, but not control, over the financial and consolidated financial statements from the date that control commences until the date that control ceases. operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint Consistent accounting policies are applied to like transactions and events in similar circumstances. Losses applicable control, established by contractual agreement and requiring unanimous consent for strategic financial and operating to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes decisions. the non-controlling interests to have a deficit balance. Investments in associates and jointly controlled entities are accounted for by the Group using the equity method and In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less accumulated are recognised initially at cost. impairment losses. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive (iii) Acquisitions of entities under amalgamation income from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. 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 When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the Companies”) resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangement investment, including any long-term interest, is reduced to zero, and the recognition of further losses is discontinued under Section 210 of the Companies Act, Chapter 50 in 1997. except to the extent that the Group has an obligation to fund the investee’s operations or has made payments on behalf of the investee. 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. In the Company’s separate financial statements, investments in associates and jointly controlled entities are accounted for at cost less accumulated impairment losses. 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 (vi) Acquisition of non-controlling interests 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 capital reserve. Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions (iv) Loss of control that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling (vii) Transactions eliminated on consolidation interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest All significant inter-company balances and transactions are eliminated on consolidation. is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level of influence retained. 3.2 Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. The major functional currencies of the Group entities are Singapore dollar, United States dollar and Euro. 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 in a foreign currency that are measured in terms of historical cost are translated using the exchange rates as at the date of the 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.

Monetary item carried at amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year and the amortised cost in foreign currency are translated at the exchange rate at the end of the year.

118 119 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.2 Foreign currency (continued) 3.3 Financial instruments (continued)

(i) Foreign currency transactions (continued) (i) Non-derivative financial assets (continued)

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising Financial assets at fair value through profit or loss on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective, or qualifying cash flow hedges to the Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets extent the hedge is effective, which are recognised in other comprehensive income. held for trading are financial assets acquired principally for the purpose of selling in the near term. Financial assets at fair value through profit or loss are measured at fair value and gains or losses arising from change in the fair values (ii) Foreign operations are recognised in profit or loss. Attributable transaction costs are recognised in profit or loss as incurred.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, Loans and receivables are translated to Singapore dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars using exchange rates at the date of the transactions. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any translation reserve in equity. However, if the foreign operation is a non wholly-owned subsidiary, then the relevant impairment losses. Gains or losses are recognised in profit or loss when the loans and receivables are derecognised proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign or impaired, as well as through the amortisation process. operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to profit or loss as part of Loans and receivables comprise cash and cash equivalents, and trade and other receivables (including finance lease the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a receivables and amounts due from related parties). Cash consists of cash on hand and cash with banks or financial foreign operation while retaining control, the relevant proportion of the cumulative amount is re-attributed to non- institutions, including fixed deposits. Cash equivalents are short-term and highly liquid investments that are readily controlling interests. When the Group disposes of only part of its investment in an associate or jointly controlled convertible to known amounts of cash and that are subject to insignificant risk of changes in value. For the purpose entity that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of of the statement of cash flows, cash and cash equivalents also include bank overdrafts that are repayable on demand the cumulative amount is reclassified to profit or loss. and form an integral part of the Group’s cash management.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor Held-to-maturity financial assets likely in the foreseeable future, foreign exchange gains or losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the presented in the foreign currency translation reserve in equity. Group has the positive intention and ability to hold the financial assets to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, 3.3 Financial instruments held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in the income statement when the held-to-maturity investments (i) Non-derivative financial assets are derecognised or impaired, and through the amortisation process. Any sale or reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity or occurs before the principal Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the amounts are substantially recovered or not attributable to non-recurring isolated events beyond the Group’s control contractual provisions of the financial instrument. All regular way purchases and sales of financial assets are and anticipation would result in the reclassification of all held-to-maturity investments as available for sale. It would recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Regular way also prevent the Group from classifying investment securities as held-to-maturity for the current and the following purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally two financial years. established by regulation or convention in the marketplace concerned. Available-for-sale financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets classified in any of the three preceding categories. Available-for-sale financial assets are recognised initially at fair that is created or retained by the Group is recognised as a separate asset or liability. value plus any directly attributable transaction costs. After initial recognition, the changes in fair value are recognised in other comprehensive income and presented in the fair value reserve in equity, except for impairment losses and Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, foreign exchange differences on available-for-sale debt instruments, until the financial asset is derecognised. Upon the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and derecognition, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from settle the liability simultaneously. equity to income statement as a reclassification adjustment.

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through The fair value of available-for-sale financial assets that are actively traded in organised financial markets is determined profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. The by reference to quoted market prices at the close of business on the balance sheet date. For those financial assets Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, where there is no active market, fair value is determined using valuation techniques. Such techniques include using re-evaluates this designation at each financial year-end. 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.

120 121 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.3 Financial instruments (continued) 3.3 Financial instruments (continued)

(i) Non-derivative financial assets (continued) (iv) Derivative financial instruments and hedge accounting (continued)

Available-for-sale financial assets (continued) On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy For those financial assets where there is no active market and where fair value cannot be reliably measured, they are for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item measured at cost. or transaction, the nature of the risk being hedged and the methods used in assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to Available-for-sale financial assets comprise equity securities and bonds. the hedged risk. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes (ii) Non-derivative financial liabilities in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the the transaction should be highly probable to occur and should present an exposure to variations in cash flows that contractual provisions of the financial instrument. The Group derecognises a financial liability when its contractual could ultimately affect profit or loss. obligations are discharged, cancelled or expire. Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is Financial liabilities for contingent consideration payable in a business combination are initially measured at fair value. entered into. Attributable transaction costs are recognised in profit or loss as incurred. Derivatives are carried as Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. assets when the fair value is positive and as liabilities when the fair value is negative. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below. Financial assets and liabilities are offset and the net amount presented in the balance sheets when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and Fair value hedges settle the liability simultaneously. The gain or loss from re-measuring the hedging instrument at fair value (for a derivative hedging instrument) or the Non-derivative financial liabilities are recognised initially at fair value plus directly attributable transaction costs. Subsequent foreign currency component of its carrying amount measured in accordance with Note 3.2(i) (for a non-derivative to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method. hedging instrument) is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk is recognised in profit or loss. The Group’s financial liabilities comprise bank overdrafts, trade and other payables (including lease obligations and amounts due to related parties), and borrowings. 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 (iii) Share capital corresponding gain or loss recognised in profit or loss. The changes in the fair value of the hedging instrument are also recognised in profit or loss. Ordinary shares The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. recognised as a deduction from equity, net of any tax effects. 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 (iv) Derivative financial instruments and hedge accounting than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.

The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and cross Cash flow hedges currency swaps to hedge its risks associated with foreign currency and interest rate fluctuations. From time to time, the Group also uses monetary assets and liabilities and embedded derivatives as hedging instruments to hedge its The portion of the gain or loss on a derivative designated as the hedging instrument that is determined to be an risks associated with foreign currency fluctuations. effective hedge is recognised in other comprehensive income and presented in the fair value reserve in equity, while the ineffective portion is recognised immediately in profit or loss. 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 Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as instrument with the same terms as the embedded derivatives would meet the definition of a derivative, and the when hedged financial income or financial expense is recognised, or when a forecast sale or purchase occurs. When combined instrument is not measured at fair value through profit or loss. the hedged item is 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 profit or loss. 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 then transferred to profit or loss.

122 123 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.3 Financial instruments (continued) 3.4 Property, plant and equipment and depreciation (continued)

(iv) Derivative financial instruments and hedge accounting (continued) (i) Recognition and measurement (continued)

Hedge of net investment in foreign operations The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income The Group has foreign currency differences arising from the translation of financial liabilities that are designated as in profit or loss. 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 The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity, of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, while the ineffective portion of the hedge are recognised immediately in profit or loss. On the disposal or partial and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. disposal of the foreign operation, the amounts previously recognised in equity are transferred to profit or loss as part of the gain or loss on disposal. (ii) Depreciation

Separable embedded derivatives and other derivatives Depreciation is based on the cost of an asset less its residual value.

Any gains or losses arising from changes in fair value on derivatives that are not designated in hedging relationships Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component are recognised immediately in profit or loss. of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. (v) Intra-group financial guarantees in the separate financial statements Property, plant and equipment purchased specifically for projects are depreciated over the useful life of the class of property, plant and equipment or the duration of the project, whichever is shorter. Construction-in-progress is Financial guarantees are financial instruments issued by the Company that require the issuer to make specified not depreciated until each stage of development is completed and becomes ready for use. Freehold land is not payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due depreciated. in accordance with the original or modified terms of a debt instrument. The estimated useful lives are as follows: Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and Buildings - 2 to 50 years * the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees Leasehold land - Over the period of the lease of between 2 to 50 years * are terminated before their original expiry date, the carrying amount of the financial guarantee is transferred to profit Improvements to premises - 3 to 30 years * or loss. Wharves and slipways - 20 years Syncrolift and floating docks - 15 years 3.4 Property, plant and equipment and depreciation Boats and barges - 10 years Plant and machinery (i) Recognition and measurement - Aerospace - 8 to 25 years - Electronics - 10 years All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and - Land Systems - 5 to 15 years equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the - Marine - 5 to 30 years item will flow to the Group and the cost of the item can be measured reliably. - Others - 5 years Production tools and equipment Cost includes expenditure that is directly attributable to the acquisition of the asset and capitalised borrowing costs. - Aerospace - 5 to 15 years The cost of self-constructed assets also includes the cost of material and direct labour, any other costs directly - Electronics - 10 years attributable to bringing the assets to a working condition for their intended use and the costs of dismantling and - Others - 3 years removing the items and restoring the site on which they are located. Cost may also include transfers from equity of Furniture, fittings, office equipment and- computers2 to 5 years any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Transportation equipment and vehicles - 5 years Aircraft and aircraft engines - 15 to 30 years Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. * Refer to Note 12(d)(ii) for details of the useful lives of the leasehold land, buildings and improvements.

Subsequent to initial measurement, except for certain property, plant and equipment Thewhich residual value,were useful lifesubject and depreciation to methoda are reviewed at each financial year-end to ensure that the one-time revaluation in 1972 (“the 1972 assets”), property, plant and equipment are measured at cost, net of amount, method and period of depreciation are consistent with previous estimates and the expected pattern of depreciation and any impairment losses. The 1972 assets stated at valuation are exempted from conducting a consumption of the future economic benefits embodied in the items of property, plant and equipment. Changes in regular frequency of revaluation but are measured net of depreciation, and any impairment losses. the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the depreciation period or method, as appropriate, and treated as changes in accounting estimates.

124 125 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.5 Intangible assets 3.5 Intangible assets (continued)

(i) Goodwill (iv) Other intangible assets

Goodwill represents the excess of: Other intangible assets that are acquired by the Group are initially recognised at cost. The cost of intangible assets • the fair value of the consideration transferred; plus acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible • the recognised amount of any non-controlling interests in the acquiree; plus assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, Licences over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. • Licences acquired as part of business combination When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. These licences relate to Air Operator Certificate issued by the Civil Aviation Safety Authority of Australia to Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated conduct commercial aviation activities such as flight training school and air charter, and the Federal Aviation impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the Administration’s Organisation Designation Authorisation programme that allows autonomy and efficiency carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, in the issuance of supplementary type certificates for avionics and interiors projects. These licences are not including goodwill, that forms part of the carrying amount of the equity-accounted investee. amortised as they are considered to have an indefinite useful life and are tested annually for impairment.

(ii) Research and development expenditure • Licences acquired for purchase and leasing of Boeing parts

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge These licences are awarded by the relevant authorities such as the Federal Aviation Authority (“FAA”), and understanding, is recognised in profit or loss as and when incurred. European Aviation Safety Agency (“EASA”), ISO9001, AS9100 Rev C, as well as commercial arrangement with Boeing for the purchase and leasing of Boeing parts. Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the development so that it will be available for use or sale, its • License acquired to develop maintenance, repair and overhaul services capabilities 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. The These licence agreements relate to the maintenance, repair and overhaul services for UTC Aerospace expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to Systems components on Boeing 787 aircraft. These licences are not amortised until the repair capabilities preparing the asset for its intended use, and capitalised borrowing costs. In any other circumstances, development are set up and available for use. costs are recognised in profit or loss as incurred. Technology agreement Development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. The technology agreement relates to the intellectual property assets required to operate the EcoPower Engine Wash (iii) Film cost inventory business. The intellectual property is an integral part of business as the business uses highly-proprietary processes to clean engines to enable fuel burn reduction and extended time on-wing. Film cost inventory comprise film production costs which are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the film so that it will be available for use or sale, its intention to (v) Subsequent expenditure complete and its ability to use or sell the film, how the film will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the film production. Other film Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific production costs are recognised in profit or loss as incurred. asset to which it relates. All other expenditure, including expenditure on internally generated intangible assets, is recognised in profit or loss as incurred. Film cost inventory is measured at cost less accumulated amortisation and accumulated impairment losses. (vi) Amortisation

Amortisation is calculated based on the cost of the asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and film cost inventory, from the date that they are available for use.

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. Amortisation commences when each film begins to earn revenue.

126 127 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.5 Intangible assets (continued) 3.7 Inventories and work-in-progress (continued)

(vi) Amortisation (continued) Work-in-progress is measured at cost plus profits recognised to date less progress billings and recognised losses. Cost includes all direct material and labour costs, equipment and sub-contracting services, together with appropriate overhead The estimated useful lives are as follows: expenses and may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of such services. Provision for foreseeable losses on uncompleted contracts is made in the year in which such Dealer network - 5 to 7 years losses are determined. Development expenditure - 5 years Commercial and intellectual property rights - 2 to 16 years Work-in-progress is included in current assets in the balance sheet for all contracts in which costs incurred plus recognised Brands profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is - Aerospace - 5 years presented as “progress billings in excess of work-in-progress” and is included in current liabilities in the balance sheet. - Electronics - 20 years - Land Systems - 70 years 3.8 Impairment Film cost inventory - 20 years Licenses - 7 to 30 years (i) Non-derivative financial assets Technology agreement - 13 years The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not The useful lives and amortisation methods are reviewed at the end of each financial year-end to ensure that the carried at fair value through profit or loss is impaired. amount, method and period of amortisation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the intangible assets. Changes in the expected useful To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The default or significant delay in payments, significant adverse changes in the business environment where the debtor/ amortisation expense is recognised in the expense category consistent with the function of the intangible asset. issuer operates and disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. 3.6 Investment property Financial assets carried at amortised cost Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are Investment property is measured at cost, net of depreciation and any impairment loss. Cost includes expenditure that is individually significant, and collectively for financial assets that are not individually significant. If it is determined that directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets condition for their intended use and capitalised borrowing costs. Depreciation is recognised in profit or loss on a straight-line is collectively assessed for impairment. Financial assets that are individually assessed for impairment and for which basis so as to write-off the cost of the investment property over its estimated useful life of 12 years. an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

Investment property is derecognised when either it has been disposed of or when the investment property is permanently In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of withdrawn from use and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic disposal of an investment property are recognised in profit or loss in the year of retirement or disposal. and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. 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 carrying value at the date of change in use becomes the cost for subsequent accounting. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the accounting policy for property, plant and equipment set out in Note 3.4 up to the date of change in use. 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 3.7 Inventories and work-in-progress 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 profit or loss. Inventories are measured at the lower of cost and net realisable value. Cost is calculated on a first-in, first-out basis or by weighted average cost depending on the nature and use of the inventories. Cost includes expenditure incurred in acquiring If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. condition. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of purchases of inventories. Allowance is made for deteriorated, damaged, obsolete and slow-moving inventories. the asset does not exceed its amortised cost at the reversal date.

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.

128 129 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.8 Impairment (continued) 3.8 Impairment (continued)

(i) Non-derivative financial assets (continued) (ii) Other non-financial assets (continued)

Financial assets carried at cost An impairment loss in respect of goodwill is not reversed. In respect of other assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the amount since the last impairment loss was recognised. If that is the case, the impairment loss is reversed only to the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net the current market rate of return for a similar financial asset. The loss recognised is not reversed in future periods. of depreciation or amortisation, if no impairment loss had been recognised in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation Available-for-sale financial assets increase. After such a reversal, the depreciation or amortisation 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. 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 Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and income statement, is transferred from equity to profit or loss. therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be Reversals in respect of impairment losses on equity instruments classified as available-for-sale are recognised in other impaired. comprehensive income. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was 3.9 Provisions recognised in profit or loss. Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is (ii) Other non-financial assets 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. The Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investment property, inventories and deferred tax assets, may be impaired. Goodwill is reviewed for (i) Warranties impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An The warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date. impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds The provision is based on past experience and industry averages for defective products. The majority of the costs is its estimated recoverable amount. expected to be incurred over the applicable warranty periods.

The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. In (ii) Liquidated damages 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 or CGU. Provision for liquidated damages is made in respect of anticipated claims from customers on contracts of which For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the deadlines are overdue or not expected to be completed on time in accordance with contractual obligations. The smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash utilisation of provisions is dependent on the timing of claims. inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is 3.10 Employee benefits performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the (i) Employee equity compensation benefits combination. The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the first to reduce the carrying amount of any goodwill allocated to the CGU or group of CGUs, and then to reduce the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related carrying amounts of other assets in the CGU or group of CGUs on a pro rata basis. service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

130 131 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.10 Employee benefits (continued) 3.12 Government grants

(ii) Defined contribution plans Government grants are recognised when the Group complies with the conditions associated with the grants. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income in the same periods in which The Group participates in national pension schemes, a post employment benefit, as defined by the laws of the the expenses are recognised. Grants relating to depreciable assets are deferred and recognised in profit or loss as other countries in which it has operations. In particular, the Singapore companies in the Group make contributions to income over the period in which such assets are depreciated and used in the projects subsidised by the grants. 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. 3.13 Finance income and finance costs

(iii) Short-term employee benefits Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, service is provided. A liability is recognised for the amount expected to be paid under cash bonus plans if the Group using the effective interest method. Dividend income is recognised in profit or loss when the shareholder’s right to receive has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, payment is established. and the obligation can be estimated reliably. Finance costs comprise interest expense on borrowings, losses on disposal of available-for-sale financial assets, fair value 3.11 Revenue losses on financial assets at fair value through profit or loss, impairment losses recognised on investments, and losses on hedging instruments that are recognised in profit or loss. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable, net of any returns, trade Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are discounts and volume rebates. recognised in profit or loss using the effective interest method.

Revenue is recognised using the following methods: Foreign currency gains and losses on financial assets and financial liabilities are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. (i) Revenue from sale of goods is recognised when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and 3.14 Finance leases possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. (i) As lessee

The timing of the transfer of risks and rewards usually occurs upon delivery of goods and acceptance by customers. 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 (ii) Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of the of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any transaction at the reporting date. The stage of completion is assessed by reference to the work performed. 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 (iii) Revenue from long-term contracts is recognised by reference to stage of completion, which is measured by either: of the liability. Finance charges are charged to profit or loss. Assets acquired on finance lease arrangements are depreciated in accordance with the policy set out in Note 3.4 above. (a) a combination of different cost components or a single cost component that would provide the most reliable indication of the stage of completion of a contract; or (ii) As lessor (b) when goods and services, representing part of a contract, are delivered; or (c) upon completion of designated phases of a contract. Leases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, are classified as finance leases. Provision for foreseeable losses on uncompleted contracts is recognised in profit or loss as soon as such losses are determinable. 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 (iv) Management fee income is recognised on an accrual basis over the duration upon which management services are present value of the lease receivables is recognised as unearned finance income. rendered. Each lease payment received is applied against the gross investment in the finance lease receivables to reduce both (v) Commission income in excess of the certain percentage of the total amount received is taken up in the income the principal and the unearned finance income. The finance income is recognised in profit or loss on a basis that statement as and when the services are performed. Where it is probable that a portion of the commission income reflects a constant periodic rate of return on the net investment in the finance lease receivables. may not materialise, a certain percentage of the total commission received is treated as downpayment and is deferred and taken up in the income statement only upon the discharge of specified contractual obligations. 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 profit or loss over the lease term on the same basis as the leased (vi) Rental income from investment property is accounted for on a straight-line basis over the duration of the lease terms. income.

(vii) Rental income from leasing of facilities is accounted for on a straight-line basis over the lease terms.

132 133 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.15 Operating leases 3.17 Earnings per share

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary over the lease term. shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share plans granted to on a straight-line basis. employees.

3.16 Income taxes 3.18 Operating segments

(i) Current tax 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 Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be segments and to assess the segments’ performance. Additional disclosures on each of these operating segments are recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that shown in Note 42, including the factors used to identify the reportable segments and the measurement basis of segment are enacted or substantively enacted by the balance sheet date. information.

Current taxes are recognised in profit or loss except to the extent that it relates to items recognised directly in other 3.19 Changes in accounting policies comprehensive income or in equity. (i) Fair value measurement (ii) Deferred tax FRS 113 establishes a single framework for measuring fair value and making disclosures about fair value Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of measurements, when such measurements are required or permitted by other FRSs. In particular, it unifies the assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is not recognised definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business take place between market participants at the measurement date. It also replaces and expands the disclosure combination and that affects neither accounting nor taxable profit or loss and taxable temporary differences arising requirements about fair value measurements in other FRSs, including FRS 107 Financial Instruments: Disclosures. on the initial recognition of goodwill. 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 From 1 January 2013, in accordance with the transitional provisions of FRS 113, the Group has applied the new fair based on tax rates enacted or substantively enacted at the balance sheet date. value measurement guidance prospectively, and has not provided any comparative information for new disclosures. Notwithstanding the above, the change had no significant impact on the measurements of the Group’s assets and Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, liabilities. The additional disclosures necessary as a result of the adoption of this standard has been included. associates and jointly controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. (ii) Presentation of items of other comprehensive income

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and From 1 January 2013, as a result of the amendments to FRS 1, the Group has modified the presentation of items of unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible other comprehensive income in its consolidated statement of comprehensive income, to present separately items temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised. that would be reclassified to profit or loss in the future from those that would never be.

At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of The adoption of the amendment to FRS 1 has no impact on the recognised assets, liabilities and comprehensive deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has income of the Group as items of other comprehensive income in its consolidated statement of comprehensive become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely income consists of items that would be reclassified to profit or loss in the future. 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. 3.20 Significant accounting estimates and judgements

Deferred income tax relating to items recognised outside profit or loss is recognised in correlation to the underlying Estimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the transaction either in other comprehensive income or directly in equity and deferred tax arising from a business application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures combination is adjusted against goodwill on acquisition. 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. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same (i) Key sources of estimation uncertainty taxable entity and the same tax authority. 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.

134 135 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 3. Summary of significant accounting policies (continued)

3.20 Significant accounting estimates and judgements (continued) 3.20 Significant accounting estimates and judgements (continued)

(i) Key sources of estimation uncertainty (continued) (i) Key sources of estimation uncertainty (continued)

Impairment of non-financial assets Income Taxes

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining Goodwill and other intangible assets are tested for impairment annually and at other times when such indicators the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected not be recoverable. 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 When value-in-use calculations are undertaken, management must estimate the expected future cash flows from tax provisions in the period in which such determination is made. the asset or CGU 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 In addition, certain subsidiaries of the Group have potential tax benefits arising from unutilised tax losses, unabsorbed are given in Note 16 to the financial statements. wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. Significant judgement is involved in determining the availability of future taxable profits against which the Impairment of loans and receivables Group can utilise the tax benefits therefrom. The use of the potential tax benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is the subsidiaries operate. Where the final outcome of these matters is different from the amounts that were initially impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the recognised, such differences will impact the income tax provision and recognised deferred tax assets relating to the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. potential tax benefits in the period in which such determination is made.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on (ii) Critical judgements made in applying accounting policies 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 44 to the financial statements. Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in Note 41 – lease classification. Depreciation charge 3.21 Future changes in accounting policies Property, plant and equipment and investment property 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 property A number of new standards, amendments to standards and interpretations have been issued but not yet effective, and to be within 2 to 50 years. Changes in the expected level of usage and technological developments could impact the have not been applied in preparing these financial statements. Those new standards, amendments to standards and economic useful lives and the residual values of these property, plant and equipment and investment property, and interpretations that are expected to have a significant effect on the financial statements of the Group and the Company in therefore future depreciation charges could be revised. future financial periods, and which the Group does not plan to early adopt except as otherwise indicated below, are set out below: Revenue recognition and provision for foreseeable losses • FRS 110 Consolidated Financial Statements The Group has recognised revenue from long-term contracts by reference to the stage of completion. The bases for measuring the stage of completion are described in Note 3.11(ii) and (iii). Significant judgement based on FRS Consolidated 110 Financial Statements introduces a new control model that is applicable to all investees, management’s knowledge and experience is required in determining the appropriate stage of completion and by focusing on whether the Group has power over an investee, exposure, or rights to variable returns from its estimating a reasonable contribution margin or expected losses for revenue and costs recognition. involvement with the investee and ability to use its power to affect those returns. In particular, FRS 110 requires the Group to consolidate investees that it controls on the basis of de facto circumstances. Allowance for inventory obsolescence and write down of finished goods to net realisable value The application of the standard has no significant impact on the control conclusion for all the Group’s investees. The allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the allowance made. • FRS 111 Joint Arrangements

Provision for warranty FRS Joint111 Arrangements , which establishes the principles for classification and accounting of joint arrangements. The adoption of this standard would require the Group to re-assess and classify its joint arrangements as either The provision for warranty is based on estimates from known and expected warranty work to be performed after joint operations or joint ventures based on its rights and obligations arising from the joint arrangements.U nder completion. The warranty expense incurred could be higher or lower than the provision made. this standard, interests in joint ventures will be accounted for using the equity method, whilst interests in joint operations will be accounted for using the applicable FRSs relating to the underlying assets, liabilities, revenue and expense items arising from the joint operations.

136 137 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

3. Summary of significant accounting policies (continued) 4. Revenue

3.21 Future changes in accounting policies (continued) Revenue represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:

• FRS 111 Joint Arrangements (continued) Group 2013 2012 The Group has investments in joint arrangements as disclosed in Note 14. The Group has re-evaluated the rights $’000 $’000 and obligations of the parties to these joint arrangements and has determined that the parties in these joint arrangements have rights to the net assets of the arrangements. Accordingly, these joint arrangements will be Sale of goods 2,381,791 2,302,575 classified as joint ventures under FRS 111 and will be accounted for using the equity method. Currently, these Service income 3,277,714 3,423,603 investments in joint arrangements are accounted for as jointly-controlled entities under FRS 31 Interests in Joint Contract revenue 973,647 653,688 Ventures using the equity method. As the Group is already applying the equity method of accounting, there will be 6,633,152 6,379,866 no impact to the Group’s financial statements when the Group adopts FRS 111 in 2014.

• FRS 112 Disclosure of Interests in Other Entities 5. Profit from operations FRS Disclosure112 of Interests in Other Entities, which sets out the disclosures required to be made in respect Profit from operations is arrived at: of all forms of an entity’s interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The adoption of this standard would result in more extensive disclosures being made in the Group’s financial statements in respect of its interests in other entities; as FRS 112 is primarily a Group disclosure standard, there will be no financial impact on the results and financial position of the Company and 2013 2012 $’000 Group when the Group adopts FRS 112 in 2014. Note $’000

After charging/(crediting) • FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities Auditors' remuneration Amendments to FRS 32 Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities, - auditors of the Company 1,828 2,371 which clarifies the existing criteria for net presentation on the face of the Balance Sheet. - other auditors 2,561 2,120 Non-audit fees under the amendments, to qualify for offsetting, the right to set off a financial asset and a financial liability must not - auditors of the Company 802 1,139 be contingent on a future event, and must be enforceable both in the normal course of business and in the event of - other auditors 1,184 1,144 default, insolvency or bankruptcy of the entity and all counterparties. Fees and remuneration of directors * 7,070 7,024 The Group currently offsets receivables and payables due from/to the same counterparty if the Group has the legal Fees paid to a firm of which a director is a member 488 994 right to set off the amounts when it is due and payable based on the contractual terms of the arrangement with the Personnel expenses 6 1,796,531 1,775,239 counterparty, and the Group intends to settle the amounts on a net basis. Based on the local laws and regulations in Depreciation charges 12, 17 127,176 123,949 certain jurisdictions in which the counterparties are located, the set-off rights are set aside in the event of bankruptcy Allowance/(write-back of allowance) for of the counterparties. On adoption of the amendments, the Group will have to present the respective receivables and - inventory obsolescence 27,631 17,915 payables on a gross basis as the right to set-off is not enforceable in the event of bankruptcy of the counterparty. - doubtful debts (trade) 2,962 14,361 The application of this standard has no significant impact to the Group’s financial statements. - doubtful debts (related parties) (793) (592) - unbilled receivables (trade) 1,202 (91) - doubtful lease receivables 7,108 8,077 Provision for - warranties 30 6,524 26,045 - liquidated damages 30 2,371 2,875 - foreseeable losses 38,234 2,792 Property, plant and equipment written off 1,386 7,314 Research, design and development expenses 101,432 95,716 Operating lease expenses 48,814 43,655 Amortisation of other intangible assets 16 14,868 13,153 Impairment losses on property, plant and equipment 12 690 251 Impairment losses on goodwill 16 2,141 12,351 Impairment losses on other intangible assets 16 312 802

* Includes share-based payment expense of $345,400 (2012: $357,900).

138 139 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

6. Personnel expenses 9. Finance costs, net

Group Group 2013 2012 2013 2012 $’000 $’000 $’000 $’000

Wages and salaries * 1,450,899 1,439,813 Finance income Contributions to defined contribution plans 133,163 128,381 Dividend income quoted equity investments 1 12 Share-based payments 14,977 18,733 Interest income Other personnel expenses 197,492 188,312 - bank deposits 13,052 12,185 1,796,531 1,775,239 - staff loans 20 20 - finance lease 579 812 * Includes directors’ remuneration of $3,909,347 (2012: $4,237,211). - bonds 8,917 12,027 - others 752 1,102 7. Key management personnel compensation Exchange gain, net 3,315 2,117 Gain on disposal of investments 6,154 3,907 Gain on fair value changes of investments held for trading 107 126 Group Fair value changes of financial instruments 2013 2012 $’000 $’000 - gain on forward currency contract and cross currency interest rate swaps not designated as hedging instrument – 7,884 - gain on forward currency denominated cash balances designated as hedging instrument Short-term employee benefits 39,575 42,748 in fair value hedges 814 – Contributions to defined contribution plans 445 437 - gain on ineffective portion of forward currency contract designated as hedging instrument Other long-term benefits 18 11 in cash flow hedges – 2 Share-based payments 7,239 6,922 - gain on forward currency contract designated as hedging instrument – 1,908 47,277 50,118 Fair value changes of hedged items 1,558 5,295 Fair value changes of embedded derivatives - not designated as hedging instrument 33,642 – 8. Other income, net - designated as hedging instrument – 990 68,911 48,387 Group Finance costs 2013 2012 $’000 $’000 Interest expenses - bank loans and overdrafts (16,484) (22,215) Gain on disposal of property, plant and equipment and investment property 12,978 14,474 - bonds (26,574) (27,093) Government grants 11,503 6,744 - finance lease (871) (23) Commission income 311 501 - others (311) (173) Rental income 6,336 4,121 Net change in fair value of cash flow hedges reclassified from equity on occurrence of forecast transactions (1,558) (5,295) Loss on disposal of a subsidiary (50) – Fair value changes of financial instruments (Loss)/gain on disposal of associates and jointly controlled entities * (318) 2,631 - loss on forward currency contracts, cross currency interest rate swaps, interest rate swaps and Impairment losses on associates (5,539) – cross currency swap not designated as hedging instrument (30,593) – Others 8,967 14,771 - loss on forward currency denominated cash balances designated as hedging instrument in fair value hedges – (1,188) 34,188 43,242 - loss on ineffective portion of foreign currency denominated cash balances designated as hedging instrument in cash flow hedges (684) * Includes gain arising from a step-up acquisition of a jointly controlled entity of $2,608,000 in the prior year. – - loss on forward currency contract designated as hedging instrument (447) – Fair value changes of hedged items (242) (2,128) Fair value changes of embedded derivatives not designated as hedging instrument – (6,221) Impairment losses on unquoted investments (624) (1,295) Impairment losses on quoted investments – (759) (77,704) (67,074)

Finance costs, net, recognised in profit or loss (8,793) (18,687)

140 141 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

10. Taxation 10. Taxation (continued)

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the Group year ended 31 December is as follows: As previously Restated reported 2013 2012 2012 $’000 $’000 $’000 Group As previously Restated reported Current income tax 2013 2012 2012 Current year 155,385 168,481 168,481 $’000 $’000 $’000 Overprovision in respect of prior years (15,472) (25,672) (25,672) Profit before taxation 729,692 715,380 723,059 Associates and jointly controlled entities – – 7,679 139,913 142,809 150,488 Taxation at statutory tax rate of 17% (2012: 17%) 124,048 121,615 122,920 Deferred income tax Adjustments: Current year (2,234) (15,997) (15,997) Income not subject to tax (5,302) (3,842) (3,842) underprovision in respect of prior years 542 2,969 2,969 Expenses not deductible for tax purposes 17,553 26,987 26,987 Effect of reduction in tax rate (76) 978 978 Different tax rates of other countries 19,149 27,083 27,083 138,145 130,759 138,438 Overprovision in prior years, net (14,930) (22,703) (22,703) Effect of change in tax rates (76) 978 978 Deferred income tax related to items charged or credited directly to other comprehensive income: Effect of results of associates and jointly controlled entities presented net of tax (5,284) (6,374) – Tax incentives (3,942) – – Group Deferred tax assets not recognised 15,008 2,013 2,013 2013 2012 $’000 $’000 Deferred tax assets previously not recognised now utilised (5,729) (13,147) (13,147) Others (2,350) (1,851) (1,851) Net change in fair value of derivative financial instruments designated in cash flow hedges 9,479 977 138,145 130,759 138,438

During the year, the Group modified the income statement classification of tax expense on associates and jointly controlled entities from taxation to share of results of associates and jointly controlled entities to reflect more appropriately the way in which tax expense is derived. Comparative amounts were reclassified for consistency, as shown below:

Group As previously Restated reported 2012 2012 $’000 $’000

Share of results of associates and jointly controlled entities, net of tax 32,926 40,605

Taxation 130,759 138,438

As the reclassifications do not affect items in the balance sheet, a third balance sheet has not been presented.

142 143 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

11. Earnings per share 12. Property, plant and equipment

Basic earnings per share Valuation/Cost Arising from The calculation for basic earnings per share is based on: acquisition As at Disposals/ of interest in Reclassi- Translation As at 1.1.2012 Additions write-off subsidiaries fications difference 31.12.2012 Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 2013 2012 $’000 $’000 The Group

Profit attributable to shareholders 580,834 576,178 At Valuation Leasehold land and buildings 1,919 – – – – – 1,919 The weighted average number of ordinary shares is arrived at as follows: Wharves and slipways 1,490 – – – – – 1,490 Syncrolift and floating docks 4,603 – – – – – 4,603 Group Plant and machinery 1,694 – – – – – 1,694 2012 2013 Furniture, fittings, office equipment and computers 279 – – – – – 279 Number of shares (’000) At Cost Issued ordinary shares at beginning of the year 3,080,442 3,056,465 Freehold land and buildings 56,185 84 (699) – 4,409 (3,242) 56,737 Weighted average number of ordinary shares issued during the year 21,302 14,841 Leasehold land and buildings 797,201 23,477 (5,372) – (21,611) (12,394) 781,301 Weighted average number of ordinary shares 3,101,744 3,071,306 Improvements to premises 57,548 5,001 (2,138) 60 688 (1,991) 59,168 Diluted earnings per share Wharves and slipways 35,601 23 – – 444 (548) 35,520 Syncrolift and floating docks 68,936 – – – – – 68,936 When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential Boats and barges 8,566 2,196 (487) – 185 (91) 10,369 ordinary shares. The number of unissued shares under option granted under the ESOP and their exercise prices are set out in Plant and machinery 1,013,939 49,725 (19,439) 10,903 (305,485) (25,231) 724,412 Note 35. The average fair value of one ordinary share during the financial year ended 31 December 2013 was $4.15 (2012: $3.31) Production tools and equipment 268,950 16,161 (6,251) 397 394 (7,070) 272,581 per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows: Furniture, fittings, office equipment and computers 203,640 34,231 (12,642) 301 1,650 (4,017) 223,163 Group Transportation equipment 2013 2012 and vehicles 17,932 1,417 (818) 66 (1,364) (300) 16,933 Aircraft and aircraft engines 190,716 11,044 (4,628) 3 (519) (3,937) 192,679 Number of shares (’000) Construction-in-progress 28,957 92,949 (490) 322 (21,572) (948) 99,218 2,758,156 236,308 (52,964) 12,052 (342,781) (59,769) 2,551,002 Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,101,744 3,071,306 Weighted average number of unissued shares under option 34,882 47,584 Number of shares that would have been issued at fair value (24,839) (39,371) Weighted average number of ordinary shares (diluted) 3,111,787 3,079,519

Nil (2012: 10,568,909) 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.

144 145 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued)

Valuation/Cost Accumulated depreciation Arising from Depreciation acquisition charge/ of interest in Finalisation impairment a subsidiary of purchase As at losses* Disposals/ Reclassi- Translation As at As at Disposals/ and price Reclassi- Translation As at 1.1.2012 for the year write-off fications difference 31.12.2012 1.1.2013 Additions* write-off business allocation fications difference 31.12.2013 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 The Group The Group At Valuation At Valuation Leasehold land and buildings 1,919 – – – – 1,919 Leasehold land and buildings 1,919 – – – – – – 1,919 Wharves and slipways 1,490 – – – – 1,490 Wharves and slipways 1,490 – – – – – – 1,490 Syncrolift and floating docks 4,603 – – – – 4,603 Syncrolift and floating docks 4,603 – – – – – – 4,603 Plant and machinery 1,694 – – – – 1,694 Plant and machinery 1,694 – – – – – – 1,694 Furniture, fittings, office equipment Furniture, fittings, office and computers 279 – – – – 279 equipment and computers 279 – – – – – – 279 At Cost At Cost Freehold land and buildings 19,867 1,104 (590) (59) (1,162) 19,160 Freehold land and buildings 56,737 5,982 – – – 166 1,798 64,683 Leasehold land and buildings 362,129 27,934 (2,494) (17,726) (4,412) 365,431 Leasehold land and buildings 781,301 44,297 (2,870) – – 143,815 10,767 977,310 Improvements to premises 35,483 4,814 (1,821) (1) (1,087) 37,388 Improvements to premises 59,168 8,082 (1,125) 11 – 4,588 1,573 72,297 Wharves and slipways 23,805 767 – – (118) 24,454 Wharves and slipways 35,520 1,958 – – – 3,719 335 41,532 Syncrolift and floating docks 68,619 28 – – – 68,647 Syncrolift and floating docks 68,936 3,508 – – – 14,388 (1) 86,831 Boats and barges 4,846 533 (487) 167 (91) 4,968 Boats and barges 10,369 – – – – – 42 10,411 Plant and machinery 446,673 42,269 (13,965) (89,444) (9,268) 376,265 Plant and machinery 724,412 65,424 (14,394) 365 (317) (54,652) 12,711 733,549 Production tools and equipment 199,195 9,362 (6,065) 89 (4,005) 198,576 Production tools and equipment 272,581 18,523 (17,528) – – 1,364 5,739 280,679 Furniture, fittings, office equipment Furniture, fittings, office and computers 167,031 26,419 (12,530) 26 (3,414) 177,532 equipment and computers 223,163 29,266 (23,505) 24 (215) 3,379 2,786 234,898 Transportation equipment and vehicles 12,460 2,101 (740) (1,326) (214) 12,281 Transportation equipment and Aircraft and aircraft engines 51,313 8,504 (4,628) – (1,240) 53,949 vehicles 16,933 2,677 (1,531) – – (699) 228 17,608 1,401,406 123,835 (43,320) (108,274) (25,011) 1,348,636 Aircraft and aircraft engines 192,679 18,601 (5,491) – – 4,485 1,176 211,450 Construction-in-progress 99,218 127,401 (24) – – 24,041 2,319 252,955 * Includes impairment losses of $251,000. 2,551,002 325,719 (66,468) 400 (532) 144,594 39,473 2,994,188

* Includes $19,726,000 under finance lease arrangement and $16,405,000 by way of non-cash government grant.

146 147 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued)

Accumulated depreciation Net book value Depreciation 31.12.2013 31.12.2012 1.1.2012 charge/ $’000 $’000 $’000 impairment As at losses* Disposals/ Reclassi- Translation As at 1.1.2013 for the year write-off fications difference 31.12.2013 The Group $’000 $’000 $’000 $’000 $’000 $’000 At Valuation The Group Leasehold land and buildings – – –

Leasehold land and buildings 1,919 – – – – 1,919 Wharves and slipways – – – Wharves and slipways 1,490 – – – – 1,490 Syncrolift and floating docks – – – Syncrolift and floating docks 4,603 – – – – 4,603 Plant and machinery – – – Plant and machinery 1,694 – – – – 1,694 Furniture, fittings, office equipment and computers – – – Furniture, fittings, office equipment At Cost and computers 279 – – – – 279 Freehold land and buildings 43,487 37,577 36,318 At Cost Leasehold land and buildings 569,111 415,870 435,072 Freehold land and buildings 19,160 1,344 – – 692 21,196 Improvements to premises 29,108 21,780 22,065 Leasehold land and buildings 365,431 32,259 (2,863) 10,161 3,211 408,199 Wharves and slipways 16,024 11,066 11,796 Improvements to premises 37,388 5,873 (1,081) (11) 1,020 43,189 Syncrolift and floating docks 17,658 289 317 Wharves and slipways 24,454 968 – – 86 25,508 Boats and barges 4,581 5,401 3,720 Syncrolift and floating docks 68,647 520 – – 6 69,173 Plant and machinery 340,524 348,147 567,266 Boats and barges 4,968 820 – – 42 5,830 Production tools and equipment 80,277 74,005 69,755 Plant and machinery 376,265 33,145 (10,420) (10,873) 4,908 393,025 Furniture, fittings, office equipment and computers 48,858 45,631 36,609 Production tools and equipment 198,576 10,457 (13,721) (240) 5,330 200,402 Transportation equipment and vehicles 4,234 4,652 5,472 Furniture, fittings, office equipment Aircraft and aircraft engines 150,042 138,730 139,403 and computers 177,532 29,433 (22,849) 249 1,675 186,040 Construction-in-progress 216,500 99,218 28,957 Transportation equipment and vehicles 12,281 2,109 (1,192) 4 172 13,374 1,520,404 1,202,366 1,356,750 Aircraft and aircraft engines 53,949 10,151 (3,220) (22) 550 61,408 Construction-in-progress – – – 36,455 – 36,455 Due to changes in the use of assets, 1,348,636 127,079 (55,346) 35,723 17,692 1,473,784 (a) Inventories (Note 21) amounting to $131,815,000 (2012: nil) were reclassified to property, plant and equipment; and * Includes impairment losses of $690,000 resulting from an assessment of the recoverable amount of an engine, based on the fair value less cost to sell. The fair value is measured based on the amount to sell the engine at market price. (b) Property, plant and equipment of net book value amounting to $22,944,000 (2012: $223,982,000) were reclassified to inventories.

In the prior year, property, plant and equipment of net book value amounting to $10,525,000 were reclassified to investment property (Note 17).

148 149 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued)

Furniture, fittings, Transportation (c) Property, plant and equipment under lease obligations office equipment equipment and computers and vehicles Total Included in the above are property, plant and equipment acquired under finance lease obligations with a net book value of: $’000 $’000 $’000

The Company Group 2013 2012 $’000 Cost $’000 As 1.1.2012 3,748 398 4,146 Leasehold land and buildings 16,975 – Additions 361 – 361 Transportation equipment and vehicles 281 171 As at 31.12.2012 4,109 398 4,507 17,256 171 Additions 776 468 1,244 Disposal/write-off (732) (341) (1,073) (d) Major properties As at 31.12.2013 4,153 525 4,678 (i) Freehold land and buildings Accumulated depreciation As 1.1.2012 2,407 23 2,430 Net book value Land Depreciation charge for the year 687 80 767 area 2013 2012 Location Description (sq. m.) $’000 $’000 As at 31.12.2012 3,094 103 3,197

Depreciation charge for the year 785 96 881 USA Disposal/write-off (732) (102) (834) As at 31.12.2013 3,147 97 3,244 13442 Emerson Road Industrial buildings 68,351 1,033 1,047 Kidron, Ohio

Net book value 300 Hackney Ave, Industrial buildings 117,358 4,643 4,525 As at 31.12.2013 1,006 428 1,434 Independence, Kansas

As at 31.12.2012 1,015 295 1,310 400 Hackney Ave, Industrial buildings 39,942 1,494 1,496 Washington, North Carolina

As at 1.1.2012 1,341 375 1,716 914 Saegers Station Drive, Industrial buildings 122,659 4,294 4,371 Montgomery, Pennsylvania (a) Property, plant and equipment at valuation 7801 Trinity Drive, Escatawpa, Shipyard and buildings 839,564 3,707 3,583 Certain property, plant and equipment, which are shown at valuation are stated at Mississippivalues arrived at by an independent firm of professional valuers on 30 November 1972, on the basis of open market value for existing use. As the property, plant and 5801 Elder Ferry Road, Shipyard and buildings 227,151 3,982 3,846 equipment were subject to a one-time revaluation prior to 1984, the Group is exempted from having a regular frequency of Moss Point, Mississippi revaluation in subsequent years. These property, plant and equipment have been fully depreciated as at 31 December 2013 and 2012. 900 Bayou Casotte Parkway, Shipyard and buildings 331,803 19,671 13,633 Pascagoula, Mississippi

(b) Property, plant and equipment pledged as security 3800 Richardson Road South, Production facility 8,361 3,021 2,818 Hope Hull, Alabama Property, plant and equipment of certain overseas subsidiaries of the Group with a carrying value of $96,217,000 (2012: $92,071,000) are pledged as security for bank loans. Australia 2 Bowral Place Ballarat, Office building and training 7,714 1,478 1,725 Victoria classrooms

150 151 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued) 12. Property, plant and equipment (continued)

(d) Major properties (continued) (d) Major properties (continued)

(ii) Leasehold land, buildings and improvements (ii) Leasehold land, buildings and improvements (continued)

Net book value Net book value Land Land area 2013 2012 area 2013 2012 Location Description Tenure (sq. m.) $’000 $’000 Location Description Tenure (sq. m.) $’000 $’000

Singapore Singapore

501 Airport Road Factory and office building 10.6 years from 1.6.2013 23,899 4,247 4,208 16 Benoi Road Administrative offices and 56 years from 1.6.1969 20,224 6,712 7,329 workshop 503 Airport Road Factory and office building 10.6 years from 1.6.2013 7,175 427 445 7 Benoi Road Buildings, foreshore and 56 years from 1.6.1969 103,802 11,764 13,059 505 Airport Road Lots Jet engine test cell 2 years from 1.7.2012 5,317 16,695 17,055 workshops 087066, 087M, 0870C and 99703 MK22 60 Tuas Road Buildings, foreshore and 30 years from 1.12.1992 137,739 3,532 4,211 workshops 540 Airport Road Warehouse and office building 30 years from 15.8.1985 5,850 310 456 30/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 3,409 3,701 Hangar and office building 30 years from 1.11.1984 18,918 381 889 USA 8 Changi North Way Hangar and office building 30 years from 1.1.1992 75,713 29,849 23,156 2100 9th Street Hangar and office building 22 years from 1.1.1991 103,825 27,149 10,075 Hangar and office building 22.5 years from 16.6.1999 14,860 2,220 2,361 Brookley Complex, Hangar and office building 16.3 years from 20.8.2005 9,764 9,772 10,212 Mobile, Alabama

102 Gul Circle Factory and office building 30 years from 17.7.2012 6,857 8,187 8,451 9800 John Saunders Road, Hangar and office building 16.6 years from 1.6.2002 255,121 22,248 22,757 San Antonio, Texas 540 Airport Road Hangars and office building 2 years lease from 1.7.2012* 48,882 17,768 19,410 People’s Republic Seletar West Camp Hangars and office building 31.7 years lease from 5.1.2009 24,828 31,068 32,365 of China

Seletar West Camp New Aero Centre 28.4 years lease from 1.4.2012 23,094 10,301 – No 2, Huayu Road, Leasehold land for factory 50 years from 20.11.2008 38,618 50,400 47,774 Huli District, Xiamen building 24 Ang Mo Kio Industrial and commercial 30 years from 1.12.2012 23,970 5,211 5,903 361006, Fujian Street 65 buildings 97 Zhong Cao Road, Leasehold land, industrial 50 years from 26.2.2008 242,662 22,006 21,060 100 Jurong East Industrial and commercial 30 years from 1.11.1988, 11,232 6,443 6,767 Guiyang, Guizhou and commercial buildings to 21.2.2058 Street 21 buildings renewable to 2048 6 Kuang Ji Road, Leasehold land, industrial 40 years from 21.5.2009 76,711 8,723 8,550 1 Ang Mo Kio Industrial and commercial 30 years from 1.11.2011 20,000 68,561 – Zhenjiang, Jiangsu and commercial buildings to 21.3.2049 Electronics Park Road buildings 1 Ding Mao Wei San Road, Leasehold land, industrial 46.5 years from 21.5.2006 55,883 8,380 8,410 6 Ang Mo Kio Industrial and commercial 30 years from 1.12.2011 5,000 20,753 – Zhenjiang, Jiangsu and commercial buildings to 5.12.2052 Electronics Park Road buildings 66 Xin Cheng Rui Leasehold land, industrial 50 years from 30.11.2012 51,576 3,142 – 33 Tuas Avenue 2 Factory and office building 30 years from 1.4.1996 to 6,669 1,967 2,084 Shandong Road, and commercial buildings to 30.11.2062 31.3.2026 Dantu, Zhenjiang, Jiangsu 16 Benoi Crescent Industrial and commercial 30 years from 16.7.1989 to 6,981 1,911 2,062 buildings 15.7.2019 68 Xin Cheng Rui Leasehold land, industrial 50 years from 31.05.2013 200,120 12,713 – Shandong Road, and commercial buildings to 31.05.2063 249 Jalan Boon Lay Industrial and commercial 27 years from 1.10.2001 to 201,031 108,238 110,825 Dantu, Zhenjiang, buildings 31.12.2028, renewable to Jiangsu 10.10.2065 * This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence Singapore on leases 16 Tuas Avenue 7 Industrial buildings 30 years from 16.8.2013 to 12,029 168 188 which are renewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost of 15.8.2043 the buildings is depreciated over the period of intended use, i.e. 30 years. 601 Rifle Range Road Industrial buildings Renewable every year* 1,380,983 4,140 858

15 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 to 39,640 21,394 22,402 31.7.2033

152 153 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries 13. Subsidiaries (continued)

Company Details of the subsidiaries are as follows: 2013 2012 $’000 $’000 Effective equity interest held by the Group Unquoted shares, at cost: 2013 2012 Singapore Technologies Aerospace Ltd 142,626 142,626 % % Singapore Technologies Electronics Limited 26,982 26,982 (a) Singapore Technologies Aerospace Ltd and its subsidiaries 100 100 Singapore Technologies Kinetics Ltd 211,938 61,938 Singapore Technologies Marine Ltd 56,000 56,000 ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100 Vision Technologies Systems, Inc. 359,021 359,021 ST PAE Holdings Pty Ltd and its subsidiaries 100 100 Singapore Technologies Dynamics Pte Ltd 6,000 6,000 Aerospace Engineering Services Pty Ltd 100 100 ST Synthesis Pte Ltd 4,656 4,656 Aerospace Engineering Services Pty Ltd Unit Trust 100 100 FusionTech Pte. Ltd. 1,000 1,000 Pacific Flight Services Pte Ltd 100 100 Kaz-ST Engineering Bastau Limited Liability Partnership 578 578 Pacific Flight Services Pty Ltd 100 100 ST Engineering Financial I Ltd. 1 1 – * – * ST Aerospace Academy Pte. Ltd. and its subsidiary: 100 100 1 1 ST Engineering Financial II Pte. Ltd. – * – * Aviation Training Academy Australia Pty Ltd and its subsidiary: 100 100 808,801 658,801 ST Aerospace Academy (Australia) Pty Ltd 100 100 Impairment in subsidiaries (7,000) (7,000) ST Aerospace Engines Pte Ltd and its subsidiary: 100 100 Carrying amount after impairment in subsidiaries 801,801 651,801 ST Aerospace Technologies (Xiamen) Company Limited 80 80 2 Capital contribution * 125,927 87,191 ST Aerospace Systems Pte Ltd 100 100 927,728 738,992 ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100 *1 Amount less than $1,000. iShopAero Pte Ltd 100 100 ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd. 100 100 *2 The amount relates mainly to capital contribution in the form of share options, performance shares and restricted shares issued to employees of subsidiaries. ST Aerospace International Structures Pte Ltd 100 100 ST Aviation Resources Pte Ltd 100 100 ST Aerospace 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 Singapore British Engineering (Pte) Ltd ^ – 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. 100 100 ST Aerospace Rotables Pte. Ltd. 100 100 Precision Products Singapore Pte Ltd 100 100 ST Aerospace Resources Pte. Ltd. 100 –

154 155 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Effective equity interest held Effective equity interest held by the Group by the Group 2013 2012 2013 2012 % % % %

(b) Singapore Technologies Electronics Limited and its subsidiaries 100 100 (c) Singapore Technologies Kinetics Ltd and its subsidiaries 100 100

SEEL Electronic & Engineering Sdn Bhd 100 100 SDG Kinetics Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100 LeeBoy India Construction Equipment Private Limited 97.9 97.9 INFA Systems Limited 100 100 LeeBoy Brazil Equipamentos De Contrução Ltda. 100 – ST Electronics (Software Services) Limited 100 100 Mobility Systems Pte Ltd and its subsidiaries: 100 100 ST Electronics (e-Services) Pte. Ltd. and its subsidiary: 100 100 Silvatech Global Systems Limited 100 100 Knowledge Alive Pte. Ltd. and its subsidiary: 100 100 Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100 COMAT Training Services Pte Ltd 100 100 Kinetics Drive Solutions Inc. 100 100 ST Electronics (Data Centre Solutions) Pte. Ltd. and its subsidiaries: 100 100 Technicae Projetos e Serviços Automotivos Ltda. 90 – PMB Project Management Business Sdn Bhd 100 100 STA Inspection Pte Ltd 100 100 PM-B (China) Ltd – 100 Singapore Commuter Private Limited and its subsidiaries: 100 100 ST Electronics (Wuxi) Co., Ltd. 100 – Jiangsu Huatong Kinetics Co., Ltd. 75.3 75.3 ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiary: 100 100 Jiangsu Huaran Kinetics Co., Ltd. 75.3 75.3 Antycip Simulation Limited and its subsidiary: 93 93 Securedge Pte. Ltd. 100 100 Antycip Simulation SAS 93 93 STA Investment Pte Ltd 100 100 ST Education & Training Private Limited and its subsidiaries: 70 70 ST Kinetics International Pte. Ltd. and its subsidiary: 100 100 STET Homeland Security Services Pte. Ltd. 70 70 VT Hackney, S.A. de C.V. 100 100 STET Maritime Pte. Ltd. 70 70 SDDA Pte. Ltd. and its subsidiary: 100 100 MERITS Technologies LLP 51 51 Kinetics Link Services Sdn. Bhd. 60 60 ST Electronics (Enterprise 1) Pte. Ltd. (formerly known as ST Electronics (Digital Media) Pte. Ltd. 100 100 ST Kinetics Integrated Engineering Pte. Ltd. 100 100 ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: 100 100 Singapore Test Services Private Limited 100 100 ST Electronics (Info-Security) Pte. Ltd. 100 100 ST Kinetics Pte. Ltd. 100 100 STELCOMMS Pte. Ltd. 51 51 Advanced Material Engineering Pte. Ltd. and its subsidiaries: 100 100 Telematics Wireless Ltd. and its subsidiary: 100 100 Advanced Pyrotechnic Materials Private Limited 51 51 Telematics Wireless USA Corp 100 100 SMART Systems Pte Ltd 51 51 ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: 100 100 Unicorn International Pte Limited 100 100 ST Electronics (Sichuan) Co., Ltd 100 100 Allied Ordnance of Singapore (Pte) Limited 100 100 iDirect Asia Pte. Ltd. 100 100 Ordnance Development and Engineering Company of Singapore (1996) Private Limited 100 100 OrisTel Systems Pte. Ltd. (formerly known as DataMark Technologies Pte Ltd) 100 100 Autonomous Technology Pte Ltd and its subsidiaries: 100 100 ST Electronics (Shanghai) Co., Ltd and its subsidiary: 100 100 Guizhou Jonyang Kinetics Co., Ltd. 60 60 ST Electronics (Tianjin) Co., Ltd 100 – Kinetics Automotive & Specialty Equipment Co., Ltd 100 – iTS Technologies Pte Ltd 100 100 Kinetics Systems (Shanghai) Co., Ltd. 100 100 ST Electronics (Taiwan) Limited 100 100 (d) Singapore Technologies Marine Ltd and its subsidiaries 100 100 STELOP Pte. Ltd. 50.05 50.05 ST Electronics (Thailand) Limited 100 – STSE Engineering Services Pte Ltd and its subsidiaries: 100 100 STSE (Shanghai) Co. Ltd. 100 100 STSE Engineering Services (B) Sdn Bhd 100 100 Hovertrans Solutions Pte. Ltd. 51 51 ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd. 100 100

156 157 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Effective equity interest held Effective equity interest held by the Group by the Group 2013 2012 2013 2012 % % % %

(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100 (j) ST Engineering Financial I Ltd. 100 100

VT Systems, Inc. α – 100 (k) ST Engineering Financial II Pte. Ltd. 100 100 Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100 ST Aerospace Mobile, Inc. 100 100 ^ These entities were dissolved during the year.  DalFort Aerospace GP, Inc. 100 100 The company was under members’ voluntary liquidation and had completed its liquidation in January 2014. α VT Systems, Inc. was merged with and into Vision Technologies Systems, Inc. pursuant to Section 253 of the General Corporation Law DalFort Aerospace, L.P. 100 100 of the State of Delaware, USA during the year. San Antonio Aerospace GP, LLC 100 100 ST Aerospace San Antonio, L.P. 100 100 Further details of the subsidiaries are as follows: DRB Aviation Consultants, Inc. 100 100 EcoServices, LLC 50.1 50.1 Country of Volant Aerospace, LLC 100 100 incorporation/ Name of subsidiary Principal activities place of business Venture Capital Systems, Inc. 100 100 Vision Technologies Electronics, Inc. and its subsidiary: 100 100 Singapore Technologies Aerospace Ltd Investment holding and provision of engineering, Singapore VT iDirect, Inc. and its subsidiaries: 100 100 marketing and engineering support services iDirect Hong Kong Limited 100 100 ST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft Singapore iDirect UK Limited and its subsidiary: 100 100 Parallel Limited 100 100 ST PAE Holdings Pty Ltd Investment holding Australia iDirect Italy S.r.l. 100 100 iDirect International, Inc. 100 100 Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia iDirect Government Technologies, Inc. 100 100 VT iDirect Canada, Inc. 100 100 Aerospace Engineering Services Pty Ltd Unit Trust Trustee of unit trust fund Australia Intelect Technologies, LLC ^ – 100 Pacific Flight Services Pte Ltd Providing air transport services Singapore Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100 Miltope Corporation and its subsidiary: 100 100 Pacific Flight Services Pty Ltd Flight training school operation and aircraft management Australia IV Phoenix Group, Inc. 97 97 MÄK Technologies, Inc. 100 100 ST Aerospace Academy Pte. Ltd. Flight training school operation and aircraft management Singapore Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100 Aviation Training Academy Australia Pty Ltd Flight training school operation and aircraft management Australia VT Dimensions, Inc. 100 100 VT LeeBoy, Inc. 100 100 ST Aerospace Academy (Australia) Pty Ltd Flight training school operation and aircraft management Australia VT Hackney, Inc. 100 100 Vision Technologies Marine, Inc. and its subsidiary: 100 100 ST Aerospace Engines Pte Ltd Repair and overhaul of engines Singapore VT Halter Marine, Inc. 100 100 VT Systems International, LLC 100 100 ST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of engines People’s Republic of China VT Systems Participações Ltda. 100 100 ST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components Singapore (f) Singapore Technologies Dynamics Pte Ltd 100 100 ST Aerospace Supplies Pte Ltd Trading, Maintenance-By-The-Hour services for Singapore (g) ST Synthesis Pte Ltd 100 100 components and repair management, warehousing services for aircraft equipment, parts and components and provision of jet fuel services (h) FusionTech Pte. Ltd. 100 100 iShopAero Pte Ltd Trading, e-commerce and information technology related Singapore (i) Kaz-ST Engineering Bastau Limited Liability Partnership 51 51 services for the aerospace industry

ST Aerospace Guangzhou Aero-Technologies & Import/export for aircraft component leasing, repair, People’s Repiblic Engineering Co Ltd. exchange and trading, warehousing, packaging, of China distribution and other related services

158 159 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Country of Country of incorporation/ incorporation/ Name of subsidiary Principal activities place of business Name of subsidiary Principal activities place of business

ST Aerospace International Structures Pte Ltd Designing, developing and manufacturing aircraft, engines, Singapore Knowledge Alive Pte. Ltd. Offer technologically-driven learning and knowledge Singapore equipment, accessories, components and such other parts solutions, products and services to corporate, tertiary and workforce markets ST Aviation Resources Pte Ltd Investment holding Singapore COMAT Training Services Pte Ltd Operating a computer training school, providing training Singapore in computer software and applications ST Aerospace Services Co Pte. Ltd. Repair, maintenance, modification and servicing of Singapore commercial aircraft ST Electronics (Data Centre Solutions) Pte. Ltd. Relate to mechanical, electrical and engineering works to Singapore design, build and provide facility management services for Singapore Technologies Engineering (Europe) Ltd Providing marketing and investment services to the Group United Kingdom mission critical environments such as data centres, disaster recovery and business continuity sites Singapore Aerospace Kabushiki Kaisha # Providing marketing services to the Group Japan PMB Project Management Business Sdn Bhd ~ Dormant Malaysia Visiontech Investment Pte Ltd Investment holding Singapore PM-B (China) Ltd Dormant People’s Republic Visiontech Engineering Pte Ltd Provision of engineering services for the repair, Singapore of China maintenance and modification of aircraft, aircraft equipment and components ST Electronics (Wuxi) Co., Ltd. Consulting, research, development, integration, distribution People’s Republic and maintenance of information communication of China technology software & hardware and related technologies ST Aerospace Solutions (Europe) A/S Supply of aircraft components, including purchase, Denmark maintenance and logistics services ST Electronics (Training & Simulation Systems) Pte. Ltd. Design, development, supply, integration and maintenance Singapore of training and simulation systems, distribution of games, Airline Rotables (UK Holdings) Limited Investment holding United Kingdom edutainment and animation programs and the sales and licensing of related products, merchandise and rights Airline Rotables Limited Providing component management and support services United Kingdom for aircraft Antycip Simulation Limited Investment holding and acting as a selling agent of United Kingdom software and incidental hardware to the defence industry and education establishments ST Aerospace Panama, Inc. + Repair and maintenance of aircraft Republic of Panama Antycip Simulation SAS A value added reseller/distributor of simulation products France and provision of simulation sub-system/components ST Aerospace Rotables Pte. Ltd. Trading, leasing and asset services of rotables Singapore solutions

Precision Products Singapore Pte Ltd Manufacture and sale of investment castings, mould Singapore ST Education & Training Private Limited Provision of education and training, management and Singapore toolings and precision formings consultancy services for operational and technical domains of maritime, aerospace and land services industries ST Aerospace Resources Pte. Ltd. ∆ Investment holding Singapore STET Homeland Security Services Pte. Ltd. Provision of security consultancy, solutions implementation Singapore Singapore Technologies Electronics Limited Design, development, supply, installation, integration Singapore and training and maintenance of transportation, intelligent building, defence electronics and communication systems STET Maritime Pte. Ltd. Provision of marine audit, survey and consultancy services Singapore

SEEL Electronic & Engineering Sdn Bhd Sales of electronic instruments and equipment, electronic Malaysia MERITS Technologies LLP # Dormant Kazakhstan engineering and systems integration services and maintenance and calibration of electronic equipment ST Electronics (Enterprise 1) Pte. Ltd. Design, development and manufacture of computers Singapore (formerly known as ST Electronics (Digital Media) and data processing systems, provision of services for the ST Electronics (Info-Software Systems) Pte. Ltd. Design, development and supply of real-time/mission Singapore Pte. Ltd.) processing and maintenance of data and information, critical systems and provision of related maintenance and production of animation pictures services

ST Electronics (Info-Comm Systems) Pte. Ltd. Design and development, systems integration, Singapore INFA Systems Limited Provision of services in consulting, designing and Hong Kong manufacturing and sale of communication equipment, developing systems integration, the maintenance and GPS-based fleet management system, traffic support of operational and computer systems and sales management system, info appliances and defence and distribution of system equipment electronics ~ ST Electronics (Software Services) Limited Dormant People’s Republic ST Electronics (Info-Security) Pte. Ltd. Design, development, sale and provision of technical Singapore of China support for information security products, solutions and services ST Electronics (e-Services) Pte. Ltd. Providing shared services to government ministries, Singapore agencies and enterprises

160 161 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Country of Country of incorporation/ incorporation/ Name of subsidiary Principal activities place of business Name of subsidiary Principal activities place of business

STELCOMMS Pte. Ltd. To undertake design and integration of projects in the Singapore iTS Technologies Pte Ltd Investment holding Singapore area of communications network and systems and to market and trade in communications related products and subsystems ST Electronics (Taiwan) Limited Provide integration for large-scale system projects in rail, Taiwan expressway and intelligent building management solutions Telematics Wireless Ltd. Development, manufacture, and marketing of products Israel for locating and directing vehicles, other mobile and STELOP Pte. Ltd. Design and development, manufacturing, maintaining Singapore stationary objects, people, equipment and merchandise, and sale of electro-optical products and systems and the systems for managing vehicular fleets, systems for provision of related services locating and thwarting car thefts, vehicular wireless equipment and communications for purposes of ST Electronics (Thailand) Limited To engage in engineering project service business as well Thailand identification and provision of information, electronic as to install, test, inspect, and control electronic system toll-road systems, and electronic systems for reading works of skytrain projects and other engineering projects water meters Singapore Technologies Kinetics Ltd Provision of design and engineering services, manufacture, Singapore Telematics Wireless USA Corp # Serves as a local point of contact for Telematics Wireless USA sales and knowhow transfer of military and commercial Ltd's customers for payments and Return Material vehicles, automotive subsystems, armament, weapons, Authorisation support weapon systems, ammunition and explosives and the provision of engineering services for assembly, upgrading/ ST Electronics (Satcom & Sensor Systems) Pte. Ltd. Manufacture of microwave components and sub-systems, Singapore modifications, maintenance, repair and overhaul of vehicles system integration and provision of related repairs and and weapon systems, and trading in motor vehicles, maintenance for the telecommunications and defence equipment, vehicle spares and related accessories electronics industries SDG Kinetics Pte. Ltd. Investment holding Singapore ST Electronics (Sichuan) Co., Ltd  Dormant People’s Republic of China LeeBoy India Construction Equipment Private Limited Design, manufacture, sale, distribution and aftersales India support of construction equipment iDirect Asia Pte. Ltd. Marketing and sales, design, manufacture & engineering Singapore services for electronics and communication systems LeeBoy Brazil Equipamentos De Contrução Ltda. # Manufacture of road construction equipment Brazil

OrisTel Systems Pte. Ltd. (formerly known as DataMark Turnkey supply of telecom network solutions to regional Singapore Mobility Systems Pte Ltd Investment holding Singapore Technologies Pte Ltd) Telecom Service Providers, Government and Utility companies, sale of telecom equipment and accessories and provision of engineering support, maintenance and Silvatech Global Systems Limited # z Owns the intellectual property rights to electro-hydraulic British Virgin training services drive, hydro-mechanical and electro-mechanical Islands continuously variable transmissions technologies, and equipment powered by such drives ST Electronics (Shanghai) Co., Ltd Development and manufacturing of monitoring and People’s Republic control systems, microwave systems, training and of China simulation systems, security systems, metro passenger Silvatech Systems Corporation Pte Ltd Designing, manufacturing, marketing and managing Singapore information systems, metro automated fare collection licences of technologies and products using electro- systems, metro platform screen door systems, integrated hydraulic drive, hydro-mechanical and electro-mechanical transportation systems (including fleet management continuously variable transmissions, and equipment systems, urban transport management systems, highway powered by such drives, globally management systems, etc.), metro transmission and

communication systems, EMC electromagnetic products # z and software; sale of product manufactured, system Kinetics Drive Solutions Inc. Research and development, manufacturing and sales Canada integration, after-sales, and consultancy services for the of electro-hydraulic drive, hydro-mechanical and above mentioned products. Engineering contractor for electro-mechanical continuously variable transmissions building intelligent projects (involving administrative technologies, and equipment powered by such drives licensing will need approved certification). Technicae Projetos e Serviços Automotivos Ltda. # Provision of automotive maintenance, repair and overhaul Brazil ST Electronics (Tianjin) Co., Ltd Development and manufacturing of monitoring and People’s Republic services including automotive platforms revitalisation and control systems, microwave systems, training and of China modernisation projects, as well as related trade, import simulation systems, security systems, metro passenger and export of parts and accessories information systems, metro automated fare collection systems, metro platform screen door systems, integrated STA Inspection Pte Ltd Dormant Singapore transportation systems (including fleet management systems, urban transport management systems, highway management systems, etc.), metro transmission and Singapore Commuter Private Limited Investment holding Singapore communication systems, EMC electromagnetic products and software; sale of product manufactured, system integration, after-sales, and consultancy services for the Jiangsu Huatong Kinetics Co., Ltd. Manufacture and sale of paving, mixing, road maintenance People’s Republic above mentioned products. Engineering contractor for and compaction equipment and other road construction of China building intelligent projects (involving administrative machineries licensing will need approved certification).

162 163 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Country of Country of incorporation/ incorporation/ Name of subsidiary Principal activities place of business Name of subsidiary Principal activities place of business

Jiangsu Huaran Kinetics Co., Ltd. Manufacture and sale of engineering machinery and People’s Republic Autonomous Technology Pte Ltd Investment holding Singapore equipment of China Guizhou Jonyang Kinetics Co., Ltd. Design, manufacture, sale and service support of People’s Republic Securedge Pte. Ltd. Provision of design and engineering services, Singapore construction, engineering and industrial-related machinery of China manufacture and sales of security related products, and accessories, provide engineering consultancy services and the provision of equipment maintenance services to engineering and manufacturing companies, provide rental of own-manufactured machinery and accessories STA Investment Pte Ltd Investment dealing Singapore Kinetics Automotive & Specialty Equipment Co., Ltd ∆ Dealer support in areas of marketing activities, product and Myanmar technical training and aftersales services including warranty ST Kinetics International Pte. Ltd. Investment holding Singapore Kinetics Systems (Shanghai) Co., Ltd. Manufacture and sale of vehicle drive systems, industrial People’s Republic VT Hackney S.A. de C.V. Manufacture and marketing of specialised aluminium Mexico drive motors and small external combustion engines of China drop-frame truck bodies and trailers Singapore Technologies Marine Ltd Construction and repair of naval and commercial vessels, Singapore SDDA Pte. Ltd. Assembling and marketing of diesel engines and related Singapore design, integration, fabrication, installation of military products and the provision of technical services, field and commercial engineering equipment and the provision services, repair and maintenance services of engineering consultancy and technical management services Kinetics Link Services Sdn. Bhd. Assembling, distributing and marketing of port handling Malaysia equipment, diesel engines and related products, and STSE Engineering Services Pte Ltd Design, manufacture, maintain and operate environmental Singapore the provision of technical services, field services and infrastructures and provide planning, consultancy services maintenance services in environmental and renewable energy management solutions ST Kinetics Integrated Engineering Pte. Ltd. Provision of customised solutions, products for defence Singapore and commercial markets STSE (Shanghai) Co. Ltd. Design, development, manufacturing, sales, after- People’s Republic sales services and consulting services of equipment for of China Singapore Test Services Private Limited Provision of professional engineering consultancy, tests, Singapore environmental protection projects; wholesale, import and inspection, certification and related services, inspection export and related business of similar products; consulting of heavy goods vehicles, light vehicles, motor cars, buses services for environmental projects information, and motorcycles, provision of vehicle inspection, project consulting services for commercial information management as well as provision of independent damage assessment services STSE Engineering Services (B) Sdn Bhd Design, manufacture, maintain and operate environmental Brunei infrastructures and provide planning, consultancy services ST Kinetics Pte. Ltd. Dormant Singapore in environmental and renewable energy management solutions Advanced Material Engineering Pte. Ltd. Provision of design and engineering services, manufacture, Singapore sales, disposal and knowhow transfer of precision Hovertrans Solutions Pte. Ltd. Design, marketing and solutioning for employment of Singapore munitions, ammunition, armament, weapon systems, heavy lift air cushion marine vessel for use in oil and gas, military equipment, explosives, hand-grenades, thunder- transportation and other civil engineering purposes flashes, pyrotechnic products and gunpowder and the provision of engineering services for assembly, upgrading/ ST Marine (Wuhan) Engineering Design Consultancy To provide industrial engineering design, research and People’s Republic modifications, maintenance, repair and overhaul of Co. Ltd. development and consultancy services of China ammunition and weapon systems, and related services Vision Technologies Systems, Inc. # Investment holding USA Advanced Pyrotechnic Materials Private Limited Manufacture and sale of pyrotechnic products Singapore Vision Technologies Aerospace, Incorporated # Investment holding USA SMART Systems Pte Ltd Life systems integration of weapon system Singapore ST Aerospace Mobile, Inc. # z Repair and maintenance of aircraft USA Unicorn International Pte Limited Trading and marketing Singapore DalFort Aerospace GP, Inc. # Dormant USA Allied Ordnance of Singapore (Pte) Limited Dormant Singapore DalFort Aerospace, L.P. ++ Dormant USA Ordnance Development and Engineering Company of Dormant Singapore Singapore (1996) Private Limited San Antonio Aerospace GP, LLC # Investment holding USA

ST Aerospace San Antonio, L.P. # z Repair and maintenance of aircraft USA

164 165 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

Country of Country of incorporation/ incorporation/ Name of subsidiary Principal activities place of business Name of subsidiary Principal activities place of business

DRB Aviation Consultants, Inc. # z Provision of aircraft engineering services USA VT Hackney, Inc. # z Manufacture and marketing of specialised aluminium USA drop-frame truck bodies, trailers, refrigerated truck bodies and trailers and specialty vehicle cabs EcoServices, LLC # z Provision of engine wash services USA Vision Technologies Marine, Inc. # Investment holding USA Volant Aerospace, LLC # z Providing new or refurbishment of aircraft interior parts; USA support services and aircraft interior configuration services VT Halter Marine, Inc. # z Construction and repair of naval and commercial vessels, USA

# design, integration, fabrication, installation of engineering Venture Capital Systems, Inc. Investment holding USA equipment and provision of engineering services

Vision Technologies Electronics, Inc. # Investment holding USA VT Systems International, LLC # Investment holding USA

VT iDirect, Inc. # z Design, develop and market two-way internet protocol – USA VT Systems Participações Ltda. # Promotion and marketing of products and services Brazil (IP) based broadband satellite networking solutions that deliver voice, data and video services to enterprise and government customer locations worldwide Singapore Technologies Dynamics Pte Ltd Technology development, advanced concept design and Singapore development and technology acquisition iDirect Hong Kong Limited  Dormant Hong Kong ST Synthesis Pte Ltd Provision of one-stop total integrated logistic support Singapore services and engineering services iDirect UK Limited Markets two-way internet protocol – United Kingdom (IP) based broadband satellite networking solutions FusionTech Pte. Ltd. Investment holding Singapore Parallel Limited Software development and associated services; United Kingdom installation, configuration, consultancy and support Kaz-ST Engineering Bastau Limited Liability Partnership # Provision of IT, engineering, defence and related services Kazakhstan

iDirect Italy S.r.l. # z Markets two-way internet protocol – Italy ST Engineering Financial I Ltd. Provision of financial and treasury services to the Group Singapore (IP) based broadband satellite networking solutions ST Engineering Financial II Pte. Ltd. Provision of financial and treasury services to the Group Singapore iDirect International, Inc. # z Markets two-way internet protocol – USA (IP) based broadband satellite networking solutions # Not required to be audited under the law in the country of incorporation. + iDirect Government Technologies, Inc. # z Design, develop and market two-way internet protocol USA The company ceased operations in November 2012. – (IP) based broadband satellite networking solutions ∆ These companies were incorporated during the year and were not audited for the purpose of consolidation for the current year. that deliver voice, data and video services to government ~ customers These companies are under members’ voluntary liquidation.  These companies are in the process of deregistration. VT iDirect Canada, Inc. # z Research and development Canada z Audited by member firms of KPMG International for consolidation purposes. ++ The company ceased operations in October 2003. Vision Technologies Kinetics, Inc. # Investment holding USA

Miltope Corporation # z Development of computers and peripheral equipment for USA rugged and other specialized applications for military and commercial customers, both domestic and international

IV Phoenix Group, Inc. # Dormant USA

MÄK Technologies, Inc. # z 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. # z 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

166 167 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

13. Subsidiaries (continued) 13. Subsidiaries (continued)

All subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore, (a) During the financial year, the Group incorporated the following companies: except for the following: Country of Equity incorporation/ interest place of held Name of subsidiary Name of auditing firm Name of company business %

Aerospace Engineering Services Pty Ltd KPMG (Perth) ST Aerospace Resources Pte. Ltd. Singapore 100 Aerospace Engineering Services Pty Ltd Unit Trust KPMG (Perth) Airline Rotables (UK Holdings) Limited KPMG LLP (United Kingdom) ST Electronics (Wuxi) Co., Ltd. People’s Republic of China 100 Airline Rotables Limited KPMG LLP (United Kingdom) Aviation Training Academy Australia Pty Ltd KPMG (Melbourne) ST Electronics (Thailand) Limited Thailand 100 Pacific Flight Services Pty Ltd KPMG (Sydney) Singapore Technologies Engineering (Europe) Ltd KPMG LLP (United Kingdom) ST Electronics (Tianjin) Co., Ltd People’s Republic of China 100 ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd. KPMG Huazhen ST Aerospace Academy (Australia) Pty Ltd KPMG (Melbourne) Kinetics Automotive & Specialty Equipment Co., Ltd Myanmar 100 ST Aerospace Panama, Inc. KPMG (Panama) LeeBoy Brazil Equipamentos De Contrução Ltda. Brazil ST Aerospace Solutions (Europe) A/S KPMG (Denmark) 100 ST Aerospace Technologies (Xiamen) Company Limited KPMG Huazhen (b) During the financial year, the Group acquired the following company: ST PAE Holdings Pty Ltd KPMG (Perth)

Antycip Simulation Limited KPMG LLP (United Kingdom) Fair value of Antycip Simulation SAS KPMG Audit Paris Interest net identifiable acquired Consideration assets acquired iDirect Hong Kong Limited KPMG (Hong Kong) Name of company % $’000 $’000 iDirect UK Limited KPMG LLP (United Kingdom) INFA Systems Limited KPMG (Hong Kong) Technicae Projetos e Serviços Automotivos Ltda. 90 612 98 Parallel Limited KPMG LLP (United Kingdom) PMB Project Management Business Sdn Bhd KPMG Desa Megat & Co SEEL Electronic & Engineering Sdn Bhd KPMG Desa Megat & Co ST Electronics (Sichuan) Co., Ltd KPMG China ST Electronics (Shanghai) Co., Ltd KPMG China ST Electronics (Software Services) Limited KPMG Huazhen ST Electronics (Taiwan) Limited KPMG (Taipei) ST Electronics (Thailand) Limited KPMG Phoomchai Audit Ltd. ST Electronics (Tianjin) Co., Ltd KPMG, Tianjin ST Electronics (Wuxi) Co., Ltd. KPMG China Telematics Wireless Ltd. KPMG Somekh Chaikin Guizhou Jonyang Kinetics Co., Ltd. KPMG China Kinetics Automotive & Specialty Equipment Co., Ltd Khin Su Htay & Associates, Myanmar Kinetics Link Services Sdn. Bhd. KPMG Desa Megat & Co. KPMG Tax Services Sdn Bhd Kinetics Systems (Shanghai) Co., Ltd. KPMG China LeeBoy India Construction Equipment Private Limited B S R & Co., Bangalore Jiangsu Huatong Kinetics Co., Ltd KPMG, Nanjing Jiangsu Huaran Kinetics Co., Ltd KPMG, Nanjing VT Hackney, S.A. de C.V. KPMG Cárdenas Dosal S.C. ST Marine (Wuhan) Engineering Design Consultancy Co Ltd. KPMG China STSE (Shanghai) Co. Ltd. KPMG China STSE Engineering Services (B) Sdn Bhd KPMG (Brunei)

168 169 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

14. Associates and jointly controlled entities 14. Associates and jointly controlled entities (continued)

Group Company (a) Details of associates are as follows: 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Effective equity interest held by the Unquoted shares, at cost 380,130 227,011 17,657 17,657 Group Goodwill on acquisition written off, net (110) (110) Country of 2012 Share of net assets acquired 226,901 incorporation/ 2013 380,020 Name of associate Principal activities place of business % % Impairment in associates and joint controlled entities * (6,660) (1,121) Share of post-acquisition reserves 88,779 80,336 Airbus Helicopters Southeast Asia Selling, maintaining and overhauling of Singapore 25 25 462,139 306,116 Private Limited (formerly known as helicopters Eurocopter South East Asia Private Limited) * During the year, (a) An impairment loss of $2,723,000 was recognised in an associate due to a permit not granted by the relevant authorities to conduct its CJS Aviation Pte. Ltd. Provision of scheduled premium class jet Singapore 26 – operations; services (b) An impairment loss of $1,270,000 was recognised in an associate as the financial performance of the associate was not up to management’s expectation; and Composite Technology International Repairing and rebuilding helicopter rotor Singapore 33.33 33.33 Pte Ltd blades (c) An impairment loss of $1,546,000 was recognised in an associate as there were indications of impairment and management assessed that the recoverable amount of the investment based on management’s estimate of fair value less cost to sell is $1. Elbe Flugzeugwerke GmbH Conversion of used Airbus passenger Germany 35 – aircraft to freighter as well as the The summarised financial information of the associates is as follows: production of aircraft components and equipment, including supply for Airbus production of new and converted aircraft Group 2013 2012 Madrid Aerospace Services S.L. Repair and overhaul of aircraft landing Spain 50 50 $’000 $’000 gears and its related components

Results Shanghai Technologies Aerospace Aircraft and component maintenance, People’s 49 49 Revenue 968,731 Company Limited repair, overhaul and other related Republic of 1,317,448 maintenance business China

Net profit for the year 79,437 86,629 ST Aerospace (Guangzhou) Aviation Aircraft and component maintenance, People’s 49 49 Services Company Limited repair, overhaul and other related Republic of Assets and liabilities maintenance business China Non-current assets 620,301 447,308 Singapore Precision Repair and Repair and overhaul of aircraft and Singapore 50 50 Current assets 669,965 509,288 Overhaul Pte Ltd helicopter landing gears and its related Current liabilities (501,008) (275,920) components Non-current liabilities (44,294) (32,980) Turbine Coating Services Pte Ltd Repair, refurbishment and upgrading Singapore 24.5 24.5 744,964 647,696 of aircraft jet engine turbine blades and vanes The Group’s share of the jointly controlled entities’ results, assets and liabilities are as follows: Turbine Overhaul Services Pte Ltd Repair and service of gas and steam Singapore 49 49 Group turbine components 2013 2012 $’000 $’000 iWOW Technology Pte Ltd *1 To carry out research and experimental Singapore 1.52 17.18 development on IT R&D, consultancy Income and expenses services on telecommunication software and manufacture of wireless Income 52,185 46,995 communications equipment, wireless communications devices and equipment manufacturing Expenses (49,188) (45,783)

Assets and liabilities Non-current assets 145,191 72,212 Current assets 39,062 38,335 Current liabilities (28,525) (28,580) Non-current liabilities (114,942) (62,440) 40,786 19,527

170 171 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

14. Associates and jointly controlled entities (continued) 14. Associates and jointly controlled entities (continued)

(a) Details of associates are as follows: (continued) (b) Details of jointly controlled entities are as follows:

Effective equity Effective equity interest held by the interest held by the Group Group Country of Country of incorporation/ 2013 2012 Name of jointly incorporation/ 2013 2012 Name of associate Principal activities place of business % % controlled entities Principal activities place of business % %

NEC STEE Cloud Services Pte. Ltd. Providing cloud computing services, Singapore 40 40 Total Engine Asset Management Leasing of engines Singapore 50 50 computing infrastructure for cloud Pte. Ltd. computing services, systems integration and systems migration services in WingStar Pte. Ltd. *4 Acquisition, ownership and management of Singapore 50 – relation to cloud computing services, aircraft customisation of SAP software or other customised software for use in conjunction with or in relation to cloud GFM Electronics S.A. de C.V. Design and implementation, distribution and Mexico 50 50 computing services sales of high technology systems, services and products, in the communications area, as well as electronics systems, principally closed circuits Prescient Systems & Technologies Business of developing, producing and Singapore – 47.84 and alarms for airports, malls, stadiums and Pte. Ltd. *2 marketing non-real time and real time highways. Management of reusable electronic instrumentation systems for defence equipment and components and commercial applications; design and development of training centres and provision of managed services ST Electronics (Satellite Systems) Design and development, system integration, Singapore 51 51 Pte. Ltd. manufacturing and sale of satellite equipment Trusted Hub Ltd *2 Provision of an integrated trusted Singapore 21.13 – ATREC Pte. Ltd. Research and technology development in Singapore 50 50 environment for secured transactions and advanced materials for both defence and e-commerce commercial applications

WizVision Pte. Ltd. Providing information technology services Singapore 22.8 22.8 Beijing Zhonghuan Kinetics Develop, manufacture and sale of specialised People’s 50 50 and trading of computer accessories Heavy Vehicles Co., Ltd. *5 heavy vehicles and sale of related spare parts and Republic of provision of relevant technical consultancy and China CityCab Pte Ltd Rental of taxis and provision of premier Singapore 46.5 46.5 after sale technical support services bus service, charge card facilities and travel related services Takata CPI Singapore Pte Ltd Manufacture of pyrotechnic components for Singapore 49 49 seatbelts and air bags used in motor vehicles GFM Maquinaria, S.A.P.I. de C.V. *3 Sale of construction and mining Mexico 40 40 machinery and equipment First Response Marine Pte. Ltd. Ship and boat leasing with operator (including Singapore 50 50 chartering)

Timoney Holdings Limited Design and prototyping services and Republic of 27.7 27.7 Fortis Marine Solutions Pte. Ltd. To provide design and systems engineering Singapore 51 51 component supply for the automotive Ireland services and maintenance of specialised naval and aerospace engineering sectors vessels

NanoScience Innovation Pte Ltd Research and development of ultra fine Singapore 21.6 27.06 Halter-Bollinger Joint Venture, To bid and secure US boat fabrication contracts USA 50 50 structure, especially nano-scale, materials, L.L.C. *6 for its shareholders devices, equipment and intellectual properties Joint Shipyard Management Construction and managing workers’ dormitories Singapore 30 30 Services Pte Ltd Experia Events Pte. Ltd. Organising and management of Singapore 33 33 conferences, exhibitions and other related Nova Star Cruises Limited *7 Provision of ferry services Canada 10 activities, including the biennial Singapore – Airshow event *1 In the prior year, despite effective shareholdings below 20%, this entity was classified as an associate as the Group was considered to have significant influence over the entity due to its Board representative. During the financial year, the Group lost its significant influence Singapore Airshow & Events Pte. Ltd. Dormant Singapore 33 33 over the management of this entity as a result of a decrease in its effective shareholdings to 1.52% and the removal of representation on its board of directors. *2 These entities were disposed of during the year. *3 This entity was disposed of in February 2014. *4 This entity was incorporated during the year and was not audited for the purpose of consolidation for the current year. *5 This entity was disposed of in January 2014 for a cash consideration of $3.28 million. As part of the agreement, the Group will co-own the product intellectual property of the entity. *6 Not required to be audited under the law in the country of incorporation. *7 This entity was incorporated during the year and was not required to be audited for for the current year.

172 173 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

14. Associates and jointly controlled entities (continued) 16. Intangible assets

All associates and jointly controlled entities that are required to be audited under the law in the country of incorporation are audited (a) Goodwill by KPMG LLP, Singapore, except for the following: Group 2013 2012 Name of associate/jointly controlled entity Name of auditing firm Note $’000 $’000

Composite Technology International Pte Ltd Deloitte and Touche LLP, Singapore Cost Elbe Flugzeugwerke GmbH KPMG (AG Dresden) At beginning of the year 460,337 463,378 Madrid Aerospace Services S.L. Deloitte S.L. Acquisition of subsidiaries and business 5,847 22,673 Shanghai Technologies Aerospace Company Limited KPMG China Finalisation of purchase price allocation (908) 899 ST Aerospace (Guangzhou) Aviation Services Company Limited KPMG Huazhen Disposal of a subsidiary (112) – Turbine Coating Services Pte Ltd PricewaterhouseCoopers LLP, Singapore Translation difference 15,233 (26,613) Turbine Overhaul Services Pte Ltd PricewaterhouseCoopers LLP, Singapore At end of the year 480,397 460,337 Total Engine Asset Management Pte. Ltd. Ernst & Young LLP, Singapore Impairment GFM Electronics S.A. de C.V. PricewaterhouseCoopers, Mexico At beginning of the year 29,262 18,729 WizVision Pte. Ltd. R Chan & Associates PAC Impairment losses for the year ^ 5 2,141 12,351 CityCab Pte Ltd Deloitte and Touche LLP, Singapore Disposal of a subsidiary (112) – GFM Maquinaria, S.A.P.I. de C.V. PricewaterhouseCoopers, Mexico Translation difference 704 (1,818) Timoney Holdings Limited KPMG (Ireland) At end of the year 31,995 29,262 Beijing Zhonghuan Kinetics Heavy Vehicles Co., Ltd. Ruihua Certified Public Accountants Takata CPI Singapore Pte Ltd Ernst & Young LLP, Singapore Group Fortis Marine Solutions Pte. Ltd. Ernst & Young LLP, Singapore 31.12.2013 31.12.2012 1.1.2012 NanoScience Innovation Pte Ltd NSC & Associates $’000 $’000 $’000

Net book value 448,402 431,075 444,649 15. Investments ^ For the purpose of annual impairment testing, the recoverable amounts of the CGUs are determined based on their value-in-use calculations. During the year, the recoverable amounts of three subsidiaries (2012: three subsidiaries) are determined to be lower Group than the carrying values and impairment losses of $2,141,000 (2012: $12,351,000) are recognised in other operating expenses in the 2013 2012 income statement. Note $’000 $’000

Quoted investments Equity shares, at fair value (Available-for-sale) 44 349 10,771

Unquoted investments Equity shares (Available-for-sale) Non-related corporations, at cost 632 1,265

Bonds, at fair value (Available-for-sale) 44 165,009 332,916 Interest rate: 1.18% to 4.95% (2012: 1.15% to 5.88%) per annum Maturity: 17.1.2014 to 7.11.2024 (2012: 18.1.2013 to 7.11.2024)

Venture capital funds and limited partnership, at fair value 44 43 44 Total unquoted investments 165,684 334,225

Total investments, net of impairment losses 166,033 344,996

Unquoted equity investments where the fair value cannot be reliably estimated are classified as available-for-sale investments. The Group has no intention to dispose these investments at the balance sheet date.

174 175 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

16. Intangible assets (continued)

(b) Other intangible assets

Commercial and Dealer Development intellectual Film cost Technology network expenditure property rights inventory Brands Licenses agreement Others Total Note $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

Cost At 1.1.2012 8,445 14,671 64,842 11,803 77,098 2,936 – 4,077 183,872 Additions – – 1,390 – – 1,545 – – 2,935 Acquisition of subsidiaries 4,335 – – – 1,062 5,862 – 7,991 19,250 Finalisation of purchase price allocation – – – – (248) (434) – (20) (702) Translation difference (498) (52) (3,275) – (4,454) (4) – (1) (8,284) At 31.12.2012 and 1.1.2013 12,282 14,619 62,957 11,803 73,458 9,905 – 12,047 197,071 Additions – 2,978 – – – 32,748 31,353 – 67,079 Acquisition of business 2,742 – 2,963 – – – – – 5,705 Finalisation of purchase price allocation 8,252 – – – 35 (155) – (1,068) 7,064 Translation difference 290 166 2,138 – 2,839 (185) 629 – 5,877 At 31.12.2013 23,566 17,763 68,058 11,803 76,332 42,313 31,982 10,979 282,796

Accumulated amortisation At 1.1.2012 6,344 1,289 36,466 10,970 5,801 – – 3,413 64,283 Amortisation for the year * 5 1,593 3,346 5,617 31 1,724 40 – 802 13,153 Impairment losses 5 – – – 802 – – – – 802 Translation difference (397) (71) (1,874) – (342) (1) – – (2,685) At 31.12.2012 and 1.1.2013 7,540 4,564 40,209 11,803 7,183 39 – 4,215 75,553 Amortisation for the year * 5 2,059 2,813 5,754 – 1,229 851 2,002 160 14,868 Impairment losses 5 – – – – 312 – – – 312 Translation difference 269 145 1,336 – 289 (4) 22 – 2,057 At 31.12.2013 9,868 7,522 47,299 11,803 9,013 886 2,024 4,375 92,790

Net book value

At 31.12.2013 13,698 10,241 20,759 – 67,319 41,427 29,958 6,604 190,006

At 31.12.2012 4,742 10,055 22,748 – 66,275 9,866 – 7,832 121,518

At 1.1.2012 2,101 13,382 28,376 833 71,297 2,936 – 664 119,589

* Amortisation charge of $14,868,000 (2012: $13,153,000) is recognised in the income statement as part of: - Other operating expense of $8,671,000 (2012: $9,350,000); and - Cost of sales of $6,197,000 (2012: $3,803,000)

176 177 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

16. Intangible assets (continued) 16. Intangible assets (continued)

(b) Other intangible assets (continued) (c) Total intangible assets (continued)

Impairment of film cost inventory Impairment testing of goodwill (continued)

In the prior year, an impairment test relating to the carrying amount of film cost inventory was triggered during the financial The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections derived year as a result of revised sales forecasts and actual sales data received from the film producers. The recoverable amount was from the financial budgets approved by management for the next five years. The key assumptions used in the calculation of estimated based on its value-in-use based on sales forecasts provided by the producers and using a discount rate of 8.44%. recoverable amounts are as follows: The carrying amount of the film inventory was determined to be higher than its recoverable amount and an impairment loss Pre-tax discount rate Terminal value growth rate of $802,000 was recognised. The impairment loss was recognised in cost of sales in the income statement. 2013 2012 2013 2012 % % % % (c) Total intangible assets Aerospace Group Aircraft Maintenance & Modification 9.2 – 13.5 7.6 – 13.5 2.0 2.0 31.12.2013 31.12.2012 1.1.2012 Component/Engine Repair & Overhaul 10.8 – 13.0 7.0 – 13.0 2.0 2.0 $’000 $’000 $’000 Engineering & Material Services 5.2 – 18.7 5.3 – 18.7 2.0 – 4.4 2.0 – 4.4

Net book value 638,408 552,593 564,238 Electronics Communications & Sensor Systems Group 12.8 – 14.1 10.3 – 13.9 4.0 – 5.0 4.0 – 5.0 Impairment testing of goodwill Software Systems Group 11.4 – 17.3 10.5 – 14.1 2.0 – 3.0 2.0 – 3.0 Land Systems For the purpose of impairment testing, goodwill is allocated to the Group’s business divisions. The aggregate carrying Automotive 14.0 – 15.9 12.0 – 15.1 5.0 3.9 amounts of goodwill allocated to each CGU within the business divisions are as follows: Others 14.2 14.5 3.0 3.0 Group The discount rate used is estimated based on past experience and the industry weighted average cost of capital. 2013 2012 $’000 $’000 The long-term terminal value growth rate has been determined based on either the nominal GDP rates for the country in which the CGU is based on the long-term compound annual growth rate estimated by management by reference to Aerospace forecasts included in industry reports and expected market development. Aircraft Maintenance & Modification 10,740 8,537 Component/Engine Repair & Overhaul 12,133 15,244 Sensitivity to changes in assumptions: Engineering & Material Services 5,921 5,866 (a) Following the impairment in three of the CGUs within the business divisions, the recoverable amounts in these CGUs are approximately equal to the carrying amounts. Therefore, any adverse movement in a key assumption would lead Electronics to a further impairment in these CGUs. Communication & Sensor Systems Group 229,164 220,996 Software Systems Group 26,263 26,938 (b) Management has identified the following key assumption for which a change as set out below could cause the carrying amount to exceed the recoverable amount. Land Systems Change required for carrying Automotive 131,477 121,941 amount to equal the recoverable amount Others 32,704 31,553 2013 2012 Business Divisions Assumption % % 448,402 431,075 Aerospace The purchase price allocation to goodwill and other net assets relating to the acquisition of EcoServices, LLC and Volant Aircraft Maintenance & Modification Sales growth rate (average of next 5 years) 4.0 4.0 Aerospace, LLC were finalised during the year. Details of the adjustments made to the provisional purchase price allocation Component/Engine Repair & Overhaul Sales growth rate (average of next 5 years) 6.5 are set out in the consolidated statement of cash flows. 5.4 Electronics Communications & Sensor Systems Group Pre-tax discount rate 2.9 –

Land Systems Automotive Pre-tax discount rate 1.0 3.3 Terminal value growth rate 1.6 3.9 (c) No sensitivity analysis was disclosed for the remaining CGUs as the Group believes that any reasonable possible change in the key assumptions is not likely to materially cause the recoverable amount to be lower than its carrying amount.

178 179 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

17. Investment property 18. Long-term receivables

Group Group 2013 2012 2013 2012 Note $’000 $’000 $’000 $’000

Cost Housing and car loans and advances to staff 670 932 At beginning of the year 10,525 3,244 Loans to: Transfer from property, plant and equipment * – 10,525 Third parties * 33,312 44,282 Disposal ^ (10,525) (3,633) Allowance for doubtful loans (8,946) (8,923) Translation difference – 389 24,366 35,359 At end of the year – 10,525 25,036 36,291

Accumulated depreciation Receivable: At beginning of the year 286 1,735 Within 1 year 12,508 12,234 Depreciation charge for the year 5 787 365 After 1 year 12,528 24,057 Disposal ^ (1,073) (2,274) 25,036 36,291 Translation difference 460 – Long-term receivables are carried at amortised cost and are subject to impairment. At end of the year – 286 * Included in the loans to third parties are: Group (a) a loan of $8,312,000 (2012: $8,312,000) secured by intellectual property rights, and is not expected to be repaid within the next 12 31.12.2013 31.12.2012 1.1.2012 months. Interest is repriced every month and chargeable at the US dollar prime rate plus 2% (2012: 2%) per annum, which is also the $’000 $’000 $’000 effective interest rate. The loan is convertible to shares of that entity, subject to certain terms and conditions. In a 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 Net book value – 10,239 1,509 was fully impaired in the prior year.

* In the prior year, the Group transferred a property from property, plant and equipment to investment property as it was no longer No owner-interest income has been accrued for this financial year due to uncertainty over the collectibility of the interest income. occupied. The property was held for rental and capital appreciation. (b) a bridging loan of $633,600 (US$500,000) (2012: $611,300 (US$500,000)) extended to a third party. The bridging loan is secured by way ^ During the year, the Group disposed of an investment property for cash consideration of $22,000,000 (2012: $3,908,000). The Group receivedof 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 the consideration on 17 January 2014. third party and is not expected to be repaid. The loan is stated at cost and has been fully impaired due to uncertainty over collectability.

The property rental income of the Group for the year ended 31 December 2013 from its investment property, which was leased out (c) an amount of $24,366,000 (2012: $35,359,000) relating to instalment payment plans granted to customers. These loans are unsecured, repayable over a period of 7.5 years from 2008. The interest rates on these loans are LIBOR with margins at 0.63% (2012: 0.63%) per under operating leases, amounted to $1,771,000 (2012: $586,000). Direct operating expenses (including repairs and maintenance) annum. The interest rates range from 0.98% to 1.16% (2012: 1.16% to 1.43%) per annum, which are also the effective interest rates. The arising from the rental-earning investment property amounted to $1,110,000 (2012: $435,000). interest rates are repriced every six months.

In the prior year, the fair value of the investment property as at 31 December 2012 of $13,000,000 was 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.

180 181 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

19. Finance lease receivables 20. Deferred tax assets and liabilities

The Group entered into finance lease arrangements with customers with terms ranging Unrecognised from temporary 1 differences to relating5 to years investments (2012: in subsidiaries 1 to 5 years) and effective interest rates ranging from 1.3% to 8.73% (2012: 2.34% to 20.74%) per annum. As at 31 December 2013, no deferred tax liabilities (2012: nil) has been recognised for taxes that would be payable on the Gross Present value of Allowance for undistributed earnings of certain subsidiaries of the Group as the Group has determined that the undistributed profits of its overseas investment in Unearned minimum lease doubtful lease Net investment subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organic growth and acquisitions. finance lease interest receivables receivables in finance lease $’000 $’000 $’000 $’000 $’000 Unrecognised deferred tax assets The Group Deferred tax assets have not been recognised in respect of the following items: 2013 Within 1 year 29,903 (330) 29,573 (13,126) 16,447 Group 2 to 5 years 4,484 (545) 3,939 (1,260) 2,679 2013 2012 $’000 $’000 34,387 (875) 33,512 (14,386) 19,126 Tax losses 231,217 138,949 2012 Deductible temporary differences 2,937 3,258 Within 1 year 33,905 (814) 33,091 (9,316) 23,775 Unabsorbed wear and tear allowance and investment allowance 2,218 3,086 2 to 5 years 11,360 (981) 10,379 – 10,379 236,372 145,293 45,265 (1,795) 43,470 (9,316) 34,154 The tax benefits have not been recognised in the financial statements due to the uncertainty of the sufficiency of future Group taxable profits to be generated in the foreseeable future. The use of these potential tax benefits is subject to the agreement of 2013 2012 the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the $’000 $’000 subsidiaries operate.

Net investment in finance lease Not past due and not impaired 6,956 24,146 Past due and not impaired 12,170 10,008 19,126 34,154

Individually assessed Doubtful lease receivables 14,386 9,316 Allowance for doubtful lease receivables (14,386) (9,316) – –

182 183 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

20. Deferred tax assets and liabilities (continued) 20. Deferred tax assets and liabilities (continued)

Recognised deferred tax assets and liabilities Movement in temporary differences during the year:

Deferred tax assets and liabilities are attributable to the following: Recognised Recognised in other Acquired Utilisation As at in profit comprehensive in business of tax Exchange As at Assets Liabilities 1.1.2012 or loss income combinations losses difference 31.12.2012 2013 2012 2013 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 The Group The Group Property, plant and equipment 70,688 6,827 – – – (1,404) 76,111 Property, plant and equipment (51) (42) 84,955 76,153 Intangible assets 65,377 (943) – 1,149 – (5,050) 60,533 Intangible assets – – 69,655 60,533 Allowance for doubtful debts (2,719) 67 – – – 166 (2,486) Allowance for doubtful debts (1,688) (2,536) – 50 Allowance for inventory obsolescence (13,421) (3,148) – – – 312 (16,257) Allowance for inventory obsolescence (18,882) (16,257) – – Provisions (117,776) (7,311) – – – 2,398 (122,689) Provisions (130,425) (122,689) – – Unabsorbed capital allowances Unabsorbed capital allowances and unutilised tax losses (24,700) (31,103) – – and unutilised tax losses (40,725) (128) – – 8,058 1,692 (31,103) Fair value of derivative financial instruments Fair value of derivative financial designated as cash flow hedges (803) (4,083) 6,934 784 instruments designated as cash flow hedges (4,377) – 977 – – 101 (3,299) Other items (8,711) (13,097) 22,949 26,628 Other items 13,876 (7,414) – – 6,842 227 13,531 Deferred tax (assets)/liabilities (185,260) (189,807) 184,493 164,148 (29,077) (12,050) 977 1,149 14,900 (1,558) (25,659) Set off of tax 89,626 79,519 (89,626) (79,519) Net deferred tax (assets)/liabilities (95,634) (110,288) 94,867 84,629 Recognised Recognised in other Acquired Utilisation Assets Liabilities As at in profit comprehensive in business of tax Exchange As at 1.1.2013 or loss income combinations losses difference 31.12.2013 2013 2012 2013 2012 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 The Group The Company Property, plant and equipment 76,111 7,822 – – – 971 84,904 Property, plant and equipment – – 167 167 Intangible assets 60,533 1,914 – 4,941 – 2,267 69,655 Provisions (7,639) – – – Allowance for doubtful debts (2,486) 890 – – – (92) (1,688) Other items – (2,099) 272 1,362 Allowance for inventory obsolescence (16,257) (2,337) – – – (288) (18,882) Deferred tax (assets)/liabilities (7,639) (2,099) 439 1,529 Provisions (122,689) (6,338) – – – (1,398) (130,425) Set off of tax 439 1,529 (439) (1,529) Unabsorbed capital allowances Net deferred tax assets (7,200) (570) – – and unutilised tax losses (31,103) (1,300) – – 8,742 (1,039) (24,700) Fair value of derivative financial instruments designated as cash flow hedges (3,299) – 9,479 – – (49) 6,131 Other items 13,531 (2,419) – – 2,556 570 14,238 (25,659) (1,768) 9,479 4,941 11,298 942 (767)

Recognised Recognised As at in profit As at in profit As at 1.1.2012 or loss 31.12.2012 or loss 31.12.2013 $’000 $’000 $’000 $’000 $’000

The Company

Property, plant and equipment 227 (60) 167 – 167 Provisions – – – (7,639) (7,639) Other items 528 (1,265) (737) 1,009 272 755 (1,325) (570) (6,630) (7,200)

184 185 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

21. Inventories and work-in-progress 22. Trade receivables

Group Group 2013 2012 2013 2012 $’000 $’000 $’000 $’000

Inventories of equipment and spares 935,692 868,276 Not past due and not impaired 574,989 525,534 Past due and not impaired 366,912 364,328 Work-in-progress in excess of progress billings 941,901 889,862 Work-in-progress, including profits recognised 3,506,919 3,869,371 Progress billings (2,635,102) (2,815,688) Collectively assessed 871,817 1,053,683 Gross receivables 4,777 16,183 Total inventories and work-in-progress at lower of cost and net realisable value 1,807,509 1,921,959 Allowance for doubtful debts (4,777) (10,398) – 5,785 Progress billings in excess of work-in-progress Work-in-progress, including profits recognised 4,456,434 3,438,176 Individually assessed Progress billings (5,191,159) (4,199,377) Gross receivables 44,946 57,377 (734,725) (761,201) Allowance for doubtful debts (44,886) (56,281) 60 1,096 In 2013, raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of sales amounted to $3,720,453,000 (2012: $3,768,484,000). Unbilled receivables 281,201 262,131 Allowance for unbilled receivables (1,225) (292) (i) Allowances for inventory obsolescence and foreseeable losses Trade receivables, net 1,221,937 1,158,582 As at 31 December 2013, the inventories are stated after allowance for inventory obsolescence of $210,103,000 Trade receivables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at (2012: $186,248,000) and work-in-progress in excess of progress billings is stated after provision for foreseeable losses of 31 December are as follows: $17,969,000 (2012: $2,319,000). • $218,060,000 (2012: $127,461,000) denominated in USD (ii) Net realisable value write-down • $14,546,000 (2012: $34,031,000) denominated in Euro As at 31 December 2013, inventories amounting to $30,225,000 (2012: $6,230,000) were written down to the estimated Trade receivables amounting to $10,970,000 (2012: $12,637,000) are arranged to be repaid through letters of credit issued by net realisable value. The written-down value was included in cost of sales. During the year, the work-in-progress with net reputable banks. realisable value of $131,815,000 was reclassified to property, plant and equipment (Note 12) as the asset will be engaged in an operating lease.

186 187 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

23. Amounts due from related parties 24. Advances and other receivables

Group Company Group Company 2013 2012 2013 2012 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Note $’000 $’000 $’000 $’000

Trade: Deposits 19,519 16,630 4,422 540 Subsidiaries – – 5,601 5,267 Interest receivables 12,330 8,370 1,602 1,195 Associates 16,061 6,645 – – Other recoverables 42,080 60,549 3,557 1,837 Jointly controlled entities 1,527 5,442 – – Non-trade receivables 73,261 50,993 44 30 Related corporations 19,069 11,574 7 20 Advance payments to suppliers 314,626 340,914 – – 36,657 23,661 5,608 5,287 Prepayments 84,580 39,527 88 337 Derivative financial instruments 44 51,814 13,568 114 17 Non-trade: 598,210 530,551 9,827 3,956 Subsidiaries *1 – – 762,665 781,956 Associates *2 2,624 2,434 – – Jointly controlled entities *3 9,285 6,857 – – 25. Short-term investments 11,909 9,291 762,665 781,956 Group Allowance for doubtful debts (1,060) (1,792) (4,901) (7,963) 2013 2012 Amounts due from related parties 47,506 31,160 763,372 779,280 Note $’000 $’000

Receivable: Quoted investments Equity shares, at fair value (Fair value through profit or loss) 44 204 347 Within 1 year 40,076 23,928 504,498 415,088 After 1 year 7,430 7,232 258,874 364,192 Unquoted investments 47,506 31,160 763,372 779,280 Bonds, at fair value (Available-for-sale) 44 134,377 25,017 There were no significant amounts due from related parties denominated in currenciesInterest rate:other 1.10% to 5.875%than (2012: the 1.05% to 3%) functional per annum currencies of the Group as at 31 December 2013 and 31 December 2012. Maturity: 7.1.2014 to 18.7.2022 (2012: 25.2.2013 to 1.9.2014) 134,581 25,364 *1 Included in the amounts due from subsidiaries (non-trade) are:

(a) loans of $752,171,000 (2012: $767,176,000) bearing interest at rates ranging from 0.61% to 4.98% (2012: 0.61% to 4.98%) per annum. The loans are unsecured and repayable from 3 February 2014 to 1 September 2015; and 26. Bank balances and other liquid funds

(b) interest-free loans of $4,901,000 (2012: $7,963,000), which are unsecured and not repayable in the foreseeable future. The loans are fully Group Company impaired. 2013 2012 2013 2012 *2 The amounts due from associates (non-trade) represents a loan of $2,624,000 (2012: $2,426,000) whereby interest is charged at $’000 $’000 $’000 $’000 EURIBOR + 1% per annum (2012: EURIBOR + 1% per annum) and is repriced every three months (2012: three months). The interest rate on the loan is 1.29% (2012: 1.18%) per annum. The loan is unsecured and repayable in 2019. Fixed deposits with financial institutions 1,460,088 1,226,046 329,417 311,111 Cash and bank balances 470,052 486,145 140,707 136,923 *3 Included in amounts due from jointly controlled entities (non-trade) are: 1,930,140 1,712,191 470,124 448,034 (a) a loan of $1,060,000 (2012: $1,792,000) bearing interest at LIBOR + 0.75% (2012: LIBOR + 0.75%) per annum. The loan is unsecured, Deposits pledged (9,216) (11,241) – – not expected to be repayable in the next 12 months and has been fully impaired; Cash and cash equivalents 1,920,924 1,700,950 470,124 448,034 (b) a loan of $3,136,000 (2012: nil) bearing interest at 6.36% (2012: nil) per annum, which is the effective interest rate. The loan is unsecured and repayable on demand; and Fixed deposits with financial institutions mature at varying periods within 10 months (2012: 12 months) from the financial year-end. Interest rates range from 0.01% to 3.08% (2012: 0.02% to 4.9%) per annum, which are also the effective interest rates. (c) a loan of $4,806,000 (2012: $4,806,000) bearing interest at 6.38% (2012: 6.38%) per annum, which is the effective interest rate. The loan is unsecured and repayable by 2029. Cash and bank balances of $9,216,000 (2012: $11,241,000) have been placed with banks as security for letters of credit issued to third parties. Cash and cash equivalents denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:

• $200,213,000 (2012: $206,589,000) denominated in USD • $304,512,000 (2012: $194,433,000) denominated in Euro

188 189 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

27. Assets classified as held for sale 29. Amounts due to related parties

Asset held for sale comprised an aircraft for which the subsidiary’s board of directors had committed to a plan Groupon 28 SeptemberCompany 2012 for the sale. The aircraft was sold in August 2013 at its carrying value. 2013 2012 2013 2012 $’000 $’000 $’000 $’000 The aircraft was stated at the lower of carrying amount and its fair value less costs to sell. No impairment loss was recognised prior to the sale of the aircraft. Trade: Subsidiaries – – 1,778 1,535 Associates 3,828 1,805 158 – 28. Trade payables and accruals Jointly controlled entities 10,266 3,719 – – Related corporations 10,409 17,390 12 232 Group Company 24,503 22,914 1,948 1,767 2013 2012 2013 2012 Note $’000 $’000 $’000 $’000 Non-trade: Trade payables 785,872 675,444 – – Subsidiaries *1 – – 650,190 538,712 Non-trade payables * 221,200 109,061 5,989 6,123 Jointly controlled entities *2 837 – – – Purchase of property, plant and equipment 228 – – – Related corporations 19 – – – Accrued operating expenses 907,400 873,687 37,845 39,068 856 – 650,190 538,712 Accrued interest payable 15,398 15,289 – – Derivative financial instruments 44 28,343 20,934 – – Amounts due to related parties 25,359 22,914 652,138 540,479 1,958,441 1,694,415 43,834 45,191 Payable: Payable: Within 1 year 24,953 19,953 98,946 44,854 Within 1 year 1,604,740 1,694,415 25,017 45,191 After 1 year 406 2,961 553,192 495,625 After 1 year 353,701 – 18,817 – 25,359 22,914 652,138 540,479 1,958,441 1,694,415 43,834 45,191 *1 Included in the amounts due to subsidiaries (non-trade) are loans of $606,055,000 (2012: $531,820,000) bearing interest at rates ranging from 4.98% to 12.15% (2012: 4.98% to 5.86%) per annum. The loans are unsecured and repayable from 1 January 2014 to 16 July 2019. * The non-trade payables includes an amount of $142,562,000 for performing engineering development work as part of the consideration for the acquisition of an associate. *2 Included in the amounts due to jointly controlled entities (non-trade) is a loan of $836,000 (2012: nil) bearing interest at 1.025% per annum, which is the effective interest rate. The loan is unsecured and repayable within a year. Trade payables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:

• $120,203,000 (2012: $80,168,000) denominated in USD • $216,914,000 (2012: $24,067,000) denominated in Euro

190 191 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

30. Provisions 31. Borrowings

Group Group 2013 2012 2013 2012 $’000 $’000 Note $’000 $’000

Provisions for: Non-current Warranties 186,212 195,447 Bonds 631,283 608,721 Liquidated damages 10,890 11,949 Long-term bank loans 288,867 459,001 Foreseeable losses 21,808 16,741 Lease obligations 18,150 244 218,910 224,137 Other Loans 564 677 938,864 1,068,643 (a) Movements in provision for warranties are as follows: Current Group Short-term bank loans 139,842 89,158 2013 2012 Long-term bank loans 292,789 120,343 Note $’000 $’000 Lease obligations 1,321 232 Other loans 369 1,054 At beginning of the year 195,447 188,785 434,321 210,787 Charge to profit or loss 5 6,524 26,045 Provision utilised (17,479) (16,546) Total borrowings 1,373,185 1,279,430 Translation difference 1,720 (2,837) At end of the year 186,212 195,447 Total borrowings comprise: Unsecured fixed rate bonds (a) 631,283 608,721 (b) Movements in provision for liquidated damages are as follows: Secured bank loans (b) 87,975 73,700 Unsecured bank loans (b) 633,523 594,802 Group Lease obligations (c) 19,471 476 2012 2013 Other loans (d) 933 1,731 Note $’000 $’000 1,373,185 1,279,430 At beginning of the year 11,949 10,957 Charge to profit or loss 5 2,371 2,875 (a) Unsecured fixed rate bonds Provision utilised (3,430) (1,820) Translation difference – (63) Group 2012 At end of the year 10,890 11,949 2013 $’000 $’000

(c) Movements in provision for foreseeable losses are as follows: Principal 633,600 611,300 Unamortised discount (2,317) (2,579) Group 631,283 608,721 2013 2012 $’000 $’000 Unamortised discount: At beginning of the year 2,579 3,088 At beginning of the year 16,741 15,005 Amortisation for the year (351) (333) Charge to profit or loss 19,706 4,203 Translation difference 89 (176) Provision utilised (14,639) (2,373) 2,317 2,579 Translation difference – (94) At end of the year 21,808 16,741 On 16 July 2009, the Group issued US$500 million 4.80% Notes due 2019 under itsU S$1.2 billion Multicurrency Medium Term Note Programme. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable every six months from the date of issue. The bonds are unconditionally and irrevocably guaranteed by the Company.

At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the guarantee.

192 193 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

31. Borrowings (continued) 31. Borrowings (continued)

(b) Secured and unsecured bank loans (d) Other loans

Group Included in other loans are: Effective interest rate 2013 2012 (i) US dollar denominated term notes of $564,000 (US$445,307) (2012: of $652,000 (US$533,534)) and $138,000 % Maturity $’000 $’000 (US$109,393) (2012: $155,000 (US$126,828)) 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 Bank loans 0.47% to 11% 2014 to 2019 721,498 668,502 buildings of the entity and bear interest, respectively, at 2.75% and 4% (2012: 2.75% and 4%) per annum, which are also the effective interest rates, and are payable through 1 July 2019 and 28 June 2019, respectively; The bank loans are denominated in SGD, USD, INR and Chinese Yuan (2012: SGD, USD and Chinese Yuan). (ii) An amount of $231,000 (MYR600,000) (2012: $479,000 (MYR1,200,000) relating to a loan from a non-controlling Included in the bank loans are: shareholder of a subsidiary. This loan is unsecured, bears interest at 5% (2012: 5%) per annum, which is also the effective interest rate, and is repayable by 2 June 2014; and (i) Loans amounting to $27,183,000 (2012: $25,493,000) which are secured by land and buildings of certain subsidiaries; and (iii) In the prior year, an amount of $445,000 relating to loans from non-controlling shareholders of another subsidiary were unsecured, borne interest at 6% per annum, which was also the effective interest rate, were forgiven during (ii) Loans amounting to $60,792,000 (2012: $48,207,000) which are secured over certain property, plant the and year. equipment of a subsidiary.

(c) Lease obligations 32. Deferred income A subsidiary leases certain land, buildings and equipment from a foreign Airport Authority under a finance lease Group arrangement until 31 October 2041, with an option to terminate the lease at any time with a 36-month written notice. The leased assets are pledged as collateral against the lease. 2013 2012 $’000 $’000

The obligations under the finance leases to be paid by the subsidiaries areGovernment as compensation follows: 48,209 12,103 Government grants 32,431 3,015 Minimum Present Deferred rents 3,055 16,330 lease value of payment Interest payment 83,695 31,448 $’000 $’000 $’000 Government compensation and grants relate mainly to grants received: The Group (a) for subsidising the costs incurred in the acquisitions of equipment for new product development and production activities, 2013 and for the relocation of a subsidiary’s manufacturing facility in the People’s Republic of China; and 1 to 5 years 7,218 (3,258) 3,960 After 5 years 30,389 (14,878) 15,511 (b) to share the cost for purchase of plant and machinery, and yard facility upgrades in the US operation. Total 37,607 (18,136) 19,471

Repayable: 33. Other long-term payables Within 1 year 1,321 After 1 year 18,150 Group 19,471 2013 2012 $’000 $’000 2012 After 1 year 1,500 2,000 1 to 5 years 482 (6) 476

Repayable: The loan of $1,500,000 (2012: $2,000,000) is payable to a previous non-controlling shareholder of a subsidiary for the purchase Within 1 year 232 of remaining shareholdings of the subsidiary. The amount payable is unsecured, interest-free and repayable within seven years After 1 year 244 from 2010. 476

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

194 195 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

34. Share capital 35. Share-based payment arrangements (continued)

Group and Company Grant no. No. of ordinary shares issued Price per ordinary share 2013 2012 $ $’000 $’000 0302N 837,393 1.790 Issued and fully paid 0308N 1,269,237 1.860 At beginning of the year 0402N 758,190 2.090 3,080,441,746 (2012: 3,056,464,902) ordinary shares 781,841 723,411 0408N 794,750 2.120 Issued during the year 0502N 1,012,895 2.370 25,461,784 (2012: 23,976,844) ordinary shares 70,770 58,430 0508N 1,142,744 2.570 At end of the year 3,105,903,530 (2012: 3,080,441,746) ordinary shares 852,611 781,841 0602N 2,298,325 3.010 0608N 1,921,710 2.840 Included in share capital is a special share issued to the Minister for Finance.0703N The special share enjoys all 3,688,502the rights attached to 3.230the ordinary shares. In addition, the special share carries the right to approve any resolution to be passed by the Company, either in 0708N 4,263,010 3.610 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. 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: 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. (i) Options outstanding under the ESOP

35. Share-based payment arrangements Number of shares 2013 2012 The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP2000”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) of the Company (collectively ESOP referred to as the “Existing Share Plans”) were approved by the members of the Company at an Extraordinary General Meeting held At beginning of the year 48,760,165 67,776,607 on 23 November 2000. Exercised (17,986,756) (16,388,198) Lapsed (255,467) (2,628,244) A new share plan comprising the Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”) and the Singapore At end of the year 30,517,942 48,760,165 Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) was approved by the members of the Company at the Annual General Meeting held on 21 April 2010 (together, the “New Share Plans”). The Existing Share Plans were terminated following the Exercisable at end of the year 30,517,942 48,760,165 adoption of the New Share Plans. However, all awards granted under the Existing Share Plans prior to its termination will continue to be valid and be subject to the terms and conditions of the Existing Share Plans.

Singapore Technologies Engineering Share Option Plan (“ESOP”)

The Company ceased to grant options under the ESOP with effect from 2007. 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 SGX 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.

During the financial year, the Company issued 17,986,756 (2012: 16,388,198) ordinary shares for cash at the respective price per share upon the exercise of options granted by the Company under ESOP.

196 197 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

35. Share-based payment arrangements (continued) 35. Share-based payment arrangements (continued)

(ii) Details of share options (iii) Details of share options exercised

2013 Exercise Proceeds from No. of shares price share issue Share price Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows: $ $’000 $

2013 Balance Balance No. of Date of as at Options Options as at holders at Exercise January to March 11,847,108 1.79 – 3.61 34,666 3.81 – 4.31 Grant 1.1.2013 lapsed exercised 31.12.2013 31.12.2013 price Exercisable period April to June 4,114,641 1.86 – 3.61 12,408 3.69 – 4.54 $ July to September 1,498,716 1.86 – 3.61 3,711 3.90 – 4.40 6.2.2003 883,629 46,236 837,393 – – 1.790 7.2.2004 to 6.2.2013 October to December 526,291 2.09 – 3.61 1,361 3.76 – 4.23 11.8.2003 1,300,123 30,886 1,269,237 – – 1.860 12.8.2004 to 11.8.2013 17,986,756 9.2.2004 1,818,628 182 758,190 1,060,256 83* 2.090 10.2.2005 to 9.2.2014 2012 10.8.2004 2,384,058 – 794,750 1,589,308 142* 2.120 11.8.2005 to 10.8.2014 January to March 3,518,907 1.79 – 3.23 8,205 2.71 – 3.23 7.2.2005 3,496,153 3,882 1,012,895 2,479,376 193* 2.370 8.2.2006 to 7.2.2015 April to June 2,402,701 1.79 – 3.61 5,567 2.91 – 3.29 10.8.2005 4,670,559 18,434 1,142,744 3,509,381 265* 2.570 11.8.2006 to 10.8.2015 July to September 5,491,199 1.79 – 3.23 14,017 3.17 – 3.59 9.2.2006 6,879,107 8,471 2,298,325 4,572,311 406* 3.010 10.2.2007 to 9.2.2016 October to December 4,975,391 1.79 – 3.61 14,596 3.45 – 3.88 10.8.2006 6,645,040 – 1,921,710 4,723,330 405* 2.840 11.8.2007 to 10.8.2016 16,388,198 15.3.2007 10,113,959 38,241 3,688,502 6,387,216 580* 3.230 16.3.2008 to 15.3.2017 10.8.2007 10,568,909 109,135 4,263,010 6,196,764 709* 3.610 11.8.2008 to 10.8.2017 The weighted average share price for options exercised during the year was $4.13 (2012: $3.37). The weighted average 48,760,165 255,467 17,986,756 30,517,942 remaining contractual life for these options is 2.43 years (2012: 3.34 years).

2012 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 Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows: account the terms and conditions upon which the options were granted. No options were granted for the years ended 31 December 2013 and 31 December 2012. Balance Balance No. of Date of as at Options Options as at holders at Exercise Singapore Technologies Engineering Performance Share Plan (“PSP2000”) and Singapore Technologies Engineering Grant 1.1.2012 lapsed exercised 31.12.2012 31.12.2012 price Exercisable period $ Performance Share Plan 2010 (“PSP2010”)

7.2.2002 2,227,920 525,279 1,702,641 – – 2.290 8.2.2003 to 7.2.2012 Performance shares are granted on an annual basis with key performance indicator targets set for a performance period, 12.8.2002 1,392,538 73,157 1,319,381 – – 1.920 13.8.2003 to 12.8.2012 currently prescribed to be a 3-year performance period. The performance shares will only be released to the recipient at 6.2.2003 1,451,058 28,384 539,045 883,629 76* 1.790 7.2.2004 to 6.2.2013 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 11.8.2003 1,953,451 30,966 622,362 1,300,123 124* 1.860 12.8.2004 to 11.8.2013 shares. In addition, commencing with the PSP contingent awards for financial year 2009, the final award for performance 9.2.2004 2,812,530 12,632 981,270 1,818,628 181* 2.090 10.2.2005 to 9.2.2014 shares is conditional upon the performance targets for restricted shares that have the same end of performance period 10.8.2004 3,544,964 31,133 1,129,773 2,384,058 234* 2.120 11.8.2005 to 10.8.2014 being met. 7.2.2005 4,799,068 37,206 1,265,709 3,496,153 306* 2.370 8.2.2006 to 7.2.2015 10.8.2005 6,518,149 40,071 1,807,519 4,670,559 397* 2.570 11.8.2006 to 10.8.2015 9.2.2006 8,979,721 134,382 1,966,232 6,879,107 680* 3.010 10.2.2007 to 9.2.2016 10.8.2006 8,871,700 109,466 2,117,194 6,645,040 648* 2.840 11.8.2007 to 10.8.2016 15.3.2007 12,568,040 367,748 2,086,333 10,113,959 979* 3.230 16.3.2008 to 15.3.2017 15.3.2007 360,000 360,000 – – – 3.230 16.3.2008 to 15.3.2012 10.8.2007 11,970,468 550,820 850,739 10,568,909 1,159* 3.610 11.8.2008 to 10.8.2017 10.8.2007 327,000 327,000 – – – 3.610 11.8.2008 to 10.8.2012 67,776,607 2,628,244 16,388,198 48,760,165

* Includes one Executive Director of the Company

198 199 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

35. Share-based payment arrangements (continued) 35. Share-based payment arrangements (continued)

PSP2000 Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) and Singapore Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) Year of grant Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently 2010 prescribed to be a 2-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 Number of performance shares 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 3-year vesting period; half at the end of the performance qualifying period and the balance will vest At grant date 1,532,000 equally over the subsequent two years. Lapsed (750,413) Released (781,587) Subject to the shareholders’ approval at the Annual General Meeting to be held on 24 April 2014, the awards granted under Outstanding as at 31.12.2013 – RSP2010 to all Non-Executive Directors (“NEDs”) for financial year 2013 are outright shares with no performance and vesting conditions and will form up to 30% of NEDs’ total compensation. The share award has a Moratorium on selling. Each NED is required PSP2010 to hold a number of shares in the Company based on the lower of: (a) the total number of shares in the Company awarded to such NED as payment of the shares’ component of the NEDs’ fees for financial year 2011 and onwards; or (b) the number of shares of equivalent value to the prevailing annual basic retainer fee for a Director of the Company. Any extra shares can be disposed of. Year of grant NED can dispose of all shares if they so desire after a year has elapsed from the time they left the Board. 2013 2012 2011 Total

Number of performance shares Number of Balance restricted Number of Number of outstanding shares as at restricted restricted as at At grant date 1,037,100 1,627,000 1,503,000 4,167,100 Date of grant grant date shares lapsed shares released 31.12.2013 Lapsed (6,255) (159,688) (172,991) (338,934) Outstanding as at 31.12.2013 1,030,845 1,467,312 1,330,009 3,828,166 RSP2000 12 November 2007 300,000 – 300,000 – During the year, performance shares amounting to 781,587 ordinary shares were awarded18 March in2009 respect of grant made 8,286,892in 20102,724,379 under 5,562,513 – PSP2000. 22 March 2010 8,547,400 1,170,460 5,692,628 1,684,312

The fair value of the performance shares is determined on conditional grant date RSP2010using the Monte Carlo simulation model.

The significant inputs to the model used for the conditional grants are as follows:25 February 2011 50,000 – 20,000 30,000 16 March 2011 7,380,041 919,947 3,399,942 3,060,152 27 June 2011 349,900 – 174,950 174,950 Year of grant 17 October 2011 5,000 – – 5,000 2013 2012 2011 22 March 2012 4,617,900 331,925 – 4,285,975 22 March 2013 4,347,000 139,367 – 4,207,633 Market conditions 16 May 2013 138,200 – 138,200 – Volatility of Defensive Index (%) 10.47 12.54 20.33 19 September 2013 90,000 – – 90,000 Volatility of the Company’s shares (%) 14.66 15.88 19.21 Correlation of volatility of Defensive Index/MSCI Index vs. the Company (%) 43.2 55.80 52.7 During the year, restricted shares amounting to 3,145,299 and 3,548,142 ordinary shares were awarded under RSP2000 and Risk-free rate (%) 0.24 0.35 0.49 RSP2010 respectively. Share price ($) 4.16 3.17 3.15 Cost of equity (%) 7.00 7.90 7.90 The fair value of the restricted shares is determined at conditional grant date using the Monte Carlo simulation model. Dividend yield (-- Management’s forecast in line with dividend policy --) The significant inputs to the model used for the conditional grant in 2012 and 2013 are as follows:

Year of grant 2013 2012

Volatility of the Company’s shares (%) 14.66 15.88 Risk-free rate (%) 0.21 – 0.35 0.24 – 0.45 Share price ($) 4.16 3.17 Dividend yield (-- Management’s forecast in line with dividend policy --) For the financial year 2013, the actual number of shares granted to each NED will be based on the volume-weighted average price of an ordinary share of the Company on the SGX over the 14 trading days immediately after Annual General Meeting.

200 201 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

36. Capital reserves 37. Other reserves (continued)

Included in capital reserves is: Premium Foreign paid on (a) an amount of $115,948,000 (2012: $115,948,000) relating to share premium of the respective pooled enterprises, namely currency Share-based acquisition of translation Statutory Fair value payment non-controlling Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd reserve reserve reserve reserve interests Total and Singapore Technologies Marine Ltd classified as capital reserve upon the pooling of interests during the financial year Note $’000 $’000 $’000 $’000 $’000 $’000 ended 31 December 1997; and The Group (b) an amount of $375,000 (2012: $375,000) relating to an excess capital contribution from non-controlling shareholders of a subsidiary in China following the additional capital injection in prior years. At 1.1.2013 (212,747) 3,830 (10,062) 85,727 (2,869) (136,121) Other comprehensive income: Net fair value changes on available-for-sale 37. Other reserves financial assets (i) – – (7,931) – – (7,931) Net fair value changes on cash flow hedges (ii) – – 49,401 – – 49,401 Premium Foreign currency translation differences (iii) 42,553 – (109) 69 (54) 42,459 Foreign paid on currency Share-based acquisition of Share of foreign currency translation translation Statutory Fair value payment non-controlling differences of associates and reserve reserve reserve reserve interests Total jointly controlled entities 10,395 – – – – 10,395 Note $’000 $’000 $’000 $’000 $’000 $’000 Reclassification adjustment of foreign currency translation reserve The Group to profit or loss arising from disposal of a foreign entity (205) – – – – (205) At 1.1.2012 (159,834) 3,092 (29,761) 82,659 (2,708) (106,552) Other comprehensive income: Total comprehensive income for the year, net of tax 52,743 – 41,361 69 (54) 94,119 Net fair value changes on available-for-sale financial assets (i) – – 9,427 – – 9,427 Issue of shares – – – (18,624) – (18,624) Net fair value changes on cash flow hedges (ii) – – 9,842 – – 9,842 Cost of share-based payment – – – 15,490 – 15,490 Foreign currency translation differences (iii) (44,317) – 430 (99) 12 (43,974) Disposal of a subsidiary – – – – 255 255 Share of foreign currency translation Transfer from retained earnings to differences of associates and statutory reserve – 230 – – – 230 jointly controlled entities (8,680) – – – – (8,680) At 31.12.2013 (160,004) 4,060 31,299 82,662 (2,668) (44,651) Reclassification adjustment of foreign currency translation reserve to profit or loss arising from disposal of foreign entities 84 – – – – 84

Total comprehensive income for the year, net of tax (52,913) – 19,699 (99) 12 (33,301) Issue of shares – – – (16,045) – (16,045) Cost of share-based payment – – – 19,212 – 19,212 Acquisition of non-controlling interests in subsidiaries – – – – (173) (173) Transfer from retained earnings to statutory reserve – 738 – – – 738 At 31.12.2012 (212,747) 3,830 (10,062) 85,727 (2,869) (136,121)

202 203 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

37. Other reserves (continued) 37. Other reserves (continued)

Group Fair value reserve 2013 2012 $’000 $’000 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 (i) Net fair value changes on available-for-sale financial assets: in cash flow hedges that are determined to be an effective hedge. – Net fair value changes during the year (2,447) 12,170 Share-based payment reserve – Reclassification adjustment to profit or loss on disposal of financial assets in finance costs, net (5,484) (2,743) Share-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to (7,931) 9,427 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 (ii) Net fair value changes on cash flow hedges: be recognised over the vesting periods. – Net fair value changes during the year 48,535 (1,224) – Reclassification adjustment to profit or loss on occurrence of forecast transaction Premium paid on acquisition of non-controlling interests in finance costs, net 1,558 5,295 – Recognised in the carrying value of non-financial assets on occurrence The reserve represents the difference between the consideration paid on acquisition of non-controlling interests and the carrying of the hedged transactions (692) 5,089 value of the proportionate share of the acquiree’s net assets acquired. – Ineffective portion in cash flow hedges – 682 49,401 9,842 38. Retained earnings (iii) Foreign currency translation differences arising from: – Translation of quasi equity loans forming part of net investments Group in foreign entities (945) (7,651) 2013 2012 – Translation of foreign currency loans used as hedging instruments $’000 $’000 for effective net investment hedges (5,890) 12,849 – Translation of foreign entities 49,388 (49,515) Retained by: 42,553 (44,317) The Company 564,416 542,390 Subsidiaries 518,693 478,125 Foreign currency translation reserve Associates and jointly controlled entities 108,849 112,129 1,191,958 1,132,644 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. 39. Dividends As at 31 December 2013, bonds amounting to $197.4 million (US$155.8 million) (2012: $112.5 million (US$92.0 million)) have been designated as a hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries (“US subsidiaries”) and are being used to hedge the Group’s exposure to foreign exchange risk on this investment. Exchange gain or loss on the Group and Company re-translation of these bonds is transferred to other comprehensive income to offset any exchange gain or loss on translation of the 2013 2012 $’000 $’000 net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year.

Final dividend paid in respect of the previous financial year of 4.0 cents Statutory reserve (2012: 4.0 cents) per share 123,355 122,259

(a) In accordance with the foreign Enterprise Law applicable to certain wholly-owned subsidiaries in the SpecialPeople’s dividend paidRepublic in respect ofof the previous financial year of 9.8 cents (2012: 8.5 cents) per share 302,220 259,784 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 Interim dividend paid in respect of the current financial year of 3.0 cents (2012: 3.0 cents) per share 93,153 92,184 must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase 518,728 474,227 the registered capital of the subsidiaries. The SRF is not available for standard distribution to shareholders. Additional final dividend paid in respect of the previous financial year due to issue of shares before books closure date 2,562 1,582 (b) In accordance with the Law of theU sing PRC Chineseon Jointand ForeignVentures Investment applicable to certain 521,290 475,809 subsidiaries, 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 The Directors propose a final dividend of 4.0 cents (2012: 4.0 cents) per share amounting to $124.3 million (2012: $123.4 million) and be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by the Board of Directors of a special dividend of 8.0 cents (2012: 9.8 cents) per share amounting to $248.6 million (2012: $302.2 million), in respect of the the PRC entities. financial year ended 31 December 2013. These dividends have not been recognised as a liability as at year end as they are subject to approval of the shareholders at the Annual General Meeting of the Company.

204 205 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

40. Related party information 41. Commitments

In addition to related party information disclosed elsewhere in the financial statements,(a) theCapital Groupcommitments has significant transactions with the following related parties on terms agreed between the parties as follows: Group Group 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Capital expenditure contracted but not provided for in the financial statements 145,575 175,761 Associates of the Group Sales and services rendered 9,692 12,231 (b) Leases Purchases and services received (24,060) (20,926) Future minimum lease payments under non-cancellable operating leases are as follows: Dividend income 38,184 30,743

Jointly controlled entities of the Group Group Sales and services rendered 15,590 1,744 2013 2012 $’000 $’000 Purchases and services received (25,043) (6,803) Dividend income 1,412 2,526 Third parties Within 1 year 36,512 51,823 Other related parties * 2 to 5 years 82,123 75,425 Sales and services rendered 106,323 78,301 After 5 years 212,861 213,329 Purchases and services received (22,408) (21,716) 331,496 340,577 Rental expense (11,701) (1,655) Rental income 3,768 2,935 Related parties Within 1 year 2,748 4,035 * Other related parties refer to subsidiaries, associates and jointly controlled entities of immediate holding company. 2 to 5 years 10,260 10,046 After 5 years 25,651 26,852 38,659 40,933

The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. The leases have varying terms, escalation clauses and renewal rights. Lease terms do not contain restrictions on the Group activities concerning dividends, additional debt or further leasing.

None of the operating leases is subject to contingent rent arrangements.

The Group has entered into commercial leases on its aircraft, aircraft engines and certain property, plant and equipment. The non-cancellable leases have lease term ranging from 1 to 17 years. The leases on the aircraft include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

The future lease payment receivables under non-cancellable operating leases are as follows:

Group 2013 2012 $’000 $’000

Within 1 year 16,298 12,948 2 to 5 years 31,846 36,500 After 5 years 17,400 20,798 65,544 70,246

None of the operating leases is subject to contingent rent arrangements.

206 207 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

41. Commitments (continued) 42. Segment information (continued)

(d) Investments (a) Analysis by business segments (continued)

(i) As at 31 December 2013, the Group has outstanding commitments in respect of uncalled Othercapital to operations the extent include of research and development, treasury, investment holding and provision of management, $0.2 million (2012: $0.1 million) in subsidiaries. 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 financial years (ii) In the prior year, the Group had outstanding commitment in respect of uncalled capital to the2013 andextent 2012. of $1.9 million in a joint venture. Management monitors the operating results of its business units separately for the purpose of making decisions about Joint Venture Agreement 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 inthe On 2 November 2006, an agreement was signed Utilitiesbetween Singapore Technologies consolidatedKinetics financialLtd statements. and BF Limited to form an Equity Joint Venture Company in Pune, India. The joint venture company was not set up and the agreement was terminated in the current financial year. Inter-segment pricing is on an arm’s length basis.

(e) Contingent liabilities (unsecured) Land The Group’s certain subsidiaries provided equipment buy-back guarantees to financial institutions which have AerospaceextendedElectronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 equipment financing to the customers for their purchase of their products. The outstanding equipment buy-back guarantees as at 31 December 2013 amounted to $10,900,000 (2012: $4,574,000). 2013

Revenue 42. Segment information External sales 2,079,076 1,650,332 1,475,361 1,237,933 190,450 – 6,633,152 Inter-segment sales 9,029 31,946 9,858 914 31,926 (83,673) – (a) Analysis by business segments 2,088,105 1,682,278 1,485,219 1,238,847 222,376 (83,673) 6,633,152 The Group is organised on a worldwide basis into four main reportable segments, namely: Reportable segment profit (i) Aerospace from operations 291,828 165,546 90,472 134,479 (58,943) 49,833 673,215 Other income, net 7,146 2,044 19,487 6,004 609,301 (609,794) 34,188 Provides a spectrum of maintenance and engineering services that include airframe,Finance income engine and component14,528 9,546 4,836 37,038 77,706 (74,743) 68,911 maintenance, repair and overhaul; engineering design and technical services; and aviation materials and Finance costs (18,645) (5,342) (11,175) (33,284) (89,735) 80,477 (77,704) management services, including Total Aviation Support. Share of results of associates and jointly controlled entities, net of tax 24,585 (1,466) 8,173 2,073 – (2,283) 31,082 (ii) Electronics Profit before taxation 319,442 170,328 111,793 146,310 538,329 (556,510) 729,692 Taxation (53,589) (30,502) (19,196) (36,325) 1,467 – (138,145) 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 Non-controlling interests (6,639) (2,707) (1,358) (30) – 21 (10,713) as broadband radio frequency and satellite communication, e-Government solutions, information communications Profit attributable to shareholders 259,214 137,119 91,239 109,955 539,796 (556,489) 580,834 technologies and IT, rail and traffic management, real-time command and control, modelling and simulation, eLearning and interactive digital media, training services, intelligent building management and information security. Other assets 2,421,451 1,732,792 1,991,478 1,137,593 4,281,836 (3,320,648) 8,244,502 Associates and jointly controlled entities 328,017 729 110,972 3,223 17,681 1,517 462,139 (iii) Land Systems Segment assets 2,749,468 1,733,521 2,102,450 1,140,816 4,299,517 (3,319,131) 8,706,641

Delivers integrated land systems, specialty vehicles and their related through life Segmentsupport liabilities for defence, 2,222,830homeland1,538,772 1,779,140 950,319 2,260,361 (2,304,695) 6,446,727 security and commercial applications. Capital expenditure 176,066 90,305 67,719 56,195 7,452 – 397,737 (iv) Marine Depreciation and amortisation 50,194 29,106 39,083 18,514 5,189 (42) 142,044 Provides turnkey building, repair and conversion services for a wide spectrum ofImpairment naval losses/ and commercial vessels. In (write-back of impairment) 3,488 3,479 2,348 – (9) – 9,306 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 Other non-cash expenses 956 315 112 – 3 – 1,386 also established a track record in providing high engineering content shiprepair and ship conversion services for a worldwide clientele. It also provides a suite of sustainable environmental engineering solutions.

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42. Segment information (continued) 42. Segment information (continued)

(a) Analysis by business segments (continued) (c) Analysis by geographical areas

Revenue is based on the location of customers regardless of where the goods are produced or services rendered. Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 Revenue 2013 2012 2012 $’000 $’000

Revenue Asia 3,868,536 3,758,800 External sales 2,019,270 1,578,045 1,512,601 1,010,546 259,404 – 6,379,866 USA 1,705,677 1,738,965 Inter-segment sales 6,357 40,672 12,740 546 29,574 (89,889) – Europe 420,875 508,018 2,025,627 1,618,717 1,525,341 1,011,092 288,978 (89,889) 6,379,866 Others 638,064 374,083 6,633,152 6,379,866 Reportable segment profit from operations 274,306 158,207 98,512 122,226 (46,529) 51,177 657,899 Other income, net 16,070 2,191 18,686 6,109 560,341 (560,155) 43,242 43. Financial risk management objectives and policies Finance income 9,774 3,206 4,448 6,820 107,458 (83,319) 48,387 The Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and credit Finance costs (25,904) (6,774) (15,423) (8,843) (83,799) 73,669 (67,074) risks, arising from its operations and the use of financial instruments. The Group’s principal financial instruments, other than foreign Share of results of associates and exchange contracts and derivatives, comprise bank guarantees, performance bonds, bank loans and overdrafts, finance leases jointly controlled entities, net of tax 23,594 (4,498) 7,045 1,270 300 5,215 32,926 and hire purchase contracts, investments, cash and short-term deposits. All financial transactions with the banks are governed by Profit before taxation 297,840 152,332 113,268 127,582 537,771 (513,413) 715,380 banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial Taxation (40,568) (29,831) (23,066) (32,926) (4,368) – (130,759) instruments and facilities limits. All financial transactions require dual signatories. The Group has various other financial assets and Non-controlling interests (4,030) (2,730) (2,042) 357 – 2 (8,443) liabilities such as trade receivables and trade payables, which arise directly from its operations. Profit attributable to shareholders 253,242 119,771 88,160 95,013 533,403 (513,411) 576,178 It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury Other assets 2,291,275 1,555,994 1,946,157 885,915 4,074,433 (3,028,328) 7,725,446 transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable Associates and jointly controlled entities 160,875 4,702 111,550 2,562 17,681 8,746 306,116 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 Segment assets 2,452,150 1,560,696 2,057,707 888,477 4,092,114 (3,019,582) 8,031,562 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 derivative financial instruments are set out in Segment liabilities 1,975,445 1,408,055 1,907,535 764,093 2,166,357 (2,202,505) 6,018,980 Note 3.

Capital expenditure 108,745 46,722 52,865 49,932 4,551 – 262,815 The policies for managing each of these risks are broadly summarised below. Depreciation and amortisation 49,014 27,452 41,467 14,339 4,876 (46) 137,102 Impairment losses/ Interest rate risk (write-back of impairment) – 11,079 4,719 – (340) – 15,458 Other non-cash expenses 7,202 101 11 – – – 7,314 As at reporting date, the interest rate profile of the interest-bearing financial instruments is:

(b) Analysis by country of incorporation Group Company 2013 2012 2013 2012 Revenue is based on the country of incorporation regardless of where the goods are produced or services $’000 rendered. $’000 $’000 $’000 Non-current assets, excluding derivative financial instruments and deferred tax assets, are based on the location of those assets. Fixed rate instruments Revenue Non-current assets Financial assets 1,487,156 1,265,006 329,417 311,111 2013 2012 2013 2012 Financial liabilities (919,839) (753,273) – – $’000 $’000 $’000 $’000 567,317 511,733 329,417 311,111 Variable rate instruments Asia 4,811,651 4,393,699 1,893,992 1,638,684 Financial assets 326,376 395,718 752,171 767,176 USA 1,642,208 1,673,270 732,649 634,313 Financial liabilities (454,182) (526,157) (606,055) (531,820) Europe 129,952 264,082 81,599 89,585 (127,806) (130,439) 146,116 235,356 Others 49,341 48,815 101,381 95,396 6,633,152 6,379,866 2,809,621 2,457,978

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43. Financial risk management objectives and policies (continued) 43. Financial risk management objectives and policies (continued)

Interest rate risk (continued) Liquidity risk

The Group has cash balances placed with reputable banks and financial institutions. To Themanage Group liquidity manages risk, its the interest Group rate monitors risk on its net operating cash flows and maintains an adequate level of cash and cash its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, cash flow requirements and optimising yield. management reviews its working capital requirements regularly.

The Group’s debts include 10-year bonds issued, bank loans and lease commitments. The The table Groupbelow seeksanalyses to theminimise Group’s its financialinterest liabilities and certain derivative financial instruments that will be settled on a gross rate risk exposure through tapping different sources of funds to refinance the debt instruments and/or enter into interest rate basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity date. The swaps, where appropriate. Movements in interest rates will therefore have an impact on the Group. An increase of 50 basis points amounts disclosed in the table below are the contractual undiscounted cash flows including estimated interest payments. in interest rate at the reporting date would lead to a reduction of the Group’s profit or loss and other comprehensive income by approximately $2.1 million (2012: $2.4 million) and $2.9 million (2012: $4.7 million) respectively. A decrease in 50 basis points Contractual Within 2 to 5 More than in interest rate at the reporting date would increase the Group’s profit or loss and other comprehensive income by approximately cash flow 1 year years 5 years $2.1 million (2012: $2.4 million) and $3.3 million (2012: $4.8 million) respectively. This analysis assumes that all other variables $’000 $’000 $’000 $’000 remain constant. The Group Fixed deposits, bonds, bank loans and other financial instruments with interest rate fixed over the contractual period are 2013 excluded from the sensitivity analysis. Information relating to the Group’s interest rate risk exposure is also disclosed in the notes on the Group’s borrowings, investments and loans receivable, where applicable. Bank loans (746,276) (438,292) (294,139) (13,845) Bonds (802,222) (30,413) (121,651) (650,158) Foreign exchange risk Other loans (1,054) (257) (84) (713) Lease obligations (37,606) (1,972) (5,246) (30,388) The Group’s foreign exchange risk arises both from its subsidiaries operating in foreignOther long-termcountries, payables generating revenue and (1,500) incurring – (1,500) – costs denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies. Trade and other payables (1,955,457) (1,601,350) (354,107) – The Group’s foreign exchange exposures are primarily from USD 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 Derivative financial instruments: foreign currencies in accordance with the Group’s hedging policy. The Group enters into cross currency swap to hedge the foreign • Forward currency contracts exchange risk of its loans denominated in foreign currency. The Group also uses monetary assets and liabilities and embedded – gross payments (1,652,840) (1,234,003) (418,837) – derivatives to hedge its risks associated with foreign currency fluctuation. – gross receipts 1,636,338 1,233,605 402,733 – • Cross currency swap The Company’s centralisedUnit (“TreasuryUnit”) facilitates intra-group foreign exchange transactions within the Group to net-off – net receipts 1,243 1,243 – – the foreign exchange exposures before proceeding to transact with the banks. • Interest rate swaps – settled net (1,744) (1,844) 100 – The Unit executes the Group’s material foreign exchange transactions with proper segregation • Crossof currencyduties interest rate swapsbetween – settled net authorised dealers3,143 4,447 298 (1,602) 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 2012 all counterparties. Bank loans (668,502) (209,501) (438,228) (20,773) Bonds (803,330) (29,342) (117,370) (656,618) No foreign exchange sensitivity analysis was disclosed as the Company had assessed Otherthat loans a reasonable change in the(1,731) exchange(1,054) rate (556) (121) would not result in any significant impact on the Group’s results. Lease obligations (479) (234) (245) – Other long-term payables (2,000) – (2,000) – Market risk Trade and other payables (1,696,395) (1,693,434) (2,961) – The Group has strategic investments in quoted equity shares. The market value Derivativeof financialthese instruments:investments will fluctuate with market conditions. • Forward currency contracts – gross payments (1,728,908) (903,443) (825,465) – The impact to the Group’s profit or loss and other comprehensive income arising– gross receiptsas a result of a 10%1,750,070 increase910,488 in the839,582 fair value– of the quoted investments, assuming no impairment on the quoted investments would lead to an increase in the Group’s profit or • Cross currency swap loss and other comprehensive income by approximately $0.02 million (2012: $0.03 million) and $0.03 million (2012: $1.1 million) – net receipts 9,534 761 8,773 – respectively. A 10% decrease in the fair value of the quoted investments, assuming no impairment on the quoted investments would have an equal but opposite effect. This analysis assumes that all other variables remain constant. • Interest rate swaps – settled net (6,571) (5,777) (794) – • Cross currency interest rate swaps – settled net 8,716 3,072 9,095 (3,451)

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43. Financial risk management objectives and policies (continued) 43. Financial risk management objectives and policies (continued)

Liquidity risk (continued) Credit risk (continued)

Group Contractual Within 2 to 5 More than cash flow 1 year years 5 years 2013 2012 $’000 $’000 $’000 $’000 $’000 $’000

The Company Aerospace 303,981 279,275 Electronics 306,528 279,894 2013 Land Systems 205,951 242,413 Trade payables and accruals (43,834) (25,017) (18,817) – Marine 98,065 69,181 Amounts due to related parties (716,713) (99,671) (535,941) (81,101) Others 27,436 25,980 Derivative financial instruments: 941,961 896,743 • Forward currency contracts – gross payments (5,354) (4,632) (722) – The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the – gross receipts 5,545 4,746 799 – reporting date is: • Intragroup financial guarantee (349,874) (349,874) – – Group Company 2012 2013 2012 2013 2012 $’000 $’000 Trade payables and accruals (45,191) (45,191) – – $’000 $’000 Amounts due to related parties (540,479) (44,854) (435,721) (59,904) Investments 300,614 370,360 – – Derivative financial instruments: Long-term receivables 25,036 36,291 – – • Forward currency contracts Finance lease receivables 19,126 34,154 – – – gross payments (4,171) (3,102) (1,069) – Derivative financial instruments 39,978 28,173 77 16 – gross receipts 4,204 3,119 1,085 – Trade receivables 941,961 896,743 – – • Intragroup financial guarantee (328,146) (328,146) – – Amounts due from related parties 47,506 31,160 763,372 779,280 Advances and other receivables 199,004 150,110 9,739 3,619 For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these Bank balances and other liquid funds 1,930,140 1,712,191 470,124 448,034 instruments. The amounts are compiled on a net basis for derivatives that are net-settled. Gross inflows and outflows are included for Recognised financial assets 3,503,365 3,259,182 1,243,312 1,230,949 derivatives that are gross-settled on a simultaneous basis. Net-settled derivative financial assets are included in the maturity analysis as they are held to hedge the cash flow variability of the Group’s bank loans and bonds. The ageing of financial assets excluding cash and cash equivalents, investments and derivative financial instruments, net of impairment losses, are as follows: Except for the cash flow arising from the intragroup financial guarantee, it is not expected that the cash flows included in the maturity analysis of the Group and the Company could occur significantly earlier, or at significantly different amounts. Group Company 2013 2012 2013 2012 At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the $’000 $’000 $’000 $’000 intragroup financial guarantee. Not past due 769,442 732,969 772,997 782,882 Credit risk 1 – 90 days 304,316 260,007 – – 91 – 180 days 59,208 58,745 – – Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and 181 – 360 days 23,729 61,052 – – monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master > 360 days 24,124 22,117 – – netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required for customers of lower 1,180,819 1,134,890 772,997 782,882 credit standing. The movements in allowance for impairment losses in respect of loans and receivables are as follows: The Group limits its exposure to credit risk on investments held by investing mostly in bonds of high credit ratings. Management Group Company actively monitors the credit ratings and does not expect any counterparty to fail to meet its obligations. 2013 2012 2013 2012 $’000 $’000 $’000 $’000 Derivatives are entered into with financial institutions, which have long-term rating of A3 by Moody’s, A- by Standard & Poor’s or the equivalent by a reputable credit rating agency. At beginning of the year 88,450 70,808 7,963 37,630 Charge to profit or loss 9,277 22,912 2,000 660 Cash and bank deposits are placed with reputable financial institutions. Allowance utilised (24,522) (3,819) (5,132) (30,200) Acquisition of subsidiaries – 792 – – As at 31 December 2013, there were no significant concentrations of credit risk, except for 30% (2012: 31%) of trade debts relating Translation difference 3,025 (2,243) 70 (127) to three major customers of the Group. The table below analyses the trade receivables by the Group’s four main reportable segments. At end of the year 76,230 88,450 4,901 7,963

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44. Fair value of financial instruments 44. Fair value of financial instruments (continued)

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy. Significant other observable inputs (Level 2) Quoted prices in Significant $’000 active markets other Significant for identical observable unobservable instruments inputs inputs The Company (Level 1) (Level 2) (Level 3) Total Note $’000 $’000 $’000 $’000 2013 Financial Assets Derivatives The Group – Forward currency contracts 191 2013 2012 Financial Assets Financial Assets Available-for-sale Derivatives – Equity investments (quoted) 15 349 – – 349 – Forward currency contracts 33 – Venture capital funds and limited partnership 15 – – 43 43 – Bonds (unquoted) 15, 25 – 299,386 – 299,386 Valuation processes applied by the Group Fair value through profit or loss The Group has an established control framework with respect to the measurement of fair values. – Equity investments (quoted) 25 204 – – 204 Derivatives The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker – Forward currency contracts – 32,031 – 32,031 quotes or pricing services, is used to measure fair value, then the Group assesses and documents the evidence obtained from – Cross currency swap – 1,241 – 1,241 the third parties to support the conclusion that such valuations meet the requirements of FRS, including the level in the fair value – Cross currency interest rate swaps – 2,871 – 2,871 hierarchy the resulting fair value estimate should be classified. – Embedded derivatives – 55,649 – 55,649 553 391,178 43 391,774 Fair value hierarchy

Financial Liabilities The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the Derivatives measurements. The fair value hierarchy have the following levels: – Forward currency contracts – 48,132 – 48,132 – Interest rate swaps – 1,728 – 1,728 (a) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities; – Embedded derivatives – 998 – 998 – 50,858 – 50,858 (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 2012 Financial Assets (c) Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Available-for-sale – Equity investments (quoted) 15 10,771 – – 10,771 The following methods and assumptions are used to estimate the fair value of each class of financial instruments. – Venture capital funds and limited partnership 15 – – 44 44 – Bonds (unquoted) 15, 25 – 357,933 – 357,933 Bank balances, other liquid funds and short-term receivables Fair value through profit or loss – Equity investments (quoted) 25 347 – – 347 The carrying amounts approximate fair values due to the relatively short-term maturity of these instruments. Derivatives – Forward currency contracts – 28,670 – 28,670 Quoted and unquoted investments – Cross currency swap – 9,541 – 9,541 – Cross currency interest rate swaps – 3,530 – 3,530 The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred. There have been no transfers from Level 2 to Level 1 and vice versa in 2013 (2012: no transfers in either 11,118 399,674 44 410,836 directions). Financial Liabilities Derivatives The fair values of quoted investments are determined directly by reference to their quoted bid prices for these investments as at – Forward currency contracts – 7,309 – 7,309 balance sheet date. For unquoted investments, the fair values cannot be reliably estimated because of the lack of quoted market – Interest rate swaps – 6,564 – 6,564 prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. For unquoted – Embedded derivatives – 28,434 – 28,434 bonds, the investments are valued using valuation models which use market observable data. – 42,307 – 42,307 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.

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44. Fair value of financial instruments (continued) 44. Fair value of financial instruments (continued)

Movements in level 3 financial instruments measured at fair value 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: The following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservable inputs (Level 3). Classification of financial instruments

Group Fair value through Derivatives Liabilities at Total 2013 2012 Loans and profit used for Available amortised carrying Fair $’000 $’000 receivables or loss hedging -for-sale cost amount value $’000 $’000 $’000 $’000 $’000 $’000 $’000 Equity instruments (unquoted) Opening balance 44 4 The Group Total gain or loss: 2013 – recognised in profit or loss, in finance costs, net 26 – – recognised in other comprehensive income – 40 Assets Sales (27) – Investments – – – 166,033 – 166,033 166,033 Closing balance 43 44 Long-term receivables 25,036 – – – – 25,036 25,036 Finance lease receivables 19,126 – – – – 19,126 19,126 Total gain or loss for the year included in profit or loss (presented in finance costs, net) for assets held at 31 December 10 – Derivative financial instruments – 18,939 21,039 – – 39,978 39,978 Trade receivables 941,961 – – – – 941,961 941,961

Long-term receivables Amounts due from related parties 47,506 – – – – 47,506 47,506 The fair values of long-term receivables and amount due from related parties are estimated based on the expected cash flows Advances and other receivables 147,190 36,424 15,390 – – 199,004 199,004 discounted to present value. Short-term investments – 204 – 134,377 – 134,581 134,581 Bank balances and other liquid funds 1,930,140 – – – – 1,930,140 1,930,140 Long-term payables 3,110,959 55,567 36,429 300,410 – 3,503,365 3,503,365 The fair values of amount due to related parties are estimated based on present value of future principal and interest cash flows, Liabilities discounted at the market rate of interest at the reporting date. Creditors and accruals – 20,734 7,609 – 1,930,098 1,958,441 1,958,441 Short-term borrowings and other current payables Amounts due to related parties – – – – 25,359 25,359 25,359 Lease obligations – – – – 19,471 19,471 19,329 The carrying amounts approximate fair values because of the short period to maturity of these instruments. Bank loans – – – – 721,498 721,498 721,498 Other loans – – – – 933 933 933 Derivatives Other long-term payables – – – – 1,500 1,500 1,357 Forward currency contracts, interest rate swaps, cross currency swap, embedded derivatives and cross currency interest rate swaps Bonds – – – – 631,283 631,283 698,265 are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include Derivative financial instruments – 16,621 5,894 – – 22,515 22,515 forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality – 37,355 13,503 – 3,330,142 3,381,000 3,447,697 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 2013 is determined by reference to market value.

218 219 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

44. Fair value of financial instruments (continued) 44. Fair value of financial instruments (continued)

Fair value Fair value Liabilities at Total through Derivatives Liabilities at Total Loans and through amortised Carrying Fair Loans and profit used for Available amortised carrying Fair receivables profit or loss cost amount value receivables or loss hedging -for-sale cost amount value $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 The Company The Group 2013 2012 Assets Assets Derivative financial instruments – 77 – 77 77 Investments – – – 344,996 – 344,996 344,996 Amounts due from related parties 763,372 – – 763,372 763,372 Long-term receivables 36,291 – – – – 36,291 36,291 Advances and other receivables 9,625 114 – 9,739 9,739 Finance lease receivables 34,154 – – – – 34,154 34,154 Bank balances and other liquid funds 470,124 – – 470,124 470,124 Derivative financial instruments – 26,809 1,364 – – 28,173 28,173 1,243,121 191 – 1,243,312 1,243,312 Trade receivables 896,743 – – – – 896,743 896,743 Amounts due from related parties 31,160 – – – – 31,160 31,160 Liabilities Advances and other receivables 136,542 6,913 6,655 – – 150,110 150,110 Trade payables and accruals – – 43,834 43,834 43,834 Short-term investments – 347 – 25,017 – 25,364 25,364 Amounts due to related parties – – 652,138 652,138 652,138 Bank balances and other liquid funds 1,712,191 – – – – 1,712,191 1,712,191 – – 695,972 695,972 695,972 2,847,081 34,069 8,019 370,013 – 3,259,182 3,259,182 2012 Liabilities Assets Creditors and accruals – 4,287 16,647 – 1,673,481 1,694,415 1,694,415 Derivative financial instruments – 16 – 16 16 Amounts due to related parties – – – – 22,914 22,914 22,914 Amounts due from related parties 779,280 – – 779,280 779,280 Lease obligations – – – – 476 476 476 Advances and other receivables 3,602 17 – 3,619 3,619 Bank loans – – – – 668,502 668,502 668,502 Bank balances and other liquid funds 448,034 – – 448,034 448,034 Other loans – – – – 1,731 1,731 1,731 1,230,916 33 – 1,230,949 1,230,949 Other long-term payables – – – – 2,000 2,000 1,761 Bonds – – – – 608,721 608,721 710,691 Liabilities Derivative financial instruments – 11,718 9,655 – – 21,373 21,373 Trade payables and accruals – – 45,191 45,191 45,191 – 16,005 26,302 – 2,977,825 3,020,132 3,121,863 Amounts due to related parties – – 540,479 540,479 540,479 – – 585,670 585,670 585,670

220 221 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements Notes to the Financial Statements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars unless otherwise stated)

44. Fair value of financial instruments (continued) 44. Fair value of financial instruments (continued)

Derivative financial instruments (a) Forward currency contracts

(i) As at 31 December 2013, the Group has forward currency contracts and embedded derivatives separated from 2013 2012 the foreign currency portion of sales contracts amounting to $1,335,724,000 (2012: $1,115,126,000) designated Contractual/ Estimated fair value Contractual/ Estimated fair value as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreign currencies, accounts notional notional receivable in foreign currencies and accounts payable in foreign currencies. amount Asset Liability amount Asset Liability Note $’000 $’000 $’000 $’000 $’000 $’000 The maturity dates of the forward currency contracts and embedded derivatives separated from the foreign currency Cash flow hedges portion of the sales contracts approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods up to seven years (2012: five years) from the financial year-end. Forward currency contracts: – to hedge confirmed sales (ii) As at 31 December 2013, the Group has outstanding forward currency contracts and embedded derivatives in foreign currencies (a)(i) 410,956 2,558 (7,720) 303,667 5,659 (1,344) separated from the foreign currency portion of sales contracts amounting to $1,443,919,000 (2012: $1,554,134,000). – to hedge firm purchase commitments in foreign currencies (a)(i) 159,225 5,912 (1,308) 193,977 1,711 (1,174) These were not designated as accounting hedges, but were used to economically hedge confirmed sales in foreign – to hedge accounts receivable currencies and firm purchase commitments in foreign currencies. in foreign currencies (a)(i) 84,950 24 (1,666) 12,166 309 – – to hedge accounts payable (b) Interest rate swaps in foreign currencies (a)(i) 2,411 18 (13) 91,643 149 (259) Interest rate swaps (b)(i) 221,760 – (886) 152,825 – (2,508) (i) As at 31 December 2013, the Group has outstanding interest rate swaps amounting to $221,760,000 Embedded derivatives (a)(i) 644,391 27,904 (998) 466,188 – (20,779) (2012: $152,825,000), which are designated as cash flow hedges.

Fair value hedges The USD interest rate swaps are being used to hedge the exposure to variability in cash flows associated with the floating rate of the unsecured USD long-term loans. Under the USD interest rate swaps, the Group pays fixed rates Forward currency contracts: of interest of 0.62% to 0.77% (2012: 3.68% to 3.69%) per annum and receives variable rates of interest equal to – to hedge firm purchase commitments the LIBOR per annum on the notional amount. The USD interest rate swaps have the same maturity terms as the in foreign currencies (a)(i) 872 13 – 16,309 108 (20) unsecured USD long-term loans due in 2016. – to hedge accounts receivable in foreign currencies (a)(i) 32,919 – (912) 24,522 44 (215) (ii) As at 31 December 2013, the Group has an outstanding interest rate swap amounting to $151,372,000 – to hedge accounts payable in foreign currencies (a)(i) – – – 6,654 39 (3) (2012: $139,900,000), which is not designated as hedging instrument in a cash flow hedge relationship.

Non-hedging instruments (c) Cross currency swap

Forward currency contracts: As at 31 December 2013, the Group has an outstanding cross currency swap amounting to $210,913,000 – sales (a)(ii) 625,415 104 (36,513) 693,416 6,026 (3,713) (2012: $203,490,000), which is not designated as hedging instrument in a cash flow hedge relationship. – purchases (a)(ii) 348,326 23,402 – 412,152 14,625 (581) Interest rate swap (b)(ii) 151,372 – (842) 139,900 – (4,056) (d) Cross currency interest rate swaps Cross currency swap (c) 210,913 1,241 – 203,490 9,541 – As at 31 December 2013, the Group has outstanding cross currency interest rate swaps amounting to $246,350,000 Cross currency interest rate swaps (d) 246,350 2,871 – 246,350 3,530 – (2012: $246,350,000), which are not designated as hedging instruments. Embedded derivatives (a)(ii) 470,178 27,745 – 448,566 – (7,655) Total 91,792 (50,858) 41,741 (42,307) The swaps are being used to economically hedge the foreign currency exposure of the US$500 million bond liability Less: Current portion (51,814) 28,343 (13,568) 20,934 and convert the fixed USD bond interest rate of 4.8% (2012: 4.8%) per annum to floating SGD interest rate at 6-month Non-current portion 39,978 (22,515) 28,173 (21,373) SOR plus margins. The effective SGD interest rates range from 2.9% to 3.6% (2012: 3.0% to 3.8%) per annum.

222 223 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Notes to the Financial Statements SGX Listing Manual Requirements 31 December 2013 31 December 2013 (Currency - Singapore dollars unless otherwise stated) (Currency - Singapore dollars)

45. Capital management Interested person transactions

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy financial Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the metrics in order to support its business and maximise shareholder value. Capital consists of total shareholders’ funds and gross debts. Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:

The Group manages its capital structure and makes adjustment to it, in the light of changes in economic and financial market Aggregate value of all conditions. The Group may adjust the dividend payout to shareholders, buy back or issue new shares to optimise capital structure transactions excluding Aggregate value of all within the Group. No major changes were made in the objectives, policies or processes during the years ended 31 December 2013 transactions conducted transactions conducted under a Shareholders’ under a Shareholders’ and 31 December 2012. Mandate pursuant Mandate pursuant to Rule 920 of the to Rule 920 of the 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 SGX Listing Manual SGX Listing Manual important aspect. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements other than 2013 2012 2013 2012 those imposed by local regulatories. $’000 $’000 $’000 $’000

Transactions for the Sale of Goods and Services Group 2013 2012 CapitaLand Limited and its Associates – – 173 602 $’000 $’000 SembCorp Industries Ltd and its Associates – – – 5,515 Gross debt SembCorp Marine Ltd and its Associates – – 6,399 7,259 Bank loans 721,498 668,502 SATS Ltd. and its Associates – – 900 – Bonds 631,283 608,721 Singapore Telecommunications Limited and its Associates – – 722 1,854 Capitalised lease obligations 19,471 476 SMRT Corporation Ltd and its Associates – – 750 72,820 Other loans 933 1,731 Temasek Holdings (Private) Limited and its Associates – – 10,208 14,593 1,373,185 1,279,430 – – 19,152 102,643

Shareholders’ funds Transactions for the Purchase of Goods and Services Share capital 852,611 781,841 Other reserves 71,672 (19,798) SembCorp Industries Ltd and its Associates – 8,233 – – Retained earnings 1,191,958 1,132,644 SATS Ltd. and its Associates – – 2,552 3,978 2,116,241 1,894,687 Singapore Telecommunications Limited and its Associates – – 1,389 2,483 Non-controlling interests 143,673 117,895 SMRT Corporation Ltd and its Associates – – 283 676 2,259,914 2,012,582 StarHub Ltd and its Associates – – – 215 Temasek Holdings (Private) Limited and its Associates – – 2,927 4,599 Gross debt/equity ratio 0.6 0.6 – 8,233 7,151 11,951

Bank balances and other liquid funds 1,930,140 1,712,191 Total Interested Person Transactions – 8,233 26,303 114,594 Funds under management 299,386 358,280 2,229,526 2,070,471 Gross debt (excluding bank overdrafts) (1,373,185) (1,279,430) Net cash position 856,341 791,041

224 225 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Aerospace Sectoral Financial Review – Aerospace

INCOME STATEMENT BALANCE SHEET

2013 2012 2013 2012 $’000 $’000 $’000 $’000

Revenue 2,088,105 2,025,627 ASSETS Non-current assets Cost of sales (1,659,131) (1,608,913) Property, plant and equipment 679,552 630,709 Gross profit 428,974 416,714 Associates and jointly controlled entities 328,017 160,875 Investments 43 44 Distribution and selling expenses (3,072) (14,111) Intangible assets 108,546 43,359 Administrative expenses (116,936) (110,177) Long-term receivables, non-current 14,900 26,109 Derivative financial instruments, non-current – 20,516 Other operating expenses (17,138) (18,120) Deferred tax assets 17,778 21,043 Profit from operations 291,828 274,306 1,148,836 902,655

Other income, net 7,146 16,070 Current assets Inventories and work-in-progress 666,523 603,391 Trade receivables 410,695 384,653 Finance income 14,528 9,774 Amount due from related parties, current 18,433 9,122 Finance costs (18,645) (25,904) Advances and other receivables 110,384 208,580 Finance costs, net (4,117) (16,130) Long-term receivables, current 12,371 11,991 Short-term investments 204 95 Share of results of associates and jointly controlled entities, net of tax 24,585 23,594 Bank balances and other liquid funds 382,022 305,124 Assets classified as held for sale – 26,539 Profit before taxation 319,442 297,840 1,600,632 1,549,495

Taxation (53,589) (40,568) TOTAL ASSETS 2,749,468 2,452,150 Profit for the year 265,853 257,272 EQUITY AND LIABILITIES

Attributable to: Current liabilities Advance payments from customers, current 110,305 282,394 Shareholder of the Company 259,214 253,242 Trade payables and accruals 520,909 547,974 Non-controlling interests 6,639 4,030 Amount due to related parties, current 415,443 279,589 265,853 257,272 Provisions 55,339 55,590 Progress billing in excess of work-in-progress 87,707 86,661 Provision for taxation 71,812 70,150 Short-term bank loans 53,793 51,899 Long-term bank loans, current 204,085 39 Lease obligations, current 358 67 1,519,751 1,374,363 NET CURRENT ASSETS 80,881 175,132 Non-current liabilities Advance payments from customers, non-current 249,931 250,455 Trade payables and accruals, non-current 246,188 - Deferred tax liabilities 30,559 25,037 Lease obligations, non-current 16,951 46 Long-term bank loans, non-current 60,771 246,880 Other loans, non-current 1,500 2,000 Derivative financial instruments, non-current 318 4,322 Amount due to related parties, non-current 96,862 72,342 703,080 601,082 TOTAL LIABILITIES 2,222,831 1,975,445 NET ASSETS 526,637 476,705 Share capital and reserves 453,316 420,708 Non-controlling interests 73,321 55,997 526,637 476,705 TOTAL EQUITY AND LIABILITIES 2,749,468 2,452,150

226 227 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Aerospace Sectoral Financial Review – Aerospace

STATEMENT OF CASH FLOWS FINANCIAL HIGHLIGHTS

2013 2012 2013 2012 2011 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Net cash from operating activities 318,689 287,449 Income Statement Revenue 2,088,105 2,025,627 1,926,800 1,874,995 1,875,225 (100,639) Net cash used in investing activities (141,534) Profit Proceeds from sale of property, plant and equipment 8,833 8,873 EBITDA 342,022 323,320 299,886 299,864 288,938 Acquisition of intangible assets (62,121) – EBIT 291,828 274,306 242,114 233,829 199,849 Dividends from associates and jointly controlled entities 25,771 21,246 PBT 319,442 297,840 278,198 262,219 228,288 Dividends from investments 1 – Net Profit 259,214 253,242 231,794 209,767 185,700 Proceeds from sale and maturity of investments 27 – Purchase of property, plant and equipment (97,040) (87,255) Balance Sheet Acquisition of subsidiaries – (46,954) Property, plant and equipment 679,552 630,709 836,777 825,248 770,076 Investment in jointly controlled entities (9,385) (2,109) Intangible and other assets 469,284 298,485 255,096 199,426 219,274 Investment in associates (7,620) – Inventories and work-in-progress 666,523 603,391 334,451 374,815 388,165 Distribution of capital from associates – 5,560 Trade receivables, deposits and prepayments 551,883 614,346 498,591 765,529 458,441 Bank balances and other liquid funds, and short-term investments 382,226 305,219 253,904 323,869 266,834 Net cash used in financing activities (108,786) (129,882) Payment to non-controlling interests for share capital reduction (1,354) (1,960) Current liabilities 1,519,751 1,374,363 1,082,014 1,464,573 924,222 Capital contribution from non-controlling interests 15,645 1,236 Non-current liabilities 703,080 601,082 629,349 602,227 721,170 Repayment of lease obligations, net (394) (1,510) Share capital 152,512 152,512 152,512 100,000 100,000 Proceeds from bank loans 9,181 10,074 Capital and other reserves (37,753) (73,513) (65,331) (68,672) (27,235) Repayment of bank loans (20) (9,959) Retained earnings 338,557 341,709 332,843 346,649 339,445 Proceeds from loans with related corporations 178,034 154,276 Non-controlling interests 73,321 55,997 47,432 44,110 45,188 Repayment of loans with related corporations (24,247) (18,028) Dividends paid to shareholder (262,366) (244,376) Financial Indicators Dividends paid to non-controlling interests (6,742) (5,655) Earnings per share (cents) 102.65 100.29 115.90 104.88 92.85 Interest paid (16,523) (13,980) Net assets value per share (cents) 208.56 238.35 233.73 211.04 228.70 Return on sales (%) 12.7 12.7 12.3 11.5 10.4 Net increase in cash and cash equivalents 68,369 56,928 Return on equity (%) 48.0 52.0 48.8 48.7 39.9 Cash and cash equivalents at beginning of the year 305,124 253,836 Return on total assets (%) 9.7 10.5 10.8 8.7 9.3 Exchange difference on cash and cash equivalents at beginning of the year 8,529 (5,640) Cash and cash equivalents at end of the year 382,022 305,124 Productivity Data Average staff strength (numbers) 7,370 7,307 7,303 7,323 7,253 Revenue per employee ($) 283,325 277,217 263,837 256,042 258,545 Net profit per employee ($) 35,172 34,657 31,740 28,645 25,603 Employment costs 648,113 657,440 608,257 591,191 594,184 Employment costs per $ of revenue ($) 0.31 0.32 0.31 0.31 0.32

Economic Value Added 217,064 189,716 180,047 163,904 146,146 Economic Value Added spread (%) 14.4 14.8 14.2 12.7 11.8 Economic Value Added per employee ($) 29,452 25,964 24,654 22,382 20,150

Value added 1,035,479 1,032,108 959,184 935,010 944,048 Value added per employee ($) 140,499 141,249 131,341 127,681 130,160 Value added per $ of employment costs ($) 1.60 1.57 1.58 1.58 1.59 Value added per $ of gross property, plant and equipment ($) 0.79 0.83 0.63 0.64 0.66 Value added per $ of revenue ($) 0.50 0.51 0.50 0.50 0.50

228 229 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Electronics Sectoral Financial Review – Electronics

INCOME STATEMENT BALANCE SHEET

2013 2012 2013 2012 $’000 $’000 $’000 $’000

Revenue 1,682,278 1,618,717 ASSETS Cost of sales (1,182,514) (1,121,619) Non-current assets Property, plant and equipment 170,244 104,672 Gross profit 499,764 497,098 Associates and jointly controlled entities 729 4,702 Distribution and selling expenses (86,827) (92,800) Investments 632 11,582 Intangible assets 282,861 279,932 Administrative expenses (158,134) (153,857) Derivative financial instrument, non-current – 15 Other operating expenses (89,257) (92,234) Deferred tax assets 31,159 33,237 Profit from operations 165,546 158,207 485,625 434,140

Other income, net 2,044 2,191 Current assets Inventories and work-in-progress 280,051 306,697 Finance income 9,546 3,206 Trade receivables 385,754 342,693 Finance costs (5,342) (6,774) Amounts due from related parties, current 24,053 27,594 Finance income/(costs), net 4,204 (3,568) Other receivables, deposits and prepayments 58,737 39,369 Advance payments to suppliers 19,818 12,056 Share of results of associates and jointly controlled entities, net of tax (1,466) (4,498) Loan receivables, current 6 11 Profit before taxation 170,328 152,332 Finance lease receivable, current 1,415 – Bank balances and other liquid funds 478,062 398,136 Taxation (30,502) (29,831) 1,247,896 1,126,556 Profit for the year 139,826 122,501 TOTAL ASSETS 1,733,521 1,560,696

Attributable to: EQUITY AND LIABILITIES Shareholder of the Company 137,119 119,771 Current liabilities Non-controlling interests 2,707 2,730 Advance payments from customers, current 173,581 180,912 139,826 122,501 Trade payables and accruals 337,406 336,647 Amounts due to related parties, current 21,210 9,014 Provisions 65,440 58,421 Progress billings in excess of work-in-progress 431,917 407,093 Provision for taxation 51,445 42,964 Lease obligations, current 6 29 1,081,005 1,035,080

NET CURRENT ASSETS 166,891 91,476

Non-current liabilities Advance payments from customers, non-current 161,379 105,310 Trade payables and accruals, non-current 38,561 – Deferred income 2,583 3,645 Deferred tax liabilities 5,009 5,531 Lease obligations, non-current – 6 Amounts due to related parties, non-current 250,235 258,483 457,767 372,975

TOTAL LIABILITIES 1,538,772 1,408,055 NET ASSETS 194,749 152,641

Share capital and reserves 182,754 142,723 Non-controlling interests 11,995 9,918 194,749 152,641

TOTAL EQUITY AND LIABILITIES 1,733,521 1,560,696

230 231 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Electronics Sectoral Financial Review – Electronics

STATEMENT OF CASH FLOWS FINANCIAL HIGHLIGHTS

2013 2012 2013 2012 2011 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Net cash from operating activities 266,548 201,930 Income Statement Revenue 1,682,278 1,618,717 1,516,975 1,428,467 1,393,356 (46,801) Net cash used in investing activities (69,032) Profit Proceeds from sale of property, plant and equipment 173 66 EBITDA 194,652 185,659 169,536 152,948 133,025 Proceed from sale of a subsidiary – 149 EBIT 165,546 158,207 145,587 130,322 107,178 Proceed from sale of an associate 1,200 30 PBT 170,328 152,332 136,853 127,563 115,276 Proceeds from sale of a quoted investment 12,842 – Net Profit 137,119 119,771 108,802 100,708 90,803 Proceed from sale of an unquoted investment 100 – Dividends from associates 23 53 Balance Sheet Purchase of property, plant and equipment (80,088) (45,973) Property, plant and equipment, and investment property 170,244 104,672 79,393 60,862 56,652 Additional investment in an associate (304) – Intangible and other assets 315,530 329,671 360,524 380,970 419,908 Additional investment in a jointly controlled entity – (377) Inventories and work-in-progress 280,051 306,697 393,085 365,162 370,345 Acquisition of other intangible assets (2,978) (749) Trade receivables, deposits and prepayments 489,634 421,520 406,138 376,186 385,977 Bank balances and other liquid funds, and short-term Net cash used in financing activities (120,836) (126,405) investments 478,062 398,136 371,411 250,458 246,071 Proceed from a related party loan 14,664 1,923 Current liabilities 1,081,005 1,035,080 990,176 856,156 849,772 Repayment of related parties loans (24,803) (16,759) Non-current liabilities 457,767 372,975 475,975 455,829 501,245 Loans to related parties (5,187) (9,526) Repayment of loans by related parties 7,010 9,783 Share capital 52,522 52,522 52,522 52,522 52,522 Proceed from a jointly controlled entity loan 836 – Capital and other reserves (20,609) (32,821) (24,361) (35,834) (5,510) Proceeds from bank loans – 227 Retained earnings 150,841 123,022 103,751 88,949 64,241 Repayment of bank loans – (1,687) Non-controlling interests 11,995 9,918 12,488 16,016 16,683 Repayment of lease obligations (29) (47) Financial Indicators Acquisition of non-controlling interests in a subsidiary – (1,158) Earnings per share (cents) 130.53 114.02 103.58 95.87 86.44 Dividends paid to shareholder (109,300) (100,500) Net assets value per share (cents) 185.40 145.31 137.47 115.81 121.79 Dividends paid to non-controlling interests (660) (3,943) Return on sales (%) 8.3 7.6 7.3 7.2 6.6 Interest paid (3,512) (2,894) Return on equity (%) 43.7 43.7 41.4 42.5 37.8 Deposits discharged/(pledged) 145 (1,824) Return on total assets (%) 8.1 7.8 6.9 7.2 6.2 Net increase in cash and cash equivalents 76,680 28,724 Productivity Data Cash and cash equivalents at beginning of the year 396,312 371,411 Average staff strength (numbers) 5,678 5,485 5,274 4,987 4,707 Exchange difference on cash and cash equivalents at beginning of the year 3,391 (3,823) Revenue per employee ($) 296,280 295,117 287,633 286,438 296,018 Cash and cash equivalents at end of the year 476,383 396,312 Net profit per employee ($) 24,149 21,836 20,630 20,194 19,291 Employment costs 527,360 493,720 457,155 418,477 394,582 Employment costs per $ of revenue ($) 0.31 0.31 0.30 0.29 0.28

Economic Value Added 106,127 101,777 88,689 80,916 66,275 Economic Value Added Spread (%) 18.1 19.5 18.0 15.4 10.8 Economic Value Added per employee ($) 18,691 18,556 16,816 16,225 14,080

Value added 737,285 691,904 633,677 587,679 561,439 Value added per employee ($) 129,849 126,145 120,151 117,842 119,277 Value added per $ of employment costs ($) 1.40 1.40 1.39 1.40 1.42 Value added per $ of gross property, plant and equipment ($) 2.23 2.69 2.84 3.06 3.12 Value added per $ of revenue ($) 0.44 0.43 0.42 0.41 0.40

232 233 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Land Systems Sectoral Financial Review – Land Systems

INCOME STATEMENT BALANCE SHEET

2013 2012 2013 2012 $’000 $’000 $’000 $’000

Revenue 1,485,219 1,525,341 ASSETS Cost of sales (1,188,779) (1,197,222) Non-current assets Property, plant and equipment 330,063 301,522 Gross profit 296,440 328,119 Associates and jointly controlled entities 110,972 111,550 Investments 349 454 Intangible assets 213,942 197,133 Distribution and selling expenses (70,289) (76,350) Investment property - 10,239 Administrative expenses (100,077) (112,065) Long-term receivables, non-current 58 97 Amounts due from related parties, non-current 5,420 5,229 Other operating expenses (35,602) (41,192) Finance lease receivables, non-current 2,679 10,379 Profit from operations 90,472 98,512 Deferred tax assets 8,898 12,859 Derivative financial instruments, non-current 9,208 939 681,589 650,401 Other income, net 19,487 18,686 Current assets Long-term receivables, current 63 73 Finance income 4,836 4,448 Amounts due from related parties, current 21,062 23,401 Finance costs (11,175) (15,423) Finance lease receivables, current 15,032 23,775 Inventories and work-in-progress 673,322 669,198 Finance costs, net (6,339) (10,975) Trade receivables 265,431 294,236 Other receivables and deposits 42,321 16,646 Advance payment to suppliers 144,121 127,540 Share of results of associates and jointly controlled entities, net of tax 8,173 7,045 Prepayments 3,411 3,284 Derivative financial instruments, current 4,252 1,767 Profit before taxation 111,793 113,268 Bank balances and other liquid funds 251,846 247,386 1,420,861 1,407,306 Taxation (19,196) (23,066) Total assets 2,102,450 2,057,707 Profit for the year 92,597 90,202 EQUITY AND LIABILITIES Current liabilities Attributable to: Advance payments from customers, current 244,284 254,063 Shareholder of the Company 91,239 88,160 Progress billings in excess of work-in-progress 3,941 35,137 Amounts due to related parties, current 100,138 134,158 Non-controlling interests 1,358 2,042 Trade payables and accruals 413,309 406,162 92,597 90,202 Provisions 46,857 53,935 Provision for taxation 39,687 37,092 Lease obligations, current 123 136 Long-term loans, current 138 130 Short-term bank loans 46,639 37,259 Short-term loan from non-controlling interests 231 479 Derivative financial instruments, current 2,821 12,493 898,168 971,044 Net current assets 522,693 436,262 Non-current liabilities Advance payments from customers, non-current 446,187 468,325 Trade payables and accruals, non-current 14,377 - Amounts due to related parties, non-current 295,275 384,990 Lease obligations, non-current 195 192 Long-term loans, non-current 564 677 Long-term bank loan 6,336 4,279 Deferred income 55,032 17,688 Deferred tax liabilities 58,316 52,985 Derivative financial instruments, non-current 4,690 7,355 880,972 936,491 TOTAL LIABILITIES 1,779,140 1,907,535 NET ASSETS 323,310 150,172

Share capital and reserves 265,486 98,231 Non-controlling interests 57,824 51,941 323,310 150,172 TOTAL EQUITY AND LIABILITIES 2,102,450 2,057,707

234 235 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Land Systems Sectoral Financial Review – Land Systems

STATEMENT OF CASH FLOWS FINANCIAL HIGHLIGHTS

2013 2012 2013 2012 2011 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Net cash from operating activities 145,577 303,034 Income Statement Revenue 1,485,219 1,525,341 1,506,465 1,518,406 1,202,051 (14,454) Cash flows used in investing activities (66,522) Profit Distribution from funds under management – 1,186 EBITDA 129,555 139,979 136,836 140,750 102,084 Proceeds from disposal of property, plant and equipment 841 4,522 EBIT 90,472 98,512 100,250 111,341 73,701 Proceeds from disposal of quoted equity investment 82 127 PBT 111,793 113,268 108,073 113,949 95,390 Proceeds from disposal of an associate – 1,590 Net Profit 91,239 88,160 83,818 90,255 82,298 Proceeds from disposal of an investment property – 3,908 Short-term loan to related party – (1,525) Balance Sheet Short-term loan to a jointly controlled entity (3,136) – Property, plant and equipment and investment property 330,063 311,761 307,314 288,408 226,948 Dividends from an associate 7,440 10,881 Intangible and other assets 347,621 324,702 341,267 350,563 386,494 Purchase of property, plant and equipment (59,892) (50,679) Inventories and work-in-progress 673,322 669,198 541,886 496,561 498,369 Purchase of intangible assets (1,980) (2,186) Trade receivables, deposits and prepayment 499,598 504,660 527,333 484,191 506,983 Acquisition of a subsidiary and business, net of cash acquired (9,877) 18,457 Bank balances and other liquid funds 251,846 247,386 151,452 254,066 172,096 Investment in an associate – (735) Current liabilities 898,168 971,044 979,820 1,081,625 1,065,339 Non-current liabilities 880,972 936,491 734,291 651,357 550,716 Cash flows used in financing activities (73,587) (193,655) Interest paid (10,587) (12,671) Share capital 194,445 44,445 44,445 44,445 44,445 Repayment of short-term related party loans (3,669) – Capital and other reserves 18,204 (13,842) (6,478) (14,916) 10,128 Proceeds from short-term related party loans 8,152 3,766 Retained earnings 52,837 67,628 67,606 66,638 74,612 Repayment of short-term immediate holding company loans (21,272) (179,300) Non-controlling interests 57,824 51,941 49,568 44,640 45,650 Proceeds from short-term immediate holding company loans 57,000 101,272 Repayment of long-term immediate holding company loans (6,851) (40,000) Financial Indicators Proceeds from long-term immediate holding company loans – 6,851 Earnings per share (cents) 17.35 73.12 69.52 74.86 68.26 Repayment of long-term related party loans (2,976) – Net assets value per share (cents) 61.47 124.56 128.68 116.79 145.01 Proceeds from long-term related party loans – 6,823 Return on sales (%) 6.2 5.9 6.0 6.4 7.0 Repayment of long-term loans (335) (133) Return on equity (%) 22.2 36.1 33.3 37.3 29.9 Proceeds from long-term bank loan 2,616 4,291 Return on total assets (%) 4.4 4.4 4.8 5.2 4.7 Proceeds from short-term bank loans 10,895 7,240 Productivity Data Repayment of short-term bank loan (4,391) – Average staff strength (numbers) 6,998 6,968 6,872 6,574 5,786 Dividends paid to shareholder (105,800) (87,400) Revenue per employee ($) 212,235 218,907 219,218 230,971 207,752 Dividends paid to non-controlling interests (5,365) (4,463) Net profit per employee ($) 13,038 12,652 12,197 13,729 14,224 Capital contribution from non-controlling interests 7,116 2,023 Employment costs 340,675 339,518 318,485 313,406 262,552 Deposits discharged/(pledged) 1,880 (1,954) Employment costs per $ of revenue ($) 0.23 0.22 0.21 0.21 0.22

Net increase in cash and cash equivalents 5,468 94,925 Economic Value Added 61,162 72,381 55,121 63,686 40,277 Cash and cash equivalents at beginning of the year 237,969 143,989 Economic Value Added spread (%) 6.4 8.8 6.3 7.8 5.5 Exchange difference on cash and cash equivalents at beginning of the year 872 (945) Economic Value Added per employee ($) 8,740 10,388 8,021 9,688 6,961 Cash and cash equivalents at end of the year 244,309 237,969 Value added 517,685 532,146 487,530 466,122 406,096 Value added per employee ($) 73,976 76,370 70,944 70,904 70,186 Value added per $ of employment costs ($) 1.52 1.57 1.53 1.49 1.55 Value added per $ of gross property, plant and equipment ($) 0.80 0.88 0.83 0.83 0.80 Value added per $ of revenue ($) 0.35 0.35 0.32 0.31 0.34

236 237 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Marine Sectoral Financial Review – Marine

INCOME STATEMENT BALANCE SHEET

2013 2012 2013 2012 $’000 $’000 $’000 $’000

Revenue 1,238,847 1,011,092 ASSETS Cost of sales (1,050,705) (833,891) Non-current assets Gross profit 188,142 177,201 Property, plant and equipment 324,043 151,322 Jointly controlled entities 3,223 2,562 Intangible assets 355 616 Distribution and selling expenses (6,699) (9,996) Long-term receivables, non-current 194 277 Administrative expenses (35,302) (34,021) Amounts due from related parties, non-current 4,806 4,806 Other operating expenses (11,662) (10,958) Derivative financial instruments, non-current 27,899 3,157 Deferred tax assets 16,072 29,933 Profit from operations 134,479 122,226 376,592 192,673

Other income, net 6,004 6,109 Current assets Inventories and work-in-progress 112,178 280,740 Finance income 37,038 6,820 Trade receivables 119,858 96,639 Amounts due from related parties, current 21,403 24,625 Finance costs (33,284) (8,843) Other receivables, deposits and prepayments 28,071 10,160 Finance income/(costs), net 3,754 (2,023) Advance payments to suppliers 149,612 62,139 Long-term receivables, current 44 59 Short-term investments – 252 Share of results of jointly controlled entities, net of tax 2,073 1,270 Bank balances and other liquid funds 333,058 221,190 Profit before taxation 146,310 127,582 764,224 695,804 Total assets 1,140,816 888,477 Taxation (36,325) (32,926) EQUITY AND LIABILITIES Profit for the year 109,985 94,656 Current liabilities Advance payments from customers, current 305,632 50,735 Attributable to: Trade payables and accruals 265,242 270,973 Shareholder of the Company 109,955 95,013 Amounts due to related parties, current 3,462 1,974 Non-controlling interests 30 (357) Provisions 42,001 52,078 Progress billings in excess of work-in-progress 210,479 231,957 109,985 94,656 Provision for taxation 19,823 16,295 Other loans, current – 445 846,639 624,457 NET CURRENT (LIABILITIES)/ASSETS (82,415) 71,347

Non-current liabilities Advance payments from customers, non-current – 93,482 Trade payables and accruals, non-current 34,636 – Deferred income 26,080 10,115 Amounts due to related parties, non-current 26,343 26,343 Derivative financial instruments, non-current 16,621 9,696 103,680 139,636

TOTAL LIABILITIES 950,319 764,093 NET ASSETS 190,497 124,384

Share capital and reserves 190,459 124,843 Non-controlling interests 38 (459) 190,497 124,384

TOTAL EQUITY AND LIABILITIES 1,140,816 888,477

238 239 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Sectoral Financial Review – Marine Sectoral Financial Review – Marine

STATEMENT OF CASH FLOWS FINANCIAL HIGHLIGHTS

2013 2012 2013 2012 2011 2010 2009 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Net cash from operating activities 227,625 210,852 Income Statement Revenue 1,238,847 1,011,092 877,204 1,044,850 955,952 (49,318) Net cash used in investing activities (38,082) Profit Proceeds from disposal of property, plant and equipment 43 22 EBITDA 152,993 136,565 123,152 119,946 104,614 Purchase of property, plant and equipment (39,790) (49,932) EBIT 134,479 122,226 110,522 109,389 87,960 Dividends from jointly controlled entities 1,412 1,089 PBT 146,310 127,582 121,617 117,666 102,145 Investment in jointly controlled entities – (510) Net Profit 109,955 95,013 91,465 89,057 81,763 Dividends from short-term investments – 12 Proceeds from disposal of investments 253 1 Balance Sheet Property, plant and equipment 324,043 151,322 118,578 112,313 102,388 Net cash used in financing activities (79,598) (75,930) Intangible and other assets 70,050 38,058 35,214 36,702 25,579 Loans from non-controlling shareholders – 329 Inventories and work-in-progress 112,178 280,740 236,426 154,194 61,030 Proceeds from short-term bank loans 6,373 – Trade receivables, deposits and prepayment 301,487 196,915 233,480 263,015 295,316 Repayment of short-term bank loans (6,194) – Bank balances and other liquid funds and short-term investments 333,058 221,442 139,889 167,239 240,329 Proceeds from related corporation loans 14,624 – Repayment of related corporation loans (14,653) – Current liabilities 846,639 624,457 574,776 597,995 560,799 Dividends paid to shareholders (79,684) (76,243) Non-current liabilities 103,680 139,636 73,563 43,022 61,342 Interest paid (64) (16) Share capital 50,856 50,856 50,856 50,856 50,856 Net increase in cash and cash equivalents 109,945 85,604 Capital and other reserves 28,425 (6,920) 2,369 (1,146) 3,237 Cash and cash equivalents at beginning of the year 221,190 139,748 Retained earnings 111,178 80,907 62,137 42,745 48,408 Exchange difference on cash and cash equivalents at beginning of the year 1,923 (4,162) Non-controlling interests 38 (459) (114) (9) – Cash and cash equivalents at end of the year 333,058 221,190 Financial Indicators Earnings per share (cents) 56.22 48.58 46.77 45.54 41.81 Net assets value per share (cents) 97.41 63.60 58.93 47.27 52.41 Return on sales (%) 8.9 9.4 10.4 8.5 8.6 Return on equity (%) 50.7 62.8 64.5 75.0 63.5 Return on total assets (%) 9.6 10.7 12.0 12.1 11.3

Productivity Data Average staff strength (numbers) 1,871 1,834 1,850 1,856 1,734 Revenue per employee ($) 662,131 551,304 474,164 562,958 551,299 Net profit per employee ($) 58,768 51,806 49,441 47,983 47,153 Employment costs 197,545 186,990 174,248 179,228 153,019 Employment costs per $ of revenue ($) 0.16 0.18 0.20 0.17 0.16

Economic Value Added 114,848 91,402 81,042 71,095 68,023 Economic Value Added spread (%) 58.2 68.8 44.3 39.0 35.0 Economic Value Added per employee ($) 61,383 49,838 43,806 38,305 39,229

Value added 366,414 332,510 308,606 307,242 277,054 Value added per employee ($) 195,839 181,303 166,814 165,540 159,777 Value added per $ of employment costs ($) 1.85 1.78 1.77 1.71 1.81 Value added per $ of gross property, plant and equipment ($) 0.56 0.77 0.79 0.83 0.78 Value added per $ of revenue ($) 0.30 0.33 0.35 0.29 0.29

240 241 Always AHEAD | SINGAPORE technologies engineering ltd annual report 2013 Shareholding Statistics Shareholding Statistics As at 3 March 2014 As at 3 March 2014

SHARE CAPITAL Notes:

(1) Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:- Paid-Up Capital : S$857,575,562.9660 Class of Shares : Ordinary Shares One Special Share held by the Minister for Finance Voting Rights : One vote per share Name of Company No. of Shares

DBS Group Holdings Ltd 7,669,820 SHAREHOLDING HELD IN HANDS OF PUBLIC Keppel Corporation Limited 4,032,000 Fullerton Fund Management Company Ltd. 117,000 Based on the information available to the Company as at 3 March 2014, 34.8413% of the issued ordinary shares of the Company is held by ST Asset Management Ltd. 82,000 the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with. (2) Includes interests held by Aberdeen Asset Management PLC and its subsidiaries, including Aberdeen Asset Management Asia Limited.

(3) Details of their deemed interests are not available. ANALYSIS OF SHAREHOLDINGS (4) The Capital Group Companies, Inc. is deemed to have an interest in the following shares held by: No. of No. of Range of Shareholdings Shareholders % Shares % Name of Company No. of Shares 1 --- 999 2,042 6.54 661,215 0.02 1,000 --- 10,000 23,957 76.67 98,571,884 3.17 Raffles Nominees (Pte.) Limited 171,454,000 10,001 --- 1,000,000 5,213 16.68 200,950,681 6.47 1,000,001 and above 35 0.11 2,807,768,086 90.34 31,247 100.00 3,107,951,866 100.00 MAJOR SHAREHOLDERS LIST – TOP 20

No. Name No. of Shares % Number of Shares Direct Deemed Total 1 Temasek Holdings (Private) Limited 1,554,764,574 50.03 Substantial Shareholder Interest Interest Interest % 2 Dbs Nominees (Private) Limited 397,910,791 12.80 3 Dbsn Services Pte. Ltd. 248,543,396 8.00 Temasek Holdings (Private) Limited 1,554,764,574 11,900,820 (1) 1,566,665,394 50.4083 4 Citibank Nominees Singapore Pte Ltd 236,836,869 7.62 Aberdeen Asset Management PLC – 281,326,071 (2) 281,326,071 9.0518 5 Bnp Paribas Securities Services 138,281,377 4.45 Aberdeen Asset Management Asia Limited – 269,959,071 (3) 269,959,071 8.6861 6 Hsbc (Singapore) Nominees Pte Ltd 71,343,238 2.30 The Capital Group Companies, Inc. – 171,454,000 (4) 171,454,000 5.5166 7 United Overseas Bank Nominees (Private) Limited 46,310,271 1.49 8 Raffles Nominees (Pte.) Limited 19,242,118 0.62 9 Lee Pineapple Company (Pte) Limited 15,000,000 0.48 10 Db Nominees (Singapore) Pte Ltd 9,006,687 0.29 11 Dbs Vickers Securities (Singapore) Pte Ltd 7,507,089 0.24 12 Ocbc Securities Private Limited 5,900,464 0.19 13 Bank of Singapore Nominees Pte. Ltd. 5,765,828 0.19 14 Lee Seng Tee 5,750,000 0.18 15 Ocbc Nominees Singapore Private Limited 4,916,919 0.16 16 Ki Investments (Hk) Limited 4,032,000 0.13 17 Tan Pheng Hock 3,533,327 0.11 18 Merrill Lynch (Singapore) Pte Ltd 3,489,035 0.11 19 Phillip Securities Pte Ltd 3,207,693 0.10 20 Societe Generale S’pore Branch 2,855,064 0.09 2,784,196,740 89.58

242 243 Contact Information

SINGAPORE TECHNOLOGIES ENGINEERING LTD SINGAPORE TECHNOLOGIES DYNAMICS PTE LTD (ST ENGINEERING) (ST DYNAMICS) ST Engineering Hub 249 Jalan Boon Lay 1 Ang Mo Kio Electronics Park Road Singapore 619523 #07-01 Tel : (65) 6660 7028 Singapore 567710 Fax : (65) 6261 6566 Tel: (65) 6722 1818 Email: [email protected] Fax: (65) 6720 2293 Email: [email protected] ST SYNTHESIS PTE LTD Website: www.stengg.com 12 Tai Seng Street #06-02 Luxasia Building SINGAPORE TECHNOLOGIES AEROSPACE LTD Singapore 534118 (ST AEROSPACE) Tel: (65) 6861 6566 540 Airport Road Paya Lebar Fax: (65) 6861 6676 Singapore 539938 Email: puahls@stengg,com Tel: (65) 6287 1111 Fax: (65) 6280 8213 VISION TECHNOLOGIES SYSTEMS, INC. Email: [email protected] (VT SYSTEMS) Website: www.staero.aero 99 Canal Center Plaza Suite 220 Alexandria SINGAPORE TECHNOLOGIES ELECTRONICS LIMITED Virginia 22314 (ST ELECTRONICS) United States of America 24 Ang Mo Kio Street 65 Tel: (1) 703 739 2610 Singapore 569061 Fax: (1) 703 739 2611 Tel: (65) 6481 8888 Email: [email protected] Fax: (65) 6482 1079 Email: [email protected] SINGAPORE TECHNOLOGIES ENGINEERING Website: www.stee.stengg.com (EUROPE) LTD Marquis House SINGAPORE TECHNOLOGIES KINETICS LTD 68 Jermyn Street (ST KINETICS) London SW1Y 6NY 249 Jalan Boon Lay United Kingdom Singapore 619523 Tel: (44) 20 7930 8989 Tel: (65) 6265 1066 Fax: (44) 20 7930 7828 Fax: (65) 6261 6932 Email: [email protected] Email: [email protected] Website: www.stengg.com ST Engineering Representative Offices : SINGAPORE TECHNOLOGIES MARINE LTD (ST MARINE) Middle East 16 Benoi Road P.O. Box 115974 Singapore 629889 Dubai, United Arab Emirates Tel : (65) 6861 2244 Tel: (971) 43197708 Fax : (65) 6861 3028 Fax: (971) 4 3197703 Email : [email protected] Email: [email protected] Website: www.stengg.com India Eros Corporate Tower Level 12, Nehru Place New Delhi 110 019, India Tel: (91)11 4104 8411 Fax: (91)11 4104 8410 Email: [email protected]

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