Annual Report 2008

IDEAS Annual Report 2008 PROMISES

Forward, innovative thinking. Strategic partnerships and close customer engagement. Consistent, superior service. These are the values upon which ST Engineering has built its reputation for excellence and dependability. Our dynamic relationships with customers, partners and stakeholders are based on trust, confidence and active cooperation – we have a proven history of listening attentively to their requirements, pre-empting their needs and providing practical, proprietary solutions that set us apart from the competition. From drawing board to delivery,

we put our exceptional creativity, responsiveness and expertise to work. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

1 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

2 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Dear Shareholders 2008 saw a world in unprecedented turmoil. What started Amidst these as the US sub-prime problem snowballed into a global challenges, the crisis, which hit financial institutions and financial markets worldwide and is now pushing many economies into ST Engineering Group recession. Oil prices hit an all-time high of US$147 per was able to deliver a barrel during the third quarter of the year, driving cost of businesses up. With the recession, oil prices nosedived steady set of results in to a record low of close to US$40 per barrel at year’s end. Although the lower oil prices have since offered 2008. We set a record in some reprieve to many industries, the uncertainties in closing the year with a macroeconomics and the financial environment continue to pose huge challenges to businesses. respectable $10.6b

Amidst these challenges, the ST Engineering Group order Book. was able to deliver a steady set of results in 2008. We achieved 6% higher turnover of $5,345m, though net Strong financial position profit was lower by 6% at $473.6m. This performance Notwithstanding the economic challenges, the Group was achieved on the back of impairment charge for continues to be in a sound financial position. Our balance long term investments of $25.9m in 2008. The Group’s sheet is strong, with a net cash position and cash and cash operating performance remained resilient with EBITDA at equivalents of $1.05b as at 31 December 2008. In addition, a healthy $667.9m, a marginal 2% decrease compared to we remain one of few companies in the world with Moody’s 2007. Our strong operational performance was weighed Aaa credit rating. down by allowance for doubtful debts of $32.4m, a weak US dollar particularly in the first three quarters which Order book at all time high resulted in translational loss, higher prototyping cost as we We set a record in closing the year with a respectable $10.6b executed the Fedex 757-200 PTF programme and higher order book. This is the first time we have recorded an order Annual Report 2008 depreciation from our continuing investment in capital book exceeding $10b, and it is despite the removal of the expenditure to strengthen our capabilities and presence. Skybus, Sterling and EAMS contracts from the order book when the companies filed for bankruptcy during the year. Rewarding our shareholders The robust order book will keep us busy for the next few In recognition of shareholders’ loyalty, the Board of years. Our untiring pursuit of new contracts as well as efforts Directors is proposing to pay all of its 2008 net profit to to strengthen customer partnerships and developing longer our shareholders as dividends. Subject to shareholders’ term relationships with OEMs have re-shaped our working approval, ST Engineering proposes to declare a final relations with customers. In so doing, we are able to minimise dividend of 12.8 cents per share comprising an ordinary some of the cyclicity of contracts and sustain our order book. dividend of 4.0 cents per share and a special dividend of Geographic, business and customer diversification, with a 8.8 cents per share at our AGM in April 2009. Together primary focus on our core capabilities, also added to order with our interim ordinary dividend of 3.0 cents per share book resilience. which was paid in September 2008, the Company will have declared a total of 15.8 cents per share in dividends Key defence and commercial contract wins from all four for FY2008, giving a dividend yield of 5.16%, computed sectors during the year contributed to the strong order book using the average of the closing share prices of 2007 growth. In particular, the Group had significant success with and 2008. defence export sales. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

3 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

For the first time, the Group sealed deals to export the Bronco, diversified customer base spanning Asia, US, Europe, the Gulf an all-terrain tracked carrier, and the Landing Platform Dock, and Africa. Today, 52% of the Group’s revenue is derived from a multi-role vessel derived from the design of the Landing markets beyond the Asian region. Ship Tank. The Bronco export deal of over 100 vehicles is the Group’s first military vehicle sale to the UK Ministry of At the sector level, diversification created new niches and Defence. These milestone wins are significant in positioning capabilities that are developed from established strengths. ST Engineering in the defence marketplace and are a For example, we have expanded our aerospace commercial recognition of the outstanding quality of our designs and business from primarily an airframe maintenance, repair and products. They further augment our reputation and credibility overhaul (MRO) provider ten years ago to include components as a key defence industry player and will increase our and engines MRO, passenger-to-freighter conversions and opportunities in defence exports. training services. We have secured long-term partnerships with both customers as well as OEMs. In the defence arena, Amongst other new businesses, the Aerospace sector landed the sector is working on a developmental programme for the training contracts of $125m to support RSAF’s training Unmanned Aerial Vehicle besides various other projects for requirements, while its European arm, STA Solutions, secured local and foreign defence forces. an extended US$160m maintenance contract with Flybe, Europe’s largest regional airline. our well-diversified The Electronics sector won a $112m contract to design and supply half-height platform doors to Singapore’s Land global portfolio has Transport Authority for MRT stations, $160m worth of afforded us some contracts to supply communication systems for the Marina Coastal Expressway and the MRT Downtown Line and resilience, providing us $86m worth of contracts to provide a security system, an IT infrastructure system and a carpark Guidance & Payment with multiple growth system to the new integrated resort on Sentosa. opportunities, and

The Land Systems sector made major inroads into defence hedging us against exports. It made headlines with the £150m and about $120m any major negative contracts from the UK Ministry of Defence for its Bronco and munitions sales respectively. It also secured a $44.8m impact from this global contract from a Gulf States customer for its mortar system, the 120mm SRAMS. downturn.

The Marine sector clinched a $200m contract from an Asia Such diversification not only expands our income streams but Pacific Navy to build a Landing Platform Dock and a $127.7m also allows us to provide our customers with comprehensive contract to build a Diving Support Vessel for a commercial solutions. During the year, our aerospace arm inked a series foreign customer in Singapore. Its US unit, VT Halter Marine, of agreements valued at US$1.5b with CFM international, an after completing Phase I of designing the Fast Missile Craft, OEM, in support of our CFM engines’ MRO operations. won the US$393m Phase II contract to build three Fast Missile Craft for the Egyptian Navy. While we have conscientiously grown our commercial sales, defence and government projects remain a strategic focus Resilience through diversity for the Group and we remain one of Asia’s largest defence Indeed, our well-diversified global portfolio has afforded firms. Our Electronics sector for example, has a healthy and us some resilience, providing us with multiple growth balanced portfolio of defence, government and infrastructure opportunities, and hedging us against any major negative related, and commercial projects. Defence business and impact from this global downturn. government projects are however expected to continue providing the Group with revenue stability. Our track record Our four core business sectors cover the spectrum of has made us a trusted partner in defence and government industries from aerospace, marine and land, with an projects both locally and overseas and we expect to gain overarching electronics sector. We have built a strong and increasing traction in these segments overseas.

4 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

A prudent approach The Group remains committed to the guiding principle of The Group’s desire to increase our foothold is balanced balancing People, Planet and Profit in the way we conduct our with a cautious approach. We have in place a risk review business. Among the many initiatives in 2008, we launched and management framework, which seeks to minimise any our Green Month, marking our commitment to doing our part negative surprises, be it investment or operational risks. for the environment. In a concerted effort, over 1,500 staff and their families, as well as community leaders and students, We continue to stress the importance of risk management and planted a record-breaking 2,008 trees in Admiralty Park, prudent policies. Our robust risk management process will Singapore. The initiative will offset over 2,000 tons of carbon ensure that we constantly stay vigilant. dioxide in the atmosphere over the lifetime of the trees.

Opportunities amidst challenges Well-poised for the future Our record order book is testament that there is demand for These are tough economic times, with many economists our products and services. With some governments, including predicting that the global slowdown may extend into the next the US, China and Singapore, announcing fiscal measures to few quarters. jumpstart their economies during the downturn, particularly directed at infrastructure development, we see opportunities We expect the year to be more challenging than before, as for the Group to participate in such projects. the Group will not be insulated from the global downturn. The Group’s global presence and customer base will no doubt We expect the current economic climate will see many translate into global exposure. However, having been through organisations explore ways to minimise cost and migrate and learned from past financial crises, we are confident that it towards an asset light operations model. We are hopeful that will be our well-diversified business and sound financial position this will result in increased outsourcing and our track record that will stand us in good stead. in the industries will put us in good stead to harness the outsourcing trends. Our success can be attributed to our passion to continually engage and deliver. We engage our stakeholders, customers, Defence opportunities will continue for the needs of defence, partners and employees in our business development and peace keeping, homeland security and even disaster relief growth. We engage innovative ideas, new technologies and operations are preventive and perennial. market intelligence to drive new and cost effective solutions for customers. We continually deliver on our commitment Apart from organic growth, our growth strategy also to our customers and stakeholders. We are committed to includes acquiring businesses or entering into partnerships growing shareholder value in the long term and are cautiously which are synergistic to our core competencies. We mine optimistic that the Group will continue to deliver a steady set Annual Report 2008 opportunities that will help us gain entry into new markets, of financials in 2009. create new business alliances or add new capabilities and talents to the Group. The current economic environment Appreciation will no doubt throw up opportunities for mergers and We wish to thank our Board Directors who have counselled, acquisitions. We remain diligent in exploring suitable steered and guided the management through a challenging acquisitions or joint ventures, in the US, China, Gulf States, year; our customers and partners for their continued trust and other growth markets. Our sound financial position and commitment to work with us; our employees for their affords us the negotiating power and nimbleness to size up loyalty and unstinting drive to grow the business; and our and seize such opportunities for growth when they arise. shareholders for their support of ST Engineering.

A responsible employer and a good corporate citizen Our employees, now over 19,000 worldwide, remain our most important resource. We will continue investing in their capabilities training and upgrade, and ensure that we continually develop, retain and nurture our top talents. As our presence now spans 24 countries and 42 cities Peter SEAH Lim Huat TAN Pheng Hock worldwide, it is also imperative that we continue to build Chairman President and CEO on our all inclusive culture to embrace differing cultures and practices. 25 February 2009 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

5 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

6 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial Annual Report 2008 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

7 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Amidst the challenging financial and economic environment, ST Engineering was able to deliver a steady set of results with revenue growth of 6% to $5.35b, PATMI of $473.6m, and ROE at 30%. The Group achieved a record order book of $10.6b as at end 2008. The Board is proposing to pay 100% of FY2008 earnings to shareholders as dividends or a total of 15.8 cents per share for the full year.

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

6,000 700 600

600 5,000 500

500

4,000 400

400

3,000 300

300

2,000 200

200

1,000 100 100

0 0 0

04 05 06 07 08 04 05 06 07 08 04 05 06 07 08

Aerospace Electronics Land Systems Marine Others

8 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

TURNOVER BY SECTOR ($m)

2008 2007 2006 2005 2004

GROUP 5,345 100% 5,051 100% 4,486 100% 3,338 100% 2,948 100% AEROSPACE 1,938 36% 1,835 36% 1,673 37% 1,236 37% 1,118 38% ELECTRONICS 1,143 21% 1,023 20% 951 21% 701 21% 626 21% LAND SYSTEMS 1,274 24% 1,178 23% 1,002 22% 600 18% 591 20% MARINE 822 15% 863 17% 702 16% 660 20% 484 16% OTHERS 168 4% 152 4% 158 4% 141 4% 129 5%

PROFIT BEFORE TAX BY SECTOR ($m)

2008 2007 2006 2005 2004

GROUP 540.7 100% 638.1 100% 564.3 100% 503.2 100% 446.2 100% AEROSPACE 272.1 50% 341.2 53% 305.3 54% 255.4 51% 235.4 53% ELECTRONICS 93.9 17% 115.3 18% 104.6 19% 76.0 15% 64.5 14% LAND SYSTEMS 84.7 16% 80.0 13% 70.0 12% 65.0 13% 71.5 16% MARINE 75.2 14% 96.6 15% 79.5 14% 87.9 17% 69.8 16% OTHERS 14.8 3% 5.0 1% 4.9 1% 18.9 4% 5.0 1%

PROFIT AFTER TAX AND MINORITY INTERESTS BY SECTOR ($m) Annual Report 2008

2008 2007 2006 2005 2004

GROUP 473.6 100% 503.5 100% 445.1 100% 396.3 100% 354.2 100% AEROSPACE 225.7 48% 270.5 54% 255.0 57% 210.3 53% 187.3 53% ELECTRONICS 68.1 14% 88.2 17% 76.3 17% 58.0 15% 51.6 15% LAND SYSTEMS 79.9 17% 70.8 14% 51.9 12% 49.0 12% 58.1 16% MARINE 74.5 16% 75.3 15% 67.8 15% 70.3 18% 53.7 15% OTHERS 25.4 5% (1.3) - (5.9) (1%) 8.7 2% 3.5 1% IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

9 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

2008 2007 2006 2005 2004 EBITDA ($m) 667.9 684.4 593.4 470.1 419.5 EBIT ($m) 509.1 550.3 457.6 389.5 341.0 Shareholders’ funds ($m) 1,580 1,633 1,565 1,493 1,358 Total assets ($m) 5,993 6,050 5,578 4,566 4,042 Net assets ($m) 1,677 1,780 1,687 1,542 1,396 Capital expenditure ($m) 191 172 197 123 84 Gross dividend per share (cents) 15.80 16.88 15.11 13.60 12.39 Dividend yield (%) 5.16 4.94 5.09 5.24 5.67 Dividend cover 1.00 1.00 1.00 1.00 1.00 Earnings per share (cents) 15.82 16.95 15.15 13.64 12.26 Return on sales (%) 9.1 10.4 10.2 12.3 12.2 Return on equity (%) 30.0 30.8 28.4 26.5 26.1 Return on total assets (%) 8.2 8.7 8.2 9.0 8.9 Net asset value per share (cents) 52.7 54.7 53.1 51.2 47.0

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

800 2,000 240

750 1,900 220

700 1,800 200

650 1,700 180

600 1,600 160

550 1,500 140

500 1,400 120

450 1,300 100

400 1,200 80

350 1,100 60

300 1,000 40

04 05 06 07 08 04 05 06 07 08 04 05 06 07 08

EBITDA EBIT 10 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

DIVIDEND YIELD RETURN ON EQUITY (%) (%)

7.0 35.0

6.5 33.5

6.0 32.0

5.5 30.5

5.0 29.0

4.5 27.5

4.0 26.0

3.5 24.5

3.0 23.0

2.5 21.5

2.0 20.0

04 05 06 07 08 04 05 06 07 08

RETURN ON TOTAL ASSETS NET ASSET VALUE (%) PER SHARE (cents)

9.4 60

9.2 58 Annual Report 2008

9.0 56

8.8 54

8.6 52

8.4 50

8.2 48

8.0 46

7.8 44

7.6 42

7.4 40

04 05 06 07 08 04 05 06 07 08 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

11 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

2008 2007 2006 2005 2004 Average staff strength 18,703 17,750 15,912 13,099 11,684 Sales per employee ($) 285,757 284,570 281,910 254,821 252,333 Profit after tax per employee ($) 25,324 28,367 27,974 30,255 30,316 Employment costs ($m) 1,422.8 1,360.3 1,243.0 899.9 826.9 Employment costs per $ of turnover ($) 0.27 0.27 0.28 0.27 0.28

Economic Value Added ($m) 357.9 388.8 327.8 290.6 234.5 Economic Value Added spread (%) 11.8 13.2 12.3 16.2 13.7 Economic Value Added per employee ($) 19,138 21,904 20,598 22,187 20,075

Value added ($m) 2,203.7 2,190.8 1,990.8 1,500.6 1,363.1 Value added per employee ($) 117,824 123,432 125,112 114,559 116,668 Value added per $ of employment costs ($) 1.55 1.61 1.60 1.67 1.65 Value added per $ of gross property, plant and equipment ($) 0.97 1.00 0.98 1.02 1.03 Value added per $ of turnover ($) 0.41 0.43 0.44 0.45 0.46

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

34 23.0 132

32 22.5 128

30 22.0 124

28 21.5 120

26 21.0 116

24 20.5 112

22 20.0 108

20 19.5 104

18 19.0 100

16 18.5 96

14 18.0 92

04 05 06 07 08 04 05 06 07 08 04 05 06 07 08

12 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

($m) 2008 2007 2006 2005 2004 Net profit before tax 501.8 591.5 512.8 457.3 387.8 Adjust for: Share of results of associated companies and joint ventures 38.9 46.6 51.5 45.9 58.4 Interest expense 67.4 53.2 45.1 10.4 8.0 Others 21.3 10.3 11.6 2.2 (4.8) Adjusted profit before interest and tax 629.4 701.6 621.0 515.8 449.4 Cash operating taxes (Note 1) (81.8) (112.4) (112.8) (99.3) (85.7) Net operating profit after tax (NOPAT) – (a) 547.6 589.2 508.2 416.5 363.7 Average capital employed (Note 2) 3,034.4 2,988.5 2,691.9 1,865.4 1,725.0 Weighted average cost of capital (Note 3)(%) 6.2 6.5 6.6 6.1 7.4 Capital charge – (b) (188.1) (194.3) (177.7) (113.8) (127.6) Economic Value Added (EVA) – [(a) – (b)] 359.5 394.9 330.5 302.7 236.1 Minority share of EVA (1.6) (6.1) (2.7) (12.1) (1.6) EVA attributable to ordinary shareholders 357.9 388.8 327.8 290.6 234.5 Unusual items (UI) (gains)/losses (Note 4) (0.1) (10.8) (30.7) (7.0) 6.1 EVA attributable to ordinary shareholders (exclude UI) 357.8 378.0 297.1 283.6 240.6

ECONOMIC VALUE ADDED ($m) Note 1: The reported current tax is adjusted for the statutory tax impact of interest expense. 500 Note 2: Monthly average share capital plus interest bearing liabilities, timing provision,

goodwill impaired/amortised, and present value of operating leases. Annual Report 2008 450 Major Capital Components:

$m 400 Long term debt 811.3 Short term debt 589.7 350 Equity 1,388.1 Others 245.3 300 3,034.4

Note 3: The Weighted Average Cost of Capital is calculated in accordance to 250 ST Engineering Group EVA Policy as follows: i) Cost of Equity using Capital Asset Pricing Model with market risk 200 premium at 6.0% (2007 @ 6.0%); ii) Risk-free rate of 2.74% (2007 @ 3.05%) based on yield-to-maturity of Singapore Government 10 years Bonds; 150 iii) Ungeared beta at 0.67 (2007 @ 0.67) based on ST Engineering risk categorisation; and 100 iv) Cost of Debt rate at 3.23% (2007 @ 3.62%) using 5-year Singapore dollar Swap Offer Rate plus 25 basis point (2007 @ 25 basis point). 50 Note 4: UI refer to divestment of investment properties, subsidiaries and associated companies, long term investments and disposal of major property, plant and equipment. 0 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore 04 05 06 07 08

13 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

The members of ST Engineering’s Board of Directors bring their extensive experience and expertise to work, providing guidance and counsel to senior management, as well as sharing their invaluable insights and independent recommendations.

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

Chairman, Mr TAN Pheng Hock, Mr Peter SEAH 51, is the President and CEO Lim Huat, of ST Engineering and an 62, was appointed non executive Director. He was executive Chairman on appointed Director on 1 May 15 April 2002 and will be 2001 and was last re-elected due for re-election at this as Director on 25 April 2008. coming AGM under Article Mr Tan sits on the Boards 98 of the Company’s Articles of SembCorp Marine Ltd* of Association. He is a member of the Temasek Holdings and Neptune Orient Lines Limited*. He is Chairman of the Advisory Panel. Mr Seah was a banker for 33 years before Nanyang Polytechnic Board of Governors and the Singapore retiring as Vice Chairman and CEO of the former Overseas Workforce Development Agency. Mr Tan began his career with Union Bank in 2001. He then joined Singapore Technologies the Group as an engineer in ST Marine in 1981. He held various Pte Ltd as President and CEO and held this position until senior appointments in the Group, including that of Executive 31 December 2004. Mr Seah is the Chairman of SembCorp Vice President of ST Marine, President of ST Kinetics, Industries Limited* and sits on the Boards of Bank of China President and Chief Operating Officer of ST Engineering, and Limited^, CapitaLand Limited*, Siam Commercial Bank ST Engineering Group President. Mr Tan holds a Bachelor Public Company Limited**, and Government of Singapore of Science (First Class Honours) in Marine Engineering from Investment Corporation. Mr Seah is also Deputy Chairman the University of Surrey, UK and a Master of Science in of Global Crossing Limited. His other appointments include Management from Stanford University, USA. being Chairman of LaSalle Foundation Limited and a member of the Boards of the S. Rajaratnam School of International Studies and Defence Science & Technology Agency (DSTA). Mr Seah was awarded the Public Service Star (Bintang Bakti Masyarakat) in 1999 and made a Justice of the Peace in 2003. He graduated from the former University of Singapore in 1968 with an honours degree in Business Administration.

14 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Mr KOH Beng Seng, Dr TAN Kim Siew, 58, is CEO of Octagon 55, is Permanent Secretary Advisors Pte Ltd. He was (Defence Development), appointed an independent MINDEF. He was appointed non executive Director on a non executive Director on 15 September 2003 and will 15 December 2003 and was be due for re-election at this last re-elected as Director coming AGM under Article on 25 April 2007. Prior to 98 of the Company’s Articles his present appointment of Association. Mr Koh was Deputy President of United with MINDEF, he was the Deputy Secretary (Policy) with Overseas Bank Ltd from June 2000 to 31 January 2005. the Ministry of Finance. He was formerly the CEO and Prior to this, Mr Koh was Senior Advisor to Asia Pulp & Paper Chief Planner of the Urban Redevelopment Authority from Co Ltd, and Advisor to Bank of China and the International 1996 to 2001. Dr Tan is Chairman of the DSTA and DSO Monetary Fund. Mr Koh has extensive experience in the National Laboratories, and is also a Director of Singapore financial services sector. He was with the Monetary Technologies Holdings Pte Ltd. Dr Tan holds a Bachelor of Authority of Singapore from 1973 to 1998, where he served Arts in Engineering Tripos and a PhD in Engineering from the as Deputy Managing Director from 1988 to 1998. Mr Koh University of Cambridge, UK. is a Director of Bank of China (Hong Kong) Limited^, BOC Hong Kong (Holdings) Limited, Fraser & Neave Ltd*, Sing- Han International Financial Services Limited, Japan Wealth Management Securities Company Ltd, and Great Eastern Holdings Limited*. Mr Koh holds a Bachelor of Commerce (First Class Honours) from the former Nanyang University, Mr QUEK Tong Boon, Singapore, and a Master of Business Administration from 53, is Chief Defence Columbia University, USA. Scientist and Chief Research & Technology Officer in MINDEF. He was appointed a non executive Director on 1 March 2008 and was last Lieutenant-General re-elected as Director on

Desmond KUEK 25 April 2008. He joined Annual Report 2008 Bak Chye, the Defence Science Organisation of MINDEF in 1980 and in 45, is Chief of the Defence the course of his career, has held various key appointments, Force. He was appointed a including that of CEO of the DSO National Laboratories. non executive Director on Mr Quek is a member of the DSO National Laboratories 27 April 2007 and was last Board, the DSTA Board, the Agency for Science, Technology re-elected as Director on & Research Board, as well as the Intellectual Property 25 April 2008. He joined Office of Singapore (IPOS) Board and an Adjunct Professor the Singapore Armed Forces (SAF) in 1982 and was awarded at the Department of Electrical & Computer Engineering the SAF Overseas Scholarship in 1982, SAF Postgraduate of the National University of Singapore (NUS). He holds a Scholarship (General Development) in 1997, and The Public Bachelor of Arts (Hons) (Engineering) from the University Administration Medal (Gold) in 2002. In the course of his of Cambridge, UK, and a Master of Science (Electrical military career, he has held various key command and staff Engineering) from NUS. positions in the Ministry of Defence (MINDEF). LG Kuek is a Board member of the Jurong Town Corporation and a Member of the DSTA Board. He holds a Bachelor of Arts (Hons) (Engineering Science) and a Master of Arts (Engineering Science) from the University of Oxford, UK, as well as a Master in Public Administration from Harvard University, USA. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

15 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Mr Winston TAN Mr QUEK Poh Huat, Tien Hin, 62, is Group CEO of 60, is Managing Director Singapore Power Limited. of Corporate Brokers He was appointed a non International Pte Ltd. Mr Tan executive Director on was a banker for 24 years, 15 April 2002 and will be having spent over due for re-election at this 16 years with Citibank, coming AGM under Article and over seven years with 98 of the Company’s Articles Deutsche Bank; his last position was that of General Manager of Association. Mr Quek is a Director of Singapore Power for the Singapore Branch. He was appointed an independent Limited, SP PowerAssets Limited, PowerGas Limited and non executive Director on 1 October 1997 and will be due SP Services Limited. He is also Chairman of SP PowerGrid for re-election at this coming AGM under Article 98 of the Limited, SPI Management Services Pty Ltd, SPI (Australia) Company’s Articles of Association. Mr Tan is a Business Assets Pty Ltd and Enterprise Business Services (Australia) Angel investor and Director of several small and medium Pty Ltd. Mr Quek is Singapore’s non resident Ambassador sized enterprises, including Roxy-Pacific Holdings Limited*. to Sweden. He was awarded the Public Service Star award Mr Tan is also a member of the Salvation Army Advisory in August 1994. Mr Quek obtained a Bachelor of Science Board. He holds a Bachelor of Science in Physics from the in Chemical Engineering from the University of Leeds, UK, former University of Singapore. and a Master of Science in Management from the Naval Postgraduate School, USA.

Dr Philip PILLAI, 61, is Senior Partner of Mr Venkatachalam Shook Lin & Bok. He was KRISHNAKUMAR, appointed an independent 59, is Senior Advisor of non executive Director on Group Technology and 1 April 2000 and was last Operation, DBS Bank Ltd. re-elected as Director on Prior to this, he was a 25 April 2008. Dr Pillai is Senior Advisor to McKinsey a Director of Singapore and Company, Barclays Press Holdings Limited*, Hotung Investment Holdings Bank PLC, Global Retail and Limited*, Prudential Assurance Co. (Singapore) Pte Ltd Commercial Banking. He was Chief Operating Officer and and International Board Trustee of Haggai Institute, Atlanta. Chief Financial Officer for the Asia Pacific Consumer Bank of He was awarded the Public Service Star (Bintang Bakti Citigroup until his retirement on 28 February 2005, after a Masyarakat) in 2003. Dr Pillai obtained his Bachelor of Law 31-year career with the group. During his career with (First Class Honours) from the former University of Singapore Citigroup, he held several senior appointments in India, and LLM and SJD from Harvard University, USA. Singapore and New York. He was appointed an independent non executive Director on 15 April 2002 and was last re-elected as Director on 25 April 2008. He is a member of the Board of the Central Depository (Pte) Limited. He holds a Bachelor of Engineering and Master of Business Administration from the Indian Institute of Management, India.

16 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Mr Davinder SINGH, Colonel CHIA Choon 51, is CEO of Drew & Napier Hoong, LLC. He was appointed an 36, is Commander 2 SIB in independent non executive MINDEF. He was appointed Director on 1 August 2007 Alternate Director to and was last re-elected as LG Desmond Kuek Bak Chye Director on 25 April 2008. on 1 August 2007. COL Chia Mr Davinder Singh has been joined the SAF in 1991. in legal practice for more He was awarded the SAF than 20 years. He was appointed Senior Counsel in 1997, Overseas Scholarship in 1991, and the SAF Postgraduate among the first batch of Senior Counsels to be so appointed Scholarship (General Development) in 2006. He has held in Singapore. Mr Davinder Singh holds an LLB (Honours) various positions in MINDEF over the last 17 years and from the former University of Singapore. assumed his present office in 2008. COL Chia holds a Master of Engineering (First Class Honours) (Electrical & Electronic Engineering) from the University College London- UOL, UK, and a Master in Business Administration from the Massachusetts Institute of Technology, USA. Annual Report 2008

PAST DIRECTORSHIPS IN THE LAST THREE YEARS

Mr Peter SEAH Lim Huat Mr Venkatachalam KRISHNAKUMAR EDB Investments Pte Ltd Citibank Korea Inc PSA International Pte Ltd Citibank Malaysia Berhad PT Bank Internasional Indonesia Tbk Citibank Savings Inc PT Indosat Tbk Singapore Computer Systems Limited Singapore Computer Systems Limited The National Kidney Foundation Mr Davinder SINGH Singapore Airlines Limited Mr TAN Pheng Hock Zagro Asia Limited ST Synthesis Pte Ltd

Lieutenant-General Desmond KUEK Bak Chye Singapore Technologies Kinetics Ltd

Mr QUEK Poh Huat SP Australia Networks (Distribution) Ltd SP Australia Networks (RE) Ltd * listed on Singapore Exchange Securities Trading Limited SP Australia Networks (Transmission) Ltd Temasek Life Sciences Laboratories Limited ^ listed on Stock Exchange of Hong Kong Temasek Management Services Pte Ltd ** listed on Stock Exchange of Thailand IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

17 ST Engineering relies on the wide-ranging knowledge and capabilities of each and every member of its senior management. Giving its employees direction and support, the team is a testament to the Group’s dedication to excellence.

Standing, left to right: Gen (Ret) John G COBURN, TAY Kok Khiang and WEE Siew Kim. Seated, left to right: TAN Pheng Hock, Eleana TAN Ai Ching, SEW Chee Jhuen, CHANG Cheow Teck and SEAH Moon Ming.

18 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

TAN Pheng Hock, member of IEEE. He was awarded the been with the Group since 1990 and held is President and CEO of ST Engineering 2007 International Manager Action various senior management appointments and a Director of the ST Engineering Award in Singapore, 2007 Top Ten within the Group before assuming his Board. (Mr Tan’s profile is on page 14) Financial and Intelligent Persons Award current position, including that of EVP in China and IES/IEEE Joint Medal Commercial Business, ST Aerospace; WEE Siew Kim, of Excellence 2008. Mr Seah holds President, VT Systems; and President, 48, was appointed Deputy CEO in May a Master of Science (Distinction) in Defence Business of ST Kinetics. 2004, overseeing the Aerospace and Electrical Engineering from the Naval Mr Chang holds a Bachelor of Mechanical Marine sectors. He is concurrently Postgraduate School, USA. Engineering (First Class Honours) from President, Defence Business of the National University of Singapore ST Engineering, a position he has held TAY Kok Khiang, and attended Harvard University’s since 1 May 2002. Prior to his current 60, was appointed President of Management Development Program. positions, Mr Wee was President of ST Aerospace in July 2001. As ST Engineering’s Europe operations from President of ST Aerospace, Mr Tay is General (Retired) John G July 2001. He joined ST Aerospace as responsible for growing the Aerospace COBURN, an engineer in 1984. He was appointed sector business, as well as its financial 66, was appointed Chairman and CEO of President, ST Aerospace from December and operational performance. He joined ST Engineering’s US subsidiary, 1997 to July 2001. Mr Wee is also a ST Aerospace as Vice President/General VT Systems, in December 2001. Director of SBS Transit Ltd*, Changi Manager of ST Aerospace Engineering Gen (Ret) Coburn joined the Group after Airport International Pte Ltd, DSO Pte Ltd in 1993, and has held many an illustrious 39-year career with the US National Laboratories and Basketball senior management appointments Department of Defense. Prior to taking Enterprises Singapore Pte Ltd. His other before becoming President. He was up this position, he was Commanding appointments include being a Member Deputy President and Chief Operating General of the US Army Materiel of Parliament for the Ang Mo Kio Group Officer prior to his current appointment. Command (AMC), one of the largest Representative Constituency. Mr Wee Mr Tay holds a Bachelor of Engineering commands in the army with 60,000 was awarded a Bachelor of Science (Honours) and a Master of Science in employees and activities in 42 states and (First Class Honours) in Aeronautical Industrial Engineering from the National 28 foreign countries. Gen (Ret) Coburn Engineering from the Imperial College University of Singapore. holds a Juris Doctor from the University of Science & Technology, University of Missouri, USA, a Doctor’s Degree of London, UK, and holds a Master in SEW Chee Jhuen, from Eastern Michigan University and Business Administration from Stanford 45, was appointed President of many other degrees. University, USA. ST Kinetics in September 2006. Prior to this, Mr Sew was Deputy President Eleana TAN Ai Ching, Annual Report 2008 SEAH Moon Ming, (Operations) and President Defence 46, was appointed Chief Financial 52, was appointed President, Business of ST Kinetics. He joined Officer of ST Engineering in March International Business and Deputy ST Aerospace as an aeronautical 2008. Ms Tan was previously Managing CEO of ST Engineering in May 2004, engineer in 1988, and has held many Director, Finance, Temasek Holdings overseeing the Electronics and Land senior management appointments (Private) Limited (Temasek). Prior Systems sectors. He is concurrently before becoming Deputy President to that, she was Director Finance at President, ST Electronics, a position (Operations). Mr Sew holds a Singapore Technologies Pte Ltd (STPL) he has held since 1 July 1997. Bachelor of Science (Distinction) from August 2003 until December Mr Seah was General Manager of CET in Aeronautical Engineering and 2004, when STPL was restructured, Technologies Pte Ltd from July 1994 Mechanics from the University of and its assets transferred to Temasek. to July 1997. He serves as Chairman Minnesota, and a Master in Business Prior to 2003, Ms Tan had held of the Board of Governors of Temasek Administration from Stanford various key finance positions in the Polytechnic, Vice Chairman of Trek University, USA. ST Engineering Group over a period of 2000 International Ltd*, and Director 13 years and last held the position of of Infocomm Development Authority CHANG Cheow Teck, Group Financial Controller of of Singapore, International Enterprise 48, was appointed President, ST Engineering. Ms Tan holds a Singapore and Alexandra Health Pte ST Marine in March 2008. Prior to Bachelor of Accountancy (Honours) Ltd. He is a Fellow of the Institution this, Mr Chang was President, Special from the National University of of Engineers Singapore and a senior Projects in ST Engineering. He has Singapore. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

* listed on SIngapore Exchange Securities Trading Limited 19 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

TAN Pheng Hock President and CEO

Eleana TAN Chief Financial Officer

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

TECHNOLOGY MERGERS & ACQUISITIONS HUMAN RESOURCE FONG Saik Hay Steven CHEONG TAN Nga Kok Chief Technology Officer Senior Vice President Senior Vice President/Director

LEGAL INFORMATION TECHNOLOGY STRATEGIC PLANS LOW Meng Wai TAN Hock Hai Robin THEVATHASAN Vice President/Director Chief Information Officer Senior Vice President

RISK MANAGEMENT DEFENCE BUSINESS CORPORATE COMMUNICATIONS Alice CHUA LOW Yee Kah Sharolyn CHOY Senior Vice President Senior Vice President Senior Vice President

BUSINESS EXCELLENCE PROCUREMENT SPECIAL PROJECTS Harnek SINGH GOH Bak Nguan NG Sing Chan Vice President/Director Chief Procurement Officer Executive Vice President

20 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

SEAH Moon Ming WEE Siew Kim Deputy CEO Deputy CEO Electronics and Land Systems Aerospace and Marine President President International Business Defence Business

ELECTRONICS LAND SYSTEMS AEROSPACE MARINE

SEAH Moon Ming SEW Chee Jhuen TAY Kok Khiang CHANG Cheow Teck President President President President

LEE Fook Sun GAN Boon Jin HO Yuen Sang HAN Yew Kwang Deputy President, Executive Vice President, Deputy President, Deputy President & Operations & Land Systems & Solutions Operations/ President, President, and Defence Business Chief Operating Officer Marketing and Business Defence Business & President, Development Defence Business NG Chong Khim Parmesh SINGH Deputy President, Jeremy CHAN Chief Operating Officer & Corporate Services and Deputy President, President, Marketing Marketing & Defence Business

Total Aviation Support Annual Report 2008

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

ADVANCED ENGINEERING INTEGRATED SERVICES CENTRE GOH Lik Kok FONG Saik Hay Vice President/General Manager President IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

21 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

22 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

The Board is accountable to its shareholders for effective governance processes to create long-term shareholder value.

This report outlines ST Engineering’s corporate President, International Business; Deputy CEO, governance processes and activities in 2008 with Aerospace and Marine/President, Defence Business; specific reference to the guidelines of the Singapore and Chief Financial Officer (CFO). Corporate Governance Code 2005 (Code). Board members receive monthly consolidated management reports on the financial performance BOARD MATTERS of each business sector, capital commitments and Board’s Conduct of its Affairs significant operational highlights. (Principle 1) The Board is responsible to shareholders for A formal letter is sent to a director upon his overseeing the management of the business in the appointment setting out his duties and responsibilities. interest of the Company. To this end, the Board A new director is also given a briefing by the President relies on the integrity and due diligence of its senior and CEO on the strategic direction and performance management and its external advisors and auditors. of the Company and its key subsidiaries as well as an introduction to the senior management team. In addition to its statutory responsibilities, the Board specifically performs the following governance roles: The Board is routinely updated on the relevant laws, continuing listing obligations and accounting standards • approves and guides the Group’s overall long requiring compliance, and their implications for term strategic objectives; the Group. Annual Report 2008 • establishes a proper risk management system to ensure that key potential risks faced by the The Board convenes scheduled meetings on a quarterly Group are properly identified and managed; basis to coincide with the announcement of the Group’s quarterly results. Ad-hoc meetings are convened as and • provides oversight in the conduct of the Group’s when necessary to review the Group’s performance, and business; to deliberate on specific issues. To facilitate the Board’s • assesses and approves annual budgets, major decision-making process, the Company’s Articles of funding proposals, investment and divestment Association provides for Directors to participate in Board proposals; and meetings by teleconference or video conference. • approves the appointment of Chief Executive The Chairman has a second or casting vote. Decisions of Officer (CEO), Board changes and appointments the Board and Board committees may also be obtained on Board committees. via circulation.

In the discharge of its functions, the Board is The Board monitors the performance of the Group supported by Board committees and the Executive through its Board committees. Office to which it delegates specific areas of responsibilities for review and decision making. The number of Board and Board committee meetings The Executive Office comprises the President and held during the year is tabulated (on the following page). IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore CEO; Deputy CEO, Electronics and Land Systems/

23 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Type of Meetings No. of Meetings Attendance Average (%) Board 7 79% Audit Committee 4 100% Business Investment and Divestment Committee 2 90% Executive Resource and Compensation Committee 3 89% Nominating Committee 1 100% Senior Human Resource Committee 1 75% Risk Review Committee 3 87% Budget and Finance Committee 2 88% Research, Development and Technology Committee 3 89%

Minutes of the Board Committee meetings are made available to all Board members.

Board Composition and Guidance The Board has five independent directors. (Principle 2) According to the Code, an independent director is The Board comprises 11 directors and an alternate one who has no relationship with the Company, director. The Board consists of members with its related companies or its officers that could established track record in finance, banking, interfere, or be reasonably perceived to interfere technology, legal and management skills. Each with the exercise of the director’s independent non executive director brings to the Board an business judgment. The independence of each independent perspective based on his training director is reviewed annually by the Nominating and expertise to make balanced and well Committee (NC). The independent directors considered decisions. are Mr Koh Beng Seng, Mr Venkatachalam Krishnakumar, Dr Philip Pillai, Mr Winston Tan The Chairman of the Board is Mr Peter Seah, a non and Mr Davinder Singh. executive director. Mr Seah was appointed to the Board on 15 April 2002 as Chairman. The Board has, at all times exercised independent judgment in decision making using its collective As a non executive director, Mr Seah is free from wisdom and experience to act in the best interests any relationship with the executive management of of the Company. the Company that could materially interfere with the exercise of his independent judgment. He is a The Board held a total of seven meetings during the Member of the Temasek Advisory Panel in Temasek year, to consider among other things, the approval of Holdings, the Company’s major shareholder. the FY2007 results and release of 1Q2008, 2Q2008 and 3Q2008 results. The President and CEO is Mr Tan Pheng Hock, who is an executive director. Save for Mr Tan Pheng Hock, the Chairman and Chief Executive Officer remaining ten directors are non executive directors. (Principle 3) The Chairman and CEO roles and responsibilities are kept separate in order to maintain effective oversight. No individual or small group of individuals dominates the Board’s decision making process. The CEO and senior management regularly consult with individual Board members and seek the advice of members of

24 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

the Board committees through meetings, telephone The NC reviewed and affirmed the independence calls as well as by electronic mail. of the Company’s independent directors and the composition of the Board and the profile of Board The Chairman, who is non executive, is responsible members in relation to the needs of the for the proper functioning of the Board and acts ST Engineering Board. independently in the best interests of the Company and its shareholders. The Chairman facilitates The NC is also responsible for renewal and the relationship between the Board, CEO and succession to ensure Board continuity. At each management, engaging them in constructive AGM, one third of the directors with the longest discussions over various matters, including strategic term in office since his last re-election is required issues and business planning processes. to retire. A retiring director may submit himself for re-election. Under this provision, Messrs Peter Seah, During the year, the NC conducted an informal Koh Beng Seng, Winston Tan and Quek Poh Huat assessment of the directors’ performance by will retire. The retiring directors, being eligible, have taking into account their collective and individual offered themselves for re-election. contributions to the Board and Board committees they were appointed on. The Committee was fully The NC has reviewed each of their contributions satisfied with the performance of the Board. and recommends that each of the retiring Directors (with Mr Peter Seah abstaining from recommending The CEO is accountable to the Board for the conduct his own re-election) be re-elected at the Company’s and performance of the Group. The CEO is also forthcoming AGM. responsible for reporting to the Board and the various board committees set up to assist the Board Supporting the Board are the following Board in its oversight function. Committees:

• Audit Committee Board Membership and Evaluation of • Business Investment and Divestment Committee Performance • Executive Resource and Compensation (Principles 4 and 5) Committee The NC is responsible for reviewing the composition

of the Board and identifying and selecting suitable • Nominating Committee Annual Report 2008 candidates to the Board. The Committee also • Budget and Finance Committee reviews the retirement and re-election of directors. • Research, Development and Technology Committee The NC comprises three directors. Dr Philip Pillai is • Senior Human Resource Committee the Chairman of the NC. The other members are Mr Peter Seah and Mr Venkatachalam Krishnakumar. • Risk Review Committee Both Dr Pillai and Mr Krishnakumar are independent • Tenders Committee non executive directors. The composition of the Board committees is found The NC is charged with the responsibility of on the next page. ensuring that the Company’s Board and its subsidiaries comprise individuals who are able to discharge their responsibilities as directors. The NC identifies suitable candidates for appointment to the boards of the Group, in particular, candidates who can value add to the management through contribution of their skills, knowledge and experience to the various businesses. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

25 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial Audit Committee Audit (estbd on 15/1/1998) Committee and Divestment Investment Business (estbd on 8/9/1997) and Compensation Committee Resource Executive (estbd on 6/12/1997) Nominating Committee (estbd on 4/12/2002) Budget and Finance Committee (estbd on 5/1/1998) Committee and Technology Development Research, (estbd on 1/8/2003) Committee Human Resource Senior (estbd on 16/1/1998) Committee Risk Review (estbd on 7/12/1998) Committee Tenders (estbd on 5/1/1998)

BOARD MEMBER

Mr Peter SEAH Lim Huat C C M C

Mr TAN Pheng Hock M M M M M

Mr KOH Beng Seng C

LG Desmond KUEK Bak Chye M M M

Dr TAN Kim Siew M M

Mr QUEK Tong Boon C

Mr Winston TAN Tien Hin M M C

Dr Philip Nalliah PILLAI M M C

Mr QUEK Poh Huat M M

Mr Venkatachalam KRISHNAKUMAR M M M M Rolling list of any three Board Directors Board three list of any Rolling Mr Davinder SINGH C M

COL CHIA Choon Hoong+

NON BOARD MEMBER

Dr Stanley LAI Tze Chang CM

DENOTES: C – Chairman M – Member CM – Co-opted Member + Alternate director to LG Desmond KUEK Bak Chye

26 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Access to Information (Principle 6) The ERCC’s role is to assist the Board to carry out The management furnishes Board members with the following key duties and responsibilities: monthly management reports, providing updates on • Review and establish executive key operational activities and financial analysis. remuneration policy The Board also has unrestricted access to the • Approve the remuneration package and service President and CEO, the CFO, management and terms for senior executives the Company Secretary as well as the internal and • Set targets for senior executives and approve external auditors and the risk management team. The equity-based incentive share plans and the Board may also seek independent professional advice granting of stock options, performance share if necessary. awards and restricted stock awards • Approve non executive director remuneration As a general rule, board papers are sent to directors structure at least three days prior to meetings in order for directors to be adequately prepared for the meeting. The ERCC met three times in 2008. Its key activities were centred on the assessment and development of the management team, target REMUNERATION MATTERS setting, and the determination of their compensation Procedures for Developing Remuneration and incentive awards. In determining the overall Policies (Principle 7) remuneration package, the ERCC assesses Level and Mix of Remuneration (Principle 8) executives’ contributions to the Group relative to Disclosure on Remuneration (Principle 9) preset targets, the performance of the Group, and the compensation and employment conditions of The Executive Resource & Compensation Committee various industries, including global remuneration (ERCC) performs the role of the remuneration benchmarking. committee. The Committee comprises Mr Peter Seah as Chairman, Dr Philip Pillai and Having started with the senior executives in 2007, Mr Venkatachalam Krishnakumar. The majority of the ERCC decided to replace all remaining share members of the ERCC have held senior positions in option grants with restricted share grants under its large organisations and are experienced in the area Restricted Stock Plan for the other executives of of executive remuneration policies and trends. the Group in 2008. The ERCC also reviewed and Annual Report 2008 decided on conditional performance share awards All the ERCC members are non executive directors. under ST Engineering’s approved share plans as Apart from Mr Peter Seah, the other members of well as Economic Value Added-based incentives for the ERCC are independent directors. senior executives.

All decisions at any meeting of the ERCC shall be decided by a majority of votes of the ERCC members present and voting (the decision of the ERCC shall at all times exclude the vote, approval or recommendation of any member who has a conflict of interest in the subject matter under consideration). IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

27 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

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

Number of Directors in Remuneration Bands 2008 2007 Remuneration Band

$500,000 and above 1 1

$250,000 to $499,999 1 –

Below $250,000 10 10

Total 12 11

The Board has delegated authority to the ERCC to ACCOUNTABILITY AND AUDIT determine the remuneration of the President and Accountability CEO and the senior management. The remuneration (Principle 10) package for non executive directors is reviewed by The Board is responsible for providing a balanced the Board annually and the fees to be paid to Board assessment of the Company’s performance, members are subject to approval at the AGM. position and prospects. In presenting the annual financial statements and quarterly results The Group has tabulated a group-wide cross announcements to shareholders promptly, it is the section of executives’ remuneration by number of aim of the Board to provide the shareholders with employees from $200,000 upwards in bands of a detailed analysis, explanation and assessment of $50,000 and $250,000. The table is found on the Group’s performance, position and prospects. page 30. Following SGX’s introduction in September 2006 The Senior Human Resource Committee, chaired of a new requirement for directors to issue a by Mr Peter Seah, comprises Mr Tan Pheng Hock, Negative Assurance Statement to accompany its LG Desmond Kuek Bak Chye and Dr Tan Kim Siew. interim financial results announcement, certain The Committee reviewed the talent management internal procedures have been put in place to and leadership development initiatives to build a enable each member of the Board reviewing the leadership pipeline for the Group. By supporting interim financial statements to immediately raise and directing the Group’s talent management and any material information known to him which may leadership initiatives, the Committee has helped render the interim financial results to be false or to enhance the process of identification and misleading prior to their release to SGX. Should development of talents to be groomed for senior there be any significant adverse issue(s) raised positions. The Committee has also reviewed the by the Audit Committee (AC) or Board member succession plans for key management positions in which may affect the results in a material way, the Group. the scheduled date of the results announcement will be postponed to allow time for investigation or further review.

The re-appointment of auditors is subject to approval at each AGM. In making its recommendations to shareholders on the appointment and re-appointment of auditors, the Board relies on the review and recommendations of the AC.

28 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED 31 DECEMBER 2008 (GROUP):

Taxable income from exercise of Directors’ Salary * Bonus ** share options*** fees Total Name of Director $ $ $ $ $

Peter SEAH Lim Huat – – – 187,000 187,000 TAN Pheng Hock 1,161,485 2,680,091 99,000 # 3,940,576 KOH Beng Seng – – – 105,000 105,000 LG Desmond KUEK Bak Chye – – – 15,000• 15,000 Dr TAN Kim Siew – – – 15,000• 15,000 QUEK Tong Boon – – – 12,500•@ 12,500 Prof LUI Pao Chuen – – – 57,416@1† 57,416 Winston TAN Tien Hin – – 100,570 156,000† 256,570 Dr Philip Nalliah PILLAI – – 26,970 133,000† 159,970 QUEK Poh Huat – – 30,360 137,000† 167,360 Venkatachalam KRISHNAKUMAR – – – 121,000 121,000 Davinder SINGH – – – 98,000 98,000 COL CHIA Choon Hoong (Alternate to LG Desmond KUEK Bak Chye) – – – – –

1,161,485 2,680,091 256,900 1,036,916 5,135,392

During the year 2008, contingent awards of shares were also granted. For details, please refer to the Directors’ Report found on pages 90 to 103.

* The salary amount shown is inclusive of AWS, allowances and employer CPF.

** The bonus amount is inclusive of employer CPF, EVA bonus, performance target bonus (based on amount accrued in 2008 financial statements) and Annual Report 2008 performance share award released during the year. *** Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. This amount has not been charged to the income statement. • Fees for public sector Directors are payable to a government agency. @ Pro-rated. Mr QUEK Tong Boon was appointed Director on 1 March 2008. @1 Pro-rated. Prof LUI Pao Chuen resigned as Director on 1 March 2008. † Includes fees for directorship in subsidiary/subsidiaries. # Fees payable to Mr TAN Pheng Hock of $163,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

29 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

REMUNERATION BANDS FOR THE YEAR 2008

Remuneration data for employees earning $200,000 and above per annum (as at 31 December 2008).

Compensation Band ($) No. of Employees Total Dollar Value ($)

200,000 to 249,999 182 40,014,974 250,000 to 499,999 150 49,450,674 500,000 to 749,999 32 19,356,386 750,000 to 999,999 8 6,817,560 1,000,000 to 1,249,999 3 3,278,844 1,250,000 to 1,499,999 0 0 1,500,000 to 1,749,999 4 6,248,912 => 1,750,000 6 16,969,360

Total 385 142,136,710

Note: Total compensation for 2008 comprises staff salaries (including employer CPF and 13th month annual wage supplement for Singapore staff), allowances, bonus including those to be paid in 2009 but earned for 2008 performance, performance share award released and gains from exercise of share options during the year. 2007 remuneration data used in 2007’s Annual Report: a) Excludes gains from exercise of share options. b) Includes bonuses paid in the year 2007 but earned for 2006 performance.

Directors and key senior executives of the Group The AC has full authority to commission and review are prohibited from dealing in ST Engineering findings of internal investigations into matters where shares two weeks before the announcement of it is alerted of any suspected fraud or irregularity ST Engineering’s first quarter, second quarter, or failure of internal controls or infringement of any third quarter and full year results up to the date of law likely to have a material impact on the Group’s the announcement of the results. Additionally, all operating results. It can investigate any matter within directors of the Group and employees are reminded its terms of reference and with the full cooperation not to trade in situations where the insider trading of management. laws and rules would prohibit trading. The Company has put in place a Whistle-Blowing The directors’ interests in shares of ST Engineering framework, endorsed by the Board, where staff may, and its related companies during the year are found in confidence and without fear of retaliation, raise on pages 90 to 103 of this Report. concerns of incidents of possible wrongdoing or breach of applicable laws, regulations or policies to the respective chairmen of the audit committees in Audit Committee the Group. As ST Engineering has become a global (Principle 11) company with a presence in many countries, it is The AC is supported in its work by the audit aware of the need to apply international corporate committees of the four business sectors. governance standards wherever it operates. It takes The respective chairmen of the audit committees a serious view of all reports of violations received by of the four business sectors are invited to attend initiating thorough investigations into each matter. the AC meetings of ST Engineering so as to have a clear understanding of policies made at the holding company level and to share any feedback or raise any issue that the sectors’ audit committees may have.

30 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

The AC comprises Mr Koh Beng Seng as considers that the Group’s framework of Chairman, Dr Philip Pillai and Mr Venkatachalam internal controls and procedures is adequate Krishnakumar. All the members of the AC are to provide reasonable assurance of the independent directors. integrity, confidentiality and availability of critical information, and the effectiveness and The AC held four meetings during the year. In efficiency of operations, safeguarding of assets two of the meetings, in February and November and compliance with applicable rules and 2008, AC had private sessions with the external regulations. It is also satisfied that problems and internal auditors, without management, before are identified on a timely basis and there is in commencement of the meeting. place a process for best practices and follow up actions to be taken promptly to minimise During the year, the AC reviewed and unnecessary lapses and for the identification recommended to the Board the release of the and containment of business risks. 2007 full year, 1Q2008, 2Q2008 and 3Q2008 financial statements, and considered and approved The IA supports the AC in reviewing the adequacy the 2008 Audit Plan and the 2008 Internal of the Company’s internal controls system. Staffed Audit (IA) Plan. It also reviewed the adequacy of by qualified auditors, IA has unrestricted direct internal control procedures including IT security access to the AC. The Head of IA’s primary line of issues, Interested Person transactions and the reporting is to the Chairman of the AC, although issues raised in IA reports. she reports administratively to the CFO of the Company. The AC was updated on the changes to the accounting standards, in particular FRS 1 on IA plans its internal audit schedules in consultation Presentation of Financial Statements and FRS 108 with, but independently of, management. Its IA on Operating Segments which would come into Plan is submitted to the AC for approval at the effect on 1 January 2009. beginning of each year. The AC also meets with IA at least once a year without the presence of The AC reviewed the level of non audit services management to gather feedback on management’s performed by its external auditors to satisfy itself level of cooperation and other matters that warrant that non audit services performed by the auditors AC’s attention. All audit reports are submitted to

did not compromise their independence under the AC for deliberation with copies of these reports Annual Report 2008 regulatory requirements. extended to the relevant senior management, for prompt corrective actions, as recommended. The AC also reviewed the performance of the Furthermore, IA’s summary of findings, external auditors. It recommended to the Board recommendations and updates on management’s the re-appointment of Ernst & Young as auditors actions taken are discussed at the quarterly for FY2008, after having been satisfied with its AC meetings. standard of audit, independence and objectivity. During the year, IA made periodic visits to overseas subsidiaries to review their operations Internal Control (Principle 12) to ensure compliance with the internal controls Internal Audit (Principle 13) framework. An external accounting firm was The AC oversees and appraises the quality of the engaged to assist IA. In accordance with its audit effort of the Company’s IA function. plan, surprise audits were conducted in the course of the year on selected areas including The Board is ultimately responsible for ensuring treasury activities and reviewing of dormant that a sound system of internal controls to bank accounts against bank mandates, bank safeguard shareholders’ investment and the statements, balances, etc. There were no Group’s assets is in place. The Board, through material issues highlighted following the IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore the AC, the President and CEO and the CFO, surprise audits.

31 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

There were no significant control issues Business Investment and Divestment Committee highlighted by IA in 2008. The Business Investment and Divestment Committee comprises Mr Peter Seah as Chairman, The IA continued with its system of rating a Mr Tan Pheng Hock, LG Desmond Kuek Bak Chye, company at the end of an internal audit for the Mr Winston Tan and Mr Quek Poh Huat. purpose of differentiating the high risk issues which require immediate attention. During the year, the Business Investment and Divestment Committee held two meetings to consider investments by the Group. Risk Review Committee The Risk Review Committee, chaired by Mr Winston Tan, comprises LG Desmond COMMUNICATION WITH SHAREHOLDERS Kuek Bak Chye, Mr Davinder Singh, (Principles 14 and 15) Mr Venkatachalam Krishnakumar, The Company enters into regular and timely Mr Tan Pheng Hock and Dr Stanley Lai, a co-opted communication with shareholders as part of member and Board Director of ST Aerospace. the Group’s effort to help shareholders better The Committee oversees the risk management understand its businesses and to obtain feedback framework and reviews key risk exposures, on the views and concerns of shareholders. including business continuity management. The Group has a comprehensive investor The Committee met three times during the year to relations programme aimed at providing existing review updates on the key risks and the measures and potential investors with comprehensive and put in place as well as the key risk indicators prompt information, to enable them to have a of each sector. The Committee reviewed the better understanding of the Group’s businesses, recommendations to put in place a Fraud Risk direction and performance. ST Engineering Management policy after commissioning an maintains a regularly updated website which external accounting firm to review the Group’s provides the latest SGX announcements, news existing anti-fraud practices. This Policy is still releases and highlights of corporate events of work in progress and would be put to the Board each sector and its capabilities. for adoption when finalised. In 2008, ST Engineering’s investor relations team held 312 investor meetings in over 23 major cities, Budget and Finance Committee as well as participated in investor roadshows and Chaired by Mr Davinder Singh, the Budget and conferences in Australia, Canada, Europe, Finance Committee members include Hong Kong, the US and Singapore. Mr Tan Pheng Hock, Mr Quek Poh Huat and Dr Tan Kim Siew. ST Engineering is committed to timely disclosures to ensure that the investing community receives Budgets prepared by the respective subsidiaries a balanced and updated view of the Group’s are consolidated at the ST Engineering level and performance and businesses. presented to the Budget and Finance Committee for review and recommendation to the Board for approval.

During the year, the Budget and Finance Committee held two meetings to review the FY2008 budget assumptions and 5-year forecast. The Committee also met to review the 2009 Plan and recommended to the Board for approval.

32 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Board members attended the AGM and EGM in 2008 where shareholders present were given an opportunity to seek clarification or question the Board on issues pertaining to the resolutions proposed before they were voted on. The external auditors were also present at the AGM to assist the directors in answering questions on audit related matters from shareholders. The Group fully supports the Code’s principle to encourage active shareholder participation. More on Investor Relations can be found on pages 40 to 41.

Financial and other information are made available on the Company’s website at www.stengg.com and these are regularly updated. Annual Report 2008 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

33 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

nurturing TALENTS FOR GLOBAL GROWTH

ST Kinetics’ management team having fun building sandcastles at Active Day for ST Aerospace employees on 8 Aug 2008. a team-building session.

ST Engineering believes that people are its most valuable In line with the objective of building up its talent pool, assets as they play a critical role in bringing the company ST Engineering has several scholarship schemes for local forward. The Group’s suite of leadership development and overseas students with outstanding academic results strategies grooms its leaders to help them achieve their fullest and demonstrated leadership qualities. These scholarship potential. It has identified eight leadership competencies schemes are one way of building up the Group’s future talent that its leaders require to be successful both today and in pool and ensuring that capable leaders are available and the future. These leadership competencies underpin the ready to take over key positions. Currently, the Group has process of identifying and preparing leaders for growth and scholars studying in China, Europe, India and the US. succession to key roles. Growing and developing ST Engineering’s talent pool is one of As ST Engineering expands and strengthens its global the Group’s key priorities. To nurture a strong and competent presence, it is essential to build up a pool of managers who team, the Group provides ongoing training for staff at all levels. are able to lead its overseas operations and effectively operate on the global stage. To develop this group of global managers, several development programmes have been put in place. These programmes provide exposure to the latest business and management perspectives, and opportunities to interact with international counterparts, as well as expand social and business networks. Employees are also posted to the Group’s overseas business units, or assigned overseas projects, to gain exposure and build up their capabilities in leading a team of members from diverse cultures.

34 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

HUMAN RESOURCE STATISTICS AS AT DECEMBER 2008

SECTOR

Aerospace (7,172) 38% Electronics (4,591) 24% Land Systems (5,257) 27% Marine (1,615) 8% Others (including ST Synthesis and ST Dynamics) (516) 3% Total (19,151) 100%

JOB GROUP

Managerial (1,080) 6% Engineering (5,704) 30% Corporate Function/Admin (3,037) 16% Sales & Marketing (425) 2% Technical & Others (8,905) 46% Total (19,151) 100%

EDUCATIONAL QUALIFICATION

Degree & Equivalent (5,490) 29%

Diploma & Equivalent (5,315) 28% Annual Report 2008 “O”/“A” Levels & Equivalent (2,556) 13% Secondary Level & Lower (1,328) 7% Trade Certificates (4,462) 23% Total (19,151) 100%

NATIONALITY

Singaporean/PR (11,047) 58% American (3,315) 17% Chinese (PRC/Hong Kong) (2,566) 14% Danish (496) 3% Indian (263) 1% Malaysian (219) 1% Swedish (215) 1% Others (1,030) 5% Total (19,151) 100% IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

DOING OUR PART FOR THE ENVIRONMENT

Extending our green efforts to the community: staff and their families, together with community leaders and students from Republic Polytechnic, at the record setting tree planting event.

ST Engineering believes that being a responsible corporate customers environmental engineering solutions, which include citizen includes taking care of the environment. waste-to-energy treatment, renewable energy, integrated waste management and advanced landfill technologies. Environmentally-friendly practices are adopted Group-wide to minimise the Group’s environmental footprint. These include To mark its commitment to Green Living, recycling paper, metals and plastics whenever possible, and ST Engineering launched “Green Month” in November, implementing energy-saving programmes such as motion an annual month-long campaign aimed at increasing sensors for lighting control. Its four business sectors also environmental awareness and efforts and eventually achieving Annual Report 2008 implement additional practices separately. ST Aerospace long-term sustainability. incorporated acoustic bar silencers within its new Engine Test Cell 5 to reduce noise impact from engine testing. ST Electronics The campaign included a Group-wide photography has a rooftop garden at its facility to help absorb heat, and is competition, as well as a “Green Seminar” for staff where a embarking on installing solar panels to harness solar energy to variety of environment-related topics were discussed. power its lights and air-conditioners. ST Kinetics has pledged to plant 2,500 trees at its premises over five years, of which 500 In line with the Group’s aim to extend environmental have already been planted. ST Marine uses NEWater (treated awareness and efforts to the greater community, a mass tree- used water) and seawater for ship washing and ballasting, planting event was held on 15 November at Admiralty Park, saving on the use of fresh water. the largest park in the northwest district of Singapore. 1,569 staff and their families, community leaders from the district, The Group also leverages its technological expertise to develop and students from Republic Polytechnic participated in the environmentally-friendly technologies and solutions. event and helped set two Singapore records – one for “the ST Electronics partnered the Land Transport Authority to install most number of people planting trees at the same time”, and 69,000 LED traffic lights island-wide, saving 90% more energy the other for “the most number of trees – 2,008 – planted at as compared to the use of incandescent lights. ST Kinetics one location”. This tree planting initiative saw a total of about introduced its Hybrid Electric Tow Tractors which are 15% more 20 tree species planted, greatly enhancing the greenery and fuel efficient and produce zero emissions during battery mode. the biodiversity of the Park, which is home to more than It is also partnering Singapore Polytechnic to set up a Solar 100 species of animals and plants. The trees planted are

Energy Test-bedding Application Centre to develop low-cost solar estimated to offset over 2,000 tons of carbon dioxide in the IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore cells. ST Marine’s subsidiary, STSE Engineering Services, offers atmosphere throughout their lifetime.

37 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ENGAGING EMPLOYEES, PARTNERS AND THE COMMUNITY

ST Engineering strongly believes in being a caring corporation, and being responsible to the communities in which it operates. Besides environmental practices, ST Engineering is also actively committed to helping society, especially those who are in need.

During the year, the Group’s various companies helped, and contributed to, numerous charitable causes. These included cash donations of over $400,000 to the President’s Challenge, and fundraising for victims of the Sichuan earthquake and Myanmar cyclone. Other donations were also given to the Melrose Home, Lee & Lee Charity Fund, Singapore Association of the Visually Handicapped, Touch HomeCare Charity and the Republic of Singapore Navy Charity Heartstrings 2008 event.

In addition, employees also participated in a range of charitable activities, such as a toy donation drive for the “More Toys” event, and a book donation drive for St Vincentius Primary School in Mentawai, Indonesia. They also donated necessities such as diapers and food items to residents of the Christalite Methodist Home, and assisted in cleaning its premises. Residents of The Moral Home for the Disabled, one of the Group’s adopted charities, were brought on an enjoyable excursion to the zoo.

Safety is another cause the Group strongly advocates. The Safety@ Top: Employees and residents of The Moral Home for the Work Creative Awards, jointly organised with Singapore’s Ministry Disabled at the Mainland Tropical Fish Farm. of Manpower, had its fourth successful run, reaching out to Above: Employees bringing cheer to the residents of the students from local tertiary institutions. Themed “Falling and Falls St Andrew’s Home for the Aged. Prevention”, the 2008 Awards featured the students’ creative talents in observing the importance of safety in the workplace. This initiative is one of several that the Group uses to extend the safety message beyond the industry.

38 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Promoting healthier, safer practices in the workplace

As befits a responsible corporate citizen, ST Engineering promotes communal and environmental health and safety in all its business practices. The Group also actively involves its employees in support of its vision to have a healthier and safer environment.

In 2008, the ST Engineering Group won various awards on health and safety, including the H.E.A.L.T.H. Award (Platinum/Gold), Workplace Safety and Health (WSH) Innovation Award and the Land Transport Authority Safety Award 2008.

Through training courses and forums on health and safety, the Group keeps its employees educated and up-to-date on the latest environmental information. Best practice forums and sharing sessions are regularly held, with learning points of incidences shared for continual improvement. The positive results of these efforts are evident in the reduction of accidents at work.

In addition, contractors are evaluated to ensure that they conform to the Group’s policy of maintaining strong health and safety practices. Frequent meetings ensure that contractors are kept well informed Annual Report 2008 and updated on market and standard practices.

As part of its contribution to the community, the Group also encourages its employees to actively share their knowledge with fellow industry workers through the various safety councils.

Top: The WSH Innovation Award winning team from ST Kinetics. Above: Safety@Work Creative Awards 2008 – Gold Award poster designed by Soh Wan Qi, Nanyang Academy of Fine Arts. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

39 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

BRinging value to Investor Relations Calendar Highlights 2008 shareholders through 1st Quarter 2008 CONTINUAL engagement, • Live webcast of FY2007 results briefing • Post-results investor lunch timely disclosures and • US and Canada investor roadshow industry updates. • Hong Kong investor roadshow 2nd Quarter 2008 • Live webcast of 1Q2008 results briefing ST Engineering continues to engage investors • Post-results investor lunch through an active investor relations programme, • Payment of final tax exempt (one-tier) ordinary keeping them updated on the Group’s latest dividend of 4.0 cents per share and a special tax developments, progress and strategies. exempt (one-tier) dividend of 10.88 cents per share for the year ended 31 December 2007 In 2008, ST Engineering’s investor relations team • Analysts’ visit to ST Aerospace held 312 investor meetings in over 23 major cities, • Nomura Asia Equity Forum – Singapore and actively participated in investor roadshows • CLSA Corporate Access Forum – Singapore and conferences in Australia, Canada, Hong Kong, Singapore and the US. In keeping with its 3rd Quarter 2008 long-standing commitment to bring value to its customers and shareholders, the Group will • Live webcast of 2Q2008 results briefing continue developing its investor relations efforts, • Post-results investor lunch and keep stakeholders informed of the Group’s news • Payment of interim ordinary dividend of and developments, as well as industry changes. 3.0 cents per share for first half ended 30 June 2008 • Australia investor roadshow • CLSA Investors’ Forum – Hong Kong

4th Quarter 2008 • Live webcast of 3Q2008 results briefing • Post-results investor lunch • Analysts’ visit to ST Marine • Morgan Stanley Asia Pacific Summit – Singapore

40 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Analysts’ visit to ST Marine’s Benoi and Tuas yards in December. Senior management addressing questions from analysts and media at a quarterly results briefing.

ST ENGINEERING SHARE PRICE AND TRADING VOLUME 2008

Trading volume Share price (millions) 30 Apr 2008 25 Aug 2008 ($) Ex-date for the payment of Ex-date for the payment of 45 2007 final dividend of 2008 interim dividend of 4.0 14.88 cents per share 3.0 cents per share 40

3.5 35

30 3.0 25

20 2.5 15 Annual Report 2008 10 2.0

0 1.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: Bloomberg Volume Price

ST ENGINEERING SHARE PRICE HISTORY

Year 2008 2007 2006 2005 2004

High $3.78 $3.98 $3.30 $2.86 $2.33

Low $1.99 $3.10 $2.62 $2.33 $1.89

Average* $2.93 $3.59 $2.95 $2.52 $2.09

*Defined as the average closing price of active trading days for the year IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

41 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Engineering aspires to deliver its best in WHATEVER it does. Over 30 awards received from local and international organisations – covering service and product excellence, staff achievements, and laudable corporate social responsibility efforts – reflect the Group’s commitment to continual progress and innovation, and the public’s recognition of its leading proprietary solutions and commendable social efforts. Exceptional accomplishments in all its areas of expertise ensure the Group unfailingly stands out from the competition and makes its mark on the global stage.

Setting the standard and a commitment to excellence QUALITY are hallmarks of ST Engineering. The Group is internationally lauded for its technological, development IES/IEEE Joint Medal of Excellence Award 2008 and production capabilities, and remains focused on by the Institution of Engineers Singapore and the delivering value to its customers and shareholders. Institute of Electrical and Electronics Engineers - ST Engineering is pleased to celebrate the many presented to Mr Seah Moon Ming, President, accolades and awards its companies and individuals ST Electronics for his contributions in engineering. have received during the year. IES Prestigious Engineering Achievement Award – presented to ST Electronics (Info-Comm Systems) for SuperneTTM Integrated Communication System ST2800. The award recognises engineering achievements that demonstrate outstanding engineering skill, and which have made significant contribution to the progress of engineering in Singapore. SuperneTTM ICS ST2800 won the award for its state-of-the-art integrated communication solution for emergency services, public safety and mission critical command and control organisations.

2008 Technology of the Year Award by World Teleport Association – presented to VT iDirect. This annual award is presented to the organisation whose technology has best contributed to the business and operational success of teleport operators through lower costs, increased efficiency, new capabilities or access to new markets.

42 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Boeing Performance Excellence Award – presented to ST Aerospace’s subsidiary, SASCO, in recognition of its quick turnaround time and quality performance on the Boeing Converted Freighter programmes.

Outstanding Quality Performance Award – presented by Japan Airlines to ST Aerospace’s subsidiary, SASCO, in appreciation of its outstanding and quality maintenance work performed on Japan Airlines’ fleet.

Total Defence Award by Singapore’s Ministry of Defence (MINDEF) – awarded to ST Aerospace’s subsidiary, STA Supplies.

Distinguished Defence Partner Award 2008 by MINDEF – awarded to ST Aerospace’s subsidiary, STA Engines, and ST Electronics (Satcom & Sensor Systems), ST Kinetics and subsidiaries, Ordnance Development & Engineering Company (1996), Advanced Material Engineering, and Allied Ordnance of Singapore. Meritorious Defence Partner Award 2008 by MINDEF – awarded to ST Aerospace’s subsidiaries, Top: IES President, Er. Lee Bee Wah (left) presenting the IES/IEEE Joint Medal of SASCO and STA Engines; ST Electronics (Info-Comm Excellence Award to Mr Seah Moon Ming, President ST Electronics. Systems), ST Electronics (Info-Software Systems) Above: Mr Wee Siew Kim, Dy CEO and President, Defence Business, and ST Kinetics’ subsidiary, Unicorn International. ST Engineering, receiving the Lifelong Learners’ Award (Corporate) from the

Guest-of-Honour, Mr Gan Kim Yong, Acting Minister for Manpower. Annual Report 2008 WSH Innovation Awards by Workplace Safety and Health (WSH) Council and Ministry of Manpower – awarded separately to two teams from ST Kinetics. ISO14001:2004 certification during the year, while The first was a project for a safer and simpler bumper its subsidiaries, ST Electronics (Info-Comm Systems) stopper installation onto the Bronco while the second and ST Electronics (Info-Software Systems) was for the development of the Hybrid Electric Tow renewed their ISO9001:2000 certification. Tractor, which has zero emission, for use in the enclosed baggage handling area of the Singapore • ST Electronics (Satcom & Sensor Systems) Changi Airport. achieved the AS9100:2004 Management Systems Certification, and ISO9001 incorporating elements CERTIFICATION specific to the aerospace industry. Its Satcom products are certified by CETECOM for Federal • VT iDirect attained the TL 9000-H-V Quality Communications Commission, CE compliant for US Management Systems Certification, a prestigious and European markets, and Wu-Wei certified for award in the global telecommunications industry. product sales in China.

• ST Electronics was awarded the OHSAS • ST Electronics (Info-Software Systems) is certified 18001:2007 certification, an international standard as a Microsoft Gold Partner and SAP strategic for occupational health and safety management partner. It provides customers with the optimisation of IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore systems in organisations. It also renewed its ERP infrastructure and software solutions.

43 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

PRODUCT EXCELLENCE LTA’s Certificate of Excellence awarded Arts Supporter Award 2008 by the to ST Electronics in recognition of their National Arts Council – awarded to Most Innovative Partner (Technology) excellent performance in Occupational ST Engineering in appreciation of its at the inaugural Land Transport Safety and Health Management. contributions toward the promotion and Excellence Awards 2008 by the Land organisation of artistic activities. Transport Authority of Singapore – CORPORATE SOCIAL presented to ST Electronics (Info-Comm RESPONSIBILITY PEOPLE Systems) for i-Transport. The award recognises excellence in the innovative Meritorious Home Team Partner Award 2008 LifeLong Learner Awards use of technology in land transport by the Ministry of Home Affairs – (Corporate), jointly organised by infrastructure and system development. awarded to ST Kinetics and subsidiaries, MediaCorp and the Singapore’s Infocomm Singapore Awards 2008 Ordnance Development & Engineering Workforce Development Agency – (Communication Category), organised Company (1996) and Advanced Material awarded to ST Engineering for its efforts by Singapore Infocomm Technology Engineering, in recognition of their in creating a lifelong learning culture Federation – for ST Electronics’ contribution towards National Service within the organisation. TM and national safety and security. SuperneT Integrated Communication NTUC Model Worker Award 2008 – System ST2800. The award recognises Home Team National Service Awards awarded to ST Aerospace’s subsidiaries, innovative products developed by local 2008, Minister for Home Affairs STA Engineering and STA Systems. players of the respective participating Award - presented by the Ministry H.E.A.L.T.H. Award (Platinum) by industry in this region. of Home Affairs to ST Electronics the Ministry of Health, Singapore – (Info-Comm Systems) in recognition of Asia Pacific ICT Awards (APICTA) awarded to ST Electronics and its support and contributions towards 2008 (Communication Applications ST Aerospace’s subsidiary, SASCO, for National Service with the Home Team. Category) Merit Award - for their efforts in creating and fostering TM ST Electronics’ SuperneT Integrated Community Chest SHARE Award 2008 a commendable workplace health Communication System ST2800. (Platinum) – awarded to ST Electronics promotion programme. This award provides industry- and its subsidiary, ST Electronics H.E.A.L.T.H. Award (Gold) – wide recognition to Information (Training & Simulation Systems), awarded to ST Marine and ST Aerospace’s Communication Technology innovators ST Aerospace and its subsidiaries, subsidiaries, STA Engineering and in the Asia Pacific region. STA Engineering, SASCO, STA Engines STA Systems. 2008 Team Defence Technology and STA Systems, as well as to Prize by MINDEF – awarded to ST Kinetics’ subsidiary, Advanced H.E.A.L.T.H. Award (Silver) – ST Aerospace Mission Computer Material Engineering. awarded to ST Aerospace’s subsidiary, Team for outstanding achievement in STA Supplies. SHARE Award 2008 (Gold) – upgrading the core avionics computer awarded to ST Electronics (Info-Comm of advanced air platforms thereby COMMUNICATIONS Systems), ST Electronics (Satcom & expanding their operational utility and Sensor Systems), ST Kinetics and its extending their lifespan. Gold Award for Best Annual Report subsidiaries, Ordnance Development 2007 (for companies with $500m or Defence Technology Prize 2008 & Engineering Company (1996) and more in market capitalisation) at the for Team Engineering by MINDEF - Singapore Test Services. Singapore Corporate Awards 2008 awarded jointly to ST Electronics (Info- SHARE Award 2008 (Silver) – organised by Business Times and Software Systems), Defence Science & awarded to ST Engineering, supported by the Singapore Exchange. Technology Agency and the Republic of ST Marine, ST Kinetics’ subsidiaries Singapore Air Force, whose members Bronze Award for Overall Annual Allied Ordnance of Singapore and formed the Air Power Generation Report at the 2008 International ARC STA Inspection as well as ST Synthesis. Command and Control Information Awards - for outstanding design and System team. SHARE Award 2008 (Bronze) – editorial in its 2007 Annual Report awarded to ST Aerospace’s subsidiary, “Life Begins At Forty”. Land Transport Authority Safety STA Supplies. Award 2008 by the Land Transport Most Transparent Company - Authority (LTA) of Singapore for Safety Community Chest 10-Year Outstanding Hall of Fame – SIAS Investors’ Choice and Best Theme Presentation. The Award – awarded to ST Electronics. Awards 2007.

44 46 Group Overview 47 Pushing New Frontiers 48 Performance of the Group 52 ST Engineering At A Glance 56 Aerospace Sector 62 Electronics Sector 68 Land Systems Sector 74 Marine Sector 80 Dynamics and Risk Factors of the Business

45 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

GROUP OVERVIEW

The ST Engineering Group was established in GROUP VISION, MISSION, OBJECTIVES & THRUSTS 1997 with the amalgamation of four public listed companies – ST Aerospace, ST Electronics, ST Automotive and ST Marine. In 2000, with the GROUP VISION acquisition of Chartered Industries of Singapore, Be a global defence and ST Automotive merged with the acquired group of engineering group companies to form ST Kinetics.

GROUP MISSION Building on the substantial capabilities and KEY PERFORMANCE Bring value to our INDICATORS experience of each of the four sectors, customers and partners by • Customer Satisfaction ST Engineering has since leveraged synergies, delivering total integrated • Customer Acceptance Rate critical mass and cross-marketing to expand its quality solutions and • Turnaround Time Compliance presence. Today, ST Engineering is recognised support • Employee Satisfaction as a significant player in the global marketplace, • Innovations / New Products, and provides integrated defence and commercial 4 STRATEGIC OBJECTIVES Services or Capabilities engineering solutions and services to its extensive • Enlarge Strategic Capabilities • Sales and Profit Growth international customer base. • Expand Global Networks • Embrace Partnerships • Return on Equity • Enhance Business Excellence • Economic Value Added Headquartered in Singapore, ST Engineering has grown its staff strength to over 19,000 and has over 100 companies and associated companies 6 STRATEGIC THRUSTS spanning 24 countries and 42 cities. • Customer Focus • Safety & Quality First • People Excellence • Technology Edge • Operational Excellence • Financial Strength

46 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

PUSHING NEW FRONTIERS

Despite the unforeseen challenging During the year, ST Engineering also revenue. The US remains the Group’s business environment and the global acquired the remaining shares of SAS single largest market outside Asia. financial crisis, ST Engineering did Components, and re-named it Europe constituted about 8% of the well in pushing several new frontiers ST Aerospace Solutions (Europe) A/S Group’s revenue with $417m in sales. in 2008. (STA Solutions). With 100% ownership, the Group is in a better position to reap ST Mobile Aerospace Engineering Record Order Book benefits from cross business and cross (MAE), San Antonio Aerospace (SAA) As at end 2008, the Group’s order geographical synergies. and Panama Aerospace Engineering book was at its record high of $10.6b. (PAE) continued to grow in tandem All four sectors contributed to the The Aerospace sector signed several with their sister companies in Asia and order book which covers defence, agreements with Original Equipment Europe. The Aerospace sector is holding government and commercial sales. Manufacturers (OEM) such as firmly to its position as the world’s The strong order book reflects GE Aviation and CFM International, a largest airframe MRO player, clocking in ST Engineering’s evolving partnerships milestone achievement in enhancing its the highest number of manhours. with its customers and the increased status as a key engines MRO player. trust in the Group’s growing VT Miltope continued with its consistent capabilities and reach. With the acquisition of Telematics Wireless, delivery to the US military programmes the Electronics sector further added and secured US$5.8m in orders for its Increasing Defence Export capabilities in the Machine-to-Machine US Army Maintenance Support Device- The Group had some significant and industry. It is now the world’s leading Version 2 (MSD-V2). unprecedented successes with defence terrestrial and urban asset location export sales in 2008, as its defence systems supplier. The acquisition also VT MÄK continued to grow through solutions gained a greater foothold in allows the Group access to a wider strategic alliances and entered into the overseas markets. spectrum of solutions involving telemetry. communications modelling and satellite simulation segments. VR-Link is the best The Land Systems sector won Nurturing New Businesses selling simulation toolkit in the market. contracts from the UK Ministry of Close to the heart of ST Engineering Defence for the supply of over 100 is the development, integration and VT iDirect remained focused on Broncos and 40mm ammunition, utilisation of new technologies. achieving its financial results and and from a Gulf States customer for extending its technology leadership. the 120mm SRAMS. The Marine sector The Group began nurturing It has 47% of the TDMA hub market scored well in securing Phase II environmental engineering as a business share and received six patent awards in of the Egyptian Navy’s Fast Missile under STSE Engineering Services, a 2008. With Panasonic Avionics licensing Craft contract through the US Foreign wholly-owned subsidiary which resides its satellite IP router technology, it is Military Sales programme, and a in the Marine sector. The business making inroads into the in-flight satellite Annual Report 2008 contract to build a Landing Platform focuses on two initial core areas – solid transmission platform. Dock for an Asia Pacific navy. The waste management technologies, and Aerospace sector continued to grow resource management and consultancy. The downturn in the North American its defence segment with a contract To tap into the burgeoning market, housing and construction markets and awarded by the Indonesian Air Force to ST Engineering set up ST Environmental the subsequent sub-prime issue affected modernise its fleet of C-130s. Services & Technologies Co. Ltd in ST Engineering’s growth in the US Shanghai, and secured an EcoPark commercial specialty vehicle business Adding New Facilities and Capabilities planning project in the city. although Latin America provided growth Staying focused on growth and opportunities. VT LeeBoy strengthened preparing to capitalise on upward trends The Aerospace sector also clinched its first its marketing and distribution network when the global economy recovers, the customer for its FanTail Unmanned Aerial by establishing dealerships in Australia, Group selectively added capabilities and Vehicle (UAV) and a new programme to China, India and Indonesia. Despite the facilities to augment its offerings to develop new UAV systems. challenges, VT LeeBoy and VT SVC its customers. remain market leaders. The specialty The Land Systems sector partnered vehicles business in China, on the other Madrid Aerospace Services (MAeS) Nanyang Technological University to open hand, experienced a strong demand for started services in the third quarter of Southeast Asia’s first R&D centre in Cold its vehicles. the year, with the added capability of Spray technology. It also teamed up with delivering MRO solutions for wide- Singapore Polytechnic on a Solar Energy ST Engineering’s globalisation and body aircraft landing gear. In Panama, Test-bedding Application Centre. diversification plans continue to serve more hangars were commissioned into the Group well. The US, China, Europe service. The construction of the new Overseas Markets and increasingly, the Gulf States and hangar complex in Pudong is on track, VT Systems, the Group’s US operations, emerging markets, will provide a

and the Group expects its completion achieved revenue of $1.38b in 2008. This sound, balanced portfolio to fortify the IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore by end 2009. marked about 26% of the Group’s total Group’s resilience.

47 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

PERFORMANCE OF THE GROUP

a) Half yearly performance

2008 2007

In $m Except Per Share Amounts 1H 2H FY 1H 2H FY Turnover 2,616 2,729 5,345 2,518 2,533 5,051 EBITDA 358.9 309.0 667.9 337.2 347.2 684.4 EBIT 284.0 225.1 509.1 272.3 278.0 550.3 Profit before tax 307.5 233.2 540.7 307.0 331.1 638.1 Profit after tax and minority interests 242.5 231.1 473.6 231.6 271.9 503.5 Basic earnings per share (cents) 8.12 7.7 15.82 7.84 9.11 16.95 Net asset value per share (cents) 47.0 52.7 52.7 47.9 54.7 54.7

Note: The half yearly figures are unaudited

The Group turnover for 2H2008 of $2,729m was higher than The Group Profit Before Tax (PBT) for 2H2008 decreased by that achieved in the first half by $113m or 4%. All sectors 24% or $74.3m over the first half. All sectors reported lower reported higher turnover, except the Land Systems sector, PBT, except the Marine sector, which had a comparable PBT which had a lower turnover vis-à-vis 1H2008. in the second half against the first half.

HALF YEARLY TURNOVER ($m) HALF YEARLY PROFIT BEFORE TAX ($m)

2nd half year 08 2nd half year 08 $2,729 $233.2

2nd half year 07 2nd half year 07

$2,533 $331.1

1st half year 08 1st half year 08 $2,616 $307.5

1st half year 07 1st half year 07

$2,518 $307.0

48 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

b) Full year performance

Turnover by Sector Turnover by Geographical Areas The Group turnover of $5,345m for FY2008 was higher than A review of the Group turnover by geographical areas is that of FY2007 by 6% or $294m. All sectors reported higher as follows: turnover, except the Marine sector, which had a lower turnover vis-à-vis FY2007. $m

6,000 5,345 5,051 15% 4% 4,486

Aerospace 4,000 3,338 2,948 Electronics

24% Land Systems 36% 2,000 Marine

Others 0 21%

Asia USA Europe Others

Profit Before Tax Earnings Per Share (EPS) Group PBT for FY2008 of $540.7m was lower than that The Group’s basic and diluted EPS for FY2008 were achieved in FY2007 by 15% or $97.4m. All sectors recorded 15.82 cents and 15.74 cents respectively (FY2007: 16.95 cents lower PBT, except the Land Systems sector, which had a and 16.91 cents respectively). The lower EPS was a result of higher PBT vis-à-vis FY2007. lower profit after tax for FY2008. Annual Report 2008

cents 3% 18 16.95 14% 15.82 15.15 Aerospace 15 13.64 12.26 16% Electronics 12 Land Systems 9 Marine 6 17% 50% Others 3

0 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

49 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Economic Value Added (EVA) The Group EVA for FY2008 was $357.9m, a decrease of 8% or $30.9m over FY2007. The Weighted Average Cost of Capital was 6.2% for 2008 (2007: 6.5%).

FY2008 EVA CONTRIBUTION BY SECTOR (%)

55%

17%

14%

17%

(3%)

Aerospace Electronics Land Systems Marine Others

Capital Expenditure The Group incurred capital expenditure of $191m in FY2008 (FY2007: $172m). The addition of a new engine test cell, new hangars and related equipment and programme-related purchases, including rotable components to support existing and new customers for Maintenance-By-Hour (MBH) programmes in the Aerospace sector accounted for the bulk of the capital expenditure for the year. The details are shown in Note 12 to the Financial Statements.

08 191

07 172

0 20 40 60 80 100 120 140 160 180 200

Aerospace Electronics Land Systems Marine Others

50 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Total Assets As at end December 2008, total assets of the Group amounted to S$5.99b ($6.05b as at end December 2007). The deployment of assets is as follows:

TOTAL ASSETS DEPLOYMENT ($m)

6,400 6,050 5,993 5,578

4,800 4,566 4,042

3,200

1,600

Bank Balance & Funds Under Management Stocks & WIP Property, Plant & Equipment

Debtors, Deposits & Prepayments Intangibles & Other Assets

Total Liabilities and Shareholders’ Funds (Capital Employed) Capital employed as at the end of 2008 was $5.99b, a decrease of $57m over 2007. Details of capital employed are as follows:

TOTAL LIABILITIES OWED AND CAPITAL INVESTED ($m) Annual Report 2008

6,050 6,400 5,993 5,578

4,566 4,800 4,042

3,200

1,600

Bank & Other Borrowings Creditors & Accruals Equity

Other Liabilities Advance Payments from Customers IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

51 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

52 REVENUE IN $m CORE CAPABILITIES FY 08 A global engineering group providing 5,345 integrated solutions for the aerospace, FY 07 electronics, land systems and marine 5,051 industries Specialises in dual use technologies, with PROFIT BEFORE TAX IN $m both military and commercial applications

FY 08 traversing traditional industry lines 540.7 Provides customised solutions through a FY 07 network-centric and systems approach that 638.1 leverages the strengths of the electronics sector Spearheads the search for new and FACTS emerging technologies One of the largest companies listed in Singapore, and one of Asia’s largest defence and engineering groups, with an order book MAJOR DEVELOPMENTS IN 2008 of $10.6b and total assets of $5.99b as at Ended the year with record order book of $10.6b end 2008 First time export of Bronco and Landing Ship Global footprint in 24 countries and 42 cities, Tank - both designed, developed and produced with over 100 subsidiaries, joint ventures and by the Group associated companies Sealed close to half a billion dollars worth VT Systems, ST Engineering’s US of contracts during the inaugural Singapore headquarters in Virginia, has extensive Airshow

US operations across the Group’s core Increased global presence, adding new cities Annual Report 2008 businesses such as Madrid, Xiamen and Mexico City Component stock of the FTSE/ASEAN 40, The Group launched and designated MSCI Singapore Free Index, S&P Asia Pacific November as Green Month as part of its 100 and Straits Times Index commitment to protecting the environment 156 patents granted to date, and Planted a record breaking 2008 trees to 244 patents filed offset 2000 tons of carbon Strong balance sheet with Aaa credit rating by Moody’s

Global workforce of 19,151, with IDEAS DELIVERING PROMISES ENGAGING 5,704 engineering staff Singapore Technologies Engineering Ltd Technologies Singapore

53 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

REVENUE IN $m REVENUE IN $m

FY 08 FY 08 1,938 1,143 FY 07 FY 07 1,835 1,023

PROFIT BEFORE TAX IN $m PROFIT BEFORE TAX IN $m FY 08 FY 08 272.1 93.9 FY 07 FY 07 341.2 115.3

CORE CAPABILITIES CORE CAPABILITIES Aircraft Maintenance & Modification Large-Scale Systems Group Line, light and base maintenance Intelligent transportation systems Technical services and maintenance planning Intelligent building management systems Modifications, conversions and refurbishment Combat systems integration Design and development Communication & Sensor Systems Group Component & Engine Total Support e-Government communications & Information Communication Engine maintenance, repair, overhaul and total support Technologies (ICT) solutions Aircraft mechanical and avionics component maintenance, repair Satellite communication systems and overhaul as well as rotable total support Communications, microwave, radar and sensor systems Materials and spares asset management and logistics Intelligent traffic and fleet management systems Info-security solutions FACTS Electro-optics systems Acclaimed as the world’s largest aircraft maintenance Software Systems Group provider with 8.1m commercial airframe manhours in 2006 e-Government solutions, managed services, by Overhaul & Maintenance magazine IT (Information Technology) and ICT solutions Leverages wide range of capabilities – airframe, engines Interactive digital media and components maintenance; engineering design and Mobile realtime command & control and homeland technical services; and aviation materials and security systems management services Modelling and simulation systems and e-Learning solutions Offers Total Aviation Support on select aircraft types Worldwide network of facilities with extensive global customer base that includes many of the world’s leading FACTS airlines, airfreight and military aircraft operators Singapore’s largest ICT solutions provider and systems integrator 7,172 staff A leading player for advanced telematics and fleet management systems, serving over 30,000 vehicles and vessels worldwide Only provider of rail solutions for command, control and MAJOR DEVELOPMENTS IN 2008 communications, automatic fare collection and platform screen Completed and redelivered the world’s first 767-300 doors, with projects in China, the Philippines, Singapore, Taiwan, Boeing Converted Freighter to ANA Thailand and Turkey Completed conversion and redelivered first 757-200 63 patents filed, of which 32 have been granted Combi aircraft to the Royal New Zealand Air Force 4,591 staff Redelivered six 757-200SF aircraft from conversion centres in Mobile and Singapore Received Supplemental Type Certificate (STC) for the MAJOR DEVELOPMENTS IN 2008 Boeing 757-200SF within a significantly short time Completed acquisition of Telematics Wireless Ltd, a key player in Expanded capacity with new hangars and an engine test the high growth Machine-to-Machine Industry cell in Singapore, and began construction of hangars in Acquired 93% of Antycip Simulation Ltd, an expert in delivering Shanghai to be ready in 2009 market leading simulation software, hardware and integrated Acquired 100% shareholding in SAS Component and solutions renamed it ‘ST Aerospace Solutions (Europe) A/S’ Awarded $272m contracts from the Land Transport Authority for Formed new landing gear joint venture with Iberia Marina Coastal Expressway, Downtown Line Mass Rapid Transit Airlines – Madrid Aerospace Services S.L. (MAeS) – which System and supply of half height platform screen doors for commenced operations and inducted first landing gear 36 stations in Singapore. input this year Secured contracts worth about $86m from Resorts World Signed long-term OEM support agreements with at Sentosa to provide security, IT infrastructure and carpark GE Aviation and CFM International on the CFM56 engines management systems for the integrated resort at Sentosa. Won two Public Private Partnership (PPP) contracts from Awarded the Future Schools project for two out of five identified the Republic of Singapore Air Force (RSAF) for G550-AEW schools by the Infocomm Development Authority and the and C90CGTi aircraft and training instruction Ministry of Education of Singapore Expanded already extensive customer base with addition Secured US$8m contract from Sharjah Public Transport of new customers such as Comair, Delta Airlines, Flybe, Corporation in the United Arab Emirates to provide advanced taxi Jetstar Pacific, LOT Polish Airlines and TransAsia despatch and management system

54 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

REVENUE IN $m REVENUE IN $m

FY 08 FY 08 1,274 822 FY 07 FY 07 1,178 863

PROFIT BEFORE TAX IN $m PROFIT BEFORE TAX IN $m FY 08 FY 08 84.7 75.2 FY 07 FY 07 80.0 96.6

CORE CAPABILITIES CORE CAPABILITIES Land Systems & Solutions In-house Design Expertise Design, development and production of integrated weapon and Custom designed naval and commercial vessels munitions systems Lightweight ship design Design, development, production and upgrade of wheeled and Stealth technology tracked mobility systems Total Naval Solutions Original equipment manufacturer for infinitely variable Design, build, own and operate services transmissions and hybrid electric solutions Engine overhaul and submarine maintenance Integration of third party solutions for military and homeland Depot repairs, on-base maintenance and through-life services security applications Shipbuilding Expertise Specialty Vehicles & Services Extensive water jet expertise Design, development and production of vehicles and equipment Thin gauge steel and aluminium construction for naval vessels for use in construction, goods distribution and urban services Onboard system installation and integration Testing and commissioning Total Support & Services Maintenance, repair and overhaul of military platforms, Shiprepair and Conversion weapons systems and ground support equipment Upgrading and jumboisation, refurbishment and reactivation Inspection and accident repair of private and commercial Conversion of commercial vessels, eg: seismic, dredgers vehicles Through-life support of automotive assets including Environmental Engineering preservation and spares management Waste transfer and sorting technology Industrial test services Mechanical biological treatment and pre-treatment process Waste-to-Energy resource recovery technology Landfill rehabilitation, gas extraction and restoration FACTS Market leader in commercial class asphalt pavers in North America FACTS World’s leading 40mm solutions provider, delivering the widest and Five shipyard facilities – two in Singapore and three in the US most innovative range of payload solutions Track record in the design and construction of sophisticated naval Worldwide clientele from more than 30 countries and commercial vessels, as well as high engineering content Annual Report 2008 101 patents filed, of which 53 have been granted shiprepair services, including ship conversions 5,257 staff Designs and develops a variety of vessels including landing ship tanks, stealth frigates, patrol vessels, feeder container vessels, MAJOR DEVELOPMENTS IN 2008 RoRo/LoLo vessels, platform supply vessels, LPG tankers, high Secured contract of about £150m for more than 100 Bronco All speed passenger ferries, fisheries survey vessels, articulated tank Terrain Tracked Carriers from the UK Ministry of Defence (UK MoD) barges, and pure car truck carriers Secured contract for the supply of 120mm Super Rapid Advanced 38 patents filed, of which 25 have been granted Mortar Systems (SRAMS) worth US$31.6m to a Gulf States customer 1,615 staff Secured two ammunition supply contracts worth a total of about $119.7m from the UK MoD MAJOR DEVELOPMENTS IN 2008 Increased shareholding in STAR Automotive Centre (Zhejiang) Two significant naval shipbuilding contracts clinched, one for the Phase II Co., Ltd. to 100% contract of Fast Missile Craft project for the Egyptian Navy worth Set up a wholly-owned subsidiary in Mexico – US$393m, and another $200m to build a landing platform dock for a navy VT Specialized Vehicles, S.A. de C.V. – to sell VT SVC’s specialty in the Asia Pacific region – its first export of the Landing Ship Tank design vehicles in Mexico and Latin America Secured total commercial contracts worth about $183m to build a diving Launched three new products for road construction sector support vessel, seismic vessel and anchor handling tug supply vessel – series 9000 Paver (wheeled), 705 Grader and upgraded to support new customers in the deepwater sector as well as about Maximizer III Distributor truck US$90m to build three platform supply vessels for its customers, Delivered Hybrid Electric Tow Tractors HETT20 to SATS for L&M Botruc and Candies Shipbuilders in the US operations at Changi Airport Terminal 3 Shiprepair won contracts of about $60m for the conversion of a seismic Launched STAR BLACK in June – an independent premium research vessel and jumboisation of a derrick pipelay barge service centre that delivers personalised comprehensive Delivered final locally built stealth frigate, RSS Supreme, to the Republic of automotive services exclusively for BMW and Mercedes Benz cars Singapore Navy, and the last two of four 1030 TEU feeder container vessels Set up Cold Spray Research Centre jointly with NTU, the first Environmental engineering business delivered waste compactor research centre in Southeast Asia systems to Keppel Seghers for their Qatar project. Also completed and IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore Signed memorandum of collaboration with Singapore Polytechnic secured two separate EcoPark planning projects in China and Singapore to jointly set up Solar Energy Test-bedding and Applications Centre respectively for next generation solar cells 55 ST Aerospace continued to grow its capabilities, capacities and GLOBAL REACH.

The in-house development of ST Aerospace’s FAA-approved STC for the 757-200SF was completed in a relatively short 11 months – a laudable engineering feat.

56 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

STEADY EXPANSION AMIDST CHALLENGES

Starting with the sub-prime exposure in the US and record fuel prices, the ensuing credit crunch adversely affected global economies and the aviation market. In spite of these challenges, ST Aerospace remained steadfast and forged ahead with its strategy to expand its global Maintenance, Repair and Overhaul (MRO) network and capabilities to bring value to customers worldwide.

2008 was a year for Passenger-To-Freighter (PTF) conversions at ST Aerospace. ST Aerospace successfully completed the conversion of the first 757 Combi aircraft, that was from an all-passenger arrangement to a multi-role, quick- change configuration, for the RNZAF.

Aircraft Maintenance & Modification ST Aerospace redelivered the 38th and final MD-11 Boeing Converted Freighter (BCF) to UPS Airlines in September 2008. By the end of the year, ST Aviation Services Co (SASCO) had redelivered a total of 58 MD-11BCF to various customers of Boeing since the programme began in 2001.

SASCO was awarded the 767-300BCF conversion Annual Report 2008 by Boeing, which began in October 2007. The launch aircraft was for All Nippon Airways (ANA), and the prototype BCF was redelivered to ANA in April 2008 as planned. The prototype aircraft passed its two-month long flight tests with outstanding results. The second 767-300BCF was redelivered in December 2008. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

57 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Aerospace also achieved a first in the development of its own FAA-approved Supplemental Type Certificate (STC) for the 757-200 Special Freighter in April 2008. The STC was developed and approved in a record time of 11 months for an STC of this scale. The STC was developed in-house by ST Aerospace’s engineers using Boeing (OEM) licensed data. To date, ST Aerospace’s STC is the only 757-200 PTF STC based on original Boeing’s data. The STC was for an 87-aircraft conversion contract awarded by FedEx Express – the largest number of aircraft awarded in a single conversion contract to date. In 2008, six aircraft were delivered by MAE in the US and ST Aerospace Engineering (STA Engineering) in Singapore.

noteworthy accomplishmentS INCLUDE THE SUCCESSFUL REDELIVERIES OF THE

Top: ST Aerospace redelivered the launch prototype for 767-300 PTF conversion FIRST PASSENGER-TO- to ANA ahead of schedule. Above: ST Aerospace commissioned its new two-bay hangar at Seletar, FREIGHTER CONVERTED Singapore, to meet demands from its growing customer base. 757-200 AIRCRAFT for FEDEX EXPRESS AND THE FIRST MULTI-ROLE 757-200 AIRCRAFT FOR RNZAF.

Another noteworthy PTF accomplishment was the successful completion and redelivery of the first multi-role 757-200 aircraft for the Royal New Zealand Air Force (RNZAF). The RNZAF programme was more complex than the standard freighter as it included both freighter conversion and special mission capabilities.

58 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

During the year, ST Aerospace continued to grow its capabilities, capacities and reach around the world. In the Aircraft Maintenance and Modification (AMM) business segment, ST Aerospace’s joint venture company, Shanghai Technologies Aerospace Company (STARCO), started the construction of its new hangars at Pudong airport in Shanghai, China. This is expected to be completed in 2009. In Panama, more hangars at PAE were refurbished and commissioned into service. In Singapore, STA Engineering added more narrow-body aircraft capacity. Operational in October 2008, ST Aerospace’s recently added facility in Madrid Component & Engine Total Support focuses on repair and overhaul work for Airbus landing gears. In the Component and Engine Total Support (CETS) segment, Guangzhou Aerospace Technologies & Engineering Company (GATE) ST Aerospace added was established at Guangzhou Baiyun International Airport Logistics Zone, and is collaborative agreements part of ST Aerospace’s global distribution network build-up for import/export and logistics with various components services for its global customer base. and aircraft OEMs, on

An engines MRO facility, named ST Aerospace military and commercial Technologies (Xiamen) Company (STATCO),

products, to enhance Annual Report 2008 was formed in 2008. STATCO is expected to commence operations in early 2010 to provide its Total Aviation MRO and total support services for the CFM56-5B and CFM56-7B engines. Support OFFERING.

Madrid Aerospace Services (MAeS), a landing gear joint venture with Iberia Airlines signed during the inaugural Singapore Airshow, started operations in the third quarter of 2008. Much investment went into new components and engines capabilities over the year, including the CFM56-5B capability and facility to complement its CFM 56-3, -7B engine capabilities and a host of components capabilities to extend its MRO support for a range of products. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

59 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Aerospace air freight operators, airlines and Low Cost Carriers (LCC). It continued to add new customers such reinforced its as Comair, Delta Airlines, Dongxin Airlines, Flybe, Indonesia Air Force, Jetstar Pacific, LOT Polish position as A provider Airlines, S7 Siberian and TransAsia. of OEM solutions It further reinforced its support for the Republic during 2008. of Singapore Air Force (RSAF) by securing two contracts to provide aircraft and instructors for RSAF’s training requirements. As part of the ST Aerospace also reinforced its position as a Public Private Partnership (PPP) agreements, provider of OEM solutions during 2008. It signed a ST Aerospace will acquire and maintain a Beechcraft strategic agreement with GE Aviation and a series of King Air C90GTi and a Gulfstream 550-AEW aircraft. agreements with CFM International for CFM engine products. It added more service centres and other Additionally, ST Aerospace won a contract to collaborative agreements with various components modernise C-130s for the Indonesian Air Force. and aircraft OEMs, on both military and commercial It also clinched its first customer for its FanTail products, to enhance its Total Aviation Support Unmanned Aerial Vehicle (UAV) and a new offering, especially on narrow-body aircraft such programme to develop new UAV systems. as the Airbus A320 and Boeing 737. Some service centre agreements signed include those with ASG, Through its commercial pilot training programme Astronautics, Honeywell, Howell Instrument, Kollsmen, under ST Aviation Training Academy (STATA), Thommen and Triumph Actuation Systems. ST Aerospace obtained China’s CAAC approval to train Chinese pilots while continuing its development Over the year, ST Aerospace continued to build on of its Multi-crew Pilot Licence (MPL) programme. relationships with its extensive customer base that included many of the world’s leading air forces, PERFORMANCE OF THE AEROSPACE SECTOR

Half Yearly Performance Turnover of the Aerospace sector in 2H2008 of $977m was 2% or $16m higher compared to 1H2008. The turnover increase came from the AMM business group, but this was largely offset by lower turnover in the Component/Engine Repair and Overhaul (CERO) and Engineering and Materials Services (EMS) business groups. The AMM business group’s higher turnover was mainly due to the 757 freighter conversion redeliveries by MAE and STA Engineering. In the CERO business group, reduced sales from ST Aerospace Solutions (Europe) (STA Solutions) accounted for the lower turnover, while in the EMS business group, the turnover decrease was due to ST Aerospace continued to build on its comprehensive rotables MRO fewer project milestone completions. capabilities and collaborations with OEMs, including for the Chinook engine transmission component.

60 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Aerospace’s new engine test facility is equipped for testing of newer generation engine types.

PBT for 2H2008 at $115.4m was lower than that achieved in 1H2008 by 26% or $41.3m and this was due to higher allowance for doubtful debts and foreign exchange losses.

Full Year Performance Aerospace sector’s FY2008 turnover of $1,938m was higher than that of FY2007 by 6% or $103m. Higher turnover was recorded in the AMM and EMS business groups, but these were partially offset by lower turnover in the CERO business group. The higher Annual Report 2008 turnover in the AMM business group was mainly due to the 757 freighter conversion redeliveries, while more project milestone completions accounted for the ST Aerospace’s flight training academy acquired the Bruce Hartwig Flying higher turnover in the EMS business group. For CERO School as part of its operations set up in Ballarat. business group, the lower turnover was attributable to lower turnover from STA Solutions, but this was partially offset by higher sales in the Acquisitions and Divestments engines division. During the year, ST Aerospace acquired the remaining shares of SAS Component for ¤28.3m PBT of the Aerospace sector in FY2008 of $272.1m and renamed the wholly-owned subsidiary was lower than that of FY2007 by 20% or $69.1m. ST Aerospace Solutions (Europe). It also made, The lower PBT was due to the unfavourable impact through STATA, a A$120,000 acquisition of the of foreign exchange rates, higher depreciation, Bruce Hartwig Flying School as part of its flight higher allowance for doubtful debts, higher PTF training operations set up in Ballarat, Australia. The prototyping costs and reduced profits from the school was renamed ST Aviation Training Academy CERO business group. (Australia) Pty Ltd. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

61 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

The year saw strong growth, with ST Electronics expanding into new territories such as Bhutan, Ghana, Sharjah (UAE) and Slovakia. It is also targeting markets in Africa, India, the GULF STATES and Turkey for further expansion. Today, the company markets its ICT and e-Government solutions to more than 70 countries worldwide.

The Future Is Wild – the first Singapore co-produced 3D animated TV series aired in the US, Germany and Singapore.

62 operating financial review

SUPERIOR SOLUTIONS FOR NEW MARKETS

The year saw strong growth, with ST Electronics expanding into new territories such as Afghanistan, Bhutan, Ghana, Sharjah (UAE) and Slovakia. It is also targeting markets in Africa, the Gulf States, India and Turkey for further expansion. Today, the company markets its Information Communication Technologies (ICT) and e-Government solutions to more than 70 countries worldwide. Having achieved its $1b revenue milestone in 2007, ST Electronics continues to build on its strengths and capabilities, focusing on three key business areas – e-Government and enterprise solutions, Satellite Communications (Satcoms) ST Electronics rail electronics solutions are used in China, Dubai, the Philippines, solutions and Interactive Digital Media (IDM). Singapore, Taiwan and Turkey.

Large-scale Systems Group a 15-year maintenance contract worth $52m to Large-scale Systems Group’s (LSG) Intelligent Building and Intelligent Transportation solutions provide maintenance for the Long Range Radar and were deployed in Asia Pacific and made inroads into Display System III Air Traffic Control System. Thales Europe, India and the Gulf States. It also marketed Australia Pty Ltd also awarded ST Electronics a its Parking Guidance System in regional markets contract worth $36.7m to design and develop an including China, Bahrain, India, Malaysia and the UAE. Interactive Auxiliary Display Sub-system, a data warehouse, and consoles for the Air Traffic Control ST Electronics is implementing its Security System for CAAS. Management System in Shanghai’s 21st Century Tower, and an Integrated Security Management Building on its strong expertise in rail solutions, LSG System in Singapore’s Khoo Teck Puat Hospital. secured a contract for electrical and mechanical Annual Report 2008 systems for the Land Transport Authority (LTA) For homeland security and defence, ST Electronics of Singapore’s Marina Bay Extension. It was strengthened its relationship with the Civil Aviation awarded the contract for Sentosa’s Song of the Sea Authority of Singapore (CAAS) when it was awarded access control and ticketing system, and a digital trunking radio system for Bangkok’s Transit System. IDEAS DELIVERING PROMISES ENGAGING echnologies Engineering Ltd echnologies Singapore T Singapore

63 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

In June, Guangzhou Metro Corporation awarded Communication & Sensor Systems Group LSG a $17.5m contract to provide Automatic Fare With the acquisition of Telematics Wireless Ltd, Collection systems for the Guangzhou Metro Line 3 ST Electronics now offers seamless end-to- North Extension in China. This is ST Electronics’ fifth end telematics solutions for projects such as MRT project in Guangzhou. Telematics Service Hub Remote Meter Reading and Gantryless Congestion Management Systems to enhance the travelling experience of both IDIRECT CAPTURED drivers and passengers. NEARLY HALF OF THE Having completed a Transport Consultancy in Kazakhstan, the Communication & Sensor Systems GLOBAL HUB MARKET Group (CSG) secured two more contracts – SHARE, MAKING IT the the implementation of the Transport Management Centre and Transport Planning Model in world’s leading hub its capital, Astana. supplier. CSG continues to market its Traffic Management Systems, Fleet Management Systems and Forward LSG continues to leverage its strategic partners to Command Vehicles to transportation agencies and target new markets for rail electronics projects. homeland security users in the Gulf States and India. It is pursuing opportunities in the Indian and Gulf States Transit System markets. The year also saw ST Electronics’ Satcom business make breakthroughs in Afghanistan, Bhutan, Ghana In Singapore, LSG sees potential in the MRT lines and Slovakia. that are planned up to Year 2020. A range of Satcom solutions that included a new wireless sensors network, Satcom-on-the-move, and microwave sensor K-band module was launched, together with the smallest 4W and 8W Ku-band Block Up Converter.

In April, ST Electronics incorporated iDirect Asia Pte Ltd in Singapore to market iDirect products, and operate a Technical Assistance Centre to provide engineering support and technical training to iDirect users in the region.

In the US, iDirect, Inc. was renamed VT iDirect, Inc. (iDirect) in June. The renaming serves to better align the company as part of the VT Systems group and capitalise on the group’s brand equity.

Maritime VSAT solution enables wireless communications at sea.

64 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

iDirect captured nearly half of the global hub market share, making it the world’s leading hub supplier. In June, it launched the Evolution DVB-S2 modem series.

iDirect will license its satellite IP router technology to Panasonic Avionics for its in-flight satellite transmission platform, which provides a broad range of passenger and crew applications.

Software Systems Group Software Systems Group (SSG) continues to market its managed services, enterprise solutions and supply chain management solutions. In October, it set up a ST Electronics offers Managed Services to meet the outsourcing needs of 60,000 sq ft data centre specialising in data centre clients which include the Singapore Ministry of Defence. management and space provisioning service.

In March, the Hong Kong Civil Aviation Department PERFORMANCE OF THE ELECTRONICS SECTOR awarded SSG the contract for a state-of-the-art Air Traffic Control Radar Simulator. Half Yearly Performance Turnover of the Electronics sector of $619m recorded VT MÄK (MÄK), ST Electronics’ simulation arm in the in 2H2008 was higher than that achieved in 1H2008 US, continues to grow its markets and entered the by 18% or $95m. The increase was contributed by all communications modelling and satellite simulation three business groups. segments. Its VR-Link is the world’s best-selling simulation networking toolkit. PBT of $44.5m for 2H2008 was lower than that of 1H2008 by 10% or $4.9m. LSG recorded lower PBT, Annual Report 2008 MÄK partnered DI-Guy in September to embed but this was partially offset by higher PBT in CSG DI-Guy’s human character models and animations and SSG. Despite higher turnover, LSG recorded a into the MÄK Stealth and the VR-Forces 3D Graphical loss in 2H2008 mainly due to impairment in value User Interface. of a quoted investment amounting to $16.5m. CSG’s profit was higher mainly due to higher turnover and To reinforce its IDM capabilities, ST Electronics set up better sales mix. SSG recorded better profit mainly a Centre of Interactive Media to research and develop due to higher turnover and share of higher profit from technologies for the Simulation, Animation, Games associated companies. and Edutainment domains. Full Year Performance SSG also showcased its Integrated Mission Debriefing FY2008 turnover of $1,143m for the Electronics Station, C-130 Flight Simulator, and iAirport air traffic sector was higher than that of FY2007 by 12% or control tower solution at the inaugural Singapore $120m. All three business groups contributed to the Airshow 2008. higher turnover. The higher turnover in LSG was due to milestone completions of the LTA’s Circle Line project and the Taiwan MRT projects, while milestone completions of a communication project as well

as sales of satellite communication products and IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

65 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

telematics systems accounted for the higher turnover in ST Electronics CSG. SSG also recorded higher turnover with milestone was awarded the completions of software system projects, a managed landmark Singapore services project and higher simulation business. Future Schools Electronics sector’s FY2008 PBT of $93.9m was lower than that achieved in FY2007 by 19% or project by the $21.4m. All business groups recorded lower PBT. Despite higher turnover and margins, LSG recorded Infocomm Development a loss mainly due to impairment in value of a quoted Authority and the investment amounting to $16.5m. The lower PBT in CSG was mainly due to lower contribution from Ministry of Education. satellite communication product sales and impairment in value of a quoted investment amounting to $2.2m. Despite higher turnover, SSG’s profit was impacted by reduction in investment income and lower income from associated companies arising from the divestment of ECS Holdings Limited, an associated company, in 4Q2007.

Image courtesy of Antycip Simulation for UTBM, Belfort-Montbéliard Institute of Technology, France

Modelling and Simulation solutions enable clients to train in a simulated virtual environment without the expense of actual operations.

66 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

Acquisitions & Divestments The acquisition of Telematics Wireless Ltd was completed in January. Telematics Wireless, a key player in the high growth Machine-to-Machine (M2M) industry, is among the world’s leading terrestrial and urban asset location system suppliers.

ST Electronics acquired 60% of Antycip Simulation Ltd in February and a further 33% in November. Antycip Simulation is recognised as an expert in the delivery of market leading simulation software, hardware and integrated solutions.

In June, ST Electronics set up a joint venture company Telematics and Fleet Management solutions provide ST Electronics’ customers in Kazakhstan, holding a 51% stake in MERITS with efficient tools for better management of time and resources. Technologies LLP. The venture will initially focus on the numerous education projects in Kazakhstan. In November, ST Electronics won contracts worth about $160m from the LTA to supply Major Projects Communications System for the Marina Coastal ST Electronics was awarded the landmark Expressway and Communications System & Singapore Future Schools project by the Infocomm Integrated Supervisory Control System for the Development Authority and the Ministry of Downtown Line MRT System. These projects will be Education (MOE) for two of the five identified completed by 2013 and 2016 respectively. schools, highlighting the company’s strong education capabilities. The company will develop The company also launched Singapore’s first 3D interactive e-learning solutions for Beacon animated TV series, the Future is Wild, Kids Series Primary School and Hwa Chong Institution. at the Science Centre Singapore in November. Annual Report 2008 Co-produced by ST Electronics, this 26-episode TV The company is also leading a consortium that series was launched in the US and Germany and has been pre-qualified to participate in the MOE’s made its debut on Singapore TV in January 2009. Standard Operating Environment for Schools, with the final tender award scheduled for 2009. In December, Resorts World at Sentosa awarded ST Electronics contracts worth about $86m to supply In June, ST Electronics secured its first project in an Integrated Security System, an IT Infrastructure Sharjah, UAE, with a US$8m contract to deliver System and a Carpark Guidance & Payment System its first advanced taxi despatch and management for the integrated resort on Sentosa. system in the Gulf States to Sharjah Public Transport Corporation. ST Electronics will deliver the system by 2009.

In September, LTA awarded ST Electronics a $112m contract for the supply of Half Height Platform Screen Doors and its associated works for all 36 existing elevated MRT stations. The project aims to further enhance commuter safety and will IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore be completed in 2012.

67 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Kinetics’ performance, in light of THE difficult market conditions, is testimony to its strong capabilities and demand for its products and services.

The Commercial Articulated Vehicle and the Bronco All Terrain Tracked Carrier.

68 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

LAND SYSTEMS SOLUTIONS THAT EXCEED THE COMPETITION

As ST Engineering’s land systems arm, ST Kinetics provides an integrated suite of state-of-the-art solutions for the defence, homeland security and commercial markets. Serving customers in over 30 countries worldwide, ST Kinetics’ capabilities cover the entire value chain, including the design, development, production, operation and through-life support of specialised land systems equipment and specialty vehicles.

Despite market uncertainties, 2008 saw LeeBoy 9000 Wheeled Paver was launched at CONEXPO 2008. improvements in ST Kinetics’ performance, largely due to defence export sales. Its defence business continued to perform well during the year, securing several significant orders, most noteworthy of which Faced with challenging market conditions in the was the £150m order for Bronco All Terrain Tracked US, the company’s US specialty vehicles business Carriers by the UK Ministry of Defence (MoD). weathered the impact and grew in market share Other key contracts announced were the supply of in some product segments. In China, its specialty 40mm ammunition to the UK MoD and the export of vehicles companies managed to strengthen the 120mm Super Rapid Advanced Mortar System operations and profitability. (SRAMS) to a Gulf States customer. ST Kinetics’ performance, in light of the difficult market conditions, is testimony to its strong

capabilities and demand for its products and services. Annual Report 2008 Each of its specialty vehicles companies grew more efficient, flexible and robust. Together with the solid showing of its defence businesses, ST Kinetics has reinforced its position as the premier land systems company in Southeast Asia.

Land Systems & Solutions The company participated in various exhibitions during the year, showcasing both its capabilities and products. In February, it participated in India’s DefExpo 2008, where it showcased its automatic assault rifle SAR21 and Ultimax100 light machine gun. In the same month, the company participated in the Singapore Airshow 2008, displaying its range of capabilities for integrated defence solutions, such as the wheeled 8x8 armoured vehicle Terrex and Total 40mm Solutions, and launching its 40mm Low Velocity Air Bursting IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore Munitions System (LV ABMS). The Commercial

69 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Articulated Vehicle (CAV) for disaster relief In September, ST Kinetics’ joint venture company, and the Hybrid Electric Tow Tractor HETT20 Advanced Technology Research Centre, and were also exhibited. The HETT20 incorporates Nanyang Technological University (NTU), officially the latest hybrid electric technologies and is opened Southeast Asia’s first research and part of ST Kinetics’ offering of green products development centre in cold spray technology. designed to reduce the emission of greenhouse Through the combined strengths of ST Kinetics gases and increase fuel efficiency. and NTU, this collaboration aims to use the Cold Spray Research Centre to spin off niche industrial Later in June, the company showcased its applications; specifically, advanced coatings for Bronco Heavy Maintenance Vehicle, SRAMS enhanced wear resistance, as well as bioactive on Spider Light Strike Vehicle, Total 40mm and anti-bacterial coatings for biomedical Solutions, including the 40mm LV ABMS, and applications. Compact Personal Weapon (CPW) at Eurosatory 2008 in Paris, France. Toward the end of the year, ST Kinetics showcased its solutions at two shows in the US. It displayed its full range of 40mm ST Kinetics’ specialty ammunition and the Bronco at Modern Day Marines in Virginia, and at the vehicles companies Association of United States Army have placed greater Annual Meeting & Exposition in Washington DC, in September and emphasis on the October respectively. development of higher margin

products, and The Bronco Heavy Maintenance Vehicle generated much interest at export sales. Eurosatory 2008.

ST Kinetics launched its 40mm Low Velocity Air Bursting Munitions System at Singapore Airshow 2008. 70 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

In October, ST Kinetics and Singapore Polytechnic signed an MOU for collaboration on a new Solar Energy Test-bedding Application Centre (SETAC) to facilitate research and development in solar applications, and the production of Dye Sensitised Solar Cell (DSSC). DSSCs are new generation solar cells that are more efficient and up to 60% cheaper than those currently available.

ST Kinetics expects greater demand for its Total 40mm Solutions. It will also continue to pursue opportunities in local and foreign defence markets for its range of products, as well as new development and upgrade programmes. Increasing The ST Kinetics-NTU Cold Spray Research Centre opened in September is global environmental awareness and pressures Southeast Asia’s first R&D centre for such technology. to reduce fuel consumption are also expected to give rise to a higher demand for electric and hybrid electric vehicles and more efficient hydro- mechanical transmissions, all of which ST Kinetics offers as subsystems or integrated end products to its customers. Annual Report 2008 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

71 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Total Support & Services Later in May, the company set up VT Specialized Singapore Airport Terminal Services Limited Vehicles, S.A. de C.V. (VT SVM) – a wholly-owned (SATS), the leading provider of integrated ground subsidiary in Mexico – to sell VT SVC’s specialty handling and airline catering services at Singapore vehicles in Mexico and Latin America. Sales of Changi Airport, became the first customer to use the VT SVC kits in Latin America have enjoyed steady Hybrid Electric Tow Tractor HETT20 in January. growth over the last few years, and the company’s presence in Mexico will enhance customer service In June, ST Kinetics launched “STAR BLACK” and facilitate expansion in the Latin American market. – an independent premium service centre that delivers personalised, comprehensive automotive At Bauma China 2008, held in Shanghai in services for high-end German cars from November, both GJK and BZK showcased their marques like BMW and Mercedes Benz. This range of products for the construction and mining complements the current one-stop automotive industries. Also exhibited at the show were a new services of STAR Automotive Centre. high mobility telehandler called Chang Jing 6, a hydraulic excavator, articulated dump truck ADT-30, CAV, and hybrid electric vehicle These EXPORT components and solutions. contracts attest Besides growing organic sales, ST Kinetics’ specialty vehicles companies have placed to the growing greater emphasis on the development of higher confidence and margin products, and export sales. It has expanded its market reach through establishing global recognition new dealers in Australia, Indonesia, India, Malaysia, the Philippines, South Africa, the UAE of ST Kinetics’ and Vietnam. These initiatives will not only help defence products. the specialty vehicles companies to weather the challenging periods of downturn, but also to emerge stronger on the upswing. ST Kinetics expects more opportunities to provide services such as integrated training, logistics and life cycle cost management. The global economic PERFORMANCE OF THE LAND SYSTEMS downturn would also reduce new acquisitions and SECTOR lead to increased demand for MRO services and life extension programmes for existing components Half Yearly Performance and equipment. Turnover of the Land Systems sector in 2H2008 of $618m was 6% or $38m lower than that achieved Specialty Vehicles & Services in 1H2008. The lower turnover was mainly due to In March, ST Kinetics generated strong interest lower turnover from the US operations and lower for three new LeeBoy products and GJK’s mini project deliveries. excavator at CONEXPO 2008 held in Las Vegas. VT LeeBoy launched its new 9000 wheeled Compared to 1H2008, PBT in 2H2008 decreased Asphalt Paver, 705 Motor Grader and the upgraded by 54% or from $31.3m to $26.7m. The lower Maximizer III Distributor. PBT was mainly attributable to lower turnover and lower margins from product mix, as well as the impairment in value of a quoted investment.

72 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

Full Year Performance Land Systems sector’s FY2008 turnover of $1,274m was higher than that achieved in FY2007 by 8% or $96m. The higher turnover was mainly contributed by the Munitions & Weapon (M&W) business group’s higher export sales, but this was partially offset by lower turnover from the Automotive (Auto) business group. The lower turnover in the Auto business group was mainly due to lower sales from the US operations, but this was partially offset by higher project deliveries.

Compared to FY2007, Land Systems sector’s PBT of $84.7m for FY2008 was higher by 6% or $4.7m. Visitors watching a demonstration of the 120mm SRAMS at Eurosatory 2008. The higher PBT was mainly contributed by the M&W An export contract for the mortar system was announced in February. business group, but this was largely offset by lower PBT in the Auto business group. The higher PBT During the year, ST Kinetics delivered the Bionix II, of the M&W business group was in line with the Bronco, Pegasus, and other weapons and munitions. higher turnover recorded, while the poorer results It also saw the sales of specialised truck bodies, of the Auto business group was mainly due to the trailers, off-road dump trucks, excavators, and road impairment in value of a quoted investment, lower construction and maintenance equipment to various interest income, weakness in US operations and commercial customers. lower margins from product mix.

In February, ST Kinetics was awarded a US$31.6m Acquisitions contract for 120mm SRAMS by a Gulf States On 10 September, ST Kinetics acquired the remaining customer. Under the export contract, ST Kinetics Annual Report 2008 13.76% stake in STAR Automotive Centre (Zhejiang) Co will supply its unsurpassed low-recoil SRAMS, with Ltd (STAR (ZJ)), making it a wholly-owned subsidiary. delivery to be completed by 2011. In the same month, The acquisition was in line with ST Kinetics’ growth the company was awarded a contract worth about plan in China’s expanding automotive repair market. $42.5m by the UK MoD for the supply of 40mm STAR (ZJ) has seen growing demand for quality after- ammunition. sales services in the provinces of Jiangsu and Zhejiang, where it is the only workshop that provides quality 2008 ended on a high note for ST Kinetics with the one-stop services for owners of premium cars such as announcements of two contracts from UK MoD - Mercedes Benz, BMW and Porsche. Using state-of-the- a £150m order for over 100 Bronco All Terrain art equipment, STAR (ZJ) has one of the largest facilities Tracked Carriers and a £35m order for 40mm in the city, and is recognised by insurance companies in ammunition. The Bronco order was a significant the Jiangsu and Zhejiang provinces. export milestone as it is the first sale of a locally designed and produced armoured vehicle and to Major Projects one of the world’s leading defence forces. UK MoD’s In August, ST Kinetics announced the $110m repeat order for more 40mm ammunition was also redevelopment of its facilities at Jalan Boon Lay and notable as it demonstrated the customer’s trust in Chin Bee Road, where it will consolidate its facilities the product’s quality and performance. These export and operations located at its Portsdown Road and Ayer contracts attest to the growing confidence and global

Rajah Crescent premises. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore recognition of ST Kinetics’ defence products.

73 Despite THE tough economic conditions DURING THE year, the marine sector secureD a steady stream of orders, $1.1b from both commercial and defence customers which will put the sector on a steady path of growth into 2009.

ST Marine’s design of the Landing Ship Tank was recognised with a $200m contract.

74 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

SUSTAINABLE GROWTH THROUGH DIVERSIFIED CAPABILITIES AND MARKETS

ST Engineering’s marine arm – comprising ST Marine in Singapore and VT Halter Marine in the US – specialises in both naval and commercial ship design, building, and repair, as well as environmental engineering services. It serves a global clientele from about 30 countries, spanning Asia, Europe, the Gulf

A rendering of the Fast Missile Craft to be built for the Egyptian Navy.

States, and the US. Despite the tough economic conditions during the year, the Marine sector secured a steady stream of orders, $1.1b from both commercial and defence customers which will put the sector on a steady path of growth into 2009.

Ship Design and Building On the naval shipbuilding front, the Marine sector achieved breakthroughs in 2008 by securing two significant naval contracts. The

first involves building three Fast Missile Craft Annual Report 2008 valued at US$393m for the Egyptian Navy under the Foreign Military Sales programme with the US Navy. This award is testimony to the growing trust the US Navy has in VT Halter Marine’s ship design and building capabilities, and has brought the total contract value awarded for this programme to US$642m, inclusive of design and long lead equipment acquisition.

ST Marine’s ship design capability was similarly recognised by an Asia Pacific navy with the second contract, worth about $200m to build a Landing Platform Dock. The contract was won despite intense competition from established European naval ship designers and builders. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

75 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

On the commercial shipbuilding front, orders were Shiprepair and Services secured to build a Diving Support Vessel, an Anchor As a result of strong market demand during the year, Handling Tug Supply Vessel, a Seismic Vessel and ST Marine’s commercial shiprepair and conversion three Platform Supply Vessels, amounting to a total business did very well. It reinforced its strong of about $269m. position in dredgers, seismic vessels, pipe/ cable layers, and support vessels for the offshore The Marine sector continued to build upon its and infrastructure markets. A term contract key customer relationships with Louis Dreyfus was secured for the maintenance of 15 tankers, Armateurs (LDA) and Crowley Maritime through while standard works for a regular ship owner deliveries of existing contracts - the first Roll-on/ client base were accomplished. New capabilities, Roll-off (RoRo) vessel and a series of Articulated with a focus on availability-based support, were Tank Barges in 2008. The sector is also poised to developed in a bid to grow the naval repair deliver on the remaining RoRo vessel, Roll-on/Roll- business. Maintenance services for the Submarine off Passenger (Ropax) ferry and the three 330,000 Support and Rescue Vessel (SSRV) were also barrel tank barges. developed as part of the 20-year agreement set out in the Republic of Singapore Navy’s (RSN) first Public Private Partnership project. Overall revenue ST Marine REINFORCED for shiprepair, conversions and services was its strong position $288m in 2008. in dredgers, seismic vessels, pipe/cable layers, and support vessels for the offshore and infrastructure markets.

76 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

Environmental Engineering & Services In 2008, the environmental engineering and services business was unveiled, with a $5m contract for waste compactor systems with Keppel Seghers. This business, nurtured under the wholly-owned subsidiary STSE Engineering Services Pte Ltd (STSE), will leverage the Marine sector’s core competencies in project management, systems integration, and plant engineering as it develops its business and solutions. An experienced core team has been assembled to lead the growth in this new business, and its initial focus is in two areas:

a. Solid waste – waste transfer logistics, sorting, separation, recycling, treatment and landfill technologies b. Resource management and consultancy

To tap into China’s burgeoning environmental engineering market, wholly-owned subsidiary ST Environmental Services & Technologies Co. Ltd was formed in July. Annual Report 2008 Top: City of Hamburg was delivered to LDA and Leif Hoegh. Above: Launching of Swift Rescue, ST Marine’s first Submarine Support and Rescue Vessel.

Singapore’s first Ropax, built by ST Marine for LDA, was keel laid in September. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

77 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

breakthroughs in the marine sector included the first TIME export of A landing platform dock to an asia pacific navy, and the building of three egyptian fast missile craft.

PERFORMANCE OF THE MARINE SECTOR PBT of the Marine sector in FY2008 of $75.2m was lower than that achieved in FY2007 by 22% or Half Yearly Performance $21.4m. The lower PBT was because of unfavourable The Marine sector’s turnover for 2H2008 at $423m performance in Shipbuilding due to lower investment increased by 6% or $24m over 1H2008 turnover of income, recognition of losses from a contract $399m and this was mainly due to different project secured in a previous year as well as higher selling mix from the US operations. & distribution expenses, from Singapore Airshow expenses and allowance for doubtful debts. The PBT for 2H2008 at $37.4m was comparable to the maturity of a fund under management in 4Q2007 $37.8m achieved in 1H2008. mainly accounted for the higher investment income.

Full Year Performance Divestment Turnover of the Marine sector in FY2008 of $822m To streamline its portfolio of associated companies, was lower than that of FY2007 by 5% or $41m. This as well as to reallocate resources to focus on its core was largely due to lower Shipbuilding turnover, but business areas, ST Marine completed the divestment partially offset by higher Shiprepair and Engineering of its entire equity stake in PT SSE-Van Der Horst turnover. The lower Shipbuilding turnover was Indonesia (PT-SSE), to SVDH Pte Ltd (SDVH) for mainly due to different project mix, while the higher $830,000 in November. Shiprepair turnover was attributable to buoyant shiprepair activities. For Engineering, the higher Major Projects turnover was contributed by the environmental In June, ST Marine signed a joint venture agreement engineering business. with James Fisher Defence Limited (JFD) to form First Response Marine Pte. Ltd. (FRM). FRM will undertake the approximately $400m contract awarded by the RSN for the provision of a ship and submarine rescue system, as well as maintenance services, announced in March 2007. ST Marine will design and construct the SSRV, while the Submarine Rescue Vehicle (SRV) will be designed and built by JFD. ST Marine launched the purpose-built SSRV in November and named the vessel Swift Rescue. In addition, ST Marine delivered OEL Dubai and OEL India – the last two of the four 1030 TEU feeder container vessels – to Shreyas World Navigation of Transworld Group and one RoRo vessel to LDA and Norway’s Leif Hoegh & Co. AS. It also delivered the RSS Supreme – the last of the five locally- built stealth frigates – to the RSN. Launching of a Fishery Survey Vessel in Pascagoula, Mississippi.

78 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

operating financial review

During the year, VT Halter Marine completed many milestone events such as the keel laying of the T-AGM 25, a Missile Range Instrumentation Ship for the US Navy. It also delivered two articulated tug barges to Crowley Maritime Corporation’s subsidiary Vessel Management Services, one 80,000 BBL barge to Poling & Cutter, a Fishery Survey Vessel for National Oceanic Atmospheric Administration, and a Platform Supply Vessel for Hornbeck.

ST Marine accomplished several significant conversion and modification projects totalling more than $100m. Rubicon Vantage was successfully converted from a FSO to a FPSO for Rubicon Offshore, Singapore. Major upgrading work was also carried out on Galaxy Driller, a drillship from Jet Drilling, and Castoro Otto, a pipelaying vessel from Saipem, Portugal. In addition, upgrading work, including the installation of a tiltable lay system, was performed on Toisa Proteus, an offshore support vessel from Acergy Shipping, Norway.

Similarly, upgrading work, including the fabrication and installation of new accommodation, and the Keel laying of Missile Instrumentation Ship T-AGM 25 at installation of a new engine, was carried out on VT Halter Marine. the Pacific Explorer, a seismic vessel from PGS, Annual Report 2008 Norway. Major steelwork renewal and tank coating work was also completed on Al Kuwait, a livestock ST Marine carrier from Livestock Transport & Trading, Kuwait. accomplished Major conversion and upgrading projects in progress several significant include the complete outfitting of Geowave Voyager, a seismic vessel from Wavefield Inseis, Norway. conversion and Work is also being carried out on the derrick pipe lay barge Java Constructor for the lengthening of the modification projects vessel, and the upgrading of its crane capacity and totalLing more than pipelay system. $100m. In the environmental engineering business, STSE was on track with her deliveries for the waste compactor systems to Keppel Seghers. The team also secured two EcoPark planning projects in the course of the year, one in Shanghai and the other in collaboration with RSP Architects. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

79 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

DYNAMICS AND RISK FACTORS OF THE BUSINESS

INDUSTRY REVIEW Such an environment, however, could present opportunities for third-party MRO service providers International businesses have been significantly like ST Aerospace, as airlines outsource more MRO affected by the current world financial crisis, causing work in an effort to reduce costs. With the deferment great instability to operations. The resulting global of delivery of new aircraft, stretched usage of existing credit crunch, coupled with high inflation, fuel prices fleets could also translate to more maintenance and materials cost for most part of the year, has services. In addition, freight operators might also negatively impacted the performances of businesses push for more Passenger-To-Freighter conversions to worldwide. replace the less fuel-efficient freighters. While all these might expand opportunities, there is also a concern ST Engineering’s well-diversified portfolio - core that cost pressures could lead to a lower MRO rate. businesses in four different sectors, and a global customer base spanning both the commercial and Raw Materials defence segments – has provided it with invaluable As with oil, the price of steel escalated in the past stability and resilience. year before abating towards yearend. With prices of raw materials stabilising, the impact on the Marine Still, its performance is subject to external factors not and Land Systems businesses had been minimal. within its control, and changes to these factors may impact the Group’s performance. Some of these key ST Engineering’s strategy to mitigate the impact risk factors are discussed below. includes locking in prices ahead of schedule and capping price offers based on a range of commodity World Economy prices, where possible. The turmoil in world financial markets, and the resulting slowdown in major economies, have caused Currency Fluctuations many countries to go into recession and lower their With substantive business operations in the US, growth forecasts. fluctuation in the USD presents the main currency concern for the Group. A weaker USD would have ST Engineering is not insulated against the recession, an unfavourable revenue and earnings impact in particular its US operational base. Should the when translating from USD to SGD. The impact economic downturn persist, ST Engineering’s would affect operations in the US, as well as sales businesses would be impacted, as would consumer denominated in USD for companies based outside consumption, market demands, infrastructure and the US. This negative impact would be partially property development, banking and aviation. cushioned by the lower cost of materials and parts imports in USD. Oil Prices Oil prices hovered around US$100 for much of The Group’s diversified business portfolio provides the year and hit an all-time high of US$147 before some room for balance and offsets. With operating abating towards yearend. While the abating of the units located in different countries, the currency oil prices has offered the aviation industry some fluctuation risk is partially mitigated. reprieve, it is now faced with the challenges of ST Engineering also hedges its forex risks to weakening demand due to the global recession. alleviate anticipated impact.

80 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

Interest Rates Emerging Markets The Fed rates was at near zero percent at the end of Africa, Central Asia and the Gulf States region 2008. However, banks have tightened credit and the continue to show great promise and opportunities cost of funds has consequently increased. for the Group as it continues its globalisation plans. Diversification into new emerging markets will help Given ST Engineering’s strong financial position, the the Group expand revenue streams, strengthen Group is well placed to explore viable acquisitions its market standing, and manage costs. Emerging and brownfield projects that might complement or markets very often serve as alternative lower cost add to its core capabilities. manufacturing or procurement bases for the Group.

Labour Supply The Group conscientiously monitors market The Group continues to harness the global talent pool conditions and will take advantage of new market for its workforce. Skilled labour remains a shortage opportunities wherever possible. globally. However, the current economic environment provides some stability for the Group, and Disasters ST Engineering continues to work with local authorities While the Group’s US operations were not affected by in markets where it operates and leverages training, Hurricane Ike, ST Engineering continues to review its retention schemes, scholarships as well as alternative disaster preparedness and business continuity plans. sources for hire to sustain its growth. The Group’s products and equipment relating to emergency services and rebuilding of infrastructure Defence Spending and are marketed to global prospects. Government Budgets Singapore’s defence budget, typically about a quarter of the total government spending budget, is RISK MANAGEMENT increased for 2009. It is expected that the Singapore government will continue to invest in defence The Group’s risk appetite and strategies are regularly solutions and systems that will give its armed forces reviewed to ensure alignment with its objectives technological superiority as it continues developing as well as to respond to the constantly changing its 3rd Generation SAF. Locally, homeland security business landscape, both locally and globally. With

remains a key focal area. ST Engineering looks a robust risk management framework, the Group Annual Report 2008 forward to continue its partnership role in seeks to minimise any negative surprises and losses national security. while at the same time enhance performance and competitiveness when faced with opportunities. In the US, the defence budget for 2009 is higher The Group will continue to build a robust risk than for 2008. The Group’s operations in both the management culture as well as strengthen its US and Singapore continue to look for partnership existing risk management practices. opportunities with the respective authorities. • Risk Management Governance As the Singapore, China, Taiwan and Gulf States The Group’s Risk Review Committee maintains governments place increasing priority on enhancing risk oversight and works with the management Information Communication Technologies (ICT) to ensure that the Group has adequately applications and infrastructure development, prioritised and addressed the risk management opportunities relating to e-government, education, issues within the Group. transport and subway systems continue to bode well for ST Electronics.

IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

81 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

• Risk Reporting Dashboard (b) Investment Risk The structured dashboard provides an overview The Group seeks to grow its businesses on three of risk profile as well as key risk indicators fronts, through organic growth of its existing and risk incidents to management and the Risk capabilities and capacities; development of new Review Committee. It enables the monitoring of capabilities; and acquisitions of business entities and key risks and appropriate mitigating actions to be operating assets or joint ventures. taken on a timely basis. Investment activities, ranging from the identification • Risk Management Infrastructure of targets to conducting due diligence, are supported Various enabling policies, methodologies, guides, by a dedicated team of investment professionals and checklists and IT applications are constantly augmented by external professionals for specialised being developed and improved in order to services. The business proposals are guided by a support the practice of risk management at both given set of internal investment criteria, evaluated Group and business unit levels. by senior management and endorsed by a Business Investment and Divestment Committee before (a) Strategic and Operational Risks seeking final Board of Directors’ approval. The Group operates in 24 countries across the globe. As part of the Group’s plan to grow its business (c) Financial Risks and Derivative Financial internationally, it will continue to focus on increasing Instrument Risk its operating activities and presence in Europe, The Group is exposed to financial risks arising from Greater China and the US. In 2008, 22% of the its operations and the use of financial instruments. Group’s assets were in the US (2003: 12%). Revenue The Group’s principal financial instruments, from customers located outside Asia increased from other than Foreign Exchange (FX) contracts 29% of the Group’s revenue in 2003 to 52% in 2008. and derivatives, comprise bankers’ guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, 22% Assets located investments, cash and short term deposits. All in US 12% financial transactions with the banks are governed by banking facilities duly accepted with Board of Revenue from 52% customers Directors’ resolutions, with banking mandates, located outside 29% which define the permitted financial instruments and Asia facilities limits, approved by the Board of Directors. 2008 2003 All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade As part of its business strategy, the Group seeks payables, which arise directly from its operations. to increase the proportion of its international business and customers, thereby achieving greater It is the Group’s policy not to engage in FX and/or geographical diversification. Likewise, the Group derivatives speculation or trading. It is not in the takes the initiative to raise the proportion of its interest of the Group to speculate or trade in treasury commercial business while maintaining strong instruments. The purpose of engaging in treasury support towards the local defence business. The transactions is solely for hedging. commercial business helps to bring commercially available technology and practices into the defence The Group’s treasury policy allows only FX spot, business, thereby allowing for more cost effective forward or non-deliverable forward, FX swap, cross systems and solutions. A more diversified base of currency swap, purchase of FX call, put or collar commercial and military customers will reduce the option, forward rate agreement, interest rate swap, risk of customer concentration. purchase of interest rate cap, floor or collar option (“Permitted Transactions”); sale of options are

82 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

expressly prohibited. These instruments are generic Group enters mainly into forward currency contracts in nature with no embedded or leverage features and to hedge against its FX risk resulting from anticipated any deviation from these instruments would require sale and purchase transactions denominated in specific approval from the Board of Directors. foreign currencies in accordance with the Group’s hedging policy. The main financial risks arising from the Group’s operations and the use of financial instruments are The Company’s centralised Treasury Unit (“Unit”) interest rate, FX, market, liquidity and credit risks. facilitates intra-group FX transactions within the The policies for managing each of these risks are Group to net-off the FX exposures before proceeding broadly summarised below: to transact the hedge with banks.

(i) Interest Rate Risk The Unit executes the Group’s material FX The Group has cash balances placed with reputable transactions. FX transactions are executed with banks, financial institutions and a related corporation. segregation of duties between authorised dealers The Group manages its interest rate risks on its and back office. Only authorised dealers can interest income by placing the cash balances in transact with the banks on behalf of the Group, varying maturities and interest rate terms with due with back office confirming the deals. The dealers’ consideration to operating cash flow requirements limits and permitted treasury instruments in the and optimising yield. form of an authorisation matrix and mandates are communicated to the banks for compliance. The Group’s debt includes bank borrowings and lease commitments. The Group seeks to minimise (iii) Market Risk its interest expense exposure through options to The Group has strategic investments in quoted equity refinance the debt instruments and/or enter into shares. The market value of these investments will interest rate swaps, where appropriate, over the fluctuate with market conditions. duration of its borrowings. (iv) Liquidity Risk (ii) Foreign Exchange Risk To manage liquidity risk, the Group monitors its net The Group’s FX risks arises both from its subsidiaries operating cash flow and maintains an adequate operating in foreign countries, generating revenue level of cash and cash equivalents and has secured and incurring cost denominated in foreign currencies, committed funding facilities from financial institutions. Annual Report 2008 and from operations of its local subsidiaries which In assessing the adequacy of these funding are transacted in foreign currencies. The Group’s FX facilities, management reviews its working capital exposures are primarily from USD and Euro, and the requirements regularly.

FOREIGN EXCHANGE

1.80 1.75

1.70 1.65 1.60 1.55 1.50 1.45 1.40 1.35 1.30 IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore J ul 07 J ul 03 J ul 06 J ul 08 J ul 04 J ul 05 Oct 07 J an 07 Oct 03 Oct 06 Apr 07 Apr Oct 08 Oct 04 Oct 05 J an 03 J an 06 Apr 03 Apr Apr 06 Apr J an 08 Apr 08 Apr J an 04 Apr 04 Apr J an 05 Apr 05 Apr J an 09

USD/SGD Source: Bloomberg 83 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

(v) Credit Risk (f) Reputation Risk Credit risk, or the risk of counterparties defaulting, is Recognising the importance of providing timely and managed through the application of credit approvals, key information to our stakeholders, the Group puts in credit limits and monitoring procedures. Where place a communications programme to ensure effective appropriate, the Company or its subsidiaries obtain communication with our stakeholders at all times. collateral from customers or arrange master netting agreements. Cash terms, advance payments and letters of credit or bank guarantees are required for SENSITIVITY ANALYSIS customers of lower credit standing. (a) Interest Rate (d) Acts of God and/or War Risk The Group’s cash and cash equivalents are largely The Group manages this risk through the invested in fixed deposits and placements with a development of business continuity plans so as to related corporation. Movements in interest rates will ensure quick recovery and resumption of critical therefore have an impact on the interest income business functions after a disruption. These plans for the Group. Likewise, movements in the effective have been communicated and the management has borrowing rate will also have an impact on the participated in simulated exercises of these plans. interest expense for the Group. The impact on the Regular reviews of these plans ensure that they Group’s annual interest income and interest expense stay relevant. Force majeure clauses are included in based on a one percentage point movement in the contracts to mitigate risk from Acts of God. effective fixed deposit rate and borrowing rate are estimated at $8m and $5m respectively. Details of (e) Legal and/or Political Risk sensitivity analysis on the interest rate movements Legal risk is, as far as commercially acceptable, can be found in Note 50 to the Financial Statements. managed through standardised contracts with terms and conditions that are pre-approved. Any deviation (b) Gross Profit Margin will be vetted and approved by the appropriate level With FY2008 turnover of $5.35b, a one percentage of management. In instances where the contract point movement in the gross profit margin of the terms and conditions are stipulated by the customer, Group will lead to a $53.5m change in gross profit deviations from our standard checklist template will for the Group. The many different programmes likewise require review and approval by the appropriate undertaken across the Group, with their level of management. The management also vigilantly accompanying variations in margin, have the effect of monitors its operating units’ business practices, reducing the Group-wide impact of specific project environmental issues, political impact on the projects margin fluctuations. and overall business in the respective countries.

INTEREST RATE (%) 6

0 J ul 07 J ul 03 J ul 06 J ul 08 J ul 04 J ul 05 Oct 07 J an 07 Oct 03 Oct 06 Apr 07 Apr Oct 08 Oct 04 Oct 05 J an 09 J an 03 J an 06 Apr 03 Apr Apr 06 Apr J an 08 Apr 08 Apr J an 04 Apr 04 Apr J an 05 Apr 05 Apr

USD SIBOR 3 mths SGD SIBOR 3 mths Source: Bloomberg 84 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

(c) Others RETURN ON EQUITY (%) Other risk factors that have an impact on turnover and net profits tend to be sector or project specific. 40 Hence, it is not practical to perform a sensitivity 30.8 30.0 analysis in such instances. 30 28.4 26.1 26.5

20 SHAREHOLDER RETURN

10 Return On Equity Compared to 2007, the Return On Equity was lower by 0.8 percentage point to 30.0% in FY2008, as a 0 result of lower profit after tax and minority interests.

Dividend, Dividend Per Share (DPS) and Earnings Per Share (EPS) DIVIDEND/EARNINGS PER SHARE (cents) The proposed dividend for FY2008 of $473.7m (including interim dividend of $89.9m paid in 18 16.95 15.82 September 2008) is lower than the FY2007 15.15 15 13.64 dividend of $505.4m. The recommended FY2008 16.88 12.39 15.11 15.80 dividend took into consideration the Group’s present 12 13.60 cash position, positive cash flow generated from 12.26 operations, and projected capital requirements. 9 Payment of the dividend is subject to the approval of 6 the shareholders of the Company at the coming AGM. The proposed 2008 dividend of $473.7m represents 3 100% of the earnings for FY2008. 0 Total Shareholder Return for DPS EPS Annual Report 2008 ST Engineering Shares ST Engineering had paid an interim ordinary dividend of 3.0 cents per share to shareholders in September TOTAL SHAREHOLDER RETURN (%) 2008 and declared a FY2008 final dividend of 12.8 cents per share. The dividend per share 40 amounts to 15.8 cents. The total FY2008 dividend, 5.2 4.9 for the sixth consecutive year, amounts to 100% of 20 22.7 21.8 the Group’s earnings. 5.1 7.7 5.2 0 To maximise shareholder value, management will -36.8 continue its policy of paying a high level of dividend to return excess cash generated from its operations, -20 provided the cash is not required for major investments in the future. These investments may -40 include potential mergers and acquisitions and the building of new facilities and capabilities to expand Capital Gain Dividend Yield the existing operations. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

85 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

ST Engineering’s share price ended the year at $2.37, The aim of the centralised Treasury Unit’s cash 37% below the share price a year ago. Over the same management and FX management strategies is to period, the STI Index retreated -49%. For 2008, maximise the returns of the Group’s cash resources and ST Engineering shares generated a total shareholder to minimise FX exposures and associated costs. The return of -31.6% for its shareholders. This consists of most common financial instruments used to manage the 5.2% of dividend yield and -36.8% of capital gain. FX exposures are spot and forward FX contracts.

Share Purchase Mandate Insurance In the coming EGM, the Company will again seek Where appropriate, the Group manages its insurance shareholders’ approval to renew the Share Purchase risks on a Group basis to leverage its position with the Mandate for the purchase of up to 10% of the number general insurance market. of ordinary shares in the capital of the Company. The share purchase can be effected either through market The Group reviews its insurable risk profile continually purchases or off market purchases. The financial and makes the necessary adjustments on risk retention impacts of various share purchase scenarios will be to optimise the coverage and cost. This is done with presented in a circular to members. advice and support from selected insurance brokers. Major group insurance policies include Industrial The purpose of the Share Purchase Mandate is to Special Risk, Liabilities and Workmen Compensation, give the Company the flexibility to undertake the share designed to protect the Group against properties risk, purchase exercise expeditiously. The Share Purchase liabilities for its products and services, and workplace Mandate provides the Company an alternate avenue accidents respectively. The aviation and marine to reward shareholders apart from the traditional businesses have specialised insurance programmes. dividend payment route. The Group adopts a proactive strategy with advice and recommendations from insurance brokers FINANCIAL REVIEW to manage the insurance risk with specific risk management programmes covering the prevention Treasury Policy and Capital Structure of fire and the adoption of behaviour based safety The centralised Treasury Unit seeks to minimise the practices, among others. Group’s financial risk, to ensure sufficient liquidity to meet day-to-day operational needs, and to invest Funding and Borrowings the cash and cash equivalents within the guidelines The Group funds its investments and operations approved by the Board of Directors. through a mixture of shareholders’ funds, advance payments from customers, and some borrowings. Cash and Foreign Exchange Management Its borrowings amounted to $881m, about 53% of its The Group adopts the strategy of centralised cash shareholders’ funds including minority interests. management, where the excess cash of its business entities are swept to the centralised Treasury Unit, Long term borrowings amounted to $295m and the which manages the investment of the funds. Similarly, balance is of a short term nature. The long term the FX requirements of the business entities are borrowings comprise mainly term loans taken by managed centrally. The business entities hedge VT Systems, which is the holding company for the their material FX exposures arising from sales and/ Group’s operations in the US and an Industrial Revenue or purchases in currencies other than the functional Bond, issued by MAE, which is a subsidiary of the currencies. Their FX requirements are matched Aerospace sector. The short term loans are mainly internally by the centralised Treasury Unit where denominated in USD and Euro at interest rates that feasible and this procedure enables the Group to commensurate with the Group’s Aaa credit rating from offset and minimise FX risk within the Group. The Moody’s. The rationale of borrowing in USD and Euro centralised Treasury Unit then hedges unmatched FX is to create a natural currency hedge position for the requirements with external counterparties. Group’s investments denominated in the currencies.

86 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

The Group’s interest cover stays at a healthy 13 Cash and Cash Equivalents times, with a gross debt-to-equity ratio of 52.6%. As at 31 December 2008, the Group’s cash and The Group is in a net cash position (see details in cash equivalents stood at $1.05b, $234m lower than Note 52 to the Financial Statements). that of FY2007. The cash and cash equivalents are managed by the centralised Treasury Unit and the majority of the funds were invested in liquid assets CASH FLOWS AND LIQUIDITY such as fixed deposits and placements with a related corporation. The cash and cash equivalents as at Operating Activities yearend is adequate to fund the committed and In 2008, the net cash generated from operating planned capital expenditure, as well as to service the activities amounted to $511m, $151m lower than Group’s borrowings. Notwithstanding the Group’s the $662m in FY2007. The lower net cash from current positive cash and cash equivalents position, operating activities in FY2008 was due to lower it has established short term financing facilities with operating profits and unfavourable working capital various financial institutions for bridging finance. movements with negative variances in trade debtors, Such liquidity facilities can be tapped into when advance payments from customers, and other the requirements arise, in particular, for financing creditors, accruals and provisions, but these were significant merger and acquisition deals. partially offset by the positive variances in stocks and work-in-progress, progress billings in excess of CASH FLOW ($m) work-in-progress and trade creditors. 800 662 Investing Activities 511 In 2008, the Group had a net cash used in investing 400 activities of $197m compared to a net cash generated from investing activities of $6m in FY2007. 6 The higher cash outflow was mainly applied towards 0 funding the acquisition of subsidiaries and acquisition (197) of additional interest in subsidiaries and lower (400) proceeds from sale of associated companies, but (543) (513) these were partially offset by higher cash inflow Annual Report 2008 from the sale and maturity of investments as well (800) as higher dividends from associated companies and joint ventures. 2008 2007

Financing Activities ACCOUNTING POLICIES The $543m net cash used in financing activities in FY2008 was higher than the $513m in FY2007 by The Group’s significant accounting policies are $30m. This was due to higher cash outflow for the presented in Notes to the Financial Statements, Note 2 payments of FY2007 final dividends and FY2008 (pg 114 to 134). The Group has applied the same interim dividend to shareholders, and lower cash accounting policies and methods of computation in inflow from the proceeds from issue of shares, but the preparation of the financial statements for the these were partially offset by higher cash inflow current reporting period compared with the from proceeds from bank loans, as well as lower audited financial statements as at 31 December 2007, cash outflow for the payment of dividends to minority except for the adoption of all the new and revised shareholders of subsidiaries. Financial Reporting Standards (FRS), that are mandatory for financial years beginning on or after 1 January 2008. The adoption of these FRS has no significant impact to the Group. IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore

87 W81250 Size: W190 x H255mm Mac 9 S.Fong 2nd Editorial

PROSPECTS FOR 2009

The global economic slowdown accelerated in the second half The Electronics sector will focus on delivering the various of 2008, following a series of shocks from the US projects in 2009. Key contracts include the Circle Line sub-prime debacle, triggered a melt down of the global project in Singapore, Taiwan and China MRT projects, a economy that necessitated extensive governmental security system project for the integrated resort at Sentosa, interventions which included Government guarantee of bank a software system project, and a managed services project. deposits, stimulus package for the economy and lowering The sector will continue to sharpen its core capabilities, focus of bank interest rates. In January 2009, the International on growing its services revenue, and tap into new market Monetary Fund slashed its prediction for global economic opportunities in e-Government, satellite communications and growth to 0.5% in 2009. The world commenced the year with interactive digital media. the continuing geo-political tensions in the Middle East and the global financial markets under stress, with many developed The Land Systems sector saw good successes in securing countries in recession and exports tumbling in the first few export military contracts in 2008, in particular the success of days of January. Oil prices have tumbled considerably from the UK Bronco project. This was the first time ST Kinetics had its record high in July 2008. This down trend in oil prices succeeded in exporting military vehicles. The milestone win for is positive to the global economy, particularly the aviation the UK Bronco is significant in positioning the Land Systems industry. Despite the weakening real economy in the second sector in the defence market place. This further augments its half of 2008, the Group continued to secure contracts and reputation and credibility as a key defence industry player and ended 2008 with an all time high order book of $10.6b. This will increase the opportunities in defence exports. In 2009, it reflects its resilience as a result of the continuing efforts will continue to develop and pursue new market opportunities in diversification of its businesses geographically and the for defence business, building on its success in markets diversity of its customer base of both government business like UK and the Gulf States. During the year, the sector will and commercial companies besides adding capacities and deliver the UK Bronco (Warthog) and other vehicles, Pegasus, new capabilities as part of the growth strategy. With recession SRAMS, munitions, weapons and specialty vehicles. In the light hitting many economies and turmoil in the global financial of market uncertainty for the commercial specialty vehicles markets, a strong order book affords the Group the operating business in the US and China, the sector will continue to right- leverage to weather an uncertain 2009. However, a drastic size its specialty vehicles operations, diversify into new markets deterioration in our operating environment would affect our and product segments. performance. Barring this, and unforeseen circumstances, the Group expects to achieve a higher turnover and comparable The Marine sector continued to win many commercial and PBT for FY2009 vis-à-vis FY2008. military newbuilding contracts in 2008 including export order for a multi-role vessel derived from the design of the Landing In the Aerospace sector, the lower fuel prices come as a Ship Tank for the first time. The strong order book will keep the reprieve to many of the airlines which could be on the verge yards in Singapore and the US well utilised in 2009. The sector of bankruptcies. Notwithstanding the lower fuel prices, keen will continue to pursue business opportunities in the naval and competition from Low Cost Carriers will continue to exert government industries and concurrently focus on delivering its pressure on the cost structure of the traditional airlines commitments to the customers. For shiprepair in Singapore which could lose market share as passengers become more yards, we expect a more subdued shiprepair market in 2009 cost conscious. We expect the cost pressure in traditional following the softening of the shipping market globally. airlines to continue to drive the MRO outsourcing trend in their quest to improve operating cost efficiency. The sector Difficult times invariably bring challenges, but also present will continue to focus on airframe heavy maintenance the Group with opportunities. The Group will intensify its and modification work, implementing the various PTF efforts in search of suitable acquisition opportunities and seek conversion and military contracts, setting up an engine collaborations with partners and OEM suppliers to position the facility in Xiamen, China to expand its MRO capacity in Group for the recovery and upturn in the global economy. At CFM56 engines, developing GEnx On-Wing Support services the same time, the Group will work closely with customers to utilising GE material and GE-approved repair processes for address their changing needs in order to stay relevant under customers all over the world from its facilities in Singapore current economic climate. The Group will also focus on cost and the US for the Boeing 787 aircraft, and continuing to cutting measures while improving on its operational efficiencies extend our Total Aviation Support offering to airlines. The to help ride this downturn. capabilities build up as reflected in the higher depreciation quantum is an ongoing process to develop the foundation for growth for the Aerospace sector. 88 105 104 90 260 258 249 248 243 227 225 114 111 109 107 106

Independent Auditors’ Report Statement by Directors Directors’ Report Notice ofAnnual General Meeting Shareholding Statistics Corporate Directory Corporate Information Group Structure Sectoral FinancialReview SGX ListingManualRequirements Notes to the FinancialStatements Consolidated StatementofCashFlows Statements ofChangesinEquity Balance Sheets Consolidated Income Statement FINANCIAL STATEMENTSFINANCIAL 89 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (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 2008.

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

Peter Seah Lim Huat (Chairman) Tan Pheng Hock (President and Chief Executive Officer) Koh Beng Seng LG Desmond Kuek Bak Chye Dr Tan Kim Siew Quek Tong Boon (Appointed on 1 March 2008) Winston Tan Tien Hin Dr Philip Nalliah Pillai Quek Poh Huat Venkatachalam Krishnakumar Davinder Singh s/o Amar Singh COL Chia Choon Hoong (Alternate Director to LG Desmond Kuek Bak Chye)

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

Directors’ interests in shares or debentures Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning (or date of appointment, if later) or at the end of the financial year or between the end of the financial year and on 21 January 2009.

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

Holdings in the name of the director, spouse or infant children 1 January 2008 or date of appointment if later 31 December 2008

The Company Ordinary Shares Peter Seah Lim Huat 307,500 307,500 Tan Pheng Hock 578,364 868,689 Winston Tan Tien Hin 420,000 *1 476,500 *1 Dr Philip Nalliah Pillai 137,000 166,000 Quek Poh Huat 841,228 874,228 COL Chia Choon Hoong 7,000 7,000

90 Koh BengSeng Tan PhengHock Peter SeahLimHuat Ordinary Shares Chartered Semiconductor Manufacturing Ltd R Winston Tan TienHin Tan PhengHock Peter SeahLimHuat Ordinary Shares Singapore T Quek Poh Huat Ordinary Shares Singapore Computer SystemsLimited COL ChiaChoonHoong Venkatachalam Krishnakumar Ordinary Shares Singapore AirlinesLimited COL ChiaChoonHoong Ordinary Shares Neptune OrientLinesimited Quek Tong Boon Unit holdings inMapletree LogisticsTrust Mapletree Logistics T Peter SeahLimHuat Common Stock ofUS$0.01 each Global Crossing Limited Directors’ interests inshares or debentures (continued) (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 Dr Pillai PhilipNalliah Quek Poh Huat COL Chia Choon Hoong Davinder Singhs/o Amar Singh Koh BengSeng Winston Tan TienHin Quek Tong Boon Dr Tan KimSiew LG DesmondKuek Bak Chye elated Corporations elecommunications Limited rust ManagementLtd 1 January 2008 or date Holdings in the nameof the director, spouseor of appointment iflater 200,000 * 104,980 * 44,074 47,320 15,000 2,000 2,000 4,000 2,850 7,000 2,230 2,030 3,040 3,350 5,210 4,610 1,520 1,870 3,170 7,771 – infant children 2 3 31 December 2008 377,000 * 44,074 47,320 12,850 13,532 2,000 2,000 4,000 7,000 2,230 2,030 3,040 3,350 4,980 6,730 5,210 4,610 1,520 1,870 3,170 – 2 91 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued) Holdings in the name of the director, spouse or infant children 1 January 2008 or date of appointment if later 31 December 2008

SMRT Corporation Ltd Ordinary Shares

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

SP AusNet Stapled Securities

Quek Poh Huat 206,000 206,000

SNP Corporation Ltd Ordinary Shares

Winston Tan Tien Hin 54,494 *4 N.A. #

StarHub Ltd Ordinary Shares

Peter Seah Lim Huat 147,560 447,560 Tan Pheng Hock 25,150 25,150 Venkatachalam Krishnakumar 15,716 15,716

STATS ChipPAC Ltd. Ordinary Shares

Peter Seah Lim Huat – 6,900 Koh Beng Seng 45,000 45,000 Venkatachalam Krishnakumar 1,000 1,000

TeleChoice International Limited Ordinary Shares

Peter Seah Lim Huat 50,000 50,000 Tan Pheng Hock 30,000 30,000

Vertex Investment (II) Ltd Ordinary Shares

Davinder Singh s/o Amar Singh 50 50

Vertex Technology Fund Ltd Ordinary Shares

Winston Tan Tien Hin 10 10

92 Tan PhengHock Koh BengSeng Koh BengSeng Redeemable Preference Shares Davinder Singhs/o Amar Singh Winston Tan TienHin Davinder Singhs/o Amar Singh Winston Tan TienHin Tan PhengHock Ordinary Shares Vertex T Directors’ interests inshares or debentures (continued) (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 Peter SeahLimHuat Options toSubscribeforOrdinaryShares The Company echnology Fund (II)Ltd date ofappointment 1 January 2008 or 400,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 225,000 227,500 175,000 175,000 22,250 22,250 44,500 44,500 if later 33,375 33,375 5,000 11,125 11,125 31 December 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 225,000 300,000 227,500 175,000 175,000 22,250 22,250 44,500 44,500 2008 33,375 33,375 5,000 11,125 11,125 1 January 2008 or date Holdings in the nameof the director, spouseor of appointment iflater Exercise price 2.00 2.09 2.09 2.26 2.84 2.84 2.68 2.29 2.72 2.57 2.57 3.23 3.23 2.37 2.37 3.01 3.01 1.86 2.12 2.12 3.61 1.92 1.79 $ 500 500 20 15 15 19 5 20.2.2002 10.2.2002 10.2.2005 10.2.2005 12.8.2004 10.2.2007 10.2.2007 16.3.2008 16.3.2008 13.8.2003 11.8.2002 11.8.2008 11.8.2005 11.8.2005 11.8.2006 11.8.2006 infant children 11.8.2007 11.8.2007 8.2.2006 8.2.2006 8.2.2003 11.8.2001 † 7.2.2004 Exercisable period 31 December 2008 to to to to to to to to to to to to to to to to to to to to to to to 10.8.2009 10.8.2009 10.8.2010 10.8.2012 10.8.2014 12.8.2012 10.8.2016 10.8.2015 15.3.2012 15.3.2017 10.8.2011 10.8.2011 11.8.2013 9.2.2009 19.2.2011 6.2.2013 9.2.2010 7.2.2010 9.2.2014 7.2.2012 9.2.2016 7.2.2015 9.2.2011 500 500 20 15 15 19 – 93 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

1 January 2008 or 31 December Exercise date of appointment 2008 price Exercisable period if later $

The Company Options to Subscribe for Ordinary Shares

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

Winston Tan Tien Hin 56,500 – 1.79 7.2.2004 to 6.2.2008 46,500 – 1.86 12.8.2004 to 11.8.2008 48,500 48,500 2.09 10.2.2005 to 9.2.2009 37,000 37,000 2.37 8.2.2006 to 7.2.2010 37,000 37,000 2.57 11.8.2006 to 10.8.2010 37,000 37,000 3.01 10.2.2007 to 9.2.2011 37,000 37,000 2.84 11.8.2007 to 10.8.2011 37,000 37,000 3.23 16.3.2008 to 15.3.2012 37,000 37,000 3.61 11.8.2008 to 10.8.2012

Dr Philip Nalliah Pillai 31,000 – 1.79 7.2.2004 to 6.2.2008 29,000 – 1.86 12.8.2004 to 11.8.2008 31,000 31,000 2.09 10.2.2005 to 9.2.2009 31,000 31,000 2.12 11.8.2005 to 10.8.2009 31,000 31,000 2.37 8.2.2006 to 7.2.2010 31,000 31,000 2.57 11.8.2006 to 10.8.2010 33,000 33,000 3.01 10.2.2007 to 9.2.2011 33,000 33,000 2.84 11.8.2007 to 10.8.2011 33,000 33,000 3.23 16.3.2008 to 15.3.2012 33,000 33,000 3.61 11.8.2008 to 10.8.2012

Quek Poh Huat 33,000 – 1.86 12.8.2004 to 11.8.2008 33,000 33,000 2.09 10.2.2005 to 9.2.2009 33,000 33,000 2.12 11.8.2005 to 10.8.2009 33,000 33,000 2.37 8.2.2006 to 7.2.2010 33,000 33,000 2.57 11.8.2006 to 10.8.2010 33,000 33,000 3.01 10.2.2007 to 9.2.2011 33,000 33,000 2.84 11.8.2007 to 10.8.2011 33,000 33,000 3.23 16.3.2008 to 15.3.2012 33,000 33,000 3.61 11.8.2008 to 10.8.2012

94 Peter SeahLimHuat Options toPurchase Common SharesofUS$0.01 each Global Crossing Limited ST Peter SeahLimHuat Options toSubscribeforOrdinaryShares StarHub Ltd Peter SeahLimHuat Options toSubscribeforOrdinaryShares Chartered Semiconductor Manufacturing Ltd R Koh BengSeng Peter SeahLimHuat Options toSubscribeforOrdinaryShares Directors’ interests inshares or debentures (continued) (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 Venkatachalam Krishnakumar Options toSubscribeforOrdinaryShares The Company elated Corporations A TS ChipPA C Ltd. date ofappointment 1 January 2008 or 40,000 40,000 50,000 25,000 45,000 85,000 85,000 95,000 25,500 25,500 25,500 25,500 35,000 25,250 25,250 70,000 47,500 if later 8,500 6,250 31 December 40,000 25,000 85,000 85,000 95,000 25,500 25,500 25,500 25,500 35,000 25,250 25,250 70,000 2008 47,500 8,500 6,250 – – – Exercise 0.985 price 10.16 2.84 0.72 2.57 3.23 2.37 3.01 1.07 1.52 1.70 3.61 1.99 1.99 1.21 1.91 1.91 1.10 1.16 $ 28.2.2004 26.8.2006 25.8.2007 27.11.2005 27.2.2005 29.8.2004 10.2.2007 31.8.2008 17.2.2005 17.2.2005 31.5.2006 16.3.2008 11.8.2008 11.8.2006 12.1.2005 11.8.2007 6.8.2004 6.8.2004 8.2.2006 Exercisable period to to to to to to to to to to to to to to to to to to to 26.11.2009 28.2.2008 27.2.2009 29.8.2008 16.2.2009 26.8.2010 30.5.2010 16.2.2014 10.8.2010 25.8.2011 10.8.2012 31.8.2012 15.3.2012 5.8.2008 10.8.2011 12.1.2014 5.8.2013 7.2.2010 9.2.2011 95 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued)

1 January 2008 or date of appointment 31 December if later 2008 Vesting period

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

Peter Seah Lim Huat 4,125 2,250 8.3.2005 to 8.3.2009 2,420 – 12.6.2008 – 4,176 24.6.2009

Holdings in the name of the director, spouse or infant children 1 January 2008 or date of appointment if later 31 December 2008

The Company Conditional Award of 250,000 Performance Shares to be delivered after 2007

Tan Pheng Hock 0 to 375,000 #1 –

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

Tan Pheng Hock 0 to 375,000 #2 0 to 375,000 #2

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

Tan Pheng Hock 0 to 300,000 #3 0 to 300,000 #3

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

Tan Pheng Hock – 0 to 375,000 #4

Conditional Award of 30,500 Restricted Shares to be delivered after 2008

Peter Seah Lim Huat – 0 to 45,750 #5

Conditional Award of 15,500 Restricted Shares to be delivered after 2008

Koh Beng Seng – 0 to 23,250 #5

Conditional Award of 22,000 Restricted Shares to be delivered after 2008

Winston Tan Tien Hin – 0 to 33,000 #5

Conditional Award of 21,000 Restricted Shares to be delivered after 2008

Dr Philip Nalliah Pillai – 0 to 31,500 #5

96 Tan PhengHock Shares tobedelivered after2008 Conditional Award of45,000 Restricted Davinder Singhs/o Amar Singh Shares tobedelivered after2008 Conditional Award of14,500 Restricted Venkatachalam Krishnakumar Directors’ interests inshares or debentures (continued) (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 ST Peter SeahLimHuat to bedelivered after2009 Conditional Award ofRestrictedShareUnits Peter SeahLimHuat to bedelivered after2008 Conditional Award ofRestrictedShareUnits Chartered Semiconductor Manufacturing Ltd R Tan PhengHock Shares tobedelivered after2009 Conditional Award of96,000 Restricted Peter SeahLimHuat to bedelivered after2008 Conditional Award ofRestrictedShareUnits Quek Poh Huat Shares tobedelivered after2008 Conditional Award of18,500 Restricted The Company elated Corporations A TS ChipPA C Ltd. 1 January 2008 or date Holdings in the nameof the director, spouseor of appointment iflater 0 to 67,500 20,700 20,190 – – – – – infant children #8 #8 #6 31 December 2008 0 to 144,000 0 to 67,500 0 to 27,750 0 to 27,750 0 to 21,750 13,800 13,460 35,110 #8 #8 #8 #5 #5 #5 #6 #7 97 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Directors’ interests in shares or debentures (continued) Holdings in the name of the director, spouse or infant children 1 January 2008 or date of appointment if later 31 December 2008

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

Peter Seah Lim Huat 17,200 #9 17,200 #9

Conditional Award of Restricted Shares to be delivered after 2009

Peter Seah Lim Huat – 19,000 #10

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

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

*3 Includes deemed interest in 100,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

*4 Includes deemed interest in 366 shares in SNP Corporation Ltd, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

# SNP Corporation Ltd ceased to be a related corporation of Temasek Holdings (Private) Limited during the financial year.

† Held in trust by a trustee company on behalf of a director.

#1 The actual number of shares to be delivered will depend on the achievement of set targets over a three-year period from 2005 to 2007. Achievement of targets below 30% target level will mean no performance shares will be delivered, while achievement up to 150% will mean up to 1.5 times the number of performance shares can be delivered. For this period, Mr Tan Pheng Hock was awarded 120,325 new shares on 17 March 2008 upon partial achievement of targets set. The balance of the conditional award covering the period from 2005 to 2007 has thus lapsed.

#2 A minimum threshold performance over a three-year period from 2006 to 2008 is required for any performance shares to be released and the actual number of performance shares to be released is capped at 150% of the conditional award.

#3 A minimum threshold performance over a three-year period from 2007 to 2009 is required for any performance shares to be released and the actual number of performance shares to be released is capped at 150% of the conditional award.

#4 A minimum threshold performance over a three-year period from 2008 to 2010 is required for any performance shares to be released and the actual number of performance shares to be released is capped at 150% of the conditional award.

#5 A minimum threshold performance over the period from 1 January 2008 to 31 December 2008 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.

#6 A minimum threshold performance over a two-year period from 2007 to 2008 is required for any restricted shares to be released. A specified number of restricted shares to be released will depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.

#7 A minimum threshold performance over a two-year period from 2008 to 2009 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.

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

98 to afirmofwhichdirector isamember asshown in the financialstatements. director is a member, or with a company in which the director has a substantial financial interest, except for professional fees paid contractwhich the bySharea byrelatedof Plans) reasoncorporationof madeCompanyorafirm director thea with the orwith Engineering ST the to pursuant granted options share and corporations related from received emoluments any or statements, or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial directorpreviousno receivedyear,of the has financial end benefit receive (otherorSince becomethe a entitled to benefit than a Directors’ interests incontra Company increased to 525,000 and197,000 respectively. Between the end of the financial year and 21 January 2009, Mr Winston Tan Tien Hin’s and Dr Philip Nalliah Pillai’s interests in the #10 #9 Directors’ interests inshares or debentures (continued) (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 person to take upunissued shares 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 Company. the of capital share issued the of 15% exceed not did Plans Share the to pursuant issued shares new of numberaggregate The the Share Plans. associates of the Company and no employees or have Company receivedthe 5% of shareholdersorcontrolling moreto grantedof been the have total awardsoptions conditionaland conditional and awards options available no under 2008, December 31 at As Singapore Technologies EngineeringExecutives’ Share OptionScheme(“ESOS”), the predecessor to the ESOP, was terminated. Followingapproval of Sharenew the byPlans shareholders at Extraordinarythe General 23on held Meeting November 2000, the The Committee members are Mr Peter SeahLimHuat(Chairman),Mr Venkatachalam Krishnakumar andDr Pillai. PhilipNalliah the and (“PSP”) Plan Singapore Technologies Share EngineeringRestricted StockPlan(“RSP”) (collectively Performance “Share Plans”). Engineering Technologies Singapore the (“ESOP”), Plan Technologies Option Singapore Share the Engineering administering for responsible is (“ERCC”) Committee Compensation and Resource Executive The Share pl

will bedelivered inphasesaccordingtothestipulatedvestingperiods. Shares exceeded. or targetsmet stretchedperformance are the if delivered be awardwill the of subject the are that 1.5shares to of numberup the times over a two-year period from 1 January 2007 to 31 December 2008. No shares will be delivered if the threshold performance targets are not achieved, while The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the company will bedelivered inphasesaccordingtothestipulatedvestingperiods. Shares exceeded. or targetsmet stretchedperformance are the if delivered be awardwill the of subject the are that 1.5shares to of numberup the times over a two-year period from 1 January 2008 to 31 December 2009. No shares will be delivered if the threshold performance targets are not achieved, whileThe actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the company ans cts 99 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Share plans (continued) (a) esos/ESOP (i) The options granted under the ESOS/ESOP are as follows:

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

Director of the Company ESOS Tan Pheng Hock – 1,699,864 1,394,864 305,000 ESOP Peter Seah Lim Huat – 530,000 307,500 222,500 Tan Pheng Hock – 2,602,500 – 2,602,500 Koh Beng Seng – 204,000 – 204,000 Winston Tan Tien Hin – 593,500 323,000 270,500 Dr Philip Nalliah Pillai – 453,000 197,000 256,000 Quek Poh Huat – 375,000 111,000 264,000 Venkatachalam Krishnakumar – 152,500 – 152,500

Non-Executive Directors of subsidiaries (including former directors) – 3,294,566 2,221,648 1,072,918

Group Executives (excluding Tan Pheng Hock) – 193,717,858 86,636,505 107,081,353

Parent Group Executives and others – 187,320 107,890 79,430

(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, 14,075,736 ordinary shares in the Company were issued pursuant to the exercise of options to take up unissued shares of the Company.

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

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

100 (b) Share pl (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 rsP (c) (excluding T Group Executives @2 @1 Name ofparticipant The awards granted under the PSP are asfollows: the MSCIAsiaPacificex JapanIndustrialIndex. With effect from financial year 2007, the performance measures are Wealth Added and ST Engineering Group TSR against Engineering Group TSR against the MSCIAsiaPacificex JapanIndustrialIndex, EVA SpreadST andEPS Growth.are 2006 and 2005 years financial for grant PSP in used measures performance The objectives. corporate Group Engineering ST on based set are period performancethree-year a overmeasured targets stretched medium-term The P a three-year vesting periodat33 actual the performance, on the Depending total year.release of one awards will to range as limited from zerois same to period a maximum performancecapped the at the 150% staff, areof the managerial conditional used award,and overexecutives key Margin, for EBITDAthose and Spread EVA Group Engineering ST ST namely, measures, of performance sector) the public the from those (excluding directors Engineering, ST Aerospace, non-executive ST Electronics, ST Kinetics and ST to Marine for the first granted time in replacement of year,ESOP. were Although the During awards directors. share non-executive to conditional ESOP under options of grant the discontinue to decided has ERCC The Group EVA Spread andEBITDA Margin. Engineering STare forperiod two-yearperformancethe used measuresperformance The Engineering corporateGroupobjectives. ST on based set are period performance two-year a over measured targets stretched medium-term The of number restricted sharesmaximum to bedelivered iscapped at150%of the the conditional award. while released be to share restricted any forrequired is performance threshold minimum A of 50%,25%andconsecutively. releasedrecipientoverand the to performanceperiod three-yeara qualifying ratio the of in end period vesting the at byERCCdetermined the be will overThis targets respective set performanceachievementthe period. of the on depend restrictedsharesdelivered of numberwill actual The currentlytwo-year a period, performanceperiod. be prescribed to Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance Engineering Group and to better alignstaff’s incentive schemewithshareholders’ interest. superior performance in ST Engineering Group. It also aims to foster a share ownership culture among staff within the ST The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and Tan PhengHock Director of the Company

SP (continued) ans (continued) A totalof1,786,494 awards havebeen released. A totalof228,825 awards havebeen released. an PhengHock) awards granted financial year under review 0 to 2,073,000 Conditional % per year. during the 0 to 375,000 Awards released financial year under review during the 120,325 856,714 of P commencement 0 to 24,355,500 financial year granted since 0 to 3,345,000 conditional Aggregate SP to endof awards awards released/ of P commencement financial year lapsed since Aggregate 17,356,500 SP to endof 2,295,000 @2 @1 outstanding asat end offinancial 0 to 6,999,000 0 to 1,050,000 Aggregate awards year 101 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

Share plans (continued) (c) rsP (continued) The awards granted under the RSP are as follows:

Aggregate Aggregate conditional awards Conditional Awards awards released/ Aggregate awards granted released granted since lapsed since awards during the during the commencement commencement outstanding financial year financial year of RSP to end of of RSP to end of as at end of Name of participant under review under review financial year financial year financial year

Director of the Company Peter Seah Lim Huat 0 to 45,750 – 0 to 45,750 – 0 to 45,750 Tan Pheng Hock 0 to 144,000 – 0 to 211,500 – 0 to 211,500 Koh Beng Seng 0 to 23,250 – 0 to 23,250 – 0 to 23,250 Winston Tan Tien Hin 0 to 33,000 – 0 to 33,000 – 0 to 33,000 Dr Philip Nalliah Pillai 0 to 31,500 – 0 to 31,500 – 0 to 31,500 Quek Poh Huat 0 to 27,750 – 0 to 27,750 – 0 to 27,750 Venkatachalam Krishnakumar 0 to 27,750 – 0 to 27,750 – 0 to 27,750 Davinder Singh s/o Amar Singh 0 to 21,750 – 0 to 21,750 – 0 to 21,750

Non-Executive Directors of subsidiaries 0 to 101,250 – 0 to 101,250 – 0 to 101,250

Group Executives (excluding Tan Pheng Hock) 0 to 11,260,775 – 0 to 12,538,775 484,625 0 to 12,054,150

102 re-appointment asauditors at the forthcoming Annual General Meetingof the Company. fornominated YoungLLP,be & Ernst auditors, the Directorsthat of Board the recommendedto has Committee Audit The interested person transactions and,with forthe assistanceapproval of the internalauditors, reviewed seek interested personnecessary, transactions.where and report and identify to Company the and Group the by up set procedures the reviewed transactions, person interested of disclosure and approvalfor requirements the reviewed has Committee Audit the addition, In Company for adoption. the directorsof the to submission their to priorCommittee Audit byreviewedthe were Company the of statements financial the Groupand the of statements financial consolidatedreviewedbygivenCompany’s assistanceThe the officers the auditors. the to auditors,and resultsthe arising therefrom,including theirevaluation of controls.systeminternal the of AuditThe Committee also The Audit Committee met during the year to review the scope of the internal audit functions and the scope of work of the statutory 50. Chapter Act, Companies Singapore the of 201B(5) accordanceSection in with functions its out carriedCommittee Audit The Venkatachalam Krishnakumar Dr Pillai PhilipNalliah Koh BengSeng(Chairman) The members of the Audit Committee at the dateof this report are asfollows: Committee.CommitteeAuditof the comprisesThe Chairman also non-executivethe threeis independent directors,whom of one Audit C (Currency stated) -Singaporedollars unlessotherwise as at31December 2008 Director Peter SeahLimHuat On behalfof the Board ofDirectors Ernst &Young LLP have expressed their willingness to accept re-appointment asauditors of the Company. Auditors 17 February 2009 Singapore

ommittee Tan PhengHock Director 103 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 We, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion of the Directors:

(a) the financial statements set out on pages 106 to 224 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2008, and changes in equity of the Company and of the Group, the results of the business and cash flows of the Group for the year ended on that date; and

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

On behalf of the Board of Directors

Peter Seah Lim Huat Tan Pheng Hock Director Director

Singapore 17 February 2009

104 We believe that the auditevidence we have obtainedissufficient andappropriate to provide abasisfor our auditopinion. estimates madeby management,aswellevaluating the overall presentation of the financialstatements. accountingreasonablenessof the and used accountingpolicies appropriatenessof the evaluating includes also internal audit entity’sAn control. the of effectiveness the on opinion an expressing of purpose the for not but circumstances, the in appropriate are proceduresthat audit design orderto in statements financial the of presentationfair preparationand entity’s the to relevant controlconsidersauditorinternal assessments, the risk those frauderror.making orto In due whether statements, financial the of misstatement material of risks the of assessment the including judgement, auditor’s the on depend selected procedures The statements. financial the in disclosures and amounts the about evidence audit proceduresperforminginvolvesobtain audit to An the audit to obtainreasonable assurance whether the financialstatementsare free ofmaterialmisstatement. StandardsSingaporeThose requirewith Standards Auditing. on requirementscomplyperformwe ethical and that with plan and Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance Auditors’ resp the in reasonable are that estimates accounting making circumstances. and policies; accounting appropriate applying of accountability and maintain selecting to and assets; sheet balance and statement income fair and true of preparation the permit to necessary as are safeguarded assets against loss that fromassurance unauthorised reasonableuse or a disposition; and provide transactions to are sufficient properlycontrols accountingauthorised and internal that they of are recordedsystem a maintaining and devising of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions Mana other explanatory notes. and policies accounting significant of summary a and ended, then year forthe Group the of statement flow cash and statement income the and Company, the and Group the of equity in changes of statements 2008,the December 31 at as GroupCompany the and the of sheets balance the comprise which 224, to its 106 pages and on out “Company”) set “Group”) (the the (collectively Ltd companies subsidiary Engineering Technologies Singapore of statements financial accompanying the audited have We to the Members ofSingapore Technologies EngineeringLtd (b) (a) In our opinion, Opinion 17 February 2009 Singapore Public Accountants andCertifiedPublic Accountants Ernst &Young LLP gement’s resp h acutn ad te rcrs eurd y h At o e et y h Cmay n b toe usday companies subsidiary those by and Company the by kept be to incorporated inSingapore Act ofwhichwe are the auditors have been properly kept inaccordance the with the provisions by of the Act. required records other and accounting the on that date; and Groupyearforended the of financial flows the cash resultsand Company,the the of Groupand the of equity in changes and 2008 December 31 at as Company the of and Group the affairsof of state the of fairview and true a give to as so the of equity in changes of statement and Company sheet are properly balance drawn the up in accordance and with Groupthe provisions of the the Act of and Singapore Financial statements Reporting Standards financial consolidated the onsibility onsibility forthe onsibility inancil st a tements

105 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 for the year ended 31 December 2008 (Currency - Singapore dollars)

Group Note 2008 2007 $’000 $’000

Turnover 3 5,344,515 5,050,982 Cost of sales (4,188,323) (3,922,708) Gross profit 1,156,192 1,128,274

Other operating income 4 26,973 88,392 Distribution and selling expenses (189,893) (146,081) Administrative expenses (381,413) (362,851) Other operating expenses (75,866) (69,019) Profit from operations before taxation, other income and financial expenses 5 535,993 638,715 Other income, net 8 8,459 3,109 Financial expenses 9 (42,687) (50,356) 501,765 591,468 Share of results of associated companies and joint ventures 38,937 46,647 Profit from operations before taxation 540,702 638,115 Taxation 10 (51,939) (114,606) Profit from operations after taxation 488,763 523,509

Attributable to: Shareholders of the Company 473,636 503,503 Minority interests 15,127 20,006 488,763 523,509

Earnings per share (cents) 11 Basic 15.82 16.95 Diluted 15.74 16.91

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

106 (Currency -Singaporedollars) as at31December 2008 ASSETS CURRENT NET Bank overdrafts Provision for taxation Progress inexcess billings ofwork-in-progress Provisions Short-term bankloans Creditors andaccruals Advance paymentsfrom customers, current Current liabilities A ND LIABILITIESEQUITY TOT Other loans,current Long-term bankloans,current Lease obligations,current Bank balancesandother liquidfunds Amounts under fundmanagement Short-term investments Finance leasereceivables, current Long-term receivables, current Advances andother debtors Due from related corporations Trade debtors Stocks andwork-in-progress Current assets Deferred tax assets Derivative financialinstruments Finance leasereceivables Long-term receivables Investment properties Intangible assets Investments Associated companies andjoint ventures Subsidiaries Property, plantandequipment Non-current assets ASSETS AL SSETS Note 30 22 32 25 20 38 26 33 23 24 27 37 21 21 31 18 19 12 14 51 16 18 15 19 13 17 3,838,986 3,321,738 2,153,785 5,992,771 1,286,331 1,019,084 1,108,229 1,406,169 234,078 379,086 263,078 490,014 322,773 641,090 475,746 818,925 517,248 177,647 185,415 261,989 138,128 $’000 2008 53,416 16,374 11,057 17,371 4,793 1,726 580 700 240 451 19 – – Group 6,050,273 3,752,295 3,946,955 (Restated) 1,229,240 1,524,838 1,014,623 2,103,318 606,526 642,436 625,837 948,507 267,506 574,595 368,757 194,660 201,324 662,913 293,918 281,783 $’000 191,760 2007 178,781 112,718 39,377 18,379 6,922 3,898 2,937 1,444 1,675 803 234 499 338 – 1,286,288 622,687 574,453 340,196 575,519 710,769 231,195 139,198 $’000 25,300 88,082 56,855 2008 5,927 1,016 180 50 – – – – – – – – – – – – – – – – – – – Company 1,259,342 558,852 302,638 700,490 644,397 557,959 313,088 $’000 2007 56,093 84,764 51,125 4,968 843 50 – – – – – – – – – – – – – – – – – – – – – 107 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 as at 31 December 2008 (Currency - Singapore dollars)

Group Company Note 2008 2007 2008 2007 $’000 $’000 $’000 $’000 (Restated)

Non-current liabilities Advance payments from customers, non-current 601,626 455,576 – – Deferred income 35 11,496 7,079 – – Deferred tax liabilities 36 62,602 45,818 201 372 Lease obligations, non-current 33 5,419 7,159 – – Long-term bank loans, non-current 37 287,642 583 – – Other loans, non-current 38 1,607 2,070 – – Derivative financial instruments 51 23,525 – – – Due to a subsidiary 39 – – 54,000 54,000 993,917 518,285 54,201 54,372

TOTAL LIABILITIES 4,315,655 4,270,580 142,283 110,465 NET ASSETS 1,677,116 1,779,693 1,144,005 1,148,877

Share capital and reserves Share capital 40 586,614 554,888 586,614 554,888 Capital reserves 41 116,323 115,948 – – Other reserves 42 (16,216) 5,419 46,779 28,246 Retained earnings 43 893,719 956,255 510,612 565,743 1,580,440 1,632,510 1,144,005 1,148,877 Minority interests 96,676 147,183 – – 1,677,116 1,779,693 1,144,005 1,148,877

TOTAL EQUITY AND LIABILITIES 5,992,771 6,050,273 1,286,288 1,259,342

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

108 (Currency -Singaporedollars) for the year ended31December 2008 At 1.1.2007 The Group financialassets Net fair value changesonavailable-for-sale Net fair value changesoncashflow hedges Foreign currency translation differences Net income recognised directly inequity Net profit for the year Total recognised netincome for the year Issue ofshares Acquisition ofasubsidiary, aspreviously reported Finalisation ofpurchase priceallocation Acquisition ofasubsidiary, asrestated Acquisition ofadditional interest inasubsidiary Capital contribution Cost ofshare-based payment Dilution ofinterest inasubsidiary Disposal ofasubsidiary Dividends (Note44) to statutory reserve Transfer from unappropriated profit At 31.12.2007 554,888 474,926 capital $’000 Share 79,962 – – – – – – – – – – – – – – – – reserves 115,948 115,948 Capital $’000 – – – – – – – – – – – – – – – – – reserves (24,445) (24,445) $’000 13,842 Other (21,113) 15,949 (4,978) 1,646 5,419 (321) 394 – – – – – – – – – (508,220) 960,654 503,503 503,503 956,255 R earnings $’000 etained (394) 712 – – – – – – – – – – – – 1,565,370 (508,220) 1,632,510 503,503 479,058 (24,445) $’000 79,962 (21,113) 15,949 (4,978) T 1,646 otal 391 – – – – – – – (R interests Minority 121,903 147,183 26,030 (21,787) $’000 estated) 19,220 19,451 2,078 6,579 6,579 1,595 (313) 483 136 (84) – – – – – 1,687,273 (R (530,007) 1,779,693 505,088 522,954 (14,534) (17,866) equity $’000 estated) 16,085 79,962 19,220 (4,978) T 2,078 1,646 1,595 otal (313) 483 391 (84) – 109 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 for the year ended 31 December 2008 (Currency - Singapore dollars)

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

The Group At 1.1.2008 554,888 115,948 5,419 956,255 1,632,510 147,183 1,779,693 Net fair value changes on available-for-sale financial assets – – (26,324) – (26,324) (6) (26,330) Net fair value changes on cash flow hedges – – (2,642) – (2,642) – (2,642) Foreign currency translation differences – – (11,091) – (11,091) 2,333 (8,758) Net income recognised directly in equity – – (40,057) – (40,057) 2,327 (37,730) Net profit for the year – – – 473,636 473,636 15,127 488,763 Total recognised net income for the year – – (40,057) 473,636 433,579 17,454 451,033 Issue of shares 31,726 – – – 31,726 – 31,726 Acquisition of a subsidiary – – – – – 1,489 1,489 Acquisition of additional interest in subsidiaries – – – – – (61,110) (61,110) Capital contribution – – – – – 2,836 2,836 Cost of share-based payment – – 17,940 – 17,940 168 18,108 Dividends (Note 44) – – – (535,690) (535,690) (11,594) (547,284) Excess capital contribution from minority shareholders – 375 – – 375 250 625 Transfer from unappropriated profit to statutory reserve – – 482 (482) – – – At 31.12.2008 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116

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

The Company At 1.1.2007 474,926 11,917 530,676 1,017,519 Net profit for the year – – 543,287 543,287 Total recognised net income for the year – – 543,287 543,287 Issue of shares 79,962 – – 79,962 Cost of share-based payment – 16,329 – 16,329 Dividends (Note 44) – – (508,220) (508,220) At 31.12.2007 554,888 28,246 565,743 1,148,877

At 1.1.2008 554,888 28,246 565,743 1,148,877 Net profit for the year – – 480,559 480,559 Total recognised net income for the year – – 480,559 480,559 Issue of shares 31,726 – – 31,726 Cost of share-based payment – 18,533 – 18,533 Dividends (Note 44) – – (535,690) (535,690) At 31.12.2008 586,614 46,779 510,612 1,144,005

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

110 (Currency -Singaporedollars) for the year ended31December 2008 Trade creditors Joint ventures Exchange difference onoperating activities Deferred income Income tax paid Interest received Cash generated from operations Loans to staff and third parties,netofrepayments Other creditors, accruals andprovisions Advancepaymentsfrom customers Associated companies Holdingcompany andrelated corporations balances Other debtors, depositsandprepayments Advancepayments to suppliers Trade debtors Progress inexcess billings ofwork-in-progress Stocksandwork-in-progress (Increase)/decrease in: Operating profit before working capitalchanges Impairment/(write-backofimpairment)other intangibleassets Amortisationofother intangibleassets Dividendsfrom investments Interest income Financialexpenses Changesinfair value offinancialinstrumentsandhedgeditems Share-based paymentexpense Profit onmaturity ofamounts under fundmanagement Long-termloanfrom aminority shareholder forgiven Net cashfrom operating activities Gainondisposalofassociated companies Loss ondisposalofasubsidiary (Gain)/loss ondisposalofinvestments Gainondilutionofinterest inasubsidiary Write-back ofimpairmentin value ofassociated companies Impairmentin value ofinvestments Depreciation charge Share ofresults ofassociated companies andjoint ventures Adjustments: companies andjoint ventures Profit before taxation includingshare ofresults ofassociated Cash flows from operating activities Gainondisposalofproperty, plantandequipment Write-back ofimpairmentproperty, plantandequipment Property, plantandequipmentwritten off (157,254) 540,702 148,590 (60,332) 715,007 561,344 (33,266) 106,989 (55,296) (38,937) 511,358 (57,596) (19,586) (92,011) 65,207 25,943 42,687 23,925 10,203 29,538 (21,151) 13,683 (4,364) 19,357 12,117 5,397 $’000 4,417 2008 1,415 1,787 (222) (650) (803) (102) (194) 392 771 2 – – – (104,548) (124,953) (42,462) (20,702) (46,647) (24,490) (30,965) 201,729 710,574 126,518 718,621 661,271 638,115 (19,853) (73,714) 50,356 (60,161) 54,796 16,085 41,544 40,148 (4,400) 10,739 (3,521) 3,506 3,007 9,655 4,037 2,962 7,556 $’000 8,721 2007 (465) (909) (743) (105) 658 (112) (84) (27) – 111 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 for the year ended 31 December 2008 (Currency - Singapore dollars)

2008 2007 $’000 $’000

Cash flows from investing activities Proceeds from sale of property, plant and equipment 11,272 6,921 Proceeds from sale of associated companies 803 58,292 Dividends from associated companies and joint ventures 42,247 23,935 Dividends from investments 222 112 Proceeds from sale and maturity of investments 131,492 78,892 Purchase of property, plant and equipment (191,291) (172,044) Purchase of investments – (295) Additional investment/acquisition of associated companies and joint ventures (2,795) (18,452) Acquisition of other intangible assets (4,556) (5,514) Acquisition of subsidiaries (121,629) 7,091 Acquisition of additional interest in subsidiaries (62,930) 25,625 Disposal of a subsidiary – (1,044) Exchange difference on investing activities 74 2,592 Net cash from/(used in) investing activities (197,091) 6,111

Cash flows from financing activities Capital contribution from minority shareholders of subsidiaries 2,836 14,306 Proceeds from issue of shares 30,477 79,962 Loan to an associated company (360) – Repayment of other loans, net (252) (210) Repayment of lease obligations, net (1,409) (8,637) Proceeds/(repayment) of bank loans, net 33,990 (10) Repayment of convertible loan – (980) Dividends paid to shareholders of the Company (535,690) (508,220) Dividends paid to minority shareholders of subsidiaries (11,594) (21,787) Interest paid (42,239) (50,364) Exchange difference on financing activities (18,838) (17,110) Net cash used in financing activities (543,079) (513,050)

Net increase/(decrease) in cash and cash equivalents (228,812) 154,332 Cash and cash equivalents at beginning of the year 1,282,724 1,141,308 Exchange difference on cash and cash equivalents at beginning of the year (4,818) (12,916) Cash and cash equivalents at end of the year (Note 46) 1,049,094 1,282,724

112 thereof asat the datesofacquisitions were asfollows: effect the and 13) Note in disclosed acquired(as subsidiaries the of liabilities and assets identifiable the fairof 2008,the value In Summary ofeff ect ona (Currency -Singaporedollars) for the year ended31December 2008 The accompanying notesarean integral partofthefinancial statements. From the datesofacquisitions, the acquired subsidiarieshave contributed $0.3 inprofits million to the netprofit of the Group. from the dateofacquisition (asdisclosedinNote13). months 12 within finalised be to expected is and assessed currentlybeing is liabilities and assets other and goodwill) (excluding and Antycip Simulation Limited and its subsidiary. The purchase price allocation of these subsidiaries to goodwill, intangible assets Included in the carrying amount before combination are the assets and liabilities of ST Aviation Training Academy (Australia) Pty Ltd Intangible assets Property, plantandequipment Debtors, depositsandprepayment Net cashoutflow onacquisition Net cashacquired with the subsidiaries Cost ofacquisitions Cash outflow onacquisitions: Cash paidincurrent year Cash paidincurrent year for asubsidiary acquired in previous year Cost ofacquisitions: Total purchase consideration Minority interests arisingonconsolidationGoodwill Net identifiableassets Deferred tax liabilities Creditors andaccruals Cash andcashequivalents cquisition ofinterestdiaries insubsi R ecognised on acquisition (122,544) (121,629) 122,544 $’000 117,181 (1,205) (1,269) (1,489) 6,852 5,363 5,363 4,993 3,724 4,017 3,128 915 915 (64) 30 31 before combination Carrying amount $’000 976 912 915 (64) (64) 30 31 – – 113 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

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

1. general

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

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

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

The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Technologies Engineering Ltd and its subsidiaries as at 31 December 2008 and for the year then ended were authorised and approved by the Board of Directors for issuance on 17 February 2009.

2. summary of significant accounting policies

(a) basis of financial statements preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”) as required by the Singapore Companies Act, Chapter 50.

The financial statements have been prepared on the historical cost convention, except for derivative financial instruments, held for trading and available-for-sale financial assets that have been measured at their fair values, and held-to-maturity financial assets that have been measured at amortised cost.

The carrying values of recognised assets and liabilities that are designated as hedged items in a fair value hedge are adjusted to record the gain or loss on the hedged items attributable to the hedged risks.

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

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

(b) basis of consolidation

(i) Subsidiaries

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

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

114 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 basisofconsolidation (continued) (b) (iii) (ii) accounting period. the of end the to statements financial management unaudited and available statements financial audited used. Where areaudited financial statements areventures not available, the joint share of results and is arrived at companiesfrom the last associated the of statements financial audited the purpose, this For in the consolidated balancesheet. investmentscarryingreservesjoint of venturesin the the companies and associatedvalue included of is in the consolidated income statement. The Group’s share of the post-acquisition accumulated profits and Group’sjoint venturesThe included companiesand associatedis results post-acquisitionof share of the joint and companies associated in interests its ventures. for account to method equity the adopts Group The the income statement. recognisedinterestsminorityis to disposal in on lossor Gain recognisedacquired assetsgoodwill. is in minorityof interests, differencethe between considerationthe and book the of value sharethe of net the with minority interests are accounted for using the Transactionsparent entity statement. extension income consolidatedmethod, whereby,the in on disclosed separatelyacquisitionare and equity, shareholders’ parent the fromseparately equity, within sheet balance consolidated the in presented are They Group. the by held not subsidiaries in assets net and loss or profit of portion the represent interests Minority Founders Ltdanditssubsidiaries. IndustriesPte of acquisition on goodwill the off write partially to years prior in utilised been had reservemerger The orotheroverassets) recordedamount the for shareacquired the capital recorded is mergerreserve.as pooled the deficiency of amount of recorded reservesas share capital and issued (plus any liabilities additional consideration assets, in excessthe orThe combinedamalgamation. formof date the areat recordedof enterprises amounts carryingexistingtheir at cash the method, interests of pooling the Under the amalgamation. with connection in statements financial consolidatedpreparation the of the in adopted been has method As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests Companies Scheme the of amalgamation the pursuant from to aschemeofarrangement under Section210of the CompaniesAct,Chapter 50in1997. resulted which Companies”) “Scheme the as to Limited, Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred for the Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics In the consolidated financial statements, subsidiaries are accounted for using the purchase method, except balances and transactions are eliminatedonconsolidation. from effectivethe acquisitionof date or up to effectivethe All disposal. of inter-companydate significant similar in circumstances. The resultsevents of subsidiaries acquired or disposed of during and the financial year transactionsare included like to applied are policies accounting Consistent its Company. the date as reporting and same the for prepared Company are statements financial the consolidated the of presentation of the in statements financial the used subsidiaries of the statements financial The year. financial include of the end up tothe made subsidiaries statements financial consolidated The icant ccounting p olicies (continued) 115 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(b) basis of consolidation (continued)

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

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

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

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

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

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

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

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

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

116 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

impairmentofnon-financialassets (d) (e) The Group doesnotreverse inasubsequentperiodany impairmentloss recognised for goodwill. residual value, onasystematic basisover itsremaining usefullife. any less amount, carrying revisedasset’s the allocate to periods future in adjusted is charged depreciation the carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, is asset unlessthe reversalstatement incomerecognisedSuch the years.is in priorrecognised in forasset the been loss impairment no depreciation,had of net determined, been havewouldexceed that amount carrying the cannot amount increased That recoverableamount. its to increased is asset the of amount carrying the case, the is that If recognised. was loss impairment last the asset’srecoverablesince the amount determine to used is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates longermaylossesexistno impairment or exists, may indication have recoverable such decreased. the If amount previouslyrecognisedthat indication any is therewhether to as date reporting each at made is assessment An income the in recognised arestatement in those expense categoriesconsistent with operationsthe functionof the impaired asset. continuing of losses Impairment asset. the to specific risks the and money of ratepre-taxvalue discountreflectstime currentthe of a assessments that market using present value down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their recoverableexceedsassetits writtenan considered of is is impairedassetand amount carrying the amount, the does not generate cash inflows that are largely independent of those from other assetsasset orthe unless groupsasset, individual of foran assets. determined When is and use in value its and sell to costs less unit’sfairvalue asset’sof the recoverable asset’sAn amount. recoverable asset’san higherof is the oramount cash-generating estimate required,an Groupmakesis asset forthe an testing impairment annual when orexists, indication such any If impaired. be mayasset an that indication an whetherthereis reportingdate each at Groupassesses The (i) marketplace concerned. the in convention or regulation by established generally period the within assets of deliveryrequire that assets Group commits the to purchase orthat sell the asset. Regulardate way purchasesthe or sales arei.e., purchases ordate sales of financial trade the on recognisedare assets financial of sales and purchases way regular All and appropriate, re-evaluates this designationateachfinancialyear end. allowedwhererecognition and, initial after assets financial its of classification the determines Group The costs. at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction contractual provisions of the the financial to partyinstrument. a becomesWhen Groupfinancial assetsthe when, are only recognisedand when, initially, sheet they balance are the measuredon recognisedare assets Financial Financial assets s ed o rdn uls hy r dsgae a efcie egn isrmns Gis r oss on losses or Gains investments heldfor trading instruments. are recognised in hedging the income statement. effective as designated are they unless trading for held classified as also are Derivatives term. near the in selling of purpose the for principally acquired assets loss. or financial or derivatives) profit embeddedseparated (including throughderivativesfor are trading held assetsvalue Financial fair at assets financial as classified are trading for held assets Financial Financial assetsatfair value throughprofit orloss icant ccounting p olicies (continued) 117 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(e) Financial assets (continued)

(ii) Loans and receivables

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

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

(iii) Held-to-maturity investments

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

(iv) Available-for-sale financial assets

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

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

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

(f) Property, plant and equipment and depreciation

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

118 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

(f) investment properties (g) statement in the year the asset isderecognised. expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are consumption of the future economic benefitsembodiedin the itemsofproperty, plantandequipment. of pattern expected the and estimates previous with consistent are depreciation of period and method amount, residualThe depreciationand life useful value, aremethod reviewed yearfinancial each at end ensureto that the of the project, whichever isshorter. Assets purchased specifically for projects are depreciated over becomes the useful life of the class of assets or and the duration completed is development of stage each operational. until depreciated not is Construction-in-progress Aircraft andaircraft engines Transportation equipmentand vehicles Furniture, fittings, office equipmentandcomputers Production tools andequipment Plant andmachinery Boats andbarges Syncrolift andfloatingdocks Wharves andslipways Improvements to premises Buildings onrented properties Leasehold landandbuildings Freehold landandbuildings over their estimatedusefullives asfollows: any impairment loss. Depreciation is provided on the straight-line basis so as to write off the cost of these assets depreciationand of net orcostvaluation, at arestated equipment recognition,and to property,Subsequent plant Property, plantandequipmentdepreciation (continued) of retirement or disposal. losses on the retirement or disposal of an investment property are recognised in the income statement in the year or gains Any disposal. its fromexpected is benefit economicfuture no and use withdrawnfrompermanently is Investment properties are derecognised when either they have been disposed of or when the investment property of 3 to 50 years. straight-linewrite-offon as the to so cost investmentof basis thepropertiesthe over lives useful their estimated provided is Depreciation loss. impairment any and depreciation of net cost, at stated areproperties Investment icant ccounting p olicies (continued) ------5 to 15years 4 to 5years 1 to 5years 3 to 10years 2 to 20 years 5 years 5 to 10years 10 to 16years 3 to 30years 30 years Over the periodof the leaseofbetween 5 to 60 years 15 to 30years 119 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(h) stocks and work-in-progress

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

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

(i) cash and cash equivalents

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

(j) impairment of financial assets

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

(i) Assets carried at amortised costs

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

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

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

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

120 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (k) impairmentoffinancialassets(continued) (j) (iii) (ii) incurred. using effectivethe interestBorrowing method. costs are recognised which expensesin theyas inperiodare the recognition,Afterattributableinitial costtransactionborrowings costs. amortised measuredareat subsequently directly less receivedconsideration the of value fair the at recognisedinitially liabilities financial Borrowingsare amortised cost using the effective interest method. at measured subsequently and value fair at recognised initially liabilities financial arecreditors other and Trade method, except for derivatives, whichare measured atfair value. Subsequent to initial recognition, financial liabilities areall measured at amortised cost using the effective interest directly attributable transaction costs. Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, contractual provisions of the financialinstrument. partythe to a Groupbecomes the when, only and when, sheet balance arerecognisedthe liabilities on Financial Financial liabilities after the impairment loss wasrecognised in the income statement. eventoccurringobjectivelyan related be to can instrument the fairof increasein value the if statement, the in recognised not are available-for-saleincome statement. Reversals of as impairment losses on debt instruments are reversed classified through the income instruments equity of respect in Reversals impairment any less value, fair statement. income currenttransferredthe is to equity from statement, income previouslythe its recognisedin loss and amortisation) and payment its principal between any difference of the (net comprising cost amount an impaired, is asset financial available-for-sale an If impaired. areassetsavailable-for-sale financial as classified securities investment that evidence objective is there whether determine considerationsto issuerare market tradingactive the an of of disappearance the and difficulties obligor, or financial significant cost, below value fair in decline prolonged or Significant Available-for-sale financialassets reversed infuture periods. not is recognisedloss The asset. financial similar a forreturn of rate marketcurrent the at discounted flows cash future estimated of value present the and amount carrying asset’s the between the differenceas measured is loss the of amount the incurred, been has instrument equity unquoted an delivery bysuch settled of be must and to linked is that asset derivative a on or measured, reliably be cannot an fairvalue its because that fairvalue at carried not issuer) is that instrument equity the unquoted an on loss of impairment difficulties financial significant or insolvency of probability operates, issuer the whereenvironment business the in changes adverse significant as (such evidence objective is there If Assets carried atcosts icant ccounting p olicies (continued) 121 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(l) Provisions

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

(i) Warranties

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

(ii) Liquidated damages

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

(m) income taxes

(i) Current tax

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

(ii) Deferred tax

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

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

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

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

122 RestrictedStock Plan • Performance SharePlan • ShareOptionPlan • summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 employee benefits (n) income (continued)taxes (m) (i) (ii) Employee equitycompensationbenefits onacquisition.adjusted againstgoodwill is combinationbusiness froma deferredrecognisedarising and equityis directlytax equity directly in in Deferred taxes are recognised in the income statement except that deferred tax relating to items recognised Deferred tax(continued) Monte Carlo simulationmodel. the using grantconditionaldate on determined restrictedfairsharesis the of The value period. The restricted shares cost is amortised and recognised in the income statement over the vesting described inNote40. are Plan Stock Restricted the of details The Group. the of directors and employees certain to awarded be can sharesCompany’s the Plan, Stock Restricted Engineering ST the to Pursuant account the market conditions andnon-market conditions. into takes which model, simulation Carlo Monte the using date grant conditional at determined is sharesperformance the of fairvalue The over three-yearbasis the period. performance line The performance shares cost is amortised and recognised in the income statement on a straight- described inNote40. to certain employees and directors of the Group. The details of the Performance Share Plan are Pursuant to the ST Engineering Performance Share Plan, the Company’s shares can be awarded of earningsper share. The dilutive effect of outstanding options is reflected as additional share dilution in the computation The proceeds received are credited to share capitalwhen the optionsare exercised. beginningthe andendof that period. at as recognised expense cumulative in movement incomethe represents the period to credita foror statement charge The vest. ultimately will that options share of number the of estimate Group’sbest the and expired has period vesting the which to extent the reflects date any. The cumulative expense recognised for share options at each reporting date until the vesting if conditions,market otherperformance condition,anythan account of takenis no shareoption, period during which the employees become unconditionally entitled to the options. In valuing the overspread and the grant date at measured is fairvalue The correspondingequity. in increase are employees recognisedis and model grantedbinomial employeea an using expenseas a determined with is and directors certain Plan, options of value fair The Option shares.Company’s the purchase to non-transferableoptions granted Share Engineering ST the to Pursuant icant ccounting p olicies (continued) 123 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(n) employee benefits (continued)

(ii) Defined contribution plans

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

(o) income recognition

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

Income is recognised using the following methods:

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

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

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

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

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

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

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

(vi) Finance charges from hire purchase financing is recognised based on the sum of digits method over the finance period.

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

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

124 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 •

• (p) (ii) (i) Foreign currency using the following procedures: dollars Singapore into translatedare companies subsidiaryforeign of position financial and results The Foreign currency translation currency foreign the in translation reserve. with dealt also are borrowings those on differences credits exchange and to charges Taxattributable statement. income the in recognised are the they of time which disposal at the investment, until net reserve translation currency foreign the to directly taken also are operation foreign a in investment net a against hedge a provide borrowingscurrencythat foreign on Differences the income statement. the of disposal on statement subsidiary.In Company’sthe separate exchangesuch statements, financial differences income are recognised in consolidated the in recognised and sheet balance consolidated the foreigncurrencyin reservetranslationas equity of componentseparate a in recognisedinitially are which companies,foreign subsidiary in investmentGroup’s net the of part form that items monetary on arising differencesexchangeforexcept statement income the recognisedin are date sheet balance the at items monetary translating on or items monetary of settlement the on arising differences Exchange determined. was fairvalue the when date the at ratesexchange foreign the currencyusing aretranslateda in value using exchangethe rates of initial at dates the transactions.as the Non-monetarymeasured items fair at translatedare currency foreign a in cost date. historical of sheet terms in balance measured are the that items at Non-monetary ruling exchange of rate closing the at translated are currencies foreign in denominated liabilities and assets Monetary dates. transaction the at ruling those approximatingrates and its subsidiary companies and are recorded on initial recognition in the functional Transactionsforeignin currenciescurrencies respectivecurrenciesCompany aremeasuredthe in functional the of at exchange Foreign currency transactions loss on disposal. or gain the of component a as statement income the recognisedin is foreignsubsidiary that to relating equity in deferreddifferences exchange of amount cumulative the subsidiary, foreign a of disposal On currency of the foreign subsidiariesand translated at the closingrate at the balancesheetdate. functional the recordedin are and subsidiaries foreign the of liabilities and assets as treatedare 2005 Goodwill and fair value adjustments arising on the acquisition of foreign subsidiaries on or after 1 January translation reserve. resultingAllexchange differences areforeignrecognised separateequityas a componentof currencyin Assets year, whichapproximates the exchange rates at the datesof the transactions. Income that balancesheetdate;and icant and and ccounting p liabilities expenses for for

each

each olicies (continued) balance income sheet statement presented are translated are translated at average at the exchange closing rate rates ruling for

the at 125 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(q) intangible assets

(i) Goodwill

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

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

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and • is not larger than a segment based on the Group’s reporting format determined in accordance with FRS 14 Segment Reporting.

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

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

(ii) Other intangible assets

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

126 Dealer network • Brands • Commercialandintellectualproperty rights • Filmcostinventory • Research anddevelopment expenditure • summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 hire purchase (r) intangibleassets (continued) (q) above. Assets acquired on hire purchase arrangements are depreciated in accordance with the policy set out in Note 2(f) equal monthly instalments to produce a constant rate of charge on the balance of capital repayments outstanding. the capitalised amount, is charged to the income statement over the period of such hire purchase arrangements in obligations treatedliability.a as The interest,total being differencethe between the payableinstalments total and Assets acquired on hire purchase arrangements are capitalised in the financial statements and the corresponding (ii) prospective basis. a on made is finite to indefinite fromassessment life useful the in continueschange the not, If assessment supportable. be life to indefinite whether determine to annually reviewed is life indefinite an with assetintangible cash-generatingan the of life useful level.areThe unit intangibles Such amortised. not at or individually either annually impairment for tested are lives useful indefinite with assets Intangible Other intangibleassets(continued) line basisover their estimatedeconomic usefullifeof7years. Costs relating to dealer network, which are acquired are capitalised and amortised on a straight- over their estimatedeconomic usefullives of20 -70 years. Costs relating to brands, which are acquired are capitalised and amortised on a straight-line basis a straight-line basis over itsestimatedeconomic useful lives. Costs relating to intellectual property rights, which are acquired are capitalised and amortised on basis. film-by-film a on made be to is value realisable net estimated its to reductioncorresponding a should this result inabook value for afilmwhich exceed the estimatednetrealisable value, then However, film. the for income gross total anticipated to bear revenuegross current that ratio using the individual-film-forecast computation method which amortises the film costs in the same Film production costs are capitalised as film cost inventory. The film cost inventory is amortised when and as statement income the incurred. to charged is expenditure development and Research icant ccounting p olicies (continued) 127 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(s) Finance leases

(i) As lessee

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

(ii) As lessor

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

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

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

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

(t) operating leases

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

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

(u) government grants

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

128 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

(v) (i) Hedges whichmeet the strictcriteriafor hedgeaccounting are accounted for asfollows: periods for which they were designated. reporting financial effectivehighlythroughoutthe been have actually theythat determine to basis ongoing an on assessed are and flows cash or value fair in changes offsetting achieving in effective highly be to expected are the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the hedge. The documentation includes identification of the hedging instrument, the hedge item or transaction, the which the Group wishes to apply hedge accounting and the risk management objective and relationshipto hedge strategythe documents and formallyGroupdesignates relationship, the for hedge a of inception undertaking Atthe For the purposeofhedgeaccounting, hedgesare classified either asfair value hedgeor cashflow hedge. fluctuations. The Group uses cash from time to time as a hedging instrument to hedge its risk associated with foreign currency to market values for similar instruments. contractssimilarwith maturity profiles. fairThe interestof value rate contractsswap forbydetermined is reference rates exchange forwardcurrent to reference by calculated is contractscurrency forward of value fair The taken directly to the income statementfor the year. fairfromorAnyin arising lossesgains changes qualify derivatives for not on do value that accountinghedge are liabilities when the fair value isnegative. as and positive is fairvalue the when assets as carried are Derivatives fairvalue. remeasuredat subsequently financial derivative Such fluctuations. rate interest instruments are and initially recognised at fair currency value on the date on which a derivative contract foreign is entered into and are with associated risks its hedge swaps rateto interest and contractscurrency forward as such instruments financial derivative uses Group The Derivative financialinstrumentsandhedging value of the hedginginstrument are also recognised in the income statement. or liability with a corresponding gain or loss recognised in the income statement. The changes in the fair cumulative subsequent fairrecognisedin commitmentthe is change firm assetattributableof risk the the an value hedged as to the item, hedged a as designated is commitment firm unrecognised an When item ceases to beadjustedfor changesinitsfair value attributable to the riskbeing hedged. hedged the when laterthan no begin shall and exists adjustment an as soon as begin may Amortisation statement. amount of a hedging carryinginstrument forthe which to the adjustment effective Anyinterest method is used maturity. is amortised to in the term incomeremaining is the overvalue loss carrying or profit to through amortised adjustment the cost, amortised at carried items to relating hedges value fair For both are taken to the income statement. from losses and gains and fairvalue remeasured at is instrument hedging the hedged, being risk the to For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable Fair value hedges icant ccounting p olicies (continued) 129 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(v) Derivative financial instruments and hedging (continued)

(i) Fair value hedges (continued)

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

(ii) Cash flow hedges

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

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

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

(w) segments

For management purposes, the Group is organised on a worldwide basis into four major operating businesses, which is the basis on which the Group reports its primary segment information.

Segment revenue, expenses and results include transfers between business segments and between geographical segments. Such transfers are accounted for on an arm’s length basis.

(x) Derecognition of financial assets and liabilities

(i) Financial assets

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

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

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

130 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 •

(x) changesinaccounting policies (y) (i) Derecognition offinancialassets andliabilities(continued) (i) (ii) Financial assets(continued) INT FRS hasnosignificantimpact to the Group. aremandatory for yearsfinancial orbeginningof on FRSafterand Januaryadoption these 1 2008.The FRSthat INT and revisedFRS and new the all adopted Grouphas 2008,Januarythe from1 effect With Adoption ofnewandrevised FRS in the respective carrying amountsisrecognised in the income statement. differencethe and liability, new recognitiona the and liabilityderecognitionof original a treated the of as exchangean existingis liabilityororsuch arean modification terms, modified, of substantially the terms differentsubstantially on lender same replacedbyfromanotherthe is liability financial existing an When expires. or cancelled or discharged is liability the under obligation the when derecognised is liability financial A Financial liabilities statement. and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the income assumed)liability new anyless obtained asset considerationnew anythe received(a) (including of sum the and amount carrying differenceentirety,the between the its in asset financial a derecognitionof On asset and the optionexercise price. the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred Group may repurchase, except that in the case of a written put option on an asset measuredthe at fairthat value, transferredasset the of amount the is involvement continuingGroup’s the of extent the asset, transferredthe on option and/orpurchased written a of form the takes involvement continuing Where required to repay. carryingof original considerationamount assetof and the amount maximum the that Groupthe could be Continuing asset. the in involvement that involvementtakes the form of a continuingguarantee over Group’s the transferredthe asset is measured of at the lower of extentthe the to asset, recognised the is of asset controltransferred the nor asset the of rewards and risks the all substantially retained nor When the Group has transferred its rights to receive cash flows from an asset and has neither transferred The asset. the of transferredcontrol has but asset, the of rewards and risks the all substantially retained transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor icant Group ccounting p has transferred olicies (continued) its rights to receive cash flows from the asset and either

(a) has 131 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(y) changes in accounting policies (continued)

(ii) Future changes in accounting policies

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

Effective for annual periods beginning on or after

FRS 1 : Presentation of Financial Statements 1 January 2009 - Revised presentation - Amendments relating to Puttable Financial Instruments and Obligations Arising on Liquidation FRS 23 : Borrowing Costs 1 January 2009 FRS 27 : Consolidation and Separate Financial Statements – Amendments 1 January 2009 Relating to Cost of an Investment in a Subsidiary, Jointly – controlled Entity or Associate FRS 32 : Financial Instruments: Presentation – Amendments relating 1 January 2009 to Puttable Financial Instruments and Obligations Arising on Liquidation FRS 101 : First-time Adoption of Financial Reporting Standards – 1 January 2009 Amendments Relating to Cost of an Investment in a Subsidiary, Jointly-controlled Entity or Associate FRS 102 : Share-based payment – Vesting conditions and cancellations 1 January 2009 FRS 108 : Operating Segments 1 January 2009 INT FRS 113 : Customer Loyalty Programmes 1 July 2008 INT FRS 116 : Hedges of a Net Investment in a Foreign Operation 1 October 2008

The Group expects that the adoption of the above pronouncements will not have a significant impact on the financial statements in the period of initial application, except for FRS 1 and FRS 108 as indicated below.

FRS 1 Presentation of Financial Statements – Revised presentation

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt.

FRS 108 Operating Segments

FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position and results of the Group when implemented in 2009.

132 summary o f signi 2. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

significantaccounting estimatesandjudgements (z) Depreciation charge • Impairmentofloans andreceivables • Impairmentofnon-financialassets • (i) including expectations offuture events that are believed to bereasonable under the circumstances. and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, affect the application of the Group’s accounting policies, reported Theyamounts statements. preparationfinancial of the the in of futurearemade concerningthe assumptions and assets, Estimates liabilities, income and expenses, and liabilitieswithin the next financialyear are discussed below. sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets The key assumptions concerning the future and other key sources of estimation uncertainty at the balance Key sourcesofestimationuncertainty revised. be could charges thereforeproperties,depreciation investmentfuture and equipment and plant property,these of residualvalues the and lives useful economic the impact coulddevelopments $1,036,455,000 (2007: $1,033,002,000). Changes in the expected level of usage and technological the Group’s property, plant and equipment and investment properties at 31 December 2008 was of amount carrying The years. 60 to 1 within be to properties investment and equipment and over their estimatedusefullives. Managementestimates the usefullives of these property, plant Property, plant and equipment and investment properties are depreciated on a straight-line basis Note 51 to the financialstatements. The carrying amount of the Group’s loans and receivable at the balance sheet date is disclosed in characteristics. risk creditsimilar with forassets experience loss historical on based estimated Where there is objective evidence of impairment, the amount and timing of future cash flows are the debtor anddefault or significantdelay inpayments. Group considers factors such as the probability of insolvency or significant financial difficulties of impaired.assetis financial To whetherdetermine thereobjectiveis impairment, evidenceof the a that evidence objective any is therewhether date sheet balance each at assessesGroup The financial statements. in the impairment assessment of goodwill and other intangible assets, are given in Note 16 to the applied assumptionskey the of details Further flows. cash those of presentvalue the calculate cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to expectedareestimate futurethe calculations must When undertaken, value-in-use Management when there are indicators that the carrying amountsmay notberecoverable. areassetsfor Othernon-financial tested indicatorsimpairment exist. such otherwhen at times and annually impairment for tested are intangibles other and Goodwill date. reporting each at assets non-financial for impairment all Groupwhetherassessesthere areindicatorsof The any icant ccounting p olicies (continued) 133 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

2. summary of significant accounting policies (continued)

(z) significant accounting estimates and judgements (continued)

(ii) Critical judgements made in applying accounting policies

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

• Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s deferred tax assets was $138,128,000 (2007: $112,718,000), tax payables was $177,647,000 (2007: $201,324,000) and deferred tax liabilities was $62,602,000 (2007: $45,818,000) at 31 December 2008.

3. turnover

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

Group 2008 2007 $’000 $’000

Sale of goods 2,907,967 2,751,918 Service income 2,436,548 2,299,064 5,344,515 5,050,982

134 o 4. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 - Dividend income Commission income - Interest income - - - Gain/(loss) ondisposalof - - - (Impairment)/write-back ofimpairmentin value ofinvestments ------Fair value changesoffinancialinstruments Loss onfair value changesofheldfor trading investments Profit onmaturity ofamounts under fundmanagement Others Gain ondilutionofinterest inasubsidiary company - Fair value ofhedgeditems ther o quoted equity investments related corporations unquoted equity investments associated companies a subsidiary company associated companies unquoted investments quoted investments others bonds finance lease staff loans bank deposits investments instrument infair value hedges gain/(loss) onforward currency contract designatedashedging instrument incashflow hedges ineffective portionofforward currency contract designatedashedging p era ting income Note 14 15 15 (25,580) 26,973 19,586 (3,308) $’000 10,731 2008 11,173 9,097 1,971 (363) 650 803 456 695 160 746 123 (69) 99 12 (9) – – – Group 20,702 88,392 24,490 $’000 19,864 (3,506) (3,007) 21,077 (4,037) (3,675) 2007 4,400 6,992 3,837 1,333 (820) 358 173 84 99 15 13 – – – 135 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

5. Profit from operations

Profit from operations is arrived at:

Group Note 2008 2007 $’000 $’000

After charging

Auditors’ remuneration - auditors of the Company 1,891 1,656 - other auditors 3,479 3,478 Non-audit fees - auditors of the Company 537 419 - other auditors 1,528 1,180 Fees and remuneration of directors 5,042 4,087 Fees paid to a firm of which a director is a member 109 74 Personnel expenses 6 1,430,643 1,368,839 Depreciation charge 12, 17 148,590 126,518 Allowance/(write-back of allowance) for - Stock obsolescence 22,515 12,941 - Doubtful debts (trade) 22 28,775 3,047 - Loan receivables 18 (1,121) (889) - Doubtful lease receivables 19 877 811 Provision/(write-back of provision) for - Foreseeable losses 31 9,009 (3,257) - Liquidated damages 31 (5,257) 2,324 - Warranties 31 5,164 33,893 Property, plant and equipment written off 12,117 8,721 Research, design and development expenses incurred 75,204 65,956 Operating lease expenses 28,491 28,976 Amortisation of other intangible assets 16 10,203 7,556 Write-back of impairment of property, plant and equipment 12 (102) (105) Impairment/(write-back of impairment) in value of other intangible assets 16 2 (27)

And crediting

Grants and subsidies received 2,153 192 Deferred income recognised 35 3,784 2,324

136 7. 6. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 o 8. * Key man Personnel exp Share-based payments Pension contributions Wages andsalaries* Other personnel expenses Others Long-term loanfrom aminority shareholder forgiven Rental income Exchange loss, net Proceeds received/receivable from insurers (Hurricane Katrina) Losses arisingfrom the impactofHurricane Katrina Gain ondisposalofproperty, plantand equipment Other long-termbenefits Pension contributions Short-term employee benefits Share-based payments ther income, net Includes directors’remuneration of$3,841,576 (2007: $2,879,359). gement p enses ersonnel com p ens a tion 1,430,643 1,187,800 144,411 (10,841) 79,075 41,650 19,357 $’000 $’000 49,128 $’000 2008 2008 2008 4,364 5,269 9,329 8,459 7,007 464 144 194 – 7 Group Group Group 1,368,839 1,137,016 144,800 40,980 70,938 34,583 16,085 $’000 $’000 (5,402) $’000 2007 2007 2007 3,866 3,690 5,935 3,109 (277) 909 323 461 – 1 137 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

9. Financial expenses

Group 2008 2007 $’000 $’000

Bank loans and overdrafts 41,606 49,363 Finance lease 506 540 Others 575 453 42,687 50,356

10. tAxation

Group 2008 2007 $’000 $’000

Current income tax Current year 119,773 123,208 Overprovision in respect of prior years (37,396) (13,394) Associated companies and joint ventures 4,441 5,641 86,818 115,455 Deferred income tax Current year (17,395) (1,532) Overprovision in respect of prior years (17,484) (8,867) Effect of reduction in tax rate – 9,550 51,939 114,606

Deferred income tax related to items charged or credited directly to equity:

Net change in fair value of available-for-sale financial assets (1,096) (4,675) Net change in fair value of derivative financial instruments designated in cash flow hedges (3,947) 500 Effect of reduction in tax rate – 109 (5,043) (4,066)

the Group

Unrecognised tax losses

As at 31 December 2008, subsidiaries of the Group have potential tax benefits of approximately $15,117,000 (2007: $27,149,000) arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. These tax benefits have not been recognised in the financial statements due to the uncertainty of its recoverability. The use of these potential tax benefits is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate.

138 tAxa 10. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Profit from operations before taxation the year ended31December isasfollows: A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for growth andacquisitions. forretainedorganic be foreseeablebut future,the in Singaporeremitted to be not will overseassubsidiaries its of some undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that the undistributed profits of At the balance sheet date, no deferred tax liability (2007: $nil) has been recognised for taxes that would be payable on the Unrecognised temporary differencesrelatingtoinvestmentsinsubsidiaries Taxation atstatutory tax rate of18%

Adjustments:

Current financialyear’s taxation charge Lower effective tax rates ofassociated companies Deferred tax assets notrecognised Income notsubject to tax Higher effective tax rates ofother countries Expenses notdeductiblefor tax purposes Deferred tax assets previously notrecognised now recognised Income subject to concessionary tax rates Effect ofchangein tax rates Overprovision inprior years, net Others tion (continued) 540,702 (54,880) 12,540 97,326 51,939 $’000 (2,687) (1,344) 2008 (1,316) 1,368 1,746 (814) – – Group 114,606 (22,261) 638,115 (13,932) 114,861 $’000 (2,807) 18,908 (8,099) 2007 9,550 11,817 6,574 (5) – 139 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

11. eArnings per share

basic earnings per share

The calculation for basic earnings per share is based on:

Group 2008 2007 $’000 $’000

Consolidated profit after taxation and minority interests 473,636 503,503

Number of shares (’000)

The weighted average number of ordinary shares is arrived at as follows: Issued ordinary shares at beginning of the year 2,983,550 2,946,254 Weighted average number of ordinary shares issued during the year 11,049 24,486 Weighted average number of ordinary shares 2,994,599 2,970,740

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOS/ESOP and their exercise prices are set out in Note 40. The average fair value of one ordinary share during the financial year ended 31 December 2008 was $2.89 (2007: $3.60) per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows:

Group 2008 2007

Number of shares (’000)

Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 2,994,599 2,970,740 Weighted average number of unissued shares under option 73,190 34,854 Number of shares that would have been issued at fair value (59,130) (28,039) Weighted average number of ordinary shares (diluted) 3,008,659 2,977,555

55,495,102 (2007: 31,217,005) of share options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented.

140 12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 and vehicles Transportation equipment equipmentandcomputers Furniture, fittings, office equipment Production tools and Plant andmachinery Syncrolift andfloatingdocks buildings Leasehold landand Construction-in-progress Boats andbarges Freehold landandbuildings At Cost Aircraft andaircraft engines Wharves andslipways Improvements to premises properties Buildings onrented equipmentandcomputers Furniture, fittings, office Plant andmachinery Syncrolift andfloatingdocks Wharves andslipways buildings Leasehold landand At Valuation The Group * Pro Included property, plant andequipmentof$16,364,000 contributedbyminorityshareholders aspartofcapitalinjection. p erty, pl ant ndequipment 2,003,774 1.1.2007 153,202 419,655 868,217 $’000 175,738 As at 68,782 62,766 14,036 61,364 71,043 28,713 43,211 21,774 4,603 5,288 1,490 1,694 1,919 279 Additions * 188,408 22,792 24,698 92,180 15,859 25,124 $’000 3,962 1,444 1,972 344 33 – – – – – – – – Disposals (54,169) (10,797) (33,731) (2,860) (3,236) $’000 (1,769) (698) (397) (152) (491) (38) – – – – – – – – of interest in Arising from subsidiaries acquisition 2,087 4,144 1,446 $’000 435 114 62 – – Valuation/ – – – – – – – – – – – disposal of a disposal ofa subsidiary (1,471) Cost Due to $’000 (202) (682) (266) (321) – – – – – – – – – – – – – – R fications (21,308) (3,666) eclassi- $’000 17,801 (3,815) 2,575 (672) 235 685 707 152 (26) – – – – – – – – T difference ranslation (3,520) 10,970 21,154 (1,509) $’000 (3,181) (878) (140) (182) (515) (138) (121) – – – – – – – – 2,147,990 31.12.2007 438,105 157,223 194,753 952,161 45,482 68,782 59,843 27,368 14,582 25,412 78,051 $’000 71,076 As at 4,603 1,490 1,694 5,167 1,919 279 141 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued)

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

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

At Cost Freehold land and buildings 59,843 394 (615) – 35 (322) 59,335 Leasehold land and buildings 438,105 9,112 (111) – 20,326 1,285 468,717 Buildings on rented properties 71,076 1,026 – – 11,216 3 83,321 Improvements to premises 45,482 9,168 (1,048) – (252) (545) 52,805 Wharves and slipways 27,368 919 – – 4,222 (13) 32,496 Syncrolift and floating docks 68,782 394 (240) – – – 68,936 Boats and barges 5,167 – – – – (10) 5,157 Plant and machinery 952,161 95,065 (51,134) – 2,206 (24,305) 973,993 Production tools and equipment 194,753 20,954 (1,810) – 81 (976) 213,002 Furniture, fittings, office equipment and computers 157,223 21,808 (10,661) 31 119 (586) 167,934 Transportation equipment and vehicles 14,582 1,390 (1,120) – – 45 14,897 Aircraft and aircraft engines 78,051 2,013 (8,111) – – – 71,953 Construction-in-progress 25,412 29,048 (148) – (37,953) (34) 16,325 2,147,990 191,291 (74,998) 31 – (25,458) 2,238,856

142 12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Pro properties Buildings onrented buildings Leasehold landand Freehold landandbuildings At Cost equipmentandcomputers Furniture, fittings, office Plant andmachinery docks Syncrolift andfloating Wharves andslipways buildings Leasehold landand At Valuation The Group Improvements to premises Plant andmachinery Boats andbarges docks Syncrolift andfloating Wharves andslipways equipmentandcomputers Furniture, fittings, office equipment Production tools and Aircraft andaircraft engines and vehicles Transportation equipment p erty, pl ant ndequipment(continued) 1,055,624 1.1.2007 242,007 344,268 126,629 $’000 138,517 As at 23,584 64,699 35,624 20,091 18,369 17,062 4,603 9,660 1,490 5,129 1,694 1,919 279 Depreciation for the year 125,517 55,542 16,008 15,861 18,105 4,563 3,543 5,140 charge 1,834 1,428 2,192 1,218 $’000 83 – – – – – Impairment/ impairment) back of back of (write- $’000 (105) (118) 13 – – – – – – – – – – – – – – – Accumulated depreciation

Disposals (39,436) (10,642) (22,161) (2,860) $’000 (1,236) (1,341) (372) (152) (491) (181) – – – – – – – – subsidiary disposal (1,079) Due to $’000 (444) (206) (277) (152) of a – – – – – – – – – – – – – R fications eclassi- $’000 (1,245) (1,417) (1,153) 1,369 (306) 376 (46) (33) (91) 56 – – – – – – – – T difference – – – – – – – – ranslation (5,909) (1,250) $’000 (1,514) (1,185) (630) (674) (441) (116) (80) (19) 1,133,367 31.12.2007 257,264 376,956 130,573 152,421 23,044 68,242 37,904 25,776 18,340 18,555 $’000 4,603 4,790 As at 1,490 9,517 1,694 1,919 279 143 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued)

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

At Cost Freehold land and buildings 18,555 1,129 – (545) – (77) 19,062 Leasehold land and buildings 257,264 17,431 – (12) 16 30 274,729 Buildings on rented properties 25,776 2,533 – – – – 28,309 Improvements to premises 23,044 6,192 – (1,036) (16) (197) 27,987 Wharves and slipways 18,340 2,020 – – – 6 20,366 Syncrolift and floating docks 68,242 512 – (240) – – 68,514 Boats and barges 4,790 37 – – – (8) 4,819 Plant and machinery 376,956 74,880 (102) (35,009) – (3,821) 412,904 Production tools and equipment 152,421 19,703 – (1,545) – (547) 170,032 Furniture, fittings, office equipment and computers 130,573 17,395 – (10,545) – (364) 137,059 Transportation equipment and vehicles 9,517 1,662 – (943) – 21 10,257 Aircraft and aircraft engines 37,904 3,943 – (6,098) – – 35,749 1,133,367 147,437 (102) (55,973) – (4,957) 1,219,772

144

12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Leasehold landandbuildings At Valuation The Group Wharves andslipways Syncrolift andfloatingdocks Plant andmachinery Improvements to premises Buildings onrented properties Leasehold landandbuildings Furniture, fittings, office equipmentandcomputers Freehold landandbuildings At Cost Construction-in-progress Aircraft andaircraft engines Transportation equipmentand vehicles Furniture, fittings, office equipmentandcomputers Production tools andequipment Plant andmachinery Boats andbarges Syncrolift andfloatingdocks Wharves andslipways Pro p erty, pl ant ndequipment(continued) 1,019,084 561,089 193,988 36,204 40,273 30,875 42,970 55,012 16,325 24,818 $’000 12,130 2008 4,640 422 338 – – – – – Net book value 1,014,623 575,205 180,841 45,300 26,650 22,438 42,332 25,412 41,288 $’000 40,147 2007 5,065 9,028 540 377 – – – – – 145 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued)

The Company

At Cost As at As at 1.1.2007 Additions Disposals 31.12.2007 $’000 $’000 $’000 $’000

Furniture, fittings, office equipment and computers 1,621 360 (180) 1,801 Transportation equipment and vehicles 298 331 (298) 331 1,919 691 (478) 2,132

Accumulated depreciation As at Depreciation As at 1.1.2007 charge for Disposals 31.12.2007 $’000 the year $’000 $’000

Furniture, fittings, office equipment and computers 1,138 314 (180) 1,272 Transportation equipment and vehicles 124 62 (169) 17 1,262 376 (349) 1,289

At Cost

As at As at 1.1.2008 Additions Disposals 31.12.2008 $’000 $’000 $’000 $’000 Furniture, fittings, office equipment and computers 1,801 696 (115) 2,382 Transportation equipment and vehicles 331 – – 331 2,132 696 (115) 2,713

Accumulated depreciation

Depreciation As at charge for As at 1.1.2008 the year Disposals 31.12.2008 $’000 $’000 $’000 $’000

Furniture, fittings, office equipment and computers 1,272 456 (114) 1,614 Transportation equipment and vehicles 17 66 – 83 1,289 522 (114) 1,697

146 12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

The Group Transportation equipmentand vehicles Furniture, fittings, office equipmentandcomputers The Company (a) (b)

and 2007. appropriateby deemed Directors. Decemberthe 2008are31 property, equipment depreciatedfullyat These and as plant when and as performed be will Revaluation revaluation. of frequency fixed no is There use. existing for value market open of basis the on November1972, 30 on professionalvaluers of firm independent an by at arrived values at stated are valuation at shownare which equipment, and 2007,plant property,January 1 at As Property, plant and equipmentat valuation (i) Property, plant and equipmentpledgedassecurity (ii) of: value book net a with obligations lease underacquired equipment and plant property,areabove the in Included Property, plant and equipmentunder leaseobligations reod ad n bidns n ln o a usday ih cryn vle f 39200 (2007: $3,952,000 of value carrying a with subsidiary a of $4,046,000) are pledgedassecurity for long-termloans. land and buildings and land Freehold bank loans. subject to a floating charge of Euro 210 (2007:million Euro 210 million) to secure two of the subsidiary’s are $450,610,000)$426,914,000(2007: of value carrying a with subsidiary a of machinery and Plant ant ndequipment(continued) $’000 $’000 2008 2008 2,004 1,016 1,813 248 768 191 Net book value Group $’000 $’000 2007 2007 2,502 2,271 843 529 314 231 147 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued)

(d) the major properties of the Group comprise:

(i) Freehold land and buildings

Net book value Land area 2008 2007 Location Description (sq. m.) $’000 $’000

USA

47889 South K Street Industrial buildings 88,949 2,544 2,581 Tulare, California

13442 Emerson Road Industrial buildings 68,351 1,403 1,320 Kidron, Ohio

300 Hackney Ave, Industrial buildings 117,358 1,898 1,928 Independence, Kansas

400 Hackney Ave, Industrial buildings 39,942 2,050 2,141 Washington, North Carolina

914 Saegers Station Drive, Industrial buildings 122,659 3,949 4,059 Montgomery, Pennsylvania

7801 Trinity Drive, Shipyard and buildings 839,564 4,552 4,592 Escatawpa, Mississippi

5801 Elder Ferry Road, Shipyard and buildings 227,151 4,266 4,316 Moss Point, Mississippi

900 Bayou Casotte Parkway, Shipyard and buildings 331,803 14,858 15,279 Pascagoula, Mississippi

3800 Richardson Road South, Hope Production facility 8,361 3,661 3,762 Hull, Alabama

(ii) Leasehold land, buildings and improvements

Net book value Land area 2008 2007 Location Description Tenure (sq. m.) $’000 $’000

Singapore 501 Airport Road Factory and office building 20 years from 1.6.1993 23,899 2,315 2,674

503 Airport Road Factory and office building 20 years from 1.6.1993 7,175 626 758

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

540 Airport Road Warehouse and office 30 years from 15.8.1985 5,850 1,045 1,200 building

Hangar and office building 30 years from 1.1.1984 18,918 2,918 3,429

148 12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 themajor properties of the Group comprise (continued) (d) Pro p erty, pl (ii) Avenue 30/36 KianTeck 60 Tuas Road 7 BenoiRoad 16 BenoiRoad 15 ChinBeeDrive 601 RifleRange Road 16 Tuas Avenue 7 Crescent 2D Ayer Rajah 249 JalanBoon Lay 16 BenoiCrescent 33 Tuas Avenue 2 5 Portsdown Road #01-12 Ubi Techpark 70 UbiCrescent Street 21 100 Jurong East Street 65 24 AngMoKio 8 ChangiNorthWay Singapore Location Leasehold land,buildingsandimprovements (continued) ant ndequipment(continued) Workers’ dormitory workshops Buildings, foreshore and workshops Buildings, foreshore and Administrative offices Industrial buildings Industrial buildings Industrial buildings buildings Industrial andcommercial buildings Industrial andcommercial buildings Industrial andcommercial Factory andoffice building buildings Industrial andcommercial Office Building buildings Industrial andcommercial buildings Industrial andcommercial Hangar andoffice building Hangar andoffice building Hangar andoffice building Description 30 years from 1.9.1995 30 years from 1.12.1992 56 years from 1.6.1969 56 years from 1.6.1969 60 years from 1.8.1973 Renewable every year * 30 years from 16.8.1983 31.3.2010 3 years from 1.4.2007 to 10.10.2065 to 31.12.2028, renewable to 27 years from 1.10.2001 30 years from 16.7.1989 30 years from 1.4.1996 to 30.9.2010 3.5 years from 1.4.2007 60 years from 5.7.1997 renewable to 2048 30 years from 1.11.1988, renewable to 2042 30 years from 1.12.1982, 16.3 years from 20.8.2005 22.5 years from 16.6.1999 30 years from 1.1.1992 T enure 1,380,983 Land area 120,000 (sq. m.) 103,802 125,262 88,400 20,224 39,640 29,904 23,970 14,860 12,029 75,713 11,232 6,669 3,908 9,764 6,981 730 32,320 Net book value 15,369 13,012 $’000 2008 5,230 3,234 2,845 4,870 9,262 2,527 4,939 1,255 3,124 8,121 1,194 1,117 926 721 – 34,806 16,488 $’000 14,012 2007 10,174 5,602 3,668 6,059 8,590 3,365 2,673 1,282 5,162 1,478 1,875 3,117 1,133 1,110 – 149 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

12. Property, plant and equipment (continued)

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

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

Net book value Land area 2008 2007 Location Description Tenure (sq. m.) $’000 $’000

USA

2100 9th Street Hangar and office building 22 years from 1.1.1991 103,825 16,699 19,465 Brookley Complex, Mobile, Alabama

7 9800 John Saunders Hangar and office building 16 /12 years from 1.6.2002 195,663 6,331 7,325 Road, San Antonio, Texas

People’s Republic of China

2008Y03, North of Leasehold land for factory 50 years from 11.8.2008 38,618 5,669 – Zhong Fang Road and building East of Wu Shi Road, Xiamen, Fujian

97 Zhong Cao Road Leasehold land, industrial 50 years from 26.2.2008 242,662 23,252 21,973 Guiyang, Guizhou and commercial buildings to 21.2.2058

613 Xin Jiao Dong Industrial and commercial 15 years from 22.4.2005 9,751 1,358 1,385 Road, Hai Zhu buildings to 21.4.2020 District, Guangzhou, Guangdong

No. 555 Kanghua Leasehold land 50 years from 12.6.2003 15,898 911 892 Road, Kangqiao to 27.7.2052 Industrial Zone, Shanghai

Panama

Bryant Ave Hangar and office building 20 years from 18.8.2006 36,278 3,085 1,905 Howard Balboa

* This relates to buildings constructed by a subsidiary on properties rented from the Ministry of Defence on leases which are renewable every year. In view of the relationship between the landlord and the subsidiary, the cost of the buildings is depreciated over 30 years.

150 ii Buildingsonrentedproperties (iii) 12. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 s ubsidiaries 13. Unquoted shares, atcost:

Capital contribution in the form ofshare options,performance shares and Carrying amountafter impairmentinsubsidiaries Impairment insubsidiaries themajor properties of the Group comprise (continued) (d) Pro Singapore Technologies Aerospace Ltd Singapore Technologies KineticsLtd Singapore Technologies Electronics Limited ST Ltd SynthesisPte Singapore Technologies Ltd DynamicsPte Vision Technologies Systems, Inc. Singapore Technologies MarineLtd FusionTech Ltd. Pte. restricted shares issued to employees ofsubsidiaries Kaz-ST EngineeringBastauLimitedLiability Partnership p erty, pl Guangzhou 510890 Aiport Logistics, Guangzhou Baiyun Logistics Centre, Guangzhou Airport China People’s R Seletar West Camp 540 AirportRoad Singapore ** ** Location ant ndequipment(continued) of Defence on leases, which are renewable every three years. In view of the relationship between the landlord and the and landlord the between relationship subsidiary,the thecostofbuildingsonrentedproperties isdepreciated over30 years. of view In years. three every renewable are which leases, on Defence Ministry of the from rented properties on subsidiary a by constructed buildings to relate properties rented on buildings The epublic of Warehouse Hangers andoffice building Hangars andoffice building Hangars andoffice building Description 2 years leasefrom 1.11.2007 3 years leasefrom 1.8.2007 Yearly 3 years leasefrom 1.7.2006 T enure 542,262 535,262 574,453 297,494 56,000 26,982 (7,000) 61,938 $’000 90,114 39,191 2008 6,000 1,000 2,156 578 Land area (sq. m.) 48,882 15,670 Company 5,760 100 25,598 Net book value 17,476 11,904 $’000 2008 542,262 535,262 297,494 557,959 56,000 26,982 22,697 34 $’000 (7,000) 61,938 2007 90,114 6,000 1,000 2,156 578 27,145 18,122 $’000 2007 33 – 151 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Details of the subsidiaries are as follows:

Effective equity interest held by the Group 2008 2007 % %

(a) singapore Technologies Aerospace Ltd and its subsidiaries 100 100

ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100 ST PAE Holdings Pty Ltd 100 100 Pacific Flight Services Pte Ltd 100 100 Pacific Flight Services Pty Ltd 100 100 ST Aviation Training Academy Pte. Ltd. and its subsidiary: 66 66 Aviation Training Academy Australia Pty Ltd and its subsidiary: 66 66 ST Aviation Training Academy (Australia) Pty Ltd 66 – ST Aerospace Engines Pte Ltd and its subsidiary: 100 100 ST Aerospace Technologies (Xiamen) Company Limited 80 – ST Aerospace Systems Pte Ltd 100 100 ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100 iShopAero Pte Ltd 100 100 Guangzhou Aerospace Technologies and Engineering Company Limited 100 100 ST Aerospace International Structures Pte Ltd 100 100 ST Aviation Resources Pte Ltd and its subsidiary: 100 100 ST Aviation Resources 1 Limited 100 100 ST Aviation Services Co Pte Ltd 80 80 Visiontech Investment Pte Ltd 100 100 Singapore Technologies Engineering (Europe) Ltd 100 100 Singapore Aerospace Kabushiki Kaisha 100 100 Visiontech Engineering Pte Ltd 51 51 ST Airport Ground Services Pte Ltd 100 100 Bournemouth Aviation Services Company Limited 81 81 Singapore British Engineering (Pte) Ltd 51 51 ST Aerospace Solutions (Europe) A/S and its subsidiary: 100 71.3 Airline Rotables (UK Holdings) Limited and its subsidiary: 100 71.3 Airline Rotables Limited 100 71.3 Panama Aerospace Engineering Inc. 100 100

152 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 singapore T (b) TranSys Ltd Pte STELOP Ltd. Pte. Ripple SystemsPty Ltd Intelect Technologies, Incorporated ST Electronics (Taiwan) Limited iTS Technologies Ltd Pte ST Electronics-PCI Co.,Ltd ST Electronics (Shanghai) Co.,Ltdanditssubsidiary: iDirect Ltd. AsiaPte. ST Electronics (Sichuan) Co.,Ltd ST Electronics (Satcom &Sensor Ltd. anditssubsidiaries: Systems)Pte. Telematics Wireless USA Corp Telematics Wireless Ltd.anditssubsidiary: STELCOMMS Ltd. Pte. DataMarkTechnologies Ltd Pte ST Electronics (Info-Security) Ltd.anditssubsidiary: Pte. ST Electronics (Info-Comm Ltd.anditssubsidiaries: Systems)Pte. MERITS Technologies LLP BrightspotInteractive LearningInc. BrightspotInteractive Ltd.anditssubsidiary: LearningPte. STET Ltd.(formerly MaritimePte. known asSTET MaritimeBureau Ltd.) Pte. STET Ltd. MaritimeEducationPte. ST Education&Training PrivateLimitedanditssubsidiaries: Antycip SimulationSAS Antycip SimulationLimitedanditssubsidiary: ST Electronics Ltd. (DigitalMedia)Pte. ST Electronics (Training Ltd.anditssubsidiaries: &SimulationSystems)Pte. PM-B(China)Ltd PTPM-BIndonesia PMBProject ManagementBusiness SdnBhd Ltdanditssubsidiaries: PM-BPte ST Electronics Ltd. (e-Services)Pte. ST Electronics (Software Services)Limited INFA SystemsLimited ST Electronics (Info-Software Ltd.anditssubsidiaries: Systems)Pte. SEEL Electronic &EngineeringSdnBhd echnologies Electronics Limitedanditssubsidiaries 50.05 93.93 93.93 78.57 Effective equity interest 61.12 2008 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 % 70 70 70 70 70 70 70 93 93 51 51 51 51 51 held by the Group 50.05 78.57 93.93 93.93 61.12 2007 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 % 70 70 70 70 70 70 70 51 51 51 51 – – – – 153 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Effective equity interest held by the Group 2008 2007 % %

Singapore Ordnance Engineering Pte. Ltd. 100 100 Mobility Systems Pte Ltd and its subsidiaries: 100 100 Silvatech Global Systems Limited 100 100 Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100 Kinetics Drive Solutions Inc. 100 100 STA Inspection Pte Ltd and its subsidiary: 100 100 JuzclickCar.com Pte Ltd * – 90 Singapore Commuter Private Limited 100 100 Securedge Pte. Ltd. 100 100 STA Investment Pte Ltd 100 100 ST Kinetics International Pte. Ltd. and its subsidiary: 100 100 VT Specialized Vehicles, S.A. de C.V. 100 – STA Detroit Diesel-Allison (Singapore) Pte Ltd 100 100 ST Kinetics Integrated Engineering Pte. Ltd. (formerly known as Expert Systems Pte Ltd) 100 100 Singapore Test Services Private Limited 100 100 ST Kinetics Pte. Ltd. (formerly known as SAO Industrial Services Pte Ltd) 100 100 Advanced Material Engineering Pte. Ltd. and its subsidiary: 100 100 Advanced Pyrotechnic Materials Private Limited 51 51 Unicorn International Pte Limited 100 100 Allied Ordnance of Singapore (Pte) Limited 100 100 Ordnance Development and Engineering Company of Singapore (1996) Private Limited 100 100 Autonomous Technology Pte Ltd and its subsidiary: 100 100 Guizhou Jonyang Kinetics Co., Ltd. 60 60 Kinetics Systems (Shanghai) Co., Ltd. 100 100 STAR Automotive Center (Zhejiang) Co., Ltd. 100 86.24 STAR Automotive Center (Guangzhou) Co., Ltd. 100 100

(d) singapore Technologies Marine Ltd and its subsidiary 100 100

STSE Engineering Services Pte Ltd and its subsidiary: 100 100 ST Environmental Services & Technologies Co. Ltd 100 –

154 subsidiaries (continued) 13.

(Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (i) (h) stLtd SynthesisPte (g) singapore T (f) (e) * ^

During theyear, thisentitywas struck offfromtheRegistrar withtheAccounting&Corporate RegulatoryAuthority. These entitiesweredissolved duringtheyear. Kaz-ST EngineeringBastauLimitediability Partnership Fusion Halter VT Marine,Inc. Vision Technologies Marine, Inc.anditssubsidiary: SpecializedVehicles VT Corporation Force Feed Loader Parts,Inc.^ Rosco Manufacturing Company LeeBoy Rents, Inc.^ LeeBoy, VT Inc.anditssubsidiaries: LeeHoldingCompany ^anditssubsidiary: Dimensions, Inc. VT Vision Technologies LandSystems,Inc.anditssubsidiaries: MÄKTechnologies, Inc. MiltopeCorporation Vision Technologies Kinetics,Inc.anditssubsidiaries: iDirect Government Technologies, Inc. iDirect Singapore Ltd. Pte. iDirect InternationalCorporation anditssubsidiary: iDirect Italy srl iDirect UKLimited iDirect HongKong Limited iDirect, VT Inc.(formerly known asiDirect, Inc.)anditssubsidiaries: Vision Technologies Electronics, Inc.anditssubsidiary: SanAntonioAerospace LP SanAntonioAerospace GP, LLC DalFort Aerospace, L.P. DalFort Aerospace GP, Inc. ST MobileAerospace Engineering,Inc. Vision Technologies Aerospace, Incorporated anditssubsidiaries: Systems,Inc. VT SA Supplies (USA) Inc. Singapore Technologies Engineering(USA) Inc. Vision T T ech Pte. Ltd. ech Pte. echnologies Systems,Inc.anditssubsidiaries echnologies Ltd DynamicsPte 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Effective equity interest 2008 80 51 % – – – held by the Group 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 2007 80 51 % 155 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Further details of the subsidiaries are as follows:

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

Singapore Technologies Aerospace Ltd Investment holding and provision of engineering, Singapore marketing and engineering support services

ST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft Singapore

ST PAE Holdings Pty Ltd Investment holding Australia

Pacific Flight Services Pte Ltd Providing air transport services Singapore

Pacific Flight Services Pty Ltd Flight training school operation and aircraft Australia management

ST Aviation Training Academy Pte. Ltd. Flight training school operation and aircraft Singapore management

Aviation Training Academy Australia Flight training school operation and aircraft Australia Pty Ltd management

ST Aviation Training Academy (Australia) Flight training school operation and aircraft Australia Pty Ltd management

ST Aerospace Engines Pte Ltd Repair and overhaul of aircraft engines Singapore

ST Aerospace Technologies (Xiamen) Repair and overhaul of aircraft engines People’s Republic Company Limited of China

ST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components Singapore

ST Aerospace Supplies Pte Ltd Trading, Maintenance-By-The-Hour services for Singapore component and repair management and warehousing services for aircraft equipment, parts and components

iShopAero Pte Ltd Trading, e-commerce and information technology Singapore related services for the aerospace industry

Guangzhou Aerospace Technologies and Import/export for aircraft component leasing, repair, People’s Republic Engineering Company Limited exchange and trading, warehousing, packaging, of China distribution and other related services

ST Aerospace International Structures Designing, developing and manufacturing aircraft, Singapore Pte Ltd engines, equipment, accessories, components and such other parts

ST Aviation Resources Pte Ltd Investment holding Singapore

ST Aviation Resources 1 Limited # Investment holding and aircraft leasing business British Virgin Islands

ST Aviation Services Co Pte Ltd Repair, maintenance, modification and servicing of Singapore commercial aircraft

156 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 ST Electronics (Software Services) Limited INFA SystemsLimited SEEL Electronic &EngineeringSdnBhd Singapore Technologies Electronics Limited Airline Rotables (UKHoldings)Limited ST Aerospace Solutions(Europe) A/S Bournemouth Aviation ServicesCompany ST AirportGround Ltd ServicesPte ST Electronics Ltd. (e-Services)Pte. Ltd. Pte. ST Electronics (Info-Software Systems) Panama Aerospace Engineering Inc. Airline Rotables Limited Singapore Ltd BritishEngineering(Pte) Ltd Visiontech EngineeringPte (Europe) Ltd Singapore Technologies Engineering Visiontech Investment Ltd Pte Singapore Aerospace Kabushiki Kaisha Name ofsubsidiary Limited +  # Principal activities agencies andenterprises Providing shared services to government ministries, development and turnkey solutions Providing IT outsourcing services, software applications and distributionofsystem equipment support ofoperational andcomputer systems andsales developing systems integration, the maintenanceand Provision for servicesinconsulting, designingand services critical systems andprovision ofrelated maintenance Design, development andsupply ofreal-time/mission equipment services andmaintenancecalibration ofelectronic electronic engineeringandsystems integration Sales ofelectronic instrumentsandequipment, defence electronic andcommunication systems and maintenanceof transportation, building, intelligent Design, development, supply, integration installation, Repair andmaintenanceofaircraft services for aircraft Providing component managementandsupport Investment holding maintenance andlogistics services Supply aircraft components, includingpurchase, development ofnewproducts andsystems and associated equipmentandparticipatingin the Marketing andsaleofarange ofdefenceproducts Dormant Dormant equipment andcomponents maintenance andmodificationofaircraft, aircraft Provision ofengineeringservices for the repair, Providing marketing services to the Group Group Providing marketing andinvestment services to the Investment holdinganddealing place ofbusiness People’s Republic incorporation/ Country of Republic of Hong Kong Singapore Singapore Singapore Singapore Singapore Singapore Singapore Denmark Malaysia of China Panama Japan UK UK UK UK 157 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

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

PM-B Pte Ltd Relate to mechanical, electrical and engineering works Singapore to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PMB Project Management Business Relate to mechanical, electrical and engineering works Malaysia Sdn Bhd to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PT PM-B Indonesia Relate to mechanical, electrical and engineering works Indonesia to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

PM-B (China) Ltd Relate to mechanical, electrical and engineering works People’s Republic to design, build and provide facility management of China services for mission critical environments such as data centres, disaster recovery and business continuity sites

ST Electronics (Training & Simulation Design, development, supply, integration and Singapore Systems) Pte. Ltd. maintenance of training and simulation systems, exploitation, production, distribution and licensing of digital media intellectual properties and distribution of games, edutainment

ST Electronics (Digital Media) Pte. Ltd. Design, development and manufacture of computers Singapore and data processing systems, provision of services for the processing and maintenance of data and information, and production of animation pictures

Antycip Simulation Limited Investment holding UK

Antycip Simulation SAS A value added reseller/distributor of simulation France products and provision of simulation sub-system/ components solution

ST Education & Training Private Limited Provision of education and training, management and Singapore consultancy services for operational and technical domains of maritime, aerospace and land services and industries

STET Maritime Education Pte. Ltd. Provision of education and training for operational and Singapore technical domains of the maritime industry

STET Maritime Pte. Ltd. (formerly known as Provision of marine audit, survey and consultancy Singapore STET Maritime Bureau Pte. Ltd.) services

Brightspot Interactive Learning Pte. Ltd. Investment holding Singapore

Brightspot Interactive Learning Inc. Provision of training services such as soft skills and People’s Republic management skills to corporations, and other courses of China to individuals

158 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 ST Electronics (Sichuan) Co.,Ltd Ltd. Pte. ST Electronics (Satcom &Sensor Systems) iDirect Ltd. Asia Pte. Telematics Wireless Ltd. STELCOMMS Ltd. Pte. DataMark Technologies Ltd Pte ST Electronics (Info-Security) Ltd. Pte. MERITS Technologies LLP Telematics Wireless USA Corp Ltd. Pte. ST Electronics (Info-Comm Systems) Name ofsubsidiary # Principal activities Authorization support customers for paymentsandReturn Material the USA andalocalpointofcontact for Telematics’ Serves assalesarmfor Telematics Wireless Ltd.in communication systems Design, manufacture &servicesfor electronics and telecommunication technology and other related apparatus andconsultant serviceof Manufacturing andmaintenanceofcommunication and defenceelectronics industries repairs andmaintenancefor the telecommunications systems, system integration andprovision ofrelated Manufacture ofmicrowave components andsub- water meters toll-road systems, andelectronic systems for reading identification andprovision of information, electronic equipment andcommunications for purposesof locating and thwarting car thefts, vehicular wireless systems for managing vehicular fleets,systems for stationary objects,people,equipmentandmerchandise, for locatinganddirecting vehicles, other mobileand Development, manufacture, andmarketing ofproducts and subsystems market and trade incommunications related products area ofcommunications network andsystems and to To undertake design andintegration ofprojects in the and related solutions Development andprovision ofdigitalwater-marking services support for information security products, solutionsand Design, development, saleandprovision of technical electronics management system, info appliances anddefence GPS-based fleetmanagementsystem, traffic manufacturing andsaleofcommunication equipment, Design anddevelopment, systems integration, solutions related to these products andservices. products andmaintenanceof andservices.Installation Marketing andsaleofeducationsimulation place ofbusiness People’s Republic incorporation/ Country of Kazakhstan Singapore Singapore Singapore Singapore Singapore Singapore of China Israel USA 159 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

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

ST Electronics (Shanghai) Co., Ltd Development and manufacturing of computer control People’s Republic and management systems, microwave control of China systems, simulation and training systems, security systems, MRT passenger information systems, MRT autofare collection system, MRT platform screen door system and related software. Provision of related technical consultation and aftersales services and sale of in-house products.

ST Electronics-PCI Co., Ltd Computer software and hardware R&D and People’s Republic manufacture, computer supervise and control of China management system, microwave system, simulation and training system, security management system and peripheral devices, selling in-house products, and offering relevant system integration and skill consultation and after-sales service. Electronic technologies, industry automatic equipment R&D, electronic consulting service, system integration and network engineering installation.

iTS Technologies Pte Ltd Investment holding Singapore

ST Electronics (Taiwan) Limited Provide integration for large-scale system projects in Taiwan rail, expressway and intelligent building management solutions

Intelect Technologies, Incorporated # Development and supply of a family of multi-access USA optical networking equipment

Ripple Systems Pty Ltd α Design, develop and implement innovative software Australia systems for technically challenging integration applications. Key markets for these applications are rail command and control (ISCS) and intelligent transport systems (ITS) for road infrastructure.

STELOP Pte. Ltd. Design and development, manufacturing, maintaining Singapore and sale of electro-optical products and systems and the provision of related services

TranSys Pte Ltd Design, development, distribution, maintenance and Singapore marketing of railway related products

Singapore Technologies Kinetics Ltd Provision of design and engineering services, Singapore manufacture, sales and knowhow transfer of military and commercial vehicles, automotive subsystems, armament, weapons, weapon systems, ammunition and explosives and the provision of engineering services for assembly, upgrading/modifications, maintenance, repair and overhaul of vehicles and weapon systems, and trading in motor vehicles, equipment, vehicle spares and related accessories

160 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Kinetics Drive SolutionsInc. Silvatech SystemsCorporation Ltd Pte VT SpecializedVehicles,VT S.A.deC.V. ST Ltd. KineticsInternationalPte. STA Investment Ltd Pte Securedge Ltd. Pte. Singapore Commuter PrivateLimited STA Ltd InspectionPte Singapore Test ServicesPrivateLimited (formerly known Ltd) asExpertSystemsPte ST Kinetics Integrated Ltd. EngineeringPte. Ltd Pte STA Detroit Diesel-Allison (Singapore) Silvatech GlobalSystemsLimited Mobility Ltd SystemsPte Singapore Ordnance Ltd. EngineeringPte. Name ofsubsidiary #

# Ψ equipment powered by suchdrives, globally mechanical continuously variable transmissions, and hydraulic drive, hydro-mechanical andelectro- licencees of technologies andproducts usingelectro- Designing, manufacturing, marketing andmanaging technologies, andequipmentpowered by suchdrives mechanical continuously variable transmissions hydraulic drive, hydro-mechanical andelectro- Owns propertythe intellectual rights to electro- drop-frame truck bodiesand trailers Manufacture andmarketing ofspecialisedaluminium Investment holding Investment dealing and the provision ofequipmentmaintenanceservices manufacture andsalesofsecurity related products, Provision ofdesignandengineering services, Dormant conducted online via the internet and purchase ofmotor vehicle spare parts mainly well as to actas the commission agentfor the sale of independentdamageassessment servicesas vehicle inspectionproject management, provision motor cars, busesandmotorcycles provision of Inspection ofheavy goods vehicles, light vehicles, by suchdrives transmissions technologies, andequipmentpowered and electro-mechanical continuously variable sales ofelectro-hydraulic drive, hydro-mechanical Research anddevelopment, manufacturing and Principal activities tests, inspection,certificationandrelated services Provision ofprofessional engineering consultancy, defence andcommercial markets Provision ofcustomisedsolutions,products for services services, fieldrepair andmaintenance related products and the provision of technical Assembling andmarketing ofdieselenginesand Investment holding Workshop andprovision ofengineeringservices place ofbusiness incorporation/ British Virgin Country of Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Canada Islands Mexico 161 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

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

ST Kinetics Pte. Ltd. (formerly known as Dormant Singapore SAO Industrial Services Pte Ltd)

Advanced Material Engineering Pte. Ltd. Provision of design and engineering services, Singapore manufacture, sales, disposal and knowhow transfer of precision munitions, ammunition, armament, weapon systems, military equipment, explosives, hand-grenades, thunder-flashes, pyrotechnic products and gunpowder and the provision of engineering services for assembly, upgrading/modifications, maintenance, repair and overhaul of ammunition and weapon systems, and related services

Advanced Pyrotechnic Materials Manufacture and sale of pyrotechnic products Singapore Private Limited

Unicorn International Pte Limited Trading and marketing Singapore

Allied Ordnance of Singapore (Pte) Limited Provision of design and engineering services, Singapore manufacture, sales and knowhow transfer of armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Ordnance Development and Engineering Provision of design and engineering services, Singapore Company of Singapore (1996) Private manufacture, sales and knowhow transfer of Limited armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Autonomous Technology Pte Ltd Investment holding Singapore

Guizhou Jonyang Kinetics Co., Ltd. Design, manufacture, sales and services support People’s Republic of construction, engineering and industrial- of China related machinery and accessories, provide engineering consultancy services to engineering and manufacturing companies, provide rental of own-manufactured machinery and accessories, be a contract manufacturer of construction, engineering and industrial-related machinery and accessories, as well as supplying of casting and forging parts for all industries

Kinetics Systems (Shanghai) Co., Ltd. Manufacture of vehicle drive systems, industrial drive People’s Republic motors, small external combustion engines and sale of of China self manufactured products

162 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 San AntonioAerospace GP, LLC DalFort Aerospace, L.P. DalFort Aerospace GP, Inc. ST Mobile Aerospace Engineering,Inc. Vision Technologies Aerospace, Incorporated Systems,Inc. VT SA Supplies (USA) Inc. Inc. Singapore Technologies Engineering(USA) Co.Ltd. ST Environmental Services&Technologies STSE Ltd EngineeringServicesPte Vision Technologies Systems, Inc. Singapore Technologies MarineLtd Co.,Ltd. STAR Automotive Center (Guangzhou) STAR Automotive Center (Zhejiang)Co.,Ltd. Name ofsubsidiary # β # # β ++ # # # # # # Investment holding Dormant Dormant Repair andmaintenanceofaircraft Investment holding and providing investment services to the Group Investment holdingandproviding investment services Dormant Dormant Investment holding Principal activities information information, consulting servicesfor commercial consulting servicesfor environmental projects and export andrelated business ofsimilar products; environmental protection projects; wholesale,import services andconsulting servicesofequipmentsfor Design, development, manufacturing, sales,after-sales energy managementsolutions consultancy servicesinenvironmental &renewable environmental infrastructures andprovide planning, Design, manufacture, maintain andoperate management services the provision ofengineeringconsultancy and technical military andcommercial engineeringequipmentand vessels, design,integration, fabrication, of installation Construction andrepair ofnaval andcommercial technical support, etc. consultation, tow truck serviceandafter sales of automotive spare parts, training, technology beautifying anddecorating, trading andsupplying and maintenance,damagefixing,automotive fixing, maintaining,service,automotive examination Provide automotive services,includingautomotive technical support, etc. consultation, tow truck serviceandafter sales of automotive spare parts, training, technology beautifying anddecorating, trading andsupplying and maintenance,damagefixing,automotive fixing, maintaining,service,automotive examination Provide automotive services,includingautomotive place ofbusiness People’s Republic People’s Republic People’s Republic incorporation/ Country of Singapore Singapore of China of China of China USA USA USA USA USA USA USA USA USA 163 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

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

San Antonio Aerospace LP Repair and maintenance of aircraft USA

Vision Technologies Electronics, Inc. # Investment holding USA

VT iDirect, Inc. (formerly known as iDirect, Design, develop and market two-way internet protocol USA Inc.) # – (IP) based broadband satellite networking solutions that deliver voice, data and video services to enterprise and government customer locations worldwide

iDirect Hong Kong Limited Markets two-way internet protocol – (IP) based Hong Kong broadband satellite networking solutions

iDirect UK Limited Markets two-way internet protocol – (IP) based UK broadband satellite networking solutions

iDirect Italy srl # Markets two-way internet protocol – (IP) based Italy broadband satellite networking solutions

iDirect International Corporation # Markets two-way internet protocol – (IP) based USA broadband satellite networking solutions

iDirect Singapore Pte. Ltd. Markets two-way internet protocol – (IP) based Singapore broadband satellite networking solutions

iDirect Government Technologies, Inc. # Design, develop and market two-way internet USA protocol – (IP) based broadband satellite networking solutions that deliver voice, data and video services to government customers

Vision Technologies Kinetics, Inc. # Investment holding USA

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

MÄK Technologies, Inc. # Develop and supply software products and services USA for Networked Synthetic Environments

Vision Technologies Land Systems, Inc. # Investment holding USA

VT Dimensions, Inc. # Investment holding and licensing of intellectual USA properties

VT LeeBoy, Inc. # Manufacture of asphalt paving and road maintenance USA equipment including LeeBoy branded asphalt pavers, motor graders, compactors, force feed loaders, asphalt maintainers/patchers, tack distributors, and Rosco branded asphalt distributors, street flushers, brooms and asphalt spray patchers

Rosco Manufacturing Company # @ Dormant USA

164 subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 @ Panama Aerospace EngineeringInc. Airline Rotables Limited Airline Rotables (UK Holdings)Limited ST Aerospace Solutions(Europe) A/S Singapore Technologies Engineering (Europe) Ltd Guangzhou Aerospace Technologies andEngineeringCompany Limited ST Aerospace Technologies (Xiamen)Company Limited Aviation Training Academy Australia Pty Ltd Pacific FlightServicesPty Ltd ST PAE HoldingsPty Ltd Name ofsubsidiary LLP, Singapore, except for the following: All subsidiaries that are required to beauditedunder the law in the country ofincorporation are auditedby Ernst& Young ++ β Ψ α +  # Partnership Kaz-ST EngineeringBastauLimitedLiability FusionTech Ltd. Pte. ST Ltd SynthesisPte Singapore Technologies Ltd DynamicsPte HalterVT Marine,Inc. Vision Technologies Marine,Inc. VT SpecializedVehiclesVT Corporation Name ofsubsidiary

This entityhasfiledanoticeofintenttodissolve duringtheyear andwas dissolved subsequently inJanuary2009. This entityceased operations inOctober2003. These entitiesareinprocess ofdissolution. This entitywas incorporated during theyear andwas notrequired tobeaudited asatthedateofthisreport. This entityceased businessactivities inOctober2008andhassincecommenced members’ voluntary liquidation. This entityceased operations inDecemberandhascommencedmembers’ 2006 voluntary liquidation inDecember 2007. Chapter. 50. Act, Companies the of 344 Section under Register the off subsidiary the strike 2000.WillapplicationThisceasedoperationssubmitto in entity Not requiredtobeaudited underthelawincountryofincorporation. # # # # services Provision ofIT, engineeringdefenceandrelated services engineering equipmentandprovision ofengineering vessels, design,integration, fabrication, of installation Construction andrepair ofnaval andcommercial to the Marinesector Investment holdingandproviding investment services bodies and trailers andspeciality vehicle cabs drop-frame truck bodies, trailers, refrigerated truck Manufacture andmarketing ofspecialisedaluminium Principal activities Investment holding services Provision ofone-stop total integrated logistic support and development and technology acquisition Technology development, advancedconcept design Ernst &Young, Panama Ernst &Young, Cambridge Ernst &Young, Cambridge Ernst &Young, Denmark Ernst &Young, Cambridge Ernst &Young, Guangzhou Ernst &Young, Xiamen PKF Chartered Accountants &Business Advisors Ernst &Young, Sydney Ernst &Young, Perth Name ofaccounting firm place ofbusiness incorporation/ Country of Kazakhstan Singapore Singapore Singapore USA USA USA 165 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

13. subsidiaries (continued)

Name of subsidiary Name of accounting firm

San Antonio Aerospace LP Ernst & Young, San Antonio SEEL Electronic & Engineering Sdn Bhd Ernst & Young, Kuala Lumpur INFA Systems Limited Ernst & Young, Hong Kong ST Electronics (Software Services) Limited Ernst & Young, Shenzhen PMB Project Management Business Sdn Bhd Ernst & Young, Kuala Lumpur PT PM-B Indonesia Ernst & Young, Jakarta PM-B (China) Ltd Ernst & Young, Beijing Antycip Simulation Limited Ernst & Young, United Kingdom Antycip Simulation SAS Ernst & Young, France Brightspot Interactive Learning Inc. Ernst & Young, Beijing MERITS Technologies LLP Ernst & Young, Kazakhstan Telematics Wireless Ltd. Ernst & Young, Israel ST Electronics (Sichuan) Co., Ltd Ernst & Young, Chengdu ST Electronics (Shanghai) Co., Ltd Ernst & Young, Shanghai ST Electronics-PCI Co., Ltd Ernst & Young, Guangzhou ST Electronics (Taiwan) Limited Ernst & Young, Taiwan Ripple Systems Pty Ltd Ernst & Young, Perth iDirect Hong Kong Limited Baker Tilly HK Ltd iDirect UK Limited PKB Chartered Accountants Guizhou Jonyang Kinetics Co., Ltd. Ernst & Young, Guangzhou ST Environmental Services & Technologies Co. Ltd Ernst & Young, Shanghai

(a) During the financial year, the Group incorporated the following companies:

Country of incorporation/ place Equity interest Date of Name of company of business held incorporation %

ST Aerospace Technologies (Xiamen) Company People’s Republic 80 25 January 2008 Limited of China

iDirect Asia Pte. Ltd. Singapore 100 21 April 2008

MERITS Technologies LLP Kazakhstan 51 21 August 2008

VT Specialized Vehicles, S.A. de C.V. Mexico 100 26 February 2008

ST Environmental Services & Technologies Co. Ltd People’s Republic 100 24 June 2008 of China

166 14. subsidiaries (continued) 13. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Reserves Share ofnetassets acquired on acquisitionGoodwill written off Unquoted shares, atadjustedcost Profits Share ofpost-acquisition: Impairment inassociated companies andjoint ventures The investment inassociated company of$50,000 in the Company represents the cost ofinvestment in 2006 Ltd. JVPte. (c) (b) Associa Co.,Ltd. STAR Automotive Center (Zhejiang) subsidiary Antycip SimulationLimitedandits Pty Ltd ST Aviation Training Academy (Australia) anditssubsidiaries ST Aerospace Solutions(Europe) A/S subsidiary Antycip SimulationLimitedandits Name ofcompany Name ofcompany During the financialyear, the Group acquired additional equity interests in the following companies: During the financialyear, the Group acquired the following companies: ted companies andjointventures acquired acquired Interest Interest 13.76 28.7 60 66 % % 33 Consideration Interest after acquisition $’000 5,216 100 100 % 93 147 Consideration Net tangible acquired 2,235 assets $’000 $’000 60,259 263,078 175,892 175,597 101,315 (12,616) $’000 2,411 2008 (1,218) 777 – (295) Group

Net tangible assets Date ofacquisition 29 February 2008 26 August 2008 acquired 59,452 $’000 267,506 100,894 188,294 190,031 1,636 (16,241) $’000 2007 (5,441) (1,737) 23 167 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

impairment in associated companies and joint ventures

Movements in impairment in associated companies and joint ventures during the year are as follows:

Group Note 2008 2007 $’000 $’000

At beginning of the year 5,441 9,845 Write-back to income statement 4 – (4,400) Provision utilised (4,113) – Disposal of an associated company (110) – Translation difference – (4) At end of the year 1,218 5,441

In the prior year, the Group wrote-back impairment of $4.4 million for one of its associated companies following a divestment arising from a share swap transaction.

The summarised financial information of the associated companies is as follows:

Group 2008 2007 $’000 $’000

Results Turnover 752,115 723,928

Net profit for the year 83,687 95,414

Assets and liabilities Non-current assets 311,918 327,411 Current assets 550,381 521,152 Current liabilities (257,363) (221,851) Non-current liabilities (26,409) (28,763) 578,527 597,949

168 14. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Non-current liabilities Current liabilities Current assets Non-current assets Assets andliabilities Expenses Income Income andexpenses (a) The Group’s share of the joint ventures’ results, assets andliabilitiesare asfollows: Associa Madrid Aerospace ServicesS.L. Limited Eurocopter SouthEastAsiaPrivate Ltd Pte Composite Technology International Overhaul Ltd Pte Singapore Precision Repair and Company Limited Shanghai Technologies Aerospace Name ofassociated company Details of the associated companies are asfollows: 1988 Ltd. JVPte. LtdUnitTrust Aerospace EngineeringServices Pty Aerospace EngineeringServices Pty Ltd ted companies and jointventures (continued) ++  helicopters maintaining andoverhaulingSelling, of rotor blades Repairing andrebuilding helicopter Dormant components helicopter landinggears anditsrelated Repair andoverhaul ofaircraft and maintenance business repair, overhaul andother related Aircraft andcomponent maintenance, gears anditsrelated components Repair andoverhaul ofaircraft landing Principal activities Trustee ofunit trust fund Maintenance andservicingofaircraft place ofbusiness People’s Republic incorporation/ Country of Singapore Singapore Singapore Singapore (26,025) (37,640) Australia Australia of China 25,644 43,919 $’000 Spain 2008 3,202 8,638 (843) Group

33.33 Effective equity interest heldby 2008 % the Group 50 50 50 50 50 25 49 (25,089) (16,790) $’000 23,132 2007 19,974 9,566 3,335

–

(111) 33.33 2007 % 50 50 50 50 25 49 169 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

(a) Details of the associated companies are as follows (continued):

Country of Effective equity incorporation/ interest held by Name of associated company Principal activities place of business the Group 2008 2007 % %

Turbine Coating Services Pte Ltd Repair, refurbishment and upgrading Singapore 24.5 24.5 of aircraft jet engine turbine blades and vanes

Turbine Overhaul Services Pte Ltd Repair and service of gas and steam Singapore 49 49 turbine components

COMAT Training Services Pte Ltd Operating of a computer training Singapore 45.47 45.47 school, providing training in computer software and applications

iWOW Technology Pte Ltd To carry out research and Singapore 21.74 21.74 development, consultancy services in telecommunication, electrical and related fields

Knowledge Alive Pte. Ltd. Offer technologically-driven learning Singapore 45.47 45.47 and knowledge solutions, products and services to corporate, tertiary and workforce markets

Mobile Solutions and Payment Mobile-commerce and mobile- Singapore – 21.57 Services Pte Ltd @ commerce related activities

mPayment Pte Ltd * To provide mobile payment and mobile Singapore – 31.78 commerce solutions and applications for business communities and consumers

PM-B Project Management Relate to mechanical, electrical and Thailand 34.3 34.3 Business (Thailand) Ltd engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Polarsat Holdings Inc β Development, manufacturing and Canada – 26.67 marketing of multimedia VSAT (Very Small Aperture Terminals) and Satcom satellite networks

Prescient Systems & Technologies Business of developing, producing and Singapore 47.84 47.84 Pte. Ltd. marketing non-real time and real time instrumentation systems for defence and commercial applications; design and development of training centres and provision of managed services

170 14. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (a) Associa AquaGen International Pte Ltd AquaGen InternationalPte Ltd Pte Anchorville Timoney HoldingsLimited Nusantara Technologies Sdn.Bhd. Ltd Pte Defence Electronics ofSingapore Ltd CityCab Pte Ximaera Technologies CanadaInc. Limited* WizVision (HK)Pte Ltd. WizVision Pte. Trusted HubLtd ST LogiTrack Ltd* Pte NanoScience Innovation Ltd Pte 2006 Ltd. JVPte. PT SSE-Van der Horst Indonesia* Name ofassociated company Details of the associated companies are asfollows (continued): RF Korea Inc. ted companies and jointventures (continued) ℑ ++ Ψ Ψ ϕ and aerospace engineeringsectors component supply for the automotive Design andprototyping servicesand calibration gauging survey andpressure gauge services, ultrasonic flawdetectionand Provision ofnon-destructive testing Manufacture offuses facilities and travel related services premier busservice,charge card Rental of taxis andprovision of Research anddevelopment Investment holding accessories services and trading ofcomputer Providing information technology and e-commerce environment for secured transactions Provision ofanintegrated trusted the logistics andrelated industries frequency identificationapplications in Development andsalesofradio equipments communication devices andrelated Manufacture wireless andsell intellectual propertiesintellectual materials, devices, equipmentand fine structure, especially nano-scale, Research anddevelopment ofultra Dormant services Provision ofprecision engineering Dormant Dormant Principal activities place ofbusiness incorporation/ Country of Republic of Hong Kong Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Indonesia Malaysia Canada Ireland Korea – – – – – – 27.06 Effective equity interest heldby 2008 22.8 46.5 21.8 % 50 25 49 49 49 the Group

27.06 39.06 2007 22.8 22.8 46.5 21.8 % 22 50 25 25 30 49 49 49 24 171 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

14. Associated companies and joint ventures (continued)

(b) Details of joint ventures are as follows:

Country of Effective equity incorporation/ interest held by Name of joint venture Principal activities place of business the Group 2008 2007 % %

GFM Electronics S.A. de C.V. Distribution and sales of high Mexico 50 50 technology systems, services and products, in the communications area, as well as electronics systems, principally closed circuits and alarms for airports, malls, stadiums and highways

ATREC Pte. Ltd. Research and technology development Singapore 50 50 in advanced materials for both defence and commercial applications

Beijing Zhonghuan Kinetics Heavy Develop, manufacture and sale of People’s Republic 50 50 Vehicles Co. Ltd. specialised heavy-duty vehicles of China and sale of related spare parts and provision of relevant technical consultancy and after sale technical support services

SMART Systems Pte Ltd Life systems integration of weapon Singapore 50 50 system

Takata CPI Singapore Pte Ltd Manufacture of pyrotechnic Singapore 49 49 components for seatbelts and air bags used in motor vehicles

Halter-Bollinger Joint Venture LLC ϕ To bid and secure US boat fabrication USA 50 50 contracts for its shareholders

Joint Shipyard Management Services Construction and managing workers’ Singapore 30 30 Pte Ltd dormitories

First Response Marine Pte. Ltd. Ship and boat leasing with operator Singapore 50 – (including chatering)

++ These entities are under members’ voluntary liquidation.  Incorporated during the year and not required to be audited under the law in the country of incorporation. @ This entity is under members’ voluntary liquidation in the prior year and has completed its liquidation in January 2008. * These entities were disposed of during the year. β During the year, following a dilution of interest, Polarsat Holdings Inc became an unquoted investment (previously an associated company). ℑ This investment had been written off during the year. ϕ Not required to be audited under the law in the country of incorporation. Ψ These entities were dissolved during the year.

172 14. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 investments 15. NanoScience Innovation Ltd Pte 2006 Ltd. JVPte. Timoney HoldingsLimited Nusantara Technologies Sdn.Bhd. Ltd CityCab Pte Beijing ZhonghuanKineticsHeavy Vehicles Co.Ltd. Ltd. WizVision Pte. Trusted HubLtd PM-B Project ManagementBusiness (Thailand)Ltd Knowledge Alive Ltd. Pte. iWOW Technology Ltd Pte GFM Electronics S.A.deC.V. COMAT Training Ltd ServicesPte Turbine Overhaul Ltd ServicesPte Turbine Ltd CoatingServicesPte Shanghai Technologies Aerospace Company Limited Eurocopter SouthEastAsiaPrivateLimited Composite Technology Ltd InternationalPte Name ofassociated company/joint venture are auditedby Ernst&Young LLP, Singapore, except for the following: joint venturescompaniesand associatedAll arecountry requiredthat incorporation,in the underof law audited the be to Associa Non-related corporations, atfair value Non-related corporations, atcost Related corporations, atcost Equity shares (Available-for-sale) Unquoted investments Impairmentin value ofquotedinvestments Non-related corporations Equity shares, atfair value (Available-for-sale) Quoted investments ted companies and jointventures (continued) NSC &Associates KPMG, Singapore KPMG, Ireland Deloitte Kassimchan, Malaysia Deloitte andTouche, Singapore Ernst &Young, Beijing B HGan&Co KPMG, Singapore SCI Audit PlusLimited BDO Raffles LW Ong&Co PricewaterhouseCoopers, Mexico BDO Raffles PricewaterhouseCoopers, Singapore PricewaterhouseCoopers, Singapore Ernst &Young, Shanghai KPMG, Singapore Deloitte andTouche, Singapore Name ofaccounting firm (28,587) 25,628 24,492 37,955 $’000 2008 9,368 955 181 Group (Restated) 25,704 24,365 $’000 34,271 31,264 (3,007) 2007 955 384 173 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

15. investments (continued)

Group 2008 2007 $’000 $’000 (Restated)

Unquoted investments (continued) Bonds, at amortised cost (Held-to-maturity), from 2.02% to 3.10% per annum due from 30.9.2010 to 1.11.2010 38,352 –

Venture capital funds and limited partnership, at fair value 2,167 4,043 Convertible loan, at amortised cost * 462 579 Convertible loan to non-related corporations # 700 700 Loan to a related corporation 4,392 4,393 7,721 9,715

Total unquoted investments 71,701 35,419 Impairment in value of unquoted investments (27,653) (27,306) 44,048 8,113

Total investments 53,416 39,377

* A subsidiary extended an interest-free convertible loan to an investee company at a nominal value of US$300,000. The subsidiary is entitled to convert it within 5 years from the date of disbursement of the loan to share equity of the investee company.

# Included in the convertible loan is an amount of $700,000 (2007: $700,000) extended by a subsidiary to an investee company at an interest rate of 1% (2007: 1%) above bank prime rate per annum. The subsidiary was granted an option by the investee company to be able to convert the loan into convertible redeemable preference shares in the investee company.

For those unquoted investments where it is not practicable to determine the fair value, the Group has no intention to dispose such investments at the balance sheet date.

impairment in value of quoted investments

During the financial year, the Group recognised an impairment loss of $25,580,000 (2007: $3,007,000) pertaining to quoted investments reflecting the write-down in the carrying value of the investments with a significant and prolong decline in the market price.

Movements in impairment in value of quoted investments during the year are as follows:

Group Note 2008 2007 $’000 $’000

At beginning of the year 3,007 – Charge to income statement 4 25,580 3,007 At end of the year 28,587 3,007

174 impairmentin value ofunquotedinvestments investments (continued) 15. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 int 16. Utilised Translation difference Charge to income statement At beginning of the year At endof the year Acquisition ofasubsidiary inprior year, asrestated Finalisation ofpurchase priceallocation Acquisition ofasubsidiary inprior year, aspreviously reported

Movements inimpairment value ofunquotedinvestments during the year are asfollows: goodwill (a) angible ssets At beginning of the year Cost Acquisition ofsubsidiariesinprior year, asrestated Finalisation ofpurchase priceallocation Acquisition ofsubsidiariesinprior year, aspreviously reported Acquisition ofadditional interest insubsidiaries Acquisition ofsubsidiariesincurrent year Goodwill writtenGoodwill off Net book value At endof the year Translation difference Impairment written off At beginning of the year Impairment At endof the year Translation difference which hasceased business activitiesinOctober 2008 andhascommenced members’ voluntary liquidation. During the financial year, the Group wrote-off goodwill amounting to $2,415,000 (2007: $nil) for a subsidiary company, Note 4 504,808 503,692 488,148 27,306 27,653 15,544 18,637 $’000 $’000 (2,415) (2,415) (4,165) 2008 2008 2,336 3,128 (678) 363 (16) – – – – – – – Group Group (Restated) (Restated) 504,808 443,633 (24,081) 486,171 (10,799) 27,306 87,308 36,765 93,788 18,503 (2,052) $’000 $’000 (6,480) 18,637 2007 2007 1,445 1,445 (105) 134 – – – – – 175 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

16. intangible assets (continued)

(b) other intangible assets

Commercial Deferred and intellectual Corporate club expenditure property rights membership Brands Others Total $’000 $’000 $’000 $’000 $’000 $’000

The Group Cost At 1.1.2007 6,629 51,314 1,345 88,337 9,986 157,611 Additions 5,513 1 – – – 5,514 Acquisition of subsidiaries in prior year, as previously reported – – – – – – Finalisation of purchase price allocation # – 18,935 – – – 18,935 Acquisition of subsidiaries in prior year, as restated – 18,935 – – – 18,935 Translation difference 1 (2,591) – (5,227) (591) (8,408) At 31.12.2007, as restated and at 1.1.2008 12,143 67,659 1,345 83,110 9,395 173,652 Additions 4,380 – – – 176 4,556 Acquisition of subsidiaries in current year – 1,315 – 2,702 – 4,017 Write-off – (608) (25) – – (633) Translation difference 68 (626) – (968) (89) (1,615) At 31.12.2008 16,591 67,740 1,320 84,844 9,482 179,977

Accumulated amortisation At 1.1.2007 836 7,759 1,039 – 834 10,468 Amortisation for the year 482 4,416 27 1,234 1,397 7,556 Translation difference – (461) – (47) (102) (610) Write-back of impairment – – (27) – – (27)

At 31.12.2007 and 1.1.2008 1,318 11,714 1,039 1,187 2,129 17,387 Amortisation for the year 797 6,805 25 1,265 1,311 10,203 Impairment loss – – 2 – – 2 Write-off – (608) (25) – – (633) Translation difference 7 54 – 1 14 76 At 31.12.2008 2,122 17,965 1,041 2,453 3,454 27,035

Net book value At 31.12.2008 14,469 49,775 279 82,391 6,028 152,942

At 31.12.2007 10,825 55,945 306 81,923 7,266 156,265

# These adjustments relate to the purchase price allocation to goodwill, intangible assets (excluding goodwill) and other assets and liabilities for Telematics Wireless Ltd., which was finalised during the current financial year. The related amortisation on other intangible assets in respect of the previous financial year was not significant to the Group, hence, no amortisation was charged in 2007.

176 Impairmenttestingofgoodwill int 16. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 of capital. Group’saveragethe costweightedalso is which (2007:calculations, for6.5%)6.2% value-in-use at assumed is applied rate discount The reports. industry in included forecasts with consistent are used rates Averagegrowth development. market of expectation its and performance past on based are margins gross budgeted The rates. growthaverage margins and gross budgeted include which budgets financial these in applied factors the determined and considered have The value-in-use calculations use cash flow projections based on financial budgets approved by Management. Management Academy (Australia) Pty LtdandAntycip SimulationLimitedanditssubsidiary asdescribedabove. recoverableThe of amounts CGUsthe are on based exceptdetermined calculations, value-in-use for ST Aviation Training t (c) angible ssets (continued) Net book value * Antycip SimulationLimitedanditssubsidiary * Pacific FlightServicesPty Ltd ST Aviation Training Academy (Australia) Pty Ltd* ST Aerospace Solutions(Europe) A/S PM-B Pte Ltdanditssubsidiaries PM-B Pte MÄK Technologies, Inc. iDirect,VT Inc. DataMark Technologies Ltd Pte Brightspot Interactive Ltd.anditssubsidiary LearningPte. Telematics Wireless Ltd. STELOP Ltd. Pte. STELCOMMS Ltd. Pte. STAR Automotive Center (Zhejiang)Co.,Ltd. VT SpecializedVehiclesVT Corporation LeeBoy,VT Inc. STAR Automotive Center (Guangzhou)Co.,Ltd. Miltope Corporation Carrying amount ofgoodwillallocated toeach oftheCGU: determined been provisionallyhas for andhasnotbeenallocated impairment subsidiarytesting. its and Limited Simulation Antycip and Ltd Pty (Australia) Academy Training AviationST to relation in Goodwill testing. impairment for unit, business individual each accordingto identified Goodwill acquired through business combinations has been allocated to the Group’s cash-generating units (“CGU”) otal intangibleassets The purchase price allocation to goodwill, intangible assets (excluding goodwill) and other assets and liabilities is currently being currently is liabilities and assets other assessed andisexpectedtobefinalised within 12months fromthedateofacquisition(as disclosed inNote13). and goodwill) (excluding assets intangible goodwill, to allocation price purchase The 105,327 488,148 641,090 171,766 85,353 37,099 40,167 25,189 $’000 11,696 2008 2,222 2,204 2,902 1,004 1,732 510 701 147 124 5 Group (Restated) 642,436 105,905 172,709 486,171 25,328 40,387 37,303 86,128 $’000 2007 11,673 2,287 1,732 1,186 224 479 124 701 5 – – 177 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

17. investment properties

Group Note 2008 2007 $’000 $’000

At Cost At beginning of the year 33,490 29,824 Translation difference 232 – Transfer from property, plant and equipment – 3,666 At end of the year 33,722 33,490

Accumulated depreciation At beginning of the year 15,111 12,865 Depreciation charge for the year 5 1,153 1,001 Translation difference 87 – Transfer from property, plant and equipment – 1,245 At end of the year 16,351 15,111

Net book value 17,371 18,379

The property rental income of the Group for the year ended 31 December 2008 from its investment properties, which are leased out under operating leases, amounted to $1,529,000 (2007: $935,000). Direct operating expenses (including repairs and maintenance) arising on the rental-earning investment properties amounted to $174,000 (2007: $146,000).

The fair value of the investment properties as at 31 December 2008 of $18,912,000 (2007: $27,823,000) are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The investment properties held by the Group as at end of the year are as follows:

Location Existing Use Tenure Land area (sq. m.)

Singapore

5 Ubi Close Car showroom cum workshop 30 years from 1.8.1994 6,274

159 Sin Ming Road Amtech Building #04-05 * Warehouse and office building Freehold 575

People’s Republic of China

No. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai Industrial building 50 years from 12.6.2003 to 27.2.2052 15,890

* Carrying amount of $1,389,000 (2007: $1,428,000) is pledged as security for long-term loan.

178 l 18. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Housing andcar loansandadvances to staff Associated company Loans to: Other debtors Trade debtors * ^ Movements inallowance for doubtfulloans to third partiesare asfollows: @ # * Loans andreceivables are carried atamortisedcost andare subject to impairment. Minority shareholder Allowance for doubtfuldebts Joint venture ^ Allowance for doubtfuldebts After 1year Within1year Receivable: Allowance for doubtfulloans Third parties At endof the year Translation difference Write-back to income statement At beginning of the year

ong-term recei vables The loan hasbeen repaidduringtheyear. Loan to a minority shareholder in 2007 is unsecured, interest-free and is repayable within 5 years from the date of the disbursement of the loan. Loan toajointventurebears interestof4% (2007: 4%) perannum,isunsecuredandhasbeen fullyimpairedduringtheyear. parties mayhaveagreed. The loan was writtenofffollowing thedivestmentofassociated company duringtheyear.the as rates other such or annum per 2% plus SIBOR at rate interest an at charged and unsecured is 2007 in company associated an to Loan reclassified totrade debtors. was amount The annum. per 0.5% plus LIBOR at rate interest half-yearly with charged and unsecured are 2007 in debtors trade Long-term @ # (1,620) (9,031) $’000 1,620 9,031 2008 1,147 1,151 1,151 700 451 4 – – – – – – – Group (10,156) 10,156 $’000 3,898 4,397 4,397 2007 1,229 1,629 1,629 (140) 582 499 953 140 Note 4 – – – 5 10,156 $’000 $’000 (1,121) 9,031 2008 2008 180 180 180 180 (4) – – – – – – – – – – – – – Company Group 10,156 11,090 $’000 $’000 2007 2007 (889) (45) – – – – – – – – – – – – – – – – – 179 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

18. long-term receivables (continued)

Included in the loans to third parties are:

(a) an amount of approximately $8,312,000 (2007: $8,312,000) secured by intellectual property rights of that entity and is not expected to be repaid within the next 12 months. Interest is repriced every month and chargeable at the US dollar prime rate plus 2% (2007: 2%) per annum, which is also the effective interest rate. The loan is convertible to shares of that entity, subject to certain terms and conditions. In the prior year, a notice was given to that entity to convert the loan to shares of that entity but the conversion has not been effected as at the end of the year.

No interest income has been accrued for this financial year for the loans stated due to the uncertainty over the collectibility of the interest income.

(b) a bridging loan of $718,750 (US$500,000) (2007: $722,700 (US$500,000)) extended to a third party. The bridging loan is secured by way of a Deed of Debenture, which creates a floating charge over the assets of the third party. This loan is treated as a net investment in the third party and is not expected to be repaid. The loan is stated at cost and has been fully provided for since financial year 2004 due to uncertainty of collectibility. Therefore, it is not practicable to determine its fair value.

(c) an amount of $1,121,000 in the prior year, which is secured by the third party’s investment in a unit trust and the loan is repayable over a period of 12 years commencing from 1996. Interest is chargeable at 15% per annum calculated on the reducing balance basis. The loan has been repaid during the year.

19. Finance lease receivables

The Group entered into finance lease arrangements with customers with terms ranging from 1 year to 10 years (2007: 1 year to 3 years) and effective interest rate of 2.2% to 29.8% (2007: 3.1% to 27.4%) per annum. Lease receivables of $149,000 (2007: $504,000) are either secured by (i) standby letter of credit, (ii) banker’s guarantees or (iii) the leased assets in cases where the legal title of the assets will only be transferred to the customers at the end of the lease term.

Group 2008 2007 $’000 $’000

Gross investment in finance lease Not later than 1 year 13,424 8,021 1 year through 5 years 3,330 1,558 Later than 5 years 2,509 – 19,263 9,579

Unearned interest Not later than 1 year 606 289 1 year through 5 years 746 114 Later than 5 years 300 – 1,652 403

180 19. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 At endof the year Translation difference Provision utilised Charge to income statement At beginning of the year Allowance for doubtfulleasereceivables Doubtful leasereceivables Individually assessed Past dueandnotimpaired Not pastdueandnotimpaired 1 year through 5years 1 year through 5years Not later than 1year Present value ofminimumleasereceivables Later than 5years Not later than 1year Net investment infinancelease Not later than 1year Allowance for doubtfulminimumleasereceivables Later than 5years Finance leases that are individually assessed to beimpaired relate to customers whohave defaulted onpayments. Movements inallowance for doubtfullease receivables are asfollows: ance lesereceiFin vables (continued) Note 5 15,850 15,850 15,850 $’000 $’000 12,818 11,057 11,657 2008 2008 17,611 2,209 2,209 2,584 2,584 (1,761) (1,761) 4,193 1,761 1,761 810 877 80 (6) – Group Group $’000 $’000 2007 2007 8,366 8,366 8,366 2,853 6,922 7,732 1,444 1,444 5,513 9,176 (810) (810) 810 810 811 (1) – – – – – 181 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

19. Finance lease receivables (continued)

Ageing of net investment in minimum lease receivables that are past due but not impaired:

Group 2008 2007 $’000 $’000

0 - 90 days 868 1,381 91 - 180 days 1,314 933 181 - 360 days 1,285 472 >360 days 726 67 4,193 2,853

20. Deferred tax assets

Group 2008 2007 $’000 $’000 (Restated)

At beginning of the year 112,718 132,768 Recognised in income statement 30,619 9,369 Effect of reduction in tax rate – (9,727) Acquisition of subsidiaries in prior year, as previously reported – 499 Finalisation of purchase price allocation – 338 Acquisition of subsidiaries in prior year, as restated – 837 Disposal of a subsidiary – (205) Translation difference (938) 474 Transfer to provision for taxation (11,680) (22,669) Changes in fair value of available-for-sale financial assets 1,096 1,637 Changes in fair value of derivative financial instruments designated in cash flow hedges 6,313 234 At end of the year 138,128 112,718

The deferred tax assets arise as a result of:

Unabsorbed capital allowances and unutilised tax losses 37,886 42,152 Allowance for doubtful debts and stock obsolescence 21,115 18,486 Provision for warranties 36,524 37,763 Provision for liquidated damages 1,101 2,049 Provision for foreseeable losses 6,307 5,848 Intangible assets (652) (820) Other temporary differences 28,349 6,356 Changes in fair value of available-for-sale financial assets 294 (7) Changes in fair value of derivative financial instruments designated in cash flow hedges 7,204 891 138,128 112,718

182 s 21. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 tradedebtors 22. Work-in-progress, includingprofits recognised Progress inexcess billings ofwork-in-progress Total stocksandwork-in-progress atlower ofcost andnetrealisable value Progress billings Progress billings excess ofprogress are billings statedafter provision for foreseeable losses of $15,167,000 (2007: $28,467,000). $158,112,000of forafterallowanceobsolescence are (2007:stated stock Stocks work-in-progress $138,816,000)and in Stocks ofequipmentandspares Work-in-progress, includingprofits recognised Work-in-progress inexcess ofprogress billings Past dueandnotimpaired Not pastdueandnotimpaired Allowance for doubtfuldebts Impaired receivable (Gross) Collectively assessed Allowance for doubtfuldebts Impaired receivable (Gross) Individually assessed Unbilled receivablesUnbilled Trade debtors, net tock s andw ork -in-p rogress (2,423,997) (1,500,914) 2,279,093 1,286,331 1,948,251 1,108,229 (475,746) 485,007 942,288 $’000 508,152 $’000 139,554 (66,654) 457,281 2008 2008 778,179 (21,075) 20,373 72,668 41,448 6,014 Group Group (1,352,052) (Restated) 2,482,230 (1,733,042) (Restated) 1,229,240 (368,757) 480,052 $’000 983,295 948,507 $’000 374,200 2007 2007 815,935 (46,349) 441,735 749,188 55,592 28,393 (15,188) 94,936 43,581 9,243 183 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

22. trade debtors (continued)

Trade debtors denominated in currencies other than the functional currencies as at 31 December 2008 are as follows:

• $260,438,000 (2007: $213,479,000) denominated in US dollars • $11,505,000 (2007: $14,073,000) denominated in Euro

Movements in allowance for doubtful debts are as follows:

Group Note 2008 2007 $’000 $’000 (Restated)

At beginning of the year 61,537 65,980 Charge to income statement 5 28,775 3,047 Bad debts written off against allowance (1,265) (13,162) Acquisition of a subsidiary in prior year, as previously reported – 15 Finalisation of purchase price allocation – 5,870 Acquisition of a subsidiary in prior year, as restated – 5,885 Translation difference (1,318) (213) At end of the year 87,729 61,537

Ageing of receivables that are past due but not impaired: 0 - 90 days 259,211 213,833 91 - 180 days 88,524 51,641 181 - 360 days 54,521 51,987 >360 days 55,025 56,739 457,281 374,200

Trade debtors that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent or in financial difficulties or who have significant delay or defaulted in payments.

Trade debtors amounting to $20,907,000 (2007: $15,480,000) are arranged to settle via letter of credits issued by reputable banks.

23. Due from related corporations

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Due from related corporations 234,078 662,913 139,198 302,638

Included in the amount due from related corporations are loans amounting to $230,188,000 (2007: $657,690,000) and $139,169,000 (2007: $302,611,000) extended from the Group and the Company respectively.

These loans are guaranteed by Fullerton Management Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private) Limited and mature on varying periods within 2 months (2007: 4 months) from the financial year end. Interest rates range from 0.50% to 5.33% (2007: 1.45% to 5.74%) per annum, which are also the effective interest rates.

184 24. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 26. short-term investments 25. Principal sumofamountsunder fundmanagement,atmarket value Non-related corporation (Available-for-sale) Equity shares, atfair value Quoted investments Non-related corporation (Heldfor trading) Cash Quoted bondinvestments atmarket value Quoted equity investments atmarket value Value ofassets under fundmanagementcanbeanalysedasfollows: movements taken to equity. Amounts under fund management in the prior year were classified as available-for-sale financial assets with the fair value Advance payments to suppliers Advances and other debtors Amounts underfman Subsidiaries Due from: andprepayments Other debtors, deposits Associated companies Joint ventures Derivative financialinstruments Note gement 28 29 51 234,736 379,086 123,519 10,138 $’000 2008 3,355 7,338 – Group (Restated) 174,404 293,918 98,246 $’000 12,431 2007 3,776 5,061 – 339,287 340,196 $’000 $’000 $’000 2008 2008 2008 909 580 369 211 – – – – – – – – – Company Group Group 313,088 307,918 178,781 178,781 90,395 $’000 $’000 35,735 52,651 2007 $’000 2007 2007 5,170 338 338 – – – – – 185 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

27. bAnk balances and other liquid funds

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Fixed deposits with financial institutions 601,382 371,933 226,569 26,811 Cash and bank balances 217,543 253,904 4,626 57,953 818,925 625,837 231,195 84,764

Fixed deposits with financial institutions mature at varying periods within 3 months (2007: 7 months) from the financial year end. Interest rates range from 0.06% to 8.1% (2007: 0.4% to 8.5%) per annum, which are also the effective interest rates.

Cash and bank balances of $265,000 (2007: $3,946,000) have been placed with banks as security for letters of credit issued to third parties.

28. other debtors, deposits and prepayments

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 (Restated)

Deposits 13,346 8,167 492 182 Prepayments 26,755 22,633 93 151 Interest receivables 1,434 4,215 95 1,154 Other recoverables 17,504 21,391 92 3,379 Non-trade debtors 64,480 41,840 137 304 123,519 98,246 909 5,170

29. Due from associated companies

Group 2008 2007 $’000 $’000

Trade balances 6,828 12,659 Non-trade balances 751 302 Allowance for doubtful debts – trade (241) (530) 7,338 12,431

186 creditors and 30. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 31. Foreseeable losses Liquidateddamages Warranties Provision for: (a) $18,134,000 (2007: $23,991,000) denominatedinEuro • $65,056,000 (2007: $52,972,000) denominatedinUS dollars • Trade creditors denominatedincurrencies other than the functionalcurrencies asat31December 2008 are asfollows: Trade creditors Pro Subsidiaries Due to: Joint ventures Associated companies Related corporations Other creditors andaccruals Derivative financialinstruments visions At endof the year Disposal ofasubsidiary Acquisition ofsubsidiariesin current year Translation difference Provision utilised Charge to income statement At beginning of the year Movements inprovision for warranties are asfollows: ccru als Note 34 51 1,406,169 775,404 616,940 $’000 2008 8,368 1,606 2,139 1,712 – Group 1,524,838 (Restated) 966,831 551,733 $’000 2007 2,195 2,168 1,911 Note – – 5 185,415 170,313 170,313 179,962 (15,062) $’000 $’000 2008 56,855 2008 55,328 5,983 $’000 5,164 2008 9,119 1,527 249 – – – – – – – Company Group Group (Restated) (Restated) 179,962 179,962 191,760 (15,297) 163,127 48,520 33,893 $’000 $’000 $’000 2007 2007 2007 11,257 51,125 (1,704) 2,605 (102) 541 45 – – – – – 187 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

31. Provisions (continued)

(b) Movements in provision for liquidated damages are as follows:

Group Note 2008 2007 $’000 $’000 (Restated)

At beginning of the year 11,257 9,396 Charge/(write-back) to income statement 5 (5,257) 2,324 Provision utilised (16) (468) Translation difference (1) 5 At end of the year 5,983 11,257

At beginning of the year 541 12,709 Charge/(write-back) to income statement 5 9,009 (3,257) Provision utilised (352) (9,100) Reclassifications – 189 Translation difference (79) – At end of the year 9,119 541

32. short-term bank loans

Effective Group Company interest rate Maturity 2008 2007 2008 2007 % $’000 $’000 $’000 $’000

Bank loans 1.25% to 8.22% Within 1 year 322,773 574,595 25,300 –

The bank loans are denominated in Singapore dollars, US dollars, Euro and Chinese Yuan (2007: US dollars, Sterling pounds, Euro, Australian dollars and Chinese Yuan).

Included in short-term bank loans are:

(a) loans amounting to $270,208,000 (2007: $520,321,000) which are unsecured;

(b) loan amounting to $44,675,000 (2007: $46,853,000) which is secured by a floating charge over a subsidiary’s plant and machinery; and

188 leaseobliga 33. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 After 1year Within1year Repayable: 1 to 5years 2007 After 1year Within1year Repayable: 1 to 5years 2008 Lease terms donotcontain restrictions concerning dividends,additional debtor further leasing. The obligationsunder the financelease to bepaidby the subsidiary are asfollows: term coincides with the term of the capitallease. fromequipment and buildings, Authorityland, the certain underoperatinglease subsidiaryleases anThe The also lease. lease required make to unable is subsidiary the payments. Theletter ofcredit expiresthat on3April2012. event the in bonds the on payments guarantee to used is which In connection with the bond issue, the subsidiary entered into a letter of credit agreement for approximately US$10,969,000, staggered maturitiesof the bondswith the finalpaymentdueon1November 2012, the expiration dateof the lease. the with coincidestructured to been have payments lease the and staggereddates havematurity bonds The bonds. the against collateral as pledged are leased being Assets Authority. bythe issued revenuebonds industrial to related lease A subsidiary leases certain land, buildings, and equipment from a foreign Airport Authority (the “Authority”) under a capital tions Minimum lease payment 10,169 8,098 $’000 Interest $’000 (1,335) (953) Present value of payments $’000 8,834 8,834 5,419 1,675 7,145 7,145 1,726 7,159 189 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

34. other creditors and accruals

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000 (Restated)

Non-trade creditors 68,701 194,379 5,321 4,679 Purchase of property, plant and equipment 118 702 – – Accrued operating expenses 697,365 761,995 49,978 43,841 Accrued interest payable 6,704 6,367 29 – Employee benefit liabilities 2,516 3,388 – – 775,404 966,831 55,328 48,520

35. Deferred income

Group Note 2008 2007 $’000 $’000

At beginning of the year 13,455 8,197 Additions 8,002 5,286 Translation difference 199 (28) 21,656 13,455 Deferred income recognised to-date (10,160) (6,376) At end of the year 11,496 7,079

Movements in deferred income recognised to-date are as follows:

At beginning of the year 6,376 4,096 Recognised in income statement 5 3,784 2,324 Translation difference – (44) At end of the year 10,160 6,376

190 36. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 equipment down value ofproperty, plantand Excess ofnetbook value over tax written The deferred tax liabilitiesariseasaresult of: d t Deferre obsolescence Allowance for doubtfuldebtsandstock Other temporary differences financialassets Changes infair value ofavailable-for-sale hedges instrumentsdesignatedincashflow Changes infair value ofderivative financial Intangible assets At beginning of the year Recognised inincome statement Effect ofreduction in tax rate Translation difference Transfer to provision for taxation aspreviously reported Acquisition ofasubsidiary inprior year, Finalisation ofpurchase priceallocation asrestated Acquisition ofasubsidiary inprior year, Acquisition ofsubsidiariesincurrent year financialassets Changes infair value ofavailable-for-sale hedges instrumentsdesignatedincashflow Changes infair value ofderivative financial At endof the year ax libilities 62,602 62,602 18,048 39,477 19,520 45,818 (4,260) (5,456) $’000 2008 2,366 3,100 1,205 5,961 (575) – – – – – – Group (Restated) $’000 40,530 46,324 2007 45,818 45,818 (5,488) (3,038) (2,914) (1,030) 3,826 1,042 5,610 5,610 5,174 200 734 734 (68) – – $’000 2008 (171) 372 201 201 118 83 – – – – – – – – – – – – – Company $’000 2007 285 278 372 372 (28) 115 94 – – – – – – – – – – – – 191 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

37. long-term bank loans

Effective Group interest rate Maturity 2008 2007 % $’000 $’000

Bank loans 2.52% to 5.69% Up to 2013 549,631 282,366

Repayable: Within 1 year 261,989 281,783 After 1 year 287,642 583 549,631 282,366

The bank loans are denominated in Singapore dollars, US dollars and Euro (2007: Euro and Singapore dollars).

Loans amounting to $261,870,000 (2007: $281,546,000) are at EURIBOR with margin ranging from 0.5% to 1.1% (2007: 0.5% to 1.1%) and secured by a floating charge over a subsidiary’s plant and machinery. As at 31 December 2008, there was non-compliance in three of the five financial undertakings of the covenant clauses. Management has obtained a letter from the bank dated 10 February 2009 to waive its rights as at 31 December 2008 under the loan agreement as a consequence of the breach of the loan covenants. The outstanding balance of the long-term bank loan was presented as a current liability as at 31 December 2008 and 2007. As at 31 December 2008, the bank has requested under the facility agreement for the repayment of the outstanding long-term bank loan of $261,870,000 (2007: $281,546,000) and short- term bank loan of $44,675,000 (2007: $46,853,000) not later than 3 April 2009.

38. other loans

(a) Included in other loans are:

(i) US dollar denominated term notes of $1.2 million (US$0.9 million) (2007: $1.4 million (US$0.9 million)) and $0.3 million (US$0.2 million) (2007: $0.3 million (US$0.2 million)) owing to the Pennsylvania Industrial Development Authority and the Industrial Properties Corporation, respectively, by a US entity of the Group. These notes are secured by assets of the entity and bear interest, respectively, at 2.75% and 4.0% (2007: 2.75% and 4.0%) per annum, which are also the effective interest rates, and are payable through 1 July 2019 and 28 June 2019, respectively.

(ii) Another US dollar denominated term note of $0.3 million (US$0.2 million) (2007: $0.4 million (US$0.3 million)) is owed by the same entity to the Pennsylvania Department of Community and Economic Development. This note is unsecured, bears interest of 2.75% (2007: 2.75%) per annum, which is also the effective interest rate, and is payable through 1 February 2012.

(b) Included in other loans in prior year was an amount of $194,000 relating to a long-term loan from a minority shareholder of a subsidiary. The loan was forgiven during the year (as disclosed in Note 8).

39. Due to a subsidiary

Amount due to a subsidiary of the Company is unsecured, interest-free and is not repayable in the foreseeable future.

192

sharecapit 40. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (c) (b) (a) Information regarding ESOP isasfollows: Singapore Technologies Engineering ShareOptionPlan (“ESOP”) Lim Huat,Mr Venkatachalam Krishnakumar andDr Pillai. PhilipNalliah administered by the Executive Resource and Compensation Committee (“ERCC”) comprising three directors, Mr Peter Seah approved by its memberswere at an Extraordinary Company General Meeting held on 23 Novemberthe 2000. of The ESOP, PSP(“RSP”) and RSP are Plan Stock Restricted Engineering TechnologiesSingapore the and (“PSP”) Plan Share The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance carry one vote per share withoutrestriction. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares Company’s ArticlesofAssociation. Thespecialshare may beconverted atany time intoanordinary share. the in specified matters certain Directors,on of Board its byor meeting general in either Company, bythe passed be to resolution approveany to right the carries share special the addition, In shares. ordinary the to attached rights the all enjoys share special The (Incorporated). Finance for Minister the to issued share special a is capital share in Included 2,998,603,162 (2007: 2,983,550,387) ordinary shares At endof the year 15,052,775 (2007: 37,296,756) ordinary shares Issued during the year 2,983,550,387 (2007: 2,946,253,631) ordinary shares At beginning of the year Issued andfully paid Company anditssubsidiaries. the of employees the for years 10 and directors,non-executive for years five after expire granted options The to bedeterminedby ERCC andare settled incash. aregrant,firstaccordanceexercisableoptions yearof of the in afterThe date end at the a vesting schedule with Singapore the on Exchange overshares the three consecutivethe fortrading daysimmediately preceding price the dateofgrant.average volume-weighted to equal is options the of price exercise The al 554,888 586,614 31,726 $’000 2008 Group andCompany 554,888 474,926 79,962 $’000 2007 193 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

40. share capital (continued)

During the financial year, the Company issued 14,075,736 (2007: 37,296,756) ordinary shares for cash at the respective price per share upon the exercise of options granted by the Company under ESOS and ESOP.

Grant no. No. of ordinary shares issued Price per ordinary share $

98R1 962,500 1.390 98R3 60,000 1.290 99R1 695,680 1.418 9902 93,000 2.000 2001 1,821,399 2.260 2002 87,500 1.808 2003 32,542 2.390 0102N 474,835 2.720 0108N 726,337 2.680 0202N 452,662 2.290 0208N 646,365 1.920 0302N 639,018 1.790 0302ND 194,375 1.790 0308N 1,263,783 1.860 0308ND 189,125 1.860 0402N 1,542,144 2.090 0402ND 42,425 2.090 0402P 5,000 2.090 0408N 1,022,675 2.120 0408ND 37,050 2.120 0502N 1,140,040 2.370 0502ND 11,875 2.370 0502P 15,000 2.370 0508N 650,656 2.570 0508ND 10,123 2.570 0508P 10,000 2.570 0602N 643,822 3.010 0602ND 1,875 3.010 0608N 324,807 2.840 0703N 278,246 3.230 0708N 877 3.610

194

sharecapit 40. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

optionsoutstandingunder ESOSthe /ESO (i) directors of the Company are asfollows: At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and (ii) Total 7.8.1998 29.4.1998 6.9.2000 9.2.2000 10.8.1999 9.2.1999 9.2.2000 grant Date of At endof the year Lapsed Exercised At beginning of the year ESOS Details ofshare options to subscribefor ordinary shares pursuant to ESOS are asfollows: 2008 Details ofshare options Exercisable atendof the year Exercised Granted andaccepted At beginning of the year ESO Exercisable atendof the year At endof the year Lapsed P al (continued) 16,289,332 11,291,850 2,029,740 1.1.2008 Balance 1,021,500 474,207 829,125 as at 567,910 75,000 226,160 340,160 Options 30,000 59,000 lapsed 10,000 15,000 – – 3,752,621 exercised 1,821,399 962,500 Options 695,680 60,000 32,542 93,000 87,500 P 31.12.2008 12,196,551 1,334,060 9,244,291 Balance 441,665 464,910 as at 711,625 – – 31.12.2008 holders at No. of 191** 20 26 29 78* 125,291,506 112,205,701 – – (10,323,115) 16,289,332 (2,762,690) (3,752,621) 67,141,259 12,196,551 12,196,551 (340,160) 2008 Exercise 2.000 2.260 2.390 price 1.808 1.290 1.390 1.418 $ Number ofshares – 30.4.2000 10.2.2002 10.2.2002 10.2.2001 8.8.2000 11.8.2001 7.9.2002 Exercisable period (25,838,733) 125,092,641 125,291,506 (11,458,023) 52,201,700 16,289,332 16,289,332 29,276,128 31,973,758 (5,936,160) (1,528,773) to to to to to to to 2007 29.4.2008 10.8.2009 9.2.2009 7.8.2008 9.2.2010 9.2.2010 6.9.2010 195 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

40. share capital (continued)

2008

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Balance Balance No. of Date of as at Options Options as at holders at Exercise grant 1.1.2008 lapsed exercised 31.12.2008 31.12.2008 price Exercisable period $

19.2.2001 5,099,273 52,812 474,835 4,571,626 395** 2.720 20.2.2002 to 19.2.2011 10.8.2001 6,833,358 61,304 726,337 6,045,717 416** 2.680 11.8.2002 to 10.8.2011 7.2.2002 4,919,653 31,438 452,662 4,435,553 343** 2.290 8.2.2003 to 7.2.2012 12.8.2002 3,062,714 10,000 646,365 2,406,349 250** 1.920 13.8.2003 to 12.8.2012 6.2.2003 3,161,835 – 639,018 2,522,817 280** 1.790 7.2.2004 to 6.2.2013 6.2.2003 227,750 33,375 194,375 – – 1.790 7.2.2004 to 6.2.2008 6.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.2013 11.8.2003 4,783,284 1,228 1,263,783 3,518,273 445** 1.860 12.8.2004 to 11.8.2013 11.8.2003 247,125 58,000 189,125 – – 1.860 12.8.2004 to 11.8.2008 11.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.2013 9.2.2004 6,751,941 26,356 1,542,144 5,183,441 653** 2.090 10.2.2005 to 9.2.2014 9.2.2004 271,300 – 42,425 228,875 11# 2.090 10.2.2005 to 9.2.2009 9.2.2004 16,426 – 5,000 11,426 1 2.090 10.2.2005 to 9.2.2014 10.8.2004 8,227,271 91,952 1,022,675 7,112,644 953** 2.120 11.8.2005 to 10.8.2014 10.8.2004 239,425 – 37,050 202,375 13# 2.120 11.8.2005 to 10.8.2009 10.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.2014 7.2.2005 10,039,234 92,132 1,140,040 8,807,062 1,041** 2.370 8.2.2006 to 7.2.2015 7.2.2005 321,625 – 11,875 309,750 17# 2.370 8.2.2006 to 7.2.2010 7.2.2005 31,426 – 15,000 16,426 2 2.370 8.2.2006 to 7.2.2015 10.8.2005 11,824,329 186,029 650,656 10,987,644 1,157** 2.570 11.8.2006 to 10.8.2015 10.8.2005 309,166 – 10,123 299,043 17# 2.570 11.8.2006 to 10.8.2010 10.8.2005 31,426 – 10,000 21,426 2 2.570 11.8.2006 to 10.8.2015 9.2.2006 12,708,952 294,108 643,822 11,771,022 1,245** 3.010 10.2.2007 to 9.2.2016 9.2.2006 361,625 – 1,875 359,750 18# 3.010 10.2.2007 to 9.2.2011 10.8.2006 14,219,586 436,727 324,807 13,458,052 1,355** 2.840 11.8.2007 to 10.8.2016 10.8.2006 355,625 – – 355,625 18# 2.840 11.8.2007 to 10.8.2011 15.3.2007 15,683,232 583,655 278,246 14,821,331 1,460** 3.230 16.3.2008 to 15.3.2017 15.3.2007 360,000 – – 360,000 18# 3.230 16.3.2008 to 15.3.2012 10.8.2007 14,846,773 803,574 877 14,042,322 1,574** 3.610 11.8.2008 to 10.8.2017 10.8.2007 327,000 – – 327,000 16# 3.610 11.8.2008 to 10.8.2012

Total 125,291,506 2,762,690 10,323,115 112,205,701

* Includes 1 executive Director and 1 past Director of the Company ** Includes 1 executive Director of the Company # Includes Directors of the Company and its subsidiaries

196 sharecapit 40. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Total 29.4.1998 7.8.1998 6.12.1997 6.12.1997 6.12.1997 10.8.1999 9.2.1999 grant Date of 9.2.2000 9.2.2000 6.9.2000 Details ofshare options to subscribefor ordinary shares pursuant to ESOS are asfollows: 2007 29,276,128 18,731,580 4,664,860 1,086,400 1,580,750 1,235,125 1,074,959 1.1.2007 Balance 262,002 al (continued) 215,000 332,981 as at 92,471 (adjustment) 1,528,773 323,000 828,843 lapsed / (65,000) Options 286,180 137,000 25,000 (6,250) – – – 11,458,023 2,348,940 6,610,887 exercised 565,500 262,002 Options 471,000 277,752 381,490 332,981 115,000 92,471 16,289,332 31.12.2007 11,291,850 2,029,740 1,021,500 Balance 474,207 829,125 567,910 as at 75,000 – – – 31.12.2007 holders at No. of 227** 46 29 24 97* 16 15 – – – Exercise 2.000 0.422 2.260 0.492 2.390 0.720 1.808 1.290 1.390 1.418 price $ 30.4.2000 10.2.2002 10.2.2002 10.2.2001 8.8.2000 18.5.1999 18.5.1999 11.8.2001 7.9.2002 11.9.1999 Exercisable period to to to to to to to to to to 24.4.2007 29.4.2008 10.8.2009 2.4.2007 9.2.2009 7.8.2008 9.2.2010 9.2.2010 9.9.2007 6.9.2010 197 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

40. share capital (continued)

2007

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Balance as at 1.1.2007 or date Balance No. of Date of of grant Options Options as at holders at Exercise grant if later lapsed exercised 31.12.2007 31.12.2007 price Exercisable period $

19.2.2001 7,432,061 357,308 1,975,480 5,099,273 441** 2.720 20.2.2002 to 19.2.2011 10.8.2001 9,587,619 289,176 2,465,085 6,833,358 465** 2.680 11.8.2002 to 10.8.2011 7.2.2002 7,254,468 249,256 2,085,559 4,919,653 394** 2.290 8.2.2003 to 7.2.2012 7.2.2002 496,000 – 496,000 – – 2.290 8.2.2003 to 7.2.2007 12.8.2002 5,580,266 245,643 2,271,909 3,062,714 312** 1.920 13.8.2003 to 12.8.2012 12.8.2002 101,750 – 101,750 – – 1.920 13.8.2003 to 12.8.2007 6.2.2003 6,433,790 310,152 2,961,803 3,161,835 353** 1.790 7.2.2004 to 6.2.2013 6.2.2003 318,500 – 90,750 227,750 12# 1.790 7.2.2004 to 6.2.2008 6.2.2003 14,972 – 10,000 4,972 1 1.790 7.2.2004 to 6.2.2013 11.8.2003 7,946,329 335,107 2,827,938 4,783,284 663** 1.860 12.8.2004 to 11.8.2013 11.8.2003 320,064 – 72,939 247,125 13# 1.860 12.8.2004 to 11.8.2008 11.8.2003 28,754 – 20,000 8,754 1 1.860 12.8.2004 to 11.8.2013 9.2.2004 9,435,793 344,675 2,339,177 6,751,941 986** 2.090 10.2.2005 to 9.2.2014 9.2.2004 314,100 – 42,800 271,300 16# 2.090 10.2.2005 to 9.2.2009 9.2.2004 31,426 – 15,000 16,426 2 2.090 10.2.2005 to 9.2.2014 21.6.2004 100,000 50,000 50,000 – – 2.000 22.6.2005 to 21.6.2014 10.8.2004 11,126,767 425,235 2,474,261 8,227,271 1,049** 2.120 11.8.2005 to 10.8.2014 10.8.2004 277,475 – 38,050 239,425 16# 2.120 11.8.2005 to 10.8.2009 10.8.2004 31,426 – 15,000 16,426 2 2.120 11.8.2005 to 10.8.2014 7.2.2005 12,487,006 465,051 1,982,721 10,039,234 1,097** 2.370 8.2.2006 to 7.2.2015 7.2.2005 348,625 – 27,000 321,625 17# 2.370 8.2.2006 to 7.2.2010 7.2.2005 31,426 – – 31,426 2 2.370 8.2.2006 to 7.2.2015 10.8.2005 14,248,987 635,643 1,789,015 11,824,329 1,229** 2.570 11.8.2006 to 10.8.2015 10.8.2005 334,291 – 25,125 309,166 17# 2.570 11.8.2006 to 10.8.2010 10.8.2005 31,426 – – 31,426 2 2.570 11.8.2006 to 10.8.2015 9.2.2006 14,291,958 616,162 966,844 12,708,952 1,321** 3.010 10.2.2007 to 9.2.2016 9.2.2006 377,500 – 15,875 361,625 18# 3.010 10.2.2007 to 9.2.2011 10.8.2006 15,738,362 855,999 662,777 14,219,586 1,440** 2.840 11.8.2007 to 10.8.2016 10.8.2006 371,500 – 15,875 355,625 18# 2.840 11.8.2007 to 10.8.2011 15.3.2007 16,274,367 ## 591,135 – 15,683,232 1,562** 3.230 16.3.2008 to 15.3.2017 15.3.2007 360,000 ## – – 360,000 18# 3.230 16.3.2008 to 15.3.2012 10.8.2007 15,012,391 ## 165,618 – 14,846,773 1,698 3.610 11.8.2008 to 10.8.2017 10.8.2007 327,000 ## – – 327,000 16# 3.610 11.8.2008 to 10.8.2012

Total 157,066,399 5,936,160 25,838,733 125,291,506

* Includes 1 executive Director and 1 past Director of the Company ** Includes 1 executive Director of the Company # Includes Directors of the Company and its subsidiaries ## These numbers relate to options granted and accepted in 2007

198 sharecapit 40. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (iii) October to December July to September April to June January to March 2007 No other features of optionswere incorporated into the measurement offair value. future trends, whichmay alsonotnecessarily be the actualoutcome. patterns that may occur. The expected exercisevolatility reflects of the assumption that indicativethe historical volatilitynecessarily is indicative of thereforenot and data historical on based is options the of life expected The ended 31December 2008. yearforgrantedwere the options 2007.No December 31 ended yearfor the used model the to inputs the lists table following The granted.were options the which upon conditions and terms accountthe into taking model, of share options granted. The estimate of the fair value of the services received is measured based on a binomial The fair value of services received in return for share options granted are measured by reference to the fair value average remaining contractual lifefor these optionsis5.74 years (2007: 6.46 years). The weighted average share price for options exercised during the year was $3.285 (2007: $3.505). The weighted October to December July to September April to June January to March 2008 Details ofshare optionsexercised Weighted average share price($) Exercise price($) Expected lifeofoption(years) Risk-free interest rate (%) Expected volatility (%) Expected dividendyield(%) al (continued) No. ofshares 16,426,452 37,296,756 10,763,244 14,075,736 6,732,563 3,978,667 8,183,482 3,374,497 940,023 973,564 Management’s forecast inlinewithdividendpolicy 0.422 0.492 1.290 1.290 1.290 1.290 1.290 1.418 Exercise price $ – – – – – – – – 2.840 3.230 3.230 3.010 3.010 3.010 3.010 3.610 Proceeds from 23.13 share issue 2.29 2.49 3.23 3.31 23,635 33,958 2007 14,922 $’000 17,681 2,058 7,447 9,128 1,610 – – – – – 31.49 5.23 3.72 2.71 3.61 Share price 2.04 2.54 3.60 2.72 3.26 3.46 3.12 3.17 $ – – – – – – – – 2.88 2.67 3.86 3.46 3.52 3.94 3.98 3.74 199 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

40. share capital (continued)

Singapore Technologies Engineering Performance Share Plan (“PSP”)

Performance shares are granted on an annual basis, conditional on targets set for a performance period, currently prescribed to be a three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period. The final number of performance shares given will depend on the level of achievement of those targets over the three-year performance period. A specified number of performance shares shall be released by the ERCC to the recipient at the end of the performance period, provided a minimum threshold performance is achieved.

Year of grant 2008 2007 2006 Total

Number of performance shares At grant date 1,632,000 1,513,000 2,450,000 5,595,000 Lapsed – (19,000) (210,000) (229,000) Outstanding as at 31.12.2008 1,632,000 1,494,000 2,240,000 5,366,000

During the year, performance shares amounting to 977,039 ordinary shares were awarded in respect of grant made in 2005.

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

The significant inputs to the model used for the conditional grants in 2006 to 2008 are as follows:

Year of grant 2008 2007 2006

Market conditions Volatility of MSCI Index (%) 20.93 13.66 14.69 Volatility of the Company’s shares (%) 15.51 14.59 15.22 Correlation of volatility of MSCI vs the Company (%) 45.30 26.83 26.46 Risk-free rate (%) 1.11 2.43 3.09 Share price ($) 3.36 3.62 2.93 Cost of equity (%) 9.60 8.27 – Dividend yield (-- Management’s forecast in line with dividend policy --)

Non-market conditions (Best estimate* of number of shares expected to vest at the end of three-year performance period) - EVA Spread (%) – – 61 - EPS Growth – – 63

* Subject to revision when new information is available

200 sharecapit 40. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 cAPit 41. At grant date Number ofrestricted shares Dividend yield Share price($) Risk-free rate (%) Mark-to-market Company TSR achievement (%) Volatility of the Company’s shares (%) (b) (a) Included incapitalreserves are: The significantinputs to the modelusedfor the conditional grant in2008 are asfollows: The fair value of the restricted shares isdeterminedatconditional grant dateusing the MonteCarlosimulationmodel. uig h fnnil er RP a itoue fr o-xctv drcos Dpnig n h aheeet f pre- capped at150%of the conditional award, over of a three-year vesting periodat33 achievement the on Depending directors. non-executive fordetermined targets over a one-year performance introduced period, the total release of awards could range was from zero to a maximum RSP year, financial the During years withfulfilmentofservicerequirements. conditions over a two-year performanceperiod, 50% of stated the RSP meeting award will on vest. Based The balance will vest shares.equally restrictedover the the of subsequent granttwo initial the of 150% and 0% between range could achievement of pre-determined targets over a two-year performance period, the final number of restricted shares the on Depending awardedperformanceforperiod. a set targets on conditional basis, annual an sharesareRestrictedgrantedon Singapore Technologies Engineering RestrictedStock Plan (“RSP”) Lapsed Outstanding asat31.12.2008 al reser the additional capitalinjectionduring the year. an amount relating to an excess capital contribution from minority shareholders of a subsidiary in China following 31 December 1997; and Technologies Marine Ltd classified as capital reserve upon the pooling of interests during the financial year Technologies ended Singapore namely enterprises, pooled Singapore and respectiveTechnologiesLtd SingaporeTechnologiesSingapore Kinetics Limited, AerospaceElectronicsLtd, the of premium share to relating amount an al (continued) ves (--Management’s forecast inlinewithdividendpolicy--) 7,529,100 (282,083) 7,811,183 2008 0.94 –1.32 2008 15.51 % per year. 3.36 – Y Y ear ofgrant ear ofgrant 856,000 897,000 (41,000) 2007 2.41 –2.50 2007 28.64 14.59 8,385,100 8,708,183 3.80 (323,083) T otal 201 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

42. other reserves

Foreign currency Share-based translation Statutory Fair value payment reserve reserve reserve reserve Total $’000 $’000 $’000 $’000 $’000

The Group At 1.1.2007 (39,742) 712 29,319 23,553 13,842 Net fair value changes on available- for-sale financial assets – – (4,978) – (4,978) Net fair value changes on cash flow hedges – – 1,646 – 1,646 Foreign currency translation differences (21,113) – – – (21,113) Total net income recognised directly in equity and for the year (21,113) – (3,332) – (24,445) Cost of share-based payment – – – 15,949 15,949 Disposal of a subsidiary 391 (712) – – (321) Transfer from unappropriated profit to statutory reserve – 394 – – 394 At 31.12.2007 (60,464) 394 25,987 39,502 5,419

At 1.1.2008 (60,464) 394 25,987 39,502 5,419 Net fair value changes on available- for-sale financial assets – – (26,324) – (26,324) Net fair value changes on cash flow hedges – – (2,642) – (2,642) Foreign currency translation differences (11,093) – 2 – (11,091) Total net income recognised directly in equity and for the year (11,093) – (28,964) – (40,057) Cost of share-based payment – – – 17,940 17,940 Transfer from unappropriated profit to statutory reserve – 482 – – 482 At 31.12.2008 (71,557) 876 (2,977) 57,442 (16,216)

202 o 42. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 - Recognised inincome statement,inother operating income - Netgainonfair value changesduring the year - Effect ofreduction in tax rate Net fair value changesoncashflow hedgesarisesfrom: - Recognised inincome statement,inother operating income - Netgainonfair value changesduring the year - Effect ofreduction in tax rate Net fair value changesonavailable-for-sale financialassets arisesfrom: for servicesreceived berecognised will over the vesting period. from employees recorded on grant of equity-settled share options, performance shares and restricted shares. The expense receivedservices of cumulativevalue the of up made reservenon-executivedirectors.is The grantedand employees to shares restricted and shares performance options, share equity-settled the represents reserve payment Share-based Share-based payment reserve instruments incashflow hedges that isdetermined to beaneffective hedge. hedging as designated fairof instruments the derivativeportion on financial as orthe the impairedchanges well value as Fair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised Fair value reserve subsidiaries, the SRFisnotavailablefor standard distribution to shareholders. the relevant PRC authorities the SRF maybe used to offset any accumulated losses or increase the registered capital of the the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. Subject to approval from tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to afterstatutory the of 10% least At Reserveare(“SRF”). requiredStatutoryFundappropriation makesubsidiaries a to to the (“PRC”), China of People’sRepublic the in subsidiaries the to application Law Enterprise foreignaccordance with In Statutory reserve currency. the of translation the from arising differences exchangefinancial statements of foreign record subsidiaries whose functional currencies to are different used from that of the Group’s is presentation reserve translation currency foreign The Foreign currency translation reserve ther reser ves (continued)

(26,324) (16,459) (5,302) (2,642) (9,865) $’000 2008 2,660 – – Group (13,020) $’000 2007 (4,978) 1,646 8,191 (149) 820 786 40 203 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

43. retained earnings

Group 2008 2007 $’000 $’000

Retained by: The Company 510,612 565,743 Subsidiaries 281,792 289,618 Associated companies and joint ventures 101,315 100,894 893,719 956,255

44. Dividends

Group and Company 2008 2007 $’000 $’000

Final dividend paid in respect of the previous financial year of 4.0 cents 119,342 117,850 (2007: 4.0 cents) per share Special dividend paid in respect of the previous financial year of 10.88 cents (2007: 11.11 cents) per share 324,610 327,277 Interim dividend paid in respect of the current financial year of 3.0 cents (2007: 2.0 cents) per share 89,922 59,562 533,874 504,689 Additional final dividend paid in respect of the previous financial year due to issue of shares under ESOS/ESOP before books closure date 1,816 3,531 535,690 508,220

The Directors propose a final dividend of 4.0 cents (2007: 4.0 cents) per share amounting to $119.9 million (2007: $119.3 million) and a special dividend of 8.8 cents (2007: 10.88 cents) per share amounting to $263.9 million (2007: $324.6 million), in respect of the financial year ended 31 December 2008. The dividends have not been recognised as a liability as at year end as it is subject to approval at the Annual General Meeting of the Company.

45. related party information

In addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with fellow subsidiaries within Temasek Group on terms agreed between the parties as follows:

Group 2008 2007 $’000 $’000

Sales and services rendered 13,401 17,044 Purchases and services received 34,578 52,761 Property, plant and equipment purchases 123 237 Interest income 10,731 19,864 Dividend income 213 99 Rental income 380 3,214 Rental expenses 4,156 2,243

204 c 47. cAshandcequivalents 46. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008

Fixed depositswithfinancialinstitutions Bank overdrafts Cash andbankbalances Short-term loans to arelated corporation Euro US dollars as are December 31 follows: at as currencies functional the than other currencies in denominated equivalents cash and Cash leases (b) capitalcommitments (a) ommitments Capital expenditure contracted butnotprovided for in the financialstatements restrictions on the Group activitiesconcerningcontain dividends,additional debtor further leasing. not do terms Lease rents. contingent forprovide not do but clauses escalation contain leases Certain The leases for leasehold land and buildings and office premises contain renewal options but not purchase options. The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. After 5years Within 2 to 5years Within 1year Future minimumleasepaymentsunder operating non-cancellable leasesare asfollows: Note 23 27 27 1,049,094 601,382 222,929 230,188 217,543 260,995 118,023 131,638 98,746 71,504 $’000 2008 19,787 $’000 2008 (19) Group Group 1,282,724 253,904 657,690 270,186 186,927 371,933 47,393 98,435 $’000 38,589 23,861 64,631 2007 $’000 2007 (803) 205 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

47. commitments (continued)

(i) The Group has entered into commercial leases on three of its aircraft engines. The non-cancellable lease has an average lease term of about 3 to 5 years.

Future lease payment receivables under non-cancellable operating lease are as follows:

Group 2008 2007 $’000 $’000 (Restated)

Within 1 year 2,023 2,709 Within 2 to 5 years 3,606 6,635 After 5 years – 1,069 5,629 10,413

(ii) The Group has entered into commercial leases on its aircraft. These non-cancellable leases have remaining lease terms of 17 years. The leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

Future minimum rentals receivable under non-cancellable operating leases at the balance sheet date are as follows:

Group 2008 2007 $’000 $’000

Within 1 year 587 587 Within 2 to 5 years 2,348 2,348 After 5 years 7,584 8,171 10,519 11,106

(d) investments

(i) As at 31 December 2008, the Group has outstanding commitments in respect of uncalled capital to the extent of $20.3 million (2007: $2.4 million) in subsidiaries.

(ii) As at 31 December 2008, in respect of investments in unquoted equity shares of venture capital fund companies, there is uncalled capital contribution amounting to $0.6 million (2007: $0.6 million) for the Group.

206 c 47. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 c 48.

investments (continued) (d) (a) (b) (c) ommitments (continued) ontingent liabilities (unsecured) (v) (iv) (iii) extended by the financialinstitution to the customer hadnotbeenutilised. facilitycredit the 2008, December 31 at As customer. bythe down drawn facility credit the institution financial irrevocablyunconditionallyagreement,and STAerospacepayhad participation the undertaken to risk Underthe customers to finance85%of the value of the servicecontractits entered between ST Aerospaceof and the customer.one to US$43,350,000 participation to up risk of facility credit years7.5 a a extend into to institution financial entered a Aerospace”)with agreement (“ST Ltd Aerospace Technologies Singapore 2008, April 8 On amounted (US$400to $914million and Euro million 167 (2007: million) $781 (US$540 million million)). Corporateguarantees given by Companyrespectfacilitiesthe in loan extended banks of to subsidiaries certain to amounted to $20 (2007: million $56.6million). 2008 December 31 at as subsidiaries grantedto facilities banking of respect in subsidiaries bygivenGuarantee

which is to becontributed over three years. To-date, the joint venture company hasnotbeenset up. a have will company venture joint The registered India. capital of US$6 Pune, million to in be contributed Company by Venture each party Joint in Equitythe proportion an of 26% form and 74%to respectively, Limited On 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF Utilities of $2.4 (2007: million $2.4 inajoint million) venture. December2008,31 capital extent commitments to at Group the respectoutstanding uncalled As the in has of propertiesintellectual to the extent of$1.43 (2007: million $2.48 million). media forproductiondigital of respect in commitments outstanding has Group 2008,the December 31 at As with the principlessetoutin the agreement. an by determined appraiseras to be jointlyvalues appointedfair by shareholdersat and be the appraiser shall shall determine the fairOption value in Secondaccordance and Option First the of shares the for price The a six-month periodfrom the dateof the auditedfinancialstatementsof STATA for the fifthfinancialyear. statements of STATA for the second financial year, while the Second Option may be exercised at anyFirstThe mayOption exercisedbe time anyat six-montha during time during fromperiod of date the financial audited the be carried forward to the Second Option. Option”). If ATAS does not exercise the First Option by the expiry date, the First not lapse and will Option shall total share capital of STATA for each option on the date of the exercise of the option (“First Option” and “Second options which will entitle ATAS to purchase STA Engineering’s shareholdings of STATA, tax before profit amounting agreed to 5% of the the excluding achieve minority interests to for able the second and arefifth financial years, subsidiaries STA its Engineering STATA will grant and if two independent agreement, the to Pursuant respectively. shareholding 34% and (“STATA”)66% Ltd. a Pte. with AcademyTraining Aviation ST as known Singapore AviationTraining Academy(Singapore)commercial(“ATAS”) Ltda Ptepilottrainingup setacademy toin September3 On2007, AerospaceST Engineering(“STA LtdPte Engineering”) agreementsignedan with 207 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

49. segment information

(a) Analysis by business segments

The Group is organised on a worldwide basis into four main operating segments, namely:

(i) Aerospace

Provides a full spectrum of maintenance and engineering services which include airframe, engine and component maintenance, repair and overhaul; engineering design and technical services; and aviation materials and management services, including Total Aviation Support.

(ii) Electronics

Delivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. It specialises in the design, development and integration of advanced electronics and communications systems, such as broadband radio frequency and satellite communication, e-Government solutions, information communications technologies and IT, rail and traffic management, real-time command and control, training and simulation, intelligent building management, and information security and mobile commerce solutions.

(iii) Land Systems

Delivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security and commercial applications.

(iv) Marine

Provides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. In shipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition to detailed design, construction, on-board system installation and integration, testing, commissioning to through-life support. It has also established a track record in providing high engineering content shiprepair and ship conversion services for a worldwide clientele.

Other operations include research and development, treasury, investment holding and provision of management, consultancy, warehousing and other support services.

Inter-segment pricing is on an arm’s length basis.

208 segmentinforma 49. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Net profit attributable to shareholders Minority interests Taxation Profit from operations before taxation companies andjoint ventures Share ofresults ofassociated Financial expenses Operating profit Interest income Investment income, net Segment results Inter-segment sales Externalsales Turnover 2008 Assets ventures Associated companies andjoint Liabilities Total assets assetsUnallocated Capital expenditure Total liabilities liabilities Unallocated Depreciation andamortisation Impairment loss Other non-cashexpenses tion (continued) Aerospace 1,940,954 1,587,644 1,919,793 1,938,411 260,685 225,691 235,310 104,343 272,120 137,386 (37,403) $’000 (21,434) 32,869 (9,026) 21,001 97,717 11,934 2,543 4,374 263 1,384,250 Electronics 1,278,836 1,142,728 1,157,704 102,534 (10,282) (22,817) (18,627) 22,335 $’000 117,481 39,835 93,940 18,688 14,976 (3,012) 11,305 3,680 68,111 1,688 90 1,280,879 1,242,453 1,360,744 1,274,093 Systems $’000 88,262 90,528 Land 84,728 20,418 32,412 79,947 (8,003) (6,690) 112,111 (1,629) (3,152) 4,424 4,469 6,892 6,786 92 642,846 Marine 566,977 $’000 821,754 821,681 74,500 75,203 72,276 77,407 (2,244) 16,218 5,506 21,711 (703) (375) 241 40 73 – – – 2,399,747 (22,800) 879,305 514,609 192,008 Others 167,602 $’000 524,741 501,941 498,131 24,406 12,668 26,610 2,754 2,105 1,528 118 – – – 1 (1,506,816) Elimination (2,141,163) (489,222) (487,230) (485,734) (509,177) (23,443) (48,784) (48,784) $’000 22,076 (2,055) (129) 507 (118) 63 – – – – – 4,048,399 5,566,217 5,344,515 5,344,515 4,315,655 5,992,771 544,452 540,702 267,256 473,636 263,078 527,992 201,055 $’000 Group (42,687) 163,476 158,793 (51,939) 25,843 (15,127) 38,937 (4,691) 21,151 12,117 – 209 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

49. segment information (continued)

Land Aerospace Electronics Systems Marine Others Elimination Group $’000 $’000 $’000 $’000 $’000 $’000 $’000

2007 (Restated) Turnover External sales 1,834,885 1,023,240 1,178,033 863,184 151,640 – 5,050,982 Inter-segment sales 2,884 15,044 10,284 1,410 13,169 (42,791) – 1,837,769 1,038,284 1,188,317 864,594 164,809 (42,791) 5,050,982

Segment results 304,905 85,858 86,195 77,356 538,356 (532,546) 560,124 Investment income, net 6,196 25,182 (6,177) 14,037 (24) 24 39,238 Interest income 11,489 4,866 7,946 8,558 37,507 (27,904) 42,462 Operating profit 322,590 115,906 87,964 99,951 575,839 (560,426) 641,824 Financial expenses (17,418) (9,461) (9,628) (3,430) (30,766) 20,347 (50,356) Share of results of associated companies and joint ventures 35,990 8,891 1,667 46 – 53 46,647 Profit from operations before taxation 341,162 115,336 80,003 96,567 545,073 (540,026) 638,115 Taxation (54,925) (24,893) (6,995) (21,303) (6,943) 453 (114,606) Minority interests (15,758) (2,220) (2,219) – – 191 (20,006) Net profit attributable to shareholders 270,479 88,223 70,789 75,264 538,130 (539,382) 503,503

Assets 1,910,535 1,364,794 1,271,504 650,278 2,316,125 (1,870,626) 5,642,610 Associated companies and joint ventures 141,335 8,971 110,983 353 1,646 4,218 267,506 Unallocated assets 140,157 Total assets 6,050,273

Liabilities 1,498,439 1,279,063 1,188,777 531,583 782,413 (1,258,808) 4,021,467 Unallocated liabilities 249,113 Total liabilities 4,270,580

Capital expenditure 111,792 103,216 24,881 20,687 2,238 – 262,814 Depreciation and amortisation 78,416 15,524 20,910 17,096 2,065 63 134,074 Impairment loss/(write-back of impairment) (188) (4,400) 3,063 – 24 (24) (1,525) Other non-cash expenses 8,446 203 72 – – – 8,721

210 segmentinforma 49. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 (c) (b) Asia Europe USA Asia unvr s ae o te oain f utmr rgrls o wee h gos r poue o services or produced are goods the where of regardless customersrendered. of location the on based is Turnover Analysis by geographical areas of those assets. location the on based are intangibles and services equipment and or plant producedproperty, to are additions and goods Assets the rendered. where of regardless incorporation of country the on based Turnover is Analysis by country ofincorporation Others USA Europe Others 3,490,238 tion (continued) 5,344,515 1,379,309 416,804 $’000 2008 58,164 T urnover 5,050,982 1,420,556 3,177,681 446,215 $’000 2007 6,530 3,795,128 5,992,771 1,286,162 738,606 172,875 $’000 2008 Assets 6,050,273 3,857,657 1,244,805 (Restated) 775,024 172,787 $’000 2007 2,538,725 5,344,515 1,522,881 539,779 743,130 $’000 2008 201,055 121,604 $’000 45,625 2008 30,461 3,365 Capital expenditure T urnover 5,050,982 2,485,993 1,588,870 655,403 320,716 (Restated) $’000 262,814 2007 $’000 92,440 38,322 2007 99,439 32,613 211 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 s

31 December 2008 (Currency - Singapore dollars unless otherwise stated)

50. Financial risk management objectives and policies

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bankers’ guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, cash and short-term deposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial instruments and facilities limits, approved by the Board of Directors. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation or trading. It is not in the interest of the Group to speculate or trade in treasury instruments. The purpose of engaging in treasury transactions is solely for hedging.

The Group’s treasury policy allows only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currency, 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”); sale of options are expressly prohibited. These instruments are generic in nature with no embedded or leverage features and any deviation from these instruments would require specific approval from the Board of Directors.

The main financial risks arising from the Group’s operations and the use of financial instruments are interest rate, foreign exchange, market, liquidity and credit risks. The policies for managing each of these risks are broadly summarised below.

The Group’s accounting policies in relation to derivatives are set out in Note 2.

interest rate risk

The Group has cash balances placed with reputable banks, financial institutions and a related corporation. The Group manages its interest rate risks on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flow requirements and optimising yield.

The Group’s debt includes bank borrowings and lease commitments. The Group seeks to minimise its interest exposure through options to refinance the debt instruments and/or enter into interest rate swaps, where appropriate, over the duration of its borrowings.

Movements in interest rates will therefore have an impact on the Group. A change of 200 basis points in interest rate at the reporting date would increase/decrease income statement by the amounts shown below. This analysis assumes that all other variables remain constant.

Income statement 200bp 200bp increase decrease $’000 $’000

The Group 2008 Bank loans (3,532) 3,532

2007 Bank loans (3,756) 3,756

Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings, investments and loan receivables, where applicable.

212 market risk 50. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 remain constant. variables other all that assumes analysis This investments. quoted the of value fair the increase/decreasein 10% a of The table below summarises the impact to the Group’s fair value reserve in equity and income statement arising as a result will investments these of fluctuate withmarket conditions. value market The bonds. and shares equity quoted in investments strategic has Group The compliance. forbanks the communicatedto are mandates and matrix authorisation an of form the in treasurypermittedinstruments authorised Only office. back and dealers authorised dealerscan transactwith of behalf on banks the Group,the officeback with confirming betweendealers’The deals. the and limits duties of segregation with executed are transactions The Company’s centralised Treasury Unit executes the Group’s material foreign exchange transactions. Foreign exchange the foreign exchange exposures before proceeding to transact the hedgewith banks. Company’sThe centralised Treasury facilitatesintra-groupUnit foreign exchange transactionsGroupwithin the net-off to and sale anticipated purchase transactionsfrom denominatedinforeign currenciesresulting inaccordance with risk the Group’sexchange hedgingpolicy. foreign its against hedge to contractscurrency forward into mainly foreign currencies. The Group’s foreign exchange exposures are primarily from US dollars and Euro and the Groupin enterstransactedare which subsidiaries local its of operationsfrom and currencies,foreign in denominated costs incurring The Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and Foreign exchange risk ancil riskmn Fin Quoted investments 2008 The Group Amounts under fundmanagement Quoted investments 2007 gement objecti ves andp increase $’000 21,038 17,878 10% 3,160 958 E quity olicies (continued) decrease (21,038) (17,878) $’000 (3,160) 10% (958) increase $’000 10% Income statement 37 – – – decrease $’000 10% (37) – – – 213 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

50. Financial risk management objectives and policies (continued)

liquidity risk

To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capital requirements regularly.

The table below analyses the Group’s financial liabilities that will be settled on a net basis and certain derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows.

Within More than Total 1 year 1 to 5 years 5 years $’000 $’000 $’000 $’000

The Group 2008 Bank loans 872,404 584,762 287,642 – Other loans 1,847 240 811 796 Lease obligations 8,098 2,025 6,073 – Bank overdrafts 19 19 – – Trade and other payables 1,395,285 1,395,285 – – Derivative financial instruments: • Forward currency contracts - gross payments 80,403 80,403 – – • Forward currency contracts - gross receipts 451,810 363,447 88,363 – • Embedded derivatives 277,640 70,871 206,769 – • Interest rate swaps - settled net 6,252 6,252 – –

2007 (Restated) Bank loans 856,961 856,378 583 – Other loans 2,304 234 911 1,159 Lease obligations 10,169 2,034 8,135 – Bank overdrafts 803 803 – – Trade and other payables 1,521,450 1,521,450 – – Derivative financial instruments: • Forward currency contracts - gross payments 35,160 35,160 – – • Forward currency contracts - gross receipts 159,888 159,888 – –

214 credit risk 50. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Due to asubsidiary Creditors andaccruals 2007 Due to asubsidiary Others Marine Land Systems Electronics Aerospace Group’s four mainoperating segments. relatingdebts to threemajor customers of respective the The below table subsidiaries. analyses the tradedebtors by the trade of 39%) (2007:26%for except risk, credit of concentrations significant no were there 2008, December 31 at As in disclosed Notes 15and23. as corporations, related and institutions financial prime of consist instruments financial to Counterparties customers oflowerfor creditrequired standing. are guarantees bank or credit of letters and payments, advance terms, Cash agreements. netting master procedures.monitoring Where appropriate, Companythe or collateralsobtain subsidiaries its from customers or arrange Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and ancil riskmn Fin Creditors andaccruals 2008 The Company gement objecti ves andp 54,000 54,000 56,855 $’000 T 51,125 otal Within 1 year $’000 56,855 51,125 – – olicies (continued) 1 to 5years $’000 – – – – 278,628 412,235 968,675 More than 147,932 106,619 23,261 5 years $’000 2008 $’000 – – – – Group No specific terms (Restated) 854,800 54,000 54,000 249,396 328,149 146,145 $’000 101,477 29,633 $’000 2007 – – 215 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

51. Fair value of financial instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models as appropriate.

The following methods and assumptions are used to estimate the fair value of each class of financial instruments.

bank balances, other liquid funds and short-term receivables

The carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.

quoted and unquoted investments

The fair values of quoted investments are determined directly by reference to their quoted market prices for these investments as at balance sheet date. For unquoted investments, it is not practicable to determine the fair values because of the lack of quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. However, for unquoted investment in related and non-related corporations as stated in Note 15, the fair value is determined by reference to valuation provided by related and non-related corporations.

loan receivables

The fair values of loan receivables are estimated based on the expected cash flows discounted to present value, except as disclosed in Note 18.

Short-term borrowings and other current payables

The carrying amounts approximate fair values because of the short period to maturity of these instruments.

216 classification offinancialinstruments 51. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Derivative financialinstruments Deferred tax liabilities Deferred income Bank overdrafts Other loans Long-term bankloans Lease obligations Short-term bankloans Provision for taxation work-in-progress Progress inexcess billings of Provisions Creditors andaccruals customers Advance paymentsfrom Liabilities funds Bank balancesandother liquid Short-term investments Advances andother debtors Due from related corporations Trade debtors Stocks andwork-in-progress Deferred tax assets Derivative financialinstruments Finance leasereceivables Long-term receivables Investment properties Intangible assets Investments ventures Associated companies andjoint Property, plantandequipment Assets 2008 The Group the financialstatements: belowout Set comparisona is by category carryingof all of amounts Group’sthe instruments financial arethat carried in F air value of inancil instruments (continued) receivables 2,147,298 Loans and 234,078 968,675 818,925 107,457 $’000 15,850 1,162 1,151 – – – – – – – – – – – – – – – – – – – – – – Fair value profit or through $’000 loss 2,950 3,572 866 866 253 369 – – – – – – – – – – – – – – – – – – – – – – – – Derivatives used for hedging $’000 23,525 23,309 13,424 31,027 7,502 9,885 – – – – – – – – – – – – – – – – – – – – – – – – Available- for-sale $’000 13,902 14,113 211 – – – – – – – – – – – – – – – – – – – – – – – – – – – Held-to- maturity $’000 38,352 38,352 – – – – – – – – – – – – – – – – – – – – – – – – – – – – amortised 2,276,700 Liabilities 1,395,285 322,773 $’000 549,631 cost at 1,847 7,145 19 – – – – – – – – – – – – – – – – – – – – – – – 2,007,062 liabilities financial 1,091,640 3,766,127 1,019,084 1,286,331 assets/ 263,078 $’000 475,746 641,090 139,554 177,647 185,415 Non- 138,128 261,491 62,602 11,496 17,371 2,516 – – – – – – – – – – – – – 4,315,655 5,992,771 1,091,640 1,108,229 1,019,084 1,286,331 1,406,169 234,078 379,086 263,078 322,773 $’000 475,746 641,090 818,925 549,631 177,647 185,415 138,128 T 62,602 23,525 15,850 53,416 16,374 otal 11,496 17,371 1,847 7,145 1,151 580 19 217 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

51. Fair value of financial instruments (continued)

Fair value Non- through Derivatives Liabilities at financial Loans and profit or used for Available- amortised assets/ receivables loss hedging for-sale cost liabilities Total $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group 2007 (Restated) Assets Property, plant and equipment – – – – – 1,014,623 1,014,623 Associated companies and joint ventures – – – – – 267,506 267,506 Investments 1,279 – – 38,098 – – 39,377 Intangible assets – – – – – 642,436 642,436 Investment properties – – – – – 18,379 18,379 Long-term receivables 4,397 – – – – – 4,397 Finance lease receivables 8,366 – – – – – 8,366 Derivative financial instruments – – 2,937 – – – 2,937 Deferred tax assets – – – – – 112,718 112,718 Stocks and work-in-progress – – – – – 1,229,240 1,229,240 Trade debtors 853,571 – – – – 94,936 948,507 Due from related corporations 662,913 – – – – – 662,913 Advances and other debtors 91,820 102 4,959 – – 197,037 293,918 Short-term investments – – – 338 – – 338 Amounts under fund management – – – 178,781 – – 178,781 Bank balances and other liquid funds 625,837 – – – – – 625,837 2,248,183 102 7,896 217,217 – 3,576,875 6,050,273

Liabilities Advance payments from customers – – – – – 1,062,102 1,062,102 Creditors and accruals – – – – 1,521,450 3,388 1,524,838 Provisions – – – – – 191,760 191,760 Progress billings in excess of – – – – – 368,757 368,757 work-in-progress Provision for taxation – – – – – 201,324 201,324 Short-term bank loans – – – – 574,595 – 574,595 Lease obligations – – – – 8,834 – 8,834 Long-term bank loans – – – – 282,366 – 282,366 Other loans – – – – 2,304 – 2,304 Bank overdrafts – – – – 803 – 803 Deferred income – – – – – 7,079 7,079 Deferred tax liabilities – – – – – 45,818 45,818 – – – – 2,390,352 1,880,228 4,270,580

218 51. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 F Due to asubsidiary Deferred tax liabilities Creditors andaccruals Liabilities Bank balancesandother liquidfunds Provision for taxation Advances andother debtors Due from related corporations Associated companies andjoint ventures Subsidiaries Property, plantandequipment Assets 2007 Due to asubsidiary Deferred tax liabilities Short-term bankloans Provision for taxation Creditors andaccruals Liabilities Bank balancesandother liquidfunds Long-term receivables, current Advances andother debtors Due from related corporations Associated companies andjoint ventures Subsidiaries Property, plantandequipment Assets 2008 The Company air value of inancil instruments (continued) receivables 302,638 700,339 Loans and 340,103 710,676 312,937 231,195 139,198 84,764 $’000 180 – – – – – – – – – – – – – – – – – at amortisedcost Liabilities 105,125 136,155 54,000 54,000 25,300 56,855 51,125 $’000 – – – – – – – – – – – – – – – – – – – assets/liabilities Non-financial 559,003 574,453 557,959 575,612 $’000 5,340 4,968 5,927 6,128 1,016 843 372 201 151 50 50 93 – – – – – – – – – – 1,286,288 1,259,342 302,638 142,283 574,453 557,959 313,088 340,196 110,465 54,000 54,000 231,195 25,300 139,198 56,855 84,764 51,125 $’000 4,968 5,927 T 1,016 otal 843 372 180 201 50 50 219 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

51. Fair value of financial instruments (continued)

Forward currency contracts

As at 31 December 2008, the Group has the following forward currency contracts and embedded derivative separated from the foreign currency portion of a sales contract amounting to $676,154,000 (2007: $183,122,000) designated as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreign currencies and accounts receivable in foreign currencies.

Note 2008 2007 Contractual/ Estimated Contractual/ Estimated notional fair notional fair amount value amount value $’000 $’000 $’000 $’000

Cash flow hedges Forward currency contracts: - to hedge confirmed sales in foreign currencies (i) 282,136 9,303 10,390 464 - to hedge firm purchase commitments in foreign currencies (i) 72,175 (1,003) 26,352 775 Other derivatives - embedded derivative (i) 167,787 9,002 – –

Fair value hedges Forward currency contracts: - to hedge confirmed sales in foreign currencies (i) 122,232 (3,068) 139,212 3,650 - to hedge accounts receivable in foreign currencies (i) 31,824 1,573 7,168 70

(i) The maturity dates of the forward currency contracts and embedded derivative separated from the foreign currency portion of a sales contract approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods up to 5 years from the financial year end.

As at 31 December 2008, the Group has the following outstanding forward currency contracts and embedded derivatives separated from the foreign currency portion of sales contracts amounting to $133,699,000 (2007: $11,926,000), which are not designated as hedges of confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.

2008 2007 Contractual/ Estimated fair Contractual/ Estimated fair value notional amount value notional amount $’000 $’000 $’000 $’000

Forward currency contracts: - purchase 8,228 (66) 8,808 82 - sale 15,618 (102) 3,118 20

Other derivatives: - embedded derivatives 109,853 2,505 – –

220 interest rate swaps 51. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Interest rate swaps Cash flow hedges rate. interest variable under million) ($130.2 64.1Euro pay million to and rateinterest fixed under ($124.761.4 million) million Subsequent to 31 December 2008, the Euro interest rate swap was terminated at the prevailing market rate to receive Euro has the samematurity terms as the secured Euro long-termloan. annum and receives a variable rate of interest equal to the EURIBOR on the notional amount. The Euro interest rate3.96% swap (2007:3.96%)of interestper of rate fixed a pays Group the swap, rateinterest Euro the Under loan. long-term Eurosecured 50% the of fairvalue the in changes exposureto the hedge to used being is swap rateinterest Euro The swaps have the samematurity terms as the unsecured USD long-termloans. annum (2007: nil) and receives variable rates of interest equal to the LIBOR on the notional amount. The USD interest rate UnderUSDinterest ratesthe rate3.68% interest fixed Group of of loans. swaps, pays the USD long-term 3.86% per to unsecured 100% the of fairvalue the in changes exposureto the hedge to used being are swaps rateinterest USD The $140,560,000), whichare designatedasacashflow hedge. As at 31 December 2008, the Group has the following outstanding interest rate swaps amounting to $417,465,000 (2007: F air value of inancil instruments (continued) Contractual/ 417,465 notional amount $’000 2008 Estimated (23,525) $’000 value fair Contractual/ 140,560 notional amount $’000 2007 Estimated $’000 value 2,937 fair 221 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

52. cAPital Management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustment to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2008 and 31 December 2007.

The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect.

Group 2008 2007 $’000 $’000 (Restated)

Gross debt Bank loans 872,404 856,961 Capitalised lease obligations 7,145 8,834 Other borrowings 1,847 2,304 881,396 868,099 Bank overdrafts 19 803 881,415 868,902

Shareholders’ funds Share capital 586,614 554,888 Other reserves 100,107 121,367 Retained earnings 893,719 956,255 1,580,440 1,632,510 Minority interests 96,676 147,183 1,677,116 1,779,693

Gross debt equity ratio 52.6% 48.8%

Cash and cash equivalents 1,049,094 1,282,724 Amounts under fund management – 178,781 1,049,094 1,461,505 Gross debt (excluding bank overdrafts) (881,396) (868,099) Net cash position 167,698 593,406

222 c 53. (Currency stated) -Singaporedollars unlessotherwise 31 December 2008 Ltd andTelematics Wireless Ltd.during the year. price allocation to goodwill, intangible assets (excluding goodwill), other assets and liabilities for Pacific Flight purchaseServices Pty the of finalisation to due yearprevious the from changed been have statements financial the in Comparatives Advances andother debtors Trade debtors Stocks andwork-in-progress Deferred tax assets Past dueandnotimpaired Not pastdueandnotimpaired Note 22: Work-in-proqress inexcess ofprogress billings Stocks ofequipmentandspares Note 21: Deferred tax assets Note 20: Other intangibleassets Goodwill Note 16: Impairment in value ofunquotedinvestments, atcost Note 15: Presented in the Notes to the Financial Statements Deferred tax liabilities Provisions Creditors andaccruals Intangible assets Investments Minority interests Presented in the BalanceS heet Impaired receivable (Gross) Collectively assessed Allowance for doubtful debts Impaired receivable (Gross) Individually assessed ompara tive f igures 1,229,240 1,524,838 480,052 642,436 948,507 374,200 R 156,265 (46,349) 293,918 441,735 (27,306) 749,188 486,171 147,183 191,760 112,718 112,718 55,592 $’000 45,818 estated 39,377 43,581 2007 1,228,125 Previously 1,524,156 reported 953,703 294,221 748,999 146,700 492,651 301,598 (40,479) 137,330 629,981 479,126 112,380 112,380 389,713 (25,861) 174,601 40,822 40,208 48,522 191,571 $’000 2007 223 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars unless otherwise stated)

53. comparative figures (continued)

Previously Restated reported 2007 2007 $’000 $’000

Presented in the Notes to the Financial Statements (continued)

Note 24: Other debtors, deposits and prepayments 98,246 98,549

Note 28: Other recoverables 21,391 21,694

Note 30: Trade creditors 551,733 551,575 Other creditors and accruals 966,831 966,307

Note 31: Provision for foreseeable losses 541 352

Note 34: Non-trade creditors 194,379 194,232 Accrued operating expenses 761,995 761,618

Note 36: Deferred tax liabilities 45,818 40,208

54. subsequent events

(a) A subsidiary’s land and buildings with a carrying amount of $23,252,000 (RMB 110,513,000) are mortgaged to secure bank loans of $16,832,000 (RMB 80,000,000), of which $8,276,000 (RMB 37,500,000) of bank loans has been drawn down as at 12 February 2009.

(b) In January 2009, the Singapore Government announced the 2009 Budget with a “Resilience Package”, which provides a number of measures to cushion the impact of the slowing Singapore economy. The Group will benefit largely from two key Budget measures, namely the reduction in corporate tax rate from 18% to 17% and the Jobs Credit scheme.

224 Interested p (Currency -Singaporedollars) 31 December 2008 Associates SembCorp IndustriesLtdandits Keppel Corporation LtdanditsAssociates Services T SembCorp MarineLtdanditsAssociates LimitedanditsAssociates Singapore AirportTerminal Services SMRT Corporation LtdanditsAssociates anditsAssociates Singapore Telecommunications Limited itsAssociates Singapore Computer Systems Limitedand Associates Temasek Holdings(Private)Limitedandits StarHub LtdanditsAssociates hpe 9 fte itn Mna o h Snaoe xhne euiis rdn Lmtd “G” b h Gop r as are Group the by (“SGX”) Limited Trading Securities follows: Exchange Singapore the of Manual Listing the of 9 Chapter Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under ransactions for the SaleofGoodsand erson trans a ctions excluding transactions conducted under a Shareholders’ Mandatepursuant to R Aggregate value ofall transactions ule 920 of the SGXListingManual $’000 2008 – – – – – – – – – – $’000 2007 – – – – – – – – – – Mandate pursuant to R Aggregate value ofall transactions conducted under aShareholders’ 13,155 6,058 2,393 $’000 3,144 2008 430 420 282 277 151 SGX ListingManual – ule 920 of the 40,887 17,510 6,629 6,906 $’000 3,274 4,413 2007 1,419 489 247 – 225 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 31 December 2008 (Currency - Singapore dollars)

Interested person transactions (continued)

Aggregate value of all transactions Aggregate value of all transactions excluding transactions conducted under conducted under a Shareholders’ a Shareholders’ Mandate pursuant to Mandate pursuant to Rule 920 of the Rule 920 of the SGX Listing Manual SGX Listing Manual 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Transactions for the Purchase of Goods and Services

CapitaLand Limited and its Associates – – 597 – SembCorp Marine Ltd and its Associates – – – 180 Singapore Computer Systems Limited and its Associates – – 2,395 3,410 Singapore Telecommunications Limited and its Associates – – 238 118 SMRT Corporation Ltd – – 845 – SNP Corporation Ltd – – 161 – StarHub Ltd and its Associates – – 322 241 Temasek Holdings (Private) Limited and its Associates – – 20,637 23,509 – – 25,195 27,458

Investment/Divestment/Leasing Transactions

Singapore Computer Systems Limited and its Associates – 1,017 – –

Treasury Transactions

Temasek Holdings (Private) Limited and its Associates – – 796,872 821,246

Total Interested Person Transactions – 1,017 835,222 889,591

226 Distribution and selling expensesDistribution andselling Other operating income Gross profit Cost ofsales T Other expenses, net Profit from operations before taxation, other income andfinancialexpenses Other operating expenses Administrative expenses Shareholder of the Company Attributable to: Profit from operations after taxation Taxation Share ofresults ofassociated companies andjoint ventures Financial expenses Profit from operations before taxation Income st Minority interests urnover a tement (1,565,515) 1,940,954 375,439 225,691 239,251 272,120 234,717 234,717 (98,863) $’000 (37,403) (25,970) 261,616 (16,386) (21,434) 2008 32,869 27,396 9,026 (931) (1,413,383) 1,837,769 424,386 324,052 286,237 286,237 270,479 (54,925) 305,172 $’000 341,162 2007 (97,186) 35,990 (15,168) (17,418) 15,758 20,611 (1,462) (8,591) 227 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Balance Sheet

2008 2007 $’000 $’000 (Restated)

ASSETS Non-current assets Property, plant and equipment 742,433 775,254 Associated companies and joint ventures 137,386 141,335 Investments 1,804 4,066 Intangible assets 3,317 2,031 Long-term receivables 117 217 Derivative financial instruments - 2,937 Deferred tax assets 45,152 54,842 930,209 980,682 Current assets Stocks and work-in-progress 413,610 366,751 Trade debtors 503,565 382,670 Due from related corporations 27,804 42,120 Advances and other debtors 110,359 62,593 Long-term receivables, current 281 376 Short-term investments 83 - Amounts under fund management - 128,743 Bank balances and other liquid funds 117,422 143,370 1,173,124 1,126,623

TOTAL ASSETS 2,103,333 2,107,305

EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 92,594 132,686 Creditors and accruals 834,406 680,048 Provisions 57,264 58,466 Progress billing in excess of work-in-progress 86,202 100,093 Provision for taxation 64,105 96,456 Short-term bank loans 51,863 46,853 Lease obligations, current 1,603 1,539 Long-term bank loans, current 261,879 281,546 1,449,916 1,397,687

NET CURRENT LIABILITIES (276,792) (271,064)

Non-current liabilities Advance payments from customers, non-current 159,866 137,372 Deferred income 295 317 Deferred tax liabilities 12,320 1,238 Lease obligations, non-current 5,347 6,970 Provision for pension benefits 2,516 3,388 Derivative financial instruments 4,043 - Loans from related corporations 53,049 53,049 237,436 202,334

TOTAL LIABILITIES 1,687,352 1,600,021 NET ASSETS 415,981 507,284

Share capital and reserves 375,925 409,977 Minority interests 40,056 97,307 415,981 507,284

TOTAL EQUITY AND LIABILITIES 2,103,333 2,107,305 228 S Cash andcashequivalentsatendof the year Exchange difference oncashandequivalentsatbeginning of the year Cash andcashequivalentsatbeginning of the year Net decrease incashandequivalents Exchange difference onfinancingactivities Interest paid Dividendspaid to minority shareholders ofsubsidiaries Dividendspaid to shareholder Proceeds from bankloans,net Repayment ofleaseobligations,net Proceeds from inter-company loans,net Capitalcontribution from minority shareholders ofasubsidiary Net cashusedinfinancingactivities Exchange difference oninvesting activities Acquisition ofadditional interest insubsidiaries Acquisition ofsubsidiaries Additional investment inassociated companies Purchase ofproperty, plantandequipment Proceeds from saleandmaturity ofinvestments Dividendsfrom associated companies Dividendsfrom investments Proceeds from saleofproperty, plantandequipment Net cashfrom/(used in)investing activities Net cashfrom operating activities t a tement ofCashFlo ws (103,213) (213,816) (60,259) (90,037) 168,996 182,973 143,194 (21,544) (39,735) (10,293) 121,396 20,540 (15,312) 21,205 35,105 29,762 $’000 (2,795) 2008 (1,513) 2,836 9,094 (147) 609 154 (44) (293,000) (257,183) 224,865 255,610 (20,232) (36,620) 182,973 (20,724) (18,452) (111,091) (38,193) (17,453) 64,573 12,002 15,356 24,841 $’000 18,437 (3,699) 16,441 2007 (1,450) 31,153 5,760 23 13 229 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Financial Highlights

2008 2007 2006 2005 2004 $’000 $’000 $’000 $’000 $’000

Turnover 1,940,954 1,837,769 1,675,493 1,235,911 1,118,309 EBITDA 331,937 381,857 321,464 233,582 202,172 EBIT 234,220 303,441 237,080 194,490 168,055 Profit before tax 272,120 341,162 305,280 255,443 235,400 Profit after tax and minority interests 225,691 270,479 255,036 210,294 187,275 Shareholders’ funds 375,925 409,977 417,680 463,024 452,329 Total assets 2,103,333 2,107,305 1,987,885 1,401,366 1,373,110 Net assets 415,981 507,284 512,220 497,982 484,100 Capital expenditure 103,213 111,091 158,373 86,973 56,944 Earnings per share (cents) 112.85 135.24 127.52 105.15 93.64 Return on sales (%) 12.1 15.6 15.6 18.1 17.5 Return on equity (%) 52.6 58.4 54.2 40.8 37.1 Return on total assets (%) 11.2 13.6 13.2 15.9 14.2 Net asset value per share (cents) 207.99 253.64 256.11 248.99 242.05

Productivity Data Average staff strength (number) 7,081 6,757 5,880 5,057 4,869 Sales per employee ($) 274,107 271,980 284,948 244,396 229,679 Profit after tax per employee ($) 31,873 40,029 43,373 41,585 38,463 Employment costs 639,900 605,220 589,440 438,163 405,125 Employment costs per $ of turnover ($) 0.33 0.33 0.35 0.35 0.36

Economic Value Added 198,653 235,931 194,390 175,200 136,694 Economic Value Added spread (%) 17.8 22.5 19.5 25.8 20.3 Economic Value Added per employee ($) 28,054 34,917 33,060 34,645 28,074

Value added 1,047,825 1,043,873 981,309 729,921 679,190 Value added per employee ($) 147,977 154,488 166,889 144,339 139,493 Value added per $ of employment costs ($) 1.64 1.72 1.66 1.67 1.68 Value added per $ of gross property, plant and equipment ($) 0.78 0.79 0.81 1.09 1.16 Value added per $ of turnover ($) 0.54 0.57 0.59 0.59 0.61

230 Income S Minority interests Shareholder of the Company Attributable to: Profit from operations after taxation Taxation Profit from operations before taxation Share ofresults ofassociated companies andjoint venture Financial expenses Other income/(expenses), net Profit from operations before taxation, other income andfinancialexpenses Other operating expenses Administrative expenses expensesDistribution andselling Other operating income/(loss), net Gross profit Cost ofsales T urnover t a tement 1,157,704 (781,489) (114,919) (53,500) 376,215 103,146 (10,282) (14,905) (22,817) (89,745) 92,252 $’000 93,940 2008 71,123 71,123 68,111 3,012 1,688 (612) 1,038,284 (107,486) (719,077) 106,445 319,207 (24,893) (78,786) 115,336 115,775 $’000 88,223 90,443 90,443 30,027 (47,187) 2007 (9,461) 2,220 8,891 131 231 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Balance Sheet

2008 2007 $’000 $’000 (Restated)

ASSETS Non-current assets Property, plant and equipment 58,996 42,262 Investment property 1,389 1,428 Associated companies and joint venture 11,305 8,971 Investments 12,425 27,382 Intangible assets 364,998 364,030 Long-term receivables 4 1,815 Deferred tax assets 23,103 22,919 472,220 468,807 Current assets Stocks and work-in-progress 330,928 322,816 Trade debtors 309,126 281,666 Due from related corporations 44,231 92,567 Debtors, deposits and prepayments 23,559 20,765 Advance payments to suppliers 53,773 22,537 Short term investment 211 338 Loan receivables, current 29 78 Bank balances and other liquid funds 185,353 189,551 947,210 930,318

TOTAL ASSETS 1,419,430 1,399,125

EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 140,860 88,463 Creditors and accruals 308,903 482,878 Provisions 26,703 29,975 Progress billing in excess of work-in-progress 254,194 214,466 Provision for taxation 31,913 28,293 Short-term bank loans (unsecured) 9,000 12,343 Lease obligations, current 41 53 Long-term bank loans, current 110 237 Bank overdrafts - 800 771,724 857,508

NET CURRENT ASSETS 175,486 72,810

Non-current liabilities Advance payments from customers, non-current 127,009 72,737 Deferred income - 35 Deferred rent 3,911 1,136 Deferred tax liabilities 6,689 6,803 Lease obligations, non-current - 33 Long-term bank loans, non-current 142 583 Loans from immediate holding company 115,416 76,757 Loans from a related corporation 292,588 293,043 545,755 451,127

TOTAL LIABILITIES 1,317,479 1,308,635 NET ASSETS 101,951 90,490

Share capital and reserves 85,042 75,611 Minority interests 16,909 14,879 101,951 90,490

TOTAL EQUITY AND LIABILITIES 1,419,430 1,399,125 232 S Net cashfrom operating activities Net cash(usedin)/from investing activities Proceeds from saleofproperty, plantandequipment Proceeds from saleofassociated companies Dividendfrom associated company Dividendsfrom investments Proceeds from saleofinvestments Purchase ofproperty, plantandequipment Purchase ofaninvestment Acquisition ofsubsidiaries Acquisition ofadditional interest inasubsidiary Net cashusedinfinancingactivities Capitalcontribution from minority shareholders ofsubsidiaries (Repayment of)/proceeds from inter-company loans,net Repayment ofleaseobligations Repayment ofbankloans,net Repayment ofconvertible loan Loans to associated companies/joint venture Repayment ofloanby aminority shareholder Dividendspaid to shareholder Dividendspaid to minority shareholders ofsubsidiaries Interest paid Net increase/(decrease) incashandequivalents Cash andcashequivalentsatbeginning of the year Exchange difference oncashandequivalentsatbeginning of the year Cash andcashequivalentsatendof the year t a tement ofCashFlo ws (155,233) (121,482) (112,292) 223,667 216,305 275,583 (33,265) (65,923) (51,220) (31,955) $’000 2008 (1,056) (7,732) (1,895) (3,911) (942) (696) 582 (45) 46 21 15 17 - - - - (103,308) 275,583 105,830 144,344 133,851 (13,627) (10,697) 58,292 92,949 $’000 2007 51,599 (5,237) (2,612) (7,993) (1,259) 2,304 6,325 (980) (295) 1,138 (313) (54) 45 34 - - - 233 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Financial Highlights

2008 2007 2006 2005 2004 $’000 $’000 $’000 $’000 $’000

Turnover 1,157,704 1,038,284 965,757 712,223 636,681 EBITDA 140,386 101,272 106,602 81,164 69,641 EBIT 118,051 85,748 91,082 72,383 60,891 Profit before tax 93,940 115,336 104,650 76,022 64,506 Profit after tax and minority interests 68,111 88,223 76,318 58,008 51,592 Shareholders’ funds 85,042 75,611 103,488 137,282 108,095 Total assets 1,419,430 1,399,125 1,205,206 1,057,526 568,990 Net assets 101,951 90,490 114,097 141,025 113,600 Capital expenditure 31,955 13,627 12,006 7,125 16,012 Earnings per share (cents) 64.84 83.99 72.65 55.22 49.11 Return on sales (%) 6.1 8.7 8.1 8.4 7.9 Return on equity (%) 31.8 43.2 32.9 23.3 47.7 Return on total assets (%) 5.0 6.5 6.5 5.7 8.8 Net asset value per share (cents) 97.1 86.1 108.6 134.3 108.1

Productivity Data Average staff strength (number) 4,373 3,823 3,256 2,828 2,649 Sales per employee ($) 264,739 271,589 296,608 251,847 240,348 Profit after tax per employee ($) 15,575 23,077 23,439 20,512 19,476 Employment costs 350,801 306,468 270,901 187,664 167,845 Employment costs per $ of turnover ($) 0.30 0.30 0.28 0.26 0.26

Economic Value Added 59,967 64,997 67,295 47,378 44,681 Economic Value Added Spread (%) 9.4 11.3 12.7 26.5 27.6 Economic Value Added per employee ($) 13,713 17,002 20,668 16,753 16,867

Value added 482,469 450,242 407,234 273,439 243,951 Value added per employee ($) 110,329 117,772 125,072 96,690 92,092 Value added per $ of employment costs ($) 1.38 1.47 1.50 1.46 1.45 Value added per $ of gross property, plant and equipment ($) 2.78 3.06 2.99 2.00 2.10 Value added per $ of turnover ($) 0.42 0.43 0.42 0.38 0.38

234 income st

Minority interests Shareholder of the Company Attributable to: Profit from operations after taxation Taxation Profit from operations before taxation Share ofresults ofassociated companies andjoint ventures Financial expenses Other income, net Other operating income/(loss), net Gross profit Cost ofsales T Profit from operations before taxation, other income andfinancialexpenses expensesDistribution andselling Other operating expenses Administrative expenses urnover a tement (1,026,777) 1,280,879 254,102 (32,799) (52,977) (86,138) 80,259 83,099 83,099 81,000 84,728 (8,003) 79,947 (1,629) $’000 (1,188) 2008 4,469 7,262 3,152 78,336 1,667 (944,823) 1,188,317 243,494 (28,263) (45,499) 80,003 $’000 73,008 73,008 (88,112) 2007 83,873 70,789 (9,628) (6,995) 2,253 2,219 4,091 235 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Balance Sheet

2008 2007 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 108,004 92,895 Associated companies and joint ventures 112,111 110,983 Long-term investments 635 7,527 Intangible assets 235,524 238,910 Investment properties 15,982 16,951 Long-term receivables 60,146 61,091 Finance lease receivables 4,793 1,444 Deferred tax assets 15,087 12,797 Derivative financial instruments 16,374 - 568,656 542,598 Current assets Stocks and work-in-progress 413,123 409,742 Trade debtors 161,538 150,423 Debtors and deposits 130,917 108,198 Prepayments 6,564 14,407 Long-term receivables, current - 9 Finance lease receivables, current 11,057 6,922 Bank balances and other liquid funds 159,132 114,844 Due from related corporations 28,356 47,366 Derivative financial instruments, current 8,599 775 919,286 852,686 TOTAL ASSETS 1,487,942 1,395,284 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 200,198 298,040 Progress billings in excess of work-in-progress 10,294 844 Creditors and accruals 380,275 299,825 Provisions 53,921 43,659 Provision for taxation 31,594 24,790 Derivative financial instruments, current 3,673 - Long-term loans, current 240 234 Short-term bank loans 11,572 10,885 Bank overdrafts 19 3 691,786 678,280 NET CURRENT ASSETS 227,500 174,406 Non-current liabilities Advance payments from customers, non-current 279,843 245,467 Non-trade creditor - 31 Due to related corporations 735 - Loans from related corporations 292,674 282,079 Due to joint venture 112 49 Long-term loans 1,607 1,876 Long-term loan from minority shareholder of a subsidiary - 194 Deferred income 7,290 5,591 Deferred tax liabilities 43,084 37,257 625,345 572,544 TOTAL LIABILITIES 1,317,131 1,250,824 NET ASSETS 170,811 144,460 Share capital and reserves 131,744 110,179 Minority interests 39,067 34,281 170,811 144,460 TOTAL EQUITY AND LIABILITIES 1,487,942 1,395,284 236 S Proceeds from disposalofproperty, plantandequipment Distributionfrom fundsunder management Net cashusedininvesting activities Net cashfrom operating activities Purchase ofproperty, plantandequipment Distributionfrom unquotedlong-terminvestment Dividendsfrom unquotedlong-terminvestments Dividendsfrom associated companies Purchase priceadjustmentfor acquisition ofasubsidiary Cash andcashequivalentsatendof the year Exchange difference oncashandequivalentsatbeginning of the year Cash andcashequivalentsatbeginning of the year Net increase incashandequivalents Interest paid Dividendspaid to minority shareholders ofasubsidiary Dividendspaid to shareholder Proceeds from/(repayment of)short-termloansfrom immediate holdingcompany Proceeds from short-termbankloans Repayment oflong-termloans Proceeds from short-termloansfrom related corporations Repayment oflong-termloansfrom related corporations Net cashusedinfinancingactivities Disposalofasubsidiary Acquisition ofadditional interest inasubsidiary t a tement ofCashFlo ws (83,000) 147,042 (27,222) 167,037 (15,328) (31,658) 45,000 66,466 $’000 23,916 (2,386) (5,862) 2008 31,417 (3,921) 3,275 1,736 (252) (245) (777) 170 21 11 - - - (20,000) (64,500) 129,050 147,042 (24,550) (74,045) 115,918 (19,144) 35,861 (4,737) $’000 (1,044) 2,026 4,360 2007 3,528 8,412 (296) (979) (210) (931) 659 106 131 99 – 237 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Financial Highlights

2008 2007 2006 2005 2004 $’000 $’000 $’000 $’000 $’000

Turnover 1,280,879 1,188,317 1,013,899 604,647 594,300 EBITDA 102,606 102,530 75,047 50,574 56,470 EBIT 82,188 81,620 57,811 39,113 45,148 Profit before tax 84,728 80,003 69,971 65,010 71,549 Profit after tax and minority interests 79,947 70,789 51,926 48,997 58,066 Shareholders’ funds 131,744 110,179 110,954 173,597 164,471 Total assets 1,487,942 1,395,284 1,252,835 1,004,039 883,498 Net assets 170,811 144,460 126,779 183,431 165,131 Capital expenditure 31,658 24,550 12,116 7,808 5,638 Return on sales (%) 6.5 6.1 5.3 8.1 9.5 Earnings per share (cents) 66.31 58.71 43.07 40.64 48.16 Return on equity (%) 28.8 27.6 20.2 22.9 34.9 Return on total assets (%) 5.6 5.2 4.3 4.9 6.4 Net asset value per share (cents) 141.68 119.82 105.15 152.14 136.96

Productivity data Average staff strength (number) 5,224 5,299 4,961 3,417 2,389 Sales per employee ($) 245,191 224,253 204,374 176,953 248,765 Profit after tax per employee ($) 15,304 13,359 10,467 14,339 24,306 Employment costs 243,506 259,424 224,828 125,030 117,116 Employment costs per $ of turnover ($) 0.19 0.22 0.22 0.21 0.20

Economic Value Added 51,690 50,593 32,994 34,087 34,821 Economic Value Added spread (%) 8.3 8.8 6.8 12.0 11.3 Economic Value Added per employee ($) 9,895 9,548 6,651 9,976 14,576

Value added 364,655 371,647 325,057 202,374 197,304 Value added per employee ($) 69,804 70,135 65,522 59,226 82,589 Value added per $ of employment costs ($) 1.50 1.43 1.45 1.62 1.68 Value added per $ of gross property, plant and equipment ($) 0.93 1.01 0.96 0.62 0.66 Value added per $ of turnover ($) 0.28 0.31 0.32 0.33 0.33

238 income st Shareholder of the Company Attributable to: Profit from operations after taxation Taxation Profit from operations before taxation Share ofresults ofassociated companies andjoint ventures Financial expenses Other income, net Profit from operations before taxation, other income andfinancialexpenses Other operating expenses Administrative expenses Distribution and selling expensesDistribution andselling Other operating income Gross profit Cost ofsales T urnover a tement (713,318) 108,436 (25,345) 821,754 (12,640) 74,500 74,500 75,203 74,827 (2,244) 12,221 75,163 (7,845) $’000 2,580 2008 (703) 40 (757,254) 864,594 107,340 (21,303) 25,898 (24,211) 75,264 75,264 96,567 96,521 (3,430) 99,106 $’000 (3,733) (6,188) 2007 845 46 239 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Balance Sheet

2008 2007 $’000 $’000

ASSETS Non-current assets Property, plant and equipment 99,255 94,124 Associated companies and joint ventures 241 353 Investments 38,533 384 Intangible assets 152 162 Long-term receivables 330 237 Deferred tax assets 36,400 20,904 174,911 116,164 Current assets Stocks and work-in-progress 83,881 90,959 Trade debtors 108,952 103,774 Due from related corporations 178,405 195,385 Other debtors, deposits and prepayments 7,703 5,022 Advance payments to suppliers 35,309 42,578 Long-term receivables, current 23 23 Short-term investments 286 - Amounts under fund management - 50,038 Bank balances and other liquid funds 113,498 90,843 528,057 578,622

TOTAL ASSETS 702,968 694,786

EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 62,628 94,196 Creditors and accruals 278,571 246,577 Provisions 43,774 56,329 Progress billings in excess of work-in-progress 124,282 52,444 Provision for taxation 37,035 36,899 Lease obligations, current 82 77 546,372 486,522

NET CURRENT ASSETS/(LIABILITIES) (18,315) 92,100

Non-current liabilities Advance payments from customers, non-current 34,908 - Loan from related corporations 26,343 84,159 Accrued staff benefits - 1,182 Lease obligations, non-current 72 156 61,323 85,497

TOTAL LIABILITIES 607,695 572,019 NET ASSETS 95,273 122,767 Share capital and reserves 95,273 122,767 TOTAL EQUITY AND LIABILITIES 702,968 694,786

240 S Exchange difference oncashandequivalentsatbeginning of the year Net cashusedininvesting activities Cash andcashequivalentsatendof the year Cash andcashequivalentsatbeginning of the year Net increase incashandequivalents Net cashusedinfinancingactivities Net cashfrom operating activities t Exchange difference onfinancingactivities Interest paid Dividends paid to shareholder Repayment ofleaseobligations,net Repayment ofinter-company loans Exchange difference oninvesting activities Purchase ofproperty, plantandequipment Proceeds from saleofproperty, plantandequipment Proceeds from saleandmaturity ofinvestments Dividend from short-terminvestments Dividend from ajoint venture Proceeds from saleofanassociated company a tement ofCashFlo ws (103,261) (134,617) 275,347 281,935 (10,448) (28,105) 151,742 (21,711) $’000 (2,211) 2008 9,832 6,677 (961) 336 788 150 156 (89) (79) 1 275,347 (20,443) 246,914 (70,894) 127,341 (15,988) (94,103) $’000 14,037 (3,430) 29,128 (3,780) 2007 2,264 (4,110) (695) 32 (11) - - - 241 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Financial Highlights

2008 2007 2006 2005 2004 $’000 $’000 $’000 $’000 $’000

Turnover 821,754 864,594 702,868 659,847 484,364 EBITDA 78,824 90,304 84,738 97,563 79,415 EBIT 62,606 73,208 68,347 78,440 57,174 Profit before tax 75,203 96,567 79,500 87,932 69,786 Profit after tax and minority interests 74,500 75,264 67,823 70,267 53,741 Shareholders’ funds 95,273 122,767 124,345 111,992 107,779 Total assets 702,968 694,786 682,867 702,775 664,556 Net assets 95,273 122,767 124,345 111,992 107,779 Capital expenditure 21,711 20,687 11,845 18,473 2,952 Earnings per share (cents) 38.09 38.48 34.68 35.93 27.48 Return on sales (%) 9.1 8.7 9.6 10.6 11.1 Return on equity (%) 61.3 50.5 45.0 50.8 40.1 Return on total assets (%) 10.6 10.8 9.9 10.0 8.1 Net asset value per share (cents) 48.72 62.77 63.58 57.26 55.11

Productivity Data Average staff strength (number) 1,541 1,439 1,404 1,416 1,514 Sales per employee ($) 533,260 600,830 500,618 465,994 319,923 Profit after tax per employee ($) 48,345 52,303 48,307 49,624 35,496 Employment costs 126,053 134,252 106,086 104,448 104,238 Employment costs per $ of turnover ($) 0.15 0.16 0.15 0.16 0.22

Economic Value Added 59,597 60,453 49,903 49,061 32,501 Economic Value Added spread (%) 26.1 24.1 18.7 18.0 11.7 Economic Value Added per employee ($) 38,674 42,010 35,543 34,648 21,467

Value added 228,006 252,348 206,753 226,932 200,186 Value added per employee ($) 147,960 175,363 147,260 160,263 132,223 Value added per $ of employment costs ($) 1.81 1.88 1.95 2.17 1.92 Value added per $ of gross property, plant and equipment ($) 0.67 0.78 0.67 0.75 0.70 Value added per $ of turnover ($) 0.28 0.29 0.29 0.34 0.41

242 Italics # ** * + ^ Subsidiaries andAssociated Companies(asat25February 2009) Singapore Technologies Electronics Limited Singapore Technologies Ltd DynamicsPte Singapore Technologies Aerospace Ltd Indicates Associated held) andindirectly Companies. OthersareSubsidiaries(bothdirectly In the process ofdissolution Balance 1%heldby SanAntonioAerospace GP, LLC Balance 1%heldby DalFort Aerospace GP, Inc. Ceased operations in2003 In members’ voluntary windingup Singapore Technologies Engineering(USA) Inc. Singapore Technologies KineticsLtd Vision Technologies Aerospace, Incorporated Kaz-ST EngineeringBastauLimited Singapore Technologies MarineLtd Vision Technologies Systems,Inc. Vision Technologies LandSystems,Inc. Vision Technologies Electronics, Inc. Vision Technologies Kinetics,Inc. Vision Technologies Marine,Inc. ST Ltd SynthesisPte FusionTech Ltd. Pte. Liability Partnership 2006 JVPte.Ltd. 2006 SA Supplies (USA) Inc. VT Systems,Inc. VT (50%)^ (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (51%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) (100%) # #

ST MobileAerospace Engineering,Inc. VT SpecializedVehiclesVT Corporation (formerly known asiDirect, Inc.) San AntonioAerospace GP, LLC NanoScience Innovation PteLtd DalFort Aerospace GP, Inc. San AntonioAerospace LP DalFort Aerospace ,L.P. Halter-Bollinger JointVenture LLC MÄK Technologies, Inc. VT iDirect,VT Inc.(100%) VT HalterVT Marine,Inc. VT Dimensions,Inc. VT Miltope Corporation VT LeeBoy,VT Inc. (27.06%) (99%)** (100%) (100%) (100%) (100%) (100%) (100%) (100%) (99%)* (100%) (80%) (50%) +

iDirect Government Technologies, Inc. Ximaera Technologies Canada Inc. iDirect HongKong Limited iDirect International,Inc. iDirect Singapore Ltd. Pte. iDirect UKLimited iDirect Italy srl (100%) (100%) (100%) (100%) (100%) (49%) (100%) 243 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 Subsidiaries and Associated Companies (as at 25 February 2009)

ST Aerospace Engineering Pte Ltd ST Aviation Training Academy Pte. Ltd. Aviation Training Academy Australia Pty Ltd (100%) (66%) (100%) Pacific Flight Services Pty Ltd ST Aviation Training Academy (Australia) Pty Ltd (100%) (100%) Pacific Flight Services Pte Ltd (100%)

ST PAE Holdings Pty Ltd Aerospace Engineering Services (100%) Pty Ltd Unit Trust (50%) Composite Technology International Pte Ltd (33.33%) Aerospace Engineering Services Pty Ltd (50%) Eurocopter South East Asia Private Limited (25%)

ST Aerospace Engines Pte Ltd ST Aerospace Technologies (Xiamen) (100%) Company Limited (80%) ST Aerospace International Structures Pte Ltd (100%)

ST Aerospace Systems Pte Ltd Singapore Precision Repair and (100%) Overhaul Pte Ltd (50%) ST Aerospace Supplies Pte Ltd iShopAero Pte Ltd (100%) (100%) Guangzhou Aerospace Technologies and ST Airport Ground Services Pte Ltd Engineering Company Limited (100%) (100%) ST Aviation Resources Pte Ltd ST Aviation Resources 1 Limited (100%) (100%) Visiontech Investment Pte Ltd (100%) Panama Aerospace Engineering Inc. (100%) Singapore Aerospace Kabushiki Kaisha (100%) Singapore Technologies Engineering (Europe) Ltd (100%) ST Aerospace Solutions (Europe) A/S Airline Rotables (UK Holdings) Limited Airline Rotables Limited (100%) (100%) (100%) Bournemouth Aviation Services Company Limited* (81%) ST Aviation Services Co Pte Ltd (80%)

Singapore British Engineering (Pte) Ltd (51%) Visiontech Engineering Pte Ltd (51%) 1988 JV Pte. Ltd.* (50%) Madrid Aerospace Services S.L. (50%) Shanghai Technologies Aerospace Company Limited (49%) Turbine Overhaul Services Pte Ltd (49%) Turbine Coating Services Pte Ltd (24.5%)

* In members’ voluntary winding up Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

244 Subsidiaries and Associated Companies (as at 25 February 2009)

ST Electronics (Satcom & Sensor ST Electronics (Sichuan) Co., Ltd Systems) Pte. Ltd. (100%) (100%) iDirect Asia Pte. Ltd. (100%) ST Electronics (Info-Comm ST Electronics (Info-Security) Pte. Ltd. DataMark Technologies Pte Ltd Systems) Pte. Ltd. (100%) (61.12%) (100%) Telematics Wireless Ltd Telematics Wireless USA Corp (93.93%) (100%) STELCOMMS Pte. Ltd. (51%) iWOW Technology Pte Ltd (21.74%) ST Electronics (Shanghai) Co., Ltd ST Electronics-PCI Co., Ltd (100%) (51%)

iTS Technologies Pte Ltd Prescient Systems & Technologies Pte. Ltd. (100%) (47.84%) ST Electronics (Training & Simulation ST Electronics (Digital Media) Pte. Ltd. Systems) Pte. Ltd. (100%) (100%) ST Education & Training Private Limited STET Maritime Pte. Ltd. (formerly known (70%) as STET Maritime Bureau Pte. Ltd.) (100%)

STET Maritime Education Pte. Ltd. (100%) STET Centre Pte. Ltd. (100%) Antycip Simulation Limited Antycip Simulation SAS (93%) (100%) Brightspot Interactive Learning Pte. Ltd. Brightspot Interactive Learning Inc. (51%) (100%) ST Electronics (Taiwan) Limited Knowledge Alive Pte. Ltd. COMAT Training Services Pte Ltd (100%) (45.47%) (100%) SEEL Electronic & Engineering Sdn Bhd MERITS Technologies LLP (100%) (51%) TranSys Pte Ltd (100%) ST Electronics (Info-Software ST Electronics (Software Systems) Pte. Ltd. Services) Limited

(100%) (100%) Annual Report 2008

ST Electronics (e-Services) Pte. Ltd. (100%) WizVision Pte. Ltd. (22.8%) INFA Systems Limited (100%) Intelect Technologies, Incorporated PM-B Pte Ltd PMB Project Management Business Sdn Bhd (78.57%) (70%) (100%) Ripple Systems Pty Ltd PT PM-B Indonesia (100%)* (100%) STELOP Pte. Ltd. PM-B (China) Ltd (50.05%) (100%) GFM Electronics S.A. de C.V. PM-B Project Management Business (50%) (Thailand) Ltd (49%) Trusted Hub Ltd (21.8%)

* In members’ voluntary liquidation Italics Indicates Associated Companies. Others are Subsidiaries IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore (both directly and indirectly held)

245 Subsidiaries and Associated Companies (as at 25 February 2009)

Advanced Material Engineering Pte. Ltd. Advanced Pyrotechnic Materials (100%) Private Limited (51%) SMART Systems Pte Ltd (50%) Takata CPI Singapore Pte Ltd (49%) Autonomous Technology Pte Ltd Guizhou Jonyang Kinetics Co., Ltd. (100%) (60%) Allied Ordnance of Singapore (Pte) Limited Defence Electronics of Singapore Pte Ltd (100%) (49%) ST Kinetics Integrated Engineering Pte. Ltd. (formerly known as Expert Systems Pte Ltd) (100%) Kinetics Systems (Shanghai) Co., Ltd. (100%) Mobility Systems Pte Ltd Silvatech Systems Corporation Pte Ltd Kinetics Drive Solutions Inc. (100%) (100%) (100%) Silvatech Global Systems Limited (100%)

Ordnance Development and Engineering Timoney Holdings Limited Company of Singapore (1996) Private Limited (25%) (100%) Singapore Commuter Private Limited (100%) SDG Kinetics Pte. Ltd. (formerly known as Singapore Ordnance Engineering Pte. Ltd.) (100%) Singapore Test Services Private Limited Nusantara Technologies Sdn. Bhd. (100%) (49%) ST Kinetics Pte. Ltd. (formerly known as SAO Industrial Services Pte Ltd) (100%) Securedge Pte. Ltd. (100%) ST Kinetics International Pte. Ltd. VT Specialized Vehicles, S.A. de C.V. (100%) (99%)* STA Detroit Diesel-Allison (Singapore) Pte Ltd (100%) STA Inspection Pte Ltd (100%) STA Investment Pte Ltd (100%) Unicorn International Pte Limited (100%) STAR Automotive Center (Guangzhou) Co., Ltd. (100%) STAR Automotive Center (Zhejiang) Co., Ltd. (100%) ATREC Pte. Ltd. (50%) Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd. (50%) CityCab Pte Ltd (46.5%)

* Balance 1% held by Singapore Technologies Kinetics Ltd Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

246 Subsidiaries and Associated Companies (as at 25 February 2009)

STSE Engineering Services Pte Ltd ST Environmental Services & (100%) Technologies Co. Ltd (100%) Joint Shipyard Management Services Pte Ltd (30%) First Response Marine Pte. Ltd. (50%) Annual Report 2008

Italics Indicates Associated Companies. Others are Subsidiaries IDEAS DELIVERING PROMISES Engineering Ltd ENGAGING Technologies Singapore (both directly and indirectly held)

247 Board of Directors Principal Bankers Mr Peter SEAH Lim Huat (Chairman) Bank of America, N.A. Mr TAN Pheng Hock (President & CEO) 9 Raffles Place Mr KOH Beng Seng #18-00 Republic Plaza Tower 1 Lieutenant-General Desmond KUEK Bak Chye Singapore 048619 Dr TAN Kim Siew Mr QUEK Tong Boon Calyon Mr Winston TAN Tien Hin 168 Robinson Road Dr Philip Nalliah PILLAI #22-01 Capital Tower Mr QUEK Poh Huat Singapore 068912 Mr Venkatachalam KRISHNAKUMAR Mr Davinder SINGH s/o Amar Singh Citibank N.A. Colonel CHIA Choon Hoong (Alternate Director to 3 Temasek Avenue Lieutenant-General Desmond KUEK Bak Chye) #17-00 Centennial Towers Singapore 039190 Company Secretary Mrs Chua Su Li DBS Bank Ltd 6 Shenton Way Registered Office DBS Building Tower One 51 Cuppage Road #09-08 Singapore 068809 StarHub Centre Singapore 229469 FIH Erhvervsbank A/S Tel: (65) 67221818 Langeline Allé 43 Fax: (65) 67202293 DK-2100 Copenhagen Ø http://www.stengg.com Denmark

Share Registrar Oversea-Chinese Banking Corporation Limited M & C Services Private Limited 65 Chulia Street 138 Robinson Road #17-00 #10-00 OCBC Centre The Corporate Office Singapore 049513 Singapore 068906

Auditors Ernst & Young LLP One Raffles Quay North Tower, Level 18 Singapore 048583 Mr TAN Wee Khim (Partner-in-charge) (Date of Appointment: 01/07/2005)

248 as at 16 February 2009

SHARE CAPITAL

Paid-Up Capital : S$589,124,375.058 Ordinary Shares Class of Shares : One Special Share held by the Minister for Finance (Incorporated) Voting Rights : One vote per share

SHAREHOLDING HELD IN HANDS OF PUBLIC Based on the information available to the Company as at 16 February 2009, 34.09% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

ANALYSIS OF SHAREHOLDINGS No. of Range of Shareholdings Shareholders % No. of Shares % 1 --- 999 1,755 5.96 515,829 0.02 1,000 --- 10,000 22,866 77.63 94,514,450 3.15 10,001 --- 1,000,000 4,811 16.33 182,137,658 6.07 1,000,001 and above 25 0.08 2,722,979,504 90.76 29,457 100.00 3,000,147,441 100.00

Number of Shares Substantial Shareholders Direct Interest Deemed Interest Total Interest % Temasek Holdings (Private) Limited 1,501,801,764 17,229,104 (1) 1,519,030,868 50.63 Aberdeen Asset Management PLC and its subsidiaries - 263,240,520 (2) 263,240,520 8.77 The Capital Group Companies, Inc. - 195,240,000 (3) 195,240,000 6.51

Notes: (1) Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by: Name of Company No. of Shares DBS Group Holdings Ltd Group 7,573,104 Keppel Corporation Limited Group 4,032,000 Fullerton Fund Management Company Ltd. 5,624,000

(2) Details of their deemed interest are not available.

(3) The Capital Group Companies, Inc. is deemed to have an interest in the following shares held by: Name of Company No. of Shares BBH Dublin 38,000 DBS Nominees Pte. Ltd. 298,000 Raffles Nominees Pte. Ltd. 194,904,000

258 as at16February 2009 MAJOR SHAREHOLDERS LIST –TO No. 2 1 7 6 5 4 3 12 11 10 9 8 20 19 18 17 16 15 14 13 Name DBS Nominees Pte Ltd DBS NomineesPte Temasek Holdings(Private)Limited Raffles Ltd NomineesPte United Overseas Ltd BankNomineesPte Citibank NomineesSingapore Ltd Pte HSBC (Singapore) Ltd NomineesPte Ltd DBSN ServicesPte OCBC SecuritiesPrivateLtd Ltd SecuritiesPte Phillip OCBC NomineesSingapore Ltd Pte UOB Kay Ltd HianPte Ltd DB Nominees(S)Pte DBS Vickers Securities(Singapore) Ltd Pte Shanwood Development Ltd Pte TM AsiaLifeSingapore Ltd-Par Fund Ltd Amalgamated HoldingsPte Royal BankOfCanada(Asia) Ltd Oversea Ltd ChineseBankNomineesPte BNP ParibasNomineesSingapore Ltd Pte KI Investments (HK)Limited P 20 No. OfShares Held 2,300,000 4,032,000 2,483,000 2,270,809 2,077,000 44,025,837 3,278,284 2,569,070 223,330,277 7,990,845 272,954,362 5,254,413 5,007,516 4,912,068 7,808,217 440,163,453 2,716,224,856 1,859,595 52,219,774 1,489,568,719 142,119,617 0.08 0.08 0.08 0.06 0.09 0.26 0.07 0.27 49.65 7.44 4.74 0.16 14.67 0.13 0.17 0.17 1.47 9.10 1.74 0.11 % 90.54 259 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 SINGAPORE TECHNOLOGIES ENGINEERING LTD (Incorporated in the Republic of Singapore) Company Registration No: 199706274H

NOTICE IS HEREBY GIVEN THAT the Twelfth Annual General Resolution 6 Meeting of the Company will be held at Crystal Suite, Level 2, That authority be and is hereby given to the Directors to: Holiday Inn Park View Singapore, 11 Cavenagh Road, Singapore 229616 on Wednesday, 22 April 2009 at 2.30 pm to transact the (a) (i) issue shares in the capital of the Company (“shares”) following business: whether by way of rights, bonus or otherwise; and/or (ii) make or grant offers, agreements or options (collectively, AS ORDINARY BUSINESS “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue Resolution 1 of (as well as adjustments to) warrants, debentures or To receive and adopt the Directors’ Report and Audited Accounts other instruments convertible into shares, for the year ended 31 December 2008 and the Auditors’ Report at any time and upon such terms and conditions and for such thereon. purposes and to such persons as the Directors may, in their absolute discretion, deem fit; and Resolution 2 (b) (notwithstanding the authority conferred by this Resolution To declare a final ordinary dividend of 4.0 cents per share and may have ceased to be in force) issue shares in pursuance a special dividend of 8.8 cents per share for the year ended of any Instrument made or granted by the Directors while this 31 December 2008. Resolution was in force,

Resolution 3 provided that: To re-elect the following Directors, each of whom will retire by rotation pursuant to Article 98 of the Articles of Association of the (1) the aggregate number of shares to be issued pursuant to this Company and who, being eligible, offer themselves for re-election: Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution): (i) Mr Peter Seah Lim Huat (ii) Mr Koh Beng Seng* (A) by way of renounceable rights issues on a pro rata basis to shareholders of the Company (“Renounceable Rights (iii) Mr Winston Tan Tien Hin Issues”) shall not exceed 100 per cent. of the total number (iv) Mr Quek Poh Huat of issued shares in the capital of the Company excluding treasury shares (as calculated in paragraph (3) below); * Mr Koh Beng Seng will, upon re-election as Director of the and Company, continue as Chairman of the Audit Committee. Mr Koh is (B) otherwise than by way of Renounceable Rights Issues considered an independent director for the purpose of Rule 704(8) (“Other Share Issues”) shall not exceed 50 per cent. of of the Singapore Exchange Securities Trading Limited (“SGX-ST”) the total number of issued shares in the capital of the Listing Manual. Company excluding treasury shares (as calculated in accordance with paragraph (3) below), of which the Resolution 4 aggregate number of shares to be issued other than on To approve the sum of $893,166 as Directors’ fees for the year a pro rata basis to shareholders of the Company shall not ended 31 December 2008. (2007: $901,833) exceed 5 per cent. of the total number of issued shares in the capital of the Company excluding treasury shares (as Resolution 5 calculated in accordance with paragraph (3) below); To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. (2) the Renounceable Rights Issues and Other Share Issues shall not, in aggregate, exceed 100 per cent. of the total number of issued shares in the capital of the Company excluding treasury AS SPECIAL BUSINESS shares (as calculated in paragraph (3) below);

To consider and, if thought fit, to pass with or without modifications, (3) (subject to such manner of calculation as may be prescribed the following resolutions which will be proposed as Ordinary by the SGX-ST) for the purpose of determining the aggregate Resolutions: number of shares that may be issued under paragraphs (1)(A) and (1)(B) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time this Resolution is passed,

260 No. 6 is passed, after adjusting for (a) new shares arising from the Resolutionarising shares new for(a) adjusting after passed, that is 6 No. time the at Company the of capital the in shares) treasury(excludingshares issued of number total the on based be shall shares issued of percentage the issued, be may that shares aggregatedetermining the Fornumberof Company.of purpose the of the issued shares (excluding treasury shares) in the capital of the shares of number exceednot shall100%issued(ii)pursuant total maybeand which (i) to the that provided shareholders, to basis a on than other issued be may 5% to up which of Issues, (i) 100% for Renounceable exceeding not Rightsnumber a Issuesto up and instruments, (ii) such of 50% forpursuance in Other Share warrants or debentures) convertible into shares, and to issue shares grantinstrumentsorasmake (such toCompany and the ofcapital Resolutionempowertois 6 No.Directors the issuesharesto thein EXPLANATORY NOTES Company (excluding treasury shares) from time to time. the of capital the in sharesordinary issued of number total the of pursuant to the Share Plans shall not exceed fifteen per cent. (15%) provided that the aggregate number of ordinary shares to be issued (b) (a) That approval beandishereby given to the Directors to: R (5) (4) esolution 7 (ii) (i) wrs ne te efrac Sae ln n/r the and/or Plan Share Performance Restricted StockPlan, the under of vesting the awards to pursuant issued be to required be may as ordinarysharespaid fully and/orof numberPlan such Option pursuantissuedunderexercise Sharebe to to options the the of required be may as Company ordinary the of of capital number the in such shares time to time from issue and allot Plan, Stock Restricted the together the “Share Plans”);and and Plan the Plan, Share Option Performance Share (the Plan”) Stock (“Restricted Plan Stock Restricted Engineering Technologies Singapore the or and/ Plan”) Share (“Performance Plan Share Performance with the provisions of the Singapore Technologies Engineering accordance in awards grant and/orto Plan”) Option (“Share Plan Option Share Engineering Technologies Singapore the of provisions the with accordance in options grant and offer held, be to law by required is whichever is the earlier. Company the of Meeting General or by Annual next of date the Company the which the in Meeting General Annual next the of continue conclusion the forceuntil shall Resolution this by conferred authority the (unless revoked or varied by the Company in General Meeting) of Association for the time beingof the Company; and Listing Articles SGX-ST)bywaivedthe and the been has compliance the of provisions the of Manual SGX-STthe for the forcein being time with (unless such comply shall the Company Resolution, this by conferred authority the exercising in after adjustingfor: n sbeun bns su o cnoiain or consolidation or issue bonus subdivision ofshares; subsequent any Resolution ispassed; and awards which are outstanding or subsisting at the time this shareorshareorof vestingconvertible options securities new shares arising from the conversion or exercise of any

pro rata pro

rpsd iied, f o prvd y ebr, il e ad on 19 May 2009. paid be will members, by approved so if dividends, The proposed dividends. proposed the to entitled be will 2009 April 30 on pm 5.00 at as Company the of capital the in sharesordinary with credited are Limited (Pte) Depository Central The with accounts proposed the to 2009. on 22 April Subject as aforesaid, members whose members convened securities be to Meeting of General Annual Twelfth the at approval dividends to subject proposed dividends, the to entitlements members’ determine to registered Office, Singapore 068906 up to 5.00 pm on 30 April 2009 will be relevant Services all Private Limited, with 138 Robinson together Road, #17-00, Company The Corporate the documents of of title received capital by the Company’s the Share in Registrar, M shares& C ordinary of respect in transfers completed Duly warrants. dividend TransferBooks closedwillbeMay 4 on2009 for thepreparation of NOTICE IS HEREBY GIVEN THAT the Register of Members and Share BOOKS CLOSURE ANDDIVIDENDPAYMENT DATES 2. 1. Notes: Singapore, 11March 2009 Company Secretary CHUA SULI(Mrs) BY ORDEROFTHEBOARD the Share Plans. of duration10-year overthe shares)(excludingtreasury Company the of capital the in sharesordinary (15%) issued of number cent. total the per of fifteen to limited is Plans Share the to issued pursuant be may which shares ordinary of number aggregate The respectiveprovisions.accordancetheir with in made be will Plans 2000. The grant of options and awards under the respective Share Extraordinary General Meeting an of at shareholdersthe by given Company was held Plans Shareon the 23 of adoption November the (collectivelyApprovalPlan “SharePlans”). Stock Restrictedthe for TechnologiesSingapore and Engineering PerformancePlan Share Technologies Singapore Engineering the Share Option to Plan, pursuant Singapore Company Technologies the Engineering of capital the in shares ordinary issue to and awards grant grantand/or and options offer to Directors the empower to is 7 No. Resolution listed facilitate and accelerate issuers’ fundraising efforts. to which measures 2009 February further 19 of introduced release news SGX the proposed to is pursuant Issues Rights Renounceable 100% for authority The bonus issue or consolidation or subdivisionofshares. subsequent any (b) and passed, is 6 No. Resolution that time the at subsisting or outstanding are which awards share of vesting or conversion or exercise of any convertible securities or share options fore the time appointed for the Annual General Meeting. StarHub Centre, Singapore 229469#09-08, Road,not less than 48 hoursCuppage be- 51 at Company the of office istered reg- the at lodged be proxymust a appointing instrument The member of the Company. a proxybe A not need stead. his proxiesin voteand attend to Annual General Meeting the is entitled at to appointvote not and more attend than to two entitled Company the of member A 261 Singapore Technologies Engineering Ltd ENGAGING IDEAS DELIVERING PROMISES Annual Report 2008 This annual report is printed on Eco-Frontier, an environmentally-friendly paper that has been endorsed by the Singapore Green Labelling Scheme (SGLS). Comprising 51% recycled and 49% virgin pulp, this paper is produced using steam and electrical energy, effectively lowering the level of emissions emitted during its manufacturing process.

The paper mill for Eco-Frontier is accredited with Quality Standard BS EN ISO 9001, Health and Safety Standard OHSAS 18001 and Environmental Management Standard BS EN ISO 14001, whilst its paper supplier, RJ Paper, is a recipient of the National Environment Agency’s Green Leaf Award. SINGAPORE TECHNOLOGIES ENGINEERING LTD 51 Cuppage Road #09-08 StarHub Centre Singapore 229469 Tel : (65) 6722 1818 • Fax : (65) 6720 2293 (Regn. No.: 199706274H)