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NOTES TO THE FINANCIAL STATEMENTS31 DECEMBER 2000(Currency - Singapore dollars)These notes form an integral part of and should be read inconjunction with the accompanying financial statements.1. THE COMPANY, ITS SUBSIDIARIES AND THEIR PRINCIPALACTIVITIESThe Company is a public limited company domiciledand incorporated in Singapore.The address of theCompany’s registered office is 51 Cuppage Road#09-08 Singapore 229469.The Company’s immediate holding company and ultimateholding company are Singapore Technologies PteLtd and Temasek Holdings (Private) Limited respectively,both incorporated in Singapore.The principal activities of the Company, are those of aninvestment holding company and the provision of engineeringand related services.The principal activities of the subsidiariesare set out in Note 9 to the financial statements.2. SIGNIFICANT ACCOUNTING POLICIES(A) BASIS OF FINANCIAL STATEMENTS PREPARATIONThe financial statements, expressed in Singapore dollars,are prepared in accordance with Statements of AccountingStandard in Singapore and historical cost convention,modified by the revaluation of certain fixed assets.(B) BASIS OF CONSOLIDATION(i) The consolidated financial statements include thefinancial statements of the Company and its subsidiariesmade up to the end of the financial year.The results ofsubsidiaries acquired or disposed during the financialyear are included from the effective date of acquisitionor up to the effective date of disposal. All significantintercompany balances and transactions are eliminatedon consolidation.In the consolidated financial statements, subsidiaries areaccounted for using purchase method, except for theCompany’s interests in Singapore Technologies AerospaceLtd, Singapore Technologies Electronics Limited,Singapore Technologies Kinetics Ltd (formerly known asSingapore Technologies Automotive Ltd), and SingaporeTechnologies Marine Ltd [collectively referred to as the“Scheme Companies”] which resulted from the amalgamationof the Scheme Companies pursuant to a schemeof arrangement under Section 210 of the Companies Act,Chapter 50 (“the Act”) in 1997.As the amalgamation of the Scheme Companies constitutesa uniting of interests, the pooling of interests method hasbeen adopted in the preparation of the consolidated financialstatements in connection with the amalgamation.Under the pooling of interests method, the combinedassets, liabilities and reserves of the pooled enterprisesare recorded at their existing carrying amounts at thedate of amalgamation.The excess or deficiency ofamount recorded as share capital issued (plus any additionalconsideration in the form of cash or other assets)over the amount recorded for the share capital acquiredis recorded as merger reserve.(ii) The Group adopts the equity method to account forits interests in associated companies and joint ventures.The Group’s share of the post-acquisition results of associatedcompanies and joint ventures is included in the consolidatedprofit and loss account.The Group’s share of the postacquisitionaccumulated profits and reserves of associatedcompanies and joint ventures is included in the carryingvalue of the investments in the consolidated balance sheet.For this purpose, the audited financial statements of theassociated companies and joint ventures are used.Whereaudited financial statements are not available, unauditedfinancial statements are used.(iii) Goodwill or reserve on consolidation represents theexcess or deficiency of the purchase consideration over thefair values (assigned by the directors) of the underlying netassets of the subsidiaries, associated companies and joint venturesat the date of acquisition. Goodwill arising on consolidationis written off against reserves in the year of acquisition.(iv) In the preparation of the consolidated financial statements,the balance sheets of foreign subsidiaries, associatedcompanies and joint ventures are translated intoSingapore dollars at rates of exchange ruling at the balancesheet date except for share capital and reserveswhich are translated at historical rates of exchange.Operating results are translated at average rates ofexchange for the year.Translation differences are taken tothe Foreign Currency Translation Reserve.(C) LONG-TERM INVESTMENTS(I) SUBSIDIARIESA subsidiary is a company in which the Group, directlyor indirectly, holds more than half of the issued sharecapital, or controls more than half of the voting power,or controls the composition of the Board of Directors.Investments in shares of subsidiaries are stated in thefinancial statement of the Company at cost.(II) ASSOCIATED COMPANIES AND JOINT VENTURESAn associated company, is a company not being a subsidiaryor joint venture, in which the Group has a substantialinterest of not less than 20 percent of the equityand in whose financial and operating policy decisions theGroup exercises significant influence.A joint venture is a company, not being a subsidiary orassociated company, in which the Group has a long-terminterest of not more than 50 percent of the equity andhas joint control in the investee company’s financial andoperating policies.Investments in associated companies and joint ventures arestated in the financial statements of the Company at cost.(III) OTHER LONG-TERM INVESTMENTSOther investments held for long-term purposes are statedat cost. Distributions from unquoted equity investmentsof a venture fund nature are treated as reductionsFIXED ASSETSFreehold land and buildingLeasehold land and buildingsBuildings on rented propertiesImprovements to premisesWharves and slipwaysSyncrolift and floating docksBoats and bargesPlant and machineryProduction tools and equipmentFurniture, fittings, office equipment and computersTransportation equipment and vehiclesAircraft engines and helicoptersin investment costs until the costs are fully recovered,after which the distributions are recognised as income.(IV) QUOTED BONDSQuoted bonds held on long-term basis are stated at thelower of cost, adjusted for amortisation of premiums andaccretion of discounts, and market value determined on aportfolio basis.Provision for diminution in value of long-term investments(other than quoted bonds) is made when, in theopinion of the directors, there has been a decline, otherthan a temporary decline in the value of the investments.(D) SHORT-TERM INVESTMENTSShort-term investments are stated at the lower of cost,adjusted for the amortisation of premium and accretion ofdiscount, and net realisable value determined on a portfoliobasis. Cost is determined on the weighted average method.Premium or discount on purchase of investment is amortisedover the period of investment.(E) AMOUNTS UNDER FUND MANAGEMENTAmounts under fund management are stated at the principalsums, net of provision for diminution in value on anindividual fund basis.(F) FIXED ASSETS AND DEPRECIATIONFixed assets are stated at cost or valuation, net of depreciationand any impairment loss. Depreciation is providedon the straight-line basis so as to write off the cost ofthese assets over their estimated useful lives as follows:ESTIMATED USEFUL LIVES30 yearsOver the period of the lease of between 10 to 30 years30 years5 to 30 years10 to 16 years10 years5 yearsLower of 5 years or project life3 to 5 years2 to 5 years4 to 5 years5 years126 • visionnotes to the financial statements • 127
Low value assets costing less than $1,000 individually arewritten off to the profit and loss account.Construction-in-progress is not depreciated until each stageof development is completed and becomes operational.(G) STOCKS AND WORK-IN-PROGRESSStocks are stated at the lower of cost (principally on thefirst-in, first-out basis) and net realisable value. Provisionis made for deteriorated, damaged, obsolete and slowmovingstocks.Work-in-progress is valued at cost less progress paymentsreceived and receivable. Cost includes all direct materialand labour costs, equipment and sub-contracting services,together with appropriate overhead expenses exceptfor work-in-progress of a developmental nature whereproduction overheads are expensed as incurred.Provision for anticipated losses on uncompleted contractsis made in the year in which such losses are determined.(H) INCOME RECOGNITIONIncome is recognised using the following methods:(i) Income from sale of goods and services rendered isrecognised upon delivery of goods/services and acceptanceby customers.Where goods and services are supplied under a long-termcontract, profit is recognised as and when goods and services,representing part of a contract, are delivered, completedand billed. Provision for foreseeable losses on uncompletedcontracts is made as soon as such losses are determinable.(ii) Income from long-term contracts is recognised onthe percentage of completion method.The stage of completionis measured by the proportion of costs incurredto estimated total costs to complete the contracts and isrestricted by progress billings received or receivable.Losses, if any, are recognised immediately when theirexistence is foreseen.(iii) Income on shipbuilding, rebuild, repair, engineering,overhaul and service work is recognised when thework is completed and billed. Provision is made formaterial losses anticipated on uncompleted contracts.(iv) Dividend income is recognised on the receipt basisexcept for dividend income from subsidiaries and associatedcompanies which is recognised when the dividendsare proposed.(v) Management fee income is recognised on an accrualbasis upon which management services are renderedand billed.(vi) For certain subsidiaries, the first 25 percent of thetotal commission receivable for each contract is treatedas downpayment and is deferred and taken up in theprofit and loss account only upon the completion ofthe contract. Commission income in respect of eachcontract in excess of the first 25 percent of the totalamount receivable is taken up in the profit and lossaccount as and when it is billed.(vii) Any surplus arising from amounts under fund managementcan only be determined at the end of the relevantfund management period. Such surplus, if any, willbe recognised as income then.(viii) Finance charges from hire purchase financing isrecognised based on sum of digits method over thefinance period.(I) MEMBERSHIP RIGHTSTransferable corporate club memberships are stated at cost.Provision for diminution in value is made when in the opinionof the directors, there has been a decline, other thantemporary, in the value of the membership rights.(J) WARRANTIESProvision for warranty claims is made on the basis ofestimated cost to fulfil warranty obligations.(K) LIQUIDATED DAMAGESProvision for liquidated damages is made in respect ofimminent claims from customers on contracts of whichdeadlines are overdue or not expected to be completedon time in accordance to contractual obligations.(L) ENVIRONMENTAL LIABILITIESEnvironmental expenditures related to existing conditionsresulting from past or current operations and fromwhich no current or future benefit is discernible areexpensed as incurred. Expenditures which extend the lifeof the related property or mitigate or prevent futureenvironmental contamination are capitalised.Environmental liabilities are recorded at the time when itis probable and can be reasonably estimated.(M) BAD AND DOUBTFUL DEBTSKnown bad debts are written off. Specific provisions aremade for accounts considered to be doubtful. In addition,an amount is set aside as a general provision for doubtfuldebts to cover potential losses which, although not separatelyidentified, can be present in any portfolio of debtors.(N) DEFERRED TAXATIONDeferred taxation is provided using the liability methodon all material timing differences resulting from thedifferent treatment of certain items for accounting andtaxation purposes. Deferred tax benefits are, however,recognised only when there is a reasonable expectation oftheir realisation.(O) FOREIGN CURRENCY TRANSLATION(i) The accounting records of the companies in the Groupare maintained in their respective functional currencies.Transactions in foreign currencies during the financialyear are recorded in the respective functional currenciesusing exchange rates approximating those ruling attransaction dates.(ii) Monetary assets and liabilities in foreign currencies,except for foreign currency assets and liabilities hedgedby forward exchange contracts, are translated into therespective functional currencies at rates of exchangeapproximating those ruling at the balance sheet date.Foreign currency assets and liabilities hedged by forwardexchange contracts are translated into the respectivefunctional currencies at the contracted forward exchangerates. All resultant exchange differences are dealt withthrough the profit and loss account.(P) RESEARCH AND DEVELOPMENT EXPENDITUREResearch and development expenditure is charged to theprofit and loss account as and when incurred.(Q) HIRE PURCHASE AND FINANCE LEASES(i) Assets acquired on hire purchase arrangements arecapitalised in the financial statements and the correspondingobligation treated as a liability.The total interest,being the difference between the total instalmentspayable and the capitalised amount, is charged to the3. SHARE CAPITALprofit and loss account over the period of such hire purchasearrangements in equal monthly instalments to producea constant rate of charge on the balance of capitalrepayments outstanding.(ii) Finance leases are those leasing agreements that giverights and obligations approximating to ownership. Assetsfinanced under such leases are treated as if they had beenpurchased outright at the present value of the minimumlease payments and the corresponding leasing commitmentsare shown as obligations to the lessors. Lease paymentsare treated as consisting of capital and interestelements and the interest is charged to the profit and lossaccount over the period of the lease to produce a constantrate of charge on the balance of capital repaymentsoutstanding. All other leases are operating leases and theannual rentals are charged to the profit and loss accountas and when incurred.(iii) Assets acquired on hire purchase and finance leasearrangements are depreciated in accordance with thepolicy set out in (F) above.(R) GOVERNMENT GRANTSGrants in recognition of specific expenses are taken toincome in the same year as the relevant expenses.Similarly, grants related to depreciable assets areallocated to income over the period in which suchassets are depreciated and used in the projects subsidisedby the grants.(S) SEGMENTSFor management purposes, the Group is organised on aworld-wide basis into four major operating businesseswhich is the basis on which the Group reports its primarysegment information.Segment revenue, expenses and results include transfersbetween business segments and between geographicalsegments. Such transfers are accounted for on an arm’slength basis.GROUP AND COMPANY2000 1999$’000 $’000Authorised:4,999,999,999 ordinary shares and 1 special share of $0.10 each 500,000 500,000Issued and fully paid:2,855,694,045 (1999: 2,838,689,213) ordinary shares and 1 special share of $0.10 each 285,569 283,869128 • visionnotes to the financial statements • 129
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S I N G A P O R E T E C H N O L O G
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editor’s noteC O N T R I B U T O
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“Opportunities Abound forNiche Pl
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Helping OthersLADY WHO MAKESA DIFFE
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NOV29 DECS$2.79JANJUNJULAUGOCTYEAR
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Turnover (S$ million)Profit before
Page 14 and 15: ECONOMIC VALUE ADDED STATEMENTS (S$
Page 16 and 17: T H E E - L I S TT H E E - L I S Ts
Page 18 and 19: It was a good year for ST Engg, wit
Page 20 and 21: GROUP TURNOVER INCREASED FROM S$1.7
Page 22 and 23: THE NEXTSTEPSvision chats with ST E
Page 24 and 25: We must take globalisation seriousl
Page 26 and 27: B O A R D • O F •D I R E C T O
Page 28 and 29: D I R E C T O R S• AEROSPACE• E
Page 30 and 31: T H E • S E N I O RM A N A G E M
Page 32 and 33: M A N A G E M E N Thuman resource b
Page 34 and 35: O U R U S T H R U S TALL SYSTEMS GO
Page 36 and 37: WE HAVE GOOD REASONSto be pleased w
Page 38 and 39: AEROSPACE CUSTOMER TALKAIR VICE MAR
Page 40 and 41: R E : V I E WElectronicsBy Seah Moo
Page 42 and 43: P A R T N E R SFORMING PARTNERSHIPS
Page 44 and 45: The ATTC created a splash when it w
Page 46 and 47: LAND SYSTEMS CUSTOMER TALKMARINE CU
Page 48 and 49: MARINE CUSTOMER TALKCruise vessel r
Page 50 and 51: GROUP FINANCIAL PERFORMANCE1. ACQUI
Page 52 and 53: TRANSFERS TO OR FROM RESERVES AND P
Page 54 and 55: RELATED CORPORATIONSHOLDINGS IN THE
Page 56 and 57: The SGX’s Listing Manual requires
Page 58 and 59: BALANCE ASAT 1.1.2000 BALANCE NO. O
Page 60 and 61: BALANCE SHEETSAS AT 31 DECEMBER 200
Page 62 and 63: STATEMENTS OF CHANGES IN EQUITY (co
Page 66 and 67: Included in the share capital is a
Page 68 and 69: 8. FIXED ASSETS (cont’d)THE GROUP
Page 70 and 71: EFFECTIVE EQUITYINTEREST HELDBY THE
Page 72 and 73: COUNTRY OF INCORPORATION/NAME OF SU
Page 74 and 75: PROVISION FOR DIMINUTION IN VALUE O
Page 76 and 77: (b) Details of joint ventures are a
Page 78 and 79: 13. STOCKS AND WORK-IN-PROGRESS14.
Page 80 and 81: 20. DUE FROM RELATED CORPORATIONS21
Page 82 and 83: Lease terms do not contain restrict
Page 84 and 85: GROUPCOMPANY2000 1999 2000 1999NOTE
Page 86 and 87: GROUP2000 1999NUMBER OF SHARES (’
Page 88 and 89: 45. SEGMENT INFORMATION (cont’d)L
Page 90 and 91: their audit to the independent dire
Page 92 and 93: SINGAPORE TECHNOLOGIES ENGINEERING
Page 94 and 95: AEROSPACE SECTOR VALUE ADDED STATEM
Page 96 and 97: ELECTRONICS SECTOR BALANCE SHEETSEL
Page 98 and 99: international recognition as a majo
Page 100 and 101: REVIEW OF FINANCIAL PERFORMANCE - M
Page 102 and 103: MARINE SECTOR FINANCIAL HIGHLIGHTS1
Page 104 and 105: SINGAPORE TECHNOLOGIES KINETICS LTD
Page 106 and 107: Professor Lui Pao Chuen is the Chai
Page 108 and 109: Contacte-mailContacte-mailASSOCIATE
Page 111 and 112: MARINE SECTORASSOCIATED COMPANIESNO
Page 113 and 114: PROXY FORMSINGAPORE TECHNOLOGIES EN
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end page• AEROSPACE• ELECTRONIC
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