Think Ahead. - Singapore Technologies Engineering

Think Ahead.A N N U A L R E P O R T 2 0 0 9

Think Ahead 01Letter to Shareholders 10Financial Highlights 16Board of Directors 22Senior Management 28Organisation Chart 30Corporate Governance 32Human Resource 44Corporate Social Responsibility 46Environment, Health and Safety 47Investor Relations 48Awards 50Operating Financial Review 53Financial Report 85This annual report has been certified by the Forest Stewardship Council as an example of environmentallyresponsible forestry print production:• From the forest, to the paper mill and printer, each step of this annual report’s production is certifiedaccording to FSC standards.• The paper material, Eco-Frontier, is an environmentally friendly paper that is FSC Certified, with theadded endorsement of the Singapore Green Labelling Scheme (SGLS). Comprising 51% recycled and49% virgin pulp, this paper is produced using steam and electrical energy, effectively lowering the levelof emissions emitted during its manufacture.• The paper’s local distributor, RJ Paper, is a recipient of the National Environment Agency’s GreenLeaf Award, and is FSC Certified; whilst the printer for this report, AlsoDominie Press, is similarlyFSC Certified.

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

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Singapore Technologies Engineering LtdThink Ahead.Annual Report 20093Strategic.

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Singapore Technologies Engineering LtdThink Ahead.Annual Report 20095Creative.

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Singapore Technologies Engineering LtdThink Ahead.Annual Report 20097Innovation.

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Singapore Technologies Engineering LtdThink Ahead.Annual Report 20099Synergy.

The ST Engineering Grouphas weathered the storm well.We continue to show strongoperating performance andcontinue to deliver good results.Peter SEAH Lim HuatChairmanWe are confident that wehave a winning businessmodel, which we continuallystrengthen, that will seeus through any economicsituation and allow us to seizeopportunities.TAN Pheng HockPresident & CEO

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200911Letter to ShareholdersEvery crisis presents opportunities. Throughout theyear, ST Engineering has consistently won newcontracts, proving the resilience of our business model.Dear ShareholdersAs we write this review, the economic outlookhas brightened considerably from a year ago.Globally, signs of recovery are showing and mostgovernments and businesses are cautiously optimisticthat the recovery is sustainable and economies areslowly getting back on their feet.Yet, for a good part of 2009, many countries werereporting much lower or even negative growth, asthe global economic crisis that started in late 2008continued into the year. Increases in job losses inmany countries forced most governments to introducemeasures to stimulate the economy. The outlook washighly uncertain and challenging, and many businessesfaced a tough operating environment.Against this backdrop, the ST Engineering Grouphas weathered the storm well. We continue to showstrong operating performance and continue to delivergood results. The Group registered 4% growth in itsturnover to $5.55b with commercial sales constituting62% or $3.4b of the Group’s turnover. Profit beforetax increased slightly to $546.6m while profit after taxand minority interests was lower by 6% at $443.9m.Earnings per share was 14.78 cents and the Group’sreturn on equity remained respectable at 28.3%.Rewarding our shareholdersTo reward our loyal shareholders, the Board ofDirectors has recommended a final dividend of 10.28cents per share, comprising an ordinary dividendof 4.00 cents and a special dividend of 6.28 cents.Together with the interim ordinary dividend of 3.00cents per share paid in September 2009, the totaldividend payout for the year will be 13.28 cents pershare. This is subject to shareholders’ approval at ourAGM in April 2010.Seizing opportunitiesEvery crisis presents opportunities. Throughoutthe year, ST Engineering has consistently won newcontracts, proving the resilience of our business model.At the end of 2009, our order book at $10.3b wasabout twice our revenue, a robust level which providesgood revenue visibility.While the order book size reflects our sales efforts, thediversity of contracts we won reflects the breadth anddepth of our capabilities and our market reputation.Significantly, many of these contracts were forgovernment-related projects, both local and overseas,both defence and commercial, providing a stabilisingbalance to our workload.While all four sectors benefited from government orgovernment-related projects, many of these projectswere the result of our dual use technology approachwhere defence technology is used in commercialapplications and vice versa. Key ones included theAdvanced Combat Man System for the SingaporeArmed Forces, Expressway Monitoring & AdvisorySystem for the Land Transport Authority, commandand control systems for the Singapore Civil DefenceForce and the Singapore Police Force, trainingservices to the Republic of Singapore Navy andsecurity-enhancement services for the Central Bankof Oman. The Land Systems sector continued towin overseas contracts for its 40mm ammunition,and has started delivery on the UK MOD Warthogcontract announced in 2008. Our US subsidiary,VT Miltope, won a US$500m contract to supply itsMSD-V3 system comprising laptops, test equipmentand instrument to the US Army. VT Miltope had beensupplying its MSD-V2 system to the US Army over fiveyears from 2004. This new contract affirms the qualityof our system in providing US Army soldiers in thefield with robust computing capabilities that work inthe toughest tactical environment. At the close of theyear, the Marine sector secured a contract to build an

12 LETTER TO SHAREHOLDERSenhanced version of a T-AGS 60 Class oceanographicsurvey ship for the US Navy. These contracts underscoreour commitment to research and development andour ability to constantly create innovative products andsystems that meet customers’ evolving needs.On the commercial front, the Aerospace sectorcontinued to win new customers and had particularsuccess with its Maintenance-By-the-Hour solution,adding customers such as Cimber Sterling, Jeju Air,Primera Air and Shanghai Airlines. For its ongoing87-unit Passenger-To-Freighter conversion projectfor FedEx, 13 units were redelivered in the year, onschedule. The sector also secured a three-year contract,with an option to extend for another two years, toprovide airframe maintenance services for a major USairline and renewed its maintenance contract with USAirways for another three years. These two contractsand various other successes reinforce our position as apreferred supplier of MRO services. The Marine sectoralso won several contracts including two from OSG ShipManagement to outfit and commission two articulatedtug barge units.During the year, we expanded our global presence andachieved breakthroughs in new markets. The Electronicssector secured a contract to install a Tower Simulatorfor the Tanzania Civil Aviation Authority, its first projectin Tanzania. We also broadened our scope of servicesunder the Marine sector. It won a logistics managementcontract from the Republic of Singapore Navy. TheLand System sector’s US specialty vehicle subsidiary,VT Leeboy, made inroads into the US military marketwhen it won a contract to supply its bituminous paverto the US Army. All these accomplishments resonatewith our strategy to gain new market access, build newcapabilities as well as cross leverage our defence andcommercial opportunities.A time for reflectionWhile the worst of the storm may be over, it is importantto learn from the crisis, and review how well ourbusiness model has served us, and how we can improvefurther for the future.The Group’s steady results did not come about bychance. Over the years, we have built a well-diversifiedglobal portfolio across four key sectors, with operationsin 24 countries and customers in over 80 countries,spanning defence, non-defence government andcommercial work. Our diversification strategy ensuresresilience to cope with varying economic landscapesas our business is not subject to the fortunes of anysingle market. Our Aerospace sector for example, camethrough the crisis better than most other MRO serviceproviders, precisely because of its diverse customerbase and a flexible business model that suits the specificneeds of each customer. With a comprehensive offeringand customers including legacy, regional and lowcost airlines as well as defence forces, the sector hasmanaged to maintain a comparable turnover despite theturbulence in the aviation industry.Our exposure to defence and other government projectshas always provided the Group with a stable baseload,and such work again provided stability through the lastyear. Having a global presence and a wide customerbase have also been critical, as it means that we arebetter able to spread our risks and also act quickly onvarious opportunities in each market.We exercised prudent liquidity management, recognisingit is key to maintaining a strong financial position. Duringthe past year, we tightened our credit controls, andworked hard to manage payments and credit terms.During the year, we generated a healthy operating cashflow of $932m.Our established Enterprise Risk ManagementFramework makes certain that we periodically reviewour business risks and identify and manage new risks.We had in place a Business Continuity Plan earlier in theyear to address the H1N1 scare, including drawing upsplit teams and off-site operations in the event that thehealth situation worsened.Thinking ahead: ready for the upturnOur diversification model has equipped us well toprepare for the future. We continue to enhance ourcapabilities, while constantly anticipating trends,introducing new solutions and exploring new marketopportunities, so that we are able to maintain ourleading position.In the Aerospace sector, we are increasing our airframemaintenance capacity in our key markets. Our Pudonghangar in Shanghai, which can accommodate the A380,is expected to be ready in the first half of this year. Weexpect to commission our fourth hangar at our Panamafacility this year and are adding a two-bay hangar atour San Antonio facility. Furthermore, as an integratedaerospace services provider, we continue to build up ourcapabilities in engines and components MRO.During the year, we signed a 20-year agreement to serveas a GE-approved On-Wing support provider for theGEnx-1B and -2B engines, and added capabilities suchas the CFM56-5B engine. Our new Xiamen engine MROfacility is on track to commence operations this year.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200913The Electronics sector has progressively developednew capabilities and new solutions leveraging dualuse technology in its applications as well as seekingnew markets in its growth strategy. In September, itwon contracts from China’s Changchun Rolling StockCompany for projects in Saudi Arabia and China. This isan important new step in terms of marketing efforts. Byworking directly with the train makers whose trains aresold internationally, we hope to capture a bigger sliceof the pie. We are also making progress in interactivedigital media, creating the Virtual World for the inauguralSingapore 2010 Youth Olympic Games, a showcase ofour technology to a worldwide audience, as well as aplatform to grow in this fast moving industry. In addition,the satellite communications (satcoms) business hasexpanded its facilities through the rental of a building inPaya Lebar to house the entire satcoms team.Two new products were delivered to the Singapore ArmedForces by the Land Systems sector: the Terrex 8x8 InfantryCarrier Vehicle unveiled at the 2009 Army Open House,and the Trailblazer Countermine Vehicle. The sector’scommercial vehicles business has seen strong demandin China, and it has strengthened its presence andofferings there by acquiring Zhenjiang Huachen HuatongRoad Machinery Co., Ltd. and Zhenjiang Huatong AranMachinery Co., Ltd. To meet market needs for eco-friendlyvehicles, the sector launched Singapore’s first commercialdiesel-electric hybrid bus and the world’s first hybridhydraulic drive enhanced port prime mover.In the Marine sector, we will be enhancing the facilitiesat our US yards, including adding a fabrication shop tosupport the construction of our previously announcedFast Missile Craft project. In addition, the sector has madeadvances in its environmental engineering business andhas secured initial success in the Middle East and Chinamarkets. We expect the needs for innovative environmentalengineering solutions to grow globally as we progressivelygrow this new thrust.The recent financial crisis has taught us the importanceof financial prudence and liquidity. Thus, we have addedfinancial strength by establishing a US$1.2b multicurrencyMedium Term Note (MTN) programme. The MTNprogramme provides us with additional funding optionsand also ensures that we can raise funds quickly tocapitalise on opportunities in the future. Taking advantageof favourable market conditions, we issued a US$500m10-year bond under the programme.factors may derail the recovery. But we cannot afford towait and watch. We need to think and plan ahead, as wehave always done.We are confident that we have a winning business model,which we continually strengthen, that will see us throughany cycle or economic situation, and allow us to seizeopportunities in a timely way.AppreciationOn behalf of the Group, we would like to express ourappreciation to our Board Directors for their wise counseland guidance. We thank Dr Philip Pillai, who resignedfrom the Board at the end of September, to take upappointment as Judicial Commissioner of the SupremeCourt of Singapore. Dr Pillai had been a Director sinceApril 2000 and we are deeply grateful for his invaluablecontributions during his tenure. We welcome Dr StanleyLai, who was appointed Independent Director in October.He has been appointed a Member of the NominatingCommittee, Audit Committee and Executive Resourceand Compensation Committee. Effective 31 March thisyear, LG Desmond Kuek Bak Chye and COL Chia ChoonHoong will resign from the Board, we take this opportunityto thank them for their guidance. We also look forward towelcoming MG Neo Kian Hong as non-executive Directorand COL Ong Ann Kiat as his Alternate Director.We wish to thank our staff for their loyalty and unwaveringcommitment to the Group these past years, and for theirsacrifices made during the year. During the worst of thefinancial crisis, the Group took a prudent approach andimplemented pay cuts for senior management and seniorexecutives, and pay freeze for all other staff.We are grateful to our Board of Directors for volunteeringto accept a reduction in directors’ retainer fees for 2009,in tandem with the senior executives’ pay cut.Finally, we thank our shareholders, stakeholders andbusiness partners for their continued confidence inthe Group.We remain focused on strengthening our foundationto enable our Group to create and deliver long termsustainable value for all our shareholders and stakeholders.ConclusionThe year ahead is still plagued with challenges anduncertainties, as the global economic pick-up is expectedto happen at a subdued pace, and even then, manyPeter SEAH Lim HuatChairman3 March 2010TAN Pheng HockPresident & CEO

14 LETTER TO SHAREHOLDERS (CHINESE)各 位 股 东 :当 我 们 在 写 这 份 报 告 时 , 这 一 年 来 的 经 济 情 况 已 经 大 为 好 转 。全 球 性 的 经 济 复 苏 迹 象 已 经 显 现 , 大 多 数 政 府 和 商 业 机 构 对 经 济的 持 续 复 苏 持 谨 慎 的 乐 观 态 度 。 他 们 认 为 , 虽 然 当 前 经 济 发 展 仍然 缓 慢 , 但 复 苏 的 脚 步 已 然 迈 开 。即 便 如 此 , 始 于 2008 年 末 的 全 球 性 经 济 危 机 导 致 许 多 国 家 在 2009年 的 大 部 分 时 间 出 现 了 经 济 低 速 发 展 , 甚 至 负 增 长 的 现 象 。 失 业率 的 上 升 迫 使 许 多 政 府 采 取 相 关 措 施 以 刺 激 经 济 发 展 。 当 时 ,经 济 发 展 的 前 景 难 以 预 测 , 且 充 满 挑 战 性 。 许 多 商 业 机 构 仍 然 面临 着 艰 难 的 运 作 环 境 。在 这 样 的 背 景 下 , 新 科 工 程 集 团 成 功 经 受 住 了 金 融 风 暴 的 冲 击 。我 们 仍 然 表 现 出 强 大 的 运 作 能 力 , 继 续 收 获 成 果 。 集 团 的 营 业 额增 长 了 4%, 达 到 了 55.5 亿 元 , 其 中 商 业 销 售 额 占 了 总 营 业 额 的62%, 即 34 亿 元 。 税 前 利 润 小 幅 度 增 长 至 5.466 亿 元 ; 税 后 净 营 业利 润 及 小 数 股 东 权 益 低 6%, 为 4.439 亿 元 。 每 股 盈 利 14.78 分 ,股 本 回 报 率 仍 然 可 观 , 保 持 在 28.3%。回 报 股 东为 回 报 广 大 忠 实 的 股 东 , 董 事 会 提 议 将 年 终 股 息 定 为 每 股 10.28分 , 由 普 通 股 息 每 股 4.00 分 和 特 别 股 息 每 股 6.28 分 组 成 。 加 上2009 年 9 月 所 支 付 的 每 股 3.00 分 中 期 普 通 股 息 ,2009 财 年 分 发 的总 股 息 为 每 股 13.28 分 。 这 一 提 议 将 在 2010 年 4 月 的 年 度 股 东 大 会上 征 求 股 东 们 的 同 意 。把 握 机 遇在 每 次 危 机 中 其 实 都 存 在 着 商 机 。 一 年 来 , 新 科 工 程 不 断 获 得 各种 新 合 约 , 这 充 分 说 明 了 我 们 商 业 模 式 在 面 临 危 机 时 强 有 力 的 恢复 力 与 灵 活 性 。 截 至 2009 年 底 , 我 们 的 订 单 总 额 达 到 103 亿 元 ,相 当 于 年 营 业 额 的 大 约 两 倍 。 这 一 稳 健 的 水 平 提 供 了 良 好 的 营 业额 能 见 度 。大 规 模 订 单 量 是 我 们 销 售 努 力 的 结 果 , 而 合 约 的 多 样 化 则 体 现 了我 们 能 力 的 广 度 和 深 度 及 良 好 的 市 场 声 誉 。 值 得 注 意 的 是 , 这 些合 约 很 多 是 与 政 府 相 关 的 项 目 , 既 有 本 地 的 , 也 有 海 外 的 ; 既 有国 防 的 , 也 有 商 业 的 —— 都 有 利 地 平 衡 了 我 们 的 工 作 量 。我 们 的 宇 航 、 电 子 、 路 陆 、 海 事 这 四 方 面 业 务 都 受 惠 于 政 府 或 政 府相 关 的 项 目 , 很 多 项 目 是 我 们 “ 军 民 两 用 技 术 ” 使 用 的 结 果 , 即 将国 防 技 术 应 用 于 商 业 用 途 , 或 将 商 业 技 术 应 用 于 国 防 用 途 。 其 中 一些 重 要 的 项 目 有 为 新 加 坡 武 装 部 队 提 供 的 “ 先 进 战 士 系 统 ”, 为 陆路 交 通 管 理 局 提 供 的 “ 路 况 提 示 系 统 ”, 为 新 加 坡 民 防 部 队 和 警察 部 队 提 供 的 指 挥 控 制 系 统 , 为 新 加 坡 海 军 部 队 提 供 的 训 练 服 务 项目 , 及 为 阿 曼 中 央 银 行 提 供 保 安 升 级 项 目 。 在 陆 路 业 务 方 面 , 我 们不 断 赢 得 生 产 40 毫 米 弹 药 的 海 外 订 单 。 根 据 我 们 与 英 国 国 防 部 在2008 年 签 订 的 合 约 , 我 们 已 经 开 始 向 其 提 供 WARTHOG 全 地 形 运载 车 。 我 们 在 美 国 的 子 公 司 VT Miltope, 赢 得 了 一 份 5 亿 美 元 的 合约 , 向 美 国 陆 军 提 供 MSD-V3 系 统 , 包 括 笔 记 本 电 脑 、 测 试 装 备 和仪 器 。VT Miltope 自 2004 年 起 , 已 经 连 续 5 年 向 美 国 陆 军 提 供 其 研发 的 MSD-V2 系 统 。 该 系 统 能 在 最 为 艰 难 的 作 战 环 境 中 , 令 美 军 发挥 强 有 力 的 计 算 机 运 作 能 力 。 这 份 新 合 约 是 对 我 们 研 发 产 品 与 系 统质 量 的 充 分 肯 定 。 在 海 事 业 务 方 面 , 今 年 末 , 我 们 与 美 国 海 军 签 定了 一 份 合 约 , 为 其 建 造 一 艘 升 级 版 的 T-AGS 60 深 海 地 质 勘 探 船 。 这些 合 约 展 现 了 我 们 的 研 发 能 力 , 不 断 开 发 出 创 新 性 的 产 品 和系 统 , 以 满 足 客 户 不 断 变 化 的 需 求 。在 商 业 业 务 方 面 , 宇 航 业 务 得 益 于 成 功 的 “ 包 修 飞 机 维 修 按 固 定 飞行 小 时 收 费 ” 的 服 务 计 划 , 使 我 们 不 断 赢 得 新 客 户 , 包 括 辛 伯 航 空公 司 、 济 州 航 空 公 司 、 西 甲 航 空 公 司 和 上 海 航 空 公 司 。 我 们 也 正 在将 联 邦 快 递 公 司 的 87 架 客 运 机 改 为 货 运 机 , 其 中 13 架 已 按 计 划 交 付使 用 。 该 业 务 获 得 了 为 一 间 美 国 主 要 航 空 公 司 提 供 飞 机 机 体 维 修 服务 的 三 年 合 约 , 并 可 选 择 延 长 两 年 ; 美 国 航 空 公 司 与 我 们 的 合 约 也延 长 了 三 年 。 这 两 项 合 约 以 及 其 它 各 项 业 务 的 成 功 , 巩 固 了 我 们 在维 护 、 修 理 及 操 作 方 面 作 为 首 选 供 应 商 的 地 位 。 在 海 事 业 务 方 面 ,我 们 也 签 订 了 几 份 新 合 约 , 包 括 从 美 国 的 海 外 船 舶 控 股 集 团 获 得 的两 份 订 单 , 以 装 备 两 套 顶 推 船 铰 接 装 置 。一 年 来 , 我 们 不 断 扩 大 全 球 业 务 , 开 拓 新 市 场 。 在 电 子 业 务 方 面 ,我 们 与 坦 桑 尼 亚 民 用 航 空 局 签 订 合 约 , 为 其 建 造 模 拟 航 空 塔 台 。这 是 我 们 在 坦 桑 尼 亚 开 展 的 第 一 个 项 目 。 我 们 也 在 海 事 业 务 方 面 不断 拓 宽 服 务 领 域 。 集 团 与 新 加 坡 海 军 签 订 了 一 份 后 勤 管 理 合 约 。VT Leeboy, 是 陆 路 业 务 设 在 美 国 的 专 用 车 生 产 子 公 司 , 赢 得 了 一份 为 美 国 陆 军 提 供 沥 青 混 凝 土 摊 铺 机 的 合 约 , 成 功 进 入 美 国 军 贸 市场 。 这 些 成 绩 的 取 得 , 是 我 们 采 取 开 拓 新 市 场 、 发 展 新 能 力 、 平 衡利 用 国 防 与 商 业 机 遇 等 策 略 的 结 果 。反 思尽 管 金 融 风 暴 最 严 重 的 时 期 可 能 已 经 过 去 , 但 是 , 吸 取 经 济 危 机过 程 的 教 训 、 审 视 我 们 的 经 营 模 式 何 以 在 危 机 中 生 存 , 以 及 将 来如 何 进 一 步 改 善 , 均 是 当 下 我 们 需 要 思 考 的 重 点 。集 团 这 一 系 列 成 果 的 取 得 并 非 偶 然 。 针 对 我 们 的 四 项 业 务 领 域 ,集 团 已 经 在 全 球 建 立 起 多 元 发 展 的 档 案 , 在 24 个 国 家 和 与 来 自 80多 个 国 家 的 客 户 在 国 防 、 非 国 防 政 府 和 商 业 等 领 域 展 开 合 作 。 我 们的 业 务 发 展 不 会 仅 仅 依 靠 某 一 个 市 场 的 盛 衰 而 起 伏 , 这 种 经 营 模 式多 样 化 的 策 略 确 保 我 们 在 面 临 不 同 经 济 境 况 时 可 以 应 付 自 如 。 以 宇航 业 务 为 例 , 我 们 之 所 以 能 够 比 其 他 进 行 维 护 、 修 理 及 操 作 的 供 应商 更 为 顺 利 地 渡 过 经 济 危 机 , 关 键 在 于 公 司 客 户 源 的 多 元 化 , 及 弹性 化 经 营 模 式 的 实 施 , 因 此 可 以 满 足 每 个 客 户 的 特 别 需 求 。 尽 管 在经 济 危 机 的 影 响 下 , 整 个 航 空 业 的 发 展 呈 现 动 荡 局 面 , 但 由 于 我 们所 具 备 的 全 方 位 供 应 能 力 , 以 及 拥 有 老 牌 航 空 公 司 、 区 域 性 航 空 公司 、 廉 价 航 空 公 司 及 国 防 部 队 等 不 同 客 户 群 , 和 去 年 相 比 , 公 司 在航 空 业 务 方 面 保 持 了 相 对 不 错 的 营 业 额 。

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200915一 直 以 来 , 国 防 与 其 它 政 府 项 目 是 集 团 业 务 稳 定 发 展 的 基 础 ,也 确 保 了 我 们 平 稳 渡 过 去 年 的 经 济 危 机 。 在 全 球 范 围 内 开 展 业 务合 作 以 及 拥 有 广 泛 的 客 户 群 也 是 关 键 因 素 , 因 为 这 意 味 着 我 们 可以 更 好 地 分 散 风 险 , 以 及 在 单 一 市 场 中 , 针 对 各 种 机 遇 迅 速 采取 行 动 。我 们 认 识 到 , 采 取 稳 健 的 资 产 流 动 管 理 是 保 持 公 司 良 好 财 政 状 况的 关 键 。 过 去 的 一 年 中 , 我 们 采 取 了 谨 慎 的 信 用 政 策 , 努 力 控 制好 支 付 和 信 贷 条 款 的 实 施 。 截 至 2009 年 底 , 我 们 的 经 营 业 务 现 金流 量 为 9.32 亿 元 。我 们 建 立 了 企 业 风 险 管 理 综 合 框 架 , 以 确 保 我 们 可 以 定 期 检 讨 业务 风 险 , 确 定 和 应 对 新 风 险 。 今 年 早 些 时 候 , 针 对 H1N1 带 来 的 恐慌 , 我 们 制 定 了 业 务 连 续 性 计 划 , 针 对 万 一 出 现 的 健 康 状 况 恶 化的 病 例 , 实 施 团 队 分 组 和 非 现 场 操 作 的 运 作 方 式 。取 得 了 初 步 成 功 。 我 们 期 望 随 着 全 球 对 创 新 性 环 境 工 程 解 决 方 案需 求 的 增 长 , 集 团 在 这 一 方 面 的 业 务 也 能 随 之 得 以 发 展 。这 次 金 融 危 机 告 诉 我 们 , 审 慎 理 财 及 资 产 流 动 的 重 要 性 。 因 此 ,我 们 通 过 建 立 一 个 12 亿 美 元 的 多 币 种 的 中 期 票 据 方 案 来 改 善 融 资模 式 。 这 一 方 案 为 我 们 提 供 了 额 外 的 筹 资 办 式 , 使 我 们 确 保 可 以在 未 来 把 握 机 会 、 迅 速 筹 集 资 金 。 根 据 该 方 案 , 我 们 在 有 利 的市 场 条 件 下 , 发 行 了 价 值 5 亿 美 元 的 10 年 期 债 券 。总 结根 据 预 测 , 经 济 复 苏 的 脚 步 将 十 分 缓 慢 , 甚 至 不 排 除 一 些 可 能 破坏 经 济 复 苏 的 因 素 存 在 。 因 此 , 未 来 的 一 年 仍 然 充 满 挑 战 和 诸 多不 确 定 因 素 。 但 是 , 我 们 不 能 驻 足 旁 观 , 我 们 需 要 一 如 既 往 地 先行 一 步 , 思 考 和 规 划 未 来 。展 望 未 来 : 为 经 济 好 转 做 好 准 备集 团 多 元 化 的 经 营 模 式 使 我 们 得 以 更 好 地 应 对 未 来 挑 战 。 我 们 将继 续 加 强 自 身 能 力 , 同 时 不 断 预 测 发 展 趋 势 , 推 出 新 的 解 决方 案 , 探 索 新 的 市 场 机 会 , 继 续 保 持 我 们 的 领 先 地 位 。在 宇 航 业 务 方 面 , 针 对 主 要 市 场 , 我 们 将 继 续 增 强 机 身 维 修能 力 。 可 以 容 纳 A380 飞 机 的 浦 东 机 库 预 计 将 在 今 年 上 半 年 建 成 。我 们 希 望 在 今 年 内 将 巴 拿 马 的 第 四 个 机 库 投 产 。 在 圣 安 东 尼 奥 也将 新 添 一 个 双 机 位 机 库 。 此 外 , 作 为 一 个 综 合 性 的 航 空 服 务 供 应商 , 我 们 将 继 续 加 强 在 维 护 、 修 理 及 操 作 发 动 机 和 零 部 件 的 能力 。 在 2009 年 , 我 们 签 署 了 一 份 长 达 20 年 的 协 议 , 为 GEnx-1B和 -2B 两 款 发 动 机 提 供 在 翼 支 援 , 同 时 我 们 也 具 备 了 CFM56-5B 发动 机 维 护 等 方 面 的 能 力 。 我 们 在 厦 门 的 新 发 动 机 维 修 设 施 也 有 望于 今 年 开 始 运 作 。电 子 业 务 方 面 , 通 过 “ 军 民 两 用 技 术 ” 的 运 用 及 寻 求 新 市 场 的 增长 策 略 的 实 施 , 我 们 逐 步 具 备 了 一 些 新 能 力 。9 月 份 , 我 们 赢 得 了长 春 轨 道 客 车 股 份 有 限 公 司 在 沙 特 阿 拉 伯 和 中 国 一 些 项 目 中 的 合约 。 这 标 志 着 我 们 在 市 场 营 销 方 面 迈 出 了 重 要 一 步 。 通 过 与 在 全世 界 销 售 机 车 的 机 车 制 造 商 的 直 接 合 作 , 我 们 希 望 获 得 更 大 的 市场 份 额 。 我 们 在 互 动 数 字 媒 介 方 面 的 业 务 也 取 得 了 发 展 , 为 即 将开 幕 的 新 加 坡 2010 年 青 年 奥 运 会 创 造 “ 虚 拟 世 界 ”, 在 这 个 平 台上 将 我 们 的 技 术 展 示 给 全 世 界 观 众 , 并 使 我 们 在 这 一 快 速 发 展 的行 业 中 迅 速 成 长 。 此 外 , 我 们 为 整 个 卫 星 通 信 团 队 的 工 作 租 用 了位 于 巴 耶 利 峇 的 一 幢 大 楼 , 以 拓 展 设 施 。陆 路 业 务 已 向 新 加 坡 武 装 部 队 提 供 了 两 样 新 产 品 , 即 在 2009 年陆 军 开 放 日 上 展 示 的 Terrex 8x8 步 兵 输 送 车 和 Trailblazer 扫 雷车 。 中 国 市 场 也 对 我 们 的 商 用 车 产 生 了 强 烈 需 求 。 通 过 收 购 镇 江华 晨 华 通 路 面 机 械 有 限 公 司 和 镇 江 华 通 阿 伦 机 械 有 限 公 司 , 公 司在 这 方 面 的 业 务 得 以 扩 展 。 为 满 足 市 场 对 环 保 汽 车 的 需 求 , 我 们推 出 了 新 加 坡 首 个 混 联 混 合 动 力 公 交 车 以 及 世 界 上 第 一 款 港 口 液压 混 合 动 力 牵 引 车 。海 事 业 务 方 面 , 我 们 将 加 强 我 们 在 美 国 船 厂 的 设 施 , 包 括 增 加 一个 配 件 制 造 车 间 , 以 支 持 我 们 先 前 宣 布 的 导 弹 快 艇 工 程 。 除 此 之外 , 我 们 在 环 境 工 程 业 务 方 面 也 取 得 了 进 展 , 在 中 东 和 中 国 市 场我 们 相 信 , 我 们 拥 有 一 个 成 功 且 不 断 加 以 改 善 的 商 业 模 式 , 它 使得 我 们 得 以 洞 察 任 何 经 济 周 期 或 经 济 状 况 , 及 时 把 握 商 机 。致 谢借 此 机 会 , 我 们 愿 代 表 整 个 集 团 , 向 董 事 会 成 员 表 示 感 谢 , 感 谢他 们 明 智 的 建 议 和 领 导 。 感 谢 Philip Pillai 博 士 , 他 已 于 9 月 底 辞去 了 董 事 职 务 , 转 而 担 任 新 加 坡 最 高 法 院 司 法 委 员 。Philip Pillai博 士 自 2000 年 4 月 担 任 董 事 , 我 们 对 他 任 职 期 间 的 宝 贵 贡 献 深 表感 谢 。 我 们 也 欢 迎 于 10 月 份 被 委 任 为 独 立 董 事 的 黎 智 昌 博 士 。 他已 经 被 委 任 为 提 名 委 员 会 委 员 , 审 计 委 员 会 委 员 和 资 源 及 薪 酬 委员 会 的 委 员 。 我 们 要 借 此 机 会 , 感 谢 将 于 今 年 3 月 31 日 从 董 事 会离 职 的 郭 木 财 中 将 和 谢 俊 雄 上 校 。 也 期 待 着 对 即 将 出 任 非 执 行 董事 的 梁 建 鸿 少 将 及 其 替 代 董 事 王 安 傑 上 校 表 示 欢 迎 。我 们 要 感 谢 员 工 们 这 些 年 来 的 忠 诚 和 奉 献 , 以 及 过 去 的 一 年 里 ,他 们 所 做 出 的 牺 牲 。 在 金 融 危 机 最 严 重 的 时 刻 , 集 团 采 取 了 审 慎的 态 度 , 对 高 级 管 理 人 员 和 执 行 人 员 实 行 减 薪 , 并 冻 结 了 其 他 所有 员 工 的 工 资 。在 对 高 级 执 行 人 员 实 行 减 薪 的 同 时 , 董 事 会 成 员 也 自 愿 减 少 2009年 董 事 聘 用 费 , 我 们 对 此 表 示 感 谢 。最 后 , 我 们 感 谢 各 位 股 东 、 利 益 相 关 者 和 业 务 合 作 伙 伴 一 直 以 来对 集 团 发 展 的 坚 定 信 心 。我 们 将 继 续 加 强 基 础 建 设 , 以 使 集 团 能 为 广 大 股 东 和 利 益 相 关 者创 造 和 提 供 长 久 的 可 持 续 发 展 的 价 值 。佘 林 发主 席2010 年 3 月 3 日陈 平 福总 裁 及 首 席 执 行 官

16Financial HighlightsAmidst the challenging financial and economicenvironment of 2009, ST Engineering delivered 4% growthin its turnover to $5.55b and PBT increased slightly to$546.6m. PATMI was lower by 6% at $443.9m with ROEat 28.3%. The Group continued to win orders in 2009 andended the year with a healthy order book of $10.3b. TheBoard is proposing to pay shareholders a total of 13.28cents per share as dividends for FY2009.TURNOVER BY SECTOR($m)PROFIT BEFORE TAX BYSECTOR ($m)PROFIT AFTER TAX ANDMINORITY INTERESTS BYSECTOR ($m)6,0007006005,0006005004,0005004004003,0003003002,0002002001,000100100000050607080905060708090506070809FYFYFYAerospace Electronics Land Systems Marine Others

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200917Key Financial DataTURNOVER BY SECTOR ($m)2009 2008 2007 2006 2005GROUP 5,548 100% 5,345 100% 5,051 100% 4,486 100% 3,338 100%AEROSPACE 1,872 34% 1,938 36% 1,835 36% 1,673 37% 1,236 37%ELECTRONICS 1,371 25% 1,143 21% 1,023 20% 951 21% 701 21%LAND SYSTEMS 1,167 21% 1,274 24% 1,178 23% 1,002 22% 600 18%MARINE 949 17% 822 15% 863 17% 702 16% 660 20%OTHERS 189 3% 168 4% 152 4% 158 4% 141 4%PROFIT BEFORE TAX BY SECTOR ($m)2009 2008 2007 2006 2005GROUP 546.6 100% 540.7 100% 638.1 100% 564.3 100% 503.2 100%AEROSPACE 228.3 42% 272.1 50% 341.2 53% 305.3 54% 255.4 51%ELECTRONICS 115.3 21% 93.9 17% 115.3 18% 104.6 19% 76.0 15%LAND SYSTEMS 95.4 17% 84.7 16% 80.0 13% 70.0 12% 65.0 13%MARINE 102.3 19% 75.2 14% 96.6 15% 79.5 14% 87.9 17%OTHERS 5.3 1% 14.8 3% 5.0 1% 4.9 1% 18.9 4%PROFIT AFTER TAX AND MINORITY INTERESTS BY SECTOR ($m)2009 2008 2007 2006 2005GROUP 443.9 100% 473.6 100% 503.5 100% 445.1 100% 396.3 100%AEROSPACE 185.7 42% 225.7 48% 270.5 54% 255.0 57% 210.3 53%ELECTRONICS 90.8 20% 68.1 14% 88.2 17% 76.3 17% 58.0 15%LAND SYSTEMS 82.3 19% 79.9 17% 70.8 14% 51.9 12% 49.0 12%MARINE 81.8 18% 74.5 16% 75.3 15% 67.8 15% 70.3 18%OTHERS 3.3 1% 25.4 5% (1.3) - (5.9) (1%) 8.7 2%

18 KEY FINANCIAL DATA2009 2008 2007 2006 2005EBITDA ($m) 649.2 667.9 684.4 593.4 470.1EBIT ($m) 486.4 509.1 550.3 457.6 389.5Shareholders’ funds ($m) 1,568 1,580 1,633 1,565 1,493Total assets ($m) 6,884 5,993 6,050 5,578 4,566Net assets ($m) 1,676 1,677 1,780 1,687 1,542Capital expenditure ($m) 277 191 172 197 123Gross dividend per share (cents) 13.28 15.80 16.88 15.11 13.60Dividend yield (%) 4.72 5.16 4.94 5.09 5.24Dividend cover 1.11 1.00 1.00 1.00 1.00Earnings per share (cents) 14.78 15.82 16.95 15.15 13.64Return on sales (%) 8.2 9.1 10.4 10.2 12.3Return on equity (%) 28.3 30.0 30.8 28.4 26.5Return on total assets (%) 6.6 8.2 8.7 8.2 9.0Net asset value per share (cents) 52.09 52.71 54.72 53.13 51.22EBITDA & EBIT($m)SHAREHOLDERS’FUNDS ($m)CAPITAL EXPENDITURE($m)7501,8003307006506005505004504003501,7001,6001,5001,4001,3001,2001,10030027024021018015012090603001,0003005 06 07 08 0905 06 07 08 0905 06 07 08 09FY FY FYEBIDTA EBIT

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200919Productivity Data2009 2008 2007 2006 2005Average staff strength 20,079 18,703 17,750 15,912 13,099Sales per employee ($) 276,298 285,757 284,570 281,910 254,821Profit after tax per employee ($) 22,109 25,324 28,367 27,974 30,255Employment costs ($m) 1,462.5 1,422.8 1,360.3 1,243.0 899.9Employment costs per $ of turnover ($) 0.26 0.27 0.27 0.28 0.27Economic Value Added ($m) 304.8 357.9 388.8 327.8 290.6Economic Value Added spread (%) 9.4 11.8 13.2 12.3 16.2Economic Value Added per employee ($) 15,181 19,138 21,904 20,598 22,187Value added ($m) 2,266.6 2,203.7 2,190.8 1,990.8 1,500.6Value added per employee ($) 112,882 117,824 123,432 125,112 114,559Value added per $ of employment costs ($) 1.55 1.55 1.61 1.60 1.67Value added per $ of gross property, plant and equipment ($) 0.91 0.97 1.00 0.98 1.02Value added per $ of turnover ($) 0.41 0.41 0.43 0.44 0.45PROFIT AFTER TAXPER EMPLOYEE ($’000)ECONOMIC VALUE ADDEDPER EMPLOYEE ($’000)VALUE ADDEDPER EMPLOYEE ($’000)33241273022122272421181512962018161412108641171121071029792878277327205 06 07 08 0905 06 07 08 0905 06 07 08 09FY FY FY

20Group Economic Value Added Statement($m) 2009 2008 2007 2006 2005Net profit before tax 507.7 501.8 591.5 512.8 457.3Adjust for:Share of results of associated companies and joint ventures 38.9 38.9 46.6 51.5 45.9Interest expense 59.9 67.4 53.2 45.1 10.4Others 18.5 21.3 10.3 11.6 2.2Adjusted profit before interest and tax 625.0 629.4 701.6 621.0 515.8Cash operating taxes (Note 1) (116.3) (81.8) (112.4) (112.8) (99.3)Net operating profit after tax (NOPAT) – (a) 508.7 547.6 589.2 508.2 416.5Average capital employed (Note 2) 3,286.7 3,034.4 2,988.5 2,691.9 1,865.4Weighted Average Cost of Capital (Note 3) (%) 6.1 6.2 6.5 6.6 6.1Capital charge – (b) (200.5) (188.1) (194.3) (177.7) (113.8)Economic Value Added (EVA) – [(a) – (b)] 308.2 359.5 394.9 330.5 302.7Minority share of EVA (3.4) (1.6) (6.1) (2.7) (12.1)EVA attributable to ordinary shareholders 304.8 357.9 388.8 327.8 290.6Unusual items (UI) (gains)/losses (Note 4) 1.3 (0.1) (10.8) (30.7) (7.0)EVA attributable to ordinary shareholders (exclude UI) 306.1 357.8 378.0 297.1 283.6

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200921Note 1:Note 2:The reported current tax is adjusted for the statutory tax impact of interest expense.Monthly average share capital plus interest bearing liabilities, timing provision, intangible assets impaired/amortised, and present value of operating leases.Major Capital Components:$mLong term debt 953.1Short term debt 231.4Equity 1,758.2Others 344.03,286.7Note 3:The Weighted Average Cost of Capital is calculated in accordance to ST Engineering Group EVA Policyas follows:i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2008 @ 6.0%);ii) Risk-free rate of 2.08% (2008 @ 2.74%) based on yield-to-maturity of Singapore Government 10 yearsBonds;iii) Ungeared beta at 0.69 (2008 @ 0.67) based on ST Engineering risk categorisation; andiv) Cost of Debt rate at 4.17% using actual cost of debt of the borrowings in the US, Europe andSingapore (2008 @ 3.23%: based on 5-year Singapore dollar Swap Offer Rate plus 25 basis points).Note 4:UI refer to divestment of investment properties, subsidiaries and associated companies, long terminvestments and disposal of major property, plant and equipment.ECONOMIC VALUE ADDED ($m)FY09080706050 35 70 105 140 175 210245 280 315 350 385 420

Board of DirectorsThe Board with its wealth of knowledge and experience indiverse fields is an asset to ST Engineering.The names of the directors holding office at the date of this report are set out below together with details of theiracademic and professional qualifications, age, date of first appointment as Director, date of last re-election asDirector, as well as directorships in listed companies.Mr Peter SEAH Lim Huat (Chairman)Mr Peter Seah Lim Huat, 63, was appointed non-executive Chairman on 15 April2002 and was last re-elected as Director on 22 April 2009. He is a member ofthe Temasek Holdings Advisory Panel. Mr Seah was a banker for 33 years beforeretiring as Vice Chairman and CEO of the former Overseas Union Bank in 2001.He then joined Singapore Technologies Pte Ltd as President and CEO and heldthis position until 31 December 2004. Mr Seah is the Chairman of SembCorpIndustries Limited* and sits on the Boards of Bank of China Limited^, CapitaLandLimited*, DBS Group Holdings Ltd* and Government of Singapore InvestmentCorporation. Mr Seah is also Deputy Chairman of Global Crossing Limited.His other appointments include being Chairman of LaSalle Foundation Limitedand Singapore Health Services Pte Ltd and a member of the Defence Science& Technology Agency (DSTA). Mr Seah was awarded the Public Service Star(Bintang Bakti Masyarakat) in 1999 and made a Justice of the Peace in 2003. Hegraduated from the former University of Singapore in 1968 with an honours degreein Business Administration.Mr TAN Pheng HockMr Tan Pheng Hock, 52, is the President & CEO of ST Engineering and an executiveDirector. He was appointed Director on 1 May 2001 and will be due for re-election at thiscoming AGM under Article 98 of the Company’s Articles of Association. Mr Tan sits on theBoards of SembCorp Marine Ltd* and Neptune Orient Lines Limited*. He is Chairman of theSingapore Airshow & Events Pte. Ltd., Nanyang Polytechnic International Private Limited,Singapore Workforce Development Agency, Nanyang Polytechnic Board of Governors andthe Lifelong Learning Endowment Fund Advisory Council. Mr Tan is also Deputy Chairmanof the Singapore Quality Award Governing Council. He began his career with the Group asan engineer in ST Marine in 1981. Mr Tan held various senior appointments in the Groupincluding that of Executive Vice President of ST Marine, President of ST Kinetics, Presidentand Chief Operating Officer of ST Engineering and ST Engineering Group President. Heholds a Bachelor of Science (First Class Honours) in Marine Engineering from the Universityof Surrey, UK and a Master of Science in Management from Stanford University, USA.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200923Mr KOH Beng SengMr Koh Beng Seng, 59, is the CEO of Octagon Advisors Pte. Ltd. He was appointed anindependent non-executive Director on 15 September 2003 and was last re-elected asDirector on 22 April 2009. Mr Koh was Deputy President of United Overseas Bank Ltd fromJune 2000 to 31 January 2005. Prior to this, Mr Koh was Senior Advisor to Asia Pulp &Paper Co Ltd, and Advisor to Bank of China and the International Monetary Fund. Mr Kohhas extensive experience in the financial services sector. He was with the Monetary Authorityof Singapore from 1973 to 1998, where he served as Deputy Managing Director from 1988to 1998. Mr Koh is a Director of Bank of China (Hong Kong) Limited^, BOC Hong Kong(Holdings) Limited, Fraser & Neave Ltd*, Sing-Han International Financial Services Limited,Japan Wealth Management Securities Inc, and Great Eastern Holdings Limited*. Mr Kohholds a Bachelor of Commerce (First Class Honours) from the former Nanyang University,Singapore, and a Master of Business Administration from Columbia University, USA.The Think TankLieutenant-General Desmond KUEK Bak ChyeLG Desmond Kuek Bak Chye, 46, is Chief of the Defence Force. He was appointed anon-executive Director on 27 April 2007. He joined the Singapore Armed Forces (SAF)in 1982 and was awarded the SAF Overseas Scholarship in 1982, SAF PostgraduateScholarship (General Development) in 1997 and The Public Administration Medal (Gold)in 2002. In the course of his military career, he has held various key command and staffpositions in the Ministry of Defence (MINDEF). LG Kuek is a Board member of the JurongTown 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 ofOxford, UK, as well as a Masters in Public Administration from Harvard University, USA.

24BOARD OF DIRECTORSThe Think TankDr TAN Kim SiewDr Tan Kim Siew, 56, is Permanent Secretary (Defence Development), MINDEF.He was appointed a non-executive Director on 15 December 2003 and will bedue for re-election at this coming AGM under Article 98 of the Company’s Articlesof Association. Prior to his present appointment with MINDEF, he was the DeputySecretary (Policy) with the Ministry of Finance. He was formerly the CEO andChief Planner of the Urban Redevelopment Authority from 1996 to 2001. Dr Tanis Chairman of the DSTA and DSO National Laboratories, and is also a Directorof Singapore Technologies Holdings Pte Ltd. Dr Tan holds a Bachelor of Arts inEngineering Tripos and a PhD in Engineering from the University of Cambridge, UK.Mr QUEK Tong BoonMr Quek Tong Boon, 54, is Chief Defence Scientist and Chief Research & Technology Officerin MINDEF. He was appointed a non-executive Director on 1 March 2008 and was last reelectedas Director on 25 April 2008. He joined the Defence Science Organisation of MINDEFin 1980 and in the course of his career, has held various key appointments, including that ofDeputy Secretary (Technology and Transformation) of MINDEF and CEO of the DSO NationalLaboratories. Mr Quek’s current chairmanship includes that of the Intellectual Property Office ofSingapore (IPOS) Board, the Temasek Laboratories@NUS Board, the Temasek Laboratories@NTU Board and the Temasek Defence Systems Institute Board. He is a member of the DSONational Laboratories Board, the DSTA Board, the Agency for Science, Technology & ResearchBoard, and the Singapore University of Technology and Design Board of Trustees. He is alsoan Adjunct Professor at the Department of Electrical & Computer Engineering of the NationalUniversity of Singapore (NUS). He holds a Bachelor of Arts (Honours) (Engineering) from theUniversity of Cambridge, UK, and a Master of Science (Electrical Engineering) from NUS.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200925Mr Winston TAN Tien HinMr Winston Tan Tien Hin, 61, is the Managing Director of Corporate Brokers InternationalPte Ltd. Mr Tan was a banker for 24 years having spent over 16 years with Citibank andover seven years with Deutsche Bank; his last position was that of General Manager for theSingapore Branch. He was appointed an independent non-executive Director on 1 October1997 and was last re-elected as Director on 22 April 2009. Mr Tan is a Business Angelinvestor and Director of several small and medium sized enterprises, including Roxy-PacificHoldings Limited*. Mr Tan is also a member of the Salvation Army Advisory Board. He holdsa Bachelor of Science in Physics from the former University of Singapore.Dr Philip PILLAIDr Philip Pillai, 62, was appointed an independent non-executive Director on 1 April2000 and relinquished this position on 30 September 2009. In October 2009, he wasappointed Judicial Commissioner of the Supreme Court of Singapore.Mr QUEK Poh HuatMr Quek Poh Huat, 63, is Group CEO of Singapore Power Limited. He was appointed anon-executive Director on 15 April 2002 and was last re-elected as Director on 22 April2009. Mr Quek is a Director of Singapore Power Limited, SP PowerAssets Limited,PowerGas Limited and SP Services Limited. He is also Chairman of SP PowerGrid Limited,SPI Management Services Pty Ltd, SPI (Australia) Assets Pty Ltd and Enterprise BusinessServices (Australia) Pty Ltd. Mr Quek is Singapore’s non-resident Ambassador to Sweden.He was awarded the Public Service Star in August 1994. Mr Quek obtained a Bachelor ofScience in Chemical Engineering from the University of Leeds, UK, and a Master of Sciencein Management from the Naval Postgraduate School, USA.

26BOARD OF DIRECTORSMr Venkatachalam KRISHNAKUMARMr Venkatachalam Krishnakumar, 60, is Chairman of Oracle Financial Services SoftwarePte Ltd. Prior to this, he was a Senior Advisor to Oracle Financial Services Software Pte Ltd,Group Technology and Operation, DBS Bank Ltd and McKinsey and Company, BarclaysBank PLC, Global Retail and Commercial Banking. He was Chief Operating Officer andChief Financial Officer for the Asia Pacific Consumer Bank of Citigroup until his retirement on28 February 2005, after a 31-year career with the group. During his career with Citigroup,he held several senior appointments in India, Singapore and New York. He was appointedan independent non-executive Director on 15 April 2002 and will be due for re-election atthis coming AGM under Article 98 of the Company’s Articles of Association. He holds aBachelor of Engineering and Master of Business Administration from the Indian Institute ofManagement, India.The Think TankMr Davinder SINGHMr Davinder Singh, 52, is CEO of Drew & Napier LLC. He was appointed an independentnon-executive Director on 1 August 2007 and was last re-elected as Director on 25 April2008. Mr Davinder Singh has been in legal practice for more than 20 years. He wasappointed Senior Counsel in 1997, the first batch of Senior Counsels to be so appointedin Singapore. Mr Singh holds an LLB (Honours) from the former University of Singapore.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200927Dr Stanley LAI Tze ChangDr Stanley Lai Tze Chang, 42, is Head of the Intellectual Property & Technology Department,Allen and Gledhill LLP. He was appointed an independent non-executive Director on8 October 2009 and will be due for re-election at this coming AGM under Article 104 of theCompany’s Articles of Association. Dr Lai was appointed Senior Counsel at the Openingof the Legal Year 2010. He obtained his law degree from the University of Leicester (UK)in 1992 and qualified to practise as a Barrister in England and Wales in 1993. Dr Lai is amember of Lincoln’s Inn. He was called to the Singapore bar in 1995. Dr Lai also holds aMaster and Doctorate (Ph.D) in law from the University of Cambridge, UK.Colonel CHIA Choon HoongCOL Chia Choon Hoong, 38, is Assistant Chief of General Staff (Plans) inMINDEF. He was appointed Alternate Director to LG Desmond Kuek Bak Chyeon 1 August 2007. COL Chia joined the SAF in 1991. He was awarded the SAFOverseas Scholarship in 1991, and the SAF Postgraduate Scholarship (GeneralDevelopment) in 2006. He has held various positions in MINDEF over the last18 years and assumed his present office in 2009. COL Chia holds a Master ofEngineering (First Class Honours) (Electrical & Electronic Engineering) from theUniversity College London-UOL, UK, and a Master in Business Administrationfrom the Massachusetts Institute of Technology, USA.PAST DIRECTORSHIPS IN THE LAST THREE YEARSMr Peter SEAH Lim HuatChartered Semiconductor Manufacturing LtdChinese Chamber Realty Private LimitedEDB Investments Pte LtdPT Bank Internasional Indonesia TbkPT Indosat TbkSCS Computer Systems Pte. Ltd.Siam Commercial Bank Public Company LimitedThe National Kidney FoundationMr TAN Pheng HockST Synthesis Pte LtdLieutenant-General Desmond KUEK Bak ChyeSingapore Technologies Kinetics LtdMr QUEK Poh HuatPowerGas LimitedSP Australia Networks (Distribution) LtdSP Australia Networks (RE) LtdSP Australia Networks (Transmission) LtdTemasek Management Services Pte LtdMr Venkatachalam KRISHNAKUMARSCS Computer Systems Pte. Ltd.Singapore Land AuthorityThe Central Depository (Pte) LimitedMr Davinder SINGHFreshfields Drew & Napier Pte LtdSingapore Airlines LimitedZagro Asia Limited* listed on the SGX-ST^ listed on the Stock Exchange of Hong Kong

Senior ManagementStanding, left to right: TAY Kok Khiang, LEE Fook Sun,Gen (Ret) John G COBURN, CHANG Cheow Teck and Eleana TAN Ai Ching.Seated, left to right: SEAH Moon Ming, SEW Chee Jhuen and TAN Pheng Hock.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200929With combined expertise covering all aspects of operations,the Senior Management team exemplifies the competence,commitment and cooperation needed to steer the Group.Mr TAN Pheng Hock is President &CEO of ST Engineering and a Director ofthe ST Engineering Board. (Mr Tan’s profileis on page 22)Mr SEAH Moon Ming,53, was re-designated as Deputy CEOand President, Defence Business ofST Engineering in August 2009,overseeing the Aerospace, Electronics,Land Systems and Marine sectors. Priorto this, he was Deputy CEO (Electronics& Kinetics) & President, InternationalBusiness, ST Engineering from May 2004to August 2009 and President,ST Electronics, a position he held fromJuly 1997 to August 2009. Mr Seah wasGeneral Manager of CET Technologiesfrom July 1994 to July 1997. He servesas Chairman of the Board of Governors ofTemasek Polytechnic, Vice Chairman ofTrek 2000 International Ltd*, and Directorof DSO National Laboratories, InfocommDevelopment Authority of Singapore,International Enterprise Singapore andAlexandra Health Pte Ltd. He is a Fellowof the Institution of Engineers Singaporeand a senior member of IEEE. He wasawarded the 2007 International ManagerAction Award in Singapore, 2007 TopTen Financial and Intelligent PersonsAward in China and IES/IEEE Joint Medalof Excellence 2008. Mr Seah holds aMaster of Science (Distinction) in ElectricalEngineering from the Naval PostgraduateSchool, USA.Mr TAY Kok Khiang,61, was appointed President ofST Aerospace in July 2001. As Presidentof ST Aerospace, Mr Tay is responsible forgrowing the Aerospace sector businessas well as its financial and operationalperformance. He joined ST Aerospace asVice President/General Manager ofST Aerospace Engineering Pte Ltdin 1993, and has held many seniormanagement appointments beforebecoming President. He was DeputyPresident & Chief Operating Officer prior* listed on the SGX-STto his current appointment. Mr Tay holds aBachelor of Engineering (Honours) and aMaster of Science in Industrial Engineeringfrom the National University of Singapore.Mr LEE Fook Sun,53, was appointed President ofST Electronics in August 2009. Prior tohis appointment, Mr Lee was DeputyPresident (Operations), ST Electronicssince 2005. He joined ST Electronicsin 2000 as President of Defence andInternational Business. Mr Lee is amember of Singapore-Zhejiang Economic& Trade Council. He holds a Bachelorof Arts (Honours) and a Master of Arts(Engineering Science) from the Universityof Oxford, UK.Mr SEW Chee Jhuen,46, was appointed President ofST Kinetics in September 2006.Prior to this, Mr Sew was DeputyPresident (Operations) and PresidentDefence Business of ST Kinetics. Hejoined ST Aerospace as an aeronauticalengineer in 1988, and has held manysenior management appointments beforebecoming Deputy President (Operations).Mr Sew serves as a Member of the Boardof Governors of Singapore Polytechnic.He holds a Bachelor of Science(Distinction) in Aeronautical Engineeringand Mechanics from the University ofMinnesota, and a Master in BusinessAdministration from Stanford University,USA.Mr CHANG Cheow Teck,49, was appointed President, ST Marine inMarch 2008. Prior to this, Mr Chang wasPresident, Special Projects inST Engineering. He has been with theGroup since 1990 and held varioussenior management appointments withinthe Group before assuming his currentposition, including that of EVP CommercialBusiness, ST Aerospace; President,VT Systems; and President, DefenceBusiness of ST Kinetics. Mr Chang holdsa Bachelor of Mechanical Engineering(First Class Honours) from the NationalUniversity of Singapore and attendedHarvard University’s ManagementDevelopment Program.General (Retired)John G COBURN,67, was appointed Chairman and CEO ofST Engineering’s US subsidiary,VT Systems, in December 2001. Gen (Ret)Coburn joined the Group after an illustrious39-year career with the US Department ofDefense. Prior to taking up this position,he was Commanding General of theUS Army Materiel Command, one ofthe largest commands in the army with60,000 employees, an annual budget ofUS$40b and activities in 42 states and28 foreign countries. Gen (Ret) Coburnholds a Juris Doctor from the Universityof Missouri, USA, a Doctor’s Degree fromEastern Michigan University and manyother degrees. He is also a noted author,speaker and a member of the SupremeCourt of the United States.Ms Eleana TAN Ai Ching,47, was appointed Chief Financial Officerof ST Engineering in March 2008.Ms Tan was previously Managing Director,Finance, Temasek Holdings (Private)Limited (Temasek). Prior to that,she was Director Finance at SingaporeTechnologies Pte Ltd (STPL) from August2003 until December 2004, when STPLwas restructured and its assets transferredto Temasek. Prior to 2003, Ms Tan hadheld various key finance positions in theST Engineering Group over a period of13 years and last held the position ofGroup Financial Controller ofST Engineering. Ms Tan holds a Bachelorof Accountancy (Honours) from theNational University of Singapore and isa member of the Institute of CertifiedPublic Accountants of Singapore andthe Association of Chartered CertifiedAccountants.

30Organisation ChartTAN Pheng HockPresident & CEOEleana TANChief Financial OfficerINTERNAL AUDITGrace KWOKSenior Vice President(Reports to Audit Committee)FINANCERaphael CHINSenior Vice President/Group Financial ControllerINTERNATIONALMARKETINGPatrick CHOYExecutive Vice PresidentTECHNOLOGYFONG Saik HayChief Technology OfficerMERGERS &ACQUISITIONSSteven CHEONGSenior Vice PresidentHUMAN RESOURCETAN Nga KokSenior Vice President/DirectorLEGALLOW Meng WaiVice President/DirectorINFORMATIONTECHNOLOGYTAN Hock HaiChief Information OfficerSTRATEGIC PLANSRobin THEVATHASANSenior Vice PresidentRISK MANAGEMENTAlice CHUASenior Vice PresidentDEFENCE BUSINESSLOW Yee KahSenior Vice PresidentCORPORATECOMMUNICATIONSSharolyn CHOYSenior Vice PresidentBUSINESS EXCELLENCEHarnek SINGHVice President/DirectorPROCUREMENTGOH Bak NguanChief Procurement OfficerSPECIAL PROJECTSHAN Yew KwangExecutive Vice PresidentSYSTEM ENGINEERGAN Boon JinChief System Engineer

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200931Think OrganisationSEAH Moon MingDeputy CEO &President, Defence BusinessAEROSPACEELECTRONICSLAND SYSTEMSMARINETAY Kok KhiangPresidentLEE Fook SunPresidentSEW Chee JhuenPresidentCHANG Cheow TeckPresidentHO Yuen SangDeputy President,Operations/Chief Operating Officer &President, Defence BusinessJeremy CHANDeputy President,Marketing &Total Aviation SupportNG Chong KhimDeputy President,Corporate Servicesand MarketingLAU Thiam BengPresident,Defence BusinessGAN Boon JinDeputy President, Operations &President, Defence BusinessNG Sing ChanDeputy President &President, Defence BusinessParmesh SINGHPresident, Marketing &Business DevelopmentUS OPERATIONSJohn G COBURNChairman & CEOEUROPE OPERATIONSAugustine SYNSenior Vice PresidentADVANCEDENGINEERING CENTREFONG Saik HayPresidentINTEGRATED SERVICESGOH Lik KokVice President/General Manager

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200933Corporate GovernanceThe Board is accountable to shareholders for ST Engineering’sperformance. It is committed to ensuring that a transparentsystem is in place where good governance is not only practisedat the Board level of the holding company but is embracedthroughout the organisation as part of its culture.This report sets out ST Engineering’s corporategovernance processes, practices and activities in2009 with specific reference to the guidelines of theSingapore Corporate Governance Code 2005 (Code).BOARD MATTERSBoard’s Conduct of its Affairs(Principle 1)The Board is responsible to shareholders foroverseeing the management of the business in theinterest of the Company. To this end, the Boardrelies on the integrity and due diligence of its seniormanagement and its external advisors and auditors.In addition to its statutory responsibilities, the Boardspecifically performs the following governance roles:• approves and guides the Group’s overall longterm strategic objectives;• establishes a proper risk management systemto ensure that key potential risks faced by theGroup are properly identified and managed;• monitors the Group’s performance;• assesses and approves annual budgets, majorfunding proposals, investment and divestmentproposals;• approves the appointment of the Chief ExecutiveOfficer, Board changes and appointments onBoard committees; and• approves the unaudited quarterly, half-yearly andfull year audited results prior to their release.In the discharge of its functions, the Board issupported by nine Board committees to which itdelegates specific areas of responsibilities for reviewand decision making, and the Executive Office. TheExecutive Office comprises the President & ChiefExecutive Officer; Deputy Chief Executive Officer;and the Chief Financial Officer (CFO).Board members receive monthly consolidatedmanagement reports on the financial performanceof each business sector, capital commitments andsignificant operational highlights.A formal letter is sent to a director uponhis appointment setting out his duties andresponsibilities. A new director is also given abriefing by the President & Chief Executive Officeron the strategic direction and performance of theCompany and its key subsidiaries as well as anintroduction to the senior management team.The Board is routinely updated on the relevantlaws, continuing listing obligations and accountingstandards requiring compliance, and theirimplications for the Group.The Board convenes scheduled meetings on aquarterly basis to coincide with the announcementof the Group’s quarterly results. Ad-hoc meetingsare convened as and when necessary to review theGroup’s performance, and to deliberate on specificissues. To facilitate the Board’s decision-makingprocess, the Company’s Articles of Associationprovides for Directors to participate in Boardmeetings by teleconference or video conference.The Chairman has a second or casting vote.Decisions of the Board and Board committees mayalso be obtained via circulation.The Board monitors the performance of the Groupthrough its Board committees.The number of Board and Board committeemeetings held during the year is tabulated on thefollowing page.

34 CORPORATE GOVERNANCEType of Meeting No. of Meetings Attendance Average (%)Board 7 82%Audit Committee 7 95%Business Investment and Divestment Committee 1 80%Executive Resource and Compensation Committee 3 100%Nominating Committee 3 100%Senior Human Resource Committee 1 75%Risk Review Committee 4 75%Budget and Finance Committee 2 100%Research, Development and Technology Committee 3 67%Tenders Committee * ** Decisions were made via circular resolution.Minutes of the Board Committee meetings are made available to all Board members.Board Composition and Guidance(Principle 2)The Board comprises 11 directors and an alternatedirector. The Board consists of members withestablished track record in finance, banking,technology, legal and management skills. Each nonexecutivedirector brings to the Board an independentperspective based on his training and expertise tomake balanced and well considered decisions.The Chairman of the Board is Mr Peter Seah,a non-executive director. Mr Seah was appointed tothe Board on 15 April 2002 as Chairman.As a non-executive director, Mr Seah is free fromany relationship with the executive managementof the Company that could materially interfere withthe exercise of his independent judgment. He is aMember of the Temasek Advisory Panel in TemasekHoldings, the Company’s major shareholder.The President & Chief Executive Officer (CEO) isMr Tan Pheng Hock, who is an executive director.Save for Mr Tan Pheng Hock, the remaining tendirectors are non-executive directors.The Board has five independent directors. Accordingto the Code, an independent director is one whohas no relationship with the Company, its relatedcompanies or its officers that could interfere, or bereasonably perceived to interfere with the exercise ofthe director’s independent business judgment. Theindependence of each director is reviewed annuallyby the Nominating Committee (NC). The independentdirectors are Mr Koh Beng Seng, Mr VenkatachalamKrishnakumar, Mr Winston Tan, Mr Davinder Singhand Dr Stanley Lai.The Board has, at all times exercised independentjudgment in decision making, using its collectivewisdom and experience to act in the best interests ofthe Company.The Board held a total of seven meetings during theyear, to consider among other things, the approval ofthe FY2008 results and release of 1Q2009, 2Q2009and 3Q2009 results.Chairman and Chief Executive Officer(Principle 3)The Chairman and CEO roles and responsibilities arekept separate in order to maintain effective oversight.No individual or small group of individuals dominatesthe Board’s decision making process. The CEO andsenior management regularly consult with individualBoard members and seek the advice of members ofthe Board committees through meetings, telephonecalls as well as by electronic mail.The Chairman, who is non-executive, is responsiblefor the proper functioning of the Board and actsindependently in the best interests of the Companyand its shareholders. The Chairman facilitatesthe relationship between the Board, CEO andmanagement, engaging them in constructivediscussions over various matters, including strategicissues and business planning processes.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200935During the year, the NC conducted an informalassessment of the directors’ performance bytaking into account their collective and individualcontributions to the Board and Board committees theywere appointed on. The Committee was fully satisfiedwith the performance of the Board.The CEO is accountable to the Board for the conductand performance of the Group. The CEO is supportedin his work by the Deputy CEO, Mr Seah Moon Mingand the CFO, Ms Eleana Tan Ai Ching in the ExecutiveOffice. During the year, Mr Wee Siew Kim, who wasone of 2 Deputy CEOs resigned to pursue other careeropportunities. Mr Wee was in charge of the Aerospaceand Marine sectors. Mr Seah now oversees all the4 business sectors comprising Aerospace, Electronics,Land Systems and Marine.Board Membership andEvaluation of Performance(Principles 4 and 5)The NC is responsible for reviewing the compositionof the Board and identifying and selecting suitablecandidates to the Board. The Committee also reviewsthe retirement and re-election of directors.The NC comprises three directors. Mr VenkatachalamKrishnakumar is the Chairman of the NC. He wasappointed Chairman of the NC on 1 October 2009following the resignation of Dr Philip Pillai who hasbeen appointed Judicial Commissioner of the SupremeCourt. The other members are Mr Peter Seah andDr Stanley Lai. Dr Lai was appointed NC memberupon joining the Board on 8 October 2009.Both Mr Krishnakumar and Dr Lai are independentnon-executive directors.The NC is also responsible for renewal and successionto ensure Board continuity. At each AGM, one thirdof the directors with the longest term in office sincehis last re-election is required to retire. A retiringdirector may submit himself for re-election. Under thisprovision, Mr Tan Pheng Hock, Dr Tan Kim Siew andMr Venkatachalam Krishnakumar will retire.Dr Stanley Lai, who is newly appointed, will hold officeuntil the forthcoming AGM of the Company.In addition, MG Neo Kian Hong, who will be appointedas non-executive director of the Company on31 March 2010, will also hold office until theforthcoming AGM of the Company. The retiringdirectors, being eligible, have offered themselvesfor re-election.The NC recommends that each of the retiring Directorsbe re-elected at the Company’s forthcoming AGM.Supporting the Board are the following BoardCommittees:• Audit Committee• Business Investment and Divestment Committee• Executive Resource and Compensation Committee• Nominating Committee• Budget and Finance Committee• Research, Development and Technology Committee• Senior Human Resource Committee• Risk Review Committee• Tenders CommitteeThe NC is charged with the responsibility of ensuringthat the Company’s Board and its subsidiariescomprise individuals who are able to discharge theirresponsibilities as directors. The NC identifies suitablecandidates for appointment to the boards of theGroup, in particular, candidates who can value add tothe management through contribution of their skills,knowledge and experience.The NC reviewed and affirmed the independenceof the Company’s independent directors and thecomposition of the Board and the profile of Boardmembers in relation to the needs of the ST EngineeringBoard. The NC recommended to the Board theappointment of Dr Stanley Lai as non executiveindependent Director. Dr Stanley Lai was appointedDirector on 8 October 2009.

36 CORPORATE GOVERNANCEThe composition of the Board committees as at 31 December 2009 is tabulated below:Board MemberAudit Committee(established on 15/1/1998)Business Investment and Divestment Committee(established on 8/9/1997)Executive Resource and Compensation Committee(established on 6/12/1997)Nominating Committee(established on 4/12/2002)Budget and Finance Committee(established on 5/1/1998)Research, Development and Technology Committee(established on 1/8/2003)Senior Human Resource Committee(established on 16/1/1998)Risk Review Committee(established on 7/12/1998)Tenders Committee(established on 5/1/1998)Mr Peter SEAH Lim Huat C C M CMr TAN Pheng Hock M M M M MMr KOH Beng SengCLG Desmond KUEK Bak Chye M M MDr TAN Kim Siew M MMr QUEK Tong BoonCMr Winston TAN Tien Hin M M CMr QUEK Poh Huat M MMr Venkatachalam KRISHNAKUMAR M M C MMr Davinder SINGH C MRolling list of any 3 Board DirectorsDr Stanley LAI Tze Chang M M MCOL CHIA Choon Hoong +DENOTES:C – ChairmanM – Member+ Alternate director to LG Desmond KUEK Bak ChyeAccess to Information (Principle 6)The management furnishes Board members withmonthly management reports, providing updates onkey operational activities and financial analysis. TheBoard also has unrestricted access to the CEO, theCFO, management and the Company Secretary aswell as the internal and external auditors and therisk management team. The Board may also seekindependent professional advice if necessary.As a general rule, board papers are sent to directors atleast three days prior to meetings in order for directorsto be adequately prepared for the meeting.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200937REMUNERATION MATTERSProcedures for Developing RemunerationPolicies (Principle 7)Level and Mix of Remuneration (Principle 8)Disclosure on Remuneration (Principle 9)The Executive Resource and CompensationCommittee (ERCC) performs the role of theremuneration committee. The Committee comprisesMr Peter Seah as Chairman, Mr VenkatachalamKrishnakumar and Dr Stanley Lai. The majority ofmembers of the ERCC have held senior positions inlarge organisations and are experienced in the area ofexecutive remuneration policies and trends.All the ERCC members are non-executive directors.Apart from Mr Peter Seah, the other members of theERCC are independent directors.All decisions at any meeting of the ERCC shallbe decided by a majority of votes of the ERCCmembers present and voting (the decision of theERCC shall at all times exclude the vote, approval orrecommendation of any member who has a conflict ofinterest in the subject matter under consideration).The ERCC’s role is to assist the Board to carry out thefollowing key duties and responsibilities:• Review and establish executive remunerationpolicy• Approve the remuneration package and serviceterms for senior executives• Set targets for senior executives and approveequity-based incentive share awards• Approve non-executive director remunerationstructureThe ERCC met three times in 2009. Its key activitieswere centred on the assessment and developmentof the senior management team, target setting, andthe determination of their compensation and incentiveawards. In determining the overall remunerationpackage, the ERCC assesses executives’contributions to the Group relative to preset targets,the performance of the Group, and the compensationand employment conditions of various industries,including global remuneration benchmarking.The existing share plans expire in November 2010.During the year, the ERCC recommended to the Boardthe adoption of new PSP and RSP share incentiveplans, on the same terms as the existing share plansbut with a lower cap of 8% over the 10-yearlife of the share plans (existing Plan has a cap of15%). The cap of 8% applies to both the PSP andRSP awards as a consolidated limit. The Board hasaccepted the ERCC’s recommendations. The Boardwill not be seeking a new mandate for the Company’sshare option plan. The grant of share options wasdiscontinued in 2007. The new share incentive planswill be proposed to shareholders for approval at theforthcoming Extraordinary General Meeting ofthe Company.The Board has delegated authority to the ERCC todetermine the remuneration of the CEO and the seniormanagement. The remuneration package for nonexecutivedirectors is reviewed by the Board annuallyand the fees to be paid to Board members are subjectto approval at the AGM. The Directors’ Fee policy istabulated in the following page.For FY2009, non-executive directors have volunteeredto accept a reduction in directors’ retainer fees for2009 in tandem with the senior executives’ pay cuts.The Group has tabulated a summary compensationtable for key executives for the year ended31 December 2009. This table is found on page 40.The Senior Human Resource Committee, chaired byMr Peter Seah, comprises Mr Tan Pheng Hock, LGDesmond Kuek Bak Chye and Dr Tan Kim Siew. TheCommittee reviewed the talent management andleadership development initiatives to build a leadershippipeline for the Group. By supporting and directing theGroup’s talent management and leadership initiatives,the Committee has helped to enhance the processof identification and development of talents to begroomed for senior positions. The Committee has alsoreviewed the succession plans for key managementpositions in the Group.The ERCC reviewed and decided on conditionalperformance share awards under ST Engineering’sapproved share plans as well as Economic ValueAdded-based incentives for senior executives.The ERCC also made a determination of theachievement factor for the final award of shares toparticipants under the approved Performance SharePlan (PSP) and Restricted Stock Plan (RSP).

38 CORPORATE GOVERNANCEDIRECTORS’ FEE POLICYThe Directors’ fees payable in respect of financial year 2009 amounts to $847,158 (financial year 2008 : $893,166) and are basedon the following rates:Basic RetainerFrom Private Sector$From Public Sector^$Director 50,000 7,500Additional/Committee Fees From Private Sector From Public SectorBoard Chairman 50,000 30,000Board Deputy Chairman / Audit Committee Chairman / Executive Committee Chairman 35,000 22,500Other Committee Chairman / Audit Committee Member / Executive Committee Member 20,000 15,000Other Committee Member 10,000 7,500Attendance FeesPer Board Meeting 2,000 –Per Board Committee Meeting 1,000 –^Fees to directors from the public sector follow the Directorship & Consultancy Appointments Council (DCAC)’s guidelines. For services rendered by a publicsector director on the Board and concurrently on Board committees, only one set of fee based on the highest rate shall be payable to the DCAC.ACCOUNTABILITY ANDAUDITAccountability(Principle 10)The Board is responsible for providing abalanced assessment of the Company’sperformance, position and prospects. Inpresenting the annual financial statementsand quarterly results announcements toshareholders promptly, it is the aim ofthe Board to provide the shareholderswith a detailed analysis, explanation andassessment of the Group’s performance,position and prospects.Following SGX’s introduction inSeptember 2006 of a new requirementfor directors to issue a NegativeAssurance Statement to accompany itsinterim financial results announcement,certain internal procedures have beenput in place to enable each member ofthe Board reviewing the interim financialstatements to immediately raise anymaterial information known to him whichmay render the interim financial resultsto be false or misleading prior to theirrelease to SGX. Should there be anysignificant adverse issue(s) raised by theAudit Committee (AC) or Board memberwhich may affect the results in a materialway, the scheduled date of the resultsannouncement will be postponed to allowtime for investigation or further review.The appointment of auditors is subjectto approval at each AGM. In making itsrecommendations to shareholders onthe appointment and re-appointment ofauditors, the Board relies on the reviewand recommendations of the AC.Directors and key senior executives ofthe Group are prohibited from dealing inST Engineering shares two weeks beforethe announcement of ST Engineering’sfirst quarter, second quarter, third quarterand full year results up to the date of theannouncement of the results. Additionally,all directors of the Group and employeesare reminded not to trade in situationswhere the insider trading laws and ruleswould prohibit trading.The directors’ interests in shares ofST Engineering and its related companiesduring the year are found on pages 86to 98 of this Report.Audit Committee(Principle 11)The AC is supported in its work by theaudit committees of the four businesssectors. The respective chairmen of theaudit committees of the four businesssectors are invited to attend the ACmeetings of ST Engineering so as to havea clear understanding of policies made atthe holding company level and to shareany feedback or raise any issue that thesectors’ audit committees may have.The AC has full authority to commissionand review findings of internalinvestigations into matters where itis alerted of any suspected fraud orirregularity or failure of internal controls orinfringement of any law likely to have amaterial impact on the Group’s operatingresults. It can investigate any matter withinits terms of reference and with the fullcooperation of management.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200939SUMMARY COMPENSATION TABLE FOR THE YEAR ENDED 31 DECEMBER 2009 (GROUP):Name of Director1. Salary$2. Variable$3. Benefits$4. Directors’Fees$5. Share-basedCompensation$Total$6. Taxable Incomefrom exercise ofshare options in2009$Peter SEAH Lim Huat – – – 187,000 57,550 239,550 7,231TAN Pheng Hock 838,676 828,500 164,566(a)576,579 2,408,321 1,500KOH Beng Seng – – – 99,000 29,247 128,247 13,065LG Desmond KUEK Bak Chye – – – 15,000 (b) – 15,000 –Dr TAN Kim Siew – – – 15,000 (b) – 15,000 –QUEK Tong Boon – – – 19,167 (b)(c) – 19,167 –Winston TAN Tien Hin – – – 147,000 (c) 41,512 188,512 13,095Dr Philip Nalliah PILLAI – – – 102,750 (c)(d) 29,638 (d) 132,388 23,250QUEK Poh Huat – – – 132,000 (c) 34,908 166,908 22,440Venkatachalam KRISHNAKUMAR – – – 127,500 34,908 162,408 37,875Davinder SINGH s/o Amar Singh – – – 82,000 27,360 109,360 –Dr Stanley LAI Tze Chang – – – 52,408 (c)(e) 9,435 61,843 –COL CHIA Choon Hoong (Alternateto LG Desmond KUEK Bak Chye)– – – – – – –838,676 828,500 164,566 978,825 841,137 3,646,704 118,4561. Salary includes base salary and employer CPF for the financial year ended 31 December 2009.2. Variable includes AWS, Performance Target Bonus paid & EVA earned* for the financial year ended 31 December 2009.* The EVA earned for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1/3 of the total is paid out, with the balance2/3 carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group havehad individual EVA Bank since the late 1990s. See next page for Individual EVA Bank as at 31 December 2009.3. Benefits provided for employees are comparable with local market practices. These include medical, insurances, car, transport, etc.4. In February 2009, ST Engineering Board endorsed the recommendation of the Executive Resource and Compensation Committee to accept a 10%reduction in the retainer portion of the Directors’ fees for FY2009 for private sector directors.5. Based on the fair values of PSP and RSP Contingent shares granted in 2009, using Monte Carlo simulation model. Contingent shares granted are subjectto key performance indicators (KPIs) being met over the performance period. The performance period for PSP is 2009-2011 and for RSP, it is 2009-2010for TAN Pheng Hock and FY2009 for the Directors. The final number of shares awarded will depend on the extent the KPIs are achieved at the end of therespective performance periods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP.6. Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged tothe income statement.(a) Fees payable to TAN Pheng Hock of $163,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd.(b) Fees for public sector directors are payable to a government agency, the DCAC.(c) Includes fees for directorship in subsidiary(ies).(d) Pro-rated. Dr Philip Nalliah PILLAI resigned as Director on 30 September 2009.(e) Pro-rated. Dr Stanley LAI Tze Chang was appointed Director on 8 October 2009.The following information relates to remuneration of directors of ST Engineering:Number of Directors in Remuneration Bands 2009 2008Remuneration Band$500,000 and above 1 1$250,000 to $499,999 – 1Below $250,000 11 10Total 12 12

40SUMMARY COMPENSATION TABLE FOR KEY EXECUTIVES FOR THE YEAR ENDED31 DECEMBER 2009 (GROUP)Fee$1. Salary%2. Variable%3. Benefits%4. Share-basedCompensation%Total%5. Taxable Incomefrom exercise ofshare optionsin 2009$Between $2,000,000 and $2,250,000Seah Moon Ming 30% 45% 7% 18% 100% 0.00Between $1,750,000 and $2,000,000Chang Cheow Teck 25% 59% 4% 12% 100% 0.00Between $1,000,000 and $1,250,000Lee Fook Sun 32% 49% 6% 13% 100% 8,625Tay Kok Khiang 54% 15% 8% 23% 100% 0.00Between $750,000 and $1,000,000Sew Chee Jhuen 44% 15% 12% 29% 100% 0.00

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009411. Salary includes base salary and employer CPF for the financial year ended 31 December 2009.2. Variable includes AWS, Performance Target Bonus paid & EVA earned* for the financial year ended 31 December 2009.* The EVA earned for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1/3 of the total is paid out, with the balance 2/3carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have hadindividual EVA Bank since the late 1990s. Details of Individual EVA Banks as at 31 December 2008 and 2009 are as follows:Individual EVA Banks as at 31 December 2008 Individual EVA Banks as at 31 December 2009Between $4,000,000 and $4,250,000 Between $3,000,000 and $3,250,000Tan Pheng HockTan Pheng HockBetween $2,500,000 and $2,750,000 Between $2,000,000 and $2,250,000Seah Moon MingSeah Moon MingBetween $2,250,000 and $2,500,000 Between $1,500,000 and $1,750,000Tay Kok KhiangTay Kok KhiangBetween $1,750,000 and $2,000,000 Between $1,250,000 and $1,500,000Sew Chee JhuenSew Chee JhuenBetween $1,500,000 and $1,750,000 Between $1,750,000 and $2,000,000Chang Cheow TeckChang Cheow TeckBetween $1,000,000 and $1,250,000 Between $750,000 and $1,000,000Lee Fook SunLee Fook Sun3. Benefits provided for employees are comparable with local market practices. These include medical, insurances, car, transport, etc.4. Based on the fair values of PSP and RSP Contingent shares granted in 2009, using the Monte Carlo simulation model. Contingent shares granted aresubject to key performance indicators (KPIs) being met over the performance period of 2009-2011 for PSP and 2009-2010 for RSP. The final numberof shares awarded will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of thecontingent grants for PSP and 0% to 150% of the contingent grants for RSP.5. Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged tothe income statement.

42 CORPORATE GOVERNANCEThe Company has put in place a Whistle-Blowing framework, endorsed by theBoard, where staff may, in confidence andwithout fear of retaliation, raise concernsof incidents of possible wrongdoing orbreach of applicable laws, regulationsor policies to the respective chairmenof the audit committees in the Group.As ST Engineering has become a globalcompany with a presence in manycountries, it is aware of the need toapply international corporate governancestandards wherever it operates. Ittakes a serious view of all reports ofviolations received by initiating thoroughinvestigations into each matter.The AC comprises Mr Koh BengSeng as Chairman, Mr VenkatachalamKrishnakumar and Dr Stanley Lai (from8 October 2009). All the members of theAC are independent directors.The AC held seven meetings during theyear. In the meeting in February 2009, AChad private sessions with the external andinternal auditors, without management,before commencement of the meeting.During the year, the AC reviewed andrecommended to the Board the releaseof the 2008 full year, 1Q2009, 2Q2009and 3Q2009 financial statements, andconsidered and approved the 2009 AuditPlan and the 2009 Internal Audit (IA) Plan.It also reviewed the adequacy of internalcontrol procedures including IT securityissues, Interested Person transactionsand the issues raised in IA reports.The AC reviewed the level of non auditservices performed by its externalauditors to satisfy itself that non auditservices performed by the auditors didnot compromise their independenceunder regulatory requirements.The AC also reviewed the performanceof the incumbent external auditors. TheAC had expressed satisfaction with thestandard of audit, independence andobjectivity of the incumbent auditors.As the external audit firm has beenengaged with the Group for 8 yearssince 2002, in the spirit of goodcorporate governance, the AC with theagreement of the Board, embarked onan audit review exercise. A request forproposal exercise was carried out withall the major auditing firms includingthe incumbent external auditors. Afterdue evaluation by the AC, the Boardaccepted the AC’s recommendations fora change of auditors for FY2010 whichwill be proposed to shareholders forapproval at the forthcoming AGM.Internal Control (Principle 12)Internal Audit (Principle 13)The AC oversees and appraises thequality of the Company’s IA function.The Board is ultimately responsiblefor ensuring that a sound system ofinternal controls is in place. The Board,through the AC, the President andCEO and the CFO, considers that theGroup’s framework of internal controlsand procedures is adequate to providereasonable assurance of the integrity,confidentiality and availability of criticalinformation, and the effectiveness andefficiency of operations, safeguarding ofassets and compliance with applicablerules and regulations. It is also satisfiedthat problems are identified on a timelybasis and there is in place a process forbest practices and follow up actions to betaken promptly to minimise unnecessarylapses and for the identification andcontainment of business risks.The IA supports the AC in reviewingthe adequacy of the Company’sinternal controls system. Staffed byqualified auditors, IA has unrestricteddirect access to the AC. The Head ofIA’s primary line of reporting is to theChairman of the AC, although shereports administratively to the CFO ofthe Company.IA plans its internal audit schedules inconsultation with, but independently of,management. The IA Plan is submittedto the AC for approval at the beginningof each year. The AC also meets with IAat least once a year without the presenceof management to gather feedbackon management’s level of cooperationand other matters that warrant AC’sattention. All audit reports are submittedto the AC for deliberation with copiesof these reports extended to therelevant senior management, for promptcorrective actions, as recommended.Furthermore, IA’s summary of findings,recommendations and updates onmanagement’s actions taken arediscussed at the quarterly AC meetings.During the year, IA worked withManagement to align newly acquiredcompanies to the Group’s internalcontrol environment and compliancestandards in order to strengthen the selfregulatingchecks and balances.IA also made periodic visits to overseassubsidiaries to review their operationsto ensure compliance with the internalcontrols framework. An externalaccounting firm was engaged to assistIA. In accordance with its plan, surpriseaudits were conducted in the courseof the year on selected areas includingtreasury activities and reviewing ofdormant bank accounts against bankmandates, bank statements, balances,etc. There were no material issueshighlighted following the surprise audits.There were no significant control issueshighlighted by IA in 2009.The IA continued with its systemof rating a company at the end ofan internal audit for the purpose ofdifferentiating the high risk issues whichrequire immediate attention.Risk Review CommitteeThe Risk Review Committee, chaired byMr Winston Tan, comprisesLG Desmond Kuek Bak Chye,Mr Davinder Singh, Mr VenkatachalamKrishnakumar and Mr Tan Pheng Hock.The Committee maintains oversightof the Enterprise Risk ManagementFramework.The Committee met four times duringthe year to review key business risks,sector level trends, major events andemerging issues and worked withthe management to ensure that theGroup had adequately prioritised andaddressed risk management issueswithin the Group.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200943During the year, the Board adopteda Fraud Risk Management policy toprovide guidance to employees onmanaging the risk of fraud.Budget and Finance CommitteeChaired by Mr Davinder Singh, theBudget and Finance Committeemembers include Mr Tan Pheng Hock,Mr Quek Poh Huat and Dr Tan Kim Siew.Budgets prepared by the respectivesubsidiaries are consolidated at theST Engineering level and presented tothe Budget and Finance Committeefor review and recommendation to theBoard for approval.During the year, the Budget and FinanceCommittee held two meetings to reviewthe FY2009 budget assumptionsand 5-year forecast. The Committeealso met to review the 2010 Plan andrecommended to the Board for approval.Business Investment and DivestmentCommitteeThe Business Investment and DivestmentCommittee comprises Mr Peter Seah asChairman, Mr Tan Pheng Hock,LG Desmond Kuek Bak Chye,Mr Winston Tan and Mr Quek Poh Huat.During the year, the Business Investmentand Divestment Committee held onemeeting to consider an investment bythe Group.ST Engineering maintains a regularlyupdated website which provides the latestSGX announcements, news releases andhighlights of corporate events of eachsector and its capabilities.In 2009, ST Engineering’s investor relationsteam held more than 300 face-to-faceinvestor meetings and conference calls,and participated in investor conferences inSingapore and Hong Kong.ST Engineering is committed to timelydisclosures to ensure that the investingcommunity receives a balancedand updated view of the Group’sperformance and businesses.Board members attended the AGMand EGM in 2009 where shareholderspresent were given an opportunity toseek clarification or question the Boardon issues pertaining to the resolutionsproposed before they were voted on.The external auditors were also presentat the AGM to assist the directors inanswering questions on audit relatedmatters from shareholders. The Groupfully supports the Code’s principleto encourage active shareholderparticipation. More on Investor Relationscan be found on pages 48 to 49.Financial and other information aremade available on the Company’swebsite at www.stengg.com and theseare regularly updated.COMMUNICATION WITHSHAREHOLDERS(Principles 14 and 15)The Company enters into regular andtimely communication with shareholdersas part of the Group’s effort to helpshareholders better understand itsbusinesses and to obtain feedback onthe views and concerns of shareholders.The Group has a comprehensive investorrelations programme aimed at providingexisting and potential investors withcomprehensive and prompt information,to enable them to have a betterunderstanding of the Group’s businesses,direction and performance.

44Human ResourceParticipants at one of our leadership development programmes.Preparing leaders for futurechallenges.ST Engineering places great importance on peopleexcellence because it is critical to the Group’s success.Over the years, a wide suite of programmes has beenput in place to help every employee realise his or herfullest potential.The Group has identified eight leadership competenciesthat are essential for its employees to be effectivein their current as well as future roles. Each of thesecompetencies is mapped across four effectiveness levelsto convey proficiency targets for the four managementlevels: junior, middle, senior and top management.The set of behavioural indicators for each level clearlyillustrates the competency “in action”. In addition, anonline assessment tool, the Leadership EnhAncementPortal (LEAP), allows employees to assess themselveson the eight competencies.ST Engineering encourages employees to take ownership oftheir own personal and career development. In line with this,LEAP includes a learning resource guide to help employeesdraw up their Personal Development Action Plans based onpreferred learning styles and individual needs.The differing abilities and aspirations of employees aretaken into account when assigning tasks andresponsibilities, as well as in their development plans.As the Group expands in an increasingly competitivebusiness environment, it faces various challenges.Assigning the right challenges to the right people is anotherdeliberate strategy to bring out the best in employees whileserving the best interests of the business.As ST Engineering continues to enlarge its global footprint,building a pool of global managers who are effective acrosscultures is a priority. With this in mind, the Group exposesemployees to other cultures through overseas postings andprojects. Executive programmes conducted by renowneduniversities abroad are added opportunities, not only tolearn executive skills, but also to network and gain theinsights and experiences necessary for leading culturallydiverse teams.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200945HUMAN RESOURCE STATISTICSAS AT 31 DECEMBER 2009SECTORAerospace (7,334) 35%Electronics (4,823) 23%Land Systems (6,314) 30%Marine (1,853) 9%Others (including ST Synthesis and ST Dynamics) (682) 3%Total (21,006) 100%JOB GROUPManagerial (1,160) 5%Engineering (6,267) 30%Corporate Function/Admin (3,538) 17%Sales & Marketing (482) 2%Technical & Others (9,559) 46%Total (21,006) 100%EDUCATIONAL QUALIFICATIONDegree & Equivalent (6,037) 29%Diploma & Equivalent (5,259) 25%“O”/“A” Levels & Equivalent (3,427) 16%Secondary Level & Lower (1,593) 8%Trade Certificates (4,690) 22%Total (21,006) 100%NATIONALITYSingaporean/PR (12,033) 57%American (3,364) 16%PRC/Hong Kong (3,365) 16%Danish (409) 2%Indian (246) 1%Malaysian (226) 1%Swedish (188) 1%Others (1,175) 6%Total (21,006) 100%

46Corporate Social ResponsibilityVolunteers shaved off their crowning glory for the Children’s Cancer Foundation.Caring for the environment andthe communityST Engineering is guided by acommitment to conduct its businessresponsibly and a desire to share itsstrengths for the common good. Efforts inthese respects focus on two areas: caringfor the environment and the community.During the year, the Group implementedseveral energy saving initiatives. Theseinclude installing motion sensors incommon areas such as washrooms,using energy saving light emitting diode(LED) lights, fitting water taps with spraythimbles to reduce water usage, and apilot project to harness solar power togenerate electricity. ST Engineering’saerospace facility in San Antonio alsoparticipated in a “Lean, Clean, andEnergy Review” to use less energyto power the lights in its hangars.This was a joint effort with the TexasManufacturing Assistance Centre/Southwest Research Institute.Staff also pitched in to do their bit forthe environment. Over 100 employeesspent two separate weekends cleaningup the Sungei Buloh Wetland Reserveand Pulau Ubin’s Chek Jawa, two naturereserves in Singapore known for their richbiodiversity. As a result, 46 mangrovesaplings were planted and about 65kg ofrubbish was cleared.Similarly, the Group’s employees ledefforts to serve the community. Theyvisited adopted homes and other charities,as well as organised tours, outings andactivities for residents. The charitableorganisations ST Engineering supportsinclude Chen Su Lan Methodist Children’sHome, Children’s Aid Society, ChristaliteMethodist Home, The Moral Home for theDisabled, Spastic Children’s AssociationSchool and Canossaville Children’s Home.Staff also gave generously to charitablecauses. ST Engineering is a strongsupporter of The President’s Challenge,an annual series of community basedactivities and fundraising benefitingmore than 30 charity organisations inSingapore. Six ST Engineering employeesdonated more than money when theyparticipated in “Hair for Hope”. Thisevent organised by the Children’s CancerFoundation invites members of the publicto shave their heads to show support forchildren with cancer.The Group continued to make workplacesafety a priority, and sought to raiseawareness of its importance throughoutthe wider community. For the fifth year,ST Engineering partnered the WorkplaceSafety & Health Council of Singaporeand Singapore’s Ministry of Manpowerto run the annual Safety@Work CreativeAwards. In addition to spreading thesafety message, the Awards are anational platform for students of tertiaryinstitutions to showcase their creativity.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200947Environment, Health & SafetyWe at ST Engineering are committed to“Safety Before Profit”. We believe that “Safety StartsWith Me” and hence we pledge to abide by all safetyrules, stop all unsafe practices and watch out for ourco-workers’ safety. We shall through our diligence andcontinuous improvement efforts achieve our goal of“Zero Accidents”.Safety pledge.Making the workplace cleaner,healthier and saferAs we strengthen our business excellencepractices, ST Engineering takes extraefforts to move up the mark towardsexcellence in Environment, Healthand Safety (EHS). The Group adheresstrictly to EHS standards throughoutthe organisation. The ST EngineeringEHS Statement was introduced in 2009to reinforce our commitment to protectthe environment, health and safety ofour customers, employees and thecommunities in which we operate.To fulfill this commitment, all sectorshave implemented the EnvironmentManagement System certified toISO 14001:2004. The sectors pursuevarious environmental initiatives, relevantto the nature of their business activities.The initiatives include waste minimisation,reduction in toxicity or volume ofhazardous waste, energy conservation,design or use of environmentally friendlyproducts and packaging and the adoptionof clean production technology.As part of the Group’s efforts to promoteOccupational Safety and Health,ST Aerospace, ST Kinetics andST Electronics were certified to OHSAS18001, while ST Marine was certified toDNV’s ISRS (International Safety RatingSystem) Level 8, which is the equivalentstandard for the marine industry.The Group complies with the WorkplaceSafety and Health Act and the SingaporeStandard Codes of Practice, and practisesBehavioural Based Safety. ST Aerospacehas put in place the Framework forHuman Factors (CAAS, EASA and FAA).The business sectors have receivedtheir fair share of awards and accolades.These include Ministry of Manpower’sWSH Practices Awards – OutstandingAchievement awarded to ST Kinetics;Singapore Police Force and Civil DefenceNational Safety and Security WatchGroup Award to ST Electronics; andAssociation of Marine Industries WSHAward to ST Marine.All sectors were recognised as bizSAFEpartners in 2009 and have theirrespective safety programmes, whichinclude Safety and Quality Briefing Notes,Hazards and Near-Miss Reporting,ST Kinetics’ Lean Behavioural BasedSafety and ST Marine’s Target Zeroprogramme. The Group conducts regularcross-sector safety assessments, whilethe sectors organise specific safetyimprovement projects under SafetyImprovement Teams, Kaizen Teamsand others.The Group believes in promoting a safeand healthy lifestyle for its employees.During the year, regular health screeningsand talks were conducted. To encourageactive lifestyles, sports and recreationalactivities were organised in every sector,such as ST Aerospace’s yearly coastalrun, ST Marine’s regular Tools Down Dayand inter-subsidiary competitions.Looking ahead, the Group is workingtowards enhancing its implementation ofSystem Safety Frameworks by promoting,sharing and aligning System Safetypractices in our Group. Our System SafetyCertifications are governed by the Mil-Std-882D, International Maritime Organization(IMO), Standard & Classification SocietyRules for ST Marine; Safety Engineering(Railways System and Equipment) forST Electronics; Fuze Safety (Mil-Std-1316)for ST Kinetics; and the Safety Engineering(Civil Airborne Systems), ARP 4754 & ARP4761 Commercial Standards forST Aerospace.

48Investor RelationsAnalysts visiting ST Electronics’ 3D theatre.Continual EngagementDuring the year, the Group’s investor relations teamheld about 337 face-to-face investor meetings andconference calls, and participated in nine investorconferences in Singapore and Hong Kong. Such effortskeep our institutional shareholders updated on ourbusiness, and promote continued interest in the stock.ST Engineering is well-covered by 18 sell-side analystsand the Group is committed to enhancing theirunderstanding of our business and strategies. Besidesquarterly results briefings and regular meetings, weorganised facility visits to our aerospace, electronics,land systems and marine facilities for analysts duringthe year. These visits provided the analysts withadditional insights into our operations.ST Engineering takes aproactive approach inour investor relations,constantly engaging theinvestment community tokeep them abreast of theGroup’s developments.As part of our outreach to retail investors,ST Engineering participated in the inaugural AsianInvestment Conference & Exhibition in Singapore, andremains a proud sponsor of the Securities InvestorsAssociation (Singapore) (SIAS) Investor EducationProgramme.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200949In line with ST Engineering’s belief in providing timelydisclosures to all investors, all our SGX releases arepromptly posted on our website. Our quarterly resultsbriefings are webcast live, with a channel for viewers topost questions online. The results presentation slidesare also made available on our website.ST Engineering’s commitment to transparency haswon us a Hall of Fame award from SIAS.Investor Relations Calendar Highlights 20091st Quarter 2009• DBS Vickers Pulse-of-Asia Conference Singapore• Live webcast of FY2008 results briefing• Post results investor lunch• Deutsche Bank Access Singapore Corporate Day• Analysts’ visit to ST Aerospace2nd Quarter 2009• Analysts’ visit to ST Electronics, ST Kineticsand ST Marine• 12th Annual General Meeting• Live webcast of 1Q2009 results briefing• Post results investor lunch• Payment of final ordinary dividend of 4.0 cents pershare and a special dividend of 8.8 cents per sharefor the year ended 31 December 2008• CLSA Corporate Access Forum Singapore• Macquarie ASEAN Conference Singapore• UBS Asian Transport Conference Singapore3rd Quarter 2009• Nomura Asian Equity Forum Singapore• SIAS Asian Investment Conference & Exhibition• Live webcast of 2Q2009 results briefing• Post results investor lunch• Citi ASEAN Investor Conference Singapore• Payment of interim ordinary dividend of 3.0 centsper share for first half ended 30 June 2009• CLSA Investor Forum Hong Kong4th Quarter 2009• Fund managers’ visit to ST Aerospace andST Electronics• Live webcast of 3Q2009 results briefing• Post results investor lunch• Morgan Stanley Asia Pacific Summit SingaporeST Engineering Average Share Price and Trading Volume 2009Trading Volume(millions)9080706028 Apr 2009Ex-date for the paymentof 2008 final dividend of12.8 cents per share19 Aug 2009Ex-date for the payment of2009 interim dividend of 3.0cents per shareShare Price($)3.403.203.00502.80402.6030202.40102.200 2.00JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDECPriceVolumeSource: BloombergST Engineering Share Price History2009 2008 2007 2006 2005High $3.25 $3.66 $3.98 $3.30 $2.86Low $2.06 $1.99 $3.10 $2.62 $2.33Average* $2.61 $2.90 $3.59 $2.95 $2.52*Defined as the average closing prices of active trading days for the year

50AwardsST Engineering President & CEO, Tan Pheng Hock, receiving the Finalist award from Mr Arin Jira, Chairman of ASEAN Business Advisory Council at theASEAN-BIS Gala Dinner on 27 February 2009 in Bangkok.ST Engineering is a market leader in many ways,earning plaudits from industry experts, the investmentcommunity and the public sector. The Group continuedits winning ways in 2009, garnering numerous awards.QualityASEAN Business Awards 2008 Finalist in theInnovation Category for Larger Size Companiesby the ASEAN Business Advisory Council – forcontributions to the growth of the ASEAN economy.Asia Talent Management of the Year – awardedto President & CEO, Mr Tan Pheng Hock, at the 8thCNBC Asian Business Leaders Awards for his personalinvolvement in nurturing leadership within the company.IES Prestigious Engineering Achievement Awards2009 – awarded to ST Electronics (Info-Comm Systems)for various breakthroughs in mobile platform designand system integration in its Expandable MobileCommand Hub.Aerospace Industry Excellence Award 2009 bythe Association of Aerospace Industries (Singapore)– awarded to ST Aerospace in recognition of itsoutstanding performance in meeting exactingrequirements of all stakeholders including customers,authorities, investors, suppliers and partners.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200951Aerospace Supplier Excellence Award2009 (Gold Standard) by the Association ofAerospace Industries (Singapore) – awardedto ST Electronics (Info-Software Systems) inrecognition of its strategy and efforts to meet therequirements of the aerospace industry.Aerospace Innovation Leadership Award2009 (Silver Standard) by the Association ofAerospace Industries (Singapore) – awardedto ST Electronics (Info-Software Systems), inrecognition of its innovative strategies to enhancethe aerospace industry.Product ExcellenceShipPax Award 2009 – awarded to ST Marinefor Outstanding Concept in the RoRo category.The award recognises the innovative combinationof functions that allows the City of Hamburg totransport airframe assemblies for the Airbus A380airliner, and at other times to carry up to 800cars.Mr Tan Pheng Hock receiving the Asia Talent Management of the Year Award at the 8th CNBC Asian BusinessLeaders Awards.Innovations 2010 Design and EngineeringAward (Computer Peripherals Product Category),at the International Consumer ElectronicsShowcase (CES) – awarded to ST Electronics(Info-Security) for its DiskCrypt MobileDCM300-128.New Zealand Defence Industry Award ofExcellence – awarded to ST Aerospace for itsinnovative and adaptive engineering design in thefirst-of-its-kind multi-role combination solutiondeveloped for a fleet of two Boeing 757-200aircraft that belonged to the Royal New ZealandAir Force.Defence Technology Prize by Singapore’sMinistry of Defence (MINDEF) – for Trailblazer,a mine clearing vehicle developed jointly byST Kinetics, Defence Science & TechnologyAgency (DSTA) and the Singapore Armed Forces.ST Aerospace received the same award forSkyblade III, a mini unmanned aerial vehicledeveloped jointly by ST Aerospace, DSO NationalLaboratories, DSTA and the Army.Mr Tan Guong Ching, Chairman of ST Aerospace, receiving the New Zealand Defence Industry Award of Excellencefrom New Zealand’s Minister of Defence, Mr Wayne Mapp, for exceptional service to the New Zealand Defence Force.

52 AWARDSCorporate Social ResponsibilityTotal Defence Awards 2009 by Singapore’s MINDEF– ST Marine was one of ten employers conferred theMinister for Defence Awards 2009. Five ST Electronicssubsidiaries, as well as ST Kinetics and four of itssubsidiaries, were presented the DistinguishedDefence Partner Awards. ST Marine, ST Aerospacesubsidiaries – ST Aerospace Services Co andST Aerospace Engines, and ST Electronics(Info-Software Systems) received the MeritoriousDefence Partner Award.Meritorious Home Team Partner Award by theMinistry of Home Affairs – awarded to ST Electronics(Info-Software Systems), ST Aerospace and itssubsidiary, ST Aerospace Services Co, as well asST Kinetics and two of its subsidiaries, for theirsupport and contribution towards National Service,and national safety and security.National Safety and Security Watch Group Award,Individual and Cluster Awards by the SingaporePolice Force (SPF) and the Singapore Civil DefenceForce (SCDF) – awarded to ST Electronics for itsefforts in taking ownership of its safety and securityconcerns at its premises, and working closely withthe Home Team to raise the emergency preparednesslevel of its staff. ST Marine also received theCluster Award.Community Chest SHARE Awards 2009 (Platinum)– The Group received ten Platinum awards, six Goldand four Silver awards for its contribution to andparticipation in the SHARE programme. ST Electronics(Info-Comm Systems) also received the 5-YearOutstanding SHARE Award 2009.People12th Convention for Workplace Safety and HealthInnovations in Marine Industry (Silver Award) –awarded to ST Marine for its well-designed jig thatgreatly reduces safety hazards and lessens cycle timein the hull fabrication process.Workplace Safety & Health Innovation Awards bythe Ministry of Manpower – awarded toST Kinetics and its subsidiary, Ordnance Development& Engineering Company of Singapore (1996).POSB Everyday Champions Award 2009 – inrecognition of ST Electronics’ efforts in building asports culture at work for its employees.CommunicationsThe Group’s 2008 Annual Report “EngagingIdeas, Delivering Promises” received accolades foroutstanding design and editorial. The report pickedup two international awards - the Hermes CreativeAwards (Platinum Award) and the Gold Award atthe 2009 International ARC Awards Competition(Multi-industry – Products & Services).Most Transparent Company – Hall of Fame Award– by Securities Investors Association (Singapore),since 2005.2009 WebAward for Outstanding Achievement inWeb Development by the Web Marketing Association– awarded to US subsidiary, iDirect, for its website inthe category of “B2B Standard of Excellence”.Associate of the Arts Awards by the National ArtsCouncil, Singapore – awarded to ST Engineeringin recognition of its valuable contributions towardsthe promotion and organisation of arts activities inSingapore.

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

54Group OverviewGroup Vision, Mission, Objectives & ThrustsGROUP VISIONBe a global defence and engineering groupGROUP MISSIONBring value to our customers and partners bydelivering total integrated quality solutions andsupport4 STRATEGIC OBJECTIVES• Enlarge Strategic Capabilities• Expand Global Networks• Embrace Partnerships• Enhance Business ExcellenceKEY PERFORMANCE INDICATORS• Customer Satisfaction• Customer Acceptance Rate• Turnaround Time Compliance• Employee Satisfaction• Innovations / New Products,Services or Capabilities• Sales and Profit Growth• Return on Equity• Economic Value Added6 STRATEGIC THRUSTS• Customer Focus• Safety & Quality First• People Excellence• Technology Edge• Operational Excellence• Financial StrengthThe ST Engineering Group was established in1997 with the amalgamation of four public listedcompanies – ST Aerospace, ST Electronics,ST Automotive and ST Marine. In 2000, with theacquisition of Chartered Industries of Singapore,ST Automotive merged with the acquired group ofcompanies to form ST Kinetics.Headquartered in Singapore, ST Engineeringhas grown its staff strength to over 20,000 andhas more than 100 companies and associatedcompanies spanning 24 countries and 42 cities.Building on the substantial capabilities andexperience of each of the four sectors,ST Engineering has since leveraged synergies,critical mass and cross-marketing to expand itspresence. Today, ST Engineering is recognisedas a significant player in the global marketplace,and provides integrated defence and commercialengineering solutions and services to its extensiveinternational customer base.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200955Staying On CourseAmidst the challenging environment resulting from the globalfinancial crisis, ST Engineering put in a steady performance.The Group’s healthy financial position,multi-market exposure and diversifiedcapabilities allowed it to consolidate itsstrengths while seizing opportunities alongthe way.Visibility from StrongOrder BookThe Group continues to build on its orderbook momentum, which at the end of2009 stood at $10.3b. Such strongshowing signals continuing strength inwinning contracts and, with typically 60-70% of each year’s revenue derived fromits order book, provides good visibility forits stakeholders.Stability from Government-Related ProjectsSignificant among the contract wins in2009 were the multitude and diversity oflocal and overseas government-relatedprojects, providing added resilience to theGroup’s performance.In Singapore, the Electronics sector willprovide the Singapore Armed Forces (SAF)with the Advanced Combat Man System,provide the Expressway Monitoring &Advisory System on major arterial roads tothe Land Transport Authority (LTA), createand operate the first Virtual World for theinaugural Singapore 2010 Youth OlympicGames for the Infocomm DevelopmentAuthority (IDA), transform SingaporeCivil Defence Force’s (SCDF) emergencycall-taking system into a new-generationcommand and control system, andprovide the Singapore Police Force (SPF)with a 3rd Generation command andcontrol system. The Marine sector willprovide logistics management of Republicof Singapore Navy’s (RSN) warehousesat Changi and Tuas Naval Bases, andthe Group’s subsidiary, ST Synthesis,will provide maintenance services on theelectrical and mechanical systems of theKallang-Paya Lebar Expressway (KPE).During the year, the Land Systems sectordelivered the Terrex 8x8 Infantry CarrierVehicles and Trailblazer CountermineVehicles to the SAF.The Group was also successful in winningoverseas government-related projects.The Electronics sector strengthenedits foothold in the China rail systembusiness, winning contracts to provide anIntegrated Supervisory Control Systemand Platform Screen Doors for China’sGuangzhou-Foshan Line. It will alsoprovide a Container Terminal ManagementSystem and a Management InformationSystem to the Chittagong Port Authority ofBangladesh, and Security EnhancementServices to the Central Bank of Oman.The Land Systems sector continued towin contracts for its 40mm ammunition,including with the UK Ministry of Defence(MOD) and the Swedish Defence MaterielAdministration. The Group’s US subsidiary,VT Miltope, won a US$500m contract tosupply its MSD-V3 system to theUS Army.The Group’s overseas successes alsoincluded achieving new market access.The Electronics sector secured a contractto install a Tower Simulator for theTanzania Civil Aviation Authority, its firstproject in Tanzania, while the Land Systemsector’s US specialty vehicles subsidiary,VT Leeboy, won a contract to supply itsbituminous paver to the US Army, its firstever military contract.Improving and Readying forthe FutureAlthough certain segments of the Group’sbusiness were slightly more affected bythe crisis, their continuing innovationand relentless pursuit of new businessmitigated the impact.The Aerospace sector turned in arespectable performance, consideringthe turmoil in the aviation industry and theinitial learning curve for its 87-unit FedExPassenger-to-Freighter (PTF) contractwhich impacted results in the first half ofthe year. The sector continued to expandits suite of offerings that include capabilityfor CFM56-5B engines and signing a20-year agreement to serve as a GEapprovedOn-Wing Support provider forthe GEnx-1B and GEnx-2B engines. Thesector won many new customers duringthe year, particularly for its Maintenance-By-the-Hour (MBH TM ) solution. Its growthplans remained on track, with its Pudonghangars in Shanghai ready by early 2010,and the fourth of its Panama hangars tobe commissioned in 2010. Its Xiamenengine facility is also expected to be readyby 2010.The Land System sector’s specialtyvehicles segment continued to feel theeffects of the crisis as the US housingmarket has yet to recover. It looks to othermarkets to grow sales, and has formeda joint venture to extend its reach intoLatin America. It seized opportunitiesin non-housing related markets, and itsUS subsidiary, VT SVC, scored its singlelargest order of 248 units of its innovativehybrid refrigerated truck bodies. China’sspecialty vehicles market has continuedto show strong demand and the sectorstrengthened its presence there withthe acquisitions of Zhenjiang HuachenHuatong Road Machinery Co., Ltd. andZhenjiang Huatong Aran Machinery Co.,Ltd. Looking to green vehicles for futuregrowth, the sector launched the world’sfirst hybrid hydraulic drive enhanced portprime mover as well as Singapore’s firstcommercial diesel-electric hybrid bus.The Group made small but strategicacquisitions during the year, furtheraddressing gaps and buildingcapabilities. The Group’s US subsidiary,VT iDirect, acquired Parallel Limitedand the remaining 51% equity stake inXimaera Technologies Canada, Inc. Theacquisitions provide iDirect additionalresources to develop and integrate newtechnologies. The Aerospace sectoracquired Precision Products SingaporePte Ltd, which manufactures casting andmould toolings, to support ST Aerospace’sbusiness. The Group also acquired a 33%interest in Singapore Airshow & EventsPte Ltd and became its single largestshareholder, further aligning the Airshow’sinterests with that of the Group, theAirshow’s anchor exhibitor.The Group closed the year on a positivenote, continuing to prove its resilience anddiligently planning for growth ahead.

56 OPERATING FINANCIAL REVIEWPerformance Of The Groupa) Half yearly performance2009 2008In $m Except Per Share Amounts 1H 2H FY 1H 2H FYTurnover 2,727 2,821 5,548 2,616 2,729 5,345EBITDA 292.7 356.5 649.2 358.9 309.0 667.9EBIT 214.6 271.8 486.4 284.0 225.1 509.1Profit before tax 250.6 296.0 546.6 307.5 233.2 540.7Profit after tax and minority interests 193.9 250.0 443.9 242.5 231.1 473.6Basic earnings per share (cents) 6.46 8.32 14.78 8.12 7.70 15.82Net asset value per share (cents) 46.69 52.09 52.09 47.04 52.71 52.71Note: The half yearly figures are unauditedThe Group turnover for 2H2009 of $2,821m wascomparable to that achieved in the first half. Land Systemssector reported higher turnover, Electronics and Marinesectors had comparable turnover while Aerospace sectorhad lower turnover vis-à-vis 1H2009.The Group Profit Before Tax (PBT) for 2H2009 increasedby 18% or $45.4m over the first half. All sectors recordedhigher PBT in 2H2009 compared to 1H2009.HALF YEARLY TURNOVER ($m)2,8212,7292,6162,727HALF YEARLY PROFIT BEFORE TAX ($m)307.5296.0250.6233.21H082H081H092H091H082H081H092H09

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200957b) Full year performanceTurnover by SectorThe Group turnover of $5,548m for FY2009 wascomparable to that of FY2008. Both Electronics andMarine sectors reported higher turnover, Aerospacesector had comparable turnover, while Land Systemssector had lower turnover vis-à-vis FY2008.Turnover by Geographical AreasA review of the Group turnover by geographical areasis as follows:$m21%17%3%6,0005,0004,0003,0003,3384,4865,0515,3455,5482,00034%1,00025%Aerospace Electronics Land SystemsMarine Others005 06 07 08 09FYAsia USA Europe OthersProfit Before Tax by SectorGroup PBT for FY2009 of $546.6m was comparableto that of FY2008. Except for the Aerospace sector,all sectors recorded higher PBT compared toFY2008.Earnings Per Share (EPS)The Group’s basic and diluted EPS for FY2009 were14.78 cents and 14.74 cents respectively (FY2008:15.82 cents and 15.74 cents respectively). The lowerEPS was a result of lower profit after tax for FY2009.17%19%1%cents1813.641515.1516.95 15.8214.7812942%621%3Aerospace Electronics Land SystemsMarine Others005 06 07 08 09FY

58 OPERATING FINANCIAL REVIEWEconomic Value Added (EVA)The Group EVA for FY2009 was $304.8m, a decrease of 15% or $53.1m over FY2008. The WeightedAverage Cost of Capital was 6.1% for 2009 (2008: 6.2%).FY2009 EVA CONTRIBUTION BY SECTOR (%)48%22%13%22%(5%)Aerospace Electronics Land Systems Marine OthersCapital ExpenditureThe Group incurred capital expenditure of $277m in FY2009 (FY2008: $191m). The bulk of the capital expenditureincurred was on the Jalan Boon Lay facilities redevelopment in the Land Systems sector, as well as build up ofXiamen facility, purchase of spare engines and programme-related purchases, including rotable components tosupport existing and new customers for MBH TM programmes in the Aerospace sector. The details are shown inNote 12 to the Financial Statements.CAPITAL EXPENDITURE ($m)FY09277081910 40 80 120 160 200 240 280 320Aerospace Electronics Land Systems Marine Others

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200959Total AssetsAs at end December 2009, total assets of the Group grew 15% to $6.89b compared to $5.99b as atend December 2008. The deployment of assets is as follows:TOTAL ASSETS DEPLOYMENT ($m)8,0006,0004,5665,5786,0505,9936,884Bank Balance, Funds underManagement and Short-TermInvestmentsDebtors, Deposits & Prepayments4,000Stocks & WIP2,000Intangibles & Other Assets0Property, Plant & Equipment05 0607 0809FYTotal Liabilities and Shareholders’ Funds (Capital Employed)Capital employed as at the end of 2009 was $6.89b, an increase of $892m over 2008. Details of capitalemployed are as follows:TOTAL LIABILITIES OWED AND CAPITAL INVESTED ($m)8,0006,0005,5786,0505,9936,884Bank & Other Borrowings4,566Other Liabilities4,000Creditors and Accruals2,000Advance Payments from Customers005 0607 0809FYEquity

60 OPERATING FINANCIAL REVIEWShareholder ReturnReturn On EquityCompared to 2008, the Return On Equity was lower by1.7 percentage point to 28.3% in FY2009, as a result oflower profit after tax and minority interests.RETURN ON EQUITY (%)403030.828.426.530.028.3Dividend, Dividend Per Share (DPS) and Earnings PerShare (EPS)The proposed dividend for FY2009 of $399.5m(which includes the interim dividend of $90.1m paid inSeptember 2009) is lower than the FY2008 dividend of$474.3m. The recommended FY2009 dividend took intoconsideration the Group’s present cash position, positivecash flow generated from operations, and projectedcapital requirements. Payment of the dividend is subjectto the approval of the shareholders of the Company at thecoming AGM. The proposed 2009 dividend of $399.5mrepresents 90% of the earnings for FY2009.2010005 06 07 08 09FYDIVIDEND / EARNINGS PER SHARE (cents)Total Shareholder Return for ST Engineering SharesST Engineering paid an interim ordinary dividend of3.00 cents per share to shareholders in September 2009and declared a FY2009 final dividend of 10.28 cents pershare. The dividend per share amounts to 13.28 cents.20151013.6413.6015.1515.1116.9516.8815.8215.8014.7813.28To maximise shareholder value, management will continueits policy of paying a high level of dividend to returnexcess cash generated from its operations, providedthe cash is not required for major investments in thefuture. These investments may include potential mergersand acquisitions and the building of new facilities andcapabilities to expand the existing operations.5005 06 07 08 09FYEPS DPSST Engineering share price ended the year at $3.25,37.1% above the share price a year ago. Over the sameperiod, the STI Index surged 64.5%. For 2009,ST Engineering shares generated a total shareholderreturn of 41.8% for its shareholders. This consists of 4.7%of dividend yield and 37.1% of capital gain.TOTAL SHAREHOLDER RETURN (%)6040200(20)5.222.75.17.74.921.85.2(36.8)4.737.1(40)05 06 07 08 09FYCapital Gain Dividend Yield

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200961Prospects For 2010Following the most severe global economic downturnin recent history, the global economy staged a gradualrecovery from the second half of 2009, resulting in aglobal economic contraction of -0.8% for 2009 (Source:International Monetary Fund [IMF]). In its 26 January2010 World Economic Outlook Update, the IMF revisedits 2010 world growth forecast to 3.9%, up from itsforecast of 3.1% made in October 2009. However, theIMF cautioned that recovery is still very much based ongovernment stimulus policies and that countries risk areturn to recession if anti-crisis measures are withdrawntoo soon. We believe that there are other factors thatmay potentially derail the economic recovery, includingthe flaring up of geo-political tensions in the Middle East,terrorism and the level of oil prices, which in 2009 climbedfrom USD40’s to USD70’s per barrel.The Group continued to secure contracts and ended2009 with an order book of $10.3b, reflecting itsoperational resilience supported by its diversity inbusiness, geographies as well as the customerbase of both government agencies and commercialcompanies. A healthy order book affords the Group theoperating leverage to weather uncertainties. Althoughmany countries were out of the recession by the endof 2009, downside risk remains as most governmentsare expected to remove stimulus packages andtighten monetary policies in 2010. Barring unforeseencircumstances, the Group expects to achieve a higherturnover and comparable PBT for FY2010 compared toFY2009.The lower fuel prices in 2009 compared to 2008 gavea life-line to many of the airlines that were on the vergeof bankruptcies, and reports point to expectations of arecovery of the industry in 2010. We believe that LowCost Carriers’ business model of low capital expenditure,as well as increasing cost pressures experienced by thelegacy airlines, will continue to drive the MRO outsourcingtrend. In 2010, the Aerospace sector will continue tofocus on airframe heavy maintenance and modificationwork, delivering the Passenger-To-Freighter conversionand military contracts, commencing airframe MROoperations at Pudong International Airport in Shanghai,developing an engine facility in Xiamen, China to expandits MRO capacity in CFM56 engines, developing GEnxOn-Wing Support services utilising GE material andGE-approved repair processes for its global customersfrom its facilities in Singapore and the US for theBoeing 787 aircraft, and continuing to extend its TotalAviation Support offerings to airlines globally. Thecapabilities and capacities build up is a continuingprocess to strengthen the foundation for growth of theAerospace sector.In 2010, the Electronics sector will focus on delivering thevarious projects in its order book. Key contracts includethe Circle Line MRT project in Singapore, Taiwan andChina MRT projects, a software system project, anda managed services project. The sector will continueto sharpen its core capabilities, focus on growing its‘Services’ revenue, and tap the new market opportunitiesin e-Government, satellite communications and interactivedigital media.The Land Systems sector will continue deliveries of theWarthog to the UK MOD, the Terrex to the SingaporeArmy, as well as other munitions, weapons and specialtyvehicles in 2010. The Warthog project is significant inpositioning the Land Systems sector as a key player inthe global defence marketplace. Building on its successin markets like the UK and Gulf States, the sector willcontinue to develop and pursue new opportunities. For itsnon-defence business, the sector will continue to reviewits commercial specialty vehicles business operations,diversify into new markets and product segments whileleveraging global sources of supplies to lower its cost.The Marine sector continued to secure variousnewbuilding contracts in 2009. The healthy order bookwill keep the yards in Singapore and the US busy in 2010.The sector will continue to pursue business opportunitiesin the naval and government industries and concurrentlyfocus on delivering its commitments to the customers.For shiprepair in Singapore yards, we expect the subduedshiprepair market to continue into 2010 following thesoftening of the global shipping market in 2009.In 2010, the Group will intensify its efforts in search ofsuitable acquisition opportunities and seek collaborationswith partners and OEMs to better position the Groupto take advantage of the current gradual recoveryand expected future growth in the global economy.Concurrently, the Group will work closely with customersto address their changing needs in order to stay relevantin the current economic climate.

62AEROSPACEThe Aerospace sector enhanced its global MRO networkof airframe, component and engine services to servecustomers better.STEADY PERFORMANCE DURINGCHALLENGING TIMESRevenue for the Aerospace sector was comparableto 2008 despite the global economic and aviationdownturn. This resulted from a strong and diversifiedcustomer base, new and wide spectrum ofcapabilities, as well as competitive and integratedservice offerings.ST Aerospace enjoyed continued support from theworld’s largest airlines and air freight operators,and won new customers such as Aero República,Air Seychelles, Air Transat, Airbridge Cargo, ApolloAviation, Arrow Cargo, Asiana Airlines, AvborneComponent Repair Services, Kingfisher Airlines,Shanghai Airlines Cargo, SpiceJet and WorldwideHoldings. Many customers expanded the scope oftheir relationship with ST Aerospace. For example,Juneyao Airlines, a customer on the componentMBH programme, added airframe maintenanceand pilot training services.Strengthening its position as an integrated servicesprovider, ST Aerospace added significant newcapabilities including CFM56-5B engines as anew product range for its engines business and tocomplement services for Airbus A320 customers.Likewise, new components repair and overhaulcapabilities enhanced the level of service tocustomers on MBH programmes, while landinggear capabilities were broadened to include Airbuslanding gears.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200963Business interests in commercial and militaryaviation enable ST Aerospace to leverage dual usecompetencies and technologies, and the abilityto offer a wide range of products and services.ST Aerospace continues to enhance its globalmaintenance, repair and overhaul (MRO) network toserve customers better, and invest in the training ofnew and existing employees to assure its quality ofservice to customers as it grows.Aircraft Maintenance & ModificationST Aerospace’s mainstay facilities in China, Panama,Singapore, Mobile (Alabama) and San Antonio inthe US supported major airframe customers – largeand small – All Nippon Airways (ANA), Delta Airlines,FedEx Express, Japan Airlines, UPS, US Airways andmany other airlines.It signed its second contract with Copa Airlines,covering a fleet of 28 Boeing 737NG, 15 EmbraerE190 aircraft, and another 11 E190 aircraft fromCopa-owned Aero República in Columbia. The fourthhangar is expected to be commissioned by early 2010.Left to right:ST Aerospace continued to enhance its integratedservice offerings.Redelivery of the 100th L382 aircraft to LyndenAir Cargo.ST Aerospace in Madrid redelivered 30 landing gearsin its first year of operations.ST Aerospace enjoyed continued supportfrom the world’s largest airlines and airfreight operators.

64AEROSPACEOngoing enhancement ofST Aerospace’s global MRO networkinvolves expanding into cost efficientlocations to serve customers better.In April, ST Aerospace celebratedredelivery of its 100th L382 aircraft toLynden Air Cargo, an Alaskan aircargo charter and transport companythat operates a fleet of six Herculesaircraft. This milestone demonstrates thevalue that ST Aerospace places on allits customers.Showing the same dedication to defencecustomers, ST Aerospace increasedsupport for the outsourcing needs ofthe Republic of Singapore Air Force(RSAF). It also refurbished two (of fourcontracted) C130 aircraft from theIndonesian Air Force.ST Aerospace received recognition fromthe Defence Industry Committee of NewZealand for its innovative and adaptiveengineering design, winning ST Aerospacethe Defence Industry Award of Excellence.The work involved a quick-change, multirolefreighter conversion and avionicsmodifications programme for RNZAF ontwo Boeing 757-200 aircraft.The year saw ST Aerospace completea system full-flight acceptance testfor an Unmanned Aerial Vehicle(UAV) programme and satellitecommunications on the Super Pumafor the RSAF. In addition, ST Aerospacebeefed up its capability for more militaryplatforms such as the Chinook, Apacheand F15 Eagle aircraft.Ongoing enhancement of the group’sglobal MRO network involves expandinginto cost efficient locations to servecustomers better. Its new hangar atPudong International Airport in Shanghai,China, is expected to be ready foraircraft induction by first half of 2010.Component & EngineTotal SupportWith the newly launched CFM56-5Bproduct line, ST Aerospace now has thefull spectrum of -3, -5B and -7B enginesthat power the Airbus A320 and Boeing737 aircraft.It also broke ground for its secondengine facility near Xiamen GaoqiInternational Airport in Xiamen, China.The new facility is scheduled tocommence operations in 2010, providingMRO and integrated engine services forthe CFM56-5B and CFM56-7B engines.Balancing its portfolio for commercialengine services with a mix of matured,new and future engine lines,ST Aerospace continues to seekstrategic cooperation with OriginalEquipment Manufacturers (OEM) andairlines to develop new competenciesand increase value creation throughparts and accessories repair.During the year, it embarked on a 20-yearagreement with GE to serve as a GEapprovedOn-Wing Support provider for theGEnx-1B and GEnx-2B engines that powerBoeing 787 and 747-8 aircraft. Preparationsfor the On-Wing Support service areunderway, and require ST Aerospaceto invest in the set up of capabilities,leveraging its global MRO network andclose relationships with many airlines thathave ordered GEnx-powered aircraft.In its components business, ST Aerospaceadded about 400 new repair capabilitiesto support its MBH programmes for theBoeing 737NG, 757, Airbus A320 as wellas for A330 and military aircraft. It also builtnew test facilities for the newer generationof aircraft.In March, Boeing Integrated DefenseSystems recognised ST Aerospace asa Boeing MRO centre for the CH47Chinook engine transmission.This positions ST Aerospace toundertake more work for otherBoeing military aircraft components.Its military service capability on theChinook transmission will be part of thecapabilities Boeing can tap to supportusers of its Chinook helicopters.To enhance its integrated serviceofferings, ST Aerospace continued toadd more service centres and othercollaborative agreements with variouscomponents and aircraft OEMson military and commercialST Aerospace in Panama successfully redelivered itsfirst E190 and expanded its contract with Copa Airlines.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200965Left to right:Groundbreaking for a second engine facility inXiamen, China.ST Aerospace completed the quick-change Boeing757-200 combi conversion programme for RNZAF.products. Agreements were signed withAmfuel, Astronautics, DAe, Eaton, Moog,MRO Aerospace, Revue Thommen,Rockwell Collins, Ruag Aerospace andThales, among others.Since commencing operations in Madridin late 2008, ST Aerospace has seen itslanding gear component business takeoff. Having inducted its first Airbus A320landing gear inputs and secured theSpanish DGAC and EASA certificationsin its first year, it successfully delivered 10shipsets of landing gears in 2009 alone.It also secured its first external airlinecustomer, SriLankan Airlines. It is nowembarking on building capabilities for theST Aerospace’sinnovative andadaptive engineeringdesign won it thedefense industryaward of excellence.A330/340 landing gears, complementingits MRO offering for A320 landing gears.Its components and engines MBHsupport programmes continue to growin popularity among operators of theBoeing 737 and Airbus A320 familyof aircraft. Initially tailored for start-upairlines and low cost carriers, the MBHsolution achieved some success withtraditional airlines too. Over the year,ST Aerospace clinched new contractswith Cimber Sterling, Jeju Air, Primera Airand Shanghai Airlines.Half Yearly PerformanceTurnover of the Aerospace sector in2H2009 of $916m was 4% or $40mlower compared to 1H2009. This wasdue to lower turnover in the AircraftMaintenance & Modification (AMM) andthe Component/Engine Repair & Overhaul(CERO) business groups, partially offsetby higher turnover in Engineering &Materials Services (EMS) business group.The reduction in AMM turnover wasmainly due to lower redeliveries in theUS operations, which was partially offsetby higher redeliveries in the Singaporeoperations. Despite higher componentssales in 2H2009, CERO’s turnover in2H2009 was lower than 1H2009 due tohigh engines inputs in 1H2009. In EMS,all the companies contributed to theturnover increase.PBT for 2H2009 at $127.6m was higherthan that in 1H2009 by 27% or $27.0mmainly due to improved profit on the 757freighter conversion programme and lowerallowance for doubtful debts.Full Year PerformanceAerospace sector’s FY2009 turnoverof $1,872m was comparable to that ofFY2008. The lower turnover in AMM andCERO was largely offset by higher turnoverin EMS. AMM’s lower turnover was due tothe redeliveries of two high value multi-role757-200 aircraft to Royal New Zealand AirForce (RNZAF) in FY2008 and fewer MD11freighter conversion redeliveries in FY2009,but these were partially offset by more757 freighter conversion redeliveries.Reduced components sales, partiallyoffset by higher engines sales, accountedfor the lower turnover in CERO. All thecompanies in EMS contributed to thehigher turnover.PBT of the Aerospace sector in FY2009of $228.3m was lower than FY2008 by16% or $43.8m. The lower PBT wasmainly due to fewer MD11 freighterconversion redeliveries and absenceof investment income, but these werepartially offset by more 757 freighterconversion redeliveries.Acquisitions & DivestmentsThe acquisition of Precision ProductsSingapore Pte Ltd was completed in Mayto support ST Aerospace’s business.Precision Products Singapore is a playerin the precision investment castingindustry and manufactures casting andmould toolings.Major Projects2009 saw more redeliveries ofST Aerospace’s freighter conversionprogrammes.The programme for FedEx, with fourconversion lines − three in Mobile, US, andone in Singapore − is producing aircraftto meet contracted deliveries. Thirteenaircraft were redelivered in 2009.Two converted Boeing 767-300 aircraftwere redelivered to ANA during the year,bringing the total to four of the sevenordered for ANA’s fleet. Backlog includesanother ten firm orders from Boeingfor Q-Aviation.Two MD11s were redelivered, as thissuccessful programme draws to agradual close, having converted mostMD11 aircraft in operation.Major milestones for ST Aerospacecommercial pilot training were thegraduation of its first cohort of 16 cadetpilots from launch customer ShenzhenAirlines, and the launch of a beta trialof its Multi-crew Pilot Licence (MPL)curriculum with Tiger Airways.

66ELECTRONICSThe Electronics sector grew its business internationally, winninge-Government, rail electronics, communications and simulationprojects around the world.SEIZING OPPORTUNITIES TO EXPANDGLOBAL REACHST Electronics continues to grow its global reach,providing its solutions to customers in more than80 countries worldwide.The company made inroads into new markets,winning contracts in Bangladesh and Tanzania. Itsthree business groups were awarded contracts in theareas of rail electronics, intelligent transportation andinteractive digital media.Large-Scale Systems GroupBuilding on its strong track record in rail projects, theLarge-Scale Systems Group (LSG) secured severalMass Rapid Transit (MRT) contracts including anAutomatic Fare Collection System and PassengerInformation Display System in Thailand; a train-borneCommunication System in Hong Kong; andIntegrated Supervisory Control and Platform ScreenDoor Systems worth about $23.7m for China’sGuangzhou-Foshan Line.In Singapore, ST Electronics’ mechanical andelectrical systems including Communications,Integrated Supervisory Control and Platform ScreenDoor systems went live when part of the Circle Linewas opened in May 2009. New MRT lines plannedfor the Thomson and Eastern regions will presentnew opportunities.Artist’s impression of the Singapore 2010 YouthOlympic Games Virtual World. The actual design maydiffer from illustration.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200967LSG continued to win contracts to provide securityand monitoring solutions. These included anIntegrated Security Management System for thenew Khoo Teck Puat Hospital and a pre-paid cardsystem for the Nanyang Technological University’sHalls of Residence.A contract was also secured to supply aMeteorological Weather Radar system to theNational Environment Agency.A model of ST Electronics’ Venus, an advancedUnmanned Surface Vehicle, was unveiled at theInternational Maritime Exhibition (IMDEX) Asia in May.The full-sized 9-metre long Venus was showcased atthe Singapore Airshow 2010.LSG continues to target new markets suchas Vietnam, India and the Gulf States whilestrengthening its presence in China andSingapore for its transportation and intelligentbuilding businesses.Left to right:Advanced Combat Man System for the SingaporeArmed Forces.The 11-metre Ku-Band Antenna System atSingTel’s Seletar Earth Station in Singapore.ST Electronics continued to grow itsglobal reach, PROVIDING Its solutions TOOVER 80 countries worldwide.

68ELECTRONICSThe Company made inroadsinto new markets,winning contractsin bangladeshand tanzaniaCommunication & SensorSystems GroupThrough Telematics Wireless,ST Electronics strengthened itscapabilities in traffic management, wirelessdata communication and sensor networksfor wireless transmission of information forremote monitoring and control.The Communication & Sensor SystemsGroup (CSG) won a $6.8m contractto provide Integrated Security, ITInfrastructure and Carpark Guidanceand Payment Systems to Resorts WorldSentosa, bringing its total involvement inthe project to $92.8m.Meeting the growing demand for urbantransportation, CSG secured a $40mcontract from Singapore’s LTA to extendthe Expressway Monitoring & AdvisorySystem to six major arterial roads thatserve as alternative routes to expressways.In the area of satellite communications(satcoms), the company’s 11-metreKu-Band antenna system wassuccessfully commissioned by SingTelat its Seletar Earth Station in June. Thesystem monitors and carries commercialtraffic on SingTel satellites.AT&T implemented a revolutionarytechnology from ST Electronics thatenables continuous reception ofvideo services on-the-move for in-carentertainment in the US.iDirect, ST Electronics’ satcomscompany in the US, upgraded itsEvolution operating software, unveilingiDX 2.0 with several advances inperformance, efficiency and flexibility.iDirect and Panasonic Avionicsdeveloped in-flight broadband,eXconnect, and through Lufthansa,now offer broadband connectivity to50 aircraft.In June, iDirect GovernmentTechnologies successfully demonstratedthe capabilities of several military-gradesatcoms technologies at the US JointUser Interoperability CommunicationsExercise at Fort Monmouth, New Jersey.iDirect Asia won a contract fromChina National Petroleum Corporationto provide a satellite-based InternetProtocol communications network tocover remote sites across China.Software Systems GroupThe Software Systems Group (SSG)continued to grow its interactivemedia, simulation and e-Supply ChainManagement solutions.In June, the IDA awarded ST Electronics acontract to provide a virtual world, the firstof its kind, to be used for the inauguralSingapore 2010 Youth Olympic Games.SSG secured its first project in Tanzaniafor the installation of a Tower Simulator forthe Tanzania Civil Aviation Authority.The Chittagong Port Authority ofBangladesh awarded ST Electronics ane-Supply Chain Management project forContainer Terminal Management andManagement Information Systems.ST Electronics will also be implementingfor the Singapore Land Authority,a Singapore Titles AutomatedRegistration System that will facilitatemore efficient searches, lodgementsand registration of properties. SSG wasawarded a project to provide the RSNwith education and training services anda training ship.The company’s US simulation arm,VT MÄK (MÄK), won the US ArmyProgram Executive Office for Simulation,Training and Instrumentation’s OmnibusContract in July to provide simulation,training and instrumentation productsand services for the warfighter. It alsolaunched its VR-Vantage product forthe development of out-the-window 3Dviews, for after-action review of scenarios,or to create customised applications.Yview, a customisable Cave-like virtual reality systemfrom Antycip Simulation.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200969Left to right:Rail electronics system for Bangkok, Thailande-Supply Chain Management project forChittagong Port Authority, BangladeshAntycip Simulation, ST Electronics’European subsidiary, won a contract inApril from VTI, the Swedish NationalRoad and Transport Research Institute,to upgrade an existing driving simulatorprojection system. In May, AntycipSimulation launched MyModels, aconfigurable high fidelity modelling toolkitthat allows the quick generation of highfidelity models in simulation applications.MyModels is integrated with MÄK’sVR-Forces and can be integratedwith other Computer GeneratedForces software.Half Yearly PerformanceThe 2H2009 turnover of $687m recordedby the Electronics sector was comparableto that of 1H2009. The increase in salescame largely from LSG which was offsetby lower sales in CSG.PBT of $60.7m for 2H2009 washigher than that of 1H2009 by 11% or$6.1m. The increase in PBT was mainlycontributed by CSG and SSG, but thiswas partially offset by lower PBT in LSG.While operating expenses for 2H2009was higher, CSG recorded higher PBTin the same period due to favourablesales mix. SSG’s higher profit was mainlydue to favourable sales mix and share ofhigher profit from associated companies.LSG‘s lower PBT was mainly due tohigher operating expenses.Full Year PerformanceFY2009 turnover of $1,371m for theElectronics sector was higher thanFY2008 by 20% or $228m. All threebusiness groups achieved higherturnover for the period. LSG recordedhigher turnover with milestonecompletions for the Circle Line projectfrom the LTA, half height platformscreen doors project, and MRT projectsin Taiwan, Guangzhou and Bangkok.CSG’s higher turnover was the result ofmilestone completions for the IntegratedResort project and a communicationproject, as well as sales of satcomsproducts and electro-optics equipment.Turnover in SSG was higher with themilestone completions of a softwaresystem project, simulator projects andmanaged services sales.PBT of the Electronics sector in FY2009of $115.3m was higher than FY2008by 23% or $21.4m. The higher PBTwas mainly due to higher turnover andthe impact of an impairment in valueof quoted investments in FY2008 of$18.7m. These were partially offset byhigher operating expenses.Acquisitions & DivestmentsRipple Systems Pty Ltd was liquidatedas a result of an ongoing businessreview to streamline capabilities andoptimise resources. The liquidation wascompleted in September.ST Electronics acquired additionalequity stakes in MÄK and DataMarkTechnologies Pte Ltd (DataMark). It tookan additional 10% stake in MÄK and38.88% in DataMark, bringing its totalshareholdings in the companies to 90%and 100% respectively.iDirect has, through its wholly ownedsubsidiary, iDirect UK Limited, acquired100% of Parallel Limited (Parallel). Bothcompanies share product synergies anda common market focus, and Parallel’sproducts will become part of the iDirectproduct portfolio.Major ProjectsThe SAF awarded ST Electronics acontract worth about $100m to providethe Advanced Combat Man System(ACMS). The 3rd Generation NetworkedACMS is expected to be completedby 2012.In China, ST Electronics won contracts toprovide Passenger Information Systems(PIS) for an MRT line and a PIS andSecurity Monitoring Systems which willbe exported to Saudi Arabia for the SaudiMashaaer MRT Line.For mission critical solutions, it won a$34m project to transform the SCDF995 emergency call-taking, resourcedespatching and incident monitoringsystem in its Operations Centre into anew generation command and controlsystem. The new system will leveragelatest technologies that will enable theSCDF to increase its efficiency andeffectiveness in responding to 995emergency calls.ST Electronics will implement a $44m,3rd Generation Command and Control(C2) System for the SPF by the firstquarter of 2012. Applying state-ofthe-arttechnologies, the system willenhance the SPF’s operational efficiencyand responsiveness to incidents andemergencies. Operators will benefit fromquick report creation functions, automaticrouting to the appropriate officers andenhanced resource allocation based onthe type of incident involved.

70LAND SYSTEMSA stream of innovative products enabled the Land Systems sector to securebreakthrough contracts in both the defence and commercial arenas.DEMONSTRATING RESILIENCE ANDREADINESS FOR THE UPTURNWith customers in over 30 countries worldwide,ST Kinetics is the leading land systems companyin Southeast Asia. Its capabilities cover the entirevalue chain, including the design, development,production, operation and through-life supportof specialised land systems equipment andspecialty vehicles.As the economic downturn persisted, the impactwas felt particularly in the specialty vehiclesmarket, notably in the US. Several countriesintroduced stimulus packages during the year,but the effects in related industries only beganto materialise towards the latter half of 2009.Nevertheless, ST Kinetics demonstrated itsresilience in weathering these poor marketconditions, with VT LeeBoy announcing abreakthrough contract for the supply of paversto the US Army, and VT SVC receiving severalsignificant orders for its Ultra Temp hybridrefrigerated bodies.Highlights of the year included the commencementof delivery to the UK MOD of the Warthog allterrain vehicles, a variant of the highly successfulBronco All Terrain Tracked Carriers. In addition,ST Kinetics delivered the Terrex 8x8 Infantry CarrierVehicles and Trailblazer Countermine Vehicles tothe SAF. Three ammunition supply contracts werealso announced: two for the UK MOD and onefor the Swedish Defence Materiel Administration,Försvarets Materielverk.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200971Land Systems & SolutionsBuilding on the momentum of the Warthogcontract win in December 2008, participationin various exhibitions and conferences furtherraised the company’s profile.There was heightened interest in theBronco and Total 40mm Solutions afterST Kinetics showcased them in February at theInternational Defence Exhibition & Conference(IDEX) in Abu Dhabi, UAE. They were similarlywell received at UK exhibitions Defence VehicleDynamics and Defence System and EquipmentInternational, followed by two exhibitions inthe US, namely Modern Day Marine 2009and the Association of the US Army AnnualMeeting and Exposition. Throughout the year,the Bronco was showcased at the ForumEntreprises Defense in Versailles, France; theArmoured Combat Mobility Conference inLondon, UK; and Armoured Vehicles Australiain Canberra, Australia.Besides the Bronco and Total 40mm Solutions,ST Kinetics displayed small arms and theHMX 1100 transmission at IDEX. A wide rangeof solutions was also exhibited at ArmouredVehicles Asia 2009, a conference held inSingapore. These included the Warthog, Terrex,Trailblazer, Spider LSV, Total 40mm Solutions,120mm SRAMS and small arms such as theSAR21, Ultimax 100 and CPW.Specialty Vehicles & ServicesThe Land Systems sector furthered itsefforts to grow sales of specialty vehiclesto the construction and related industries,strengthening its market reach internationally.In April, ST Kinetics extended its operations toMexico, with the formation of a joint venturecompany, GFM Maquinaria, S.A.P.I. de C.V.The joint venture gains ST Kinetics abeachhead in the Latin American market andis the Group’s second collaboration withLeft to right:The delivery of Warthog to the UK MOD commencedat year’s end.Trailblazer – the only armoured counterminevehicle in its weight class.The Terrex ICV is one of the world’s mostadvanced 8x8 armoured vehicles.ST Kinetics demonstrated resilience in poormarket conditions, with VT LeeBoy announcinga contract for the supply of pavers to the USArmy, and VT SVC receiving significant ordersfor its Ultra Temp hybrid refrigerated bodies.

72LAND SYSTEMSST Kinetics achieved milestones in thegreen vehicles arena when it launchedSingapore’s first commercial dieselelectrichybrid bus and the world’sfirst hybrid hydraulic drive enhancedport prime mover.Grupo Ferrominero, S.A. de C.V., aMexican company with diverse interests.The following month, ST Kineticsadded to its presence in China withthe acquisition of Zhenjiang HuachenHuatong Road Machinery Co., Ltd. andZhenjiang Huatong Aran MachineryCo., Ltd. Both companies are leadingplayers in China’s road construction andmaintenance equipment market, andexport their products to more than20 countries.Guizhou Jonyang Kinetics and BeijingZhonghuan Kinetics showcased theirconstruction equipment at the 10thBeijing International ConstructionMachinery Exhibition & Seminarin November.ST Kinetics achieved two significantmilestones in the green vehicles arenawhen, in collaboration with its strategicpartners, it launched Singapore’s firstcommercial diesel-electric hybrid busand the world’s first hybrid hydraulicdrive enhanced port prime mover. Itsenvironmentally friendly and emissionresponsible hybrid solutions receivedstrong endorsement when local transportoperator, Brickston Transport Service,and port operator, PSA SingaporeTerminals, inked memoranda ofunderstanding on their intent to testbeda fleet of the hybrid bus and hybridhydraulic drive prime mover respectively.Total Support & ServicesLeveraging the rising demand forreliable, value-for-money automotiveservices during the economic downturn,ST Kinetics expanded its automotiveservices with the April opening ofSTAR Ubi, a new mega service centrein the eastern part of Singapore. Amongits comprehensive service brands areSTAR BLACK and STAR J, high qualityand competitively priced services cateringto premium German marques andJapanese cars respectively.In December, the company’s third andlargest vehicle servicing and accidentrepair complex in Singapore openedat Jalan Boon Lay. This location offersconvenience to motorists, fleet operatorsand commercial vehicle owners in thewestern part of the island. In addition,STAR Jalan Boon Lay features a first-ofits-kindvehicle repair training academyin collaboration with Car-O-Liner(collision repair systems), DuPont (spraypainting solutions) and the Institute ofTechnical Education.ST Kinetics also grew its vehicleinspection business in 2009. Building onthe success of the inspection centres atSin Ming and Ayer Rajah, the companylaunched a third centre at Jalan BoonLay. Besides the full range of independentvehicle inspection services, the centreprovides insurance quotations from anumber of insurers, road tax renewaland other related services, making it aone-stop shop for motorists.AcquisitionsST Kinetics completed its acquisitionsof Zhenjiang Huachen Huatong RoadMachinery Co., Ltd. and ZhenjiangHuatong Aran Machinery Co.,Ltd. in April. To align them with STKinetics’ branding, the companieswere subsequently renamed JiangsuHuatong Kinetics Co., Ltd. andJiangsu Huaran Kinetics Co., Ltd. Theiracquisitions are joint ventures with

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200973Left to right:Market leading products from Jiangsu Huatong Kineticsinclude the asphalt paver and road milling machine.Jiangsu Huatong Machinery Co., Ltd.,a subsidiary of Zhenjiang State-ownedAssets Supervision and AdministrationCommission.Major ProjectsDuring the year, ST Kinetics deliveredspecialised truck bodies and trailers,road construction and maintenanceequipment, off-road dump trucks andexcavators to commercial customers.The company received its single largestorder for its Ultra Temp hybrid refrigeratedtruck bodies. The contract from IdealeaseInc., on behalf of its client Schwan FoodCompany, is for 248 units of the energyefficientand environmentally friendlyhybrid refrigerated truck bodies.In the areas of defence and homelandsecurity, ST Kinetics delivered thePegasus, 120mm SRAMS and variousmunitions products as well as the Bionix II,Trailblazer and Terrex. ST Kinetics wasawarded three contracts to supply40mm ammunition to defence forces,comprising an €8m (about $15.6m)contract with the Swedish FMV, and twocontracts worth £9.5m (about $20.7m)and £2.8m (about $6.6m) respectivelywith the UK MOD.The company also won a contract worthover US$11m (about $15.8m) from theUS Army Contracting Command for thesupply of asphalt paving equipment overa five-year timeframe beginning in 2010.The year ended with commencement ofdelivery of the Warthog to the UK MOD.This is part of the £150m order made inDecember 2008 for over 100 Warthogs,the first sale of a Singapore designed andproduced armoured vehicle to one of theworld’s leading defence forces.Compared toFY2008, LandSystems sector’sPBT of $95.4m forFY2009 was higherby 13% or $10.7m.Half Yearly PerformanceTurnover of the Land Systems sector in2H2009 of $652m was 27% or $137mhigher than that achieved in 1H2009, duemainly to higher munitions sales.Compared to 1H2009, 2H2009 PBTincreased by 19% or $8.1m to $51.8m.The higher PBT was mainly attributable tohigher turnover, but this was partially offsetby higher operating expenses mainly fromthe subsidiaries acquired.Full Year PerformanceLand Systems sector’s FY2009 turnoverof $1,167m was lower than that achievedin FY2008 by 8% or $107m, attributablemainly to lower sales from the Autobusiness group’s US operations.Compared to FY2008, Land Systemssector’s PBT of $95.4m for FY2009 washigher by 13% or $10.7m. Despite lowerturnover, PBT was higher due mainly tobetter product mix, but this was partiallyoffset by higher other operating expensesmainly from the subsidiaries acquired.There was an impairment in value of aquoted investment in FY2008.Left to right:Significant orders were secured for the Ultra Temp hybrid refrigerated body.New “green” fuel saving and emission responsible products launched included the HybridDiesel-Electric Bus and Hybrid Hydraulic Drive enhanced port prime mover.

74MARINEThe Marine sector rose above odds to achieve significant milestonesand turned in a steady performance with $949m of revenue in 2009.REAPING RESULTS AND EarningRECOGNITION2009 saw the Marine sector grow its revenue by15% and profit before tax by 36%. Overall backlogcontinues to be healthy with new contracts secured.Among the new contracts signed during the yearwere two contracts from OSG Ship Management(OSG) for the outfitting and commissioning of two350,000 barrel Articulated Tug Barge (ATB) units.The sector also secured a contract worth US$87m(about $121m) to build an enhanced version of aT-AGS 60 Class Oceanographic Survey Ship for theUS Navy. Construction of the new ship, T-AGS 66,will begin at Halter Moss Point in mid 2010 withdelivery scheduled in 2013. The Marine sector grewthe scope of its services for the RSN, landing a$108m contract for the logistics management of theRSN’s warehouses at its Changi and TuasNaval Bases.The Marine sector also commenced a Public PrivatePartnership support contract providing SubmarineSupport and Rescue Services to the RSN. Duringthe year, the sector completed and delivered to itscustomers a Platform Supply Vessel (PSV), an AnchorHandling Tug Supply Vessel (AHTS), three ATBs andtwo Fishery Survey Vessels (FSV).The sector was also successful in obtaining a grantfrom the United States Maritime Administration

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200975to develop shipyard infrastructure. These funds,along with a Mississippi state grant, will be usedto enhance its US operations’ production facilities,including the construction of a 40,000 sq ftfabrication shop to support the Fast Missile Craftproject as the programme enters production phase.The Marine sector participated in major industryexhibitions during the year, including IMDEX Asia,Brunei International Defence Exhibition, Nor-Shipping,the International WorkBoat Show, and theConnecticut Maritime Association’s 24th AnnualShipping Conference and Exhibition.ST Marine garnered its first ShipPax Award at theprestigious 2009 event for its first Roll-on Roll-offvessel (RoRo), City of Hamburg, in the RoRoconcept category. This is also a first for a Singaporebasedshipbuilding company in the category. Theaward recognises ST Marine’s detailed design andinnovative engineering capabilities and reaffirms itsstanding in the global RoRo marketplace.Left to right:ST Marine won a ShipPax Award for its first RoRo vessel,City of Hamburg.The 20-year operations contract for the Submarine Supportand Rescue Vessel commenced.Major lengthening and upgrading work on Java Constructorwas delivered on schedule with over 1.25 million manhoursfree of Lost Time Injury and Medical Treatment Injury.ST Marine continued to build on its strongposition in dredgers, seismic vessels, pipelaying vessels and support vessels in theoffshore and infrastructure markets.

76MARINEBy securing an equal mix of commercial and governmentcontracts, the order book for the Marine sector’s USoperations grew to its largest ever.Ship Design and BuildingThe Marine sector achieved severalmilestones in shipbuilding during the year.In Singapore, it successfully deliveredan AHTS for Lewek Shipping. It alsocompleted the Submarine Support andRescue Vessel with the commencementof a 20-year operations contract for RSNwith its partner James Fisher MarineServices. A milestone was achieved whenST Marine launched Singapore’s first RollonRoll-off Passenger (Ropax) ferry forLouis Dreyfus Armateurs. The Ropax wasalso the largest vessel to be launchedfrom the new permanent launchway. Inaddition, it keel laid a Seismic SurveyVessel for Swire Pacific Offshore, aLanding Platform Dock for a regionalnavy, and a Diving Support Vessel (DSV).In Mississippi, the US operationsdelivered its largest ever ATB and PSV toOSG and Hornbeck Offshore respectively.It also delivered two FSVs for the NationalOceanic and Atmospheric Administrationand two ATBs to Crowley MaritimeCorporation’s Vessel ManagementServices.Shiprepair and ServicesST Marine continued to build on itsstrong position in dredgers, seismicvessels, pipe laying vessels and supportvessels in the offshore and infrastructuremarkets. Among the projects undertakensuccessfully during the year was the100th Stolt-Nielsen vessel, markinga decade-long partnership. Thisexemplifies the kind of long termpartnership the Marine sector strivesto nurture with all its customers.The sector completed several significantconversion and modification projects.These included the complete outfitting ofGeowave Voyager, a seismic vessel fromNorwegian company Wavefield Inseis.In April, Java Constructor, from CloughJava Offshore, Australia, was deliveredon schedule after the completion oflengthening and upgrading work onthe derrick pipe lay barge. Its pipe laysystem was upgraded and its cranecapacity was increased from 400 to 900tons. During the upgrading, ST Marineand Clough Offshore achieved over 1.25million manhours free of Lost Time Injuryand Medical Treatment Injury.In addition, modification and upgradingwork was done on pipe laying vessel,Semac1 from Saipem, Portugal andresearch vessel Geo Natuna from SwirePacific Offshore, Singapore. Othermajor upgrading works were carriedout on: dredger Goryo Ho from HyundaiEngineering, Korea; container vesselPacific Osprey from Uniteam, Germany;livestock carrier Al Messilah fromLivestock Transport and Trading, Kuwait;and geotechnical vessel Bluestone Topazfrom Bluestone Offshore, Singapore.Major upgrading works in progressinclude upgrading of accommodationand outfitting work on pipe layingvessel Castoro 10 from Saipem anddredger Volvox Asia from Van Oord ACZ,Netherlands.The Marine sector is poised to deliveron schedule the Ropax, Seismic SurveyVessel, DSV, PSV, the remaining 330,000and 350,000 barrel ATBs for Crowley andOSG respectively, the TAGM-25 MissileInstrumentation Ship and the EgyptianFast Missile Craft.The AHTS was delivered ahead ofschedule to Lewek Shipping.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200977Left to right:One of two ATBs delivered to Crowley Maritime.ST Marine completed the 100th vessel for Stolt-Nielsenover a decade-long partnership.Environmental Engineering andServicesIn August, ST Marine’s wholly ownedsubsidiary STSE Engineering ServicesPte Ltd (STSE) signed an MOU withSino-Singapore Tianjin Eco-CityInvestment & Development Co., Ltd toexplore collaboration in the provision ofPneumatic Waste Collection Systemsin Tianjin Eco City’s business park andseveral residential developments.STSE’s subsidiary in China,ST Environmental Services & TechnologiesCo. Ltd (STE&T), made a breakthroughin the Chinese market within its first year,scoring a contract to design, build anddeliver a Materials Recovery Facility inBeijing. In December, STE&T also wona contract worth about RMB33m (about$6.5m) in Wuhan, China for the design,build and delivery of a Waste TransferStation in Donghu Newtech Zone.The project has commenced and isexpected to be completed by the thirdquarter of 2010.PBT of the Marinesector in FY2009 of$102.3m was higherthan that achievedin FY2008 by 36% or$27.1m.Half Yearly PerformanceThe Marine sector’s turnover for2H2009 at $470m was comparable tothat of 1H2009.PBT for 2H2009 at $57.3m was higherthan 1H2009 by 27% or $12.3m as aresult of favourable sales mix.Full Year PerformanceTurnover of the Marine sector in FY2009of $949m was higher than FY2008 by15% or $127m. The higher Shipbuildingturnover resulting from favourable salesmix in both the local and US operationswas partially offset by lower Shiprepairturnover arising from fewer conversionjobs. Engineering turnover was higherby $4m.PBT of the Marine sector in FY2009 of$102.3m was higher than that achievedin FY2008 by 36% or $27.1m. Thehigher PBT was attributable mainly tohigher turnover and lower distributionand selling expenses due to lowerallowance for doubtful debts.First Ropax built in Singapore, Norman Leader, at its launch.

78OPERATING FINANCIAL REPORTDynamics And RiskIndustry ReviewThe global financial crisis hit most economies hard,especially in the earlier part of the year. Businessesworldwide suffered setbacks, both from shrinking demandas well as the tightening of credit. After a few recessionaryquarters, global economies are showing signs of stabilisingand gradual recovery. However, growth is expected to besubdued and may not reach pre-crisis levels soon.ST Engineering’s well-diversified portfolio – corebusinesses in four different segments, and a globalcustomer base in both the commercial and defencesectors – has provided it with some level of resiliencethrough the crisis. In particular, it benefited fromgovernments’ stimulus spending in defence, infrastructureand other projects.However, the Group is subject to its operating andeconomic environment, and changes to external factorsnot within its control could impact its performance. Someof these key factors are discussed below.World EconomyAccording to the IMF, major economies have stabilisedand modest growth is expected in 2010. However, therebound is mainly due to government stimulus plans.There is a risk that when the spending stops, economiesmay slow down again.Not unlike other MNCs, ST Engineering’s performancecould be impacted by the effects of any resultingslowdown.Currency FluctuationsAs the Group has substantive business operations in theUS and international sales, a weaker USD would have anunfavourable revenue and earnings impact on the Group’sresults. This negative impact would be partially cushionedby the lower cost of materials and parts imports in USD.The Group’s diversified business portfolio providessome room for offsets. With operating units locatedin different countries, the currency risk is partiallymitigated. ST Engineering also hedges its foreignexchange risks to mitigate anticipated impact.Oil PricesOil prices have been on the uptrend since the beginningof the year and was around US$70 at year’s close.High oil prices would have a negative impact on theGroup’s customers in the Aerospace sector, and this mayin turn impact the Group’s performance. However, suchan environment of high costs could present opportunitiesfor third-party MRO providers like ST Aerospace, asairlines outsource more MRO work in an effort to containcosts.Interest RatesChanges in interest rates affect the cost of business forthe Group. Financial markets were volatile in the earlierpart of the year, and credit and borrowing terms weretightened. The markets are now stabilising. As a triple-Arated corporate, ST Engineering’s access to funding wasrelatively unaffected.As an added precautionary measure to ensure availablefunding, the Group established a multi-currency Medium-Term Note (MTN) programme, under which it issued aUS$500m 10-year note during the year. This provides theGroup the ability to pursue opportunities quickly when theneed arises.Labour SupplyThe Group continues to harness the global talent pool forits workforce. There remains a shortage of skilled labourglobally. ST Engineering continues to work with localauthorities in markets where it operates, and leveragestraining, retention schemes, scholarships as well asalternative sources for hire to sustain its growth.Defence Spending and Government BudgetsA substantial portion of the Group’s business comes fromgovernment agencies, including the military.While several countries have cut their defence budgets,some, such as Singapore and the US, have maintainedtheirs. Singapore’s defence spending, typically abouta quarter of the total government spending budget,corresponds to GDP growth. It is expected that theSingapore government will continue to invest in defencesolutions and systems that will give its armed forcestechnological superiority as it continues developing its3rd Generation SAF. Locally, homeland security remainsa key focus. ST Engineering looks forward to continue itspartnering role in national security.In the US, the proposed defence budget for 2010 ishigher than that enacted for 2009, to support the US’ongoing fight against global terrorism, and the need forenhanced homeland security. The Group’s operationsin both the US and Singapore continue to look for

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200979partnership opportunities with the respective authorities.During the financial crisis, governments in manycountries increased spending to stimulate their respectiveeconomies, and the Group has benefited from suchspending through project wins.The Singapore, China, Taiwan and Gulf StatesGovernments are placing increasing priority on enhancingInformation Communications Technologies (ICT)applications and infrastructure development, boding wellfor ST Electronics in areas relating to e-Government,education, transport and subway systems.Emerging marketsDiversification into new emerging markets such as Africa,Central Asia and the Gulf States region will help the Groupexpand revenue streams, strengthen its market standing,and manage costs.The Group conscientiously monitors market conditionsand will take advantage of new market opportunitieswherever possible.DisastersSome of the Group’s operations are in regions subject tonatural occurrences such as hurricanes which could affectthe Group’s operations. A pandemic outbreak such asH1N1 may have a negative impact on global economiesand ST Engineering would not be insulated. The Grouphas in place disaster preparedness and businesscontinuity plans and these are continually reviewed.Management reviews and discusses key businessrisks, and the potential impact brought on by businesstrends, major events and emerging issues with theRRC at regular intervals.To promote a strong culture in risk management, riskmanagement discipline is integrated into the mainbusiness lines and devolved to the operating level sothat risks are managed by all managers. Througha system of Dashboard Reporting that has beendeveloped and cascaded down to the business units,risks and opportunities are periodically reviewed,to respond to the constantly changing businesslandscape, both locally and globally.To support the risk management practices withinthe Group, policies, guidelines and methodologiesare constantly being developed and improved upon.Investments are made in our people, to enhancetheir risk management competencies, as well as ininformation technology to better facilitate the riskmanagement process.(a) Strategic and Operational RiskThe Group operates in 24 countries across the globe.As part of the Group’s plan to grow its businessinternationally, it will continue to focus on increasing itsoperating activities and presence in Europe, GreaterChina and the US. In 2009, 18% of the Group’s assetswere in the US (2004: 10%). Revenue from customerslocated outside Asia increased from 33% of the Group’srevenue in 2004 to 44% in 2009.Risk ManagementThe Group’s enterprise risk management frameworkaims to provide reasonable assurance to the Board ofDirectors that risks are understood and being activelymanaged within the Group. The framework seeksto achieve downside protection against negativesurprises, while at the same time maximising its upsidepotential when faced with opportunities.%60402018%10%33%44%The Group’s Risk Review Committee (RRC) maintainsoversight of the framework and works with themanagement to ensure that the Group has adequatelyprioritised and addressed risk management issueswithin the Group.0Assets located in US2004 2009Revenue from customerslocated outside AsiaThe Group’s risk appetite and strategies are regularlyreviewed to ensure alignment with its objectives.

80OPERATING FINANCIAL REPORTAs part of its business strategy, the Group seeks toincrease the proportion of its international businessand customers, thereby achieving greater geographicaldiversification. Likewise, the Group takes the initiativeto raise the proportion of its commercial business whilemaintaining strong support towards the local defencebusiness. The commercial business helps to bringcommercially available technology and practices intothe defence business, thereby allowing for more costeffective systems and solutions. A more diversifiedbase of commercial and military customers will reducethe risk of customer concentration.(b) Investment RiskThe Group seeks to grow its businesses on three fronts,through: organic growth of its existing capabilitiesand capacities; development of new capabilities; andacquisitions of business entities and operating assets orjoint ventures.Investment activities, ranging from the identificationof targets to conducting due diligence, are supportedby a dedicated team of investment professionals andaugmented by external professionals for specialisedservices. The business proposals are guided by a givenset of internal investment criteria, evaluated by seniormanagement and endorsed by a Business Investmentand Divestment Committee before seeking final Boardof Directors’ approval.(c) Financial Risks and Derivative FinancialInstrument RiskThe Group is exposed to financial risks arising from itsoperations and the use of financial instruments. TheGroup’s principal financial instruments, other than foreignexchange (FX) contracts and derivatives, comprisebankers’ guarantees, performance bonds, bank loansand overdrafts, finance leases and hire purchasecontracts, investments, cash and short term deposits.All financial transactions with the banks are governed bybanking facilities duly accepted with Board of Directors’resolutions, with banking mandates, which define thepermitted financial instruments and facilities limits. Allfinancial transactions require dual signatories. The Grouphas various other financial assets and liabilities such astrade receivables and trade payables, which arise directlyfrom its operations.It is the Group’s policy not to engage in FX and/orderivatives speculation. The purpose of engaging intreasury transactions is solely for hedging. The Group’streasury mandates allow only FX spot, forward or nondeliverableforward, FX swap, cross currency swap,purchase of FX call, put or collar option, forward rateagreement, interest rate swap, purchase of interest ratecap, floor or collar option (“Permitted Transactions”).These instruments are generic in nature with noembedded or leverage features. Any deviation from theseinstruments and any other derivative transactions wouldrequire specific approval from the Board of Directors.The main financial risks arising from the Group’soperations and the use of financial instruments areinterest rate, FX, market, liquidity and credit risks. Thepolicies for managing each of these risks are broadlysummarised below:(i) Interest Rate RiskThe Group has cash balances placed with reputablebanks and financial institutions. The Group managesits interest rate risks on its interest income by placingthe cash balances in varying maturities and interestrate terms with due consideration to operating cashflow requirements and optimising yield.The Group’s debts includes 10-year bonds issued,long and short term bank borrowings and leasecommitments. The Group seeks to minimise itsinterest expense exposure through tapping differentsources of funds to refinance the debt instruments indifferent tenors and/or enter into interest rate swaps,where appropriate.The impact on the Group’s annual interest incomeand interest expense based on a one percentagepoint movement in the effective fixed deposit rateand borrowing rate are estimated at $15m and $2mrespectively.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200981INTEREST RATE (%)6543210USD SIBOR 3 mths SGD SIBOR 3 mths Source: Bloomberg(ii) Foreign Exchange RiskThe Group’s FX risk arises both from its subsidiariesoperating in foreign countries, generating revenueand incurring cost denominated in foreign currencies,and from operations of its local subsidiaries whichare transacted in foreign currencies. The Group’s FXexposures are primarily from USD and Euro, and theGroup enters mainly into forward currency contractsto hedge against its FX risk resulting from anticipatedsale and purchase transactions denominated inforeign currencies in accordance with the Group’shedging policy. The Group also enters into crosscurrency swap to hedge the FX risk of its loansdenominated in foreign currencies.FOREIGN EXCHANGE1.801.751.701.651.601.551.501.451.401.351.30Jan 05Apr 05Jul 05Oct 05Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07Jul 07Oct 07Jan 08Apr 08Jul 08Oct 08Jan 09Apr 09Jul 09Oct 09Jan 10Jan 05Apr 05Jul 05Oct 05Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07Jul 07Oct 07Jan 08Apr 08Jul 08Oct 08Jan 09Apr 09Jul 09Oct 09Jan 10USD / SGDSource: Bloomberg

82OPERATING FINANCIAL REPORT(iii) Market RiskThe Group has strategic investments in quotedequity shares. The market value of theseinvestments will fluctuate with market conditions.Management reviews the market value of theseinvestments regularly.(iv) Liquidity RiskTo manage liquidity risk, the Group monitors its netoperating cash flows closely, maintains an adequatelevel of cash and cash equivalents, securedadditional funding facilities from more financialinstitutions, and diversified the source of fundingwith a US$1.2b MTN programme ready to tap thedebt capital market when needs arise.(v) Credit RiskCredit risk, or the risk of counterparties defaulting, ismanaged through the application of credit approvals,credit limits and monitoring procedures. Whereappropriate, the Company or its subsidiaries obtaincollateral from customers or arrange master nettingagreements. Cash terms, advance payments andletters of credit or bankers’ guarantees are requiredfor customers of lower credit standing.(d) Acts of God and/or War RiskThe Group recognises that quick recovery andresumption of business operations after a disruptionare critical to minimising financial, operational andreputation impact.Accordingly, it has in place a Business ContinuityManagement Framework (“BCM Framework”), whichembodies enterprise-wide planning and arrangementsof key resources and procedures that enable theGroup to respond and continue to operate criticalbusiness functions across a broad spectrum ofinterruptions to the business, arising from internal orexternal events.The BCM Framework sets out the business continuitymethodology which requires business units withinthe Group to identify and assess the impact ofpotential threats that could severely interrupt businessoperations, develop and continuously maintainbusiness continuity strategies and plans to managethe risks of major disruptions.The key threats identified by the Group include severeweather (such as hurricanes and storms), loss ofproperties resulting from fire and/or acts of terror, andpandemic flu outbreak.Business continuity plans have been developed forscenarios arising from these threats, and the plans aretested and updated at periodic intervals.Besides incorporating force majeure clauses in allcontracts to mitigate risk from Acts of God, the Groupalso has in place a comprehensive insurance programmeaimed at mitigating financial losses that might arise fromsuch risks.(e) Legal and/or Political RiskDue to the nature of the Group’s business, legal risk canarise from the non-enforceability of material contracts,and the violation of rules, regulations, laws and businesspractices.As part of the enterprise risk management framework,legal and compliance risks are identified and reviewedperiodically.Policies and practices to manage contract risks includerequiring all contracts of material values to be reviewed bylegal counsels, and adhering to pre-approved standardcontract terms and conditions. Significant deviations fromthese standard terms are explained and highlighted, andthe rationale reviewed and approved by higher levels ofmanagement.Compliance risk may arise from the violation of laws andregulations by which the Group is bound. Significant lawsand regulations include the FAA rules and regulations inthe Group’s Aerospace business, the Strategic ExportControl Act, and relevant Security laws and regulations inthe Group’s defence business.Practices to manage compliance risks are integrated intothe core business processes, to enable these risks to bemanaged holistically.(f) Reputation RiskThe damage to the Group’s reputation may resultfrom any risk event the Group is confronted with. Thedamage may also be directly linked to how the Groupmanages and deals with that risk event. The Group’sreputation can be ruined overnight, if the risk event isnot managed well, and it results in a crisis.Hence, the Group recognises that the key to managingreputation risk is not only sound risk management, butalso good communication with our stakeholders.The Group’s existing enterprise risk managementframework is aimed at building business resiliencethrough sound risk management practices. It alsoensures that a structured group-wide corporatecommunications programme is developed to facilitateeffective communication with our stakeholders.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200983Cash FlowOperating ActivitiesIn 2009, net cash generated from operating activitiesamounted to $932m, $421m higher than the $511min FY2008. This was mainly due to favourableworking capital movements with positive variances intrade debtors, advance payments to suppliers, otherdebtors, deposits and prepayments as well as advancepayments from customers, but these were partiallyoffset by the negative variances in progress billings inexcess of work-in-progress and trade creditors.Investing ActivitiesThe Group’s net cash used in investing activities of$484m in FY2009 was higher than FY2008 by $287m,mainly due to increase in purchase of investmentsand property, plant and equipment, as well as lowerproceeds from sale and maturity of investments, butthese were partially offset by lower cash outflow for theacquisition of subsidiaries and acquisition of additionalinterest in subsidiaries.Financing ActivitiesThe Group had a net cash from financing activitiesof $19m in FY2009 compared to a net cash used infinancing activities of $543m in FY2008. The highercash inflow was attributable to proceeds from theissue of bonds net of repayment of bank loans.Cash and Cash EquivalentsAs at 31 December 2009, the Group’s cash and cashequivalents stood at $1.51b, $465m higher thanthat of FY2008. The cash and cash equivalents aremanaged by the Group’s centralised Treasury Unit andthe majority of the funds were invested in liquid assetssuch as fixed deposits. The cash and cash equivalentsas at yearend are adequate to fund the committed andplanned capital expenditure, as well as to service theGroup’s borrowings.Capital Structure And Treasury ManagementThe Group strives to maintain a strong balance sheetand an efficient capital structure to ensure a strong creditrating and healthy capital ratios in order to support itsbusiness and maximise shareholder value. To maintainor adjust the capital structure, the Group may adjustthe dividend payment to shareholders, return capital toshareholders or issue new shares.Funding and BorrowingsThe Group funds its investments and operations througha mixture of shareholders’ funds, advance paymentsfrom customers, and borrowings. On an ongoing basis,the Group reviews its cash flow, debt maturity profile andoverall liquidity position. In addition to bilateral borrowingfacilities with the banks, the Group established a US$1.2bMTN programme in July 2009 as part of the Group’sfinancing strategy to diversify its funding sources. TheGroup issued US$500m of bonds at a fixed coupon of4.8% in July 2009 for the purpose of funding new capitalexpenditures, merger and acquisitions and other generalcorporate purposes.As at end of 2009, Group borrowings amounted to$1,439m, which is about 86% of its shareholders’ fundsincluding minority interests. 94% or $1,353m of totalborrowings are long term borrowings and the balanceis of a short term nature. The long term borrowingscomprised US$500m bonds (10-year) and other termloans largely denominated in USD and Euro, while shortterm loans are mainly denominated in USD and ChineseYuan. 90% of total borrowings is on fixed interest ratebasis while the balance is on floating rate basis.The Group’s interest cover stays at a healthy 10 times,with a gross debt-to-equity ratio of 85.8%. The Group isin a net cash position (see details in Note 52 in the Notesto the Financial Statements).CASH FLOW ($m)1,2008004000(400)(800)511932OperatingActivities2008 2009(197)(484) (543)InvestingActivities19FinancingActivitiesMATURITY PROFILE OF BORROWINGS$1,439m6%Within 1 year25%Within 2 to3 years20%Within 4 to5 years49%After 5 yearsTotal

84OPERATING FINANCIAL REPORTCash ManagementThe Group’s centralised Treasury Unit seeks to minimisethe Group’s financial risk, to ensure sufficient liquidityto meet day-to-day operational needs, and to investthe cash and cash equivalents within the guidelinesapproved by the Board of Directors.The Group adopts the strategy of centralised cashmanagement, where the excess cash of its businessentities are pooled and managed through a cashmanagement system. The aim of the centralised cashmanagement strategy is to maximise the returns of theGroup’s cash resources and minimise associated risksand costs.Foreign Exchange ManagementThe aim of the Group’s FX management strategies isto minimise FX exposures and associated costs. Themost common financial instruments used to managethe FX exposures are spot, forward FX contracts, aswell as cross currency swap.The Group’s centralised Treasury Unit (“Unit”)facilitates material intra-group FX transactionswithin the Group to net-off the FX exposures beforeproceeding to transact the hedge with banks. TheUnit executes the Group’s material FX transactionswith proper segregation of duties between authoriseddealers and back office. Only authorised dealerscan transact with the counterparties on behalf of theGroup, with back office confirming and settling thetrades. The dealers’ limits and permitted treasuryinstruments in the form of an authorisation matrix andmandates are communicated to all counterparties.In accordance with the Group’s counterparties riskmanagement policy, the Group established bankingfacilities including FX facility with a wide panel of localand foreign banks.Share Purchase MandateThe purpose of the Share Purchase Mandate is togive the Company the flexibility to undertake theshare purchase exercise expeditiously. The SharePurchase Mandate provides the Company analternate avenue to reward shareholders apart fromthe traditional dividend payment route as well asacts as a tool for the Company to manage itscapital structure.In the coming EGM, the Company will again seekshareholders’ approval to renew the Share PurchaseMandate for the purchase of up to 10% of the numberof ordinary shares in the capital of the Company. Theshare purchase can be effected either through marketpurchases or off market purchases. The financialimpacts of various share purchase scenarios will bepresented in a circular to shareholders.InsuranceWhere appropriate, the Group manages its insurancerisks on a group basis to leverage its position withthe general insurance market.The Group reviews its insurable risk profilecontinually and makes the necessary adjustmentson risk retention to optimise the coverage andcost. This is done with advice and support fromselected insurance brokers. Major group insurancepolicies include Industrial Special Risk, Liabilitiesand Workmen Compensation, designed to protectthe Group against properties risk, liabilities for itsproducts and services, and workplace accidentsrespectively. The aviation and marine businesseshave specialised insurance programmes.The Group adopts a proactive strategy with adviceand recommendations from insurance brokersto manage the insurance risk with specific riskmanagement programmes covering the preventionof fire and the adoption of behaviour based safetypractices, among others.Accounting PoliciesThe Group’s significant accounting policies arepresented in Notes to the Financial Statements,Note 2 (pages 112 to 133). The Group has appliedthe same accounting policies and methods ofcomputation in the preparation of the financialstatements for the current reporting period comparedwith the audited financial statements as at 31December 2008, except for the adoption of all the newand revised Financial Reporting Standards (FRS), thatare mandatory for financial years beginning on or after1 January 2009. The adoption of these FRS has nosignificant impact on the financial statements, exceptfor FRS 1, FRS 107 and FRS 108 as indicated onpages 129 and 130.

Financial ReportDirectors’ Report 86Statement by Directors 100Independent Auditors’ Report 101FINANCIAL STATEMENTSConsolidated Income Statement 102Consolidated Statement ofComprehensive Income 103Balance Sheets 104Statements of Changes in Equity 106Consolidated Statement of Cash Flows 108Notes to the Financial Statements 112SGX Listing Manual Requirements 228Sectoral Financial Review 230Group Structure 246Corporate Directory 251Corporate Information 261Shareholding Statistics 262

86Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together with the audited financialstatements of the Group and of the Company for the financial year ended 31 December 2009.DirectorsThe 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 SengLG Desmond Kuek Bak ChyeDr Tan Kim SiewQuek Tong BoonWinston Tan Tien HinQuek Poh HuatVenkatachalam KrishnakumarDavinder Singh s/o Amar SinghDr Stanley Lai Tze Chang (Appointed on 8 October 2009)COL Chia Choon Hoong(Alternate Director to LG Desmond Kuek Bak Chye)Arrangements to enable directors to acquire shares or debenturesExcept for the Singapore Technologies Engineering Executives’ Share Option Scheme, Singapore Technologies Engineering Share Option Plan, SingaporeTechnologies Engineering Performance Share Plan and Singapore Technologies Engineering Restricted Stock Plan (collectively the “ST Engineering SharePlans”), 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 whoseobjects 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 otherbody corporate.Directors’ interests in shares or debenturesExcept 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 ofrelated 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 andon 21 January 2010.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200987Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars of interests ofdirectors 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 children1 January 2009or date ofappointment if later 31 December 2009The CompanyOrdinary SharesPeter Seah Lim Huat 307,500 335,108Tan Pheng Hock 868,689 1,052,264Koh Beng Seng – 41,723Winston Tan Tien Hin 476,500 * 1 528,864 * 1Quek Poh Huat 874,228 943,478Davinder Singh s/o Amar Singh – 2,547Venkatachalam Krishnakumar – 53,750Dr Stanley Lai Tze Chang 3,878 3,878COL Chia Choon Hoong 7,000 7,000Related CorporationsChartered Semiconductor Manufacturing LtdOrdinary SharesPeter Seah Lim Huat 6,730 N.A. @Tan Pheng Hock 7,000 N.A. @Koh Beng Seng 44,074 N.A. @Winston Tan Tien Hin 377,000 * 2 N.A. @Global Crossing LimitedCommon Stock of US$0.01 eachPeter Seah Lim Huat 13,532 21,618Mapletree Logistics Trust Management LtdUnit holdings in Mapletree Logistics TrustQuek Tong Boon 2,000 2,000Neptune Orient Lines LimitedOrdinary SharesCOL Chia Choon Hoong 2,000 2,000Singapore Airlines LimitedOrdinary SharesVenkatachalam Krishnakumar 3,733 3,733COL Chia Choon Hoong 1,870 1,870

88Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2009 ordate of appointmentif later 31 December 2009Singapore Telecommunications LimitedOrdinary SharesPeter Seah Lim Huat 3,040 3,040Tan Pheng Hock 3,350 3,350Koh Beng Seng 1,520 1,520LG Desmond Kuek Bak Chye 2,230 2,230Dr Tan Kim Siew 12,850 52,850Quek Tong Boon 2,030 2,030Winston Tan Tien Hin 4,980 54,980 * 3Quek Poh Huat 5,210 35,210Davinder Singh s/o Amar Singh 3,170 3,170COL Chia Choon Hoong 4,610 9,610SMRT Corporation LtdOrdinary SharesQuek Tong Boon 4,000 4,000Quek Poh Huat 8,000 8,000SP AusNetStapled SecuritiesQuek Poh Huat 206,000 256,000StarHub LtdOrdinary SharesPeter Seah Lim Huat 447,560 470,710Tan Pheng Hock 25,150 25,150Winston Tan Tien Hin – 30,000 * 2Venkatachalam Krishnakumar 15,716 15,716STATS ChipPAC Ltd.Ordinary SharesPeter Seah Lim Huat 6,900 6,900Koh Beng Seng 45,000 45,000TeleChoice International LimitedOrdinary SharesPeter Seah Lim Huat 50,000 50,000Tan Pheng Hock 30,000 30,000

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200989Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2009or date ofappointment if later 31 December 2009Vertex Investment (II) LtdOrdinary SharesDavinder Singh s/o Amar Singh 50 50Vertex Technology Fund LtdOrdinary SharesWinston Tan Tien Hin 10 10Vertex Technology Fund (II) LtdOrdinary SharesKoh Beng Seng 15 15Winston Tan Tien Hin 20 20Davinder Singh s/o Amar Singh 500 500Redeemable Preference SharesKoh Beng Seng 15 15Winston Tan Tien Hin 19 19Davinder Singh s/o Amar Singh 500 5001 January 2009or date ofappointment if later 31 December 2009 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 11,125 – 2.09 10.2.2005 to 9.2.200911,125 – 2.12 11.8.2005 to 10.8.200922,250 22,250 2.37 8.2.2006 to 7.2.201022,250 22,250 2.57 11.8.2006 to 10.8.201033,375 33,375 3.01 10.2.2007 to 9.2.201133,375 33,375 2.84 11.8.2007 to 10.8.201144,500 44,500 3.23 16.3.2008 to 15.3.201244,500 44,500 3.61 11.8.2008 to 10.8.2012

90Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)1 January 2009or date ofappointment if later 31 December 2009 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesTan Pheng Hock 5,000 – 2.00 11.8.2001 to 10.8.2009300,000 300,000 2.26 10.2.2002 to 9.2.2010225,000 225,000 2.72 20.2.2002 to 19.2.2011227,500 227,500 2.68 11.8.2002 to 10.8.2011175,000 175,000 2.29 8.2.2003 to 7.2.2012175,000 175,000 1.92 13.8.2003 to 12.8.2012200,000 200,000 1.79 7.2.2004 to 6.2.2013200,000 200,000 1.86 12.8.2004 to 11.8.2013200,000 200,000 2.09 10.2.2005 to 9.2.2014200,000 200,000 2.12 11.8.2005 to 10.8.2014200,000 200,000 2.37 8.2.2006 to 7.2.2015200,000 200,000 2.57 11.8.2006 to 10.8.2015200,000 200,000 3.01 10.2.2007 to 9.2.2016200,000 200,000 2.84 11.8.2007 to 10.8.2016200,000 200,000 3.23 16.3.2008 to 15.3.2017Koh Beng Seng 19,500 – 2.09 10.2.2005 to 9.2.200919,500 – 2.12 11.8.2005 to 10.8.200927,500 27,500 2.37 8.2.2006 to 7.2.201027,500 27,500 2.57 11.8.2006 to 10.8.201027,500 27,500 3.01 10.2.2007 to 9.2.201127,500 27,500 2.84 11.8.2007 to 10.8.201127,500 27,500 3.23 16.3.2008 to 15.3.201227,500 27,500 3.61 11.8.2008 to 10.8.2012Winston Tan Tien Hin 48,500 – 2.09 10.2.2005 to 9.2.200937,000 37,000 2.37 8.2.2006 to 7.2.201037,000 37,000 2.57 11.8.2006 to 10.8.201037,000 37,000 3.01 10.2.2007 to 9.2.201137,000 37,000 2.84 11.8.2007 to 10.8.201137,000 37,000 3.23 16.3.2008 to 15.3.201237,000 37,000 3.61 11.8.2008 to 10.8.2012Quek Poh Huat 33,000 – 2.09 10.2.2005 to 9.2.200933,000 – 2.12 11.8.2005 to 10.8.200933,000 33,000 2.37 8.2.2006 to 7.2.201033,000 33,000 2.57 11.8.2006 to 10.8.201033,000 33,000 3.01 10.2.2007 to 9.2.201133,000 33,000 2.84 11.8.2007 to 10.8.201133,000 33,000 3.23 16.3.2008 to 15.3.201233,000 33,000 3.61 11.8.2008 to 10.8.2012

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200991Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)1 January 2009or date ofappointment if later 31 December 2009 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesVenkatachalam Krishnakumar 25,250 – 2.37 8.2.2006 to 7.2.201025,250 – 2.57 11.8.2006 to 10.8.201025,500 25,500 3.01 10.2.2007 to 9.2.201125,500 25,500 2.84 11.8.2007 to 10.8.201125,500 25,500 3.23 16.3.2008 to 15.3.201225,500 25,500 3.61 11.8.2008 to 10.8.2012Related CorporationsChartered Semiconductor Manufacturing LtdOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 85,000 N.A. @ 1.70 27.2.2005 to 27.2.200985,000 N.A. @ 1.16 26.8.2006 to 26.8.201095,000 N.A. @ 1.21 25.8.2007 to 25.8.201147,500 N.A. @ 1.07 31.8.2008 to 31.8.2012Global Crossing LimitedOptions to Purchase Common Shares of US$0.01 eachPeter Seah Lim Huat 40,000 40,000 10.16 12.1.2005 to 12.1.2014StarHub LtdOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 6,250 – 0.985 27.11.2005 to 26.11.20098,500 – 1.52 31.5.2006 to 30.5.2010STATS ChipPAC Ltd.Options to Subscribe for Ordinary SharesPeter Seah Lim Huat 70,000 70,000 1.99 6.8.2004 to 5.8.201335,000 35,000 1.91 17.2.2005 to 16.2.2014Koh Beng Seng 25,000 – 1.91 17.2.2005 to 16.2.2009Global Crossing LimitedRestricted Stock Units of Common Stock of US$0.01 eachPeter Seah Lim Huat 2,250 – 8.3.2005 to 8.3.20094,176 – 24.6.2009– 2,345 4.6.2010

92Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2009or date ofappointment if later 31 December 2009The CompanyConditional Award of 250,000 PerformanceShares to be delivered after 2008Tan Pheng Hock 0 to 375,000 #1 – ^Conditional Award of 200,000 PerformanceShares to be delivered after 2009Tan Pheng Hock 0 to 300,000 #1 0 to 300,000 #1Conditional Award of 250,000 PerformanceShares to be delivered after 2010Tan Pheng Hock 0 to 375,000 #1 0 to 375,000 #1Conditional Award of 250,000 PerformanceShares to be delivered after 2011Tan Pheng Hock – 0 to 425,000 #2Conditional Award of RestrictedShares to be delivered after 2008Peter Seah Lim Huat (30,500 shares) 0 to 45,750 #3 10,716 #5Tan Pheng Hock (45,000 shares) 0 to 67,500 #4 17,325 #5Koh Beng Seng (15,500 shares) 0 to 23,250 #3 5,446 #5Winston Tan Tien Hin (22,000 shares) 0 to 33,000 #3 7,730 #5Quek Poh Huat (18,500 shares) 0 to 27,750 #3 6,500 #5Venkatachalam Krishnakumar (18,500 shares) 0 to 27,750 #3 6,500 #5Davinder Singh s/o Amar Singh (14,500 shares) 0 to 21,750 #3 5,095 #5Dr Stanley Lai Tze Chang (5,000 shares) 1,757 #5 1,757 #5

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200993Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2009or date ofappointment if later 31 December 2009The CompanyConditional Award of RestrictedShares to be delivered after 2009Peter Seah Lim Huat (30,500 shares) – 0 to 45,750 #6Tan Pheng Hock (96,000 shares) 0 to 144,000 #6 0 to 144,000 #6Koh Beng Seng (15,500 shares) – 0 to 23,250 #6Winston Tan Tien Hin (22,000 shares) – 0 to 33,000 #6Quek Poh Huat (18,500 shares) – 0 to 27,750 #6Venkatachalam Krishnakumar (18,500 shares) – 0 to 27,750 #6Davinder Singh s/o Amar Singh (14,500 shares) – 0 to 21,750 #6Dr Stanley Lai Tze Chang (5,000 shares) 0 to 7,500 #6 0 to 7,500 #6Conditional Award of 96,000 RestrictedShares to be delivered after 2010Tan Pheng Hock – 0 to 144,000 #6Related CorporationsChartered Semiconductor Manufacturing LtdConditional Award of Restricted Share Unitsto be delivered after 2008Peter Seah Lim Huat 13,460 #7 N.A. @Conditional Award of Restricted Share Unitsto be delivered after 2009Peter Seah Lim Huat 35,110 #7 N.A. @STATS ChipPAC Ltd.Conditional Award of Restricted Share Unitsto be delivered after 2008Peter Seah Lim Huat 13,800 #7 6,900 #7

94Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2009or date ofappointment if later 31 December 2009Related CorporationsStarHub LtdConditional Award of Restricted Sharesto be delivered after 2008Peter Seah Lim Huat 17,200 #8 –Unvested Restricted Shares(Performance period from 01/01/2007 to 31/12/2008)Peter Seah Lim Huat – 16,712 #5Conditional Award of Restricted Sharesto be delivered after 2009Peter Seah Lim Huat 19,000 #9 19,000 #9Conditional Award of Restricted Sharesto be delivered after 2010Peter 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 whichWinston Tan Tien Hin has a 50% interest.* 2 Held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.* 3 Includes deemed interest in 10,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd, a company in whichWinston Tan Tien Hin has a 50% interest.@Ceased to be a related corporation of Temasek Holdings (Private) Limited during the financial year.^During the financial year, 131,250 shares were released to Mr Tan Pheng Hock.#1A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number ofperformance shares to be released is capped at 150% of the conditional award.#2A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number ofperformance shares to be released is capped at 170% of the conditional award.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200995Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)#3For this period, Messrs Peter Seah Lim Huat, Koh Beng Seng, Winston Tan Tien Hin, Quek Poh Huat, Venkatachalam Krishnakumar and DavinderSingh s/o Amar Singh were awarded 16,074, 8,169, 11,594, 9,750, 9,750 and 7,642 new shares on 26 March 2009 respectively upon partialachievement of targets set. The balance of the conditional award covering the period from 1 January 2008 to 31 December 2008 has thus lapsed.#4For this period, Mr Tan Pheng Hock was awarded 34,650 new shares on 26 March 2009 upon partial achievement of targets set. The balance of theconditional award covering the period from 1 January 2007 to 31 December 2008 has thus lapsed.#5Balance of unvested restricted shares to be released according to the stipulated vesting periods.#6A minimum threshold performance over a one-year or two-year period is required for any restricted shares to be released. A specified number ofrestricted shares to be released will depend on the extent of achievement of all performance conditions and will be delivered in phases according tothe stipulated vesting periods.#7The restricted share units will vest over a period of three years starting from the first anniversary of grant.#8The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in thecompany over a two-year period from 1 January 2007 to 31 December 2008. No shares will be delivered if the threshold performance targets arenot achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets aremet or exceeded. For this period, 25,112 new shares were awarded on 19 March 2009 upon partial achievement of targets set. The balance of theconditional award covering the period from 1 January 2007 to 31 December 2008 has thus lapsed.#9The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in thecompany over a two-year period from 1 January 2008 to 31 December 2009. No shares will be delivered if the threshold performance targets arenot achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets aremet or exceeded. Shares will be delivered in phases according to the stipulated vesting periods.#10The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in thecompany over a two-year period from 1 January 2009 to 31 December 2010. No shares will be delivered if the threshold performance targets arenot achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets aremet or exceeded. Shares will be delivered in phases according to the stipulated vesting periods.Between the end of the financial year and 21 January 2010, the following Directors’ interests in the Company had increased as follows:(a) Mr Peter Seah Lim Huat – increased to 357,358(b) Mr Tan Pheng Hock – increased to 1,352,264(c) Mr Koh Beng Seng – increased to 69,223(d) Mr Quek Poh Huat – increased to 976,478Directors’ interests in contractsSince the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a fulltimeemployee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from relatedcorporations and share options granted pursuant to the ST Engineering Share Plans) by reason of a contract made by the Company or a related corporationwith the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except forprofessional fees paid to a firm of which a director is a member as shown in the financial statements.

96Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Share plansThe Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the Singapore Technologies Engineering Share Option Plan(“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”)(collectively “Share Plans”).The Committee members are Mr Peter Seah Lim Huat (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang who was appointed on 8October 2009. He replaces Dr Philip Nalliah who was a Committee member until 30 September 2009.Following approval of the new Share Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore TechnologiesEngineering Executives’ Share Option Scheme (“ESOS”), the predecessor to the ESOP, was terminated.As at 31 December 2009, no options and conditional awards have been granted to controlling shareholders of the Company or associates of the Companyand no employees have received 5% or more of the total options and conditional awards available under the Share Plans.The aggregate number of new shares issued pursuant to the Share Plans did not exceed 15% of the issued share capital of the Company.During the financial year, except as disclosed below, there were no options granted and no shares awarded by the Company to any person to take up unissuedshares of the Company.(a)ESOS/ESOP(i)The options granted under the ESOS/ESOP are as follows:Name of participantOptions grantedand acceptedduring the financialyear under reviewAggregate optionsgranted andaccepted sincecommencement ofESOS/ESOP to endof financialyear under reviewAggregate optionsexercised/lapsed sincecommencement ofESOS/ESOP to endof financialyear under reviewAggregate optionsoutstanding as atend of financialyear under reviewDirector of the CompanyESOSTan Pheng Hock – 1,699,864 1,399,864 300,000ESOPPeter Seah Lim Huat – 530,000 329,750 200,250Tan Pheng Hock – 2,602,500 – 2,602,500Koh Beng Seng – 204,000 39,000 165,000Winston Tan Tien Hin – 593,500 371,500 222,000Quek Poh Huat – 375,000 177,000 198,000Venkatachalam Krishnakumar – 152,500 50,500 102,000Non-Executive Directors of subsidiaries(including former directors) – 3,550,566 2,506,523 1,044,043Group Executives(excluding Tan Pheng Hock) – 191,115,358 91,372,537 99,742,821Parent Group Executives and others – 187,320 107,890 79,430

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200997Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Share plans (continued)(a)ESOS/ESOP (continued)(ii)(iii)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 anyshare issue of any other company.During the financial year, 10,215,827 ordinary shares in the Company were issued pursuant to the exercise of options to take up unissuedshares of the Company.(b)PSPThe PSP is established with the objective of motivating senior management staff to strive for sustained long-term growth and performance inST Engineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are granted conditional on performance targetsset 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, currentlyprescribed to be a three-year performance period. The performance shares will only be released to the recipient at the end of the performancequalifying period. A specified number of performance shares shall be released by the ERCC to the recipient and the actual number ofperformance shares will depend on the achievement of set targets over the respective performance period. A minimum threshold performanceis required for any performance share to be released and the actual number of performance shares to be released is capped at 150% to 170%of the conditional award.In addition to PSP performance targets being met, the ERCC has decided that the final award for PSP going forward is conditional upon theperformance targets for RSP that has the same end of performance period being met. This is to create alignment between senior management andother employees. As an example, the final award for PSP 2009 is therefore conditional on the performance targets for RSP 2010, which has the sameend of performance period in December 2011, being met.Known as the plan trigger condition, this will apply to all PSP contingent awards from financial year 2009 onwards.With effect from financial year 2007, the performance measures used in PSP grants are Wealth Added and ST Engineering Group TSR against theMSCI Asia Pacific ex Japan Industrial Index.The awards granted under the PSP are as follows:Name of participantConditional awardsgranted during thefinancial year underreviewAwards releasedduring the financialyear under reviewAggregateconditional awardsgranted sincecommencementof PSP to end offinancial year underreviewAggregate awardsreleased sincecommencementof PSP to end offinancial year underreviewAggregateconditional awardsnot released as atend of financial yearunder reviewDirector of the CompanyTan Pheng Hock 0 to 425,000 131,250 0 to 3,770,000 360,075 0 to 1,100,000Group Executives 0 to 2,867,900 1,158,500 0 to 30,568,400 3,087,719 0 to 6,619,736

98Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Share plans (continued)(c)RSPThe RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and superior performancein ST Engineering Group. It also aims to foster a share ownership culture among staff within the ST Engineering Group and to better align staff’sincentive scheme with shareholders’ interest.Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currentlyprescribed to be a two-year performance period. The actual number of restricted shares delivered will depend on the achievement of set targets overthe respective performance period. This will be determined by the ERCC at the end of the qualifying performance period and released to the recipientover a three-year vesting period in the ratio of 50%, 25% and 25% consecutively.A minimum threshold performance is required for any restricted share to be released while the maximum number of restricted shares to be deliveredis capped at 150% of the conditional award.The medium-term stretched targets measured over a two-year performance period are set based on ST Engineering Group corporate objectives. Theperformance measures used for the two-year performance period are ST Engineering Group EVA Spread and EBITDA Margin.During the year, conditional share awards were also granted to non-executive directors (excluding those from the public sector) of ST Engineering, STAerospace, ST Electronics, ST Kinetics and ST Marine. Although the performance measures, namely, ST Engineering Group EVA Spread and EBITDAMargin, used are the same as those for key executives and managerial staff, the performance period is limited to one year. Depending on the actualperformance, the total release of awards will range from zero to a maximum capped at 150% of the conditional award, over a three-year vestingperiod at 33 1 / 3% per year.The awards granted under the RSP are as follows:Name of participantConditional awardsgranted during thefinancial year underreviewAwardsreleasedduring thefinancialyear underreviewAggregateconditional awardsgranted sincecommencementof RSP to end offinancial yearunder reviewAggregateawardsreleased sincecommencementof RSP to endof financial yearunder reviewAggregateawards notreleasedas at endof financialyearAggregateconditional awardsnot released as atend of financialyear under reviewDirector of the CompanyPeter Seah Lim Huat 0 to 45,750 5,358 0 to 91,500 5,358 10,716 0 to 45,750Tan Pheng Hock 0 to 144,000 17,325 0 to 355,500 17,325 17,325 0 to 288,000Koh Beng Seng 0 to 23,250 2,723 0 to 46,500 2,723 5,446 0 to 23,250Winston Tan Tien Hin 0 to 33,000 3,864 0 to 66,000 3,864 7,730 0 to 33,000Quek Poh Huat 0 to 27,750 3,250 0 to 55,500 3,250 6,500 0 to 27,750Venkatachalam Krishnakumar 0 to 27,750 3,250 0 to 55,500 3,250 6,500 0 to 27,750Davinder Singh s/o Amar Singh 0 to 21,750 2,547 0 to 43,500 2,547 5,095 0 to 21,750Dr Stanley Lai Tze Chang 0 to 7,500 878 0 to 15,000 878 1,757 0 to 7,500Non-Executive Directorsof the Company and itssubsidiaries 0 to 315,750 43,912 0 to 641,250 43,912 65,709 0 to 307,811Group Executives 0 to 12,430,338 434,732 0 to 25,480,613 434,732 524,901 0 to 22,457,495

Singapore Technologies Engineering LtdThink Ahead.Annual Report 200999Directors’ Reportas at 31 December 2009(Currency - Singapore dollars unless otherwise stated)Audit CommitteeThe Audit Committee comprises three independent non-executive directors, one of whom is also the Chairman of the Committee. The members of the AuditCommittee at the date of this report are as follows:Koh Beng Seng (Chairman)Venkatachalam KrishnakumarDr Stanley Lai Tze ChangThe Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50. The Audit Committee metduring the year to review the scope of the internal audit functions and the scope of work of the statutory auditors, and the results arising therefrom, includingtheir evaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company’s officers to the auditors. Theconsolidated financial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submissionto the directors of the Company for adoption.In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions, reviewed the procedures set upby the Group and the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of theinternal auditors, reviewed interested person transactions.The Audit Committee has received the requisite information from Ernst & Young LLP (“E&Y”) and has considered the financial, business and professionalrelationship between E&Y and the Group. It is of the view that such relationship is compatible with maintaining E&Y’s independence.AuditorsErnst & Young LLP will not be seeking re-election and KPMG LLP has been nominated to be the auditors for the ensuing year. The appointment is subject toshareholders’ approval at the Annual General Meeting on 21 April 2010.On behalf of the Board of DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore18 February 2010

100Statement by DirectorsWe, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion ofthe Directors:(a)the accompanying balance sheets, consolidated income statement, consolidated statement of comprehensive income, statements of changes inequity, and consolidated statement of cash flows together with notes thereto set out on pages 102 to 227 are drawn up so as to give a true and fairview of the state of affairs of the Company and of the Group as at 31 December 2009, and changes in equity of the Company and of the Group, theresults 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 DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore18 February 2010

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009101Independent Auditors’ Reportto the Members of Singapore Technologies Engineering LtdWe have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its subsidiary companies (collectivelythe “Group”) set out on pages 102 to 227, which comprise the balance sheets of the Group and the Company as at 31 December 2009, the statements ofchanges in equity of the Group and the Company, and the consolidated income statement, consolidated statement of comprehensive income and consolidatedstatement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the SingaporeCompanies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system ofinternal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition;and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair income statement andbalance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standardson Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selecteddepend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion,(a)(b)the consolidated financial statements of the Group and the balance sheet and statements of changes in equity of the Company are properly drawnup in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairsof the Group and of the Company as at 31 December 2009 and changes in equity of the Group and of the Company, the results and cash flows ofthe Group for the financial year ended on that date; andthe accounting and other records required by the Act to be kept by the Company and by those subsidiary companies incorporated in Singapore ofwhich we are the auditors have been properly kept in accordance with the provisions of the Act.Ernst & Young LLPPublic Accountants and Certified Public AccountantsSingapore18 February 2010

102Consolidated Income Statementfor the year ended 31 December 2009(Currency - Singapore dollars)GroupNote 2009 2008$’000 $’000Turnover 3 5,547,787 5,344,515Cost of sales (4,397,582) (4,188,323)Gross profit 1,150,205 1,156,192Other operating income, net 4 21,413 26,973Distribution and selling expenses (182,174) (189,893)Administrative expenses (397,011) (381,413)Other operating expenses (84,607) (75,866)Profit from operations before taxation, other income and financial expenses 5 507,826 535,993Other income, net 8 55,974 8,459Financial expenses 9 (56,120) (42,687)507,680 501,765Share of results of associated companies and joint ventures 38,879 38,937Profit from operations before taxation 546,559 540,702Taxation 10 (90,162) (51,939)Profit from operations after taxation 456,397 488,763Attributable to:Shareholders of the Company 443,930 473,636Minority interests 12,467 15,127456,397 488,763Earnings per share (cents) 11Basic 14.78 15.82Diluted 14.74 15.74The accompanying notes are an integral part of the financial statements.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009103Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2009(Currency - Singapore dollars)Group2009 2008$’000 $’000Profit from operations after taxation 456,397 488,763Other comprehensive income:Net fair value changes on available-for-sale financial assets 8,251 (26,330)Net fair value changes on cash flow hedges (4,214) (2,642)Foreign currency translation (27,500) (8,758)Other comprehensive income for the year, net of tax (23,463) (37,730)Total comprehensive income for the year 432,934 451,033Total comprehensive income attributable to:Shareholders of the Company 422,464 433,579Minority interests 10,470 17,454432,934 451,033The accompanying notes are an integral part of the financial statements.

104Balance Sheetsas at 31 December 2009(Currency - Singapore dollars)GroupCompanyNote 2009 2008 2009 2008$’000 $’000 $’000 $’000ASSETSNon-current assetsProperty, plant and equipment 12 1,166,677 1,019,084 711 1,016Subsidiaries 13 – – 588,477 574,453Associated companies and joint ventures 14 273,379 263,078 17,707 50Investments 15 21,464 53,416 – –Intangible assets 16 642,784 641,090 – –Investment properties 17 2,009 17,371 – –Long-term receivables, non-current 18 36,800 451 – –Finance lease receivables, non-current 19 5,227 4,793 – –Derivative financial instruments 51 18,742 16,374 – –Deferred tax assets 20 127,196 138,128 – –2,294,278 2,153,785 606,895 575,519Current assetsStocks and work-in-progress 21 1,364,296 1,286,331 – –Trade debtors 22 1,062,227 1,108,229 – –Due from related corporations 23 4,082 234,078 29 139,198Advances and other debtors 24 388,226 379,086 340,096 340,196Long-term receivables, current 18 7,637 700 90 180Finance lease receivables, current 19 14,386 11,057 – –Short-term investments 25 235,825 580 – –Bank balances and other liquid funds 26 1,513,610 818,925 241,984 231,1954,590,289 3,838,986 582,199 710,769TOTAL ASSETS 6,884,567 5,992,771 1,189,094 1,286,288EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 655,669 490,014 – –Creditors and accruals 29 1,392,392 1,406,169 41,650 56,855Provisions 30 211,851 185,415 – –Progress billings in excess of work-in-progress 21 557,329 475,746 – –Provision for taxation 178,734 177,647 5,204 5,927Short-term bank loans 31 83,510 322,773 – 25,300Lease obligations, current 32 1,822 1,726 – –Long-term bank loans, current 36 – 261,989 – –Other loans, current 37 240 240 – –Bank overdrafts 1 19 – –3,081,548 3,321,738 46,854 88,082NET CURRENT ASSETS 1,508,741 517,248 535,345 622,687

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009105Balance Sheetsas at 31 December 2009(Currency - Singapore dollars)GroupCompanyNote 2009 2008 2009 2008$’000 $’000 $’000 $’000Non-current liabilitiesAdvance payments from customers, non-current 682,025 601,626 – –Deferred income 34 14,546 11,496 – –Deferred tax liabilities 35 58,297 62,602 205 201Lease obligations, non-current 32 3,730 5,419 – –Long-term bank loans, non-current 36 648,854 287,642 – –Bonds 38 698,462 – – –Other loans, non-current 37 2,088 1,607 – –Other long-term payables, non-current 39 1,453 – – –Derivative financial instruments 51 17,368 23,525 – –Due to a subsidiary 40 – – 54,000 54,0002,126,823 993,917 54,205 54,201Total liabilities 5,208,371 4,315,655 101,059 142,283Net assets 1,676,196 1,677,116 1,088,035 1,144,005Share capital and reservesShare capital 41 611,808 586,614 611,808 586,614Capital reserves 42 116,323 116,323 – –Other reserves 43 (22,793) (16,216) 61,790 46,779Retained earnings 44 862,764 893,719 414,437 510,6121,568,102 1,580,440 1,088,035 1,144,005Minority interests 108,094 96,676 – –1,676,196 1,677,116 1,088,035 1,144,005Total equity and liabilities 6,884,567 5,992,771 1,189,094 1,286,288The accompanying notes are an integral part of the financial statements.

106Statements of Changes in Equityfor the year ended 31 December 2009(Currency - Singapore dollars)NoteShare Capital Other RetainedMinority Totalcapital reserves reserves earnings Total interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2008 554,888 115,948 5,419 956,255 1,632,510 147,183 1,779,693Net profit for the year – – – 473,636 473,636 15,127 488,763Other comprehensive income for the year – – (40,057) – (40,057) 2,327 (37,730)Total comprehensive income for the year – – (40,057) 473,636 433,579 17,454 451,033Issue of shares 31,726 – – – 31,726 – 31,726Acquisition of a subsidiary – – – – – 1,489 1,489Acquisition of additional interest insubsidiaries – – – – – (61,110) (61,110)Capital contribution – – – – – 2,836 2,836Cost of share-based payment – – 17,940 – 17,940 168 18,108Dividends 45 – – – (535,690) (535,690) (11,594) (547,284)Excess capital contribution from minorityshareholders – 375 – – 375 250 625Transfer from unappropriated profit tostatutory reserve – – 482 (482) – – –At 31.12.2008 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116At 1.1.2009 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116Net profit for the year – – – 443,930 443,930 12,467 456,397Other comprehensive income for the year – – (21,466) – (21,466) (1,997) (23,463)Total comprehensive income for the year – – (21,466) 443,930 422,464 10,470 432,934Issue of shares 25,194 – – – 25,194 – 25,194Acquisition of subsidiaries – – – – – 9,756 9,756Acquisition of additional interest insubsidiaries – – – – – (1,075) (1,075)Capital contribution – – – – – 5,092 5,092Cost of share-based payment – – 14,559 – 14,559 157 14,716Dividends 45 – – – (474,555) (474,555) (12,982) (487,537)Transfer from unappropriated profit tostatutory reserve – – 330 (330) – – –At 31.12.2009 611,808 116,323 (22,793) 862,764 1,568,102 108,094 1,676,196

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009107Statements of Changes in Equityfor the year ended 31 December 2009(Currency - Singapore dollars)NoteSharecapitalShare-basedpaymentreserveRetainedearningsTotal$’000 $’000 $’000 $’000The CompanyAt 1.1.2008 554,888 28,246 565,743 1,148,877Net profit for the year – – 480,559 480,559Total comprehensive income for the year – – 480,559 480,559Issue of shares 31,726 – – 31,726Cost of share-based payment – 18,533 – 18,533Dividends 45 – – (535,690) (535,690)At 31.12.2008 586,614 46,779 510,612 1,144,005At 1.1.2009 586,614 46,779 510,612 1,144,005Net profit for the year – – 378,380 378,380Total comprehensive income for the year – – 378,380 378,380Issue of shares 25,194 – – 25,194Cost of share-based payment – 15,011 – 15,011Dividends 45 – – (474,555) (474,555)At 31.12.2009 611,808 61,790 414,437 1,088,035The accompanying notes are an integral part of the financial statements.

108Consolidated Statement of Cash Flowsfor the year ended 31 December 2009(Currency - Singapore dollars)2009 2008$’000 $’000Cash flows from operating activitiesProfit before taxation including share of results of associated companies and joint ventures 546,559 540,702Adjustments:Share of results of associated companies and joint ventures (38,879) (38,937)Depreciation charge 150,985 148,590Impairment in value of investments 1,060 25,943Property, plant and equipment written off 10,948 12,117Write-back of impairment of property, plant and equipment (42) (102)Gain on disposal of property, plant and equipment (1,255) (4,364)Gain on disposal of an investment property (447) –Gain on disposal of investments (690) (650)Loss on disposal of subsidiaries 83 –Gain on disposal of associated companies – (803)Long-term loan from a minority shareholder forgiven – (194)Profit on maturity of amounts under fund management – (19,586)Negative goodwill written off (427) –Goodwill written off 1,599 –Share-based payment expense 17,702 19,357Changes in fair value of financial instruments and hedged items (812) 1,415Financial expenses 56,120 42,687Interest income (12,688) (21,151)Dividends from investments (181) (222)Amortisation of other intangible assets 11,773 10,203Impairment of other intangible assets 397 2Operating profit before working capital changes 741,805 715,007(Increase)/decrease in:Stocks and work-in-progress (57,866) (55,296)Progress billings in excess of work-in-progress 81,583 106,989Trade debtors 74,312 (157,254)Advance payments to suppliers (21,706) (60,332)Other debtors, deposits and prepayments 38,608 (33,266)Holding company and related corporations balances (520) 771Associated companies 1,089 5,397Joint ventures (11,033) 1,787Trade creditors (46,526) 65,207Advance payments from customers 242,899 29,538Other creditors, accruals and provisions 11,328 (57,596)Loans to staff and third parties, net of repayments (35,975) 392Cash generated from operations 1,017,998 561,344Interest received 9,230 23,925Income tax paid (87,830) (92,011)Deferred income 1,540 4,417Exchange difference on operating activities (9,429) 13,683Net cash from operating activities 931,509 511,358

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009109Consolidated Statement of Cash Flowsfor the year ended 31 December 2009(Currency - Singapore dollars)2009 2008$’000 $’000Cash flows from investing activitiesProceeds from sale of property, plant and equipment 5,045 11,272Proceeds from sale of an investment property 1,800 –Proceeds from sale of associated companies – 803Dividends from associated companies and joint ventures 44,505 42,247Dividends from investments 181 222Proceeds from sale and maturity of investments 1,154 131,492Purchase of property, plant and equipment (276,525) (191,291)Purchase of investments (195,399) –Additional investment/acquisition of associated companies and joint ventures (19,803) (2,795)Acquisition of other intangible assets (6,696) (4,556)Acquisition of subsidiaries (38,923) (121,629)Acquisition of additional interest in subsidiaries (2,562) (62,930)Exchange difference on investing activities 3,601 74Net cash used in investing activities (483,622) (197,091)Cash flows from financing activitiesCapital contribution from minority shareholders of subsidiaries 5,092 2,836Proceeds from issue of shares 22,208 30,477Proceeds from issue of bonds 716,653 –Loan from a minority shareholder 757 –Loan to associated companies and joint ventures (6,820) (360)Repayment of other loans, net (234) (252)Repayment of lease obligations, net (1,692) (1,409)(Repayment)/proceeds of bank loans, net (151,442) 33,990Dividends paid to shareholders of the Company (474,555) (535,690)Dividends paid to minority shareholders of subsidiaries (12,982) (11,594)Interest paid (42,902) (42,239)Exchange difference on financing activities (34,902) (18,838)Net cash from/(used in) financing activities 19,181 (543,079)Net increase/(decrease) in cash and cash equivalents 467,068 (228,812)Cash and cash equivalents at beginning of the year 1,049,094 1,282,724Exchange difference on cash and cash equivalents at beginning of the year (2,553) (4,818)Cash and cash equivalents at end of the year (Note 47) 1,513,609 1,049,094

110Consolidated Statement of Cash Flowsfor the year ended 31 December 2009(Currency - Singapore dollars)Summary of effect on acquisition of interest in subsidiariesIn 2009, the fair value of the identifiable assets and liabilities of the subsidiaries acquired (as disclosed in Note 13) and the effect thereof as at the dates ofacquisitions were as follows:CarryingRecognised on amount beforeacquisition combination$’000 $’000Property, plant and equipment 30,550 23,283Associated company 180 180Intangible assets 5,244 –Deferred tax assets 251 –Stocks and work-in-progress 18,749 18,749Trade and other debtors 48,162 48,254Cash and cash equivalents 15,235 15,235Other non-current assets 18 18118,389 105,719Creditors and accruals (40,258) (40,214)Advance payments from customers (3,155) (3,155)Provision for warranty (226) (226)Provision for taxation (1,041) (1,041)Bank loans (20,532) (20,532)Deferred tax liabilities (1,849) (147)Deferred income (1,510) (1,510)(68,571) (66,825)Net identifiable assets 49,818 38,894Goodwill arising on consolidation 14,84464,662Minority interests (9,756)Total purchase consideration 54,906Cost of acquisitions:Cash to be paid in subsequent year 35Reclassification from investment in an associated company 713Cash paid in current year 54,15854,906Cash outflow on acquisitions:Cost of acquisitions (54,158)Net cash acquired with the subsidiaries 15,235Net cash outflow on acquisition (38,923)

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009111Consolidated Statement of Cash Flowsfor the year ended 31 December 2009(Currency - Singapore dollars)Summary of effect on acquisition of interest in subsidiaries (continued)Included in the carrying amount before combination are the assets and liabilities of Precision Products Singapore Pte Ltd, Parallel Limited, VT iDirect Canada,Inc. (formerly known as Ximaera Technologies Canada Inc.), Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd. The purchase priceallocation of Precision Products Singapore Pte Ltd, Parallel Limited and VT iDirect Canada, Inc. to goodwill, intangible assets (excluding goodwill) and otherassets and liabilities is currently being assessed and is expected to be finalised within 12 months from the date of acquisition (as disclosed in Note 13).From the dates of acquisitions, the acquired subsidiaries have contributed $2.8 million in profits to the net profit after tax and minority interests ofthe Group.If the acquisition had taken place at the beginning of the year, the turnover and net profit after tax and minority interests of the Group would have been$5.6 billion and $445.2 million respectively.The accompanying notes are an integral part of the financial statements.

112Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)These notes form an integral part of and should be read in conjunction with the accompanying financial statements.1. GeneralThe Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principalplace 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. Theprincipal 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 EngineeringLtd and its subsidiaries as at 31 December 2009 and for the year then ended were authorised and approved by the Board of Directors for issuanceon 18 February 2010.2. Summary of significant accounting policies(a)Basis of financial statements preparationThe financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below.The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000) except whenotherwise indicated.The accounting policies have been consistently applied by the Company and the Group and except for changes in accounting policiesdiscussed in Note 2(y), are consistent with those used in the previous year.(b)Basis of consolidation(i)SubsidiariesA subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefitsfrom its activities. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued sharecapital, or controls more than half of the voting power, or controls the composition of the board of the directors.In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009113Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(b)Basis of consolidation (continued)(ii)The consolidated financial statements include the financial statements of the Company and its subsidiaries made up to the end ofthe financial year. The financial statements of the subsidiaries used in the presentation of the consolidated financial statements areprepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events insimilar circumstances. The results of subsidiaries acquired or disposed of during the financial year are included from the effectivedate of acquisition or up to the effective date of disposal. All significant inter-company balances and transactions are eliminatedon consolidation.In the consolidated financial statements, subsidiaries are accounted for using the purchase method, except for the Company’sinterests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies KineticsLtd, and Singapore Technologies Marine Ltd (collectively referred to as the “Scheme Companies”) which resulted from theamalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter50 in 1997.As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has beenadopted in the preparation of the consolidated financial statements in connection with the amalgamation.Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded attheir existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued(plus any additional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired isrecorded as merger reserve. The merger reserve had been utilised in prior years to partially write off the goodwill on acquisition ofFounders Industries Pte Ltd and its subsidiaries.Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are presented inthe consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in theconsolidated income statement. Transactions with minority interests are accounted for using the parent entity extension method,whereby, on acquisition of minority interests, the difference between the consideration and the book value of the share of the netassets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in the income statement.(iii)The Group adopts the equity method to account for its interests in associated companies and joint ventures.The Group’s share of the post-acquisition results of associated companies and joint ventures is included in the consolidatedincome statement. The Group’s share of the post-acquisition accumulated profits and reserves of associated companies and jointventures is included in the carrying value of the investments in the consolidated balance sheet.For this purpose, the audited financial statements of the associated companies and joint ventures are used. Where auditedfinancial statements are not available, the share of results is arrived at from the last audited financial statements available andunaudited management financial statements to the end of the accounting period.(iv)Goodwill or reserve on consolidation represents the excess or deficiency of the purchase consideration over the fair value (assignedby 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 ofbusiness combination is recognised in the income statement on the date of acquisition.

114Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(b)Basis of consolidation (continued)(v)In the preparation of the consolidated financial statements, the balance sheets of foreign subsidiaries, associated companies andjoint ventures are translated into Singapore dollars at rates of exchange ruling at the balance sheet date except for share capitaland reserves, which are translated at historical rates of exchange. Operating results are translated at average rates of exchangefor the year. Translation differences are taken to other comprehensive income.Goodwill and fair value adjustments arising from the acquisition of a foreign subsidiary are treated as assets or liabilities andtranslated at exchange rates ruling at the balance sheet date.(c)Investments in associated companies and joint venturesThe 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 than20% 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 than50% 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 postacquisitionchanges in the Group’s share of net assets of the associated company/joint venture. Goodwill relating to an associated companyis included in the carrying amount of the investment and is not amortised. After application of the equity method, the Group determineswhether 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 hasbeen a change recognised directly in the equity of the associated company/joint venture, the Group recognises its share of any changes anddiscloses 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 usedby the Group for like transactions and events in similar circumstances.(d)Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. Anasset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from otherassets or groups of assets. When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired andis written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their presentvalue using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to theasset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent withthe function of the impaired asset.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009115Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(d)Impairment of non-financial assets (continued)An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may nolonger exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment lossis reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairmentloss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amountcannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for theasset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case thereversal is treated as a revaluation increase. After such a reversal, the depreciation charged is adjusted in future periods to allocate theasset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.The Group does not reverse in a subsequent period any impairment loss recognised for goodwill.(e)Financial assetsFinancial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of thefinancial instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not atfair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets afterinitial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchaseor sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the periodgenerally established by regulation or convention in the marketplace concerned.(i)Financial assets at fair value through profit or lossFinancial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held fortrading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of sellingin the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments.Gains or losses on investments held for trading are recognised in the income statement.(ii)Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an activemarket. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in theincome 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 amountswhen there is objective evidence that the Group will not be able to collect the debt. Known bad debts are written off. Further detailson the accounting policy for impairment of financial assets are stated in Note 2(j).(iii)Held-to-maturity investmentsFinancial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has thepositive intention and ability to hold the investment to maturity. Subsequent to initial recognition, held-to-maturity investments aremeasured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement whenthe held-to-maturity investments are derecognised or impaired, and through the amortisation process.

116Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(e)Financial assets (continued)(iv)Available-for-sale financial assetsAvailable-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are notclassified in any of the three preceding categories. After initial recognition, available-for-sale financial assets are measured atfair value with gains or losses being recognised in other comprehensive income until the investment is derecognised or until theinvestment is determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in theincome statement. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity toincome statement as a reclassification adjustment when the financial asset is derecognised.The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted marketprices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determinedusing valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the currentmarket 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 depreciationAll items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognisedas 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 theitem can be measured reliably.Subsequent to recognition, property, plant and equipment are stated at cost or valuation, net of depreciation and any impairment loss.Depreciation is provided on the straight-line basis so as to write off the cost of these assets over their estimated useful lives as follows:Buildings - 15 to 30 yearsLeasehold land - Over the period of the lease of between 5 to 60 yearsImprovements to premises - 3 to 30 yearsWharves and slipways - 10 to 16 yearsSyncrolift and floating docks - 5 to 10 yearsBoats and barges - 5 yearsPlant and machinery - 2 to 20 yearsProduction tools and equipment - 3 to 10 yearsFurniture, fittings, office equipment and computers - 2 to 5 yearsTransportation equipment and vehicles - 5 yearsAircraft and aircraft engines - 5 to 20 yearsFreehold land has unlimited useful life and therefore is not depreciated.Construction-in-progress is not depreciated until each stage of development is completed and becomes operational.Assets purchased specifically for projects are depreciated over the useful life of the class of assets or the duration of the project, whicheveris shorter.The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate thatthe carrying value may not be recoverable.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009117Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(f)Property, plant and equipment and depreciation (continued)The residual value, useful life and depreciation method are reviewed at each financial year end to ensure that the amount, method andperiod of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefitsembodied in the items of property, plant and equipment.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use ordisposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.(g)Investment propertiesInvestment properties are stated at cost, net of depreciation and any impairment loss. Depreciation is provided on the straight-line basis soas to write-off the cost of the investment properties over their estimated useful lives of 15 - 50 years.Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawnfrom use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty are recognised in the income statement in the year of retirement or disposal.Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owneroccupied property, the deemed cost for subsequent accounting is the carrying value at the date of change in use. For a transfer from owneroccupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant andequipment set out in Note 2(f) up to the date of change in use.(h)Stocks and work-in-progressStocks 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 uncompletedcontracts is made in the year in which such losses are determined.Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimatedcosts necessary to make the sale.(i)Cash and cash equivalentsCash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalents are short-term, highlyliquid investments and short-term loans to related corporations that are readily convertible to known amounts of cash and that are subjectto insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cash management.

118Notes to the Financial Statements1 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(j)Impairment of financial assetsThe Group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.(i)Assets carried at amortised costsIf there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, theamount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated futurecash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interestrate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced eitherdirectly or through use of an allowance account. The amount of the loss shall be recognised in the income statement.The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individuallysignificant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objectiveevidence of impairment exists for an individually assessed financial asset, whether significant or not, the assets is included ina group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed forimpairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognisedare 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 Groupconsiders factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significantdelay in payments.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversalof an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed itsamortised cost at the reversal date.(ii)Assets carried at costsIf there is objective evidence (such as significant adverse changes in the business environment where the issuer operates,probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on an unquoted equity instrumentthat is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to andmust be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as thedifference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the currentmarket rate of return for a similar financial asset. The loss recognised is not reversed in future periods.(iii)Available-for-sale financial assetsSignificant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and thedisappearance of an active trading market are considerations to determine whether there is objective evidence that investmentsecurities classified as available-for-sale financial assets are impaired.If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principalpayment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, istransferred from equity to the income statement. Reversals in respect of equity instruments classified as available-for-sale arenot recognised in the income statement. Reversals of impairment losses on debt instruments are reversed through the incomestatement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment losswas recognised in the income statement.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009119Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(k)Financial liabilitiesFinancial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions ofthe financial instrument.Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributabletransaction costs.Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, except forderivatives, which are measured at fair value.Trade and other creditors are financial liabilities initially recognised at fair value and subsequently measured at amortised cost using theeffective interest method.Borrowings are financial liabilities initially recognised at the fair value of the consideration received less directly attributable transactioncosts. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Borrowingcosts are recognised as expenses using the effective interest method except for those that are directly attributable to the acquisition,construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset areincurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.(l)ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of theamount of the obligation.(i)WarrantiesThe warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date. The provisionis based on past experience and industry averages for defective products. The majority of the costs is expected to be incurred overthe applicable warranty periods.(ii)Liquidated damagesProvision for liquidated damages is made in respect of anticipated claims from customers on contracts of which deadlines areoverdue or not expected to be completed on time in accordance with contractual obligations. The utilisation of provisions isdependent on the timing of claims.

120Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(m)Income taxes(i)Current taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from orpaid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantivelyenacted by the balance sheet date.Current taxes are recognised in the income statement except to the extent that the tax relates to items recognised outside theincome statement, either in other comprehensive income or directly in equity.(ii)Deferred taxDeferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities aremeasured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expectedto 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, associatedcompanies and interests in joint ventures, except where the timing of the reversal of the temporary difference can be controlledand 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 taxlosses, 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 taxassets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that futuretaxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferredtax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or allof the deferred tax asset to be utilised.Deferred income tax relating to items recognised outside profit or loss is recognised outside the income statement. Deferred taxitems are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity anddeferred tax arising from a business combination is adjusted against goodwill on acquisition.Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off currenttax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the sametaxation authority.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009121Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(n)Employee benefits(i)Employee equity compensation benefits• Share Option PlanPursuant to the ST Engineering Share Option Plan, certain directors and employees are granted non-transferable optionsto purchase the Company’s shares. The fair value of options granted is determined using a binomial model and isrecognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date andspread over the period during which the employees become unconditionally entitled to the options. In valuing the shareoption, no account is taken of any performance condition, other than market conditions, if any. The cumulative expenserecognised for share options at each reporting date until the vesting date reflects the extent to which the vesting periodhas expired and the Group’s best estimate of the number of share options that will ultimately vest. The charge or creditto the income statement for a period represents the movement in cumulative expense recognised as at the beginningand end of that period.The proceeds received are credited to share capital when the options are exercised.The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earningsper share.• Performance Share PlanPursuant to the ST Engineering Performance Share Plan, the Company’s shares can be awarded to certain employeesand directors of the Group. The details of the Performance Share Plan are described in Note 41.The performance shares cost is amortised and recognised in the income statement on a straight-line basis over thethree-year performance period. The fair value of the performance shares is determined at conditional grant date using theMonte Carlo simulation model, which takes into account the market conditions and non-market conditions.• Restricted Stock PlanPursuant to the ST Engineering Restricted Stock Plan, the Company’s shares can be awarded to certain employees anddirectors of the Group. The details of the Restricted Stock Plan are described in Note 41.The restricted shares cost is amortised and recognised in the income statement over the vesting period. The fair value ofthe restricted shares is determined on conditional grant date using the Monte Carlo simulation model.(ii)Defined contribution plansThe Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. Inparticular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a definedcontribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which therelated service is performed.

122Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(o)Income recognitionIncome is recognised to the extent that it is probable that the economic benefits will flow to the Group and the income can be reliablymeasured. 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)(b)(c)the percentage of costs incurred to estimated total costs to complete the contracts; orwhen goods and services, representing part of a contract, are delivered; orupon 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 isdeferred and taken up in the income statement only upon the discharge of specified contractual obligations. Commission incomein respect of each contract in excess of the first 15% of the total amount receivable is taken up in the income statement as andwhen it is billed. For certain back to back contracts, commission income is recognised upon delivery of goods and services.(vi)Interest income, including income arising from finance leases and other financial instruments, is recognised on an accrual basisusing the effective interest method.(vii)Rental income arising from investment properties is accounted for on a straight-line basis over the lease terms.(p)Foreign currency(i)Foreign currency transactionsTransactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiarycompanies and are recorded on initial recognition in the functional currencies at exchange rates approximating those rulingat the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate ofexchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currencyare translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in aforeign currency are translated using the exchange rates at the date when the fair value was determined.Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date arerecognised in the income statement except for exchange differences arising on monetary items that form part of the Group’s netinvestment in foreign subsidiary companies, which are recognised initially in other comprehensive income and accumulated underforeign currency translation reserve in equity and recognised in the consolidated income statement on disposal of the subsidiary.In the Company’s separate financial statements, such exchange differences are recognised in the income statement.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009123Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(p)Foreign currency (continued)(i)Foreign currency transactions (continued)Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are also takendirectly to other comprehensive income until the disposal of the net investment, at which time they are recognised in the incomestatement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in the othercomprehensive income.(ii)Foreign currency translationThe results and financial position of foreign subsidiary companies are translated into Singapore dollars using thefollowing procedures:• Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheetdate; and• Income and expenses for each income statement are translated at average exchange rates for the year, whichapproximates the exchange rates at the dates of the transactions.All resulting exchange differences are recognised in other comprehensive income.Goodwill and fair value adjustments arising on the acquisition of foreign subsidiaries on or after 1 January 2005 are treatedas assets and liabilities of the foreign subsidiaries and are recorded in the functional currency of the foreign subsidiaries andtranslated at the closing rate at the balance sheet date.On disposal of a foreign subsidiary, the cumulative amount of exchange differences deferred in equity relating to that foreignsubsidiary is recognised in the income statement as a component of the gain or loss on disposal.(q)Intangible assets(i)GoodwillGoodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairmentlosses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that thecarrying value may be impaired.For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to eachof the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of thecombination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Eachunit 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 108Operating Segments.

124Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(q)Intangible assets (continued)(i)Goodwill (continued)Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), towhich the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less thanthe carrying amount, an impairment loss is recognised. Impairment losses recognised in respect of cash-generating unit (group ofcash-generating units) are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating unit (groupof cash-generating units) and then, to reduce the carrying amount of the other assets in the cash-generating unit (group of cashgeneratingunits) 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 unitis disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation whendetermining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on therelative fair values of the operation disposed of and the portion of the cash-generating unit retained.(ii)Other intangible assetsIntangible assets acquired separately are measured on initial recognition at costs. The cost of intangible assets acquired in abusiness combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried atcost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets are notcapitalised and the expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives ofintangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the economicuseful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisationperiod 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 isaccounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. Theamortisation expense on intangible asset with finite lives is recognised in the income statement in the expense category consistentwith the function of the intangible asset.Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unitlevel. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually todetermine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment fromindefinite to finite is made on a prospective basis.• Research and development expenditureResearch expenditure is charged to the income statement as and when incurred. Deferred development costs arisingfrom development expenditure on an individual project are recognised when the Group can demonstrate the technicalfeasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete andits ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resourcesto complete and the ability to measure reliably the expenditure during the development. Deferred development costshave a finite useful life and are amortised over the period of expected sales from the related project (5 years) on astraight-line basis.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009125Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(q)Intangible assets (continued)(ii)Other intangible assets (continued)• Film cost inventoryFilm production costs are capitalised as film cost inventory. The film cost inventory is amortised using the individualfilm-forecastcomputation method which amortises the film costs in the same ratio that current gross revenue bearto anticipated total gross income for the film. However, should this result in a book value for a film which exceed theestimated net realisable value, then a corresponding reduction to its estimated net realisable value is to be made on afilm-by-film basis. Amortisation is to commence when each film begins to earn revenue.• Commercial and intellectual property rightsCosts relating to intellectual property rights, which are acquired are capitalised and amortised on a straight-line basisover its estimated economic useful lives of 2 - 16 years.• BrandsCosts relating to brands, which are acquired are capitalised and amortised on a straight-line basis over their estimatedeconomic useful lives of 20 - 70 years.• Dealer networkCosts relating to dealer network, which are acquired are capitalised and amortised on a straight-line basis over theirestimated economic useful life of 7 years.(r)Hire purchaseAssets acquired on hire purchase arrangements are capitalised in the financial statements and the corresponding obligations treated as aliability. The total interest, being the difference between the total instalments payable and the capitalised amount, is charged to the incomestatement over the period of such hire purchase arrangements in equal monthly instalments to produce a constant rate of charge on thebalance of capital repayments outstanding. Assets acquired on hire purchase arrangements are depreciated in accordance with the policyset out in Note 2(f) above.(s)Finance leases(i)As lesseeFinance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefitsincidental to ownership of the lease items. Assets financed under such leases are capitalised at the inception of the lease at the fairvalue of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added tothe amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as toachieve 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.

126Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(s)Finance leases (continued)(ii)As lessorLeases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, areclassified as finance lease.The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs for negotiating andarranging the lease) is recognised on the balance sheet. The difference between the gross receivables and the present value ofthe 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 principaland the unearned finance income. The finance income is recognised in the income statement on a basis that reflects a constantperiodic 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 andrecognised as an expense in the income statement over the lease term on the same basis as the leased income.(t)Operating leasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operatingleases. 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 straightlinebasis.(u)Government grantsGrants in recognition of specific expenses are taken to income in the same year as the relevant expenses. Grants related to depreciableassets are deferred and allocated to income over the period in which such assets are depreciated and used in the projects subsidised bythe grants.(v)Derivative financial instruments and hedgingThe Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associatedwith foreign currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the date onwhich a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fairvalue is positive and as liabilities when the fair value is negative.Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are taken directly to the incomestatement for the year.Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of thehost contract and the embedded derivatives are not closely related, a separate instrument with the same terms as the embedded derivativeswould meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009127Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(v)Derivative financial instruments and hedging (continued)The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similarmaturity profiles. The fair value of interest rate swap and cross currency swap contracts is determined by reference to market valuesfor similar instruments.The Group uses cash from time to time as a hedging instrument to hedge its risk associated with foreign currency fluctuations.For the purpose of hedge accounting, hedges are classified either as fair value hedge or cash flow hedge.At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishesto apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includesidentification of the hedging instrument, the hedge item or transaction, the nature of the risk being hedged and how the entity will assessthe hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to thehedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessedon an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which theywere designated.Hedges which meet the strict criteria for hedge accounting are accounted for as follows:(i)Fair value hedgesFor fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being hedged,the hedging instrument is remeasured at fair value and gains and losses from both are taken to the income statement.For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through profit orloss over the remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument for which the effectiveinterest 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 adjustedfor changes in its fair value attributable to the risk being hedged.When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of thefirm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognisedin the income statement. The changes in the fair value of the hedging instrument are also recognised in the income statement.The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, thehedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carryingamount of a hedging instrument for which the effective interest method is used is amortised in the income statement. Amortisationmay begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changesin its fair value attributable to the risk being hedged.

128Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(v)Derivative financial instruments and hedging (continued)(ii)Cash flow hedgesFor cash flow hedges the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while theineffective 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, suchas when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedgeditem is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount ofthe non-financial asset or liability.If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the incomestatement. If the hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designationas a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the relatedtransaction is not expected to occur, the amount is taken to the income statement.(iii)Hedge of net investment in foreign operationsThe Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investmenthedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translationdifferences on the financial liabilities relating to the effective portion of the hedge are recognised in the currency translation reservein the consolidated financial statements and transferred to the income statement as part of the gain or loss on disposal of theforeign operations. The currency translation differences relating to the ineffective portion of the hedge are recognised immediatelyin the income statement.(w)SegmentsFor management purposes, the Group is organised on a worldwide basis into four major operating segments. The Management of theCompany reviewed the segments’ operating results regularly in order to allocate resources to the segments and to assess the segmentperformance. Additional disclosures on each of these operating segments are shown in Note 49, including the factors used to identify thereportable segments and the measurement basis of segment information.(x)Derecognition of financial assets and liabilities(i)Financial assetsA 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 themin full without material delay to a third party under a “pass-through” arrangement; or• The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially allthe risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards ofthe asset, but has transferred control of the asset.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009129Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(x)Derecognition of financial assets and liabilities (continued)(i)Financial assets (continued)When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantiallyall the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’scontinuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset ismeasured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Groupcould be required to repay.Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of theGroup’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case ofa written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower ofthe fair value of the transferred asset and the option exercise price.On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the considerationreceived (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has beenrecognised in other comprehensive income is recognised in the income statement.(ii)Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.When an existing financial liability is replaced by another from the same lender on substantially different terms, or the termsof an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of theoriginal liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognisedin the income statement.(y)Changes in accounting policies(i)Adoption of new and revised FRSWith effect from 1 January 2009, the Group has adopted all the new and revised FRS and INT FRS that are mandatory for financialyears beginning on or after 1 January 2009. The adoption of these FRS and INT FRS has no significant impact to the Group, exceptfor FRS 1, FRS 107 and FRS 108 as indicated below:FRS 1 Presentation of Financial Statements – Revised presentationThe revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only detailsof transactions with owners, with all non-owner changes in equity presented in the statement of other comprehensive income. Inaddition, the Standard introduces the statement of comprehensive income which presents income and expense recognised in theperiod. This statement may be presented in one single statement, or two linked statements. The Group is presenting the statementof comprehensive income in two statements.

130Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(y)Changes in accounting policies (continued)(i)Adoption of new and revised FRS (continued)Amendments to FRS 107 Financial Instruments: DisclosuresThe amendments to FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value measurementsare to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, reconciliationbetween the beginning and ending balance for Level 3 fair value measurements is now required, as well as significant transfersbetween Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures.The fair value measurement disclosures and liquidity risk disclosures are presented in Note 50 and Note 51 to the financialstatements respectively.FRS 108 Operating SegmentsFRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determineprimary and secondary reporting segments of the Group. The Group determined that the reportable operating segments are thesame as the business segments previously identified under FRS 14 Segment Reporting. Additional disclosures about each of thesegments are shown in Note 49, including the revised comparative information.(ii)Future changes in accounting policiesThe Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:Effective for annualperiods beginningon or afterFRS 27 : Consolidated and Separate Financial Statements – Amendments Relating to 1 July 2009Cost of an Investment in a Subsidiary, Jointly-controlled Entity or AssociateFRS 39 : Financial Instruments: Recognition and Measurement – Amendments 1 July 2009Relating to Eligible Hedged ItemsFRS 101 : First-Time Adoption of Financial Reporting Standards – Amendments 1 January 2010Relating to Additional Exemptions for First-time AdoptersFRS 102 : Share-based Payment – Amendments Relating to Group Cash-settled 1 January 2010Share-based Payment TransactionsFRS 103 : Business Combinations 1 July 2009FRS 105 : Non-current Assets Held for Sale and Discontinued Operations 1 July 2009INT FRS 117 : Distributions of Non-cash Assets to Owners 1 July 2009

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009131Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(y)Changes in accounting policies (continued)(ii)Future changes in accounting policies (continued)Effective for annualperiods beginningon or afterImprovements to FRSs issued in 2009FRS 38 : Intangible Assets 1 July 2009FRS 102 : Share-based Payment 1 July 2009FRS 108 : Operating Segments 1 July 2009INT FRS 109 : Reassessment of Embedded Derivatives 1 July 2009INT FRS 116 : Hedges of a Net Investment in a Foreign Operation 1 July 2009FRS 1 : Presentation of Financial Statements 1 January 2010FRS 7 : Statement of Cash Flows 1 January 2010FRS 17 : Leases 1 January 2010FRS 36 : Impairment of Assets 1 January 2010FRS 39 : Financial Instruments: Recognition and Measurement 1 January 2010FRS 105 : Non-current Assets Held for Sale and Discontinued Operations 1 January 2010FRS 108 : Operating Segments 1 January 2010The Group expects that the adoption of the above pronouncements will not have a significant impact on the financial statementsin the period of initial application, except for FRS 103 and FRS 27 as indicated below.FRS 103 Business Combinations and Amendments to FRS 27 Consolidated and Separate Financial StatementsThe revised FRS 103 introduces a number of changes in the accounting for business combinations occurring after 1 July 2009.These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, andfuture reported results. The Amendments to FRS 27 require that a change in the ownership interest of a subsidiary (without lossof control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will theygive rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary aswell as the loss of control of a subsidiary. Other consequential amendments were made to FRS 7 Statement of Cash Flows, FRS 12Income Taxes, FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interestsin Joint Ventures. The changes from revised FRS 103 and Amendments to FRS 27 will affect future acquisitions or loss of controland transactions with minority interest. The standards may be early applied. However, the Group does not intend to early adopt.(z)Significant accounting estimates and judgementsEstimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the application of theGroup’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on anongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonableunder the circumstances.

132Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(z)Significant accounting estimates and judgements (continued)(i)Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that havea significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial yearare discussed below.• Impairment of non-financial assetsThe Group assesses whether there are any indicators of impairment for all non-financial assets at each reportingdate. Goodwill and other intangibles are tested for impairment annually and at other times when such indicators exist.Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may notbe recoverable.When value-in-use calculations are undertaken, Management must estimate the expected future cash flows from theasset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cashflows. Further details of the key assumptions applied in the impairment assessment of goodwill and other intangibleassets, are given in Note 16 to the financial statements.• Impairment of loans and receivablesThe Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired.To determine whether there is objective evidence of impairment, the Group considers factors such as the probability ofinsolvency or significant financial difficulties of the debtor and default or significant delay in payments.Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based onhistorical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans andreceivables at the balance sheet date is disclosed in Note 51 to the financial statements.• Depreciation chargeProperty, plant and equipment and investment properties are depreciated on a straight-line basis over their estimateduseful lives. Management estimates the useful lives of these property, plant and equipment and investment propertiesto be within 2 to 60 years. The carrying amount of the Group’s property, plant and equipment and investment propertiesat 31 December 2009 was $1,168,686,000 (2008: $1,036,455,000). Changes in the expected level of usage andtechnological developments could impact the economic useful lives and the residual values of these property, plant andequipment and investment properties, therefore future depreciation charges could be revised.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009133Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)2. Summary of significant accounting policies (continued)(z)Significant accounting estimates and judgements (continued)(ii)Critical judgements made in applying accounting policiesIn the process of applying the Group’s accounting policies, Management has made certain judgements, apart from those involvingestimations, which have significant effect on the amounts recognised in the financial statements.• Income taxesThe Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determiningthe group-wide provision for income taxes. There are certain transactions and computations for which the ultimatetax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expectedtax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters isdifferent from the amounts that were initially recognised, such differences will impact the income tax and deferred taxprovisions in the period in which such determination is made. The carrying amount of the Group’s deferred tax assetswas $127,196,000 (2008: $138,128,000), tax payables was $178,734,000 (2008: $177,647,000) and deferred taxliabilities was $58,297,000 (2008: $62,602,000) at 31 December 2009.3. TurnoverTurnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:Group2009 2008$’000 $’000Sale of goods 2,966,111 2,907,967Service income 2,581,676 2,436,5485,547,787 5,344,515

134Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)4. Other operating income, netGroupNote 2009 2008$’000 $’000Commission income 371 746Dividend income- quoted equity investments 118 99- unquoted equity investments 63 123Interest income- related corporations 1,823 10,731- bank deposits 5,731 9,097- staff loans 12 12- finance lease 625 456- bonds 3,202 160- others 1,295 695Impairment in value of investments- quoted investments 15 (313) (25,580)- unquoted investments 15 (747) (363)Gain/(loss) on disposal of- subsidiary companies (83) –- associated companies – 803- investments 690 650Profit on maturity of amounts under fund management – 19,586Gain/(loss) on fair value changes of held for trading investments 421 (9)Fair value changes of financial instruments- gain/(loss) on forward currency contract designated as hedging instrument in fairvalue hedges 996 (3,308)- ineffective portion of forward currency contract designated as hedging instrument incash flow hedges (15) (69)Fair value of hedged items (590) 1,971Others 7,814 11,17321,413 26,973

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009135Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)5. Profit from operationsProfit from operations is arrived at:GroupNote 2009 2008$’000 $’000After chargingAuditors’ remuneration- auditors of the Company 1,782 1,891- other auditors 2,979 3,479Non-audit fees- auditors of the Company 484 537- other auditors 1,190 1,528Fees and remuneration of directors 3,810 5,042Fees paid to a firm of which a director is a member 269 109Personnel expenses 6 1,470,638 1,430,643Depreciation charge 12, 17 150,985 148,590Allowance for- Stock obsolescence 48,726 22,515- Doubtful debts (trade) 22 28,084 28,775- Unbilled receivables (trade) 22 1,854 –- Loan receivables 18 – 435- Doubtful lease receivables 19 1,138 877Provision/(write-back of provision) for- Foreseeable losses 4,966 4,867- Liquidated damages 30 2,901 (5,257)- Warranties 30 34,903 5,164Property, plant and equipment written off 10,948 12,117Research, design and development expenses incurred 82,238 75,204Operating lease expenses 36,464 28,491Amortisation of other intangible assets 16 11,773 10,203Write-back of impairment of property, plant and equipment 12 (42) (102)Impairment in value of other intangible assets 16 397 2And creditingGrants and subsidies received 2,494 2,122Deferred income recognised 34 2,259 3,784

136Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)6. Personnel expensesGroup2009 2008$’000 $’000Wages and salaries * 1,219,616 1,187,800Pension contributions 86,600 79,075Share-based payments 17,702 19,357Other personnel expenses 146,720 144,4111,470,638 1,430,643* Includes directors’ remuneration of $1,667,176 (2008: $3,841,576).7. Key management personnel compensationGroup2009 2008$’000 $’000Short-term employee benefits 34,382 41,650Pension contributions 432 464Other long-term benefits 5 7Share-based payments 4,138 7,00738,957 49,1288. Other income, netGroup2009 2008$’000 $’000Gain on disposal of property, plant and equipment and investment property 1,702 4,364Grant income from Jobs Credit Scheme 39,118 –Proceeds received/receivable from insurers (Hurricane Katrina) – 144Exchange loss, net (3,495) (10,841)Rental income 5,774 5,269Long-term loan from a minority shareholder forgiven – 194Others 12,875 9,32955,974 8,459During the financial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit scheme (“Scheme”).Under this Scheme, the Group received a 12% cash grant on the first $2,500 of each month’s wages for each employee on their Central ProvidentFund payroll. The Group received its grant income of $39,118,000 (2008: $nil) in four receipts in March, June, September and December 2009.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009137Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)9. Financial expensesGroup2009 2008$’000 $’000Interest expenses:Bank loans and overdrafts 39,653 41,606Bonds 15,586 –Finance lease 375 506Others 506 57556,120 42,68710. TaxationGroup2009 2008$’000 $’000Current income taxCurrent year 107,490 119,773Overprovision in respect of prior years (17,112) (37,396)Associated companies and joint ventures (307) 4,44190,071 86,818Deferred income taxCurrent year (7,271) (17,395)Underprovision/(overprovision) in respect of prior years 4,951 (17,484)Effect of reduction in tax rate 2,411 –90,162 51,939Deferred income tax related to items charged or credited directly to other comprehensive income:Net change in fair value of available-for-sale financial assets 243 (1,096)Net change in fair value of derivative financial instruments designated in cash flow hedges 160 (3,947)Effect of reduction in tax rate (152) –251 (5,043)

138Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)10. Taxation (continued)The GroupUnrecognised tax lossesAs at 31 December 2009, subsidiaries of the Group have potential tax benefits of approximately $20,885,000 (2008: $15,271,000) arising fromunutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxableprofits. These tax benefits have not been recognised in the financial statements due to the uncertainty of its recoverability. The use of these potentialtax benefits is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countriesin which the subsidiaries operate.Unrecognised temporary differences relating to investments in subsidiariesAt the balance sheet date, no deferred tax liability (2008: $nil) has been recognised for taxes that would be payable on the undistributed earnings ofcertain of the Group’s subsidiaries as the Group has determined that the undistributed profits of some of its overseas subsidiaries will not be remittedto Singapore in the foreseeable future, but be retained for organic growth and acquisitions.A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended31 December is as follows:Group2009 2008$’000 $’000Profit from operations before taxation 546,559 540,702Taxation at statutory tax rate of 17% (2008: 18%) 92,915 97,326Adjustments:Income not subject to tax (8,751) (1,344)Expenses not deductible for tax purposes 10,749 12,540Higher effective tax rates of other countries 4,003 1,368Overprovision in prior years, net (12,161) (54,880)Effect of change in tax rates 2,411 –Lower effective tax rates of associated companies (6,064) (1,316)Deferred tax assets not recognised 10,368 1,746Deferred tax assets previously not recognised now recognised (997) (814)Others (2,311) (2,687)Current financial year’s taxation charge 90,162 51,939The corporate income tax rate applicable to Singapore companies of the Group was reduced to 17% for the year of assessment 2010 onwards from18% for year of assessment 2009.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009139Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)11. Earnings per shareBasic earnings per shareThe calculation for basic earnings per share is based on:Group2009 2008$’000 $’000Consolidated profit after taxation and minority interests 443,930 473,636The weighted average number of ordinary shares is arrived at as follows:Group2009 2008Number of shares (’000)Issued ordinary shares at beginning of the year 2,998,603 2,983,550Weighted average number of ordinary shares issued during the year 5,466 11,049Weighted average number of ordinary shares 3,004,069 2,994,599Diluted earnings per shareWhen calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares.The number of unissued shares under option granted under the ESOS/ESOP and their exercise prices are set out in Note 41. The average fair valueof one ordinary share during the financial year ended 31 December 2009 was $2.63 (2008: $2.89) per share. The weighted average number ofordinary shares adjusted for the unissued shares under option is as follows:Group2009 2008Number of shares (’000)Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,004,069 2,994,599Weighted average number of unissued shares under option 54,150 73,190Number of shares that would have been issued at fair value (46,168) (59,130)Weighted average number of ordinary shares (diluted) 3,012,051 3,008,65963,870,596 (2008: 55,495,102) of share options granted to employees under the existing employee share option plans have not been included inthe calculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented.

140Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipmentValuation/CostAs atArising fromacquisitionof interest in ReclassificationsTranslation As at1.1.2008 Additions Disposals subsidiariesdifference 31.12.2008$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – 1,919Wharves and slipways 1,490 – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – 4,603Plant and machinery 1,694 – – – – – 1,694Furniture, fittings, office equipment and computers 279 – – – – – 279At CostFreehold land and buildings 59,843 394 (615) – 35 (322) 59,335Leasehold land and buildings 509,181 10,138 (111) – 31,542 1,288 552,038Improvements to premises 45,482 9,168 (1,048) – (252) (545) 52,805Wharves and slipways 27,368 919 – – 4,222 (13) 32,496Syncrolift and floating docks 68,782 394 (240) – – – 68,936Boats and barges 5,167 – – – – (10) 5,157Plant and machinery 952,161 95,065 (51,134) – 2,206 (24,305) 973,993Production tools and equipment 194,753 20,954 (1,810) – 81 (976) 213,002Furniture, fittings, office equipment and computers 157,223 21,808 (10,661) 31 119 (586) 167,934Transportation equipment and vehicles 14,582 1,390 (1,120) – – 45 14,897Aircraft and aircraft engines 78,051 2,013 (8,111) – – – 71,953Construction-in-progress 25,412 29,048 (148) – (37,953) (34) 16,3252,147,990 191,291 (74,998) 31 – (25,458) 2,238,856

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009141Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Valuation/CostAs atArising fromacquisitionof interest inTransferfromReclassificationsinvestment Translation As at1.1.2009 Additions Disposals subsidiaries properties difference 31.12.2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 17)The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – – 1,919Wharves and slipways 1,490 – – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – – 4,603Plant and machinery 1,694 – – – – – – 1,694Furniture, fittings, office equipment andcomputers 279 – – – – – – 279At CostFreehold land and buildings 59,335 484 – – – – (1,397) 58,422Leasehold land and buildings 552,038 34,211 (2,677) 24,856 2,085 28,217 (3,732) 634,998Improvements to premises 52,805 2,674 (420) 94 (218) – (691) 54,244Wharves and slipways 32,496 382 – – – – (160) 32,718Syncrolift and floating docks 68,936 – – – – – – 68,936Boats and barges 5,157 – – – – – (44) 5,113Plant and machinery 973,993 85,932 (41,266) 3,375 2,067 – (5,987) 1,018,114Production tools and equipment 213,002 19,803 (1,641) 599 142 – (890) 231,015Furniture, fittings, office equipment andcomputers 167,934 23,995 (14,866) 188 25 – (756) 176,520Transportation equipment and vehicles 14,897 2,251 (548) 1,198 – – (144) 17,654Aircraft and aircraft engines 71,953 38,254 – – – – – 110,207Construction-in-progress 16,325 68,539 (17) 240 (4,101) – (67) 80,9192,238,856 276,525 (61,435) 30,550 – 28,217 (13,868) 2,498,845Additions during the year included property, plant and equipment of $7,780,000 contributed by minority shareholders as part ofcapital injection.

142Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Accumulated depreciationAs atDepreciationchargeWritebackofReclassificationsTranslation As at1.1.2008 for the year impairment Disposalsdifference 31.12.2008$’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 5) (Note 5)The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – 1,919Wharves and slipways 1,490 – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – 4,603Plant and machinery 1,694 – – – – – 1,694Furniture, fittings, office equipment and computers 279 – – – – – 279At CostFreehold land and buildings 18,555 1,129 – (545) – (77) 19,062Leasehold land and buildings 283,040 19,964 – (12) 16 30 303,038Improvements to premises 23,044 6,192 – (1,036) (16) (197) 27,987Wharves and slipways 18,340 2,020 – – – 6 20,366Syncrolift and floating docks 68,242 512 – (240) – – 68,514Boats and barges 4,790 37 – – – (8) 4,819Plant and machinery 376,956 74,880 (102) (35,009) – (3,821) 412,904Production tools and equipment 152,421 19,703 – (1,545) – (547) 170,032Furniture, fittings, office equipment and computers 130,573 17,395 – (10,545) – (364) 137,059Transportation equipment and vehicles 9,517 1,662 – (943) – 21 10,257Aircraft and aircraft engines 37,904 3,943 – (6,098) – – 35,7491,133,367 147,437 (102) (55,973) – (4,957) 1,219,772

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009143Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)As at1.1.2009Depreciationchargefor the yearImpairment/(write-back ofimpairment)Accumulated depreciationTransferfromReclassificationsinvestmentpropertiesTranslation As atDisposalsdifference 31.12.2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 5) (Note 5) (Note 17)The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – – 1,919Wharves and slipways 1,490 – – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – – 4,603Plant and machinery 1,694 – – – – – – 1,694Furniture, fittings, office equipment andcomputers 279 – – – – – – 279At CostFreehold land and buildings 19,062 1,157 – – – – (468) 19,751Leasehold land and buildings 303,038 23,426 – (2,545) – 14,617 (1,013) 337,523Improvements to premises 27,987 5,568 – (364) 16 – (425) 32,782Wharves and slipways 20,366 2,136 – – – – (32) 22,470Syncrolift and floating docks 68,514 47 – – – – – 68,561Boats and barges 4,819 342 – – – – (48) 5,113Plant and machinery 412,904 69,806 (84) (27,380) – – (2,466) 452,780Production tools and equipment 170,032 21,698 – (1,597) – – (806) 189,327Furniture, fittings, office equipment andcomputers 137,059 19,872 42 (14,414) (16) (773) 141,770Transportation equipment and vehicles 10,257 2,178 – (397) – – (68) 11,970Aircraft and aircraft engines 35,749 4,387 – – – – – 40,1361,219,772 150,617 (42) (46,697) – 14,617 (6,099) 1,332,168

144Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Net book value2009 2008$’000 $’000The GroupAt ValuationLeasehold land and buildings – –Wharves and slipways – –Syncrolift and floating docks – –Plant and machinery – –Furniture, fittings, office equipment and computers – –At CostFreehold land and buildings 38,671 40,273Leasehold land and buildings * 297,475 249,000Improvements to premises 21,462 24,818Wharves and slipways 10,248 12,130Syncrolift and floating docks 375 422Boats and barges – 338Plant and machinery 565,334 561,089Production tools and equipment 41,688 42,970Furniture, fittings, office equipment and computers 34,750 30,875Transportation equipment and vehicles 5,684 4,640Aircraft and aircraft engines 70,071 36,204Construction-in-progress 80,919 16,3251,166,677 1,019,084* The net book value of leasehold land and buildings amounting to $13,600,000 (2008: $nil) was reclassified from investment propertiesfollowing the change in a subsidiary’s occupation in the property during the year.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009145Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Furniture, fittings, office Transportation equipmentequipment and computers and vehiclesTotal$’000 $’000 $’000The CompanyCostAs at 1.1.2008 1,801 331 2,132Additions 696 – 696Disposals (115) – (115)As at 31.12.2008 and 1.1.2009 2,382 331 2,713Additions 311 – 311Disposals (204) – (204)As at 31.12.2009 2,489 331 2,820Accumulated depreciationAs at 1.1.2008 1,272 17 1,289Depreciation charge for the year 456 66 522Disposals (114) – (114)As at 31.12.2008 and 1.1.2009 1,614 83 1,697Depreciation charge for the year 548 66 614Disposals (202) – (202)As at 31.12.2009 1,960 149 2,109Net book valueAs at 31.12.2009 529 182 711As at 31.12.2008 768 248 1,016

146Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)The Group(a)Property, plant and equipment at valuationProperty, plant and equipment, which are shown at valuation are stated at values arrived at by an independent firm of professional valuerson 30 November 1972, on the basis of open market value for existing use. There is no fixed frequency of revaluation. Revaluation will beperformed as and when deemed appropriate by the Directors. These property, plant and equipment are fully depreciated as at 31 December2009 and 2008.(b)Property, plant and equipment pledged as securityFreehold and leasehold land and buildings with a carrying value of $45,623,000 (2008: $3,952,000) are pledged as security for short-termand long-term loans.In the prior year, plant and machinery of a subsidiary with a carrying value of $426,914,000 were subject to a floating charge ofEuro 210 million to secure two of the subsidiary’s bank loans.(c)Property, plant and equipment under lease obligationsIncluded in the above are property, plant and equipment acquired under lease obligations with a net book value of:Group2009 2008$’000 $’000Leasehold land and buildings 1,335 1,813Transportation equipment and vehicles 364 1911,699 2,004

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009147Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)The major properties of the Group comprise:(i)Freehold land and buildingsLandNet book valueLocation Description area 2009 2008(sq. m.) $’000 $’000USA47889 South K StreetTulare, California13442 Emerson RoadKidron, Ohio300 Hackney Ave,Independence, Kansas400 Hackney Ave,Washington, North Carolina914 Saegers Station Drive,Montgomery, Pennsylvania7801 Trinity Drive,Escatawpa, Mississippi5801 Elder Ferry Road,Moss Point, Mississippi900 Bayou Casotte Parkway,Pascagoula, Mississippi3800 Richardson Road South,Hope Hull, AlabamaIndustrial buildings 88,949 2,487 2,544Industrial buildings 68,351 1,317 1,403Industrial buildings 117,358 1,784 1,898Industrial buildings 39,942 1,952 2,050Industrial buildings 122,659 3,841 3,949Shipyard and buildings 839,564 4,434 4,552Shipyard and buildings 227,151 4,142 4,266Shipyard and buildings 331,803 14,329 14,858Production facility 8,361 3,378 3,661

148Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)The major properties of the Group comprise (continued)(ii)Leasehold land, buildings and improvementsLandLocation Description Tenure area(sq. m.)Net book value2009 2008$’000 $’000Singapore501 Airport Road Factory and office building 20 years from 1.6.1993 23,899 3,792 2,315503 Airport Road Factory and office building 20 years from 1.6.1993 7,175 546 626505 Airport Road Lots087066, 087M, 0870Cand 99703 MK22Jet engine test cell 3 years from 17.4.2007 5,317 19,171 20,237540 Airport Road Warehouse and office building 30 years from 15.8.1985 5,850 891 1,045Hangar and office building 30 years from 1.1.1984 18,918 2,411 2,9188 Changi North Way Hangar and office building 30 years from 1.1.1992 75,713 29,834 32,320Hangar and office building 22.5 years from 16.6.1999 14,860 2,884 3,124Hangar and office building 16.3 years from 20.8.2005 9,764 12,011 13,012540 Airport Road Hangars and office building 3 years lease from1.7.2009 *48,882 24,052 25,598Seletar West Camp Hangars and office building Yearly * 15,670 17,058 17,476Hangers and office building24 Ang Mo Kio Street 65 Industrial and commercialbuildings100 Jurong East Street 21 Industrial and commercialbuildings3 years lease from1.8.2007 *30 years from 1.12.1982,renewable to 204230 years from 1.11.1988,renewable to 20485,760 11,807 11,90423,970 8,263 9,26211,232 7,815 8,12170 Ubi CrescentUbi Techpark#01-12Office building 60 years from 5.7.1997 730 1,229 1,2555 Portsdown Road Industrial and commercialbuildings3.5 years from 1.4.2007 to30.9.201088,400 511 1,1945 Ubi Close ^ Car show room cum workshop 30 years from 1.8.1994 6,274 12,814 –33 Tuas Avenue 2 Factory and office building 30 years from 1.4.1996 6,669 2,379 2,52716 Benoi Crescent Industrial and commercialbuildings30 years from 16.7.1989 6,981 2,574 2,845

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009149Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)The major properties of the Group comprise (continued)(ii)Leasehold land, buildings and improvements (continued)LandLocation Description Tenure area(sq. m.)Net book value2009 2008$’000 $’000Singapore249 Jalan Boon Lay Industrial and commercialbuildings27 years from 1.10.2001 to31.12.2028, renewableto 10.10.2065148,091 32,714 5,2302D Ayer Rajah CrescentIndustrial and commercialbuildings3 years from 1.4.2007to 31.3.201029,404 309 72116 Tuas Avenue 7 Industrial buildings 30 years from 16.8.1983 12,029 741 926601 Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,168 1,11715 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 39,640 2,847 3,23416 Benoi Road Administrative offices 56 years from 1.6.1969 20,224 3,406 –7 Benoi Road Buildings, foreshore andworkshops60 Tuas Road Buildings, foreshore andworkshops56 years from 1.6.1969 103,802 14,122 15,36930 years from 1.12.1992 125,262 5,205 4,93930/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 4,578 4,870USA2100 9 th StreetBrookley Complex,Mobile, Alabama9800 John Saunders Road,San Antonio, TexasHangar and office building 22 years from 1.1.1991 103,825 13,272 16,699Hangar and office building 16 7 / 12 years from 1.6.2002 195,663 5,392 6,331People’s Republic of China2008Y03, North of ZhongFang Road and East of WuShi Road, Xiamen, FujianLeasehold land for factorybuilding50 years from 11.8.2008 38,618 5,436 5,669Guangzhou Airport Logistics Warehouse 1 year lease from 31.10.2009 # 100 32 34Centre, Guangzhou Baiyun AiportLogistics, Guangzhou 510890

150Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)The major properties of the Group comprise (continued)(ii)Leasehold land, buildings and improvements (continued)LandLocation Description Tenure area(sq. m.)Net book value2009 2008$’000 $’000People’s Republic of China97 Zhong Cao Road Guiyang,GuizhouLeasehold land, industrial andcommercial buildings50 years from 26.2.2008to 21.2.2058242,662 22,190 23,252613 Xin Jiao Dong Road,Hai Zhu District, Guangzhou,GuangdongIndustrial and commercialbuildings15 years from 22.4.2005to 21.4.20209,751 1,219 1,358No. 555 Kanghua Road,Kangqiao Industrial Zone,ShanghaiLeasehold land 50 years from 12.6.2003to 27.7.205215,898 854 9116 Kuang Ji Road,Zhenjiang, JiangsuLeasehold land, industrial andcommercial buildings40 years from 21.5.2009to 21.3.204976,711 11,482 –1 Ding Mao Wei San Road,Zhenjiang, JiangsuLeasehold land, industrial andcommercial buildings46 years from 20.4.2006to 20.5.205255,883 10,573 –PanamaBryant Ave,Howard BalboaHangar and office building 20 years from 18.8.2006 36,278 2,258 3,085* This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence on leases whichare renewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost ofthe buildings is depreciated over 30 years.# This relates to a warehouse constructed by a subsidiary on properties rented from the Authority on leases whichare renewable yearly. In view of the relationship between the landlord and the subsidiary, the cost of the warehouseis depreciated over 20 years.^This property was reclassed from investment property to property, plant and equipment following the change in asubsidiary’s occupation in the property during the year.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009151Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. SubsidiariesCompany2009 2008$’000 $’000Unquoted shares, at cost:Singapore Technologies Aerospace Ltd 90,114 90,114Singapore Technologies Electronics Limited 26,982 26,982Singapore Technologies Kinetics Ltd 61,938 61,938Singapore Technologies Marine Ltd 56,000 56,000Vision Technologies Systems, Inc. 297,494 297,494Singapore Technologies Dynamics Pte Ltd 6,000 6,000ST Synthesis Pte Ltd 2,156 2,156FusionTech Pte. Ltd. 1,000 1,000Kaz-ST Engineering Bastau Limited Liability Partnership 578 578ST Engineering Financial I Ltd. – * –542,262 542,262Impairment in subsidiaries (7,000) (7,000)Carrying amount after impairment in subsidiaries 535,262 535,262Capital contribution in the form of share options, performance shares and restricted sharesissued to employees of subsidiaries 53,215 39,191* Amount less than $1,000588,477 574,453

152Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Details of the subsidiaries are as follows:Effective equity interest held by the Group2009 2008% %(a) Singapore Technologies Aerospace Ltd and its subsidiaries 100 100ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100ST PAE Holdings Pty Ltd 100 100Pacific Flight Services Pte Ltd 100 100Pacific Flight Services Pty Ltd 100 100ST Aerospace Training Academy Pte. Ltd. (formerly known as ST AviationTraining Academy Pte. Ltd.) and its subsidiary: 70 66Aviation Training Academy Australia Pty Ltd and its subsidiary: 70 66ST Aviation Training Academy (Australia) Pty Ltd 70 66ST Aerospace Engines Pte Ltd and its subsidiary: 100 100ST Aerospace Technologies (Xiamen) Company Limited 80 80ST Aerospace Systems Pte Ltd 100 100ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100iShopAero Pte Ltd 100 100ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd (formerly known asGuangzhou Aerospace Technologies and Engineering Company Limited) 100 100ST Aerospace International Structures Pte Ltd 100 100ST Aviation Resources Pte Ltd and its subsidiary: 100 100ST Aviation Resources 1 Limited 100 100ST Aerospace Services Co Pte. Ltd. (formerly known as ST Aviation Services Co Pte Ltd) 80 80Singapore Technologies Engineering (Europe) Ltd 100 100Singapore Aerospace Kabushiki Kaisha 100 100Visiontech Investment Pte Ltd 100 100Visiontech Engineering Pte Ltd 51 51ST Airport Ground Services Pte Ltd 100 100Bournemouth Aviation Services Company Limited ** – 81Singapore British Engineering (Pte) Ltd 51 51ST Aerospace Solutions (Europe) A/S and its subsidiary: 100 100Airline Rotables (UK Holdings) Limited and its subsidiary: 100 100Airline Rotables Limited 100 100ST Aerospace Panama, Inc. (formerly known as Panama Aerospace Engineering Inc.) 100 100Precision Products Singapore Pte Ltd 100 –

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009153Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interest held by the Group2009 2008% %(b) Singapore Technologies Electronics Limited and its subsidiaries 100 100SEEL Electronic & Engineering Sdn Bhd 100 100ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100INFA Systems Limited 100 100ST Electronics (Software Services) Limited 100 100ST Electronics (e-Services) Pte. Ltd. 100 100PM-B Pte Ltd and its subsidiaries: 70 70PMB Project Management Business Sdn Bhd 70 70PT PM-B Indonesia 70 70PM-B (China) Ltd 70 70ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Digital Media) Pte. Ltd. 100 100Antycip Simulation Limited and its subsidiary: 93 93Antycip Simulation SAS 93 93ST Education & Training Private Limited and its subsidiaries: 70 70STET Homeland Security Services Pte. Ltd. (formerly known as STETMaritime Education Pte. Ltd.) 70 70STET Maritime Pte. Ltd. 70 70STET Institute Pte. Ltd. (formerly known as STET Centre Pte. Ltd.) 70 –Brightspot Interactive Learning Pte. Ltd. and its subsidiary: 51 51Brightspot Interactive Learning Inc. 51 51MERITS Technologies LLP 51 51ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Info-Security) Pte. Ltd. and its subsidiary: 100 100DataMark Technologies Pte Ltd 100 61.12STELCOMMS Pte. Ltd. 51 51Telematics Wireless Ltd. and its subsidiary: 95.04 93.93Telematics Wireless USA Corp 95.04 93.93ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Sichuan) Co., Ltd 100 100iDirect Asia Pte. Ltd. 100 100ST Electronics (Shanghai) Co., Ltd and its subsidiary: 100 100ST Electronics-PCI Co., Ltd 51 51iTS Technologies Pte Ltd 100 100ST Electronics (Taiwan) Limited 100 100Intelect Technologies, Incorporated 78.57 78.57Ripple Systems Pty Ltd ^ – 100STELOP Pte. Ltd. 50.05 50.05TranSys Pte Ltd 100 100

154Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interest held by the Group2009 2008% %(c) Singapore Technologies Kinetics Ltd and its subsidiaries 100 100SDG Kinetics Pte. Ltd. (formerly known as Singapore Ordnance Engineering Pte. Ltd.) 100 100Mobility Systems Pte Ltd and its subsidiaries: 100 100Silvatech Global Systems Limited 100 100Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100Kinetics Drive Solutions Inc. 100 100STA Inspection Pte Ltd 100 100Singapore Commuter Private Limited 100 100Securedge Pte. Ltd. 100 100STA Investment Pte Ltd 100 100ST Kinetics International Pte. Ltd. and its subsidiary: 100 100VT Specialized Vehicles, S.A. de C.V. 100 100STA Detroit Diesel-Allison (Singapore) Pte Ltd 100 100ST Kinetics Integrated Engineering Pte. Ltd. 100 100Singapore Test Services Private Limited 100 100ST Kinetics Pte. Ltd. 100 100Advanced Material Engineering Pte. Ltd. and its subsidiary: 100 100Advanced Pyrotechnic Materials Private Limited 51 51Unicorn International Pte Limited 100 100Allied Ordnance of Singapore (Pte) Limited 100 100Ordnance Development and Engineering Company of Singapore (1996) Private Limited 100 100Autonomous Technology Pte Ltd and its subsidiary: 100 100Guizhou Jonyang Kinetics Co., Ltd. 60 60Kinetics Systems (Shanghai) Co., Ltd. 100 100STAR Automotive Center (Zhejiang) Co., Ltd. 100 100STAR Automotive Center (Guangzhou) Co., Ltd. 100 100Jiangsu Huatong Kinetics Co., Ltd. 75.3 –Jiangsu Huaran Kinetics Co., Ltd. 75.3 –(d) Singapore Technologies Marine Ltd and its subsidiary 100 100STSE Engineering Services Pte Ltd and its subsidiary: 100 100ST Environmental Services & Technologies Co. Ltd 100 100

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009155Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interest held by the Group2009 2008% %(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100Singapore Technologies Engineering (USA) Inc. @ – 100SA Supplies (USA) Inc. @ – 100VT Systems, Inc. 100 100Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100ST Aerospace Mobile, Inc. (formerly known as ST Mobile Aerospace Engineering, Inc.) 100 100DalFort Aerospace GP, Inc. 100 100DalFort Aerospace, L.P. 100 100San Antonio Aerospace GP, LLC 100 100ST Aerospace San Antonio, L.P. (formerly known as San Antonio Aerospace LP) 100 100Vision Technologies Electronics, Inc. and its subsidiary: 100 100VT iDirect, Inc. and its subsidiaries: 100 100iDirect Hong Kong Limited 100 100iDirect UK Limited and its subsidiary: 100 100Parallel Limited 100 –iDirect Italy srl 100 100iDirect International Corporation and its subsidiary: 100 100iDirect Singapore Pte. Ltd. α – 100iDirect Government Technologies, Inc. 100 100VT iDirect Canada, Inc. (formerly known as Ximaera Technologies Canada Inc.) 100 49Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100Miltope Corporation and its subsidiaries: 100 100Miltope Business Products, Inc. 100 100IV Phoenix Group, Inc. 95 95MÄK Technologies, Inc. 90 80Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100VT Dimensions, Inc. 100 100VT LeeBoy, Inc. and its subsidiary: 100 100Rosco Manufacturing Company @ – 100VT Specialized Vehicles Corporation 100 100Vision Technologies Marine, Inc. and its subsidiary: 100 100VT Halter Marine, Inc. 100 100(f) Singapore Technologies Dynamics Pte Ltd 100 100(g) ST Synthesis Pte Ltd 100 100(h) FusionTech Pte. Ltd. 100 100(i) Kaz-ST Engineering Bastau Limited Liability Partnership 51 51(j) ST Engineering Financial I Ltd. 100 –

156Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)** This entity ceased operations in December 2006 and was dissolved in December 2009.^ This entity had completed its liquidation during the year.@These entities were dissolved during the year.αDuring the year, this entity was struck off from the Registrar of the Accounting and Corporate Regulatory Authority.During the year, following an additional acquisition of equity interest, VT iDirect, Canada, Inc. (formerly known as Ximaera TechnologiesCanada Inc.) had become a subsidiary of the Group.Further details of the subsidiaries are as follows:Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessSingapore Technologies Aerospace LtdInvestment holding and provision of engineering,marketing and engineering support servicesSingaporeST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft SingaporeST PAE Holdings Pty Ltd Investment holding AustraliaPacific Flight Services Pte Ltd Providing air transport services SingaporePacific Flight Services Pty Ltd Flight training school operation and aircraft management AustraliaST Aerospace Training Academy Pte. Ltd. (formerlyknown as ST Aviation Training Academy Pte. Ltd.)Flight training school operation and aircraft managementSingaporeAviation Training Academy Australia Pty Ltd Flight training school operation and aircraft management AustraliaST Aviation Training Academy (Australia) Pty Ltd Flight training school operation and aircraft management AustraliaST Aerospace Engines Pte Ltd Repair and overhaul of aircraft engines SingaporeST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of aircraft engines People’s Republicof ChinaST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components SingaporeST Aerospace Supplies Pte LtdTrading, Maintenance-By-The-Hour services forcomponent and repair management and warehousingservices for aircraft equipment, parts and componentsSingaporeiShopAero Pte LtdTrading, e-commerce and information technology relatedservices for the aerospace industrySingaporeST Aerospace Guangzhou Aero-Technologies & EngineeringCo Ltd (formerly known as Guangzhou AerospaceTechnologies and Engineering Company Limited)Import/export for aircraft component leasing, repair,exchange and trading, warehousing, packaging,distribution and other related servicesPeople’s Republicof ChinaST Aerospace International Structures Pte LtdDesigning, developing and manufacturing aircraft, engines,equipment, accessories, components and such other partsSingapore

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009157Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessST Aviation Resources Pte Ltd Investment holding SingaporeST Aviation Resources 1 Limited # Investment holding and aircraft leasing business British Virgin IslandsST Aerospace Services Co Pte. Ltd. (formerlyknown as ST Aviation Services Co Pte Ltd)Repair, maintenance, modification and servicing ofcommercial aircraftSingaporeSingapore Technologies Engineering (Europe) Ltd Providing marketing and investment services to the Group United KingdomSingapore Aerospace Kabushiki Kaisha # Providing marketing services to the Group JapanVisiontech Investment Pte Ltd Investment holding and dealing SingaporeVisiontech Engineering Pte LtdProvision of engineering services for the repair, maintenanceand modification of aircraft, aircraft equipment and componentsSingaporeST Airport Ground Services Pte Ltd * Dormant SingaporeSingapore British Engineering (Pte) LtdST Aerospace Solutions (Europe) A/SMarketing and sale of a range of defence products andassociated equipment and participating in the development ofnew products and systemsSupply aircraft components, including purchase, maintenanceand logistics servicesSingaporeDenmarkAirline Rotables (UK Holdings) Limited Investment holding United KingdomAirline Rotables LimitedST Aerospace Panama, Inc. (formerly knownas Panama Aerospace Engineering Inc.)Providing component management and support servicesfor aircraftRepair and maintenance of aircraftUnited KingdomRepublic of PanamaPrecision Products Singapore Pte LtdSingapore Technologies Electronics LimitedSEEL Electronic & Engineering Sdn BhdST Electronics (Info-Software Systems) Pte. Ltd.Manufacture and sale of investment castings, mould toolingsand precision formingsDesign, development, supply, installation, integration andmaintenance of transportation, intelligent building, defenceelectronic and communication systemsSales of electronic instruments and equipment, electronicengineering and systems integration services and maintenanceand calibration of electronic equipmentDesign, development and supply of real-time/mission criticalsystems and provision of related maintenance servicesSingaporeSingaporeMalaysiaSingapore

158Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessINFA Systems LimitedST Electronics (Software Services) LimitedST Electronics (e-Services) Pte. Ltd.PM-B Pte LtdPMB Project Management Business Sdn BhdPT PM-B IndonesiaProvision for services in consulting, designing and developingsystems integration, the maintenance and support ofoperational and computer systems and sales and distributionof system equipmentProviding IT outsourcing services, software applicationsdevelopment and turnkey solutionsProviding shared services to government ministries, agenciesand enterprisesRelate to mechanical, electrical and engineering works todesign, build and provide facility management services formission critical environments such as data centres, disasterrecovery and business continuity sitesRelate to mechanical, electrical and engineering works todesign, build and provide facility management services formission critical environments such as data centres, disasterrecovery and business continuity sitesRelate to mechanical, electrical and engineering works todesign, build and provide facility management services formission critical environments such as data centres, disasterrecovery and business continuity sitesHong KongPeople’s Republicof ChinaSingaporeSingaporeMalaysiaIndonesiaPM-B (China) Ltd Dormant People’s Republicof ChinaST Electronics (Training & Simulation Systems)Pte. Ltd.ST Electronics (Digital Media) Pte. Ltd.Design, development, supply, integration and maintenanceof training and simulation systems, distribution of games,edutainment and animation programs and the sales andlicensing of related products, merchandise and rightsDesign, development and manufacture of computers and dataprocessing systems, provision of services for the processingand maintenance of data and information, and production ofanimation picturesSingaporeSingaporeAntycip Simulation Limited Investment holding United KingdomAntycip Simulation SASST Education & Training Private LimitedA value added reseller/distributor of simulation products andprovision of simulation sub-system/components solutionsProvision of education and training, management andconsultancy services for operational and technical domains ofmaritime, aerospace and land services and industriesFranceSingapore

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009159Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessSTET Homeland Security Pte. Ltd. (formerlyknown as STET Maritime Education Pte. Ltd.)Provision of security consultancy, solutions implementationand trainingSingaporeSTET Maritime Pte. Ltd. Provision of marine audit, survey and consultancy services SingaporeSTET Institute Pte. Ltd. (formerly known asSTET Centre Pte. Ltd.)Operate a school to provide academic and professionaleducation/trainingSingaporeBrightspot Interactive Learning Pte. Ltd. Investment holding SingaporeBrightspot Interactive Learning Inc.MERITS Technologies LLP #ST Electronics (Info-Comm Systems) Pte. Ltd.ST Electronics (Info-Security) Pte. Ltd.DataMark Technologies Pte LtdSTELCOMMS Pte. Ltd.Telematics Wireless Ltd.Telematics Wireless USA Corp #ST Electronics (Satcom & Sensor Systems) Pte. Ltd.Provision of training services such as soft skills andmanagement skills to corporations, and other coursesto individualsMarketing and sale of education and simulation products andservices. Installation and maintenance of solutions related tothese products and services.Design and development, systems integration, manufacturingand sale of communication equipment, GPS-based fleetmanagement system, traffic management system, infoappliances and defence electronicsDesign, development, sale and provision of technical supportfor information security products, solutions and servicesDevelopment and provision of digital water-marking andrelated solutionsTo undertake design and integration of projects in the area ofcommunications network and systems and to market and tradein communications related products and subsystemsDevelopment, manufacture, and marketing of products forlocating and directing vehicles, other mobile and stationaryobjects, people, equipment and merchandise, systems formanaging vehicular fleets, systems for locating and thwartingcar thefts, vehicular wireless equipment and communicationsfor purposes of identification and provision of information,electronic toll-road systems, and electronic systems for readingwater metersServes as sales arm for Telematics Wireless Ltd. in the USA anda local point of contact for Telematics’ customers for paymentsand Return Material Authorization supportManufacture of microwave components and sub-systems,system integration and provision of related repairs andmaintenance for the telecommunications and defenceelectronics industriesPeople’s Republicof ChinaKazakhstanSingaporeSingaporeSingaporeSingaporeIsraelUSASingapore

160Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessST Electronics (Sichuan) Co., LtdiDirect Asia Pte. Ltd.ST Electronics (Shanghai) Co., LtdManufacturing and maintenance of communication andother related apparatus and consultant service oftelecommunication technologyMarketing and sales, design, manufacture & engineeringservices for electronics and communication systemsDevelopment and manufacturing of computer control andmanagement systems, microwave control systems, simulationand training systems, security systems, MRT passengerinformation systems, MRT autofare collection system, MRTplatform screen door system and related software. Provision ofrelated technical consultation and aftersales services and saleof in-house products.People’s Republicof ChinaSingaporePeople’s Republicof ChinaST Electronics-PCI Co., LtdComputer software and hardware R&D and manufacture,computer supervise and control management system,microwave system, simulation and training system, securitymanagement system and peripheral devices, selling in-houseproducts, and offering relevant system integration and skillconsultation and after-sales service. Electronic technologies,industry automatic equipment R&D, electronic consultingservice, system integration and network engineering installation.People’s Republicof ChinaiTS Technologies Pte Ltd Investment holding SingaporeST Electronics (Taiwan) LimitedIntelect Technologies, Incorporated #STELOP Pte. Ltd.TranSys Pte LtdSingapore Technologies Kinetics LtdSDG Kinetics Pte. Ltd. (formerly known asSingapore Ordnance Engineering Pte. Ltd.)Provide integration for large-scale system projects in rail,expressway and intelligent building management solutionsDevelopment and supply of a family of multi-access opticalnetworking equipmentDesign and development, manufacturing, maintaining and saleof electro-optical products and systems and the provision ofrelated servicesDesign, development, distribution, maintenance and marketingof railway related productsProvision of design and engineering services, manufacture,sales and knowhow transfer of military and commercialvehicles, automotive subsystems, armament, weapons, weaponsystems, ammunition and explosives and the provision ofengineering services for assembly, upgrading/ modifications,maintenance, repair and overhaul of vehicles and weaponsystems, and trading in motor vehicles, equipment, vehiclespares and related accessoriesInvestment holdingTaiwanUSASingaporeSingaporeSingaporeSingapore

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009161Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessMobility Systems Pte Ltd Investment holding SingaporeSilvatech Global Systems Limited # Silvatech Systems Corporation Pte LtdKinetics Drive Solutions Inc. # STA Inspection Pte LtdOwns the intellectual property rights to electro-hydraulicdrive, hydro-mechanical and electro-mechanical continuouslyvariable transmissions technologies, and equipment poweredby such drivesDesigning, manufacturing, marketing and managing licencesof technologies and products using electro-hydraulic drive,hydro-mechanical and electro-mechanical continuously variabletransmissions, and equipment powered by such drives, globallyResearch and development, manufacturing and sales of electrohydraulicdrive, hydro-mechanical and electro-mechanicalcontinuously variable transmissions technologies, andequipment powered by such drivesInspection of heavy goods vehicles, light vehicles, motor cars,buses and motorcycles, provision of vehicle inspection projectmanagement as well as provision of independent damageassessment servicesBritish Virgin IslandsSingaporeCanadaSingaporeSingapore Commuter Private Limited Investment holding SingaporeSecuredge Pte. Ltd.Provision of design and engineering services, manufactureand sales of security related products, and the provision ofequipment maintenance servicesSingaporeSTA Investment Pte Ltd Investment dealing SingaporeST Kinetics International Pte. Ltd. Investment holding SingaporeVT Specialized Vehicles, S.A. de C.V. # STA Detroit Diesel-Allison (Singapore) Pte LtdST Kinetics Integrated Engineering Pte. Ltd.Singapore Test Services Private LimitedManufacture and marketing of specialised aluminium dropframetruck bodies and trailersAssembling and marketing of diesel engines and relatedproducts and the provision of technical services, field services,repair and maintenance servicesProvision of customised solutions, products for defence andcommercial marketsProvision of professional engineering consultancy, tests,inspection, certification and related servicesMexicoSingaporeSingaporeSingaporeST Kinetics Pte. Ltd. Trading and marketing Singapore

162Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessAdvanced Material Engineering Pte. Ltd.Provision of design and engineering services, manufacture,sales, disposal and knowhow transfer of precision munitions,ammunition, armament, weapon systems, military equipment,explosives, hand-grenades, thunder-flashes, pyrotechnicproducts and gunpowder and the provision of engineeringservices for assembly, upgrading/ modifications, maintenance,repair and overhaul of ammunition and weapon systems, andrelated servicesSingaporeAdvanced Pyrotechnic Materials Private Limited Manufacture and sale of pyrotechnic products SingaporeUnicorn International Pte Limited Trading and marketing SingaporeAllied Ordnance of Singapore (Pte) LimitedOrdnance Development and Engineering Companyof Singapore (1996) Private LimitedProvision of design and engineering services, manufacture,sales and knowhow transfer of armament, weapons, weaponsystems, ammunition, explosives, weapon magazines, militaryequipment, machines, tools, spares and components and theprovision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns andweapons systems, and related servicesProvision of design and engineering services, manufacture,sales and knowhow transfer of armament, weapons, weaponsystems, ammunition, explosives, weapon magazines, militaryequipment, machines, tools, spares and components and theprovision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns andweapons systems, and related servicesSingaporeSingaporeAutonomous Technology Pte Ltd Investment holding SingaporeGuizhou Jonyang Kinetics Co., Ltd. Kinetics Systems (Shanghai) Co., Ltd. STAR Automotive Center (Zhejiang) Co., Ltd. STAR Automotive Center (Guangzhou) Co., Ltd. Design, manufacture, sale and service support ofconstruction, engineering and industrial-related machineryand accessories, provide engineering consultancy services toengineering and manufacturing companies, provide rental ofown-manufactured machinery and accessoriesManufacture and sale of vehicle drive systems, industrial drivemotors and small external combustion enginesProvide automotive services, including automotive repair,maintenance, examination and beautifying and decorating,import, export and trading of automotive spare parts, training,technical consultancy and after sales supportProvide automotive services, including automotive repair,maintenance, examination and beautifying and decorating,import, export and trading of automotive spare parts, technicalconsultancy and after sales supportPeople’s Republicof ChinaPeople’s Republicof ChinaPeople’s Republicof ChinaPeople’s Republicof China

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009163Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessJiangsu Huatong Kinetics Co., Ltd. Jiangsu Huaran Kinetics Co., Ltd. Singapore Technologies Marine LtdSTSE Engineering Services Pte LtdST Environmental Services & Technologies Co. LtdManufacture and sale of paving, mixing, roadmaintenance and compaction equipment and other roadconstruction machineriesManufacture and sale of engineering machineryand equipmentConstruction and repair of naval and commercial vessels,design, integration, fabrication, installation of military andcommercial engineering equipment and the provision ofengineering consultancy and technical management servicesDesign, manufacture, maintain and operate environmentalinfrastructures and provide planning, consultancy services inenvironmental and renewable energy management solutionsDesign, development, manufacturing, sales, after-salesservices and consulting services of equipments forenvironmental protection projects; wholesale, import andexport and related business of similar products; consultingservices for environmental projects information, consultingservices for commercial informationPeople’s Republicof ChinaPeople’s Republicof ChinaSingaporeSingaporePeople’s Republicof ChinaVision Technologies Systems, Inc. # Investment holding USAVT Systems, Inc. #Investment holding and providing investment servicesto the GroupUSAVision Technologies Aerospace, Incorporated # Investment holding and providing investment services USAST Aerospace Mobile, Inc. (formerly known as Repair and maintenance of aircraft USAST Mobile Aerospace Engineering, Inc.) # DalFort Aerospace GP, Inc. # Dormant USADalFort Aerospace, L.P. ++ # Dormant USASan Antonio Aerospace GP, LLC # Investment holding USAST Aerospace San Antonio, L.P. (formerly known as Repair and maintenance of aircraft USASan Antonio Aerospace LP) # Vision Technologies Electronics, Inc. # Investment holding USAVT iDirect, Inc. # Design, develop and market two-way internet protocol- (IP)based broadband satellite networking solutions that delivervoice, data and video services to enterprise and governmentcustomer locations worldwideUSA

164Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessiDirect Hong Kong LimitediDirect UK LimitedParallel Limited # iDirect Italy srl #iDirect International Corporation # iDirect Government Technologies, Inc. # Markets two-way internet protocol – (IP) based broadbandsatellite networking solutionsMarkets two-way internet protocol – (IP) based broadbandsatellite networking solutionsSoftware development and associated services; installation,configuration, consultancy and supportMarkets two-way internet protocol – (IP) based broadbandsatellite networking solutionsMarkets two-way internet protocol – (IP) based broadbandsatellite networking solutionsDesign, develop and market two-way internet protocol – (IP)based broadband satellite networking solutions that delivervoice, data and video services to government customersHong KongUnited KingdomUnited KingdomItalyUSAUSAVT iDirect Canada, Inc. (formerly known asResearch and development CanadaXimaera Technologies Canada Inc.) # Vision Technologies Kinetics, Inc. # Investment holding USAMiltope Corporation # Development of computers and peripheral equipment forrugged and other specialized applications for military andcommercial customers, both domestic and internationalUSAMiltope Business Products, Inc. # Dormant USAIV Phoenix Group, Inc. # Dormant USAMÄK Technologies, Inc. # Develop and supply software products and services forNetworked Synthetic EnvironmentsUSAVision Technologies Land Systems, Inc. # Investment holding USAVT Dimensions, Inc. # Investment holding and licensing of intellectual properties USAVT LeeBoy, Inc. # VT Specialized Vehicles Corporation # Manufacture of asphalt paving and road maintenanceequipment including LeeBoy branded asphalt pavers, motorgraders, compactors, force feed loaders, asphalt maintainers/patchers, tack distributors, and Rosco branded asphaltdistributors, street flushers, brooms and asphalt spray patchersManufacture and marketing of specialised aluminiumdrop-frame truck bodies, trailers, refrigerated truck bodiesand trailers and specialty vehicle cabsUSAUSA

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009165Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry of incorporation/place of businessVision Technologies Marine, Inc. #VT Halter Marine, Inc. # Singapore Technologies Dynamics Pte LtdInvestment holding and providing investment services to theMarine sectorConstruction and repair of naval and commercial vessels,design, integration, fabrication, installation of engineeringequipment and provision of engineering servicesTechnology development, advanced concept design anddevelopment and technology acquisitionUSAUSASingaporeST Synthesis Pte Ltd Provision of one-stop total integrated logistic support services SingaporeFusionTech Pte. Ltd. Investment holding SingaporeKaz-ST Engineering Bastau Limited LiabilityProvision of IT, engineering defence and related services KazakhstanPartnership #ST Engineering Financial I Ltd. Provision of financial and treasury services to related parties Singapore#Not required to be audited under the law in the country of incorporation.* This entity was struck off from the Registrar of the Accounting and Corporate Regulatory Authority in February 2010.This entity has commenced members’ voluntary liquidation in December 2009.Audited by member firms of Ernst & Young International for consolidation purposes.++This entity ceased operations in October 2003.All subsidiaries that are required to be audited under the law in the country of incorporation are audited by Ernst & Young LLP, Singapore, except forthe following:Name of subsidiaryName of accounting firmAirline Rotables (UK Holdings) LimitedAirline Rotables LimitedAviation Training Academy Australia Pty LtdST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd (formerly known asGuangzhou Aerospace Technologies and Engineering Company Limited)Pacific Flight Services Pty LtdPrecision Products Singapore Pte LtdST PAE Holdings Pty LtdST Aviation Training Academy (Australia) Pty LtdST Aerospace Panama, Inc. (formerly known as Panama Aerospace Engineering, Inc.)ST Aerospace Solutions (Europe) A/SST Aerospace Technologies (Xiamen) Company LimitedSingapore Technologies Engineering (Europe) LtdAntycip Simulation LimitedAntycip Simulation SASBrightspot Interactive Learning Inc.Ernst & Young, CambridgeErnst & Young, CambridgeKPMG, MelbourneErnst & Young, GuangzhouErnst & Young, SydneyKPMG LLP, SingaporeErnst & Young, PerthKPMG, MelbourneErnst & Young, PanamaErnst & Young, CopenhagenErnst & Young, XiamenErnst & Young, CambridgeErnst & Young, ReadingErnst & Young, ParisErnst & Young, Beijing

166Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryName of accounting firmiDirect Hong Kong LimitediDirect UK LimitedINFA Systems LimitedPMB Project Management Business Sdn BhdPT PM-B IndonesiaSEEL Electronic & Engineering Sdn BhdST Electronics-PCI Co., LtdST Electronics (Sichuan) Co., LtdST Electronics (Shanghai) Co., LtdST Electronics (Software Services) LimitedST Electronics (Taiwan) LimitedTelematics Wireless Ltd.ST Environmental Services & Technologies Co. LtdGuizhou Jonyang Kinetics Co., Ltd.STAR Automotive Center (Zhejiang) Co., LtdSTAR Automotive Center (Guangzhou) Co., LtdKinetics Systems (Shanghai) Co., Ltd.Jiangsu Huatong Kinetics Co., LtdJiangsu Huaran Kinetics Co., LtdBaker Tilly HK LtdPKB Chartered AccountantsErnst & Young, Hong KongErnst & Young, Kuala LumpurErnst & Young, JakartaErnst & Young, Kuala LumpurErnst & Young, GuangzhouErnst & Young, ChengduErnst & Young, ShanghaiErnst & Young, ShenzhenErnst & Young, TaipeiErnst & Young, Tel AvivErnst & Young, ShanghaiErnst & Young, GuangzhouZhejiang Zhejing Tiance Certified Public Accountants Co., LtdGuangzhou Yuansheng Certified Public AccountantsShanghai Jinrui Certified Public AccountantsJiangsu Suya Jincheng Certified Public AccountantsJiangsu Suya Jincheng Certified Public Accountants(a)During the financial year, the Group incorporated the following companies:Name of companyCountry of incorporation/place of businessEquity interestheld%Date of incorporationSTET Institute Pte. Ltd. (formerly known asSTET Centre Pte. Ltd.)Singapore 70 3 February 2009ST Engineering Financial I Ltd. Singapore 100 28 May 2009(b)During the financial year, the Group acquired the following companies:Net tangibleName of company Interest acquired Consideration assets acquired% $’000 $’000Date of acquisitionPrecision Products Singapore Pte Ltd 100 8,281 4,683 18 May 2009Jiangsu Huatong Kinetics Co., Ltd andJiangsu Huaran Kinetics Co., Ltd75.3 36,313 29,512 30 April 2009Parallel Limited 100 9,027 4,582 31 December 2009

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009167Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)(c)During the financial year, the Group acquired additional equity interests in the following companies:Name of companyInterest afterNet tangibleInterest acquired acquisition Consideration assets acquired% % $’000 $’000ST Aerospace Training Academy Pte. Ltd. (formerlyknown as ST Aviation Training Academy Pte. Ltd.)and its subsidiaries4 70 320 120DataMark Technologies Pte Ltd 38.88 100 148 123MÄK Technologies, Inc. 10 90 302 580Telematics Wireless Ltd. 1.11 95.04 1,276 262VT iDirect Canada, Inc. (formerly known asXiamera Technologies Canada Inc.)51 100 1,285 1,285(d)During the year, the Group made additional capital contributions of $18,462,000 in ST Aerospace Technologies (Xiamen) Company Limited.The effective equity interest held by the Group remains the same at 80%.14. Associated companies and joint venturesGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Unquoted shares, at cost 195,703 175,831 17,707 50Goodwill on acquisition written off, net (110) (234)Share of net assets acquired 195,593 175,597Impairment in associated companies and joint ventures (1,218) (1,218)Share of post-acquisition:Profits 95,394 101,315Reserves (16,390) (12,616)273,379 263,078

168Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)Impairment in associated companies and joint venturesMovements in impairment in associated companies and joint ventures during the year are as follows:Group2009 2008$’000 $’000At beginning of the year 1,218 5,441Provision utilised – (4,113)Disposal of an associated company – (110)At end of the year 1,218 1,218Group2009 2008$’000 $’000The summarised financial information of the associated companies is as follows:ResultsTurnover 792,662 752,115Net profit for the year 81,615 83,687Assets and liabilitiesNon-current assets 385,802 311,918Current assets 601,769 550,381Current liabilities (261,600) (257,363)Non-current liabilities (41,310) (26,409)684,661 578,527The Group’s share of the joint ventures’ results, assets and liabilities are as follows:Income and expensesIncome 33,327 25,644Expenses (32,080) (26,025)Assets and liabilitiesNon-current assets 51,693 3,202Current assets 36,420 43,919Current liabilities (29,908) (37,640)Non-current liabilities (47,544) (843)10,661 8,638

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009169Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)(a)Details of the associated companies are as follows:Name of associated companyPrincipal activitiesCountry ofincorporation/placeof businessEffective equity interestheld by the Group2009 2008% %Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia 50 50Aerospace Engineering Services Pty LtdUnit TrustTrustee of unit trust fund Australia 50 501988 JV Pte. Ltd. ++ Dormant Singapore 50 50Composite Technology InternationalPte LtdEurocopter South East AsiaPrivate LimitedMadrid Aerospace Services S.L.Repairing and rebuilding helicopterrotor bladesSelling, maintaining and overhaulingof helicoptersRepair and overhaul of aircraft landinggears and its related componentsSingapore 33.33 33.33Singapore 25 25Spain 50 50Shanghai Technologies AerospaceCompany LimitedAircraft and component maintenance,repair, overhaul and other relatedmaintenance businessPeople’s Republicof China49 49Singapore Precision Repair andOverhaul Pte LtdTurbine Coating Services Pte LtdTurbine Overhaul Services Pte LtdCOMAT Training Services Pte LtdiWOW Technology Pte LtdKnowledge Alive Pte. Ltd.Repair and overhaul of aircraft andhelicopter landing gears and itsrelated componentsRepair, refurbishment and upgrading ofaircraft jet engine turbine blades and vanesRepair and service of gas and steamturbine componentsOperating of a computer training school,providing training in computer softwareand applicationsTo carry out research and development,consultancy services in telecommunication,electrical and related fieldsOffer technologically-driven learning andknowledge solutions, products and servicesto corporate, tertiary and workforce marketsSingapore 50 50Singapore 24.5 24.5Singapore 49 49Singapore 45.47 45.47Singapore 21.74 21.74Singapore 45.47 45.47

170Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)Name of associated companyPrincipal activitiesCountry ofincorporation/placeof businessEffective equity interestheld by the Group2009 2008% %PM-B Project Management Business(Thailand) LtdPrescient Systems & TechnologiesPte. Ltd.Trusted Hub LtdWizVision Pte. Ltd.CityCab Pte LtdRelate to mechanical, electrical andengineering works to design, build andprovide facility management services formission critical environments such as datacentres, disaster recovery and businesscontinuity sitesBusiness of developing, producing andmarketing non-real time and real timeinstrumentation systems for defenceand commercial applications; designand development of training centres andprovision of managed servicesProvision of an integrated trustedenvironment for secured transactions ande-commerceProviding information technology servicesand trading of computer accessoriesRental of taxis and provision of premier busservice, charge card facilities and travelrelated servicesThailand 34.3 34.3Singapore 47.84 47.84Singapore 21.14 21.8Singapore 22.8 22.8Singapore 46.5 46.5Defence Electronics of Singapore Pte Ltd Manufacture of fuses Singapore 49 49GFM Maquinaria, S.A.P.I. de C.V. Sale of construction and mining machineryand equipmentMexico 40 –Hualun International Trading Co., LtdImport and export of commercial products,patents, licences and government-approvedtechnologiesPeople’s Republicof China40 –Nusantara Technologies Sdn. Bhd.Timoney Holdings LimitedProvision of non-destructive testingservices, ultrasonic flaw detection andgauging survey and pressuregauge calibrationDesign and prototyping services andcomponent supply for the automotive andaerospace engineering sectorsMalaysia 49 49Republic of Ireland 25 25

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009171Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)Name of associated companyPrincipal activitiesCountry ofincorporation/placeof businessEffective equity interestheld by the Group2009 2008% %2006 JV Pte. Ltd. β Dormant Singapore 50 50NanoScience Innovation Pte LtdSingapore Airshow & Events Pte. Ltd.Research and development of ultra finestructure, especially nano-scale, materials,devices, equipment and intellectualpropertiesOrganising and management ofconferences, exhibitions and other relatedactivities, includes the biennial SingaporeAirshow eventSingapore 27.06 27.06Singapore 33 –(b)Details of joint ventures are as follows:Name of joint venturePrincipal activitiesCountry ofincorporation/placeof businessEffective equity interestheld by the Group2009 2008% %GFM Electronics S.A. de C.V.ATREC Pte. Ltd.Distribution and sales of high technologysystems, services and products, in thecommunications area, as well as electronicssystems, principally closed circuits andalarms for airports, malls, stadiums andhighwaysResearch and technology development inadvanced materials for both defence andcommercial applicationsMexico 50 50Singapore 50 50Beijing Zhonghuan Kinetics HeavyVehicles Co. Ltd. Develop, manufacture and sale ofspecialised heavy vehicles and sale ofrelated spare parts and provision of relevanttechnical consultancy and after saletechnical support servicesPeople’s Republicof China50 50SMART Systems Pte Ltd Life systems integration of weapon system Singapore 50 50Takata CPI Singapore Pte LtdManufacture of pyrotechniccomponents for seatbelts and airbags used in motor vehiclesSingapore 49 49

172Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)Name of joint venturePrincipal activitiesCountry ofincorporation/placeof businessEffective equity interestheld by the Group2009 2008% %First Response Marine Pte. Ltd.Halter-Bollinger Joint Venture LLC §Joint Shipyard Management ServicesPte LtdShip and boat leasing with operator(including chartering)To bid and secure US boat fabricationcontracts for its shareholdersConstruction and managing workers’dormitoriesSingapore 50 50USA 50 50Singapore 30 30++This entity is under members’ voluntary liquidation.§Not required to be audited under the law in the country of incorporation.This entity was newly incorporated during the year and was not required to be audited as at the date of this report.βThis entity was dissolved in January 2010.Audited by member firms of Ernst & Young International for consolidation purposes.All associated companies and joint ventures that are required to be audited under the law in the country of incorporation, are audited by Ernst &Young LLP, Singapore, except for the following:Name of associated company/joint ventureName of accounting firmAerospace Engineering Services Pty LtdAerospace Engineering Services Pty Ltd Unit TrustComposite Technology International Pte LtdEurocopter South East Asia Private LimitedMadrid Aerospace Services S.L.Shanghai Technologies Aerospace Company LimitedTurbine Coating Services Pte LtdTurbine Overhaul Services Pte LtdCOMAT Training Services Pte LtdGFM Electronics S.A. de C.V.iWOW Technology Pte LtdKnowledge Alive Pte. Ltd.PM-B Project Management Business (Thailand) LtdTrusted Hub LtdWizVision Pte. Ltd.Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd.Ernst & Young, AustraliaErnst & Young, AustraliaDeloitte and Touche LLP, SingaporeKPMG LLP, SingaporeDeloitte S.L.Ernst & Young, ShanghaiPricewaterhouseCoopers LLP, SingaporePricewaterhouseCoopers LLP, SingaporeBDO RafflesPricewaterhouseCoopers, MexicoLW Ong & CoBDO RafflesMazars LimitedKPMG LLP, SingaporeBF Teo AssociatesGuofu Haohua Certified Public Accountants Co., Ltd

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009173Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)14. Associated companies and joint ventures (continued)Name of associated company/joint ventureName of accounting firmCityCab Pte LtdHualun International Trading Co., LtdNusantara Technologies Sdn. Bhd.Timoney Holdings LimitedJoint Shipyard Management Services Pte LtdNanoScience Innovation Pte LtdSingapore Airshow & Events Pte. Ltd.Deloitte and Touche LLP, SingaporeJiangsu Suya Jincheng Certified Public AccountantsDeloitte Kassimchan, MalaysiaKPMG, IrelandKPMG LLP, SingaporeNSC & AssociatesKPMG LLP, Singapore15. InvestmentsGroup2009 2008$’000 $’000Quoted investmentsEquity shares, at fair value (Available-for-sale)Non-related corporations 46,001 37,955Impairment in value of quoted investments (28,900) (28,587)17,101 9,368Unquoted investmentsEquity shares (Available-for-sale)Related corporations, at cost 629 630Non-related corporations, at cost 23,339 23,379Non-related corporations, at fair value – 18123,968 24,190Bonds, at amortised cost (Held-to-maturity)from 2.02% to 3.10% per annum due from 30.9.2010 to 1.11.2010 – 38,352Venture capital funds and limited partnership, at fair value 1,745 2,167Convertible loan, at amortised cost * 486 462Convertible loan to non-related corporations # 700 700Loan to a related corporation 4,387 4,3927,318 7,721Total unquoted investments 31,286 70,263Impairment in value of unquoted investments (26,923) (26,215)4,363 44,048Total investments 21,464 53,416

174Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)15. Investments (continued)* A subsidiary extended an interest-free convertible loan to an investee company at a nominal value of US$300,000. The subsidiary is entitledto convert it within 5 years from the date of disbursement of the loan to share equity of the investee company.# Included in the convertible loan is an amount of $700,000 (2008: $700,000) extended by a subsidiary to an investee company at an interestrate of 1% (2008: 1%) above bank prime rate per annum. The subsidiary was granted an option by the investee company to be able toconvert 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 atthe balance sheet date.Impairment in value of quoted investmentsDuring the financial year, the Group recognised an impairment loss of $313,000 (2008: $25,580,000) pertaining to quoted investments reflectingthe write-down in the carrying value of the investments with a significant and prolonged decline in the market price.Movements in impairment in value of quoted investments during the year are as follows:GroupNote 2009 2008$’000 $’000At beginning of the year 28,587 3,007Charge to income statement 4 313 25,580At end of the year 28,900 28,587Impairment in value of unquoted investmentsMovements in impairment in value of unquoted investments during the year are as follows:GroupNote 2009 2008$’000 $’000At beginning of the year 26,215 25,861Charge to income statement 4 747 363Translation difference (39) (9)At end of the year 26,923 26,215

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009175Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)16. Intangible assets(a)GoodwillGroup2009 2008$’000 $’000CostAt beginning of the year 503,692 504,808Acquisition of subsidiaries 14,844 3,128Acquisition of additional interest in subsidiaries 1,239 2,336Finalisation of purchase price allocation @ 60 –Goodwill written off (1,599) (2,415)Translation difference (11,510) (4,165)At end of the year 506,726 503,692ImpairmentAt beginning of the year 15,544 18,637Impairment written off – (2,415)Translation difference (54) (678)At end of the year 15,490 15,544Net book value 491,236 488,148@During the year, the purchase price allocation to goodwill and other net assets relating to the acquisition of ST Aviation TrainingAcademy (Australia) Pty Ltd has been finalised and the effect of $60,000 has been adjusted in the current year.During the year, the Group wrote-off goodwill amounting to $1,599,000 for a subsidiary due to closure of a plant.In the prior year, the Group wrote-off goodwill amounting to $2,415,000 for a subsidiary, which had ceased business activities in October2008 and had commenced members’ voluntary liquidation.

176Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)(b)Other intangible assetsNoteDealernetworkDeferredexpenditureCommercialand intellectualproperty rightsFilm costinventory Brands Others Total$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupCostAt 1.1.2008 9,395 2,941 67,659 9,202 83,110 1,345 173,652Additions – 3,332 – 1,048 – 176 4,556Acquisition of subsidiaries – – 1,315 – 2,702 – 4,017Write-off – – (608) – – (25) (633)Translation difference (51) 68 (626) – (968) (38) (1,615)At 31.12.2008 and at1.1.2009 9,344 6,341 67,740 10,250 84,844 1,458 179,977Additions – 4,629 – 1,333 – 2,126 8,088Acquisition of subsidiaries – 2,032 1,669 – 143 1,400 5,244Translation difference (212) (27) (1,359) – (1,748) 37 (3,309)At 31.12.2009 9,132 12,975 68,050 11,583 83,239 5,021 190,000AccumulatedamortisationAt 1.1.2008 2,129 1,318 11,714 – 1,187 1,039 17,387Amortisation for the year 5 1,311 273 6,805 524 1,265 25 10,203Impairment loss 5 – – – – – 2 2Write-off – – (608) – – (25) (633)Translation difference 14 7 54 – 1 – 76At 31.12.2008 and1.1.2009 3,454 1,598 17,965 524 2,453 1,041 27,035Amortisation for the year 5 1,352 350 7,101 220 1,323 1,427 11,773Impairment loss 5 – 397 – – – – 397Translation difference (123) (19) (522) – (89) – (753)At 31.12.2009 4,683 2,326 24,544 744 3,687 2,468 38,452Net book valueAt 31.12.2009 4,449 10,649 43,506 10,839 79,552 2,553 151,548At 31.12.2008 5,890 4,743 49,775 9,726 82,391 417 152,942

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009177Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)(c)Total intangible assetsGroup2009 2008$’000 $’000Net book value 642,784 641,090Impairment testing of goodwillGoodwill acquired through business combinations has been allocated to the Group’s cash-generating units (“CGU”) identified according to eachindividual business unit, for impairment testing. Goodwill in relation to Precision Products Singapore Pte Ltd and Parallel Limited has been determinedprovisionally and has not been allocated for impairment testing.Carrying amount of goodwill allocated to each of the CGU:ST Aerospace Solutions (Europe) A/S 2,194 2,204ST Aerospace Training Academy Pte Ltd and its subsidiaries 200 –ST Aviation Training Academy (Australia) Pty Ltd 207 147Pacific Flight Services Pty Ltd 701 701Precision Products Singapore Pte Ltd * 3,598 –Antycip Simulation Limited and its subsidiary 3,158 2,902Brightspot Interactive Learning Pte. Ltd. and its subsidiary 2,245 2,222DataMark Technologies Pte Ltd 149 124VT iDirect, Inc. 167,882 171,766MÄK Technologies, Inc. 24,271 25,189Parallel Limited * 4,445 –PM-B Pte Ltd and its subsidiaries 11,665 11,696STELCOMMS Pte. Ltd. 5 5STELOP Pte. Ltd. 1,732 1,732Telematics Wireless Ltd. and its subsidiary 84,383 85,353Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd 6,002 –STAR Automotive Center (Zhejiang) Co., Ltd. 982 1,004STAR Automotive Center (Guangzhou) Co., Ltd. 498 510VT LeeBoy, Inc. 102,945 105,327VT Specialized Vehicles Corporation 37,714 40,167Miltope Corporation 36,260 37,099491,236 488,148* The purchase price allocation to goodwill, intangible assets (excluding goodwill) and other assets and liabilities is currently being assessedand is expected to be finalised within 12 months from the date of acquisition (as disclosed in Note 13).The recoverable amounts of the CGUs are determined based on value-in-use calculations, except for Precision Products Singapore Pte Ltd andParallel Limited as described above.

178Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)The value-in-use calculations use cash flow projections based on financial budgets approved by Management. Management have considered anddetermined the factors applied in these financial budgets which include budgeted gross margins and average growth rates. The budgeted grossmargins are based on past performance and its expectation of market development. Average growth rates used are consistent with forecasts includedin industry reports. The discount rate applied is assumed at 6.1% (2008: 6.2%) for value-in-use calculations, which is also the Group’s weightedaverage cost of capital.17. Investment propertiesGroupNote 2009 2008$’000 $’000At costAt beginning of the year 33,722 33,490Disposal (2,178) –Translation difference (83) 232Transfer to property, plant and equipment 12 (28,217) –At end of the year 3,244 33,722Accumulated depreciationAt beginning of the year 16,351 15,111Depreciation charge for the year 5 368 1,153Translation difference (42) 87Disposal (825) –Transfer to property, plant and equipment 12 (14,617) –At end of the year 1,235 16,351Net book value 2,009 17,371The property rental income of the Group for the year ended 31 December 2009 from its investment properties, which are leased out under operatingleases, amounted to $330,000 (2008: $1,529,000). Direct operating expenses (including repairs and maintenance) arising from the rental-earninginvestment properties amounted to $60,000 (2008: $174,000).The fair value of the investment properties as at 31 December 2009 of $7,867,000 (2008: $18,912,000) are based on market values, being theestimated 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 lengthtransaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.During the year, the Group(a)(b)transferred one property that was held as investment property to property, plant and equipment following part of the building having beenretained for the Group’s internal use; anddisposed of an investment property for a cash consideration of $1,800,000. In the prior year, the said property with a carrying amount of$1,389,000 was pledged as security for long-term loan.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009179Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)17. Investment properties (continued)The investment property held by the Group as at end of the year is as follows:Location Existing Use Tenure Land area(sq. m.)People’s Republic of ChinaNo. 555 Kanghua Road, Kangqiao Industrial Zone,ShanghaiIndustrial building 50 years from 12.6.2003 to 27.2.2052 15,89818. Long-term receivablesGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Housing and car loans and advances to staff 998 1,147 90 180Other receivables * 1 1,987 4 – –Loans to:Associated company * 2 3,022 – – –Joint ventures * 3 5,874 1,620 – –Allowance for doubtful debts (1,583) (1,620) – –4,291 – – –Third parties * 4 43,154 9,031 – –Allowance for doubtful loans (9,015) (9,031) – –34,139 – – –44,437 1,151 90 180Receivable:Within 1 year 7,637 700 90 180After 1 year 36,800 451 – –44,437 1,151 90 180Loans and receivables are carried at amortised cost and are subject to impairment.* 1 Other receivables relate to government grants that would be received upon compliance with the conditions indicated in a non-cancellablelease agreement entered into by a subsidiary. Under the agreement, the future rental payable is to be paid from the eleventh year onwards,when the subsidiary had invested a total of US$10,000,000 for the first 10 years. The government grant is recognised on the account thatthere is reasonable assurance that the subsidiary will comply with the conditions. As at 31 December 2009, the subsidiary has investedUS$8,949,000.

180Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)18. Long-term receivables (continued)* 2 The loan to an associated company is unsecured and repayable in 2019. The interest on this loan is EURIBOR +1.0% per annum. In 2009,the interest rates range from 1.76% to 2.58% per annum, which are also the effective interest rates.* 3 Included in loans to joint ventures are:(a)(b)a loan amounting to $1,583,000 (2008: $1,620,000) and bears interest at 4% (2008: 4%) per annum. The loan is unsecured andhas been fully impaired during the year; andloans amounting to $4,291,000 (2008: $nil) and bear interest at rates ranging from 4.57% to 5.07% per annum. The loans areunsecured and repayable within 20 years.Movements in allowance for doubtful loans to joint ventures are as follows:GroupNote 2009 2008$’000 $’000At beginning of the year 1,620 –Charge to income statement 5 – 1,556Translation difference (37) 64At end of the year 1,583 1,620* 4 Included in the loans to third parties are:(a)an amount of approximately $8,312,000 (2008: $8,312,000) secured by intellectual property rights is not expected to be repaidwithin the next 12 months. Interest is repriced every month and chargeable at the US dollar prime rate plus 2% (2008: 2%)per annum, which is also the effective interest rate. The loan is convertible to shares of that entity, subject to certain terms andconditions. In the prior year, a notice was given to that entity to convert the loan to shares of that entity but the conversion has notbeen effected as at the end of the year. The loan is fully impaired at the balance sheet date.No interest income has been accrued for this financial year for the loans stated due to the uncertainty over the collectibility of theinterest income.(b)(c)a bridging loan of $702,500 (US$$500,000) (2008: $718,750 (US$500,000)) extended to a third party. The bridging loan issecured by way of a Deed of Debenture, which creates a floating charge over the assets of the third party. This loan is treated as anet investment in the third party and is not expected to be repaid. The loan is stated at cost and has been fully provided for sincefinancial year 2004 due to uncertainty of collectibility. Therefore, it is not practicable to determine its fair value.an amount of $34,139,000 (2008: $nil) relating to instalment payment plans granted to customers. These loans arerepayable over a period of 3.5 years to 6.5 years from 2009. The interest rates on these loans are LIBOR with marginsranging from 0.5% to 0.63% per annum. In 2009, the interest rates range from 1.11% to 1.86% per annum, which are alsothe effective interest rates.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009181Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)18. Long-term receivables (continued)Movements in allowance for doubtful loans to third parties are as follows:GroupNote 2009 2008$’000 $’000At beginning of the year 9,031 10,156Write-back to income statement 5 – (1,121)Translation difference (16) (4)At end of the year 9,015 9,03119. Finance lease receivablesThe Group entered into finance lease arrangements with customers with terms ranging from 1 year to 10 years (2008: 1 year to 10 years) andeffective interest rate of 1.42% to 19.96% (2008: 2.2% to 29.8%) per annum. In the prior year, lease receivables of $149,000 were secured bystandby letters of credit.Group2009 2008$’000 $’000Gross investment in finance leaseNot later than 1 year 17,779 13,4241 year through 5 years 4,360 3,330Later than 5 years 1,639 2,50923,778 19,263Unearned interestNot later than 1 year 577 6061 year through 5 years 615 746Later than 5 years 157 3001,349 1,652Present value of minimum lease receivablesNot later than 1 year 17,202 12,8181 year through 5 years 3,745 2,584Later than 5 years 1,482 2,20922,429 17,611

182Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)19. Finance lease receivables (continued)GroupNote 2009 2008$’000 $’000Allowance for doubtful lease receivablesNot later than 1 year (2,816) (1,761)Net investment in finance leaseNot later than 1 year 14,386 11,0571 year through 5 years 3,745 2,584Later than 5 years 1,482 2,20919,613 15,850Not past due and not impaired 15,535 11,657Past due and not impaired 4,078 4,19319,613 15,850Individually assessedDoubtful lease receivables 2,816 1,761Allowance for doubtful lease receivables (2,816) (1,761)– –Movements in allowance for doubtful lease receivables are as follows:19,613 15,850At beginning of the year 1,761 810Charge to income statement 5 1,138 877Provision utilised (8) (6)Translation difference (75) 80At end of the year 2,816 1,761Finance leases that are individually assessed to be impaired relate to customers who have defaulted on payments.Ageing of net investment in minimum lease receivables that are past due but not impaired:1 - 90 days 1,260 86891 - 180 days 964 1,314181 - 360 days 888 1,285>360 days 966 7264,078 4,193

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009183Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)20. Deferred tax assetsGroup2009 2008$’000 $’000At beginning of the year 138,128 112,718Recognised in income statement 1,442 30,619Effect of reduction in tax rate (2,236) –Acquisition of subsidiaries 251 –Disposal of a subsidiary (6) –Translation difference (954) (938)Transfer to provision for taxation (7,465) (11,680)Changes in fair value of available-for-sale financial assets (243) 1,096Changes in fair value of derivative financial instruments designated in cash flow hedges (1,721) 6,313At end of the year 127,196 138,128The deferred tax assets arise as a result of:Unabsorbed capital allowances and unutilised tax losses 41,277 37,886Allowance for doubtful debts and stock obsolescence 15,788 21,115Provision for warranties 38,721 36,524Provision for liquidated damages 1,568 1,101Provision for foreseeable losses 5,469 6,307Intangible assets (54) (652)Other temporary differences 19,048 28,349Changes in fair value of available-for-sale financial assets 51 294Changes in fair value of derivative financial instruments designated in cash flow hedges 5,328 7,204127,196 138,128

184Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)21. Stocks and work-in-progressGroup2009 2008$’000 $’000Stocks of equipment and spares 509,342 508,152Work-in-progress in excess of progress billingsWork-in-progress, including profits recognised 2,600,296 2,279,093Progress billings (1,745,342) (1,500,914)854,954 778,179Total stocks and work-in-progress at lower of cost and net realisable value 1,364,296 1,286,331Progress billings in excess of work-in-progressWork-in-progress, including profits recognised 2,304,408 1,948,251Progress billings (2,861,737) (2,423,997)(557,329) (475,746)Stocks are stated after allowance for stock obsolescence of $191,860,000 (2008: $158,112,000) and work-in-progress in excess of progressbillings are stated after provision for foreseeable losses of $14,517,000 (2008: $23,073,000).22. Trade debtorsGroup2009 2008$’000 $’000Not past due and not impaired 527,214 485,007Past due and not impaired 360,236 457,281887,450 942,288Collectively assessedImpaired receivable (Gross) 34,667 41,448Allowance for doubtful debts (7,786) (21,075)26,881 20,373Individually assessedImpaired receivable (Gross) 111,183 66,771Allowance for doubtful debts (98,542) (60,757)12,641 6,014Unbilled receivables 137,109 139,554Allowance for unbilled receivables (1,854) –Trade debtors, net 1,062,227 1,108,229

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009185Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)22. Trade debtors (continued)Trade debtors denominated in currencies other than the functional currencies as at 31 December 2009 are as follows:• $189,707,000 (2008: $260,615,000) denominated in US dollars• $11,060,000 (2008: $11,505,000) denominated in EuroGroupNote 2009 2008$’000 $’000Movements in allowance for doubtful debts are as follows:At beginning of the year 81,832 55,608Charge to income statement 5 28,084 28,775Bad debts written off against allowance (10,430) (1,265)Acquisition of subsidiaries 8,384 –Translation difference (1,542) (1,286)At end of the year 106,328 81,832Movements in allowance for unbilled receivables are as follows:At beginning of the year – –Charge to income statement 5 1,854 –At end of the year 1,854 –Ageing of receivables that are past due but not impaired:1 - 90 days 243,766 259,21191 - 180 days 47,278 88,524181 - 360 days 36,338 54,521>360 days 32,854 55,025360,236 457,281Trade debtors that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent or in financial difficultiesor who have significant delay or defaulted in payments.At the balance sheet date, trade debtors with balances amounting to approximately $8,097,000 (2008: $nil) are partially secured by shares held inmoratorium of the guarantor company amounting to $978,000.Trade debtors amounting to $20,050,000 (2008: $20,907,000) are arranged to settle via letters of credit issued by reputable banks.

186Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)23. Due from related corporationsGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Due from related corporations 4,082 234,078 29 139,198Included in the amount due from related corporations in the prior year were loans amounting to $230,188,000 and $139,169,000 extended fromthe Group and the Company respectively. These loans guaranteed by Fullerton Management Pte Ltd, a wholly-owned subsidiary of Temasek Holdings(Private) Limited were repaid during the year. The loans matured on varying periods within 2 months from 2008 and bore interest rates ranging from0.50% to 5.33% per annum, which were also the effective interest rates.24. Advances and other debtorsGroupCompanyNote 2009 2008 2009 2008$’000 $’000 $’000 $’000Advance payments to suppliers 259,231 234,736 – –Other debtors, depositsand prepayments 27 98,435 123,519 4,615 909Due from:Subsidiaries – – 335,481 339,287Associated companies 28 6,792 7,338 – –Joint ventures 13,229 3,355 – –Derivative financial instruments 51 10,539 10,138 – –388,226 379,086 340,096 340,196

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009187Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)25. Short-term investmentsGroup2009 2008$’000 $’000Quoted investmentsEquity shares, at fair valueNon-related corporation (Fair value through profit or loss) 1,710 369Non-related corporation (Available-for-sale) – 2111,710 580Unquoted investmentsBonds, at fair value (Available-for-sale)from 4.25% to 5.875% per annum due from 4.11.2013 to 18.11.2019 195,541 –Bonds, at amortised cost value (Held-to-maturity)from 2.02% to 3.10% per annum due from 30.09.2010 to 1.11.2010 38,574 –234,115 –235,825 58026. Bank balances and other liquid fundsGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Fixed deposits with financial institutions 1,006,528 601,382 194,073 226,569Cash and bank balances 507,082 217,543 47,911 4,6261,513,610 818,925 241,984 231,195Fixed deposits with financial institutions mature at varying periods within 8 months (2008: 3 months) from the financial year end. Interest rates rangefrom 0.03% to 5.12% (2008: 0.06% to 8.1%) per annum, which are also the effective interest rates.Cash and bank balances of $1,681,000 (2008: $265,000) have been placed with banks as security for letters of credit issued to third parties.

188Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)27. Other debtors, deposits and prepaymentsGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Deposits 15,542 13,346 501 492Prepayments 25,765 26,755 439 93Interest receivables 4,301 1,434 220 95Other recoverables 19,259 17,504 3,352 92Non-trade debtors 33,568 64,480 103 13798,435 123,519 4,615 90928. Due from associated companiesGroup2009 2008$’000 $’000Trade balances 6,785 6,828Non-trade balances 248 751Allowance for doubtful debts – trade (241) (241)6,792 7,33829. Creditors and accrualsGroupCompanyNote 2009 2008 2009 2008$’000 $’000 $’000 $’000Trade creditors 599,313 616,940 – –Other creditors and accruals 33 780,978 775,404 40,002 55,328Other long-term payables, current 39 2,904 – – –Due to:Subsidiaries – – 1,648 1,527Related corporations 1,348 1,606 – –Associated companies 3,175 2,139 – –Joint ventures 556 1,712 – –Derivative financial instruments 51 4,118 8,368 – –1,392,392 1,406,169 41,650 56,855Trade creditors denominated in currencies other than the functional currencies as at 31 December 2009 are as follows:• $65,293,000 (2008: $65,056,000) denominated in US dollars• $26,578,000 (2008: $18,134,000) denominated in Euro

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009189Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)30. ProvisionsGroupNote 2009 2008$’000 $’000Provision for:Warranties 189,740 170,313Liquidated damages 8,643 5,983Foreseeable losses 13,468 9,119211,851 185,415(a)Movements in provision for warranties are as follows:At beginning of the year 170,313 179,962Charge to income statement 5 34,903 5,164Provision utilised (14,546) (15,062)Translation difference (1,156) 249Acquisition of subsidiaries 226 –At end of the year 189,740 170,313(b)Movements in provision for liquidated damages are as follows:At beginning of the year 5,983 11,257Charge/(write-back) to income statement 5 2,901 (5,257)Provision utilised (160) (16)Translation difference (81) (1)At end of the year 8,643 5,983(c)Movements in provision for foreseeable losses are as follows:At beginning of the year 9,119 541Charge to income statement 4,392 9,009Provision utilised – (352)Translation difference (43) (79)At end of the year 13,468 9,119

190Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)31. Short-term bank loansEffective Group Companyinterest rate Maturity 2009 2008 2009 2008% $’000 $’000 $’000 $’000Bank loans 1.78% to 5.84% Within 1 year 83,510 322,773 – 25,300The bank loans are denominated in Singapore dollars, US dollars and Chinese Yuan (2008: Singapore dollars, US dollars, Euro and Chinese Yuan).Included in short-term bank loans are:(a)(b)(c)(d)loans amounting to $68,478,000 (2008: $270,208,000) which are unsecured;loan amounting to $1,030,000 (2008 $7,890,000) which is guaranteed by a standby letter of credit;loans amounting to $4,736,000 (2008: $nil) which are guaranteed by Zhenjiang State-owned Assets Investment Management Co., Ltd. andsecured by a subsidiary’s buildings; andloans amounting to $9,266,000 which are secured by a subsidiary’s land and buildings.In the prior year, a loan amounting to $44,675,000 secured by a floating charge over a subsidiary’s plant and machinery was repaid duringthe year.32. Lease obligations(a)A subsidiary leases certain land, buildings, and equipment from a foreign Airport Authority (the “Authority”) under a capital lease related toindustrial revenue bonds issued by the Authority. Assets being leased are pledged as collateral against the bonds. The bonds have staggeredmaturity dates and the lease payments have been structured to coincide with the staggered maturities of the bonds with the final paymentdue on 1 November 2012, the expiration date of the lease.In connection with the bond issue, the subsidiary entered into a letter of credit agreement for approximately US$10,969,000, which is usedto guarantee payments on the bonds in the event that the subsidiary is unable to make required lease payments. The letter of credit expireson 3 April 2012.The subsidiary also leases certain land, buildings, and equipment from the Authority under an operating lease. The lease term coincideswith the term of the capital lease.(b)During the year, a subsidiary entered into finance leases for transportation equipment and vehicles with term ranging from 2 to 4 years andeffective interest rates ranging from 6.88% to 16.52% per annum.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009191Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)32. Lease obligations (continued)The obligations under the finance lease to be paid by the subsidiaries are as follows:Minimum leasePresent valuepaymentInterest of payments$’000 $’000 $’00020091 to 5 years 6,211 (659) 5,552Repayable:Within 1 year 1,822After 1 year 3,7305,55220081 to 5 years 8,098 (953) 7,145Repayable:Within 1 year 1,726After 1 year 5,4197,145Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.33. Other creditors and accrualsGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000Non-trade creditors 41,987 68,701 1,521 5,321Purchase of property, plant and equipment 2,699 118 – –Accrued operating expenses 714,408 697,365 38,481 49,978Accrued interest payable 19,388 6,704 – 29Employee benefit liabilities 2,496 2,516 – –780,978 775,404 40,002 55,328

192Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)34. Deferred incomeGroupNote 2009 2008$’000 $’000At beginning of the year 21,656 13,455Additions 4,082 8,002Acquisition of subsidiaries 1,510 –Translation difference (275) 19926,973 21,656Deferred income recognised to-date (12,427) (10,160)At end of the year 14,546 11,496Movements in deferred income recognised to-date are as follows:At beginning of the year 10,160 6,376Recognised in income statement 5 2,259 3,784Translation difference 8 –At end of the year 12,427 10,16035. Deferred tax liabilitiesGroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000At beginning of the year 62,602 45,818 201 372Recognised in income statement (878) (4,260) 15 (171)Effect of reduction in tax rate 175 – (11) –Translation difference (1,101) (575) – –Transfer to provision for taxation (2,637) 18,048 – –Acquisition of subsidiaries 1,849 1,205 – –Changes in fair value of derivative financialinstruments designated in cash flow hedges (1,713) 2,366 – –At end of the year 58,297 62,602 205 201

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009193Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)35. Deferred tax liabilities (continued)GroupCompany2009 2008 2009 2008$’000 $’000 $’000 $’000The deferred tax liabilities arise as a result of:Excess of net book value over tax writtendown value of property, plant and equipment 19,828 5,961 69 118Allowance for doubtful debts and stockobsolescence (9,227) (5,456) – –Other temporary differences 2,417 19,520 136 83Changes in fair value of derivative financialinstruments designated in cash flow hedges 1,387 3,100 – –Intangible assets 43,892 39,477 – –58,297 62,602 205 20136. Long-term bank loansEffectiveGroupinterest rate Maturity 2009 2008% $’000 $’000Bank loans 0.58% to 5.76% Up to 2013 648,854 549,631Repayable:Within 1 year – 261,989After 1 year 648,854 287,642648,854 549,631The bank loans are denominated in US dollars, Euro and Chinese Yuan. (2008: Singapore dollars, US dollars and Euro).Included in the long-term bank loans is a loan amounting to $7,412,000 (RMB36,000,000) (2008: $nil) at 5.76% per annum and secured by asubsidiary’s land and guaranteed by a standby letter of credit.In the prior year, a loan amounting to $261,870,000 at EURIBOR with margin ranging from 0.5% to 1.1% per annum was secured by a floating chargeover a subsidiary’s plant and machinery. The Group had since re-structured the bank loans in 2009 and the bank loans had been fully repaid.

194Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)37. Other loans(a)Included in other loans are:(i)(ii)US dollar denominated term notes of $1.1 million (US$0.8 million) (2008: $1.2 million (US$0.9 million)) and $0.2 million (US$0.2million) (2008: $0.3 million (US$0.2 million)) owing to the Pennsylvania Industrial Development Authority and the IndustrialProperties Corporation, respectively, by a US entity of the Group. These notes are secured by land and buildings of the entity andbear interest, respectively, at 2.75% and 4.0% (2008: 2.75% and 4.0%) per annum, which are also the effective interest rates,and are payable through 1 July 2019 and 28 June 2019, respectively.Another US dollar denominated term note of $0.2 million (US$0.2 million) (2008: $0.3 million (US$0.2 million)) is owed by thesame entity to the Pennsylvania Department of Community and Economic Development. This note is unsecured, bears interest of2.75% (2008: 2.75%) per annum, which is also the effective interest rate, and is payable through 1 February 2012.(b)an amount of $0.8 million (2008: $nil) relating to long-term loans from a minority shareholder of a subsidiary. The loans are unsecured withinterest rates ranging from 3.85% to 4.36% per annum, which are also the effective interest rates, and are payable in 2014.38. BondsGroup2009$’000Principal 702,500Unamortised discount (4,038)698,462Unamortised discount:Additions 4,297Amortisation for the year (150)Translation difference (109)4,038The Group issued US$500,000,000 4.80% Notes due 2019 under its US$1.2 billion Multicurrency Medium Term Note Programme on 16 July2009. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable every 6 months from the date of issue. The bonds areunconditionally and irrevocably guaranteed by the Company.39. Other long-term payablesDuring the year, a subsidiary entered into an arrangement with an external supplier for deferment of payment relating to purchase of equipment. Theamount payable is unsecured, bears interest of 1.45% per annum, and is not expected to be repaid within the next 12 months.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009195Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)40. Due to a subsidiaryAmount due to a subsidiary of the Company is unsecured, interest-free and is not repayable in the foreseeable future.41. Share capitalGroup and Company2009 2008$’000 $’000Issued and fully paidAt beginning of the year2,998,603,162 (2008: 2,983,550,387) ordinary shares 586,614 554,888Issued during the year11,852,971 (2008: 15,052,775) ordinary shares 25,194 31,726At end of the year3,010,456,133 (2008: 2,998,603,162) ordinary shares 611,808 586,614Included in share capital is a special share issued to the Minister for Finance (Incorporated). The special share enjoys all the rights attached to theordinary shares. In addition, the special share carries the right to approve any resolution to be passed by the Company, either in general meeting orby its Board of Directors, on certain matters specified in the Company’s Articles of Association. The special share may be converted at any time intoan ordinary share.The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per sharewithout restriction.The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) andthe Singapore Technologies Engineering Restricted Stock Plan (“RSP”) of the Company were approved by its members at an Extraordinary GeneralMeeting held on 23 November 2000. The ESOP, PSP and RSP are administered by the Executive Resource and Compensation Committee (“ERCC”)comprising three directors, Mr Peter Seah Lim Huat, Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang. Following approval of the newShare Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore Technologies Engineering Executive’sShare Option Scheme (“ESOS”), the predecessor to the ESOP, was terminated.Singapore Technologies Engineering Share Option Plan (“ESOP”)Information regarding ESOP is as follows:(a)(b)(c)The exercise price of the options is equal to volume-weighted average price for the shares on the Singapore Exchange over the threeconsecutive trading days immediately preceding the date of grant.The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to be determined by ERCCand are settled in cash.The options granted expire after five years for non-executive directors, and 10 years for the employees of the Company and its subsidiaries.

196Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)During the financial year, the Company issued 10,215,827 (2008: 14,075,736) ordinary shares for cash at the respective price per share upon theexercise of options granted by the Company under ESOS and ESOP.Grant no. No. of ordinary shares issued Price per ordinary share$99R1 1,066,460 1.4189902 258,000 2.0002001 2,914,978 2.2602002 55,500 1.8082003 45,000 2.3900102N 149,380 2.7200108N 157,265 2.6800202N 319,631 2.2900208N 213,977 1.9200302N 243,873 1.7900308N 349,356 1.8600402N 745,111 2.0900402ND 228,875 2.0900408N 982,764 2.1200408ND 190,875 2.1200502N 980,651 2.3700502ND 54,625 2.3700508N 872,465 2.5700508ND 25,250 2.5700602N 80,797 3.0100608N 276,509 2.8400703N 4,485 3.230

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009197Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and directors of the Companyare as follows:(i)Options outstanding under the ESOS/ESOPNumber of shares2009 2008ESOSAt beginning of the year 12,196,551 16,289,332Exercised (4,339,938) (3,752,621)Lapsed (504,510) (340,160)At end of the year 7,352,103 12,196,551Exercisable at end of the year 7,352,103 12,196,551ESOPAt beginning of the year 112,205,701 125,291,506Exercised (5,875,889) (10,323,115)Lapsed (1,973,768) (2,762,690)At end of the year 104,356,044 112,205,701Exercisable at end of the year 87,883,347 67,141,259(ii)Details of share options2009Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:Date ofgrantBalanceas at1.1.2009OptionslapsedOptionsexercisedBalanceas at31.12.2009No. ofholders at31.12.2009Exerciseprice$Exercisable period9.2.1999 1,334,060 267,600 1,066,460 – – 1.418 10.2.2001 to 9.2.200910.8.1999 464,910 206,910 258,000 – – 2.000 11.8.2001 to 10.8.20099.2.2000 9,244,291 30,000 2,914,978 6,299,313 135 * 2.260 10.2.2002 to 9.2.20109.2.2000 711,625 – 55,500 656,125 22 1.808 10.2.2002 to 9.2.20106.9.2000 441,665 – 45,000 396,665 18 2.390 7.9.2002 to 6.9.2010Total 12,196,551 504,510 4,339,938 7,352,103

198Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)(ii)Details of share options (continued)2009Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Date ofgrantBalanceas at1.1.2009OptionslapsedOptionsexercisedBalanceas at31.12.2009No. ofholders at31.12.2009Exerciseprice$Exercisable period19.2.2001 4,571,626 31,537 149,380 4,390,709 374 * 2.720 20.2.2002 to 19.2.201110.8.2001 6,045,717 71,556 157,265 5,816,896 398 * 2.680 11.8.2002 to 10.8.20117.2.2002 4,435,553 35,339 319,631 4,080,583 308 * 2.290 8.2.2003 to 7.2.201212.8.2002 2,406,349 14,866 213,977 2,177,506 221 * 1.920 13.8.2003 to 12.8.20126.2.2003 2,522,817 – 243,873 2,278,944 244 * 1.790 7.2.2004 to 6.2.20136.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.201311.8.2003 3,518,273 1,981 349,356 3,166,936 384 * 1.860 12.8.2004 to 11.8.201311.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.20139.2.2004 5,183,441 16,482 745,111 4,421,848 528 * 2.090 10.2.2005 to 9.2.20149.2.2004 228,875 – 228,875 – – 2.090 10.2.2005 to 9.2.20099.2.2004 11,426 – – 11,426 1 2.090 10.2.2005 to 9.2.201410.8.2004 7,112,644 30,980 982,764 6,098,900 729 * 2.120 11.8.2005 to 10.8.201410.8.2004 202,375 11,500 190,875 – – 2.120 11.8.2005 to 10.8.200910.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.20147.2.2005 8,807,062 92,002 980,651 7,734,409 839 * 2.370 8.2.2006 to 7.2.20157.2.2005 309,750 – 54,625 255,125 13 # 2.370 8.2.2006 to 7.2.20107.2.2005 16,426 – – 16,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 10,987,644 197,205 872,465 9,917,974 995 * 2.570 11.8.2006 to 10.8.201510.8.2005 299,043 – 25,250 273,793 16 # 2.570 11.8.2006 to 10.8.201010.8.2005 21,426 – – 21,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 11,771,022 278,424 80,797 11,411,801 1,201 * 3.010 10.2.2007 to 9.2.20169.2.2006 359,750 – – 359,750 18 # 3.010 10.2.2007 to 9.2.201110.8.2006 13,458,052 346,221 276,509 12,835,322 1,308 * 2.840 11.8.2007 to 10.8.201610.8.2006 355,625 – – 355,625 18 # 2.840 11.8.2007 to 10.8.201115.3.2007 14,821,331 388,697 4,485 14,428,149 1,408 * 3.230 16.3.2008 to 15.3.201715.3.2007 360,000 – – 360,000 18 # 3.230 16.3.2008 to 15.3.201210.8.2007 14,042,322 456,978 – 13,585,344 1,509 * 3.610 11.8.2008 to 10.8.201710.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.2012Total 112,205,701 1,973,768 5,875,889 104,356,044* Includes 1 executive Director of the Company#Includes Directors of the Company and its subsidiaries

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009199Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)(ii)Details of share options (continued)2008Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:Date ofgrantBalanceas at1.1.2008OptionslapsedOptionsexercisedBalanceas at31.12.2008No. ofholders at31.12.2008Exerciseprice$Exercisable period29.4.1998 1,021,500 59,000 962,500 – – 1.390 30.4.2000 to 29.4.20087.8.1998 75,000 15,000 60,000 – – 1.290 8.8.2000 to 7.8.20089.2.1999 2,029,740 – 695,680 1,334,060 29 1.418 10.2.2001 to 9.2.200910.8.1999 567,910 10,000 93,000 464,910 78 * 2.000 11.8.2001 to 10.8.20099.2.2000 11,291,850 226,160 1,821,399 9,244,291 191 ** 2.260 10.2.2002 to 9.2.20109.2.2000 829,125 30,000 87,500 711,625 26 1.808 10.2.2002 to 9.2.20106.9.2000 474,207 – 32,542 441,665 20 2.390 7.9.2002 to 6.9.2010Total 16,289,332 340,160 3,752,621 12,196,551

200Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)(ii)Details of share options (continued)2008Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Date ofgrantBalanceas at1.1.2008OptionslapsedOptionsexercisedBalanceas at31.12.2008No. ofholders at31.12.2008Exerciseprice$Exercisable period19.2.2001 5,099,273 52,812 474,835 4,571,626 395 ** 2.720 20.2.2002 to 19.2.201110.8.2001 6,833,358 61,304 726,337 6,045,717 416 ** 2.680 11.8.2002 to 10.8.20117.2.2002 4,919,653 31,438 452,662 4,435,553 343 ** 2.290 8.2.2003 to 7.2.201212.8.2002 3,062,714 10,000 646,365 2,406,349 250 ** 1.920 13.8.2003 to 12.8.20126.2.2003 3,161,835 – 639,018 2,522,817 280 ** 1.790 7.2.2004 to 6.2.20136.2.2003 227,750 33,375 194,375 – – 1.790 7.2.2004 to 6.2.20086.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.201311.8.2003 4,783,284 1,228 1,263,783 3,518,273 445 ** 1.860 12.8.2004 to 11.8.201311.8.2003 247,125 58,000 189,125 – – 1.860 12.8.2004 to 11.8.200811.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.20139.2.2004 6,751,941 26,356 1,542,144 5,183,441 653 ** 2.090 10.2.2005 to 9.2.20149.2.2004 271,300 – 42,425 228,875 11 # 2.090 10.2.2005 to 9.2.20099.2.2004 16,426 – 5,000 11,426 1 2.090 10.2.2005 to 9.2.201410.8.2004 8,227,271 91,952 1,022,675 7,112,644 953 ** 2.120 11.8.2005 to 10.8.201410.8.2004 239,425 – 37,050 202,375 13 # 2.120 11.8.2005 to 10.8.200910.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.20147.2.2005 10,039,234 92,132 1,140,040 8,807,062 1,041 ** 2.370 8.2.2006 to 7.2.20157.2.2005 321,625 – 11,875 309,750 17 # 2.370 8.2.2006 to 7.2.20107.2.2005 31,426 – 15,000 16,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 11,824,329 186,029 650,656 10,987,644 1,157 ** 2.570 11.8.2006 to 10.8.201510.8.2005 309,166 – 10,123 299,043 17 # 2.570 11.8.2006 to 10.8.201010.8.2005 31,426 – 10,000 21,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 12,708,952 294,108 643,822 11,771,022 1,245 ** 3.010 10.2.2007 to 9.2.20169.2.2006 361,625 – 1,875 359,750 18 # 3.010 10.2.2007 to 9.2.201110.8.2006 14,219,586 436,727 324,807 13,458,052 1,355 ** 2.840 11.8.2007 to 10.8.201610.8.2006 355,625 – – 355,625 18 # 2.840 11.8.2007 to 10.8.201115.3.2007 15,683,232 583,655 278,246 14,821,331 1,460 ** 3.230 16.3.2008 to 15.3.201715.3.2007 360,000 – – 360,000 18 # 3.230 16.3.2008 to 15.3.201210.8.2007 14,846,773 803,574 877 14,042,322 1,574 ** 3.610 11.8.2008 to 10.8.201710.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.2012Total 125,291,506 2,762,690 10,323,115 112,205,701* Includes 1 executive Director and 1 past Director of the Company** Includes 1 executive Director of the Company#Includes Directors of the Company and its subsidiaries

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009201Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)(iii)Details of share options exercisedNo. of sharesExercise Proceeds frompriceshare issue Share price$ $’000 $2009January to March 1,921,090 1.418 – 2.840 3,295 2.19 – 2.62April to June 1,393,746 1.790 – 3.230 3,002 2.29 – 2.58July to September 1,668,147 1.790 – 2.720 3,677 2.43 – 2.78October to December 5,232,844 1.790 – 3.230 12,234 2.72 – 3.3310,215,8272008January to March 8,183,482 1.290 – 3.230 17,681 3.17 – 3.74April to June 3,978,667 1.290 – 3.230 9,128 2.72 – 3.52July to September 973,564 1.290 – 3.610 2,058 2.54 – 2.88October to December 940,023 1.418 – 2.840 1,610 2.04 – 2.6714,075,736The weighted average share price for options exercised during the year was $2.812 (2008: $3.285). The weighted average remainingcontractual life for these options is 4.97 years (2008: 5.74 years).The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted.The estimate of the fair value of the services received is measured based on a binomial model, taking into account the terms and conditionsupon which the options were granted. No options were granted for the year ended 31 December 2009 and 31 December 2008.

202Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)Singapore Technologies Engineering Performance Share Plan (“PSP”)Performance shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to bea three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period if thetargets are met. The final number of performance shares awarded will depend on the level of achievement of those targets and can range from 0%to 170% of the conditional award of performance shares. In addition, the final award for performance shares is conditional upon the performancetargets for restricted shares that has the same end of performance period being met.Year of grant2009 2008 2007 TotalNumber of performance sharesAt grant date 1,687,000 1,632,000 1,513,000 4,832,000Lapsed (169,484) (210,091) (241,603) (621,178)Outstanding as at 31.12.2009 1,517,516 1,421,909 1,271,397 4,210,822During the year, performance shares amounting to 1,158,500 ordinary shares were awarded in respect of grant made in 2006.The fair value of the performance shares is determined on conditional grant date using the Monte Carlo simulation model.The significant inputs to the model used for the conditional grants in 2007 to 2009 are as follows:Year of grant2009 2008 2007Market conditionsVolatility of MSCI Index (%) 33.10 20.93 13.66Volatility of the Company’s shares (%) 18.88 15.51 14.59Correlation of volatility of MSCI vs the Company (%) 67.50 45.30 26.83Risk-free rate (%) 1.03 1.11 2.43Share price ($) 2.26 3.36 3.62Cost of equity (%) 7.86 9.60 8.27Dividend yield (-- Management’s forecast in line with dividend policy --)

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009203Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)41. Share capital (continued)Singapore Technologies Engineering Restricted Stock Plan (“RSP”)Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be atwo-year performance period. The restricted shares will only be released to the recipient at the end of the performance qualifying period if the targetsare met. The final number of restricted shares awarded will depend on the level of achievement of those targets and range between 0% and 150% ofthe conditional award of the restricted shares and will be delivered to recipients over a three-year vesting period; half at the end of the performancequalifying period and the balance will vest equally over the subsequent two years.For non-executive directors, depending on the achievement of pre-determined targets over a one-year performance period, the final number ofrestricted shares awarded can range from zero to a maximum capped at 150% of the conditional award and will be released over a three-yearvesting period at 33 1 ⁄ 3% per year.Date ofgrantNumber ofrestricted shares asat grant dateNumber ofrestricted shareslapsedNumber ofrestricted sharesreleasedBalanceoutstanding as at31.12.200926 July 2007 897,000 237,367 374,732 284,90112 November 2007 300,000 – 60,000 240,00024 March 2008 7,603,183 607,627 – 6,995,55624 March 2008 217,000 107,379 43,912 65,70918 March 2009 8,286,892 310,785 – 7,976,10718 March 2009 210,500 5,293 – 205,207Total 17,514,575 1,268,451 478,644 15,767,480The fair value of the restricted shares is determined at conditional grant date using the Monte Carlo simulation model.The significant inputs to the model used for the conditional grant in 2008 and 2009 are as follows:Year of grant2009 2008Volatility of the Company’s shares (%) 18.88 15.51Risk-free rate (%) 0.72 – 1.29 0.94 – 1.32Share price ($) 2.26 3.36Dividend yield(--Management’s forecast in line with dividend policy--)42. Capital reservesIncluded in capital reserves are:(a)(b)an amount relating to share premium of the respective pooled enterprises, namely Singapore Technologies Aerospace Ltd, SingaporeTechnologies Electronics Limited, Singapore Technologies Kinetics Ltd and Singapore Technologies Marine Ltd classified as capital reserveupon the pooling of interests during the financial year ended 31 December 1997; andan amount relating to an excess capital contribution from minority shareholders of a subsidiary in China following the additional capitalinjection in prior year.

204Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)43. Other reservesForeigncurrencytranslationreserveStatutoryreserveFair valuereserveShare-basedpaymentreserveTotal$’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2008 (60,464) 394 25,987 39,502 5,419Other comprehensive income:Net fair value changes on available-for-salefinancial assets – – (26,324) – (26,324)Net fair value changes on cash flow hedges – – (2,642) – (2,642)Foreign currency translation differences (11,093) – 2 – (11,091)Total comprehensive income for the year (11,093) – (28,964) – (40,057)Cost of share-based payment – – – 17,940 17,940Transfer from unappropriated profit tostatutory reserve – 482 – – 482At 31.12.2008 (71,557) 876 (2,977) 57,442 (16,216)At 1.1.2009 (71,557) 876 (2,977) 57,442 (16,216)Other comprehensive income:Net fair value changes on available-for-salefinancial assets – – 8,245 – 8,245Net fair value changes on cash flow hedges – – (4,218) – (4,218)Foreign currency translation differences (25,808) – 315 – (25,493)Total comprehensive income for the year (25,808) – 4,342 – (21,466)Cost of share-based payment – – – 14,559 14,559Transfer from unappropriated profit tostatutory reserve – 330 – – 330At 31.12.2009 (97,365) 1,206 1,365 72,001 (22,793)

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009205Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)43. Other reserves (continued)Group2009 2008$’000 $’000Net fair value changes on available-for-sale financial assets:- Net gain/(loss) on fair value changes during the year 8,043 (16,459)- Recognised in income statement, in other operating income 202 (9,865)8,245 (26,324)Net fair value changes on cash flow hedges:- Net loss on fair value changes during the year (12,413) (5,302)- Recognised in income statement, in other operating income 8,195 2,660(4,218) (2,642)Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreignsubsidiaries whose functional currencies are different from that of the Group’s presentation currency.As at 31 December 2009, bonds amounting to $68.7 million (US$48.9 million) have been designated as a hedge of the net investment in VisionTechnologies Systems, Inc. and its subsidiaries and are being used to hedge the Group’s exposure to foreign exchange risk on this investment. Gainsor losses on the retranslation of these bonds are transferred to equity to offset any gains or losses on translation on the net investment in the USsubsidiaries. There is no ineffectiveness in the hedge during the year.Statutory reserveIn accordance with foreign Enterprise Law application to the wholly-owned subsidiaries in the People’s Republic of China (“PRC”), the subsidiariesare required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordancewith the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% ofthe subsidiary’s registered capital. Subject to approval from the relevant PRC authorities the SRF may be used to offset any accumulated losses orincrease the registered capital of the subsidiaries. The SRF is not available for standard distribution to shareholders.In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment, appropriations from the net profits are made to theReserve Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from prior years (if any), and before profit distributions to theinvestors. The percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by the Board of Directorsof the China entities.Fair value reserveFair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired as well asthe portion of the fair value changes on the derivative financial instruments designated as hedging instruments in cash flow hedges that is determinedto be an effective hedge.

206Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)43. Other reserves (continued)Share-based payment reserveShare-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to employees and nonexecutivedirectors. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled shareoptions, performance shares and restricted shares. The expense for services received will be recognised over the vesting period.44. Retained earningsGroup2009 2008$’000 $’000Retained by:The Company 414,437 510,612Subsidiaries 352,933 281,792Associated companies and joint ventures 95,394 101,315862,764 893,71945. DividendsGroup and Company2009 2008$’000 $’000Final dividend paid in respect of the previous financial year of 4.0 cents(2008: 4.0 cents) per share 119,944 119,342Special dividend paid in respect of the previous financial year of 8.8 cents(2008: 10.88 cents) per share 263,877 324,610Interim dividend paid in respect of the current financial year of 3.0 cents(2008: 3.0 cents) per share 90,130 89,922473,951 533,874Additional final dividend paid in respect of the previous financial year due toissue of shares under ESOS/ESOP before books closure date 604 1,816474,555 535,690The Directors propose a final dividend of 4.0 cents (2008: 4.0 cents) per share amounting to $120.4 million (2008: $119.9 million) and aspecial dividend of 6.28 cents (2008: 8.8 cents) per share amounting to $188.9 million (2008: $263.9 million), in respect of the financialyear ended 31 December 2009. The dividends have not been recognised as a liability as at year end as it is subject to approval at the AnnualGeneral Meeting of the Company.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009207Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)46. Related party informationIn addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with fellow subsidiarieswithin Temasek Group on terms agreed between the parties as follows:Group2009 2008$’000 $’000Sales and services rendered 23,636 13,401Purchases and services received 24,524 34,578Property, plant and equipment purchases 461 123Interest income 1,823 10,731Dividend income 192 213Rental income 3,102 380Rental expenses 4,102 4,15647. Cash and cash equivalentsGroupNote 2009 2008$’000 $’000Fixed deposits with financial institutions 26 1,006,528 601,382Cash and bank balances 26 507,082 217,543Short-term loans to a related corporation 23 – 230,188Bank overdrafts (1) (19)1,513,609 1,049,094Cash and cash equivalents denominated in currencies other than the functional currencies as at 31 December are as follows:US dollars 463,553 98,746Euro 158,060 118,023GBP 21,377 3,298

208Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)48. Commitments(a)Capital commitmentsGroup2009 2008$’000 $’000Capital expenditure contracted but not provided for in the financial statements 180,940 260,995(b)LeasesFuture minimum lease payments under non-cancellable operating leases are as follows:Group2009 2008$’000 $’000Within 1 year 28,321 19,787Within 2 to 5 years 86,479 71,504After 5 years 133,884 131,638248,684 222,929The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. The leases forleasehold land and buildings and office premises contain renewal options but not purchase options. Certain leases contain escalationclauses but do not provide for contingent rents. Lease terms do not contain restrictions on the Group activities concerning dividends,additional debt or further leasing.(c)Operating lease commitments – As lessor(i)The Group has entered into commercial leases on four of its aircraft engines. The non-cancellable leases have an average leaseterm of about 1 month to 5 years.Future lease payment receivables under non-cancellable operating leases are as follows:Group2009 2008$’000 $’000Within 1 year 1,358 2,023Within 2 to 5 years 981 3,6062,339 5,629

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009209Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)48. Commitments (continued)(c)Operating lease commitments – As lessor (continued)(ii)The Group has entered into commercial leases on its aircraft. These non-cancellable leases have remaining lease terms of17 years. The leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailingmarket conditions.Future minimum rentals receivable under non-cancellable operating leases at the balance sheet date are as follows:Group2009 2008$’000 $’000Within 1 year 611 587Within 2 to 5 years 2,442 2,348After 5 years 7,276 7,58410,329 10,519(d)Investments(i)(ii)(iii)As at 31 December 2009, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.2 million(2008: $20.3 million) in subsidiaries.As at 31 December 2009, in respect of investments in unquoted equity shares of venture capital fund companies, there is uncalledcapital contribution amounting to $0.2 million (2008: $0.6 million) for the Group.On 3 September 2007, ST Aerospace Engineering Pte Ltd (“STA Engineering”) signed an agreement with Aviation Training Academy(Singapore) Pte Ltd (“ATAS”) to set up a commercial pilot training academy in Singapore known as ST Aerospace Training AcademyPte Ltd (“STATA”) (formerly known as ST Aviation Training Academy Pte. Ltd.) with a 70% and 30% shareholding respectively.Pursuant to the agreement, if STATA and its subsidiaries are able to achieve the agreed profit before tax excluding minorityinterests for the second and fifth financial years, STA Engineering will grant two independent options which will entitle ATAS topurchase STA Engineering’s shareholdings of STATA, amounting to 5% of the total share capital of STATA for each option on thedate of the exercise of the option (“First Option” and “Second Option”). If ATAS does not exercise the First Option by the expiry date,the First Option shall lapse and will not be carried forward to the Second Option.The First Option may be exercised at any time during a six-month period from the date of the audited financial statements of STATAfor the second financial year, while the Second Option may be exercised at any time during a six-month period from the date ofthe audited financial statements of STATA for the fifth financial year.The price for the shares of the First Option and Second Option shall be at fair values as determined by an appraiser to bejointly appointed by shareholders and the appraiser shall determine the fair value in accordance with the principles set out inthe agreement.As at 31 December 2009, STATA and its subsidiaries have not achieved the agreed profit before tax excluding minority interestsfor the second financial year.

210Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)48. Commitments (continued)(d)Investments (continued)(iv)(v)As at 31 December 2009, the Group has outstanding commitments in respect of production for digital media intellectual propertiesto the extent of $0.2 million (2008: $1.4 million).As at 31 December 2009, the Group has outstanding commitment in respect of uncalled capital to the extent of $2.3 million(2008: $nil) in an associated company, GFM Maquinaria, S.A.P.I. de C.V. and $2.2 million (2008: $2.4 million) in a joint venture.Joint Venture AgreementOn 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF Utilities Limited to forman Equity Joint Venture Company in Pune, India. The joint venture company will have a registered capital of US$6 million to becontributed by each party in the proportion of 26% and 74% respectively, which is to be contributed over three years. To-date, thejoint venture company has not been set up.49. Segment information(a)Analysis by business segmentsThe Group is organised on a worldwide basis into four main operating segments, namely:(i)AerospaceProvides a spectrum of maintenance and engineering services that include airframe, engine and component maintenance,repair and overhaul; engineering design and technical services; and aviation materials and management services, includingTotal Aviation Support.(ii)ElectronicsDelivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. It specialisesin the design, development and integration of advanced electronics and communications systems, such as broadband radiofrequency and satellite communication, e-Government solutions, information communications technologies and IT, rail and trafficmanagement, real-time command and control, modelling and simulation, interactive digital media, intelligent building managementand information security.(iii)Land SystemsDelivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security andcommercial applications.(iv)MarineProvides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. In shipbuilding, ithas the proven capabilities to provide turnkey solutions from concept definition to detailed design, construction, on-board systeminstallation and integration, testing, commissioning to through-life support. It has also established a track record in providing highengineering content shiprepair and ship conversion services for a worldwide clientele.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009211Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)49. Segment information (continued)(a)Analysis by business segments (continued)Other operations include research and development, treasury, investment holding and provision of management, consultancy, integratedlogistics management, integrated facilities management, warehousing and other support services. None of these segments meets any ofthe quantitative thresholds for determining reportable segments in 2009 or 2008.Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocationand performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explainedin the table below, is measured differently from operating profit or loss in the consolidated financial statements.Inter-segment pricing is on an arm’s length basis.LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002009TurnoverExternal sales 1,872,124 1,370,781 1,167,450 948,917 188,515 – 5,547,787Inter-segment sales 3,101 22,575 34,601 7,035 25,670 (92,982) –1,875,225 1,393,356 1,202,051 955,952 214,185 (92,982) 5,547,787Segment results 216,607 120,376 98,929 97,816 381,927 (364,692) 550,963Investment income, net 187 (970) 362 653 413 (496) 149Interest income 2,029 1,636 1,693 4,580 26,342 (23,592) 12,688Operating profit 218,823 121,042 100,984 103,049 408,682 (388,780) 563,800Financial expenses (24,640) (6,677) (10,063) (1,577) (37,036) 23,873 (56,120)Share of results of associated companiesand joint ventures 34,105 911 4,469 807 – (1,413) 38,879Profit from operations before taxation 228,288 115,276 95,390 102,279 371,646 (366,320) 546,559Taxation (33,688) (22,996) (10,981) (20,516) (2,352) 371 (90,162)Minority interests (8,900) (1,477) (2,111) – – 21 (12,467)Net profit attributable to shareholders 185,700 90,803 82,298 81,763 369,294 (365,928) 443,930

212Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)49. Segment information (continued)(a)Analysis by business segments (continued)LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002009Other assets 1,977,189 1,466,308 1,675,386 722,728 2,960,721 (2,191,144) 6,611,188Associated companies and joint ventures 125,601 11,560 115,504 1,914 19,092 (292) 273,379Segment assets 2,102,790 1,477,868 1,790,890 724,642 2,979,813 (2,191,436) 6,884,567Segment liabilities 1,645,392 1,349,932 1,616,055 622,141 1,519,116 (1,544,265) 5,208,371Capital expenditure 141,805 27,821 108,827 20,590 5,218 (3,505) 300,756Depreciation and amortisation 89,089 25,847 28,383 16,654 2,785 – 162,758Impairment loss/(write-back of impairment) (44) 1,417 42 – 93 (93) 1,415Other non-cash expenses 10,525 271 1,751 – – – 12,547LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002008TurnoverExternal sales 1,938,411 1,142,728 1,274,093 821,681 167,602 – 5,344,515Inter-segment sales 2,543 14,976 6,786 73 24,406 (48,784) –1,940,954 1,157,704 1,280,879 821,754 192,008 (48,784) 5,344,515Segment results 235,310 117,481 90,528 72,276 498,131 (485,734) 527,992Investment income, net 21,001 (18,627) (6,690) (375) – – (4,691)Interest income 4,374 3,680 4,424 5,506 26,610 (23,443) 21,151Operating profit 260,685 102,534 88,262 77,407 524,741 (509,177) 544,452Financial expenses (21,434) (10,282) (8,003) (2,244) (22,800) 22,076 (42,687)Share of results of associated companies and jointventures 32,869 1,688 4,469 40 – (129) 38,937Profit from operations before taxation 272,120 93,940 84,728 75,203 501,941 (487,230) 540,702Taxation (37,403) (22,817) (1,629) (703) 12,668 (2,055) (51,939)Minority interests (9,026) (3,012) (3,152) – – 63 (15,127)Net profit attributable to shareholders 225,691 68,111 79,947 74,500 514,609 (489,222) 473,636

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009213Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)49. Segment information (continued)(a)Analysis by business segments (continued)LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002008Other assets 1,965,947 1,408,125 1,375,831 702,727 2,417,084 (2,140,021) 5,729,693Associated companies and joint ventures 137,386 11,305 112,111 241 1,528 507 263,078Total assets 2,103,333 1,419,430 1,487,942 702,968 2,418,612 (2,139,514) 5,992,771Segment liabilities 1,687,352 1,317,479 1,317,131 607,695 892,814 (1,506,816) 4,315,655Capital expenditure 104,343 39,835 32,412 21,711 2,754 – 201,055Depreciation and amortisation 97,717 22,335 20,418 16,218 2,105 – 158,793Impairment loss 263 18,688 6,892 – 118 (118) 25,843Other non-cash expenses 11,934 90 92 – 1 – 12,117(b)Analysis by country of incorporationTurnover is based on the country of incorporation regardless of where the goods are produced or services rendered. Non-current assets,excluding derivative financial instruments and deferred tax assets, are based on the location of those assets.2009$’000Turnover2008$’0002009$’000Non-Current Assets2008$’000Asia 3,790,209 3,490,238 1,001,044 815,877USA 1,361,119 1,379,309 617,791 632,636Europe 345,877 416,804 413,455 434,657Others 50,582 58,164 116,050 116,1135,547,787 5,344,515 2,148,340 1,999,283(c)Analysis by geographical areasTurnover is based on the location of customers regardless of where the goods are produced or services rendered.Turnover2009 2008$’000 $’000Asia 3,093,411 2,538,725USA 1,430,243 1,522,881Europe 710,974 743,130Others 313,159 539,7795,547,787 5,344,515

214Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)50. Financial risk management objectives and policiesThe Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and credit risks, arising from itsoperations 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 andshort-term deposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions,with banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. TheGroup has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solelyfor hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, crosscurrency swap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap,floor or collar option (“Permitted Transactions”). These instruments are generic in nature with no embedded or leverage features and any deviationfrom these instruments would require specific approval from the Board of Directors. The Group’s accounting policies in relation to derivatives areset out in Note 2.The policies for managing each of these risks are broadly summarised below.Interest rate riskThe Group has cash balances placed with reputable banks, financial institutions and a related corporation. The Group manages its interest raterisk on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flowrequirements and optimising yield.The Group’s debt includes bank borrowings and lease commitments. The Group seeks to minimise its interest exposure through options to refinancethe 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 wouldincrease/decrease income statement by the amounts shown below. This analysis assumes that all other variables remain constant.Income statement200bp200bpincreasedecrease$’000 $’000The Group2009Bank loans and loans payable (1,224) 1,224Loans receivable 829 (829)2008Bank loans (3,532) 3,532Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings, investments and loan receivables,where applicable.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009215Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)50. Financial risk management objectives and policies (continued)Foreign exchange riskThe Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and incurring costs denominatedin foreign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies. The Group’s foreign exchange exposuresare primarily from US dollars and Euro and the Group enters mainly into forward currency contracts to hedge against its foreign exchange riskresulting from anticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group’s hedging policy.The Company’s centralised Treasury Unit facilitates intra-group foreign exchange transactions within the Group to net-off the foreign exchangeexposures before proceeding to transact the hedge with banks.The Company’s centralised Treasury Unit executes the Group’s material foreign exchange transactions. Foreign exchange transactions are executedwith segregation of duties between authorised dealers and back office. Only authorised dealers can transact with the banks on behalf of the Group,with back office confirming the deals. The dealers’ limits and permitted treasury instruments in the form of an authorisation matrix and mandatesare communicated to the banks for compliance.Market riskThe Group has strategic investments in quoted equity shares. The market value of these investments will fluctuate with market conditions.The table below summarises the impact to the Group’s fair value reserve in equity and income statement arising as a result of a 10% increase/decrease in the fair value of the quoted investments. This analysis assumes that all other variables remain constant.EquityIncome statement10%increase10%decrease10%increase10%decrease$’000 $’000 $’000 $’000The Group2009Quoted investments 1,710 (1,710) 171 (171)2008Quoted investments 958 (958) 37 (37)

216Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)50. Financial risk management objectives and policies (continued)Liquidity riskTo manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and securedcommitted funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capitalrequirements 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 besettled on a gross basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity date. Theamounts disclosed in the table below are the contractual undiscounted cash flows.Total$’000Within1 year$’0002 to 5 years$’000More than5 years$’000The Group2009Bank loans 732,364 83,510 648,854 –Bonds 702,500 – – 702,500Other loans 2,328 240 1,461 627Lease obligations 6,211 2,050 4,161 –Bank overdrafts 1 1 – –Other long-term payables 4,357 2,904 1,453 –Trade and other payables 1,382,874 1,382,874 – –Derivative financial instruments:• Forward currency contracts - gross payments 44,336 42,106 2,230 –• Forward currency contracts - gross receipts 434,134 423,675 10,459 –• Cross currency swap - gross receipts 300,000 – 300,000 –• Interest rate swaps - settled net 3,321 3,321 – –2008Bank loans 872,404 584,762 287,642 –Other loans 1,847 240 811 796Lease obligations 8,098 2,025 6,073 –Bank overdrafts 19 19 – –Trade and other payables 1,395,285 1,395,285 – –Derivative financial instruments:• Forward currency contracts - gross payments 80,403 80,403 – –• Forward currency contracts - gross receipts 451,810 363,447 88,363 –• Interest rate swaps - settled net 6,252 6,252 – –

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009217Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)50. Financial risk management objectives and policies (continued)Total$’000Within1 year$’0002 to 5 years$’000More than5 years$’000No specificterms$’000The Company2009Creditors and accruals 41,650 41,650 – – –Due to a subsidiary 54,000 – – – 54,0002008Creditors and accruals 56,855 56,855 – – –Due to a subsidiary 54,000 – – – 54,000Credit riskCredit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures.Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, advancepayments, and letters of credit or bank guarantees are required for customers of lower credit standing.Counterparties to financial instruments consist of prime financial institutions and related corporations, as disclosed in Notes 15 and 23.As at 31 December 2009, there were no significant concentrations of credit risk, except for 37% (2008: 26%) of trade debts relating to three majorcustomers of the respective subsidiaries. The table below analyses the trade debtors by the Group’s four main operating segments.Group2009 2008$’000 $’000Aerospace 280,300 412,235Electronics 291,367 278,628Land Systems 245,733 147,932Marine 81,802 106,619Others 27,770 23,261926,972 968,675

218Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instrumentsFair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in anarm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow modelsand option pricing models as appropriate.The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.NoteQuoted pricesin activemarkets foridenticalinstruments(Level 1)Significantotherobservableinputs(Level 2)Significantunobservableinputs(Level 3)Total$’000 $’000 $’000 $’000The Group2009Financial AssetsAvailable-for-sale- Equity investments (quoted) 15 17,101 – – 17,101- Venture capital funds and limited partnership 15 – – 1,342 1,342- Bonds (unquoted) 25 – 195,541 – 195,541Fair value through profit and loss- Equity investments (quoted) 25 1,710 – – 1,710Derivatives- Forward currency contracts – 6,958 – 6,958- Cross currency swap – 6,405 – 6,405- Embedded derivatives – 15,918 – 15,91818,811 224,822 1,342 244,975Financial LiabilitiesDerivatives- Forward currency contracts – 3,820 – 3,820- Interest rate swaps – 16,539 – 16,539- Embedded derivatives – 1,127 – 1,127– 21,486 – 21,486

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009219Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Fair value hierarchyThe Group classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.The fair value hierarchy have the following levels:(a)(b)(c)Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices)or indirectly (i.e., derived from prices); andLevel 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs).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 receivablesThe carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.Quoted and unquoted investmentsThe fair values of quoted investments are determined directly by reference to their quoted market prices for these investments as at balance sheetdate. For unquoted investments, it is not practicable to determine the fair values because of the lack of quoted market prices and the assumptionsused in valuation models to value these investments cannot be reasonably determined. For unquoted bonds, the investments are valued usingvaluation models which uses observable data.For unquoted investments in venture capital funds and limited partnerships as stated in Note 15, the fair value is determined by reference to valuationprovided by non-related fund managers based on non-observable data. Changing one or more of the inputs to reasonable alternative assumptions isnot expected to have a material impact on the changes in fair value.

220Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Quoted and unquoted investments (continued)Movements in level 3 financial instruments measured at fair valueThe following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservableinputs (Level 3).Equityinstruments(unquoted)$’0002009Opening balance 1,804Total gains or losses:- recognised in income statement, other operating income 103- recognised in other comprehensive income (471)Purchases 57Sales (151)Closing balance 1,342Total gains or losses for the year included in income statement (presented in other operating income)for assets held at 31 December 2009 103Long-term receivablesThe fair values of long-term receivables are estimated based on the expected cash flows discounted to present value.Short-term borrowings and other current payablesThe carrying amounts approximate fair values because of the short period to maturity of these instruments.DerivativesForward currency contracts, interest rate swaps, cross currency swap and embedded derivatives are valued using a valuation technique with marketobservable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. Themodels incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.BondsThe fair value of the US$500 million bonds as at 31 December 2009 approximates $704.1 million and is determined by reference to market value.

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009221Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Set out below is a comparison by category of carrying amounts of all the Group’s financial instruments that are carried in the financial statements.Classification of financial instrumentsLoans andreceivablesFair valuethroughprofit orlossDerivativesused forhedgingAvailablefor-saleHeld-tomaturityLiabilitiesatamortisedcostNonfinancialassets/liabilities Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2009AssetsProperty, plant and equipment – – – – – – 1,166,677 1,166,677Associated companies and joint ventures – – – – – – 273,379 273,379Investments 1,186 – – 20,278 – – – 21,464Intangible assets – – – – – – 642,784 642,784Investment properties – – – – – – 2,009 2,009Long-term receivables 44,437 – – – – – – 44,437Finance lease receivables 19,613 – – – – – – 19,613Derivative financial instruments – 4,234 14,508 – – – – 18,742Deferred tax assets – – – – – – 127,196 127,196Stocks and work-in-progress – – – – – – 1,364,296 1,364,296Trade debtors 926,972 – – – – – 135,255 1,062,227Due from related corporations 4,082 – – – – – – 4,082Advances and other debtors 92,691 742 9,797 – – – 284,996 388,226Short-term investments – 1,710 – 195,541 38,574 – – 235,825Bank balances and other liquid funds 1,513,610 – – – – – – 1,513,6102,602,591 6,686 24,305 215,819 38,574 – 3,996,592 6,884,567LiabilitiesAdvance payments from customers – – – – – – 1,337,694 1,337,694Creditors and accruals – 485 3,633 – – 1,385,778 2,496 1,392,392Provisions – – – – – – 211,851 211,851Progress billings in excess ofwork-in-progress – – – – – – 557,329 557,329Provision for taxation – – – – – – 178,734 178,734Short-term bank loans – – – – – 83,510 – 83,510Lease obligations – – – – – 5,552 – 5,552Long-term bank loans – – – – – 648,854 – 648,854Other loans – – – – – 2,328 – 2,328Other payables – – – – – 1,453 – 1,453Bonds – – – – – 698,462 – 698,462Bank overdrafts – – – – – 1 – 1Deferred income – – – – – – 14,546 14,546Deferred tax liabilities – – – – – – 58,297 58,297Derivative financial instruments – 309 17,059 – – – – 17,368– 794 20,692 – – 2,825,938 2,360,947 5,208,371

222Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Loans andreceivablesFair valuethroughprofit orlossDerivativesused forhedgingAvailablefor-saleHeld-tomaturityLiabilitiesatamortisedcostNonfinancialassets/liabilities Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2008AssetsProperty, plant and equipment – – – – – – 1,019,084 1,019,084Associated companies and joint ventures – – – – – – 263,078 263,078Investments 1,162 – – 13,902 38,352 – – 53,416Intangible assets – – – – – – 641,090 641,090Investment properties – – – – – – 17,371 17,371Long-term receivables 1,151 – – – – – – 1,151Finance lease receivables 15,850 – – – – – – 15,850Derivative financial instruments – 2,950 13,424 – – – – 16,374Deferred tax assets – – – – – – 138,128 138,128Stocks and work-in-progress – – – – – – 1,286,331 1,286,331Trade debtors 968,675 – – – – – 139,554 1,108,229Due from related corporations 234,078 – – – – – – 234,078Advances and other debtors 107,457 253 9,885 – – – 261,491 379,086Short-term investments – 369 – 211 – – – 580Bank balances and other liquid funds 818,925 – – – – – – 818,9252,147,298 3,572 23,309 14,113 38,352 – 3,766,127 5,992,771LiabilitiesAdvance payments from customers – – – – – – 1,091,640 1,091,640Creditors and accruals – 866 7,502 – – 1,395,285 2,516 1,406,169Provisions – – – – – – 185,415 185,415Progress billings in excess ofwork-in-progress – – – – – – 475,746 475,746Provision for taxation – – – – – – 177,647 177,647Short-term bank loans – – – – – 322,773 – 322,773Lease obligations – – – – – 7,145 – 7,145Long-term bank loans – – – – – 549,631 – 549,631Other loans – – – – – 1,847 – 1,847Bank overdrafts – – – – – 19 – 19Deferred income – – – – – – 11,496 11,496Deferred tax liabilities – – – – – – 62,602 62,602Derivative financial instruments – – 23,525 – – – – 23,525– 866 31,027 – – 2,276,700 2,007,062 4,315,655

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009223Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Loans andreceivables$’000Liabilitiesat amortisedcost$’000Non-financialassets/liabilities$’000Total$’000The Company2009AssetsProperty, plant and equipment – – 711 711Subsidiaries – – 588,477 588,477Associated companies and joint ventures – – 17,707 17,707Due from related corporations 29 – – 29Advances and other debtors 339,657 – 439 340,096Long-term receivables, current 90 – – 90Bank balances and other liquid funds 241,984 – – 241,984581,760 – 607,334 1,189,094LiabilitiesCreditors and accruals – 41,650 – 41,650Provision for taxation – – 5,204 5,204Deferred tax liabilities – – 205 205Due to a subsidiary – 54,000 – 54,000– 95,650 5,409 101,0592008AssetsProperty, plant and equipment – – 1,016 1,016Subsidiaries – – 574,453 574,453Associated companies and joint ventures – – 50 50Due from related corporations 139,198 – – 139,198Advances and other debtors 340,103 – 93 340,196Long-term receivables, current 180 – – 180Bank balances and other liquid funds 231,195 – – 231,195710,676 – 575,612 1,286,288LiabilitiesCreditors and accruals – 56,855 – 56,855Provision for taxation – – 5,927 5,927Short-term bank loans – 25,300 – 25,300Deferred tax liabilities – – 201 201Due to a subsidiary – 54,000 – 54,000– 136,155 6,128 142,283

224Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)Derivative financial instrumentsNote2009 2008Contractual/ Estimated fair value Contractual/notionalnotionalEstimated fair valueamount Asset Liability amount Asset Liability$’000 $’000 $’000 $’000 $’000 $’000Cash flow hedgesForward currency contracts:- to hedge confirmed sales inforeign currencies (a)(i) 186,931 2,497 (2,386) 282,136 10,555 (1,252)- to hedge firm purchasecommitments in foreign currencies (a)(i) 39,930 414 (533) 72,175 1,681 (2,684)- to hedge accounts receivablecommitments in foreign currencies (a)(i) 2,184 76 – – – –- to hedge accounts payablecommitments in foreign currencies (a)(i) 381 56 – – – –Interest rate swaps (b) 581,000 – (16,539) 417,465 – (23,525)Cross currency swap (c) 300,000 6,405 – – – –Other derivatives- embedded derivatives (a)(i) 173,113 11,498 (818) 167,787 9,002 –Fair value hedgesForward currency contracts:- to hedge confirmed sales inforeign currencies (a)(i) 118,241 1,774 (222) 122,232 498 (3,566)- to hedge accounts receivable inforeign currencies (a)(i) 62,387 1,585 (194) 31,824 1,573 –Non-hedging instrumentsForward currency contracts:- sales (a)(ii) 64,391 556 (383) 15,618 – (170)- purchases (a)(ii) 4,025 – (102) 8,228 253 (251)Other derivatives- embedded derivatives (a)(ii) 66,996 4,420 (309) 109,853 2,950 (445)Total 29,281 (21,486) 26,512 (31,893)Less: Current portion (10,539) 4,118 (10,138) 8,368Non-current portion 18,742 (17,368) 16,374 (23,525)

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009225Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)51. Fair value of financial instruments (continued)(a)Forward currency contracts(i)As at 31 December 2009, the Group has forward currency contracts and embedded derivative separated from the foreign currencyportion of a sales contract amounting to $583,167,000 (2008: $676,154,000) designated as hedges of confirmed sales in foreigncurrencies, firm purchase commitments in foreign currencies, accounts receivable in foreign currencies and accounts payable inforeign currencies.The maturity dates of the forward currency contracts and embedded derivative separated from the foreign currency portion of asales contract approximate the timing of the expected cash flows of their respective hedged items, which are on varying periodsup to 5 years from the financial year end.(ii)As at 31 December 2009, the Group has outstanding forward currency contracts and embedded derivatives separated from theforeign currency portion of sales contracts amounting to $135,412,000 (2008: $133,699,000), which are not designated ashedges of confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.(b)Interest rate swapsAs at 31 December 2009, the Group has outstanding interest rate swaps amounting to $581,000,000 (2008: $417,465,000), which aredesignated as cash flow hedges.The USD interest rate swaps are being used to hedge the exposure to changes in the fair value of the 100% unsecured USD long-termloans. Under the USD interest rate swaps, the Group pays fixed rates of interest of 3.68% to 3.86% (2008: 3.68% to 3.86%) per annumand receives variable rates of interest equal to the LIBOR on the notional amount. The USD interest rate swaps have the same maturityterms as the unsecured USD long-term loans.The Euro interest rate swap is being used to hedge the exposure to changes in the fair value of the same unsecured long-term loan. Underthe Euro interest rate swap, the Group pays a fixed rate of interest of 2.95% per annum and receives a variable rate of interest equal to theEURIBOR + 1.2% on the notional amount. The Euro interest rate swap has the same maturity terms as the unsecured long-term loan.In 2008, the Euro interest rate swap is being used to hedge the exposure to changes in the fair value of the 50% secured Euro long-termloan. Under the Euro interest rate swap, the Group pays a fixed rate of interest of 3.96% per annum and receives a variable rate of interestequal to the EURIBOR on the notional amount. The Euro interest rate swap has the same maturity terms as the secured Euro long-term loan.Subsequent to 31 December 2008, the Euro interest rate swap was terminated at the prevailing market rate.(c)Cross currency swapAs at 31 December 2009, the Group has an outstanding cross currency swap amounting to $300,000,000 (2008: $nil), which is designatedas cash flow hedge.The SGD cross currency swap converts the SGD bank loan with floating SGD interest rate at SIBOR + 1.325% to an equivalent Euro bankloan (approximately Euro 145,300,000) with floating Euro interest at EURIBOR + 1.2%.

226Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)52. Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order tosupport 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 capitalstructure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were madein the objectives, policies or processes during the years ended 31 December 2009 and 31 December 2008.The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of which gearing is animportant aspect.Group2009 2008$’000 $’000Gross debtBank loans 732,364 872,404Bonds 698,462 –Capitalised lease obligations 5,552 7,145Other loans 2,328 1,8471,438,706 881,396Bank overdrafts 1 191,438,707 881,415Shareholders’ fundsShare capital 611,808 586,614Other reserves 93,530 100,107Retained earnings 862,764 893,7191,568,102 1,580,440Minority interests 108,094 96,6761,676,196 1,677,116Gross debt equity ratio 85.8% 52.6%Cash and cash equivalents 1,513,609 1,049,094Short-term investments 235,825 5801,749,434 1,049,674Gross debt (excluding bank overdrafts) (1,438,706) (881,396)Net cash position 310,728 168,278

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009227Notes to the Financial Statements31 December 2009(Currency - Singapore dollars unless otherwise stated)53. Subsequent eventsA subsidiary in the Group had entered into an agreement on 20 January 2010 to sell its 51% owned subsidiary, ST Electronics-PCI Co., Ltd for acash consideration of $1.47 million (RMB7.14 million).

228SGX Listing Manual Requirements31 December 2009(Currency - Singapore dollars)Interested person transactionsInterested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the Listing Manual ofthe Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:Aggregate value of all transactionsexcluding transactions conductedunder a Shareholders’ Mandatepursuant to Rule 920 of the SGX ListingManualAggregate value of all transactionsconducted under a Shareholders’Mandate pursuant to Rule 920 of theSGX Listing Manual2009 2008 2009 2008$’000 $’000 $’000 $’000Transactions for the Sale of Goods and ServicesKeppel Corporation Ltd and its Associates – – – 6,058SembCorp Industries Ltd and its Associates – – 160 151SembCorp Marine Ltd and its Associates – – – 277Singapore Airport Terminal Services Limited and its Associates – – 2,512 420Singapore Computer Systems Limited and its Associates – – – 282Singapore Telecommunications Limited and its Associates – – 272 2,393SMRT Corporation Ltd and its Associates – – 1,625 –StarHub Ltd and its Associates – – – 430Temasek Holdings (Private) Limited and its Associates – – 6,210 3,144– – 10,779 13,155

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009229SGX Listing Manual Requirements31 December 2009(Currency - Singapore dollars)Interested person transactions (continued)Aggregate value of all transactionsexcluding transactions conductedunder a Shareholders’ Mandatepursuant to Rule 920 of the SGXListing ManualAggregate value of all transactionsconducted under a Shareholders’Mandate pursuant to Rule 920 ofthe SGX Listing Manual2009 2008 2009 2008$’000 $’000 $’000 $’000Transactions for the Purchase of Goods and ServicesCapitaLand Limited and its Associates – – 1,733 597SembCorp Industries Ltd and its Associates – – 190 –Singapore Airport Terminal Services Limited andits Associates – – 2,434 –Singapore Computer Systems Limited and its Associates – – – 2,395Singapore Telecommunications Limited andits Associates – – 2,395 238SMRT Corporation Ltd and its Associates – – 1,057 845SNP Corporation Ltd – – – 161StarHub Ltd and its Associates – – 433 322Temasek Holdings (Private) Limited and its Associates – – 15,170 20,637– – 23,412 25,195Investment/Divestment/Leasing TransactionsSembCorp Industries Ltd and its Associates 1,529 – – –Treasury TransactionsTemasek Holdings (Private) Limited and its Associates – – 652,130 796,872Total Interested Person Transactions 1,529 – 686,321 835,222

230Sectoral Financial Review - AerospaceINCOME STATEMENT2009 2008$’000 $’000Turnover 1,875,225 1,940,954Cost of sales (1,556,683) (1,565,515)Gross profit 318,542 375,439Other operating income, net 4,244 27,396Distribution and selling expenses (11,929) (25,970)Administrative expenses (91,258) (98,863)Other operating expenses (15,506) (16,386)Profit from operations before taxation, other income and financial expenses 204,093 261,616Other income/(expenses), net 14,730 (931)Financial expenses (24,640) (21,434)194,183 239,251Share of results of associated companies and joint ventures 34,105 32,869Profit from operations before taxation 228,288 272,120Taxation (33,688) (37,403)Profit from operations after taxation 194,600 234,717Attributable to:Shareholder of the Company 185,700 225,691Minority interests 8,900 9,026194,600 234,717

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009231Sectoral Financial Review - AerospaceBALANCE SHEET2009 2008$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 770,076 742,433Associated companies and joint ventures 125,601 137,386Investments 1,342 1,804Intangible assets 9,311 3,317Long-term receivables, non-current 32,064 117Derivative financial instruments 6,405 -Deferred tax assets 44,551 45,152989,350 930,209Current assetsStocks and work-in-progress 388,165 413,610Trade debtors 363,844 503,565Due from related corporations 4,244 27,804Advances and other debtors 82,954 110,359Long-term receivables, current 7,399 281Short-term investments 91 83Bank balances and other liquid funds 266,743 117,4221,113,440 1,173,124TOTAL ASSETS 2,102,790 2,103,333EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 110,602 92,594Creditors and accruals 571,976 834,406Provisions 63,271 57,264Progress billing in excess of work-in-progress 95,622 86,202Provision for taxation 81,107 64,105Short-term bank loans - 51,863Lease obligations, current 1,644 1,603Long-term bank loans, current - 261,879924,222 1,449,916NET CURRENT ASSET/(CURRENT LIABILITIES) 189,218 (276,792)Non-current liabilitiesAdvance payments from customers, non-current 287,884 159,866Deferred income 2,199 295Deferred tax liabilities 8,844 12,320Lease obligations, non-current 3,583 5,347Long-term bank loans, non-current 360,442 -Other loans, non-current 757 -Provision for pension benefits 2,496 2,516Derivative financial instruments 1,916 4,043Loans from related corporations 53,049 53,049721,170 237,436TOTAL LIABILITIES 1,645,392 1,687,352NET ASSETS 457,398 415,981Share capital and reserves 412,210 375,925Minority interests 45,188 40,056457,398 415,981TOTAL EQUITY AND LIABILITIES 2,102,790 2,103,333

232Sectoral Financial Review - AerospaceSTATEMENT OF CASH FLOWS2009 2008$’000 $’000Net cash from operating activities 456,559 29,762Net cash (used in)/from investing activities (86,844) 20,540Proceeds from sale of property, plant and equipment 4,322 9,094Dividends from associated companies 42,495 35,105Dividends from investments 104 154Proceeds from sale and maturity of investments 128 121,396Purchase of property, plant and equipment (130,148) (103,213)Purchase of investments (57) -Additional investment in associated companies - (2,795)Acquisition of subsidiaries (7,248) (147)Acquisition of additional interest in subsidiaries (320) (60,259)Exchange difference on investment activities 3,880 21,205Net cash used in financing activities (245,851) (90,037)Capital contribution from minority shareholders of a subsidiary 5,092 2,836Loan to an associated company (3,022) -(Repayment of)/proceeds from inter-company loans, net (117,166) 168,996Repayment of lease obligations, net (1,578) (1,513)Proceeds from long-term bank loans, net 358,815 -(Repayment of)/proceeds from short-term bank loans, net (313,742) 609Dividends paid to shareholder (142,629) (213,816)Dividends paid to minority shareholders of subsidiaries (8,514) (10,293)Interest paid (24,589) (21,544)Exchange difference on financing activities 1,482 (15,312)Net increase/(decrease) in cash and cash equivalents 123,864 (39,735)Cash and cash equivalents at beginning of the year 143,194 182,973Exchange difference on cash and cash equivalents at beginning of the year (315) (44)Cash and cash equivalents at end of the year 266,743 143,194

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009233Sectoral Financial Review - AerospaceFINANCIAL HIGHLIGHTS2009 2008 2007 2006 2005$’000 $’000 $’000 $’000 $’000Turnover 1,875,225 1,940,954 1,837,769 1,675,493 1,235,911EBITDA 288,938 331,937 381,857 321,464 233,582EBIT 199,849 234,220 303,441 237,080 194,490Profit before tax 228,288 272,120 341,162 305,280 255,443Profit after tax and minority interests 185,700 225,691 270,479 255,036 210,294Shareholders’ funds 412,210 375,925 409,977 417,680 463,024Total assets 2,102,790 2,103,333 2,107,305 1,987,885 1,401,366Net assets 457,398 415,981 507,284 512,220 497,982Capital expenditure 130,148 103,213 111,091 158,373 86,973Earnings per share (cents) 92.85 112.85 135.24 127.52 105.15Return on sales (%) 10.4 12.1 15.6 15.6 18.1Return on equity (%) 39.9 52.6 58.4 54.2 40.8Return on total assets (%) 9.3 11.2 13.6 13.2 15.9Net assets value per share (cents) 228.70 207.99 253.64 256.11 248.99Productivity DataAverage staff strength (number) 7,253 7,081 6,757 5,880 5,057Sales per employee ($) 258,545 274,107 271,980 284,948 244,396Profit after tax per employee ($) 25,603 31,873 40,029 43,373 41,585Employment costs 594,184 639,900 605,220 589,440 438,163Employment costs per $ of turnover ($) 0.32 0.33 0.33 0.35 0.35Economic Value Added 146,146 198,653 235,931 194,390 175,200Economic Value Added spread (%) 11.8 17.8 22.5 19.5 25.8Economic Value Added per employee ($) 20,150 28,054 34,917 33,060 34,645Value added 944,048 1,047,825 1,043,873 981,309 729,921Value added per employee ($) 130,160 147,977 154,488 166,889 144,339Value added per $ of employment costs ($) 1.59 1.64 1.72 1.66 1.67Value added per $ of gross property, plantand equipment ($) 0.66 0.78 0.79 0.81 1.09Value added per $ of turnover ($) 0.50 0.54 0.57 0.59 0.59

234Sectoral Financial Review - ElectronicsINCOME STATEMENT2009 2008$’000 $’000Turnover 1,393,356 1,157,704Cost of sales (1,002,368) (781,489)Gross profit 390,988 376,215Other operating income/(loss), net 646 (14,905)Distribution and selling expenses (97,701) (89,745)Administrative expenses (132,228) (114,919)Other operating expenses (53,881) (53,500)Profit from operations before taxation, other income and financial expenses107,824 103,146Other income/(expenses), net 13,218 (612)Financial expenses (6,677) (10,282)114,365 92,252Share of results of associated companies and joint venture 911 1,688Profit from operations before taxation 115,276 93,940Taxation (22,996) (22,817)Profit from operations after taxation 92,280 71,123Attributable to:Shareholder of the Company 90,803 68,111Minority interests 1,477 3,01292,280 71,123

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009235Sectoral Financial Review - ElectronicsBALANCE SHEET2009 2008$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 57,084 58,996Investment property - 1,389Associated companies and joint venture 11,560 11,305Investments 16,792 12,425Intangible assets 363,993 364,998Long-term receivables - 4Deferred tax assets 25,790 23,103475,219 472,220Current assetsStocks and work-in-progress 370,345 330,928Trade debtors 314,256 309,126Due from related corporations 9,699 44,231Debtors, deposits and prepayments 22,880 23,559Advance payments to suppliers 39,521 53,773Short-term investments 978 211Loan receivables, current 25 29Bank balances and other liquid funds 244,945 185,3531,002,649 947,210TOTAL ASSETS 1,477,868 1,419,430EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 159,679 140,860Creditors and accruals, current 329,183 308,903Provisions 30,627 26,703Progress billing in excess of work-in-progress 287,704 254,194Provision for taxation 31,547 31,913Short-term bank loans (unsecured) 10,000 9,000Long-term bank loans, current - 110Lease obligations, current 5 41848,745 771,724NET CURRENT ASSETS 153,904 175,486Non-current liabilitiesAdvance payments from customers, non-current 155,388 127,009Creditor and accrual, non-current 1,453 -Deferred rent 3,203 3,911Deferred tax liabilities 7,647 6,689Loans from immediate holding company 30,000 115,416Loans from related corporations 303,496 292,588Long-term bank loans, non current - 142501,187 545,755TOTAL LIABILITIES 1,349,932 1,317,479NET ASSETS 127,936 101,951Share capital and reserves 111,253 85,042Minority interests 16,683 16,909127,936 101,951TOTAL EQUITY AND LIABILITIES 1,477,868 1,419,430

236Sectoral Financial Review - ElectronicsSTATEMENT OF CASH FLOWS2009 2008$’000 $’000Net cash from operating activities 232,618 216,305Net cash used in investing activities (24,478) (155,233)Proceeds from sale of property, plant and equipment 53 21Proceed from sale of an investment property 1,800 -Proceed from sale of an associated company - 15Proceed from sale of a quoted investment 368 -Dividends from associated companies 175 17Dividends from other investments 6 46Purchase of property, plant and equipment (16,375) (31,955)Acquisition of subsidiaries (8,263) (121,482)Acquisition of additional interest in subsidiaries (2,242) (1,895)Net cash used in financing activities (186,227) (112,292)Repayment of inter-company loans, net (110,051) (33,265)Proceeds from/(repayment of) bank loans, net 748 (3,911)Repayment of loan by an associated company 493 -Loans to associated companies/joint venture - (942)Repayment of loan by a minority shareholder - 582Repayment of lease obligations (36) (45)Dividends paid to shareholder (67,704) (65,923)Dividends paid to minority shareholders of a subsidiary (600) (1,056)Interest paid (9,077) (7,732)Net increase/(decrease) in cash and cash equivalents 21,913 (51,220)Cash and cash equivalents at beginning of the year 223,667 275,583Exchange difference on cash and cash equivalents at beginning of the year (635) (696)Cash and cash equivalents at end of the year 244,945 223,667

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009237Sectoral Financial Review - ElectronicsFINANCIAL HIGHLIGHTS2009 2008 2007 2006 2005$’000 $’000 $’000 $’000 $’000Turnover 1,393,356 1,157,704 1,038,284 965,757 712,223EBITDA 133,025 140,386 101,272 106,602 81,164EBIT 107,178 118,051 85,748 91,082 72,383Profit before tax 115,276 93,940 115,336 104,650 76,022Profit after tax and minority interests 90,803 68,111 88,223 76,318 58,008Shareholders’ funds 111,253 85,042 75,611 103,488 137,282Total assets 1,477,868 1,419,430 1,399,125 1,205,206 1,057,526Net assets 127,936 101,951 90,490 114,097 141,025Capital expenditure 16,375 31,955 13,627 12,006 7,125Earnings per share (cents) 86.44 64.84 83.99 72.65 55.22Return on sales (%) 6.6 6.1 8.7 8.1 8.4Return on equity (%) 37.8 31.8 43.2 32.9 23.3Return on total assets (%) 6.2 5.0 6.5 6.5 5.7Net assets value per share (cents) 121.79 97.1 86.1 108.6 134.3Productivity DataAverage staff strength (number) 4,707 4,373 3,823 3,256 2,828Sales per employee ($) 296,018 264,739 271,589 296,608 251,847Profit after tax per employee ($) 19,291 15,575 23,077 23,439 20,512Employment costs 394,582 350,801 306,468 270,901 187,664Employment costs per $ of turnover ($) 0.28 0.30 0.30 0.28 0.26Economic Value Added 66,275 59,967 64,997 67,295 47,378Economic Value Added Spread (%) 10.8 9.4 11.3 12.7 26.5Economic Value Added per employee ($) 14,080 13,713 17,002 20,668 16,753Value added 561,439 482,469 450,242 407,234 273,439Value added per employee ($) 119,277 110,329 117,772 125,072 96,690Value added per $ of employment costs ($) 1.42 1.38 1.47 1.50 1.46Value added per $ of gross property, plantand equipment ($) 3.11 2.78 3.06 2.99 2.00Value added per $ of turnover ($) 0.40 0.42 0.43 0.42 0.38

238Sectoral Financial Review - Land SystemsINCOME STATEMENT2009 2008$’000 $’000Turnover 1,202,051 1,280,879Cost of sales (940,190) (1,026,777)Gross profit 261,861 254,102Other operating income/(loss), net 4,292 (1,188)Distribution and selling expenses (56,106) (52,977)Administrative expenses (96,690) (86,138)Other operating expenses (35,364) (32,799)Profit from operations before taxation,other income and financial expenses 77,993 81,000Other income, net 22,991 7,262Financial expenses (10,063) (8,003)90,921 80,259Share of results of associated companies and joint ventures 4,469 4,469Profit from operations before taxation 95,390 84,728Taxation (10,981) (1,629)Profit from operations after taxation 84,409 83,099Attributable to:Shareholder of the Company 82,298 79,947Minority interests 2,111 3,15284,409 83,099

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009239Sectoral Financial Review - Land SystemsBALANCE SHEET2009 2008$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 224,939 108,004Associated companies and joint ventures 115,504 112,111Long-term investments 3,311 635Intangible assets 233,078 235,524Investment properties 2,009 15,982Long-term receivables, non-current 60,009 60,146Finance lease receivables, non-current 5,227 4,793Deferred tax assets 15,365 15,087Derivative financial instruments 11,715 16,374671,157 568,656Current assetsStocks and work-in-progress 498,369 413,123Trade debtors 269,366 161,538Debtors and deposits 15,519 18,213Advance payments to suppliers 117,349 112,704Prepayments 5,160 6,564Finance lease receivables, current 14,386 11,057Bank balances and other liquid funds 172,096 159,132Due from related corporations 19,967 28,356Derivative financial instruments, current 7,521 8,5991,119,733 919,286TOTAL ASSETS 1,790,890 1,487,942EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 340,924 200,198Advance payments from related corporations, current 6,064 7,201Progress billings in excess of work-in-progress 16,044 10,294Creditors and accruals 585,551 373,074Provisions 67,622 53,921Provision for taxation 30,498 31,594Derivative financial instruments, current 3,260 3,673Lease obligations, current 103 -Long-term loans, current 240 240Short-term bank loans 15,032 11,572Bank overdrafts 1 191,065,339 691,786NET CURRENT ASSETS 54,394 227,500Non-current liabilitiesAdvance payments from customers, non-current 203,845 279,843Advance payments from related corporations, non-current 2,683 735Lease obligations, non-current 147 -Derivative financial instruments, non-current 738 -Loans from related corporations 284,487 292,674Due to joint venture - 112Long-term loans, non-current 1,331 1,607Long-term bank loan 7,412 -Deferred income 9,144 7,290Deferred tax liabilities 40,929 43,084550,716 625,345TOTAL LIABILITIES 1,616,055 1,317,131NET ASSETS 174,835 170,811Share capital and reserves 129,185 131,744Minority interests 45,650 39,067174,835 170,811TOTAL EQUITY AND LIABILITIES 1,790,890 1,487,942

240Sectoral Financial Review - Land SystemsSTATEMENT OF CASH FLOWS2009 2008$’000 $’000Net cash from operating activities 65,168 66,466Net cash used in investing activities (123,862) (27,222)Distribution from funds under management 65 11Proceeds from sale of property, plant and equipment 525 1,736Distribution from unquoted long-term investment 241 170Dividends from unquoted long-term investments 56 21Dividends from associated companies 1,835 3,275Purchase of property, plant and equipment (102,026) (31,658)Acquisition of additional interest in a subsidiary - (777)Acquisition of subsidiaries (23,412) -Investment in an associated company (1,146) -Net cash from/(used in) financing activities 64,698 (15,328)(Repayment of)/proceeds from short-term related corporations loans (38,025) 31,417Proceeds from short-term immediate holding company loans 209,000 45,000Repayment of long-term related corporations loans (5,094) (2,386)Repayment of long-term loans (235) (252)Repayment of short-term bank loans (8,233) -Dividends paid to shareholder (78,800) (83,000)Dividends paid to minority shareholders of subsidiaries (3,868) (245)Interest paid (10,047) (5,862)Net increase in cash and cash equivalents 6,004 23,916Cash and cash equivalents at beginning of the year 167,037 147,042Exchange difference on cash and cash equivalents at beginning of the year (946) (3,921)Cash and cash equivalents at end of the year 172,095 167,037

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009241Sectoral Financial Review - Land SystemsFINANCIAL HIGHLIGHTS2009 2008 2007 2006 2005$’000 $’000 $’000 $’000 $’000Turnover 1,202,051 1,280,879 1,188,317 1,013,899 604,647EBITDA 102,084 102,606 102,530 75,047 50,574EBIT 73,701 82,188 81,620 57,811 39,113Profit before tax 95,390 84,728 80,003 69,971 65,010Profit after tax and minority interests 82,298 79,947 70,789 51,926 48,997Shareholders’ funds 129,185 131,744 110,179 110,954 173,597Total assets 1,790,890 1,487,942 1,395,284 1,252,835 1,004,039Net assets 174,835 170,811 144,460 126,779 183,431Capital expenditure 102,026 31,658 24,550 12,116 7,808Return on sales (%) 7.0 6.5 6.1 5.3 8.1Earnings per share (cents) 68.26 66.31 58.71 43.07 40.64Return on equity (%) 29.9 28.8 27.6 20.2 22.9Return on total assets (%) 4.7 5.6 5.2 4.3 4.9Net assets value per share (cents) 145.01 141.68 119.82 105.15 152.14Productivity dataAverage staff strength (number) 5,786 5,224 5,299 4,961 3,417Sales per employee ($) 207,752 245,191 224,253 204,374 176,953Profit after tax per employee ($) 14,224 15,304 13,359 10,467 14,339Employment costs 262,552 243,506 259,424 224,828 125,030Employment costs per $ of turnover ($) 0.22 0.19 0.22 0.22 0.21Economic Value Added 40,277 51,690 50,593 32,994 34,087Economic Value Added spread (%) 5.5 8.3 8.8 6.8 12.0Economic Value Added per employee ($) 6,961 9,895 9,548 6,651 9,976Value added 406,096 364,655 371,647 325,057 202,374Value added per employee ($) 70,186 69,804 70,135 65,522 59,226Value added per $ of employment costs ($) 1.55 1.50 1.43 1.45 1.62Value added per $ of gross property, plantand equipment ($) 0.80 0.93 1.01 0.96 0.62Value added per $ of turnover ($) 0.34 0.28 0.31 0.32 0.33

242Sectoral Financial Review - MarineINCOME STATEMENT2009 2008$’000 $’000Turnover 955,952 821,754Cost of sales (824,015) (713,318)Gross profit 131,937 108,436Other operating income, net 9,627 12,221Distribution and selling expenses (7,607) (12,640)Administrative expenses (27,916) (25,345)Other operating expenses (8,454) (7,845)Profit from operations before taxation, other income and financial expenses 97,587 74,827Other income, net 5,462 2,580Financial expenses (1,577) (2,244)101,472 75,163Share of results of joint ventures 807 40Profit from operations before taxation 102,279 75,203Taxation (20,516) (703)Profit from operations after taxation 81,763 74,500Attributable to:Shareholder of the Company 81,763 74,500

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009243Sectoral Financial Review - MarineBALANCE SHEET2009 2008$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 102,388 99,255Associated companies and joint ventures 1,914 241Investments - 38,533Intangible assets 142 152Long-term receivables, non-current 4,736 330Derivative financial instruments 622 -Deferred tax assets 21,678 36,400131,480 174,911Current assetsStocks and work-in-progress 61,030 83,881Trade debtors 83,801 108,952Due from related corporations 132,210 178,405Other debtors, deposits and prepayments 15,702 7,703Advance payments to suppliers 60,054 35,309Long-term receivables, current 36 23Short-term investments 39,215 286Bank balances and other liquid funds 201,114 113,498593,162 528,057TOTAL ASSETS 724,642 702,968EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 48,526 62,628Creditors and accruals 283,918 278,571Provisions 46,279 43,774Progress billings in excess of work-in-progress 157,765 124,282Provision for taxation 24,241 37,035Lease obligations, current 70 82560,799 546,372NET CURRENT ASSETS/(LIABILITIES) 32,363 (18,315)Non-current liabilitiesAdvance payments from customers, non-current 34,908 34,908Loan from related corporations 26,343 26,343Derivative financial instruments 91 -Lease obligations, non-current - 7261,342 61,323TOTAL LIABILITIES 622,141 607,695NET ASSETS 102,501 95,273Share capital and reserves 102,501 95,273TOTAL EQUITY AND LIABILITIES 724,642 702,968

244Sectoral Financial Review - MarineSTATEMENT OF CASH FLOWS2009 2008$’000 $’000Net cash from operating activities 145,535 151,742Net cash used in investing activities (20,353) (10,448)Proceeds from sale of an associated company - 788Dividend from a joint venture - 150Investment in a joint venture (1,000) -Dividends from short-term investments 15 1Proceeds from sale and maturity of investments 352 9,832Purchase of short-term investments (68) -Proceeds from sale of property, plant and equipment 127 156Purchase of property, plant and equipment (20,590) (21,711)Exchange difference on investing activities 811 336Net cash used in financing activities (85,587) (134,617)Loans to a joint venture (4,291) -Repayment of inter-company loans, net (5,518) (28,105)Repayment of lease obligations, net (84) (79)Dividends paid to shareholder (74,009) (103,261)Interest paid (1,355) (2,211)Exchange difference on financing activities (330) (961)Net increase in cash and cash equivalents 39,595 6,677Cash and cash equivalents at beginning of the year 281,935 275,347Exchange difference on cash and cash equivalents at beginning of the year (416) (89)Cash and cash equivalents at end of the year 321,114 281,935

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009245Sectoral Financial Review - MarineFINANCIAL HIGHLIGHTS2009 2008 2007 2006 2005$’000 $’000 $’000 $’000 $’000Turnover 955,952 821,754 864,594 702,868 659,847EBITDA 104,614 78,824 90,304 84,738 97,563EBIT 87,960 62,606 73,208 68,347 78,440Profit before tax 102,279 75,203 96,567 79,500 87,932Profit after tax and minority interests 81,763 74,500 75,264 67,823 70,267Shareholders’ funds 102,501 95,273 122,767 124,345 111,992Total assets 724,642 702,968 694,786 682,867 702,775Net assets 102,501 95,273 122,767 124,345 111,992Capital expenditure 20,590 21,711 20,687 11,845 18,473Earnings per share (cents) 41.81 38.09 38.48 34.68 35.93Return on sales (%) 8.6 9.1 8.7 9.6 10.6Return on equity (%) 63.5 61.3 50.5 45.0 50.8Return on total assets (%) 11.3 10.6 10.8 9.9 10.0Net assets value per share (cents) 52.41 48.72 62.77 63.58 57.26Productivity DataAverage staff strength (number) 1,734 1,541 1,439 1,404 1,416Sales per employee ($) 551,299 533,260 600,830 500,618 465,994Profit after tax per employee ($) 47,153 48,345 52,303 48,307 49,624Employment costs 153,019 126,053 134,252 106,086 104,448Employment costs per $ of turnover ($) 0.16 0.15 0.16 0.15 0.16Economic Value Added 68,023 59,597 60,453 49,903 49,061Economic Value Added spread (%) 35.0 26.1 24.1 18.7 18.0Economic Value Added per employee ($) 39,229 38,674 42,010 35,543 34,648Value added 277,054 228,006 252,348 206,753 226,932Value added per employee ($) 159,777 147,960 175,363 147,260 160,263Value added per $ of employment costs ($) 1.81 1.81 1.88 1.95 2.17Value added per $ of gross property, plantand equipment ($) 0.78 0.67 0.78 0.67 0.75Value added per $ of turnover ($) 0.29 0.28 0.29 0.29 0.34

246Group StructureSingapore Technologies Engineering LtdSubsidiaries and Associated Companies (as at 25 February 2010)Singapore Technologies Aerospace Ltd(100%)Singapore Technologies Electronics Limited(100%)Singapore Technologies Kinetics Ltd(100%)Singapore Technologies Marine Ltd(100%)Singapore Technologies Dynamics Pte Ltd(100%)ST Synthesis Pte Ltd(100%)ST Engineering Financial I Ltd.(100%)FusionTech Pte. Ltd.(100%)Kaz-ST Engineering Bastau Limited Liability Partnership(51%)Singapore Airshow & Events Pte. Ltd.(33%)Vision Technologies Systems, Inc.(100%)Vision Technologies Aerospace, Incorporated(100%)Vision Technologies Electronics, Inc.(100%)NanoScience Innovation Pte Ltd(27.06%)San Antonio Aerospace GP, LLC(100%)ST Aerospace San Antonio, L.P. (formerly known asSan Antonio Aerospace L.P.)(99%)**ST Aerospace Mobile, Inc. (formerly known asST Mobile Aerospace Engineering, Inc.)(100%)DalFort Aerospace GP, Inc. +(100%)DalFort Aerospace, L.P. +(99%)*VT iDirect, Inc.(100%)iDirect UK Limited(100%)Parallel Limited(100%)iDirect Italy srl(100%)iDirect Hong Kong Limited(100%)iDirect Government Technologies, Inc.(100%)Ximaera Technologies Canada, Inc.(100%)iDirect International, Inc.(100%)Vision Technologies Kinetics, Inc.(100%)Vision Technologies Marine, Inc.(100%)VT Systems, Inc.(100%)Vision Technologies Land Systems, Inc.(100%)Miltope Corporation(100%)MÄK Technologies, Inc.(90%)VT Halter Marine, Inc.(100%)Halter-Bollinger Joint Venture LLC(50%)VT Dimensions, Inc.(100%)VT Specialized Vehicles Corporation(100%)VT LeeBoy, Inc.(100%)IV Phoenix Group, Inc.(100%)Miltope Business Products, Inc.(100%)+ Ceased operations in 2003* Balance 1% held by DalFort Aerospace GP, Inc.** Balance 1% held by San Antonio Aerospace GP, LLCItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

Group StructureSingapore Technologies Aerospace LtdSubsidiaries and Associated Companies (as at 25 February 2010)Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009247ST Aerospace Engineering Pte Ltd(100%)ST Aerospace Engines Pte Ltd(100%)ST Aerospace International Structures Pte Ltd(100%)ST Aerospace Systems Pte Ltd(100%)ST Aerospace Supplies Pte Ltd(100%)ST Aviation Resource Pte Ltd(100%)Visiontech Investment Pte Ltd(100%)Precision Products Singapore Pte Ltd(100%)ST Aerospace Panama, Inc. (formerly known asPanama Aerospace Engineering, Inc.)(100%)Singapore Aerospace Kabushiki Kaisha(100%)Singapore Technologies Engineering (Europe) Ltd(100%)ST Aerospace Solutions (Europe) A/S(100%)ST Aerospace Services Co Pte. Ltd.(formerly known as ST Aviation Services Co Pte Ltd)(80%)Singapore British Engineering (Pte) Ltd(51%)Visiontech Engineering Pte Ltd(51%)1988 JV Pte. Ltd.*(50%)Madrid Aerospace Services S.L.(50%)Shanghai Technologies Aerospace Company Limited(49%)Turbine Overhaul Services Pte Ltd(49%)Turbine Coating Services Pte Ltd(24.5%)ST Aerospace Training Academy Pte. Ltd. (formerlyknown as ST Aviation Training Academy Pte. Ltd.)(70%)Pacific Flight Services Pty Ltd(100%)Pacific Flight Services Pte Ltd(100%)ST PAE Holdings Pty Ltd(100%)Composite Technology International Pte Ltd(33.3%)Eurocopter South East Asia Private Limited(25%)ST Aerospace Technologies (Xiamen) Company Limited(80%)Singapore Precision Repair and Overhaul Pte Ltd(50%)iShopAero Pte Ltd(100%)ST Aerospace Guangzhou Aero-Technologies &Engineering Co Ltd. (formerly known as GuangzhouAerospace Technologies & EngineeringCompany Limited)(100%)ST Aviation Resources 1 Limited(100%)Airline Rotables (UK Holdings) Limited(100%)Aviation Training Academy Australia Pty Ltd(100%)ST Aviation Training Academy (Australia) Pty Ltd(100%)Aerospace Engineering Services Pty Ltd Unit Trust(50%)Aerospace Engineering Services Pty Ltd(50%)Airline Rotables Limited(100%)* In members’ voluntary winding upItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

248Group StructureSingapore Technologies Electronics LimitedSubsidiaries and Associated Companies (as at 25 February 2010)ST Electronics (Satcom & Sensor Systems) Pte. Ltd.(100%)ST Electronics (Info-Comm Systems) Pte. Ltd.(100%)ST Electronics (Shanghai) Co., Ltd(100%)iTS Technologies Pte Ltd(100%)ST Electronics (Training & Simulation Systems) Pte. Ltd.(100%)ST Electronics (Taiwan) Limited(100%)SEEL Electronic & Engineering Sdn Bhd(100%)TranSys Pte Ltd(100%)ST Electronics (Info-Software Systems) Pte. Ltd.(100%)Intelect Technologies, Incorporated(100%)STELOP Pte. Ltd.(50.05%)GFM Electronics S.A. de C.V.(50%)Trusted Hub Ltd(21.14%)ST Electronics (Sichuan) Co., Ltd(100%)iDirect Asia Pte. Ltd.(100%)ST Electronics (Info-Security) Pte. Ltd.(100%)Telematics Wireless Ltd(95.04%)STELCOMMS Pte. Ltd.(51%)iWOW Technology Pte Ltd(21.74%)ST Electronics-PCI Co., Ltd(51%)Prescient Systems & Technologies Pte. Ltd.(47.84%)ST Electronics (Digital Media) Pte. Ltd.(100%)ST Education & Training Private Limited(70%)Antycip Simulation Limited(93%)Brightspot Interactive Learning Pte. Ltd.(51%)Knowledge Alive Pte. Ltd.(45.47%)MERITS Technologies LLP(51%)ST Electronics (Software Services) Limited(100%)ST Electronics (e-Services) Pte. Ltd.(100%)WizVision Pte. Ltd.(22.8%)INFA Systems Limited(100%)PM-B Pte Ltd(70%)DataMark Technologies Pte Ltd(100%)Telematics Wireless USA Corp(100%)STET Maritime Pte. Ltd.(100%)STET Homeland Security Services Pte. Ltd. (formerlyknown as STET Maritime Education Pte. Ltd.)(100%)STET Institute Pte. Ltd. (formerly known asSTET Centre Pte. Ltd.)(100%)Antycip Simulation SAS(100%)Brightspot Interactive Learning Inc.(100%)Comat Training Services Pte Ltd(100%)PMB Project Management Business Sdn Bhd(100%)PT PM-B Indonesia(100%)PM-B (China) Ltd(100%)PM-B Project Management Business (Thailand) Ltd(49%)ItalicsIn members’ voluntary winding upIndicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

Group StructureSingapore Technologies Kinetics LtdSubsidiaries and Associated Companies (as at 25 February 2010)Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009249Advanced Material Engineering Pte. Ltd.(100%)Autonomous Technology Pte Ltd(100%)Allied Ordnance of Singapore (Pte) Limited(100%)ST Kinetics Integrated Engineering Pte. Ltd.(100%)Kinetics Systems (Shanghai) Co., Ltd.(100%)Mobility Systems Pte Ltd(100%)Ordnance Development and Engineering Companyof Singapore (1996) Private Limited(100%)SDG Kinetics Pte. Ltd.(100%)Singapore Commuter Private Limited(100%)Singapore Test Services Private Limited(100%)ST Kinetics Pte. Ltd.(100%)Securedge Pte. Ltd.(100%)ST Kinetics International Pte. Ltd.(100%)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%)Advanced Pyrotechnic Materials Private Limited(51%)SMART Systems Pte Ltd(50%)Takata CPI Singapore Pte Ltd(49%)Guizhou Jonyang Kinetics Co., Ltd.(60%)Defence Electronics of Singapore Pte Ltd(49%)Silvatech Systems Corporation Pte Ltd(100%)Silvatech Global Systems Limited(100%)Timoney Holdings Limited(25%)GFM Maquinaria, S.A.P.I. de C.V.(40%)Jiangsu Huatong Kinetics Co., Ltd.(75.3%)Jiangsu Huaran Kinetics Co., Ltd.(75.3%)Nusantara Technologies Sdn. Bhd.(49%)VT Specialized Vehicles, S.A. de C.V.(99%)*Kinetics Drive Solutions Inc.(100%)Hualun International Trading Co., Ltd(40%)* Balance 1% held by Singapore Technologies Kinetics LtdItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

250Group StructureSingapore Technologies Marine LtdSubsidiaries and Associated Companies (as at 25 February 2010)STSE Engineering Services Pte Ltd(100%)Joint Shipyard Management Services Pte Ltd(30%)First Response Marine Pte. Ltd.(50%)Hovertrans Solutions Pte. Ltd.(51%)ST Environmental Services & Technologies Co. Ltd(100%)ItalicsIndicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009261Corporate InformationBoard of DirectorsPrincipal BankersMr Peter SEAH Lim Huat (Chairman)Bank of America, N.A.Mr TAN Pheng Hock (President & CEO)9 Raffles PlaceMr KOH Beng Seng #18-00 Republic Plaza Tower 1Lieutenant-General Desmond KUEK Bak Chye Singapore 048619Dr TAN Kim SiewMr QUEK Tong BoonCrédit Agricole Corporate and Investment BankMr Winston TAN Tien Hin168 Robinson RoadMr QUEK Poh Huat#22-01 Capital TowerMr Venkatachalam KRISHNAKUMAR Singapore 068912Mr Davinder SINGH s/o Amar SinghDr Stanley LAI Tze ChangCitibank N.A.Colonel CHIA Choon Hoong (Alternate Director toLieutenant-General Desmond KUEK Bak Chye)3 Temasek Avenue#17-00 Centennial TowersSingapore 039190Company SecretaryMrs Chua Su LiDBS Bank Ltd6 Shenton WayRegistered OfficeDBS Building Tower One51 Cuppage Road #09-08 Singapore 068809StarHub CentreSingapore 229469Oversea-Chinese Banking Corporation LimitedTel: (65) 6722181865 Chulia StreetFax: (65) 67202293#10-00 OCBC Centrehttp://www.stengg.com Singapore 049513Share RegistrarM & C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906AuditorsErnst & Young LLPOne Raffles QuayNorth Tower, Level 18Singapore 048583Mr TAN Wee Khim (Partner-in-charge)(Date of Appointment: 01/07/2005)

262Shareholding StatisticsAs at 17 February 2010SHARE CAPITALPaid-Up Capital : S$630,943,412.8324Class of Shares : Ordinary SharesOne Special Share held by the Minister for Finance (Incorporated)Voting Rights : One vote per shareSHAREHOLDING HELD IN HANDS OF PUBLICBased on the information available to the Company as at 17 February 2010, 32.9245% of the issued ordinary shares of the Company is held by the publicand therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.ANALYSIS OF SHAREHOLDINGSNo. ofNo. ofRange of Shareholdings Shareholders % Shares %1 --- 999 1,761 5.80 513,953 0.021,000 --- 10,000 23,542 77.55 97,256,520 3.2210,001 --- 1,000,000 5,023 16.55 194,072,728 6.431,000,001 and above 30 0.10 2,726,881,160 90.3330,356 100.00 3,018,724,361 100.00Substantial ShareholderDirectInterestDeemedInterestNumber of SharesTotalInterest %Temasek Holdings (Private) Limited 1,509,419,764 16,352,840 (1) 1,525,772,604 50.5436The Capital Group Companies, Inc. - 168,234,000 (2) 168,234,000 5.5730Aberdeen Asset Management PLC - 315,949,491 (3) 315,949,491 10.4663Aberdeen Asset Management Asia Limited - 308,305,071 (4) 308,305,071 10.2130Aberdeen Asset Managers Limited - 183,415,420 (4) 183,415,420 6.0759Credit Suisse Group AG - 327,567,045 (5) 327,567,045 10.8511Credit Suisse AG - 327,515,045 (4) 327,515,045 10.8494

Singapore Technologies Engineering LtdThink Ahead.Annual Report 2009263Shareholding StatisticsAs at 17 February 2010Notes:(1)Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:Name of CompanyNo. of SharesDBS Group Holdings Ltd 5,739,840Keppel Corporation Limited 4,032,000Fullerton Fund Management Company Ltd 6,581,000(2)The Capital Group Companies, Inc. is deemed to have an interest in the following Shares held by:Name of CompanyNo. of SharesRaffles Nominees (Pte) Ltd 168,234,000(3)Includes interests held by Aberdeen Asset Management Asia Limited and Aberdeen Asset Managers Limited.(4)Details of their deemed interest are not available.(5)Includes interests held by Aberdeen Asset Management PLC and Credit Suisse Group AG’s entities.MAJOR SHAREHOLDERS LIST – TOP 20NO. NAME NO. OF SHARES HELD %1 Temasek Holdings (Private) Limited 1,497,186,719 49.602 DBS Nominees Pte Ltd 312,492,246 10.353 Citibank Nominees Singapore Pte Ltd 273,799,938 9.074 DBSN Services Pte Ltd 240,741,078 7.985 HSBC (Singapore) Nominees Pte Ltd 119,688,003 3.966 BNP Paribas Secs Svcs Singapore Pte Ltd 116,444,811 3.867 United Overseas Bank Nominees Pte Ltd 76,639,115 2.548 Raffles Nominees (Pte) Ltd 21,801,213 0.729 Lee Pineapple Company Pte Ltd 12,500,000 0.4110 UOB Kay Hian Pte Ltd 7,107,217 0.2411 OCBC Securities Private Ltd 5,242,236 0.1712 OCBC Nominees Singapore Pte Ltd 5,211,268 0.1713 KI Investments (HK) Limited 4,032,000 0.1314 Phillip Securities Pte Ltd 3,559,411 0.1215 BNP Paribas Nominees Singapore Pte Ltd 3,472,543 0.1216 TM Asia Life Singapore Ltd – Par Fund 3,238,000 0.1117 Morgan Stanley Asia (Singapore) Pte Ltd 2,916,000 0.1018 Merrill Lynch (Singapore) Pte Ltd 2,216,815 0.0719 Kim Eng Securities Pte. Ltd. 2,215,963 0.0720 Shanwood Development Pte Ltd 2,077,000 0.072,712,581,576 89.86

SINGAPORE TECHNOLOGIES ENGINEERING LTD51 Cuppage Road #09-08 StarHub Centre Singapore 229469Tel : (65) 6722 1818 • Fax : (65) 6720 2293www.stengg.com(Regn. No.: 199706274H)