View - Singapore Technologies Engineering

Forty is an important number. At forty you’ve taken some risks, had some knocksand gained wisdom in the process. You know who you are and where you’re going.You’ve honed your strengths, and you’re raring to go. The best is yet to come.life begins atf rtyAnnual Report 2007

atforty

Singapore Technologies Engineering LtdAnnual Report 20071foresightoriginalityresponsibilityteamworkyoungThe growth of Singapore is buttressed by its engineeringachievements, of which ST Engineering has played no smallrole. ST Engineering celebrated its 40 th Anniversary in2007 with aplomb and gratitude, and looks forward to thenext 40 years.A fervent supporter of the arts and community,ST Engineering is showcasing the rich illustrative styles oflocal artists in this annual report, which is printed entirely onrecycled paper.Contents01 Life Begins at Forty12 Letter to Shareholders18 Financial Highlights24 Board of Directors28 Senior Management32 Organisation Chart34 Corporate Governance45 40 th Anniversary48 Community and Environment50 Investor Relations50 – Investor Relations Calendar51 – Share Price Performance52 Awards and Commendations55 Operating Financial Review62 – ST Engineering at a Glance89 Financial Report

2fortyforesightST Engineering’s visionary approach drives its success.Over the past 40 years, it has anticipated changes andadapted its business focus to serve the global market.

Singapore Technologies Engineering LtdAnnual Report 20073Illustrated by Michael Ng (Mindflyer)

4fortyoriginalityST Engineering values originality above all things. It spurs theGroup to create novel solutions that transcend the ordinaryand enhance our competitiveness.

Singapore Technologies Engineering LtdAnnual Report 20075Illustrated by Michael Ng (Mindflyer)

6fortyresponsibilitySuccess in the business arena is not ST Engineering’s solefocus. Ever mindful of its responsibility to society,it proactively reaches out to the less fortunate, promotesthe arts and education, engages local communities,and helps preserve the environment.

Singapore Technologies Engineering LtdAnnual Report 20077Illustrated by Adeline Tan

8fortyteamworkST Engineering’s success is dependent on the combinedeffort of its stakeholders – staff, business partners andcustomers – working together in a synergistic relationship tocreate value for all.

Singapore Technologies Engineering LtdAnnual Report 20079Illustrated by Andrew Tan (Drewscape)

10fortyyoungAt 40 years young, life is just beginning for ST Engineering.Youthfulness is a state of mind; and the energy andenthusiasm this produces are exhibited atall levels within the Group.

Singapore Technologies Engineering LtdAnnual Report 200711Illustrated by Lee Wai Leng (Fleecircus)

12Illustrated by Kristal Melson

Singapore Technologies Engineering LtdAnnual Report 200713The Group registered double digit growth for the third consecutive year in 2007. Our netprofit rose by 13% to $503.5m on the strength of all sectors. Group turnover crossed the$5b mark with an increase of 13% to $5.05b, while profit before tax increased 13% to$638.1m. Our earnings per share was 16.95 cents, an increase of 12%. Economic ValueAdded grew 19% to $388.8m. Return on equity was a respectable 30.8%, higher than the28.4% in 2006. Cash and cash equivalents, including funds under management, remained ahealthy $1.5b.Dear ShareholdersThe ST Engineering Group celebrated its 40 th Anniversary in2007. While our history may not be long compared to manyMNCs in the US and Europe, it marks a history that is filledwith pride, pioneering achievements and record-breakingmilestones. Since the amalgamation of the Aerospace,Electronics, Land Systems and Marine sectors in 1997 toform the ST Engineering Group, we have enjoyed synergiesand an enlarged critical mass that allow us to compete in theglobal marketplace.The ST Engineering Group delivered a stellar performance in2007. For the third consecutive year, the Group registereddouble digit growth with net profit growing by 13% to$503.5m. This is despite the fact that the world economyfaced a number of challenges in 2007 with oil prices closeto US$100 a barrel, cost of doing business escalating, aweakening USD and the sub-prime problem in the US andEurope.Continuing the Journey of GlobalisationThe Group’s sterling performance amidst a changing andevolving economic landscape reaffirms its decision toglobalise. Leveraging on the globalisation and acquisitionstrategy of prior years, the Group continues to build onthe new operations and synergise the complementarycapabilities in the Group. Today, with a staff strength of over18,000 spanning five continents, 21 countries and 35 cities,the ST Engineering Group is well poised to seize globalopportunities and diversify our earnings stream.2007 was a landmark year for the Group’s US operationsas VT Systems and its operating units in the US reachedthe US$1b revenue mark. This makes the US the singlelargest market for the Group outside of Asia. Elsewhere,our Aerospace sector’s Panama MRO facility signedon a second customer and STARCO, our MRO facilityin Shanghai, is adding hangar capacity to cater to theincreasing demand. China continues to be a key marketfor the Group, with the Aerospace, Electronics and LandSystems sectors gaining a stronger foothold in the fastexpanding market.Today, Group revenue from outside of Asia has grown to51%, reflecting the results of our globalisation efforts.Recent acquisitions have added to our revenue and bottomline and also re-shaped our geographical business profileto one with a global customer base. While commercialbusiness is growing at a faster pace than defencebusiness, the ability of the Group to harness dual usetechnology is benefiting both business groups, enhancingour competitiveness in the market place. Flexibility inleveraging on the interplay between our defence andcommercial businesses remains a key advantage of theGroup. Evolving technologies also provide fodder for newideas and solutions. We continually challenge the traditionaland innovate cost effective solutions to meet customers’requirements. Our global customer base now covers morethan 70 countries.Globalisation continues to drive our growth strategy as ithelps diversify our geographical and economic exposure,thereby hedging the interests of the Group. We areselective and stringent with our acquisition and jointventure processes. Every new acquisition or partnership isintended to add value to our existing businesses, expand ourtechnologies and capabilities, address new markets, enlargeour customer base, and/or infuse fresh talents into ourglobal workforce.During the year, the Aerospace sector signed agreementsto set up ST Aviation Training Academy, a commercial pilot

14training academy in Singapore, as well as an engines MROfacility in Xiamen, China. The sector also acquired SydneybasedPacific Flight Services Pty Ltd (PFS) to complementour charter and training business.The Electronics sector entered into an agreement topurchase Telematics Wireless Ltd, a key player in the highgrowth Machine-to-Machine industry in which machineassets are connected through wireless infocommunicationinfrastructures to allow wireless transmission of informationfor remote monitoring and control. The acquisition wascompleted in January 2008. The sector divested its stakein ECS Holdings Limited (ECS), a marketing and distributionchannel for the group’s information technology solutionsto customers in Singapore and other regional markets forthe last three years. The sale of ECS’ shares presented anopportunity to maximise shareholder value.The Land Systems sector further invested in GuizhouJonyang Kinetics Co., Ltd. (GJK) to expand our facilities andadd new capabilities to strengthen our foothold in specialtyvehicles in China.2007, the Company will have declared a total of 16.88 centsper share in dividends for FY2007, giving a dividend yield of4.94%.Winning Customers and Engaging PartnersThe Group registered a strong order book of $9.49b in2007. Significant contracts were clinched from existing andnew customers throughout the year.Some of the significant contracts, secured during theyear included the FedEx Express’ Passenger-to-Freighter(PTF) conversion agreement for its B757-200 aircraft;Boeing’s contract to perform PTF conversions under the767-300 Boeing Converted Freighter (BCF) programme($208m); Delta Air Lines’ contracts for MRO work ($232m);comprehensive engines maintenance and engineeringsupport for Xiamen Airlines ($248m); MINDEF’s sharedservices and e-government services contract ($255m);an integrated solutions commuter rail project in Turkey($123m); a weapons maintenance contract from theSingapore Army ($78m); a contract from the Republic ofSingapore Navy to design, build, operate and maintain a2008 is expected to be a year of uncertainties. The state of the US economy will affect worldeconomic growth, which in turn will affect the Group’s global businesses. However, given ourdiversified earnings stream and excellent business portfolio, we are cautiously optimistic that wewill deliver in the year.Celebrating another Year of Double Digit GrowthThe Group registered double digit growth for the thirdconsecutive year in 2007. Our net profit rose by 13% to$503.5m on the strength of all sectors. Group turnovercrossed the $5b mark with an increase of 13% to $5.05b,while profit before tax increased 13% to $638.1m. Ourearnings per share was 16.95 cents, an increase of 12%.Economic Value Added grew 19% to $388.8m. Return onequity was a respectable 30.8%, higher than the 28.4% in2006. Cash and cash equivalents, including funds undermanagement, remained a healthy $1.5b.ST Engineering’s market capitalisation reached $11.2b as atend December 2007, compared to $9.1b at close of 2006.Rewarding our ShareholdersIn recognition of shareholders’ loyalty, the Board of Directorsis proposing to pay 100% of 2007 net profit of $503.5mto our shareholders as dividends. Subject to shareholders’approval, ST Engineering proposes to declare a finaldividend of 14.88 cents per share comprising an ordinary taxexempt (one-tier) dividend of 4 cents per share and a specialtax exempt (one-tier) dividend of 10.88 cents per share atour AGM in April 2008. Together with our interim ordinarydividend of 2 cents per share which was paid in Septembership and submarine rescue system ($400m); and a contractto build 330,000-barrel tank barges for Crowley MaritimeCorporation ($381m).The Marine sector successfully entered the Roll-on/Roll-offPassenger (Ropax) ferry newbuilding market with a contractfrom Louis Dreyfus Armateurs of France. This is a first forSingapore’s shipbuilding history.During the year, we further engaged our partners in growingthe business. The Electronics sector signed a letter ofintent with Corus Entertainment, Inc. to co-produce a seriesof animated direct-to-video titles. It also launched The TenCommandments, which was co-produced with PromenadePictures and Huhu Studios. We became the first Singaporebasedcompany to launch a 3-D digital animation movie inUS cinemas.Winning the SQA with Special Commendation AwardOne of the greatest achievements in 2007 for the Groupwas winning the Singapore Quality Award (SQA) withSpecial Commendation. The ST Engineering Group wasone of two inaugural winners of the prestigious awardpresented by the SQA Governing Council. The award isthe highest accolade in business excellence, and atteststo ST Engineering’s world-class standard of performanceexcellence.

Singapore Technologies Engineering LtdAnnual Report 200715The award means three things to us. Firstly, it inspires usto scale even greater heights. It spurs us to constantlyoutdo ourselves and develop new strategies and platformsto grow our business. Secondly, it helps us benchmarkagainst the best in the global marketplace. This isimperative since we are competing against the big boys inthe global market. Thirdly, we see the process as a meansto help us address our gaps. Through this rigorous exercise,all our staff, not just management, from our global networkare put to the test.Participating in Corporate CitizenryThe ST Engineering Group continues to play its part as agood corporate citizen. Balancing profits and principles,we will continue to demonstrate sensitivity and respect forpeople, communities and the environment.Some of the corporate social responsibility initiativesundertaken by the Group include ethical business conduct,preservation of the environment, conservation and recyclingpractices, advocacy of safety practices, and support for thearts and the disadvantaged.The Group continues to embrace and inculcate goodcorporate governance practices. This is especially importantas we globalise. Transparent practices, applied with culturaland local sensitivity, will guide the Group. The Group’ssenior management and Board of Directors constantlyreview the guidelines and practices to ensure theirrelevance.Looking Ahead2008 is expected to be a year of uncertainties. The state ofthe US economy will affect world economic growth, whichin turn will affect the Group’s global businesses. However,given our diversified earnings stream and excellent businessportfolio, we are cautiously optimistic that we will deliver inthe year.We will remain focused on growing our businessesorganically while keeping a watch on acquisition, jointventure and partnership opportunities to further propelour growth. Uncertainties can also be translated intoopportunities. We will diligently explore opportunities thatcan help us gain entry into new markets, and deliberate onacquisitions or joint ventures to add to our capabilities andgrowth. The US, China, India, South America, Middle Eastand Central Asia continue to feature on our radar screen.Moving into and growing new markets will help us growshareholder value in the long term.The capabilities of our current businesses continue toleverage on our global operations to create synergies. Weenvisage more cross marketing opportunities for the Group.We will continue to distinguish ourselves through innovationand quality.For the coming year, the Group expects to achieve amodestly higher turnover and profit before tax compared to2007, barring unforeseen circumstances.Expressing our AppreciationAs we celebrate our 40 years of history and achievements,we wish to thank all our shareholders, customers, partners,employees and friends of the ST Engineering Group for theirunstinting faith and deep trust in the Group.We published Under One Sun, a commemorative bookwhich chronicles ST Engineering’s vibrant history and growthin the last 40 years and encapsulates many memorablemoments of people involved in the Group. The birth ofST Engineering is very much the result of the vision andwork of Dr Goh Keng Swee. Hence, we also commissioneda second book, Unchartered Territory, which pays tribute toDr Goh Keng Swee for his incisive role in the creation anddevelopment of Singapore’s defence industry. Together, thetwo books present a holistic perspective of ST Engineering– our history, our growth and our achievements as well as aglimpse into the future.We wish to thank our Board Directors who have committedtheir time to counsel, steer and guide the management.On behalf of the ST Engineering Group, we record oursincere appreciation to Lieutenant-General (NS) Ng YatChung, Brigadier-General (NS) Bernard Tan Kok Kiangand Mr Lucien Wong Yuen Kuai who stepped down fromthe Board in 2007. We also extend our deep appreciationto Professor Lui Pao Chuen who stepped down from theBoard in March 2008. The Group has benefited from theirwise counsel and guidance during their tenure as BoardDirectors.To our over 18,000 employees worldwide, cheers to keepingfaith with the Group over the last 40 years! We look forwardto many more good years ahead.Peter SEAH Lim HuatChairman18 March 2008TAN Pheng HockPresident and CEO

Singapore Technologies Engineering LtdAnnual Report 200717

18Group turnover, PBT and PATMI rose 13% to $5,051m, $638.1m, and $503.5m respectively.EBIT increased by 20% to $550.3m. Order book as at end December 2007 was $9.49b.Return on equity crossed the 30% mark, improving from 28.4% for FY2006 to 30.8% forFY2007. The Board is proposing to pay 100% of FY2007 earnings to shareholders as dividendsor a total of 16.88 cents per share for the full year.TURNOVER BY SECTOR ($m)PROFIT BEFORE TAXBY SECTOR ($m)PROFIT AFTER TAXAND MINORITY INTERESTSBY SECTOR ($m)6,0008006005,00070050006004,00050040003,00040030002,00030020002001,000100100000003 04 05 06 07 03 04 05 06 0703 04 05 06 07AEROSPACE ELECTRONICS LAND SYSTEMS MARINE OTHERS

Singapore Technologies Engineering LtdAnnual Report 200719TURNOVER BY SECTOR ($m)2007 2006 2005 2004 2003GROUP 5,051 100% 4,486 100% 3,338 100% 2,948 100% 2,819 100%AEROSPACE 1,835 36% 1,673 37% 1,236 37% 1,118 38% 1,092 39%ELECTRONICS 1,023 20% 951 21% 701 21% 626 21% 614 22%LAND SYSTEMS 1,178 23% 1,002 22% 600 18% 591 20% 717 25%MARINE 863 17% 702 16% 660 20% 484 16% 387 14%OTHERS 152 4% 158 4% 141 4% 129 5% 9 –PROFIT BEFORE TAX BY SECTOR ($m)2007 2006 2005 2004 2003GROUP 638.1 100% 564.3 100% 503.2 100% 446.2 100% 412.7 100%AEROSPACE 341.2 53% 305.3 54% 255.4 51% 235.4 53% 225.2 55%ELECTRONICS 115.3 18% 104.6 19% 76.0 15% 64.5 14% 61.4 15%LAND SYSTEMS 80.0 13% 70.0 12% 65.0 13% 71.5 16% 96.4 23%MARINE 96.6 15% 79.5 14% 87.9 17% 69.8 16% 35.2 9%OTHERS 5.0 1% 4.9 1% 18.9 4% 5.0 1% (5.5) (2%)PROFIT AFTER TAX AND MINORITY INTERESTS BY SECTOR ($m)2007 2006 2005 2004 2003GROUP 503.5 100% 445.1 100% 396.3 100% 354.2 100% 325.6 100%AEROSPACE 270.5 54% 255.0 57% 210.3 53% 187.3 53% 176.3 54%ELECTRONICS 88.2 17% 76.3 17% 58.0 15% 51.6 15% 48.0 15%LAND SYSTEMS 70.8 14% 51.9 12% 49.0 12% 58.1 16% 76.5 24%MARINE 75.3 15% 67.8 15% 70.3 18% 53.7 15% 30.8 9%OTHERS (1.3) – (5.9) (1%) 8.7 2% 3.5 1% (6.0) (2%)

202007 2006 2005 2004 2003Shareholders’ funds ($m) 1,632 1,565 1,493 1,358 1,324Total assets ($m) 6,043 5,578 4,566 4,042 4,122Net tangible assets ($m) 996.9 980.7 1,131 1,296 1,266Gross dividend per share (cents) 16.88 15.11 13.60 12.39 11.30Dividend yield (%) 4.94 5.09 5.24 5.67 6.12Dividend cover 1.00 1.00 1.00 1.00 1.00Earnings per share (cents) 16.95 15.15 13.64 12.26 11.29Return on sales (%) 10.4 10.2 12.3 12.2 11.6Return on equity (%) 30.8 28.4 26.5 26.1 24.6Return on total assets (%) 8.7 8.2 9.0 8.9 7.9Net tangible assets per share (cents) 33.4 33.3 38.8 44.8 43.9SHAREHOLDERS’FUNDS ($m)RETURNON EQUITY (%)NET TANGIBLE ASSETSPER SHARE (cents)2,00035.0501,90033.5481,80032.0461,70030.5441,60029.0421,50027.5401,40026.0381,30024.5361,20023.0341,10021.5321,00020.03003 04 05 06 0703 04 05 06 0703 04 05 06 07

Singapore Technologies Engineering LtdAnnual Report 2007212007 2006 2005 2004 2003Average staff strength 17,750 15,912 13,099 11,684 11,702Sales per employee ($) 284,570 281,910 254,821 252,333 240,898Profit after tax per employee ($) 28,367 27,974 30,255 30,316 27,823Employment costs ($m) 1,360.3 1,243.0 899.9 826.9 798.0Employment costs per $ of turnover ($) 0.27 0.28 0.27 0.28 0.28Economic Value Added ($m) 388.8 327.8 290.6 234.5 240.9Economic Value Added spread (%) 13.2 12.3 16.2 13.7 13.9Economic Value Added per employee ($) 21,904 20,598 22,187 20,075 20,587Value added ($m) 2,190.8 1,990.8 1,500.6 1,363.1 1,337.0Value added per employee ($) 123,432 125,112 114,559 116,668 114,253Value added per $ of employment costs ($) 1.61 1.60 1.67 1.65 1.68Value added per $ of gross property, plant and equipment ($) 1.00 0.98 1.02 1.03 1.05Value added per $ of turnover ($) 0.43 0.44 0.45 0.46 0.47PROFIT AFTER TAXPER EMPLOYEE ($’000)ECONOMIC VALUE ADDEDPER EMPLOYEE ($’000)VALUE ADDEDPER EMPLOYEE ($’000)3524.01503423.51443323.01383222.51323122.01263021.51202921.01142820.51082720.01022619.5962519.09003 04 05 06 0703 04 05 06 0703 04 05 06 07

22FY 07FY 06FY 05FY 04FY 03388.8327.8290.6234.5240.9EVA ATTRIBUTABLE TOORDINARY SHAREHOLDERS ($m)($m) 2007 2006 2005 2004 2003Net profit before tax 591.5 512.8 457.3 387.8 367.4Adjust for:Share of results of associated companies and joint ventures 46.6 51.5 45.9 58.4 45.3Interest expense 53.2 45.1 10.4 8.0 3.7Others 10.3 11.6 2.2 (4.8) 18.4Adjusted profit before interest and tax 701.6 621.0 515.8 449.4 434.8Cash operating taxes (Note 1) (112.4) (112.8) (99.3) (85.7) (84.7)Net operating profit after tax (NOPAT) – (a) 589.2 508.2 416.5 363.7 350.1Average capital employed (Note 2) 2,988.5 2,691.9 1,865.4 1,725.0 1,712.1Weighted average cost of capital (Note 3) (%) 6.5 6.6 6.1 7.4 6.5Capital charge – (b) (194.3) (177.7) (113.8) (127.6) (111.3)Economic Value Added (EVA) – [(a) – (b)] 394.9 330.5 302.7 236.1 238.8Minority share of EVA (6.1) (2.7) (12.1) (1.6) 2.1EVA attributable to ordinary shareholders 388.8 327.8 290.6 234.5 240.9Unusual items (UI) (gains)/losses (Note 4) (10.8) (30.7) (7.0) 6.1 0.7EVA attributable to ordinary shareholders (exclude UI) 378.0 297.1 283.6 240.6 241.6Note 1:Note 2:The reported current tax is adjusted for the statutory taximpact of interest expense.Monthly average share capital plus interest bearingliabilities, timing provision, goodwill impaired/amortised,and present value of operating leases.Major Capital Components:$mLong term debt 1,011.5Short term debt 233.0Equity 1,522.3Others 221.72,988.5Note 3:Note 4:The Weighted Average Cost of Capital is calculated inaccordance to Singapore Technologies Engineering GroupEVA Policy as follows:i) Cost of Equity using Capital Asset Pricing Model withmarket risk premium at 6.0% (2006 @ 6.0%);ii) Risk-free rate of 3.05% (2006 @ 3.31%) based onyield-to-maturity of Singapore Government 10 yearsBonds;iii) Ungeared beta at 0.67 (2006 @ 0.65) basedon Singapore Technologies Engineering riskcategorisation; andiv) Cost of Debt rate at 3.62% (2006 @ 3.54%) using5-year Singapore dollar Swap Offered Rate plus 25basis point (2006 @ 25 basis point).Unusual Items refer to divestment of investment properties,subsidiary and associates, long term investments anddisposal of major property, plant and equipment.

Singapore Technologies Engineering LtdAnnual Report 200723FY 07FY 06FY 05FY 04FY 032,190.81,990.81,500.61,363.11,337.0TOTAL VALUE ADDED ($m)($m) 2007 2006 2005 2004 2003Value added from:Revenue earned 5,051.0 4,485.8 3,337.9 2,948.1 2,819.0Bought in materials and services (2,998.3) (2,644.0) (1,959.0) (1,698.6) (1,578.5)2,052.7 1,841.8 1,378.9 1,249.5 1,240.5Income from investments and interest 81.7 79.9 49.4 36.2 32.1Exchange loss, net (5.4) (3.9) (1.8) (2.1) (1.2)Other non-operating income 15.2 21.5 28.2 21.1 20.3Share of results of associated companies and joint ventures 46.6 51.5 45.9 58.4 47.3Amortisation of goodwill on acquisition of associated companies – – – – (2.0)Total value added 2,190.8 1,990.8 1,500.6 1,363.1 1,337.0Distribution of total value addedTo employees in wages, salaries and benefits 1,358.0 1,241.0 898.3 826.2 797.4To government in income and other taxes 123.7 116.8 99.6 93.8 93.1To providers of capital on:• Interest paid on borrowings 50.3 42.3 8.0 4.2 2.2• Dividends to shareholders 508.2 399.5 359.8 326.5 449.92,040.2 1,799.6 1,365.7 1,250.7 1,342.6Balance retained in/(applied from) businessDepreciation 126.5 130.7 79.1 77.7 86.4Impairment of assets (0.1) 9.3 16.5 1.0 1.1Retained profits (53.5) (15.6) 5.3 (0.6) (149.7)72.9 124.4 100.9 78.1 (62.2)Non-production cost and incomeBad debts 1.4 (9.2) (13.6) 0.2 25.7Income from investments and interest 81.7 79.9 49.4 36.2 32.1Exchange loss, net (5.4) (3.9) (1.8) (2.1) (1.2)77.7 66.8 34.0 34.3 56.6Total distribution 2,190.8 1,990.8 1,500.6 1,363.1 1,337.0

24The names of the directors holding office at the date of this report are set out below together withdetails of their academic and professional qualifications, age, date of first appointment as director,date of last re-election as director, as well as directorships in listed companies.1Mr Peter SEAH Lim Huat,ChairmanMr Peter Seah Lim Huat, 61, wasappointed non executive Chairman on15 April 2002 and was last re-electedas Director on 31 March 2006. He isa member of the Temasek HoldingsAdvisory Panel. Mr Seah was a bankerfor 33 years before retiring as ViceChairman and CEO of the formerOverseas Union Bank in 2001. Hethen joined Singapore TechnologiesPte Ltd as President and CEO andheld this position until 31 December2004. Mr Seah is the Chairman ofSembCorp Industries Limited* andSingapore Computer Systems Limited*.He also sits on the Boards of Bank ofChina Limited^, CapitaLand Limited*,Siam Commercial Bank PublicCompany Limited~, and Governmentof Singapore Investment Corporation.Mr Seah is President Commissionerof PT Indosat Tbk and DeputyChairman of Global Crossing Limited.His other appointments include beinga member of the Board of theS. Rajaratnam School of InternationalStudies, Defence Science TechnologyAgency, Singapore Chinese Chamberof Commerce and Singapore BusinessFederation Council. Mr Seah wasawarded the Public Service Star(Bintang Bakti Masyarakat) in 1999and made a Justice of the Peace in2003. He graduated from the formerUniversity of Singapore in 1968with an honours degree in BusinessAdministration.2Mr TAN Pheng HockMr Tan Pheng Hock, 50, is thePresident and CEO of ST Engineeringand an executive Director. He wasappointed Director on 1 May 2001and will be due for re-election at thiscoming AGM under Article 98 of theCompany’s Articles of Association.Mr Tan sits on the Boards ofSembCorp Marine Ltd* and NeptuneOrient Lines Limited*. He is Chairmanof the Nanyang Polytechnic Boardof Governors and the SingaporeWorkforce Development Authority.Mr Tan began his career with theGroup as an engineer in ST Marinein 1981. He has held various seniorappointments in the Group includingthat of Executive Vice President ofST Marine, President of ST Kinetics,President and Chief Operating Officerof ST Engineering and ST EngineeringGroup President. Mr Tan holds aBachelor of Science (First ClassHonours) in Marine Engineering fromthe University of Surrey, UK and aMaster of Science in Managementfrom Stanford University, USA.

Singapore Technologies Engineering LtdAnnual Report 2007251235643Mr KOH Beng SengMr Koh Beng Seng, 57, is the CEOof Octagon Advisors Pte Ltd. Hewas appointed an independent nonexecutive Director on 15 September2003 and was last re-elected asDirector on 25 April 2007. Mr Kohwas Deputy President of UnitedOverseas Bank Ltd (UOB) from June2000 to 31 January 2005. Prior toUOB, Mr Koh was Senior Advisor toAsia Pulp & Paper Co Ltd and Advisorto Bank of China and the InternationalMonetary Fund. Mr Koh has extensiveexperience in the financial servicessector. He was with the MonetaryAuthority of Singapore from 1973 to1998, where he served as DeputyManaging Director from 1988 to 1998.Mr Koh is a Director of Bank of China(Hong Kong) Limited^, BOC HongKong (Holdings) Ltd, Fraser & NeaveLtd*, Sing-Han International FinancialServices Limited, Japan WealthManagement Securities Company Ltdand Great Eastern Holdings Limited*.Mr Koh holds a Bachelor of Commerce(First Class Honours) from the formerNanyang University, Singapore, anda Master of Business Administrationfrom Columbia University, USA.4Lieutenant-GeneralDesmond KUEK Bak ChyeLG Desmond Kuek Bak Chye, 44, isChief of the Defence Force. He wasappointed a non executive Directoron 27 April 2007 and will be duefor re-election at this coming AGMunder Article 104 of the Company’sArticles of Association. He joinedthe Singapore Armed Forces (SAF)in 1982 and was awarded the SAFOverseas Scholarship in 1982, SAFPostgraduate Scholarship (GeneralDevelopment) in 1997 and ThePublic Administration Medal (Gold)in 2002. In the course of his militarycareer, he has held various keycommand and staff positions in theMinistry of Defence. LG Kuek is aBoard member of the InternationalEnterprise Singapore and a Memberof the Defence Science & TechnologyAgency. He holds a Bachelor ofArts (Hons) (Engineering Science)and a Master of Arts (EngineeringScience) from the University of Oxford,UK, as well as a Masters in PublicAdministration from HarvardUniversity, USA.5Dr TAN Kim SiewDr Tan Kim Siew, 54, is PermanentSecretary (Defence Development),Ministry of Defence (MINDEF). Hewas appointed a non executiveDirector on 15 December 2003 andwas last re-elected as Director on25 April 2007. Prior to his presentappointment with MINDEF, he wasthe Deputy Secretary (Policy) with theMinistry of Finance. He was formerlythe CEO and Chief Planner of theUrban Redevelopment Authority from1996 to 2001. Dr Tan is Chairman ofthe Defence Science and TechnologyAgency, DSO National Laboratoriesand also a Director of SingaporeTechnologies Holdings Pte Ltd.Dr Tan holds a Bachelor of Arts inEngineering Tripos and a PhD inEngineering from the University ofCambridge, UK.6Mr Davinder SINGHMr Davinder Singh, 50, is the CEOof Drew & Napier LLC. He wasappointed an independent nonexecutive Director on 1 August 2007and will be due for re-election at thiscoming AGM under Article 104 of theCompany’s Articles of Association.Mr Davinder Singh has been in legalpractice for more than 20 years. Hewas appointed Senior Counsel in 1997,the first batch of Senior Counselsto be so appointed in Singapore.Mr Davinder Singh holds a LL.B(Honours) from the former Universityof Singapore.

2678910111213Illustrated by Kristal Melson7Dr Philip PILLAIDr Philip Pillai, 60, is the SeniorPartner of Shook Lin & Bok. Hewas appointed an independent nonexecutive Director on 1 April 2000and will be due for re-election at thiscoming AGM under Article 98 of theCompany’s Articles of Association.Dr Pillai is a Director of SingaporePress Holdings Limited*, HotungInvestment Holdings Limited*,Prudential Assurance Co. (Singapore)Pte Ltd and International BoardTrustee of Haggai Institute, Atlanta.He was awarded the Public ServiceStar (Bintang Bakti Masyarakat) in2003. Dr Pillai obtained his Bachelorof Law (First Class Honours) fromthe former University of Singaporeand LLM and SJD from HarvardUniversity, USA.8Mr QUEK Poh HuatMr Quek Poh Huat, 61, is the GroupCEO of Singapore Power Limited.He was appointed a non executiveDirector on 15 April 2002 and waslast re-elected as Director on 31March 2006. Mr Quek is a Directorof Singapore Power Limited, SPPowerAssets Limited, SP AusNet @ ,PowerGas Limited and SP ServicesLimited. He is also Chairman of SPIManagement Services Pty Ltd andSP PowerGrid Limited. Mr Quek isSingapore’s non resident Ambassadorto Sweden. Mr Quek was awarded thePublic Service Star award in August1994. He obtained a Bachelor ofScience in Chemical Engineeringfrom the University of Leeds, UK,and a Master of Science inManagement from the NavalPostgraduate School, USA.9Mr VenkatachalamKRISHNAKUMARMr Venkatachalam Krishnakumar, 58,is a Senior Advisor to Barclays BankPLC, Global Retail and CommercialBanking. Prior to his presentappointment, he was a Senior Advisorto McKinsey and Co. He was theChief Operating Officer and ChiefFinancial Officer for the Asia PacificConsumer Bank of Citigroup untilhis retirement on 28 February 2005,after a 31 year career with the group.During his career with Citigroup, heheld several senior appointments inIndia, Singapore and New York. Hewas appointed an independent nonexecutive Director on 15 April 2002and will be due for re-election at thiscoming AGM under Article 98 of theCompany’s Articles of Association. Heis a Director of Singapore ComputerSystems Limited* and also a memberof the Board of the Central Depository(Pte) Limited. He holds a Bachelor ofEngineering and Master of BusinessAdministration from the Indian Instituteof Management, India.10Professor LUI Pao Chuen #Prof Lui Pao Chuen, 66, is the ChiefDefence Scientist in MINDEF. He wasappointed a non executive Directoron 1 October 1997 and was last reelectedas Director on 31 March 2006.Prof Lui sits on the managementboards of various scientific andresearch institutes. He is an AdjunctProfessor with the Engineering Facultyof the National University of Singapore(NUS). He is also Chairman ofSembCorp Design and ConstructionPte Ltd, a subsidiary of SembCorpIndustries Ltd, ATREC Pte Ltd andJurong Consultancy Holdings Pte Ltd.His other appointments include beingthe Chairman of the ManagementBoards of Temasek Defence SystemsInstitute, Temasek Laboratories ofNUS and Temasek Laboratoriesof NTU respectively. Prof Luigraduated from the former Universityof Singapore with a Bachelor ofScience (Honours) in Physics andobtained a Master of Science degreein Operations Research & SystemsAnalysis from the Naval PostgraduateSchool, USA.

Singapore Technologies Engineering LtdAnnual Report 20072711Mr Winston TAN Tien HinMr Winston Tan Tien Hin, 59, is theManaging Director of CorporateBrokers International Pte Ltd.Mr Tan was a banker for 24 yearshaving spent over 16 years withCitibank and over 7 years withDeutsche Bank; his last positionwas that of General Manager for theSingapore Branch. He was appointedan independent non executive Directoron 1 October 1997 and was lastre-elected as Director on 31 March2006. Mr Tan is also a member ofthe Salvation Army Advisory Board.He holds a Bachelor of Science inPhysics from the former Universityof Singapore.12Lieutenant-ColonelCHIA Choon HoongLTC Chia Choon Hoong, 36, is theDeputy Assistant Chief of GeneralStaff (Operations) in MINDEF. He wasappointed Alternate Director to LGDesmond Kuek Bak Chye on1 August 2007. LTC Chia joined theSAF in 1991 and was awarded theSAF Overseas Scholarship in 1991and the SAF Postgraduate Scholarship(General Development) in 2006.He has held various positions inMINDEF over the last 16 yearsand assumed his present office in2007. LTC Chia holds a Master ofEngineering (1st Class Honours)(Electrical & Electronic Engineering)from the University College London-UOL, UK, and a Master in BusinessAdministration from the MassachusettsInstitute of Technology.13Mr QUEK Tong BoonMr Quek Tong Boon, 52, is theDeputy Secretary (Technology &Transformation) and Chief Research& Technology Officer of MINDEF.He was appointed a non executiveDirector on 1 March 2008 and will bedue for re-election at this coming AGMunder Article 104 of the Company’sArticles of Association. He joinedthe Defence Science Organisation ofMINDEF in 1980 and in the courseof his career, has held various keyappointments. From 1998 to 2004,he was the Chief Executive Officerof the DSO National Laboratories.Mr Quek is currently a member ofthe DSO National LaboratoriesBoard, the Defence Science andTechnology Agency Board, theAgency for Science, Technology &Research (A*Star) Board as well asthe Intellectual Property Office ofSingapore (IPOS) Board, and anAdjunct Professor at the Departmentof Electrical & Computer Engineeringof the National University of Singapore(NUS). He holds a Bachelor of Arts(Hons) (Engineering) and Master ofArts (Engineering) from the Universityof Cambridge, UK and a Master ofScience (Electrical Engineering)from NUS.PAST DIRECTORSHIPS IN THE LAST THREE YEARSMr Peter SEAH Lim Huat• Civil Aviation Authority of Singapore• Board of Commissioners of Currency,Singapore• AF (Indonesia) Pte Ltd• EDBV Management Pte Ltd• EDB Ventures 2 Pte Ltd• EDB Ventures Pte Ltd• PSA International Pte Ltd• P T Bank InternasionalIndonesia Tbk• The National Kidney FoundationMr TAN Pheng Hock• ST Synthesis Pte LtdMr KOH Beng Seng• Far Eastern Bank Limited• Industrial & CommercialBank Limited• Overseas Union Bank Limited• United Overseas Bank LimitedLieutenant-General Desmond KUEKBak Chye• Singapore TechnologiesKinetics LtdDr TAN Kim Siew• HDB Corporation Pte Ltd• Keppel Offshore & Marine LtdProfessor LUI Pao Chuen• SembCorp Engineers and ConstructorsPte Ltd• DSO National LaboratoriesMr Winston TAN Tien Hin• Ascendas Pte LtdDr Philip PILLAI• Lindeteves-Jacoberg Ltd*• PT Agro IndomasMr QUEK Poh Huat• Shangri-la Asia Ltd• S I Technology Fund Limited• PSA Corporation Ltd• Temasek Life Sciences LaboratoriesLimitedMr Venkatachalam KRISHNAKUMAR• Citibank Korea Inc• CitiBank Malaysia Berhad• Citibank Savings Inc• e-Serve International Limited• Polaris Software Lab Limited• Singapore Land AuthorityMr Davinder SINGH• Singapore Airlines Limited• Zagro Asia Limited* listed on Singapore Exchange Securities Trading Limited^ listed on Stock Exchange of Hong Kong~ listed on Stock Exchange of Thailand@ A stapled group comprising SP Australia Networks (Transmission) Ltd, SP Australia Networks (Distribution) Ltd and SP AustraliaNetworks (Finance) Trust, acting through its responsible entity, SP Australia Networks (RE) Ltd. It is dual-listed on the AustralianStock Exchange and the Singapore Exchange Securities Trading Limited# Professor Lui Pao Chuen resigned from the Board on 1 March 2008

Singapore Technologies Engineering LtdAnnual Report 200729Illustrated by Kristal Melson

301Mr TAN Pheng Hockis President and CEO ofST Engineering anda Director of the STEngineering Board.(Mr Tan’s profile is onpage 24)2Mr WEE Siew Kim,47, was appointed DeputyCEO in May 2004,overseeing the Aerospaceand Marine sectors. He isconcurrently the President,Defence Business of STEngineering, a position hehas held since 1 May 2002.Prior to his current positions,Mr Wee was President ofST Engineering’s Europeoperations from July 2001to April 2002. He joinedST Aerospace as anengineer in 1984. He wasappointed President, STAerospace from December1997 to July 2001.Mr Wee is also a Directorof Basketball EnterprisesSingapore Pte Ltd, SBSTransit Ltd and ChangiAirports International PteLtd. His other appointmentsinclude being a Member ofParliament for the Ang MoKio Group RepresentativeConstituency. Mr Weewas awarded a Bachelorof Science (First ClassHonours) in AeronauticalEngineering from theImperial College of Science& Technology, Universityof London, UK, and holdsa Master in BusinessAdministration from StanfordUniversity, USA.3Mr SEAH Moon Ming,51, was appointed President,International Businessand Deputy CEO of STEngineering in May 2004,overseeing the Electronicsand Land Systemssectors. He is concurrentlyPresident, ST Electronics, aposition he has held since1 July 1997. Mr Seah wasGeneral Manager of CETTechnologies from July1994 to July 1997. Heserves as Chairman ofthe Board of Governors ofTemasek Polytechnic, ViceChairman of Trek 2000Limited, Director of theInfocomm DevelopmentAuthority of Singapore,and KTPH Private Limited.He is a Board Member ofInternational EnterpriseSingapore. He is a Fellow ofthe Institution of EngineersSingapore and a seniormember of IEEE. Hewas awarded the 2007International ManagerAction Award in Singaporeand also 2007 Top TenFinancial and IntelligentPersons in China. Mr Seahholds a Master of Science(with distinction) in ElectricalEngineering from the NavalPostgraduate School, USA.4Mr TAY Kok Khiang,59, was appointed Presidentof ST Aerospace on 10July 2001. As Presidentof ST Aerospace, Mr Tay isresponsible for growing theAerospace sector businessas well as its financial andoperational performance.He joined ST Aerospaceas Vice President/GeneralManager of ST AerospaceEngineering Pte Ltd in 1993and has held many seniormanagement appointmentsbefore becoming President.He was Deputy President &Chief Operating Officer priorto his current appointment.Mr Tay holds a Bachelorof Engineering (Honours)and a Master of Science inIndustrial Engineering fromthe National University ofSingapore.

Singapore Technologies Engineering LtdAnnual Report 200731748652135Mr SEW Chee Jhuen,44, was appointed Presidentof ST Kinetics on 1September 2006. Priorto his current position,Mr Sew was DeputyPresident (Operations)and President DefenceBusiness of ST Kinetics.He joined ST Aerospace asan aeronautical engineerin 1988 and has heldmany senior managementappointments beforebecoming Deputy President(Operations). Mr Sew holdsa Bachelor of Science (withdistinction) in AeronauticalEngineering and Mechanicsfrom the University ofMinnesota and a Master inBusiness Administrationfrom Stanford University,USA.6Mr SEE Leong Teck # ,57, was appointed President,ST Marine in December1997. Mr See overseesST Marine’s push to be aworld class provider of nicheproducts and services inshipbuilding and shiprepair.Prior to his current position,Mr See was ExecutiveVice President/GeneralManager of ST Marine.He joined ST Marine asNaval Architect in 1980and has held many seniormanagement appointmentsbefore rising to his currentposition. Mr See holds aMaster of Science in NavalArchitecture from theUniversity of London, UKand a Master of BusinessAdministration fromthe Cranfield School ofManagement, UK.7General (Retired)John G COBURN,65, was appointedChairman and CEO ofST Engineering’s USsubsidiary, VT Systems,Inc. on 1 December2001. Gen (Ret) Coburnjoined the Group after anillustrious 39-year careerwith the US Department ofDefense. Prior to takingup this position, he wasCommanding General of theUS Army Materiel Command(AMC), one of the largestcommands in the armywith 60,000 employeesand activities in 42 statesand 28 foreign countries.Gen (Ret) Coburn holdsa Juris Doctor from theUniversity of Missouri, USAand a Doctor’s Degree fromEastern Michigan Universityand other degrees.8Raphael CHIN,43, is currently GroupFinancial Controllerand was Acting ChiefFinancial Officer of theST Engineering Group fromMarch 2007 to February2008. He began his careerat ST Engineering as anaccountant in ST Aerospacein 1990. In 1999,he took up the positionof Financial Controller atST Marine. The followingyear, he was appointedVP/Financial Controller ofST Engineering and becameSVP/Group FinancialController in 2006.Mr Chin holds a Bachelorof Economics from MonashUniversity and a Master ofCommerce (Hons) from theUniversity of Auckland. Heis a Fellow of the Institute ofCertified Public Accountantsof Singapore.# Mr See Leong Teck retired on 29 February 08

32as at 29 february 2008TAN Pheng HockPresident and CEOEleana TAN*Chief Financial Offi cerINTERNAL AUDITGrace KWOKSenior Vice President(Reporting to Audit Committee)FINANCERaphael CHINSenior Vice President/Group Financial ControllerINTERNATIONAL MARKETINGPatrick CHOYExecutive Vice PresidentTECHNOLOGYFONG Saik HayChief Technology OfficerMERGERS & ACQUISITIONSSteven CHEONGSenior Vice PresidentHUMAN RESOURCETAN Nga KokSenior Vice President/DirectorLEGALLOW Meng WaiVice President/DirectorINFORMATION TECHNOLOGYTAN Hock HaiChief Information OfficerSTRATEGIC PLANSRobin THEVATHASANSenior Vice PresidentSPECIAL PROJECTSWU Tzu ChienPresidentDEFENCE BUSINESSLOW Yee KahSenior Vice PresidentCORPORATECOMMUNICATIONSSharolyn CHOYVice President/DirectorBUSINESS EXCELLENCEHarnek SINGHVice President/DirectorRISK MANAGEMENTAlice CHUASenior Vice PresidentPROCUREMENTGOH Bak NguanChief Procurement Officer/Vice PresidentMembers of Executive Offi ce

Singapore Technologies Engineering LtdAnnual Report 200733SEAH Moon MingDeputy CEOElectronics and Land SystemsPresidentInternational BusinessWEE Siew KimDeputy CEOAerospace and MarinePresidentDefence BusinessELECTRONICSSEAH Moon MingPresidentLAND SYSTEMSSEW Chee JhuenPresidentAEROSPACETAY Kok KhiangPresidentMARINESEE Leong Teck #PresidentLEE Fook SunDeputy President,Operations & President,Defence BusinessNG Chong KhimPresident, Communication andSensor Systems GroupDeputy President,Corporate Services and MarketingGAN Boon JinExecutive Vice President,Land Systems & Solutionsand Defence BusinessHO Yuen SangDeputy President, Operations/Chief Operating Officer& President, Defence BusinessJeremy CHANDeputy President, Marketing& Total Aviation SupportCHANG Cheow Teck*PresidentHAN Yew KwangDeputy President,Corporate Development& President, Defence BusinessParmesh SINGHChief Operating OfficerUS OPERATIONSJohn G COBURNChairman and CEOEUROPE OPERATIONSOOI Ling HeongExecutive Vice PresidentADVANCEDENGINEERING CENTREFONG Saik HayPresidentINTEGRATED SERVICESGOH Lik KokVice President/General Manager*Effective 1 Mar 2008# Retired 29 Feb 2008

34Illustrated by Cherie Tan

Singapore Technologies Engineering LtdAnnual Report 200735The Board is committed to highstandards of corporate governance andprovides the leadership and guidanceto management to develop and drivecorporate strategy, business directions,acquisitions and divestments and riskpolicies for ST Engineering.This Corporate Governance Reportoutlines ST Engineering’s corporategovernance processes and activitiesin 2007 in accordance with theprinciples of the Singapore CorporateGovernance Code 2005 (Code).BOARD MATTERSBoard’s Conduct of Its Affairs(Principle 1)The fundamental responsibility of adirector is to act in the best interestsof the Company and its shareholders.To this end, the Board relies on theintegrity and due diligence of its seniormanagement and its external advisorsand auditors. In addition to its statutoryresponsibilities, the Board performs thefollowing governance roles:• guides the Group’s overall longterm strategic objectives;• establishes a proper riskmanagement system to ensure thatkey potential risks faced by theGroup are properly identified andmanaged;• provides oversight in the properconduct of the Group’s business;• assesses and approves annualbudgets, major funding proposals,investment and divestmentproposals; and• approves Board changesand appointments on Boardcommittees.The Board meets on a quarterlybasis and when required to reviewthe Group’s performance, and todeliberate on specific issues includingmajor acquisitions and investments,shareholder matters, policies relating tocorporate governance, Chief ExecutiveOfficer (CEO) appointment, approvalof budgets, Board changes andappointments on Board committees.Board members receive monthlyconsolidated management reportson the financial performance of eachbusiness sector, capital commitmentsand significant operational highlights.Other matters are delegated to Boardcommittees and the Executive Officefor review and decision making. TheExecutive Office comprises thePresident and CEO; Deputy CEO,Electronics and Land Systems/President, International Business;Deputy CEO, Aerospace and Marine/President, Defence Business; andChief Financial Officer (CFO).A formal letter is sent to a directorupon his appointment setting out hisduties and responsibilities. A newdirector is also given a briefing by thePresident and CEO on the strategicdirection and performance of theCompany and its key subsidiaries aswell as an introduction to the seniormanagement team.From time to time, the Board is updatedon the relevant laws, continuing listingobligations and standards requiringcompliance, and their implications forthe Group.The Board convenes scheduledmeetings on a quarterly basis tocoincide with the announcement ofthe Group’s quarterly results. Ad-hocmeetings are convened as and whennecessary. The Company’s Articles ofAssociation allows Board meetings tobe conducted by way of teleconferenceor video conference. The Chairman hasa second or casting vote. Decisions ofthe Board and Board committees mayalso be obtained via circulation.The Board monitors the performanceof the Group through its Boardcommittees.The number of Board and Boardcommittee meetings held during theyear is tabulated on the following page:

36Type of Meeting No. of AttendanceMeetings (Average %)Board 5 84%Audit Committee 6 94%Business Investment and Divestment Committee 1 60%Executive Resource and Compensation Committee 4 83%Nominating Committee 1 67%Senior Human Resource Committee 1 100%Risk Review Committee 4 75%Budget and Finance Committee 2 100%Research, Development and Technology Committee 2 83%Minutes of the Board Committee meetings are made available to all Board members.Board Composition and Guidance(Principle 2)The Board comprises 11 directorsand an alternate director. The Boardconsists of members with establishedtrack record in finance, banking,technology, legal and managementskills. Each non executive directorbrings to the Board an independentand objective perspective basedon his training and expertise tomake balanced and wellconsidered decisions.The Chairman of the Board is Mr PeterSeah, a non executive director.Mr Seah was appointed to the Boardon 15 April 2002 as Chairman.As a non executive director, Mr Seahis free from any relationship with theexecutive management of the Companythat could materially interfere with theexercise of his independent judgment.He is a Member of the TemasekAdvisory Panel in Temasek Holdings,the Company’s major shareholder.The President and CEO is Mr TanPheng Hock, who is an executivedirector. Save for Mr Tan Pheng Hock,the remaining ten directors are nonexecutive directors.The Board has five independentdirectors. According to the Code,an independent director is one whohas no relationship with the Company,its related companies or its officersthat could interfere, or be reasonablyperceived to interfere with the exerciseof the director’s independent businessjudgment. The independence ofeach director is reviewed annuallyby the Nominating Committee (NC).The independent directors areMr Koh Beng Seng, Mr VenkatachalamKrishnakumar, Dr Philip Pillai,Mr Winston Tan and Mr Davinder Singh.Relationship tests aside, it is the qualityof the governance that counts andthat distinguishes an independent andeffective board. While not all the nonexecutive directors are consideredindependent based on relationshiptests, the Board has, at all timesexercised independent judgment indecision making using its collectivewisdom and experience to act in thebest interests of the Company.The Board held a total of five meetingsduring the year, in accordance withits planning cycle, for the approval ofthe FY2006 results and release of1Q2007, 2Q2007 and 3Q2007 results.Chairman and Chief ExecutiveOfficer (Principle 3)The Chairman and CEO roles andresponsibilities are kept separate inorder to maintain effective oversight.No individual or small group ofindividuals dominates the Board’sdecision making process. The CEOand senior management regularlyconsult with individual Board membersand seek the advice of members ofthe Board committees throughmeetings, telephone calls as wellas by electronic mail.The Chairman, who is non executive, isresponsible for the proper functioningof the Board and acts independentlyin the best interests of the Companyand its shareholders. The Chairmanfacilitates the relationship between theBoard and the CEO and management,engaging them in constructivediscussions over various matters,including strategic issues andbusiness planning processes.The CEO is accountable to the Boardfor the conduct and performance of theGroup. The CEO is also responsible forreporting to the Board and the variousboard committees set up to assist theBoard in its oversight function.

Singapore Technologies Engineering LtdAnnual Report 200737Board Membership and Evaluationof Performance (Principles 4 and 5)The NC is responsible for reviewingthe composition of the Board andidentifying and selecting suitablecandidates to the Board. TheCommittee also reviews the retirementand re-election of directors.The NC comprises three directors.Dr Philip Pillai is the Chairman ofthe NC. The other members areMr Peter Seah and Mr VenkatachalamKrishnakumar. Both Dr Pillai andMr Krishnakumar are independentnon executive directors.The NC is charged with theresponsibility of ensuring that theCompany’s Board and its subsidiariescomprise individuals who are ableto discharge their responsibilities asdirectors. The NC identifies suitablecandidates for appointment to theboards of the Group, in particular,candidates who can value add to themanagement through contribution oftheir skills, knowledge and experienceto the various businesses.During the year, the NC reviewed andaffirmed the independence of theCompany’s independent directors andthe composition of the Board and theprofile of Board members in relation tothe needs of the ST Engineering Board.The NC recommended to the Boardthe appointment of Mr Davinder Singhas non-executive independent Director,LG Desmond Kuek Bak Chye andMr Quek Tong Boon as non executiveDirectors.At each AGM, one third of thedirectors with the longest term inoffice is required to retire and submitthemselves for re-election. Under thisprovision, Mr Tan Pheng Hock,Dr Philip Pillai, and Mr VenkatachalamKrishnakumar will retire. The newlyappointed directors, LG Desmond KuekBak Chye, Mr Davinder Singh andMr Quek Tong Boon will also retire.The retiring directors, being eligible,have offered themselves for reelection.The NC has reviewed theircontributions and recommended thateach of the retiring Directors bere-elected at the Company’sforthcoming AGM.Supporting the Board are the followingBoard Committees:• Audit Committee• Business Investment andDivestment Committee• Executive Resource andCompensation Committee• Nominating Committee• Budget and Finance Committee• Research, Development andTechnology Committee• Senior Human ResourceCommittee• Risk Review Committee• Tenders CommitteeThe composition of the Boardcommittees is found on the next page.

38BOARD MEMBERAudit Committee(estbd on 5/1/1998)Business Investment and Divestment Committee(estbd on 8/9/1997)Executive Resource and Compensation Committee(estbd on 6/12/1997)Nominating Committee(estbd on 4/12/2002)Budget and Finance Committee(estbd on 5/1/1998)Research, Development and Technology Committee(estbd on 1/8/2003)Senior Human Resource Committee(estbd on 16/1/1998)Risk Review Committee(estbd on 7/12/1998)Tenders Committee(estbd on 5/1/1998)Mr Peter SEAH Lim Huat C C M CMr TAN Pheng Hock M M M M MMr KOH Beng SengCLieutenant-General Desmond KUEK Bak Chye M M MDr TAN Kim Siew M MProfessor LUI Pao ChuenCMr Winston TAN Tien Hin M M CDr Philip Nalliah PILLAI M M CMr QUEK Poh Huat M MMr Venkatachalam KRISHNAKUMAR M M M MRolling list of any 3 Board DirectorsMr Davinder SINGH C MLTC CHIA Choon Hoong +NON BOARD MEMBERDr Stanley LAI Tze ChangCMDENOTES:C – ChairmanM – MemberCM – Co-opted Member+ Alternate director to LG Desmond Kuek Bak Chye

Singapore Technologies Engineering LtdAnnual Report 200739Access to Information (Principle 6)The management furnishes Boardmembers with monthly managementreports, providing updates on keyoperational activities and financialanalysis. The Board also hasunrestricted access to the Presidentand CEO, the CFO, management andthe Company Secretary as well as theinternal and external auditors and therisk management team. The Board canalso seek independent professionaladvice if necessary.As a general rule, board papers aresent to directors at least three daysprior to meetings in order for directorsto be adequately prepared for themeeting.REMUNERATION MATTERSProcedures for DevelopingRemuneration Policies (Principle 7)Level and Mix of Remuneration(Principle 8)Disclosure on Remuneration(Principle 9)The Executive Resource &Compensation Committee (ERCC)performs the role of the remunerationcommittee. The Committee comprisesMr Peter Seah as Chairman, Dr PhilipPillai and Mr VenkatachalamKrishnakumar. The majority ofmembers of the ERCC have held seniorpositions in large organisations and areexperienced in the area of executiveremuneration.All the ERCC members are nonexecutive directors. Apart fromMr Peter Seah, the other members ofthe ERCC are independent directors.The ERCC has access to professionaladvice from appropriate externaladvisors where necessary. The ERCCmay meet with these external advisorswithout the presence of management.All decisions at any meeting of theERCC shall be decided by a majorityof votes of the ERCC memberspresent and voting (the decision ofthe ERCC shall at all times excludethe vote, approval or recommendationof any member who has a conflict ofinterest in the subject matter underconsideration).The ERCC has been authorised by theBoard to carry out the following keyduties and responsibilities:• Review and establish executiveremuneration policy• Approve the remuneration packageand service terms for seniorexecutives• Set targets for senior executivesand approve equity based incentiveshare plans and the granting of stockoptions, performance share awardsand restricted stock awards• Approve non executive directorremuneration structureThe ERCC met four times in 2007.Its key activities were centred onthe assessment and developmentof the management team, targetsetting, and the determination oftheir compensation and incentiveawards. In determining the overallremuneration package, the ERCCassesses executives’ contributions tothe Group relative to preset targets,the performance of the Group, andthe compensation and employmentconditions of various industries,including global remunerationbenchmarking.During the year, the ERCC reviewedand decided to gradually replaceshare options with restricted sharesunder its Restricted Stock Plan. TheERCC also decided on conditionalperformance share awards andrestricted stock awards under STEngineering’s approved share plans aswell as Economic Value Added-basedincentives for senior executives.The following information relates to remunerationof directors of ST Engineering:Number of Directors inRemuneration Bands 2007 2006Remuneration Band$500,000 and above 1 1$250,000 to $499,999 – –Below $250,000 10 10Total 11 11

40Summary compensation table for the year ended 31 December 2007 (Group):StockoptionsDirectors’ granted ExerciseName of director Salary * Bonus * fees Total in 2007 price Exercisable period$ $ $ $ $Peter Seah Lim Huat – – 187,000 187,000 44,500 3.23 16.3.2008 to 15.3.201244,500 3.61 11.8.2008 to 10.8.2012Tan Pheng Hock 993,181 1,886,178 # 2,879,359 200,000 3.23 16.3.2008 to 15.3.2017Koh Beng Seng – – 99,000 99,000 27,500 3.23 16.3.2008 to 15.3.201227,500 3.61 11.8.2008 to 10.8.2012LG Desmond KuekBak Chye – – 13,125• @† 13,125 – – –LG (NS) Ng Yat Chung – – 3,750• @1 3,750 – – –Dr Tan Kim Siew – – 13,750• 13,750 – – –Professor Lui Pao Chuen – – 118,000 † 118,000 – – –Winston Tan Tien Hin – – 147,000 † 147,000 37,000 3.23 16.3.2008 to 15.3.201237,000 3.61 11.8.2008 to 10.8.2012Lucien Wong Yuen Kuai – – 48,000 @2 48,000 21,500 3.23 16.3.2008 to 15.3.2012Dr Philip Nalliah Pillai – – 129,000 † 129,000 33,000 3.23 16.3.2008 to 15.3.201233,000 3.61 11.8.2008 to 10.8.2012Quek Poh Huat – – 128,000 † 128,000 33,000 3.23 16.3.2008 to 15.3.201233,000 3.61 11.8.2008 to 10.8.2012VenkatachalamKrishnakumar – – 116,000 116,000 25,500 3.23 16.3.2008 to 15.3.201225,500 3.61 11.8.2008 to 10.8.2012Davinder Singh – – 37,333 @3 37,333 – – –LTC Chia Choon Hoong(Alternate to LG DesmondKuek Bak Chye) – – – – – – –993,181 1,886,178 1,039,958 3,919,317 622,500* The salary and bonus amount shown is inclusive of allowances and CPF.@Pro-rated. LG Desmond Kuek Bak Chye was appointed Director on 27 April 2007.@1Pro-rated. LG (NS) Ng Yat Chung retired as Director on 25 April 2007.@2Pro-rated. Mr Lucien Wong Yuen Kuai resigned as Director on 1 July 2007.@3Pro-rated. Mr Davinder Singh was appointed Director on 1 August 2007.• Fees for public sector Directors are payable to a government agency.† Includes fees for directorship in subsidiary/subsidiaries.# Fees payable to Mr Tan Pheng Hock of $167,825 include fees for directorships in subsidiaries and are payable toSingapore Technologies Engineering Ltd.

Singapore Technologies Engineering LtdAnnual Report 200741Remuneration Bands for Year 2007Remuneration data for employees earning $200,000 and above per annum (as at 31 December 2007).Compensation Band ($) No. of Employees Total Dollar Value ($)200,000 to 249,999 123 27,092,300250,000 to 499,999 120 39,522,931500,000 to 749,999 15 8,690,684750,000 to 999,999 5 4,353,1091,000,000 to 1,249,999 2 2,252,7851,250,000 to 1,499,999 3 4,079,1351,500,000 to 1,749,999 1 1,720,305=> 1,750,000 3 6,569,626Total 272 94,280,875Note: Total compensation comprises all staff salaries (including CPF for Singapore staff), overtime pay, variable bonuses, special bonuses,annual wage supplement (13th month), benefits-in-kind plus overseas postees’ cost of living allowance.The Board has delegated authorityto the ERCC to determine theremuneration of the President andCEO and the senior management.The remuneration package for nonexecutive directors is reviewed by theBoard annually and the fees to bepaid to Board members are subject toapproval at the AGM.The Group has set out a groupwidecross section of executives’remuneration by number of employeesfrom $200,000 upwards in bands of$50,000 and $250,000.The Senior Human ResourceCommittee, chaired by Mr Peter Seah,comprises Mr Tan Pheng Hock,LG Desmond Kuek Bak Chye andDr Tan Kim Siew. The Committeereviewed the talent management andleadership development initiativesto build a leadership pipeline for theGroup. By supporting and directingthe Group’s talent management andleadership initiatives, the Committeehas helped to enhance the processof identification and developmentof talents to be groomed for seniorpositions. The Committee has alsoreviewed the succession plans for keymanagement positions in the Group.ACCOUNTABILITY AND AUDITAccountability (Principle 10)The Board is responsible for providinga balanced assessment of theCompany’s performance, position andprospects. In presenting the annualfinancial statements and quarterlyannouncements to shareholderspromptly, it is the aim of the Board toprovide the shareholders with a detailedanalysis, explanation and assessmentof the Group’s performance, positionand 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 havebeen put in place to enable eachmember of the Board reviewingthe interim financial statementsto immediately raise any materialinformation known to him which mayrender the interim financial results tobe false or misleading prior to theirrelease to SGX. Should there be anysignificant adverse issue(s) raised bythe Audit Committee (AC) or Boardmember which may affect the resultsin a material way, the scheduleddate of the results announcementwill be postponed to allow time forinvestigation or further review.

42The re-appointment of auditors issubject to approval at each AGM.In making its recommendations toshareholders on the appointmentand re-appointment of auditors,the Board relies on the review andrecommendations of the AC.Directors and key senior executives ofthe Group are prohibited from dealingin ST Engineering shares two weeksbefore the announcement ofST Engineering’s first quarter,second quarter, third quarter andfull year results up to the date ofthe announcement of the results.Additionally, all directors ofthe Group and employees are remindednot to trade in situations where theinsider trading laws and rules wouldprohibit trading.The directors’ interests in shares ofST Engineering and its relatedcompanies during the year are foundon pages 90 to 98 of this Report.Audit Committee (Principle 11)The AC is supported in its workby the audit committees of thefour main business sectors. Therespective chairmen of the auditcommittees of the four businesssectors are invited to attend theAC meetings of ST Engineering soas to have a clear understandingof policies made at the holdingcompany level and to share anyfeedback or raise any issue that thesectors’ audit committees may have.The AC has full authority tocommission and review findings ofinternal investigations into matterswhere it is alerted of any suspectedfraud or irregularity or failure ofinternal controls or infringementof any law likely to have a materialimpact on the Group’s operatingresults. It can investigate anymatter within its terms of referenceand with the full cooperation ofmanagement.The Company has put in placea Whistle-Blowing framework,endorsed by the AC, where staffmay, in confidence and withoutfear of retaliation, raise concernsof incidents of possible wrongdoingor breach of applicable laws,regulations or policies to therespective chairmen of the auditcommittees in the Group. AsST Engineering has become a globalcompany with a presence in manycountries, it is aware of the needto apply international corporategovernance standards wherever itoperates. It takes a serious viewof all reports of violations receivedby initiating thorough investigationsinto each matter.The AC comprises Mr Koh BengSeng as Chairman, Dr PhilipPillai and Mr VenkatachalamKrishnakumar. All the members ofthe AC are independent directors.The AC held six meetings duringthe year, including a February2007 session with the externaland internal auditors, withoutmanagement.During the year, the AC reviewedand recommended to the Boardthe release of the 2006 full year,1Q2007, 2Q2007 and 3Q2007financial statements, and consideredand approved the 2007 Audit Planand the 2007 Internal Audit (IA)Plan. It also reviewed the adequacyof internal control procedures,Interested Person transactionsand the issues raised in IA reportswith IA being given the authorityto rate risk issues according todifferent risk levels, and to followup with remedial actions by themanagement.The AC reviewed the level of nonaudit services performed by itsexternal auditors to satisfy itselfthat non audit services performedby the auditors did not compromisetheir independence under regulatoryrequirements.The AC also reviewed theperformance of the externalauditors. It recommended to theBoard the re-appointment ofErnst & Young as auditors forFY2007, after having beensatisfied with its standard of audit,independence and objectivity.The AC reviewed the Group’sprocurement framework and themeasures that had been put inplace by the respective sectors’managements both locally andoverseas to provide for checksand balances.

Singapore Technologies Engineering LtdAnnual Report 200743Internal Controls (Principle 12)Internal Audit (Principle 13)The AC oversees and appraisesthe quality of the audit effort of theCompany’s IA function.The Board is ultimately responsiblefor ensuring that a sound systemof internal controls to safeguardshareholders’ investment and theGroup’s assets 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, safeguardingof assets and compliance withapplicable rules and regulations.It is also satisfied that problems areidentified on a timely basis and thereis in place a process for best practicesand follow up actions to be takenpromptly to minimise unnecessarylapses and for the identification andcontainment of business risks.The IA supports the AC in reviewingthe adequacy of the Company’s internalcontrol system.Staffed by qualified auditors, IA hasunrestricted direct access to theAC. The Head of IA’s primary line ofreporting is to the Chairman of the AC,although she reports administratively tothe CFO of the Company.IA plans its internal audit schedules inconsultation with, but independently of,management. Its IA Plan is submittedto the AC for approval at the beginningof each year. The AC also meets withIA at least once a year without thepresence of management to gatherfeedback on management’s level ofcooperation and other matters thatwarrant AC’s attention. All auditreports are submitted to the AC fordeliberation with copies of thesereports extended to the relevantsenior 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.There were no significant control issueshighlighted by IA in 2007.During the year, IA briefed the AC on itsplan to carry out surprise audits acrossthe Group. The IA continued with itssystem of rating a company at the endof an internal audit for the purposeof differentiating the high risk issueswhich require immediate attention.On an ongoing basis, IA ensuresthat good practices are shared withinthe Group.Risk Review CommitteeThe Risk Review Committee, chairedby Mr Winston Tan, comprisesLG Desmond Kuek Bak Chye, MrDavinder Singh, Mr VenkatachalamKrishnakumar, Mr Tan Pheng Hockand Dr Stanley Lai, a co-opted memberand Board Director of ST Aerospace.The Committee oversees the riskmanagement framework and reviewskey risk exposures, including businesscontinuity management.The Committee met four times duringthe year to review the key risks andthe measures put in place as well asthe key risk indicators of each sector.Emerging risk perspectives facing theGroup were also discussed.Budget and Finance CommitteeChaired by Mr Davinder Singh, theBudget and Finance Committeemembers include Mr Tan Pheng Hock,Mr Quek Poh Huat and Dr Tan KimSiew.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 andFinance Committee held two meetingsto review the FY2007 budgetassumptions and forecast. TheCommittee also met to review the2008 Plan and recommended to theBoard for approval.Business Investment andDivestment CommitteeThe Business Investment andDivestment Committee comprisesMr Peter Seah as Chairman, Mr TanPheng Hock, LG Desmond Kuek BakChye, Mr Winston Tan andMr Quek Poh Huat.During the year, the BusinessInvestment and Divestment Committeemet to consider an investment bythe Group.

44COMMUNICATION WITHSHAREHOLDERS(Principles 14 and 15)The Company believes in regularand timely communication withshareholders as part of the Group’seffort to help shareholders betterunderstand its businesses.The Group has a comprehensiveinvestor relations programme aimedat providing existing and potentialinvestors with comprehensive andprompt information, to enable themto have a better understanding ofthe Group’s businesses, directionand performance. ST Engineeringmaintains a regularly updated websitewhich provides a chronology of thelatest press releases and highlights ofcorporate events of each sector andits capabilities.In 2007, ST Engineering’s investorrelations team held over 350 investormeetings in over 25 major cities,participating in 13 investor roadshowsand conferences in Australia, Canada,Europe, Hong Kong, Japan and the US.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 2007 where shareholderspresent were given an opportunityto seek clarification or question theBoard on issues pertaining to theresolutions proposed before theywere voted on. The external auditorswere also present at the AGM toassist the directors in answeringquestions on audit related matters fromshareholders. The Group fully supportsthe Code’s principle to encourageactive shareholder participation. Moreon Investor Relations can be found onpages 50 to 51.Financial and other information aremade available on the Company’swebsite at http://www.stengg.comand these are regularly updated.

Singapore Technologies Engineering LtdAnnual Report 200745

46Turning 40 is a momentous event for most. ST Engineeringmarked the coming of age with a series of singular events,both to commemorate the occasion as well as to fosterunity and team spirit among its over 18,000 staff.A string of interactive activitieswas held, engaging the participationof staff members to promote thecollegial spirit within the Group.ST Engineering’s Family Day on21 July saw Siloso Beach at Sentosaturn into a giant carnival, withthousands of staff members and theirfamilies enjoying games, performancesand fun-filled activities.Employees from ST Engineeringand its global offices also gamelyparticipated in the painting of theinsides of over 1,000 teacups, someof which were eventually arrangedinto a IV x X design as artpieces. InSeptember, about 160 staff took partin a series of races entitled Backto Our Roots, covering a distance of40km to mark the 40th Anniversary.At the same event, the Gardenof Origin was unveiled at Jalan BoonLay, the founding ground ofST Engineering.A bamboo garden, the Garden ofOrigin symbolises longevity andadaptability. Five time capsulescarrying emblematic items fromST Engineering and each of itsbusiness sectors were assembled, tobe displayed at each of their respectiveoffices. The capsules will be reopenedat ST Engineering’s 100th Anniversary.The anniversary celebrationsculminated in the launch of a twobookset in November, comprisingUnder One Sun – which tracesST Engineering’s historic developmentand achievements, and UncharteredTerritory – which pays tribute toDr Goh Keng Swee for his incisive rolein Singapore’s defence industry andthe formation of ST Engineering.12

Singapore Technologies Engineering LtdAnnual Report 2007476 7594 83FAMILY DAY1 HE President S R Nathan presentingChairman, Mr Peter Seah, with a tokenof appreciation for ST Engineering’scontribution towards thePresident’s Challenge.2-3 Staff and their families beingtreated to a day of carnival fun at SilosoBeach, Sentosa.BACK TO OUR ROOTS4 Ms Ho Ching, Executive Directorand CEO, Temasek Holdings,officiating at the opening of theGarden of Origin. The Garden ofOrigin was built on the site where thefirst seeds of ST Engineering wereplanted.5 Joining hands to set a new worldrecord for the longest T-shirt chain.6 ST Engineering staff taking partin a series of fun relays to mark its40th Anniversary.7 Guests and ST Engineering staffsigning their well wishes for the 40thAnniversary.ST ENGINEERING’S40TH ANNIVERSARYCOMMEMORATIVE BOOK8 Mr Peter Seah launching the bookwith the cast from Phua Chu Kang.TEACUP PAINTING9 ST Engineering staff participatingin the painting of teacups for the40th Anniversary artpieces.

48OPERATING AS A RESPONSIBLECORPORATE CITIZENEmbracing Environment, Healthand Safety InitiativesST Engineering regards its corporateresponsibility to the Environment,Health and Safety (EHS) with deepgravity. Most of the Group’s businessunits are ISO 14001 EnvironmentalManagement System and/or OHSAS18001 Occupational Health andSafety Management System certified.During the year, its business unitsreviewed their EHS policies to ensurecontinued relevance to the workplace.Where possible, environmentallyfriendly practices are adopted,sometimes leveraging technology,to preserve the environment. Forinstance, electricity and waterconsumption is reduced throughmotion sensors and timers, while“straight-through” processes minimisehuman intervention and enable apaperless working environment.ST Engineering’s subsidiaries andjoint ventures are encouraged toincorporate environmentally friendlypractices into their operations.Recycling of office products andproper waste disposal are two ofthese initiatives.A healthy and safe workingenvironment is an essential componentof employee welfare. Safetyinspections and audits, systematicaccident reporting audits and regulartraining form part of ST Engineering’scomprehensive measures to ensurehealth and safety at the workplace.Aerospace and Land Systemssubsidiaries – STA Engines andAdvanced Material Engineering –received the Workplace Safety andHealth Performance Award 2007(Silver), awarded by Singapore’sMinistry of Manpower.Making a Difference to theCommunityST Engineering is a fervent supporterof the community. By helping the lessfortunate, as well as promoting artsand education, it is embracing its roleas a responsible corporate citizen.During the year, ST Engineering and itssubsidiaries gave generously to severalworthy causes, including $668,000 tothe President’s Challenge in Singaporeand others like SingHealth Foundation,Great Singapore Duck Race, KidneyDialysis Foundation, Thye Hua KwanCharity, MINDS and Hospice CareAssociation.Apart from financial donations, staffalso gave readily of their time to visithomes such as the Melrose Homeand St Andrew Home for the Aged,bearing goodies and spreadingcheer to the residents. The year sawST Electronics sponsor computerhardware and provide IT training totwo orphanages and a school for theblind in Kazakhstan.The arts and education were alsofocus areas in ST Engineering’scommunity efforts. For the thirdconsecutive year, the Safety@WorkCreative Awards invited tertiarystudents to spread the message ofsafety in a multimedia art competition.As part of regular initiatives to promoteeducation, ST Engineering supportedprominent conferences such as theIE Forum 2007, organised by theInternational Enterprise Singapore; andthe Shangri-La Dialogue, organised bythe International Institute of StrategicStudies.

Singapore Technologies Engineering LtdAnnual Report 200749Safety@Work CreativeAwards 2007 trophies.Mr Tan Pheng Hock, President and CEO,with the winners of the Safety@WorkCreative Awards 2007.HE President S R Nathan posing fora photo with members of the MoralHome for the Disabled.Mr Peter Seah, Chairman, and Mr TanPheng Hock, President and CEO,presenting a cheque of $668,000to HE President S R Nathan forPresident’s Challenge 2007.

50BREAKINGNEW GROUNDAnalysts visiting MAE, the Group’s US Airframe MRO facilityin Mobile, Alabama.ST Engineering has an active investorrelations programme to help investorsfully comprehend the Group’sdevelopments and keep them updatedof its progress and strategies.Today, the Group has a shareholderbase of about 30,000 with institutionalshareholders in virtually all majorglobal financial markets. Its proactiveinvestor relations efforts go a longway towards promoting the stock andcultivating shareholder loyalty.In 2007, ST Engineering’s investorrelations team held over 350 investormeetings in over 25 major cities,participating actively in 13 investorroadshows and conferences inAustralia, Canada, Europe, Hong Kong,Japan and the US.The Group also focuses on enrichingthe depth of knowledge of over 20sell-side analysts who cover thestock, as they serve as independentvoices providing analyses andrecommendations to investors. Thisyear, ST Engineering organised itsfirst ever analyst facility visit to the US,the Group’s largest market outsideAsia, giving analysts the opportunityto examine the Group’s US operationsand hear first-hand from US seniormanagement.The Group constantly seeks ways toreward shareholders. In response toinvestors’ feedback for more frequentdividend distribution, the Group paid itsmaiden interim dividend of two centsper share in September.Moving forward, ST Engineeringwill continue to build on its investorrelations efforts to better address theever changing needs of the investmentand analyst communities.Investor Relations Calendar Highlights 20071st Quarter 2007• DBS Vickers The Pulse of Asia Conference – Singapore• US and Canada Investor Roadshow• Hong Kong Investor Roadshow• Live webcast of FY2006 results briefing• Post results investor lunch• Credit Suisse Asian Investment Conference – Hong Kong2nd Quarter 2007• Live webcast of 1Q2007 results briefing• Post results investor lunch• Analyst visit to US operations• Payment of first and final tax exempt (one-tier) dividend of 4.0cents per share and a special tax exempt (one-tier) dividend of11.11 cents per share for the year ended 31 December 2006• Citigroup ASEAN Mini Conference – Tokyo• Europe Investor Roadshow3rd Quarter 2007• Fund managers’ visit to ST Kinetics via Nomura Securities• Nomura Asia Equity Forum – Singapore• Fund manager/analyst visit to ST Electronics• Live webcast of 2Q2007 results briefing• Post results investor lunch• Australia Investor Roadshow• US and Canada Investor Roadshow• Payment of interim tax exempt (one-tier) dividend of 2.0 cents pershare for first half ended 30 June 2007• CLSA Investors’ Forum – Hong Kong4th Quarter 2007• Live webcast of 3Q2007 results briefing• Post results investor lunch• Morgan Stanley Asia Pacific Summit – Singapore• Europe Investor Roadshow

Singapore Technologies Engineering LtdAnnual Report 200751Analysts trying out a commercial class asphalt paver at VT LeeBoy inLincolnton, North Carolina.Analysts watching a staff member conduct a stringent watersubmerging test of a ruggedised computer at VT Miltope inMontgomery, Alabama.ST Engineering Share Price and Trading Volume in 2007Trading volume(millions)4540Ex-date for the paymentof 2006 final dividend of15.11 cents per shareEx-date for the paymentof 2007 interim dividend of2.0 cents per shareShare price($)4.03.9353.8303.72520153.63.53.43.3103.253.10Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec3.0Share priceTrading volumeSource: BloombergST Engineering Share Price HistoryYear 2007 2006 2005 2004 2003High $3.98 $3.30 $2.86 $2.33 $2.06Low $3.10 $2.62 $2.33 $1.89 $1.47Average* $3.59 $2.95 $2.52 $2.09 $1.83* Defined as the average closing prices of active trading days for the year.

52RECOGNISING EXCEPTIONALACHIEVEMENTST Engineering celebrates its numerousachievements and awards accordedto both its outstanding companies andindividuals during the year.QualityST Engineering is honoured to beone of two winners of the inauguralSingapore Quality Award (SQA) 2007with Special Commendation. Thehighest quality accolade in Singapore,the award recognises past SQAwinners for continuing to scale greaterheights in business excellence, and fordemonstrating global leadership in keybusiness areas after winning the SQA.President and CEO, Mr Tan Pheng Hock,was the first Singaporean to be awardedthe Walter L. Hurd Executive Medal.The medal is given annually to a seniorexecutive or owner of an organisationin recognition of his contributionstowards the advancement of the qualitymovement within the Pacific region.The Aerospace sector’s San Antoniofacility was awarded the DiamondCertificate of Excellence, a FederalAviation Administration (FAA) awardfor employers, for having all itseligible employees clinch the AviationMaintenance Technician (AMT) award.Subsidiary of the Aerospace sector,STA Systems, received the NationalAerospace Defence for ContractorAccreditation Programme (fornon destructive testing) from thePerformance Review Institute. STASystems was one of the few Singaporecompanies to achieve such aninternational certification.The Group’s sectors and theirsubsidiaries won a multitude of awardsby Singapore’s Ministry of Defence(MINDEF) during the year, whichacknowledged ST Engineering’s role inSingapore’s Total Defence. One of theseawards was the Minister of DefenceAward 2007, given to the Group’sElectronics sector and Aerospacesubsidiary, STA Systems. In addition,subsidiaries of its Electronics sector,ST Electronics (Info-Comm Systems)and ST Electronics (Satcom & SensorSystems), won the DistinguishedDefence Partner Award 2007. LandSystems subsidiaries, Allied Ordnance ofSingapore and Ordnance Development& Engineering Company of Singapore(1996), also received the DistinguishedDefence Partner Award 2007.Electronics subsidiary, ST Electronics(Info-Software Systems), as well as theMarine and Land Systems sectors, LandSystems subsidiary, Advanced MaterialEngineering, and Aerospace subsidiary,STA Engines, were conferred theMeritorius Defence Partner Award 2007.Aerospace subsidiaries – SASCO,STA Engineering, STA Engines, STASystems – were awarded the Gold andSilver awards by SPRING Singapore atthe National Innovation Quality Circlesfor their efforts in upholding high qualitystandards.Business ExcellenceST Engineering was, once again, ratedamong the top 20 companies in theSingapore International 100 Ranking2007, organised by InternationalEnterprise Singapore (IE Singapore).The ranking is a national initiativeaimed at identifying and recognisingSingapore’s top 100 companies basedon overseas revenue.Across the globe, its US subsidiary,iDirect, was named one of the 50 fastestgrowing companies in the WashingtonDC area by Washington BusinessJournal. The ranking was based onpercentage revenue growth over threeyears from 2004 to 2006. iDirectachieved an annual revenue growthof 56%.iDirect was also a recipient of theMarket Leadership Award 2007 byFrost & Sullivan, for its dominant marketpresence and growth in the Middle Eastand Africa regions during the year.Another US subsidiary, MÄK, wasamong Military Training Technology’sTop 100 ranking 2007 which recognisescompanies that have made a significantimpact on the military training industry.

Singapore Technologies Engineering LtdAnnual Report 200753Product ExcellenceST Engineering’s Electronics sectorbecame the first manufacturer inAsia to attain the Det Norske Veritas(DNV) Product Certification for its FullMission Ship Handling Simulator. Thecertification complies with the DNVClass ‘A’ Bridge Operation standard –the highest attainable grade – and isa testament to the sector’s expertisein designing and building worldclass simulators.The Electronics sector clinched theCongrès de la RadiocommunicationProfessionnelle (CRP) 2007 ProductTrophy for its SuperneT Radio GatewayST2860 (SuperneT ST2860), inrecognition of the product’s innovation,value and technological capabilities.The sector also won the Boat Asia 2007Innovation Award for its Harbour CraftIdentification & Monitoring System. Thisaward recognises technical innovationthat benefits the boating industry.Another electronics innovation, CityNetII The Next Generation Taxi Booking& Despatch System, received the IESPrestigious Engineering AchievementAward 2007 by the Institution ofEngineers Singapore.The Electronics sector also did well atthe Asia Pacific Infocomm TechnologyAlliance (APICTA) Awards 2007, pickingPresident and CEO, Mr Tan Pheng Hock receiving the SQA 2007 with Special Commendation.

54Acting CFO, Raphael Chinreceiving the award atthe Singapore CorporateAwards 2008up two awards. The first was in theTourism and Hospitality category forCityNet II The Next Generation of TaxiBooking & Despatch System. Thesecond award was for the CommonApplication Platform – Third GenerationMobilising System (CAP-TGMS), in thee-Community & e-Government category.The APICTA Awards is an internationalawards programme that aims to increaseInfocommunications Technology (ICT)awareness and promote ICT researchamong its 16 member economies.ST Engineering’s Aerospace andMarine sectors won recognition for theiroutstanding engineering capability whenthey received the Defence TechnologyPrize 2007 Team Award from MINDEF.SafetyAerospace subsidiary, STA Engines, andLand Systems subsidiary, AdvancedMaterial Engineering, received theWorkplace Safety & Health PerformanceAward (Silver) from Singapore’sMinistry of Manpower for implementingeffective safety and health managementprocesses to achieve a commendablesafety record.Corporate Social ResponsibilityAerospace sector and its subsidiaries– STA Engineering, SASCO, STAEngines, STA Systems; Land Systemssector subsidiary, Advanced MaterialEngineering; and the Marine sectorreceived the SHARE Platinum Awardfrom the Community Chest of Singaporefor their continued community support.The Electronics sector and itssubsidiaries, ST Electronics (Training& Simulation Systems), ST Electronics(Satcom & Sensor Systems); as wellas the Land Systems sector andits subsidiaries, Allied Ordnance ofSingapore, Ordnance Development &Engineering Company of Singapore(1996), received the SHARE GoldAward.The Aerospace and Marine sectorsand subsidiaries – STA Engineeringand STA Engines – received the5-Year Outstanding SHARE Awardwhile Aerospace subsidiaries, SASCOand STA Systems, were accorded the10-Year Outstanding SHARE Award.Employee WelfareFor its staunch support of NSmenemployees, the Electronics sector’ssubsidiary, ST Electronics (Info-CommSystems), won a Special Award at theHome Team NS Awards for Employers2007, organised by the Ministry ofHome Affairs. ST Electronics (Info-Software Systems), ST Electronics(Satcom & Sensor Systems) and LandSystems subsidiaries – AdvancedMaterial Engineering, Allied Ordnance ofSingapore and Ordnance Development& Engineering Company (1996) –attained commendation awards.PeopleAerospace subsidiary, STA Systems,received the NTUC Model WorkerAward 2007.President of the Electronics sector,Mr Seah Moon Ming, was conferredthe 6th International ManagementAction Award. The award recognisesoutstanding individuals who havedemonstrated exceptional managementability to achieve sustainable, tangibleresults for an organisation, society orthe nation.CommunicationsThe Group was recognised for itscommunications initiatives. It clinchedthe Gold award for Best Annual Report2006 (for companies with $500m ormore in market capitalisation) at theSingapore Corporate Awards 2008. Italso received the Bronze award for BestAnnual Report 2005 at the same eventthe previous year.The Group’s 2006 Annual Report alsowon the Silver Award for Overall AnnualReport at the 2007 International ARCAwards, for its success in communicatingthe theme of the report both in designand editorial.

56 Group Overview57 Entering a New Phase of Globalisation58 Performance of the Group62 ST Engineering at a Glance66 Aerospace Sector70 Electronics Sector74 Land Systems Sector78 Marine Sector81 Dynamics and Risk Factors of the Business81 Industry Review82 Risk Management85 Sensitivity Analysis85 Shareholder Return86 Financial Review87 Accounting Policies88 Prospects for 2008

56GROUPOVERVIEWDecember 1997 marked theestablishment of the ST EngineeringGroup, with the historic amalgamationof four public listed companies –ST Aerospace, ST Electronics,ST Automotive and ST Marine.ST Kinetics was formed in 2000 whenthe Group acquired the CharteredIndustries of Singapore group ofcompanies and merged it withST Automotive.Individually, each entity is a leader inits own industry, with over 30 yearsof operating history. The strengthsand synergy offered by each companycontribute to ST Engineering’sreputation as one of the world’sforemost providers of integrateddefence and engineering capabilitiesand solutions, with an extensive globalcustomer base.Headquartered in Singapore,ST Engineering has a staff strengthof over 18,000, located in more than21 countries across the globe. It hasestablished a strong internationalpresence, offering a comprehensiverange of solutions through itsAerospace, Electronics, Land Systemsand Marine sectors.GROUP VISION, MISSION, OBJECTIVES & THRUSTSGROUP VISIONTo be a global defence andengineering groupGROUP MISSIONTo bring value to our customersand partners by delivering totalintegrated quality solutions andsupport4 STRATEGIC OBJECTIVES• Enlarge Strategic Capabilities• Expand Global Networks• Embrace Partnerships• Enhance Business Excellence6 STRATEGIC THRUSTS• Customer Focus• Safety & Quality First• People Excellence• Technology Edge• Operational Excellence• Financial StrengthKey PerformanceIndicators• Customer Satisfaction• Customer AcceptanceRate• Turnaround TimeCompliance• Employee Satisfaction• Innovations / NewProducts, Services orCapabilities• Sales and Profit Growth• Return on Equity• Economic Value Added

Singapore Technologies Engineering LtdAnnual Report 200757ENTERING A NEW PHASEOF GLOBALISATIONUS Billion Dollar Mark2007 was a landmark year forST Engineering’s US operations,as VT Systems’ revenue reachedUS$1b. This constituted about 28%of the Group’s turnover, a significantincrease of more than four timescompared to 2001 when VT Systemswas first incorporated.Today, the US is the single largestmarket for the Group outside Asia.2007 saw unprecedented successthrough both organic growth withinthe US operating units as well as thereaping of benefits from the crossbusiness and cross geographicalsynergies.Despite the challenges posed by theUS economic environment followingthe US sub-prime issue and theweakening of the US dollar, severalVT Systems companies maintainedtheir leadership positions in themarketplace. VT LeeBoy, ST MobileAerospace Engineering (MAE), SanAntonio Aerospace (SAA) and iDirectremained key players in the US marketas well as the global arena.MAE and SAA, along with their sistercompanies in the Aerospace sectorin Asia and Europe, has establisheda firm position as the world’s largestthird party Maintenance, Repair andOverhaul (MRO) provider, recording8.1m airframe manhours in 2006 inthe biennial study by the Overhaul& Maintenance magazine. Thenewly formed Panama AerospaceEngineering (PAE) was awardedcertification by the Federal AviationAdministration (FAA) in September2007, and is now capable of servicingUS registered aircraft.iDirect continues to be amongthe top three global players inend-to-end broadband satellitecommunications, and is leveragingST Engineering’s network to makeinroads into new markets such asChina, India, the Middle East, NorthAfrica and Southeast Asia. VTMiltope consistenty delivers on theUS military programmes, and to bluechip customers such as Airbus, Boeingand Lockheed Martin, adding to thetopline of the US group of companies.In 2007, MÄK signed a contract tofurther develop and field a simulationsupported training capability at sixUS Air Force Air Support OperationsCenter (ASOC) squadrons.The specialty vehicles strategy ismaking steady progress in the USand China, creating and customisingdesigns, products and solutions forspecific market segments. The groupcontinues to implement strategiesaimed at improving margins andmarket share for vehicles intended fordisaster relief, homeland security andinfrastructure development. VT HalterMarine delivered another year ofprofits, building up a strong order bookwith new and repeat customers.Developing opportunities with theUS government was also a key growthstrategy, with the VT Systems groupof companies further building onrelationships with US governmentagencies.Looking ahead, the US will continueto be an important and growingmarket for ST Engineering. TheVT Systems group will continue toplay both a dominant role in the USas well as a complementary role toST Engineering’s business areas.The evolving alignment and synergisticworking partnerships with sistercompanies, not just in the US butworldwide, will ensure continuedrevenue growth and sustainablebusiness development.Leveraging Opportunities in ChinaIn terms of revenue, China is thesecond largest market outsideSingapore for ST Engineering. Witha staff strength of over 3,500, theGroup’s Aerospace, Electronics andLand Systems sectors are representedin 16 cities including Beijing, Chengdu,Hong Kong, Guangzhou, Shanghai,Shenyang, Shenzhen and Yi Chun.In 2007, the Group further investedinto China. This included building asecond hangar complex at Shanghai’sPudong International Airport tocomplement STARCO’s hangar facilityat Hongqiao. When completed in2009, the new complex will addanother three narrow-body and twowide-body bays, with a capacity for theA380 aircraft, to its global aerospaceMRO network.With China’s rising demand forinfrastructure and equipment,ST Engineering’s Land Systemsand Electronics sectors envisageopportunities for new sales.Construction and maintenancevehicles and equipment, rail systemsand solutions and integrated trafficcommand systems are some of theareas in which the Group has madesubstantial headway.ST Engineering remains focused onChina, expanding its presence andmarket reach while leveraging localresources to propel further growth inthe market.

58PERFORMANCEOF THE GROUPa) Half yearly performance2007 2006In $m Except Per Share Amounts 1H 2H FY 1H 2H FYTurnover 2,518 2,533 5,051 2,070 2,416 4,486EBITDA 337.2 347.2 684.4 259.5 333.9 593.4EBIT 272.3 278.0 550.3 205.3 252.3 457.6Profit before tax 307.0 331.1 638.1 259.4 304.9 564.3Profit after tax after minority interests 231.6 271.9 503.5 198.3 246.8 445.1Basic earnings per share (cents) 7.84 9.11 16.95 6.78 8.37 15.15Net asset value per share (cents) 47.9 54.7 54.7 45.4 53.1 53.1Note: The half yearly figures are unauditedThe Group’s turnover for 2H2007 of $2,533m wascomparable to that achieved in the first half. Marine sectorreported higher turnover, Electronics and Land Systemssectors had comparable turnover, while Aerospace sectorhad lower turnover in the second half vis-à-vis the first half.The Group’s Profit Before Tax (PBT) for 2H2007 increasedby 8% or $24.1m over the first half. Both Electronics andMarine sectors reported higher PBT, Aerospace sector hadcomparable PBT, while Land Systems sector recorded lowerPBT in the second half versus the first half.HALF YEARLY TURNOVER ($m)HALF YEARLY PROFIT BEFORE TAX ($m)2nd half year 071st half year 07$2,533m$2,518m2nd half year 071st half year 07$331.1m$307.0m2nd half year 061st half year 06$2,070m$2,416m2nd half year 061st half year 06$259.4m$304.9m

Singapore Technologies Engineering LtdAnnual Report 200759b) Full year perfomanceTurnoverThe Group’s turnover of $5,051m for FY2007 was higherthan that of FY2006 by 13% or $565m. All sectorsreported higher turnover.Earnings Per Share (EPS)The Group’s basic and diluted EPS for FY2007 were 16.95cents and 16.91 cents respectively (FY2006: 15.15 centsand 15.00 cents respectively). The higher EPS was a resultof higher profit after tax for FY2007.FY 0716.95FY 06FY 0513.6415.15Aerospace 36%Electronics 20%Land Systems 23%Marine 17%Others 4%FY 04FY 03EARNINGS PER SHARE (CENTS)11.2912.26Profit Before TaxGroup PBT for FY2007 of $638.1m was higher thanthat achieved in FY2006 by 13% or $73.8m. All sectorsrecorded higher PBT.Economic Value Added (EVA)The Group’s EVA for FY2007 was $388.8m, an increase of19% or $61.0m over FY2006. The Weighted Average Costof Capital was 6.5% for 2007 (2006: 6.6%).61%17%13%15%Aerospace 53%Electronics 18%Land Systems 13%Marine 15%Others 1%(6%)FY2007 EVA CONTRIBUTION BY SECTOR (%)Aerospace Electronics Land SystemsMarine Others

60Capital ExpenditureThe Group incurred capital expenditure of $172m in FY2007. The addition of a new engine test cell, new hangars andrelated equipment and programme-related purchases, including components to support existing and new customers in theAerospace sector accounted for the bulk of the capital expenditure for the year. The details are shown in Note 7 to theFinancial Statements.FY 07FY 06$m0 20 40 60 80 100 120 140 160 180 200Aerospace Electronics Land Systems Marine OthersTotal AssetsAs at end December 2007, total assets of the Group amounted to $6.04b compared to $5.58b as at end December 2006.The deployment of assets is as follows:DEPLOYMENT OF ASSETS – 2007DEPLOYMENT OF ASSETS – 2006Property, Plant and Equipment 17%Associated Companies & Investments 5%Intangible Assets 11%Deferred Tax Assets 2%Stocks & WIP 20%Debtors, Deposits & Prepayments 32%Amounts under Fund Management 3%Bank Balances & Other Liquid Funds 10%Property, Plant and Equipment 17%Associated Companies & Investments 6%Intangible Assets 10%Deferred Tax Assets 3%Stocks & WIP 20%Debtors, Deposits & Prepayments 29%Amounts under Fund Management 4%Bank Balances & Other Liquid Funds 11%

Singapore Technologies Engineering LtdAnnual Report 200761Human Resource Statistics(as at 31 December 2007)SECTORAerospace (6,993) 38%Electronics (4,154) 23%Land Systems (5,191) 28%Marine (1,466) 8%Others (450) 3%Total (18,254) 100%JOB GROUPManagerial (1,018) 5%Engineering (5,102) 28%Corporate Function/Admin (2,693) 15%Sales & Marketing (527) 3%Technical & Others (8,914) 49%Total (18,254) 100%EDUCATIONAL QUALIFICATIONDegree & Equivalent (5,035) 28%Diploma & Equivalent (5,149) 28%“O”/“A” Levels & Equivalent (2,459) 13%Secondary Level & Lower (1,289) 7%Trade Certificates (4,322) 24%Total (18,254) 100%NATIONALITYSingaporean/PR (10,100) 55%American (3,502) 19%PRC/Hong Kong (2,663) 15%Indian (171) 1%Malaysian (218) 1%Others (1,600) 9%Total (18,254) 100%

62ST ENGINEERINGFACTS– One of the largest companies listed inSingapore and one of Asia’s largest defenceand engineering groups, with an order bookof $9.5b and total assets of $6.0b as atend 2007– Global footprint in 21 countries and 35cities, with over 100 subsidiaries, jointventures and associated companies– VT Systems, ST Engineering’s USheadquarters in Virginia, has extensiveUS operations across the Group’s corebusinesses– Component stock of the FTSE/ASEAN40, MSCI Singapore Free Index, S&P AsiaPacific 100 and Straits Times Index– 126 patents granted to date, with 292patents filed– Global workforce of 18,254 with 5,102engineering staffCORE CAPABILITIES– A global engineering group providing integratedsolutions for the aerospace, electronics, landsystems and marine industries– Specialises in dual use technologies, with bothmilitary and commercial applications traversingtraditional industry lines– Provides customised solutions through anetwork-centric and systems approach thatleverages the strengths of the Electronicssector– Spearheads the search for new and emergingtechnologiesMAJOR DEVELOPMENTS IN 2007– Winner of inaugural Singapore Quality Award(SQA) 2007 with Special Commendation –the highest accolade awarded by SingaporeQuality Council in recognition of businessexcellence– Celebrated 40th Anniversary – commemoratingfour decades of achievements– Launched 4th Safety@Work Creative Awards– Organised inaugural analyst and mediafamiliarisation trips to the Group’s USoperations– US operations revenue reached the US billiondollar markREVENUE IN $mFY 07FY 064,4865,051PROFIT BEFORE TAX IN $mFY 07FY 06638564

Singapore Technologies Engineering LtdAnnual Report 200763AEROSPACESECTORELECTRONICSSECTORCORE CAPABILITIES– Aircraft Maintenance & Modification• Line and base maintenance• Technical services and maintenance planning• Modification, conversions and refurbishment• Design, development and technology integration– Component & Engine Total Support• Engine maintenance, repair and overhaul• Aircraft mechanical and avionics component repair• Materials and spares support and managementFACTS– Ranked in an Overhaul & Maintenance 2007 survey as theworld’s largest third party maintenance provider for the thirdconsecutive time, with 8.1m commercial airframe manhoursin 2006– Leverages a wide range of services – airframe, engine andcomponent maintenance; engineering design and technicalservices; and aviation materials and management services– to offer Total Aviation Support– Worldwide network of facilities with diverse global customerbase that includes many of the world’s leading airlines, airfreightoperators and military aircraft operators– 70 patents filed of which 25 have been granted– 6,993 staffMAJOR DEVELOPMENTS IN 2007– Award by Boeing to perform freighter conversions under its767-300 Boeing Converted Freighter programme– Won contract with FedEx Express for the freighter conversion ofits 87 Boeing 757 aircraft– Won two contracts ($393m) from the RSAF for themodernisation of its fleet of ten C-130 transport aircraft and aTAS programme for its fleet of 16 A-4SU/TA-4SU Skyhawkaircraft– Secured a 15-year MBH contract ($248m) with XiamenAirlines for 22 of its CFM56-7B engines– Continued gaining component support business throughcontracts with AirAsia, Juneyao Airlines and Martinair– Expanded its global capacity with new hangars in Singaporeand started new hangar construction in Shanghai– Signed a joint venture agreement with Xiamen AviationIndustry Co to set up an engine MRO facility, ST AerospaceTechnologies (Xiamen) Co (STATCO)– Commenced operations at Panama Aerospace Engineering(PAE)– Received Design Organisation Approval by EASA whichexpands ST Aerospace’s engineering capability in aircraftmodificationsREVENUE IN $mCORE CAPABILITIES– Large-Scale Systems Group• Intelligent transportation systems• Intelligent building management systems• Combat systems integration– Communication & Sensor Systems Group• e-Government communications & InformationCommunications Technologies (ICT) solutions• Satellite communication systems• Communications, microwave, radar and sensor systems• Intelligent traffic and fleet management systems• Info-security solutions• Electro-optics systems– Software Systems Group• e-Government solutions and managed services• Interactive digital media• Mobile realtime and homeland security systems• Training and simulation systems and education solutionsFACTS– Singapore’s largest ICT solutions provider and systems integrator– Only provider of 3-in-1 rail solutions for command, control andcommunications, automatic fare collection and platform screendoors, with projects in China, the Philippines, Singapore, Taiwan,Thailand and Turkey– One of the world’s leading providers of multi-channel multipointdistribution systems and satellite communications systemsand solutions– 53 patents filed of which 28 have been granted– 4,154 staffMAJOR DEVELOPMENTS IN 2007– First Singapore ICT system company to cross the billion dollarmark in revenues– Secured $104.5m rail contracts for Taiwan’s TaoyuanInternational Airport, Songshan and Xinyi lines and a $123mMarmaray Commuter Rail project in Istanbul, Turkey– Strengthened presence in the Middle East with contracts inSaudi Arabia to provide a $60m integrated traffic managementsolution and an integrated security system for the Dubai FestivalCity in UAE– Renamed subsidiaries to strengthen market branding –ST Electronics (Digital Media), ST Electronics (SoftwareServices) and ST Electronics (Info-Security)– iDirect opened a Dubai office and made headway in Asia withcontracts in China, Indonesia and Pakistan. Set up iDirectGovernment Technologies, Inc. to focus on government markets– Entered into an agreement to acquire about 94% of TelematicsWireless Ltd, a key player in the high growth Machine-to-Machine IndustryREVENUE IN $mFY 071,835FY 071,023FY 061,673FY 06951PROFIT BEFORE TAX IN $mPROFIT BEFORE TAX IN $mFY 07341FY 07115FY 06305FY 06105

64LAND SYSTEMSSECTORMARINESECTORCORE CAPABILITIES– Land Systems & Solutions• Design, development and production of integrated weaponand munitions systems• Design, development, production and upgrade of wheeled andtracked mobility systems• Integration of third party solutions for military and homelandsecurity applications– Specialty Vehicles & Services• Design, development and production of vehicles andequipment for use in construction, goods distribution andurban services– Total Support & Services• Maintenance, repair and overhaul of military platforms,weapons systems and ground support equipment• Inspection and accident repair of private and commercialvehicles• Through-life support of automotive assets includingpreservation and spares management• Industrial test servicesFACTS– Leading 40mm payload solutions provider in the world– Market leader in commercial class asphalt pavers in NorthAmerica– International clientele from more than 30 countries– 34 patents filed of which 24 have been granted– 5,191 staffMAJOR DEVELOPMENTS IN 2007– Secured $78m weapon maintenance contract from the SAF– Secured hybrid electric tow tractor contract of over 70 units withSingapore Airport Terminal Services– Increased shareholding in STAR Automotive Center GuangzhouCo., Ltd. to 100% in line with business growth in the expandingautomotive repair market in China– Increased investment in Guizhou Jonyang Kinetics Co., Ltd. togrow the specialty vehicle business in China– Received approval from the US Government SupplyAdministration for VT SVC and VT LeeBoy to list products fordirect sales to US government entities– Launched mobile command vehicle for the law enforcementmarket in North America– Unveiled articulated dump truck and new excavators including ahybrid version to complement its family of offerings in China– Launched Commercial Articulated Vehicle, a track-basedplatform designed for disaster relief operationsCORE CAPABILITIES– Project Management• Turnkey shipbuilding• Ship upgrading and conversion• Weapon systems integration and installation– Inhouse Design Expertise• Custom designed naval and commercial vessels usinginhouse CAD/CAM facilities and CAE software• Lightweight ship design• Stealth technology– Shipbuilding• Extensive water jet expertise• Thin gauge steel and aluminium construction for naval vessels– Maintenance• Overhaul and maintenance of high performance marineengines– Shiprepair• Upgrading and retrofitting• Conversion of commercial vesselsFACTS– Five shipyard facilities – two in Singapore and three in the US– Track record in the design and construction of sophisticatednaval and commercial vessels as well as high engineeringcontent shiprepair services, including ship conversions– Designs and develops a variety of vessels including landing shiptanks, stealth frigates, patrol vessels, feeder container vessels,RoRo vessels, platform supply vessels, LPG tankers, high speedpassenger ferries, fisheries survey vessels, articulated tug bargesand pure car truck carriers– 31 patents filed of which 16 have been granted– 1,466 staffMAJOR DEVELOPMENTS IN 2007– Singapore operations secured contracts worth about $568m toprovide ship and submarine system and maintenance servicesto the RSN, and to build a Ropax ferry for LDA– US operations secured contracts worth US$319m (about$480.6m) including a contract modification for the EgyptianFast Missile Craft project as well as the building of a platformsupply vessel and three 330,000-barrel tank barges– Delivered third and fourth locally-built stealth frigates,RSS Tenacious and RSN Stalwart, to the RSN– Delivered the first and second of four 1030 TEU feedercontainer vessels and launched the last two– Completed conversions of fishing trawler and platform supplyvessels to seismic research vesselsREVENUE IN $mREVENUE IN $mFY 071,178FY 07863FY 061,002FY 06702PROFIT BEFORE TAX IN $mPROFIT BEFORE TAX IN $mFY 0780FY 0797FY 0670FY 0680

66ILLUSTRATION STYLEIllustrated by Don Low

Singapore Technologies Engineering LtdAnnual Report 200767KEEPING AIRCRAFTFLYING SAFELYIn 2007, ST Aerospace was once againrecognised as the world’s largest thirdparty airframe MRO provider withmore than eight million commercialairframe manhours. Through theglobal expansion of airframe MROoperations, broadening of aircraftengines and components maintenancecapabilities and businesses, and TotalAviation Support (TAS TM ) solutions,ST Aerospace continued to deliver asterling performance.Growing Customer BaseST Aerospace continued to buildupon its relationship with existingcustomers while adding new ones.New customers such as Copa Airlines,Delta Airlines and Lionair were addedto the established customer base ofleading airlines as well as smaller andnew airlines.In engines and components support,ST Aerospace won an $8.3m contractfrom the Brazilian Air Force for theoverhaul of 12 Rolls Royce T56-A-15engines that power its C-130 fleet.Other new engine customers includedthose from Brazil, Ukraine and Asia.New total support programmesin engines and components MROwere awarded by existing and newcustomers like AirAsia, JetX, JuneyaoAirlines, Lionair, Martinair and XiamenAirlines.ST Aerospace secured a contract fromthe Republic of Singapore Air Force(RSAF) for the TAS of its fleet of16 A-4SU/TA-4SU Skyhawk aircraft(also known as RSAF’s Advanced JetTraining), operating in Cazaux, France.In engineering development andmodification, ST Aerospace wasawarded a programme to upgrade theavionic systems for RSAF’s fleet of tenC-130 transport aircraft, including theaircraft’s navigation, communicationsand flight management systems.Both contracts have a total value ofabout $393m.On the commercial front, ST Aerospacelaunched the operations of its majorTAS TM programme for Skybus inthe US.It also won two contracts involvingthe merging of an operational flightprogramme that provides growth in thecentral processing unit and memory ofthe aircraft, as well as the design anddevelopment of a new mini UnmannedAerial Vehicle (UAV) system thatconsists of camera payloads, a groundcontrol station and a man-portablereceive-onlystation.Extending Range of CapabilitiesAround the WorldST Aerospace continued to invest inand extend its range of capabilitiesto improve its service support forcustomers worldwide. The AircraftMaintenance & Modification (AMM)group added new capabilities toprovide a broader range of supportfor customers. Fledgling STARCOobtained certifications from Australia’sCivil Aviation Safety Authority (CASA),European Aviation Safety Agency(EASA), India’s Directorate Generalof Civil Aviation and Japan CivilAirworthiness Board (JCAB), as wellas an AS9100 quality standard, inaddition to its certifications by CivilAviation Administration of China(CAAC) and FAA.In 2007, third party work continued togrow, and STARCO won a three-yearcontract to support All Nippon Airways(ANA) on its A320 fleet. In October,STARCO broke ground for its newhangar facility at Shanghai’s PudongInternational Airport.The year also saw PAE commenceoperations with two hangars, capableof housing six narrow-body aircraft.This Panama startup promptlyredelivered five aircraft to Copa Airlinesand won a contract from Transaerowithin its inaugural year.In Singapore, ST Aerospace addedtwo new hangars at the Seletar airportto meet the demands of its growingclientele, including many low costcarriers in Asia.

68ST Aerospace broke ground for STARCO’snew hangar complex at Pudong Airport.(following page, from left to right)ST Aerospace signed a significant B757 PTFconversion contract with FedEx Express.ST Aerospace selected byBoeing for the 767-300 BCF programme.The Component & Engine TotalSupport (CETS) group added some400 new component MRO capabilitiesfor the A320, B737CG/NG, B757,Q400 as well as the Apache, Chinookand F-16. These included expansionof existing landing gear capabilitiesand build up of a pneumatic shop inStockholm.ST Aerospace Solutions (Europe)(STA Solutions), formerly known asSAS Component Group, continued toenhance its operations and integrationwith the rest of the group in providingComponent Total Support solutionsto customers.ST Aerospace also added an importand export facility, GuangzhouAerospace Technologies andEngineering (GATE). It would serveas a logistics centre for aircraftcomponents maintenance and materialsupport services in China.On engines MRO, new capabilities formilitary and commercial engines wereadded to the group. This included ahigh speed grinder for the CFM56engines. ST Aerospace invested ina new engine test cell to support thetesting of the CFM56-5B enginesthat power the A320 family of aircraftand F110 engines on F-16 and F-15aircraft.In addition, the group signed a jointventure with Xiamen Aviation IndustryCo to set up an engine MRO facilityin Xiamen, China. The joint venturecompany will be named ST AerospaceTechnologies (Xiamen) Co (STATCO).Through its Engineering DevelopmentCentre, ST Aerospace became thefirst company in Southeast Asia toreceive EASA’s Design OrganisationApproval (DOA). This expandedST Aerospace’s ability to provideengineering and modification serviceson EU registered aircraft. Togetherwith its ability to perform similar workunder Supplemental Type Certificates(STC) for FAA registered aircraft,ST Aerospace now has the abilityto serve the US and Europeanmarkets better through engineeringdevelopments.PERFORMANCE OF THEAEROSPACE SECTORHalf Yearly PerformanceTurnover of the Aerospace sector in2H2007 of $889m was $57m lowercompared to 1H2007. The turnoverdecrease came from AMM andComponent/Engine Repair & Overhaul(CERO). This was partially offset byhigher turnover in the Engineering &Materials Services (EMS). In 1H2007,AMM had very high turnover in STAviation Services Co (SASCO) andSan Antonio Aerospace due to timingof redeliveries. In CERO, the enginesdivision experienced very high turnoverin 1H2007 due to high inputs ofengines. In EMS, the turnover increasewas due to more project milestonecompletions and higher material sales.PBT for 2H2007 at $171.8m wascomparable to that achieved in1H2007 despite lower turnover.CERO registered higher PBT dueto improved profitability, while EMSachieved higher PBT on the back ofhigher turnover. The PBT increasein both business groups was partiallyoffset by lower contributions fromAMM as a result of lower turnoverin 2H2007.Full Year PerformanceAerospace sector’s FY2007 turnoverof $1,835m was higher than thatachieved in FY2006 by 10% or$162m. The higher turnover wascontributed by CERO and EMS.Higher sales in the engines andcomponents divisions as well as theinclusion of a full year’s sales from STASolutions vis-à-vis ten-month salesin FY2006 accounted for the higherturnover in CERO. The higher turnover

Singapore Technologies Engineering LtdAnnual Report 200769in EMS was the result of more projectmilestone completions and highermaterial sales.Compared to FY2006, Aerospacesector’s FY2007 PBT of $341.2mwas higher by 12% or $35.9m. Allthree business groups recordedhigher PBT in the current financialyear. The higher PBT in AMM was dueto improved performance in SASCOand ST Aerospace Engineering (STAEngineering) as well as lower lossesfrom Bournemouth Aviation ServicesCompany (ceased operations inDecember 2006). The performanceof CERO improved as the FY2006’sperformance was impacted by thepost-acquisition business alignmentinitiatives and the closure of Stavangerfacility at STA Solutions. For EMS, thehigher PBT was in line with the higherturnover.AcquisitionsIn 2007, ST Aerospace made aA$550,000 acquisition of PFSAustralia in New South Wales.Major ProjectsST Aerospace continued toperform Passenger-To-Freighter(PTF) conversions in 2007. Sevenconversions for the MD-11 werecompleted in 2007, and the Aerospacesector had, to date, redelivered 52converted MD-11 aircraft.2007 saw the award of a largePTF conversion programme of 87B757-200 aircraft by FedEx Express.This would be performed under anSTC developed by ST Aerospace withdata from Boeing. Conversion workcommenced at MAE in the US andSTA Engineering in Singapore.In addition, ST Aerospace was awardeda contract by Boeing for the conversionof the B767-300 aircraft. The launchcustomer for this programme is ANA,and the door cutting (an activity thatsignifies the start of a major milestonein the PTF) was completedin November.In Singapore, ST Aerospaceembarked on commercial pilot trainingthrough the set up of an academy,ST Aviation Training Academy (STATA).A Singapore-based joint venturecompany with a 70% stake owned byST Aerospace, STATA would initiallyprovide traditional pilot training underthe existing Commercial Pilot Licence(CPL) and Air Transport Pilot Licence(ATPL) curricula, and eventuallydevelop a Multi-crew Pilot Licence(MPL) programme upon endorsementsfrom relevant airworthiness authorities.The MPL programme would offeradvances in teaching methodologiesand simulation technologies in a multicrewcooperation environment over thetraditional pilot training programme.This would allow pilots to be trainedin half the time compared totraditional training.

70ILLUSTRATION STYLEIllustrated by Adeline Tan

Singapore Technologies Engineering LtdAnnual Report 200771PIONEERINGNEW GENERATION TECHNOLOGIESFOR GLOBAL MARKETSST Electronics identifies three keyareas for growth – interactive digitalmedia, satellite communications(satcom) and e-Governmentsolutions. It markets its InformationCommunications Technology (ICT)and e-Government solutions to morethan 70 countries worldwide and thenumber is set to grow.2007 marked a major milestone forST Electronics as it became the firstICT system company in Singaporeto cross the billion dollar revenuethreshold.In 2007, it gained foothold in newterritories including Africa, CentralAsia, Europe, India and the MiddleEast, while targeting markets in Africa,India, Qatar, Saudi Arabia, Turkey andUAE for expansion. ST Electronics’core business activities are organisedinto three key business groups.Large-Scale Systems Group (LSG)ST Electronics continued to enhanceits capabilities in intelligent buildingsolutions, carving a niche in carparkguidance systems in India, Indonesia,Singapore and UAE. Its securityaccess solutions are now being usedat Changi Airport terminals and bythe Port of Singapore Authority.ST Electronics provides operationsand support services for the airportsystems of the Civil Aviation Authorityof Singapore and set up Singapore’slargest electro-magnetic compatibilitychamber at the Nanyang TechnologicalUniversity.ST Electronics continued to build upits maintenance capabilities to supportthe Republic of Singapore Navy(RSN) New Frigate Programme. Thecompany also provided the RSN with askilled workforce and an experiencedand competent management team toundertake and operate maintenance,management and engineeringservices.In 2007, it strengthened its marketpresence for rail electronics solutionsin Taiwan and secured a footholdin Turkey. Its access control andticketing system for Singapore’sSentosa Light Rail Transit (LRT) wasopened in January 2007, and theGuangzhou Metro Line 4 in China andBangkok’s Mass Transit System werecommissioned during the year.Communication & SensorSystems Group (CSG)ST Electronics’ Harbour CraftIdentification and MonitoringSystem now enhances the securityof Singapore’s port waters throughGPS and GPRS technologies.ST Electronics was also awardedcontracts by the Singapore Ministry ofDefence (MINDEF) for its electro-optic(EO) solutions which include thermalweapons sights and EO maintenance.ST Electronics is pursuing the NextGeneration National InfocommInfrastructure project, Singapore’snew digital super highway for superconnectivity.A maritime broadband service waslaunched with SingTel using the Agilis1.2m C-Band maritime Very SmallAperture Terminals (VSAT), currentlythe smallest of its class in the world.Ghana and Slovakia were added tothe growing list of customers forsatcom solutions which are currentlysold to 74 countries.iDirect made headway into newmarkets in China, Indonesia, theMiddle East and Pakistan for itssatellite networking and remotecommunications solutions. It wasalso awarded a contract by Intelsatfor its Network Broadband GlobalMaritime services.Software Systems Group (SSG)ST Electronics has made inroadswith its e-Government solutionsand managed services in China,Kazakhstan, the Middle East andSingapore. It set up ST Electronics(e-Services) Pte Ltd to meet therising demand for these services ascompanies realise the benefits ofoutsourcing non key functions.

72Digital animation projects fuelST Electronics’ interactive digital mediainitiatives.(following page, from left to right)The 1.2m C-Band MaritimeVSAT system boosts communicationsfor small vessels.Managed services is set to grow ascompanies outsourcetheir non core activities.A second software developmentcentre was set up in Yichun, China tomeet increasing demand for softwaresolutions. ST Electronics is one ofthe shortlisted participants in theSingapore Ministry of Education’sCall for Collaboration for theFutureSchools@Singapore project.It also signed a Memorandum ofUnderstanding (MOU) with theInstitute of Automation, ChineseAcademy of Science to conductjoint research and develop newtechnologies in interactive media.Together with Nelvana Studios ofCanada, it co-produced The Future isWild, a 26-episode half-hour televisionseries. This is part of a partnershipwith Nelvana to co-produce multipleprojects and is aired on Discovery Kidsin the US and Teletoons in Canada.The Ten Commandments,co-produced with Promenade Picturesand Huhu Studios for the DVD market,was screened in over 700 theatres inthe US and in Singapore. This makesST Electronics the first Singaporecompany to launch a 3D digitalanimation movie in US cinemas.It plans for a total of 12 movies, tenDVDs and three TV series in itsproduction pipeline.Marking its first contract for AirTraffic Control Systems in Africa,ST Electronics is to upgradeBotswana’s mobile aeronauticalservices and Very High Frequency(VHF) voice communications. India’sAirports Authority will implementST Electronics’ Air Traffic ControlDigital Voice Recording Systems.Working with MÄK of the US,ST Electronics has expandedits simulation and visualisationcapabilities and modelling andsimulation solutions to includeVR-Forces. MÄK was awardeda contract to further develop andfield a simulation supported trainingcapability at six US Air Force AirSupport Operations Centre squadrons.The backbone of this system isMÄK’s QuickStrike tactical desktopsimulation.PERFORMANCE OF THEELECTRONICS SECTORHalf Yearly PerformanceTurnover of the Electronics sectorof $522m recorded in 2H2007 wascomparable to the $501m achievedin 1H2007. The increase wascontributed by LSG and CSG.PBT of $67.2m for 2H2007 washigher than that of 1H2007 by 40%or $19.1m. All three business groupsrecorded higher PBT. CSG’s PBT washigher mainly due to higher sales andhigher profit contribution from satcomproduct sales. SSG and LSG recordedhigher PBT largely due to higherinvestment income.Full Year PerformanceFY2007 turnover of $1,023m for theElectronics sector was higher thanthat of FY2006 by 8% or $72m. Thehigher turnover was mainly contributedby SSG with milestone completionsof command and control systemprojects, a managed services project,data centre infrastructure projectsand simulator projects. CSG alsorecorded higher turnover with sales ofsatcom products and electro-opticsequipment, and milestone completionsof various intelligent transport systemand communication projects.PBT of the Electronics sector inFY2007 of $115.3m was higher thanthat of FY2006 by 10% or $10.7m.Both LSG and SSG had higher PBT,but these were partially offset by lowerPBT in CSG. The higher PBT in LSGwas due to better overall performanceof overseas subsidiaries and higherinvestment income, while the higherPBT in SSG was in line with higherturnover as well as higher investmentincome. In respect of CSG, the lowerPBT was mainly due to lower profitcontribution from satcom productsales and lower investment income.Overall, the sector recorded a higherinvestment income in FY2007.

Singapore Technologies Engineering LtdAnnual Report 200773Acquisitions and DivestmentsTo rationalise and streamline itsportfolio of associated companies,and to re-allocate managementattention and resources to new growthinitiatives, ST Electronics diluted itsstake in Polarsat Holdings Inc anddivested its entire stake in InfoWavePte Ltd, Sandz Solutions (Singapore)Pte Ltd and ECS Holdings Limited.Ripple Systems Pty Limited and INFASystems Limited became whollyownedsubsidiaries during the year.ST Electronics sold its entire ordinaryshareholding in Sino Stride Technology(Holdings) Limited for shares inShougang Concord TechnologyHoldings.ST Electronics entered into anagreement to acquire TelematicsWireless Ltd and this was completedin January 2008. Telematics is a keyplayer in the high growth Machineto-Machineindustry and is currentlyamong the largest terrestrial andurban asset location system suppliersworldwide with customers fromArgentina, Brazil, China and Korea.iDirect appointed Yoel Gat to itsBoard of Directors and Mary Cottonas its new Chief Executive Officer.It set up a wholly-owned subsidiary,iDirect Government Technologies,Inc., to focus its business ondriving the broader adoption ofits Internet Protocol (IP)-basedsatellite networking solutions in thegovernment market.Major ProjectsIn the Middle East, ST Electronicswon a contract from the GeneralTraffic Directorate/Ministry ofInterior of Saudi Arabia to provideIntegrated Traffic Management andSecurity Systems for the AutomatedTraffic Violations Administering andMonitoring project. ST Electronics willalso implement an Integrated SecuritySystem for the Dubai Festival City.It signed an MOU with AlbacompComputers Company of Budapest tojointly pursue and implement ICTbasedinfrastructure projects for thepublic and private sectors in Hungary.Taiwan Taoyuan InternationalAirport Access Mass Rapid TransitConstruction Project will installcommunications, supervisory controland data acquisition, platform screendoors and maintenance managementsystems from ST Electronics. Thecompany won a contract for turnkeyintegrated solutions for the MarmarayCommuter Rail CR1 project in Istanbul,Turkey. It ended the year with a railcontract for Taipei’s Songshan andXinyi MRT Lines.iDirect made its maiden entry into theChinese market when it was awardeda contract by CrossSat TelecomTechnology to provide a satellite huband remote satellite routers to create aglobal IP network.Back home, ST Electronics competedsuccessfully against internationalplayers from Norway, UK andSingapore to win a contract to provideand maintain Vessel Traffic Radars toreplace the Maritime Port Authority’sexisting radars.It will also be providing customisedForward Command Vehicles withstate-of-the-art communication andelectronics systems to the SingaporePolice Force, a contract won againststiff competition from international andlocal players.ST Electronics’ managed servicesreceived a boost when it was awardeda ten-year contract worth some$250m by MINDEF to provide sharedservices to more than 350,000 activepersonnel, regulars and NSmen fromthe Singapore Armed Forces.ST Electronics will implement a localand wide area network to connect tenlocations of the Bangladesh Bank.This is part of the bank’s Central BankStrengthening Project with financialassistance from the World Bank.

Illustrated by Adeline Tan

Singapore Technologies Engineering LtdAnnual Report 200775DELIVERING EXCELLENCEIN LAND SYSTEMSST Kinetics, the land systems arm ofST Engineering, offers an integratedsuite of innovative solutions for thedefence, homeland security andcommercial markets. With customersin more than 30 countries, ST Kinetics’capabilities span the entire valuechain from systems centricdesign and development to leanmanufacturing and comprehensivethrough-life support.In 2007, ST Kinetics reorganised itscore activities under three businessgroups to enhance the integration ofits operations.Land Systems & SolutionsAs an original equipment manufacturerfor a wide range of mobility, weaponand munitions systems, 2007 sawST Kinetics continue to help maintainthe peace of nations by deliveringcreative and versatile solutions forthe defence and homeland securitymarkets.In March, ST Kinetics unveiled itsnew Commercial Articulated Vehicle,a track-based platform designed fordisaster relief operations, at GlobalSecurity Asia. With a four-tonnepayload, the vehicle provides greatversatility in a wide range of rescuemissions, from fire fighting and therecovery of trapped vehicles duringmassive floods to the transportation ofrelief cargo.During the year, ST Kinetics alsoshowcased its defence productsat major exhibitions, including theAssociation of the United StatesArmy Annual Meeting and Exposition2007 in Washington D.C., and theinaugural Brunei International DefenceExhibition 2007.Recognising robotics as a key growtharea, ST Kinetics sponsored andparticipated with the team from CornellUniversity in the prestigious USDefense Advanced Research ProjectsAgency (DARPA) Urban Challenge.The race required a vehicle to interactautonomously with traffic signals,pedestrians and other vehicles. TheCornell team emerged as one of sixteams, out of an initial group of 35,to successfully complete the race.ST Kinetics will continue to invest inand develop such types of dual usetechnologies for both commercial anddefence applications.Specialty Vehicles & ServicesWorking to raise end users’productivity, ST Kinetics continuedto develop new specialty vehiclesand equipment with reliable productperformance, low cost of ownershipand ease of maintenance for use inconstruction, goods distribution andurban services.In North America, ST Kineticslaunched a mobile command vehiclefor the law enforcement market.During the year, ST Kinetics alsoreceived approval from the USGovernment Supply Administration(GSA) for VT Specialized VehiclesCorporation (VT SVC) and VT LeeBoyto list products for direct sales to USgovernment entities.In China, ST Kinetics unveiled anarticulated dump truck and newexcavators, including a hybrid version,expanding its family of offerings.In addition, ST Kinetics injectedUS$16.9m (about $25.6m) intoGuizhou Jonyang Kinetics Co., Ltd.(GJK) to increase production capacityand enhance product lines, bringing itstotal investment in GJK to US$28.9m(about $43.8m).ST Kinetics also appointed newdealers throughout Asia, includingIndia, Indonesia, the Philippines,as well as Australia, to market andsupport its range of specialty vehiclesand equipment.

76ST Kinetics launched the hybridelectric excavator at BICES 2007.(following page, from left to right)The mobile command vehicle wasdeveloped specially for the lawenforcement market.ST Kinetics successfully developeda range of environmentally friendlyspecialty vehicles, including a hybridelectric luggage tow tractor.Total Support & ServicesIn 2007, ST Kinetics continued tomaximise the uptime of its customers’specialised equipment, specialtyvehicles and automotives through itscomprehensive through-life supportservices.STAR Automotive Centre in Singaporesecured a two-year renewal contractfor taxi fleet maintenance fromSMART Automobile.Singapore Test Services, which is oneof the largest test services houses inSingapore, signed an agreement withRHE Asia Pacific to provide repair,maintenance, testing and certificationservices of aircraft jacks andassociated ground support equipmentexclusively in the Asia Pacific.PERFORMANCE OF THE LANDSYSTEMS SECTORHalf Yearly PerformanceTurnover of the Land Systems sectorin 2H2007 of $594m was comparableto the $584m achieved in 1H2007.Compared to 1H2007, 2H2007 PBTdecreased by 47% or $24.4m to$27.8m. The lower PBT was mainlyattributable to loss on disposal ofa subsidiary, impairment in value ofa long term investment and higheroperating expenses.Full Year PerformanceLand Systems sector’s FY2007turnover of $1,178m was higher thanthat achieved in FY2006 by 18% or$176m. Higher turnover was recordedin Automotive (Auto) with higherspecialty vehicles sales, Bionix II andBronco deliveries, but this was partiallyoffset by lower turnover in Munitions &Weapon (M&W). The lower turnover inM&W was mainly due to the absenceof Primus and SAR 21 deliveries aswell as lower weapon export sales, butthese were partially offset by highermunitions sales.Compared to FY2006, Land Systemssector’s PBT of $80.0m for FY2007was higher by 14% or $10.0m. BothAuto and Services, Trading and Others(S&T) recorded higher PBT, but thesewere partially offset by lower PBT inM&W. The higher PBT of Auto wasattributable to higher contributionfrom higher turnover, but this waspartially offset by loss on disposal of asubsidiary and the impairment in valueof a long term investment. For S&T,the higher PBT was mainly due to theshare of higher profits from CityCab,an associated company, as well ashigher trading sales. M&W’s PBTwas impacted by lower turnover andproduct mix.AcquisitionsST Kinetics increased its shareholdingin STAR Automotive Center(Guangzhou) Co., Ltd. making it awholly-owned subsidiary. The capitalinjection of an additional RMB11.36m(about $2.27m) was in line withbusiness growth in the expandingautomotive repair market in China.Major ProjectsST Kinetics won a $78m six-yearcontract, with an option for anothersix years, to provide weaponmaintenance and related services tothe Singapore Armed Forces (SAF).The contract enabled SAF, whoseweapon maintenance was previouslyhandled by various agencies and thirdparties, to consolidate and streamlinevarious weapon maintenance activitiesfor greater efficiency and costeffectiveness.In the clean and green technologyarena, ST Kinetics successfullydeveloped a range of environmentallyfriendly and commercially viablespecialty vehicles. This included an

Singapore Technologies Engineering LtdAnnual Report 200777innovatively designed hybrid electricluggage tow tractor, over 70 units ofwhich had been ordered by SingaporeAirport Terminal Services Ltd (SATS)for use at Changi Airport Terminal 3.ST Kinetics also unveiled a new hybridelectric excavator with significantlylower fuel consumption at the BeijingInternational Construction MachineryExhibition and Seminar (BICES) 2007.Using similar technologies, VT SVClaunched UltraTemp – a hybrid systemfor refrigerated distribution thatcombines the benefits of both coldplate and mechanical refrigeration.The state-of-the-art system offers lowoperating costs, high reliability andlong life expectations associated withcold plates while providing unlimitedroute capability, automatic defrostand lower weight advantages of amechanical refrigeration system.As part of its efforts to further protectthe environment and contribute to therealisation of a sustainable society,ST Kinetics became a foundingpartner of the Fuel Cell Communityin Singapore to help spearhead thedrive towards the maturity and greaterusage of fuel cell technology.

78Illustrated by Don Low

Singapore Technologies Engineering LtdAnnual Report 200779PROVIDING CUSTOMISED SOLUTIONSIN SHIPBUILDING AND SHIPREPAIRST Marine is a turnkey provider ofshipbuilding, ship conversionand shiprepair services, serving aglobal clientele that spans America,Europe, Asia and the Middle East.ST Marine’s operations in Singaporeare complemented by its USshipbuilding facilities in Pascagoula,Mississippi, under VT Halter Marine.The year for the Marine sector washighlighted by new products, productdeliveries and launches, and expandingbusiness from existing customersrequiring higher engineering expertise.Some of these customers includedthe Republic of Singapore Navy(RSN), the US Navy, Crowley MaritimeCorporation, Louis Dreyfus ArmateursS.A.S. (LDA), and Shreyas WorldNavigation.ShipbuildingLeveraging on its strength indesigning and building customisedand sophisticated vessels, ST Marinecontinued to secure high value addedcontracts and break new ground.ST Marine successfully entered theRoll-on/Roll-off Passenger (Ropax)ferry newbuilding market, by securinga contract to design and build a Ropaxferry for LDA – the first in Singapore’sshipbuilding history. The shipyard,in collaboration with James FisherDefence Limited (JFD), also clinchedthe first public-private partnership(PPP) project from the RSN. VT HalterMarine received repeat orders fromexisting customers, most significantly,from Crowley Maritime Corporation’ssubsidiary, Vessel ManagementServices Inc.ShiprepairST Marine continued to extend itsreliable expertise and consistentservice quality in shiprepair,modification and conversion to a widevariety of vessels, maintaining itsstrong presence in the regional market.The year’s shiprepair business wasmarked by the completion of severalnotable conversion projects. Ofnoteworthy mention was the conversionof Rubicon Intrepid’s Floating Storageand Offloading (FSO) system to theFloating Production Storage andOffloading (FPSO) system for RubiconOffshore. ST Marine also convertedthe BGP Pioneer from a fishing trawlerto a seismic research vessel for ChinaNational Petroleum Corporation’s BGPInc., one of the world’s leading onshoregeo-physical exploration company.PERFORMANCE OFTHE MARINE SECTORHalf Yearly PerformanceThe Marine sector’s turnover for2H2007 at $446m increased by7% or $29m over 1H2007 turnoverof $417m, following higher shipbuildingactivities.PBT for 2H2007 at $60.5m increasedby 67% or $24.4m over 1H2007, as aresult of better shiprepair performanceand higher investment income from thematurity of a fund under management.Full Year PerformanceFY2007 turnover of $863m for theMarine sector was higher than thatof FY2006 by 23% or $161m andthis was largely contributed by theshipbuilding and shiprepair businesses.The higher shipbuilding turnoverwas mainly contributed by the USoperation, while the higher shiprepairturnover was the result of a moreactive shiprepair market.PBT of the Marine sector in FY2007of $96.6m was higher than thatachieved in FY2006 by 21% or$17.1m. The higher PBT was mainlyattributable to higher gross profitcontribution from higher turnover aswell as higher investment incomefrom the maturity of a fund undermanagement.

80(from left to right)Delivery of third ATB unit toCrowley Maritime.ST Marine signing the Ropaxcontract with LDA.Major ProjectsIn shipbuilding, ST Marine secured acontract worth about $400m to deliversubmarine rescue and other relatedservices to the RSN over 20 years.ST Marine will design and construct theSubmarine Support and Rescue Vessel(SSRV) necessary for the SubmarineRescue Vehicle (SRV), which will bedesigned and built by JFD. On topof this contract, ST Marine deliveredthe third and fourth of five locally-builtstealth frigates, RSS Tenacious andRSS Stalwart, to the RSN.ST Marine was awarded a $168mcontract to build a Ropax ferry forrenowned French shipowner LDA, forday and night crossing in the EnglishChannel. The Ropax ferry is the thirdnewbuilding order awarded by LDAto ST Marine, following the order oftwo Roll-on/Roll-off (RoRo) vessels inassociation with Norway’s Leif Hoegh& Co. AS (LH) for the transportationof Airbus A380 aircraft componentsin 2006. This brings the total value ofcontracts awarded by LDA toST Marine to $288m.ST Marine delivered the first andsecond of four 1030 TEU feedercontainer vessels, OEL Singaporeand OEL Blessing, to Shreyas WorldNavigation of Transworld Group. Thelast two vessels, OEL Dubai andOEL India, were also launched atthe shipyard.VT Halter Marine, clinched a contractvalued at US$254m (about $381m)to build three 330,000-barrel tankbarges for Crowley Maritime’ssubsidiary, Vessel ManagementServices Inc. VT Halter Marinecurrently has three contracts withVessel Management Services Inc. tobuild the tugs and 185,000-barrelbarges for ten articulated tug barge(ATB) units. The third ATB unit and thetug for the fourth unit were launchedin 2007. The tank barge project willbring the total contractual value withVessel Management Services to aboutUS$769m ($1.2b). The shipyard alsosecured a contract worth US$23.5m(about $35.6m) to build a platformsupply vessel.VT Halter Marine was awarded acontract modification worth US$41.5m(about $64m) from the US Navy forthe Egyptian Navy’s Fast Missile Craft(FMC) project under the ForeignMilitary Sales (FMS) programme. Thecontract modification will enable theUS shipyard to procure long lead timematerial for the command and controlsystem. This is in addition to the earlierPhase I functional design contract forUS$28.8m (approximately $49m) andthe first contract modification valuedat US$165m (about $263m). Thissecond contract modification bringsthe total amount awarded on the FMCproject to approximately US$235m(about $376m).VT Halter Marine delivered a doubleendedpassenger/vehicle ferry to theNantucket Steamship Authority (SSA),and a catamaran lift barge to theWashington Group International (WGI)and the Alberici Group for the OlmstedDam construction project on theOhio River.In shiprepair, ST Marine hasaccomplished several significantconversions and modificationsworth more than $100m. The BGPPioneer was successfully convertedfrom a fishing trawler to a seismicresearch vessel for BGP Inc. Alsocompleted was the extensive repairand modification of Phoenix, a cuttersuction dredger from Boskalis B.V.,of The Netherlands. The extensivemodification work also saw theupgrading of its dredging capacity,fitting of new engines, generators,dredging equipment, and the additionof new accommodation spaces.The Aquila Explorer, from SeabirdExploration Norway AS, was convertedfrom a platform supply vessel to aseismic research vessel. A secondconversion contract was also awardedto ST Marine by Rubicon Offshore,following the successful conversion ofRubicon Intrepid from an FSO to anFPSO this year. With these projectssuccessfully completed, the shipyardcontinued to maintain its dominance inthe market for shiprepair, modificationand conversion for a wide variety ofvessels.

Singapore Technologies Engineering LtdAnnual Report 200781DYNAMICS AND RISK FACTORSOF THE BUSINESSIndustry ReviewThe well diversified business portfolioof the ST Engineering Group providesa mechanism for the Group to leveragethe dynamic economies of growingmarkets while at the same timebuffer the ones with weaker marketperformance.Not unlike other large MNCs, theGroup’s operations and performanceare subject to changes in theeconomic and business environments,external factors such as naturaland man-made disasters, as well asother operating risks. The Grouptakes cognizance of these riskfactors through its risk managementframework. Some of the key riskfactors are discussed below.Oil PricesSurging oil prices, approaching theUS$100 level in the final month of2007, will continue to pose significantchallenges to the aviation sectorand add to the global economicuncertainties amidst the US sub-primeissue in 2007 and continuinginto 2008.With oil prices staying high, manymajor airlines are led to continuallyrestructure, which could result inmore outsourcing as part of costcontainment efforts. However, suchoil price induced cost pressure onthe airlines could also lead to a lowermanhour selling rate for MRO work.The US EconomyThe sub-prime issue, rising pricesof raw materials, oil price increase,rising unemployment, falling consumerconsumption and the financial marketproblems could push the US economyinto a recession. Should this happen,the economic downturn wouldaffect industries ranging from retailsales to infrastructure and propertydevelopment, and from banking toaviation. Naturally, ST Engineering’sUS operations would not be spared theeffects of an impending slowdown.Interest RatesThe Fed rates ended the year at4.25% and are expected to be furtheradjusted downwards during 2008.A lower interest rate environment willreduce the cost of doing business inthe US. Given the Group’s net cashposition and the lower borrowingrates, ST Engineering is well placedto consider viable acquisitionsand brownfield projects that mightcomplement or add to its capabilities.Raw MaterialsThe escalation of raw materials prices,in part attributable to the significantrise in crude oil prices, could impactmargins in relation to businesses inthe Marine and Land Systems sectors.To mitigate the impact, the Group willcontinue its strategy of locking in rawmaterials prices ahead of schedule,capping price offers based on a rangeof commodity prices and hedgingas well as shortening the validity ofthe proposals to customers, wherepossible.Currency FluctuationsWith substantive business operationsin the US and some in Europe,the Group is most concerned withfluctuations in the USD and theEuro. Any continued weakening USDagainst the SGD would translateinto a possibility of lowered revenueand earnings from the US as wellas from sales denominated in USDfor our companies that are outsidethe US. This negative impact wouldbe partially cushioned by the lowercost of importing materials and partsdenominated in USD.As the Euro strengthens against othercurrencies, demand for componentsservices from STA Solutions, whichis located in the Euro zone, may slowdown. However, the stronger Eurocould also contribute to higher Grouprevenue and earnings when the Euro istranslated into SGD.

82The Group’s diversified businessportfolio provides some room forbalance and offsets. With operatingunits located in different countries,currency fluctuation risk is partiallymitigated.Labour SupplyShortage of skilled labour remainsa concern as the Group continuesto expand. To address the needfor skilled labour and talents in ouroperations located in different partsof the world, the Group has embarkedon a series of initiatives, includingtraining, manpower retention schemesand looking at alternative sourcesof supply. For instance, the Groupengages the local communities andoffers scholarships to hone skillsin areas such as aerospace andanimation for specific job needs.Defence Spending andGovernment BudgetsDefence spending in Singaporecontinues to increase year on year inline with the growth in Gross DomesticProduct. Defence spending inSingapore forms over a quarter of totalgovernment spending budget today.It is expected that the Singaporegovernment will continue to focus onbuilding a strong defence force andhomeland security for the country.ST Engineering Group looks forward toproviding the SAF with the necessarymaintenance services, upgrades,and the development of integratedtechnological solutions for a 3rdGeneration SAF.With increased focus by the Singaporegovernment to enhance InformationCommunications Technologies (ICT)applications, ST Electronics is wellpoised to participate in initiativesrelated to e-Government, education,transport and subway systems, and thepublic sector.In the US, the defence budget isexpected to be maintained at thesame level for 2008 in view of thecontinued geo-political unrest andtension, and the need for enhancedhomeland security. The Group, via itsUS operations, will continue to workclosely with local partners to identifyopportunities for partnerships andcontracts for the US military and localauthorities.Emerging MarketsNew and emerging markets continueto feature on the Group’s radar screen.Having made further inroads intoCentral America via PAE, the Groupwill tap on the relationships and marketknowledge to gain a stronger footholdin the market. Africa, Central Asiaand the Middle East form the newmarkets which the Group identifiesas presenting gaps and opportunities.Diversification into these new marketswill help the Group better enlargethe revenue streams and managecosts. The new markets very oftenserve as lower cost manufacturing orprocurement bases for the Group.The Group conscientiously leveragesthe Free Trade Agreements (FTAs)signed by the Singapore governmentwith various countries. FTAs help withcollaboration efforts and economicnegotiations when establishingoperations in the overseas markets.DisastersHaving experienced the effects ofHurricane Katrina along the GulfCoast of the US, the Group’s readinessin disaster preparedness and businesscontinuity planning is enhanced. Theexperience has enabled the Group todevelop equipment and products thathelp with disaster recovery. Theseproducts are marketed to globalprospects in both the defence andcommercial sectors. They help withemergency services and the rebuildingof infrastructure.Risk ManagementThe Group’s risk appetite andstrategies are regularly reviewed toensure alignment with its objectivesas well as to respond to the constantlychanging business landscape, bothlocally and globally. With a robustrisk management framework, theGroup seeks to minimise any negativesurprises and losses while at thesame time enhance performance andcompetitiveness when faced withopportunities. The Group will continueto build a robust risk managementculture as well as strengthen itsexisting risk management practices.• Risk Management Governance:The Group’s Risk ReviewCommittee maintains riskoversight and works with themanagement to ensure thatthe Group has adequatelyprioritised and addressed therisk management issues withinthe Group.• Risk Reporting Dashboard:The structured dashboard providesan overview of risk profile as wellas key risk indicators and riskincidents to management andthe Risk Review Committee. Itenables the monitoring of key risksand appropriate mitigating actionsto be taken on a timely basis.

Singapore Technologies Engineering LtdAnnual Report 200783• Risk ManagementInfrastructure: Various enablingpolicies, methodologies, guides,checklists and IT applications areconstantly being developed andimproved in order to support thepractice of risk management atboth Group and business unit level.a) Strategic and Operational RiskThe Group operates in 21 countriesacross the globe. As part of theGroup’s plan to grow its businessinternationally, it will continue to focuson increasing its operating activitiesand presence in Europe, Greater Chinaand the US. In 2007, 21% of theGroup’s assets were in the US (2002:10%). Revenue from customerslocated outside Asia increased from28% of the Group’s revenue in 2002to 51% in 2007.As part of its business strategy,the Group seeks to increase theproportion of its international businessand customers, thereby achievinggreater geographical diversification.Likewise, the Group takes theinitiative to raise the proportion of itscommercial business while maintainingstrong support towards the localdefence business. The commercialbusiness helps to bring commerciallyavailable technology and practices intothe defence business, thereby allowingfor more cost effective systems andsolutions. A more diversified base ofcommercial and military customerswill reduce the risk of customerconcentration.b) Investment RiskThe Group seeks to grow itsbusinesses on three fronts,through: organic growth of itsexisting capabilities and capacities;development of new capabilities; andacquisitions of business entities andoperating assets or joint ventures.Investment activities, ranging from theidentification of targets to conductingdue diligence, are supported bya dedicated team of investmentprofessionals and augmented byexternal professionals for specialisedservices. The business proposalsare guided by a given set of internalinvestment criteria, evaluated by seniormanagement and endorsed by aBusiness Investment and DivestmentCommittee before seeking finalBoard of Directors’ approval.c) Financial Risks and DerivativeFinancial Instrument RiskThe Group is exposed to financialrisks arising from its operations andthe use of financial instruments. TheGroup’s principal financial instruments,other than foreign exchange (FX)contracts and derivatives, comprisebankers’ guarantees, performancebonds, bank loans and overdrafts,finance leases and hire purchasecontracts, investments, funds undermanagement, and cash and short termdeposits. All financial transactionswith the banks are governed bybanking facilities duly accepted withBoard of Directors’ resolutions, withbanking mandates, which define thepermitted financial instruments andfacilities limits, approved by the Boardof Directors. All financial transactionsrequire dual signatories. The Grouphas various other financial assets andliabilities such as trade receivables andtrade payables, which arise directlyfrom its operations.It is the Group’s policy not to engagein FX and/or derivatives speculation ortrading. It is not in the interest of theGroup to speculate or trade in treasuryinstruments. The purpose of engagingin treasury transactions is solely forhedging.The Group’s treasury policy allowsonly FX spot and forward contracts,non-deliverable forward contracts,FX call and put options, forward rateagreements, interest rate swap andinterest rate cap and floor options(“Permitted Transactions”); sale ofoptions are expressly prohibited.These instruments are generic innature with no embedded or leveragefeatures and any deviation from theseinstruments would require specificapproval from the Board of Directors.Any complex FX or derivativestransactions involving any combinationof the Permitted Transactions orany combination of the PermittedTransactions and other derivativestransactions are prohibited.The main financial risks arising fromthe Group’s operations and the use offinancial instruments are interest rate,FX, market, liquidity and credit risks.The policies for managing each ofthese risks are summarised below.Assetslocated in US10%21%Revenue fromcustomers locatedoutside Asia28%51%2007 2002

84i) Interest Rate RiskThe Group has cash balances placedwith reputable banks, financialinstitutions and a related corporation.The Group manages its interest raterisks on its interest income by placingthe cash balances in varying maturitiesand interest rate terms.The Group’s debt includes bankborrowings and lease commitments.The Group seeks to minimise itsinterest expense exposure throughoptions to refinance the debtinstruments and/or enter into interestrate swaps, where appropriate, overthe duration of its borrowings.ii) Foreign Exchange RiskThe Group’s FX risk arises both fromits subsidiaries operating in foreigncountries, generating revenue andincurring costs denominated in foreigncurrencies, and from operations of itslocal subsidiaries which are transactedin foreign currencies. The Group’sFX exposures are primarily fromUSD and Euro, and the Group entersinto forward currency contracts tohedge against its FX risk resultingfrom anticipated sale and purchasetransactions denominated in foreigncurrencies.The Company’s centralised TreasuryUnit facilitates intra-group FXtransactions to net-off the FXexposures within the Group. Theremaining FX exposures are thenhedged via the banks.The treasury transactions are executedby the Company’s centralised TreasuryUnit, within which there is segregationof duties between back office anddealers. Only authorised dealers cantransact with the banks on behalf ofthe Group, with back office confirmingthe deals. The dealers’ limits andpermitted treasury instruments in theform of an authorisation matrix andmandates are communicated to thebanks for compliance.iii) Market RiskThe Group has strategic investments inquoted equity shares and placed fundswith fund management companies.The market value of these investmentswill fluctuate with market conditions.To mitigate market risk, the Group’sfunds placed with fund managers areguaranteed 95% to 100% of theirprincipal values at the end of the fundmanagement period. Also, beforea fund manager is allocated fundsfor management, its managementcapability and financial strength arecarefully considered.iv) Liquidity RiskTo manage liquidity risk, the Groupmonitors its net operating cash flowand maintains an adequate levelof cash and cash equivalents andhas secured committed fundingfacilities from financial institutions.In assessing the adequacy of thesefunding facilities, management reviewsits working capital requirementsregularly.v) Credit RiskCredit risk, or the risk of counterpartiesdefaulting, is managed through theapplication of credit approvals, creditlimits and monitoring procedures.Where appropriate, the Company orits subsidiaries obtain collateral fromcustomers or arrange master nettingFOREIGN EXCHANGE1.901.851.801.751.701.651.601.551.501.451.40INTEREST RATE (%)6543210Jan 02Apr 02Jul 02Oct 02Jan 03Apr 03Jul 03Oct 03Jan 04Apr 04Jul 04Oct 04Jan 05Apr 05Jul 05Oct 05Jan 06Apr 06Jul 06Oct 06Jan 07Apr 07Jul 07Oct 07Jan 02Mar 02Jul 02Sep 02Nov 02Jan 03Mar 03Jul 03Sep 03Nov 03Jan 04Mar 04Jul 04Sep 04Nov 04Jan 05Mar 05Jul 05Sep 05Nov 05Jan 06Mar 06Jul 06Sep 06Nov 06Jan 07Mar 07Jul 07Sep 07Nov 07USD/SGDSource: BloombergUSD SIBOR (3 months)SGD SIBOR (3 months)Source: Bloomberg

Singapore Technologies Engineering LtdAnnual Report 200785agreements. Cash terms, advancepayments and letters of credit or bankguarantees are required for customersof lower credit standing.d) Acts of God and/or War RiskThe Group manages this risk throughthe development of business continuityplans so as to ensure quick recoveryand resumption of critical businessfunctions after a disruption. Theseplans have been communicated andthe management has participated insimulated exercises of these plans.Regular reviews of these plans ensurethat they stay relevant. Force majeureclauses are included in contracts tomitigate risk from Acts of God.e) Legal and/or Political RiskLegal risk is, as far as commerciallyacceptable, managed throughstandardised contracts with termsand conditions that are pre-approved.Any deviation will be vetted andapproved by the appropriate level ofmanagement. In instances wherethe contract terms and conditions arestipulated by the customer, deviationsfrom our standard checklist templatewill likewise require review andapproval by the appropriate level ofmanagement. The management alsovigilantly monitors its operating unitsbusiness practices, environmentalissues, political impact on the projectsand overall business in the respectivecountries.f) Reputation RiskRecognising the importance ofproviding timely and key informationto our stakeholders, the Group put inplace a communications programme toensure effective communication withour stakeholders at all times.SENSITIVITY ANALYSISa) Interest RateThe Group’s cash and cashequivalents as well as funds undermanagement are largely investedin fixed deposits and fixed incomesecurities. Movements in interestrates will therefore have an impact onthe interest and investment incomefor the Group. Likewise, movementsin the effective borrowing rate willalso have an impact on the interestexpense for the Group. The impacton the Group’s annual interest incomeand interest expense based on aone percentage point movement inthe effective fixed deposit rate andborrowing rate are estimated at $10mand $7m respectively. Details ofsensitivity analysis on the interest ratemovements can be found in Note 50 inthe Notes to the Financial Statements.b) Gross Profit MarginAt the 2007 turnover of $5.05b, aone percentage point movement inthe gross profit margin of the Groupwill lead to a $50.5m change ingross profit for the Group. The manydifferent programmes undertakenacross the Group, with theiraccompanying variations in margin,have the effect of reducing the Groupwideimpact of specific project marginfluctuations.c) OthersOther risk factors that have an impacton turnover and net profits tend to besector or project specific. Hence, it isnot practical to perform a sensitivityanalysis in such instances.SHAREHOLDER RETURNReturn On EquityThe Return On Equity improved 2.4percentage points to 30.8% in 2007,as a result of higher profit after tax andminority interests.Dividend Per Share (DPS) andEarnings Per Share (EPS)The proposed dividend for 2007 of$503.5m (including interim dividendof $59.6m paid in September 2007)is higher than the 2006 dividend of$448.6m paid in May 2007. Therecommended 2007 dividend took intoconsideration the Group’s present cashposition, positive cash flow generatedfrom operations, and projectedcapital requirements. Payment of thedividend is subject to the approvalof the shareholders of the Companyat the coming AGM. The proposed2007 dividend of $503.5m represents100% of the earnings for FY2007.RETURN ON EQUITY (%)3230.8DIVIDEND/EARNINGS PER SHARE (cents)203028.41816.952826242226.526.124.603 04 05 06 071614121016.8815.1513.6415.1112.3911.3013.6012.2611.2903 04 05 06 07DPSEPS

86Total Shareholder Return forST Engineering SharesST Engineering had paid its maiden2007 interim ordinary dividend of twocents per share to shareholders inSeptember 2007 and declared a 2007final dividend of 14.88 cents per share.The dividend per share amounts to16.88 cents. The total 2007 dividend,for the fifth consecutive year, amountsto 100% of the Group’s earnings.To maximise shareholder value,management will continue its policyof paying a high level of dividend toreturn excess cash generated from itsoperations, provided the cash is notrequired for major investments in thefuture. These investments may includepotential mergers and acquisitionsand the building of new facilities andcapabilities to expand the existingoperations.For 2007, ST Engineering sharesgenerated a total shareholder returnof 26.7% for its shareholders. Thisconsists of 4.9% of dividend yield and21.8% of capital gain.Share Purchase MandateIn the coming EGM, the Company willagain seek shareholders’ approval torenew the Share Purchase Mandatefor the purchase of up to 10% ofthe number of ordinary shares in thecapital of the Company. The sharepurchase can be effected eitherthrough market purchases or offmarket purchases. The financialimpacts of various share purchasescenarios will be presented in acircular to members.The purpose of the Share PurchaseMandate is to give the Company theflexibility to undertake the sharepurchase exercise expeditiously.The Share Purchase Mandate providesthe Company an alternate avenue toreward shareholders apart from thetraditional dividend payment route.FINANCIAL REVIEWTreasury Policy and CapitalStructureThe Company’s centralised TreasuryUnit seeks to minimise the Group’sfinancial risk, to ensure sufficientliquidity to meet day-to-day operationalneeds, and to invest the cash andcash equivalents within the guidelinesapproved by the Board of Directors.Cash and Foreign ExchangeManagementThe Group adopts the strategy ofcentralised cash management, wherethe excess cash of its businessentities are swept to the centralisedTreasury Unit, which manages theinvestment of the funds. Similarly,the FX requirements of the businessentities are managed centrally. Thebusiness entities hedge their materialFX exposures arising from sales and/or purchases in currencies other thanthe functional currencies. Their FXrequirements are matched internallyby the centralised Treasury Unit wherefeasible and this procedure enablesthe Group to offset and minimise FXrisk within the Group. The centralisedTreasury Unit then hedges unmatchedFX requirements with externalcounterparties.The aim of the centralised TreasuryUnit’s cash management andFX management strategies is tomaximise the returns of the Group’scash resources and to minimise FXexposures and associated costs. Themost common financial instrumentsused to manage the FX exposures arespot and forward FX contracts.InsuranceWhere appropriate, the Groupmanages its insurance risks on aGroup basis to leverage its positionwith the general insurance market.The Group reviews its insurablerisk profile continually and makesthe necessary adjustments on riskretention to optimise the coverageand cost. This is done with adviceand support from selected insurancebrokers. Major group insurancepolicies include Industrial SpecialRisk, Liabilities and WorkmenCompensation, designed to protect theGroup against properties risk, liabilitiesfor its products and services, andworkplace accidents respectively.The aviation and marine businesseshave specialised insuranceprogrammes.The Group adopts a proactive strategywith advice and recommendationsfrom insurance brokers to managethe insurance risk with specific riskmanagement programmes coveringthe prevention of fire and the adoptionof behaviour based safety practices,among others.Funding and BorrowingsThe Group funds its investmentsand operations through a mixtureof shareholders’ funds, advancepayments from customers, andsome borrowings. Its borrowingsamounted to $869m, about 53%of its shareholders’ funds.Long term borrowings amountedto $291m and the balance is of a

Singapore Technologies Engineering LtdAnnual Report 200787short term nature. The long termborrowings comprise mainly termloans taken by STA Solutions and anIndustrial Revenue Bond, issued byMAE; both entities are subsidiariesof the Aerospace sector. The shortterm loans are denominated in USDat a floating rate that commensurateswith the Group’s Aaa credit rating fromMoody’s. The rationale of borrowingin USD is to create a natural currencyhedge position for the Group’sinvestments denominated in thecurrency.The Group’s interest cover stays at ahealthy 13 times, with a gross debtto-equityratio of 48.8%. The Groupis in a net cash position (see details inNote 53 in the Notes to the FinancialStatements).CASH FLOWS AND LIQUIDITYOperating ActivitiesIn 2007, the net cash generatedfrom operating activities amountedto $662m, $201m higher than the$461m in FY2006. The improvementin FY2007 net cash from operatingactivities was largely due to higheroperating profits and favourableworking capital movements, withpositive variances in stocks andwork-in-progress, and advancepayments from customers, but thesewere partially offset by the negativevariances in advance payments tosuppliers, and other debtors, depositsand prepayments.Investing ActivitiesIn 2007, a net cash of $6m wasgenerated from investing activitiesas compared to a net cash usedin investing activities of $362m inFY2006. The higher cash inflowmainly came from proceeds from thesale of associated companies andthe absence of cash outflow for theacquisition of subsidiaries, but thesewere partially offset by lower cashinflow from the sale and maturity ofinvestments.Financing ActivitiesThe $513m net cash used in financingactivities in FY2007 was higher thanthe $143m in FY2006 by $370m.This was largely due to the absence ofproceeds from bank loans in FY2007,as well as a higher cash outflow forthe payments of FY2006 dividendand FY2007 interim dividend toshareholders.Cash and Cash EquivalentsAs at 31 December 2007, theGroup’s cash and cash equivalentsstood at $1.28b, $141m higherthan that of FY2006. The cashand cash equivalents are managedby the centralised Treasury Unitand the majority of the funds wereinvested in liquid assets such asfixed deposits and placements witha related corporation. The cash andcash equivalents as at yearend isadequate to fund the committed andplanned capital expenditure, as wellas to service the Group’s borrowings.Notwithstanding the Group’s currentpositive cash and cash equivalentsposition, it has established shortterm financing facilities with variousfinancial institutions for bridgingfinance. Such liquidity facilitiescan be tapped into when therequirements arise, in particular,for financing significant merger andacquisition deals.ACCOUNTING POLICIESThe Group’s significant accountingpolicies are presented in Notes to theFinancial Statements, Note 2 (pg 113to 129). The Group has applied thesame accounting policies and methodsof computation in the preparation ofthe financial statements for the currentreporting period compared with theaudited financial statements as at31 December 2006, except for theadoption of all the new and revisedFinancial Reporting Standards (FRS),that are mandatory for financial yearsbeginning on or after 1 January 2007.The adoption of these FRS has nosignificant impact to the Group.TOTAL SHAREHOLDER RETURNCASH FLOW ($m)FY 07FY 067.7%5.1%12.8%21.8 %4.9% 26.7%OperatingActivities461662FY 05FY 04Capital Gain22.7% 5.2%14.2% 5.7% 19.9%Dividend Yield27.9%InvestingActivitiesFinancingActivities6(362)(513)(143)2007 2006

88PROSPECTS FOR 2008The world economy startedpromisingly in 2007, with many stockmarket indices reaching record highsuntil the US sub-prime mortgage crisisemerged and clouded the second halfof 2007. The Fed has cut interest ratedown to 3% on 30 January 2008 in itsefforts to stave off the possibility of arecession in the US. The geo-politicaltensions in the Middle East remainand the high oil prices are likely topersist and continue to be volatile,which coupled with the increasing foodprices are adding to global inflationarypressure. With the US experiencing aneconomic slowdown, and the potentialspillover effects on her major tradingpartners, the world economy in 2008is shrouded in uncertainty. We arecognizant of these developments andstand ready to manage the challengesahead to maintain our market andcompetitive positions and to seizeopportunities that come along. Barringunforeseen circumstances, the Groupexpects to achieve a modestly higherturnover and PBT for FY2008.In the Aerospace sector, high fuelprices and keen competition from theLCCs will continue to exert pressureon the cost structure of the traditionalairlines. Cost pressure is likely tofacilitate the MRO outsourcing trend,as traditional airlines are underimmense pressure from high fuelprices to improve operating costefficiency. Several US airlines hadreported losses in the fourth quarterof 2007. The sector will continue tofocus on airframe heavy maintenanceand modification work, implement thevarious PTF conversion contracts,and offer Total Aviation Support toairlines. It will set up an engine facilityin Xiamen, China to expand its MROcapacity in CFM56 engine. The sectorwill continue its efforts to grow itspresence in the global componentsand material services marketspearheaded by STA Solutions.The Electronics sector completed thestrategic acquisition of TelematicsWireless Ltd., which enables theGroup to enter the growing marketsof M2M applications and wirelesstelemetry around the world. In 2007,the sector set up an e-Servicessubsidiary to implement the sharedservices contract from MINDEF. Thisnew entity will focus on the emerginge-Government Managed Servicesmarket in Singapore and e-Enterprise,which includes e-Supply ChainManagement. The sector will continueto tap into new market opportunities insatcom and interactive digital media.The Land Systems sector willcontinue its growth strategy forits defence and specialty vehiclesbusiness, by broadening its salesand distribution network in targetedmarkets, developing niche productsand fostering local partnerships in theglobal market. It will also develop newmarket opportunities for both defenceand specialty vehicles leveraging onits success in markets like UK and theMiddle East for the defence business.In the light of market uncertainty,the sector will continue to rationaliseits operations, create synergies andimprove operating efficiencies for thecommercial specialty vehicles businessin the US and China.The Marine sector won a few largecontracts in Singapore and US in2007. Coupled with ongoing projects,these will keep the yards in Singaporeand the US well utilised in 2008.The sector will continue to pursuebusiness opportunities in the navaland government industries, and nichesegments of the commercial market,and concurrently focus on deliveringits commitments to the customers. Itwill also continue to pursue high valueadded conversion projects, which wasone of the key drivers in the profitgrowth in 2007.

90 Directors’ Report103 Statement by Directors104 Independent Auditors’ Report105 Financial Statements105 Balance Sheets106 Statement of Profi t and Loss107 Statements of Changes in Equity109 Consolidated Statement of Cash Flows113 Notes to the Financial Statements213 SGX Listing Manual Requirements214 Shareholding Statistics216 Sectoral Financial Review236 Group Structure241 Corporate Information242 Corporate Directory251 Notice of Annual General Meeting253 Proxy FormIllustrated by Cherie Tan

90We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together withthe audited financial statements of the Group and of the Company for the financial year ended 31 December 2007.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 Chye (Appointed on 27 April 2007)Dr Tan Kim SiewProfessor Lui Pao ChuenWinston Tan Tien HinDr Philip Nalliah PillaiQuek Poh HuatVenkatachalam KrishnakumarDavinder Singh s/o Amar Singh (Appointed on 1 August 2007)LTC Chia Choon Hoong (Alternate Director to LG Desmond Kuek Bak Chye on 1 August 2007)ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURESExcept for the Singapore Technologies Engineering Executives’ Share Option Scheme, Singapore Technologies Engineering ShareOption Plan, Singapore Technologies Engineering Performance Share Plan and Singapore Technologies Engineering RestrictedStock Plan (collectively the “ST Engineering Share Plans”), neither at the end of nor at any time during the financial year was theCompany a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company toacquire benefits by means of the acquisition of shares in or debentures of the Company or any other body 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 debenturesof the Company or of related corporations either at the beginning (or date of appointment, if later) or at the end of the financial year.There were no changes in any of the directors’ interests in the Company between the end of the financial year and on 21 January2008.According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50,particulars of interests of directors who held office at the end of the financial year in shares or debentures in the Company and itsrelated corporations were as follows:Holdings in the name of the director,spouse or infant children1 January 2007 or date ofappointment if later 31 December 2007The CompanyOrdinary SharesPeter Seah Lim Huat – 307,500Tan Pheng Hock 173,364 578,364Professor Lui Pao Chuen 181,444 224,444Winston Tan Tien Hin 315,000* 1 420,000* 1Dr Philip Nalliah Pillai 75,000 137,000Quek Poh Huat 813,728 841,228LTC Chia Choon Hoong 7,000 7,000

Singapore Technologies Engineering LtdAnnual Report 200791DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)Holdings in the name of the director,spouse or infant children1 January 2007 or date ofappointment if later 31 December 2007Related CorporationsChartered Semiconductor Manufacturing LtdOrdinary SharesTan Pheng Hock 7,000 7,000Koh Beng Seng 44,074 44,074Winston Tan Tien Hin 20,000* 2 200,000* 2Global Crossing LimitedCommon Stock of US$0.01 eachPeter Seah Lim Huat 1,785 7,771Mapletree Logistics Trust Management LtdUnit holdings in Mapletree Logistics TrustProfessor Lui Pao Chuen 63,000 63,000Neptune Orient Lines LimitedOrdinary SharesLTC Chia Choon Hoong 4,000 2,000SIA Engineering Company LimitedOrdinary SharesProfessor Lui Pao Chuen 40,000 50,000Singapore Airlines LimitedOrdinary SharesProfessor Lui Pao Chuen 8,000 7,600Venkatachalam Krishnakumar 4,000 4,000LTC Chia Choon Hoong 2,000 1,870Singapore Airport Terminal Services LtdOrdinary SharesProfessor Lui Pao Chuen 90,000 90,000Singapore Computer Systems LimitedOrdinary SharesQuek Poh Huat 15,000 15,000Singapore Food Industries LimitedOrdinary SharesProfessor Lui Pao Chuen 20,000 20,000

92DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)Holdings in the name of the director,spouse or infant children1 January 2007 or date ofappointment if later 31 December 2007Singapore 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 2,850 2,850Professor Lui Pao Chuen 3,210 3,210Winston Tan Tien Hin 137,980* 3 104,980* 4Davinder Singh s/o Amar Singh 3,170 3,170Dr Philip Nalliah Pillai 47,320 47,320Quek Poh Huat 5,210 5,210LTC Chia Choon Hoong 4,610 4,610SMRT Corporation LtdOrdinary SharesQuek Poh Huat 8,000 8,000SP AusNetStapled SecuritiesQuek Poh Huat 206,000 206,000SNP Corporation LtdOrdinary SharesWinston Tan Tien Hin 54,494* 5 54,494* 5StarHub LtdOrdinary SharesPeter Seah Lim Huat 133,720 147,560Tan Pheng Hock 27,430 25,150Venkatachalam Krishnakumar 17,144 15,716STATS ChipPAC Ltd.Ordinary SharesKoh Beng Seng N.A. # 45,000Quek Poh Huat N.A. # 1,000Venkatachalam Krishnakumar N.A. # 1,000TeleChoice International LimitedOrdinary SharesPeter Seah Lim Huat 50,000 50,000Tan Pheng Hock 30,000 30,000

Singapore Technologies Engineering LtdAnnual Report 200793DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)Holdings in the name of the director,spouse or infant children1 January 2007 or date ofappointment if later 31 December 2007Vertex Investment (II) LtdOrdinary SharesProfessor Lui Pao Chuen 20 20Davinder Singh s/o Amar Singh 50 50Vertex Technology Fund LtdOrdinary SharesWinston Tan Tien Hin 10 10Vertex Technology Fund (II) LtdOrdinary SharesTan Pheng Hock 5 † 5 †Koh Beng Seng 15 15Winston Tan Tien Hin 20 20Davinder Singh s/o Amar Singh 550 550Redeemable Preference SharesKoh Beng Seng 15 15Winston Tan Tien Hin 20 20Davinder Singh s/o Amar Singh 500 5001 January 2007 ordate of appointment if later 31 December 2007 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 89,000 – 1.92 13.8.2003 to 12.8.200744,500 – 1.79 7.2.2004 to 6.2.200840,500 – 1.86 12.8.2004 to 11.8.200844,500 11,125 2.09 10.2.2005 to 9.2.200944,500 11,125 2.12 11.8.2005 to 10.8.200944,500 22,250 2.37 8.2.2006 to 7.2.201044,500 22,250 2.57 11.8.2006 to 10.8.201044,500 33,375 3.01 10.2.2007 to 9.2.201144,500 33,375 2.84 11.8.2007 to 10.8.2011– 44,500 3.23 16.3.2008 to 15.3.2012– 44,500 3.61 11.8.2008 to 10.8.2012

94DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)1 January 2007 ordate of appointment if later 31 December 2007 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesTan Pheng Hock 5,000 – 1.29 8.8.2000 to 7.8.2008400,000 – 1.418 10.2.2001 to 9.2.20095,000 5,000 2.00 11.8.2001 to 10.8.2009400,000 400,000 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 10.8.2016– 200,000 3.23 16.3.2008 to 15.3.2017Koh Beng Seng 19,500 19,500 2.09 10.2.2005 to 9.2.200919,500 19,500 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 10.8.2011– 27,500 3.23 16.3.2008 to 15.3.2012– 27,500 3.61 11.8.2008 to 10.8.2012Professor Lui Pao Chuen 21,500 – 1.79 7.2.2004 to 6.2.200821,500 – 1.86 12.8.2004 to 11.8.200821,500 21,500 2.09 10.2.2005 to 9.2.200925,250 25,250 2.12 11.8.2005 to 10.8.200929,000 29,000 2.37 8.2.2006 to 7.2.201029,000 29,000 3.01 10.2.2007 to 9.2.2011

Singapore Technologies Engineering LtdAnnual Report 200795DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)1 January 2007 ordate of appointment if later 31 December 2007 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary SharesWinston Tan Tien Hin 105,000 – 2.29 8.2.2003 to 7.2.200756,500 56,500 1.79 7.2.2004 to 6.2.200846,500 46,500 1.86 12.8.2004 to 11.8.200848,500 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 10.8.2011– 37,000 3.23 16.3.2008 to 15.3.2012– 37,000 3.61 11.8.2008 to 10.8.2012Dr Philip Nalliah Pillai 62,000 – 2.29 8.2.2003 to 7.2.200731,000 31,000 1.79 7.2.2004 to 6.2.200829,000 29,000 1.86 12.8.2004 to 11.8.200831,000 31,000 2.09 10.2.2005 to 9.2.200931,000 31,000 2.12 11.8.2005 to 10.8.200931,000 31,000 2.37 8.2.2006 to 7.2.201031,000 31,000 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 10.8.2011– 33,000 3.23 16.3.2008 to 15.3.2012– 33,000 3.61 11.8.2008 to 10.8.2012Quek Poh Huat 12,750 – 1.92 13.8.2003 to 12.8.200714,750 – 1.79 7.2.2004 to 6.2.200833,000 33,000 1.86 12.8.2004 to 11.8.200833,000 33,000 2.09 10.2.2005 to 9.2.200933,000 33,000 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 10.8.2011– 33,000 3.23 16.3.2008 to 15.3.2012– 33,000 3.61 11.8.2008 to 10.8.2012Venkatachalam Krishnakumar 25,250 25,250 2.37 8.2.2006 to 7.2.201025,250 25,250 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 10.8.2011– 25,500 3.23 16.3.2008 to 15.3.2012– 25,500 3.61 11.8.2008 to 10.8.2012

96DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)1 January 2007 ordate of appointment if later 31 December 2007 Exercise price Exercisable period$Related CorporationsChartered Semiconductor Manufacturing LtdOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 23,443 – 3.46 22.2.2003 to 22.2.200746,887 – 1.86 30.8.2003 to 30.8.200740,000 40,000 0.72 28.2.2004 to 28.2.200845,000 45,000 1.10 29.8.2004 to 29.8.200885,000 85,000 1.70 27.2.2005 to 27.2.200985,000 85,000 1.16 26.8.2006 to 26.8.201095,000 95,000 1.21 25.8.2007 to 25.8.2011– 47,500 1.07 31.8.2008 to 31.8.2012Koh Beng Seng 29,304 – 1.86 30.8.2003 to 30.8.2007Global 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 – 0.88 29.11.2004 to 28.11.20086,250 – 0.96 3.4.2005 to 2.4.200912,500 6,250 0.985 27.11.2005 to 26.11.200917,000 8,500 1.52 31.5.2006 to 30.5.2010STATS ChipPAC Ltd.Options to Subscribe for Ordinary SharesPeter Seah Lim Huat N.A. # 70,000 1.99 6.8.2004 to 5.8.2013N.A. # 35,000 1.91 17.2.2005 to 16.2.2014Koh Beng Seng N.A. # 50,000 1.99 6.8.2004 to 5.8.2008N.A. # 25,000 1.91 17.2.2005 to 16.2.2009STT Communications LtdOptions to Subscribe for Ordinary SharesPeter Seah Lim Huat 9,750 – 0.57 30.7.2004 to 29.7.201365,000 – 1.08 29.7.2005 to 28.7.20141 January 2007 ordate of appointment if later 31 December 2007Vesting periodGlobal Crossing LimitedRestricted Stock Units of Common Stock of US$0.01 eachPeter Seah Lim Huat 5,625 4,125 8.3.2005 to 8.3.20093,294 – 15.8.2007– 2,420 12.6.2008

Singapore Technologies Engineering LtdAnnual Report 200797DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)Holdings in the name of the director,spouse or infant children1 January 2007 or date ofappointment if later 31 December 2007The CompanyConditional Award of 250,000 PerformanceShares to be delivered after 2006Tan Pheng Hock 0 to 500,000 #1 –Conditional Award of 250,000 PerformanceShares to be delivered after 2007Tan Pheng Hock 0 to 375,000 #2 0 to 375,000 #2Conditional Award of 250,000 PerformanceShares to be delivered after 2008Tan Pheng Hock 0 to 375,000 #3 0 to 375,000 #3Conditional Award of 200,000 PerformanceShares to be delivered after 2009Tan Pheng Hock – 0 to 300,000 #4Conditional Award of 45,000 RestrictedShares to be delivered after 2008Tan Pheng Hock – 0 to 67,500 #5Related CorporationsChartered Semiconductor Manufacturing LtdConditional Award of Restricted Share Unitsto be delivered after 2008Peter Seah Lim Huat – 20,190 #6STATS ChipPAC Ltd.Conditional Award of Restricted Share Unitsto be delivered after 2008Peter Seah Lim Huat – 20,700 #6StarHub LtdConditional Award of Restricted Sharesto be delivered after 2008Peter Seah Lim Huat – 17,200 #7

98DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)* 1 Includes deemed interest in 200,000 shares in Singapore Technologies Engineering Ltd, held by Winmark Investments PteLtd, a company in which Winston Tan Tien Hin has a 50% interest.* 2 Held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.* 3 Includes deemed interest in 133,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd,a company in which Winston Tan Tien Hin has a 50% interest.* 4 Includes deemed interest in 100,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd,a company in which Winston Tan Tien Hin has a 50% interest.* 5 Includes deemed interest in 366 shares in SNP Corporation Ltd, held by Winmark Investments Pte Ltd, a company in whichWinston Tan Tien Hin has a 50% interest.#STATS ChipPAC Ltd. became a related corporation on 13 April 2007.†Held in trust by a trustee company on behalf of a director.#1The actual number of shares to be delivered will depend on the achievement of set targets over a three-year period from 2004to 2006. Achievement of targets below 80% target level will mean no performance shares will be delivered, while achievementup to 200% will mean up to twice the number of performance shares can be delivered. For this period, no new shares wereawarded. The conditional award covering the period from 2004 to 2006 have thus lapsed.#2A minimum threshold performance over a three-year period from 2005 to 2007 is required for any performance shares to bereleased and the actual number of performance shares to be released is capped at 150% of the conditional award.#3A minimum threshold performance over a three-year period from 2006 to 2008 is required for any performance shares to bereleased and the actual number of performance shares to be released is capped at 150% of the conditional award.#4A minimum threshold performance over a three-year period from 2007 to 2009 is required for any performance shares to bereleased and the actual number of performance shares to be released is capped at 150% of the conditional award.#5A minimum threshold performance over a two-year period from 2007 to 2008 is required for any restricted shares to bereleased and the actual number of restricted shares to be released is capped at 150% of the conditional award.#6The restricted share units will vest over a period of three years starting from the first anniversary of grant.#7The actual number of shares to be delivered under the conditional award will depend on the level of achievement of setperformance targets in the company over a two-year period from 1 January 2007 to 31 December 2008. No shares willbe delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are thesubject of the award will be delivered if the stretched performance targets are met or exceeded. Shares will be delivered inphases according to the stipulated vesting periods.

Singapore Technologies Engineering LtdAnnual Report 200799DIRECTORS’ INTERESTS IN CONTRACTSSince the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefitor any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financialstatements, or any emoluments received from related corporations and share options granted pursuant to the ST Engineering SharePlans) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director isa member, or with a company in which the director has a substantial financial interest, except for professional fees paid to a firm ofwhich a director is a member as shown in the financial statements.SHARE PLANSThe Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the Singapore TechnologiesEngineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and theSingapore Technologies Engineering Restricted Stock Plan (“RSP”) (collectively “Share Plans”).The Committee members are Mr Peter Seah Lim Huat (Chairman), Mr Venkatachalam Krishnakumar and Dr Philip Nalliah Pillai.Following approval of the new Share Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, theSingapore Technologies Engineering Executives’ Share Option Scheme (“ESOS”) was terminated.As at 31 December 2007, no options 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 available under the Share Plans.The number of options granted and accepted under the ESOP and the number of conditional awards under the PSP and RSP iswithin the 15% limit allowed under the Share Plans.During the financial year, except as disclosed below, there were no options granted by the Company to any person to take upunissued shares of the Company.(a)Options granted under the ESOS/ESOP(i) During the financial year, the following options were granted under the ESOP:No. of shares grantedDate of grant Exercisable period under options Exercise price$15.3.2007 16.3.2008 to 15.3.2012 390,500 3.2315.3.2007 16.3.2008 to 15.3.2017 16,694,011 3.2310.8.2007 11.8.2008 to 10.8.2012 357,500 3.6110.8.2007 11.8.2008 to 10.8.2017 15,400,873 3.61

100SHARE PLANS (continued)(a) Options granted under the ESOS/ESOP (continued)(ii) The options granted to directors under the ESOS/ESOP are as follows:Aggregate options Aggregate optionsOptions granted granted and accepted exercised sinceand accepted since commencement commencement of Aggregate optionsduring the financial of ESOS/ESOP to ESOS/ESOP to outstanding as atName of participant year under review end of financial year end of financial year end of financial yearDirector of the CompanyESOSTan Pheng Hock – 1,699,864 1,294,864 405,000ESOPPeter Seah Lim Huat 89,000 530,000 307,500 222,500Tan Pheng Hock 200,000 2,602,500 – 2,602,500Koh Beng Seng 55,000 204,000 – 204,000Professor Lui Pao Chuen – 147,750 43,000 104,750Winston Tan Tien Hin 74,000 593,500 220,000 373,500Dr Philip Nalliah Pillai 66,000 453,000 137,000 316,000Quek Poh Huat 66,000 375,000 78,000 297,000Venkatachalam Krishnakumar 51,000 152,500 – 152,500(iii)(iv)In respect of options granted to employees of related corporations, no options were granted during the financial year. Thetotal options granted from the commencement of the ESOS/ESOP to the end of the financial year is 631,479.The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right toparticipate in any share issue of any other company.(v) No share options had been offered at a discount during the financial year ended 31 December 2007.(b)(c)Issue of shares under optionDuring the financial year, 37,296,756 ordinary shares in the Company were issued pursuant to the exercise of options to takeup unissued shares of the Company.PSPThe PSP is established with the objective of motivating senior executives to strive for sustained long-term growth andperformance in ST Engineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are grantedconditional on performance targets set based on the ST Engineering Group corporate objectives.Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performanceperiod, currently prescribed to be a three-year performance period. The performance shares will only be released to therecipient at the end of the performance qualifying period. A specified number of performance shares shall be released by theERCC to the recipient and the actual number of performance shares will depend on the achievement of set targets over therespective performance period. A minimum threshold performance is required for any performance share to be released andthe actual number of performance shares to be released is capped at 150% of the conditional award.

Singapore Technologies Engineering LtdAnnual Report 2007 101SHARE PLANS (continued)(c) PSP (continued)The medium-term stretched targets measured over a three-year performance period are set based on ST Engineering Groupcorporate objectives. The performance measures used in PSP grant for financial years 2005 and 2006 are ST EngineeringGroup TSR against the MSCI Asia Pacific ex Japan Industrial Index, EVA Spread and EPS Growth.With effect from financial year 2007, the performance measures are Wealth Added and ST Engineering Group TSR against theMSCI Asia Pacific ex Japan Industrial Index.No shares were released in 2007 for the award covering the performance period 2004 to 2006 as the achievement of the settargets was below 80%. The 2,130,000 shares conditionally awarded for this performance period have hence lapsed.Pursuant to the PSP for the financial year 2007, conditional awards aggregating 1,513,000 performance shares were made to40 key executives of the ST Engineering Group. The key executives include Mr Tan Pheng Hock, an executive Director of theBoard, who was conditionally awarded 200,000 performance shares. This conditional award is for the performance qualifyingperiod of 2007 to 2009.The total number of shares in the remaining awards, which are granted conditionally for the performance periods 2005 to2007, 2006 to 2008 and 2007 to 2009 respectively, total 5,823,000. Depending on the actual performance, the total releaseof awards will range from zero to a maximum of 8,734,500 shares.(d)RSPThe RSP is established with the objective of motivating managers and above to strive for sustained long-term growth andsuperior performance in ST Engineering Group. It also aims to foster a share ownership culture among staff within the STEngineering Group and to better align staff’s incentive scheme with shareholders’ interest.Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performanceperiod, currently prescribed to be a two-year performance period. The actual number of restricted shares delivered will dependon the achievement of set targets over the respective performance period. This will be determined by the ERCC at the end ofthe qualifying performance period and released to the recipient over a three-year vesting period in the ratio of 50%, 25% and25% each subsequent year.A minimum threshold performance is required for any restricted share to be released while the maximum number of restrictedshares to be delivered is capped at 150% of the conditional award.The medium-term stretched targets measured over a two-year performance period are set based on ST EngineeringGroup corporate objectives. The performance measures used for the two-year performance period 2007 to 2008 are STEngineering Group EVA Spread and EBITDA Margin.Pursuant to the RSP for the financial year 2007, conditional awards aggregating 897,000 restricted shares were made forthe first time and only to 48 key executives of the ST Engineering Group, in place of the 2nd tranche of ESOP they were toreceive for 2007. The key executives include Mr Tan Pheng Hock, an executive Director of the Board, who was conditionallyawarded 45,000 restricted shares. This conditional award is for the qualifying performance period of 2007 to 2008 with athree-year vesting period of 2009 to 2011.

102AUDIT COMMITTEEThe Audit Committee comprises three independent non-executive directors, one of whom is also the Chairman of the Committee.The members of the Audit Committee at the date of this report are as follows:Koh Beng SengDr Philip Nalliah PillaiVenkatachalam Krishnakumar(Chairman)The financial statements, accounting policies and system of internal accounting controls are the responsibility of the Board ofDirectors acting through the Audit Committee. The Audit Committee met during the year to review the scope of the internal auditfunctions and the scope of work of the statutory auditors, and the results arising therefrom, including their evaluation of the systemof 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 Committeeprior to their submission to the directors of the Company for adoption.In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions,reviewed the procedures set up by the Group and the Company to identify and report and where necessary, seek approval forinterested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions.The Audit Committee has recommended to the Board of Directors that the auditors, Ernst & Young, be nominated for reappointmentas auditors at the forthcoming Annual General Meeting of the Company.AUDITORSErnst & Young have expressed their willingness to accept re-appointment as auditors of the Company.On behalf of the Board of DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore26 February 2008

Singapore Technologies Engineering LtdAnnual Report 2007 103We, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, inthe opinion of the Directors:(a)(b)the financial statements set out on pages 105 to 212 are drawn up so as to give a true and fair view of the state of affairs ofthe Company and of the Group as at 31 December 2007, and changes in equity of the Company and of the Group, the resultsof the business and cash flows of the Group for the year ended on that date; andat the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as andwhen they fall due.On behalf of the Board of DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore26 February 2008

104INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SINGAPORE TECHNOLOGIES ENGINEERING LTDWe have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and itssubsidiary companies (collectively the “Group”) set out on pages 105 to 212, which comprise the balance sheets of the Group andthe Company as at 31 December 2007, the statements of changes in equity of the Group and the Company, and the statement ofprofit and loss and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies andother explanatory notes.Directors’ responsibility for the financial statementsThe Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordancewith the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. Thisresponsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentationof financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance whether the financial statements are free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bydirectors, 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 statement of changes in equity of the Companyare properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to givea true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and changes in equity ofthe Group and of the Company, the results and cash flows of the 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 companiesincorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.ERNST & YOUNGCertified Public AccountantsSingapore26 February 2008

Singapore Technologies Engineering LtdAnnual Report 2007 105GroupCompanyNote 2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)Share capital and reservesShare capital 3 554,888 474,926 554,888 474,926Capital reserve 4 115,948 115,948 – –Other reserves 5 5,419 13,842 28,246 11,917Retained earnings 6 956,255 960,654 565,743 530,6761,632,510 1,565,370 1,148,877 1,017,519Minority interests 146,700 121,903 – –1,779,210 1,687,273 1,148,877 1,017,519Property, plant and equipment 7 1,014,623 948,150 843 657Subsidiaries 8 – – 557,959 544,209Associated companies and joint ventures 9 267,506 294,145 50 50Investments 10 40,822 27,858 – –Intangible assets 11 629,981 572,273 – –Investment properties 12 18,379 16,959 – –Long-term receivables 13 3,898 5,203 – –Finance lease receivables 14 1,444 – – –Derivative financial instruments 51 2,937 – – –Deferred tax assets 15 112,380 132,768 – –Current assetsStocks and work-in-progress 16 1,228,125 1,102,618 – –Trade debtors 17 953,703 858,265 – –Due from related corporations 18 662,913 516,440 302,638 238,783Advances and other debtors 19 294,221 242,894 313,088 199,172Long-term receivables, current 13 499 476 – –Finance lease receivables, current 14 6,922 – – –Short-term investment 20 338 – – –Amounts under fund management 21 178,781 228,173 – –Bank balances and other liquid funds 22 625,837 631,561 84,764 145,6553,951,339 3,580,427 700,490 583,610Current liabilitiesAdvance payments from customers, current 606,526 582,381 – –Creditors and accruals 25 1,524,156 1,362,073 51,125 50,078Provisions 26 191,571 185,232 – –Progress billings in excess of work-in-progress 16 368,757 328,609 – –Provision for taxation 201,324 213,931 4,968 6,644Short-term bank loans 27 574,595 595,850 – –Lease obligations, current 28 1,675 2,137 – –Long-term bank loans, current 32 281,783 6,859 – –Other loans, current 33 234 1,217 – –Bank overdrafts 803 1,737 – –3,751,424 3,280,026 56,093 56,722Net current assets 199,915 300,401 644,397 526,888Non-current liabilitiesAdvance payments from customers, non-current 455,576 277,998 – –Deferred income 30 7,079 4,101 – –Deferred tax liabilities 31 40,208 46,324 372 285Lease obligations, non-current 28 7,159 9,113 – –Long-term bank loans, non-current 32 583 270,525 – –Other loans, non-current 33 2,070 2,423 – –Due to a subsidiary 34 – – 54,000 54,000The accompanying notes are an integral part of the fi nancial statements.1,779,210 1,687,273 1,148,877 1,017,519

106GroupNote 2007 2006$’000 $’000Turnover 35 5,050,982 4,485,758Cost of sales (3,922,708) (3,453,961)Gross profit 1,128,274 1,031,797Other operating income 36 88,392 88,134Distribution and selling expenses (146,081) (116,635)Administrative expenses (362,851) (383,034)Other operating expenses (69,019) (74,501)Profit from continuing operations before taxation,other income and financial expenses 37 638,715 545,761Other income, net 40 3,109 9,340Financial expenses 41 (50,356) (42,252)591,468 512,849Share of results of associated companies and joint ventures 46,647 51,490Profit from continuing operations before taxation 638,115 564,339Taxation 42 (114,606) (108,895)Profit from continuing operations after taxation 523,509 455,444Attributable to:Shareholders of the Company 503,503 445,127Minority interests 20,006 10,317523,509 455,444Earnings per share (cents) 44Basic 16.95 15.15Diluted 16.91 15.00The accompanying notes are an integral part of the fi nancial statements.

Singapore Technologies Engineering LtdAnnual Report 2007 107Share Share Capital Other Retained Minority Totalcapital premium reserve reserves earnings Total interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Restated)(Restated) (Restated) (Restated)The GroupAt 1.1.2006 291,450 117,197 115,948 52,957 915,246 1,492,798 49,058 1,541,856Transfer from share premiumaccount to share capital uponimplementation of the Companies(Amendment) Act 2005 117,197 (117,197) – – – – – –Net fair value changes onavailable-for-sale financial assets – – – (14,542) – (14,542) – (14,542)Net fair value changes oncash flow hedges – – – (879) – (879) – (879)Foreign currency translationdifferences – – – (33,371) – (33,371) 4,151 (29,220)Net income recogniseddirectly in equity – – – (48,792) – (48,792) 4,151 (44,641)Net profit for the year – – – – 445,127 445,127 10,038 455,165Total recognised net incomefor the year – – – (48,792) 445,127 396,335 14,189 410,524Issue of shares 66,279 – – – – 66,279 – 66,279Acquisition of subsidiaries,as previously reported – – – – – – 89,616 89,616Finalisation of purchaseprice allocation – – – – – – (20,900) (20,900)Acquisition of subsidiaries,as restated – – – – – – 68,716 68,716Acquisition of additional interestin a subsidiary – – – – – – 80 80Capital contribution – – – – – – 4,971 4,971Cost of share-based payment – – – 9,431 – 9,431 80 9,511Dividends (Note 43) – – – – (399,473) (399,473) (15,191) (414,664)Revaluation surplus, aspreviously reported – – – 81 – 81 35 116Effect of adopting FRS 40 – – – (81) – (81) (35) (116)Revaluation surplus, as restated – – – – – – – –Transfer from unappropriatedprofit to statutory reserve – – – 246 (246) – – –At 31.12.2006 474,926 – 115,948 13,842 960,654 1,565,370 121,903 1,687,273

108Share Capital Other Retained Minority Totalcapital reserve reserves earnings Total interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2007 474,926 115,948 13,842 960,654 1,565,370 121,903 1,687,273Net fair value changes on available-for-salefinancial assets – – (4,978) – (4,978) – (4,978)Net fair value changes on cash flow hedges – – 1,646 – 1,646 – 1,646Foreign currency translation differences – – (21,113) – (21,113) 6,579 (14,534)Net income recognised directly in equity – – (24,445) – (24,445) 6,579 (17,866)Net profit for the year – – – 503,503 503,503 19,451 522,954Total recognised net income for the year – – (24,445) 503,503 479,058 26,030 505,088Issue of shares 79,962 – – – 79,962 – 79,962Acquisition of subsidiaries – – – – – 1,595 1,595Acquisition of additional interest in a subsidiary – – – – – (313) (313)Capital contribution – – – – – 19,220 19,220Cost of share-based payment – – 15,949 – 15,949 136 16,085Dilution of interest in a subsidiary – – – – – (84) (84)Disposal of a subsidiary – – (321) 712 391 – 391Dividends (Note 43) – – – (508,220) (508,220) (21,787) (530,007)Transfer from unappropriatedprofit to statutory reserve – – 394 (394) – – –At 31.12.2007 554,888 115,948 5,419 956,255 1,632,510 146,700 1,779,210Share-basedShare Share payment Retainedcapital premium reserves earnings Total$’000 $’000 $’000 $’000 $’000The CompanyAt 1.1.2006 291,450 117,197 1,974 396,815 807,436Transfer from share premium account toshare capital upon implementation of theCompanies (Amendment) Act 2005 117,197 (117,197) – – –Net profit for the year – – – 533,334 533,334Total recognised net income for the year – – – 533,334 533,334Issue of shares 66,279 – – – 66,279Cost of share-based payment – – 9,943 – 9,943Dividends (Note 43) – – – (399,473) (399,473)At 31.12.2006 474,926 – 11,917 530,676 1,017,519At 1.1.2007 474,926 – 11,917 530,676 1,017,519Net profit for the year – – – 543,287 543,287Total recognised net income for the year – – – 543,287 543,287Issue of shares 79,962 – – – 79,962Cost of share-based payment – – 16,329 – 16,329Dividends (Note 43) – – – (508,220) (508,220)At 31.12.2007 554,888 – 28,246 565,743 1,148,877The accompanying notes are an integral part of the fi nancial statements.

Singapore Technologies Engineering LtdAnnual Report 2007 1092007 2006$’000 $’000(Restated)Cash flows from operating activitiesProfit before taxation including share of results of associated companies and joint ventures 638,115 564,339Adjustments:Share of results of associated companies and joint ventures (46,647) (51,490)Depreciation charge 126,518 130,676Impairment in value of investments 3,007 8,428Impairment/(write-back of impairment) in value of associated companies (4,400) 4,865Property, plant and equipment written off 8,721 10,942Impairment/(write-back of impairment) of property, plant and equipment (105) 297Gain on disposal of property, plant and equipment (909) (11)Gain on dilution of interest in a subsidiary (84) –Gain on dilution of interest in an associated company – (571)(Gain)/loss on disposal of investments 4,037 (35,701)Loss on disposal of a subsidiary 3,506 –Gain on disposal of associated companies (20,702) –Short-term loans from minority shareholders forgiven – (2,766)Profit on maturity of amounts under fund management (24,490) (6,491)Negative goodwill written off – (615)Share-based payment expense 16,085 9,885Changes in fair value of financial instruments and hedged items 658 155Interest expense 50,356 42,252Interest income (42,462) (40,151)Dividends from investments (112) (10,291)Impairment of goodwill – 8,135Amortisation of other intangible assets 7,556 5,135Impairment/(write-back of impairment) of other intangible assets (27) 818Operating profit before working capital changes 718,621 637,840(Increase)/decrease in:Stocks and work-in-progress (124,953) (192,116)Progress billings in excess of work-in-progress 40,148 7,634Trade debtors (73,714) (78,653)Advance payments to suppliers (60,161) 26,613Other debtors, deposits and prepayments (30,965) 18,262Holding company and related corporations balances (743) 1,150Associated companies (3,521) (185)Joint ventures 9,655 18,912Trade creditors (19,853) 4,287Advance payments from customers 201,729 17,900Other creditors, accruals and provisions 54,796 47,461Loans to staff and third parties, net of repayments (465) 97Cash generated from operations 710,574 509,202Interest received 41,544 40,905Income tax paid (104,548) (95,193)Deferred income 2,962 1,798Exchange difference on operating activities 10,739 3,690Net cash from operating activities 661,271 460,402

1102007 2006$’000 $’000(Restated)Cash flows from investing activitiesProceeds from sale of property, plant and equipment 6,921 1,709Proceeds from sale of associated companies 58,292 –Dividends from associated companies 23,935 48,237Dividends from investments 112 10,291Proceeds from sale and maturity of investments 78,892 166,545Purchase of property, plant and equipment (172,044) (197,143)Purchase of investments (295) (880)Proceeds from capital redemption of investments – 170Loan to an investee company – (140)Additional investment/acquisition of associated companies and joint ventures (18,452) (34,258)Acquisition of other intangible assets (5,514) (3,466)Acquisition of subsidiaries 7,091 (356,696)Acquisition of additional interest in subsidiaries 25,625 (1,669)Disposal of a subsidiary (1,044) –Loans to joint ventures – (1,235)Exchange difference on investing activities 2,592 6,600Net cash from/(used in) investing activities 6,111 (361,935)Cash flows from financing activitiesCapital contribution from minority shareholders of subsidiaries 14,306 233Proceeds from issue of shares 79,962 65,905Loan from minority shareholders – 43Repayment of other loans, net (210) (923)Repayment of lease obligations, net (8,637) (2,245)(Repayment of)/proceeds from bank loans, net (10) 261,082Repayment of convertible loan (980) –Dividends paid to shareholders of the Company (508,220) (399,473)Dividends paid to minority shareholders of subsidiaries (21,787) (15,191)Interest paid (50,364) (36,979)Exchange difference on financing activities (17,110) (15,102)Net cash used in financing activities (513,050) (142,650)Net increase/(decrease) in cash and cash equivalents 154,332 (44,183)Cash and cash equivalents at beginning of the year 1,141,308 1,198,248Exchange difference on cash and cash equivalents at beginning of the year (12,916) (12,757)Cash and cash equivalents at end of the year (Note 46) 1,282,724 1,141,308

Singapore Technologies Engineering LtdAnnual Report 2007 111Summary of effect on acquisition of interest in subsidiariesIn 2007, the fair value of the identifiable assets and liabilities of the subsidiaries acquired (as disclosed in Note 8) and the effectthereof as at the date of acquisition were as follows:Recognised on Carrying amountacquisition before combination$’000 $’000Property, plant and equipment 4,144 4,144Other investments 1,445 1,445Deferred tax assets 499 499Stocks and work-in-progress 2,982 2,982Debtors, deposits and prepayment 24,577 24,577Short-term investment 338 338Cash and cash equivalents 9,336 9,33643,321 43,321Creditors and accruals (13,276) (13,276)Advance payments from customers (13) (13)Provisions (45) (45)Provision for taxation (1,402) (1,402)(14,736) (14,736)Net identifiable assets 28,585 28,585Goodwill arising on consolidation 93,788122,373Minority interests (1,595)Total purchase consideration 120,778Cost of acquisitions:Cash paid in subsequent year 117,437Reclassification from investment in a joint venture 1,096Cash paid in current year 2,245120,778Cash inflow on acquisitions:Cost of acquisitions (2,245)Net cash acquired with the subsidiaries 9,336Net cash inflow on acquisition 7,091Included in the carrying amount before combination are the assets and liabilities of Pacific Flight Services Pty Ltd and TelematicsWireless Ltd. The purchase price allocation of these subsidiaries to goodwill, intangible assets (excluding goodwill) and other assetsand liabilities is currently being assessed and is expected to be finalised within 12 months from the date of acquisition (as disclosed inNote 8).From the dates of acquisitions, the acquired subsidiaries have contributed $2.0 million in losses to the net profit of the Group. If theacquisitions had taken place at the beginning of the year, the turnover and net profit of the Group would have been $5.4 billion and$503.6 million respectively.

112Summary of effect on disposal of interest in a subsidiaryThe Group disposed Shanghai Elite Electric Vehicles Co., Ltd, a wholly-owned subsidiary during the year.The value of assets and liabilities of Shanghai Elite Electric Vehicles Co., Ltd, recorded in the financial statements as at disposal date,and the cash flow effect of the disposal were as follows:Property, plant and equipment 392Deferred tax assets 205Stocks and work-in-progress 2,389Debtors, deposits and prepayment 2,049Cash and cash equivalents 2,5197,554Creditors and accruals (2,862)Provisions (102)(2,964)Foreign currency translation reserve 391Net assets disposed 4,981Loss on disposal of a subsidiary (3,506)Consideration received 1,475Net cash disposed with a subsidiary (2,519)Net cash outflow on disposal (1,044)$’000The accompanying notes are an integral part of the fi nancial statements.

Singapore Technologies Engineering LtdAnnual Report 2007 113These 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 registeredoffice and principal place of business is 51 Cuppage Road #09-08, StarHub Centre, Singapore 229469.The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated inSingapore.The principal activities of the Company, are those of an investment holding company and the provision of engineering andrelated services. The principal activities of the subsidiaries are set out in Note 8 to the financial statements.The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of SingaporeTechnologies Engineering Ltd and its subsidiaries as at 31 December 2007 and for the year then ended were authorised andapproved by the Board of Directors for issuance on 26 February 2008.2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of financial statements preparationThe financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”) as required bythe Singapore Companies Act, Chapter 50.The financial statements have been prepared on the historical cost convention, except for derivative financial instrumentsand held for trading and available-for-sale financial assets that have been measured at their fair values.The carrying values of recognised assets and liabilities that are designated as hedged items in a fair value hedge areadjusted to record the gain or loss on the hedged items attributable to the hedged risks.The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000)except when otherwise indicated.The accounting policies have been consistently applied by the Company and the Group and except for changes inaccounting policies discussed in Note 2(ab), 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 toobtain benefits from its activities. The Group generally has such power when it, directly or indirectly, holds more than50% of the issued share capital, or controls more than half of the voting power, or controls the composition of theboard of the directors.In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairmentlosses.(ii) The consolidated financial statements include the financial statements of the Company and its subsidiaries made up tothe end of the financial year. The financial statements of the subsidiaries used in the presentation of the consolidatedfinancial statements are prepared for the same reporting date as the Company. Consistent accounting policies areapplied to like transactions and events in similar circumstances. The results of subsidiaries acquired or disposed ofduring the financial year are included from the effective date of acquisition or up to the effective date of disposal. Allsignificant inter-company balances and transactions are eliminated on consolidation.

1142. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(b) Basis of consolidation (continued)In the consolidated financial statements, subsidiaries are accounted for using the purchase method, except forthe Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited,Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred to as the “SchemeCompanies”) which resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangementunder Section 210 of the Companies Act, Chapter 50 in 1997.As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method hasbeen adopted in the preparation of the consolidated financial statements in connection with the amalgamation.Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises arerecorded at their existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recordedas share capital issued (plus any additional consideration in the form of cash or other assets) over the amountrecorded for the share capital acquired is recorded as merger reserve. The merger reserve had been utilised in prioryears to partially write off the goodwill on acquisition of Founders Industries Pte Ltd and its subsidiaries.Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They arepresented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and areseparately disclosed in the consolidated statement of profit and loss.(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 theconsolidated statement of profit and loss. The Group’s share of the post-acquisition accumulated profits and reservesof associated companies and joint ventures is included in the carrying value of the investments in the consolidatedbalance sheet.For this purpose, the audited financial statements of the associated companies and joint ventures are used. Whereaudited financial statements are not available, the share of results is arrived at from the last audited financialstatements available and unaudited management financial statements to the end of the accounting period.(iv) Goodwill or reserve on consolidation represents the excess or deficiency of the purchase consideration over the fairvalue (assigned by the directors) of the underlying net assets of the subsidiaries, associated companies and jointventures at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulatedimpairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected tobenefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group areassigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:• represents the lowest level within the Group at which the goodwill is monitored for internal managementpurposes; and• is not larger than a segment based on the Group’s reporting format determined in accordance with FRS 14Segment Reporting.

Singapore Technologies Engineering LtdAnnual Report 2007 1152. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(b) Basis of consolidation (continued)Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generatingunits), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cashgeneratingunits) is less than the carrying amount, an impairment loss is recognised. Impairment losses recognisedin respect of cash-generating unit (group of cash-generating units) are allocated first to reduce the carrying amountof any goodwill allocated to cash-generating unit (group of cash-generating units) and then, to reduce the carryingamount of the other assets in the cash-generating unit (group of cash-generating units) on a pro-rata basis.Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operationwithin that unit is disposed of, the goodwill associated with the operation disposed of is included in the carryingamount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in thiscircumstance is measured based on the relative fair values of the operation disposed of and the portion of the cashgeneratingunit retained.Any excess of the Group’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities overthe cost of business combination is recognised in the statement of profit and loss on the date of acquisition.(v) In the preparation of the consolidated financial statements, the balance sheets of foreign subsidiaries, associatedcompanies and joint ventures are translated into Singapore dollars at rates of exchange ruling at the balance sheetdate except for share capital and reserves, which are translated at historical rates of exchange. Operating resultsare translated at average rates of exchange for the year. Translation differences are taken to the Foreign CurrencyTranslation Reserve.Goodwill and fair value adjustments arising from the acquisition of a foreign subsidiary are treated as assets orliabilities and translated 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 ofaccounting.An associated company is a company not being a subsidiary or joint venture, in which the Group has a substantial interestof not less than 20 percent of the equity and in whose financial and operating policy decisions the Group exercisessignificant influence.A joint venture is a company, not being a subsidiary or associated company, in which the Group has a long-term interest ofnot more than 50 percent 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 costplus post-acquisition changes in the Group’s share of net assets of the associated company/joint venture. Goodwillrelating to an associated company is included in the carrying amount of the investment and is not amortised. Afterapplication of the equity method, the Group determines whether it is necessary to recognise any additional impairmentloss with respect to the Group’s net investment in the associated company/joint venture. The statement of profit and lossreflects the share of the results of operations of the associated company/joint venture. Where there has been a changerecognised directly in the equity of the associated company/joint venture, the Group recognises its share of any changesand discloses this, where applicable, in the statement of changes in equity.The reporting dates of the associated company/joint venture and the Group are identical and the accounting policiesconform to those used by the Group for like transactions and events in similar circumstances.

1162. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(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 suchindication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’srecoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value lesscosts to sell and its value in use and is determined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups of assets. When the carrying amount of anasset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Inassessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount ratethat reflects current market assessments of the time value of money and the risks specific to the asset. Impairment lossesof continuing operations are recognised in the statement of profit and loss in those expense categories consistent with thefunction of the impaired asset.An assessment is made at each reporting date as to whether there is any indication that previously recognised impairmentlosses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. Apreviously recognised impairment loss is reversed only if there has been a change in the estimates used to determine theasset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of theasset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would havebeen determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversalis recognised in the statement of profit and loss unless the asset is carried at revalued amount, in which case the reversalis treated as a revaluation increase. After such a reversal, the depreciation charged is adjusted in future periods to allocatethe asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.The Group does not reverse in a subsequent period any impairment loss recognised for goodwill.(e) Investments and other financial assetsFinancial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractualprovisions of the financial instrument. When financial assets are recognised initially, they are measured at fair value, plus,in the case of investments not at fair value through profit and loss, directly attributable transaction costs. The Groupdetermines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluatesthis 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 Groupcommits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets thatrequire delivery of assets within the period generally established by regulation or convention in the marketplace concerned.(i) Financial assets at fair value through profit or lossFinancial assets classified as held for trading are included in the category “financial assets at fair value through profitor loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the nearterm. 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 statement of profit and loss.(ii) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted inan active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses arerecognised in the statement of profit and loss when the loans and receivables are derecognised or impaired, as well asthrough the amortisation process.

Singapore Technologies Engineering LtdAnnual Report 2007 1172. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(e) Investments and other financial assets (continued)(iii) Available-for-sale financial assetsAvailable-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale orare not classified in any of the two preceding categories. After initial recognition, available-for-sale financial assets aremeasured at fair value with gains or losses being recognised as a separate component of equity until the investment isderecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previouslyreported in equity is included in the statement of profit and loss.The fair value of investments that are actively traded in organised financial markets is determined by reference toquoted market prices at the close of business on the balance sheet date. For investments where there is no activemarket, fair value is determined using valuation techniques. Such techniques include using recent arm’s length markettransactions; reference to the current market value of another instrument, which is substantially the same; discountedcash flow analysis and option pricing models.For investments where there is no active market and where fair value cannot be reliably measured, they are measuredat cost.(f) Amounts under fund managementAmounts under fund management are classified as available-for-sale investments and the recognition criteria is as statedin Note 2(e)(iii) above, except for the impairment assessment.Provision for impairment in value is made up to the non-guaranteed returns of the principal sums by the fund managerswhen the market value of the fund is below cost.(g) Property, plant and equipment and depreciationProperty, plant and equipment are stated at cost or valuation, net of depreciation and any impairment loss. Depreciation isprovided on the straight-line basis so as to write off the cost of these assets over their estimated useful lives as follows:Freehold land and buildings – 15 to 30 yearsLeasehold land and buildings – Over the period of the lease of between 5 to 60 yearsBuildings on rented properties – 30 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 – 1 to 5 yearsTransportation equipment and vehicles – 4 to 5 yearsAircraft and aircraft engines – 5 to 15 yearsConstruction-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 theproject, whichever is shorter.The residual value, useful life and depreciation method are reviewed at each financial year end to ensure that the amount,method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of thefuture economic benefits embodied in the items of property, plant and equipment.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits areexpected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the statement ofprofit and loss in the year the asset is derecognised.

1182. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(h) Investment propertiesInvestment properties are stated at cost, net of depreciation and any impairment loss. Depreciation is provided on thestraight-line basis so as to write off the cost of the investment properties over their estimated useful lives of 3 to 50 years.(i) 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 ismade 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 materialand labour costs, equipment and sub-contracting services, together with appropriate overhead expenses. Provision forforeseeable losses on uncompleted contracts is made in the year in which such losses are determined.(j) Trade and other debtorsTrade and other debtors are classified as loans and receivables under FRS 39. The accounting policy for this category offinancial assets is stated in Note 2(e).An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collectthe debt. Known bad debts are written off. Further details on the accounting policy for impairment of financial assets arestated in Note 2(l).(k) Cash and cash equivalentsCash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalentsare short-term, highly liquid investments and short-term loans to related corporations that are readily convertible to knownamounts of cash and that are subject to insignificant risk of changes in value.For the purposes of the statement of cash flows, cash and cash equivalents are shown net of outstanding bank overdrafts.Cash and cash equivalents carried in the balance sheets are classified as loans and receivables under FRS 39. Theaccounting policy for this category of financial assets is stated in Note 2(e).(l) 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 beenincurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the presentvalue of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at thefinancial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). Thecarrying amount of the asset shall be reduced either directly or through use of an amortisation account. The amountof the loss shall be recognised in the statement of profit and loss.The Group first assesses whether objective evidence of impairment exists individually for financial assets that areindividually significant, and individually or collectively for financial assets that are not individually significant. If it isdetermined that no objective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, the assets is included in a group of financial assets with similar credit risk characteristics and thatgroup of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairmentand for which an impairment loss is or continues to be recognised are not included in a collective assessment ofimpairment.

Singapore Technologies Engineering LtdAnnual Report 2007 1192. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(l) Impairment of financial assets (continued)To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, theGroup considers factors such as the probability of insolvency or significant financial difficulties of the debtor anddefault or significant delay in payments.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectivelyto an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.Any subsequent reversal of an impairment loss is recognised in the statement of profit and loss, to the extent that thecarrying value of the asset does not exceed its amortised 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 issueroperates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on anunquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or ona derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has beenincurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the presentvalue of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Theloss 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 thatinvestment securities classified as available-for-sale financial assets are impaired.If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of anyprincipal payment and amortisation) and its current fair value, less any impairment loss previously recognised in thestatement of profit and loss, is transferred from equity to the statement of profit and loss. Reversals in respect ofequity instruments classified as available-for-sale are not recognised in the statement of profit and loss. Reversalsof impairment losses on debt instruments are reversed through the statement of profit and loss, if the increase in fairvalue of the instrument can be objectively related to an event occurring after the impairment loss was recognised inthe statement of profit and loss.(m) Trade and other creditorsTrade and other creditors are initially recognised at fair value and subsequently measured at amortised cost using theeffective interest method.Gains and losses are recognised in the statement of profit and loss when the liabilities are derecognised as well asthrough the amortisation process.(n) BorrowingsBorrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method.Gains and losses are recognised in the statement of profit and loss when the liabilities are derecognised as well throughthe amortisation process.Borrowing costs are recognised as expenses in the period in which they are incurred.

1202. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(o) ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliableestimate can be made of the amount of the obligation.(i) WarrantiesThe warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date.The provision is based on past experience and industry averages for defective products. The majority of the costs isexpected to be incurred over the applicable warranty periods.(ii) Liquidated damagesProvision for liquidated damages is made in respect of anticipated claims from customers on contracts of whichdeadlines are overdue or not expected to be completed on time in accordance with contractual obligations. Theutilisation of provisions is dependent on the timing of claims.(p) Income taxes(i) Current taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to berecovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are thosethat are enacted or substantively enacted by the balance sheet date.(ii) Deferred taxDeferred income tax is provided, using the liability method, on all temporary differences at the balance sheet datebetween the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferredtax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled based on tax rates enacted or substantivelyenacted at the balance sheet date.Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries,associated companies and interests in joint ventures, except where the timing of the reversal of the temporarydifference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets andunused tax losses, to the extent that it is probable that taxable profit will be available against which the deductibletemporary 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 ofdeferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it hasbecome probable that future taxable profit will allow the deferred tax asset to be recovered. The Group converselyreduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxableprofit will be available to allow the benefit of part or all of the deferred tax asset to be utilised.Deferred taxes are recognised in the statement of profit and loss except that deferred tax relating to items recogniseddirectly in equity is recognised directly in equity and deferred tax arising from a business combination is adjustedagainst goodwill on acquisition.

Singapore Technologies Engineering LtdAnnual Report 2007 1212. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(q) Employee benefits(i) Employee equity compensation benefits• Share Option PlanPursuant to the ST Engineering Share Option Plan, certain directors and employees are granted non-transferableoptions to purchase the Company’s shares. The fair value of options granted is determined using a binomial modeland is recognised as an employee expense with a corresponding increase in equity. The fair value is measured atgrant date and spread over the period during which the employees become unconditionally entitled to the options.In valuing the share option, no account is taken of any performance condition, other than market conditions, if any.The cumulative expense recognised for share options at each reporting date until the vesting date reflects theextent to which the vesting period has expired and the Group’s best estimate of the number of share options thatwill ultimately vest. The charge or credit to the statement of profit and loss for a period represents the movementin cumulative expense recognised as at the beginning and end of that period.The proceeds received are credited to share capital when the options are exercised.The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earningsper share.• Performance Share PlanPursuant to the ST Engineering Performance Share Plan, the Company’s shares can be awarded to certainemployees and directors of the Group. The details of the Performance Share Plan are described in Note 3.The performance shares cost is amortised and recognised in the statement of profit and loss on a straightlinebasis over the three-year performance period. The fair value of the performance shares is determined atconditional grant date using the Monte Carlo simulation model, which takes into account the market conditionsand non-market conditions.• Restricted Stock PlanPursuant to the ST Engineering Restricted Stock Plan, the Company’s shares can be awarded to certainemployees and directors of the Group. The details of the Restricted Stock Plan are described in Note 3.The restricted shares cost is amortised and recognised in the statement of profit and loss over the vesting period.The fair value of the restricted shares is determined on conditional grant date using the Monte Carlo simulationmodel.(ii) Defined contribution plansThe Group participates in the national pension schemes as defined by the laws of the countries in which it hasoperations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fundscheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes arerecognised as an expense in the period in which the related service is performed.(r) Income recognitionIncome is recognised using the following methods:(i) Income from sale of goods and services rendered is recognised upon delivery of goods/services and acceptance bycustomers.

1222. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(r) Income recognition (continued)(ii) Income from long-term contracts is recognised by reference to stage of completion, which is measured by either:(a) the percentage of costs incurred to estimated total costs to complete the contracts; or(b) when goods and services, representing part of a contract, are delivered; or(c) upon completion of designated phases of a contract.Provision for foreseeable losses on uncompleted contracts is made as soon as such losses are determinable.(iii) Dividend income is recognised when the shareholder’s rights to receive payment is established.(iv) Management fee income is recognised on an accrual basis upon which management services are rendered.(v) For certain subsidiaries, the first 15 percent of the total commission receivable for each contract is treated asdownpayment and is deferred and taken up in the statement of profit and loss only upon the discharge of specifiedcontractual obligations. Commission income in respect of each contract in excess of the first 15 percent of the totalamount receivable is taken up in the statement of profit and loss as and when it is billed. For certain back to backcontracts, commission income is recognised upon delivery of goods and services.(vi) Any surplus arising from amounts under fund management can only be determined at the end of the relevant fundmanagement period. Such surplus, if any, will be recognised as income then.(vii) Finance charges from hire purchase financing is recognised based on the sum of digits method over the financeperiod.(viii) Interest income, including income arising from finance leases and other financial instruments, is recognised on anaccrual basis using the effective interest method.(ix) Rental income arising from investment properties is accounted for on a straight-line basis over the lease terms.(s) Foreign currency transactions/translation(i) Foreign currency transactionsTransactions in foreign currencies are measured in the respective functional currencies of the Company andits subsidiary companies and are recorded on initial recognition in the functional currencies at exchange ratesapproximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currenciesare translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measuredin terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initialtransactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange ratesat the date when the fair value was determined.Exchange differences arising on the settlement of monetary items or on translating monetary items at the balancesheet date are recognised in the statement of profit and loss except for exchange differences arising on monetaryitems that form part of the Group’s net investment in foreign subsidiary companies, which are recognised initiallyin a separate component of equity as foreign currency translation reserve in the consolidated balance sheet andrecognised in the consolidated statement of profit and loss on disposal of the subsidiary. In the Company’s separatefinancial statements, such exchange differences are recognised in the statement of profit and loss.Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation arealso taken directly to the foreign currency translation reserve until the disposal of the net investment, at which timethey are recognised in the statement of profit and loss. Tax charges and credits attributable to exchange differenceson those borrowings are also dealt with in the foreign currency translation reserve.

Singapore Technologies Engineering LtdAnnual Report 2007 1232. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(s) Foreign currency transactions/translation (continued)(ii) Foreign currency translationThe results and financial position of foreign subsidiaries are translated into Singapore dollars using the followingprocedures:• Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balancesheet date; and• Income and expenses for each statement of profit and loss are translated at average exchange rates for the year,which approximates the exchange rates at the dates of the transactions.All resulting exchange differences are recognised in a separate component of equity as foreign currency translationreserve.Goodwill and fair value adjustments arising on the acquisition of foreign subsidiaries on or after 1 January 2005 aretreated as assets and liabilities of the foreign subsidiaries and are recorded in the functional currency of the foreignsubsidiaries and translated at the closing rate at the balance sheet date.On disposal of a foreign subsidiary, the cumulative amount of exchange differences deferred in equity relating to thatforeign subsidiary is recognised in the statement of profit and loss as a component of the gain or loss on disposal.(t) Intangible assetsIntangible assets acquired separately are measured on initial recognition at costs. The cost of intangible assets acquiredin a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assetsare carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generatedintangible assets are not capitalised and the expenditure is charged against profits in the year in which the expenditureis incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finitelives are amortised over the economic useful life and assessed for impairment whenever there is an indication that theintangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finiteuseful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern ofconsumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period ormethod, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assetwith finite lives is recognised in the statement of profit and loss in the expense category consistent with the function of theintangible asset.Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generatingunit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewedannually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful lifeassessment from indefinite to finite is made on a prospective basis.(i) Research and development expenditureResearch and development expenditure is charged to the statement of profit and loss as and when incurred.(ii) 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.

1242. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(t) Intangible assets (continued)(iii) 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.(iv) BrandsCosts relating to brands, which are acquired are capitalised and amortised on a straight-line basis over their estimatedeconomic useful life of 70 years.(v) 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.(u) Hire purchaseAssets acquired on hire purchase arrangements are capitalised in the financial statements and the correspondingobligations treated as a liability. The total interest, being the difference between the total instalments payable and thecapitalised amount, is charged to the statement of profit and loss over the period of such hire purchase arrangements inequal monthly instalments to produce a constant rate of charge on the balance of capital repayments outstanding. Assetsacquired on hire purchase arrangements are depreciated in accordance with the policy set out in Note 2(g) above.(v) Finance leases(i) As lesseeFinance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks andbenefits incidental to ownership of the lease items. Assets financed under such leases are treated as if they had beenpurchased outright at the present value of the minimum lease payments and the corresponding leasing commitmentsare shown as obligations to the lessors. Lease payments are treated as consisting of capital and interest elementsand interest is charged to the statement of profit and loss over the period of the lease to produce a constant rateof charge on the balance of capital repayments outstanding. Assets acquired on finance lease arrangements aredepreciated in accordance with the policy set out in Note 2(g) above.(ii) As lessorLeases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leasedassets, are classified as finance lease.The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs fornegotiating and arranging the lease) is recognised on the balance sheet. The difference between the grossreceivables and the present value of the lease receivables is recognised as unearned finance income.Each lease payment received is applied against the gross investment in the finance lease receivables to reduce boththe principal and the unearned finance income. The finance income is recognised in the statement of profit and losson a basis that reflects a constant periodic rate of return on the net investment in the finance lease receivables.Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance leasereceivables and recognised as an expense in the statement of profit and loss over the lease term on the same basis asthe leased income.

Singapore Technologies Engineering LtdAnnual Report 2007 1252. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(w) Operating leasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, areclassified as operating leases. Operating lease payments are recognised as an expense in the statement of profit and losson 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 leaseterm on a straight-line basis.(x) Government grantsGrants in recognition of specific expenses are taken to income in the same year as the relevant expenses. Grants relatedto depreciable assets are deferred and allocated to income over the period in which such assets are depreciated and usedin the projects subsidised by the grants.(y) Derivative financial instruments and hedgingThe Group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedgeits risks associated with foreign currency and interest rate fluctuations. Such derivative financial instruments are initiallyrecognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fairvalue. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are takendirectly to the statement of profit and loss for the year.The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contractswith similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values forsimilar instruments.The Group uses cash from time to time as a hedging instrument to hedge its risk associated with foreign currencyfluctuations.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 theGroup wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. Thedocumentation includes identification of the hedging instrument, the hedge item or transaction, the nature of the risk beinghedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in thehedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effectivein achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that theyactually have been highly effective throughout the financial reporting periods for which they were designated.Hedges which meet the strict criteria for hedge accounting are accounted for as follows:(i) Fair value hedgesFor fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the riskbeing hedged, the hedging instrument is remeasured at fair value and gains and losses from both are taken to thestatement of profit and loss.For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised throughprofit or loss over the remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument forwhich the effective interest method is used is amortised in the statement of profit and loss.

1262. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(y)Derivative financial instruments and hedging (continued)(i) Fair value hedges (continued)Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceasesto be adjusted for changes in its fair value attributable to the risk being hedged.When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change inthe fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with acorresponding gain or loss recognised in the statement of profit and loss. The changes in the fair value of thehedging instrument are also recognised in the statement of profit and loss.The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated orexercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation.Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used isamortised in the statement of profit and loss. Amortisation may begin as soon as an adjustment exists and shallbegin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the riskbeing hedged.(ii) Cash flow hedgesFor cash flow hedges the effective portion of the gain or loss on the hedging instrument is recognised directly inequity, while the ineffective portion is recognised in the statement of profit and loss.Amounts taken to equity are transferred to the statement of profit and loss when the hedged transaction affectsprofit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale orpurchase occurs. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equityare transferred to the initial carrying amount of the non-financial asset or liability.If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferredto the statement of profit and loss. If the hedging instrument expires or is sold, terminated, or exercised withoutreplacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain inequity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken tothe statement of profit and loss.(z)SegmentsFor management purposes, the Group is organised on a worldwide basis into four major operating businesses, which isthe basis on which the Group reports its primary segment information.Segment revenue, expenses and results include transfers between business segments and between geographicalsegments. Such transfers are accounted for on an arm’s length basis.(aa) 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) isderecognised 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 topay them in full without material delay to a third party under a “pass-through” arrangement; or• The Group has transferred its rights to receive cash flows from the asset and either (a) has transferredsubstantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all therisks and rewards of the asset, but has transferred control of the asset.

Singapore Technologies Engineering LtdAnnual Report 2007 1272. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(aa) 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 norretained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset isrecognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes theform of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the assetand the maximum amount of consideration that the Group could be required to repay.Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, theextent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase,except that in the case of a written put option on an asset measured at fair value, the extent of the Group’scontinuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a)the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulativegain or loss that has been recognised directly in equity is recognised in the statement of profit and loss.(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 theterms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognitionof the original liability and the recognition of a new liability, and the difference in the respective carrying amounts isrecognised in the statement of profit and loss.(ab) Changes in accounting policies(i) Adoption of new and revised FRSWith effect from 1 January 2007, the Group has adopted all the new and revised FRS and INT FRS that aremandatory for financial years beginning on or after 1 January 2007. The adoption of these FRS and INT FRS has nosignificant impact to the Group.• FRS 40The new FRS 40 Investment Property that came into effect for the Group in the financial year beginning 1January 2007 requires the properties (land or a building, or part of a building, or both) held to earn rentals tobe classified as “Investment Properties”. In adopting FRS 40, investment properties of the Group are measuredat cost less accumulated depreciation and impairment losses. Under the provision of FRS 40, the change inaccounting policy has resulted in the following accounts in the financial statements as at 31 December 2006being reclassified with no impact to the statement of profit and loss.Balance Sheet $mProperty, plant and equipment (17)Investment properties 17

1282. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(ab) Changes in accounting policies (continued)(ii) FRS and INT FRS not yet effectiveThe Group has not applied the following FRS and INT FRS that have been issued but not yet effective:Effective for annualperiods beginningon or afterFRS 23 : Amendment to FRS 23, Borrowing Costs 1 January 2009FRS 108 : Operating Segments 1 January 2009INT FRS 111 : Group and Treasury Share Transactions 1 March 2007INT FRS 112 : Service Concession Arrangements 1 January 2008The Group expects that the adoption of the above pronouncements will not have a significant impact on the financialstatements in the period of initial application, except for FRS 108 as indicated below.FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chiefoperating decision maker. The impact of this standard on the other segment disclosures is still to be determined. Asthis is disclosure standard, it will have no impact on the financial position or financial performance of the Group whenimplemented in 2009.(ac) Significant accounting estimates and judgementsEstimates and assumptions concerning the future are made in the preparation of the financial statements. They affectthe application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, anddisclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, includingexpectations of future events that are believed to be reasonable under the circumstances.(i) Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheetdate, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilitieswithin the next financial year are discussed below.• Impairment of goodwillThe Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation ofthe value-in-use of the cash-generating units to which the goodwill is allocated. Estimating the value-in-userequires the Group to make an estimate of the expected future cash flows from the cash-generating unit andalso to choose a suitable discount rate in order to calculate the present value of those cash flows. The carryingamount of the Group’s goodwill at 31 December 2007 was $492,651,000 (2006: $425,130,000). More detailsare provided in Note 11.• Impairment of investments and fi nancial assetsThe Group follows the guidance of FRS 39 on determining when an investment or financial asset is other-thantemporarilyimpaired. This determination requires significant judgement, the Group evaluates, among otherfactors, the duration and extent to which the fair value of an investment or financial asset is less than its cost;and the financial health of and near-term business outlook for the investment or financial asset, including factorssuch as industry and sector performance, changes in technology and operational and financing cash flow.

Singapore Technologies Engineering LtdAnnual Report 2007 1292. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(ac) Significant accounting estimates and judgements (continued)(i) Key sources of estimation uncertainty (continued)• Depreciation chargeProperty, plant and equipment and investment properties are depreciated on a straight-line basis over theirestimated useful lives. Management estimates the useful lives of these property, plant and equipment andinvestment properties to be within 1 to 60 years. The carrying amount of the Group’s property, plant andequipment and investment properties at 31 December 2007 was $1,033,002,000 (2006: $965,109,000).Changes in the expected level of usage and technological developments could impact the economic usefullives and the residual values of these property, plant and equipment and investment properties, therefore futuredepreciation charges could be revised.(ii) Critical judgements made in applying accounting policiesIn the process of applying the Group’s accounting policies, management has made certain judgements, apart fromthose involving estimations, which have significant effect on the amounts recognised in the financial statements.3. SHARE CAPITAL• Income taxesThe Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved indetermining the group-wide provision for income taxes. There are certain transactions and computations forwhich the ultimate tax determination is uncertain during the ordinary course of business. The Group recognisesliabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the finaltax outcome of these matters is different from the amounts that were initially recognised, such differenceswill impact the income tax and deferred tax provisions in the period in which such determination is made. Thecarrying amount of the Group’s tax payables at 31 December 2007 was $201,324,000 (2006: $213,931,000).Group and Company2007 2006$’000 $’000Issued and fully paidAt beginning of the year2,946,253,631 (2006: 2,914,495,627) ordinary shares 474,926 291,450Transfer from share premium account – 117,197Issued during the year37,296,756 (2006: 31,758,004) ordinary shares 79,962 66,279At end of the year2,983,550,387 (2006: 2,946,253,631) ordinary shares 554,888 474,926Included in share capital is a special share issued to the Minister for Finance (Incorporated). The special share enjoys all therights attached to the ordinary shares. In addition, the special share carries the right to approve any resolution to be passed bythe Company, either in general meeting or by its Board of Directors, on certain matters specified in the Company’s Articles ofAssociation. The special share may be converted at any time into an ordinary share.The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary sharescarry one vote per share without restriction.

1303. SHARE CAPITAL (continued)The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering PerformanceShare Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”) of the Company wereapproved by its members at an Extraordinary General Meeting held on 23 November 2000. The ESOP, PSP and RSP areadministered by the Executive Resource and Compensation Committee (“ERCC”) comprising three directors, Mr Peter SeahLim Huat, Mr Venkatachalam Krishnakumar and Dr Philip Nalliah Pillai.Singapore Technologies Engineering Share Option Plan (“ESOP”)Information regarding ESOP is as follows:(a) The exercise price of the options is equal to volume-weighted average price for the shares on the Singapore Exchangeover the three consecutive trading days immediately preceding the date of grant.(b) The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to bedetermined by ERCC and are settled in cash.(c) The options granted expire after five years for non-executive directors, and 10 years for the employees of the Companyand its subsidiaries.During the financial year, the Company issued 37,296,756 (2006: 30,953,004) ordinary shares for cash at the respective priceper share upon the exercise of options granted by the Company under ESOS and ESOP.Grant no. No. of ordinary shares issued Price per ordinary share$97R1 332,981 0.42297R3 262,002 0.49297R5 92,471 0.72098R1 565,500 1.39098R3 115,000 1.29099R1 2,348,940 1.4189902 381,490 2.0002001 6,610,887 2.2602002 471,000 1.8082003 277,752 2.3900102N 1,975,480 2.7200108N 2,465,085 2.6800202N 2,085,559 2.2900202ND 496,000 2.2900208N 2,271,909 1.9200208ND 101,750 1.9200302N 2,961,803 1.7900302ND 90,750 1.7900302P 10,000 1.7900308N 2,827,938 1.8600308ND 72,939 1.8600308P 20,000 1.8600402N 2,339,177 2.0900402ND 42,800 2.0900402P 15,000 2.0900406N 50,000 2.0000408N 2,474,261 2.1200408ND 38,050 2.120

Singapore Technologies Engineering LtdAnnual Report 2007 1313. SHARE CAPITAL (continued)Grant no. No. of ordinary shares issued Price per ordinary share$0408P 15,000 2.1200502N 1,982,721 2.3700502ND 27,000 2.3700508N 1,789,015 2.5700508ND 25,125 2.5700602N 966,844 3.0100602ND 15,875 3.0100608N 662,777 2.8400608ND 15,875 2.840At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees anddirectors of the Company are as follows:(i) Options outstanding under the ESOS/ESOPNumber of shares2007 2006ESOSAt beginning of the year 29,276,128 40,533,204Exercised (11,458,023) (11,161,676)Lapsed (1,528,773) (95,400)At end of the year 16,289,332 29,276,128Exercisable at end of the year 16,289,332 29,276,128ESOPAt beginning of the year 125,092,641 117,256,385Granted and accepted 31,973,758 31,361,732Exercised (25,838,733) (19,791,328)Lapsed (5,936,160) (3,734,148)At end of the year 125,291,506 125,092,641Exercisable at end of the year 52,201,700 45,687,091

1323. SHARE CAPITAL (continued)(ii) Details of share options2007Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:Balanceas at1.1.2007or date Options Balance No. ofDate of of grant lapsed/ Options as at holders at Exercisegrant if later (adjustment) exercised 31.12.2007 31.12.2007 price Exercisable period$6.12.1997 332,981 – 332,981 – – 0.422 18.5.1999 to 2.4.20076.12.1997 262,002 – 262,002 – – 0.492 18.5.1999 to 24.4.20076.12.1997 92,471 – 92,471 – – 0.720 11.9.1999 to 9.9.200729.4.1998 1,580,750 (6,250) 565,500 1,021,500 16 1.390 30.4.2000 to 29.4.20087.8.1998 215,000 25,000 115,000 75,000 15 1.290 8.8.2000 to 7.8.20089.2.1999 4,664,860 286,180 2,348,940 2,029,740 46 1.418 10.2.2001 to 9.2.200910.8.1999 1,086,400 137,000 381,490 567,910 97* 2.000 11.8.2001 to 10.8.20099.2.2000 18,731,580 828,843 6,610,887 11,291,850 227** 2.260 10.2.2002 to 9.2.20109.2.2000 1,235,125 (65,000) 471,000 829,125 29 1.808 10.2.2002 to 9.2.20106.9.2000 1,074,959 323,000 277,752 474,207 24 2.390 7.9.2002 to 6.9.2010Total 29,276,128 1,528,773 11,458,023 16,289,332

Singapore Technologies Engineering LtdAnnual Report 2007 1333. SHARE CAPITAL (continued)2007Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Balanceas at1.1.2007or date Balance No. ofDate of of grant Options Options as at holders at Exercisegrant if later lapsed exercised 31.12.2007 31.12.2007 price Exercisable period$19.2.2001 7,432,061 357,308 1,975,480 5,099,273 441** 2.720 20.2.2002 to 19.2.201110.8.2001 9,587,619 289,176 2,465,085 6,833,358 465** 2.680 11.8.2002 to 10.8.20117.2.2002 7,254,468 249,256 2,085,559 4,919,653 394** 2.290 8.2.2003 to 7.2.20127.2.2002 496,000 – 496,000 – – 2.290 8.2.2003 to 7.2.200712.8.2002 5,580,266 245,643 2,271,909 3,062,714 312** 1.920 13.8.2003 to 12.8.201212.8.2002 101,750 – 101,750 – – 1.920 13.8.2003 to 12.8.20076.2.2003 6,433,790 310,152 2,961,803 3,161,835 353** 1.790 7.2.2004 to 6.2.20136.2.2003 318,500 – 90,750 227,750 12 # 1.790 7.2.2004 to 6.2.20086.2.2003 14,972 – 10,000 4,972 1 1.790 7.2.2004 to 6.2.201311.8.2003 7,946,329 335,107 2,827,938 4,783,284 663** 1.860 12.8.2004 to 11.8.201311.8.2003 320,064 – 72,939 247,125 13 # 1.860 12.8.2004 to 11.8.200811.8.2003 28,754 – 20,000 8,754 1 1.860 12.8.2004 to 11.8.20139.2.2004 9,435,793 344,675 2,339,177 6,751,941 986** 2.090 10.2.2005 to 9.2.20149.2.2004 314,100 – 42,800 271,300 16 # 2.090 10.2.2005 to 9.2.20099.2.2004 31,426 – 15,000 16,426 2 2.090 10.2.2005 to 9.2.201421.6.2004 100,000 50,000 50,000 – – 2.000 22.6.2005 to 21.6.201410.8.2004 11,126,767 425,235 2,474,261 8,227,271 1,049** 2.120 11.8.2005 to 10.8.201410.8.2004 277,475 – 38,050 239,425 16 # 2.120 11.8.2005 to 10.8.200910.8.2004 31,426 – 15,000 16,426 2 2.120 11.8.2005 to 10.8.20147.2.2005 12,487,006 465,051 1,982,721 10,039,234 1,097** 2.370 8.2.2006 to 7.2.20157.2.2005 348,625 – 27,000 321,625 17 # 2.370 8.2.2006 to 7.2.20107.2.2005 31,426 – – 31,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 14,248,987 635,643 1,789,015 11,824,329 1,229** 2.570 11.8.2006 to 10.8.201510.8.2005 334,291 – 25,125 309,166 17 # 2.570 11.8.2006 to 10.8.201010.8.2005 31,426 – – 31,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 14,291,958 616,162 966,844 12,708,952 1,321** 3.010 10.2.2007 to 9.2.20169.2.2006 377,500 – 15,875 361,625 18 # 3.010 10.2.2007 to 9.2.201110.8.2006 15,738,362 855,999 662,777 14,219,586 1,440** 2.840 11.8.2007 to 10.8.201610.8.2006 371,500 – 15,875 355,625 18 # 2.840 11.8.2007 to 10.8.201115.3.2007 16,274,367 ## 591,135 – 15,683,232 1,562** 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 15,012,391 ## 165,618 – 14,846,773 1,698 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 157,066,399 5,936,160 25,838,733 125,291,506* Includes 1 executive Director and 1 past Director of the Company** Includes 1 executive Director of the Company#Includes Directors of the Company and its subsidiaries##These numbers relate to options granted and accepted in 2007

1343. SHARE CAPITAL (continued)2006Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:Balanceas at1.1.2006or date Balance No. ofDate of of grant Options Options as at holders at Exercisegrant if later lapsed exercised 31.12.2006 31.12.2006 price Exercisable period$6.12.1997 43,138 – 43,138 – – 0.905 18.5.1999 to 3.4.20066.12.1997 257,698 – 257,698 – – 0.373 18.5.1999 to 30.8.20066.12.1997 174,668 – 174,668 – – 0.465 18.5.1999 to 16.10.20066.12.1997 367,981 – 35,000 332,981 3 0.422 18.5.1999 to 2.4.20076.12.1997 8 – 8 – – 0.629 18.5.1999 to 7.4.20076.12.1997 262,002 – – 262,002 2 0.492 18.5.1999 to 24.4.20076.12.1997 92,471 – – 92,471 2 0.720 11.9.1999 to 9.9.200729.4.1998 2,155,000 – 574,250 1,580,750 33 1.390 30.4.2000 to 29.4.20087.8.1998 265,000 – 50,000 215,000 40** 1.290 8.8.2000 to 7.8.20089.2.1999 6,383,590 – 1,718,730 4,664,860 88** 1.418 10.2.2001 to 9.2.200910.8.1999 1,894,500 5,000 803,100 1,086,400 169* 2.000 11.8.2001 to 10.8.20099.2.2000 24,986,953 51,400 6,203,973 18,731,580 336** 2.260 10.2.2002 to 9.2.20109.2.2000 1,779,865 15,000 529,740 1,235,125 39 1.808 10.2.2002 to 9.2.20106.9.2000 1,870,330 24,000 771,371 1,074,959 35 2.390 7.9.2002 to 6.9.2010Total 40,533,204 95,400 11,161,676 29,276,128

Singapore Technologies Engineering LtdAnnual Report 2007 1353. SHARE CAPITAL (continued)2006Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Balanceas at1.1.2006or date Balance No. ofDate of of grant Options Options as at holders at Exercisegrant if later lapsed exercised 31.12.2006 31.12.2006 price Exercisable period$19.2.2001 9,297,650 69,099 1,796,490 7,432,061 633** 2.720 20.2.2002 to 19.2.201119.2.2001 225,000 – 225,000 – – 2.720 20.2.2002 to 19.2.200619.2.2001 745,000 – 745,000 – – 2.720 20.2.2002 to 19.2.200610.8.2001 452,500 452,500 – – – 2.680 11.8.2002 to 10.8.200610.8.2001 12,498,029 92,201 2,818,209 9,587,619 657** 2.680 11.8.2002 to 10.8.20117.2.2002 9,408,471 32,127 2,121,876 7,254,468 616** 2.290 8.2.2003 to 7.2.20127.2.2002 593,750 – 97,750 496,000 11 # 2.290 8.2.2003 to 7.2.200712.8.2002 8,055,308 94,893 2,380,149 5,580,266 718** 1.920 13.8.2003 to 12.8.201212.8.2002 132,000 – 30,250 101,750 2 # 1.920 13.8.2003 to 12.8.20076.2.2003 9,247,254 148,476 2,664,988 6,433,790 969** 1.790 7.2.2004 to 6.2.20136.2.2003 348,750 – 30,250 318,500 16 # 1.790 7.2.2004 to 6.2.20086.2.2003 24,972 – 10,000 14,972 2 1.790 7.2.2004 to 6.2.201311.8.2003 10,446,835 226,885 2,273,621 7,946,329 1,016** 1.860 12.8.2004 to 11.8.201311.8.2003 330,500 – 10,436 320,064 17 # 1.860 12.8.2004 to 11.8.200811.8.2003 28,754 – – 28,754 2 1.860 12.8.2004 to 11.8.20139.2.2004 11,554,310 270,907 1,847,610 9,435,793 995** 2.090 10.2.2005 to 9.2.20149.2.2004 325,325 – 11,225 314,100 16 # 2.090 10.2.2005 to 9.2.20099.2.2004 31,426 – – 31,426 2 2.090 10.2.2005 to 9.2.201421.6.2004 100,000 – – 100,000 1 2.000 22.6.2005 to 21.6.201410.8.2004 12,988,412 454,008 1,407,637 11,126,767 1,129** 2.120 11.8.2005 to 10.8.201410.8.2004 286,325 – 8,850 277,475 16 # 2.120 11.8.2005 to 10.8.200910.8.2004 31,426 – – 31,426 2 2.120 11.8.2005 to 10.8.20147.2.2005 14,035,878 589,074 959,798 12,487,006 1,171** 2.370 8.2.2006 to 7.2.20157.2.2005 355,750 – 7,125 348,625 17 # 2.370 8.2.2006 to 7.2.20107.2.2005 31,426 – – 31,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 15,312,742 721,566 342,189 14,248,987 1,313** 2.570 11.8.2006 to 10.8.201510.8.2005 337,166 – 2,875 334,291 17 # 2.570 11.8.2006 to 10.8.201010.8.2005 31,426 – – 31,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 14,802,585 ## 510,627 – 14,291,958 1,417** 3.010 10.2.2007 to 9.2.20169.2.2006 377,500 ## – – 377,500 18 # 3.010 10.2.2007 to 9.2.201110.8.2006 15,810,147 ## 71,785 – 15,738,362 1,550** 2.840 11.8.2007 to 10.8.201610.8.2006 371,500 ## – – 371,500 18 # 2.840 11.8.2007 to 10.8.2011Total 148,618,117 3,734,148 19,791,328 125,092,641* Includes 1 executive Director and 1 past Director of the Company** Includes 1 executive Director of the Company#Includes Directors of the Company and its subsidiaries##These numbers relate to options granted and accepted in 2006

1363. SHARE CAPITAL (continued)(iii) Details of share options exercisedExercise Proceeds fromNo. of shares price share issue Share price$ $’000 $2007January to March 16,426,452 0.422 – 3.010 33,958 3.12 – 3.46April to June 10,763,244 0.492 – 3.010 23,635 3.46 – 3.86July to September 6,732,563 1.290 – 3.010 14,922 3.26 – 3.98October to December 3,374,497 1.290 – 3.010 7,447 3.60 – 3.9437,296,7562006January to March 21,715,361 0.373 – 2.720 46,736 2.88 – 3.12April to June 3,454,019 1.390 – 2.720 7,417 2.63 – 3.30July to September 2,403,556 0.373 – 2.720 4,580 2.66 – 2.98October to December 3,380,068 1.290 – 2.720 7,172 2.94 – 3.2030,953,004The weighted average share price for options exercised during the year was $3.505 (2006: $3.022). The weighted averageremaining contractual life for these options is 6.46 years (2006: 6.30 years).The fair value of services received in return for share options granted are measured by reference to the fair value of shareoptions granted. The estimate of the fair value of the services received is measured based on a binomial model, taking intoaccount the terms and conditions upon which the options were granted. The following table lists the inputs to the model usedfor the years ended 31 December 2007 and 2006.2007 2006Expected dividend yield (%)(--Management’s forecast in line with dividend policy--)Expected volatility (%) 23.13 – 31.49 17.02 – 23.31Risk-free interest rate (%) 2.29 – 2.71 2.71 – 3.19Expected life of option (years) 2.49 – 5.23 2.49 – 5.25Exercise price ($) 3.23 – 3.61 2.84 – 3.01Weighted average share price ($) 3.31 – 3.72 2.80 – 3.01The expected life of the options is based on historical data and therefore not necessarily indicative of exercise patterns thatmay occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which mayalso not necessarily be the actual outcome.No other features of options were incorporated into the measurement of fair value.

Singapore Technologies Engineering LtdAnnual Report 2007 1373. SHARE CAPITAL (continued)Singapore Technologies Engineering Performance Share Plan (“PSP”)Performance shares are granted on an annual basis, conditional on targets set for a performance period, currently prescribedto be a three-year performance period. The performance shares will only be released to the recipient at the end of theperformance qualifying period. The final number of performance shares given will depend on the level of achievement of thosetargets over the three-year performance period. A specified number of performance shares shall be released by the ERCC tothe recipient at the end of the performance period, provided a minimum threshold performance is achieved.Date of grant2 July 2007 26 January 2006 5 August 2005 8 July 2004 TotalNumber of performance sharesAt grant date 1,513,000 2,450,000 2,160,000 2,130,000 8,253,000Lapsed – (170,000) (130,000) (2,130,000) (2,430,000)Outstanding as at 31.12.2007 1,513,000 2,280,000 2,030,000 – 5,823,000The 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 2005 to 2007 are as follows:Date of grant2 July 2007 26 January 2006 5 August 2005Market conditionsVolatility of MSCI Index (%) 13.66 14.69 13.80Volatility of the Company’s shares (%) 14.59 15.22 17.44Correlation of volatility of MSCI vs the Company (%) 26.83 26.46 31.62Risk-free rate (%) 2.43 3.09 2.20Share price ($) 3.62 2.93 2.56Cost of equity (%) 8.27 – –Dividend yield (-- Management’s forecast in line with dividend policy --)Non-market conditions(Best estimate* of number of shares expected to vest at the end of three-year performance period)– EVA Spread (%) – 61 79– EPS Growth – 63 64* Subject to revision when new information is available

1383. SHARE CAPITAL (continued)Singapore Technologies Engineering Restricted Stock Plan (“RSP”)During the financial year, a new share-based incentive plan, RSP, was introduced for senior management staff. Depending onthe achievement of pre-determined targets over a two-year performance period, the final number of restricted shares awardedcould range between 0% and 150% of the initial grant of the restricted shares. Based on meeting stated performanceconditions over a two-year period, 50% of the RSP award will vest. The balance will vest equally over the subsequent twoyears with fulfilment of service requirements.Date of grant26 July 2007Number of restricted sharesAt grant date 897,000Lapsed (5,000)Outstanding as at 31.12.2007 892,000The 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 2007 are as follows:Date of grant26 July 2007Volatility of the Company’s shares (%) 14.59Mark-to-market Company TSR achievement (%) 28.64Risk-free rate (%) 2.41 – 2.50Share price ($) 3.80Dividend yieldManagement’s forecast in line with dividend policy4. CAPITAL RESERVEThis amount relates to share premium of the respective pooled enterprises, namely Singapore Technologies Aerospace Ltd,Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd and Singapore Technologies Marine Ltdclassified as capital reserve upon the pooling of interests during the financial year ended 31 December 1997.

Singapore Technologies Engineering LtdAnnual Report 2007 1395. OTHER RESERVESForeignSharecurrencyFair based Assettranslation Statutory value payment Revaluationreserve reserve reserve reserve reserve Total$’000 $’000 $’000 $’000 $’000 $’000(Restated) (Restated)The GroupAt 1.1.2006 (6,371) 466 44,740 14,122 – 52,957Net fair value changes onavailable-for-sale financial assets – – (14,542) – – (14,542)Net fair value changes oncash flow hedges – – (879) – – (879)Foreign currency translationdifferences (33,371) – – – – (33,371)Total net income recogniseddirectly in equity andfor the year (33,371) – (15,421) – – (48,792)Cost of share-based payment – – – 9,431 – 9,431Revaluation surplus, aspreviously reported – – – – 81 81Effect of adopting FRS 40 – – – – (81) (81)Revaluation surplus, as restated – – – – – –Transfer from unappropriatedprofit to statutory reserve – 246 – – – 246At 31.12.2006 (39,742) 712 29,319 23,553 – 13,842At 1.1.2007 (39,742) 712 29,319 23,553 – 13,842Net fair value changes onavailable-for-sale financial assets – – (4,978) – – (4,978)Net fair value changes oncash flow hedges – – 1,646 – – 1,646Foreign currency translationdifferences (21,113) – – – – (21,113)Total net income recogniseddirectly in equity andfor the year (21,113) – (3,332) – – (24,445)Cost of share-based payment – – – 15,949 – 15,949Disposal of a subsidiary 391 (712) – – – (321)Transfer from unappropriatedprofit to statutory reserve – 394 – – – 394At 31.12.2007 (60,464) 394 25,987 39,502 – 5,419

1405. OTHER RESERVES (continued)Group2007 2006$’000 $’000Net fair value changes on available-for-sale financial assets arises from:– Effect of reduction in tax rate (149) –– Net gain on fair value changes during the year 8,191 9,795– Recognised in statement of profit and loss, in other operating income (13,020) (24,337)(4,978) (14,542)Net fair value changes on cash flow hedges arises from:– Effect of reduction in tax rate 40 –– Net gain on fair value changes during the year 786 (931)– Recognised in statement of profit and loss, in other operating income 820 521,646 (879)Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financialstatements of foreign subsidiaries whose functional currencies are different from that of the Group’s presentation currency.Statutory reserveIn accordance with foreign Enterprise Law application to the subsidiaries in the People’s Republic of China (“PRC”), thesubsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after taxprofits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to theSRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. Subject to approval from therelevant PRC authorities the SRF maybe used to offset any accumulated losses or increase the registered capital of thesubsidiaries, the SRF is not available for standard distribution to shareholders.Fair value reserveFair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognisedor impaired as well as the portion of the fair value changes on the derivative financial instruments designated as hedginginstruments in cash flow hedges that is determined to be an effective hedge.Share-based payment reserveShare-based payment reserve represents the equity-settled share options, performance shares and restricted shares grantedto employees. The reserve is made up of the cumulative value of services received from employees recorded on grant ofequity-settled share options, performance shares and restricted shares. The expense for services received will be recognisedover the vesting period.6. RETAINED EARNINGSGroup2007 2006$’000 $’000Retained by:The Company 565,743 530,676Subsidiaries 289,618 335,670Associated companies and joint ventures 100,894 94,308956,255 960,654

Singapore Technologies Engineering LtdAnnual Report 2007 1417. PROPERTY, PLANT AND EQUIPMENTValuation/CostArisingfrom Finalisationacquisition of purchase Effect ofAs at of interest in price Reclassi- Re- adopting Translation As at1.1.2006 Additions * Disposals subsidiaries allocation fications valuation FRS 40 difference 31.12.2006$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Restated)The GroupAt ValuationFreehold landand buildings – – – 1,874 – – 116 (1,990) – –Leasehold landand buildings 1,919 – – – – – – – – 1,919Wharves andslipways 1,490 – – – – – – – – 1,490Syncrolift andfloating docks 4,603 – – – – – – – – 4,603Plant andmachinery 1,694 – – – – – – – – 1,694Furniture, fittings,office equipmentand computers 279 – – – – – – – – 279At CostFreehold landand buildings 65,274 407 (117) – – 630 – – (4,830) 61,364Leasehold landand buildings 424,119 22,446 (50) 1,412 – 4,179 – (27,950) (4,501) 419,655Buildings onrentedproperties 60,878 10,165 – – – – – – – 71,043Improvementsto premises 31,210 3,698 (2,520) 7,712 – 4,573 – – (1,462) 43,211Wharves andslipways 19,826 5,310 – – – 3,592 – – (15) 28,713Syncrolift andfloating docks 68,782 – – – – – – – – 68,782Boats andbarges 5,455 – – – – – – – (167) 5,288Plant andmachinery 385,298 99,608 (30,121) 378,464 12,930 4,888 – – 17,150 868,217Productiontools andequipment 150,479 19,787 (1,992) 9,399 – (101) – – (1,834) 175,738Furniture,fittings, officeequipmentand computers 140,810 16,698 (7,483) 3,350 249 1,506 – – (1,928) 153,202Transportationequipmentand vehicles 12,287 1,612 (903) 1,193 – – – – (153) 14,036Aircraft andaircraftengines 62,766 – – – – – – – – 62,766Constructionin-progress16,980 22,415 (273) 3,122 – (19,267) – – (1,203) 21,7741,454,149 202,146 (43,459) 406,526 13,179 – 116 (29,940) 1,057 2,003,774

1427. PROPERTY, PLANT AND EQUIPMENT (continued)Valuation/CostArisingfrom Due toacquisition disposalAs at of interest in of a Reclassi- Translation As at1.1.2007 Additions* Disposals subsidiaries subsidiary fications difference 31.12.2007$’000 $’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, officeequipment and computers 279 – – – – – – 279At CostFreehold land and buildings 61,364 1,444 (152) – – 707 (3,520) 59,843Leasehold land and buildings 419,655 24,698 (698) 1,446 – (3,815) (3,181) 438,105Buildings on rented properties 71,043 33 – – – – – 71,076Improvements to premises 43,211 3,962 (397) 114 (682) 152 (878) 45,482Wharves and slipways 28,713 – (491) – – (672) (182) 27,368Syncrolift and floating docks 68,782 – – – – – – 68,782Boats and barges 5,288 – – – – – (121) 5,167Plant and machinery 868,217 92,180 (33,731) 2,087 (321) 2,575 21,154 952,161Production toolsand equipment 175,738 22,792 (3,236) – – (26) (515) 194,753Furniture, fittings, officeequipment and computers 153,202 15,859 (10,797) 435 (202) 235 (1,509) 157,223Transportation equipmentand vehicles 14,036 1,972 (1,769) 62 (266) 685 (138) 14,582Aircraft and aircraft engines 62,766 344 (2,860) – – 17,801 – 78,051Construction-in-progress 21,774 25,124 (38) – – (21,308) (140) 25,4122,003,774 188,408 (54,169) 4,144 (1,471) (3,666) 10,970 2,147,990* Additions during the year included property, plant and equipment of $16,364,000 (2006: $5,003,339) contributed byminority shareholders as part of capital injection.

Singapore Technologies Engineering LtdAnnual Report 2007 1437. PROPERTY, PLANT AND EQUIPMENT (continued)Accumulated depreciationDepreciationEffect ofAs at charge for Reclassi- adopting Translation As at1.1.2006 the year Impairment Disposals fications FRS 40 difference 31.12.2006$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Restated)The GroupAt ValuationFreehold land and buildings – 40 – – – (40) – –Leasehold 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, officeequipment and computers 279 – – – – – – 279At CostFreehold land and buildings 20,572 1,096 – (54) – – (1,523) 20,091Leasehold land and buildings 238,267 18,276 33 (22) – (12,825) (1,722) 242,007Buildings on rented properties 21,643 1,941 – – – – – 23,584Improvements to premises 16,143 5,308 – (2,452) – – (630) 18,369Wharves and slipways 15,575 1,495 – – – – (8) 17,062Syncrolift and floating docks 61,051 3,648 – – – – – 64,699Boats and barges 5,455 124 – – (280) – (170) 5,129Plant and machinery 307,339 59,386 264 (19,048) 353 – (4,026) 344,268Production tools andequipment 125,179 15,943 – (1,420) (101) – (1,084) 138,517Furniture, fittings, officeequipment and computers 119,510 15,744 – (7,096) 28 – (1,557) 126,629Transportation equipmentand vehicles 8,927 1,357 – (531) – – (93) 9,660Aircraft and aircraft engines 29,306 6,318 – – – – – 35,624978,952 130,676 297 (30,623) – (12,865) (10,813) 1,055,624

1447. PROPERTY, PLANT AND EQUIPMENT (continued)Accumulated depreciationImpairment/Due toDepreciation (write- disposalAs at charge for back of of a Reclassi- Translation As at1.1.2007 the year impairment) Disposals subsidiary fications difference 31.12.2007$’000 $’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, officeequipment and computers 279 – – – – – – 279At CostFreehold land and buildings 20,091 1,218 – (152) – (1,417) (1,185) 18,555Leasehold land and buildings 242,007 18,105 – (181) – (1,153) (1,514) 257,264Buildings on rented properties 23,584 2,192 – – – – – 25,776Improvements to premises 18,369 4,563 – (372) (444) 1,369 (441) 23,044Wharves and slipways 17,062 1,834 – (491) – (46) (19) 18,340Syncrolift and floating docks 64,699 3,543 – – – – – 68,242Boats and barges 5,129 83 – – – (306) (116) 4,790Plant and machinery 344,268 55,542 (118) (22,161) (277) 376 (674) 376,956Production tools andequipment 138,517 15,861 – (1,236) – (91) (630) 152,421Furniture, fittings, officeequipment and computers 126,629 16,008 13 (10,642) (152) (33) (1,250) 130,573Transportation equipmentand vehicles 9,660 1,428 – (1,341) (206) 56 (80) 9,517Aircraft and aircraft engines 35,624 5,140 – (2,860) – – – 37,9041,055,624 125,517 (105) (39,436) (1,079) (1,245) (5,909) 1,133,367

Singapore Technologies Engineering LtdAnnual Report 2007 1457. PROPERTY, PLANT AND EQUIPMENT (continued)Net book value2007 2006$’000 $’000(Restated)The 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 41,288 41,273Leasehold land and buildings * 180,841 177,648Buildings on rented properties 45,300 47,459Improvements to premises * 22,438 24,842Wharves and slipways 9,028 11,651Syncrolift and floating docks 540 4,083Boats and barges 377 159Plant and machinery 575,205 523,949Production tools and equipment 42,332 37,221Furniture, fittings, office equipment and computers 26,650 26,573Transportation equipment and vehicles 5,065 4,376Aircraft and aircraft engines 40,147 27,142Construction-in-progress 25,412 21,7741,014,623 948,150* The net book value of property, plant and equipment amounting to $2,421,000 (2006: $nil) was reclassified to investmentproperties following the change in a subsidiary’s occupation during the year.The CompanyAs atAs at1.1.2006 Additions 31.12.2006$’000 $’000 $’000At CostFurniture, fittings, office equipment and computers 1,370 251 1,621Transportation equipment and vehicles 298 – 2981,668 251 1,919DepreciationAs at charge for As at1.1.2006 the year 31.12.2006$’000 $’000 $’000Accumulated depreciationFurniture, fittings, office equipment and computers 862 276 1,138Transportation equipment and vehicles 65 59 124927 335 1,262

1467. PROPERTY, PLANT AND EQUIPMENT (continued)The CompanyAs atAs at1.1.2007 Additions Disposals 31.12.2007$’000 $’000 $’000 $’000At CostFurniture, fittings, office equipment and computers 1,621 360 (180) 1,801Transportation equipment and vehicles 298 331 (298) 3311,919 691 (478) 2,132DepreciationAs at charge for As at1.1.2007 the year Disposals 31.12.2007$’000 $’000 $’000 $’000Accumulated depreciationFurniture, fittings, office equipment and computers 1,138 314 (180) 1,272Transportation equipment and vehicles 124 62 (169) 171,262 376 (349) 1,289Net book value2007 2006$’000 $’000Furniture, fittings, office equipment and computers 529 483Transportation equipment and vehicles 314 174843 657The Group(a) Property, plant and equipment at valuationAs at 1 January 2007, property, plant and equipment, which are shown at valuation are stated at values arrived at by anindependent firm of professional valuers on 30 November 1972, on the basis of open market value for existing use. Thereis no fixed frequency of revaluation. Revaluation will be performed as and when deemed appropriate by the Directors.These property, plant and equipment are fully depreciated as at 31 December 2007 and 2006.(b) Property, plant and equipment pledged as security(i) Freehold land and buildings and leasehold buildings of subsidiaries with a carrying value of $5,328,000(2006: $5,696,000) are pledged as security for long-term loans.(ii) Plant and machinery of a subsidiary with carrying value of $450,610,000 (2006: $427,396,000) are subject to afloating charge of Euro 210 million (2006: Euro 210 million) to secure two of the subsidiary’s bank loans.

Singapore Technologies Engineering LtdAnnual Report 2007 1477. PROPERTY, PLANT AND EQUIPMENT (continued)(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:Group2007 2006$’000 $’000Leasehold land and buildings 2,271 2,927Transportation equipment and vehicles 231 –2,502 2,927(d) The major properties of the Group comprise:(i) Freehold land and buildingsNet book valueLocation Description Land area 2007 2006(sq. m.) $’000 $’000MalaysiaAwana Chalet Staff recreation and apartment unit 58 2 28th mile,Genting Highlands,69000 Genting Highlands,PahangUSA47889 South K Street Industrial buildings 88,949 2,581 2,801Tulare, California13442 Emerson Road Industrial buildings 68,351 1,320 1,441Kidron, Ohio300 Hackney Ave, Industrial buildings 117,358 1,928 2,071Independence, Kansas400 Hackney Ave, Industrial buildings 39,942 2,141 2,248Washington, North Carolina914 Saegers Station Drive, Industrial buildings 122,659 4,059 4,389Montgomery, Pennsylvania7801 Trinity Drive, Shipyard and buildings 839,564 4,592 4,896Escatawpa, Mississippi5801 Elder Ferry Rd, Shipyard and buildings 227,151 4,316 4,497Moss Point, Mississippi900 Bayou Casotte Parkway, Shipyard and buildings 331,803 15,279 13,258Pascagoula, Mississippi3800 Richardson Road Production facility 8,361 3,762 4,197South, Hope Hull, Alabama

1487. PROPERTY, PLANT AND EQUIPMENT (continued)(ii) Leasehold land, buildings and improvementsNet book valueLocation Description Tenure Land area 2007 2006(sq. m.) $’000 $’000Singapore501 Airport Road Factory and 20 years from 1.6.1993 23,899 2,674 3,158office building503 Airport Road Factory and 20 years from 1.6.1993 7,175 758 890office building540 Airport Road Warehouse and 30 years from 15.8.1985 5,850 1,200 1,354office buildingHangar and 30 years from 1.1.1984 18,918 3,429 3,936office building8 Changi North Way Hangar and 30 years from 1.1.1992 75,713 34,806 37,292office buildingHangar and 22.5 years from 16.6.1999 14,860 3,365 3,605office buildingHangar and 16.3 years from 20.8.2005 9,764 14,012 15,012office building24 Ang Mo Kio Street 65 Industrial and 30 years from 1.12.1982, 23,970 10,174 11,384commercial buildings renewable to 2042100 Jurong East Street 21 Industrial and 30 years from 1.11.1988, 11,232 8,590 9,227commercial buildings renewable to 204870 Ubi Crescent Factory 60 years from 5.7.1997 730 1,282 1,307Ubi Techpark #01-125 Portsdown Road Industrial and 3 years from 1.12.2005, 88,400 1,875 472commercial buildings renewable to 201033 Tuas Avenue 2 Factory and 30 years from 1.4.1996 6,669 2,673 2,820office building16 Benoi Crescent Industrial and 30 years from 16.7.1989 6,981 3,117 3,388commercial buildings249 Jalan Boon Lay Industrial and 27 years from 1.10.2001 120,000 6,059 6,851commercial buildings to 31.12.2028, renewableto 10.10.2065

Singapore Technologies Engineering LtdAnnual Report 2007 1497. PROPERTY, PLANT AND EQUIPMENT (continued)(ii) Leasehold land, buildings and improvements (continued)Net book valueLocation Description Tenure Land area 2007 2006(sq. m.) $’000 $’000Singapore2D Ayer Rajah Crescent Industrial and 3 years from 1.4.2007 29,904 1,133 –commercial buildings to 31.3.201016 Tuas Avenue 7 Industrial buildings 30 years from 16.8.1983 12,029 1,110 1,294601 Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,478 1,72415 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 39,640 3,668 4,1017 Benoi Road Buildings, foreshore 56 years from 1.6.1969 103,802 16,488 17,961and workshops60 Tuas Road Buildings, foreshore 30 years from 1.12.1992 125,262 5,602 6,265and workshops16 Benoi Road Administrative offices 56 years from 1.6.1969 20,244 – –30/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 5,162 5,454USA2100 9th Street Hangar and 22 years from 1.1.1991 103,825 19,465 22,294Brookley Complex, office buildingMobile, Alabama9800 John Saunders Road, Hangar and 16 7 / 12 years from 1.6.2002 195,663 7,325 8,848San Antonio, Texas office buildingPeople’s Republic of China555 Kanghua Road, Industrial buildings 50 years from 12.6.2003 15,890 892 3,538Kangqiao Industrial Zone, to 27.7.2052Shanghai #97 Zhong Cao Road Industrial and 41 years from 1.10.2005 276,633 21,973 6,094Guiyang, Guizhou commercial buildings to 30.9.2045613 Xin Jiao Dong Road, Commercial building 15 years from 22.4.2005 9,751 1,385 –Hai Zhu District, Guangzhou, to 21.4.2020Guangdong

1507. PROPERTY, PLANT AND EQUIPMENT (continued)(ii) Leasehold land, buildings and improvements (continued)Net book valueLocation Description Tenure Land area 2007 2006(sq. m.) $’000 $’000PanamaBryant Ave Hangar and office 20 years from 18.8.2006 36,278 1,905 –Howard Balboabuilding* This relates to buildings constructed by a subsidiary on properties rented from the Ministry of Defence on leases whichare renewable every year. In view of the relationship between the landlord and the subsidiary, the cost of the buildingsis depreciated over 30 years.#This leasehold land and building (excluding land use rights) is classified as investment property following the change ina subsidiary’s occupation in the leasehold land and building during the year.(iii) Buildings on rented propertiesNet book valueLocation Description Tenure Land area 2007 2006(sq. m.) $’000 $’000Singapore**540 Airport Road Hangars and 3 years lease from 1.7.2006 48,882 27,145 28,891office buildingSeletar West Camp Hangars and Yearly 15,670 18,122 18,568office buildingPeople’s Republic of ChinaGuangzhou Airport Warehouse 2 years lease from 1.11.2007 100 33 –Logistics Centre,Guangzhou BaiyunAiport Logistics,Guangzhou 510890** The buildings on rented properties relate to buildings constructed by one of the subsidiaries on properties rented fromthe Ministry of Defence on leases, which are renewable every three years. In view of the relationship between thelandlord and the subsidiary, the cost of the buildings on rented properties, except for the hangar in Seletar West Camp,is depreciated over 30 years. The hangar in Seletar West Camp is depreciated over 10 years.

Singapore Technologies Engineering LtdAnnual Report 2007 1518. SUBSIDIARIESCompany2007 2006$’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 578542,262 542,262Impairment in subsidiaries (7,000) (7,000)Carrying amount after impairment in subsidiaries 535,262 535,262Capital contribution in the form of share options, performanceshares and restricted shares issued to employees of subsidiaries 22,697 8,947557,959 544,209Details of the subsidiaries are as follows:Effective equity interestheld by the Group2007 2006% %(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 –ST Aviation Training Academy Pte. Ltd. and its subsidiary: 66 –Aviation Training Academy Australia Pty Ltd 66 –ST Aerospace Engines Pte Ltd 100 100ST Aerospace Systems Pte Ltd 100 100ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100iShopAero Pte Ltd 100 100Guangzhou Aerospace Technologies and Engineering Company Limited 100 –ST Aerospace International Structures Pte Ltd 100 100ST Aviation Resources Pte Ltd and its subsidiary: 100 100ST Aviation Resources 1 Limited 100 100ST Aviation Services Co Pte Ltd 80 80Visiontech Investment Pte Ltd 100 100Singapore Technologies Engineering (Europe) Ltd 100 100Singapore Aerospace Kabushiki Kaisha 100 100Visiontech Engineering Pte Ltd 51 51ST Airport Ground Services Pte Ltd 100 100Bournemouth Aviation Services Company Limited 81 81Singapore British Engineering (Pte) Ltd 51 51

1528. SUBSIDIARIES (continued)Effective equity interestheld by the Group2007 2006% %(a) Singapore Technologies Aerospace Ltd and its subsidiaries (continued)ST Aerospace Solutions (Europe) A/S (formerly known as SAS Component Group A/S)and its subsidiary: 71.3 71.3Airline Rotables (UK Holdings) Limited and its subsidiary: 71.3 71.3Airline Rotables Limited 71.3 71.3Panama Aerospace Engineering Inc. 100 100(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 70ST Electronics (Software Services) Limited 100 100ST Electronics (e-Services) Pte. Ltd. 100 –PM-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 100ST Education & Training Private Limited and its subsidiaries: 70 70STET Maritime Education Pte. Ltd. 70 70STET Maritime Bureau Pte. Ltd. 70 70Brightspot Interactive Learning Pte. Ltd. and its subsidiary: 51 51Brightspot Interactive Learning Inc. 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 61.12 61.12STELCOMMS Pte. Ltd. 51 100Telematics Wireless Ltd 93.93 –ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiary: 100 100ST Electronics (Sichuan) Co., 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 100 70STELOP Pte. Ltd. 50.05 50.05TranSys Pte Ltd 100 100(c) Singapore Technologies Kinetics Ltd and its subsidiaries 100 100Singapore 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 and its subsidiary: 100 100JuzclickCar.com Pte Ltd 90 90

Singapore Technologies Engineering LtdAnnual Report 2007 1538. SUBSIDIARIES (continued)Effective equity interestheld by the Group2007 2006% %(c) Singapore Technologies Kinetics Ltd and its subsidiaries (continued)Singapore Commuter Private Limited 100 100Securedge Pte. Ltd. (formerly known as ST Automotive Industrial Pte Ltd) 100 100STA Investment Pte Ltd 100 100ST Kinetics International Pte. Ltd. (formerly known as ST Automotive (Vietnam) Pte Ltd) 100 100STA Detroit Diesel-Allison (Singapore) Pte Ltd 100 100Shanghai Elite Electric Vehicles Co., Ltd ^ – 100Expert Systems Pte Ltd 100 100Singapore Test Services Private Limited and its subsidiary: 100 100SAO Industrial Services 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 100Founders Industries Pte Ltd * – 100STAR Automotive Center (Zhejiang) Co., Ltd. 86.24 86.24STAR Automotive Center (Guangzhou) Co., Ltd. @ 100 50(d) Singapore Technologies Marine Ltd and its subsidiary 100 100STSE Engineering Services Pte Ltd 100 100(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100Singapore Technologies Engineering (USA) Inc. 100 100SA Supplies (USA) Inc. 100 100VT Systems, Inc. 100 100Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100ST Mobile Aerospace Engineering, Inc. 100 100DalFort Aerospace GP, Inc. 100 100DalFort Aerospace, L.P. 100 100San Antonio Aerospace GP, LLC 100 100San Antonio Aerospace LP 100 100Vision Technologies Electronics, Inc. and its subsidiary: 100 100iDirect, Inc. and its subsidiaries: 100 100iDirect Hong Kong Limited 100 100iDirect UK Limited 100 100iDirect Italy srl 100 100iDirect International Corporation and its subsidiary: 100 100iDirect Singapore Pte. Ltd. 100 100iDirect Government Technologies, Inc. 100 –Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100Miltope Corporation 100 100MÄK Technologies, Inc. 80 80

1548. SUBSIDIARIES (continued)Effective equity interestheld by the Group2007 2006% %(e) Vision Technologies Systems, Inc. and its subsidiaries (continued)Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100VT Dimensions, Inc. 100 100Lee Holding Company and its subsidiary: 100 100VT LeeBoy, Inc. and its subsidiaries: 100 100LeeBoy Rents, Inc. 100 100Rosco Manufacturing Company 100 100Force Feed Loader Parts, Inc. 100 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^ The entity was disposed of during the year.* This entity was fully liquidated during the year.@During the year, following an additional acquisition of equity interest, STAR Automotive Center (Guangzhou) Co., Ltd. hadbecome a subsidiary of the Group.Further details of the subsidiaries are as follows:Country of incorporation/Name of subsidiary Principal activities place of businessSingapore Technologies Aerospace Ltd Investment holding and provision of engineering, Singaporemarketing and engineering support servicesST 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 Aviation Training Academy Pte. Ltd. Flight training school operation and aircraft management SingaporeAviation Training Academy Australia Flight training school operation and aircraft management AustraliaPty LtdST Aerospace Engines Pte Ltd Repair and overhaul of aircraft engines SingaporeST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components Singapore

Singapore Technologies Engineering LtdAnnual Report 2007 1558. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessST Aerospace Supplies Pte Ltd Trading, Maintenance-By-The-Hour services for component Singaporeand repair management and warehousing services for aircraftequipment, parts and componentsiShopAero Pte Ltd Trading, e-commerce and information technology related Singaporeservices for the aerospace industryGuangzhou Aerospace Technologies Import/export for aircraft component leasing, repair, People’s Republicand Engineering Company Limited exchange and trading, warehousing, packaging, distribution of Chinaand other related servicesST Aerospace International Structures Designing, developing and manufacturing aircraft, engines, SingaporePte Ltdequipment, accessories, components and such other partsST Aviation Resources Pte Ltd Investment holding SingaporeST Aviation Resources 1 Limited # Investment holding and aircraft leasing business British Virgin IslandsST Aviation Services Co Pte Ltd Repair, maintenance, modification and servicing of Singaporecommercial aircraftVisiontech Investment Pte Ltd Investment holding and dealing SingaporeSingapore Technologies Engineering Providing marketing and investment services to the Group UK(Europe) LtdSingapore Aerospace Kabushiki Providing marketing services to the Group JapanKaisha #Visiontech Engineering Pte Ltd Provision of engineering services for the repair, maintenance Singaporeand modification of aircraft, aircraft equipment and componentsST Airport Ground Services Pte Ltd Investment holding and provision of airport ground cargo Singaporeand passenger handling servicesBournemouth Aviation Services Dormant UKCompany Limited +Singapore British Engineering (Pte) Ltd Marketing and sale of a range of defence products and Singaporeassociated equipment and participating in the developmentof new products and systemsST Aerospace Solutions (Europe) Supply aircraft components, including purchase, maintenance DenmarkA/S (formerly known as SASand logistics servicesComponent Group A/S)Airline Rotables (UK Holdings) Limited Investment holding UKAirline Rotables Limited Providing component management and support services for aircraft UK

1568. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessPanama Aerospace Engineering Inc. Repair and maintenance of aircraft Republic of PanamaSingapore Technologies Design, development, supply, installation, integration and SingaporeElectronics Limitedmaintenance of transportation, intelligent building, defenceelectronic and communication systemsSEEL Electronic & Engineering Sales of electronic instruments and equipment, electronic MalaysiaSdn Bhdengineering and systems integration services for infrastructureprojects as well as maintenance and calibration of electronicequipmentST Electronics (Info-Software Systems) Design, development and supply of real-time/mission critical SingaporePte. Ltd.systems and provision of related maintenance servicesINFA Systems Limited Provision for services in consulting, designing and developing Hong Kongsystems integration, the maintenance and support ofoperational and computer systems and sales and distributionof system equipmentST Electronics (Software Services) Providing IT outsourcing services, software applications People’s RepublicLimited development and turnkey solutions of ChinaST Electronics (e-Services) Pte. Ltd. Providing shared services to government ministries, agencies Singaporeand enterprisesPM-B Pte Ltd Relate to mechanical, electrical and engineering works to Singaporedesign, build and provide facility management services formission critical environments such as data centres, disasterrecovery and business continuity sitesPMB Project Management Business Relate to mechanical, electrical and engineering works to MalaysiaSdn Bhddesign, build and provide facility management services formission critical environments such as data centres,disaster recovery and business continuity sitesPT PM-B Indonesia Relate to mechanical, electrical and engineering works to Indonesiadesign, build and provide facility management services formission critical environments such as data centres, disasterrecovery and business continuity sitesPM-B (China) Ltd Relate to mechanical, electrical and engineering works to People’s Republicdesign, build and provide facility management services forof Chinamission critical environments such as data centres,disaster recovery and business continuity sitesST Electronics (Training & Simulation Design, development, supply, integration and maintenance SingaporeSystems) Pte. Ltd.of training and simulation systems

Singapore Technologies Engineering LtdAnnual Report 2007 1578. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessST Electronics (Digital Media) Pte. Ltd. Design, development and manufacture of computers and Singaporedata processing systems, provision of services for theprocessing and maintenance of data and information andproduction of animation picturesST Education & Training Private Limited Provision of education and training, management and Singaporeconsultancy services for operational and technical domainsof maritime, aerospace and land services industriesSTET Maritime Education Pte. Ltd. Provision of education and training for operational and Singaporetechnical domains of the maritime industrySTET Maritime Bureau Pte. Ltd. Provision of marine audit, survey and consultancy services SingaporeBrightspot Interactive Learning Pte. Ltd. Investment holding and provision of training services such Singaporeas soft skills and management skills to corporations, andother courses to individuals through satellites broadcastBrightspot Interactive Learning Inc. Provision of training services such as soft skills and People’s Republicmanagement skills to corporations, and other courses toof Chinaindividuals through satellites broadcastST Electronics (Info-Comm Systems) Design, development, systems integration, manufacturing SingaporePte. Ltd.and sale of communication equipment, GPS-based fleetmanagement system, traffic management system, infoappliances and defence electronicsST Electronics (Info-Security) Pte. Ltd. Design, development, sale and provision of technical support Singaporefor information security products, solutions and servicesDataMark Technologies Pte Ltd Develop and provide digital water marking and related solutions SingaporeSTELCOMMS Pte. Ltd. Design, development and sale of communication related Singaporeproducts and subsystemsTelematics Wireless Ltd Development, manufacture, and marketing of products for Israellocating and directing vehicles, other mobile and stationeryobjects, people, equipment and merchandise, systems formanaging vehicular fleets, systems for locating and thwartingcar theft, vehicular wireless equipment and communicationsfor purposes of identification and provision of information,electronics toll-road systems, and electronic systems forreading water metersST Electronics (Satcom & Sensor Manufacture of microwave components and sub-systems, SingaporeSystems) Pte. Ltd.system integration and provision of related repairs andmaintenance for the telecommunications and defenceelectronics industries

1588. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessST Electronics (Sichuan) Co., Ltd Maintenance of communication and other related apparatus People’s Republicand consultant service of telecommunication technologyof ChinaST Electronics (Shanghai) Development and manufacturing of computer control and People’s RepublicCo., Ltd management systems, microwave control systems, simulation of Chinaand training systems, security systems, MRT passengerinformation systems, MRT autofare collection system, MRTplatform screen door system and related software.Provision of related technical consultation and aftersalesservices and sale of in-house products.ST Electronics-PCI Co., Ltd Computer software and hardware R&D and manufacture, People’s Republiccomputer supervise and control management system,of Chinamicrowave 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.iTS Technologies Pte Ltd Development, marketing and maintenance of advance Singaporesimulation and training systems for the aircraft and other industriesST Electronics (Taiwan) Limited Provide integration for large-scale system projects in rail, Taiwanexpressway and intelligent building management solutionsIntelect Technologies, Incorporated # Development and supply of a family of multi-access optical USAnetworking equipmentRipple Systems Pty Ltd Design, develop and implement innovative software systems Australiafor technically challenging integration applications. Key marketsfor these applications are rail command and control (ISCS) andintelligent transport systems (ITS) for road infrastructure.STELOP Pte. Ltd. Design, development, manufacture and sale of electro-optical Singaporeand electronic products and systems and the provision ofrelated servicesTranSys Pte Ltd Design, development, distribution, maintenance and marketing Singaporeof railway related productsSingapore Technologies Kinetics Ltd Provision of design and engineering services, manufacture, Singaporesales and knowhow transfer of military and commercial vehicles,automotive subsystems, armament, weapons, weapon systems,ammunition and explosives and the provision of engineeringservices for assembly, upgrading/modifications, maintenance,repair and overhaul of vehicles and weapon systems, and tradingin motor vehicles, equipment, vehicle spares and related accessories

Singapore Technologies Engineering LtdAnnual Report 2007 1598. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessSingapore Ordnance Engineering Workshop and provision of engineering services SingaporePte. Ltd.Mobility Systems Pte Ltd Investment holding SingaporeSilvatech Global Systems Limited # Owns the intellectual property rights to electro-hydraulic British Virgindrive, hydro-mechanical and electro-mechanical continuouslyIslandsvariable transmissions technologies, and equipment poweredby such drivesSilvatech Systems Corporation Pte Ltd Designing, manufacturing, marketing and managing licencees Singaporeof technologies and products using electro-hydraulic drive,hydro-mechanical and electro-mechanical continuously variabletransmissions, and equipment powered by such drives, globallyKinetics Drive Solutions Inc. # Research and development, manufacturing and sales of Canadaelectro-hydraulic drive, hydro-mechanical and electro-mechanicalcontinuously variable transmissions technologies, and equipmentpowered by such drivesSTA Inspection Pte Ltd Inspection of heavy goods vehicles, light vehicles, motor cars, Singaporebuses and motorcycles, provision of vehicle inspection projectmanagement, provision of independent damage assessmentservices as well as to act as the commission agent for thesale and purchase of motor vehicle spare parts mainly conductedonline via the internetJuzclickCar.com Pte Ltd # Dormant SingaporeSingapore Commuter Private Limited Dormant SingaporeSecuredge Pte. Ltd. (formerly known Dormant Singaporeas ST Automotive Industrial Pte Ltd)STA Investment Pte Ltd Investment dealing SingaporeST Kinetics International Pte. Ltd. Dormant Singapore(formerly known as ST Automotive(Vietnam) Pte Ltd) #STA Detroit Diesel-Allison Assembling and marketing of diesel engines and related products Singapore(Singapore) Pte Ltdand the provision of technical services, field services, repairand maintenance servicesExpert Systems Pte Ltd # Dormant SingaporeSingapore Test Services Private Limited Provision of professional engineering consultancy, tests, Singaporeinspection, certification and related services

1608. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessSAO Industrial Services Pte Ltd Dormant SingaporeAdvanced 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,and related servicesSingaporeAdvanced Pyrotechnic Materials Manufacture and sale of pyrotechnic products SingaporePrivate LimitedUnicorn International Pte Limited Trading and Marketing SingaporeAllied Ordnance of Singapore Provision of design and engineering services, manufacture, Singapore(Pte) Limitedsales and knowhow transfer of armament, weapons, weaponsystems, ammunition, explosives, weapon magazines, militaryequipment, machines, tools, spares and components andthe provision of engineering services for assembly,upgrading/modification, maintenance, repair and overhaulof guns and weapons systems, and related servicesOrdnance Development and Provision of design and engineering services, manufacture, SingaporeEngineering Company of Singapore sales and knowhow transfer of armament, weapons, weapon(1996) Private Limited systems, ammunition, explosives, weapon magazines, militaryequipment, machines, tools, spares and components andthe provision of engineering services for assembly,upgrading/modification, maintenance, repair and overhaulof guns and weapons systems, and related servicesAutonomous Technology Pte Ltd Investment holding SingaporeGuizhou Jonyang Kinetics Co., Ltd. Design, manufacture, sales and services support of People’s Republicconstruction, engineering and industrial-relatedof Chinamachinery and accessories, provide engineering consultancyservices to engineering and manufacturing companies,be a contract manufacturer of construction, engineering andindustrial-related machinery and accessories, as well assupplying of casting and forging parts for all industries,represent and sell other manufacturer’s construction,engineering, energy and industrial-related machineryand accessories in the domestic and international marketKinetics Systems (Shanghai) Co., Ltd. Manufacture of vehicle drive systems, industrial drive People’s Republicmotors, small external combustion engines, and saleof Chinaof self manufactured products

Singapore Technologies Engineering LtdAnnual Report 2007 1618. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessSTAR Automotive Center (Zhejiang) Provide automotive services, including automotive fixing, People’s RepublicCo., Ltd. maintaining, service, automotive examination and of Chinamaintenance, damage fixing, automotive beautifying anddecorating, trading and supplying of automotive spare parts,training, technology consultation, tow truck service andafter sales technical support, etc.STAR Automotive Center (Guangzhou) Provide automotive services, including automotive fixing, People’s RepublicCo., Ltd. maintaining, service, automotive examination and of Chinamaintenance, damage fixing, automotive beautifying anddecorating, trading and supplying of automotive spare parts,training, technology consultation, tow truck service andafter sales technical support, etc.Singapore Technologies Marine Ltd Construction and repair of naval and commercial vessels, Singaporedesign, integration, fabrication, installation of military andcommercial engineering equipment and the provision ofengineering consultancy and technical management servicesSTSE Engineering Services Pte Ltd Contractor, developer and sub-contractor of engineering Singaporeand engineering related works and provider of turnkeyengineering solutionsVision Technologies Systems, Inc. # Investment holding USASingapore Technologies Engineering Dormant USA(USA) Inc. #SA Supplies (USA) Inc. # Dormant USAVT Systems, Inc. # Investment holding and providing investment services to USAthe GroupVision Technologies Aerospace, Investment holding and providing investment services USAIncorporated #ST Mobile Aerospace Engineering, Repair and maintenance of aircraft USAInc. #DalFort Aerospace GP, Inc. # Dormant USADalFort Aerospace, L.P. ++ # Dormant USASan Antonio Aerospace GP, LLC # Investment holding USASan Antonio Aerospace LP Repair and maintenance of aircraft USAVision Technologies Electronics, Inc. # Investment holding USA

1628. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessiDirect, Inc. # Design, develop and market two-way internet protocol USA– (IP) based broadband satellite networking solutions thatdeliver voice, data and video services to enterprise andgovernment customer locations worldwideiDirect Hong Kong Limited Markets two-way internet protocol – (IP) based broadband Hong Kongsatellite networking solutionsiDirect UK Limited Markets two-way internet protocol – (IP) based broadband UKsatellite networking solutionsiDirect Italy srl Markets two-way internet protocol – (IP) based broadband Italysatellite networking solutionsiDirect International Corporation # Markets two-way internet protocol – (IP) based broadband USAsatellite networking solutionsiDirect Singapore Pte. Ltd. Markets two-way internet protocol – (IP) based broadband Singaporesatellite networking solutionsiDirect Government Technologies, Inc. # Design, develop and market two-way internet protocol USA– (IP) based broadband satellite networking solutions thatdeliver voice, data and video services to government customersVision Technologies Kinetics, Inc. # Investment holding USAMiltope Corporation # Development of computers and peripheral equipment for USArugged and other specialized applications for military andcommercial customers, both domestic and internationalMÄK Technologies, Inc. # Develop and supply software products and services for USANetworked Synthetic EnvironmentsVision Technologies Land Systems, Inc. # Investment holdingUSAVT Dimensions, Inc. # Investment holding and licensing of intellectual properties USALee Holding Company # Investment holding USAVT LeeBoy, Inc. # Manufacture of asphalt paving and road maintenance USAequipment including LeeBoy branded asphalt pavers, motorgraders, compactors, force feed loaders, asphalt maintainers/patchers, tack distributors, and Rosco branded asphalt distributors,street flushers, brooms and asphalt spray patchers

Singapore Technologies Engineering LtdAnnual Report 2007 1638. SUBSIDIARIES (continued)Country of incorporation/Name of subsidiary Principal activities place of businessLeeBoy Rents, Inc. # Rental of asphalt paving and road maintenance equipment USAincluding LeeBoy branded asphalt pavers, motor graders,compactors, force feed loaders, asphalt maintainers/patchers, tack distributors, and Rosco branded asphaltdistributors, street flushers, brooms and asphalt spray patchersRosco Manufacturing Company # Dormant USAForce Feed Loader Parts, Inc. # Dormant USAVT Specialized Vehicles Corporation # Manufacture and marketing of specialised aluminium drop-frame USAtruck bodies, trailers, refrigerated truck bodies and trailersand speciality vehicle cabsVision Technologies Marine, Inc. #Investment holding and providing investment services to theMarine sectorUSAVT Halter Marine, Inc. # Construction and repair of naval and commercial vessels, design, USAintegration, fabrication, installation of engineering equipment andprovision of engineering servicesSingapore Technologies Dynamics Technology development, advanced concept design and SingaporePte Ltddevelopment and technology acquisitionST Synthesis Pte Ltd Provision of one-stop total integrated logistic support services SingaporeFusionTech Pte. Ltd. Investment holding SingaporeKaz-ST Engineering Bastau Limited Provision of IT, engineering defence and related services KazakhstanLiability Partnership ##Not required to be audited under the law in the country of incorporation.+This entity ceased operations in December 2006 and has commenced members’ voluntary liquidation in January 2008.++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,Singapore, except for the following:Name of subsidiaryST PAE Holdings Pty LtdPacific Flight Services Pty LtdGuangzhou Aerospace Technologies and Engineering Company LimitedSingapore Technologies Engineering (Europe) LtdST Aerospace Solutions (Europe) A/SAirline Rotables (UK Holdings) LimitedAirline Rotables LimitedPanama Aerospace Engineering Inc.San Antonio Aerospace LPSEEL Electronic & Engineering Sdn BhdName of accounting firmErnst & Young, PerthErnst & Young, SydneyErnst & Young, GuangzhouErnst & Young, CambridgeErnst & Young, DenmarkErnst & Young, CambridgeErnst & Young, CambridgeErnst & Young, PanamaErnst & Young, San AntonioErnst & Young, Kuala Lumpur

1648. SUBSIDIARIES (continued)Name of subsidiaryINFA Systems LimitedST Electronics (Software Services) LimitedPMB Project Management Business Sdn BhdPT PM-B IndonesiaPM-B (China) LtdBrightspot Interactive Learning Inc.ST Electronics (Sichuan) Co., LtdST Electronics (Shanghai) Co., LtdST Electronics-PCI Co., LtdST Electronics (Taiwan) LimitedRipple Systems Pty LtdGuizhou Jonyang Kinetics Co., Ltd.Name of accounting firmErnst & Young, Hong KongErnst & Young, ShenzhenErnst & Young, Kuala LumpurErnst & Young, JakartaErnst & Young, BeijingErnst & Young, BeijingErnst & Young, ShanghaiErnst & Young, ShanghaiErnst & Young, GuangzhouErnst & Young, TaiwanErnst & Young, PerthErnst & Young, Guangzhou(a) During the financial year, the Group incorporated the following companies:Name of company Country of incorporation/ Equity interest held Date of incorporationplace of business %ST Aviation Training Academy Pte. Ltd. Singapore 66 1 June 2007Aviation Training Academy Australia Pty Ltd Australia 66 3 July 2007Guangzhou Aerospace Technologies and People’s Republic 100 25 July 2007Engineering Company Limitedof ChinaST Electronics (e-Services) Pte. Ltd. Singapore 100 22 January 2007iDirect Government Technologies, Inc. USA 100 23 April 2007(b) During the financial year, the Group acquired the following companies:Net tangibleName of company Interest acquired Consideration assets acquired Date of acquisition% $’000 $’000Pacific Flight Services Pty Ltd 100 – (554) 12 April 2007Telematics Wireless Ltd 93.93 117,437 24,682 31 December 2007(c) During the financial year, the Group acquired additional equity interests in the following companies:Interest afterNet tangibleName of company Interest acquired acquisition Consideration assets acquired% % $’000 $’000Ripple Systems Pty Ltd 30 100 – –INFA Systems Limited 30 100 313 313STAR Automotive Center 50 100 931 1,766(Guangzhou) Co., Ltd.(d) During the financial year, the Group made capital contributions in Panama Aerospace Engineering Inc. of $3,051,000.The effective equity interest in the company remains the same at 100%.

Singapore Technologies Engineering LtdAnnual Report 2007 1659. ASSOCIATED COMPANIES AND JOINT VENTURESGroupNote 2007 2006$’000 $’000Quoted shares, at cost – 24,800Unquoted shares, at adjusted cost 190,031 200,165Preference shares, at cost – 238Goodwill on acquisition written off (1,737) (1,737)Share of net assets acquired 188,294 223,466Impairment in associated companies and joint ventures (5,441) (9,845)Share of post-acquisition:Profits 100,894 94,308Reserves (16,241) (13,784)267,506 294,145The investment in associated company of $50,000 in the Company represents the cost of investment in 2006 JV Pte. Ltd.The Group has a call option to acquire up to 51% of one of the associated companies subject to certain terms and conditions.Impairment in associated companies and joint venturesMovements in impairment in associated companies and joint ventures during the year are as follows:At beginning of the year 9,845 4,973Charge/(write-back) to statement of profit and loss 36 (4,400) 4,865Translation difference (4) 7At end of the year 5,441 9,845During the year, the Group wrote-back impairment of $4.4 million for one of its associated companies following a divestmentarising from a share swap transaction.The summarised financial information of the associated companies is as follows:ResultsTurnover 723,928 2,892,730Net profit for the year 95,414 108,545Assets and liabilitiesNon-current assets 327,411 423,305Current assets 521,152 1,150,366Current liabilities (221,851) (290,195)Non-current liabilities (28,763) (458,824)597,949 824,652As at 31 December 2007, cumulative and current year’s unrecognised share of losses in associated companies amounted to$946,808 (2006: $828,492) and $573,021 (2006: $448,049) respectively.

1669. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)The Group’s share of the joint ventures’ results, assets and liabilities are as follows:Group2007 2006$’000 $’000ResultsTurnover 19,974 22,516Net profit/(loss) for the year (5,115) 228Assets and liabilitiesNon-current assets 3,335 5,362Current assets 23,132 34,500Current liabilities (16,790) (21,253)Non-current liabilities (111) (172)9,566 18,437(a) Details of the associated companies are as follows:Country ofEffective equityincorporation/ interest held byName of associated company Principal activities place of business the Group2007 2006% %Aerospace Engineering Services Maintenance and servicing of aircraft Australia 50 50Pty LtdAerospace Engineering Services Trustee of unit trust fund Australia 50 50Pty Ltd Unit Trust1988 JV Pte. Ltd. ++ Dormant Singapore 50 50Composite Technology Repairing and rebuilding helicopter Singapore 33.33 33.33International Pte Ltdrotor bladesEurocopter South East Asia Selling, maintaining and overhauling Singapore 25 25Private Limitedof helicoptersShanghai Technologies Aerospace Aircraft and component maintenance, People’s Republic 49 æ 49Company Limited repair, overhaul and other related of Chinamaintenance businessSingapore Precision Repair and Repair and overhaul of aircraft and helicopter Singapore 50 50Overhaul Pte Ltdlanding gears and its related componentsTurbine Coating Services Pte Ltd Repair, refurbishment and upgrading of Singapore 24.5 24.5aircraft jet engine turbine blades and vanesTurbine Overhaul Services Pte Ltd Repair and service of gas and steam Singapore 49 49turbine components

Singapore Technologies Engineering LtdAnnual Report 2007 1679. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)Country ofEffective equityincorporation/ interest held byName of associated company Principal activities place of business the Group2007 2006% %Autoscan Technology Pte Ltd * Computer consultancy, trading in Singapore – 25.8computerised information retrievalequipment and related, rendering oftechnical support services and printingand trading of labels and book bindingCOMAT Training Services Pte Ltd Operating of a computer training school, Singapore 45.47 45.47providing training in computer softwareand applicationsECS Holdings Limited * Relating to investment holding and the Singapore – 20.86distribution of information technologyproductsGreen Dot Internet Services Web hosting services and development of Singapore – 22.66Pte Ltd *e-commerce applicationsInfowave Pte Ltd * Design, development and supply of mobile Singapore – 43computing and wireless communicationsproducts and solutionsiWOW Technology Pte Ltd To carry out research and development, Singapore 21.74 21.74consultancy services in telecommunication,electrical and related fieldsKnowledge Alive Pte. Ltd. Offer technologically-driven learning and Singapore 45.47 45.47knowledge solutions, products and servicesto corporate, tertiary and workforce marketsMobile Solutions and Payment Mobile-commerce and mobile-commerce Singapore 21.57 21.57Services Pte Ltd @related activitiesmPayment Pte Ltd Provide mobile payment and mobile Singapore 31.78 31.78commerce solutions and applications forbusiness communities and consumersPM-B Project Management Relate to mechanical, electrical and Thailand 34.3 34.3Business (Thailand) Ltdengineering works to design, build andprovide facility management services formission critical environments such as datacentres, disaster recovery and businesscontinuity sitesPolarsat Holdings Inc (formerly Development, manufacturing and marketing Canada 26.67 38.98known as PolarSat Inc) ßof multimedia VSAT (Very Small ApertureTerminals) and Satcom satellite networks

1689. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)Country ofEffective equityincorporation/ interest held byName of associated company Principal activities place of business the Group2007 2006% %Prescient Systems & Business of developing, producing and Singapore 47.84 47.84Technologies Pte. Ltd.marketing non-real time and real timeinstrumentation systems for defence andcommercial applicationsRF Korea Inc. ß Manufacture and sell wireless communication Korea 22 22devices and related equipmentsSandz Solutions (Singapore) Providing enterprise computing solutions Singapore – 25Pte Ltd *and trading in computer and peripheralsSandz Solutions (HK) Pte Ltd * Provider of enterprise business IT solutions Hong Kong – 25Sentry Technologies Pte Ltd ** Design, development and sale of computer Singapore – 35security productsSino Stride Technology Development and provision of system Cayman Islands – 28.01(Holdings) Limited +integration solutionsST LogiTrack Pte Ltd Development and sales of radio frequency Singapore 39.06 39.06identification applications in the logistics andrelated industriesTrusted Hub Ltd Provision of an integrated trusted Singapore 21.8 21.8environment for secured transactionsand e-commerceWizVision Pte. Ltd. Providing information technology services Singapore 22.8 22.8and trading of computer accessoriesWizVision (HK) Pte Limited Investment holding Hong Kong 22.8 22.8Ximaera Technologies Canada Inc. ß Research and development Canada 49 49(formerly known as 1699590Ontario Inc)CityCab Pte Ltd Rental of taxis and provision of premier Singapore 46.5 46.5bus service, charge card facilities and travelrelated services

Singapore Technologies Engineering LtdAnnual Report 2007 1699. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)Country ofEffective equityincorporation/ interest held byName of associated company Principal activities place of business the Group2007 2006% %Defence Electronics of Singapore Manufacture of fuses Singapore 49 49Pte LtdNusantara Technologies Sdn. Bhd. Provision of non-destructive testing services, Malaysia 49 49ultrasonic flaw detection and gauging surveyand pressure gauge calibrationTimoney Holdings Limited Design and prototyping services and Republic of 25 25component supply for the automotive and Irelandaerospace engineering sectorsAnchorville Pte Ltd ## Dormant Singapore 30 30AquaGen International Pte Ltd ## Dormant Singapore 25 25PT SSE-Van der Horst Indonesia Provision of precision engineering services Indonesia 24 242006 JV Pte. Ltd. Dormant Singapore 50 50NanoScience Innovation Pte Ltd Research and development, manufacturing, Singapore 27.06 27.06distributing and trading of ultra fine structure,especially nano-scale, materials, devices,equipment and intellectual properties(b) Details of joint ventures are as follows:Country ofEffective equityincorporation/ interest held byName of joint venture Principal activities place of business the Group2007 2006% %GFM Electronics S.A. de C.V. Distribution and sales of high technology Mexico 50 50systems, services and products in thecommunications area, as well as electronicssystems, principally closed circuits and alarmsfor airports, malls, stadiums and highwaysATREC Pte. Ltd. Research and technology development in Singapore 50 50advanced materials for both defence andcommercial applicationsBeijing Zhonghuan Kinetics Develop, manufacture and sale of specialised People’s Republic 50 50Heavy Vehicles Co. Ltd. heavy-duty vehicles and sale of related spare of Chinaparts and provision of relevant technicalconsultancy and after sale technicalsupport services

1709. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)Country ofEffective equityincorporation/ interest held byName of joint venture Principal activities place of business the Group2007 2006% %SMART Systems Pte Ltd Life systems integration of weapon system Singapore 50 50Takata CPI Singapore Pte Ltd Manufacture of pyrotechnic components for Singapore 49 49seatbelts and air bags used in motor vehiclesHalter-Bollinger Joint Venture LLC ß To bid and secure US boat fabrication USA 50 50contracts for its shareholdersJoint Shipyard Management Construction and managing workers’ Singapore 30 30Services Pte Ltddormitories++This entity is under members’ voluntary liquidation.æDuring the financial year, the Group made additional capital contribution in this entity for a consideration of $18,452,000.The effective equity interest in this entity remains the same at 49%.* These entities were disposed of during the year.@The company was under members’ voluntary liquidation in the prior year and has completed its liquidation in January 2008.ßNot required to be audited under the law in the country of incorporation.** During the year, this entity was struck off from the Registrar with ACRA.+The shares of this company held were swapped with shares of Shougang Concord Technology Holdings during thefinancial year.##These associated companies are under compulsory winding up by the Court.

Singapore Technologies Engineering LtdAnnual Report 2007 1719. ASSOCIATED COMPANIES AND JOINT VENTURES (continued)All associated companies and joint ventures that are required to be audited under the law in the country of incorporation, areaudited by Ernst & Young, Singapore, except for the following:Name of associated company/joint ventureName of accounting firmComposite Technology International Pte LtdDeloitte and Touche, SingaporeEurocopter South East Asia Private LimitedKPMG, SingaporeShanghai Technologies Aerospace Company LimitedErnst & Young, ShanghaiTurbine Coating Services Pte LtdPricewaterhouseCoopers, SingaporeTurbine Overhaul Services Pte LtdPricewaterhouseCoopers, SingaporeCOMAT Training Services Pte LtdBDO RafflesGFM Electronics S.A. de C.V.PricewaterhouseCoopers, MexicoiWOW Technology Pte LtdLW Ong & CoKnowledge Alive Pte. Ltd.BDO RafflesmPayment Pte LtdThong & LimPM-B Project Management Business (Thailand) LtdSCI Audit Plus LimitedST LogiTrack Pte LtdKPMG, SingaporeTrusted Hub LtdKPMG, SingaporeWizVision Pte. Ltd.B H Gan & CoWizVision (HK) Pte LimitedPeter Cheng & CompanyBeijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd.Ernst & Young, BeijingCityCab Pte LtdDeloitte and Touche, SingaporeNusantara Technologies Sdn. Bhd.Deloitte Kassimchan, MalaysiaTimoney Holdings LimitedKPMG, IrelandPT SSE-Van der Horst IndonesiaKap Fitradewata Teramihardja, Bap, Indonesia2006 JV Pte. Ltd. KPMG, SingaporeNanoScience Innovation Pte LtdNSC & Associates

17210. INVESTMENTSGroupNote 2007 2006$’000 $’000Quoted investments (Available-for-sale)Equity shares, at fair valueNon-related corporations 34,271 19,044Impairment in value of quoted investments 36 (3,007) –Total quoted investments 31,264 19,044Unquoted investmentsEquity sharesRelated corporations, at cost 955 955Non-related corporations, at cost 24,365 33,519Non-related corporations, at fair value 384 1,32125,704 35,795Venture capital funds and limited partnership, at fair value 4,043 4,079Convertible loan, at amortised cost * 579 –Convertible loan to non-related corporations # 700 1,258Loan to a related corporation 4,393 4,405Unit trust – 4235,419 45,579Impairment in value of unquoted investments, at cost (25,861) (36,765)Total unquoted investments 9,558 8,814Total investments 40,822 27,858* During the current financial year, a subsidiary extended an interest-free convertible loan to an investee company at anominal value of US$300,000. The subsidiary is entitled, at any time during the following five years from the date ofdisbursement of the loan, to convert into share equity of the investee company for the entire amount or such portionthereof on the basis of one ordinary share for every $1 of the loan amount.#Included in the convertible loan is an amount of $700,000 (2006: $700,000) extended by a subsidiary to an investeecompany at an interest rate of 1% (2006: 1%) above bank prime rate per annum. This loan is convertible to shares in theinvestee company.For those unquoted investments where it is not practicable to determine the fair value, the Group has no intention to disposesuch investments at the balance sheet date.Impairment in value of quoted investments in non-related corporationsDuring the financial year, the Group recognised an impairment loss of $3,007,000 (2006: $nil) pertaining to quotedinvestments reflecting the write-down in the carrying value of the investments with a significant and prolong decline in themarket price.

Singapore Technologies Engineering LtdAnnual Report 2007 17310. INVESTMENTS (continued)Impairment in value of unquoted investmentsMovements in impairment in value of unquoted investments are as follows:GroupNote 2007 2006$’000 $’000At beginning of the year 36,765 28,380Charge to statement of profit and loss 36 – 8,428Translation difference (105) (43)Utilised (10,799) –At end of the year 25,861 36,76511. INTANGIBLE ASSETS(a) GoodwillGroupNote 2007 2006$’000 $’000(Restated)CostAt beginning of the year 443,633 318,165Acquisition of subsidiaries in prior year, as previously reported – 224,886Finalisation of purchase price allocation – (69,688)Acquisition of subsidiaries in prior year, as restated – 155,198Acquisition of subsidiaries in current year 93,788 –Acquisition of additional interest in subsidiaries (2,052) 222Translation difference (24,081) (29,952)At end of the year 511,288 443,633ImpairmentAt beginning of the year 18,503 10,344Impairment for the year 37 – 8,135Translation difference 134 24At end of the year 18,637 18,503Net book value 492,651 425,130

17411. INTANGIBLE ASSETS (continued)(b) Other intangible assetsCommercial andDeferred intellectual Corporate clubexpenditure* property rights + membership Brands # Others Total$’000 $’000 $’000 $’000 $’000 $’000The GroupCostAt 1.1.2006 1,076 39,281 1,345 – – 41,702Additions 4,742 520 – – – 5,262Acquisition of subsidiaries, aspreviously reported 811 18,098 – – 10,256 29,165Finalisation of purchase price allocation – (3,087) – 88,337 – 85,250Acquisition of subsidiaries, as restated 811 15,011 – 88,337 10,256 114,415Translation difference – (3,498) – – (270) (3,768)At 31.12.2006, as restated andat 1.1.2007 6,629 51,314 1,345 88,337 9,986 157,611Additions 5,513 1 – – – 5,514Translation difference 1 (2,591) – (5,227) (591) (8,408)At 31.12.2007 12,143 48,724 1,345 83,110 9,395 154,717Accumulated amortisationAt 1.1.2006 413 3,417 1,011 – – 4,841Amortisation for the year 424 3,823 28 – 860 5,135Translation difference (1) (299) – – (26) (326)Impairment loss – 818 – – – 818At 31.12.2006 and 1.1.2007 836 7,759 1,039 – 834 10,468Amortisation for the year 482 4,416 27 1,234 1,397 7,556Translation difference – (461) – (47) (102) (610)Write-back of impairment – – (27) – – (27)At 31.12.2007 1,318 11,714 1,039 1,187 2,129 17,387Net book valueAt 31.12.2007 10,825 37,010 306 81,923 7,266 137,330At 31.12.2006 5,793 43,555 306 88,337 9,152 147,143* Deferred expenditure includes a carrying amount of $9.2 million (2006: $4.6 million), of which amortisation has notcommenced as the intangible asset has not begun to generate revenue.+During the year, an impairment of $nil (2006: $818,000) was recognised in respect of the commercial and intellectualproperty rights of a product for which sales prospects have become uncertain.#These adjustments relate to the purchase price allocation to goodwill, intangible assets (excluding goodwill) and otherassets and liabilities for VT LeeBoy, Inc., which was finalised during the current financial year. The related amortisationon other intangible assets (Brands) in respect of the previous financial year was not significant to the Group, hence, noamortisation was charged in 2006.

Singapore Technologies Engineering LtdAnnual Report 2007 17511. INTANGIBLE ASSETS (continued)(c) Total intangible assetsGroup2007 2006$’000 $’000(Restated)Net book value 629,981 572,273Impairment testing of goodwillGoodwill acquired through business combinations has been allocated to the Group’s cash-generating units (“CGU”) identifiedaccording to each individual business unit, for impairment testing. Goodwill in relation to Pacific Flight Services Pty Ltd andTelematics Wireless Ltd has been determined provisionally and has not been allocated for impairment testing.Carrying amount of goodwill allocated to each of the CGU:ST Aerospace Solutions (Europe) A/S 1,186 1,186Pacific Flight Services Pty Ltd * 554 –Brightspot Interactive Learning Pte. Ltd. and its subsidiary 2,287 2,293DataMark Technologies Pte Ltd 124 124iDirect, Inc. 172,709 187,532MÄK Technologies, Inc. 25,328 25,222PM-B Pte Ltd and its subsidiaries 11,673 11,639STELCOMMS Pte. Ltd. 5 5STELOP Pte. Ltd. 1,732 1,732Telematics Wireless Ltd * 92,755 –STAR Automotive Center (Zhejiang) Co., Ltd. 224 222STAR Automotive Center (Guangzhou) Co., Ltd. 479 –VT LeeBoy, Inc. 105,905 112,598VT Specialized Vehicles Corporation 40,387 42,928Miltope Corporation 37,303 39,649492,651 425,130* The purchase price allocation to goodwill, intangible assets (excluding goodwill) and other assets and liabilities is currentlybeing assessed and is expected to be finalised within 12 months from the date of acquisition (as disclosed in Note 8).The recoverable amounts of the CGUs are determined based on value-in-use calculations, except for Pacific Flight ServicesPty Ltd and Telematics Wireless Ltd as described above.The value-in-use calculations use cash flow projections based on financial budgets approved by management. Managementhave considered and determined the factors applied in these financial budgets which include budgeted gross margins andaverage growth rates. The budgeted gross margins are based on past performance and its expectation of market development.Average growth rates used are consistent with forecasts included in industry reports. The discount rate applied is assumed at6.5% (2006: 6.6%) for value-in-use calculations, which is also the Group’s weighted average cost of capital.

17612. INVESTMENT PROPERTIESGroup2007 2006$’000 $’000(Restated)At CostAt beginning of the year, as previously reported – –Effect of adopting FRS 40 – 29,824At beginning of the year, as restated 29,824 29,824Transfer from property, plant and equipment 3,666 –At end of the year 33,490 29,824Accumulated depreciationAt beginning of the year, as previously reported – –Effect of adopting FRS 40 – 11,458At beginning of the year, as restated 12,865 11,458Depreciation charge for the year 1,001 1,407Transfer from property, plant and equipment 1,245 –At end of the year 15,111 12,865Net book value 18,379 16,959The property rental income of the Group for the year ended 31 December 2007 from its investment properties, which areleased out under operating leases, amounted to $935,000 (2006: $1,001,000). Direct operating expenses (including repairsand maintenance) arising on the rental-earning investment properties amounted to $1,107,000 (2006: $1,423,000).The fair value of the investment properties as at 31 December 2007 of $27,823,000 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 willingseller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently andwithout compulsion.The investment properties held by the Group as at end of the year are as follows:Location Existing Use Tenure Land area(sq. m.)Singapore5 Ubi Close Car showroom cum workshop 30 years from 1.8.1994 6,274159 Sin Ming Road Warehouse and office building Freehold 575Amtech Building #04-05 *People’s Republic of China555 Kanghua Road, Industrial building 50 years from 15,890Kangqiao Industrial Zone, 12.6.2003 to 27.2.2052Shanghai* Carrying amount of $1,428,000 (2006: $1,468,000) is pledged as security for long-term loan.

Singapore Technologies Engineering LtdAnnual Report 2007 17713. LONG-TERM RECEIVABLES(a) Long-term receivables comprise:GroupNote 2007 2006$’000 $’000Housing and car loans and advances to staff 953 975Trade debtors* 1,229 2,657Other debtors 4 99Loans to:Associated company # 140 140Allowance for doubtful debts (140) –– 140Joint venture^ 1,629 1,808Minority shareholder @ 582 –Third parties 10,156 11,090Allowance for doubtful loans (10,156) (11,090)– –4,397 5,679Receivable:Within 1 year 499 476After 1 year 3,898 5,2034,397 5,679* Long-term trade debtors are unsecured and charged with half-yearly interest rate at LIBOR plus 0.5% per annum (2006:LIBOR plus 0.5% per annum).#Loan to an associated company is unsecured and charged at an interest rate at SIBOR plus 2% per annum or such otherrates as the parties may have agreed (2006: fixed interest rate of 3% per annum).^ Loan to a joint venture bears interest of 4% (2006: 4%) per annum, is unsecured and is repayable by 31 August 2008.@Loan to a minority shareholder is unsecured, interest-free and is repayable within five years from the date of thedisbursement of the loan.Movements in allowance for doubtful loans to third parties are as follows:At beginning of the year 11,090 12,097Write-back to statement of profit and loss 37 (889) (944)Translation difference (45) (63)At end of the year 10,156 11,090Loans and receivables are carried at amortised cost and are subject to impairment.

17813. LONG-TERM RECEIVABLES(b) Included in the loans to third parties are:(i) an amount of $1,121,000 (2006: $2,010,000) which is secured by the third party’s investment in a unit trust and theloan is repayable over a period of 12 years commencing from 1996. Interest is chargeable at 15% (2006: 15%) perannum calculated on the reducing balance basis.(ii) an amount of approximately $8,312,000 (2006: $8,312,000) secured by intellectual property rights of that entityand is not expected to be repaid within the next 12 months. Interest is repriced every month and chargeable at theUS dollar prime rate plus 2% (2006: 2%) per annum, which is also the effective interest rate. The loan is convertibleto shares of that entity, subject to certain terms and conditions. In the prior year, a notice was given to that entity toconvert the loan to shares of that entity but the conversion has not been effected as at the end of the year.No interest income has been accrued for this financial year for the loans stated due to the uncertainty over thecollectibility of the interest income.(iii) a bridging loan of $722,700 (US$500,000) (2006: $768,150 (US$500,000)) extended to a third party. The bridgingloan is secured by way of a Deed of Debenture, which creates a floating charge over the assets of the third party. Thisloan is treated as a net investment in the third party and is not expected to be repaid. The loan is stated at cost andhas been fully provided for since financial year 2005 due to uncertainty of collectibility. Therefore, it is not practicableto determine its fair value.14. FINANCE LEASE RECEIVABLESDuring the financial year, the Group entered into finance lease arrangements with customers with terms ranging from 1 to 3years and effective interest rate of 3.1% to 27.4% per annum. These lease receivables of $504,000 (2006: $nil) are eithersecured by (i) banker’s guarantees or (ii) the leased assets in cases where the legal title of the assets will only be transferredto the customers at the end of the lease term.Group2007$’000Gross investment in finance leasesNot later than 1 year 8,0211 year through 3 years 1,5589,579Unearned interestNot later than 1 year 2891 year through 3 years 114403Present value of minimum lease receivablesNot later than 1 year 7,7321 year through 3 years 1,4449,176Allowance for doubtful minimum lease receivablesNot later than 1 year (810)1 year through 3 years –(810)

Singapore Technologies Engineering LtdAnnual Report 2007 17914. FINANCE LEASE RECEIVABLES (continued)GroupNote 2007$’000Net investment in finance leaseNot later than 1 year 6,9221 year through 3 years 1,4448,366Not past due and not impaired 5,513Past due and not impaired 2,8538,366Individually assessedDoubtful lease receivables 810Allowance for doubtful lease receivables (810)–8,366Movements in allowance for doubtful lease receivables are as follows:At beginning of the year –Charge to statement of profit and loss 37 (811)Translation difference 1At end of the year (810)Finance leases that are individually assessed to be impaired relate to customers who have defaulted on payments.Ageing of net investment in minimum lease receivables that are past due but not impaired:0 – 90 days 1,38191 – 180 days 933181 – 360 days 472>360 days 672,853

18015. DEFERRED TAX ASSETSGroup2007 2006$’000 $’000(Restated)At beginning of the year 132,768 110,872Write-back to statement of profit and loss 9,369 (4,613)Effect of reduction in tax rate (9,727) –Acquisition of subsidiaries in prior year, as previously reported – 18,783Finalisation of purchase price allocation – 15,131Acquisition of subsidiaries in prior year, as restated – 33,914Acquisition of subsidiaries in current year 499 –Disposal of a subsidiary in current year (205) –Translation difference 474 (3,158)Transfer to provision for taxation (22,669) (3,190)Changes in fair value of available-for-sale financial assets 1,637 (1,218)Changes in fair value of derivative financial instruments designated in cash flow hedges 234 161At end of the year 112,380 132,768The deferred tax assets arise as a result of:Unabsorbed capital allowances and unutilised tax losses 42,151 52,601Allowance for doubtful debts and stock obsolescence 18,414 24,585Provision for warranties 37,763 36,379Provision for liquidated damages 2,049 1,879Provision for foreseeable losses 5,848 7,813Intangible assets (820) (19,109)Other temporary differences 6,091 29,498Changes in fair value of available-for-sale financial assets (7) (1,495)Changes in fair value of derivative financial instruments designated in cash flow hedges 891 617112,380 132,76816. STOCKS AND WORK-IN-PROGRESSStocks of equipment and spares 479,126 484,861Work-in-progress in excess of progress billingsWork-in-progress, including profits recognised 2,482,041 1,905,536Progress billings (1,733,042) (1,287,779)748,999 617,757Total stocks and work-in-progress at lower of cost and net realisable value 1,228,125 1,102,618Progress billings in excess of work-in-progressWork-in-progress, including profits recognised 983,295 1,499,763Progress billings (1,352,052) (1,828,372)(368,757) (328,609)Stocks are stated after allowance for stock obsolescence of $140,477,000 (2006: $135,183,000) and work-in-progress inexcess of progress billings are stated after provision for foreseeable losses of $28,656,000 (2006: $26,311,000).

Singapore Technologies Engineering LtdAnnual Report 2007 18117. TRADE DEBTORSGroup2007 2006$’000 $’000(Restated)Not past due and not impaired 389,713 447,967Past due and not impaired 301,598 317,243691,311 765,210Collectively assessedImpaired receivable (Gross) 174,601 42,425Allowance for doubtful debts (15,188) (19,690)159,413 22,735Individually assessedImpaired receivable (Gross) 48,522 63,263Allowance for doubtful debts (40,479) (46,290)8,043 16,973Unbilled receivables 94,936 53,347Trade debtors, net 953,703 858,265Trade debtors denominated in currencies other than the functional currencies as at 31 December 2007 are as follows:• $213,479,000 (2006: $222,880,000) denominated in US dollars• $14,073,000 (2006: $34,277,000) denominated in EuroMovements in allowance for doubtful debts are as follows:GroupNote 2007 2006$’000 $’000At beginning of the year 65,980 75,091Charge/(write-back) to statement of profit and loss 37 3,047 (7,378)Bad debts written off against allowance (13,162) (2,401)Acquisition of subsidiaries 15 1,920Translation difference (213) (1,252)At end of the year 55,667 65,980Ageing of receivables that are past due but not impaired:Group2007 2006$’000 $’000(Restated)0 – 90 days 202,569 211,27591 – 180 days 44,121 70,475181 – 360 days 24,648 27,109>360 days 30,260 8,384301,598 317,243Trade debtors that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent orin financial difficulties or who have significant delay or defaulted in payments.Trade debtors amounting to $15,480,000 (2006: $7,609,000) are arranged to settle via letter of credits issued by reputablebanks.

18218. DUE FROM RELATED CORPORATIONSGroupCompany2007 2006 2007 2006$’000 $’000 $’000 $’000Due from:Related corporations 662,913 516,440 302,638 238,783Included in the amount due from related corporations are loans amounting to $657,690,000 (2006: $511,484,000) and$302,611,000 (2006: $238,757,000) extended from the Group and the Company respectively.These loans are guaranteed by Fullerton Management Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private)Limited and mature on varying periods within 4 months (2006: 3 months) from the financial year end. Interest rates rangefrom 1.45% to 5.74% (2006: 2.45% to 5.40%) per annum, which are also the effective interest rates.19. ADVANCES AND OTHER DEBTORSGroupCompanyNote 2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)Advance payments to suppliers 174,404 114,215 – –Other debtors, deposits and prepayments 23 98,549 105,745 5,170 1,413Due from:Subsidiaries – – 307,918 197,759Associated companies 24 12,431 7,416 – –Joint ventures 3,776 13,455 – –Derivative financial instruments 51 5,061 2,063 – –294,221 242,894 313,088 199,17220. SHORT-TERM INVESTMENTGroup2007 2006$’000 $’000Quoted investment (Available-for-sale)Equity shares, at fair valueNon-related corporation 338 –21. AMOUNTS UNDER FUND MANAGEMENTPrincipal sum of amounts under fund management, at market value 178,781 228,173Amounts under fund management are classified as available-for-sale financial assets with the fair value movements taken toequity. However, any deficiency in fair value below principal amount is recognised to the extent of the guaranteed amount.This applies to impairment assessment as well.The terms of the fund management agreements, which are for periods ranging from 1 to 3 years (2006: 2 to 3 years), providefor the following:(a) the guarantee of the return of the principal sums from 95% to 100% (2006: 95% to 100%) by the fund managers at theend of the relevant fund management period;

Singapore Technologies Engineering LtdAnnual Report 2007 18321. AMOUNTS UNDER FUND MANAGEMENT (continued)(b) the fees payable to the fund managers include a share, in specified proportions, of any surplus (determined at the end ofthe relevant fund management period) arising from the management of the fund; and(c) the Group can, pursuant to the terms, terminate the agreement by giving one month prior notice in writing to the fundmanagers. In the event of early termination, the guarantee of the return of the principal sum will not be applicable.Value of assets under fund management can be analysed as follows:Group2007 2006$’000 $’000Quoted equity investments at market value 35,735 55,481Quoted bond investments at market value 90,395 167,220Cash 52,651 5,472178,781 228,17322. BANK BALANCES AND OTHER LIQUID FUNDSGroupCompanyNote 2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)Fixed deposits with financial institutions 371,933 333,695 26,811 90,645Cash and bank balances 253,904 297,866 57,953 55,010625,837 631,561 84,764 145,655Fixed deposits with financial institutions mature at varying periods within 7 months (2006: 12 months) from the financial yearend. Interest rates range from 0.4% to 8.5% (2006: 1.71% to 5.55%) per annum, which are also the effective interest rates.Cash and bank balances of $3,946,000 (2006: $1,633,000) have been placed with banks as security for letters of creditissued to third party.23. OTHER DEBTORS, DEPOSITS AND PREPAYMENTSDeposits 8,167 6,698 182 168Prepayments 22,633 14,673 151 193Interest receivable 4,215 3,318 1,154 717Other recoverables 21,694 26,840 3,379 14Non-trade debtors 41,840 54,216 304 32198,549 105,745 5,170 1,41324. DUE FROM ASSOCIATED COMPANIESGroup2007 2006$’000 $’000Trade balances 12,659 7,566Non-trade balances 302 243Allowance for doubtful debts – trade (530) (393)12,431 7,416

18425. CREDITORS AND ACCRUALSGroupCompanyNote 2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)Trade creditors 551,575 545,996 – –Other creditors and accruals 29 966,307 810,384 48,520 49,458Due to:Subsidiaries – – 2,605 620Related corporations 2,168 2,670 – –Associated companies 2,195 841 – –Joint ventures 1,911 2,114 – –Derivative financial instruments 51 – 68 – –1,524,156 1,362,073 51,125 50,078Trade creditors denominated in currencies other than the functional currencies as at 31 December 2007 are as follows:• $52,972,000 (2006: $31,440,000) denominated in US dollars• $23,991,000 (2006: $32,210,000) denominated in Euro26. PROVISIONSGroupNote 2007 2006$’000 $’000(Restated)Provision for:Warranties 179,972 163,127Liquidated damages 11,247 9,396Foreseeable losses 352 12,709191,571 185,232(a) Movements in provision for warranties are as follows:At beginning of the year 163,127 149,910Charge to statement of profit and loss 37 33,893 23,855Provision utilised (15,297) (11,639)Translation difference (1,694) (1,689)Acquisition of subsidiaries in prior year, as previously reported – 2,369Finalisation of purchase price allocation – 321Acquisition of subsidiaries in prior year, as restated – 2,690Acquisition of subsidiaries in current year 45 –Disposal of a subsidiary (102) –At end of the year 179,972 163,127

Singapore Technologies Engineering LtdAnnual Report 2007 18526. PROVISIONS (continued)GroupNote 2007 2006$’000 $’000(b) Movements in provision for liquidated damages are as follows:At beginning of the year 9,396 7,893Charge to statement of profit and loss 37 2,324 2,020Provision utilised (468) (496)Translation difference (5) (21)At end of the year 11,247 9,396(c) Movements in provision for foreseeable losses are as follows:At beginning of the year 12,709 19,261Write-back to statement of profit and loss 37 (3,257) (448)Provision utilised (9,100) (6,104)At end of the year 352 12,70927. SHORT-TERM BANK LOANSEffectiveGroupinterest rate Maturity 2007 2006% $’000 $’000Bank loans 5.04% to 8.22% Within 1 year 574,595 595,850The bank loans are denominated in US dollars, Sterling pounds, Euro, Australian dollars and Chinese Yuan.Short-term bank loans amounting to $527,742,000 (2006: $571,627,000) are unsecured and loans amounting to$46,853,000 (2006: $24,223,000) are secured by a floating charge over a subsidiary’s plant and machinery.28. LEASE OBLIGATIONSA subsidiary leases certain land, buildings, and equipment from a foreign Airport Authority (the “Authority”) under a capitallease related to industrial revenue bonds issued by the Authority. Assets being leased are pledged as collateral against thebonds. The bonds have staggered maturity dates and the lease payments have been structured to coincide with the staggeredmaturities of the bonds with the final payment due on 1 November 2012, the expiration date of the lease.In connection with the bond issue, the subsidiary entered into a letter of credit agreement for approximately US$10,969,000,which is used to guarantee payments on the bonds in the event that the subsidiary is unable to make required lease payments.The letter of credit expires on 3 April 2012.The subsidiary also leases certain land, buildings, and equipment from the Authority under an operating lease. The lease termcoincides with the term of the capital lease.

18628. LEASE OBLIGATIONS (continued)The obligations under the finance lease to be paid by the subsidiary are as follows:PresentMinimumvalue oflease payment Interest payments$’000 $’000 $’00020071 to 5 years 10,119 (1,318) 8,801After 5 years 50 (17) 3310,169 (1,335) 8,834Repayable:Within 1 year 1,675After 1 year 7,1598,83420061 to 5 years 11,109 (1,943) 9,166After 5 years 2,195 (96) 2,09913,304 (2,039) 11,265Discount (15) – (15)13,289 (2,039) 11,250Repayable:Within 1 year 2,137After 1 year 9,11311,250Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.29. OTHER CREDITORS AND ACCRUALSGroupCompany2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)Non-trade creditors 194,232 17,666 4,679 3,342Purchase of property, plant and equipment 702 1,209 – –Accrued operating expenses 761,618 783,415 43,841 46,116Accrued interest payable 6,367 6,375 – –Employee benefit liabilities 3,388 1,719 – –966,307 810,384 48,520 49,458

Singapore Technologies Engineering LtdAnnual Report 2007 18730. DEFERRED INCOMEGroupNote 2007 2006$’000 $’000At beginning of the year 8,197 6,222Additions 5,286 1,975Translation difference (28) –13,455 8,197Deferred income recognised to-date (6,376) (4,096)At end of the year 7,079 4,101Movements in deferred income recognised to-date are as follows:At beginning of the year 4,096 3,919Recognised in statement of profit and loss 37 2,324 132Translation difference (44) 45At end of the year 6,376 4,09631. DEFERRED TAX LIABILITIESGroupCompany2007 2006 2007 2006$’000 $’000 $’000 $’000(Restated)At beginning of the year 46,324 7,751 285 190Charge/(write-back) to statement of profit and loss (1,030) (5,025) 115 95Effect of reduction in tax rate (68) – (28) –Translation difference (2,914) (433) – –Transfer to provision for taxation 200 – – –Acquisition of subsidiaries in prior year, as previously reported – 10,771 – –Finalisation of purchase price allocation – 31,134 – –Acquisition of subsidiaries in prior year, as restated – 41,905 – –Changes in fair value of available-for-sale financial assets (3,038) 2,126 – –Changes in fair value of derivative financial instrumentsdesignated in cash flow hedges 734 – – –At end of the year 40,208 46,324 372 285The deferred tax liabilities arise as a result of:Excess of net book value over tax written down valueof property, plant and equipment 3,826 913 94 75Allowance for doubtful debts and stock obsolescence (5,488) (271) – –Other temporary differences (4,568) (5,977) 278 210Property, plant and equipment fair value adjustmentarising from acquisition of subsidiaries – 2,589 – –Changes in fair value of available-for-sale financial assets 5,174 4,140 – –Changes in fair value of derivative financial instrumentsdesignated in cash flow hedges 734 – – –Intangible assets 40,530 44,930 – –40,208 46,324 372 285

18832. LONG-TERM BANK LOANSEffectiveGroupinterest rate Maturity 2007 2006% $’000 $’000Bank loans 5.168 Up to 2012 282,366 277,384Repayable:Within 1 year 281,783 6,859After 1 year 583 270,525282,366 277,384The bank loans are denominated in Euro (2006: US dollars and Euro) and secured by assets of subsidiaries.Loans amounting to $281,546,000 (2006: $271,461,000) are at EURIBOR with margin ranging from 0.5% to 1.1% andsecured by a floating charge over a subsidiary’s plant and machinery. Due to the non-compliance of two of the five financialundertakings of the covenant clauses, as at 31 December 2007, the bank is contractually entitled to request for immediaterepayment of the outstanding long-term bank loan of $281,546,000 and short-term bank loan of $46,853,000. Consequently,the outstanding balance of the bank loan of $281,546,000 was presented as a current liability as at 31 December 2007.Management has obtained a letter from the bank dated 6 February 2008 to waive its rights as at 31 December 2007 underthe loan agreement as a consequence of the breach of the loan covenants. The bank had not requested early repaymentof the loan as of the date when the financial statements were approved by the Board of Directors.33. OTHER LOANSIncluded in other loans are:(a) US dollar denominated term notes of $1.4 million (US$0.9 million) (2006: $1.5 million (US$1.0 million)) and $0.3 million(US$0.2 million) (2006: $0.3 million (US$0.2 million)) owing to the Pennsylvania Industrial Development Authority andthe Industrial Properties Corporation, respectively, by a US entity of the Group. These notes are secured by assets of theentity and bear interest, respectively, at 2.75% and 4.0% (2006: 2.75% and 4.0%) per annum, which are also the effectiveinterest rates, and are payable through 1 July 2019 and 28 June 2019, respectively.Another US dollar denominated term note of $0.4 million (US$0.3 million) (2006: $0.6 million (US$0.4 million)) is owedby the same entity to the Pennsylvania Department of Community and Economic Development. This note is unsecured,bears interest of 2.75% (2006: 2.75%) per annum, which is also the effective interest rate, and is payable through1 February 2012.(b) an amount of $194,000 (2006: $194,000) relating to a long-term loan from a minority shareholder of a subsidiary.The loan is unsecured, interest-free and the shareholder has indicated that they will not request for the repayment ofthe loan within the next 12 months.34. DUE TO A SUBSIDIARYAmount due to a subsidiary of the Company is unsecured, interest-free and is not repayable in the foreseeable future.

Singapore Technologies Engineering LtdAnnual Report 2007 18935. TURNOVERTurnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts asfollows:Group2007 2006$’000 $’000Sale of goods 2,751,918 2,495,426Service income 2,299,064 1,990,3325,050,982 4,485,75836. OTHER OPERATING INCOMEGroupNote 2007 2006$’000 $’000Commission income 358 1,326Dividend income– quoted equity investments 13 506– unquoted equity investments 99 9,785Interest income– related corporations 19,864 24,287– bank deposits 21,077 14,638– staff loans 15 28– finance lease 173 –– others 1,333 1,198(Impairment)/write-back of impairment in value of investments– quoted investments 10 (3,007) –– unquoted investments 10 – (8,428)– associated companies 9 4,400 (4,865)Gain/(loss) on disposal of– a subsidiary company (3,506) –– associated companies 20,702 –– investments (4,037) 35,701Profit on maturity of amounts under fund management 24,490 6,491Fair value changes of financial instruments– gain on forward currency contract designated as hedging instrument in fair value hedges 3,837 1,256– ineffective portion of forward currency contract designated as hedging instrument incash flow hedges (820) (52)Fair value of hedged items (3,675) (1,359)Gain on dilution of interest in– a subsidiary company 84 –– an associated company – 571Others 6,992 7,05188,392 88,134

19037. PROFIT FROM CONTINUING OPERATIONSProfit from continuing operations is arrived at:GroupNote 2007 2006$’000 $’000After chargingAuditors’ remuneration– auditors of the Company 1,656 1,555– other auditors 3,478 2,929Non-audit fees– auditors of the Company 419 330– other auditors 1,180 1,000Fees and remuneration of directors 4,087 3,960Fees paid to a firm of which a director is a member 74 193Personnel expenses 38 1,368,839 1,245,704Depreciation charge 7, 12 126,518 130,676Allowance/(write-back of allowance) for– Stock obsolescence 12,941 9,330– Doubtful debts (trade) 17 3,047 (7,378)– Loan receivables 13 (889) (944)– Doubtful lease receivables 14 811 –Provision/(write-back of provision) for– Foreseeable losses 26 (3,257) (448)– Liquidated damages 26 2,324 2,020– Warranties 26 33,893 23,855Property, plant and equipment written off 8,721 10,942Research, design and development expenses incurred 65,956 58,435Operating lease expenses 28,976 22,412Amortisation of other intangible assets 11 7,556 5,135Impairment of goodwill 11 – 8,135Impairment/(write-back of impairment) of property, plant and equipment 7 (105) 297Impairment/(write-back of impairment) in value of other intangible assets 11 (27) 818And creditingGrants and subsidies received 192 1,204Deferred income recognised 30 2,324 132

Singapore Technologies Engineering LtdAnnual Report 2007 19138. PERSONNEL EXPENSESGROUP2007 2006$’000 $’000Wages and salaries * 1,137,016 1,042,644Pension contributions 70,938 61,850Share-based payments 16,085 9,885Other personnel expenses 144,800 131,325* Includes directors’ remuneration of $2,879,359 (2006: $2,802,266).39. KEY MANAGEMENT PERSONNEL COMPENSATIONThe key management personnel compensation are as follows:1,368,839 1,245,704Short-term employee benefits 34,583 30,202Pension contributions 461 406Other long-term benefits 1 7Share-based payments 1,271 78136,316 31,39640. OTHER INCOME, NETGain on disposal of property, plant and equipment 909 11Losses arising from the impact of Hurricane Katrina (277) (41,908)Proceeds received/receivable from insurers (Hurricane Katrina) 323 41,118Exchange loss, net (5,402) (3,914)Rental income 3,690 3,798Short-term loans from minority shareholders forgiven – 2,766Service fee – 2,201Others 3,866 5,2683,109 9,34041. FINANCIAL EXPENSESBank loans and overdrafts 49,363 41,182Finance lease 540 711Others 453 35950,356 42,252

19242. TAXATIONGroup2007 2006$’000 $’000Current income taxCurrent year 123,208 115,321Overprovision in respect of prior years (13,394) (13,762)Associated companies and joint ventures 5,641 7,748115,455 109,307Deferred income taxCurrent year (1,532) 894Overprovision in respect of prior years (8,867) (1,306)Effect of reduction in tax rate 9,550 –114,606 108,895Deferred income tax related to items charged or credited directly to equity:Net change in fair value of available-for-sale financial assets (4,675) 3,344Net change in fair value of derivative financial instruments designated in cash flow hedges 500 (161)Effect of reduction in tax rate 109 –(4,066) 3,183The GroupUnrecognised tax lossesAs at 31 December 2007, subsidiaries of the Group have potential tax benefits of approximately $24,731,000 (2006:$40,707,000) arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, whichare available for set-off against future taxable profits. These tax benefits have not been recognised in the financial statementsdue to the uncertainty of its recoverability. The use of these potential tax benefits is subject to the agreement of the taxauthorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiariesoperate.Unrecognised temporary differences relating to investments in subsidiariesAt the balance sheet date, no deferred tax liability (2006: $nil) has been recognised for taxes that would be payable on theundistributed earnings of certain of the Group’s subsidiaries as the Group has determined that the undistributed profits ofsome of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organicgrowth and acquisitions.

Singapore Technologies Engineering LtdAnnual Report 2007 19342. TAXATION (continued)A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate forthe years ended 31 December is as follows:Group2007 2006$’000 $’000Profit from continuing operations before taxation 638,115 564,339Taxation at statutory tax rate of 18% (2006: 20%) 114,861 112,868Adjustments:Income not subject to tax (13,932) (21,892)Expenses not deductible for tax purposes 11,817 20,264Higher effective tax rates of other countries 18,908 15,523Overprovision in prior years, net (22,261) (15,068)Effect of change in tax rates 9,550 –Income subject to concessionary tax rates (2,807) (4,444)Deferred tax assets not recognised 6,574 6,403Deferred tax assets previously not recognised now recognised (5) (3,432)Others (8,099) (1,327)Current financial year’s taxation charge 114,606 108,895The corporate income tax rate applicable to Singapore companies of the Group was reduced to 18% for the year ofassessment 2008 onwards from 20% for year of assessment 2007.43. DIVIDENDSFinal tax exempt (one-tier) dividend paid in respect of the previous financial year of 4.0 cents(2006: 4.0 cents) per share 117,850 116,580Special tax exempt (one-tier) dividend paid in respect of the previous financial year of11.11 cents (2006: 9.6 cents) per share 327,277 279,792Interim tax exempt (one-tier) dividend paid in respect of the current financial year of 2.0 cents(2006: nil) per share 59,562 –504,689 396,372Additional final dividend paid in respect of the previous financial year due to issue of sharesunder ESOS/ESOP before books closure date 3,531 3,101508,220 399,473The Directors propose a final tax exempt (one-tier) dividend of 4.0 cents (2006: 4.0 cents) per share amounting to $119.3million (2006: $117.9 million) and a special tax exempt (one-tier) dividend of 10.88 cents (2006: 11.11 cents) per shareamounting to $324.6 million (2006: $327.3 million), in respect of the financial year ended 31 December 2007. The dividendshave not been recognised as a liability as at year end as it is subject to approval at the Annual General Meeting of theCompany.

19444. EARNINGS PER SHAREGroup2007 2006$’000 $’000Basic earnings per shareThe calculation for basic earnings per share is based on:Consolidated profit after taxation and minority interests 503,503 445,127Group2007 2006Number of shares (‘000)The weighted average number of ordinary shares is arrived at as follows:Issued ordinary shares at beginning of the year 2,946,254 2,914,496Weighted average number of ordinary shares issued during the year 24,486 23,234Weighted average number of ordinary shares 2,970,740 2,937,730Diluted earnings per shareWhen calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutivepotential ordinary shares. The number of unissued shares under option granted under the ESOS/ESOP and their exerciseprices are set out in Note 3. The average fair value of one ordinary share during the financial year ended 31 December 2007was $3.60 (2006: $2.97) per share. The weighted average number of ordinary shares adjusted for the unissued shares underoption is as follows:Number of shares (‘000)Weighted average number of ordinary shares(used in the calculation of basic earnings per share) 2,970,740 2,937,730Weighted average number of unissued shares under option 34,854 134,206Number of shares that would have been issued at fair value (28,039) (104,474)Weighted average number of ordinary shares (diluted) 2,977,555 2,967,46231,217,005 (2006: 30,779,320) of share options granted to employees under the existing employee share option plans havenot been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previousfinancial years presented.45. RELATED PARTY INFORMATIONIn addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactionswith fellow subsidiaries within Temasek Group on terms agreed between the parties as follows:Group2007 2006$’000 $’000Sales and services rendered 17,044 7,978Purchases and services received 52,761 41,398Property, plant and equipment purchases 237 3,145Interest income 19,864 24,287Dividend income 99 525Rental income 3,214 3,239Rental expenses 2,243 2,918

Singapore Technologies Engineering LtdAnnual Report 2007 19546. CASH AND CASH EQUIVALENTSGroupNote 2007 2006$’000 $’000(Restated)Cash and cash equivalents comprise the following:Fixed deposits with financial institutions 22 371,933 333,695Cash and bank balances 22 253,904 297,866Short-term loans to a related corporation 18 657,690 511,484Bank overdrafts (803) (1,737)1,282,724 1,141,308Cash and cash equivalents denominated in currencies other than the functional currenciesas at 31 December are as follows:Group2007 2006$’000 $’000US dollars 270,186 115,699Euro 47,393 75,15747. COMMITMENTS(a) Capital commitmentsCapital expenditure contracted but not provided for in the financial statements 38,589 60,625(b) LeasesFuture minimum lease payments under non-cancellable operating leases are as follows:Within 1 year 23,861 25,188Within 2 to 5 years 64,631 66,190After 5 years 98,435 129,041186,927 220,419The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. Theleases for leasehold land and buildings and office premises contain renewal options but not purchase options. Certainleases contain escalation clauses but do not provide for contingent rents. Lease terms do not contain restrictions on theGroup activities concerning dividends, additional debt or further leasing.(c) Operating lease commitments – As lessorThe Group has entered into a commercial lease on two of its aircraft engines. The non-cancellable lease has an averagelease term of about 3 to 10 years.Future lease payment receivables under non-cancellable operating lease are as follows:Not later than 1 year 549 807Later than 1 year but not later than 5 years 739 1,206Later than 5 years 538 7691,826 2,782

19647. COMMITMENTS (continued)(d) Investments(i) As at 31 December 2007, the Group has outstanding commitments in respect of uncalled capital to the extent of $2.4million (2006: $0.2 million) in subsidiaries.(ii) As at 31 December 2007, in respect of investments in unquoted equity shares of venture capital fund companies,there is uncalled capital contribution amounting to $0.6 million (2006: $0.6 million) for the Group.(iii) Under the Shareholders Agreement in respect of the overseas subsidiary, ST Aerospace Solutions (Europe) A/S(“STA Solutions”) dated 15 March 2006, Singapore Technologies Aerospace Ltd (“ST Aerospace”) grants a putoption to STA Solutions’ minority shareholder SAS Technical Services AB (“STS”), who in turn grants a call option forST Aerospace to acquire the remaining 28.7% stake in STA Solutions. ST Aerospace may exercise its option fromthe fourth anniversary to the seventh anniversary of 15 March 2006, while STS may exercise its option from thesecond anniversary to the seventh anniversary of 15 March 2006. The Option Notice can be given from the relevantanniversary dates of 15 March 2006 by ST Aerospace or STS respectively as the case may be and the price, subjectto a floor and ceiling, is the fair market value to be determined in accordance with the principles set forth in theShareholders Agreement.(iv) On 3 September 2007, ST Aerospace Engineering Pte Ltd (“STA Engineering”) signed an agreement with AviationTraining Academy (Singapore) Pte Ltd (“ATAS”) to set up a commercial pilot training academy in Singapore known asST Aviation Training Academy Pte Ltd (“STATA”) with a 66% and 34% shareholding respectively.Pursuant to the agreement, if STATA and its subsidiaries are able to achieve the agreed profit before tax excludingminority interests for the second and fifth financial years, STA Engineering will grant two independent options whichwill entitle ATAS to purchase STA Engineering’s shareholdings of STATA, amounting to 5% of the total share capital ofSTATA for each option on the date of the exercise of the option (“First Option” and “Second Option”). If ATAS does notexercise the First Option by the expiry date, the First Option shall lapse and will not be carried forward to the SecondOption.The First Option may be exercised at any time during a six-month period from the date of the audited financialstatements of STATA for the second financial year, while the Second Option may be exercised at any time during a sixmonthperiod from the date of the audited financial statements of STATA for the fifth financial year.The price for the shares of the First Option and Second Option shall be at fair values as determined by an appraiser tobe jointly appointed by shareholders and the appraiser shall determine the fair value in accordance with the principlesset out in the agreement.(v) ST Aerospace Engines Pte Ltd (“STA Engines”) has signed a joint venture agreement with Xiamen Aviation IndustryCo. (“XAICO”) to set up an engine maintenance, repair and overhaul facility in Xiamen, China, on 23 December 2007.A joint venture company, to be registered as “ST Aerospace Technologies (Xiamen) Company Limited” (“STATCO”),will have a total investment of US$78 million. STA Engines will own an 80% stake of STATCO, while XAICO will own20%.(vi) As at 31 December 2007, the Group has outstanding commitments in respect of additional investment to the extent of$13.0 million (2006: $nil) in a subsidiary.(vii) As at 31 December 2007, the Group has outstanding commitments in respect of uncalled capital to the extent of $2.4million (2006: $2.4 million) in a joint venture.On 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF UtilitiesLimited to form an Equity Joint Venture Company in Pune, India. The joint venture company will have a registeredcapital of US$6 million to be contributed by each party in the proportion of 26% and 74% respectively, which is to becontributed over three years. To-date, the joint venture company has not been set up.

Singapore Technologies Engineering LtdAnnual Report 2007 19748. CONTINGENT LIABILITIES (UNSECURED)(a) Corporate guarantees given by the Company to banks in respect of loan facilities extended to certain subsidiariesincorporated in the USA amounted to $781 million (US$540 million) (2006: $753 million (US$490 million)).(b) Guarantee given by subsidiaries in respect of banking facilities granted to subsidiaries as at 31 December 2007amounted to $56.6 million (2006: $59.5 million).(c) A subsidiary in the Group, who is the subcontractor of a project, is in dispute with the main contractor of the projectregarding the performance of the work under the subcontract. During the current financial year, a provision of $3 millionfor costs involved had been made.49. SEGMENT INFORMATION(a) Analysis by business segmentsThe Group is organised on a worldwide basis into four main operating segments, namely:(i) AerospaceProvides a full spectrum of maintenance and engineering services which include airframe, engine and componentmaintenance, repair and overhaul; engineering design and technical services; and aviation materials and managementservices, including Total Aviation Support.(ii) ElectronicsDelivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. Itspecialises in the design, development and integration of advanced electronics and communications systems, suchas broadband radio frequency and satellite communication, e-Government solutions, information communicationstechnologies and IT, rail and traffic management, real-time command and control, training and simulation, intelligentbuilding management, and information security and mobile commerce solutions.(iii) Land SystemsDelivers integrated land systems, specialty vehicles and their related through life support for defence, homelandsecurity and commercial applications.(iv) MarineProvides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. Inshipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition to detailed design,construction, on-board system installation and integration, testing, commissioning to through-life support. It hasalso established a track record in providing high engineering content shiprepair and ship conversion services for aworldwide clientele.Other operations include research and development, treasury, investment holding and provision of management,consultancy, warehousing and other support services.Inter-segment pricing is on an arm’s length basis.

19849. SEGMENT INFORMATION (continued)LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002007TurnoverExternal sales 1,834,885 1,023,240 1,178,033 863,184 151,640 – 5,050,982Inter-segment sales 2,884 15,044 10,284 1,410 13,169 (42,791) –1,837,769 1,038,284 1,188,317 864,594 164,809 (42,791) 5,050,982Segment results 304,905 85,858 86,195 77,356 538,356 (532,546) 560,124Investment income, net 6,196 25,182 (6,177) 14,037 (24) 24 39,238Interest income 11,489 4,866 7,946 8,558 37,507 (27,904) 42,462Operating profit 322,590 115,906 87,964 99,951 575,839 (560,426) 641,824Financial expenses (17,418) (9,461) (9,628) (3,430) (30,766) 20,347 (50,356)Share of results ofassociated companiesand joint ventures 35,990 8,891 1,667 46 – 53 46,647Profit from continuingoperations before taxation 341,162 115,336 80,003 96,567 545,073 (540,026) 638,115Taxation (54,925) (24,893) (6,995) (21,303) (6,943) 453 (114,606)Minority interests (15,758) (2,220) (2,219) – – 191 (20,006)Net profit attributableto shareholders 270,479 88,223 70,789 75,264 538,130 (539,382) 503,503Assets 1,910,388 1,358,504 1,271,504 650,278 2,315,936 (1,870,626) 5,635,984Associated companiesand joint ventures 141,335 8,971 110,983 353 1,646 4,218 267,506Unallocated assets 139,819Total assets 6,043,309Liabilities 1,498,292 1,272,918 1,188,777 531,583 782,224 (1,258,808) 4,014,986Unallocated liabilities 249,113Total liabilities 4,264,099Capital expenditure 111,645 109,843 24,881 20,687 2,238 – 269,294Depreciation and amortisation 78,416 15,524 20,910 17,096 2,065 63 134,074Impairment loss/(write-backof impairment) (188) (4,400) 3,063 – 24 (24) (1,525)Other non-cash expenses 8,446 203 72 – – – 8,721

Singapore Technologies Engineering LtdAnnual Report 2007 19949. SEGMENT INFORMATION (continued)LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002006 (Restated)TurnoverExternal sales 1,673,209 951,336 1,001,847 701,520 157,846 – 4,485,758Inter-segment sales 2,284 14,421 12,052 1,348 580,253 (610,358) –1,675,493 965,757 1,013,899 702,868 738,099 (610,358) 4,485,758Segment results 241,983 91,818 63,940 72,823 538,661 (534,036) 475,189Investment income, net 28,271 11,930 388 733 (3,254) 1,693 39,761Interest income 9,805 5,107 7,952 9,123 31,500 (23,336) 40,151Operating profit 280,059 108,855 72,280 82,679 566,907 (555,679) 555,101Financial expenses (11,962) (8,879) (6,579) (3,519) (27,954) 16,641 (42,252)Share of results ofassociated companiesand joint ventures 37,183 4,674 4,270 340 – 5,023 51,490Profit from continuingoperations before taxation 305,280 104,650 69,971 79,500 538,953 (534,015) 564,339Taxation (43,621) (26,515) (16,360) (11,677) (8,299) (2,423) (108,895)Minority interests (6,623) (1,817) (1,685) – – (192) (10,317)Net profit attributable toshareholders 255,036 76,318 51,926 67,823 530,654 (536,630) 445,127Assets 1,804,936 1,115,622 1,121,083 632,310 2,219,119 (1,778,956) 5,114,114Associated companiesand joint ventures 111,781 61,573 114,667 290 1,670 4,164 294,145Unallocated assets 169,524Total assets 5,577,783Liabilities 1,351,496 1,055,564 1,051,714 526,140 816,111 (1,190,306) 3,610,719Unallocated liabilities 279,791Total liabilities 3,890,510Capital expenditure 157,921 57,268 127,985 11,845 2,806 – 357,825Depreciation and amortisation 84,384 15,520 17,236 16,391 2,280 – 135,811Impairment loss 621 15,187 5,174 – 1,561 – 22,543Other non-cash expenses 10,826 2 114 – – – 10,942

20049. SEGMENT INFORMATION (continued)(b) Analysis by country of incorporationTurnover is based on the country of incorporation regardless of where the goods are produced or services rendered.Assets and additions to property, plant and equipment and intangibles are based on the location of those assets.Turnover Assets Capital expenditure2007 2006 2007 2006 2007 2006$’000 $’000 $’000 $’000 $’000 $’000(Restated)(Restated)Asia 3,177,681 2,836,921 3,993,349 3,545,778 192,748 122,565USA 1,420,556 1,240,985 1,244,805 1,303,511 38,322 157,039Europe 446,215 406,770 772,198 709,282 32,613 78,106Others 6,530 1,082 32,957 19,212 5,611 1155,050,982 4,485,758 6,043,309 5,577,783 269,294 357,825(c) Analysis by geographical areasTurnover is based on the location of customers regardless of where the goods are produced or services rendered.Turnover2007 2006$’000 $’000Asia 2,485,993 2,365,334USA 1,588,870 1,478,907Europe 655,403 481,292Others 320,716 160,2255,050,982 4,485,75850. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments.The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bankers’guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, fundsunder management, and cash and short-term deposits. All financial transactions with the banks are governed by bankingfacilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financialinstruments and facilities limits, approved by the Board of Directors. All financial transactions require dual signatories. TheGroup has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly fromits operations.It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation or trading. It is not in the interestof the Group to speculate or trade in treasury instruments. The purpose of engaging in treasury transactions is solely forhedging.The Group’s treasury policy allows only foreign exchange spot and forward contracts, non-deliverable forward contracts,foreign exchange call and put options, forward rate agreements, interest rate swap and interest rate cap and floor options(“Permitted Transactions”); sale of options are expressly prohibited. These instruments are generic in nature with noembedded or leverage features and any deviation from these instruments would require specific approval from the Board ofDirectors. Any complex foreign exchange or derivatives transactions involving any combination of the Permitted Transactionsor any combination of the Permitted Transactions and other derivatives transactions are prohibited.

Singapore Technologies Engineering LtdAnnual Report 2007 20150. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)The main financial risks arising from the Group’s operations and the use of financial instruments are interest rate, foreignexchange, market, liquidity and credit risks. The policies for managing each of these risks are summarised below.The Group’s accounting policies in relation to derivatives are set out in Note 2.Interest rate riskThe Group has cash balances placed with reputable banks, financial institutions and a related corporation. The Groupmanages its interest rate risks on its interest income by placing the cash balances in varying maturities and interest rate terms.The Group’s debt includes bank borrowings and lease commitments. The Group seeks to minimise its interest exposurethrough options to refinance the debt instruments and/or enter into interest rate swaps, where appropriate over the duration ofits borrowings.Movements in interest rates will therefore have an impact on the Group. A change of 100 basis points in interest rate at thereporting date would increase/decrease equity and profit or loss by the amounts shown below. This analysis assumes that allother variables remain constant.Profit and loss100bp 100bpincrease decrease$’000 $’000The Group2007Fixed deposits with financial institutions 3,719 (3,719)Short-term loans to related corporations 6,577 (6,577)Bank loans (7,162) 7,1623,134 (3,134)2006Fixed deposits with financial institutions 3,337 (3,337)Short-term loans to related corporations 5,115 (5,115)Bank loans (8,732) 8,732(280) 280Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings, investmentsand loan receivables, where applicable.Foreign exchange riskThe Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue andincurring costs denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in foreigncurrencies. The Group’s foreign exchange exposures are primarily from US dollars and Euro and the Group enters into forwardcurrency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactionsdenominated in foreign currencies.The Company’s centralised Treasury Unit facilitates intra-group foreign exchange transactions to net-off the foreign exchangeexposures within the Group. The remaining foreign exchange exposures are then hedged via the banks.The treasury transactions are executed by the Company’s centralised Treasury Unit, within which there is segregation of dutiesbetween back office and dealers. Only authorised dealers can transact with the banks on behalf of the Group, with backoffice confirming the deals. The dealers’ limits and permitted treasury instruments in the form of an authorisation matrix andmandates are communicated to the banks for compliance.

20250. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)Market riskThe Group has strategic investments in quoted equity shares and bonds, and has placed funds with fund managementcompanies. The market value of these investments will fluctuate with market conditions. To mitigate market risk, the Group’sfunds placed with fund managers are guaranteed 95% to 100% of their principal values at the end of the fund managementperiod. Also, before a fund manager is given funds for management, its financial strength is carefully considered.The table below summarises the impact to the Group’s fair value reserve in equity arising as a result of a 10% increase/decrease in the fair value of the quoted investments and funds with fund management companies. This analysis assumes thatall other variables remain constant.Equity10% increase 10% decrease$’000 $’000The Group2007Quoted investments 3,427 (3,427)Amounts under fund management 17,878 (17,878)21,305 (21,305)2006Quoted investments 1,904 (1,904)Amounts under fund management 22,817 (22,817)24,721 (24,721)Liquidity riskTo manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cashequivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these fundingfacilities, management reviews its working capital requirements regularly.The table below analyses the Group’s financial liabilities that will be settled on a net basis and certain derivative financialinstruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at reportingdate to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows.Within More than No specificTotal 1 year 1 to 5 years 5 years terms$’000 $’000 $’000 $’000 $’000The Group2007Bank loans 856,961 856,378 583 – –Other loans 2,304 234 911 1,159 –Lease obligations 10,169 2,024 8,095 50 –Bank overdrafts 803 803 – – –Trade and other payables 1,520,768 1,520,768 – – –Derivative financial instruments:• Forward currency contracts – gross payments 35,160 35,160 – – –• Forward currency contracts – gross receipts 159,888 159,888 – – –

Singapore Technologies Engineering LtdAnnual Report 2007 20350. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)Liquidity risk (continued)Within More than No specificTotal 1 year 1 to 5 years 5 years terms$’000 $’000 $’000 $’000 $’000The Group2006Bank loans 873,234 602,709 58,411 212,114 –Other loans 3,640 1,217 2,229 194 –Lease obligations 13,289 2,222 8,872 2,195 –Bank overdrafts 1,737 1,737 – – –Trade and other payables 1,360,354 1,360,354 – – –Derivative financial instruments:• Forward currency contracts – gross payments 19,570 19,570 – – –• Forward currency contracts – gross receipts 121,749 121,749 – – –The Company2007Creditors and accruals 51,125 51,125 – – –Due to a subsidiary 54,000 – – – 54,0002006Creditors and accruals 50,078 50,078 – – –Due to a subsidiary 54,000 – – – 54,000Credit riskCredit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits andmonitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrangemaster netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required forcustomers of lower credit standing.Counterparties to financial instruments consist of prime financial institutions and related corporations, as disclosed in Notes10 and 18.As at 31 December 2007, there were no significant concentrations of credit risk, except for 39% (2006: 37%) of trade debtsrelating to three major customers of the respective subsidiaries. The table below analyses the trade debtors by the Group’sfour main operating segments.Group2007 2006$’000 $’000(Restated)Aerospace 382,671 321,702Electronics 288,091 269,720Land Systems 150,423 158,285Marine 103,774 89,214Others 29,973 22,001954,932 860,922

20451. FAIR VALUE OF FINANCIAL INSTRUMENTSFair value is defined as the amount at which the instrument could be exchanged in a current transaction betweenknowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtainedfrom quoted market prices, discounted cash flow models and option pricing models as appropriate.The following methods and assumptions are used to estimate the fair value of each class of financial instruments.Bank balances, other liquid funds and short-term 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 estimated based on quoted market prices for these investments. For unquotedinvestments, 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. However, for unquoted investment inrelated and non-related corporations as stated in Note 10, the fair value is determined by reference to valuation provided byrelated and non-related corporations and fund managers.Loan receivablesThe fair values of loan receivables are estimated based on the expected cash flows discounted to present value, except asdisclosed in Note 13.Short-term borrowings and other current payablesThe carrying amounts approximate fair values because of the short period to maturity of these instruments.

Singapore Technologies Engineering LtdAnnual Report 2007 20551. 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 thefinancial statements:Classification of financial instrumentsFair value Derivatives Liabilities Non-financialLoans and through profit used for Available- at amortised assets/receivables or loss hedging for-sale cost liabilities Total$’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2007AssetsProperty, plant and equipment – – – – – 1,014,623 1,014,623Associated companies andjoint ventures – – – – – 267,506 267,506Investments 1,279 – – 39,543 – – 40,822Intangible assets – – – – – 629,981 629,981Investment properties – – – – – 18,379 18,379Long-term receivables 4,397 – – – – – 4,397Finance lease receivables 8,366 – – – – – 8,366Derivative financialinstruments – – 2,937 – – – 2,937Deferred tax assets – – – – – 112,380 112,380Stocks and work-in-progress – – – – – 1,228,125 1,228,125Trade debtors 953,703 – – – – – 953,703Due from relatedcorporations 662,913 – – – – – 662,913Advances and other debtors 92,123 3,017 2,044 – – 197,037 294,221Short-term investments – – – 338 – – 338Amounts under fundmanagement – – – 178,781 – – 178,781Bank balances and otherliquid funds 625,837 – – – – – 625,8372,348,618 3,017 4,981 218,662 – 3,468,031 6,043,309LiabilitiesAdvance payments fromcustomers – – – – – 1,062,102 1,062,102Creditors and accruals – – – – 1,520,768 3,388 1,524,156Provisions – – – – – 191,571 191,571Progress billings in excessof work-in-progress – – – – – 368,757 368,757Provision for taxation – – – – – 201,324 201,324Short-term bank loans – – – – 574,595 – 574,595Lease obligations – – – – 8,834 – 8,834Long-term bank loans – – – – 282,366 – 282,366Other loans – – – – 2,304 – 2,304Bank overdrafts – – – – 803 – 803Deferred income – – – – – 7,079 7,079Deferred tax liabilities – – – – – 40,208 40,208– – – – 2,389,670 1,874,429 4,264,099

20651. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)Fair value Derivatives Liabilities Non-financialLoans and through profit used for Available- at amortised assets/receivables or loss hedging for-sale cost liabilities Total$’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2006 (Restated)AssetsProperty, plant and equipment – – – – – 948,150 948,150Associated companiesand joint ventures – – – – – 294,145 294,145Investments 1,258 – – 26,600 – – 27,858Intangible assets – – – – – 572,273 572,273Investment properties – – – – – 16,959 16,959Long-term receivables 5,679 – – – – – 5,679Deferred tax assets – – – – – 132,768 132,768Stocks and work-in-progress – – – – – 1,102,618 1,102,618Trade debtors 858,265 – – – – – 858,265Due from relatedcorporations 516,440 – – – – – 516,440Advances andother debtors 111,943 1,204 859 – – 128,888 242,894Amounts under fundmanagement – – – 228,173 – – 228,173Bank balances and otherliquid funds 631,561 – – – – – 631,5612,125,146 1,204 859 254,773 – 3,195,801 5,577,783LiabilitiesAdvance payments fromcustomers – – – – – 860,379 860,379Creditors and accruals – – 68 – 1,360,286 1,719 1,362,073Provisions – – – – – 185,232 185,232Progress billings in excessof work-in-progress – – – – – 328,609 328,609Provision for taxation – – – – – 213,931 213,931Short-term bank loans – – – – 595,850 – 595,850Lease obligations – – – – 11,250 – 11,250Long-term bank loans – – – – 277,384 – 277,384Other loans – – – – 3,640 – 3,640Bank overdrafts – – – – 1,737 – 1,737Deferred income – – – – – 4,101 4,101Deferred tax liabilities – – – – – 46,324 46,324– – 68 – 2,250,147 1,640,295 3,890,510

Singapore Technologies Engineering LtdAnnual Report 2007 20751. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)Liabilities Non-financialLoans and at amortised assets/receivables cost liabilities Total$’000 $’000 $’000 $’000The Company2007AssetsProperty, plant and equipment – – 843 843Subsidiaries – – 557,959 557,959Associated companies and joint ventures – – 50 50Due from related corporations 302,638 – – 302,638Advances and other debtors 312,937 – 151 313,088Bank balances and other liquid funds 84,764 – – 84,764700,339 – 559,003 1,259,342LiabilitiesCreditors and accruals – 51,125 – 51,125Provision for taxation – – 4,968 4,968Deferred tax liabilities – – 372 372Due to a subsidiary – 54,000 – 54,000– 105,125 5,340 110,465

20851. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)Liabilities Non-financialLoans and at amortised assets/receivables cost liabilities Total$’000 $’000 $’000 $’000The Company2006AssetsProperty, plant and equipment – – 657 657Subsidiaries – – 544,209 544,209Associated companies and joint ventures – – 50 50Due from related corporations 238,783 – – 238,783Advances and other debtors 198,979 – 193 199,172Bank balances and other liquid funds 145,655 – – 145,655583,417 – 545,109 1,128,526LiabilitiesCreditors and accruals – 50,078 – 50,078Provision for taxation – – 6,644 6,644Deferred tax liabilities – – 285 285Due to a subsidiary – 54,000 – 54,000– 104,078 6,929 111,007Forward currency contractsAs at 31 December 2007, the Group has the following forward currency contracts amounting to $183,122,000 (2006:$135,485,000) designated as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreigncurrencies and accounts receivable in foreign currencies.Note 2007 2006Contractual/Contractual/notional Estimated notional Estimatedamount fair value amount fair value$’000 $’000 $’000 $’000Cash flow hedgesForward currency contracts:– to hedge confirmed sales in foreign currencies (i) 10,390 464 4,918 15– to hedge firm purchase commitments inforeign currencies (i) 26,352 775 18,081 143Fair value hedgesForward currency contracts:– to hedge confirmed sales in foreign currencies (i) 139,212 3,650 98,571 1,599– to hedge accounts receivable in foreigncurrencies (i) 7,168 70 13,915 153(i) The maturity dates of the forward currency contracts approximate the timing of the expected cash flows of their respectivehedged items, which are on varying periods up to one year from the financial year end.

Singapore Technologies Engineering LtdAnnual Report 2007 20951. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)As at 31 December 2007, the Group has the following outstanding forward currency contracts amounting to $11,926,000(2006: $5,834,000), which are not designated as hedges of confirmed sales in foreign currencies and firm purchasecommitments in foreign currencies.2007 2006Contractual/Contractual/notional Estimated notional Estimatedamount fair value amount fair value$’000 $’000 $’000 $’000Forward currency contracts:– purchase 8,808 82 1,489 28– sale 3,118 20 4,345 57Interest rate swapAs at 31 December 2007, the Group has the following outstanding interest rate swap amounting to $140,560,000, whichis designated as a cash flow hedge. The swap is being used to hedge the exposure to changes in the fair value of the 50%secured long-term loan. The swap receives a fixed rate interest of 3.96% and pays a variable rate equal to the EURIBOR onthe notional amount. The secured long-term loan and interest rate swap have the same terms and conditions.2007Contractual/notional Estimatedamount fair value$’000 $’000Cash flow hedgesInterest rate swap 140,560 2,937

21052. CAPITAL MANAGEMENTThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthycapital ratios in order to support its business and maximise shareholder value.The Group manages its capital structure and makes adjustment to it, in the light of changes in economic conditions. Tomaintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital toshareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended31 December 2007 and 31 December 2006.The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of whichgearing is an important aspect.Group2007 2006$’000 $’000(Restated)Gross debtBank loans 856,961 873,234Capitalised lease obligations 8,834 11,250Other borrowings 2,304 3,640868,099 888,124Bank overdrafts 803 1,737868,902 889,861Shareholders’ fundsShare capital 554,888 474,926Other reserves 121,367 129,790Retained earnings 956,255 960,6541,632,510 1,565,370Minority interests 146,700 121,9031,779,210 1,687,273Gross debt equity ratio 48.8% 52.7%Cash and cash equivalents 1,282,724 1,141,308Amounts under fund management 178,781 228,1731,461,505 1,369,481Gross debt (excluding bank overdrafts) (868,099) (888,124)Net cash position 593,406 481,357

Singapore Technologies Engineering LtdAnnual Report 2007 21153. COMPARATIVE FIGURESComparatives in the financial statements have been changed from the previous year due to finalisation of the purchase priceallocation to goodwill, intangible assets (excluding goodwill), other assets and liabilities for ST Aerospace Solutions (Europe)A/S, MÄK Technologies, Inc., the group of companies under PM-B Pte Ltd and Brightspot Interactive Learning Pte. Ltd. andVT LeeBoy, Inc. during the year and the reclassification of investment properties from property, plant and equipment as a resultof the adoption of FRS 40.PreviouslyRestated reported2006 2006$’000 $’000Presented in the Balance SheetOther reserves 13,842 13,973Minority interests 121,903 142,883Property, plant and equipment 948,150 952,209Intangible assets 572,273 556,711Investment properties 16,959 –Deferred tax assets 132,768 117,637Stocks and work-in-progress 1,102,618 1,103,417Trade debtors 858,265 858,211Advances and other debtors 242,894 229,039Bank balances and other liquid funds 631,561 624,723Advance payments from customers, current 582,381 582,234Creditors and accruals 1,362,073 1,338,928Provisions 185,232 184,911Progress billings in excess of work-in-progress 328,609 298,938Advance payments from customers, non-current 277,998 277,764Deferred tax liabilities 46,324 15,190Presented in the Notes to the Financial StatementsNote 5:Asset revaluation reserve – 81Note 7:Property, plant and equipment 948,150 952,209Note 11:Goodwill 425,130 494,818Other intangible assets 147,143 61,893Note 12:Investment properties 16,959 –Note 15:Deferred tax assets 132,768 117,637Note 16:Stocks and work-in-progress 1,102,618 1,103,417Progress billings in excess of work-in-progress (328,609) (298,938)

21253. COMPARATIVE FIGURES (continued)PreviouslyRestated reported2006 2006$’000 $’000Note 17:Trade debtors 858,265 858,211Note 19:Other debtors, deposits and prepayments 105,745 91,890Note 22:Cash and bank balances 297,866 291,028Note 23:Deposits 6,698 6,875Prepayments 14,673 33,314Other recoverables 26,840 23,876Non-trade debtors 54,216 24,507Note 25:Trade creditors 545,996 545,766Other creditors and accruals 810,384 787,469Note 26:Provision for warranties 163,127 162,806Note 29:Non-trade creditors 17,666 14,372Accrued operating expenses 783,415 755,170Employee benefit liabilities 1,719 10,343Note 31:Deferred tax liabilities 46,324 15,190

Singapore Technologies Engineering LtdAnnual Report 2007 213INTERESTED PERSON TRANSACTIONSInterested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:Aggregate value of allAggregate value of all transactionstransactions conductedexcluding transactions conductedunder a Shareholders’under a Shareholders’Mandate pursuant toMandate pursuant to Rule 920Rule 920 of the SGXof the SGX Listing ManualListing Manual2007 2006 2007 2006$’000 $’000 $’000 $’000Transactions for the Sale of Goods and ServicesKeppel Corporation Ltd and its Associates – – 247 –SembCorp Industries Ltd and its Associates – – 1,419 770Singapore Airport Terminal Services Limitedand its Associates – – 17,510 252Singapore Computer Systems Limitedand its Associates – – 489 475Singapore Telecommunications Limitedand its Associates – – 3,274 3,604SMRT Corporation Ltd and its Associates – – 6,629 –StarHub Ltd and its Associates – – 6,906 –Temasek Holdings (Private) Limitedand its Associates – – 4,413 7,787– – 40,887 12,888Transactions for the Purchase of Goods and ServicesSembCorp Logistics Ltd and its Associates – – – 101SembCorp Marine Ltd and its Associates – – 180 1,914Singapore Computer Systems Limitedand its Associates – – 3,410 2,389Singapore Telecommunications Limitedand its Associates – – 118 168StarHub Ltd and its Associates – – 241 130Temasek Holdings (Private) Limitedand its Associates – – 23,509 14,317– – 27,458 19,019Investment/Divestment/Leasing TransactionsSingapore Computer Systems Limitedand its Associates 1,017 238 – –SMRT Corporation Ltd and its Associates – 6,500 – –Temasek Holdings (Private) Limitedand its Associates – – – –1,017 6,738 – –Treasury TransactionsTemasek Holdings (Private) Limitedand its Associates – – 821,246 889,681Total Interested Person Transactions 1,017 6,738 889,591 921,588

214SHARE CAPITALPaid-Up Capital : S$566,284,662.967Class 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 11 March 2008, 34.543% of the issued ordinary shares of the Companyis held by the public and 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 1,748 6.81 519,278 0.021,000 – 10,000 19,806 77.20 81,996,865 2.7410,001 – 1,000,000 4,069 15.86 156,379,952 5.231,000,001 and above 32 0.13 2,749,960,575 92.0125,655 100.00 2,988,856,670 100.00Number of sharesDirect Deemed TotalSubstantial shareholders interest interest interest %Temasek Holdings (Private) Limited 1,474,168,719 44,299,713 (1) 1,518,468,432 50.80The Capital Group Companies, Inc. – 209,965,000 (2) 209,965,000 7.0249Aberdeen Asset Management PLC and its subsidiaries – 228,114,100 (3) 228,114,100 7.6321Notes:(1) Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:Name of companyNo. of sharesTemasek a/c with DBS Custodian 25,000,800DBS Group Holdings Limited Group 6,281,913Keppel Corporation Limited Group 4,032,000Fullerton Fund Management Company Ltd 8,985,000(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. 206,748,000Bank of Tokyo (Singapore) 198,000BBH Dublin 102,000DBS Bank 113,000DBS Nominees Pte. Ltd. 1,752,000HongKong & Shanghai Banking Corp 342,000HSBC 129,000HSBC (Singapore) Nominees Pte. Ltd. 464,000Standard Chartered Bank (Hong Kong) 71,000State Street Australia Limited 46,000(3) Details of their deemed interest are not available.

Singapore Technologies Engineering LtdAnnual Report 2007 215MAJOR SHAREHOLDERS LIST – TOP 20No. Name No. of shares held %1 Temasek Holdings (Private) Limited 1,474,168,719 49.322 DBS Nominees Pte Ltd 394,149,951 13.193 DBSN Services Pte Ltd 325,013,612 10.874 HSBC (Singapore) Nominees Pte Ltd 257,087,109 8.605 Citibank Nominees Singapore Pte Ltd 133,556,108 4.476 Raffles Nominees Pte Ltd 47,766,234 1.607 United Overseas Bank Nominees Pte Ltd 45,933,252 1.548 DB Nominees (S) Pte Ltd 10,417,914 0.359 UOB Kay Hian Pte Ltd 8,540,391 0.2810 OCBC Securities Private Ltd 5,150,237 0.1711 OCBC Nominees Singapore Pte Ltd 4,741,360 0.1612 KI Investments (HK) Limited 4,032,000 0.1313 Phillip Securities Pte Ltd 3,485,563 0.1214 Selected Holdings Pte Ltd 3,025,000 0.1015 Raffles Investments Limited 3,000,000 0.1016 Oversea Chinese Bank Nominees Pte Ltd 2,652,070 0.0917 Royal Bank Of Canada (Asia) Ltd 2,503,000 0.0818 Morgan Stanley Asia (Singapore) Securities Pte Ltd 2,355,173 0.0819 Amalgamated Holdings Pte Ltd 2,300,000 0.0820 TM Asia Life Singapore Ltd - Par Fund 2,270,809 0.082,732,148,502 91.41

216STATEMENT OF PROFIT AND LOSS2007 2006$’000 $’000Turnover 1,837,769 1,675,493Cost of sales (1,413,383) (1,287,577)Gross profit 424,386 387,916Other operating income 20,611 41,433Distribution and selling expenses (8,591) 5,489Administrative expenses (97,186) (137,116)Other operating expenses (15,168) (19,209)Profit from continuing operations before taxation,other income and financial expenses 324,052 278,513Other income/(expense), net (1,462) 1,546Financial expenses (17,418) (11,962)305,172 268,097Share of results of associated companies and joint ventures 35,990 37,183Profit from continuing operations before taxation 341,162 305,280Taxation (54,925) (43,621)Profit from continuing operations after taxation 286,237 261,659Attributable to:Shareholder of the Company 270,479 255,036Minority interests 15,758 6,623286,237 261,659

Singapore Technologies Engineering LtdAnnual Report 2007 217BALANCE SHEET2007 2006$’000 $’000(Restated)Share capital and reserves 409,977 417,680Minority interests 97,307 94,540507,284 512,220Property, plant and equipment 775,254 735,289Associated companies and joint ventures 141,335 111,781Investments 4,066 4,173Intangible assets 1,884 1,321Long-term receivables 217 275Derivative financial instruments 2,937 –Deferred tax assets 54,842 70,355Current assetsStocks and work-in-progress 366,751 271,088Trade debtors 382,670 321,702Due from related corporations 42,120 56,183Advances and other debtors 62,593 75,200Long-term receivables, current 376 367Amounts under fund management 128,743 170,700Bank balances and other liquid funds 143,370 169,4511,126,623 1,064,691Current liabilitiesAdvance payments from customers, current 132,686 152,324Creditors and accruals 679,901 654,548Provisions 58,466 53,106Progress billing in excess of work-in-progress 100,093 82,327Provision for taxation 96,456 103,212Short-term bank loans 46,853 24,223Lease obligations, current 1,539 1,567Long-term bank loans, current 281,546 5,5711,397,540 1,076,878Net current liabilities (270,917) (12,187)Non-current liabilitiesAdvance payments from customers, non-current 137,372 63,936Deferred income 317 478Deferred tax liabilities 1,238 4,696Lease obligations, non-current 6,970 9,019Provision for pension benefits 3,388 1,719Long-term bank loans, non-current – 265,890Loans from related corporations 53,049 53,049202,334 398,787507,284 512,220

218STATEMENT OF CASH FLOWS2007 2006$’000 $’000(Restated)Net cash from operating activities 255,610 291,335Net cash used in investing activities (36,620) (136,545)Proceeds from sale of property, plant and equipment 5,760 406Dividends from associated companies 18,437 42,630Dividends from investments 13 9,637Proceeds from sale and maturity of investments 64,573 136,435Purchase of investments – (155)Purchase of property, plant and equipment (111,091) (158,373)Additional investment in an associated company (18,452) (27,647)Acquisition of a subsidiary 23 (119,538)Acquisition of additional interest in subsidiaries 24,841 (1,520)Exchange difference on investing activities (20,724) (18,420)Net cash used in financing activities (257,183) (218,708)Capital contribution from minority shareholders of a subsidiary 12,002 –Proceeds from inter-company loans, net 31,153 92,270Repayment of lease obligations, net (1,450) (1,477)Proceeds from bank loans, net 16,441 3,243Dividends paid to shareholder (293,000) (299,699)Dividends paid to minority shareholders of subsidiaries (20,232) (14,204)Interest paid (17,453) (11,876)Exchange difference on financing activities 15,356 13,035Net decrease in cash and cash equivalents (38,193) (63,918)Cash and cash equivalents at beginning of the year 224,865 291,149Exchange difference on cash and cash equivalents at beginning of the year (3,699) (2,366)Cash and cash equivalents at end of the year 182,973 224,865

Singapore Technologies Engineering LtdAnnual Report 2007 219VALUE ADDED STATEMENT2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Value added from:Revenue earned 1,837,769 1,675,493 1,235,911 1,118,309 1,092,173Bought in materials and services (849,035) (774,346) (567,862) (507,429) (473,460)988,734 901,147 668,049 610,880 618,713Income from investments and interest 17,685 38,076 22,767 23,370 7,599Exchange gain/(loss), net (3,805) 935 (864) (770) (906)Other non-operating income 5,269 3,968 1,799 8,235 7,490Share of results of associated companiesand joint ventures 35,990 37,183 38,170 37,475 34,047Total value added 1,043,873 981,309 729,921 679,190 666,943Distribution of total value addedTo employees in wages, salaries and benefits 603,658 588,048 437,014 404,562 375,946To government in income and other taxes 58,634 47,123 35,294 42,609 46,611To providers of capital on:• Interest paid on borrowings 17,418 11,962 919 965 972• Dividends to shareholder 293,000 299,699 215,321 183,719 174,912972,710 946,832 688,548 631,855 598,441Balance retained in/(applied from) businessDepreciation 78,398 84,366 39,092 34,117 39,604Impairment of assets (170) 1,784 (431) 852 1,112Retained profits (20,643) (77,051) (14,020) (10,961) (759)57,585 9,099 24,641 24,008 39,957Non-production cost and incomeBad debts (302) (13,633) (5,171) 727 21,852Income from investments and interest 17,685 38,076 22,767 23,370 7,599Exchange gain/(loss), net (3,805) 935 (864) (770) (906)13,578 25,378 16,732 23,327 28,545Total distribution 1,043,873 981,309 729,921 679,190 666,943

220FINANCIAL HIGHLIGHTS2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Turnover 1,837,769 1,675,493 1,235,911 1,118,309 1,092,173Profit before tax 341,162 305,280 255,443 235,400 225,189Profit after tax and minority interests 270,479 255,036 210,294 187,275 176,297Shareholders’ funds 409,977 417,680 463,025 452,329 456,130Total assets 2,107,158 1,987,885 1,401,366 1,373,110 1,431,936Net tangible assets 408,093 416,359 460,868 450,325 456,074Earnings per share (cents) 135.24 127.52 105.15 93.64 88.15Return on sales (%) 15.6 15.6 18.1 17.5 16.6Return on equity (%) 58.4 54.2 40.8 37.1 34.6Return on total assets (%) 13.6 13.2 15.9 14.2 12.6Net tangible assets per share (cents) 204.0 208.2 230.4 225.2 228.0Productivity dataAverage staff strength (number) 6,757 5,880 5,057 4,869 4,877Sales per employee ($) 271,980 284,948 244,396 229,679 223,944Profit after tax per employee ($) 40,029 43,373 41,585 38,463 36,149Employment costs 605,220 589,440 438,163 405,125 376,390Employment costs per $ of turnover ($) 0.33 0.35 0.35 0.36 0.34Economic Value Added 235,931 194,390 175,200 136,694 149,843Economic Value Added spread (%) 22.5 19.5 25.8 20.3 22.7Economic Value Added per employee ($) 34,917 33,060 34,645 28,074 30,724Value added 1,043,873 981,309 729,921 679,190 666,943Value added per employee ($) 154,488 166,889 144,339 139,493 136,753Value added per $ of employment costs ($) 1.72 1.66 1.67 1.68 1.77Value added per $ of gross property, plantand equipment ($) 0.79 0.81 1.09 1.16 1.24Value added per $ of turnover ($) 0.57 0.59 0.59 0.61 0.61

Singapore Technologies Engineering LtdAnnual Report 2007 221STATEMENT OF PROFIT AND LOSS2007 2006$’000 $’000Turnover 1,038,284 965,757Cost of sales (719,077) (664,529)Gross profit 319,207 301,228Other operating income 30,027 17,674Distribution and selling expenses (78,786) (69,034)Administrative expenses (107,486) (103,265)Other operating expenses (47,187) (37,847)Profit from continuing operations before taxation,other income and financial expenses 115,775 108,756Other income, net 131 99Financial expenses (9,461) (8,879)106,445 99,976Share of results of associated companies and joint venture 8,891 4,674Profit from continuing operations before taxation 115,336 104,650Taxation (24,893) (26,515)Profit from continuing operations after taxation 90,443 78,135Attributable to:Shareholder of the Company 88,223 76,318Minority interests 2,220 1,81790,443 78,135

222BALANCE SHEET2007 2006$’000 $’000(Restated)Share capital and reserves 75,611 103,488Minority interests 14,396 10,60990,007 114,097Property, plant and equipment 42,262 37,867Investment property 1,428 1,468Associated companies and joint venture 8,971 61,573Investments 28,827 8,299Intangible assets 351,722 274,510Long-term receivables 1,815 2,872Deferred tax assets 22,581 27,274Current assetsStocks and work-in-progress 321,890 313,853Trade debtors 286,862 267,063Due from related corporations 92,567 66,201Debtors, deposits and prepayments 21,068 23,403Advance payments to suppliers 22,537 21,642Short term investment 338 –Loan receivables, current 78 43Bank balances and other liquid funds 189,551 99,138934,891 791,343Current liabilitiesAdvance payments from customers, current 88,463 89,358Creditors and accruals 482,343 342,683Provisions 29,975 27,983Progress billings in excess of work-in-progress 214,466 210,710Provision for taxation 28,293 33,969Short-term bank loans (unsecured) 12,343 19,868Lease obligations, current 53 51Long-term bank loans, current 237 231Other loan, current – 980Bank overdrafts 800 800856,973 726,633Net current assets 77,918 64,710Non-current liabilitiesAdvance payments from customers, non-current 72,737 60,490Deferred income 35 76Deferred rent 1,136 736Deferred tax liabilities 1,193 1,436Lease obligations, non-current 33 89Long-term bank loans, non current 583 819Loan from immediate holding company 76,757 –Loans from a related corporation 293,043 300,830445,517 364,47690,007 114,097

Singapore Technologies Engineering LtdAnnual Report 2007 223STATEMENT OF CASH FLOWS2007 2006$’000 $’000(Restated)Net cash from operating activities 92,949 34,760Net cash from/(used in) investing activities 51,599 (15,516)Proceeds from sale of property, plant and equipment 34 262Proceeds from sale of associated companies 58,292 –Dividends from associated companies 1,138 2,025Dividend from investment – 378Proceeds from sale of investments 45 29,264Purchase of property, plant and equipment (13,627) (12,006)Purchase of investment/convertible loans (295) (725)Proceed from capital redemption of an associated company – 170Investment in associated company/joint venture – (6,611)Acquisition of subsidiaries 6,325 (28,133)Acquisition of additional interest in a subsidiary (313) –Loan to an associated company – (140)Net cash from/(used in) financing activities (10,697) 21,598Capital contribution from minority shareholders of subsidiaries 2,304 –Proceeds from inter-company loans, net of repayment 105,830 100,396Repayment of lease obligations (54) (51)(Repayment of)/proceeds from bank loans, net (7,993) 2,591Repayment of convertible loan (980) –Dividends paid to shareholder (103,308) (76,000)Dividends paid to minority shareholders of subsidiaries (1,259) (889)Interest paid (5,237) (4,449)Net increase in cash and cash equivalents 133,851 40,842Cash and cash equivalents at beginning of the year 144,344 106,809Exchange difference on cash and cash equivalents at beginning of the year (2,612) (3,307)Cash and cash equivalents at end of the year 275,583 144,344

224VALUE ADDED STATEMENT2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Value added from:Revenue earned 1,038,284 965,757 712,223 636,681 621,100Bought in materials and services (627,091) (580,970) (443,918) (396,458) (389,430)411,193 384,787 268,305 240,223 231,670Income from investments and interest 30,048 17,037 5,660 1,953 84Exchange gain/(loss), net (449) (726) 321 (263) 385Other operating income/(expenses) (21) 637 (138) 209 22Other non-operating income 580 825 889 1,484 1,494Share of results of associated companiesand joint ventures 8,891 4,674 (1,598) 345 (269)Amortisation of goodwill on acquisition ofassociated companies – – – – (258)Total value added 450,242 407,234 273,439 243,951 233,128Distribution of total value addedTo employees in wages, salaries and benefits 306,377 270,816 187,600 167,821 161,920To government in income and other taxes 25,534 27,170 16,731 14,821 15,686To providers of capital on:• Interest paid on borrowings 9,461 8,879 1,495 113 48• Dividends to shareholder 103,308 76,000 58,300 52,800 45,600444,680 382,865 264,126 235,555 223,254Balance retained in/(applied from) businessDepreciation 15,524 15,520 8,781 8,750 7,884Retained profits (42,464) (12,481) (4,059) (4,097) 969(26,940) 3,039 4,722 4,653 8,853Non-production cost and incomeBad debts 2,903 5,019 (1,390) 2,053 552Income from investments and interest 30,048 17,037 5,660 1,953 84Exchange gain/(loss), net (449) (726) 321 (263) 38532,502 21,330 4,591 3,743 1,021Total distribution 450,242 407,234 273,439 243,951 233,128

Singapore Technologies Engineering LtdAnnual Report 2007 225FINANCIAL HIGHLIGHTS2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Turnover 1,038,284 965,757 712,223 636,681 621,100Profit before tax 115,336 104,650 76,022 64,506 61,390Profit after tax and minority interests 88,223 76,318 58,008 51,592 48,018Shareholders’ funds 75,611 103,488 137,282 108,095 107,882Total assets 1,392,497 1,205,206 1,057,526 568,990 592,583Net tangible assets (277,001) (178,727) (118,966) 103,297 99,894Earnings per share (cents) 83.99 72.65 55.22 49.11 45.71Return on sales (%) 8.7 8.1 8.4 7.9 7.4Return on equity (%) 43.2 32.9 23.3 47.7 44.5Return on total assets (%) 6.5 6.5 5.7 8.8 7.8Net tangible assets per share (cents) (263.7) (170.1) (113.3) 98.3 95.1Productivity dataAverage staff strength (number) 3,823 3,256 2,828 2,649 2,662Sales per employee ($) 271,589 296,608 251,847 240,348 233,321Profit after tax per employee ($) 23,077 23,439 20,512 19,476 18,038Employment costs 306,468 270,901 187,664 167,845 161,965Employment costs per $ of turnover ($) 0.30 0.28 0.26 0.26 0.26Economic Value Added 64,997 67,295 47,378 44,681 39,299Economic Value Added spread (%) 11.1 12.5 25.6 28.7 27.0Economic Value Added per employee ($) 17,002 20,668 16,753 16,867 14,763Value added 450,242 407,234 273,439 243,951 233,128Value added per employee ($) 117,772 125,072 96,690 92,092 87,576Value added per $ of employment costs ($) 1.47 1.50 1.46 1.45 1.44Value added per $ of gross property,plant and equipment ($) 3.06 2.99 2.00 2.10 2.22Value added per $ of turnover ($) 0.43 0.42 0.38 0.38 0.38

226STATEMENT OF PROFIT AND LOSS2007 2006$’000 $’000Turnover 1,188,317 1,013,899Cost of sales (944,823) (808,188)Gross profit 243,494 205,711Other operating income 2,253 8,573Distribution and selling expenses (45,499) (39,459)Administrative expenses (88,112) (71,544)Other operating expenses (28,263) (36,897)Profit from continuing operations before taxation,other income and financial expenses 83,873 66,384Other income, net 4,091 5,896Financial expenses (9,628) (6,579)78,336 65,701Share of results of associated companies and joint ventures 1,667 4,270Profit from continuing operations before taxation 80,003 69,971Taxation (6,995) (16,360)Profit from continuing operations after taxation 73,008 53,611Attributable to:Shareholder of the Company 70,789 51,926Minority interests 2,219 1,68573,008 53,611

Singapore Technologies Engineering LtdAnnual Report 2007 227BALANCE SHEET2007 2006$’000 $’000(Restated)Share capital and reserves 110,179 110,954Minority interests 34,281 15,825144,460 126,779Property, plant and equipment 92,895 71,607Associated companies and joint ventures 110,983 114,667Investments 7,527 14,048Intangible assets 238,910 256,527Investment properties 16,951 15,491Long-term receivables 61,091 58,042Finance lease receivables 1,444 –Deferred tax assets 12,797 17,085Current assetsStocks and work-in-progress 409,742 375,816Trade debtors 150,423 158,285Debtors and deposits 108,198 41,178Prepayments 14,407 7,708Long-term receivables, current 9 9Finance lease receivables, current 6,922 –Bank balances and other liquid funds 114,844 86,475Due from related corporations 47,366 35,807Forward currency contracts 775 90852,686 705,368Current liabilitiesAdvance payments from customers, current 298,040 223,916Creditors and accruals 299,825 311,575Provisions 43,659 54,461Progress billing in excess of work-in-progress 844 –Provision for taxation 24,790 34,450Forward currency contract – 24Long-term loans, current 234 237Short-term bank loans 10,885 2,458Bank overdrafts 3 937678,280 628,058Net current assets 174,406 77,310Non-current liabilitiesAdvance payments from customers, non-current 245,467 153,338Non-trade creditor 31 –Forward currency contract – 39Loans from related corporation 282,079 299,495Due to joint venture 49 –Long-term loans 1,876 2,229Long-term loan from minority shareholder of a subsidiary 194 194Deferred income 5,591 2,811Deferred tax liabilities 37,257 39,892572,544 497,998144,460 126,779

228STATEMENT OF CASH FLOWS2007 2006$’000 $’000Net cash from operating activities 129,050 12,872Net cash used in investing activities (19,144) (220,486)Proceeds from disposal of property, plant and equipment 659 919Dividends from associated companies and joint venture 4,360 3,606Dividends from unquoted long-term investments 99 138Proceeds from sale and maturity of investments 237 250Purchase of property, plant and equipment (24,550) (12,116)Purchase of commercial and intellectual property rights – (517)Purchase price adjustment for acquisition of a subsidiary 2,026 –Acquisition of additional interest in a subsidiary (931) (150)Acquisition of subsidiaries – (211,381)Disposal of a subsidiary (1,044) –Long-term loan to joint venture – (1,235)Net cash from/(used in) financing activities (74,045) 94,036Proceeds from loans from minority shareholders – 43Proceeds from long-term loans from related corporation – 211,798Proceeds from short-term loans from related corporation 3,528 21,631Repayment of long-term loans (210) (923)Proceeds from short-term bank loans 8,412 2,510(Repayment of)/proceeds from short-term loan from immediate holding company (20,000) 20,000Long-term loan to immediate holding company – (54,000)Dividends paid to shareholder (64,500) (103,173)Dividends paid to minority shareholders of a subsidiary (296) (98)Interest paid (979) (3,752)Net increase/(decrease) in cash and cash equivalents 35,861 (113,578)Cash and cash equivalents at beginning of the year 115,918 234,752Exchange difference on cash and cash equivalents at beginning of the year (4,737) (5,256)Cash and cash equivalents at end of the year 147,042 115,918

Singapore Technologies Engineering LtdAnnual Report 2007 229VALUE ADDED STATEMENT2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Value added from:Revenue earned 1,188,317 1,013,899 604,647 594,300 717,711Bought in materials and services (824,681) (707,581) (428,872) (423,482) (487,411)363,636 306,318 175,775 170,818 230,300Income from investments and interest 5,275 8,340 9,604 2,068 9,911Exchange gain/(loss), net (1,037) (3,121) (329) (796) (806)Other non-operating income 2,106 9,250 7,604 4,638 6,652Share of results of associated companiesand joint ventures 1,667 4,270 9,720 20,576 11,970Total value added 371,647 325,057 202,374 197,304 258,027Distribution of total value addedTo employees in wages, salaries and benefits 259,184 224,622 124,881 117,191 135,401To government in income and other taxes 9,106 18,378 17,668 16,294 23,401To providers of capital on:• Interest paid on borrowings 9,628 6,579 702 85 29• Dividends to shareholder 64,500 103,173 48,316 78,000 105,000342,418 352,752 191,567 211,570 263,831Balance retained in/(applied from) businessDepreciation 17,869 15,489 10,740 10,594 15,560Retained profits 7,367 (47,860) (3,780) (22,270) (35,588)25,236 (32,371) 6,960 (11,676) (20,028)Non-production cost and incomeBad debts (245) (543) (5,428) (3,862) 5,119Income from investments and interest 5,275 8,340 9,604 2,068 9,911Exchange gain/(loss), net (1,037) (3,121) (329) (796) (806)3,993 4,676 3,847 (2,590) 14,224Total distribution 371,647 325,057 202,374 197,304 258,027

230FINANCIAL HIGHLIGHTS2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Turnover 1,188,317 1,013,899 604,647 594,300 717,711Profit before tax 80,003 69,971 65,010 71,549 96,458Profit after tax and minority interests 70,789 51,926 48,997 58,066 76,538Shareholders’ funds 110,179 110,954 173,597 164,471 183,807Total assets 1,395,284 1,252,835 1,004,039 883,498 1,014,346Net tangible assets (133,049) (149,891) 115,058 149,890 168,841Return on sales (%) 6.1 5.3 8.1 9.5 10.4Earnings per share (cents) 58.71 43.07 40.64 48.16 63.48Return on equity (%) 27.6 20.2 22.9 34.9 41.3Return on total assets (%) 5.2 4.3 4.9 6 .4 7.3Net tangible assets per share (cents) (110.4) (124.3) 95.4 124.3 140.0Productivity dataAverage staff strength (number) 5,299 4,961 3,417 2,389 2,483Sales per employee ($) 224,253 204,374 176,953 248,765 289,050Profit after tax per employee ($) 13,359 10,467 14,339 24,306 30,825Employment costs 259,424 224,828 125,030 117,116 135,417Employment costs per $ of turnover ($) 0.22 0.22 0.21 0.20 0.19Economic Value Added 50,593 32,994 34,087 34,821 62,799Economic Value Added spread (%) 8.8 6.8 12.0 11.3 18.2Economic Value Added per employee ($) 9,548 6,651 9,976 14,576 25,292Value added 371,647 325,057 202,374 197,304 258,027Value added per employee ($) 70,135 65,522 59,226 82,589 103,917Value added per $ of employment costs ($) 1.43 1.45 1.62 1.68 1.91Value added per $ of gross property,plant and equipment ($) 1.01 0.96 0.62 0.66 0.84Value added per $ of turnover ($) 0.31 0.32 0.33 0.33 0.36

Singapore Technologies Engineering LtdAnnual Report 2007 231STATEMENT OF PROFIT AND LOSS2007 2006$’000 $’000Turnover 864,594 702,868Cost of sales (757,254) (602,581)Gross profit 107,340 100,287Other operating income 25,898 13,851Distribution and selling expenses (3,733) (5,532)Administration expenses (24,211) (20,067)Other operating expenses (6,188) (6,341)Profit from continuing operations before taxation,other income and financial expenses 99,106 82,198Other income, net 845 481Financial expenses (3,430) (3,519)96,521 79,160Share of results of associated companies and joint ventures 46 340Profit from continuing operations before taxation 96,567 79,500Taxation (21,303) (11,677)Profit from continuing operations after taxation 75,264 67,823Attributable to:Shareholder of the Company 75,264 67,823Minority interests – –75,264 67,823

232BALANCE SHEET2007 2006$’000 $’000Share capital and reserves 122,767 124,345Property, plant and equipment 94,124 92,807Associated companies and joint ventures 353 290Investments 384 1,321Intangible assets 162 171Long-term receivables 237 198Deferred tax assets 20,904 15,612Current assetsStocks and work-in-progress 90,959 104,549Trade debtors 103,774 89,214Due from related corporations 195,385 132,134Advances and other debtors 47,600 65,940Long-term receivables, current 23 20Amounts under fund management 50,038 57,473Bank balances and other liquid funds 90,843 123,138578,622 572,468Current liabilitiesAdvance payments from customers, current 94,196 115,974Creditors and accruals 246,577 228,251Provisions 56,329 48,450Progress billings in excess of work-in-progress 52,444 37,072Provision for taxation 36,899 29,155Lease obligations, current 77 –486,522 458,902Net current assets 92,100 113,566Non-current liabilitiesLoans from related corporations 84,159 97,013Accrued staff benefits 1,182 2,607Lease obligations, non-current 156 –85,497 99,620122,767 124,345

Singapore Technologies Engineering LtdAnnual Report 2007 233STATEMENT OF CASH FLOWS2007 2006$’000 $’000Net cash from operating activities 127,341 101,610Net cash used in investing activities (4,110) (7,635)Proceeds from sale of property, plant and equipment 32 122Dividends from investments – 138Proceeds from sale and maturity of investments 14,037 596Purchase of property, plant and equipment (20,443) (11,845)Exchange difference on investing activities 2,264 3,354Net cash used in financing activities (94,103) (68,261)Proceeds from inter-company loans, net (15,988) 1,648Repayment of lease obligations, net (11) (12)Dividends paid to shareholder (70,894) (60,079)Interest paid (3,430) (3,519)Exchange difference on financing activities (3,780) (6,299)Net increase in cash and cash equivalents 29,128 25,714Cash and cash equivalents at beginning of the year 246,914 221,663Exchange difference on cash and cash equivalents at beginning of the year (695) (463)Cash and cash equivalents at end of the year 275,347 246,914

234VALUE ADDED STATEMENT2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Value added from:Revenue earned 864,594 702,868 659,847 484,364 387,323Bought in materials and services (639,035) (510,787) (444,879) (298,043) (249,406)225,559 192,081 214,968 186,321 137,917Income from investments and interest 22,595 9,856 6,998 7,944 14,520Exchange gain/(loss), net (21) (59) (334) (231) 47Other non-operating income 4,169 4,535 5,300 6,152 4,401Share of results of associated companiesand joint ventures 46 340 – – –Total value added 252,348 206,753 226,932 200,186 156,885Distribution of total value addedTo employees in wages, salaries and benefits 133,855 105,791 104,216 104,072 97,909To government in income and other taxes 23,940 13,432 19,986 18,506 6,595To providers of capital on:• Interest paid on borrowings 3,430 3,519 2,472 1,253 1,184• Dividends to shareholder 70,894 60,079 70,249 55,133 –232,119 182,821 196,923 178,964 105,688Balance retained in/(applied from) businessDepreciation 17,087 16,381 18,974 22,241 22,811Retained profits (18,195) (2,043) 5,913 (9,105) 16,241(1,108) 14,338 24,887 13,136 39,052Non-production cost and incomeBad debts (1,237) (203) (1,542) 373 (2,422)Income from investments and interest 22,595 9,856 6,998 7,944 14,520Exchange gain/(loss), net (21) (59) (334) (231) 4721,337 9,594 5,122 8,086 12,145Total distribution 252,348 206,753 226,932 200,186 156,885

Singapore Technologies Engineering LtdAnnual Report 2007 235FINANCIAL HIGHLIGHTS2007 2006 2005 2004 2003$’000 $’000 $’000 $’000 $’000Turnover 864,594 702,868 659,847 484,364 387,323Profit before tax 96,567 79,500 87,932 69,786 35,172Profit after tax and minority interests 75,264 67,823 70,267 53,741 30,808Shareholders’ funds 122,767 124,345 111,992 107,779 109,316Total assets 694,786 682,867 702,775 664,556 594,272Net tangible assets 122,605 124,174 111,811 107,449 109,316Earnings per share (cents) 38.48 34.68 35.93 27.48 15.75Return on sales (%) 8.7 9.6 10.6 11.1 8.0Return on equity (%) 50.5 45.0 50.8 40.1 22.7Return on total assets (%) 10.8 9.9 10.0 8.1 5.2Net tangible assets per share (cents) 62.7 63.5 57.2 54.9 55.9Productivity dataAverage staff strength (number) 1,439 1,404 1,416 1,514 1,490Sales per employee ($) 600,830 500,618 465,994 319,923 259,948Profit after tax per employee ($) 52,303 48,307 49,624 35,496 20,677Employment costs 134,252 106,086 104,448 104,238 98,028Employment costs per $ of turnover ($) 0.16 0.15 0.16 0.22 0.25Economic Value Added 60,453 49,903 49,061 32,501 10,363Economic Value Added spread (%) 24.1 18.7 18.0 11.7 3.9Economic Value Added per employee ($) 42,010 35,543 34,648 21,467 6,955Value added 252,348 206,753 226,932 200,186 156,885Value added per employee ($) 175,363 147,260 160,263 132,223 105,292Value added per $ of employment costs ($) 1.88 1.95 2.17 1.92 1.60Value added per $ of gross property,plant and equipment ($) 0.78 0.67 0.75 0.70 0.54Value added per $ of turnover ($) 0.29 0.29 0.34 0.41 0.41

236Singapore 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%)FusionTech Pte. Ltd.(100%)NanoScience Innovation Pte Ltd(27.06%)2006 JV Pte. Ltd.(50%)Kaz-ST Engineering Bastau LimitedLiability Partnership(51%)Vision Technologies Systems, Inc.(100%)SA Supplies (USA) Inc.(100%)Singapore Technologies Engineering (USA) Inc.(100%)Vision Technologies Aerospace, Incorporated(100%)San Antonio Aerospace GP, LLC(100%)Vision Technologies Electronics, Inc.(100%)Vision Technologies Kinetics, Inc.(100%)Vision Technologies Marine, Inc.(100%)VT Systems, Inc.(100%)Vision Technologies Land Systems, 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)San Antonio Aerospace LP(99%)**ST Mobile Aerospace Engineering, Inc.(100%)DalFort Aerospace GP, Inc.(100%)DalFort Aerospace, L.P. +(99%)*iDirect, Inc.(100%)Miltope Corporation(100%)MÄK Technologies, Inc.(80%)VT Halter Marine, Inc.(100%)Halter-Bollinger Joint Venture LLC(50%)VT Dimensions, Inc.(100%)VT Specialized Vehicles Corporation(100%)Lee Holding Company(100%)iDirect UK Limited(100%)iDirect Italy srl(100%)iDirect Hong Kong Limited(100%)iDirect Government Technologies, Inc.(100%)Ximaera Technologies Canada, Inc(49%)iDirect International Corporation(100%)iDirect Singapore Pte. Ltd.(100%)VT LeeBoy, Inc(100%)LeeBoy Rents, Inc(100%)Rosco Manufacturing Company(100%)Force Feed Loader Parts, Inc.(100%)

Singapore Technologies Engineering LtdAnnual Report 2007 237ST Aerospace Engineering Pte Ltd(100%)ST Aviation Training Academy Pte. Ltd.(70%)Pacifi c Flight Services Pty Ltd(100%)Aviation Training Academy Australia Pty 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 Airport Ground Services Pte Ltd(100%)ST Aviation Resources Pte Ltd(100%)Visiontech Investment Pte Ltd(100%)Panama Aerospace Engineering Inc.(100%)Pacifi c Flight Services Pte Ltd(100%)ST PAE Holdings Pty Ltd(100%)Composite Technology International Pte Ltd(33.33%)Eurocopter South East Asia Private Limited(25%)Singapore Precision Repair and Overhaul Pte Ltd(50%)iShopAero Pte Ltd(100%)Guangzhou Aerospace Technologies andEngineering Company Limited(100%)ST Aviation Resources 1 Limited(100%)Aerospace Engineering Services Pty Ltd Unit Trust(50%)Aerospace Engineering Services Pty Ltd(50%)Singapore Aerospace Kabushiki Kaisha(100%)Singapore Technologies Engineering (Europe) Ltd(100%)ST Aerospace Solutions (Europe) A/S(formerly known as SAS Component Group A/S)(71.3%)Airline Rotables (UK Holdings) Limited(100%)Airline Rotables Limited(100%)Bournemouth Aviation Services Company Limited*(81%)ST Aviation Services Co Pte Ltd(80%)ST Aerospace Technologies (Xiamen)Company Limited(80%)Singapore British Engineering (Pte) Ltd(51%)Visiontech Engineering Pte Ltd(51%)1988 JV Pte. Ltd.*(50%)Shanghai Technologies AerospaceCompany Limited(49%)Turbine Overhaul Services Pte Ltd(49%)Turbine Coating Services Pte Ltd(24.5%)* In members’ voluntary winding upItalics Indicates Associated Companies. Others are Subsidiaries(both directly and indirectly held)

238ST Electronics (Satcom & Sensor Systems)Pte. Ltd.(100%)ST Electronics (Sichuan) Co., Ltd(100%)Polarsat Holdings Inc.(26.67%)ST Electronics (Info-Comm Systems) Pte. Ltd.(100%)ST Electronics (Info-Security) Pte. Ltd.(100%)Telematics Wireless Ltd(93.93%)DataMark Technologies Pte Ltd(61.12%)STELCOMMS Pte. Ltd.(51%)mPayment Pte Ltd(31.78%)iWOW Technology Pte Ltd(21.74%)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(78.57%)Ripple Systems Pty Ltd(100%)STELOP Pte. Ltd.(50.05%)ST LogiTrack Pte Ltd(39.06%)GFM Electronics S.A. de C.V.(50%)RF Korea Inc.(22%)Trusted Hub Ltd(21.8%)ST Electronics-PCI Co., Ltd(51%)Prescient Systems & Technologies Pte. Ltd.(47.84%)ST Electronics (Digital Media) Pte. Ltd.(100%)Brightspot Interactive Learning Pte. Ltd.(51%)ST Education & Training Private Limited(70%)Antycip Simulation Limited(60%)Knowledge Alive Pte. Ltd.(45.47%)ST Electronics (Software Services) Limited(100%)ST Electronics (e-Services) Pte. Ltd.(100%)INFA Systems Limited(100%)WizVision Pte. Ltd.(22.8%)PM-B Pte Ltd(70%)Brightspot Interactive Learning Inc.(100%)STET Maritime Bureau Pte. Ltd.(100%)STET Maritime Education Pte. Ltd.(100%)COMAT Training Services Pte Ltd(100%)WizVision (HK) Pte Limited(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%)ItalicsIndicates Associated Companies.Others are Subsidiaries (both directly and indirectly held)

Singapore Technologies Engineering LtdAnnual Report 2007 239Advanced Material Engineering Pte. Ltd.(100%)Advanced Pyrotechnic Materials Private Limited(51%)SMART Systems Pte Ltd(50%)Takata CPI Singapore Pte Ltd(49%)Autonomous Technology Pte Ltd(100%)Allied Ordnance of Singapore (Pte) Limited(100%)Guizhou Jonyang Kinetics Co., Ltd.(60%)Defence Electronics of Singapore Pte Ltd(49%)Expert Systems Pte Ltd(100%)Kinetics Systems (Shanghai) Co., Ltd.(100%)Mobility Systems Pte Ltd(100%)Ordnance Development and Engineering Companyof Singapore (1996) Private Limited(100%)Singapore Commuter Private Limited(100%)Singapore Ordnance Engineering Pte. Ltd.(100%)Singapore Test Services Private Limited(100%)Securedge Pte. Ltd.(formerly known as ST Automotive Industrial Pte Ltd)(100%)ST Kinetics International Pte. Ltd. (formerly knownas ST Automotive (Vietnam) Pte Ltd)(100%)Silvatech Systems Corporation Pte Ltd(100%)Silvatech Global Systems Limited(100%)Timoney Holdings Limited(25%)SAO Industrial Services Pte Ltd(100%)Nusantara Technologies Sdn. Bhd.(49%)Kinetics Drive Solutions Inc.(100%)STA Detroit Diesel-Allison (Singapore) Pte Ltd(100%)STA Inspection Pte Ltd(100%)STA Investment Pte Ltd(100%)JuzclickCar.com Pte Ltd(90%)Unicorn International Pte Limited(100%)STAR Automotive Center (Guangzhou) Co., Ltd.(100%)STAR Automotive Center (Zhejiang) Co., Ltd.(86.24%)ATREC Pte. Ltd.(50%)Beijing Zhonghuan Kinetics Heavy VehiclesCo. Ltd.(50%)CityCab Pte Ltd(46.5%)ItalicsIndicates Associated Companies.Others are Subsidiaries (both directly and indirectly held)

240STSE Engineering Services Pte Ltd(100%)PT SSE-Van der Horst Indonesia(24%)Anchorville Pte Ltd*(30%)AquaGen International Pte Ltd*(25%)Joint Shipyard Management Services Pte Ltd(30%)* Under compulsory winding up by CourtItalics Indicates Associated Companies. Others are Subsidiaries(both directly and indirectly held)

Singapore Technologies Engineering LtdAnnual Report 2007 241Board of DirectorsMr Peter SEAH Lim Huat (Chairman)Mr TAN Pheng Hock (President & CEO)Mr KOH Beng SengLieutenant-General Desmond KUEK Bak ChyeDr TAN Kim SiewProfessor LUI Pao Chuen #Mr Winston TAN Tien HinDr Philip Nalliah PILLAIMr QUEK Poh HuatMr Venkatachalam KRISHNAKUMARMr Davinder SINGH s/o Amar SinghMr QUEK Tong BoonLieutenant-Colonel CHIA Choon Hoong (Alternate Director toLieutenant-General Desmond KUEK Bak Chye)Company SecretaryMrs CHUA Su LiRegistered Office51 Cuppage Road #09-08StarHub CentreSingapore 229469Tel: (65) 6722 1818Fax: (65) 6720 2293http://www.stengg.comShare RegistrarM & C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906Principal BankersCalyon168 Robinson Road#22-01 Capital TowerSingapore 068912Citibank N.A.3 Temasek Avenue#17-00 Centennial TowersSingapore 039190DBS Bank Ltd6 Shenton WayDBS Building Tower OneSingapore 068809FIH Erhvervsbank A/SLangeline Allé 43DK-2100 Copenhagen ØDenmarkOversea-Chinese Banking Corporation Limited65 Chulia Street#10-00 OCBC CentreSingapore 049513United Overseas Bank Limited80 Raffles PlaceUOB Plaza 1Singapore 048624AuditorsErnst & YoungOne Raffles QuayNorth Tower, Level 18Singapore 048583Mr TAN Wee Khim (Partner-in-charge)(Date of Appointment: 01/07/2005)# Professor Lui Pao Chuen resigned from the Board on 1 March 2008.

Singapore Technologies Engineering LtdAnnual Report 2007 251NOTICE IS HEREBY GIVEN THAT the Eleventh Annual GeneralMeeting of the Company will be held at Crystal Suite, Level 2,Holiday Inn Park View Singapore, 11 Cavenagh Road, Singapore229616 on Friday, 25 April 2008 at 2.30 p.m. to transact thefollowing business:AS ORDINARY BUSINESSResolution 1To receive and adopt the Directors’ Report and Audited Accountsfor the year ended 31 December 2007 and the Auditors’ Reportthereon.Resolution 2To declare a final tax exempt (one-tier) dividend of 4.0 cents pershare and a special tax exempt (one-tier) dividend of 10.88 centsper share for the year ended 31 December 2007.Resolution 3(a) To re-elect the following Directors, each of whom will retire byrotation pursuant to Article 98 of the Articles of Associationof the Company and who, being eligible, will offer themselvesfor re-election:(i) Mr Tan Pheng Hock(ii) Dr Philip Nalliah Pillai*(iii) Mr Venkatachalam Krishnakumar** Dr Philip Nalliah Pillai and Mr Venkatachalam Krishnakumarwill, upon re-election as Directors of the Company, continueas Members of the Audit Committee. Dr Pillai and MrKrishnakumar are considered independent directors for thepurpose of Rule 704(8) of the Singapore Exchange SecuritiesTrading Limited (“SGX-ST”) Listing Manual.(b) To re-elect the following Directors, each of whom will ceaseto hold office pursuant to Article 104 of the Articles ofAssociation of the Company and who, being eligible, will offerthemselves for re-election:(i) Lieutenant-General Desmond Kuek Bak Chye(ii) Mr Davinder Singh(iii) Mr Quek Tong BoonResolution 4To approve the sum of $901,833 as Directors’ fees for the yearended 31 December 2007. (2006: $866,000)Resolution 5To re-appoint Ernst & Young as Auditors of the Company and toauthorise the Directors to fix their remuneration.AS SPECIAL BUSINESSTo consider and, if thought fit, to pass with or withoutmodifications, the following resolutions which will be proposed asOrdinary Resolutions:Resolution 6That authority be and is hereby given to the Directors to:(a) (i) issue shares in the capital of the Company (“shares”)whether by way of rights, bonus or otherwise; and/or(ii) make or grant offers, agreements or options (collectively,“Instruments”) that might or would require shares to beissued, including but not limited to the creation and issueof (as well as adjustments to) warrants, debentures orother instruments convertible into shares, at any time andupon such terms and conditions and for such purposesand to such persons as the Directors may, in their absolutediscretion, deem fit; and(b) (notwithstanding the authority conferred by this Resolutionmay have ceased to be in force) issue shares in pursuance ofany Instrument made or granted by the Directors while thisResolution was in force,provided that:(1) the aggregate number of shares to be issued pursuant to thisResolution (including shares to be issued in pursuance ofInstruments made or granted pursuant to this Resolution) doesnot exceed 50 per cent. of the total number of issued shares(excluding treasury shares) in the capital of the Company (ascalculated in accordance with paragraph (2) below), of whichthe aggregate number of shares to be issued other than ona pro rata basis to shareholders of the Company (includingshares to be issued in pursuance of Instruments made orgranted pursuant to this Resolution) does not exceed 10 percent. of the total number of issued shares (excluding treasuryshares) in the capital of the Company (as calculated inaccordance with paragraph (2) below);(2) (subject to such manner of calculation as may be prescribedby the SGX-ST) for the purpose of determining the aggregatenumber of shares that may be issued under paragraph (1)above, the percentage of issued shares shall be based onthe total number of issued shares (excluding treasury shares)in the capital of the Company at the time this Resolution ispassed, after adjusting for:(i) new shares arising from the conversion or exercise of anyconvertible securities or share options or vesting of shareawards which are outstanding or subsisting at the time thisResolution is passed; and(ii) any subsequent bonus issue or consolidation orsubdivision of shares;(3) in exercising the authority conferred by this Resolution, theCompany shall comply with the provisions of the ListingManual of the SGX-ST for the time being in force (unless suchcompliance has been waived by the SGX-ST) and the Articlesof Association for the time being of the Company; and(4) (unless revoked or varied by the Company in General Meeting)the authority conferred by this Resolution shall continue inforce until the conclusion of the next Annual General Meetingof the Company or the date by which the next Annual GeneralMeeting of the Company is required by law to be held,whichever is the earlier.

252Resolution 7THAT approval be and is hereby given to the Directors to:(a) offer and grant options in accordance with the provisions ofthe Singapore Technologies Engineering Share Option Plan(“Share Option Plan”) and/or to grant awards in accordancewith the provisions of the Singapore Technologies EngineeringPerformance Share Plan (“Performance Share Plan”) and/or the Singapore Technologies Engineering Restricted StockPlan (“Restricted Stock Plan”) (the Share Option Plan, thePerformance Share Plan and the Restricted Stock Plan,together the “Share Plans”); and(b) allot and issue from time to time such number of ordinaryshares in the capital of the Company as may be required tobe issued pursuant to the exercise of options under the ShareOption Plan and/or such number of fully paid ordinary sharesas may be required to be issued pursuant to the vestingof awards under the Performance Share Plan and/or theRestricted Stock Plan,provided that the aggregate number of ordinary shares to beissued pursuant to the Share Plans shall not exceed fifteenper cent. (15%) of the total number of issued ordinary sharesin the capital of the Company (excluding treasury shares) fromtime to time.STATEMENT PURSUANT TO ARTICLE 60 OF THE ARTICLES OFASSOCIATION OF THE COMPANYResolution No. 6 is to empower the Directors to issue shares inthe capital of the Company and to make or grant instruments(such as warrants or debentures) convertible into shares, and toissue shares in pursuance of such instruments, up to a numbernot exceeding in total fifty per cent. (50%) of the total numberof issued shares (excluding treasury shares) in the capital of theCompany, of which up to ten per cent. (10%) of the total numberof issued shares (excluding treasury shares) may be issuedother than on a pro rata basis to shareholders. For the purposeof determining the aggregate number of shares that may beissued, the percentage of issued shares shall be based on thetotal number of issued shares (excluding treasury shares) in thecapital of the Company at the time that Resolution No. 6 is passed,after adjusting for (a) new shares arising from the conversion orexercise of any convertible securities or share options or vesting ofshare awards which are outstanding or subsisting at the time thatResolution No. 6 is passed, and (b) any subsequent bonus issue,consolidation or subdivision of shares.shares which may be issued pursuant to the Share Plans is limitedto fifteen per cent. (15%) of the total number of ordinary issuedshares in the capital of the Company (excluding treasury shares)over the 10-year duration of the Share Plans.BY ORDER OF THE BOARDCHUA SU LI (Mrs)Company SecretarySingapore, 9 April 2008NOTES1. A member of the Company entitled to attend and vote at theAnnual General Meeting is entitled to appoint not more thantwo proxies to attend and vote in his stead. A proxy need notbe a member of the Company.2. The instrument appointing a proxy must be lodged at theregistered office of the Company at 51 Cuppage Road,#09-08, StarHub Centre, Singapore 229469 not less than48 hours before the time appointed for the Annual GeneralMeeting.BOOKS CLOSURE AND DIVIDEND PAYMENT DATESDuly completed transfers in respect of ordinary shares in thecapital of the Company together with all relevant documents oftitle received by the Company’s share registrar, M & C ServicesPrivate Limited, 138 Robinson Road, #17-00, The CorporateOffice, Singapore 068906 up to the close of business at 5.00 p.m.on 5 May 2008 (the “Books Closure Date”) will be registeredto determine members’ entitlements to the proposed dividends,subject to approval of members to the proposed dividends atthe Eleventh Annual General Meeting to be convened on 25April 2008. Subject as aforesaid, members whose SecuritiesAccounts with The Central Depository (Pte) Limited are creditedwith ordinary shares in the capital of the Company as at 5.00 p.m.on the Books Closure Date will be entitled to the dividends. TheRegister of Members and Share Transfer Books will be closed on6 May 2008 for the purpose of determining members’ entitlementsto the proposed dividends. The proposed dividends, if so approvedby members, will be paid on 21 May 2008.Resolution No. 7 is to empower the Directors to offer and grantoptions and/or grant awards and to issue ordinary shares in thecapital of the Company pursuant to the Singapore TechnologiesEngineering Share Option Plan, Singapore TechnologiesEngineering Performance Share Plan and Singapore TechnologiesEngineering Restricted Stock Plan (collectively the “SharePlans”). Approval for the adoption of the Share Plans was given byshareholders at an Extraordinary General Meeting of the Companyheld on 23 November 2000. The grant of options and awardsunder the respective Share Plans will be made in accordancewith their respective provisions. The aggregate number of ordinary

IMPORTANT1. For investors who have used their CPF moneys to buyordinary shares in the capital of Singapore TechnologiesEngineering Ltd, the 2007 Annual Report is forwarded tothem at the request of their CPF Approved Nominees and issent solely FOR INFORMATION ONLY.2. This Proxy Form is not valid for use by CPF investors and shallbe ineffective for all intents and purposes if used or purportedto be used by them.I I/We, NRIC/Passport Numberofbeing a member/members of the abovenamed Company, hereby appointIIName Address NRIC/Passport NumberProportion ofShareholdings (%)(a)(b)and/or (delete as appropriate)as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the EleventhAnnual General Meeting of the Company to be held at Crystal Suite, Level 2, Holiday Inn Park View Singapore, 11 Cavenagh Road,Singapore 229616 on 25 April 2008 at 2.30 p.m. and at any adjournment thereof.(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the OrdinaryResolutions as set out in the Notice of the Annual General Meeting. In the absence of specific directions, the proxy/proxies willvote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)III No Ordinary Resolutions For AgainstOrdinary Business1 Adoption of Accounts and Reports2 Declaration of Final Tax Exempt (one-tier) Dividend and Special Tax Exempt (one-tier) Dividend3 (a)Re-election of Directors retiring by rotation pursuant to Article 98 of the Articles of Association ofthe Company(i) Mr Tan Pheng Hock(ii)(iii)Dr Philip Nalliah PillaiMr Venkatachalam Krishnakumar3 (b) Re-election of Directors retiring pursuant to Article 104 of the Articles of Association of the Company(i)(ii)(iii)Lieutenant-General Desmond Kuek Bak ChyeMr Davinder SinghMr Quek Tong Boon4 Approval of Directors’ Fees5 Re-appointment of Ernst & Young as AuditorsSpecial Business6 Authority for Directors to issue shares7Authority for Directors to offer and grant options and/or grant awards and allot shares, pursuant to theSingapore Technologies Engineering Share Option Plan, Singapore Technologies Engineering PerformanceShare Plan and Singapore Technologies Engineering Restricted Stock PlanDated this day of 2008Total Number of Shares heldSignature(s) of Member(s) or Common SealIMPORTANTPLEASE READ NOTES OVERLEAF

2 fold this dotted line >Postage will bepaid byaddressee.For posting inSingapore only.Singapore Technologies Engineering Ltd51 Cuppage Road#09-08 StarHub CentreSingapore 229469(Regn No: 199706274H)< 1 fold this dotted line >Notes:1 Please insert the total number of shares held by you. If you haveshares entered against your name in the Depository Register(as defi ned in Section 130A of the Companies Act, Chapter 50of Singapore), you should insert that number of shares. If youhave shares registered in your name in the Register of Members,you should insert that number of shares. If you have sharesentered against your name in the Depository Register and sharesregistered in your name in the Register of Members, you shouldinsert the aggregate number of shares entered against your namein the Depository Register and registered in your name in theRegister of Members. If no number is inserted, the instrumentappointing a proxy or proxies shall be deemed to relate to all theshares held by you.2 A member of the Company entitled to attend and vote at a meetingof the Company is entitled to appoint one or two proxies to attendand vote instead of him. Such proxy need not be a member of theCompany.3 Where a member appoints two proxies, the appointments shallbe invalid unless he specifi es the proportion of his shareholding(expressed as a percentage of the whole) to be represented byeach proxy.4 The instrument appointing a proxy or proxies must be depositedat the registered offi ce of the Company at 51 Cuppage Road,#09-08, StarHub Centre, Singapore 229469, not less than 48hours before the time appointed for the Eleventh Annual GeneralMeeting.5 The instrument appointing a proxy or proxies must be under thehand of the appointor or of his attorney duly authorised in writing.Where the instrument appointing a proxy or proxies is executed bya corporation, it must be executed either under its seal or underthe hand of an offi cer or attorney duly authorised.6 A corporation which is a member may authorise by a resolution ofits directors or other governing body such person as it thinks fi t toact as its representative at the Eleventh Annual General Meeting,in accordance with Section 179 of the Companies Act, Chapter50 of Singapore.General:The Company shall be entitled to reject the instrument appointing aproxy or proxies if it is incomplete, improperly completed or illegibleor where the true intentions of the appointor are not ascertainablefrom the instructions of the appointor specifi ed in the instrumentappointing a proxy or proxies. In addition, in the case of sharesentered in the Depository Register, the Company may reject anyinstrument appointing a proxy or proxies lodged if the member, beingthe appointor, is not shown to have shares entered against his namein the Depository Register as at 48 hours before the time appointedfor holding the Eleventh Annual General Meeting, as certifi ed by TheCentral Depository (Pte) Limited to the Company.

surveylife begins atf rtyST ENGINEERING ANNUAL REPORT 2007Thank you for reading our annual report. We would appreciate your feedback, both good and bad, to help us to improvethis annual publication. Kindly complete this survey and return it either via prepaid mail or fax to +65 6720 2293 before30 May 2008 or in person at our Annual General Meeting on 25 April 2008.Eleana TanCFO, ST Engineering Please tick “ ” accordingly1. Please help us to assess each of the following sections in terms of how they helped you understand the operationsand strategic directions of the Group:DID NOTGOOD AVERAGE POOR READa. Page 34 Corporate Governanceb. Page 48 Community and Environmentc. Page 50 Investor Relationsd. Page 56 Operating Financial Reviewe. Page 62 ST Engineering at a Glance2. How would you rate the overall writing style of this report?3. Which parts of this report did you find particularly good or weak and why?Good:Weak:4. Do you have any suggestions or a wish list of what you would hope to see in our report next year?5. Do you prefer (please tick “ ”):Onlineannual reportPrintannual reportBoth onlineand print versionsNopreference6. Are you a: Shareholder / Customer / Staff member / Analyst / Journalist? (please circle)Others (please specify):7. Please leave your contact details to allow us to clarify any matters, if required.Name:Tel:

2 fold this dotted line >Postage will bepaid byaddressee.For posting inSingapore only.Singapore Technologies Engineering Ltd51 Cuppage Road#09-08 StarHub CentreSingapore 229469(Regn No: 199706274H)< 1 fold this dotted line >

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