View - Singapore Technologies Engineering

The return on assets (ROA) for U.S. firms hassteadily fallen to almost one-quarter of 1965 levelsEconomy-wide Asset Profitability (1965-2008)Return on Assets (%)5.0% 4.7%4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.5%0.0%1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2008Return on AssetsSource: Compustat, Deloitte analysisSimilarly, the ROA performance gap between corporate winners andlosers has increased over time, with the “winners” barely maintainingprevious performance levels while the losers experience rapidperformance deteriorationEconomy-wide Asset Profitability by quartile (1965-2008)20%15%10%12.9%11.0%5%eturn On Assets (%)R0%Top Quartile20%1.2%0%-14.7%-20%-40%-60%-80%-100%1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2008Bottom QuartileSource: Compustat, Deloitte analysis3

4 SIMPLY SMARTERLETTER TO SHAREHOLDERSFrom Left to Right:Peter SEAH Lim Huat (Chairman),TAN Pheng Hock (President & CEO)business, a joint venture with NanyangTechnological University and DSONational Laboratories was formed todesign and develop advanced earthobservation satellites. This segment,which has been expanding its footprintinto more than 100 countries, continuesto establish its globally acceptedindustry standard for the groundsegment for fixed and mobile satcom,as well as develop a new area in theremote satellite imagery market. In theUS, we received the US government’sapproved Proxy Agreement for iDirectGovernment Technologies to pursueclassified Government and militarycontracts.The Land Systems sector accountedfor 25% of the Group’s revenue with$1.48b in revenue. Profit beforetax was $108.1m. While defencebusiness is a key component ofthe sector’s business, we continueto seek new commercial growthdrivers for this sector, in line with ourstrategy to diversify revenue stream.A key example is the new focus togrow the construction equipmentbusiness globally, and to become amore significant player in the roadconstruction and maintenance,excavation and mining equipmentsegments in Asia. LeeBoy India waslaunched in November to cater to thegrowing construction sector in India,leveraging the brand name of LeeBoy.It launched the localised 785i MotorGrader, which was engineered andmanufactured in India to internationalstandards based on our proventechnologies. In Singapore, thesector made its foray into the city bussegment when it clinched a $65mcontract to provide MAN A22 buses toSMRT Ltd.Separately on the defence business, wecompleted the delivery of the Warthogto the UK Ministry of Defence in early2011 and we are proud to say that theWarthog has been performing well inoperations in Afghanistan. The sectorcontinued to win orders for its defencesolutions, including a $68m contractto provide the SAF with the newgeneration Spider Light Strike Vehicle.The Marine sector achieved revenue of$876m or 14% of the Group’s revenue,

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 20115and profi t before tax of $121.8m. TheUS operations continued to performwell. The sector gained a strongerfoothold in the Offshore SupportVessels (OSV) market by securingcontracts for 12 OSVs, which includedthe $441m contract from HornbeckOffshore Services for eight of thesevessels. Other wins included the$171m contract from Swire Pacifi cOffshore Operations for four AnchorHandling Tug Supply Vessels and$185m contract from Pasha Hawaiifor a car-truck carrier. With a view toextend our ship engineering designcapability and expertise outside ofSingapore, we opened an offi ce inWuhan, China to provide engineeringand consultancy services for domesticand international maritime customers.Other businesses outside of thefour sectors also recorded notableachievements. ST Synthesis madegood headway in establishing itsreputation in the facilities engineeringand management sector. It wasawarded a fi ve-year $125m contractby Singapore’s Defence Science &Technology Agency to provide facilitiesmaintenance services to select MINDEFcontrolled properties and facilities. OurUS subsidiary, VT Miltope also reportedpositive development, particularly fromits teaming with General DynamicsC4 Systems to provide the US Armywith military rugged products. Itcould potentially receive orders up toUS$250m over the next fi ve years fromthis partnership.On the international marketing front, ourBrazil offi ce in Sao Paolo is moving inthe right direction with good progress.The Group put in concerted marketingefforts and plans, approaching LatinAmerica in a strategic way to maximisepotential of any business discussions,complemented by the respectivesectors’ products and solutionsofferings.IN PURSUIT OF BUSINESSEXCELLENCEIn uncertain times, having strongcorporate governance and riskmanagement frameworks becomeeven more critical. ST Engineeringremains committed to good corporategovernance and we have, over theyears, built up robust frameworks whichwe regularly review and strengthen.We are also guided by the BusinessExcellence framework on aspects suchas workplace safety and health, peopledevelopment, and innovation.Our pursuit of business excellence is atall levels within the Group addressinghow structures and processes couldbe put in place to do things moreeffi ciently. Our outstanding practiceswere recognised by the Asia Pacifi cQuality Organisation as a World ClassWinner of the Global PerformanceExcellence Award. This internationalquality award, given out to only twoSingapore companies, is testamentto the untiring efforts of each of ouremployees to strive for excellence.Notwithstanding the Group’s keenfocus on profi tability, we have never lostsight of our social responsibility. At theGroup and sector levels, we continueto reach out to and engage thecommunity through various initiatives.A key highlight was the planting of950 trees at the Punggol Promenadeduring the Green Month where over1,600 employees and their familiesparticipated in the event.Details of our business excellence andsustainability efforts are captured in thisannual report on pages 36 to 53.PUTTING SMARTNESS IN OURWORKLooking ahead, we expect the globaleconomy to remain vulnerable andbusiness conditions challenging. Weare mindful that doing business will bemore diffi cult and complex. In additionto building on our diversifi ed businessmodel to weather a slower period ofgrowth or a downturn, we recognisethat we have to put smartness in theway we do things. This mindset isnot new, but we will put more focusin adopting it across sectors andlevels – strategically in the businessthinking and operationally in processesto enable us to respond better andeffectively to external forces. We wantthis smartness to drive the way weinnovate products and solutions, andthe manner in which we manage theevolving business landscape.ST Engineering is here for the long runand we are committed to deliveringconsistent returns our shareholdershave come to expect of us.APPRECIATIONIn closing, we wish to thank our22,000 employees for their invaluablecontributions and commitment.We would also like to express ourappreciation to our Board of Directorsfor their guidance and counsel.In particular, we acknowledge withdeep appreciation the contributionsof Mr Winston Tan Tien Hin who retiredfrom our Board at our last AGM in April2011 after having served 14 years.Last but not least, we thank ourbusiness partners and shareholdersfor their continued support.Peter SEAH Lim Huat TAN Pheng HockChairmanPresident & CEO29 February 2012

6 SIMPLY SMARTER2011 () 1459.94%6.5527%5.2753%8%123117.7A20111237%820111.8912.54.73815.55.07%19.22.782 201 1 1 0 CFM“TRUEngine”“EcoServices” 50.1%DRB14.825%1.3697%930N E C DSO100 iDirectGovernment Technologies 14.825%1.081 (LeeBoy) LeeBoy 785iSMRT6500SMRTA222011WarthogWarthog

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 20117“”68008.7614%1.21812Hornbeck Offshore Services84.41()1.711.85 1.251,600950VT MiltopeC4536-532.52012229

SMARTER TECHNOLOGIESDRIVING INNOVATION

We are able to stay ahead of the competitionbecause we welcome change and aren’tafraid of challenges. Understanding thattechnology is key to our success, weenthusiastically embrace it. This has earnedus a reputation for being both innovative andproductive. Equipped with a positive attitudeand the resources and capabilities to engagein continual research and development,we are constantly creating winning productsand solutions.Read about our innovation and productivity efforts– Page 38-41

SMARTER PARTNERSHIPSBUILDING RAPPORT

Because we believe in two-waycommunication, we listen to our customers’requirements, concerns and suggestions. Weconsciously go beyond understanding needsto anticipating them. As a result, we buildstrong relationships that stand the test oftime. We adopt the same approach with ourOEMs, treating them as long-term partnersin our quest to serve customers better. Ourrespect for the people we work with extendsto our own employees who are indispensablein realising our shared vision.Read about our HR practices – Page 46-48

SMARTER STRATEGIESDELIVERING VALUE

We are committed to globalisation anddiversification. These proven strategies haveyielded stable revenues and steady growthin good years and bad, enabling us to repayshareholders for their faith in us. By stayingthe course, we are ensuring a sustainablebusiness that will continue to deliver value,well into the future.Read about our global footprint – Page 14-15Read about our Total Shareholder Return – Page 60

14 SIMPLY SMARTERGLOBAL FOOTPRINTST Engineering’s main facilities and officesLangley, CanadaHerndon, Virginia, USAAlexandria, Virginia, USAHope Hull, Alabama, USAWashington, North Carolina, USALincolnton, North Carolina, USAPascagoula,Mississippi, USAMobile, Alabama, USASan Antonio, Texas, USAMonterrey, MexicoNuevo Leon, MexicoCambridge, Massachusetts, USAOxfordshire, UKLondon,UKCounty Meath, IrelandBerkshire,Bristol, UKUKArgenteuil , FranceCazaux,FranceMadrid,SpainPanamaSao Paulo, BrazilREVENUE BY CUSTOMEREurope8%Others6%USA 26%60%AsiaOur global footprint and welldiversified customer baseprovide consistent earningsand steady growth.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201115Oslo,NorwayStockholm, SwedenCopenhagen, DenmarkBeijing, ChinaAlmaty, KazakhstanWuhan, ChinaTianjin, ChinaJiangsu, ChinaTokyo, JapanLegendShanghai, ChinaAerospaceDubai, UAEDhaka,BangladeshGuizhou, ChinaGuangzhou, ChinaXiamen,ChinaShenzhen, ChinaTaipei, ROCElectronicsBangkok, ThailandHong KongLand SystemsBangalore,IndiaJohor, MalaysiaKuala Lumpur, MalaysiaBandar Seri Begawan, BruneiSingaporeMarineOthersGaborone, BotswanaBallarat, AustraliaST Engineering is an integratedengineering group providingsolutions and services in theaerospace, electronics, land systemsand marine sectors.A leader in each of our corebusinesses, ST Engineeringleverages our multi-sectorcapabilities to develop advancedsolutions for customers acrossindustries. We serve commercial,defence and government-relatedcustomers in over 100 countries,through our global network ofsubsidiaries and associatedcompanies.

16 SIMPLY SMARTERBOARD OFDIRECTORSMr Peter SEAH Lim Huat(Chairman)Mr Peter Seah Lim Huat, 65, wasappointed non-executive Chairmanon 15 April 2002 and is due forre-election at the 2012 AGM underArticle 98 of the Company’s Articlesof Association. He is a member of theTemasek Holdings Advisory Panel.Mr Seah was a banker for 33 yearsbefore retiring as Vice Chairmanand CEO of the former OverseasUnion Bank in 2001. He then joinedSingapore Technologies Pte Ltdas President & CEO and held thisposition until 31 December 2004. MrSeah is also Chairman of DBS GroupHoldings Ltd* and DBS Bank Ltd andsits on the Boards of CapitaLandLimited*, StarHub Ltd*, STATSChipPAC Ltd.* and Government ofSingapore Investment Corporation PteLtd. His other appointments includebeing Chairman of LaSalle Collegeof the Arts Limited and SingaporeHealth Services Pte Ltd and amember of the Defence Science &Technology Agency (DSTA). Mr Seahwas awarded 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.Mr TAN Pheng HockMr Tan Pheng Hock, 54, is the President& CEO of ST Engineering and anexecutive Director. He was appointedDirector on 1 May 2001 and is due forre-election at the 2012 AGM underArticle 98 of the Company’s Articlesof Association. Mr Tan is Chairman ofSingapore Workforce DevelopmentAgency and Nanyang PolytechnicBoard of Governors. He is also DeputyChairman of the Singapore QualityAward Governing Council. Mr Tanserves as Director on the board of theSingapore Economic DevelopmentBoard and the Board of Governors of theS. Rajaratnam School of InternationalStudies. He was awarded the PublicService Star in 2011. He began hiscareer with ST Engineering as anengineer in ST Marine in 1981. Overthe last three decades, he had heldnumerous senior appointments in theGroup including that of Executive VicePresident of ST Marine, Presidentof ST Kinetics, President and ChiefOperating Officer of ST Engineering andST Engineering Group President. Heholds a Bachelor of Science (First ClassHonours) in Marine Engineering from theUniversity of Surrey, UK and a Master ofScience in Management from StanfordUniversity, USA.Mr KOH Beng SengMr Koh Beng Seng, 61, is the CEOof Octagon Advisors Pte. Ltd. Hewas appointed an independent nonexecutiveDirector on 15 September2003 and is due for re-election at the2012 AGM under Article 98 of theCompany’s Articles of Association.Mr Koh was Deputy President ofUnited Overseas Bank Ltd fromJune 2000 to 31 January 2005. Priorto this, Mr Koh was Senior Advisorto Asia Pulp & Paper Co Ltd, andAdvisor to Bank of China and theInternational Monetary Fund. MrKoh has extensive experience in thefinancial services sector. He was withthe Monetary Authority of Singaporefrom 1973 to 1998, where he servedas Deputy Managing Director from1988 to 1998. Mr Koh is a Director ofBank of China (Hong Kong) Limited^,BOC Hong Kong (Holdings) Limited,Fraser and Neave Limited*, Sing-Han International Financial ServicesLimited and Great Eastern HoldingsLimited*. Mr Koh holds a Bachelorof Commerce (First Class Honours)from the former Nanyang University,Singapore, and a Master of BusinessAdministration from ColumbiaUniversity, USA.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201117The names of the directors holding office at the date ofthis report are set out below together with details of theiracademic and professional qualifications, age, date of firstappointment as Director, date of last re-election as Director,as well as directorships in companies.Lieutenant-GeneralNEO Kian HongLG Neo Kian Hong, 47, is Chief of theDefence Force. He was appointed anon-executive Director on 31 March2010 and was last re-elected asDirector on 21 April 2010. Prior tothis, LG Neo was the Chief of Army.He joined the Ministry of Defence(MINDEF) in 1984 and was awardedthe SAF Overseas Scholarship in1985, SAF Postgraduate Scholarship(General Development) in 1997 andThe Public Administration Medal(Gold) in 2007. In the course of hismilitary career, he has held variouskey command and staff positionsin MINDEF. LG Neo is a Director ofJurong Town Corporation and a boardmember of DSTA Board. He holds aBachelor of Engineering (Honours)(Electrical & Electronic) from theUniversity of London, UK, as well asa Master of Science (Management ofTechnology) from the MassachusettsInstitute of Technology, USA.Dr TAN Kim SiewDr Tan Kim Siew, 58, is PermanentSecretary (Defence Development),MINDEF. He was appointed a nonexecutiveDirector on 15 December2003 and was last re-elected asDirector on 21 April 2010. Prior to hispresent appointment with MINDEF,he was the Deputy Secretary (Policy)with the Ministry of Finance. Hewas formerly the CEO and ChiefPlanner of the Urban RedevelopmentAuthority from 1996 to 2001. Dr Tanis Chairman of the DSTA and DSONational Laboratories, and is also aDirector of Singapore TechnologiesHoldings Pte Ltd. Dr Tan holds aBachelor of Arts in Engineering Triposand a Ph.D in Engineering from theUniversity of Cambridge, UK.Mr QUEK Tong BoonMr Quek Tong Boon, 56, is ChiefDefence Scientist and Chief Research& Technology Officer in MINDEF.He was appointed a non-executiveDirector on 1 March 2008 and waslast re-elected as Director on 20 April2011. He joined the Defence ScienceOrganisation of MINDEF in 1980 andin the course of his career, has heldvarious key appointments, includingthat of Deputy Secretary (Technologyand Transformation) of MINDEF andCEO of the DSO National Laboratories.Mr Quek’s current chairmanshipincludes that of the Intellectual PropertyOffice of Singapore (IPOS). He is alsoan Adjunct Professor at the Departmentof Electrical & Computer Engineeringof the National University of Singapore(NUS). He holds a Bachelor of Arts(Honours) (Engineering) from theUniversity of Cambridge, UK, anda Master of Science (ElectricalEngineering) from NUS.

SIMPLY SMARTERBOARD OF DIRECTORSMr QUEK Poh HuatMr Quek Poh Huat, 65, is SeniorAdvisor of Singapore Power Limited.Prior to this, he was the Group CEOof Singapore Power Limited until hisretirement on 31 December 2011.He was appointed a non-executiveDirector on 15 April 2002 and was lastre-elected as Director on 20 April 2011.Mr Quek is Singapore’s non-residentAmbassador to Sweden.He was awarded the Public ServiceStar in August 1994. Mr Quek obtaineda Bachelor of Science in ChemicalEngineering from the University ofLeeds, UK, and a Master of Sciencein Management from the NavalPostgraduate School, USA.Mr VenkatachalamKRISHNAKUMARMr Venkatachalam Krishnakumar, 62, isChairman of Oracle Financial ServicesSoftware Pte Ltd (Singapore). Priorto this, he had held Senior Advisoryroles at DBS Bank Ltd, McKinsey andCompany and Barclays Bank PLC,Global Retail and Commercial Banking.He was Chief Operating Officer andChief Financial Officer for the Asia PacificConsumer Bank of Citigroup until hisretirement on 28 February 2005, after a31-year career with the group. Duringhis career with Citigroup, he held severalsenior appointments in India, Singaporeand New York. He was appointed anindependent non-executive Director on15 April 2002 and is due for re-electionat the 2012 AGM under Article 98 ofthe Company’s Articles of Association.He is a Director of HiSoft TechnologyInternational Ltd # , MediaCorp Pte. Ltd.,Aspen Holdings Limited and CypressHoldings Limited. He holds a Bachelorof Engineering and Master of BusinessAdministration from the Indian Institute ofManagement, India.Mr Davinder SINGHMr Davinder Singh, 54, is CEO of Drew& Napier LLC. He was appointed anindependent non-executive Directoron 1 August 2007 and was last reelectedas Director on 20 April 2011.Mr Davinder Singh has been in legalpractice for more than 20 years. Hewas appointed Senior Counsel in 1997,the first batch of Senior Counsels tobe so appointed in Singapore. He isa Director of Singapore ExchangeLimited* and Petra Foods Limited*.Mr Davinder Singh holds an LLB(Honours) from the former Universityof Singapore.PAST DIRECTORSHIPS IN THE LAST THREE YEARSMr Peter SEAH Lim HuatAlliance Bank Malaysia BerhadBank of China LimitedChartered Semiconductor Manufacturing Ltd.Chinese Chamber Realty Private LimitedGIC Special Investments Private LimitedGlobal Crossing LimitedSembCorp Industries LtdSiam Commercial Bank Public Company LimitedSingapore Technologies Telemedia Pte LtdMr TAN Pheng Hock2006 JV Pte. Ltd. (Dissolved under members’voluntary liquidation)Neptune Orient Lines LimitedSembCorp Marine Ltd

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201119Dr Stanley LAI Tze ChangMr KHOO Boon HuiColonel ONG Ann KiatDr Stanley Lai Tze Chang, 44, isHead of the Intellectual Property &Technology Department, Allen andGledhill LLP. He was appointed anindependent non-executive Directoron 8 October 2009 and was last reelectedas Director on 21 April 2010.Dr Lai was appointed Senior Counselat the Opening of the Legal Year2010. Dr Lai was appointed DeputyChairman of IPOS from 1 October2011. He obtained his law degree fromthe University of Leicester (UK) in 1992and qualified to practise as a Barristerin England and Wales in 1993. Dr Laiis a member of Lincoln’s Inn. He wascalled to the Singapore bar in 1995. DrLai also holds a Master and Doctorate(Ph.D) in law from the University ofCambridge, UK.Mr Khoo Boon Hui, 57, is the SeniorDeputy Secretary of the Ministry ofHome Affairs. He was appointed anindependent non-executive Directoron 1 September 2010 and was lastre-elected as Director on 20 April 2011.Mr Khoo was appointed Commissionerof the Singapore Police Force (SPF)in July 1997, and relinquished thispost in January 2010 after serving 32years in SPF. He is also the Presidentof INTERPOL, Alternate Chairmanof Home Team Academy Board ofGovernors, Deputy Chairman ofSingapore Island Country Club andSingapore Quality Award GoverningCouncil and a Board Member ofSingapore Health Services Pte Ltd.Mr Khoo holds a Bachelor of Arts(Engineering Science & Economics)degree from Oxford University and aMaster in Public Administration fromthe Kennedy School of Government,Harvard University. He attended theAdvanced Management Program atWharton School of the University ofPennsylvania in 2002.COL Ong Ann Kiat, 38, is Commanderof Imagery Support Group in MINDEF.Prior to this, he was the Assistant Chiefof General Staff (Plans) in MINDEF.COL Ong was appointed AlternateDirector to LG Neo Kian Hong on 31March 2010. He joined the SAF in1992. COL Ong was awarded the SAFOverseas Scholarship in 1992, and theSAF Postgraduate Scholarship (GeneralDevelopment) in 2008. He has heldvarious command and staff positionsin MINDEF in the course of his militarycareer. COL Ong holds a Bachelorof Science (First Class Honours)(Economics) from the London Schoolof Economics and Political Science,University of London, UK as well asa Master of Business Administrationfrom the Massachusetts Institute ofTechnology, USA.* listed on the SGX-ST^listed on the Stock Exchange of Hong Kong#listed on the Nasdaq Stock MarketPAST DIRECTORSHIPS IN THE LAST THREE YEARSKOH Beng SengJapan Wealth Management Securities IncLieutenant-General NEO Kian HongSingapore Technologies Kinetics LtdQUEK Poh HuatSingapore Power LimitedSP PowerAssets LimitedPowerGas LimitedSP PowerGrid LimitedSP Services LimitedMr Venkatachalam KRISHNAKUMARThe Central Depository (Pte) LimitedMr Davinder SINGHFreshfields Drew & Napier Pte Ltd

20 SIMPLY SMARTERSENIOR MANAGEMENTMr TAN Pheng Hock is President &CEO of ST Engineering and a Directorof the ST Engineering Board. (Mr Tan’sprofile is on page 16)Mr SEAH Moon Ming, 55, is DeputyCEO and President, Defence Businessof ST Engineering, overseeing theAerospace, Electronics, Land Systemsand Marine sectors. Prior to this,he was Deputy CEO (Electronics &Kinetics) & President, InternationalBusiness, ST Engineering from May2004 to August 2009 and President,ST Electronics, a position he heldfrom July 1997 to August 2009. MrSeah was General Manager of CETTechnologies from July 1994 to July1997. He serves as Chairman ofthe Board of Governors of TemasekPolytechnic, Vice Chairman of Trek2000 International Ltd*, DeputyChairman of International EnterpriseSingapore and Director of DSO NationalLaboratories, Infocomm DevelopmentAuthority of Singapore and AlexandraHealth System Pte Ltd. He is a Fellowof the Institution of Engineers Singaporeand a senior member of IEEE. Hewas awarded the 2007 InternationalManagement Action Award inSingapore, 2007 Top Ten Financial andIntelligent Persons Award in China, IES/IEEE Joint Medal of Excellence 2008and NUS Distinguished EngineeringAlumni Award 2011. Mr Seah holdsa Master of Science (Distinction) inElectrical Engineering from the NavalPostgraduate School, USA.Mr CHANG Cheow Teck, 51, wasappointed President, ST Aerospacein May 2010. Prior to this, Mr Changwas President of ST Marine from2008. He has been with the Groupsince 1990 and has spent 17 yearsof his career in the Aerospace sector.Mr Chang has held several seniormanagement appointments withinthe Group including that of ExecutiveVice President, Commercial Business,ST Aerospace; President, VisionTechnologies Systems, Inc.; andPresident, Defence Business,ST Kinetics. As President, SpecialProjects, ST Engineering, Mr Changwas closely involved in identifyinggrowth opportunities for the Group,resulting in several acquisitions.He holds a Bachelor of MechanicalEngineering (First Class Honours)from the National University ofSingapore and attended the HarvardUniversity’s Management DevelopmentProgramme.Mr LEE Fook Sun, 55, was appointedPresident of ST Electronics in August2009. Prior to his appointment, Mr Leewas Deputy President (Operations),ST Electronics from 2005. He joinedST Electronics in 2000 as President ofDefence and International Business. Heholds a Bachelor of Arts (Honours) anda Master of Arts (Engineering Science)from the University of Oxford, UK andattended the Stanford University’sExecutive Programme. Mr Lee is aFellow of the Institution of Engineers,Singapore and a member of theSingapore-Zhejiang Economic & TradeCouncil.Mr SEW Chee Jhuen, 48, wasappointed President of ST Kinetics inSeptember 2006. Prior to this, Mr Sewwas Deputy President (Operations)and President, Defence Business ofST Kinetics. He joined ST Aerospaceas an aeronautical engineer in 1988,and has held many senior managementappointments before becomingDeputy President (Operations). Mr Sewserves as a Member of the Board ofGovernors of Singapore Polytechnic.He holds a Bachelor of Science(Distinction) in Aeronautical Engineeringand Mechanics from the University ofMinnesota, and a Master in BusinessAdministration from Stanford University,USA.Mr NG Sing Chan, 51, was appointedPresident, ST Marine in May 2010. Priorto this, Mr Ng was Deputy Presidentand President, Defence Business ofST Marine. He joined ST Marine in1987 as an engineer. Mr Ng left in1991 and later became the DeputyGeneral Manager of Pan-UnitedShipyard Pte Ltd. He subsequentlytook on the positions of President ofChangshu Xinghua Changjiang DevCo and Executive Director of Pan-United Marine Ltd (now known asDrydocks World – Singapore Pte Ltd).Mr Ng re-joined the Group in March2008 as Executive Vice President,Special Projects, ST Engineeringand moved to ST Marine as DeputyPresident in April 2009. Mr Ng holdsa Master of Business Administration(Finance & Banking) from the NanyangTechnological University, Singaporeand a Masters in Engineering from theUniversity of Hamburg, Germany.General (Retired) John G COBURN,69, was appointed Chairman and CEOof ST Engineering’s US subsidiary,VT Systems, in December 2001. Gen(Ret) Coburn joined the Group afteran illustrious 39-year career with theUS Department of Defense. Priorto taking up this position, he wasCommanding General of the US ArmyMateriel Command, one of the largestcommands in the army with 60,000employees with an annual budget ofUS$40b and activities in 42 states and28 foreign countries. Gen (Ret) Coburn

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201121holds a Juris Doctor from the Universityof Missouri, USA, a Doctor’s Degreefrom Eastern Michigan University andmany other degrees. He is also a notedauthor, speaker and a member of theSupreme Court of the United States.Ms Eleana TAN Ai Ching, 49, wasappointed Chief Financial Officer ofST Engineering in March 2008. MsTan was previously Managing Director,Finance, Temasek Holdings (Private)Limited (Temasek). Prior to that, shewas Director Finance at SingaporeTechnologies Pte Ltd (STPL) fromAugust 2003 until December 2004,when STPL was restructured, and itsassets transferred to Temasek. Priorto 2003, Ms Tan had held various keyfinance positions in the ST EngineeringGroup over a period of 13 years andlast held the position of Group FinancialController of ST Engineering. Ms Tanholds a Bachelor of Accountancy(Honours) from the NUS and is amember of the Institute of CertifiedPublic Accountants of Singapore.From left to right:Front row:Seah Moon Ming, Tan Pheng Hock, Eleana Tan.Second row:Ng Sing Chan, Sew Chee Jhuen, John G Coburn,Lee Fook Sun, Chang Cheow Teck.* listed on the SGX-ST

22 SIMPLY SMARTERORGANISATIONCHARTTAN Pheng HockPresident & CEOEleana TANChief Financial OfficerINTERNAL AUDITGrace KWOKSenior Vice President(Reports to Audit Committee)FINANCERaphael CHINSenior Vice President/Group Financial ControllerRISK MANAGEMENTAlice CHUASenior Vice President(Joint reporting to Risk Review Committee)INTERNATIONAL MARKETING TECHNOLOGY MERGERS & ACQUISITIONSPatrick CHOYExecutive Vice PresidentFONG Saik HayChief Technology OfficerSteven CHEONGSenior Vice PresidentHUMAN RESOURCETAN Nga KokSenior Vice President/DirectorLEGALLOW Meng WaiSenior Vice PresidentINFORMATION TECHNOLOGYTAN Hock HaiChief Information OfficerSTRATEGIC PLANSRobin THEVATHASANSenior Vice PresidentCORPORATE COMMUNICATIONSLina POASenior Vice PresidentDEFENCE BUSINESSLOW Yee KahSenior Vice PresidentSPECIAL PROJECTSParmesh SINGHExecutive Vice PresidentBUSINESS EXCELLENCEHarnek SINGHVice President/DirectorPROCUREMENTGOH Bak NguanChief Procurement OfficerSYSTEM ENGINEERGAN Boon JinChief System Engineer

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201123SEAH Moon MingDeputy CEO &President, Defence BusinessAEROSPACEELECTRONICSLAND SYSTEMSMARINECHANG Cheow TeckPresidentLEE Fook SunPresidentSEW Chee JhuenPresidentNG Sing ChanPresidentLIM Serh GheeChief Operating Officer &President, Defence BusinessLAU Thiam BengDeputy President, Operations &President, Defence BusinessGAN Boon JinChief Operating Officerfi& President, Defence BusinessHAN Yew KwangExecutive Vice President,Special ProjectsYONG Thiam ChongDeputy President, InternationalBusinessUS OPERATIONSEUROPE OPERATIONSJohn G COBURNChairman & CEOAugustine SYNSenior Vice PresidentADVANCED ENGINEERINGCENTREINTEGRATED SERVICESFONG Saik HayPresidentGOH Lik KokVice President/General Manager

24 SIMPLY SMARTERCORPORATEGOVERNANCEThe Board of Directors ofST Engineering is committed tomaintaining high standards of corporategovernance within the Group. Ourcommitment is founded in the beliefthat there is a link between goodcorporate governance and creatingsustainable long term value for ourshareholders and stakeholders. Goodcorporate governance is not only theBoard’s responsibility, but that of theentire organisation.This Report sets out ST Engineering’scorporate governance processes,practices and activities in 2011 withspecific reference to the guidelines ofthe Singapore Corporate GovernanceCode 2005 (Code).BOARD MATTERSBoard’s Conduct of its Affairs(Principle 1)The Board is accountable toshareholders for overseeing theeffective management of the business.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 reserves thefollowing matters for its decision: overall long term strategicobjectives; system where key potential risksfaced by the Group are properlyidentified and managed; budgets, major funding proposals,investment and divestmentproposals in accordance with theapproved delegation of authorityframework; President & CEO, Board changesand appointments on Boardcommittees; and half yearly and full year auditedresults prior to their release.Besides monitoring the performanceof the Group, the Board also providesguidance on sustainability issues suchas environmental and social factors, aspart of the overall business strategy.In the discharge of its functions, theBoard is supported by nine Boardcommittees to which it delegatesspecific areas of responsibilities forreview and decision making, andthe Executive Office. The ExecutiveOffice comprises the President &CEO; Deputy CEO; and the ChiefFinancial Officer (CFO). Boardmembers receive monthly consolidatedmanagement reports on the financialperformance of each business sector,capital commitments and significantoperational highlights.A formal letter is sent to a director uponhis appointment setting out his dutiesand responsibilities. A new director isalso given a briefing by the President& CEO on the strategic directionand performance of the Companyand its key subsidiaries. The Boardis routinely updated on the relevantlaws, continuing listing obligationsand accounting standards requiringcompliance, and their implicationsfor the Group, so as to enable eachDirector to properly discharge hisduties as Board and Board committeemember.Depending on their skillsets andbackground, directors are sponsoredfor relevant courses, conferencesand seminars in order that they canbe better equipped to fulfill theirgovernance role and to comply withdirectors’ obligations.The Board convenes scheduledmeetings on a quarterly basis tocoincide with the announcement ofthe Group’s quarterly results. Adhocmeetings are convened as andwhen necessary to review the Group’sperformance, and/or to deliberateon specific issues. To facilitate theBoard’s decision-making process,the Company’s Articles of Associationprovides for Directors to participate inBoard meetings by teleconference orvideo conference. The Chairman hasa second or casting vote. Decisions ofthe Board and Board committees mayalso be obtained via circulation. TheBoard monitors the performance of theGroup through its Board committees.The number of Board and Boardcommittee meetings held during theyear is tabulated on the following page.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201125Type of Meeting No. of Meetings Attendance Average (%)Board 488%Audit Committee 5 93%Business Investment and Divestment Committee – –Executive Resource and Compensation Committee 2 100%Nominating Committee 3 100%Senior Human Resource Committee 1 75%Risk Review Committee 4 85%Budget and Finance Committee 2 87%Research, Development and Technology Committee 3 100%Tenders Committee * ** Decisions were made via circular resolution.Minutes of the Board Committee meetings are made available to all Board members.Board Composition and Guidance(Principle 2)The Board comprises 11 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 independentperspective based on his training andexpertise to make balanced and wellconsidered decisions.The Chairman of the Board is Mr PeterSeah, an independent non-executivedirector. Mr Seah was appointed to theBoard on 15 April 2002 as Chairman.As an independent director, Mr Seahis free from any relationship withthe executive management of theCompany that could materially interferewith the exercise of his independentjudgment.The President & CEO is Mr Tan PhengHock, who is an executive director.Save for Mr Tan Pheng Hock, theremaining ten directors are nonexecutivedirectors.The Board has six independentdirectors. The independence ofeach director is determined uponappointment and reviewed annually bythe Nominating Committee (NC). TheNC has affirmed that the independentdirectors are Mr Peter Seah, MrKoh Beng Seng, Mr VenkatachalamKrishnakumar, Mr Davinder Singh, DrStanley Lai and Mr Khoo Boon Hui.The NC is of the view that each of theindependent directors is independent incharacter and judgment.The Board has, at all times, exercisedindependent judgment in decisionmaking, using its collective wisdomand experience to act in the bestinterests of the Company. Any directorwho has an interest that may conflictwith a subject under discussion by theBoard either recuses himself from theinformation flow and discussion of thesubject matter or declares his interestand abstains from decision-making.The Board held a total of four meetingsduring the year, to consider amongother things, the approval of theFY2010 results and release of 1Q2011,2Q2011 and 3Q2011 results.Chairman and Chief Executive Officer(Principle 3)The Chairman and President & CEOroles and responsibilities are keptseparate in order to maintain effectiveoversight. No individual or small groupof individuals dominates the Board’sdecision making process. The President& CEO and senior managementregularly consult with individual Boardmembers and seek the advice of

26 SIMPLY SMARTERCORPORATE GOVERNANCEmembers of the Board committeesthrough meetings, telephone calls aswell as by electronic mail.The Chairman, Mr Peter Seah, isresponsible for the proper functioningof the Board and acts independentlyin the best interests of the Companyand its shareholders. The Chairmanfacilitates the relationship betweenthe Board, President & CEO andmanagement, engaging them inconstructive discussions over variousmatters, including strategic issuesand business planning processes. Heensures that discussions at the Boardlevel are conducted objectively andprofessionally where all views are heardand key issues are debated in a fairand open manner. The Chairman alsoensures that adequate time is providedfor strategic issues. He represents theviews of the Board to the shareholders.The President & CEO is accountableto the Board for the conduct andperformance of the Group. He hasbeen delegated authority to makedecisions within certain financial limitsimposed by the Board. The President& CEO is supported in his work by theDeputy CEO, Mr Seah Moon Ming andthe CFO, Ms Eleana Tan Ai Ching in theExecutive Office.Board Membership and Evaluationof Performance (Principles 4 and 5)Supporting the Board are the followingBoard Committees: Divestment Committee Compensation Committee Technology Committee NOMINATING COMMITTEE (NC)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 nonexecutiveindependent directors.Mr Venkatachalam Krishnakumar isthe Chairman of the NC. The othermembers are Mr Peter Seah andDr Stanley Lai.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 experience.The NC reviewed and affirmed theindependence of the Company’sindependent directors and thecomposition and profile of Boardmembers in relation to the needs of theST Engineering Board.During the year, the NC conducted acollective assessment by the Board togauge the effectiveness of the Board’sperformance, the adequacy of theblend of skillsets and experience of theBoard, and the quality and timelinessof board and committee meetingagendas and papers submitted by theManagement. The review was internallyundertaken with each Director beingasked to complete a questionnaire.Their feedback was collated and sharedwith the Board. The review indicatedthat the Board continues to functioneffectively.The NC has also noted the list of otherdirectorships held by our directorstaking into consideration their principalcommitments. The NC is satisfied thateach of the directors is able to devotetime to the affairs of the Company.The NC is also responsible for renewaland succession plans to ensure Boardcontinuity. At each AGM, one thirdof the directors with the longest termin office since his last re-election isrequired to retire. A retiring director maysubmit himself for re-election. Underthis provision, Mr Peter Seah,Mr Tan Pheng Hock, Mr Koh BengSeng and Mr VenkatachalamKrishnakumar will retire. The retiringdirectors, being eligible, have offeredthemselves for re-election.Each of the retiring non-executivedirectors has confirmed that he doesnot have any relationship with his fellowdirectors nor with the Company andits substantial shareholders. Mr PeterSeah is a member of the TemasekAdvisory Panel of Temasek Holdings(Private) Limited. The Temasek AdvisoryPanel provides a platform for memberswho are industry leaders to sharetheir wealth of experience. It is not adecision-making body and hence suchan appointment does not interfere withMr Seah’s exercise of independentjudgment on the Board.The NC recommends that each of theretiring Directors be re-elected at theCompany’s forthcoming AGM.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201127The composition of the Board committees as at 31 December 2011 is tabulated below:Board MemberCMr TAN Pheng HockM M M M MMr KOH Beng SengLG NEO Kian HongDr TAN Kim SiewMr QUEK Tong BoonMr QUEK Poh Huat M MCMMr Venkatachalam KRISHNAKUMAR M M CMMr Davinder SINGH CMDr Stanley LAI Tze Chang* M M MMMr KHOO Boon Hui**COL ONG Ann Kiat+Audit Committee(established on 15/1/1998)Business Investment and Divestment Committee(established on 8/9/1997)Executive Resource and Compensation Committee(established on 6/12/1997)CNominating Committee(established on 4/12/2002)MBudget and Finance Committee(established on 5/1/1998)MResearch, Development and Technology Committee(established on 1/8/2003)CSenior Human Resource Committee(established on 16/1/1998)CMMRisk Review Committee(established on 7/12/1998)MCTenders Committee(established on 5/1/1998)Rolling list of any 3 Board DirectorsDENOTES:C – ChairmanM – Member+ Alternate director to LG NEO Kian Hong* Appointed Member of Research, Development and Technology Committee on 20 April 2011** Appointed Chairman of Risk Review Committee on 20 April 2011Access 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 President& CEO, the CFO, management andthe Company Secretary as well as theinternal and external auditors and therisk management team. The Board mayalso seek independent professionaladvice if necessary.The Company Secretary is responsibleto the Board for updating statutoryrecords and decisions of the Boardand, among other things, for ensuringthat interests by directors are properlydisclosed to the Board and SGXrespectively in a timely way. To assistthe Board with timely disclosures, anelectronic database system has beenintroduced for Board members to maketheir disclosures by electronic means tothe Company Secretary.The Company Secretary also ensuresthat board procedures are compliedwith. Board papers are sent to directorsat least three days prior to meetingsin order for directors to be adequatelyprepared for the meetings.

28 SIMPLY SMARTERCORPORATE GOVERNANCEREMUNERATION MATTERSProcedures for DevelopingRemuneration Policies (Principle 7)Level and Mix of Remuneration(Principle 8)Disclosure on Remuneration(Principle 9)The Executive Resource andCompensation Committee (ERCC)performs the role of the remunerationcommittee. The Committee comprisesMr Peter Seah as Chairman, MrVenkatachalam Krishnakumar and DrStanley Lai. The members of the ERCChave held senior positions in largeorganisations and are experienced inthe area of executive remunerationpolicies and trends.All the ERCC members areindependent non-executive directors.All decisions at any meeting of theERCC are decided by a majority ofvotes of the ERCC members presentand voting (the decision of the ERCCshall at all times exclude the vote,approval or recommendation ofany member who has a conflict ofinterest in the subject matter underconsideration).The ERCC’s role is to assist the Boardto carry out the following key dutiesand responsibilities: remuneration policy and service terms for seniorexecutives and approve equity-based incentiveshare awards remuneration structureThe ERCC met two times in 2011.Its key activities were centred onthe assessment and developmentof the senior management team,target setting, and the determinationof their 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.The ERCC reviewed and decided onconditional performance share awardsunder ST Engineering’s PerformanceShare Plan 2010 and Restricted SharePlan 2010 (collectively the “2010Share Plan”) to employees subject tocertain performance criteria as wellas Economic Value Added-basedincentives for senior executives.The ERCC made a determination ofthe achievement factors for the finalaward of shares to participants underST Engineering’s Performance SharePlan and Restricted Stock Plan(“RSP2000”) (collectively the “2000Share Plan”). RSP shares granted tonon-executive directors under the 2000Share Plan were vested and releasedin 2011 and new shares were issued.The 2000 Share Plan has since expiredand has been replaced with the 2010Share Plan.The Board has delegated authorityto the ERCC to determine theremuneration of the President & CEOand the senior management.During the year, the ERCC reviewedthe remuneration package for nonexecutivedirectors to consolidate thecash and shares components into anaggregate sum expressed as directors’fees for approval at the AGM. Thefees to be paid to Board members aresubject to approval at the AGM.The Directors’ Fee policy is tabulatedon page 29.Remuneration benefits for keyexecutives comprise a fixedcomponent, a variable component,benefits and a share-basedcomponent. The fixed componentcomprises the base salary andcompulsory employer contributionto an employee’s CPF. The variablecomponent includes the MonthlyPerformance Bonus (which is 1/12 ofthe 13th month salary), PerformanceTarget Bonus and Economic ValueAdded or EVA earned for the year. Keyexecutives in the Group have individualEVA banks which are earned accordingto a formula computed based onthe Group’s and /or Sectors’ EVAperformance. The EVA earned for theyear is added to the balance carriedforward in each of the executive’s EVAbank. One-third of the total is paid out,with the balance two-thirds carriedforward to the next year. A negativeEVA earned will result in a clawback ofEVA earned in previous years.The benefits provided are comparablewith local market practices.The share-based componentcomprises the performance shareawards and restricted share awardsunder the respective approved shareplans. Contingent shares are granted toexecutives subject to key performanceindicators (KPIs) being met over aspecified performance period.The Group has tabulated a summarycompensation table for key executivesfor the year ended 31 December 2011.This table is found on page 31.The Senior Human ResourceCommittee, chaired by Mr PeterSeah, comprises LG Neo Kian Hong,Dr Tan Kim Siew and Mr Tan PhengHock. The Committee reviewed thetalent management and leadershipdevelopment initiatives to build aleadership pipeline for the Group.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201129By supporting and directing the Group’stalent management and leadershipinitiatives, the Committee has helpedto enhance the process of identificationand development of talents to begroomed for senior positions. TheCommittee has also reviewed thesuccession plans for key managementpositions in the Group.DIRECTORS’ FEE POLICYDirectors’ fees are approved in arrearsby shareholders for services renderedthe previous year. For 2011, a portionof the directors’ compensation willbe paid out to certain non-executivedirectors in the form of restrictedshare awards pursuant to the STEngineering Restricted Share Plan2010 (“RSP2010”). In the past, nonexecutivedirectors had been grantedshare awards under the terms of theRSP2000 which has since expired.These share awards (which havebeen disclosed in previous AnnualReports) were granted in recognition ofthe contributions made by the nonexecutivedirectors to the success ofthe Group, and were not directly linkedto directors’ fees.Under the new RSP2010 approvedby shareholders at the 2010 AGM,we continue to award shares to nonexecutivedirectors. However, theseshare awards are now directly linked to,and form part of, their compensationwhich is subject to shareholders’approval annually. This move providesgreater transparency and enablesshareholders to have visibility and agreater say over the total compensationof non-executive directors. Payment ofpart of the directors’ compensation inthe form of shares aligns the interestsof our non-executive directors with thatof our shareholders.As these are shares awarded in lieu ofdirectors’ compensation in cash, theshares will be awarded outright as fullypaid shares and there will be no vestingperiod for the shares. The ERCC hasdetermined that 30% of a participatingnon-executive director’s compensationshall be paid in the form of shares.The number of shares to be awardedto a participating non-executive directorwill be determined by reference to thevolume-weighted average price of ashare on the SGX-ST over 14 tradingdays immediately following approvalfrom shareholders for the non-executivedirectors’ compensation at the AGM tobe held in 2012.The non-executive directors’compensation payable in respect offinancial year 2011 is proposed tobe $1,076,346, and comprises boththe cash component of $774,949(FY 2010: $833,540) and the sharescomponent of $301,397. Forcomparison purposes only, sharesawarded to non-executive directorsin recognition of their contributionsfor 2010 under the RSP2000 wereascribed a fair value of $308,937.The computation of the non-executivedirectors’ compensation is based onthe following fee policy rates:Basic RetainerFrom Private Sector$From Public Sector^$Director 72,000 11,250Additional/Committee Fees From Private Sector From Public SectorBoard Chairman 72,000 45,000Board Deputy Chairman / Audit CommitteeChairman / Executive Committee Chairman50,000 33,750Other Committee Chairman / Audit CommitteeMember / Executive Committee Member29,000 22,500Other Committee Member 14,000 11,250Attendance FeesPer Board Meeting 2,000 –Per Board Committee Meeting 1,000 –^Fees to directors who hold public sector appointments follow the Directorship & Consultancy Appointments Council (DCAC)’s guidelines.Non-executive directors who hold public sector appointments follow DCAC guidelines and will not be eligible for the sharescomponent of the non-executive directors’ compensation. 100% of their compensation in cash is payable to DCAC, whereapplicable.

30 SIMPLY SMARTERCORPORATE GOVERNANCESUMMARY COMPENSATION TABLE FOR DIRECTORS FOR THE YEAR ENDED31 DECEMBER 2011 (GROUP):Name of DirectorSalary *1$Variable *2$Benefits *3$Share-basedCompensation *4$Directors’ Total Fees *5Cash-based$Share-based *6$Total$Taxable Incomefrom exercise ofshare options in2011 *7$Executive Director:(a)TAN Pheng Hock 1,132,398 3,147,878 166,516 794,557N.A. 5,241,349 259,925Non-Executive Directors:Peter SEAH Lim Huat – – – – 181,300 77,700 259,0004,339KOH Beng Seng – – – – 93,100 39,900 133,00014,575LG NEO Kian Hong – – – – 19,375 (b) N.A. 19,375–Dr TAN Kim Siew – – – – 19,375 (b) N.A. 19,375–QUEK Tong Boon – – – – 26,063 (c) N.A. 26,063–Winston TAN Tien Hin – – – – 69,914 (c) (d) 29,963 (c) (d) 99,877 5,550QUEK Poh Huat – – – – 125,300 (c) 53,700 (c) 179,000 13,860Venkatachalam KRISHNAKUMAR – – – – 126,000 54,000 180,00011,985Davinder SINGH s/o Amar Singh – – – – 87,500 37,500 125,000–Dr Stanley LAI Tze Chang – – – – 140,547 (c) 60,234 (c) 200,781 –KHOO Boon Hui – – – –(b) (c)38,750N.A. 38,750–COL ONG Ann Kiat(Alternate to LG NEO Kian Hong)––––––––1,132,3983,147,878166,516794,557927,224352,9976,521,570*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2011.*2 Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or former AWS paid over 12 months), Performance Target Bonus paid &EVA earned* for the financial year ended 31 December 2011.* The EVA earned for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1∕3 of the total is paid out, with the balance 2∕3carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have hadindividual EVA Bank since the late 1990s.*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc.*4 Based on the fair values of PSP and RSP Contingent shares granted in 2011, using the Monte Carlo simulation model. Contingent shares granted are subject tokey performance indicators (KPIs) being met over the performance period. The performance period for PSP is 2011-2013 and for RSP, it is 2011-2012 for TANPheng Hock. The final number of shares awarded to TAN Pheng Hock will depend on the extent the KPIs are achieved at the end of the respective performanceperiods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP. Since 2009, the contingent awardsfor PSP are also conditional upon the KPIs for RSP that has the same end of performance period being met, i.e. PSP ending 2013 having met its KPIs will onlybe awarded if RSP ending 2013 also meets its KPIs.*5 The directors’ cash fees and share awards will only be paid/granted upon approval by the shareholders at the forthcoming AGM of the Company.*6 The awards granted under ST Engineering Restricted Share Plan (“RSP”) to all Directors, except TAN Pheng Hock, are outright shares with no performancenor vesting conditions but with a Moratorium on selling. NEDs are required to hold shares (including ST Engineering shares obtained by other means) up to1 x Annual Base Retainer ($ Cap). NEDs can dispose of all shares if they so desire after a year has elapsed from the time they left the Board.*7 Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to theincome statement.(a) Fees payable to TAN Pheng Hock of $231,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd.(b) Fees for public sector directors are payable to a government agency, the DCAC.(c) Includes fees for directorship in subsidiary(ies).(d) Pro-rated. Mr Winston Tan retired on 20 April 2011.310,234The following information relates to remuneration of directors of Singapore Technologies Engineering Ltd:Number of Directors in Remuneration Bands 2011 2010$500,000 and above 1 1$250,000 to $499,999 1 1Below $250,000 10 11Total 12 13

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201131SUMMARY COMPENSATION TABLE FOR KEY EXECUTIVES FOR THE YEAR ENDED31 DECEMBER 2011 (GROUP):Fees$Salary *1$Variable *2$Benefits *3$Share-basedCompensation *4$Total$Taxable Incomefrom exerciseof share optionsin 2011 *5$Between $3,250,000 and $3,500,000Seah Moon Ming 24% 57% 4% 15% 100% 66,150Between $2,750,000 and $3,000,000Chang Cheow Teck 21% 65% 3% 11% 100% –Lee Fook Sun 16% 70% 3% 11% 100% 5,400Between $2,500,000 and $2,750,000Ng Sing Chan 14% 69% 4% 13% 100% –Between $1,500,000 and $1,750,000Sew Chee Jhuen 26% 50% 5% 19% 100% 163,200*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2011.*2 Variable includes Monthly Performance Bonus (which is 1/12 of the 13th month salary or former AWS paid over 12 months), Performance Target Bonus paid &EVA earned* for the financial year ended 31 December 2011.* The EVA earned for the year is added to the balance carried forward in each of the executive’s EVA Bank. 1∕3 of the total is paid out, with the balance 2∕3carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have hadindividual EVA Bank since the late 1990s.*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc.*4 Based on the fair values of PSP and RSP Contingent shares granted in 2011, using the Monte Carlo simulation model. Contingent shares granted are subjectto key performance indicators (KPIs) being met over the performance period of 2011 – 2013 for PSP and 2011 – 2012 for RSP. The final number of sharesawarded will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of the contingentgrants for PSP and 0% to 150% of the contingent grants for RSP. Since 2009, the contingent awards for PSP are also conditional upon the KPIs for RSP thathas the same end of performance period being met, i.e. PSP ending 2013 having met its KPIs will only be awarded if RSP ending 2013 also meets its KPIs.*5 Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to theincome statement.

32 SIMPLY SMARTERCORPORATE GOVERNANCEACCOUNTABILITY AND AUDITAccountability(Principle 10)The Board is responsible for providinga balanced assessment of theCompany’s performance, position andprospects. In presenting the annualfinancial statements and quarterlyresults announcements to shareholderspromptly, it is the aim of the Board toprovide the shareholders with a detailedanalysis, explanation and assessmentof the Group’s performance, position,risk review and prospects.Directors are required to issue aNegative Assurance Statement toaccompany the Company’s interimfinancial results announcement. For thispurpose, certain internal procedureshave been put in place to enableeach member 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.The appointment of auditors is subjectto approval at each AGM. In making itsrecommendations to shareholders onthe appointment and re-appointment ofauditors, the Board relies on the reviewand recommendations of the AC.KPMG LLP in Singapore auditsSingapore incorporated subsidiariesthat are not exempt from audit underthe Singapore Companies Act.Subsidiaries incorporated in countriesoutside Singapore that require an auditin their local jurisdictions are largelyaudited by other independent memberfirms of the KPMG network affiliatedwith KPMG International Cooperative,a Swiss entity. Some of our overseasassociates and jointly controlled entitieswhich engage other auditing firms donot constitute a significant number.The names of the auditing firms of oursubsidiaries, associates and jointlycontrolled entities are disclosed atpages 168 and 174 of this AnnualReport. The Company has compliedwith Rules 712, 715 and 716 of theSGX Listing Manual in relation to theengagement of its auditors .Directors and key senior executivesof the Group are prohibited fromdealing in ST Engineering shares twoweeks before the announcementof ST Engineering’s first quarter,second quarter, third quarter andfull year results up to the date of theannouncement of the results. Directorsare discouraged from trading on shorttermconsiderations. Additionally, alldirectors of the Group and employeesare reminded not to trade in situationswhere the insider trading laws and ruleswould prohibit trading.The directors’ interests in shares ofST Engineering and its relatedcompanies during the year are foundon pages 89 to 101 of this Report.Audit Committee(Principle 11)The AC is supported in its work by theaudit committees of the four businesssectors. The respective chairmenof the audit committees of the fourbusiness sectors are invited to attendthe AC meetings of ST Engineering soas to have a clear understanding ofpolicies made at the holding companylevel and to share any feedback orraise any issue that the sectors’ auditcommittees may have.The AC has full authority to commissionand review findings of internalinvestigations into matters where itis alerted of any suspected fraud orirregularity or failure of internal controlsor infringement of any law likely tohave a material impact on the Group’soperating results. It can investigateany matter within its terms of referenceand with the full cooperation ofmanagement.The AC’s key terms of reference includethe following:regulatory functions of an AC as areprescribed by law from time to time;and internal auditors to providea further layer of assurance ofthe integrity, confidentiality andavailability of critical information;transactions;auditors and recommending to theBoard their re-appointment andcompensation on an annual basis;andservices.The Company has in place a Whistle-Blowing framework, where staff may,in confidence and without fear ofretaliation, raise concerns of incidentsof possible wrongdoing or breachof applicable laws, regulations orpolicies to the respective chairmen ofthe audit committees in the Group.As ST Engineering has become aglobal company with a presence inmany countries, it is aware of theneed to apply international corporategovernance standards wherever itoperates. It takes a serious view ofall reports of violations received byinitiating thorough investigations intoeach matter.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201133The AC comprises Mr Koh BengSeng as Chairman, Mr VenkatachalamKrishnakumar and Dr Stanley Lai.All the members of the AC areindependent directors.The AC held five meetings during theyear. In the meeting in February 2011,AC had private sessions with theexternal and internal auditors, withoutmanagement, before commencementof the meeting. During the year, theAC reviewed and recommended tothe Board the release of the 2010 fullyear, 1Q2011, 2Q2011 and 3Q2011financial statements, and consideredand approved the 2011 Audit Plan andthe 2011 Internal Audit (IA) Plan. Inaddition, the AC reviewed the adequacyof internal control procedures includingIT security issues, Interested Persontransactions and the issues raised inIA reports.The AC reviewed the level of non auditservices performed by its externalauditors to satisfy itself that non auditservices performed by the auditors didnot compromise their independenceunder regulatory requirements. For thefull year 2011, $4,975,000 was paid tothe external auditors for audit and nonauditservices, of which $1,629,000 or33% were for non-audit services.The AC is routinely updated on theproposed and impending changesin accounting standards and theirimplications for the Group.Internal Control (Principle 12)Internal Audit (Principle 13)The AC oversees and appraises thequality of the Company’s IA function.The Board, through the AC and theRisk Review Committee, is responsiblefor oversight of the risk managementresponsibilities, internal controls andgovernance processes delegated toManagement.The IA supports the AC in reviewingthe adequacy of the Company’sinternal control system. Staffed byqualified auditors, IA has unrestricteddirect access to the AC. The Head ofIA’s primary line of reporting is to theChairman of the AC, although shereports administratively to the President& CEO of the Company.IA plans its internal audit schedules inconsultation with, but independently of,management. The IA Plan is submittedto the AC for approval at the beginningof each year. The AC also meets 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 audit reportsare submitted to the AC for deliberationwith copies of these reports extendedto the relevant senior management,for prompt corrective actions, asrecommended. Furthermore, IA’ssummary of findings, recommendationsand updates on management actionstaken are discussed at the quarterlyAC meetings.During the year, IA worked withManagement to align newly acquiredcompanies to the Group’s internalcontrol environment and compliancestandards in order to strengthen theself-regulating checks and balances.IA also made periodic visits to overseassubsidiaries to review their operationsto ensure compliance with the internalcontrols framework. An externalaccounting firm was engaged to assistIA. In accordance with its plan, surpriseaudits were conducted in the courseof the year on selected areas includingtreasury activities and reviewing ofdormant bank accounts against bankmandates, bank statements, balances,etc. There were no material issueshighlighted following the surpriseaudits.There were no significant control issueshighlighted by IA in 2011.The IA continued with its systemof rating a company at the end ofan internal audit for the purpose ofdifferentiating the high risk issues whichrequire immediate attention.The Board, with the concurrence ofthe Audit Committee, is satisfied thatthe Company’s framework of internalcontrols and procedures is adequateto provide reasonable assuranceof achieving its internal controlobjectives and addressing financial,operational and compliance risks.The Board is satisfied that problemsare identified on a timely basis andfollow up actions are taken promptlyto minimise unnecessary lapses. TheBoard, through the board committees,is supported in these areas by theInternal Audit and Risk Managementteams of the Company.

34 SIMPLY SMARTERCORPORATE GOVERNANCERisk Review CommitteeThe Risk Review Committee (“RRC”),chaired by Mr Khoo Boon Hui,comprises LG Neo Kian Hong, MrDavinder Singh, Mr VenkatachalamKrishnakumar and Mr Tan Pheng Hock.a) Risk GovernanceThe RRC assists the Board in its riskgovernance responsibility. RRC’s roleis one of oversight of the responsibilitydelegated to Management to ensurethat there is a system of controls inplace for identifying and managing riskin order to safeguard stakeholders’interests and the Company’s assets.The RRC is supported by the GroupRisk Management Team (“GRMT”),headed by SVP, Risk Management,working with the Sector Chief RiskOfficers from each of the followingbusiness sectors:(1) Aerospace(2) Electronics(3) Land Systems(4) MarineThe Head of GRMT reports tothe Chairman of the Risk ReviewCommittee and ST Engineering’sPresident & CEO. The GRMT providesleadership in the implementationof a Group-wide Enterprise RiskManagement (“ERM”) Framework thatallows risks to be identified, assessed,monitored and managed by thebusiness managers.b) Risk Review ProcessUnder the ERM framework, a riskdashboard of the top 15 business risks(comprising the key inherent risks thatmay impact the business objectives) isdeveloped and maintained by each ofthe significant business units, rolling upinto a summary dashboard for each ofthe four business sectors – Aerospace,Electronics, Land Systems and Marine.Once the top business risks areidentified, measures will then betaken to develop and implement riskpreventive and mitigation actions(collectively known as “controls”)and risk monitoring processes. Thebusiness managers are required toperiodically review the effectiveness ofthe controls implemented, and initiatenecessary changes as the risk profilechanges.Quarterly, the Sector Chief Risk Officersand the Presidents review with theRRC, their respective dashboardof top 15 business risks. At themeetings, the Presidents and SectorChief Risk Officers would discussthe risk management action plansand measures to address these topbusiness risks. At the same time,the Presidents and Sector ChiefRisk Officers would also highlight thefollowing for discussion:1. Emerging trends and issues in eachbusiness sector2. New risk or changes to existing riskprofile3. New risk incident4. Major risk exposures5. Risk Management actions taken onpreviously identified risksThe Committee met four times duringthe year with management.c) Risk Management Self AssuranceProcessThe Risk Management Self Assuranceis a process whereby the business riskowners, together with the respectivecontrol owners, evaluate and assessthe operational effectiveness of thecontrols established to manage the keyrisks that are reported in Sector RiskDashboard.On the basis of this self assessment,the Sector President makes an annualwritten representation on the overallstate of the risk management systemfor managing the top business risks,to the RRC.For more information on the Company’sprincipal inherent risks, and riskmanagement framework, please referto the “Risk Management Section”at page 65 of this Annual Report formore details.System of Internal Control andRisk ManagementThe Board receives, at regular intervals,updates from the Board committees onthe key business risks identified throughthe Group’s ERM framework, thecontrols to manage these risks, and theinternal audit reports on the operationaleffectiveness of the controls.The Board is satisfied with the riskmanagement process in place, and, inits opinion, that the effectiveness andadequacy of the controls have beenappropriately reviewed through themanagement self assurance process,as well as the independent assuranceprovided by the Company’s IA Functionand the External Auditors.Budget and Finance CommitteeChaired by Mr Davinder Singh, theBudget and Finance Committeemembers include Mr Quek Poh Huat,Dr Tan Kim Siew and Mr Tan PhengHock.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.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201135During the year, the Budget andFinance Committee held two meetingsto review the FY2011 budgetassumptions and 5-year forecast. TheCommittee also met to review the 2012Plan and recommended it to the Boardfor approval.Business Investment andDivestment CommitteeThe Business Investment andDivestment Committee comprisesMr Peter Seah as Chairman, LG NeoKian Hong, Mr Quek Poh Huat andMr Tan Pheng Hock. The Committeeis delegated authority by the Board toconsider investments and divestmentsup to certain threshold values and toensure that investments/divestmentsare in line with the Group’s strategy.During the year, no potentialinvestments/divestments within thethreshold authority of the Committeewere contemplated.COMMUNICATION WITHSHAREHOLDERS(Principles 14 and 15)The Company enters into regularand timely communication withshareholders as part of the Group’seffort to help shareholders betterunderstand its businesses and toobtain feedback on the views andconcerns of shareholders.The Group has a comprehensiveinvestor relations programme aimedat providing existing and potentialinvestors with comprehensive andtimely information, to enable them tohave a better understanding of theGroup’s businesses, direction andperformance.ST Engineering maintains a regularlyupdated website which providesthe latest announcements to SGX,news releases and highlights ofcorporate events of each sector and itscapabilities.In 2011, ST Engineering’s investorrelations team held close to 200face-to-face investor meetings andconference calls, and participated ininvestor conferences in Singapore,Hong Kong and US.ST Engineering is committed to timelyand transparent disclosures to ensurethat the investing community receivesa balanced and updated view of theGroup’s performance and businesses.Board members attended the AGMand EGM in 2011 where shareholderspresent were given an opportunity toseek clarification or question the Boardon issues pertaining to the resolutionsproposed before they were voted on.The external auditors were also presentat the AGM to assist the directors inanswering questions on audit relatedmatters from shareholders.The Company fully supports theCode’s principle to encourageactive shareholder participation. Fortransparency in the voting process,ST Engineering has, since 2010,adopted the use of electronic pollvoting for all the resolutions put to voteat its AGM and EGM. This is a fair andtransparent way of voting compared tovoting by show of hands as it enablesshareholders to vote on the principle ofone share one vote. ST Engineering willcontinue to use electronic poll voting atthe forthcoming AGM. More on investorrelations can be found on pages 50to 51.Financial and other information aremade available on the Company’swebsite at www.stengg.com and theseare regularly updated.

36 SIMPLY SMARTERSUSTAINABILITYST Engineering defines sustainabilityin line with many of the world’sleading corporations, and that of UN’sBrundtland Commission, that is to‘meet the needs of the present withoutcompromising the ability of futuregenerations to meet their own needs’.ST Engineering believes thatsustainability is about our performanceon the triple bottom line – People(Social), Planet (Environment) andProfit (Economic).Sustainability is about PeopleOur employees, customers andpartners make up the People.Our employees are our greatestresource. We foster a committed andengaged workforce through continuouslearning, an equitable recognitionsystem and a conducive culturethat embraces our core values andappreciates resilience and innovation.Our customers dictate our success.We deliver high levels of satisfactionthrough value creation, quality productsand systems, and exemplary services.Our partners help us extend our marketreach. We build positive and longterm relationships with our partnersto ensure continual improvement inthe delivery of quality products andservices to our customers.Sustainability is about the PlanetWe hold the environment in trust forfuture generations and are committedto conducting our business in anenvironmentally-friendly manner.Sustainability is about ProfitA business cannot exist withoutcreating economic value. We createvalue for our shareholders throughprudent risk management and goodgovernance practices.Sustainability management is thereforehow we integrate the management ofeconomic, environmental and socialperformances with the goal of creatingvalue for our stakeholders.OUR APPROACH TOSUSTAINABILITY MANAGEMENTIn ST Engineering, we implement theBusiness Excellence Framework withthe aim of achieving our sustainabilitygoals. ST Engineering’s BusinessExcellence Council was establishedin early 2007 to provide direction andoversight on the Business ExcellenceFramework, and review the results ofour sustainability performance.The Business Excellence Council ischaired by the President & CEO, withthe Deputy CEO as Deputy Chairman.Supported by its six componentcommittees, the Council providesguidance, decides on new projects,and approves budget allocations.A major goal of the Council is to ensurethat the principles of sustainabilityare incorporated within businessdecision-making to achieve positiveand sustainable outcomes for allstakeholders including businesses,employees, unions, the environmentand the community at large.The Council meets at least twice ayear, while its component committeesmeet at least four times a year. Thecommittees are chaired by membersof the senior management team,and involve management staff fromall business areas. Annually, thecommittees publish the results of theirinitiatives and performance, and sharethem at a Business Excellence seminarwhich employees are invited to attend.Our efforts in the areas of innovation,the environment, workplace safety andpeople excellence are detailed in thenext few pages.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201137THE BUSINESS EXCELLENCE COUNCILChairmanPresident & CEO(ST Engineering)Business ExcellenceSecretariatDeputy ChairmanDeputy CEO(ST Engineering)Business Foresight Committee(1) Identify and analyse emerging risks andopportunities (including sustainabilityissues) that are material to the Group(2) Review and update the Group’s visionand mission statements, as well as itsCore ValuesCustomer Excellence Committee(1) Foster a customer centric culture thatinculcates a ‘customer first’ mindset(2) Establish and implement customerexcellence practicesTechnology, IPR & Innovation Committee(1) Identify key technological trends, analysetheir impact on sustainable growth, andrecommend new areas for businessgrowth(2) Promote and manage innovative andcreative efforts within the GroupPeople Excellence & Learning OrganisationCommittee(1) Foster a committed and engagedworkforce(2) Develop and maximise the potential ofour employees(3) Build a healthy pipeline of talent andleaders for sustainable growthEnvironment, Health & Safety Committee(1) Promote and share good practices in –(a) managing and enhancingoccupational health and safetyperformance at our workplace(b) managing the environmental impactof our activities, products or services,and improving our environmentalperformance(c) implementing system safety into ourproducts and services(2) Establish and implement frameworksfor compliance with environmental,occupational health and safety laws,regulations, and industry/internationalstandards (including those relating toproduct system safety)Corporate Social Responsibility Committee(1) Review the impact of local andinternational practices and trendson the Group’s corporate socialresponsibility and sustainability; andmake recommendations to the Councilregarding these matters(2) Promote the awareness of the currentand future impact of our actions on theenvironment and community(3) Develop and implement projects toincorporate our ideals of sustainabilityinto the business operations and thelives of our employees

38 SIMPLY SMARTERINNOVATIONA CATALYST FOR GROWTHST Engineering’s unrelenting focuson innovation earned us a placeon Forbes’ list of the World’s 100Most Innovative Growth Companies.To promote innovation across theGroup, we encourage employees toconstantly challenge conventions,explore new ideas and implementinnovative ideas. Various forums serveas platforms for employees to suggestnew products and services, bounceideas off senior management, and tohone their proposals in the process.Promising ideas are then sponsored bythe relevant business units. Given theGroup’s global footprint, our innovationforums in Singapore are seeingincreased interest and participationfrom our overseas subsidiaries. Forexample, our US-based subsidiary,VT LeeBoy, emerged as one of thewinners in the annual ST EngineeringIdea Competition. Its innovationinvolved converting the existing ForceFeed Loader into a Sand Shark toclean oil-contaminated beaches. Thiswas done within a short time in urgentresponse to the Gulf of Mexico oil spillin 2010.ST Engineering’s innovation effortsare steered by the Technology, IPand Innovation Committee, one of sixcomponent committees of the Group’sBusiness Excellence Council. Chairedby the Group’s Chief TechnologyThe Sand Shark cleans oil-contaminated beaches.Officer, the committee ensures thatwe stay at the forefront of technologyand maintain a competitive edge in ourstrategic capabilities. The committee’sobjectives include promoting andmanaging innovative and creativeefforts, identifying emerging technologytrends and analysing their impact onthe sustainable growth of the Group,and recommending new businessgrowth areas.PATENTING TO SHARPENINNOVATIONThe Group’s robust intellectualproperty rights framework protectsour investments in technology andideas through patents.We view patenting as an importantpart of the process that helpsST Engineering stay ahead of theinnovation curve. Every patent wefile contributes to our ability to offeran attractive business and valueproposition. At the technologydevelopment level, patenting providesa framework for our engineers toconsider the business case whendeveloping a product. When weventure into various markets, patentingprovides the assurance that we will beable to differentiate our products andprotect our intellectual property. It alsoassures our customers the uniquenessof our products.40mm Low Velocity Air Bursting Munitions System.ENGINEERING BETTERPARTNERSHIPS THROUGHINNOVATIONThe innovation process helps us tofocus on our customers’ needs andthe challenging environments in whichthey operate. The following examplesexemplify our efforts to be a valuepartner to our customers throughinnovative engineering:New 40mm SolutionsST Kinetics is a world leader in 40mmgrenade solutions, from its completefamily of grenade launchers to itsbattle proven range of low and highvelocity 40mm munitions. We recentlydeveloped two new first-in-the-worldproducts in this class: the 40mm LowVelocity Air Bursting Munitions System(40mm LV ABMS) and 40mm LowVelocity Extended Range (40mm LV ER)munitions.The 40mm LV ABMS transforms theexisting standard low velocity 40mmgrenade launcher into a low costprecision weapon by adding aprogramming unit and air burstingmunitions. It provides pinpoint accuracyin engaging with dismounted troopsand targets on rooftops, behindwindows and behind alleys, targetswhich could not be engaged withtraditional point impact munitions.The 40mm LV ER munitions can befired from all low velocity grenadelaunchers in the market and allowtroops to engage the enemy at arange of up to 600m instead of thestandard 400m. Quicker engagementis also possible due to shorter flighttime and better hit probability with aflatter trajectory. The innovative designachieves these with a recoil forcenot significantly different from that ofstandard 40mm low velocity rounds.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201139Hangar Capacity ExtensionHangars are an integral infrastructureinvestment for the maintenance, repairand overhaul (MRO) business of theAerospace sector. Through out-of-theboxthinking, a team comprising staffwith diverse professional backgroundcame up with a cost effective idea toincrease hangar capacity for widebodyaircraft without the need forland acquisitions and other capitalinvestments. The use of a lightweight, semi-transparent, moveablestructure gives us the flexibility to makeslots available to service aircraft ofdifferent sizes while maintaining ourhigh standards in safety and aircraftprotection.FBG sensor used in AgilFence PIDS.The proprietary AgilFence PIDSwith intelligent signal processingwas developed by ST Electronicsbased on fibre sensor technologylicensed from its research partner,the A*STAR Institute for InfocommResearch. The AgilFence PIDS wascustomised to meet the uniqueoperational requirements ofSingapore Changi Airport.specific areas to be customised toachieve a higher probability of detectionwhile reducing the possibility of falsealarms triggered by weather elementsand wildlife along the perimeter.Modular HoverbargeThe 50-tonne modular Hoverbargewas developed by ST Marine incollaboration with its subsidiary,Hovertrans Solutions. When off hover,the Hoverbarge floats on water like astandard marine barge. When hovering,it is able to traverse swamps, mud,shallow water and rivers in remoteareas where heavy lift is required. Ithas a large deck area for payloadand is scalable up to over 2,000tonnes. Applications include cargotransportation, oil exploration & drillingand ice breaking.Hangar capacity extension.Fibre Sensor Technology forPerimeter Fence SecurityIn August, the Changi Airport Groupand ST Electronics’ wholly ownedsubsidiary, ST Electronics (Satcom& Sensor Systems), announced acollaboration to implement a PerimeterIntrusion Detection System (PIDS) tostrengthen airfield security at SingaporeChangi Airport. This is the first timethat Fibre Bragg Grating (FBG) sensortechnology is being used for perimetersecurity enhancement anywhere inthe world.Unlike non fibre sensor technologies,the performance of the AgilFencePIDS is not affected by factors such aselectromagnetic and radio frequencyinterference. Also, the high pinpointingaccuracy of the AgilFence PIDS allowsoptimal deployment of closed circuittelevisions around the perimeter fence.The unique signal processing algorithmof the system allows FBG sensors at50-tonne modular Hoverbarge can be split into separate units.The uniqueness of the 50-tonneHoverbarge is its modular designconsisting of ISO-container sizeindividual watertight modules, peripheraldetachable skirt frames and lift fansystem. The modular design enablesthe Hoverbarge to be split into separateunits and trucked to a location where itcan then be assembled on-site.

40 SIMPLY SMARTERPRODUCTIVITYDRIVING PRODUCTIVITYFOR STRONGER BUSINESSPERFORMANCEimprovement is a continuous effort byall. We see productivity as a means forevery employee and business to reachtheir optimum level of performance.This is achieved through better use ofour resources, from equipment andtechnology to the skills, knowledge andteamwork of our people. Productivityis also about how effectively theseresources are translated into high qualitygoods or services at a lower cost, toensure delivery of our Value Propositionfor customers.The Group’s Business ExcellenceCouncil provides the leadership andadopts a holistic people engagementframework for its sub-committees toidentify opportunities and projects. Theframework is built on four strategies –Leadership Involvement, Communicationand Facilitation, Learning andDevelopment, and Rewards andRecognition – and provides theenvironment for active participationby employees across the Group. Thebusinesses’ Productivity/EVA SteeringCommittees set the pace and identifycritical drivers to focus on and monitor.ENGAGING OUR WORKFORCEIn 2011, more than 80% of employeescontributed to productivity initiatives.Exemplary contributions are recognisedthrough best practices, Kaizen andEVA project sharing sessions, valueinnovation projects, the annual TeamExcellence Convention, GLOW Awardsand Top Kaizen Awards. Annually,the best teams and individuals areacknowledged through theST Engineering Innovation Awards,ST Engineering Idea Awards andThe Terrex.ST Engineering Team ExcellenceAwards at the ST Engineering BusinessExcellence Seminar. There is also aconcerted effort to build upon theharmonious relationship betweenmanagement and the unions. Unionrepresentatives participate actively inproductivity initiatives as an opportunityto contribute to employee and businesssuccess.A prime example of how our employeeswork together to improve workprocesses is the Terrex StationInstallation Process. The Terrex,which is in service with the SingaporeArmed Forces’ fi rst motorised infantrybattalion, is designed and developedby ST Kinetics and production iscurrently underway. During production,it was observed that the establishedprocesses at a particular station wherethe vehicle suspension was installedwere time-consuming and diffi cult.Engineers and technicians workedtogether to analyse the installationprocess and identify steps forimprovement. Since workers found itdiffi cult to lift, align and install the heavyand bulky components directly onto thevehicle, jigs were introduced to addressthe lifting problem and alignmentwas done on alignment tables priorto installation. These improvementsyielded a 36% reduction in installationtime at the station and made theprocess much safer.DELIVERING OUR VALUEPROPOSITIONOur productivity initiatives focusprimarily on improving existing productsand processes to increase the valueadded to customers directly, or onservice or work processes to reducethe time it takes to complete a taskwithout compromising quality. In 2011,we achieved a 96% turnaround timecompliance.Knowledge of our market, customers,industry trends and competitors allowsus to identify what we must do. Thistriggers EVA, Kaizen, Innovation andR&D projects, as well as ThinkoutSessions that help us stay abreastof advances in technology. In doingso, we are able to improve ourproducts and processes, enabling ourcustomers’ success. In 2011, customersatisfaction levels averaged 98%.Attesting to this is the signifi cantvalue created by ST Aerospace

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201141for long-standing customer FedExExpress. ST Aerospace has redeliveredhundreds of MD11 ‘C-Checks’to FedEx Express over the years.A ‘C-Check’ typically consists ofextensive series of work, inspections,modifications, manufacturers’Service Bulletin/Engineering Order/Airworthiness Directive compliance,troubleshooting and rectifications,operational and functional checks andassessment flight tests. In an effort toadd value, ST Aerospace formed anexperienced team of managers, aircraftengineers, planners, controllers, materialcoordinators, quality inspectors andservice engineers to reduce turnaroundtime from 25 days to 18 days.The resulting improvements haveachieved the target, and the reductionin aircraft downtime has increasedthe availability of MD11 aircraftfor FedEx Express and raised itsbusiness capacity.Similarly, cohesive teamwork andproductivity enabled ST Electronicsto overcome challenges in its projectfor Resorts World Sentosa (RWS).ST Electronics was responsible forconceptualising and implementing theSurveillance & Security, Trunk RadioNetwork, Network and StructuredCabling Infrastructure, Intelligent CarParks, Data Centres and SurveillanceMonitoring Systems for RWS.FedEx Express’ MD11 programme.The team adopted a systematicconcurrent engineering approach,working closely with RWS and multiplestakeholders to address issues suchas changes in requirements, sitechallenges and timely manpowerdeployment to ensure seamlessintegration of the various sub-systemswithin the delivery schedule. The team’scommitment helped ensure the safeand efficient operation of the integratedresort. The project clinched thePrestigious Engineering AchievementAward 2010 from the Institute ofEngineers Singapore for outstandingengineering skills and significantcontributions to engineering progressand the quality of life in Singapore.GENERATING PRODUCTIVITYSAVINGSOur focus on smart cost managementand capital effectiveness includesreducing unnecessary complexity tosave costs and using our cash andassets more effectively. This allows usto incorporate productivity improvementin our annual performance incentives,e.g. assigning a higher weightage toon-target Value Added/EmploymentCost (VA/EC) to recognise the effortsof those who champion productivity.In 2011, people engagement activitiesgenerated productivity savings inexcess of $50m for our businesses.Receiving the Prestigious Engineering AchievementAward.Using a Bobcat for the grit cleaning process.ST Marine has a track record of drivingproductivity improvement through suchactivities, and implemented severalprojects during the year that loweredenergy costs, increased capacity andenhanced productivity. These includedthe use of purpose-built Bobcatsinstead of bulldozers to improve theeffectiveness and efficiency of the gritcleaning process. This yielded a 13%reduction in manhours as well as animproved cycle time allowing faster dockpreparation for the next vessel.The Marine sector is moving theexisting Diesel Workshop for engineservice and repair work to a differentlocation. The new workshop will allowtwo additional engines (a total of eight)to be overhauled at any one time. Anadditional shiprepair transfer bay willbe created on the existing site, therebyincreasing the Benoi Yard’s shiprepaircapacity. These changes are expectedto contribute to revenue growth.

42 SIMPLY SMARTERWORKPLACEHEALTH & SAFETYST ENGINEERING’S ENVIRONMENT, HEALTH AND SAFETY (EHS)STATEMENT:We are committed to protecting the environment, and the health and safetyof our customers, employees and the communities where we operate in.We will fulfil this commitment by:1. Complying, as a minimum, with existing EHS laws and legislation in all ouroperations.2. Integrating EHS into all our key business activities – design, development,manufacturing, upgrading, engineering services, integration, maintenance,servicing, repairs, overhaul and support of our products and services.3. Conducting operations in the most efficient manner to reduce environmentalimpact and to ensure that wastage of any form and pollution emissions arecut to the minimum.4. Promoting EHS consciousness and responsibility among our employeesand the communities where we operate in.5. Working with suppliers to comply with all EHS regulations.6. Seeking continuous improvement through proactive hazard identification,elimination, control and regular reviews.7. Setting realistic and achievable EHS targets and monitoring ourperformance against the targets so as to enable continual improvement.IMPROVING SAFETY ACROSSSECTORSSafe practices are of paramountimportance to our operations.The Group adheres strictly to EHSstandards, and complies with theWorkplace Safety and Health Actand the Singapore Standard Codeof Practice. All four business sectorshave implemented the EnvironmentManagement System certified toISO 14001:2004. Additionally,ST Aerospace, ST Electronics andST Kinetics are certified toOHSAS18001, while ST Marine’s SafetyManagement System is rated to level 8based on DNV’s ISRS rating system.The Group EHS Committee, underthe Business Excellence Framework,has maintained a cross-sector SafetyAssessment to enhance learningand sharing of good practices inoccupational safety since 2009.In 2011, the Group EHS Committeeconducted detailed studies of accidentstatistics in the different sectors. It alsocarried out quarterly benchmarkingexercises in focus areas including thefollowing: in constrained work environments handling and suspended loads stands, cranes and elevatedstructures methods, effectiveness ofmeasurements such as keyperformance indicators (KPIs) andfollow-up, as well as supervisorymethods such as staff training anddeploymentOur Workplace Safety and Health(WSH) efforts earned several industryaccolades during the year. BothST Kinetics and ST Marine won theWSH Innovation Award. In addition,ST Marine clinched the WSHAward for Supervisors as well asthe WSH Innovations in the MarineIndustry (Gold) from the Associationof Singapore Marine Industries.ST Electronics received the WSHPerformance Award (Silver) and theLTA Certificate of Excellence forOutstanding Performance in EHS. Atthe Association of Aerospace Industries(Singapore) Singapore AerospaceAwards 2011, ST Aerospace won theSingapore Aerospace Workplace Safetyand Health Award.We continue to emphasise SystemSafety, an integral component of theGroup EHS Committee’s efforts whichaddresses the safety features of ourdesign and products. In 2011, thevarious business sectors focused onintegrating Military Standard MIL-STD-882D Process into major programmesand projects. This Standard is a widely

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201143recognised System Safety Processthat provides a consistent means ofevaluating and identifying risks. Thechecklist in the Standard includes: support hazard analysis acceptanceAmong the initiatives introducedto support System Safety wereKPIs to drive System Safety in allbusiness sectors and to encouragelearning and participation in SystemSafety training. We also launched aSystem Safety Checklist for SystemSafety considerations to be built intoprogrammes upfront.In order to build a culture thatinternalises System Safety, weorganised various educational coursesfor our employees and held workshopsfor selected partners.ENCOURAGING HEALTHY LIVINGThe Group EHS Committee organisedvarious programmes and activitieson a regular basis to improveoccupational health. These includedhealth screenings, audiometric testing,occupational health risk assessmentsand follow-up care for at-risk individuals.To build up the competency ofemployees’ occupational health, weheld seminars and in-house training forour employees. Learning and sharing ofbest practices across sectors werealso encouraged.PROMOTING SAFETYAWARENESS IN THE COMMUNITYOur efforts to promote WSH extendbeyond our own operations. As arecognised role model in WSH,we are occasionally invited to shareour experiences. This year, President& CEO Tan Pheng Hock delivereda presentation at the 3rd BusinessExcellence Global Conference at thePlenary session on StrengtheningCapabilities: A key enabler forOrganisational Sustainability.Additionally, ST Engineering jointlyorganised the Safety@Work CreativeAwards with the WSH Council. Intoits seventh year, the objectives of theAwards are to develop young artistictalent, raise awareness of workplacesafety among tertiary students, and,through their posters and digitalanimations, reach out to the widercommunity. The winning posters andanimation clips are reproduced andmade available to industrial companiesas resources for safety training.Winners of Safety@Work Creative Awards 2011.

44 SIMPLY SMARTERTHE ENVIRONMENTMAKING OUR BUSINESS GREENST Engineering continues on ourgreen journey, working on reducingour energy consumption and carbonfootprint. All sectors are ISO 14001certified, and we have completed aproject with an external consultantto implement our Carbon Footprintinitiative in accordance with ISO14064:2006 (Standard for GreenhouseGases) for the Group’s companies inSingapore. Our next goal is to do thesame for our overseas companies,targeting to do so in 2012.As part of our ISO 14064 process,we conducted a workshop to helpemployees better understand theimportance of carbon reduction, wherewe discussed carbon identification andscoping, carbon footprint measurementsand computations, and identification ofcarbon abatement levers.The various business sectors continueto work on reducing their electricityconsumption. All business sectorsare at different stages of replacing thelighting and water chillers at their plantswith more efficient alternatives. Forexample, ST Aerospace is replacingtheir air compressor and ST Electronicsis upgrading their air compressorin its Ang Mo Kio facility and theCooling Tower system in its JurongEast facility. Since installing electricalpower controllers at some facilities,ST Synthesis and ST Kinetics haveachieved cost savings of 20% and arenow exploring installing them at morefacilities. Separately, ST Synthesisinstalled smart electrical meters tomeasure the consumption profile of thefacilities it manages for more precisemonitoring and better management ofpower consumption. ST Aerospace,ST Electronics and ST Kinetics are inthe process of following suit.One of the two upgraded CNC Underwater PlasmaCutting Machines installed in Benoi Yard.In the Marine sector, we have replacedacetylene gas with environmentallyfriendlyCNG in plate cutting operations,yielding savings of about $370,000 peryear. In addition, progressive conversionof existing lighting on ST Marine’spremises to Prismalence boosters andupgrading of plasma cutting machineshas resulted in power savings of over75% and 60% respectively. For theplasma cutting machines upgrade,we received a grant from Singapore’sNational Environment Agency (NEA).ST Marine also utilises NEWater in itsship ballasting process, resulting insavings of over $80,000 a year, andis in the process of implementing WetAbrasive Blasting on some vesselsdocked for shiprepair, a method whichis less pollutive. In an ongoing effortto greening its facilities, ST Kineticsplanted another 2,100 trees and shrubsduring the year.The Group has appointed an “EnergyEfficiency Manager” in each sector.After undergoing training andcertification by NEA, these managerswill lead the various energy efficiencyinitiatives in their respective sectors.We recognise that the quest for CarbonReduction is not a one-off exercisebut a continuous activity. Our greeninvestments will take into accounttechnological maturity and commercialviability at any given point in time,and re-investments may occur whenmore energy efficient systems becomeavailable. As a Group, we are in themidst of planning our carbon reductionjourney and setting targets up to 2020.We are committed to engaging ouremployees in environmental efforts.In line with this objective, we organiseda mass event during the year, planting950 trees at Punggol Promenade on29 October.One of 950 trees planted during our Tree-Planting Day.MAKING GREEN OUR BUSINESSIn addition to reducing our owncarbon footprint, the Group is helpingcustomers around the world tomanage their operations in a moreenvironmentally-friendly manner. Forexample, the Land Systems sector,through its wholly owned subsidiaryin Canada, Kinetics Drive Solutions,partnered Cargotec to introduce theworld’s first production-ready hydraulicdrive hybrid terminal tractor.In Asia Pacific, our electric and hybridelectric drivetrain components arewinning business in Korea, Singaporeand Taiwan. We also made ourpresence felt in the area of green publictransportation. In China, our subsidiary,Kinetics Systems Shanghai, is growing

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201145The Group is involved in a number of projects in Tianjin Eco-City.its long-standing collaboration withbus OEMs to provide electric andhybrid electric buses in GuangzhouKnowledge City, Qingdao and TianjinEco-City. Our other sectors have beenactive in Tianjin as well. On 8 July,ST Electronics was awarded a contractby Sino-Singapore Tianjin Eco-CityInvestment & Development Co., Ltdto supply an integrated renewableenergy system for Tianjin GEMS WorldAcademy. The company will implementsolar heating and geothermal energywhich will provide heating, while miniwind turbines and solar photovoltaicpanels will generate electricity withinthe school. In addition, the energymanagement system and interactiveenergy wall display designed byST Electronics will integrate therenewable energy harvested andeducate students about energyconservation.At the same time, we signed an MOUto participate in the Low Carbon LivingLab (LCLL) within the Eco-BusinessPark in Tianjin. This building will be aplatinum-rated office building underthe Tianjin Eco-City’s Green BuildingEvaluation Standards. The first of itskind, the LCLL is positioned as a ‘LivingLab’ test-bed and to demonstrategreen building features and buildingtechnologies in energy saving, carbonfootprint reduction and other areas.Completion is expected to be in 2013.In June, ST Marine’s environmentalengineering arm, STSE, set up abranch office in Tianjin to executeand manage the RMB113m contractsigned in September 2010 for theprovision of a proprietary loop-basedPneumatic Waste Collection Systemto collect recyclables, non-recyclablesand food waste in Tianjin Eco-City’sEco-Business Park. The team hascompleted laying the piping system.STSE has also been busy with projectssecured elsewhere in the region overthe last four years. These includeinstallation and testing of the equipmentfor the Waste Transfer Station inDonghu Newtech Zone in China’sWuhan, Hubei, and partial operationof the Integrated Waste ManagementFacility in Sungai Paku, Brunei. Whencompleted in 2012, the 110-hectareEngineered Landfill at Sungai Paku willbe one of the largest in Asia.ST Electronics, together withAccenture, is in the process ofdelivering Phase 1 of the IntelligentEnergy System (IES) pilot project forthe Energy Market Authority (EMA).This pilot will be conducted intwo phases. Phase 1 will focuson implementing the enablinginfrastructure for the IES. Theseinclude key infrastructure components;advanced metering infrastructure(commonly referred to as smart meters)and its communication system. Thisintegrated smart grid will provideconsumers with more information,choice and control over their electricityusage, thereby improving energyefficiency for Singapore.

46 SIMPLY SMARTERPEOPLE EXCELLENCEST Engineering seeks to create anenvironment that helps employeesrealise their potential and gives us acompetitive advantage. A robust HRplanning process ensures that we havethe talents to achieve our strategicobjectives, while the People Excellenceand Learning Organisation componentof our Business Excellence Frameworklooks into enhancing areas such aslearning and development, employeeengagement and work life balance.As part of our effort to reinforce apositive organisation culture,ST Engineering signed the Employer’sPledge of Fair Employment Practicesin 2008.TALENT RECRUITMENT ANDMANAGEMENTTo attract talents, we offer fair rewards,competitive remuneration andopportunities for career and personaldevelopment. We also award overseasand local scholarships to GCE ‘A’Level and equivalent graduates, aswell as mid term local undergraduate,polytechnic and institute of technicaleducation scholarships. In 2011, weawarded 55 scholarships to Singaporecitizens and permanent residents,and hosted 565 interns from localpolytechnics and universities.To support our expansion overseas,we offer scholarships to students fromtop universities in China and India. In2011, 19 scholars from China and eightfrom India interned with us, gainingindustry experience and getting toknow Singapore and the Group.Advocating lifelong learning, wesponsored 43 staff to further theirstudies. We also invested $15.9m instaff learning and development, andregistered employees for a total of2,255 training places in governmentfundedprogrammes.To build up a pool of systemsengineers, the Group has sponsoredmore than 60 staff since 2002, forthe Master of Defence Technologyand Systems Programme. Jointlyconducted by the National Universityof Singapore and the US NavalPostgraduate School, it equipsparticipants with knowledge in keydefence technologies and providesa networking platform.We provide opportunities for ourpeople to fulfil their career aspirations.Employees may move up the generalmanagement track or progress alongthe engineering specialist path. Thosewho are versatile may move betweenboth tracks. Meanwhile, our openresourcing policy facilitates movementacross business units, helping to retaintalent within the Group.We reward individual contributionswith competitive remuneration andperformance-based pay and bonuses.Senior executives are grantedperformance-based shares with KPIsthat drive productivity and profitability.LEADERSHIP AND SUCCESSIONTo develop leaders at all levels, ouronline self-assessment tool, theLeadership EnhAncement Portal(LEAP) allows employees to draw uptheir Personal Development ActionPlan based on their preferred learningstyle. Besides mentorship androtations across departments, selectedemployees have their leadershipcompetencies assessed by externalconsultants. Selected senior employeesare sent to executive educationprogrammes in renowned overseasuniversities such as Harvard, Stanfordand INSEAD.As the Group expands globally, aconscious effort is made to equip ouremployees to operate in and leadculturally diverse business units, forexample through overseas postings.We also identify potential successorsto key positions which are critical to theGroup’s success. Development plansare then drawn up to prepare them fortheir future roles.EMPLOYEE ENGAGEMENT ANDWELFAREOur Employee Information Portal isthe main platform to communicate theGroup’s vision, mission, values andbusiness thrusts. Information on theCompany’s performance, directionsand plans is communicated throughquarterly dialogue and twice-yearlyforums by the sector Presidents.Other Group-wide communicationchannels include the biennial EmployeeOpinion Survey, newsletter and e-StaffSuggestion Scheme.At the operational level, managementbriefings and toolbox meetings addressday-to-day operational issues, whilesafety and quality briefings highlightspecific issues and the lessons learnt.Recognising deserving employees ispart of our corporate culture. Examplesare ST Aerospace’s GLOW Awardsand ST Kinetics’ Spot On Awards.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201147The radio-controlled car club is one of ST Kinetics’ hobbies mini-clubs for employees.ST Marine also acknowledgesemployees who have excelled in theirstudies, served society in a significantway or contributed internally throughKaizen projects. ST Electronicsengages its staff in Value InnovationActivities, the Exploration/IncubatorFund Scheme, Business InnovationCompetition and Patent Awards.We emphasise work life harmony forour employees, providing fitness/workout, sports and recreationalfacilities in the workplace. Each sectorhas a committee that oversees staffwellness and organises programmessuch as health screenings and talks,as well as recreational and competitivesporting activities. The Group alsosupports a range of recreationalinterests, for example throughST Aerospace’s quarterly Music &Food Festival and ST Kinetics’ Mini-Clubs for hobbies.In 2011, ST Electronics introduceda portal to create awareness on theimportance of work-life balance. Theportal also highlights various activitiesavailable to help employees achievethat balance. Meanwhile, ST Marinesupported the Health PromotionBoard’s Roadshow, Eat with YourFamily Day, No Tobacco Day and ToolsDown Day.HARMONIOUS UNION RELATIONSIn addition to joint activities such as theNational Day Observance Ceremony,the sectors maintain good relations withtheir unions through various initiatives.To encourage union members’ childrenin their studies, ST Electronics annuallycontributes $5,000 to the Union’sScholarship Award. ST Marine supportsthe Super V Programme, a jobre-creation initiative jointly developedby the Association of Singapore MarineIndustries, National Trades UnionCongress (NTUC) and the SingaporeWorkforce Development Agency.Recognising that mature employeesstill have much to contribute, the Groupimplemented a re-employment policy,ahead of proposed legislation.Such efforts regularly earn usrecognition. In 2011, ST Aerospaceand ST Kinetics received the NTUC 50Model Partnership Award, presentedto institutions which help create amore inclusive workforce by improvingproductivity and sharing gains, investingin workers’ skills and promoting anenlightened employment approach.Employees playing games during ST Marine’sTools Down Day.

48 SIMPLY SMARTERPEOPLE EXCELLENCEHUMAN RESOURCE STATISTICSAS AT 31 DECEMBER 2011SECTORGEOGRAPHY8%3%MarineOthers (includingST Synthesis andST Dynamics)19% Americas34% Aerospace

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201149COMMUNITY RELATIONSCARING FOR THE COMMUNITYEmployees of ST Engineering continuedto contribute to the community,donating funds and volunteering theirtime to various causes. Donations fromemployees during the year included acontribution of over $360,000 to thePresident’s Challenge. We also donatedto the victims of the Japan Earthquakethrough the Singapore Red CrossSociety. With the Company matchingdollar for dollar, over $230,000 wascontributed in total.Employees from the various businesssectors visited homes for the aged andthe underprivileged, and organisedoutings and activities for residents.On top of these visits and outings,many took part in other charity events.For example, 14 employees fromST Marine participated in the TerryST Aerospace employees with residents from the Moral Home for the Disabled at the Marina Barrage.Fox Run in support of cancer victims.Separately, 61 employees fromST Kinetics, including its President,shaved their heads in Hair for Hope,raising over $36,000 for the Children’sCancer Foundation.ST Electronics employees on a visit to theAdventist Home For The Elders.ST Kinetics employees getting ready to shave theirheads for charity.We continued our partnership withCare Corner, where our employeesinteract with at-risk teenagers toinspire, guide and mentor them. Weorganised activities for the youths,such as visits to our facilities, careertalks, motivational lectures and talks onengineering products. The objectives ofsuch programmes are to exposethe youths to more life choices andthe means to go about achievingtheir life goals.In addition to employee-led efforts, ourindividual businesses did their part tobe good corporate citizens. In 2011,ST Aerospace contributed $10,000 tothe U Care fund, a fund raising effort bythe National Trades Unions Congressto help low-income families, needychildren and the elderly. ST Electronics(Info-Comm Systems) organised its25th Anniversary Charity Golf Challengein November and raised $74,000 forST Marine employees with Care Corner youths onthe Singapore Flyer.the Breadline Group, an all-volunteerwelfare group committed to helping theelderly and destitute in Singapore.ST Marine fulfilled the wish of a sevenyear-oldboy with epilepsy who wishedfor a ‘Rifton Activity Chair’, throughMake-A-Wish Foundation Singapore.Meanwhile, ST Marine continuedto be an active supporter of sailingactivities at the SAF Yacht Club, havingsponsored the ST Marine Regattasince 2008. This year, we sponsoredthe Club’s Get-Kids-Afloat programmewhich introduces sailing to studentsaged seven to 17. Many sailors fromthis programme have gone on torepresent Singapore in competitivesailing at the international level.

50 SIMPLY SMARTERINVESTOR RELATIONSST Engineering places a high priority onkeeping relevant regulatory bodies andstakeholders informed of our corporatedevelopments. We comply withcapital market laws and regulations,and communicate frequently andconsistently with our stakeholdersincluding shareholders, investors,financial analysts and the media.Our proactive Investor Relationsteam keeps investors updated onour businesses, and helps themunderstand the strategies and anychallenges the Group may face.We are committed to discloseinformation in a timely and transparentmanner to the marketplace.We hold quarterly results briefings,which analysts and the media areinvited to attend in-person or througha live webcast. Like all press releases,the results presentation slides are alsoposted on our website.During the year, the Investor Relationsteam held face-to-face meetingsand conference calls with over 200analysts, institutional investors and fundmanagers. The team also participatedin nine investor conferences held inSingapore, Hong Kong and the US.In addition, we organised regularvisits to our facilities to provide furtherinsights into our business operations.During the year, 17 analysts visitedand toured the aerospace facilities andAnalysts on a visit to ST Aerospace’s facilities, receiving updates from the management.were provided with Aerospace sectorupdates.Our stock is currently well-coveredby 16 sell-side analysts, and westrive to continue to enhance theirunderstanding of the Group’s businessand strategies.As an active player in the globalfinancial markets and a leadingcorporate player in Singapore,ST Engineering aims to be knownfor our spirit of good corporategovernance. The Group’s commitmentto transparency is recognised by theinvestment community. ST Engineeringis one of only two companies listed inthe Most Transparent Hall of Fame bythe Securities’ Investors Association ofSingapore (SIAS).In reaching out to retail investors,ST Engineering continues to supportSIAS’s quest in promoting investoreducation. We remain a proud sponsorof the SIAS Investor EducationProgramme, with the aim of helping toequip the investing community with theright knowledge to make well-informedinvestment decisions.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201151INVESTOR RELATIONS CALENDAR HIGHLIGHTS 20111st Quarter 2011 briefing 2nd Quarter 2011 briefing (Singapore) of 4.0 cents per share and a specialdividend of 7.55 cents per share forthe year ended 31 December 2010 (Singapore) (Singapore) 3rd Quarter 2011 briefing dividend of 3.0 cents per share for (Singapore) Corporate Day (Singapore) Kong)4th Quarter 2011 briefing (Singapore)ST ENGINEERING AVERAGE WEEKLY SHARE PRICE AND TRADING VOLUME 2011Trading Volume(millions)454025 AprEx-date for the paymentof 2010 final dividend of11.55 cents per share.8 AugEx-date for the paymentof 2011 interim dividendof 3 cents per share.Share Price($)3.83.6353.4303.2253.0202.8152.6102.452.20JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC2.0PriceVolumeSource: BloombergST ENGINEERING SHARE PRICE HISTORY2011 2010 2009 2008 2007High $3.40 $3.47 $3.25 $3.66 $3.98Low $2.63 $3.05 $2.06 $1.99 $3.10Average* $3.00 $3.25 $2.61 $2.90 $3.59* average closing prices of active trading days for the yearSource: Bloomberg

52 SIMPLY SMARTERAWARDS &COMMENDATIONSEach award that the Group wins –whether it is from our customers, theinvestment community or the industrieswe are in – affirms that we are on theright track and encourages us to doeven better. As with previous years,2011 saw us receive a number ofaccolades including the following:QUALITYWorld Class Winner of theGlobal Performance ExcellenceAwards 2011Organisation category by Asia PacificGreen IT Award by SingaporeSingapore Aerospace SupplierExcellence Award by Association ofAerospace Industries (Singapore) –ST Aerospace’s subsidiary, PrecisionProducts ServicesFrost and Sullivan MRO of the YearAward – ST AerospacePRODUCT EXCELLENCESingapore Aerospace Innovationand Productivity Leadership Awardby Association of Aerospace Industries(Singapore) – ST AerospacePresident & CEO Tan Pheng Hock (first from left) receiving the Global Performance Excellence Award.IES Prestigious EngineeringAchievement Award 2011 byInstitution of Engineers Singapore– ST ElectronicsASEAN Outstanding EngineeringAchievement Award 2011 by ASEAN– ST ElectronicsMAN Asia Pacific Best Importer2011 and Best Bus Performance2011ST Kinetics, the first distributor inAsia Pacific to be presented withtwo awards at the same timeAward. ST Aerospace, ST Electronics(Info-Software Systems) andST Kinetics and its subsidiary,received the Meritorious HomeTeam Partner AwardCommunity Chest SHARE Award2011 (Platinum) – ST Aerospace andsubsidiaries STA Engineering,STA Engines, STA Services andSTA Systems; ST Electronics andsubsidiary, ST Electronics (Info-Software Systems); and ST KineticsEngineeringSingapore Service Class Awardby national standards and accreditationbody, Spring Singapore –ST EngineeringTrainAir Plu Award by InternationalCivil Aviation Organisation –ST Aerospace’s subsidiary,STA AcademyCORPORATE SOCIALRESPONSIBILITYMinistry of Home Affairs Awards2011 – ST Electronics (Info-CommSystems) received the Minister’sHonours Roll while ST Electronicsthe Minister for Home AffairsCommunity Chest SHARE Award2011 (Gold) – ST Aerospace’ssubsidiary STA Supplies, ST Electronicsand subsidiaries ST Electronics(e-Services), ST Electronics (Info-CommSystems), ST Electronics (Trainingsubsidiary Singapore Test Services

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201153Community Chest SHARE Award2011 (Silver) – ST Electronics (SatcomTotal Defence Awards 2011Singapore received the Minister forDefence Award. STA Engines,ST Electronics (Info-Comm Systems),ST Electronics (Info-Software Systems),ST Electronics (Info-Security),Systems), ST Electronics (e-Services);ST Kinetics and subsidiaries, AdvancedST Synthesis received theDistinguished Defence PartnerAward 2011. ST Aerospacesubsidiaries STA Services and STASupplies; ST Electronics (Info-SoftwareSystems) and ST Electronics (DataCentre Solutions); and ST Synthesisreceived the Meritorious DefencePartner AwardSCDF Strategic Partner Award 2011ST Electronics (Info-Software Systems)Associate of the Arts Awards byNational Arts Council – ST EngineeringNational Safety and Security WatchGroup Award (Cluster Award) byST Aerospace, ST ElectronicsPEOPLESingapore Aerospace HumanCapital Leadership Award byAssociation of Aerospace Industries(Singapore) – ST AerospaceWorkplace Safety & HealthInnovation Award by WorkplaceSafety and Health Council (WSHWorkplace Safety & HealthPerformance Awards (Silver)by WSH Council – ST Electronics14th Convention for WSHInnovations in Marine Industry(Gold & Bronze Awards) bySingapore Aerospace WorkplaceSafety and Health Award byAssociation of Aerospace Industries(Singapore) – STA Systems2011 Leaders Portfolio Awardfor Business Leader of the YearGovernment Technologies (US)Certificate of Excellence forOutstanding Performance inEnvironment, Health and Safetyand Certificates of Recognitionfor ‘Achieving more than 0.25million accident free man-hours’ bySingapore’s Land Transport Authority(LTA) – ST ElectronicsNTUC 50 Model Partnership Awards– ST Kinetics, STA SystemsCOMMUNICATIONSBronze Award for Best AnnualReport at Singapore CorporateAwards 2011Bronze Award, EngineeredIndustrial Products Categoryat the 2011 ARC Awards for its2010 Annual Report, ‘Innovate’

54 SIMPLY SMARTERFINANCIAL REVIEWSTEADY PERFORMANCE FOR THE GROUP IN FY2011Record high order book of$12.3b at end 2011 continuesto affirm our resilience andprovides greater visibility ofthe Group’s future revenue.The Group recorded comparableRevenue at $5.99b, while Profit BeforeTax (PBT) and Net Profit increased byrespectively. Return on Equity remainedregister steady performance despite thehighly uncertain and volatile economicenvironment.The year saw the Group completed anindustry and benchmarking study on thebasis and estimates on allowance forinventory obsolescence with the adviceof an external consultancy firm. Based onthe results obtained, the Group revisedthe obsolescence rates to align moreclosely to that of industry practices.The Group continued to record positiveand the Board is proposing to payshareholders a final dividend of12.5 cents per share. Together withthe 3 cents interim dividend per sharepaid in September 2011, a total of15.5 cents of dividends per share willAEROSPACEELECTRONICSRevenue ($m)Revenue ($m)FY 20111,920FY 20111,4811,8711,389Profit Before Tax ($m)Profit Before Tax ($m)FY 2011278.2FY 2011136.9262.2127.6in CERO whilst more project milestone completionsallowance for inventory obsolescence following therevised inventory allowance estimates, higher contributionfrom associated companies and lower finance costs, net,but these were partially offset by higher administrativeexpensesbusiness groups contributed to the higher revenuewas mainly due to milestone completions of the LTA’s CircleLine project, the half height platform screen doors projectand Bangkok automatic fare collection system projectsGroup was mainly due to higher sales of satellite communicationproducts as well as milestone completions of an electronicssystem project and various communication projectsattributable to milestone completions of various softwaresystem projectsof allowance for inventory obsolescence as a result of therevised inventory allowance estimates, but these were partiallyoffset by higher operating expenses and share of loss from anassociated company

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201155FY 2011 EBITDA BY SECTORFY 2010 EBITDA BY SECTOR2%17% 17%AerospaceElectronics40% 42%18% 20%Land SystemsOthers23% 21%LAND SYSTEMSMARINERevenue ($m)Revenue ($m)FY 20111,480FY 20118761,5061,044Profit Before Tax ($m)Profit Before Tax ($m)FY 2011108.1FY 2011121.8113.9118.0group was largely offset by higher sales of the Automotiveand Services, Trading and Others business groupsmix, but this was partially offset by lower foreign exchangelosses and favourable fair value change of embeddedderivativeshigher Shiprepair and Engineering revenuecontract termination, while buoyant repair activitiescontributed to the higher Shiprepair revenuesales from environmental engineering businessLegend:

56 SIMPLY SMARTERFINANCIAL REVIEWFINANCIAL POSITIONwas $139m or 2% marginally higher than that of31 December 2010. The higher total assets were mainlydue to increases in property, plant and equipment,inventories and work-in-progress as well as other assets.These were partially offset by decreases in trade receivables,deposits and prepayments, as well as cash and cashequivalents and short-term investments.Total Assets Deployment ($m)During the year, the Group incurred capital expenditure of$189m (2010: $333m). About 68% or $128m of the totalcapital expenditure was investments in new capacity andcapability. Additional capital expenditure included purchasesof rotable components to support the growth in Maintenanceby-the-Hour(MBH TM ) programmes in Europe, Taiwan andJapan, investments in training aircraft and simulator inAustralia and Singapore for the Multi-Crew Pilot Trainingprogramme, toolings for engine facilities in Singapore andXiamen, infrastructure for a data centre project as well asredevelopment of Jalan Boon Lay facilities in Singapore.80007,2687,407Capital Expenditure70006000Cash and CashEquivalents &Short-Term InvestmentsBy Sector10% 2%5000400030002000Trade Receivables,Deposits & PrepaymentsInventories &Work-in-ProgressProperty, Plant &Equipment30%39%AerospaceElectronicsLand SystemsMarineOthers1000Intangibles &Other Assets19%02010 2011By Geography13%6%Asia12%EuropeUSAOthers69%Replacement / New Capacity and Capability32%New Capacityand CapabilityReplacement68%

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201157Increase in capital employed to $7,407m as at end 2011 wasmainly attributable to higher shareholders’ funds includingnon-controlling interests, increases in trade payables andaccruals, as well as other liabilities, but these were partiallyoffset by a decrease in advance payments from customerslargely due to timing of contracts secured at end of the yearwith customer advances collected after year end.Capital Employed ($m)800070007,2687,407FOREIGN EXCHANGE MANAGEMENTAs the foreign exchange environment becomes more volatile,changes in foreign exchange exposure are monitoredmore closely. Through more frequent updates on cash flowprojection, hedging strategies are developed to respondto rapid changes of both business dynamics and foreignexchange market. During the year, USD was hedged at therate of $1.2957 against SGD, whilst the average book ratewas $1.2547.In addition, the four sectors have also entered into theInternational Swaps & Derivatives Association, Inc. (“ISDA”)agreements to allow hedging of longer dated foreignexchange position.600050004000300020001000EquityTrade Payables andAccrualsAdvance Paymentsfrom CustomersBank & Other BorrowingsOther LiabilitiesLIQUIDITY MANAGEMENTThe Group’s total cash and cash equivalents and short-terminvestments stood at $1.77b as at 31 December.To improve yield on the Group’s cash, the Group placed outmore funds with fund managers to invest in fixed incomeinstruments, largely in bonds. As at end of 2011, $403m wasinvested in fixed income instruments. The yield on the bondsfor FY2011 ranged from 1.33% to 4.08% per annum.02010 2011TREASURY MANAGEMENTThe Group has in place a robust treasury framework,with regular reviews to enhance its treasury policies andprocedures. Internal Audit also conducts audits on theTreasury division throughout the year.The Group adopted treasury best practices which includesegregation of front and back office duties, regular rotationof tasks to ensure proper checks and balances, as well asfamiliarise staff with the various tasks in the Treasury functionas part of business continuity planning.

58 SIMPLY SMARTERFINANCIAL REVIEWAVAILABLE LINESThe Group continued to build a diversified pipeline of bankingfacilities from various banks, which included banker’sguarantee and performance bonds, in addition to foreignexchange facility line to support the Group in differentbusiness segments and geographies.Sources of Fund20112010Bonds48% 52%48% 52%Bank LoansThe Group established a Reg S MTN Programme of US$1.2band made its maiden bond issue of US$500m in July2009. As at end 2011, the Group has unused MTN facilityamounting to US$700m.Banking Facilities2011$m2010$mLoans 1,696 1,706Interest Rates Swaps and CrossCurrency Swaps1,619 1,406Foreign Exchange 3,145 1,887Trade Finance 4,584 3,669Total available facilities 11,044 8,668Less: Utilisation (4,152) (3,765)Unutilised facilities 6,892 4,903Banking Facilities by GeographyThe sources of fund profile as at 31 December stayed largelyunchanged as compared to the year before. As at end of2011, 48% of the total borrowings was funded from capitalmarket bonds issuance and the balance 52% was raisedthrough bank borrowings.By Maturity2011201015%28%37%23%Within 1 yr 2 to 5 yrs >5 yrs48%49%As at end of 2011, more than 1 year borrowings including theUS$500m bonds (10-year) made up 85% of total borrowings.During the year, a $300m loan for a European subsidiary wasre-financed with a USD loan; 72% for 3 years and 28% within1 year.7% 1% SingaporeBy Currency20%USAEuropeOthers20112010USDEUR75% 20% 5%70% 26% 4%Others72%Borrowings were predominantly in USD and Euro to fund ouroperations in the US and Europe.By Fixed and Floating Rate2011201076% 24%89% 11%FixedFloatingIn the year, the Group re-financed some loans from fixed tofloating rates to reduce cost of funds, bringing the effectivecost of fund down from 4.12% to 3.83% per annum.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201159INTEREST COVER RATIOThe Group’s interest cover improved to 13.3 times. Theimprovement in interest cover was the result of improvedprofits and lower interest expense from re-financing somefixed rate to lower floating rate USD loan as well as favourableforeign exchange impact resulting from a weakened USD onthe USD borrowings.CASH FLOWSFinancingActivities(419)(415)20112010$m80014XInvestingActivities(397)(267)7006005004003002001000 0200920102011PBT before Associates/JV and interest expenseInterest expenseInterest CoverThe Group generated healthy operating cash flow of $586min 2011 and continued to be in a net cash position as atthe end of 2011. Compared to 2010, operating cash flowdecreased by $224m. This was mainly attributable to finalsettlement following the Ropax contract termination. Grossdebt/equity ratio improved marginally to 0.7 times.2011 2010 2009Gross Debt/Equity Ratio 0.7 0.8 0.9Operating Cash Flow ($m) 586 810 900Free Cash Flow ($m) 189 543 416Net Cash ($m) 405 442 31112X10X8X6X4X2XOperatingActivities(800) (600) (400) (200) 0 200 400 600 800 1000Operating ActivitiesIn FY2011, net cash generated from operating activitiesamounted to $586m, $224m lower than the $810m inFY2010. This was mainly due to less favourable workingcapital movements from negative variances in tradereceivables, advance payments from customers and othercreditors, accruals and provisions, but partially offset bypositive variances in advance payments to suppliers, progressbillings in excess of work-in-progress and trade creditors.Investing ActivitiesThe Group’s net cash used in investing activities of $397m inFY2011 was higher than FY2010 by $130m, mainly due tohigher investment in bonds, partially offset by lower purchaseof property, plant and equipment.Financing ActivitiesThe Group’s net cash used in financing activities of $419min FY2011 was comparable to FY2010; net cash used wasmainly for payment of dividends.586810$m

60 SIMPLY SMARTERFINANCIAL REVIEWTAX INITIATIVESTo foster economic growth and encourage innovations, manyof the countries which the Group operates in, offer tax breaksfor job creation and research and development. In Singapore,the government has initiated an enhanced productivityand innovation credit (“PIC”). In US, the government hasextended the tax credit for increasing research activities.These government incentives, particularly on research anddevelopment activities, pleasantly complement the Group’sinnovation drive and its diligent effort in pursuing incentives.The Group had benefited from various tax incentives fromtime to time and its effective tax rate was 17% (2010: 20%).Increasingly, we also see a global trend in which more TaxAuthorities in various parts of the world have stepped up theirscrutiny and tax enforcement efforts, particularly on transferpricing for cross border transactions. The Group recognisesthe inherent tax risk associated with its global operations inthe pursuit of growth. For continuing compliance with thetightened tax regulations and enforcement in the jurisdictionswhere the Group operates, management has reviewed andenhanced its compliance guidelines and procedures whileregular tax updates and training are provided to managementand employees in 2011.SIGNIFICANT ACCOUNTING POLICIESThe Group’s significant accounting policies are presentedin Notes to the Financial Statements, Note 3 (pages 117to 137). The Group has applied the same accountingpolicies and methods of computation in the preparationof the financial statements for the current reporting periodcompared with the audited financial statements as at31 December 2010, except for the adoption of all thenew and revised Singapore Financial Reporting Standards(“FRS”), that are mandatory for financial years beginning onor after 1 January 2011 as indicated on page 135, as wellas change in accounting estimates in allowance for inventoryobsolescence.Change in Accounting Estimates – Allowance forInventory ObsolescenceDuring the year, the Group engaged independent consultantsto perform an industry and benchmarking study on the basisand estimates (the “obsolescence rates”) used to determineallowance for inventory obsolescence. The study consideredthe industry practices of the four sectors and compared theobsolescence rates against industry peer companies. Based onthe results obtained, the Group has revised the obsolescencerates to align more closely with the industry practices.TOTAL SHAREHOLDER RETURNWith healthy cash flow generated from operating activities,the Group ended the year with $1.77b of cash and cashequivalents and short-term investments. Management willcontinue to recommend return of excess cash generatedfrom its operations to the shareholders. ST Engineering hadpaid an interim ordinary dividend of 3.0 cents per share toshareholders in September 2011 and would recommend toshareholders at the forthcoming Annual General Meeting afinal dividend of 12.5 cents per share. The total dividend pershare (DPS) for FY2011 will amount to 15.5 cents. Basedon the average share price of $3.06, the DPS of 15.5 centstranslates to a dividend yield of 5.1%.ST Engineering share price ended the year at $2.69, a 21.3%decrease in the share price compared to a year ago. Overthe same period, the STI Index retreated 17%. With dividendyield at 5.1%, ST Engineering shares generated a negativetotal shareholder return of 16.2% for its shareholders. Theshare price has since risen to $3.18 as at end February 2012,a 18% improvement over end December closing price of $2.69.Total Shareholder Return50403020100(10)(20)(30)(40)(50)26.7%4.9%21.8%5.2%(36.8%)(31.6%)41.8%4.7%37.1%9.6%4.4%5.2%5.1%(21.3%)(16.2%)2007 2008 2009 2010 2011Capital GainDividend Yield

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201161ECONOMIC VALUE ADDEDThe Group has generated yet another year of positive Economic Value Added (EVA). Group’s FY2011 EVA attributable toordinary shareholders of $405.0m was 10% or $35.3m higher than that achieved in FY2010 despite a higher Weighted AverageCost of Capital. The increase was driven mainly by improved earnings. Net Operating Profit After Tax (NOPAT) of $612.1m forFY2011 was 6% or $34.2m higher than FY2010, while capital charge was comparable to FY2010.EVA StatementNet profit before tax 620.6 583.4Adjust for:Share of results of associates and jointly controlled entities 34.6 44.1Interest expense 57.4 60.4Others 1.2 10.3Adjusted profit before interest and tax 713.8 698.2Cash operating taxes (Note 1) (101.7) (120.3)NOPAT - (a) 612.1 577.92011$m2010$mAverage capital employed (Note 2) 3,426.3 3,575.8Weighted average cost of capital (Note 3) (%) 5.9 5.7Capital charge - (b) (202.2) (203.8)EVA - [(a) - (b)] 409.9 374.1Non-controlling share of EVA (4.9) (4.4)EVA attributable to ordinary shareholders 405.0 369.7Unusual items (UI) losses /(gains) (Note 4) 2.9 (1.1)EVA attributable to ordinary shareholders (exclude UI) 407.9 368.6Note 1:Note 2:The reported current tax is adjusted for the statutory tax impact of interest expense.Monthly average equity plus interest bearing liabilities, timing provision and present value of operating leases.Major Capital Components:$mBorrowings 1,468.2Equity 1,672.6Others 285.53,426.3Note 3:Note 4:The Weighted Average Cost of Capital is calculated in accordance to ST Engineering Group EVA Policy as follows:i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 5.0% (2010 @ 5.0%);ii) Risk-free rate of 2.68% (2010 @ 2.61%) based on yield-to-maturity of Singapore Government 10 years Bonds;iii) Ungeared beta at 0.71 (2010 @ 0.69) based on ST Engineering risk categorisation; andiv) Cost of Debt at 4.21% (2010 @ 4.17%) using actual cost of debt of the borrowings in US, Europe, China and Singapore.UI refer to divestment of investment properties, subsidiaries and associates, long term investments and disposal of major property, plant and equipment.

62 SIMPLY SMARTERFINANCIAL REVIEWVALUE ADDEDGroup’s total value added for FY2011 of $2,494.5m was higher than that achieved in FY2010 by 4% or $98.9m.Value Added StatementValue added from:2011$m2010$mRevenue earned 5,990.9 5,984.5Bought in materials and services (3,594.6) (3,685.9)2,396.3 2,298.6Other income 32.3 40.0Finance income 45.1 44.1Finance costs (exclude interest expenses) (13.8) (31.2)Share of results of associates and jointly controlled entities 34.6 44.1Total value added 2,494.5 2,395.6Distribution of total value addedTo employees in wages, salaries and benefits 1,629.6 1,564.9To government in taxes and levies127.6 134.2To providers of capital on: 50.6 56.2 444.2 402.22,252.0 2,157.5Balance retained in/(applied from) businessDepreciation and amortisation 135.0 132.0Retained profits 93.7 97.5Non-controlling interests 13.1 13.8241.8 243.3Non-production costs/(income) 0.7 (5.2)Total distribution2,494.5 2,395.6

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011635-YEAR PERFORMANCE OF THE GROUPREVENUE BY SECTOR ($m)7000NET PROFIT BY SECTOR ($m)70060006005000500400040030003002000200100010002007 2008 2009 2010 201102007 2008 2009 2010 2011Aerospace Electronics Land SystemsAerospace Electronics Land SystemsMarineOthersMarineOthersPROFIT BEFORE TAX BY SECTOR ($m)700ORDER BOOK ($b)146001250010400830062004100202007 2008 2009 2010 201102007 2008 2009 2010 2011Aerospace Electronics Land SystemsMarineOthers

64 SIMPLY SMARTERFINANCIAL REVIEW5-Year Key Financial Data 2011 2010 2009 2008 2007Operating PerformanceEBITDA ($m) 742.7 718.7 649.2 667.9 684.4EBIT ($m) 607.7 586.7 486.4 509.1 550.3Financial IndicatorsEarnings per share (cents) 17.28 16.21 14.78 15.82 16.95Return on sales (%) 9.0 8.4 8.2 9.1 10.4Return on equity (%) 29.9 30.3 28.3 30.0 30.8Return on total assets (%) 7.3 6.9 6.6 8.2 8.7Net assets value per share (cents) 57.79 53.38 52.09 52.71 54.72Selected Balance Sheet DataShareholders' funds ($m) 1,766 1,622 1,568 1,580 1,633Total assets ($m)7,407 7,268 6,885 5,993 6,050Net assets ($m) 1,876 1,727 1,676 1,677 1,780Capital expenditure ($m) 189 333 277 191 172DividendGross dividend per share (cents) 15.50 14.55 13.28 15.80 16.88Dividend yield (%) 5.07 4.36 4.72 5.16 4.94Dividend cover 1.111.11 1.11 1.00 1.00Productivity DataAverage staff strength (numbers) 22,193 21,508 20,079 18,703 17,750Revenue per employee ($) 269,944 278,244 276,298 285,757 284,570Net profit per employee ($) 23,771 22,829 22,109 25,324 28,367Employment costs ($m) 1,633.2 1,568.1 1,462.5 1,422.8 1,360.3Employment costs per $ of revenue ($) 0.27 0.26 0.26 0.27 0.27Economic Value Added ($m)405.0 369.7 304.8 357.9 388.8Economic Value Added spread (%) 12.0 10.5 9.4 11.8 13.2Economic Value Added per employee ($) 18,250 17,187 15,181 19,138 21,904Value added ($m) 2,494.5 2,395.6 2,266.6 2,203.7 2,190.8Value added per employee ($) 112,398 111,382 112,882 117,824 123,432Value added per $ of employment costs ($) 1.53 1.53 1.55 1.55 1.61Value added per $ of gross property, plantand equipment ($)0.900.91 0.91 0.97 1.00Value added per $ of revenue ($) 0.42 0.40 0.41 0.41 0.43

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201165RISK MANAGEMENTST Engineering believes thateffective risk managementis critical to achieving theGroup’s strategic objectivesand corporate governancegoals.ENTERPRISE RISK MANAGEMENT(“ERM”) FRAMEWORKThe ST Engineering ERM Framework isa discipline with which the Group usesto identify, assess, control and monitorrisks from six key areas:(1) Strategic(2) Operational(3) Reputational(4) Financial(5) Legal, Regulatory & Political(6) Acts of God & WarThe ERM framework sets out aconsistent definition of risk and risktolerance limits to ensure that businessunits have a common understandingwhen identifying and assessing risks.To enable ERM practices throughoutthe Group, the Group invested in aGRC system,a software application,that captures risks and controls inelectronic risk registers, which areperiodically reviewed and updated bythe risk and control owners, regardlessof where the businesses are locatedgeographically.As the Group diversifies its businessactivities across multiple industries,sectors, geographies and jurisdiction, ithas become of paramount importancethat both the Senior Management Teamand the Board have visibility of theGroup’s key business risks. The GRCsystem therefore provides the neededtransparency on risks.FRAUD RISK MANAGEMENTFraud is used to describe a dishonestactivity and comprises such acts asdeception, theft, conflict of interest, aswell as corruption and bribery.Fraud can be costly and detrimentalto the Group and hence the Group iscommitted to proactively mitigate therisk of fraud. Besides financial losses,there can be collateral damages in theform of tarnished reputation.The Group’s fraud risk managementframework comprises the following:(1) Promoting an Anti-FraudCulture. The senior managementsets the tone of the Group andpromotes an anti-fraud culturethroughout the Group, through itsset of Core Values.To maintain an ethical environmentthat encourages and promotesprofessional and ethical conductof the management and staffmembers, a Code of BusinessConduct and Ethics (“The Code”)has been promulgated.This Code sets out the guidingprinciples and desired behavioursthat embody how the Groupand our people are expectedto operate, and embrace thebusiness practices and standardsof behaviour that support thecommitment to honest and ethicalbusiness conduct.

66 SIMPLY SMARTERRISK MANAGEMENTMany standards set out in the Codehave also been embedded andaugmented by various policies. Allemployees are required to complywith the standards set out withinthis Code, as well as all policies.(2) Periodic Assessment of theRisk of Fraud. The Group hasduring the year implemented a selfassessment process for which thebusiness operations proactivelyidentify fraud risk areas togetherwith other key business risk areasand mitigate these risks throughregular review and scrutiny of itsoperations.(3) Process for reporting wrongdoings. An employee in the courseof his or her work may come acrossany of the following:(a) violations of the Code orcompany policies,(b) violation of laws, rules orregulations,(c) any wrong doing, or issueswhich he or she believes maynot have been managed ordealt with properly.action arising by reason of theirhaving made these reports.(4) Responding to Fraud. A processon how fraud and suspectedfraud concerns raised through theestablished reporting channelsshould be dealt with has beenestablished. All fraud andsuspected fraud cases received willbe promptly notified to the AuditCommittee Chairman. The AuditCommittee has the powers to takeprompt actions to inquire into theconcerns raised.(5) Monitoring and EvaluatingEffectiveness of Controls.The self assessment processmentioned in (3) above includesa process for business owners toevaluate the design and operatingeffectiveness of the controlsdesigned to prevent and detectfraud. The Internal Audit functionalso carries out regular audits wherethe operating effectiveness of theseanti fraud controls is independentlyevaluated.Under the whistle-blowing policy, aprocess has been established foremployees to raise a report of theabove concerns, which can alsobe done on an anonymous basis.Subject to applicable laws, theidentity of the employees who raiseany such reports is kept in strictconfidence and they are protectedfrom any disciplinary or retaliatory

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201167THE GROUP’S PRINCIPAL INHERENT RISKSRisk Area Inherent Risk DescriptionStrategic Concentration Risk The Group’s customers include government agencies and commercialorganizations. While it is important for the Group to develop close relationshipswith key customers, the Group is mindful to avoid over concentration in any singlekey customer, and hence the need for diversity of customers.Strategic Competition The Group’s businesses are subject to competition from national and multinationalfirms in the various markets it operates in, and many contracts areobtained through a competitive bidding process.The Group’s ability to compete for contracts depends to a large extent on theeffectiveness and innovation of the solutions it offers, as well as its ability to offerbetter-value-for-money solutions.As the Group seeks to strengthen its commercial business, speed to marketbecomes ever more critical to success.The Group conscientiously monitors market conditions and continually seeksto innovate its processes and systems to better position itself in both local andoverseas markets.Strategic / Legal,Regulatory &PoliticalRisks inherentin operating in aglobal marketThe Group conducts business in a number of countries and, as a result, assumesrisks that are associated with operating in a global market.These risks include:(1) changes to government regulations and administrative policies that may resultin restraints on the movement of capital, expropriation of the Group’s assets,new burdensome taxes or tariffs that could be introduced;(2) political changes that could lead to changes in the business environment inwhich the Group operates;(3) economic downturns;(4) political instability and civil disturbances that could disrupt the Group’sbusiness activitiesThe Group seeks to maintain an even more balanced portfolio by spreading itsbusiness operations across several markets. It continues to pursue new emergingmarkets such as Africa, Central Asia and the Gulf States region to further expandand diversify its revenue streams.

68 SIMPLY SMARTERRISK MANAGEMENTRisk Area Inherent Risk DescriptionStrategicMerger &Acquisition(“M&A”)One of the avenues through which the Group seeks to grow its businesses is theacquisition of business entities and operating assets or joint ventures. M&A risksinclude the under-performance or failure of acquired entities.M&A activities, ranging from the identification of targets to conducting duediligence, are supported by a dedicated team of investment professionals andaugmented by external professionals for specialised services. The businessproposals are guided by a given set of internal investment criteria, evaluated bysenior management and endorsed by a Business Investment and DivestmentCommittee before seeking final Board of Directors’ approval.Financial Foreign Exchange The Group’s foreign exchange risk arises both from its subsidiaries operating inforeign countries, generating revenue and incurring cost denominated in foreigncurrencies, and from operations of its local subsidiaries which are transacted inforeign currencies.The Group’s foreign exchange exposures are primarily from USD and Euro, andthe Group enters mainly into forward currency contracts to hedge against itsforeign exchange risk resulting from anticipated sale and purchase transactionsdenominated in foreign currencies in accordance with the Group’s hedging policy.The Group also enters into cross currency swap to hedge the foreign exchangerisk of its loans denominated in foreign currencies.Financial Credit Credit risk, or the risk of counterparties defaulting, is managed through theapplication of credit approvals, credit limits and monitoring procedures. Whereappropriate, the Company and its subsidiaries obtain collateral from customers orarrange master netting agreements. Cash terms, advance payments and letters ofcredit or bankers’ guarantees are required for customers of lower credit standing.OperationalProjectManagementThe main business activity of the Group relates to management and executionof projects for defence and commercial customers. Risks relating to projectmanagement are therefore inherent in the business. These may include issuesrelating to project costs and schedules, as well as contractual and quality matters.The Group has project review and quality assurance systems in place to mitigatesuch risks.All contracts of material value require review by legal counsel, and significantdeviations from pre-approved standard contract terms and conditions are tobe highlighted and presented to higher levels of management for review andapproval.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201169Risk Area Inherent Risk DescriptionOperational Human Capital The recruitment and retention of qualified and experienced personnel is criticalto achieving the Group’s strategic objectives. The Group continues to work withlocal authorities in markets where it operates, and leverages training, retentionschemes, scholarships as well as alternative sources for hire to sustain itsgrowth. Talent management programmes also help to create a pool of potentialsuccessors for key positions.OperationalLegal, Regulatory &PoliticalLegal, Regulatory &PoliticalSubcontractorPerformance andKey SuppliersExport ControlsCompliance withLaws & RegulationsThe Group is dependent upon the delivery of key materials or components bysuppliers and the performance by its subcontractors in a timely manner, andin accordance to specifications. The respective sector procurement functionis responsible for establishing and managing end-to-end integrated supplierarrangements within each of their respective sectors. Supplier milestones andperformance are reviewed periodically by the respective project teams.Exports of ordnance products, which constitute a portion of the Group’s sales,are typically subject to export control regulations. Changes in these regulationscould have an impact on the Group’s sales, while non-compliance could resultin financial penalties, suspension of projects or even restrictions on future exportbusiness. The Group continues to place great emphasis on this area and hasformal systems in place and designated personnel to ensure export controlregulations are complied with.The Group, with its operations in several parts of the world, is subject toapplicable laws and regulations of various jurisdictions. These laws andregulations include anti-corruption laws, export controls, safety and environmentalregulations and anti-competition laws.Failure by the Group to comply with these laws and regulations may result incriminal liabilities such as fines and penalties, and/or the suspension or debarmentof the Group from government contracts.Acts of God & WarBusinessInterruptionThe Group proactively identifies applicable laws and regulatory obligations, andembeds compliance into the day to day business processes.The Group recognises that quick recovery and resumption of business operationsafter a disruption are critical to minimising financial, operational and reputationimpact.Accordingly, it has in place a Business Continuity Management Framework (“BCMFramework”), which embodies enterprise-wide planning and arrangements ofkey resources and procedures that enable the Group to respond and continue tooperate critical business functions across a broad spectrum of interruptions to thebusiness, arising from internal or external events.The Group employs the use of force majeure clauses extensively in all contractsto mitigate risk from Acts of God. The Group also has in place a comprehensiveinsurance programme aimed at mitigating financial losses that might arise fromsuch risks.

70 SIMPLY SMARTEROPERATING REVIEW &OUTLOOKThe Group delivered good operatingresults for FY2011, despite anenvironment of global economicuncertainty and currency volatility.WINNING NEW CONTRACTSThe Aerospace sector manageda steady stream of contract wins,despite the softer-than-expectedrecovery in the global aviation industry.These contracts spanned our rangeof capabilities, including heavymaintenance, Passenger-to-Freighter(PTF) conversion, Maintenance-By-the-Hour and cabin reconfiguration.Urbanisation in the region continuedto drive demand for our various railelectronics and road managementsystems, with the Electronics sectorwinning contracts in various parts ofAsia to provide Passenger InformationSystems, Automatic Fare CollectionSystems, consultancy on an IntegratedTransport Platform, and other solutions.We were also one of four consortiaawarded a tender by Singapore’sLand Transport Authority to conducta System Evaluation Test for the nextgeneration electronic road pricingsystem. In addition, the sector wona number of info-security contracts,including the National AuthenticationFramework project in Singaporeand the set-up of a Cyber SecurityOperations Centre. Our expertise insecurity extended to implementing aPerimeter Intrusion Detection Systemfor Changi Airport Group. Our satellitecommunications business continued towin contracts from global customers,further cementing its position as amarket leader. Other notable projectwins for the sector included theIntelligent Water Management Systemfor Singapore’s Public Utilities Boardand the Army Gunnery Tactical& Driving Simulation Systems forSingapore’s Ministry of Defence(MINDEF).Another MINDEF contract was won byour Land Systems sector, for the supplyof the new generation Spider LightStrike Vehicle. On the commercial side,the Chinese specialty vehicles businesssaw positive results from the 2010exercise that rebranded them underTRXBUILD. The brand continued togain momentum for international sales.As the sole distributor for MAN Truck &Bus AG, we also won our first city buscontract, supplying Euro-5 compliantMAN A22 buses to SMRT Buses Ltd.Our yards were kept busy throughoutthe year, as our Marine sectorcontinued to perform steadily. Wesecured a number of shipbuildingcontracts from various customers,including four Anchor Handling TugSupply vessels, 12 Offshore SupportVessels, a Car Truck Carrier and an ATBOffshore Tug. The sector’s shiprepairand conversion business remainedbusy. Among other projects, wecompleted our first rig conversion jobwhen we converted a decommissionedjack-up rig into a Mobile OffshoreProduction Unit. We are also in theprocess of upgrading vessels for theRepublic of Singapore Navy.In other business areas, our USsubsidiary, VT Miltope, teamed withGeneral Dynamics C4 Systems on theCommon Hardware Systems-4 (CHS-4)programme. The US Army awardedGeneral Dynamics C4 Systems afive-year Indefinite Delivery IndefiniteQuantity contract with a potentialvalue of US$3.7b. VT Miltope couldpotentially earn up to US$250m overthe life of this contract. Our Singaporesubsidiary, ST Synthesis continuedto build up critical experience andtrack record in facility managementservices to key installations and majorinfrastructure. Singapore’s DefenceScience & Technology Agency awardedthe company a five-year contract worthabout $125m for its services to selectMINDEF’s controlled properties andfacilities.INVESTING FOR THE FUTUREIn October, ST Aerospace Technologies(Xiamen) Company Limited, a jointventure between ST Aerospace andXiamen Aviation Industry Co., Ltd,unveiled its new engine maintenance,repair and overhaul facility in XiamenGaoqi International Airport, China. TheUS$78m facility has capacity to supportup to 300 engines annually, and willinitially provide maintenance, repair andoverhaul (MRO), and total support forthe CFM56-7B and CFM56-5B seriesof engines. Meanwhile, ST Aerospace’sjoint venture with Guangdong AirportManagement Corporation to set up aheavy maintenance facility within theGuangzhou Baiyun International Airportis progressing well. The hangar isexpected to be operational in 2013.Besides increasing capacity, theAerospace sector is creating value-

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201171added solutions for its customers.During the year, a new joint venturebetween ST Aerospace and MarubeniCorporation was set up to provideengine leasing services. The sector alsoacquired DRB Aviation Consultants,Inc., an established US-based aircraftinteriors engineering company, todevelop our cabin interior engineeringcapability. Also, ST Aerospace becamethe first independent MRO companyto be declared a TRUEngine TM serviceprovider by CFM International.To grow our core capabilities in theElectronics sector, two joint ventureswere set up during the year. The first,with Nanyang Technological Universityand DSO National Laboratories, willdesign, develop and produce advancedearth observation satellites. The other,with NEC Asia Pacific Ltd, will offercloud computing solutions.OUTLOOK FOR 2012The World Bank’s “Global EconomicProspects” report titled “Uncertainties& Vulnerabilities” released in January2012 commented that the worldeconomy has entered a dangerousperiod and downgraded its forecasts.It now expects the global economy toexpand 2.5% in 2012, versus the 3.6%projected in its previous report. It furthernoted that Europe has entered into arecession, and should the debt crisisexpand, developing countries wouldfeel its effects deeply.Factors that affect the performanceof each of ST Engineering’s sectorsvary, depending greatly on the interplayof political, social and economicconditions of the various regions wherethe sectors operate. The Group’sbusiness, geography and customerbase diversification has enabled us toweather the uncertainties in 2011; weenvisage, likewise for 2012.The Group ended 2011 with a recordorder book of $12.3b, providinggood visibility on our revenue streamand adding to our resilience. Barringunforeseen circumstances, the Groupexpects to achieve higher revenue andPBT for FY2012 over FY2011.There has been continuing steadydemand for aircraft MRO in 2011.In 2012, our Aerospace sector willcontinue to focus on airframe heavymaintenance and modification work,delivering the 757 PTF conversion andmilitary contracts, and aircraft interiormodification work. The sector expectsto conclude the definitive agreementswith Airbus and EADS EFW for theA330 P2F conversion programme.On the component and engine MRObusinesses, the sector will step up itsengine facility in Xiamen, engine leasingand environmentally-friendly enginewash business, explore componentleasing opportunities and extendits Total Aviation Support offeringsto airlines globally. The investmentin EcoServices, which is subject toregulatory and customary conditionsprecedent, will enhance the Aerospacesector’s plan to develop engine totalsupport capability to address customerand market demands. This investmentis part of the Group’s thrust to focuson the development of sustainableenvironmentally-friendly solutions.In 2012, our Electronics sector willcontinue its business thrusts in theareas of e-Government & eEnterprise,Satellite & Broadband Communications,and Eco-Enabling InfocommTechnologies. The sector will deliver thevarious projects in its order book, whichinclude the Half Height Platform ScreenDoors and Circle Line MRT projectsin Singapore, Advanced Combat ManSystem, communication systemsprojects, the supply of telematicssystems, satellite communicationproducts and electro-optics equipment,milestone completions of a simulatorproject, an Advanced C3 emergencysystem and managed services sales.The sector will continue to sharpen itscore capabilities and pursue growth innew market segments. The acquisitionof NERA Telecommunications Ltd,which is subject to court and regulatoryapprovals, will enhance the Electronicssector’s communications infrastructureofferings.Our Land Systems sector will continueto deliver the Terrex Infantry CarrierVehicles to the Singapore ArmedForces, 40mm L70 naval guns, SMRTMAN buses, munitions, weapons andspecialty vehicles in 2012. The sectorwill continue to develop and pursuekey defence programmes, includingupgrade and reset programmes fordefence customers globally. For itsnon-defence business, the sector willwork to expand the scale and marketreach of LeeBoy and TRXBUILDfamily of construction equipment, andpenetrate new markets with new andexisting specialty vehicles products.Our Marine sector continued to securevarious newbuilding contracts in 2011,notably 12 Offshore Supply Vessels forthe offshore Oil & Gas segment. Thehealthy order book will keep the yardsin Singapore and the US busy in 2012.The sector will continue to pursueshipbuilding opportunities in the naval,government and commercial industriesand focus on delivering its order book.For shiprepair in the Singapore yards,we are cautiously optimistic that thehealthy demand in the shiprepairmarket will continue into 2012.In 2012, the Group will stay focusedon executing and delivering ordersand work closely with customersto fulfill their evolving requirements.To complement the organic growth,the Group will continue its efforts insearch of acquisition opportunitiesand seek collaborations with partnersand OEM suppliers to offer newservices, products and solutions to ourcustomers.

ST Aerospace launched our line maintenanceservices at Singapore Changi Airport.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201173AEROSPACEBy growing our maintenance, repair and overhaul (MRO) andengineering capabilities, we continue to create longer termvalue for our global customer base.An integrated service provider, our Aerospace sector delivers customised solutions ranging from aircraftMRO and training to engineering design and engineering development.The Aerospace sector came in witha revenue of $1.9b despite a weakUS dollar environment and uncertaineconomic conditions heading into2012. Focusing on costs managementand productivity improvements, profi tbefore tax improved 6% to $278m,with the order book remaining healthythrough new contracts secured.Compared to 2010, 2011 performancewould have been stronger if not for thelower US dollar and Euro impactingrevenue by $91m. Profi t before tax wasimpacted by $16.4m due to the weakerUS dollar.EXPANDING CAPABILITIES,ENLARGING FOOTPRINTThe Aerospace sector remained focuson being relevant to customers andmaintaining cost competitiveness.Supporting a diverse customer basethrough our global MRO network inthe Americas, Asia Pacifi c and Europe,we continued to broaden our range ofcapability offerings while extending ourglobal presence.Meanwhile, a steady stream ofcontracts totalling $1.4b reaffi rmedST Aerospace’s position as anintegrated service provider.AIRCRAFT MAINTENANCE &MODIFICATION (AMM)The AMM business continued toimprove, building on a strong trackrecord of quality standards, quickturnaround and cost effi ciencyfor customers. Over the year, theAerospace sector achieved severalmilestones. Our facility in Mobile,Alabama celebrated 20 years ofexcellence and the redelivery of over4,000 aircraft over the two decades.Our joint venture in Shanghai, Chinahas redelivered 500 aircraft sinceits commencement in 2005 andcelebrated the 50th aircraft redelivery toAll Nippon Airways.The Aerospace sector securedlong term contracts with our corecustomers, as we expand our rangeof MRO services. On the engineeringdesign and development front, weadded the passenger-to-passenger/cargo (combi) aircraft conversioncapability for the Boeing 757. Throughthe acquisition of DRB AviationConsultants, Inc in the US, we haveenhanced our cabin interior engineeringdesign and development capability.In 2011, ST Aerospace secured a cabinreconfi guration project for Jet Airway’sAirbus A330, and completed a fullcabin reconfi guration and refurbishmenton a DC8 VIP aircraft, which extendedfrom design, engineering andinstallation to certifi cation and projectmanagement. We also delivered aEuropean Aviation Safety Agency(EASA) approved Supplemental TypeCertifi cate (STC) project for cabinreconfi guration of Ural Airlines’ AirbusA320.On Boeing 757 conversions, theAerospace sector completed thefi rst contractual milestone ahead ofschedule with a total of 34 Boeing 757redelivered to FedEx Express. We havestarted on the second batch of freighterconversions while FedEx Express hasexercised the option for the third batch,bringing the total fi rm order to 87aircraft. Additionally, we inducted ourfi rst Boeing 757-200 for passenger-topassenger/cargo(combi) conversion,with redelivery expected by end ofMarch 2012.During the year, we launched our linemaintenance services for TransAsiaAirways’ fl eet of A320 aircraft atSingapore Changi Airport. We alsobroadened our maintenance servicesfor general aviation aircraft with theinduction of two Beechcraft 1990aircraft into our Singapore facility.

74 SIMPLY SMARTERAEROSPACEWe continued to maintain a strongMRO network to serve the needs ofour global customers. In January,our joint venture company,ST Aerospace (Guangzhou)Aviation Services Company Limited,received the business licence fromthe Administration of Industry andCommerce of the GuangzhouMunicipality to establish an aircraftrepair facility in Guangzhou, China.Hangar construction is expectedto commence in 1Q2012 and beoperational in 2013.ST Aerospace continued to supportthe outsourcing needs of the Republicof Singapore Air Force (RSAF). Duringthe year, we fi nalised two agreementswith Alenia Aermacchi for the logisticssupport of the 12 M346 aircraft over 20years. The overall support programmeis worth about $50m in the fi rst year ofoperation.ST Aerospace inducted our fi rst Boeing 757-200 for passenger-to-passenger/cargo (combi)conversion.Supporting the RSAF’s operations inthe Gulf, our team of 11 maintenancecrew joined the RSAF’s Fokker 50maritime patrol aircraft team for a threemonthinternational counter-piracymission in the Gulf of Aden.On unmanned aerial vehicle (UAV)capability development, ST Aerospacestarted the development of Skyblade360, a new mini-UAV system with theDSO National Laboratories. This newST Aerospace added a new pilot training facility at Ballarat Airport to meet the growing demand for pilottraining.UAV is able to achieve longer fl ightdurations, translating into increasedmission versatility.To meet the growing demand for ourpilot training business, we boostedcapacity and capabilities during theyear. This included adding a 9,000 sqmfacility at Ballarat Airport in Australiaand commencing development of anew fl ight operations centre, targetedto be ready by June 2012. We alsopurchased an Airbus A320 fl ightsimulator, which will be delivered bythe end of 2012. To improve trainingdelivery, we acquired an all-glasscockpit fl eet comprising a single-engineCessna 172S and four new multiengine Piper PA44 Seminole aircraft.ST Aerospace successfully completedSingapore’s fi rst Multi-crew PilotLicence (MPL) programme for TigerAirways. The programme’s six cadetpilots received their MPL from the CivilAviation Authority of Singapore (CAAS)in October and are now employed bythe airline as First Offi cers.ST Aerospace also provides premiumfl ight services for aeromedical,executive and leisure travel. Our privatecharter fl eet comprises Beechcraft KingAir C90, Bombardier Learjet 35, Learjet45, Eurocopter EC120 and the newlyadded Gulfstream G550 which wasacquired during the year.COMPONENT TOTAL SUPPORT(CTS)Growth of the Aerospace sector’scomponent MRO services remainedrobust in 2011. Our componentMaintenance-By-the-Hour (MBH TM )support programmes continued to gainpopularity with customers worldwide.To date, ST Aerospace is committedto provide component MBH TM supportfor over 750 aircraft.The sector added new componentrepair capabilities to support MBHprogrammes for the Boeing 737NG,757, Airbus A320 as well as for A330and military aircraft. We also built newtest facilities for the newer generationof aircraft. Our Singapore facility addednew repair capabilities for the Boeing737NG landing gear, and receivedcertifi cations from the CAAS, EASA andthe US Federal Aviation Administration(FAA) respectively.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201175Our landing gear facility in Madridcontinued to see success in its thirdyear of operations, completing anddelivering over 100 landing gears sinceinception. Focusing on the AirbusA320, A330 and A340 landing gears,the facility added new repair capabilitiesduring the year and commissionednew test facilities to augment thesecapabilities.ENGINE TOTAL SUPPORT (ETS)Our engine MRO capacity, capabilitiesand customer base continued toexpand during the year, extending thesector’s engine total support offering.Our second engine facility commencedoperations in Xiamen, China, with theinduction of the first engine, a CFM56-7B from our long term customerXiamen Airlines. The new facility hasobtained approvals from the CivilAviation Administration of China, FAAand Korea’s Ministry of Land, Transportand Maritime Affairs. It will providemaintenance, repair and overhaul aswell as integrated engine solutions forthe CFM56-5B and CFM56-7B engines.We broadened our range of engineaftermarket solutions with the set-upof a new engine leasing business withMarubeni Corporation. The joint ventureoffers leasing solutions for CFM56-3,CFM56-5B and CFM56-7B engines.ST Aerospace also became the firstindependent MRO company to bedeclared a TRUEngine TM serviceprovider, making all CFM56 enginesoverhauled by ST Aerospace eligible forTRUEngine status.Meanwhile, a contract from low fareairline Solaseed Air to maintain itsCFM56-7B/7BE engines over fiveyears saw our engine MRO footprintextend into Japan, further widening ourcustomer base. Our presence in Koreawas also expanded with contracts fromJeju Air and Eastar Jet, to support theirCFM56-7B engines.ACQUISITIONS & DIVESTMENTSWe acquired 100% of the sharesin DRB Aviation during the year,making it a wholly owned subsidiaryof VT Aerospace specialising inaircraft engineering design. It is anorganisational designee under the FAA’sOrganisation Designation Authorisationprogramme, that allows autonomyST Aerospace extended our engine MRO footprintinto Japan with a contract from Solaseed Air.The Aerospace sector enhanced its aircraft interiorengineering design capabilities.and efficiency in the issuance of minorSTCs for aerospace avionics andinteriors projects. The acquisition ofDRB Aviation is part of our strategicplan to develop the Group’s aircraftcabin interior engineering capability.At the close of 2011, VT Aerospaceentered into an agreement with Pratt& Whitney to invest a 50.1% stakein EcoServices, focusing on thedevelopment of green solutions that willenhance the Aerospace sector’s enginetotal support offering.ST Aerospace added a new engine facility in Xiamen to better serve our customers.

Our Electronics sector delivers innovativesolutions through our commitment to researchand development and high quality standards.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201177ELECTRONICSWe provide innovative solutions to customers worldwide covering intelligenttransportation, satellite communications, cyber security, smart utilities, andeco-enabling Information Communication Technologies applications.In 2011, the Electronics sector postedrevenue of $1.52b. This is attributableto our continuous drive to grow ourorder book, provide innovative andcost effective solutions and engagecustomers worldwide.We have embarked on the developmentof smart utilities management and cybersecurity solutions to address currentand future market needs. Key contractswere secured for smart utilities,urban transport systems and securitysolutions. These included rail electronicssystems in Thailand and China, andthe Intelligent Water ManagementSystem and National AuthenticationFramework in Singapore. ST Electronicsis participating in Tianjin Eco-City’sLow Carbon Living Lab project inChina which is scheduled to becompleted in 2013. It will test-bed anddemonstrate green building features andtechnologies, and aim for Green BuildingEvaluation Standards and InternationalGreen Mark Platinum certifi cations.We also launched the AgilFence PerimeterIntrusion Detection System (PIDS),enhancing security for key installationswith long fence lines. This was developedthrough collaboration between industryand academia in Singapore.dollar communications project fora major metro line in Asia and anAutomatic Fare Collection System(AFCS) contract for the Bangkok MassTransit System Silom Line extension inThailand. To be delivered by end 2012,the extension adds 5.25km and fi venew stations to the line.In China, ST Electronics continuesto venture into cities that are buildingtheir fi rst metro and subway lines. InJiangsu province, we will implementan AFCS for Wuxi city’s fi rst metro line,supplying nearly 300 ticketing machinesto 25 stations by 2013. Our on-trainPassenger Information Systems (PIS)also won recognition in Guangzhou,Kunming, Ningbo and Shanghai. Inthese cities, the PIS services more than140 trains, sending realtime informationto passengers while our surveillanceand alarm systems on trains ensure asafer passenger environment.Taiwan’s Taichung City Wuri-WenxinBeitun Line will soon showcaseST Electronics’ communicationssystems, making this the third city inTaiwan to use the company’s solutions.The 16.5km, 18 above-ground stationline is expected to be completed by 2017.LSG continues to develop newproducts, showcasing the VenusUnmanned Surface Vehicle (USV) atexhibitions such as IMDEX Asia 2011.Building on the success of the 9-metreVenus USV in 2010, we commenceddeveloping the new 11-metre Venus-11and the advanced 16-metre Venus-16.ST Electronics also introducedeco solutions that help clients attainbusiness sustainability. These includedistrict cooling solutions, LED lighting,energy usage measurements,optimisation and verifi cation solutions.LARGE-SCALE SYSTEMS GROUP(LSG)Demand for our rail electronics systemswill continue to grow as urbanisationand populations increase. Contractwins in 2011 included a multi-millionTwo-factor authentication for secure online transactions.

78 SIMPLY SMARTERELECTRONICSCOMMUNICATION & SENSORSYSTEMS GROUP (CSG)Our intelligent transportationsolutions make roads safer and moreefficient. In Asia, ST Electronics wasawarded a number of eco-enablingtraffic management projects to bedelivered in 2012. These includedthe implementation of a radar systemwith a central management systemfor monitoring traffic; an 18-monthSystem Evaluation Test for the nextgeneration electronic road pricingsystem in Singapore; and consultancyfor an Integrated Transport Platform fora major city in western China. The latterextends to the design of subsystemssuch as licence plate recognition,automated incident detection, trafficsignal controls and enforcementsystem, control centre and expertsystems. In Singapore, 26 digitalsignboards were commissioned alongtwo key arterial corridors as part ofthe Expressway Monitoring & AdvisorySystem.Strengthening its telematics capabilityfor use in transportation, TelematicsWireless was awarded a one-yearcontract to supply SMART vehicleand asset tracking devices for therecovery of stolen vehicles and goods.The devices will be implemented for aterrestrial location and security systemdeveloped by Telematics Wirelessand will be used in countries such asArgentina, Brazil and the US.ST Electronics continues to build oncapabilities in data centre infrastructure,Information CommunicationTechnologies, managed services andSecurity-as-a-Service, winning theNational Authentication Framework(NAF) project from Assurity TrustedSolutions, a wholly owned subsidiaryof Infocomm Development Authorityof Singapore. A secure infocomminfrastructure, the NAF is a commonplatform for strong two-factorauthentication technology thatfacilitates secure online transactions forboth e-Government and commercialentities, and prevents unauthorisedaccess to sensitive information.CSG’s expertise in info-securitywon contracts for implementationof a Security Incident and EventManagement System and the set-up ofa Cyber Security Operations Centre.An alert will be triggered at the command centreshould an attempt be made to breach theAgilFence PIDS.During the year, we startedimplementing the AgilFence PIDS forthe Changi Airport Group (CAG). Thiswill complement Singapore ChangiAirport’s existing security systemsfor its more than 20km of fencing.ST Electronics and CAG will collaboratein marketing the solution globally toother airports and facilities.In the satellite communications(satcom) and sensor business, newcontracts included the implementationof magnetic sensors for open-airparking guidance in Malaysia, andsatcom networks in Asia, Europe andthe Middle East. Among the innovativeadditions to our stable of ‘common-the-move’solutions was ourlightest and most compact 1.2-metremotorised satellite antenna solution,suited for installation on any standardvehicle roof fixture. Meanwhile, Class1K and 100K cleanroom facilitieswere added to augment CSG’s highperformance radio frequency and digitalmodule production capabilities.VT iDirect (iDirect) in the US launched thegroundbreaking iDX 3.0 software, thefirst time the advantages of Time DivisionMultiple Access and Single Channel PerCarrier are combined in a single platform.This enables network operators to offerthe most efficient communicationsservices that meet their customers’bandwidth requirements.Strategic maritime customer, Marlink,successfully upgraded over 1,000vessels to the iDirect Evolution platformleveraging the iDX 3.0 software formore efficient communications at sea.Mobily, a key telecom player in SaudiArabia, adopted iDirect’s platform todeliver enterprise class services to its15 million subscribers.iDirect strengthened its dominantposition in the enterprise maritimemarket, securing a 62% share forsatellite ground infrastructure accordingto a Comsys Report in December (12thedition).Inmarsat selected iDirect to deliver theground segment infrastructure andand terminals for its global Ka service,Global Xpress. Ka-band satellites areincreasingly used to meet the industry’sneed for more capacity at a lower cost.iDirect’s Evolution government line ofsatellite routers and line cards receiveda boost when it met the physical criteriafor the Federal Information ProcessingStandards Publications 140-2 Level 2validation, required for cryptographicproducts used in any US governmentnetwork.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201179them to create a realistic air trafficsimulation environment by linking over500 individual flight simulators.Antycip Simulation, ST Electronics’subsidiary in Europe, developedsimulation systems in the retail areawith its customer, Red Dot Square,providing immersive projection solutionsto Unilever and Coca-Cola.VR-Vantage provides a comprehensive overview of any scenario with multiple views.SOFTWARE SYSTEMS GROUP(SSG)ST Electronics secured a contractfrom the Public Utilities Board (PUB),Singapore’s national water agency, toprovide consultancy services, and todevelop and implement parts of anIntelligent Water Management System(IWMS) in 2012. The IWMS aims toenhance PUB’s capability to integraterealtime information on water resourcesand manage water operations. Thiscontract hones expertise previouslygained from providing an IntelligentEnergy System to the Energy MarketAuthority.ST Electronics will design, build andmaintain a data centre for Singapore’sHong Leong Finance. Growing oure-Services, we now manage corporatetravel for the 65 National SportsAssociations of the Singapore SportsCouncil. We also secured contracts fromthe Ministry of Education to managesome of their administrative processes.Our training and simulation capabilitieswon us a contract to supply ArmyGunnery Tactical & Driving SimulationSystems to Singapore’s Ministry ofDefence.Our i-Learning capability has expandedto include products and applicationsthat support computing devicessuch as iPads. SSG is also providingsolutions for primary and secondaryschool students on the Cloudinfrastructure accessible anywhere,anytime. Partnering Fujitsu, we offerApplication-as-a-Service through oureducation suites on the Cloud.VT MÄK (MÄK), the Electronics sector’ssimulation company in the US, launchedthe VR-Vantage Plan View Display, a 2Dvisual solution that provides a tacticalmap view of the virtual world for use inmission planning and after action review.VR-inTerra, another solution releasedduring the year, brings terrain agility tosimulation applications.MÄK’s VR-Forces solution was used byRheinmetall Canada for its Air DefenceOperations Simulation (ADOS) forthe Dutch Army. The ADOS systemis used for training and as an aid indeveloping air defence doctrines,tactics, techniques and procedures. InSouth Africa, the Council for Scientificand Industrial Research’s AeronauticSystems division selected MÄK’s VR-Vantage Toolkit as its image generatorfor rendering ‘out-the-window’ displaysof its existing Helicopter Ship-boardLanding Simulator.The Air Traffic Operations Laboratoryat NASA Langley will adopt MÄK’sRun Time Infrastructure to implementhigh level architecture in its air trafficmanagement simulations, allowingACQUISITIONS & DIVESTMENTSST Electronics continues to investin companies that offer growthpotential and strengthen our corecapabilities. We have identified theearth observation satellite segmentas a complementary addition to oursatcom and sensor systems businessand set up ST Electronics (SatelliteSystems) Pte. Ltd. as a joint venturewith Nanyang Technological University(NTU: 16% stake) and DSO NationalLaboratories (DSO: 33% stake) in May.NEC STEE Cloud Services Pte. Ltd.was set up to offer Software-as-a-Service to public and private institutionsin Singapore, and subsequently otherASEAN countries. ST Electronics owns40% of the joint venture and NEC AsiaPacific Pte Ltd the remaining stake.To optimise resources and better focuson data centre services, we divestedour share in PT PM-B Indonesia andacquired PM-B Pte Ltd as a whollyowned subsidiary, renaming itST Electronics (Data Centre Services)Pte. Ltd. ST Electronics now hasfacilities offering customised datacentres and disaster recovery facilities ofup to Tier 3 plus standards for clients.Engineers from NTU and DSO working on theEarth Observation Satellite.

The Land Systems sector deliversengineering peace of mind by ensuringsystems safety, reliability and quality.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201181LAND SYSTEMSWe are fully committed to delivering cost effective innovativesolutions to our global land systems and specialty vehiclescustomers through our pursuit of business excellence.During the year, ST Kinetics secured anumber of signifi cant orders, includingthe provision of the new generationSpider Light Strike Vehicle (Spider LSV)to the Singapore Armed Forces (SAF),and the supply of the MAN A22 citybus to SMRT Buses Ltd.ST Kinetics’ Warthog is an operational success, safeguarding soldiers’ lives while providing the mobilityneeded.The Land Systems sector is a leadingdefence and construction equipmentplayer in Asia. We further strengthenedour position in 2011 by showcasingour existing and latest productsinternationally and sealing new andrepeat orders from our growing list ofglobal customers.Building on the efforts of prior years,we expanded our R&D tie-ups withtertiary institutions, while marketingkey products like the Bronco family ofall-terrain tracked vehicles, the SuperRapid Advanced Mortar System andour Total 40mm Grenade Solutions.We also actively promoted ourTRXBUILD brand of constructionequipment in major shows aroundthe world.DEFENCE SOLUTIONSWe extended ST Kinetics’ globalfootprint with debut marketing effortsin Latin America at LAAD 2011 (Brazil)and SINPRODE 2011 (Argentina) withour comprehensive range of small armsand 40mm munitions, including thenewly launched low velocity extendedrange munitions.We also expanded the Adder family ofRemote Weapon Stations (RWS) withthe introduction of a navalised RWSduring IMDEX 2011 (Singapore). TheAdder RWS family, all equipped withadvanced sighting and video tracking,was exhibited at BRIDEX 2011 (Brunei).During the year, ST Kinetics securednew orders from various armed forcesincluding a $68m contract for theprovision of the new generation SpiderLSV to the SAF.2011 saw the successful deliveryof the Warthogs to the UK Ministryof Defence. The Warthog has beenperforming well in Afghanistan,providing soldiers with the protectionneeded to ensure mission successwithout fatalities from mines andimprovised explosive devices.

82 SIMPLY SMARTERLAND SYSTEMSSPECIALTY VEHICLESWe continued the rollout of ourTRXBUILD brand of constructionequipment in countries like Mexico,Brazil and Indonesia, and exhibitedin a number of international showslike CONEXPO (USA), CONBUILD(Indonesia), CONSTRUCTO (Mexico),MINING (Indonesia), BICES (Beijing)and EXCON (India).At the same time, we continued toinvest in new product development,introducing products like the 42-tonneMulti-Axle Rigid Dump Truck (MRDT42),the 32-tonne Automatic TransmissionRigid Dump Truck (D32i), the 45-tonneRigid Dump Truck (D45), the PY165and PY185 Motor Graders and theSynchronised Asphalt Distributor andChip Spreader under the TRXBUILDbrand. In addition, we launched threenew products under the LeeBoy BlawKnox brand (Road Paver Model PF-195B, Road Widener Model RW-195Band RW-100-80, and Brooms ModelCB90 and FB90), and successfullyintroduced the Hackney range ofrefrigerated bodies into Mexico.A highlight of the year was the officiallaunch of LeeBoy India, marked by therollout of the localised version of the785 Motor Grader in November. Thesustained growth of the constructionequipment industry in India hasplaced LeeBoy India well on its courseto develop, manufacture and sellST Kinetics’ range of constructionequipment to meet the needs of thegrowing Indian market.In China, ST Kinetics’ subsidiaryJiangsu Huatong Kinetics was awarded14 patents by the China Patent Officeand its ABH4500 Asphalt Hot-Mix Plantwas named one of the Top 50 Productsof China Construction Machinery.TOTAL SUPPORT SERVICESWe continued to make good progressin growing our maintenance, repairand overhaul services and through-lifesupport to defence and commercialcustomers alike.In the first half of the year, ST Kineticsopened a new MAN Truck & BusCentre and a fully equipped TaxiMaintenance Workshop to better serveour customers. Delivery of 65 units ofMAN trucks and coaches worth $9.5mwas completed, while an additionalorder of 80 units was secured andexpected to be fully delivered by1Q2012.We also won our first city bus contractworth $65m for the supply of a stateof-the-artlow floor MAN A22 bus toSMRT Buses Ltd. Equipped with apatented PM-Kat © filter in the engine,the MAN A22 bus complies fully withEuro 5 guidelines and has been wellreceived by the travelling public.In addition, ST Kinetics renewedanother three-year agreementwith CityCab Pte Ltd to providecomprehensive maintenance andaccident repair services for its fleet of1,100 taxis.The testing, inspection and certificationarm of ST Kinetics, Singapore TestServices (STS), attained accreditationstatus from the Singapore AccreditationCouncil for Guide 65 as a certificationbody to issue product certificationfor fire-safety related products. STSalso expanded its product reliabilitytesting capability by launching itssolar radiation testing services and anumber of new capabilities such astests for heavy metals in wafer andsemiconductors, the presence ofantibiotics/pesticides in food and theeffects of ultraviolet light on equipment.For better synergy, STA Inspection PteLtd was merged into STS in October,becoming its automotive division. Thedivision will continue to provide vehicleinspection, car evaluation and accidentvehicle assessment services under theSTA brand name.ST Kinetics expanded its mining trucks portfolio with the unveiling of the D45 Dump Truck at majorconstruction equipment shows in the year under the TRXBUILD brand.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201183ST Kinetics won its fi rst city bus contract for the supply of the state-of-the-art low fl oor MAN A22 bus toSMRT Buses Ltd.Formed in November 2010 as a jointventure between SDDA Pte Ltd andIT Portlink Sdn Bhd to pursue seaportsupport businesses in Malaysia and theregion, Kinetics Link Services Sdn Bhdprogressed well with the award of afi ve-year Vendor Management Inventorycontract by Pelabuhan Tanjung PelepasSdn Bhd.SUSTAINABLE TRANSPORTENGINEERINGST Kinetics and our wholly ownedsubsidiary, Kinetics Systems Shanghai,continued to enlarge collaborationwith bus OEMs in China through theSino-Singapore projects in TianjinEco-City and Guangzhou KnowledgeCity. We also successfully establisheda partnership with the State GridCooperation of China and supplied ourintelligent vehicle controllers for useon pure electric bus fl eets in Qingdao,China.Locally, the diesel-hybrid electric busjointly developed with Xiamen KingLong Bus, started its passenger servicetrial on Singapore roads with a leadinglocal public bus operator in the lastquarter of 2011. ST Kinetics’ customerbase for electric and hybrid electricdrivetrain components also grew, withnew customers from Korea, Taiwan andSingapore.In Canada, our wholly ownedsubsidiary, Kinetics Drive Solutions,launched the world’s fi rst productionready hydraulic drive hybrid terminaltractor together with Cargotec.Currently marketed globally byCargotec as an option, the hydraulichybrid drive provides regenerativepower to maximise fuel economy forterminal tractors used in ports.RESEARCH AND DEVELOPMENTCOLLABORATIONSUnderscoring our emphasis onR&D and productivity, ST Kineticscollaborated with SingaporePolytechnic to establish the SP-STK Robotics Laboratory during theyear to develop infrastructure basednavigation solutions with the use ofRadio-Frequency Identifi cation, LightDetection, and Ranging and Visionbasedtechnologies. These navigationsolutions will be used on AutomatedGuided Vehicles, and are targeted atthe global material handling industry,with special emphasis on largecontainerised seaports.Singapore Polytechnic and ST Kinetics launchedthe SP-STK Robotics Laboratory to developinfrastructure-based navigation technologies forAutomated Guided Vehicle applications.

Banking on our expertise in designingcustomised vessels, our Marine sector continuesto scale new heights with value-added contracts.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201185MARINEQuality and excellence are the hallmarks of Marine sector’sunwavering commitment to deliver world-class products andservices in shipbuilding, shiprepair and environmental engineering.Rubicone, a MOPU, was converted from adecommissioned jack-up rig in record time.The Marine sector withstood theuncertain economic tide in 2011 andrecorded revenue of $876m and profi tbefore tax of $121.8m.In Singapore, Swire Pacifi c OffshoreOperations (Pte) Ltd (SPO), a whollyowned subsidiary of Swire Pacifi cLimited awarded us a shipbuildingcontract to detail design, build andoutfi t four 18,000 bhp Anchor HandlingTug Supply (AHTS) vessels. SPO willfurnish the major equipment forST Marine’s installation which includesmain engines, thrusters, switchboardsand automation sytems, cranes,A-frame, stern rollers and deckmachinery. The fi rst AHTS, measuring92m by 22m, is expected to bedelivered by 1H2013 and the fourth by1H2014. The four vessels will be able tosupport the latest generation of semisubmersiblerigs operating in deepwater and a harsh environment. Theywill also have adequate tank capacitiesand clear deck space of about 650m 2for other offshore applications. Thevessels will adopt the latest DynamicPositioning technology and be SpecialPurpose Ship 2008 compliant.In the US, VT Halter Marine nettedtheir largest contract for the year –a US$353m contract by HornbeckOffshore Services, Inc. (Hornbeck)– to build eight 97.2m long OffshoreSupply Vessels with options for upto 24 additional identical vessels.Based on VT Halter Marine’s Super320 design developed for Hornbeck,the DP2 OSVs are designed to haveapproximately 20,900bbl of liquid mudcarrying capability, 1,102m 2 of deckarea and a fi re-fi ghting class notation.Deliveries of the fi rst and another eightvessels are planned for October 2013and September 2014 respectively.VT Halter Marine also secured a newcontract to build an Articulated TugBarge Offshore Tug for BouchardTransportation Co., Inc. (Bouchard).Measuring about 34.1m by 10.6m by5.2m, the 4,000hp tug is classed byABS as an A1 Towing Vessel, DualMode, and will be equipped with anIntercon Coupler System. Constructionis already under way on the secondRoll-On/Roll-Off Car Truck Carrier forHonolulu-based Pasha Hawaii whichwas secured in February 2011 forUS$144m. The ship is expected to bedelivered in 2H2013 and will ply theHawaii and US West Coast trade. Inaddition, an option agreement was alsosigned for the construction of a secondvessel, with some scope variation, for abase price of about US$137m.We continued to demonstrate ourshiprepair capability, especially wherehigh engineering content was requiredin the conversion, modifi cation andupgrading of sophisticated vesseltypes. We received a steady fl ow ofcontracts totalling $373m from bothnaval and commercial customers.In October, ST Marine (Wuhan)Engineering Design Consultancy LtdCo (ST Marine Wuhan EDC) wasincorporated in China as a whollyowned subsidiary of ST Marine.

86 SIMPLY SMARTERMARINEStrategically based in Wuhan,ST Marine Wuhan EDC is set up asan extension of our inhouse engineeringdesign capability to strengthen ourengineering team in Singapore. Byleveraging our well established shipdesign capability, the company will offerengineering design and consultancyservices to tap into the potential Chinahas to offer, as a marine power countryand the world’s largest shipbuildingcountry.Among the major exhibitions that weparticipated in during the year wereBRIDEX, IMDEX Asia, Nor-shipping,Marine Log Tug & Barge and theInternational Workboat Show.SHIP DESIGN AND SHIPBUILDINGIn Singapore, the yards were kept busywith the launching of a 140m LandingPlatform Dock built for a regional navyin March and within the same monthdelivered Pacific Finder, a 68m SeismicSurvey Vessel, to SPO. The vesselwill be deployed for marine seismicsurvey in shallow waters for oil andgas clients in the Asia Pacific region.Another successful delivery was ofSkandi Singapore, a 107.1m DivingSupport Vessel to DOF Subsea, one ofthe world’s leading subsea companieswith a track record in the oil and gasindustry.A 50-tonne modular Hoverbarge, thefirst of its kind built in Singapore, wascompleted in October. Developedin collaboration with ST Marine’ssubsidiary, Hovertrans Solutions, theHoverbarge has undergone successfultrials and is ready for charter.In Mississippi, the US operationsdelivered the final of two 350,000barrel ATBs and two 8,000hp Tugsto OSG Ship Management, Inc. Wealso delivered the final of ten 185,000barrel ATBs and the first of three330,000 barrel ATBs to Crowley, andTwo Offshore Support Vessels delivered during the year – Diving Support Vessel, Skandi Singapore (top)and Seismic Survey Vessel, Pacific Finder (bottom).the TAGM-25 Missile InstrumentationShip to NAVSEA. In addition, we helda dedication ceremony for the firstEgyptian Fast Missile Craft (FMC) andkeel laid a T-AGS 66, USNS Maury,currently under construction at HalterMoss Point in the US. The vessel isan enhanced version of the T-AGS 60Class oceanographic survey ship usedby the US Navy.In the next few years, the Marine sectoris on track to deliver the followingvessels: Anchor Handling Tug SupplyVessels, Landing Platform Dock, T-AGS66 Oceanographic Survey Ship, RoRoCar Truck Carrier, and the Egyptian FMC.SHIP REPAIR AND SERVICESRiding on the burgeoning offshoreoil and gas activities, ST Marinesecured several repair and conversioncontracts. Notably, we completed ourfirst rig conversion job, converting adecommissioned jack-up rig, Hercules191, into a Mobile Offshore ProductionUnit (MOPU) in record time. The fullyfunctional MOPU, renamed Rubicone,is capable of handling 5,000 barrels ofcrude, 200MMscfd of gas processingand 165MMscfd of gas compressionper day. The conversion covered an18m extension of the MOPU legsas well as major work including theinstallation and assembly of production

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201187modules on the platform, the fabricationand installation of new piping, electricaland instrumentation systems onboard.ST Marine is working progressivelyon the upgrading of two classes ofvessels for the Republic of SingaporeNavy (RSN), including detailedsystem design, installation andintegration to enhance the capabilityof the vessels to meet the RSN’soperational requirements. These worksare expected to be completed by2015. We are heartened to receivecommendations from the RSN onthe high quality of work done for thecompleted vessels thus far.Shiprepair projects completed duringthe year included: the repair andconversion of Semac 1, a semisubmersiblepipe lay vessel and CaballoMaya, an offshore diving supportconstruction vessel; major upgradingof Volvox Terranova, a Trailing SuctionHopper Dredger; and double hullingof HMAS Success, a combat logisticsvessel. Other shiprepair projects in thepipeline are: the repair and upgrading ofpipelaying vessel Castoro 8; conversionof the accommodation vessel TrinitySupporterrto a multi-purpose offshorevessel; and renewal of major steel,tank coating work for ballast and cargotanks of chemical tanker Stolt Hill.ENVIRONMENTAL ENGINEERINGAND SERVICESHaving made inroads into theneighbouring region in the last fouryears, STSE, the environmentalengineering arm of ST Marine, isbusying itself with various projectssuch as the installation and testing ofthe equipment for the Waste TransferStation in Donghu Newtech Zonein Wuhan, Hubei, China and partialoperation of the Integrated WasteManagement Facility in Sungai Paku,Brunei. The 110-hectare EngineeredLandfill at Sungai Paku will be one of thelargest in Asia when completed in 2012.In June, STSE set up a branch office inTianjin, China to execute and managethe RMB113m contract signed inSeptember 2010 for the provision ofa proprietary loop-based PneumaticWaste Collection System. The teamhas completed laying the piping systemThe 140m Landing Platform Dock was launchedsuccessfully in March.Brunei’s Integrated Waste Management Facilityunder construction.designed to collect recyclables, nonrecyclablesand food waste in theEco-Business Park of Tianjin Eco-City.This Sino-Singapore Tianjin Eco-City islocated in the strategic Tianjin BinhaiNew Area of about 31.23km 2 and has aplanned population of 350,000.During the year, STSE raised its profileby participating in international tradeexhibitions such as the SingaporeInternational Water Week and theRecycling & Waste Management inBirmingham, UK.First of three 330,000 bbl ATB units delivered to Crowley.

CONTENTSDirectors’ Report 89Statement by Directors 103Independent Auditors’ Report 104FINANCIAL STATEMENTSConsolidated Income Statement 106Consolidated Statement ofComprehensive Income 107Balance Sheets 108Statements of Changes in Equity 110Consolidated Statement of Cash Flows 113Notes to the Financial Statements 117SGX Listing Manual Requirements 226Sectoral Financial Review 227

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201189DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together with the audited financialstatements of the Group and of the Company for the financial year ended 31 December 2011.DirectorsThe directors of the Company in office at the date of this report are as follows:Peter Seah Lim HuatTan Pheng HockKoh Beng SengLG Neo Kian HongDr Tan Kim SiewQuek Tong BoonQuek Poh HuatVenkatachalam KrishnakumarDavinder Singh s/o Amar SinghDr Stanley Lai Tze ChangKhoo Boon HuiCOL Ong Ann Kiat(Chairman)(President and Chief Executive Officer)(Alternate Director to LG Neo Kian Hong)Arrangements to enable directors to acquire shares or debenturesExcept for the Singapore Technologies Engineering Share Option Plan (“ESOP”), Singapore Technologies Engineering Performance Share Plan (“PSP2000”),Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”), Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) andSingapore Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) (collectively the “ST Engineering Share Plans”), neither at the end of nor at any timeduring the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company 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 debentures of the Company or of relatedcorporations either at the beginning or at the end of the financial year or as at 21 January 2012.

90 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars of interests of directorswho held office at the end of the financial year in shares or debentures in the Company and its related corporations were as follows:Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011The CompanyOrdinary r SharesPeter Seah Lim Huat 391,483 494,108Tan Pheng Hock 1,471,422 2,092,629Koh Beng Seng 102,758 175,893Quek Poh Huat 1,016,681 1,104,184Venkatachalam Krishnakumar 60,953 134,656Davinder Singh s/o Amar Singh 8,192 25,138Dr Stanley Lai Tze Chang 5,824 24,471Related CorporationsGlobal Crossing LimitedCommon Stock of US$0.01 eachPeter Seah Lim Huat 25,522 N.A. @Mapletree Commercial Trust Management Ltd.Unit holdings in Mapletree Commercial TrustVenkatachalam Krishnakumar – 100,000Mapletree Industrial Trust Management LtdUnit holdings in Mapletree Industrial TrustQuek Poh Huat 51,000 –Venkatachalam Krishnakumar 8,000 8,000Mapletree Logistics Trust Management Ltd.Unit holdings in Mapletree Logistics TrustQuek Tong Boon 2,000 2,000Singapore Airlines LimitedOrdinary SharesLG Neo Kian Hong 9,000 9,000Dr Tan Kim Siew – 5,000Venkatachalam Krishnakumar 3,733 3,733

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201191DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011Singapore Airlines LimitedS$300 million 2.15% Bonds due 2015Davinder Singh s/o Amar Singh $500,000 $500,000Singapore Telecommunications LimitedOrdinary SharesPeter Seah Lim Huat 3,040 3,040Tan Pheng Hock 3,350 3,350Koh Beng Seng 1,520 1,520LG Neo Kian Hong 8,030 8,030Dr Tan Kim Siew 52,850 52,850Quek Tong Boon 2,030 2,030Quek Poh Huat 35,210 35,210Venkatachalam Krishnakumar – 34,000Davinder Singh s/o Amar Singh 1,810 1,810Khoo Boon Hui 3,087 3,087COL Ong Ann Kiat 2,240 2,240SMRT Corporation LtdOrdinary SharesQuek Tong Boon 4,000 4,000Quek Poh Huat 8,000 8,000COL Ong Ann Kiat 10,000 10,000SP AusNetStapled SecuritiesQuek Poh Huat 256,000 256,000COL Ong Ann Kiat 20,000 20,000StarHub LtdOrdinary SharesPeter Seah Lim Huat 482,110 519,022Tan Pheng Hock 25,150 25,150Venkatachalam Krishnakumar 15,716 15,716STATS ChipPAC Ltd.Ordinary SharesPeter Seah Lim Huat 6,900 6,900

92 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011TeleChoice International LimitedOrdinary r SharesPeter Seah Lim Huat 50,000 50,000Tan Pheng Hock 30,000 30,000Vertex Technology Fund (II) LtdOrdinary SharesKoh Beng Seng 15 15Davinder Singh s/o Amar Singh 500 500Redeemable Preference SharesKoh Beng Seng 15 15Davinder Singh s/o Amar Singh 486 4861 January 2011 31 December 2011 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary r SharesPeter Seah Lim Huat 33,375 – 3.01 10.2.2007 to 9.2.201133,375 – 2.84 11.8.2007 to 10.8.201144,500 44,500 3.23 16.3.2008 to 15.3.201244,500 44,500 3.61 11.8.2008 to 10.8.2012Tan Pheng Hock 225,000 – 2.72 20.2.2002 to 19.2.2011227,500 – 2.68 11.8.2002 to 10.8.2011175,000 175,000 2.29 8.2.2003 to 7.2.2012175,000 175,000 1.92 13.8.2003 to 12.8.2012200,000 200,000 1.79 7.2.2004 to 6.2.2013200,000 200,000 1.86 12.8.2004 to 11.8.2013200,000 200,000 2.09 10.2.2005 to 9.2.2014200,000 200,000 2.12 11.8.2005 to 10.8.2014200,000 200,000 2.37 8.2.2006 to 7.2.2015200,000 200,000 2.57 11.8.2006 to 10.8.2015200,000 200,000 3.01 10.2.2007 to 9.2.2016200,000 200,000 2.84 11.8.2007 to 10.8.2016200,000 200,000 3.23 16.3.2008 to 15.3.2017

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201193DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)1 January 2011 31 December 2011 Exercise price Exercisable period$The CompanyOptions to Subscribe for Ordinary r SharesKoh Beng Seng 27,500 – 3.01 10.2.2007 to 9.2.201127,500 – 2.84 11.8.2007 to 10.8.201127,500 27,500 3.23 16.3.2008 to 15.3.201227,500 27,500 3.61 11.8.2008 to 10.8.2012Quek Poh Huat 33,000 – 3.01 10.2.2007 to 9.2.201133,000 – 2.84 11.8.2007 to 10.8.201133,000 33,000 3.23 16.3.2008 to 15.3.201233,000 33,000 3.61 11.8.2008 to 10.8.2012Venkatachalam Krishnakumar 25,500 – 3.01 10.2.2007 to 9.2.201125,500 – 2.84 11.8.2007 to 10.8.201125,500 25,500 3.23 16.3.2008 to 15.3.201225,500 25,500 3.61 11.8.2008 to 10.8.2012Related CorporationsGlobal Crossing LimitedOptions to Purchase Common Shares of US$0.01 eachPeter Seah Lim Huat 40,000 N.A. @ 10.16 12.1.2005 to 12.1.2014STATS ChipPAC Ltd.Options to Subscribe for Ordinary SharesPeter Seah Lim Huat 70,000 70,000 1.99 6.8.2004 to 5.8.201335,000 35,000 1.91 17.2.2005 to 16.2.2014Global Crossing LimitedRestricted Stock Units of Common Stock of US$0.01 eachPeter Seah Lim Huat 7,229 N.A. @ 8.7.2011

94 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011The CompanyConditional Award of 250,000 Shares under PSP2000for performance period 2008 to 2010Tan Pheng Hock 0 to 375,000 #1 – #2Conditional Award of 250,000 shares under PSP2000for performance period 2009 to 2011Tan Pheng Hock 0 to 425,000 #3 0 to 425,000 #3Conditional Award of 250,000 shares under PSP2000for performance period 2010 to 2012Tan Pheng Hock 0 to 425,000 #3 0 to 425,000 #3Conditional Award of 250,000 shares under PSP2010for performance period 2011 to 2013Tan Pheng Hock – 0 to 425,000 #3Unvested shares under RSP2000 arisingfrom release of Conditional Award of 45,000 sharesfor performance period 2007 to 2008Tan Pheng Hock 8,663 #4 –Unvested shares under RSP2000 arising fromrelease of Conditional Award for performance period1 January 2008 to 31 December 2008Peter Seah Lim Huat (30,500 shares) 5,358 #4 –Koh Beng Seng (15,500 shares) 2,723 #4 –Quek Poh Huat (18,500 shares) 3,250 #4 –Venkatachalam Krishnakumar (18,500 shares) 3,250 #4 –Davinder Singh s/o Amar Singh (14,500 shares) 2,548 #4 –Dr Stanley Lai Tze Chang (5,000 shares) 879 #4 –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201195DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011The CompanyUnvested shares under RSP2000 arising fromrelease of Conditional Award of 96,000 Sharesfor performance period 2008 to 2009Tan Pheng Hock 20,496 #4 10,248 #4Unvested shares under RSP2000 arising fromrelease of Conditional Award for performance period1 January 2009 to 31 December 2009Peter Seah Lim Huat (30,500 shares) 13,034 #4 6,517 #4Koh Beng Seng (15,500 shares) 6,624 #4 3,312 #4Quek Poh Huat (18,500 shares) 7,906 #4 3,953 #4Venkatachalam Krishnakumar (18,500 shares) 7,906 #4 3,953 #4Davinder Singh s/o Amar Singh (14,500 shares) 6,197 #4 3,099 #4Dr Stanley Lai Tze Chang (5,000 shares) 2,137 #4 1,069 #4Time-based restricted shares under RSP2000vested in 2011Peter Seah Lim Huat 24,000 –Koh Beng Seng 12,100 –Quek Poh Huat 14,300 –Venkatachalam Krishnakumar 15,500 –Davinder Singh s/o Amar Singh 11,300 –Dr Stanley Lai Tze Chang 16,700 –Conditional Award of 96,000 Shares under RSP2000for performance period 2009 to 2010Tan Pheng Hock 0 to 144,000 #5 – #6Unvested shares under RSP2000 arising fromrelease of Conditional Award of 96,000 Sharesfor performance period 2009 to 2010Tan Pheng Hock – 37,296 #4Conditional Award of 96,000 Shares under RSP2000for performance period 2010 to 2011Tan Pheng Hock 0 to 144,000 #5 0 to 144,000 #5

96 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)Holdings in the name of the director,spouse or infant children1 January 2011 31 December 2011The CompanyConditional Award of 96,000 Shares under RSP2010for performance period 2011 to 2012Tan Pheng Hock – 0 to 144,000 #5Related CorporationsStarHub LtdUnvested Restricted Shares(Performance period from 01/01/2007 to 31/12/2008)Peter Seah Lim Huat 8,312 #4 –Unvested Restricted Shares(Performance period from 01/01/2008 to 31/12/2009)Peter Seah Lim Huat 5,740 #4 2,740 #4Conditional Award of Restricted Sharesto be delivered after 2010Peter Seah Lim Huat 19,000 #7 –Unvested Restricted Shares(Performance period from 01/01/2009 to 31/12/2010)Peter Seah Lim Huat – 10,930 #4Time-based restricted sharesvested in 2011Peter Seah Lim Huat 20,000 #8 –@Ceased to be a related corporation of Temasek Holdings (Private) Limited during the financial year.#1A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to bereleased is capped at 150% of the conditional award.#2For this period, Mr Tan Pheng Hock was awarded 112,500 new shares upon partial achievement of targets set. The balance of the conditional award covering the periodfrom 2008 to 2010 has thus lapsed.#3A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to bereleased is capped at 170% of the conditional award.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201197DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Directors’ interests in shares or debentures (continued)#4Balance of unvested restricted shares to be released according to the stipulated vesting periods.#5A minimum threshold performance over a two-year period is required for any restricted shares to be released. A specified number of restricted shares to be releasedwill depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.#6For this period, Mr Tan Pheng Hock was awarded 74,592 new shares upon partial achievement of targets set. The balance of the conditional award covering the periodfrom 2009 to 2010 has thus lapsed.#7The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the Company over atwo-year period from 1 January 2009 to 31 December 2010. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 timesthe number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. The final award comprising 16,530shares was granted in March 2011 based on the actual level of achievement of the pre-determined performance targets. The shares under the final award were partiallydelivered in April 2011, and the balance will be delivered in 2012 and 2013.#8The shares under the time-based restricted award was awarded on 18 May 2011.As at 21 January 2012, Mr Tan Pheng Hock has a direct interest of 2,267,629 shares in the Company.Directors’ interests in contractsSince the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a fulltimeemployee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from relatedcorporations and share options/awards granted pursuant to the ST Engineering Share Plans) by reason of a contract made by the Company or a related corporationwith the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except for professionalfees paid to a firm of which a director is a member as shown in the financial statements.Share PlansThe Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the ST Engineering Share Plans.The Committee members are Mr Peter Seah Lim Huat (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang.As at 31 December 2011, no options and conditional awards have been granted to controlling shareholders of the Company or associates of the Company and noemployees have received 5% or more of the total options and conditional awards available under the Share Plans.The aggregate number of new shares issued pursuant to the ESOP, RSP2000 and PSP2000 did not exceed 15% of the issued share capital of the Company andthe aggregate number of new shares issued pursuant to the RSP2010 and PSP2010 did not exceed 8% of the issued share capital of the Company.During the financial year, except as disclosed below, there were no options granted and no shares awarded by the Company to any person to take up unissuedshares of the Company.

98 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Share Plans (continued)(a)ESOP(i)The options granted under the ESOP are as follows:Name of participantOptions granted andaccepted duringthe financial yearunder reviewAggregate optionsgranted andaccepted sincecommencementto end of financialyear under reviewAggregate optionsexercised/lapsed sincecommencementto end of financialyear under reviewAggregate optionsoutstanding asat end of financialyear under reviewDirectors of the CompanyPeter Seah Lim Huat – 530,000 441,000 89,000Tan Pheng Hock – 2,602,500 452,500 2,150,000Koh Beng Seng – 204,000 149,000 55,000Quek Poh Huat – 375,000 309,000 66,000Venkatachalam Krishnakumar – 152,500 101,500 51,000Non-Executive Directors of theCompany and its subsidiaries(including former directors) – 5,405,566 4,718,566 687,000Group Executives – 193,717,858 126,628,251 67,089,607Parent Group Executives and others – 187,320 187,320 –(ii)The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any shareissue of any other company.(iii)During the financial year, 13,690,266 ordinary shares in the Company were issued pursuant to the exercise of options to take up unissuedshares of the Company.(b)PSP2000 / PSP2010 (“PSP”)The PSP is established with the objective of motivating senior management staff to strive for sustained long-term growth and performance in STEngineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are granted conditional on performance targets set based onthe ST Engineering Group corporate objectives.Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribedto be a three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period.A specified number of performance shares shall be released by the ERCC to the recipient and the actual number of performance shares will depend onthe achievement of set targets over the respective performance period. A minimum threshold performance is required for any performance share to bereleased and the actual number of performance shares to be released is capped at 170% of the conditional award.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 201199DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Share Plans (continued)(b)PSP2000 / PSP2010 (“PSP”) (continued)In addition to PSP performance targets being met, the ERCC decided that commencing with the PSP contingent awards for financial year 2009, the finalaward for PSP is conditional upon the performance targets for RSP that has the same end of performance period being met. Known as the plan triggercondition, this is to create alignment between senior management and other employees. The final award for PSP 2009 is therefore conditional on theperformance targets for RSP 2010, which has the same end of performance period in December 2011, being met. As the performance targets for RSP2010 have been made, PSP 2009 which has also met its performance targets will be released.For the financial years from 2007 to 2009, the performance measures used in PSP grants under PSP2000 are Wealth Added and ST Engineering GroupTotal Shareholder Return (“TSR”) against MSCI Asia Pacific ex Japan Industrial Index (“MSCI Index”).In February 2010, the Committee reviewed the continued appropriateness of the 2 performance measures and decided to change the MSCI Index to aDefensive Stock Index, the constituents of which are selected “defensive stock” companies that have similar market risk as ST Engineering and are listedon Singapore Exchange Securities Trading Limited (“SGX”). Therefore, with effect from financial year 2010, the performance measures used in PSP grantsare Wealth Added and ST Engineering Group TSR against Defensive Stock Index.The awards granted under the PSP2000 / PSP2010 are as follows:PSP2000Name of participantConditional awardsgranted duringthe financial yearunder reviewAwards releasedduring the financialyear under reviewAggregateconditional awardsgranted sincecommencementof PSP2000 to endof financial yearunder reviewAggregate awardsreleased sincecommencementof PSP2000 to endof financial yearunder reviewAggregateconditional awardsnot released asat end of financialyear under reviewDirector of the CompanyTan Pheng Hock– 112,500 0 to 4,195,000 562,575 0 to 850,000Group Executives – 587,594 0 to 33,172,800 4,231,242 0 to 4,643,164PSP2010Name of participantConditional awardsgranted duringthe financial yearunder reviewAwards releasedduring the financialyear under reviewAggregateconditional awardsgranted sincecommencementof PSP2010 to endof financial yearunder reviewAggregate awardsreleased sincecommencementof PSP2010 to endof financial yearunder reviewAggregateconditional awardsnot released asat end of financialyear under reviewDirector of the CompanyTan Pheng Hock0 to 425,000 – 0 to 425,000 – 0 to 425,000Group Executives 0 to 2,555,100 – 0 to 2,555,100 – 0 to 2,539,164

100 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Share Plans (continued)(c)RSP2000 / RSP2010 (“RSP”)The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and superior performance inST Engineering Group. It also aims to foster a share ownership culture among staff within the ST Engineering Group and to better align staff’s incentivescheme with shareholders’ interest.Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribedto be a two-year performance period. The actual number of restricted shares delivered will depend on the achievement of set targets over the respectiveperformance period. This will be determined by the ERCC at the end of the qualifying performance period and released to the recipient over a three-yearvesting period in the ratio of 50%, 25% and 25% consecutively.A minimum threshold performance is required for any restricted share to be released while the maximum number of restricted shares to be delivered iscapped at 150% of the conditional award.The medium-term stretched targets measured over a two-year performance period are set based on ST Engineering Group corporate objectives. Theperformance measures used for the two-year performance period are ST Engineering Group EVA Spread and EBITDA Margin.For the year 2011, except for Tan Pheng Hock, the awards granted under the ST Engineering RSP2010 to the Non-Executive Directors are outright shareswith no performance and vesting conditions but with a Moratorium on selling. These shares will form up to 30% of their total compensation with theremaining 70% being their Retainer, Committee and Attendance Fees.The awards granted under the RSP2000 / RSP2010 are as follows:RSP2000Name of participantConditionalawards grantedduring thefinancial yearunder reviewAwards releasedduring thefinancial yearunder reviewAggregateconditionalawardsgranted sincecommencementof RSP2000 toend of financialyear underreviewAggregateawardsreleased sincecommencementof RSP2000 toend of financialyear underreviewAggregateawards notreleasedas at end offinancial yearAggregateconditionalawards notreleasedas at end offinancial yearunder reviewDirectors of the CompanyPeter Seah Lim Huat – 35,875 0 to 115,500 53,108 6,517 –Tan Pheng Hock – 56,207 0 to 499,500 102,690 47,544 0 to 144,000Koh Beng Seng – 18,135 0 to 58,600 26,893 3,312 –Quek Poh Huat – 21,503 0 to 69,800 31,956 3,953 –Venkatachalam Krishnakumar – 22,703 0 to 71,000 33,156 3,953 –Davinder Singh s/o Amar Singh – 16,946 0 to 54,800 25,138 3,099 –Dr Stanley Lai Tze Chang – 18,647 0 to 31,700 21,471 1,069 –Non-Executive Directors of theCompany and its subsidiaries – 240,849 0 to 812,050 368,159 40,504 –Group Executives – 4,205,498 0 to 38,301,713 7,129,252 3,794,973 0 to 11,389,993

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011101DIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)Share Plans (continued)(c)RSP2000 / RSP2010 (“RSP”) (continued)RSP2010Name of participantConditionalawards grantedduring thefinancial yearunder reviewAwards releasedduring thefinancial yearunder reviewAggregateconditionalawardsgranted sincecommencementof RSP2010 toend of financialyear underreviewAggregateawardsreleased sincecommencementof RSP2010 toend of financialyear underreviewAggregateawards notreleasedas at end offinancial yearAggregateconditionalawards notreleasedas at end offinancial yearunder reviewDirector of the CompanyTan Pheng Hock0 to 144,000 – 0 to 144,000 – – 0 to 144,000Group Executives 0 to 11,469,961 174,950 0 to 11,469,961 174,950 174,950 0 to 10,521,131Audit CommitteeThe Audit Committee comprises three independent non-executive directors, one of whom is also the Chairman of the Committee. The members of the AuditCommittee at the date of this report are as follows:Koh Beng Seng (Chairman)Venkatachalam KrishnakumarDr Stanley Lai Tze ChangThe Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50. The Audit Committee met duringthe year to review the scope of the internal audit functions and the scope of work of the statutory auditors, and the results arising therefrom, including theirevaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company’s officers to the auditors. The consolidatedfinancial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submission to the directors ofthe 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 bythe Group and the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of the internalauditors, reviewed interested person transactions.The Audit Committee has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcomingAnnual General Meeting of the Company.

102 SIMPLY SMARTERDIRECTORS’ REPORTas at 31 December 2011(Currency - Singapore dollars unless otherwise stated)AuditorsThe Auditors, KPMG LLP, have indicated their willingness to accept re-appointment.On behalf of the Board of DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore23 February 2012

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011103STATEMENT BY DIRECTORSWe, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion of the Directors:(a)the accompanying balance sheets, consolidated income statement, consolidated statement of comprehensive income, statements of changes in equity,and consolidated statement of cash flows together with notes thereto set out on pages 106 to 225 are drawn up so as to give a true and fair view of thestate of affairs of the Company and of the Group as at 31 December 2011, and changes in equity of the Company and of the Group, the results of thebusiness and cash flows of the Group for the year ended on that date; and(b)at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.On behalf of the Board of DirectorsPeter Seah Lim HuatDirectorTan Pheng HockDirectorSingapore23 February 2012

104 SIMPLY SMARTERINDEPENDENT AUDITORS’ REPORTto the Members of Singapore Technologies Engineering LtdReport on the financial statementsWe have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its subsidiaries (collectively the “Group”),which comprise the balance sheets of the Group and the Company as at 31 December 2011, the statements of changes in equity of the Group and the Company,the consolidated income statement, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Group for the yearthen ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 106 to 225.Management’s responsibility for the financial statementsManagement is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies’Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient toprovide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and thatthey are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards onAuditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected dependon the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011105INDEPENDENT AUDITORS’ REPORTto the Members of Singapore Technologies Engineering LtdOpinionIn our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawnup in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and ofthe Company as at 31 December 2011 and the changes in equity of the Group and of the Company, the results and cash flows of the Group for the year endedon that date.Report on other legal and regulatory requirementsIn our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which weare the auditors have been properly kept in accordance with the provisions of the Act.KPMG LLPPublic Accountants andCertified Public AccountantsSingapore23 February 2012

106 SIMPLY SMARTERCONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2011(Currency - Singapore dollars)GroupNote 2011 2010$’000 $’0004 5,990,878 5,984,473Cost of sales (4,685,920) (4,721,022)Gross profit 1,304,958 1,263,451Distribution and selling expenses (168,315) (165,602)Administrative expenses (423,018) (407,286)Other operating expenses (105,953) (103,880)Profit from operations 5 607,672 586,683Other income, net 8 32,312 39,998Finance income 45,070 44,091Finance costs (64,446) (87,416)Finance costs, net 9 (19,376) (43,325)Share of results of associates and jointly controlled entities 34,617 44,119Profit before taxation 655,225 627,475Taxation 10 (114,564) (122,623)Profit for the year 540,661 504,852Attributable to:Shareholders of the Company 527,544 491,005Non-controlling interests 13,117 13,847540,661 504,852Earnings per share (cents) 11Basic 17.28 16.21Diluted 17.24 16.13The accompanying notes are an integral part of the financial statements.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011107CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2011(Currency - Singapore dollars)Note 2011 2010$’000 $’000Profit for the year 540,661 504,852Other comprehensive incomeNet fair value changes on available-for-sale financial assets 41 (11,434) (848)Net fair value changes on effective portion of cash flow hedges (8,386) (12,629)Foreign currency translation differences 21,476 (82,111)Share of foreign currency translation differences of associates and jointly controlled entities 41 4,310 (8,082)Reclassification adjustment of foreign currency translation reserve to profit or lossarising from disposal of foreign entities 41 2,817 30Other comprehensive income for the year, net of tax 8,783 (103,640)Total comprehensive income for the year 549,444 401,212Total comprehensive income attributable to:Shareholders of the Company 534,744 390,467Non-controlling interests 14,700 10,745549,444 401,212The accompanying notes are an integral part of the financial statements.

108 SIMPLY SMARTERBALANCE SHEETSas at 31 December 2011(Currency - Singapore dollars)GroupCompanyNote 2011 2010 2011 2010$’000 $’000 $’000 $’000ASSETSNon-current assetsProperty, plant and equipment 12 1,356,750 1,301,543 1,716 433Subsidiaries 13 – – 663,617 594,995Associates and jointly controlled entities 14 320,894 281,171 17,657 17,657Investments 15 11,611 16,190 – –Intangible assets 16 564,238 580,523 – –Investment property 17 1,509 1,666 – –Long-term receivables, non-current 18 38,255 36,375 – –Amounts due from related parties, non-current 23 7,330 7,377 214,446 –Finance lease receivables, non-current 19 14,482 6,552 – –Derivative financial instruments, non-current 48 12,033 566 – –Deferred tax assets 20 113,167 118,794 – –Current assets2,440,269 2,350,757 897,436 613,085Inventories and work-in-progress 21 1,593,670 1,470,429 – –Trade receivables 22 1,187,503 1,019,805 – –Amounts due from related parties, current 23 37,332 21,872 683,600 761,214Advances and other receivables 24 340,070 590,248 4,653 1,281Long-term receivables, current 18 12,925 10,428 19 77Finance lease receivables, current 19 26,163 14,479 – –Short-term investments 25 402,799 198,464 – –Bank balances and other liquid funds 26 1,366,452 1,591,727 301,859 336,8114,966,914 4,917,452 990,131 1,099,383Total assets7,407,183 7,268,209 1,887,567 1,712,468EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 512,061 614,342 – –Trade payables and accruals 27 1,690,522 1,589,009 36,136 29,053Amounts due to related parties, current 28 29,340 8,294 269,076 393,996Provisions 29 214,747 210,390 – –Progress billings in excess of work-in-progress 21 656,163 567,193 – –Provision for taxation 168,241 187,020 3,954 2,833Short-term bank loans 30 204,084 63,404 17,541 –Lease obligations, current 31 2,934 2,741 – –Long-term bank loans, current 34 41 307,047 – –Other loans, current 35 758 1,869 – –3,478,891 3,551,309 326,707 425,882Net current assets 1,488,023 1,366,143 663,424 673,501

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011109BALANCE SHEETSas at 31 December 2011(Currency - Singapore dollars)GroupCompanyNote 2011 2010 2011 2010$’000 $’000 $’000 $’000Advance payments from customers, non-current 759,004 917,939 – –Deferred income 32 26,695 13,411 – –Deferred tax liabilities 33 84,090 58,216 755 426Lease obligations, non-current 31 1,245 3,883 – –Long-term bank loans, non-current 34 507,774 327,118 – –Bonds 36 646,562 641,108 – –Other loans, non-current 35 856 991 – –Other long-term payables, non-current 37 2,500 2,500 – –Derivative financial instruments, non-current 48 23,094 24,698 – –Amounts due to related parties, non-current 28 364 202 227,321 54,0002,052,184 1,990,066 228,076 54,426Total liabilities 5,531,075 5,541,375 554,783 480,308Net assets 1,876,108 1,726,834 1,332,784 1,232,160Share capital and reservesShare capital 38 723,411 677,590 723,411 677,590Capital reserves 40 116,323 116,323 – –Other reserves 41 (106,552) (123,180) 72,496 66,586Retained earnings 42 1,033,013 950,802 536,877 487,9841,766,195 1,621,535 1,332,784 1,232,160Non-controlling interests 109,913 105,299 – –1,876,108 1,726,834 1,332,784 1,232,160Total equity and liabilities 7,407,183 7,268,209 1,887,567 1,712,468The accompanying notes are an integral part of the financial statements.

110 SIMPLY SMARTERSTATEMENTS OF CHANGES IN EQUITYfor the year ended 31 December 2011(Currency - Singapore dollars)NoteShare Capital Other RetainedNon-controlling Totalcapital reserves reserves earnings Total interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2010 611,808 116,323 (22,793) 862,764 1,568,102 108,094 1,676,196Total comprehensive income for the yearProfit for the year – – – 491,005 491,005 13,847 504,852Other comprehensive incomeNet fair value changes on available-for-salefinancial assets 41 – – (848) – (848) – (848)Net fair value changes on effective portion of cashflow hedges 41 – – (12,633) – (12,633) 4 (12,629)Foreign currency translation differences 41 – – (79,005) – (79,005) (3,106) (82,111)Share of foreign currency translation differences ofassociates and jointly controlled entities 41 – – (8,082) – (8,082) – (8,082)Reclassification adjustment of foreign currencytranslation reserve to profit or loss arising fromdisposal of a foreign entity 41 – – 30 – 30 – 30Other comprehensive income for the year, net of tax – – (100,538) – (100,538) (3,102) (103,640)Total comprehensive income for the year – – (100,538) 491,005 390,467 10,745 401,212Transactions with owners of the Company,recognised directly in equityContributions by and distributions to ownersof the CompanyIssue of shares 65,782 – (7,328) – 58,454 (52) 58,402Capital contribution by non-controlling interests – – – – – 1,042 1,042Cost of share-based payment – – 12,068 – 12,068 113 12,181Dividends paid 43 – – – (402,238) (402,238) – (402,238)Dividends paid to non-controlling interests – – – – – (13,460) (13,460)Total contributions by and distributions to owners ofthe Company 65,782 – 4,740 (402,238) (331,716) (12,357) (344,073)Changes in ownership interests insubsidiariesAcquisition of non-controlling interests insubsidiaries representing total changes inownership interests in subsidiaries that do notresult in a loss of control – – (5,318) – (5,318) 75 (5,243)Disposal of a subsidiary – – – – – (1,258) (1,258)Total transactions with owners of the Company 65,782 – (578) (402,238) (337,034) (13,540) (350,574)Transfer from retained earnings to statutory reserve – – 729 (729) – – –At 31.12.2010 677,590 116,323 (123,180) 950,802 1,621,535 105,299 1,726,834

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011111STATEMENTS OF CHANGES IN EQUITYfor the year ended 31 December 2011(Currency - Singapore dollars)NoteShare Capital Other RetainedNon-controlling Totalcapital reserves reserves earnings Total interests equity$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2011 677,590 116,323 (123,180) 950,802 1,621,535 105,299 1,726,834Total comprehensive income for the yearProfit for the year – – – 527,544 527,544 13,117 540,661Other comprehensive incomeNet fair value changes on available-for-salefinancial assets 41 – – (11,434) – (11,434) – (11,434)Net fair value changes on effective portion of cashflow hedges 41 – – (7,177) – (7,177) (1,209) (8,386)Foreign currency translation differences 41 – – 18,684 – 18,684 2,792 21,476Share of foreign currency translation differences ofassociates and jointly controlled entities 41 – – 4,310 – 4,310 – 4,310Reclassification adjustment of foreign currencytranslation reserve to profit or loss arising fromdisposal of foreign entities 41 – – 2,817 – 2,817 – 2,817Other comprehensive income for the year, net of tax – – 7,200 – 7,200 1,583 8,783Total comprehensive income for the year – – 7,200 527,544 534,744 14,700 549,444Transactions with owners of the Company,recognised directly in equityContributions by and distributions to ownersof the CompanyIssue of shares 45,821 – (10,656) – 35,165 – 35,165Capital contribution by non-controlling interests – – – – – 849 849Cost of share-based payment – – 16,475 – 16,475 91 16,566Dividends paid 43 – – – (444,176) (444,176) – (444,176)Dividends paid to non-controlling interests – – – – – (6,077) (6,077)Total contributions by and distributions to owners ofthe Company 45,821 – 5,819 (444,176) (392,536) (5,137) (397,673)Changes in ownership interests insubsidiariesAcquisition of non-controlling interests insubsidiaries representing total changes inownership interests in subsidiaries that do notresult in a loss of control – – 2,429 – 2,429 (4,691) (2,262)Disposal of a subsidiary – – 23 – 23 (258) (235)Total transactions with owners of the Company 45,821 – 8,271 (444,176) (390,084) (10,086) (400,170)Transfer from retained earnings to statutory reserve – – 1,157 (1,157) – – –At 31.12.2011 723,411 116,323 (106,552) 1,033,013 1,766,195 109,913 1,876,108

112 SIMPLY SMARTERSTATEMENTS OF CHANGES IN EQUITYfor the year ended 31 December 2011(Currency - Singapore dollars)NoteSharecapitalShare-basedpaymentreserveRetainedearningsTotal$’000 $’000 $’000 $’000The CompanyAt 1.1.2010 611,808 61,790 414,437 1,088,035Total comprehensive income for the yearProfit for the year – – 475,785 475,785Total comprehensive income for the year – – 475,785 475,785Transactions with owners of the Company,recognised directly in equityContributions by and distributions to ownersof the CompanyIssue of shares 65,782 (7,380) – 58,402Cost of share-based payment – 12,176 – 12,176Dividends paid 43 – – (402,238) (402,238)Total contributions by and distributions to owners 65,782 4,796 (402,238) (331,660)At 31.12.2010 677,590 66,586 487,984 1,232,160At 1.1.2011 677,590 66,586 487,984 1,232,160Total comprehensive income for the yearProfit for the year – – 493,069 493,069Total comprehensive income for the year – – 493,069 493,069Transactions with owners of the Company,recognised directly in equityContributions by and distributions to ownersof the CompanyIssue of shares 45,821 (10,656) – 35,165Cost of share-based payment – 16,566 – 16,566Dividends paid 43 – – (444,176) (444,176)Total contributions by and distributions to owners 45,821 5,910 (444,176) (392,445)At 31.12.2011 723,411 72,496 536,877 1,332,784The accompanying notes are an integral part of the financial statements.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011113CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2011(Currency - Singapore dollars)2011 2010$’000 $’000Cash flows from operating activitiesProfit before taxation including share of results of associates and jointly controlled entities 655,225 627,475Adjustments:Share of results of associates and jointly controlled entities (34,617) (44,119)Depreciation charge 125,784 120,940Impairment losses on investments 19 417Property, plant and equipment written off 7,455 7,493Write-back of impairment losses of property, plant and equipment – (14)Gain on disposal of property, plant and equipment (4,028) (2,813)Gain on disposal of investments (5,618) (10,849)Gain on disposal of subsidiaries (1,476) (429)Gain on disposal of associates (441) (81)Loss on dilution of an associate – 115Impairment losses on goodwill 3,240 3,741Share-based payment expense 16,566 12,181Changes in fair value of financial instruments and hedged items (407) 9,343Interest expenses 50,623 56,190Interest income (20,190) (20,462)Dividends from investments (221) (30)Amortisation of other intangible assets 9,275 11,090Other intangible assets written off – 90Impairment losses on other intangible assets 6,964 4,938Operating profit before working capital changes 808,153 775,216(Increase)/decrease in:Inventories and work-in-progress (118,522) (137,305)Progress billings in excess of work-in-progress 88,970 9,864Trade receivables (167,316) 26,564Advance payments to suppliers 190,800 (145,649)Other receivables, deposits and prepayments (18,560) 3,032Holding company and related corporations balances 673 (1,223)Associates 79 850Jointly controlled entities 4,996 5,619Trade payables 123,114 88,799Advance payments from customers (261,163) 197,044Other payables, accruals and provisions (20,807) 83,049Loans to staff and third parties (4,151) (9,688)Deferred income 13,284 (1,135)Foreign currency translation of foreign operations 12,898 (17,347)Cash generated from operations 652,448 877,690Interest received 20,056 21,387Income tax paid (86,672) (88,318)Net cash from operating activities 585,832 810,759

114 SIMPLY SMARTERCONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2011(Currency - Singapore dollars)Note 2011 2010$’000 $’000Proceeds from sale of property, plant and equipment 7,905 7,673Proceeds from disposal of associates 449 410Dividends from associates and jointly controlled entities 25,651 24,184Dividends from investments 221 30Proceeds from sale and maturity of investments 95,907 238,608Purchase of property, plant and equipment (199,283) (323,508)Purchase of investments (297,326) (207,273)Loan to associates and jointly controlled entities – (515)Repayment of loan by an associate – 241Investment in associates (28,939) (2,243)Investment in jointly controlled entities (2,260) (979)Acquisition of other intangible assets (2,803) (4,707)Acquisition of controlling interests in subsidiaries (1,810) (793)Disposal of subsidiaries (528) 1,218Reduction in cost of investment in a subsidiary 5,733 –Net cash used in investing activities (397,083) (267,654)Cash flows from financing activitiesCapital contribution from non-controlling interests of subsidiaries 849 1,042Proceeds from issue of shares 35,165 58,402Loan from non-controlling shareholders 615 –Repayment of loan to non-controlling shareholders (1,731) –Proceeds from other loans 1,465 1,641Repayment of other loans (230) (221)Repayment of lease obligations (2,500) (1,624)Proceeds from bank loans 457,121 69,310Repayment of bank loans (406,814) (65,893)Acquisition of non-controlling interests in subsidiaries (2,262) (3,085)Dividends paid to shareholders of the Company (444,176) (402,238)Dividends paid to non-controlling interests (6,077) (13,460)Interest paid (49,975) (58,723)Net cash used in financing activities (418,550) (414,849)Net (decrease)/increase in cash and cash equivalents (229,801) 128,256Cash and cash equivalents at beginning of the year 1,591,727 1,513,757Exchange difference on cash and cash equivalents at beginning of the year 4,526 (50,286)Cash and cash equivalents at end of the year 26 1,366,452 1,591,727

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011115CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2011(Currency - Singapore dollars)Acquisition of controlling interests in subsidiaries in 2011During the year, the Group acquired 100% of the equity interests of DRB Aviation Consultants, Inc (“DRB Aviation”) for a consideration of $1,835,000.From September 2011, DRB Aviation contributed revenue of $1,000 and net loss of $235,000 to the Group. If the acquisition had occurred on 1 January 2011,management estimates that the consolidated revenue would have been $5,994.0 million and the consolidated profit attributable to shareholders for the year wouldhave been $527.5 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition wouldhave been the same if the acquisition had occurred on 1 January 2011.The final allocation of the purchase price to the identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination is currentlybeing determined and has not been completed. In the meantime, a provisional goodwill of $785,000, which results from the difference between the purchaseconsideration and the adjusted carrying amounts of the assets and liabilities acquired, is reported under “Intangible assets”.The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:Recognised on Carrying amountacquisition before acquisition$’000 $’000Property, plant and equipment 6 6Intangible assets 896 –Inventories and work-in-progress 26 26Advances and other receivables 693 693Cash and cash equivalents 25 251,646 750Trade payables and accruals (596) (596)(596) (596)Net identifiable assets 1,050 154Goodwill arising on consolidation 785Total purchase consideration 1,835Cash outflow on acquisition in 2011:Cost of acquisition 1,835Net cash acquired with the subsidiary (25)Net cash outflow on acquisition 1,810

116 SIMPLY SMARTERCONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2011(Currency - Singapore dollars)Acquisition of controlling interests in subsidiaries in 2010In prior year, the Group obtained control of Knowledge Alive Pte. Ltd. and its wholly-owned subsidiary, COMAT Training Services Pte Ltd by acquiring 54.53% equityinterest for a consideration of $1,225,000. As a result, the Group’s equity interest in Knowledge Alive Pte. Ltd. and its subsidiary increased from 45.47% to 100%.The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:Recognised on Carrying amountacquisition before acquisition$’000 $’000Property, plant and equipment 283 283Inventories and work-in-progress 212 212Trade receivables 712 712Advances and other receivables 184 184Cash and cash equivalents 873 8732,264 2,264Trade payables and accruals (1,091) (1,091)Provision for taxation (33) (33)Deferred tax liabilities (19) (19)(1,143) (1,143)Net identifiable assets 1,121 1,121Goodwill arising on consolidation 104Total purchase consideration 1,225Cost of acquisitions:Cash paid in 2010 for a subsidiary acquired in previous year 949Cash paid in 2010 717Reclassification from investment in associates 508Total cost of acquisition 2,174Cash outflow on acquisitions in 2010:Cost of acquisition (1,666)Net cash acquired with the subsidiaries 873Net cash outflow on acquisition (793)The accompanying notes are an integral part of the financial statements.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011117NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)These notes form an integral part of and should be read in conjunction with the accompanying financial statements.1. GeneralThe Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principal placeof business is 51 Cuppage Road #09-08, Singapore 229469.The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated in Singapore.The principal activities of the Company are those of an investment holding company and the provision of engineering and related services. The principalactivities of the subsidiaries are set out in Note 13 to the financial statements.The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Technologies Engineering Ltdand its subsidiaries (collectively referred to as the “Group”) as at 31 December 2011 and for the year then ended were authorised and approved by theBoard of Directors for issuance on 23 February 2012.2. Basis of financial statements preparationThe financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below.The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.Except for changes in accounting policies discussed in Note 3(t), the accounting policies set out below have been consistently applied by the Companyand the Group and are consistent with those used in the previous year.3. Summary of significant accounting policies(a)Basis of consolidation(i)Business combinationsBusiness combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control istransferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from itsactivities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts aregenerally recognised in profit or loss.Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs inconnection with a business combination are expensed as incurred.Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified asequity, it is not re-measured and settlement is accounted for within equity. Otherwise, any subsequent changes to the fair value of thecontingent consideration are recognised in profit or loss.

118 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(a)Basis of consolidation n (continued)(ii)SubsidiariesSubsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financialstatements from the date that control commences until the date that control ceases.Consistent accounting policies are applied to like transactions and events in similar circumstances. Losses applicable to the noncontrollinginterests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling intereststo have a deficit balance.In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less accumulatedimpairment losses.(iii)Acquisitions of entities under amalgamationThe Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, SingaporeTechnologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred to as the “Scheme Companies”) resulted fromthe amalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter50 in 1997.As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has been adopted inthe preparation of the consolidated financial statements in connection with the amalgamation.Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded at theirexisting carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued (plus anyadditional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired is recorded asmerger reserve.(iv)Loss of controlUpon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the othercomponents of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. Ifthe Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost.Subsequently, it is accounted for as an equity-accounted investee or as an available-for-sale financial asset, depending on the level ofinfluence retained.(v)Investments in associates and jointly controlled entities (equity-accounted investees)Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies.Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of the entity. Jointlycontrolled entities are those entities over whose activities the Group has joint control, established by contractual agreement andrequiring unanimous consent for strategic financial and operating decisions.Investments in associates and jointly controlled entities are accounted for by the Group using the equity method and are recognisedinitially at cost.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011119NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(a)Basis of consolidation n (continued)(v)Investments in associates and jointly controlled entities (equity-accounted investees) (continued)The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income from the datethat significant influence or joint control commences until the date that significant influence or joint control ceases. The reporting datesfor the associates and jointly controlled entities and the Group are identical and the accounting policies conform to those used by theGroup for like transactions and events in similar circumstances.When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, includingany long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Grouphas an obligation or has made payments on behalf of the investee.In the Company’s separate financial statements, investments in associates and jointly controlled entities are accounted for at cost lessaccumulated impairment losses.(vi)Acquisition of non-controlling interestsAcquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore thecarrying amounts of assets and liabilities are not changed and goodwill is not recognised as a result of such transactions. The adjustmentsto non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the fair valueof the consideration paid and the carrying value of the additional interest acquired will be recognised within equity.(vii)Transactions eliminated on consolidationAll significant inter-company balances and transactions are eliminated on consolidation.(b)Foreign currency(i)Foreign currency transactionsTransactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and arerecorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Themajor functional currencies of the Group entities are Singapore dollars, United States dollars and Euro. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date.Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rates as atthe dates of the transactions. 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.Monetary item carried at amortised cost in the functional currency at the beginning of the year, adjusted for effective interest andpayments during the year, and the amortised cost in foreign currency are translated at the exchange rate at the end of the year.Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslationof available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation that iseffective (see note c(iii) below), or qualifying cash flow hedges, which are recognised in other comprehensive income.

120 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(b)Foreign currency (continued)(ii)Foreign operationsThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated toSingapore dollars at exchange rates at the reporting date. The income and expenses of foreign operation are translated to Singaporedollars at exchange rates at the dates of the transactions.Foreign currency differences are recognised in other comprehensive income and presented in the foreign currency translation reservein equity. However, if the foreign operation is a non wholly-owned subsidiary, then the relevant proportionate share of the translationdifference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influenceor joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassifiedto profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includesa foreign operation while retaining control, the relevant proportion of the cumulative amount is re-attributed to non-controlling interests.When the Group disposes of only part of its investment in an associate or jointly controlled entity that includes a foreign operation whileretaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeablefuture, foreign exchange gains or losses arising from such a monetary item are considered to form part of a net investment in a foreignoperation and are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity.(c)Financial instruments(i)Non-derivative financial assetsFinancial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisionsof the financial instrument. All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date thatthe Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that requiredelivery of assets within the period generally established by regulation or convention in the marketplace concerned.The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rightsto receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownershipof the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognisedas a separate asset or liability.Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has alegal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit orloss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. The Group determines theclassification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at eachfinancial year-end.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011121NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(c)Financial instruments s (continued)(i)Non-derivative financial assets (continued)Financial assets at fair value through profit or lossFinancial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading arefinancial assets acquired principally for the purpose of selling in the near term. Financial assets at fair value through profit or loss aremeasured at fair value and gains or losses arising from change in the fair values are recognised in profit or loss. Attributable transactioncosts are recognised in profit or loss as incurred.Loans and receivablesLoans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets arerecognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivablesare measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in profitor loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.Loans and receivables comprise cash and cash equivalents and trade and other receivables (including finance lease receivables andamounts due from related parties). Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits.Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of cash and that aresubject to insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents also includebank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.Held-to-maturity financial assetsFinancial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has thepositive intention and ability to hold the financial assets to maturity. Held-to-maturity financial assets are recognised initially at fair valueplus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured atamortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in the income statementwhen the held-to-maturity investments are derecognised or impaired, and through the amortisation process. Any sale or reclassificationof a more than insignificant amount of held-to-maturity investments not close to their maturity would result in the reclassification of allheld-to-maturity investments as available for sale. It would also prevent the Group from classifying investment securities as held-tomaturityfor the current and the following two financial years.Available-for-sale financial assetsAvailable-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified in any ofthe three preceding categories. Available-for-sale financial assets are recognised initially at fair value plus any directly attributabletransaction costs. After initial recognition, an available-for-sale financial asset is measured at fair value, with gains or losses beingrecognised in other comprehensive income and presented in the fair value reserve in equity, except for impairment losses andforeign exchange differences on available-for-sale debt instruments, until the financial asset is derecognised. Upon derecognition,the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to income statement as areclassification adjustment.

122 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(c)Financial instruments s (continued)(i)Non-derivative financial assets (continued)Available-for-sale financial assets (continued)The fair value of available-for-sale financial assets that are actively traded in organised financial markets is determined by referenceto quoted market prices at the close of business on the balance sheet date. For those financial assets where there is no activemarket, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions;reference to the current market value of another instrument, which is substantially the same; discounted cash flow analysis andoption pricing models.For those financial assets where there is no active market and where fair value cannot be reliably measured, they are measured at cost.Available-for-sale financial assets comprise equity securities and bonds.(ii)Non-derivative financial liabilitiesFinancial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisionsof the financial instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled orexpired.Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has alegal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.Non-derivative financial liabilities are recognised initially at fair value plus directly attributable transaction costs. Subsequent to initialrecognition, these financial liabilities are measured at amortised cost using the effective interest method.The Group’s financial liabilities comprise bank overdrafts, trade and other payables (including lease obligations and amounts due torelated parties) and borrowings.Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash and cash equivalents are included as acomponent of cash and cash equivalents for the purpose of the statement of cash flows.(iii)Derivative financial instruments and hedge accountingThe Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and cross currency swapsto hedge its risks associated with foreign currency and interest rate fluctuations. From time to time, the Group also uses monetaryassets and liabilities and embedded derivatives as hedging instruments to hedge its risks associated with foreign currency fluctuations.Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks ofthe host contract and the embedded derivatives are not closely related, a separate instrument with the same terms as the embeddedderivatives would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011123NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(c)Financial instruments s (continued)(iii)Derivative financial instruments and hedge accounting (continued)On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge relationship to which theGroup wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentationincludes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and the methodsused in assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cashflows attributable to the hedged risk. The Group makes an assessment, both at the inception of the hedge relationship as well as onan ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair valueor cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within arange of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and shouldpresent an exposure to variations in cash flows that could ultimately affect profit or loss.Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into. Attributabletransaction costs are recognised in profit or loss as incurred. Derivatives are carried as assets when the fair value is positive and asliabilities when the fair value is negative. Subsequent to initial recognition, derivatives are measured at fair value, and changes thereinare accounted for as described below.Fair value hedgesThe gain or loss from re-measuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currencycomponent of its carrying amount measured in accordance with Note 3(b)(i) (for a non-derivative hedging instrument) is recognised inprofit or loss. The gain or loss on the hedged item attributable to the hedged risk is recognised in profit or loss.For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through profit or loss overthe remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument for which the effective interest methodis used is amortised in the income statement. Amortisation may begin as soon as an adjustment exists and shall begin no later thanwhen the hedged item ceases to 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 in the fair value of thefirm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised inprofit or loss. The changes in the fair value of the hedging instrument are also recognised in profit or loss.The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, the hedgeno longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of ahedging instrument for which the effective interest method is used is amortised in the income statement. Amortisation may begin assoon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair valueattributable to the risk being hedged.Cash flow hedgesThe portion of the gain or loss on a derivative designated as the hedging instrument that is determined to be an effective hedge isrecognised in other comprehensive income and presented in the fair value reserve in equity, while the ineffective portion is recognisedimmediately in profit or loss.

124 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(c)Financial instruments s (continued)(iii)Derivative financial instruments and hedge accounting (continued)Cash flow hedges (continued)Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when hedgedfinancial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedged item is a nonfinancialasset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. Ifthe hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designation as a hedge isrevoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is notexpected to occur, the amount is then transferred to profit or loss.Hedge of net investment in foreign operationsThe Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investmenthedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translationdifferences on the financial liabilities relating to the effective portion of the hedge are recognised in other comprehensive income andpresented in the foreign currency translation reserve in equity, while the ineffective portion of the hedge are recognised immediately inprofit or loss. On the disposal or partial disposal of the foreign operation, the amounts previously recognised in equity are transferredto profit or loss as part of the gain or loss on disposal.Separable embedded derivatives and other derivativesAny gains or losses arising from changes in fair value on derivatives that are not designated in hedging relationships are recognisedimmediately in profit or loss.(d)Property, plant and equipment and depreciation(i)Recognition and measurementAll items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment isrecognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group andthe cost of the item can be measured reliably.Cost includes expenditure that is directly attributable to the acquisition of the asset and capitalised borrowing costs. The cost of selfconstructedassets also includes the cost of material and direct labour, any other costs directly attributable to bringing the assets to aworking condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they arelocated. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchasesof property, plant and equipment.Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder ofthat asset, that component is depreciated separately.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011125NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(d)Property, plant and equipment and depreciation (continued)(i)Recognition and measurement (continued)Subsequent to initial measurement, except for certain property, plant and equipment which were subject to a one-time revaluation in1972 (“the 1972 assets”), property, plant and equipment are measured at cost, net of depreciation and any impairment loss. The 1972assets stated at valuation are exempted from conducting a regular frequency of revaluation but are measured net of depreciation, andany impairment loss.The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal withthe carrying amount of property, plant and equipment, and is recognised net within other income in profit or loss.The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it isprobable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably.The carrying amount of the replaced component is derecognised.(ii)DepreciationDepreciation is based on the cost of an asset less its residual value.Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each item of property, plant andequipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certainthat the Group will obtain ownership by the end of the lease term. Property, plant and equipment purchased specifically for projectsare depreciated over the useful life of the class of property, plant and equipment or the duration of the project, whichever is shorter.Construction-in-progress is not depreciated until each stage of development is completed and becomes ready for use. Freehold landis not depreciated.The estimated useful lives for the current period are as follows:Buildings – 15 to 50 yearsLeasehold land – Over the period of the lease of between 5 to 50 yearsImprovements to premises – 3 to 30 yearsWharves and slipways – 20 yearsSyncrolift and floating docks – 15 yearsBoats and barges – 10 yearsPlant and machinery – 5 to 25 yearsProduction tools and equipment – 3 to 15 yearsFurniture, fittings, office equipment and computers – 2 to 5 yearsTransportation equipment and vehicles – 5 yearsAircraft and aircraft engines – 15 to 30 yearsThe residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method andperiod of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefitsembodied in the items of property, plant and equipment. Changes in the expected useful life or the expected pattern of consumption offuture economic benefits embodied in the asset is accounted for by changing the depreciation period or method, as appropriate, andtreated as changes in accounting estimates.

126 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(e)Intangible assets(i)GoodwillGoodwill represents the excess of: over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairmentlosses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment,and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amountof the equity-accounted investee.(ii)Research and development expenditureResearch expenditure is recognised in profit or loss as and when incurred.Development expenditure on an individual project are recognised as an intangible asset when the Group can demonstrate the technicalfeasibility of completing the development so that it will be available for use or sale, its intention to complete and its ability to useor sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability tomeasure reliably the expenditure during the development. The expenditure capitalised includes the cost of materials, direct labour,overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. In any othercircumstances, development costs are recognised in profit or loss as incurred.Development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.(iii)Film cost inventoryFilm cost inventory comprise film production costs which are recognised as an intangible asset when the Group can demonstrate thetechnical feasibility of completing the film so that it will be available for use or sale, its intention to complete and its ability to use orsell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measurereliably the expenditure during the film production. Other film production costs are recognised in profit or loss as incurred.Film cost inventory is measured at cost less accumulated amortisation and accumulated impairment losses.(iv)Other intangible assetsOther intangible assets that are acquired by the Group are measured on initial recognition at cost. The cost of intangible assets acquiredin a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at costless any accumulated amortisation and any accumulated impairment losses.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011127NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(e)Intangible assets s (continued)(v)Subsequent expenditureSubsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which itrelates. All other expenditure, including expenditure on internally generated intangible assets, is recognised in profit or loss as incurred.(vi)AmortisationAmortisation is calculated based on the cost of the asset less its residual value.Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other thangoodwill and film cost inventory, from the date that they are available for use.Film cost inventory is amortised using the individual-film-forecast computation method which amortises the film costs in the sameratio that current gross revenue bear to anticipated total gross income for the film. Amortisation commences when each film beginsto earn revenue.The estimated useful lives for the current and comparative periods are as follows:Dealer network – 7 yearsDevelopment expenditure – 5 yearsCommercial and intellectual property rights – 2 to 16 yearsBrands – 20 to 70 yearsFilm cost inventory – 20 yearsThe useful lives and amortisation methods are reviewed at the end of each financial year-end to ensure that the amount, methodand period of amortisation are consistent with previous estimates and the expected pattern of consumption of the future economicbenefits embodied in the intangible assets. Changes in the expected useful life or the expected pattern of consumption of futureeconomic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treatedas changes in accounting estimates. The amortisation expense is recognised in the expense category consistent with the functionof the intangible asset.(f)Investment propertyInvestment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary courseof business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost, netof depreciation and any impairment loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. Thecost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing theinvestment property to a working condition for their intended use and capitalised borrowing costs. Depreciation is recognised in profit or loss ona straight-line basis so as to write-off the cost of the investment property over its estimated useful life of 15 years.Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn fromuse and no future economic benefit is expected from its disposal. Any gain or loss on the retirement or disposal of an investment property arerecognised in profit or loss in the year of retirement or disposal.

128 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(f)Investment property (continued)Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupiedproperty, the carrying value at the date of change in use becomes the cost for subsequent accounting. For a transfer from owner-occupiedproperty to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment setout in Note 3(d) up to the date of change in use.(g)Inventories and work-in-progressInventories are measured at the lower of cost and net realisable value. Cost is calculated on a first-in, first-out basis or by weighted average costdepending on the nature and use of the inventories. Cost includes expenditure incurred in acquiring the inventories, production or conversioncosts and other costs incurred in bringing them to their existing location and condition. Cost may also include transfers from equity of any gainor loss on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete andslow-moving inventories.Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costsnecessary to make the sale.Work-in-progress is measured at cost plus profits recognised to date less progress billings and recognised losses. Cost includes all directmaterial and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses and may also include transfersfrom equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of such services. Provision for foreseeable losseson uncompleted contracts is made in the year in which such losses are determined.Work-in-progress is included in current assets in the balance sheet for all contracts in which costs incurred plus recognised profits exceedprogress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as “progress billings inexcess of work-in-progress” and is included in current liabilities in the balance sheet.(h)Impairment(i)Non-derivative financial assetsThe Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not carried at fairvalue through profit or loss is impaired.To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the Group considersfactors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, default or significant delay inpayments, significant adverse changes in the business environment where the debtor/issuer operates and disappearance of an activemarket for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below itscost is objective evidence of impairment.Financial assets carried at amortised costThe Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant,and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence ofimpairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financialassets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Financial assetsthat are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in acollective assessment of impairment.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011129NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(h)Impairment (continued)(i)Non-derivative financial assets (continued)Financial assets carried at amortised cost (continued)In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and theamount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that theactual losses are likely to be greater or less than suggested by historical trends.If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortisedcost has been incurred, 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 the financial asset’soriginal effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall bereduced either directly or through use of an allowance account. The amount of the loss shall be recognised in profit or loss.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of animpairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost atthe reversal date.Financial assets carried at costIf there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because itsfair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquotedequity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount andthe present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The lossrecognised is not reversed in future periods.Available-for-sale financial assetsIf an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal paymentand amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferredfrom equity to profit or loss.Reversals in respect of impairment losses on equity instruments classified as available-for-sale are recognised in other comprehensiveincome. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of theinstrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.(ii)Other non-financial assetsThe Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investmentproperty, inventories and deferred tax assets, may be impaired. Goodwill is reviewed for impairment, annually or more frequently ifevents or changes in circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group makesan estimate of the asset’s recoverable amount. An impairment loss is recognised if the carrying amount of an asset or its related cashgeneratingunit (“CGU”) exceeds its estimated recoverable amount.

130 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(h)Impairment (continued)(ii)Other non-financial assets (continued)The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. In assessing value inuse, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets thatcannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing usethat are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposesof goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testingis performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a businesscombination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce thecarrying amount of any goodwill allocated to the CGU or group of CGUs, and then to reduce the carrying amounts of other assets in theCGU or group of CGUs on a pro rata a basis.An impairment loss in respect of goodwill is not reversed. In respect of other assets, an assessment is made at each reporting date asto whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If suchindication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been achange in the estimates used to determine the recoverable amount since the last impairment loss was recognised. If that is the case,the impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that wouldhave been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years. Such reversalis recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluationincrease. After such a reversal, the depreciation or amortisation charged is adjusted in future periods to allocate the asset’s revisedcarrying amount, less any residual value, on a systematic basis over its remaining useful life.Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is nottested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single assetwhen there is objective evidence that the investment in an associate may be impaired.(i)ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable that anoutflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amountof the obligation.(i)WarrantiesThe warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date. The provision isbased on past experience and industry averages for defective products. The majority of the costs is expected to be incurred over theapplicable warranty periods.(ii)Liquidated damagesProvision for liquidated damages is made in respect of anticipated claims from customers on contracts of which deadlines are overdueor not expected to be completed on time in accordance with contractual obligations. The utilisation of provisions is dependent on thetiming of claims.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011131NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(j)Employee benefits(i)Employee equity compensation benefitsThe grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with acorresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amountrecognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditionsare expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet therelated service and non-market performance conditions at the vesting date.(ii)Defined contribution plansThe Group participates in national pension schemes as defined by the laws of the countries in which it has operations. In particular,the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contributionpension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service isperformed.(iii)Short-term employee benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.A liability is recognised for the amount expected to be paid under cash bonus plans if the Group has a present legal or constructiveobligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.(k)RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and revenue can be reliably measured.Revenue is measured at the fair value of consideration received or receivable, net of any returns, trade discounts and volume rebates.Revenue is recognised using the following methods:(i)Revenue from sale of goods and services rendered is recognised when persuasive evidence exists that the significant risks and rewardsof ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible returnof goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can bemeasured reliably.The timing of the transfer of risks and rewards usually occurs upon delivery of goods/services and acceptance by customers.(ii)Revenue from long-term contracts is recognised by reference to stage of completion, which is measured by either:(a)(b)(c)a combination of different cost components or a single cost component that would provide the most reliable indication of thestage of completion of a contract; orwhen goods and services, representing part of a contract, are delivered; orupon completion of designated phases of a contract.Provision for foreseeable losses on uncompleted contracts is recognised in profit or loss as soon as such losses are determinable.

132 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(k)Revenue e (continued)(iii)Management fee income is recognised on an accrual basis over the duration upon which management services are rendered.(iv)Where it is probable that a portion of the commission income may not materialise, a certain percentage of the total commissionreceived is treated as downpayment and is deferred and taken up in the income statement only upon the discharge of specifiedcontractual obligations. Commission income in excess of the certain percentage of the total amount received is taken up in the incomestatement as and when it is billed.(v)Rental income from investment property is accounted for on a straight-line basis over the duration of the lease terms.(l)Government grantsGovernment grants are recognised when the Group complies with the conditions associated with the grants. Grants that compensate the Groupfor expenses incurred are recognised in profit or loss as other income in the same periods in which the expenses are recognised. Grants relatingto depreciable assets are deferred and recognised in profit or loss as other income over the period in which such assets are depreciated andused in the projects subsidised by the grants.(m)Finance income and finance costsFinance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposalof available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, gains on hedging instruments thatare recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend incomeis recognised in profit or loss when the shareholder’s right to receive payment is established.Finance costs comprise interest expense on borrowings, losses on disposal of available-for-sale financial assets, fair value losses on financialassets at fair value through profit or loss, impairment losses recognised on financial assets (other than trade receivables), and losses on hedginginstruments that are recognised in profit or loss.Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit orloss using the effective interest method.Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currencymovements are in a net gain or net loss position.(n)Hire purchaseAssets acquired on hire purchase arrangements are capitalised in the financial statements and the corresponding obligations treated as aliability. The total interest, being the difference between the total instalments payable and the capitalised amount, is recognised in profit orloss over the period of such hire purchase arrangements in equal monthly instalments to produce a constant rate of charge on the balance ofcapital repayments outstanding. Assets acquired on hire purchase arrangements are depreciated in accordance with the policy set out in Note3(d) above.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011133NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(o)Finance leases(i)As lesseeFinance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefits incidentalto ownership of the lease items. Assets financed under such leases are capitalised at the inception of the lease at the fair value of theleased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amountcapitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Assets acquired onfinance lease arrangements are depreciated in accordance with the policy set out in Note 3(d) above.(ii)As lessorLeases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, areclassified as finance leases.The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs for negotiating and arrangingthe lease) is recognised on the balance sheet. The difference between the gross receivables and the present value of the leasereceivables is recognised as unearned finance income.Each lease payment received is applied against the gross investment in the finance lease receivables to reduce both the principal andthe unearned finance income. The finance income is recognised in profit or loss on a basis that reflects a constant periodic rate ofreturn on the net investment in the finance lease receivables.Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance lease receivables andrecognised as an expense in profit or loss over the lease term on the same basis as the leased income.(p)Operating leasesLeases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operatingleases. Operating lease payments are recognised as an expense in the profit or loss on a straight-line basis over the lease term.The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straightlinebasis.(q)Income taxes(i)Current taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paidto the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted bythe balance sheet date.Current taxes are recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensiveincome or in equity.

134 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(q)Income taxes (continued)(ii)Deferred taxDeferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax is not recognised for temporarydifferences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neitheraccounting nor taxable profit or loss and taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assetsand liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differencesare expected to be recovered or settled based on tax rates enacted or substantively enacted at the balance sheet date.Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiaries, associates andjointly controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable thatthe temporary differences will not reverse in the foreseeable future.Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses,to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forwardof unused tax assets and unused tax losses can be utilised.At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets.The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profitwill allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to theextent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred taxasset to be utilised.Deferred income tax relating to items recognised outside profit or loss is recognised in correlation to the underlying transaction eitherin other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwillon acquisition.Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current income taxassets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same tax authority.(r)Earnings per shareThe Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing theprofit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during theyear, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholdersand the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinaryshares, which comprise share plans granted to employees.(s)Operating segmentsFor management purposes, the Group is organised on a worldwide basis into four major operating segments. The management of the Companyreviewed the segments’ operating results regularly in order to allocate resources to the segments and to assess the segments’ performance.Additional disclosures on each of these operating segments are shown in Note 46, including the factors used to identify the reportable segmentsand the measurement basis of segment information.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011135NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(t)Changes in accounting policiesAdoption of new and revised FRSWith effect from 1 January 2011, the Group has adopted all the new and revised FRS and INT FRS that are mandatory for financial yearbeginning on or after 1 January 2011. The adoption of these FRS and INT FRS has no significant impact to the Group with the exception of FRS24 as described below.Related party disclosuresFrom 1 January 2011, the Group has applied the revised FRS 24 Related Party Disclosures s (2010) to identify parties that are related to theGroup and to determine the disclosures to be made on transactions and outstanding balances, including commitments, between the Groupand its related parties. FRS 24 (2010) improved the definition of a related party in order to eliminate inconsistencies and ensure symmetricalidentification of relationships between two parties.The adoption of FRS 24 (2010) has resulted in additional parties being identified as related to the Group. Transactions, including commitments,with these related parties for the current and comparative years have been disclosed accordingly in notes 44 and 45 to the financial statements.The adoption of FRS 24 (2010) affects only the disclosures made in the financial statements. There is no financial effect on the results andfinancial position of the Group for the current and previous financial years. Accordingly, the adoption of FRS 24 (2010) has no impact on earningsper share.(u)Significant accounting estimates and judgementsEstimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the application of theGroup’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on anongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable underthe circumstances.(i)Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have asignificant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year arediscussed below.Impairment of non-financial assetsThe Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill andother intangible assets are tested for impairment annually and at other times when such indicators exist. Other non-financial assets aretested for impairment when there are indicators that the carrying amounts may not be recoverable.When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or CGUand choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the key assumptionsapplied in the impairment assessment of goodwill and other intangible assets, are given in Note 16 to the financial statements.

136 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(u)Significant accounting estimates and judgements (continued)(i)Key sources of estimation uncertainty (continued)Impairment of loans and receivablesThe Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determinewhether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significantfinancial difficulties of the debtor and default or significant delay in payments.Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical lossexperience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balancesheet date is disclosed in Note 48 to the financial statements.Depreciation chargeProperty, plant and equipment and investment property are depreciated on a straight-line basis over their estimated useful lives.Management estimates the useful lives of these property, plant and equipment and investment property to be within 2 to 50 years. Thecarrying amount of the Group’s property, plant and equipment and investment property at 31 December 2011 was $1,358,259,000(2010: $1,303,209,000). 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 property, and therefore future depreciation chargescould be revised.Revenue recognition and provision for foreseeable lossesThe Group has recognised revenue from long-term contracts by reference to the stage of completion. The bases for measuring thestage of completion are described in Note 3(k)(ii). Significant judgement based on management’s knowledge and experience is requiredin determining the appropriate stage of completion and estimating a reasonable contribution margin or expected losses for revenueand costs recognition.Allowance for inventory obsolescenceThe allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. Theactual amount of inventory write-offs could be higher or lower than the allowance made. The allowance for inventory obsolescence ofthe Group as at 31 December 2011 was $187,674,000 (2010: $195,316,000).Provision for warrantyThe provision for warranty is based on estimates from known and expected warranty work to be performed after completion.The warranty expense incurred could be higher or lower than the provision made. The provision for warranty of the Group as at31 December 2011 was $188,785,000 (2010: $188,102,000).

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011137NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)3. Summary of significant accounting policies (continued)(u)Significant accounting estimates and judgements (continued)(ii)Critical judgements made in applying accounting policiesIn the process of applying the Group’s accounting policies, management has made certain judgements, apart from those involvingestimations, which have significant effect on the amounts recognised in the financial statements.The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wideprovision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain duringthe ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxeswill be due. Where the final tax 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.In addition, certain subsidiaries of the Group have potential tax benefits arising from unutilised tax losses, unabsorbed wear and tearallowances and other temporary differences, which are available for set-off against future taxable profits. Significant judgement isinvolved in determining the availability of future taxable profits against which the Group can utilise the tax benefits therefrom. The useof the potential tax benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of the taxlegislation of the respective countries in which the subsidiaries operate. Where the final outcome of these matters is different fromthe amounts that were initially recognised, such differences will impact the income tax provision and recognised deferred tax assetsrelating to the potential tax benefits in the period in which such determination is made.The carrying amount of the Group’s deferred tax assets was $113,167,000 (2010: $118,794,000), tax payables was $168,241,000(2010: $187,020,000) and deferred tax liabilities was $84,090,000 (2010: $58,216,000) as at 31 December 2011.(v)Future changes in accounting policiesA number of new standards, amendments to standards and interpretations have been issued but not yet effective, and have not been applied inpreparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group.4. RevenueRevenue represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:Group2011 2010$’000 $’000Sale of goods 2,256,546 2,599,167Service income 3,218,669 2,660,087Contract revenue 515,663 725,2195,990,878 5,984,473

138 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)5. Profit from operationsProfit from operations is arrived at:GroupNote 2011 2010$’000 $’000After charging/(crediting)Auditors’ remuneration- auditors of the Company 1,320 1,209- other auditors 2,026 1,837Non-audit fees- auditors of the Company 625 553- other auditors 1,004 800Fees and remuneration of directors 6,753 7,666Fees paid to a firm of which a director is a member 769 191Personnel expenses 6 1,645,083 1,576,726Depreciation charges 12, 17 125,784 120,940Allowance/(write-back of allowance) for- Inventory obsolescence 181 27,642- Doubtful debts (trade) 22 (143) 467- Unbilled receivables (trade) 22 187 (474)- Doubtful lease receivables 19 202 (543)Provision/(write-back of provision) for- Foreseeable losses 9,395 (5,134)- Liquidated damages 29 5,473 5,937- Warranties 29 19,834 17,069Property, plant and equipment written off 7,455 7,493Research, design and development expenses 96,248 98,171Operating lease expenses 39,362 41,215Amortisation of other intangible assets 16 9,275 11,090Write-back of impairment loss on property, plant and equipment 12 – (14)Impairment loss on goodwill 16 3,240 3,741Impairment losses on other intangible assets 16 6,964 4,9386. Personnel expensesGroup2011 2010$’000 $’000Wages and salaries * 1,351,316 1,312,478Contributions to defined contribution plans 110,289 94,658Share-based payments 15,995 12,181Other personnel expenses 167,483 157,4091,645,083 1,576,726* Includes directors’ remuneration of $4,280,276 (2010: $5,246,497).

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011139NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)7. Key management personnel compensationGroup2011 2010$’000 $’000Short-term employee benefits 42,881 47,581Contributions to defined contribution plans * 409 387Other long-term benefits 9 12Share-based payments 5,094 3,78848,393 51,768* Relates to post employment benefits.8. Other income, netGroup2011 2010$’000 $’000Gain on disposal of property, plant and equipment and investment property 4,028 2,813Grant income from Jobs Credit Scheme – 7,966Government grants 3,364 5,387Commission income 1,889 2,045Rental income 5,030 6,610Gain on disposal of- subsidiaries 1,476 429- associates 441 81Loss on dilution of interest in an associate – (115)Others 16,084 14,78232,312 39,998Under the Jobs Credit Scheme (“Scheme”), the Group received a 12% cash grant on the first $2,500 of each month’s wages for each employee on theirCentral Provident Fund payroll. The Scheme ended in July 2010.

140 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)9. Finance costs, netGroupNote 2011 2010$’000 $’000Finance incomeDividend income- quoted equity investments 33 10- unquoted equity investments 188 20Interest income- bank deposits 5,876 6,055- staff loans 22 13- finance lease 788 721- bonds 11,299 12,374- others 2,205 1,299Exchange gain, net 4,830 –Gain on disposal of investments 5,618 10,849Gain on fair value changes of investments held for trading – 33Fair value changes of financial instruments- gain on forward currency contract designated as hedging instrument – 12,717- gain on ineffective portion of forward currency contract designated as hedging instrument incash flow hedges 9 –Fair value changes of hedged items 10,424 –Fair value changes of embedded derivatives- not designated as hedging instrument 1,021 –- designated as hedging instrument 2,757 –45,070 44,091Finance costsInterest expenses- bank loans and overdrafts (19,711) (22,425)- bonds (30,433) (32,993)- finance lease (206) (320)- others (273) (452)Exchange loss, net – (8,716)Loss on fair value changes of investments held for trading (45) –Net change in fair value of cash flow hedges reclassified from equity- on occurrence of forecast transactions (8,289) –Fair value changes of financial instruments- loss on forward currency contract designated as hedging instrument (5,382) –- loss on forward currency contract not designated as hedging instrument (88) –- loss on ineffective portion of forward currency contract designated as hedging instrument incash flow hedges – (65)Fair value changes of hedged items – (9,915)Fair value changes of embedded derivatives- not designated as hedging instrument – (8,367)- designated as hedging instrument – (3,746)Impairment loss on unquoted investments 15 (19) (417)(64,446) (87,416)Finance costs, net, recognised in profit or loss (19,376) (43,325)

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011141NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)10. TaxationGroup2011 2010$’000 $’000Current income taxCurrent year 129,533 140,432Overprovision in respect of prior years (26,315) (13,098)Associates and jointly controlled entities 4,744 6,336107,962 133,670Deferred income taxCurrent year 475 (20,527)Underprovision in respect of prior years 6,177 9,299Effect of reduction in tax rate (50) 181114,564 122,623Deferred income tax related to items charged or credited directly to other comprehensive income:Net change in fair value of available-for-sale financial assets – 51Net change in fair value of derivative financial instruments designated in cash flow hedges 3,536 (4,345)3,536 (4,294)The GroupUnrecognised tax benefitsAs at 31 December 2011, certain subsidiaries of the Group have potential tax benefits of approximately $134,786,000 (2010: $92,733,000) arising fromunutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits.These tax benefits have not been recognised in the financial statements due to the uncertainty of the sufficiency of future taxable profits to be generatedfor these subsidiaries in the foreseeable future. The use of these potential tax benefits is subject to the agreement of the tax authorities and compliancewith certain provisions of the tax legislation of the respective countries in which the subsidiaries operate.Unrecognised temporary differences relating to investments in subsidiariesAs at 31 December 2011, no deferred tax liabilities (2010: $nil) has been recognised for taxes that would be payable on the undistributed earnings ofcertain subsidiaries of the Group as the Group has determined that the undistributed profits of some of its overseas subsidiaries will not be remitted toSingapore in the foreseeable future, but be retained for organic growth and acquisitions.

142 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)10. Taxation (continued)A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended 31 Decemberis as follows:Group2011 2010$’000 $’000Profit before taxation 655,225 627,475Taxation at statutory tax rate of 17% (2010: 17%)111,388 106,671Adjustments:Income not subject to tax (2,168) (2,988)Expenses not deductible for tax purposes 9,517 11,717Different effective tax rates of other countries 11,578 7,934Overprovision in prior years, net (20,138) (3,799)Effect of change in tax rates (50) 181Deferred tax assets not recognised 7,584 7,987Deferred tax assets previously not recognised now recognised (1,004) (5,478)Others (2,143) 398114,564 122,62311. Earnings per shareBasic earnings per shareThe calculation for basic earnings per share is based on:Group2011 2010$’000 $’000Profit attributable to shareholders 527,544 491,005The weighted average number of ordinary shares is arrived at as follows:Group2011 2010Number of shares (’000)Issued ordinary shares at beginning of the year 3,037,566 3,010,456Weighted average number of ordinary shares issued during the year 15,079 18,589Weighted average number of ordinary shares 3,052,645 3,029,045

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011143NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)11. Earnings per share (continued)Diluted earnings per shareWhen calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares. Thenumber of unissued shares under option granted under the ESOP and their exercise prices are set out in Note 39. The average fair value of one ordinaryshare during the financial year ended 31 December 2011 was $2.98 (2010: $3.23) per share. The weighted average number of ordinary shares adjustedfor the unissued shares under option is as follows:Group2011 2010Number of shares (’000)Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,052,645 3,029,045Weighted average number of unissued shares under option 37,889 67,704Number of shares that would have been issued at fair value (30,765) (53,318)Weighted average number of ordinary shares (diluted) 3,059,769 3,043,43134,205,229 (2010: 26,926,006) of share options granted to employees under the existing employee share option plans have not been included in thecalculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented.

144 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipmentValuation/CostArising fromAs at1.1.2010 AdditionsDisposals/write-offacquisitionof interest insubsidiariesDue todisposal ofsubsidiariesReclassificationsTranslationdifferenceAs at31.12.2010$’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, office equipment andcomputers 279 – – – – – – 279At CostFreehold land and buildings 58,422 1,178 – – – 846 (4,767) 55,679Leasehold land and buildings 634,998 8,933 (24,037) – – 79,399 (7,673) 691,620Improvements to premises 54,243 4,566 (443) 170 (22) (1,486) (4,174) 52,854Wharves and slipways 32,718 2,116 – – – 1,268 (574) 35,528Syncrolift and floating docks 68,936 – – – – – – 68,936Boats and barges 5,113 – – – – (177) (154) 4,782Plant and machinery 1,018,114 77,773 (63,529) – – 7,819 (81,307) 958,870Production tools and equipment 230,577 14,684 (2,591) – – 5,482 (6,092) 242,060Furniture, fittings, office equipment andcomputers 176,527 21,873 (7,302) 94 (119) 3,751 (4,678) 190,146Transportation equipment and vehicles 17,654 2,208 (1,249) 19 – 21 (314) 18,339Aircraft and aircraft engines 110,207 1,965 – – – 70,333 – 182,505Construction-in-progress 80,919 197,575 (15) – – (167,256) (1,887) 109,3362,498,413 332,871 (99,166) 283 (141) – (111,620) 2,620,640

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011145NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Valuation/CostArising fromAs at1.1.2011 AdditionsDisposals/write-offacquisitionof interest insubsidiariesDue todisposal ofsubsidiariesReclassificationsTranslationdifferenceAs at31.12.2011$’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, office equipment andcomputers 279 – – – – – – 279At CostFreehold land and buildings 55,679 2,436 (2,528) – – 157 441 56,185Leasehold land and buildings 691,620 11,606 (7,200) – (1,481) 96,578 6,078 797,201Improvements to premises 52,854 5,256 (2,735) – (40) 2,122 91 57,548Wharves and slipways 35,528 – – – – – 73 35,601Syncrolift and floating docks 68,936 – – – – – – 68,936Boats and barges 4,782 3,772 – – – – 12 8,566Plant and machinery 958,870 77,072 (29,241) – (298) 10,851 (3,315) 1,013,939Production tools and equipment 242,060 19,919 (2,955) – – 7,349 2,577 268,950Furniture, fittings, office equipment andcomputers 190,146 21,832 (7,878) 6 (388) (743) 665 203,640Transportation equipment and vehicles 18,339 2,573 (1,579) – (88) (1,441) 128 17,932Aircraft and aircraft engines 182,505 9,744 (5,595) – – 632 3,430 190,716Construction-in-progress 109,336 35,093 (10) – – (118,314) 2,852 28,9572,620,640 189,303 (59,721) 6 (2,295) (2,809) 13,032 2,758,156

146 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)As at1.1.2010Depreciationcharge forthe year$’000 $’000(Note 5)Accumulated depreciationDue toWrite-back of Disposals/ disposal of ReclassificationsTranslation As atimpairment write-off subsidiariesdifference 31.12.2010$’000 $’000 $’000 $’000 $’000 $’000(Note 5)The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – – 1,919Wharves and slipways 1,490 – – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – – 4,603Plant and machinery 1,694 – – – – – – 1,694Furniture, fittings, office equipment andcomputers 279 – – – – – – 279At CostFreehold land and buildings 19,751 859 – – – – (1,632) 18,978Leasehold land and buildings 337,523 23,036 – (22,871) – – (3,370) 334,318Improvements to premises 32,782 3,948 – (438) (19) (1,147) (2,338) 32,788Wharves and slipways 22,470 676 – – – – (116) 23,030Syncrolift and floating docks 68,561 29 – – – – – 68,590Boats and barges 5,113 – – – – (177) (154) 4,782Plant and machinery 452,780 57,516 (14) (52,683) – (218) (30,645) 426,736Production tools and equipment 189,327 6,274 – (2,518) – 1,845 (4,625) 190,303Furniture, fittings, office equipment andcomputers 141,770 21,434 – (7,144) (61) (303) (3,759) 151,937Transportation equipment and vehicles 11,970 2,326 – (1,159) – – (220) 12,917Aircraft and aircraft engines 40,136 4,597 – – – – – 44,7331,332,168 120,695 (14) (86,813) (80) – (46,859) 1,319,097

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011147NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)As at1.1.2011Depreciationcharge forthe year$’000 $’000(Note 5)Accumulated depreciationDue toDisposals/ disposal of ReclassificationsTranslation As atwrite-off subsidiariesdifference 31.12.2011$’000 $’000 $’000 $’000 $’000The GroupAt ValuationLeasehold land and buildings 1,919 – – – – – 1,919Wharves and slipways 1,490 – – – – – 1,490Syncrolift and floating docks 4,603 – – – – – 4,603Plant and machinery 1,694 – – – – – 1,694Furniture, fittings, office equipment and computers 279 – – – – – 279At CostFreehold land and buildings 18,978 883 (177) – 5 178 19,867Leasehold land and buildings 334,318 26,727 (7,146) (434) 6,410 2,254 362,129Improvements to premises 32,788 4,333 (2,156) (39) 389 168 35,483Wharves and slipways 23,030 749 – – – 26 23,805Syncrolift and floating docks 68,590 29 – – – – 68,619Boats and barges 4,782 52 – – – 12 4,846Plant and machinery 426,736 49,725 (24,015) (265) (6,386) 878 446,673Production tools and equipment 190,303 9,281 (2,890) – (137) 2,638 199,195Furniture, fittings, office equipment and computers 151,937 23,451 (7,844) (343) (374) 204 167,031Transportation equipment and vehicles 12,917 2,126 (1,429) (88) (1,188) 122 12,460Aircraft and aircraft engines 44,733 8,193 (2,732) – – 1,119 51,3131,319,097 125,549 (48,389) (1,169) (1,281) 7,599 1,401,406

148 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Net book value2011 2010$’000 $’000The GroupAt ValuationLeasehold land and buildings – –Wharves and slipways – –Syncrolift and floating docks – –Plant and machinery – –Furniture, fittings, office equipment and computers – –At CostFreehold land and buildings 36,318 36,701Leasehold land and buildings 435,072 357,302Improvements to premises 22,065 20,066Wharves and slipways 11,796 12,498Syncrolift and floating docks 317 346Boats and barges 3,720 –Plant and machinery 567,266 532,134Production tools and equipment 69,755 51,757Furniture, fittings, office equipment and computers 36,609 38,209Transportation equipment and vehicles 5,472 5,422Aircraft and aircraft engines 139,403 137,772Construction-in-progress 28,957 109,3361,356,750 1,301,543Property, plant and equipment of net book value amounting to $1,528,000 (2010: $nil) were reclassified to inventories due to changes in the use of these assets(Note 21).

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011149NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)Furniture, fittings,office equipmentand computersTransportationequipment andvehiclesTotal$’000 $’000 $’000The CompanyCostAs at 1.1.2010 2,489 331 2,820Additions 146 – 146Disposals/write-off (3) – (3)As at 31.12.2010 and 1.1.2011 2,632 331 2,963Additions 1,398 398 1,796Disposals/write-off (282) (331) (613)As at 31.12.2011 3,748 398 4,146Accumulated depreciationAs at 1.1.2010 1,960 149 2,109Depreciation charge for the year 358 66 424Disposals/write-off (3) – (3)As at 31.12.2010 and 1.1.2011 2,315 215 2,530Depreciation charge for the year 374 78 452Disposals/write-off (282) (270) (552)As at 31.12.2011 2,407 23 2,430Net book valueAs at 31.12.2011 1,341 375 1,716As at 31.12.2010 317 116 433(a)Property, plant and equipment at valuationCertain property, plant and equipment, which are shown at valuation are stated at values arrived at by an independent firm of professional valuerson 30 November 1972, on the basis of open market value for existing use. As the property, plant and equipment were subject to a one-timerevaluation prior to 1984, the Group is exempted from having a regular frequency of revaluation in subsequent years. These property, plant andequipment have been fully depreciated as at 31 December 2011 and 2010.(b)Property, plant and equipment pledged as securityProperty, plant and equipment with a carrying value of $97,668,000 (2010: $87,450,000) are pledged as security for short-term and longtermloans.

150 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(c)Property, plant and equipment under lease obligationsIncluded in the above are property, plant and equipment acquired under finance lease obligations with a net book value of:Group2011 2010$’000 $’000Leasehold land and buildings 438 830Transportation equipment and vehicles293 196731 1,026(d)Major properties(i)Freehold land and buildingsLocation Description Land Net book valuearea 2011 2010(sq. m.) $’000 $’000USA47889 South K StreetTulare, California13442 Emerson RoadKidron, Ohio300 Hackney Ave,Independence, Kansas400 Hackney Ave,Washington, North Carolina914 Saegers Station Drive,Montgomery, Pennsylvania7801 Trinity Drive,Escatawpa, Mississippi5801 Elder Ferry Road,Moss Point, Mississippi900 Bayou Casotte Parkway,Pascagoula, Mississippi3800 Richardson Road South,Hope Hull, AlabamaIndustrial buildings 88,949 – 2,281Industrial buildings 68,351 1,152 1,176Industrial buildings 117,358 1,601 1,661Industrial buildings 39,942 1,662 1,720Industrial buildings 122,659 3,648 3,777Shipyard and buildings 839,564 4,092 4,064Shipyard and buildings 227,151 3,816 3,793Shipyard and buildings 331,803 14,500 13,902Production facility 8,361 3,227 3,434Australia2 Bowral PlaceBallaratOffice building and trainingclassrooms1,350 1,866 –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011151NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)Major properties (continued)(ii)Leasehold land, buildings and improvementsLocation Description Tenure Land Net book valuearea 2011 2010(sq. m.) $’000 $’000Singapore501 Airport Road Factory and office building 20 years from 1.6.1993 23,899 4,559 3,737503 Airport Road Factory and office building 20 years from 1.6.1993 7,175 507 513505 Airport RoadLots 087066, 087M, 0870Cand 99703 MK22Jet engine test cell 3 years from 1.7.2009 5,317 18,826 18,521540 Airport Road Warehouse and office building 30 years from 15.8.1985 5,850 601 746Hangar and office building 30 years from 1.1.1984 18,918 1,396 1,9048 Changi North Way Hangar and office building 30 years from 1.1.1992 75,713 25,252 27,349Hangar and office building 22.5 years from 16.6.1999 14,860 2,502 2,643Hangar and office building 16.3 years from 20.8.2005 9,764 10,572 11,010540 Airport Road Hangars and office building 3 years lease from 1.7.2009* 48,882 20,958 22,507Seletar West Camp Hangars and office building Yearly * 15,670 15,753 16,405Hangars and office building 31.7 years lease from 5.1.2009 5,760 10,970 11,38824 Ang Mo Kio Street 65 Industrial and commercialbuildings100 Jurong East Street 21 Industrial and commercialbuildings30 years from 1.12.1982,renewable to 204230 years from 1.11.1988,renewable to 204823,970 6,914 7,75411,232 7,119 7,4725 Ubi Close Car show room cum workshop 30 years from 1.8.1994 6,274 11,097 11,95633 Tuas Avenue 2 Factory and office building 30 years from 1.4.1996 6,669 2,086 2,23316 Benoi Crescent Industrial and commercialbuildings30 years from 16.7.1989 6,981 2,215 2,380249 Jalan Boon Lay Industrial and commercialbuildings27 years from 1.10.2001to 31.12.2028, renewableto 10.10.2065148,091 112,986 84,4752D Ayer Rajar CrescentIndustrial and commercialbuildings3 years from 1.10.2010 14,499 – –16 Tuas Avenue 7 Industrial buildings 30 years from 16.8.1983 12,029 373 557

152 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)Major properties (continued)(ii)Leasehold land, buildings and improvements (continued)Location Description Tenure Land Net book valuearea 2011 2010(sq. m.) $’000 $’000Singapore601 Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,025 1,12415 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 39,640 23,985 10,12316 Benoi Road Administrative offices 56 years from 1.6.1969 20,224 3,083 3,3237 Benoi Road Buildings, foreshore andworkshops60 Tuas Road Buildings, foreshore andworkshops56 years from 1.6.1969 103,802 14,510 15,29930 years from 1.12.1992 125,262 4,296 4,46930/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 3,994 4,286USA2100 9 th StreetBrookley Complex,Mobile, Alabama9800 John Saunders Road,San Antonio, TexasHangar and office building 22 years from 1.1.1991 103,825 11,331 11,552Hangar and office building 16.6 years from 1.6.2002 255,121 23,899 24,852People’s Republic of ChinaNo 2, Huayu Road, Huli District,Xiamen 361006, FujianLeasehold land for factorybuilding50 years from 20.11.2008 38,618 51,235 5,04897 Zhong Cao Road Guiyang,GuizhouLeasehold land, industrial andcommercial buildings50 years from 26.2.2008 to21.2.2058242,662 22,656 21,482613 Xin Jiao Dong Road,Hai Zhu District, Guangzhou,GuangdongIndustrial and commercialbuildings15 years from 22.4.2005 to21.4.20209,751 – 1,149No. 555 Kanghua Road,Kangqiao Industrial Zone,ShanghaiLeasehold land50 years from 12.6.2003 to27.7.205215,898 780 7756 Kuang Ji Road,Zhenjiang, JiangsuLeasehold land, industrial andcommercial buildings40 years from 21.5.2009 to21.3.204976,711 9,457 9,6351 Ding Mao Wei San Road,Zhenjiang, JiangsuLeasehold land, industrial andcommercial buildings46.5 years from 21.5.2006 to5.12.205255,883 9,480 9,500

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011153NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)12. Property, plant and equipment (continued)(d)Major properties (continued)(ii)Leasehold land, buildings and improvements (continued)Location Description Tenure Land Net book valuearea 2011 2010(sq. m.) $’000 $’000Republic of PanamaBryant Ave,Howard BalboaHangar and office building 20 years from 18.8.2006 36,278 2,039 2,176* This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence Singapore on leases which arerenewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost of the buildings isdepreciated over the period of intended use, i.e. 30 years.13. SubsidiariesCompany2011 2010$’000 $’000Unquoted shares, at cost:Singapore Technologies Aerospace Ltd 142,626 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. 299,117 299,117Singapore Technologies Dynamics Pte Ltd 6,000 6,000ST Synthesis Pte Ltd 4,656 2,156FusionTech Pte. Ltd. 1,000 1,000Kaz-ST Engineering Bastau Limited Liability Partnership 578 578ST Engineering Financial I Ltd. – * – *ST Engineering Financial II Pte. Ltd. – * – *598,897 543,885Impairment in subsidiaries (7,000) (7,000)Carrying amount after impairment in subsidiaries 591,897 536,885Capital contribution in the form of share options, performance shares and restrictedshares issued to employees of subsidiaries 71,720 58,110663,617 594,995* Amount less than $1,000

154 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Details of the subsidiaries are as follows:Effective equity interestheld by the Group2011 2010% %(a) Singapore Technologies Aerospace Ltd and its subsidiaries 100 100ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100ST PAE Holdings Pty Ltd 100 100Pacific Flight Services Pte Ltd 100 100Pacific Flight Services Pty Ltd 100 100ST Aerospace Academy Pte. Ltd. and its subsidiary: 100 100Aviation Training Academy Australia Pty Ltd and its subsidiary: 100 100ST Aerospace Academy (Australia) Pty Ltd(formerly known as ST Aviation Training Academy (Australia) Pty Ltd) 100 100ST Aerospace Engines Pte Ltd and its subsidiary: 100 100ST Aerospace Technologies (Xiamen) Company Limited 80 80ST Aerospace Systems Pte Ltd 100 100ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100iShopAero Pte Ltd 100 100ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd 100 100ST Aerospace International Structures Pte Ltd 100 100ST Aviation Resources Pte Ltd and its subsidiary: 100 100ST Aviation Resources 1 Limited 100 100ST Aerospace Services Co Pte. Ltd. 80 80Singapore Technologies Engineering (Europe) Ltd 100 100Singapore Aerospace Kabushiki Kaisha 100 100Visiontech Investment Pte Ltd 100 100Visiontech Engineering Pte Ltd 51 51Singapore British Engineering (Pte) Ltd 51 51ST Aerospace Solutions (Europe) A/S and its subsidiary: 100 100Airline Rotables (UK Holdings) Limited and its subsidiary: 100 100Airline Rotables Limited 100 100ST Aerospace Panama, Inc. 100 100Precision Products Singapore Pte Ltd 100 100

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011155NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interestheld by the Group2011 2010% %(b) Singapore Technologies Electronics Limited and its subsidiaries 100 100SEEL Electronic & Engineering Sdn Bhd 100 100ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100INFA Systems Limited 100 100ST Electronics (Software Services) Limited 100 100ST Electronics (e-Services) Pte. Ltd. and its subsidiary: 100 100Knowledge Alive Pte. Ltd. and its subsidiary: 100 100COMAT Training Services Pte Ltd 100 100ST Electronics (Data Centre Solutions) Pte. Ltd. (formerly known as PM-B Pte Ltd) and its subsidiaries: 100 70PMB Project Management Business Sdn Bhd 100 70PT PM-B Indonesia^ – 70PM-B (China) Ltd 100 70ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Digital Media) Pte. Ltd. 100 100Antycip Simulation Limited and its subsidiary: 93 93Antycip Simulation SAS 93 93ST Education & Training Private Limited and its subsidiaries: 70 70STET Homeland Security Services Pte. Ltd. 70 70STET Maritime Pte. Ltd. 70 70Brightspot Interactive Learning Pte. Ltd. and its subsidiary ^: – 51Brightspot Interactive Learning Inc. ^ – 51MERITS Technologies LLP 51 51ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Info-Security) Pte. Ltd. and its subsidiary: 100 100DataMark Technologies Pte Ltd 100 100STELCOMMS Pte. Ltd. 51 51Telematics Wireless Ltd. and its subsidiary: 97.15 96.66Telematics Wireless USA Corp 97.15 96.66ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: 100 100ST Electronics (Sichuan) Co., Ltd 100 100iDirect Asia Pte. Ltd. 100 100ST Electronics (Shanghai) Co., Ltd 100 100iTS Technologies Pte Ltd 100 100ST Electronics (Taiwan) Limited 100 100STELOP Pte. Ltd. 50.05 50.05TranSys Pte Ltd 100 100

156 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interestheld by the Group2011 2010% %(c) Singapore Technologies Kinetics Ltd and its subsidiaries 100 100SDG Kinetics Pte. Ltd. and its subsidiary: 100 100LeeBoy India Construction Equipment Private Limited 97.9 97Mobility Systems Pte Ltd and its subsidiaries: 100 100Silvatech Global Systems Limited 100 100Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100Kinetics Drive Solutions Inc. 100 100STA Inspection Pte Ltd 100 100Singapore Commuter Private Limited and its subsidiaries: 100 100Jiangsu Huatong Kinetics Co., Ltd. 75.3 75.3Jiangsu Huaran Kinetics Co., Ltd. 75.3 75.3Securedge Pte. Ltd. 100 100STA Investment Pte Ltd 100 100ST Kinetics International Pte. Ltd. and its subsidiary: 100 100VT Hackney, S.A. de C.V. 100 100SDDA Pte. Ltd. and its subsidiary: 100 100Kinetics Link Services Sdn. Bhd. 60 60ST Kinetics Integrated Engineering Pte. Ltd. 100 100Singapore Test Services Private Limited 100 100ST Kinetics Pte. Ltd. 100 100Advanced Material Engineering Pte. Ltd. and its subsidiary: 100 100Advanced Pyrotechnic Materials Private Limited 51 51Unicorn International Pte Limited 100 100Allied Ordnance of Singapore (Pte) Limited 100 100Ordnance Development and Engineering Company of Singapore (1996) Private Limited 100 100Autonomous Technology Pte Ltd and its subsidiary: 100 100Guizhou Jonyang Kinetics Co., Ltd. 60 60Kinetics Systems (Shanghai) Co., Ltd. 100 100STAR Automotive Center (Zhejiang) Co., Ltd. 100 100STAR Automotive Center (Guangzhou) Co., Ltd. ^ – 100(d) Singapore Technologies Marine Ltd and its subsidiaries 100 100STSE Engineering Services Pte Ltd and its subsidiaries: 100 100STSE (Shanghai) Co. Ltd. (formerly known as ST Environmental Services & Technologies Co. Ltd) 100 100STSE Engineering Services (B) Sdn Bhd 100 100Hovertrans Solutions Pte. Ltd. 51 51ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd. 100 –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011157NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interestheld by the Group2011 2010% %(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100VT Systems, Inc. 100 100Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100ST Aerospace Mobile, Inc. 100 100DalFort Aerospace GP, Inc. 100 100DalFort Aerospace, L.P. 100 100San Antonio Aerospace GP, LLC 100 100ST Aerospace San Antonio, L.P. 100 100DRB Aviation Consultants, Inc. 100 –Vision Technologies Electronics, Inc. and its subsidiary: 100 100VT iDirect, Inc. and its subsidiaries: 100 100iDirect Hong Kong Limited 100 100iDirect UK Limited and its subsidiary: 100 100Parallel Limited 100 100iDirect Italy srl 100 100iDirect International Inc. (formerly known as iDirect International Corporation) 100 100iDirect Government Technologies, Inc. 100 100VT iDirect Canada, Inc. 100 100Intelect Technologies, LLC 100 100Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100Miltope Corporation and its subsidiaries: 100 100Miltope Business Products, Inc.^^ – 100IV Phoenix Group, Inc. 95 95MÄK Technologies, Inc. 90 90Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100VT Dimensions, Inc. 100 100VT LeeBoy, Inc. 100 100VT Hackney, Inc. 100 100Vision Technologies Marine, Inc. and its subsidiary: 100 100VT Halter Marine, Inc. 100 100VT Systems International, LLC 100 100VT Systems Participações Ltda. 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

158 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Effective equity interestheld by the Group2011 2010% %(j) ST Engineering Financial I Ltd. 100 100(k) ST Engineering Financial II Pte. Ltd. 100 100^ These entities were disposed of during the year.^^ The company was dissolved during the year.Further details of the subsidiaries are as follows:Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessSingapore Technologies Aerospace LtdInvestment holding and provision of engineering, marketing andengineering support servicesSingaporeST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft SingaporeST PAE Holdings Pty Ltd Investment holding AustraliaPacific Flight Services Pte Ltd Providing air transport services SingaporePacific Flight Services Pty Ltd Flight training school operation and aircraft management AustraliaST Aerospace Academy Pte. Ltd. Flight training school operation and aircraft management SingaporeAviation Training Academy Australia Pty Ltd Flight training school operation and aircraft management AustraliaST Aerospace Academy (Australia) Pty Ltd (formerly known asST Aviation Training Academy (Australia) Pty Ltd)Flight training school operation and aircraft managementAustraliaST Aerospace Engines Pte Ltd Repair and overhaul of engines SingaporeST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of engines People’s Republicof ChinaST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components SingaporeST Aerospace Supplies Pte LtdTrading, Maintenance-By-The-Hour services for component andrepair management, warehousing services for aircraft equipment,parts and components and provision of jet fuel servicesSingapore

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011159NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessiShopAero Pte LtdTrading, e-commerce and information technology related servicesfor the aerospace industrySingaporeST Aerospace Guangzhou Aero-Technologies &Engineering Co LtdImport/export for aircraft component leasing, repair, exchange andtrading, warehousing, packaging, distribution and other relatedservicesPeople’s Republicof ChinaST Aerospace International Structures Pte LtdDesigning, developing and manufacturing aircraft, engines,equipment, accessories, components and such other partsSingaporeST Aviation Resources Pte Ltd Investment holding SingaporeST Aviation Resources 1 Limited ~ Dormant British VirginIslandsST Aerospace Services Co Pte. Ltd.Repair, maintenance, modification and servicing of commercialaircraftSingaporeSingapore Technologies Engineering (Europe) Ltd Providing marketing and investment services to the Group United KingdomSingapore Aerospace Kabushiki Kaisha # Providing marketing services to the Group JapanVisiontech Investment Pte Ltd Investment holding and dealing SingaporeVisiontech Engineering Pte LtdProvision of engineering services for the repair, maintenance andmodification of aircraft, aircraft equipment and componentsSingaporeSingapore British Engineering (Pte) Ltd ~ Dormant SingaporeST Aerospace Solutions (Europe) A/SSupply aircraft components, including purchase, maintenance andlogistics servicesDenmarkAirline Rotables (UK Holdings) Limited Investment holding United KingdomAirline Rotables LimitedProviding component management and support services foraircraftUnited KingdomST Aerospace Panama, Inc. Repair and maintenance of aircraft Republic ofPanamaPrecision Products Singapore Pte LtdManufacture and sale of investment castings, mould toolings andprecision formingsSingaporeSingapore Technologies Electronics LimitedDesign, development, supply, installation, integration andmaintenance of transportation, intelligent building, defenceelectronics and communication systemsSingapore

160 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessSEEL Electronic & Engineering Sdn BhdSales of electronic instruments and equipment, electronicengineering and systems integration services and maintenanceand calibration of electronic equipmentMalaysiaST Electronics (Info-Software Systems) Pte. Ltd.Design, development and supply of real-time/mission criticalsystems and provision of related maintenance servicesSingaporeINFA Systems LimitedProvision for services in consulting, designing and developingsystems integration, the maintenance and support of operationaland computer systems and sales and distributionof system equipmentHong KongST Electronics (Software Services) LimitedProviding IT outsourcing services, software applicationsdevelopment and turnkey solutionsPeople’s Republicof ChinaST Electronics (e-Services) Pte. Ltd.Providing shared services to government ministries, agencies andenterprisesSingaporeKnowledge Alive Pte. Ltd.Offer technologically-driven learning and knowledge solutions,products and services to corporate, tertiary and workforce marketsSingaporeCOMAT Training Services Pte LtdOperating a computer training school, providing training incomputer software and applicationsSingaporeST Electronics (Data Centre Solutions) Pte. Ltd.(formerly known as PM-B Pte Ltd)Relate to mechanical, electrical and engineering works to design,build and provide facility management services for missioncritical environments such as data centres, disaster recovery andbusiness continuity sitesSingaporePMB Project Management Business Sdn BhdRelate to mechanical, electrical and engineering works to design,build and provide facility management services for missioncritical environments such as data centres, disaster recovery andbusiness continuity sitesMalaysiaPM-B (China) Ltd ~ Dormant People’s Republicof ChinaST Electronics (Training & Simulation Systems) Pte. Ltd.Design, development, supply, integration and maintenanceof training and simulation systems, distribution of games,edutainment and animation programs and the sales and licensingof related products, merchandise and rightsSingaporeST Electronics (Digital Media) Pte. Ltd.Design, development and manufacture of computers and dataprocessing systems, provision of services for the processing andmaintenance of data and information, and production of animationpicturesSingapore

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011161NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessAntycip Simulation LimitedInvestment holding and acting as a selling agent of softwareand incidental hardware to the defence industry and educationestablishmentsUnited KingdomAntycip Simulation SASA value added reseller/distributor of simulation products andprovision of simulation sub-system/components solutionsFranceST Education & Training Private LimitedProvision of education and training, management and consultancyservices for operational and technical domains of maritime,aerospace and land services industriesSingaporeSTET Homeland Security Services Pte. Ltd.Provision of security consultancy, solutions implementation andtrainingSingaporeSTET Maritime Pte. Ltd. Provision of marine audit, survey and consultancy services SingaporeMERITS Technologies LLP # Dormant KazakhstanST Electronics (Info-Comm Systems) Pte. Ltd.Design and development, systems integration, manufacturing andsale of communication equipment, GPS-based fleet managementsystem, traffic management system, info appliances and defenceelectronicsSingaporeST Electronics (Info-Security) Pte. Ltd.Design, development, sale and provision of technical support forinformation security products, solutions and servicesSingaporeDataMark Technologies Pte LtdDevelopment and provision of digital water-marking and relatedsolutionsSingaporeSTELCOMMS Pte. Ltd.To undertake design and integration of projects in the area ofcommunications network and systems and to market and trade incommunications related products and subsystemsSingaporeTelematics Wireless Ltd.Development, manufacture, and marketing of products for locatingand directing vehicles, other mobile and stationary objects,people, equipment and merchandise, systems for managingvehicular fleets, systems for locating and thwarting car thefts,vehicular wireless equipment and communications for purposesof identification and provision of information, electronic toll-roadsystems, and electronic systems for reading water metersIsraelTelematics Wireless USA Corp #Serves as sales arm for Telematics Wireless Ltd. in the USA and alocal point of contact for Telematics’ customers for payments andReturn Material Authorization supportUSAST Electronics (Satcom & Sensor Systems) Pte. Ltd.Manufacture of microwave components and sub-systems, systemintegration and provision of related repairs and maintenance forthe telecommunications and defence electronics industriesSingapore

162 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessST Electronics (Sichuan) Co., LtdManufacturing and maintenance of communication and otherrelated apparatus and consultant service of telecommunicationtechnologyPeople’s Republicof ChinaiDirect Asia Pte. Ltd.Marketing and sales, design, manufacture & engineering servicesfor electronics and communication systemsSingaporeST Electronics (Shanghai) Co., LtdDevelopment and manufacturing of monitoring and controlsystems, microwave systems, training and simulation systems,security systems, metro passenger information systems, metroautomated fare collection systems, metro platform screen doorsystems, integrated transportation systems (including fleetmanagement systems, urban transport management systems,highway management systems, etc.), metro transmission andcommunication systems, EMC electromagnetic products andsoftware; sale of product manufactured, system integration, aftersales,and consultancy services for the above mentioned products.Engineering contractor for building intelligent projects (involvingadministrative licensing will need approved certification)People’s Republicof ChinaiTS Technologies Pte Ltd Investment holding SingaporeST Electronics (Taiwan) LimitedProvide integration for large-scale system projects in rail,expressway and intelligent building management solutionsTaiwanSTELOP Pte. Ltd.Design and development, manufacturing, maintaining and sale ofelectro-optical products and systems and the provision of relatedservicesSingaporeTranSys Pte Ltd * Dormant SingaporeSingapore Technologies Kinetics LtdProvision of design and engineering services, manufacture,sales 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, andtrading in motor vehicles, equipment, vehicle spares and relatedaccessoriesSingaporeSDG Kinetics Pte. Ltd. Investment holding SingaporeLeeBoy India Construction Equipment Private LimitedDesign, manufacture, sales, distribution and aftersales support ofconstruction equipmentIndiaMobility Systems Pte Ltd Investment holding Singapore

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011163NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessSilvatech Global Systems Limited # Owns the intellectual property rights to electro-hydraulic drive,hydro-mechanical and electro-mechanical continuously variabletransmissions technologies, and equipment powered by suchdrivesBritish VirginIslandsSilvatech Systems Corporation Pte LtdDesigning, manufacturing, marketing and managing licencesof technologies and products using electro-hydraulic drive,hydro-mechanical and electro-mechanical continuously variabletransmissions, and equipment powered by such drives, globallySingaporeKinetics Drive Solutions Inc. # Research and development, manufacturing and sales of electrohydraulicdrive, hydro-mechanical and electro-mechanicalcontinuously variable transmissions technologies, and equipmentpowered by such drivesCanadaSTA Inspection Pte Ltd Dormant SingaporeSingapore Commuter Private Limited Investment holding SingaporeSecuredge Pte. Ltd.Provision of design and engineering services, manufacture andsales of security related products, and the provision of equipmentmaintenance servicesSingaporeSTA Investment Pte Ltd Investment dealing SingaporeST Kinetics International Pte. Ltd. Investment holding SingaporeVT Hackney S.A. de C.V.Manufacture and marketing of specialised aluminium drop-frametruck bodies and trailersMexicoSDDA Pte. Ltd.Assembling and marketing of diesel engines and related productsand the provision of technical services, field services, repair andmaintenance servicesSingaporeKinetics Link Services Sdn. Bhd.Assembling, distributing and marketing of port handlingequipment, diesel engines and related products, and the provisionof technical services, field services and maintenance servicesMalaysiaST Kinetics Integrated Engineering Pte. Ltd.Provision of customised solutions, products for defence andcommercial marketsSingapore

164 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessSingapore Test Services Private LimitedProvision of professional engineering consultancy, tests,inspection, certification and related services, inspection of heavygoods vehicles, light vehicles, motor cars, buses and motorcycles,provision of vehicle inspection, project management as well asprovision of independent damage assessment servicesSingaporeST Kinetics Pte. Ltd. Trading and marketing 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, pyrotechnic productsand gunpowder and the provision of engineering services forassembly, upgrading/ modifications, maintenance, repair andoverhaul of ammunition and weapon systems, and related servicesSingaporeAdvanced Pyrotechnic Materials Private Limited Manufacture and sale of pyrotechnic products SingaporeUnicorn International Pte Limited Trading and marketing SingaporeAllied Ordnance of Singapore (Pte) LimitedProvision of design and engineering services, manufacture, salesand knowhow transfer of armament, weapons, weapon systems,ammunition, explosives, weapon magazines, military equipment,machines, tools, spares and components and the provisionof engineering services for assembly, upgrading/modification,maintenance, repair and overhaul of guns and weapons systems,and related servicesSingaporeOrdnance Development and Engineering Company ofSingapore (1996) Private LimitedDormantSingaporeAutonomous Technology Pte Ltd Investment holding SingaporeGuizhou Jonyang Kinetics Co., Ltd.Design, manufacture, sales and service support of construction,engineering and industrial-related machinery and accessories,provide engineering consultancy services to engineering andmanufacturing companies, provide rental of own-manufacturedmachinery and accessoriesPeople’s Republicof ChinaKinetics Systems (Shanghai) Co., Ltd.Manufacture and sale of vehicle drive systems, industrial drivemotors and small external combustion enginesPeople’s Republicof ChinaSTAR Automotive Center (Zhejiang) Co., Ltd. ~ Dormant People’s Republicof ChinaJiangsu Huatong Kinetics Co., Ltd.Manufacture and sale of paving, mixing, road maintenance andcompaction equipment and other road construction machineriesPeople’s Republicof China

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011165NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessJiangsu Huaran Kinetics Co., Ltd. Manufacture and sale of engineering machinery and equipment People’s Republicof ChinaSingapore Technologies Marine LtdConstruction and repair of naval and commercial vessels, design,integration, fabrication, installation of military and commercialengineering equipment and the provision of engineeringconsultancy and technical management servicesSingaporeSTSE Engineering Services Pte LtdDesign, manufacture, maintain and operate environmentalinfrastructures and provide planning, consultancy services inenvironmental and renewable energy management solutionsSingaporeST Marine (Wuhan) Engineering DesignConsultancy Co. Ltd. **To provide industrial engineering design, research anddevelopment and consultancy servicesPeople’s Republicof ChinaSTSE (Shanghai) Co. Ltd. (formerly known asST Environmental Services & Technologies Co. Ltd)Design, development, manufacturing, sales, after-sales servicesand consulting services of equipments for environmental protectionprojects; wholesale, import and export and related business ofsimilar products; consulting services for environmental projectsinformation, consulting services for commercial informationPeople’s Republicof ChinaSTSE Engineering Services (B) Sdn BhdDesign, manufacture, maintain and operate environmentalinfrastructures and provide planning, consultancy services inenvironmental and renewable energy management solutionsBruneiHovertrans Solutions Pte. Ltd.Design, marketing and solutioning for employment of heavy lift aircushion marine vessel for use in oil and gas, transportation andother civil engineering purposesSingaporeVision Technologies Systems, Inc. # Investment holding USAVT Systems, Inc. # Providing investment and associated services to the Group USAVision Technologies Aerospace, Incorporated # Investment holding USAST Aerospace Mobile, Inc. # Repair and maintenance of aircraft USADalFort Aerospace GP, Inc. # Dormant USADalFort Aerospace, L.P. ++ Dormant USASan Antonio Aerospace GP, LLC # Investment holding USAST Aerospace San Antonio, L.P. # Repair and maintenance of aircraft USADRB Aviation Consultants, Inc. ∞ Provision of aircraft engineering services USA

166 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessVision Technologies Electronics, Inc. # Investment holding USAVT iDirect, Inc. # Design, develop and market two-way internet protocol - (IP)based broadband satellite networking solutions that deliver voice,data and video services to enterprise and government customerlocations worldwideUSAiDirect Hong Kong LimitedMarkets two-way internet protocol - (IP) based broadband satellitenetworking solutionsHong KongiDirect UK LimitedMarkets two-way internet protocol - (IP) based broadband satellitenetworking solutionsUnited KingdomParallel Limited # Software development and associated services; installation,configuration, consultancy and supportUnited KingdomiDirect Italy srl # Markets two-way internet protocol - (IP) based broadband satellitenetworking solutionsItalyiDirect International, Inc. (formerly known asiDirect International Corporation) # Markets two-way internet protocol - (IP) based broadband satellitenetworking solutionsUSAiDirect Government Technologies, Inc. # Design, develop and market two-way internet protocol - (IP) basedbroadband satellite networking solutions that deliver voice, dataand video services to government customersUSAVT iDirect Canada, Inc. # Research and development CanadaIntelect Technologies, LLC #Development and supply of a family of multi-access opticalnetworking equipmentUSAVision Technologies Kinetics, Inc. # Investment holding USAMiltope Corporation # Development of computers and peripheral equipment for ruggedand other specialized applications for military and commercialcustomers, both domestic and internationalUSAIV Phoenix Group, Inc. # Dormant USAMÄK Technologies, Inc. # Develop and supply software products and services for NetworkedSynthetic EnvironmentsUSAVision Technologies Land Systems, Inc. # Investment holding USAVT Dimensions, Inc. # Investment holding and licensing of intellectual properties USA

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011167NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)Name of subsidiaryPrincipal activitiesCountry ofincorporation/place of businessVT LeeBoy, Inc. # Manufacture of asphalt paving and road maintenance equipmentincluding LeeBoy branded asphalt pavers, motor graders,compactors, force feed loaders, asphalt maintainers/patchers,tack distributors, and Rosco branded asphalt distributors, streetflushers, brooms and asphalt spray patchersUSAVT Hackney, Inc. # Manufacture and marketing of specialised aluminium drop-frametruck bodies, trailers, refrigerated truck bodies and trailers andspecialty vehicle cabsUSAVision Technologies Marine, Inc. # Investment holding USAVT Halter Marine, Inc. # Construction and repair of naval and commercial vessels, design,integration, fabrication, installation of engineering equipment andprovision of engineering servicesUSAVT Systems International, LLC # Investment holding USAVT Systems Participações Ltda. # Promotion and marketing of products and services BrazilSingapore Technologies Dynamics Pte LtdTechnology development, advanced concept design anddevelopment and technology acquisitionSingaporeST Synthesis Pte LtdProvision of one-stop total integrated logistic support services andengineering servicesSingaporeFusionTech Pte. Ltd. Investment holding SingaporeKaz-ST Engineering Bastau Limited Liability Partnership # Provision of IT, engineering, defence and related services KazakhstanST Engineering Financial I Ltd. Provision of financial and treasury services to related parties SingaporeST Engineering Financial II Pte. Ltd. Provision of financial and treasury services to related parties Singapore# Not required to be audited under the law in the country of incorporation.~ The company is in the process of liquidation.* The company has commenced procedures pursuant to Section 344 of the Singapore Companies Act Chapter 50 to strike off the name of the company fromthe Register. Audited by member firms of KPMG International for consolidation purposes.++ This entity ceased operations in October 2003.∞ This entity was acquired during the year and was not required to be audited as at the date of this report.** This entity was incorporated during the year and was not required to be audited as at the date of this report.

168 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)All subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore, except for the following:Name of subsidiaryName of auditing firmAirline Rotables (UK Holdings) LimitedAirline Rotables LimitedAviation Training Academy Australia Pty LtdPacific Flight Services Pty LtdSingapore Technologies Engineering (Europe) LtdST Aerospace Guangzhou Aero-Technologies & Engineering Co LtdST Aerospace Academy (Australia) Pty LtdST Aerospace Panama, Inc.ST Aerospace Solutions (Europe) A/SST Aerospace Technologies (Xiamen) Company LimitedST PAE Holdings Pty LtdAntycip Simulation LimitedAntycip Simulation SASiDirect Hong Kong LimitediDirect UK LimitedINFA Systems LimitedPMB Project Management Business Sdn BhdPM-B (China) LtdSEEL Electronic & Engineering Sdn BhdST Electronics (Sichuan) Co., LtdST Electronics (Shanghai) Co., LtdST Electronics (Software Services) LimitedST Electronics (Taiwan) LimitedTelematics Wireless Ltd.Kinetics Link Services Sdn. Bhd.LeeBoy India Construction Equipment Private LimitedVT Hackney, S.A. de C.V.Guizhou Jonyang Kinetics Co., Ltd.Kinetics Systems (Shanghai) Co., Ltd.Jiangsu Huatong Kinetics Co., LtdJiangsu Huaran Kinetics Co., LtdSTSE (Shanghai) Co. Ltd.STSE Engineering Services (B) Sdn BhdKPMG, CambridgeKPMG, CambridgeKPMG, MelbourneKPMG, SydneyKPMG, CambridgeKPMG, GuangzhouKPMG, MelbourneKPMG, PanamaKPMG, FrederiksbergKPMG, FuzhouKPMG, PerthKPMG, United KingdomKPMG, ParisKPMG, Hong KongKPMG, United KingdomKPMG, Hong KongKPMG, Kuala LumpurBeijing JinRui YongDa Certified Public Accountants Co., LtdKPMG, Kuala LumpurKPMG, ChengduKPMG, ShanghaiKPMG, ShenzhenKPMG, TaipeiKPMG, Tel AvivKPMG, Johor BahruB S R & Co., BangaloreKPMG, MexicoKPMG, ChengduKPMG, ShanghaiKPMG, NanjingKPMG, NanjingKPMG, ShanghaiKPMG, Brunei

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011169NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)13. Subsidiaries (continued)(a)During the financial year, the Group incorporated the following companies:Name of companyCountry of incorporation/place of businessEquity interestheld%VT Systems Participações Ltda. Brazil 100ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd. People’s Republic of China 100(b)During the financial year, the Group acquired the following company:Fair value of net identifiableName of company Interest acquired Considerationassets acquired% $’000 $’000DRB Aviation Consultants, Inc. 100 1,835 1,050(c)During the financial year, the Group acquired additional equity interests in the following subsidiaries:Name of companyCarrying value ofInterest acquiredInterestafter acquisition Considerationnet identifiableassets acquired% % $’000 $’000Telematics Wireless Ltd. and its subsidiary 0.49 97.15 262 156ST Electronics (Data Centre Solutions)Pte. Ltd. (formerly known as PM-B Pte Ltd)and its subsidiaries 30 100 2,000 4,535(d)During the financial year, the Group disposed of the following companies:Name of company Interest disposed ConsiderationCarrying value of netidentifiable assets/(liabilities) disposed% $’000 $’000Brightspot Interactive Learning Pte. Ltd. and its subsidiary 51 6 (260)PT PM-B Indonesia 100 482 270STAR Automotive Centre (Guangzhou) Co., Ltd 100 1,012 (50)

170 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)14. Associates and jointly controlled entitiesGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000Unquoted shares, at cost 228,516 197,907 17,657 17,657Goodwill on acquisition written off, net (110) (110)Share of net assets acquired 228,406 197,797Share of post-acquisition reserves 92,488 83,374320,894 281,171The summarised financial information of the associates is as follows:Group2011 2010$’000 $’000ResultsRevenue 888,490 819,524Net profit for the year 69,319 93,034Assets and liabilitiesNon-current assets 430,884 415,543Current assets 624,868 540,925Current liabilities (332,464) (301,891)Non-current liabilities (40,805) (48,723)682,483 605,854The Group’s share of the jointly controlled entities’ results, assets and liabilities are as follows:Income and expensesIncome 45,102 45,742Expenses (44,185) (43,155)Assets and liabilitiesNon-current assets 62,323 50,783Current assets 101,978 37,685Current liabilities (91,691) (27,996)Non-current liabilities (56,308) (48,541)16,302 11,931

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011171NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)14. Associates and jointly controlled entities (continued)(a)Details of associates are as follows:Name of associatePrincipal activitiesCountry ofincorporation/place of businessEffective equity interestheld by the Group2011 2010% %Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia 50 50Aerospace Engineering Services Pty LtdUnit TrustTrustee of unit trust fund Australia 50 501988 JV Pte. Ltd. ++ Dormant Singapore – 50Composite Technology International Pte LtdRepairing and rebuilding helicopter rotorbladesSingapore 33.33 33.33Eurocopter South East Asia Private LimitedSelling, maintaining and overhauling ofhelicoptersSingapore 25 25Madrid Aerospace Services S.L.Repair and overhaul of aircraft landing gearsand its related componentsSpain 50 50Shanghai Technologies Aerospace CompanyLimitedAircraft and component maintenance, repair,overhaul and other related maintenancebusinessPeople’s Republicof China49 49ST Aerospace (Guangzhou) Aviation ServicesCompany LimitedAircraft and component maintenance, repair,overhaul and other related maintenancebusinessPeople’s Republicof China49 –Singapore Precision Repair and OverhaulPte LtdRepair and overhaul of aircraft and helicopterlanding gears and its related componentsSingapore 50 50Turbine Coating Services Pte LtdRepair, refurbishment and upgrading of aircraftjet engine turbine blades and vanesSingapore 24.5 24.5Turbine Overhaul Services Pte LtdRepair and service of gas and steam turbinecomponentsSingapore 49 49Total Engine Asset Management Pte. Ltd. Leasing of engines Singapore 50 –iWOW Technology Pte Ltd @To carry out research and development,consultancy services in telecommunication,electrical and related fieldsSingapore 17.18 17.18PM-B Project Management Business(Thailand) LtdRelate to mechanical, electrical andengineering works to design, build and providefacility management services for missioncritical environments such as data centres,disaster recovery and business continuity sitesThailand 49 34.3

172 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)14. Associates and jointly controlled entities (continued)Name of associatePrincipal activitiesCountry ofincorporation/place of businessEffective equity interestheld by the Group2011 2010% %Prescient Systems & Technologies Pte. Ltd.Business of developing, producing andmarketing non-real time and real timeinstrumentation systems for defence andcommercial applications; design anddevelopment of training centres and provisionof managed servicesSingapore 47.84 47.84Trusted Hub LtdProvision of an integrated trusted environmentfor secured transactions and e-commerceSingapore 21.13 21.14WizVision Pte. Ltd.Providing information technology services andtrading of computer accessoriesSingapore 22.8 22.8NEC STEE Cloud Services Pte. Ltd.Providing Software as a Service (SaaS) to bothpublic and private institutions in Singapore,and subsequently to other ASEAN countriesSingapore 40 –CityCab Pte LtdRental of taxis and provision of premier busservice, charge card facilities and travel relatedservicesSingapore 46.5 46.5Defence Electronics of Singapore Pte Ltd ++ Manufacture of fuses Singapore – 49GFM Maquinaria, S.A.P.I. de C.V.Sale of construction and mining machinery andequipmentMexico 40 40Nusantara Technologies Sdn. Bhd.Provision of non-destructive testing services,ultrasonic flaw detection and gauging surveyand pressure gauge calibrationMalaysia 49 49Timoney Holdings LimitedDesign and prototyping services andcomponent supply for the automotive andaerospace engineering sectorsRepublic of Ireland 27.4 25NanoScience Innovation Pte LtdResearch and development of ultra finestructure, especially nano-scale, materials,devices, equipment and intellectual propertiesSingapore 27.06 27.06Experia Events Pte Ltd (formerly known asSingapore Airshow & Events Pte. Ltd.)Organising and management of conferences,exhibitions and other related activities, includesthe biennial Singapore Airshow eventSingapore 33 33Singapore Airshow & Events Pte. Ltd. Dormant Singapore 33 –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011173NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)14. Associates and jointly controlled entities (continued)(b)Details of jointly controlled entities are as follows:Name of jointly controlled entitiesPrincipal activitiesCountry ofincorporation/place of businessEffective equity interestheld by the Group2011 2010% %GFM Electronics S.A. de C.V.Distribution and sales of high technologysystems, services and products, in thecommunications area, as well as electronicssystems, principally closed circuits and alarmsfor airports, malls, stadiums and highwaysMexico 50 50ST Electronics (Satellite Systems) Pte. Ltd.Design and development, system integration,manufacturing and sale of satellite equipmentSingapore 51 –ATREC Pte. Ltd.Research and technology development inadvanced materials for both defence andcommercial applicationsSingapore 50 50Beijing Zhonghuan Kinetics HeavyVehicles Co. Ltd. Develop, manufacture and sale of specialisedheavy vehicles and sale of related spare partsand provision of relevant technical consultancyand after sale technical support servicesPeople’s Republicof China50 50SMART Systems Pte Ltd Life systems integration of weapon system Singapore 50 50Takata CPI Singapore Pte LtdManufacture of pyrotechnic components forseatbelts and air bags used in motor vehiclesSingapore 49 49First Response Marine Pte. Ltd.Ship and boat leasing with operator (includingchartering)Singapore 50 50Halter-Bollinger Joint Venture LLC §To bid and secure US boat fabrication contractsfor its shareholdersUSA 50 50Joint Shipyard Management Services Pte LtdConstruction and managing workers’dormitoriesSingapore 30 30++ These entities were struck off from the Registrar of the Accounting and Regulatory Authority during the year.@ Despite effective shareholdings below 20%, this entity continues to be classified as an associate as the Group has representation on the board ofdirectors of the investee, indicating significant influence. Audited by member firms of KPMG International for consolidation purposes.§ Not required to be audited under the law in the country of incorporation.

174 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)14. Associates and jointly controlled entities (continued)All associates and jointly controlled entities that are required to be audited under the law in the country of incorporation are audited by KPMG LLP,Singapore, except for the following:Name of associate/jointly controlled entityName of auditing firmAerospace Engineering Services Pty LtdAerospace Engineering Services Pty Ltd Unit TrustST Aerospace (Guangzhou) Aviation Services Company LimitedComposite Technology International Pte LtdMadrid Aerospace Services S.L.Shanghai Technologies Aerospace Company LimitedTurbine Coating Services Pte LtdTurbine Overhaul Services Pte LtdTotal Engine Asset Management Pte. Ltd.GFM Electronics S.A. de C.V.iWOW Technology Pte LtdPM-B Project Management Business (Thailand) LtdWizVision Pte. Ltd.Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd.CityCab Pte LtdNusantara Technologies Sdn. Bhd.Timoney Holdings LimitedNanoScience Innovation Pte LtdGFM Maquinaria, S.A.P.I. de C.V.KPMG, AustraliaKPMG, AustraliaKPMG, GuangzhouDeloitte and Touche LLP, SingaporeDeloitte S.L.KPMG, ShanghaiPricewaterhouseCoopers LLP, SingaporePricewaterhouseCoopers LLP, SingaporeErnst & Young LLP, SingaporePricewaterhouseCoopers, MexicoLW Ong & CoTonkla Miraculous Co., Ltd.R Chan & Associates PACCrowe Horwath China CPA Co., LtdDeloitte and Touche LLP, SingaporeSteven Chin & Co., MalaysiaKPMG, IrelandNSC & AssociatesPricewaterhouseCoopers, Mexico15. InvestmentsGroup2011 2010$’000 $’000Quoted equity investmentsEquity shares, at fair value (Available-for-sale)Non-related corporations 38,242 42,804Impairment losses on quoted investments (28,900) (28,900)9,342 13,904Unquoted equity investmentsEquity shares (Available-for-sale)Related corporations, at cost 5,000 4,999Non-related corporations, at cost 16,110 22,37321,110 27,372

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011175NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)15. Investments (continued)Group2011 2010$’000 $’000Venture capital funds and limited partnership, at fair value 583 580Convertible loan to non-related corporations # 700 7001,283 1,280Total unquoted investments 22,393 28,652Impairment losses on unquoted investments (20,124) (26,366)2,269 2,286Total investments 11,611 16,190#This relates to a convertible loan extended by a subsidiary to an investee company at an interest rate of 1% (2010: 1%) per annum above bank prime rate.The subsidiary was granted an option by the investee company to be able to convert the loan into convertible redeemable preference shares in the investeecompany. The convertible loan has been fully impaired.During the year, pursuant to a share swap arrangement, a subsidiary received a quoted equity investment with a fair value of $1,444,000 in exchangefor an unquoted equity investment of $4,571,000 that was fully impaired in prior years. As at 31 December 2011, the quoted equity investment wasvalued at $1,248,000.For those unquoted investments where the fair value cannot be reliably estimated, the Group has no intention to dispose such investments at the balancesheet date.Impairment losses on unquoted investmentsMovements in impairment losses on unquoted investments during the year are as follows:GroupNote 2011 2010$’000 $’000At beginning of the year 26,366 26,923Charge to profit or loss 9 19 417Utilised (6,276) (500)Disposal – (325)Translation difference 15 (149)At end of the year 20,124 26,366

176 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)16. Intangible assets(a)GoodwillGroupNote 2011 2010$’000 $’000At beginning of the year 468,302 508,317Acquisition of subsidiaries 785 104Disposal of subsidiaries (3,714) –Finalisation of purchase price allocation – (1,336)Acquisition of non-controlling interests in subsidiaries – 342Reduction in cost of investment * (5,733) –Translation difference3,738 (39,125)At end of the year 463,378 468,302ImpairmentAt beginning of the year 19,061 15,490Impairment loss for the year 5 3,240 3,741Disposal of subsidiaries (3,776) –Translation difference 204 (170)At end of the year 18,729 19,061Net book value 444,649 449,241* During the financial year, a subsidiary in the Group received $5,733,000 from its previous shareholders following a successful outcome ofan arbitration case. This amount was treated as a reduction in cost of investment.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011177NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)(b)Other intangible assetsNoteDealernetworkDevelopmentexpenditureCommercialandintellectualpropertyrightsFilm costinventory Brands Others Total$’000 $’000 $’000 $’000 $’000 $’000 $’000The GroupCostAt 1.1.2010 9,132 12,971 68,080 11,583 83,239 5,021 190,026Additions – 3,231 1,256 220 – – 4,707Finalisation of purchase priceallocation – – – – – 1,336 1,336Write-off – (2,153) – – – – (2,153)Translation difference (754) (434) (5,024) – (6,981) 7 (13,186)At 31.12.2010 and at 1.1.2011 8,378 13,615 64,312 11,803 76,258 6,364 180,730Additions – 2,803 – – – – 2,803Acquisition of a subsidiary – – – – 248 648 896Disposal of a subsidiary – (2,082) – – – – (2,082)Translation difference 67 335 530 – 592 1 1,525At 31.12.2011 8,445 14,671 64,842 11,803 77,098 7,013 183,872Accumulated amortisationAt 1.1.2010 4,683 2,326 24,544 744 3,687 2,468 38,452Amortisation for the year 5 1,266 1,155 6,926 13 1,258 472 11,090Impairment loss 5 – 815 – 4,123 – – 4,938Write-off – (2,063) – – – – (2,063)Translation difference (454) (118) (2,017) – (380) – (2,969)At 31.12.2010 and 1.1.2011 5,495 2,115 29,453 4,880 4,565 2,940 49,448Amortisation for the year 5 778 1,175 5,680 – 1,169 473 9,275Impairment loss 5 – – 874 6,090 – – 6,964Disposal of a subsidary – (2,082) – – – – (2,082)Translation difference 71 81 459 – 67 – 678At 31.12.2011 6,344 1,289 36,466 10,970 5,801 3,413 64,283Net book valueAt 31.12.2011 2,101 13,382 28,376 833 71,297 3,600 119,589At 31.12.2010 2,883 11,500 34,859 6,923 71,693 3,424 131,282Impairment of film cost inventoryAn impairment test relating to the carrying amount of film cost inventory was triggered during the financial year as a result of revised salesforecasts and actual sales data received from the film producers. The recoverable amount was estimated based on its value in use basedon sales forecasts provided by the producers and using a discount rate of 8.49% (2010: 5.7%). The carrying amount of the film inventorywas determined to be higher than its recoverable amount and an impairment loss of $6,090,000 (2010: $4,123,000) was recognised. Theimpairment loss is recognised in cost of sales in the income statement.

178 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)(c)Total intangible assetsGroup2011 2010$’000 $’000Net book value 564,238 580,523Impairment testing of goodwillGoodwill acquired through business combinations has been allocated to the Group’s CGUs identified according to each individual business unit, forimpairment testing.Carrying amount of goodwill allocated to each of the CGU:Group2011 2010$’000 $’000ST Aerospace Solutions (Europe) A/S 1,966 1,987ST Aerospace Academy Pte. Ltd. and its subsidiaries 200 200ST Aerospace Academy (Australia) Pty Ltd (formerly known as ST Aviation TrainingAcademy (Australia) Pty Ltd) 207 207Pacific Flight Services Pty Ltd 701 701Precision Products Singapore Pte Ltd 2,262 2,262DRB Aviation Consultants, Inc. 785 –Antycip Simulation Limited and its subsidiary 2,799 2,781DataMark Technologies Pte Ltd 149 149Knowledge Alive Pte. Ltd. and its subsidiary 104 104MÄK Technologies, Inc. 22,783 22,603ST Electronics (Data Centre Solutions) Pte. Ltd. (formerly known as PM-B Pte Ltd)and its subsidiaries 11,745 11,705STELCOMMS Pte. Ltd. 5 5STELOP Pte. Ltd. 1,732 1,732Telematics Wireless Ltd. and its subsidiary 72,302 77,416VT iDirect, Inc. and its subsidiary 160,653 159,387Jiangsu Huatong Kinetics Co., Ltd. and Jiangsu Huaran Kinetics Co., Ltd. 6,002 5,690VT LeeBoy, Inc. 95,201 94,446VT Hackney, Inc. 31,521 34,599Miltope Corporation 33,532 33,267444,649 449,241The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections derived from the financial budgetsapproved by management for the next 5 years. The key assumptions used in the calculation of recoverable amounts are discount rate and terminal valuegrowth rates. The discount rates applied range from 5.9% to 14.2% (2010: 5.7% to 8.9%) and the terminal value growth rates assumed range from 0%to 5.0% (2010:1.5% to 5.0%).

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011179NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)16. Intangible assets (continued)The discount rate used is a measure estimated based on past experience and the industry weighted average cost of capital.The long-term terminal growth rate has been determined based on either the nominal GDP rates for the country in which the CGU is based or the longtermcompound annual growth rate estimated by management by reference to forecasts included in industry reports and expected market development.17. Investment propertyGroupNote 2011 2010$’000 $’000At costAt beginning of the year 3,045 3,244Translation difference199 (199)At end of the year 3,244 3,045Accumulated depreciationAt beginning of the year 1,379 1,235Depreciation charge for the year 5 235 245Translation difference 121 (101)At end of the year 1,735 1,379Net book value 1,509 1,666The property rental income of the Group for the year ended 31 December 2011 from its investment property, which is leased out under operating leases,amounted to $22,000 (2010: $187,000). Direct operating expenses (including repairs and maintenance) arising from the rental-earning InvestmentProperty amounted to $1,000 (2010: $9,000).The fair value of the investment property as at 31 December 2011 of $11,512,000 (2010: $9,547,000) are based on market values, being the estimatedamount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transactionafter proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.The investment property held by the Group as at end of the year is as follows:Location Existing Use Tenure Land area(sq. m.)People’s Republic of ChinaNo. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai Industrial buildings 50 years from 12.6.2003 to 27.7.2052 15,898

180 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)18. Long-term receivablesGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000Housing and car loans and advances to staff 1,295 1,036 19 77Deposits – 4,099 – –Other receivables – 2,489 – –Loans to:Third parties * 1 58,847 48,136 – –Allowance for doubtful loans (8,962) (8,957) – –49,885 39,179 – –51,180 46,803 19 77Receivable:Within 1 year 12,925 10,428 19 77After 1 year 38,255 36,375 – –51,180 46,803 19 77Loans and receivables are carried at amortised cost and are subject to impairment.* 1 Included in the loans to third parties are:(a)(b)(c)a loan of $8,312,000 (2010: $8,312,000) secured by intellectual property rights, and is not expected to be repaid within the next 12 months.Interest is repriced every month and chargeable at the US dollar prime rate plus 2% (2010: 2%) per annum, which is also the effective interest rate.The loan is convertible to shares of that entity, subject to certain terms and conditions. In a prior year, a notice was given to that entity to convert theloan to shares of that entity but the conversion has not been effected as at the end of the year. The loan is fully impaired at the balance sheet date.No interest income has been accrued for this financial year stated due to uncertainty over the collectibility of the interest income.a bridging loan of $649,650 (US$500,000) (2010: $645,000 (US$500,000)) extended to a third party. The bridging loan is secured by way of a Deedof Debenture, which creates a floating charge over the assets of the third party. This loan is treated as a net investment in the third party and is notexpected to be repaid. The loan is stated at cost and has been fully impaired due to uncertainty over collectibility.an amount of $49,885,000 (2010: $39,179,000) relating to instalment payment plans granted to customers. These loans are unsecured, repayableover a period of 7.5 years from 2008. The interest rates on these loans are LIBOR with margins at 0.63% (2010: 0.5% to 0.63%) per annum. Theinterest rates range from 0.91% to 1.43% (2010: 0.92% to 1.39%) per annum, which are also the effective interest rates.Movements in allowance for doubtful loans to third parties are as follows:Group2011 2010$’000 $’000At beginning of the year 8,957 9,015Translation difference5 (58)At end of the year 8,962 8,957

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011181NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)19. Finance lease receivablesThe Group entered into finance lease arrangements with customers with terms ranging from 1 to 10 years (2010: 1 to 10 years) and effective interestrate of 1.35% to 20.74% (2010: 1.42% to 20.7%) per annum.Gross investmentin finance leaseUnearnedinterestPresent value ofminimum leasereceivablesAllowance fordoubtful leasereceivablesNet investmentin finance lease$’000 $’000 $’000 $’000 $’000Group2011Within 1 year 28,687 1,081 27,606 (1,443) 26,1632 to 5 years 15,361 1,161 14,200 – 14,200More than 5 years 287 5 282 – 28215,648 1,166 14,482 – 14,482201044,335 2,247 42,088 (1,443) 40,645Within 1 year 17,183 562 16,621 (2,142) 14,4792 to 5 years 6,094 646 5,448 – 5,448More than 5 years 1,188 84 1,104 – 1,1047,282 730 6,552 – 6,55224,465 1,292 23,173 (2,142) 21,031GroupNote 2011 2010$’000 $’000Net investment in finance leaseNot past due and not impaired 33,100 14,699Past due and not impaired 7,545 6,33240,645 21,031Individually assessedDoubtful lease receivables 1,443 2,142Allowance for doubtful lease receivables (1,443) (2,142)– –Movements in allowance for doubtful lease receivables are as follows:At beginning of the year 2,142 2,816Charge/(write-back) to profit or loss 5 202 (543)Allowance utilised (1,031) –Translation difference 130 (131)At end of the year 1,443 2,142

182 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)19. Finance lease receivables (continued)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:Group2011 2010$’000 $’0001 - 90 days 2,360 3,10991 - 180 days 2,387 1,616181 - 360 days 1,771 615>360 days 1,027 9927,545 6,33220. Deferred tax assetsGroup2011 2010$’000 $’000At beginning of the year 118,794 127,196Recognised in profit or loss 9,556 5,659Effect of reduction in tax rate 59 (168)Disposal of a subsidiary (30) –Translation difference 385 (8,492)Utilisation of tax losses (12,063) (8,306)Changes in fair value of available-for-sale financial assets – (51)Changes in fair value of derivative financial instruments designated as cash flow hedges (3,534) 2,956At end of the year 113,167 118,794The deferred tax assets arise as a result of:Unabsorbed capital allowances and unutilised tax losses 15,297 3,149Allowance for doubtful debts and inventory obsolescence 8,693 15,730Provisions 73,102 88,986Intangible assets – 405Other temporary differences 11,718 2,672Changes in fair value of derivative financial instruments designated as cash flow hedges 4,357 7,852113,167 118,794

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011183NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)21. Inventories and work-in-progressGroup2011 2010$’000 $’000Inventories of equipment and spares 785,617 575,315Work-in-progress in excess of progress billingsWork-in-progress, including profits recognised 3,093,530 3,179,861Progress billings (2,285,477) (2,284,747)808,053 895,114Total inventories and work-in-progress at lower of cost and net realisable value 1,593,670 1,470,429Progress billings in excess of work-in-progressWork-in-progress, including profits recognised 3,078,244 2,043,709Progress billings (3,734,407) (2,610,902)(656,163) (567,193)In 2011, raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of sales amounted to $3,663,208,000(2010: $3,539,892,000).(i)Revision to inventory obsolescence estimatesDuring the year, the Group engaged independent consultants to perform an industry and benchmarking study on the basis and estimates (the“obsolescence rates”) used to determine allowance for inventory obsolescence. The study considered the industry practices of the 4 mainoperating segments and compared the obsolescence rates against industry peer companies. Based on the results obtained, the Group hasrevised the obsolescence rates to align more closely with industry practices. The effect of these changes resulted in a write-back of allowancefor inventory obsolescence of $18,985,000 to the income statement.The determination of inventory obsolescence charge involves ascertaining the net realisable values of inventory, which are dependent on theprevailing selling prices, which in turn are impacted by demand and supply, technological advancement and etc. Therefore, it is impractical toestimate the effects of these changes on the income statements in the future years.(ii)Allowances for inventory obsolescence and foreseeable lossesAs at 31 December 2011, the inventories are stated after allowance for inventory obsolescence of $187,674,000 (2010: $195,316,000) andwork-in-progress in excess of progress billings is stated after provision for foreseeable losses of $6,365,000 (2010: $4,168,000).(iii)Net realisable value write-downAs at 31 December 2011, work-in-progress amounting to $38,718,000 (2010: $nil) was written down to the estimated net realisable value. Thewrite-down was included in cost of sales.

184 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)22. Trade receivablesGroup2011 2010$’000 $’000620,068 566,814Past due and not impaired 308,599 256,132928,667 822,946Collectively assessedImpaired receivables (Gross) 24,141 34,816Allowance for doubtful debts (6,838) (10,159)17,303 24,657Individually assessedImpaired receivables (Gross) 57,510 79,926Allowance for doubtful debts (50,378) (75,635)7,132 4,291Unbilled receivables 235,885 169,291Allowance for unbilled receivables (1,484) (1,380)Trade receivables, net1,187,503 1,019,805Trade debtors denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:Movements in allowance for doubtful debts are as follows:GroupNote 2011 2010$’000 $’000At beginning of the year 85,794 106,328(Write-back)/charge to profit or loss 5 (143) 467Bad debts written off against allowance (28,667) (13,478)Acquisition of subsidiaries 15 21Disposal of subsidiaries (196) –Translation difference 413 (7,544)At end of the year 57,216 85,794

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011185NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)22. Trade receivables (continued)Movements in allowance for unbilled receivables are as follows:GroupNote 2011 2010$’000 $’000At beginning of the year 1,380 1,854Charge/(write-back) to profit or loss 5 187 (474)Translation difference (83) –At end of the year 1,484 1,380Ageing of receivables that are past due but not impaired:1 – 90 days 235,022 180,13291 – 180 days 29,153 40,972181 – 360 days 31,928 21,833>360 days 12,496 13,195308,599 256,132Trade receivables that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent or in financial difficultiesor who have significant delay or defaulted in payments.In the prior year, trade receivables amounting to approximately $7,662,000 are partially secured by shares held by a guarantor company amounting to$278,000.Trade receivables amounting to $8,210,000 (2010: $30,582,000) are arranged to settle via letters of credit issued by reputable banks.Except for the impaired trade receivables, the Group believes that the past due receivables are still collectible based on the historical payment patternsand good reputation of the Group’s customers.

186 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)23. Amounts due from related partiesGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000Trade:Subsidiaries – – 4,607 6,095Associates 6,124 5,189 – –Jointly controlled entities 9,610 11,297 – –Related corporations 21,242 4,727 21 2736,976 21,213 4,628 6,122Non-trade:Subsidiaries *1 – – 931,048 790,905Associates *2 2,525 2,572 – –Jointly controlled entities *3 7,680 7,985 – –10,205 10,557 931,048 790,905Allowance for doubtful debts (2,519) (2,521) (37,630) (35,813)Amounts due from related parties 44,662 29,249 898,046 761,214Receivable:Within 1 year 37,332 21,872 683,600 761,214After 1 year 7,330 7,377 214,446 –44,662 29,249 898,046 761,214* 1 Included in the amounts due from subsidiaries (non-trade) are mainly:(a)(b)loans of $874,083,000 (2010: $752,281,000) bearing interest at rates ranging from 1.13% to 4.98% (2010: 0.67% to 4.98%) per annum. Theloans are unsecured and repayable on demand; andinterest-free loans of $37,630,000 (2010: $35,813,000), which are unsecured and are not repayable in the foreseeable future. The loans are fullyimpaired.* 2 Included in the amounts due from associates (non-trade) is a loan to an associate of $2,524,000 (2010: $2,571,000). Interest is charged at EURIBOR + 1.0%per annum (2010: EURIBOR + 1.0% per annum) and is repriced every 3 months (2010: 3 months). The interest rate on the loan is 2.42% (2010: 2.02%) perannum. The loan is unsecured and repayable in 2019.* 3 Included in amounts due from jointly controlled entities (non-trade) are:(a) a loan of $2,519,000 (2010: $1,453,000) bearing interest at 4% (2010: 4%) per annum. The loan is unsecured and has been fully impaired; and(b) loans of $4,806,000 (2010: $4,806,000) bearing interest at 6.38% (2010: 4.57% to 6.38%) per annum. The loans are unsecured and repayableby 2029.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011187NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)23. Amounts due from related parties (continued)Movements in allowance for doubtful debts are as follows:GroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000At beginning of the year 2,521 4,237 35,813 28,216(Write-back)/charge to profit or loss (29) (1,564) 1,800 7,788Translation difference27 (152) 17 (191)At end of the year 2,519 2,521 37,630 35,81324. Advances and other receivablesGroupCompanyNote 2011 2010 2011 2010$’000 $’000 $’000 $’000Deposits 12,031 12,346 547 524Interest receivables 5,151 3,193 270 341Other recoverables 37,972 20,559 3,575 84Non-trade receivables 33,061 60,785 25 49Advance payments to suppliers 212,997 403,802 – –Prepayments 34,086 27,508 213 283Derivative financial instruments 48 4,772 62,055 23 –340,070 590,248 4,653 1,28125. Short-term investmentsGroupNote 2011 2010$’000 $’000Quoted investmentsEquity shares, at fair value (Fair value through profit or loss) 209 534Unquoted investmentsBonds, at fair value (Available-for-sale)Interest rate: 0.5% to 5.88% (2010: 0.43% to 6.15%) per annumMaturity: 9.2.2012 to 15.11.2022 (2010: 7.3.2011 to 15.11.2022) 48 402,590 197,930402,799 198,464

188 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)26. Bank balances and other liquid fundsGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000Fixed deposits with financial institutions 937,808 1,142,427 264,346 319,867Cash and bank balances 428,644 449,300 37,513 16,944Cash and cash equivalents in the statement ofcash flows 1,366,452 1,591,727 301,859 336,811Fixed deposits with financial institutions mature at varying periods within 11 months (2010: 6 months) from the financial year-end. Interest rates rangefrom 0.03% to 8.25% (2010: 0.04% to 6.45%) per annum, which are also the effective interest rates.Cash and bank balances of $7,463,000 (2010: $4,204,000) have been placed with banks as security for letters of credit issued to third parties.Cash and cash equivalents denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December areas follows:27. Trade payables and accrualsGroupCompanyNote 2011 2010 2011 2010$’000 $’000 $’000 $’000Trade payables 798,531 675,730 – –Non-trade payables 65,912 48,559 5,492 3,543Purchase of property, plant and equipment 2,082 12,062 – –Accrued operating expenses 787,999 821,203 30,637 25,504Accrued interest payable 16,386 16,202 7 –Other long-term payables, current 37 – 1,333 – –Derivative financial instruments 48 19,612 13,920 – 61,690,522 1,589,009 36,136 29,053Trade payables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011189NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)28. Amounts due to related partiesGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000Trade:Subsidiaries – – 8,544 2,880Associates 3,844 2,763 – –Jointly controlled entities 7,902 4,963 – –Related corporations 17,958 770 – –29,704 8,496 8,544 2,880Non-trade:Subsidiaries * – – 487,853 445,11629,704 8,496 496,397 447,996Payable:Within 1 year 29,340 8,294 269,076 393,996After 1 year 364 202 227,321 54,00029,704 8,496 496,397 447,996* Included in the amounts due to subsidiaries (non-trade) are loans of $469,316,000 (2010: $389,607,000) bearing interest at rates ranging from 4.98% to5.86% (2010: 0.93% to 4.98%) per annum. The loans are unsecured and repayable on demand.During the year, an unsecured interest-free loan of $54,000,000 was fully repaid.29. ProvisionsGroupNote 2011 2010$’000 $’000Provisions for:Warranties 188,785 188,102Liquidated damages 10,957 12,005Foreseeable losses 15,005 10,283214,747 210,390(a)Movements in provision for warranties are as follows:At beginning of the year 188,102 189,740Charge to profit or loss 5 19,834 17,069Provision utilised (20,186) (14,955)Translation difference 1,048 (3,752)Disposal of subsidiaries (13) –At end of the year 188,785 188,102

190 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)29. Provisions (continued)(b)Movements in provision for liquidated damages are as follows:GroupNote 2011 2010$’000 $’000At beginning of the year 12,005 8,643Charge to profit or loss 5 5,473 5,937Provision utilised (6,553) (2,478)Translation difference 32 (97)At end of the year 10,957 12,005(c)Movements in provision for foreseeable losses are as follows:At beginning of the year 10,283 13,468Charge/(write-back) to profit or loss 7,149 (1,912)Provision utilised (2,337) (308)Translation difference (90) (965)At end of the year 15,005 10,28330. Short-term bank loansEffectiveGroupinterest rate Maturity 2011 2010% $’000 $’000Bank loans 0.70% to 6.56% Within 1 year 204,084 63,404The bank loans are denominated in US dollars, Euro and Chinese Yuan (2010: Singapore dollars, US dollars, Euro and Chinese Yuan). Included in the bankloans is an amount of $61,820,000 (2010: $12,799,000) borrowed from related parties of the immediate holding company.Included in short-term bank loans are:(a)(b)(c)loans amounting to $175,820,000 (2010: $43,110,000) which are unsecured;loans amounting to $23,164,000 (2010: $12,981,000) which are secured by land and buildings of certain subsidiaries; andloans amounting to $5,100,000 (2010: $nil) which are secured by certain property, plant and equipment of a subsidiary.In the prior year, a loan amounting to $976,000 guaranteed by a standby letter of credit and another loan amounting to $6,337,000 secured byreceivables and inventories were repaid during the year.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011191NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)31. Lease obligations(a)A subsidiary leases certain land, buildings and equipment from a foreign Airport Authority (“Authority”) under a finance lease arrangement. Theleased assets are pledged as collateral against industrial revenue bonds issued by the Authority. The bonds have staggered maturity dates andthe lease payments have been structured to coincide with the staggered maturities of the bonds with the final payment due on 1 November2012, the expiration date of the lease.In connection with the bonds issued by the Authority the subsidiary entered into a letter of credit agreement for approximately US$10,969,000,which is used to guarantee payments on the bonds in the event that the subsidiary is unable to make required lease payments. The letter ofcredit expires on 3 April 2012.The subsidiary also leases certain land, buildings and equipment from the Authority under an operating lease. The lease term coincides with theterm of the finance lease agreement entered into with the Authority.(b)A subsidiary entered into finance leases for transportation equipment and vehicles with terms of 2 years (2010: 2 to 4 years) and effectiveinterest rates ranging from 3.10% to 3.90% (2010: 8.87% to 9.19%) per annum.The obligations under the finance leases to be paid by the subsidiaries are as follows:Minimum leasePresent valuepayment Interest of payment$’000 $’000 $’000The Group20111 to 5 years 4,397 (218) 4,179Repayable:Within 1 year 2,934After 1 year 1,24520104,1791 to 5 years 6,983 (359) 6,624Repayable:Within 1 year 2,741After 1 year 3,8836,624Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

192 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)32. Deferred incomeGroup2011 2010$’000 $’000Government grants 12,202 6,676Deferred rents 14,493 6,73526,695 13,411Government grants relate mainly to grants received:(a)(b)for subsidising the costs incurred in the acquisitions of equipment for new product development and production activities in the People’sRepublic of China (“PRC”); andto share the cost for purchase of plant and machinery and yard facility upgrades in the US operation.33. Deferred tax liabilitiesGroupCompany2011 2010 2011 2010$’000 $’000 $’000 $’000At beginning of the year 58,216 58,355 426 205Recognised in profit or loss 16,208 (5,569) 329 221Effect of reduction in tax rate 9 13 – –Translation difference631 (3,820) – –Utilisation of tax losses 9,024 10,609 – –Acquisition of subsidiaries in current year – 19 – –Disposal of subsidiaries in current year – (2) – –Changes in fair value of derivative financial instrumentsdesignated as cash flow hedges 2 (1,389) – –At end of the year 84,090 58,216 755 426The deferred tax liabilities arise as a result of:property, plant and equipment 46,211 22,499 227 54Allowance for doubtful debts and inventoryobsolescence (7,802) (5,026) – –Other temporary differences (2,992) (6,088) 528 372Changes in fair value of derivative financial instrumentsdesignated as cash flow hedges – (2) – –Intangible assets 48,673 46,833 – –84,090 58,216 755 426

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011193NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)34. Long-term bank loansEffectiveGroupinterest rate Maturity 2011 2010% $’000 $’000Bank loans 0.77% to 7.76% Up to 2019 507,815 634,165Repayable:Within 1 year 41 307,047After 1 year 507,774 327,118507,815 634,165The bank loans are denominated in Singapore dollars, US dollars, Euro and Chinese Yuan (2010: Singapore dollars, US dollars, Euro and Chinese Yuan).Included in the bank loans is an amount of $155,916,000 (2010: $300,000,000) borrowed from related parties of the immediate holding company.Included in the long-term bank loans are loans amounting to $40,039,000 (2010: $17,912,000) which are secured over a subsidiary’s certain property,plant and equipment. Repayment commences in 2012 in accordance with an agreed repayment schedule over eight years.In the prior year, loan amounting to $7,027,000 which was secured by a subsidiary’s land and guaranteed by a standby letter of credit had been fullyrepaid during the year.35. Other loans(a)Included in other loans are:(i)(ii)(iii)US dollar denominated term notes of $805,000 (US$619,000) (2010: $906,000 (US$703,000)) and $186,000 (US$144,000)(2010: $205,000 (US$159,000)) owing to the Pennsylvania Industrial Development Authority and the Industrial PropertiesCorporation, respectively, by a US entity of the Group. These notes are secured by land and buildings of the entity and bear interest,respectively, at 2.75% and 4.0% (2010: 2.75% and 4.0%) per annum, which are also the effective interest rates, and are payablethrough 1 July 2019 and 28 June 2019, respectively.Another US dollar denominated term note of $8,000 (US$7,000) (2010: $108,000 (US$84,000)) is owed by the same entity to thePennsylvania Department of Community and Economic Development. This note is unsecured, bears interest of 2.75% (2010: 2.75%)per annum, which is also the effective interest rate, and is payable through 1 February 2012.An amount of $492,000 (2010: $nil) relating to a loan from a non-controlling shareholder of a subsidiary. This loan is unsecured, bearsinterest at 5.34% (2010: nil) per annum, which is also the effective interest rate, and is repayable by 2 April 2012.(b)In the prior year, a loan amounting to $1,641,000 related to a long-term loan from a non-controlling shareholder of another subsidiary. The loanwas unsecured with interest rate at 3.47% per annum, which was also the effective interest rate. The loan has been fully repaid during the year.

194 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)36. BondsGroup2011 2010$’000 $’000Principal 649,650 644,500Unamortised discount (3,088) (3,392)646,562 641,108Unamortised discount:At beginning of the year 3,392 4,038Amortisation for the year (319) (330)Translation difference 15 (316)3,088 3,392On 16 July 2009, the Group issued US$500,000,000 4.80% Notes due 2019 under its US$1.2 billion Multicurrency Medium Term Note Programme. Thebonds bear interest at a fixed rate of 4.80% per annum and interest is payable every 6 months from the date of issue. The bonds are unconditionally andirrevocably guaranteed by the Company.37. Other long-term payablesGroupNote 2011 2010$’000 $’000Within 1 year 27 – 1,333After 1 year 2,500 2,5002,500 3,833(a)(b)The loan of $2,500,000 (2010: $2,500,000) is payable to a previous non-controlling shareholder of a subsidiary for the purchase of remainingshareholdings of the subsidiary. The amount payable is unsecured, interest-free and repayable within 7 years from 2010.The sum of $1,333,000 previously payable to an external supplier under a deferred payment agreement relating to purchase of equipment wassettled during the year.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011195NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)38. Share capitalGroup and Company2011 2010$’000 $’000Issued and fully paidAt beginning of the year3,037,565,745 (2010: 3,010,456,133) ordinary shares 677,590 611,808Issued during the year18,899,157 (2010: 27,109,612) ordinary shares 45,821 65,782At end of the year3,056,464,902 (2010: 3,037,565,745) ordinary shares 723,411 677,590Included in share capital is a special share issued to the Minister for Finance. The special share enjoys all the rights attached to the ordinary shares. Inaddition, the special share carries the right to approve any resolution to be passed by the Company, either in general meeting or by its Board of Directors,on certain matters specified in the Company’s Articles of Association. The special share may be converted at any time into an ordinary share.The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per sharewithout restriction.39. Share-based payment arrangementsThe Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP2000”) andthe Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) of the Company (collectively referred to as the “Existing Share Plans”) wereapproved by the members of the Company at an Extraordinary General Meeting held on 23 November 2000. Following the approval of the Existing SharePlans by its shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore Technologies Engineering Executive’s ShareOption Scheme (“ESOS”), the predecessor to the ESOP, was terminated.A new share plan comprising the Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”) and the Singapore TechnologiesEngineering Restricted Share Plan 2010 (“RSP2010”) was approved by the members of the Company at the Annual General Meeting held on21 April 2010 (together, the “New Share Plans”). The Existing Share Plans were terminated following the adoption of the New Share Plans. However,all awards granted under the Existing Share Plans prior to its termination will continue to be valid and be subject to the terms and conditions of theExisting Share Plans.Singapore Technologies Engineering Share Option Plan (“ESOP”)The Company ceased to grant options under the ESOP with effect from 2007. Information regarding ESOP is as follows:(a)The exercise price of the options is equal to volume-weighted average price for the shares on the SGX over the 3 consecutive trading daysimmediately preceding the date of grant.(b)The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to be determined by ERCC andare settled in cash.(c)The options granted expire after 5 years for non-executive directors and 10 years for the employees of the Company and its subsidiaries.

196 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)During the financial year, the Company issued 13,690,266 (2010: 23,981,263) ordinary shares for cash at the respective price per share upon theexercise of options granted by the Company under ESOP.Grant no. No. of ordinary shares issued Price per ordinary share$0102N 2,350,890 2.7200108N 3,637,005 2.6800202N 819,090 2.2900208N 245,775 1.9200302N 233,427 1.7900302P 4,972 1.7900308N 276,598 1.8600308P 8,754 1.8600402N 480,962 2.0900402P 11,426 2.0900408N 931,020 2.1200408P 11,426 2.1200502N 1,013,484 2.3700502P 16,426 2.3700508N 1,105,913 2.5700508P 21,426 2.5700602P 569,105 3.0100602ND 270,750 3.0100608N 1,234,370 2.8400608ND 321,750 2.8400703N 125,653 3.2300708N 44 3.610At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and directors of the Company areas follows:(i)Options outstanding under the ESOS/ESOPNumber of shares2011 2010At beginning of the year – 7,352,103Exercised – (5,676,343)Lapsed – (1,675,760)At end of the year – –Exercisable at end of the year – –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011197NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)(i)Options outstanding under the ESOS/ESOP (continued)Number of shares2011 2010At beginning of the year 84,290,501 104,356,044Exercised (13,690,266) (18,304,920)Lapsed (2,823,628) (1,760,623)At end of the year 67,776,607 84,290,501Exercisable at end of the year 67,776,607 77,558,999(ii)Details of share options2011Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Date ofgrantBalanceas at1.1.2011OptionslapsedOptionsexercisedBalanceas at31.12.2011No. ofholders at31.12.2011Exerciseprice$Exercisable period19.2.2001 2,646,916 296,026 2,350,890 – – 2.720 20.2.2002 to 19.2.201110.8.2001 4,017,363 380,358 3,637,005 – – 2.680 11.8.2002 to 10.8.20117.2.2002 3,047,010 – 819,090 2,227,920 146 * 2.290 8.2.2003 to 7.2.201212.8.2002 1,638,313 – 245,775 1,392,538 130 * 1.920 13.8.2003 to 12.8.20126.2.2003 1,684,485 – 233,427 1,451,058 145 * 1.790 7.2.2004 to 6.2.20136.2.2003 4,972 – 4,972 – – 1.790 7.2.2004 to 6.2.201311.8.2003 2,230,049 – 276,598 1,953,451 223 * 1.860 12.8.2004 to 11.8.201311.8.2003 8,754 – 8,754 – – 1.860 12.8.2004 to 11.8.20139.2.2004 3,295,905 2,413 480,962 2,812,530 307 * 2.090 10.2.2005 to 9.2.20149.2.2004 11,426 – 11,426 – – 2.090 10.2.2005 to 9.2.201410.8.2004 4,500,115 24,131 931,020 3,544,964 373 * 2.120 11.8.2005 to 10.8.201410.8.2004 11,426 – 11,426 – – 2.120 11.8.2005 to 10.8.20147.2.2005 5,843,288 30,736 1,013,484 4,799,068 461 * 2.370 8.2.2006 to 7.2.20157.2.2005 16,426 – 16,426 – – 2.370 8.2.2006 to 7.2.201510.8.2005 7,662,529 38,467 1,105,913 6,518,149 596 * 2.570 11.8.2006 to 10.8.201510.8.2005 21,426 – 21,426 – – 2.570 11.8.2006 to 10.8.20159.2.2006 9,815,209 266,383 569,105 8,979,721 903 * 3.010 10.2.2007 to 9.2.20169.2.2006 270,750 – 270,750 – – 3.010 10.2.2007 to 9.2.201110.8.2006 10,293,383 187,313 1,234,370 8,871,700 915 * 2.840 11.8.2007 to 10.8.201610.8.2006 344,750 23,000 321,750 – – 2.840 11.8.2007 to 10.8.201115.3.2007 13,359,023 665,330 125,653 12,568,040 1,236 * 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 12,879,983 909,471 44 11,970,468 1,316 * 3.610 11.8.2008 to 10.8.201710.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.201284,290,501 2,823,628 13,690,266 67,776,607* Includes 1 Executive Director of the Company#Includes Directors of the Company and its subsidiaries

198 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)(ii)Details of share options (continued)2010Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:Date ofgrantBalanceas at1.1.2010OptionslapsedOptionsexercisedBalanceas at31.12.2010No. ofholders at31.12.2010Exerciseprice$Exercisable period9.2.2000 6,299,313 1,292,760 5,006,553 – – 2.260 10.2.2002 to 9.2.20119.2.2000 656,125 363,000 293,125 – – 1.808 10.2.2002 to 9.2.20116.9.2000 396,665 20,000 376,665 – – 2.390 7.9.2002 to 6.9.2011Total 7,352,103 1,675,760 5,676,343 – –Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:Date ofgrantBalanceas at1.1.2010OptionslapsedOptionsexercisedBalanceas at31.12.2010No. ofholders at31.12.2010Exerciseprice$Exercisable period19.2.2001 4,390,709 10,035 1,733,758 2,646,916 212 * 2.720 20.2.2002 to 19.2.201110.8.2001 5,816,896 512 1,799,021 4,017,363 272 * 2.680 11.8.2002 to 10.8.20117.2.2002 4,080,583 – 1,033,573 3,047,010 212 * 2.290 8.2.2003 to 7.2.201212.8.2002 2,177,506 – 539,193 1,638,313 163 * 1.920 13.8.2003 to 12.8.20126.2.2003 2,278,944 – 594,459 1,684,485 180 * 1.790 7.2.2004 to 6.2.20136.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.201311.8.2003 3,166,936 – 936,887 2,230,049 263 * 1.860 12.8.2004 to 11.8.201311.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.20139.2.2004 4,421,848 – 1,125,943 3,295,905 370 * 2.090 10.2.2005 to 9.2.20149.2.2004 11,426 – – 11,426 1 2.090 10.2.2005 to 9.2.201410.8.2004 6,098,900 2,590 1,596,195 4,500,115 468 * 2.120 11.8.2005 to 10.8.201410.8.2004 16,426 – 5,000 11,426 1 2.120 11.8.2005 to 10.8.20147.2.2005 7,734,409 2,600 1,888,521 5,843,288 558 * 2.370 8.2.2006 to 7.2.20157.2.2005 255,125 11,500 243,625 – – 2.370 8.2.2006 to 7.2.20117.2.2005 16,426 – – 16,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 9,917,974 18,681 2,236,764 7,662,529 701 * 2.570 11.8.2006 to 10.8.201510.8.2005 273,793 11,500 262,293 – – 2.570 11.8.2006 to 10.8.201110.8.2005 21,426 – – 21,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 11,411,801 192,213 1,404,379 9,815,209 986 * 3.010 10.2.2007 to 9.2.20169.2.2006 359,750 – 89,000 270,750 15 # 3.010 10.2.2007 to 9.2.201110.8.2006 12,835,322 221,437 2,320,502 10,293,383 1,083 * 2.840 11.8.2007 to 10.8.201610.8.2006 355,625 – 10,875 344,750 18 # 2.840 11.8.2007 to 10.8.201115.3.2007 14,428,149 594,328 474,798 13,359,023 1,329 * 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 13,585,344 695,227 10,134 12,879,983 1,413 * 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 104,356,044 1,760,623 18,304,920 84,290,501* Includes 1 Executive Director of the Company#Includes Directors of the Company and its subsidiaries

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011199NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)(iii)Details of share options exercisedNo. of sharesExercise Proceeds fromprice share issue Share price$ $’000 $2011January to March 7,234,427 1.790 – 3.230 18,825 3.12 – 3.40April to June 3,315,215 1.790 – 3.610 8,323 2.83 – 3.28July to September 2,495,300 1.790 – 2.840 6,568 2.72 – 3.06October to December 645,324 1.790 – 2.570 1,450 2.66 – 2.8813,690,2662010January to March 11,030,484 1.790 – 3.610 25,878 3.09 – 3.34April to June 5,044,938 1.790 – 3.610 12,329 3.08 – 3.33July to September 3,885,566 1.790 – 3.610 9,735 3.13 – 3.43October to December 4,020,275 1.790 – 3.610 10,460 3.25 – 3.4423,981,263The weighted average share price for options exercised during the year was $3.15 (2010: $3.25). The weighted average remaining contractuallife for these options is 4.0 years (2010: 4.5 years).The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. Theestimate of the fair value of the services received is measured based on a binomial model, taking into account the terms and conditions uponwhich the options were granted. No options were granted for the years ended 31 December 2011 and 31 December 2010.Singapore Technologies Engineering Performance Share Plan (“PSP2000”) and Singapore Technologies Engineering Performance SharePlan 2010 (“PSP2010”)Performance shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a3-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period if the targetsare met. The final number of performance shares awarded will depend on the level of achievement of those targets and can range from 0% to 170%of the conditional award of performance shares. In addition, commencing with the PSP contingent awards for financial year 2009, the final award forperformance shares is conditional upon the performance targets for restricted shares that have the same end of performance period being met.PSP2000Year of grant2011 2010 2009 TotalNumber of performance sharesAt grant date – 1,532,000 1,687,000 3,219,000Lapsed – (161,295) (326,432) (487,727)Outstanding as at 31.12.2011 – 1,370,705 1,360,568 2,731,273

200 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)PSP2010Year of grant2011Number of performance sharesAt grant date 1,503,000Lapsed (9,374)Outstanding as at 31.12.2011 1,493,626During the year, performance shares amounting to 587,594 ordinary shares were awarded in respect of grant made in 2008 under PSP2000.The fair value of the performance shares is determined on conditional grant date using the Monte Carlo simulation model.The significant inputs to the model used for the conditional grants in 2009 to 2011 are as follows:Year of grant2011 2010 2009Market conditionsVolatility of MSCI Index (%) – – 33.10Volatility of Defensive Index (%) 20.33 16.56 –Volatility of the Company’s shares (%) 19.21 20.18 18.88Correlation of volatility of Defensive Index/MSCI Index vs. the Company (%) 55.80 50.10 67.50Risk-free rate (%) 0.49 0.71 1.03Share price ($) 3.15 3.26 2.26Cost of equity (%) 7.90 8.90 7.86Dividend yield (-- Management’s forecast in line with dividend policy --)Singapore Technologies Engineering Restricted Stock Plan (“RSP2000”) and Singapore Technologies Engineering Restricted Share Plan2010 (“RSP2010”)Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a 2-yearperformance period. The restricted shares will only be released to the recipient at the end of the performance qualifying period if the targets are met. Thefinal number of restricted shares awarded will depend on the level of achievement of those targets and range between 0% and 150% of the conditionalaward of the restricted shares and will be delivered to recipients over a 3-year vesting period; half at the end of the performance qualifying period andthe balance will vest equally over the subsequent 2 years.Subject to the shareholders’ approval at the Annual General Meeting to be held on 19 April 2012, the awards granted under the Restricted Share Plan2010 to all Non-Executive Directors (“NEDs”) for FY2011 are outright shares with no performance and vesting conditions and will form up to 30% ofNEDs’ total compensation. The share award has a Moratorium on selling as NEDs are required to hold shares (including ST Engineering shares obtainedby other means) up to one time Annual Base Retainer ($ cap). Any extra shares can be disposed of and NEDs can dispose of all shares at least after ayear has elapsed from the time they left the Board.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011201NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)39. Share-based payment arrangements (continued)RSP2000Date of grantNumber ofrestrictedshares as atgrant dateNumber ofrestrictedshares lapsedNumber ofrestrictedshares releasedBalanceoutstandingas at31.12.201126 July 2007 897,000 248,147 648,853 –12 November 2007 300,000 – 180,000 120,00024 March 2008 7,603,183 3,246,874 3,367,025 989,28424 March 2008 217,000 107,379 109,621 –18 March 2009 8,286,892 2,667,829 2,933,374 2,685,68918 March 2009 210,500 78,958 91,038 40,50422 March 2010 8,547,400 954,071 – 7,593,32922 March 2010 170,800 3,300 167,500 –Total 26,232,775 7,306,558 7,497,411 11,428,806RSP2010Date of grantNumber ofrestrictedshares as atgrant dateNumber ofrestrictedshares lapsedNumber ofrestrictedshares releasedBalanceoutstandingas at31.12.201125 February 2011 50,000 – – 50,00016 March 2011 7,380,041 399,287 – 6,980,75427 June 2011 349,900 – 174,950 174,950Total 7,779,941 399,287 174,950 7,205,704During the year, restricted shares amounting to 4,446,347 and 174,950 ordinary shares were awarded under RSP2000 and RSP2010 respectively.The 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 2010 and 2011 are as follows:Year of grant2011 2010Volatility of the Company’s shares (%) 19.21 20.18Risk-free rate (%) 0.35 – 0.82 0.57 – 1.12Share price ($) 3.15 3.26Dividend yield(--Management’s forecast in line with dividend policy--)For 2011, the actual number of shares granted to each NED will be based on the volume-weighted average price of an ordinary share of the Company onthe SGX over the 14 trading days immediately after Annual General Meeting.

202 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)40. Capital reservesIncluded in capital reserves are:(a)(b)an amount of $115,948,000 (2010: $115,948,000) relating to share premium of the respective pooled enterprises, namely SingaporeTechnologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd and Singapore TechnologiesMarine Ltd classified as capital reserve upon the pooling of interests during the financial year ended 31 December 1997; andan amount of $375,000 (2010: $375,000) relating to an excess capital contribution from non-controlling shareholders of a subsidiary in Chinafollowing the additional capital injection in prior years.41. Other reservesForeigncurrencytranslationreservePremiumpaid onacquisition ofnon-controllingStatutoryreserveFair valuereserveShare-basedpaymentreserve interests TotalNote $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2010 (97,365) 1,206 1,365 72,001 – (22,793)Other comprehensive income:Net fair value changes on available-for-salefinancial assets (i) – – (848) – – (848)Net fair value changes on effective portion ofcash flow hedges (ii) – – (12,633) – – (12,633)Foreign currency translation differences (iii) (80,291) – 1,202 – 84 (79,005)Share of foreign currency translation differences ofassociates and jointly controlled entities (8,082) – – – – (8,082)Reclassification adjustment of foreign currencytranslation reserve to profit or loss arising fromdisposal of a foreign entity 30 – – – – 30Total comprehensive income for the year, net of tax (88,343) – (12,279) – 84 (100,538)Issue of shares – – – (7,328) – (7,328)Cost of share-based payment – – – 12,068 – 12,068Acquisition of non-controlling interests in subsidiaries – – – – (5,318) (5,318)Transfer from retained earnings to statutory reserve – 729 – – – 729At 31.12.2010 (185,708) 1,935 (10,914) 76,741 (5,234) (123,180)

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011203NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)41. Other reserves (continued)ForeigncurrencytranslationreservePremiumpaid onacquisition ofnon-controllingStatutoryreserveFair valuereserveShare-basedpaymentreserve interests TotalNote $’000 $’000 $’000 $’000 $’000 $’000The GroupAt 1.1.2011 (185,708) 1,935 (10,914) 76,741 (5,234) (123,180)Other comprehensive income:Net fair value changes on available-for-salefinancial assets (i) – – (11,434) – – (11,434)Net fair value changes on effective portion ofcash flow hedges (ii) – – (7,177) – – (7,177)Foreign currency translation differences (iii) 18,747 – (236) 99 74 18,684Share of foreign currency translation differences ofassociates and jointly controlled entities 4,310 – – – – 4,310Reclassification adjustment of foreign currencytranslation reserve to profit or loss arising fromdisposal of foreign entities 2,817 – – – – 2,817Total comprehensive income for the year, net of tax 25,874 – (18,847) 99 74 7,200Issue of shares – – – (10,656) – (10,656)Cost of share-based payment – – – 16,475 – 16,475Acquisition of non-controlling interests in subsidiaries – – – – 2,429 2,429Disposal of a subsidiary – – – – 23 23Transfer from retained earnings to statutory reserve – 1,157 – – – 1,157At 31.12.2011 (159,834) 3,092 (29,761) 82,659 (2,708) (106,552)Group2011 2010$’000 $’000i. Net fair value changes on available-for-sale financial assets:- Net fair value changes during the year (7,437) 10,161- Reclassification adjustment to profit or loss on disposal of financial assetsin finance costs, net (3,997) (11,009)(11,434) (848)ii.Net fair value changes on effective portion of cash flow hedges:- Net fair value changes during the year (15,457) (12,698)- Reclassification adjustment to profit or loss on occurrence of forecast transactionin finance costs, net 8,289 –- Ineffective portion in cash flow hedges (9) 65(7,177) (12,633)

204 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)41. Other reserves (continued)Group2011 2010$’000 $’000iii.Foreign currency translation differences arise from:- Translation of quasi equity loans forming part of net investments in foreign entities (9,529) (2,423)- Translation of foreign currency loans used as hedging instruments for effective netinvestment hedges (5,487) 7,005- Translation of foreign entities 33,763 (84,873)18,747 (80,291)Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreignsubsidiaries whose functional currencies are different from that of the Group’s presentation currency.As at 31 December 2011, bonds amounting to $257.4 million (US$198.1 million) (2010: $134.0 million (US$103.9 million)) have been designated asa hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries (“US subsidiaries”) and are being used to hedge the Group’sexposure to foreign exchange risk on this investment. Gain or loss on the re-translation of these bonds is transferred to other comprehensive income tooffset any gain or loss on translation on the net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year.Statutory reserveIn accordance with foreign Enterprise Law application to the wholly-owned subsidiaries in the People’s Republic of China (“PRC”), certain subsidiaries arerequired to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with theapplicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registeredcapital of the subsidiaries. The SRF is not available for standard distribution to shareholders.In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment applicable to certain subsidiaries, appropriations fromthe net profits are made to the Reserve Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from prior years (if any), and beforeprofit distributions to the investors. The percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by theBoard of Directors of the PRC entities.Fair value reserveFair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired as well as theportion of the fair value changes on the derivative financial instruments designated as hedging instruments in cash flow hedges that are determined tobe an effective hedge.Share-based payment reserveShare-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to employees and nonexecutivedirectors. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options,performance shares and restricted shares. The expense for services received will be recognised over the vesting periods.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011205NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)41. Other reserves (continued)Premium paid on acquisition of non-controlling interestsThe reserve represents the difference between the consideration paid on acquisition of non-controlling interests and the carrying value of the proportionateshare of the acquiree’s net assets acquired.42. Retained earningsGroup2011 2010$’000 $’000Retained by:The Company 536,877 487,984Subsidiaries 379,268 353,754Associates and jointly controlled entities 116,868 109,0641,033,013 950,80243. DividendsGroup and Company2011 2010$’000 $’000Final dividend paid in respect of the previous financial year of 4.0 cents(2010: 4.0 cents) per share 121,503 120,418Special dividend paid in respect of the previous financial year of 7.55 cents(2010: 6.28 cents) per share 229,508 188,906Interim dividend paid in respect of the current financial year of 3.0 cents(2010: 3.0 cents) per share 91,656 90,955442,667 400,279Additional final dividend paid in respect of the previous financial year due to issue of sharesbefore books closure date 1,509 1,959444,176 402,238The Directors propose a final dividend of 4.0 cents (2010: 4.0 cents) per share amounting to $122.3 million (2010: $121.5 million) and a special dividendof 8.5 cents (2010: 7.55 cents) per share amounting to $259.8 million (2010: $229.5 million), in respect of the financial year ended 31 December 2011.These dividends have not been recognised as a liability as at year-end as they are subject to approval at the Annual General Meeting of the Company.

206 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)44. Related party informationIn addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with the following relatedparties on terms agreed between the parties as follows:Group2011 2010$’000 $’000Associates of the GroupSales and services rendered 10,882 8,342Purchases and services received 24,885 24,760Dividend income 24,104 22,777Forward currency contracts- sales 5,171 3,364- purchases 6,517 5,863Jointly controlled entities of the GroupSales and services rendered 14,687 15,020Purchases and services received 15,762 1,254Dividend income 1,547 1,407Other related parties *Sales and services rendered 56,641 25,577Purchases and services received 26,763 20,300Rental expense 4,271 5,290Rental income 2,511 2,241Bankers’ guarantees / Letters of credit 191,610 137,257Forward currency contracts- sales 535,530 185,778- purchases 203,398 193,714Interest rate swap 145,584 –Cross currency swap 216,225 –* Other related parties refer to subsidiaries, associates and jointly controlled entities of immediate holding company.45. CommitmentsGroup2011 2010$’000 $’000(a)Capital commitmentsCapital expenditure contracted but not provided for in the financial statements 161,023 99,689

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011207NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)45. Commitments (continued)(b)LeasesFuture minimum lease payments under non-cancellable operating leases are as follows:Group2011 2010$’000 $’000Third partiesWithin 1 year 47,409 51,9492 to 5 years 85,088 107,464After 5 years 137,263 103,636269,760 263,049Related partiesWithin 1 year 3,990 2,2452 to 5 years 11,311 14,241After 5 years 28,020 29,18743,321 45,673The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. The leases have varyingterms, escalation clauses and renewal rights. Lease terms do not contain restrictions on the Group activities concerning dividends, additionaldebt or further leasing.(c)Operating lease commitments - As lessorThe Group has entered into commercial leases on its aircraft, aircraft engines and certain property, plant and equipment. The non-cancellableleases have an average lease term of about 8 months to 19 years. The leases on the aircraft include a clause to enable upward revision of therental charge on an annual basis based on prevailing market conditions.The future lease payment receivables under non-cancellable operating leases are as follows:Group2011 2010$’000 $’000Within 1 year 12,437 5,8062 to 5 years 37,293 14,116After 5 years 21,957 6,82471,687 26,746

208 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)45. Commitments (continued)(d)Investments(i)(ii)(iii)As at 31 December 2011, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.4 million(2010: $0.4 million) in subsidiaries.On 22 December 2011, Vision Technologies Aerospace, Incorporated entered into a sale and purchase agreement to acquire 50.1% of theequity interests in EcoServices, LLC for a cash consideration of $43,000,000 (equivalent to US$33,300,000). As at 31 December 2011,Vision Technologies Aerospace, Incorporated was committed to pay the purchase consideration upon the completion of the agreement.As at 31 December 2011, the Group has outstanding commitment in respect of uncalled capital to the extent of $2.0 million(2010: $2.0 million) in a joint venture.Joint Venture AgreementOn 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF Utilities Limited to form an EquityJoint Venture Company in Pune, India. The joint venture company will have a registered capital of US$6 million to be contributed byeach party in the proportion of 26% and 74% respectively, which is to be contributed over 3 years. To-date, the joint venture companyhas not been set up.46. Segment information(a)Analysis by business segmentsThe Group is organised on a worldwide basis into 4 main operating segments, namely:(i)AerospaceProvides a spectrum of maintenance and engineering services that include airframe, engine and component maintenance, repair andoverhaul; engineering design and technical services; and aviation materials and management services, including Total Aviation Support.(ii)ElectronicsDelivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. It specialises in thedesign, development and integration of advanced electronics and communications systems, such as broadband radio frequency andsatellite communication, e-Government solutions, information communications technologies and IT, rail and traffic management, real-timecommand and control, modelling and simulation, interactive digital media, intelligent building management and information security.(iii)Land SystemsDelivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security and commercialapplications.(iv)MarineProvides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. In shipbuilding, ithas the proven capabilities to provide turnkey solutions from concept definition to detailed design, construction, on-board systeminstallation and integration, testing, commissioning to through-life support. It has also established a track record in providinghigh engineering content shiprepair and ship conversion services for a worldwide clientele. It also provides a suite of sustainableenvironmental engineering solutions.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011209NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)46. Segment information (continued)(a)Analysis by business segments s (continued)Other operations include research and development, treasury, investment holding and provision of management, consultancy, integrated logisticsmanagement, integrated facilities management, warehousing and other support services. None of these segments meets any of the quantitativethresholds for determining reportable segments in 2011 or 2010.Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation andperformance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in thetable below, is measured differently from operating profit or loss in the consolidated financial statements.Inter-segment pricing is on an arm’s length basis.LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’000RevenueExternal sales 1,920,240 1,481,268 1,479,506 876,109 233,755 – 5,990,878Inter-segment sales 6,560 35,707 26,959 1,095 29,343 (99,664) –1,926,800 1,516,975 1,506,465 877,204 263,098 (99,664) 5,990,878Reportable segment profit fromoperations 242,114 145,587 100,250 110,522 (38,226) 47,425 607,672Other income, net 7,975 1,821 14,968 7,327 45,744 (45,523) 32,312Finance income 17,662 1,396 3,516 6,248 592,037 (575,789) 45,070Finance costs (22,852) (6,880) (16,715) (3,809) (99,511) 85,321 (64,446)Share of results of associates and jointlycontrolled entities 33,299 (5,071) 6,054 1,552 – (1,217) 34,617Profit before taxation 278,198 136,853 108,073 121,840 500,044 (489,783) 655,225Taxation (41,831) (25,690) (17,966) (30,477) 543 857 (114,564)Non-controlling interests (4,573) (2,361) (6,289) 102 – 4 (13,117)Profit attributable to shareholders 231,794 108,802 83,818 91,465 500,587 (488,922) 527,544Other assets 2,008,646 1,601,647 1,751,679 761,716 4,090,429 (3,127,828) 7,086,289Associates and jointly controlled entities 170,173 8,904 117,573 1,871 18,906 3,467 320,894Segment assets 2,178,819 1,610,551 1,869,252 763,587 4,109,335 (3,124,361) 7,407,183Segment liabilities 1,711,363 1,466,151 1,714,111 648,339 2,398,914 (2,407,803) 5,531,075Capital expenditure 74,856 33,170 56,700 18,362 4,233 (163) 187,158Depreciation and amortisation 57,772 23,949 36,586 12,630 4,167 (45) 135,059Impairment loss – 6,090 4,114 – 19 – 10,223Other non-cash expenses 6,823 17 614 – 1 – 7,455

210 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)46. Segment information (continued)(a)Analysis by business segments s (continued)LandAerospace Electronics Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’0002010RevenueExternal sales 1,870,497 1,389,084 1,505,459 1,044,278 175,155 – 5,984,473Inter-segment sales 4,498 39,383 12,947 572 26,847 (84,247) –1,874,995 1,428,467 1,518,406 1,044,850 202,002 (84,247) 5,984,473Reportable segment profit fromoperations 233,829 130,322 111,341 109,389 (44,795) 46,597 586,683Other income, net 9,350 5,915 17,113 7,296 41,622 (41,298) 39,998Finance income 15,194 1,359 5,603 11,356 543,392 (532,813) 44,091Finance costs (25,391) (9,916) (27,981) (11,957) (58,973) 46,802 (87,416)Share of results of associates and jointlycontrolled entities 29,237 (117) 7,873 1,910 – 5,216 44,119Profit before taxation 262,219 127,563 113,949 117,994 481,246 (475,496) 627,475Taxation (46,848) (24,555) (17,357) (29,346) (3,384) (1,133) (122,623)Non-controlling interests (5,604) (2,300) (6,337) 409 – (15) (13,847)Profit attributable to shareholders 209,767 100,708 90,255 89,057 477,862 (476,644) 491,005Other assets 2,360,809 1,422,289 1,757,156 731,374 3,863,429 (3,148,019) 6,987,038Associates and jointly controlled entities 128,078 11,349 116,633 2,089 18,924 4,098 281,171Segment assets 2,488,887 1,433,638 1,873,789 733,463 3,882,353 (3,143,921) 7,268,209Segment liabilities 2,066,800 1,311,985 1,732,982 641,017 2,283,627 (2,495,036) 5,541,375Capital expenditure 185,863 25,252 92,971 23,786 8,733 (1,009) 335,596Depreciation and amortisation 66,035 22,626 29,409 10,557 3,418 (15) 132,030Impairment loss/(write-back ofimpairment) 162 7,467 1,453 – 118 (118) 9,082Other non-cash expenses 7,394 113 62 – 14 – 7,583

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011211NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)46. Segment information (continued)(b)Analysis by country of incorporationRevenue is based on the country of incorporation regardless of where the goods are produced or services rendered. Non-current assets,excluding derivative financial instruments and deferred tax assets, are based on the location of those assets.RevenueNon-current assets2011 2010 2011 2010$’000 $’000 $’000 $’000Asia 4,173,232 4,188,454 1,276,954 1,184,597USA 1,483,184 1,447,716 597,017 596,400Europe 283,815 286,115 332,210 341,582Others 50,647 62,188 108,888 108,8185,990,878 5,984,473 2,315,069 2,231,397(c)Analysis by geographical areasRevenue is based on the location of customers regardless of where the goods are produced or services rendered.Revenue2011 2010$’000 $’000Asia 3,566,778 3,328,265USA 1,541,931 1,552,782Europe 484,600 754,802Others 397,569 348,6245,990,878 5,984,47347. Financial risk management objectives and policiesThe Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and credit risks, arising from itsoperations and the use of financial instruments. The Group’s principal financial instruments, other than foreign exchange contracts and derivatives,comprise bankers’ guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, cash and shorttermdeposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with bankingmandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. The Group has variousother financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solely forhedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currencyswap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor orcollar option (“Permitted Transactions”). These instruments are generic in nature with no embedded or leverage features and any deviation from theseinstruments would require specific approval from the Board of Directors. The Group’s accounting policies in relation to derivatives are set out in Note 3.

212 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)47. Financial risk management objectives and policies (continued)The policies for managing each of these risks are broadly summarised below.Interest rate riskAs at reporting date, the interest rate profile of the interest-bearing financial instruments was:Group2011 2010$’000 $’000Fixed rate instrumentsFinancial assets 983,259 1,168,264Financial liabilities (1,207,250) (1,278,823)(223,991) (110,559)Variable rate instrumentsFinancial assets 454,999 239,680Financial liabilities (157,004) (69,338)297,995 170,342The Group has cash balances placed with reputable banks and financial institutions. The Group manages its interest rate risk on its interest income byplacing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flow requirements and optimising yield.The Group’s debts include 10-year bonds issued, long and short-term bank borrowings and lease commitments. The Group seeks to minimise its interestrate risk exposure through tapping different sources of funds to refinance the debt instruments and/or enter into interest rate swaps, where appropriate.Movements in interest rates will therefore have an impact on the Group. A change of 50 basis points in interest rate at the reporting date would increase/decrease Group’s profit or loss and other comprehensive income by the amounts shown below. This analysis assumes that all other variables remain constant.Other comprehensive incomeProfit or loss50bpIncrease50bpDecrease50bpIncrease50bpDecrease$’000 $’000 $’000 $’000The Group2011Bank loans – – (785) 785Loans receivable – – 262 (262)Short-term investments (4,631) 7,442 – –2010Bank loans – – (347) 347Loans receivable – – 209 (209)Short-term investments (2,367) 2,844 – –Fixed deposits and bank loans with interest rate fixed over the contractual period are excluded from the sensitivity analysis. Information relating to theGroup’s interest rate risk exposure is also disclosed in the notes on the Group’s borrowings, investments and loans receivable, where applicable.

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011213NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)47. Financial risk management objectives and policies (continued)Foreign exchange riskThe Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and incurring costs denominated inforeign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies. The Group’s foreign exchange exposures areprimarily from US dollars and Euro and the Group enters mainly into forward currency contracts to hedge against its foreign exchange risk resulting fromanticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group’s hedging policy. The Group enters into crosscurrency swap to hedge the foreign exchange risk of its loans denominated in foreign currency. The Group also uses monetary assets and liabilities andembedded derivatives to hedge its risks associated with foreign currency fluctuation.The Company’s centralised Treasury Unit (“Unit”) facilitates intra-group foreign exchange transactions within the Group to net-off the foreign exchangeexposures before proceeding to transact with the banks.The Unit executes the Group’s material foreign exchange transactions with proper segregation of duties between authorised dealers and back office. Onlyauthorised dealers can transact with the banks on behalf of the Group, with back office confirming the deals. The dealers’ limits and permitted treasuryinstruments in the form of an authorisation matrix and mandates are communicated to all counterparties.Market riskThe Group has strategic investments in quoted equity shares. The market value of these investments will fluctuate with market conditions.The table below summarises the impact to the Group’s profit or loss and other comprehensive income arising as a result of a 10% increase/decreasein the fair value of the quoted investments, assuming no impairment on the quoted investments. This analysis assumes that all other variables remainconstant.Other comprehensive incomeProfit or loss10%increase10%decrease10%increase10%decrease$’000 $’000 $’000 $’000The Group2011Quoted investments 934 (934) 21 (21)2010Quoted investments 1,390 (1,390) 53 (53)Liquidity riskTo manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and securedcommitted funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capitalrequirements regularly.The table below analyses the Group’s financial liabilities and certain derivative financial instruments that will be settled on a gross basis into relevantmaturity groupings based on the remaining period at reporting date to the contractual maturity date. The amounts disclosed in the table below are thecontractual undiscounted cash flows.

214 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)47. Financial risk management objectives and policies (continued)Liquidity risk (continued)ContractualWithin2 to 5 More thancash flow1 yearyears 5 years$’000 $’000 $’000 $’000The Group2011Bank loans 711,899 204,085 496,601 11,213Bonds 649,650 – – 649,650Other loans 1,614 758 574 282Lease obligations 4,280 3,013 1,267 –Other long-term payables 2,500 – 2,000 500Trade and other payables 1,700,614 1,700,250 364 –Derivative financial instruments: - gross payments 753,454 695,716 57,738 –- gross receipts 761,508 702,580 58,928 – - net receipts 11,793 – 11,793 – 12,850 6,574 6,276 –2010Bank loans 697,569 370,451 309,226 17,892Bonds 644,500 – – 644,500Other loans 2,860 1,869 563 428Lease obligations 6,983 2,863 4,120 –Other long-term payables 3,833 1,333 1,500 1,000Trade and other payables 1,582,252 1,582,050 202 –Derivative financial instruments: - gross receipts 575,637 536,524 39,113 –- gross payments 559,501 520,800 38,701 – - net receipts 43,369 43,369 – – 18,138 9,100 9,038 –

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011215NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)47. Financial risk management objectives and policies (continued)Liquidity risk (continued)ContractualWithin2 to 5 No specificcash flow1 yearyearsterms$’000 $’000 $’000 $’000The Company2011Trade payables and accruals36,136 36,136 – –Amounts due to related corporations 496,397 269,076 227,321 –Derivative financial instruments: - gross receipts 3,869 3,869 – –- gross payments 3,846 3,846 – – 348,082 88,222 259,860 –2010Trade payables and accruals 29,047 29,047 – –Amounts due to related corporations 447,996 393,996 – 54,000Derivative financial instruments: - gross receipts 496 496 – –- gross payments 502 502 – – 637,584 328,358 309,226 –For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these instruments. Theamounts are compiled on a net basis for derivatives that are net-settled. Gross inflows and outflows are included for derivatives that are gross-settledon a simultaneous basis. Net-settled derivative financial assets are included in the maturity analyses as they are held to hedge the cash flow variabilityof the Group’s floating rate loans.Except for the cash flow arising from the intragroup financial guarantee, it is not expected that the cash flows included in the maturity analysis of theGroup and the Company could occur significantly earlier, or at significantly different amounts.At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the intragroup financial guarantee.Credit riskCredit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures. Whereappropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, advance payments,and letters of credit or bank guarantees are required for customers of lower credit standing.Cash and bank deposits are placed with prime financial institutions.As at 31 December 2011, there were no significant concentrations of credit risk, except for 46% (2010: 29%) of trade debts relating to 3 major customersof the Group. The table below analyses the trade receivables by the Group’s 4 main operating segments.

216 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)47. Financial risk management objectives and policies (continued)Credit risk (continued)Group2011 2010$’000 $’000Aerospace 260,591 263,923Electronics 301,881 275,750Land Systems 257,305 201,179Marine 113,046 88,878Others 20,279 22,164953,102 851,89448. Fair value of financial instrumentsFair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in anarm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow models andoption pricing models as appropriate.The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.NoteQuoted prices inactive marketsfor identicalinstruments(Level 1)Significantotherobservableinputs(Level 2)Significantunobservableinputs(Level 3)Total$’000 $’000 $’000 $’000The Group2011Financial AssetsAvailable-for-sale- Equity investments (quoted) 15 9,342 – – 9,342- Venture capital funds and limited partnership – – 4 4- Bonds (unquoted) 25 – 402,590 – 402,590Fair value through profit or loss- Equity investments (quoted) 25 209 – – 209Derivatives- Forward currency contracts – 5,012 – 5,012- Cross currency swap – 11,793 – 11,7939,551 419,395 4 428,950Financial LiabilitiesDerivatives- Forward currency contracts – 13,066 – 13,066- Interest rate swaps – 12,793 – 12,793- Embedded derivatives – 16,847 – 16,847– 42,706 – 42,706

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011217NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)NoteQuoted prices inactive marketsfor identicalinstruments(Level 1)Significantotherobservableinputs(Level 2)Significantunobservableinputs(Level 3)Total$’000 $’000 $’000 $’000Financial AssetsAvailable-for-sale- Equity investments (quoted) 15 13,904 – – 13,904- Venture capital funds and limited partnership – – 1 1- Bonds (unquoted) 25 – 197,930 – 197,930Fair value through profit or loss- Equity investments (quoted) 25 534 – – 534Derivatives- Forward currency contracts – 19,252 – 19,252- Cross currency swap – 43,369 – 43,36914,438 260,551 1 274,990Financial LiabilitiesDerivatives- Forward currency contracts – 3,116 – 3,116- Interest rate swaps – 14,513 – 14,513- Embedded derivatives – 20,989 – 20,989– 38,618 – 38,618Fair value hierarchyThe Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements.The fair value hierarchy have the following levels:(a)(b)(c)Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) orindirectly (i.e., derived from prices); andLevel 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).The following methods and assumptions are used to estimate the fair value of each class of financial instruments.Bank balances, other liquid funds and short-term receivablesThe carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.

218 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)Quoted and unquoted investmentsThe fair values of quoted investments are determined directly by reference to their quoted bid prices for these investments as at balance sheet date. Forunquoted investments, the fair values cannot be reliably estimated because of the lack of quoted market prices and the assumptions used in valuationmodels to value these investments cannot be reasonably determined. For unquoted bonds, the investments are valued using valuation models which useobservable data.For unquoted investments in venture capital funds and limited partnerships as stated in Note 15, the fair value is determined by reference to valuationprovided by non-related fund managers based on non-observable data. Changing one or more of the inputs to reasonable alternative assumptions is notexpected to have a material impact on the changes in fair value.Movements in level 3 financial instruments measured at fair valueThe following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservable inputs (Level 3).Group2011 2010$’000 $’000Equity instruments (unquoted)Opening balance 1 1,342Total gain or loss:- recognised in profit or loss, in finance costs, net 56 1,033- recognised in other comprehensive income 3 (1,269)Purchases – 104Sales (56) (1,209)Closing balance 4 1Total gain or loss for the year included in profit or loss (presented in finance costs, net)for assets held at 31 December 56 1,033Long-term receivablesThe fair values of long-term receivables and amount due from related parties are estimated based on the expected cash flows discounted to present value.Long-term payablesThe fair values of amount due to related parties are estimated based on present value of future principal and interest cash flows, discounted at the marketrate of interest at the reporting date.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 LTD Annual Report 2011219NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)DerivativesForward currency contracts, interest rate swaps, cross currency swap and embedded derivatives are valued using a valuation technique with marketobservable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. Themodels incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.BondsThe fair value of the US$500 million bonds as at 31 December 2011 approximates $717.8 million (2010: $675.2 million) and is determined by referenceto market value.Set out below is a comparison by category of carrying amounts of all the Group’s financial instruments that are carried in the financial statements:Classification of financial instrumentsLoans andreceivablesFair valuethrough profitor lossDerivativesused forhedgingAvailablefor-saleLiabilities atamortisedcostTotalcarryingamountFairvalue$’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2011AssetsInvestments – – – 11,611 – 11,611 11,611Long-term receivables 51,180 – – – – 51,180 51,180Finance lease receivables 40,645 – – – – 40,645 40,645Derivative financial instruments – 41 11,992 – – 12,033 12,033Trade receivables 953,102 – – – – 953,102 953,102Amounts due from related parties 44,662 – – – – 44,662 44,662Advances and other receivables 88,215 2,544 2,228 – – 92,987 92,987Short-term investments – 209 – 402,590 – 402,799 402,799Bank balances and other liquid funds 1,366,452 – – – – 1,366,452 1,366,4522,544,256 2,794 14,220 414,201 – 2,975,471 2,975,471LiabilitiesCreditors and accruals – 1,670 17,942 – 1,670,910 1,690,522 1,690,522Amounts due to related parties – – – – 29,704 29,704 29,704Short-term bank loans – – – – 204,084 204,084 204,084Lease obligations – – – – 4,179 4,179 4,147Long-term bank loans – – – – 507,815 507,815 507,815Other loans – – – – 1,614 1,614 1,614Other long-term payables – – – – 2,500 2,500 2,077Bonds – – – – 646,562 646,562 717,798Derivative financial instruments – 919 22,175 – – 23,094 23,094– 2,589 40,117 – 3,067,368 3,110,074 3,180,855

220 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)Classification of financial instruments s (continued)Loans andreceivablesFair valuethrough profitor lossDerivativesused forhedgingAvailablefor-saleLiabilities atamortisedcostTotalcarryingvalueFairvalue$’000 $’000 $’000 $’000 $’000 $’000 $’000The Group2010AssetsInvestments – – – 16,190 – 16,190 16,190Long-term receivables 46,803 – – – – 46,803 46,803Finance lease receivables 21,031 – – – – 21,031 21,031Derivative financial instruments – – 566 – – 566 566Trade receivables 851,894 – – – – 851,894 851,894Amounts due from related parties 29,249 – – – – 29,249 29,249Advances and other receivables 96,883 1,825 60,230 – – 158,938 158,938Short-term investments – 534 – 197,930 – 198,464 198,464Bank balances and other liquid funds 1,591,727 – – – – 1,591,727 1,591,7272,637,587 2,359 60,796 214,120 – 2,914,862 2,914,862LiabilitiesCreditors and accruals – 1,214 12,706 – 1,575,089 1,589,009 1,589,009Amounts due to related parties – – – – 8,496 8,496 8,496Short-term bank loans – – – – 63,404 63,404 63,404Lease obligations – – – – 6,624 6,624 6,534Long-term bank loans – – – – 634,165 634,165 634,165Other loans – – – – 2,860 2,860 2,860Other long-term payables – – – – 2,500 2,500 1,963Bonds – – – – 641,108 641,108 675,178Derivative financial instruments – 4,242 20,456 – – 24,698 24,698– 5,456 33,162 – 2,934,246 2,972,864 3,006,307

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011221NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)Classification of financial instruments s (continued)Loans and Fair value through Liabilities at Total Carryingreceivables profit or loss amortised cost amount Fair value$’000 $’000 $’000 $’000 $’0002011AssetsAmounts due from related parties 898,046 – – 898,046 898,046Advances and other receivables 4,417 23 – 4,440 4,440Long-term receivables 19 – – 19 19Bank balances and other liquid funds 301,859 – – 301,859 301,8591,204,341 23 – 1,204,364 1,204,364LiabilitiesTrade payables and accruals – – 36,136 36,136 36,136Amounts due to related parties – – 496,397 496,397 496,397Short-term bank loans – – 17,541 17,541 17,541– – 550,074 550,074 550,0742010AssetsAmounts due from related parties 761,214 – – 761,214 761,214Advances and other receivables 998 – – 998 998Long-term receivables 77 – – 77 77Bank balances and other liquid funds 336,811 – – 336,811 336,8111,099,100 – – 1,099,100 1,099,100LiabilitiesTrade payables and accruals – 6 29,047 29,053 29,053Amounts due to related parties – – 447,996 447,996 447,996– 6 477,043 477,049 477,049

222 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)Derivative financial instrumentsNote2011 2010Contractual/ Estimated fair value Contractual/ Estimated fair valuenotionalnotionalamount Asset Liability amount Asset Liability$’000 $’000 $’000 $’000 $’000 $’000Cash flow hedgesForward currency contracts:- to hedge confirmed sales inforeign currencies (a)(i) 182,035 1,504 (2,548) 38,320 865 (127)- to hedge firm purchasecommitments in foreign currencies (a)(i) 91,808 491 (2,431) 63,185 727 (1,077)- to hedge accounts receivablein foreign currencies (a)(i) 87,363 15 (2,581) – – –- to hedge accounts payablein foreign currencies (a)(i) 4,779 16 (116) 3,264 189 (24)Interest rate swaps (b) 340,479 – (12,793) 557,800 – (14,513)Cross currency swap (c) 216,255 11,793 – 248,481 43,369 –Embedded derivatives (a)(i) 228,366 – (15,119) 126,487 – (11,933)Fair value hedgesForward currency contracts:- to hedge confirmed sales inforeign currencies (a)(i) 46,110 – (765) 183,217 6,692 (1,541)- to hedge accounts receivable inforeign currencies (a)(i) 83,798 353 (2,720) 171,849 8,954 –- to hedge purchasecommitments in foreign currencies (a)(i) 17,396 48 (61) 18,783 – (201)Embedded derivatives (a)(i) 9,160 – (973) 35,751 – (3,746)Non-hedging instrumentsForward currency contracts:- sales (a)(ii) 162,819 2,348 (1,130) 82,786 1,825 –- purchases (a)(ii) 79,876 237 (714) 14,765 – (146)Embedded derivatives (a)(ii) 28,621 – (755) 60,357 – (5,310)Total 16,805 (42,706) 62,621 (38,618)Less: Current portion (4,772) 19,612 (62,055) 13,920Non-current portion 12,033 (23,094) 566 (24,698)

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011223NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)48. Fair value of financial instruments (continued)(a)Forward currency contracts(i)As at 31 December 2011, the Group has forward currency contracts and embedded derivatives separated from the foreign currencyportion of sales contracts amounting to $750,815,000 (2010: $640,856,000) designated as hedges of confirmed sales in foreigncurrencies, firm purchase commitments in foreign currencies, accounts receivable in foreign currencies and accounts payable inforeign currencies.The maturity dates of the forward currency contracts and embedded derivatives separated from the foreign currency portion of thesales contracts approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods upto 6 years from the financial year-end.(ii)As at 31 December 2011, the Group has outstanding forward currency contracts and embedded derivatives separated from theforeign currency portion of sales contracts amounting to $271,316,000 (2010: $157,908,000), which are not designated as hedgesof confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.(b)Interest rate swapsAs at 31 December 2011, the Group has outstanding interest rate swaps amounting to $340,479,000 (2010: $557,800,000), which aredesignated as cash flow hedges.The USD interest rate swaps are being used to hedge the exposure to variability in cash flows associated with the floating rate of the unsecuredUSD long-term loans. Under the USD interest rate swaps, the Group pays fixed rates of interest of 3.68% to 3.80% (2010: 3.68% to 3.86%)per annum and receives variable rates of interest equal to the LIBOR per annum on the notional amount. The USD interest rate swaps have thesame maturity terms as the unsecured USD long-term loans due in 2013.During the year, the Group entered into a new Euro interest rate swap which is used to hedge 72% of the exposure to variability in cash flowsassociated with the floating rate of a cross currency swap. Under the Euro interest rate swap, the Group pays a fixed rate of interest of 2.50%per annum and receives a variable rate of interest equal to the EURIBOR per annum on the notional amount. The Euro interest rate swap has thesame maturity terms as the cross currency swap.In the prior year, the Group had a Euro interest rate swap which the Group paid a fixed rate of interest of 2.95% per annum and received avariable rate of interest equal to the EURIBOR + 1.2% per annum on the notional amount. The cross interest rate swap matured during the year.(c)Cross currency swapAs at 31 December 2011, the Group has an outstanding cross currency swap amounting to $216,255,000 (2010: $248,481,000), which isdesignated as hedging instrument in a cash flow hedge relationship.During the year, the Group entered into a new USD cross currency swap which is used to hedge foreign currency exposure of a USD bank loanmaturing in 2014. It converts the USD bank loan with floating USD interest rate at LIBOR + 0.60% per annum to an equivalent Euro bank loan(Euro 120,000,000) with floating Euro interest rate at EURIBOR + 0.41% per annum.In the prior year, the Group had a SGD cross currency swap which converted a SGD bank loan with floating SGD interest rate at SIBOR + 1.325%per annum to an equivalent Euro bank loan (Euro 112,300,000) with floating Euro interest rate at EURIBOR + 1.2% per annum. The crosscurrency swap matured during the year.

224 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)49. Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy financial metrics in order tosupport its business and maximise shareholder value.The Group manages its capital structure and makes adjustment to it, in the light of changes in economic and financial market conditions. The Group mayadjust the dividend payout to shareholders, buy back or issue new shares to optimise capital structure within the Group. No major changes were made inthe objectives, policies or processes during the years ended 31 December 2011 and 31 December 2010.The Group is currently in a net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect.Group2011 2010$’000 $’000Gross debtBank loans 711,899 697,569Bonds 646,562 641,108Capitalised lease obligations 4,179 6,624Other loans 1,614 2,8601,364,254 1,348,161Shareholders’ fundsShare capital 723,411 677,590Other reserves 9,771 (6,857)Retained earnings 1,033,013 950,8021,766,195 1,621,535Non-controlling interests 109,913 105,2991,876,108 1,726,834Gross debt/equity ratio 0.7 0.8Cash and cash equivalents 1,366,452 1,591,727Short-term investments 402,799 198,4641,769,251 1,790,191Gross debt (excluding bank overdrafts) (1,364,254) (1,348,161)Net cash position 404,997 442,030

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011225NOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)50. Subsequent events(a)On 16 January 2012, a subsidiary, ST Aerospace Engineering Pte Ltd, entered into an agreement to acquire the remaining 50% of theequity interests in the associates, Aerospace Engineering Services Pty Ltd and Aerospace Engineering Services Pty Ltd Unit Trust, for a cashconsideration of $550,000 (equivalent to AUD416,000). Following the completion of the acquisition, the two associates will become whollyownedsubsidiaries of the Group.(b)On 10 February 2012, a subsidiary, Singapore Technologies Electronics Limited (“ST Electronics”), entered into a conditional agreement withNera Telecommuncations Ltd (“NERA”) for the acquisition of all the shares of NERA. The acquisition is by way of a scheme of arrangement underSection 210 of the Companies Act, Chapter 50 of Singapore and in accordance with the Singapore code on Take-overs and Mergers (“Scheme”).The Scheme is subject to court, regulatory and NERA shareholders’ approval. The consideration for each NERA share is $0.45 comprising of$0.39 to be paid by ST Electronics and $0.06 to be paid in cash by NERA as permitted dividend on or prior to the effective date of the Schemeand the total consideration (excluding the permitted dividends) amounts to approximately $141.1 million.

226 SIMPLY SMARTERSGX LISTING MANUAL REQUIREMENTS31 December 2011(Currency - Singapore dollars)Interested person transactionsInterested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the Listing Manual of theSingapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:Aggregate value of alltransactions excludingtransactions conductedunder a Shareholders’Mandate pursuant to Rule 920of the SGX Listing ManualAggregate value of alltransactions conductedunder a Shareholders’Mandate pursuant to Rule 920of the SGX Listing Manual2011 2010 2011 2010$’000 $’000 $’000 $’000Transactions for the Sale of Goods and ServicesKeppel Corporation Ltd and its Associates – – – 198Neptune Orient Lines Limited and its Associates – – – 454SIA Engineering Company Limited and its Associates – – 4,212 –Singapore Airport Terminal Services Limited and its Associates – – 525 101,443Singapore Telecommunications Limited and its Associates – – 326 183SMRT Corporation Ltd and its Associates – – 71,692 2,336StarHub Ltd and its Associates – – 3,440 1,800Temasek Holdings (Private) Limited and its Associates – – 9,944 7,782– – 90,139 114,196CapitaLand Limited and its Associates – – – 1,361SembCorp Marine Ltd and its Associates – – 416 –Singapore Airport Terminal Services Limited and its Associates – – 3,087 2,431Singapore Telecommunications Limited and its Associates – – 2,021 4,404SMRT Corporation Ltd and its Associates – – 5,666 1,263Temasek Holdings (Private) Limited and its Associates – – 1,071 5,209– – 12,261 14,668Total Interested Person Transactions – – 102,400 128,864

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011227SECTORAL FINANCIAL REVIEW – AEROSPACEINCOME STATEMENT2011 2010$’000 $’000Revenue 1,926,800 1,874,995Cost of sales (1,564,850) (1,529,338)Gross profit 361,950 345,657Distribution and selling expenses (7,504) (7,442)Administrative expenses (96,512) (89,239)Other operating expenses (15,820) (15,147)Profit from operations 242,114 233,829Other income, net 7,975 9,350Finance income 17,662 15,194Finance costs (22,852) (25,391)Finance costs, net (5,190) (10,197)Share of results of associates and jointly controlled entities 33,299 29,237Profit before taxation 278,198 262,219Taxation (41,831) (46,848)Profit for the year 236,367 215,371Attributable to:Shareholder of the Company 231,794 209,767Non-controlling interests 4,573 5,604236,367 215,371

228 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – AEROSPACEBALANCE SHEET2011 2010$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 836,777 825,248Associates and jointly controlled entities 170,173 128,078Investments 4 1Intangible assets 9,846 8,648Long-term receivables, non-current 40,076 34,368Amount due from related parties, non-current 11,834 –Derivative financial instruments, non-current – 523Deferred tax assets 23,163 27,8081,091,873 1,024,674Current assetsInventories and work-in-progress 334,451 374,815Trade receivables 390,242 364,392Amount due from related parties, current 9,520 121,306Advances and other receivables 86,091 269,604Long-term receivables, current 12,738 10,227Short-term investments 68 99Bank balances and other liquid funds 253,836 323,7701,086,946 1,464,213TOTAL ASSETS 2,178,819, 2,488,887EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 87,500 96,696Trade payables and accruals 567,051 510,951Amount due to related parties, current 161,421 312,630Provisions 58,695 58,095Progress billing in excess of work-in-progress 73,105 109,408Provision for taxation 67,079 75,194Short-term bank loans 65,439 –Lease obligations, current 1,683 1,579Long-term bank loans, current 41 300,0201,082,014 1,464,573NET CURRENT ASSETS/(LIABILITIES) 4,932 (360)Non-current liabilitiesAdvance payments from customers, non-current 291,353 456,452Deferred income 32 2,615Deferred tax liabilities 26,315 7,557Lease obligations, non-current 43 1,713Long-term bank loans, non-current 247,914 69,318Other loans, non-current 2,500 11,523Derivative financial instruments, non-current 6,141 –Amount due to related parties, non-current 55,051 53,049629,349 602,227TOTAL LIABILITIES 1,711,363, 2,066,800,NET ASSETS 467,456422,087Share capital and reserves 420,024 377,977Non-controlling interests 47,432 44,110467,456422,087TOTAL EQUITY AND LIABILITIES 2,178,819, 2,488,887,

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011229SECTORAL FINANCIAL REVIEW – AEROSPACESTATEMENT OF CASH FLOWS2011 2010$’000 $’000Net cash from operating activities 273,282 358,596Net cash used in investing activities (81,418) (155,583)Proceeds from sale of property, plant and equipment 4,500 4,599Dividends from associates 18,977 17,763Dividends from investments 211 –Proceeds from sale and maturity of investments 287 1,209Purchase of property, plant and equipment (75,789) (177,170)Purchase of investments – (104)Investment in jointly-controlled entities (2,260) –Acquisition of subsidiaries (1,810) –Investment in associates (25,534) (1,880)Net cash used in financing activities (261,457) (142,606)Acquisition of additional interest in subsidiaries – (743)Repayment of lease obligations, net (1,594) (1,510)Proceeds from long-term bank loans, net 289,770 17,892(Repayment of)/proceeds from bank loans, net (310,610) 20Proceeds from loans with related parties, net 18,023 63,249Dividend paid to shareholder (245,600) (202,563)Dividend paid to non-controlling interests (559) (6,859)Interest paid (10,887) (12,092)Net (decrease)/increase in cash and cash equivalents (69,593) 60,407Cash and cash equivalents at beginning of the year 323,770 266,743Exchange difference on cash and cash equivalents at beginning of the year (341) (3,380)Cash and cash equivalents at end of the year 253,836 323,770

230 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – AEROSPACEFINANCIAL HIGHLIGHTS2011 2010 2009 2008 2007$’000 $’000 $’000 $’000 $’000Operating PerformanceRevenue 1,926,800 1,874,995 1,875,225 1,940,954 1,837,769EBITDA 299,886 299,864 288,938 331,937 381,857EBIT 242,114 233,829 199,849 234,220 303,441Profit before tax 278,198 262,219 228,288 272,120 341,162Net Profit 231,794 209,767 185,700 225,691 270,479Balance SheetsShareholders’ funds 420,024 337,977 412,210 375,925 409,977Total assets 2,178,819 2,488,887 2,102,790 2,103,333 2,107,305Net assets 467,456 422,087 457,398 415,981 507,284Capital expenditure 65,809 186,533 132,729 103,213 111,091Financial RatiosEarnings per share (cents) 115.90 104.88 92.85 112.85 135.24Return on sales (%) 12.3 11.5 10.4 12.1 15.6Return on equity (%) 48.8 48.7 39.9 52.6 58.4Return on total assets (%) 10.8 8.7 9.3 11.2 13.6Net assets value per share (cents) 233.73 211.04 228.70 207.99 253.64Productivity DataAverage staff strength (numbers) 7,303 7,323 7,253 7,081 6,757Revenue per employee ($) 263,837 256,042 258,545 274,107 271,980Net profit per employee ($) 31,740 28,645 25,603 31,873 40,029Employment costs 608,257 591,191 594,184 639,900 605,220Employment costs per $ of revenue ($) 0.31 0.31 0.32 0.33 0.33Economic Value Added 180,047 163,904 146,146 198,653 235,931Economic Value Added spread (%) 14.2 12.7 11.8 17.8 22.5Economic Value Added per employee ($) 24,654 22,382 20,150 28,054 34,917Value added 959,184 935,010 944,048 1,047,825 1,043,873Value added per employee ($) 131,341 127,681 130,160 147,977 154,488Value added per $ of employment costs ($) 1.58 1.58 1.59 1.64 1.72Value added per $ of gross property, plant andequipment ($) 0.63 0.64 0.66 0.78 0.79Value added per $ of revenue ($) 0.50 0.50 0.50 0.54 0.57

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011231SECTORAL FINANCIAL REVIEW – ELECTRONICSINCOME STATEMENT2011 2010$’000 $’000Revenue 1,516,975 1,428,467Cost of sales (1,075,059) (1,013,473)Gross profit 441,916 414,994Distribution and selling expenses (83,182) (88,901)Administrative expenses (140,493) (127,434)Other operating expenses (72,654) (68,337)Profit from operations 145,587 130,322Other income, net 1,821 5,915Finance income 1,396 1,359Finance costs (6,880) (9,916)Finance costs, net (5,484) (8,557)Share of results of associates and jointly controlled entities (5,071) (117)Profit before taxation 136,853 127,563Taxation (25,690) (24,555)Profit for the year 111,163 103,008Attributable to:Shareholder of the Company 108,802 100,708Non-controlling interests 2,361 2,300111,163 103,008

232 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – ELECTRONICSBALANCE SHEET2011 2010$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 79,393 60,862Associates and jointly controlled entities 8,904 11,349Investments 9,190 10,888Intangible assets 314,354 327,463Deferred tax assets 28,011 30,917439,852 441,479Current assetsInventories and work-in-progress 393,085 365,162Trade receivables 337,504 309,201Amounts due from related parties, current 18,897 16,751Receivables, deposits and prepayments 24,412 17,974Advance payments to suppliers 25,378 32,598Short-term investment – 278Loan receivables, current 12 15Bank balances and other liquid funds 371,411 250,1801,170,699 992,159TOTAL ASSETS 1,610,551, 1,433,638EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 147,452 157,969Trade payables and accruals 309,142 273,223Amounts due to related parties, current 51,588 12,239Provisions 43,894 35,883Progress billings in excess of work-in-progress 399,936 327,353Provision for taxation 36,635 37,632Short-term bank loans (unsecured) 1,482 11,824Lease obligations, current 47 33990,176 856,156NET CURRENT ASSETS 180,523 136,003Non-current liabilitiesAdvance payments from customers, non-current 185,404 161,659Deferred income 2,295 2,880Deferred tax liabilities 6,387 6,497Lease obligations, non-current 35 35Derivative financial instruments, non-current 4 –Amounts due to related parties, non-current 281,850 284,758475,975 455,829TOTAL LIABILITIES 1,466,151, 1,311,985,NET ASSETS 144,400121,653Share capital and reserves 131,912 105,637Non-controlling interests 12,488 16,016144,400121,653TOTAL EQUITY AND LIABILITIES 1,610,551, 1,433,638,

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011233SECTORAL FINANCIAL REVIEW – ELECTRONICSSTATEMENT OF CASH FLOWS2011 2010$’000 $’000Net cash from operating activities 273,966 189,387Net cash used in investing activities (35,363) (19,886)Proceeds from sale of property, plant and equipment 44 2,260Proceeds from sale of subsidiaries 73 1,218Proceed from transfer of a subsidiary – 1,623Proceeds from sale of unquoted investments – 686Dividends from an associate 90 132Purchase of property, plant and equipment (36,100) (21,355)Acquisition of an associate (2,400) –Additional investment in a jointly controlled entity – (206)Acquisition of other intangible assets (2,803) (3,451)Acquisition of controlling interests in subsidiaries – (793)Reduction in cost of investment in a subsidiary 5,733 –Net cash used in financing activities (117,843) (157,142)Proceeds from a related party loan 1,689 1,745Repayment of related parties loans (4,542) (78,759)Loans to related parties (27,500) (30,000)Repayment of loans by related parties 25,500 30,000Proceeds from bank loans 1,014 1,824Repayment of bank loans (11,297) –Repayment of loan by an associate – 241Addition/(repayment) of lease obligations 14 (13)Acquisition of non-controlling interests in subsidiaries (2,262) (2,000)Dividends paid to shareholder (94,000) (76,000)Dividends paid to non-controlling interests (956) (949)Interest paid (5,503) (3,231)Net increase in cash and cash equivalents 120,760 12,359Cash and cash equivalents at beginning of the year 250,180 245,093Exchange difference on cash and cash equivalents at beginning of the year 471 (7,272)Cash and cash equivalents at end of the year 371,411 250,180

234 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – ELECTRONICSFINANCIAL HIGHLIGHTS2011 2010 2009 2008 2007$’000 $’000 $’000 $’000 $’000Operating PerformanceRevenue 1,516,975 1,428,467 1,393,356 1,157,704 1,038,284EBITDA 169,536 152,948 133,025 140,386 101,272EBIT 145,587 130,322 107,178 118,051 85,748Profit before tax 136,853 127,563 115,276 93,940 115,336Net Profit 108,802 100,708 90,803 68,111 88,223Balance SheetsShareholders’ funds 131,912 105,637 111,253 85,042 75,611Total assets 1,610,551 1,433,638 1,478,953 1,419,430 1,399,125Net assets 144,400 121,653 127,936 101,951 90,490Capital expenditure 36,100 21,355 16,375 31,955 13,627Financial RatiosEarnings per share (cents) 103.58 95.87 86.44 64.84 83.99Return on revenue (%) 7.3 7.2 6.6 6.1 8.7Return on equity (%) 41.4 42.5 37.8 31.8 43.2Return on total assets (%) 6.9 7.2 6.2 5.0 6.5Net assets value per share (cents) 137.47 115.81 121.79 97.1 86.1Productivity DataAverage staff strength (numbers) 5,274 4,987 4,707 4,373 3,823Revenue per employee ($) 287,633 286,438 296,018 264,739 271,589Net profit per employee ($) 20,630 20,194 19,291 15,575 23,077Employment costs 457,155 418,477 394,582 350,801 306,468Employment costs per $ of revenue ($) 0.30 0.29 0.28 0.30 0.30Economic Value Added 88,689 80,916 66,275 59,967 64,997Economic Value Added Spread (%) 18.0 15.4 10.8 9.4 11.3Economic Value Added per employee ($) 16,816 16,225 14,080 13,713 17,002Value added 633,677 587,679 561,439 482,469 450,242Value added per employee ($) 120,151 117,842 119,277 110,329 117,772Value added per $ of employment costs ($) 1.39 1.40 1.42 1.38 1.47Value added per $ of gross property, plant andequipment ($) 2.84 3.06 3.12 2.78 3.06Value added per $ of revenue ($) 0.42 0.41 0.40 0.42 0.43

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011235SECTORAL FINANCIAL REVIEW – LAND SYSTEMSINCOME STATEMENT2011 2010$’000 $’000Revenue 1,506,465 1,518,406Cost of sales (1,198,627) (1,198,503)Gross profit 307,838 319,903Distribution and selling expenses (65,226) (56,703)Administrative expenses (99,730) (111,068)Other operating expenses (42,632) (40,791)Profit from operations 100,250 111,341Other income, net 14,968 17,113Finance income 3,516 5,603Finance costs (16,715) (27,981)Finance costs, net (13,199) (22,378)Share of results of associates and jointly controlled entities 6,054 7,873Profit before taxation 108,073 113,949Taxation (17,966) (17,357)Profit for the year 90,107 96,592Attributable to:Shareholder of the Company 83,818 90,255Non-controlling interests 6,289 6,33790,107 96,592

236 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – LAND SYSTEMSBALANCE SHEET2011 2010$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 305,805 286,742Associates and jointly controlled entities 117,573 116,633Long-term investments 2,417 5,282Intangible assets 205,629 210,007Investment properties 1,509 1,666Long-term receivables, non-current 151 4,099Amounts due from related parties, non-current 5,556 59,514Finance lease receivables, non-current 14,482 6,552Deferred tax assets 13,760 12,010Derivative financial instruments, non-current 151 43667,033 702,548Current assetsLong-term receivables, current 56 –Inventories and work-in-progress 541,886 496,561Trade receivables 309,399 226,922Other receivables and deposits 14,634 12,233Advance payments to suppliers 106,468 130,230Prepayments 6,031 6,165Finance lease receivables, current 26,163 14,479Bank balances and other liquid funds 151,452 254,066Amounts due from related parties, current 44,393 23,997Derivative financial instruments, current 1,737 6,5881,202,219 1,171,241TOTAL ASSETS 1,869,252, 1,873,789,EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 203,898 249,289Progress billings in excess of work-in-progress 13,780 9,128Amounts due to related parties, current 222,611 293,097Trade payables and accruals 412,676 407,717Employee benefits, current – 52Provisions 55,239 63,029Provision for taxation 31,704 28,144Derivative financial instruments, current 7,787 5,315Lease obligations, current 90 73Long-term loans, current 143 228Short-term bank loans 31,400 23,912Short-term loan from non-controlling interests 492 1,641979,820 1,081,625NET CURRENT ASSETS 222,399 89,616Non-current liabilitiesAdvance payments from customers, non-current 242,143 299,828Amounts due to related parties, non-current 413,750 289,099Lease obligations, non-current 247 118Derivative financial instruments, non-current 9,657 11,646Long-term loans, non-current 856 991Deferred income 17,252 6,859Deferred tax liabilities 50,386 42,808Employee benefits, non-current – 8734,291 651,357TOTAL LIABILITIES 1,714,111, 1,732,982,NET ASSETS 155,141140,807Share capital and reserves 105,573 96,167Non-controlling interests 49,568 44,640155,141140,807TOTAL EQUITY AND LIABILITIES 1,869,252, 1,873,789,

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011237SECTORAL FINANCIAL REVIEW – LAND SYSTEMSSTATEMENT OF CASH FLOWS2011 2010$’000 $’000Net cash (used in)/from operating activities (68,194) 272,144Net cash used in investing activities (50,165) (87,666)Distribution from funds under management 9 8Proceeds from sale of property, plant and equipment 2,827 558Distribution from unquoted long-term investment 58 20Dividends from unquoted long-term investments – 20Dividends from associates 5,037 4,882Purchase of property, plant and equipment (56,700) (92,971)Distribution from dissolution of an associate 210 180Disposal of a subsidiary (514) –Deconsolidation of a subsidiary (87) –Investment in an associate (1,005) (363)Net cash from/(used in) financing activities 14,045 (100,667)Interest paid (16,499) (10,857)(Repayment of)/proceeds from short-term related party loans (117,499) 122,528Proceeds from/(repayment of) short-term immediate holding company loans 47,700 (122,400)Proceeds from long-term immediate holding company loans 110,000 –Repayment of long-term loan by immediate holding company 54,000 –Proceeds from long-term related party loans 15,683 8,671(Repayment of)/proceeds from short-term non-controlling interests loans (1,149) 1,641Proceeds from/(repayment of) long-term loans 1,235 (222)Proceeds from short-term bank loans 5,987 2,495Dividends paid to shareholder (81,700) (97,500)Dividends paid to non-controlling interests (4,562) (5,652)Capital contribution from non-controlling interests 849 629Net (decrease)/increase in cash and cash equivalents (104,314) 83,811Cash and cash equivalents at beginning of the year 254,066 172,095Exchange difference on cash and cash equivalents at beginning of the year 1,700 (1,840)Cash and cash equivalents at end of the year 151,452 254,066

238 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – LAND SYSTEMSFINANCIAL HIGHLIGHTS2011 2010 2009 2008 2007$’000 $’000 $’000 $’000 $’000Operating PerformanceRevenue 1,506,465 1,518,406 1,202,051 1,280,879 1,188,317EBITDA 136,836 140,750 102,084 102,606 102,530EBIT 100,250 111,341 73,701 82,188 81,620Profit before tax 108,073 113,949 95,390 84,728 80,003Net Profit 83,818 90,255 82,298 79,947 70,789Balance SheetsShareholders’ funds 105,573 96,167 129,185 131,744 110,179Total assets 1,869,252 1,873,789 1,790,890 1,487,942 1,395,284Net assets 155,141 140,807 174,835 170,811 144,460Capital expenditure 56,700 92,971 102,026 31,658 24,550Financial RatiosEarnings per share (cents) 69.52 74.86 68.26 66.31 58.71Return on sales (%) 6.0 6.4 7.0 6.5 6.1Return on equity (%) 33.3 37.3 29.9 28.8 27.6Return on total assets (%) 4.8 5.2 4.7 5.6 5.2Net assets value per share (cents) 128.68 116.79 145.01 141.68 119.82Productivity dataAverage staff strength (numbers) 6,872 6,574 5,786 5,224 5,299Revenue per employee ($) 219,218 230,971 207,752 245,191 224,253Net profit per employee ($) 12,197 13,729 14,224 15,304 13,359Employment costs 318,485 313,406 262,552 243,506 259,424Employment costs per $ of revenue ($) 0.21 0.21 0.22 0.19 0.22Economic Value Added 55,121 63,686 40,277 51,690 50,593Economic Value Added spread (%) 6.3 7.8 5.5 8.3 8.8Economic Value Added per employee ($) 8,021 9,688 6,961 9,895 9,548Value added 487,530 466,122 406,096 364,655 371,647Value added per employee ($) 70,944 70,904 70,186 69,804 70,135Value added per $ of employment costs ($) 1.53 1.49 1.55 1.50 1.43Value added per $ of gross property, plant andequipment ($)Value added per $ of revenue ($)0.830.320.830.310.800.340.930.281.010.31

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011239SECTORAL FINANCIAL REVIEW – MARINEINCOME STATEMENT2011 2010$’000 $’000Revenue 877,204 1,044,850Cost of sales (720,528) (896,734)Gross profit 156,676 148,116Distribution and selling expenses (3,091) (2,759)Administrative expenses (31,656) (27,230)Other operating expenses (11,407) (8,738)Profit from operations 110,522 109,389Other income, net 7,327 7,296Finance income 6,248 11,356Finance costs (3,809) (11,957)Finance income/(costs), net 2,439 (601)Share of results of jointly controlled entities 1,552 1,910Profit before taxation 121,840 117,994Taxation (30,477) (29,346)Profit for the year 91,363 88,648Attributable to:Shareholder of the Company 91,465 89,057Non-controlling interests (102) (409)91,363 88,648

240 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – MARINEBALANCE SHEET2011 2010$’000 $’000ASSETSNon-current assetsProperty, plant and equipment 118,578 112,313Jointly controlled entities 1,871 2,089Intangible assets 877 1,138Long-term receivables, non-current 552 479Amounts due from related parties, non-current 4,806 4,806Derivative financial instruments, non-current 48 –Deferred tax assets 32,418 30,971159,150 151,796Current assetsInventories and work-in-progress 236,426 154,194Trade receivables 120,387 89,790Amounts due from related parties, current 58,365 71,070Other receivables, deposits and prepayments 5,525 23,356Advance payments to suppliers 43,785 75,975Long-term receivables, current 60 43Short-term investments 141 157Bank balances and other liquid funds 139,748 167,082604,437 581,667TOTAL ASSETS 763,587733,463EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 42,717 89,886Payables and accruals 281,895 288,468Amounts due to related parties, current 1,417 8,230Provisions 53,319 50,387Progress billings in excess of work-in-progress 169,155 121,098Provision for taxation 26,150 39,926Other loans, current 123 –574,776 597,995NET CURRENT ASSETS /(LIABILITIES) 29,661 (16,328)Non-current liabilitiesAdvance payments from customers, non-current 40,104 –Deferred income 7,116 1,057Amounts due to related parties, non-current 26,343 41,811Derivative financial instruments, non-current – 15473,563 43,022TOTAL LIABILITIES 648,339641,017NET ASSETS 115,24892,446Share capital and reserves 115,362 92,455Non-controlling interests (114) (9)115,24892,446TOTAL EQUITY AND LIABILITIES 763,587733,463

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011241SECTORAL FINANCIAL REVIEW – MARINESTATEMENT OF CASH FLOWS2011 2010$’000 $’000Net cash from/(used in) operating activities 32,858 (22,177)Net cash (used in)/from investing activities (16,727) 15,366Proceeds from sale of property, plant and equipment 23 146Purchase of property, plant and equipment (18,362) (23,622)Dividends from jointly controlled entities 1,547 1,407Loan to a jointly controlled entity – (515)Acquisition of intangible assets – (1,256)Dividends from short-term investments 10 10Proceeds from sale and maturity of investments 55 39,196Net cash used in financing activities (93,775) (94,846)Capital contribution from non-controlling interests of a subsidiary – 413Loans from non-controlling shareholders 119 –Repayment of related corporation loans (21,000) –Proceeds from related corporation loans – 551Repayment of lease obligations – (70)Dividends paid to shareholder (72,066) (94,720)Interest paid (828) (1,020)Net decrease in cash and cash equivalents (77,644) (101,657)Cash and cash equivalents at beginning of the year 217,082 321,114Exchange difference on cash and cash equivalents at beginning of the year 310 (2,375)Cash and cash equivalents at end of the year 139,748 217,082

242 SIMPLY SMARTERSECTORAL FINANCIAL REVIEW – MARINEFINANCIAL HIGHLIGHTS2011 2010 2009 2008 2007$’000 $’000 $’000 $’000 $’000Operating PerformanceRevenue 877,204 1,044,850 955,952 821,754 864,594EBITDA 123,152 119,946 104,614 78,824 90,304EBIT 110,522 109,389 87,960 62,606 73,208Profit before tax 121,840 117,994 102,279 75,203 96,567Net Profit 91,465 89,057 81,763 74,500 75,264Balance SheetsShareholders’ funds 115,362 92,455 102,501 95,273 122,767Total assets 763,587 733,463 724,642 702,968 694,786Net assets 115,248 92,446 102,501 95,273 122,767Capital expenditure 18,362 23,622 20,590 21,711 20,687Financial RatiosEarnings per share (cents) 46.77 45.54 41.81 38.09 38.48Return on sales (%) 10.4 8.5 8.6 9.1 8.7Return on equity (%) 64.5 75.0 63.5 61.3 50.5Return on total assets (%) 12.0 12.1 11.3 10.6 10.8Net assets value per share (cents) 58.93 47.27 52.41 48.72 62.77Productivity DataAverage staff strength (numbers) 1,850 1,856 1,734 1,541 1,439Revenue per employee ($) 474,164 562,958 551,299 533,260 600,830Net profit per employee ($) 49,441 47,983 47,153 48,345 52,303Employment costs 174,248 179,228 153,019 126,053 134,252Employment costs per $ of revenue ($) 0.20 0.17 0.16 0.15 0.16Economic Value Added 81,042 71,095 68,023 59,597 60,453Economic Value Added spread (%) 44.3 39.0 35.0 26.1 24.1Economic Value Added per employee ($) 43,806 38,305 39,229 38,674 42,010Value added 308,606 307,242 277,054 228,006 252,348Value added per employee ($) 166,814 165,540 159,777 147,960 175,363Value added per $ of employment costs ($) 1.77 1.71 1.81 1.81 1.88Value added per $ of gross property, plant andequipment ($) 0.79 0.83 0.78 0.67 0.78Value added per $ of revenue ($) 0.35 0.29 0.29 0.28 0.29

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011243GROUP STRUCTURESingapore Technologies Engineering LtdSubsidiaries and Associated Companies (as at 29 February 2012)Singapore Technologies Aerospace Ltd(100%)Singapore Technologies Electronics Limited(100%)Singapore Technologies Kinetics Ltd(100%)Singapore Technologies Marine Ltd(100%)Singapore Technologies Dynamics Pte Ltd(100%)ST Synthesis Pte Ltd(100%)ST Engineering Financial I Ltd.(100%)ST Engineering Financial II Pte. Ltd.(100%)FusionTech Pte. Ltd.(100%)Kaz-ST Engineering Bastau Limited Liability Partnership(51%)Experia Events Pte. Ltd. (formerly known asSingapore Airshow & Events Pte. Ltd.)(33%)Vision Technologies Systems, Inc.(100%)Vision Technologies Aerospace Incorporated(100%)NanoScience Innovation Pte Ltd(27.06%)Singapore Airshow & Events Pte. Ltd.(100%) ##San Antonio Aerospace GP, LLC(100%)ST Aerospace San Antonio, L.P.(99%)**ST Aerospace Mobile, Inc.(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%)VT Systems International, LLC(100%)DalFort Aerospace GP, Inc. +(100%)DalFort Aerospace, L.P. +(99%)*DRB Aviation Consultants, Inc.(100%)EcoServices, LLC(50.1%)VT iDirect, Inc.(100%)Miltope Corporation(100%)MÄK Technologies, Inc.(100%)VT Halter Marine, Inc.(100%)Halter-Bollinger Joint Venture, L.L.C.(50%)VT Dimensions, Inc.(100%)VT Hackney, Inc.(100%)VT LeeBoy, Inc.(100%)VT Systems Participações Ltda.(99%) #Please refer to www.stengg.com for complete group structureiDirect UK Limited(100%)Parallel Limited(100%)iDirect Italy S.r.l.(100%)iDirect Hong Kong Limited(100%)iDirect Government Technologies, Inc.(100%)VT iDirect Canada, Inc.(100%)iDirect International, Inc.(100%)Intelect Technologies, LLC(100%)IV Phoenix Group, Inc.(95%)+ Ceased operations in 2003* Balance 1% held by DalFort Aerospace GP, Inc.** Balance 1% held by San Antonio Aerospace GP, LLC# Balance 1% held by Vision Technologies Systems, Inc.## Newly incorporated in 2011Italics Indicates Associated Companies. Others are Subsidiaries(both directly and indirectly held)

244 SIMPLY SMARTERCORPORATE INFORMATIONBoard of DirectorsMr Peter SEAH Lim Huat (Chairman)Mr TAN Pheng Hock (President & CEO)Mr KOH Beng SengLieutenant-General NEO Kian HongDr TAN Kim SiewMr QUEK Tong BoonMr QUEK Poh HuatMr Venkatachalam KRISHNAKUMARMr Davinder SINGH s/o Amar SinghDr Stanley LAI Tze ChangMr KHOO Boon HuiColonel ONG Ann Kiat (Alternate Director toLieutenant-General NEO Kian Hong)Company SecretaryMrs CHUA Su LiRegistered Office51 Cuppage Road #09-08Singapore 229469Tel: (65) 6722 1818Fax: (65) 6720 2293http://www.stengg.comShare RegistrarM & C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906Principal BankersBank of America, N.A.9 Raffles Place#18-00 Republic Plaza Tower 1Singapore 048619Citibank N.A.8 Marina View#21-01 Asia Square Tower 1Singapore 018960Credit Agricole Corporate and Investment Bank168 Robinson Road#22-01 Capital TowerSingapore 068912DBS Bank Ltd6 Shenton Way#25-00 DBS Building Tower OneSingapore 068809Oversea-Chinese Banking Corporation Limited65 Chulia Street#10-00 OCBC CentreSingapore 049513Sumitomo Mitsui Banking Corporation3 Temasek Avenue#06-01 Centennial TowerSingapore 039190AuditorsKPMG LLP16 Raffles Quay #22-00Hong Leong BuildingSingapore 048581Mr THAM Sai Choy (Partner-in-charge)(Date of Appointment: 21/04/2010)

246 SIMPLY SMARTERSHAREHOLDING STATISTICSAs at 24 February 2012Share CapitalPaid-Up Capital : S$728,101,944.8349Class of Shares : Ordinary SharesOne Special Share held by the Minister for FinanceVoting Rights : One vote per shareShareholding Held in Hands of PublicBased on the information available to the Company as at 24 February 2012, 32.2197% of the issued ordinary shares of the Company is held by the public andtherefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.Analysis of ShareholdingsNo. ofNo. ofRange of Shareholdings Shareholders % Shares %1 --- 999 1,893 5.80 584,148 0.021,000 --- 10,000 25,130 76.99 104,767,573 3.4210,001 --- 1,000,000 5,588 17.12 214,413,400 7.011,000,001 AND ABOVE 30 0.09 2,738,770,787 89.5532,641 100.00 3,058,535,908 100.00Number of SharesSubstantial ShareholderDirectInterestDeemedInterestTotalInterest %Temasek Holdings (Private) Limited 1,554,764,574 6,494,911 (1) 1,561,259,485 51.0460Aberdeen Asset Management PLC – 339,365,071 (2) 339,365,071 11.0957Aberdeen Asset Management Asia Limited – 328,201,071 (3) 328,201,071 10.7307Aberdeen Asset Managers Limited – 193,276,000 (3) 193,276,000 6.3192The Capital Group Companies, Inc. – 168,234,000 (4) 168,234,000 5.5005

SINGAPORE TECHNOLOGIES ENGINEERING LTD Annual Report 2011247SHAREHOLDING STATISTICSAs at 24 February 2012Notes:(1)Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:-Name of CompanyNo. of SharesDBS Group Holdings Ltd 592,911Keppel Corporation Limited 4,032,000Fullerton Fund Management Company Ltd 1,788,000ST Asset Management Ltd 82,000(2)Includes interests held by Aberdeen Asset Management PLC and its subsidiaries.(3)Details of their deemed interest are not available.(4)The Capital Group Companies, Inc. is deemed to have an interest in the following shares held by:Name of CompanyNo. of SharesRaffles Nominees (Pte) Ltd 168,234,000Major Shareholders List – Top 20No. Name No. of Shares Held %1 Temasek Holdings (Private) Limited 1,554,764,574 50.832 DBS Nominees Pte Ltd 357,258,291 11.683 DBSN Services Pte Ltd 240,684,593 7.874 Citibank Nominees Singapore Pte Ltd 186,904,409 6.115 BNP Paribas Securities Services 154,762,141 5.066 HSBC (Singapore) Nominees Pte Ltd 98,745,133 3.237 United Overseas Bank Nominees Pte Ltd 54,988,202 1.808 Raffles Nominees (Pte) Ltd 15,963,392 0.529 Lee Pineapple Company Pte Ltd 15,000,000 0.4910 Bank of Singapore Nominees Pte Ltd 7,675,985 0.2511 DBS Vickers Securities (S) Pte Ltd 7,096,781 0.2312 OCBC Nominees Singapore Pte Ltd 5,369,071 0.1813 OCBC Securities Private Ltd 4,646,064 0.1514 KI Investments (HK) Limited 4,032,000 0.1315 Merrill Lynch (Singapore) Pte Ltd 3,639,455 0.1216 Lee Seng Tee 3,600,000 0.1217 DB Nominees (S) Pte Ltd 3,287,650 0.1118 Phillip Securities Pte Ltd 2,872,705 0.0919 Tan Pheng Hock 2,267,629 0.0720 Shanwood Development Pte Ltd 2,077,000 0.072,725,635,075 89.11