notes to the financial statements - Singapore Technologies ...

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 (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 (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 (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 (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 (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 (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 (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 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 (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 (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 vehicles 293 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 $’000CostAt 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 difference 3,738 (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 difference 199 (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) 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.(b) 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.(c) 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 difference 5 (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 $’000Not past due and not impaired 620,068 566,814Past due and not impaired 308,599 256,132928,667 822,946Collectively assessedImpaired receivables (Gross) 24,141 34,816Allowance for doubtful debts (6,838) (10,159)17,303 24,657Individually assessedImpaired receivables (Gross) 57,510 79,926Allowance for doubtful debts (50,378) (75,635)7,132 4,291Unbilled receivables 235,885 169,291Allowance for unbilled receivables (1,484) (1,380)Trade receivables, net 1,187,503 1,019,805Trade debtors denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:Movements in allowance for doubtful debts are as follows:GroupNote 2011 2010$’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) 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; and(b) interest-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 $’000At beginning of the year 2,521 4,237 35,813 28,216(Write-back)/charge to profit or loss (29) (1,564) 1,800 7,788Translation difference 27 (152) 17 (191)At end of the year 2,519 2,521 37,630 35,81324. Advances and other receivablesGroupCompanyNote 2011 2010 2011 2010$’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 difference 631 (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:Excess of net book value over tax written down value ofproperty, 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 2010ESOSAt 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 2010ESOPAt 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 (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 $’0002011RevenueExternal 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 (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 accruals 36,136 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 $’0002010Financial 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 (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 (continued)Loans and Fair value through Liabilities at Total Carryingreceivables profit or loss amortised cost amount Fair value$’000 $’000 $’000 $’000 $’000The Company2011AssetsAmounts 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.