annual report 2010 - national university of...

Annual Report 2010

SINGAPORE TECHNOLOGIES ENGINEERING LTD51 Cuppage Road #09-08 StarHub Centre Singapore 229469Tel : (65) 6722 1818 • Fax : (65) 6720 2293www.stengg.com

(Regn. No.: 199706274H)

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010

Innovation. It’s our ability to think out of the box, adapt technologies from one field and apply them to another, integrate and customise our solutions. It sets us apart from the competition, captivates the market and keeps our customers coming back for more. It’s the engine of growth for the whole ST Engineering Group. And what fuels this engine is more powerful than technology, economies of scale or financial strength. It’s the talent and passion of our people.

mprove

ntegrity

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Financial Highlights

$5.98bTurnover

8%

$627.5mProfit Before Tax

15%14.55¢Dividend Per Share

10%

$491.0mNet Profit

11%$369.7mEconomic Value Added

21%

30.3%Return on Equity

7%$543mFree Cash Flow

31%

16.21¢Earnings Per Share

10%

GOOD PERFORMANCE

2 Singapore Technologies Engineering Ltd » AnnuAl REpoRT 2010

of the Group’s continued diversification strategy, supported by our innovative solutions and quality work.

Despite the fact that the commercial aviation heavy maintenance market has yet to recover, the Aerospace sector continued to clinch new contracts from a diverse customer base comprising air freight operators, legacy airlines, low cost carriers and air forces, involving diverse segments of the business. notable contracts awarded included a uS$750m engine Maintenance-By-the-Hour (MBHTM) contract by Jet Airways, component MBHTM contracts with T’Way Air, Spring Airlines and China Airlines, and a RSAF $543m contract for the procurement of trainers and ground based training system in Cazaux, France. our ongoing passenger-to-freighter (pTF) conversion project with FedEx Express has progressed on schedule with improving margins as the team continues to improve the work processes.

The Electronics sector managed to extend its customer reach to more than 100 countries during the year, including to Ecuador through a new contract from the country’s Department of Civil Aviation, and to Brazil and Turkey through a partnership with China’s train manufacturers. It also won a contract to provide Automatic Meter Reading radio transceivers to Arad Technologies which will be used in China, Europe, India and the uS. iDirect Government Technologies, a subsidiary of VT iDirect in the uS, is now operating under a uS Government approved proxy Agreement and may pursue classified government and military contracts, opening the door to more defence opportunities.

Highlight of the year for the land Systems sector was the delivery of its

Warthog All-terrain Tracked Vehicle to the uK Ministry of Defence (MoD), with some of the vehicles now in operation in Afghanistan. It also delivered its Terrex Infantry Carrier Vehicle to the Singapore Armed Forces (SAF). new defence contracts included those from the SAF

Letter to Shareholders

DEAR ShAREhOLDERS,

We started 2010 on a brighter note, as we put the worst of the global financial crisis behind us. Singapore and most of Asia seem to have rebounded, but economic recovery has been subdued in other parts of the world, and remains elusive in the uS, one of our key markets. The business environment has not quite returned to pre-crisis levels and uncertainties remain, though there is increasing optimism for a sustainable recovery.

Amidst the fragile global recovery, we are pleased to report a strong set of results for the ST Engineering Group. For financial year 2010, turnover grew 8% to $5.98b. profit before tax increased 15% to $627.5m and net profit was 11% higher at $491.0m. our operating performance was strong despite the weak uS dollar. Return on Equity (RoE) was a respectable 30.3%. We closed the year with a healthy order book of $11.5b, with new contracts from all sectors.

To reward our shareholders, the Board of Directors has recommended a final dividend of 11.55 cents per share, comprising an ordinary dividend of 4.00 cents and a special dividend of 7.55 cents. This is subject to shareholders’ approval at our AGM in April 2011. Together with the interim ordinary dividend of 3.00 cents per share paid in September 2010, the total dividend payout for the year will be 14.55 cents per share which translates to a dividend yield of 4.36%.

DOiNG whAT wE DO bEST

Having the right attitude and aptitude is important, especially during challenging times. 2010 was a litmus test of our positive mindset and innovative thinking. The strong set of results and healthy order book were achieved on the back

for the provision of driver training as well as for the maintenance of vehicles and preservation of its equipment, a demilitarisation contract from an African nation and a naval gun contract from the Brazilian navy. Its commercial arm launched a new brand, TRXBuIlD, unifying its construction equipment from its three China entities for better marketing opportunities.

In the Marine sector, we continue to deliver on our order book, including a 350,000 barrel Articulated Tug Barge (ATB) to oSG Ship Management, the largest ATB in the uS. The sector also won new orders, including a uS navy contract for a fourth Fast Missile Craft (FMC), bringing the total value of the FMC project to uS$807m, and scored its first upgrading contract from the Royal Australian navy. Its environmental engineering arm is also seeing increasing success, winning new contracts in Brunei and China.

The strong set of results

and healthy order book

were achieved on the back

of the Group’s continued

diversification strategy,

supported by our innovative

solutions and quality work.

3Singapore Technologies Engineering Ltd » AnnuAl REpoRT 2010

iNNOvATiON TO DRivE LONG TERM GROwTh

Innovation has always been the Group’s catalyst for growth, be it in the form of developing new solutions, products, services and markets, or adapting and reapplying our technologies to new areas, or improving our processes to do things better. Through innovation, new growth drivers are constantly identified and developed.

Some of the Group’s newest products unveiled during the year included the Skyblade IV, our latest unmanned Aerial Vehicle (uAV), and the Venus unmanned Surface Vehicle (uSV), South East Asia’s first uSV. unmanned vehicles and technologies could play increasingly important roles in defence and security missions. It was reported that the SAF used the Group’s Skyblade III in an operational exercise in november and that uAVs will be part of the systems available to SAF ground troops.

leveraging our know-how in various areas, the Group developed a range of eco-friendly solutions to meet rising global demand. our Marine sector designed and developed a concept for an eco-friendly ship while our Electronics sector is in a pilot Intelligent Energy Systems project with the Energy Market Authority. The Electronics and land Systems sectors signed Mous for separate projects in the Sino-Singapore Tianjin Eco-City, in areas such as green buildings and green transportation.

our proprietary Boeing 757-200 pTF design received two additional approvals from the Chinese and Canadian aviation authorities, allowing us to expand our pTF solutions to aircraft registered in these two countries. Building on our engineering

Letter to Shareholders

Mr peter Seah Mr Tan pheng Hock


capabilities in pTF solutions, we also secured two contracts for passenger-to-passenger/cargo (combi) conversion for our first commercial customers.

SCALiNG uP FOR ThE FuTuRE

looking to new markets, we see emerging markets being increasingly important to the Group. These markets not only offer good growth opportunities, there are also fewer established in-market players, hence providing us a better playing field. In line with this strategy, the Group has set up an operating company in Sao paolo, Brazil, to explore opportunities in Brazil and latin America. This is a first step in understanding the vast market, positioning ourselves for these opportunities if they are right for us. Also, our land Systems sector has ventured into India, setting up leeBoy India Construction Equipment in Bangalore to market and manufacture a range of construction equipment. India is currently the fifth largest construction equipment market in the world with a high growth rate, and we are optimistic that with our unique proposition we will be able to build up our market share there steadily.

The Group took the opportunity during the downturn to invest in new capacity, positioning us well for the recovery when it comes. During the year, our Aerospace sector added new hangar capacity in China’s pudong International Airport and San Antonio in the uS to cater to growing demands. These are now operational and being utilised. The sector’s new engine test cell in Xiamen has attained certification and is scheduled to be operational by end 2011. The sector has also entered into a joint venture with Guangdong Airport

Peter SEAh Lim huat TAN Pheng hockChairman president & CEo

28 February 2011

Management Corporation to set up a new heavy maintenance facility in Guangzhou. When ready, this would extend our presence in China, projected to be one of the world’s largest aviation hubs in future. our Marine sector continues in its quest to expand capacity in Asia and to add on shiprepair capabilities in the uS. We are in the process of studying several possibilities for one with the best fit.

R&D and infrastructure investments take time to mature and meanwhile, may not contribute significant returns. But we believe they are necessary investments that, down the road, will provide us new long term growth drivers in important markets.

ENSuRiNG SuSTAiNAbiLiTy

Growth must be sustainable to create long term value for stakeholders. The Group balances its innovation with robust corporate governance and risk management frameworks, ensuring that growth is not pursued blindly. We also have a Business Excellence framework which ensures all aspects of our business, from people development to corporate social responsibility, receive the necessary focus. We are pleased to share with you some of our business excellence practices in this annual report.

A TRibuTE

2010 was tinged with sadness with the passing of ST Engineering’s founding father, Dr Goh Keng Swee. It was Dr Goh who, in the Group’s early years, encouraged our people to think out of the box and to adopt a “can-do” spirit, sowing the seeds of innovation into our corporate culture. His belief has shaped ST Engineering into the

global player we are today. We pay tribute to him for his foresight and profound contributions not only to ST Engineering but also to Singapore.

OuR APPRECiATiON

It is our talented and dedicated people who drive this Group through their constant hard work and new ideas, leading to various breakthroughs and improvements. We wish to express our gratitude to our employees for their commitment to the Group.

We would also like to thank our Board Directors for their invaluable counsel and guidance. We welcome Mr Khoo Boon Hui, who joined the Board on 1 September 2010 as a non-executive independent Director.

our appreciation also extends to our business partners, shareholders and stakeholders. With our proven diversification strategy and continuing innovation efforts, we are poised to take the Group to the next level of growth. We look forward to your continued support.


各位股东：

在经历了全球金融危机最严重的阶段后，

2010年初经济发展势头相对良好。虽然新加

坡和亚洲大部分地区的经济发展似有回升，

但世界其他地区的复苏趋势仍处于抑制状态。

作为我们主要市场之一的美国，其经济复苏

迹象仍不明显。商业环境还没有完全回到危

机前的水平，不确定因素依然存在。不过，越

来越多的人乐观地认为世界经济正处于持续复

苏的态势。

在全球经济复苏仍相对疲软的背景下，新科工

程集团取得良好业绩。在2010财年，我们的

营业额增长了8％，达到59.8亿元；税前利润

增长了15％，达到6.275亿元；净利润增长了

11％，达到4.91亿元。尽管美元持续疲弱，

我们的经营绩效仍非常出色。股本回报率高达

30.3％。截至年终，来自各业务的订单总额高

达115亿元。

为了回报广大股东，董事会建议将年终股息

定为每股11.55分，包括了普通股息每股4.00

分和特别股息每股7.55分。此建议将提交到

2011年4月的年度股东大会上征求股东们的同

意。连同2010年9月支付的每股3.00分中期普

通股息，2010财年分发的总股息为每股14.55

分，即相当于4.36%的股息收益率。

发挥所长

在这个充满挑战的时代里，拥有正确的态度和

合适的资质非常重要。 2010年是考验我们积

极心态和创新思维的一年。我们之所以能获得

良好的业绩和稳定的订单，离不开集团一如继

往地实施多元化经营模式、创新方案和广大员

工高质量完成工作的能力。

尽管商业航空大型维修市场尚未恢复，集团的

宇航业务仍不断收到来自货机、传统航空公

司、廉价航空和空军等不同客户群、涉及不同

商业业务的新合约。其中包括与印度捷特航空

签订的一份价值7.5亿美元的 “包修飞机维修

按固定飞行小时收费” 合同，与韩星航空、春

秋航空和中华航空分别签订的组件合同，和新

加坡空军签订采购训练机培训系统的合同。我

们与联邦快递合作的客货机改装项目正依计划

进行，随着团队不断改进工作流程，所获利润

也随之提高。

在电子业务方面，我们的客户范围在2010年

扩大到100多个国家。我们从厄瓜多尔的民航

处获得一份新合同；也通过与中国的列车制造

商展开合作，把市场扩展到巴西和土耳其。

此外，我们还向阿拉德科技公司提供自动抄

表无线电收发报机；该产品将在中国、欧洲、

印度和美国使用。本集团在美国的 iDirect Government Technologies 公司是美国政府特

批的公司，可从事有关美国政府和军事机密的

项目，从而为集团创造更多防务方面的商机。

2010年，陆路业务的工作亮点是将Warthog全地形运载车交付给英国国防部，其中部分车

辆正参与在阿富汗的军事行动中。该业务还向

新加坡武装部队提供了TERREX轮形战斗车。

新的防务合同包括：与新加坡武装部队签订了

关于提供驾驶培训、车辆及设备维护的合同；

和一个非洲国家签订的废除军备合同；以及和

巴西海军签订的舰炮合同。该业务的商业部门

开发了 “道胜” (TRXBuIlD) 这个全新品牌，

它把在中国的三个不同品牌的建筑设备进行整

合，以获取更好的商机。

在海事业务方面，我们继续交付订单。其中

包括oSG Ship Management 订购的一艘35万

bbl铰接式拖轮驳船，这是美国最大的铰接式

拖轮驳船。我们获得的新订单包括来自美国海

军订购的第四艘导弹快艇，从而使导弹快艇的

项目总价值达到8.07亿美元。该业务也首次获

得澳大利亚皇家海军舰船改善的订单。该业务

在环保工程方面也不断取得成功，获得了来自

文莱和中国的新合同。

锐意创新持续增长

无论是在提出新的解决方案、开发新产品、拓

展新业务和开拓市场方面，或是调整技术并将

其重新应用到新的领域中，还是改善工作流程

以提高工作质量，创新一直是本集团发展壮大

的催化剂。通过创新，我们不断识别和发展新

的增长点。

本集团于2010年推出的新产品包括了天刃四

(Skyblade IV)，我们最新研发制造的无人驾驶

侦察机，以及东南亚第一款多功能可重配置无

人驾驶水面艇。无人驾驶车辆和技术在防务和

安全任务中起着日益重要的作用。据报道，新

加坡武装部队在11月的一次作战演习中使用

了本集团的天刃三 (Skyblade III)，而且无人驾

驶侦察机将成为武装部队地面部队所拥有的

武器装备。

凭借我们在各个领域的专业知识，集团研发出

一系列环保方案，以满足全球不断增长的环

保需求。海事业务方面，我们设计和发展了

一种环保型船舶的概念；电子业务方面，我们

正在与能源市场管理局合作开展智慧能源系统

试点项目；电子和陆路业务方面，我们签署了

中新天津生态城实施项目中个别项目的谅解备

忘录，项目所涉及的领域包括环保建筑和环

保交通等。

我们专有的波音757-200客货机改装的设计又

获得了另外两个国家 (中国和加拿大) 民航当

局的批准，使我们能够在此两国注册的飞机上

采用我们的客货机改装方案。凭借着我们在客

改货设计上所呈现的工程设计能力，我们还

为我们的客货机组合改装方案赢得了第一批

商业客户。

展望未来扩大规模

展望未来，我们可以预见新兴市场对集团的发

展日益重要。这些市场不仅可以提供良好的

发展机遇，而且有资历的市场对手也相对较

少，从而为我们提供一个更好的市场环境。根

据这一策略，本集团在巴西圣保罗成立一个营

业公司作为了解这个广阔市场的第一步，以期

在巴西和拉丁美洲寻求商机。此外，在陆路业

务方面，我们也尝试向印度扩展，在班加罗

尔设立印度力博 (leeBoy India Construction Equipment) 公司，以推销和生产一系列建筑

设备。印度是目前高速增长的世界第五大建筑

设备市场。我们乐观地认为：凭借我们独一

无二的模式，集团能够在印度稳步增加市场

占有份额。


本集团利用经济衰退中的机会投资新的生产能

力，为经济复苏做好了准备。2010年内，宇

航业务方面，我们提高了中国上海浦东国际机

场和美国圣安东尼奥的机库容量，以满足日益

增长的需求。现在这些机库已投入使用。我们

在厦门的新发动机维修设施已取得认证，并预

计于2011年底投入使用。我们也与广东省机

场管理集团公司合资，在广州建立一个新的大

型维修设施。该工程完工后，我们在中国的市

场占有率又将扩大。中国预计将成为世界未来

最大的航空枢纽之一。我们的海事业务将继续

寻求扩大其在亚洲的船厂容量，并在美国附加

船舶修理能力。我们目前正在从几套备选方案

中考察最佳方案。

研发和基础设施投资需要一段时间。在此期

间，它们可能不会带来明显回报。但我们相信

投资于这两个方面是必要的。一段时间后，

它们将会为我们在重要的市场提供新的长期

增长动力。

确保可持续性发展

只有可持续性发展才能使本集团长期增值。集

团平衡了创新能力和强有力的运营管理及风险

管理之间的关系，确保集团并非盲目地追求财

富增长。我们也有一套“卓越商业”运营架

构，可以确保从员工培训到企业社会责任等事

关集团业务发展的各方面都受到必要的关注。

我们很乐意在这份年度报告中，与您分享本集

团业务发展中的卓越商业惯例。

致敬

新科工程的创始人吴庆瑞博士的去世，给

2010年蒙上了一丝哀伤。在集团发展早期，

是吴博士鼓舞我们打破陈规、发扬“我行”

精神，把创新的种子播种到我们的企业文化

中。是他的信念把新科工程塑造成今天的全球

性竞争者。对他的远见卓识，和他对新科工程

及新加坡的卓越贡献，我们表示敬意。

致谢

本集团的广大员工富有才干、肯于奉献，正是

他们的不断努力和创新思维，本集团的业务才

得以取得多项突破和进展。我们向对集团发展

做出贡献的广大员工表达谢意。

同时，我们也要向提出宝贵建议和指导意见的

董事会成员们表示感谢。我们欢迎邱文晖先

生，他已于2010年9月1日，作为非执行独立

董事加入了董事会。

最后，我们还要感谢各位商业伙伴、股东和利

益相关者。秉持多元化经营模式和依靠可持续

创新能力，集团正向更高层次迈进。我们期待

着您的继续支持。

佘林发陈平福

主席总裁及首席执行官

2011年2月28日


“to form, coordinate or blend into a functioning or unified whole”

Our global Group is greater

than the sum of its parts.

With our international

presence, we are able

to serve our customers

wherever they are.

ntegrate

Global Footprint

Our geographical footprint has grown over the years, resulting in a global

network of over 100 subsidiaries and associated companies. Our presence in

key customer markets enables us to anticipate needs in those markets and to

meet those needs with innovative solutions.

Legend

Aerospace

Electronics

Land Systems

Marine

Others

Herndon, Virginia, USA

Lincolnton, North Carolina, USA

Washington, North Carolina, USA

Monterrey, Mexico

Pascagoula, Mississippi, USA

San Antonio, Texas, USAMobile, Alabama, USA

Madrid, Spain

Cazaux, France

London, UK

County Meath, Ireland

Oxfordshire, UK

Panama

Langley, Canada

Nuevo Leon, Mexico

Mexico City, Mexico

Sao Paulo, Brazil

Hope Hull, Alabama, USA

ST Engineering’s main facilities and offices

Cambridge, Massachusetts, USA


Turnover By Customerour customers are located in over 100 countries, and operate in the defence, government and commercial sectors. This well diversified customer base ensures consistent earnings and constant exposure to opportunities.

Dubai, UAE

Ballarat, Australia

Johor, Malaysia

Gaborone, Botswana

Dhaka, Bangladesh

Tokyo, Japan

Shanghai, China

Hangzhou, China

Beijing, China

Jiangsu, China

Bangalore, India

Yichun, China

Xiamen, China

Shenzhen, China

Hong Kong

Taipei, ROC

Guangzhou, ChinaGuizhou, China

Bangkok, Thailand

Kuala Lumpur, Malaysia

Chengdu, China

SingaporeBandar Seri Begawan, Brunei

Almaty, Kazakhstan

Copenhagen, Denmark

Oslo, Norway

Stockholm, Sweden

Asia

uSA

Europe

others

55%

26%

13%

6%


“notably or brilliantly outstanding because of dignity or achievements or actions”

The Group is guided by a

Board of Directors comprising

distinguished individuals, working

in tandem with a committed and

experienced management team.

This leadership has steered the

Group in making its mark around

the world.

llustrious

Board of Directors

01. Mr Peter SEAh Lim huat (Chairman)

Mr peter Seah lim Huat, 64, was appointed non-executive Chairman on 15 April 2002 and was last re-elected as Director on 22 April 2009. He is a member of the Temasek Holdings Advisory panel. Mr Seah was a banker for 33 years before retiring as Vice Chairman and CEo of the former overseas union Bank in 2001. He then joined Singapore Technologies pte ltd as president & CEo and held this position until 31 December 2004. Mr Seah is also Chairman of DBS Bank ltd* and sits on the Boards of Capitaland limited* and Government of Singapore Investment Corporation. His other appointments include being Chairman of laSalle Foundation limited and Singapore Health Services pte ltd and a member of the Defence Science & Technology Agency (DSTA). Mr Seah was awarded the public Service Star (Bintang Bakti Masyarakat) in 1999 and made a Justice of the peace in 2003. He graduated from the former university of Singapore in 1968 with an honours degree in Business Administration.

02. Mr TAN Pheng hock

Mr Tan pheng Hock, 53, is the president & CEo of ST Engineering and an executive Director. He was appointed Director on 1 May 2001 and was last re-elected as Director on 21 April 2010. Mr Tan is a Director of SembCorp Marine ltd*. He is Chairman of the Singapore Airshow & Events pte. ltd., Singapore Workforce Development Agency, nanyang polytechnic Board of Governors, nanyang polytechnic International private limited, and the lifelong learning Endowment Fund Advisory Council. Mr Tan is also Deputy Chairman of the Singapore Quality Award Governing Council and a member of the Singapore Economic Development Board. He began his career with the Group as an engineer in ST Marine in 1981. He held various senior appointments in the Group including that of Executive Vice president of ST Marine, president of ST Kinetics, president and Chief operating officer of ST Engineering and ST Engineering Group president. He holds a Bachelor of Science (First Class Honours) in Marine Engineering from the university of Surrey, uK and a Master of Science in Management from Stanford university, uSA.

The names of the directors holding

office at the date of this report are

set out below together with details

of their academic and professional

qualifications, age, date of first

appointment as Director, date of last

re-election as Director, as well as

directorships in companies.

01 02


03 04 05 06

03. Mr KOh beng Seng

Mr Koh Beng Seng, 60, is the CEo of octagon Advisors pte. ltd. He was appointed an independent non-executive Director on 15 September 2003 and was last re-elected as Director on 22 April 2009. Mr Koh was Deputy president of united overseas Bank ltd from June 2000 to 31 January 2005. prior to this, Mr Koh was Senior Advisor to Asia pulp & paper Co ltd, and Advisor to Bank of China and the International Monetary Fund. Mr Koh has extensive experience in the financial services sector. He was with the Monetary Authority of Singapore from 1973 to 1998, where he served as Deputy Managing Director from 1988 to 1998. Mr Koh is a Director of Bank of China (Hong Kong) limited^, BoC Hong Kong (Holdings) limited, Fraser & neave ltd*, Sing-Han International Financial Services limited, Japan Wealth Management Securities Inc, and Great Eastern Holdings limited*. Mr Koh holds a Bachelor of Commerce (First Class Honours) from the former nanyang university, Singapore, and a Master of Business Administration from Columbia university, uSA.

04. Lieutenant-General NEO Kian hong

lG neo Kian Hong, 46, is Chief of the Defence Force. He was appointed a non-executive Director on 31 March 2010 and was re-elected as Director on 21 April 2010. prior to this, lG neo was the Chief of Army. He joined the Ministry of Defence (MInDEF) in 1984 and was awarded the SAF overseas Scholarship in 1985, SAF postgraduate Scholarship (General Development) in 1997 and The public Administration Medal (Gold) in 2007. In the course of his military career, he has held various key command and staff positions in MInDEF. lG neo holds a Bachelor of Engineering (Honours) (Electrical & Electronic) from the university of london, uK, as well as a Master of Science (Management of Technology) from the Massachusetts Institute of Technology, uSA.

05. Dr TAN Kim Siew

Dr Tan Kim Siew, 57, is permanent Secretary (Defence Development), MInDEF. He was appointed a non-executive Director on 15 December 2003 and was last re-elected as Director on 21 April 2010. prior to his present appointment with MInDEF, he was the Deputy Secretary (policy) with the Ministry of Finance. He was formerly the CEo and Chief planner of the urban Redevelopment Authority from 1996 to 2001. Dr Tan is Chairman of the DSTA and DSo national laboratories, and is also a Director of Singapore Technologies Holdings pte ltd. Dr Tan holds a Bachelor of Arts in Engineering Tripos and a ph.D in Engineering from the university of Cambridge, uK.

06. Mr QuEK Tong boon

Mr Quek Tong Boon, 55, is Chief Defence Scientist and Chief Research & Technology officer in MInDEF. He was appointed a non-executive Director on 1 March 2008 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. He joined the Defence Science organisation of MInDEF in 1980 and in the course of his career, has held various key appointments, including that of Deputy Secretary (Technology and Transformation) of MInDEF and CEo of the DSo national laboratories. Mr Quek’s current chairmanship includes that of the Intellectual property office of Singapore (IpoS) Board, the Temasek laboratories@nuS Board, the Temasek laboratories@nTu Board and the Temasek Defence Systems Institute Board. He is a member of the DSo national laboratories Board, the DSTA Board, the Agency for Science, Technology & Research Board, and the Singapore university of Technology and Design Board of Trustees. He is also an Adjunct professor at the Department of Electrical & Computer Engineering of the national university of Singapore (nuS). He holds a Bachelor of Arts (Honours) (Engineering) from the university of Cambridge, uK, and a Master of Science (Electrical Engineering) from nuS.


07. Mr winston TAN Tien hin

Mr Winston Tan Tien Hin, 62, is the Managing Director of Corporate Brokers International pte ltd. Mr Tan was a banker for 24 years having spent over 16 years with Citibank and over seven years with Deutsche Bank; his last position was that of General Manager for the Singapore Branch. He was appointed an independent non-executive Director on 1 october 1997 and will retire at this coming AGM. Mr Tan is a Business Angel investor and Director of several small and medium sized enterprises, including Roxy-pacific Holdings limited*. Mr Tan is also a member of the Salvation Army Advisory Board. He holds a Bachelor of Science in physics from the former university of Singapore.

08. Mr QuEK Poh huat

Mr Quek poh Huat, 64, is Group CEo of Singapore power limited. He was appointed a non-executive Director on 15 April 2002 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. Mr Quek is a Director of Singapore power limited, Sp powerAssets limited, powerGas limited and Sp Services limited. He is also Chairman of Sp powerGrid limited, SpI Management Services pty ltd, SpI (Australia) Assets pty ltd and Enterprise Business Services (Australia) pty ltd. Mr Quek is Singapore’s non-resident Ambassador to Sweden. He was awarded the public Service Star in August 1994. Mr Quek obtained a Bachelor of Science in Chemical Engineering from the university of leeds, uK, and a Master of Science in Management from the naval postgraduate School, uSA.

Board of Directors

09. Mr venkatachalam KRiShNAKuMAR

Mr Venkatachalam Krishnakumar, 61, is Chairman of oracle Financial Services Software pte ltd (Singapore). prior to this, he has held Senior Advisory roles at DBS Bank ltd, McKinsey and Company and Barclays Bank plC, Global Retail and Commercial Banking. He was Chief operating officer and Chief Financial officer for the Asia pacific Consumer Bank of Citigroup until his retirement on 28 February 2005, after a 31-year career with the group. During his career with Citigroup, he held several senior appointments in India, Singapore and new York. He was appointed an independent non-executive Director on 15 April 2002 and was last re-elected as Director on 21 April 2010. He holds a Bachelor of Engineering and Master of Business Administration from the Indian Institute of Management, India.

10. Mr Davinder SiNGh

Mr Davinder Singh, 53, is CEo of Drew & napier llC. He was appointed an independent non-executive Director on 1 August 2007 and will be due for re-election at this coming AGM under Article 98 of the Company’s Articles of Association. Mr Davinder Singh has been in legal practice for more than 20 years. He was appointed Senior Counsel in 1997, the first batch of Senior Counsels to be so appointed in Singapore. Mr Davinder Singh holds an llB (Honours) from the former university of Singapore.

11. Dr Stanley LAi Tze Chang

Dr Stanley lai Tze Chang, 43, is Head of the Intellectual property & Technology Department, Allen and Gledhill llp. He was appointed an independent non-executive Director on 8 october 2009 and was re-elected as Director on 21 April 2010. Dr lai was appointed Senior Counsel at the opening of the legal Year 2010. He obtained his law degree from the university of leicester (uK) in 1992 and qualified to practise as a Barrister in England and Wales in 1993. Dr lai is a member of lincoln’s Inn. He was called to the Singapore bar in 1995. Dr lai also holds a Master and Doctorate (ph.D) in law from the university of Cambridge, uK.

07 08 09 10


12. Mr KhOO boon hui

Mr Khoo Boon Hui, 56, is the Senior Deputy Secretary of the Ministry of Home Affairs. He was appointed an independent non-executive Director on 1 September 2010 and will be offering himself for re-election at this coming AGM under Article 104 of the Company’s Articles of Association. Mr Khoo was appointed Commissioner of the Singapore police Force (SpF) in July 1997, and relinquished this post in January 2010 after serving 32 years in SpF. He is also the president of InTERpol, Alternate Chairman of Home Team Academy Board of Governors, Deputy Chairman of Singapore Island Country Club and SpRInG Singapore – Singapore Quality Award Governing Council and a Board Member of Singhealth. Mr Khoo holds a Bachelor of Arts (Engineering Science & Economics) degree from oxford university and a Master in public Administration from the Kennedy School of Government, Harvard university. He attended the Advanced Management program at Wharton School of the university of pennsylvania in 2002.

13. Colonel ONG Ann Kiat

Col ong Ann Kiat, 37, is Assistant Chief of General Staff (plans) in MInDEF. He was appointed Alternate Director to lG neo Kian Hong on 31 March 2010. Col ong joined the SAF in 1992. He was awarded the SAF overseas Scholarship in 1992, and the SAF postgraduate Scholarship (General Development) in 2008. He has held various command and staff positions in MInDEF in the course of his military career. Col ong holds a Bachelor of Science (First Class Honours) (Economics) from the london School of Economics and political Science, university of london, uK as well as a Master of Business Administration from the Massachusetts Institute of Technology, uSA.

13

* listed on the SGX-ST^ listed on the Stock Exchange of Hong Kong

PAST DiRECTORShiPS iN ThE LAST ThREE yEARS

Mr Peter SEAh Lim huatAlliance Bank Malaysia BerhadBank of China limitedChartered Semiconductor Manufacturing ltd.Chinese Chamber Realty private limitedpT Indosat TbkSCS Computer Systems pte. ltd.SembCorp Industries ltdSiam Commercial Bank public Company limitedSingapore Technologies Telemedia pte ltd

Mr TAN Pheng hock2006 JV pte. ltd. (Dissolved under members’

voluntary liquidation)neptune orient lines limited

Lieutenant-General NEO Kian hongSingapore Technologies Kinetics ltd

Mr winston TAN Tien hinnewBiomed pIKA pte. ltd.

Mr QuEK Poh huatpowerGas limitedSp Australia networks (Distribution) ltdSp Australia networks (RE) ltdSp Australia networks (Transmission) ltdTemasek Management Services pte ltd

Mr venkatachalam KRiShNAKuMARSCS Computer Systems pte. ltd.The Central Depository (pte) limited

Mr Davinder SiNGhFreshfields Drew & napier pte ltd

1211


Senior Management

Mr TAN Pheng hock is president & CEo of ST Engineering and a Director of the ST Engineering Board. (Mr Tan’s profile is on page 14)

Mr SEAh Moon Ming, 54, was re-designated as Deputy CEo and president, Defence Business of ST Engineering in August 2009, overseeing the Aerospace, Electronics, land Systems and Marine sectors. prior to this, he was Deputy CEo (Electronics & Kinetics) and president, International Business, ST Engineering from May 2004 to August 2009 and president, ST Electronics, a position he has held from July 1997 to August 2009. Mr Seah was General Manager

Left to Right: Mr CHAnG Cheow Teck, Mr lEE Fook Sun, Mr TAn pheng Hock, Ms Eleana TAn Ai Ching, General (Retired) John G CoBuRn, Mr SEAH Moon Ming, Mr SEW Chee Jhuen, Mr nG Sing Chan

of CET Technologies from July 1994 to July 1997. He serves as Chairman of the Board of Governors of Temasek polytechnic, Vice Chairman of Trek 2000 International ltd*, and Director of DSo national laboratories, Infocomm Development Authority of Singapore, International Enterprise Singapore and Alexandra Health pte ltd. He is a Fellow of the Institution of Engineers, Singapore and a senior member of IEEE. He was awarded the 2007 International Manager Action Award in Singapore, 2007 Top Ten Financial and Intelligent persons Award in China and IES/IEEE Joint Medal of Excellence 2008. Mr Seah holds a Master of Science (Distinction) in Electrical Engineering from the naval postgraduate School, uSA.

Mr ChANG Cheow Teck, 50, was appointed president, ST Aerospace in May 2010. prior to this, Mr Chang was president of ST Marine from 2008.

He has been with the Group since 1990 and has spent 16 years of his career in the aerospace sector. Mr Chang has held several senior management appointments within the Group including that of EVp Commercial Business, ST Aerospace; president, Vision Technologies Systems, Inc.; and president, Defence Business, ST Kinetics. As president, Special projects, ST Engineering, Mr Chang was closely involved in identifying growth opportunities for the Group resulting in several acquisitions. He holds a Bachelor of Mechanical Engineering (First Class Honours) from the nuS and attended the Harvard university’s Management Development program.

Mr LEE Fook Sun, 54, was appointed president of ST Electronics in August 2009. prior to his appointment, Mr lee was Deputy president (operations), ST Electronics from 2005. He joined

ST Electronics in 2000 as president of Defence and International Business. He holds a Bachelor of Arts (Honours) and a Master of Arts (Engineering Science) from the university of oxford, uK and attended the Stanford university’s Executive programme. Mr lee is a Fellow of the Institution of Engineers, Singapore and a member of the Singapore-Zhejiang Economic & Trade Council.

Mr SEw Chee Jhuen, 47, was appointed president of ST Kinetics in September 2006. prior to this, Mr Sew was Deputy president (operations) and president Defence Business of ST Kinetics. He joined ST Aerospace as an aeronautical engineer in 1988, and had held many senior management appointments before becoming Deputy president (operations). Mr Sew serves as a Member of the Board of Governors of Singapore polytechnic. He holds a Bachelor of Science (Distinction) in Aeronautical Engineering and Mechanics from the university of Minnesota, and a Master in Business Administration from Stanford university, uSA.

Mr NG Sing Chan, 50, was appointed president, ST Marine in May 2010. prior to this, Mr ng was Deputy president and president, Defence Business of ST Marine. He joined Singapore Shipbuilding & Engineering limited (now ST Marine) in 1987 as an engineer. Mr ng left in 1991 and later became the Deputy General Manager of pan-united Shipyard pte ltd. He subsequently took on the positions of president of Changshu Xinghua Changjiang Dev Co and Executive Director of pan-united Marine ltd (now known as Drydocks World – Singapore pte ltd). Mr ng re-joined the Group in March 2008 as EVp, Special projects, ST Engineering and moved to ST Marine as Deputy president in April 2009. Mr ng holds

a Master of Business Administration (Finance & Banking) from the nanyang Technological university, Singapore and a Masters in Engineering from the university of Hamburg, Germany.

General (Retired) John G CObuRN, 68, was appointed Chairman and CEo of ST Engineering’s uS subsidiary, VT Systems, in December 2001. Gen (Ret) Coburn joined the Group after an illustrious 39-year career with the uS Department of Defense. prior to taking up this position, he was Commanding General of the uS Army Materiel Command, one of the largest commands in the army with 60,000 employees with an annual budget of uS$40b and activities in 42 states and 28 foreign countries. Gen (Ret) Coburn holds a Juris Doctor from the university of Missouri, uSA, a Doctor’s Degree from Eastern Michigan university and many other degrees. He is also a noted author, speaker and a member of the Supreme Court of the united States.

Ms Eleana TAN Ai Ching, 48, was appointed Chief Financial officer of ST Engineering in March 2008. Ms Tan was previously Managing Director, Finance, Temasek Holdings (private) limited (Temasek). prior to that, she was Director Finance at Singapore Technologies pte ltd (STpl) from August 2003 until December 2004, when STpl was restructured, and its assets transferred to Temasek. prior to 2003, Ms Tan had held various key finance positions in the ST Engineering Group over a period of 13 years and last held the position of Group Financial Controller of ST Engineering. Ms Tan holds a Bachelor of Accountancy (Honours) from the nuS and is a member of the Institute of Certified public Accountants of Singapore.

* listed on the SGX-ST

Organisation Chart

iNTERNAL AuDiT

Grace KWOKSenior Vice President(Reports to Audit Committee)

iNTERNATiONAL MARKETiNG

Patrick CHOYExecutive Vice President

huMAN RESOuRCE

TAN Nga KokSenior Vice President/ Director

STRATEGiC PLANS

Robin THEVATHASANSenior Vice President

CORPORATE COMMuNiCATiONS

Sharolyn CHOYSenior Vice President

SPECiAL PROJECTS

HAN Yew KwangExecutive Vice President

FiNANCE

Raphael CHINSenior Vice President/Group Financial Controller

SySTEM ENGiNEER

GAN Boon JinChief System Engineer

TEChNOLOGy

FONG Saik HayChief Technology Officer

LEGAL

LOW Meng WaiVice President/Director

RiSK MANAGEMENT

Alice CHUASenior Vice President

buSiNESS EXCELLENCE

Harnek SINGHVice President/Director

MERGERS & ACQuiSiTiONS

Steven CHEONGSenior Vice President

iNFORMATiON TEChNOLOGy

TAN Hock HaiChief Information Officer

DEFENCE buSiNESS

LOW Yee Kah Senior Vice President

PROCuREMENT

GOH Bak NguanChief Procurement Officer

TAN Pheng HockPresident & CEO

Eleana TANChief Financial Officer


AEROSPACE

CHANG Cheow TeckPresident

LIM Serh GheeChief Operating Officer &President,Defence Business

ELECTRONiCS

LEE Fook SunPresident

NG Chong KhimDeputy President, Corporate Services and Marketing

LAU Thiam BengDeputy President, Operations & President, Defence Business

YONG Thiam ChongDeputy President, International Business

LAND SySTEMS

SEW Chee JhuenPresident

GAN Boon JinDeputy President, Operations & President, Defence Business

MARiNE

NG Sing ChanPresident

Parmesh SINGHPresident, Marketing and Business Development

uS OPERATiONS

John G COBURNChairman & CEO

EuROPE OPERATiONS

Augustine SYNSenior Vice President

ADvANCED ENGiNEERiNG CENTRE

FONG Saik HayPresident

iNTEGRATED SERviCES

GOH Lik KokVice President/ General Manager

SEAH Moon MingDeputy CEO &

President, Defence Business


“the quality of being honest and having strong moral principles”

‘Integrity’ is one of our core

values. We are committed

to good governance at the

Board level and throughout

the Group.

ntegrity

Corporate Governance

bOARD MATTERS

board’s Conduct of its Affairs(Principle 1)The Board is responsible to shareholders for overseeing the management of the business in the interest of the Company. To this end, the Board relies on the integrity and due diligence of its senior management and its external advisors and auditors. In addition to its statutory responsibilities, the Board specifically performs the following governance roles:

• approvesandguidestheGroup’soverall long term strategic objectives;

• establishesaproperriskmanagement system to ensure that key potential risks faced by the Group are properly identified and managed;

• monitorstheGroup’sperformance;• assessesandapprovesannual

budgets, major funding proposals, investment and divestment proposals;

• approvestheappointmentofthepresident & CEo, Board changes and appointments on Board committees; and

• approvestheunauditedquarterly, half yearly and full year audited results prior to their release.

In the discharge of its functions, the Board is supported by nine Board committees to which it delegates specific areas of responsibilities for review and decision making, and the Executive office. The Executive office comprises the president & CEo; Deputy CEo; and the Chief Financial officer (CFo).

Board members receive monthly consolidated management reports on the financial performance of each business sector, capital commitments and significant operational highlights.

A formal letter is sent to a director upon his appointment setting out his duties and responsibilities. A new director is also given a briefing by the president & CEo on the strategic direction and performance of the Company and its key subsidiaries.

The Board is routinely updated on the relevant laws, continuing listing obligations and accounting standards requiring compliance, and their implications for the Group.

The Board convenes scheduled meetings on a quarterly basis to coincide with the announcement of the Group’s quarterly results. Ad-hoc meetings are convened as and when necessary to review the Group’s performance, and/or to deliberate on specific issues. To facilitate the Board’s decision-making process, the Company’s Articles of Association provides for Directors to participate in Board meetings by teleconference or video conference. The Chairman has a second or casting vote. Decisions of the Board and Board committees may also be obtained via circulation.

The Board monitors the performance of the Group through its Board committees. The number of Board and Board committee meetings held during the year is tabulated on the following page.

The Board of ST Engineering

is committed to upholding a

high standard of corporate

governance within the

Group to protect the

interests of its shareholders

and maximise long term

shareholder value.

This report sets out

ST Engineering’s corporate

governance processes,

practices and activities

in 2010 with specific

reference to the guidelines

of the Singapore Corporate

Governance Code 2005

(Code).


Type of Meeting no. of Meetings Attendance Average (%)

Board 4 86%

Audit Committee 4 100%

Business Investment and Divestment Committee 2 80%

Executive Resource and Compensation Committee 3 89%

nominating Committee 1 100%

Senior Human Resource Committee 1 75%

Risk Review Committee 4 71%

Budget and Finance Committee 2 88%

Research, Development and Technology Committee 3 78%

Tenders Committee * *

* Decisions were made via circular resolution.Minutes of the Board Committee meetings are made available to all Board members.

board Composition and Guidance(Principle 2)The Board comprises 12 directors and an alternate director. The Board consists of members with established track record in finance, banking, technology, legal and management skills. Each non-executive director brings to the Board an independent perspective based on his training and expertise to make balanced and well considered decisions.

The Chairman of the Board is Mr peter Seah, a non-executive director. Mr Seah was appointed to the Board on 15 April 2002 as Chairman.

As a non-executive director, Mr Seah is free from any relationship with the executive management of the Company that could materially interfere with the exercise of his independent judgment. He is a Member of the Temasek Advisory panel in Temasek Holdings, the Company’s major shareholder.

The president & CEo is Mr Tan pheng Hock, who is an executive director. Save for Mr Tan pheng Hock, the

remaining eleven directors are non-executive directors.

The Board has six independent directors. According to the Code, an independent director is one who has no relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere with the exercise of the director’s independent business judgment. The independence of each director is reviewed annually by the nominating Committee (nC). The independent directors are Mr Koh Beng Seng, Mr Venkatachalam Krishnakumar, Mr Winston Tan, Mr Davinder Singh, Dr Stanley lai and Mr Khoo Boon Hui.

The Board has, at all times, exercised independent judgment in decision making, using its collective wisdom and experience to act in the best interests of the Company.

The Board held a total of four meetings during the year, to consider among other things, the approval of the FY2009 results and release of 1Q2010, 2Q2010 and 3Q2010 results.

Chairman and Chief Executive Officer(Principle 3)The Chairman and president & CEo roles and responsibilities are kept separate in order to maintain effective oversight. no individual or small group of individuals dominates the Board’s decision making process. The president & CEo and senior management regularly consult with individual Board members and seek the advice of members of the Board committees through meetings, telephone calls as well as by electronic mail.

The Chairman, who is non-executive, is responsible for the proper functioning of the Board and acts independently in the best interests of the Company and its shareholders. The Chairman facilitates the relationship between the Board, president & CEo and management, engaging them in constructive discussions over various matters, including strategic issues and business planning processes.

During the year, the nC conducted an informal assessment of the directors’ performance by taking into account their collective and individual contributions to the Board and Board committees they



were appointed to. The Committee was fully satisfied with the performance of the Board.

The president & CEo is accountable to the Board for the conduct and performance of the Group. The president & CEo is supported in his work by the Deputy CEo, Mr Seah Moon Ming and the CFo, Ms Eleana Tan Ai Ching in the Executive office.

board Membership and Evaluation of Performance (Principles 4 and 5)The nC is responsible for reviewing the composition of the Board and identifying and selecting suitable candidates to the Board. The Committee also reviews the retirement and re-election of directors.

The nC comprises three non-executive directors. Mr Venkatachalam Krishnakumar is the Chairman of the nC. The other members are Mr peter Seah and Dr Stanley lai. Both Mr Krishnakumar and Dr lai are independent non-executive directors.

The nC is charged with the responsibility of ensuring that the Company’s Board and its subsidiaries comprise individuals who are able to discharge their responsibilities as directors. The nC identifies suitable candidates for appointment to the boards of the Group, in particular, candidates who can value add to the management through contribution of their skills, knowledge and experience.

The nC reviewed and affirmed the independence of the Company’s independent directors and the composition of the Board and the profile of Board members in relation to the needs

of the ST Engineering Board. During the year, the nC recommended to the Board the appointment of Mr Khoo Boon Hui as non-executive independent Director. Mr Khoo was appointed Director on 1 September 2010.

The nC is also responsible for renewal and succession to ensure Board continuity. At each AGM, one third of the directors with the longest term in office since his last re-election is required to retire. A retiring director may submit himself for re-election. under this provision, Mr Quek poh Huat, Mr Quek Tong Boon, Mr Davinder Singh and Mr Winston Tan Tien Hin will retire. Mr Khoo Boon Hui, who is newly appointed, will hold office until the forthcoming AGM of the Company. The retiring directors, being eligible, have offered themselves for re-election, save for Mr Winston Tan who has decided not to offer himself for re-election.

The nC recommends that each of the retiring Directors, save for Mr Winston Tan, be re-elected at the Company’s forthcoming AGM.

Supporting the Board are the following Board Committees:

• AuditCommittee• BusinessInvestmentand

Divestment Committee• ExecutiveResourceand

Compensation Committee• NominatingCommittee• BudgetandFinanceCommittee• Research,Developmentand

Technology Committee• SeniorHumanResourceCommittee• RiskReviewCommittee• TendersCommittee


The composition of the Board committees as at 31 December 2010 is tabulated below:

Board Member

Mr peter SEAH lim Huat C C M C

Mr TAn pheng Hock M M M M M

Mr KoH Beng Seng C

lG nEo Kian Hong M M M

Dr TAn Kim Siew M M

Mr QuEK Tong Boon C

Mr Winston TAn Tien Hin M M C

Mr QuEK poh Huat M M

Mr Venkatachalam KRISHnAKuMAR M M C M

Mr Davinder SInGH C M

Dr Stanley lAI Tze Chang M M M

Mr KHoo Boon Hui M

Col onG Ann Kiat+R

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DEnoTES:

C – ChairmanM – Member+ Alternate director to lG nEo Kian Hong

Access to information (Principle 6)The management furnishes Board members with monthly management reports, providing updates on key operational activities and financial analysis. The Board also has unrestricted access to the president & CEo, the CFo, management and the Company Secretary as well as the internal

and external auditors and the risk management team. The Board may also seek independent professional advice if necessary.

As a general rule, board papers are sent to directors at least three days prior to meetings in order for directors to be adequately prepared for the meetings.



REMuNERATiON MATTERS

Procedures for Developing Remuneration Policies (Principle 7)Level and Mix of Remuneration (Principle 8)Disclosure on Remuneration (Principle 9)The Executive Resource and Compensation Committee (ERCC) performs the role of the remuneration committee. The Committee comprises Mr peter Seah as Chairman, Mr Venkatachalam Krishnakumar and Dr Stanley lai. The majority of the members of the ERCC have held senior positions in large organisations and are experienced in the area of executive remuneration policies and trends.

All the ERCC members are non-executive directors. Apart from Mr peter Seah, the other members of the ERCC are independent directors.

All decisions at any meeting of the ERCC shall be decided by a majority of votes of the ERCC members present and voting (the decision of the ERCC shall at all times exclude the vote, approval or recommendation of any member who has a conflict of interest in the subject matter under consideration).

The ERCC’s role is to assist the Board to carry out the following key duties and responsibilities:

• Reviewandestablishexecutiveremuneration policy

• Approvetheremunerationpackageand service terms for senior executives

• Settargetsforseniorexecutivesandapprove equity-based incentive share awards

• Approvenon-executivedirectorremuneration structure

The ERCC met three times in 2010. Its key activities were centred on the assessment and development of the senior management team, target setting, and the determination of their compensation and incentive awards. In determining the overall remuneration package, the ERCC assesses executives’ contributions to the Group relative to preset targets, the performance of the Group, and the compensation and employment conditions of various industries, including global remuneration benchmarking.

The ERCC reviewed and decided on conditional performance share awards under ST Engineering’s performance Share plan and Restricted Share plan (collectively the “2000 Share plans”) as well as Economic Value Added-based incentives for senior executives. The ERCC also made a determination of the achievement factors for the final award of shares to participants under the 2000 Share plans.

At our Extraordinary General Meeting (EGM) held in April 2010, the shareholders approved the adoption of a new performance Share plan and Restricted Share plan (2010 Share plans). upon the adoption of the 2010 Share plans, the 2000 Share plans were terminated without prejudice to the rights of holders of outstanding options and awards. The 2010 Share plans carry

the same terms as the 2000 Share plans except that the maximum size of the shares to be awarded has been reduced to 8% over the 10-year life of the 2010 Share plans (compared to 15% for the 2000 Share plans).

The Board has delegated authority to the ERCC to determine the remuneration of the president & CEo and the senior management. The remuneration package for non-executive directors is reviewed by the Board annually and the fees to be paid to Board members are subject to approval at the AGM. The Directors’ Fee policy is tabulated in the following page.

The Group has tabulated a summary compensation table for key executives for the year ended 31 December 2010. This table is found on page 31.

The Senior Human Resource Committee, chaired by Mr peter Seah, comprises lG neo Kian Hong, Dr Tan Kim Siew and Mr Tan pheng Hock. The Committee reviewed the talent management and leadership development initiatives to build a leadership pipeline for the Group. By supporting and directing the Group’s talent management and leadership initiatives, the Committee has helped to enhance the process of identification and development of talents to be groomed for senior positions. The Committee has also reviewed the succession plans for key management positions in the Group.

DiRECTORS’ FEE POLiCyThe Directors’ fees payable in respect of financial year 2010 amount to $833,540 (financial year 2009 : $847,158) and are based on the following rates:


Basic RetainerFrom private Sector

$From public Sector^

$

Director 50,000 7,500

Additional/Committee Fees From private Sector From public Sector

Board Chairman 50,000 30,000

Board Deputy Chairman / Audit Committee Chairman / Executive Committee Chairman

35,000 22,500

other Committee Chairman / Audit Committee Member / Executive Committee Member

20,000 15,000

other Committee Member 10,000 7,500

Attendance Fees

per Board Meeting 2,000 –

per Board Committee Meeting 1,000 –

^ Fees to directors from the public sector follow the Directorship & Consultancy Appointments Council (DCAC)’s guidelines.

ACCOuNTAbiLiTy AND AuDiT

Accountability (Principle 10)The Board is responsible for providing a balanced assessment of the Company’s performance, position and prospects. In presenting the annual financial statements and quarterly results announcements to shareholders promptly, it is the aim of the Board to provide the shareholders with a detailed analysis, explanation and assessment of the Group’s performance, position and prospects.

Following SGX’s introduction in September 2006 of a new requirement for directors to issue a negative Assurance Statement to accompany its interim financial results announcement,

certain internal procedures have been put in place to enable each member of the Board reviewing the interim financial statements to immediately raise any material information known to him which may render the interim financial results to be false or misleading prior to their release to SGX. Should there be any significant adverse issue(s) raised by the Audit Committee (AC) or Board member which may affect the results in a material way, the scheduled date of the results announcement will be postponed to allow time for investigation or further review.

The appointment of auditors is subject to approval at each AGM. In making its recommendations to shareholders on the appointment and re-appointment of auditors,

the Board relies on the review and recommendations of the AC.

Directors and key senior executives of the Group are prohibited from dealing in ST Engineering shares two weeks before the announcement of ST Engineering’s first quarter, second quarter, third quarter and full year results up to the date of the announcement of the results. Additionally, all directors of the Group and employees are reminded not to trade in situations where the insider trading laws and rules would prohibit trading.

The directors’ interests in shares of ST Engineering and its related companies during the year are found on pages 91 to 104 of this Report.

DiRECTORS’ FEE POLiCy



SuMMARy COMPENSATiON TAbLE FOR DiRECTORS FOR ThE yEAR ENDED 31 DECEMbER 2010 (GROuP):

*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2010.*2 Variable includes AWS, Performance Target Bonus paid & EVA earned* for the financial year ended 31 December 2010.

* The EVA earned for the year is added to the balance brought forward in each of the executive’s EVA Bank. 1∕3 of the total is paid out, with the balance 2∕3 carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have had individual EVA Bank since the late 1990s.

*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc.*4 Based on the fair values of PSP and RSP Contingent shares granted in 2010, using the Monte Carlo simulation model. Contingent shares granted are subject to key

performance indicators (KPIs) being met over the performance period. The performance period for PSP is 2010-2012 and for RSP, it is 2010-2011 for TAN Pheng Hock and FY2010 for the directors. The final number of shares awarded to TAN Pheng Hock will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP.

*5 Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to the income statement.(a) Fees payable to TAN Pheng Hock of $171,750 includes fees for directorships in subsidiaries and are payable to Singapore Technologies Engineering Ltd.(b) Fees for public sector directors are payable to a government agency, the DCAC.(c) Includes fees for directorship in subsidiary(ies).(d) Pro-rated. LG NEO Kian Hong was appointed Director on 31 March 2010.(e) Pro-rated. LG Desmond KUEK Bak Chye resigned as Director on 31 March 2010.(f) Pro-rated. KHOO Boon Hui was appointed Director on 1 September 2010.(g) COL ONG Ann Kiat was appointed Alternate Director to LG NEO Kian Hong on 31 March 2010.(h) COL CHIA Choon Hoong resigned as Alternate Director to LG Desmond KUEK Bak Chye on 31 March 2010.

Name of Director

Peter SEAH Lim Huat – – – 185,000 75,504 260,504 33,820

TAN Pheng Hock 1,045,564 4,200,933 164,709 (a) 742,790 6,153,996 258,000

KOH Beng Seng – – – 97,000 38,067 135,067 40,975

LG NEO Kian Hong – – – 15,040 (b) (c) (d) – 15,040 –

LG Desmond KUEK Bak Chye – – – 3,750 (b) (e) – 3,750 –

Dr TAN Kim Siew – – – 15,000 (b) – 15,000 –

QUEK Tong Boon – – – 23,000 (c) – 23,000 –

Winston TAN Tien Hin – – – 147,000 (c) 53,797 200,797 53,280

QUEK Poh Huat – – – 133,000 (c) 44,988 177,988 49,500

Venkatachalam KRISHNAKUMAR – – – 127,000 48,763 175,763 –

Davinder SINGH s/o Amar Singh – – – 88,000 35,550 123,550 –

Dr Stanley LAI Tze Chang – – – 137,000 (c) 52,538 189,538 –

KHOO Boon Hui – – – 20,000 (b)(c)(f) – 20,000 –

COL ONG Ann Kiat (Alternate to LG NEO Kian Hong) – – – – (g) – – –

COL CHIA Choon Hoong (Alternate to LG Desmond KUEK Bak Chye) – – – – (h) – – –

1,045,564 4,200,933 164,709 990,790 1,091,997 7,493,993 435,575

Salary *1

$Variable *2

$Benefits *3

$Total

$Directors’ fees

$

Share-based Compensation *4

$

Taxable Income from exercise

of share options in 2010 *5

$

number of Directors in Remuneration Bands 2010 2009

Remuneration Band

$500,000 and above 1 1

$250,000 to $499,999 1 –

Below $250,000 11 11

Total 13 12

The following information relates to remuneration of directors of Singapore Technologies Engineering ltd:


SuMMARy COMPENSATiON TAbLE FOR KEy EXECuTivES FOR ThE yEAR ENDED 31 DECEMbER 2010 (GROuP):

*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2010.*2 Variable includes AWS, Performance Target Bonus paid & EVA earned* for the financial year ended 31 December 2010.

* The EVA earned for the year is added to the balance carried forward in each of the executive’s EVA Bank. 1∕3 of the total is paid out, with the balance 2∕3 carried forward to the next year. A negative EVA earned will result in a claw back of EVA earned in previous years. Key executives in the Group have had individual EVA Bank since the late 1990s.

*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, car, transport, etc.*4 Based on the fair values of PSP and RSP Contingent shares granted in 2010, using the Monte Carlo simulation model. Contingent shares granted are subject to key

performance indicators (KPIs) being met over the performance period of 2010 – 2012 for PSP and 2010 – 2011for RSP. The final number of shares awarded will depend on the extent the KPIs are achieved at the end of the respective performance periods and can range from 0% to 170% of the contingent grants for PSP and 0% to 150% of the contingent grants for RSP.

*5 Taxable income from exercise of share options are gains on exercise of the Company’s share options during the year. The amount has not been charged to the income statement.

Fee $

Between $4,000,000 and $4,250,000

Seah Moon Ming 18% 67% 3% 12% 100% 76,125

Between $3,500,000 and $3,750,000

Sew Chee Jhuen 12% 77% 3% 8% 100% –

Between $3,000,000 and $3,250,000

Lee Fook Sun 13% 75% 3% 9% 100% 34,800

Between $2,500,000 and $2,750,000

Chang Cheow Teck 21% 65% 3% 11% 100% 167,250

Between $1,500,000 and $1,750,000

Ng Sing Chan 19% 67% 6% 8% 100% –

Salary *1

%Variable *2

%Benefits *3

%Total

%

Share-based Compensation *4

%

Taxable Income from exercise

of share options in 2010 *5

%



Audit Committee(Principle 11)The AC is supported in its work by the audit committees of the four business sectors. The respective chairmen of the audit committees of the four business sectors are invited to attend the AC meetings of ST Engineering so as to have a clear understanding of policies made at the holding company level and to share any feedback or raise any issue that the sectors’ audit committees may have.

The AC has full authority to commission and review findings of internal investigations into matters where it is alerted of any suspected fraud or irregularity or failure of internal controls or infringement of any law likely to have a material impact on the Group’s operating results. It can investigate any matter within its terms of reference and with the full cooperation of management.

The Company has put in place a Whistle-Blowing framework, endorsed by the Board, where staff may, in confidence and without fear of retaliation, raise concerns of incidents of possible wrongdoing or breach of applicable laws, regulations or policies to the respective chairmen of the audit committees in the Group. As ST Engineering has become a global company with a presence in many countries, it is aware of the need to apply international corporate governance standards wherever it operates. It takes a serious view of all reports of violations received by initiating thorough investigations into each matter.

The AC comprises Mr Koh Beng Seng as Chairman, Mr Venkatachalam Krishnakumar and Dr Stanley lai. All the members of the AC are independent directors.

The AC held four meetings during the year. In the meeting in February 2010, AC had private sessions with the

external and internal auditors, without management, before commencement of the meeting. During the year, the AC reviewed and recommended to the Board the release of the 2009 full year, 1Q2010, 2Q2010 and 3Q2010 financial statements, and considered and approved the 2010 Audit plan and the 2010 Internal Audit (IA) plan. In addition, the AC reviewed the transitional activities between the management and the auditors, taking into account that FY2010 was the first year of audit performed by KpMG llp since its appointment in May 2010. It also reviewed the adequacy of internal control procedures including IT security issues, Interested person transactions and the issues raised in IA reports.

The AC reviewed the level of non audit services performed by its external auditors to satisfy itself that non audit services performed by the auditors did not compromise their independence under regulatory requirements.

internal Control (Principle 12)internal Audit (Principle 13)The AC oversees and appraises the quality of the Company’s IA function.

The Board is ultimately responsible for ensuring that a sound system of internal controls is in place. The Board, through the AC, the president & CEo and the CFo, considers that the Group’s framework of internal controls and procedures is adequate to provide reasonable assurance of the integrity, confidentiality and availability of critical information, and the effectiveness and efficiency of operations, safeguarding of assets and compliance with applicable rules and regulations. It is also satisfied that problems are identified on a timely basis and there is in place a process for best practices and follow up actions to be taken promptly to minimise unnecessary lapses and for the identification and containment of business risks.

The IA supports the AC in reviewing the adequacy of the Company’s internal control system. Staffed by qualified auditors, IA has unrestricted direct access to the AC. The Head of IA’s primary line of reporting is to the Chairman of the AC, although she reports administratively to the president & CEo of the Company.

IA plans its internal audit schedules in consultation with, but independently of, management. The IA plan is submitted to the AC for approval at the beginning of each year. The AC also meets with IA at least once a year without the presence of management to gather feedback on management’s level of cooperation and other matters that warrant AC’s attention. All audit reports are submitted to the AC for deliberation with copies of these reports extended to the relevant senior management, for prompt corrective actions, as recommended. Furthermore, IA’s summary of findings, recommendations and updates on management’s actions taken are discussed at the quarterly AC meetings.

During the year, IA worked with Management to align newly acquired companies to the Group’s internal control environment and compliance standards in order to strengthen the self-regulating checks and balances. IA also made periodic visits to overseas subsidiaries to review their operations to ensure compliance with the internal controls framework. Two external accounting firms were engaged to assist IA. In accordance with its plan, surprise audits were conducted in the course of the year on select areas including treasury activities and reviewing of dormant bank accounts against bank mandates, bank statements, balances, etc. There were no material issues highlighted following the surprise audits.

To reinforce its internal control framework, IA oversaw the implementation and roll out of a


structured Control Self Assessment Workplan of risks and controls with professional support from an external accounting firm.

There were no significant control issues highlighted by IA in 2010.

The IA continued with its system of rating a company at the end of an internal audit for the purpose of differentiating the high risk issues which require immediate attention.

Risk Review CommitteeThe Risk Review Committee, chaired by Mr Winston Tan, comprises lG neo Kian Hong, Mr Davinder Singh, Mr Venkatachalam Krishnakumar, Mr Khoo Boon Hui and Mr Tan pheng Hock.

The Committee maintains oversight of the Enterprise Risk Management Framework.

The Committee met four times during the year to review key business risks, sector level trends, major events and emerging issues and worked with the management to ensure that the Group had adequately prioritised and addressed risk management issues within the Group.

The Company has in place a Fraud Risk Management policy to provide guidance to employees on managing the risk of fraud.

budget and Finance CommitteeChaired by Mr Davinder Singh, the Budget and Finance Committee members include Mr Quek poh Huat, Dr Tan Kim Siew and Mr Tan pheng Hock.

Budgets prepared by the respective subsidiaries are consolidated at the ST Engineering level and presented to the Budget and Finance Committee for review and recommendation to the Board for approval.

During the year, the Budget and Finance Committee held two meetings to review the FY2010 budget assumptions and 5-year forecast. The Committee also met to review the 2011 plan and recommended to the Board for approval.

business investment and Divestment CommitteeThe Business Investment and Divestment Committee comprises Mr peter Seah as Chairman, lG neo Kian Hong, Mr Winston Tan, Mr Quek poh Huat and Mr Tan pheng Hock.

During the year, the Business Investment and Divestment Committee held two meetings to consider a divestment by the Group as well as growth plans.

COMMuNiCATiON wiTh ShAREhOLDERS

(Principles 14 and 15)The Company enters into regular and timely communication with shareholders as part of the Group’s effort to help shareholders better understand its businesses and to obtain feedback on the views and concerns of shareholders.

The Group has a comprehensive investor relations programme aimed at providing existing and potential investors with comprehensive and prompt information, to enable them to have a better understanding of the Group’s businesses, direction and performance.

ST Engineering maintains a regularly updated website which provides the latest announcements to SGX, news releases and highlights of corporate events of each sector and its capabilities.

In 2010, ST Engineering’s investor relations team held close to 300 face-to-face investor meetings and

conference calls, and participated in investor conferences in Singapore and Hong Kong, and road shows in uS, Canada, Japan and Hong Kong.

ST Engineering is committed to timely disclosures to ensure that the investing community receives a balanced and updated view of the Group’s performance and businesses.

Board members attended the AGM and EGM in 2010 where shareholders present were given an opportunity to seek clarification or question the Board on issues pertaining to the resolutions proposed before they were voted on. The external auditors were also present at the AGM to assist the directors in answering questions on audit related matters from shareholders. The Group fully supports the Code’s principle to encourage active shareholder participation. For transparency in the voting process, ST Engineering introduced electronic poll voting for all the resolutions passed at the AGM and EGM in 2010. All votes cast for, or against, each resolution were tallied and displayed live onscreen to shareholders immediately after each resolution was put to the vote. This is a fair and transparent way of voting compared to voting by show of hands as it enables shareholders to vote on the principle of one share one vote. ST Engineering was commended by Asian Corporate Governance Association for voluntarily adopting voting by poll at its AGM in 2010. ST Engineering will continue to use electronic poll voting at the forthcoming AGM. More on investor relations can be found on pages 50 to 51.

Financial and other information are made available on the Company’s website at www.stengg.com and these are regularly updated.


“to influence or impel”

We are committed to

our responsibilities as a

global corporate citizen.

Through caring for people,

communities and the

environment, we are

contributing to a sustainable

future for all.

nspire

Innovation has always been

ST Engineering’s catalyst for

growth.

Growing Innovation

ST Engineering continually improves existing processes to enhance its value-adding capabilities and achieve its strategic objectives. The entire Group is committed to promoting a culture of innovation and harnessing technology to generate solutions and services that delight customers.

Creative ideas are acquired from both external and internal sources. External sources include interaction with customers and suppliers, market studies, competitive intelligence and monitoring of regulatory changes. These may influence the direction and focus of the Group’s innovations. Through R&D and the academia, ST Engineering enhances

and upgrades its range and depth of product offerings. one such collaboration is a joint venture between ST Kinetics and DSo national laboratories to set up the Advanced Technology Research Centre (ATREC) in 2006. Besides its role in advanced material R&D, ATREC will also help the Group to forge collaborative ties with local and foreign research organisations.

Reflecting the changing needs of our customers, and to stay ahead of technological developments, the Group actively seeks out complementary technologies in areas such as biometrics, robotics, artificial intelligence, explosive detection and green solutions.

ST Aerospace’s Skyblade IV, an example of uAVs.


DRiviNG iNNOvATiON

The way innovation is driven within the Group reflects the strategic importance of innovation to business excellence. The Group’s innovation efforts are steered by the Technology, Ip and Innovation Committee, one of six component committees of the Group’s Business Excellence Council. Chaired by the Group’s Chief Technology officer, the committee ensures that the Group stays at the forefront of technology and maintains a competitive edge in its strategic capabilities.

The committee’s objectives include promoting and managing innovative and creative efforts in ST Engineering, identifying emerging technological trends and analysing their impact on the sustainable growth of the Group, and recommending new business growth areas for ST Engineering. To date, this has led to the development of products such as uAVs, the Venus uSV and the unmanned Ground Surveillance Vehicle.

PROMOTiNG iNNOvATiON wiThiN

The Group also taps internal sources of ideas by promoting an innovation culture, creating an encouraging environment and establishing infrastructure to support innovation efforts. These provide channels for staff to utilise resources, share ideas, render support and receive due recognition.

An important part of these efforts is the ST Engineering Innovation Competition, which recognises and rewards outstanding employees for their innovations. The quality and significance of these innovations has been recognised externally. For instance, competition entries ‘Terrex Infantry Carrier Vehicle’ and ‘Trailblazer Countermine Vehicle’ were awarded the

Creative thinking games at Innovation Workshop ThinkOut 2010.

Defence Technology prize Team Award (Engineering) by Singapore’s Ministry of Defence in 2010 and 2009 respectively.

The ST Engineering Innovation Competition recognises newly developed products or services that have been well received by our customers. Complementing this is the ST Engineering Idea Competition, which encourages innovative idea generation. past winners of the Idea Competition include Singapore’s first commercial diesel-electric hybrid bus and the world’s first hybrid hydraulic drive enhanced port prime mover. Ideas may not be confined to products and services. For example, ST Aerospace Guangzhou Aero-Technologies & Engineering Co ltd was formed as a result of a winning idea. It now provides aviation logistics for aircraft components, and handles import, export, warehousing, logistics and other related activities for the Aerospace sector in China.

In 2010, ST Engineering launched a group-wide innovation workshop, ThinkOut 2010. The workshop aims to provide a networking platform for cross-breeding of ideas within ST Engineering and to promote innovative thinking. It comprises ten teams represented by members from the Aerospace, Electronics, land Systems and Marine sectors, ST Dynamics and ST Synthesis. The various business units also conduct regular activities to inculcate an innovative culture within the organisation. Examples of such activities are workshops, training and competitions to complement activities at the Group level.


Productivity

PuShiNG FOR PRODuCTiviTy

ST Engineering’s productivity push is driven by the need to do things right the first time, and to do them better. It is designed to strengthen revenue growth, support earnings momentum and improve customer experience.

A cost competitive approach enables ST Engineering to streamline processes and eliminate activities that do not add value. Greater integration across the supply chain helps to cut costs, reduce cycle time and increase speed to market. In 2010, the Group achieved on average over 98% for turnaround time compliance and customer satisfaction.

productivity initiatives are steered by senior management through the Business Excellence Council and committees specific to the various business sectors. Senior management sets the directions, identifies focus areas, engages employees, establishes key performance indicators and reviews performance. The business sectors identify key productivity levers to focus on, while managers drive programmes and projects, engage employees directly, and report on progress. In 2010, the Group incorporated the Integrated Management of productivity Activities framework developed by SpRInG. This will sustain the Group’s productivity gains by further strengthening its people engagement framework, systems and processes.

PRODuCTiviTy iMPROvEMENT AS A wAy OF LiFE

ST Engineering encourages all employees to be involved in productivity improvement and creative innovations. Improvement targets are built into business, team and individual objectives as part of the planning process. Equipped with tools such as IQC, EVA, Kaizen, Six Sigma and TRIZ, more than 75% of employees participated in productivity initiatives in 2010, resulting in cost savings and value creation of more than $50m.

The Group leverages its people engagement framework built on four key strategies: leadership Involvement,

AEROSPACE – ENhANCED iNSTALLATiON FiXTuRE

under a contract with FedEx Express, ST Aerospace has been performing passenger-to-freighter (pTF) conversions for 87 Boeing 757-200 aircraft. As part of the modification, new Gilliners (wall panels) are required to be installed on the aircraft cabin sidewalls and ceilings to meet uS Federal Aviation Administration regulations. This installation requires more than 500 new brackets

to be installed on the existing 130 cabin frames. A typical installation requires a three-man crew to work over 19 days.

A team of aircraft technicians and engineers embarked on a project to improve the Gilliners installation process. The team studied the installation process and identified several non value adding tasks when using the existing original Equipment Manufacturer (oEM) installation fixture.

The team eventually designed an enhanced installation fixture, which is lightweight and can be operated by one man instead of two. The new fixture eliminates the need for the cabin floor boards to be removed for access, allowing work to be carried out two weeks ahead of the original schedule. The essential reference points and data of the aircraft are incorporated onto the fixture, allowing the technician to perform the markings and locations of the brackets on the frame-side. This shortens the marking-out process significantly. In addition, the new fixture is less bulky and thus creates more work space for other tradesmen. This allows multiple works to be carried out concurrently.

As a result, ST Aerospace has improved the installation lead time by 30% and halved the required maintenance manhours.

An aircraft undergoing pTF conversion.

Communication and Facilitation, learning and Development, and Rewards and Recognition. Business sectors recognise team and individual contributions through events such as best practice sharing sessions, Glow Awards and Top Kaizen Awards. At the annual Business Excellence Seminar, the Group also provides recognition through the ST Engineering Innovation Awards, the ST Engineering Idea Awards and the ST Engineering Team Excellence Awards.

In addition, the Group works with the trade unions and union representatives to encourage more productive work practices and a more engaged workforce.

Productivity improvement

is a continuous effort at

all levels.


ELECTRONiCS – bARRiER FLAP MEChANiSM

As a leading provider of Intelligent Transportation Systems internationally, ST Electronics’ emphasis on research and development ensures that it continues to meet customers’ needs. To this end, a project team was formed to look into improving the design of the Barrier Flap Mechanism (BFM), a key component of the Automatic Fare Collection (AFC) gate used in rail systems. The result was an innovative, in-house BFM design that is more cost competitive, yet boasts more advanced features and functionalities than many other existing products in the market today.

By applying comprehensive design tools, the team accelerated and simplified the concept-to-manufacturing process, shortened delivery time and reduced the cost of design. To ensure the effectiveness of the design for manufacturing of the BFM, ST Electronics adopted a structured project

management process. This reduced the overall cost of the AFC gate considerably and improved delivery time by about three months.

Factory acceptance testing of Automatic Fare Collection gate.

LAND SySTEMS – TERREX iNFANTRy CARRiER vEhiCLE (iCv) wELDiNG PROCESS

The Terrex is one of ST Kinetics’ notable military solutions. During prototyping, data indicated that welding activities constituted 42% of the Terrex’s overall manufacturing time. A productivity improvement programme was therefore initiated before embarking on full scale production.

Engineers, technicians and workers formed teams to systematically review the entire welding process. Many improvements were adopted, including re-orientating the vehicle to increase accessibility for welding, designing new fixtures to enhance welding positions, and simplifying set-up time for extensive robotic welding. This resulted in an overall 26% savings on welding time. The improvement in welding positions and extensive use of robotic welding also produced better and

more consistent weld quality, to the delight of customers. These initiatives also provided a safer working environment for the welders. The reduction in welding time significantly improved the overall cycle time for the Terrex.

Terrex.

MARiNE – KAiZEN iNiTiATivES

ST Marine uses Kaizen as one of the main initiatives to improve productivity throughout the company. For example, a Kaizen team developed an innovative device capable of installing all types of windows on passenger liners. This project achieved a 36% productivity increase over the standard manual installation method, and won the Gold Award at the 13th Convention for Workplace Safety and Health Innovations in the Marine Industry in 2010.

Seeking to reduce manhours and cost in the grit blasting process that is essential to shipbuilding, another Kaizen team introduced and integrated an additional filter in the process. This allows better segregation of the grits, which enables good grits to be recycled up to three times, thereby reducing wastage and the cost of grit replacement.

The Kaizen methodology also facilitated the adoption of a one-man-operation in the hull fitting installation process. This is the result of an innovative new jig which improves the alignment of bulb plates, increasing the overall efficiency of the shipbuilding process and reducing the risk of hand injuries. The Kaizen team achieved the STAR award during the ST Engineering Team Excellence Convention 2010.

The team that improved the grit blasting process.


ST Engineering is able to

sustain its competitive

advantage because the

organisation manages its

most important asset well.

People Excellence

ThE MOST iMPORTANT ASSET

A robust Human Resource (HR) Framework ensures that the necessary people, skills and talents are available to achieve the Group’s strategic objectives and thrusts. underpinning the HR Framework are the Group’s five core values – Integrity, Value Creation, Courage, Commitment and Compassion. To help employees understand and practise the values, behavioural indicators are identified for each core value.

The people Excellence and learning organisation (pElo) is one component of the Group’s Business Excellence Framework. The pElo Committee explores areas that the Group can work on to enhance existing policies to bring about HR excellence.

As part of its efforts to reinforce a positive organisational culture, ST Engineering signed the Employer’s pledge of Fair Employment practices in 2008.

ATTRACTiNG ThE RiGhT PEOPLE

The Group aims to attract the right talents to support its global growth. It constantly reviews and enhances the Employee Value proposition, taking into account the diverse needs of employees, as well as the aspirations of younger candidates.

In a 2010 survey of local graduates by GTI Media, ST Engineering was ranked the second most preferred employer in Singapore and the most preferred under the Engineering Services category.

As part of the plan to identify and develop talent early, the Group awards various types of scholarships to outstanding students, for studies at both local and overseas universities. To support regional expansion, scholarships are also offered to students at top universities in China and India.

Internships are available to polytechnic and university students, allowing them to get to know the Group and consider a career with it. About 600 students completed internships with ST Engineering in 2010.

DEvELOPiNG TALENTS

Talent management and development ensures that the Group has the right talent at the right place and at the right time.

In 2010, the Group invested a total of $15.4m in learning and development. programmes such as the leadership Foundation Course, leadership Excellence Course and Senior leadership programme are examples of courses organised to help employees enhance their leadership competencies and effectiveness. Besides courses and programmes that improve employees’ functional and technical skills, the Group also offers undergraduate and postgraduate scholarships to employees who demonstrate leadership qualities.

Because continued effective leadership is essential to sustainable growth, ST Engineering emphasises succession planning and developing leaders at all levels. Development plans are drawn up for identified successors and select

employees are given opportunities to attend executive education programmes at renowned universities such as Harvard, Stanford and InSEAD.

As ST Engineering expands its global footprint, overseas assignments and postings have become a way to groom managers who can operate in diverse cultural environments.

The Group provides employees with various opportunities for career progression. As an engineering company, employees may move up the general management track, or along the engineering specialist path. The two distinct career tracks provide room for career growth for employees with different aspirations. Employees who are versatile can move between tracks to gain exposure.

Select employees are rotated across departments or business units to broaden their exposure. An open resourcing policy also facilitates movement across the different business units, allowing employees more options to meet their aspirations.

PROMOTiNG TOTAL wELLNESS

ST Electronics’ employees at an in-house exercise class.

Besides providing employees with fair rewards and opportunities for career development, ST Engineering helps them to achieve work-life balance.


Guided by the philosophy that a healthy worker is a happy and productive worker, the Group has established the following Work-life Harmony objectives:

• Tocreateaworkenvironmentthatissupportive and flexible

• Toaligntheobjectivesofbothorganisation and employees

• Tobuildaharmoniousworkforce• Toimproveemployeesatisfaction,

engagement and retention• Toreducecostsrelatedtoturnover

and absenteeism.

There are also dedicated committees to look into the wellness and recreation of the staff. The committees plan and organise a comprehensive Workplace Health promotion (WHp) programme incorporating work-life balance, healthy lifestyle, sports and recreational activities. These include annual health screenings and health talks, mass activities such as cross-country runs, walk-and-jogs and karaoke, and inter-business unit sports competitions. The work environment is also important, and chill-out rooms and community gardens provide respite during breaks, and ‘nursing rooms’ provide privacy for female employees returning from maternity leave.

For their commitment to employees’ well-being, the Group’s business units have been awarded the platinum Award by Singapore’s Health promotion Board. This is given to organisations that have achieved at least two consecutive Gold Awards and have demonstrated tangible benefits from their WHp programme. ST Electronics won this in 2008 which is good for four years, followed by ST Kinetics, ST Marine and ST Aerospace in 2010.

COMMuNiCATiON AND ENGAGEMENT

ST Engineering uses a wide range of communication channels to convey its vision, mission and values, as well as to share business objectives and decisions.

The 24/7 one-stop Employee Information portal (EIp) is the primary platform for staff communication. This is complemented by the Group and sector newsletters. The sector presidents also host quarterly dialogue tea sessions where employees are encouraged to share their ideas and opinions. In addition, each sector organises twice-yearly president’s Forums and Management Briefings to disseminate information on performance, directions and plans.

on a more operational level, morning briefings and toolbox meetings allow management to address day-to-day issues that impact work, while Safety and Quality Briefings highlight important safety issues and lessons.

Senior managers also chair informal focus groups and discussions to engage and consult employees. other notable feedback channels include the biennial Employee opinion Survey and the e-Staff Suggestion Scheme. In 2009, ST Kinetics piloted an e-forum to gain feedback and ideas on topics that are close to employees’ hearts. For example, suggestions for features of the new canteen and improvements to the work environment were solicited and taken into consideration in the redevelopment of the work premises.

hARMONiOuS uNiON RELATiONS

ST Engineering has established various channels to facilitate effective communication between management and union and forge a strong partnership built on mutual respect and trust. Across the Group, union representatives sit on various committees, resulting in positive engagement and constructive inputs that help improve policies, processes and staff well-being. Staff branch union meetings are another means to discuss, clarify and resolve issues, and seek buy-in on new initiatives.

The Group worked collaboratively with the union to facilitate the re-employment of older employees, implementing processes and systems ahead of the tripartite guidelines announced in 2010. These joint efforts enabled ST Engineering to secure funding under the Singapore Workforce Development Agency’s ADVAnTAGE! scheme.

The excellent relations between the unions and management have earned the Group several awards from the national Trades union Congress.

ST Kinetics’ management briefing session sees active participation from the employees.


People Excellence

HUMAN RESOURCE STATISTICS AS AT 31 DECEMBER 2010

Sector Geography

others (including ST Synthesis and ST Dynamics)

Marine

AerospaceAsia pacific (excluding Singapore)

Europeothers

Electronics

land Systems Singapore

3%

9%

Americas20%

34%14%

3%<1%

23%

31% 63%

Total (22,011) 100% Total (22,011) 100%

Educational Qualification Nationality

Trade Certificates

Secondary level & lower

Degree & equivalent

Diploma & equivalent

“o”/ “A” levels & equivalent

21%

7%

American 16%

31%

Singaporean/pR 58%

22%

19%

pRC/Hong Kong 15%

Malaysian 1%

others6%

Danish2%

Indian1%

Swedish 1%

Total (22,011) 100% Total (22,011) 100%


Community Relations

CARiNG FOR ThE COMMuNiTy

The people of ST Engineering continue to take the lead in serving the community, generously contributing their resources to various worthy causes. During the year, they donated significant funds to charities, including a total contribution of over $400,000 to the president’s Challenge. ST Aerospace, ST Electronics and ST Marine joined the “1000 Enterprises for Children-In-need” in 2010, a fundraising project where companies pledge donations to the Singapore Children’s Society for the next three years.

Employees from the various business sectors also visited homes for the aged and underprivileged, and organised outings and activities for the residents. These charities supported by the Group include the Chen Su lan Methodist Children’s Home, St. Andrew’s Cathedral Home for the Aged, Spastic Children’s Association, SWAMI home, and Thye Hua Kwan Moral Society.

Aside from these visits and outings, 15 ST Electronics employees participated in Singapore’s largest static cycling event at Downtown East in January 2010, helping to raise funds for the Society for the physically Disabled. In July, another six employees shaved their heads in Hair for Hope, a fundraising event organised by the Children’s Cancer Foundation. In September, 25 volunteers from ST Marine visited SWAMI Home to paint and clean the premises. In october, ST Kinetics organised a seven-day programme in Singapore for students from the Guangzhou English Training Centre for the Handicapped, the adopted charity of its subsidiary STAR Automotive Centre (Guangzhou). The programme culminated in a friendly match between

the students and the Singapore Stars from the Wheelchair Basketball Association (Singapore).

In 2010, the Group’s CSR Committee identified youth work as a focus area, and tied up with Care Corner to support its Youth Rangers leadership programme. The objectives of the programme are to help at-risk youths discover their potential, and to develop their self esteem through positive influences. In the first year alone, a series of activities were organised, including outings, educational talks and visits to ST Engineering’s facilities. These have provided Care Corner’s youth rangers with opportunities to learn from

Friendly match between Guangzhou English Training Centre for the Handicapped and the Wheelchair Basketball Association (Singapore).

ST Engineering believes in

being a caring corporate

citizen and actively supports

community goals.

ST Engineering’s employees through fun and meaningful activities. ST Synthesis has also partnered Assumption pathway School, offering students 250 hours of structured industrial attachment in various skill areas. The Group’s employees have responded warmly to youth work, and the Group will continue to provide support in this area.

ST Marine’s employees and Care Corner’s youths on an outing to Singapore Discovery Centre.


Workplace Safety & Health

The Group adheres strictly to EHS standards, and complies with the Workplace Safety and Health Act and the Singapore Standard Code of Practice. All four business sectors have implemented the Environment Management System certified to ISO 14001:2004. Additionally, ST Aerospace, ST Electronics and ST Kinetics are certified to OHSAS18001, while ST Marine’s Safety Management System is rated to level 8 based on DNV’s ISRS rating system.

ImprovIng Safety acroSS SectorS

ST Engineering recognises the importance of a coordinated approach when it comes to workplace safety. Under its Business Excellence Framework, the Group set up the EHS Committee as one of its six component

ST Engineering takes a

holistic approach towards

workplace safety and health

as well as the environment.

This is articulated in the

Group’s Environment, Health

and Safety (EHS) Statement:

We are committed to protecting the environment and the health and safety of our customers, employees and the communities in which we operate.

We will fulfil this commitment by:

1. Complying, as a minimum, with existing environmental, health and safety laws and legislation in all our operations.

2. Integrating EHS into all our key business activities – design, development, manufacturing, upgrading, engineering services, integration, maintenance, servicing, repairs, overhaul and support of our products and services.

3. Conducting operations in the most efficient manner to reduce environment impact and to ensure that wastage of any form and pollution emissions are cut to the minimum.

4. Promoting environmental, health and safety consciousness and responsibility among our employees and the communities we operate in.

5. Working with suppliers to comply with all environmental, health and safety regulations.

6. Seeking continuous improvement through proactive hazard identification, elimination, control and regular reviews.

7. Setting realistic and achievable EHS targets and monitoring our performance against the targets so as to enable continual improvement.

committees. One of the many initiatives of the EHS Committee is the Cross-Sector (Aerospace, Electronics, Land Systems and Marine) Safety Audit. This was initiated in 2009 to benchmark good practices as well as create awareness of areas for improvement among the sectors. The second cycle of the Cross-Sector Safety Audit was conducted in 2010.

Through the EHS Committee, the various sectors also conducted joint benchmarking projects such as Injury Management and Safety in Spray Painting Operations.

The Group earned several industry accolades for its Workplace Safety and Health (WSH) efforts. VT Hackney, a subsidiary of ST Kinetics, was accorded the prestigious Truck & Trailer

44 Singapore technologies engineering Ltd » ANNUAL REPORT 2010

Manufacturing Association Safety Award 2010 in the US. ST Aerospace received the WSH Innovation award (Manufacturing Category) while ST Marine received the Gold award at the 13th Convention for WSH Innovations in Marine Industry 2010.

System Safety is an important part of ST Engineering’s holistic approach towards safety. To promote this, group-wide activities focusing on System Safety were conducted during the year, including in-house and external training for design engineers, and sharing sessions with key local customers and the System Safety Society (Singapore Chapter). Staff with System Safety responsibilities also attended the 28th International System Safety Conference.

Meanwhile, a common System Safety compliance checklist has been implemented for all major programmes across the sectors. Steps are also being taken to introduce the Safety and System Safety Frameworks to the Group’s overseas entities.

encouragIng HeaLtHy LIvIng

The Group organises various programmes and regular activities to improve occupational health. Among these are medical checks that enable employees to monitor their physical health. These include spinal, audiometric, respiratory and body mass index checks, and comprehensive health screening.

Complementing these are programmes to educate employees on preventive or remedial action. Examples of topics covered are: ergonomics management, hearing conservation, occupational diseases, physical and chemical health hazards, and bio-mechanical health hazards.

In addition to addressing physical well-being, the Group emphasises the importance of a balanced lifestyle. Besides providing a family-friendly work environment and educating employees on mental health, the various sectors organise sporting activities and other programmes that promote a healthy lifestyle. As a result, ST Aerospace, ST Electronics, ST Kinetics and ST Marine have all won the Platinum Health Award from Singapore’s Health Promotion Board.

promotIng Safety awareneSS In tHe communIty

ST Engineering also promotes workplace safety awareness beyond its own workplace.

As a leader in WSH, the Group was invited to share its experiences and practices at the inaugural Singapore WSH Conference 2010. The Group

The winning team from Nanyang Polytechnic for the Safety@Work Creative Awards (Digital Animation Category).

President & CEO delivered a presentation on Strengthening Capabilities: A key enabler for transformation.

In addition, the WSH Council and ST Engineering jointly organise the annual Safety@Work Creative Awards. Into its sixth year, the Awards aim to inculcate in youths an appreciation of workplace safety, and at the same time, showcase and nurture young creative talents. The Awards offer students peer recognition as well as cash prizes. Winners also receive two-month internships at renowned companies such as advertising agency Grey Singapore and media company Infinite Frameworks. The winning posters are printed and distributed to all industrial companies in Singapore for placement on their premises and shopfloors, while winning animation clips are compiled on DVDs and made available as safety training resources through the WSH Council.

45Singapore technologies engineering Ltd » ANNUAL REPORT 2010

The Environment

carIng for tHe envIronment

Internally, ST Engineering does its part to care for the environment. All operating units are already ISO 14001 certified. As part of the ongoing programme to reduce energy consumption, operating units are required to conduct energy audits of their operations. In the last two years, the Group implemented various energy saving devices, such as a range of energy efficient lighting solutions, and upgraded air conditioning systems that have return on investments (ROIs) of three years or less. The energy savings have been significant. For instance, ST Aerospace saves 235,000 kWh per year through the use of motion-sensors and LED lighting.

The various sectors are implementing other energy-efficient practices, adopting approaches and timing best suited to their businesses. ST Aerospace is in the process of reducing the number of printing devices by 27%, installing thimbles and water-flow regulators in washrooms, and engaging recycling vendors to collect recyclable waste.

ST Electronics has in place energy usage reduction targets, and is testing its solar power system, which will harness solar energy to power its lights and air conditioners. To help optimise energy consumption, ST Kinetics and ST Synthesis have installed ”hypermizers”. Meanwhile, ST Kinetics has planted a total of 3,400 trees and shrubs on its premises as part of its green efforts. To improve energy conservation, ST Marine is applying green building concepts to renovations. Since 2007, ST Marine has been using NEWater for ship ballasting, resulting in annual savings of about $88,000.

One new initiative that the Group will implement is the installation of “smart meters” in office buildings and production plants. With more accurate metering and related data monitoring, it will be possible to identify areas where energy efficiency could be improved. The other focus area will be the compressed air supply used to power air tools, which could be made more efficient.

ST Engineering is currently conducting a carbon footprint study and identifiying the risks and opportunities climate change presents. The study is scheduled to be completed by 2011.

ST Engineering and its Aerospace, Electronics, Land Systems and Marine sectors are founding members of the Energy Efficiency National Partnership, a voluntary programme launched by the National Environment Agency (NEA) to promote energy efficiency in industry. Each sector now has an employee designated as “energy manager”, who will be trained and certified by the NEA. The Group plans to set up an Energy Management System in alignment with ISO 50001, a framework for organisations to manage energy which is currently at draft stage, that will help operations to be more energy efficient, thus lowering carbon emissions and energy costs.

In March, the Group participated in Earth Hour Singapore 2010 organised by WWF – World Wide Fund For Nature Singapore, joining individuals and organisations around the world in making a stand on climate change.

engagIng every empLoyee

On a macro level, carbon abatement and energy cost management are being integrated into the Group’s strategic planning and decision planning. The Group’s response to climate change will involve every employee, in keeping with the philosophy that every person has a part to play in carbon management at work and at home.

For the past few years, the Corporate Social Responsibility (CSR) Committee

ST Engineering is committed to conducting business in a

way that demonstrates responsibility and respect for its

people, customers, partners, suppliers, the environment and

the communities it operates in. This is based on the belief

that achieving sustainability entails generating economic

prosperity, ensuring an eco-efficient environment and

eco-effective products, and contributing to the betterment

of society. In short, sustainability is about creating value

ethically through People, Planet and Profit.


organised seminars on the impact of climate change and what can be done to mitigate it. To bring the message of conservation closer to all employees, a CSR Roadshow was held in November 2010. This exhibition of posters and videos ‘travelled’ to the Group’s various facilities, to raise employees’ awareness of environmental challenges and various initiatives that the Group is undertaking.

Following its record-setting tree-planting event in 2008, ST Engineering set another Singapore record for “the largest number of people cleaning the beach at one location”, when 1,652 employees and their families gathered on 13 November 2010 to clean up an 8-km stretch of East Coast Park.

The objective of such group-wide activities is to create greater awareness and encourage employees to do more for the environment. The Group will continue to educate employees on the importance of climate change and ways to live a lower carbon lifestyle.

A group of ST Engineering’s employees and their families at the beach cleaning event.

The CSR Roadshow spreads the conservation message to employees.

SeIzIng green opportunItIeS

Across the Group, ST Engineering consciously leverages technologies and domain expertise to innovate smart products, solutions and services that enable customers to meet environmental challenges and manage their operations in a more resource-efficient manner.

ST Kinetics launched Singapore’s first commercial diesel-electric hybrid bus in November 2009. The bus has achieved significant improvements in fuel savings and almost zero black smoke emissions. A strategic partnership with major bus OEM partner Xiamen King Long United Automotive Industry Co. Ltd. has helped the hybrid electric system receive acceptance as a viable solution for the Chinese market and other export markets. ST Kinetics is currently working with Xiamen King Long on

production of a diesel-electric hybrid bus for the Chinese market, with the launch scheduled for mid 2011. In Singapore, ST Kinetics and King Long Singapore will also be collaborating with SBS Transit Ltd on a passenger service trial for the diesel-hybrid bus.

Another innovative product, the Hybrid Hydraulic Drive (HHD), is also undergoing trials. This regenerative braking system manages the energy captured during braking to power the vehicle. In 2009, ST Kinetics delivered two units of HHD integrated in a Terminal Prime Mover (TPM) to PSA International. The units have since clocked more than 10,000km in the operational trial, and demonstrated significant fuel savings with equivalent reduction in exhaust emissions. A Cargotec TPM installed with HHD was presented at roadshows to major distribution and port customers in North America in 2010.


ST Electronics’ solutions integrate and enable functions such as in-vehicle realtime traffic information, route planning, parking guidance, electronic toll payment, emergency services and location-based services. The use of such technology can help reduce travelling time, gas emissions and energy consumption.

ST Electronics has inked an MOU with Sino-Singapore Tianjin Eco-City Investment & Development Co., Ltd for the design, development, system integration and maintenance of Green Buildings, Green Transportation Energy Management and District Security System for Tianjin Eco-City in China. These will help the Eco-City meet its environmental sustainability objectives.

The growing environmental engineering industry worldwide presents opportunities for STSE Engineering Services (STSE), a unit of ST Marine.

The Environment

STSE offers environmental engineering solutions including consultancy, research and assessment for municipalities and urban planning companies, as well as design, construction, operations and maintenance.

STSE’s key technologies include Landfill Technology; Waste Transfer Technology which allows waste to be transferred from city centres to suburban landfills by road, water or high-tech rail systems, freeing up valuable land, reducing pollutants and shrinking the overall carbon footprint; Mechanical Biological Treatment, an environmentally friendly alternative to conventional thermal incineration and landfill methods of waste disposal as well as Waste-To-Energy technologies.

STSE was part of the consortium that won a $66.5m contract in 2010 to design and construct a modern Integrated Waste Management Facility in Brunei.

The fuel saving diesel-electric hybrid bus.

The Electronics sector is working on next generation eco-enabling Information Communications Technologies (ICT) for sustainable urban development in three broad areas. The first is Intelligent Energy Systems (IES), which are smart energy and smart grid solutions that improve efficiency in energy generation, transmission, monitoring and recovery. ST Electronics’ work in this area includes Advanced Metering Infrastructure (AMI) and integration of alternative energy sources with the main grid. ST Electronics has recently partnered Accenture Pte Ltd in a pilot project by the Energy Market Authority (EMA) to design and implement its IES in Singapore. ST Electronics will implement the critical infrastructure to enable smart grid applications, as well as provide and integrate wireless and powerline transceivers to enhance the power meters used for this project and other home and building automation solutions required by EMA.

In the area of Green ICT Infrastructure, ST Electronics is extending its capabilities in intelligent building and facility management systems. It is emphasising energy efficiency and larger scale integration of emerging green ICT technologies such as smart lighting, virtualisation and ICT-as-utility solutions.

Building on its strong base of traffic management systems and fleet management systems, ST Electronics is also working on next generation Intelligent Transport Systems in which telematics will feature prominently. With telematics, which involves equipping cars with intelligence and the ability to communicate with one another,


The project comprises an engineered landfill at Sungai Paku, a state-of-the-art waste transfer and logistics station plus three years of operations and maintenance of the facility. STSE’s China operations, ST Environment Services & Technologies (STE&T), also won a RMB113m contract to design, build and operate a Pneumatic Waste Collection System (PWCS) to convey recyclables, non-recyclables and food waste in the Tianjin Eco-City’s Eco-Business Park.

With increasing concerns over pollutive emissions and global warming, many countries and international organisations are realising the importance of replacing older ships with a new generation of “green” ships which employ various technologies to reduce emissions and better control waste and ballast water. This is projected to set a trend for new

ships to be built, and will also drive companies to convert their existing fleets to achieve “greener” standards.

ST Marine is currently building a “green” Roll-on Roll-off Passenger Ferry (Ropax). The dimensions, hull form and arrangement of appendages are configured to maximise fuel efficiency, minimise emissions and optimise turnaround time. Energy efficiency is also aided by the air conditioning system, double glazed windows and recycling of engine waste heat.

Management of environmentally hazardous substances onboard complies with the latest International Maritime Organization “Green Passport” guidelines. A Selective Catalytic Reduction System renders nitrous oxides into harmless nitrogen and

Artist’s impression of the Integrated Waste Management Facility in Brunei.

water, while Sewage Treatment Plants use biopopulation to convert organic substances into carbon dioxide and water, suitable for direct discharge into the seas. Meanwhile, the Waste Handling System collects garbage in a central holding container, with a separate chute for glass waste. Such measures further minimise the environmental impact of the ship’s operations.


Investor Relations

The stock is well covered by 18 sell-side analysts, and the Group strives to enhance their understanding of its business and strategies. Besides quarterly results briefings and regular meetings, regular visits to its facilities are organised, which provide further insights into ST Engineering’s operations. During the year, analysts were invited to tour the Group’s marine facilities as well as its exhibition at the Singapore Airshow 2010, the largest showcase of its latest products, solutions and services.

At its Thirteenth Annual General Meeting held on 21 April 2010, ST Engineering conducted its voting by poll. This initiative has won it commendation by the Asian Corporate Governance Association, which had remarked that voting by poll is the most transparent way to count votes.

Earlier in the year, the Group pledged its support towards excellence in corporate governance, in an initiative by the SIAS.

The Group’s commitment to transparency is recognised by the SIAS; ST Engineering is only one of two companies in SIAS’ Most Transparent Company Hall of Fame.

Analysts on a visit to ST Marine’s yards.

tranSparency and engagement

The Group’s proactive investor relations programme aims to keep the investing community updated on its businesses, and help them understand our strategies, as well as the opportunities and challenges the Group may face.

Timely disclosure is critical in the marketplace. All of the Group’s SGXNet releases are promptly posted on the company website. Quarterly results briefings are webcast live, with a channel for viewers to post questions online. The results presentation slides are also made available on the website. As part of outreach to retail investors, ST Engineering remains a proud sponsor of Securities’ Investors Association of Singapore (SIAS) Investor Education Programme.

During the year, the Group’s investor relations team held close to 300 face-to-face investor meetings and conference calls. The team also participated in seven investor conferences in Singapore and Hong Kong, and went on marketing roadshows to US, Canada, Japan and Hong Kong. Such engagement with the institutional investors promotes continued interest in the stock.

ST Engineering remains

committed to its policy

of open and timely

communication with

investors.


3.3

3.4

3.5

3.2

3.1

3.0

2.9

2.8

2.7

2.6

InveStor reLatIonS caLendar HIgHLIgHtS 2010

1st Quarter 2010• DBSVickersPulse-of-Asia

Conference (Singapore)• LivewebcastofFY2009results

briefing• Postresultsinvestorlunch• Non-DealRoadshowtoUS

and Canada

2010 2009 2008 2007 2006

High $3.47 $3.25 $3.66 $3.98 $3.30

Low $3.05 $2.06 $1.99 $3.10 $2.62

Average* $3.25 $2.61 $2.90 $3.59 $2.95

* Defined as the average closing price of active trading days for the year

St engineering Share price History

St engineering average monthly Share price and trading volume 2010

2nd Quarter 2010• Non-DealRoadshowtoJapanand

Hong Kong• ThirteenthAnnualGeneralMeeting• Livewebcastof1Q2010results

briefing • Postresultsinvestorlunch• DBAccessAsiaConference

(Singapore) • CLSACorporateAccessForum

(Singapore) • Paymentoffinalordinarydividend

of 4.0 cents per share and a special dividend of 6.28 cents per share for the year ended 31 December 2009

• NomuraAsianEquityForum(Singapore)

3rd Quarter 2010• Livewebcastof2Q2010results

briefing• Postresultsinvestorlunch• CitiASEANInvestorConference

(Singapore)• Paymentofinterimordinarydividend

of 3.0 cents per share for first half ended 30 June 2010

• CLSAInvestorForum(HongKong)

4th Quarter 2010 • Analysts’visittoSTMarine• Livewebcastof3Q2010results

briefing • MorganStanleyAsiaPacificSummit

(Singapore)

Source: Bloomberg

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

35

40

45

30

25

20

15

10

5

0

Trading Volume(millions)

Share Price ($)

27 Apr 2010Ex-date for the payment of 2009 final dividend of 10.28 cents per share

18 Aug 2010Ex-date for the payment of 2010 interim dividend of 3.0 cents per share

Price Volume


Awards & Commendations

Best managed Infrastructure (project partner category), Land transport excellence awards 2010 by the Land Transport Authority of Singapore (LTA) – to ST Electronics for its significant contributions to Singapore’s land transport. The Best Managed Project Award recognises and honours partners who have excelled in the development and provision of land transport solutions and services.

guiyang city recommended Brand & product 2009-2011 and guiyang city top class new product by Guiyang Municipal Authority - to Guizhou Jonyang Kinetics Co. (GJK) for its Jonyang brand and products.

new and Highly technical enterprise award by Guizhou Provincial Government - awarded to GJK

Industrial Safety award (gold Standard) 2010 by Beijing (Tong Zhou) Government Safety Bureau - to Beijing Zhonghuan Kinetics, one of three companies awarded for excellent industrial safety management.

ST Engineering wins

numerous awards in

various fields each year.

These awards serve both to

acknowledge the efforts of

the Group’s employees and

to inspire them to achieve

even greater heights.

QuaLIty

asia Leader for Singapore 2010 and one of the 2010 asia Leaders by The Platinum Circle – Tan Pheng Hock. The Asia Leadership Dialogues is a regional forum to showcase a selection of leaders from the private and public sectors who are role models in the region. This year’s leaders shared their experiences and efforts in leading their organisations out of the economic downturn, their challenges, as well as opportunities presented by Asia’s recovery. The 2010 Asia Leader from Singapore is Mr Tan Pheng Hock, President & CEO of ST Engineering.

defence technology prize 2010 – team award (engineering) by Singapore’s Ministry of Defence (MINDEF) – awarded to ST Aerospace, ST Electronics, ST Electronics (Info-Software Systems) and ST Kinetics, with their partners, for their respective projects.

ceS Innovations 2010 design and engineering awards Honoree by CES International – awarded to ST Electronics (InfoSecurity) for DigiSAFE DiskCrypt Mobile.

truck & trailer manufacturing association Safety award 2010 – awarded to US subsidiary VT LeeBoy’s Hackney plant in Washington NC for its achievements in reducing the number and severity of accidents during 2009.

Scdf Strategic partner award 2010 by Singapore Civil Defence Force – awarded to ST Electronics (Info-Software Systems), ST Kinetics and ST Synthesis in appreciation of their invaluable contributions and continued support.

fire Safety excellence by Shanghai Airport Police Authority – awarded to ST Aerospace’s Shanghai facility, Shanghai Technologies Aerospace Company for excellence in fire safety management.

product exceLLence

IeS prestigious engineering achievement award 2010 by the Institution of Engineers Singapore – to ST Electronics (Info-Comm Systems) in recognition of its innovative approaches and successful implementation for the Accelerated Project Management and System Integration for Resorts World Sentosa.

ST Engineering President & CEO, Mr Tan Pheng Hock being honoured as the 2010 Asia Leader at the Asia Leadership Dialogues 2010 presented by Platinum Circle.


corporate SocIaL reSponSIBILIty

Singapore environment achievement award 2010 (merit) (SEAA) by Singapore Environment Council – awarded to ST Marine. SEAA is the only local award that addresses the overall environmental initiatives and awareness within an organisation.

total defence awards 2010 by mIndef – ST Electronics (Satcom & Sensor Systems) received the minister for defence award while ST Electronics (Info-Software Systems), ST Electronics (Info-Comm Systems), ST Electronics (Info-Security), ST Electronics (e-Services), ST Electronics (Training & Simulation Systems), STELCOMMS, STELOP, ST Kinetics and ST Marine received the distinguished defence partner award 2010 by MINDEF. The meritorious defence partner award 2010 was awarded to ST Aerospace Services, ST Aerospace Supplies, ST Electronics (Info-Software Systems) and ST Synthesis.

Home team national Service awards 2010 by the ministry of Home affairs - ST Electronics (Info-Comm Systems) and ST Electronics (Satcom & Sensor Systems) received the Minister for Home Affairs Award while ST Aerospace Services was awarded the Distinguished Home Team Partner Award. ST Aerospace, ST Kinetics and ST Electronics (Info-Software Systems) received the Meritorious Home Team Partner Award. These awards honour employees for their strong support and commitment shown towards the safety and security of the nation.

associate of the arts awards by the National Arts Council – awarded to ST Engineering for its contribution and support of arts activities in Singapore.

community chest SHare award 2010 (platinum) – awarded to ST Electronics and its subsidiaries, ST Electronics (Info-Software Systems) and ST Electronics (Info-Comm Systems), ST Kinetics, as well as ST Aerospace’s subsidiaries, ST Aerospace Engineering, ST Aerospace Services, ST Aerospace Engines and ST Aerospace Systems.

community chest SHare award 2010 (gold) – awarded to ST Aerospace, ST Aerospace Supplies, ST Electronics (Training & Simulation Systems), ST Kinetics and ST Marine.

community chest SHare award 2010 (Sliver) – ST Engineering and ST Electronics (Satcom & Sensor Systems).

peopLe

annual Safety award 2010 (e&m category ≥ $20m & mega category ≥ $50m) by LTA – awarded to ST Electronics in appreciation of its efforts and contributions in promoting best practices and for consistent outstanding performance in Occupational Safety and Health Management.

Leading practices in Hr communications and Branding award (Special mention) by Singapore Human Resources Institute – awarded to ST Kinetics. The award recognises organisations that have achieved overall effectiveness in their HR and people management functions. ST Kinetics also received the Leading practices in Quality work-Life, physical and mental well-Being award.

may day cBf model partnership awards 2010 (Institutional category) by NTUC – to ST Kinetics. The Awards recognises efforts of companies that have adopted an enlightened and forward-looking management approach, promoted productivity and excellence.

Singapore Health award 2010 by Singapore’s Health Promotion Board - ST Aerospace, ST Kinetics and ST Marine received the Platinum award for exemplary workplace health promotion programmes, while ST Aerospace Systems, ST Aerospace Engineering and ST Aerospace Engines received the Gold award. ST Aerospace Supplies received the Silver award and ST Electronics (Satcom & Sensor Systems) received the Bronze award.

Singapore Manufacturer’s Convention for wSH awards 2010 (gold award) - ST Aerospace Engineering.

workplace Safety & Health performance awards (Silver award) by WSH Council - ST Aerospace Systems.

workplace Safety & Health Innovation award by WSH Council - to ST Aerospace Engineering.

13th convention for workplace Safety and Health Innovations in marine Industry 2010 (gold award) by Association of Singapore Marine Industries – to ST Marine.

national Safety and Security watch group award, Individual and cluster awards by Singapore Police Force – to ST Electronics and ST Marine for efforts in taking ownership of its safety and security concerns at our premises, and working closely with the Home Team to raise the emergency preparedness level of our staff.


“an accurate and deep understanding”

This section includes

a discussion of our

operational performance

and financial results, as well

as our risk management

approach and measures.

nsights

fInancIaL revIew

• Turnoverof$1,389mrecordedinFY2010wascomparabletothatofFY2009.ThehigherturnoverinCommunication& Sensor Systems Group (CSG) was offset by the lower turnover in Large-Scale Systems Group (LSG)

• CSGrecordedhighersalesmainlyduetodeliveryoftelematics systems and milestone completions of communication projects and a VSAT network project

• LowerturnoverinLSGwasmainlyduetolowervalueproject milestone completions

• PBTof$127.6mforFY2010washigherthanthatinFY2009by 11% or $12.3m, mainly due to higher turnover and favourable sales mix

fInancIaL revIew

• FY2010turnoverof$1,871mwascomparabletothatof FY2009.ThehigherturnoverinAircraftMaintenance& Modification (AMM) and Engineering & Materials Services (EMS) business groups were offset by the lower turnover in Component/Engine Repair & Overhaul (CERO) business group

• AMM’shigherturnoverwasmainlyduetomoreaircraftredeliveries, whilst more project milestone completions and higher Maintenance-by-the-Hour (MBHTM) sales contributed to the higher turnover in EMS

• Lowersalesinthecomponentsbusinessaccountedforthelower turnover in CERO

• PBTof$262.2minFY2010was15%or$33.9mhigherthanthatachievedinFY2009

• NotwithstandingtheimpactofaweakenedUSdollar,higher PBT was achieved as a result of lower depreciation and finance costs, partially offset by lower contributions from associates

Aerospace Electronics

Financial Review of the Group

group Quarterly results ($m)

2010 2009 yoy growth1Q 2Q 3Q 4Q fy 1Q 2Q 3Q 4Q FY

Turnover 1,361 1,518 1,487 1,619 5,985 1,318 1,409 1,352 1,469 5,548 8%

EBITDA 153.0 190.5 200.6 174.6 718.7 128.2 164.5 177.4 179.1 649.2 11%EBIT 110.9 147.3 157.4 171.1 586.7 88.7 125.9 137.4 134.4 486.4 21%Profit Before Tax 116.6 157.6 159.8 193.5 627.5 111.3 139.3 149.1 146.9 546.6 15%Net Profit 92.8 124.0 130.2 144.0 491.0 85.2 108.7 120.3 129.7 443.9 11%

turnover ($m)

1,871

1,872FY2009

fy 2010

profit Before tax ($m)

262.2

228.3FY2009

fy 2010

turnover ($m)

1,389

1,371FY2009

fy 2010

profit Before tax ($m)

127.6

115.3FY2009

fy 2010

performance overvIew

TheGroupregisteredgoodgrowthinTurnoverandProfitsinFY2010overFY2009.Turnoverincreasedby8%toalmost$6bwhileProfitBefore Tax (PBT) and Net Profit improved by 15% and 11% to $627.5m and $491.0m respectively. This good performance translates to an ROE of 30.3%.

In 2010, the Group invested more than $300m of capital expenditure in new capabilities and capacity to tap the growth opportunities across the four sectors. We ended the year with a strong order book of $11.5b, which provides good visibility of the Group’s future revenue stream and will further add to our resilience. The Board is proposing to pay shareholders a final dividend of 11.55 cents per share. Together with the interim 3 cents per share paid in September 2010, a total of 14.55 cents dividendspersharewillhavebeenpaidforFY2010.


fInancIaL revIew

• TurnoverforFY2010of$1,044mwashigherthanthatofFY2009by10%or$95masallthethreebusinessgroupscontributed to the higher turnover

• HigherShipbuildingturnoverwasduemainlytofavourablesales mix, while higher repair activities from naval customers contributed to the higher Shiprepair turnover

• Engineering’shigherturnoverwasmainlyattributableto higher engine repair activities and naval logistics management sales

• FY2010PBTof$118.0mwashigherthanthatachievedinFY2009by15%or$15.7m

• ThehigherPBTwasmainlyattributabletohigherturnover,share of higher profits from joint ventures and lower distribution and selling expenses, partially offset by higher finance cost

Land Systems

fInancIaL revIew

• FY2010turnoverof$1,506mwashigherthanthatofFY2009by29%or$339m

• Higherprojectdeliveriesandspecialtyvehiclesalesof Automotive business group and higher turnover of Services, Trading and Others business group were partially offset by Munitions & Weapon business group’s lower project deliveries

• ComparedtoFY2009,PBTof$113.9mforFY2010washigher by 19% or $18.5m

• ThehigherPBTwasmainlyduetohigherturnover,partiallyoffset by unfavourable product mix and higher other operating expenses

Marineturnover ($m) turnover ($m)

1,506 1,044

1,167 949FY2009 FY2009

fy 2010 fy 2010

profit Before tax ($m) profit Before tax ($m)

113.9

95.4FY2009

fy 2010 118.0

102.3FY2009

fy 2010

fy 2010 turnover by Sector fy 2010 profit Before tax by Sector

Aerospace

Electronics

Land Systems

Marine

Others

31%

23%

25%

18%

3%

Aerospace

Electronics

Land Systems

Marine

Others

42%

20%

18%

19%

1%



fInancIaL poSItIon

As at 31 December 2010, Group’s total assets of $7,268m was $383m or 6% higher than that of 31 December 2009. The higher total assets were mainly due to increases in property, plant and equipment, inventories and work-in-progress, as well as advances and other debtors. These were, however, partially offset by a decrease in intangible assets. The increase in property, plant and equipment was mainly due to increase in capital expenditure, while the reduced intangible assets were attributable to unfavourable translation impact as a result of a weakened USD.

LIQuIdIty

As at 31 December 2010, Group’s cash and cash equivalents and short term investments stood at $1,790m, $40m higher than that of 2009. The majority of the funds were invested in liquid assets such as fixed deposits which were centrally managed through a cash pooling arrangement, as well as short term investments managed by fund managers.

total assets deployment ($m)

0

2000

4000

8000

6000

2010

7,2686,885

2009

Cash and Cash Equivalents & Short- Term Investments

Inventories & Work-in-Progress

Debtors, Deposits & Prepayments

Intangibles & Other Assets

Property, Plant & Equipment

During the year, the Group incurred capital expenditure of $333m (2009: $277m). The bulk of the capital expenditure incurred was for the addition of a two-bay wide-body hangar at San Antonio facility, the build up of engine repair and overhaul facility in Xiamen, the purchases of a Gulfstream G550 aircraft for a service contract and rotable components to support existing and new customers for MBHTM programmes, as well as the Jalan Boon Lay facilities redevelopment.

Increase in capital employed to $7,268m as at end 2010 was mainly attributable to higher total liabilities and shareholders’ funds including non-controlling interests. Total liabilities increased by 6% or $332m to $5,541m, mainly due to increases in creditors and accruals and advance payments from customers. Shareholders’ funds including non-controlling interests increased by $51m to $1,727m at 31 December 2010. The increase was mainly attributable to increases in retained earnings and share capital arising from issuance of shares for share plan, but these were partially offset by foreign exchange loss resulting from translation of foreign operations.

Aerospace

OthersMarine

Land SystemsElectronics

capital expenditure ($m)

2009 277

2010 333

0 50 100 150 200 250 300 350

capital employed ($m)

0

2000

4000

8000

6000

2010

7,2686,885

2009

Bank & Other Borrowings

Creditors and Accruals

Other Liabilities

Advance Payments from Customers

Equity


Fixed Floating

fixed vs floating rate

89%11%

2010 2009 2008 2007

Interest Cover Ratio 11.4 10.0 12.8 12.7

Gross Debt/Equity Ratio

0.8 0.9 0.5 0.5

Free Cash Flow ($m) 543 416 358 625

Operating Cash Flow ($m)

810 900 493 647

Net Cash ($m) 442 311 168 593

The Group’s interest cover improved to 11.4 times, with a gross debt/equity ratio of 0.8 times. The Group generated healthy operating cash flow of $810m in 2010, and continued to be in a net cash position as at the end of 2010.

In line with the Group’s global business expansion plan, the Group has doubled its banking facilities from $4,288m in 2007 to $8,668m in 2010, of which, about 57% or $4,903m was available for use as at end of 2010.

Banking facilities2010 $m

2007 $m

Loans 1,706 1,661

Interest Rates Swaps and Cross Currency Swaps

1,406 –

Foreign Exchange 1,887 472

Trade Finance 3,669 2,155

total available facilities 8,668 4,288

Less: Utilisation (3,765) (2,231)

unutilised facilities 4,903 2,057

fundIng and BorrowIngS

As at end of 2010, Group borrowings amounted to $1,348m, which was about 78% of its shareholders’ funds including non-controlling interests. Group’s borrowings were denominated largely in USD and Euro to hedge against overseas investments. About 72% or $973m of total borrowings were long term borrowings (> 1 year) which primarily comprised US$500m bonds (10-year) intended for long term strategic investments. 89% of total borrowings were on fixed interest rate basis while the balance was on floating rate basis, with interest rates ranging between 0.75% to 5.76% per annum.

2010 Borrowings profile

Within 1 yr2 to 5 yrs> 5 yrs

By maturity profile

23%28% 49%

USD EUR Others

By currency

70%26%4%

Bank loans Bonds

Sources of fund

48% 52%

The Group has established a Reg S Multicurrency Medium Term Note (MTN) Programme of US$1.2b and made its maiden bond issue of US$500m in July 2009. As at end 2010, the Group has unused MTN facility amounting to US$700m.



caSH fLowS

Operating ActivitiesIn 2010, net cash generated from operating activities amounted to $810m, $90m lower than the $900m in 2009. This was mainly due to less favourable working capital movements from negative variances in inventories and work-in-progress, progress billings in excess of work-in-progress and advance payments to suppliers, but partially offset by positive variances in trade creditors and other creditors, accruals and provisions.

Investing ActivitiesThe Group’s net cash used in investing activities of $267m in 2010 was lower than 2009 by $218m, mainly due to higher proceeds from sale and maturity of bonds, partially offset by an increase in property, plant and equipment.

Financing ActivitiesThe Group had a net cash used in financing activities of $415m in 2010 compared to a net cash from financing activities of $52m in 2009. Net cash used in financing activities in 2010 was largely attributable to dividends paid to shareholders of the Company, while net cash generated from financing activities in 2009 arose mainly from proceeds from the issuance of bonds (US$500m) net of partial repayment of bank loans, as well as dividends paid to shareholders of the Company.

cash flows ($m)

(1,000)

(600)

(800)

(400)

(200)

0

1,000

200

400

600

800

(267)

(415)

900

52

(485)

810

operating activities

Investing activities

financing activities

2010 2009


SIgnIfIcant accountIng poLIcIeS

The Group’s significant accounting policies are presented in Notes to the Financial Statements, Note 3 (pages 121 to 141). The Group has applied the same accounting policies and methods of computation in the preparation of the financial statements for the current reporting period compared with the audited financial statements as at 31 December 2009, except for the adoption of all the new and revised Financial Reporting Standards (FRS), that are mandatory for financial years beginning on or after 1 January 2010 as indicated on pages 138 and 139, as well as change in depreciation policy for its property, plant and equipment.

Change in depreciation policy for property, plant and equipment FRS 16 requires the Group to review the estimated useful lives of property, plant and equipment periodically such that it best reflects the pattern in which the assets’ future economic benefits are expected to be consumed. During the year, the Group engaged independent consultants to perform industry and benchmarking study of the depreciation rates of its property, plant and equipment. The industry and benchmarking study considered the industry practices of the four sectors and studied the economic useful lives of its property, plant and equipment. Based on the results obtained, the Group revised the estimated useful lives of the property, plant and equipment to align them to industry practices with effect from the financial year ended 2010. The revised estimated useful lives can be found on Note 12 in Notes to the Financial Statements on page 157.

totaL SHareHoLder return

ST Engineering had paid an interim ordinary dividend of 3.0 cents per share to shareholders in September 2010 and proposedtodeclareaFY2010finaldividendof11.55centspershare.TheFY2010dividendpershare(DPS)amountsto14.55cents. Based on the average share price of $3.34, the DPS of 14.55 cents translates to a dividend yield of 4.4%.

To maximise shareholder value, management will continue its policy of paying a high level of dividend to return excess cash generated from its operations, provided the cash is not required for major investments in the future. These investments may include potential mergers and acquisitions and the building of new facilities and capabilities to expand the existing operations.

ST Engineering share price ended the year at $3.42, 5.2% above the share price a year ago. Over the same period, the STI Index advanced by 10%. For 2010, ST Engineering shares generated a total shareholder return of 9.6% for its shareholders. This consists of 4.4% of dividend yield and 5.2% of capital gain.

total Shareholder return (%)

5.1%12.8%

26.7%

41.8%

9.6%

(31.6%)

4.9%

4.7%

4.4%5.2%7.7%

21.8%

37.1%

5.2%(36.8%)

(50)

(30)

(40)

(20)

(10)

0

50

10

20

30

40

2006 2007 2008 2009 2010

Capital Gain DividendYield



eva Statement2010 $m

2009 $m

Net profit before tax 583.4 507.7

Adjust for:

Share of results of associates and joint ventures 44.1 38.9

Interest expense 60.4 59.9

Others 10.3 18.5

Adjusted profit before interest and tax 698.2 625.0

Cash operating taxes (Note 1) (120.3) (116.3)

nopat – (a) 577.9 508.7

Average capital employed (Note 2) 3,575.8 3,286.7

Weighted average cost of capital (Note 3) (%) 5.7 6.1

capital charge – (b) (203.8) (200.5)

eva – [(a) – (b)] 374.1 308.2

Non-controlling share of EVA (4.4) (3.4)

eva attributable to ordinary shareholders 369.7 304.8

Unusual items (UI) (gains)/losses (Note 4) (1.1) 1.3

eva attributable to ordinary shareholders (exclude uI) 368.6 306.1

Note 1: The reported current tax is adjusted for the statutory tax impact of interest expense.Note 2: Monthly average equity plus interest bearing liabilities, timing provision and present value of operating leases.

Major Capital Components:

$m

Long term debt 1,159.1

Short term debt 238.3

Equity 1,613.0

Others 565.4

3,575.8

Note 3: The Weighted Average Cost of Capital is calculated in accordance with ST Engineering Group EVA Policy as follows: i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 5.0% (2009 @ 6.0%); ii) Risk-free rate of 2.61% (2009 @ 2.08%) based on yield-to-maturity of Singapore Government 10 years Bonds; iii) Ungeared beta at 0.69 (2009 @ 0.69) based on ST Engineering risk categorisation; and iv) Cost of Debt rate at 4.17% (2009 @ 4.17%) using actual cost of debt of the borrowings in US, Europe, China and Singapore.

Note 4: UI refer to divestment of investment properties, subsidiaries and associates, long term investments and disposal of major property, plant and equipment.

economIc vaLue added

Sincetheformationin1997,theGrouphasbeengeneratingyearlypositiveEconomicValueAdded(EVA).Group’sFY2010EVAattributabletoordinaryshareholdersof$369.7mwas21%or$64.9mhigherthanthatachievedinFY2009.Theincreasewasdrivenmainlybyimprovedearnings.NetOperatingProfitAfterTax(NOPAT)of$577.9mwas14%or$69.2mhigherthanFY2009,while capital charge increased to $203.8m due mainly to higher average EVA capital employed of $3,575.8m.


value added Statement2010 $m

2009 $m

value added from:

Revenue earned 5,984.5 5,547.8

Bought in materials and services (3,685.9) (3,397.5)

2,298.6 2,150.3

Other income 40.0 67.6

Finance income 44.1 16.3

Finance costs (exclude interest expenses) (31.2) (6.5)

Share of results of associates and joint ventures 44.1 38.9

total value added 2,395.6 2,266.6

distribution of total value added

To employees in wages, salaries and benefits 1,564.9 1,459.4

To government in taxes and levies 134.2 100.2

To providers of capital on:

• Interestpaidonborrowings 56.2 56.1

• Dividendstoshareholders 402.2 474.6

2,157.5 2,090.3

Balance retained in/(applied from) business

Depreciation and amortisation 132.0 162.8

Retained profits 97.5 (30.6)

Non-controlling interests 13.8 12.5

243.3 144.7

non-production (income)/costs (5.2) 31.6

total distribution 2,395.6 2,266.6

vaLue added

Group’s total value added for 2010 of $2,395.6m was higher than that achieved in 2009 by 6% or $129m.



5-year performance of tHe group

2006 2007 2008 2009 2010

turnover by Sector ($m)

0

2000

1000

4000

3000

6000

5000

2006 2007 2008 2009 2010

profit Before tax by Sector ($m)

0

200

100

400

500

300

700

600

2006 2007 2008 2009 2010

net profit by Sector ($m)

0

100

600

200

300

400

500

Aerospace

OthersMarine


Aerospace

OthersMarine


Aerospace

OthersMarine



5-year Key financial data 2010 2009 2008 2007 2006

operating performance

EBITDA ($m) 718.7 649.2 667.9 684.4 593.4

EBIT ($m) 586.7 486.4 509.1 550.3 457.6

financial Indicators

Earnings per share (cents) 16.21 14.78 15.82 16.95 15.15

Return on sales (%) 8.4 8.2 9.1 10.4 10.2

Return on equity (%) 30.3 28.3 30.0 30.8 28.4

Return on total assets (%) 6.9 6.6 8.2 8.7 8.2

Net assets value per share (cents) 53.38 52.09 52.71 54.72 53.13

Selected Balance Sheet data

Shareholders' funds ($m) 1,622 1,568 1,580 1,633 1,565

Total assets ($m) 7,268 6,885 5,993 6,050 5,578

Net assets ($m) 1,727 1,676 1,677 1,780 1,687

Capital expenditure ($m) 333 277 191 172 197

dividend

Gross dividend per share (cents) 14.55 13.28 15.80 16.88 15.11

Dividend yield (%) 4.36 4.72 5.16 4.94 5.09

Dividend cover 1.11 1.11 1.00 1.00 1.00

productivity data

Average staff strength 21,508 20,079 18,703 17,750 15,912

Sales per employee ($) 278,244 276,298 285,757 284,570 281,910

Profit after tax per employee ($) 22,829 22,109 25,324 28,367 27,974

Employment costs ($m) 1,568.1 1,462.5 1,422.8 1,360.3 1,243.0

Employment costs per $ of turnover ($) 0.26 0.26 0.27 0.27 0.28

Economic Value Added ($m) 369.7 304.8 357.9 388.8 327.8

Economic Value Added spread (%) 10.5 9.4 11.8 13.2 12.3

Economic Value Added per employee ($) 17,187 15,181 19,138 21,904 20,598

Value added ($m) 2,395.6 2,266.6 2,203.7 2,190.8 1,990.8

Value added per employee ($) 111,382 112,882 117,824 123,432 125,112

Value added per $ of employment costs ($) 1.53 1.55 1.55 1.61 1.60

Value added per $ of gross property, plant and equipment ($)

0.91 0.91 0.97 1.00 0.98

Value added per $ of turnover ($) 0.40 0.41 0.41 0.43 0.44


Risk Management

The ERM framework sets out a consistent definition of risk and risk appetite to ensure that business units have a common understanding when identifying and assessing risks. The GRMT conducts risk identification workshops and training, where key business risks are identified, analysed and assessed. Business managers actively participate in these risk workshops, as they are ultimately responsible for monitoring and managing risk exposures in their respective areas.

Once the significant risks are identified, business managers are appointed risk owners, and shall be responsible for developing and implementing risk mitigation strategies and risk monitoring processes. They shall also periodically review the effectiveness of the controls implemented, and initiating necessary changes as the risk profile changes.

To enable ERM practices throughout the Group, the Group invested in a Governance, Risk and Compliance system that captures risks and controls in electronic risk registers, which are periodically reviewed and updated by the risk and control owners, regardless of where the business owners are located geographically.

As the Group diversifies its business activities across multiple industries, sectors, geographies and jurisdiction, it has become of paramount importance that both the Senior Management Team and the Board have visibility of the Group’s key business risks.

ST Engineering believes that effective risk management is critical to achieving the Group’s strategic objectives and corporate governance goals.

The Risk Review Committee at Board level provides the leadership and direction in the establishment of an Enterprise-wide Risk Management framework (ERM), that is instrumental to building robust risk management processes within the Group, and strengthening them over time.

The Risk Review Committee is assisted by the Group Risk Management Team (GRMT). GRMT, reporting to ST Engineering’s President & CEO, is responsible for implementing the ERM framework. The GRMT’s key roles include facilitating the risk management process by formulating risk management frameworks, policies and procedures, and instilling a risk awareness culture through workshops, training and seminars. The main thrust of GRMT’s work is to embed the risk management process into all business operating procedures, where it becomes ultimately the responsibility of all business and operational managers.

The ST Engineering ERM Framework is a discipline with which the Group uses to identify, assess, control and monitor risks from six key areas:

(1) Strategic(2) Operational(3) Reputational(4) Financial(5) Legal and Regulatory(6) Acts of God/War

Under the ERM framework, a risk dashboard is developed and maintained by each of the significant business units, rolling up into a summary dashboard for each of the following key business areas:

(1) Aerospace(2) Electronics(3) Land Systems(4) Marine

Quarterly, Management reviews the four risk dashboards with the Risk Review Committee. During this time, Management would highlight the following for discussion:

(1) Emerging trends and issues in each business sector

(2) New risk or changes to existing risk profile

(3) New risk incident(4) Unusual trends in the Key Risk

Indicators.

Going forward, the Group will continue to review and adjust its risk management methodologies and processes, to remain nimble in managing risks, and to adapt quickly to changes in the internal and external environments.


risk area Inherent risk description

Strategic Key Customers A substantial portion of the Group’s business comes from government agencies, including the military. While maintaining strong support towards its defence business, the Group also actively seeks to increase the proportion of its commercial business. This not only allows for the introduction of more cost effective systems and solutions into the defence business, but also reduces the risk of customer concentration for the Group.

Strategic Competition The Group’s businesses are subject to competition from national and multi-national firms in the various markets it operates in, and many contracts are obtained through a competitive bidding process.

The Group’s ability to compete for contracts depends to a large extent on the effectiveness and innovation of the solutions it offers, and its ability to offer better performance at a lower cost to its customers.

As the Group seeks to strengthen its commercial business, speed to market becomes ever more critical to success.

The Group conscientiously monitors market conditions and continually seeks to innovate its processes and systems to better position itself in both local and overseas markets.

Strategic Risks inherent in operating in a global market

The Group conducts business in a number of countries and, as a result, assumes risks that are associated with operating in a global market.

These risks include:

(1) changes to government regulations and administrative policies that may result in restraints on the movement of capital, expropriation of the Group’s assets, new burdensome taxes or tariffs that could be introduced;

(2) political changes that could lead to changes in the business environment in which the Group operates;

(3) economic downturns;(4) political instability and civil disturbances that could disrupt the Group’s business

activities

The group seeks to maintain an even more balanced portfolio by spreading its business operations across several markets. It continues to pursue new emerging markets to further expand and diversify its revenue streams.

tHe group’S prIncIpaL InHerent rISKS


Risk Management


Strategic Mergers & Acquisitions (M&A)

One of the avenues through which the Group seeks to grow its businesses is the acquisition of business entities and operating assets or joint ventures. M&A risks include the under-performance or failure of acquired entities.

M&A activities, ranging from the identification of targets to conducting due diligence, are supported by a dedicated team of investment professionals and augmented by external professionals for specialised services. The business proposals are guided by a given set of internal investment criteria, evaluated by senior management and endorsed by a Business Investment and Divestment Committee before seeking final Board of Directors’ approval.

Financial Foreign Exchange The Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and incurring cost denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies.

The Group’s foreign exchange exposures are primarily from USD and Euro, and the Group enters mainly into forward currency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group’s hedging policy.

The Group also enters into cross currency swap to hedge the foreign exchange risk of its loans denominated in foreign currencies.

Financial Credit Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collateral from customers or arrange master netting agreements. Cash terms, advance payments and letters of credit or bankers’ guarantees are required for customers of lower credit standing.

Operational Project Management

The main business activity of the Group relates to management and execution of projects for defence and commercial customers. Risks relating to project management are therefore inherent in the business. These may include issues relating to project costs and schedules, as well as contractual and quality matters.

The Group has project review and quality assurance systems in place to mitigate such risks.

All contracts of material value require review by legal counsel, and significant deviations from pre-approved standard contract terms and conditions are to be highlighted and presented to higher levels of management for review and approval.

tHe group’S prIncIpaL InHerent rISKS



Operational Human Capital The recruitment and retention of qualified and experienced personnel is critical to achieving the Group’s strategic objectives. ST Engineering continues to work with local authorities in markets where it operates, and leverages training, retention schemes, scholarships as well as alternative sources for hire to sustain its growth. Talent management programmes also help to create a pool of potential successors for key positions.

Operational Subcontractor Performance and Key Suppliers

The Group is dependent upon the delivery of key materials or components by suppliers and the performance by its subcontractors in a timely manner, and in accordance to specifications. The respective sector procurement function is responsible for establishing and managing end-to-end integrated supplier arrangements within each of their respective sectors. Supplier milestones and performance are reviewed periodically by the respective project teams.

Legal, Regulatory and Political

Export Controls Exports of ordnance products, which constitute a portion of the Group’s sales, are typically subject to export control regulations. Changes in these regulations could have an impact on the Group’s sales, while non-compliance could result in financial penalties, suspension of projects or even restrictions on future export business. The Group continues to place great emphasis on this area and has formal systems in place and designated personnel to ensure export control regulations are complied with.

Acts of God and/or War

Business Interruption

The Group recognises that quick recovery and resumption of business operations after a disruption are critical to minimising financial, operational and reputation impact.

Accordingly, it has in place a Business Continuity Management Framework (“BCM Framework”), which embodies enterprise-wide planning and arrangements of key resources and procedures that enable the Group to respond and continue to operate critical business functions across a broad spectrum of interruptions to the business, arising from internal or external events.

Besides incorporating force majeure clauses in all contracts to mitigate risk from Acts of God, the Group also has in place a comprehensive insurance programme aimed at mitigating financial losses that might arise from such risks.


Operating Review and Outlook

The Group demonstrated strong operating performance in 2010, amidst persisting uncertainties in the global economies and the continued weakening of the US dollar. All four sectors delivered double digit profits growth.

While the aviation industry is showing signs of recovery, the Group’s Aerospace sector, which focuses on heavy maintenance, has yet to benefit fully as airlines defer maintenance to conservecash.Yetitproveditsmettleby continuing to clinch new contracts throughout the year, the largest of which was a US$750m Maintenance-By-the-Hour (MBH™) contract from Jet Airways. Its Boeing 757-200 Passenger-to-Freighter (PTF) programme with FedEx Express progressed on schedule and showed improved margins. The sector continues to extend its presence in the growing China market. It added new hangars at Pudong International Airport in Shanghai. It also completed construction and certification of the test cell for its engine facility in Xiamen.

The Electronics sector expanded its market reach, and now has customers in over 100 countries. Projects secured from overseas customers during the year included the Automatic Fare Collection System (AFCS) from Bangkok Bus Rapid Transit (BRT), Automatic Meter Reading (AMR) radio transceivers from Arad Technologies, and a software systems contract from the Department of Civil Aviation in Ecuador, among others. The sector continued to play a part in Singapore’s national projects, winning contracts for the Energy Market Authority’s (EMA) Intelligent Energy System (IES) and the Land Transport Authority’s (LTA) Downtown MRT Line.

For the Land Systems sector, the bulk of the delivery of the Warthog to UK Ministry of Defence (MOD) took place during the year, with some of the vehicles now in operation in Afghanistan. The sector successfully pursued new overseas defence contracts. Those announced during the year included a demilitarisation contract for an African nation, supply of naval guns to Brazil and supply of ammunition to the Finnish army. In the commercial arena, the sector’s Chinese specialty vehicles are now consolidated under the TRXBUILD brand to better serve customers. In Singapore, ST Kinetics’ facilities at Portsdown Road were successfully relocated to the Jalan Boon Lay premises, further optimising operations.

The Marine sector delivered several vessels during the year, including the first of two 350,000 barrel Articulated Tug Barges (ATBs) to OSG Ship Management, Inc, the largest ATB unit in the US. At the same time, new contracts were added to its healthy order book, including a US Navy contract for a fourth Fast Missile Craft (FMC) for the Egyptian Navy, bringing the total value of the Egyptian FMC project to about US$807m. The sector’s young environmental engineering arm continued to show promising growth, winning about $90m of contracts in Brunei and China.

Group subsidiary ST Synthesis also did well, winning projects such as a management and maintenance contract for the Tuas Marine Transfer Station and Semakau Landfill by National Environment Agency (NEA), as well as an LTA contract for the installation and maintenance of traffic signals for the eastern part of Singapore.

new productS and SoLutIonS

Innovation continues to drive the Group, and the year opened with the Group showcasing its latest capabilities at the Singapore Airshow 2010 to much success. New solutions displayed at the show included: the Venus Unmanned Surface Vessel (USV), a vessel adaptable to different naval and security missions; its accompanying USV Simulator for training USV operators; the SAR21A, an improved version of one of the world’s most advanced assault rifles; and the Remote Control Weapon System, which allows the gunner of an armoured vehicle or patrol boat to operate the weapon under protection.

InveStIng for tHe future

Recognising that China will become one of the world’s largest aviation hubs, ST Aerospace is looking to further build its presence there. It has formed a joint venture with Guangdong Airport Management Corporation to set up a commercial aircraft heavy maintenance facility in Guangzhou Baiyun

The Group demonstrated

strong operating

performance in 2010, amidst

persisting uncertainties in

the global economies and

the continued weakening

of the US dollar. All four

sectors delivered double

digit profits growth.


International Airport. Incorporated in late 2010, the JV is expected to begin operations in two years’ time. The facility will have four wide-body bays, and will enhance and complement ST Aerospace’s operations, providing international airlines with further integrated cost competitive solutions.

Looking to tap into another fast growing economy, ST Kinetics established a subsidiary in India to grow its specialty vehicles and services business. LeeBoy India is located in Bangalore and will manufacture and market ST Kinetics’ construction equipment products.

The Group’s US arm, VT Systems, has set up wholly owned subsidiaries, VT Systems International and VT Systems Participações Ltda. to explore opportunities in Brazil and the Latin American region. While this is an exploratory step to understand the market better, the Group believes the region offers many opportunities for its various businesses.

outLooK for 2011

While the global economy is in the midst of gradual recovery, the Group believes that several factors may undermine the recovery in 2011. These include the flaring up of geo-political tensions and the contagion effect of the Egyptian revolution and tensions in the Middle East, terrorism, the level of inflation and oil prices, which crept up from US$80 per barrel in early 2010 to over US$100 per barrel recently.

Factors that affect the performance of each of the sectors differ, depending greatly on the political, social and economic conditions of the various regions where the sectors operate.

Some of these external factors can be mitigated while some such as calamities are not within our control. Regardless, the Group’s business, geography and customer base diversifications offer the Group a strong level of resilience in weathering the uncertainties.

The Group ended 2010 with a strong order book of $11.5b, providing good visibility on the Group’s revenue stream and adding to our resilience. Barring unforeseen circumstances, the Group expects to achieve higher turnover and PBTforFY2011comparedtoFY2010.

With the improving passenger load and financial performance of airlines, indications of an uptake in aircraft Maintenance Repair and Overhaul (MRO) in mid-to-late 2011 are good. In 2011, the Aerospace sector will continue to focus on airframe heavy maintenance and modification work, delivering PTF conversion and military contracts, embarking on the construction of the Guangzhou facility, and pursuing new PTF conversion opportunities and aircraft interior modification work. On the components and engines business, the sector will step up its landing gear capability in the Singapore facility, complete the Xiamen engine facility, and extend its Total Aviation Support offerings to airlines globally. The capabilities and capacities expansion is a continuing process to strengthen the foundation for growth.

In 2011, the Electronics sector will focus on delivering the various projects in its order book. Major contracts include the half height Platform Screen Doors and Circle Line MRT projects in Singapore, Advanced Combat Man System, a communication system project, the supply of telematics systems,

satellite communication products and electro-optics equipment, milestone completions of simulator projects, a Third Generation Learning System, software system projects and managed services sales. The sector will continue to sharpen its core capabilities and pursue growth in new market segments.

The Land Systems sector will continue to deliver the Terrex to the Singapore Army, the balance of the Warthog fleet to the UK MOD, munitions, weapons and specialty vehicles in 2011. The deployment of the UK Warthog in Afghanistan is significant in positioning the Land Systems sector in the global defence market place, which further augments its reputation and credibility as a key defence industry player. The sector will continue to develop and pursue key defence programmes. For its non-defence business, the sector will raise its TRXBUILD’s brand awareness, and penetrate new markets with new and existing specialty vehicles products.

The Marine sector continued to secure various newbuilding contracts in 2010. The healthy order book will keep the yards in Singapore and the US busy in 2011. The sector will continue to pursue business opportunities in the naval, government and commercial industries and focus on delivering its commitments to customers. For shiprepair in the Singapore yards, we expect the subdued shiprepair market to continue into 2011.

In 2011, the Group will stay focused on delivering the orders in hand and work closely with customers to address their evolving requirements. Concurrently, the Group will continue its efforts in search of acquisition opportunities and seek collaborations with partners and OEM suppliers to better position the Group to tap business opportunities for growth.


AerospaceLeveraging its global

MRO network of airframe,

component and engine

capabilities, the Aerospace

sector continued to create

value for customers

worldwide.

Extending beyond MRO support, ST Aerospace is one of the few MRO providers with full in-house engineering capability such as the design and development of UAVs.

Over the year, the AMM business marked many significant milestones with its long standing customers. These included the redelivery of the 100th aircraft to All Nippon Airways, 1,000th aircraft to Delta Air Lines and 800th aircraft to UPS. ST Aerospace also celebrated 20 years of partnership with Japan Airlines.

On the engineering design and development front, the sector completed several cabin interior modifications and obtained European Aviation Safety Agency (EASA) Supplemental Type Certificates (STC) for Airbus A320 and A321 aircraft for Jetstar Asia and Ural Airlines respectively. Late in the year, ST Aerospace secured a Boeing 757-200 passenger-to-passenger/cargo (combi) conversion programme from Guggenheim Aviation Partners for TNT Airways, which further solidified its track record for Boeing 757 PTF conversions.

Establishing the same dedication to defence customers, ST Aerospace continued to cater to the outsourcing needs of the Republic of Singapore Air Force (RSAF). It stays committed in its strategic partnership with the RSAF, remaining relevant by leveraging rapidly advancing technology and providing innovative solutions. The sector established F15 mission and avionics systems upgrade capability to support the RSAF’s new fighters. It also completed the modernisation of the first C130 transport aircraft for the RSAF, which equipped the aircraft with an avionics suite that will improve the operational readiness, despatch reliability and operational efficiency of the fleet.

During the year, ST Aerospace signed several military programmes involving Unmanned Aerial Vehicles (UAV) and fighter platform upgrades. These included a $543m contract to procure 12 M346 aircraft and a ground based training system for RSAF’s fighter pilot training in Cazaux, France. Delivery of the first aircraft is expected in 2012.

In an ongoing effort to increase capacity and capability to position itself for the eventual upturn, ST Aerospace entered into a joint venture with Guangdong Airport Management Corporation to set up a commercial aircraft heavy maintenance facility in Guangzhou,

ImprovIng performance, engagIng cuStomerS

Revenue for the Aerospace sector was comparable to 2009 and profit before tax grew by 15%. This was despite the lack of a broad-based recovery in the MRO sector, with most airlines deferring heavy maintenance in an effort to conserve cash. The year also saw the end of the Singapore government’s Jobs Credit Scheme and the continued depreciation of the US dollar, both of which affected the sector. The sector’s improved performance under these circumstances was made possible by its strong focus on engaging its customers, enhancing its capabilities and remaining cost competitive.

Through its network of facilities spanning the Americas, Asia Pacific and Europe, ST Aerospace continued to offer cost competitive airframe, component and engine solutions to over 315 customers from 65 countries. During the year, ST Aerospace made forays into new markets, maintaining a robust and diversified customer base while adding more MBH™ programmes.

aIrcraft maIntenance & modIfIcatIon (amm)

Building on its track record of quality standards, quick turnaround and cost efficiency for customers, the AMM business remained steadfast in its performance and continued to extend relationships with its core customers.

New customers, both large and small, were added. More work was secured from key customers in the Americas, Asia Pacific and Europe, such as All Nippon Airways, Delta Air Lines, FedEx Express, Japan Airlines and US Airways, as well as customers from Australia, Bhutan, Finland, Malaysia, New Zealand, Russia and Seychelles.

ST Aerospace enjoyed

continued support from the

world’s largest airlines and

air freight operators.

ST Aerospace completed the modernisation of the first C130 transport aircraft for the RSAF.


Aerospace

China. Endorsed by the Civil Aviation Administration of China, ST Aerospace (Guangzhou) Aviation Services Company Limited was incorporated in late 2010 and is expected to begin operations in two years’ time.

ST Aerospace continued to enhance its global MRO network with new hangars launched at Pudong International Airport in Shanghai, China. This facility is able to accommodate an Airbus A380. A new hangar in San Antonio, Texas, USA was also commissioned in December.

Jeju Air, Primera Air, Shanghai Airlines and Spring Airlines. In the second half of the year, MBH™ contracts with China Airlines and T’way Air were also added. To date, ST Aerospace is committed to provide MBH™ support for over 700 aircraft.

Spring Airlines, whose fleet of 78 Airbus A320 aircraft is supported by the component MBH™ programme, honoured ST Aerospace with an Outstanding Supplier Award 2010 in the Aircraft Material Suppliers’ category. This was for its expanded component support and airframe services, including C and D checks, seats and slides overhaul and Aircraft-On-Ground (AOG) support.

Another notable support contract was for Jet Airways. It selected ST Aerospace’s engine MBH™ solution for the 143 CFM56-7B engines that power the 67 Boeing 737 next generation aircraft operated by the airline and its low cost carrier subsidiary JetLite. Worth US$750m, the agreement requires ST Aerospace to provide comprehensive engine maintenance and engineering support that offer the customer a high

standard of maintenance quality with improvement in technical reliability and longer on-wing life for the engines.

In August, ST Aerospace was selected by SAS Airlines to maintain its CFM56-3 engines on a time-and-material basis. This contract extends the engine maintenance footprint of ST Aerospace to Europe. One month later, another contract was secured involving engine maintenance support for T’Way Air’s CFM56-7B engines that power the Boeing 737-800 aircraft, on an exclusive time-and-material basis for ten years.

The sector also completed construction and certification of the test cell for

ST Aerospace added a new hangar complex in China’s Pudong International Airport to meet demands from its growing customer base.

component & engIne totaL Support (cetS)

The Aerospace sector continued to grow the customer base and repertoire of services for its components and engines business during the year. Leveraging the growing popularity of narrow- body aircraft such as the Airbus A320 and Boeing 737 family of aircraft, ST Aerospace continued to market its component and engine MBH™ support programmes globally. Initially tailored for start-up airlines and low cost carriers, the MBH™ solution has gained acceptance among traditional airlines in Asia and Europe, including Cimber Sterling,

Jet Airways awarded ST Aerospace a $1b engine MBH™ contract.

ST Aerospace’s innovative

and adaptive engineering

design won it the defence

industry award of

excellence.


its second engine facility near Gaoqi International Airport in Xiamen, China. The new facility will obtain certifications from key international civil aviation authorities in 2011, and will provide maintenance, repair and overhaul as well as integrated engine solutions for the CFM56-5B and CFM56-7B engines.

Having been appointed a GE-approved On-Wing Support provider for the GEnx-1B and GEnx-2B engines that power Boeing 787 and 747-8 aircraft, ST Aerospace sent its engineers and technicians for training at GE’s customer technical education centre in Ohio, USA. There, they acquired expertise in the management of the key on-wing activities expected during the engines’ Entry-in-Service maintenance phase. These included engine change on- wing, line replacement units change, fan-stator/propulsor split and mate, full video borescope and bore-blending on engines. ST Aerospace will have access to GEnx’s engineering support, ensuring leading edge technology for ST Aerospace’s maintenance process, at the same time, providing GEnx operators with the highest standards of on-wing support.

To enhance its service offerings in the components business, ST Aerospace continued to augment repair capabilities to support MBH™ initiatives for the Boeing 737NG, 757, Airbus A320, A330 and military aircraft. It also established more service centres, basic ordering agreements and other collaborative agreements with various components and aircraft OEMs on military and commercial products. Agreements were signed with Aerokool, Dukane, Hamilton Sundstrand, IPECO, Kollsman, Northrop Grumman and Triumph.

The landing gear facility in Madrid saw further success during the year. Since commencing operations in 2008, it has completed and delivered more than 60 A319/A320 landing gears (20 shipsets).

It has also completed the repair of the first A330/A340 Main Landing Gear for Iberworld Airlines in late 2010. Overhaul capabilities were added in 2010 for the A340 Centreline Landing Gear, complementing the MRO offering for A320 landing gears.

In June, the facility was certified by the US Federal Aviation Administration (FAA) as an FAA Part 145 Repair Station. This followed the approval of the facility as a Part 145 maintenance organisation by the Spanish civil aviation authority, Agencia Estatal de Seguridad Aérea, and the EASA in its first year of operations. With these approvals, ST Aerospace is now the only certified FAA and EASA Part 145 repair station in Spain specialising in the maintenance of Airbus A320, A330 and A340 landing gears.

acQuISItIonS & dIveStmentS

Acquisition of the remaining 30% equity stake in ST Aerospace Training Academy Pte. Ltd. was completed in August.

ST Aerospace added A330 and A340 landing gear repair capabilities in its Madrid facility.

ST Aerospace Training Academy thus became a wholly owned subsidiary and was renamed ST Aerospace Academy.

Managed and operated by ST Aerospace, the academy is the first non-airline affiliated flight training organisation in Singapore to offer commercial pilot training services to network airlines, low cost carriers and individuals. Apart from its Commercial Pilot License with Instrument Rating (CPL/IR) training programme, the academy is in the midst of conducting a beta trial for its Multi-crew Pilot License (MPL) training, a modern pilot training programme that uses state-of-the-art training techniques and devices to prepare pilots for today’s multi-crew jet aircraft.

major projectS

In the area of PTF conversions, ST Aerospace sustained steady redeliveries for various freighter conversion programmes.

The programme for FedEx Express has moved into a steady state and ST Aerospace has been redelivering the converted aircraft on time. A second conversion line was added in Singapore in August. With a total of five conversion lines (three in Mobile, US and two in Singapore), 14 Boeing 757-200 aircraft were converted and redelivered during the year.

The Boeing Converted Freighter programme for All Nippon Airways’ Boeing 767-300 was successfully completed in December, with redelivery of all seven converted aircraft to the customer. Backlog includes another ten firm orders from Boeing for Q-Aviation.

Two MD11s were redelivered over the year as this successful programme draws to a gradual close, having converted most of the MD11 aircraft in operation worldwide.


The Electronics sector

helps customers transform

to meet environmental

challenges and manage

their operations in a more

resource-efficient manner.

Electronics

The Venus USV’s modular design concept envisages a common platform reconfigurable for multiple missions, through integrating different payload modules, offering a high level of mission autonomy.

the development of eco-solutions for the Eco-City. Another significant milestone is its participation in the EMA IES pilot project in Singapore.

ST Electronics’ strength in exploiting dual use technologies, and its extensive experience and skills in its three core business groups, have made it a trusted partner of its customers, both government and commercial.

Large-ScaLe SyStemS group (LSg)

The rapid urbanisation of cities around the region has created opportunities for the sector’s MRT electronics systems. Krungthep Thanakom Co Ltd awarded the company the Bangkok BRT AFCS contract. The first route of the new BRT opened in September 2010. The company was also awarded a AFCS contract for the Bangkok Mass Transit System Sukhumvit Line which is to be delivered by the second half of 2011.

During the year, LSG also received orders from train manufacturers in China for its Passenger Information Systems that would be installed in the Singapore Downtown Line MRT, the Rio de Janeiro metro vehicles in Brazil and Izmir Light Rail Transit System in Turkey. The sector’s overseas rail electronics contracts totalled about $150m for the year.

LSG continued to secure a number of security systems projects in Singapore. These included the security system for the Marina Bay Financial Centre Phase II and an accreditation and access control project for the 2010 Formula 1 Singapore Grand Prix.

In May, the sector was awarded a contract for an airfield ground lighting control and monitoring system for Singapore’s Changi International Airport. In addition, it delivered a Meteorological Doppler Weather Radar System for the National Environment Agency, in time fortheYouthOlympicGamesheldinSingapore during the year.

expandIng marKetS, executIng SoLutIonS

Revenue for the Electronics sector was comparable to 2009 despite the uncertain global economic conditions. PBT was 11% higher and the order book remains healthy with new contracts secured.

During the year, ST Electronics won several contracts including its first contract to provide an AFCS to Bangkok BRT, a contract to install the Signalling System for the Singapore Downtown Line and a US$21.5m AMR radio transceivers contract from Arad Technologies. In product sales, ST Electronics has expanded its market reach to more than 100 countries.

The sector has also embarked on its new business thrust into the development and marketing of Eco-enabling ICT solutions. These Eco·Smart products and solutions include IES, Advanced Metering Infrastructure (AMI), Green ICT infrastructure and intelligent transport systems. ST Electronics helps customers transform to meet environmental challenges and manage their operations in a more resource-efficient manner. The sector has signed a strategic partnership with Sino-Singapore Tianjin Eco-City Investment & Development Co Ltd for

Eco·Smart products and

solutions include intelligent

energy systems, advanced

metering infrastructure,

Green ICT infrastructure and

intelligent transport systems.

Passenger Information Display Systems from ST Electronics are deployed in Brazil, China, Saudi Arabia, Singapore, Thailand, Turkey and elsewhere.


products and solutions in Bulgaria, China, Finland, India and Madagascar. ACOMSYSMaritimeVSATreport, released in June, noted that the satellite communications platform from VT iDirect (iDirect), a global company headquartered in the US, is the system of choice for both service providers and end users. Twelve, or 80%, of the top 15 maritime service providers now leverage iDirect’s technology.

In addition, iDirect expanded its new DVB-S2/Evolution platform with improvements in performance, efficiency and flexibility. It also strengthened its strategic partnership with Verizon Business which started to test iDirect Evolution for its 2011-2012 network rollout over Verizon’s 500 retail sites in the US. Intelsat General has worked with iDirect Government Technologies (iGT) to implement its SatManage Network management system to support a major maritime network for military vessels.

iGT is now operating under a US Government approved Proxy Agreement and may pursue classified government and military contracts.

Software SyStemS group (SSg)

SSG achieved several milestones during the year, including winning a contract from the Department of Civil Aviation in Ecuador and delivering the Royal Thai Air Force’s first F16A networked mission trainers over two separate locations in the region. In Singapore, ST Electronics led a consortium in delivering a 3D virtual world, the Singapore 2010 Odyssey, to the Infocomm Development Authority andtheSingapore2010YouthOlympicGames Organising Committee for the inauguralYouthOlympicGames. ST Electronics also implemented K-Link, an Internet-based one stop platform linking all kindergartens directly to the Singapore Ministry of Education.

With the growing migration to the Cloud, ST Electronics’ data centre co-location business has met with good success. It has recently won another contract to provide 20,000 sq ft of premium data centre space for a major multinational company to host its customer applications.

In the area of capability development, Antycip Simulation, ST Electronics’ subsidiary in Europe, released new features for its MyModels and

Singapore’s first integrated resort, Resorts World Sentosa showcases ST Electronics’ integrated security systems, IT infrastructure, carpark guidance and payment systems.

Electronics

ST Electronics continues to

secure new customers for its

VSAT products and solutions

in Bulgaria, China, Finland,

India and Madagascar.

communIcatIon & SenSor SyStemS group (cSg)

The opening of Resorts World Sentosa in January saw the successful delivery of the company’s integrated security system, IT infrastructure and a carpark guidance and payment system.

Through its subsidiary, Telematics Wireless, ST Electronics was awarded a contract to provide SMART vehicle and asset tracking devices for the recovery of stolen vehicles and goods. The SMART tracking devices are used in Brazil, Argentina and Europe.

In the area of satellite network systems, ST Electronics continues to secure new customers for its VSAT

Modern production facilities for VSAT equipment.

In new product development, LSG showcased its Venus USV at the Singapore Airshow and Euronaval in 2010.


MyBehaviour which enable quick generation of high fidelity models in simulation and training applications. Through close partnership with CMLabs, the company developed two state-of-the-art Vortex Crane Simulators for PNI Training Centre in Norway, for training crane operators, banksmen and slingers.

VT MÄK (MÄK), ST Electronics’ simulation company in the US, released its 3D visualisation solution, VR-Vantage XR and VR-TheWorld Server, from which simulation and visualisation applications can stream terrain directly as users move about the world. MÄK is also now able to support the HLA Evolved, an international simulation networking standard (IEEE-1516.2010). Embraer has selected MÄK’s VR-Vantage as part of its Mission Planning Station and Mission Debriefing Station to support pilots for operation on the Super Tucano aircraft.

acQuISItIonS & dIveStmentS

ST Electronics increased its stake in Telematics Wireless to 96.66%, while Intelect Technologies Inc. in the US became a wholly owned subsidiary of ST Electronics. The sector plans to

consolidate Intelect into iDirect to draw synergies and expand market channels for ST Electronics’ products in the US.

As part of ongoing business review to streamline operations, enhance marketing channels and lower cost structures, the sector divested its stake in ST Electronics-PCI Co., Ltd in Guangzhou, China.

To focus on strengthening professional education and training in Singapore, it divested STET Institute Pte Ltd and acquired the remaining shares in Knowledge Alive Pte Ltd. Knowledge Alive is an e-Learning solutions provider of premier IT education to the private and public sectors.

major projectS

A leading supplier of AMR and AMI solutions, ST Electronics will provide AMR radio transceivers to Arad Technologies till 2015. Radio transceivers are a key component in smart AMR meters which are used to monitor water, electricity or gas usage. These transceivers will be deployed in China, Europe, India and the US.

The company will also be participating in EMA’s milestone IES pilot project in partnership with Accenture Pte Ltd. The IES is an advanced metering infrastructure and smart grid pilot that will test smart grid applications and intelligent technologies before implementing them throughout Singapore. ST Electronics will design and implement the critical infrastructure that is necessary to enable smart grid applications.

During the year, ST Electronics successfully completed the delivery of platform screen doors, integrated supervisory control, signalling and various systems for the Circle Line, Stages 1 and 2. It extended its involvement in Singapore’s MRT development by securing a contract from Invensys Rail to install a Signalling System for the Downtown Line, which is expected to complete by 2016.

Other significant projects include the LEARNet programme for the Third Generation SAF servicemen to learn ‘on-the-go’, the delivery of the first Aerodrome Simulator System in East Africa to Tanzania Civil Aviation Authority and the implementation of MÄK’s and Antycip Simulation’s solutions for the Spanish Army.

1,200 students from over 25 schools gathered online in the Singapore 2010 Odyssey for a virtual pledge-taking ceremony for the National Day celebrations.

Tanzania Civil Aviation Authority provides training with ST Electronics’ aerodrome control tower simulator.


Land SystemsA stream of innovative

products enabled the Land

Systems sector to secure

breakthrough contracts

in both the defence and

commercial arenas.

The team at ST Kinetics adding the final touch in preparing the vehicles for showcase at Singapore’s National Day Parade 2010.

at Eurosatory 2010. It was fitted with the ST Kinetics 40/7.62 Remote Control Weapon Station (RCWS) on the front cabin, and armed with the ST Kinetics 50 RCWS at the rear cabin, making the Bronco FSV the world’s first dual RCWS design, and the most lethal ATV in its class. The ST Kinetics 30 RCWS fitted with a 30mm cannon gun, and the world’s only under 30 tonnes Trailblazer Countermine Vehicle were also showcased to the public for the first time at the Singapore Airshow.

A major highlight of the year for the LSS group was the successful delivery of the Warthog ATV to the UK MOD for operations in Afghanistan. In addition, it delivered the first battalion of the Terrex ICV to the SAF in August, enabling the SAF to achieve Initial Operating Capability in the second half of the year. Deliveries of Warthog and Terrex will continue into 2011.

During the course of the year, the LSS group secured healthy orders from various armed forces. Some of the announced new orders include a €30.13m contract for the demilitarisation of ammunition for an African country, a repeat contract from the Finnish Army for the supply of 40mm High Velocity High-Explosive Dual Purpose Self-Destruct (HV HEDP-SD) ammunition, a US$20.9m contract from the Brazilian Navy for the supply of five units of 40mm L70 naval guns, and the supply of 40mm ammunition to the UK MOD.

SpecIaLty veHIcLeS & ServIceS (SvS)

A key highlight of the year for the SVS group was the successful launch of a new brand, TRXBUILD, to unite three existing China brands for its range of construction equipment sold by Beijing Zhonghuan Kinetics, Guizhou Jonyang Kinetics and Jiangsu Huatong Kinetics.

TRXBUILD leverages the cost benefits of the three China entities and draws on the engineering resources of the sector in China, US, Canada and Singapore to integrate and optimise proven components (from Japan, Europe and the US) to offer its customers an extensive range of reliable, efficient and cost effective construction equipment. In addition, TRXBUILD’s customers will benefit from an expanded dealer and aftersales network, and enjoy maximum uptime and productivity through TRXBUILD’s comprehensive end-to-end through-life support. The TRXBUILD brand was launched in Singapore in September and this was followed by an international launch and showcase of TRXBUILD products in Shanghai at Bauma 2010.

Another highlight for the SVS group was the establishment of a wholly owned Indian subsidiary, LeeBoy India. Fuelled by its huge growth in infrastructure development, India has one of the world’s highest demands for construction equipment. Established

deLIverIng productS, deveLopIng tecHnoLogIeS

The Land Systems sector continued its pursuit of sustainable growth in all its business groups in 2010, delivering on major contracts like the Warthog to the UK MOD, and the Terrex to the SAF; and showcasing new products such as the 40mm Low Velocity Extended Range round, and the Bronco Fire Support Vehicle (FSV) both internationally and locally.

The year also saw the opening of LeeBoy India Construction Equipment Pvt Ltd (LeeBoy India) in Bangalore, India and the launch of the Land Systems sector’s new TRXBUILD brand of construction equipment to unify the branding of the products made by its three specialty vehicles companies in China.

In terms of order book, the sector secured a number of important orders, from the provision of driver training, maintenance and preservation support to the SAF, to the supply of 40mm munitions to the various militaries, through to the demilitarisation of ammunition for an African nation, and the supply of naval guns to the Brazilian Navy.

Continuing the efforts of prior years, the Land Systems sector furthered its R&D tie-ups with tertiary institutions while pushing forward its activities in sustainable transport engineering, getting its diesel-electric hybrid bus on the roads of Singapore while inking new collaborations with the Tianjin Eco-City.

Land SyStemS & SoLutIonS (LSS)

The 40mm Low Velocity Extended Range ammunition was launched at two global platforms, the Singapore Airshow 2010 and Eurosatory 2010. The Bronco FSV, a new concept derived from the original Bronco All-terrain Tracked Vehicle (ATV), was also unveiled

The Warthog All-terrain Tracked Vehicle was successfully delivered to the UK MOD.

The LSS Group introduced

a number of new products

during the year, all of which

were well received by

the international defence

industry and trade media.


with a total investment of $50m, LeeBoy India is to market, manufacture and support a range of construction equipment from road construction and maintenance equipment to excavators and off-road dump trucks. LeeBoy India is based in Bangalore, one of the country’s hubs for construction equipment manufacturing, with an extensive network of high quality suppliers and production capabilities.

In the US, VT LeeBoy responded to an urgent request by BP to customise its standard LeeBoy force feed loader with a screening device to remove minute tar balls left embedded in the sand along the beaches in the Gulf of Mexico as a result of the oil spill there. Named the Sand Shark, the first equipment was delivered to BP in September, with subsequent units delivered over the rest of the year.

VT SVC was renamed VT Hackney in October to better align the company’s corporate name with its best known brand, Hackney. VT Hackney will continue to keep its well established Kidron brand name for its line of refrigerated bodies and trailers.

totaL Support ServIceS (tSS)

The TSS group continued to make good progress in promoting its total support approach to both its military and commercial customers.

On defence, the TSS group won a six-year contract worth $87m to provide driver training for a wide spectrum of wheeled and armoured vehicles. This new contract extends the training services that ST Kinetics has been providing since August 1997 to December 2015. In the second half of the year, the SAF also exercised its option for a vehicle maintenance contract, and awarded a new preservation services contract to the TSS group. Under the maintenance contract, ST Kinetics will continue to perform depot level maintenance, repair and overhaul of SAF vehicles and components. Under the preservation services contract, ST Kinetics will provide preservation support of equipment and components for SAF’s fleet of reserve vehicles. The contracts are worth a total of $160m and will run for four years, with an option for a two-year extension of the preservation services contract.

On the commercial front, in line with the Land Systems sector’s strategy to grow its total support services business, SDDA, a wholly owned subsidiary of ST Kinetics, established Kinetics Link Services with Malaysia’s IT Portlink to pursue seaport maintenance, repair, overhaul and spare management business. The $5m joint venture is 60% owned by SDDA and 40% owned by IT Portlink.

Singapore Test Services (STS), a wholly owned subsidiary, launched a certification business for ISO 9001, ISO 14001 and OHSAS 18001 and has achieved the Singapore Accreditation Council’s accreditation for calibration of vibration sensors and systems. STS also attained the Approved Test Centre status for the Singapore Green Labelling scheme by the Singapore Environment Council.

SuStaInaBLe tranSport engIneerIng

The Land Systems sector, through its wholly owned subsidiary Kinetics Systems Shanghai, has been supplying electric powertrain components to vehicle manufacturers and customers

Land Systems

TRXBUILD was launched in September for the specialty vehicles market.

A key highlight of the year

for the SVS group was the

successful launch of a new

brand, TRXBUILD, to unite

three existing China brands

for its range of construction

equipment sold by Beijing

Zhonghuan Kinetics, Guizhou

Jonyang Kinetics and

Jiangsu Huatong Kinetics.


Bionix – one of the many vehicles from ST Kinetics featured at National Day Parade 2010 mobile column.

Defence Technology Prize (DTP) 2010 Winners:(Fromleft)MrYeoBengHai,DTPTeam (Engineering) Award Winner and Mr Loh Heng Fong, DTP Individual (Engineering) Award Winner.

University of Munich’s Research Centre at the Nanyang Technological University, to pursue joint R&D in electromobility.

As a testament to the R&D capabilities of the Land Systems sector, ST Kinetics was awarded three Defence Technology Prizes in 2010. Mr Loh Heng Fong was awarded the Defence Technology Prize - Individual for his contributions over 30 years in the area of armoured track vehicle design and development. The Terrex won the Defence Technology Prize - Team Award (Engineering), while AME, a business unit of the LSS group, in collaboration with the DSO National Laboratories, received the Defence Technology Prize – Team Award (R&D) for the development and production of major sub-systems for a classified programme.

in the China domestic market for many years. In September, the sector signed an MOU to form the Eco-City New Energy Vehicle Alliance together with leading international and China-based stakeholders in the electric vehicles industry. The alliance will jointly develop a suite of comprehensive green transport solutions for a sustainable eco-friendly city in Tianjin. As part of the alliance, the sector will contribute its expertise in the development, testing and assembly of electric powertrain components, as well as vehicle controllers for electric and hybrid-electric vehicles.

At the same time, a Sino-Singapore partnership led by ST Kinetics signed an agreement with Liang Hao Car Rental Co. Ltd. to engage in the supply of electric and hybrid electric buses to provide shuttle services within the Tianjin Eco-City.

In Singapore, the Land Systems diesel-electric hybrid bus ferried athletesduringtheinauguralYouthOlympics 2010. An MOU was also signed with a local bus operator to test bed a fleet of the hybrid buses.

The Land Systems sector’s business unit in Canada, Kinetics Drive Systems, furthered its collaboration with Cargotec, incorporating a production hybrid hydraulics drive into its Terminal Prime Movers, to achieve a 20% fuel saving for port operator customers worldwide.

reSearcH and deveLopment coLLaBoratIonS

Underscoring the importance of R&D, the Land Systems sector established several research collaborations with academic institutions during the year.

ST Kinetics and Singapore Polytechnic signed a Master Agreement to set up the Applied Materials Engineering Centre for the promotion of joint research on advanced materials. A Memorandum of Cooperation was also signed between ST Kinetics and Republic Polytechnic to establish the Advanced Composites Engineering Laboratory, which will conduct joint research on advanced composite materials. To explore clean energy applied translational R&D, specifically fuel cell research, ST Kinetics and Temasek Polytechnic collaborated to set up the Advanced Power and Energy Centre.

In the automotive area, ST Kinetics joined the A*STAR Capabilities for Automotive Research (A*CAR) Programme as a consortium member. A*CAR seeks to drive technology innovation in the automotive industry by establishing value chains among automotive OEMs, systems integrators and local supporting industries. Another Memorandum of Cooperation was signed with TUM-CREATE, the Technical

ST Kinetics’ fuel-saving diesel-electric hybrid bus joined the fleet of buses at the inaugural YouthOlympicGames.


A steady stream of

contracts from both naval

and commercial customers

reaffirmed the Marine

sector’s capabilities,

especially in projects

requiring extensive

engineering expertise.

Marine

a 51% stake, while the remaining 49% shareholding is divided equally between Hovertransport and Clearstone. Hovertrans Solutions seeks to exploit the use of hoverbarges for heavy lift in difficult terrain, in the global oil and gas and specialist transportation industries.

The Marine sector participated in major industry exhibitions during the year, including Euronaval, Posidonia, Offshore Technology Conference, SMM, AUSA and the International Workboat Show.

SHIp deSIgn and SHIpBuILdIng

In Singapore, the sector successfully launched a Seismic Survey Vessel for Swire Pacific Offshore and a Diving Support Vessel for DOF Subsea Pte Ltd.

In Mississippi, the US operations delivered the first of two 350,000 barrel ATBs to OSG Ship Management, Inc, the largest ATB unit in the US. It also delivered: the fourth Fishery Survey

Vessel for the National Oceanic and Atmospheric Administration which exceeds international standards for acoustically quiet vessels; two Platform Supply Vessels to L&M Botruc Rental Inc, one of the largest fleet operators of offshore maritime transportation vessels in the Gulf; and two 185,000 barrel ATB units to Crowley.

SurpaSSIng expectatIonS, emBracIng opportunItIeS

2010 saw the Marine sector cross the billion-dollar mark with turnover of $1.04b and profit before tax grew by 15% to $118m compared to the year before. This was fuelled by stronger sales in all three segments of the business, as well as higher margin contracts.

Among the new contracts signed during the year was an agreement with subsidiaries of Overseas Shipbuilding Group, Inc. to build two 8,000 barrel ATB units worth over US$21m. These are expected to be delivered in the second and third quarters of 2011.

The Marine sector also secured an undefinitised contract in excess of US$165m from the US Navy for a fourth FMC. This brings the total value of the Egyptian FMC project to approximately US$807m. Work on this fourth FMC will commence by mid 2011 and delivery is expected by end 2013. The first FMC was keel-laid in April 2010 with delivery targeted for mid 2012.

A steady stream of contracts totalling $276m from both naval and commercial customers reaffirmed ST Marine’s shiprepair capability, including conversion, modification and upgrading services for sophisticated vessel types, especially those requiring high engineering content.

In January, ST Marine signed a joint venture agreement with Hovertransport Consultants Ltd (Hovertransport) and Clearstone Investments LLC (Clearstone) to form Hovertrans Solutions Pte. Ltd. (Hovertrans Solutions). The new company is a subsidiary of ST Marine, which holds

VT Halter Marine delivered the first of two 350,000 bbl ATBs to OSG, the largest ATB unit in the US.

2010 saw the Marine sector

growing sales by 10% and

profit before tax by 15%.

This was fuelled by stronger

sales in all three segments

of the business, as well as

higher margin contracts.


In the next few years, the Marine sector is poised to deliver the following vessels: Seismic Survey Vessel, Diving Support Vessel, Landing Platform Dock, two 8,000 HP Tugs, the second 350,000 barrel ATB, the TAGM-25 Missile Instrumentation Ship, T-AGS 66 Oceanographic Survey Ship and the Egyptian FMC.

SHIprepaIr and ServIceS

The Marine sector continued to build on its strong position in dredgers, seismic vessels, pipe laying vessels and support vessels in the offshore and infrastructure markets.

The Republic of Singapore Navy (RSN) appointed ST Marine to upgrade two classes of its vessels. The work scope involves detailed system design, installation and integration to enhance the capability of the vessels to meet RSN’s operational requirements. The upgrading work is expected to be completed by end 2015.

The sector also scored its first contract with the Royal Australian Navy (RAN) to convert its 157.2m long combat logistics vessel, HMAS Success to be double hulled to meet the International Maritime Organisation standards for environmental protection against oil spills. The HMAS Success is designed to supply naval combat units with fuel, ammunition, food and stores whilst underway at sea. Capable of day and night Replenishment at Sea to ships alongside and concurrently by her embarked helicopter to other ships in company, the HMAS Success weighs 18,000 tonnes when fully loaded. Commissioned in 1986, HMAS Success is the largest ship built in Australia for the RAN. Work has commenced and the tanker will be redelivered by the first half of 2011.

ST Marine was also engaged by New Zealand’s National Institute of Water & Atmospheric Research Ltd to upgrade

Marine

its research vessel, Tangaroa. Capable of working in conditions ranging from sub-tropical to sub-antarctic, the vessel performs a wide range of stock assessment functions like fisheries acoustic work and seismic surveying.

The sector also secured two significant repair and conversion jobs for a 188.1m long semi submersible pipe lay vessel and a 143.5m long offshore diving support construction vessel from Saipem (Portugal) Comercio Maritimo and Coastline Group of Companies respectively.

Some of the shiprepair projects completed in the year include: the docking and steelwork repair on the tanker Coastal Energy Resolution; repair work on the supply vessels Lady Gerda, Far Sound, Far Grip, Far Spirit and Lady Christine; and repair work on chemical tankers Stolt Sneland, Stolt Mountain and Stolt Aquamarin.

The environmental

engineering business made

further inroads into the

Asia Pacific region, scoring

two significant contracts in

Brunei and China totalling

about $90m.

The repair works on the trimaran, a three parallel-hulled luxury yacht, White Rabbit Echo was commended by its owner.

Two PSVs were delivered to L&M Botruc Rental Inc.


STSE sealed one of its largest contracts to date to design and construct a modern Integrated Waste Management Facility in Brunei for $66.5m.

envIronmentaL engIneerIng and ServIceS

The environmental engineering business made further inroads into the Asia Pacific region, scoring two significant contracts in Brunei and China totalling about $90m.

The first was awarded in June, with ST Marine and its Brunei consortium partner QAF Limited being awarded a $66.5m contract to design and construct a modern Integrated Waste Management Facility in Brunei. Comprising a state-of-the-art Waste Transfer and Logistics station plus a 36-month operations and maintenance (O&M) contract for all the facilities, the project is the largest environmental infrastructure contract to be secured to date by ST Marine and its environmental arm, STSE. The 110-hectare Engineered Landfill at Sungai Paku will probably be the largest in Asia when completed in 2012.

A year after signing an MOU with Sino-Singapore Tianjin Eco-City Investment & Development Co., Ltd, STSE’s subsidiary in China, STE&T, signed a RMB113m contract in September to clinch its

second contract for the year. STE&T will provide a proprietary loop-based PWCS to collect recyclables, non-recyclables and food waste in Tianjin Eco-City’s Eco-Business Park. Contracted on a design, build, own, operate, and transfer (DBOOT) business model, the construction period is estimated to be 18 months, beginning from 1 October 2010, followed by an O&M period of 13 years.

STSE and STE&T have completed and handed over the four transfer stations in Doha, Qatar, and commissioned the Materials Recovery Facility in Daxing, Beijing. Construction is on schedule for the Waste Transfer Station in Donghu Newtech Zone in Wuhan, Hubei.

In November, STSE set up a wholly owned subsidiary, STSE Engineering Services (B) Sdn Bhd (STSEB) in Brunei to execute the Integrated Waste Management Facility project in Sungai Paku. STSEB will also leverage STSE’s environmental engineering expertise to offer innovative solutions, to meet Brunei’s growing demand for sustainable environmental solutions.

Semac 1, a semi submersible pipe lay vessel undergoingmajorupgradingatTuasYard.


“to increase in value”

Our Financial Reports

demonstrate the Group’s

performance and growth.

mprove

Directors’ Report 91

Statement by Directors 106

Independent Auditors’ Report 107

Financial Statements

Consolidated Income Statement 109

Consolidated Statement of Comprehensive Income 110

Balance Sheets 111

Statements of Changes in Equity 113

Consolidated Statement of Cash Flows 116

Notes to the Financial Statements 121

SGX Listing Manual Requirements 234

Sectoral Financial Review 236

Financial Report

90 Singapore Technologies Engineering Ltd » AnnuAl RepoRt 2010

as at 31 December 2010(Currency – Singapore dollars unless otherwise stated)

Directors’ Report

We, the undersigned directors, on behalf of all the directors of the Company, submit this annual report to the members together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2010.

Directors

The directors of the Company in office at the date of this report are as follows:

Peter Seah Lim Huat (Chairman)Tan Pheng Hock (President and Chief Executive Officer)Koh Beng SengLG Neo Kian Hong (Appointed on 31 March 2010)Dr Tan Kim SiewQuek Tong BoonWinston Tan Tien HinQuek Poh HuatVenkatachalam KrishnakumarDavinder Singh s/o Amar SinghDr Stanley Lai Tze ChangKhoo Boon Hui (Appointed on 1 September 2010)COL Ong Ann Kiat (Appointed on 31 March 2010 as Alternate Director to LG Neo Kian Hong)

Arrangements to enable directors to acquire shares or debentures

Except for the Singapore Technologies Engineering Executives’ Share Option Scheme, Singapore Technologies Engineering Share Option Plan, Singapore Technologies Engineering Performance Share Plan and Singapore Technologies Engineering Restricted Stock Plan (collectively the “ST Engineering Share Plans”), neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Directors’ interests in shares or debentures

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning (or date of appointment, if later) or at the end of the financial year or between the end of the financial year and on 21 January 2011.

91Singapore Technologies Engineering Ltd » AnnuAl RepoRt 2010


Directors’ Report

Directors’ interests in shares or debentures (continued)

According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars of interests of directors who held office at the end of the financial year in shares or debentures in the Company and its related corporations were as follows:

Holdings in the name of the director, spouse or infant children

1 January 2010or date of

appointment if later 31 December 2010

The CompanyOrdinary Shares

Peter Seah Lim Huat 335,108 391,483Tan Pheng Hock 1,052,264 1,471,422Koh Beng Seng 41,723 102,758Winston Tan Tien Hin 528,864 *1 611,428 *1

Quek Poh Huat 943,478 1,016,681Venkatachalam Krishnakumar 53,750 60,953Davinder Singh s/o Amar Singh 2,547 8,192Dr Stanley Lai Tze Chang 3,878 5,824

Related CorporationsGlobal Crossing LimitedCommon Stock of US$0.01 each

Peter Seah Lim Huat 21,618 25,522

Mapletree Industrial Trust Management LtdUnit holdings in Mapletree Industrial Trust

Quek Poh Huat – 51,000Venkatachalam Krishnakumar – 8,000

Mapletree Logistics Trust Management Ltd.Unit holdings in Mapletree Logistics Trust

Quek Tong Boon 2,000 2,000

Singapore Airlines LimitedOrdinary Shares

LG Neo Kian Hong 9,000 9,000Venkatachalam Krishnakumar 3,733 3,733

S$300 million 2.15% Bonds due 2015 Davinder Singh s/o Amar Singh – $500,000




1 January 2010 or date of


Singapore Telecommunications LimitedOrdinary Shares

Peter Seah Lim Huat 3,040 3,040Tan Pheng Hock 3,350 3,350Koh Beng Seng 1,520 1,520LG Neo Kian Hong 8,030 8,030Dr Tan Kim Siew 52,850 52,850Quek Tong Boon 2,030 2,030Winston Tan Tien Hin 54,980 *2 54,980 *2

Quek Poh Huat 35,210 35,210Davinder Singh s/o Amar Singh 3,170 1,810Khoo Boon Hui 3,087 3,087COL Ong Ann Kiat 2,240 2,240

SMRT Corporation LtdOrdinary Shares

Quek Tong Boon 4,000 4,000Quek Poh Huat 8,000 8,000COL Ong Ann Kiat 10,000 10,000

SP AusNetStapled Securities

Quek Poh Huat 256,000 256,000COL Ong Ann Kiat 20,000 20,000

StarHub LtdOrdinary Shares

Peter Seah Lim Huat 470,710 482,110Tan Pheng Hock 25,150 25,150Winston Tan Tien Hin 30,000 *3 30,000 *3

Venkatachalam Krishnakumar 15,716 15,716

STATS ChipPAC Ltd.Ordinary Shares

Peter Seah Lim Huat 6,900 6,900Koh Beng Seng 45,000 45,000


Directors’ Report






TeleChoice International LimitedOrdinary Shares

Peter Seah Lim Huat 50,000 50,000Tan Pheng Hock 30,000 30,000

Vertex Investment (II) LtdOrdinary Shares

Davinder Singh s/o Amar Singh 50 –

Vertex Technology Fund LtdOrdinary Shares

Winston Tan Tien Hin 10 10

Vertex Technology Fund (II) LtdOrdinary Shares

Koh Beng Seng 15 15Winston Tan Tien Hin 20 20Davinder Singh s/o Amar Singh 500 500

Redeemable Preference Shares

Koh Beng Seng 15 15Winston Tan Tien Hin 19 19Davinder Singh s/o Amar Singh 486 486


Directors’ Report



Directors’ Report




Exercise price Exercisable period

$

The CompanyOptions to Subscribe for Ordinary Shares

Peter Seah Lim Huat 22,250 – 2.37 8.2.2006 to 7.2.201022,250 – 2.57 11.8.2006 to 10.8.201033,375 33,375 3.01 10.2.2007 to 9.2.201133,375 33,375 2.84 11.8.2007 to 10.8.201144,500 44,500 3.23 16.3.2008 to 15.3.201244,500 44,500 3.61 11.8.2008 to 10.8.2012

Tan Pheng Hock 300,000 – 2.26 10.2.2002 to 9.2.2010225,000 225,000 2.72 20.2.2002 to 19.2.2011227,500 227,500 2.68 11.8.2002 to 10.8.2011175,000 175,000 2.29 8.2.2003 to 7.2.2012175,000 175,000 1.92 13.8.2003 to 12.8.2012200,000 200,000 1.79 7.2.2004 to 6.2.2013200,000 200,000 1.86 12.8.2004 to 11.8.2013200,000 200,000 2.09 10.2.2005 to 9.2.2014200,000 200,000 2.12 11.8.2005 to 10.8.2014200,000 200,000 2.37 8.2.2006 to 7.2.2015200,000 200,000 2.57 11.8.2006 to 10.8.2015200,000 200,000 3.01 10.2.2007 to 9.2.2016200,000 200,000 2.84 11.8.2007 to 10.8.2016200,000 200,000 3.23 16.3.2008 to 15.3.2017

Koh Beng Seng 27,500 – 2.37 8.2.2006 to 7.2.201027,500 – 2.57 11.8.2006 to 10.8.201027,500 27,500 3.01 10.2.2007 to 9.2.201127,500 27,500 2.84 11.8.2007 to 10.8.201127,500 27,500 3.23 16.3.2008 to 15.3.201227,500 27,500 3.61 11.8.2008 to 10.8.2012





Exercise price Exercisable period

$

The CompanyOptions to Subscribe for Ordinary Shares

Winston Tan Tien Hin 37,000 – 2.37 8.2.2006 to 7.2.201037,000 – 2.57 11.8.2006 to 10.8.201037,000 37,000 3.01 10.2.2007 to 9.2.201137,000 37,000 2.84 11.8.2007 to 10.8.201137,000 37,000 3.23 16.3.2008 to 15.3.201237,000 37,000 3.61 11.8.2008 to 10.8.2012

Quek Poh Huat 33,000 – 2.37 8.2.2006 to 7.2.201033,000 – 2.57 11.8.2006 to 10.8.201033,000 33,000 3.01 10.2.2007 to 9.2.201133,000 33,000 2.84 11.8.2007 to 10.8.201133,000 33,000 3.23 16.3.2008 to 15.3.201233,000 33,000 3.61 11.8.2008 to 10.8.2012

Venkatachalam Krishnakumar 25,500 25,500 3.01 10.2.2007 to 9.2.201125,500 25,500 2.84 11.8.2007 to 10.8.201125,500 25,500 3.23 16.3.2008 to 15.3.201225,500 25,500 3.61 11.8.2008 to 10.8.2012

Related CorporationsGlobal Crossing LimitedOptions to Purchase Common Shares of US$0.01 each

Peter Seah Lim Huat 40,000 40,000 10.16 12.1.2005 to 12.1.2014

STATS ChipPAC Ltd.Options to Subscribe for Ordinary Shares

Peter Seah Lim Huat 70,000 70,000 1.99 6.8.2004 to 5.8.201335,000 35,000 1.91 17.2.2005 to 16.2.2014

Global Crossing LimitedRestricted Stock Units of Common Stock of US$0.01 each

Peter Seah Lim Huat 2,345 – 4.6.2010 – 7,229 8.7.2011


Directors’ Report






The CompanyConditional Award of 200,000 Performance Shares to be delivered after 2009

Tan Pheng Hock 0 to 300,000 #1 – ^

Conditional Award of 250,000 PerformanceShares to be delivered after 2010

Tan Pheng Hock 0 to 375,000 #1 0 to 375,000 #1

Conditional Award of 250,000 Performance Shares to be delivered after 2011


Conditional Award of 250,000 Performance Shares to be delivered after 2012

Tan Pheng Hock – 0 to 425,000 #2

Conditional Award of Restricted Shares to be delivered after 2008

Peter Seah Lim Huat (30,500 shares) 10,716 #3 5,358 #3

Tan Pheng Hock (45,000 shares) 17,325 #3 8,663 #3

Koh Beng Seng (15,500 shares) 5,446 #3 2,723 #3

Winston Tan Tien Hin (22,000 shares) 7,730 #3 3,866 #3

Quek Poh Huat (18,500 shares) 6,500 #3 3,250 #3

Venkatachalam Krishnakumar (18,500 shares) 6,500 #3 3,250 #3

Davinder Singh s/o Amar Singh (14,500 shares) 5,095 #3 2,548 #3

Dr Stanley Lai Tze Chang (5,000 shares) 1,757 #3 879 #3


Directors’ Report






The CompanyConditional Award of Restricted Shares to be delivered after 2009

Peter Seah Lim Huat (30,500 shares) 0 to 45,750 #4 13,034 #3

Tan Pheng Hock (96,000 shares) 0 to 144,000 #5 20,496 #3

Koh Beng Seng (15,500 shares) 0 to 23,250 #4 6,624 #3

Winston Tan Tien Hin (22,000 shares) 0 to 33,000 #4 9,402 #3

Quek Poh Huat (18,500 shares) 0 to 27,750 #4 7,906 #3

Venkatachalam Krishnakumar (18,500 shares) 0 to 27,750 #4 7,906 #3

Davinder Singh s/o Amar Singh (14,500 shares) 0 to 21,750 #4 6,197 #3

Dr Stanley Lai Tze Chang (5,000 shares) 0 to 7,500 #4 2,137 #3

Time-based Restricted Shares to be delivered after 2010

Peter Seah Lim Huat – 24,000 #6

Koh Beng Seng – 12,100 #6

Winston Tan Tien Hin – 17,100 #6

Quek Poh Huat – 14,300 #6

Venkatachalam Krishnakumar – 15,500 #6

Davinder Singh s/o Amar Singh – 11,300 #6

Dr Stanley Lai Tze Chang – 16,700 #6

Conditional Award of 96,000 Restricted Shares to be delivered after 2010


Conditional Award of 96,000 Restricted Shares to be delivered after 2011

Tan Pheng Hock – 0 to 144,000 #7

Related CorporationsSTATS ChipPAC Ltd.Conditional Award of Restricted Share Unitsto be delivered after 2008

Peter Seah Lim Huat 6,900 #8 –


Directors’ Report






Related CorporationsStarHub LtdUnvested Restricted Shares(Performance period from 01/01/2007 to 31/12/2008)

Peter Seah Lim Huat 16,712#3 8,312#3


Peter Seah Lim Huat 19,000 #9 –

Unvested Restricted Shares(Performance period from 01/01/2008 to 31/12/2009)

Peter Seah Lim Huat – 5,740#3


Peter Seah Lim Huat 19,000 #10 19,000 #10

Time-based restricted shares to be delivered after 2010

Peter Seah Lim Huat – 20,000 #11

*1 Includes deemed interest in 200,000 shares in Singapore Technologies Engineering Ltd, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

*2 Includes deemed interest in 10,000 shares in Singapore Telecommunications Limited, held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

*3 Held by Winmark Investments Pte Ltd, a company in which Winston Tan Tien Hin has a 50% interest.

^ During the financial year, 90,000 shares were released to Mr Tan Pheng Hock.


Directors’ Report



#1 A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to be released is capped at 150% of the conditional award.

#2 A minimum threshold performance over a three-year period is required for any performance shares to be released and the actual number of performance shares to be released is capped at 170% of the conditional award.

#3 Balance of unvested restricted shares to be released according to the stipulated vesting periods.

#4 For this period, Messrs Peter Seah Lim Huat, Koh Beng Seng, Winston Tan Tien Hin, Quek Poh Huat, Venkatachalam Krishnakumar, Davinder Singh s/o Amar Singh and Dr Stanley Lai Tze Chang was awarded 19,551, 9,936, 14,102, 11,859, 11,859, 9,295 and 3,205 new shares on 1 April 2010 upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2009 to 31 December 2009 has thus lapsed.

#5 For this period, Mr Tan Pheng Hock was awarded 40,992 new shares on 1 April 2010 upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2008 to 31 December 2009 has thus lapsed.

#6 The shares under the time-based restricted award will be vested in 2011.

#7 A minimum threshold performance over a two-year period is required for any restricted shares to be released. A specified number of restricted shares to be released will depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.

#8 The restricted share units will vest over a period of three years starting from the first anniversary of grant.

#9 The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the Company over a two-year period from 1 January 2008 to 31 December 2009. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. For this period, 8,740 new shares were awarded on 30 March 2010 upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2008 to 31 December 2009 has thus lapsed.

#10 The actual number of shares to be delivered under the conditional award will depend on the level of achievement of set performance targets in the Company over a two-year period from 1 January 2009 to 31 December 2010. No shares will be delivered if the threshold performance targets are not achieved, while up to 1.5 times the number of shares that are the subject of the award will be delivered if the stretched performance targets are met or exceeded. Shares will be delivered in phases according to the stipulated vesting periods.

#11 The shares under the time-based restricted award will be vested in May 2011.

Between the end of the financial year and 21 January 2011, the following Directors’ interests in the Company had increased as follows:

(a) Mr Tan Pheng Hock – increased to 1,696,422(b) Mr Koh Beng Seng – increased to 130,258(c) Mr Venkatachalam Krishnakumar – increased to 86,453


Directors’ Report


Directors’ interests in contracts

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit or any fixed salary of a full-time employee of the Company included in the aggregate amount of emoluments shown in the financial statements, or any emoluments received from related corporations and share options granted pursuant to the ST Engineering Share Plans) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except for professional fees paid to a firm of which a director is a member as shown in the financial statements.

Share plans

The Executive Resource and Compensation Committee (“ERCC”) is responsible for administering the Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”) (collectively “Share Plans”).

The Committee members are Mr Peter Seah Lim Huat (Chairman), Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang.

At our Extraordinary General Meeting (EGM) held on 21 April 2010, the shareholders approved the adoption of new PSP and RSP share incentive plans (2010 Share Plans). Upon the adoption of the 2010 Share Plans, the 2000 Share Plans were terminated without prejudice to the rights of holders of outstanding options and awards. The 2010 Share Plans carry the same terms as the 2000 Share Plans except that the maximum size of the shares to be awarded has been reduced to 8% over the 10-year life of the 2010 Share Plans (compared to 15% for the 2000 Share Plans).

As at 31 December 2010, no options and conditional awards have been granted to controlling shareholders of the Company or associates of the Company and no employees have received 5% or more of the total options and conditional awards available under the Share Plans.

The aggregate number of new shares issued pursuant to the Share Plans did not exceed 15% of the issued share capital of the Company.

During the financial year, except as disclosed below, there were no options granted and no shares awarded by the Company to any person to take up unissued shares of the Company.


Directors’ Report


Share plans (continued)

(a) ESOS/ESOP

(i) The options granted under the ESOS/ESOP are as follows:

Name of participant

Options granted and accepted

during the financial year under review

Aggregate options granted and

accepted since commencement of ESOS/ESOP to end

of financial year under review

Aggregate options exercised/

lapsed since commencement of ESOS/ESOP to end

of financial year under review

Aggregate options outstanding

as at end of financial year

under review

Director of the Company

ESOS

Tan Pheng Hock – 1,699,864 1,699,864 –

ESOP

Peter Seah Lim Huat – 530,000 374,250 155,750Tan Pheng Hock – 2,602,500 – 2,602,500Koh Beng Seng – 204,000 94,000 110,000Winston Tan Tien Hin – 593,500 445,500 148,000Quek Poh Huat – 375,000 243,000 132,000Venkatachalam Krishnakumar – 152,500 50,500 102,000

Non-Executive Directors of the Company and its subsidiaries (including former directors) – 5,405,566 4,103,066 1,302,500

Group Executives – 193,717,858 110,804,287 82,913,571

Parent Group Executives and others – 187,320 112,890 74,430

(ii) The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.

(iii) During the financial year, 23,981,263 ordinary shares in the Company were issued pursuant to the exercise of options to take up unissued shares of the Company.


Directors’ Report



(b) PSP

The PSP is established with the objective of motivating senior management staff to strive for sustained long-term growth and performance in ST Engineering and its subsidiaries (“ST Engineering Group”). Awards of performance shares are granted conditional on performance targets set based on the ST Engineering Group corporate objectives.

Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribed to be a three-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period. A specified number of performance shares shall be released by the ERCC to the recipient and the actual number of performance shares will depend on the achievement of set targets over the respective performance period. A minimum threshold performance is required for any performance share to be released and the actual number of performance shares to be released is capped at 150% to 170% of the conditional award.

In addition to PSP performance targets being met, the ERCC decided that commencing with the PSP contingent awards for financial year 2009, the final award for PSP is conditional upon the performance targets for RSP that has the same end of performance period being met. Known as the plan trigger condition, this is to create alignment between senior management and other employees. As an example, the final award for PSP 2010 is therefore conditional on the performance targets for RSP 2011, which has the same end of performance period in December 2012, being met.

For the financial years from 2007 to 2009, the performance measures used in PSP grants are Wealth Added and ST Engineering Group Total Shareholder Return (“TSR”) against MSCI Asia Pacific ex Japan Industrial Index.

In February 2010, the Committee reviewed the continued appropriateness of the 2 performance measures and decided to change the MSCI Asia Pacific ex Japan Industrial Index to a Defensive Stock Index, the constituents of which are selected “defensive stock” companies that have similar market risk as ST Engineering and are listed on Singapore Exchange Securities Trading Limited (“SGX”). Therefore, with effect from financial year 2010, the performance measures used in PSP grants are Wealth Added and ST Engineering Group TSR against Defensive Stock Index.

The awards granted under the PSP are as follows:

Name of participant

Conditional awards

granted during the financial year under

review

Awards released


Aggregate conditional

awards granted since

commencementof PSP to end of financial year under review

Aggregate awards

released since commencementof PSP to end of financial year under review

Aggregate conditional awards not

released as at end of financial

year under review


Tan Pheng Hock 0 to 425,000 90,000 0 to 4,195,000 450,075 0 to 1,225,000

Group Executives 0 to 2,604,400 555,929 0 to 33,172,800 3,643,648 0 to 6,696,535


Directors’ Report



(c) RSP

The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth and superior performance in ST Engineering Group. It also aims to foster a share ownership culture among staff within the ST Engineering Group and to better align staff’s incentive scheme with shareholders’ interest.

Pursuant to the RSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribed to be a two-year performance period. The actual number of restricted shares delivered will depend on the achievement of set targets over the respective performance period. This will be determined by the ERCC at the end of the qualifying performance period and released to the recipient over a three-year vesting period in the ratio of 50%, 25% and 25% consecutively.

A minimum threshold performance is required for any restricted share to be released while the maximum number of restricted shares to be delivered is capped at 150% of the conditional award.

The medium-term stretched targets measured over a two-year performance period are set based on ST Engineering Group corporate objectives. The performance measures used for the two-year performance period are ST Engineering Group EVA Spread and EBITDA Margin.

For the first time, non-executive directors (excluding those from the public sector) of ST Engineering, ST Aerospace, ST Electronics, ST Kinetics and ST Marine were granted contingent share awards during the year with no performance conditions nor vesting period. The performance period remains the same at one year and the final award is contingent upon non-executive directors completing the 1 year term ending 31 December 2010.

The awards granted under the RSP are as follows:

Name of participant

Conditional awards granted

duringthe financial year under

review

Awards released


Aggregate conditional

awards granted since

commencement of RSP to end of financial yearunder review

Aggregate awards

released since commencement of RSP to end of financial year under review

Aggregate awards not

released as at end of

financial year

Aggregate conditional awards not

releasedas at end of

financial year under review


Peter Seah Lim Huat 24,000 11,875 0 to 115,500 17,233 18,392 24,000Tan Pheng Hock 0 to 144,000 29,158 0 to 499,500 46,483 29,159 0 to 288,000Koh Beng Seng 12,100 6,035 0 to 58,600 8,758 9,347 12,100Winston Tan Tien Hin 17,100 8,564 0 to 83,100 12,428 13,268 17,100Quek Poh Huat 14,300 7,203 0 to 69,800 10,453 11,156 14,300Venkatachalam Krishnakumar 15,500 7,203 0 to 71,000 10,453 11,156 15,500Davinder Singh s/o Amar Singh 11,300 5,645 0 to 54,800 8,192 8,745 11,300Dr Stanley Lai Tze Chang 16,700 1,946 0 to 31,700 2,824 3,016 16,700

Non-Executive Directors of the Company and its subsidiaries 170,800 83,398 0 to 812,050 127,310 113,853 170,800

Group Executives 0 to 12,821,100 2,489,022 0 to 38,301,713 2,923,754 2,451,990 0 to 23,371,239


Directors’ Report


Audit Committee

The Audit Committee comprises three independent non-executive directors, one of whom is also the Chairman of the Committee. The members of the Audit Committee at the date of this report are as follows:

Koh Beng Seng (Chairman)Venkatachalam KrishnakumarDr Stanley Lai Tze Chang

The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act, Chapter 50. The Audit Committee met during the year to review the scope of the internal audit functions and the scope of work of the statutory auditors, and the results arising therefrom, including their evaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company’s officers to the auditors. The consolidated financial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submission to the directors of the Company for adoption.

In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions, reviewed the procedures set up by the Group and the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions.

The Audit Committee has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

Auditors

At the last Annual General Meeting held on 21 April 2010, Messrs KPMG LLP were appointed as the auditors of the Company in place of Ernst & Young LLP.

The Auditors, KPMG LLP, have expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Peter Seah Lim Huat Tan Pheng HockDirector Director

Singapore15 February 2011


Directors’ Report


We, Peter Seah Lim Huat and Tan Pheng Hock, being directors of Singapore Technologies Engineering Ltd, do hereby state that, in the opinion of the Directors:

(a) the accompanying balance sheets, consolidated income statement, consolidated statement of comprehensive income, statements of changes in equity, and consolidated statement of cash flows together with notes thereto set out on pages 109 to 233 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2010, and changes in equity of the Company and of the Group, the results of the business and cash flows of the Group for the year ended on that date; and

(b) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

Peter Seah Lim Huat Tan Pheng HockDirector Director


Statement by Directors


Report on the financial statements

We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the “Company”) and its subsidiary companies (collectively the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2010, the statements of changes in equity of the Group and the Company, the income statement, the statement of comprehensive income and the statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 109 to 233.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

to the Members of Singapore Technologies Engineering Ltd

Independent Auditors’ Report


Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet and the statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and the changes in equity of the Group and of the Company, the results and cash flows of the Group for the financial year ended on that date.

Other matter

The financial statements for the year ended 31 December 2009 were audited by another firm of public accountants and certified public accountants whose report dated 18 February 2010 expressed an unqualified opinion on those financial statements.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMG LLPPublic Accountants and Certified Public Accountants


to the Members of Singapore Technologies Engineering Ltd

Independent Auditors’ Report


GroupNote 2010 2009

$’000 $’000

Turnover 4 5,984,473 5,547,787Cost of sales (4,721,022) (4,397,582)Gross profit 1,263,451 1,150,205

Distribution and selling expenses (165,602) (182,174)Administrative expenses (407,286) (397,011)Other operating expenses (103,880) (84,607)Profit from operations before taxation, other income and finance costs, net 5 586,683 486,413

Other income, net 8 39,998 67,571

Finance income 44,091 16,322Finance costs (87,416) (62,626)

Finance costs, net 9 (43,325) (46,304)

Share of results of associates and joint ventures 44,119 38,879Profit from operations before taxation 627,475 546,559

Taxation 10 (122,623) (90,162)

Profit from operations after taxation 504,852 456,397

Attributable to:Shareholders of the Company 491,005 443,930Non-controlling interests 13,847 12,467

504,852 456,397

Earnings per share (cents) 11 Basic 16.21 14.78 Diluted 16.13 14.74

for the year ended 31 December 2010(Currency - Singapore dollars)

Consolidated Income Statement

The accompanying notes are an integral part of the financial statements.


Group2010 2009$’000 $’000


Other comprehensive income

Net fair value changes on available-for-sale financial assets (848) 8,251Net fair value changes on effective portion of cash flow hedges (12,629) (4,214)Foreign currency translation of foreign operations (90,193) (27,500)Reclassification adjustment of foreign currency translation reserve to profit or loss

arising from disposal of a subsidiary 30 –Other comprehensive income for the year, net of tax (103,640) (23,463)

Total comprehensive income for the year 401,212 432,934

Total comprehensive income attributable to:

Shareholders of the Company 390,467 422,464Non-controlling interests 10,745 10,470

401,212 432,934


Consolidated Statement of Comprehensive Income



Group CompanyNote 2010 2009 2010 2009

$’000 $’000 $’000 $’000

ASSETS

Non-current assets

Property, plant and equipment 12 1,301,543 1,166,245 433 711Subsidiaries 13 – – 594,995 588,477Associates and joint ventures 14 281,171 273,379 17,657 17,707Investments 15 16,190 21,464 – –Intangible assets 16 580,523 644,401 – –Investment properties 17 1,666 2,009 – –Long-term receivables, non-current 18 36,375 29,487 – –Amounts due from related parties,

non-current 23 7,377 7,313 – 5,488Finance lease receivables, non-current 19 6,552 5,227 – –Derivative financial instruments 48 566 18,742 – –Deferred tax assets 20 118,794 127,196 – –

2,350,757 2,295,463 613,085 612,383

Current assets

Inventories and work-in-progress 21 1,470,429 1,364,296 – –Trade debtors 22 1,019,805 1,061,972 – –Amounts due from related parties, current 23 21,872 24,103 761,214 330,022Advances and other debtors 24 590,248 368,212 1,281 4,615Long-term receivables, current 18 10,428 7,637 77 90Finance lease receivables, current 19 14,479 14,386 – –Short-term investments 25 198,464 235,825 – –Bank balances and other liquid funds 26 1,591,727 1,513,758 336,811 241,984

4,917,452 4,590,189 1,099,383 576,711

Total assets 7,268,209 6,885,652 1,712,468 1,189,094

EQUITY AND LIABILITIES

Current liabilities

Advance payments from customers, current 614,342 655,669 – –Creditors and accruals 27 1,589,009 1,388,350 29,053 40,002Amounts due to related parties, current 28 8,294 5,079 393,996 1,648Provisions 29 210,390 211,851 – –Progress billings in excess of

work-in-progress 21 567,193 557,329 – –Provision for taxation 187,020 178,724 2,833 5,204Short-term bank loans 30 63,404 83,510 – –Lease obligations, current 31 2,741 1,822 – –Long-term bank loans, current 34 307,047 – – –Other loans, current 35 1,869 240 – –Bank overdrafts 26 – 1 – –

3,551,309 3,082,575 425,882 46,854

Net current assets 1,366,143 1,507,614 673,501 529,857

as at 31 December 2010(Currency - Singapore dollars)

Balance Sheets



$’000 $’000 $’000 $’000

Non-current liabilities

Advance payments from customers, non-current 917,939 682,025 – –

Deferred income 32 13,411 14,546 – –Deferred tax liabilities 33 58,216 58,355 426 205Lease obligations, non-current 31 3,883 3,730 – –Long-term bank loans, non-current 34 327,118 648,854 – –Bonds 36 641,108 698,462 – –Other loans, non-current 35 991 2,088 – –Other long-term payables, non-current 37 2,500 1,453 – –Derivative financial instruments 48 24,698 17,368 – –Amounts due to related parties, non-current 28 202 – 54,000 54,000

1,990,066 2,126,881 54,426 54,205

Total liabilities 5,541,375 5,209,456 480,308 101,059

Net assets 1,726,834 1,676,196 1,232,160 1,088,035

Share capital and reserves

Share capital 38 677,590 611,808 677,590 611,808Capital reserves 40 116,323 116,323 – –Other reserves 41 (123,180) (22,793) 66,586 61,790Retained earnings 42 950,802 862,764 487,984 414,437

1,621,535 1,568,102 1,232,160 1,088,035Non-controlling interests 105,299 108,094 – –

1,726,834 1,676,196 1,232,160 1,088,035

Total equity and liabilities 7,268,209 6,885,652 1,712,468 1,189,094

as at 31 December 2010(Currency - Singapore dollars)

Balance Sheets



NoteShare

capitalCapital

reservesOther

reservesRetainedearnings Total

Non-controllinginterests

Totalequity

$’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2009 586,614 116,323 (16,216) 893,719 1,580,440 96,676 1,677,116

Total comprehensive income for the yearNet profit for the year – – – 443,930 443,930 12,467 456,397

Other comprehensive incomeNet fair value changes on available-for-sale financial

assets – – 8,245 – 8,245 6 8,251Net fair value changes on effective portion of cash flow

hedges – – (4,218) – (4,218) 4 (4,214)Foreign currency translation of foreign operations – – (25,493) – (25,493) (2,007) (27,500)

Other comprehensive income for the year – – (21,466) – (21,466) (1,997) (23,463)

Total comprehensive income for the year – – (21,466) 443,930 422,464 10,470 432,934

Transactions with owners of the Company, recorded directly in equity

Contributions by and distributions to owners of the Company

Issue of shares 25,194 – (2,986) – 22,208 – 22,208Capital contribution by non-controlling interests – – – – – 5,092 5,092Cost of share-based payment – – 17,545 – 17,545 157 17,702Dividends paid 43 – – – (474,555) (474,555) – (474,555)Dividends paid to non-controlling interests – – – – – (12,982) (12,982)Total contributions by and distributions to owners of the

Company 25,194 – 14,559 (474,555) (434,802) (7,733) (442,535)

Changes in ownership interests in subsidiariesAcquisition of non-controlling interests in subsidiaries – – – – – (1,075) (1,075)Total changes in ownership interests in subsidiaries that

do not result in a loss of control – – – – – (1,075) (1,075)

Total transactions with owners of the Company 25,194 – 14,559 (474,555) (434,802) (8,808) (443,610)

Acquisition of controlling interests in subsidiaries – – – – – 9,756 9,756

Transfer from unappropriated profit to statutory reserve – – 330 (330) – – –

At 31.12.2009 611,808 116,323 (22,793) 862,764 1,568,102 108,094 1,676,196


Statements of Changes in Equity


NoteShare

capitalCapital

reservesOther

reservesRetainedearnings Total

Non-controllinginterests

Totalequity

$’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2010 611,808 116,323 (22,793) 862,764 1,568,102 108,094 1,676,196

Total comprehensive income for the yearNet profit for the year – – – 491,005 491,005 13,847 504,852

Other comprehensive incomeNet fair value changes on available-for-sale financial

assets – – (848) – (848) – (848)Net fair value changes on effective portion of cash flow

hedges – – (12,633) – (12,633) 4 (12,629)Foreign currency translation of foreign operations – – (87,087) – (87,087) (3,106) (90,193)Reclassification adjustment of foreign currency

translation reserve to profit or loss arising from disposal of a subsidiary – – 30 – 30 – 30

Other comprehensive income for the year – – (100,538) – (100,538) (3,102) (103,640)

Total comprehensive income for the year – – (100,538) 491,005 390,467 10,745 401,212


Contributions by and distributions to owners of the Company

Issue of shares 65,782 – (7,328) – 58,454 (52) 58,402Capital contribution by non-controlling interests – – – – – 1,042 1,042Cost of share-based payment – – 12,068 – 12,068 113 12,181Dividends paid 43 – – – (402,238) (402,238) – (402,238)Dividends paid to non-controlling interests – – – – – (13,460) (13,460)Total contributions by and distributions to owners of the

Company 65,782 – 4,740 (402,238) (331,716) (12,357) (344,073)

Changes in ownership interests in subsidiariesAcquisition of non-controlling interests in subsidiaries – – (5,318) – (5,318) 75 (5,243)Total changes in ownership interests in subsidiaries that

do not result in a loss of control – – (5,318) – (5,318) 75 (5,243)

Disposal of a subsidiary – – – – – (1,258) (1,258)Total transactions with owners of the Company 65,782 – (578) (402,238) (337,034) (13,540) (350,574)

Transfer from unappropriated profit to statutory reserve – – 729 (729) – – –

At 31.12.2010 677,590 116,323 (123,180) 950,802 1,621,535 105,299 1,726,834




NoteShare

capital

Share-basedpaymentreserve

Retainedearnings Total

$’000 $’000 $’000 $’000

The Company

At 1.1.2009 586,614 46,779 510,612 1,144,005

Total comprehensive income for the year

Net profit for the year – – 378,380 378,380Total comprehensive income for the year – – 378,380 378,380


Contributions by and distributions to ownersIssue of shares 25,194 (2,986) – 22,208Cost of share-based payment – 17,997 – 17,997Dividends paid 43 – – (474,555) (474,555)Total contributions by and distributions to owners 25,194 15,011 (474,555) (434,350)

At 31.12.2009 611,808 61,790 414,437 1,088,035

At 1.1.2010 611,808 61,790 414,437 1,088,035

Total comprehensive income for the yearNet profit for the year – – 475,785 475,785Total comprehensive income for the year – – 475,785 475,785


Contributions by and distributions to ownersIssue of shares 65,782 (7,380) – 58,402Cost of share-based payment – 12,176 – 12,176Dividends paid 43 – – (402,238) (402,238)Total contributions by and distributions to owners 65,782 4,796 (402,238) (331,660)

At 31.12.2010 677,590 66,586 487,984 1,232,160





2010 2009$’000 $’000

Cash flows from operating activities

Profit before taxation including share of results of associates and joint ventures 627,475 546,559Adjustments: Share of results of associates and joint ventures (44,119) (38,879) Depreciation charge 120,940 150,985 Impairment in value of investments 417 1,060 Property, plant and equipment written off 7,493 10,948 Write-back of impairment of property, plant and equipment (14) (42) Gain on disposal of property, plant and equipment (2,813) (1,255) Gain on disposal of an investment property – (447) Gain on disposal of investments (10,849) (690) (Gain)/loss on disposal of subsidiaries (429) 83 Gain on disposal of an associate (81) – Loss on dilution of an associate 115 – Negative goodwill – (427) Goodwill written off – 1,599 Impairment of goodwill 3,741 – Share-based payment expense 12,181 17,702 Changes in fair value of financial instruments and hedged items 9,343 (812) Interest expenses 56,190 56,120 Interest income (20,462) (12,688) Dividends from investments (30) (181) Amortisation of other intangible assets 11,090 11,773 Other intangible assets written off 90 – Impairment of other intangible assets 4,938 397Operating profit before working capital changes 775,216 741,805(Increase)/decrease in: Inventories and work-in-progress (137,305) (57,866) Progress billings in excess of work-in-progress 9,864 81,583 Trade debtors 26,564 74,312 Advance payments to suppliers (145,649) (21,706) Other debtors, deposits and prepayments 3,032 38,608 Holding company and related corporations balances (1,223) (520) Associates 850 1,089 Joint ventures 5,619 (11,033) Trade creditors 88,799 (46,526) Advance payments from customers 197,044 242,899 Other creditors, accruals and provisions 83,049 11,328 Loans to staff and third parties (9,688) (35,975) Deferred income (1,135) 1,540 Foreign currency translation of foreign operations (17,347) (40,730)Cash generated from operations 877,690 978,808Interest received 21,387 9,230Income tax paid (88,318) (87,830)

Net cash from operating activities 810,759 900,208


Consolidated Statement of Cash Flows


Note 2010 2009$’000 $’000

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 7,673 5,045Proceeds from sale of an investment property – 1,800Proceeds from sale of associates 410 –Dividends from associates and joint ventures 24,184 44,505Dividends from investments 30 181Proceeds from sale and maturity of investments 238,608 1,154Purchase of property, plant and equipment (323,508) (276,525)Purchase of investments (207,273) (195,399)Acquisition of associates (2,243) (18,803)Additional investment in a joint venture (979) (1,000)Acquisition of other intangible assets (4,707) (6,696)Acquisition of controlling interests in subsidiaries (793) (38,775)Proceeds from disposal of a subsidiary 1,218 –

Net cash used in investing activities (267,380) (484,513)

Cash flows from financing activities

Capital contribution from non-controlling interests of subsidiaries 1,042 5,092Proceeds from issue of shares 58,402 22,208Proceeds from issue of bonds – 716,653Loan from non-controlling shareholders – 757Loan to associates and joint ventures (515) (7,313)Repayment of loan by an associate 241 493Proceeds from other loans 1,641 –Repayment of other loans (221) (234)Repayment of lease obligations (1,624) (1,692)Proceeds/(repayment) of bank loans 3,417 (151,442)Acquisition of non-controlling interests in subsidiaries (3,085) (2,562)Dividends paid to shareholders of the Company (402,238) (474,555)Dividends paid to non-controlling interests (13,460) (12,982)Interest paid (58,723) (42,902)

Net cash (used in)/from financing activities (415,123) 51,521

Net increase in cash and cash equivalents 128,256 467,216Cash and cash equivalents at beginning of the year 1,513,757 1,049,094Exchange difference on cash and cash equivalents at beginning of the year (50,286) (2,553)

Cash and cash equivalents at end of the year 26 1,591,727 1,513,757




Acquisition of controlling interests in subsidiaries in 2010

During the year, the Group obtained control of Knowledge Alive Pte. Ltd. and its wholly-owned subsidiary, COMAT Training Services Pte Ltd by acquiring an equity interest of 54.53% for a consideration of $1,225,000. As a result, the Group’s equity interest in Knowledge Alive Pte. Ltd. and its subsidiary increased from 45.47% to 100%.

From the date of acquisition, Knowledge Alive Pte. Ltd. and its subsidiary contributed turnover of $4.7 million and net profit of $0.6 million to the Group’s results. If the acquisition had occurred on 1 January 2010, Management estimates that the consolidated turnover would have been $5,986.3 million and the consolidated profit attributable to shareholders for the year would have been $491.1 million. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2010.

The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:

Recognised onacquisition

Carrying amountbefore acquisition

$’000 $’000

Property, plant and equipment 283 283Inventories and work-in-progress 212 212Trade debtors 712 712Advances and other debtors 184 184Cash and cash equivalents 873 873

2,264 2,264

Creditors and accruals (1,091) (1,091)Provision for taxation (33) (33)Deferred tax liabilities (19) (19)

(1,143) (1,143)

Net identifiable assets 1,121 1,121

Goodwill arising on consolidation 104

Total purchase consideration 1,225

Cost of acquisitions:Cash paid in 2010 for a subsidiary acquired in previous year 949Cash paid in 2010 717Reclassification from investment in associates 508

Total cost of acquisition 2,174

Cash outflow on acquisitions in 2010:Cost of acquisition (1,666)Net cash acquired with the subsidiaries 873

Net cash outflow on acquisition (793)




Acquisition of controlling interests in subsidiaries in 2009

In prior year, the Group acquired the following companies:

Name of companyInterest

acquired ConsiderationNet identifiableassets acquired

Date ofacquisition

% $’000 $’000

Precision Products Singapore Pte Ltd 100 8,281 4,683 18 May 2009

Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd 75.3 36,313 29,512 30 April 2009

Parallel Limited 100 9,897 3,861 31 December 2009

The acquisitions had the following effect on the Group’s assets and liabilities on acquisition dates:

Recognised onacquisition

Carrying amount before acquisition

$’000 $’000

Property, plant and equipment 30,118 23,363Associate 180 180Intangible assets 5,270 –Deferred tax assets 251 –Inventories and work-in-progress 18,749 18,749Trade and other debtors 47,874 47,966Cash and cash equivalents 15,383 15,383

117,825 105,641

Creditors and accruals (40,367) (40,246)Advance payments from customers (3,155) (3,155)Provision for warranty (226) (226)Provision for taxation (1,031) (1,031)Bank loans (20,532) (20,532)Deferred tax liabilities (1,907) (205)Deferred income (1,510) (1,510)

(68,728) (66,905)

Net identifiable assets 49,097 38,736Goodwill arising on consolidation 16,435

65,532Non-controlling interests (9,756)

Total purchase consideration 55,776




Acquisition of controlling interests in subsidiaries in 2009 (continued)

2009$’000

Cost of acquisitions:Cash to be paid in subsequent year 13Reclassification from investment in an associate 656Cash paid in 2010 949Cash paid in 2009 54,158

55,776

Cash outflow on acquisitions in 2009:Cost of acquisitions (54,158)Net cash acquired with the subsidiaries 15,383

Net cash outflow on acquisition (38,775)

From the dates of acquisitions, the acquired subsidiaries have contributed approximately $2.8 million to the net profit of the Group for the year ended 31 December 2009.

If the acquisition had taken place on 1 January 2009, the turnover and profit attributable to shareholders of the Group for the year ended 31 December 2009 would have been approximately $5,600 million and $445.2 million respectively.





31 December 2010(Currency - Singapore dollars unless otherwise stated)

Notes to the Financial Statements

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1. General

The Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principal place of business is 51 Cuppage Road #09-08, StarHub Centre, Singapore 229469.

The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated in Singapore.

The principal activities of the Company are those of an investment holding company and the provision of engineering and related services. The principal activities of the subsidiaries are set out in Note 13 to the financial statements.

The financial statements of Singapore Technologies Engineering Ltd and the consolidated financial statements of Singapore Technologies Engineering Ltd and its subsidiaries (collectively referred to as the “Group”) as at 31 December 2010 and for the year then ended were authorised and approved by the Board of Directors for issuance on 15 February 2011.

2. Basis of financial statements preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on the historical cost convention, except as disclosed in the accounting policies below.

The financial statements are presented in Singapore dollars and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.

Except for changes in accounting policies discussed in Note 3(s) and Note 12(e), the accounting policies set out below have been consistently applied by the Company and the Group and are consistent with those used in the previous year.

3. Summary of significant accounting policies

(a) Basis of consolidation

(i) Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which

control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not re-measured and settlement is accounted for within equity. Otherwise, any subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.




3. Summary of significant accounting policies (continued)

(a) Basis of consolidation (continued)

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements 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 non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less accumulated impairment losses.

(iii) Acquisitions of entities under amalgamation

The Company’s interests in Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd, and Singapore Technologies Marine Ltd (collectively referred to as the “Scheme Companies”) resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter 50 in 1997.

As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has been adopted in the preparation of the consolidated financial statements in connection with the amalgamation.

Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded at their existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired is recorded as merger reserve. The merger reserve had been utilised in prior years to partially write off the goodwill on acquisition of Founders Industries Pte Ltd and its subsidiaries. Founders Industries Pte Ltd was subsequently liquidated in 2007.

(iv) Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the 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 of influence retained.

(v) Investments in associates and joint ventures (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. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. The Group’s investment in joint ventures comprised jointly controlled entities.

Investments in associates and jointly controlled entities are accounted for by the Group using the equity method and are recognised initially at cost.





(a) Basis of consolidation (continued)

(v) Investments in associates and joint ventures (equity-accounted investees) (continued)

The consolidated financial statements includes the Group’s share of the profit or loss and other comprehensive income from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. The reporting dates for the associates and joint ventures and the Group are identical and the accounting policies conform to those used by the Group for like transactions and events in similar circumstances.

For this purpose, the audited financial statements of the associates and joint ventures are used. Where audited financial statements are not available, the share of results is arrived at from the last audited financial statements available and unaudited management financial statements to the end of the accounting period.

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

In the Company’s separate financial statements, investments in associates and joint ventures are accounted for at cost less accumulated impairment losses.

(vi) Acquisition of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the fair value of the consideration paid and the carrying value of the additional interest acquired will be recognised as “Premium paid on acquisition of non-controlling interests” within equity.

(vii) Transactions eliminated on consolidation

All significant inter-company balances and transactions are eliminated on consolidation.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiary companies and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. The major functional currencies of the Group entities are Singapore dollar, United States dollar and Euro. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in income statement except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiary companies, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity and recognised in the consolidated income statement on disposal of the subsidiary. In the Company’s separate financial statements, such exchange differences are recognised in the income statement.





(b) Foreign currency (continued)

(i) Foreign currency transactions (continued)

Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are also taken directly to other comprehensive income until the disposal of the net investment, at which time they are recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in other comprehensive income.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Singapore dollars at exchange rates at the reporting date. The income and expenses of foreign operation are translated to Singapore dollars 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 reserve in equity. However, if the foreign operation is a non wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the foreign currency translation reserve related to that foreign operation is reclassified to 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 includes a 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 joint venture that includes a foreign operation while retaining 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 foreseeable future, foreign exchange gains or losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity.

(c) Financial instruments

(i) Non-derivative financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery 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 rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as 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 a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.





(c) Financial instruments (continued)

(i) Non-derivative financial assets (continued)

The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end.

Financial assets at fair value through profit or loss

Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading are financial assets acquired principally for the purpose of selling in the near term. Financial assets at fair value through profit or loss are measured at fair value and gains or losses arising from change in the fair values are recognised in profit or loss. Attributable transaction costs are recognised in profit or loss as incurred.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in profit or 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 debtors. 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 are subject to insignificant risk of changes in value. For the purpose of the statement of cash flows, cash and cash equivalents also include bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management.

Held-to-maturity financial assets

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the financial assets to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses. Gains or losses are recognised in the income statement when the held-to-maturity investments are derecognised or impaired, and through the amortisation process.







Available-for-sale financial assets

Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. After initial recognition, an available-for-sale financial asset is measured at fair value, with gains or losses being recognised in other comprehensive income and presented in the fair value reserve in equity, except for impairment losses and foreign 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 a reclassification adjustment.

The fair value of available-for-sale financial assets that are actively traded in organised financial markets is determined by reference to quoted market prices at the close of business on the balance sheet date. For those financial assets where there is no active market, 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 and option 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.

(ii) Non-derivative financial liabilities

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a legal 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 initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

The Group’s financial liabilities comprise bank overdrafts, trade and other creditors 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 a component of cash and cash equivalents for the purpose of the statement of cash flows.






(iii) Derivative financial instruments and hedge accounting

The Group uses derivative financial instruments such as forward currency contracts, interest rate swaps and cross currency swaps to hedge its risks associated with foreign currency and interest rate fluctuations. From time to time, the Group also uses monetary assets 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 of the host contract and the embedded derivatives are not closely related, a separate instrument with the same terms as the embedded derivatives would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and the methods used in assessing the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80% to 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present 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. Attributable transaction costs are recognised in profit or loss as incurred. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Subsequent to initial recognition, derivatives are measured at fair value, changes therein are accounted for as described below.

Fair value hedges

The gain or loss from re-measuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount measured in accordance with Note 3(b)(i) (for a non-derivative hedging instrument) is recognised in profit 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 over the remaining term to maturity. Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used is amortised in the income statement. Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be 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 the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding gain or loss recognised in profit 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 hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any adjustment to the carrying amount of a hedging instrument for which the effective interest method is used is amortised in the income statement. Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.






(iii) Derivative financial instruments and hedge accounting (continued)

Cash flow hedges

The portion of the gain or loss on a derivative designated as the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income and presented in the fair value reserve in equity, while the ineffective portion is recognised immediately in profit or loss.

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase occurs. When the hedged item is a non-financial asset 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. If the hedging instrument expires or is sold, terminated, or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is then transferred to profit or loss.

Hedge of net investment in foreign operations

The Group has foreign currency differences arising from the translation of financial liabilities that are designated as net investment hedges of foreign operations. These hedging instruments are accounted for similarly to cash flow hedges. The currency translation differences on the financial liabilities relating to the effective portion of the hedge are recognised in other comprehensive income and presented in the foreign currency translation reserve in equity, while the ineffective portion of the hedge are recognised immediately in profit or loss. On the disposal or partial disposal of the foreign operation, the amounts previously recognised in equity are transferred to profit or loss as part of the gain or loss on disposal.

Separable embedded derivatives and other derivatives

Any gains or losses arising from changes in fair value on derivatives that are not designated in hedging relationships are recognised immediately in profit or loss.

(d) Property, plant and equipment and depreciation

(i) Recognition and measurement

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of 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 self-constructed assets also includes the cost of material and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of 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 of that asset, that component is depreciated separately.





(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 in 1972 (“1972 assets”), property, plant and equipment are measured at cost, net of depreciation and any impairment loss. The 1972 assets stated at valuation are exempted from conducting a regular frequency of revaluation but are measured net of depreciation, and any impairment loss.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the 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 is probable 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) Depreciation

Depreciation 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 and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Property, plant and equipment purchased specifically for projects are 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 operational. Freehold land is 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 years

The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the depreciation period or method, as appropriate, and treated as changes in accounting estimates.





(e) Intangible assets

(i) Goodwill

Goodwill represents the excess of: • thefairvalueoftheconsiderationtransferred;plus • therecognisedamountofanynon-controllinginterestsintheacquiree;plus • ifthebusinesscombinationisachievedinstages,thefairvalueoftheexistingequityinterestintheacquiree, 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 impairment losses. 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 amount of the equity-accounted investee.

(ii) Research and development expenditure

Research 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 technical feasibility of completing the development so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Other 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 inventory

Film cost inventory comprise film production costs which are recognised as an intangible asset when the Group can demonstrate the technical feasibility of completing the film so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably 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 assets

Other intangible assets that are acquired by the Group are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

(v) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated intangible assets, is recognised in profit or loss as incurred.





(e) Intangible assets (continued)

(vi) Amortisation Amortisation 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 than goodwill 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 same ratio that current gross revenue bear to anticipated total gross income for the film. Amortisation commences when each film begins to 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 years

The useful lives and amortisation methods are reviewed at the end of each financial year-end to ensure that the amount, method and period of amortisation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the intangible assets. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense is recognised in the expense category consistent with the function of the intangible asset.

(f) Investment properties

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at cost, net of depreciation and any impairment loss. Depreciation is recognised in profit or loss on a straight-line basis so as to write-off the cost of the investment property over its estimated useful life of 30 years.

Investment property is derecognised when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the carrying value at the date of change in use becomes the cost for subsequent accounting. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 3(d) up to the date of change in use.





(g) Inventories and work-in-progress

Inventories 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 cost depending on the nature and use of the inventories. Cost includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete and slow-moving inventories.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary 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 direct material and labour costs, equipment and sub-contracting services, together with appropriate overhead expenses and may also includes transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases. Provision for foreseeable losses on 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 exceed progress billings. If progress billings exceed costs incurred plus recognised profits, then the difference is presented as “progress billings in excess of work-in-progress” and is included in current liabilities in the balance sheet.

(h) Impairment

(i) Non-derivative financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not carried at fair value through profit or loss is impaired.

To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, default or significant delay in payments, significant adverse changes in the business environment where the debtor/issuer operates and disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

Financial assets carried at amortised cost

The 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 of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Financial assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.





(h) Impairment (continued)


Financial assets carried at amortised cost (continued)

If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced 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 event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Financial assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The loss recognised is not reversed in future periods.

Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to profit or loss.

Reversals in respect of impairment losses on equity instruments classified as available-for-sale are recognised in other comprehensive income. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

(ii) Other non-financial assets

The Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investment properties, inventories and deferred tax assets, may be impaired. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. If any such indication exists, the Group makes an estimate of the asset’s recoverable amount. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (“CGU”) exceeds its estimated recoverable amount.





(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 in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination 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 the carrying amount of any goodwill allocated to the CGU or group of CGUs, and then to reduce the carrying amounts of other assets in the CGU 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 as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change 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 would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation or amortisation charged is adjusted in future periods to allocate the asset’s revised carrying 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 not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

(i) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(i) Warranties

The warranty provision represents the best estimate of the Group’s contractual obligations at the balance sheet date. The provision is based on past experience and industry averages for defective products. The majority of the costs is expected to be incurred over the applicable warranty periods.

(ii) Liquidated damages

Provision for liquidated damages is made in respect of anticipated claims from customers on contracts of which deadlines are overdue or not expected to be completed on time in accordance with contractual obligations. The utilisation of provisions is dependent on the timing of claims.





(j) Employee benefits

(i) Employee equity compensation benefits

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

(ii) Defined contribution plans

The Group participates in the 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 contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.

(iii) Short-term employee benefits

Short-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 constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

(k) Revenue

Revenue 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 rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured 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) a combination of different cost components or a single cost component that would provide the most reliable indication of the stage of completion of a contract; or

(b) when goods and services, representing part of a contract, are delivered; or (c) upon completion of designated phases of a contract.

Provision for foreseeable losses on uncompleted contracts is recognised in profit or loss as soon as such losses are determinable.





(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 commission received is treated as downpayment and is deferred and taken up in the income statement only upon the discharge of specified contractual obligations. Commission income in excess of the certain percentage of the total amount received is taken up in the income statement as and when it is billed.

(v) Rental income from investment properties is accounted for on a straight-line basis over the duration of the lease terms.

(l) Government grants

Government grants are recognised when the Group complies with the conditions associated with the grants. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income in the same periods in which the expenses are recognised. Grants relating to depreciable assets are deferred and recognised in profit or loss as other income over the period in which such assets are depreciated and used in the projects subsidised by the grants.

(m) Finance income and finance costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is 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 financial assets at fair value through profit or loss, impairment losses recognised on financial assets (other than trade receivables), and losses on hedging instruments 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 or loss 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 currency movements are in a net gain or net loss position.

(n) Hire purchase

Assets acquired on hire purchase arrangements are capitalised in the financial statements and the corresponding obligations treated as a liability. The total interest, being the difference between the total instalments payable and the capitalised amount, is recognised in profit or loss over the period of such hire purchase arrangements in equal monthly instalments to produce a constant rate of charge on the balance of capital repayments outstanding. Assets acquired on hire purchase arrangements are depreciated in accordance with the policy set out in Note 3(d) above.





(o) Finance leases

(i) As lessee

Finance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the lease items. Assets financed under such leases are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Assets acquired on finance lease arrangements are depreciated in accordance with the policy set out in Note 3(d) above.

(ii) As lessor

Leases where the Group transferred substantially all the risks and rewards incidental to legal ownership of the leased assets, are classified as finance leases.

The leased asset is derecognised and the present value of the lease receivables (net of initial direct costs for negotiating and arranging the lease) is recognised on the balance sheet. The difference between the gross receivables and the present value of the lease receivables is recognised as unearned finance income.

Each lease payment received is applied against the gross investment in the finance lease receivables to reduce both the principal and the unearned finance income. The finance income is recognised in profit or loss on a basis that reflects a constant periodic rate of return on the net investment in the finance lease receivables.

Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to finance lease receivables and recognised as an expense in profit or loss over the lease term on the same basis as the leased income.

(p) Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. 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 straight-line basis.

(q) Income taxes

(i) Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current taxes are recognised in profit or loss except to the extent that it relates to items recognised directly in other comprehensive income or in equity.





(q) Income taxes (continued)

(ii) Deferred tax

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are 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 and interests in associates and joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the 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-forward of unused tax assets and unused tax losses can be utilised.

At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. The Group conversely reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised.

Deferred income tax relating to items recognised outside profit or loss is recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same tax authority.

(r) Operating segments

For management purposes, the Group is organised on a worldwide basis into four major operating segments. The management of the Company reviewed the segments’ operating results regularly in order to allocate resources to the segments and to assess the segment ‘s performance. Additional disclosures on each of these operating segments are shown in Note 46, including the factors used to identify the reportable segments and the measurement basis of segment information.

(s) Changes in accounting policies

Adoption of new and revised FRS

With effect from 1 January 2010, the Group has adopted all the new and revised FRS and INT FRS that are mandatory for financial years beginning on or after 1 January 2010. The adoption of these FRS and INT FRS has no significant impact to the Group, except for FRS 27 and FRS 103 as described below.





(s) Changes in accounting policies (continued)

Accounting for acquisitions of non-controlling interests

From 1 January 2010, the Group has applied FRS 27 Consolidated and Separate Financial Statements (2008) in accounting for acquisitions of non-controlling interests. See Note 3(a)(vi) for the new accounting policy.

Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.

The change in accounting policy has been applied prospectively and has no impact on earnings per share.

Accounting for business combinations

From 1 January 2010, the Group has applied FRS 103 Business Combinations (2009) in accounting for business combinations. Business combinations are now accounted for using the acquisition method as at the acquisition date (see Note 3(a)(i)).

Previously, business combinations were accounted for under the purchase method. The cost of an acquisition was measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition was credited to profit or loss in the period of acquisition. For business acquisitions that were achieved in stages, any existing equity interests in the acquiree were not re-measured to their fair value. Contingent consideration was recognised as an adjustment to the cost of acquisition only when it was probable and can be measured reliably.

The change in accounting policy has been applied prospectively and has no material impact on earnings per share.

(t) Significant accounting estimates and judgements

Estimates and assumptions concerning the future are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an ongoing basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.

(i) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other intangible asset are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or CGU and choose a suitable discount rate in order to calculate the present value of those cash flows. Further details of the key assumptions applied in the impairment assessment of goodwill and other intangible assets, are given in Note 16 to the financial statements.





(t) Significant accounting estimates and judgements (continued)

(i) Key sources of estimation uncertainty (continued)

Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 48 to the financial statements.

Depreciation charge

Property, plant and equipment and investment properties 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 properties to be within 2 to 50 years. The carrying amount of the Group’s property, plant and equipment and investment properties at 31 December 2010 was $1,303,209,000 (2009: $1,168,254,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these property, plant and equipment and investment properties, and therefore future depreciation charges could be revised.

Revenue recognition and provision for foreseeable losses

The Group has recognised revenue from long-term contracts by reference to the stage of completion. The bases for measuring the stage of completion are described in Note 3(k)(ii). Significant judgement based on management’s knowledge and experience is required in determining the appropriate stage of completion and estimating a reasonable contribution margin or expected losses for revenue and costs recognition.

Allowance for inventory obsolescence

The allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the allowance made. The allowance for inventory obsolescence of the Group as at 31 December 2010 was $195,316,000 (2009: $191,860,000).

Provision for warranty

The 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 at 31 December 2010 was $188,102,000 (2009: $189,740,000).





(t) Significant accounting estimates and judgements (continued)

(ii) Critical judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made certain judgements, apart from those involving estimations, 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-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will 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 tear allowances and other temporary differences, which are available for set-off against future taxable profits. Significant judgement is involved in determining the availability of future taxable profits against which the Group can utilise the tax benefits therefrom. The use of the potential tax benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax provision and recognised deferred tax assets relating 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 $118,794,000 (2009: $127,196,000), tax payables was $187,020,000 (2009: $178,724,000) and deferred tax liabilities was $58,216,000 (2009: $58,355,000) as at 31 December 2010.

(u) Future changes in accounting policies

A number of new standards, amendments to standards and interpretations have been issued but not yet effective, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Group, except for the adoption of FRS 24 Related Party Disclosures as described below.

The revised FRS 24 clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised FRS 24 expands the definition of a related party and would treat two entities as related to each other whenever a person (or a close member of that person’s family) or a third party has control or joint control over the entity, or has significant influence over the entity. The Group is currently determining the impact of the changes to the definition of a related party has on the disclosure of related party transaction. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2011.




4. Turnover

Turnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows:

Group2010 2009$’000 $’000

Sale of goods 2,601,482 2,301,675Service income 2,660,087 2,581,676Contract revenue 722,904 664,436

5,984,473 5,547,787

5. Profit from operations

Profit from operations is arrived at:

GroupNote 2010 2009

$’000 $’000

After charging

Auditors' remuneration- auditors of the Company 1,209 1,782- other auditors 1,837 2,979Non-audit fees- auditors of the Company 553 484- other auditors 800 1,190Fees and remuneration of directors 7,666 3,810Fees paid to a firm of which a director is a member 191 269Personnel expenses 6 1,576,726 1,470,638Depreciation charge 12, 17 120,940 150,985Allowance/(write-back of allowance) for- Inventory obsolescence 27,642 48,726- Doubtful debts (trade) 22 467 28,084- Unbilled receivables (trade) 22 (474) 1,854- Doubtful lease receivables 19 (543) 1,138Provision/(write-back of provision) for- Foreseeable losses (5,134) 4,966- Liquidated damages 29 5,937 2,901- Warranties 29 17,069 34,903Property, plant and equipment written off 7,493 10,948Research, design and development expenses incurred 98,171 82,238Operating lease expenses 41,215 36,464Amortisation of other intangible assets 16 11,090 11,773Write-back of impairment of property, plant and equipment 12 (14) (42)Impairment of goodwill 16 3,741 –Impairment in value of other intangible assets 16 4,938 397

The Audit Committee has undertaken a review of all non-audit services provided by the auditors of the Company and in the opinion of the Audit Committee, these services would not affect the independence of the auditors.




6. Personnel expenses

Group2010 2009$’000 $’000

Wages and salaries * 1,312,478 1,219,616Contributions to defined contribution plans 94,658 86,600Share-based payments 12,181 17,702Other personnel expenses 157,409 146,720

1,576,726 1,470,638

* Includes directors’ remuneration of $5,246,497 (2009: $1,667,176).

7. Key management personnel compensation

Group2010 2009$’000 $’000

Short-term employee benefits 47,581 34,382Contributions to defined contribution plans 387 432Other long-term benefits 12 5Share-based payments 3,788 4,138

51,768 38,957

8. Other income, net

Group2010 2009$’000 $’000

Gain on disposal of property, plant and equipment and investment property 2,813 1,702Grant income from Jobs Credit Scheme 7,966 39,118Government grants 5,387 4,025Commission income 2,045 371Rental income 6,610 5,774Gain/(loss) on disposal of- subsidiaries 429 (83)- associate 81 –Loss on dilution of interest in an associate (115) –Others 14,782 16,664

39,998 67,571

The Singapore Finance Minister announced the introduction of a Jobs Credit Scheme (“Scheme”) in 2009. The Group received its grant income of $7,966,000 in 2010 (2009: $39,118,000). The Scheme ended in July 2010.




9. Finance costs, net

GroupNote 2010 2009

$’000 $’000

Finance incomeDividend income- quoted equity investments 10 118- unquoted equity investments 20 63Interest income- related corporations – 1,823- bank deposits 6,055 5,731- staff loans 13 12- finance lease 721 625- bonds 12,374 3,202- others 1,299 1,295Gain on disposal of investments 10,849 690Gain on fair value changes of held for trading investments 33 421Fair value changes of financial instruments- gain on forward currency contract designated as hedging instrument 12,717 365Fair value changes of embedded derivatives not designated as hedging instrument – 1,977

44,091 16,322

Finance costsInterest expenses- Bank loans and overdrafts (22,425) (39,653)- Bonds (32,993) (15,586)- Finance lease (320) (375)- Others (452) (506)Exchange loss, net (8,716) (4,841)Fair value changes of financial instruments - ineffective portion of forward currency contract designated as hedging instrument

in cash flow hedges (65) (15)- loss on embedded derivatives designated as hedging instrument (3,746) –Fair value changes of hedged items (9,915) (590)Fair value changes of embedded derivatives not designated as hedging instrument (8,367) –Impairment in value of investments- quoted investments 15 – (313)- unquoted investments 15 (417) (747)

(87,416) (62,626)

Finance costs, net, recognised in profit or loss (43,325) (46,304)




10. Taxation

Group2010 2009$’000 $’000

Current income tax Current year 140,432 107,490 Overprovision in respect of prior years (13,098) (17,112) Associates and joint ventures 6,336 (307)

133,670 90,071Deferred income tax Current year (20,527) (7,271) Underprovision in respect of prior years 9,299 4,951 Effect of reduction in tax rate 181 2,411

122,623 90,162

Deferred income tax related to items charged or credited directly to other comprehensive income:

Net change in fair value of available-for-sale financial assets 51 243Net change in fair value of derivative financial instruments designated in cash flow hedges (4,345) 160Effect of reduction in tax rate – (152)

(4,294) 251

The Group

Unrecognised tax benefits

As at 31 December 2010, certain subsidiaries of the Group have potential tax benefits of approximately $92,733,000 (2009: $83,064,000) arising from unutilised 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 generated for these subsidiaries in the foreseeable future. The use of these potential tax benefits is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate.

Unrecognised temporary differences relating to investments in subsidiaries

As at 31 December 2010, no deferred tax liability (2009: $nil) has been recognised for taxes that would be payable on the undistributed earnings of certain subsidiaries of the Group as the Group has determined that the undistributed profits of some of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organic growth and acquisitions.




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 December is as follows:

Group2010 2009$’000 $’000

Profit from operations before taxation 627,475 546,559

Taxation at statutory tax rate of 17% (2009: 17%) 106,671 92,915Adjustments: Income not subject to tax (2,988) (8,751) Expenses not deductible for tax purposes 11,717 10,749 Different effective tax rates of other countries 7,934 4,003 Overprovision in prior years, net (3,799) (12,161) Effect of change in tax rates 181 2,411 Deferred tax assets not recognised 7,987 10,368 Deferred tax assets previously not recognised now recognised (5,478) (997) Others 398 (8,375)

122,623 90,162

11. Earnings per share

Basic earnings per share

The calculation for basic earnings per share is based on:

Group2010 2009$’000 $’000

Profit attributable to shareholders 491,005 443,930

The weighted average number of ordinary shares is arrived at as follows:

Group2010 2009

Number of shares (’000)

Issued ordinary shares at beginning of the year 3,010,456 2,998,603Weighted average number of ordinary shares issued during the year 18,589 5,466

Weighted average number of ordinary shares 3,029,045 3,004,069




11. Earnings per share (continued)

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of shares is adjusted for the effect of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOS/ESOP and their exercise prices are set out in Note 39. The average fair value of one ordinary share during the financial year ended 31 December 2010 was $3.23 (2009: $2.63) per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows:

Group2010 2009

Number of shares (’000)

Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,029,045 3,004,069Weighted average number of unissued shares under option 67,704 54,150Number of shares that would have been issued at fair value (53,318) (46,168)

Weighted average number of ordinary shares (diluted) 3,043,431 3,012,051

26,926,006 (2009: 63,870,596) of share options granted to employees under the existing employee share option plans have not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current and previous financial years presented.




12. Property, plant and equipment

Valuation/Cost

As at 1.1.2009 Additions

Disposals/write-off

Arising from acquisition

of interest insubsidiaries

Finalisation of purchase

price allocation

Reclassi-fications

Transfer from investment properties

Translation difference

As at 31.12.2009

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

(Note 17)

The Group

At 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 – – – – – – – 279

At CostFreehold land and buildings 59,335 484 – – – – – (1,397) 58,422Leasehold land and buildings 552,038 34,211 (2,677) 24,856 – 2,085 28,217 (3,732) 634,998Improvements to premises 52,805 2,674 (420) 94 (1) (218) – (691) 54,243Wharves and slipways 32,496 382 – – – – – (160) 32,718Syncrolift and floating docks 68,936 – – – – – – – 68,936Boats and barges 5,157 – – – – – – (44) 5,113Plant and machinery 973,993 85,932 (41,266) 3,375 – 2,067 – (5,987) 1,018,114Production tools and equipment 213,002 19,803 (1,641) 599 (438) 142 – (890) 230,577Furniture, fittings, office equipment

and computers 167,934 23,995 (14,866) 188 7 25 – (756) 176,527Transportation equipment and

vehicles 14,897 2,251 (548) 1,198 – – – (144) 17,654Aircraft and aircraft engines 71,953 38,254 – – – – – – 110,207Construction-in-progress 16,325 68,539 (17) 240 – (4,101) – (67) 80,919

2,238,856 276,525 (61,435) 30,550 (432) – 28,217 (13,868) 2,498,413

Included property, plant and equipment of $7,780,000 contributed by non-controlling shareholders as part of capital injection.




12. Property, plant and equipment (continued)

Valuation/Cost

As at1.1.2010 Additions

Disposals/write-off

Arising from acquisition

of interest in subsidiaries

Due to disposal of

subsidiariesReclassi-fications


As at 31.12.2010

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

At 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 – – – – – – 279

At 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 and computers 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) 109,336

2,498,413 332,871 (99,166) 283 (141) – (111,620) 2,620,640





Accumulated depreciation

As at1.1.2009

Depreciation charge

for the year

Impairment/(write-back of

impairment)Disposals/

write-offReclassi-fications

Transfer from investment properties


As at 31.12.2009

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

(Note 5) (Note 5) (Note 17)

The Group

At 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 – – – – – – 279

At CostFreehold land and buildings 19,062 1,157 – – – – (468) 19,751Leasehold land and buildings 303,038 23,426 – (2,545) – 14,617 (1,013) 337,523Improvements to premises 27,987 5,568 – (364) 16 – (425) 32,782Wharves and slipways 20,366 2,136 – – – – (32) 22,470Syncrolift and floating docks 68,514 47 – – – – – 68,561Boats and barges 4,819 342 – – – – (48) 5,113Plant and machinery 412,904 69,806 (84) (27,380) – – (2,466) 452,780Production tools and equipment 170,032 21,698 – (1,597) – – (806) 189,327Furniture, fittings, office equipment and

computers 137,059 19,872 42 (14,414) (16) – (773) 141,770Transportation equipment and vehicles 10,257 2,178 – (397) – – (68) 11,970Aircraft and aircraft engines 35,749 4,387 – – – – – 40,136

1,219,772 150,617 (42) (46,697) – 14,617 (6,099) 1,332,168





Accumulated depreciation

As at

1.1.2010

Depreciationcharge

for the yearWrite-back of

impairmentDisposals/

write-off

Due to disposal of

subsidiariesReclassi-fications


As at 31.12.2010

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

(Note 5) (Note 5)

The Group

At 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 – – – – – – 279

At 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 and

computers 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 – – – – – 44,733

1,332,168 120,695 (14) (86,813) (80) – (46,859) 1,319,097





Net book value2010 2009$’000 $’000

The Group

At 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 36,701 38,671Leasehold land and buildings * 357,302 297,475Improvements to premises 20,066 21,461Wharves and slipways 12,498 10,248Syncrolift and floating docks 346 375Boats and barges – –Plant and machinery 532,134 565,334Production tools and equipment 51,757 41,250Furniture, fittings, office equipment and computers 38,209 34,757Transportation equipment and vehicles 5,422 5,684Aircraft and aircraft engines 137,772 70,071Construction-in-progress 109,336 80,919

1,301,543 1,166,245

* In prior year, the net book value of leasehold land and buildings amounting to $13,600,000 was reclassified from investment properties following the change in a subsidiary’s occupation in the property.





Furniture, fittings,office equipment

and computers

Transportationequipment and

vehicles Total$’000 $’000 $’000

The Company

CostAs at 1.1.2009 2,382 331 2,713Additions 311 – 311Disposals (204) – (204)As at 31.12.2009 and 1.1.2010 2,489 331 2,820Additions 146 – 146Disposals (3) – (3)

As at 31.12.2010 2,632 331 2,963

Accumulated depreciationAs at 1.1.2009 1,614 83 1,697Depreciation charge for the year 548 66 614Disposals (202) – (202)As at 31.12.2009 and 1.1.2010 1,960 149 2,109Depreciation charge for the year 358 66 424Disposals (3) – (3)

As at 31.12.2010 2,315 215 2,530

Net book valueAs at 31.12.2010 317 116 433

As at 31.12.2009 529 182 711

(a) Property, plant and equipment at valuation

Certain property, plant and equipment, which are shown at valuation are stated at values arrived at by an independent firm of professional valuers on 30 November 1972, on the basis of open market value for existing use. As the property, plant and equipment were subject to a one-time revaluation prior to 1984, the Group is exempted from having a regular frequency of revaluation in subsequent years. These property, plant and equipment have been fully depreciated as at 31 December 2010 and 2009.

(b) Property, plant and equipment pledged as security

Freehold and leasehold land and buildings with a carrying value of $36,099,000 (2009: $45,623,000) are pledged as security for short-term and long-term loans.





(c) Property, plant and equipment under lease obligations

Included in the above are property, plant and equipment acquired under lease obligations with a net book value of:

Group2010 2009$’000 $’000

Leasehold land and buildings 830 1,335Transportation equipment and vehicles 196 364

1,026 1,699

(d) Major properties

(i) Freehold land and buildings

Location Description Land Net book valuearea 2010 2009

(sq. m.) $’000 $’000

USA

47889 South K StreetTulare, California

Industrial buildings 88,949 2,281 2,487

13442 Emerson RoadKidron, Ohio


300 Hackney Ave,Independence, Kansas


400 Hackney Ave,Washington, North Carolina


914 Saegers Station Drive,Montgomery, Pennsylvania


7801 Trinity Drive,Escatawpa, Mississippi

Shipyard and buildings 839,564 4,064 4,434

5801 Elder Ferry Road,Moss Point, Mississippi


900 Bayou Casotte Parkway, Pascagoula, Mississippi


3800 Richardson Road South, Hope Hull, Alabama

Production facility 8,361 3,434 3,378





(d) Major properties (continued)

(ii) Leasehold land, buildings and improvements

Location Description Tenure Land Net book valuearea

(sq. m.)2010$’000

2009$’000

Singapore

501 Airport Road Factory and office building 20 years from 1.6.1993 23,899 3,737 3,792

503 Airport Road Factory and office building 20 years from 1.6.1993 7,175 513 546

505 Airport Road Lots 087066, 087M, 0870C and 99703 MK22

Jet engine test cell 3 years from 1.7.2009 5,317 18,521 19,171

540 Airport Road Warehouse and office building 30 years from 15.8.1985 5,850 746 891

Hangar and office building 30 years from 1.1.1984 18,918 1,904 2,411

8 Changi North Way Hangar and office building 30 years from 1.1.1992 75,713 27,349 29,834

Hangar and office building 22.5 years from 16.6.1999 14,860 2,643 2,884

Hangar and office building 16.3 years from 20.8.2005 9,764 11,010 12,011

540 Airport Road Hangars and office building 3 years lease from 1.7.2009 * 48,882 22,507 24,052

Seletar West Camp Hangars and office building Yearly * 15,670 16,405 17,058

Hangars and office building 31 2/3 years lease from 5.1.2009 to 5.9.2040

5,760 11,388 11,807

24 Ang Mo Kio Street 65 Industrial and commercial buildings

30 years from 1.12.1982, renewable to 2042

23,970 7,327 8,263

100 Jurong East Street 21 Industrial and commercial buildings

30 years from 1.11.1988, renewable to 2048

11,232 7,473 7,815

70 Ubi CrescentUbi Techpark #01-12

Office building 60 years from 5.7.1997 @ 730 – 1,229

5 Portsdown Road Industrial and commercial buildings

1 year from 1.10.2010 88,400 – 511

5 Ubi Close Car show room cum workshop 30 years from 1.8.1994 6,274 11,956 12,814

33 Tuas Avenue 2 Factory and office building 30 years from 1.4.1996 6,669 2,233 2,379

16 Benoi Crescent Industrial and commercial buildings

30 years from 16.7.1989 6,981 2,380 2,574

249 Jalan Boon Lay Industrial and commercial buildings

27 years from 1.10.2001 to 31.12.2028, renewable to 10.10.2065

148,091 84,475 32,714

2D Ayer Rajah Crescent Industrial and commercial buildings

2.5 years from 1.10.2010 14,449 – 309






(ii) Leasehold land, buildings and improvements (continued)


(sq. m.)2010$’000

2009$’000

Singapore

16 Tuas Avenue 7 Industrial buildings 30 years from 16.8.1983 12,029 557 741

601 Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,124 1,168

15 Chin Bee Drive Industrial buildings 60 years from 1.8.1973 39,640 10,123 2,847

16 Benoi Road Administrative offices 56 years from 1.6.1969 20,224 3,323 3,406

7 Benoi Road Buildings, foreshore and workshops

56 years from 1.6.1969 103,802 15,299 14,122

60 Tuas Road Buildings, foreshore and workshops

30 years from 1.12.1992 125,262 4,469 5,205

30/36 Kian Teck Avenue Workers’ dormitory 30 years from 1.9.1995 3,908 4,286 4,578

USA

2100 9th Street Brookley Complex, Mobile, Alabama


9800 John Saunders Road, San Antonio, Texas

Hangar and office building 16 7/12 years from 1.6.2002 195,663 24,852 5,392

People’s Republic of China

No 2, Huayu Road, Huli District, Xiamen 361006, Fujian

Leasehold land for factory building

50 years from 11.8.2009 38,618 5,048 5,436

Guangzhou Airport Logistics Centre, Guangzhou Baiyun Airport Logistics, Guangzhou 510890

Warehouse 2 1/4 years lease from 31.10.2010 #

100 64 32

97 Zhong Cao Road Guiyang, Guizhou

Leasehold land, industrial and commercial buildings

50 years from 26.2.2008 to 21.2.2058

242,662 21,482 22,190

613 Xin Jiao Dong Road, Hai Zhu District, Guangzhou, Guangdong

Industrial and commercial buildings

15 years from 22.4.2005 to 21.4.2020

9,751 1,149 1,219

No. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai

Leasehold land 50 years from 12.6.2003 to 27.7.2052

15,898 775 854

6 Kuang Ji Road,Zhenjiang, Jiangsu


40 years from 21.5.2009 to 21.3.2049

76,711 9,635 11,482

1 Ding Mao Wei San Road, Zhenjiang, Jiangsu


46.5 years from 21.5.2006 to 5.12.2052

55,883 9,500 10,573






(ii) Leasehold land, buildings and improvements (continued)


(sq. m.)2010$’000

2009$’000

Panama

Bryant Ave,Howard Balboa


* This relates to buildings constructed by subsidiaries on properties rented from the Ministry of Defence Singapore on leases which are renewable from one to three years. In view of the relationship between the landlord and the subsidiaries, the cost of the buildings is depreciated over 30 years.

@ During the year, the Group disposed of a leasehold property for a cash consideration of $2,200,000.# This relates to a warehouse constructed by a subsidiary on properties rented from the Authority on leases. In view of the

relationship between the landlord and the subsidiary, the cost of the warehouse is depreciated over 20 years.

(e) Changes in estimates

FRS 16 requires the Group to review the estimated useful lives of property, plant and equipment periodically such that it best reflects the pattern in which the assets’ future economic benefits are expected to be consumed. During the year, the Group engaged independent consultants to perform industry and benchmarking study of the depreciation rates of its property, plant and equipment. The industry and benchmarking study considered the industry practices of the 4 sectors and studied the economic useful lives of their property, plant and equipment. Based on the results obtained, the Group revised the estimated useful lives of the property, plant and equipment to align them to industry practices with effect from the financial year ended 2010. The revised estimated useful lives are as follows:

Existing estimated useful lives Revised estimated useful lives

Buildings 15 to 30 years 15 to 50 yearsPlant and machinery 2 to 20 years 5 to 25 yearsProduction tools and equipment 3 to 10 years 3 to 15 yearsAircraft and aircraft engines 5 to 20 years 15 to 30 yearsWharves and slipways 10 to 16 years 20 yearsSyncrolift and floating docks 5 to 10 years 15 yearsBoats and barges 5 years 10 years

The effect of these changes on the income statement in current and future years is as follows:

Group2010$’000

2011$’000

2012$’000

Decrease in depreciation charge 39,478 32,221 22,927




13. Subsidiaries

Company2010 2009$’000 $’000

Unquoted shares, at cost: Singapore Technologies Aerospace Ltd 90,114 90,114 Singapore Technologies Electronics Limited 26,982 26,982 Singapore Technologies Kinetics Ltd 61,938 61,938 Singapore Technologies Marine Ltd 56,000 56,000 Vision Technologies Systems, Inc. 299,117 297,494 Singapore Technologies Dynamics Pte Ltd 6,000 6,000 ST Synthesis Pte Ltd 2,156 2,156 FusionTech Pte. Ltd. 1,000 1,000 Kaz-ST Engineering Bastau Limited Liability Partnership 578 578 ST Engineering Financial I Ltd. – * – * ST Engineering Financial II Pte. Ltd. – * –

543,885 542,262Impairment in subsidiaries (7,000) (7,000)Carrying amount after impairment in subsidiaries 536,885 535,262Capital contribution in the form of share options, performance shares and restricted

shares issued to employees of subsidiaries 58,110 53,215

594,995 588,477

* Amount less than $1,000




13. Subsidiaries (continued)

Details of the subsidiaries are as follows:

Effective equity interest heldby the Group

2010 2009% %

(a) Singapore Technologies Aerospace Ltd and its subsidiaries 100 100

ST Aerospace Engineering Pte Ltd and its subsidiaries: 100 100 ST PAE Holdings Pty Ltd 100 100 Pacific Flight Services Pte Ltd 100 100 Pacific Flight Services Pty Ltd 100 100 ST Aerospace Academy Pte. Ltd. (formerly known as

ST Aerospace Training Academy Pte. Ltd.) and its subsidiary: 100 70 Aviation Training Academy Australia Pty Ltd and its subsidiary: 100 70 ST Aviation Training Academy (Australia) Pty Ltd 100 70ST Aerospace Engines Pte Ltd and its subsidiary: 100 100 ST Aerospace Technologies (Xiamen) Company Limited 80 80ST Aerospace Systems Pte Ltd 100 100ST Aerospace Supplies Pte Ltd and its subsidiaries: 100 100 iShopAero Pte Ltd 100 100 ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd 100 100ST Aerospace International Structures Pte Ltd 100 100ST Aviation Resources Pte Ltd and its subsidiary: 100 100 ST 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 51ST Airport Ground Services Pte Ltd # – 100Singapore British Engineering (Pte) Ltd 51 51ST Aerospace Solutions (Europe) A/S and its subsidiary: 100 100 Airline Rotables (UK Holdings) Limited and its subsidiary: 100 100 Airline Rotables Limited 100 100ST Aerospace Panama, Inc. 100 100Precision Products Singapore Pte Ltd 100 100






2010 2009% %

(b) Singapore Technologies Electronics Limited and its subsidiaries 100 100

SEEL Electronic & Engineering Sdn Bhd 100 100ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100 INFA Systems Limited 100 100 ST Electronics (Software Services) Limited 100 100 ST Electronics (e-Services) Pte. Ltd. and its subsidiary: 100 100 Knowledge Alive Pte. Ltd. @ and its subsidiary: 100 45.47 COMAT Training Services Pte Ltd @ 100 45.47 PM-B Pte Ltd and its subsidiaries: 70 70 PMB Project Management Business Sdn Bhd 70 70 PT PM-B Indonesia 70 70 PM-B (China) Ltd 70 70ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Digital Media) Pte. Ltd. 100 100 Antycip Simulation Limited and its subsidiary: 93 93 Antycip Simulation SAS 93 93 ST Education & Training Private Limited and its subsidiaries: 70 70 STET Homeland Security Services Pte. Ltd. 70 70 STET Maritime Pte. Ltd. 70 70 STET Institute Pte. Ltd. ^ – 70 Brightspot Interactive Learning Pte. Ltd. and its subsidiary: 51 51 Brightspot Interactive Learning Inc. 51 51 MERITS Technologies LLP 51 51ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Info-Security) Pte. Ltd. and its subsidiary: 100 100 DataMark Technologies Pte Ltd 100 100 STELCOMMS Pte. Ltd. 51 51 Telematics Wireless Ltd. and its subsidiary: 96.66 95.04 Telematics Wireless USA Corp 96.66 95.04ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: 100 100 ST Electronics (Sichuan) Co., Ltd 100 100 iDirect Asia Pte. Ltd. 100 100ST Electronics (Shanghai) Co., Ltd and its subsidiary: 100 100 ST Electronics-PCI Co., Ltd ^ – 51iTS Technologies Pte Ltd 100 100ST Electronics (Taiwan) Limited 100 100STELOP Pte. Ltd. 50.05 50.05TranSys Pte Ltd 100 100






2010 2009% %

(c) Singapore Technologies Kinetics Ltd and its subsidiaries 100 100

SDG Kinetics Pte. Ltd. and its subsidiary: 100 100 LeeBoy India Construction Equipment Private Limited 97 –Mobility Systems Pte Ltd and its subsidiaries: 100 100 Silvatech Global Systems Limited 100 100 Silvatech Systems Corporation Pte Ltd and its subsidiary: 100 100 Kinetics Drive Solutions Inc. 100 100STA Inspection Pte Ltd 100 100Singapore Commuter Private Limited and its subsidiaries: 100 100 Jiangsu Huatong Kinetics Co., Ltd. 75.3 75.3 Jiangsu Huaran Kinetics Co., Ltd. 75.3 75.3Securedge Pte. Ltd. 100 100STA Investment Pte Ltd 100 100ST Kinetics International Pte. Ltd. and its subsidiary: 100 100 VT Hackney, S.A. de C.V. (formerly known as VT Specialized Vehicles, S.A. de C.V.) 100 100SDDA Pte. Ltd. (formerly known as STA Detroit Diesel-Allison (Singapore) Pte Ltd) and its

subsidiary: 100 100 Kinetics Link Services Sdn. Bhd. 60 –ST 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: 100 100 Advanced 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: 100 100 Guizhou Jonyang Kinetics Co., Ltd. 60 60Kinetics Systems (Shanghai) Co., Ltd. 100 100STAR Automotive Center (Zhejiang) Co., Ltd. 100 100STAR Automotive Center (Guangzhou) Co., Ltd. 100 100

(d) Singapore Technologies Marine Ltd and its subsidiaries 100 100

STSE Engineering Services Pte Ltd and its subsidiaries: 100 100 ST Environmental Services & Technologies Co. Ltd 100 100 STSE Engineering Services (B) Sdn Bhd 100 –Hovertrans Solutions Pte. Ltd. 51 –






2010 2009% %

(e) Vision Technologies Systems, Inc. and its subsidiaries 100 100

VT Systems, Inc. 100 100Vision Technologies Aerospace, Incorporated and its subsidiaries: 100 100 ST Aerospace Mobile, Inc. 100 100 DalFort Aerospace GP, Inc. 100 100 DalFort Aerospace, L.P. 100 100 San Antonio Aerospace GP, LLC 100 100 ST Aerospace San Antonio, L.P. 100 100Vision Technologies Electronics, Inc. and its subsidiary: 100 100 VT iDirect, Inc. and its subsidiaries: 100 100 iDirect Hong Kong Limited 100 100 iDirect UK Limited and its subsidiary: 100 100 Parallel Limited 100 100 iDirect Italy srl 100 100 iDirect International Corporation 100 100 iDirect Government Technologies, Inc. 100 100 VT iDirect Canada, Inc. 100 100 Intelect Technologies, LLC (formerly known as Intelect Technologies, Incorporated) 100 78.57Vision Technologies Kinetics, Inc. and its subsidiaries: 100 100 Miltope Corporation and its subsidiaries: 100 100 Miltope Business Products, Inc. 100 100 IV Phoenix Group, Inc. 95 95 MÄK Technologies, Inc. 90 90Vision Technologies Land Systems, Inc. and its subsidiaries: 100 100 VT Dimensions, Inc. 100 100 VT LeeBoy, Inc. 100 100 VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) 100 100Vision Technologies Marine, Inc. and its subsidiary: 100 100 VT Halter Marine, Inc. 100 100VT Systems International, LLC 100 –

(f) Singapore Technologies Dynamics Pte Ltd 100 100

(g) ST Synthesis Pte Ltd 100 100

(h) FusionTech Pte. Ltd. 100 100

(i) Kaz-ST Engineering Bastau Limited Liability Partnership 51 51

(j) ST Engineering Financial I Ltd. 100 100

(k) ST Engineering Financial II Pte. Ltd. 100 –





# During the year, this entity was struck off from the Registrar of the Accounting and Corporate Regulatory Authority (“ACRA”) under Section 344 of the Companies Act, Chapter 50.

@ During the year, following an additional acquisition of equity interest, Knowledge Alive Pte. Ltd. and COMAT Training Services Pte Ltd had become subsidiaries of the Group.

^ These entities were disposed of during the year.

Further details of the subsidiaries are as follows:

Name of subsidiary Principal activities

Country of incorporation/

place of business

Singapore Technologies Aerospace Ltd Investment holding and provision of engineering, marketing and engineering support services

Singapore

ST Aerospace Engineering Pte Ltd Repair, maintenance and servicing of aircraft Singapore

ST PAE Holdings Pty Ltd Investment holding Australia

Pacific Flight Services Pte Ltd Providing air transport services Singapore

Pacific Flight Services Pty Ltd Flight training school operation and aircraft management Australia

ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.)

Flight training school operation and aircraft management Singapore

Aviation Training Academy Australia Pty Ltd Flight training school operation and aircraft management Australia

ST Aviation Training Academy (Australia) Pty Ltd Flight training school operation and aircraft management Australia

ST Aerospace Engines Pte Ltd Repair and overhaul of aircraft engines Singapore

ST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of aircraft engines People’s Republic of China

ST Aerospace Systems Pte Ltd Service, repair and overhaul of aircraft components Singapore

ST Aerospace Supplies Pte Ltd Trading, Maintenance-By-The-Hour services for component and repair management, warehousing services for aircraft equipment, parts and components and provision of jet fuel services

Singapore

iShopAero Pte Ltd Trading, e-commerce and information technology related services for the aerospace industry

Singapore

ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd

Import/export for aircraft component leasing, repair, exchange and trading, warehousing, packaging, distribution and other related services








place of business

ST Aerospace International Structures Pte Ltd Designing, developing and manufacturing aircraft, engines, equipment, accessories, components and such other parts

Singapore

ST Aviation Resources Pte Ltd Investment holding Singapore

ST Aviation Resources 1 Limited # Investment holding and aircraft leasing business British Virgin Islands

ST Aerospace Services Co Pte. Ltd. Repair, maintenance, modification and servicing of commercial aircraft

Singapore

Singapore Technologies Engineering (Europe) Ltd Providing marketing and investment services to the Group

United Kingdom

Singapore Aerospace Kabushiki Kaisha # Providing marketing services to the Group Japan

Visiontech Investment Pte Ltd Investment holding and dealing Singapore

Visiontech Engineering Pte Ltd Provision of engineering services for the repair, maintenance and modification of aircraft, aircraft equipment and components

Singapore

Singapore British Engineering (Pte) Ltd Marketing and sale of a range of defence products and associated equipment and participating in the development of new products and systems

Singapore

ST Aerospace Solutions (Europe) A/S Supply aircraft components, including purchase, maintenance and logistics services

Denmark

Airline Rotables (UK Holdings) Limited Investment holding United Kingdom

Airline Rotables Limited Providing component management and support services for aircraft

United Kingdom

ST Aerospace Panama, Inc. Repair and maintenance of aircraft Republic of Panama

Precision Products Singapore Pte Ltd Manufacture and sale of investment castings, mould toolings and precision formings

Singapore

Singapore Technologies Electronics Limited Design, development, supply, installation, integration and maintenance of transportation, intelligent building, defence electronic and communication systems

Singapore

SEEL Electronic & Engineering Sdn Bhd Sales of electronic instruments and equipment, electronic engineering and systems integration services and maintenance and calibration of electronic equipment

Malaysia







place of business

ST Electronics (Info-Software Systems) Pte. Ltd. Design, development and supply of real-time/mission critical systems and provision of related maintenance services

Singapore

INFA Systems Limited Provision for services in consulting, designing and developing systems integration, the maintenance and support of operational and computer systems and sales and distribution of system equipment

Hong Kong

ST Electronics (Software Services) Limited Providing IT outsourcing services, software applications development and turnkey solutions


ST Electronics (e-Services) Pte. Ltd. Providing shared services to government ministries, agencies and enterprises

Singapore

Knowledge Alive Pte. Ltd. Offer technologically-driven learning and knowledge solutions, products and services to corporate, tertiary and workforce markets

Singapore

COMAT Training Services Pte Ltd Operating a computer training school, providing training in computer software and applications

Singapore

PM-B Pte Ltd Relate to mechanical, electrical and engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Singapore

PMB Project Management Business Sdn Bhd Relate to mechanical, electrical and engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Malaysia

PT PM-B Indonesia Relate to mechanical, electrical and engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Indonesia

PM-B (China) Ltd Dormant People’s Republic of China

ST Electronics (Training & Simulation Systems) Pte. Ltd. Design, development, supply, integration and maintenance of training and simulation systems, distribution of games, edutainment and animation programs and the sales and licensing of related products, merchandise and rights

Singapore

ST Electronics (Digital Media) Pte. Ltd. Design, development and manufacture of computers and data processing systems, provision of services for the processing and maintenance of data and information, and production of animation pictures

Singapore







place of business

Antycip Simulation Limited Investment holding and acting as a selling agent of software and incidental hardware to the defence industry and education establishments

United Kingdom

Antycip Simulation SAS A value added reseller/distributor of simulation products and provision of simulation sub-system/components solutions

France

ST Education & Training Private Limited Provision of education and training, management and consultancy services for operational and technical domains of maritime, aerospace and land services and industries

Singapore

STET Homeland Security Services Pte. Ltd. Provision of security consultancy, solutions implementation and training

Singapore

STET Maritime Pte. Ltd. Provision of marine audit, survey and consultancy services

Singapore

Brightspot Interactive Learning Pte. Ltd. Investment holding Singapore

Brightspot Interactive Learning Inc. Provision of training services such as soft skills and management skills to corporations, and other courses to individuals


MERITS Technologies LLP # Marketing and sale of education and simulation products and services. Installation and maintenance of solutions related to these products and services

Kazakhstan

ST Electronics (Info-Comm Systems) Pte. Ltd. Design and development, systems integration, manufacturing and sale of communication equipment, GPS-based fleet management system, traffic management system, info appliances and defence electronics

Singapore

ST Electronics (Info-Security) Pte. Ltd. Design, development, sale and provision of technical support for information security products, solutions and services

Singapore

DataMark Technologies Pte Ltd Development and provision of digital water-marking and related solutions

Singapore

STELCOMMS Pte. Ltd. To undertake design and integration of projects in the area of communications network and systems and to market and trade in communications related products and subsystems

Singapore







place of business

Telematics Wireless Ltd. Development, manufacture, and marketing of products for locating and directing vehicles, other mobile and stationary objects, people, equipment and merchandise, systems for managing vehicular fleets, systems for locating and thwarting car thefts, vehicular wireless equipment and communications for purposes of identification and provision of information, electronic toll-road systems, and electronic systems for reading water meters

Israel

Telematics Wireless USA Corp # Serves as sales arm for Telematics Wireless Ltd. in the USA and a local point of contact for Telematics’ customers for payments and Return Material Authorization support

USA

ST Electronics (Satcom & Sensor Systems) Pte. Ltd. Manufacture of microwave components and sub-systems, system integration and provision of related repairs and maintenance for the telecommunications and defence electronics industries

Singapore

ST Electronics (Sichuan) Co., Ltd Manufacturing and maintenance of communication and other related apparatus and consultant service of telecommunication technology


iDirect Asia Pte. Ltd. Marketing and sales, design, manufacture & engineering services for electronics and communication systems

Singapore

ST Electronics (Shanghai) Co., Ltd Development and manufacturing of computer control and management systems, microwave control systems, simulation and training systems, security systems, MRT passenger information systems, MRT autofare collection system, MRT platform screen door system and provision of related technical consultation and aftersales services


iTS Technologies Pte Ltd Investment holding Singapore

ST Electronics (Taiwan) Limited Provide integration for large-scale system projects in rail, expressway and intelligent building management solutions

Taiwan

STELOP Pte. Ltd. Design and development, manufacturing, maintaining and sale of electro-optical products and systems and the provision of related services

Singapore

TranSys Pte Ltd Design, development, distribution, maintenance and marketing of railway related products

Singapore







place of business

Singapore Technologies Kinetics Ltd Provision 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 engineering services for assembly, upgrading/modifications, maintenance, repair and overhaul of vehicles and weapon systems, and trading in motor vehicles, equipment, vehicle spares and related accessories

Singapore

SDG Kinetics Pte. Ltd. Investment holding Singapore

LeeBoy India Construction Equipment Private Limited Design, manufacture, sales, distribution and aftersales support of construction equipment

India

Mobility Systems Pte Ltd Investment holding Singapore

Silvatech Global Systems Limited # Owns the intellectual property rights to electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives

British Virgin Islands

Silvatech Systems Corporation Pte Ltd Designing, manufacturing, marketing and managing licences of technologies and products using electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions, and equipment powered by such drives, globally

Singapore

Kinetics Drive Solutions Inc. # Research and development, manufacturing and sales of electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives

Canada

STA Inspection Pte Ltd Inspection of heavy goods vehicles, light vehicles, motor cars, buses and motorcycles, provision of vehicle inspection project management as well as provision of independent damage assessment services

Singapore

Singapore Commuter Private Limited Investment holding Singapore

Securedge Pte. Ltd. Provision of design and engineering services, manufacture and sales of security related products, and the provision of equipment maintenance services

Singapore

STA Investment Pte Ltd Investment dealing Singapore

ST Kinetics International Pte. Ltd. Investment holding Singapore







place of business

VT Hackney S.A. de C.V. (formerly known as VT Specialized Vehicles, S.A. de C.V.)

Manufacture and marketing of specialised aluminium drop-frame truck bodies and trailers

Mexico

SDDA Pte. Ltd. (formerly known as STA Detroit Diesel-Allison (Singapore) Pte Ltd)

Assembling and marketing of diesel engines and related products and the provision of technical services, field services, repair and maintenance services

Singapore

Kinetics Link Services Sdn. Bhd. Assembling, distributing and marketing of port handling equipment, diesel engines and related products, and the provision of technical services, field services and maintenance services

Malaysia

ST Kinetics Integrated Engineering Pte. Ltd. Provision of customised solutions, products for defence and commercial markets

Singapore

Singapore Test Services Private Limited Provision of professional engineering consultancy, tests, inspection, certification and related services

Singapore

ST Kinetics Pte. Ltd. Trading and marketing Singapore

Advanced 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 products and gunpowder and the provision of engineering services for assembly, upgrading/modifications, maintenance, repair and overhaul of ammunition and weapon systems, and related services

Singapore

Advanced Pyrotechnic Materials Private Limited Manufacture and sale of pyrotechnic products Singapore

Unicorn International Pte Limited Trading and marketing Singapore

Allied Ordnance of Singapore (Pte) Limited Provision of design and engineering services, manufacture, sales and knowhow transfer of armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Singapore

Ordnance Development and Engineering Company of Singapore (1996) Private Limited

Provision of design and engineering services, manufacture, sales and knowhow transfer of armament, weapons, weapon systems, ammunition, explosives, weapon magazines, military equipment, machines, tools, spares and components and the provision of engineering services for assembly, upgrading/modification, maintenance, repair and overhaul of guns and weapons systems, and related services

Singapore







place of business

Autonomous Technology Pte Ltd Investment holding Singapore

Guizhou 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 and manufacturing companies, provide rental of own-manufactured machinery and accessories


Kinetics Systems (Shanghai) Co., Ltd. Manufacture and sale of vehicle drive systems, industrial drive motors and small external combustion engines


STAR Automotive Center (Zhejiang) Co., Ltd. Provide automotive services, including automotive repair, maintenance, examination and beautifying and decorating, import, export and trading of automotive spare parts, training, technical consultancy and after sales support


STAR Automotive Center (Guangzhou) Co., Ltd. Provide automotive services, including automotive repair, maintenance, examination and beautifying and decorating, import, export and trading of automotive spare parts, technical consultancy and after sales support


Jiangsu Huatong Kinetics Co., Ltd. Manufacture and sale of paving, mixing, road maintenance and compaction equipment and other road construction machineries


Jiangsu Huaran Kinetics Co., Ltd. Manufacture and sale of engineering machinery and equipment


Singapore Technologies Marine Ltd Construction and repair of naval and commercial vessels, design, integration, fabrication, installation of military and commercial engineering equipment and the provision of engineering consultancy and technical management services

Singapore

STSE Engineering Services Pte Ltd Design, manufacture, maintain and operate environmental infrastructures and provide planning, consultancy services in environmental and renewable energy management solutions

Singapore

ST Environmental Services & Technologies Co. Ltd Design, development, manufacturing, sales, after-sales services and consulting services of equipments for environmental protection projects; wholesale, import and export and related business of similar products; consulting services for environmental projects information, consulting services for commercial information








place of business

STSE Engineering Services (B) Sdn Bhd Design, manufacture, maintain and operate environmental infrastructures and provide planning, consultancy services in environmental and renewable energy management solutions

Brunei

Hovertrans Solutions Pte. Ltd. Design, marketing and solutioning for employment of heavy lift air cushion marine vessel for use in oil and gas, transportation and other civil engineering purposes

Singapore

Vision Technologies Systems, Inc. # Investment holding USA

VT Systems, Inc. # Investment holding and providing investment services to the Group

USA

Vision Technologies Aerospace, Incorporated # Investment holding and providing investment services USA

ST Aerospace Mobile, Inc. # Repair and maintenance of aircraft USA

DalFort Aerospace GP, Inc. # Dormant USA

DalFort Aerospace, L.P. ++ Dormant USA

San Antonio Aerospace GP, LLC # Investment holding USA

ST Aerospace San Antonio, L.P. # Repair and maintenance of aircraft USA

Vision Technologies Electronics, Inc. # Investment holding USA

VT 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 customer locations worldwide

USA

iDirect Hong Kong Limited Markets two-way internet protocol – (IP) based broadband satellite networking solutions

Hong Kong

iDirect UK Limited Markets two-way internet protocol – (IP) based broadband satellite networking solutions

United Kingdom

Parallel Limited # Software development and associated services; installation, configuration, consultancy and support

United Kingdom

iDirect Italy srl # Markets two-way internet protocol – (IP) based broadband satellite networking solutions

Italy

iDirect International Corporation # Markets two-way internet protocol – (IP) based broadband satellite networking solutions

USA







place of business

iDirect Government Technologies, Inc. # Design, develop and market two-way internet protocol – (IP) based broadband satellite networking solutions that deliver voice, data and video services to government customers

USA

VT iDirect Canada, Inc. # Research and development Canada

Intelect Technologies, LLC (formerly known as Intelect Technologies, Incorporated) #

Development and supply of a family of multi-access optical networking equipment

USA

Vision Technologies Kinetics, Inc. # Investment holding USA

Miltope Corporation # Development of computers and peripheral equipment for rugged and other specialized applications for military and commercial customers, both domestic and international

USA

Miltope Business Products, Inc. # Dormant USA

IV Phoenix Group, Inc. # Dormant USA

MÄK Technologies, Inc. # Develop and supply software products and services for Networked Synthetic Environments

USA

Vision Technologies Land Systems, Inc. # Investment holding USA

VT Dimensions, Inc. # Investment holding and licensing of intellectual properties

USA

VT LeeBoy, Inc. # Manufacture of asphalt paving and road maintenance equipment including LeeBoy branded asphalt pavers, motor graders, compactors, force feed loaders, asphalt maintainers/patchers, tack distributors, and Rosco branded asphalt distributors, street flushers, brooms and asphalt spray patchers

USA

VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) #

Manufacture and marketing of specialised aluminium drop-frame truck bodies, trailers, refrigerated truck bodies and trailers and specialty vehicle cabs

USA

Vision Technologies Marine, Inc. # Investment holding and providing investment services to the Marine sector

USA







place of business

VT Halter Marine, Inc. Construction and repair of naval and commercial vessels, design, integration, fabrication, installation of engineering equipment and provision of engineering services

USA

VT Systems International, LLC # Investment holding USA

Singapore Technologies Dynamics Pte Ltd Technology development, advanced concept design and development and technology acquisition

Singapore

ST Synthesis Pte Ltd Provision of one-stop total integrated logistic support services

Singapore

FusionTech Pte. Ltd. Investment holding Singapore

Kaz-ST Engineering Bastau Limited Liability Partnership # Provision of IT, engineering, defence and related services

Kazakhstan

ST Engineering Financial I Ltd. Provision of financial and treasury services to related parties

Singapore

ST 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. Commenced members’ voluntary liquidation since December 2009. Audited by member firms of KPMG International for consolidation purposes.++ This entity ceased operations in October 2003. This entity was incorporated during the year and was not required to be audited as at the date of this report.





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 subsidiary Name of accounting firm

Airline Rotables (UK Holdings) Limited KPMG, CambridgeAirline Rotables Limited KPMG, CambridgeAviation Training Academy Australia Pty Ltd KPMG, MelbournePacific Flight Services Pty Ltd KPMG, SydneySingapore Technologies Engineering (Europe) Ltd KPMG, CambridgeST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd KPMG, GuangzhouST Aerospace Mobile, Inc. KPMG, San AntonioST Aerospace San Antonio, L.P. KPMG, San AntonioST Aviation Training Academy (Australia) Pty Ltd KPMG, MelbourneST Aerospace Panama, Inc. KPMG, PanamaST Aerospace Solutions (Europe) A/S KPMG, FrederiksbergST Aerospace Technologies (Xiamen) Company Limited KPMG, FuzhouST PAE Holdings Pty Ltd KPMG, PerthAntycip Simulation Limited KPMG, CambridgeAntycip Simulation SAS KPMG, Paris and Ernst & Young, ParisBrightspot Interactive Learning Inc. KPMG, BeijingiDirect Hong Kong Limited KPMG, Hong KongiDirect UK Limited KPMG, CambridgeINFA Systems Limited KPMG, Hong KongPMB Project Management Business Sdn Bhd KPMG, Kuala LumpurPT PM-B Indonesia Ernst & Young, JakartaSEEL Electronic & Engineering Sdn Bhd KPMG, Kuala LumpurST Electronics (Sichuan) Co., Ltd KPMG, ChengduST Electronics (Shanghai) Co., Ltd KPMG, ShanghaiST Electronics (Software Services) Limited KPMG, ShenzhenST Electronics (Taiwan) Limited KPMG, TaipeiTelematics Wireless Ltd. KPMG, Tel AvivKinetics Link Services Sdn. Bhd. KPMG, Johor BahruLeeBoy India Construction Equipment Private Limited B S R & Co., BangaloreVT Hackney, S.A. de C.V. KPMG, Mexico CityGuizhou Jonyang Kinetics Co., Ltd. KPMG, ChengduSTAR Automotive Center (Zhejiang) Co., Ltd KPMG, HangzhouSTAR Automotive Center (Guangzhou) Co., Ltd KPMG, GuangzhouKinetics Systems (Shanghai) Co., Ltd. KPMG, ShanghaiJiangsu Huatong Kinetics Co., Ltd KPMG, NanjingJiangsu Huaran Kinetics Co., Ltd KPMG, NanjingST Environmental Services & Technologies Co. Ltd KPMG, Shanghai





(a) During the financial year, the Group incorporated the following companies:

Name of companyCountry of incorporation/

place of business Equity interest held Date of incorporation%

LeeBoy India Construction Equipment Private Limited India 97 23 September 2010

Kinetics Link Services Sdn. Bhd. Malaysia 60 13 May 2010

STSE Engineering Services (B) Sdn Bhd Brunei 100 1 November 2010

Hovertrans Solutions Pte. Ltd. Singapore 51 22 January 2010

VT Systems International, LLC USA 100 19 October 2010

ST Engineering Financial II Pte. Ltd. Singapore 100 6 May 2010

(b) During the financial year, the Group acquired additional equity interests in the following companies:

Name of company Interest acquiredInterest after acquisition Consideration

Net identifiable assets acquired

% % $’000 $’000

ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.) and its subsidiaries

30 100 4,000 323

Knowledge Alive Pte. Ltd. and its subsidiary 54.53 100 1,225 1,121

Telematics Wireless Ltd. 1.62 96.66 1,789 403

Intelect Technologies, LLC (formerly known as Intelect Technologies, Incorporated)

21.43 100 211 (44)

(c) During the financial year, the Group disposed of the following companies:

Name of company Interest disposed ConsiderationNet identifiable assets disposed Date of disposal

% $’000 $’000

ST Electronics-PCI Co., Ltd 51 1,469 1,340 29 March 2010

STET Institute Pte. Ltd. 70 533 233 30 June 2010




14. Associates and joint ventures

Group Company2010 2009 2010 2009

$'000 $'000 $'000 $'000

Unquoted shares, at cost 197,907 195,703 17,657 17,707Goodwill on acquisition written off, net (110) (110)Share of net assets acquired 197,797 195,593Share of post-acquisition: Profits 109,064 95,394 Reserves (25,690) (17,608)

281,171 273,379

The summarised financial information of the associates is as follows:

Group2010 2009$’000 $’000

Results

Turnover 819,524 792,662

Net profit for the year 93,034 81,615

Assets and liabilitiesNon-current assets 415,543 385,802Current assets 540,925 601,769Current liabilities (301,891) (261,600)Non-current liabilities (48,723) (41,310)

605,854 684,661

The Group’s share of the joint ventures’ results, assets and liabilities are as follows:

Income and expenses

Income 45,742 33,327

Expenses (43,155) (32,080)

Assets and liabilitiesNon-current assets 50,783 51,693Current assets 37,685 36,420Current liabilities (27,996) (29,908)Non-current liabilities (48,541) (47,544)

11,931 10,661




14. Associates and joint ventures (continued)

(a) Details of associates are as follows:

Name of associate Principal activities


place of businessEffective equity interest

held by the Group2010 2009

% %

Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia 50 50

Aerospace Engineering Services Pty Ltd Unit Trust

Trustee of unit trust fund Australia 50 50

1988 JV Pte. Ltd. ++ Dormant Singapore 50 50

Composite Technology International Pte Ltd Repairing and rebuilding helicopter rotor blades

Singapore 33.33 33.33

Eurocopter South East Asia Private Limited Selling, maintaining and overhauling of helicopters

Singapore 25 25

Madrid Aerospace Services S.L. Repair and overhaul of aircraft landing gears and its related components

Spain 50 50

Shanghai Technologies Aerospace Company Limited

Aircraft and component maintenance, repair, overhaul and other related maintenance business


49 49

Singapore Precision Repair and Overhaul Pte Ltd

Repair and overhaul of aircraft and helicopter landing gears and its related components

Singapore 50 50

Turbine Coating Services Pte Ltd Repair, refurbishment and upgrading of aircraft jet engine turbine blades and vanes

Singapore 24.5 24.5

Turbine Overhaul Services Pte Ltd Repair and service of gas and steam turbine components

Singapore 49 49

iWOW Technology Pte Ltd @ To carry out research and development, consultancy services in telecommunication, electrical and related fields


PM-B Project Management Business (Thailand) Ltd

Relate to mechanical, electrical and engineering works to design, build and provide facility management services for mission critical environments such as data centres, disaster recovery and business continuity sites

Thailand 34.3 34.3





Name of associate Principal activities




% %

Prescient Systems & Technologies Pte. Ltd. Business of developing, producing and marketing non-real time and real time instrumentation systems for defence and commercial applications; design and development of training centres and provision of managed services


Trusted Hub Ltd Provision of an integrated trusted environment for secured transactions and e-commerce


WizVision Pte. Ltd. Providing information technology services and trading of computer accessories

Singapore 22.8 22.8

CityCab Pte Ltd Rental of taxis and provision of premier bus service, charge card facilities and travel related services

Singapore 46.5 46.5

Defence Electronics of Singapore Pte Ltd # Dormant Singapore 49 49

GFM Maquinaria, S.A.P.I. de C.V. Sale of construction and mining machinery and equipment

Mexico 40 40

Hualun International Trading Co., Ltd + Import and export of commercial products, patents, licences and government-approved technologies


– 30.12

Nusantara Technologies Sdn. Bhd. Provision of non-destructive testing services, ultrasonic flaw detection and gauging survey and pressure gauge calibration

Malaysia 49 49

Timoney Holdings Limited Design and prototyping services and component supply for the automotive and aerospace engineering sectors

Republic of Ireland 25 25

NanoScience Innovation Pte Ltd Research and development of ultra fine structure, especially nano-scale, materials, devices, equipment and intellectual properties


Singapore Airshow & Events Pte. Ltd. Organising and management of conferences, exhibitions and other related activities, includes the biennial Singapore Airshow event

Singapore 33 33





(b) Details of joint ventures are as follows:

Name of joint venture Principal activities




% %

GFM Electronics S.A. de C.V. Distribution and sales of high technology systems, services and products, in the communications area, as well as electronics systems, principally closed circuits and alarms for airports, malls, stadiums and highways

Mexico 50 50

ATREC Pte. Ltd. Research and technology development in advanced materials for both defence and commercial applications

Singapore 50 50

Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd.

Develop, manufacture and sale of specialised heavy vehicles and sale of related spare parts and provision of relevant technical consultancy and after sale technical support services


50 50

SMART Systems Pte Ltd Life systems integration of weapon system

Singapore 50 50

Takata CPI Singapore Pte Ltd Manufacture of pyrotechnic components for seatbelts and air bags used in motor vehicles

Singapore 49 49

First Response Marine Pte. Ltd. Ship and boat leasing with operator (including chartering)

Singapore 50 50

Halter-Bollinger Joint Venture LLC § To bid and secure US boat fabrication contracts for its shareholders

USA 50 50

Joint Shipyard Management Services Pte Ltd Construction and managing workers’ dormitories

Singapore 30 30

++ This entity is under members’ voluntary liquidation.@ During the year, following a dilution of interest, the effective equity interest of this entity held by the Group falls below 20%. This

entity continues to be classified as an associate as the Group has representation on the board of directors of the investee, indicating significant influence.

# Pending approval from ACRA, an application to strike off this entity was lodged with ACRA during the year.+ This entity was dissolved during the year. Audited by member firms of KPMG International for consolidation purposes.§ Not required to be audited under the law in the country of incorporation.





All associates and joint ventures 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/joint venture Name of accounting firm

Aerospace Engineering Services Pty Ltd KPMG, AustraliaAerospace Engineering Services Pty Ltd Unit Trust KPMG, AustraliaComposite Technology International Pte Ltd Deloitte and Touche LLP, SingaporeMadrid Aerospace Services S.L. Deloitte S.L.Shanghai Technologies Aerospace Company Limited KPMG, ShanghaiTurbine Coating Services Pte Ltd PricewaterhouseCoopers LLP, Singapore Turbine Overhaul Services Pte Ltd PricewaterhouseCoopers LLP, SingaporeGFM Electronics S.A. de C.V. PricewaterhouseCoopers, MexicoiWOW Technology Pte Ltd LW Ong & CoPM-B Project Management Business (Thailand) Ltd Tonkla Miraculous Co., Ltd.WizVision Pte. Ltd. BF Teo AssociatesBeijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd. Crowe Horwath China CPA Co., LtdCityCab Pte Ltd Deloitte and Touche LLP, SingaporeNusantara Technologies Sdn. Bhd. Deloitte Kassimchan, MalaysiaTimoney Holdings Limited KPMG, IrelandNanoScience Innovation Pte Ltd NSC & AssociatesGFM Maquinaria, S.A.P.I. de C.V. PricewaterhouseCoopers, Mexico

15. InvestmentsGroup

2010 2009$’000 $’000

Quoted investmentsEquity shares, at fair value (Available-for-sale) Non-related corporations 42,804 46,001 Impairment in value of quoted investments (28,900) (28,900)

13,904 17,101Unquoted investments Equity shares (Available-for-sale) Related corporations, at cost 4,999 5,016 Non-related corporations, at cost 22,373 23,339

27,372 28,355

Venture capital funds and limited partnership, at fair value 580 1,745Convertible loan, at amortised cost * – 486Convertible loan to non-related corporations # 700 700

1,280 2,931

Total unquoted investments 28,652 31,286Impairment in value of unquoted investments (26,366) (26,923)

2,286 4,363

Total investments 16,190 21,464




15. Investments (continued)

* A subsidiary extended an interest-free convertible loan to an investee company at a nominal value of US$300,000. The subsidiary was entitled to convert it within 5 years from the date of disbursement of the loan to share equity of the investee company. This investment was disposed of during the year.

# Included in the convertible loan is an amount of $700,000 (2009: $700,000) extended by a subsidiary to an investee company at an interest rate of 1% (2009: 1%) above bank prime rate per annum. The subsidiary was granted an option by the investee company to be able to convert the loan into convertible redeemable preference shares in the investee company.

For those unquoted investments where the fair value cannot be reliably estimated, the Group has no intention to dispose such investments at the balance sheet date.

Impairment in value of quoted investments

In prior year, the Group recognised an impairment loss of $313,000 pertaining to quoted investments reflecting the write-down in the carrying value of the investments with a significant and prolonged decline in the market price.

Movements in impairment in value of quoted investments during the year are as follows:

GroupNote 2010 2009

$’000 $’000

At beginning of the year 28,900 28,587Charge to profit or loss 9 – 313

At end of the year 28,900 28,900

Impairment in value of unquoted investments

Movements in impairment in value of unquoted investments during the year are as follows:

At beginning of the year 26,923 26,215Charge to profit or loss 9 417 747Utilised (500) –Disposal (325) –Translation difference (149) (39)





16. Intangible assets

(a) Goodwill

GroupNote 2010 2009

$’000 $’000

CostAt beginning of the year 508,317 503,692Acquisition of subsidiaries in prior year, as previously reported – 14,904Finalisation of purchase price allocation – 1,591Acquisition of subsidiaries in prior year, as restated – 16,495Acquisition of subsidiaries in current year 104 –Finalisation of purchase price allocation in current year (1,336) –Acquisition of non-controlling interests in subsidiaries 342 1,239Goodwill written off – (1,599)Translation difference (39,125) (11,510)


ImpairmentAt beginning of the year 15,490 15,544Impairment for the year 5 3,741 –Translation difference (170) (54)


Net book value 449,241 492,827

In prior year, the Group wrote-off goodwill amounting to $1,599,000 for a CGU due to closure of a plant.




16. Intangible assets (continued)

(b) Other intangible assets

NoteDealer

networkDevelopment expenditure

Commercial and

intellectual property

rights Film cost inventory Brands Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

The Group

CostAt 1.1.2009 9,344 6,341 67,740 10,250 84,844 1,458 179,977Additions – 4,629 – 1,333 – 2,126 8,088Acquisition of subsidiaries in prior

year, as previously reported – 2,032 1,669 – 143 1,400 5,244Finalisation of purchase price

allocation – (4) 30 – – – 26Acquisition of subsidiaries in prior

year, as restated – 2,028 1,699 – 143 1,400 5,270Translation difference (212) (27) (1,359) – (1,748) 37 (3,309)At 31.12.2009 and at 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 price

allocation in current year – – – – – 1,336 1,336Write-off – (2,153) – – – – (2,153)Translation difference (754) (434) (5,024) – (6,981) 7 (13,186)

At 31.12.2010 8,378 13,615 64,312 11,803 76,258 6,364 180,730

Accumulated amortisationAt 1.1.2009 3,454 1,598 17,965 524 2,453 1,041 27,035Amortisation for the year 5 1,352 350 7,101 220 1,323 1,427 11,773Impairment loss 5 – 397 – – – – 397Translation difference (123) (19) (522) – (89) – (753)At 31.12.2009 and 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 5,495 2,115 29,453 4,880 4,565 2,940 49,448

Net book valueAt 31.12.2010 2,883 11,500 34,859 6,923 71,693 3,424 131,282

At 31.12.2009 4,449 10,645 43,536 10,839 79,552 2,553 151,574





(c) Total intangible assets

Group2010 2009$’000 $’000


Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to the Group’s CGUs identified according to each individual business unit, for impairment testing.

Carrying amount of goodwill allocated to each of the CGU:

Group2010 2009$’000 $’000

ST Aerospace Solutions (Europe) A/S 1,987 2,194ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.) and

its subsidiaries 200 200ST Aviation Training Academy (Australia) Pty Ltd 207 207Pacific Flight Services Pty Ltd 701 701Precision Products Singapore Pte Ltd * 2,262 3,598Antycip Simulation Limited and its subsidiary 2,781 3,158Brightspot Interactive Learning Pte. Ltd. and its subsidiary – 2,245DataMark Technologies Pte Ltd 149 149Knowledge Alive Pte. Ltd. and its subsidiary 104 –MÄK Technologies, Inc. 22,603 24,271Parallel Limited * 5,365 6,036PM-B Pte Ltd and its subsidiaries 11,705 11,665STELCOMMS Pte. Ltd. 5 5STELOP Pte. Ltd. 1,732 1,732Telematics Wireless Ltd. and its subsidiary 77,416 84,383VT iDirect, Inc. 154,022 167,882Jiangsu Huatong Kinetics Co., Ltd. and Jiangsu Huaran Kinetics Co., Ltd. 5,690 6,002STAR Automotive Center (Zhejiang) Co., Ltd. – 982STAR Automotive Center (Guangzhou) Co., Ltd. – 498VT LeeBoy, Inc. 94,446 102,945VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) 34,599 37,714Miltope Corporation 33,267 36,260

449,241 492,827

* During the year, the purchase price allocation to goodwill, intangible assets and other assets and liabilities have been finalised.





The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections derived from the financial budgets approved by management for the next 5 years. The discount rates applied range from 5.7% to 8.9% (2009: 6.1%). Cash flows beyond these periods are extrapolated using the estimated terminal growth rates ranging from 1.5% to 5.0% (2009: 2.0% to 5.0%). Management has considered and determined the factors applied in these financial budgets which include budgeted gross margins and average growth rates. The budgeted gross margins are based on past performance and its expectation of market development. Average growth rates used are consistent with forecasts included in industry reports.

17. Investment properties

GroupNote 2010 2009

$’000 $’000

At costAt beginning of the year 3,244 33,722Disposal – (2,178)Translation difference (199) (83)Transfer to property, plant and equipment 12 – (28,217)


Accumulated depreciationAt beginning of the year 1,235 16,351Depreciation charge for the year 5 245 368Translation difference (101) (42)Disposal – (825)Transfer to property, plant and equipment 12 – (14,617)



The property rental income of the Group for the year ended 31 December 2010 from its investment properties, which are leased out under operating leases, amounted to $187,000 (2009: $330,000). Direct operating expenses (including repairs and maintenance) arising from the rental-earning investment properties amounted to $9,000 (2009: $60,000).

The fair value of the investment properties as at 31 December 2010 of $9,547,000 (2009: $7,867,000) are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

In prior year, the Group

(a) transferred one property that was held as investment property to property, plant and equipment following part of the building having been retained for the Group’s internal use; and

(b) disposed of an investment property for a cash consideration of $1,800,000.




17. Investment properties (continued)

The investment property held by the Group as at end of the year is as follows:

Location Existing Use Tenure Land area(sq. m.)


No. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai

Industrial building 50 years from 12.6.2003 to 27.7.2052 15,898

18. Long-term receivables

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

Housing and car loans and advances to staff 1,036 998 77 90Deposits 4,099 – – –Other receivables *1 2,489 1,987 – –Loans to:

Third parties *2 48,136 43,154 – – Allowance for doubtful loans (8,957) (9,015) – –

39,179 34,139 – –

46,803 37,124 77 90

Receivable: Within 1 year 10,428 7,637 77 90 After 1 year 36,375 29,487 – –

46,803 37,124 77 90




18. Long-term receivables (continued)

Loans and receivables are carried at amortised cost and are subject to impairment.

*1 Other receivables relate to government grants that would be received upon compliance with the conditions indicated in a non-cancellable lease agreement entered into by a subsidiary. Under the agreement, the future rental payable is to be paid from the eleventh year onwards, when the subsidiary had invested a total of US$10,000,000 for the first 10 years. The government grant is recognised on the account that there is reasonable assurance that the subsidiary will comply with the conditions. As at 31 December 2010, the subsidiary has invested US$7,223,000 (2009: US$6,048,000).

*2 Included in the loans to third parties are:

(a) an amount of approximately $8,312,000 (2009: $8,312,000) secured by intellectual property rights 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% (2009: 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 prior year, a notice was given to that entity to convert the loan 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 for the loan stated due to the uncertainty over the collectibility of the interest income.

(b) a bridging loan of $645,000 (US$500,000) (2009: $702,500 (US$500,000)) extended to a third party. The bridging loan is secured by way of a Deed of 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 not expected to be repaid. The loan is stated at cost and has been fully provided for since financial year 2004 due to uncertainty of collectibility.

(c) an amount of $39,179,000 (2009: $34,139,000) relating to instalment payment plans granted to customers. These loans are repayable over a period of 3.5 years to 6.5 years from 2009. The interest rates on these loans are LIBOR with margins ranging from 0.5% to 0.63% (2009: 0.5% to 0.63%) per annum. The interest rates range from 1.11% to 1.86% (2009: 1.11% to 1.86%) per annum, which are also the effective interest rates.

Movements in allowance for doubtful loans to third parties are as follows:

Group2010 2009$’000 $’000

At beginning of the year 9,015 9,031Translation difference (58) (16)





19. Finance lease receivables

The Group entered into finance lease arrangements with customers with terms ranging from 1 to 10 years (2009: 1 to 10 years) and effective interest rate of 1.42% to 20.7% (2009: 1.42% to 29.8%) per annum.

Gross investmentin finance lease

Unearnedinterest

Present value ofminimum lease

receivables

Allowance fordoubtful lease

receivablesNet investment

in finance lease$’000 $’000 $’000 $’000 $’000

The Group

2010

Within 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 – 1,104

7,282 730 6,552 – 6,552

24,465 1,292 23,173 (2,142) 21,031

2009

Within 1 year 17,779 577 17,202 (2,816) 14,3862 to 5 years 4,360 615 3,745 – 3,745More than 5 years 1,639 157 1,482 – 1,482

5,999 772 5,227 – 5,227

23,778 1,349 22,429 (2,816) 19,613

GroupNote 2010 2009

$’000 $’000

Net investment in finance leaseNot past due and not impaired 14,699 15,535Past due and not impaired 6,332 4,078

21,031 19,613

Individually assessedDoubtful lease receivables 2,142 2,816Allowance for doubtful lease receivables (2,142) (2,816)

– –

Movements in allowance for doubtful lease receivables are as follows:

At beginning of the year 2,816 1,761(Write-back)/charge to profit or loss 5 (543) 1,138Allowance utilised – (8)Translation difference (131) (75)





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:

Group2010 2009$’000 $’000

1 - 90 days 3,109 1,26091 - 180 days 1,616 964181 - 360 days 615 888>360 days 992 966

6,332 4,078

20. Deferred tax assets

Group2010 2009$’000 $’000

At beginning of the year 127,196 138,128Recognised in profit or loss 5,659 1,442Effect of reduction in tax rate (168) (2,236)Acquisition of subsidiaries – 251Disposal of a subsidiary – (6)Translation difference (8,492) (954)Transfer to provision for taxation (8,306) (7,465)Changes in fair value of available-for-sale financial assets (51) (243)Changes in fair value of derivative financial instruments designated in cash flow hedges 2,956 (1,721)


The deferred tax assets arise as a result of:

Unabsorbed capital allowances and unutilised tax losses 3,149 41,277Allowance for doubtful debts and inventory obsolescence 15,730 15,788Provisions 88,986 63,692Intangible assets 405 (54)Other temporary differences 2,672 1,114Changes in fair value of available-for-sale financial assets – 51Changes in fair value of derivative financial instruments designated in cash flow hedges 7,852 5,328

118,794 127,196




21. Inventories and work-in-progress

Group2010 2009$’000 $’000

Inventories of equipment and spares 575,315 509,342

Work-in-progress in excess of progress billingsWork-in-progress, including profits recognised 3,179,861 2,600,296Progress billings (2,284,747) (1,745,342)

895,114 854,954

Total inventories and work-in-progress at lower of cost and net realisable value 1,470,429 1,364,296

Progress billings in excess of work-in-progressWork-in-progress, including profits recognised 2,043,709 2,304,408Progress billings (2,610,902) (2,861,737)

(567,193) (557,329)

Inventories are stated after allowance for inventory obsolescence of $195,316,000 (2009: $191,860,000) and work-in-progress in excess of progress billings are stated after provision for foreseeable losses of $4,168,000 (2009: $14,517,000).

22. Trade debtors

Group2010 2009$’000 $’000

Not past due and not impaired 566,814 526,959 Past due and not impaired 256,132 360,236

822,946 887,195Collectively assessedImpaired receivable (Gross) 34,816 34,667Allowance for doubtful debts (10,159) (7,786)

24,657 26,881Individually assessedImpaired receivable (Gross) 79,926 111,183Allowance for doubtful debts (75,635) (98,542)

4,291 12,641

Unbilled receivable 169,291 137,109Allowance for unbilled receivable (1,380) (1,854)

Trade debtors, net 1,019,805 1,061,972




22. Trade debtors (continued)

Trade debtors denominated in currencies other than the functional currencies as at 31 December are as follows:

• $205,999,000(2009:$189,707,000)denominatedinUSdollars• $29,258,000(2009:$11,060,000)denominatedinEuro• $27,845,000(2009:$22,180,000)denominatedinGBP

Movements in allowance for doubtful debts are as follows:

GroupNote 2010 2009

$’000 $’000

At beginning of the year 106,328 81,832Charge to profit or loss 5 467 28,084Bad debts written off against allowance (13,478) (10,430)Acquisition of subsidiaries 21 8,384Translation difference (7,544) (1,542)


Movements in allowance for unbilled receivable are as follows:

At beginning of the year 1,854 –(Write-back)/charge to profit or loss 5 (474) 1,854


Ageing of receivable that are past due but not impaired:

1 - 90 days 180,132 243,76691 - 180 days 40,972 47,278181 - 360 days 21,833 36,338>360 days 13,195 32,854

256,132 360,236

Trade debtors that are individually determined to be impaired at the balance sheet date relates to debtors that are insolvent or in financial difficulties or who have significant delay or defaulted in payments.

At the balance sheet date, trade debtors with balances amounting to approximately $7,662,000 (2009: $8,097,000) are partially secured by shares held by a guarantor company amounting to $278,000 (2009: $978,000).

Trade debtors amounting to $30,582,000 (2009: $20,050,000) are arranged to settle via letters of credit issued by reputable banks.

Except for the impaired trade receivable, the Group believes that the past due receivable are still collectible based on the historical payment patterns and good reputation of the Group’s customers.




23. Amounts due from related parties

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

Trade: Subsidiaries – – 6,095 3,242 Associates 5,189 6,785 – – Joint ventures 11,297 13,435 – – Related corporations 4,727 4,272 27 29

21,213 24,492 6,122 3,271

Non-trade: Subsidiaries*1 – – 790,905 360,455 Associates*2 2,572 3,270 – – Joint ventures*3 7,985 7,891 – –

10,557 11,161 790,905 360,455Allowance for doubtful debts (2,521) (4,237) (35,813) (28,216)

Amounts due from related parties 29,249 31,416 761,214 335,510

Receivable: Within 1 year 21,872 24,103 761,214 330,022 After 1 year 7,377 7,313 – 5,488

29,249 31,416 761,214 335,510

*1 Included in the amounts due from subsidiaries (non-trade) are: (a) loans amounting to $752,281,000 (2009: $359,872,000) and bearing interest at rates ranging from 0.67% to 4.98% (2009: 0.73% to

1.97%) per annum. The loans are unsecured and repayable on demand; and (b) interest-free loans amounting to $35,813,000 (2009: $33,704,000), which are unsecured and are not repayable in the foreseeable

future. The loans are fully impaired as at 31 December 2010.

*2 Included in the amounts due from associates (non-trade) is a loan to an associate amounting to $2,571,000 (2009: $3,022,000). The loan is unsecured and repayable in 2019. The interest on this loan is EURIBOR + 1.0% per annum. In 2010, the interest rate is 2.02% (2009: 1.71%) per annum, which is also the effective interest rate. The interest rate is repriced every 3 months.

*3 Included in amounts due from joint ventures (non-trade) are: (a) a loan amounting to $1,453,000 (2009: $1,583,000) and bearing interest at 4% (2009: 4%) per annum. The loan is unsecured and has

been fully impaired during the year; and (b) loans amounting to $4,806,000 (2009: $4,291,000) and bearing interest at rates ranging from 4.57% to 6.38% (2009: 4.57% to 5.07%)

per annum. The loans are unsecured and repayable by 2029.




23. Amounts due from related parties (continued)

Movements in allowance for doubtful debts are as follows:

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

At beginning of the year 4,237 3,837 28,216 26,488(Write-back)/charge to profit or loss (1,564) 416 7,788 1,782Translation difference (152) (16) (191) (54)

At end of the year 2,521 4,237 35,813 28,216

24. Advances and other debtors


$’000 $’000 $’000 $’000

Advance payments to suppliers 403,802 259,231 – –Deposits 12,346 15,542 524 501Prepayments 27,508 25,765 283 439Interest receivables 3,193 4,301 341 220Other recoverables 20,559 19,266 84 3,352Non-trade debtors 60,785 33,568 49 103Derivative financial instruments 48 62,055 10,539 – –

590,248 368,212 1,281 4,615

25. Short-term investments

GroupNote 2010 2009

$’000 $’000

Quoted investmentsEquity shares, at fair value (Fair value through profit or loss) 534 1,710

Unquoted investmentsBonds, at fair value (Available-for-sale) Interest rate: 0.43% to 6.15% (2009: 4.25% to 5.88%) per annum Maturity: 7.3.2011 to 15.11.2022 (2009: 4.11.2013 to 18.11.2019) 48 197,930 195,541Bonds, at amortised cost (Held-to-maturity) Interest rate: nil (2009: 2.02% to 3.10% per annum) Maturity: nil (2009: 30.09.2010 to 1.11.2010) – 38,574

197,930 234,115

198,464 235,825




26. Cash and cash equivalents

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

Fixed deposits with financial institutions 1,142,427 1,006,528 319,867 194,073Cash and bank balances 449,300 507,230 16,944 47,911

Bank balances and other liquid funds 1,591,727 1,513,758 336,811 241,984

Bank overdrafts – (1)

Cash and cash equivalents in the statement of cash flows 1,591,727 1,513,757

Fixed deposits with financial institutions mature at varying periods within 6 months (2009: 8 months) from the financial year-end. Interest rates range from 0.04% to 6.45% (2009: 0.03% to 5.12%) per annum, which are also the effective interest rates.

Cash and bank balances of $4,204,000 (2009: $1,681,000) 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 as at 31 December are as follows:


27. Creditors and accruals


$’000 $’000 $’000 $’000

Trade creditors 675,730 599,311 – –Non-trade creditors 48,559 43,026 3,543 4,263Purchase of property, plant and equipment 12,062 2,699 – –Accrued operating expenses 821,203 716,904 25,504 35,739Accrued interest payable 16,202 19,388 – –Other long-term payables, current 37 1,333 2,904 – –Derivative financial instruments 48 13,920 4,118 6 –

1,589,009 1,388,350 29,053 40,002

Trade creditors denominated in currencies other than the functional currencies as at 31 December are as follows:





28. Amounts due to related parties

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

Trade: Subsidiaries – – 2,880 1,644 Associates 2,763 3,175 – – Joint ventures 4,963 556 – – Related corporations 770 1,348 – 4

8,496 5,079 2,880 1,648

Non-trade: Subsidiaries * – – 445,116 54,000

8,496 5,079 447,996 55,648

Payable: Within 1 year 8,294 5,079 393,996 1,648 After 1 year 202 – 54,000 54,000

8,496 5,079 447,996 55,648

* Included in the amounts due to subsidiaries (non-trade) are: (a) loans amounting to $389,607,000 (2009: $nil) and bearing interest at rates ranging from 0.93% to 4.98% per annum. The loans are

unsecured and repayable on demand; and (b) an interest-free loan amounting to $54,000,000 (2009: $54,000,000), which is unsecured and is not repayable in the foreseeable future.




29. Provisions

GroupNote 2010 2009

$’000 $’000

Provision for: Warranties 188,102 189,740 Liquidated damages 12,005 8,643 Foreseeable losses 10,283 13,468

210,390 211,851

(a) Movements in provision for warranties are as follows:

At beginning of the year 189,740 170,313Charge to profit or loss 5 17,069 34,903Provision utilised (14,955) (14,546)Translation difference (3,752) (1,156)Acquisition of subsidiaries – 226


(b) Movements in provision for liquidated damages are as follows:

At beginning of the year 8,643 5,983Charge to profit or loss 5 5,937 2,901Provision utilised (2,478) (160)Translation difference (97) (81)


(c) Movements in provision for foreseeable losses are as follows:

At beginning of the year 13,468 9,119(Write-back)/charge to profit or loss (1,912) 4,392Provision utilised (308) –Translation difference (965) (43)





30. Short-term bank loans

Effective Groupinterest rate Maturity 2010 2009

% $’000 $’000

Bank loans 0.75% to 5.56% Within 1 year 63,404 83,510

The bank loans are denominated in Singapore dollars, US dollars, Euro and Chinese Yuan (2009: Singapore dollars, US dollars and Chinese Yuan).

Included in short-term bank loans are:

(a) loans amounting to $43,110,000 (2009: $68,478,000) which are unsecured;

(b) loan amounting to $976,000 (2009: $1,030,000) which is guaranteed by a standby letter of credit;

(c) loans amounting to $1,269,000 (2009: $4,736,000) which are guaranteed by Zhenjiang State-owned Assets Investment Management Co., Ltd. and secured by a subsidiary’s buildings;

(d) loans amounting to $11,712,000 (2009: $9,266,000) which are secured by a subsidiary’s land and buildings; and

(e) loan amounting to $6,337,000 (2009: $nil) which is secured by receivables and inventories.

31. Lease obligations

(a) A subsidiary leases certain land, buildings, and equipment from a foreign Airport Authority (“Authority”) under a finance lease arrangement. The leased assets are pledged as collateral against industrial revenue bonds issued by the Authority. The bonds have staggered maturity dates and the lease payments have been structured to coincide with the staggered maturities of the bonds with the final payment due on 1 November 2012, 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 of credit expires on 3 April 2012.

The subsidiary also leases certain land, buildings, and equipment from the Authority under an operating lease. The lease term coincides with the term of the finance lease agreement entered into with the Authority.

(b) A subsidiary entered into finance leases for transportation equipment and vehicles with terms ranging from 2 to 4 years (2009: 2 to 4 years) and effective interest rates ranging from 8.87% to 9.19% (2009: 6.88% to 16.52%) per annum.




31. Lease obligations (continued)

The obligations under the finance leases to be paid by the subsidiaries are as follows:

Minimum leasepayment Interest

Present value ofpayment

$’000 $’000 $’000

The Group

2010

1 to 5 years 6,983 (359) 6,624

Repayable: Within 1 year 2,741 After 1 year 3,883

6,624

2009

1 to 5 years 6,211 (659) 5,552

Repayable: Within 1 year 1,822 After 1 year 3,730

5,552

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

32. Deferred income

Group2010 2009$’000 $’000

Government grants 7,916 9,144Deferred rents 5,495 5,402

13,411 14,546




33. Deferred tax liabilities

Group Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

At beginning of the year 58,355 62,602 205 201Recognised in profit or loss (5,569) (878) 221 15Effect of reduction in tax rate 13 175 – (11)Translation difference (3,820) (1,101) – –Transfer to provision for taxation 10,609 (2,637) – –Acquisition of subsidiaries in prior year, as

previously reported – 1,849 – –Finalisation of purchase price allocation – 58 – –Acquisition of subsidiaries in prior year,

as restated – 1,907 – –Acquisition of subsidiaries in current year 19 – – –Disposal of subsidiaries in current year (2) – – –Changes in fair value of derivative

financial instruments designated in cash flow hedges (1,389) (1,713) – –

At end of the year 58,216 58,355 426 205

The deferred tax liabilities arise as a result of:

Excess of net book value over tax written down value of property, plant and equipment 22,499 19,832 54 69

Allowance for doubtful debts and inventory obsolescence (5,026) (9,227) – –

Other temporary differences (6,088) 2,417 372 136Changes in fair value of derivative

financial instruments designated in cash flow hedges (2) 1,387 – –

Fair value adjustment upon acquisition of subsidiaries 46,833 43,946 – –

58,216 58,355 426 205




34. Long-term bank loans

Effective Groupinterest rate Maturity 2010 2009

% $’000 $’000

Bank loans 0.61% to 5.76% Up to 2019 634,165 648,854

Repayable: Within 1 year 307,047 – After 1 year 327,118 648,854

634,165 648,854

The bank loans are denominated in Singapore dollars, US dollars, Euro and Chinese Yuan (2009: Singapore dollars, US dollars, Euro and Chinese Yuan).

Included in the long-term bank loans are:

(a) loan amounting to $17,912,000 (2009: $nil) which is secured over a subsidiary’s certain property, plant and equipment. Repayment shall commence in 2011 in accordance with an agreed repayment schedule; and

(b) loan amounting to $7,027,000 (2009: $7,412,000) which is secured by a subsidiary’s land and guaranteed by a standby letter of credit.

35. Other loans

(a) Included in other loans are:

(i) US dollar denominated term notes of $0.9 million (US$0.7 million) (2009: $1.1 million (US$0.8 million)) and $0.2 million (US$0.2 million) (2009: $0.2 million (US$0.2 million)) owing to the Pennsylvania Industrial Development Authority and the Industrial Properties Corporation, 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% (2009: 2.75% and 4.0%) per annum, which are also the effective interest rates, and are payable through 1 July 2019 and 28 June 2019, respectively.

(ii) Another US dollar denominated term note of $0.1 million (US$0.1 million) (2009: $0.2 million (US$0.2 million)) is owed by the same entity to the Pennsylvania Department of Community and Economic Development. This note is unsecured, bears interest of 2.75% (2009: 2.75%) per annum, which is also the effective interest rate, and is payable through 1 February 2012.

(iii) An amount of $1.6 million (RMB8.4 million) (2009: $nil) relating to a loan from a non-controlling shareholder of a subsidiary. The loan is unsecured with interest rate at 3.47% (2009: nil) per annum, which is also the effective interest rate, and is repayable on 7 February 2011.

(b) In prior year, loans amounting to $0.8 million relate to long-term loans from a non-controlling shareholder of a subsidiary. The loans were unsecured with interest rates ranging from 3.85% to 4.36% per annum, which were also the effective interest rates. The loans had been fully repaid.




36. Bonds

Group2010 2009$’000 $’000

Principal 644,500 702,500Unamortised discount (3,392) (4,038)

641,108 698,462Unamortised discount: At beginning of the year 4,038 – Additions – 4,297 Amortisation for the year (330) (150) Translation difference (316) (109)

3,392 4,038

On 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. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable every 6 months from the date of issue. The bonds are unconditionally and irrevocably guaranteed by the Company.

37. Other long-term payables

GroupNote 2010 2009

$’000 $’000

Within 1 year 27 1,333 2,904After 1 year 2,500 1,453

3,833 4,357

Included in the other long-term payables are:

(a) an amount of $1,333,000 (2009: $4,357,000) payable to an external supplier. A subsidiary entered into an agreement with an external supplier for deferment of payment relating to purchase of equipment. The amount payable is unsecured, bears interest at 1.45% (2009: 1.45%) per annum; and

(b) an amount of $2,500,000 (2009: $nil) payable to a previous non-controlling shareholder of a subsidiary for payment relating to purchase of remaining shareholdings of the subsidiary. The amount payable is unsecured, interest-free and repayable within 7 years.




38. Share capital

Group and Company2010 2009$’000 $’000

Issued and fully paidAt beginning of the year 3,010,456,133 (2009: 2,998,603,162) ordinary shares 611,808 586,614Issued during the year 27,109,612 (2009: 11,852,971) ordinary shares 65,782 25,194At end of the year 3,037,565,745 (2009: 3,010,456,133) ordinary shares 677,590 611,808

Included 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. In addition, 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 share without restriction.

39. Share-based payment arrangements

The Singapore Technologies Engineering Share Option Plan (“ESOP”), the Singapore Technologies Engineering Performance Share Plan (“PSP”) and the Singapore Technologies Engineering Restricted Stock Plan (“RSP”) of the Company were approved by its members at an Extraordinary General Meeting held on 23 November 2000. The ESOP, PSP and RSP are administered by the Executive Resource and Compensation Committee (“ERCC”) comprising 3 directors, Mr Peter Seah Lim Huat, Mr Venkatachalam Krishnakumar and Dr Stanley Lai Tze Chang. Following approval of the new Share Plans by shareholders at the Extraordinary General Meeting held on 23 November 2000, the Singapore Technologies Engineering Executive’s Share Option Scheme (“ESOS”), the predecessor to the ESOP, was terminated.

Singapore Technologies Engineering Share Option Plan (“ESOP”)

Information regarding ESOP is as follows:

(a) The exercise price of the options is equal to volume-weighted average price for the shares on the Singapore Exchange over the 3 consecutive trading days immediately preceding the date of grant.

(b) The options are exercisable at the end of the first year after date of grant, in accordance with a vesting schedule to be determined by ERCC and are 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.




39. Share-based payment arrangements (continued)

During the financial year, the Company issued 23,981,263 (2009: 10,215,827) ordinary shares for cash at the respective price per share upon the exercise of options granted by the Company under ESOS and ESOP.

Grant no. No. of ordinary shares issued Price per ordinary share$

2001 5,006,553 2.2602002 293,125 1.8082003 376,665 2.3900102N 1,733,758 2.7200108N 1,799,021 2.6800202N 1,033,573 2.2900208N 539,193 1.9200302N 594,459 1.7900308N 936,887 1.8600402N 1,125,943 2.0900408N 1,596,195 2.1200408P 5,000 2.1200502N 1,888,521 2.3700502ND 243,625 2.3700508N 2,236,764 2.5700508ND 262,293 2.5700602N 1,404,379 3.0100602ND 89,000 3.0100608N 2,320,502 2.8400608ND 10,875 2.8400703N 474,798 3.2300708N 10,134 3.610





At the end of the financial year, unissued ordinary shares of the Company under options granted to eligible employees and directors of the Company are as follows:

(i) Options outstanding under the ESOS/ESOP

Number of shares2010 2009

ESOSAt beginning of the year 7,352,103 12,196,551Exercised (5,676,343) (4,339,938)Lapsed (1,675,760) (504,510)

At end of the year – 7,352,103

Exercisable at end of the year – 7,352,103

ESOPAt beginning of the year 104,356,044 112,205,701Exercised (18,304,920) (5,875,889)Lapsed (1,760,623) (1,973,768)

At end of the year 84,290,501 104,356,044

Exercisable at end of the year 77,558,999 87,883,347

(ii) Details of share options

2010

Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:

Date ofgrant

Balanceas at

1.1.2010Optionslapsed

Optionsexercised

Balanceas at

31.12.2010

No. ofholders at31.12.2010

Exerciseprice Exercisable period

$

9.2.2000 6,299,313 1,292,760 5,006,553 – – 2.260 10.2.2002 to 9.2.20109.2.2000 656,125 363,000 293,125 – – 1.808 10.2.2002 to 9.2.20106.9.2000 396,665 20,000 376,665 – – 2.390 7.9.2002 to 6.9.2010

Total 7,352,103 1,675,760 5,676,343 – –





(ii) Details of share options (continued)

2010

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Date ofgrant

Balanceas at


Options exercised

Balanceas at

31.12.2010

No. ofholders at 31.12.2010


$

19.2.2001 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 7.2.20107.2.2005 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 10.8.201010.8.2005 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 10.8.2012

Total 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






2009

Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows:

Date ofgrant

Balanceas at


Optionsexercised

Balanceas at

31.12.2009



$

9.2.1999 1,334,060 267,600 1,066,460 – – 1.418 10.2.2001 to 9.2.200910.8.1999 464,910 206,910 258,000 – – 2.000 11.8.2001 to 10.8.20099.2.2000 9,244,291 30,000 2,914,978 6,299,313 135* 2.260 10.2.2002 to 9.2.20109.2.2000 711,625 – 55,500 656,125 22 1.808 10.2.2002 to 9.2.20106.9.2000 441,665 – 45,000 396,665 18 2.390 7.9.2002 to 6.9.2010

Total 12,196,551 504,510 4,339,938 7,352,103






2009 (continued)

Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows:

Date ofgrant

Balanceas at


Optionsexercised

Balanceas at

31.12.2009



$

19.2.2001 4,571,626 31,537 149,380 4,390,709 374* 2.720 20.2.2002 to 19.2.201110.8.2001 6,045,717 71,556 157,265 5,816,896 398* 2.680 11.8.2002 to 10.8.20117.2.2002 4,435,553 35,339 319,631 4,080,583 308* 2.290 8.2.2003 to 7.2.201212.8.2002 2,406,349 14,866 213,977 2,177,506 221* 1.920 13.8.2003 to 12.8.20126.2.2003 2,522,817 – 243,873 2,278,944 244* 1.790 7.2.2004 to 6.2.20136.2.2003 4,972 – – 4,972 1 1.790 7.2.2004 to 6.2.201311.8.2003 3,518,273 1,981 349,356 3,166,936 384* 1.860 12.8.2004 to 11.8.201311.8.2003 8,754 – – 8,754 1 1.860 12.8.2004 to 11.8.20139.2.2004 5,183,441 16,482 745,111 4,421,848 528* 2.090 10.2.2005 to 9.2.20149.2.2004 228,875 – 228,875 – – 2.090 10.2.2005 to 9.2.20099.2.2004 11,426 – – 11,426 1 2.090 10.2.2005 to 9.2.201410.8.2004 7,112,644 30,980 982,764 6,098,900 729* 2.120 11.8.2005 to 10.8.201410.8.2004 202,375 11,500 190,875 – – 2.120 11.8.2005 to 10.8.200910.8.2004 16,426 – – 16,426 2 2.120 11.8.2005 to 10.8.20147.2.2005 8,807,062 92,002 980,651 7,734,409 839* 2.370 8.2.2006 to 7.2.20157.2.2005 309,750 – 54,625 255,125 13 # 2.370 8.2.2006 to 7.2.20107.2.2005 16,426 – – 16,426 2 2.370 8.2.2006 to 7.2.201510.8.2005 10,987,644 197,205 872,465 9,917,974 995* 2.570 11.8.2006 to 10.8.201510.8.2005 299,043 – 25,250 273,793 16 # 2.570 11.8.2006 to 10.8.201010.8.2005 21,426 – – 21,426 2 2.570 11.8.2006 to 10.8.20159.2.2006 11,771,022 278,424 80,797 11,411,801 1,201* 3.010 10.2.2007 to 9.2.20169.2.2006 359,750 – – 359,750 18 # 3.010 10.2.2007 to 9.2.201110.8.2006 13,458,052 346,221 276,509 12,835,322 1,308* 2.840 11.8.2007 to 10.8.201610.8.2006 355,625 – – 355,625 18 # 2.840 11.8.2007 to 10.8.201115.3.2007 14,821,331 388,697 4,485 14,428,149 1,408* 3.230 16.3.2008 to 15.3.201715.3.2007 360,000 – – 360,000 18 # 3.230 16.3.2008 to 15.3.201210.8.2007 14,042,322 456,978 – 13,585,344 1,509* 3.610 11.8.2008 to 10.8.201710.8.2007 327,000 – – 327,000 16 # 3.610 11.8.2008 to 10.8.2012

Total 112,205,701 1,973,768 5,875,889 104,356,044

* Includes 1 Executive Director of the Company# Includes Directors of the Company and its subsidiaries





(iii) Details of share options exercised

No. of sharesExercise

priceProceeds from

share issue Share price $ $’000 $

2010January 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 – 3.44

23,981,263

2009January to March 1,921,090 1.418 – 2.840 3,295 2.19 – 2.62April to June 1,393,746 1.790 – 3.230 3,002 2.29 – 2.58July to September 1,668,147 1.790 – 2.720 3,677 2.43 – 2.78October to December 5,232,844 1.790 – 3.230 12,234 2.72 – 3.33

10,215,827

The weighted average share price for options exercised during the year was $3.25 (2009: $2.812). The weighted average remaining contractual life for these options is 4.5 years (2009: 4.97 years).

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a binomial model, taking into account the terms and conditions upon which the options were granted. No options were granted for the years ended 31 December 2010 and 31 December 2009.





(iii) Details of share options exercised (continued)

Singapore Technologies Engineering Performance Share Plan (“PSP”)

Performance shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a 3-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period if the targets are met. The final number of performance shares awarded will depend on the level of achievement of those targets and can range from 0% to 170% of the conditional award of performance shares. In addition, the final award for performance shares is conditional upon the performance targets for restricted shares that has the same end of performance period being met.

Year of grant2010 2009 2008 Total

Number of performance shares

At grant date 1,532,000 1,687,000 1,632,000 4,851,000Lapsed (132,844) (307,984) (316,238) (757,066)

Outstanding as at 31.12.2010 1,399,156 1,379,016 1,315,762 4,093,934

During the year, performance shares amounting to 555,929 ordinary shares were awarded in respect of grant made in 2007.

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 2008 to 2010 are as follows:

Year of grant2010 2009 2008

Market conditionsVolatility of MSCI Index (%) – 33.10 20.93Volatility of Defensive Index (%) 16.56 – –Volatility of the Company’s shares (%) 20.18 18.88 15.51Correlation of volatility of Defensive Index/

MSCI Index vs. the Company (%) 50.10 67.50 45.30Risk-free rate (%) 0.71 1.03 1.11Share price ($) 3.26 2.26 3.36Cost of equity (%) 8.90 7.86 9.60Dividend yield (-- Management's forecast in line with dividend policy --)





(iii) Details of share options exercised (continued)

Singapore Technologies Engineering Restricted Stock Plan (“RSP”)

Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a 2-year performance period. The restricted shares will only be released to the recipient at the end of the performance qualifying period if the targets are met. The final number of restricted shares awarded will depend on the level of achievement of those targets and range between 0% and 150% of the conditional award 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 and the balance will vest equally over the subsequent 2 years.

During the year, contingent shares are awarded to non-executive directors with no performance conditions nor vesting period. At the end of the performance period, 100% of the contingent shares will be awarded to non-executive directors for completing the 1-year term ending 31 December 2010.

Date of grant

Number ofrestricted

shares as atgrant date

Number ofrestricted

shares lapsed

Number ofrestricted

shares released

Balanceoutstanding

as at31.12.2010

26 July 2007 897,000 248,147 518,518 130,33512 November 2007 300,000 – 120,000 180,00024 March 2008 7,603,183 3,176,292 2,285,236 2,141,65524 March 2008 217,000 107,379 76,757 32,86418 March 2009 8,286,892 782,072 – 7,504,82018 March 2009 210,500 78,958 50,553 80,98922 March 2010 8,547,400 471,394 – 8,076,00622 March 2010 170,800 – – 170,800

Total 26,232,775 4,864,242 3,051,064 18,317,469

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 2009 and 2010 are as follows:

Year of grant2010 2009

Volatility of the Company’s shares (%) 20.18 18.88Risk-free rate (%) 0.57 – 1.12 0.72 – 1.29Share price ($) 3.26 2.26Dividend yield (--Management's forecast in line with dividend policy--)




40. Capital reserves

Included in capital reserves are:

(a) an amount of $115,948,000 (2009: $115,948,000) relating to share premium of the respective pooled enterprises, namely Singapore Technologies Aerospace Ltd, Singapore Technologies Electronics Limited, Singapore Technologies Kinetics Ltd and Singapore Technologies Marine Ltd classified as capital reserve upon the pooling of interests during the financial year ended 31 December 1997; and

(b) an amount of $375,000 (2009: $375,000) relating to an excess capital contribution from non-controlling shareholders of a subsidiary in China following the additional capital injection in prior year.

41. Other reserves

Foreigncurrency

translationreserve

Statutoryreserve

Fair valuereserve

Share-basedpaymentreserve Total

$’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2009 (71,557) 876 (2,977) 57,442 (16,216)

Other comprehensive income:

Net fair value changes on available-for-sale financial assets – – 8,245 – 8,245

Net fair value changes on effective portion of cash flow hedges – – (4,218) – (4,218)

Foreign currency translation of foreign operations (25,808) – 315 – (25,493)Total comprehensive income for the year (25,808) – 4,342 – (21,466)Issue of shares – – – (2,986) (2,986)Cost of share-based payment – – – 17,545 17,545Transfer from unappropriated profit to statutory reserve – 330 – – 330

At 31.12.2009 (97,365) 1,206 1,365 72,001 (22,793)




41. Other reserves (continued)

Foreigncurrency

translationreserve

Statutory reserve

Fair value reserve

Share-basedpayment reserve

Premium paidon acquisition of

non-controllinginterests Total

$’000 $’000 $’000 $’000 $’000 $’000

The Group

At 1.1.2010 (97,365) 1,206 1,365 72,001 – (22,793)

Other comprehensive income:

Net fair value changes on available-for-sale financial assets – – (848) – – (848)

Net fair value changes on effective portion of cash flow hedges – – (12,633) – – (12,633)

Foreign currency translation of foreign operations (88,373) – 1,202 – 84 (87,087)Reclassification adjustment of foreign currency translation reserve to profit or loss arising from disposal of a subsidiary 30 – – – – 30

Total comprehensive income for the year (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 unappropriated profit to

statutory reserve – 729 – – – 729

At 31.12.2010 (185,708) 1,935 (10,914) 76,741 (5,234) (123,180)

Group 2010 2009$’000 $’000

Net fair value changes on available-for-sale financial assets:- Net gain on fair value changes during the year 10,161 8,043- Reclassification adjustment to profit or loss on disposal, in finance costs, net (11,009) 202

(848) 8,245Net fair value changes on effective portion of cash flow hedges:- Net loss on fair value changes during the year (10,862) (12,413)- Reclassification adjustment to profit or loss on occurrence of forecast transaction,

in finance costs, net (1,771) 8,195

(12,633) (4,218)




41. Other reserves (continued)

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries whose functional currencies are different from that of the Group’s presentation currency.

As at 31 December 2010, bonds amounting to $134 million (US$103.9 million) (2009: $68.7 million (US$48.9 million)) have been designated as a hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries (“US subsidiaries”) and are being used to hedge the Group’s exposure to foreign exchange risk on this investment. Gain or loss on the re-translation of these bonds is transferred to other comprehensive income to offset 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 reserve

In accordance with foreign Enterprise Law application to the wholly-owned subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for standard distribution to shareholders.

In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment, appropriations from the net profit are made to the Reserve Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from prior years (if any), and before profit distributions to the investors. The percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by the Board of Directors of the PRC entities.

Fair value reserve

Fair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired as well as the portion of the fair value changes on the derivative financial instruments designated as hedging instruments in cash flow hedges that are determined to be an effective hedge.

Share-based payment reserve

Share-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to employees and non-executive directors. 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.

Premium paid on acquisition of non-controlling interests

The reserve represents the difference between the fair value of the consideration paid on acquisition of non-controlling interests and the carrying value of the additional interests acquired.




42. Retained earnings

Group 2010 2009$’000 $’000

Retained by: The Company 487,984 414,437 Subsidiaries 353,754 352,933 Associates and joint ventures 109,064 95,394

950,802 862,764

43. Dividends

Group and Company2010 2009$’000 $’000

Final dividend paid in respect of the previous financial year of 4.0 cents (2009: 4.0 cents) per share 120,418 119,944Special dividend paid in respect of the previous financial year of 6.28 cents

(2009: 8.8 cents) per share 188,906 263,877Interim dividend paid in respect of the current financial year of 3.0 cents (2009: 3.0 cents) per share 90,955 90,130

400,279 473,951Additional final dividend paid in respect of the previous financial year due to issue of shares before

books closure date 1,959 604

402,238 474,555

The Directors propose a final dividend of 4.0 cents (2009: 4.0 cents) per share amounting to $121.5 million (2009: $120.4 million) and a special dividend of 7.55 cents (2009: 6.28 cents) per share amounting to $229.4 million (2009: $188.9 million), in respect of the financial year ended 31 December 2010. These dividends have not been recognised as a liability as at year end as it is subject to approval at the Annual General Meeting of the Company.

44. Related party information

In addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with fellow subsidiaries within Temasek Group on terms agreed between the parties as follows:

Group2010 2009$’000 $’000

Sales and services rendered 25,577 23,636Purchases and services received 20,300 24,524Property, plant and equipment purchased 16 461Interest income – 1,823Dividend income 30 192Rental income 2,241 3,102Rental expenses 5,290 4,102




45. Commitments

(a) Capital commitmentsGroup

2010 2009$’000 $’000

Capital expenditure contracted but not provided for in the financial statements 99,689 180,940

(b) Leases

Future minimum lease payments under non-cancellable operating leases are as follows:

Group2010 2009$’000 $’000

Within 1 year 54,194 44,9922 to 5 years 121,706 86,479After 5 years 132,823 187,813

308,723 319,284

The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. The leases have varying terms, escalation clauses and renewal rights. Lease terms do not contain restrictions on the Group activities concerning dividends, additional debt or further leasing.

(c) Operating lease commitments – As lessor

The Group has entered into commercial leases on its aircrafts and aircraft engines. The non-cancellable leases have an average lease term of about 1 month to 16 years. The leases on the aircrafts include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

Future lease payment receivables under non-cancellable operating leases are as follows:

Group2010 2009$’000 $’000

Within 1 year 1,525 1,9692 to 5 years 2,501 3,423After 5 years 6,824 7,276

10,850 12,668




45. Commitments (continued)

(d) Investments

(i) As at 31 December 2010, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.4 million (2009: $0.4 million) in subsidiaries.

(ii) As at 31 December 2010, in respect of investments in unquoted equity shares of venture capital fund companies, there is uncalled capital contribution amounting to $0.2 million (2009: $0.2 million) for the Group.

(iii) As at 31 December 2010, the Group has outstanding commitment in respect of uncalled capital to the extent of $1.8 million (2009: $2.3 million) in an associate, GFM Maquinaria, S.A.P.I. de C.V. and $2.0 million (2009: $2.2 million) in a joint venture.

Joint Venture Agreement

On 2 November 2006, an agreement was signed between Singapore Technologies Kinetics Ltd and BF Utilities Limited to form an Equity Joint Venture Company in Pune, India. The joint venture company will have a registered capital of US$6 million to be contributed by each party in the proportion of 26% and 74% respectively, which is to be contributed over 3 years. To-date, the joint venture company has not been set up.

46. Segment information

(a) Analysis by business segments

The Group is organised on a worldwide basis into 4 main operating segments, namely:

(i) Aerospace

Provides a spectrum of maintenance and engineering services that include airframe, engine and component maintenance, repair and overhaul; engineering design and technical services; and aviation materials and management services, including Total Aviation Support.

(ii) Electronics

Delivers innovative system solutions to government, commercial, defence, and industrial customers worldwide. It specialises in the design, development and integration of advanced electronics and communications systems, such as broadband radio frequency and satellite communication, e-Government solutions, information communications technologies and IT, rail and traffic management, real-time command and control, modelling and simulation, interactive digital media, intelligent building management and information security.

(iii) Land Systems

Delivers integrated land systems, specialty vehicles and their related through life support for defence, homeland security and commercial applications.

(iv) Marine

Provides turnkey building, repair and conversion services for a wide spectrum of naval and commercial vessels. In shipbuilding, it has the proven capabilities to provide turnkey solutions from concept definition to detailed design, construction, on-board system installation and integration, testing, commissioning to through-life support. It has also established a track record in providing high engineering content shiprepair and ship conversion services for a worldwide clientele.




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 logistics management, integrated facilities management, warehousing and other support services. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2010 or 2009.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Inter-segment pricing is on an arm’s length basis.

Aerospace ElectronicsLand

Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’000

2010Turnover External sales 1,870,497 1,389,084 1,505,459 1,044,278 175,155 – 5,984,473 Inter-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 before

taxation, other income and finance costs, net 233,829 130,322 111,341 109,389 (44,795) 46,597 586,683

Other 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 joint

ventures 29,237 (117) 7,873 1,910 – 5,216 44,119Profit from operations 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) 491,005

Other assets 2,360,809 1,422,289 1,757,156 731,374 3,863,429 (3,148,019) 6,987,038Associates and joint ventures 128,078 11,349 116,633 2,089 18,924 4,098 281,171

Segment assets 2,488,887 1,433,638 1,873,789 733,463 3,882,353 (3,143,921) 7,268,209

Segment liabilities 2,066,800 1,311,985 1,732,982 641,017 2,283,627 (2,495,036) 5,541,375

Capital 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 of

impairment) 162 7,467 1,453 – 118 (118) 9,082Other non-cash expenses 7,394 113 62 – 14 – 7,583





(a) Analysis by business segments (continued)

Aerospace ElectronicsLand

Systems Marine Others Elimination Group$’000 $’000 $’000 $’000 $’000 $’000 $’000

2009Turnover External sales 1,872,124 1,370,781 1,167,450 948,917 188,515 – 5,547,787 Inter-segment sales 3,101 22,575 34,601 7,035 25,670 (92,982) –

1,875,225 1,393,356 1,202,051 955,952 214,185 (92,982) 5,547,787

Reportable segment profit before taxation, other income and finance costs, net 199,849 107,178 73,701 87,960 (22,783) 40,508 486,413

Other income, net 20,434 14,428 22,258 9,767 40,477 (39,793) 67,571Finance income 7,971 1,693 7,272 7,358 393,111 (401,083) 16,322Finance costs (34,071) (8,934) (12,310) (3,613) (39,159) 35,461 (62,626)Share of results of associates and joint

ventures 34,105 911 4,469 807 – (1,413) 38,879Profit from operations before taxation 228,288 115,276 95,390 102,279 371,646 (366,320) 546,559Taxation (33,688) (22,996) (10,981) (20,516) (2,352) 371 (90,162)Non-controlling interests (8,900) (1,477) (2,111) – – 21 (12,467)

Profit attributable to shareholders 185,700 90,803 82,298 81,763 369,294 (365,928) 443,930

Other assets 1,977,189 1,467,393 1,675,386 722,728 2,960,721 (2,191,144) 6,612,273Associates and joint ventures 125,601 11,560 115,504 1,914 19,092 (292) 273,379

Segment assets 2,102,790 1,478,953 1,790,890 724,642 2,979,813 (2,191,436) 6,885,652

Segment liabilities 1,645,392 1,351,017 1,616,055 622,141 1,519,116 (1,544,265) 5,209,456

Capital expenditure 141,805 29,412 108,827 20,590 5,218 (3,505) 302,347Depreciation and amortisation 89,089 25,847 28,383 16,654 2,785 – 162,758(Write-back of impairment)/

impairment loss (44) 1,417 42 – 93 (93) 1,415Other non-cash expenses 10,525 271 1,751 – – – 12,547





(b) Analysis by country of incorporation

Turnover 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.

Turnover Non-current assets2010$’000

2009$’000

2010$’000

2009$’000

Asia 4,188,454 3,790,209 1,184,597 1,001,044USA 1,447,716 1,361,119 596,400 617,791Europe 286,115 345,877 341,582 414,640Others 62,188 50,582 108,818 116,050

5,984,473 5,547,787 2,231,397 2,149,525

(c) Analysis by geographical areas

Turnover is based on the location of customers regardless of where the goods are produced or services rendered.

Turnover2010 2009

$’000 $’000

Asia 3,328,265 3,093,411USA 1,552,782 1,430,243Europe 754,802 710,974Others 348,624 313,159

5,984,473 5,547,787

47. Financial risk management objectives and policies

The Group and the Company are exposed to financial risks, namely, interest rate, foreign exchange, market, liquidity and credit risks, arising from its operations and the use of financial instruments. The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bankers’ guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, cash and short-term deposits. All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currency swap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor or collar option (“Permitted Transactions”). These instruments are generic in nature with no embedded or leverage features and any deviation from these instruments would require specific approval from the Board of Directors. The Group’s accounting policies in relation to derivatives are set out in Note 3.




47. Financial risk management objectives and policies (continued)

The policies for managing each of these risks are broadly summarised below.

Interest rate risk

The Group has cash balances placed with reputable banks and financial institutions. The Group manages its interest rate risk on its interest income by placing 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 interest rate 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 200 basis points in interest rate at the reporting date would increase/decrease income statement by the amounts shown below. This analysis assumes that all other variables remain constant.

Profit or loss200bp

increase200bp

decrease$’000 $’000

The Group

2010Bank loans and loans payable (1,386) 1,386Loans receivable 931 (931)

2009Bank loans and loans payable (1,224) 1,224Loans receivable 829 (829)

Information relating to the Group’s interest rate risk exposure is also disclosed in the notes on the Group’s borrowings, investments and loans receivable, where applicable.

Foreign exchange risk

The Group’s foreign exchange risk arises both from its subsidiaries operating in foreign countries, generating revenue and incurring costs denominated in foreign currencies, and from operations of its local subsidiaries which are transacted in foreign currencies. The Group’s foreign exchange exposures are primarily from US dollars and Euro and the Group enters mainly into forward currency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group’s hedging policy. The Group enters into cross currency swap to hedge the foreign exchange risk of its loans denominated in foreign currency. The Group also uses monetary assets and liabilities and embedded 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 exchange exposures 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. Only authorised dealers can transact with the banks on behalf of the Group, with back office confirming the deals. The dealers’ limits and permitted treasury instruments in the form of an authorisation matrix and mandates are communicated to all counterparties.





Market risk

The 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/decrease in the fair value of the quoted investments, assuming no impairment on the quoted investments. This analysis assumes that all other variables remain constant.

Other comprehensive income Profit or loss10%

increase10%

decrease10%

increase10%

decrease$’000 $’000 $’000 $’000

The Group

2010Quoted investments 1,390 (1,390) 53 (53)

2009Quoted investments 1,710 (1,710) 171 (171)

Liquidity risk

To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capital requirements regularly.

The table below analyses the Group’s financial liabilities and certain derivative financial instruments that will be settled on a gross basis into relevant maturity groupings based on the remaining period at reporting date to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows.





Liquidity risk (continued)

TotalWithin1 year 2 to 5 years

More than5 years

$’000 $’000 $’000 $’000

The Group

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 1,582,252 – –Derivative financial instruments:• Forward currency contracts

- gross payments 99,997 88,340 11,657 – - gross receipts 476,172 445,952 30,220 –• Cross currency swap

- gross receipts 248,481 248,481 – –• Interest rate swaps - settled net 2,748 2,748 – –

2009 Bank loans 732,364 83,510 648,854 –Bonds 702,500 – – 702,500Other loans 2,328 240 1,461 627Lease obligations 6,211 2,050 4,161 –Bank overdrafts 1 1 – –Other long-term payables 4,357 2,904 1,453 –Trade and other payables 1,386,407 1,386,407 – –Derivative financial instruments:• Forward currency contracts

- gross payments 44,336 42,106 2,230 – - gross receipts 434,134 423,675 10,459 –• Cross currency swap

- gross receipts 300,000 – 300,000 –• Interest rate swaps - settled net 3,321 3,321 – –





Liquidity risk (continued)

TotalWithin1 year

No specific terms

$’000 $’000 $’000

The Company

2010Creditors and accruals 29,047 29,047 –Amounts due to related parties 447,996 393,996 54,000Derivative financial instruments:• Forward currency contracts - gross payments 502 502 –

2009Creditors and accruals 40,002 40,002 –Amounts due to related parties 55,648 1,648 54,000

Credit risk

Credit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, 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 2010, there were no significant concentrations of credit risk, except for 29% (2009: 37%) of trade debts relating to 3 major customers of the Group. The table below analyses the trade debtors by the Group’s 4 main operating segments.

Group2010 2009$’000 $’000

Aerospace 263,923 280,300Electronics 275,750 291,112Land Systems 201,179 245,733Marine 88,878 81,802Others 22,164 27,770

851,894 926,717




48. Fair value of financial instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained from quoted market prices, discounted cash flow models and option pricing models as appropriate.

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.

Note

Quoted prices inactive markets

for identicalinstruments

(Level 1)

Significantother

observableinputs

(Level 2)

Significantunobservable

inputs(Level 3)

Total

$’000 $’000 $’000 $’000

The Group

2010Financial AssetsAvailable-for-sale - Equity investments (quoted) 15 13,904 – – 13,904- Venture capital funds and limited partnership 15 – – 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 – 43,369

14,438 260,551 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 – 38,6182009Financial AssetsAvailable-for-sale - Equity investments (quoted) 15 17,101 – – 17,101- Venture capital funds and limited partnership 15 – – 1,342 1,342- Bonds (unquoted) 25 – 195,541 – 195,541Fair value through profit or loss - Equity investments (quoted) 25 1,710 – – 1,710Derivatives - Forward currency contracts – 6,958 – 6,958- Cross currency swap – 6,405 – 6,405- Embedded derivatives – 15,918 – 15,918

18,811 224,822 1,342 244,975Financial LiabilitiesDerivatives - Forward currency contracts – 3,820 – 3,820- Interest rate swaps – 16,539 – 16,539- Embedded derivatives – 1,127 – 1,127

– 21,486 – 21,486




48. Fair value of financial instruments (continued)

Fair value hierarchy

The 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) Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

(b) Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

(c) Level 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 receivables

The carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.

Quoted and unquoted investments

The fair values of quoted investments are determined directly by reference to their quoted market prices for these investments as at balance sheet date. For unquoted investments, the fair values cannot be reliably estimated because of the lack of quoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. For unquoted bonds, the investments are valued using valuation models which use observable data.

For unquoted investments in venture capital funds and limited partnerships as stated in Note 15, the fair value is determined by reference to valuation provided by non-related fund managers based on non-observable data. Changing one or more of the inputs to reasonable alternative assumptions is not expected to have a material impact on the changes in fair value.

Movements in level 3 financial instruments measured at fair value

The following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservable inputs (Level 3).

Group2010 2009

$'000 $'000

Equity instruments (unquoted)Opening balance 1,342 1,804Total gain or loss: - recognised in profit or loss, in finance costs, net 1,033 81- recognised in other comprehensive income (1,269) (471)Purchases 104 57Sales (1,209) (129)

Closing balance 1 1,342

Total gain or loss for the year included in profit or loss (presented in finance costs, net) for assets held at 31 December 1,033 81





Long-term receivables

The fair values of long-term receivables are estimated based on the expected cash flows discounted to present value.

Short-term borrowings and other current payables

The carrying amounts approximate fair values because of the short period to maturity of these instruments.

Derivatives

Forward currency contracts, interest rate swaps, cross currency swap and embedded derivatives are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves.

Bonds

The fair value of the US$500 million bonds as at 31 December 2010 approximates $675.2 million (2009: $704.1 million) and is determined by reference to 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 instruments

Loans andreceivables

Fair valuethrough profit

or loss

Derivativesused forhedging

Available-for-sale

Liabilities atamortised cost

$’000 $’000 $’000 $’000 $’000

The Group

2010AssetsInvestments 700 – – 15,490 –Long-term receivables 46,803 – – – –Finance lease receivables 21,031 – – – –Derivative financial instruments – – 566 – –Trade debtors 851,894 – – – –Amounts due from related parties 29,249 – – – –Advances and other debtors 96,883 1,825 60,230 – –Short-term investments – 534 – 197,930 –Bank balances and other liquid funds 1,591,727 – – – –

2,638,287 2,359 60,796 213,420 –

LiabilitiesCreditors and accruals – 1,214 12,706 – 1,575,089 Amounts due to related parties – – – – 8,496 Short-term bank loans – – – – 63,404 Lease obligations – – – – 6,624 Long-term bank loans – – – – 634,165 Other loans – – – – 2,860 Other long-term payables – – – – 2,500 Bonds – – – – 641,108 Derivative financial instruments – 4,242 20,456 – –

– 5,456 33,162 – 2,934,246





Classification of financial instruments (continued)


Fair valuethrough profit

or loss

Derivativesused forhedging

Available-for-sale

Held-to-maturity

Liabilities atamortised cost

$’000 $’000 $’000 $’000 $’000 $’000

The Group

2009AssetsInvestments 1,186 – – 20,278 – –Long-term receivables 37,124 – – – – –Finance lease receivables 19,613 – – – – –Derivative financial instruments – 4,234 14,508 – – –Trade debtors 926,717 – – – – –Amounts due from related parties 31,416 – – – – –Advances and other debtors 72,677 742 9,797 – – –Short-term investments – 1,710 – 195,541 38,574 –Bank balances and other liquid funds 1,513,758 – – – – –

2,602,491 6,686 24,305 215,819 38,574 –

LiabilitiesCreditors and accruals – 485 3,633 – – 1,384,232 Amounts due to related parties – – – – – 5,079 Short-term bank loans – – – – – 83,510 Lease obligations – – – – – 5,552 Long-term bank loans – – – – – 648,854 Other loans – – – – – 2,328 Other long-term payables – – – – – 1,453 Bonds – – – – – 698,462 Bank overdrafts – – – – – 1 Derivative financial instruments – 309 17,059 – – –

– 794 20,692 – – 2,829,471





Classification of financial instruments (continued)


Fair value throughprofit or loss

Liabilitiesat amortised cost

$’000 $’000 $’000

The Company

2010AssetsAmounts due from related parties 761,214 – –Advances and other debtors 998 – –Long-term receivables, current 77 – –Bank balances and other liquid funds 336,811 – –

1,099,100 – –

LiabilitiesCreditors and accruals – 6 29,047Amounts due to related parties – – 447,996

– 6 477,043

2009AssetsAmounts due from related parties 335,510 – –Advances and other debtors 4,176 – –Long-term receivables, current 90 – –Bank balances and other liquid funds 241,984 – –

581,760 – –

LiabilitiesCreditors and accruals – – 40,002Amounts due to related parties – – 55,648

– – 95,650





Derivative financial instruments

2010 2009

Note

Contractual/notionalamount

Estimated fair value Contractual/notional amount

Estimated fair value

Asset Liability Asset Liability$’000 $’000 $’000 $’000 $’000 $’000

Cash flow hedges

Forward currency contracts:- to hedge confirmed sales in foreign currencies (a)(i) 38,320 865 (127) 186,931 2,497 (2,386)- to hedge firm purchase commitments in foreign currencies (a)(i) 63,185 727 (1,077) 39,930 414 (533)- to hedge accounts receivable commitments in foreign currencies (a)(i) – – – 2,184 76 –- to hedge accounts payable commitments in foreign currencies (a)(i) 3,264 189 (24) 381 56 –Interest rate swaps (b) 557,800 – (14,513) 581,000 – (16,539)Cross currency swap (c) 248,481 43,369 – 300,000 6,405 –Other derivatives- embedded derivatives (a)(i) 126,487 – (11,933) 173,113 11,498 (818)

Fair value hedges

Forward currency contracts:- to hedge confirmed sales in foreign currencies (a)(i) 183,217 6,692 (1,541) 118,241 1,774 (222)- to hedge accounts receivable in foreign currencies (a)(i) 171,849 8,954 – 62,387 1,585 (194)- to hedge purchase commitments in foreign currencies (a)(i) 18,783 – (201) – – –Other derivatives- embedded derivatives (a)(i) 35,751 – (3,746) – – –

Non-hedging instruments

Forward currency contracts:- sales (a)(ii) 82,786 1,825 – 64,391 556 (383)- purchases (a)(ii) 14,765 – (146) 4,025 – (102)Other derivatives- embedded derivatives (a)(ii) 60,357 – (5,310) 66,996 4,420 (309)Total 62,621 (38,618) 29,281 (21,486)Less: Current portion (62,055) 13,920 (10,539) 4,118

Non-current portion 566 (24,698) 18,742 (17,368)





(a) Forward currency contracts

(i) As at 31 December 2010, the Group has forward currency contracts and embedded derivatives separated from the foreign currency portion of sales contracts amounting to $640,856,000 (2009: $583,167,000) designated as hedges of confirmed sales in foreign currencies, firm purchase commitments in foreign currencies, accounts receivable in foreign currencies and accounts payable in foreign currencies.

The maturity dates of the forward currency contracts and embedded derivatives separated from the foreign currency portion of sales contracts approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods up to 4 years from the financial year-end.

(ii) As at 31 December 2010, the Group has outstanding forward currency contracts and embedded derivatives separated from the foreign currency portion of sales contracts amounting to $157,908,000 (2009: $135,412,000), which are not designated as hedges of confirmed sales in foreign currencies and firm purchase commitments in foreign currencies.

(b) Interest rate swaps

As at 31 December 2010, the Group has outstanding interest rate swaps amounting to $557,800,000 (2009: $581,000,000), which are designated 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 unsecured USD long-term loans. Under the USD interest rate swaps, the Group pays fixed rates of interest of 3.68% to 3.86% (2009: 3.68% to 3.86%) per annum and receives variable rates of interest equal to the LIBOR on the notional amount. The USD interest rate swaps have the same maturity terms as the unsecured USD long-term loans.

The Euro interest rate swap is being used to hedge the exposure to variability in cash flows associated with the floating rate of the unsecured long-term loan. Under the Euro interest rate swap, the Group pays a fixed rate of interest of 2.95% per annum and receives a variable rate of interest equal to the EURIBOR + 1.2% per annum on the notional amount. The Euro interest rate swap has the same maturity terms as the unsecured long-term loan.

(c) Cross currency swap

As at 31 December 2010, the Group has an outstanding cross currency swap amounting to $248,481,000 (2009: $300,000,000), which is designated as cash flow hedge.

The SGD cross currency swap converts the SGD bank loan with floating SGD interest rate at SIBOR + 1.325% per annum to an equivalent Euro bank loan (approximately Euro 112,300,000) with floating Euro interest at EURIBOR + 1.2% per annum.




49. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustment to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2010 and 31 December 2009.

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.

Group2010 2009$’000 $’000

Gross debt Bank loans 697,569 732,364 Bonds 641,108 698,462 Capitalised lease obligations 6,624 5,552 Other loans 2,860 2,328

1,348,161 1,438,706 Bank overdrafts – 1

1,348,161 1,438,707Shareholders’ funds Share capital 677,590 611,808 Other reserves (6,857) 93,530 Retained earnings 950,802 862,764

1,621,535 1,568,102Non-controlling interests 105,299 108,094

1,726,834 1,676,196

Gross debt/equity ratio 0.8 0.9

Cash and cash equivalents 1,591,727 1,513,757Short-term investments 198,464 235,825

1,790,191 1,749,582Gross debt (excluding bank overdrafts) (1,348,161) (1,438,706)

Net cash position 442,030 310,876




50. Comparative information

The comparative figures relate to the financial statements for the year ended 31 December 2009 which were audited by another firm of public accountants and certified public accountants.

During the financial year,

(a) the income statement presentation for interest income, fair value changes on financial instruments and foreign exchange differences were revised to better reflect the nature of these items; and

(b) the balance sheet has been changed from the previous year due to the finalisation of the purchase price allocation to goodwill, intangible assets, other assets and liabilities associated with the acquisition of a subsidiary, Parallel Limited.

The changes in the comparative financial statements are as follows:

NoteAs previously

reportedAmount

reclassifiedAs

reclassified$’000 $’000 $’000

Consolidated Income Statement (a)Other operating income, net 21,413 (21,413) –Other income, net 55,974 11,597 67,571Finance income – 16,322 16,322Finance costs (56,120) (6,506) (62,626)

Balance Sheet (b)Property, plant and equipment 1,166,677 (432) 1,166,245Intangible assets 642,784 1,617 644,401Long-term receivables, non-current 36,800 (7,313) 29,487Amounts due from related parties, non-current – 7,313 7,313Trade debtors 1,062,227 (255) 1,061,972Amounts due from related parties, current 4,082 20,021 24,103Advances and other debtors 388,226 (20,014) 368,212Bank balances and other liquid funds 1,513,610 148 1,513,758Creditors and accruals 1,392,392 (4,042) 1,388,350Amounts due to related parties, current – 5,079 5,079Provision for taxation 178,734 (10) 178,724Deferred tax liabilities 58,297 58 58,355

51. Subsequent events

On 5 January 2011, a subsidiary in the Group had acquired the remaining 30% equity stake in PM-B Pte Ltd for a cash consideration of $2 million. As a result of this, PM-B Pte Ltd has become a wholly-owned subsidiary of the Group.


Interested person transactions

Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX”) by the Group are as follows:

Aggregate value of all transactions excluding transactions conducted

under a Shareholders’ Mandate pursuant to Rule 920 of the SGX

Listing Manual

Aggregate value of all transactions conducted under a Shareholders’

Mandate pursuant to Rule 920 of the SGX Listing Manual

2010 2009 2010 2009$’000 $’000 $’000 $’000

Transactions for the Sale of Goods and Services

Keppel Corporation Ltd and its Associates – – 198 –Neptune Orient Lines Limited and its Associates – – 454 –Sembcorp Industries Ltd and its Associates – – – 160Singapore Airport Terminal Services Limited and its Associates – – 101,443 2,512Singapore Telecommunications Limited and its Associates – – 183 272SMRT Corporation Ltd and its Associates – – 2,336 1,625StarHub Ltd and its Associates – – 1,800 –Temasek Holdings (Private) Limited and its Associates – – 7,782 6,210

– – 114,196 10,779

Transactions for the Purchase of Goods and Services

CapitaLand Limited and its Associates – – 1,361 1,733Sembcorp Industries Ltd and its Associates – – – 190Singapore Airport Terminal Services Limited and its Associates – – 2,431 2,434Singapore Telecommunications Limited and its Associates – – 4,404 2,395SMRT Corporation Ltd and its Associates – – 1,263 1,057StarHub Ltd and its Associates – – – 433Temasek Holdings (Private) Limited and its Associates – – 5,209 15,170

– – 14,668 23,412

31 December 2010(Currency - Singapore dollars)

SGX Listing Manual Requirements


31 December 2010(Currency - Singapore dollars)

SGX Listing Manual Requirements

Interested person transactions (continued)

Aggregate value of all transactions excluding transactions conducted

under a Shareholders’ Mandate pursuant to Rule 920 of the SGX

Listing Manual

Aggregate value of all transactions conducted under a Shareholders’

Mandate pursuant to Rule 920 of the SGX Listing Manual

2010 2009 2010 2009$’000 $’000 $’000 $’000

Investment/Divestment/Leasing Transactions

Sembcorp Industries Ltd and its Associates – 1,529 – –

Treasury Transactions

Temasek Holdings (Private) Limited and its Associates – – – 652,130

Total Interested Person Transactions – 1,529 128,864 686,321


Sectoral Financial Review – Aerospace

INCOME STATEMENT

2010 2009$’000 $’000

Turnover 1,874,995 1,875,225Cost of sales (1,529,338) (1,556,683)Gross profit 345,657 318,542

Distribution and selling expenses (7,442) (11,929)Administrative expenses (89,239) (91,258)Other operating expenses (15,147) (15,506)Profit from operations before taxation, other income and finance costs, net 233,829 199,849

Other income net 9,350 20,434

Finance income 15,194 7,971Finance costs (25,391) (34,071)Finance costs, net (10,197) (26,100)


Taxation (46,848) (33,688)


Attributable to:Shareholders of the Company 209,767 185,700Non-controlling interests 5,604 8,900

215,371 194,600



BALANCE SHEET

2010 2009$’000 $’000

ASSETSNon-current assetsProperty, plant and equipment 825,248 770,076Associates and joint ventures 128,078 125,601Investments 1 1,342Intangible assets 8,648 9,311Long-term receivables, non-current 34,368 32,064Derivative financial instruments 523 6,405Deferred tax assets 27,808 44,551

1,024,674 989,350Current assetsInventories and work-in-progress 374,815 388,165Trade debtors 364,392 363,844Amounts due from related parties, current 122,047 4,244Advances and other debtors 268,863 82,954Long-term receivables, current 10,227 7,399Short-term investments 99 91Bank balances and other liquid funds 323,770 266,743

1,464,213 1,113,440

TOTAL ASSETS 2,488,887 2,102,790

EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 96,696 110,602Creditors and accruals 510,951 437,860Amounts due to related parties, current 312,630 134,116Provisions 58,095 63,271Progress billing in excess of work-in-progress 109,408 95,622Provision for taxation 75,194 81,107Lease obligations, current 1,579 1,644Long-term bank loans, current 300,020 –

1,464,573 924,222

NET CURRENT (LIABILITIES)/ASSETS (360) 189,218

Non-current liabilitiesAdvance payments from customers, non-current 456,452 287,884Deferred income 2,615 2,199Deferred tax liabilities 7,557 8,844Lease obligations, non-current 1,713 3,583Long-term bank loans, non-current 69,318 360,442Other loans, non-current 11,523 3,253Derivative financial instruments – 1,916Amounts due to related parties, non-current 53,049 53,049

602,227 721,170

TOTAL LIABILITIES 2,066,800 1,645,392NET ASSETS 422,087 457,398

Share capital and reserves 377,977 412,210Non-controlling interests 44,110 45,188

422,087 457,398

TOTAL EQUITY AND LIABILITIES 2,488,887 2,102,790237Singapore Technologies Engineering Ltd » AnnuAl RepoRt 2010


STATEMENT OF CASH FLOWS

2010 2009$’000 $’000


Net cash used in investing activities (155,583) (90,404) Proceeds from sale of property, plant and equipment 4,599 4,322 Dividends from associates 17,763 42,495 Dividends from investments – 104 Proceeds from sale and maturity of investments 1,209 128 Purchase of property, plant and equipment (177,170) (130,148) Purchase of investments (104) (57) Acquisition of subsidiaries – (7,248) Additional investment in associates (1,880) –

Net cash used in financing activities (142,606) (247,653) Capital contribution from non-controlling interests of a subsidiary – 5,092 Acquisition of non-controlling interests in subsidiaries (743) (320) Repayment of lease obligations, net (1,510) (1,578) Proceeds from long-term bank loans 17,892 358,815 Proceeds/(repayment) of bank loans 20 (313,742) Proceeds from loans with related parties 259,079 6,830 Repayment of loans with related parties (195,830) (123,996) Loan to associate – (3,022) Dividend paid to shareholder (202,563) (142,629) Dividend paid to non-controlling interests (6,859) (8,514) Interest paid (12,092) (24,589)

Net increase in cash and cash equivalents 60,407 123,864Cash and cash equivalents at beginning of the year 266,743 143,194Exchange difference on cash and cash equivalents at beginning of the year (3,380) (315)

Cash and cash equivalents at end of the year 323,770 266,743


FINANCIAL HIGHLIGHTS

2010 2009 2008 2007 2006$’000 $’000 $’000 $’000 $’000

Operating PerformanceTurnover 1,874,995 1,875,225 1,940,954 1,837,769 1,675,493EBITDA 299,867 288,938 331,937 381,857 321,464EBIT 233,829 199,849 234,220 303,441 237,080Profit before tax 262,219 228,288 272,120 341,162 305,280Net profit 209,767 185,700 225,691 270,479 255,036

Financial IndicatorsEarnings per share (cents) 104.88 92.85 112.85 135.24 127.52Return on sales (%) 11.5 10.4 12.1 15.6 15.6Return on equity (%) 48.7 39.9 52.6 58.4 54.2Return on total assets (%) 8.7 9.3 11.2 13.6 13.2Net assets value per share (cents) 211.04 228.70 207.99 253.64 256.11

Selected Balance Sheet DataShareholders’ funds 337,977 412,210 375,925 409,977 417,680Total assets 2,488,887 2,102,790 2,103,333 2,107,305 1,987,885Net assets 422,087 457,398 415,981 507,284 512,220Capital expenditure 186,533 132,729 103,213 111,091 158,373

Productivity DataAverage staff strength (numbers) 7,323 7,253 7,081 6,757 5,880Sales per employee ($) 256,042 258,545 274,107 271,980 284,948Net profit per employee ($) 28,645 25,603 31,873 40,029 43,373Employment costs 591,191 594,184 639,900 605,220 589,440Employment costs per $ of turnover ($) 0.31 0.32 0.33 0.33 0.35

Economic Value Added 163,904 146,146 198,653 235,931 194,390Economic Value Added spread (%) 12.7 11.8 17.8 22.5 19.5Economic Value Added per employee ($) 22,382 20,150 28,054 34,917 33,060

Value added 935,010 944,048 1,047,825 1,043,873 981,309Value added per employee ($) 127,681 130,160 147,977 154,488 166,889Value added per $ of employment

costs ($) 1.58 1.59 1.64 1.72 1.66Value added per $ of gross property,

plant and equipment ($) 0.64 0.66 0.78 0.79 0.81Value added per $ of turnover ($) 0.50 0.50 0.54 0.57 0.59



Sectoral Financial Review – Electronics

INCOME STATEMENT

2010 2009$’000 $’000

Turnover 1,428,467 1,393,356Cost of sales (1,013,473) (1,002,368)Gross profit 414,994 390,988


Other income, net 5,915 14,428


Share of results of associates and joint venture (117) 911Profit from operations before taxation 127,563 115,276

Taxation (24,555) (22,996)


Attributable to:Shareholder of the Company 100,708 90,803Non-controlling interests 2,300 1,477

103,008 92,280



BALANCE SHEET

2010 2009$’000 $’000

ASSETSNon-current assetsProperty, plant and equipment 60,862 56,652Associates and joint venture 11,349 11,560Investments 10,888 16,792Intangible assets 327,463 365,610Deferred tax assets 30,917 25,790

441,479 476,404Current assetsInventories and work-in-progress 365,162 370,345Trade debtors 309,201 314,001Amounts due from related parties, current 16,751 10,562Debtors, deposits and prepayments 17,974 22,024Advance payments to suppliers 32,598 39,521Short-term investment 278 978Loan receivables, current 15 25Bank balances and other liquid funds 250,180 245,093

992,159 1,002,549

TOTAL ASSETS 1,433,638 1,478,953

EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 157,969 159,679Creditors and accruals, current 273,223 282,585Amounts due to related parties, current 12,239 47,635Provisions 35,883 30,627Progress billing in excess of work-in-progress 327,353 287,704Provision for taxation 37,632 31,537Short-term bank loans (unsecured) 11,824 10,000Lease obligations, current 33 5

856,156 849,772

NET CURRENT ASSETS 136,003 152,777

Non-current liabilitiesAdvance payments from customers, non-current 161,659 155,388Creditor and accrual, non-current – 1,453Deferred rent 2,880 3,203Deferred tax liabilities 6,497 7,705Lease obligations, non-current 35 –Amounts due to related parties, non-current 284,758 333,496

455,829 501,245

TOTAL LIABILITIES 1,311,985 1,351,017NET ASSETS 121,653 127,936


121,653 127,936

TOTAL EQUITY AND LIABILITIES 1,433,638 1,478,953




2010 2009$’000 $’000


Net cash used in investing activities (21,886) (28,900) Proceeds from sale of property, plant and equipment 2,260 53 Proceed from sale of an investment property – 1,800 Proceeds from sale of subsidiaries 1,218 – Proceed from transfer of a subsidiary 1,623 – Proceed from sale of a quoted investment – 368 Proceeds from sale of unquoted investments 686 – Dividends from associates 132 175 Dividend from other investment – 6 Purchase of property, plant and equipment (21,355) (16,375) Additional investment in a joint venture (206) – Acquisition of other intangible assets (3,451) (4,570) Acquisition of controlling interests in subsidiaries (793) (8,115) Acquisition of non-controlling interests in subsidiaries (2,000) (2,242)

Net cash used in financing activities (155,142) (186,227) Repayment of inter-company loans, net (77,014) (110,051) Proceeds from bank loans, net 1,824 748 Repayment of loan by an associate 241 493 Repayment of lease obligations (13) (36) Dividends paid to shareholder (76,000) (67,704) Dividends paid to non-controlling interests (949) (600) Interest paid (3,231) (9,077)






2010 2009 2008 2007 2006$’000 $’000 $’000 $’000 $’000

Operating PerformanceTurnover 1,428,467 1,393,356 1,157,704 1,038,284 965,757EBITDA 152,948 133,025 140,386 101,272 106,602EBIT 130,322 107,178 118,051 85,748 91,082Profit before tax 127,563 115,276 93,940 115,336 104,650Net profit 100,708 90,803 68,111 88,223 76,318




Economic Value Added 80,916 66,275 59,967 64,997 67,295Economic Value Added Spread (%) 15.4 10.8 9.4 11.3 12.7Economic Value Added per employee ($) 16,225 14,080 13,713 17,002 20,668

Value added 587,679 561,439 482,469 450,242 407,234Value added per employee ($) 117,842 119,277 110,329 117,772 125,072Value added per $ of employment

costs ($) 1.40 1.42 1.38 1.47 1.50Value added per $ of gross property, plant

and equipment ($) 3.06 3.12 2.78 3.06 2.99Value added per $ of turnover ($) 0.41 0.40 0.42 0.43 0.42


Sectoral Financial Review – Land Systems

INCOME STATEMENT

2010 2009$’000 $’000

Turnover 1,518,406 1,202,051Cost of sales (1,198,503) (940,190)Gross profit 319,903 261,861





Taxation (17,357) (10,981)


Attributable to:Shareholder of the Company 90,255 82,298Non-controlling interests 6,337 2,111

96,592 84,409


BALANCE SHEET2010 2009$’000 $’000

ASSETSNon-current assetsProperty, plant and equipment 286,742 224,939Associates and joint ventures 116,633 115,504Investments 5,282 3,311Intangible assets 210,007 233,078Investment properties 1,666 2,009Long-term receivables 4,099 –Amounts due from related parties, non-current 59,514 60,009Finance lease receivables, non-current 6,552 5,227Deferred tax assets 12,010 15,365Derivative financial instruments, non-current 43 11,715

702,548 671,157Current assetsInventories and work-in-progress 496,561 498,369Trade debtors 226,922 269,366Debtors and deposits 12,233 9,599Advance payments to suppliers 130,230 117,349Prepayments 6,165 5,160Finance lease receivables, current 14,479 14,386Bank balances and other liquid funds 254,066 172,096Amounts due from related parties, current 23,997 25,887Derivative financial instruments, current 6,588 7,521

1,171,241 1,119,733

TOTAL ASSETS 1,873,789 1,790,890EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 249,289 340,924Progress billings in excess of work-in-progress 9,128 16,044Amounts due to related parties, current 293,097 287,582Creditors and accruals 407,717 304,033Employee benefits, current 52 –Provisions 63,029 67,622Provision for taxation 28,144 30,498Derivative financial instruments, current 5,315 3,260Lease obligations, current 73 103Long-term loans, current 228 240Short-term bank loans 23,912 15,032Short-term loan from non-controlling interests 1,641 –Bank overdrafts – 1

1,081,625 1,065,339NET CURRENT ASSETS 89,616 54,394Non-current liabilitiesAdvance payments from customers, non-current 299,828 203,845Amounts due to related parties, non-current 289,099 287,170Lease obligations, non-current 118 147Derivative financial instruments, non-current 11,646 738Long-term loans, non-current 991 1,331Long-term bank loans – 7,412Deferred income 6,859 9,144Deferred tax liabilities 42,808 40,929Employee benefits, non-current 8 –

651,357 550,716

TOTAL LIABILITIES 1,732,982 1,616,055

NET ASSETS 140,807 174,835


140,807 174,835

TOTAL EQUITY AND LIABILITIES 1,873,789 1,790,890




2010 2009$’000 $’000


Net cash used in investing activities (87,666) (123,862) Distribution from funds under management 8 65 Proceeds from sale of property, plant and equipment 558 525 Distribution from unquoted investment 20 241 Dividends from unquoted investments 20 56 Dividends from associates 4,882 1,835 Purchase of property, plant and equipment (92,971) (102,026) Distribution from dissolution of an associate 180 – Acquisition of subsidiaries – (23,412) Investment in an associate (363) (1,146)

Net cash (used in)/from financing activities (100,667) 64,698 Interest paid (10,857) (10,047) Proceeds from/(repayment of) short-term related party loans 122,528 (38,025) (Repayment of)/proceeds from short-term immediate holding company loans (122,400) 209,000 Proceeds from/(repayment of) long-term related party loans 8,671 (5,094) Proceed from short-term non-controlling interest loan 1,641 – Repayment of long-term loans (222) (235) Proceeds from/(repayment of) short-term bank loans 2,495 (8,233) Dividends paid to shareholder (97,500) (78,800) Dividends paid to non-controlling interests (5,652) (3,868) Capital contribution from non-controlling interests 629 –






2010 2009 2008 2007 2006$’000 $’000 $’000 $’000 $’000

Operating PerformanceTurnover 1,518,406 1,202,051 1,280,879 1,188,317 1,013,899EBITDA 140,750 102,084 102,606 102,530 75,047EBIT 111,341 73,701 82,188 81,620 57,811Profit before tax 113,949 95,390 84,728 80,003 69,971Net profit 90,255 82,298 79,947 70,789 51,926



Productivity dataAverage staff strength (numbers) 6,574 5,786 5,224 5,299 4,961Sales per employee ($) 230,971 207,752 245,191 224,253 204,374Net profit per employee ($) 13,729 14,224 15,304 13,359 10,467Employment costs 313,406 262,552 243,506 259,424 224,828Employment costs per $ of turnover ($) 0.21 0.22 0.19 0.22 0.22



costs ($) 1.49 1.55 1.50 1.43 1.45Value added per $ of gross property, plant

and equipment ($)Value added per $ of turnover ($)

0.830.31

0.80 0.34

0.93 0.28

1.01 0.31

0.96 0.32



Sectoral Financial Review – Marine

INCOME STATEMENT

2010 2009$’000 $’000

Turnover 1,044,850 955,952Cost of sales (896,734) (824,015)Gross profit 148,116 131,937

Distribution and selling expenses (2,759) (7,607)Administrative expenses (27,230) (27,916)Other operating expenses (8,738) (8,454)Profit from operations before taxation, other income and finance (costs)/income, net 109,389 87,960


Finance income 11,356 7,358Finance costs (11,957) (3,613)Finance (costs)/income, net (601) 3,745

Share of results of joint ventures 1,910 807Profit from operations before taxation 117,994 102,279

Taxation (29,346) (20,516)


Attributable to:Shareholders of the Company 89,057 81,673Non-controlling interests (409) –

88,648 81,673



BALANCE SHEET

2010 2009$’000 $’000

ASSETSNon-current assetsProperty, plant and equipment 112,313 102,388Joint ventures 2,089 1,914Intangible assets 1,138 142Long-term receivables, non-current 479 445Amounts due from related parties, non-current 4,806 4,291Derivative financial instruments – 622Deferred tax assets 30,971 21,678

151,796 131,480Current assetsInventories and work-in-progress 154,194 61,030Trade debtors 89,790 83,801Amounts due from related parties, current 71,070 141,544Other debtors, deposits and prepayments 23,356 6,368Advance payments to suppliers 75,975 60,054Long-term receivables, current 43 36Short-term investments 157 39,215Bank balances and other liquid funds 167,082 201,114

581,667 593,162

TOTAL ASSETS 733,463 724,642

EQUITY AND LIABILITIESCurrent liabilitiesAdvance payments from customers, current 89,886 48,526Creditors and accruals 288,468 258,012Amounts due to related parties, current 8,230 25,906Provisions 50,387 46,279Progress billings in excess of work-in-progress 121,098 157,765Provision for taxation 39,926 24,241Lease obligations, current – 70

597,995 560,799

NET CURRENT (LIABILITIES)/ASSETS (16,328) 32,363

Non-current liabilitiesAdvance payments from customers, non-current – 34,908Deferred income 1,057 –Amounts due to related parties, non-current 41,811 26,343Derivative financial instruments 154 91

43,022 61,342

TOTAL LIABILITIES 641,017 622,141NET ASSETS 92,446 102,501

Share capital and reserves 92,455 102,501Non-controlling interests (9) –

92,446 102,501

TOTAL EQUITY AND LIABILITIES 733,463 724,642




2010 2009$’000 $’000

Net cash (used in)/from operating activities (22,177) 146,016

Net cash from/(used in) investing activities 15,881 (21,164)

Investment in a joint venture – (1,000)

Dividends from short-term investments 10 15

Dividends from joint ventures 1,407 –

Proceeds from sale and maturity of investments 39,196 352

Purchase of short-term investments – (68)

Proceeds from sale of property, plant and equipment 146 127

Purchase of property, plant and equipment (23,622) (20,590)

Acquisition of other intangible assets (1,256) –

Net cash used in financing activities (95,361) (85,257)

Capital contribution from minority shareholders of subsidiaries 413 –

Loans to a joint venture (515) (4,291)

Proceeds/(repayment) of inter-company loans 551 (5,518)

Repayment of lease obligations (70) (84)

Dividends paid to shareholder (94,720) (74,009)

Interest paid (1,020) (1,355)

Net (decrease)/ increase in cash and cash equivalents (101,657) 39,595

Cash and cash equivalents at beginning of the year 321,114 281,935

Exchange difference on cash and cash equivalents at beginning of the year (2,375) (416)





2010 2009 2008 2007 2006$’000 $’000 $’000 $’000 $’000

Operating PerformanceTurnover 1,044,850 955,952 821,754 864,594 702,868EBITDA 119,946 104,614 78,824 90,304 84,738EBIT 109,389 87,960 62,606 73,208 68,347Profit before tax 117,994 102,279 75,203 96,567 79,500Net profit 89,057 81,763 74,500 75,264 67,823


Selected Balance Sheet DataShareholders’ funds 92,455 102,501 95,273 122,767 124,345Total assets 733,463 724,642 702,968 694,786 682,867Net assets 92,446 102,501 95,273 122,767 124,345Capital expenditure 23,622 20,590 21,711 20,687 11,845




costs ($) 1.71 1.81 1.81 1.88 1.95Value added per $ of gross property,

plant and equipment ($) 0.83 0.78 0.67 0.78 0.67Value added per $ of turnover ($) 0.29 0.29 0.28 0.29 0.29


Singapore Technologies Aerospace Ltd (100%)

Singapore Technologies Electronics Limited(100%)

Singapore Technologies Kinetics Ltd(100%)

Singapore Technologies Marine Ltd(100%)

Singapore Technologies Dynamics Pte Ltd(100%)

ST Synthesis Pte Ltd(100%)

ST Engineering Financial I Ltd. (100%)

FusionTech Pte. Ltd.(100%)

ST Engineering Financial II Pte. Ltd. (100%)

NanoScience Innovation Pte Ltd (27.06%)

+ Ceased operations in 2003* Balance 1% held by DalFort Aerospace GP, Inc.** Balance 1% held by San Antonio Aerospace GP, LLC# Balance 1% held by Vision Technologies Systems, Inc.Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

VT LeeBoy, Inc. (100%)

VT Systems Participações Ltda. (99%)#

Vision Technologies Systems, Inc. (100%)

San Antonio Aerospace GP, LLC(100%)

ST Aerospace San Antonio, L.P. (99%)**

Vision Technologies Aerospace, Incorporated(100%)

Kaz-ST Engineering Bastau Limited Liability Partnership(51%)

Singapore Airshow & Events Pte. Ltd. (33%)

iDirect UK Limited (100%)

Parallel Limited(100%)

iDirect Italy srl (100%)

iDirect Hong Kong Limited(100%)

iDirect Government Technologies, Inc.(100%)

iDirect International, Inc.(100%)

Intelect Technologies, LLC(100%)

ST Aerospace Mobile, Inc. (100%)

VT iDirect Canada, Inc (formerly known as Ximaera Technologies Canada, Inc.)

(100%)

VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation)

(100%)

DalFort Aerospace GP, Inc.+ (100%)

DalFort Aerospace, L.P.+

(99%)*

VT iDirect, Inc. (100%)

Miltope Corporation(100%)

VT Halter Marine, Inc.(100%)

Halter-Bollinger Joint Venture LLC(50%)

MÄK Technologies, Inc.(90%)

VT Dimensions, Inc. (100%)

Vision Technologies Electronics, Inc.(100%)

Vision Technologies Kinetics, Inc. (100%)

Vision Technologies Marine, Inc.(100%)

VT Systems, Inc.(100%)

Vision Technologies Land Systems, Inc. (100%)

VT Systems International, LLC (100%)

IV Phoenix Group, Inc.(95%)

Miltope Business Products, Inc.(100%)

Subsidiaries and Associated Companies (as at 22 February 2011)

Group StructureSingapore Technologies Engineering Ltd



Group StructureSingapore Technologies Aerospace Ltd

ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.)

(100%)ST Aerospace Academy (Australia) Pty Ltd

(formerly known as ST Aviation Training Academy (Australia) Pty Ltd)

(100%)

Aviation Training Academy Australia Pty Ltd (100%)

ST Aerospace Engineering Pte Ltd(100%)

Italics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

Precision Products Singapore Pte Ltd(100%)

Pacific Flight Services Pty Ltd(100%)

ST Aerospace Panama, Inc.(100%)

ST Aerospace International Structures Pte Ltd(100%)

Pacific Flight Services Pte Ltd(100%)

Singapore Precision Repair and Overhaul Pte Ltd(50%)

ST Aviation Resources 1 Limited(100%)

ST Aerospace Systems Pte Ltd(100%)

ST Aviation Resources Pte Ltd(100%)

ST PAE Holdings Pty Ltd (100%)

iShopAero Pte Ltd(100%)

ST Aerospace Supplies Pte Ltd(100%)

Visiontech Investment Pte Ltd(100%)

Aerospace Engineering Services Pty Ltd Unit Trust(50%)

Aerospace Engineering Services Pty Ltd(50%)

Composite Technology International Pte Ltd(33.3%)

ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd.

(100%)

Eurocopter South East Asia Private Limited(25%)

ST Aerospace Technologies (Xiamen) Company Limited(80%)

ST Aerospace Engines Pte Ltd(100%)

Singapore Aerospace Kabushiki Kaisha(100%)

Singapore Technologies Engineering (Europe) Ltd(100%)

ST Aerospace Solutions (Europe) A/S(100%)

Airline Rotables (UK Holdings) Limited(100%)

Airline Rotables Limited(100%)

Singapore British Engineering (Pte) Ltd(51%)

Visiontech Engineering Pte Ltd(51%)

Madrid Aerospace Services S.L.(50%)

Shanghai Technologies Aerospace Company Limited(49%)

Turbine Overhaul Services Pte Ltd(49%)

Turbine Coating Services Pte Ltd(24.5%)

ST Aerospace Services Co Pte. Ltd.(80%)


Group StructureSingapore Technologies Electronics Limited

ST Electronics (Satcom & Sensor Systems) Pte. Ltd. (100%)

ST Electronics (Sichuan) Co., Ltd(100%)

iDirect Asia Pte. Ltd.(100%)

Antycip Simulation Limited(93%)

Antycip Simulation SAS(100%)

WizVision Pte. Ltd. (22.8%)

PM-B (China) Ltd(100%)ˆ

ST Electronics (Info-Comm Systems) Pte. Ltd.(100%)

ST Electronics (Info-Security) Pte. Ltd. (100%)

Brightspot Interactive Learning Pte. Ltd.(51%)

Brightspot Interactive Learning Inc. (100%)

INFA Systems Limited(100%)

PM-B Project Management Business (Thailand) Ltd (49%)

DataMark Technologies Pte Ltd(100%)

Telematics Wireless Ltd(96.66%)

ST Electronics (Data Centre Solutions) Pte. Ltd. (formerly known as PM-B Pte Ltd)

(100%)

Telematics Wireless USA Corp(100%)

STELCOMMS Pte. Ltd.(51%)

MERITS Technologies LLP(51%)

ST Electronics (Taiwan) Limited(100%)

ST Electronics (Shanghai) Co., Ltd(100%)

SEEL Electronic & Engineering Sdn Bhd(100%)

iTS Technologies Pte Ltd(100%)

Prescient Systems & Technologies Pte. Ltd.(47.84%)

TranSys Pte Ltd(100%)

ST Education & Training Private Limited(70%)

ST Electronics (Software Services) Limited(100%)

PMB Project Management Business Sdn Bhd(100%)

ST Electronics (e-Services) Pte. Ltd.(100%)

GFM Electronics S.A. de C.V.(50%)

Trusted Hub Ltd(21.14%)

STELOP Pte. Ltd.(50.05%)

PT PM-B Indonesia(100%)

ST Electronics (Training & Simulation Systems) Pte. Ltd. (100%)

ST Electronics (Digital Media) Pte. Ltd.(100%)

ST Electronics (Info-Software Systems) Pte. Ltd.(100%)

STET Maritime Pte. Ltd.(100%)

STET Homeland Security Services Pte. Ltd. (100%)

Knowledge Alive Pte. Ltd.(100%)

ˆ In members’ voluntary liquidationItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)

COMAT Training Services Pte Ltd(100%)



Group StructureSingapore Technologies Kinetics Ltd

Silvatech Global Systems Limited(100%)

Takata CPI Singapore Pte Ltd(49%)

Timoney Holdings Limited(25%)

Autonomous Technology Pte Ltd(100%)

Singapore Commuter Private Limited(100%)

Jiangsu Huatong Kinetics Co., Ltd. (75.3%)

Guizhou Jonyang Kinetics Co., Ltd.(60%)

Allied Ordnance of Singapore (Pte) Limited(100%)

ST Kinetics International Pte. Ltd.(100%)

Unicorn International Pte Limited(100%)

Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd.(50%)

CityCab Pte Ltd(46.5%)

Jiangsu Huaran Kinetics Co., Ltd.(75.3%)

LeeBoy India Construction Equipment Pvt Ltd(97%)

Defence Electronics of Singapore Pte Ltd(49%)

VT Specialized Vehicles, S.A. de C.V.(99%)*

Kinetics Link Services Sdn. Bhd.(60%)

Advanced Material Engineering Pte. Ltd.(100%)

Advanced Pyrotechnic Materials Private Limited (51%)

ST Kinetics Integrated Engineering Pte. Ltd.(100%)

Singapore Test Services Private Limited (100%)

STAR Automotive Center (Guangzhou) Co., Ltd.(100%)

Nusantara Technologies Sdn. Bhd.(49%)

SMART Systems Pte Ltd(50%)

Kinetics Systems (Shanghai) Co., Ltd.(100%)

ST Kinetics Pte. Ltd.(100%)

STA Inspection Pte Ltd (100%)

STAR Automotive Center (Zhejiang) Co., Ltd.(100%)

SDG Kinetics Pte. Ltd.(100%)

GFM Maquinaria, S.A.P.I. de C.V.(40%)

Mobility Systems Pte Ltd(100%)

Securedge Pte. Ltd.(100%)

STA Investment Pte Ltd(100%)

ATREC Pte. Ltd. (50%)

Silvatech Systems Corporation Pte Ltd(100%)

Kinetics Drive Solutions Inc. (100%)

Ordnance Development and Engineering Company of Singapore (1996) Private Limited

(100%)

SDDA Pte. Ltd. (formerly known as STA Detroit Diesel-Allison (Singapore) Pte Ltd)

(100%)

* Balance 1% held by Singapore Technologies Kinetics LtdItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)



Group StructureSingapore Technologies Marine Ltd

Joint Shipyard Management Services Pte Ltd(30%)

First Response Marine Pte. Ltd.(50%)

Hovertrans Solutions Pte. Ltd.(51%)

ST Environmental Services & Technologies Co. Ltd(100%)

STSE Engineering Services Pte Ltd(100%)

STSE Engineering Services (B) Sdn Bhd (99%)*

* Balance 1% held by Singapore Technologies Marine LtdItalics Indicates Associated Companies. Others are Subsidiaries (both directly and indirectly held)



Corporate Information

Board of DirectorsMr Peter SEAH Lim Huat (Chairman)Mr TAN Pheng Hock (President & CEO)Mr KOH Beng SengLieutenant-General NEO Kian HongDr TAN Kim SiewMr QUEK Tong BoonMr Winston TAN Tien HinMr QUEK Poh HuatMr Venkatachalam KRISHNAKUMARMr Davinder SINGH s/o Amar SinghDr Stanley LAI Tze ChangMr KHOO Boon HuiColonel ONG Ann Kiat (Alternate Director to Lieutenant-General NEO Kian Hong)

Company SecretaryMrs CHUA Su Li

Registered Office51 Cuppage Road #09-08StarHub CentreSingapore 229469Tel: (65) 67221818Fax: (65) 67202293http://www.stengg.com

Share RegistrarM & C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906

AuditorsKPMG LLP16 Raffles Quay #22-00Hong Leong BuildingSingapore 048581Mr THAM Sai Choy (Partner-in-charge)(Date of Appointment: 21/04/2010)

Principal BankersBank of America, N.A.9 Raffles Place#18-00 Republic Plaza Tower 1Singapore 048619

Credit Agricole Corporate and Investment Bank168 Robinson Road#22-01 Capital TowerSingapore 068912

Citibank N.A.3 Temasek Avenue#17-00 Centennial TowersSingapore 039190

DBS Bank Ltd6 Shenton Way#43-00 DBS Building Tower OneSingapore 068809

Oversea-Chinese Banking Corporation Limited65 Chulia Street#10-00 OCBC CentreSingapore 049513


Contact Information

SINGAPORE TECHNOLOGIES ENGINEERING LTD (ST ENGINEERING)51 Cuppage Road#09-08 StarHub CentreSingapore 229469Tel : (65) 6722 1818Fax : (65) 6720 2293Website : www.stengg.comEmail : [email protected]

SINGAPORE TECHNOLOGIES AEROSPACE LTD (ST AEROSPACE)540 Airport RoadPaya LebarSingapore 539938Tel : (65) 6287 1111Fax : (65) 6280 9713/8213Website : www.staero.aeroEmail : [email protected]

SINGAPORE TECHNOLOGIES ELECTRONICS LIMITED (ST ELECTRONICS)24 Ang Mo Kio Street 65Singapore 569061Tel : (65) 6481 8888Fax : (65) 6482 1079Website : www.stee.stengg.comEmail : [email protected]

SINGAPORE TECHNOLOGIES KINETICS LTD (ST KINETICS)249 Jalan Boon LaySingapore 619523Tel : (65) 6265 1066Fax : (65) 6261 6932Website : www.stengg.comEmail : [email protected]

SINGAPORE TECHNOLOGIES MARINE LTD (ST MARINE)16 Benoi RoadSingapore 629889Tel : (65) 6861 2244Fax : (65) 6861 3028Website : www.stengg.comEmail : [email protected]

SINGAPORE TECHNOLOGIES DYNAMICS PTE LTD (ST DYNAMICS)249 Jalan Boon LaySingapore 619523Tel : (65) 6660 7028Fax : (65) 6261 6566Email : [email protected]

ST SYNTHESIS PTE LTD3A Joo Koon CircleSingapore 629033Tel : (65) 6861 6566Fax : (65) 6861 6676Email : [email protected]

VISION TECHNOLOGIES SYSTEMS, INC. (VT SYSTEMS)99 Canal Center Plaza, Suite 220Alexandria, Virginia 22314United States of AmericaTel : (1) 703 739 2610Fax : (1) 703 739 2611Email : [email protected]

SINGAPORE TECHNOLOGIES ENGINEERING (EUROPE) LTDMarquis House68 Jermyn StreetLondon SW1Y 6NYUnited KingdomTel : (44) 20 7930 8989Fax : (44) 20 7930 7828Email : [email protected]

SINGAPORE TECHNOLOGIES ENGINEERING LTDRepresentative Offices:

Middle EastP.O. Box 115974Dubai, United Arab EmiratesTel : (971) 4 3197708Fax : (971) 4 3197703Email : [email protected]

India12th Floor, EROS Corporate Tower,Nehru Place,New Delhi 110 019, India Tel : (91) 11 4104 8411Fax : (91) 11 4104 8410Email : [email protected]


SHARE CAPITAL

Paid-Up Capital : S$690,321,231.2314Class of Shares : Ordinary Shares

One Special Share held by the Minister for FinanceVoting Rights : One vote per share

SHAREHOLDING HELD IN HANDS OF PUBLIC

Based on the information available to the Company as at 17 February 2011, 30.7674% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

ANALYSIS OF SHAREHOLDINGS

No. of No. ofRange of Shareholdings Shareholders % Shares %

1 --- 999 2,043 6.67 684,894 0.021,000 --- 10,000 23,488 76.71 97,289,387 3.2010,001 --- 1,000,000 5,059 16.52 196,986,280 6.471,000,001 AND ABOVE 31 0.10 2,747,427,843 90.31

30,621 100.00 3,042,388,404 100.00

Number of Shares

Substantial ShareholderDirect

InterestDeemedInterest

TotalInterest %

Temasek Holdings (Private) Limited 1,554,764,574 7,722,554 (1) 1,562,487,128 51.3573Credit Suisse Group AG – 371,785,411 (2) 371,785,411 12.2202Credit Suisse AG – 371,725,411 (3) 371,725,411 12.2182Aberdeen Asset Management PLC – 362,140,491 (4) 362,140,491 11.9032Aberdeen Asset Management Asia Limited – 349,905,491 (3) 349,905,491 11.5010Aberdeen Asset Managers Limited – 201,712,420 (3) 201,712,420 6.6301The Capital Group Companies, Inc. – 168,234,000 (5) 168,234,000 5.5297

As at 17 February 2011

Shareholding Statistics


Notes:

(1) Temasek Holdings (Private) Limited is deemed to have an interest in the following shares held by:

Name of Company No. of Shares

DBS Group Holdings Ltd 2,817,554Keppel Corporation Limited 4,032,000Fullerton Fund Management Company Ltd 873,000

(2) Includes interests held by Aberdeen Asset Management PLC and Credit Suisse Group AG’s entities.

(3) Details of their deemed interest are not available.

(4) Includes interests held by Aberdeen Asset Management PLC and its subsidiaries.

(5) The Capital Group Companies, Inc. is deemed to have an interest in the following shares held by:

Name of Company No. of Shares

Raffles Nominees (Pte) Ltd 168,234,000

MAJOR SHAREHOLDERS LIST – TOP 20

NO. NAME NO. OF SHARES HELD %

1 Temasek Holdings (Private) Limited 1,554,764,574 51.10 2 DBS Nominees Pte Ltd 335,929,020 11.043 DBSN Services Pte Ltd 231,696,707 7.624 Citibank Nominees Singapore Pte Ltd 224,848,120 7.395 BNP Paribas Secs Svcs Singapore Pte Ltd 174,155,277 5.726 HSBC (Singapore) Nominees Pte Ltd 84,332,221 2.777 United Overseas Bank Nominees Pte Ltd 52,379,877 1.728 Raffles Nominees (Pte) Ltd 15,248,501 0.50 9 Lee Pineapple Company Pte Ltd 15,000,000 0.4910 UOB Kay Hian Pte Ltd 6,244,157 0.21 11 Paramount Assets Investments Pte Ltd 5,500,000 0.1812 OCBC Nominees Singapore Pte Ltd 5,142,207 0.17 13 OCBC Securities Private Ltd 4,884,064 0.16 14 DB Nominees (S) Pte Ltd 4,649,304 0.1515 KI Investments (HK) Limited 4,032,000 0.13 16 Lee Seng Tee 3,600,000 0.1217 Phillip Securities Pte Ltd 3,244,887 0.11 18 DBS Vickers Securities (S) Pte Ltd 2,700,781 0.0919 BNP Paribas Nominees Singapore Pte Ltd 2,365,677 0.0820 Shanwood Development Pte Ltd 2,077,000 0.07

2,732,794,374 89.82

As at 17 February 2011

Shareholding Statistics


Notice of Fourteenth Annual General MeetingSINGAPORE TECHNOLOGIES ENGINEERING LTD(Incorporated in the Republic of Singapore) Company Registration No: 199706274H

NOTICE IS HEREBY GIVEN THAT the Fourteenth Annual General Meeting of Singapore Technologies Engineering Ltd (“the Company”) will be held at NTUC Auditorium, One Marina Boulevard, Level 7, Singapore 018989 on Wednesday, 20 April 2011 at 2.30 pm to transact the following business:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Accounts for the year ended 31 December 2010 and the Auditors’ Report thereon.

Resolution 1

2. To declare a final ordinary tax exempt (one-tier) dividend of 4.00 cents per share and a special tax exempt (one-tier) dividend of 7.55 cents per share for the year ended 31 December 2010.

Resolution 2

3. To re-elect the following Directors, each of whom will retire by rotation pursuant to Article 98 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election:

(i) Mr Quek Poh Huat Resolution 3

(ii) Mr Quek Tong Boon Resolution 4

(iii) Mr Davinder Singh s/o Amar Singh Resolution 5

Mr Winston Tan Tien Hin is also due to retire by rotation pursuant to Article 98 of the Articles of Association of the Company, but will not be offering himself for re-election.

4. To re-elect Mr Khoo Boon Hui, who will cease to hold office pursuant to Article 104 of the Articles of Association of the Company and who, being eligible, offers himself for re-election.

Resolution 6

5. To approve the sum of $833,540 as Directors’ fees for the year ended 31 December 2010. (2009: $847,158) Resolution 7

6. To re-appoint KPMG LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 8

AS SPECIAL BUSINESS

To consider and, if thought fit, to pass with or without modifications, the following resolutions which will be proposed as Ordinary Resolutions:

7. That authority be and is hereby given to the Directors to: Resolution 9

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 50 per cent. of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed five per cent. of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited (“SGX-ST”)) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time this Resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision of shares;


(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and

(4) (unless revoked or varied by the Company in General Meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.

8. That approval be and is hereby given to the Directors to: Resolution 10

(i) grant awards in accordance with the provisions of the Singapore Technologies Engineering Performance Share Plan 2010 (“PSP2010”) and/or the Singapore Technologies Engineering Restricted Share Plan 2010 (“RSP2010”) (the PSP2010 and the RSP2010, together the “Share Plans”); and

(ii) allot and issue from time to time such number of fully paid ordinary shares in the capital of the Company as may be required to be issued pursuant to the vesting of awards under the PSP2010 and/or the RSP2010,

provided that the aggregate number of ordinary shares to be issued pursuant to the Share Plans shall not exceed eight per cent. of the total number of issued ordinary shares in the capital of the Company (excluding treasury shares) from time to time.

EXPLANATORY NOTES

Resolution 9Resolution 9 is to empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments, up to a number not exceeding 50 per cent. of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to five per cent. of the total number of issued shares (excluding treasury shares) may be issued other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time that Resolution 9 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 9 is passed, and (b) any subsequent bonus issue or consolidation or subdivision of shares.

Resolution 10Resolution 10 is to empower the Directors to grant awards and to issue ordinary shares in the capital of the Company pursuant to the Singapore Technologies Engineering Performance Share Plan 2010 and the Singapore Technologies Engineering Restricted Share Plan 2010 (collectively the “Share Plans’). Approval for the adoption of the Share Plans was given by shareholders at an Extraordinary General Meeting of the Company held on 21 April 2010. The aggregate number of ordinary shares which may be issued pursuant to the Share Plans is limited to eight per cent. of the total number of issued ordinary shares in the capital of the Company (excluding treasury shares) over the 10-year duration of the Share Plans.

BY ORDER OF THE BOARD

CHUA SU LI (Mrs)Company Secretary

Singapore, 14 March 2011

Notes:1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in

his stead. A proxy need not be a member of the Company.2. The instrument appointing a proxy must be lodged at the registered office of the Company at 51 Cuppage Road, #09-08, StarHub Centre, Singapore 229469

not less than 48 hours before the time appointed for the Annual General Meeting.

BOOKS CLOSURE AND DIVIDEND PAYMENT DATES

NOTICE IS HEREBY GIVEN THAT the Register of Members and Share Transfer Books will be closed on 28 April 2011 for the preparation of dividend warrants. Duly completed transfers in respect of ordinary shares in the capital of the Company together with all relevant documents of title received by the Company’s Share Registrar, M & C Services Private Limited, 138 Robinson Road, #17-00, The Corporate Office, Singapore 068906 up to 5.00 pm on 27 April 2011 will be registered to determine members’ entitlements to the proposed dividends, subject to approval of members to the proposed dividends at the Fourteenth Annual General Meeting to be convened on 20 April 2011. Subject as aforesaid, members whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 pm on 27 April 2011 will be entitled to the proposed dividends. The proposed dividends, if so approved by members, will be paid on 19 May 2011.

Notice of Fourteenth Annual General MeetingSINGAPORE TECHNOLOGIES ENGINEERING LTD(Incorporated in the Republic of Singapore) Company Registration No: 199706274H


SINGAPORE TECHNOLOGIES ENGINEERING LTD(Incorporated in the Republic of Singapore) Company Registration No: 199706274H

IMPORTANT1. For investors who have used their CpF moneys to buy ordinary

shares in the capital of Singapore technologies engineering ltd, the 2010 Annual Report is forwarded to them at the request of their CpF Approved nominees and is sent solely FoR InFoRMAtIon onlY.

2. this proxy Form is not valid for use by CpF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

IMPORTANT PLEASE READ NOTES OVERLEAF

Total Number of Shares held

PROXY FORM

I I/We, nRIC/passport number

of being a member/members of the abovenamed Company, hereby appoint

II Name Address NRIC/Passport NumberProportion of

Shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Fourteenth Annual General Meeting of the Company to be held at NTUC Auditorium, One Marina Boulevard, Level 7, Singapore 018989 on Wednesday, 20 April 2011 at 2.30 p.m. and at any adjournment thereof.

(please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the ordinary Resolutions as set out in the notice of the Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

III No Ordinary Resolutions For Against

ordinary Business

1 Adoption of Accounts and Reports

2 Declaration of Final ordinary Dividend and Special Dividend

3 Re-election of Mr Quek poh Huat as Director pursuant to Article 98 of the Articles of Association of the Company

4 Re-election of Mr Quek tong Boon as Director pursuant to Article 98 of the Articles of Association of the Company

5 Re-election of Mr Davinder Singh s/o Amar Singh as Director pursuant to Article 98 of the Articles of Association of the Company

6 Re-election of Mr Khoo Boon Hui as Director pursuant to Article 104 of the Articles of Association of the Company

7 Approval of Directors' Fees

8 Re-appointment of KpMG llp as Auditors

Special Business

9 Authority for Directors to issue shares and to make or grant convertible instruments

10 Authority for Directors to grant awards and allot shares pursuant to the Singapore technologies engineering performance Share plan 2010 and the Singapore technologies engineering Restricted Share plan 2010

Dated this day of 2011

Signature(s) of Member(s) or Common Seal

Notes:

1 please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2 A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. Such proxy need not be a member of the Company.

3 Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy in the event of a poll. on a show of hands, only one of the two proxies as determined by that member or, failing such determination by the Chairman of the meeting in his sole discretion shall be entitled to vote on a show of hands.

4 the instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 51 Cuppage Road, #09-08, StarHub Centre, Singapore 229469, not less than 48 hours before the time appointed for the Fourteenth Annual General Meeting.

5 the instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.

6 A corporation which is a member may authorise by a resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Fourteenth Annual General Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

General:

the Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Fourteenth Annual General Meeting, as certified by the Central Depository (pte) limited to the Company.

1st Fold along this line

2nd Fold along this line

Sealed here

Singapore Technologies Engineering Ltd51 Cuppage Road

#09-08 StarHub CentreSingapore 229469

Postage willbe paid byaddressee.

For posting inSingapore only.

Contents

Innovate

Financial Highlights 02

Letter to Shareholders 03

Integrate

Global Footprint 10

Illustrious

Board of Directors 14

Senior Management 18

Organisation Chart 20

Integrity

Corporate Governance 24

Inspire

Growing Innovation 36

Productivity 38

People Excellence 40

Community Relations 43

Workplace Safety & Health 44

The Environment 46

Investor Relations 50

Awards & Commendations 52

Insights

Financial Review of the Group 56

Risk Management 66

Operating Review and Outlook 70

Improve

Financial Report 90

Group Structure 252

Corporate Information 257

Contact Information 258

Shareholding Statistics 259

Notice of Fourteenth 261Annual General Meeting

ST EnginEEring’S ViSion & MiSSion

Be a global defence and engineering group.

Bring value to our customers and partners by delivering total integrated quality solutions and support.

This annual report has been certified by the Forest Stewardship Council as an example of environmentally responsible forestry print production:

• Fromtheforest,tothepapermillandprinter,eachstepofthisannualreport’sproductioniscertifiedaccording to FSC standards.

• Thepapermaterial,Eco-Frontier,isanenvironmentallyfriendlypaperthatisFSCCertified,withtheaddedendorsement of the Singapore Green Labelling Scheme (SGLS). Comprising 51% recycled and 49% virgin pulp,thispaperisproducedusingsteamandelectricalenergy,effectivelyloweringthelevelofemissionsemitted during its manufacture.

• Thepaper’slocaldistributor,RJPaper,isarecipientoftheNationalEnvironmentAgency’sGreenLeafAward,andisFSCCertified;whilsttheprinterforthisreport,AlsoDominiePress,issimilarlyFSCCertified.

Annual Report 2010

SINGAPORE TECHNOLOGIES ENGINEERING LTD51 Cuppage Road #09-08 StarHub Centre Singapore 229469Tel : (65) 6722 1818 • Fax : (65) 6720 2293www.stengg.com

(Regn. No.: 199706274H)

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