Notes to the Financial Statements

Transcription

1 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 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 and for the year then ended were authorised and approved by the Board of Directors for issuance on 15 February 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. 121

2 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 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 (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. 122

3 3. Summary of significant accounting policies (continued) (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. 123

4 3. Summary of significant accounting policies (continued) (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. 124

5 3. Summary of significant accounting policies (continued) (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. 125

6 3. Summary of significant accounting policies (continued) (c) Financial instruments (continued) (i) Non-derivative financial assets (continued) 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. 126

7 3. Summary of significant accounting policies (continued) (c) Financial instruments (continued) (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. 127

8 3. Summary of significant accounting policies (continued) (c) Financial instruments (continued) (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. 128

9 3. Summary of significant accounting policies (continued) (d) Property, plant and equipment and depreciation (continued) (i) Recognition and measurement (continued) Subsequent to initial measurement, except for certain property, plant and equipment which were subject to a one-time revaluation 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 years Leasehold land Over the period of the lease of between 5 to 50 years Improvements to premises 3 to 30 years Wharves and slipways 20 years Syncrolift and floating docks 15 years Boats and barges 10 years Plant and machinery 5 to 25 years Production tools and equipment 3 to 15 years Furniture, fittings, office equipment and computers 2 to 5 years Transportation equipment and vehicles 5 years Aircraft 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. 129

10 3. Summary of significant accounting policies (continued) (e) Intangible assets (i) Goodwill Goodwill represents the excess of: the fair value of the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree, 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. 130

11 3. Summary of significant accounting policies (continued) (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 years Development expenditure 5 years Commercial and intellectual property rights 2 to 16 years Brands 20 to 70 years Film 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 owneroccupied 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. 131

12 3. Summary of significant accounting policies (continued) (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. 132

13 3. Summary of significant accounting policies (continued) (h) Impairment (continued) (i) Non-derivative financial assets (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. 133

14 3. Summary of significant accounting policies (continued) (h) Impairment (continued) (ii) Other non-financial assets (continued) The recoverable amount of an asset or CGU is the higher of its fair value less costs to sell and its value in use. In assessing value 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. 134

15 3. Summary of significant accounting policies (continued) (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) (b) (c) 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 when goods and services, representing part of a contract, are delivered; or 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. 135

16 3. Summary of significant accounting policies (continued) (k) Revenue (continued) (iii) (iv) (v) Management fee income is recognised on an accrual basis over the duration upon which management services are rendered. 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. 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. 136

17 3. Summary of significant accounting policies (continued) (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. 137

18 3. Summary of significant accounting policies (continued) (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 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. 138

19 3. Summary of significant accounting policies (continued) (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. 139

20 3. Summary of significant accounting policies (continued) (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 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 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 was $188,102,000 (2009: $189,740,000). 140

21 3. Summary of significant accounting policies (continued) (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 groupwide 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. (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

22 4. Turnover Turnover represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows: Group $ 000 $ 000 Sale of goods 2,601,482 2,301,675 Service income 2,660,087 2,581,676 Contract revenue 722, ,436 5,984,473 5,547, Profit from operations Profit from operations is arrived at: After charging Group Note $ 000 $ 000 Auditors' remuneration - auditors of the Company 1,209 1,782 - other auditors 1,837 2,979 Non-audit fees - auditors of the Company other auditors 800 1,190 Fees and remuneration of directors 7,666 3,810 Fees paid to a firm of which a director is a member Personnel expenses 6 1,576,726 1,470,638 Depreciation charge 12, , ,985 Allowance/(write-back of allowance) for - Inventory obsolescence 27,642 48,726 - Doubtful debts (trade) ,084 - Unbilled receivables (trade) 22 (474) 1,854 - Doubtful lease receivables 19 (543) 1,138 Provision/(write-back of provision) for - Foreseeable losses (5,134) 4,966 - Liquidated damages 29 5,937 2,901 - Warranties 29 17,069 34,903 Property, plant and equipment written off 7,493 10,948 Research, design and development expenses incurred 98,171 82,238 Operating lease expenses 41,215 36,464 Amortisation of other intangible assets 16 11,090 11,773 Write-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, 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. 142

23 6. Personnel expenses Group $ 000 $ 000 Wages and salaries * 1,312,478 1,219,616 Contributions to defined contribution plans 94,658 86,600 Share-based payments 12,181 17,702 Other personnel expenses 157, ,720 1,576,726 1,470,638 * Includes directors remuneration of $5,246,497 (2009: $1,667,176). 7. Key management personnel compensation Group $ 000 $ 000 Short-term employee benefits 47,581 34,382 Contributions to defined contribution plans Other long-term benefits 12 5 Share-based payments 3,788 4,138 51,768 38, Other income, net Group $ 000 $ 000 Gain on disposal of property, plant and equipment and investment property 2,813 1,702 Grant income from Jobs Credit Scheme 7,966 39,118 Government grants 5,387 4,025 Commission income 2, Rental income 6,610 5,774 Gain/(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 The Group received its grant income of $7,966,000 in 2010 (2009: $39,118,000). The Scheme ended in July

24 9. Finance costs, net Group Note $ 000 $ 000 Finance income Dividend income - quoted equity investments unquoted equity investments Interest income - related corporations 1,823 - bank deposits 6,055 5,731 - staff loans finance lease bonds 12,374 3,202 - others 1,299 1,295 Gain on disposal of investments 10, Gain on fair value changes of held for trading investments Fair value changes of financial instruments - gain on forward currency contract designated as hedging instrument 12, Fair value changes of embedded derivatives not designated as hedging instrument 1,977 44,091 16,322 Finance costs Interest 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) 144

25 10. Taxation Group $ 000 $ 000 Current income tax Current year 140, ,490 Overprovision in respect of prior years (13,098) (17,112) Associates and joint ventures 6,336 (307) 133,670 90,071 Deferred 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, ,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 Net change in fair value of derivative financial instruments designated in cash flow hedges (4,345) 160 Effect of reduction in tax rate (152) The Group Unrecognised tax benefits (4,294) 251 As at, 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, 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. 145

26 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: Group $ 000 $ 000 Profit from operations before taxation 627, ,559 Taxation at statutory tax rate of 17% (2009: 17%) 106,671 92,915 Adjustments: 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, Earnings per share Basic earnings per share The calculation for basic earnings per share is based on: Group $ 000 $ 000 Profit attributable to shareholders 491, ,930 The weighted average number of ordinary shares is arrived at as follows: Group Number of shares ( 000) Issued ordinary shares at beginning of the year 3,010,456 2,998,603 Weighted average number of ordinary shares issued during the year 18,589 5,466 Weighted average number of ordinary shares 3,029,045 3,004,

27 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 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: Group Number of shares ( 000) Weighted average number of ordinary shares (used in the calculation of basic earnings per share) 3,029,045 3,004,069 Weighted average number of unissued shares under option 67,704 54,150 Number 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. 147

28 12. Property, plant and equipment As at Additions Disposals/ write-off Valuation/Cost Arising from Finalisation acquisition of purchase of interest in price subsidiaries allocation Reclassifications Transfer from investment properties Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (Note 17) The Group At Valuation Leasehold land and buildings 1,919 1,919 Wharves and slipways 1,490 1,490 Syncrolift and floating docks 4,603 4,603 Plant and machinery 1,694 1,694 Furniture, fittings, office equipment and computers At Cost Freehold land and buildings 59, (1,397) 58,422 Leasehold land and buildings 552,038 34,211 (2,677) 24,856 2,085 28,217 (3,732) 634,998 Improvements to premises 52,805 2,674 (420) 94 (1) (218) (691) 54,243 Wharves and slipways 32, (160) 32,718 Syncrolift and floating docks 68,936 68,936 Boats and barges 5,157 (44) 5,113 Plant and machinery 973,993 85,932 (41,266) 3,375 2,067 (5,987) 1,018,114 Production tools and equipment 213,002 19,803 (1,641) 599 (438) 142 (890) 230,577 Furniture, fittings, office equipment and computers 167,934 23,995 (14,866) (756) 176,527 Transportation equipment and vehicles 14,897 2,251 (548) 1,198 (144) 17,654 Aircraft and aircraft engines 71,953 38, ,207 Construction-in-progress 16,325 68,539 (17) 240 (4,101) (67) 80,919 2,238, ,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. 148

29 12. Property, plant and equipment (continued) As at Additions Disposals/ write-off Arising from acquisition of interest in subsidiaries Valuation/Cost Due to disposal of subsidiaries Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group At Valuation Leasehold land and buildings 1,919 1,919 Wharves and slipways 1,490 1,490 Syncrolift and floating docks 4,603 4,603 Plant and machinery 1,694 1,694 Furniture, fittings, office equipment and computers At Cost Freehold land and buildings 58,422 1, (4,767) 55,679 Leasehold land and buildings 634,998 8,933 (24,037) 79,399 (7,673) 691,620 Improvements to premises 54,243 4,566 (443) 170 (22) (1,486) (4,174) 52,854 Wharves and slipways 32,718 2,116 1,268 (574) 35,528 Syncrolift and floating docks 68,936 68,936 Boats and barges 5,113 (177) (154) 4,782 Plant and machinery 1,018,114 77,773 (63,529) 7,819 (81,307) 958,870 Production tools and equipment 230,577 14,684 (2,591) 5,482 (6,092) 242,060 Furniture, fittings, office equipment and computers 176,527 21,873 (7,302) 94 (119) 3,751 (4,678) 190,146 Transportation equipment and vehicles 17,654 2,208 (1,249) (314) 18,339 Aircraft and aircraft engines 110,207 1,965 70, ,505 Construction-in-progress 80, ,575 (15) (167,256) (1,887) 109,336 2,498, ,871 (99,166) 283 (141) (111,620) 2,620,

30 12. Property, plant and equipment (continued) As at Depreciation charge for the year Impairment/ (write-back of impairment) Accumulated depreciation Disposals/ write-off Reclassifications Transfer from investment properties Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (Note 5) (Note 5) (Note 17) The Group At Valuation Leasehold land and buildings 1,919 1,919 Wharves and slipways 1,490 1,490 Syncrolift and floating docks 4,603 4,603 Plant and machinery 1,694 1,694 Furniture, fittings, office equipment and computers At Cost Freehold land and buildings 19,062 1,157 (468) 19,751 Leasehold land and buildings 303,038 23,426 (2,545) 14,617 (1,013) 337,523 Improvements to premises 27,987 5,568 (364) 16 (425) 32,782 Wharves and slipways 20,366 2,136 (32) 22,470 Syncrolift and floating docks 68, ,561 Boats and barges 4, (48) 5,113 Plant and machinery 412,904 69,806 (84) (27,380) (2,466) 452,780 Production tools and equipment 170,032 21,698 (1,597) (806) 189,327 Furniture, fittings, office equipment and computers 137,059 19, (14,414) (16) (773) 141,770 Transportation equipment and vehicles 10,257 2,178 (397) (68) 11,970 Aircraft and aircraft engines 35,749 4,387 40,136 1,219, ,617 (42) (46,697) 14,617 (6,099) 1,332,

31 12. Property, plant and equipment (continued) As at Depreciation charge for the year Write-back of impairment Accumulated depreciation Disposals/ write-off Due to disposal of subsidiaries Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (Note 5) (Note 5) The Group At Valuation Leasehold land and buildings 1,919 1,919 Wharves and slipways 1,490 1,490 Syncrolift and floating docks 4,603 4,603 Plant and machinery 1,694 1,694 Furniture, fittings, office equipment and computers At Cost Freehold land and buildings 19, (1,632) 18,978 Leasehold land and buildings 337,523 23,036 (22,871) (3,370) 334,318 Improvements to premises 32,782 3,948 (438) (19) (1,147) (2,338) 32,788 Wharves and slipways 22, (116) 23,030 Syncrolift and floating docks 68, ,590 Boats and barges 5,113 (177) (154) 4,782 Plant and machinery 452,780 57,516 (14) (52,683) (218) (30,645) 426,736 Production tools and equipment 189,327 6,274 (2,518) 1,845 (4,625) 190,303 Furniture, fittings, office equipment and computers 141,770 21,434 (7,144) (61) (303) (3,759) 151,937 Transportation equipment and vehicles 11,970 2,326 (1,159) (220) 12,917 Aircraft and aircraft engines 40,136 4,597 44,733 1,332, ,695 (14) (86,813) (80) (46,859) 1,319,

32 12. Property, plant and equipment (continued) Net book value $ 000 $ 000 The Group At Valuation Leasehold land and buildings Wharves and slipways Syncrolift and floating docks Plant and machinery Furniture, fittings, office equipment and computers At Cost Freehold land and buildings 36,701 38,671 Leasehold land and buildings * 357, ,475 Improvements to premises 20,066 21,461 Wharves and slipways 12,498 10,248 Syncrolift and floating docks Boats and barges Plant and machinery 532, ,334 Production tools and equipment 51,757 41,250 Furniture, fittings, office equipment and computers 38,209 34,757 Transportation equipment and vehicles 5,422 5,684 Aircraft and aircraft engines 137,772 70,071 Construction-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. 152

33 12. Property, plant and equipment (continued) Furniture, fittings, office equipment and computers Transportation equipment and vehicles Total $ 000 $ 000 $ 000 The Company Cost As at , ,713 Additions Disposals (204) (204) As at and , ,820 Additions Disposals (3) (3) As at , ,963 Accumulated depreciation As at , ,697 Depreciation charge for the year Disposals (202) (202) As at and , ,109 Depreciation charge for the year Disposals (3) (3) As at , ,530 Net book value As at As at (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 and (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 shortterm and long-term loans. 153

34 12. Property, plant and equipment (continued) (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: Group $ 000 $ 000 Leasehold land and buildings 830 1,335 Transportation equipment and vehicles ,026 1,699 (d) Major properties (i) Freehold land and buildings Location Description Land Net book value area (sq. m.) $ 000 $ 000 USA South K Street Tulare, California Emerson Road Kidron, Ohio 300 Hackney Ave, Independence, Kansas 400 Hackney Ave, Washington, North Carolina 914 Saegers Station Drive, Montgomery, Pennsylvania 7801 Trinity Drive, Escatawpa, Mississippi 5801 Elder Ferry Road, Moss Point, Mississippi 900 Bayou Casotte Parkway, Pascagoula, Mississippi 3800 Richardson Road South, Hope Hull, Alabama Industrial buildings 88,949 2,281 2,487 Industrial buildings 68,351 1,176 1,317 Industrial buildings 117,358 1,661 1,784 Industrial buildings 39,942 1,720 1,952 Industrial buildings 122,659 3,777 3,841 Shipyard and buildings 839,564 4,064 4,434 Shipyard and buildings 227,151 3,793 4,142 Shipyard and buildings 331,803 13,902 14,329 Production facility 8,361 3,434 3,

35 12. Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements Location Description Tenure Land Net book value area (sq. m.) 2010 $ $ 000 Singapore 501 Airport Road Factory and office building 20 years from ,899 3,737 3, Airport Road Factory and office building 20 years from , Airport Road Lots , 087M, 0870C and MK22 Jet engine test cell 3 years from ,317 18,521 19, Airport Road Warehouse and office building 30 years from , Hangar and office building 30 years from ,918 1,904 2,411 8 Changi North Way Hangar and office building 30 years from ,713 27,349 29,834 Hangar and office building 22.5 years from ,860 2,643 2,884 Hangar and office building 16.3 years from ,764 11,010 12, Airport Road Hangars and office building 3 years lease from * 48,882 22,507 24,052 Seletar West Camp Hangars and office building Yearly * 15,670 16,405 17,058 Hangars and office building 24 Ang Mo Kio Street 65 Industrial and commercial buildings 100 Jurong East Street 21 Industrial and commercial buildings 31 2 /3 years lease from to years from , renewable to years from , renewable to ,760 11,388 11,807 23,970 7,327 8,263 11,232 7,473 7, Ubi Crescent Ubi Techpark #01-12 Office building 60 years from 730 1,229 5 Portsdown Road Industrial and commercial buildings 1 year from , Ubi Close Car show room cum workshop 30 years from ,274 11,956 12, Tuas Avenue 2 Factory and office building 30 years from ,669 2,233 2, Benoi Crescent Industrial and commercial buildings 30 years from ,981 2,380 2, Jalan Boon Lay Industrial and commercial buildings 27 years from to , renewable to ,091 84,475 32,714 2D Ayer Rajah Crescent Industrial and commercial buildings 2.5 years from ,

36 12. Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements (continued) Location Description Tenure Land Net book value area (sq. m.) 2010 $ $ 000 Singapore 16 Tuas Avenue 7 Industrial buildings 30 years from , Rifle Range Road Industrial buildings Renewable every year * 1,380,983 1,124 1, Chin Bee Drive Industrial buildings 60 years from ,640 10,123 2, Benoi Road Administrative offices 56 years from ,224 3,323 3,406 7 Benoi Road Buildings, foreshore and workshops 60 Tuas Road Buildings, foreshore and workshops 56 years from ,802 15,299 14, years from ,262 4,469 5,205 30/36 Kian Teck Avenue Workers dormitory 30 years from ,908 4,286 4,578 USA th Street Brookley Complex, Mobile, Alabama 9800 John Saunders Road, San Antonio, Texas Hangar and office building 22 years from ,825 11,552 13,272 Hangar and office building 16 7 /12 years from ,663 24,852 5,392 People s Republic of China No 2, Huayu Road, Huli District, Xiamen , Fujian Guangzhou Airport Logistics Centre, Guangzhou Baiyun Airport Logistics, Guangzhou Leasehold land for factory building Warehouse 50 years from ,618 5,048 5, /4 years lease from # 97 Zhong Cao Road Guiyang, Guizhou Leasehold land, industrial and commercial buildings 50 years from to ,662 21,482 22, Xin Jiao Dong Road, Hai Zhu District, Guangzhou, Guangdong Industrial and commercial buildings 15 years from to ,751 1,149 1,219 No. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai Leasehold land 50 years from to , Kuang Ji Road, Zhenjiang, Jiangsu Leasehold land, industrial and commercial buildings 40 years from to ,711 9,635 11,482 1 Ding Mao Wei San Road, Zhenjiang, Jiangsu Leasehold land, industrial and commercial buildings 46.5 years from to ,883 9,500 10,

37 12. Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements (continued) Location Description Tenure Land Net book value area (sq. m.) 2010 $ $ 000 Panama Bryant Ave, Howard Balboa Hangar and office building 20 years from ,278 2,176 2,258 * 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 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 The revised estimated useful lives are as follows: Existing estimated useful lives Revised estimated useful lives Buildings 15 to 30 years 15 to 50 years Plant and machinery 2 to 20 years 5 to 25 years Production tools and equipment 3 to 10 years 3 to 15 years Aircraft and aircraft engines 5 to 20 years 15 to 30 years Wharves and slipways 10 to 16 years 20 years Syncrolift and floating docks 5 to 10 years 15 years Boats and barges 5 years 10 years The effect of these changes on the income statement in current and future years is as follows: 2010 $ 000 Group 2011 $ $ 000 Decrease in depreciation charge 39,478 32,221 22,

38 13. Subsidiaries Company $ 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, ,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 ST Engineering Financial I Ltd. * * ST Engineering Financial II Pte. Ltd. * 543, ,262 Impairment in subsidiaries (7,000) (7,000) Carrying amount after impairment in subsidiaries 536, ,262 Capital contribution in the form of share options, performance shares and restricted shares issued to employees of subsidiaries 58,110 53, , ,477 * Amount less than $1,

39 13. Subsidiaries (continued) Details of the subsidiaries are as follows: Effective equity interest held by the Group % % (a) Singapore Technologies Aerospace Ltd and its subsidiaries ST Aerospace Engineering Pte Ltd and its subsidiaries: ST PAE Holdings Pty Ltd Pacific Flight Services Pte Ltd Pacific Flight Services Pty Ltd ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.) and its subsidiary: Aviation Training Academy Australia Pty Ltd and its subsidiary: ST Aviation Training Academy (Australia) Pty Ltd ST Aerospace Engines Pte Ltd and its subsidiary: ST Aerospace Technologies (Xiamen) Company Limited ST Aerospace Systems Pte Ltd ST Aerospace Supplies Pte Ltd and its subsidiaries: ishopaero Pte Ltd ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd ST Aerospace International Structures Pte Ltd ST Aviation Resources Pte Ltd and its subsidiary: ST Aviation Resources 1 Limited ST Aerospace Services Co Pte. Ltd Singapore Technologies Engineering (Europe) Ltd Singapore Aerospace Kabushiki Kaisha Visiontech Investment Pte Ltd Visiontech Engineering Pte Ltd ST Airport Ground Services Pte Ltd # 100 Singapore British Engineering (Pte) Ltd ST Aerospace Solutions (Europe) A/S and its subsidiary: Airline Rotables (UK Holdings) Limited and its subsidiary: Airline Rotables Limited ST Aerospace Panama, Inc Precision Products Singapore Pte Ltd

40 13. Subsidiaries (continued) Effective equity interest held by the Group % % (b) Singapore Technologies Electronics Limited and its subsidiaries SEEL Electronic & Engineering Sdn Bhd ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: INFA Systems Limited ST Electronics (Software Services) Limited ST Electronics (e-services) Pte. Ltd. and its subsidiary: Knowledge Alive Pte. and its subsidiary: COMAT Training Services Pte PM-B Pte Ltd and its subsidiaries: PMB Project Management Business Sdn Bhd PT PM-B Indonesia PM-B (China) Ltd ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: ST Electronics (Digital Media) Pte. Ltd Antycip Simulation Limited and its subsidiary: Antycip Simulation SAS ST Education & Training Private Limited and its subsidiaries: STET Homeland Security Services Pte. Ltd STET Maritime Pte. Ltd STET Institute Pte. Ltd. ^ 70 Brightspot Interactive Learning Pte. Ltd. and its subsidiary: Brightspot Interactive Learning Inc MERITS Technologies LLP ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: ST Electronics (Info-Security) Pte. Ltd. and its subsidiary: DataMark Technologies Pte Ltd STELCOMMS Pte. Ltd Telematics Wireless Ltd. and its subsidiary: Telematics Wireless USA Corp ST Electronics (Satcom & Sensor Systems) Pte. Ltd. and its subsidiaries: ST Electronics (Sichuan) Co., Ltd idirect Asia Pte. Ltd ST Electronics (Shanghai) Co., Ltd and its subsidiary: ST Electronics-PCI Co., Ltd ^ 51 its Technologies Pte Ltd ST Electronics (Taiwan) Limited STELOP Pte. Ltd TranSys Pte Ltd

41 13. Subsidiaries (continued) Effective equity interest held by the Group % % (c) Singapore Technologies Kinetics Ltd and its subsidiaries SDG Kinetics Pte. Ltd. and its subsidiary: LeeBoy India Construction Equipment Private Limited 97 Mobility Systems Pte Ltd and its subsidiaries: Silvatech Global Systems Limited Silvatech Systems Corporation Pte Ltd and its subsidiary: Kinetics Drive Solutions Inc STA Inspection Pte Ltd Singapore Commuter Private Limited and its subsidiaries: Jiangsu Huatong Kinetics Co., Ltd Jiangsu Huaran Kinetics Co., Ltd Securedge Pte. Ltd STA Investment Pte Ltd ST Kinetics International Pte. Ltd. and its subsidiary: VT Hackney, S.A. de C.V. (formerly known as VT Specialized Vehicles, S.A. de C.V.) SDDA Pte. Ltd. (formerly known as STA Detroit Diesel-Allison (Singapore) Pte Ltd) and its subsidiary: Kinetics Link Services Sdn. Bhd. 60 ST Kinetics Integrated Engineering Pte. Ltd Singapore Test Services Private Limited ST Kinetics Pte. Ltd Advanced Material Engineering Pte. Ltd. and its subsidiary: Advanced Pyrotechnic Materials Private Limited Unicorn International Pte Limited Allied Ordnance of Singapore (Pte) Limited Ordnance Development and Engineering Company of Singapore (1996) Private Limited Autonomous Technology Pte Ltd and its subsidiary: Guizhou Jonyang Kinetics Co., Ltd Kinetics Systems (Shanghai) Co., Ltd STAR Automotive Center (Zhejiang) Co., Ltd STAR Automotive Center (Guangzhou) Co., Ltd (d) Singapore Technologies Marine Ltd and its subsidiaries STSE Engineering Services Pte Ltd and its subsidiaries: ST Environmental Services & Technologies Co. Ltd STSE Engineering Services (B) Sdn Bhd 100 Hovertrans Solutions Pte. Ltd

42 13. Subsidiaries (continued) Effective equity interest held by the Group % % (e) Vision Technologies Systems, Inc. and its subsidiaries VT Systems, Inc Vision Technologies Aerospace, Incorporated and its subsidiaries: ST Aerospace Mobile, Inc DalFort Aerospace GP, Inc DalFort Aerospace, L.P San Antonio Aerospace GP, LLC ST Aerospace San Antonio, L.P Vision Technologies Electronics, Inc. and its subsidiary: VT idirect, Inc. and its subsidiaries: idirect Hong Kong Limited idirect UK Limited and its subsidiary: Parallel Limited idirect Italy srl idirect International Corporation idirect Government Technologies, Inc VT idirect Canada, Inc Intelect Technologies, LLC (formerly known as Intelect Technologies, Incorporated) Vision Technologies Kinetics, Inc. and its subsidiaries: Miltope Corporation and its subsidiaries: Miltope Business Products, Inc IV Phoenix Group, Inc MÄK Technologies, Inc Vision Technologies Land Systems, Inc. and its subsidiaries: VT Dimensions, Inc VT LeeBoy, Inc VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) Vision Technologies Marine, Inc. and its subsidiary: VT Halter Marine, Inc VT Systems International, LLC 100 (f) Singapore Technologies Dynamics Pte Ltd (g) ST Synthesis Pte Ltd (h) FusionTech Pte. Ltd (i) Kaz-ST Engineering Bastau Limited Liability Partnership (j) ST Engineering Financial I Ltd (k) ST Engineering Financial II Pte. Ltd

43 13. Subsidiaries (continued) # 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 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 ishopaero Pte Ltd ST Aerospace Guangzhou Aero-Technologies & Engineering Co 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 Trading, e-commerce and information technology related services for the aerospace industry Import/export for aircraft component leasing, repair, exchange and trading, warehousing, packaging, distribution and other related services Singapore Singapore People s Republic of China 163

44 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ 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. Singapore Technologies Engineering (Europe) Ltd Repair, maintenance, modification and servicing of commercial aircraft Providing marketing and investment services to the Group Singapore 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 Singapore British Engineering (Pte) Ltd ST Aerospace Solutions (Europe) A/S Provision of engineering services for the repair, maintenance and modification of aircraft, aircraft equipment and components Marketing and sale of a range of defence products and associated equipment and participating in the development of new products and systems Supply aircraft components, including purchase, maintenance and logistics services Singapore Singapore 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 Singapore Technologies Electronics Limited SEEL Electronic & Engineering Sdn Bhd Manufacture and sale of investment castings, mould toolings and precision formings Design, development, supply, installation, integration and maintenance of transportation, intelligent building, defence electronic and communication systems Sales of electronic instruments and equipment, electronic engineering and systems integration services and maintenance and calibration of electronic equipment Singapore Singapore Malaysia 164

45 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business ST Electronics (Info-Software Systems) Pte. Ltd. INFA Systems Limited ST Electronics (Software Services) Limited ST Electronics (e-services) Pte. Ltd. Knowledge Alive Pte. Ltd. COMAT Training Services Pte Ltd PM-B Pte Ltd PMB Project Management Business Sdn Bhd PT PM-B Indonesia Design, development and supply of real-time/mission critical systems and provision of related maintenance services 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 Providing IT outsourcing services, software applications development and turnkey solutions Providing shared services to government ministries, agencies and enterprises Offer technologically-driven learning and knowledge solutions, products and services to corporate, tertiary and workforce markets Operating a computer training school, providing training in computer software and applications 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 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 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 Hong Kong People s Republic of China Singapore Singapore Singapore Singapore Malaysia Indonesia PM-B (China) Ltd Dormant People s Republic of China ST Electronics (Training & Simulation Systems) Pte. Ltd. ST Electronics (Digital Media) 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 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 Singapore 165

46 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Antycip Simulation Limited Antycip Simulation SAS ST Education & Training Private Limited STET Homeland Security Services Pte. Ltd. STET Maritime Pte. Ltd. Investment holding and acting as a selling agent of software and incidental hardware to the defence industry and education establishments A value added reseller/distributor of simulation products and provision of simulation sub-system/components solutions Provision of education and training, management and consultancy services for operational and technical domains of maritime, aerospace and land services and industries Provision of security consultancy, solutions implementation and training Provision of marine audit, survey and consultancy services United Kingdom France Singapore Singapore Singapore Brightspot Interactive Learning Pte. Ltd. Investment holding Singapore Brightspot Interactive Learning Inc. MERITS Technologies LLP # ST Electronics (Info-Comm Systems) Pte. Ltd. ST Electronics (Info-Security) Pte. Ltd. DataMark Technologies Pte Ltd STELCOMMS Pte. Ltd. Provision of training services such as soft skills and management skills to corporations, and other courses to individuals Marketing and sale of education and simulation products and services. Installation and maintenance of solutions related to these products and services Design and development, systems integration, manufacturing and sale of communication equipment, GPS-based fleet management system, traffic management system, info appliances and defence electronics Design, development, sale and provision of technical support for information security products, solutions and services Development and provision of digital water-marking and related solutions 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 People s Republic of China Kazakhstan Singapore Singapore Singapore Singapore 166

47 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Telematics Wireless Ltd. Telematics Wireless USA Corp # ST Electronics (Satcom & Sensor Systems) Pte. Ltd. ST Electronics (Sichuan) Co., Ltd idirect Asia Pte. Ltd. ST Electronics (Shanghai) Co., 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 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 Manufacture of microwave components and subsystems, system integration and provision of related repairs and maintenance for the telecommunications and defence electronics industries Manufacturing and maintenance of communication and other related apparatus and consultant service of telecommunication technology Marketing and sales, design, manufacture & engineering services for electronics and communication systems 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 Israel USA Singapore People s Republic of China Singapore People s Republic of China its Technologies Pte Ltd Investment holding Singapore ST Electronics (Taiwan) Limited STELOP Pte. Ltd. TranSys Pte Ltd Provide integration for large-scale system projects in rail, expressway and intelligent building management solutions Design and development, manufacturing, maintaining and sale of electro-optical products and systems and the provision of related services Design, development, distribution, maintenance and marketing of railway related products Taiwan Singapore Singapore 167

48 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ 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 # Silvatech Systems Corporation Pte Ltd Kinetics Drive Solutions Inc. # Owns the intellectual property rights to electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives Designing, manufacturing, marketing and managing licences of technologies and products using electrohydraulic drive, hydro-mechanical and electromechanical continuously variable transmissions, and equipment powered by such drives, globally 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 British Virgin Islands Singapore 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 168

49 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business VT Hackney S.A. de C.V. (formerly known as VT Specialized Vehicles, S.A. de C.V.) SDDA Pte. Ltd. (formerly known as STA Detroit Diesel- Allison (Singapore) Pte Ltd) Kinetics Link Services Sdn. Bhd. ST Kinetics Integrated Engineering Pte. Ltd. Singapore Test Services Private Limited Manufacture and marketing of specialised aluminium drop-frame truck bodies and trailers Assembling and marketing of diesel engines and related products and the provision of technical services, field services, repair and maintenance services Assembling, distributing and marketing of port handling equipment, diesel engines and related products, and the provision of technical services, field services and maintenance services Provision of customised solutions, products for defence and commercial markets Provision of professional engineering consultancy, tests, inspection, certification and related services Mexico Singapore Malaysia Singapore 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 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 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 Singapore 169

50 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Autonomous Technology Pte Ltd Investment holding Singapore Guizhou Jonyang Kinetics Co., Ltd. Kinetics Systems (Shanghai) Co., Ltd. STAR Automotive Center (Zhejiang) Co., Ltd. STAR Automotive Center (Guangzhou) Co., Ltd. Jiangsu Huatong Kinetics Co., Ltd. Jiangsu Huaran Kinetics Co., Ltd. Singapore Technologies Marine Ltd STSE Engineering Services Pte Ltd ST Environmental Services & Technologies 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 Manufacture and sale of vehicle drive systems, industrial drive motors and small external combustion engines 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 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 Manufacture and sale of paving, mixing, road maintenance and compaction equipment and other road construction machineries Manufacture and sale of engineering machinery and equipment 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 Design, manufacture, maintain and operate environmental infrastructures and provide planning, consultancy services in environmental and renewable energy management solutions Design, development, manufacturing, sales, aftersales 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 People s Republic of China People s Republic of China People s Republic of China People s Republic of China People s Republic of China People s Republic of China Singapore Singapore People s Republic of China 170

51 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ place of business STSE Engineering Services (B) Sdn Bhd Hovertrans Solutions Pte. Ltd. Design, manufacture, maintain and operate environmental infrastructures and provide planning, consultancy services in environmental and renewable energy management solutions 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 Brunei 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 idirect UK Limited Parallel Limited # idirect Italy srl # idirect International Corporation # Markets two-way internet protocol (IP) based broadband satellite networking solutions Markets two-way internet protocol (IP) based broadband satellite networking solutions Software development and associated services; installation, configuration, consultancy and support Markets two-way internet protocol (IP) based broadband satellite networking solutions Markets two-way internet protocol (IP) based broadband satellite networking solutions Hong Kong United Kingdom United Kingdom Italy USA 171

52 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ 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. # VT LeeBoy, Inc. # VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) # Vision Technologies Marine, Inc. # Investment holding and licensing of intellectual properties 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 Manufacture and marketing of specialised aluminium drop-frame truck bodies, trailers, refrigerated truck bodies and trailers and specialty vehicle cabs Investment holding and providing investment services to the Marine sector USA USA USA USA 172

53 13. Subsidiaries (continued) Name of subsidiary Principal activities Country of incorporation/ 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 ST Synthesis Pte Ltd Technology development, advanced concept design and development and technology acquisition Provision of one-stop total integrated logistic support services Singapore Singapore FusionTech Pte. Ltd. Investment holding Singapore Kaz-ST Engineering Bastau Limited Liability Partnership # ST Engineering Financial I Ltd. ST Engineering Financial II Pte. Ltd. Provision of IT, engineering, defence and related services Provision of financial and treasury services to related parties Provision of financial and treasury services to related parties Kazakhstan Singapore Singapore # Not required to be audited under the law in the country of incorporation. Commenced members voluntary liquidation since December Audited by member firms of KPMG International for consolidation purposes. ++ This entity ceased operations in October This entity was incorporated during the year and was not required to be audited as at the date of this report. 173

54 13. Subsidiaries (continued) All subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore, except for the following: Name of subsidiary Name of accounting firm Airline Rotables (UK Holdings) Limited Airline Rotables Limited Aviation Training Academy Australia Pty Ltd Pacific Flight Services Pty Ltd Singapore Technologies Engineering (Europe) Ltd ST Aerospace Guangzhou Aero-Technologies & Engineering Co Ltd ST Aerospace Mobile, Inc. ST Aerospace San Antonio, L.P. ST Aviation Training Academy (Australia) Pty Ltd ST Aerospace Panama, Inc. ST Aerospace Solutions (Europe) A/S ST Aerospace Technologies (Xiamen) Company Limited ST PAE Holdings Pty Ltd Antycip Simulation Limited Antycip Simulation SAS Brightspot Interactive Learning Inc. idirect Hong Kong Limited idirect UK Limited INFA Systems Limited PMB Project Management Business Sdn Bhd PT PM-B Indonesia SEEL Electronic & Engineering Sdn Bhd ST Electronics (Sichuan) Co., Ltd ST Electronics (Shanghai) Co., Ltd ST Electronics (Software Services) Limited ST Electronics (Taiwan) Limited Telematics Wireless Ltd. Kinetics Link Services Sdn. Bhd. LeeBoy India Construction Equipment Private Limited VT Hackney, S.A. de C.V. Guizhou Jonyang Kinetics Co., Ltd. STAR Automotive Center (Zhejiang) Co., Ltd STAR Automotive Center (Guangzhou) Co., Ltd Kinetics Systems (Shanghai) Co., Ltd. Jiangsu Huatong Kinetics Co., Ltd Jiangsu Huaran Kinetics Co., Ltd ST Environmental Services & Technologies Co. Ltd KPMG, Cambridge KPMG, Cambridge KPMG, Melbourne KPMG, Sydney KPMG, Cambridge KPMG, Guangzhou KPMG, San Antonio KPMG, San Antonio KPMG, Melbourne KPMG, Panama KPMG, Frederiksberg KPMG, Fuzhou KPMG, Perth KPMG, Cambridge KPMG, Paris and Ernst & Young, Paris KPMG, Beijing KPMG, Hong Kong KPMG, Cambridge KPMG, Hong Kong KPMG, Kuala Lumpur Ernst & Young, Jakarta KPMG, Kuala Lumpur KPMG, Chengdu KPMG, Shanghai KPMG, Shenzhen KPMG, Taipei KPMG, Tel Aviv KPMG, Johor Bahru B S R & Co., Bangalore KPMG, Mexico City KPMG, Chengdu KPMG, Hangzhou KPMG, Guangzhou KPMG, Shanghai KPMG, Nanjing KPMG, Nanjing KPMG, Shanghai 174

55 13. Subsidiaries (continued) (a) During the financial year, the Group incorporated the following companies: Name of company Country of incorporation/ place of business Equity interest held Date of incorporation % LeeBoy India Construction Equipment Private Limited India September 2010 Kinetics Link Services Sdn. Bhd. Malaysia May 2010 STSE Engineering Services (B) Sdn Bhd Brunei November 2010 Hovertrans Solutions Pte. Ltd. Singapore January 2010 VT Systems International, LLC USA October 2010 ST Engineering Financial II Pte. Ltd. Singapore May 2010 (b) During the financial year, the Group acquired additional equity interests in the following companies: Name of company Interest after Net identifiable Interest acquired acquisition Consideration assets acquired % % $ 000 $ 000 ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.) and its subsidiaries , Knowledge Alive Pte. Ltd. and its subsidiary ,225 1,121 Telematics Wireless Ltd , Intelect Technologies, LLC (formerly known as Intelect Technologies, Incorporated) (44) (c) During the financial year, the Group disposed of the following companies: Net identifiable Name of company Interest disposed Consideration assets disposed % $ 000 $ 000 Date of disposal ST Electronics-PCI Co., Ltd 51 1,469 1, March 2010 STET Institute Pte. Ltd June

56 14. Associates and joint ventures Group Company $'000 $'000 $'000 $'000 Unquoted shares, at cost 197, ,703 17,657 17,707 Goodwill on acquisition written off, net (110) (110) Share of net assets acquired 197, ,593 Share of post-acquisition: Profits 109,064 95,394 Reserves (25,690) (17,608) 281, ,379 The summarised financial information of the associates is as follows: Group $ 000 $ 000 Results Turnover 819, ,662 Net profit for the year 93,034 81,615 Assets and liabilities Non-current assets 415, ,802 Current assets 540, ,769 Current liabilities (301,891) (261,600) Non-current liabilities (48,723) (41,310) 605, ,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 liabilities Non-current assets 50,783 51,693 Current assets 37,685 36,420 Current liabilities (27,996) (29,908) Non-current liabilities (48,541) (47,544) 11,931 10,

57 14. Associates and joint ventures (continued) (a) Details of associates are as follows: Name of associate Principal activities Country of incorporation/ place of business Effective equity interest held by the Group % % Aerospace Engineering Services Pty Ltd Maintenance and servicing of aircraft Australia Aerospace Engineering Services Pty Ltd Unit Trust Trustee of unit trust fund Australia JV Pte. Ltd. ++ Dormant Singapore Composite Technology International Pte Ltd Eurocopter South East Asia Private Limited Madrid Aerospace Services S.L. Repairing and rebuilding helicopter rotor blades Selling, maintaining and overhauling of helicopters Repair and overhaul of aircraft landing gears and its related components Singapore Singapore Spain Shanghai Technologies Aerospace Company Limited Aircraft and component maintenance, repair, overhaul and other related maintenance business People s Republic of China Singapore Precision Repair and Overhaul Pte Ltd Turbine Coating Services Pte Ltd Turbine Overhaul Services Pte Ltd iwow Technology Pte PM-B Project Management Business (Thailand) Ltd Repair and overhaul of aircraft and helicopter landing gears and its related components Repair, refurbishment and upgrading of aircraft jet engine turbine blades and vanes Repair and service of gas and steam turbine components To carry out research and development, consultancy services in telecommunication, electrical and related fields 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 Singapore Singapore Singapore Thailand

58 14. Associates and joint ventures (continued) Name of associate Principal activities Country of incorporation/ place of business Effective equity interest held by the Group % % Prescient Systems & Technologies Pte. Ltd. Trusted Hub Ltd WizVision Pte. Ltd. CityCab 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 Provision of an integrated trusted environment for secured transactions and e-commerce Providing information technology services and trading of computer accessories Rental of taxis and provision of premier bus service, charge card facilities and travel related services Singapore Singapore Singapore Singapore Defence Electronics of Singapore Pte Ltd # Dormant Singapore GFM Maquinaria, S.A.P.I. de C.V. Sale of construction and mining machinery and equipment Mexico Hualun International Trading Co., Ltd + Import and export of commercial products, patents, licences and government-approved technologies People s Republic of China Nusantara Technologies Sdn. Bhd. Timoney Holdings Limited NanoScience Innovation Pte Ltd Singapore Airshow & Events Pte. Ltd. Provision of non-destructive testing services, ultrasonic flaw detection and gauging survey and pressure gauge calibration Design and prototyping services and component supply for the automotive and aerospace engineering sectors Research and development of ultra fine structure, especially nano-scale, materials, devices, equipment and intellectual properties Organising and management of conferences, exhibitions and other related activities, includes the biennial Singapore Airshow event Malaysia Republic of Ireland Singapore Singapore

59 14. Associates and joint ventures (continued) (b) Details of joint ventures are as follows: Name of joint venture Principal activities Country of incorporation/ place of business Effective equity interest held by the Group % % GFM Electronics S.A. de C.V. ATREC Pte. Ltd. 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 Research and technology development in advanced materials for both defence and commercial applications Mexico Singapore 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 People s Republic of China SMART Systems Pte Ltd Takata CPI Singapore Pte Ltd First Response Marine Pte. Ltd. Halter-Bollinger Joint Venture LLC Joint Shipyard Management Services Pte Ltd Life systems integration of weapon system Manufacture of pyrotechnic components for seatbelts and air bags used in motor vehicles Ship and boat leasing with operator (including chartering) To bid and secure US boat fabrication contracts for its shareholders Construction and managing workers dormitories Singapore Singapore Singapore USA Singapore This entity is under members voluntary 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. 179

60 14. Associates and joint ventures (continued) 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 Aerospace Engineering Services Pty Ltd Unit Trust Composite Technology International Pte Ltd Madrid Aerospace Services S.L. Shanghai Technologies Aerospace Company Limited Turbine Coating Services Pte Ltd Turbine Overhaul Services Pte Ltd GFM Electronics S.A. de C.V. iwow Technology Pte Ltd PM-B Project Management Business (Thailand) Ltd WizVision Pte. Ltd. Beijing Zhonghuan Kinetics Heavy Vehicles Co. Ltd. CityCab Pte Ltd Nusantara Technologies Sdn. Bhd. Timoney Holdings Limited NanoScience Innovation Pte Ltd GFM Maquinaria, S.A.P.I. de C.V. KPMG, Australia KPMG, Australia Deloitte and Touche LLP, Singapore Deloitte S.L. KPMG, Shanghai PricewaterhouseCoopers LLP, Singapore PricewaterhouseCoopers LLP, Singapore PricewaterhouseCoopers, Mexico LW Ong & Co Tonkla Miraculous Co., Ltd. BF Teo Associates Crowe Horwath China CPA Co., Ltd Deloitte and Touche LLP, Singapore Deloitte Kassimchan, Malaysia KPMG, Ireland NSC & Associates PricewaterhouseCoopers, Mexico 15. Investments Group $ 000 $ 000 Quoted investments Equity 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 17,101 Unquoted 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 1,745 Convertible loan, at amortised cost * 486 Convertible loan to non-related corporations # ,280 2,931 Total unquoted investments 28,652 31,286 Impairment in value of unquoted investments (26,366) (26,923) 2,286 4,363 Total investments 16,190 21,

61 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: Group Note $ 000 $ 000 At beginning of the year 28,900 28,587 Charge to profit or loss 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 26,215 Charge to profit or loss Utilised (500) Disposal (325) Translation difference (149) (39) At end of the year 26,366 26,

62 16. Intangible assets (a) Goodwill Group Note $ 000 $ 000 Cost At beginning of the year 508, ,692 Acquisition of subsidiaries in prior year, as previously reported 14,904 Finalisation of purchase price allocation 1,591 Acquisition of subsidiaries in prior year, as restated 16,495 Acquisition of subsidiaries in current year 104 Finalisation of purchase price allocation in current year (1,336) Acquisition of non-controlling interests in subsidiaries 342 1,239 Goodwill written off (1,599) Translation difference (39,125) (11,510) At end of the year 468, ,317 Impairment At beginning of the year 15,490 15,544 Impairment for the year 5 3,741 Translation difference (170) (54) At end of the year 19,061 15,490 Net book value 449, ,827 In prior year, the Group wrote-off goodwill amounting to $1,599,000 for a CGU due to closure of a plant. 182

63 16. Intangible assets (continued) (b) Other intangible assets Note Dealer network Development expenditure Commercial and intellectual property rights Film cost inventory Brands Others Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group Cost At ,344 6,341 67,740 10,250 84,844 1, ,977 Additions 4,629 1,333 2,126 8,088 Acquisition of subsidiaries in prior year, as previously reported 2,032 1, ,400 5,244 Finalisation of purchase price allocation (4) Acquisition of subsidiaries in prior year, as restated 2,028 1, ,400 5,270 Translation difference (212) (27) (1,359) (1,748) 37 (3,309) At and at ,132 12,971 68,080 11,583 83,239 5, ,026 Additions 3,231 1, ,707 Finalisation of purchase price allocation in current year 1,336 1,336 Write-off (2,153) (2,153) Translation difference (754) (434) (5,024) (6,981) 7 (13,186) At ,378 13,615 64,312 11,803 76,258 6, ,730 Accumulated amortisation At ,454 1,598 17, ,453 1,041 27,035 Amortisation for the year 5 1, , ,323 1,427 11,773 Impairment loss Translation difference (123) (19) (522) (89) (753) At and ,683 2,326 24, ,687 2,468 38,452 Amortisation for the year 5 1,266 1,155 6, , ,090 Impairment loss ,123 4,938 Write-off (2,063) (2,063) Translation difference (454) (118) (2,017) (380) (2,969) At ,495 2,115 29,453 4,880 4,565 2,940 49,448 Net book value At ,883 11,500 34,859 6,923 71,693 3, ,282 At ,449 10,645 43,536 10,839 79,552 2, ,

64 16. Intangible assets (continued) (c) Total intangible assets Group $ 000 $ 000 Net book value 580, ,401 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: Group $ 000 $ 000 ST Aerospace Solutions (Europe) A/S 1,987 2,194 ST Aerospace Academy Pte. Ltd. (formerly known as ST Aerospace Training Academy Pte. Ltd.) and its subsidiaries ST Aviation Training Academy (Australia) Pty Ltd Pacific Flight Services Pty Ltd Precision Products Singapore Pte Ltd * 2,262 3,598 Antycip Simulation Limited and its subsidiary 2,781 3,158 Brightspot Interactive Learning Pte. Ltd. and its subsidiary 2,245 DataMark Technologies Pte Ltd Knowledge Alive Pte. Ltd. and its subsidiary 104 MÄK Technologies, Inc. 22,603 24,271 Parallel Limited * 5,365 6,036 PM-B Pte Ltd and its subsidiaries 11,705 11,665 STELCOMMS Pte. Ltd. 5 5 STELOP Pte. Ltd. 1,732 1,732 Telematics Wireless Ltd. and its subsidiary 77,416 84,383 VT idirect, Inc. 154, ,882 Jiangsu Huatong Kinetics Co., Ltd. and Jiangsu Huaran Kinetics Co., Ltd. 5,690 6,002 STAR Automotive Center (Zhejiang) Co., Ltd. 982 STAR Automotive Center (Guangzhou) Co., Ltd. 498 VT LeeBoy, Inc. 94, ,945 VT Hackney, Inc. (formerly known as VT Specialized Vehicles Corporation) 34,599 37,714 Miltope Corporation 33,267 36, , ,827 * During the year, the purchase price allocation to goodwill, intangible assets and other assets and liabilities have been finalised. 184

65 16. Intangible assets (continued) 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 Group Note $ 000 $ 000 At cost At beginning of the year 3,244 33,722 Disposal (2,178) Translation difference (199) (83) Transfer to property, plant and equipment 12 (28,217) At end of the year 3,045 3,244 Accumulated depreciation At beginning of the year 1,235 16,351 Depreciation charge for the year Translation difference (101) (42) Disposal (825) Transfer to property, plant and equipment 12 (14,617) At end of the year 1,379 1,235 Net book value 1,666 2,009 The property rental income of the Group for the year ended 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 rentalearning investment properties amounted to $9,000 (2009: $60,000). The fair value of the investment properties as at 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,

66 17. Investment properties (continued) The investment property held by the Group as at end of the year is as follows: Location Existing Use Tenure Land area (sq. m.) People s Republic of China No. 555 Kanghua Road, Kangqiao Industrial Zone, Shanghai Industrial building 50 years from to , Long-term receivables Group Company $ 000 $ 000 $ 000 $ 000 Housing and car loans and advances to staff 1, Deposits 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, Receivable: Within 1 year 10,428 7, After 1 year 36,375 29,487 46,803 37,

67 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, 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) (c) 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. 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 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: Group $ 000 $ 000 At beginning of the year 9,015 9,031 Translation difference (58) (16) At end of the year 8,957 9,

68 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 investment in finance lease Unearned interest Present value of minimum lease receivables Allowance for doubtful lease receivables Net investment in finance lease $ 000 $ 000 $ 000 $ 000 $ 000 The Group 2010 Within 1 year 17, ,621 (2,142) 14,479 2 to 5 years 6, ,448 5,448 More than 5 years 1, ,104 1,104 7, ,552 6, ,465 1,292 23,173 (2,142) 21,031 Within 1 year 17, ,202 (2,816) 14,386 2 to 5 years 4, ,745 3,745 More than 5 years 1, ,482 1,482 5, ,227 5,227 23,778 1,349 22,429 (2,816) 19,613 Group Note $ 000 $ 000 Net investment in finance lease Not past due and not impaired 14,699 15,535 Past due and not impaired 6,332 4,078 21,031 19,613 Individually assessed Doubtful lease receivables 2,142 2,816 Allowance 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) 1,138 Allowance utilised (8) Translation difference (131) (75) At end of the year 2,142 2,

69 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: Group $ 000 $ days 3,109 1, days 1, days >360 days ,332 4, Deferred tax assets Group $ 000 $ 000 At beginning of the year 127, ,128 Recognised in profit or loss 5,659 1,442 Effect of reduction in tax rate (168) (2,236) Acquisition of subsidiaries 251 Disposal 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) At end of the year 118, ,196 The deferred tax assets arise as a result of: Unabsorbed capital allowances and unutilised tax losses 3,149 41,277 Allowance for doubtful debts and inventory obsolescence 15,730 15,788 Provisions 88,986 63,692 Intangible assets 405 (54) Other temporary differences 2,672 1,114 Changes in fair value of available-for-sale financial assets 51 Changes in fair value of derivative financial instruments designated in cash flow hedges 7,852 5, , ,

70 21. Inventories and work-in-progress Group $ 000 $ 000 Inventories of equipment and spares 575, ,342 Work-in-progress in excess of progress billings Work-in-progress, including profits recognised 3,179,861 2,600,296 Progress billings (2,284,747) (1,745,342) 895, ,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-progress Work-in-progress, including profits recognised 2,043,709 2,304,408 Progress 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 Group $ 000 $ 000 Not past due and not impaired 566, ,959 Past due and not impaired 256, , , ,195 Collectively assessed Impaired receivable (Gross) 34,816 34,667 Allowance for doubtful debts (10,159) (7,786) 24,657 26,881 Individually assessed Impaired receivable (Gross) 79, ,183 Allowance for doubtful debts (75,635) (98,542) 4,291 12,641 Unbilled receivable 169, ,109 Allowance for unbilled receivable (1,380) (1,854) Trade debtors, net 1,019,805 1,061,

71 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) denominated in US dollars $29,258,000 (2009: $11,060,000) denominated in Euro $27,845,000 (2009: $22,180,000) denominated in GBP Movements in allowance for doubtful debts are as follows: Group Note $ 000 $ 000 At beginning of the year 106,328 81,832 Charge to profit or loss ,084 Bad debts written off against allowance (13,478) (10,430) Acquisition of subsidiaries 21 8,384 Translation difference (7,544) (1,542) At end of the year 85, ,328 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 At end of the year 1,380 1,854 Ageing of receivable that are past due but not impaired: 1-90 days 180, , days 40,972 47, days 21,833 36,338 >360 days 13,195 32, , ,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. 191

72 23. Amounts due from related parties Group Company $ 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, ,213 24,492 6,122 3,271 Non-trade: Subsidiaries* 1 790, ,455 Associates* 2 2,572 3,270 Joint ventures* 3 7,985 7,891 10,557 11, , ,455 Allowance for doubtful debts (2,521) (4,237) (35,813) (28,216) Amounts due from related parties 29,249 31, , ,510 Receivable: Within 1 year 21,872 24, , ,022 After 1 year 7,377 7,313 5,488 29,249 31, , ,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. * 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 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

73 23. Amounts due from related parties (continued) Movements in allowance for doubtful debts are as follows: Group Company $ 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 1,782 Translation difference (152) (16) (191) (54) At end of the year 2,521 4,237 35,813 28, Advances and other debtors Group Company Note $ 000 $ 000 $ 000 $ 000 Advance payments to suppliers 403, ,231 Deposits 12,346 15, Prepayments 27,508 25, Interest receivables 3,193 4, Other recoverables 20,559 19, ,352 Non-trade debtors 60,785 33, Derivative financial instruments 48 62,055 10, , ,212 1,281 4, Short-term investments Group Note $ 000 $ 000 Quoted investments Equity shares, at fair value (Fair value through profit or loss) 534 1,710 Unquoted investments Bonds, at fair value (Available-for-sale) Interest rate: 0.43% to 6.15% (2009: 4.25% to 5.88%) per annum Maturity: to (2009: to ) , ,541 Bonds, at amortised cost (Held-to-maturity) Interest rate: nil (2009: 2.02% to 3.10% per annum) Maturity: nil (2009: to ) 38, , , , ,

74 26. Cash and cash equivalents Group Company $ 000 $ 000 $ 000 $ 000 Fixed deposits with financial institutions 1,142,427 1,006, , ,073 Cash and bank balances 449, ,230 16,944 47,911 Bank balances and other liquid funds 1,591,727 1,513, , ,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: $355,011,000 (2009: $463,553,000) denominated in US dollars $113,067,000 (2009: $158,060,000) denominated in Euro $66,238,000 (2009: $21,377,000) denominated in GBP 27. Creditors and accruals Group Company Note $ 000 $ 000 $ 000 $ 000 Trade creditors 675, ,311 Non-trade creditors 48,559 43,026 3,543 4,263 Purchase of property, plant and equipment 12,062 2,699 Accrued operating expenses 821, ,904 25,504 35,739 Accrued interest payable 16,202 19,388 Other long-term payables, current 37 1,333 2,904 Derivative financial instruments 48 13,920 4, ,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: $79,072,000 (2009: $65,293,000) denominated in US dollars $26,496,000 (2009: $26,578,000) denominated in Euro $1,597,000 (2009: $9,462,000) denominated in GBP 194

75 28. Amounts due to related parties Group Company $ 000 $ 000 $ 000 $ 000 Trade: Subsidiaries 2,880 1,644 Associates 2,763 3,175 Joint ventures 4, Related corporations 770 1, ,496 5,079 2,880 1,648 Non-trade: Subsidiaries * 445,116 54,000 8,496 5, ,996 55,648 Payable: Within 1 year 8,294 5, ,996 1,648 After 1 year ,000 54,000 8,496 5, ,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. 195

76 29. Provisions Group Note $ 000 $ 000 Provision for: Warranties 188, ,740 Liquidated damages 12,005 8,643 Foreseeable losses 10,283 13, , ,851 (a) Movements in provision for warranties are as follows: At beginning of the year 189, ,313 Charge to profit or loss 5 17,069 34,903 Provision utilised (14,955) (14,546) Translation difference (3,752) (1,156) Acquisition of subsidiaries 226 At end of the year 188, ,740 (b) Movements in provision for liquidated damages are as follows: At beginning of the year 8,643 5,983 Charge to profit or loss 5 5,937 2,901 Provision utilised (2,478) (160) Translation difference (97) (81) At end of the year 12,005 8,643 (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) 4,392 Provision utilised (308) Translation difference (965) (43) At end of the year 10,283 13,

77 30. Short-term bank loans Effective Group interest rate Maturity % $ 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) (b) (c) (d) (e) loans amounting to $43,110,000 (2009: $68,478,000) which are unsecured; loan amounting to $976,000 (2009: $1,030,000) which is guaranteed by a standby letter of credit; 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; loans amounting to $11,712,000 (2009: $9,266,000) which are secured by a subsidiary s land and buildings; and 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 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. 197

78 31. Lease obligations (continued) The obligations under the finance leases to be paid by the subsidiaries are as follows: Minimum lease Present value of payment Interest payment $ 000 $ 000 $ 000 The Group to 5 years 6,983 (359) 6,624 Repayable: Within 1 year 2,741 After 1 year 3, ,624 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 Group $ 000 $ 000 Government grants 7,916 9,144 Deferred rents 5,495 5,402 13,411 14,

79 33. Deferred tax liabilities Group Company $ 000 $ 000 $ 000 $ 000 At beginning of the year 58,355 62, Recognised in profit or loss (5,569) (878) Effect of reduction in tax rate (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, 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, Allowance for doubtful debts and inventory obsolescence (5,026) (9,227) Other temporary differences (6,088) 2, Changes 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,

80 34. Long-term bank loans Effective Group interest rate Maturity % $ 000 $ 000 Bank loans 0.61% to 5.76% Up to , ,854 Repayable: Within 1 year 307,047 After 1 year 327, , , ,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) (b) 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 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) (ii) (iii) 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. 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 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 (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. 200

81 36. Bonds Group $ 000 $ 000 Principal 644, ,500 Unamortised discount (3,392) (4,038) 641, ,462 Unamortised 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, % 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 Group Note $ 000 $ 000 Within 1 year 27 1,333 2,904 After 1 year 2,500 1,453 3,833 4,357 Included in the other long-term payables are: (a) (b) 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 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. 201

82 38. Share capital Group and Company $ 000 $ 000 Issued and fully paid At beginning of the year 3,010,456,133 (2009: 2,998,603,162) ordinary shares 611, ,614 Issued during the year 27,109,612 (2009: 11,852,971) ordinary shares 65,782 25,194 At end of the year 3,037,565,745 (2009: 3,010,456,133) ordinary shares 677, ,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 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) (c) 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. The options granted expire after 5 years for non-executive directors, and 10 years for the employees of the Company and its subsidiaries. 202

83 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 $ ,006, , , N 1,733, N 1,799, N 1,033, N 539, N 594, N 936, N 1,125, N 1,596, P 5, N 1,888, ND 243, N 2,236, ND 262, N 1,404, ND 89, N 2,320, ND 10, N 474, N 10,

84 39. Share-based payment arrangements (continued) 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 shares ESOS At beginning of the year 7,352,103 12,196,551 Exercised (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 ESOP At beginning of the year 104,356, ,205,701 Exercised (18,304,920) (5,875,889) Lapsed (1,760,623) (1,973,768) At end of the year 84,290, ,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 of grant Balance as at Options lapsed Options exercised Balance as at No. of holders at Exercise price $ Exercisable period ,299,313 1,292,760 5,006, to , , , to ,665 20, , to Total 7,352,103 1,675,760 5,676,

85 39. Share-based payment arrangements (continued) (ii) Details of share options (continued) 2010 Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows: Date of grant Balance as at Options lapsed Options exercised Balance as at No. of holders at Exercise price $ Exercisable period ,390,709 10,035 1,733,758 2,646, * to ,816, ,799,021 4,017, * to ,080,583 1,033,573 3,047, * to ,177, ,193 1,638, * to ,278, ,459 1,684, * to ,972 4, to ,166, ,887 2,230, * to ,754 8, to ,421,848 1,125,943 3,295, * to ,426 11, to ,098,900 2,590 1,596,195 4,500, * to ,426 5,000 11, to ,734,409 2,600 1,888,521 5,843, * to ,125 11, , to ,426 16, to ,917,974 18,681 2,236,764 7,662, * to ,793 11, , to ,426 21, to ,411, ,213 1,404,379 9,815, * to ,750 89, , # to ,835, ,437 2,320,502 10,293,383 1,083* to ,625 10, , # to ,428, , ,798 13,359,023 1,329* to , , # to ,585, ,227 10,134 12,879,983 1,413* to , , # to 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 205

86 39. Share-based payment arrangements (continued) (ii) Details of share options (continued) 2009 Details of share options to subscribe for ordinary shares pursuant to ESOS are as follows: Date of grant Balance as at Options lapsed Options exercised Balance as at No. of holders at Exercise price $ Exercisable period ,334, ,600 1,066, to , , , to ,244,291 30,000 2,914,978 6,299, * to ,625 55, , to ,665 45, , to Total 12,196, ,510 4,339,938 7,352,

87 39. Share-based payment arrangements (continued) (ii) Details of share options (continued) 2009 (continued) Details of share options to subscribe for ordinary shares pursuant to ESOP are as follows: Date of grant Balance as at Options lapsed Options exercised Balance as at No. of holders at Exercise price $ Exercisable period ,571,626 31, ,380 4,390, * to ,045,717 71, ,265 5,816, * to ,435,553 35, ,631 4,080, * to ,406,349 14, ,977 2,177, * to ,522, ,873 2,278, * to ,972 4, to ,518,273 1, ,356 3,166, * to ,754 8, to ,183,441 16, ,111 4,421, * to , , to ,426 11, to ,112,644 30, ,764 6,098, * to ,375 11, , to ,426 16, to ,807,062 92, ,651 7,734, * to ,750 54, , # to ,426 16, to ,987, , ,465 9,917, * to ,043 25, , # to ,426 21, to ,771, ,424 80,797 11,411,801 1,201* to , , # to ,458, , ,509 12,835,322 1,308* to , , # to ,821, ,697 4,485 14,428,149 1,408* to , , # to ,042, ,978 13,585,344 1,509* to , , # to Total 112,205,701 1,973,768 5,875, ,356,044 * Includes 1 Executive Director of the Company # Includes Directors of the Company and its subsidiaries 207

88 39. Share-based payment arrangements (continued) (iii) Details of share options exercised No. of shares Exercise Proceeds from price share issue Share price $ $ 000 $ 2010 January to March 11,030, , April to June 5,044, , July to September 3,885, , October to December 4,020, , ,981, January to March 1,921, , April to June 1,393, , July to September 1,668, , October to December 5,232, , ,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 and 31 December

89 39. Share-based payment arrangements (continued) (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 grant Total Number of performance shares At grant date 1,532,000 1,687,000 1,632,000 4,851,000 Lapsed (132,844) (307,984) (316,238) (757,066) Outstanding as at ,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 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 grant Market conditions Volatility of MSCI Index (%) Volatility of Defensive Index (%) Volatility of the Company s shares (%) Correlation of volatility of Defensive Index/ MSCI Index vs. the Company (%) Risk-free rate (%) Share price ($) Cost of equity (%) Dividend yield (-- Management's forecast in line with dividend policy --) 209

90 39. Share-based payment arrangements (continued) (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. Date of grant Number of restricted shares as at grant date Number of restricted shares lapsed Number of restricted shares released Balance outstanding as at July , , , , November , , , March ,603,183 3,176,292 2,285,236 2,141, March , ,379 76,757 32, March ,286, ,072 7,504, March ,500 78,958 50,553 80, March ,547, ,394 8,076, March , ,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 grant Volatility of the Company s shares (%) Risk-free rate (%) Share price ($) Dividend yield (--Management's forecast in line with dividend policy--) 210

91 40. Capital reserves Included in capital reserves are: (a) (b) 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 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 Foreign currency translation reserve Statutory reserve Fair value reserve Share-based payment reserve Total $ 000 $ 000 $ 000 $ 000 $ 000 The Group At (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 17,545 Transfer from unappropriated profit to statutory reserve At (97,365) 1,206 1,365 72,001 (22,793) 211

92 41. Other reserves (continued) Foreign currency translation reserve Premium paid on acquisition of non-controlling Statutory reserve Fair value reserve Share-based payment reserve interests Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group At (97,365) 1,206 1,365 72,001 (22,793) Other comprehensive income: Net fair value changes on available-forsale 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, (87,087) Reclassification adjustment of foreign currency translation reserve to profit or loss arising from disposal of a subsidiary 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 12,068 Acquisition of non-controlling interests in subsidiaries (5,318) (5,318) Transfer from unappropriated profit to statutory reserve At (185,708) 1,935 (10,914) 76,741 (5,234) (123,180) Group $ 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) 8,245 Net 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) 212

93 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, 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. 213

94 42. Retained earnings Group $ 000 $ 000 Retained by: The Company 487, ,437 Subsidiaries 353, ,933 Associates and joint ventures 109,064 95, , , Dividends Group and Company $ 000 $ 000 Final dividend paid in respect of the previous financial year of 4.0 cents (2009: 4.0 cents) per share 120, ,944 Special dividend paid in respect of the previous financial year of 6.28 cents (2009: 8.8 cents) per share 188, ,877 Interim dividend paid in respect of the current financial year of 3.0 cents (2009: 3.0 cents) per share 90,955 90, , ,951 Additional final dividend paid in respect of the previous financial year due to issue of shares before books closure date 1, , ,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. 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: Group $ 000 $ 000 Sales and services rendered 25,577 23,636 Purchases and services received 20,300 24,524 Property, plant and equipment purchased Interest income 1,823 Dividend income Rental income 2,241 3,102 Rental expenses 5,290 4,

95 45. Commitments (a) Capital commitments Group $ 000 $ 000 Capital expenditure contracted but not provided for in the financial statements 99, ,940 (b) Leases Future minimum lease payments under non-cancellable operating leases are as follows: Group $ 000 $ 000 Within 1 year 54,194 44,992 2 to 5 years 121,706 86,479 After 5 years 132, , , ,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: Group $ 000 $ 000 Within 1 year 1,525 1,969 2 to 5 years 2,501 3,423 After 5 years 6,824 7,276 10,850 12,

96 45. Commitments (continued) (d) Investments (i) (ii) (iii) As at, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.4 million (2009: $0.4 million) in subsidiaries. As at, 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. As at, 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. 216

97 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 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. Land Aerospace Electronics Systems Marine Others Elimination Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Turnover External sales 1,870,497 1,389,084 1,505,459 1,044, ,155 5,984,473 Inter-segment sales 4,498 39,383 12, ,847 (84,247) 1,874,995 1,428,467 1,518,406 1,044, ,002 (84,247) 5,984,473 Reportable segment profit before taxation, other income and finance costs, net 233, , , ,389 (44,795) 46, ,683 Other income, net 9,350 5,915 17,113 7,296 41,622 (41,298) 39,998 Finance income 15,194 1,359 5,603 11, ,392 (532,813) 44,091 Finance 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 44,119 Profit from operations before taxation 262, , , , ,246 (475,496) 627,475 Taxation (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, ,708 90,255 89, ,862 (476,644) 491,005 Other assets 2,360,809 1,422,289 1,757, ,374 3,863,429 (3,148,019) 6,987,038 Associates and joint ventures 128,078 11, ,633 2,089 18,924 4, ,171 Segment assets 2,488,887 1,433,638 1,873, ,463 3,882,353 (3,143,921) 7,268,209 Segment liabilities 2,066,800 1,311,985 1,732, ,017 2,283,627 (2,495,036) 5,541,375 Capital expenditure 185,863 25,252 92,971 23,786 8,733 (1,009) 335,596 Depreciation and amortisation 66,035 22,626 29,409 10,557 3,418 (15) 132,030 Impairment loss/(write-back of impairment) 162 7,467 1, (118) 9,082 Other non-cash expenses 7, ,

98 46. Segment information (continued) (a) Analysis by business segments (continued) Land Aerospace Electronics Systems Marine Others Elimination Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Turnover External sales 1,872,124 1,370,781 1,167, , ,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, , ,185 (92,982) 5,547,787 Reportable segment profit before taxation, other income and finance costs, net 199, ,178 73,701 87,960 (22,783) 40, ,413 Other income, net 20,434 14,428 22,258 9,767 40,477 (39,793) 67,571 Finance income 7,971 1,693 7,272 7, ,111 (401,083) 16,322 Finance costs (34,071) (8,934) (12,310) (3,613) (39,159) 35,461 (62,626) Share of results of associates and joint ventures 34, , (1,413) 38,879 Profit from operations before taxation 228, ,276 95, , ,646 (366,320) 546,559 Taxation (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, ,294 (365,928) 443,930 Other assets 1,977,189 1,467,393 1,675, ,728 2,960,721 (2,191,144) 6,612,273 Associates and joint ventures 125,601 11, ,504 1,914 19,092 (292) 273,379 Segment assets 2,102,790 1,478,953 1,790, ,642 2,979,813 (2,191,436) 6,885,652 Segment liabilities 1,645,392 1,351,017 1,616, ,141 1,519,116 (1,544,265) 5,209,456 Capital expenditure 141,805 29, ,827 20,590 5,218 (3,505) 302,347 Depreciation and amortisation 89,089 25,847 28,383 16,654 2, ,758 (Write-back of impairment)/ impairment loss (44) 1, (93) 1,415 Other non-cash expenses 10, ,751 12,

99 46. Segment information (continued) (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 $ 000 Turnover 2009 $ $ 000 Non-current assets 2009 $ 000 Asia 4,188,454 3,790,209 1,184,597 1,001,044 USA 1,447,716 1,361, , ,791 Europe 286, , , ,640 Others 62,188 50, , ,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. Turnover $ 000 $ 000 Asia 3,328,265 3,093,411 USA 1,552,782 1,430,243 Europe 754, ,974 Others 348, ,159 5,984,473 5,547, 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

100 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 loss 200bp 200bp increase decrease $ 000 $ 000 The Group 2010 Bank loans and loans payable (1,386) 1,386 Loans receivable 931 (931) 2009 Bank loans and loans payable (1,224) 1,224 Loans 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. 220

101 47. Financial risk management objectives and policies (continued) 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 loss 10% increase 10% decrease 10% increase 10% decrease $ 000 $ 000 $ 000 $ 000 The Group 2010 Quoted investments 1,390 (1,390) 53 (53) 2009 Quoted 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. 221

102 47. Financial risk management objectives and policies (continued) Liquidity risk (continued) Within More than Total 1 year 2 to 5 years 5 years $ 000 $ 000 $ 000 $ 000 The Group 2010 Bank loans 697, , ,226 17,892 Bonds 644, ,500 Other loans 2,860 1, Lease obligations 6,983 2,863 4,120 Other long-term payables 3,833 1,333 1,500 1,000 Trade 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, ,952 30,220 Cross currency swap - gross receipts 248, ,481 Interest rate swaps - settled net 2,748 2, Bank loans 732,364 83, ,854 Bonds 702, ,500 Other loans 2, , Lease 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, ,675 10,459 Cross currency swap - gross receipts 300, ,000 Interest rate swaps - settled net 3,321 3,

103 47. Financial risk management objectives and policies (continued) Liquidity risk (continued) Within No specific Total 1 year terms $ 000 $ 000 $ 000 The Company 2010 Creditors and accruals 29,047 29,047 Amounts due to related parties 447, ,996 54,000 Derivative financial instruments: Forward currency contracts - gross payments Creditors 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, 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. Group $ 000 $ 000 Aerospace 263, ,300 Electronics 275, ,112 Land Systems 201, ,733 Marine 88,878 81,802 Others 22,164 27, , ,

104 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 in active markets for identical instruments (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Total $ 000 $ 000 $ 000 $ 000 The Group 2010 Financial Assets Available-for-sale - Equity investments (quoted) 15 13,904 13,904 - Venture capital funds and limited partnership Bonds (unquoted) , ,930 Fair value through profit or loss - Equity investments (quoted) Derivatives - Forward currency contracts 19,252 19,252 - Cross currency swap 43,369 43,369 14, , ,990 Financial Liabilities Derivatives - Forward currency contracts 3,116 3,116 - Interest rate swaps 14,513 14,513 - Embedded derivatives 20,989 20,989 38,618 38, Financial Assets Available-for-sale - Equity investments (quoted) 15 17,101 17,101 - Venture capital funds and limited partnership 15 1,342 1,342 - Bonds (unquoted) , ,541 Fair value through profit or loss - Equity investments (quoted) 25 1,710 1,710 Derivatives - Forward currency contracts 6,958 6,958 - Cross currency swap 6,405 6,405 - Embedded derivatives 15,918 15,918 18, ,822 1, ,975 Financial Liabilities Derivatives - Forward currency contracts 3,820 3,820 - Interest rate swaps 16,539 16,539 - Embedded derivatives 1,127 1,127 21,486 21,

105 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) (b) (c) Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and 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). Group $'000 $'000 Equity instruments (unquoted) Opening balance 1,342 1,804 Total gain or loss: - recognised in profit or loss, in finance costs, net 1, recognised in other comprehensive income (1,269) (471) Purchases Sales (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,

106 48. Fair value of financial instruments (continued) 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 approximates $675.2 million (2009: $704.1 million) and is determined by reference to market value. 226

107 48. Fair value of financial instruments (continued) Set out below is a comparison by category of carrying amounts of all the Group s financial instruments that are carried in the financial statements: Classification of financial instruments Loans and receivables Fair value through profit or loss Derivatives used for hedging Availablefor-sale Liabilities at amortised cost $ 000 $ 000 $ 000 $ 000 $ 000 The Group 2010 Assets Investments ,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 ,930 Bank balances and other liquid funds 1,591,727 2,638,287 2,359 60, ,420 Liabilities Creditors 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,

108 48. Fair value of financial instruments (continued) Classification of financial instruments (continued) Loans and receivables Fair value through profit or loss Derivatives used for hedging Availablefor-sale Held-tomaturity Liabilities at amortised cost $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group 2009 Assets Investments 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, ,797 Short-term investments 1, ,541 38,574 Bank balances and other liquid funds 1,513,758 2,602,491 6,686 24, ,819 38,574 Liabilities Creditors 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 , ,692 2,829,

109 48. Fair value of financial instruments (continued) Classification of financial instruments (continued) Loans and Fair value through Liabilities receivables profit or loss at amortised cost $ 000 $ 000 $ 000 The Company 2010 Assets Amounts 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 Liabilities Creditors and accruals 6 29,047 Amounts due to related parties 447, , Assets Amounts due from related parties 335,510 Advances and other debtors 4,176 Long-term receivables, current 90 Bank balances and other liquid funds 241, ,760 Liabilities Creditors and accruals 40,002 Amounts due to related parties 55,648 95,

110 48. Fair value of financial instruments (continued) Derivative financial instruments Note Contractual/ Estimated fair value Contractual/ Estimated fair value notional notional amount Asset Liability amount Asset Liability $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Cash flow hedges Forward currency contracts: - to hedge confirmed sales in foreign currencies (a)(i) 38, (127) 186,931 2,497 (2,386) - to hedge firm purchase commitments in foreign currencies (a)(i) 63, (1,077) 39, (533) - to hedge accounts receivable commitments in foreign currencies (a)(i) 2, to hedge accounts payable commitments in foreign currencies (a)(i) 3, (24) Interest rate swaps (b) 557,800 (14,513) 581,000 (16,539) Cross currency swap (c) 248,481 43, ,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, (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) 230

111 48. Fair value of financial instruments (continued) (a) Forward currency contracts (i) As at, 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, 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, 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, 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 % per annum to an equivalent Euro bank loan (approximately Euro 112,300,000) with floating Euro interest at EURIBOR + 1.2% per annum. 231

112 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 and 31 December 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. Group $ 000 $ 000 Gross debt Bank loans 697, ,364 Bonds 641, ,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 1,438,707 Shareholders funds Share capital 677, ,808 Other reserves (6,857) 93,530 Retained earnings 950, ,764 1,621,535 1,568,102 Non-controlling interests 105, ,094 1,726,834 1,676,196 Gross debt/equity ratio Cash and cash equivalents 1,591,727 1,513,757 Short-term investments 198, ,825 1,790,191 1,749,582 Gross debt (excluding bank overdrafts) (1,348,161) (1,438,706) Net cash position 442, ,

113 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) (b) 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 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: Note As previously Amount As reported reclassified reclassified $ 000 $ 000 $ 000 Consolidated Income Statement (a) Other operating income, net 21,413 (21,413) Other income, net 55,974 11,597 67,571 Finance income 16,322 16,322 Finance costs (56,120) (6,506) (62,626) Balance Sheet (b) Property, plant and equipment 1,166,677 (432) 1,166,245 Intangible assets 642,784 1, ,401 Long-term receivables, non-current 36,800 (7,313) 29,487 Amounts due from related parties, non-current 7,313 7,313 Trade debtors 1,062,227 (255) 1,061,972 Amounts due from related parties, current 4,082 20,021 24,103 Advances and other debtors 388,226 (20,014) 368,212 Bank balances and other liquid funds 1,513, ,513,758 Creditors and accruals 1,392,392 (4,042) 1,388,350 Amounts due to related parties, current 5,079 5,079 Provision for taxation 178,734 (10) 178,724 Deferred tax liabilities 58, , 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. 233