136 ST ENGINEERING / ABOVE & BEYOND

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1 136 ST ENGINEERING / ABOVE & BEYOND Independent auditors report Members of the Company Singapore Technologies Engineering Ltd Report on the financial STATEMENTS We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the Company ) and its subsidiaries (collectively the Group ), which comprise the balance sheets of the Group and the Company as at, the statements of changes in equity of the Group and the Company, the consolidated income statement, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 137 to 269. Management s responsibility for the financial STATEMENTS Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act ) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at, the changes in equity of the Group and of the Company, and the results and cash flows of the Group for the year ended on that date. Report on other legal and REGULATORY requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. KPMG LLP Public Accountants and Chartered Accountants Singapore 26 February 2015

2 137 ANNUAL REPORT 2014 Consolidated Income Statement for the year ended (Currency - Singapore dollars) Group Note $ 000 $ 000 Revenue 4 6,539,433 6,633,152 Cost of sales (5,220,934) (5,201,083) Gross profit 1,318,499 1,432,069 Distribution and selling expenses (180,309) (175,908) Administrative expenses (467,687) (466,598) Other operating expenses (115,530) (116,348) Profit from operations 5 554, ,215 Other income 45,175 40,095 Other expenses (5,000) (5,907) Other income, net 8 40,175 34,188 Finance income 43,550 68,911 Finance costs (45,197) (77,704) Finance costs, net 9 (1,647) (8,793) Share of results of associates and joint ventures, net of tax 57,182 31,082 Profit before taxation 650, ,692 Taxation 10 (113,693) (138,145) Profit for the year 536, ,547 Attributable to: Shareholders of the Company 531, ,834 Non-controlling interests 5,038 10, , ,547 Earnings per share (cents) 11 Basic Diluted The accompanying notes are an integral part of the financial statements.

3 138 ST ENGINEERING / ABOVE & BEYOND Consolidated Statement of Comprehensive Income for the year ended (Currency - Singapore dollars) Group Note $ 000 $ 000 Profit for the year 536, ,547 Other comprehensive income Items that are or may be reclassified subsequently to profit or loss: Net fair value changes on available-for-sale financial assets 36 (2,020) (7,931) Net fair value changes on cash flow hedges (58,327) 48,592 Share of net fair value changes on cash flow hedges of an associate (9,891) Foreign currency translation differences 19,968 45,993 Share of foreign currency translation differences of associates and joint ventures 36 1,336 10,395 Reclassification of foreign currency translation reserve to profit or loss arising from disposal of foreign entities (205) Other comprehensive income for the year, net of tax (48,884) 96,844 Total comprehensive income for the year, net of tax 488, ,391 Total comprehensive income attributable to: Shareholders of the Company 482, ,953 Non-controlling interests 44 5,584 13, , ,391 The accompanying notes are an integral part of the financial statements.

4 139 ANNUAL REPORT 2014 Balance Sheets as at (Currency - Singapore dollars) Group Company Note $ 000 $ 000 $ 000 $ 000 ASSETS Non-current assets Property, plant and equipment 12 1,577,523 1,520,404 4,568 1,434 Subsidiaries 13 1,197, ,728 Associates and joint ventures , ,139 17,657 17,657 Investments , ,033 Intangible assets , ,408 Long-term receivables, non-current 17 2,735 12,528 Finance lease receivables, non-current ,679 Deferred tax assets ,318 95,634 7,000 7,200 Amounts due from related parties, non-current 22 4,806 7,430 50, ,874 Derivative financial instruments, non-current 43 24,263 39, ,993,203 2,945,233 1,277,022 1,212,970 Current assets Inventories and work-in-progress 20 1,802,073 1,807,509 Trade receivables 21 1,319,101 1,221,937 Amounts due from related parties, current 22 66,382 40, , ,498 Advances and other receivables , ,210 3,597 9,827 Long-term receivables, current 17 11,375 12,508 Finance lease receivables, current 18 6,872 16,447 Short-term investments , ,581 Bank balances and other liquid funds 25 1,470,723 1,930, , ,124 5,326,103 5,761, , ,449 Total assets 8,319,306 8,706,641 2,182,565 2,197,419 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 809, ,895 Trade payables and accruals, current 26 1,667,180 1,604,740 26,961 25,017 Amounts due to related parties, current 27 29,364 24, ,988 98,946 Provisions , ,910 Progress billings in excess of work-in-progress , ,725 Provision for taxation 164, ,139 8,112 11,666 Short-term bank loans 29 29, ,842 Long-term bank loans, current 29 43, ,789 Lease obligations, current 29 1,126 1,321 Other loans, current ,715,944 4,093, , ,629 Net current assets 1,610,159 1,667, , ,820

5 140 ST ENGINEERING / ABOVE & BEYOND Balance Sheets as at (Currency - Singapore dollars) Group Company Note $ 000 $ 000 $ 000 $ 000 Non-current liabilities Advance payments from customers, non-current 899, ,496 Trade payables and accruals, non-current , ,701 17,006 18,817 Deferred tax liabilities ,484 94,867 Bonds , ,283 Long-term bank loans, non-current , ,867 Lease obligations, non-current 29 17,547 18,150 Other loans, non-current Deferred income 30 98,759 83,695 Other long-term payables, non-current 31 1,000 1,500 Derivative financial instruments, non-current 43 11,260 22,515 Amounts due to related parties, non-current 27 1, , ,192 2,338,752 2,353, , ,009 Total liabilities 6,054,696 6,446, , ,638 Net assets 2,264,610 2,259,914 1,526,085 1,489,781 Share capital and reserves Share capital , , , ,611 Treasury shares 33 (6,529) (6,529) Capital reserves , ,323 Other reserves 36 (92,057) (44,651) 74,865 72,754 Retained earnings 37 1,225,040 1,191, , ,416 Equity attributable to owners of the Company 2,132,203 2,116,241 1,526,085 1,489,781 Non-controlling interests , ,673 2,264,610 2,259,914 1,526,085 1,489,781 Total equity and liabilities 8,319,306 8,706,641 2,182,565 2,197,419 The accompanying notes are an integral part of the financial statements.

6 141 ANNUAL REPORT 2014 Statements of Changes in Equity for the year ended (Currency - Singapore dollars) Note Share capital Capital reserves Other reserves Retained earnings Total Noncontrolling interests Total equity $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group At , ,323 (136,121) 1,132,644 1,894, ,895 2,012,582 Total comprehensive income for the year Profit for the year 580, ,834 10, ,547 Other comprehensive income Net fair value changes on available-for-sale financial assets 36 (7,931) (7,931) (7,931) Net fair value changes on cash flow hedges 49,401 49,401 (809) 48,592 Foreign currency translation differences 36 42,459 42,459 3,534 45,993 Share of foreign currency translation differences of associates and joint ventures 36 10,395 10,395 10,395 Reclassification of foreign currency translation reserve to profit or loss arising from disposal of a foreign entity 36 (205) (205) (205) Other comprehensive income for the year, net of tax 94,119 94,119 2,725 96,844 Total comprehensive income for the year, net of tax 94, , ,953 13, ,391 Transactions with owners of the Company, recognised directly in equity Contributions by and distributions to owners of the Company Issue of shares 70,770 (18,624) 52,146 52,146 Capital contribution by non-controlling interests 22,761 22,761 Cost of share-based payment 15,490 15, ,598 Return of capital by a subsidiary (1,354) (1,354) Dividends paid 38 (521,290) (521,290) (521,290) Dividends paid to non-controlling interests (12,767) (12,767) Loans forgiven by non-controlling interests Total contributions by and distributions to owners of the Company 70,770 (3,134) (521,290) (453,654) 9,231 (444,423) Changes in ownership interests in subsidiaries Acquisition of subsidiaries with non-controlling interests 3,109 3,109 Disposal of a subsidiary Total transactions with owners of the Company 70,770 (2,879) (521,290) (453,399) 12,340 (441,059) Transfer from retained earnings to statutory reserve 230 (230) At , ,323 (44,651) 1,191,958 2,116, ,673 2,259,914

7 142 ST ENGINEERING / ABOVE & BEYOND Statements of Changes in Equity for the year ended (Currency - Singapore dollars) The Group Note Share Treasury Capital Other Retained Noncontrolling Total capital shares reserves reserves earnings Total interests equity $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At , ,323 (44,651) 1,191,958 2,116, ,673 2,259,914 Total comprehensive income for the year Profit for the year 531, ,952 5, ,990 Other comprehensive income Net fair value changes on available-for-sale financial assets 36 (2,020) (2,020) (2,020) Net fair value changes on cash flow hedges (57,327) (57,327) (1,000) (58,327) Share of net fair value changes on cash flow hedges of an associate (9,891) (9,891) (9,891) Foreign currency translation differences 36 18,422 18,422 1,546 19,968 Share of foreign currency translation differences of associates and joint ventures 36 1,336 1,336 1,336 Reclassification of foreign currency translation reserve to profit or loss arising from disposal of foreign entities Other comprehensive income for the year, net of tax (49,430) (49,430) 546 (48,884) Total comprehensive income for the year, net of tax (49,430) 531, ,522 5, ,106 Transactions with owners of the Company, recognised directly in equity Contributions by and distributions to owners of the Company Issue of shares 36,815 (19,559) 17,256 17,256 Capital contribution by non-controlling interests 9,368 9,368 Cost of share-based payment 21,574 21, ,670 Purchase of treasury shares 33 (6,529) (6,529) (6,529) Dividends paid 38 (498,857) (498,857) (498,857) Dividends paid to non-controlling interests (18,193) (18,193) Total contributions by and distributions to owners of the Company 36,815 (6,529) 2,015 (498,857) (466,556) (8,729) (475,285) Changes in ownership interests in subsidiaries Acquisition of non-controlling interests in subsidiaries representing total changes in ownership interests in subsidiaries that do result in a loss of control (194) (194) Acquisition of subsidiaries with noncontrolling interests Deconsolidation of a subsidiary (8,656) (8,656) Disposal of subsidiaries (4) (4) (4) Total transactions with owners of the Company 36,815 (6,529) 2,011 (498,857) (466,560) (16,850) (483,410) Transfer from retained earnings to statutory reserve 13 (13) At ,426 (6,529) 116,323 (92,057) 1,225,040 2,132, ,407 2,264,610

8 143 ANNUAL REPORT 2014 Statements of Changes in Equity for the year ended (Currency - Singapore dollars) Note Share capital Treasury shares Share-based payment reserve Retained earnings Total $ 000 $ 000 $ 000 $ 000 $ 000 The Company At ,841 75, ,390 1,400,011 Total comprehensive income for the year Profit for the year 543, ,316 Total comprehensive income for the year 543, ,316 Transactions with owners of the Company, recognised directly in equity Contributions by and distributions to owners of the Company Issue of shares 70,770 (18,624) 52,146 Cost of share-based payment 15,598 15,598 Dividends paid 38 (521,290) (521,290) Total contributions by and distributions to owners of the Company 70,770 (3,026) (521,290) (453,546) At ,611 72, ,416 1,489,781 At ,611 72, ,416 1,489,781 Total comprehensive income for the year Profit for the year 502, ,764 Total comprehensive income for the year 502, ,764 Transactions with owners of the Company, recognised directly in equity Contributions by and distributions to owners of the Company Issue of shares 36,815 (19,559) 17,256 Cost of share-based payment 21,670 21,670 Purchase of treasury shares 33 (6,529) (6,529) Dividends paid 38 (498,857) (498,857) Total contributions by and distributions to owners of the Company 36,815 (6,529) 2,111 (498,857) (466,460) At ,426 (6,529) 74, ,323 1,526,085 The accompanying notes are an integral part of the financial statements.

9 144 ST ENGINEERING / ABOVE & BEYOND Consolidated Statement of Cash Flows for the year ended (Currency - Singapore dollars) Cash flows from operating activities Group $ 000 $ 000 Profit before taxation 650, ,692 Adjustments: Share of results of associates and joint ventures, net of tax (57,182) (31,082) Depreciation charge 154, ,176 Property, plant and equipment written off 885 1,386 Gain on disposal of property, plant and equipment (1,310) (430) Gain on disposal of an investment property (12,548) Gain on disposal of investments (2,640) (6,154) (Gain)/loss on disposal of subsidiaries (519) 50 (Gain)/loss on disposal of associates and a joint venture (2,797) 318 Gain on bargain purchase (47) Impairment losses on goodwill 10,829 2,141 Impairment losses on other intangible assets 3, Impairment losses on property, plant and equipment 1, Impairment losses on quoted and unquoted investments Impairment losses on associates 2,108 5,539 Impairment loss on loan to an associate 2,892 Impairment loss on progressive payments to contractor 7,109 Share-based payment expense 21,670 15,598 Changes in fair value of financial instruments and hedged items (15,592) (3,174) Changes in fair value of financial instruments held for trading (152) (107) Interest expenses 37,874 44,240 Interest income (23,629) (23,320) Dividends from investments (2) (1) Amortisation of other intangible assets 16,188 14,868 Operating profit before working capital changes 805, ,818 Changes in: Inventories and work-in-progress 17,475 4,904 Progress billings in excess of work-in-progress 10,809 (26,476) Trade receivables (91,592) (61,792) Advance payments to suppliers (27,658) 26,292 Other receivables, deposits and prepayments 34,891 36,296 Amount due from holding company and related corporations balances (21,499) (7,495) Amount due to holding company and related corporations balances 12,065 (6,962) Amount due from associates (4,508) (7,385) Amount due from joint ventures (9,122) 10,439 Trade payables 43, ,060 Advance payments from customers (19,001) 18,648 Other payables, accruals and provisions (37,263) 8,777 Loans to staff and third parties 12,191 11,735 Deferred income 7,224 35,432 Foreign currency translation of foreign operations 52 6,885 Cash generated from operations 733,452 1,020,176 Interest received 23,662 19,595 Income tax paid (132,792) (109,978) Net cash from operating activities 624, ,793

10 145 ANNUAL REPORT 2014 Consolidated Statement of Cash Flows for the year ended (Currency - Singapore dollars) Cash flows from investing activities Group Note $ 000 $ 000 Proceeds from sale of property, plant and equipment 4,543 10,166 Proceeds from sale of an investment property 22,000 Proceeds from sale and maturity of investments 147, ,419 Proceeds from disposal of an associate and a joint venture 3,280 1,200 Proceeds from insurance settlement 5,220 Loan to associates (640) Loan to a joint venture (272) (3,136) Repayment of loan from joint ventures 3,887 Dividends from associates and joint ventures 38,840 39,596 Dividends from investments 2 1 Purchase of property, plant and equipment (223,771) (282,121) Purchase of investments (90,172) (66,623) Investments in associates (7,924) Investments in joint ventures (622) (9,385) Acquisition of other intangible assets (30,878) (67,079) Acquisition of controlling interests in subsidiaries and business, net of cash acquired (67) (9,877) Deconsolidation of a subsidiary 44 (35,896) Net cash used in investing activities (157,489) (257,763) Cash flows from financing activities Capital contribution from non-controlling interests of subsidiaries 9,368 22,761 Repayment of other loans (369) (335) Repayment of bank loans (471,990) (172,596) Repayment of lease obligations (1,550) (726) Repayment of loan to a joint venture (824) Proceeds of a loan from a joint venture 836 Proceeds from bank loans 80, ,898 Proceeds from issue of shares 17,256 52,146 Purchase of treasury shares (6,529) Payment to non-controlling interest for reduction of share capital (1,354) Acquisition of non-controlling interests in a subsidiary (194) Dividends paid to shareholders of the Company (498,857) (521,290) Dividends paid to non-controlling interests (18,193) (12,767) Interest paid (34,504) (40,346) Deposits discharged 1,105 2,025 Net cash used in financing activities (924,846) (469,748) Net (decrease)/increase in cash and cash equivalents (458,013) 202,282 Cash and cash equivalents at beginning of the year 1,920,924 1,700,950 Exchange difference on cash and cash equivalents at beginning of the year (299) 17,692 Cash and cash equivalents at end of the year 25 1,462,612 1,920,924

11 146 ST ENGINEERING / ABOVE & BEYOND Consolidated Statement of Cash Flows for the year ended (Currency - Singapore dollars) Acquisitions of controlling INTERESTS in subsidiaries in 2014 During the year, the Group acquired the following companies: (i) On 20 May 2014, the Group acquired 100% of Aviation Academy of America, Inc. ( AAA ) for a cash consideration of US$811,000. AAA specialises in the provision of flight training services for pilots. In the seven months to, AAA contributed revenue of $15,000 and loss of $416,000. If the acquisition had occurred on 1 January 2014, management estimates that the contributions to consolidated revenue and net profit would be immaterial. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January The allocation of the purchase price to the identifiable assets acquired and liabilities assumed in the business combination has been completed with $996,000 of intangible assets recognised on acquisition. (ii) On 30 December 2014, the Group acquired additional interest of 1% in an associate, GFM Electronics S.A. de C.V. ( GFME ) for a cash consideration of $713,000. GFME provides design and implementation, distribution and sales of high technology systems, services and products, in the communications area, as well as electronics systems. As a result of the additional interest acquired, the Group increased its equity interest in GFME from 50% to 51%. The Group was deemed to have acquired control of GFME and accounted for the additional investment as an acquisition of a subsidiary. If the acquisition had occurred on 1 January 2014, management estimates that the contributions to consolidated revenue and net profit would have been $0.17 million and $0.15 million respectively. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2014.

12 147 ANNUAL REPORT 2014 Consolidated Statement of Cash Flows for the year ended (Currency - Singapore dollars) Acquisitions of controlling interests in subsidiaries in 2014 (continued) The acquisitions had the following effect on the Group s assets and liabilities on acquisition date: Carrying Recognised on amount before acquisition acquisition $ 000 $ 000 Property, plant and equipment Intangible assets 1, Trade receivables Advances and other receivables Cash and cash equivalents 1, , Trade payables and accruals (359) (606) (359) (606) Net identifiable assets 2, Non-controlling interests (729) Net identifiable assets, after non-controlling interests 1,777 Gain on bargain purchase (47) Total purchase consideration 1,730 Total purchase consideration: Cost of acquisitions 1,693 Fair value of pre-existing interest in the acquiree 37 1,730 Cash outflow on acquisitions in 2014: Cost of acquisitions (1,693) Cash to be paid in subsequent year 371 Net cash acquired with the subsidiaries 1,255 Net cash outflow on acquisition (67)

13 148 ST ENGINEERING / ABOVE & BEYOND Consolidated Statement of Cash Flows for the year ended (Currency - Singapore dollars) Acquisitions of controlling INTERESTS in a subsidiary and business in 2013 In the prior year, the Group acquired the following subsidiary and business: (i) (ii) On 22 July 2013, the Group acquired 90% of Technicae Projetos e Serviços Automotivos Ltda. ( Technicae ) for a cash consideration of $612,000. On 27 December 2013, the Group acquired the manufacturing assets, intellectual property and relevant manufacturing expertise from Ticel Equipamentos Ltda, a Brazilian construction equipment company, for a total cash consideration of $9,284,000. Following the completion of the final purchase price allocation during the financial year, the Group made adjustments to the provisional fair value originally recorded in the prior year. The effect of the adjustments made during the 12-month period from acquisition date (the Window Period ) is set out below: Fair values recognised on acquisition (provisional) 2013 Adjustments during Window Period 2014 Fair values recognised on acquisition (final) 2014 $ 000 $ 000 $ 000 Property, plant and equipment Intangible assets 5,705 (741) 4,964 Inventories and work-in-progress 3 3 Advances and other receivables 4 4 Cash and cash equivalents ,131 (741) 5,390 Trade payables and accruals (132) (132) Deferred tax liabilities (1,939) 252 (1,687) (2,071) 252 (1,819) Net identifiable assets 4,060 (489) 3,571 Non-controlling interests (11) (11) Net identifiable assets, after non-controlling interests 4,049 (489) 3,560 Goodwill arising on consolidation 5, ,336 Total purchase consideration 9,896 9,896 Cash outflow on acquisitions: Cost of acquisitions (9,896) (9,896) Net cash acquired with the subsidiary and business Net cash outflow on acquisition (9,877) (9,877) Purchase price adjustments, which are non-cash in nature, made during the Window Period have not been applied retrospectively as these adjustments, which relate mainly to balance sheet effects and certain consequential income statement effects, are immaterial to the Group. In 2013, the Group incurred acquisition-related cost at $262,000 related to external legal fees and due diligence costs. The legal fees and due diligence costs have been included in administrative expenses in the Group s income statement. The accompanying notes are an integral part of the financial statements.

14 149 ANNUAL REPORT 2014 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 1 Ang Mo Kio Electronics Park Road #07-01 ST Engineering Hub, 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 26 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 which is the Company s functional currency. All values are rounded to the nearest thousand ($ 000) except when otherwise indicated. The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses are disclosed in Note Actual results may differ from these estimates. Except for changes in accounting policies discussed in Note 3.19, 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 3.1 Basis of consolidation (i) Business combinations Business combinations are accounted for using the acquisition method in accordance with FRS 103 Business Combination as at the acquisition date, which is the date on which control is transferred to the Group. Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, refer to Note 3.5(i). 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.

15 150 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.1 Basis of consolidation (continued) (i) Business combinations (continued) 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. Non-controlling interests ( NCI ) that are present ownership interests and entitle their holders to a proportionate share of the acquiree s net assets in the event of liquidation are measured either at fair value or at the NCI s proportionate share of the recognised amounts of the acquiree s identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All other NCI are measured at acquisition-date fair value, unless another measurement basis is required by FRSs. Changes in the Group s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill and no gain or loss is recognised in profit or loss. Adjustments to NCI arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 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 capital reserve. (iv) Loss of control Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any noncontrolling 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.

16 151 ANNUAL REPORT Summary of significant accounting policies (continued) 3.1 Basis of consolidation (continued) (v) Investments in associates and joint ventures (equity-accounted investees) Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% or more of the voting power of another entity. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Investments in associates and joint ventures are accounted for by the Group using the equity method and are recognised initially at cost, which includes transaction costs. The consolidated financial statements include 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. When the Group s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, including any long-term interest, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the investee s operations 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) Transactions eliminated on consolidation 3.2 Foreign currency All significant inter-company balances and transactions are eliminated on consolidation. (i) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Company and its subsidiaries 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 in a foreign currency that are measured in terms of historical cost are translated using the exchange rates as at the date of the 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. Monetary item carried at amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year and the amortised cost in foreign currency are translated at the exchange rate at the end of the year. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective, or qualifying cash flow hedges to the extent the hedge is effective, which are recognised in other comprehensive income.

17 152 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.2 Foreign currency (continued) (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 operations are translated to Singapore dollars using exchange rates at the date 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. 3.3 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. The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, reevaluates this designation at each financial year-end.

18 153 ANNUAL REPORT Summary of significant accounting policies (continued) 3.3 Financial instruments (continued)) (i) Non-derivative financial assets (continued) 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 receivables (including finance lease receivables and amounts due from related parties). Cash consists of cash on hand and cash with banks or financial institutions, including fixed deposits. Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of cash and that 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. 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, the changes in fair value are 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 and bonds.

19 154 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.3 Financial instruments (continued) (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 expire. Financial liabilities for contingent consideration payable in a business combination are initially measured at fair value. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. Financial assets and liabilities are offset and the net amount presented in the balance sheets 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 payables (including lease obligations and amounts due to related parties), and borrowings. (iii) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. (iv) Treasury shares When ordinary shares are reacquired by the Company, the consideration paid is recognised as deduction from equity. Reacquired shares are classified as treasury shares. When treasury shares are sold, or re-issued subsequently, the cost of treasury shares is reversed from treasury shares account and the realised gain or loss on transaction is presented as a change in equity of the Company. No gain or loss is recognised in profit or loss. Treasury shares have no voting rights and no dividends are allocated to them. (v) 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.

20 155 ANNUAL REPORT Summary of significant accounting policies (continued)) 3.3 Financial instruments (continued) (v) Derivative financial instruments and hedge accounting (continued) On initial designation of the derivative as the hedging instrument, the Group formally documents the hedge relationship to which 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, and 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 3.2(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. 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. 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.

21 156 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.3 Financial instruments (continued) (v) Derivative financial instruments and hedge accounting (continued) 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. (vi) Intra-group financial guarantees in the separate financial statements Financial guarantees are financial instruments issued by the Company that require the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantee is transferred to profit or loss. 3.4 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. Subsequent to initial measurement, except for certain property, plant and equipment which were subject to a one-time revaluation in 1972 ( the 1972 assets ), property, plant and equipment are measured at cost, net of depreciation and any impairment losses. The 1972 assets stated at valuation are exempted from conducting a regular frequency of revaluation but are measured net of depreciation, and any impairment losses. 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.

22 157 ANNUAL REPORT Summary of significant accounting policies (continued) 3.4 Property, plant and equipment and depreciation (continued) (i) Recognition and measurement (continued) 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 component of an 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 ready for use. Freehold land is not depreciated. The estimated useful lives are as follows: Buildings 2 to 50 years * Leasehold land Over the period of the lease of between 2 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 to 23 years Plant and machinery Aerospace 8 to 25 years Electronics 10 years Land Systems 5 to 15 years Marine 5 to 30 years Others 5 years Production tools and equipment Aerospace 5 to 15 years Electronics 10 years Others 3 years Furniture, fittings, office equipment 2 to 5 years and computers Transportation equipment and vehicles 5 years Aircraft and aircraft engines 15 to 30 years * Refer to Note 12(d)(ii) for details of the lease tenure used to approximate the useful lives of the leasehold land, buildings and improvements. 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.

23 158 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.5 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 Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as and when incurred. Development expenditure on an individual project is 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. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. In any other circumstances, 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 film, how the film 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.

24 159 ANNUAL REPORT Summary of significant accounting policies (continued) 3.5 Intangible assets (continued) (iv) Other intangible assets Other intangible assets that are acquired by the Group are initially recognised 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. Licences Licences acquired as part of business combination a) These licences relates to Air Operator Certificate issued by the Civil Aviation Safety Authority of Australia to conduct commercial aviation activities such as flight training school and air charter, and the Federal Aviation Administration s Organisation Designation Authorisation programme that allows autonomy and efficiency in the issuance of supplementary type certificates for avionics and interiors projects. b) These licences relates to the Federal Aviation Administration s Part 141 Approval to a flight school for pilot training in the US, including the issuance of the relevant entry visa to foreign students to enter the US. These licences are not amortised as they are considered to have an indefinite useful life and are tested annually for impairment. Licences acquired for purchase and leasing of Boeing parts These licences are awarded by the relevant authorities such as the Federal Aviation Authority ( FAA ), European Aviation Safety Agency ( EASA ), ISO9001, AS9100 Rev C, as well as commercial arrangement with Boeing for the purchase and leasing of Boeing parts. Licences acquired to develop maintenance, repair and overhaul services capabilities These licence agreements relate to the maintenance, repair and overhaul services for UTC Aerospace Systems components on Boeing 787 aircraft. These licences are not amortised until the repair capabilities are set up and available for use. Technology agreement The technology agreement relates to the intellectual property assets required to operate the EcoPower Engine Wash business. The intellectual property is an integral part of business as the business uses highlyproprietary processes to clean engines to enable fuel burn reduction and extended time on-wing. (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.

25 160 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.5 Intangible assets (continued) (vi) Amortisation 3.6 Investment property 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, development expenditure of Aerospace sector and film cost inventory, from the date that they are available for use. Amortisation of development expenditure is recognised in profit or loss using the units of production method. 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/units are as follows: Dealer network 5 to 10 years Development expenditure Aerospace 21 to 80 units Electronics 2 to 5 years Commercial and intellectual property rights 2 to 16 years Brands Aerospace 5 years Electronics 20 years Land Systems 70 years Film cost inventory 20 years Licences 7 to 30 years Technology agreement 7 to 13 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. 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. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs. 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 12 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 gain or loss on the retirement or disposal of an investment property are recognised in profit or loss in the year of retirement or disposal.

26 161 ANNUAL REPORT Summary of significant accounting policies (continued) 3.6 Investment property (continued) Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the carrying value at the date of change in use becomes the cost for subsequent accounting. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment set out in Note 3.4 up to the date of change in use. 3.7 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 include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of such services. 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. 3.8 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 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.

27 162 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.8 Impairment (continued) (i) Non-derivative financial assets (continued) Financial assets carried at amortised cost (continued) In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and 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. 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) Non-financial assets The Group assesses at each reporting date whether there is an indication that its non-financial assets, other than goodwill, investment property, inventories, work-in-progress 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.

28 163 ANNUAL REPORT Summary of significant accounting policies (continued) 3.8 Impairment (continued) (ii) Non-financial assets (continued) 3.9 Provisions 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 and/or joint venture is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate and/or joint venture is tested for impairment as a single asset when there is objective evidence that the investment in an associate and/or joint venture may be impaired. 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. Under the terms of the revenue contracts with key customers, the Group is obligated to make good, by repair or replacement, engineering or manufacturing defects that become apparent within the warranty period from the date of sale. The warranty obligation varies from 1 year to 8 years. The Group s experience of the proportion of its products sold that requires repair or replacement differs from year to year as every contract is customised to the specification of the customers. The estimation of the provision for warranty expenses is based on the Group s past claim experience over the duration of the warranty period and the industry average in relation to warranty exposures and represents the best estimates of the costs expected to incur per dollar of sales. The warranty provision made as at is expected to be incurred over the applicable warranty periods.

29 164 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.9 Provisions (continued) (ii) Liquidated damages 3.10 Employee benefits 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. (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 national pension schemes, a post employment benefit, 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. (iv) Economic Value Added ( EVA )-based Incentive Scheme The Group adopts an incentive compensation plan, which is tied to the creation of EVA, as well as attainment of individual and Group performance goals for its key executives. An EVA bank is used to hold incentive compensation credited in any year. Typically one-third of the accumulated EVA-based bonus, comprising the EVA declared in the financial year and the balance of such bonus brought forward from preceding years is paid out in cash each year, with the balance being carried forward to the following year. The balances of the EVA bank in future will be adjusted by the yearly EVA performance of the Group and the payouts made from the EVA bank. The Group measures the bonus payable after one year at the present value of the amount payable.

30 165 ANNUAL REPORT Summary of significant accounting policies (continued) 3.11 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 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 and acceptance by customers. (ii) (iii) Revenue from rendering of services is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to the work performed. 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. (iv) (v) (vi) (vii) Management fee income is recognised on an accrual basis over the duration upon which management services are rendered. Commission income in excess of the certain percentage of the total amount received is taken up in the income statement as and when the services are performed. 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. Rental income from investment property is accounted for on a straight-line basis over the duration of the lease terms. Rental income from leasing of facilities is accounted for on a straight-line basis over the lease terms 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.

31 166 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.13 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 investments, and losses on hedging instruments that are recognised in profit or loss. In 2014, the Group has re-assessed the nature of the fair value gains or losses arising from embedded derivatives and forward currency contracts that provide an economic hedge to trading transactions. The Group has considered that the economic hedges are part of the Group s operating activities and are classified under part of cost of sales prospectively to better reflect the nature of the transactions. Comparative information are not reclassified as the Group has assessed that the net impact of the fair value changes of embedded derivatives and forward currency contracts to be not material to the financial statements of the Group. 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 on financial assets and financial liabilities 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 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 3.4 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.

32 167 ANNUAL REPORT Summary of significant accounting policies (continued) 3.15 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 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 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. (ii) Deferred tax Deferred income tax is provided 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 is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and taxable temporary differences arising on the initial recognition of goodwill. 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, 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.

33 168 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.17 Earnings per share The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share plans granted to employees 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 segments performance. Additional disclosures on each of these operating segments are shown in Note 41, including the factors used to identify the reportable segments and the measurement basis of segment information Changes in accounting policies The Group has adopted FRS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities, FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements and FRS 112 Disclosure of Interests in Other Entities, as well as the consequential amendments to FRS 28 Investments in Associates and Joint Ventures (2011), with a date of initial application of 1 January (i) Subsidiaries As a result of the adoption of FRS 110 Consolidated Financial Statements, the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investees. FRS 110 introduces a new control model that is applicable to all investees, by focusing on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power to affect those returns. In particular, FRS 110 requires the Group to consolidate investees that it controls on the basis of de facto circumstances. As a consequence, the Group has changed its control conclusion in respect of its investment in STELOP Pte. Ltd. ( STELOP ), which was previously accounted for as a subsidiary. Although the Group owns more than half of the voting rights of STELOP, the contractual agreement requires all shareholders to act together to direct the operations of STELOP. Accordingly, the Group has reclassified its investment in STELOP to a joint venture. The change in accounting policy was not applied retrospectively as the impact of restating prior year s comparative was immaterial. (ii) FRS 111 Joint Arrangements FRS 111 Joint Arrangements, which establishes the principles for classification and accounting of joint arrangements. The adoption of this standard required the Group to re-assess and classify its joint arrangements as either joint operations or joint ventures based on its rights and obligations arising from the joint arrangements. Under this standard, interests in joint ventures will be accounted for using the equity method, whilst interests in joint operations will be accounted for using the applicable FRSs relating to the underlying assets, liabilities, revenue and expense items arising from the joint operations. The Group has investments in joint arrangements as disclosed in Note 14. The Group has re-evaluated the rights and obligations of the parties to these joint arrangements and has determined that the parties in these joint arrangements have rights to the net assets of the arrangements. Accordingly, these have been classified as joint ventures under FRS 111 and will be accounted for using the equity method. Previously, these investments in joint arrangements are accounted for as jointly-controlled entities under FRS 31 Interests in Joint Ventures using the equity method. As the Group is already applying the equity method of accounting, there is no impact to the Group s financial statements when the Group adopted FRS 111.

34 169 ANNUAL REPORT Summary of significant accounting policies (continued) 3.19 Changes in accounting policies (continued) (iii) FRS 112 Disclosure of Interests in Other Entities FRS 112 Disclosure of Interests in Other Entities, which sets out the disclosures required to be made in respect of all forms of an entity s interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The adoption of this standard resulted in more extensive disclosures being made in the Group s financial statements in respect of its interests in other entities; as FRS 112 is primarily a disclosure standard, there was no financial impact on the results and financial position of the Company and the Group when the Group adopted FRS 112 in This has been presented in Notes 14 and 44. (iv) FRS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities Amendments to FRS 32 Financial Instruments: Presentation Offsetting Financial Assets and Financial Liabilities, which clarifies the existing criteria for net presentation on the face of the Balance Sheet. Under the amendments, to qualify for offsetting, the right to set off a financial asset and a financial liability must not be contingent on a future event, and must be enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The application of the standard had no impact to the Group s financial statements 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 assets 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.

35 170 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.20 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 43 to the financial statements. Depreciation charge Property, plant and equipment and investment property are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment and investment property to be within 2 to 50 years. 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 property, 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 3.11(ii) and (iii). 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 and write down of finished goods to net realisable value 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. 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.

36 171 ANNUAL REPORT Summary of significant accounting policies (continued) 3.20 Significant accounting estimates and judgements (continued) (i) Key sources of estimation uncertainty (continued) Income taxes The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. In addition, certain subsidiaries of the Group have potential tax benefits arising from unutilised tax losses, unabsorbed wear and tear allowances and other temporary differences, which are available for set-off against future taxable profits. Significant judgement is involved in determining the availability of future taxable profits against which the Group can utilise the tax benefits therefrom. The use of the potential tax benefits is also subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the subsidiaries operate. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax provision and recognised deferred tax assets relating to the potential tax benefits in the period in which such determination is made. Measurement of fair values A number of the Group s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in Note 43 to the financial statements. EVA-based Incentive Scheme ( EBIS ) Estimates of the Group s obligations arising from the EBIS at the balance sheet date may be affected by future events, which cannot be predicated with any certainty. The assumptions and estimates are made based on management s knowledge and experience and may vary from actual experience so that the actual liability may vary considerably from the best estimates. Negative EVA will result in a clawback of EVA bonus accumulated in previous years. (ii) Critical judgements made in applying accounting policies Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements relates to assessing whether the Group has control over its investee companies. During the year, the Group assessed the terms and conditions of the shareholders agreement of subsidiaries that are not wholly-owned by the Group. The Group made critical judgements over: (a) (b) (c) their ability to exercise power over its investees; their exposure or rights to variable returns for its investments with those investees; and their ability to use its power to affect those returns. The Group s judgement included considerations of their power exercised at the board of the respective investees and rights and obligations arising from board reserve of matters as agreed with the other shareholders.

37 172 ST ENGINEERING / ABOVE & BEYOND 3. Summary of significant accounting policies (continued) 3.21 Future changes in accounting policies Except as otherwise indicated below, those new standards, amendments to standards, and interpretations are not expected to have a significant effect on the financial statements of the Group and the Company. The Group does not plan to early adopt these standards. FRS 115 Revenue from Contracts with Customers FRS 115 Revenue from Contracts with Customers will replace FRS 18 Revenue, FRS 11 Construction Contracts and related interpretations. The standard establishes the principle for companies to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled to in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed (e.g. service revenue and contract modifications) and improved guidance for multi-element arrangements. The Group is currently assessing the impact upon adoption of this standard in financial year ending 31 December FRS 109 Financial Instruments The standard replaces FRS 39 Financial Instruments: Recognition and Measurement. The standard sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The Group is currently assessing the impact on adoption of this standard in financial year ending 31 December Revenue Revenue represents invoiced value of sales/services less returns and discounts given and billings recognised on contracts as follows: Group $ 000 $ 000 Sale of goods 2,155,395 2,381,791 Service income 3,322,171 3,277,714 Contract revenue 1,061, ,647 6,539,433 6,633,152

38 173 ANNUAL REPORT Profit from operations Profit from operations is arrived at: After charging/(crediting) Group Note $ 000 $ 000 Auditors remuneration auditors of the Company 1,690 1,828 other auditors 2,375 2,561 Non-audit fees auditors of the Company other auditors 1,174 1,184 Fees and remuneration of directors * 5,231 7,070 Fees paid to a firm of which a director is a member Personnel expenses 6 1,749,364 1,796,531 Depreciation charges , ,176 Allowance/(write-back of allowance) for inventory obsolescence 102,671 27,631 doubtful debts (trade) 5,546 2,962 doubtful debts (related parties) (792) (793) unbilled receivables (trade) 1,202 doubtful lease receivables 9,872 7,108 Provision for warranties 28 39,076 6,524 liquidated damages 28 12,928 2,371 foreseeable losses 24,758 38,234 Property, plant and equipment written off 885 1,386 Research, design and development expenses 96, ,432 Operating lease expenses 44,425 48,814 Amortisation of other intangible assets 16 16,188 14,868 Impairment losses on property, plant and equipment 12 1, Impairment losses on goodwill 16 10,829 2,141 Impairment losses on other intangible assets 16 3, Impairment loss on progressive payments to contractor 23 7,109 Fair value changes in embedded derivatives not designated as hedging instruments (included in cost of sales) Losses 24,199 Fair value changes of forward currency contracts not designated as hedging instruments (included in cost of sales) Gains (27,577) Losses 4,578 * Includes share-based payment expense of $492,421 (2013: $345,400).

39 174 ST ENGINEERING / ABOVE & BEYOND 6. Personnel expenses Group $ 000 $ 000 Wages and salaries * 1,406,667 1,450,899 Contributions to defined contribution plans 130, ,163 Share-based payments 20,925 14,977 Other personnel expenses 191, ,492 1,749,364 1,796,531 * Includes directors remuneration of $2,438,009 (2013: $3,909,347). 7. Key management personnel COMPENSATION Group $ 000 $ 000 Short-term employee benefits 31,082 39,575 Contributions to defined contribution plans Other long-term benefits 3 18 Share-based payments 8,287 7,239 39,847 47, Other income, net Group $ 000 $ 000 Other income Gain on disposal of property, plant and equipment and investment property 1,310 12,978 Gain on disposal of subsidiaries 519 Gain on disposal of a joint venture 2,797 Government grants 5,787 11,503 Grant income from Wage Credit Scheme 9,122 Commission income Rental income 7,345 6,336 Proceeds received from insurers 5,023 Others 12,874 8,967 45,175 40,095 Other expenses Loss on disposal of a subsidiary (50) Loss on disposal of associates (318) Impairment losses on associates (2,108) (5,539) Impairment loss on loan to an associate (2,892) (5,000) (5,907) Other income, net, recognised in profit or loss 40,175 34,188

40 175 ANNUAL REPORT Finance COSTS, net Group $ 000 $ 000 Finance income Dividend income quoted equity investments 2 1 Interest income bank deposits 14,327 13,052 staff loans finance lease bonds 6,921 8,917 others 2, Exchange gain, net 3,315 Gain on disposal of investments 2,640 6,154 Gain on fair value changes of investments held for trading Net change in fair value of cash flow hedges reclassified from equity on occurrence of forecast transactions 739 Fair value changes of financial instruments gain on forward currency contract, cross currency interest rate swaps and cross currency swap not designated as hedging instrument 15,822 gain on forward currency denominated cash balances designated as hedging instrument in fair value hedges 814 Fair value changes of hedged items 566 1,558 Fair value changes of embedded derivatives not designated as hedging instrument 33,642 43,550 68,911 Finance costs Interest expenses bank loans and overdrafts (10,269) (16,484) bonds (26,542) (26,574) finance lease (744) (871) others (319) (311) Exchange loss, net (5,150) Net change in fair value of cash flow hedges reclassified from equity on occurrence of forecast transactions (1,558) Fair value changes of financial instruments loss on forward currency contracts, cross currency interest rate swaps, interest rate swaps and cross currency swap not designated as hedging instrument (30,593) loss on forward currency contract designated as hedging instrument (796) (447) Fair value changes of hedged items (739) (242) Impairment losses on unquoted investments (638) (624) (45,197) (77,704) Finance costs, net, recognised in profit or loss (1,647) (8,793)

41 176 ST ENGINEERING / ABOVE & BEYOND 10. Taxation Group $ 000 $ 000 Current income tax Current year 122, ,385 Overprovision in respect of prior years (15,122) (15,472) 107, ,913 Deferred income tax Current year 2,699 (2,234) Underprovision in respect of prior years 3, Effect of reduction in tax rate (286) (76) 6,209 (1,768) Deferred income tax related to items (charged)/credited directly to other comprehensive income: 113, ,145 Group $ 000 $ 000 Net change in fair value of derivative financial instruments designated in cash flow hedges (10,770) 9,479 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 before taxation 650, ,692 Taxation at statutory tax rate of 17% (2013: 17%) 110, ,048 Adjustments: Income not subject to tax (4,442) (5,302) Expenses not deductible for tax purposes 34,257 17,553 Different tax rates of other countries (4,736) 19,149 Overprovision in prior years, net (11,326) (14,930) Effect of change in tax rates (286) (76) Effect of results of associates and joint ventures presented net of tax (9,721) (5,284) Tax incentives (3,536) (3,942) Deferred tax assets not recognised 9,755 15,008 Deferred tax assets previously not recognised now utilised (2,133) (5,729) Deferred tax assets previously not recognised now recognised (1,000) Others (3,755) (2,350) 113, ,145

42 177 ANNUAL REPORT Earnings per share Basic earnings per share The calculation for basic earnings per share is based on: Group $ 000 $ 000 Profit attributable to shareholders 531, ,834 The weighted average number of ordinary shares is arrived at as follows: Group Number of shares Issued ordinary shares at beginning of the year 3,105,904 3,080,442 Weighted average number of ordinary shares issued during the year 11,959 21,302 Weighted average number of ordinary shares 3,117,863 3,101,744 Diluted earnings per share When calculating diluted earnings per share, the weighted average number of ordinary shares is adjusted for the effect of all dilutive potential ordinary shares. The number of unissued shares under option granted under the ESOP and their exercise prices are set out in Note 34. The average fair value of one ordinary share during the financial year ended was $3.71 (2013: $4.15) per share. The weighted average number of ordinary shares adjusted for the unissued shares under option is as follows: Group Number of shares Weighted average number of ordinary shares * (used in the calculation of basic earnings per share) 3,117,863 3,101,744 Weighted average number of unissued shares under option 25,761 34,882 Number of shares that would have been issued at fair value (21,089) (24,839) Weighted average number of ordinary shares (diluted) 3,122,535 3,111,787 * The weighted average number of ordinary shares takes into account the weighted average effect of changes in treasury shares transactions during the year. There are no anti-dilutive share options granted to employees under the existing employee share option plans for the current and previous financial years presented.

43 178 ST ENGINEERING / ABOVE & BEYOND 12. Property, plant and equipment The Group Valuation/Cost Arising from As at Additions* Disposals/ write-off acquisition of interest in a subsidiary and business Finalisation of purchase price allocation Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 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 56,737 5, ,798 64,683 Leasehold land and buildings 781,301 44,297 (2,870) 143,815 10, ,310 Improvements to premises 59,168 8,082 (1,125) 11 4,588 1,573 72,297 Wharves and slipways 35,520 1,958 3, ,532 Syncrolift and floating docks 68,936 3,508 14,388 (1) 86,831 Boats and barges 10, ,411 Plant and machinery 724,412 65,424 (14,394) 365 (317) (54,652) 12, ,549 Production tools and equipment 272,581 18,523 (17,528) 1,364 5, ,679 Furniture, fittings, office equipment and computers 223,163 29,266 (23,505) 24 (215) 3,379 2, ,898 Transportation equipment and vehicles 16,933 2,677 (1,531) (699) ,608 Aircraft and aircraft engines 192,679 18,601 (5,491) 4,485 1, ,450 Construction-inprogress 99, ,401 (24) 24,041 2, ,955 2,551, ,719 (66,468) 400 (532) 144,594 39,473 2,994,188 * Includes $19,726,000 under finance lease arrangement and $16,405,000 by way of non-cash government grant.

44 179 ANNUAL REPORT Property, plant and equipment (continued) The Group Valuation/Cost Arising from As at Additions* Disposals/ write-off acquisition of interest in a subsidiary Deconsolidation of a subsidiary Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 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 64, (1,746) 305 2,602 66,247 Leasehold land and buildings 977,310 15,618 (12,805) 41,329 8,293 1,029,745 Improvements to premises 72,297 10,789 (3,507) (451) 13, ,920 Wharves and slipways 41,532 1,608 1, ,366 Syncrolift and floating docks 86, ,877 Boats and barges 10,411 2, , ,075 Plant and machinery 733,549 45,781 (18,575) (12,390) 4, ,231 Production tools and equipment 280,679 22,953 (5,662) (1,858) 96 3, ,821 Furniture, fittings, office equipment and computers 234,898 33,643 (11,363) 24 (3,136) 5,670 2, ,006 Transportation equipment and vehicles 17,608 1,110 (1,245) (101) ,563 Aircraft and aircraft engines 211, , ,938 Construction-inprogress 252, ,256 (584) (239,235) 2, ,397 2,994, ,494 (55,487) 24 (5,546) (20,552) 28,050 3,181,171 * Includes $16,258,000 by way of non-cash government grant.

45 180 ST ENGINEERING / ABOVE & BEYOND 12. Property, plant and equipment (continued) The Group Accumulated depreciation As at Depreciation charge / impairment losses* for the year Disposals/ write-off Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 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 19,160 1, ,196 Leasehold land and buildings 365,431 32,259 (2,863) 10,161 3, ,199 Improvements to premises 37,388 5,873 (1,081) (11) 1,020 43,189 Wharves and slipways 24, ,508 Syncrolift and floating docks 68, ,173 Boats and barges 4, ,830 Plant and machinery 376,265 33,145 (10,420) (10,873) 4, ,025 Production tools and equipment 198,576 10,457 (13,721) (240) 5, ,402 Furniture, fittings, office equipment and computers 177,532 29,433 (22,849) 249 1, ,040 Transportation equipment and vehicles 12,281 2,109 (1,192) ,374 Aircraft and aircraft engines 53,949 10,151 (3,220) (22) ,408 Construction-in-progress 36,455 36,455 1,348, ,079 (55,346) 35,723 17,692 1,473,784 * Includes impairment losses of $690,000 resulting from an assessment of the recoverable amount of an engine, based on the fair value less cost to sell. The fair value is measured based on the amount to sell the engine at market price.

46 181 ANNUAL REPORT Property, plant and equipment (continued) The Group Accumulated depreciation As at Depreciation charge / impairment losses* for the year Disposals/ write-off Deconsolidation of a subsidiary Reclassifications Translation difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 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 21,196 1,309 (1,505) ,961 Leasehold land and buildings 408,199 37,497 (4,339) 3, ,963 Improvements to premises 43,189 7,639 (3,495) (356) ,473 Wharves and slipways 25,508 1, ,827 Syncrolift and floating docks 69,173 1, ,487 Boats and barges 5,830 6,634 36, ,969 Plant and machinery 393,025 39,795 (10,781) (1) 4, ,869 Production tools and equipment 200,402 13,821 (5,214) (1,583) 2 3, ,329 Furniture, fittings, office equipment and computers 186,040 34,683 (11,207) (2,924) 1 2, ,715 Transportation equipment and vehicles 13,374 1,862 (1,185) (101) ,092 Aircraft and aircraft engines 61,408 9,755 (2) ,978 Construction-inprogress 36,455 (36,455) 1,473, ,405 (37,726) (4,964) 17,149 1,603,648 * Due to continued losses of a subsidiary, the Group performed an impairment assessment and recognised an impairment loss of $1,087,000 on certain plant and equipment. The recoverable amounts of these plant and equipment were determined based on the fair market value of the plant and equipment, net of selling costs.

47 182 ST ENGINEERING / ABOVE & BEYOND 12. Property, plant and equipment (continued) The Group Net book value $ 000 $ 000 $ 000 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 44,286 43,487 37,577 Leasehold land and buildings 584, , ,870 Improvements to premises 45,447 29,108 21,780 Wharves and slipways 18,539 16,024 11,066 Syncrolift and floating docks 17,390 17, Boats and barges 132,106 4,581 5,401 Plant and machinery 326, , ,147 Production tools and equipment 88,492 80,277 74,005 Furniture, fittings, office equipment and computers 53,291 48,858 45,631 Transportation equipment and vehicles 3,471 4,234 4,652 Aircraft and aircraft engines 142, , ,730 Construction-in-progress 120, ,500 99,218 1,577,523 1,520,404 1,202,366 Due to changes in the use of assets, plant and machinery with net book value amounting to $20,552,000 (2013: $22,944,000) were reclassified to inventories. In the prior year, inventories (Note 20) amounting to $131,815,000 were reclassified to property, plant and equipment and included within construction-in-progress as the asset would be engaged in an operating lease. This was reclassified to boats and barges during the year when the asset was put into use.

48 183 ANNUAL REPORT Property, plant and equipment (continued) The Company Leasehold land and buildings Furniture, fittings, office equipment and computers Transportation equipment and vehicles Total $ 000 $ 000 $ 000 $ 000 Cost As at , ,507 Additions ,244 Disposal/write-off (732) (341) (1,073) As at , ,678 Additions 2,841 1,546 4,387 Disposal/write-off (767) (767) As at ,841 4, ,298 Accumulated depreciation As at , ,197 Depreciation charge for the year Disposal/write-off (732) (102) (834) As at , ,244 Depreciation charge for the year ,251 Disposal/write-off (765) (765) As at , ,730 Net book value As at ,676 1, ,568 As at , ,434 As at , ,310 (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 Property, plant and equipment of certain overseas subsidiaries of the Group with a carrying value of $86,778,000 (2013: $96,217,000) are pledged as security for bank loans.

49 184 ST ENGINEERING / ABOVE & BEYOND 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 finance lease obligations with a net book value of: Group $ 000 $ 000 Leasehold land and buildings 17,059 16,975 Transportation equipment and vehicles ,301 17,256 (d) Major properties (i) Freehold land and buildings Land Net book value Location Description area (sq. m.) $ 000 $ 000 USA 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 68,351 1,022 1,033 Industrial buildings 117,358 4,718 4,643 Industrial buildings 39,942 1,541 1,494 Industrial buildings 122,659 4,383 4,294 Shipyard and buildings 839,564 3,856 3,707 Shipyard and buildings 227,151 4,146 3,982 Shipyard and buildings 331,803 20,486 19,671 Production facility 8,361 2,655 3,021 Australia 2 Bowral Place Ballarat, Victoria Office building and training classrooms 7,714 1,364 1,478

50 185 ANNUAL REPORT Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements Land Net book value Location Description Tenure area (sq. m.) $ 000 $ 000 Singapore 501 Airport Road Factory and office building 10.6 years from ,899 4,085 4, Airport Road Factory and office building 10.6 years from , Airport Road Jet engine test cell 2 years from ,317 16,380 16, Airport Road Warehouse and office building 30 years from , Hangar and office building 30 years from , Changi North Way Hangar and office building 30 years from ,713 27,457 29,849 Hangar and office building 22.5 years from ,860 2,079 2,220 Hangar and office building 16.3 years from ,764 9,331 9, Gul Circle Factory and office building 30 years from ,857 7,903 8, Airport Road Hangars and office building 2 years lease from * 48,882 19,625 17,768 Seletar West Camp Hangars and office building 31.7 years lease from ,200 30,987 31,068 Seletar West Camp New Aero Centre 28.4 years lease from ,094 10,200 10, Ang Mo Kio Street 65 Industrial and commercial buildings 30 years from ,970 4,545 5, Jurong East Street 21 Industrial and commercial buildings 30 years from , renewable to ,232 6,170 6,443 1 Ang Mo Kio Electronics Park Road 6 Ang Mo Kio Electronics Park Road Industrial and commercial buildings Industrial and commercial buildings 30 years from ,000 68,165 68, years from ,000 19,228 20, Tuas Avenue 2 Factory and office building 30 years from to ,669 1,817 1, Benoi Crescent Industrial and commercial buildings 30 years from to ,981 1,761 1, Jalan Boon Lay Industrial and commercial buildings 27 years from to , renewable to , , ,238

51 186 ST ENGINEERING / ABOVE & BEYOND 12. Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements (continued) Land Net book value Location Description Tenure area (sq. m.) $ 000 $ 000 Singapore 16 Tuas Avenue 7 Industrial buildings 30 years from to , Rifle Range Road Industrial buildings Renewable every year * 556,074 4,554 4, Chin Bee Drive Industrial buildings 60 years from to ,137 20,327 21, Benoi Road Administrative offices and workshop 7 Benoi Road Buildings, foreshore and workshops 60 Tuas Road Buildings, foreshore and workshops 56 years from ,224 6,119 6, years from ,802 16,091 11, years from ,739 4,039 3,532 30/36 Kian Teck Avenue Workers dormitory 30 years from ,908 3,117 3,409 USA 2100 Aerospace Drive Brookley Complex, Mobile, Alabama Hangar and office building 22 years from ,825 27,579 27, John Saunders Road, San Antonio, Texas Hangar and office building 16.6 years from ,121 22,045 22,248 People s Republic of China No 2, Huayu Road, Huli District, Xiamen , Fujian Leasehold land for factory building 50 years from ,618 50,207 50, Zhong Cao Road, Guiyang, Guizhou 6 Kuang Ji Road, Zhenjiang, Jiangsu 1 Ding Mao Wei San Road, Zhenjiang, Jiangsu Leasehold land, industrial and commercial buildings Leasehold land, industrial and commercial buildings Leasehold land, industrial and commercial buildings 50 years from to years from to years from to ,662 21,773 22,006 76,711 8,461 8,723 55,883 8,380

52 187 ANNUAL REPORT Property, plant and equipment (continued) (d) Major properties (continued) (ii) Leasehold land, buildings and improvements (continued) Land Net book value Location Description Tenure area (sq. m.) $ 000 $ 000 People s Republic of China 66 Xin Cheng Rui Shandong Road, Dantu, Zhenjiang, Jiangsu Leasehold land, industrial and commercial buildings 50 years from to ,576 12,812 3, Xin Cheng Rui Shandong Road, Dantu, Zhenjiang, Jiangsu Leasehold land, industrial and commercial buildings 50 years from to ,120 12,688 12,713 * 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 the period of intended use, i.e. 30 years. 13. Subsidiaries Company $ 000 $ 000 Unquoted shares, at cost: Singapore Technologies Aerospace Ltd 358, ,626 Singapore Technologies Electronics Limited 26,982 26,982 Singapore Technologies Kinetics Ltd 211, ,938 Singapore Technologies Marine Ltd 56,000 56,000 Vision Technologies Systems, Inc. 422, ,021 Singapore Technologies Dynamics Pte Ltd 6,000 6,000 ST Synthesis Pte Ltd 4,656 4,656 FusionTech Pte. Ltd. 1,000 1,000 Kaz-ST Engineering Bastau Limited Liability Partnership ST Engineering Financial I Ltd. * 1 * 1 ST Engineering Financial II Pte. Ltd. * 1 * 1 1,088, ,801 Impairment in subsidiaries (7,000) (7,000) Carrying amount after impairment in subsidiaries 1,081, ,801 Capital contribution * 2 116, ,927 1,197, ,728 * 1 Amount less than $1,000. * 2 The amount relates mainly to capital contribution in the form of share options, performance shares and restricted shares issued to employees of subsidiaries.

53 188 ST ENGINEERING / ABOVE & BEYOND 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 and its subsidiaries Aerospace Engineering Services Pty Ltd Aerospace Engineering Services Pty Ltd Unit Trust Pacific Flight Services Pte Ltd Pacific Flight Services Pty Ltd ST Aerospace Academy Pte. Ltd. and its subsidiary: Aviation Training Academy Australia Pty Ltd and its subsidiary: ST Aerospace 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 ST Aerospace Services Co Pte. Ltd Singapore Technologies Engineering (Europe) Ltd Singapore Aerospace K.K Visiontech Investment Pte Ltd ^ 100 Visiontech 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 ST Aerospace Rotables Pte. Ltd Precision Products Singapore Pte Ltd ST Aerospace Resources Pte. Ltd

54 189 ANNUAL REPORT Subsidiaries (continued) Details of the subsidiaries are as follows: (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. Ltd. and its subsidiary: COMAT Training Services Pte Ltd ST Electronics (Data Centre Solutions) Pte. Ltd. and its subsidiary: PMB Project Management Business Sdn Bhd ST Electronics (Wuxi) Co., Ltd ST Electronics (Training & Simulation Systems) Pte. Ltd. and its subsidiaries: 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 MERITS Technologies LLP ³ 51 ST Electronics (Enterprise 1) Pte. Ltd ST Electronics (Info-Comm Systems) Pte. Ltd. and its subsidiaries: ST Electronics (Info-Security) 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., 100 idirect Asia Pte. Ltd OrisTel Systems Pte. Ltd ST Electronics (Shanghai) Co., Ltd and its subsidiary: ST Electronics (Tianjin) Co., Ltd its Technologies Pte Ltd ST Electronics (Taiwan) Limited ST Electronics (Thailand) Limited ST Electronics do Brasil Serviços e Soluções em Sistemas Eletronicôs Ltda 100 GFM Electronics S.A. de C.V. 51

55 190 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Details of the subsidiaries are as follows: (continued) Effective equity interest held by the Group % % (c) Singapore Technologies Kinetics Ltd and its subsidiaries SDG Kinetics Pte. Ltd. and its subsidiaries: LeeBoy India Construction Equipment Private Limited LeeBoy Brazil Equipamentos De Construção Ltda Mobility Systems Pte Ltd and its subsidiaries: Silvatech Global Systems Limited Silvatech Systems Corporation Pte Ltd and its subsidiary: Kinetics Drive Solutions Inc Technicae Projetos e Serviços Automotivos Ltda 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 SDDA Pte. Ltd. and its subsidiary: Kinetics Link Services Sdn. Bhd ST Kinetics Integrated Engineering Pte. Ltd Singapore Test Services Private Limited Advanced Material Engineering Pte. Ltd. and its subsidiaries: Advanced Pyrotechnic Materials Private Limited SMART Systems Pte Ltd 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 subsidiaries: Guizhou Jonyang Kinetics Co., Ltd Kinetics Automotive & Specialty Equipment Co., Ltd Kinetics Systems (Shanghai) Co., Ltd (d) Singapore Technologies Marine Ltd and its subsidiaries STSE Engineering Services Pte Ltd and its subsidiaries: STSE (Shanghai) Co. Ltd STSE Engineering Services (B) Sdn Bhd Hovertrans Solutions Pte. Ltd ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd

56 191 ANNUAL REPORT Subsidiaries (continued) Details of the subsidiaries are as follows: (continued) Effective equity interest held by the Group % % (e) Vision Technologies Systems, Inc. and its subsidiaries Vision Technologies Aerospace, Incorporated and its subsidiaries: VT Mobile Aerospace Engineering, Inc. (formerly known as ST Aerospace Mobile, Inc.) DalFort Aerospace GP, Inc DalFort Aerospace, L.P San Antonio Aerospace GP, LLC D 100 VT San Antonio Aerospace, Inc. (formerly known as ST Aerospace San Antonio, L.P.) VT DRB Aviation Consultants, Inc. (formerly known as DRB Aviation Consultants, Inc.) EcoServices, LLC Aviation Academy of America, Inc. 100 VT Volant Aerospace, LLC (formerly known as Volant Aerospace, LLC) VT Aviation Services, Inc. (formerly known as Venture Capital Systems, Inc.) Vision Technologies Electronics, Inc. and its subsidiary: VT idirect, Inc. and its subsidiaries: idirect Hong Kong 100 idirect UK Limited and its subsidiary: Parallel Limited idirect Italy S.r.l idirect International, Inc idirect Government Technologies, Inc VT idirect Canada, Inc Vision Technologies Kinetics, Inc. and its subsidiaries: Miltope Corporation and its subsidiary: IV Phoenix Group, Inc MÄK Technologies, Inc Vision Technologies Land Systems, Inc. and its subsidiaries: VT Dimensions, Inc VT LeeBoy, Inc VT Hackney, Inc Vision Technologies Marine, Inc. and its subsidiary: VT Halter Marine, Inc VT Systems International, LLC and its subsidiary: VT Systems Participações Ltda (f) Singapore Technologies Dynamics Pte Ltd and its subsidiary Innosparks Pte. Ltd. (formerly known as ST Kinetics Pte. Ltd.)

57 192 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Details of the subsidiaries are as follows: (continued) Effective equity interest held by the Group % % (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 ^ The company was struck off from the Registrar of the Accounting and Corporate Regulatory Authority pursuant to Section 344 of Companies Act, Cap 50, in December ³ The company was disposed during the D These companies completed their deregistration during the year. This company merged into VT San Antonio Aerospace, Inc. pursuant to Section of the Texas Business Organizations Code, State of Texas, USA 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 Aerospace Engineering Services Pty Ltd Trustee of unit trust fund Australia Aerospace Engineering Services Pty Ltd Dormant Australia Unit Trust D Pacific Flight Services Pte Ltd Providing air transport services Singapore Pacific Flight Services Pty Ltd ST Aerospace Academy Pte. Ltd. Flight training school operation and aircraft management Flight training school operation and simulator-based pilot training Australia Singapore

58 193 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Aviation Training Academy Australia Pty Ltd Aircraft management Australia ST Aerospace Academy (Australia) Pty Ltd Flight training academy Australia ST Aerospace Engines Pte Ltd ST Aerospace Technologies (Xiamen) Company Limited Repair and overhaul of engines, parts repair, on-wing services, asset management and parts manufacturing Repair and overhaul of engines Singapore 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. ST Aerospace International Structures Pte Ltd Maintenance-By-the-Hour services, materials distribution, trading and warehousing services, asset management 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 Designing, developing and manufacturing aircraft, engines, equipment, accessories, components and such other parts Singapore Singapore People s Republic of China Singapore ST Aviation Resources Pte Ltd Investment holding Singapore 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 K.K. # Providing marketing services to the Group Japan Visiontech Engineering Pte Ltd Provision of engineering services for the repair, maintenance and modification of aircraft, aircraft equipment and components Singapore

59 194 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business ST Aerospace Solutions (Europe) A/S Supply of aircraft components, including purchase, maintenance and logistics services Denmark Airline Rotables (UK Holdings) Limited Investment holding United Kingdom Airline Rotables Limited Providing component management and support services for aircraft United Kingdom ST Aerospace Panama, Inc. + Repair and maintenance of aircraft Republic of Panama ST Aerospace Rotables Pte. Ltd. Trading, leasing and asset services of rotables Singapore Precision Products Singapore Pte Ltd Manufacture and sale of investment castings, mould toolings and precision formings Singapore ST Aerospace Resources Pte. Ltd. Investment holding Singapore Singapore Technologies Electronics Limited SEEL Electronic & Engineering Sdn Bhd ST Electronics (Info-Software Systems) Pte. Ltd. INFA Systems Limited Design, development, supply, installation, integration and maintenance of transportation, intelligent building, defence electronics and communication systems Sales of electronic instruments and equipment, electronic engineering and system integration services and maintenance and calibration of electronic equipment Design, development and supply of real-time/ mission critical systems and provision of related maintenance services Provision of services in consulting, designing and developing systems integration, the maintenance and support of operational and computer systems and distribution sales of system equipment Singapore Malaysia Singapore Hong Kong ST Electronics (Software Services) Limited ~ Dormant People s Republic of China ST Electronics (e-services) Pte. Ltd. Providing shared services to government ministries, agencies and enterprises Singapore

60 195 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Knowledge Alive Pte. Ltd. COMAT Training Services Pte Ltd ST Electronics (Data Centre Solutions) Pte. Ltd. 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 Singapore Singapore Singapore PMB Project Management Business Dormant Malaysia Sdn Bhd ~ ST Electronics (Wuxi) Co., Ltd. ST Electronics (Training & Simulation Systems) Pte. Ltd. Antycip Simulation Limited Antycip Simulation SAS ST Education & Training Private Limited STET Homeland Security Services Pte. Ltd. Consulting, research, development, integration, distribution and maintenance of information communication technology software & hardware and related technologies 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 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 subsystem/components solutions Provision of education and training, management and consultancy services for operational and technical domains of maritime, aerospace and land services industries Provision of security consultancy, solutions implementation and training People s Republic of China Singapore United Kingdom France Singapore Singapore

61 196 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business STET Maritime Pte. Ltd. ST Electronics (Enterprise 1) Pte. Ltd. Provision of marine audit, survey and consultancy services 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 ST Electronics (Info-Comm Systems) Pte. Ltd. Design and development, systems integration, manufacturing and sale of communication equipment, GPS-based fleet management system, traffic management system, info appliances and defence electronics Singapore ST Electronics (Info-Security) Pte. Ltd. STELCOMMS Pte. Ltd. Telematics Wireless Ltd. Telematics Wireless USA Corp # ST Electronics (Satcom & Sensor Systems) Pte. Ltd. idirect Asia Pte. Ltd. Design, development, sale and provision of technical support for information security products, solutions and services 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 Development, manufacture, and marketing of products for Location Based Services such as stolen car recovery, Automatic Meter Reading for remote reading of utility meters and Electronic Toll Collection tags and roadside readers Serves as a local point of contact for Telematics Wireless Ltd s customers for payments and Return Material Authorisation support Manufacture of microwave components and sub-systems, system integration and provision of related repairs and maintenance for the telecommunications and defence electronics industries Marketing and sales, design, manufacture & engineering services for electronics and communication systems Singapore Singapore Israel USA Singapore Singapore

62 197 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business OrisTel Systems Pte. Ltd. ST Electronics (Shanghai) Co., Ltd ST Electronics (Tianjin) Co., Ltd Turnkey supply of telecom network solutions to regional Telecom Service Providers, Government and Utility companies, sale of telecom equipment and accessories and provision of engineering support, maintenance and training services Development and manufacturing of monitoring and control systems, microwave systems, training and simulation systems, security systems, metro passenger information systems, metro automated fare collection systems, metro platform screen door systems, integrated transportation systems (including fleet management systems, urban transport management systems, highway management systems, etc.), metro transmission and communication systems, EMC electromagnetic products and software; sale of product manufactured, system integration, aftersales, and consultancy services for the above mentioned products. Engineering contractor for building intelligent projects (involving administrative licensing will need approved certification). Development and manufacturing of monitoring and control systems, microwave systems, training and simulation systems, security systems, metro passenger information systems, metro automated fare collection systems, metro platform screen door systems, integrated transportation systems (including fleet management systems, urban transport management systems, highway management systems, etc.), metro transmission and communication systems, EMC electromagnetic products and software; sale of product manufactured, system integration, aftersales, and consultancy services for the above mentioned products. Engineering contractor for building intelligent projects (involving administrative licensing will need approved certification). Singapore People s Republic of China People s Republic of China its Technologies Pte Ltd Dormant Singapore

63 198 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business ST Electronics (Taiwan) Limited ST Electronics (Thailand) Limited Provide integration for large-scale system projects in rail, expressway and intelligent building management solutions To engage in engineering project service business as well as to install, test, inspect, and control electronic system works of skytrain projects and other engineering projects Taiwan Thailand ST Electronics do Brasil Serviços Engineering services Brazil e Soluções em Sistemas Eletronicôs Ltda # GFM Electronics S.A. de C.V. Singapore Technologies Kinetics Ltd Design and implementation, 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. Management of reusable electronic equipment and components 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 Mexico Singapore SDG Kinetics Pte. Ltd. Investment holding Singapore LeeBoy India Construction Equipment Private Limited Design, manufacture, sale, distribution and aftersales support of construction equipment India LeeBoy Brazil Equipamentos Manufacture of road construction equipment Brazil De Construção Ltda. # z Mobility Systems Pte Ltd Investment holding Singapore Silvatech Global Systems Limited # z Owns the intellectual property rights to electrohydraulic drive, hydro-mechanical and electromechanical continuously variable transmissions technologies, and equipment powered by such drives British Virgin Islands

64 199 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Silvatech Systems Corporation Pte Ltd Kinetics Drive Solutions Inc. # z Technicae Projetos e Serviços Automotivos Ltda. # z Designing, manufacturing, marketing and managing licences of technologies and products using electro-hydraulic drive, hydro-mechanical and electro-mechanical continuously variable transmissions, and equipment powered by such drives, globally Research and development, manufacturing and sales of electro-hydraulic drive, hydromechanical and electro-mechanical continuously variable transmissions technologies, and equipment powered by such drives Provision of automotive maintenance, repair and overhaul services including automotive platforms revitalisation and modernisation projects, as well as related trade, import and export of parts and accessories Singapore Canada Brazil STA Inspection Pte Ltd Dormant Singapore Singapore Commuter Private Limited Investment holding Singapore Jiangsu Huatong Kinetics Co., Ltd. Jiangsu Huaran Kinetics Co., Ltd. Securedge Pte. Ltd. Manufacture and sale of paving, mixing, road maintenance and compaction equipment and other road construction machineries Manufacture and sale of engineering machinery and equipment Provision of design and engineering services, manufacture and sales of security related products, and the provision of equipment maintenance services People s Republic of China People s Republic of China Singapore STA Investment Pte Ltd Dormant Singapore ST Kinetics International Pte. Ltd. Investment holding Singapore VT Hackney S.A. de C.V. SDDA Pte. Ltd. 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 Mexico Singapore

65 200 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Kinetics Link Services Sdn. Bhd. ST Kinetics Integrated Engineering Pte. Ltd. Singapore Test Services Private Limited Advanced Material Engineering Pte. Ltd. Advanced Pyrotechnic Materials Private Limited 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, 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 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 Manufacture and sale of pyrotechnic products Malaysia Singapore Singapore Singapore Singapore SMART Systems Pte Ltd Life systems integration of weapon system Singapore Unicorn International Pte Limited Trading and marketing Singapore Allied Ordnance of Singapore (Pte) Limited Dormant Singapore Ordnance Development and Engineering Company of Singapore (1996) Private Limited Dormant Singapore Autonomous Technology Pte Ltd Investment holding Singapore

66 201 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Guizhou Jonyang Kinetics Co., Ltd. Kinetics Automotive & Specialty Equipment Co., Ltd z Kinetics Systems (Shanghai) Co., Ltd. Singapore Technologies Marine Ltd STSE Engineering Services Pte Ltd STSE (Shanghai) Co. Ltd. STSE Engineering Services (B) Sdn Bhd Hovertrans Solutions Pte. Ltd. Design, manufacture, sale and service support of construction, engineering and industrialrelated machinery and accessories, provide engineering consultancy services to engineering and manufacturing companies, provide rental of own-manufactured machinery and accessories Dealer support in areas of marketing activities, product and technical training and aftersales services including warranty Manufacture and sale of vehicle drive systems, industrial drive motors and small external combustion engines 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, after-sales services and consulting services of equipment 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 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 People s Republic of China Myanmar People s Republic of China Singapore Singapore People s Republic of China Brunei Singapore

67 202 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business ST Marine (Wuhan) Engineering Design Consultancy Co. Ltd. To provide industrial engineering design, research and development and consultancy services People s Republic of China Vision Technologies Systems, Inc. # Investment holding USA Vision Technologies Aerospace, Investment holding USA Incorporated # VT Mobile Aerospace Engineering, Inc. (formerly known as ST Aerospace Mobile, Inc.) # z Repair and maintenance of aircraft USA DalFort Aerospace GP, Inc. ++ # Dormant USA DalFort Aerospace, L.P. ++ Dormant USA VT San Antonio Aerospace, Inc. (formerly Repair and maintenance of aircraft USA known as ST Aerospace San Antonio, L.P.) # z VT DRB Aviation Consultants, Inc. (formerly Provision of aircraft engineering services USA known as DRB Aviation Consultants, Inc.) # z EcoServices, LLC # z Provision of engine wash services USA Aviation Academy of America, Inc. Flight training academy USA VT Volant Aerospace, LLC (formerly known as Volant Aerospace, LLC) # z Providing new or refurbishment of aircraft interior parts; support services and aircraft interior configuration services USA VT Aviation Services, Inc. (formerly known Aircraft management USA as Venture Capital Systems, Inc.) # Vision Technologies Electronics, Inc. # Investment holding USA VT idirect, Inc. # z idirect UK Limited 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 Markets two-way internet protocol (IP) based broadband satellite networking solutions USA United Kingdom

68 203 ANNUAL REPORT Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Parallel Limited idirect Italy S.r.l. # z idirect International, Inc. # z idirect Government Technologies, Inc. # z 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 Design, develop and market two-way internet protocol (IP) based broadband satellite networking solutions that deliver voice, data and video services to government customers United Kingdom Italy USA USA VT idirect Canada, Inc. # z Research and development Canada Vision Technologies Kinetics, Inc. # Investment holding USA Miltope Corporation # z Development of computers and peripheral equipment for rugged and other specialized applications for military and commercial customers, both domestic and international USA IV Phoenix Group, Inc. # Dormant USA MÄK Technologies, Inc. # z 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. # z VT Hackney, Inc. # z 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 USA USA USA

69 204 ST ENGINEERING / ABOVE & BEYOND 13. Subsidiaries (continued) Further details of the subsidiaries are as follows: (continued) Name of subsidiary Principal activities Country of incorporation/ place of business Vision Technologies Marine, Inc. # Investment holding USA VT Halter Marine, Inc. # z 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 VT Systems Participações Ltda. # Singapore Technologies Dynamics Pte Ltd Innosparks Pte. Ltd. (formerly known as ST Kinetics Pte. Ltd.) ST Synthesis Pte Ltd Promotion and marketing of products and services Technology development, advanced concept design and development and technology acquisition Manufacturing, distribution, sales and marketing of engineering products Provision of one-stop total integrated logistic support services and engineering services Brazil Singapore Singapore Singapore FusionTech Pte. Ltd. Investment holding Singapore Kaz-ST Engineering Bastau Limited Liability Dormant Kazakhstan Partnership # ST Engineering Financial I Ltd. ST Engineering Financial II Pte. Ltd. Provision of financial and treasury services to the Group Provision of financial and treasury services to the Group Singapore Singapore D The company ceased operations in November # Not required to be audited under the law in the country of incorporation. + The company ceased operations in November ~ These companies are under members voluntary liquidation. z Audited by member firms of KPMG International for consolidation purposes. ++ These companies ceased operations in October 2003.

70 205 ANNUAL REPORT Subsidiaries (continued) All subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore and other member firms of KPMG International, except for the following: Name of subsidiary GFM Electronics S.A. de C.V. LeeBoy India Construction Equipment Private Limited Kinetics Automotive & Specialty Equipment Co., Ltd Name of auditing firm Deloitte Mexico B S R R & Co., Bangalore Khin Su Htay & Associates, Myanmar (a) During the financial year, the Group incorporated the following company: Name of company Country of incorporation/ place of business Equity interest held % ST Electronics do Brasil Serviços e Soluções em Sistemas Eletronicôs Ltda Brazil 100 (b) During the financial year, the Group acquired the following company: Fair value of net identifiable Name of company Interest acquired Consideration assets acquired % $ 000 $ 000 Aviation Academy of America, Inc ,017 1,017 (c) During the financial year, the Group acquired additional equity interests in the following companies: Name of company Carrying value of Interest acquired Interest after acquisition Consideration net identifiable assets acquired % % $ 000 $ 000 GFM Electronics S.A. de C.V LeeBoy India Construction Equipment Private Limited (d) During the financial year, the Group disposed the following company: Name of company Carrying value of Interest disposed Consideration net identifiable assets disposed % $ 000 $ 000 Date of disposal MERITS Technologies LLP 51 # 4 September 2014 # Amount less than $1,000 Singapore dollar. (e) During the financial year, the Group made an additional capital contribution of $27,086,000 in ST Aerospace Technologies (Xiamen) Company Ltd. The effective equity interest held by the Group remains the same at 80%.

71 206 ST ENGINEERING / ABOVE & BEYOND 14. Associates and joint ventures Group Company $ 000 $ 000 $ 000 $ 000 Unquoted shares, at cost 373, ,130 17,657 17,657 Goodwill on acquisition written off, net (110) (110) Share of net assets acquired 373, ,020 Impairment in associates and joint ventures * (7,222) (6,660) Share of post-acquisition reserves 112,377 88, , ,139 Represented by: Interest in associates 437, ,258 Interest in joint ventures 40,967 25, , ,139 * During the year, an impairment loss of $2,108,000 was recognised in an associate due to sustained losses and expiry of the contract on repair and overhaul of A320 landing gears. In the prior year, (a) An impairment loss of $2,723,000 was recognised in an associate due to a permit not granted by the relevant authorities to conduct its operations; (b) An impairment loss of $1,270,000 was recognised in an associate as the financial performance of the associate was not up to management s expectation; and (c) An impairment loss of $1,546,000 was recognised in an associate as there were indications of impairment and management assessed that the recoverable amount of the investment based on management s estimate of fair value less cost to sell is $1. (a) Details of associates are as follows: Name of associate Airbus Helicopters Southeast Asia Private Limited CJS Aviation Pte. Ltd. Composite Technology International Pte Ltd Principal activities Selling, maintaining and overhauling of helicopters Provision of scheduled premium class jet services Repairing and rebuilding helicopter rotor blades Country of incorporation/ Effective equity interest place of business held by the Group % % Singapore Singapore Singapore

72 207 ANNUAL REPORT Associates and joint ventures (continued) (a) Details of associates are as follows: (continued) Name of associate Principal activities Country of incorporation/ Effective equity interest place of business held by the Group % % Elbe Flugzeugwerke GmbH Madrid Aerospace Services S.L. * 1 Conversion of used Airbus passenger aircraft to freighter as well as the production of aircraft components and equipment, including supply for Airbus production of new and converted aircraft Repair and overhaul of aircraft landing gears and its related components Germany Spain Shanghai Technologies Aerospace Company Limited Aircraft and component maintenance, repair, overhaul and other related maintenance business People s Republic of China ST Aerospace (Guangzhou) Aviation Services 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 NEC STEE Cloud Services Pte. 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 Providing cloud computing services, computing infrastructure for cloud computing services, systems integration and systems migration services in relation to cloud computing services, customisation of SAP software or other customised software for use in conjunction with or in relation to cloud computing services Singapore Singapore Singapore Singapore 40 40

73 208 ST ENGINEERING / ABOVE & BEYOND 14. Associates and joint ventures (continued) (a) Details of associates are as follows: (continued) Name of associate WizVision Pte. Ltd. CityCab Pte Ltd GFM Maquinaria, S.A.P.I. de C.V. * 2 Principal activities 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 Sale of construction and mining machinery and equipment Country of incorporation/ Effective equity interest place of business held by the Group % % Singapore Singapore Mexico 40 Timoney Holdings Limited Design and prototyping services and component supply for the automotive and aerospace engineering sectors Republic of Ireland NanoScience Innovation Pte Ltd Experia Events Pte. Ltd. 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, including the biennial Singapore Airshow event Singapore Singapore Singapore Airshow & Events Pte. Ltd. Dormant Singapore 33 33

74 209 ANNUAL REPORT Associates and joint ventures (continued) (b) Details of joint ventures are as follows: Name of joint venture Principal activities Country of incorporation/ Effective equity interest place of business held by the Group % % Total Engine Asset Management Pte. Ltd. Leasing of engines Singapore WingStar Pte. Ltd. GFM Electronics S.A. de C.V. * 3 ST Electronics (Satellite Systems) Pte. Ltd. STELOP Pte. Ltd. * 4 ATREC Pte. Ltd. Acquisition, ownership and management of aircraft Design and implementation, 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. Management of reusable electronic equipment and components Design and development, system integration, manufacturing and sale of satellite equipment Design and development, manufacturing, maintaining and sale of electro-optical products and systems and the provision of related services Research and technology development in advanced materials for both defence and commercial applications Singapore Mexico 50 Singapore Singapore Singapore Beijing Zhonghuan Kinetics Heavy Vehicles Co., Ltd. * 5 Develop, manufacture and sale of People s Republic specialised heavy vehicles and sale of China of related spare parts and provision of relevant technical consultancy and after sale technical support services 50 Takata CPI Singapore Pte Ltd First Response Marine Pte. Ltd. Manufacture of pyrotechnic components for seatbelts and air bags used in motor vehicles Ship and boat leasing with operator (including chartering) Singapore Singapore 50 50

75 210 ST ENGINEERING / ABOVE & BEYOND 14. Associates and joint ventures (continued) (b) Details of joint ventures are as follows: (continued) Name of joint venture Fortis Marine Solutions Pte. Ltd. Halter-Bollinger Joint Venture, L.L.C. * 6 Joint Shipyard Management Services Pte Ltd Principal activities To provide design and systems engineering services and maintenance of specialised naval vessels To bid and secure US boat fabrication contracts for its shareholders Construction and managing workers dormitories Country of incorporation/ Effective equity interest place of business held by the Group % % Singapore USA Singapore Nova Star Cruises Limited Provision of ferry services Canada * 1 This entity is under members voluntary liquidation. * 2 This entity was disposed during the year for a cash consideration of US$1. * 3 This entity has been reclassified from a joint venture to a subsidiary following the acquisition of additional equity interest during the year. * 4 Based on the revised definition of control over entities in FRS 110 Consolidated Financial Statements, the Group reclassified its investment in this entity from a subsidiary to a joint venture. The change in accounting policy was not applied retrospectively as the impact of restating prior year s comparative was immaterial. * 5 This entity was disposed in January 2014 for a cash consideration of $3.28 million. As part of the agreement, the Group will co-own the product intellectual property of the entity. * 6 Not required to be audited under the law in the country of incorporation. All associates and joint ventures that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore and other member firms of KPMG International, except for the following: Name of associate/joint venture Composite Technology International Pte Ltd ST Aerospace (Guangzhou) Aviation Services Company Limited Turbine Coating Services Pte Ltd Turbine Overhaul Services Pte Ltd Total Engine Asset Management Pte. Ltd. WizVision Pte. Ltd. CityCab Pte Ltd Takata CPI Singapore Pte Ltd Fortis Marine Solutions Pte. Ltd. Nova Star Cruises Limited NanoScience Innovation Pte Ltd Name of auditing firm Deloitte and Touche LLP, Singapore BDO Shu Lun Pan Certified Public Accountants LLP, Guangdong Branch PricewaterhouseCoopers LLP, Singapore PricewaterhouseCoopers LLP, Singapore Ernst & Young LLP, Singapore R Chan & Associates PAC Deloitte and Touche LLP, Singapore Ernst & Young LLP, Singapore Ernst & Young LLP, Singapore Grant Thornton LLP, Canada NSC & Associates Pac

76 211 ANNUAL REPORT Associates and joint ventures (continued) Associates The following table summarises the information of each of the Group s material associates, based on their respective financial statements prepared in accordance with FRS, modified for fair value adjustments on acquisitions and differences with the Group s accounting policies. The summarised financial information is not adjusted for percentage ownership held by the Group. Name of associate Elbe Flugzeugwerke GmBH Shanghai Technologies Aerospace Company Limited Turbine Coating Services Pte Ltd Turbine Overhaul Services Pte Ltd CityCab Pte Ltd Experia Events Pte. Ltd. Immaterial associates Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Percentage of interest 35% 49% 24.5% 49% 46.5% 33% Revenue 301,488 60,182 47, , ,933 52,926 Profit for the year 4, ,932 55,076 24,664 16,622 Other comprehensive income (39,074) 1,880 1,796 4,902 Total comprehensive income (34,510) 2,624 19,728 59,978 24,664 16,622 Attributable to NCI 167 Attributable to investee s shareholders (34,510) 2,624 19,728 59,978 24,497 16,622 Non-current assets 386,114 95,668 27,899 27, ,022 64,083 Current assets 158,459 49,123 26, , ,395 41,065 Non-current liabilities (2,498) (26,467) (3,330) Current liabilities (157,083) (10,299) (8,157) (85,036) (64,972) (28,165) Net assets 384, ,492 46, , ,978 73,653 Attributable to NCI 1,253 Attributable to investee s shareholders 384, ,492 46, , ,725 73,653 Group s interest in net assets of investee at beginning of the year 147,657 64,619 11,554 52,276 96,361 18,821 44, ,258 Group s share of: Profit/(loss) for the year ,392 26,989 11,391 5,486 (68) 49,320 Total other comprehensive income (13,676) ,400 (2) 422 (9,496) Total comprehensive income (12,910) 1,282 4,834 29,389 11,391 5, ,824 Dividends received during the year (4,947) (19,789) (9,300) (2,553) (36,589) Impairment of an associate (2,108) (2,108) Carrying amount of interest in investee at end of the year 134,747 65,901 11,441 61,876 98,452 24,305 40, ,385

77 212 ST ENGINEERING / ABOVE & BEYOND 14. Associates and joint ventures (continued) Name of associate Elbe Flugzeugwerke GmBH Shanghai Technologies Aerospace Company Limited Turbine Coating Services Pte Ltd Turbine Overhaul Services Pte Ltd CityCab Pte Ltd Experia Events Pte. Ltd. Immaterial associates Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Percentage of interest 35% 49% 24.5% 49% 46.5% 33% Revenue 347,251 60,479 58, , ,144 8,080 Profit/(loss) for the year 4,829 (327) 20,876 44,293 21,487 (6,801) Other comprehensive income 9,043 8,210 1,473 3,541 Total comprehensive income 13,872 7,883 22,349 47,834 21,487 (6,801) Attributable to NCI 221 Attributable to investee s shareholders 13,872 7,883 22,349 47,834 21,266 (6,801) Non-current assets 388,734 97,701 17,326 24, ,118 66,988 Current assets 174,428 45,915 38, ,740 88,367 30,855 Non-current liabilities (8,094) (25,684) (3,133) Current liabilities (133,190) (11,741) (8,942) (63,819) (59,566) (37,678) Net assets 421, ,875 47, , ,235 57,032 Attributable to NCI 1,006 Attributable to investee s shareholders 421, ,875 47, , ,229 57,032 Group s interest in net assets of investee at beginning of the year 60,753 9,754 48,431 93,912 26,016 52, ,098 Group s share of: Profit/(loss) for the year (2,311) (160) 5,115 21,707 9,889 (2,245) (2,970) 29,025 Total other comprehensive income 3,165 4, ,735 1,605 10,890 Total comprehensive income 854 3,866 5,474 23,442 9,889 (2,245) (1,365) 39,915 Group s contribution during the year 146,803 3, ,486 Dividends received during the year (3,674) (19,597) (7,440) (4,950) (2,523) (38,184) Impairment of associates (5,539) (5,539) Disposal of associates during the year (1,518) (1,518) Carrying amount of interest in investee at end of the year 147,657 64,619 11,554 52,276 96,361 18,821 44, ,258

78 213 ANNUAL REPORT Associates and joint ventures (continued) Joint venture The following table summarises the information of each of the Group s material joint ventures, adjusted for any differences in accounting policies and reconciles the carrying amount of the Group s interest in joint ventures and the share of profit and other comprehensive income of equity-accounted investment (net of tax). The summarised financial information is not adjusted for the percentage ownership held by the Group. Name of joint venture Total Engine Asset Management Pte Ltd. STELOP Pte. Ltd. Beijing Zhonghuan Kinetics Heavy Vehicles Co., Ltd. Fortis Marine Solutions Pte. Ltd. Immaterial joint ventures Total $ 000 $ 000 $ 000 $ 000 $ 000 $ Percentage of interest 50% 50.05% 50% 51% Revenue 12,213 26,773 5,490 39,977 Profit/(loss) for the year 2, (3,558) 9,196 Other comprehensive income a 1,448 Total comprehensive income 4, (3,558) 9,196 a Includes: Depreciation and amortisation of: 4, Interest expense of: 2, Income tax expense of: ,872 Non-current assets 141,035 6, Current assets b 8,083 52,687 20,591 Non-current liabilities c (112,781) (6,737) Current liabilities d (1,233) (33,453) (9,221) Net assets 35,104 18,651 11,708 b Includes cash and cash equivalents of: 8,048 25,523 17,576 c Includes non-current financial liabilities (excluding trade and other payables and provisions) 112,781 d Includes current financial liabilities (excluding trade and other payables and provisions) 675 Group s interest in net assets of investee at beginning of the year 14,859 4,403 1,281 5,338 25,881 Share of total comprehensive income 2, (1,920) 4,690 3,808 8,803 Group s contribution during the year Carrying amount of interest in a joint venture deconsolidated as a subsidiary 10,432 10,432 Carrying amount of interest in a joint venture reclassified to a subsidiary (37) (37) Disposal of joint ventures during the year (2,483) (2,483) Dividends received during the year (1,251) (1,000) (2,251) Carrying amount of interest in investee at end of the year 17,552 9,335 5,971 8,109 40,967

79 214 ST ENGINEERING / ABOVE & BEYOND 14. Associates and joint ventures (continued) Name of joint venture Total Engine Asset Management Pte Ltd. Beijing Zhonghuan Kinetics Heavy Vehicles Co., Ltd. Immaterial joint ventures Total $ 000 $ 000 $ 000 $ Percentage of interest 50% 50% Revenue 4,938 8,038 Profit/(loss) for the year 1,600 (5,122) Other comprehensive income a 888 Total comprehensive income 2,488 (5,122) a Includes: Depreciation and amortisation of: 2, Interest expense of: 1, Income tax expense of: 204 Non-current assets 101, Current assets b 2,532 22,260 Non-current liabilities c (72,695) Current liabilities d (1,365) (14,204) Net assets 29,718 8,806 b Includes cash and cash equivalents of: 2, c Includes non-current financial liabilities (excluding trade and other payables and provisions) 72,695 d Includes current financial liabilities (excluding trade and other payables and provisions) 679 6,764 Group s interest in net assets of investee at beginning of the year 4,231 6,587 4,200 15,018 Share of total comprehensive income 1,244 (2,184) 3,830 2,890 Group s contribution during the year 9, ,385 Dividends received during the year (1,412) (1,412) Carrying amount of interest in investee at end of the year 14,859 4,403 6,619 25,881

80 215 ANNUAL REPORT Investments Group Note $ 000 $ 000 Quoted investments Equity shares, at fair value (Available-for-sale) Unquoted investments Equity shares (Available-for-sale) Non-related corporations, net of impairment losses 3, Bonds, at fair value (Available-for-sale) , ,009 Interest rate: 1.5% to 4.95% (2013: 1.18% to 4.95%) per annum Maturity: to (2013: to ) Venture capital funds and limited partnership, at fair value Total unquoted investments 126, ,684 Total investments, net of impairment losses 127, ,033 Unquoted equity investments where the fair value cannot be reliably estimated are classified as available-for-sale investments. The Group has no intention to dispose these investments at the balance sheet date.

81 216 ST ENGINEERING / ABOVE & BEYOND 16. Intangible assets (a) Goodwill Group Note $ 000 $ 000 Cost At beginning of the year 480, ,337 Acquisition of a subsidiary and business 5,847 Finalisation of purchase price allocation 489 (908) Deconsolidation of a subsidiary (1,732) Disposal of subsidiaries 476 (112) Translation difference 17,575 15,233 At end of the year 497, ,397 Impairment At beginning of the year 31,995 29,262 Impairment losses for the year ^ 5 10,829 2,141 Disposal of a subsidiary (112) Translation difference At end of the year 43,622 31,995 Group $ 000 $ 000 $ 000 Net book value 453, , ,075 ^ For the purpose of annual impairment testing, the recoverable amounts of the CGUs are determined based on their value-in-use calculations. During the year, the recoverable amounts of three CGUs (2013: three CGUs) are determined to be lower than the carrying values and impairment losses of $10,829,000 (2013: $2,141,000) are recognised in other operating expenses in the income statement.

82 217 ANNUAL REPORT Intangible assets (continued) (b) Other intangible assets Note Dealer network Development expenditure Commercial and intellectual property rights Film cost inventory Brands Licenses Technology agreement Others Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group Cost At ,282 14,619 62,957 11,803 73,458 9,905 12, ,071 Additions 2,978 32,748 31,353 67,079 Acquisition of business 2,742 2,963 5,705 Finalisation of purchase price allocation 8, (155) (1,068) 7,064 Translation difference ,138 2,839 (185) 629 5,877 At and ,566 17,763 68,058 11,803 76,332 42,313 31,982 10, ,796 Additions ^ 29,094 2,000 12,024 43,118 Acquisition of subsidiaries ,049 Finalisation of purchase price allocation (1,391) 650 (741) Deconsolidation of a subsidiary (749) (749) Translation difference ,987 2,903 (87) 1,355 6,498 At ,331 47,041 71,946 11,803 79,235 55,246 33,337 11, ,971 Accumulated amortisation At ,540 4,564 40,209 11,803 7, ,215 75,553 Amortisation for the year * 5 2,059 2,813 5,754 1, , ,868 Impairment losses Translation difference , (4) 22 2,057 At and ,868 7,522 47,299 11,803 9, ,024 4,375 92,790 Amortisation for the year * 5 1,488 3,518 4,369 1,294 1,154 2,432 1,933 16,188 Impairment losses + 5 1,900 1,310 3,210 Deconsolidation of a subsidiary (175) (175) Translation difference , (11) 186 (1) 2,519 At ,696 11,122 55,055 11,803 10,568 3,339 4,642 6, ,532 Net book value At ,635 35,919 16,891 68,667 51,907 28,695 4, ,439 At ,698 10,241 20,759 67,319 41,427 29,958 6, ,006 At ,742 10,055 22,748 66,275 9,866 7, ,518

83 218 ST ENGINEERING / ABOVE & BEYOND 16. Intangible assets (continued) (b) Other intangible assets (continued) ^ Includes $2,000,000 of intellectual property rights received as part of the consideration received from disposal of a joint venture. * Amortisation charge of $16,188,000 (2013: $14,868,000) is recognised in the income statement as part of: Other operating expenses of $6,172,000 (2013: $8,671,000); and Cost of sales of $10,016,000 (2013: $6,197,000) + During the year, the Group assessed that certain licenses and commercial and intellectual property rights are impaired as these intangible assets are not expected to be generating future economic benefits for the Group. Hence, impairment losses of $3,210,000 were recognised during the year. (c) Total intangible assets Group $ 000 $ 000 $ 000 Net book value 671, , ,593 Impairment testing of goodwill For the purpose of impairment testing, goodwill is allocated to the Group s business divisions. The aggregate carrying amounts of goodwill allocated to each CGU within the business divisions are as follows: Group $ 000 $ 000 Aerospace Aircraft Maintenance & Modification 11,527 10,740 Component/Engine Repair & Overhaul 12,940 12,133 Engineering & Material Services 3,986 5,921 Electronics Communication & Sensor Systems Group 236, ,164 Software Systems Group 27,353 26,263 Land Systems Automotive 126, ,477 Others 34,090 32, , ,402 The purchase price allocation to goodwill and other net assets relating to the acquisition of Technicae Projetos e Serviços Automotivos Ltda. and Ticel Equipamentos Ltda were finalised during the year. Details of the adjustments made to the provisional purchase price allocation are set out in the consolidated statement of cash flows.

84 219 ANNUAL REPORT Intangible assets (continued) (c) Total 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 five years. The key assumptions used in the calculation of recoverable amounts are as follows: Pre-tax discount rate Terminal value growth rate % % % % Aerospace Aircraft Maintenance & Modification Component/Engine Repair & Overhaul Engineering & Material Services Electronics Communications & Sensor Systems Group Software Systems Group Land Systems Automotive Others The discount rate used is estimated based on past experience and the industry weighted average cost of capital. The long-term terminal value growth rate has been determined based on either the nominal GDP rates for the country in which the CGU is based on the long-term compound annual growth rate estimated by management by reference to forecasts included in industry reports and expected market development.

85 220 ST ENGINEERING / ABOVE & BEYOND 16. Intangible assets (continued) (c) Total intangible assets (continued) Sensitivity to changes in assumptions: (a) (b) Following the impairment in three (2013: three) of the CGUs within the business divisions, the recoverable amounts in these CGUs are approximately equal to the carrying amounts. Therefore, any adverse movement in a key assumption would lead to a further impairment in these CGUs. Management has identified the following key assumption for which a change as set out below could cause the carrying amount to exceed the recoverable amount. Business Divisions 2014 Others Assumption Sales growth rate (average of next 5 years) Change required for carrying amount to equal the recoverable amount % Aerospace Aircraft Maintenance & Modification Component/Engine Repair & Overhaul Sales growth rate (average of next 5 years) Sales growth rate (average of next 5 years) Electronics Communications & Sensor Systems Group Pre-tax discount rate 2.9 Land Systems Automotive Pre-tax discount rate 1.0 Terminal value growth rate 1.6 (c) No sensitivity analysis was disclosed for the remaining CGUs as the Group believes that any reasonable possible change in the key assumptions is not likely to materially cause the recoverable amount to be lower than its carrying amount.

86 221 ANNUAL REPORT Long-term receivables Group $ 000 $ 000 Long-term trade receivables 887 Housing and car loans and advances to staff Loans to: Third parties * 12,606 33,312 Allowance for doubtful loans (8,946) 12,606 24,366 14,110 25,036 Receivable: Within 1 year 11,375 12,508 After 1 year 2,735 12,528 14,110 25,036 Long-term receivables are carried at amortised cost and are subject to impairment. * Included in the loans to third parties are: (a) an amount of $12,606,000 (2013: $24,366,000) relating to instalment payment plans granted to customers. These loans are unsecured, repayable over a period of 7.5 years from The interest rates on these loans are LIBOR with margins at 0.63% (2013: 0.63%) per annum. The interest rates range from 0.95% to 0.98% (2013: 0.98% to 1.16%) per annum, which are also the effective interest rates. The interest rates are repriced every six months. Included in the loans to third parties in the prior year are: (a) a loan of $8,312,000 secured by intellectual property rights. Interest was repriced every month and chargeable at the US dollar prime rate plus 2% per annum, which was also the effective interest rate. The loan was convertible to shares of that entity, subject to certain terms and conditions. The loan was fully impaired in the prior year and the loan was written off during the year. (b) a bridging loan of $633,600 (US$500,000) was extended to a third party. The bridging loan was secured by way of a Deed of Debenture, which created a floating charge over the assets of the third party. This loan was treated as a net investment in the third party. The loan was stated at cost and was fully impaired due to uncertainty over collectability. During the year, bridging loan of US$500,000 was converted into ordinary shares of an investment. The conversion was due to the third party restructuring all their outstanding loans into new ordinary shares.

87 222 ST ENGINEERING / ABOVE & BEYOND 18. Finance lease RECEIVABLES The Group entered into finance lease arrangements with customers with terms ranging from 1 to 5 years (2013: 1 to 5 years) and effective interest rates ranging from 3.95% to 23.38% (2013: 1.3% to 8.73%) per annum. The Group 2014 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 Within 1 year 31,067 (517) 30,550 (23,678) 6,872 2 to 5 years 2,553 (283) 2,270 (1,297) ,620 (800) 32,820 (24,975) 7, Within 1 year 29,903 (330) 29,573 (13,126) 16,447 2 to 5 years 4,484 (545) 3,939 (1,260) 2,679 34,387 (875) 33,512 (14,386) 19,126 Group $ 000 $ 000 Net investment in finance lease Not past due and not impaired 2,984 6,956 Past due and not impaired 4,861 12,170 7,845 19,126 Individually assessed Doubtful lease receivables 24,975 14,386 Allowance for doubtful lease receivables (24,975) (14,386) 19. Deferred tax assets and liabilities Unrecognised temporary differences relating to investments in subsidiaries As at, a deferred tax liability of $138,236,000 (2013: $131,076,000) for temporary difference of $486,606,000 (2013: $459,651,000) related to undistributed earnings of certain subsidiaries was not recognised as the Group has determined that the undistributed profits of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but be retained for organic growth and acquisitions.

88 223 ANNUAL REPORT Deferred tax assets and liabilities (continued) Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Group $ 000 $ 000 Tax losses 244, ,291 Deductible temporary differences 3,135 2,915 Unabsorbed wear and tear allowance and investment allowance 2,198 2, , ,424 The tax benefits have not been recognised in the financial statements due to the uncertainty over the sufficiency of future taxable profits to be generated 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. Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: The Group Assets Liabilities $ 000 $ 000 $ 000 $ 000 Property, plant and equipment (24) (51) 98,615 84,955 Intangible assets 71,987 69,655 Allowance for doubtful debts (712) (1,688) Allowance for inventory obsolescence (25,724) (18,882) Provisions and accruals (131,624) (130,425) 1 Unabsorbed capital allowances and unutilised tax losses (21,002) (24,700) Fair value of derivative financial instruments designated as cash flow hedges (4,788) (803) 172 6,934 Other items (9,310) (8,711) 24,575 22,949 Deferred tax (assets)/liabilities (193,184) (185,260) 195, ,493 Set off of tax 86,866 89,626 (86,866) (89,626) Net deferred tax (assets)/liabilities (106,318) (95,634) 108,484 94,867 The Company Assets Liabilities $ 000 $ 000 $ 000 $ 000 Property, plant and equipment Provisions and accruals (7,392) (7,639) Other items Deferred tax (assets)/liabilities (7,392) (7,639) Set off of tax (392) (439) Net deferred tax assets (7,000) (7,200)

89 224 ST ENGINEERING / ABOVE & BEYOND 19. Deferred tax assets and liabilities (continued) Movement in temporary differences during the year: The Group Recognised As at Recognised in profit or loss in other comprehensive income Acquired in business combinations Utilisation of tax losses $ 000 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment 76,111 7,822 Intangible assets 60,533 1,914 4,941 Allowance for doubtful debts (2,486) 890 Allowance for inventory obsolescence (16,257) (2,337) Provisions and accruals (122,689) (6,338) Unabsorbed capital allowances and unutilised tax losses (31,103) (1,300) 8,742 Fair value of derivative financial instruments designated as cash flow hedges (3,299) 9,479 Other items 13,531 (2,419) 2,556 (25,659) (1,768) 9,479 4,941 11,298 The Company As at Recognised in As at Recognised in As at profit or loss profit or loss $ 000 $ 000 $ 000 $ 000 $ 000 Property, plant and equipment (18) 149 Provisions and accruals (7,639) (7,639) 247 (7,392) Other items (737) 1, (29) 243 (570) (6,630) (7,200) 200 (7,000)

90 225 ANNUAL REPORT 2014 Deconsolidation of a Exchange difference As at Recognised in profit or loss Recognised in other comprehensive income subsidiary/ Finalisation of purchase price allocation Utilisation of tax losses Exchange difference As at $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ ,904 13,024 (79) (643) 1,385 98,591 2,267 69, (252) 2,534 71,987 (92) (1,688) 1,023 (47) (712) (288) (18,882) (6,270) 25 (597) (25,724) (1,398) (130,425) (912) (1,344) (131,623) (1,039) (24,700) 63 4,175 (540) (21,002) (49) 6, (10,770) (13) (4,616) ,238 (805) 1, , (767) 6,209 (10,770) 106 5,685 1,703 2,166

91 226 ST ENGINEERING / ABOVE & BEYOND 20. Inventories and work-in-progress Group $ 000 $ 000 Inventories of equipment and spares 847, ,692 Work-in-progress in excess of progress billings Work-in-progress, including profits recognised 4,184,535 3,506,919 Progress billings (3,230,036) (2,635,102) 954, ,817 Total inventories and work-in-progress at lower of cost and net realisable value 1,802,073 1,807,509 Progress billings in excess of work-in-progress Work-in-progress, including profits recognised 4,318,592 4,456,434 Progress billings (5,043,939) (5,191,159) (725,347) (734,725) In 2014, raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of sales amounted to $4,952,789,000 (2013: $4,739,240,000). (i) Allowances for inventory obsolescence and foreseeable losses As at, the inventories are stated after allowance for inventory obsolescence of $302,931,000 (2013: $210,103,000) and work-in-progress in excess of progress billings is stated after provision for foreseeable losses of $15,567,000 (2013: $17,969,000). (ii) Net realisable value write-down As at, write down of work-in-progress to net realisable value was nil (2013: $30,225,000). The written-down value was included in cost of sales. In 2013, the work-in-progress with net realisable value of $131,815,000 was reclassified to construction-in-progress (Note 12) as the asset would be engaged in an operating lease.

92 227 ANNUAL REPORT Trade RECEIVABLES Group $ 000 $ 000 Not past due and not impaired 596, ,989 Past due and not impaired 430, ,912 1,027, ,901 Collectively assessed Gross receivables 4,310 4,777 Allowance for doubtful debts (4,310) (4,777) Individually assessed Gross receivables 50,378 44,946 Allowance for doubtful debts (50,378) (44,886) 60 Unbilled receivables 292, ,201 Allowance for unbilled receivables (1,242) (1,225) Trade receivables, net 1,319,101 1,221,937 Trade receivables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows: $289,498,000 (2013: $218,060,000) denominated in USD $51,779,000 (2013: $14,546,000) denominated in Euro Trade receivables amounting to $30,092,000 (2013: $10,970,000) are arranged to be repaid through letters of credit issued by reputable banks. A subsidiary within the Group has not recognised $17,600,000 (2013: $18,100,000) of trade receivable due from one of its customers in view of uncertainty over the collectability of the debts. The amount would be recognised in the financial statements upon receipt.

93 228 ST ENGINEERING / ABOVE & BEYOND 22. Amounts due from related PARTIES Group Company $ 000 $ 000 $ 000 $ 000 Trade: Subsidiaries 6,592 5,601 Associates 22,383 16,061 Joint ventures 3,090 1,527 Related corporations 40,568 19, ,041 36,657 6,635 5,608 Non-trade: Subsidiaries *1 547, ,665 Associates *2 3,049 2,624 Joint ventures *3 5,279 9,285 8,328 11, , ,665 Allowance for doubtful debts (3,181) (1,060) (6,981) (4,901) 71,188 47, , ,372 Receivable: Within 1 year 66,382 40, , ,498 After 1 year 4,806 7,430 50, ,874 71,188 47, , ,372 There were no significant amounts due from related parties denominated in currencies other than the functional currencies of the Group as at and 31 December Amounts due from related parties denominated in currencies other than the functional currency of the Company as at 31 December are as follows: $84,119,000 (2013: $147,204,000) denominated in USD * 1 Included in the amounts due from subsidiaries (non-trade) are: (a) loans of $532,724,000 (2013: $752,171,000) bearing interest at rates ranging from 1.30% to 4.18% (2013: 0.61% to 4.98%) per annum. The loans are unsecured and repayable from 12 March 2015 to 31 March 2016; and (b) interest-free loans of $6,981,000 (2013: $4,901,000), which are unsecured and not repayable in the foreseeable future. The loans are fully impaired.

94 229 ANNUAL REPORT Amounts due from related parties (continued) * 2 The amounts due from associates (non-trade) are: (a) a loan of $2,892,000 (2013: $2,624,000) whereby interest is charged at EURIBOR + 1% per annum (2013: EURIBOR + 1% per annum) and is repriced every three months (2013: three months). The interest rate on the loan is 1.08% (2013: 1.29%) per annum. The loan is unsecured and repayable on demand; and (b) an interest-free loan of $157,000 (2013: nil), which is unsecured and repayable on demand. * 3 Included in amounts due from joint ventures (non-trade) are: (a) a loan of $272,000 (2013: $1,060,000) bearing interest at LIBOR % (2013: LIBOR %) per annum. The loan is unsecured, not expected to be repayable in the next 12 months and had been fully impaired in prior years; (b) a loan of $4,806,000 (2013: $4,806,000) bearing interest at 6.38% (2013: 6.38%) per annum, which is the effective interest rate. The loan is unsecured and repayable by 2029; and (c) a loan of $3,136,000 in 2013 was fully repaid during the year. The loan was unsecured, bearing interest at 6.36% per annum, which was the effective interest rate. 23. Advances and other RECEIVABLES Group Company Note $ 000 $ 000 $ 000 $ 000 Deposits 22,604 19, ,422 Interest receivables 13,098 12,330 1,432 1,602 Other recoverables 30,543 42,080 2,035 3,557 Non-trade receivables 37,642 73, Advance payments to suppliers 341, ,626 Prepayments * 83,737 84, Derivative financial instruments 43 1,171 51, , ,210 3,597 9,827 * The Group made progressive payments to a contractor of $7,109,000 for the development of intellectual property rights relating to the design and prototype of a construction and mining equipment. During the year, the Group issued a notice for breach of contract to the contractor as they were unable to fulfil their contractual obligations to complete the development. The Group assessed that the progressive payments made are not recoverable and the intellectual property developed to date has no economic value. As such, the Group fully impaired the progressive payments made in relation to the intellectual property rights being developed up to.

95 230 ST ENGINEERING / ABOVE & BEYOND 24. Short-term investments Group Note $ 000 $ 000 Quoted investments Equity shares, at fair value (Fair value through profit or loss) Unquoted investments Bonds, at fair value (Available-for-sale) , ,377 Interest rate: 2.67% to 4.95% (2013: 1.10% to 5.875%) per annum Maturity: to (2013: to ) 119, , Bank balances and other liquid funds Group Company $ 000 $ 000 $ 000 $ 000 Fixed deposits with financial institutions 1,134,657 1,460, , ,417 Cash and bank balances 336, ,052 88, ,707 1,470,723 1,930, , ,124 Deposits pledged (8,111) (9,216) Cash and cash equivalents 1,462,612 1,920, , ,124 Fixed deposits with financial institutions mature at varying periods within 10 months (2013: 10 months) from the financial year-end. Interest rates range from 0.04% to 3.8% (2013: 0.01% to 3.08%) per annum, which are also the effective interest rates. Cash and bank balances of $8,111,000 (2013: $9,216,000) have been placed with banks as security for letters of credit issued to third parties. Cash and cash equivalents denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows: $184,243,000 (2013: $200,213,000) denominated in USD $132,114,000 (2013: $304,512,000) denominated in Euro

96 231 ANNUAL REPORT Trade PAYABLES and accruals Group Company Note $ 000 $ 000 $ 000 $ 000 Trade payables 831, ,872 Non-trade payables * 172, ,200 8,004 5,989 Purchase of property, plant and equipment Accrued operating expenses 897, ,400 35,963 37,845 Accrued interest payable 18,396 15,398 Derivative financial instruments 43 21,410 28,343 1,941,335 1,958,441 43,967 43,834 Payable: Within 1 year 1,667,180 1,604,740 26,961 25,017 After 1 year 274, ,701 17,006 18,817 1,941,335 1,958,441 43,967 43,834 * The non-trade payables includes an amount of $101,352,000 (2013: $142,562,000) for its obligation to perform engineering development work as part of the consideration for the acquisition of an associate. Trade payables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows: $199,622,000 (2013: $120,203,000) denominated in USD $169,913,000 (2013: $216,914,000) denominated in Euro

97 232 ST ENGINEERING / ABOVE & BEYOND 27. Amounts due to related PARTIES Group Company $ 000 $ 000 $ 000 $ 000 Trade: Subsidiaries 1,882 1,778 Associates 5,625 3, Joint ventures 3,117 10,266 Related corporations 22,488 10, ,230 24,503 1,885 1,948 Non-trade: Subsidiaries * 1 602, ,190 Joint ventures * Related corporations , ,190 31,235 25, , ,138 Payable: Within 1 year 29,364 24, ,988 98,946 After 1 year 1, , ,192 31,235 25, , ,138 Amounts due to related parties denominated in currencies other than the functional currency of the Company as at 31 December are as follows: $195,103,000 (2013: $246,067,000) denominated in USD * 1 Included in the amounts due to subsidiaries (non-trade) are loans of $562,959,000 (2013: $606,055,000) bearing interest at 4.18% (2013: 4.98% to 12.15%) per annum. The loans are unsecured and repayable from 01 September 2015 to 16 July * 2 In the prior year, the amounts due to joint ventures (non-trade) included a loan of $836,000 bearing interest at 1.025% per annum, which was the effective interest rate. The loan was unsecured and had been fully repaid.

98 233 ANNUAL REPORT Provisions Group $ 000 $ 000 Provisions for: Warranties 200, ,212 Liquidated damages 20,710 10,890 Foreseeable losses 24,007 21, , ,910 (a) Movements in provision for warranties are as follows: Group Note $ 000 $ 000 At beginning of the year 186, ,447 Charge to profit or loss 5 39,076 6,524 Provision utilised (25,924) (17,479) Deconsolidation of a subsidiary (854) Translation difference 1,845 1,720 At end of the year 200, ,212 (b) Movements in provision for liquidated damages are as follows: Group Note $ 000 $ 000 At beginning of the year 10,890 11,949 Charge to profit or loss 5 12,928 2,371 Provision utilised (1,861) (3,430) Deconsolidation of a subsidiary (1,241) Translation difference (6) At end of the year 20,710 10,890 (c) Movements in provision for foreseeable losses are as follows: Group $ 000 $ 000 At beginning of the year 21,808 16,741 Charge to profit or loss 14,939 19,706 Provision utilised (12,769) (14,639) Translation difference 29 At end of the year 24,007 21,808

99 234 ST ENGINEERING / ABOVE & BEYOND 29. Borrowings Group Note $ 000 $ 000 Non-current Bonds 658, ,283 Long-term bank loans 267, ,867 Lease obligations 17,547 18,150 Other loans , ,864 Current Short-term bank loans 29, ,842 Long-term bank loans 43, ,789 Lease obligations 1,126 1,321 Other loans , ,321 Total borrowings 1,018,628 1,373,185 Total borrowings comprise: Unsecured fixed rate bonds (a) 658, ,283 Secured bank loans (b) 46,809 87,975 Unsecured bank loans (b) 294, ,523 Lease obligations (c) 18,673 19,471 Other loans (d) ,018,628 1,373,185 (a) Unsecured fixed rate bonds Group $ 000 $ 000 Principal 660, ,600 Unamortised discount (2,026) (2,317) 658, ,283 Unamortised discount: At beginning of the year 2,317 2,579 Amortisation for the year (372) (351) Translation difference ,026 2,317 On 16 July 2009, the Group issued US$500 million 4.80% Notes due 2019 under its US$1.2 billion Multicurrency Medium Term Note Programme. The bonds bear interest at a fixed rate of 4.80% per annum and interest is payable every six months from the date of issue. The bonds are unconditionally and irrevocably guaranteed by the Company. At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the guarantee.

100 235 ANNUAL REPORT Borrowings (continued) (b) Secured and unsecured bank loans Effective Group interest rate Maturity % $ 000 $ 000 Bank loans 0.41% to 7.21% 2015 to , ,498 The bank loans are denominated in USD and Chinese Yuan (2013: SGD, USD, Indian Rupees and Chinese Yuan). Included in the bank loans are: (i) (ii) Loans amounting to $17,040,000 (2013: $27,183,000) which are secured by land and buildings of certain subsidiaries; and Loans amounting to $29,769,000 (2013: $60,792,000) which are secured over certain property, plant and equipment of a subsidiary. (c) Lease obligations A subsidiary leases certain land, buildings and equipment from a foreign Airport Authority under a finance lease arrangement until 31 October 2041, with an option to terminate the lease at any time with a 36-month written notice. The leased assets are pledged as collateral against the lease. The obligations under the finance leases to be paid by the subsidiaries are as follows: The Group 2014 Minimum Present value lease payment Interest of payment $ 000 $ 000 $ to 5 years 6,368 (3,410) 2,958 After 5 years 30,543 (14,828) 15,715 Total 36,911 (18,238) 18,673 Repayable: Within 1 year 1,126 After 1 year 17,547 18, to 5 years 7,218 (3,258) 3,960 After 5 years 30,389 (14,878) 15,511 Total 37,607 (18,136) 19,471 Repayable: Within 1 year 1,321 After 1 year 18,150 19,471 Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

101 236 ST ENGINEERING / ABOVE & BEYOND 29. Borrowings (continued) (d) Other loans Included in other loans are: (i) (ii) US dollar denominated term notes of $468,000 (US$354,622) (2013: of $564,000 (US$445,307)) and $121,000 (US$91,248) (2013: $138,000 (US$109,393)) 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% (2013: 2.75% and 4%) per annum, which are also the effective interest rates, and are payable through 1 July 2019 and 28 June 2019, respectively; and A loan of $231,000 (MYR600,000) from a non-controlling shareholder of a subsidiary in 2013 was fully repaid during the year. This loan was unsecured, bears interest at 5% per annum, which was also the effective interest rate. 30. Deferred income Group $ 000 $ 000 Government compensation 41,507 48,209 Government grants 47,876 32,431 Deferred rents 9,376 3,055 98,759 83,695 Government compensation and grants relate mainly to grants received: (a) (b) for subsidising the costs incurred in the acquisitions of plant and equipment for new product development and production activities, and for the relocation of a subsidiary s manufacturing facility in the People s Republic of China; and to share the cost for purchase of plant and machinery, and yard facility upgrades in the US operation. 31. Other long-term payables Group $ 000 $ 000 After 1 year 1,000 1,500 The loan of $1,000,000 (2013: $1,500,000) is payable to a previous non-controlling shareholder of a subsidiary for the purchase of remaining shareholdings of the subsidiary. The amount payable is unsecured, interest-free and repayable within seven years from 2010.

102 237 ANNUAL REPORT Share capital Group and Company $ 000 $ 000 Issued and fully paid At beginning of the year 3,105,903,530 (2013: 3,080,441,746) ordinary shares 852, ,841 Issued during the year 14,101,186 (2013: 25,461,784) ordinary shares 36,815 70,770 At end of the year 3,120,004,716 (2013: 3,105,903,530) ordinary shares 889, ,611 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. 33. Treasury shares Group and Company 2014 $ 000 At beginning of the year Purchased during the year 6,529 At end of the year 6,529 Treasury shares relate to ordinary shares of the Company that are held by the Company. During the financial year, the Company purchased 2,034,000 of its ordinary shares by way of on-market purchases. The total amount paid to purchase the shares was $6,529,000. The shares, held as treasury shares, were included as deduction against shareholders equity.

103 238 ST ENGINEERING / ABOVE & BEYOND 34. Share-based payment arrangements The Singapore Technologies Engineering Share Option Plan ( ESOP ), the Singapore Technologies Engineering Performance Share Plan ( PSP2000 ) and the Singapore Technologies Engineering Restricted Stock Plan ( RSP2000 ) of the Company (collectively referred to as the Old Share Plans ) were approved by the members of the Company at an Extraordinary General Meeting held on 23 November Current share plan comprising the Singapore Technologies Engineering Performance Share Plan 2010 ( PSP2010 ) and the Singapore Technologies Engineering Restricted Share Plan 2010 ( RSP2010 ) was approved by the members of the Company at the Annual General Meeting held on 21 April 2010 (together, the Current Share Plans ). The Old Share Plans were terminated following the adoption of the Current Share Plans. However, all options and awards granted under the Old Share Plans prior to its termination will continue to be valid and be subject to the terms and conditions of the Old Share Plans. ESOP The Company ceased to grant options under the ESOP with effect from Information regarding ESOP is as follows: (a) (b) (c) The exercise price of the options is equal to volume-weighted average price for the shares on the SGX over the three consecutive trading days immediately preceding the date of grant. 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 five years for non-executive directors and 10 years for the employees of the Company and its subsidiaries. During the financial year, the Company issued 6,644,956 (2013: 17,986,756) ordinary shares for cash at the respective price per share upon the exercise of options granted by the Company under ESOP. Grant no. No. of ordinary shares issued Price per ordinary share $ 0402N 1,020, N 1,511, N 730, N 823, N 639, N 612, N 817, N 488,

104 239 ANNUAL REPORT Share-based payment arrangements (continued) ESOP (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 ESOP Number of shares ESOP At beginning of the year 30,517,942 48,760,165 Exercised (6,644,956) (17,986,756) Lapsed (400,978) (255,467) At end of the year 23,472,008 30,517,942 Exercisable at end of the year 23,472,008 30,517,942 (ii) Details of share options 2014 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 ,060,256 39,873 1,020, to ,589,308 78,260 1,511, to ,479,376 13, ,606 1,735, * to ,509,381 32, ,404 2,653, * to ,572,311 36, ,705 3,896, * to ,723,330 47, ,993 4,063, * to ,387,216 74, ,837 5,494, * to ,196,764 78, ,980 5,628, * to ,517, ,978 6,644,956 23,472,008 * Includes one Executive Director of the Company

105 240 ST ENGINEERING / ABOVE & BEYOND 34. Share-based payment arrangements (continued) ESOP (continued) (ii) Details of share options (continued) 2013 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 ,629 46, , to ,300,123 30,886 1,269, to ,818, ,190 1,060,256 83* to ,384, ,750 1,589, * to ,496,153 3,882 1,012,895 2,479, * to ,670,559 18,434 1,142,744 3,509, * to ,879,107 8,471 2,298,325 4,572, * to ,645,040 1,921,710 4,723, * to ,113,959 38,241 3,688,502 6,387, * to ,568, ,135 4,263,010 6,196, * to ,760, ,467 17,986,756 30,517,942 * Includes one Executive Director of the Company (iii) Details of share options exercised No. of shares Exercise Proceeds from price share issue Share price $ $ 000 $ 2014 January to March 3,291, , April to June 1,709, , July to September 1,218, , October to December 425, , ,644, January to March 11,847, , April to June 4,114, , July to September 1,498, , October to December 526, , ,986,756 The weighted average share price for options exercised during the year was $3.80 (2013: $4.13). The weighted average remaining contractual life for these options is 1.68 years (2013: 2.43 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 2013.

106 241 ANNUAL REPORT Share-based payment arrangements (continued) PSP2010 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 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, commencing with the PSP contingent awards for financial year 2009, the final award for performance shares is conditional upon the performance targets for restricted shares that have the same end of performance period being met. Outstanding Awards under PSP2010 are as follow: Year of grant Total Number of performance shares At grant date 1,413,000 1,037,100 1,627,000 4,077,100 Lapsed (155,634) (147,584) (340,345) (643,563) Outstanding as at ,257, ,516 1,286,655 3,433,537 During the year, performance shares amounting to 1,545,821 ordinary shares were awarded in respect of grant made in 2011 under PSP2010. 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 are as follows: Year of grant Market conditions 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 --) RSP2000 / RSP2010 Restricted shares are granted on an annual basis with key performance indicator targets set for a performance period, currently prescribed to be a 2-year performance period. The restricted shares will only be released to the recipient at the end of the performance 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 two years.

107 242 ST ENGINEERING / ABOVE & BEYOND 34. Share-based payment arrangements (continued) Outstanding Awards under RSP2000 / RSP2010 are as follow: 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 RSP March ,547,400 1,194,840 7,352,560 RSP February ,000 30,000 20, March ,380,041 1,028,241 4,938,890 1,412, June , , October ,000 5, March ,617, ,401 2,011,749 1,731, March ,347, ,669 3,910, September ,000 30,000 60, March ,873, ,125 4,624,475 4 April , , April ,404, ,530 1,081, May , ,300 During the year, restricted shares amounting to 1,659,932 and 4,250,477 ordinary shares were awarded under RSP2000 and RSP2010 respectively. The fair value of the restricted shares is determined at conditional grant date using the Monte Carlo simulation model. The significant inputs to the model used for the conditional grant in 2013 and 2014 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--)

108 243 ANNUAL REPORT Capital RESERVES Included in capital reserves is: (a) (b) an amount of $115,948,000 (2013: $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 (2013: $375,000) relating to an excess capital contribution from non-controlling shareholders of a subsidiary in China following the additional capital injection in prior years. 36. Other RESERVES The Group Note Foreign currency translation reserve Sharebased payment Premium paid on acquisition of non-controlling Fair Statutory reserve value reserve reserve interests Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At (212,747) 3,830 (10,062) 85,727 (2,869) (136,121) Other comprehensive income: Net fair value changes on available-for-sale financial assets (i) (7,931) (7,931) Net fair value changes on cash flow hedges (ii) 49,401 49,401 Foreign currency translation differences (iii) 42,553 (109) 69 (54) 42,459 Share of foreign currency translation differences of associates and joint ventures 10,395 10,395 Reclassification of foreign currency translation reserve to profit or loss arising from disposal of a foreign entity (205) (205) Total comprehensive income for the year, net of tax 52,743 41, (54) 94,119 Issue of shares (18,624) (18,624) Cost of share-based payment 15,490 15,490 Disposal of a subsidiary Transfer from retained earnings to statutory reserve At (160,004) 4,060 31,299 82,662 (2,668) (44,651)

109 244 ST ENGINEERING / ABOVE & BEYOND 36. Other reserves (continued) The Group Note Foreign currency translation reserve Sharebased payment Premium paid on acquisition of noncontrolling Fair Statutory reserve value reserve reserve interests Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At (160,004) 4,060 31,299 82,662 (2,668) (44,651) Other comprehensive income: Net fair value changes on available-for-sale financial assets (i) (2,020) (2,020) Net fair value changes on cash flow hedges (ii) (57,327) (57,327) Share of net fair value changes on cash flow hedges of an associate (ii) (9,891) (9,891) Foreign currency translation differences (iii) 18, (67) 18,422 Share of foreign currency translation differences of associates and joint ventures 1,336 1,336 Reclassification of foreign currency translation reserve to profit or loss arising from disposal of foreign entities Total comprehensive income for the year, net of tax 19,716 1 (69,201) 121 (67) (49,430) Issue of shares (19,559) (19,559) Cost of share-based payment 21,574 21,574 Disposal of a subsidiary (4) (4) Transfer from retained earnings to statutory reserve At (140,288) 4,074 (37,902) 84,798 (2,739) (92,057)

110 245 ANNUAL REPORT Other reserves (continued) Group $ 000 $ 000 (i) Net fair value changes on available-for-sale financial assets: Net fair value changes during the year 619 (2,447) Reclassification adjustment to profit or loss on disposal of financial assets in finance costs, net (2,639) (5,484) (2,020) (7,931) (ii) Net fair value changes on cash flow hedges: Net fair value changes during the year (66,601) 48,535 Reclassification adjustment to profit or loss on occurrence of forecast transaction in finance costs, net (739) 1,558 Recognised in the carrying value of non-financial assets on occurrence of the hedged transactions 122 (692) (67,218) 49,401 (iii) Foreign currency translation differences arising from: Translation of quasi equity loans forming part of net investments in foreign entities (8,764) (945) Translation of foreign currency loans used as hedging instruments for effective net investment hedges (14,579) (5,890) Translation of foreign entities 41,673 49,388 Foreign currency translation reserve 18,330 42,553 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 $396.3 million (US$300 million) (2013: $197.4 million (US$155.8 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. Exchange gain or loss on the re-translation of these bonds is transferred to other comprehensive income to offset any exchange gain or loss on translation of the net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year. Statutory reserve (a) (b) In accordance with the Foreign Enterprise Law applicable to certain 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 subsidiaries 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 applicable to certain subsidiaries, appropriations from the net profits 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.

111 246 ST ENGINEERING / ABOVE & BEYOND 36. Other reserves (continued) 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 consideration paid on acquisition of non-controlling interests and the carrying value of the proportionate share of the acquiree s net assets acquired. 37. Retained earnings Group $ 000 $ 000 Retained by: The Company 568, ,416 Subsidiaries 515, ,693 Associates and joint ventures 141, ,849 1,225,040 1,191, Dividends Group and Company $ 000 $ 000 Final dividend paid in respect of the previous financial year of 4.0 cents (2013: 4.0 cents) per share 124, ,355 Special dividend paid in respect of the previous financial year of 8.0 cents (2013: 9.8 cents) per share 248, ,220 Interim dividend paid in respect of the current financial year of 4.0 cents (2013: 3.0 cents) per share 124,774 93, , ,728 Additional final dividend paid in respect of the previous financial year due to issue of shares before books closure date 1,197 2, , ,290 The Directors propose a final dividend of 4.0 cents (2013: 4.0 cents) per share amounting to $124.9 million (2013: $124.3 million) and a special dividend of 7.0 cents (2013: 8.0 cents) per share amounting to $218.5 million (2013: $248.6 million), in respect of the financial year ended. These dividends have not been recognised as a liability as at year end as they are subject to approval of the shareholders at the Annual General Meeting of the Company.

112 247 ANNUAL REPORT Related party information In addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with the following related parties on terms agreed between the parties as follows: Group $ 000 $ 000 Associates of the Group Sales and services rendered 12,087 9,692 Purchases and services received (22,367) (24,060) Dividend income 36,589 38,184 Joint ventures of the Group Sales and services rendered 27,514 15,590 Purchases and services received (15,081) (25,043) Dividend income 2,251 1,412 Other related parties * Sales and services rendered 124, ,323 Purchases and services received (23,023) (22,408) Rental expense (7,180) (11,701) Rental income 2,246 3,768 * Other related parties refer to subsidiaries, associates and joint ventures of immediate holding company. 40. Commitments (a) Capital commitments Group $ 000 $ 000 Capital expenditure contracted but not provided in the financial statements 145, ,575

113 248 ST ENGINEERING / ABOVE & BEYOND 40. Commitments (continued) (b) Leases Future minimum lease payments under non-cancellable operating leases are as follows: Group $ 000 $ 000 Third parties Within 1 year 40,680 37,574 2 to 5 years 106,850 82,942 After 5 years 222, , , ,661 Related parties Within 1 year 5,047 2,938 2 to 5 years 17,761 10,884 After 5 years 24,161 25,651 46,969 39,473 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. None of the operating leases is subject to contingent rent arrangements. (c) Operating lease commitments As lessor The Group has entered into commercial leases on its aircraft, aircraft engines and certain property, plant and equipment. The non-cancellable leases have lease term ranging from 1 to 16 years. The leases on the aircraft include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions. The future lease payment receivables under non-cancellable operating leases are as follows: Group $ 000 $ 000 Within 1 year 17,872 16,298 2 to 5 years 27,970 31,846 After 5 years 15,424 17,400 61,266 65,544 None of the operating leases is subject to contingent rent arrangements. (d) Investments As at, the Group has outstanding commitments in respect of uncalled capital to the extent of $0.7 million (2013: $0.2 million) in subsidiaries.

114 249 ANNUAL REPORT Commitments (continued) (e) Contingent liabilities (unsecured) (i) (ii) The Group is a party to various claims that arise in the normal course of the Group s business. The total liability on these matters cannot be determined with certainty. However, in the opinion of management, the ultimate liability, to the extent not otherwise provided for, will not materially impact the combined financial statements of the Group. The Group s certain subsidiaries provided equipment buy-back guarantees to financial institutions which have extended equipment financing to the customers for their purchase of their products. The outstanding equipment buy-back guarantees as at amounted to $10,531,000 (2013: $10,900,000). 41. Segment information (a) Analysis by business segments The Group is organised on a worldwide basis into four main reportable 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, elearning and interactive digital media, training services, 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. It also provides a suite of sustainable environmental engineering solutions. 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 financial years 2014 and 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.

115 250 ST ENGINEERING / ABOVE & BEYOND 41. Segment information (continued) 2014 Aerospace Electronics Land Systems Marine Others Elimination Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Revenue External sales 2,061,225 1,583,288 1,396,880 1,341, ,956 6,539,433 Inter-segment sales 10,239 30,791 8, ,069 (74,218) 2,071,464 1,614,079 1,405,132 1,341, ,025 (74,218) 6,539,433 Reportable segment profit from operations 261, ,371 38, ,835 (76,109) 55, ,973 Other income 7,059 10,402 14,525 12, ,530 (627,456) 45,175 Other expenses (5,035) (6) (1,570) (37) (24) 1,672 (5,000) Finance income 11,894 4,867 3,124 3, ,809 (96,075) 43,550 Finance costs (24,670) (6,136) (11,655) (112,961) 110,225 (45,197) Share of results of associates and joint ventures, net of tax 32, ,050 5,936 5,446 57,182 Profit before taxation 282, ,968 56, , ,245 (550,510) 650,683 Taxation (53,892) (30,614) (11,001) (14,695) (3,491) (113,693) Non-controlling interests (8,963) (1,211) 5, (5,038) Profit attributable to shareholders 220, ,143 50, , ,754 (550,498) 531,952 Other assets 2,202,519 1,783,773 2,091,015 1,106,096 4,250,300 (3,592,749) 7,840,954 Associates and joint ventures 322,508 10, ,750 8,159 17,657 6, ,352 Segment assets 2,525,027 1,794,070 2,203,765 1,114,255 4,267,957 (3,585,768) 8,319,306 Segment liabilities 1,779,360 1,596,964 1,931, ,383 2,102,832 (2,311,169) 6,054,696 Capital expenditure 87,674 61,893 86,318 37,581 10, ,101 Depreciation and amortisation 60,166 38,362 38,053 27,098 6,869 (42) 170,506 Impairment losses 6, ,049 27,873 Other non-cash expenses (1) 885

116 251 ANNUAL REPORT Segment information (continued) 2013 Aerospace Electronics Land Systems Marine Others Elimination Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Revenue External sales 2,079,076 1,650,332 1,475,361 1,237, ,450 6,633,152 Inter-segment sales 9,029 31,946 9, ,926 (83,673) 2,088,105 1,682,278 1,485,219 1,238, ,376 (83,673) 6,633,152 Reportable segment profit from operations 291, ,546 90, ,479 (58,943) 49, ,215 Other income 9,884 3,685 23,840 6, ,322 (612,683) 40,095 Other expenses (2,738) (1,641) (4,353) (43) (21) 2,889 (5,907) Finance income 14,528 9,546 4,836 37,038 77,706 (74,743) 68,911 Finance costs (18,645) (5,342) (11,175) (33,284) (89,735) 80,477 (77,704) Share of results of associates and joint ventures, net of tax 24,585 (1,466) 8,173 2,073 (2,283) 31,082 Profit before taxation 319, , , , ,329 (556,510) 729,692 Taxation (53,589) (30,502) (19,196) (36,325) 1,467 (138,145) Non-controlling interests (6,639) (2,707) (1,358) (30) 21 (10,713) Profit attributable to shareholders 259, ,119 91, , ,796 (556,489) 580,834 Other assets 2,421,451 1,732,792 1,991,478 1,137,593 4,281,836 (3,320,648) 8,244,502 Associates and joint ventures 328, ,972 3,223 17,681 1, ,139 Segment assets 2,749,468 1,733,521 2,102,450 1,140,816 4,299,517 (3,319,131) 8,706,641 Segment liabilities 2,222,830 1,538,772 1,779, ,319 2,260,361 (2,304,695) 6,446,727 Capital expenditure 176,066 90,305 67,719 56,195 7, ,737 Depreciation and amortisation 50,194 29,106 39,083 18,514 5,189 (42) 142,044 Impairment losses/(write-back of impairment) 3,488 3,479 2,348 (9) 9,306 Other non-cash expenses ,386

117 252 ST ENGINEERING / ABOVE & BEYOND 41. Segment information (continued) (b) Analysis by country of incorporation Revenue 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. Revenue Non-current assets $ 000 $ 000 $ 000 $ 000 Asia 4,981,137 4,811,651 1,932,656 1,893,992 USA 1,420,462 1,642, , ,649 Europe 75, ,952 47,647 81,599 Others 62,321 49, , ,381 6,539,433 6,633,152 2,862,622 2,809,621 (c) Analysis by geographical areas Revenue is based on the location of customers regardless of where the goods are produced or services rendered. Revenue $ 000 $ 000 Asia 3,780,770 3,868,536 USA 1,525,088 1,705,677 Europe 290, ,875 Others 943, ,064 6,539,433 6,633, 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 bank 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 derivative financial instruments are set out in Note 3.

118 253 ANNUAL REPORT Financial risk management objectives and policies (continued) The policies for managing each of these risks are broadly summarised below. Interest rate risk As at reporting date, the interest rate profile of the interest-bearing financial instruments is: Group Company $ 000 $ 000 $ 000 $ 000 Fixed rate instruments Financial assets 1,147,308 1,487, , ,417 Financial liabilities (735,904) (919,839) 411, , , ,417 Variable rate instruments Financial assets 254, , , ,171 Financial liabilities (282,724) (454,182) (562,959) (606,055) (28,183) (127,806) (30,235) 146,116 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, bank loans 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. An increase of 50 basis points in interest rate at the reporting date would lead to a reduction of the Group s profit or loss and other comprehensive income by approximately $1.4 million (2013: $2.1 million) and $2.4 million (2013: $2.9 million) respectively. A decrease in 50 basis points in interest rate at the reporting date would increase the Group s profit or loss and other comprehensive income by approximately $1.4 million (2013: $2.1 million) and $2.6 million (2013: $3.3 million) respectively. This analysis assumes that all other variables remain constant. Fixed deposits, bonds, bank loans and other financial instruments with interest rate fixed over the contractual period are excluded from the sensitivity analysis. 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 USD and Euro and the Group enters mainly into forward currency contracts to hedge against its foreign exchange risk resulting from anticipated sale and purchase transactions denominated in foreign currencies in accordance with the Group s hedging policy. The Group 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. No foreign exchange sensitivity analysis was disclosed as the Company had assessed that a reasonable change in the exchange rate would not result in any significant impact on the Group s results.

119 254 ST ENGINEERING / ABOVE & BEYOND 42. 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 impact to the Group s profit or loss and other comprehensive income arising as a result of a 10% increase in the fair value of the quoted investments, assuming no impairment on the quoted investments would lead to an increase in the Group s profit or loss and other comprehensive income by approximately $0.04 million (2013: $0.02 million) and $0.04 million (2013: $0.03 million) respectively. A 10% decrease in the fair value of the quoted investments, assuming no impairment on the quoted investments would have an equal but opposite effect. This analysis assumes that all other variables remain constant. 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 including estimated interest payments. The Group 2014 Contractual Within 2 to 5 More than cash flow 1 year years 5 years $ 000 $ 000 $ 000 $ 000 Bank loans (351,486) (76,460) (275,026) Bonds (804,516) (31,702) (772,814) Other loans (669) (18) (651) Lease obligations (36,911) (1,818) (4,550) (30,543) Other long-term payables (1,000) (1,000) Trade and other payables (1,951,160) (1,675,134) (276,026) Derivative financial instruments: Forward currency contracts gross payments (791,244) (553,680) (237,564) gross receipts 777, , ,132 Interest rate swaps - settled net (667) (857) 190 Cross currency interest rate swaps settled net 24,184 4,381 19,803

120 255 ANNUAL REPORT Financial risk management objectives and policies (continued) Liquidity risk (continued) The Group 2013 Contractual Within 2 to 5 More than cash flow 1 year years 5 years $ 000 $ 000 $ 000 $ 000 Bank loans (746,276) (438,292) (294,139) (13,845) Bonds (802,222) (30,413) (121,651) (650,158) Other loans (1,054) (257) (84) (713) Lease obligations (37,606) (1,972) (5,246) (30,388) Other long-term payables (1,500) (1,500) Trade and other payables (1,955,457) (1,601,350) (354,107) Derivative financial instruments: Forward currency contracts gross payments (1,652,840) (1,234,003) (418,837) gross receipts 1,636,338 1,233, ,733 Cross currency swap net receipts 1,243 1,243 Interest rate swaps - settled net (1,744) (1,844) 100 Cross currency interest rate swaps settled net 3,143 4, (1,602) The Company 2014 Trade payables and accruals (43,967) (26,961) (17,006) Amounts due to related parties (638,327) (201,973) (436,354) Derivative financial instruments: Forward currency contracts gross payments (722) (722) gross receipts Intra-group financial guarantee (274,748) (274,748) 2013 Trade payables and accruals (43,834) (25,017) (18,817) Amounts due to related parties (716,713) (99,671) (535,941) (81,101) Derivative financial instruments: Forward currency contracts gross payments (5,354) (4,632) (722) gross receipts 5,545 4, Intra-group financial guarantee (349,874) (349,874)

121 256 ST ENGINEERING / ABOVE & BEYOND 42. Financial risk management objectives and policies (continued) Liquidity risk (continued) For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these instruments. The amounts are compiled on a net basis for derivatives that are net-settled. Gross inflows and outflows are included for derivatives that are gross-settled on a simultaneous basis. Net-settled derivative financial assets are included in the maturity analysis as they are held to hedge the cash flow variability of the Group s bank loans and bonds. Except for the cash flow arising from the intra-group financial guarantee, it is not expected that the cash flows included in the maturity analysis of the Group and the Company could occur significantly earlier, or at significantly different amounts. At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the intra-group financial guarantee. 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. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is: Group Company $ 000 $ 000 $ 000 $ 000 Investments 246, ,614 Long-term receivables 13,223 25,036 Finance lease receivables 7,845 19,126 Derivative financial instruments, non-current 24,263 39, Trade receivables 1,028, ,961 Amounts due from related parties 71,188 47, , ,372 Advances and other receivables 105, ,004 3,573 9,739 Bank balances and other liquid funds 1,470,723 1,930, , ,124 Recognised financial assets 2,967,294 3,503, ,600 1,243,312 The Group limits its exposure to credit risk on investments held by investing mostly in bonds of high credit ratings. Management actively monitors the credit ratings and does not expect any counterparty to fail to meet its obligations. Derivatives are entered into with financial institutions, which have long-term rating of A3 by Moody s, A- by Standard & Poor s or the equivalent by a reputable credit rating agency. Cash and bank deposits are placed with reputable financial institutions.

122 257 ANNUAL REPORT Financial risk management objectives and policies (continued) Credit risk (continued) As at, there were no significant concentrations of credit risk, except for 43% (2013: 30%) of trade debts relating to three major customers of the Group. The table below analyses the trade receivables by the Group s four main reportable segments. Group $ 000 $ 000 Aerospace 261, ,981 Electronics 354, ,528 Land Systems 303, ,951 Marine 89,863 98,065 Others 19,328 27,436 1,028, ,961 The ageing of financial assets excluding cash and cash equivalents, investments and derivative financial instruments, net of impairment losses, are as follows: Group Company $ 000 $ 000 $ 000 $ 000 Not past due 734, , , , days 365, , days 52,347 59, days 48,839 23,729 > 360 days 23,960 24,124 1,224,647 1,180, , ,997 The movements in allowance for impairment losses in respect of financial assets excluding cash and cash equivalents, intangibles and derivative financial instruments are as follows: Group Company $ 000 $ 000 $ 000 $ 000 At beginning of the year 76,230 88,450 4,901 7,963 Charge to profit or loss 17,797 9,277 2,000 2,000 Allowance utilised (10,572) (24,522) (5,132) Translation difference 1,012 3, At end of the year 84,467 76,230 6,981 4,901

123 258 ST ENGINEERING / ABOVE & BEYOND 43. Fair value of financial instruments 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 2014 Financial Assets Available-for-sale Equity investments (quoted) Venture capital funds and limited partnership Bonds (unquoted) 15, , ,778 Fair value through profit or loss Equity investments (quoted) Derivatives Forward currency contracts 2,612 2,612 Cross currency interest rate swaps 22,247 22,247 Embedded derivatives , ,961 Financial Liabilities Derivatives Forward currency contracts 16,469 16,469 Interest rate swaps Embedded derivatives 15,548 15,548 32,670 32, Financial Assets Available-for-sale Equity investments (quoted) Venture capital funds and limited partnership Bonds (unquoted) 15, , ,386 Fair value through profit or loss Equity investments (quoted) Derivatives Forward currency contracts 32,031 32,031 Cross currency swap 1,241 1,241 Cross currency interest rate swaps 2,871 2,871 Embedded derivatives 55,649 55, , ,774 Financial Liabilities Derivatives Forward currency contracts 48,132 48,132 Interest rate swaps 1,728 1,728 Embedded derivatives ,858 50,858

124 259 ANNUAL REPORT Fair value of financial instruments (continued) The Company 2014 Significant other observable inputs (Level 2) $ 000 Financial Assets Derivatives Forward currency contracts Financial Assets Derivatives Forward currency contracts 191 Valuation processes applied by the Group The Group has an established approach with respect to the measurement of fair values. The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair value, then the Group assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of FRS, including the level in the fair value hierarchy the resulting fair value estimate should be classified. 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 Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred. There have been no transfer from Level 2 to Level 1 and vice versa in 2014 (2013: no transfers in either directions). The fair values of quoted investments are determined directly by reference to their quoted bid 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 market 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.

125 260 ST ENGINEERING / ABOVE & BEYOND 43. Fair value of financial instruments (continued) Long-term receivables The fair values of long-term receivables and amount due from related parties are estimated based on the expected cash flows discounted to present value. Long-term payables The fair values of amount due to related parties are estimated based on present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. Short-term borrowings and other current payables The carrying amounts approximate fair values because of the short period to maturity of these instruments. Derivatives The fair value of forward currency contracts, interest rate swaps, cross currency swap, embedded derivatives and cross currency interest rate swaps are based on broker quotes. Similar contract are traded in an active market and the quotes reflect the actual transactions in similar instruments. Bonds The fair value of the US$500 million bonds as at is determined based on quoted market prices. 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 Total gain or loss: recognised in profit or loss, in finance costs, net 26 recognised in other comprehensive income (31) Sales (27) Closing balance Total gain or loss for the year included in profit or loss (presented in finance costs, net) for assets held at 31 December 10

126 261 ANNUAL REPORT 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 The Group 2014 Loans and receivables Fair value through profit or loss Derivatives used for hedging Available -for-sale Liabilities at amortised cost Total carrying amount Fair value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Assets Investments 127, , ,211 Long-term receivables 13,223 13,223 13,223 Finance lease receivables 7,845 7,845 7,845 Derivative financial instruments 23, ,263 24,263 Trade receivables 1,028,504 1,028,504 1,028,504 Amounts due from related parties 71,188 71,188 71,188 Advances and other receivables 103, , ,058 Short-term investments , , ,279 Bank balances and other liquid funds 1,470,723 1,470,723 1,470,723 2,695,370 24,099 1, ,131 2,967,294 2,967,294 Liabilities Creditors and accruals 5,257 16,153 1,919,925 1,941,335 1,936,667 Amounts due to related parties 31,235 31,235 31,235 Lease obligations 18,673 18,673 17,938 Bank loans 340, , ,942 Other loans Other long-term payables 1,000 1, Bonds 658, , ,227 Derivative financial instruments ,439 11,260 11,260 6,078 26,592 2,970,788 3,003,458 3,069,770

127 262 ST ENGINEERING / ABOVE & BEYOND 43. Fair value of financial instruments (continued) The Group 2013 Loans and receivables Fair value through profit or loss Derivatives used for hedging Available -for-sale Liabilities at amortised cost Total carrying amount Fair value $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Assets Investments 166, , ,033 Long-term receivables 25,036 25,036 25,036 Finance lease receivables 19,126 19,126 19,126 Derivative financial instruments 18,939 21,039 39,978 39,978 Trade receivables 941, , ,961 Amounts due from related parties 47,506 47,506 47,506 Advances and other receivables 147,190 36,424 15, , ,004 Short-term investments , , ,581 Bank balances and other liquid funds 1,930,140 1,930,140 1,930,140 3,110,959 55,567 36, ,410 3,503,365 3,503,365 Liabilities Creditors and accruals 20,734 7,609 1,930,098 1,958,441 1,951,234 Amounts due to related parties 25,359 25,359 25,359 Lease obligations 19,471 19,471 19,329 Bank loans 721, , ,498 Other loans Other long-term payables 1,500 1,500 1,357 Bonds 631, , ,265 Derivative financial instruments 16,621 5,894 22,515 22,515 37,355 13,503 3,330,142 3,381,000 3,440,490

128 263 ANNUAL REPORT Fair value of financial instruments (continued) The Company 2014 Loans and receivables Fair value through profit or loss Liabilities at amortised cost Total Carrying amount Fair value $ 000 $ 000 $ 000 $ 000 $ 000 Assets Derivative financial instruments Amounts due from related parties 547, , ,070 Advances and other receivables 3,573 3,573 3,573 Bank balances and other liquid funds 404, , , , , ,600 Liabilities Trade payables and accruals 43,967 43,967 42,893 Amounts due to related parties 604, , , , , , Assets Derivative financial instruments Amounts due from related parties 763, , ,372 Advances and other receivables 9, ,739 9,739 Bank balances and other liquid funds 470, , ,124 1,243, ,243,312 1,243,312 Liabilities Trade payables and accruals 43,834 43,834 42,629 Amounts due to related parties 652, , , , , ,767

129 264 ST ENGINEERING / ABOVE & BEYOND 43. Fair value of financial instruments (continued) Derivative financial instruments Cash flow hedges Contractual/ Estimated fair value Contractual/ notional notional Estimated fair value Note amount Asset Liability amount Asset Liability $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Forward currency contracts: to hedge confirmed sales in foreign currencies (a)(i) 275,705 1,505 (6,016) 410,956 2,558 (7,720) to hedge firm purchase commitments in foreign currencies (a)(i) 180, (5,528) 159,225 5,912 (1,308) to hedge accounts receivable in foreign currencies (a)(i) 4,861 (154) 84, (1,666) to hedge accounts payable in foreign currencies (a)(i) 2,045 (143) 2, (13) Interest rate swaps (b)(i) 231,158 (653) 221,760 (886) Embedded derivatives (a)(i) 433,068 (12,211) 644,391 27,904 (998) Fair value hedges Forward currency contracts: to hedge firm purchase commitments in foreign currencies (a)(i) to hedge accounts receivable in foreign currencies (a)(i) 22,971 6 (952) 32,919 (912) to hedge accounts payable in foreign currencies (a)(i) 14,060 (935) Non-hedging instruments Forward currency contracts: sales (a)(ii) 230, (2,671) 625, (36,513) purchases (a)(ii) 52, (70) 348,326 23,402 Interest rate swap (b)(ii) 151,372 (842) Cross currency swap (c) 210,913 1,241 Cross currency interest rate swaps (d) 246,350 22, ,350 2,871 Embedded derivatives (a)(ii) 249, (3,337) 470,178 27,745 Total 25,434 (32,670) 91,792 (50,858) Less: Current portion (1,171) 21,410 (51,814) 28,343 Non-current portion 24,263 (11,260) 39,978 (22,515)

130 265 ANNUAL REPORT 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 $933,575,000 (2013: $1,335,724,000) 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 the sales contracts approximate the timing of the expected cash flows of their respective hedged items, which are on varying periods up to six years (2013: seven 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 $532,429,000 (2013: $1,443,919,000). These were not designated as accounting hedges, but were used to economically hedge confirmed sales in foreign currencies and firm purchase commitments in foreign currencies. (b) Interest rate swaps (i) As at, the Group has outstanding interest rate swaps amounting to $231,158,000 (2013: $221,760,000), 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 0.61% to 0.77% (2013: 0.62% to 0.77%) per annum and receives variable rates of interest equal to the LIBOR per annum on the notional amount. The USD interest rate swaps have the same maturity terms as the unsecured USD long-term loans due in (ii) In the prior year, the Group had an outstanding interest rate swap amounting to $151,372,000, which was not designated as hedging instrument in a cash flow hedge relationship. The Euro interest rate swap was being used to hedge the exposure to variability in cash flows associated with the floating rate of the unsecured long-term bank loan. Under the Euro interest rate swap, the Group paid a fixed rate of interest of 2.50% per annum and receives a variable rate of interest up to the EURIBOR per annum on the notional amount. The Euro interest rate swap had the same maturity terms as the unsecured bank loan. In 2014, the interest rate swap had matured with the repayment of the bank loan. (c) Cross currency swap In the prior year, the Group had an outstanding cross currency swap amounting to $210,913,000, which was not designated as hedging instrument in a cash flow hedge relationship. The cross currency swap was matured during the year with gain recognised in profit or loss. The USD cross currency swap converted the USD bank loan with floating USD interest rate at LIBOR % per annum to an equivalent Euro bank loan (Euro 120,000,000) with floating Euro interest rate at EURIBOR % per annum. (d) Cross currency interest rate swaps As at, the Group has outstanding cross currency interest rate swaps amounting to $246,350,000 (2013: $246,350,000), which are not designated as hedging instruments. The swaps are being used to economically hedge the foreign currency exposure of the US$500 million bond liability and convert the fixed USD bond interest rate of 4.8% (2013: 4.8%) per annum to floating SGD interest rate at 6-month SOR plus margins. The effective SGD interest rates range from 2.8% to 3.6% (2013: 2.9% to 3.6%) per annum.

131 266 ST ENGINEERING / ABOVE & BEYOND 43. Fair value of financial instruments (continued) Master netting or similar agreements The disclosures set out in the tables below include financial assets and financial liabilities that: are offset in the Group s and the Company s balance sheets; or are subject to an enforceable master netting arrangement, irrespective of whether they are offset in the balance sheets. Financial instruments such as trade receivables and trade payables are not disclosed in the tables below unless they are offset in the balance sheets. The derivative transactions that the Group and the Company enter into, are not subject to master netting arrangements. These derivative transactions are also not offset into the balance sheets as the Group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously. The following table sets out the carrying amounts of recognised financial instruments that are subject to the above agreements. The Group 2014 Gross amount of recognised financial instruments Gross amounts of recognised financial instruments offset in the balance sheets Net amounts of financial instruments presented in the balance sheets Related financial instruments that are not offset Net amount $ 000 $ 000 $ 000 $ 000 $ 000 Financial assets Trade receivables Financial liabilities Trade payables Financial assets Trade receivables Financial liabilities Trade payables 1 1 The gross amounts of financial assets and financial liabilities and their net amounts as presented in the balance sheets that are disclosed in the above tables are measured amortised cost. The amounts in the above tables that are offset in the balance sheets are measured on the same basis.

132 267 ANNUAL REPORT Non-controlling interests in subsidiaries The following table summarises the information relating to each of the Group s subsidiaries with material NCI, based on their respective (consolidated) financial statements prepared in accordance with FRS, modified for fair value adjustments on acquisition and differences in Group s accounting policies. The summarised financial information is not adjusted for percentage ownership held by NCI. Name of NCI ST Aerospace Services Co Pte. Ltd. EcoServices, LLC Guizhou Jonyang Kinetics Co., Ltd Jiangsu Huatong Kinetics Co., Ltd Other individually immaterial subsidiaries Intra-group elimination Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ NCI percentage 20% 50% 40% 24.7% Revenue 269,186 30, ,717 54,227 Profit/(loss) 42,267 3,853 (15,029) (9,421) Other comprehensive income (2,517) 2, ,360 Total comprehensive income 39,750 6,074 (14,134) (8,061) Attributable to NCI: Profit/(loss) 8,453 1,923 (6,012) (2,327) 3,547 (546) 5,038 Other comprehensive income (503) 1, (716) (18) 546 Total comprehensive income 7,950 3,031 (5,633) (2,031) 2,831 (564) 5,584 Non-current assets 61,034 34,452 31, ,789 Current assets 237,244 24, ,131 56,907 Non-current liabilities (15,900) (7,838) (41,299) Current liabilities (91,197) (5,065) (202,452) (62,009) Net assets 191,181 53,686 56,225 59,388 Net assets attributable to NCI 38,236 26,789 22,490 14,669 27,403 2, ,407 Cash flows from operating activities 61,956 (1,794) (7,753) 30,289 Cash flows from investing activities (19,659) (431) (23,364) 2,397 Cash flows from financing activities * (40,000) (11,793) 2,495 (15,600) Net increase/ (decrease) in cash and cash equivalents 2,297 (14,018) (28,622) 17,086 * including dividends to NCI (8,000) (3,926) (3,706)

133 268 ST ENGINEERING / ABOVE & BEYOND 44. Non-controlling interests in subsidiaries (continued) Name of NCI ST Aerospace Services Co Pte. Ltd. EcoServices, LLC STELOP Pte. Ltd. D Guizhou Jonyang Kinetics Co., Ltd Jiangsu Huatong Kinetics Co., Ltd Other individually immaterial subsidiaries Intra-group elimination Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ NCI percentage 20% 50% 49.95% 40% 24.7% Revenue 252,737 28,467 35, ,786 61,148 Profit/(loss) 34,332 3,248 3,028 3,790 (6,504) Other comprehensive income (4,325) 1,464 6,017 2,960 Total comprehensive income 30,007 4,712 3,028 9,807 (3,544) Attributable to NCI: Profit/(loss) 6,866 1,621 1,512 1,516 (1,606) 1,522 (718) 10,713 Other comprehensive income (865) 732 2, (96) 2,725 Total comprehensive income 6,001 2,353 1,512 3,662 (1,082) 1,806 (814) 13,438 Non-current assets 63,945 37,626 1,514 32,222 71,403 Current assets 235,670 25,482 57, ,547 81,399 Non-current liabilities (21,364) (7,969) (5,294) (48,804) Current liabilities (87,299) (7,631) (33,612) (209,020) (46,562) Net assets 190,952 55,477 17,356 79,455 57,436 Net assets attributable to NCI 38,190 27,683 8,669 31,782 14,187 19,943 3, ,673 Cash flows from operating activities 35,422 8,791 (3,913) 35, Cash flows from investing activities (8,766) (32,684) (290) (755) 4,371 Cash flows from financing activities * (30,000) 32,259 (4) (9,031) 28,576 Net increase/ (decrease) in cash and cash equivalents (3,344) 8,366 (4,207) 25,458 33,577 * including dividends to NCI (6,000) (3,638) D Due to the implementation of the FRS 110 Consolidated Financial Statements, the Group has reclassified its investment in STELOP Pte. Ltd. ( STELOP ) from a subsidiary to a joint venture with effect from 1 January The net assets of STELOP includes cash and cash equivalents of $35,896,000.

134 269 ANNUAL REPORT Capital management The primary objective of the Group s capital management is to ensure that it maintains a strong credit rating and healthy financial metrics in order to support its business and maximise shareholder value. Capital consists of total shareholders funds and gross debts. The Group manages its capital structure and makes adjustment to it, in the light of changes in economic and financial market conditions. The Group may adjust the dividend payout to shareholders, buy back or issue new shares to optimise capital structure within the Group. No major 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. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements other than those imposed by local regulatories. Group $ 000 $ 000 Gross debt Bank loans 340, ,498 Bonds 658, ,283 Capitalised lease obligations 18,673 19,471 Other loans ,018,628 1,373,185 Shareholders funds Share capital 889, ,611 Treasury shares (6,529) Other reserves 24,266 71,672 Retained earnings 1,225,040 1,191,958 2,132,203 2,116,241 Non-controlling interests 132, ,673 2,264,610 2,259,914 Gross debt/equity ratio Cash and cash equivalents 1,462,612 1,920,924 Funds under management 241, ,386 1,704,390 2,220,310 Gross debt (excluding bank overdrafts) (1,018,628) (1,373,185) Net cash position 685, ,125

135 270 ST ENGINEERING / ABOVE & BEYOND SGX Listing Manual Requirements (Currency - Singapore dollars) Interested person TRANSACTIONS Interested person transactions carried out during the financial year pursuant to the Shareholders Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited ( SGX ) by the Group are as follows: Transactions for the Sale of Goods and Services Aggregate value of all transactions excluding transactions conducted under a Shareholders Mandate pursuant to Rule 920 of the SGX Listing Manual Aggregate value of all transactions conducted under a Shareholders Mandate pursuant to Rule 920 of the SGX Listing Manual $ 000 $ 000 $ 000 $ 000 CapitaLand Limited and its Associates SembCorp Industries Ltd and its Associates 190 SembCorp Marine Ltd and its Associates 13,236 6,399 SATS Ltd. and its Associates 900 Singapore Telecommunications Limited and its Associates SMRT Corporation Ltd and its Associates 120, StarHub Ltd and its Associates 2,296 Temasek Holdings (Private) Limited and its Associates 4,490 10, ,092 19,152 Transactions for the Purchase of Goods and Services SATS Ltd. and its Associates 2,599 2,552 Singapore Airlines Limited and its Associates 11,977 Singapore Telecommunications Limited and its Associates 2,775 1,389 SMRT Corporation Ltd and its Associates 283 Temasek Holdings (Private) Limited and its Associates 23,036 2,927 40,387 7,151 Total Interested Person Transactions 181,479 26,303

136 271 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW AEROSPACE (Currency - Singapore dollars) INCOME STATEMENT $ 000 $ 000 Revenue 2,071,464 2,088,105 Cost of sales (1,664,645) (1,659,131) Gross profit 406, ,974 Distribution and selling expenses (10,892) (3,072) Administrative expenses (113,731) (116,936) Other operating expenses (20,725) (17,138) Profit from operations 261, ,828 Other income 7,059 9,884 Other expenses (5,035) (2,738) Other income, net 2,024 7,146 Finance income 11,894 14,528 Finance costs (24,670) (18,645) Finance costs, net (12,776) (4,117) Share of results of associates and joint ventures, net of tax 32,280 24,585 Profit before taxation 282, ,442 Taxation (53,892) (53,589) Profit for the year 229, ,853 Attributable to: Shareholder of the Company 220, ,214 Non-controlling interests 8,963 6, , ,853

137 272 ST ENGINEERING / ABOVE & BEYOND BALANCE SHEET SECTORAL FINANCIAL REVIEW AEROSPACE (Currency - Singapore dollars) $ 000 $ 000 ASSETS Non-current assets Property, plant and equipment 671, ,552 Associates and joint ventures 322, ,017 Investments Intangible assets 126, ,546 Long-term receivables, non-current 1,534 14,900 Deferred tax assets 19,941 17,778 1,142,021 1,148,836 Current assets Inventories and work-in-progress 560, ,523 Trade receivables 388, ,695 Amount due from related parties, current 35,173 18,433 Advances and other receivables 144, ,384 Long-term receivables, current 11,428 12,371 Short-term investments Bank balances and other liquid funds 243, ,022 1,383,006 1,600,632 TOTAL ASSETS 2,525,027 2,749,468 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 60, ,305 Trade payables and accruals, current 500, ,909 Amount due to related parties, current 360, ,443 Provisions 47,538 55,339 Progress billing in excess of work-in-progress 105,617 87,707 Provision for taxation 64,518 71,812 Short-term bank loans 53,793 Long-term bank loans, current 204,085 Lease obligations, current ,139,953 1,519,751 NET CURRENT ASSETS 243,053 80,881 Non-current liabilities Advance payments from customers, non-current 237, ,931 Trade payables and accruals, non-current 180, ,188 Deferred tax liabilities 39,689 30,559 Long-term bank loans, non-current 29,769 60,771 Lease obligations, non-current 17,341 16,951 Other loans, non-current 1,000 1,500 Derivative financial instruments, non-current 318 Amount due to related parties, non-current 132,976 96, , ,080 TOTAL LIABILITIES 1,779,360 2,222,831 NET ASSETS 745, ,637 Share capital and reserves 668, ,316 Non-controlling interests 77,246 73, , ,637 TOTAL EQUITY AND LIABILITIES 2,525,027 2,749,468

138 273 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW AEROSPACE (Currency - Singapore dollars) STATEMENT OF CASH FLOWS $ 000 $ 000 Net cash from operating activities 247, ,689 Net cash used in investing activities (49,883) (141,534) Proceeds from sale of property, plant and equipment 2,318 8,833 Proceeds from sale and maturity of investments 27 Dividends from associates 27,125 25,771 Dividends from investments 2 1 Purchase of property, plant and equipment (65,410) (97,040) Investment in associates (7,620) Acquisition of subsidiaries (632) Investment in joint ventures (622) (9,385) Loans to associates (640) Acquisition of intangible assets (12,024) (62,121) Net cash used in financing activities (330,753) (108,786) Capital contribution from non-controlling interests of subsidiary 6,772 15,645 Capital contribution from holding company 216,000 Repayment of bank loans (290,014) (20) Repayment of lease obligations, net (371) (394) Proceeds from bank loans 9,181 Proceeds from loans with related corporations 290,224 8,034 Repayment of loans with related corporations (419,113) (24,247) Payment to non-controlling interests for reduction of share capital (1,354) Dividends paid to shareholder (107,299) (92,366) Dividends paid to non-controlling interests (12,525) (6,742) Interest paid (14,427) (16,523) Net (decrease)/increase in cash and cash equivalents (132,910) 68,369 Cash and cash equivalents at beginning of the year 382, ,124 Exchange difference on cash and cash equivalents at beginning of the year (5,615) 8,529 Cash and cash equivalents at end of the year 243, ,022

139 274 ST ENGINEERING / ABOVE & BEYOND SECTORAL FINANCIAL REVIEW AEROSPACE (Currency - Singapore dollars) FINANCIAL HIGHLIGHTS $ 000 $ 000 $ 000 $ 000 $ 000 Income Statement Revenue 2,071,464 2,088,105 2,025,627 1,926,800 1,874,995 Profit EBITDA 321, , , , ,864 EBIT 261, , , , ,829 PBT 282, , , , ,219 Net Profit 220, , , , ,767 Balance Sheet Property, plant and equipment 671, , , , ,248 Intangible and other assets 470, , , , ,426 Inventories and work-in-progress 560, , , , ,815 Trade receivables, deposits and prepayments 579, , , , ,529 Bank balances and other liquid funds, and short-term investments 243, , , , ,869 Current liabilities 1,139,953 1,519,751 1,374,363 1,082,014 1,464,573 Non-current liabilities 639, , , , ,227 Share capital 368, , , , ,000 Capital and other reserves (41,493) (37,753) (73,513) (65,331) (68,672) Retained earnings 341, , , , ,649 Non-controlling interests 77,246 73,321 55,997 47,432 44,110 Financial Indicators Earnings per share (cents) Net assets value per share (cents) Return on sales (%) Return on equity (%) Return on total assets (%) Return on capital employed (%) Productivity Data Average staff strength (numbers) 7,314 7,370 7,307 7,303 7,323 Revenue per employee ($) 283, , , , ,042 Net profit per employee ($) 30,099 35,172 34,657 31,740 28,645 Employment costs 607, , , , ,191 Employment costs per $ of revenue ($) Economic Value Added 162, , , , ,904 Economic Value Added spread (%) Economic Value Added per employee ($) 22,162 29,452 25,964 24,654 22,382 Value added 975,569 1,035,479 1,032, , ,010 Value added per employee ($) 133, , , , ,681 Value added per $ of employment costs ($) Value added per $ of gross property, plant and equipment ($) Value added per $ of revenue ($)

140 275 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW ELECTRONICS (Currency - Singapore dollars) INCOME STATEMENT $ 000 $ 000 Revenue 1,614,079 1,682,278 Cost of sales (1,125,260) (1,182,514) Gross profit 488, ,764 Distribution and selling expenses (82,982) (86,827) Administrative expenses (153,706) (158,134) Other operating expenses (77,760) (89,257) Profit from operations 174, ,546 Other income 10,402 3,685 Other expenses (6) (1,641) Other income, net 10,396 2,044 Finance income 4,867 9,546 Finance costs (6,136) (5,342) Finance (costs)/income, net (1,269) 4,204 Share of results of associates and joint ventures, net of tax 470 (1,466) Profit before taxation 183, ,328 Taxation (30,614) (30,502) Profit for the year 153, ,826 Attributable to: Shareholder of the Company 152, ,119 Non-controlling interests 1,211 2, , ,826

141 276 ST ENGINEERING / ABOVE & BEYOND SECTORAL FINANCIAL REVIEW ELECTRONICS (Currency - Singapore dollars) BALANCE SHEET $ 000 $ 000 ASSETS Non-current assets Property, plant and equipment 179, ,244 Associates and joint ventures 10, Investments 3, Intangible assets 304, ,861 Long-term receivable, non-current 187 Deferred tax assets 30,023 31, , ,625 Current assets Inventories and work-in-progress 381, ,051 Trade receivables 427, ,754 Amounts due from related parties, current 104,178 24,053 Other receivables, deposits and prepayments 57,776 58,737 Advance payments to suppliers 16,976 19,818 Loan receivables, current 7 6 Finance lease receivable, current 1,415 Bank balances and other liquid funds 277, ,062 1,265,351 1,247,896 TOTAL ASSETS 1,794,070 1,733,521 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 169, ,581 Trade payables and accruals, current 387, ,406 Amounts due to related parties, current 26,934 21,210 Provisions 78,382 65,440 Progress billings in excess of work-in-progress 375, ,917 Provision for taxation 48,805 51,445 Lease obligations, current 6 1,086,428 1,081,005 NET CURRENT ASSETS 178, ,891 Non-current liabilities Advance payments from customers, non-current 182, ,379 Trade payables and accruals, non-current 42,534 38,561 Deferred tax liabilities 4,825 5,009 Deferred income 8,565 2,583 Amounts due to related parties, non-current 271, , , ,767 TOTAL LIABILITIES 1,596,964 1,538,772 NET ASSETS 197, ,749 Share capital and reserves 191, ,754 Non-controlling interests 5,259 11, , ,749 TOTAL EQUITY AND LIABILITIES 1,794,070 1,733,521

142 277 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW ELECTRONICS (Currency - Singapore dollars) STATEMENT OF CASH FLOWS $ 000 $ 000 Net cash from operating activities 88, ,548 Net cash used in investing activities (99,367) (69,032) Proceeds from sale of property, plant and equipment Proceed from sale of an associate 1,200 Proceeds from sale of a quoted investment 12,842 Proceed from sale of an unquoted investment 100 Dividends from an associate and a joint venture 1, Purchase of property, plant and equipment (42,574) (80,088) Additional investment in an associate (304) Acquisition of other intangible assets (18,854) (2,978) Investment in unquoted investments (3,970) Acquisition of controlling interests in a subsidiary, net of cash acquired 565 Deconsolidation of a subsidiary (35,896) Net cash used in financing activities (188,171) (120,836) Repayment of a related party loan (50,140) (24,803) Loans to related parties (173,000) (5,187) Proceeds from a related party loan 89,009 14,664 Repayment of lease obligations (6) (29) Repayment of loans by related parties 93,000 7,010 Proceed of a loan from a joint venture 836 Repayment of a joint venture loan (824) Dividends paid to shareholder (143,249) (109,300) Dividends paid to non-controlling interests (660) Interest paid (4,005) (3,512) Deposits discharged 1, Net (decrease)/increase in cash and cash equivalents (199,345) 76,680 Cash and cash equivalents at beginning of the year 476, ,312 Exchange difference on cash and cash equivalents at beginning of the year (145) 3,391 Cash and cash equivalents at end of the year 276, ,383

143 278 ST ENGINEERING / ABOVE & BEYOND SECTORAL FINANCIAL REVIEW ELECTRONICS (Currency - Singapore dollars) FINANCIAL HIGHLIGHTS $ 000 $ 000 $ 000 $ 000 $ 000 Income Statement Revenue 1,614,079 1,682,278 1,618,717 1,516,975 1,428,467 Profit EBITDA 212, , , , ,948 EBIT 174, , , , ,322 PBT 183, , , , ,563 Net Profit 152, , , , ,708 Balance Sheet Property, plant & equipment, and investment property 179, , ,672 79,393 60,862 Intangible and other assets 348, , , , ,970 Inventories and work-in-progress 381, , , , ,162 Trade receivables, deposits and prepayments 606, , , , ,186 Bank balances and other liquid funds, and shortterm investments 277, , , , ,458 Current liabilities 1,086,428 1,081,005 1,035, , ,156 Non-current liabilities 510, , , , ,829 Share capital 52,522 52,522 52,522 52,522 52,522 Capital and other reserves (5,135) (20,609) (32,821) (24,361) (35,834) Retained earnings 144, , , ,751 88,949 Non-controlling interests 5,259 11,995 9,918 12,488 16,016 Financial Indicators Earnings per share (cents) Net assets value per share (cents) Return on sales (%) Return on equity (%) Return on total assets (%) Return on capital employed (%) Productivity Data Average staff strength (numbers) 5,933 5,678 5,485 5,274 4,987 Revenue per employee ($) 272, , , , ,438 Net profit per employee ($) 25,644 24,149 21,836 20,630 20,194 Employment costs 536, , , , ,477 Employment costs per $ of revenue ($) Economic Value Added 118, , ,777 88,689 80,916 Economic Value Added Spread (%) Economic Value Added per employee ($) 19,998 18,691 18,556 16,816 16,225 Value added 764, , , , ,679 Value added per employee ($) 128, , , , ,842 Value added per $ of employment costs ($) Value added per $ of gross property, plant and equipment ($) Value added per $ of revenue ($)

144 279 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW LAND SYSTEMS (Currency - Singapore dollars) INCOME STATEMENT $ 000 $ 000 Revenue 1,405,132 1,485,219 Cost of sales (1,140,622) (1,188,779) Gross profit 264, ,440 Distribution and selling expenses (69,100) (70,289) Administrative expenses (106,692) (100,077) Other operating expenses (49,991) (35,602) Profit from operations 38,727 90,472 Other income 14,525 23,840 Other expenses (1,570) (4,353) Other income, net 12,955 19,487 Finance income 3,124 4,836 Finance costs (11,655) (11,175) Finance costs, net (8,531) (6,339) Share of results of associates and joint ventures, net of tax 13,050 8,173 Profit before taxation 56, ,793 Taxation (11,001) (19,196) Profit for the year 45,200 92,597 Attributable to: Shareholder of the Company 50,323 91,239 Non-controlling interests (5,123) 1,358 45,200 92,597

145 280 ST ENGINEERING / ABOVE & BEYOND BALANCE SHEET ASSETS SECTORAL FINANCIAL REVIEW LAND SYSTEMS (Currency - Singapore dollars) $ 000 $ 000 Non-current assets Property, plant and equipment 372, ,063 Associates and joint ventures 112, ,972 Investments Intangible assets 205, ,942 Investment property Long-term receivables, non-current Finance lease receivables, non-current 973 2,679 Deferred tax assets 18,028 8,898 Amounts due from related parties, non-current 5,650 5,420 Derivative financial instruments, non-current 1,196 9, , ,589 Current assets Inventories and work-in-progress 673, ,322 Trade receivables 359, ,431 Amounts due from related parties, current 27,726 21,062 Advances and other receivables 134, ,853 Long-term receivables, current Finance lease receivables, current 6,872 15,032 Derivative financial instruments, current 609 4,252 Bank balances and other liquid funds 284, ,846 1,487,167 1,420,861 TOTAL ASSETS 2,203,765 2,102,450 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 247, ,284 Trade payables and accruals 468, ,309 Amounts due to related parties, current 119, ,138 Progress billings in excess of work-in-progress 1,848 3,941 Provisions 60,199 46,857 Provision for taxation 30,907 39,687 Lease obligations, current Long-term loans, current Short-term bank loans 29,820 46,639 Short-term loan from non-controlling interests 231 Derivative financial instruments, current 5,687 2, , ,168 NET CURRENT ASSETS 522, ,693

146 281 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW LAND SYSTEMS (Currency - Singapore dollars) BALANCE SHEET (continued) $ 000 $ 000 Non-current liabilities Advance payments from customers, non-current 478, ,187 Trade payables and accruals, non-current 2,455 14,377 Amounts due to related parties, non-current 356, ,275 Lease obligations, non-current Long-term loans, non-current Long-term bank loan 6,605 6,336 Deferred income 50,588 55,032 Deferred tax liabilities 63,041 58,316 Derivative financial instruments, non-current 8,142 4, , ,972 TOTAL LIABILITIES 1,931,326 1,779,140 NET ASSETS 272, ,310 Share capital and reserves 223, ,486 Non-controlling interests 49,379 57, , ,310 TOTAL EQUITY AND LIABILITIES 2,203,765 2,102,450

147 282 ST ENGINEERING / ABOVE & BEYOND SECTORAL FINANCIAL REVIEW LAND SYSTEMS (Currency - Singapore dollars) STATEMENT OF CASH FLOWS $ 000 $ 000 Net cash from operating activities 122, ,577 Cash flows used in investing activities (43,601) (66,522) Proceeds from sale of property, plant and equipment 1, Proceeds from sale of an investment property 22,000 Proceeds from disposal of a subsidiary 2 Proceeds from disposal of quoted equity investment 1 82 Proceeds from disposal of a joint venture 3,280 Short-term loan to joint venture (3,136) Repayment of short-term loan by joint ventures 3,887 Dividends from associates 9,418 7,440 Purchase of property, plant and equipment (83,829) (59,892) Purchase of intangible assets (1,980) Acquisition of a subsidiary and business, net of cash acquired (9,877) Acquisition of a non-controlling interests in subsidiary (194) Cash flows used in financing activities (47,095) (73,587) Interest paid (10,190) (10,587) Repayment of short-term related party loans (7,865) (3,669) Proceeds from short-term related party loans 20,000 8,152 Repayment of short-term immediate holding company loans (47,000) (21,272) Proceeds from long-term immediate holding company loans 50,000 Repayment of long-term immediate holding company loans (6,851) Repayment of long-term related party loans (2,976) Repayment of long-term loans (335) Repayment of short-term loans (369) Proceeds from long-term bank loan 2,616 Proceeds from short-term bank loans 28,847 10,895 Repayment of short-term bank loans (45,709) (4,391) Dividends paid to shareholder (31,800) (48,800) Dividends paid to non-controlling interests (5,666) (5,365) Capital contribution from non-controlling interests 2,596 7,116 Deposits discharged 61 1,880 Net increase in cash and cash equivalents 31,411 5,468 Cash and cash equivalents at beginning of the year 244, ,969 Exchange difference on cash and cash equivalents at beginning of the year 1, Cash and cash equivalents at end of the year 276, ,309

148 283 ANNUAL REPORT 2014 SECTORAL FINANCIAL REVIEW LAND SYSTEMS (Currency - Singapore dollars) FINANCIAL HIGHLIGHTS $ 000 $ 000 $ 000 $ 000 $ 000 Income Statement Revenue 1,405,132 1,485,219 1,525,341 1,506,465 1,518,406 Profit EBITDA 76, , , , ,750 EBIT 38,727 90,472 98, , ,341 PBT 56, , , , ,949 Net Profit 50,323 91,239 88,160 83,818 90,255 Balance Sheet Property, plant and equipment and investment property 372, , , , ,408 Intangible and other assets 338, , , , ,563 Inventories and work-in-progress 673, , , , ,561 Trade receivables, deposits and prepayment 535, , , , ,191 Bank balances and other liquid funds 284, , , , ,066 Current liabilities 965, , , ,820 1,081,625 Non-current liabilities 966, , , , ,357 Share capital 194, ,445 44,445 44,445 44,445 Capital and other reserves 8,655 18,204 (13,842) (6,478) (14,916) Retained earnings 19,960 52,837 67,628 67,606 66,638 Non-controlling interests 49,379 57,824 51,941 49,568 44,640 Financial Indicators Earnings per share (cents) Net assets value per share (cents) Return on sales (%) Return on equity (%) Return on total assets (%) Return on capital employed (%) Productivity Data Average staff strength (numbers) 6,738 6,998 6,968 6,872 6,574 Revenue per employee ($) 208, , , , ,971 Net profit per employee ($) 7,469 13,038 12,652 12,197 13,729 Employment costs 342, , , , ,406 Employment costs per $ of revenue ($) Economic Value Added 4,963 61,162 72,381 55,121 63,686 Economic Value Added spread (%) (0.4) Economic Value Added per employee ($) 737 8,740 10,388 8,021 9,688 Value added 483, , , , ,122 Value added per employee ($) 71,816 73,976 76,370 70,944 70,904 Value added per $ of employment costs ($) Value added per $ of gross property, plant and equipment ($) Value added per $ of revenue ($)

149 284 ST ENGINEERING / ABOVE & BEYOND INCOME STATEMENT SECTORAL FINANCIAL REVIEW MARINE (Currency - Singapore dollars) $ 000 $ 000 Revenue 1,341,951 1,238,847 Cost of sales (1,187,968) (1,050,705) Gross profit 153, ,142 Distribution and selling expenses (8,906) (6,699) Administrative expenses (33,150) (35,302) Other operating expenses (11,092) (11,662) Profit from operations 100, ,479 Other income 12,115 6,047 Other expenses (37) (43) Other income, net 12,078 6,004 Finance income 3,931 37,038 Finance costs (33,284) Finance income, net 3,931 3,754 Share of results of joint ventures, net of tax 5,936 2,073 Profit before taxation 122, ,310 Taxation (14,695) (36,325) Profit for the year 108, ,985 Attributable to: Shareholder of the Company 108, ,955 Non-controlling interests (1) , ,985

150 285 ANNUAL REPORT 2014 BALANCE SHEET SECTORAL FINANCIAL REVIEW MARINE (Currency - Singapore dollars) $ 000 $ 000 ASSETS Non-current assets Property, plant and equipment 334, ,043 Joint ventures 8,159 3,223 Intangible assets Long-term receivables, non-current 1, Deferred tax assets 19,021 16,072 Amounts due from related parties, non-current 12,806 4,806 Derivative financial instruments, non-current , , ,592 Current assets Inventories and work-in-progress 110, ,178 Trade receivables 117, ,858 Amounts due from related parties, current 123,776 21,403 Other receivables, deposits and prepayments 5,252 28,071 Advance payments to suppliers 157, ,612 Long-term receivables, current Bank balances and other liquid funds 224, , , ,224 TOTAL ASSETS 1,114,255 1,140,816 EQUITY AND LIABILITIES Current liabilities Advance payments from customers, current 289, ,632 Trade payables and accruals, current 256, ,242 Amounts due to related parties, current 2,900 3,462 Provisions 51,491 42,001 Progress billings in excess of work-in-progress 241, ,479 Provision for taxation 14,456 19, , ,639 NET CURRENT LIABILITIES (117,821) (82,415) Non-current liabilities Advance payments from customers, non-current 650 Trade payables and accruals, non-current 29,670 34,636 Deferred income 39,606 26,080 Derivative financial instruments, non-current 2,799 16,621 Amounts due to related parties, non-current 26,343 26,343 99, ,680 TOTAL LIABILITIES 955, ,319 NET ASSETS 158, ,497 Share capital and reserves 158, ,459 Non-controlling interests , ,497 TOTAL EQUITY AND LIABILITIES 1,114,255 1,140,816

151 286 ST ENGINEERING / ABOVE & BEYOND SECTORAL FINANCIAL REVIEW MARINE (Currency - Singapore dollars) STATEMENT OF CASH FLOWS $ 000 $ 000 Net cash from operating activities 112, ,625 Net cash used in investing activities (15,064) (38,082) Proceeds from disposal of property, plant and equipment Proceeds from insurance settlement 5,220 Proceeds from disposal of investments 253 Purchase of property, plant and equipment (21,323) (39,790) Dividends from joint ventures 1,000 1,412 Net cash used in financing activities (209,460) (79,598) Repayment of related corporation loans (14,653) Repayment of short-term bank loan (6,194) Proceeds from related corporation loans 14,624 Proceeds from short-term bank loan 6,373 Loans to related corporation (115,494) Repayment of loan by a related corporation 19,814 Dividends paid to shareholders (113,780) (79,684) Interest paid (64) Net (decrease)/increase in cash and cash equivalents (112,062) 109,945 Cash and cash equivalents at beginning of the year 333, ,190 Exchange difference on cash and cash equivalents at beginning of the year 3,031 1,923 Cash and cash equivalents at end of the year 224, ,058

152 287 ANNUAL REPORT 2014 FINANCIAL HIGHLIGHTS SECTORAL FINANCIAL REVIEW MARINE (Currency - Singapore dollars) $ 000 $ 000 $ 000 $ 000 $ 000 Income Statement Revenue 1,341,951 1,238,847 1,011, ,204 1,044,850 Profit EBITDA 127, , , , ,946 EBIT 100, , , , ,389 PBT 122, , , , ,666 Net Profit 108, ,955 95,013 91,465 89,057 Balance Sheet Property, plant and equipment 334, , , , ,313 Intangible and other assets 28,776 70,050 38,058 35,214 36,702 Inventories and work-in-progress 110, , , , ,194 Trade receivables, deposits and prepayment 416, , , , ,015 Bank balances and other liquid funds and short-term investments 224, , , , ,239 Current liabilities 856, , , , ,995 Non-current liabilities 99, , ,636 73,563 43,022 Share capital 50,856 50,856 50,856 50,856 50,856 Capital and other reserves 2,494 28,425 (6,920) 2,369 (1,146) Retained earnings 105, ,178 80,907 62,137 42,745 Non-controlling interests (459) (114) (9) Financial Indicators Earnings per share (cents) Net assets value per share (cents) Return on sales (%) Return on equity (%) Return on total assets (%) Return on capital employed (%) Productivity Data Average staff strength (numbers) 1,884 1,871 1,834 1,850 1,856 Revenue per employee ($) 712, , , , ,958 Net profit per employee ($) 57,370 58,768 51,806 49,441 47,983 Employment costs 180, , , , ,228 Employment costs per $ of revenue ($) Economic Value Added 93, ,848 91,402 81,042 71,095 Economic Value Added spread (%) Economic Value Added per employee ($) 49,678 61,383 49,838 43,806 38,305 Value added 336, , , , ,242 Value added per employee ($) 178, , , , ,540 Value added per $ of employment costs ($) Value added per $ of gross property, plant and equipment ($) Value added per $ of revenue ($)