Design Builder (DB - V.3.0)

Board of Directors ($) ($)

Basic Fee 28,000 23,800

Chairman’s Allowance 28,000 23,800

Deputy Chairman’s Allowance 14,000 11,900

Audit Committee

Overall Cap on Fees and Allowances

Chairman of the Board NA 71,400

Deputy Chairman of the Board NA 59,500

Director NA 47,600

@the proposed fees and allowances in this column are based on a 15% reduction of the basic fee for Directors, in the light of the general economic downturn and the events of 11 September 2001 which occurred during FY01/02.

Every Director on the Board during FY01/02 will receive the Basic Fee. In addition, he will receive the Chairman’s or Deputy Chairman’s Allowance if he is Chairman or Deputy Chairman of the Board respectively, as well as the relevant Allowance (depending on whether he is Chairman or Member of the relevant Board Committee) for each position he holds on a Board Committee, subject to an overall cap on the total fees and allowances to be received by him. If he occupied a position for part of FY01/02, the Fee or Allowance payable will be prorated accordingly.

7.3 Based on the proposed formula set out above, all seven Directors on the Board at the end of FY01/02 will each receive total fees and allowances not exceeding $250,000.

7.4 Details of the SATS Employee Share Option Plan The Plan comprises two schemes, namely:

(a) The Senior Executive Share Option Scheme for senior executives; and (b) The Employee Share Option Scheme for all other employees.

Its objective is to promote group cohesiveness and team spirit through a sense of ownership of the Company.

The Senior Executive Share Option Scheme is intended to attract, retain and motivate senior executives whose participation in policy and decision-making can influence the Company’s performance and returns to Shareholders.

Options under the Plan may be granted only to full-time and part-time employees of the Company or of its wholly-owned subsidiaries (other than subsidiaries whose shares become listed on a recognised stock exchange), who satisfy the eligibility criteria under the Plan.

The aggregate nominal amount of shares over which Options may be granted on any date, when added to the nominal amount of shares issued and issuable in respect of all Options granted under the Plan, shall not exceed 15% of the issued share capital of the Company on the day preceding that date.

The maximum number of shares over which Options may be granted under the Plan in each financial year to any employee, based on the Company’s current issued share capital, ranges from:

• 272,000 for Grade I senior executives to 7,800 for Grade VI senior executives, under the Senior Executive Share Option Scheme; and

• 4,800 for administrative officers to 2,600 for employees other than administrative officers and supervisors, under the Employee Share Option Scheme.

The actual number of shares to be offered to any employee under the Plan will be determined by the Remuneration Committee at its absolute discretion after taking into account the employee’s performance and other criteria as the Remuneration Committee may consider appropriate, subject to these maximum limits.

The Exercise Price for each share on exercise of an Option shall be the average of the last dealt prices for the shares (as determined by reference to the daily official list or any other publication published by the SGX-ST) for the five consecutive market days immediately preceding the date of grant of the Option, but shall not be less than the nominal value of the shares.

Options granted may be exercised in whole or in part during the period commencing on the first anniversary of the date of grant and expiring on its 10th anniversary, subject to the following vesting schedule:

(i) for senior executives, 25% of the total amount of the grant will vest on each of the first to fourth anniversaries of the date of grant; and

(ii) for all other employees, the grant of Options will vest on the second anniversary of the date of grant.

CORPORATE GOVERNANCE

8. INTERNAL AUDIT

8.1 The Company’s internal audit function is carried out by the Internal Audit department of Singapore Airlines Limited (“SIA”), the Company’s holding company. At present, the internal auditors issue summaries of its findings and reports to the Audit Committee at least three times a year, and sends copies of its detailed reports to the Chairman of the Board. The internal auditors meet the professional standards set out in the Code.

9. INTERNAL CONTROLS

9.1 Management established a new Corporate Services department on 19 November 2001 to oversee, implement and administer risk management.

9.2 A risk management consultant has been appointed which will advise the Group on the development and establishment of a risk management structure. This structure will include a Risk Management Committee that will integrate and coordinate all the various different risk management activities in the Group.

Some of the recent risk management initiatives were:

• Conduct of Business Interruption (BI) Review to study the financial impact on the Group following a catastrophic loss event

• Setting up of a Computer Incidence Response Team (CIRT) to support the Group’s Information Security Policy

• Fraud Prevention and Internal Controls Seminars for all senior staff

• Crime and Security Awareness for all junior staff

• Risk assessment for the key ground facilities owned and operated by the Group in Singapore

• A group-wide Information Security Awareness Campaign

10. COMMUNICATIONS WITH SHAREHOLDERS

10.1 The Company strives to convey to Shareholders pertinent information in a clear, forthcoming, detailed, timely manner and on a regular basis, take into consideration their views and inputs, and address Shareholders’

concerns. While the Company’s Investor Relations department communicates with analysts regularly, the Company monitors the dissemination of material information to ensure that it is made publicly available on a timely and non-selective basis.

10.2 The Articles currently do not provide for Shareholders to vote at General Meetings in absentia such as by mail, email or fax. The Company will consider implementing the relevant amendment to the Articles if the Board is of the view that there is a demand for the same, and after the Company has evaluated and put in place the necessary security and other measures to facilitate absentia voting and protect against errors, fraud and other irregularities.

10.3 Chairmen of the Audit, Nominating and Remuneration Committees, or members of the respective Committees standing in for them, as well as the external auditors, will be present and available to address questions at General Meetings.

11. SECURITIES TRANSACTIONS

11.1 The Company has a clear set of Policy and Guidelines for Dealings in the shares of the Company and the other listed companies in the SIA group, SIA and SIA Engineering Company Limited. The Policy and Guidelines have been disseminated to employees of the Group. The Policy and Guidelines are in conformity with the guidelines of the SGX-ST.

Financial Review 46

Report of Directors 54

Profit and Loss Accounts 61

Balance Sheets 62

Consolidated Statement of Changes in Shareholders’ Equity 63 Statement of Changes in Shareholders’ Equity 64

Consolidated Cash Flow Statement 65

Notes to Financial Statements 66

Additional Information 94

Statement by Directors 95

Auditors’ Report 96

Half-Yearly Results of The Group 97

Five-Year Financial Summary of The Group 98

Information on Shareholdings 100

Share Prices and Turnover 101

Notice of Annual General Meeting 102

FINANCIALS