山东hao.rising.cn

SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT0山东航空股份有限公司2007年年度报告SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORTMarch,2008Jinan·PRCSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT1ContentsandImportantNotes.
CompanyProfile2.
SummaryⅡofFinancialHighlightandBusinessHighlight3.
ChangesinCapitalSharesandParticularsaboutShareholders6.
ParticularsaboutDirectors,Supervisors,SenioⅣrExecutivesandEmployees-----9.
AdministratⅤiveStructure15.
BriefIntroductiontotheShareholders'GeneralMeeting19.
ReportoftheBoardofDirectors20.
ReportoftheSupervisoryCommittee32.
SignificantEvents33.
FinancialReport37.
DocumentsforReference109ImportantNotes:TheBoardofDirectorsandtheSupervisoryCommitteeofShandongAirlinesCo.
,Ltd.
(hereinafterreferredtoastheCompany)anditsdirectors,supervisorsandseniorexecutivesherebyconfirmthattherearenoanyfictitiousstatements,misleadinginformationorimportantomissionscarriedinthisreport,andshalltakeallresponsibilities,individualand/orjoint,forthereality,accuracyandcompletionofthewholecontents.
AllDirectorsattendedtheBoardmeeting.
ReandaCertifiedPublicAccountantsissuedthestandardunqualifiedAuditors'ReportfortheCompany.
ChairmanoftheBoardMr.
ZhangXingfu,GeneralManagerMr.
ZengGuoqiang,andChiefAccountantMr.
XiaoFengoftheCompanyherebyconfirmthattheFinancialReportoftheAnnualReport2007istrueandcomplete.
Paraphrases:TheCompany:ShandongAirlinesCo.
,Ltd.
SDA:ShandongAviationGroup;thecontrollingshareholderoftheCompanyAirChina:AirChinaLimited,theactualcontrolleroftheCompanyAirChinaGroup:ChinaNationalAviationGroupCo.
,Ltd.
,thecontrollingshareholderofAirChinaSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT2I.
CompanyProfile1.
LegalChineseNameoftheCompany:山东航空股份有限公司LegalEnglishNameoftheCompany:SHANDONGAIRLINESCO.
,LTD.
2.
LegalRepresentative:ZhangXingfu3.
SecretaryofBoardofDirectorsoftheCompany:LiQing'enContactAddress:19/F,SDABldg.
,No.
5746,ErHuanEastRoad,Jinan,ShandongTel.
:(86)531-5698966E-mail:liqe@shandongair.
com.
cnAuthorizedRepresentative:HuangHaimingE-mail:huanghm@shandongair.
com.
cnTel.
:(86)531-85698678Fax:(86)531-856986794.
RegisteredAddress:YaoqiangInternationalAirport,Jinan,ShandongOfficeAddress:SDABldg.
,No.
5746,ErHuanEastRoad,Jinan,ShandongPostCode:250014Company'sWebSite:http://www.
shandongair.
com.
cnE-mail:zqb@shandongair.
com.
cn5.
NewspapersforDisclosingtheInformationDesignatedbytheCompany:Domestic:ChinaSecuritiesandSecuritiesTimesOverseas:HongKongWenWeiPoInternetWebSiteforPublishingtheAnnualReport:http://www.
cninfo.
com.
cnThePlaceWheretheAnnualReportisPreparedandPlaced:EnterpriseManagementandInvestmentManagementofSecuritiesDept.
oftheCompany(Room1920,SDABldg.
)LiaisonTel:(86)531-856986786.
StockExchangeListedwith:ShenzhenStockExchangeShortFormoftheStock:SHANHANGBStockCode:2001527.
OtherRelevantInformationoftheCompanyInitialregistrationdate:Dec.
13,1999Registrationdateafterchange:June14,2007Registrationaddress:IndustrialandCommercialAdministrationBureauofShandongProvinceRegisterednumberforenterprisecorporationbusinesslicense:QGLZZiNo.
003926Registerednumberfortaxation:370112720721201NameandaddressofcertifiedpublicaccountantsengagedbytheCompany:ReandaCertifiedPublicAccountantsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT3Address:Room2008on20/F,EastDistrictofNo.
1Building,No.
100,XiliStreet,Balizhuang,ChaoyangDistrict,BeijingII.
SummaryofFinancialHighlightandBusinessHighlightUnit:RMB(I)MainprofitindexoftheCompanyasofthereportyearItemsAmountOperatingprofit76,633,320Totalprofit57,546,814Netprofitattributabletoshareholdersofthelistedcompany37,255,986Netprofitattributabletoshareholdersofthelistedcompanyafterdeductingnon-recurringgainsandlosses50,392,078Netcashflowarisingfromoperatingactivities734,571,421(II)Itemsofdeductingnon-recurringgainsandlossesandtheinvolvedamountsareasfollowing:Itemsofnon-recurringgainsandlossesAmountNetprofit37,255,985.
51Minus:Profitandlossindisposalofnon-circulationassets-21,736,311.
72TaxreturnandtaxdeductionoverexaminationrightorwithoutformaldocumentGovernmentalallowanceaccruedtothecurrentprofitandlossGainorlossfromcombinationcostandfairvalueofidentifiablenetassetswhentheenterprisecombinationgainorlossfromexchangenon-monetaryassets10,000,000.
00Provisionsfortheimpairmentofassetduetoactofgod-498,594.
46Gain/lossformdebtrestructuringExpensesofenterpriserestructuringProfit/lossformthatoftradingpricehigherthanfairvalueGain/lossfromprojectedliabilitieswithoutrelationshipwithmainoperation-7,370,706.
97Subtotal-19,605,613.
15Plus:non-recurringgain/lossattributabletominorityshareholders331.
50Amountinfluencedduetoincometax-6,469,852.
34Netprofitafterdeductionofnon-recurringgain/loss50,392.
077.
82(III)Majoraccountingdataandfinancialhighlightsoverthepreviousthreeyearsasattheendofthereportperiod1.
MainaccountingdataSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT42006Increase/decreaseinthisyearcomparedwithlastyear(%)2005Items2007BeforeadjustmentAfteradjustmentAfteradjustmentBeforeadjustmentAfteradjustmentOperatingincome4,630,130,5384,231,057,9454,231,057,9459.
43%2,903,537,0962,903,537,096Totalprofit57,546,81445,711,71043,421,49432.
53%-272,591,445-272,591,445Netprofitattributabletoshareholdersofthelistedcompany37,255,98644,017,7848,875,632319.
76%-273,637,981-171,456,745Netprofitattributabletoshareholdersofthelistedcompanyafterdeductingnon-recurringgainsandlosses50,392,078-42,384,657-77,526,809165.
00%-281,356,718-179,175,481Netcashflowarisingfromoperatingactivities734,571,4211,059,281,2981,059,281,298-30.
65%217,831,950217,831,950Attheendof2006Increase/decreaseattheendofthisyearcomparedwiththatattheendoflastyear(%)Attheendof2005ItemsAttheendof2007BeforeadjustmentAfteradjustmentAfteradjustmentBeforeadjustmentAfteradjustmentTotalassets7,039,689,3685,943,307,4316,035,555,28316.
64%6,551,168,5426,676,188,686Owners'equity(Shareholders'equity)436,964,877309,883,766399,824,5759.
29%265,865,982390,886,1262.
Mainfinancialindexes20072006Increase/decreaseinthisyearcomparedwithlastyear(%)2005BeforeadjustmentAfteradjustmentAfteradjustmentBeforeadjustmentAfteradjustmentBasicearningspershare0.
090.
110.
02350.
00%-0.
68-0.
43Dilutedearningspershare0.
090.
110.
02350.
00%-0.
68-0.
43Basicearningspershareafter0.
13-0.
11-0.
19168.
42%-0.
70-0.
45SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT5deductingnon-recurringgainsandlossesFullydilutedreturnonequity8.
53%14.
20%2.
22%Increase6.
31percent-102.
92%-43.
86%Weightedaveragereturnonequity8.
90%15.
29%2.
24%Increase6.
66percent-66.
82%-35.
46%Fullydilutedreturnonequityafterdeductingnon-recurringgainsandlosses11.
53%-13.
68%-19.
39%Increase30.
92percent-105.
83%-45.
84%Weightedaveragereturnonequityafterdeductingnon-recurringgainsandlosses12.
04%-14.
72%-19.
61%Increase31.
65percent-68.
70%-37.
06%Netcashflowarisingfromoperatingactivitiespershare1.
842.
652.
65-30.
57%0.
540.
54Attheendof2007Attheendof2006Increase/decreaseattheendofthisyearcomparedwiththatattheendoflastyear(%)Attheendof2005BeforeadjustmentAfteradjustmentAfteradjustmentBeforeadjustmentAfteradjustmentNetassetpershareattributabletoshareholdersoflistedcompany1.
090.
771.
009.
00%0.
660.
98(IV)TheCompany'sreturnonequityandearningspershareasoftheyear2007ascalculatedbasedonfullydilutedmethodandweightedaveragemethodtakingRequirementsontheInformationDisclosureofCompaniesPubliclyIssuingSharesNo.
9asthereference1.
ReturnonEquityAmountinthisperiodAmountinsameperiodoflastyearProfitinthereportperiodFullydilutedWeightedaverageFullydilutedWeightedaverageNetprofitattributabletocommonshareholders8.
53%8.
90%2.
22%2.
24%Netprofitattributabletocommonshareholdersafterdeductingthenon-recurringlossesandgains11.
53%12.
04%-19.
39%-19.
61%2.
EarningsperShareAmountinthisperiodAmountinsameperiodoflastyearProfitinthereportperiodBasicearningspershareDilutedearningspershareBasicearningspershareDilutedearningspershareNetprofitattributabletocommonshareholders0.
090.
090.
020.
02Netprofitattributabletocommonshareholdersafterdeductingthe0.
130.
13-0.
19-0.
19SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT6non-recurringlossesandgainsIII.
ChangesinSharesCapitalandParticularsabouttheShareholders(I)StatementofchangesinshareUnit:SharesBeforechangeIncrease/decreaseinthistime(+,-)AfterchangeRationedshareBonusshareCapitalizationofpublicreserveAdditionalinsuranceOthersSubtotalI.
Unlistedshares260,000,000260,000,0001.
Sponsor'sshares168,800,000-19,900-19,900168,780,100Including:State-ownedshares68,601,000-19,900-19,900168,581,100Domesticlegalperson'sshares199,000199,000Foreignlegalperson'ssharesOthers2.
Raisedlegalperson'sshares3.
Inneremployees'shares4.
Preferencesharesorother91,200,000199,000199,00091,200,000Totalunlistedshares260,000,000260,000,000Ⅱ.
Listedshares140,000,000140,000,0001.
RMBordinaryshares2.
Domesticallylistedforeignshares140,000,000140,000,0003.
Overseaslistedforeignshares4.
OtherTotallistedshares140,000,000140,000,000Ⅲ.
Totalshares400,000,000400,000,000SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT7Note:Inthereportperiod,199,000sponsors'sharesheldbyShandongFisheryEnterprisesGroupCorporationhavebeenauctionedjudiciallyandtransferredtheownershiptoQingdaoZhenyuanShipyardCo.
,Ltd.
,whicharestate-ownedlegalperson'ssharesinnature.
(II)Particularsaboutissuanceandlistingofshares1.
IssuanceandlistingThepreviousthreeyearendedbytheperiod-end,theCompanydidnotissuesharesandderivedsecurities2.
Duringthereportperiod,therewerenochangesinthenumberandstructureoftheCompany'ssharesduetobonusshare,capitalpublicreservetransferringintosharecapital,rationedshare,additionalissuance,sharemerger,convertiblecompany'sbondstransferringshares,disinvestments,listingofinneremployees'sharesorcompany'semployee'sshares,etc.
Therewerenoinneremployees'sharesintheCompany.
(III)AboutShareholders1.
TotalshareholdersasattheendofthereportperiodUptoDec.
31,2007,theCompanyhadtotally19,009shareholders,including19,003onesofdomesticallylistedforeignshares.
ThetoptenshareholdersoftheCompanyareasfollowing:Unit:ShareNo.
Shareholders'nameIncrease/decreaseinthisyearNumberofsharesheldattheyear-endProportion(%)TypeNumberofsharespledgedorfrozen1SHANDONGAVIATIONGROUP0168,004,00042State-ownedlegalperson'sshare84,000,000sharespledged2AIRCHINALIMITED091,200,00022.
8State-ownedlegalperson'sshareUnknown3CREDITSUISSE(HONGKONG)LIMITEDUnknown4,000,0001CirculationshareUnknown4GUOTAIJUNANSECURIESHONGKONGLIMITED1,680,7362,094,4000.
52CirculationshareUnknown5CHENCHUNPENG-711,544,8000.
39CirculationshareUnknown6ZHENGWEIHUAUnknown1,488,0000.
37CirculationshareUnknown7LIYIJUNUnknown1,167,3380.
29CirculationshareUnknown8FANGRUIUnknown1,102,6000.
28CirculationshareUnknownSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT89WUHAOYUAN17,0001,062,7000.
27CirculationshareUnknown10LIULIYA01,015,2160.
25CirculationshareUnknownNote:1.
ShandongAviationGroupisthefirstlargestshareholderoftheCompany,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares.
2.
AirChinaLimitedisthesecondlargestshareholderoftheCompany,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares;AirChinaisthefirstlargestshareholderofSDAandtheactualcontrolleroftheCompany.
3.
Amongtheabovethetoptenshareholders,AirChina,shareholdersofstate-ownedlegalperson'sshare,isthefirstlargestshareholderoftheSDA,andthereexistsnoassociatedrelationshipbetweenSDAandAirChinaandtheothershareholders,andtheydon'tbelongtotheconsistentactionistregulatedbytheManagementRegulationofInformationDisclosureonChangeofShareholdingforListedCompanieswiththeothershareholders.
TheCompanyisnotawareoftheirassociatedrelationshipamongtheothershareholdersofcirculationshare,whetherbelongstotheconsistentactionistregulatedbytheManagementRegulationofInformationDisclosureonChangeofShareholdingforListedCompanies.
2.
ThecontrollingshareholderoftheCompanyNameofthecontrollingshareholder:ShandongAviationGroupLegalrepresentative:FengGangDateoffoundation:Feb.
9,1995PlaceofSDA:No.
5746,ErHuanEastRoad,LixiaDistrict,Jinan,ShandongBusinessscope:Investmentandmanagementonaviationtransportation;maintainingofaerostatandgroundfacilitieslimitedbypermission;conferenceandexhibitionservice;workingservice;maintainingonvehiclesofgroundpassengertransportationandgroundtransportation;thesalesofgeneralmerchandise,handicraftandsouvenir;thelodgings;thediningservice;retailsalesofthetobaccoproduct;leaseofhouse(limitedlymanagedbybranches)Registeredcapital:RMB580million3.
TheactualcontrolleroftheCompanyActualcontrolleroftheCompany:AirChinaLimited.
LegalRepresentative:LiJiaxiang(hasnotchangedyet)Structureofshareequity:ChinaNationalAviationCorporation(Group)LimitedandChinaAviation(Group)Co.
,Ltd.
(wholly-ownedsubsidiarycompanyofAirChinaGroupinHongKong)jointlysponsoredandfoundedAirChinaLimited,whichwaslistedinHongKong,LondonandShanghai.
AirChinaGroupholdsits43.
59%equity.
DateofFoundation:Sep.
30,2004Businessscope:Itwasengagedinthedomesticandoverseastransportationbusinesssuchasperiodicandaperiodicaviationpassenger,cargo,letterandbaggage;domesticandoverseasofficialflightbusiness;aeroplanemanagementbusiness;repairingofaerostat;businessagentamongaircompanies;groundserviceandaircourierservicesrelatedwiththemainoperations(excludingletterandarticleswiththenatureofletters);tax-freecommoditiesinSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT9airplane.
Registeredcapital:RMB9,433,210,90949.
406%22.
8%42%4.
TheCompanyhasnoshareholdersholdingover10%ofsharesoftheCompanyexceptforthecontrollingshareholderSDAandactualcontrollerAirChinaLimited.
5.
ParticularsaboutthetoptenshareholdersofcirculationshareNameofshareholdersNumberofsharesheldattheyear-end(share)TypeofsharesheldNameofshareholders1CREDITSUISSE(HONGKONG)LIMITED4,000,000B-share2GUOTAIJUNANSECURIESHONGKONGLIMITED2,094,400B-share3CHENCHUNPENG1,544,800B-share4ZHENGWEIHUA1,488,000B-share5LIYIJUN1,167,338B-share6FANGRUI1,102,600B-share7WUHAOYUAN1,062,700B-share8LIULIYA1,015,216B-share9JOHNPOSS756,000B-share10DENGHONGWEI650,609B-shareTheCompanyisnotawareoftheirassociatedrelationshipamongthetoptenshareholdersofcirculationshare,whetherbelongstotheconsistentactionistregulatedbytheManagementRegulationofInformationDisclosureonChangeofShareholdingforListedCompanies.
IV.
ParticularsaboutDirectors,Supervisors,SeniorExecutivesandEmployees(I)Directors,SupervisorsandSeniorExecutivesNameSexBirthdayTitleOfficetermAmountsattheAmountsattheAirChinaLimitedShandongAviationGroupShandongAirlinesCo.
,Ltd.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT10year-beginyear-endFengGangMaleSep.
,1963ViceChairmanoftheBoardJune28,2006-March14,200900ZhangXingfuMaleApr.
,1955ChairmanoftheBoardMarch15,2006–March14,200900ZengGuoqiangMaleOct.
,1953Director,GeneralMangerMarch15,2006–March14,200900SuZhongminMaleMarch,1954Director,StandingDeputyGeneralManagerMarch15,2006–March14,200900BaiWeisanMaleOct.
,1957Director,DeputyGeneralManager,GeneralManagerofQingdaoBranchMarch15,2006–March14,200900XiaoFengMaleOct.
,1968Director,ChiefAccountantMarch15,2006–March14,200900WangMingyuanMaleSep.
,1965DirectorMarch15,2006–March14,200900KouZunxianMaleAug.
,1955DirectorMarch15,2006–March14,200900WangJiemingFemaleJune,1958DirectorMarch15,2006–March14,200900WangZhiMaleMay,1942IndependentDirectorMarch15,2006–March14,200900HuJijianMaleNov.
,1942IndependentDirectorMarch15,2006–March14,200900FangShaokunMaleOct.
,1962IndependentDirectorMarch15,2006–March14,200900WeiJincaiMaleFeb.
,1950IndependentDirectorMarch15,2006–March14,200900WangFuzhuMaleJune,1953PresidentoftheSupervisoryCommitteeMarch15,2006–March14,200900GaoLihuaMaleMay,1969SupervisorMarch15,2006–March14,200900WangWupingMaleMarch,1965SupervisorMarch15,2006–March14,200900WangXianlinMaleNov.
,1965Supervisor,TeamLeaderofthe2ndflyingTeamMarch15,2006–March14,200900ZhouQiaoyanFemaleJan.
,1975Supervisor,DeputyHeadofMarch15,2006–March14,20090SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT11CabinServiceDepartmentSongYuxiaFemaleJan.
,1956DeputyGeneralManagerMarch15,2006–March14,200900YuHaitianMaleSep.
,1969DeputyGeneralManagerMarch15,2006–March14,200900LiQing'enMaleAug.
,1955DeputyGeneralManager,SecretaryoftheBoardMarch15,2006–March14,200900ZhangQingsheMaleOct.
,1958ChiefPilotMarch15,2006–March14,200900HeGuobinMaleJuly,1949ChiefEngineerMarch15,2006–March14,200900Note:1.
Therewasnochangeinthenumberofsharesheldbydirectors,supervisorsandseniorexecutivesinthereportperiod.
2.
Particularsaboutdirectors,supervisorsholdingthepostinShareholdingCompanyNameNameoftheShareholdingCompanyPositionintheShareholdingCompanyDrawpaymentandallowancefromtheShareholdingCompany(Yesorno)FengGangSDAChairmanoftheBoard,PresidentYesZhangXingfuSDAPartySecretary,Vice-presidentYesWangFuzhuSDAChiefAccountantYesWangWupingSDAHeadofFinancialDepartmentYesWangMingyuanAirChinaCommissaryofCommerceCommission,GeneralManagerofNetworkProceedingsDepartmentYesGaoLihuaAirChinaDeputyGeneralManagerofFinancialDepartmentYes(II)Mainworkexperiencesinthenearfiveyearsofthedirectors,supervisorsandseniorexecutives,aswellasparticularsoftheirfulltimeorparttimepostsincompaniesotherthantheshareholdingcompaniesNameMainworkexperienceFull-timeorpart-timepostsincompaniesotherthantheshareholdingcompaniesFengGang01/2003-2/2003,AssistanttoPresidentofAirChina;02/2003-2/2007,GeneralManagerandPartySecretaryofChinaNationalAviationAssetSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT12ManagementCo.
,Ltd.
;05/2007tillnow,ChairmanandPresidentofSDA;06/2007tillnow,DirectorandVice-presidentoftheCompanyZhangXingfu01/2003-12/2005,DeputyMayorinYantai;12/2005tillnow,PartySecretary,Vice-presidentofSDA;03/2006tillnow,ChairmanoftheBoardoftheCompany.
ChairmanofTaikooShandongAircraftEngineeringCo.
,Ltd.
ZengGuoqiang01/2003tillnow,DirectorandGeneralManageroftheCompany.
SuZhongmin01/2003tillnow,DirectorandStandingDeputyGeneralManageroftheCompany.
ChairmanoftheBoardofQingdaoInternationalLogisticsCentreCo.
,Ltd.
BaiWeisan01/2003-12/2005,DirectorandDeputyGeneralManageroftheCompany;05/2005tillnow,GeneralManagerofQingdaoBranchoftheCompany.
ChairmanoftheBoardofShandongAirlinesRainbowJetsCo.
,Ltd.
XiaoFeng01/2003-04/2003,MangerofCashManagementoftheFinancialDepartmentofAirChina;04/2003-08/2005,DeputyGeneralManagerofFinancialDepartmentofAirChina;04/2005tillnow,DirectoroftheCompany;08/2005tillnow,ChiefAccountantoftheCompany.
WangMingyuan01/2003-06/2005,DeputyGeneralManagerofSales&MarketingDepartmentofAirChina;06/2005tillnow,CommissaryofCommerceCommission,GeneralManagerofNetworkProceedingsDepartmentofAirChina;03/2006tillnow,DirectoroftheCompany.
KouZunxian01/2003-03/2007,DirectorofAssetManagementDepartmentofShandongEconomicDevelopmentandInvestmentCompany;03/2007tillnow,DeputyGeneralManagerofShandongEconomicDevelopmentandInvestmentCompany;04/2005tillnow,DirectoroftheCompany.
WangJieming2003tillnow,DirectorofPlanningFinancialDepartmentofShandongEconomicDevelopmentandInvestmentCompany;03/2006tillnow,DirectoroftheCompany.
WangZhi2003tillnow,IndependentDirectoroftheCompany.
PresidentofNanjingUniversityofAeronauticsandAstronautics;IndependentDirectorofChinaSouthernAirlines;SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT13IndependentDirectorofHainanAirlines.
HuJijian01/2003tillnow,memberofCPPCCCommitteeofShandongProvinceandprofessorofShandongInstituteofEconomics;01/2003tillnow,IndependentDirectoroftheCompany.
IndependentDirectorofLuyinInvestmentGroupCo.
,Ltd.
FangShaokun01/2003-12/2003,DeanofLawSchoolofYantaiUniversity;12/2003tillnow,VicePresidentofYantaiUniversity;12/2004tillnow,IndependentDirectoroftheCompany.
LawyeratShandongSunsumLawFirm;IndependentDirectorofYantaiOrientalElectronicsInformationIndustryGroupCo.
,Ltd.
WeiJincai01/2003tillnow,PartySecretaryofCivilAviationManagementInstituteofChina;03/2006tillnow,IndependentDirectoroftheCompany.
WangFuzhu01/2003-04/2005,DirectoroftheCompany;01/2003tillnow,ChiefAccountantofSDA;05/2005tillnow,ChairmanofSupervisoryCommitteeoftheCompany.
GaoLihua01/2003-04/2003,ManagerofAccountingCalculationofFinancialDepartmentofAirChina;04/2003tillnow,DeputyGeneralManageroftheFinancialDepartmentofAirChina;03/2006tillnow,SupervisoroftheCompany.
WangWuping01/2003tillnow,DirectoroftheFinancialDepartmentofSDA;SupervisoroftheCompany.
WangXianlin01/2003-09/2007,GroupLeaderofNO.
2FlyingGroupoftheCompany;09/2007tillnow,DeputyChiefPilotandconcurrentlyMinisterofOperations&StandardsDepartmentoftheCompany;01/2003tillnow,SupervisoroftheCompany.
ZhouQiaoyan01/2003-03/2003,DeputySquadronLeaderofCrewSafeguardingSquadron;03/2003tillnow,DeputyHeadofCabinServiceDepartmentoftheCompany;03/2006tillnow,SupervisoroftheCompany.
SongYuxia01/2003-04/2005,DirectoroftheCompany;01/2003-05/2005,GeneralManagerofQingdaoBranchoftheCompany;01/2003tillnow,DeputyGeneralManageroftheCompany.
ChairwomanoftheBoardofShandongInternationalAeroTrainingCo.
,Ltd.
,ChairmanoftheBoardofQingdaoFeishengInternationalAeroTechnicalTrainingCo.
,Ltd.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT14YuHaitian01/2003-03/2003,GeneralEngineeroftheCompany;03/2003tillnow,DeputyGeneralManageroftheCompany.
ChairmanoftheBoardofShandongXiangyuAeroTechnicalServicesCo.
,Ltd.
LiQing'en01/2003-08/2005,ChiefAccountantoftheCompany;01/2005tillnow,DeputyGeneralManageroftheCompany,SecretaryofBoardofDirectors.
ZhangQingshe01/2003tillnow,ChiefPilotoftheCompany.
HeGuobin01/2003-03/2003,ChairmanoftheBoardofTaikooShandongAircraftEngineeringCo.
,Ltd.
;03/2003tillnow,GeneralEngineeroftheCompany.
(II)ParticularsaboutannualpaymentThepaymentsofthedirectors,supervisorsandseniorexecutivesoftheCompanyweredeterminedaccordingtotheachievementsandresultssalarysystem.
TheallowanceforeachindependentdirectorwasRMB50,000peryearasthebasicnumberplusanextraallowanceofRMB600foreveryworkingday.
NameTitleTotalamountofannualremuneration(RMB'000,beforetax)ZengGuoqiangDirector,GeneralManager44.
18SuZhongminDirector,StandingDeputyGeneralManager37.
85BaiWeisanDirector,DeputyGeneralManager,GeneralManagerofQingdaoBranchoftheCompany34.
98XiaoFengDirector,ChiefAccountant29.
45WangZhiIndependentDirector5.
90HuJijianIndependentDirector5.
90FangShaokunIndependentDirector5.
90WeiJincaiIndependentDirector5.
90WangXianlinSupervisor,TeamLeaderofthe2ndflyingTeam19.
56ZhouQiaoyanSupervisor,DeputyHeadofCabinServiceDepartment15.
91SongYuxiaDeputyGeneralManager38.
25YuHaitianDeputyGeneralManager34.
36LiQing'enDeputyGeneralManager,SecretaryofBoardofDirectors34.
46ZhangQingsheChiefPilot35.
22HeGuobinGeneralEngineer34.
53Total382.
34DirectorMr.
FengGangandDirectorMr.
ZhangXingfu,togetherwithMr.
WangFuzhuandMr.
WangWupingofSupervisoryCommittee,drewtheirremunerationsfromSDA,thecontrollingshareholder,notfromtheCompany;DirectorMr.
WangMingyuan,andSupervisorSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT15Mr.
GaoLihuadrewtheirremunerationsfromAirChina,notfromtheCompany;DirectorMr.
KouZunxianandDirectorMs.
WangJiemingdrewtheirremunerationsfromShandongEconomicDevelopmentandInvestmentCompany,notfromtheCompany.
(III)Particularsaboutchangesofdirectors,supervisorsandseniorexecutiveOnMay23,2007,originalDirector&Vice-chairmanoftheCompanyMr.
SunYudehandedtheresignationlettertotheboardofdirectorsduetoworkchange,inwhichheresignedhispostsofDirector&Vice-chairmanofthe3rdboardofdirectors;inthesameday,Mr.
FengGangwasnominatedthecandidateofdirectorofthe3rdboardofdirectorsoftheCompanybySDA,thecontrollingshareholderoftheCompany.
OnJune28,2007,the2006AnnualShareholders'GeneralMeetingelectedMr.
FengGangasthedirectoroftheCompany;inthesameday,the8thmeetingofthe3rdboardofdirectorsoftheCompanyelectedMr.
FengGangasthevice-chairmanofthe3rdboardofdirectorsandmemberofStrategy&NominationsCommitteeoftheCompany.
Inthereportperiod,therewerenochangesonotherdirectors,supervisorsandseniorexecutives.
(IV)AboutstaffBytheendofthereportperiod,theCompanyhad3,304employeesintotal,including34postgraduates(MasterDegreeandDoctorDegree)orabove,1,778personsgraduatedfrom3-yearsregularcollegeorabove.
Thestaffstructureisasfollows:TypeofemployeeNumberProportionholdingtotalstaffFlightpersonnel38311.
59%Aircraftcrewandmaintenanceperson51515.
59%Salespeople69721.
09%Airhostandhostess57517.
40%Groundattendant2878.
69%Accountant1394.
21%Others70821.
43%Bytheendofthereportperiod,therewere13retireesintheCompany.
V.
AdministrationStructureoftheCompany(I)ParticularsaboutCompanyAdministration1.
ParticularsabouttheCompanyAdministrationinthereportperiodIn2007,strictlyaccordingtoCompanyLaw,SecuritiesLawandrelevantlawsandregulationspromulgatedbyCSRC,theCompanyperfectedconsistentlytheCompany'sadministrationstructureandstandardizeditsoperation.
Inthereportperiod,throughtheimplementationofgovernancecampaignforlistedcompanies,theCompanyperfectedaseriesofadministrativeandinternalcontrolsystem,modifiedrulesandsystems,thusprovidingpowerfulsystemandorganizationguaranteeforitsorderlyoperation.
Professionalcommitteesoftheboardofdirectorscarriedtheirworkstepbystep,andthescientificdecisionmakinglevelfurtherenhanced.
Workingascallersofdifferentprofessionalcommittees,independentdirectors'influencealsostrengthened.
ComparedtostandardSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT16documentsissuedbyCSRCongovernanceforlistedcompanies,theboardofdirectorsthinkstheactualadministrationoftheCompanyisbasicallyinaccordancewithregulationsofCodeofCorporateGovernanceforListedCompanies.
2.
ParticularsaboutSpecialGovernanceCampaignAccordingtorequirementsofNoticeontheMattersConcerningCarryingoutaSpecialCampaigntoStrengthentheCorporateGovernanceofListedCompanies(ZGSZiNo.
28[2007]),theCompanyestablishedaspecialcampaigngroupwhichassignsthechairmanoftheboardtobetheleaderandseniorexecutorsofthecompanytobeitsmemberstoberesponsibleforthespecialgovernancecampaign,governanceactivities'planmakingresearchandselfinspectionorganizingformethodsandworkplan.
FromApriltoOctoberof2007,accordingtorequirementsandunifiedassignmentsoflistedcompanies'specialadministrationactivity,ourcompanyfinishedthethreephaseworkofadministrativeitselfchecking,publiccommentingandimplantingandimprovingonthewholepurposeofstandardizingoperationoftheCompanyandimprovingtheadministrativelevelobjectively,publicly,fairly,fullyandfurther.
Duringthecheckingperiod,theCompanyontheprincipleofseekingtruthfromthefacts,accordingtotheRulesofTheCompanyandotherlawsandadministrativerulesandtheArticlesofAssociation,RulesandProcedureoftheBoardofDirectors,RulesandProcedureoftheSupervisoryCommittee,carefullycheckeditselfadministrationandmadetheReportandPlanonStrengtheningListedCompanies'Administrationandpublisheditaftercheckingandgettingthroughbythe3rdmeetingofthe3rdboardofdirectors.
Duringthecommentingperiod,theCompanysetupspecialphone,faxandemail,assignedparticularpersontoberesponsibleofpickingupphonesandreceivingemailstohearopinionsandsuggestionsofinvestorsandthepublicandgetcommentsfrominvestors.
AccordingtoManagementLetterofauditingorganization,theCompanycombineditsactualconditionstochange.
3.
ShandongStockSupervisoryBureau'sChangeSuggestiontotheCompanyandparticularsaboutthechangeProblem1:TheinternalcontrolsystemoftheCompanyisincomplete,andshouldbeperfectedfurther.
Particularsaboutchange:TheCompany,throughhacklingandcomparingdifferentinternalcontrolsystems,modifiedandperfectedRulesofProcedureofDirectors'MeetingforShandongAirlinesCo.
Ltd.
onthe10thmeetingofthe3rdDirectors'MeetingonOct.
30th.
TheCompanycontinuedperfectingitsinternalcontrolsystemaccordingtoitsactualconditionanddevelopmentneeds.
Problem2:Anindependentdirectordoesn'thavequalificationcertificateyet.
Particularsaboutchange:IndependentdirectorWeiJincaiworkedasindependentdirectoroftheCompanysinceMarchof2006,andhedidn'thaveanytrainingforindependentdirector.
AccordingtoarrangementbyShenzhenSecurityExchange,inSeptemberof2006,WeiJincaitookpartinthe13thindependentdirectors'trainingclassinFuzhouandpassedtheexamtogetacertificate.
Problem3:TheInformationDisclosureManagementSystemneedsperfectingandimplementing.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT17Particularsaboutchange:On28thJune,theCompanyexaminedandpassedthenewInformationDisclosureManagementSystemofShandongAirlinesCo.
Ltd.
onthe8thmeetingofthe3rdDirectors'Meeting,andorganizedseniorexecutorstostudyit.
TheCompanywillstrictlyconformtorequirementsofthismanagementsystemtodiscloseinformationwell.
Problem4:SpecialCommitteesoftheBoardofDirectorsshouldfurtherfullymaketheiruse.
TheCompanyconsistentlyperfectedresponsibilitylimit,workingprocedureandrulesofprocedureofspecialcommittees,firstlycollectedopinionsofdifferentspecialcommitteesonexaminingrelevantmatters,strengthenedinformationcommunicationatthesametime,andtheuseofspecialcommitteeswasimprovingstepbystep.
Problem5:Investorsrelationshipmanagementneedsdeeplyperfecting,andespeciallytheimplementationwaysshouldberichertostrengthentheactivityofinformationdisclosure.
PresentlytheCompanyhascommunicatedwithinvestorsthroughregularreport,temporarynotice,phonecallreceiving,investorvisitreceptionandspecialcolumnmaintenanceforinvestorrelationshiponitswebsite.
AsapureB-sharecompany,nowfeworganizationinvestorsalsoinfluencedinvestors'relationshipmanagement.
TheCompanywillcontinuestrengtheninginvestors'relationshipmanagementandmutualactiontofurtherenhancetheworkinglevel.
What'smore,asapureB-sharecompany,theCompany'sparticipationoncapitalmarketisstillweak.
AndtheCompanystrengthenedcommunicationwithsupervisorydepartmentsaswellasagencies,andearnestlyresearchedandstudiedrelatedpolicies.
Boardofdirectors'officeisresponsibleforwatchingpoliciestopromoteitsdevelopmentbycapitalmarket.
InNov.
2007,afterfinishingallrectifications,theCompanymadeReportonSpecialGovernanceRectificationwhichwasdisclosedafterexaminingandpassingonthe2ndtemporarymeetingofthe3rdDirectors'Meeting.
(II)PerformanceofIndependentDirectorsSincetheIndependentDirectorsoftheCompany,Mr.
WangZhi,Mr.
HuJijian,Mr.
FangShaokunandMr.
WeiJincaitooktheirposts,theyfulfilledtheirdutiesinanhonest,diligentandresponsibleway,attendedvariousmeetingsoftheBoardandShareholders'GeneralMeetingontimeandattendedSupervisoryCommitteemeetingsasnon-votingdelegates;researchedandstudiesactivelytheoperation,businessdevelopmentandfinanceoftheCompany,supervisedpatientlyoverandguidedthenormativeoperationoftheCompany,participatedactivelyinthedecision-makingoftheBoardofDirectors,andexpressedindependentandobjectiveopinionsonthenomination,appointingandremovingofdirectors,engagementanddisengagementofseniorexecutives,suggestionandengagementofcertifiedpublicaccountantsandsignificantrelatedtransactionsoftheCompany,offeringscientificandreasonablecommentsandproposalsformanytimesonthemanagementanddevelopmentoftheCompanybytheirownprofessionalknowledge.
1.
ParticularsaboutIndependentDirectors'AttendingtheBoardofDirectors:NamePresentTimesfortheBoardofDirectorsthisyearPresentinginperson(Times)Entrustedpresence(Times)Absent(Times)SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT18WangZhi7610HuJijian7700FangShaokun7610WeiJincai65012.
ObjectionsontherelatedtermsoftheCompanyofferedbytheindependentdirectors:Inthereportperiod,therewasnoobjectionmadebyindependentdirectorsonrelatedmatters.
(III)SeparationoftheCompanyandholdingshareholderinbusiness,personal,assets,organizationandfinance.
TheCompanyandSDA,thecontrollingshareholder,areseparatedinbusiness,personal,assets,organizationandfinance.
TheCompanypossessestheindependentandcompletebusinessandoperatesindependently.
(IV)EvaluationandencouragementmechanismofseniorexecutivesAccordingtotheinternalRegulationontheIntegratedEvaluationandManagementofExecutives,theCompanyconductedtheannualcomprehensiveevaluationontheseniorexecutivesandimplementedthewagesystemwherepaymentwaslinkedwithachievements.
(IV)ParticularsaboutestablishmentandperfectionoftheCompany'sinternalcontrolsystem1.
ComprehensivedescriptionoftheCompany'sinternalcontrolsystemInthereportperiod,inaccordancewithrelevantregulationsofNoticeofIssuesonConcerningCampaigntoStrengthenCorporateGovernanceofListedCompanies(ZJGSZi[2007]No.
28)madebyCSRCandGuidelinesforInternalControlofListedCompaniesbyShenzhenStockExchange,combinedselfinspectionofspecialgovernanceandchangecampaign,theCompanymadeInformationDisclosureManagementSystemofShandongAirlinesCo.
Ltd.
andmodifiedRulesofProceduresforDirectors'MeetingofShandongAirlinesCo.
Ltd.
.
2.
Boardofdirectors'self-commentsoninternalcontrolsystemThroughconsistentestablishing,completingandperfectingandspecialgovernancecampaignof2007,theCompanymadecorrespondingchangeandenhancement,andtheexistinginternalcontrolsystemisrelativelycomplete,reasonableandeffective.
Everysystemcanbefullyandeffectivelyimplemented,thusadjustingrequirementsofexistingmanagementaswellasneedsofdevelopment,guaranteeingbusinessoperationinorderandensuringwholeimplementationandfullrealizationofitsdevelopmentstrategyandoperationtarget.
Systemscanensureaccuracy,legalityandcompletenessofitsfinancialdocuments,securityandcompletenessofitsassets,finishinformationdisclosureaccurately,exactly,timelyandcompletelytoensuretreatallinvestorsopenly,equallyandjustlyaswellastoprotectinterestfortheCompanyanditsinvestors.
Inordertostrengthenitsoverallmanagingandcontrollingability,perfectoperation,managementandsupervisionsystem,andincreaseabilityandlevelforpreventingandcontrollinginternalrisks,theCompanywillfurtherstrengtheninternalexaminationandotherfunctionsofinternalcontrolsystemtoguaranteeitshealthoperationandpromoteitsdevelopment.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT19(VI)OpinionsgivenbySupervisoryCommitteeonSelf-estimationforTheCompanyInternalControlAccordingtotheGuidelineofInternalControlfortheListedCompaniesofShenzhenStockExchange,TheCompanycheckedtheinternalcontrolsystemof2007whollyanddeeply,thought:1.
Theinternalcontrolpolicybasicallyagreedwithrequirementsofstocksupervisorydepartment,andalsowentwellwiththepresentparticularsforcompanyoperation.
2.
TheinternalcontrolmethodoftheCompanyhadgoodeffectonthecontrolofeveryprocedureandeverypartsofenterprisemanagement.
3.
TheCompanyshouldcontinueperfectingitsinternalcontrolsteps,organizationandstrength.
(VII)IndependentOpiniongivenbyIndependentBoardofDirectorsonSelf-estimationforTheCompanyInternalcontrolIn2007,TheCompanycheckedtheinternalcontrolsystemwhollyanddeeply,accordingtotheGuidelineofInternalControlfortheListedCompaniesofShenzhenStockExchange.
Oncompanyadministration,wesetupandcontinuouslyimprovelegalrepresentativeadministrationstructure,promoteunceasinglystrictadministrationforboardofdirectors,supervisorycommitteeandshareholders'meeting,tohaveacleartargetonrightlimit,decisionprocedure,associatedtransaction,informationdisclosure,investors'relationship,importantinvestment,riskcontrolandothermanagementissue.
Onthebasicmanagementsystemconstruction,wecombinedthefactofoperationandfurtherimprovedmanagementsystemtomakerelativelysystematicmanagementsystem,onemphasisofmanagementforfinance,guarantee,andinformationpublishingandimportantinvests.
Onthebasisofindependentjudgment;independentdirectorsmadecarefulcheckingoninternalcontroloftheCompanyandmadethefollowingindependentopinions:(1)Theinternalcontrolpolicyconformedtotherelevantlawsandrequirementsofstocksupervisorydepartment,andalsowentwellwiththepresentparticularsforcompanyoperation.
(2)TheinternalcontrolmethodoftheCompanyhadgoodeffectsonthecontrolofeveryprocedureandeverypartsofenterprisemanagement.
VI.
BriefintroductiontotheShareholders'GeneralMeetingInthereportperiod,theCompanyheldaShareholders'GeneralMeeting,whichistheAnnualShareholders'GeneralMeetingof2006.
1.
Notification,conveningandholdingoftheShareholders'GeneralMeetingOnJune28,2007attimeof9:30,theCompanyheldits2006AnnualShareholders'GeneralMeetingon31/FconferenceroomofSDABuilding.
TheCompanynotifiedtheshareholdersofthemeetingbymeansofPublicNotice,andthenotificationofthemeetingwaspublishedinChinaSecurities,SecuritiesTimesandHongKongWenWeiPaodatedJune1,2007.
Thereareintotal5Shareholdersandshareholder'sproxiesrepresenting259,801,000sharesoftheCompany,andtheyauthorizedaforeignagency(B-shareshareholder)'strusteeshipbankHSBCShanghaibranchtotrusteeshipsecretaryofficeoftheboardofdirectorsforvotinginsteadtothevotingwillingnessrepresenting413,400sharesoftheCompany.
TheSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT20abovesharesintotalare260,214,400shares,taking65.
05%inthetotalamountofshareswithvotingrightsoftheCompany;including259,602,000state-ownedlegalperson'sshares,taking64.
90%oftotalsharesoftheCompany;199,000domesticlegalperson'sshares,taking0.
05%oftotalshares;413,400domesticallylistedforeignshare(Bshare),taking0.
10%oftotalsharesoftheCompany.
ChairmanoftheBoard,Mr.
ZhangXingfupresidedthemeeting.
Thedirectors,supervisorsandseniorexecutivesoftheCompanyattendedthemeeting.
TheconveningandholdingoftheMeetingaccordedwiththeregulationsofCompanyLaw,StandardizingOpinionsonShareholders'GeneralMeetingofListedCompanyandArticlesofAssociationoftheCompany.
2.
TheresolutionspassedbytheShareholders'GeneralMeetingandthedisclosureofpublicnoticeonresolutions.
Followingproposalswereexamineditem-by-itemandapprovedbymeansofsignedvoteinthemeeting:(1)ProposalonAdjustingDirectors;(2)WorkReport2006oftheBoardofDirectorsofShandongAirlinesCo.
,Ltd.
;(3)WorkReport2006oftheSupervisoryCommitteeofShandongAirlinesCo.
,Ltd.
;(4)WorkReport2006ofIndependentDirectorsofShandongAirlinesCo.
,Ltd.
;(5)AnnualReport2006ofShandongAirlinesCo.
,Ltd.
;(6)FinancialSettlementReport2006ofShandongAirlinesCo.
,Ltd.
;(7)ProfitDistributionPlan2006ofShandongAirlinesCo.
,Ltd.
;(8)ProposalonRoutineRelatedTransactionin2007;(9)ProposalonAllowanceofIndependentDirectors;(10)ProposalonEnlargingBusinessScopeofShandongAirlinesCo.
,Ltd;(11)ProposalonRevisingtheArticlesofAssociationofShandongAirlinesCo.
,Ltd;(12)ProposalonRe-engagingCertifiedPublicAccountantsanditsRemunerations.
TheresolutionsofthemeetingwerepublishedinChinaSecurities,SecuritiesTimesandHongKongWenWeiPaodatedJune29,2007.
VII.
ReportoftheBoardofDirectors(I)DiscussionandanalysistotheoperationTheCompanyisacivilaviationtransportationenterprise.
In2007,theCompanyinsistedinthestartofutmostinterestforitselfanditsshareholders,earnestlycarriedoutresponsibilityinArticlesofAssociation.
Intheleaders'attentionandsupportfromShandongProvincialPartyCommittee,ProvincialGovernment,AirChinaGroupandAirChina,theCompanydeeplyimplementedscientificdevelopment,activelyhandledfuriouscompetitioninairlineindustry,dealtwithdifficultieslikeincreaseoilprice,changedthepressureoffastdevelopmentintomomentumforbetterdevelopment,andeveryworkcontinueskeepingactivityandgrowth.
1.
Implementingsecurityincreasingprojecttorealizethe13thsecurityyear.
(1)AccordingtorequirementsofGeneralAdministrationofCivilAviationofChina,theCompanyidentified1stsecurityresponsibleperson,directsecurityresponsiblestaffandsecuritypersonsforitssubsidiariesandotherplacestofurtherperfectingsecureoperationresponsibilitysystem.
(2)TheCompanytookmanagementcreationandspecificcontrollingSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT21methods,strengthenedcontrolineveryprocedure,increasedsecureoperationquality.
Accountingflightplanpercentagerealized94%,whichraised37%.
Andnewsystemwasformedbythegovernanceofmassairlinedelay.
(3)Sincethesecondhalfyearof2007,theCompanyearnestlyimplementedthe"21Suggestions"byGeneralAdministrationofCivilAviationofChina,organizedsecurityneaten,andgraspedsecurityimplementation.
Therewere12securitycheckswasorganized,and343problemswasclearedinthesecurityneaten.
(4)TheCompanyfurtherenhancestheconstructionofflight,locomotive,dispatchandairpoliceandconsolidatesthebasiswithsafety.
2.
Basearrangementandairlinewebsitekeptoptimizing,marketsaleswerestrengthened,andincomelevelwasincreasedcomparedtothesametimeoflastyear.
TheCompanyfurtherstrengthenedoperationorganizationmanagementaswellcomprehensiveuseofmanufactureresource,arrangedflightplanandflightstopplanscientificallytoincreasetransportationefficiency.
Throughstrengtheningrollingbudgetmanagementandkeyindexcontrolofinterest,possiblecontradictionwasdigestedinadvance.
Pricecoordinatechannelwasestablishedtoincreaseincomelevel.
Agencymanagementwasstrengthenedtomotivatesalesactivity.
TheCompanydevelopedsalesdecisionanalysissystem,establishedsalesdatafilesandtook"quantificationmanagementandtargetevaluation".
Directsalesandwebsitesaleschannelswerestrengthenedtoexplorenewsalesmodel.
3.
Costdecreasingandefficiencyincreasinggotnewachievement,andprofitlevelreachedanewheight.
FiveincomeincreasingandcostsavinggroupsoftheCompanyactivelydiggedthepotentialstoachievetargetfully.
Byimplementingeveryincomeincreasingandcostsavingmethod,theprofitmakinglevelofthewholecompanyhadnewincrease.
4.
Structureadjustmenthaditsprimaryeffectsandgotintogooddevelopment.
Foronething,thestructureofairplanetroopsfurtheroptimized,andsix737airplaneswasaddbuttwoCRJairplaneswerecancelledleasing,profitmakingairplanesbecamethemainairplanes;foranotherairlinesstructurewasadjusted,andonthebasisofensuringutmostinterest,theCompanyaddedlongdistanceflightsanddirectflightsaswellasdecreasedshortdistanceflightandtransferflights.
5.
Phenomenaeffecthasbeenreflectedinintegritylinkageandresourcesconformityhasbeenpromotedforcefully.
ShandongAirlinesandAirChinahavetogetherenjoyedthesamecodeoffreesalepatternfor120flightcourses.
Thetwocompaniesconductjointstockoperationin6flightcoursesandproducemanylinkingjointproductsaccordingtothesituationofbases.
AftertheseasonchangeofscheduledflightbetweenwinterandspringonOct27th,theCompanymakesfourairplanesinwetleasetoAirChinainsuccession,whichisbelievedtomakeupthetransportcapabilityinlow-seasonandaddnewmotivityforrealizingmainoperatingincome.
Withinayear,ShandongAirlinesandAirChinahavemadenewprogressinenjoyingandsupportingflightmaterials,informationmanagement,developingsystem,negotiationandcooperationofadministrationandconformityoftrainingbusiness.
6.
Carryouttheflightpunctualityengineeringandcontinuouslyperfecttheservicequality.
TheCompanypromotesthefinecontrolsystemindetailsin2007,emphasizesinreleasing,organizationandspotsupervisionofflight,strengthensthecooperationabilityonspot,andtriestoreducetheeffectbroughtbyhumanfactorsonthenormaloperationofflight.
Meanwhile,thepreplanfordealingwiththeabnormalflightisfurtherperfectedandgroundSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT22servicenetworkoffastreflectionandcompletecontentisestablished.
Statisticsandanalysisfornormalflightrateisreinforcedandprizeandpunishmentforencashingflightpunctualityispracticedintime.
Graspingtheopportunityofthe2008OlympicGamesandthe2009NationalGames,theCompanyfocusesontheimprovementofitsservicequalitybyservicereform,andmakesitsbestefforttoimprovethesupervisioninserviceprocedure,correction,preventionandlastingprogressofservicequalityproblems.
7.
PromoteorganizationinnovationandstrengthenthefundamentalconstructionoftheCompany.
Throughpracticalimplementationofthesuggestiononmanagementpresentedbyexternalaudit,theCompanyactivelyimprovesitsenterpriseadministrationandputsforwarditsmanagementlevelintoanewstep.
Clearingupthefunctionmanagementofbasicconstruction,theCompanymakesefforttoboostitsfundamentalconstruction.
ConstructionofQingdaoHangarandJinanFreightWarehouseareinsuccessfulprogressing.
AndJinanComprehensiveBuildingandYantaiComprehensiveBuildingareinprophasepreparationtoconstruct.
8.
Innovatethetrainingwayandreceiveprogressintrainingquality.
TheCompanyintensifiesthetrainingpowerin2007,advancingtheimplementationoftrainingplansofitsvariousdepartmentsandcarryingoutevaluationontrainingquality.
Withvarioustrainings,thebusinessdiathesisofitsstuffsandmanagingdiathesisofitsleadersallgetnewimprovement.
(II)Operationsinthereportperiod1.
ScopeofmainoperationsandtheirstatusTheCompanyismainlyengagedinbusinessofpassengerandcargocivilaviationtransportationandairtrafficfromhometoitssurroundingnationsanddistricts,hotelandfoodservice,airmachinereparation,agencybusinessforinterairlines,relatedlandserviceswithmainoperation.
Inthereportperiod,theCompanycompletedtotalturnovervolumeoftransportamountingto650milliontonskilometers,anincreaseof12.
6%overtheyear2006andcarried5.
767millionpassengersinasafeway,anincreaseof7.
3%overthelastyear.
Inthereportperiod,theCompanyrealizedincomefrommainoperationsamountingtoRMB4.
63billion,anincreaseof9.
43%comparedwiththecorrespondingperiodofthepreviousyear,includingincomefrompassengeraviationtransportationofRMB4.
353billion,takingup94.
02%ofthetotalincomeandrevenuefromcargoandmailaviationtransportationofRMB150million,takingup3.
25%ofthetotalincome,otherincome(includinghotelandfoodservice)amountingtoRMB126.
4692million,accountingfor2.
73%oftotalincome.
Inthereportperiod,theoperationprofitrealizedRMB76.
6333million.
(1)ParticularsaboutdifferentindustriesofmainoperationUnit:RMBSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT23IndustryOperationincomeOperationcostOperationprofitproportion(%)Mainoperationincomeincreasedordecreasedcomparedtolastyear(%)Mainoperationcostincreasedordecreasedcomparedtolastyear(%)OperationprofitproportionincreasedordecreasedcomparedtolastyearAviationtransportationservice4,503,661,260.
703,761,738,252.
6016.
47%7.
13%8.
20%decreased0.
83%percentagepointsCargotransportation7,250,905.
821,733,971.
6176.
09%-17.
37%60.
31%decreased11.
59%percentagepointshotelandfoodservice26,059,386.
9216,312,368.
4937.
40%18.
41%206.
31%decreased38.
40%percentagepoints(2)ParticularsaboutdifferentdistrictsformainoperationUnit:RMBDomesticInternationalIndustryMainoperationincomeincreasedordecreasedcomparedtolastyearMainoperationincomeincreasedordecreasedcomparedtolastyearAviationtransportationservice4,343,952,321.
575.
97%159,708,939.
1361.
74%Cargotransportation7,250,905.
82-17.
37%--hotelandfoodservice26,059,386.
9218.
41%--3.
Operationsandachievementsofholdingandshare-holdingcompanies(1)QingdaoInternationalAirlinesLogisticsCenterCo.
,Ltd.
ItssharecontrolledbytheCompanyanditismainlyengagedinaircargostorage,grounddispatching,e-commerce,the3rdpartylogisticsdesignandimplementation,logisticsbusinessconsultantandservicesconcernedwithregisteredcapitalamountingtoRMB30million.
Inthereportperiod,theCompanyrealizednetprofitamountingtoRMB2.
4444million.
Attheendofthereportperiod,thetotalcapitalisRMB45,311,900,andnetcapitalisRMB39,712,600.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT24(2)SichuanAirlinesCo.
,Ltd.
Inthereportperiod,itsshareparticipatedSichuanAirlinesCo.
,Ltd.
realizedmainoperationincomeRMB5,343,815,800andnetprofitofRMB135,510,300byauditing.
(3)ShandongAirlinesRainbowJetCo.
,Ltd.
Inthereportperiod,itsshareparticipatedbytheCompanyandrealizednetprofitamountingtoRMB-4,142,000asaudited.
Attheendofthereportperiod,thetotalcapitalisRMB92,187,400.
(4)TravelskyTechnologyLimitedItsshareparticipatedbytheCompanyanditsauditingworkof2006isnotfinishedyetatpresent.
(5)JinanInternationalAirportCo.
,Ltd.
Inthereportperiod,itsshareparticipatedbytheCompanyanditsauditingworkof2007isnotfinishedyetatpresent.
4.
ParticularsaboutmajorsuppliersandcustomersThetotalamountofpurchaseofthetopfivesuppliersoftheCompanytookup27.
71%ofthetotalannualamountofpurchase(mainlyispurchaseofaviationoil,aviationmaterialsandplanesupplyproducts)andthetotalamountofsalesofthetopfivecustomerstookup18.
47%ofthetotalannualamountofsalesoftheCompany.
5.
Problemsanddifficultiesfromoperationsandtheirsolutions(1)In2007,theaverageoilpriceincreasedconsistently,andthecontinuousrisinginaviationoilpriceresultedinoperationcostascendingendlessly.
Facedwiththedisadvantagephaseofoilpricefunctioninginhighorder,theCompanycontinuouslydevelopedworkonincreasingincomeandreducingexpenditure,wentonconsummatemeasures,putintopracticethespiritoftheSavingOilMeetingoftheCompany,andoilsavingcostreachedRMB39,310,000.
In2008,theCompanywillfurtherenhancethebudgetenforcement,establishandconsummatethemonitoringandassessmentmechanism,andcontroltheincreaseofoperationcost.
(2)ThelossesofseriesofCRJairplanesoftheCompanyhavenotbeensolvedyet.
In2007,theCompanycanceledreleaseoftwoCRJ-200airplanes,andprofitmakingairlineshavebecomeitsmainairlines.
In2008,theCompanywillalsocancelreleaseofanothertwoCRJ200airplanes.
AndtheCompanywillcontinuefasteningairlinestructureadjustment,arrangelateralairlineplantomeettheairlinecostdecreasingtarget.
(3)Atpresent,theprofitmakingabilityhasnotbeenimproved.
In2008,theCompanywilltakedifferentmeasurestoenhanceitsprofitmakingability.
Withthetargetofincreasingwebsiteinterest,theCompanywillstrengthenitsairlinewebsiteconstruction.
Promotingcreativesalesmodelandincreasingsalescompetitiveabilityisalsoitstarget.
TheCompanywillalsostrengthenincomemanagementtoincreaseseatvalue.
Lowcostmanagementworkontheemphasisofcostdecreaseandefficiencyincreaseshouldbedeeplycarriedout.
TheCompanywillcontinueimplementingassetstructureadjustment,aswellaspromoteairlinegroupadjustmenttofurtherdeepenresourceadjustmentwithAirChinaLimited,thusrealizingbettercoordinateinterest.
(III)InvestmentsoftheCompany1.
InvestmentofraisedproceedsInthereportperiod,therewasnoapplicationofproceedsraisedorapplicationofproceedsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT25raisedinthepreviousperiodbutlastingtothereportperiodintheCompany.
2.
Investmentofnon-raisedproceedsOnOct30thof2007,theproposalonEstablishmentofFreightWarehouseinJinanBasehasbeenexaminedandapprovedinthe10thmeetingofthe3rdsessionBoardofDirectorsoftheCompany.
ItwasdeterminedtoestablishafreightwarehouseinJinanBase.
ThisprojectislocatedwithintheareaofJinanYaoqiangInternationalAirportandisdividedtothearrivalwarehouseandthedeparturewarehouseinaccordancewiththestandardoffreightwarehouse.
Thetotalareaoftheconstructionsoftheprojectcoversapproximately7,577squaremetersandRMB13,890,000isestimatedforthebudgetoftheconstruction.
(IV)FinancialstatusoftheCompany1.
ChangeinaccountingpolicyandaccountingestimationTheCompanyhasimplementedtheAccountingStandardsSystemandGuidanceforEnterprisepromulgatedbythestatesinceJan1stof2007.
Inaccordancewiththefollowingregulationsanddocuments:No.
38oftheAccountingStandardsforEnterprise-FirstTimeAdoptionofAccountingStandardsforEnterprises,No.
1oftheExplanationofAccountingStandardsforEnterprises,NoticeonDisclosureofFinancialandAccountingInformationRelatedtotheNewAccountingStandards(ZJF2006No.
136)promulgatedbytheCSRC,aswellastheNo.
7oftheQuestionsandAnswersontheStandardizationofInformationDisclosureoftheCompaniesOfferingPublicIssueofSecurities-theFormationandDisclosureoftheFinancialandAccountingInformationduringtheTransitionPeriodbetweentheOldandNewAccountingStandards(ZJA2007No.
10)promulgatedbytheCSRC,theCompanymaderetroactiveadjustmentstothechangesofaccountingpolicyonlong-termequityinvestmentandincometaxrelatedtotheFirstTimeAdoptionofAccountingStandardsforEnterprisesTheprospectiveapplicationmethodwasadoptedbytheCompanyfortreatingtheotherchangesofaccountingpolicy.
Thedetailsareasfollows:(a)Retroactiveadjustmenthasbeenmadebythecostmethodonthelong-termequityinvestmentmadebyparentcompanytoitssubsidiaryAccordingtothe(CK2007No.
14)NoticeonPublishingtheNo.
1oftheExplanationofAccountingStandardsforEnterprisespromulgatedbytheMinistryofFinance,astothealready-existedlong-termequityinvestmentheldbytheparentcompanytoitssubsidiarybeforethefirsttimeadoption,theretroactiveadjustmentsshouldbemadeonthefirsttimeadoption.
Anditshouldbetreatedasthatthecalculationhasbeenmadebytheparentcompanywithcostmethodatthefirstbeginning.
Aftertheimplementationofthenewaccountingstandards,theinvestmentincomeshouldbeconfirmedinaccordancewiththedistributedpartfromtheallocatedcashbonusorprofitannouncedbythesubsidiary.
Theaforesaidchangesofaccountingpolicyhavenoinfluenceupontheconsolidatednetassets.
(b)IncometaxAccordingtothenewAccountingStandardsforEnterprise,ifthebookvalueofassetsislessthanitstaxbase,theCompanytakesthebalancebetweenthetwoforcomputationofdeferredincometaxassets;butifthepreviousoneishigherthanthenextone,theCompanyshouldtakesthebalanceforcomputationofdeferredincometaxliability.
TheretainedearningsonJan1stof2007wouldbeincreasedbyRMB92,247,851.
58,includingRMB92,231,026.
43increasedintheshareholders'equityattributabletoparentcompanyandRMB16,825.
15intheequityattributabletotheminorshareholders.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT26(c)OthersDuetothattheemployeeshaveabandonedtheirholidayswithpayinpreviousyears;theCompanyisexpectedtooffercompensationexpenditurestotheemployeesinthefollowingperiodsaccordingtotherelevantregulations.
Therefore,theretainedearningsattributabletotheshareholders'equityofparentcompanyonJan1stof2007wouldbedecreasedbyRMB2,290,216.
00.
2.
Assetsconstitutionandreasonsforthechanges(1)SignificantchangeinassetsconstitutionoftheCompanycomparedtothatofthesameperiodoflastyearduringthereportperiodUnit:RMB(2)ReasonsforchangesItemExplanationsAccountsreceivableMainlytoBSPchequeandthenewly-increasedjointservicesroutesInventoryMainlyduetotheincreaseinreserveofflightmaterialswhicharenewlybroughtinConstructioninprocessMainlyduetotheincreaseintheexpenditureaccountsfortheprojectofairplaneintroductionBillspayableMainlyduetothedecreaseintheaccountswhichareinneedofpaymentbybillsinthisreportperiodAccountspayableMainlybecausetheaccruedexpensesforbigrepairofairplaneshavebeentransferredintothisitemforcalculationAccountsreceivedMainlyduetotheintensificationinrecoverypowerDec31stof2007Dec31stof2006ItemAmountProportionAmountProportionIncreaseordecreasescopeinamountcomparedtothatoflastyear%ScopeofchangeinproportionAccountsreceivable208,349,054.
202.
96%158,213,884.
002.
62%31.
690.
34%Inventory52,238,139.
370.
74%39,445,839.
630.
65%32.
430.
09%Constructioninprocess1,154,132,471.
1116.
39%553,829,863.
159.
18%108.
397.
22%Billspayable15,000,000.
000.
21%50,000,000.
000.
83%-70.
00-0.
62%Accountspayable760,365,588.
1210.
80%402,115,575.
596.
66%89.
094.
14%Accountsreceivedinadvance89,600,059.
231.
27%55,034,797.
280.
91%62.
810.
36%Wagespayable73,407,937.
881.
04%39,620,548.
340.
66%85.
280.
39%Otheraccountspayable135,360,048.
661.
92%301,939,818.
305.
00%-55.
17-3.
08%Long-termloan2,600,391,847.
9736.
94%1,814,701,451.
7830.
07%43.
306.
87%SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT27inadvanceinthisaccountsandtherecoverypowerisfasterthanthatofflightcouponWagespayableMainlyduetotheincreasesintheyear-endbonusandthepilots'yearamountofsafetyinthereportperiodOtheraccountspayableMainlybecauseofthetransferredoutoftheexpensesforbigrepairofairplanesfromthisiteminthereportperiodLong-termloanMainlybecausethelong-termloansareincreasedfrombanksfortheexpenditureinintroductionofairplanesinthereportperiod3.
Significantchangesinthemainfinancialdatacomparedtothatofthesameperiodoflastyearandreasonsforthechanges(1)SignificantchangesinthemainfinancialdataUnit:RMBItem20072006Increaseordecreasescope%Operatingincome4,630,130,538.
194,231,057,944.
719.
43Operatingcost3,836,749,656.
283,481,368,056.
4710.
21Assetimpairmentloss670,094.
39-14,816,307.
30-104.
52Investmentincome954,109.
3216,413,444.
68-94.
19Non-operatingexpense30,448,695.
77636,075.
184,686.
96Incometaxexpense19,557,510.
4133,081,388.
72-40.
88(2)ReasonsforchangesItemExplanationOperatingincomeMainlyduetotheincreaseintheoperatingroutesandinputtransportcapacityinthisreportperiodOperatingcostMainlyduetotheincreaseinrelatedcostexpensebroughtbytheincreaseinincomeAssetimpairmentlossMainlybecausethecurrentbaddebtprovisionhasbeenturnedbackinthereportperiodInvestmentincomeMainlybecausethecashdividendsofthejointstockcompaniesoftheCompanydecreased,andsodidtheincomefromthedisposalofthejointstockcompaniesNon-operatingexpenseMainlyduetotheincreaseinexpensefordiscardedasuselessofthehigh-pricedturnoversofflightmaterialsinthereportperiodIncometaxexpenseMainlybecausetheatonablelossesresultedinthedecreaseinswitchingbackofdeferredincometaxassets4.
MeasurementattributesadoptedforthemainassetsWhenmakingmeasurementonaccountingelements,theCompanyusuallyadoptstheprincipleofhistoricalcost.
Butiftheassuredamountoftheaccountingelementsisavailableandmeasuredreliably,thenmeasurementbyreplacementcost,netrealizablevalue,presentvalueandfairvaluewouldbeadoptedforsomeparticularaccountingelements.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT28Withmeasurementbyprincipleofhistoricalcost,assetsshouldbemeasuredaccordingtotheamountofcashorcashequivalentpaidforpurchase,orthefairvalueofconsiderationpaidoutwhenpurchasingtheassets.
Andliabilitiesshouldbemeasuredaccordingtotheactualreceivedaccountorassetsamountwhenbearingpresentduty,orcontractamountwhenbearingpresentduty,orexpectedamountofcashorcashequivalentswhichisneededforrepayingliabilitiesindailyactivities.
Methodforconfirmingthefairvalueoffinancialassetsandfinancialliabilities:Astothefinancialassetsandfinancialliabilityexistedinactivemarket,theirfairvalueisensuredaccordingtothequotationofferedintheactivemarket.
Quotationofferedinactivemarketincludespricesacquiredfromexchanges,brokers,industryassociation,serviceorganizationsforpricinginperiod.
Meanwhile,thekindofquotationrepresentstheactualmarkettransactionpriceinfairtrading.
Whiletothefinancialassetsandfinancialliabilitywhichdonotexistinactivemarket,thefairvalueisensuredbyadoptionofestimatedvaluetechnique.
Estimatedvaluetechniqueincludesthereferencetothemarkettransactionpricesrecentlyusedbypartieswhoarequitewellknownofmarketandmaketransactioninfreewill,andreferencetothecurrentfairvalue,discountedcashflowmethodandpricingmodelofoptionofotherfinancialassetsandfinancialliabilitywhicharealmostthesame.
5.
ConstitutionofthecashflowoftheCompany,andparticularsabouttheitemswhichreceivesignificantchangescomparedtothoseoflastyearandreasonsforthechanges(1)ConstitutionofthecashflowUnit:RMBItem20072006Increaseordecreaseoccurredinthisyearcomparedtothatoflastyear%Netcashflowfromoperatingactivities734,571,420.
981,059,281,297.
52-30.
65%Netcashflowfrominvestmentactivities-1,301,291,326.
1174,760,079.
43-1840.
62%Netcashflowfromfinancingactivities542,815,571.
18-1,132,731,821.
27-147.
92%Effectofforeignexchangeratechangesoncashorcashequivalents-2,220,419.
94-1,149,261.
9793.
20%Netincreaseincashandcashequivalents-26,124,753.
89160,293.
71-16398.
05%(2)ParticularsaboutthesignificantchangesincashflowcomparedtothatoflastyearandreasonsforthechangesduringthereportperiodUnit:RMBItem20072006IncreaseordecreaseoccurredinthisyearExplanationSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT29comparedtothatoflastyear%Netcashflowfrominvestmentactivities-1,301,291,326.
1174,760,079.
43-1840.
62%MainlyduetothepurchaseforairplanesinthereportperiodCashreceivedtakingbackfrominvestment-684,750,512.
65MainlybecausetheUSdollarloanbusinesswhichtooktheRMBdepositaspledgewithBankofChinahasbeenfinishedin2006Cashreceivedobtainingtheinvestmentincome956,670.
008,500,155.
00-88.
75%MainlybecausethecashdividendsofthejointstockcompaniesoftheCompanydecreased,andsodidtheincomefromthedisposalofthejointstockcompanies(V)Influenceofchangesinproductiveandoperativeenvironment,macro-policiesandregulationsontheCompany1.
Duringthereportperiod,aviationoilhasexperiencedseveralsignificantlyrisingsinprice.
BecausetheaviationoilexpensetakesalargeproportioninmainoperatingcostoftheCompany,theaforesaidrisingsdirectlybringlastingrisingtothemainoperatingcostoftheCompany.
What'sworse,thereisapossibilitythattheaviationoilpriceiscontinuouslyclimbingupandkeepingoperationinhighprice,whichmakesquitepressureforimprovingtheprofit-makingcapabilityoftheCompany.
2.
TheNationalDevelopmentandReformCommissionandCAAC(GeneralAdministrationofCivilAviationofChina)decidetonudgeupthebunkersurchargeincivilflightcourseinNovemberof2007,whichbroughtincreaseinincomeoftheCompany,buttheincomewasstillnotenoughformeetingthebalanceresultingfromtheaviationoilpriceincrease.
(VI)ExplanationoftheBoardoninterpretativeexplanationparagraphintheauditors'reportReandaInternationalCertifiedPublicAccountantsauditedFinancialReport2007oftheCompanyandpresentedstandardunqualifiedAuditor'sReport.
(VII)ProspectsofthefuturedevelopmentoftheCompanyandworkplanoftheBoardofDirectorsforyear2008Theyear2008isthefirstyearwhenimplementingthespiritofthe17thSessionofNationalPeople'sCongressofthePeople'sRepublicofChinaandalsoanessentialyearforimplementationofthe11thFiveYearPlan.
Wearegoingtowelcomethe30anniversaryoftheReformandOpenPolicyandthe2008BeijingOlympicGames,soitisveryimportanttodotheworkwellforthisyear.
TheCompanyisfacinggoodopportunityfordevelopmentandmeanwhile,theunconfirmedelementsandrisksareincreasing.
ThenewopportunityfacedbytheCompanyisthat:thegeneralinternationalenvironmentSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT30keepssteadyandthetrendofglobaleconomicisdevelopingfurther.
ItisparticipatedthatChina'seconomicwillstillkeepthedouble-digitgrowthandCNYisstillgoingtobeappreciated.
Theimplementationoftheannualholidaysystemwithpay,celebrationoftheBeijingOlympicGamesandthe2008OlympicsSailingEventsinQingdaowillbringmoremarketopportunitiesfortheCompany.
Beingoneoftheimportantbrands,ShandongAirlinesCo.
,LtdhasbeenconsideredintothegeneraldevelopmentstrategicplanofAirChina,thuscooperateddevelopmentwillbringmorechancesforShandongAirlines.
ThenewchallengesinfrontoftheCompanyarethat:theunconfirmedelementsexistedinmacro-economyincreasetheoperatingrisksforairlinescompanies.
TheUSsubprimelendingcrisiscontinuallyimpactstheeconomyofUSAandthewholeworldinlarge.
Thereisstilloverheatedeconomyandinflationpressureindomesticmarket.
Andtheexpensespaidforaviationoilandlandingfeesarefacingascending,whichpresentsanewchallengeforimprovingthegeneralincome.
Theotherairlinecompaniesaredevelopingwithquitefastgrowthintransportcapability,sothepressurefromcompetitionwithintheindustryisintensifieddaybyday.
Toenlargethenetworklayoutofflightcoursealsobringsforwardnewchallengeforguaranteeofsafetyproduction.
ThegeneralconsiderationforthedevelopmentoftheCompanyin2008is:guidedwiththespiritofthe17thSessionofNationalPeople'sCongressofthePeople'sRepublicofChina,leadedwithscientificdevelopmentview,theCompanymanagestosetexcellenttargets,insistwithpreferenceforexcellenceandimprovethemanaginglevel;also,theCompanymanagestodoexcellentwork,ensuresafetyproduction,improveitsoperatingcompetitionability,carryoutthestrategicforimprovingbrand,furtherthereformforenterprisemanagement,andperfectitssystemsandmechanisms;last,theCompanymanagestocreateexcellentperformanceandrealizethedevelopmentofsafety,efficiency,lasting,healthandharmony.
1.
ContinuetoperfectthecorporateadministrationstructureoftheCompanyTobringintothefullplayondecision-making,auditingandassessingfunctionofspecialcommissionsoftheBoardofDirectors;furtherguaranteetheindependentdirectors,specialcommissionsandSupervisoryCommitteeimplementtheirduties,substantiallyprovidenecessaryandconvenientconditionsforsupervisingwork;continuetoperfecttheinternalcontrolsystem,improvetheinternalmanagementlevel.
2.
Particularlydowelltheworksinthefollowingfiveaspectsandrealizethefivedevelopments(1)Takingthesystematicallyestablishmentofsafetymanagementasmainlinetorealizedevelopmentofsafety.
(2)Takingtheexaltationofmarketcompetitionabilityasmainlinetorealizedevelopmentofefficiency.
(3)Takingtheexecutionofservicebrandstrategicasmainlinetorealizedevelopmentoflasting.
(4)Takinghumanbeingasessencetoconsolidatethemanagementbasisandrealizedevelopmentofhealth.
(5)Strengtheningtheestablishmentofpartyandspiritcivilizationtorealizedevelopmentofharmony.
(VIII)Capitalneedsinrealizingoperationplan,usingplanandcapitalsourceSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT31In2008,theexistedfinancialstructureandloansarrangementfrombankcouldsatisfycapitalneedinnormaloperationsoftheCompany.
(IX)RoutineworkoftheBoardofDirectors1.
TheBoardofDirectorsoftheCompanytotallyheldsevenmeetingsin2007.
(1)OnMar29thof2007,theCompanyheldthe6thmeetingofthe3rdBoardofDirectors.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedMar31stof2007.
(2)OnApr26thof2007,theCompanyheldthe7thmeetingofthe3rdBoardofDirectorsinwayofcommunication.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedApr27thof2007.
(3)OnMay31stof2007,theCompanyheldthe20071sttemporarymeetingofthe3rdBoardofDirectorsinwayofcommunication.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedJun1stof2007.
(4)OnJun28thof2007,theCompanyheldthe8thmeetingofthe3rdBoardofDirectors.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedJun29thof2007.
(5)OnAug24thof2007,theCompanyheldthe9thmeetingofthe3rdBoardofDirectorsinwayofcommunication.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedAug28thof2007.
(6)OnOct30thof2007,theCompanyheldthe10thmeetingofthe3rdBoardofDirectorsinwayofcommunication.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedOct31stof2007.
(7)OnNov9thof2007,theCompanyheldthe20072ndtemporarymeetingofthe3rdBoardofDirectorsinwayofcommunication.
ThepublicnoticeoftheresolutionsoftheMeetingwaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedNov10thof2007.
2.
TheimplementationoftheresolutionsofShareholders'GeneralMeetingbytheBoardofDirectorsInthereportperiod,accordingtotherequirementsoftherelevantlawsandregulationsofCompanyLaw,SecuritiesLawandArticlesofAssociation,theBoardofDirectorsoftheCompanyseriouslyimplementedvariousresolutionsapprovedbyShareholders'GeneralMeetingstrictlyincompliancewiththeresolutionsandauthorizationofShareholders'GeneralMeeting.
(1)TheimplementationofprofitdistributionoftheCompanyof2006Inordertomakeupthelossesinpreviousyear,theCompanydidn'tcarryoutprofitdistributionin2006.
(2)TheBoardofDirectorsoftheCompanystrictlyimplementedothervariousresolutionsapprovedbyShareholders'GeneralMeeting,activelyarrangedtheproduction,operation,investmentdisposalandfundamentalconstructionetc.
.
(X)ProfitdistributionpreplanorpreplanonconvertingcapitalpublicreserveintosharecapitalAuditedbyReandaCertifiedPublicAccountantsLtd,theCompanyrealizednetprofitofRMB37,989,000in2007.
Inordertooffsetthelossofthepreviousyears,theCompanydecidednotSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT32tocarryoutprofitdistributionorconversionfromcapitalpublicreserveintosharecapitalin2007.
Theprofitdistributionpreplanwouldbehandedintothe2007GeneralShareholders'MeetingoftheCompanyforexaminationanddiscussion.
(XI)ReasonforwhynocashprofitdistributionpreplanispresentedthoughprofitismadeduringthereportperiodandusageoftheundistributedprofitAccordingtotheregulationsoftheArticleofAssociationoftheCompany,becausetheprofitmadeduringthereportperiodisinsufficienttooffsettheaccumulatedlossesofpreviousyears,thusnocashprofitdistributionpreplanispresented.
(XII)DutyimplementationoftheAuditCommitteeoftheBoardofDirectorsInthereportperiod,theAuditCommitteeoftheBoardofDirectorsissuedopinionsonthevariousperiodreportsandeventaboutthereengagementofcertifiedpublicaccountant.
TheAuditCommitteeoftheBoardofDirectorshasdonelotsworkduringthe2007auditingperiodoftheCompany.
AccordingtotherequirementofNoticeon2007AnnualReportsandRelatedWorksofListedCompany(ZJGS(2007)No.
235)promulgatedbytheCSRC,theAuditCommitteemakesthefollowingsummaryonthe2007auditingwork:1.
EnsuresthegeneralauditplanandexaminesthefinancialstatementsoftheCompanyWithnegotiationamongtheindependentdirectorsoftheCompany,theAuditCommitteeandReandaCertifiedPublicAccountantsLtd,theauditworkarrangementfor2007oftheCompanywasconfirmed.
Atthesametime,theindependentdirectorsandtheAuditCommitteehasexaminedthe2007financialstatementsformedbytheCompanyandconsideredthat:theCompanymakesfinancialcalculationincompliancewiththeregulationofthenewaccountingstandardsandnosignificantuntruecontentshasbeencarriedintheannualreportmaterials;the2007financialstatementsformedbytheCompanybasicallyreflecttheassets,liabilitiesandproductionandoperationachievementsoftheCompanytillDec31stof2007anditisagreedtotakethisfinancialstatementasthebasistocarryoutthe2007financialauditwork.
2.
KeepsnormalnegotiationwiththeCertifiedPublicAccountantsLtdandpaysattentiontotheprogressofauditingDuringtheauditperiod,theAuditCommitteeconsistentlykeepsnegotiationswiththefinancialdepartmentandtheCertifiedPublicAccountantsLtd.
Meanwhile,theCommitteetakescloseeyestotheprogressofauditingandexaminesthefinancialreports.
3.
CallsintheAuditCommitteetoexamineandapprovetheproposalsrelatedtoannualreportReandaCertifiedPublicAccountantsLtdhasfinisheditsauditingworkinscheduledtimeandissuedstandardunqualifiedAuditor'sReport.
TheAuditCommitteeheldmeetingtoexamineandapprovethefollowingproposals:the2007FinancialSettlementReport,the2007ProfitDistributionPreplan,the2007AnnualReport,ReengagementofCertifiedPublicAccountant,andRegulationsofAuditWorkoftheAuditCommitteefortheAnnualFinancialReport.
ResolutiononPresentationtotheBoardofDirectorsontheReengagementofReandaCertifiedPublicAccountantsLtdasthe2008FinancialAuditOrganizationoftheCompanyhasbeenformed.
(XIII)DutyimplementationoftheRemunerationCommitteeoftheBoardofDirectorsTheRemunerationCommitteemakesexaminationontheremunerationofthedirectors,supervisorsandseniorexecutivesoftheCompanydisclosedinthe2007AnnualReportandoffersthefollowingopinions:thepresentremunerationsystemoftheCompanyismadeSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT33accordingtotheregulateddecision-makingprocedure;theremunerationofthedirectors,supervisorsandseniorexecutivesoftheCompanyisincompliancewithrelevantregulations;theremunerationofrelevantpersonneldisclosedinthe2007AnnualReportoftheCompanyisrealandaccurate.
VIII.
ReportoftheSupervisoryCommittee(I)ParticularsabouttheworkofSupervisoryCommitteeIn2007,theSupervisoryCommitteeexertedthedutiesauthorizedbyCompanyLawoftheP.
R.
C.
andtheArticlesofAssociationoftheCompanyaccordingtolawswithassiduityandresponsibility,dutifullyimplementedsupervisionfunctionsontheCompany'soperatingdecision-making,financialstatus,theresponsibilityandbehavioursofdirectorsandseniormanagersintheperiodandstrictlysafeguardedtherightsandinterestsoftheshareholders.
TheSupervisoryCommitteehadholdtwomeetingsoftheSupervisoryCommitteeandattendedallshareholders'generalmeetingsandmeetingsoftheBoardin2007.
Inthereportperiod,theSupervisoryCommitteetotallyheldthefollowingmeetings:1.
OnMar29thof2007,the6thMeetingofthe3rdSupervisoryCommitteewasheldintheconferenceroomofSDABuilding.
Themeetingexaminedandapprovedthefollowingproposals:(1)The2006AnnualReportandSummaryofShandongAirlinesCo.
,Ltd;(2)The2006WorkingReportofShandongAirlinesCo.
,Ltd.
ThepublicnoticeoftheresolutionswaspublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedMar31stof2007.
2.
OnAug24thof2007,the7thMeetingofthe3rdSupervisoryCommitteewasheldintheconferenceroomofSDABuilding.
Themeetingexaminedandapprovedthe2007Semi-annualReportanditsSummaryofShandongAirlinesCo.
,Ltd.
(II)IndependentOpinionsoftheSupervisoryCommitteeonrelevanteventsin2007TheSupervisoryCommitteeconductedseriousinspectionandsupervisiononsuchconditionsastheCompany'sfinance,implementingresolutionsofshareholders'generalmeeting,operatingdecision-making,operationaccordingtolaws,operatingbehavioursofdirectors,managersandseniorexecutivesandrelatedtransactions,etc;andbelievedthattheoperationmanagementoftheCompanywasinaccordancewiththerelevantlawsandregulationsandtheArticlesofAssociationoftheCompany.
1.
OperationaccordingtolawsInthereportperiod,theCompanyconductedregulatedoperationcomplyingwithCompanyLaw,SecuritiesLaw,ArticlesofAssociationoftheCompany,andRulesforSharesListedwithShenzhenStockExchangeandothernationalrelevantpoliciesandregulations.
ItimplementedeffectiveinternalcontrolsysteminsidetheCompany.
Followingtheregulationsandlawsandbeinghonestwithfaithanddiligence,directorsandseniorexecutivesoftheCompanycarefullyimplementedeveryresolutionsapprovedbyshareholders'generalmeetingwithaviewtoprotectingtheshareholders'interests.
Therewasnobehavioursfoundthatdirectorsorseniorexecutivesbrokethelaws,regulations,orArticlesofAssociationorharmedtheinterestsoftheCompanyintheirofficeterms.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT342.
FinancemanagementoftheCompanyTheSupervisoryCommitteeexaminedmeticulouslythefinancingsituationoftheCompany.
IntheopinionoftheSupervisoryCommittee,2007FinancialReportoftheCompanyreflectedthefinancialsituationandoperationresultoftheCompanytruthfullyandfairly.
Theaccountingvouchers,booksandstatements,andotheraccountingmaterialsweregenuineandstandard.
3.
RelatedtransactionTherelatedtransactionsoftheCompanyaredoneinaccordancewiththemarketprinciple,sotheyareofequalityandreasonableprice,andalsomaintaintheprofitofshareholders'equityandthelistedcompany.
4.
Self-estimationoftheinternalcontrolTheSupervisoryCommitteeoftheCompanyconductscarefulinspectionontheinternalcontrolof2007oftheCompany,accordingtotheGuidanceforListedCompanyinInternalControl,anditholdsthat:(1)TheinternalcontrolsystemoftheCompanybasicallycomplieswiththerequirementofsupervisionandmeetsthedemandforthecurrentproductionandoperationoftheCompany.
(2)TheinternalcontrolmeasurementsoftheCompanybringwelleffectinthecontrolsofvariousproceduresandtachesinenterprisemanagement.
(3)TheCompanyshouldcontinuallytoperfecttheinternalcontroltachesandinternalcontrolorganizationsetc.
IX.
SignificantEvents(I)TheCompanyhasnotbeeninvolvedinsignificantlawsuitsorarbitrationsinthereportperiod.
(II)TheCompanyhasnobankruptcyandreforminginthereportperiod.
(III)TheCompanyholds8,697,000sharesofChineseInformationNetworkIncorporationofCivilAviationwhichislistedinHongKongExchangesandClearingLimited.
Thenatureofthesesharesisnon-circulatingdomesticshares.
TheCompanyholdsnoshareequityofotherlistedcompanies,orequityoffinancialenterprisessuchasjointstockcommercialbanks,securitiescompanies,insurancecompanies,trustcompaniesandfuturescompanies.
(IV)PurchaseandsaleofassetsandmergeroftheCompanyinthereportperiodAccordingtotheadjustmentstrategicoftheCompany,the6thmeetingofthe3rdsessionBoardofDirectordecidedtologofflegallyShandongAirlinesUnitedExpressCo.
,LtdandShenzhenSDAHengchiCargoCo.
,LtdwhosesharesareheldbytheCompany;andthegovernmentleveloftheCompanyhasbeenauthorizedtodealwiththeproceduresoflog-outandliquidation.
(TherelevantnoticehasbeenpublishedonChinaSecurities,SecuritiesTimesandHongKongWenWeiPodatedMar31stof2007.
)(V)TheimplementationofstockoptionincentiveplaninthereportperiodThereisnoimplementationofstockoptionincentiveplanoftheCompanyinthereportperiod.
(VI)SignificantrelatedtransactionTheCompanyhassomerelatedtransactionswithitsholdingshareholdersandtheirsubordinatecompaniesatpresent.
TheserelatedtransactionsarenecessityfortheCompanyandareunavoidable.
Beforethetransactions,theCompanyhasalreadyfullyconsideredthequality,SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT35priceandefficiencyoftheservicesandgoodsprovidedbytherelatedpartiesandalsomadeanalysisandcomparisononthemarketenvironment.
TheindependentdirectorsoftheCompanypresentopinionontherelatedtransactionswhichbelievesthattheCompanyandtherelatedpartiesmakethedealwithmarketprincipleofopen,equalityandjustice,thetransactionpriceisfairandthereisnobehaviourhurtingprofitofothershareholders.
1.
Purchasingandsellingmerchandise,providingandacceptingservice(1)Inthereportperiod,airplanemaintainingfeeofRMB56,344,000hasoccurredbetweentheCompanyandTaikoo(Shandong)AircraftEngineeringCo.
,Ltd.
Thistransactionamounttakesproportionof15.
01%inthesamekindtransactions.
TheCompanypaidforthistransactionincashaccordingtothemarketprice.
(2)Inthereportperiod,scheduledflightcooperationamountofRMB85,834,000hasoccurredbetweentheCompanyandChinaAirlinesCo.
,Ltd.
Thetransactionwaspricedaccordingtothepriceregulatedinthecontractagreedbythebothparties.
(3)Therelatedtransactionsabouttheroutineoperationsin2007Unit:RMB'0000ClassificationoftherelatedtransactionsRelatedpartiesAnticipatedamountActualamountTaikoo(Shandong)AircraftEngineeringCo.
,Ltd72005,634ShandongXiangyuAeroTechnicalServicesCo.
,Ltd.
4453321.
MaintenanceofaircraftandfittingsSubtotal7,6455,966QingdaoFeishengInternationalAeroTechnicalTrainingCo.
,Ltd.
700588ShandongInternationalAeroTrainingCo.
,Ltd.
13207932.
TrainingexpenseSubtotal2,0201,381ShandongAviationGroup(Rentforofficeland)450621ShandongAviationGroup(DailyAccommodation)5804913.
Rentforofficeland,anddailyaccommodationSubtotal1,0301,112AirChinaLimited(aircraftlease)20,16025,918AirChinaLimited(jointownedoperationinSouthKoreaflightcourse)4,8008,583AirChinaLimited(labourservicesupport)1,3121,2394.
AircraftleaseandmarketcooperationSubtotal26,27235,7402.
TheCompanyanditscontrollingshareholder'scooperativeinvestmentTheCompanyhadnocooperativeinvestmentwithitscontrollingshareholdersinthereportperiod.
3.
CreditsandliabilitiesbetweentheCompanyandrelatedpartiesTherearenonewlyincreasedcreditsandliabilitiesbetweentheCompanyandrelatedpartiesinthereportperiod.
(VII)SignificantcontractsandimplementationSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT361.
Therearenoassetsentrustment,contractandleaseinthereportperiod.
2.
Inthereportperiod,theCompanyhadnoexternalsignificantguarantee.
3.
Inthereportperiod,theCompanyhadnoentrustedfinancing.
4.
OthersignificantcontractsUntiltheendofthereportperiod,theaccumulatedamountoflong-termandshort-termborrowingsoftheCompanyamountstoRMB41,082,455,000.
TheCompanyhadnoothersignificantcontractsnotdisclosed.
(VIII)TheCompanyhadnotentrustedanyonetomanageitscashassetsinthereportperiod.
(IX)Inthereportperiod,thereisnosignificantcommitment.
(X)EngagementofCertifiedPublicAccountantsInthereportperiod,theCompanycontinuedtoengageReandaCertifiedPublicAccountantsasAuditingOrganizationoftheCompany.
2006AnnualShareholders'GeneralMeetingexaminedandapprovedtheProposalonRenewalofEngagingCPAanditsRemunerations,theCompanyengagedReandaCertifiedPublicAccountantsas2007AuditingOrganizationoftheCompany.
Inthereportperiod,theCompanyshouldpaytheannualauditingfeeofRMB600,000.
TheaforesaidauditingorganizationhasprovidedauditingservicestotheCompanyforthe4thyear.
(XI)Inthereportperiod,theCompanyandtheBoardofDirectorshavenotreceivedcheck,administrativepunishmentandnoticeofcriticismfromtheCSRC,andpubliccriticismfromthesecuritiesexchange.
(XII)Inthereportperiod,thereceivedresearchandinterviewoftheCompany.
Inaccordancewiththeprinciplesofjust,fairandpublicity,furtherregulatethebehavioursofinformationdisclosureforthelistedcompanies,theCompanyreceivedtheresearchandmediainterviewsinstandardizedwayaccordingtotheregulationsofGuidelineonFairInformationDisclosureforListedCompaniespromulgatedbyShenzhenStockExchange.
Inthereportperiod,theCompanyreceivedorganizationinvestors,analysts,investorsofB-stock,andtheresearch,visitsandtelephonecommunicationfromspecializedmediamanytimes;theCompanyreceivedthemandrepliesstrictlyinaccordancewithrelevantregulations;thereoccurrednosuchsituationsasselectivelyandprivatelyrevealorleaknon-publicsignificantinformationtospecificparties;andalltheseassurethefairnessofinformationdisclosureoftheCompany.
Activitiesformofreceivingresearch,communicationandinterviewinthereportperiod:ThereceiveddateThereceivedplaceThereceivedwayThereceivedpartiesContentsdiscussedandmaterialssupplied2007JinanSpotresearchNewsmedia,organizationinvestorsandinvestorsofB-shareFinancialstatusandoperationsplanin2007,providethe2006AnnualReport2007JinanTelephoneinterview,organizationinvestorsandinvestorsofB-shareOperatingsituationsandsignificanteventsoftheCompanySHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT37communicationX.
FinancialReportAuditors'ReportTotheShareholdersofShangdongAirlinesCo.
,Ltd山东航空股份有限公司WehaveauditedtheaccompanyingfinancialstatementsofShangdongAirlinesCo.
,Ltd.
("TheSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT38Company"),whichcomprisetheconsolidatedbalancesheetasatDecember31,2007,andtheconsolidatedincomestatement,consolidatedcashflowstatementfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.
Management'sResponsibilityfortheFinancialStatementsTheCompany'smanagementisresponsibleforthepreparationofthesefinancialstatementsinaccordancewiththeEnterprisesAccountingStandardsofChina.
Thisresponsibilityincludes:(1)designing,implementingandmaintaininginternalcontrolrelevanttothepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;(2)selectingandapplyingappropriateaccountingpolicies;(3)makingaccountingestimatesthatarereasonableinthecircumstances.
Auditor'sResponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.
WeconductedourauditinaccordancewiththeChineseCertifiedPublicAccountants'AuditingStandards.
Thesestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountanddisclosuresinthefinancialstatements.
Theproceduresselecteddependontheauditor'sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.
Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity'spreparationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity'sinternalcontrol.
Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandreasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
AuditingopinionSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT39Inouropinion,thefinancialstatementshavebeenpreparedinaccordancewiththerequirementsoftheEnterprisesAccountingStandardspromulgatedbythePeople'sRepublicofChina,andpresentfairly,inallmaterialrespects,thefinancialpositionofShangdongAirlinesCo.
,LtdasatDecember31,2007,andtheresultsofitsoperationsanditscashflowsfortheyearthenended.
ReandaCertifiedPublicAccountantsCo.
,Ltd.
CertifiedPublicAccountant:SunYibingBeijing,ChinaCertifiedPublicAccountant:YangGanlinMarch21,2008ConsolidatedBalanceSheetDecember31st,2007Nameofthecompany:ShandongAirlinesCo.
,LtdMonetaryunit:(RMB)Yuan31/12/200731/12/2006AssetNoteconsolidationparentcompanyconsolidationparentcompanySHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT40Currentassets:MonetaryfundsVIII(1)69,524,098.
8257,489,203.
7997,539,227.
7188,186,887.
18TradablefinancialassetsNotereceivableAccountsreceivableVIII(2)208,349,054.
20206,861,203.
30158,213,884.
00156,305,211.
47AdvancetosuppliersVIII(3)20,788,886.
8020,731,073.
6918,104,467.
9418,036,808.
50InterestsreceivableDividendreceivableOtheraccountsreceivablesVIII(4)160,626,933.
07160,504,589.
08136,917,119.
84135,018,578.
41InventoriesVIII(5)52,238,139.
3752,238,139.
3739,445,839.
6339,445,839.
63Non-currentassetsduewithinoneyearOthercurrentassetsTotalcurrentassets511,527,112.
26497,824,209.
23450,220,539.
12436,993,325.
19Non-currentassets:Available-for-salefinancialassetsHeld-to-maturityinvestmentLong-termaccountsreceivableLong-termequityinvestmentVIII(6)89,459,196.
91112,815,305.
9788,694,292.
04114,732,132.
51InvestmentpropertyFixedassetsVIII(7)4,995,005,633.
804,981,126,769.
374,660,680,882.
094,647,611,263.
80ConstructioninprocessVIII(8)1,154,132,471.
111,154,132,471.
11553,829,863.
15552,871,373.
86ConstructionmaterialsLiquidationoffixedassets833,029.
86833,029.
86ProductionbiologyassetsOilandgasassetsIntangibleassetsVIII(9)43,412,609.
0628,461,786.
2144,026,148.
8029,040,670.
00DevelopmentexpensesGoodwillLong-termdeferredassetsVIII(10)172,330,090.
76172,330,090.
76145,855,706.
29145,855,706.
29DeferredincometaxassetsVIII(11)72,989,224.
1872,966,789.
3392,247,851.
5892,191,764.
44Othernon-currentassetsTotalnon-currentassets6,528,162,255.
686,522,666,242.
615,585,334,743.
955,582,302,910.
90Totalassets7,039,689,367.
947,020,490,451.
846,035,555,283.
076,019,296,236.
09ConsolidatedBalanceSheet(continue)December31st,2007Nameofthecompany:ShandongAirlinesCo.
,LtdMonetaryunit:(RMB)YuanLiabilitiesandShareholders'Note31/12/200731/12/2006SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT41equitiesconsolidationparentcompanyconsolidationparentcompanyCurrentliability:Short-termloanVIII(14)1,205,230,000.
001,205,230,000.
001,130,000,000.
001,130,000,000.
00TradablefinancialliabilitiesNotespayableVIII(15)15,000,000.
0015,000,000.
0050,000,000.
0050,000,000.
00AccountspayableVIII(16)760,365,588.
12757,934,844.
01402,115,575.
59401,452,703.
13AdvancefromcustomersVIII(17)89,600,059.
2387,573,432.
7355,034,797.
2853,778,267.
83PayrollpayableVIII(18)73,407,937.
8873,386,833.
7039,620,548.
3439,269,434.
48TaxpayableVIII(19)86,739,296.
5585,841,693.
2167,013,359.
0666,952,038.
65InterestspayableVIII(20)12,429,380.
4812,429,380.
48325,198.
23325,198.
23Dividendpayable11,940.
0011,940.
00111,940.
0011,940.
00OtheraccountspayableVIII(21)135,360,048.
66135,408,278.
25301,939,818.
30301,327,478.
57Non-currentliabilitiesduewithinoneyearVIII(22)302,623,652.
29302,623,652.
29329,198,284.
79329,198,284.
79OthercurrentliabilitiesTotalcurrentliabilities2,680,767,903.
212,675,440,054.
672,375,359,521.
592,372,315,345.
68Non-currentliabilities:Long-termborrowingsVIII(23)2,600,391,847.
972,600,391,847.
971,814,701,451.
781,814,701,451.
78BondspayableLong-termaccountspayableVIII(24)1,304,559,910.
241,304,559,910.
241,426,544,652.
231,426,544,652.
23SpecialaccountspayableDeferredincomeVIII(25)4,871,343.
114,871,343.
116,262,526.
116,262,526.
11AccruedliabiltiesDeferredincometaxliabilitiesOthernon-currentliabilitiesTotalnon-currentliabilities3,909,823,101.
323,909,823,101.
323,247,508,630.
123,247,508,630.
12Totalliabilities6,590,591,004.
536,585,263,155.
995,622,868,151.
715,619,823,975.
80Shareholders'equity:SharecapitalVIII(26)400,000,000.
00400,000,000.
00400,000,000.
00400,000,000.
00CapitalreserveVIII(27)84,050,162.
8484,050,162.
8484,050,162.
8484,050,162.
84Less:inventorysharesSurplusreserveVIII(28)24,919,586.
7124,442,948.
1425,001,281.
3424,442,948.
14GeneralriskreserveRetainedearningsVIII(29)-72,004,872.
16-73,265,815.
13-109,226,868.
91-109,020,850.
69ExchangedifferenceofforeigncurrencyfinancialstatementstranslationShareholders'equityattributabletoparentcompany:436,964,877.
39435,227,295.
85399,824,575.
27399,472,260.
29SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT42Minorityinterests12,133,486.
0212,862,556.
09Totalshareholders'equities449,098,363.
41435,227,295.
85412,687,131.
36399,472,260.
29Totalliabilitiesandshareholders'equities7,039,689,367.
947,020,490,451.
846,035,555,283.
076,019,296,236.
09ConsolidatedIncomeStatementFortheyearendedDecember31st,2007Nameofthecompany:ShandongAirlinesCo.
,LtdMonetaryunit:(RMB)Yuan20072006ItemNoteconsolidationparentcompanyconsolidationparentcompany1.
TotaloperatingincomeVIII(30)4,630,130,538.
194,623,549,570.
264,231,057,944.
714,222,282,928.
47Minus:operatingcostVIII(30)3,836,749,656.
283,835,722,274.
413,481,368,056.
473,480,286,431.
58BusinesstaxesandsurtaxVIII(31)137,305,155.
03136,961,706.
63126,158,588.
33125,743,401.
56Sellingexpense211,372,665.
37211,372,665.
37203,075,903.
87203,075,903.
87Administrationexpense171,407,025.
30169,224,699.
39171,171,816.
49169,028,177.
22FinancialexpensesVIII(32)196,946,731.
36197,050,639.
66249,325,498.
44249,365,380.
84ImpairmentlossofassetsVIII(33)670,094.
39670,094.
39-14,816,307.
30-14,816,307.
30Add:profitsfromthefairvaluechanges(Thelossislistedbeginningwith"-")Investmentincome(Thelossislistedbeginningwith"-")VIII(34)954,109.
32956,670.
0016,413,444.
6816,919,261.
65Including:theinvestmentincomefromassociatedandjointventuresenterprises44,183.
04II.
Operatingprofit76,633,319.
7873,504,160.
4131,187,833.
0926,519,202.
35Add:non-operatingincomeVIII(35)11,362,190.
1811,362,190.
1812,869,735.
7012,851,346.
52Less:non-operatingexpenseVIII(36)30,448,695.
7730,060,019.
70636,075.
18631,133.
76Including:lossfromdisposalofnon-currentassets21,736,311.
7221,347,787.
09277,433.
76III.
Totalprofits(Thelossislistedbeginningwith"-")57,546,814.
1954,806,330.
8943,421,493.
6138,739,415.
11Less:incometaxexpenseVIII(37)19,557,510.
4119,224,975.
1133,081,388.
7232,828,379.
20SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT43IV.
Netprofits(thenetlossislistedbeginningwith"-")37,989,303.
7835,581,355.
7810,340,104.
895,911,035.
91Netprofitsattributabletoparentcompany37,255,985.
5135,581,355.
788,875,631.
955,911,035.
91Minorityinterests733,318.
271,464,472.
94V.
Earningspershare1.
Basicearningspershare0.
090.
022.
Dilutedearningspershare0.
090.
02ConsolidatedCashFlowStatementFortheYearEndedDecember31st,2007Nameofthecompany:ShandongAirlinesCo.
,LtdMonetaryunit:(RMB)Yuan20072006ItemNoteconsolidationparentcompanyconsolidationparentcompanyI.
CashflowsfromoperatingactivitiesCashreceivedfromsalesofgoodsorrenderingofservices4,614,996,501.
554,607,979,662.
014,266,609,184.
914,257,953,067.
38TaxrefundCashreceivedrelatedtootheroperatingactivitiesVIII(38)62,474,713.
4960,201,534.
74250,844,879.
67242,708,910.
04Subtotalofcashinflowfromoperatingactivities4,677,471,215.
044,668,181,196.
754,517,454,064.
584,500,661,977.
42Cashreceivedfromsalesofgoodsorrenderingofservices3,245,072,652.
983,244,937,455.
552,882,885,125.
242,882,872,835.
95Cashpaidtoandonbehalfofemployees382,490,652.
80381,146,275.
72267,905,566.
37263,272,956.
91Taxpayments240,417,165.
04239,862,229.
14128,881,447.
89127,422,872.
57OthercashespaidtooperatingactivitiesVIII(39)74,919,323.
2474,292,822.
30178,500,627.
56177,925,475.
38SubtotalofCashoutflowfromoperatingactivities3,942,899,794.
063,940,238,782.
713,458,172,767.
063,451,494,140.
81Netcashflowfromoperatingactivities734,571,420.
98727,942,414.
041,059,281,297.
521,049,167,836.
61II.
Cashflowfrominvestmentactivities:Cashreceivedfrominvestments684,750,512.
65684,750,512.
65Cashdividentsreceivedfrominvestment956,670.
00956,670.
008,500,155.
008,500,155.
00Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets4,267,733.
984,249,344.
80Netcashamountreceivedfromthedisposalofsubsidiariesanotherbusinessunits750,000.
00750,000.
00CashreceivedrelatedtootherinvestmentactivitiesSubtotalofcashinflowfromtheinvestmentactivities1,706,670.
001,706,670.
00697,518,401.
63697,500,012.
45Cashpaidtoacquireandconstructfixedassets,SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT44intangibleassetsandotherlong-termassets1,299,602,794.
391,299,053,039.
73622,758,322.
20617,154,840.
64CashpaidtoacquireinvestmentsNetcashamountpaidtoacquirethesubsidiariesandotherbusinessunitsCashpaidrelatedtootherinvestmentactivitiesVIII(40)3,395,201.
72SubtotalofCashoutflowfrominvestmentactivities1,302,997,996.
111,299,053,039.
73622,758,322.
20617,154,840.
64Netcashflowfrominvestmentactivities-1,301,291,326.
11-1,297,346,369.
7374,760,079.
4380,345,171.
81III.
Cashflowfromfinancingactivities:CashreceivedfrominvestorsIncluding:subsidiariesreceivedcashinvestmentfromminorityshareholdersCashreceivedfromloans3,096,874,737.
103,096,874,737.
102,830,450,046.
872,830,450,046.
87CashreceivedrelatedtootherfinancingactivitiesVIII(41)22,817,555.
1422,817,555.
14Subtotalofcashinflowfromthefinancingactivities3,119,692,292.
243,119,692,292.
242,830,450,046.
872,830,450,046.
87repaymentofloans2,281,783,413.
742,281,783,413.
743,620,725,729.
493,620,725,729.
49Cashdividends,profitsandinterestspaid186,766,834.
35186,766,834.
35231,394,565.
31231,394,565.
31Including:subsidiariespaidforminorityshareholderswithcashdividendsandprofitsCashpaymentsrelatedtootherfinancingactivitiesVIII(42)108,326,472.
97108,326,472.
97111,061,573.
34111,061,573.
34Sub-totalofcashoutflowfromthefinancingactivities2,576,876,721.
062,576,876,721.
063,963,181,868.
143,963,181,868.
14Netcashflowfromfinacingactivities542,815,571.
18542,815,571.
18-1,132,731,821.
27-1,132,731,821.
27IV.
EffectofForeignExchangeRateChangesonCashandcashequivalents-2,220,419.
94-2,218,923.
88-1,149,261.
97-1,149,261.
97V.
Netincreaseincashandcashequivalents-26,124,753.
89-28,807,308.
39160,293.
71-4,368,074.
82Add:beginningbalanceofcashandcashequivalents68,256,602.
7158,904,262.
1868,096,309.
0063,272,337.
00VIendingbalanceofcashandcashequivalents42,131,848.
8230,096,953.
7968,256,602.
7158,904,262.
18statementofchangesintheshareholders'equity(con.
)Nameofthecompany:ShandongAirlinesCo.
,Ltd2007Monetaryunit:(RMB)Yuanshareholders'equitybelongstoparentcompanyItemSharecapitalCapitalreserveminus:SharesatstockCapitalsurplusUndistributedProfitdifferenceofForeignCurrencyMinorityinterestToatlofshareholder'sequityI.
Balanceattheendofpreviousyear400,000,000.
0084,050,162.
8425,001,281.
34-109,226,868.
9112,862,556.
09412,687,131.
36plus(I):SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT45changesofaccountingpolicies(II)CorrectionoferrorsinpreviousyearsII.
Balanceatthebeginningofthisyear400,000,000.
0084,050,162.
8425,001,281.
34-109,226,868.
9112,862,556.
09412,687,131.
36III.
Increaseordecreaseofchangeamountinthisyear(thedecreaseislistedbeginningwith"-")-81,694.
6337,221,996.
75-729,070.
0736,411,232.
05(I)Netprofitsintheyear37,255,985.
51733,318.
2737,989,303.
78(II)Profitandlossdirectlyaccruedtoowners'equities173,679.
78173,679.
781.
Netamountoffairvaluechangesofsaleablefinancialassets2.
Netamountaboutthechangeoffairvaluesofcashflowarbitragetools3.
Incometaxeffectrelatedtotheprojectsaccruedtoowner'seuity4.
Others173,679.
78173,679.
78Subtotalof(I)and(II)37,429,665.
29733,318.
2738,162,983.
56SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT46(III)Capitalsinvestedbytheowners1.
Capitalinvestmentbyownersincurrentperiod2.
Repurchaseofsharesatstockintheyear3.
others(IV)Profitdistributionintheyea207,668.
54-207,668.
54Withdrawalofsurplusreserve207,668.
54-207,668.
542.
Withdrawalofgeneralriskpreparation3.
Distributiontoshareholders4.
Others(V)Internalsettlementandtransferofowners'equity-289,363.
17-1,462,388.
34-1,751,751.
511.
Transferofcapitalreservetocapital2.
Transferofsurplusreservetocapital3.
Surplusreservemakesupfortheloss4.
others-289,363.
17-1,462,388.
34-1,751,751.
51IV.
Balanceattheendofthisperiod400,000,000.
0084,050,162.
8424,919,586.
71-72,004,872.
1612,133,486.
02449,098,363.
41SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT47statementofchangesintheowner'sequity(con.
)Nameofthecompany:ShandongAirlinesCo.
,Ltd2006Monetaryunit:(RMB)Yuanshareholders'equitybelongstoparentcompanyItemSharecapitalCapitalreserveminus:SharesatStockCapitalsurplusUndistributedProfitdifferenceofForeignCurrencyMinorityinterestToatlofshareholder'sequityI.
Balanceattheendofpreviousyear400,000,000.
0084,050,162.
8424,676,134.
47-117,777,353.
9911,398,083.
15402,347,026.
47plus(I):changesofaccountingpolicies(II)CorrectionoferrorsintheearlystageII.
Balanceatthebeginningofthisyear400,000,000.
0084,050,162.
8424,676,134.
47-117,777,353.
9911,398,083.
15402,347,026.
47III.
Increaseordecreaseofchangeamountinthisyear(thedecreaseislistedbeginningwith"-")325,146.
878,550,485.
081,464,472.
9410,014,958.
02(I)Netprofitintheyear8,875,631.
951,464,472.
9410,340,104.
89(II)Profitandlossdirectlyaccruedtoowners'equities1.
Netamountoffairvaluechangesofsaleablefinancialassets2.
NetamountaboutthechangeoffairvaluesofcashflowarbitragetoolsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT483.
Incometaxeffectrelatedtotheprojectsaccruedtoowner'seuity4.
OthersSubtotalof(I)and(II)8,875,631.
951,464,472.
9410,340,104.
89(III)Capitalsinvestedbytheowners1.
Capitalinvestmentbyownersincurrentperiod2.
Repurchaseofsharesatstockintheyear3.
others(IV)Profitdistributionintheyea325,146.
87-325,146.
87Withdrawalofsurplusreserve325,146.
87-325,146.
872.
Withdrawalofgeneralriskpreparation3.
Distributiontoshareholders4.
Others(V)Internalsettlementandtransferofowners'equity1.
Transferofcapitalreservetocapital2.
Transferofsurplusreservetocapital3.
Surplusreservemakesupfortheloss4.
othersSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT49IV.
Balanceattheendofthisperiod400,000,000.
0084,050,162.
8425,001,281.
34-109,226,868.
9112,862,556.
09412,687,131.
36statementofchangesintheshareholders'equityNameofthecompany:ShandongAirlinesCo.
,Ltd2007Monetaryunit:(RMB)YuanItemSharecapitalCapitalreserveminus:SharesatStockCapitalsurplusUndistributedProfitToatlofshareholder'sequityI.
Balanceattheendofpreviousyear400,000,000.
0084,050,162.
8424,442,948.
14-109,020,850.
69399,472,260.
29plus(I):changesofaccountingpolicies(II)CorrectionoferrorsintheearlystageII.
Balanceatthebeginningofthisyear400,000,000.
0084,050,162.
8424,442,948.
14-109,020,850.
69399,472,260.
29III.
Increaseordecreaseofchangeamountinthisyear(thedecreaseislistedbeginningwith"-")35,755,035.
5635,755,035.
56(I)Netprofitintheyear35,581,355.
7835,581,355.
78(II)Profitandlossdirectlyaccruedtoowners'equities173,679.
78173,679.
781.
Netamountoffairvaluechangesofsaleablefinancialassets2.
Netamountaboutthechangeoffairvaluesofcashflowarbitragetools3.
Incometaxeffectrelatedtotheprojectsaccruedtoowner'seuity4.
Others173,679.
78173,679.
78Subtotalof(I)and(II)35,755,035.
5635,755,035.
56(III)Capitalsinvestedbytheowners1.
Capitalinvestmentbyownersincurrentperiod2.
Repurchaseofsharesatstockintheyear3.
others(IV)ProfitdistributionintheSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT50yeaWithdrawalofsurplusreserve2.
Withdrawalofgeneralriskpreparation3.
Distributiontoshareholders4.
Others(V)Internalsettlementandtransferofowners'equity1.
Transferofcapitalreservetocapital2.
Transferofsurplusreservetocapital3.
Surplusreservemakesupfortheloss4.
othersIV.
Balanceattheendofthisperiod400,000,000.
0084,050,162.
8424,442,948.
14-73,265,815.
13435,227,295.
85statementofchangesintheowner'sequityNameofthecompany:ShandongAirlinesCo.
,Ltd2006Monetaryunit:(RMB)YuanItemSharecapitalCapitalreserveminus:SharesatStockCapitalsurplusUndistributedProfitToatlofshareholder'sequityI.
Balanceattheendofpreviousyear400,000,000.
0084,050,162.
8424,442,948.
14-114,931,886.
60393,561,224.
38plus(I):changesofaccountingpolicies(II)CorrectionoferrorsintheearlystageII.
Balanceatthebeginningofthisyear400,000,000.
0084,050,162.
8424,442,948.
14-114,931,886.
60393,561,224.
38III.
Increaseordecreaseofchangeamountinthisyear(thedecreaseislistedbeginningwith"-")5,911,035.
915,911,035.
91(I)Netprofitintheyear5,911,035.
915,911,035.
91(II)Profitandlossdirectlyaccruedtoowners'equities1.
NetamountoffairvaluechangesofsaleablefinancialassetsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT512.
Netamountaboutthechangeoffairvaluesofcashflowarbitragetools3.
Incometaxeffectrelatedtotheprojectsaccruedtoowner'seuity4.
OthersSubtotalof(I)and(II)5,911,035.
915,911,035.
91(III)Capitalsinvestedbytheowners1.
Capitalinvestmentbyownersincurrentperiod2.
Repurchaseofsharesatstockintheyear3.
others(IV)ProfitdistributionintheyeaWithdrawalofsurplusreserve2.
Withdrawalofgeneralriskpreparation3.
Distributiontoshareholders4.
Others(V)Internalsettlementandtransferofowners'equity1.
Transferofcapitalreservetocapital2.
Transferofsurplusreservetocapital3.
Surplusreservemakesupfortheloss4.
othersIV.
Balanceattheendofthisperiod400,000,000.
0084,050,162.
8424,442,948.
14-109,020,850.
69399,472,260.
29SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT52ShangdongAirlinesCo.
,LtdNotestoFinancialStatementsFortheyearof2007(AllamountsareexpressedinRMByuanunlessotherwisestated)I.
GeneralShandongAirlinesCo.
,Ltd.
(the"Company")wasestablishedinthePeople'sRepublicofChina("PRC")onDecember13,1999,andisresponsibleforitsownoperation,subjecttothesupervisionandregulationoftheCivilAviationAdministrationofChina("CAAC"),aregulatoryauthorityofthecivilaviationindustryinthePRC.
ItsBsharesarelistedontheShenzhenStockExchange("theStockExchange")witheffectfromSeptember12,2000.
ItsholdingcompanyisShangdongAviationGroup山东航空集团有限公司(formerlyShangdongAirlinesLimited山东航空集团有限公司),acompanyalsoestablishedinthePRC.
.
Thecompanyisengagedintheprovisionofdomesticpassengerandcargoairtransportationservices.
TheprincipleactivitiesofsubsidiariesandassociatesaresetoutinnotesVII(1)and(2).
TheCompanyanditssubsidiariesarehereinaftercollectivelyreferredtoas"theGroup".
II.
BasisforpreparationTheCompanyanditssubsidiariesmaintaintheiraccountingrecordsandpreparetheirstatutoryfinancialstatementsinaccordancewiththeEnterpriseAccountingStandardsissuedbytheMinistryofFinanceinFebruary2006whichimplementfromJanuary1,2007,andwithreferenceofCivilAviationAccountingmethod.
Thefinancialstatementisbasedontheassumptionofgoingconcern,actualtransactionsanditemsandinaccordancewiththelatestEnterpriseAccountingStandards,ZhengJianFa[2006]No.
136NoticeontheImprovementinDisclosingtheAccountingInformationRelatedtotheNewAccountingStandardsissuedbyChinaSecuritiesRegulatoryCommission,ZhengJianKuaiJiZi[2007]No.
10NoticeontheImprovementinDisclosingtheAccountingInformationRelatedtotheNewAccountingStandardsissuedbyChinaSecuritiesRegulatoryCommission,No.
7QuestionsandAnswersabouttheStandardizationofInformationDisclosureofCompaniesMakingPublicOfferingofSecurities–ComparisonaboutPreparationandDisclosureofAccountingInformationintheTransitionPeriodofNewandOldAccountingStandardsissuedbyChinaSecuritiesRegulatoryCommission,thisSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT53statementpreparedunderthefollowingimportantaccountingandvaluationpolicies.
The2006annualfinancialstatementswereoriginallypreparedinaccordancewiththeenterpriseaccountingstandardsandEnterpriseAccountingSystemsandrelevantsupplementaryregulations.
However,accordingtoarticles5to19oftheNo.
38EnterprisesAccountingStandard-FirstImplementationofEnterpriseAccountingStandardsandNo.
1InterpretationofEnterprisesAccountingStandardwhichinterprettheimpactsofthecomparableincomestatementandbalancesheet,theCompanycompliedwithretroactiveadjustmentprinciple,andadjusteddataintocomparableincomestatementandbalancesheet.
III.
DeclarationofCompliancewiththeEnterpriseAccountingStandardsTheCompany'sfinancialstatementspreparedmeettherequirementsoftheEnterpriseAccountingStandards,fairlyandcompletelypresentsthefinancialposition,operationresultandcashflow,andotherrelevantinformationofthecompany.
IV.
Mainaccountingpoliciesandaccountingestimatesandmethodsofconsolidation(1)AccountingYearThecompanyemploystheperiodofthecalendardaysfromtheJanuary1toDecember31eachyearastheaccountingyear.
(2)ReportingcurrencyTheCompany'sreportingcurrencyisRenminbi("RMB").
(3)MeasurementcharactersTheCompanycommonlymeasuresaccountingfactorsbyhistoricalcostmethod;ifthedeterminedaccountingfactoramountcanbeobtainedorreliablymeasured,thereplacementcost,netrealizablevalue,netvalueandfairvaluemethodmaybeemployed.
A.
Byusinghistoricalcostmethod,theassetsareaccountedforonthebasisofcashorcashequivalentspaid,orfairvalueoftheconsiderationspaidforacquiredassets.
Theliabilitiesareaccountedforonthebasisoftheactuallyreceivedamountorassetamountforperformingthecurrentobligations,orthecontractamountforperformingthecurrentobligations,orthecashorcashequivalentamountpaidtorepaythedebtsindailyactivities.
B.
Thereisnochangeofmeasurecharactersoffinancialstatementitemsduringthereportperiod.
(4)StandardofcashequivalentsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT54Inpreparingcashflowstatement,cashequivalentsofthecompanyincludetheinvestmentswithshortterm(itusuallyexpireswithinthreemonthsfromthepurchasedate),highlyliquidity,easytoconvertintoknownamountofcash,andlow-riskofchangesinvalue.
Equityinvestmentsshallnotdeemascashequivalents.
(5)ForeigncurrencytransactionsForeigncurrency(currencyotherthanthereportingcurrency)transactionsaretranslatedintoreportingcurrencyatspotexchangeratesprevailingonthedayinwhichthetransactionstakeplace.
Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthebalancesheetdatearerestatedintothereportingcurrencyusingthespotexchangeratesatthatdate.
Theexchangegainsorlosesaredealtwithintheincomestatementfortheyear.
Theexchangegainsorlosesarisingfromforeigncurrencyborrowingsinrelationtotheacquisitionorconstructionoffixedassetsareaccountedforaccordingtotherequirementsofcapitalizationofborrowingcosts.
(6)ConversionoffinancialstatementinforeigncurrencyMonetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthebalancesheetdateareconvertedintothereportingcurrencyusingthespotexchangeratesatthatdate.
Amongshareholders'equityitems,allitemsexcept"undistributedprofits"areconvertedintoreportingcurrencyatthespotexchangerateontheoccurrencedate.
IncomeandexpenseitemsinIncomeStatementareconvertedintoreportingcurrencyatspotexchangerateontheoccurrencedate.
(7)FinancialassetsandfinancialliabilitiesA.
ClassificationoffinancialassetsandfinancialliabilitiesFinancialassetsandliabilitiesincludefinancialassetsandliabilitiesheldfortrading,anddesignatedasatfairvalue,andthosechangesoffairvaluearerecognizedincurrentprofitandlossaccount;held-to-maturityinvestments;accountsreceivable;available-for-salefinancialassets;andotherfinancialliabilities.
B.
Recognitionandmeasurementoffinancialassetsandfinancialliabilities(a)Financialassetsandfinancialliabilitiesaremeasuredinitiallywithfairvalue(deductedwithdeclaredbutnotpaidcashdividendsandduebondinterestsbutnotpaid)whenareacquiredorconfirmed.
Relatedtransactionfeesareaccountedforprofitandlossincurrentperiod.
Interestsreceivedandcashdividendsreceivedduringtheperiodheldarerecognizedasinvestmentincome.
Whendisposeoffinancialassetsorfinancialliabilities,thedifferencesbetweenfairvalueandbookvaluearerecognizedasinvestmentincome.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT55(b)Held-to-maturityinvestmentsaremeasuredwithfairvalue(deductedwithanydeclaredbutnotpaidcashdividendsandduebondinterestsbutnotpaid)andtransactionfeeswhenareacquired.
Interestsaremeasuredbyresidualcostandactualinterestrate(ifactrualinterestrateislessthancontractrate,usecontractrate)duringtheperiodheldandrecognizedasinvestmentincome.
Whendisposeofheld-to-maturityinvestment,thedifferencesbetweenvalueobtainedandbookvaluearerecognizedasinvestmentincome.
(c)AccountsreceivableThecontractualrightsfromsalesofgoodsorservicesrenderedareusuallyinitiallyaccountedforthepricesinthecontractsandagreements.
Whenreceiveordisposalofaccountsreceivable,thedifferencebetweenthevalueobtainedandbookvalueisrecognizedasprofitandlossaccounts.
(d)Available-for-salefinancialassetsaremeasuredwithfairvalue(deductedwithanydeclaredbutnotpaidcashdividendsandduebondinterestsbutnotpaid)andtransactionfeeswhenareacquired.
Interestreceivedandcashdividendsreceivedduringtheperiodheldarerecognizedasinvestmentincome.
Anychangesoffairvalueofavailable-for-salefinancialassetsattheendofperiodareaccountedforcapitalreserve(othercapitalreserve).
Whendisposeofavailable-to-saleinvestment,thedifferencesbetweenvalueobtainedandbookvaluearerecognizedasinvestmentincome.
Atthesametime,thechangesoffairvaluethatrecognizedincapitalreserve(othercapitalreserve)aretransferredtoinvestmentincome.
(e)Otherfinancialliabilitiesaremeasuredwithfairvalueandtransactionfeeswhenareacquired.
Thesubsequentcalculationsemployamortizedcostmethod.
C.
RecognitionandmeasurementoffinancialassetsTheCompanyshallderecognizefinancialassetswhenalltherisksandrewardshavebeentransferredtootherparty;ifnot,theCompanyshallrecognizethefinancialassets.
Thecompanyadoptssubstantialoverformmethodwhilemakingjudgmentifthederecognitionoffinancialassetsmeettherequirementofaccountingprinciples.
Thecompanydifferentiatesthetransferoffinancialassetsintoentiretransferandthepartialtransferoffinancialasset.
Whenderecognizitonconditionofentiretransferredassetshasbeensatisfied,thedifferencesbetweentheamountoffollowingtwoitemsshallbeaccountedforprofitsandlossesofcurrentperiod.
(a)Thebookvalueoftransferredfinancialassets;(b)Thesumofconsiderationreceivedfromthetransfer,andtheaccumulativeamountofthechangesofthefairvalueoriginallyrecordedintheshareholders'equities(intheeventthatthefinancialassetinvolvedinthetransferisafinancialassetavailable-for-sale)Ifthetransferofpartialfinancialassetssatisfiestheconditionsofderecognition,theentirebookvalueofthetransferredfinancialassetshall,betweentheportionwhosederecognitionandtherecognizedportionSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT56(undersuchcircumstance,theserviceassetretainedshallbedeemedasaportionoffinancialassetwhosederecognition),beapportionedaccordingtotheirrespectiverelativefairvalue,andthedifferencebetweentheamountsofthefollowingtwoitemsshallbeaccountedfortheprofitsandlossesofthecurrentperiod.
(a)Thebookvalueoftheportionwhosederecognition.
(b)Thesumofconsiderationoftheportionwhosederecognitionandtheportionofaccumulativeamountofthechangesinthefairvalueoriginallyrecordedintheshareholders'equitywhichiscorrespondingtotheportionwhosederecognized(intheeventthatthefinancialassetsinvolvedinthetransferisafinancialassetsavailable-for-sale).
IftheCompanyfailstosatisfytheconditions0fderecognitionfortransferredfinancialassets,itshallcontinuetorecognizetheentirefinancialassetstobetransferredandshallrecognizetheconsiderationitreceivesasafinancialliability.
D.
FairvaluesoffinancialassetsandfinancialLiabilitiesForactivefinancialassetsorfinancialliabilitiesinthemarket,thequotationsshallbeusedforthedeterminationoftheirfairvalues;forinactivefinancialinstruments,theCompanyshallemployevaluationtechniquestodeterminetheirfairvalues.
Valuationtechniquesincludeusingrecentmarkettransactionsbetweenknowledgeable,willingparties,referencetothecurrentfairvalueofanotherinstrumentthatissubstantiallythesame,discountedcashflowanalysisandoptionpricingmodels.
E.
ImpairmentoffinancialassetsTheCompanyassessesthefinancialassetsthatcarryatfairvalue,andthosefinancialassetswhichchangesoffairvaluearerecognizedinprofitandlossaccountsatthebalancesheetdate.
Ifthereisobjectiveevidencethattheoneorseveralfinancialassetsareimpaired,theCompanyshalldeterminetheamountofanyimpairmentloss.
(a)AccountsreceivableAttheendoftheperiod,ifthereisobjectiveevidencethattheaccountsreceivablehavebeenimpaired,theimpairmentlossshallberecognizedbasedonthedifferencebetweenbookvaluesandexpectedcashinflowvalues.
Attheendoftheperiod,impairmenttestshallbemadeonindividualaccountsreceivablewithsignificantamounts.
Ifthereisobjectiveevidencethattheyhavebeenimpaired,baddebtlossshallberecognizedandprovisionforbaddebtsshallbemadebasedonthedifferencebetweentheexpectedcashinflowvaluesandbookvalues.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT57Forthoseindividualaccountsreceivablewithnotsignificantamountsattheendoftheperiod,alongwiththoseaccountsreceivablethathavebeentestedindividuallybutnotimpaired,theCompanyclassifiestheminlinewithsimilarcreditriskcharacteristicsintoseveralgroups,andmake5%ofbaddebtsprovisionontheaccountsreceivablebalancesatbalancesheetdate.
Thispercentagereflectstheactualimpairmentloss,thatis,theamountofwhichbookvaluesofeachgroupareovertheirexpectedinflowvalues.
Onthebasisoftheactuallossrateofreceivableaccounts,withsameorsimilarcreditriskcharacteristicsofaccountsreceivablepackageinpreviousyear,theCompanyalsoconsiderscurrentsituationanddeterminethepercentageofbaddebtprovision.
Nobaddebtsprovisionhasbeenmadeforsecuritydepositsfortheoperatingleaseaircraftsandaircraftmachineries.
(b)Held-to-maturityinvestmentThemeasurementofimpairmentlossofheld-to-maturityinvestment,pleaserefertoimpairmentlosstreatmentofaccountsreceivable.
(c)Available-for-salefinancialassetsIfthereisobjectiveevidencethatavailable-for-salefinancialassetshavesignificantdepreciated,orafterconsideringvariousrelevantfactors,thisdownwardtendencyisdeemedasnottemporary,theimpairmentlossshallberecognizedbasedonthedifferencebetweentheexpectedcashinflowvaluesandbookvalues.
Incaseofimpairmentlossofavailable-for-salefinancialassetsrecognized,itcannotbewrittenback.
(8)InventoryA.
Inventoriescategory:aircraftconsumableparts,low-valueconsumablesuppliesforairplanesB.
Inventoriesstocktakingsystem:perpetualinventorymethodC.
Valuationofmethodsofinventories:Inventoriesarecalculatedatactualcostswhenacquire,andissuanceofinventoriesisdeterminedonfirstinfirstoutbasis.
D.
low-valueconsumableproductsamortizationmethodThelow–valueconsumablesuppliesareamortizedatonetime.
E.
ImpairmentlossofinventoriesForinventoriesatbalancesheetdate,theevaluationcriteriashouldbaseonthelowervaluebetweencostsandnetvaluesthatcanbeconvertedintocash.
WhennetvaluesthatcanbeconvertedintocasharelowerSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT58thancosts,provisionforimpairmentlossofinventoriesshallbemade.
Forlargequantityandlow-unit-priceinventories,provisionforimpairmentlossofinventoriesshallbemadebasedonthecategoryofinventories;forthoseinventoriesthatrelatetoproductserieswhichproductionandsaleareinsameareas,havesameorsimilarfinalusagesorpurposes,andarehardtoseparatecalculationfromotheritems,theirimpairmentlossprovisionshallbeconsolidated.
Thenetvaluethatcanbeconvertedintocashisreferredtothevalueafterestimatedthesellingpricesubtractstheestimatedfinishedcostandestimatedsalesexpensesandrelatedtaxandfeesinnormaloperatingprocess.
(9)FixedassetanddepreciationmethodA.
RecognitionoffixedassetsFixedassetsaretangibleassetsthatareheldforuseinproductionorsupplyofgoodsorservices,forrentaltoothers,orforadministrativepurpose,andhaveusefullivesmorethanoneaccountingyear.
Fixedassetsshallberecognizediftheymeetthefollowingconditions:(a)Theeconomicbenefitsrelatedtofixedassetprobablyflowtotheenterprise;(b)Thecostoffixedassetmaybereliablymeasured.
B.
MeasurementoffixedassetsFixedassetsshallbeinitiallymeasuredatcost.
Thecostoffixedassetcomprisespurchaseprice,relatetaxorduties,andanydirectlyattributablecostofbringingtheassettoworkingconditionforitsintendeduse,suchasdeliverycost,insuranceetc.
C.
Thedepreciationmethodoffixedassets:straight-linemethodisinusedtocalculatethedepreciationoffixedassets(includingfinanceleasedfixedassets).
Theestimatedusefullives,expectedresidualvalueandannualdepreciationrateofvarioustypesfixedassetsarelistedasfollows:CategoryEstimatedusefullives(years)AnnualdepreciationrateResidualvalue(%)Buildingsandstructures27-335.
002.
88-3.
52LLPandAPU15-205.
004.
75-6.
33Aircraftframereplaceableparts6-8-12.
5-16.
67Enginereplaceableparts3-5-20-33.
33Machineries,Electronicsandequipments4-100-5.
009.
5-23.
75Highpricerotables15-18-5.
56-6.
67Vehicles5-105.
009.
5-19SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT59D.
Ateachofbalancesheetdate,theCompanyshallreviewfixedassets'usefullives,expectedresidualvaluesanddepreciationmethod,andadjustedifnecessary.
(10)ConstructioninprogressConstructioninprogressshallbecalculatedbasedontheclassificationofproposedprojects.
Constructioninprogressismeasuredatactualcost.
Constructioninprogressistransferredtofixedassetswhentheprojectissubstantiallyreadyforitsintendeduse.
Borrowingcostsrelatingtoconstructioninprogressaremeasuredaccordingtoborrowingcostsmeasurementmethod.
Attheendofperiod,thecompanymakesjudgmentifanyprovisionofimpairmentlossisnecessary.
Iftheprojecthasbeenstoppedforalongtimeandwillnotbeconstructedwithinthreeyears,theimpairmentlossforsuchconstructioninprogressshallbemadebasedonthedifferencesbetweenrecoverableamountandbookvalues.
Onceimpairmentlossismade,itcannotbewrittenback.
(11)IntangibleAssetsA.
RecognitionofintangibleassetsIntangibleassetsareintangible,heldorcontrolledbyenterprise,andcanbeidentifiednonmonetaryassets.
Intangibleassetsarerecognizedonlywhenthefollowingconditionsaremet:(a)Theeconomicbenefitsrelatedtotheintangibleassetprobablyflowtotheenterprise;(b)Thecostofintangibleassetmaybereliablydeterminated.
B.
Intangibleassetsarerecognizedinitiallyatactualcosts.
C.
UsefullivesandamortizationofintangibleassetsTheamortizationofanintangibleassetwithfiniteusefullivesshallbeallocatedonasystematicandrationalbasisoveritsusefullives.
Anintangibleassetwithinfiniteusefullives,noamortizationshallbemade.
Attheendofeachyear,thecompanywillreviewusefullivesofintangibleassetswithfiniteusagelivesandamortizationmethod.
Incasetheusefullivesandamortizationmethodaredifferentfromthepreviousestimations,theCompanymaychangeasnecessary.
Theusefullivesofintangibleassets:IntangibleassetsEstimatedusefullives(years)Land-userights50(12)MaintenanceexpensesThemaintenanceexpensesforaircraftandleasedaircraftarebothtreatedascurrentexpenditurewhenSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT60theyoccur.
SinceJanuary1,2007,theoccurrenceofthemaintenanceexpenseswillbecapitalizedifthemaintenanceexpensessatisfytheconditionsforcapitalization,confirmasresettingthecostsoffixedassetsanddepreciateinthereasonableterms.
Foraircraftunderoperatinglease,maintenancearerequiredbeforereturntheaircrafttothelessor,theexpensesformaintenanceisestimatedbasedonstraightlinemethodorflighthours.
(13)Long-termdeferredassetsTheCompany'slong-termdeferredassetsrefertoexpensewhichhasbeenpaidoutandthebenefitingperiodisoveroneyear,suchasexpensesforpilots'initialtrainingsandsubsequenttrainings.
Thoseexpensesareamortisedat20yearsaccordingtotheirbenefitperiodrespectively.
(14)Impairmentoflongtermnon-financialassetsAttheendofperiod,theCompanyshouldcheckcarryingamountsoffixedassets,constructioninprocess,intangibleassetsandinvestmentpropertythatrecognizedbycostmethodetclong-termnon-financialassetsandjudgeifanyevidenceofimpairmentlossforthoseassets.
Goodwillandintangibleassetswithinfiniteusefullives,theCompanyshallmakeimpairmenttesteachyearwhethertherearesignsofpossibleimpairment.
Attheendofperiodthecompanyshouldmakejudgementwhetherthereisanyobjectiveevidencethattherelevantassetisimpaired.
Ifthereisobjectiveevidencethattheassetisimpaired,recoverableamountoftheassetshallbeestimated.
Therecoverableamountshouldbaseonthehighervaluebetweenfairvaluelessdisposalexpenseandpresentvalueofestimatedcashflowinthefuture.
Whentherecoverableamountoftheassetislessthanitscarryingamount,thedifferencesarerecognizedasprovisionforimpairmentloss.
Oncetheimpairmentlossisrecognized,itshallnotbewrittenbackinsubsequentyears.
Ifthereisobjectiveevidencethatanassetisimpaired,recoverableamountshallbeestimatedfortheindividualasset.
Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,thecompanyshalldeterminetherecoverableamountoftheassetgrouptowhichtheassetbelongs.
TheCompanydeterminesassetgroupbasedonwhethercashflowgeneratingfromtheassetgroupisindependentwithotherassetsorassetgroup.
AtthesameSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT61time,thecompanyshouldconsideradministration,productionandoperationactivities,andheld-for-usageofassetsordisposaldecision.
Oncetheassetgroupisdetermined,itshallnotbechangedineachaccountingperiod.
Aproductisproducedbyacombinationofseveralassets,ifitsatisfiestheconditionasabove,itshouldbeconfirmedasagroupassetevenifitispartlyorfullyusedbyinternal.
Ifthecashinflowofthisgroupassetisinfluencedbytheinternaltransferprice,thenthecashflowofthisgroupassetisdeterminedbythebestfuturepricepredictionwhichismadebythebusinessmanagementunderfairtrading.
Thegoodwillreflectedintheconsolidatedfinancialstatementshallnotincludethegoodwillofsubsidiaryattributabletotheequityfortheminorityofshareholders;butthetestsofthedepreciationaboutrelevantgroupswillincludethegoodwillattributabletotheequityfortheminorityofshareholders;thecompanywilladjustthebookvaluesofassetgroupsascomparetheadjustedbookvaluesofassetgroupswiththeirreceivableamountstodetermineiftheassetgroups(includingthegoodwill)aredepreciated.
Ifso,thecompanywilldeducttheequityshareoftheminorityofshareholdersfromabovelossestodeterminethedeprecationlossesofgoodwillattributabletotheparentcompany.
(15)Long-termEquityInvestmentA.
Long-termequityinvestmentismeasuredatinitialinvestmentcostafterobtained.
(a)Long-termequityinvestmentcausedbytheenterprisemergerLong-termequityinvestmentobtainedthroughbusinesscombinations:forobtainingsubsidiaryundercommoncontrol,theconsiderationcostcanbecashpayment,non-monetaryassetstransferortakingoverthesubsidiary'sliability.
Underthissituation,theinitialinvestmentcostiscarryingamountofshareholder'sequityofthesubsidiaryonthemergerdate.
Thedifferencebetweenthecarryingamountofthenetassetsobtainedandinitialinvestmentcostoflong-termequityinvestmentshallbeadjustedtocapitalreserve.
Ifthecapitalreserveisnotsufficienttoabsorbthedifference,anyexcessshallbeadjustedagainstretainedearnings.
Inthecaseofcompanyissuesequitysecuritiesastheconsideration,theinitialinvestmentcostiscarryingamountofshareholder'sequityofthesubsidiaryonthemergerdate.
Ifthebookvalueamountoftheissuedsharesisdeemedasthecapital,thedifferencebetweenthecarryingamountoftheissuedsharesandinitialinvestmentcostoflong-termequityinvestmentshallbeadjustedtocapitalreserve.
Ifthecapitalreserveisnotsufficienttoabsorbthedifference,anyexcessshallbeadjustedagainstretainedearningsAllSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT62directexpensesrelatedtothemerger,includingtheauditorfee,evaluationexpense,legalserviceexpense,etcwillbeaccruedtothecurrentprofitandloss.
Forobtainingsubsidiarynotundercommoncontrol,thecostoflong-termequityinvestmentisfairvalueofassetspaidorliabilitiesundertakenbytheCompany.
Wherethecostofabusinesscombinationexceedstheacquirer'sinterestinthefairvalueoftheacquiree'sidentifiablenetassets,thedifferenceshallberecognizedasgoodwill,goodwillshallbemeasuredatcostlessaccumulatedimpairmentlosses.
Wherethecostofcombinationislessthantheacquirer'sinterestinthefairvalueoftheacquiree'sidentifiablenetassets,afterreassessment,thedifferenceshallberecognizedinprofitorlossforthecurrentperiod.
(2)Othertypesoflong-termequityinvestmentLong-termequityinvestment,whichisacquiredbycashconsideration,theactualcashpaymentamountwillbedeemedastheinitialinvestmentcost.
Theinitialinvestmentcostincludesthedirectexpensesrelatedtothelong-termequityinvestment,taxesandothernecessaryexpenses.
Long-termequityinvestment,whichisacquiredbyequitysecurities,thefairvalueoftheissuedequitywillbedeemedastheinitialinvestmentcost.
Forthelong-termequityinvestmentmadebytheinvestors,thevaluesagreedintheinvestmentcontractsoragreementswillbedeemedastheinitialinvestmentcost,exceptthatthecontractsoragreementsprovidethatthevaluesarenotfair.
Long-termequityinvestmentisacquiredbyexchangeofnon-monetaryassets,ifthistransactionhascommercialsubstanceorthefairvaluesofexchangeassetscanbereliablymeasured,thefairvaluesoftheseassetsandrelevanttaxeswillbedeemedastheinitialinvestmentcost;thedifferencebetweenthefairvaluesoftheassetsandbookvalueswillbeaccruedtothecurrentprofitandloss;ifthenon-currencyassetexchangedoesnotsatisfythesetwoconditionsmentionabove,thebookvaluesoftheassetsandrelevanttaxeswillbedeemedastheinitialinvestmentcost.
Long-termequityinvestment,whichisacquiredbythemodeofliabilityrestructure,thefairvaluesoftheobtainedequitieswillbedeemedastheinitialinvestmentcost;thedifferencebetweentheinitialinvestmentcostandbookvaluesofcreditwillbeaccruedtothecurrentprofitandloss.
2.
SubsequentMeasurementsThecostmethodisemployedtocalculatethelong-termequityinvestmentofsubsidiariesandwillbeadjustedinaccordancewiththeequitymethodinthepreparationoftheconsolidatedfinancialstatements.
TheCompanyusescostmethodforthefollowingconditions:along-termequityinvestmentwheretheSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT63investingenterprisecanexercisecontrolovertheinvestee,ortheinvestingenterprisedoesnothavejointcontrolorsignificantinfluenceovertheinvestee,theinvestmentisnotquotedinanactivemarketanditsfairvaluecan'tbereliablymeasured.
Whenaninvestingenterprisecanexercisejointcontrolorsignificantinfluenceovertheinvestee,along-termequityinvestmentshallbetreatedasarecoveryofinitialinvestmentcost.
(1)Whenusingcostmethod,cashdividendsorprofitdistributionsdeclaredbytheinvesteeshallberecognizedasinvestmentincomeinthecurrentperiod.
However,investmentincomerecognizedbytheinvestingenterpriseshallbelimitedtotheamountdistributedtoitoutofaccumulatednetprofitsoftheinvesteearisingaftertheinvestmentwasmade.
Anycashdividendsordistributionsreceivedinexcessofthisamountshallbetreatedasarecoveryofinitialinvestmentcost.
(2)Whenusingequitymethod,aftertheinvestingenterprisehasacquiredalong-termequityinvestment,itshallrecognizeitsshareofnetprofitsorlossesmadebytheinvesteeasinvestmentincomeorlosses,andadjustthecarryingamountoftheinvestmentaccordingly.
Thecarryingamountoftheinvestmentshallbereducedbytheportionofanyprofitdistributionsorcashdividendsdeclaredbytheinvesteethatisattributedtotheinvestingenterprise.
(3)Provisionforlong-termequityinvestmentimpairmentlossCompanyshouldhaveimpairmenttestforanylong-termequityinvestmentonverybalancesheetdate.
Whentheestimatedvalueinuseislessthanitsbookvalue,itwillbetreatedasimpairmentloss.
Andthislossshouldbetransferredintocurrentprofitandlossaccount;meanwhile,thecompanyshouldsetupprovisionforthelong-termequityinvestmentimpairmentloss.
Toanylong-termequityinvestments,whicharemeasuredbycostmethod,thereisnopriceoritsfairvaluecannotbemeasuredreliably,theimpairmentlossoftheseinvestmentsshouldbethedifferencebetweenthebookvalueandthepresentvalueofthefuturecashflowcalculatedbyusingcurrentmarketrateofsimilarfinancialasset.
Forotherlong-termequityinvestment,ifthecalculationofitsmoneyreturninfuturedeclaredthatthemoneyreturnislessthanitsbookvalue,thedifferencewillbetreatedasimpairmentloss.
Thelong-termequityinvestmentimpairmentlosscannotbereversed.
(16)CapitalizationofborrowingcostA.
PrincipleofcapitalizationofborrowingcostBorrowingcostsmaybeattributabletotheconstructionandproductionsofassetsandcompliedwiththecapitalizationconditions,theyshallbecapitalizedandaccountedforascostofassets;otherSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT64borrowingcostsshallberecognizedasexpenseswhenincurredandaccountedforcurrentprofitandlossaccount.
Theassetscomplyingwiththecapitalizationconditionsmeanassetssuchasfixedassets,investmentpropertiesandinventoriesetc,thatrequirealongtimeofconstructionandproductionactivitiesbeforebeingintendedforuseorforsales.
Thecapitalizationofborrowingcostsshallsatisfythefollowingconditions:(a)Theexpenditureofassetshasbeenincurred;(b)Theborrowingcostshavebeenincurred;(c)Activitiesrelatingtoacquisition,constructionorproductionthatarenecessarytomaketheassetsbeingintendedforuseorsaleshavebeenlaunched.
Capitalizationofborrowingcostsshallbesuspendedduringperiodsinwhichacquisition,constructionorproductionofassetsisinterruptedabnormally,andisinterruptedforacontinuousperiodofthreemonths.
Capitalizationofborrowingcostsalsoshallbesuspendedwhentheacquisition,constructionorproductionofassetsarepreparedbeingintendedforuseorsales.
B.
CapitalizationperiodBorrowingcostswhichareincurredbytheacquisition,constructionorproductionofassets,andaresatisfiedwiththeaforesaidcapitalizationconditions,arerecognizedascostofassetsbeforethoseassetsareintendedforuseorsales.
Anyborrowingcostsincurredafterthoseassetsareintendedforuseorsales,arerecognizedasfinancialcosts.
C.
Duringthecapitalizationperiod,theamountofinteresttobecapitalizedforeachaccountingperiodshallbedeterminedasfollowing:-foraspecificpurposeborrowing,theamountofinteresttobecapitalizedshallbetheactualinterestexpensesincurredfortheperiodlesstemporarydepositinterestsorinvestmentincome;-Wherefundsareborrowedundergeneralpurpose,theCompanyshalldeterminetheamountofinteresttobecapitalizedbyapplyingcapitalizationratetotheweightedaverageoftheexcessamountsofcumulativeexpendituresontheassetoverandabovetheamountsofspecific-purposeborrowings.
Thecapitalizationrateshallbeweightedaverageoftheinterestratesapplicabletothegeneral-purposeborrowings.
(17)PrincipleofaccruedliabilitiesA.
PrincipleofaccruedliabilitiesTheobligationsrelatedtosomeitemsthatmeetthefollowingconditionsatthesametimewillbeconfirmedSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT65astheliabilities:(a)Thisobligationisthecurrentobligationofthecompany;(b)Theperformanceofthisobligationwillprobablycausetheeconomicbenefitstoflowoutofthecompany;(c)Theamountofthisobligationcanbereliablycalculated.
Losscontractsandrestructuringobligationsofthecompanymeettheaboveconditions,theyshallberecognizedasaccruedliabilities.
B.
OptimumevaluationofaccruedliabilitiesIfthenecessarypaymentshavescopes,theoptimumevaluationshallbedeterminedbasedontheaverageamountbetweentheupperandlowerlimitamountofscope;ifthenecessarypaymentsdonothavesuchscopes,theoptimumevaluationshallbedeterminedinthefollowingmethod:(a)Ifthecontingenteventisinvolvedinanindividualproject,theoptimumevaluationamountwillbedeterminedbasedonthepossibleamount;(b)Ifthecontingenteventisinvolvedinsomeprojects,theoptimumevaluationamountshallbedeterminedbasedonpossibleamountandoccurrenceprobability.
Incaseofallorpartofpaymentsabouttheconfirmedliquidationliabilitiesareexpectedtobecompensatedbythethirdpartiesorotherparties,andthecompensationamountsaresurelyreceived,thensuchamountsshallbeseparatelyrecognized.
Theconfirmedcompensationamountsshallnotexceedbookvaluesofconfirmedliabilities.
(18)RevenuerecognitionA.
RenderingofservicesPassengerandcargosalesarerecognizedasoperatingrevenueswhenthetransportationserviceisprovidedratherthanticketsaresold.
B.
UserightoftransferredassetsWhentheeconomicbenefitsrelatedtothetransactionareprobablywillflowintoenterpriseandtheamountscanbereliablydetermined,thecompanyshallrecognizethemasincomebyuserightoftransferredassetsunderthefollowingsituations:(a)Theamountofinterestincomeisdeterminedbythecapitalusageperiodandactualinterestrate.
(b)Theamountofroyaltiesisdeterminedbytheperiodandmethodofchargingasstipulatedintherelevantcontractoragreement.
(19)IncometaxesThecompanyusesdeferredincometaxliabilitymethodincalculationofincometaxes.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT66A.
DeferredincometaxassetsDeferredincometaxassetsshallberecognizedfordeductibletemporarydifferencestotheextentthatisprobablethattaxprofitswillbeavailableagainstwhichthedeductibletemporarydifferencescanbeutilized,unlessthedeferredtaxassetsduetoinitialrecognitionofassetsorliabilitiesfromsomespecialtransactions.
B.
DeferredincometaxliabilitiesDeferredtaxliabilitiesshallberecognizedforalltaxabletemporarydifferences,excepttotheextentthatthedeferredtaxliabilitiesarisefrom:(a)theinitialrecognitionofgoodwill;(b)thetransactionisnotabusinesscombination,atthetimeofthetransaction,itaffectsneitheraccountingprofitnortaxableprofit(ordeductibleloss).
(c)fortemporarydifferencesassociatedwithinvestmentinsubsidiaries,associates,andinterestsinjointlycontrolledenterprises,theinvestingenterpriseisabletocontrolthetimingofthereversalofthetemporarydifference,anditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
C.
IncometaxesmeasurementIncometaxesincludeincometaxesforthecurrentperiodanddeferredincometaxes.
Currentanddeferredincometaxshallberecognizedasincometaxexpensesorincomethatincludedintheprofitandlossaccounts,exceptthat(a)incometaxarisingfromabusinesscombination;(b)incometaxarisingfromatransactionoraneventwhichisrecognizeddirectlyinowner'sequity.
(20)BasisofConsolidationTheconsolidatedfinancialstatementspreparedareinaccordancewiththeNo.
33EnterpriseAccountingStandards–ConsolidatedFinancialStatementissuedinFebruary,2006.
TheconsolidatedfinancialstatementsincorporatethefinancialstatementsoftheCompanyandenterprisescontrolledbytheCompany("itssubsidiaries")madeupto31Decembereachyear.
ControlisachievedwheretheCompanyhasthepowertogovernthefinancialandoperatingpoliciesofaninvesteeenterprisesoastoobtainbenefitsfromitsactivities.
Onacquisition,theassetsandliabilitiesofasubsidiaryaremeasuredattheirfairvaluesatthedateofacquisition.
Anyexcess(deficiency)ofthecostofacquisitionover(below)thefairvaluesoftheidentifiablenetassetsacquiredisrecognizedasgoodwill(negativegoodwill).
Theinterestofminorityshareholdersisstatedattheminority'sproportionofthefairvaluesoftheassetsandliabilitiesrecognized.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT67Theresultsofsubsidiariesacquiredordisposedofduringtheyearareincludedintheconsolidatedincomestatementfromtheeffectivedateofacquisitionoruptothedateofdisposal,asappropriate.
Wherenecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestobringtheaccountingpoliciesusedintolinewiththoseusedbyothermembersoftheGroup.
Allsignificantintercompanytransactionandbalancesbetweengroupenterprisesareeliminatedonconsolidation.
V.
Changeinaccountingpolicies,accountingestimatesSinceJanuary1,2007,thecompanycarriedoutthenewenterpriseaccountingstandardssystemsandguidelinespromulgatedbythePeople'sRepublicofChina.
InaccordancewiththeNo38EnterpriseAccountingStandard–FirstimplementationofEnterpriseAccounting,No1InterpretationofEnterpriseAccountingStandard,ZhengJianFa[2006]136NoticeonimprovementindisclosingtheaccountinginformationrelatingtoNewAccountingStandards,andthecircularonissuingNo7QuestionandresponsesofinformationDisclosurestandardofPubliccompanies-CompletionandDisclosureofthecomparativeFinancialaccountinginformationduringthetransitionperiodbetweenNewandOldaccountstandardsandadjustedretroactivelythefinancialstatementduringthecomparativeperiod,ofwhich(1)Retroactiveadjustmentforlong-termequityinvestmentinsubsidiariesInaccordancewiththeCaiKuai[2007]No.
14noticeaboutprintingandissuingofNo.
1InterpretationofEnterpriseAccountingStandardsissuedbytheMinistryofFinance,onthefirstimplementationdate,theparentcompanyshouldretroactivelyadjustlong-termequityinvestmentinsubsidiariesthathavebeenheldbyitselfbeforesuchdateanditisdeemedthatthissubsidiaryhasemployedthecostmethod.
Aftertheimplementationofnewaccountingstandards,thecompanyshallrecognizedeclareddistributablecashdividendsordistributableproportionatenetprofitsasinvestmentincome.
Theaboveaccountingpolicychangehasnoeffectonconsolidatednetassets.
(2)IncometaxImplementationofnewEnterpriseAccountingStandards,theCompanyrecognizedthenegativetemporarydifferencebetweenthebookvalueofassetsandtaxableassetsasdeferredincometaxassets,andthepositivetemporarydifferencebetweenthebookvaluesofassetsandtaxableassetsasdeferredincometaxliabilities.
OnJanuary1,2007,thecompanyincreasedretainedearningsforRMB92,247,851.
58,theowner'sequitythatareattributabletoparentcompanyforRMB92,231026.
43andtheowner'sequitythatisattributabletotheminorityforRMB16,825.
15.
(3)OthersForthosestaffwhogaveupannualpaidleavesinpreviousyears,theCompanyshouldpayreimbursementstotheminfutureperiodsinaccordancewithrelatedregulation.
Thereimbursementshavebeenusedtooffsetparentcompany'sretainedearningsfor2,290,216.
00onJanuary1,2007.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT68VI.
Taxation(1)BusinesstaxBusinesstaxiscalculatedat3%onpassenger,cargotransportationrevenue,and5%oncommissionandrentalincome.
(2)EnterprisesincometaxEnterprisesincometaxiscalculatedat33%ontheestimatedassessableprofitfortheyear.
CivilaviationbasicconstructionfundAccordingtoCausing[2004]No38ThenoticeoftemporaryadministrationmethodforcivilaviationbasicconstructionfundissuedbytheMinistryofFinance,civilfundiscalculatedbasedonclassificationofairline,maximumtakeofweight,airlinemileageetcandrelatedregulation.
(3)OthersOthertaxesarecalculatedinaccordancewithstaterelevantregulations.
VII.
Subsidiary,jointventureandaffiliatedenterprises*ThemonetaryunitistenthousandRMBYuan,unlessotherwisestated.
(1)SubsidiarieswerenotobtainedthroughcombinationCompanyNameRegisteredAddressBusinessnatureRegisteredcapitalBusinessscopeActualinvestmentatyearendBalanceofnetinvestmentinsubsidiaryinfactProportionofsharesheldbythecompanyProportionofvotingrightsWhetherconsolidatedornotNotesQingdaoInt'lAviationLogisticsCenterCo.
,Ltd.
QingdaoTransportationandwarehousing3000Aviationcargowarehousing,groundallocation;Electroniccommerceandsoon2381238170%70%YesUnionExpressServiceShandongAirlinesCo.
,Ltd.
AirlinesCo.
,LtdJinanTransportation100Highwaytransportation656565%65%NoSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT69Notice:TheUnionExpressServiceShandongAirlinesCo.
,LtdwasdismissedonJuly6,2007upontheshareholdermeetingresolution;meanwhile,theliquidationcommitteewasestablishedandcommencedtheliquidation.
TheUnionExpressServiceShandongAirlinesCo.
,LtdhasbeenwithdrawnfromtaxregistertillDecember31,2007.
(2)jointventureandassociatedenterprisesCompanyNameRegisteredAddressBusinessnatureHoldingProportionProportionofvotingrightsSARJJinanAviationshippingindustry45%45%UnionExpressServiceShandongairlinesQindaoTransportation40%40%CurrentfinancialinformationofjointventureandaffiliatedenterprisesCompanyNameTotalasstsattheendofbalancedateTotalliabilitiesattheendofbalancedateTotalincomeTotalexpenditureNetprofitSARJ9,218.
7524,067.
37978.
45397.
45-414.
20UnionExpressServiceShandongairlines92.
3024.
74106.
4861.
33-0.
09(3)ScopechangesofconsolidatedfinancialstatementsIncomparisonwithlastyear,thenumberofcompaniesthatincludedintheconsolidatedfinancialstatementhasbeenreducedbytwo.
Thereasonsare:-Accordingtotheshareholder'smeetingresolutiononMarch28,2007,SDA-HangchiCargoCo.
,Ltd.
hadenteredintoliquidationinApril2007,andtheliquidationhadcompletedonNovember30,2007.
-Accordingtotheshareholder'smeetingresolutiononJuly6,2007,theUnionExpressServiceShandongairlineCo.
,LtdwasdismissedonJuly6,2007;meanwhile,theliquidationcommitteewasestablishedandcommencedtheliquidation.
UptoDecember31,2007,theUnionExpressServiceShandongAirlineCo.
,Ltdhasbeenwithdrewfromtaxregister.
(4)MinorityinterestofsubsidiariesCompanyNameMinorityshareholderinterestsat31/12/2006NetprofitsofsubsidiariesTheproportionofsharesheldbyminorityshareholdersProfitandlossattributetominorityshareholdersTheexcesslossesbyMinorityshareholdersthatparentcompanyhastobearedMinorityshareholderinterestsat31/12/2007SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT70QingdaoInt'lAviationLogisiticsCenterCo.
,Ltd.
1,118.
04244.
4430%73.
33——1,191.
38UnionExpressServiceShandongAirlinesCo.
,Ltd.
59.
75-0.
3935%-0.
14——59.
61VIII.
Mainitemsofconsolidatedfinancialstatements(1)MonetaryFunds1.
1.
Compositionofmonetaryfund2007.
12.
312006.
12.
31ItemsOriginalcurrencyExchangerateEquivalenttoRMBOriginalcurrencyExchangerateEquivalenttoRMBCashonhandRMB828,873.
93——828,873.
93304,610.
62——304,610.
62HKD5,930.
000.
93645,552.
8612,003.
271.
004712,059.
69USD7,901.
927.
304657,720.
361,290.
857.
808710,079.
86EUR37.
0710.
2665380.
58AUD42.
636.
1599262.
60GBP1,652.
8014.
580724,098.
992,152.
8015.
323232,987.
79CAD10.
007.
441974.
42431.
886.
69902,893.
17JPY135,000.
000.
06418,653.
50——————Subtotal————924,974.
06————363,274.
31BankdepositRMB40,277,417.
37-40,274,001.
8762,726,542.
36-62,726,542.
36HKDUSD127,710.
337.
3046932,872.
89661,670.
457.
80875,166,786.
04Subtotal————41,206,874.
76————67,893,328.
40OthermonetaryfundRMBSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT71HKDUSD3,750,000.
007.
304627,392,250.
003,750,000.
007.
808729,282,625.
00Subtotal————27,392,250.
00————29,282,625.
00Total————69,524,098.
82————97,539,227.
711.
2.
Othermonetaryfundsareduetoaircraftandenginesecuritydeposit,theamountisRMB27,392,250.
00(OriginalcurrencyUSD3,750,000.
00)attheyearend2007.
(2)Accountsreceivable2.
1.
CompositionofAccountsReceivable2007.
12.
312006.
12.
31ItemsBalanceProportionBaddebtprovisionBalanceProportionBaddebtprovisionIndividualtransactionwithsignificantamount189,588,286.
6589.
54%——144,809,355.
7689.
73%——Individualtransactionwithnotsosignificantamountbutsignificantrecoverablerisk2,608,298.
831.
23%2,608,298.
832,608,298.
831.
62%2,608,298.
83Othertransactionwithnosignificantamount19,538,120.
589.
23%777,353.
0313,966,721.
098.
65%562,192.
85Total211,734,706.
06100.
00%3,385,651.
86161,384,375.
68100.
00%3,170,491.
682.
2.
IndividualaccountsreceivablewithsignificantamountItemsAmountreasonBSP93,715,534.
35balanceduetothesettlementmethod,allamountafterperiodarereceivedAccountsreceivablefromChinaaviationsettlementcenter45,791,500.
35balanceduetothesettlementmethod,allamountafterperiodarereceivedAirChinaLimited50,081,251.
95balanceduetothesettlementmethod,allamountafterperiodarereceivedTotal189,588,286.
652.
3.
AgeanalysisofaccountsreceivableSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT722.
4.
Upto31Dec2007,thereis50,081,251.
95YuantradeaccountreceivableisduefromAirChinaLimited,whoowns5%orover5%ofvotingshares.
2.
5.
Detailsoftopfiveaccountsreceivables2007.
12.
312006.
12.
31ItemsBalanceProportionageBalanceProportionageBSP93,715,534.
3544.
26%Within1year68,240,034.
3542.
28%Within1yearAccountreceivablefromChinaAviationSettlementCenter中国结算中心票款45,791,500.
3521.
63%Within1year43,069,349.
2826.
69%Within1yearAirChina中国国际航空股份有限公司50,081,251.
9523.
65%Within1year33,478,831.
8720.
74%Within1yearAnHuiCivilAviationAirportCo.
,Ltd安徽民航机场集团有限公司——————1,269,000.
000.
79%Within1yearTheMunicipalGovernmentofHeiHeCity黑河市人民政府840,178.
120.
40%Within1year779,339.
000.
48%Within1yearGanzhouShengHuaIndustryCo.
,Ltd赣州胜华实业有限公司709,014.
830.
33%2to3years——————Totalamountandproportionoffistfiveaccountreceivable191,137,479.
6090.
27%146,836,554.
5090.
98%——(3)Advancepayable3.
1.
Ageanalysisofadvancepayable2007.
12.
312006.
12.
31AgeBalanceproportionBaddebtprovisionNetvalueBalanceproportionBaddebtprovisionNetvalueWithinoneyear208,993,647.
5898.
70%770,715.
04208,222,932.
54158,089,411.
6897.
95%566,055.
31157,523,356.
371to2years307,308.
500.
15%206,030.
43101,278.
071,386,848.
420.
86%1,371,315.
6715,532.
752to3years1,200,577.
980.
57%1,175,785.
6924,792.
29929,258.
000.
58%929,206.
7051.
303to4years929,258.
000.
44%929,206.
7051.
30978,857.
580.
61%303,914.
00674,943.
584to5years303,914.
000.
14%303,914.
00Above5yearsTotal211,734,706.
06100.
00%3,385,651.
86208,349,054.
20161,384,375.
68100.
00%3,170,491.
68158,213,884.
00SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT73Age2007.
12.
31Proportion2006.
12.
31ProportionWithin1year20,787,499.
3299.
99%17,604,261.
9497.
24%1to2years1,387.
480.
01%500,206.
002.
76%2to3years3to4years4to5yearsAbove5yearsTotal20,788,886.
80100.
00%18,104,467.
94100.
00%3.
2.
Upto31Dec2007,theaccountbalancedidnotcontainanydebtownedbymajorshareholderswhoowns5%orover5%ofvotingshares.
(4)Otheraccountreceivable4.
1.
Compositionofotheraccountreceivable2007.
12.
312006.
12.
31ItemsBalanceProportionBaddebtprovisionBalanceProportionBaddebtprovisionIndividualtransactionwithsignificantamount228,111,849.
8983.
89%109,136,552.
15227,423,720.
9691.
79%109,635,146.
61IndividualtransactionwithnotsosignificantamountbutsignificantrecoverableriskOthertransactionwithnosignificantamount43,806,896.
8616.
11%2,155,261.
5320,331,910.
178.
21%1,203,364.
68Total271,918,746.
75100.
00%111,291,813.
68247,755,631.
13100.
00%110,838,511.
294.
2.
OtherindividualaccountreceivablewithsignificantamountDebtorBalancePercentageofbaddebtsprovisionReasonDepositofaircraftengine118,975,297.
74——Depositforenginemaintenanceandpurchaseofaircraft,allamountisreceivableinthefuture.
ShandongAirlinesRainbow-JetCo.
,Ltd(SARJ)山东航空彩虹公务机109,136,552.
15100.
00%Long-termaccountsreceivable,thecompanycouldnotrepaydebtsduetoitsfinancialdifficultySHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT74有限公司Total228,111,849.
894.
3.
Ageanalysisofotheraccountreceivable2007.
12.
312006.
12.
31AgeBalanceProportionBaddebtprovisionNetvalueBalanceProportionBaddebtprovisionNetvalueWithin1year45,332,097.
7516.
67%1,339,820.
6443,992,277.
1135,542,040.
7414.
35%11,656,166.
0623,885,874.
681to2years29,195,356.
3010.
74%11,280,098.
1617,915,258.
14141,922,459.
8557.
28%80,397,791.
4161,524,668.
442to3years137,151,532.
6550.
44%80,385,813.
4056,765,719.
2524,402,160.
509.
85%18,657,038.
615,745,121.
893to4years23,496,543.
298.
64%18,138,057.
205,358,486.
0933,158,611.
9613.
38%82,684.
0533,075,927.
914to5years24,265,824.
298.
92%77,624.
2024,188,200.
0912,730,358.
085.
14%44,831.
1612,685,526.
92Above5years12,477,392.
474.
59%70,400.
0812,406,992.
39Total271,918,746.
75100.
00%111,291,813.
68160,626,933.
07247,755,631.
13100.
00%110,838,511.
29136,917,119.
844.
4.
Lastyear'stotalbaddebtprovisionofSARJis109,635,146.
61Yuanand498,594.
46Yuanhasbeenreceivedbythecurrentyearend.
4.
5.
Upto31Dec2007,thereis2,550,000.
00yuantradeaccountreceivableisduedbyAirChina,whoowns5%orover5%ofvotingshares.
4.
6.
ListofsignificantdebtorsNameofdebtorsBalanceNatureorcontentAgeProportionSARJ109,136,552.
15Disbursementfee1to4years40.
13%Shenzhenfinanceleasecompany深圳金融租赁有限公司41,354,563.
28Depositofaircraft2to3years15.
21%SingaporeAircraftLeasingEnterprise20,452,880.
00Depositofaircraft1to2years7.
52%RainierAircraftLeasing(Ireland)Limited17,623,671.
90Depositofaircraft2to5years6.
48%GeneralElectricCapitalCorporation15,596,781.
92Depositofaircraft1to5years5.
74%Total204,164,449.
2575.
08%(5)INVENTORY5.
1.
Detailsofinventories2007.
12.
312006.
12.
31ItemsBalanceImpairmentlossprovisionNetvalueBalanceImpairmentlossprovisionNetvalueAviationconsumablematerial51,137,472.
47353,539.
7950,783,932.
6838,569,622.
83353,539.
7938,216,083.
04SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT75Lowvalueconsumable943,633.
30——943,633.
30839,833.
80——839,833.
80Material497,251.
68——497,251.
68297,690.
98——297,690.
98Others13,321.
71——13,321.
7192,231.
81——92,231.
81Total52,591,679.
16353,539.
7952,238,139.
3739,799,379.
42353,539.
7939,445,839.
635.
2.
InventoriesimpairmentlossprovisionItems2006.
12.
31ChargefortheyearReversalWriteoff2007.
12.
31ProportionofcurrentreversaltoinventoriesclosingbalanceAviationconsumablematerial353,539.
79353,539.
79LowvalueconsumableMaterialOthersTotal353,539.
79353,539.
795.
3.
Upto31Dec2007,thecompanydidnotuseanyinventoriesforguarantee.
(6)Long-termequityinvestment6.
1.
Long-termequityinvestmentandimpairmentlossprovision2007.
12.
312006.
12.
31ItemsBalanceImpairmentlossprovisionBookvalueBalanceImpairmentlossprovisionBookvalueLong-termEquityInvestment111,959,196.
9122,500,000.
0089,459,196.
91111,194,292.
0422,500,000.
0088,694,292.
04Include:InvestmentinSubsidiary1,107,096.
91——1,107,096.
91——————JointVentureAffiliatedEnterprise22,500,000.
0022,500,000.
00——22,842,192.
0422,500,000.
00342,192.
04InvestmentinOtherCompanies88,352,100.
00——88,352,100.
0088,352,100.
00——88,352,100.
006.
2.
Long-termequityinvestmentsmeasuredwithcostmethodInvesteeInitialinvestmentcost2006.
12.
31IncrementDecrement2007.
12.
31ChinaCivilaviationinformationnetworkCo.
,Ltd民航信息网络股份有限公司6,690,000.
006,690,000.
00————6,690,000.
00SiChuanairlinesCo.
Ltd四川航空股份有限公司35,000,000.
0035,000,000.
00————35,000,000.
00JiNanInternationalAirportco.
Ltd济南遥墙国际机场有限责任公司46,662,100.
0046,662,100.
00————46,662,100.
00Total88,352,100.
0088,352,100.
00————88,352,100.
00SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT766.
3.
Long-termequityinvestmentsmeasuredwithequitymethodInvesteeInitialinvestmentcost2006.
12.
31IncrementDecrement2007.
12.
31CashdividendSARJ22,500,000.
00UnionExpressServiceShangdongAirlineco.
Ltd山东航空联合快运有限公司650,000.
00——1,107,096.
91——1,107,096.
91——QingdaoSDAUnionExpressCo.
,Ltd青岛山航联合快运有限公司240,000.
00342,192.
04——342,192.
04————6.
4.
Long-termequityinvestmentsimpairmentlossprovisionInvestmentItem2006.
12.
31IncrementDecrement2007.
12.
31SARJ22,500,000.
00————22,500,000.
00Total22,500,000.
00————22,500,000.
00Note:DuetotheinsolvencyofSARJ,thecompanydecidedtosetupanimpairmentprovisionforthislong-terminvestmentofSARJ.
(7)Fixedassetsandaccumulateddepreciation7.
1.
ClassifyDetailsItems2006.
12.
31IncrementDecrement2007.
12.
311、Fixedassetoriginalpricetotal5,705,764,053.
58763,582,829.
0755,276,128.
776,414,070,753.
88Building141,215,252.
392,521,841.
95160,600.
00143,576,494.
34Aircraftenginecoreaccessoriesandengineaiddriveequipments4,793,758,712.
00646,681,963.
39——5,440,440,675.
39Airframereplaceaccessories41,250,000.
00————41,250,000.
00Enginereplaceaccessories252,080,000.
0061,302,455.
9814,700,000.
00298,682,455.
98machineryequipments、electricequipmentsandfurniture71,620,102.
2217,095,095.
224,701,171.
0484,014,026.
40Expensiveturnoveraccessories370,960,819.
9732,740,443.
2330,306,761.
42373,394,501.
78Transportequipments34,879,167.
003,241,029.
305,407,596.
3132,712,599.
99Items2006.
12.
31IncrementDecrement2007.
12.
312、Accumulateddepreciationtotal1,045,083,171.
49405,262,347.
3831,280,398.
791,419,065,120.
08Building14,224,619.
133,941,579.
21——18,166,198.
34Aircraftenginecoreaccessoriesandengineaiddriveequipments826,789,305.
30257,536,200.
4114,700,000.
001,069,625,505.
71Airframereplaceaccessories13,393,578.
4713,032,478.
04——26,426,056.
51Enginereplaceaccessories46,074,328.
30103,461,813.
31——149,536,141.
61machineryequipments、electricequipmentsandfurniture35,180,773.
928,043,339.
304,035,275.
7939,188,837.
43SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT77Expensiveturnoveraccessories91,678,006.
8916,497,388.
657,755,042.
63100,420,352.
91Transportequipment17,742,559.
482,749,548.
464,790,080.
3715,702,027.
573、Fixedassetnetbookvaluetotal4,660,680,882.
09————4,995,005,633.
80Building126,990,633.
26————125,410,296.
00Aircraftenginecoreaccessoriesandengineaiddriveequipments3,966,969,406.
70————4,370,815,169.
68Airframereplaceaccessories27,856,421.
53————14,823,943.
49Enginereplaceaccessories206,005,671.
70————149,146,314.
37Machineryequipments、electricequipmentsandfurniture36,439,328.
30————44,825,188.
97Expensiveturnoveraccessories279,282,813.
08————272,974,148.
87Transportequipments17,136,607.
52————17,010,572.
427.
2.
Currentyearcompletedconstructioninprogresstransferredtofixedassetis651,562,578.
13Yuan.
7.
3.
FinanceleasesItemsBookvalueAccumulateddepreciationNetbookvalueOriginalcostoffixedasset:Building——————Aircraftenginecoreaccessoriesandengineaiddriveequipments2,320,277,084.
02515,252,541.
031,805,024,542.
99Airframereplaceaccessories26,250,000.
0011,426,056.
5114,823,943.
49Enginereplaceaccessories154,242,455.
9896,225,145.
0658,017,310.
92Machineryequipments、electricequipmentsandfurniture——————Expensiveturnoveraccessories——————Transportequipments——————Total2,500,769,540.
00622,903,742.
601,877,865,797.
407.
4.
RestrictiontotheownershipoffixedassetsandthebookvalueofthosefixedassetsforpledgeNetclosingvalueoffixedassetsforpledgeAircraft4,534,785,427.
54Include:Purchase2,656,919,630.
14pledgeoflong-termbrorrowingFinancelease1,877,865,797.
40pledgeoflong-termfinancialleaseSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT78(8)Constructioninprogress8.
1.
Constructioninprogress2007.
12.
312006.
12.
31TitleBookvalueImpairmentlossprovisionNetvalueBookvalueImpairmentlossprovisionNetvalueAircraftB737-800(Projectfor2007、2008)527,446,403.
69——527,446,403.
69459,291,189.
30——459,291,189.
30AircraftB737-800(Projectfor2009)454,857,420.
33——454,857,420.
3325,894,852.
30——25,894,852.
30AircraftB737-800(Projectfor2012)104,366,795.
48——104,366,795.
48——————AircraftARJ21-70060,778,195.
00——60,778,195.
0060,778,195.
00——60,778,195.
00QingdaoEngineServiceandMaintenanceGarage青岛机务维修库4,820,907.
63——4,820,907.
631,701,608.
38——1,701,608.
38Otherprojects1,862,748.
98——1,862,748.
986,164,018.
17——6,164,018.
17Total1,154,132,471.
11——1,154,132,471.
11553,829,863.
15——553,829,863.
158.
2.
DetailsTransferredtoOtherTitle2006.
12.
31IncrementFixedassetdecrement2007.
12.
31AircraftB737-800(Projectfor2007、2008)459,291,189.
30713,483,591.
66645,328,377.
27——527,446,403.
69AircraftB737-800(Projectfor2009)25,894,852.
30428,962,568.
03————454,857,420.
33AircraftB737-800(Projectfor2012)——104,366,795.
48————104,366,795.
48AircraftARJ21-70060,778,195.
0060,778,195.
00QingdaoEngineServiceandMaintenanceGarage青岛机务维修库1,701,608.
383,119,299.
25————4,820,907.
63Otherprojects6,164,018.
172,104,327.
676,234,200.
86171,396.
001,862,748.
98Total553,829,863.
151,252,036,582.
09651,562,578.
13171,396.
001,154,132,471.
118.
3.
Capitalizationofborrowingforconstructioninprogressto31Dec2007Tile2006.
12.
31IncrementTransferredtofixedassetOtherDecrement2007.
12.
31AircraftB737-80010,664,709.
8114,610,430.
2616,996,592.
79——8,278,547.
28AircraftARJ21-700487,587.
70487,587.
70QingdaoEngineServiceandMaintenanceGarage青岛机务维修库OtherprojectsSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT79Total11,152,297.
5114,610,430.
2616,996,592.
79——8,766,134.
98(9)IntangibleassetsandaccumulatedamortisationItems2006.
12.
31IncrementDecrement2007.
12.
311、Totaloriginalvalue44,850,133.
13————44,850,133.
13landUseright44,850,133.
13————44,850,133.
132、Totalaccumulatedamortisation823,984.
33613,539.
74——1,437,524.
07landUseright823,984.
33613,539.
74——1,437,524.
073、TotalaccumulatedimpairmentlossprovisionforintangibleassetslandUseright4、Totalbookvalueofintangibleassets44,026,148.
80————43,412,609.
06landUseright44,026,148.
80————43,412,609.
06(10)Long-termdeferredexpensesItems2006.
12.
31bookvalueTransferAmortizationIncrement2007.
12.
31BookvalueExpensesofrecruitmentandtrainingforpilots145,855,706.
29——10,720,417.
0737,194,801.
54172,330,090.
76Total145,855,706.
29——10,720,417.
0737,194,801.
54172,330,090.
76a)Theexpensesofrecruitmentandtrainingforpilotsamortizeover20years.
ItemsOriginalpriceAmortizationRemainingamortizedyearsExpensesofrecruitmentandtrainingforpilots234,666,198.
4062,336,107.
6417yearsTotal234,666,198.
4062,336,107.
64(11)DeferredincometaxassetsRecognizeddeferredincometaxassetsanddeferredincometaxassetsItems2007.
12.
312006.
12.
311、DeferredincometaxAccountreceivablebaddebtprovision28,669,366.
3728,501,842.
79Inventoryimpairmentprovision88,384.
9588,384.
95Expenseinadvance24,833,527.
6341,051,039.
72Employeewagepayable16,237,400.
7510,748,066.
34Deductibledifferenceresultingfromlossremedy3,138,109.
6211,802,430.
64Launchfeeamortization22,434.
8656,087.
14Total72,989,224.
1892,247,851.
58SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT80(12)ProvisionforassetimpairmentDecrementItems2006.
12.
31IncrementreversalDisposal2007.
12.
31Accountreceivablebaddebtprovision3,170,491.
68215,160.
18————3,385,651.
86Otheraccountreceivablebaddebtprovision110,838,511.
29951,896.
85498,594.
46——111,291,813.
68Provisionofinventoryimpairmentloss353,539.
79353,539.
79Total114,362,542.
761,167,057.
03498,594.
46——115,031,005.
33(13)RestrictedassetsItem2006.
12.
312007.
12.
31一、NetworthofpledgedassetsAircraft4,200,831,499.
934,534,785,427.
54Include:Purchase2,147,744,185.
772,656,919,630.
14pledgeoflong-termborrowingFinancelease2,053,087,314.
161,877,865,797.
40pledgeoflong-termfinancelease(14)Short-termloan14.
1.
Typesofshort-termloanTypes2007.
12.
312006.
12.
31Creditbankloan36,523,000.
00100,000,000.
00Pledgedbankloan——160,000,000.
00Guaranteedbankloan1,168,707,000.
00870,000,000.
00Total1,205,230,000.
001,130,000,000.
0014.
2.
DetailsofguaranteedbankloanCreditorsAmount(RMB)termGuarantorTermofgaranteed100,000,000.
002007.
3.
16-2008.
3.
1510,000,000.
002007.
3.
28-2008.
3.
27100,000,000.
002007.
5.
31-2008.
4.
21AgriculturebankofChina,MingHubranch150,000,000.
002007.
5.
31-2008.
5.
21ShanDongairlinesco.
ltd1yearChinaMerchantsBank,JiNanbranch40,000,000.
002007.
12.
20-2008.
12.
20ShanDongairlinesco.
ltd1year80,000,000.
002007.
6.
14-2008.
6.
1340,000,000.
002007.
6.
18-2008.
6.
18ChinaMerchantsBank,QingDaobranch40,000,000.
002007.
6.
19-2008.
6.
19ShanDongairlinesco.
ltd1yearConstructionbank,city120,000,000.
002007.
5.
9-2008.
5.
8ShanDongairlines1yearSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT81centerbranch80,000,000.
002007.
12.
17-2008.
12.
16co.
ltd40,184,498.
762007.
7.
13-2008.
7.
121year6,266,428.
172007.
7.
18-2008.
7.
121year16,070,120.
002007.
7.
25-2008.
7.
121year50,401,740.
002007.
8.
15-2008.
7.
121year16,070,120.
002007.
8.
22-2008.
7.
121year50,107,364.
622007.
9.
4-2008.
7.
121year20,891,156.
002007.
9.
13-2008.
7.
121year16,070,120.
002007.
9.
25-2008.
7.
121year27,811,534.
042007.
9.
28-2008.
7.
121year20,883,851.
402007.
10.
15-2008.
7.
121year8,249,570.
172007.
10.
24-2008.
7.
121yearChinaDevelopmentbank,ShanDongbranch55,700,496.
842007.
11.
30-2008.
7.
12ShanDongairlinesco.
ltd1yearChinaCITICBank,QingDaobranch80,000,000.
002007.
12.
20-2008.
12.
19ShanDongairlinesco.
ltd1yearTotal1,168,707,000.
0014.
3.
DetailsofCreditloanBorrowingmethodCreditorsAmount(originalcurrency,USD)Amount(EquivalenttoRMB)TermofborrowingCredit2007.
1.
10-2008.
1.
10CreditBankofChina(HongKong),QingDaobranch5,000,000.
0036,523,000.
002007.
11.
14-2008.
11.
14(15)NotespayableItems2007.
12.
312006.
12.
31Maturityamountfornextaccountingperiodbankacceptance15,000,000.
0050,000,000.
0015,000,000.
00Total15,000,000.
0050,000,000.
0015,000,000.
00(16)Accountspayable16.
1.
AgeAge2007.
12.
312006.
12.
31Within1year760,092,700.
15401,320,180.
14AboveIyear272,887.
97795,395.
45Total760,365,588.
12402,115,575.
5916.
2.
Upto31Dec2007,theaccountbalancedidnotcontaindebtthatshouldbepaidtoanymajorSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT82shareholderswhoownmorethan5%oftheCompany'ssharecapital,andnosignificantaccountspayable,whichageismorethanoneyear.
16.
3.
AccountspayabletorelatedpartiesUpto31Dec2007,companystillownShandongTaecoAircraftEngineeringCo.
,Ltdtradeaccountpayable717,414.
49Yuan.
(17)Advancedfromcustomers17.
1.
AgeAge2007.
12.
312006.
12.
31Within1year89,541,466.
6355,034,797.
28Above1year58,592.
60——Total89,600,059.
2355,034,797.
2817.
2.
Upto31Dec2007,theyearendbalancedidnotcontainreceivablethatshouldbepaidtoanymajorshareholderswhoownmorethan5%oftheCompany'ssharecapital.
(18)PayrollpayableItems2006.
12.
31IncrementDecrement2007.
12.
311、Salary,bonusandallowance32,999,995.
88301,878,781.
38269,710,902.
3465,167,874.
922、Employeebenefit91,514.
7215,206,603.
8715,298,118.
59——3、Socialinsurancefee-1,229.
7242,834,238.
9542,832,903.
41105.
82Include:1.
medicalinsurance-293.
33173,398.
43173,076.
4128.
692.
Basicretirementinsurance-799.
7525,947,947.
3225,947,081.
6565.
923.
Annuityfee——12,810,936.
4412,810,936.
44——4.
Unemploymentfee-83.
412,364,494.
702,364,404.
706.
595.
Injuryinsurance-23.
43592,273.
94592,248.
861.
656.
Procreationinsurancepremium-29.
8945,188.
12945,155.
352.
974、Housingaccumulationfund219,406.
0449,245,419.
3949,228,210.
73236,614.
705、Labourunionfeeandemployeeeducationfee6,310,861.
427,077,041.
255,384,560.
238,003,342.
446、Non-monetarybenefit7、Redemptionofterminationoflaborcontract——35,957.
5035,957.
50——8、OthersInclude:sharepaymentbycashTotal39,620,548.
34416,278,042.
34382,490,652.
8073,407,937.
88(19)TaxpayableSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT83types2007.
12.
312006.
12.
31VAT&Customtax32,283,139.
01——Salestax11,655,870.
9616,521,052.
71Citymaintenanceconstructionfee3,780.
642,975.
41EnterpriseIncometax81,547.
63-0.
35Propertytax1,160,007.
23499,471.
47Tenuretax766,030.
00——Personalincometax1,107,868.
53889,530.
25Stampduty2,649,751.
77788,755.
97Vehicleandvesselusagelicenseplatetax——-260Educationsurcharge——214.
24Commercialaviationinfrastructurefacilitiesfund8,348,032.
198,466,961.
72Civilaviationairportadministrationfee22,865,399.
0038,312,448.
77Incometaxinadvance5,817,869.
591,532,208.
87Total86,739,296.
5567,013,359.
06(20)InterestpayableTheyearendinterestpayablebalanceis12,429,380.
48yuan.
(21)Otheraccountspayable21.
1.
AgeAge2007.
12.
312006.
12.
31Within1year78,174,526.
56254,031,080.
32Above1year57,185,522.
1047,908,737.
98Total135,360,048.
66301,939,818.
3021.
2.
Upto31Dec2007,amountsduetoshareholderswhoown5%orover5%ofvotingrightsareasfollowing:NameamounttermproportiontootherpaybalereasonAirChina20,000,000.
00Within1year14.
77%AirChinaprepaid20millionYuanforaircraftwetrentingonDecember10,2007.
BothpartiesagreedthatthesettlementshouldbaseontheactualoperationoftheseaircraftsandshallsettlethepaymentSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT84inthelastmonthbeforethecontractterminated.
ShanDongAviationGroupCo.
,Ltd1,019,818.
83Within1year0.
75%21.
3.
AmountsduetorelatedpartiesNameAmountProportionAirChina20,000,000.
0014.
77%ShanDongAviationGroupCo.
,Ltd1,019,818.
830.
75%QingdaoFeiShengInternationalAviationTrainingCo.
,Ltd1,150,179.
770.
85%ShanDongTaecoAircraftEngineeringco.
ltd6,554,109.
844.
84%ShanDongInternationalAviationTrainingco.
ltd1,417,927.
191.
05%Total30,142,035.
6322.
26%21.
4.
TopfiveofotheraccountpayableNameAmounttermproportionaccountnatureorcontentAirChina20,000,000.
00Within1year14.
77%AirChinaprepaid20millionYuanforaircraftwetrentingonDecember10,2007.
Bothpartiesagreedthatthesettlementshouldbaseontheactualoperationoftheseaircraftsandshallsettlethepaymentinthelastmonthbeforethecontractterminated.
HuaXiaAviationCo.
,Ltd9,603,088.
57Above1year7.
09%Receivedsecondsecuritydepositfor3001aircraftfromHuaXiaaviationCo.
,LtdCivilAviationInformationNetworkCo.
,Ltd8,689,485.
56Within1year6.
42%E-bookingchargeShanDongTaecoAircraftEngineeringCo.
,Ltd6,554,109.
84Above1year4.
84%Electricengineeringfee、maintainedfeeect.
CAAC5,729,229.
84Within1year4.
23%ChargeforcivilaviationairporttaxSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT85(22)Non-currentliabilitiesduewithinoneyear22.
1.
TypesItems2007.
12.
312006.
12.
31Long-termborrowingwithin1year190,810,617.
13139,414,840.
00Long-termaccountpayablewithin1year161,580,345.
90288,532,995.
63Total352,390,963.
03427,947,835.
63Less:Unrecognizedfinancingliabilities49,767,310.
7498,749,550.
84Total302,623,652.
29329,198,284.
7922.
2.
ListofcreditorsClosingbalanceItemscurrenciesOriginalcurrencyEquivalenttoRMBLoanconditionInterestrateBankofChina,JiNanbranchRMB80,000,000.
0080,000,000.
00pledge6.
60%ChinaMinShengBankingCo.
,LtdRMB50,000,000.
0050,000,000.
00pledge7.
83%BankofCommunicationCo.
,LtdJiNanbranchRMB44,860,950.
0044,860,950.
00Guarantee7.
05%BankofCommunicationCo.
,Ltd,JiNanbrancUSD2,183,510.
0015,949,667.
13Guarantee5.
51%-6.
13125%Commerzbank,NewYorkbranchUSD2,317,315.
9516,927,066.
09Pledge6.
01%-6.
015%SocieteGenerale(SG),NewYorkbranchUSD1,441,699.
8110,531,040.
43Pledge6.
605%-6.
975%ShenZhenFinancialleasecompanyRMB84,354,928.
6484,354,928.
64Pledge7.
25%Total302,623,652.
29SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT86(23)Long-termborrowing23.
1.
TypesTypes2007.
12.
312006.
12.
31Creditbankloan——23,426,100.
00Pledgebankloan1,487,075,281.
451,043,349,859.
89Guaranteedbankloan1,113,316,566.
52747,925,491.
89Total2,600,391,847.
971,814,701,451.
78Note:TheCompany'slong-termborrowingincludesinstallmentrepaymentofcapitalwithinterest;thefirstyearrepaymentamounthasbeentreatedaslong-termliabilitywithin1year.
23.
2.
Listofcreditors2007.
12.
31CreditorUSDEquivalenttoRMBInterestrateloantermLoancondition——277,000,000.
007.
832004.
6.
29-2014.
6.
29——19,000,000.
007.
832004.
11.
2-2014.
6.
29ChinaMingShengBank,JiNanbranch——54,000,000.
007.
832005.
1.
31-2014.
6.
29Aircraftaspledge3,112,190.
0022,733,303.
085.
53132006.
10.
31-2016.
12.
303,121,327.
5022,800,048.
865.
60632006.
11.
30-2016.
12.
303,112,190.
0022,733,303.
086.
02692007.
1.
31-2016.
12.
303,074,365.
0022,457,006.
585.
60632007.
2.
28-2016.
12.
303,065,397.
5022,391,502.
585.
53562007.
4.
29-2016.
12.
30BankofCommunicationCo.
,Ltd,JiNanbranch3,074,365.
0022,457,006.
586.
11132007.
5.
31-2016.
12.
30ShanDongairlineco.
ltdasguarantor——150,450,000.
006.
482006.
5.
30-2016.
12.
30——115,268,075.
007.
0472007.
11.
12-2016.
12.
30BankofCommunicationCo.
,Ltd,JiNanbranch——115,600,000.
007.
0472007.
12.
3-2016.
12.
30ShanDongairlineco.
ltdasguarantorIndustrial&CommercialBankOfChinaCo.
,Ltd,DongJiaobranch——100,000,000.
007.
0472006.
12.
18-2018.
12.
17ShanDongairlineco.
ltdasguarantor6,039,200.
0044,113,940.
326.
12972007.
3.
29-2022.
3.
28ShanDongairlineco.
ltdasguarantor3,749,800.
0027,390,789.
086.
162007.
4.
30-2022.
4.
29ShanDongairlineco.
ltdasguarantor6,765,620.
0049,420,147.
856.
18442007.
5.
31-2022.
5.
30ShanDongairlineco.
ltdasguarantor17,954,820.
00131,152,778.
176.
182007.
7.
2-2022.
7.
1ShanDongairlineco.
ltdasguarantorChinaConstructionBankCo.
ltd,JiNancitycenterbranch3,749,800.
0027,390,789.
086.
11252007.
8.
1-2022.
7.
31ShanDongairlineco.
ltdasguarantorSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT8712,000,000.
0087,655,200.
006.
21132007.
8.
29-2010.
8.
28Aircraftasrpledge1,300,000.
009,495,980.
006.
36252007.
9.
10-2010.
8.
28Aircraftasrpledge700,000.
005,113,220.
005.
912007.
9.
21-2010.
8.
28Aircraftasrpledge14,908,900.
00108,903,550.
945.
94252007.
9.
28-2022.
9.
27ShanDongairlineco.
ltdasguarantor3,671,400.
0026,818,108.
445.
66252007.
5.
31-2018.
12.
173,671,400.
0026,818,108.
446.
3352007.
9.
4-2018.
12.
17Industrial&CommercialBankOfChinaLtd,DongJiaobranch3,671,400.
0026,818,108.
445.
69382007.
12.
3-2018.
12.
17ShanDongairlineco.
ltdasguarantorChinaConstructionBankCo.
ltd,JiNancitycenterbranch——27,600,000.
007.
0472007.
12.
3-2022.
12.
2ShanDongairlineco.
ltdasguarantorIndustrial&CommercialBankOfChinaLtd,DongJia——188,000,000.
006.
7232006.
12.
18-2009.
12.
10Aircraftaspledge2007.
12.
31CreditorUSDEquivalenttoRMBInterestrateLoantermLoancondition——12,276,000.
007.
112004.
5.
8-2019.
4.
28——18,500,000.
007.
832005.
12.
22-2019.
4.
28BankofChina,JiNanbranch——10,600,000.
006.
842006.
2.
16-2019.
4.
28Aircraftaspledge518,200.
003,785,243.
725.
97752004.
1.
5-2019.
4.
282,840,753.
6020,750,568.
755.
97752005.
2.
1-2019.
4.
282,690,700.
0019,654,487.
225.
97752005.
2.
28-2019.
4.
281,057,280.
007,723,007.
495.
97752005.
4.
8-2019.
4.
282,762,800.
0020,181,148.
875.
97752005.
4.
29-2019.
4.
28469,200.
003,427,318.
325.
97752005.
6.
23-2019.
4.
2825,656,600.
00187,411,200.
365.
97752005.
7.
15-2019.
4.
2826,071,798.
00190,444,055.
675.
97752005.
10.
19-2019.
4.
2826,213,260.
00191,477,379.
005.
97752005.
12.
21-2019.
4.
28923,467.
006,745,557.
055.
97752005.
12.
23-2019.
4.
28BankofChina,JiNanbranch525,000.
003,834,915.
005.
97752006.
4.
27-2019.
4.
28Aircraftaspledge——50,000,000.
006.
7232007.
2.
5-2009.
2.
5ShanghaiPudongDevelopmentBankCo.
,Ltd,JiNanbranch——100,000,000.
006.
7232007.
1.
9-2009.
12.
13AircraftaspledgeTotal2,600,391,847.
97(24)Long-termaccountpayable24.
1.
Thelong-termaccountpayableisforfinanceleasepayable,whichisleasedforaircraftandrelatedequipment,thefirstyearrepaymentamounthasbeentreatedaslong-termliabilitywithin1year.
Balanceduewithinfollowingdates2007.
12.
312006.
12.
31Firstyearafterbalancesheetdate266,014,982.
84288,532,995.
63SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT88Secondyearafterbalancesheetdate219,714,595.
69264,144,546.
77Thirdyearafterbalancesheetdate219,714,595.
69214,648,909.
56Overthereyears1,341,366,941.
631,511,414,722.
91Totalminimumleasepayment2,046,811,115.
852,278,741,174.
87Less:unrecognizedfinancingfee630,438,170.
45662,413,077.
85Financeleasepayable1,416,372,945.
401,616,328,097.
02Include:financeleasepayablewithin1year111,813,035.
16189,783,444.
79Financeleasepayableabove1year1,304,559,910.
241,426,544,652.
2324.
2.
Listoflong-termpayableClosingbalanceItemscurrencyOriginalcurrencyEquivalenttoRMBLoanconditionInterestratematuritydateSocitGenrale,NewYorkBranchUSD18,909,579.
06138,126,911.
20Financelease6.
605%-6.
975%2008.
8.
15Commerzbank,NewYorkBranchUSD6,338,524.
6246,300,386.
94Financelease6.
010%-6.
015%2010.
7.
15ShenZhenfinanceleasecompanyRMB1,862,383,817.
71Financelease7.
25%2020.
6.
15Total2,046,811,115.
8524.
3.
Financeleasepayablewithin1yearhasbeenexplainedasnote2224.
4.
Theyearendbalancedidnotincludefiancéleasepayableowetothemainshareholder,whoownsmorethan5%ofourcapitalshares.
(25)DeferredIncomeItemsOriginalvalue2006.
12.
31AmortisationAccumulativeamortisation2007.
12.
31CRJleasebackprofit9,741,746.
006,265,526.
111,394,183.
004,870,402.
894,871,343.
11Total9,741,746.
006,265,526.
111,394,183.
004,870,402.
894,871,343.
11(26)ShareCapitalIncrease/Decrease(+、-)Unit:sharesItems2006.
12.
31IssuanceofnewsharesBonussharesCapitalizationofpublicreserveOthersSub-total2007.
12.
31Unlistedshares①Sharessubjecttotradingmoratorium260,000,000.
00260,000,000.
00Including:SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT89Sharesheldbythestate259,801,000.
00259,801,000.
00Sharesheldbystate-ownedlegalpersons199,000.
00199,000.
00SharesheldbyoverseaslegalpersonsOthersRaisedlegalperson'ssharesInneremployees'sha③resPreferencesharesorotherInclude:transferred/allottedsharesTotalunlistedshares260,000,000.
00260,000,000.
00Increase/Decrease(+、-)Unit:sharesItems2006.
12.
31IssuanceofnewsharesBonussharesCapitalizationofpublicreserveOthersSub-total2007.
12.
31ListedsharesRMBordinary①sharesDomesticallylistedforeignshares②140,000,000.
00140,000,000.
00OverseaslistedforeignsharesTotallistedshares140,000,000.
00140,000,000.
00Totalshares400,000,000.
00400,000,000.
0026.
1.
TheaforesaidlistedsharesarelistedonBsharesatRMB1each;26.
2.
TheaforesaidsharecapitalhasbeenexaminedbyShangdongYantaiQianjuCertifiedPublicAccountantsandissuedaCapitalVerificationReportwithYanqianzi[2000]NO.
27.
(27)CapitalReserveItems2006.
12.
31IncreaseDecrease2007.
12.
31Premiumonsharecapital76,258,081.
68————76,258,081.
68Othercapitalreserve7,792,081.
16————7,792,081.
16Total84,050,162.
84————84,050,162.
84(28)SurplusReserveItems2006.
12.
31IncreaseDecrease2007.
12.
31Statutorysurplusreserve25,001,281.
34207,668.
54289,363.
1724,919,586.
71Total25,001,281.
34207,668.
54289,363.
1724,919,586.
71SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT90(29)RetainedEarningsItems20072006Balanceatthebeginningoftheyearof2007-109,226,868.
91-117,777,353.
99Add:Consolidatednetprofit37,255,985.
518,875,631.
95Othertransfer-in173,679.
78——Less:Withdrawalofstatuarysurplusreserve207,668.
54325,146.
87Balanceattheendoftheyearof2007-72,004,872.
16-109,226,868.
91(30)OperatingRevenueandOperatingCost30.
1.
Operatingrevenueandoperatingcost20072006ItemsOperatingIncomeOperatingCostOperatingIncomeOperatingCostIncomefrommainoperation4,536,790,226.
623,779,784,586.
764,198,152,384.
843,481,368,056.
47Otheroperatingincome93,340,311.
5756,965,069.
5232,905,559.
87——Total4,630,130,538.
193,836,749,656.
284,231,057,944.
713,481,368,056.
4730.
2.
Mainoperationincome,mainoperationcostandgrossprofitofsegment20072006SegmentOperatingIncomeOperatingCostGrossprofitOperatingIncomeOperatingCostGrossprofitAviationtransportationservice4,503,661,260.
703,761,738,252.
60741,923,008.
104,167,736,135.
513,474,988,533.
23692,747,602.
28Logistictransportationservice7,250,905.
821,733,971.
615,516,934.
218,593,552.
311,081,624.
897,511,927.
42HospitalityandCateringservice26,059,386.
9216,312,368.
499,747,018.
4321,822,697.
025,297,898.
3516,524,798.
67SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT91Leaseservice49,549,336.
8952,470,312.
13-2,920,975.
24——————Others43,609,647.
864,494,751.
4539,114,896.
4132,905,559.
87——32,905,559.
87Total4,630,130,538.
193,836,749,656.
28793,380,881.
914,231,057,944.
713,481,368,056.
47749,689,888.
24(31)BusinesstaxandsurtaxItemApplicabletaxrate20072006Businesstax3%、5%137,305,155.
03126,152,745.
77Citymaintenanceandconstructiontax0、7%——2,756.
90Educationalsurcharge0、3%——3,085.
66Total137,305,155.
03126,158,588.
33(32)FinancialcostsItems20072006Interestexpenses283,408,485.
31301,154,308.
66Less:Interestincome23,598,291.
7711,061,406.
74Exchangegains-66,751,899.
20-45,264,943.
57Others3,888,437.
024,497,540.
09Total196,946,731.
36249,325,498.
44(33)ImpairmentlossofassetsItems20072006Baddebtsprovision670,094.
39-14,816,307.
30Total670,094.
39-14,816,307.
30(34)InvestmentincomeTheoriginoftheinvestmentincome20072006Increaseincomebyequitymethod-2,560.
6844,183.
03Incomefromdisposalofequityinvestment——7,869,106.
65Incomefromequityinvestment956,670.
008,500,155.
00Total954,109.
3216,413,444.
68(35)Non-operatingincome35.
1.
Non-operatingincomeItems20072006Gainsfromdisposalofnon-currentassets——26,119.
18SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT92Including:Gainsdisposaloffixedassets——26,119.
18GovernmentGrant10,000,000.
0010,000,000.
00Other1,362,190.
182,843,616.
52Total11,362,190.
1812,869,735.
7035.
2.
GovernmentGrantItem20072006Airlinesubsidy10,000,000.
0010,000,000.
00Total10,000,000.
0010,000,000.
00(36)Non-operatingexpensesItems20072006Lossondisposalofnon-currentassets21,736,311.
72277,433.
76Include:Lossondisposaloffixedassets21,348,892.
09277,433.
76Donation215,000.
00150,000.
00Extra-ordinaryloss8,482,707.
78——Others14,676.
27208,641.
42Total30,448,695.
77636,075.
18(37)EnterpriseincometaxItems20072006Incometaxforcurrentperiod298,883.
01219,357.
23Deferredincometax19,258,627.
4032,862,031.
49Total19,557,510.
4133,081,388.
72(38)CashreceivedrelatingtootheroperatingactivitiesItems2007Governmentgrant10,000,000.
00Interestincomes667,658.
52Cashreceivedfromnon-operatingactivities1,362,190.
18Cashreceivedfromcurrentfund50,444,864.
79Total62,474,713.
49(39)CashpaidrelatingtootheroperatingactivitiesItems2007Bankcommissioncharge3,888,437.
02CashPaidfornon-operatingactivities229,676.
27Cashpaidforcurrentfund15,017,209.
45SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT93Marketingcost,administrationcostandcashpaidforoperatingactivities55,784,000.
50Total74,919,323.
24(40)CashpaidrelatingtootherinvestmentactivitiesItem2007Decreaseofcashinsubsidiariesforreconciliation3,395,201.
72Total3,395,201.
72(41)CashreceivedrelatingtootherfinancingactivitiesItem2007Interestrateswapcontracts22,817,555.
14Total22,817,555.
14(42)CashpaidrelatingtootherfinancingactivitiesItem2007Interestexpensesforleasedaircrafts108,326,472.
97Total108,326,472.
97(43)AdjustingnetprofittocashflowfromoperatingactivitiesItems200720061.
Adustingnetprofittocashflowfromoperatingactivities:Netprofit37,989,303.
7810,340,104.
89Add:Impairmentlossprovisionofassets670,094.
39-14,816,307.
03Depreciationoffixedassets、oilandgasassetsandconsumablebiologicalassets405,262,347.
38313,545,682.
20Amortizationofintangibleassets613,539.
74388,190.
07AmortizationofLong-termdeferredandprepaidexpenses10,720,417.
07-Lossondisposaloffixedassets、intangibleassetsandotherlong-termdeferredassets(Loss/Gain+/-)387,419.
63-7,617,792.
07Lossfromwrittenoffassets(Loss/Gain+/-)21,348,892.
09-Lossoffairvaluefluctuationonassets(Loss/Gain+/-)--Financialcost(Loss/Gain+/-)283,408,485.
31301,154,308.
66Lossoninvestment(Loss/Gain+/-)-954,109.
32-16,413,444.
68Decreaseofdeferredincometaxassets(Loss/Gain+/-)19,258,627.
3932,862,031.
49Decreaseofdeferredincometaxliabilities(Loss/Gain+/-)--Decreaseofinventories(Loss/Gain+/-)-12,792,299.
7418,214,631.
15Decreaseofoperatingreceivables(Loss/Gain+/-)-98,303,411.
61188,048,742.
63Increaseofoperatingpayables(Loss/Gain+/-)66,962,114.
87233,575,150.
21Others--Netcashflowsarisingfromoperatingactivities734,571,420.
981,059,281,297.
52SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT942.
Significantinvestmentandfinancingactivitiesthatwithourcashflows:Liabilitytransfertocapital--Convertiblecorporatebondduewithin1year--Financelease-fixedassets--3.
Netincrease(decrease)ofcashandcashequivalentsEndingbalanceofcash42,131,848.
8268,256,602.
71Less:Beginningbalanceofcash68,256,602.
7168,096,309.
00Add:Endingbalanceofcashequivalents--Less:Beginningbalanceofcashequivalents--Netincreaseofcashandcashequivalents-26,124,753.
89160,293.
71(44)Relatinginformationforacquiredordisposalofsubsidiariesandotherbusinessunitsforcurrentperiod20072006Relatinginformationforacquiredordisposalofsubsidiariesandotherbusinessunits:1.
Priceofdisposalofsubsidiariesandotherbusinessunit2,592,379.
24——2.
Cashandcashequivalentreceivedfromdisposalofsubsidiariesandotherbusinessunit750,000.
00——Less:Cashandcashequivalentheldbysubsidiariesandotherbusinessunit1,138,731.
24——3.
Netcashreceivedfromdisposalofsubsidiariesandotherbusinessunit-388,731.
24——4.
Netassetsfromdisposalofsubsidiaries2,592,379.
24——Currentassets2,592,379.
24——Non-currentassets————Currentliabilities————Non-currentliabilities————(45)CashandcashequivalentsItems20072006一、Cash42,131,848.
8268,256,602.
71Including:Cashonhand924,974.
06363,274.
31Nonrestrictedbankdeposit41,206,874.
7667,893,328.
40Nonrestrictedothermonetaryfund————二、Cashequivalents————Including:Bondinvestmentwithinthreemonth————三、Endingbalanceofcashandcashequivalents42,131,848.
8268,256,602.
71Inculding:restrictedcashandcashequivalentsforparentorgroupsubsidiaries————SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT95(46)Analysisofchangeover30%offinancialitemsWeconductanalysisforthefinancialitemsthatchange30%orover30%,andthefinancialitemsthathas5%orover5%oftotalassetsatbalancesheetdateor10%orover10%oftotalnetprofitduringthereportingperiod.
1、Accountsreceivableisincreasedof31.
69%comparedwithlastyear,itismainlyduetotheincreaseofBSPandnewlyaddedassociatedairlines;2、Inventoriesareincreasedof32.
43%comparedwithlastyear,itismainlyduetoincreaseofinventoriesfornewlyintroductionofairlinematerial;3、Contructioninprogressisincreasedof108.
39%comparedwithlastyear,itismainlyduetotheincreaseofintroductionofairplaneproject;4、Billspayableisdecreasedof70.
00%comparedwithlastyear,itismainlyduetothedecreaseofsettlementmethodbybills;5、Accountspayableisincreasedof89.
09%comparedwithlastyear,itismainlyduetoreclassificationofaccruedmaintenanceexpensesforairplanes;6、Advancefromcustomersisincreasedof62.
81%comparedwithlastyear,itismainlyduetothecontrolofbillsoraccountsreceivable,andadvancefromcustomersismorequickthanthereturnofpassengers'ticket.
7、Salariesorwagespayableisincreasedof85.
28%oflastyear,itismainlyduetoaccruedannualbonusandsafetyaviationbonus;8、Interestpayableisincreasedof3,722.
09%,itismainlyduetoaccruedinterestexpensesforcurrentperiod;9、Otheraccountspayableisdecreasedof55.
17%comparedwithlastyear,itismainlyduetopaymentofairplanemaintenanceexpenses.
10、Long-termloanisincreasedof43.
30%comparedwithlastyear,itismainlyduetotheincreaseoflong-termloantopayforthepurchaseofairplane;11、Lossonimpairmentassetsisincreasedof104.
52%comparedwithlastyear,itismainlyduetotheincreaseofprovisionofbaddebts;12、Investmentincomeisdecreasedof94.
19%comparedwithlastyear,itismainlyduetothedecreaseofcashdividendsreceivedandtheincomefromdisposalofinvestingcompanies;13、Non-operatingexpensesisincreasedof4,686.
96%,itismainlyduetotheincreaseofdisposalofhighvalueofconsumableaviationmatherials;14、Incometaxisdecreasedof40.
88%,itismainlyduetotheredeemablelossresultingthedecreaseofdeferredincometaxassets.
i.
Notestofinancialstatementforparentcompany1.
AccountsReceivableSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT961.
1.
Detailsofaccountsreceivable2007.
12.
312006.
12.
31ItemBalanceProportion(%)ProvisionforbaddebtsBalanceProportion(%)ProvisionforbaddebtsIndividualtransactionwithsignificantamount189,588,286.
6590.
17%——144,809,355.
7690.
80%——Individualtransactionwithnotsosignificantamountbutsignificantrecoverablerisk2,608,298.
831.
24%2,608,298.
832,608,298.
831.
64%2,608,298.
83Othertransactionwithnosignificantamount18,050,269.
688.
59%777,353.
0312,058,048.
567.
56%562,192.
85Total210,246,855.
16100.
00%3,385,651.
86159,475,703.
15100.
00%3,170,491.
681.
2.
IndividualsignificantaccountsreceivableNameAmountExplanationBSP93,715,534.
35Settlementdifference,allarereceivedinsubsequentdateChinaAviationSettlementCentre45,791,500.
35Settlementdifference,allarereceivedinsubsequentdateAirChina50,081,251.
95Settlementdifference,allarereceivedinsubsequentdateTotal189,588,286.
651.
3.
Ageanalysis2007.
12.
312006.
12.
31AgeBalance%BaddebtprovisionNetValueBalance%BaddebtprovisionNetValueWithinoneyear207,505,796.
6898.
70%770,715.
04206,735,081.
64156,855,682.
7398.
36%566,055.
31156,289,627.
421-2years307,308.
500.
15%206,030.
43101,278.
071,386,848.
420.
87%1,371,315.
6715,532.
752-3years1,200,577.
980.
57%1,175,785.
6924,792.
29929,258.
000.
58%929,206.
7051.
303-4years929,258.
000.
44%929,206.
7051.
30303,914.
000.
19%303,914.
00——4-5years303,914.
000.
14%303,914.
00OverfiveyearsTotal210,246,855.
16100.
00%3,385,651.
86206,861,203.
30159,475,703.
15100.
00%3,170,491.
68156,305,211.
471.
4.
Theaccountsreceivablewhichisduefromshareholderswhohold5%orover5%votingrightsharesisincludedAirChinaLimitedoperatingreceivableamountingtoRMB50,081,251.
95;1.
5.
Detailsoftopfivedebtorsforaccountsreceivable2007.
12.
312006.
12.
31ItemsBalancePercentageAgeBalancePercentageAgeBSP93,715,534.
3544.
57%Within1year68,240,034.
3542.
79%Within1yearChinaAviationSettlementCentre45,791,500.
3521.
78%Within143,069,349.
2827.
01%Within1SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT97yearyearAirChina50,081,251.
9523.
82%Within1year33,478,831.
8720.
99%Within1yearAnHuiCivilAviationAirportCo.
,Ltd————1,269,000.
000.
80%Within1yearTheMunicipalGovernmentofHeiHeCity840,178.
120.
40%Within1year779,339.
000.
49%Within1yearGanzhouShengHuaIndustryCo.
,Ltd709,014.
830.
34%2to3years————Total191,137,479.
6090.
91%146,836,554.
5092.
08%(2)Otheraccountsreceivable2.
1.
Detailsofotheraccountsreceivable2007.
12.
312006.
12.
31ItemsBalance%BaddebtsprovisionBalance%BaddebtsprovisionIndividualtransactionwithsignificantamount228,111,849.
8983.
93%109,136,552.
15227,423,720.
9692.
50%109,635,146.
61IndividualtransactionwithnotsosignificantamountbutsignificantrecoverableriskOthertransactionwithnosignificantamount43,684,552.
8716.
07%2,155,261.
5318,431,736.
927.
50%1,201,732.
86Total271,796,402.
76100.
00%111,291,813.
68245,855,457.
88100.
00%110,836,879.
472.
2.
OtherindividualsignificantaccountsreceivableNameBalancePercentageofbaddebtsprovisionReasonSecuritydepositforairplaneengine118,975,297.
74——SecuritydepositforaircraftenginemaintenanceexpensesandthepurchaseofaircrafitShangdongAirlineRainbowJetCo.
,Ltd109,136,552.
15100.
00%Long-termaccountsreceivable,thecompanycouldnotrepaydebtsduetoitsfinancialdifficultyTotal228,111,849.
89——2.
3.
Ageanalysis2007.
12.
312006.
12.
31AgeBalance%ProvisionforNetValueBalance%ProvisionforNetValueSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT98BaddebtsBaddebtsWithinoneyear45,220,181.
7616.
64%1,339,820.
6443,880,361.
1233,641,867.
4913.
68%11,654,534.
2421,987,333.
251-2year29,184,928.
3010.
74%11,280,098.
1617,904,830.
14141,922,459.
8557.
73%80,397,791.
4161,524,668.
442-3year137,151,532.
6550.
46%80,385,813.
4056,765,719.
2524,402,160.
509.
92%18,657,038.
615,745,121.
893-4year23,496,543.
298.
64%18,138,057.
205,358,486.
0933,158,611.
9613.
49%82,684.
0533,075,927.
914-5year24,265,824.
298.
93%77,624.
2024,188,200.
0912,730,358.
085.
18%44,831.
1612,685,526.
92Over5year12,477,392.
474.
59%70,400.
0812,406,992.
39Total271,796,402.
76100.
00%111,291,813.
68160,504,589.
08245,855,457.
88100.
00%110,836,879.
47135,018,578.
412.
4.
lastyear'stotalbaddebtprovisionofSARJis109,635,146.
61Yuan,and498,594.
46Yuanhasbeenreceivedbythecurrentyearend.
2.
5.
Upto31Dec2007,thereis2,550,000.
00yuantradeaccountreceivableisduebyAirChina,whoowns5%orover5%ofvotingrights.
2.
6.
ListofsignificantdebtorsNameofdebtorsBalanceNatureorcontentAgeProportionSARJ109,136,552.
15Disbursementfee1to4years40.
15%Shenzhenfinanceleasecompany41,354,563.
28Depositofaircraft2to3years15.
22%SingaporeAircraftLeasingEnterprise20,452,880.
00Depositofaircraft1to2years7.
53%RainierAircraftLeasing(Ireland)Limited17,623,671.
90Depositofaircraft2to5years6.
48%GeneralElectricCapitalCorporation15,596,781.
92Depositofaircraft1to5years5.
74%Total204,164,449.
2575.
12%(3)Long-termequityinvestment3.
1.
Long-termequityinvestmentandprovisionforimpairmentloss2007.
12.
312006.
12.
31ItemsBalanceProvisionforimpairmentlossBookvalueBalanceProvisionforimpairmentlosBookvalueLong-termequityinvestment135,315,305.
9722,500,000.
00112,815,305.
97137,232,132.
5122,500,000.
00114,732,132.
51Include:InvestmentinSubsidiary24,463,205.
97——24,463,205.
9726,380,032.
51——26,380,032.
51SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT99Joint-ventureinvestment——————22,500,000.
0022,500,000.
00——Affiliatedenterpriseinvestment22,500,000.
0022,500,000.
00InvestmentinOtherCompanies88,352,100.
00——88,352,100.
0088,352,100.
00——88,352,100.
003.
2.
Long-termequityinvestmentmeasuredbycostmethodInvesteeBeginningbalance2006.
12.
31IncreaseDecrease2007.
12.
31Subsidiaries:QingdaoInternationalAviationLogisticcenterCo.
,Ltd23,813,205.
9723,813,205.
97————23,813,205.
97UnionExpressServiceShangdongAirlineCo.
,Ltd650,000.
00650,000.
00————650,000.
00SDA-HangchiCargoCo.
,Ltd1,916,826.
541,916,826.
54——1,916,826.
54——Sub-total26,380,032.
5126,380,032.
51——1,916,826.
5424,463,205.
97Otherlong-termequityinvestmentChinaCivilaviationinformationnetworkCo.
,Ltd6,690,000.
006,690,000.
00————6,690,000.
00SiChuanairlinesco.
Ltd35,000,000.
0035,000,000.
00————35,000,000.
00JiNanInternationalAirportco.
Ltd46,662,100.
0046,662,100.
00————46,662,100.
00Sub-total88,352,100.
0088,352,100.
00————88,352,100.
00Total114,732,132.
51114,732,132.
51——1,916,826.
54112,815,305.
973.
3.
Long-termequityinvestmentmeasuredbyequitymethodInvesteeCost2006.
12.
31IncreaseDecrease2007.
12.
31CashdividentShangdongairlinerain-bow25,000,000.
00SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT100jetCo.
,LtdQingdaoSDAUnionExpressCo.
,Ltd240,000.
00342,192.
04——342,192.
04————3.
4.
Impairmentlossprovisionoflong-terminvestmentItems2006.
12.
31IncreaseDecrase2007.
12.
31Shangdongairlinerain-bowjetCo.
,Ltd22,500,000.
00————22,500,000.
00Total22,500,000.
00————22,500,000.
00(4)Operatingincomeandoperatingcost4.
1.
Operatingincomeandoperatingcost20072006ItemsOperatingincomeOperatingcostOperatingincomeOperatingcostMainbusiness4,530,329,258.
693,778,757,204.
894,189,558,832.
533,480,286,431.
58Otherbusiness93,220,311.
5756,965,069.
5232,724,095.
94——Total4,623,549,570.
263,835,722,274.
414,222,282,928.
473,480,286,431.
584.
2.
Themainbusinessarelistedasperproductorcategory.
20072006ProductorcategoryOperatingincomeOperatingcostGrossprofitOperatingincomeOperatingcostGrossprofitAviationshippingservice4,503,661,260.
703,761,738,252.
60741,923,008.
104,167,736,135.
513,474,988,533.
23692,747,602.
28Logisticservice789,937.
89706,583.
8083,354.
09——————Cateringservice26,059,386.
9216,312,368.
499,747,018.
4321,822,697.
025,297,898.
3516,524,798.
67Leasingservice49,549,336.
8952,470,312.
13-2,920,975.
24——————Others43,489,647.
864,494,757.
3938,994,890.
4732,724,095.
94——32,724,095.
94Total4,623,549,570.
263,835,722,274.
41787,827,295.
854,222,282,928.
473,480,286,431.
58741,996,496.
89(5)BusinesstaxandsurtaxItemsRate20072006Businesstax3%、5%136,961,706.
63125,743,401.
56Total136,961,706.
63125,743,401.
56SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT101(6)InvestmentincomeTheoriginoftheinvestmentincome20072006Profitdistributedbythedisposalofshareholder'sright——7,869,106.
65Profitdistributedbytheequityinvestments956,670.
008,500,155.
00Cashdividenddistributedbythesubsidiaries——550,000.
00Total956,670.
0016,919,261.
65X.
Relatedpartyandrelatedpartytransactions(1)confirmationstandardofrelatedpartTheotherpartywhichiscontrolled,jointlycontrolledorsubstantiallyinfluencedbythecompany,orcontrols,jointlycontrolsorsubstantiallyinfluencesthecompany,orisunderthesamecontrol,jointcontrolorsubstantialinfluenceofthesamepartiesasthecompanywillbedeemedastheassociatedpartyofthecompany.
(2)Therelationshipofrelatedparties2.
1.
relatedpartywithcontrollablerelationshipRelationshipBusinessnameRegisteredADDMainbusinessBusinessnatureLegalrepresentiveAirChinaLimitedBeiJingairpassengertransport,freighttransportandrelatedserviceetcControlledpartyCorp.
JiaxiangLiShangdongAviationGroupCo.
Ltd.
.
JinanAircraftandgroundequipmentrepairandmaintenance,airpassengertransport,freighttransportandrelatedserviceetcControlledshareholderLimitedliabilitycompanyGangfeng2.
2TheregisteredcapitalandchangestherelatedpartieswithcontrollablerelationshipBusinessname2006.
12.
31IncreaseinthecurrentperiodDecreaseinthecurrentperiod2007.
12.
31AirChina9,433,210,909.
00————9,433,210,909.
00ShangdongAviationGroupCo.
Ltd.
580,000,000.
00————580,000,000.
00SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT1022.
3.
changesinsharecapitalandparticularaboutrelatedpartywithcontrollablerelationshipBusinessname2007.
12.
31Proportion(%)IncreaseDecrease2006.
12.
31Proportion(%)AirChina171,840,000.
0042.
96%2,362,080.
00——174,202,080.
0043.
55%ShangdongAviationGroupCo.
Ltd.
168,004,000.
0042.
00%————168,004,000.
0042.
00%2.
4.
TherelatedpartywithuncontrollablerelationshipBusinessnameRelationshipShandongTaecoAircraftEngineeringCo.
,LtdSubsidiarywhichunderthecontrolofholdingcompanyAviationbuildingmanagementlimitedcompanySubsidiarywhichunderthecontrolofholdingcompanyShandongxiaoyutechnologyserviceltdSubsidiarywhichunderthecontrolofholdingcompanyQingdaoFeishenginternationalAviationTrainingCo.
,LtdSubsidiarywhichunderthecontrolofholdingcompanyShandongInternationalAviationTrainingCo.
,Ltd.
SubsidiarywhichunderthecontrolofholdingcompanySARJassociate(3)Relatedpartytransactions3.
1.
Thepricingprincipleofthetransactionbetweenthecompanyandrelatedparty:thepriceoftherelatedpartytransactionwillbesettledatthemarketpriceasthesimilarproductorservice.
3.
2.
Relatedpartytransaction3.
2.
1acceptanceorprovisionofservices,purchaseofassetsRelatedpartyNatureoftransaction20072006AcceptanceofserviceShandongTaecoAircraftEngineeringCo.
,LtdExpenditureforaircraftmaintenance56,344,238.
5160,809,917.
13ShangdongAviationGroupCo.
Ltd.
Rentalchargesinrespectoflandandbuildings6,207,465.
774,232,015.
68ShangdongAviationGroupCo.
Ltd.
Roomandrestaurantservicecharges4,911,669.
105,325,808.
00QingdaoFeishenginternationalAviationTrainingCo.
,LtdTrainingfee5,879,227.
007,023,156.
00ShandongInternationalAviationTrainingCo.
,Ltd.
Trainingfee7,933,074.
5013,344,724.
45ShandongxiaoyutechnologyserviceltdRepairsandmaintenancecharges3,323,330.
443,813,802.
97SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT103AirChinaProvisionoflabor12,390,700.
008,779,300.
00OthersSARJRentalincomeinrespectofaircraft——7,185,208.
02SARJCommutedebt498,594.
4615,684,200.
00AirChinaLeasingofaircraftandengine259,180,758.
50282,634,851.
50AirChinaJointflightcourse85,833,974.
3719,948,035.
323.
2.
2.
GuaranteeShangdongAviationGroupCo.
Ltd.
Providesguaranteeforthecompanyasfollowing:TypeofloansNameofthebankAmountChinaMerchantsBankjinanbranch40,000,000.
00AgriculturalBankOfchinaMinghubranch360,000,000.
00ChinaMerchantsBankQingdaobranch160,000,000.
00ChinaConstructionBankShizhongbranch200,000,000.
00ChinadevelopmentbankShandongbranch328,707,000.
00Short-termloansChinaciticbankQingdaobranch80,000,000.
00BankofcommunicationTianqiaobranch516,890,245.
76IndustrialandcommercialbankofchinaDongjiaobranch180,454,325.
32Long-termborrowingChinaConstructionBankShizhongbranch415,971,995.
44Non-currentliabilitiesduewithinoneyearChinaciticbankQingdaobranch60,810,617.
133.
3.
Thebalanceofpayablesandreceivablesforrelatedparty.
31/12/200631/12/2007BusinessnameAmountsproportionAmountProportionTradereceivables:AirChina33,478,831.
8720.
74%50,081,251.
9523.
65%Total33,478,831.
8750,081,251.
95Otherreceivables:ShangdongAviationGroupCo.
Ltd.
871,203.
720.
35%————AirChina1,154,376.
290.
47%2,550,000.
000.
94%ShandongInternationalAviation407,569.
920.
16%80,342.
040.
03%SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT104TrainingCo.
,Ltd.
QingdaoFeishenginternationalAviationTrainingCo.
,Ltd195,850.
980.
08%41,041.
700.
02%SARJ109,635,146.
6144.
25%109,136,552.
1540.
14%Total112,264,147.
52111,807,935.
89Tradepayables:ShandongTaecoAircraftEngineeringCo.
,Ltd717,414.
490.
09%Total717,414.
49Otherpayables:31/12/200631/12/2007BusinessnameAmountsproportionAmountsproportionAirChina20,000,000.
0014.
77%ShangdongAviationGroupCo.
Ltd————1,019,818.
830.
75%QingdaoFeishenginternationalAviationTrainingCo.
,Ltd————1,150,179.
770.
85%ShandongTaecoAircraftEngineeringCo.
,Ltd16,073,838.
495.
32%6,554,109.
844.
84%ShandongInternationalAviationTrainingCo.
,Ltd.
1,575,414.
430.
52%1,417,927.
191.
05%Total17,649,252.
9230,142,035.
63Itemsreceivedinadvance:AirChinaLimited1,645,700.
002.
99%——Total1,645,700.
00——XI.
Contingency1、GuaranteeforexternalentityAttheendofbalancedate,thereisnoguaranteeforexternalentitythatneedstobedisclosed.
2.
PendingLitigationAttheendofbalancedate,thereisnosignificanteventofpendinglitigationthatneedstobedisclosed.
3.
OthercontingencyAttheendofbalancedate,thereisnoanyothersignificantcontingencythatneedstobedisclosed.
XII.
CommitmentSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT1052007.
12.
31Items1year1-3yearsAbove3yearsTotalUnit:ThousandYuanLeasecommitments406,547.
00708,705.
001,426,421.
002,541,673.
00CapitalCommitments1,357,650.
00215,618.
006,498,218.
008,071,486.
00Total1,764,197.
00924,323.
007,924,639.
0010,613,159.
002006.
12.
31Items1year1-3yearsAbove3yearsTotalUnit:ThousandYuanLeasecommitments326,496.
00687,570.
001,729,108.
002,743,174.
00CapitalCommitmentofc683,285.
002,512,610.
00-3,195,895.
00Total1,009,781.
003,200,180.
001,729,108.
005,939,069.
00XIII.
Non-adjustingeventsoccurringafterthebalancesheetdateBy31/12/2007thecompanyhasnonon-adjustingeventsoccurringafterthebalancesheetdatethatneedtobedisclosed.
XIV.
Financialderivativeinstrument1、Thecompanywillmakepaymentsofforeigncurrencyliabilitieswhichresultingfromfinanceleaseandpurchasingaircrafts.
Inordertoreducetherisksofforeignexchangeandinterestrates,thecompanymadeseveralcontractsofforwardsandinterestrateswaps,thetotalamountis$309,000.
00thousand.
2、Attheendofbalancedate,contractsofforwardsandinterestrateswapwhichareheldbythecompanyisamountedto$179,344.
00thousand,inwhich,$66,513.
80thousandcanberedeemed.
i.
Thecontractsofforwardsandinterestrateswapwilldueasfollowing:ExpiryperiodofthecontactsAmounts(Unit:10thousandUSdollar)1yearafterbalancesheetdate2,343.
482yearsafterbalancesheetdate——3yearsafterbalancesheetdate1,704.
13Lateryear13,886.
79Total17,934.
40SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT106ii.
Duringthecurrentaccountingperiod,thenetprofitgainedfrominterestrateswapisRMB22,379.
20thousand.
Inwhich:(1)NetlossesRMB1,502.
80thousand,thecorrespondingvalueofthecontractsofforwardandinterestswaprateis$32,018.
70thousand.
(2)NetprofitsRMB23,882.
00thousand,thecorrespondingvalueofthecontractsofforwardandinterestswaprateis$147,325.
30thousand.
Becauseoftheabovecontractsofforwardandinterestrateswapweremadeinaccordancewithtermsofparticularfinancingproject,itisunabletogainreferencedvalueofsimilarcontracts,andthecompanyconsidersthatthefairvalueofthesecontractsareunabletobeestimated,thereforethepossiblychangesintheequitywhichcausedbythecontractsofforwardandinterestrateswapwerenotconfirmedinthefinancialreports.
a)Netprofitafterdeductionofthenon-recurringprofitandlossItemAmountNetprofit37,255,985.
51Minus:Profitandlossindisposalofnon-circulationassets-21,736,311.
72TaxreturnandtaxdeductionoverexaminationrightorwithoutformaldocumentGovernmentalallowanceaccruedtothecurrentprofitandlossGainorlossfromcombinationcostandfairvalueofidentifiablenetassetswhentheenterprisecombinationgainorlossfromexchangenon-monetaryassets10,000,000.
00Provisionsfortheimpairmentofassetduetoactofgod-498,594.
46Gain/lossformdebtrestructuringExpensesofenterpriserestructuringProfit/lossformthatoftradingpricehigherthanfairvalueGain/lossfromprojectedliabilitieswithoutrelationshipwithmainoperation-7,370,706.
97Subtotal-19,605,613.
15Plus:non-recurringgain/lossattributabletominorityshareholders331.
50Amountinfluencedduetoincometax-6,469,852.
34Netprofitafterdeductionofnon-recurringgain/loss50,392.
077.
82b)YieldRateofNetAssetsandEarningsPerShare(1)2007YieldRateofNetAssetsandEarningsPerShareYieldRateofNetAssetsProfitinthereportperiodFulldilutionWeightedaverageBasicprofitpershareProfitpershareafterdilutionNetprofitattributableto37,255,985.
518.
538.
900.
090.
09SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT107ordinaryshareholdersNetprofitattributabletotheordinaryshareholdersafterdeductionofnon-recurring50,392,077.
8211.
5312.
040.
130.
13(2)Calculationmethodonreturnonequityandearningspershare2.
1.
FullydilutedreturnonequityFullydilutedreturnonequity=P÷EOfwhich:PreferstoNetprofitattributabletocommonshareholderoftheCompanyornetprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany;Ereferstonetassetsattheperiod-endattributabletocommonshareholdersoftheCompany.
WhentheCompanypreparedanddisclosedtheconsolidatedstatement,"NetprofitattributabletocommonshareholderoftheCompany"excludedminorityinterest,"netprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany"wouldbecalculatedbasedonconsolidatednetprofitafterdeductingminorityinterests;deductingnon-recurringgainandlossofparentcompany(theCompanyshouldconsiderinfluenceofincometax)andnon-recurringgainandlossofeachsubsidiary(theCompanyshouldconsiderinfluenceofincometax);"netassetsattheperiod-endattributabletocommonshareholdersoftheCompany"excludedminorityinterests.
2.
2.
WeightedaveragereturnonequityWeightedaveragereturnonequity=P/(E0+NP÷2+Ei*Mi÷M0-Ej*Mj÷M0±Ek*Mk÷M0)Ofwhich:PreferstoNetprofitattributabletocommonshareholderoftheCompanyornetprofitafterdeductingnon-recurringgainsandlossesattributabletocommonshareholderoftheCompany;NPreferstonetprofitattributabletocommonshareholdersoftheCompany;E0referstonetassetsattheperiod-beginattributabletocommonshareholdersoftheCompany;EireferstonetassetsincreasedduetoissuanceofnewshareordebtsforequityswaporattributabletocommonshareholdersoftheCompany;EjreferstonetassetsdecreasedduetorepurchasedordividendsincashorattributabletocommonshareholdersoftheCompany;M0referstothenumberofmonthsduringthereportperiod;Mireferstothenumberofmonthsfromthenextmonthwhennetassetsincreasedtotheendofthereportperiod;Mjreferstothenumberofmonthsfromthenextmonthwhennetassetsdecreasedtotheendofthereportperiod;Ekreferstochangeofincrease/decreaseofnetassetsduetoothertransactionevents;Mkreferstothenumberofmonthsfromthenextmonthwhenothernetassetschangedtheendofthereportperiod.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT1082.
3.
Earningspershare-basisEPS-basis=P÷SS=S0+S1+Si*Mi÷M0-Sj*Mj÷M0-SkOfwhich:Preferstonetprofitattributabletoshareholdersholdingordinarysharesornetprofitattributabletoshareholdersholdingordinarysharesafterdeductingnon-recurringgainsandlosses;Sweightedaveragenumberofordinarysharesissuedout;S0referstototalnumberofsharesattheperiod-begin;S1referstothenumberofsharesincreasedduetotransferringcapitalreserveintosharecapitalordividenddistributionofsharesduringthereportperiod;Sireferstothenumberofsharesincreasedduetoissuanceofnewsharesordebtforequityswapduringthereportperiod;Sjreferstothenumberofsharesdecreasedduetostockrepurchaseduringthereportperiod;Skreferstothenumberofsplit-shareduringthereportperiod;M0referstothenumberofmonthsduringthereportperiod;Mireferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodforincreaseofshares;Mjreferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodfordecreaseofshares.
2.
4.
Earningspershare-dilutedEPS-diluted=[netprofitattributabletoshareholdersholdingordinaryshares+(potentialdilutedinterestsofordinarysharesrecognizedasexpense-transferfee)*(1-incometaxrate)]/(S0+S1+Si*Mi÷M0-Sj*Mj÷M0-Sk+weightedaverageamountofordinarysharesincreasedduetowarrant,shareoptions、convertiblebond)Preferstonetprofitattributabletoshareholdersholdingordinarysharesornetprofitattributabletoshareholdersholdingordinarysharesafterdeductingnon-recurringgainsandlosses;S0referstototalnumberofsharesattheperiod-begin;S1referstothenumberofsharesincreasedduetotransferringcapitalreserveintosharecapitalordividenddistributionofsharesduringthereportperiod;Sireferstothenumberofsharesincreasedduetoissuanceofnewsharesordebtforequityswapduringthereportperiod;Sjreferstothenumberofsharesdecreasedduetostockrepurchaseduringthereportperiod;Skreferstothenumberofsplit-shareduringthereportperiod;M0referstothenumberofmonthsduringthereportperiod;Mireferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodforincreaseofshares;Mjreferstothenumberofmonthsfromthenextmonthtotheendofthereportperiodfordecreaseofshares.
TheCompanyshallconsiderallinfluenceonpotentialdilutedinterestsofordinaryshareswhentheCompanycalculateddilutedearningspershare,tilltominimumdilutedEPS.
c)SupplementaryInformation(1).
IncomparisonwiththeadjustedproceduresofprofitandlossstatementSHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT109Adjusteditemsforprofitandlossstatementin2006ItemPre-adjustmentPost-adjustmentOperatingincome4,198,152,384.
84Operatingexpenses3,481,368,056.
47Otherincome31,212,135.
06Salesrevenues4,231,057,944.
71Salescost3,481,368,056.
47Businesstaxandsurtax126,158,588.
33Mainbusinesstaxandsurtax124,465,163.
52ItemPre-adjustmentPost-adjustmentBusinessexpenses203,075,903.
87Salesexpenses203,075,903.
87Administrationexpense154,065,293.
19171,171,816.
49Financialexpenses249,325,498.
44249,325,498.
44Lossesofdevaluationofasset-14,816,307.
30Gain/lossfromchangeinfairvalueGain/(loss)frominvestment16,413,444.
6816,413,444.
68incomefromsubsidy10,000,000.
00non-businessincome2,869,735.
7012,869,735.
70non-businessexpense636,075.
18636,075.
18Incometaxexpense219,357.
2333,081,388.
72Netprofit45,492,352.
3810,340,104.
89Netprofitattributabletoowner'sparentcompany44,017,783.
758,875,631.
95Gain/lossattributabletominorityshareholders1,474,568.
631,464,472.
94(2).
Netprofitinsimulatingtheimplementationofnewaccountingstandardsin2006andthedifferenceadjustmentstatementofnetprofitdisclosedbythe2006annualreport2006AnnualDifferenceAdjustmentforNetProfitItemAmountNetprofitin2006(originalaccountingstandard)45,492,352.
38including:Netprofitattributableparentcompany44,017,783.
75Minorityintersests1,474,568.
63Totalamountofretroactiveadjustment-35,152,247.
49SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT110Including:retroactiveadjustmentofdeferredtaxexpenses-32,862,031.
49Reimbursementforstaffgaveupthepayingleave-2,290,216.
00Netprofitin2006(newaccountingstandard)10,340,104.
89including:Netprofitattributabletoparentcompany8,875,631.
95ItemAmountMinorityintersests1,464,472.
94AssumethatthecompanywillfullyimplementthereferencedaccountingstandardTotaleffectnumberofotheritems-71,105,105.
34Including:amortizationoflanduseright-193,604.
47Interestcapitalization579,700.
00AdjustmentforexpensesofCapitalizationofrepairandmaintenanceexpenseforaircraftsandengines-71,491,200.
87Netprofitin2006insimulation-60,765,000.
45including:Netprofitattributabletoowner'sparentcompany-62,229,473.
39Gain/lossattributabletominorityshareholders1,464,472.
94(3)Theshareholderequitiesreportedinaccordancewiththeoriginalaccountingsystemsareadjustedtothenewenterpriseaccountingstandard3.
1.
AdjustmentofshareholderequitiesonJanuary1,2006ItemPre-adjustmentPost-adjustmentSharecapital400,000,000.
00400,000,000.
00Capitalreserve84,050,163.
8384,050,162.
84Surplusreserve24,676,134.
4724,676,134.
47Undistributedprofit-242,860,316.
00-117,777,353.
99Total265,865,982.
30390,948,943.
323.
2.
AdjustmentofshareholderequitiesonDecember31,2006ItemPre-adjustmentPost-adjustmentSharecapital400,000,000.
00400,000,000.
00Capitalreserve84,050,163.
8384,050,162.
84SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT111Surplusreserve25,001,281.
3425,001,281.
34ItemPre-adjustmentPost-adjustmentUndistributedprofit-199,167,679.
34-109,226,868.
91Total309,883,765.
83399,824,575.
27d)ThecorrespondingdisclosureofchangesinShareholder'sequityundernewandoldaccountingstandard.
ItemNoItemnameTheamountstobedisclosedin2007Theamountstobedisclosedin2006DifferencereasonshareholderequitiesonDecember31,2006(originalaccountingstandard)309,883,765.
83309,883,765.
831Incometax92,231,025.
4441,051,039.
7251,179,985.
72ApprovedtooffsettheLossesandprovisionforbaddebt2Minorityinterest12,862,556.
0912,845,729.
9516,826.
14Adjustmentofthesubsidiary'sdeferredtax3Others-2,290,216.
00-2,290,216.
00shareholderequitiesonJanuary1,2007(newaccountingstandard)412,687,131.
36361,490,319.
5051,196,811.
86e)ApprovaloffinancialstatementsThisfinancialstatementisapprovedandauthorizedforissuancebytheBoardofDirectorsonMarch21,2008.
XI.
DocumentsAvailableforReference1.
FinancialstatementscarryingthepersonalsignaturesandsealsofChairmanoftheBoard,GeneralAccountantsandAccountingdepartments;2.
OriginalofAuditors'ReportcarryingthesealsofCertifiedPublicAccountantsaswellaspersonalsignaturesandsealsofcertifiedpublicaccountants;3.
OriginalsofalldocumentsandnoticespubliclydisclosedonnewspapersdesignatedbyCSRCinthereportperiodin2007;4.
TheCompanywillofferabovedocumentsforreferencetimelyprovidedthatCSRCorStockExchangedemandsorshareholdersrequiresaccordingtotheregulationsandArticlesofAssociation.
SHANDONGAIRLINESCO.
,LTD.
2007ANNUALREPORT112ChairmanoftheBoard:ZhangXingfuTheBoardofDirectorsofShandongAirlinesCo.
,Ltd.
March21,2008