Shandong Airlines Co., Ltd. 2009 Annual Report
1
山东航空股份有限公司
2009 年年度报告
SHANDONG AIRLINES CO., LTD.
2009 ANNUAL REPORT
March / Year 2010
Jinan · P.R.C.Shandong Airlines Co., Ltd. 2009 Annual Report
2
Contents and Important Notes
I. Company Profile -------------------------------------------------------------------------3
II. Summary of Financial Highlight and Business Highlight -------------------------4
III. Changes in Capital Shares and Particulars about Shareholders ------------------7
IV. Particulars about Directors, Supervisors, Senior Executives and Employees ---11
V. Administrative Structure -------------------------------------------------------------- --19
VI. Brief Introduction to the Shareholders’ General Meeting ---------------------- ---22
VII. Report of the Board of Directors -----------------------------------------------------23
VIII. Report of the Supervisory Committee ----------------------------------------------33
IX. Significant Events -----------------------------------------------------------------------35
X. Financial Report --------------------------------------------------------------------------39
XI. Documents for Reference --------------------------------------------------------------133
Important Notes:
The Board of Directors and the Supervisory Committee of Shandong Airlines Co., Ltd.
(hereinafter referred to as the Company) and its directors, supervisors and senior
executives hereby confirm that there are no any fictitious statements, misleading
information or important omissions carried in this report, and shall take all
responsibilities, individual and/or joint, for the reality, accuracy and completion of the
whole contents.
Director Mr.Wang Mingyuan was absent from the Board meeting and authorized
Director Mr.Feng Gang to vote on his behalf.
Reanda Certified Public Accountants issued the standard unqualified Auditors’ Report
for the Company.
Chairman of the Board Mr. Zhang Xingfu, General Manager Mr. Zeng Guoqiang, and
Chief Accountant Mr. Xu Guojian of the Company hereby confirm that the Financial
Report of the Annual Report is true and complete.
Paraphrases:
The Company: Shandong Airlines Co., Ltd.
SDA: Shandong Aviation Group; the controlling shareholder of the Company
Air China: Air China Limited, the actual controller of the Company
Air China Group: China National Aviation Group Co., Ltd., the controlling
shareholder of Air ChinaShandong Airlines Co., Ltd. 2009 Annual Report
3
I. Company Profile
1. Legal Chinese Name of the Company: 山东航空股份有限公司
Legal English Name of the Company: SHANDONG AIRLINES CO., LTD.
2. Legal Representative: Zhang Xingfu
3. Secretary of Board of Directors of the Company: Dong Qiantang
Contact Address: SDA Bldg., No. 5746, Er Huan East Road, Jinan, Shandong
Tel.: (86) 531-85698229
E-mail: dongqt@shandongair.com.cn
Authorized Securities Affairs Representative: Fan Peng
E-mail: fanp@shandongair.com.cn
Tel.: (86) 531-85698678
Fax: (86) 531-85698679
4. Registered Address: Yaoqiang International Airport, Jinan, Shandong
Office Address: SDA Bldg., No. 5746, Er Huan East Road, Jinan, Shandong
Post Code: 250014
Company’s Website: http://www.shandongair.com.cn
E-mail: zqb@shandongair.com.cn
5. Newspapers for Disclosing the Information Designated by the Company:
Domestic: China Securities Journal and Securities Times
Overseas: Hong Kong Commcercial Daily
Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn
The Place Where the Annual Report is Prepared and Placed: Office of the Board of the
Company (Room 1920, SDA Bldg.)
Liaison Tel: (86) 531-85698678
6. Stock Exchange Listed with: Shenzhen Stock Exchange
Short Form of the Stock: SHANHANG B
Stock Code: 200152
7. Other Relevant Information of the Company
Initial registration date: Dec. 13, 1999
Registration date after change: Sep. 16, 2009
Registration address: Industrial and Commercial Administration Bureau of
Shandong Province
Registered number for enterprise corporation business license: 370000400002351
Registered number for taxation: 370112720721201
Name and address of certified public accountants engaged by the Company:Shandong Airlines Co., Ltd. 2009 Annual Report
4
Reanda Certified Public Accountants
Address: Room 2008 on 20/F, East District of No.1 Building, No.100, Xili Street,
Balizhuang, Chaoyang District, Beijing
II. Summary of Financial Highlight and Business Highlight
Unit: RMB
(I)Main profit index of the Company as of the report year
Items Amount
Operating profit 261,760,990.12
Total profit 403,361,305.82
Net profit attributable to the shareholders of
the listed company 302,282,325.68
Net profit attributable to the shareholders of
the listed company after deducting
non-recurring losses/gains 203,597,306.19
Net cash flow arising from operating activities
1,317,347,150.42
(II) Items of deducting non-recurring gains and losses and the involved amounts are
as following:
Items of non-recurring gains and losses Amount
Net profit 302,743,202.40
Add: (1) Gains and losses from the disposal of non-current asset, including
the offsetting parts which was made accrual of provision for asset
impairment -2,758,500.92
(2) Governmental subsidy calculated into current gains and losses,
while closely related with the business of the Company, excluding the
fixed-amount or fixed-proportion governmental subsidy according to the
unified national standard -135,213,761.47
(3) Losses/gains from changes of fair values occurred in holding
transaction financial assets and transaction financial liabilities, and
investment income obtaining from the disposal of transaction financial
assets and transaction financial liabilities and financial assets available for
sales, excluded effective hedging business relevant with normal operations
of the Company 10,020,739.69
(4) Other non-operating income and expenditure except for the
aforementioned items -3,628,053.31
Subtotal -131,579,576.01
Less: Influenced number of income tax of non-recurring losses/gains -32,894,894.00
Net profit after deducting non-recurring gains and losses 204,058,520.39
Less: Net profit deducted non-recurring losses/gains attributable to 461,214.20Shandong Airlines Co., Ltd. 2009 Annual Report
5
minority shareholder
Net profit attributable to shareholder of parent company after deducting
non-recurring losses/gains 203,597,306.19
(III) Major accounting data and financial highlights over the previous three years as at
the end of the report period
1. Main accounting data
2007
Items 2009 2008
Increase/decrea
se in this year
compared with
that in last year
(%)
Before adjustment After adjustment
Operating
income
5,366,113,363.
68
5,049,391,116.
47
6.27% 4,630,130,538.
19
4,630,130,538.
19
Total profit
403,361,305.82 108,260,827.56
272.58%
57,546,814.19 98,768,111.17
Net profit
attributable
to
shareholder
s of the
listed
company
302,282,325.68 80,981,442.68
273.27%
37,255,985.51 68,171,958.24
Net profit
attributable
to
shareholder
s of the
listed
company
after
deducting
non-recurri
ng gains
and losses
203,597,306.19 92,440,296.87 120.25% 50,392,077.82 53,689,781.57
Net cash
flow arising
from
operating
activities
1,317,347,150.
42
1,059,833,106.
56
24.30%
734,571,420.98 734,571,420.98
Items At the end of 2009 At the end of 2008 Increase/decrea At the end of 2007Shandong Airlines Co., Ltd. 2009 Annual Report
6
se at the end of
this year
compared with
that at the end
of last year (%)
Before adjustment After adjustment
Total assets 8,096,403,730.
75
7,844,104,901.
47
3.22% 7,039,689,367.
94
7,082,444,002.
92
Owners’
equity( or
Shareholder
s’ equity)
852,294,621.98
550,012,296.30
54.96%
436,964,877.39 469,030,853.62
2. Main financial indexes
2007
2009 2008
Increase/decrease in this year
compared with that in last year (%)
Before
adjustment
After
adjustment
Basic earnings per share 0.76 0.20 280% 0.09 0.17
Diluted earnings per share 0.76 0.20 280% 0.09 0.17
Basic earnings per share
after deducting non-recurring
gains and losses
0.51 0.23 121.74% 0.13 0.13
Fully diluted return on equity 35.47% 14.72% Up20.75 percentage points 8.53% 14.53%
Weighted average return on
equity
43.11% 15.89% Up27.22 percentage points 8.90% 15.67%
Fully diluted return on equity
after deducting non-recurring
gains and losses
23.89% 16.81% Up7.08percentage points 11.53% 11.45%
Weighted average return on
equity after deducting
non-recurring gains and
losses
29.04% 18.14% Up10.9percentage points 12.04% 12.34%
Net cash flow per share
arising from operating
activities(RMB)
3.29 2.65 24.15% 1.84 1.84
At the end of 2007
At the end of
2009
At the end of 2008
Increase/decrease at the end of this
year compared with that at the end
of last year (%)
Before
adjustment
After
adjustment
Net asset per share attributable to
shareholders of listed company
2.13 1.38 54.35% 1.09 1.17Shandong Airlines Co., Ltd. 2009 Annual Report
7
(IV) The Company’s return on equity and earnings per share as of the year 2009 as
calculated based on fully diluted method and weighted average method taking
Requirements on the Information Disclosure of Companies Publicly Issuing Shares
No. 9 as the reference
1. Return on Equity
Amount in this period Amount in same period
Profit in the report of last report period
Period Fully diluted
Weighted
average
Fully diluted Weighted average
Net profit attributable to common
shareholders
35.47% 43.11% 14.72% 15.89%
Net profit attributable to common
shareholders after deducting the
non-recurring losses and gains
23.89% 29.04% 16.81% 18.14%
2. Earnings per Share
Amount in this period Amount in same period of last report
Profit in the report period
period Basic earnings
per share
Diluted
earnings per
share
Basic earnings
per share
Diluted earnings
per share
Net profit attributable to common
shareholders
0.76 0.76 0.20 0.20
Net profit attributable to common
shareholders after deducting the
non-recurring losses and gains
0.51 0.51 0.23 0.23
III. Changes in Shares Capital and Particulars about the
Shareholders
(I) Statement of changes in share
Unit: Shares
Before
change
Increase/decrease in this time (+ , - )
After
change
Rationed
share
Bonus
share
Conversion
of capital
public
reserve
Additional
insurance
Others Subtotal
I. Unlisted shares 260000000 260000000
1. Sponsor’s shares 168780100 168780100Shandong Airlines Co., Ltd. 2009 Annual Report
8
Including:
State-owned shares 168581100 168581100
Domestic legal
person’s shares 199000 199000
Foreign legal
person’s shares
Others
2. Raised legal
person’s shares
3. Inner employees’
shares
4. Preference shares
or other 91219900 91219900
Total unlisted shares 260000000 260000000
II. Listed shares 140000000 140000000
1. RMB ordinary
shares
2.Domestically listed
foreign shares 140000000 140000000
3. Overseas listed
foreign shares
4. Other
Total listed shares 140000000 140000000
III. Total shares 400000000 400000000
(II) Particulars about issuance and listing of shares
1. Issuance and listing of shares
The previous three year ended by the period-end, the Company did not issue shares
and derivative securities for trading.
2. During the report period, there were no changes in the number and structure of the
Company’s shares due to bonus share, capital public reserve transferring into share
capital, rationed share, additional issuance, share merger, convertible company’s
bonds transferring shares, disinvestments, listing of inner employees’ shares or
company’s employee’s shares, etc. There were no inner employees’ shares in the
Company.
(III) About Shareholders
1. Total shareholders as at the end of the report period
Up to Dec. 31, 2009, the Company had totally 20,162 shareholders, including 20,156
ones of domestically listed foreign shares. The top ten shareholders of the CompanyShandong Airlines Co., Ltd. 2009 Annual Report
9
are as following:
Unit: Share
No. Shareholders’ name
Number of
shares held at
the year-end
Proportion
(%)
Type
Number of shares
pledged or frozen
1
SHANDONG
AVIATION GROUP 168004000 42
State-owned legal
person’s share
Naught
2
AIR CHINA
LIMITED 91200000 22.8
State-owned legal
person’s share
Naught
3 CHEN TIAN MING 1769072 0.44 Circulation share Unknown
4 CHEN CHUN PENG 1430000 0.36 Circulation share Unknown
5 CHEN JING JIAN 1304200 0.33 Circulation share Unknown
6 WU HAO YUAN 1062700 0.27 Circulation share Unknown
7 LIU LI YA 904217 0.23 Circulation share Unknown
8 JOHN POSS 700000 0.18 Circulation share Unknown
9 DENG HONG WEI 650609 0.16 Circulation share Unknown
10 FENG WU CHU 631700 0.16 Circulation share Unknown
Note: 1. Shandong Aviation Group is the first largest shareholder of the Company,
who holds the shares of the Company on behalf of the State with unlisted shares.
2. Air China Limited is the second largest shareholder of the Company, who holds the
shares of the Company on behalf of the State with unlisted shares; Air China is the
first largest shareholder of SDA and the actual controller of the Company.
3. Among the above the top ten shareholders, Air China, shareholders of state-owned
legal person’s share, is the first largest shareholder of the SDA, and there exists no
associated relationship between SDA and Air China and the other shareholders, and
they don’t belong to the consistent actionist regulated by the Management Regulation
of Information Disclosure on Change of Shareholding for Listed Companies with the
other shareholders. The Company is not aware of their associated relationship among
the other shareholders of circulation share, whether belongs to the consistent actionist
regulated by the Management Regulation of Information Disclosure on Change of
Shareholding for Listed Companies.
2. The controlling shareholder of the Company
Name of the controlling shareholder: Shandong Aviation Group
Legal representative: Feng Gang
Date of foundation: Feb. 9, 1995
Place of SDA: No. 5746, Er Huan East Road, Lixia District, Jinan, Shandong
Business scope: Investment and management on aviation transportation; maintaining
of aerostat and ground facilities limited by permission; conference and exhibitionShandong Airlines Co., Ltd. 2009 Annual Report
10
service; working service; maintaining on vehicles of ground passenger transportation
and ground transportation; the sales of general merchandise, handicraft and souvenir;
the lodgings; the dining service; retail sales of the tobacco product; lease of house
(limitedly managed by branches)
Registered capital: RMB 580 million
3. The actual controller of the Company
Actual controller of the Company: Air China Limited.
Place: 9F/Sky Mansion, No.28 Buliding Tianzhu Road, Block A of Tianzhu Airport
Industrial Zone, Shunyi District, Beijing.
Legal Representative: Kong Dong
Registered capital: RMB 12.251 billion
Business scope: It was engaged in the domestic and overseas transportation business
such as periodic and aperiodic aviation passenger, cargo, letter and baggage; domestic
and overseas official flight business; aeroplane management business; repairing of
aerostat; business agent among air companies; ground service and air courier services
related with the main operations (excluding letter and articles with the nature of
letters); tax-free commodities in airplane.
Main shareholders: China National Aviation Group Co., Ltd., which accounted for
40.4% in total shares;
Cathay Pacific Airways Ltd., which accounted for 18.1% in total shares.
100%
40.4%
49.406%
22.8%
42%
4. The Company has no shareholders holding over 10% of shares of the Company
Air China Limited
Shandong Aviation Group
Shandong Airlines Co., Ltd.
China National Aviation Group Co., Ltd.
State-owned Assets Supervision & Administration Commission of State CouncilShandong Airlines Co., Ltd. 2009 Annual Report
11
except for the controlling shareholder SDA and actual controller Air China Limited.
5. Particulars about the top ten shareholders of circulation share
No. Name of shareholders
Number of shares held at the
year-end (share)
Type of shares held
1 CHEN TIAN MING 1769072 B-share
2 CHEN CHUN PENG 1430000 B-share
3 CHEN JING JIAN 1304200 B-share
4 WU HAO YUAN 1062700 B-share
5 LIU LI YA 904217 B-share
6 JOHN POSS 700000 B-share
7 DENG HONG WEI 650609 B-share
8 FENG WU CHU 631700 B-share
9 XU ZHAO HUAN 623400 B-share
10 CHEN ZI XIANG 610700 B-share
The Company is not aware of their associated relationship among the top ten
shareholders of circulation share, and is unknown whether other circulation
shareholders belong to the consistent actionist regulated by the Management
Regulation of Information Disclosure on Change of Shareholding for Listed
Companies.
IV. Particulars about Directors, Supervisors, Senior Executives and
Employees
(I) Directors, Supervisors and Senior Executives
Name Sex Birthday Title Office term
Amounts
at the
year-begin
Amounts
at the
year-end
Zhang Xingfu Male Apr. 1955 Chairman
June 26, 2009－
June 25, 2012
0 0
Feng Gang Male Sep. 1963
Vice
Chairman
June 26, 2009－
June 25, 2012
0 0
Zeng Guoqiang Male Oct. 1953
Director,
General
Manger
June 26, 2009－
June 25, 2012
0 0
Su Zhongmin Male March 1954 Director, June 26, 2009－ 0 0Shandong Airlines Co., Ltd. 2009 Annual Report
12
Standing
Deputy
General
Manager
June 25, 2012
Xiao Feng Male Oct. 1968 Director
June 26, 2009－
March 24, 2010
0 0
Wang Mingyuan Male Sep. 1965 Director
June 26, 2009－
June 25, 2012
0 0
Kou Zunxian Male Aug. 1955 Director
June 26, 2009－
June 25, 2012
0 0
Wang Jieming Female June 1958 Director
June 26, 2009－
June 25, 2012
0 0
Wei Jincai Male Feb. 1950
Independent
Director
June 26, 2009－
June 25, 2012
0 0
Li Chun male March 1957
Independent
Director
June 26, 2009－
June 25, 2012
0 0
Qu Wenzhou Male June 1972
Independent
Director
June 26, 2009－
June 25, 2012
0 0
Wang Fuzhu Male June 1953
Chairman of
the
Supervisory
Committee
June 26, 2009－
June 25, 2012
0 0
Xue Ruitao Male March 1961 Supervisor
June 26, 2009－
June 25, 2012
0 0
Zhang Kai Male May 1965 Supervisor
June 26, 2009－
June 25, 2012
0 0
Miao Liubin Male Feb. 1971
Employee
Supervisor,
GM of
Flight
Depratment
June 26, 2009－
June 25, 2012
0 0
Zhou Qiaoyan Female Jan. 1975
Employee
Supervisor,
Deputy Head
June 26, 2009－
June 25, 2012
0 0Shandong Airlines Co., Ltd. 2009 Annual Report
13
of Cabin
Service
Department
Yu Haitian Male Sep. 1969
Deputy
General
Manager
June 26, 2009－
June 25, 2012
0 0
Song Yuxia Female Jan. 1956
Deputy
General
Manager
June 26, 2009－
June 25, 2012
0 0
Li Qing’en Male Aug. 1955
Deputy
General
Manager
June 26, 2009－
June 25, 2012
0 0
Xiao Feng Male Oct. 1968
Deputy
General
Manager,
Chief
Accountant
June 26, 2009－
Jan. 26, 2010
0 0
Qiu Feng Male Jan. 1967
Deputy
General
Manager
June 26, 2009－
June 25, 2012
0 0
Zhang Qingshe Male Oct. 1958 Chief Pilot
June 26, 2009－
June 25, 2012
0 0
Xiong Jianbo Male Jan. 1965
General
Engineer
Dec. 1, 2009－
June 25, 2012
0 0
Dong Qiantang Male Jan. 1962
Secretary of
the Board
June 26, 2009－
June 25, 2012
0 0
Note: 1. There was no change in the number of shares held by directors, supervisors
and senior executives in the report period.
2. Particulars about directors, supervisors holding the post in Shareholding Company
Name
Name of the
Shareholding
Company
Position in the Shareholding Company
Draw remuneration
and allowance from
the Shareholding
Company
(Yes or no)
Feng Gang SDA
Chairman, President, Vice-Secretary of
Party Committee
Yes
Zhang Xingfu SDA
Secretary of Party Committee,
Vice-president
Yes
Wang Fuzhu SDA Chief Accountant Yes
Xue Ruitao SDA General Manager of Financial Department YesShandong Airlines Co., Ltd. 2009 Annual Report
14
Wang
Mingyuan
Air China Director of Commerce Commission Yes
Zhang Kai Air China
Senior Management of Investment
Enterprise Management of Assets
Management Department
Yes
(II) Main work experiences in the near five years of the directors, supervisors and
senior executives, as well as particulars of their full time or part time posts in other
units other than the shareholding companies
Name Main work experience
Full-time or part-time posts in other units
other than the shareholding companies
Zhang Xingfu
01/2004-12/2005, Deputy Mayor in Yantai;
12/2005 till now, Party Secretary, Vice-president
of SDA;
03/2006 till now, Chairman of the Board of the
Company.
Chairman of Taikoo Shandong Aircraft
Engineering Co., Ltd.
Feng Gang
01/2004-05/2007, General Manager and Party
Secretary of China National Aviation Asset
Management Co., Ltd.;
05/2007 till now, Chairman, President and Vice
Party Secretary of SDA;
06/2007 till now, Vice-chairman of the
Company.
Zeng Guoqiang
01/2004 till now, Director and General Manager
of the Company.
Su Zhongmin
01/2004 till now, Director and Standing Deputy
General Manager of the Company.
Chairman of the Board of Qingdao
International Logistics Centre Co., Ltd.
Xiao Feng
01/2004-08/2005, Deputy General Manager of
Financial Department of Air China ;
08/2005-01/2010, Chief Accountant of the
Company;
03/2009-01/2010, Deputy General Manager of
the Company;
04/2005 till now, Director of the Company.
Wang
Mingyuan
01/2004-06/2005, Deputy General Manager of
Sales & Marketing Department of Air China;
06/2005-07/2008, Commissary of Commerce
Commission, General Manager of Network
Proceedings Department of Air China ;
07/2008 till now, Director of Commerce
Commission Air China;
03/2006, Director of the Company.Shandong Airlines Co., Ltd. 2009 Annual Report
15
Kou Zunxian
01/2004-03/2007, Director of Asset Management
Department of Shandong Economic
Development and Investment Company;
03/2007 till now, Deputy General Manager of
Shandong Economic Development and
Investment Company;
04/2005 till now, Director of the Company.
Wang Jieming
01/2004 till now, Director of Planning Financial
Department of Shandong Economic
Development and Investment Company;
03/2006 till now, Director of the Company.
Wei Jincai
01/2004-10/2008, Party Secretary of Civil
Aviation Management Institute of China;
10/2008 till now, President of Civil Aviation
Management Institute of China;
03/2006 till now, Independent Director of the
Company.
President of Civil Aviation Management
Institute of China
Li Chun
Now he is Chairman of Shenzhen Lawyers
Association, Vice-director of Development
Strategy Committee of Chinese National
Lawyers Association, Finance and Securities
Committee of National Counsel Association,
Chief Researcher of Venture Investment Law
Research Center and Managing Partner of
Grandall Legal Group.
06/2009 till now, Independent Director of the
Company.
Qu Wenzhou
Once served as Manager of Investment Bank
Department of Xiamen Jianfa Investment Trust
Corporation, Post doctor of Tsinghua University,
bonds researcher of Shenzhen Stock Exchange
Workstation. Now he is in Xiamen University
taking the positions of PhD Student Supervisor
in School of Management, Deputy Dean of
Department of Finance, chairman of China
Capital Market Research Center;
06/2009 till now, Independent Director of the
Company.
Concurrently serves as Independent
Director of Xiamen International Airport
Co.,Ltd, Meihua Umbrella Co., Ltd., Fujian
Zhonghe Co., Ltd.
Wang Fuzhu
01/2004-04/2005, Director of the Company;
01/2004 till now, Chief Accountant of SDA;
05/2005 till now, Chairman of Supervisory
Committee of the Company.
Xue Ruitao
2004-03/2009, Minister of the Finance
Department of the Company;Shandong Airlines Co., Ltd. 2009 Annual Report
16
03/2009 till now, General Manager of Finance
Department of Shandong Aviation Group.
06/2009 till now, Supervisor of the Company.
Zhang Kai
07/2004-12/2005, Enterprise Management
Department of Air China Limited;
01/2006 till now, Senior Manager of Assets
Management Department of Air China Limited;
06/2009 till now, Employee Supervisor of the
Company.
Miao Liubin
04/2004-08/2007, Captain of the First Flying
Brigade;
08/2007 till now, General Manager of the Flight
Department of the Company;
06/2009 till now, Employee Supervisor of the
Company.
Zhou Qiaoyan
01/2004 till now, Deputy Head of Cabin Service
Department of the Company;
03/2006 till now, Employee Supervisor of the
Company.
Yu Haitian
01/2004 till now, Deputy General Manager of
the Company.
Chairman of the Board of Shandong
Airlines Rainbow Jets Co., Ltd.
Song Yuxia
01/2004-04/2005, Director of the Company;
01/2004-05/2005, General Manager of Qingdao
Branch of the Company;
01/2004 till now, Deputy General Manager of
the Company.
Chairwoman of the Board of Shandong
International Aero Training Co., Ltd.,
Chairwoman of the Board of Qingdao
Feisheng International Aero Technical
Training Co., Ltd.
Li Qing’en
01/2004-08/2005, Chief Accountant of the
Company;
01/2005-03/2009, Secretary of Board of
Directors of the Company;
01/2005 till now, Deputy General Manager of
the Company.
Qiu Feng
07/2005-03/2009, Deputy GM of Network
Proceedings Department of Air China;
03/2009 till now, Deputy GM of the Company.
Zhang Qingshe 01/2004 till now, Chief Pilot of the Company.
Xiong Jianbo
01/2004-05/2008, Minister of Aircraft
Engineering Department;
05/2008-12/2009, General Manager of
Engineering Technology Company of the
Company;
12/2009 till now, Chief Engineer of the
Company.Shandong Airlines Co., Ltd. 2009 Annual Report
17
Dong Qiantang
01/2003-02/2009, Minister of Enterprise
Planning and Developmnet Department of
Shandong Aviation Group;
02/2009 till now, General Manager of Enterprise
Management of the Company;
06/2009 till now, Secretary of the Board of
Directors.
(II) Particulars about annual payment
The payments of the directors, supervisors and senior executives of the Company
were determined according to the performances and results salary system. The
allowance for each independent director was RMB 50,000 per year as the basic
number plus an extra allowance of RMB 600 for every working day.
Name Title
Total amount of annual
remuneration in 2009
(RMB’0000, before tax)
Zeng Guoqiang Director, General Manager 65.65
Su Zhongmin Director, Standing Deputy General Manager 56.41
Xiao Feng
Director, Deputy General Manager, Chief
Accountant
46.83
Wei Jincai Independent Director 5.90
Li Chun Independent Director 2.98
Qu Wenzhou Independent Director 2.98
Miao Liubin Employee Supervisor, GM of Flight Department 30.79
Zhou Qiaoyan
Employee Supervisor, Deputy Head of Cabin
Service Department
19.27
Yu Haitian Deputy General Manager 54.82
Song Yuxia Deputy General Manager 56.97
Li Qing’en Deputy General Manager 53.70
Qiu Feng Deputy General Manager 33.28
Zhang Qingshe Chief Pilot 54.85
Xiong Jianbo General Engineer 31.50
Dong Qiantang Secretary of Board of Directors 23.21
Total 539.14
1. Director Mr. Zhang Xingfu and Director Mr. Feng Gang, together with Supervisor
Mr. Wang Fuzhu and Supervisor Mr. Xue Ruitao drew their remunerations from SDA,
the controlling shareholder, not from the Company; Director Mr. Wang Mingyuan,
and Supervisor Mr. Zhang Kai drew their remunerations from Air China, not from the
Company; Director Mr. Kou Zunxian and Director Ms. Wang Jieming drew their
remunerations from Shandong Economic Development and Investment Company, notShandong Airlines Co., Ltd. 2009 Annual Report
18
from the Company.
2. Independent Directors Mr. Li Chun and Mr. Qu Wenzhou were elected as
Independent Directors of the Company on June 26, 2009, thus, the remuneration for
second half of 2009 was delivered.
3. Mr. Qiu Feng did not withdraw remuneration from the Company since May 2009;
Mr. Dong Qiantang withdrew remuneration from the Company since March 2009.
(III) Particulars about changes of directors, supervisors and senior executive
1. On March 6, 2009, due to work change, Mr. Bai Weisan brought forward to resign
his posts of Director and Deputy General Manager of the Company; Deputy General
Manager Mr. Li Qing’en did not concurrently take the post of Secretary of the Board
due to work arrangement; at the same time, Mr. Xiao Feng was engaged as the Deputy
General Manager and Chief Accountant of the Company, Mr. Qiu Feng was engaged
as Deputy General Manager of the Company.
2. On June 26, 20009, the 2008 Annual Shareholders’ General Meeting of the
Company elected Mr. Zhang Xingfu, Mr. Feng Gang, Mr. Zeng Guoqiang, Mr. Su
Zhongmin, Mr. Kou Zunxian, Ms. Wang Jieming, Mr. Xiaofeng and Mr. Wang
Mingyuan as the directors of the 4th board; elected Mr. Wei Jincai, Mr. Li Chun and
Mr. Qu Wenzhou as the independent director of the 4th board; elected Mr. Wang Fuzhu,
Mr. Xue Ruitao and Mr. Zhang Kai as the supervisors of the 4th supervisory
committee, they formed the 4th Supervisory Committee of the Company with 2
employee supervisors Mr. Miao Liubin and Ms. Zhou Qiaoyan elected in Employee
Representative Conference.
On the same day, the 1st meeting of the 4th board of the Company elected Mr. Zhang
Xingfu as Chairman of the Company, Mr. Feng Gang as Vice-chairman of the
Company; engaged Mr. Zeng Guoqiang as the General Manager of the Company, Mr.
Su Zhongmin as the Standing Deputy General Manager; engaged Mr. Yu Haitian, Ms.
Song Yuxia, Mr. Li Qing’en, Mr. Xiao Feng. Mr. Qiu Feng as General Managers of
the Company; engaged Mr. Zhang Qingshe as Chief Pilot, Mr. Xiao Feng as Chief
Accountant(concurrently-taking), Mr. Dong Qiantang as Secretary of the Board.
On the same day, the 1st meeting of the 4th board of the Company elected Mr. Wang
Fuzhu as the Chairman of the Supervisory Committee.
3. In Dec. 2009, the 2nd Extraordinary Meeting of the 4th board of the Company
engaged Mr. Xiong Jianbo as the Chief Pilot of the Company.
4. On Jan. 26, 2010, Mr. Xiao Feng put forward to resign his posts of Deputy General
Manager and Chief Accountant of the Company; on Jan. 29, 2010, the board engaged
Mr. Xu Guo Jian as the Deputy General Manager and Chief Accountant of the
Company.
(IV) About staff
By the end of the report period, the Company had 4,115 employees in total, including
38 postgraduates (Master Degree and Doctor Degree) or above, 2,056 persons
graduated from 3-years regular college or above. The staff structure is as follows:Shandong Airlines Co., Ltd. 2009 Annual Report
19
Type of employee Number
Proportion to the total
employees
Flight personnel 475 11.5％
Aircraft crew and maintenance personnel 654 15.9％
Marketing personnel (market and freight) 824 20％
Air host and hostess 940 22.8％
Ground attendant 313 7.6％
Financial personnel 143 3.5％
Others 766 18.6％
By the end of the report period, there were 31 retirees in the Company.
V. Administration Structure of the Company
(I) Particulars about Company Administration
1. Particulars about the Company Administration in the report period
In 2009, strictly according to Company Law, Securities Law and relevant laws and
regulations promulgated by CSRC, the Company continuously perfected the
Company’s corporate governance structure and standardized its operation. In the
report period, the election on changes and appointment of the fourth board,
supervisory committee and senior executives was accomplished; a series of internal
control system and management system were modified and perfected, thus assuring
orderly operation of the Company. Professional committees of the board of directors
carried their work step by step, and the scientific decision-making level was further
enhanced. On the basis of Articles of Association, Working System of Independent
Directors and other regulations and systems, independent directors of the Company
took an active part in board meetings and shareholders’ general meetings, deepened to
know the development and operation status of the Company and expressed
independent opinions on the significant events in a diligent and responsible way.
Compared with the standard documents issued by CSRC on governance for listed
companies, the Board of Directors thinks the actual administration of the Company
was basically in accordance with regulations of Code of Corporate Governance for
Listed Companies.
The Company further fined and perfected the Company’s system construction,
regulated governance and information disclosure of the Company, operated strictly in
accordance with the laws and regulations and the rules of the Company, promoted
regulated operation level, and advanced the sustainable, healthy and steady
development of the Company.
(II) Performance of Independent Directors
Since the Independent Directors of the Company, Mr. Wei Jincai, Mr. Li Chun and Mr.Shandong Airlines Co., Ltd. 2009 Annual Report
20
Qu Wenzhou took their posts, they fulfilled their duties in an honest, diligent and
responsible way, attended various meetings of the Board and Shareholders’ General
Meeting on time and attended Supervisory Committee meetings as non-voting
delegates; researched and studies actively the operation, business development and
financial status of the Company, supervised stictly over and guided the normative
operation of the Company, participated actively in the decision-making of the Board
of Directors, and expressed independent and objective opinions on the nomination of
Director, suggestion and engagement of certified public accountants and significant
related transactions of the Company; during the process of preparing the periodical
report, the management team of the Company had sufficient communication with
accountants, earnestly fulfilled its duties of supervision and inspection, making
tremendous contributions to the scientification and standardization of decisions,
enhanced the gradual perfection of the administration structure, and defended
corporate interest as well as legitimate interest of all the investors.
1. Particulars about Independent Directors’ Attending the Board of Directors
Name
Present times for
the Board of
Directors this
year
Presenting
in person
(Times)
Entrusted presence
(Times)
Absent
(Times)
Wei Jincai 8 8 0 0
Li Chun 4 4 0 0
Qu Wenzhou 4 4 0 0
2. Objections on the related terms of the Company offered by the independent
directors:
In the report period, there was no objection made by independent directors on related
matters.
(III) Separation of the Company and holding shareholder in business, personal, assets,
organization and finance.
The Company and SDA, the controlling shareholder, have been made “Five
Seperations” in business, personal, assets, organization and finance. The Company
possesses the independent and complete business and operates independently.
(IV) Evaluation and encouragement mechanism of senior executives
According to the internal Regulation on the Integrated Evaluation and Management of
Executives, the Company conducted the annual comprehensive evaluation on the
senior executives and implemented the wage system where payment was linked with
performances.
(V) Particulars about establishment and perfection of the Company’s internal control
systemShandong Airlines Co., Ltd. 2009 Annual Report
21
1. Self-assessment summary on implementation effectiveness of internal control
system of the Company in this year from the board of directors:
The Company had developed and effectively enforced a set of internal control system
that is comparatively complete combining with self-operation characteristics,
therefore, ensured the operational normality and order of the Company, protected the
security and intactness of corporate assets and guaranteed the truthfulness, legality,
accuracy and wholeness of information including accounting data. The inner control
system on a whole has characteristic of entirety, reasonableness and validity. Taking
Basic Standards for Internal Control of Business Enterprise and Guideline of Internal
Control for the Listed Companies of Shenzhen Stock Exchange as the yardstick, the
inner control of the Company was normative, strict, adequate and effective in the
aspects of inner environment, goal-setting, event recognition, risk assessment and
solution, controlling activities, information and communication and supervision and
inspection, etc, which was in general in accordance with the relevant requirements of
CSRC and SZSE.
The Board of Directors of the Company made self-assessment on the aforesaid
aspects of internal control of this year; no significant faults in internal control design
or implementation were discovered. The Board of Directors of the Company thought
the internal control system of the Company was integrated and implemented
effectively from Jan. 1st of this year to the end of the report period.
For details, please refer the Bord of Directors’ Self Assessment Report on Internal
Control of Shandong Airlines Co., Ltd. (Year 2009)
2. Opinions given by Supervisory Committee on S Self-assessment for The Company
Internal Control
According to Basic Standard for Enterprise Internal Control and the Guideline of
Internal Control for the Listed Companies of Shenzhen Stock Exchange, The
Company earnestly checked the internal control system of the Company in 2009, and
drew conclusions that:
(1) Complying with the relevant regulations promulgated by CSRC and SZSE,
following the basic principles for internal control, and basing on the actual status of
the Company, the Company had built a sound internal control system covering a wide
range of link which maintained the normal operation and protected corporate
properties.
(2) Adequate and effective enforcement and supervision of major activities on
internal-control was secured by the complete internal control mechanism. In 2009, the
Company has no such status case which violated the Guideline of Internal Control for
the Listed Companies of Shenzhen Stock Exchange or the internal control system of
the Company.
3. Independent Opinion given by Independent Board of Directors on Self-assessment
for The Company Internal control
In 2009, According to Basic Standard for Enterprise Internal Control and the
Guideline of Internal Control for the Listed Companies of Shenzhen Stock Exchange,Shandong Airlines Co., Ltd. 2009 Annual Report
22
the Company checked the internal control system wholly and deeply; on the basis of
independent judgment, independent directors made careful checkings on internal
control of the Company in 2009 and made the following independent opinions:
(1) In 2009, the Company further revised and improved a series of internal control
and management systems, the internal control system was further improved, which
comformed to the national laws and rules, requirements of supervisory organization
and demands of the current production operations of the Company.
(2) Important activities on internal control were carried out in compliance with the
regulations regarding control systems; internal control exercised over subsidiaries,
related transactions, external guarantee, significant investment and information
disclosure was strict, full and effective, which played a satisfactory role in taking
charging of each managerial processes and links and ensured normal operation of the
Company, and presented qualities of rationality, entirety and effectiveness.
VI. Brief introduction to the Shareholders’ General Meeting
In the report period, the Company held one Shareholders’ General Meeting, which
was the Annual Shareholders’ General Meeting of 2008.
1. Notification, convening and holding of the Shareholders’ General Meeting
On June 26, 2009, at time of 9:00, the Company held its 2008 Annual Shareholders’
General Meeting on 31/F conference room of SDA Building. The Company notified
the shareholders of the meeting by means of Public Notice, and the notification of the
meeting was published in China Securities Journal, Securities Times and Hong Kong
Wen Wei Po dated June 3, 2009. Totally 6 shareholders and shareholder’s proxies with
authorization from shareholders representing 259,851,000 shares of the Company
presented at the meeting, and Shandong Hualu Group Co., Ltd. entrusted the office of
board to vote on its own voting will representing 199,000 shares of the Company,
which totaled 260,050,000 shares taking 65.0125% in the total amount of shares with
voting rights of the Company: including 259,801,000 state-owned legal person’s
shares, taking 64.95% of total shares of the Company; 199,000 domestic legal
person’s shares, taking 0.05% of total shares; 50,000 domestically listed foreign share
(B share), taking 0.0125% of total shares of the Company. Chairman of the Board, Mr.
Zhang Xingfu presided the meeting. The directors, supervisors and senior executives
of the Company attended the meeting. The convening and holding of the Meeting
accorded with the regulations of Company Law, Standardizing Opinions on
Shareholders’ General Meeting of Listed Company and Articles of Association of the
Company.
2. The resolutions passed by the Shareholders’ General Meeting and the disclosure of
public notice on resolutions
Following proposals were examined item-by-item and approved by means of roll callShandong Airlines Co., Ltd. 2009 Annual Report
23
vote in the meeting:
(1) Work Report 2008 of the Board of Directors of Shandong Airlines Co., Ltd.;
(2) Work Report 2008 of the Supervisory Committee of Shandong Airlines Co., Ltd.;
(3) Annual Report 2008 of Shandong Airlines Co., Ltd.;
(4) Financial Settlement Report 2008 of Shandong Airlines Co., Ltd.;
(5) Profit Distribution Plan 2008 of Shandong Airlines Co., Ltd.;
(6) Proposal on Election of Changing Office Term of Board of Directors;
(7) Proposal on Election of Changing Office Term of Supervisory Committee;
(8) Proposal on Increasing Business Scope of Shandong Airlines Co., Ltd.;
(9) Proposal on Revising Articles of Association of Shandong Airlines Co., Ltd.;
(10) Proposal on Routine Related Transaction in 2009;
(11) Proposal on Re-engaging Certified Public Accountants and its Remunerations.
The resolutions of the meeting were published in China Securities Journal, Securities
Times and Hong Kong Wen Wei Po dated June 27, 2009.
VII. Report of the Board of Directors
(I) Discussion and analysis to the operation
Confronted with severe impact posed by international financial crisis, the Company
thoroughly applied the Scientific Development Thought and implemented
Crisis-Passing strategy actively under the right leadership of Shandong Provincial
Party Committee, Shandong Provincial Government, and Civil Aviation
Administration of China. The Company scientifically and practically adapted itself to
the changing environment to turn crisis into opportunities; made coordinated
arrangement for works involving reform, innovation and development; achieved the
stable development of safe production; realized historic breakthrough in profit; had
prominent improvement in service, positive change in overall management levels, a
harmonious and stable staff; and successfully realized safe flights for 15 years.
1. Safety: The Company kept zero human error-caused flying accident for two
consecutive years and zero record of ground accident. The safety management level
and safety control ability were reinforced further and the general security trend
remained steady.
2. Transportation index: In 2009, the Company totally had 151,000 hours for safety
flights and 87,000 sorties, respectively 18.5% and 13.9% up compared to those of the
same period of last year; overall transportation amounting to 971 million
ton*kilometer was accomplished by the Company, 21.3% up compared to those of the
same period of last year; and totally 7,817,000 passengers were safely conveyed,
19.2% up compared to those of the same period of last year.
3. Benefit: In 2009, the operating income realized by the Company totaled RMB
5.302 billion，6.34 % up compared to that of the same period of the last year; total
profit amounted to RMB403 million , increasing by RMB295 million compared to
that of the same period of last year; ratio of debts to assets was reduces to below 90%.
The Company received some promotions in its capabilities of profit-making,
development and debts repayment.Shandong Airlines Co., Ltd. 2009 Annual Report
24
4. Service:
The punctuality rate for the scheduled flight in the whole year of 2009 was 83.4%,
ranking second among the national civil aviation; only 0.82 time complaints were
received from every 10,000 passengers, 0.48 time/10,000 passenger down compared
to that of the same period of last year; the satisfaction rate from passengers was
89.82%, 0.62 percentage points up compared to that of the same period of last year;
and the dilapidation error rate for baggage was 0.0238%, 0.0044% down compared to
that of the same period of the last year. As the flight service partner for the Eleventh
National Games, the Company successfully finished the service and assurance task
during the session and was thus rewarded as “Advanced Collective for Preparing the
Eleventh National Games” and “Award for Special Contributions for the Eleventh
National Games” by Provincial Party Committee of Shandong, Shandong Provincial
Government, and Organization Committee for National Games.
(II) Operation in the report period
1. Scope of main operations and their status
The Company is mainly engaged in business of passenger and cargo civil aviation
transportation and air traffic from home to its surrounding nations and districts, hotel
and food service, air machine reparation, agency business for inter airlines, ground
services related to main operation.
2. Constitution of main business of the Company
(1)Main business classified by industries
Unit: RMB
Industry Operation income Operation cost
Operation income
increased or
decreased
compared to last
year (%)
Operation cost
increased or
decreased compared
to last year (%)
Aviation transportation
industry
5,274,362,420.93 4,085,895,627.76 6.49% -0.38%
Logistics transportation
industry
7,015,287.38 1,910,437.19 16.52% 45.48%
Hotel and food industry 22,984,060.08 19,179,045.59 1.98% 22.83%
(2)Main business classified by areas
Unit: RMB
Domestic International
Industry
Operation income
Increased or
decreased
compared to
last year
Operation income
Increased or
decreased
compared to
last year
Aviation transportation industry 5,129,904,072.85 7.41% 144,458,348.08 -18.33%
Logistics transportation industry 7,015,287.38 16.52% - -Shandong Airlines Co., Ltd. 2009 Annual Report
25
Hotel and food industry 22,984,060.08 1.98% - -
3. Operations and achievements of holding and share-join companies
(1) Qingdao International Airlines Logistics Center Co., Ltd.
Qingdao International Airlines Logistics Center Co., Ltd., whose shares are held by
the Company, is mainly engaged in air cargo storage, ground dispatching,
e-commerce, the 3rd party logistics design and implementation, logistics business
consultation and other related services, with registered capital amounting to RMB 30
million. In the report period, the company realized net profit amounting to RMB
1,536,300. Till the end of the report period, the total assets were RMB 45,776,600 and
RMB 43,439,400 for net assets.
(2) Shandong Airlines Rainbow Jets Co., Ltd.
Shandong Airlines Rainbow Jet Co., Ltd., which the Company joined shares in,
realized net profit of RMB 585,000 by audited in the report period. Till the end of the
report period, the total assets were RMB 89,010,000.
(3)Sichuan Airlines Co., Ltd.
Sichuan Airlines Co., Ltd., which the Company joined shares in, has not finished the
2009 audit work till now.
(4) Travelsky Technology Limited
Travelsky Technology Limited, which the Company joined shares in, has not finished
the 2009 audit work till now.
(5) Jinan International Airport Co., Ltd.
Jinan International Airport Co., Ltd., which the Company joined shares in, has not
finished the 2009 audit work till now.
4. Main suppliers and customers
The total amount of purchase to the top five suppliers took up 43% of the total annual
amount of purchases of the Company (mainly purchases of aviation fuel, aircraft
materials, and machine offerings); the total amount of sales to the top five customers
took up 13.08% of the total annual amount of sales of the Company.
(III)Investment of the Company
1. In the report period, there was no proceeds raised or application of proceeds raised
in the previous period but lasted to this report period in the Company.
2. In the report period, the Company had no investment with non-raised proceeds.
(IV) Financial status of the Company in the report period
1. Change of accounting policy and accounting estimation, and correction ofShandong Airlines Co., Ltd. 2009 Annual Report
26
accounting error
With the changes on recent market condition and pilot mobility, the Company
re-examined the beneficial years in accordance with the service years and resignations
of the pilots. The 2010 First Extraordinary Meeting of the 4th Board of the Company
examined and approved the Proposal on Changes to Accounting Estimation of
Shandong Airlines Co., Ltd., which decided to adopt new accounting estimations
since Oct. 1, 2009, and change the amortization periods of training expense on pilots
from 20 years to 10 year. Thus, the changes of accounting estimation made the current
net profit decrease amounting to RMB 24,159,590.99.
The influences on net profit of 2009 by the aforementioned as follows: (Unit: RMB)
2009
Adjustment
Item Amount
Changes of the amortization periods Operating cost 32,212,787.99
of training expense on pilots Income tax expense -8,053,197.00
Total 24,159,590.99
2. Assets constitution and reasons for the changes
(1) Significant change in assets constitution of the Company compared to that of the
same period of last year during the report period
Unit: RMB
Dec. 31st of 2009 Dec. 31st of 2008
Items
Amount
Proportio
n
Amount Proportion
Increase or
decrease
scope in
amount
compared to
that of last
year (%)
Scope of change in
proportion
Transaction
financial
assets 11,341,846.48 0.14% 23,460,812.11 0.30% -52%
Down 0.16 percentage points
Construction
in progress
422,277,445.58 5.22%
1,277,744,153.3
2 16.29% -66.95%
Down 11.07 percentage points
Notes payable
182,124,331.32 2.25% 10,000,000.00 0.13% 1721%
Up 2.12 percentage points
Accounts
receivable in
advance
117,956,240.43
1.46%
87,735,493.54 1.12% 34.45%
Up 0.34 percentage points
Tax payable
177,564,425.49
2.19%
111,337,241.37
1.42% 59.48%
Up 0.77 percentage pointsShandong Airlines Co., Ltd. 2009 Annual Report
27
Interest
payable
4,001,134.66
0.05%
9,634,990.00 0.12% -58.47%
Down 0.07 percentage points
Deferred
income tax
assets
91,836,911.34
1.13%
68,774,158.11 0.88% 33.53%
Up 0.25 percentage points
Deferred
income tax
liabilities 2,835,461.62 0.04%
19,816,576.46 0.25% -86%
Down 0.21 percentage points
(2)Reason for change
Item Explanations
Transaction financial
assets
Fair value of interest rate swap decreased.
Construction in progress Purchased airplanes which were transferred into fixed assets.
Notes payable Adopting notes financing method increased.
Accounts receivable in
advance
The freight capacity of the Company was consolidated.
Tax payable Tax payable in year-end increased.
Interest payable Loan rate of foreign currency in year-end decreased.
Deferred income tax
assets
Withdrawal in advance of heavy maintenance expense of assets increased.
Deferred income tax
liabilities
Due to the decrease of fair values of transaction financial assets and adjustment of
tax of exchange gains/losses.
3. Changes on the main financial data of the Company occurred in the report period
Unit: RMB
Item 2009 2008
Increase or
decrease
scope (%)
Explanations for change reasons
Investment
income
3,715,867.94 11,175,753.02 -67%
Due to decrease in investment
income which was actually
delivered during holding the
transaction financial assets in the
report period.
Sales expense 346,387,720.51 236,554,096.88 46%
Due to expansion in scales of
Company’s fleet and marketing
network, and increases in
computer reservation fees and
agent commission fees.
Non-operating 155,122,260.87 43,893,809.88 253% Due to the returns ofShandong Airlines Co., Ltd. 2009 Annual Report
28
income Construction Fund of Civil
Aviation.
Income tax
expense
100,618,103.42 26,622,215.36 278%
Due to increase in total profit of
this report year.
4. Measurement attributes adopted for the main assets
The Company started to implement the new Accounting Standard for Enterprise since
Jan. 1st of 2007. In the report period, no significant change had happened to the
measurement attributes adopted for the main assets of the Company. Details of the
measurement attributes are available in Notes to Financial Report.
5. Constitution of cash flow of the Company, and particulars about the items which
received significant changes compared to those of last year and reasons for the
changes
(1) Constitution of the cash flow
Unit: RMB
Item 2009 2008
Increase or decrease
occurred in this year
compared to that of last
year (%)
Net cash flow arising from operating
activities 1,317,347,150.42 1,059,833,106.56 24%
Net cash flow arising from
investment activities -672,532,927.01 -1,285,932,710.29 -48%
Net cash flow arising from financing
activities -640,382,266.73 229,614,517.64 -379%
Influence on cash and cash
equivalents from change of exchange
rate -35,585.75 -709,703.85 -95%
Net increase in cash and cash
equivalents 4,396,370.93 2,805,210.06 57%
(2) Particulars about the significant changes in cash flow compared to that of last
year and reasons for the changes during the report period
Unit: RMB
Item 2009 2008
Increase or decrease
occurred in this year
compared to that of last
year (%)
Explanations for change
reasons
Other cash received
concerning operating
activities
144,094,051.53 79,525,658.45
81.19%
Due to return of
infrastructure fund of Civil
Aviation in the report period.
Cash received from
investment income
2,098,225.94 11,211,668.70
-81.29%
Due to decrease in
investment income whichShandong Airlines Co., Ltd. 2009 Annual Report
29
was actually delivered during
holding the transaction
financial assets in the report
period.
Net cash received from
disposal of fixed,
intangible and other
long-term assets
327,572,914.09 23,995.00 1365071.55%
Due to transfer the rights of
purchasing airplanes.
Net cash received from
disposal of subsidiaries
and other units
0 912,019.23
-100.00%
Due to liquidate the
Shandong Aviation Union
Express Co., Ltd.
Cash paid for dividend
and profit distributing or
interest paying
195,890,585.87 262,317,177.48
-25.32%
Due to decrease in loan rate
of foreign currency.
Influence on cash and
cash equivalents due to
fluctuation in exchange
rate
-35,585.75 -709,703.85
-94.99%
Influenced comprehensively
by the changes in deposit
structure of foreign currency
and exchange rate in the
report period.
(V) Influence on the Company brought by change in operation environment,
macro-policy and laws and regulations
1. Owing to the smooth and rapid growth of national economy, there will be an
increase in the demand for civil aviation, especially for domestic civil aviation. The
state will intensify adjustment on the economic structure, enlarge civil consumption
demands, stabilize foreign trade, and implement the programs for adjusting and
revitalizing key industries, fostered strategic and newly-emerging industries and
promoted modern services industry, which will give a forceful push to the
development of civil aviation.
2. The impact of financial crisis has not yet been eliminated; the outside environment
might change in a more complicated way and the economic trend seems obscure and
unpredictable; the international aviation oil price is likely to be shocked to go up, he
fluctuation on dollar exchange rate could be aggravated; the influences on civil
aviation affected by the high-speed train is uncertain; and the operation cost of
aviation company would be probably added by the low-carbon economy.
(VI) Explanation of the Board of Directors on interpretative explanatory paragraph in
the auditors’ report
Reanda Certified Public Accountants audited Financial Report 2009 of the Company
and presented standard unqualified Auditor’s Report.
(VII) Prospects of the future development of the Company and work plan of theShandong Airlines Co., Ltd. 2009 Annual Report
30
Board of Directors for year 2010
2010 is a crucial year for the comprehensive implementation of “the Eleventh
Five-Year Plan” and the design for the “Twelfth Five-Year Plan”, while the period
from 2010 to the “Twelfth Five-Year” will be a period of important strategic
opportunities for the rapid progress of the Company. At this momentous turning point
connecting the past and the future, the Company will stay sober-minded constantly to
take into full consideration of both the current and the long-term, get hold of every
opportunity and challenge, and integrate innovation with development, lay a solid
foundation for the realization of new leap forward in scientific development by means
of steady and effective endeavors.
1. Continue to perfect corporate governance structure and strengthen the construction
of internal control system
Fully exert the functions of decide-making, audit and examination of each special
committee of the Board of Directors; further ensure that independent directors, each
special committee and supervisory committee fulfill their duties and actually provide
necessary and convenient conditions for supervisory work; according to basic
criterion and specific criterion of enterprises’ internal control issued by relevant
department, continue to complete and perfect internal control system and improve
management level of internal control.
2. Several works will be focused on:
(1) Strengthen the capability of safe management and control, ensure the lasting
safety.
(2) Enhance resources integration and the utilization efficiency guarantee sustainable
profit-making.
(3) Keep in line with the international standards for service, upgrade the service
quality persistently
(4) Promote managerial innovation in an all-round manner, shape the core
competition strength.
(5) Exert the advantages of political work, reinforce the rallying and combat spirit of
the team.
(VIII) Capital needs in realizing operation plan, using plan and capital source
In 2010, the existed financial structure and loans arrangement from bank could satisfy
capital need in normal operations of the Company.
(IX) Routine work of the Board of Directors
1. The Board of Directors of the Company totally held 8 meetings in 2009.
(1) On Mar. 6, 2009, the Company held the 2009 1st Extraordinary Meeting of the 3rd
Board of Director voting in communication. The public notice of the resolutions of
the Meeting was published on China Securities Journal, Securities Times and Hong
Kong Wen Wei Po dated Mar. 7, 2009.
(2) On Mar. 27, 2009, the Company held the 14th meeting of the 3rd Board ofShandong Airlines Co., Ltd. 2009 Annual Report
31
Directors. The public notice of the resolutions of the Meeting was published on China
Securities Journal, Securities Times and Hong Kong Wen Wei Po dated Mar. 31, 2009.
(3) On April 28, 2009, the Company held the 15th meeting of the 3rd Board of
Directors. The public notice of the resolutions of the Meeting was published on China
Securities Journal, Securities Times and Hong Kong Wen Wei Po dated April 30,
2009.
(4) On June 2, 2009, the Company held the 16th meeting of the 3rd Board of Directors
voting in communication. The public notice of the resolutions of the Meeting was
published on China Securities Journal, Securities Times and Hong Kong Wen Wei Po
dated June 3, 2009.
(5) On June 26, 2009, the Company held the 1st meeting of the 4th Board of Directors.
The public notice of the resolutions of the Meeting was published on China Securities
Journal Securities Times and Hong Kong Wen Wei Po dated June 27, 2009.
(6) On Aug. 21, 2009, the Company held the 2nd meeting of the 4th Board of Directors
voting in communication. The public notice of the resolutions of the Meeting was
published on China Securities Journal, Securities Times and Hong Kong Wen Wei Po
dated Aug. 25, 2009.
(7) On Oct. 29, 2009, the Company held the 3rd meeting of the 4th Board of Directors
voting in communication. The public notice of the resolutions of the Meeting was
published on China Securities Journal Securities Times and Hong Kong Wen Wei Po
dated Oct. 30, 2009.
(8) On Dec. 1, 2009, the Company held the 2009 2nd Extraordinary Meeting of the 4th
Board of Directors voting in communication. The public notice of the resolutions of
the Meeting was published on China Securities Journal, Securities Times and Hong
Kong Wen Wei Po dated Dec. 2, 2009.
2. The implementation of the resolutions of Shareholders’ General Meeting by the
Board of Directors
In the report period, according to the requirements of the relevant laws and
regulations of Company Law, Securities Law and Articles of Association, the Board
of Directors of the Company seriously implemented various resolutions approved by
Shareholders’ General Meeting strictly in compliance with the resolutions and
authorization of Shareholders’ General Meeting.
(1) The implementation of profit distribution of the Company of 2008
The main business of the Company was still in losses, in order to meet the demands of
daily production operations, the Company didn’t carry out profit distribution in 2008.
Particulars about the cash bonus of the Company in previous three years
Unit: RMB
Amount of cash bonus
(tax included)
Net profit attributable to
shareholders of listed
company in
consolidated statement
Ratio of net profit attributable to
shareholders of listed company in
consolidated statementShandong Airlines Co., Ltd. 2009 Annual Report
32
(2) The Board of Directors of the Company strictly implemented other various
resolutions approved by Shareholders’ General Meeting, actively arranged the
production and operation, investment disposal and fundamental construction etc..
(X) Profit Distribution Preplan or Preplan on Converting Capital Public Reserve into
Share Capital
Audited by Reanda Certified Public Accountants, the Company realized net profit
RMB300.8534 million in 2009. The undistributed profits of the beginning of the year
was 33,9647 million,And the profit available for distribution of parent company till
Dec. 31, 2009 was RMB334.8181 million.
In order to return the shareholder’s supports for many years, and meanwhile, consider
the long-term development of the Company, the Board plans to submit the 2009 profit
distribution plan to the shareholders’ general meeting, as follows:
1. Withdrawal of current statutory surplus reserve amounts to RMB30.0853 million.
2. Plans to distribute cash bonus amounting to RMB80 million, taking the total shares
400,000,000 of the Company ended as Dec. 31, 2009 as the base, the cash bonus for
each 10 share is RMB2(Tax included).
(XI) Duty implementation of the Audit Committee of the Board of Directors
In the report period, the Audit Committee of the Board of Directors issued opinions
on the various periodic reports and event about the reengagement of certified public
accountant.
The Audit Committee of the Board of Directors has done lots of work during the 2009
auditing period of the Company. According to the requirements of Articles of
Association, Work System of Annual Report for Independent Directors of Shandong
Airlines Co., Ltd. and Work Rules of Audit Committee of Shandong Airlines Co., Ltd.,
the Audit Committee makes the following summary on the 2009 auditing work:
1. Ensured the general audit plan and examined the financial statements of the
Company
With negotiation among the independent directors of the Company, the Audit
Committee and Reanda Certified Public Accountants, the audit work arrangement for
2009 of the Company was confirmed. At the same time, the independent directors and
the Audit Committee examined the 2009 financial statements formed by the Company
and considered that: the Company made financial calculation in compliance with the
regulation of the new accounting standards and no significant untrue contents was
of bonus year
2008 0.00 80,981,442.68 0.00%
2007 0.00 68,171,958.24 0.00%
2006 0.00 10,025,635.45 0.00%Shandong Airlines Co., Ltd. 2009 Annual Report
33
carried in the annual report materials; the 2009 financial statements preprared by the
Company basically reflected the assets, liabilities and production and operation
achievements of the Company till Dec. 31, 2009 and it was agreed to take this
financial statement as the basis to carry out the 2009 financial audit work.
2. Kept normal negotiations with the Certified Public Accountants and paid attention
to the progress of auditing
During the audit period, the Audit Committee consistently kept negotiations with the
financial department and the Certified Public Accountants. Meanwhile, the
Committee took close eyes to the progress of auditing and examines the financial
reports.
3. Called in the Audit Committee to examine and approve the proposals related to
Annual Report
Reanda Certified Public Accountants finished its auditing work in scheduled time and
issued standard unqualified Auditor’s Report. The Audit Committee held meeting to
examine and approve the following proposals: the 2009 Financial Settlement Report,
the 2009 Profit Distribution Preplan, the 2009 Annual Report, and Reengagement of
Certified Public Accountant.
(XII) Duty implementation of the Remuneration Committee of the Board of Directors
The Remuneration Committee made examination on the remuneration of the directors,
supervisors and senior executives of the Company disclosed in the 2009 Annual
Report and offered the following opinions: the present remuneration system of the
Company was made according to the regulated decision-making procedure; the
remuneration of the directors, supervisors and senior executives of the Company was
in compliance with relevant regulations; the remuneration of relevant personnel
disclosed in the 2009 Annual Report of the Company was real and accurate.
VIII. Report of the Supervisory Committee
(I) Particulars about the work of Supervisory Committee
In 2009, the Supervisory Committee exerted the duties authorized by Company Law
of the P.R.C. and the Articles of Association of the Company according to laws with
assiduity and responsibility, actively implemented supervision functions on the
Company’s operating decision-making, financial status, the responsibility and
behaviors of directors and senior managers in the period and tried to safeguard the
rights and interests of the shareholders.
The Supervisory Committee had hold four meetings of the Supervisory Committee
and attended all Shareholders’ General Meetings and meetings of the Board in 2009.
In the report period, the Supervisory Committee totally held the following meetings:
1. On Mar. 27th of 2009, the 9th Meeting of the 3rd Supervisory Committee was held inShandong Airlines Co., Ltd. 2009 Annual Report
34
the conference room of SDA Building. The meeting examined and approved the
following proposals:
(1) The 2008 Annual Report and Summary of Shandong Airlines Co., Ltd;
(2) The 2008 Working Report of Shandong Airlines Co., Ltd.;
(3) Proposal on Accounting Treatment of Errors Correction of Interest Rate Swap.
The public notice of the resolutions was published on China Securities Journal,
Securities Times and Hong Kong Wen Wei Po dated Mar. 31st of 2009.
2. On April 28th of 2009, the 10th Meeting of the 3rd Supervisory Committee was held
in the conference room of SDA Building. The meeting examined and approved the
Proposal on Election of Changing Term of Supervisory Committee of Shandong
Airlines Co., Ltd.
The public notice of the resolutions was published on China Securities Journal,
Securities Times and Hong Kong Wen Wei Po dated April 30th of 2009.
3. On June 26th of 2009, the 1st Meeting of the 4th Supervisory Committee was held in
the conference room of SDA Building. The meeting examined and approved Proposal
on Election of Chairman of Supervisory Committee of Shandong Airlines Co., Ltd.
The public notice of the resolutions was published on China Securities Journal,
Securities Times and Hong Kong Wen Wei Po dated June 27th of 2009.
4. On Aug. 21st of 2009, the Meeting of the Supervisory Committee was held in the
conference room of SDA Building. The meeting examined and approved the 2009
Semi-annual Report and its Summary of Shandong Airlines Co., Ltd.
(II) Independent Opinions of the Supervisory Committee on relevant events in 2009
The Supervisory Committee conducted serious inspection and supervision on such
conditions as the Company’s finance, implementing resolutions of Shareholders’
General Meeting, operating decision-making, operation according to laws, operating
behaviors of directors, managers and senior executives and related transactions, etc;
and believed that the operation management of the Company was in accordance with
the relevant laws and regulations and the Articles of Association of the Company.
1. Operation according to laws
In the report period, the Company conducted regulated operation complying with
Company Law, Securities Law, Articles of Association of the Company, and Rules for
Shares Listed with Shenzhen Stock Exchange and other national relevant laws and
regulations. It implemented effective internal control system inside the Company.
Following the regulations and laws and being honest with faith and diligence,
directors and senior executives of the Company carefully implemented every
resolutions approved in Shareholders’ General Meeting with a view to protect the
shareholders’ interests. There was no behaviors found that directors or senior
executives broke the laws, regulations, or Articles of Association or harmed the
interests of the Company in their office terms.Shandong Airlines Co., Ltd. 2009 Annual Report
35
2. Finance management of the Company
The Supervisory Committee carefully examined the financing situation of the
Company. In the opinion of the Supervisory Committee, 2009 Financial Report of the
Company reflected the financial situation and operation results of the Company
truthfully and fairly. The accounting vouchers, books and statements, and other
accounting materials were genuine and standard.
3. Related transaction
The related transactions of the Company are done in accordance with the market
principle, so they are of equality and reasonable price, and also maintain the interests
of shareholders’ equity and the listed companies.
IX. Significant Events
(I) The Company has not been involved in significant lawsuits or arbitrations in the
report period.
(II) The Company has no bankruptcy and reforming in the report period.
(III) The Company holds 8,697,000 shares of Chinese Information Network
Incorporation of Civil Aviation which is listed in Hong Kong Exchanges and Clearing
Limited. The nature of these shares is non-circulating domestic shares.
The Company holds no share equity of other listed companies, or equity of financial
enterprises such as joint stock commercial banks, securities companies, insurance
companies, trust companies and futures companies.
(IV) No purchase and sale of assets and merger of the Company in the report period.
(V) The implementation of stock option incentive plan in the report period
There is no implementation of stock option incentive plan of the Company in the
report period.
(VI) Significant related transaction
The Company has some related transactions with its holding shareholders and their
subordinate companies at present. These related transactions are necessity for the
Company and are unavoidable. Before the transactions, the Company has already
fully considered the quality, price and efficiency of the services and goods provided
by the related parties and also made analysis and comparison on the market
environment. The independent directors of the Company presented opinions on the
related transactions which believed that the Company and the related parties made the
deals with market principles of open, equality and justice, the transaction price was
fair and there was no behaviour hurting profit of other shareholders.Shandong Airlines Co., Ltd. 2009 Annual Report
36
1. Purchasing and selling merchandise, providing and accepting service
(1) In the report period, airplane maintaining fee of RMB 83.347 million has occurred
between the Company and Taikoo (Shandong) Aircraft Engineering Co., Ltd. This
transaction amount took proportion of 22.19% in the same kind transactions. The
Company paid for this transaction in cash according to the market price.
(2) The occurring amount on cooperation of the scheduled flights between Air China
Limited and the Company was RMB 19.2 million, the transaction was collected based
on the negotiated price by the two concerned parties.
(3) The related transactions about the routine operations in 2009
Unit: RMB’0000
Classification of the
related transactions
Related parties
Anticipated
amount
Actual
amount
Taikoo (Shandong) Aircraft Engineering Co., Ltd 8,151 8,334
Shandong Xiangyu Aero Technical Services Co., Ltd. 1,200 1,935
1. Maintenance of
aircraft and fittings
Subtotal 9,351 10,269
Qingdao Feisheng International Aero Technical Training Co.,
Ltd.
703 410
Shandong International Aero Training Co., Ltd. 1,172 793
2. Training expense
Subtotal 1,875 1,203
Shandong Aviation Group(Rent for office land and daily
accommodation)
1,220 1,129
3.Rent for office
land, and daily
accommodation Subtotal 1,220 1,129
Air China Limited (aircraft lease) 57,184 62,323
Air China Limited (joint owned operation) 1,000 1,920
Air China Limited (labour service support) 1,074 1,020
4. Aircraft lease and
market cooperation
Subtotal 59,258 65,263
2. The Company and its controlling shareholder’s cooperative investment
The Company had no cooperative investment with its controlling shareholders in the
report period.
3. Credits and liabilities between the Company and related parties
There are no newly increased credits and liabilities between the Company and related
parties in the report period.
(VII) Significant contracts and implementation
1. There are no assets entrustment, contract and lease in the report period.
2. In the report period, the Company had no external significant guarantee.
3. In the report period, the Company had no entrusted financing.Shandong Airlines Co., Ltd. 2009 Annual Report
37
4. Other significant contracts
Up to the end of the report period, the accumulated amount of long-term and
short-term borrowings of the Company amounted to RMB 4,142,571,600.
The Company had no other significant contracts which were not disclosed.
(VIII) The Company had not entrusted anyone to manage its cash assets in the report
period.
(IX) In the report period, there is no significant commitment.
(X) Engagement of Certified Public Accountants
In the report period, the Company continued to engage Reanda Certified Public
Accountants as Auditing Organization of the Company. 2008 Annual Shareholders’
General Meeting examined and approved the Proposal on Renewal of Engaging CPA
and its Remunerations, the Company engaged Reanda Certified Public Accountants as
2009 Auditing Organization of the Company. In the report period, the Company
should pay the annual auditing fee of RMB 600,000. The aforesaid auditing
organization has provided auditing services to the Company for the 6th year.
(XI) In the report period, the Company and the Board of Directors have not received
check, administrative punishment and notice of criticism from the CSRC, and public
criticism from the securities exchange.
(XII) In the report period, the received research and interview of the Company.
In accordance with the principles of just, fair and publicity, further regulate the
behaviors of information disclosure for the listed companies, the Company received
the research and media interviews in standardized way according to the regulations of
Guideline on Fair Information Disclosure for Listed Companies promulgated by
Shenzhen Stock Exchange. In the report period, the Company received organization
investors, analysts, investors of B-stock, and the research, visits and telephone
communication from specialized media many times; the Company received them and
replies strictly in accordance with relevant regulations; there occurred no such
situations as selectively and privately reveal or leak non-public significant
information to specific parties; and all these assure the fairness of information
disclosure of the Company.
Activities Form of Receiving Research,
Communication and Interview in the Report Period
The
received
date
The
received
place
The received
way
The received parties
Contents discussed and materials
supplied
June 2009 Jinan Spot research News media, organization Financial status and operations planShandong Airlines Co., Ltd. 2009 Annual Report
38
investors and investors of
B-share
in 2009, provide the 2008 Annual
Report of the Company
Jan.-Dec.,
2009
Jinan
Telephone
interview,
communication
Organization investors
and investors of B-share
Operating situations and significant
events of the Company
X. Financial ReportShandong Airlines Co., Ltd. 2009 Annual Report
39
Auditors' Report
REANDA SHEN ZI [2010] No. 1141
To the Shareholders of Shandong Airlines Co., Ltd
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (“The
Company”), which comprise the balance sheet and the consolidated balance sheet as at
December 31, 2009, the income statement and the consolidated income statement, the
statement of changes in equity and the consolidated statement of changes in equity and the
cash flow statement and the consolidated cash flow statement for the year then ended, as well
as a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
The Company’s management is responsible for the preparation of these financial statements
in accordance with the Enterprises Accounting Standards of China. This responsibility
includes: (1) designing, implementing and maintaining internal control relevant to the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error; (2) selecting and applying appropriate accounting policies; (3) making
accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Chinese Certified Public Accountants'
Auditing Standards. These standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amount and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditorShandong Airlines Co., Ltd. 2009 Annual Report
40
considers internal control relevant to the entity’s preparation of the financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation
of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Auditing opinion
In our opinion, the financial statements have been prepared in accordance with the
requirements of the Enterprises Accounting Standards promulgated by the People’s Republic
of China, and present fairly, in all material respects, the financial position of Shandong
Airlines Co., Ltd as at December 31, 2009, and the results of its operations and its cash flows
for the year then ended.
Reanda Certified Public Accountants Co., Ltd. Certified Public Accountant
Certified Public Accountant
Beijing, China March 24, 2010Shandong Airlines Co., Ltd. 2009 Annual Report
41
Consolidated Balance Sheet
For the year ended December 31, 2009
Name of the company: Shandong Airlines Co.,Ltd Monetary unit : ( RMB) Yuan
Assets Notes 31/12/2009 31/12/2008
Liabilities and Shareholders'
equity
Notes 31/12/2009 31/12/2008
Current Assets： Current liabilities:
Monetary funds
Ⅴ.1 194,065,742.69
71,872,933.88
Short-term loans
Ⅴ.16
739,819,020.88 1,006,887,514.55
Held for trading financial
assets Ⅴ.2
11,341,846.48
23,460,812.11
Held for trading financial
liabilities
Notes receivable
Notes payables
Ⅴ.17
182,124,331.32
10,000,000.00
Accounts receivable
Ⅴ.3 142,545,895.96 126,118,032.09
Account payables
Ⅴ.18
812,032,950.07
875,319,060.11
Advances to suppliers
Ⅴ.4
22,504,262.48
29,124,244.97
Advances from customers
Ⅴ.19
117,956,240.43
87,735,493.54
Interests receivable
Payroll payables
Ⅴ.20
135,033,537.40
91,119,967.07
Dividend receivable
Ⅴ.5
1,617,642.00
Tax payable
Ⅴ.21
177,564,425.49
111,337,241.37
Other accounts receivable
Ⅴ.6 160,552,013.99 144,978,136.24
Interest payables
Ⅴ.22
4,001,134.66
9,634,990.00
Inventories Ⅴ.7 Dividend payablesShandong Airlines Co., Ltd. 2009 Annual Report
42
65,267,781.10 74,347,529.57 11,940.00 11,940.00
Non-current assets due
within one year
Other account payables
Ⅴ.23
124,930,463.59
161,736,748.70
Other current assets
Non-current liabilities due
within one year Ⅴ.24
535,108,457.71
615,589,677.22
Total Current Assets 597,895,184.70 469,901,688.86 Other current liabilities
Non-current assets: Total current liabilities 2,828,582,501.55 2,969,372,632.56
Available-for-sale financial
assets
Non-current liabilities:
Held-to-maturity investments Long-term borrowings Ⅴ.25 3,402,752,588.39 3,159,333,277.39
Long-term account
receivables
Bonds payable
Long-term equity
investments Ⅴ.9
88,352,100.00
88,352,100.00
Long-term account payable
Ⅴ.26
968,968,451.94 1,114,459,905.38
Investment properties Grants&Subsidies received
Fixed assets Ⅴ.10 6,631,600,764.96 5,684,074,945.46 Accrued liabilities
Construction in progress
Ⅴ.11 422,277,445.58 1,277,744,153.32
Deferred income tax liabilities
Ⅴ.14
2,835,461.62
19,816,576.46
Construction materials
Other non-current liabilities
Ⅴ.27
27,718,573.00
18,319,557.83
Liquidation of fixed assets Total non-current liabilities 4,402,275,074.95 4,311,929,317.06
Production biology assets Total liabilities 7,230,857,576.50 7,281,301,949.62
Oil and gas assets Shareholders' equity:
Intangible assets
Ⅴ.12
47,895,073.21
46,945,074.17
Share capital
Ⅴ.28
400,000,000.00
400,000,000.00
Development expenses Capital reserve Ⅴ.29Shandong Airlines Co., Ltd. 2009 Annual Report
43
84,050,162.84 84,050,162.84
Goodwill Less: inventory shares
Long-term deferred assets
Ⅴ.13 216,546,250.96 208,312,781.55
Appropriation of reserve
fund
Deferred income tax assets
Ⅴ.14
91,836,911.34
68,774,158.11
Surplus reserve
Ⅴ.30
59,576,069.03
29,490,727.77
Other non-current assets
Appropriation of normal risk
provision
Total non-current assets
7,498,508,546.05 7,374,203,212.61
Undistributed profits
Ⅴ.31
308,668,390.11
36,471,405.69
Exchange difference of
foreign currency financial
statements translation
Equity attributable to the
shareholders of parent
company
852,294,621.98
550,012,296.30
Minority interests
13,251,532.27
12,790,655.55
Total shareholders’
equity
865,546,154.25
562,802,951.85
Total assets
8,096,403,730.75 7,844,104,901.47
Total liabilities and
shareholders’ equity 8,096,403,730.75 7,844,104,901.47
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
44
Consolidated Income Statement
For the year ended December 31, 2009
Name of the company: Shandong Airlines Co.,Ltd Monetary unit : ( RMB) Yuan
Items Notes For the year 2009 For the year 2008
I. Total operating income
Ⅴ.32
5,366,113,363.68
5,049,391,116.47
Less: Operating costs
Ⅴ.32
4,110,033,275.19
4,156,123,366.72
Operating tax and surcharge
Ⅴ.33
158,797,763.77
132,823,862.65
Selling expenses
Ⅴ.34
346,387,720.51
236,554,096.88
Administrative expenses
228,619,847.42
187,022,654.78
Financial costs
Ⅴ.35
251,871,219.83
253,541,156.57
Impairment loss of assets
Ⅴ.36
239,449.15
-551,458.89
Add: gains from the fair value changes (The loss is listed
beginning with “-“) Ⅴ.37
-12,118,965.63
-19,293,822.87
Investment income (The loss is listed beginning with “-“)
Ⅴ.38
3,715,867.94
11,175,753.02
Including: the investment income from associated and joint
ventures enterprises
Exchange gains(The loss is listed beginning with “-“)Shandong Airlines Co., Ltd. 2009 Annual Report
45
II. Operating profit(The loss is listed beginning with “-“)
261,760,990.12
75,759,367.91
Add: non-operating income
Ⅴ.39
155,122,260.87
43,893,809.88
Less: non-operating expense
Ⅴ.40
13,521,945.17
11,392,350.23
Including: loss from disposal of non-current assets
13,495,868.42
10,915,236.47
III. Total profits (The loss is listed beginning with “-“)
403,361,305.82
108,260,827.56
Less: income tax expense
Ⅴ.41
100,618,103.42
26,622,215.36
IV. Net profits (the net loss is listed beginning with “-”)
302,743,202.40
81,638,612.20
Net profits attributable to shareholders of the parent company
302,282,325.68
80,981,442.68
Minority interests
460,876.72
657,169.52
V. Earnings per share
(Ⅰ) Basic earnings per share
0.76
0.20
(Ⅱ) Diluted earnings per share
0.76
0.20
VI . Other comprehensive gains
VII. Total comprehensive gains
302,743,202.40
81,638,612.20Shandong Airlines Co., Ltd. 2009 Annual Report
46
Total comprehensive gains attributable to shareholders of
the parent company
302,282,325.68
80,981,442.68
Total comprehensive gains attributable to minority
shareholders
460,876.72
657,169.52
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang Wuping
Consolidated Cash Flow Statement
For the year ended December 31, 2009
Name of the company: Shandong Airlines Co.,Ltd Monetary unit : ( RMB) Yuan
Items Notes For the year 2009 For the year 2008
I. Cash flows from operating activities:
Cash received from sales of goods or rendering of services
5,372,538,176.19
5,142,461,900.44
Refund of taxes and levies
Cash received related to other operating activities
Ⅴ.43（1）
144,094,051.53
79,525,658.45
Subtotal of cash inflow from operating activities
5,516,632,227.72
5,221,987,558.89
Cash paid for goods and services
3,288,589,954.21
3,362,644,381.56
Cash paid to and on behalf of employees
614,147,622.35
543,461,203.22
Payments of taxes and leviesShandong Airlines Co., Ltd. 2009 Annual Report
47
199,428,230.46 176,555,377.04
Cash paid related to other operating activities
Ⅴ.43（2）
97,119,270.28
79,493,490.51
Subtotal of cash outflow from operating activities
4,199,285,077.30
4,162,154,452.33
Net cash flow arising from operating activities
1,317,347,150.42
1,059,833,106.56
II. Cash flow from investment activities:
Cash received from investments
Cash dividends received from investment
2,098,225.94
11,211,668.70
Net cash received from disposal of fixed assets, intangible assets and other
long-term assets
327,572,914.09
23,995.00
Net cash received from disposal of subsidiaries and other business units
912,019.23
Cash received related to other investing activities
Subtotal of cash inflow from investing activities
329,671,140.03
12,147,682.93
Cash paid to acquire and construct fixed assets, intangible assets and other
long-term assets
1,002,204,067.04
1,298,080,393.22
Cash paid to acquire investments
Net cash paid to acquire subsidiaries and other business units
Cash paid related to other investing activities
Subtotal of Cash outflow from investing activities
1,002,204,067.04
1,298,080,393.22
Net cash flow arising from investing activitiesShandong Airlines Co., Ltd. 2009 Annual Report
48
-672,532,927.01 -1,285,932,710.29
III. Cash flow from financing activities:
Cash received from investments
Including: Cash received from investment in subsidiaries from minority
shareholders
Cash received from loans
2,228,373,619.53
2,578,478,035.95
Cash received from issuance of bonds
Cash received related to other financing activities
Subtotal of cash inflow from financing activities
2,228,373,619.53
2,578,478,035.95
Repayment of loans or debts
2,345,081,757.10
1,812,750,241.19
Cash payments for interest expenses and distribution of dividends or profits
195,890,585.87
262,317,177.48
Including: Dividends and profits paid from subsidiary to minority shareholders
Cash paid related to other financing activities
Ⅴ.43（3）
327,783,543.29
273,796,099.64
Subtotal of cash outflow from financing activities
2,868,755,886.26
2,348,863,518.31
Net cash flow arising from finacing activities
-640,382,266.73
229,614,517.64
IV. Effects on cash and cash equivalents for the change of foreign exchange
rates
-35,585.75
-709,703.85
V. Net increase in cash and cash equivalents
4,396,370.93
2,805,210.06Shandong Airlines Co., Ltd. 2009 Annual Report
49
Add: beginning balance of cash and cash equivalents
44,937,058.88
42,131,848.82
VI .Ending balance of cash and cash equivalents
Ⅴ.44（2）
49,333,429.81
44,937,058.88
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang Wuping
Consolidated Statement of Changes in Shareholders'Equity
For the year ended December 31, 2009
Name of the company: Shandong Airlines Co.,Ltd Monetary unit : ( RMB) Yuan
For the year 2009
Equity attributable to the shareholders of parent company
Items
Share capital
Capital
reserve
minus:
Inventory
shares
Reserve
Funds
Surplus
reserve
Normal
risk
provision
Undistributed
profits
Others
Minority
interests
Total
shareholders’
equity
I. Balance at the end of previous year
400,000,000.00
84,050,162.84
29,490,727.77
36,471,405.69
12,790,655.55
562,802,951.85
Add: Changes of accounting policies
Correction of errors in prior
years
OthersShandong Airlines Co., Ltd. 2009 Annual Report
50
II. Balance at the beginning of the
year
400,000,000.00
84,050,162.84
29,490,727.77
36,471,405.69
12,790,655.55
562,802,951.85
III. Changes in equity in the year
30,085,341.26
272,196,984.42
460,876.72
302,743,202.40
(I)Net profit for the year
302,282,325.68
460,876.72
302,743,202.40
(II)Other comprehensive gains
Sub-total of above (I) and (II)
302,282,325.68
460,876.72
302,743,202.40
(III) Capital investment by the
shareholders
1.Capital investment by shareholders in
the year
2. Amount calculated into equity paid
in shares
3. Others
(IV) Profit distribution in the year
30,085,341.26
-30,085,341.26
1．Appropriation of surplus reserve
30,085,341.26
-30,085,341.26
2．Appropriation of normal risk
provision
3．Distribution to shareholders
4．Others
(V) Internal settlement and transfer of
shareholders' equityShandong Airlines Co., Ltd. 2009 Annual Report
51
1. Transfer of capital reserve to capital
2. Transfer of surplus reserve to capital
3. Surplus reserve makes up for the loss
4. Others
(VI) Reserve Funds
1．Appropriated in current year
2．Used in current year
IV. Balance at the end of this period
400,000,000.00
84,050,162.84
59,576,069.03
308,668,390.11
13,251,532.27
865,546,154.25
Consolidated Statement of Changes in Shareholders'Equity
For the year ended December 31, 2008
Name of the company: Shandong Airlines Co.,Ltd Monetary unit : ( RMB) Yuan
For the year 2008
Equity attributable to the shareholders of parent company
Items
Share capital
Capital
reserve
minus:
Inventory
shares
Reserve
Funds
Surplus
reserve
Normal
risk
provision
Undistributed
profits
Others
Minority
interests
Total
shareholders’
equity
I. Balance at the end of previous year
400,000,000.00
84,050,162.84
24,919,586.71
-39,938,895.93
12,133,486.03
481,164,339.65
Add: Changes of accounting policies
Correction of errors in priorShandong Airlines Co., Ltd. 2009 Annual Report
52
years
Others
II. Balance at the beginning of the
year
400,000,000.00
84,050,162.84
24,919,586.71
-39,938,895.93
12,133,486.03
481,164,339.65
III. Changes in equity in the year (the
decrease is listed beginning with “-”)
4,571,141.06
76,410,301.62
657,169.52
81,638,612.20
(I)Net profit for the year 80,981,442.68
657,169.52
81,638,612.20
(II)Other comprehensive gains
Sub-total of above (I) and (II)
80,981,442.68
657,169.52
81,638,612.20
(III) Capital investment by the
shareholders
1.Capital investment by shareholders in
the year
2. Amount calculated into equity paid
in shares
3. Others
(IV) Profit distribution in the year
4,571,141.06
-4,571,141.06
1．Appropriation of surplus reserve
4,571,141.06
-4,571,141.06
2．Appropriation of normal risk
provision
3．Distribution to shareholdersShandong Airlines Co., Ltd. 2009 Annual Report
53
4．Others
(V) Internal settlement and transfer of
shareholders' equity
1. Transfer of capital reserve to capital
2. Transfer of surplus reserve to capital
3. Surplus reserve makes up for the loss
4. Others
(VI) Reserve Funds
1．Appropriated in current year
2．Used in current year
IV. Balance at the end of this period
400,000,000.00
84,050,162.84
29,490,727.77
36,471,405.69
12,790,655.55
562,802,951.85
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
54
Balance Sheet
December 31st, 2009
Name of the company ： Shandong Airlines Co., Ltd Monetary unit : ( RMB) Yuan
Asset Note 31/12/2009 31/12/2008
Liabilities and Shareholders'
equities Note 31/12/2009 31/12/2008
Current assets: Current liability:
Monetary funds
179,813,989.83
57,648,117.02
Short-term loan
739,819,020.88 1,006,887,514.55
Tradable financial
assets
11,341,846.48
23,460,812.11
Tradable financial liabilities
Note receivable Notes payable 182,124,331.32 10,000,000.00
Accounts
receivable
Ⅺ.1
140,731,572.47
125,105,495.35
Accounts payable
810,639,584.15 873,297,361.73
Advance to
suppliers
22,370,882.70
28,986,600.63
Advance from customers
117,467,352.04 86,115,566.69
Interests
receivable
Payroll payable
135,018,545.42 91,114,079.09
Dividend
receivable
1,617,642.00
Tax payable
177,319,512.46 111,270,281.82
Other accounts
receivables
Ⅺ.2
160,483,475.47
145,198,107.29
Interests payable
4,001,134.66 9,634,990.00
Inventories
65,267,781.10
74,347,529.57
Dividend payable
11,940.00
11,940.00Shandong Airlines Co., Ltd. 2009 Annual Report
55
Non-current assets
due within one
year
Other accounts payable
124,872,192.44 161,909,084.49
Other current
assets
Non-current liabilities due within
one year 535,108,457.71 615,589,677.22
Total current
assets
581,627,190.05
454,746,661.97
Other current liabilities
Non-current
assets:
Total current liabilities
2,826,382,071.08 2,965,830,495.59
Available-for-sale
financial assets
Non-current liabilities:
Held-to-maturity
investment
Long-term borrowings
3,402,752,588.39 3,159,333,277.39
Long-term
accounts
receivable
Bonds payable
Long-term equity
investment
Ⅺ.3
112,165,305.97
112,165,305.97
Long-term accounts payable
968,968,451.94 1,114,459,905.38
Investment
property
Grants&Subsidies received
Fixed assets 6,619,089,545.44 5,670,839,727.85 Accrued liabilties
Construction in
process
422,277,445.58 1,277,744,153.32
Deferred income tax liabilities
2,835,461.62 19,816,576.46
Construction
materials
Other non-current liabilities
27,718,573.00 18,319,557.83Shandong Airlines Co., Ltd. 2009 Annual Report
56
Liquidation of
fixed assets
Total non-current liabilities
4,402,275,074.95 4,311,929,317.06
Production
biology assets
Total liabilities
7,228,657,146.03 7,277,759,812.65
Oil and gas assets Shareholders' equity:
Intangible assets
33,013,562.26
32,028,907.27
Share capital
400,000,000.00 400,000,000.00
Development
expenses
Capital reserve
84,050,162.84 84,050,162.84
Goodwill Less: inventory shares
Long-term
deferred assets
216,370,254.46
208,312,781.55
Appropriation of reserve fund
Deferred income
tax assets
91,812,136.84
68,767,156.73
Surplus reserve
58,915,364.50 28,830,023.24
Other non-current
assets
Appropriation of normal risk
provision
Total
non-current
assets 7,494,728,250.55 7,369,858,032.69
Undistributed profits
304,732,767.23 33,964,695.93
Total shareholders’ equity 847,698,294.57 546,844,882.01
Total assets
8,076,355,440.60 7,824,604,694.66
Total liabilities and
shareholders’ equity 8,076,355,440.60 7,824,604,694.66
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
57
Income Statement
For the year 2009
Name of the company ： Shandong Airlines Co.,
Ltd
Monetary unit : ( RMB) Yuan
Items Notes For the year 2009 For the year 2008
I.Total operating income Ⅺ.4 5,362,673,481.18 5,043,370,423.20
Less: operating cost Ⅺ.4 4,111,698,242.88 4,154,810,196.93
Business taxes and surtax 158,446,999.40 132,521,572.99
Selling expense 346,387,720.51 236,554,096.88
Administration expense 225,696,583.77 185,216,685.46
Financial expenses 252,180,082.66 253,847,227.41
Impairment loss of assets
196,362.15
-607,469.89
Add: profits from the fair value changes (The loss
is listed beginning with “-“) -12,118,965.63 -19,293,822.87
Investment income (The loss is listed beginning
with “-“)
Ⅺ.5
3,715,867.94 11,632,849.93
Including: the investment income from associated
and joint ventures enterprises
II. Operating profit(The loss is listed beginning
with “-“) 259,664,392.12
73,367,140.48Shandong Airlines Co., Ltd. 2009 Annual Report
58
Add: non-operating income 155,122,260.87 43,886,369.82
Less: non-operating expense 13,520,445.27 11,392,350.23
Including: loss from disposal of non-current assets 13,494,368.52 10,915,236.47
III. Total profits (The loss is listed beginning
with “-“) 401,266,207.72 105,861,160.07
Less: income tax expense 100,412,795.16 26,309,550.15
IV. Net profits (The net loss is listed beginning
with “-”) 300,853,412.56
79,551,609.92
V. Earnings per share
1.Basic earnings per share
2.Diluted earnings per share
Ⅵ.Other comprehensive gains
Ⅶ.Total comprehensive gains
300,853,412.56
79,551,609.92
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
59
Cash Flow Statement
For the year 2009
Name of the company ： Shandong Airlines Co., Ltd Monetary unit : ( RMB) Yuan
Items Notes For the year 2009 For the year 2008
I. Cash flows from operating activities:
Cash received from sales of goods or rendering of
services
5,371,074,050.51
5,136,425,151.76
Refund of taxes and levies
Cash received related to other operating activities
143,549,876.83
79,162,652.85
Subtotal of cash inflow from operating activities
5,514,623,927.34
5,215,587,804.61
Cash paid for goods and services
3,290,761,891.91
3,362,102,687.66
Cash paid to and on behalf of employees
612,051,079.62
542,037,899.11
Payments of taxes and levies
198,501,653.16
174,869,903.11
Cash paid related to other operating activities
96,311,963.23
79,146,006.44
Subtotal of cash outflow from operating activities
4,197,626,587.92
4,158,156,496.32
Net cash flow arising from operating activities
1,316,997,339.42
1,057,431,308.29Shandong Airlines Co., Ltd. 2009 Annual Report
60
II. Cash flow from investment activities:
Cash received from investments
Cash dividends received from investment
2,098,225.94
11,211,668.70
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets
327,572,914.09
19,095.00
Net cash received from disposal of subsidiaries and
other business units
912,019.23
Cash received related to other investing activities
Subtotal of cash inflow from investing activities
329,671,140.03
12,142,782.93
Cash paid to acquire and construct fixed assets,
intangible assets and other long-term assets
1,001,881,192.04
1,297,866,611.22
Cash paid to acquire investments
Net cash paid to acquire subsidiaries and other
business units
Cash paid related to other investing activities
Subtotal of Cash outflow from investing activities
1,001,881,192.04
1,297,866,611.22
Net cash flow arising from investing activities
-672,210,052.01
-1,285,723,828.29
III. Cash flow from financing activities:
Cash received from investments
Cash received from loans
2,228,373,619.53
2,578,478,035.95Shandong Airlines Co., Ltd. 2009 Annual Report
61
Cash received related to other financing activities
Subtotal of cash inflow from financing activities
2,228,373,619.53
2,578,478,035.95
Repayment of loans or debts
2,345,081,757.10
1,812,750,241.19
Cash payments for interest expenses and distribution
of dividends or profits
195,890,585.87
262,317,177.48
Cash paid related to other financing activities
327,783,543.29
273,796,099.64
Subtotal of cash outflow from financing activities
2,868,755,886.26
2,348,863,518.31
Net cash flow arising from finacing activities
-640,382,266.73
229,614,517.64
IV. Effects on cash and cash equivalents for the
change of foreign exchange rates
-35,585.75
-706,709.41
V. Net increase in cash and cash equivalents
4,369,434.93
615,288.23
Add: beginning balance of cash and cash
equivalents
30,712,242.02
30,096,953.79
VI .Ending balance of cash and cash equivalents
35,081,676.95
30,712,242.02
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
62
Statement of changes in the shareholders' equity
For the year 2009
Name of the company ： Shandong
Airlines Co., Ltd
Monetary unit : ( RMB)
Yuan
For the year 2009
Items Notes
Share capital
Capital
reserve
minus:
Inventory
shares
Reserve
Funds
Surplus
reserve
Normal risk
provision
Undistributed
profits
Total shareholders’ equity
I. Balance at the end of previous year
400,000,000.00
84,050,162.84
28,830,023.24 33,964,695.93 546,844,882.01
Add: 1.Changes of accounting
policies
2.Correction of errors in
prior years
3.Others
II. Balance at the beginning of the
year
400,000,000.00
84,050,162.84
28,830,023.24 33,964,695.93 546,844,882.01
III. Changes in equity in the year (the
decrease is listed beginning with “-”)
30,085,341.26 270,768,071.30 300,853,412.56
(I)Net profit for the year 300,853,412.56 300,853,412.56
(II)Other comprehensive gains
Sub-total of above (I) and (II) 300,853,412.56 300,853,412.56
(III) Capital investment by the
shareholdersShandong Airlines Co., Ltd. 2009 Annual Report
63
1.Capital investment by shareholders in
the year
2. Amount calculated into equity paid
in shares
3. Others
(IV) Profit distribution in the year
30,085,341.26 -30,085,341.26
1．Appropriation of surplus reserve
30,085,341.26 -30,085,341.26
2．Appropriation of normal risk
provision
3．Distribution to shareholders
4．Others
(V) Internal settlement and transfer of
shareholders' equity
1. Transfer of capital reserve to capital
2. Transfer of surplus reserve to capital
3. Surplus reserve makes up for the loss
4. Others
(VI) Reserve Funds
1．Appropriated in current year
2．Used in current year
IV. Balance at the end of current
period
400,000,000.00
84,050,162.84
58,915,364.50 304,732,767.23 847,698,294.57Shandong Airlines Co., Ltd. 2009 Annual Report
64
Statement of changes in the shareholders' equity
Name of the company ： Shandong Airlines Co., Ltd For the year 2008 Monetary unit : ( RMB) Yuan
For the year 2008
Items Notes
Share capital
Capital
reserve
minus:
Inventory
shares
Reserve
Funds
Surplus
reserve
Normal risk
provision
Undistributed
profits
Total shareholders’ equity
I. Balance at the end of previous year
400,000,000.00
84,050,162.84
24,442,948.14 -41,199,838.89 467,293,272.09
Add: 1.Changes of accounting
policies
2.Correction of errors in
prior years
3.Others
II. Balance at the beginning of the
year
400,000,000.00
84,050,162.84
24,442,948.14 -41,199,838.89 467,293,272.09
III. Changes in equity in the year (the
decrease is listed beginning with “-”)
4,387,075.10 75,164,534.82 79,551,609.92
(I)Net profit for the year 79,551,609.92 79,551,609.92
(II)Other comprehensive gains
Sub-total of above (I) and (II) 79,551,609.92 79,551,609.92
(III) Capital investment by the
shareholders
1.Capital investment by shareholders in
the yearShandong Airlines Co., Ltd. 2009 Annual Report
65
2. Amount calculated into equity paid
in shares
3. Others
(IV) Profit distribution in the year
4,387,075.10 -4,387,075.10
1．Appropriation of surplus reserve
4,387,075.10 -4,387,075.10
2．Appropriation of normal risk
provision
3．Distribution to shareholders
4．Others
(V) Internal settlement and transfer of
shareholders' equity
1. Transfer of capital reserve to capital
2. Transfer of surplus reserve to capital
3. Surplus reserve makes up for the loss
4. Others
(VI) Reserve Funds
1．Appropriated in current year
2．Used in current year
IV. Balance at the end of current
period
400,000,000.00
84,050,162.84
28,830,023.24 33,964,695.93 546,844,882.01
Legal Representative: Zhang Xingfu Person in charge of accounting work: Xu Guojian Person in charge of accounting department:Wang WupingShandong Airlines Co., Ltd. 2009 Annual Report
66
Shandong Airlines Co., Ltd.
Notes to the financial statements
As at 31st December 2009
（All amounts are expressed in RMB Yuan unless otherwise stated）
Ⅰ General
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign investment limited liability
company incorporated in the People’s Republic of China (hereafter, the PRC) on 29th July 1999 as
part of the reorganization of Shandong Airlines Group Co., Ltd., the holding company of the
Company. The operation of the Company is subject to the supervision and regulation of the Civil
Aviation Administration of China (hereafter, the CAAC), a regulatory body of the civil aviation
industry in the PRC.
The 140,000,000 B-shares of the Company have been listed the Shenzhen Stock Exchange
(hereafter, the Stock Exchange) since 12th September 2000.
The approved operating scope of the Company is the operation of international、domestic air
services for the carriage of passengers and freight; hotel restaurants (Just limited to branch);
aircraft repair and maintenance; civil aviation aircrew training; the agency business between
airlines; ground services that relevant to the Company’s main business.
Ⅱ Summary of significant accounting policies and estimates, and correction of errors
1. Bases for preparation of the financial statements
The (consolidated) financial statements of the Company (and the Group) have been prepared
on the going concern basis with reference to the actual occurrence of transactions and events and
in accordance with the China Enterprise Accounting Standards (CAS) issued by the Ministry of
Finance on 15th February 2006 and the significant accounting policies and estimates as set out in
Part Ⅱ.
2. Declaration of Compliance with the Enterprise Accounting Standards
The (consolidated) financial statements of the Company (and the Group) have been prepared
in accordance with the Enterprise Accounting Standards to present truly and completely the
financial position, result of operation and cash flow and the relevant information of the Company
(and the Group).
3. Accounting year
The Company adopts the accounting year ending 31st December.
4. Presentation (functional) currency
The presentation (functional) currency of the Company is Renminbi (hereafter, CNY).Shandong Airlines Co., Ltd. 2009 Annual Report
67
5. Business acquisitions
(1) Acquiring business under common control
The Company measures the identifiable assets acquired and liabilities assumed at their
acquisition-date book values in the accounts of the acquiree. The excess of the consideration
transferred in the form of book value or shares issued over the acquisition-date book values in the
acquiree’s accounts of the identifiable net assets acquired is debited to Capital reserves, and to
Undistributed profits where the total value of Capital reserves is insufficient.
(2) Acquiring business not under common control
The Company measures the identifiable assets acquired and the liabilities assumed at their
acquisition-date fair values. Goodwill as of the acquisition date measured as the excess of the
amount of the total consideration paid for the acquisition measured in accordance with s11, Ch. 3,
CAS 20 over the net of the acquisition-date amounts of the identifiable assets acquired and the
liabilities assumed measured in accordance with s14, Ch.3, CAS 20 is recognised by the Company,
if the later exceeds the former (ie. negative excess), the Company recognises the resulting gain in
profit or loss on the acquisition date after reviewing their fair values and confirming the negative
excess.
6. Consolidated financial statements
(1) Scope of consolidated financial statements
Consolidated financial statements are prepared on the basis of control existence in
accordance with CAS 33 issued by the Ministry of Finance in February 2006. The consolidated
financial statements of the Company include all subsidiaries and the entities, which are established
for specified purposes, either directly or indirectly controlled by the Company and the Company
itself. The Company has control over an entity where the Company has the power to govern the
financial and operating policies of the entity under a statute or an agreement and is able to obtain
economic benefit from the entity’s operation by virtue of that power. Where it is clearly
demonstrated that the Company’s investment in an entity does not constitute control over the
entity, the Company excludes the entity from consolidation.
(2) Purchase and sales of ordinary shares of subsidiaries
The Company determines the date of purchase and sales of the ordinary shares of subsidiaries
on the basis of the actual occurance of transfer of the risks attached to and proceeds associated
with the shares respectively. The respective post- or pre-transaction-date operation results and cash
flows of the subsidiary acquired or disposed in the course of the combination of businesses not
under common control are accounted for in the consolidated income statement and cash flow
statement. The operation results and cash flows of the subsidiary, which occur after the start date
of the accounting period in which the subsidiary is acquired and prior to the disposal date,
acquired in the course of the combination of businesses under common control are accounted forShandong Airlines Co., Ltd. 2009 Annual Report
68
and separately presented in the consolidated income statement and cash flow statement with
comparables adjusted accordingly.
The excess of the value of a long-term equity investment, recognised and measured in
accordance with CAS 2, in a subsidiary arising from the purchase of small amount of the ordinary
shares of the subsidiary over the Company’s share of the net fair value of the subsidiary’s
identifiable assets and liabilities as from the purchase date is debited to Capital reserves, and to
Undistributed profits where the total value of Capital reserves is insufficient.
(3) Uniform accounting policies
If a subsidiary uses accounting policies other than those adopted in the consolidated financial
statements for like transactions and events in similar circumstances, appropriate adjustments are
made to its financial statements in preparing the consolidated financial statements; the adjustments
are conducted also with reference to the acquisition-date fair values of the identifiable assets
acquired and the liabilities assumed from the subsidiary measured in accordance with s14, Ch.3,
CAS 20 where the subsidiary is acquired in the course of the combination of businesses not under
common control.
(4) Consolidation procedures
Intragroup balances and transactions are eliminated in full in the preparation of consolidated
financial statements. Non-controlling interests in the net assets of consolidated subsidiaries are
identified separately from the Company’s ownership interests in them. Non-controlling interests
are debited by the excess, if any, of the loss attributable to non-controlling shareholders over their
share of the net fair value of the subsidiary’s identifiable assets and liabilities where they are able
and obliged to contribute to the excess; the excess is otherwise attributable to the Company.
7. Cash equivalents
Cash equivalents are short-term (usually with a maturity date within three months from the
date of acquisition), highly liquid investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in value.
8. Foreign currency transactions and foreign currency translation
(1) Foreign currency transactions
The Company’s foreign currency transactions are recorded, on initial recognition in the
reporting (functional) currency, by applying to the foreign currency amount the middle exchange
rate quoted by the People’s Bank of China (hereafter, the (spot) exchange rate) between the
reporting (functional) currency and the foreign currency at the date of the transaction.
Foreign currency monetary items as at the balance sheet date are translated using the
balance-sheet-date spot exchange rate; non-monetary items as at the balance sheet date that are
measured in terms of historical cost in foreign currencies are translated using the transaction-date
exchange rates with no adjustment made to the recorded amounts on initial recognition in theShandong Airlines Co., Ltd. 2009 Annual Report
69
reporting (functional) currency; non-monetary items as at the balance sheet date that are measured
at fair value in foreign currencies are translated using the exchange rates at the dates when the fair
values were determined. Exchange differences arising on translating monetary or non-monetary
items at rates different from those at which they were translated on initial recognition during the
period or in previous financial statements are recognised directly or as fair value adjustments in
profit or loss in the period in which they arise except for monetary items that satisfy the criteria for
borrowing costs capitalisation.
(2) Foreign currency translation
① Assets, liabilities and all Shareholders’ equity items as at the balance sheet date except
Undistributed profits are translated using the balance-sheet-date spot exchange rates.
② Income and expenses are translated using the transaction-date exchange rates.
Exchange differences arising from the translation methods specified in paragraph 8(2)① and
② are separately presented in Shareholders’ equity.
③ The cash flows of a foreign subsidiary are translated at the exchange rates at the dates of
the cash flows. The effect of exchange rate changes on cash and cash equivalents held or due in
foreign currencies is reported in the cash flow statement by presenting separately the amount of
the unrealised exchange differences arising from changes in foreign currency exchange rates
9. Financial instruments
(1) Categorisation of financial assets and financial liabilities
The Company categorises its financial assets and financial liabilities, with reference to their
objectives of investments and economic nature, as financial assets or financial liabilities at fair
value through profit or loss, held-to-maturity investments, loans and receivables, available-for-sale
financial assets, and other financial liabilities.
① Financial assets or financial liabilities at fair value through profit or loss include the
financial assets or financial liabilities classified as held for trading and the financial assets or
financial liabilities designated by the Company as at fair value through profit or loss on their
initial recognition.
A financial asset or financial liability is classified as held for trading if it meets either of
the following conditions:
a. it is acquired or incurred principally for the purpose of selling or repurchasing it in
the near term;
b. on initial recognition it is part of a portfolio of identified financial instruments that
are managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking; or
c. it is a derivative (except for a derivative that is a designated and effective hedging
instrument, a financial guarantee contract, or linked to and only settled by delivery of an
equity instrument that does not have a quoted market price in an active market and
whose fair value cannot be reliably measured).Shandong Airlines Co., Ltd. 2009 Annual Report
70
A financial asset or financial liability is designated by the Company as at fair value
through profit or loss if it meets either of the following conditions:
a. the designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities or
recognising the gains and losses on them on different bases; or
b. a group of financial assets, financial liabilities or both is managed and its
performance is evaluated on a fair value basis, in accordance with an officially
documented risk management or investment strategy, and information about the group is
provided internally on that basis to the Company’s key management personnel.
② Held-to-maturity investments are non-derivative financial assets with fixed or
determinable payments and fixed maturity that the Company has the positive intention and ability
to hold to maturity, which include principally fixed-rate treasury bonds and floating-rate corporate
bonds that the Company has the positive intention and ability to hold to maturity.
③ Receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, which include principally accounts receivables arising from
sales of products and provisions of services by the Company and other receivables.
④ Available-for-sale financial assets are those non-derivative financial assets that are
designated as available for sale on their initial recognition or are not categorised as either loans
and receivables, held-to-maturity investments or financial assets at fair value through profit or
loss.
⑤ Other financial liabilities are financial liabilities that are not categorised as financial
liabilities at fair value through profit or loss.
(2) Measurement of financial assets and financial liabilities
When a financial asset or financial liability is recognised initially, the Company measures it
at its fair value plus, in the case of a financial asset or financial liability not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition or issue of the
financial asset or financial liability; transaction costs attributable to the acquisition or issue of the
financial asset or financial liability at fair value through profit or loss are accounted for through
profit or loss for the current period.
The Company subsequently measures financial assets and financial liabilities according to the
following procedures:
① Financial assets or financial liabilities are subsequently measured at fair value through
profit or loss at their fair value, with gains or losses arising from changes in fair value or
de-recognistion accounted for through profit or loss for the current period.
② Held-to-maturity investments are subsequently measured at amortised cost using the
effective interest method, with gains or losses arising from de-recognistion, impairment or
amortisation accounted for through profit or loss for the current period.
③ Receivables are subsequently measured at amortised cost using the effective interest
method, with gains or losses arising from de-recognistion, impairment or amortisation
accounted for through profit or loss for the current period.Shandong Airlines Co., Ltd. 2009 Annual Report
71
④ Available-for-sale financial assets are subsequently measured at their fair value, with
gains or losses arising from changes in fair value recognised in Capital reserves. The
difference between the disposal proceeds and carrying value of an available-for-sale financial
asset on its disposal is recognised as investment gain or loss, with the cumulative gains or
losses recognised in Capital reserves de-recognised from Capital reserves and re-recognised
as investment gains or losses. Impairment losses and exchange differences of
available-for-sale financial assets, if any, are accounted for through profit or loss for the
current period. Interests and dividends arising from the possession of available-for-sale
financial assets, if any, are recognised as investment gains.
⑤ Other financial liabilities and a instrument that is linked to and only settled by delivery of
an equity instrument that does not have a quoted market price in an active market and whose
fair value cannot be reliably measured are subsequently measured at cost.
A financial guarantee contract or a loan that bears an off-market interest rate, which are
not designated by the Company as at fair value through profit or loss, are subsequently
measured at the higher of:
a. the value specified by CAS 13 Contingencies; and
b. the residual value after deducting the cumulative amortisation determined in
accordance with CAS 14 Revenue from the value recognised on its initial recognition.
Other financial liabilities are subsequently measured at amortised cost using the
effective interest method, with gains or losses arising from de-recognistion, impairment or
amortisation accounted for through profit or loss for the current period.
⑥ Fair value is the amount for which an asset could be exchanged or a liability settled
between knowledgeable, willing parties in an arm’s length transaction. The parties to an
arm’s length transaction shall be going concerns, not subject to or intended to enter the
procedures of liquidation or significant reduction in operating capacity, or forced to enter the
transaction. The fair value of a financial asset or financial liability for which there is an active
market shall be measured at the quoted market price in the active market; the fair value of a
financial asset or financial liability for which there is not an active market shall be established
by the Company using a valuation technique.
The Company measures initially and subsequently the fair value of an interest rate swap
at the value of a competitor’s interest rate swap quoted by a recognised financial institution as
at the Company’s balance sheet date in accordance with the principle of consistency.
⑦ The residual cost of a financial asset is the residual value after deducting the sum of
impairment losses and the principal amount that has been repaid from the sum of its value
measured on its initial recognition and the cumulative amortisation of the difference between
its value measured on its initial recognition and its value on its maturity determined using the
effective interest method. The residual cost of a financial liability is the residual value after
deducting the sum of the principal amount that has been repaid and the cumulative
amortisation of the difference between its value measured on its initial recognition and its
value on its maturity determined using the effective interest method from its value measured
on its initial recognition.Shandong Airlines Co., Ltd. 2009 Annual Report
72
⑧ The effective interest rate method is a valuation method for determining the residual
value and interest income or/and expense of a financial instrument (or a group of financial
instruments) using the effective interest rate. An effective interest rate is the interest rate used
to discount the cash flows of a financial instrument (or a group of financial instruments) over
its expected life, or a shorter period if it is relevant, to determine its current carrying value.
The effective interest rate applicable to a financial intrument (or a group of financial
instruments) shall be determined with reference to its future cash flows estimated by taking
into account the whole of its contract terms (including but not limited to early repayment
rights, call options and option equivalents, but excluding future credit losses).
(3) Transfer and de-recognition of financial assets
① The Company de-recognises a financial asset if it meets either of the following
conditions:
a. the contractual rights to the cash flows from the financial asset expire;
b. the financial asset has been transferred and all the risks and rewards of ownership
of the financial asset have been substantially transferred to the transferee; or
c. the financial asset has been transferred and the Company has neither transferred nor
retained substantially all the risks and rewards of ownership of the financial asset and
not retained control of the financial asset.
② Where the transfer of the whole of a financial asset satisfies the conditions for
de-recognition set out in paragraph 9(3)①, the Company recognises through profit or loss for
the current period the difference between:
a. the carrying value of the financial asset; and
b. the sum of the proceeds from the transfer and the cumulative gains or losses
recognised in Shareholders’ equity.
③ Where the transfer of a part of a financial asset satisfies the conditions for
de-recognition set out in paragraph 9(3)①, the fair value of the whole of the financial asset is
apportioned accordingly to the transferred part and the part not transferred; and, the Company
recognizes through profit or loss for the current period the difference between:
a. the carrying value of the transferred part of the financial asset; and
b. the sum of the proceeds from the transfer and the cumulative gains or losses
attributable to the transferred part of the financial asset recognised in Shareholders’
equity.
④ If a transfer of a financial asset does not satisfy the conditions for de-recognition set out
in paragraph 9(3)①, the Company continues to recognise the transferred asset in its entirety
and recognises a financial liability for the consideration received. Where the Company is in
continuing involvement in a transferred financial asset, the Company continues to recognise
the financial asset to the extent of its continuing involvement, and recognises an associated
financial liability.
(4) Impairment assessment and impairment allowanceShandong Airlines Co., Ltd. 2009 Annual Report
73
① The company recognises impairment of a financial asset if either of the following is
objectively evidential:
a. significant financial difficulty of the issuer or obligor;
b. a breach of contract, such as a default or delinquency in interest or principal
payments, by the obligor;
c. the lender, for economic or legal reasons relating to the obligor’s financial difficulty,
granting to the obligor a concession that the lender would not otherwise consider;
d. it becoming probable that the obligor will enter bankruptcy or other financial
reorganization;
e. the disappearance of an active market for that financial asset because of significant
financial difficulty of the issuer;
f. observable data indicating that there is a measurable decrease in the estimated
future cash flows from a group of financial assets since the initial recognition of those
assets, although the decrease cannot yet be identified with the individual financial assets
in the group;
g. significant changes with an adverse effect that have taken place in the technological,
market, economic or legal environment in which the obligor operates, and indicates that
the cost of the investment in the equity instrument may not be recovered;
h. a significant or prolonged decline in the fair value of an investment in an equity
instrument; or
i. other events of impairment.
② The Company assesses the occurrence of impairment of different categories of financial
assets and recognises and measures impairment on the balance sheet date using different
criteria.
a. If there is objective evidence that an impairment loss on a held-to-maturity
investments has been incurred as at the balance sheet date, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value of
its estimated future cash flows.
b. If there is objective evidence that the fair value of an available-for-sale financial
asset has experienced a significant decline and the decline is not temporary after
considering all relevant information as at the balance sheet date, impairment loss on the
available-for-sale financial asset is recognised and the cumulative loss recognised in
Shareholders’ equity is reclassified from equity to profit or loss as impairment loss.
10. Account receivables
(1) Method of provision for bad debts for individual accounts receivable with significant
amounts:
The Company classifies receivables, other than intragroup receivables, of which the carrying
values are individually not less than 5 per cent of the carrying value of total receivables as at the
balance sheet date as receivables of individual significance. Receivables of individual significanceShandong Airlines Co., Ltd. 2009 Annual Report
74
are individually assessed for impairment loss. If there is objective evidence that a receivable of
individual significance has been impaired as at the balance sheet date, the excess of the present
value of its estimated future cash flows over its carrying value as at the balance sheet date is
recognised as impairment loss through profit or loss for the current period and in Bad and doubtful
debts.
(2) Method of provision for bad debts for individual accounts receivable with nonsignificant
amounts, but in according to the characteristics of credit risk portfolio, the risk of
the portfolio is high:
The Company classifies receivables of individual insignificance and non-impaired
receivables of individual significance of which the ages are individually over three years as a
group of receivables of significant credit risk.
The Company recognises as bad and doubtful debt expense through profit or loss for the
current period and in Bad and doubtful debts the higher of the following:
① 5 per cent of the carrying value of total receivables as at the balance sheet date; and
② the excess of the carrying value of receivables of individual insignificance over the
amount estimated by analyses of age and the financial positions and cash flows of the
obligors.
(3) For other account receivable (including Notes receivable、Advances to suppliers、
Interest receivables etc), the provision for bad debts recognized based on the difference of
the book values higher than the present value of future cash flows.
11. Inventories
(1) Categorisation of inventories
The Company’s inventories include materials or supplies to be consumed by the Company in the
rendering of services during the Company’s ordinary operating activities. The Company
categorises its inventories as air materials and low-value consumables.
(2) Cost of inventories
The cost of inventories at their acquisition is measured at their actual cost of purchase. The cost of
inventories at their issue is determined using the first-in, first-out (FIFO) cost formula.
(3) Net realisable value and impairment of inventories
① Determination of net realisable value of inventories
The net realisable value of finished goods, products and sellable materials is measured
as the residual value after deducting the estimated sales expense and related taxes and fees
from the estimated selling price. The net realisable value of an item of inventories subject to
further processing is measured as the residual value after deducting the sum of the estimated
costs of completion, sales expense and related taxes and fees from the estimated selling price
of the sellable item. The net realisable value of the quantity of inventories held to satisfy firmShandong Airlines Co., Ltd. 2009 Annual Report
75
sales or service contracts is based on the contract price. If the sales contracts are for less than
the inventory quantities held, the net realisable value of the excess is based on general selling
prices.
② Impairment of inventories
The Company measures inventories at the lower of historical costs and net realisable
values as at the balance sheet date. If the net realisable value is lower than the historical cost
of an item of inventories as at the balance sheet date, an impairment allowance is recognised.
An impairment allowance, if any, is generally individually recognised for each type of
inventories except:
a. an individual impairment allowance, if any, is recognised for the whole category of
inventories of low value and large quantities; and
b. an individual impairment allowance, if any, is recognised for a group of inventories,
which are held for the production and sales of products of a single territory and for
identical or similar usages or purposes, and which are indistinguishable from other types
of inventories within the group.
When the circumstances that previously caused inventories to be written down below
cost no longer exist, the amount of the write-down is reversed and the associated impairment
allowance de-recognised and re-recognised through profit or loss for the period in which the
reversal occurs.
(4) Stocktaking
The Company adopts the perpetual stocktaking system.
(5) Amortisation of low-value consumables and packaging materials
The Company amortises consumables in full when they are issued for use.
12. Long-term equity investments
The Company’s long-term equity investments include the Company’s equity investments in
an investee which constitute the Company’s control, joint control or significant influence over the
investee and the Company’s equity investments in an investee which do not constitute the
Company’s control, joint control or significant influence over the investee and of which the fair
value is not quoted in an active market.
(1) Initial measurement of long-term equity investments
① Initial measurement of long-term equity investments acquired through business
combination
a. The cost of a business under common control acquired by the Company by
payment in cash, non-monetary asset transfer, or assuming the acquiree’s liabilities is
initially measured at the carrying value of the equity instruments acquired as at the
acquisition date, with the excess of the (carrying) value of cash paid, assets transferred,
or liabilities assumed over the initially measured cost debited to Capital reserves, and toShandong Airlines Co., Ltd. 2009 Annual Report
76
Undistributed profits where the total value of Capital reserves is insufficient. The cost of
a business under common control acquired by the Company by share issues is initially
measured at the carrying value of the equity instruments acquired as at the acquisition
date, with the excess of the total value at par of shares issued over the initially measured
cost debited to Capital reserves, and to Undistributed profits where the total value of
Capital reserves is insufficient. Expenses incurred directly for the acquisition, including
but not limited to audit fees, valuation fees and legal fees, are recognised through profit
or loss for the period in which the expenses are incurred.
b. The cost of a business not under common control acquired by the Company is
initially measured at the fair value of assets transferred, liabilities incurred or assumed,
or shares issued for the acquisition as at the transaction date. The excess of the initially
measured cost over the net of the carrying values of the identifiable assets acquired and
the liabilities assumed as at the acquisition date is recognised as goodwill. The excess of
the net of the carrying values of the identifiable assets acquired and the liabilities
assumed as at the acquisition date over the initially measured cost is recognised through
profit or loss for the current period in Non-operating revenue. Expenses incurred directly
for the acquisition (excluding the expenses for bond issues and share issues) are
recognised as part of the acquisition cost.
② Initial measurement of long-term equity investments acquired not through business
combination
a. The cost of a long-term equity investment acquired by the Company by payments
in cash is initially measured at the sum of the consideration transferred and the fees,
taxes and necessary expenses directly attributable to the acquisition, with the value of
declared-but-unpaid cash dividends included in the consideration separately recognised
as receivables.
b. The cost of a long-term equity investment acquired by the Company by share issues
is initially measured at the fair value of shares issued for the acquisition as at the
issuance date.
c. The cost of a long-term equity investment acquired by the Company by direct
shareholder contribution is initially measured at the value agreed upon the investment
contract or agreement, excluding a contract value or agreement value that is inconsistent
with the definition of fair value.
d. The cost of a long-term equity investment acquired by the Company by
non-monetary asset transfer is initially measured at the sum of the fair values of the
assets transferred to the transferee and the taxes directly attributable to the asset transfer,
with the difference between the fair values of the assets transferred to the transferee and
their carrying values as at the transaction date recognised through profit or loss for the
current period, where the exchange of non-monetary assets for equity instruments is
transacted on a commercial basis and the fair values of the assets transferred and equity
instruments acquired can be reliably measured; or, at the sum of the carrying values of
the assets transferred to the transferee and the taxes directly attributable to the assetShandong Airlines Co., Ltd. 2009 Annual Report
77
transfer, where the exchange of non-monetary assets for equity is not on a commercial
basis or the fair values of the assets transferred or equity instruments acquired can not be
reliably measured.
e. The cost of a long-term equity investment acquired by the Company through the
investee’s debt restructuring is initially measured at the fair values of the equity
instruments acquired, with the difference between the initially measured cost and the
carrying value of the original loans to the investee as at the restructuring date recognised
through profit or loss for the current period.
(2) Subsequent measurement and recognition and measurement of gains or losses
Long-term equity investments in subsidiaries are subsequently measured at cost. In preparing
consolidated financial statements, the long-term equity investments in subsidiaries are adjusted
using the equity method.
Long-term equity investments which do not constitute the Company’s joint control or significant
influence over the investee, of which the fair value of equity instruments is not quoted in an active
market and can not be measured reliably, are subsequently measured at cost.
Long-term equity investments which constitute the Company’s joint control or significant
influence over the investee are subsequently measured by the equity method.
a. If a long-term equity investment is subsequently measured at cost, further acquisition or
disposal of the investment increases or reduces the cost of the investment accordingly; dividends
or share of profits, except those included in the consideration which has been declared but not
received, are recognised through profit or loss for the current period.
b. If a long-term equity investment is subsequently measured by the equity method, its carrying
value is adjusted by the share of the investee’s net profit or loss.
Gain or loss for the current period is measured at the share of the net profit or loss of the
investee for the current period. When determining the net profit or loss of the investee, where the
investee adopts different accounting policies, the net profit or loss reported by the investee is
adjusted by the depreciation or amortisation calculated on the basis of the fair value of the
investee’s fixed assets or intangible assets as at acquisition and the impairment provisions
determined on the basis of the fair value of the relevant assets of the investee as at acquisition;
transactions between the Company and associates or joint ventures are also eliminated. The losses
arising from transactions between the Company and associates or joint ventures are wholly
recognised as asset impairment if the losses meet the conditions set by CAS 9 – Asset Impairment.
Losses of a long-term equity investment reduce the carrying value of the investment to zero
as the furthest. If the cumulative value of subsequent profits of the investee becomes higher than
the cumulative value of unrecognised losses, the excess of the cumulative profits over the
cumulative unrecognised losses is recognised in the carrying value of the investment.
Where a long-term equity investment existed prior to the first adoption of CAS, the excess of
consideration over acquired net assets of the investee as at the adoption date, if any, is amortised
over the remaining life determined at the acquisition using the straight line method; the
amortisation is recognised through profit or loss for the current period.Shandong Airlines Co., Ltd. 2009 Annual Report
78
(3) Joint control and significant influence
① The Company has joint control over an investee if the investment meets one of the following
conditions:
a. neither of the investors can individually influence the operation of the investee;
b. decisions of the investee’s must be approved by the general consensus of the investors; or
c. an individual investor is authorised by an agreement of contract signed by each investor to
manage the investee’s operation in accordance with the accounting and operation policies agreed
by each investor.
Investors may lose joint controls over an investee where the investee is in the procedures of
legal administration or bankruptcy, or where the investee’s ability to transfer economic resource to
investors is severely limited for a substantial length of time; however, if it is objectively evidential
that the joint control exists, the investors shall continue to recognise and measure the investment
using the equity method.
② The Company has significant influence over an investee if:
a. the Company has delegates in the investee’s Board of Directors or similar body;
b. the Company participates in the investee’s policy making process, including the policy
making process for declaration of dividends;
c. the Company has significant transactions with the investee;
d. the Company has delegated personnel to the investee’s management; or
e. the Company has provided key technology to the investee.
(4) Impairment of long-term equity investments
The Company assesses the operation policies, legal environment, market and industry
conditions, and profitability each long-term equity investment individually on the balance sheet
date to determine whether an investment is subject to impairment. If the net recoverable value of
an investment is lower than its carrying value as at the balance sheet date, an impairment provision
is recognised at the excess of its carrying value over te net recoverable value as at the balance
sheet date. A recognised impairment loss of an investment is not recoverable in subsequent
periods.
13. Fixed Assets
(1) Recognition
A fixed asset is a tangible asset the Company holds for the purpose of production, service
rendering, leasing and operation, of which the useful life is longer than one year and which has a
relatively higher value. A fixed asset is measured at the cost of acquisition if it meets both of the
following conditions:
① it is probable that the economic benefits associated with the asset will flow to the Company;
and
② the cost of the asset can be measured reliably.Shandong Airlines Co., Ltd. 2009 Annual Report
79
Subsequent expense associated with the asset, which meets the above conditions, is
recognised as parts of its cost; otherwise, through profit or loss for the period in which the expense
is accrued.
(2) Depreciation
Fixed assets are depreciated using the straight line method. The useful life, residual value
percentage and annual depreciation are listed below.
Types
Residual value
percentage(%)
Expected
useful life(years)
Annual
depreciation rate(%)
Houses and building 5.00 27-33 2.88-3.52
Key components and power
supports of aircraft engine 5.00 15-20 4.75-6.33
Replacement parts of aircraft body 0.00 6-8 12.5-16.67
Replacement parts of engine 0.00 3-5 20-33.33
Equipments, electronic
devices and furniture 0-5.00 4-10 9.5-23.75
High value rotables 0.00 15-18 5.56-6.67
Transportation vehicles 5.00 5-10 9.5-19.00
(3) Impairment
The Company assesses each non-current asset for impairment on the balance sheet date. If it
is objectively evidential that the net recoverable value of a non-current asset is lower than its
carrying value as at the balance sheet date, its carrying value is reduced to the net recoverable
value and the reduction accounted for through profit for the current period and recognised as
impairment provision. A recognised impairment loss of a non-current asset is not recoverable in
subsequent periods. A non-current asset is impaired if one of the following is evidential:
① its fair value decreased significantly during the current period with a decrease rate
significantly higher than the rate estimated on the basis of time or normal usage;
② the economic, technological or legal environment, in which the Company operates or in
which the asset is located, changed during the current period or is going to change in the near
future; and, e the change caused or is going to cause significant disadvantage to the Company;
③ the rate for discounting future cash flows, which has been affected by the increased interest
rate or investment return rate, has led to a significant decrease of the asset’s recoverable value;
④ the asset is either obsolete or physically damaged;
⑤ the asset has been or is going to be retired, terminated for usage or disposed prior to the end
of its use life;
⑥ the Company recognised internally that the asset’s associated economic benefit has been or is
going to be below expectation, eg. the net cash flows or net profit or loss significantly lower than
the expected value; or
⑦ there is other evidence which suggests the asset has been impaired.Shandong Airlines Co., Ltd. 2009 Annual Report
80
(4) Leased fixed assets
If the Company acquired substantially the risks attached to and the economic benefits
associated with a leased non-current asset, the asset is recognised. The asset is measured at the
lower of the asset’s fair value as at the lease-commence date and the net present value of the
minimum lease payment. The depreciation policies for owned non-current assets are applicable to
leased non-current assets. The expected useful life of a leased asset, of which the ownership is
reasonably transferrable to the Company after the expiry of the lease, is the asset’s own expected
useful life; the expected useful life of a leased asset, of which the ownership is not reasonably
transferrable to the Company, is the shorter of the lease life and the asset’s own expected useful
life.
14. Construction-in-progress
(1) Categorisation
The Company categorises construction-in-progress on the basis of project approval.
(2) Conversion of construction -in-progress to fixed assets
A construction-in-progress is recognised as a fixed asset when it satisfied the predetermined
usable state. A converted construction-in-progress is initially measured at its full construction cost.
A converted construction-in-progress of which the construction cost is not fully recognised is
initially measured at a reasonable estimate; and, the initial measured cost is adjusted to its full
construction cost when the construction is fully recognised; but, its recognised depreciation as at
the full recognition is not adjusted.
(3) Impairment
The Company assesses each construction-in-progress for impairment on the balance sheet
date. If it is objectively evidential that the net recoverable value of a construction-in-progress is
lower than its carrying value as at the balance sheet date, its carrying value is reduced to the net
recoverable value and the reduction accounted for through profit for the current period and
recognised as impairment provision. A recognised impairment loss of a construction-in-progress is
not recoverable in subsequent periods. A construction-in-progress is impaired if one or more of the
following are evidential:
① the project has been suspended for a substantially long period of time and of which the
construction is not to be re-activated within three years;
② either the capability or the technology of the project is obsolete and the economic benefit
associated with the project is highly indeterminable; or
③ there is other evidence which suggests the project has been impaired.
15. Borrowing costs
(1) Capitalisation of borrowing costs
The borrowing costs directly attributable to asset construction or production are capitalisedShandong Airlines Co., Ltd. 2009 Annual Report
81
into cost of asset when they meet the following conditions:
① the asset construction or production expense has been incurred;
② the borrowing costs have been incurred; and
③ the construction or production which directly contributes to the usable state of the asset has
been activated.
Other borrowing costs, discounts, premiums and exchange differences are accounted for
through profit or loss of the period in which they are incurred.
If the construction or production of an asset eligible for capitalisation has suspended not in
accordance with schedule, where the suspension has lasted continuously for a period longer than
three months, the capitalisation of relevant borrowing costs is suspended.
The capitalisation of relevant borrowing costs is terminated when a constructed or produced
asset reaches its usable or sellable state. Any subsequent borrowing cost associated with the asset
is accounted for through profit or loss for the period in which it is incurred.
(2) Measurement of capitalised borrowing costs
The capitalised borrowing costs of a finance specifically raised for an asset construction or
production are measured at the excess of the borrowing costs over the interests arising from the
deposit of the unused part of the finance or the gains arising from the investment using the unused
part of the finance for the relevant period.
Where the value of an asset construction or product is higher than the finance specifically
raised for the construction or production, the capitalised borrowing costs of the part of general
finance used by the construction or production are measured by multiplying the weighted average
of the excess of the asset value over the specific-raised finance with the capitalisation rate of
general finance.
16. Intangible assets
(1) Measurement
Intangible assets are initially measured at cost.
(2) Useful life and amortization
The period during which an intangible asset is reasonably capable of generating economic
benefits for the Company with reference to its contractual rights and other legal rights, industry
practice, historical experience, and professional evidence is determined as the asset’s useful life. If
a period during which an intangible asset is reasonably capable of generating economic benefits
for the Company is not determinable, the asset is categorised as with undeterminable useful life.
① The useful life of an intangible asset with useful life is determined on the basis of:
a. the general useful life of products produced by the asset and the obtainable information in
relation to the useful life of a similar asset;
b. the current condition and estimated future trends of technology and techniques;
c. the market demand for products produced or service rendered by the asset;Shandong Airlines Co., Ltd. 2009 Annual Report
82
d. the expected reaction of existing and potential competitors;
e. the estimated maintenance expense for the continuance of the asset’s ability in generating
economic benefits and the Company's estimated ability in maintaining the expense;
f. the relevant law and regulation which regulate the ownership period of the asset, eg.
chartered usage rights and lease rights; and
g. the connection between the useful life of the asset and the useful life of the Company’s other
assets.
② An intangible asset with undeterminable useful life is amortised using a reasonable method
determined by the realisation process of the asset’s expected economic benefit. Where a
reasonable amortisation method is undeterminable, the asset is amortised using the straight line
method.
(3) Impairment of intangible assets with undeterminable useful life
① The Company assesses the useful life of each intangible asset with undeterminable useful life
on the balance sheet date. If the useful life of an asset remains undeterminable, the asset is
assessed for impairment on the balance sheet date. If it is objectively evidential that the net
recoverable value of an intangible asset with undeterminable useful life is lower than its carrying
value as at the balance sheet date, its carrying value is reduced to the net recoverable value and the
reduction accounted for through profit for the current period and recognised as impairment
provision. A recognised impairment loss of an intangible asset with undeterminable useful life is
not recoverable in subsequent periods. An intangible asset with undeterminable useful life is
assessed for impairment if one or more of the following are evidential:
a. the asset has been replaced by another new technology which renders its ability to generate
economic benefit for the Company being significantly devastated;
b. the asset’s fair value has decreased significantly during the period and it may not increase
during the remaining life of the asset; or
c. there is there is other evidence which suggests the asset has been impaired.
(4) Research and development
Research expenses associated with an internal development project are accounted for through
profit or loss for the period in which they are incurred. Development expenses associated with an
internal development project are recognised as intangible assets if the project meets all of the
following:
① assets arising from the project are either for sale or for internal use and it is technically viable
to complete the project;
② the Company has clear intention to complete the intangible asset and to use or sell the asset;
③ it is objectively evidential that products produced by the intangible or the intangible asset
itself are marketable or that the intangible asset is employable if used internally;
④ it is practical, in terms of technology, finance and other resources, to complete the
development of the intangible asset and to use or sell the intangible asset; and
⑤ development expenses of the development of the intangible asset can be measured reliably.Shandong Airlines Co., Ltd. 2009 Annual Report
83
17. Regular repair and substantial repair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is
accounted for through profit or loss for the period in which it is incurred. Substantial repair
expenditure eligible for capitalisation is capitalised when incurred and recognised as replacement
cost of non-current assets and depreciated over a reasonable length of time. Substantial repair
expenditure of aircrafts under an operating lease incurred before the lease expiry date is amortised
using the straight line method or on the basis of air hours over the lease period.
18. Long-term deferred assets
The Company’s long-term deferred assets refer to expense which has been incurred but which
generates economic benefit for the Company for a period of longer than one year, such as
expenses for pilots’ initial trainings. Those expenses are amortized at 10 years according to their
benefit period respectively. When a pilot is transferred from the Company, the cost of transfer is
the unamortized part of the original expenditure.
19. Accrued liabilities
(1) Recognition of accrued liabilities
The obligations related to some items that meet the following conditions at the same time
will be confirmed as the liabilities:
①This obligation is the current obligation of the company;
②The performance of this obligation will probably cause the economic benefits to flow out
of the company;
③The amount of this obligation can be reliably calculated.
The Company should recognize accrued liabilities, when the Company’s loss contract and
restructuring liabilities undertaken satisfied above conditions.
(2) The measurement of accrued liabilities
The accrued liabilities are initially measured in accordance with the best estimated outflow
of economic benefits to fulfill the current obligation as well as related risks regarding the
contingencies, uncertainties and time value of money. Significant impact on the time value of
money the best estimation is determined through the related discounted future cash outflows. The
increase of book value of accrued liability caused due to the passage of time is recognized as
interest.
(3) Optimum evaluation of accrued liabilities
If the necessary payments have scopes, the optimum evaluation shall be determined based
on the average amount between the upper and lower limit amount of scope ; if the necessary
payments do not have such scopes, the optimum evaluation shall be determined in the following
method:
(a) If the contingent event is involved in an individual project, the optimum evaluation
amount will be determined based on the possible amount;Shandong Airlines Co., Ltd. 2009 Annual Report
84
(b) If the contingent event is involved in some projects, the optimum evaluation amount shall
be determined based on possible amount and occurrence probability. In case of all or part of
payments about the confirmed liquidation liabilities are expected to be compensated by the third
parties or other parties, and the compensation amounts are surely received, then such amounts
shall be separately recognized. The confirmed compensation amounts shall not exceed book
values of confirmed liabilities
20. Revenue
(1) Service rendering
① The Company recognise revenue from rendering of air service for carriage of passengers
when the service is rendered or when an unused ticket expires. The sale of a ticket does not
constitute revenue. An unused ticket expires on the annual anniversary of its sale. Tickets sold but
of which the service is not yet rendered are recognised in current liabilities as Advances from
customers. If service is rendered through code sharing, revenue arising from the service provision
is apportioned amongst parties to the code sharing agreement. The revenue arising from code
sharing is also recognised when the service is rendered.
② If the service is rendered in conjunction with reward points, the amount arising from ticket
sales and of receivables shall be apportioned between revenue and reward points. The amount
apportioned to reward points is initially recognised as deferred income and subsequently
accounted for through profit or loss for the period in which the reward points expire or are
exchanged.
③ Revenue arising from other air service rendering is recognised when the service rendering is
completed.
(2) Transfer of asset use rights
Revenue is recognised when the inflow of the economic benefit associated with the transfer is
probable and when the amount of the inflow can be measured reliably. Revenue arising from
transfer of asset use rights is recognised according to the income category:
① interest income is recognised on the basis of the length of time for which the Company’s
monetary asset is used by other parties using the effective interest rates;
② use right income is recognised in accordance with the payment schedules and means agreed
in the relevant contracts or agreements.
21. Government grants
(1) Recognition
The Company meets the conditions attached to the grant; and
the Company is probable to receive the grant.
(2) Types of government grants and accounting for government grants
① A grant associated with an asset is recognised as deferred income when the grant is received.Shandong Airlines Co., Ltd. 2009 Annual Report
85
The grant is subsequently averaged over the useful life of the asset and the average is accounted
for through profit or loss for subsequent periods during the asset’s useful life after the asset
reaches its usable state. If the asset is disposed, transferred, scrapped or damaged prior to the end
of its useful life, the whole of the remaining deferred income is accounted for through profit or
loss for the period in which the asset is disposed, transferred, scrapped or damaged.
② A grant compensating expenditure or loss in subsequent periods is initially recognised as
deferred income and subsequently accounted for through profit or loss for the period in which the
relevant expenditure of loss is incurred. A grant compensating expenditure or loss already incurred
is accounted for through profit or loss for the period in which the grant is received.
(3) Measurement
A grant that is in the form of monetary asset is measured at the amount of actual receipt or
actual receivable. A grant that is in the form of non-monetary asset is measured at fair value, or at
notional value if fair value can not be obtained.
(4) Repayment of government grants
① If there is deferred income associated with the grant, the carrying value of the deferred
income is reduced by the repayment. The excess of the repayment over the carrying value of the
deferred income is accounted for through profit or loss for the period in which the repayment is
incurred.
② If there is not deferred income associated with the grant, the repayment is accounted for
through profit or loss for the period in which the repayment is incurred.
22. Deferred income tax assets and deferred income tax liabilities
The Company accounts for income taxes by the balance sheet approach.
The Company calculates the value of a deferred income tax asset or deferred income tax
liability on the basis of the difference between the carrying value of an asset or liability and its tax
base and the income tax rates applicable to the period through which the asset or liability is
recovered or settled.
(1) Recognition of deferred income tax assets
① A deferred income tax asset is recognised for all deductible temporary differences to the
extent that it is probable that taxable profit will be available against which the deductible
temporary difference can be utilised, unless the deferred income tax asset arises from the initial
recognition of an asset or liability in a transaction that:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
② A deferred income tax asset is recognised for all deductible temporary differences arising
from investments in subsidiaries, branches and associates, and interests in joint ventures, to the
extent that, and only to the extent that, it is probable that:
a. the temporary difference will reverse in the foreseeable future; andShandong Airlines Co., Ltd. 2009 Annual Report
86
b. taxable profit will be available against which the temporary difference can be utilised.
③ A deferred income tax asset is recognised for all tax losses and tax credits eligible for being
carried forward to the extent that it is probable that taxable profit will be available against which
the tax losses and tax credits can be utilised.
(2) Recognition of deferred income tax liabilities
A deferred income tax liability is recognised for all taxable temporary differences, except to the
extent that the deferred income tax liability arises from:
① the initial recognition of goodwill; or
② the initial recognition of an asset or liability in a transaction which:
a. is not a business combination; and
b. at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
③ A deferred income tax liability is recognised for all taxable temporary differences associated
with investments in subsidiaries, branches and associates, and interests in joint ventures, except to
the extent that both of the following conditions are satisfied:
a. the parent, investor or venturer is able to control the timing of the reversal of the temporary
difference; and
b. it is probable that the temporary difference will not reverse in the foreseeable future.
(3) The carrying value of a deferred income tax asset is assessed on the balance sheet date. It is
probable that there is not enough taxable profit in the future against which the deferred income tax
asset can be utilised, the carrying value of the deferred income tax asset is written off; when it
becomes probable again that there is enough taxable profit in the future against which the deferred
income tax asset can be utilised, the write-off is reversed.
23. Financial leases and operating leases
(1) Operating leases
① When the Company is the leasee to a operating lease, the total lease expenditure is
apportioned over the lease life using the straight line method or on the basis of the leased asset
usage. The apportioned amount is recognised through profit or loss for the relevant period. Initial
expenditure directly attributable to the acquisition of the lease is recognised in administrative
expenses for the period in which the expenditure is incurred or recognised through profit of loss
for the period in which the first lease payment is incurred. If a rent holiday is offered by the leasor,
the total expenditure is apportioned over the whole life of the lease using the straight line method
or on a reasonable basis; the lease expense during the rent holiday is accounted for through profit
or loss for the relevant period and recognised as a liability on the balance sheet. If a part of the
total lease expenditure is compensated by the leasor, the residual amount after deducting the
compensation from the total lease expenditure is apportioned over the lease life.
② When the Company is the leasor to a operating lease, the total lease revenue is apportioned
over the lease life. The apportioned amount is recognised through profit or loss for each year of
the lease life. Initial expenditure directly attributable to the grant of the lease is recognised throughShandong Airlines Co., Ltd. 2009 Annual Report
87
profit or loss for the period in which it is incurred. If the initial expenditure is of significant value,
it is capitalised and apportioned over the lease life using the same method adopted for the
apportionment of lease revenue; the apportioned amount is recognised through profit or loss for
each year of the lease life. The initial expenditure of significant value is recognised in full through
profit or loss for the period in which the first lease income is accrued if the recognition is so
provided by an agreement. If a rent holiday is offered, the total lease revenue is apportioned over
the whole life of the lease using the straight line method or on a reasonable basis. The apportioned
amount is recognised as lease income for each year of the lease life, including the years within the
rent holiday. If a part the total lease expenditure is compensated by the leasor, the residual amount
after deducting the compensation from the total lease revenue is apportioned over the lease life.
(2) Financial leases
① When the Company is the leasee to a financial lease, the Company recognises on the lease
start date the leased asset at the lower of its fair value as at the lease start date and the minimum
total lease payments; the minimum total lease payments is recognised as long-term payables; and,
the excess of the minimum total lease payments over the leased asset’s fair value as at the lease
start date is accounted for as unrecognised financing cost and amortised over the life of the lease
using the effective interest rate method with the amortised amount recognised in financial costs for
the relevant period. Initial expenditure directly attributable to the acquisition of the lease is
recognised as a part of the leased asset’s carrying value.
The depreciation policies for owned depreciatable assets are applicable to an asset leased
under a financial lease. The expected useful life of a leased asset, of which the ownership is
reasonably transferrable to the Company after the expiry of the lease, is the asset’s own expected
useful life; the expected useful life of a leased asset, of which the ownership is not reasonably
transferrable to the Company, is the shorter of the lease life and the asset’s own expected useful
life.
② When the Company the leasor to a financial lease, the Company recognises on the lease start
date the sum of initial expenditure directly attributable to the grant of the lease and the minimum
total lease revenue as long-term receivables; and, the unguaranteed residual value is recorded. The
excess of the sum of the minimum total lease revenue, initial expenditure directly attributable to
the grant of the lease and unguaranteed residual value over the leased asset’s fair value as at the
least start date is accounted for as unrealised financing income and amortised over the lease life
using the effective interest rate method with the amortised amount recognised as rental income for
the relevant period.
24. Significant changes of accounting policies and accounting estimates
Resulting from changed market conditions and pilot mobility, the Company reviewed the benefit
periods by considering pilot service length and pilot resignation, the first meeting of the 4th term of
the Board of Directors held in 2010 publish a resolution which authorises the adoption of a new
accounting estimate with effect from 1st October, 2009 which changes the length of amortisation
period for pilot training fees from 20 years to 10 years. The change of accounting estimate reducesShandong Airlines Co., Ltd. 2009 Annual Report
88
the net profit for 2009 by CNY 24,159,590.00.
The impact of the above change of accounting estimate on the net profit for 2009 is presented
below:
2009
Change of accounting estimate
Financial statement items Amount (CNY)
Change of the length of amortisation period Operating costs 32,212,787.99
for pilot training fees Income tax expense -8,053,197.00
Total 24,159,590.99
Ⅲ Taxation
1. Major taxes and tax rates
The major taxes and tax rates applicable to the Company are listed below:
Tax Tax base Tax rate
Operating tax Revenue from air service for carriage of goods and passengers and from commission or rental service 3% / 5%
Enterprise income tax Taxable profit 25%
Other taxes applicable to the Company are calculated in accordance with the relevant law and
regulation.
2. Infrastructure fund for civil aviation
Infrastructure fund for civil aviation is calculated in accordance with the guidelines set out in
the document (CaiZong[2004] No.38) issued by the Ministry of Finance.
As authorised by the document (CaiJian[2009] No.4) jointly issued by the Ministry of Finance
and Civil Aviation Administration of China, infrastructure funds for civil aviation payable by
domestic air companies during the period from 1st July 2008 to 30th June 2009 are subsequently
repaid to the tax payers after the tax collection.
3. Tax incentives
As authorised by the document (CaiShui[2008] No.178) jointly issued by the Ministry of
Finance and State Administration of Taxation, fuel surcharges collected by air companies during
the period from 1st January 2008 to 31st December 2010 are exempted from operating tax.
Ⅳ Business combination and consolidated financial statements
Subsidiaries acquired through incorporation or investment
Subsidiary name Qingdao International Air Logistics Centre Co., Ltd
Type of subsidiary Holding subsidiary
Place of registration Qingdao
Nature of business Transportation warehousing
Registered capital CNY 30,000,000.00
Business scope Warehousing and distribution of air cargo, E-commerce, etc
Actual investment value as at December 31,2009 CNY 23,813,205.97Shandong Airlines Co., Ltd. 2009 Annual Report
89
Subsidiary name Qingdao International Air Logistics Centre Co., Ltd
Ending balances of projects constituting net investment in the subsidiary CNY 0.00
Shareholding 70%
Voting right 70%
Financial statement consolidation Yes
Minority interest CNY 13,251,532.27
Value of minority interest that utilized to write off the profits or losses attributed to
minority shareholders
CNY 0.00
The balance of parent company’s equity, that is equal to the parent shareholders’
equity less the subsidiary’s current loss undertaken by the minority shareholders
according their share quotient at the beginning of the period
CNY 0.00
Ⅴ Main items of the consolidated financial statements
1. Monetary fund
Balance carried forward Balance brought forward
Exchange Presentation Currency Original Exchange Presentation
currency rate currency
Original
currency rate currency
Cash on hand
CNY 262,286.69 1.00 262,286.69 168,989.78 1.00 168,989.78
HKD 386.60 0.8805 340.40 1,559.60 0.8819 1,375.43
USD 1,057.92 6.8282 7,223.69 1,520.92 6.8346 10,394.89
GBP 362.80 10.978 3,982.82 82.80 9.8798 818.04
CAD 10.00 6.5171 65.17 10.00 5.6146 56.15
JPY 0.00 0.0738 0.00 135,000.00 0.0757 10,219.50
EUR 6,870.00 9.7971 67,306.08 2,970.00 9.659 28,687.23
Subtotal 341,204.85 220,541.02
Bank
CNY 47,952,878.72 1.00 47,952,878.72 44,483,350.50 1.00 44,483,350.50
USD 126,124.43 6.8282 861,202.83 34,115.73 6.8346 233,167.36
KRW 30,317,123.00 0.005876 178,143.41 0.00 0.005446 0.00
Subtotal 48,992,224.96 44,716,517.86
Other monetary funds
CNY 144,732,312.88 1.00 144,732,312.88 26,935,875.00 1.00 26,935,875.00
Subtotal 144,732,312.88 26,935,875.00
Total 194,065,742.69 71,872,933.88
(1) The other limited monetary funds of CNY 144,732,312.99 as at 31st December 2009 is
guarantee for letters of guarantee for aircrafts and aircraft engines, for bank draft acceptance and
for short-term borrowings.
(2) The increase of monetary funds of 1.7 times from the ending balance to the opening balance
reflects the increased level of guarantee resulting from the increased usage of notes and increased
amount of finance.Shandong Airlines Co., Ltd. 2009 Annual Report
90
2. Held for trading financial assets
Item Fair value as at 09.12.31 (CNY) Fair value as at 09.01.01 (CNY)
Derivative financial assets 11,341,846.48 23,460,812.11
Total 11,341,846.48 23,460,812.11
(1) The immature interest swaps held by the Company as at 31st December 2009 have a fair
value as at acquisition of USD 196,386,577.11, within which the swaps containing redemption
clauses have a fair value as at acquisition of USD 2,990,345.11, of which the fair value as at 31st
December 2009 quoted by banks is CNY 11,341,846.48 (USD 1,661,030.21).
(2) The decrease of tradable financial assets from the opening balance principally results from
the decrease in fair value.
3. Accounts receivables
(1) Disclosure by classification
Balance carried forward Balance brought forward
Book value Provision for bad debts Book value Provision for bad debts
Types
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Individual
significant
amounts
130,379,296.86 91.06 0.00 0.00 115,826,770.70 91.46 0.00 0.00
Non-significant
in amount but
in accordance
with the
characteristics
of credit risk
portfolio, the
risk of the
portfolio is high
9,502.08 0.01 60.93 0.01 23,802.42 0.02 1,190.12 0.23
Other
non-significant
receivables
12,797,444.39 8.93 640,286.44 99.99 10,789,191.00 8.52 520,541.91 99.77
Total 143,186,243.33 100.00 640,347.37 100.00 126,639,764.12 100.00 521,732.03 100.00
Note: See paragraph Ⅱ10 for criteria for categorising individual significance and individual
insignificance but significant portfolio credit risk.
(2) Bad and doubtful debt provisions for account receivables that classified as individual
significance amount or non-significant in amount but in accordance with the
characteristics of credit risk portfolio, the risk of the portfolio is high:Shandong Airlines Co., Ltd. 2009 Annual Report
91
Details
Book value
(CNY)
Bad and doubtful debt
(CNY)
Proportion
(%)
Comment
BSP 48,494,454.43 0.00 0.00 Amount not due received prior to the statement date.
China Civil Aviation
Clearing Centre
28,056,201.97 0.00 0.00 Amount not due received prior to the statement date.
Air China Co., Ltd. 53,828,640.46 0.00 0.00 Amount not due received prior to the statement date.
Total 130,379,296.86 0.00 0.00 Amount not due received prior to the statement date.
(3) Aging analysis
Balance carried forward Balance brought forward
Book value
Provision for bad
debts
Book value
Provision for bad
Age debts
Amount
(CNY)
Proportion (%)
Amount
(CNY)
Amount
(CNY)
Proportion (%)
Amount
(CNY)
Within 1 year 142,119,187.40 99.25 593,424.08 125,431,572.82 99.05 445,258.73
1 – 2 years 754,989.67 0.53 32,009.09 1,157,864.08 0.91 75,222.25
2 – 3 years 302,564.18 0.21 14,853.27 26,524.80 0.02 60.93
3 – 4 years 9,502.08 0.01 60.93 23,802.42 0.02 1,190.12
4 – 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Over 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Total 143,186,243.33 100.00 640,347.37 126,639,764.12 100.00 521,732.03
(4) Accounts receivables owed by shareholders with 5% or more voting right during the
reporting period
Balance carried forward Balance brought forward
Shareholder Amount
(CNY)
Provision for bad debts
(CNY)
Amount
(CNY)
Provision for bad
debts
(CNY)
Air China Co., Ltd. 53,828,640.46 0.00 55,089,147.43 0.00
Total 53,828,640.46 0.00 55,089,147.43 0.00
(5) The top five account receivables
Name of company
Relationship with the
Company
Amount
(CNY)
Age
% of total accounts
receivables
Air China Co., Ltd. Related parties 53,828,640.46 Within 1 year 37.59
BSP Non-related parties 48,494,454.43 Within 1 year 33.87
China Civil Aviation Clearing Centre Non-related parties 28,056,201.97 Within 1 year 19.59
Yantai Post Office Non-related parties 618,272.41 Within 1 year 0.43
Linyi Civil Aviation Administration Non-related parties 554,599.95 Within 1 year 0.39
Total 131,552,169.22 91.87
(6) Accounts receivables owed by related parties
Name Relationship with the Company Amount (CNY) % of total accounts receivables
Air China Co., Ltd. Parent 53,828,640.46 37.59Shandong Airlines Co., Ltd. 2009 Annual Report
92
Total 53,828,640.46 37.59
4. Advances to suppliers
(1) Presentation by age
Balance carried forward Balance brought forward
Age
Amount (CNY) Proportion (%) Amount (CNY) Proportion (%)
Within 1 year 21,184,884.28 94.13 28,449,390.88 97.68
1 – 2 years 1,304,378.20 5.80 674,854.09 2.32
2 – 3 years 15,000.00 0.07 0.00 0.00
Total 22,504,262.48 100.00 29,124,244.97 100.00
(2) List the top five balance of advance to supplier
Name of company
Relationship with
the Company
Balance carried
forward (CNY)
Age Reasons for unsettlement
RBS Aerospace Ltd. Non-related parties 6,542,090.17 Within 1 year Advanced rental
Singapore Aircraft Leasing Enterprise Non-related parties 4,781,000.00 Within 1 year Advanced rental
Beijing FuLaiTe Technology Development Co., Ltd. Non-related parties 3,015,019.31 Within 1 year Deposit for clearing
Rainier Aircraft Leasing Ltd. Non-related parties 2,480,190.48 Within 1 year Advanced rental
Pacific Brihar Corporation Ltd. Non-related parties 1,201,992.00 Within 1 year Advanced rental
Total 18,020,291.96
(3) There is no Advance to supplier balance due from shareholders who own five or over five
percent voting rights as at December 31, 2009.
5. Dividend receivables
Item
Balance brought
forward
(CNY)
Increase in year
(CNY)
Decrease in
year
(CNY)
Balance carried
forward
(CNY)
Collection after
balance sheet date
Impairment
Dividends receivable within 1 year
China TravelSky Co.,
Ltd.
0.00 1,617,642.00 0.00 1,617,642.00 Yes No
Total 0.00 1,617,642.00 0.00 1,617,642.00
6. Other accounts receivables
(1) Disclosure by classification
Balance carried forward Balance brought forward
Book value Provision for bad debts Book value Provision for bad debts
Types
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)Shandong Airlines Co., Ltd. 2009 Annual Report
93
Individual significant
amounts
209,239,407.19 77.02 109,051,717.65 98.14 203,908,540.13 79.66 109,051,717.65 98.25
Non-significant in
amount but in
accordance with the
characteristics of
credit risk portfolio,
the risk of the
portfolio is high
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other non-significant
receivables
62,429,416.40 22.98 2,065,091.95 1.86 52,065,571.90 20.34 1,944,258.14 1.75
Total 271,668,823.59 100.00 111,116,809.60 100.00 255,974,112.03 100.00 110,995,975.79 100.00
Note: See paragraph Ⅱ10 for criteria for categorising individual significance and individual
insignificance but significant portfolio credit risk.
(2) Provision for bad debts of other account receivables that belong to individual significant
amounts on the balance sheet date:
Accounts receivables
Book value
(CNY)
Bad and doubtful debt
(CNY)
Proportion
(%)
Comment
Shandong Rainbow
Commercial Jet Co., Ltd.
109,051,717.65 109,051,717.65 100.00
Significantly overdue debt resulting from
deteriorated financial condition.
CDB Leasing Co., Ltd. 41,354,563.28 0.00 0.00
In accordance with accounting policies for
bad and doubtful debt provision.
Singapore Aircraft Leasing
Enterprise
19,118,960.00 0.00 0.00
In accordance with accounting policies for
bad and doubtful debt provision.
Rainier Aircraft Leasing
(Ireland) Ltd.
16,331,211.00 0.00 0.00
In accordance with accounting policies for
bad and doubtful debt provision.
Air China Co., Ltd. 23,382,955.26 0.00 0.00
In accordance with accounting policies for
bad and doubtful debt provision.
Total 209,239,407.19 109,051,717.65
(3) Aging analysis
Balance carried forward Balance brought forward
Book value Proportion
Provision for bad
debts
Book value Proportion
Provision for bad
Age debts
Amount
(CNY) %
Amount
(CNY)
Amount
(CNY)
%
Amount
(CNY)
Within 1 year 51,941,469.78 19.12 1,142,919.16 42,992,690.15 16.80 2,038,542.29
1 – 2 years 14,220,621.28 5.23 842,507.38 31,169,427.89 12.18 669,245.45
2 – 3 years 25,446,259.18 9.37 872,347.11 17,263,584.49 6.74 10,698,669.47
3 – 4 years 16,492,449.22 6.07 10,674,554.07 133,052,336.46 51.98 80,329,246.11
4 – 5 years 133,038,338.06 48.97 80,329,246.11 23,398,644.42 9.14 17,195,422.39
Over 5 years 30,529,686.07 11.24 17,255,235.77 8,097,428.62 3.16 64,850.08Shandong Airlines Co., Ltd. 2009 Annual Report
94
Total 271,668,823.59 100.00 111,116,809.60 255,974,112.03 100.00 110,995,975.79
(4) Other accounts receivables owed by shareholders with 5% or more voting right during
the reporting period
Balance carried forward Balance brought forward
Shareholder Amount
(CNY)
Provision for bad debts
(CNY)
Amount
(CNY)
Provision for bad
debts (CNY)
Air China Co., Ltd. 23,382,955.26 0.00 1,100.00 0.00
Total 23,382,955.26 0.00 1,100.00 0.00
(5) List the amount of top five other accounts receivable
Name of company
Relationship with the
Company
Amount
(CNY)
Age
% of total accounts
receivables
Shandong Rainbow
Commercial Jet Co., Ltd.
Related parties 109,051,717.65 2 – 6 years 40.14
CDB Leasing Co., Ltd. Non-related parties 41,354,563.28 4 – 5 years 15.22
Air China Co., Ltd Related parties 23,382,955.26 Within 1 year 8.61
Singapore Aircraft Leasing
Enterprise
Non-related parties 19,118,960.00 2 – 4 years 7.04
Rainier Aircraft Leasing
(Ireland) Ltd.
Non-related parties 16,331,211.00 Over 4 years 6.01
Total 209,239,407.19 77.02
(6) Other accounts receivables owed by related parties
Name of company
Relationship with the
Company
Amount
(CNY)
% of total accounts
receivables
Air China Co., Ltd. Parent company 23,382,955.26 8.61
Shandong XiangYu Air Technology
Co., Ltd.
Under common control 2,966,545.86 1.09
Qingdao FeiSheng International Air
Training Co., Ltd.
Under common control 1,405,287.30 0.52
Shandong Rainbow Commercial Jet
Co., Ltd.
Under common control 109,051,717.65 40.14
Total 136,806,506.07 50.36
7. Inventories
(1) Classification
Types Balance carried forward Balance brought forwardShandong Airlines Co., Ltd. 2009 Annual Report
95
Cost
(CNY)
Impairment
provision
(CNY)
Carrying value
(CNY)
Cost
(CNY)
Impairment
provision
(CNY)
Carrying value
(CNY)
Consumable air equipments 63,025,085.14 353,539.79 62,671,545.35 73,263,438.33 353,539.79 72,909,898.54
Low-value consumables 1,814,143.03 0.00 1,814,143.03 762,731.56 0.00 762,731.56
Materials 270,642.83 0.00 270,642.83 605,146.87 0.00 605,146.87
Others 511,449.89 0.00 511,449.89 69,752.60 0.00 69,752.60
Total 65,621,320.89 353,539.79 65,267,781.10 74,701,069.36 353,539.79 74,347,529.57
(2) Impairment
Decrease in year
Type
Balance brought forward
(CNY)
Provision in year
(CNY)
Reversal
(CNY)
Write off
(CNY)
Balance carried forward
(CNY)
Consumable air
equipments
353,539.79 0.00 0.00 0.00 353,539.79
Total 353,539.79 0.00 0.00 0.00 353,539.79
8. Investment in associates
Associate Shandong Rainbow Commercial Jet Co., Ltd.
Type of registration Limited liability company
Place of registration Jinan, Shandong
Legal representative YU, Haitian
Nature of business Air transportation
Register capital CNY 50,000,000.00
Shareholding 45.00%
Voting right 45.00%
Total assets carried forward CNY 89,014,514.23
Total liabilities carried forward CNY 207,114,051.11
Net assets carried forward CNY -118,099,536.88
Total operating income for the reporting period CNY 9,951,954.75
Net profits for the reporting period CNY 584,983.70
9. Long-term equity investments
(1) Disclosure
Name of investee
Balance
brought
forward
(CNY)
Changes
in year
(CNY)
Balance
carried
forward
(CNY)
Accumulated
impairment
provision
(CNY)
Impairment
provision
in year
(CNY)
Ⅰ. Long-term equity investments measured
at cost method
China TravelSky Co., Ltd. 6,690,000.00 0.00 6,690,000.00 0.00 0.00Shandong Airlines Co., Ltd. 2009 Annual Report
96
Name of investee
Balance
brought
forward
(CNY)
Changes
in year
(CNY)
Balance
carried
forward
(CNY)
Accumulated
impairment
provision
(CNY)
Impairment
provision
in year
(CNY)
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00 0.00 0.00
Jinan Yaoqiang International Airport Co.,
Ltd 46,662,100.00 0.00 46,662,100.00 0.00 0.00
Subtotal 88,352,100.00 0.00 88,352,100.00 0.00 0.00
Ⅱ. Long-term equity investments measured
by the equity method
Shandong Rainbow Commercial Jet Co., Ltd 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Subtotal 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Total 110,852,100.00 0.00 110,852,100.00 22,500,000.00 0.00
Continued:
Name of investee
Initial investment
cost
(CNY)
Shareholding
Voting
right
Reasons for
discrepancy
between
shareholding
and
voting right
Cash
dividends
in year
(CNY)
Ⅰ. Long-term equity investments measured
at cost method
6,690,000.00 0.45% 0.45% n/a 1,617,642.00
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00% 10.00% n/a 0.00
Jinan Yaoqiang International Airport Co.,
Ltd 46,662,100.00 14.00% 14.00% n/a 0.00
Subtotal 88,352,100.00 1,617,642.00
Ⅱ. Long-term equity investments measured
by the equity method
Shandong Rainbow Commercial Jet Co., Ltd 22,500,000.00 45.00% 45.00% n/a 0.00
Subtotal 22,500,000.00 0.00
Total 110,852,100.00 1,617,642.00
(2) Long-term equity investments held as at 31st December 2009 have no limitation on disposal
imposed.
10. Fixed assets and accumulated depreciation
(1) ClassificationShandong Airlines Co., Ltd. 2009 Annual Report
97
Types
Balance brought
forward
(CNY)
Increased
(CNY)
Decreased
(CNY)
Balance carried
forward
(CNY)
① Total historical cost 7,472,780,209.13 1,469,494,704.84 57,378,155.96 8,884,896,758.01
Houses and buildings 141,400,628.79 82,191,694.51 0.00 223,592,323.30
Aircrafts and aircraft engine 6,801,818,456.15 1,336,146,595.98 47,550,000.00 8,090,415,052.13
High-value rotables 401,057,334.04 34,208,785.91 4,141,745.89 431,124,374.06
Transportation vehicles 34,555,729.63 6,452,025.61 2,810,648.11 38,197,107.13
Machinery, equipments and others 93,948,060.52 10,495,602.83 2,875,761.96 101,567,901.39
② Total accumulated depreciation 1,788,705,263.67 517,592,568.89 53,001,839.51 2,253,295,993.05
Houses and buildings 22,393,646.58 4,301,143.36 0.00 26,694,789.94
Aircrafts and aircraft engine 1,584,732,713.81 476,608,312.35 47,085,525.44 2,014,255,500.72
High-value rotables 119,773,454.99 24,274,952.37 965,915.31 143,082,492.05
Transportation vehicles 18,294,678.86 2,787,131.42 2,408,258.32 18,673,551.96
Machinery, equipments and others 43,510,769.43 9,621,029.39 2,542,140.44 50,589,658.38
③ Total carrying value 5,684,074,945.46 6,631,600,764.96
Houses and buildings 119,006,982.21 196,897,533.36
Aircrafts and aircraft engine 5,217,085,742.34 6,076,159,551.41
High-value rotables 281,283,879.05 288,041,882.01
Transportation vehicles 16,261,050.77 19,523,555.17
Machinery, equipments and others 50,437,291.09 50,978,243.01
Note: ①Depreciation increase in year totals CNY 517,592,568.89. The total value of construction
projects completed and recognised as non-current assets in year is CNY 1,348,817,938.64. ②
Total value of non-current assets pledged as security for borrowings and leased aircraft engines
with limitation imposed is CNY 5,615,349,974.29.
(2) Leased fixed assets under financial leases
Type
Historical cost
(CNY)
Accumulated depreciation
(CNY)
Impairment
(CNY)
Balance as at 2009.12.31
(CNY)
Aircrafts and aircraft engines 2,512,216,335.42 891,592,319.11 0.00 1,620,624,016.31
Total 2,512,216,335.42 891,592,319.11 0.00 1,620,624,016.31
(3) Fixed assets pending ownership registration
Types
Balance as at 2009.12.31
(CNY)
Reasons for pending ownership registration
Jinan cargo arrival and departure warehouses 18,901,312.01
Land rented from Jinan Air Control, not eligible for
ownership registration
Qingdao aircraft maintenance workshops 42,181,000.00
Construction completed in December 2009, ownership
registration in process
Yantai terminal building 20,345,000.00
Construction completed in December 2009, ownership
registration in process
Total 81,427,312.01
(4) Impairment
No impairment provision was provided as at 31st December 2009 as no evidence suggestsShandong Airlines Co., Ltd. 2009 Annual Report
98
assets has impaired.
11. Construction in progress
(1) Details of construction in progress
Balance carried forward Balance brought forward
Types Book value
(CNY)
Impairment
provision
(CNY)
Carrying value
(CNY)
Book value
(CNY)
Impairment
provision
(CNY)
Carrying value
(CNY)
B737-800 aircrafts 340,589,155.31 0.00 340,589,155.31 1,174,964,394.73 0.00 1,174,964,394.73
ARJ21-700 aircrafts 60,778,195.00 0.00 60,778,195.00 60,778,195.00 0.00 60,778,195.00
B737NG simulated
aircrafts
19,435,867.69 0.00 19,435,867.69 0.00 0.00 0.00
Maintenance workshops,
terminal buildings
and arrival and departure
warehouses
0.00 0.00 0.00 39,287,553.61 0.00 39,287,553.61
Other construction
projects
1,474,227.58 0.00 1,474,227.58 2,714,009.98 0.00 2,714,009.98
Total 422,277,445.58 0.00 422,277,445.58 1,277,744,153.32 0.00 1,277,744,153.32
(2) Changes of significant construction in progress
Types
Balance
brought forward
(CNY)
Increase in year
(CNY)
Transferred
to
fixed assets
(CNY)
Other decreased
(CNY)
Balance
carried forward
(CNY)
B737-800 aircrafts 1,174,964,394.73 749,667,802.22 1,266,904,021.63 317,139,020.01 340,589,155.31
ARJ21-700 aircrafts 60,778,195.00 0.00 0.00 0.00 60,778,195.00
B737NG simulated
aircrafts
0.00 19,435,867.69 0.00 0.00 19,435,867.69
Maintenance workshops,
terminal buildings and
arrival and departure
warehouses
39,287,553.61 42,139,758.40 81,427,312.01 0.00 0.00
Other construction
projects
2,714,009.98 461,696.00 486,605.00 1,214,873.40 1,474,227.58
Total 1,277,744,153.32 811,705,124.31 1,348,817,938.64 318,353,893.41 422,277,445.58
(3) Capitalisation of construction progress
Projects
Balance brought
forward
(CNY)
Increase in year
(CNY)
Transferred to
fixed assets
(CNY)
Other decrease
(CNY)
Balance carried
forward
(CNY)
Source of finance
B737-800 10,435,598.27 19,782,529.30 24,501,059.43 859,347.13 4,857,721.01 Loans from financialShandong Airlines Co., Ltd. 2009 Annual Report
99
aircrafts institutions
ARJ21-700
aircrafts 487,587.70 0.00 0.00 0.00 487,587.70
Total 10,923,185.97 19,782,529.30 24,501,059.43 859,347.13 5,345,308.71
(4) Assets pledged as security
The corresponding carrying value of aircraft purchase rights pledged as security for
borrowings in construction in progress as at 31st December 2009 is 340,822,347.97.
(5) Impairment
No impairment provision is provided as at 31st December 2009 as no evidence suggests
construction project impairment.
(6) Value decrease of construction in progress
The 66.95% decrease from the balance brought forward to the balance carried forward
principally results from the conversion of purchased aircrafts to non-current assets.
12. Intangible assets
(1) Details of intangible assets
Types
Balance brought
forward
(CNY)
Increase in year
(CNY)
Decrease in year
(CNY)
Balance carried
forward
(CNY)
A. Total historical cost 49,044,696.49 1,763,436.64 0.00 50,808,133.13
Land use rights 49,044,696.49 1,763,436.64 0.00 50,808,133.13
B. Total accumulated
amortization
2,099,622.32 813,437.60 0.00 2,913,059.92
Land use rights 2,099,622.32 813,437.60 0.00 2,913,059.92
C. Total net value 46,945,074.17 0.00 0.00 47,895,073.21
Land use rights 46,945,074.17 0.00 0.00 47,895,073.21
D. Total accumulated
impairment loss
0.00 0.00 0.00 0.00
Land use rights 0.00 0.00 0.00 0.00
E. Total carrying value 46,945,074.17 0.00 0.00 47,895,073.21
Land use rights 46,945,074.17 0.00 0.00 47,895,073.21
(2) Impairment
No impairment provision was provided as at 31st December 2009 as no evidence suggests
intangible asset has impaired.
13. Long-term deferred assets
Type
Balance
Brought
forward
Increase
in year
(CNY)
Amortisation
in year
(CNY)
Other decreased
(CNY)
Balance
carried forward
(CNY)
Reasons for other
decreaseShandong Airlines Co., Ltd. 2009 Annual Report
100
(CNY)
Pilot recruitment
and training
expenditure
208,312,781.55 65,708,936.20 48,353,314.82 9,122,151.97 216,546,250.96
Training fee loss
resulting from closure
of CAPT Pilot
Academy
Total 208,312,781.55 65,708,936.20 48,353,314.82 9,122,151.97 216,546,250.96
14. Deferred income tax assets and deferred income tax liabilities
(1) Recognised deferred income tax assets and deferred income tax liabilities
Types
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Deferred income tax assets
Deductable temporary difference resulting from impairment provision 27,939,289.24 27,865,424.20
Impairment provision for inventories 88,384.95 88,384.95
Provision for asset substantial repair 60,683,229.57 39,207,218.58
Provision for wages and salaries due 3,126,007.58 1,606,129.00
Amortisation of pre-incorporation expenses 0.00 7,001.38
Total 91,836,911.34 68,774,158.11
Deferred income tax liabilities
Fair value changes of tradable financial assets 2,835,461.62 5,865,203.03
Unrealised exchange surplus 0.00 13,951,373.43
Total 2,835,461.62 19,816,576.46
(2) Corresponding temporary differences to assets and liabilities causing temporary
differences
Types
Temporary difference balance carried
forward( CNY)
Corresponding temporary differences to assets causing temporary
differences
Deductable temporary difference resulting from impairment provision 111,757,156.97
Impairment provision for inventories 353,539.79
Provision for substantial asset repair 242,732,918.26
Provision for wages and salaries due 12,504,030.31
Total 367,347,645.33
Corresponding temporary differences to liabilities causing temporary
differences
Fair value changes of tradable financial assets 11,341,846.48
Total 11,341,846.48
(3) Increase of deferred income tax assets in year and decrease of deferred income tax
liabilities in year
Deferred income tax assets increase in year of 33.53% principally results from the in-year increase
of provision for substantial asset repair; deferred income tax liabilities decrease in year of 85.69%Shandong Airlines Co., Ltd. 2009 Annual Report
101
principally results from tax adjustments for fair value changes of tradable financial assets and
unrealised exchange difference.
15. Impairment provisions
Decrease in year
Types
Balance
brought
forward
(CNY)
Increase in
year
(CNY)
Reversal
(CNY)
Write off
(CNY)
Balance carried
forward
(CNY)
(1) Impairment provision for accounts
receivables
521,732.03 118,615.34 0.00 0.00 640,347.37
(2) Impairment provision for other
accounts receivables
110,995,975.79 120,833.81 0.00 0.00 111,116,809.60
(3) Impairment provision for
inventories
353,539.79 0.00 0.00 0.00 353,539.79
(4) Impairment provision for long-term
equity investments
22,500,000.00 0.00 0.00 0.00 22,500,000.00
Total 134,371,247.61 239,449.15 0.00 0.00 134,610,696.76
16. Short-term loans
Types
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Hypothecated loans 71,537,020.88 0.00
Credits 0.00 70,503,800.00
Collaterals 0.00 126,383,714.55
Guaranteed loans 668,282,000.00 810,000,000.00
Total 739,819,020.88 1,006,887,514.55
17. Notes payables
(1) Details of notes payables
Types
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Trade acceptances 0.00 10,000,000.00
Bank acceptances 182,124,331.32 0.00
Total 182,124,331.32 10,000,000.00
(2) The 17.21 times in-year increase of notes payables from the balance brought forward
principally results from the increased usage of bill financing in the period.Shandong Airlines Co., Ltd. 2009 Annual Report
102
18. Accounts payable
(1) Aging analysis
Age
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Within 1 year 804,837,986.14 866,216,091.36
Over 1 year 7,194,963.93 9,102,968.75
Total 812,032,950.07 875,319,060.11
(2) Accounts payables owed to shareholders or related parties with 5% or more voting
right as at 31st December 2009
Companies Nature of liability
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Shandong International Air
Training Co., Ltd.
Taining fees 1,816,020.00 0.00
Qingdao FeiSheng International
air training Co., Ltd.
Taining fees 3,750,453.00 0.00
Air China Co., Ltd.
Ground services, delay and claim for lossed
baggage
3,962,987.26 0.00
Shandong TaiGu Aircraft
Projecting Co., Ltd.
Maintenance expense and air route
subscription
13,641,513.24 717,414.49
Total 23,170,973.50 717,414.49
(3) There is no accounts payable of significant value of which the age is over 1 year.
19. Advances from customers
(1) Aging analysis
Type
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Within 1 year 117,859,114.71 87,709,493.54
Over 1 year 97,125.72 26,000.00
Total 117,956,240.43 87,735,493.54
(2) The 34.45% in-year increase of advances from customers from the balance brought forward
principally results from the increased transportation capacity.
20. Payroll payablesShandong Airlines Co., Ltd. 2009 Annual Report
103
Types
Balance brought
forward
(CNY)
Increase in year
(CNY)
Payments in year
(CNY)
Balance carried
forward
(CNY)
(1) Wages and salaries, bonuses, subsidies and
allowances
84,396,042.97 482,451,434.17 444,310,116.29 122,537,360.85
(2) Employee benefits 0.00 25,631,021.22 25,631,021.22 0.00
(3) Social insurance fee 251.24 63,616,490.48 63,616,741.72 0.00
Within: ① Medical insurance 0.00 222,504.55 222,504.55 0.00
②Basic retirement insurance 251.24 34,254,984.51 34,255,235.75 0.00
③Annuity fee 0.00 23,584,727.98 23,584,727.98 0.00
④Unemployment fee 0.00 3,455,154.75 3,455,154.75 0.00
⑤ Work injury insurance 0.00 885,837.83 885,837.83 0.00
⑥Pregnancy insurance 0.00 1,213,280.86 1,213,280.86 0.00
(4) Housing accumulation fund 3,042.24 74,802,210.61 74,793,106.61 12,146.24
(5) Labor union fee and employee education fee 6,720,630.62 10,497,256.42 4,713,856.73 12,504,030.31
(6) Non-monetary benefits 0.00 0.00 0.00 0.00
(7) Redemption of termination of labor contract 0.00 62,358.00 62,358.00 0.00
(8) Others 0.00 1,020,421.78 1,020,421.78 0.00
Within: Share-based payments settled by cash 0.00 0.00 0.00 0.00
Total 91,119,967.07 658,081,192.68 614,147,622.35 135,033,537.40
Note: (1) There is no payroll in arrears within payroll payables.
(2) The 48.19% in-year increase of payroll payables from the balance brought forward principally
results from the increased number of employees and effectiveness of the Company’s operation.Shandong Airlines Co., Ltd. 2009 Annual Report
104
21. Tax payables
Types of Tax
Balance carried forward
(CNY)
Balance brought forward
(CNY)
VAT and customs 0.00 42,093,679.29
Business Tax 13,493,990.29 4,783,260.78
Enterprise income tax 102,676,537.26 7,878,180.11
Property tax 1,818,917.29 1,174,020.58
Tenure tax 114,655.77 3,468.00
Personal income tax 1,594,343.92 1,846,373.79
Stamp duty 3,567,551.64 3,099,249.32
Infrastructure fund for civil aviation 11,478,774.38 9,223,996.01
Construction fund for civil airports 34,178,042.00 26,114,804.00
Withholding income tax 8,641,320.63 15,119,191.76
Others 292.31 1,017.73
Total 177,564,425.49 111,337,241.37
Note: The 59.48% in-year increase of tax payables from the balance brought forward principally
results from the increased income tax payables at the year end.
22. Interest payables
Type
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Interest on borrowings 4,001,134.66 9,634,990.00
Total 4,001,134.66 9,634,990.00
Note: The 58.47% in-year decrease of interest payables from the balance brought forward
principally results from the decreased interest rates on foreign currency borrowings at the year
end.
23. Other accounts payable
(1) Aging analysis
Age
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Within 1 year 78,664,291.44 117,844,706.36
Over 1 year 46,266,172.15 43,892,042.34
Total 124,930,463.59 161,736,748.70
(2) Other accounts payables owed to shareholders or related parties with 5% or more
voting right as at 31st December 2009
Companies Nature of liability
Balance carried forward
(CNY)
Balance brought forward
(CNY)Shandong Airlines Co., Ltd. 2009 Annual Report
105
Shandong Airlines Group Co., Ltd. Account balance 4,051,799.74 5,551,323.91
Air China Co., Ltd. Quality margin 20,000,000.00 20,000,000.00
Shandong International Air Training Co., Ltd. Account balance 3,465,953.82 0.00
Total 27,517,753.56 25,551,323.91
(3) Other accounts payables of significant value due for more than one year
Company Balance (CNY) Age Reasons for unsettlement
Air China Co., Ltd. 20,000,000.00 2 – 3 years Wet lease not yet expired, guarantee unsettled
Total 20,000,000.00
24. Non-current liabilities due within one year
(1) Types
Types
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Long-term borrowings due within 1 year 393,832,752.98 487,168,908.19
Long-term accounts payables due with 1 year 209,832,453.69 227,593,094.74
Subtotal 603,665,206.67 714,762,002.93
Less: Unrecognised financial lease expenditure 68,556,748.96 99,172,325.71
Total 535,108,457.71 615,589,677.22
(2) Long-term borrowings due within one year
① Types
Types
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Collaterals 393,832,752.98 415,084,540.74
Guaranteed loans 0.00 72,084,367.45
Total 393,832,752.98 487,168,908.19
② Details of the top five balances of long-term borrowings due within one year
Balance carried forward Balance brought forward
Companies Start date Due date Currency Amount
in foreign currency
Amount
in reporting
currency
(CNY)
Amount
in foreign
currency
Amount
in reporting
currency
(CNY)Shandong Airlines Co., Ltd. 2009 Annual Report
106
Balance carried forward Balance brought forward
Companies Start date Due date Currency Amount
in foreign currency
Amount
in reporting
currency
(CNY)
Amount
in foreign
currency
Amount
in reporting
currency
(CNY)
USD account, Jinan
ShiZhong Branch
China Construction
Bank
2007-8-29 2010-8-28 USD $12,000,000.00 81,938,400.00 $0.00 0.00
USD account,
Shandong Branch
China Development
Bank
2008-9-2
Installment
repayment
USD $7,481,350.00 51,084,154.07 $0.00 0.00
CNY account, Jinan
Branch
China Minsheng
Banking Corp., Ltd.
2005-4-7
Installment
repayment CNY 50,000,000.00 50,000,000.00 0.00 0.00
USD account, Jinan
Branch
Bank of China
2005-7-15
Installment
repayment
USD $6,461,066.40 44,117,453.59 $0.00 0.00
USD account,
DongJiao Branch
Industrial and
Commercial Bank
of China
2009-6-30
Installment
repayment USD $4,000,000.00 27,312,800.00 $0.00 0.00
Total 254,452,807.66 0.00
Note: The interest rates applicable to the above long-term borrowings as at 31st December 2009
are between 1.7825% and 5.9400%.
(3) Borrowings remained unsettled after the due dates
There is no borrowing remained unsettled after the due date as at 31st December 2009.
(4) Long-term accounts payables due within one year
Companies
Credit
term
Original amount
(CNY)
Interest rate
(%)
Interest
accrued
(CNY)
Balance carried
forward
(CNY)
Conditions of
borrowing
New York Branch,
Commerzbank
Twelve
months
43,039,462.58 6.01%-6.025 734,518.35 42,304,944.23
Financial lease
for aircraft
CDB Leasing Co.,
Ltd.
Twelve
months
166,792,991.11 6.4872 67,822,230.61 98,970,760.50
Financial lease
for aircraft
25. Long-term borrowingsShandong Airlines Co., Ltd. 2009 Annual Report
107
(1) Types
Type
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Hypothecated loans 162,717,904.24 0.00
Collaterals 2,024,291,990.60 1,157,489,900.59
Guaranteed loans 1,215,742,693.55 2,001,843,376.80
Total 3,402,752,588.39 3,159,333,277.39
(2) Details of the top five balances of long-term borrowings
Balance carried forward Balance brought forward
Company Start date Due date Currency Amount in foreign
currency
Amount in
reporting currency
(CNY)
Amount in foreign
currency
Amount in reporting
currency
(CNY)
CNY account,
Jinan Branch
China
Minsheng
Banking
Corp., Ltd.
2005-4-7
Installment
repayment
CNY 227,000,000.00 227,000,000.00 270,000,000.00 270,000,000.00
USD account,
DongJiao
Branch
Industrial and
Commercial
Bank of China
2009-6-30
Installment
repayment
USD $34,491,654.64 235,515,916.21 0.00 0.00
USD account,
Jinan Branch
Bank of China
2005-12-21
Installment
repayment
USD $26,213,260.00 178,989,381.93 $26,213,260.00 179,157,146.80
USD account,
Jinan Branch
Bank of China
2005-10-19
Installment
repayment
USD $26,071,798.00 178,023,451.10 $26,071,798.00 178,190,310.61
USD account,
Jinan Branch
Bank of China
2005-7-15
Installment
repayment
USD $19,195,533.60 131,070,942.53 $25,656,600.00 175,352,598.36
Total 950,599,691.77 802,700,055.77
Note: The interest rates applicable to the above long-term borrowings as at 31st December 2009
are between 1.7825% and 5.9400%.
26. Long-term accounts payables
(1) The top five balances of long-term accounts payablesShandong Airlines Co., Ltd. 2009 Annual Report
108
Company Credit term
Original amount
(CNY)
Interest rate
(%)
Interest accrued
(CNY)
Balance carried
forward
(CNY)
Conditions of
borrowing
CDB Leasing Co.,
Ltd.
114 months 1,300,175,375.58 6.4872 331,206,923.64 968,968,451.94 Financial lease
Total 1,300,175,375.58 331,206,923.64 968,968,451.94
(2) Details of financial lease payables within long-term accounts payables
Balance carried forward Balance brought forward
Companies
Amount in
original currency
Currency
Amount in
reporting currency
(CNY)
Amount in original
currency
Currency
Amount in
reporting currency
(CNY)
CDB Leasing Co., Ltd 968,968,451.94 CNY 968,968,451.94 1,071,020,669.93 CNY 1,071,020,669.93
New York Branch,
Commerzbank
0.00 USD 0.00 $6,355,783.14 USD 43,439,235.45
Total 968,968,451.94 1,114,459,905.38
27. Other non-current liabilities
Items
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Gains from CRJ post-sale buy-back 2,087,462.11 3,479,150.11
Gains from reward points 19,891,652.55 9,840,407.72
Subsidy exclusively for post-disaster rehabitation 4,739,458.34 5,000,000.00
SMS fund 1,000,000.00 0.00
Total 27,718,573.00 18,319,557.83
(1) Asset-connected government grants
Items
Balance brought
forward (CNY)
Increase in year
(CNY)
Decrease in year
(CNY)
Balance carried
forward (CNY)
Subsidy exclusively for post-disaster rehabitation 5,000,000.00 0.00 260,541.66 4,739,458.34
SMS fund 0.00 1,000,000.00 0.00 1,000,000.00
Total 5,000,000.00 1,000,000.00 260,541.66 5,739,458.34
(2) The 51.31% in-year increase of other non-current liabilities from the balance brought forward
principally results from the increased reward points.Shandong Airlines Co., Ltd. 2009 Annual Report
109
28. Share capital
Change of number of shares in year (+/–)
Items
Balance
brought forward
(Unit:Shares)
Share
allotment
Bonus issue
Shares converted
from accumulated
fund
Others Subtotal
Balance
carried forward
(Unit:Shares)
(1) Unlisted floating shares
① Promoter’s shares 260,000,000.00 0.00 0.00 0.00 0.00 0.00 260,000,000.00
Including:
State-owned shares 259,801,000.00 0.00 0.00 0.00 0.00 0.00 259,801,000.00
Shares held by domestic legal
persons
199,000.00 0.00 0.00 0.00 0.00 0.00 199,000.00
Shares held by foreign legal
persons
0.00 0.00 0.00 0.00 0.00 0.00 0.00
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Private placement of legal
person’s shares
0.00 0.00 0.00 0.00 0.00 0.00 0.00
③ Staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
④ Preferred shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Within: Transferred allotted shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total unlisted floating shares 260,000,000.00 0.00 0.00 0.00 0.00 0.00 260,000,000.00
(2) Listed floating shares
① Domestic shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Within: shares held by the
management
0.00 0.00 0.00 0.00 0.00 0.00 0.00
② Domestic shares in foreign
currency
140,000,000.00 0.00 0.00 0.00 0.00 0.00 140,000,000.00
Total listed floating shares 140,000,000.00 0.00 0.00 0.00 0.00 0.00 140,000,000.00
(3) Floating shares with imposed
limitation on sales
0.00 0.00 0.00 0.00 0.00 0.00 0.00
(4) Total 400,000,000.00 0.00 0.00 0.00 0.00 0.00 400,000,000.00
Note: ① The par value of the above shares is CNY 1.00. ② The above shares have been verified
by the Report on the Verification of Capital (YanQianZi[2000]NO.27) issued by Shandong Yantai
QianJu Certified Public Accountants Co., Ltd.
29. Capital reserveShandong Airlines Co., Ltd. 2009 Annual Report
110
Type
Balance brought forward
(CNY)
Increase in year
(CNY)
Decrease in year
(CNY)
Balance carried forward
(CNY)
Share premium 76,258,081.68 0.00 0.00 76,258,081.68
Other capital
reserve
7,792,081.16 0.00 0.00 7,792,081.16
Total 84,050,162.84 0.00 0.00 84,050,162.84
30. Surplus reserve
Type
Balance brought forward
(CNY)
Increase in year
(CNY)
Decrease in year
(CNY)
Balance carried forward
(CNY)
Statutory surplus reserve 29,490,727.77 30,085,341.26 0.00 59,576,069.03
Total 29,490,727.77 30,085,341.26 0.00 59,576,069.03
31. Undistributed profits
Type
Current reporting period
(CNY)
Last reporting period
(CNY)
Balance brought forward 36,471,405.69 -39,938,895.93
Add: Profits for the year 302,282,325.68 80,981,442.68
Add: Other transfers 0.00 0.00
Less: Statutory surplus reserve 30,085,341.26 4,571,141.06
Less: Employee bonus and benefit fund 0.00 0.00
Less: Reserve fund 0.00 0.00
Less: Enterprise development fund 0.00 0.00
Less: Repaid investments 0.00 0.00
Less: Preferred dividends 0.00 0.00
Less: Discretionary surplus reserve 0.00 0.00
Less: Ordinary dividends 0.00 0.00
Less: Ordinary dividends converted to
capital
0.00 0.00
Balance carried forward 308,668,390.11 36,471,405.69
32. Operating income and operating costs
(1) Operating income and operating costsShandong Airlines Co., Ltd. 2009 Annual Report
111
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Income from principal activities 5,301,584,923.05 4,985,950,205.16
Income from other activities 64,528,440.63 63,440,911.31
Total operating income 5,366,113,363.68 5,049,391,116.47
Principal activity costs 4,106,686,199.09 4,122,612,353.88
Other activity costs 3,347,076.10 33,511,012.84
Total operating costs 4,110,033,275.19 4,156,123,366.72
(2) Operating income and operating costs by segment
Current reporting period Last reporting period
Segment Operating income
(CNY)
Operating costs
(CNY)
Operating income
(CNY)
Operating costs
(CNY)
Air transportation 5,274,362,420.93 4,085,895,627.76 4,953,048,164.35 4,101,665,962.58
Cargos and logistics 7,015,287.38 1,910,437.19 6,020,693.27 1,313,169.79
Hospitality 22,984,060.08 19,179,045.59 22,538,565.66 15,614,100.05
Rental services 854,642.06 30,000.00 31,801,807.87 35,128,834.04
Others 60,896,953.23 3,018,164.65 35,981,885.32 2,401,300.26
Total 5,366,113,363.68 4,110,033,275.19 5,049,391,116.47 4,156,123,366.72
(3) Details of operating revenues from top five clients
Clients Operating income(CNY) % of total operating income
Air China Co., Ltd. 642,432,367.01 11.97
Beijing DeLong Travel Service Co., Ltd. 30,286,076.69 0.56
Inner-Mongolia Civil Airport Co., Ltd. 16,550,030.87 0.31
WuYiShan LianHang Travel Service Co., Ltd. 10,447,830.50 0.19
Shenzhen HengLu Logistics Co., Ltd. 2,576,000.00 0.05
Total 702,292,305.07 13.08
33. Business tax and surtax
Item
Current reporting period
(CNY)
Last reporting period
(CNY)
Rate
Business tax 158,797,763.77 132,823,862.65 3%、5%
Total 158,797,763.77 132,823,862.65Shandong Airlines Co., Ltd. 2009 Annual Report
112
34. Selling expense
The increase of 46.43% from the previous reporting period to current reporting period mainly due
to increased the scale of the Company’s aircraft team and sales, as well as increased the computer
ticket reservation fees and agency fees.
35. Financial costs
Items Current reporting period (CNY) Last reporting period (CNY)
Interest expenses 248,349,435.60 328,596,797.15
Less: Interest income 1,107,957.64 5,839,812.54
Exchange differences -781,979.99 -78,963,306.70
Bank charges and others 5,411,721.86 9,747,478.66
Total 251,871,219.83 253,541,156.57
36. Impairment loss
Item
Current reporting period
(CNY)
Last reporting period
(CNY)
Bad and doubtful debt expenses 239,449.15 -551,458.89
Total 239,449.15 -551,458.89
37. Gains from fair value changes
Source of fair value changes
Current reporting period
(CNY)
Last reporting period
(CNY)
Tradable financial assets -12,118,965.63 -19,293,822.87
Total -12,118,965.63 -19,293,822.87
38. Investment income
(1) Details of investment income
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Income from long-term equity investments measured at cost 1,617,642.00 1,130,610.00
Income from long-term equity investments measured by the equity
method
0.00 -35,915.68
Gains from disposals of long-term equity investments 0.00 0.00
Gains from possession of tradable financial assets 2,098,225.94 10,081,058.70
Others 0.00 0.00
Total 3,715,867.94 11,175,753.02Shandong Airlines Co., Ltd. 2009 Annual Report
113
(2) Income from long-term equity investments measured at cost
Investee
Current reporting period
(CNY)
Last reporting period
(CNY)
Reasons for change
China TravelSky Co., Ltd. 1,617,642.00 1,130,610.00 Increase in cash dividends
Total 1,617,642.00 1,130,610.00
(3) As at 31st December 2009, there is no investment of which income remittance is imposed
with limitation.
(4) The 66.75% decrease of investment income from last reporting period principally results
from the decreased gains from settlement of tradable financial assets.
39. Non-operating income
(1) Details of non-operating income
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Gains from disposals of non-current assets 16,254,369.34 0.00
Including: Gains from disposals of non-current assets 16,254,369.34 0.00
Government grants 135,213,761.47 42,232,215.00
Others 3,654,130.06 1,661,594.88
Total 155,122,260.87 43,893,809.88
(2) Government grants
Items
Current reporting
period
(CNY)
Last reporting period
(CNY)
Comment
Repayment of infrastructure fund for civil
aviation
114,488,319.75 0.00 CaiJian[2009]No.4 issued by
Subsidies for branch line aviation 15,910,000.00 37,409,700.00
Subsidies granted by local Civil
Aviation Administration
Subsidies for earthquake assistance 0.00 3,000,000.00 Civil Aviation Administration of China
Others 4,815,441.72 1,822,515.00
Air route subsidies granted by local
governments
Total 135,213,761.47 42,232,215.00
(3) The 2.53 times increase of non-operating income from last reporting period principally
results from the increased gains from repayment of infrastructure fund for civil aviation.Shandong Airlines Co., Ltd. 2009 Annual Report
114
40. Non-operating expenses
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Total losses from disposals of non-current assets 13,495,868.42 10,915,236.47
Within: Losses from disposals of non-current assets 4,373,716.45 10,915,236.47
Others 26,076.75 477,113.76
Total 13,521,945.17 11,392,350.23
41. Income tax expenses
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Income tax for current period computed in accordance with
tax laws and regulations
140,661,971.49 13,279,231.57
Adjustments of deferred income tax -40,043,868.07 13,342,983.79
Total 100,618,103.42 26,622,215.36
Note: The 2.78 times increase of income tax expenses from last reporting period principally results
from the increased total profits.
42. Computation of basic earnings per share and diluted earnings per share
Current reporting period
(CNY)
Last reporting period
(CNY)
Profits for the reporting period
Basic earnings
per share
Diluted earnings
per share
Basic earnings
per share
Diluted earnings
per share
Net profits attributable to ordinary shareholders 0.76 0.76 0.20 0.20
Net profits attributable to ordinary shareholders after
deducting extraordinary gains or losses
0.51 0.51 0.23 0.23
Basic earnings per share = P0 ÷ S
S = S0 + S1 + Si × Mi ÷ M0 － Sj × Mj ÷ M0 － Sk
P0: net profits attributable to ordinary shareholders or net profits attributable to ordinary
shareholders after deducting extraordinary gains or losses
S: weighted average of number of listed ordinary shares
S0: number of ordinary shares brought forward
S1: number of shares increased in the reporting period resulting from conversion of
accumulated fund or dividends
Si: number of shares increased in the reporting period resulting from share issues or
convertible bond issues
Sj: number of shares decreased in the reporting period resulting from share buy-backs
Sk: number of shares decreased in the reporting period resulting from share contractionShandong Airlines Co., Ltd. 2009 Annual Report
115
M0: number of months in the reporting period
Mi: cumulative number of months from the second month of the share number increase
month to the last month of the reporting period
Mj: cumulative number of months from the second month of the share number decrease
month to the last month of the reporting period
Diluted earnings per share = P1 / (S0 + S1 + Si × Mi ÷ M0 － Sj × Mj ÷ M0 － Sk +
the weighted average of number of ordinary shares increased by share warrants, share options
and convertible bonds)
P1: net profits attributable to ordinary shareholders or net profits attributable to ordinary
shareholders after deducting extraordinary gains or losses adjusted for dilutive impact in
accordance with CAS and relevant regulations
43. Notes to the consolidated cash flow statement
(1) Cash received related to other operating activities
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Government grants 135,213,761.47 47,232,215.00
Interest income from bank deposits 1,107,957.64 5,839,812.54
Cash received from non-operating activities 3,654,130.06 1,661,594.88
Cash received from accounts balances 4,118,202.36 24,792,036.03
Total 144,094,051.53 79,525,658.45
(2) Cash paid related to other operating activities
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Bank charges 10,533,288.71 9,747,478.66
Cash paid from non-operating activities 26,076.75 477,113.76
Cash paid from accounts balances 13,080,052.93 4,898,582.20
Cash paid from selling expenses and administrative
expenses
73,479,851.89 64,370,315.89
Total 97,119,270.28 79,493,490.51
(3) Cash paid related to other financing activities
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Cash paid to guarantee hypothecated loans 71,537,020.88 0.00Shandong Airlines Co., Ltd. 2009 Annual Report
116
Cash paid to guarantee bank acceptance 46,259,417.00 0.00
Cash paid for financial leases of aircrafts 209,987,105.41 273,796,099.64
Total 327,783,543.29 273,796,099.64
44. Supplements to the consolidated cash flow statement
(1) Supplements to the consolidated cash flow statement
(1) Cash flows adjusted from net profits
Current reporting
period
(CNY)
Last reporting period
(CNY)
Net profits 302,743,202.40 81,638,612.20
Add: Impairment losses 239,449.15 -551,458.89
Add: Depreciation of non-current assets and productive biological assets and losses
of fuel
517,592,568.89 436,398,118.13
Add: Amortisation of intangible assets 813,437.60 662,098.25
Add: Amortisation of long-term deferred assets 48,353,314.82 13,699,336.63
Add: Losses on disposals of non-current assets, intangible assets and long-term
assets (minus sign representing gains)
-6,132,054.93 -19,700.00
Add: Losses arising from scrapping non-current assets (minus sign representing
gains)
3,373,554.01 10,915,236.47
Add: Losses arising from fair value changes (minus sign representing gains) 12,118,965.63 19,293,822.87
Add: Financial costs (minus sign representing income) 248,224,796.69 252,838,009.68
Add: Investment losses (minus sign representing income) -3,715,867.94 -11,175,753.02
Add: Decrease of deferred income tax assets (minus sign representing increase) -23,062,753.23 4,215,066.07
Add: Increase of deferred income tax liabilities (minus sign representing decrease) -16,981,114.84 9,127,917.72
Add: Decrease of inventories (minus sign representing increase) 9,079,748.47 -22,109,390.20
Add: Decrease of operating accounts receivables (minus sign representing increase) -18,730,591.77 83,801,585.12
Add: Increase of operating accounts payables (minus sign representing decrease) 243,430,495.47 181,099,605.53
Add: Others 0.00 0.00
Net cash flows from operating activities 1,317,347,150.42 1,059,833,106.56
(2) Non-cash-flow related significant investing and financing activities
Conversion of debt to equity 0.00 0.00
Conversion debt instruction of maturity less than 1 year 0.00 0.00Shandong Airlines Co., Ltd. 2009 Annual Report
117
(1) Cash flows adjusted from net profits
Current reporting
period
(CNY)
Last reporting period
(CNY)
Non-current assets under financial leases 0.00 0.00
(3) Net change of cash and cash equivalents
Cash carried forward 49,333,429.81 44,937,058.88
Less: Cash brought forward 44,937,058.88 42,131,848.82
Add: Cash equivalents carried forward 0.00 0.00
Less: Cash equivalents brought forward 0.00 0.00
Net increase of cash and cash equivalents 4,396,370.93 2,805,210.06
(2) Composition of cash and cash equivalents
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Ⅰ. Cash 49,333,429.81 44,937,058.88
Including: Cash on hand 341,204.85 220,541.02
Bank deposit capable of immediate payments 48,992,224.96 44,716,517.86
Other monetary assets capable of immediate payments 0.00 0.00
Ⅱ. Cash equivalents 0.00 0.00
Including: Debt instruments matured with three months 0.00 0.00
Ⅲ. Balance of cash and cash equivalents 49,333,429.81 44,937,058.88
Including: Cash and cash equivalents with imposed usage limitation 0.00 0.00
Ⅵ Related party relationships and transactions
1. Details of the Company’s parent company
Name Shandong Airlines Group Co., Ltd.
Relationship Parent
Type of registration State-owned company
Place of registration Jinan, Shandong
Legal representative FENG, Gang
Nature of business Air transportation
Registered capital CNY 580,000,000.00
Shareholding in the Company 42.00%
Voting right in the Company 42.00%
Ultimate parent of the Company Air China Co., Ltd.
Institution code 61407164-7Shandong Airlines Co., Ltd. 2009 Annual Report
118
2. Details of the Company’s subsidiaries
Name Qingdao International Air Logistics Centre Co., Ltd.
Relationship Subsidiary
Type of registration Sino-foreign joint venture
Place of registration Qingdao, Shandong
Legal representative SU, Zhongmin
Nature of business Transportation warehousing
Registered capital CNY 30,000,000.00
Shareholding 70.00%
Voting right 70.00%
Institution code 73349654-1
3. Details of the company’s associated companies
Name Shandong Rainbow Commercial Jet Co., Ltd
Type of registration Limited liability company
Place of registration Jinan, Shandong
Legal representative YU, Haitian
Nature of business Air transportation
Registered capital CNY 50,000,000.00
Shareholding 45.00%
Voting right 45.00%
Total assets carried forward CNY 89,014,514.23
Total liabilities carried forward CNY 207,114,051.11
Net assets carried forward CNY -118,099,536.88
Total operating income for the reporting period CNY 9,951,954.75
Net profits for the reporting period CNY 584,983.70
Relationship Associate
Institution code 72497146
4. Other related parties
Name of company Relationships Institution code
Shandong TaiGu Aircraft Projecting Co., Ltd. Under common control 70588297-1
Shandong Airlines House Management Co., Ltd. Under common control 77741596-9
Shandong XiangYu Air Technology Co., Ltd. Under common control 720736454
Qingdao FeiSheng International Air Training Co., Ltd. Under common control 72557262-0
Shandong International Air Training Co., Ltd. Under common control 72755322-0
Shandong Rainbow Commercial Jet Co., Ltd. Associate 72497146
5. Transactions with related parties
(1) Acceptance of goods and serviceShandong Airlines Co., Ltd. 2009 Annual Report
119
Current reporting period Last reporting period
Related parties
Type of
transaction
Transaction
description
Pricing
and
decision making
process
Amount
(CNY)
% of
transaction
within
Same type
Amount
(CNY)
% of transaction
within
same type
Shandong TaiGu
Aircraft Projecting
Co., Ltd.
Receipt of
service
Aircraft
maintenance fees
Market price 83,347,029.89 22.19 61,209,045.29 17.68
Shandong Airlines
Group Co., Ltd.
Receipt of
service
Rental fees and
food and
accommodation
fees
Market price 11,294,563.03 23.70 10,969,949.61 21.43
Qingdao FeiSheng
International Air
Training Co., Ltd.
Receipt of
service
Training fees Market price 4,097,421.00 4.64 5,010,748.92 6.17
Shandong
International Air
Training Co., Ltd.
Receipt of
service
Training fees Market price 7,927,892.00 8.98 10,917,712.53 13.48
Shandong XiangYu
Air Technology
Co., Ltd.
Receipt of
service
Repair
expenditure
Market price 19,350,032.57 5.15 11,073,497.62 3.63
Total 126,016,938.49 99,180,953.97
(2) Supply of goods and service
Current reporting period Last reporting period
Related parties
Type
of transaction
Transaction
description
Pricing
and
decision making
process
Amount
(CNY)
% of
transaction
within same
type
Amount
(CNY)
% of
transaction
Within same
type
Air China Co.,
Ltd.
Supply of
service
Service fees Agreed price 10,200,000.00 79.01 5,950,000.00 43.44
Total 10,200,000.00 79.01 5,950,000.00 43.44
(3) Guarantee
Name of Guarantor Secured party
Secured amount
(CNY)
Start date Expiry date
Completion of
guarantee
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd. 40,000,000.00 2009-11-2 2010-11-9 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-11-10 2010-11-9 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-11-17 2010-11-16 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 50,000,000.00 2009-11-24 2010-11-23 NoShandong Airlines Co., Ltd. 2009 Annual Report
120
Name of Guarantor Secured party
Secured amount
(CNY)
Start date Expiry date
Completion of
guarantee
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-1-7 2010-1-6 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-1-14 2010-1-13 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-1-21 2010-1-20 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-7-7 2010-7-6 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-7-14 2010-7-13 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-7-22 2010-7-21 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 40,000,000.00 2009-7-27 2010-7-26 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 50,000,000.00 2009-2-12 2010-2-11 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 6,828,200.00 2009-9-1 2010-8-31 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 8,193,840.00 2009-9-8 2010-8-31 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 27,312,800.00 2009-9-22 2010-8-31 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 25,947,160.00 2009-10-12 2010-8-31 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 100,000,000.00 2009-6-29 2010-6-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 27,600,000.00 2007-12-3 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 83,000,000.00 2008-1-2 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 54,000,000.00 2008-3-3 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 53,000,000.00 2008-4-1 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 26,500,000.00 2008-4-29 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 52,300,000.00 2008-6-2 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 51,500,000.00 2008-7-1 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 120,000,000.00 2008-7-15 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 114,000,000.00 2009-4-21 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 41,236,865.44 2007-3-29 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 25,604,384.36 2007-4-30 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 46,197,006.48 2007-5-31 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 122,599,101.93 2007-7-2 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 25,604,384.36 2007-8-1 2022-3-28 NoShandong Airlines Co., Ltd. 2009 Annual Report
121
Name of Guarantor Secured party
Secured amount
(CNY)
Start date Expiry date
Completion of
guarantee
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 101,800,950.98 2007-9-28 2022-3-28 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 100,000,000.00 2006-12-18 2018-12-17 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 2,200,000.00 2008-6-5 2018-12-17 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 2,100,000.00 2008-6-18 2018-12-17 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 123,000,000.00 2008-6-19 2018-12-17 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 13,500,000.00 2008-7-1 2018-12-17 No
Shandong Airlines Group Co., Ltd. Shandong Airlines Co., Ltd 30,000,000.00 2008-8-19 2018-12-17 No
Total 1,884,024,693.55
(4) Reorganisation and assets transfer between related parties
Current reporting period Last reporting period
Related parties
Type
of
transaction
Transaction
description
Pricing
policy
Amount
(CNY)
% of transaction
within same
type
Amount
(CNY)
% of transaction
within
same type
Air China Co., Ltd. Sales
Aircraft
purchase right
Agreed
price
333,393,389.35 100.00 0.00 0.00
Shandong XiangYu
Air Technology Co.,
Ltd.
Sales
High-value
rotables
Agreed
price
2,871,828.77 100.00 0.00 0.00
Total 336,265,218.12 0.00
(5) Other transactions with related parties
Current reporting period Last reporting period
Related parties
Transaction
description
Pricing
policy
Amount
(CNY)
% of transaction
within same
type
Amount
(CNY)
% of transaction
within
same type
Shandong Rainbow Commercial
Jet Co., Ltd.
Wet lease Agreed price 623,229,927.00 100.00 600,186,086.00 94.97
Shandong Rainbow Commercial
Jet Co., Ltd
Debt
compensation
0.00 0.00 84,834.50 0.00
Shandong Airlines Group Co., Ltd. Guarantee fee Agreed price 2,740,500.00 100.00 4,445,800.00 100.00
Air China Co., Ltd. Route sharing Agreed price 19,202,440.01 100.00 96,046,056.93 100.00
Total 645,172,867.01 700,762,777.43
6. The balance of accounts payables and receivables among related parties:Shandong Airlines Co., Ltd. 2009 Annual Report
122
Items Related party
Balance carried forward
(CNY)
Balance brought forward
(CNY)
Accounts receivable
Air China Co., Ltd. 53,828,640.46 55,089,147.43
Total 53,828,640.46 55,089,147.43
Other accounts
receivable
Air China Co., Ltd. 23,382,955.26 1,100.00
Shandong International Air Training Co.,
Ltd.
0.00 780,969.77
Qingdao FeiSheng International Air
Training Co., Ltd.
1,405,287.30 0.00
Shandong XiangYu Air Technology Co.,
Ltd.
2,966,545.86 706,431.65
Shandong Rainbow Commercial Jet Co.,
Ltd
109,051,717.65 109,051,717.70
Total 136,806,506.07 110,540,219.12
Accounts payable
Shandong International Air Training Co.,
Ltd.
1,816,020.00 0.00
Qingdao FeiSheng International Air
Training Co., Ltd.
3,750,453.00 0.00
Air China Co., Ltd. 3,962,987.26 0.00
Shandong TaiGu Aircraft Projecting Co.,
Ltd.
13,641,513.24 717,414.49
Total 23,170,973.50 717,414.49
Other accounts payable
Air China Co., Ltd. 20,000,000.00 20,000,000.00
Shandong Airlines Group Co., Ltd. 4,051,799.74 5,551,323.91
Qingdao FeiSheng International Air
Training Co., Ltd.
0.00 3,827,607.16
Shandong TaiGu Aircraft Projecting Co.,
Ltd.
0.00 24,756,728.86
Shandong International Air Training Co.,
Ltd.
3,465,953.82 0.00
Total 27,517,753.56 54,135,659.93
Ⅶ Contingencies
1. Contingent liabilities resulting from unsettled litigation and arbitration and their
financial impact
No contingent liabilities resulting from unsettled litigation and arbitration as at the balance
sheet date.Shandong Airlines Co., Ltd. 2009 Annual Report
123
2. Contingent liabilities resulting from guarantee provision and their financial impact
No contingent liabilities resulting from guarantee provision as at the balance sheet date.
3. Other contingent liabilities and their financial impact
No other contingent liabilities as at the balance sheet date.
Ⅷ Commitment
Signed commitments of which the performance was in process as at 31st December 2009 are listed
below:
Carrying value carried forward
Items Within 1 year
(CNY)
1 – 2 years
(CNY)
2 – 3 years
(CNY)
Over 3 years
(CNY)
Total
(CNY)
Operating lease 389,429,440.00 461,712,580.00 404,109,640.00 2,124,748,150.00 3,379,999,810.00
Capital 868,160,870,00 1,340,006,700.00 1,755,662,090.00 1,015,688,090.00 4,979,517,750.00
Total 1,257,590,310.00 1,801,719,280.00 2,159,771,730.00 3,140,436,240.00 8,359,517,560.00
Ⅸ Post balance sheet date events
1. Significant post balance sheet date events
A share transfer agreement which authorises the transfer of 100% shareholding in Shandong
International FeiSheng Air Training Co., Ltd. from Shandong Airlines Group Co., Ltd. to the
Company for CNY 50,740,053.00 was sign between Shandong Airlines Group Co., Ltd. and the
Company on March 1st, 2010. The agreement has verified by Shanghai United Assets and Equity
Exchange on March 11, 2010.
2. Post balance sheet date profit distribution
A proposal for a cash dividend of CNY 2.00 per 10 shares for the 40,000 shares as at the year
end of 2009 was passed by a resolution of the Fourth term meeting of the Fourth Board of
Directors Meeting held on March 24, 2010.
3. Other post balance sheet date events
No other post balance sheet date events as at the report date.
Ⅹ Other significant events
No other significant events as at the balance sheet date.
Ⅺ Main notes to financial statements of parent company
1. Accounts receivablesShandong Airlines Co., Ltd. 2009 Annual Report
124
(1) Disclosure by classification
Balance carried forward Balance brought forward
Book value Provision for bad debts Book value Provision for bad debts
Types
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proporti
on (%)
Individual significant
amounts 130,379,296.86 92.29 0.00 0.00 115,826,770.70 92.24 0.00 0.00
Non-significant in
amount but in
accordance with the
characteristics of credit
risk portfolio, the risk of
the portfolio is high
9,502.08 0.01 60.93 0.01 23,802.42 0.02 1,190.12 0.25
Other non-significant
receivables 10,887,630.19 7.70 544,795.73 99.99 9,724,095.16 7.74 467,982.81 99.75
Total 141,276,429.13 100.00 544,856.66 100.00 125,574,668.28 100.00 469,172.93 100.00
Note: See paragraph Ⅱ10 for criteria for categorising individual significance and individual
insignificance but significant portfolio credit risk.
(2) Provision for bad debts of account receivables which classified as individual significant
amount or non-significant in amount but execute impairment loss test individually
Items
Book value
(CNY)
Bad and doubtful debt
(CNY)
Proportion
(%)
Comment
BSP 48,494,454.43 0.00 0.00 Amount not due received prior to the statement date.
China Civil Aviation
Clearing Centre
28,056,201.97 0.00 0.00 Amount not due received prior to the statement date.
Air China Co., Ltd. 53,828,640.46 0.00 0.00 Amount not due received prior to the statement date.
Total 130,379,296.86 0.00 0.00 Amount not due received prior to the statement date.
(3) Aging analysis
Balance carried forward Balance brought forward
Book value Proportion
Provision for
bad debts
Book value Proportion
Provision for
Age bad debts
Amount
(CNY) %
Amount
(CNY)
Amount
(CNY)
%
Amount
(CNY)
Within 1 year 140,732,293.60 99.61 524,079.39 124,366,476.98 99.04 392,699.63
1 – 2 years 232,069.27 0.16 5,863.07 1,157,864.08 0.92 75,222.25
2 – 3 years 302,564.18 0.22 14,853.27 26,524.80 0.02 60.93
3 – 4 years 9,502.08 0.01 60.93 23,802.42 0.02 1,190.12Shandong Airlines Co., Ltd. 2009 Annual Report
125
Balance carried forward Balance brought forward
Book value Proportion
Provision for
bad debts
Book value Proportion
Provision for
Age bad debts
Amount
(CNY) %
Amount
(CNY)
Amount
(CNY)
%
Amount
(CNY)
4 – 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Over 5 years 0.00 0.00 0.00 0.00 0.00 0.00
Total 141,276,429.13 100.00 544,856.66 125,574,668.28 100.00 469,172.93
(3) Accounts receivable owed by shareholders with 5% or more voting right during the
reporting period
Balance carried forward Balance brought forward
Shareholder Amount
(CNY)
Provision for bad debts
(CNY)
Amount
(CNY)
Provision for bad debts
(CNY)
Air China Co., Ltd. 53,828,640.46 0.00 55,089,147.43 0.00
Total 53,828,640.46 0.00 55,089,147.43 0.00
(5) The balance of top five accounts receivable
Name of company
Relationship with
the Company
Amount
(CNY)
Age
Nature
of accounts receivable
% of total
accounts
receivables
Air China Co., Ltd. Related party 53,828,640.46 Within 1 year
Settlement of wet
lease
38.10
BSP Non-related party 48,494,454.43 Within 1 year Air ticket 34.33
China Civil Aviation
Clearing Centre
Non-related party 28,056,201.97 Within 1 year Air ticket 19.86
Yantai Post Office Non-related party 618,272.41 Within 1 year Aircraft charter fees 0.44
Linyi Civil Aviation
Administration
Non-related party 554,599.95 Within 1 year Aircraft charter fees 0.39
Total 131,552,169.22 93.12
(6) Accounts receivables owed by related parties
Name Relationship with the Company Amount (CNY) % of total accounts receivables
Air China Co., Ltd. Parent 53,828,640.46 38.10Shandong Airlines Co., Ltd. 2009 Annual Report
126
Total 53,828,640.46 38.10
2. Other accounts receivables
(1) Disclosure by classification
Balance carried forward Balance brought forward
Book value Provision for bad debts Book value Provision for bad debts
Types
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Amount
(CNY)
Proportion
(%)
Individual
significant
amounts
209,239,407.19 77.04 109,051,717.65 98.14 203,908,540.13 79.59 109,051,717.65 98.25
Non-significant in
amount but in
accordance with
the characteristics
of credit risk
portfolio, the risk
of the portfolio is
high
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other
non-significant
receivables
62,357,270.59 22.96 2,061,484.66 1.86 52,282,091.05 20.41 1,940,806.24 1.75
Total 271,596,677.78 100.00 111,113,202.31 100.00 256,190,631.18 100.00 110,992,523.89 100.00
Note: See paragraph Ⅱ10 for Criteria for categorising individual significance and individual
insignificance but significant portfolio credit risk.
(2) Provision for bad debts of other account receivables which classified as individual
significant amount or non-significant in amount but execute impairment loss test
individually
Accounts receivables
Book value
(CNY)
Bad and doubtful debt
(CNY)
Proportion
(%)
Comment
Shandong Rainbow Commercial Jet Co.,
Ltd.
109,051,717.65 109,051,717.65 100.00
Significantly overdue debt resulting
from deteriorated financial condition.
CDB Leasing Co., Ltd. 41,354,563.28 0.00 0.00
In accordance with accounting policies
for bad and doubtful debt provision.
Singapore Aircraft Leasing Enterprise 19,118,960.00 0.00 0.00
In accordance with accounting policies
for bad and doubtful debt provision.
Rainier Aircraft Leasing (Ireland) Ltd. 16,331,211.00 0.00 0.00
In accordance with accounting policies
for bad and doubtful debt provision.
Air China Co., Ltd. 23,382,955.26 0.00 0.00
In accordance with accounting policies
for bad and doubtful debt provision.
Total 209,239,407.19 109,051,717.65Shandong Airlines Co., Ltd. 2009 Annual Report
127
(3) Aging analysis
Balance carried forward Balance brought forward
Book value Proportion Provision for bad debts Book value Age Proportion Provision for bad debts
Amount
(CNY) %
Amount
(CNY)
Amount
(CNY)
%
Amount
(CNY)
Within 1 year 51,876,423.97 19.11 1,139,666.87 43,209,209.30 16.87 2,035,090.39
1 – 2 years 14,213,521.28 5.23 842,152.38 31,169,427.89 12.17 669,245.45
2 – 3 years 25,446,259.18 9.37 872,347.11 17,263,584.49 6.74 10,698,669.47
3 – 4 years 16,492,449.22 6.07 10,674,554.07 133,052,336.46 51.93 80,329,246.11
4 – 5 years 133,038,338.06 48.98 80,329,246.11 23,398,644.42 9.13 17,195,422.39
Over 5 years 30,529,686.07 11.24 17,255,235.77 8,097,428.62 3.16 64,850.08
Total 271,596,677.78 100.00 111,113,202.31 256,190,631.18 100.00 110,992,523.89
(4) Other accounts receivables owed by shareholders with 5% or more voting right during
the reporting period
Balance carried forward Balance brought forward
Shareholder Amount
(CNY)
Bad and doubtful debt provision
(CNY)
Amount
(CNY)
Bad and doubtful debt provision
(CNY)
Air China Co., Ltd. 23,382,955.26 0.00 1,100.00 0.00
Total 23,382,955.26 0.00 1,100.00 0.00
(5) List the top five balance of other accounts receivables
Name of company
Relationship with
the Company
Amount
(CNY)
Nature of
other accounts
receivable
Age
% of total
accounts
receivables
Shandong Rainbow Commercial Jet Co., Ltd. Related party 109,051,717.65 Account balance 2 – 6 years 40.14
CDB Leasing Co., Ltd. Non-related party 41,354,563.28 Guarantee 4 – 5 years 15.22
Air China Co., Ltd Related party 23,382,955.26 Guarantee Within 1 year 8.61
Singapore Aircraft Leasing Enterprise Non-related party 19,118,960.00 Guarantee 2 – 4 years 7.04
Rainier Aircraft Leasing (Ireland) Ltd. Non-related party 16,331,211.00 Guarantee Over 4 years 6.01
Total 209,239,407.19 77.02
(6) Other accounts receivables owed by related parties
Name of company
Relationship with the
Company
Amount
(CNY)
% of total accounts
receivablesShandong Airlines Co., Ltd. 2009 Annual Report
128
Air China Co., Ltd. Parent 23,382,955.26 8.61
Shandong XiangYu Air Technology Co., Ltd. Under common control 2,966,545.86 1.09
Qingdao FeiSheng International Air Training Co., Ltd. Under common control 1,405,287.30 0.52
Shandong Rainbow Commercial Jet Co., Ltd. Associate 109,051,717.65 40.15
Total 136,806,506.07 50.37
3. Long-term equity investments
Name of investee
Balance
brought
forward
(CNY)
Changes
in year
(CNY)
Balance
carried
forward
(CNY)
Accumulated
impairment
provision
(CNY)
Impairment
provision
in year
(CNY)
Long-term equity investments measured at cost:
Qingdao International
Air Logistics Co., Ltd.
23,813,205.97 0.00 23,813,205.97 0.00 0.00
China TravelSky Co., Ltd. 6,690,000.00 0.00 6,690,000.00 0.00 0.00
Sichuan Airlines Co., Ltd. 35,000,000.00 0.00 35,000,000.00 0.00 0.00
Jinan Yaoqiang
International Airport Co., Ltd
46,662,100.00 0.00 46,662,100.00 0.00 0.00
Subtotal 112,165,305.97 0.00 112,165,305.97 0.00 0.00
Long-term equity investments measured by the equity method:
Shandong Rainbow
Commercial Jet Co., Ltd
22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Subtotal 22,500,000.00 0.00 22,500,000.00 22,500,000.00 0.00
Total 134,665,305.97 0.00 134,665,305.97 22,500,000.00 0.00
Continued：
Name of investee
Initial investment
cost
(CNY)
Shareholding
(%)
Voting
right
(%)
Reasons for
discrepancy
between
shareholding
and
voting right
Cash
dividends
in year
(CNY)
Long-term equity investments measured at cost:
Qingdao International
Air Logistics Co., Ltd.
23,813,205.97 70.00 70.00 n/a 0.00
China TravelSky Co., Ltd. 6,690,000.00 0.45 0.45 n/a 1,617,642.00
Sichuan Airlines Co., Ltd. 35,000,000.00 10.00 10.00 n/a 0.00
Jinan Yaoqiang
International Airport Co., Ltd 46,662,100.00
14.00 14.00 n/a 0.00Shandong Airlines Co., Ltd. 2009 Annual Report
129
Subtotal 112,165,305.97 1,617,642.00
Long-term equity investments measured by the equity method:
Shandong Rainbow
Commercial Jet Co., Ltd
22,500,000.00 45.00 45.00 n/a 0.00
Subtotal 22,500,000.00 0.00
Total 134,665,305.97 1,617,642.00
4. Operating income and operating costs
(1) Operating income and operating costs
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Income from principal activities 5,298,145,040.55 4,979,929,511.89
Income from other activities 64,528,440.63 63,440,911.31
Total operating income 5,362,673,481.18 5,043,370,423.20
Principal activity costs 4,108,351,166.78 4,121,299,184.09
Other activity costs 3,347,076.10 33,511,012.84
Total operating costs 4,111,698,242.88 4,154,810,196.93
(2) Operating income and operating costs by segment
Current reporting period Last reporting period
Segment Operating income
(CNY)
Operating costs
(CNY)
Operating income
(CNY)
Operating costs
(CNY)
Air transportation 5,277,937,825.81 4,089,471,032.64 4,953,048,164.35 4,101,665,962.58
Hospitality 22,984,060.08 19,179,045.59 22,538,565.66 15,614,100.05
Rental services 854,642.06 30,000.00 31,801,807.87 35,128,834.04
Others 60,896,953.23 3,018,164.65 35,981,885.32 2,401,300.26
Total 5,362,673,481.18 4,111,698,242.88 5,043,370,423.20 4,154,810,196.93
(3) Details of operating revenues from top five clients
Clients Operating income (CNY) % of total operating income
Air China Co., Ltd. 642,432,367.01 11.98
Beijing DeLong Travel Service Co., Ltd. 30,286,076.69 0.56
Inner-Mongolia Civil Airport Co., Ltd. 16,550,030.87 0.31
WuYiShan LianHang Travel Service Co.,
Ltd.
10,447,830.50 0.19Shandong Airlines Co., Ltd. 2009 Annual Report
130
Shenzhen HengLu Logistics Co., Ltd. 2,576,000.00 0.05
Total 702,292,305.07 13.09
5. Investment income
(1) Details of investment income
Items
Current reporting period
(CNY)
Last reporting period
(CNY)
Income from long-term equity investments measured at
cost
1,617,642.00 1,130,610.00
Gains from disposals of long-term equity investments 0.00 421,181.23
Gains from possession of tradable financial assets 2,098,225.94 10,081,058.70
Total 3,715,867.94 11,632,849.93
(2) Income from long-term equity investments measured at cost
Investee
Current reporting period
(CNY)
Last reporting period
(CNY)
Reasons for change
China TravelSky Co., Ltd. 1,617,642.00 1,130,610.00 Increase in cash dividends
(3) As at 31st December 2009, there is no investment of which income remittance is imposed
with limitation.
Ⅻ Supplemental information
1. Details of extraordinary gains and losses for the current reporting period
Items Amount (CNY) Comment
Gains from disposals of non-current assets after expending impairment
provisions
2,758,500.92
Disposals of non-current assets
and contracts of
construction in process; losses
resulting from
closure of CAPT Pilot School
Exceeded-authority approved, non-official approved or accidental tax
repayment and relief
0.00
Government grants recognised through profit or loss for the current
reporting period, excluding grants which are closely related to the
Company’s operating activities and of which the quota or approval is
eligible for automatic renewal in accordance with relevant regulations
135,213,761.47
Repayment of infrastructure fund
for civil aviation
and route subsidies
Financial resource usage fees charged on non-financial institution
recognised through profit or loss for the current reporting period
0.00
Gains arising from bargain purchase in business combination and
investments in associates and joint ventures
0.00Shandong Airlines Co., Ltd. 2009 Annual Report
131
Items Amount (CNY) Comment
Non-monetary asset exchange 0.00
Consigned investment and asset management 0.00
Impairment provision resulting from force majeure, eg. natural desasters 0.00
Reorganisation 0.00
Reorganisation expenditure 0.00
Unfair transactions 0.00
Net profits or losses achieved by an acquired under-common-control entity
during the period from the start of the period to the acquisition date
0.00
Gains or losses arising from contingent events unconnected with the
Company’s daily operating activities
0.00
Fair value changes of tradable financial assets and tradable financial
liabilities held and gains or losses arising from disposals of tradable
financial assets, tradable financial liabilities and available-for-sale financial
assets, excluding hedging contracts relevant to the Company’s daily
operating activities
-10,020,739.69
Gains or losses arising from
settlement of interest
swaps and fair value changes
Reversal of impairment provision for accounts receivables eligible for
individual impairment assessment
0.00
Gains or losses arising from consigned borrowings 0.00
Fair value changes of property investments subsequently measured at fair
value
0.00
One-off adjustment of profit or loss for the current reporting period in
accordance with tax and accounting laws and regulations
0.00
Consignment income arising from consigned operations 0.00
Income and expenses other than items listed above 3,628,053.31
Other gains or losses satisfying the definition of extraordinary gains or
losses
0.00
Subtotal 131,579,576.01
Less: Impact of income tax 32,894,894.00
Less: Impact on non-controling interest -337.48
Total 98,685,019.49
2. Yield rate of net assets and earnings per share
Earnings per share
Net profits for the current reporting period
Weighted average
of returns on equity (%) Basic earnings per share (%) Diluted earnings per share (%)Shandong Airlines Co., Ltd. 2009 Annual Report
132
Net profits attributable to ordinary shareholders 43.11 0.76 0.76
Net profits attributable to ordinary shareholders
after deducting extraordinary gains or losses
29.04 0.51 0.51
Computation of earnings per share:
(1) Basic earnings per share
Current reporting period Last reporting period
Items Computation
Amount
After deducting
extraordinary
gains or losses
Amount
After deducting
extraordinary
gains or losses
Net profits attributable to
ordinary shareholders
(1)
CNY
302,282,325.68
CNY 203,597,306.19 CNY 80,981,442.68 CNY 92,440,296.87
Number of listed ordinary
shares brought forward
(2) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
Number of listed ordinary
share equivalents increased
in year
(3) 0.00 0.00 0.00 0.00
Number of listed ordinary
share equivalents decreased
in year
(4) 0.00 0.00 0.00 0.00
Weighted average of listed
ordinary shares
(5)=(2)+(3)-(4
)
400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
Basic earnings per share (6)=(1)÷(5) CNY 0.76 CNY 0.51 CNY 0.20 CNY 0.23
(2) Diluted earnings per share
Current reporting period Last reporting period
Items Computation
Amount
After deducting
extraordinary
gains or losses
Amount
After deducting
extraordinary
gains or losses
Net profits attributable to ordinary
shareholders
(1)
CNY
302,282,325.68
CNY
203,597,306.19
CNY 80,981,442.68 CNY 92,440,296.87
Potential dilutive ordinary
dividends recognised as expenses
(2) 0.00 0.00 0.00 0.00
Potential dilutive ordinary share
conversion expenses
(3) 0.00 0.00 0.00 0.00
Income tax rate (4) 25.00% 25.00% 25.00% 25.00%
Net profits attributable to ordinary
shareholders after adjustment
(5)=(1)+[(2)-(3
)]×[1-(4)]
CNY
302,282,325.68
CNY
203,597,306.19
CNY 80,981,442.68 CNY 92,440,296.87Shandong Airlines Co., Ltd. 2009 Annual Report
133
Current reporting period Last reporting period
Items Computation
Amount
After deducting
extraordinary
gains or losses
Amount
After deducting
extraordinary
gains or losses
Weighted average of ordinary
shares for basic earnings per share
computation
(6) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
Weighted average of dilutive
ordinary share conversion
(7) 0.00 0.00 0.00 0.00
Weighted average of ordinary
shares for diluted earnings per
share
(8)=(6)+(7) 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
Diluted earnings per share (9)=(5)÷(8) CNY 0.76 CNY 0.51 CNY 0.20 CNY 0.23
ⅩⅢ Approval of financial statements
This financial statement is approved and authorized for issuance by the Board of Directors on
March 24, 2010.
XI. Documents Available for Reference
1. Financial statements carrying the personal signatures and seals of Chairman of the
Board, Chief Accountant and Person in Charge of Accounting Department;
2. Original of Auditors’ Report carrying the seals of Certified Public Accountants as
well as personal signatures and seals of certified public accountants;
3. Originals of all documents and notices publicly disclosed on newspapers designated
by CSRC in the report period in 2009;
4. The Company will offer above documents for reference timely provided that CSRC
or Stock Exchange demands or shareholders requires according to the regulations and
Articles of Association.
Board of Directors of Shandong Airlines Co., Ltd.
March 24, 2010
