ANNUAL REPORT 2014
March 2015
ShandongAirlinesCo.,Ltd.AnnualReport2014 Contents
Section I Important Notice andParaphrase ..................................................................................1 Section II Company Profile...............................................................................................................4 Section IIIAccountingdata and summary offinancial indexes ..................................................6 Section IVReport of theBoard ofDirectors ..................................................................................9 SectionVImportantEvents ..........................................................................................................22 SectionVIChanges insharesand particularaboutshareholders...............................................27 SectionVIIPreferredStock……………………………………………………………………….32 SectionVIIIParticulars aboutDirectors, Supervisors,SeniorExecutives andEmployees.......33 Section IX Corporate Governance..................................................................................................40 Section XInternal Control..............................................................................................................45 Section XI Financial Report............................................................................................................48 Section XII Documents available forreference...........................................................................162
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section I. Important Notice and Paraphrase
Board of Directors, Supervisory Committee, all directors, supervisors and senior executives of Shandong Airlines Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no any fictitious statements, misleading statements, 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. Other directors attending the Meeting for annual report deliberation except for the followed:
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|Nameofdirectorabsent|Titleforabsentdirector|Reasonsforabsent|Attorney|
|WangMingyuan|Director|Workscheduleconflict|Machongxian|
|WangKaiyuan|Independentdirector|Submittedapplicationforresignation||

The profit distribution plan that deliberated and approved by the Board is: based on total stock issued 400,000,000 shares, distributed 2.00 Yuan (tax included) bonus in cash for every 10-share hold by all shareholders, 0 shares bonus issued (tax included) and no capitalizing of common reserves carried out.
Yu Haitian, Principal of the Company, Xu Guojian, person in charger of accounting works and Sun Jingping, person in charge of accounting organ (accounting principal) hereby confirm that the Financial Report of 2014Annual Report is authentic, accurate and complete.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Paraphrase
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|-|-|-|
|Items|Refersto|Contents|
|TheCompany,Company|Refersto|ShandongAirlinesCo.,Ltd.|
|SDA|Refersto|ShandongAviationGroup;thefirstlargestshareholderandcontrollingshareholderoftheCompany|
|AirChina|Refersto|AirChinaLimited,thesecondlargestshareholderoftheCompany|

ShandongAirlinesCo.,Ltd.AnnualReport2014 Major Risk Warning
China Securities Journal, Securities Times, Hong Kong Commercial Daily and Juchao Website (www.cninfo.com.cn) are the media for information disclosure appointed by the Company, all information under the name of the Company disclosed on the above said media shall prevail, and Investors are advised to exercise caution of investment risks.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section II Company profile
I.Company information
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|-|-|-|-|
|Shortformofthestock|Shanhang-B|Stockcode|200152|
|Stockexchangeforlisting|ShenzhenStockExchange|||
|NameoftheCompany(inChinese)|山东航空股份有限公司|||
|ShortformoftheCompany(inChinese)|山东航空|||
|ForeignnameoftheCompany(ifapplicable)|SHANDONGAIRLINESCO.,LTD.|||
|ShortformofforeignnameoftheCompany(ifapplicable)|SDA|||
|Legalrepresentative|YuHaitian|||
|Registrationsadd.|YaoqiangInternationalAirport,Jinan,Shandong|||
|Codeforregistrationsadd|250107|||
|Officesadd.|SDABldg.,No.5746,ErHuanEastRoad,Jinan,Shandong|||
|Codesforofficeadd.|250014|||
|Companywebsite|http://www.shandongair.com.cn|||
|Email|zqb@shandongair.com.cn|||

II. Person/Way to contact
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|-|-|-|
||SecretaryoftheBoard|Rep.ofsecurityaffairs|
|Name|DongQiantang|FanPeng|
|Contactsadd.|19/F,SDABldg.,No.5746,ErHuanEastRoad,Jinan,Shandong|8/F,SDABldg.,No.5746,ErHuanEastRoad,Jinan,Shandong|
|Tel.|0531－85698229|0531－85698678|
|Fax.|0531－85698767ext.8679|0531－85698767ext.8679|
|Email|dongqt@shandongair.com.cn|fanp@shandongair.com.cn|

III. Information disclosureandpreparation place
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|Newspaperappointedforinformationdisclosure|InChina:ChinaSecuritiesJournal,SecuritiesTimesoverseas:HongKongCommercialDaily|

ShandongAirlinesCo.,Ltd.AnnualReport2014
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|WebsiteforannualreportpublishappointedbyCSRC|http://www.cninfo.com.cn|
|Preparationplaceforannualreport|OfficeofBoard(8/F,SDABldg.,No.5746,ErHuanEastRoad,Jinan,Shandong)|

IV.Registration changes ofthe Company
|||||||
|-|-|-|-|-|-|
||Dateforregistration|Placeforregistration|RegistrationNO.forenterpriselegallicense|No.oftaxationregistration|Organizationcode|
|Initialregistration|1999-12-13|ShandongAdministrationforIndustry&Commerce|370000400002351|370112720721201|72072120-1|
|Registrationatendofreportperiod|2014-03-26|ShandongAdministrationforIndustry&Commerce|370000400002351|370112720721201|72072120-1|

V. Otherrelevant information
CPAengagedbytheCompany
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|-|-|
|NameofCPA|RuihuaCertifiedPublicAccountants(LLP)|
|Officesadd.forCPA|5-11/F,WestTower,ChinaOverseaPropertyPlaza,WestBinheRd.,DongchengDistrict,Beijing|
|SigningAccountants|YangGanlin,WuXiaolei|

SponsorengagedbytheCompanyforperformingcontinuoussupervisiondutiesinreportingperiod
□Applicable√Notapplicable
FinancialconsultantengagedbytheCompanyforperformingcontinuoussupervisiondutiesinreportingperiod
□Applicable√Notapplicable
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section III. Accounting data and summary of financial indexes I.Main accounting data andfinancialindexes
Whetherithasretroactiveadjustmentorre-statementonpreviousaccountingdataforaccountingpolicychangedandaccounting errorcorrectionornot
√Yes□No
||||||||
|-|-|-|-|-|-|-|
||2014|2013||Changesoverlastyear|2012||
|||Beforetheadjustment|Aftertheadjustment|Aftertheadjustment|Beforetheadjustment|Aftertheadjustment|
|Operatingincome(RMB)|11,570,296,757.48|11,427,157,933.15|11,427,157,933.15|1.25%|10,993,024,914.41|10,993,024,914.41|
|Net profit attributable toshareholders of the listedcompany(RMB)|287,851,542.09|389,081,811.72|390,121,811.72|-26.21%|589,810,932.47|589,810,932.47|
|Net profit attributable toshareholders of the listedcompany after deductingnon-recurring gains andlosses(RMB)|146,403,043.43|137,850,318.37|138,890,318.37|5.41%|490,146,637.15|490,146,637.15|
|Net cash flow arising fromoperatingactivities(RMB)|1,459,828,215.31|1,411,186,522.15|1,411,186,522.15|3.45%|1,726,317,500.75|1,726,317,500.75|
|Basicearningspershare(RMB/Share)|0.72|0.97|0.98|-26.53%|1.47|1.47|
|Dilutedearningspershare(RMB/Share)|0.72|0.97|0.98|-26.53%|1.47|1.47|
|WeightedaverageROE|10.33%|15.08%|15.42%|5.09percentagepointsdown|26.36%|26.36%|
||Endof2014|Endof2013||Changesoverendoflastyear|Endof2012||
|||Beforetheadjustment|Aftertheadjustment|Aftertheadjustment|Beforetheadjustment|Aftertheadjustment|
|Totalassets(RMB)|12,118,867,620.51|11,403,124,428.82|11,474,898,669.33|5.61%|11,261,341,430.03|11,298,444,116.84|
|Netassetsattributabletoshareholderoflistedcompany(RMB)|2,878,120,380.35|2,708,137,664.00|2,692,517,344.38|6.89%|2,479,055,852.28|2,429,050,867.39|

ShandongAirlinesCo.,Ltd.AnnualReport2014 II. Difference ofthe accountingdata underaccounting rules inand outof China
1. Difference of the net profit and net assets disclosed in financial report, under both IAS (International AccountingStandards)andChineseGAAP(GenerallyAcceptedAccountingPrinciples)
InRMB
||||||
|-|-|-|-|-|
||Netprofitattributabletoshareholdersoflistedcompany||Netassetsattributabletoshareholdersoflistedcompany||
||Currentperiod|Lastperiod|Period-end|Period-begin|
|ChineseGAAP|287,851,542.09|390,121,811.72|2,878,120,380.35|2,692,517,344.38|
|ItemsandamountadjustedbyIAS|||||

2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting rulesandChineseGAAP(GenerallyAcceptedAccountingPrinciples)
InRMB
||||||
|-|-|-|-|-|
||Netprofitattributabletoshareholdersoflistedcompany||Netassetsattributabletoshareholdersoflistedcompany||
||Currentperiod|Lastperiod|Period-end|Period-begin|
|ChineseGAAP|287,851,542.09|390,121,811.72|2,878,120,380.35|2,692,517,344.38|
|Itemsandamountadjustedbyforeignaccountingrules|||||

III. Items andamounts ofextraordinary profit(gains)/loss
InRMB
||||||
|-|-|-|-|-|
|Item|2014|2013|2012|Note|
|Gains/losses from the disposal ofnon-current asset (including the write-offthataccruedforimpairmentofassets)|-5,392,037.39|68,990,941.57|-6,848,192.53||
|Governmentalsubsidyreckonedintocurrentgains/losses (not including the subsidyenjoyed in quota or ration according tonational standards, which are closelyrelevanttoenterprise’sbusiness)|161,105,606.12|22,465,841.77|52,137,058.47||
|Losses/gains from changes of fair valuesoccurred in holding transaction financialassets and transaction financial liabilities,and investment income obtaining from thedisposal of transaction financial assets andtransaction financial liabilities and financial|-3,363,887.84|4,292,356.41|-6,906,114.54||

ShandongAirlinesCo.,Ltd.AnnualReport2014
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|-|-|-|-|-|
|assets available for sales, excluded effectivehedging business relevant with normaloperationsoftheCompany|||||
|Reversal of impairment reserve for accountreceivablewithseparateimpairmenttesting||7,500,000.00|||
|Othernon-operatingincomeandexpenditureexceptfortheaforementioneditems|36,398,186.39|165,501,423.87|94,505,753.93||
|Other gains/losses satisfied definition ofextraordinaryprofit(gains)/loss||67,342,734.17|||
|Less:Impactonincometax|47,299,368.62|84,861,804.44|33,224,210.01||
|Total|141,448,498.66|251,231,493.35|99,664,295.32|--|

Inreportingperiod,theCompanyhasnoparticularaboutitemsdefinedasrecurringprofit(gain)/lossaccordingtothelistsofextraordinaryprofit(gain)/lossinQ&AAnnouncementNo.1onInformationDisclosureforCompaniesOfferingTheirSecuritiesto thePublic---ExtraordinaryProfit/loss
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section IV. Report of the Board of Directors
I.Introduction
Against the severe and complicated safety benefit situation since 2014, the Company adherence to stable operation, line with “innovativecontrolling,qualityandefficiencyachieved”;aggressivelyimplementedstructuraladjustmentofstrategyresources;asa whole,thesafety,operation,benefitandservicesachievedintendedtarget;theCompanymaintainsstableoperationtrendsandgains abetteroperationresults.
(I)Thoroughgoingeffortstopromoteinnovationupgradeofsafetycontrollingsystem,maintainsstablesafetytrends In 2014, theCompany’s transportation core business guaranteed a safety flight of 275,200 hours and 145,200 sorties, respectivelyincreasedby6.83%and5.23%yearonyear,andnosafetyincidentsastransportandaviationaccidentpronenessorabovecausedby theCompanyandsub-contractoroccurred.Thesecurityqualityevalutiaonindexis10.74withastabilesafetypositionowned.Byend of 2014, the Company achieved a safety flight of 2,090,000 hours, horned the civil aviation “Flight Safety-Two Star Award” and smoothly realized the 20 anniversary of safety flight. Continued to strengthen safety responsibility, breaking in safety supervision system,madethesafetyfoundationfirmandachievedafruitfulspecificgovernanceinkeylink.
(II)Optimizeflightnormalcontrollingmechanism,flightoperatingefficiencyenhancecontinuously
TheCompany’saverageflightpunctualityratewas80.92%atallyearround,a2.64percentagepointsupy-o-y;guarantee62flights of important mission and expert III (included) or above; the prosponed flight over 4 hours takes0.83% in total flights, a 0.74 percentage points declined y-o-y; the rates of flight alternating and returning was2.90%, a 1.18 permillage points down y-o-y. Vigorouslyfocusonsourcemanagementandprocessmanagement,ontimeperformanceisrisingsteadily.
(III)Improveproductionorganizationefficiency,benefitstandardslargelyinlinewiththeexpectation
In 2014, the Company completed total transport turnover volume of 1,940 million tons km, the passenger transport volume of15,320,000person-time,mailvolumewas141,400tons(includingwetleaseservices),respectivelyincreasedby10.38%,9.14%and8.03% year on year; achieved operating income of 11.57 billion Yuan, net profit of 398 million Yuan; affected by a slowdown in demand and faster growth of transport capacity, the passenger load factor turns to77.21% with 0.55 percentage points down on ay-o-ybasis,andthecargoandmailloadfactorturnsto42.67%,a4.02percentagepointsdownyearonyear.Continuedtoimprove acquireabilityforresourcesanditsuseefficiency,thecompetitiveadvantageinmarkethasbeenconsolidated.Promotedinnovation ofmarketingmodewithgreateffortsandthee-Commercestayaheadofthecurve.
(IV)Promotefive-starobtainedplans,servicequalityenhancecontinuously
The overall passenger satisfaction survey score reached 91.69, increased 2.16 scores year on year,media authorityis fifth-rated on average;thevalidcustomercomplaintratewas0.2028pertenthousandperson-times,lowerthantheindexcarriedoutatbeginning of the year. Won the title of “China 500 Most Valuable Brands” for the seventh consecutive year, brand value achieving 18,272 millionYuanwith298,600millionYuanaddedoverlastyearinvalue,rose9placesto112nd.
Operationdatasummary:
Index 2014 2013 Changes
Totalt-kmloadrate(10thousandt-km)193984.88 175746.71 10.38%
Volume of passenger traffic (101531.87 1403.58 9.14%
thousandpassengers)
Cargo& mail traffic volume (1014.14 13.08 8.03%
thousandtons)
ShandongAirlinesCo.,Ltd.AnnualReport2014 Flyingkm(onemillionkm) 155.64 145.29 7.13%
Flyinghours(10thousandhours) 27.52 25.76 6.83
Numberofflight(10thousandtimes) 14.52 13.8 5.23
PLF(passengerloadfactor) 77.21% 77.76% 0.55percentagepointsdown
Cargo&MailOLF(overallloadfactor)42.67% 46.69% 4.02percentagepointsdown
InthePeriod,totallytenB737-800aircraftsareintroducedbytheCompanyandtwoB737-300aircraftsareoutofservices.Upto31 December2014,theCompanyoperates80aircraftsintotalandthefleetdistributionbelow:
Model Numbers Averageserviceage
(Year)
737-700 3
737-800 70
CRJ-200 5 4.7-year
CRJ-700 2
II. Main business analysis
1.Introduction
Reasonsfordifferenceofactualoperationperformancehas20%lowerorhigherthanprofitforecastoftheYeardisclosed
□Applicable√Notapplicable
2.Revenue
Changesofrevenueforyearof2014
InRMB
|||||
|-|-|-|-|
|Item|2014|2013|+,-(%)|
|Airtransportservice|11,373,090,243.66|11,246,302,839.28|1.13%|
|Logisticsfreightservice|20,643,816.23|8,642,617.01|138.86%|
|Hotel&cateringservice|42,594,968.97|32,879,987.03|29.55%|
|Trainingservice|20,667,812.43|22,194,939.18|-6.88%|

MajorclientsoftheCompanyinsales
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|-|-|
|Totaltopfiveclientsinsales(RMB)|742,923,412.56|
|Proportionintotalannualsalesvolumefortopfiveclients|6.42%|

 TopfiveclientsoftheCompany
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|-|-|-|-|
|Serial|Name|Sales(RMB)|Proportionintotalannualsales|
|1|Client1|547,581,022.48|4.73%|
|2|Client2|106,213,617.45|0.92%|
|3|Client3|37,721,612.63|0.33%|
|4|Client4|27,850,000.00|0.24%|
|5|Client5|23,557,160.00|0.20%|

ShandongAirlinesCo.,Ltd.AnnualReport2014
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|-|-|-|-|
|Total|--|742,923,412.56|6.42%|

 Othersituationofmainclients
AirChinaisthesecondlargestshareholderoftheCompany.
3.Cost
Industryclassification
InRMB
||||||||
|-|-|-|-|-|-|-|
|Industryclassification|Item|2014||2013||Y-o-ychanges|
|||Amount|Ratioinoperationcost|Amount|Ratioinoperationcost||
|Airtransportservice|Aviationfuelconsumption|3,702,466,137.94|36.96%|3,854,933,435.85|39.87%|-3.96%|
||Take-off&landingfees|1,264,745,117.58|12.63%|1,155,209,250.95|11.95%|9.48%|
||Employee’ssalary|1,196,174,819.27|11.94%|1,077,378,712.69|11.15%|11.03%|
||Depreciationofaircraftandengine|634,776,512.79|6.34%|723,612,575.70|7.49%|-12.28%|
||Other|3,217,824,624.63|32.13%|2,855,740,816.76|29.54%|12.68%|
||Total|10,015,987,212.21|100.00%|9,666,874,791.95|100.00%|3.61%|
|Logisticsfreightservice|Employee’ssalary|9,324,062.17|55.19%|2,072,808.90|31.91%|349.83%|
||Other|7,569,168.33|44.81%|4,423,145.29|68.09%|71.13%|
||Total|16,893,230.50|100.00%|6,495,954.19|100.00%|160.06%|
|Hotel&cateringservice|Rawmaterials|13,127,597.01|37.31%|16,936,712.26|58.01%|-22.49%|
||Employee’ssalary|4,722,408.33|13.42%|4,840,025.55|16.58%|-2.43%|
||Depreciation|1,630,743.02|4.63%|976,617.70|3.35%|66.98%|
||Other|15,710,406.62|44.64%|6,438,210.38|22.06%|144.02%|
||Total|35,191,154.98|100.00%|29,191,565.89|100.00%|20.55%|
|Trainingservice|Depreciation|4,848,538.46|51.40%|4,849,087.29|69.68%|-0.01%|
||Other|4,583,654.65|48.60%|2,109,547.19|30.32%|117.28%|
||Total|9,432,193.11|100.00%|6,958,634.48|100.00%|35.55%|

ShandongAirlinesCo.,Ltd.AnnualReport2014 MainsuppliersoftheCompany
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|-|-|
|Totalpurchaseamountfromtopfivesuppliers(RMB)|2,755,442,799.49|
|Proportionintotalannualpurchaseamountfortopfivesuppliers|39.21%|

TopfivesuppliersoftheCompany
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|-|-|-|-|
|Serial|Name|Purchases(RMB)|Proportionintotalannualpurchase|
|1|EastChinaBranchofChinaAviationFuelCo.,Ltd.|1,521,218,623.84|21.65%|
|2|QingdaoBranchofChinaAviationFuelCo.,Ltd.|655,149,291.92|9.32%|
|3|Xi’anBranchofChinaAviationFuelCo.,Ltd.|217,906,507.79|3.10%|
|4|ChinaNationalAviationFuelYantaiCo.,Ltd.|208,534,997.29|2.97%|
|5|ChongqingBranchofChinaAviationFuelCo.,Ltd.|152,633,378.65|2.17%|
|Total|--|2,755,442,799.49|39.21%|

 4.Expenses
Changesofexpensesforyearof2014
InRMB
||||||
|-|-|-|-|-|
|Item|2014|2013|+,-(%)|Reasonforchanges|
|Salesexpenses|789,909,342.97|775,204,419.75|1.90%||
|Administrativeexpenses|234,028,777.30|221,433,947.49|5.69%||
|Financialexpenses|200,729,150.28|145,665,611.58|37.80%|Mainly due to the exchange losses arisingfromYuan/Dollarratedevalued;sameperiodoflastyearduetotheexchangegains.|

5.Cashflow
InRMB
|||||
|-|-|-|-|
|Item|2014|2013|Y-o-ychanges|
|Subtotalofcashin-flowfromoperationactivity|13,084,238,469.29|12,120,664,358.85|7.95%|
|Subtotalofcashout-flowfromoperationactivity|11,624,410,253.98|10,709,477,836.70|8.54%|
|Netcashflowfromoperation|1,459,828,215.31|1,411,186,522.15|3.45%|

ShandongAirlinesCo.,Ltd.AnnualReport2014
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|-|-|-|-|
|activity||||
|Subtotalofcashin-flowfrominvestmentactivity|89,351,151.43|177,128,657.92|-49.56%|
|Subtotalofcashout-flowfrominvestmentactivity|1,882,464,644.58|1,725,696,472.77|9.08%|
|Netcashflowfrominvestmentactivity|-1,793,113,493.15|-1,548,567,814.85|15.79%|
|Subtotalofcashin-flowfromfinancingactivity|2,292,448,748.00|2,611,008,010.20|-12.20%|
|Subtotalofcashout-flowfromfinancingactivity|1,944,987,512.97|2,183,736,323.48|-10.93%|
|Netcashflowfromfinancingactivity|347,461,235.03|427,271,686.72|-18.68%|
|Netincreasedamountofcashandcashequivalent|16,219,065.14|289,134,528.24|-94.39%|

Reasonsfory-o-yrelevantdatawithover30%changes
InRMB
||||||
|-|-|-|-|-|
|Item|2014|2013|+,-(%)|Reasonforchanges|
|Taxespaid|416,630,299.89|687,341,028.75|-39.39%|Affected by decreased profit and tax burden reductiondue to implementation of “business tax changed toValue-added tax”, relevant taxes paid actually in theYeardeclined|
|Cashreceivedfrominvestmentincome|15,149,770.75|2,447,115.15|519.09%|Received dividend from Jinan International AirportCo.,Ltd.andSichuanAirlinesCo.,Ltd.intheYear.|
|Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets|74,201,380.68|174,681,542.77|-57.52%|Relatedtodisposalofoldplanesassets|
|Net cash paid foracquiring subsidiaryand other operationunit|26,000,000.00|||InvestmentinQingdaoAirlinesCo.,Ltd.intheYear|
|Impact on cash andcash equivalentfrom changes ofexchangerate|2,043,107.95|-755,865.78|370.30%|Exchange rate of RMB against foreign currencychanged|

ReasonsofmajordifferencebetweenthecashflowofoperationactivityinreportperiodandnetprofitoftheCompany
□Applicable√Notapplicable
ShandongAirlinesCo.,Ltd.AnnualReport2014 III. Composition ofmain business
InRMB
||||||||
|-|-|-|-|-|-|-|
||Operatingrevenue|Operatingcost|Grossprofitratio|Increase/decreaseofoperatingrevenuey-o-y|Increase/decreaseofoperatingcosty-o-y|Increase/decreaseofgrossprofitratioy-o-y|
|Accordingtoindustries|||||||
|Airtransportservice|11,358,457,336.52|10,015,838,231.61|11.82%|1.12%|3.61%|2.12percentagepointsdown|
|Hotel&cateringservice|42,594,968.97|35,191,154.98|17.38%|40.29%|28.68%|7.45percentagepointsup|
|Trainingservice|20,667,812.43|9,432,193.11|54.36%|-6.88%|35.55%|14.29percentagepointsdown|
|Logisticsfreightservice|20,643,816.23|16,893,230.50|18.17%|138.86%|160.06%|6.67percentagepointsdown|
|Accordingtoregion|||||||
|InChina|10,796,193,625.02|9,559,822,048.40|11.45%|-1.25%|1.52%|2.41percentagepointsdown|
|H.K.,MacaoandTaiwan|241,918,800.63|196,968,077.63|18.58%|15.57%|23.64%|5.32percentagepointsdown|
|International|404,251,508.50|320,564,684.17|20.70%|166.51%|143.91%|7.35percentagepointsup|

 Undercircumstancesofadjustmentinreportingperiodforstatisticscopeofmainbusinessdata,adjustedmainbusinessbasedonlatestoneyear’sscopeofperiod-end
□Applicable√Notapplicable
IV.Assets andliability analysis
1.Majorchangesofassets
InRMB
||||||||
|-|-|-|-|-|-|-|
||Endof2014||Endof2013||Ratiochanges|Notesofmajorchanges|
||Amount|Ratiointotalassets|Amount|Ratiointotalassets|||
|Monetaryfund|460,741,336.35|3.80%|444,522,271.21|3.87%|0.07 percentage points down||
|Accountreceivable|217,039,947.40|1.79%|250,524,757.67|2.18%|0.39 percentage points down||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|Inventory|112,151,772.45|0.93%|107,973,473.35|0.94%|0.01 percentage points down||
|Long-termequityinvestment|173,410,020.12|1.43%||0.00%|1.43 percentage points up|InvestmentinQingdaoAirlinesCo.,Ltdintheyear|
|Fixassets|6,923,262,003.49|57.13%|7,564,658,140.23|65.92%|8.79 percentage points down||
|Constructioninprogress|2,437,585,905.29|20.11%|1,647,915,995.78|14.36%|5.75 percentage points up|InterimpaymentforpurchasingplanespaidintheYear|
|Advancepayment|138,893,259.40|1.15%|88,182,040.98|0.77%|0.38 percentage points up|PlaneleasingincreasedintheYear,andrentpaidinadvanceincreasedcorrespondingly|
|Dividendsreceivable|1,826,370.00|0.02%|14,325,586.06|0.12%|0.1 percentage pointsdown|ThedividendfromSichuanAirlinesforyearof2012wasreceived|
|Othercurrentassets|108,805,651.21|0.90%|71,828,962.65|0.63%|0.27 percentage points up|ThependingdeductVATinputtaxincreasedintheYear|

2.Majorchangesofliability
InRMB
||||||||
|-|-|-|-|-|-|-|
||2014||2013||Ratiochanges|Notesofmajorchanges|
||Amount|Ratiointotalassets|Amount|Ratiointotalassets|||
|Short-termloans||0.00%|434,137,220.00|3.78%|3.78percentagepointsdown|Short-termloansaredueinthePeriod|
|Long-termloans|3,219,443,999.28|26.57%|3,525,047,206.06|30.72%|4.15percentagepointsdown||
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedinto|1,559,710.77|0.01%|296,902.47|0.00%|0.01percentagepointsup|FairvalueoftheinterestrateswapsheldintheYearchanged|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|currentgains/losses|||||||
|Otheraccountpayable|367,285,868.35|3.03%|193,868,858.34|1.69%|1.34percentagepointsup|SubsidywithassetsdisposalrelatedisreceivedintheYear,andtheassetsarenotdisposedcompleted|
|Non-currentliabilitiesduewithin1year|1,741,517,725.20|14.37%|538,030,658.42|4.69%|9.68percentagepointsup|Thebondpayable,long-termloansandlong-termpayablesreturnednextyearincreased|
|Bondspayable||0.00%|500,000,000.00|4.36%|4.36percentagepointsdown|TheMTNissuedbytheCompanyareexpiredon13thJune2015,suchpartsarere-classifytonon-currentliabilityduewithinoneyear|
|Long-termaccountpayable|2,079,557,697.82|17.16%|1,542,515,998.39|13.44%|3.72percentagepointsup|Thefinanceleaseforplanesareincreased,thantherentpayableforplanesgrowthcorrespondingly|

3.Assetsandliabilitymeasurebyfairvalue
InRMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Openingamount|Gains/lossesofchangesinfairvalue|Accumulativechangesinfairvaluereckonedintoequity|Impairmentaccrualinthisperiod|Amountpurchasedinthisperiod|Saleamount|Closingamount|
|Financialassets||||||||
|3.Available-for-salefinancialassets|78,464,240.51|7,779,325.17|79,553,565.68||||86,243,565.68|
|Subtotaloffinancialassets|78,464,240.51|7,779,325.17|79,553,565.68||||86,243,565.68|
|Theabovetotal|78,464,240.51|7,779,325.17|79,553,565.68||||86,243,565.68|
|Financialliability|296,902.47|1,262,808.30|1,559,710.77||||1,559,710.77|

WhethertherehavemajorchangesonmeasurementattributesformainassetsoftheCompanyinreportperiodornot
□Yes√No
ShandongAirlinesCo.,Ltd.AnnualReport2014 V. Investmentanalysis
1.Foreignequityinvestment
||||
|-|-|-|
|Investedcompany|||
|Name|Mainbusiness|Proportionofequityininvestedcompanyforlistedcompany|
|QingdaoInternationalAviationLogisticsCenterCo.,Ltd.|Aircargowarehousing,grounddelivery|100.00%|
|QingdaoFeishengInternationalAviationTechnologyDevelopmentTrainingCo.,Ltd.|Pilottraining|100.00%|
|ShandongRainbowCorporateAircraftCo.,Ltd.|Airtransport|45.00%|
|QingdaoAirlinesCo.,Ltd.|Airtransport|20.00%|
|SichuanAirlinesCo.,Ltd.|Airtransport|10.00%|
|JinanInternationalAirportCo.,Ltd.|Civilairport|2.53%|
|TravelSkyTechnologyLimited|Civilaviationinformationtechnologyservice|0.45%|

2.Useoffundraised
Inreportingperiod,therearenofundsraised.
3.Mainsubsidiariesandstock-jointlycompanies
Particularaboutmainsubsidiariesandstock-jointlycompanies
InRMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Companyname|Type|Industries|Mainproductsorservice|Registercapital|Totalassets|NetAssets|Operatingrevenue|Operatingprofit|Netprofit|
|QingdaoInternationalAviationLogisticsCenterCo.,Ltd.|Subsidiary|Transportationandwarehousingindustry|Aircargowarehousing,grounddelivery;E-business|30,000,000.00|125,219,599.04|43,234,302.02|34,780,012.90|964,762.74|685,540.32|
|QingdaoFeishengInternationalAviation|Subsidiary|Pilottraining|Pilottraining|51,545,500.00|71,899,691.00|71,004,114.90|9,963,272.81|799,210.24|574,304.25|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|TechnologyDevelopmentTrainingCo.,Ltd.||||||||||
|ShandongRainbowCorporateAircraftCo.,Ltd.|Stock-jointlycompany|Airtransportindustry|Airtransport|50,000,000.00|1,903,849.02|-165,861,964.31||-53,218.82|-53,218.82|
|QingdaoAirlinesCo.,Ltd.|Stock-jointlycompany|Airtransportindustry|Airtransport|1,000,000,000.00|1,133,386,975.84|798,971,880.58|229,712,981.25|-172,839,309.05|-171,868,234.30|

Particularaboutsubsidiariesobtainedordisposedinreportperiod
□Applicable√Notapplicable
VI.Estimated performance foryear of2015(From January to March)
Estimation on accumulative net profit from the beginning of the year to the end of next report period to be loss probably or the warningofitsmaterialchangecomparedwiththecorrespondingperiodofthelastyearandexplanationonreason
□Applicable√Notapplicable
VII. Special purposevehicle controlled bytheCompany
NospecialpurposevehiclecontrolledbytheCompany
VIII. Prospect forfuturedevelopment ofthe Company
2015isbotha“12thFive-Year”planningending,andacrucialyearforlayingthefoundationof“13thFive-Year”.Currently,national economicdevelopmentisgoodonthewhole,characteristicof“middlehighspeed,mode-transfer,structure-optimizedandemerging motion”isincreasinglyapparent.Undertheinfluenceofkeencompetitioninandoutoftheindustryandlowerlevel inmainstream passenger source, civil aviation enters ageneration of “popularization” and“meager profit” with characteristic of “lowprices” and “lower discount”. Promoted business mode innovation and product differentiation, strengthen cost controlling will be crucial for achievingprofitandstayssustainabledevelopmentincivilaviationenterprise.
Fleet of the Company will reach nearly 100 planes by the end of 2015, and officially entered to major airlines ranks. During the crucialperiodofaconnectinglink,theCompanywill,rapidupstrategyplanningandcontrollingmechanismpromotion,constantly improvingoperationmanagementstandardsandcomprehensivecompetitivestrength,enhancingcoreteambuildingandideological style building, focus on strategic guidance and moving ahead on implementation issues; In 2015, the Company will insist on innovationandchangetofitthenewsituation,strivetoconsolidatedandexpandcomprehensivecompetitiveadvantage,achievinga stabledevelopmentfortheCompany.
ShandongAirlinesCo.,Ltd.AnnualReport2014 IX. Explanation from the Board and Supervisory Committee for “Qualified Opinion” from theCPA
Inreportingperiod,theRuihuaCertifiedPublicAccountants(LLP)issuedastandardunqualifiedauditors’reportfortheCompany. X. Comparingwithlastyear’s financial report, explainchanges inaspect ofaccounting policy, accounting estimates and calculationmeasures
The fourth extraordinary meeting 2014 of the 5th session of the Board was held on 23 October 2014, deliberated and passed the “proposal of acounting policychange”. A serial accountingruleswere promulgated successively orrevised in 2014byMinistry of Finance, and part of the rules are come itno effect dated 1 July 2014. Relevant accounting policies have been changed by the Companyinlinewithrequirements.Foundmoredetailsin“SectionIII.ImportantEvent”carriedin3QReportof2014publishedon ChinaSecuritiesJournal,SecuritiesTimes,HongKongCommercialDailyandJuchaoWebsite(http://www.cninfo.com.cn). XI. Particular about major accounting errors correction that needs retroactive re-statement in reporting period
Nomajoraccountingerrorscorrectionthatneedsretroactivere-statementinreportingperiod.
XII. Compare with lastyear’s financial report, explain changes in consolidationstatement’s scope
Nochangesinconsolidationstatement’sscopeinreportingperiod.
XIII. Profitanddividend distribution
TheCompanyimplementedapositiveprofitdistributionplan,andalsoattachesimportancetothereasonablereturnforinvestorsas well as taking sustainable development of the Company into consideration. In accordance with requirement of “Notice on Further Implementation of Matters with Cash Dividend Concerned for Listed Company” from CSRC and “Letter of Regulation of Establishment& Improvement of Cash Dividend Mechanism for Listed Company in Province-controlled District” from Shandong Securities Regulatory Bureau, relevant clauses with profit distribution concerned in Article of Association were revised by the Company on First Extraordinary Shareholders General Meeting of 2013 held on 5 March 2013. Decision-making procedure and mechanism of profit distribution was well-defined after revised, and fully listening to the opinionsfrom independent directors and minorityshareholders.
TheprofitdistributionplanandcapitalizingofcommonreservesplaninreportingperiodaremeetarelevantregulationsofArticleof Association.
|||
|-|-|
|Specificstatementofcashbonus||
|WhetherornotitcorrespondstoregulationofArticleofAssociationorrequirementofAGM:|Y|
|Whetherornotthebonusstandardsandratioareclearandwell-defined:|Y|
|Whetherornotrelevantdecision-makingproceduresandmechanismareperfect:|Y|
|Whetherornotindependentdirectorsfulfilltheirdutiesandplaycorrespondingroles:|Y|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||
|-|-|
|Whetherornotminorityshareholdershaveopportunitytoexpresstheirviewsanddemands,legalinterestofminorityhasbeenprotectedornot:|Y|
|Asforthecashbonuspolicyadjustedorchanged,conditionsandprocedureswhetherexerciseregulatedandtransparencyornot:|Y|

Profitdistributionplanandcapitalizingofcommonreservesplaninlatestthreeyears(includingthereportingperiod):
2012:distributed4.00Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas 31December2012;
2013:distributed2.5Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas 31December2013;
2014:distributed2.0Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas 31December2014;
Cashdividendinlatestthreeyears
InRMB
|||||||
|-|-|-|-|-|-|
|Yearforbonusshares|Amountforcashbonus(taxincluded)|Netprofitattributabletoshareholdersoflistedcompanyinconsolidationstatementforbonusyear|Ratioinnetprofitattributabletoshareholdersoflistedcompanycontainedinconsolidationstatement|Amountreckonedintocashbonusfromcashrepurchase|Proportionoftheamountreckonedintocashbonusfromcashrepurchase|
|2014|80,000,000.00|287,851,542.09|27.79%|0.00|0.00%|
|2013|100,000,000.00|390,121,811.72|25.63%|0.00|0.00%|
|2012|160,000,000.00|589,810,932.47|27.13%|0.00|0.00%|

 XIV. Profitdistributionplanandcapitalizing ofcommon reserves plan forthePeriod
|||
|-|-|
|Bonussharesforevery10-share(Share)|0|
|Dividendsforevery10-share(RMB)(Taxincluded)|2.00|
|Sharestransferredfromevery10shares(Share)|0|
|Equitybaseofdistributionplan(Share)|400,000,000|
|Totalcashdividend(RMB)(Taxincluded)|80,000,000.00|
|Distributableprofits(RMB)|2,041,386,334.25|
|Ratioofcashdividendintotalprofitdistribution|100.00%|
|Cashdividendpolicy:||
|TheCompanyisinadevelopmentstageandhasthearrangementofmajorcapitalexpenses,ratioofcashdividendinprofitdistributionshouldreachaminimumof20%whiletheprofitdistributed||

ShandongAirlinesCo.,Ltd.AnnualReport2014 XV. Socialresponsibility
Asalistedcompany,toprotect theinterestofshareholders,minorityshareholdersinparticular,isthebasicsocialresponsibilityfor theCompany.Accordingtolaws andregulationsfromCompany Law,SecurityLawand Codeof CorporateGovernancefor Listed Company,theCompanycontinuestoimproveditsgovernancestructure,establishedandperfectedinternalcontrolsystem,createda decision-making and operation system with core ofshareholders’general meeting, board of directors, supervisory committee and managementlevels,toprotectlegalinterestofallshareholders,minorityshareholdersinparticular.
Inreportingperiod,theCompanyvigorouslypromotedvary energy-savingmeasures, completedtheenergy efficiencytarget. The Companytimelysubmittedtheenergyconsumptiondataandtheenergyconservationandemissionreductionsummarytothehigher units such as the municipal government, Civil Aviation Authority monthly, and regularly supervised the completion the energy savingindex.TheCompanysummarizedtheenergysavingandemissionreductionworkandcompiled“Handbookofenergysaving and emission reduction” as the company-level manual for management, which provided support for the company to carry out the policy ofenergyconservation.In 2014,theassessment performance ofenergy savingandemission reductionareimplementedina good condition. During the "Twelfth Five-Year", the company was listed in the low-carbon action organized by hundreds of companies in Jinan City, the overall goal of energy saving and emission reduction was to save 25,000 tons of standard coal, and signedthegoalresponsibilityofenergysavingwithPeople'sGovernmentofJinan.
By making themost of “Air Superiority”, the Company makes great efforts on Shandongimage recommendation. In works of the servicesafeguardfor2014QingdaoWorldHorticulturalExposition,theCompanyofferingthemostapproachableservicesandcaring on behalf of the Shandong people to the distinguished guest from all over the world, smoothly completed the service safeguard mission, and the Company have made their due contributions to theShandong’s economic& cultural construction and imagepresentation.Meanwhile,furtherraisedtheCompany’spublicawarenessandthebrandinfluenceofSDAhavebeenimproved. In 2015,theCompanywillcontinue tofocusonfulfillingtheir social responsibility. Inprocess ofthemanufactureoperationand business development, at the same of creating value for shareholders, conform to the integrated development of the Country and society,vigorouslyassumemore social responsibilities,realized ahealthyandharmonious development between theCompanyand employees,thesocietyandenvironment.
XVI. Inthereport period, reception ofresearch, communication andinterview
|||||||
|-|-|-|-|-|-|
|Time|Place|Way|Type|Reception|Contentsdiscussedandmaterialprovided|
|Jan.-Dec.2014|Jinan|Telephonecommunication|Individual|Individualinvestor|OperationoftheCompanyandnomaterialrequired|
|2014-06-27|Jinan|Fieldresearch|Other|Newsmedia,legalperson’sshareholdersandindividualinvestor|OperationoftheCompanyandannualreportrequired|

ShandongAirlinesCo.,Ltd.AnnualReport2014 Section V. Important Events
I.Significantlawsuits andarbitrations ofthe Company
Nosignificantlawsuitsandarbitrationinreportingperiod
II. Questionfrom media
Nouniversalquestionedbymediainreportingperiod
III.Controllingshareholder’s andits relatedparty’snon-business capitaloccupying
Therearenocontrollingshareholderanditsrelatedpartyoccupyingnon-businesscapitaloftheCompanyinPeriod
IV.Bankruptcy reorganization
Nobankruptcyreorganizationoccurredinreportingperiod
V. Assets transaction
TheCompanyhadnoacquisitionofassets,salesofassetsorenterprisemergersundisclosedinthePeriod.
VI.ImplementationoftheCompany’s equity incentiveandthe effects
EquityincentivehasnotbeenimplementedbytheCompanyinthePeriod
VII. Material related transactions
1.Relatedtransactionwithroutineoperationconcerned
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relatedrelationship|Typeofrelatedtransaction|Contentofrelatedtransaction|Pricingprinciples|Dealingprice|Tradingamount(in10thousandYuan)|Proportionintheamountofthesametransaction|Meansofpayments|Marketpriceofsimilartransactionavailable|Dateofdisclosure|Indexofdisclosure|
|SDA|Controllingshareholder|Laborservicereceived|Rentofofficeandboard&lodgingexpenses|Marketprice|29,085,604.61|2,908.56|31.22%|Cashsettlement|29,085,604.61|2014-03-22|2014-05|
|Shandong|Subsidiar|Labor|Airplane|Market|75,512,10|7,551.21|10.08%|Cash|75,512,10|2014-03-|2014-05|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|TaikooAircraftEngineeringCo.,Ltd.|yofcontrollingshareholder|servicereceived|maintenancecharge|price|4.46|||settlement|4.46|22||
|ShandongXiangyuAirTechnologyServiceCo.,ltd|Subsidiaryofcontrollingshareholder|Laborservicereceived|Maintenancecharge|Marketprice|22,747,907.54|2,274.79|2.89%|Cashsettlement|22,747,907.54|2014-03-22|2014-05|
|AirChina|2ndlargestshareholder|Laborservicereceived|Groundserviceexpenses|Marketprice|18,484,871.15|1,848.49|1.50%|Cashsettlement|18,484,871.15|2014-03-22|2014-05|
|AirChina|2ndlargestshareholder|Laborservicereceived|Maintenancecharge|Marketprice|39,671,050.51|3,967.11|5.05%|Cashsettlement|39,671,050.51|2014-03-22|2014-05|
|BeijingAircraftMaintenanceEngineCo.,Ltd|Subsidiaryof2ndlargestshareholder|Laborservicereceived|Groundserviceexpenses|Marketprice|10,334,412.87|1,033.44|0.82%|Cashsettlement|17,172,871.84|2014-03-22|2014-05|
|SichuanInternationalAirlinesEnginemaintenanceCo.,Ltd.|Subsidiaryof2ndlargestshareholder|Laborservicereceived|Maintenancecharge|Marketprice|50,060,087.93|5,006.01|6.37%|Cashsettlement|144,373,756.70|2014-03-22|2014-05|
|AirChina|2ndlargestshareholder|Otherrelatedtransaction|Wetlease|Agreementprice|607,814,935.00|60,781.49|100.00%|Cashsettlement|607,814,935.00|2014-03-22|2014-05|
|AirChina|2ndlargestshareholder|Otherrelatedtransaction|Frequentpassengercooperation|Agreementprice|35,000,000.00|3,500|100.00%|Cashsettlement|35,000,000.00|2014-03-22|2014-05|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||||
|-|-|-|-|-|-|-|-|-|
|Total|--|--|88,871.1|--|--|--|--|--|
|Detailsofreturnofsalesinsignificantamount|N/A||||||||
|Necessityandcontinuityofrelatedtransaction,andreasonforenteringintorelatedtransactionwithrelatedparties(otherthanotherparticipantsinthemarket)|Theabovesaidtransactionsarenecessaryrelatedtransactionwithnormaloperationactivityconcerned;boardofdirectoroftheCompanyguaranteethefairvaluepricingandreasonablefortherelatedtransactionsfromthepointofprotectinginvestors’interestandtheCompany||||||||
|Affectofrelatedtransactiononindependenceoflistedcompany|NoinfluenceonindependenceoftheCompany;mainbusinessoftheCompanyshowsnodependencywithrelatedparty(orbeingcontrol)||||||||
|DependenceoftheCompanyonrelatedpartyandrelevantmeasures(ifany)|N/A||||||||
|Reporttheactualimplementationofthenormalrelatedtransactionswhichwereprojectedabouttheirtotalamountbytypesduringthereportingperiod(ifany)|Implementedbytheagreement,noamountexceedthebudgetapprovedin generalmeeting||||||||
|Reasonsformajordifferencebetweentradingpriceandmarketreferenceprice(ifapplicable)|N/A||||||||

2.Other relatedtransaction
Approvalby6thmeetingof5thsessionoftheBoarddatedon30May2014,whichagreedtoleasetwoCRJ-700aircraftputinto operationfromQingdaoAirlinesbywayofoperationlease.(FoundmoreinNoticeNo.:2014-13)
Disclosureinformationforrelatedtransactiontemporarydisclosed
||||
|-|-|-|
|Temporarynotice|Dateddisclosed|Websitefordisclosure|
|AnnouncementofRelatedTransactionofOperationleaseofTwoCRJ-700AircraftforSDA|2014-05-30|JuchaoWebsite（http://www.cninfo.com.cn）|

VIII. Major contract andimplantation
1.Trusteeship,contractandleasing
Notrusteeship,contractandleasingoccurredinreportingperiod
2.Guarantee
Noexternalguaranteeoccurredinreportingperiod
3.Othermaterialcontracts
ShandongAirlinesCo.,Ltd.AnnualReport2014 Noothermaterialcontractsundisclosed
4.Other material transaction
TheCompanyenteredintoanagreementwithBoeingCompanydated21April2014forplanningtopurchase50Boeing737aircrafts during the "Thirteenth Five-Year", the transaction was non-affiliated transaction and does not constitute a material assets reorganization;andhasbeendeliberatedandapprovedbyannualgeneralmeetingof2013.(FoundmoreinNoticeNo.:2014-10) IX.Implementation ofcommitments
CommitmentsmadebytheCompanyorshareholdersholdingabove5%sharesoftheCompanyinreportingperiodorextendingto reportingperiod.
|||||||
|-|-|-|-|-|-|
|Commitments|Accepter|Contents|Commitmenttime|Commitmentperiod|Implementation|
|Commitmentsinreportof acquisitionorequitychange|AirChina|InFebruary2004,ChinaNationalAviationHoldingCompany(CNAHC)enteredintoaequitytransferagreementwithSDA,thatispromise“toavoidinghorizontalcompetitionwiththeCompanythroughreasonablebusinessarrangement”;inDecember,beingapproved,theequityassigneewasreplacedbyAirChina,andallrightsandobligationsundertheagreementwastransfertoAirChinaasthepartywhoimplementedthecommitments|2004-12-06|Long-termeffective|Strictlyimplementtimely|
|Commitmentsmakeininitialpublicofferingorre-financing|SDA|Controllingshareholder—SDAprovideacommitmentletterofavoidinghorizontalcompetitiontotheCompanyinyearof2000whentheCompanyinitialpublicofferingshares|2000-09-12|Long-termeffective|Strictlyimplementtimely|
|Completedontime(Y/N)|Y|||||

X. Appointmentandnon-reappointment (dismissal) ofCPA
Accountingfirmappointed
|||
|-|-|
|Nameofdomesticaccountingfirm|RuihuaCPAs(LLP)|
|Remunerationfordomesticaccountingfirm(in10thousandYuan)|130|
|Continuouslifeofauditingservicefordomesticaccountingfirm|2|
|NameofdomesticCPA|YangGanlin,WuXiaolei|

Whetherre-appointedaccountingfirmsinthisperiodornot
ShandongAirlinesCo.,Ltd.AnnualReport2014□Yes√No
Appointmentofinternalcontrolauditingaccountingfirm,financialconsultantorsponsor
Take consistencyintoconsideration,theCompany alsoengagedRuihuaCPAs (LLP)astheauditinstitutionfor internal controlfor yearof2014,andauditingefficiencyofinternalcontrolandissuedtheauditreportofinternalcontrolof2014fortheCompany.The auditingchargeforinternalcontrolwasRMB0.4million.
XI.Penalty and rectification
NopenaltyorrectificationfortheCompanyintheperiod.
XII. Explanation onother significantevents
SignificanteventsoftheCompanyandannouncementarepublishedonChinaSecuritiesJournal,SecuritiesTimes,HongKong CommercialDailyandJuchaoWebsite(http://www.cninfo.com.cn),moredetailscanbefoundintheabovesaidmedia.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section VI. Changes in Shares and Particulars about Shareholders
1.Changesinshares
In Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Beforechange||Increase/decreaseinthistime(+,-)|||||Afterchange||
||Amount|Ratio|Newissue|Bonusshare|Capitalizationofpublicreserve|Other|Subtotal|Amount|Ratio|
|I.Unlistedshares|260,000,000|65.00%||||||260,000,000|65.00%|
|1.Sponsor’sshares|168,601,000|42.15%||||||168,601,000|42.15%|
|Including:State-ownedshares|168,402,000|42.10%||||||168,402,000|42.10%|
|Domesticlegalperson’sshares|199,000|0.05%||||||199,000|0.05%|
|4.Preferencesharesorother|91,399,000|22.85%||||||91,399,000|22.85%|
|II.Listedshares|140,000,000|35.00%||||||140,000,000|35.00%|
|2.Domesticallylistedforeignshares|140,000,000|35.00%||||||140,000,000|35.00%|
|III.Totalshares|400,000,000|100.00%||||||400,000,000|100.00%|

II. Securities issueandlisting
Thepreviousthreeyearendedbytheperiod-end,theCompanyhasnosecuritiesandderivativesecuritiesissuedforlisting
Changesoftotalsharesandshareholdersstructureaswellasexplanationonchangesofassetsandliabilitystructure
Duringthereportperiod,therewerenochangesinthetotalnumberandstructureoftheCompany’ssharesduetobonusshare,capital public reserve transferring into share capital, rationed share, additional issuance, share merger, convertiblecompany’s bondstransferringshares,disinvestments,listingofinneremployees’sharesorcompany’semployee’sshares
ShandongAirlinesCo.,Ltd.AnnualReport2014 III. Shareholders andactual controller
1.NumberofshareholdersoftheCompanyandshare-holding
In Share
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Totalcommonshareholdersinreportingperiod-end|15,879|Totalcommonshareholdersatendofthe5thtradingdaybeforeannualreportdisclosed||||15,924||Totalpreferenceshareholderswithvotingrightsrecoveredatendofreportingperiod(ifapplicable)(foundinnote8)|||0|
|Particularsaboutsharesheldabove5%byshareholdersortop10shareholding||||||||||||
|Shareholders|Natureofshareholder||Proportionofsharesheld|SharesheldatendofPeriod|Changesinreportperiod||Amountofun-listedsharesheld||Amountoflistedsharesheld|Numberofsharespledged/frozen||
|||||||||||Stateofshare|Amount|
|ShandongAviationGroup|State-ownedlegalperson||42.00%|168,004,000|0||168,004,000||0|||
|AirChinaLimited|State-ownedlegalperson||22.80%|91,200,000|0||91,200,000||0|||
|YaoMing|Domesticnatureperson||0.62%|2,486,308|1,559,308||0||2,486,308|||
|WANXIANGINTERNATIONALINVESTMENTCORPORATION|Foreignlegalperson||0.56%|2,250,983|445,458||0||2,250,983|||
|BOCISECURITIESLIMITED|Foreignlegalperson||0.38%|1,530,744|971,323||0||1,530,744|||
|ChenJingjian|Domesticnatureperson||0.37%|1,481,800|43,000||0||1,481,800|||
|GUOTAIJUNANSECURITIES(HONGKONG)LIMITED|Foreignlegalperson||0.35%|1,410,678|-2,127,095||0||1,410,678|||
|XieQingjun|Domesticnatureperson||0.28%|1,103,379|1,103,379||0||1,103,379|||
|NAVCANADAPENSIONPLAN|Foreignlegalperson||0.26%|1,052,295|531,000||0||1,052,295|||
|CREDITSUISSE(HONGKONG)LIMITED|Foreignlegalperson||0.25%|999,962|999,962||0||999,962|||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||
|-|-|-|-|-|
|Explanationonrelatedrelationshiporconcertedactionamongtheabovementionedshareholders||1. Shandong Aviation Group(SDA) is the first largest shareholder of the Company,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares;2.AirChinaLimitedisthesecondlargestshareholderoftheCompany,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares;3.Amongtheabovetoptenshareholders,AirChinaLimitedisthefirstlargestshareholderoftheSDA,andthereexistsnoassociatedrelationshipbetweenSDAandAirChinaandtheothershareholders,andtheydon’tbelongtotheconsistentactionistregulatedbytheManagementRegulationofInformationDisclosureonChangeofShareholdingforListedCompanieswiththeothershareholders.|||
|Shareholdingoftop10circulatedshareholders|||||
|Shareholders|AmountoflistedsharesheldatendofthePeriod||Typeofshares||
||||Type|Amount|
|YaoMing|2,486,308||Domesticallylistedforeignshares||
|WANXIANGINTERNATIONALINVESTMENTCORPORATION|2,250,983||Domesticallylistedforeignshares||
|BOCISECURITIESLIMITED|1,530,744||Domesticallylistedforeignshares||
|ChenJingjian|1,481,800||Domesticallylistedforeignshares||
|GUOTAIJUNANSECURITIES(HONGKONG)LIMITED|1,410,678||Domesticallylistedforeignshares||
|XieQingjun|1,103,379||Domesticallylistedforeignshares||
|NAVCANADAPENSIONPLAN|1,052,295||Domesticallylistedforeignshares||
|CREDITSUISSE(HONGKONG)LIMITED|999,962||Domesticallylistedforeignshares||
|YeQufa|913,300||Domesticallylistedforeignshares||
|OuYanping|893,000||Domestically||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|||listedforeignshares|
|Explanationonrelatedrelationshiporconcertedactionamongthetoptenshareholderswithun-restrictedsharesheldandbetweenthetoptenshareholderswithun-restrictedsharesheldandtoptenshareholders|The Company is not aware of their associated relationship among the top ten shareholderscirculationshare,andisunknownwhetherothercirculationshareholdersbelongtotheconsisteactionist regulated by the Management Regulation of Information Disclosure on ChangeShareholdingforListedCompanies.||

2.ControllingshareholdersandactualcontrolleroftheCompany
|||||||
|-|-|-|-|-|-|
|Controllingshareholders|Legalrep./unitleader|Dateoffoundation|Organizationcode|Registercapital|Mainoperationbusiness|
|ShandongAviationGroup|MaChongxian|1995-02-09|61407164-7|RMB580million|General business: investment andmanagementofairtransportindustryand aviation maintenance industry;conference and exhibition services;office services; daily necessities,handicrafts,salesofsouvenirs,rentalhousing; pre-licensed business:lodging, food and beverage services,retail of tobacco products (restrictedtobeoperatedonlybythebranches)|
|Futuredevelopmentstrategy|Air carrier focus, aviation maintenance and relevant industries spreading; building a trine networkstructure around Shandong, Xiamen and Chongqing, achieve a leap forward from medium airlines tomajor airlines, from regional airlines to national airlines and from traditional business model to modernbusiness mode. And dedicated to becoming a regional-leading, national-competitiveness andworld-influentialairlineenterprise.|||||
|Operationresult,financialstatus,cashflowetc.|Operation results: revenue achieved as 48 million Yuan in 2014 with 4.38% declined y-o-y; profit inoperationshows18millionYuan,ay-o-ydownof59.08%;netprofitgains75millionYuanwith48.72%downonay-o-ybasisandtheROEwas9.33%,declined9.44percentagepointsy-o-y.Financial status: total assets amounting to 867 million Yuan up to 31 December 2014, net assetsamountingto805millionYuan,asset-liabilityratiowas7.20%,up1.54percentagepointy-o-y.Cashflow:thenetcashflowarisingfromoperationactivitiesin2014amountingto49millionYuan,netcash flow arising from investment activity shows 45 million Yuan and the net cash flow arising fromfinancialactivityamountedas-80millionYuan.(Abovedataunaudited)|||||

ControllingshareholderoftheCompanyhasnochanged
PropertyrightandcontrollingrelationshipbetweentheactualcontrollerandtheCompanyisasfollow:
ShandongAirlinesCo.,Ltd.AnnualReport2014 ShandongAviationGroup
42%
ShandongAirlinesCo.,Ltd.
3.SecondlargestshareholderoftheCompany
|||||||
|-|-|-|-|-|-|
|Corporateshareholder|Legalrep./unitleader|Dateoffoundation|Organizationcode|Registercapital|Mainoperationbusinessormanagementactivities|
|AirChinaLimited|CaiJianjiang|2004-09-30|71787100-6|RMB13.085billion|Domestic and overseas transportationbusiness such as periodic and un-periodicaviation passenger, cargo, letter andbaggage; domestic and overseas officialflight business; airplane managementbusiness; repairing of aerostat; businessagent among air companies; groundserviceandaircourierservicesrelatedwiththe main operations (excluding letter andarticles with the nature of letters); tax-freecommoditiesinairplane.|

ShandongAirlinesCo.,Ltd.AnnualReport2014 Section VII. Preferred Stock
TheCompanyhadnopreferredstockinthereporting.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section VIII. Particulars about Directors, Supervisors, Senior Executives and Employees
I.Changes ofshares held bydirectors, supervisors andseniorexecutives
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Name|Title|Workingstatus|Sex|Age|Startdatedofofficeterm|Enddateofofficeterm|Sharesheldatperiod-begin(Share)|Increasingsharesheldinthisperiod(Share)|Decreasingsharesheldinthisperiod(Share)|Sharesheldatperiod-end(Share)|
|YuHaitian|Chairman|Currentlyinoffice|M|46|2014-03-20|2015-06-27|0|0|0|0|
|MaChongXian|DeputyChairman|Currentlyinoffice|M|50|2012-06-28|2015-06-27|0|0|0|0|
|ZhangXingfu|Director|Currentlyinoffice|M|60|2012-06-28|2015-06-27|0|0|0|0|
|SunXiujiang|Director|Currentlyinoffice|M|53|2013-10-28|2015-06-27|0|0|0|0|
|XuGuojian|Director,deputyGM&Chiefaccountant|Currentlyinoffice|M|51|2012-06-28|2015-06-27|0|0|0|0|
|WangMingyuan|Director|Currentlyinoffice|M|50|2012-06-28|2015-06-27|0|0|0|0|
|WangJieming|Director|Currentlyinoffice|F|57|2012-06-28|2015-06-27|0|0|0|0|
|LiXiuqing|Director|Currentlyinoffice|F|52|2012-06-28|2015-06-27|0|0|0|0|
|WangKaiyuan|Independentdirector|Currentlyinoffice|M|72|2012-06-28|2015-06-27|0|0|0|0|
|PingXiaofeng|Independentdirector|Currentlyinoffice|M|66|2012-06-28|2015-06-27|0|0|0|0|
|LiChun|Independentdirector|Currentlyinoffice|M|58|2012-06-28|2015-06-27|0|0|0|0|
|QuWenzhou|Independentdirector|Currentlyinoffice|M|43|2012-06-28|2015-06-27|0|0|0|0|
|WangWuping|Chairmanof|Currentlyinoffice|M|50|2013-10-28|2015-06-27|0|0|0|0|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||SupervisoryCommittee||||||||||
|XueRuitao|Supervisor|Currentlyinoffice|M|54|2012-06-28|2015-06-27|0|0|0|0|
|ZhangKai|Supervisor|Currentlyinoffice|M|50|2012-06-28|2015-06-27|0|0|0|0|
|DongJianmin|Employeesupervisor|Currentlyinoffice|M|46|2012-06-28|2015-06-27|0|0|0|0|
|ZhouQiaoyan|Employeesupervisor|Currentlyinoffice|F|40|2012-06-28|2015-06-27|0|0|0|0|
|MiaoLiubin|GM|Currentlyinoffice|M|44|2014-03-20|2015-06-27|0|0|0|0|
|ZhangQingshe|DeputyGM,chiefpilot|Currentlyinoffice|M|57|2013-10-28|2015-06-27|0|0|0|0|
|WangXianlin|DeputyGM,SafetyDirector|Currentlyinoffice|M|50|2014-03-20|2015-06-27|0|0|0|0|
|ZhouLixin|DeputyGM|Currentlyinoffice|M|51|2013-07-31|2015-06-27|0|0|0|0|
|DongQiantang|SecretaryoftheBoard|Currentlyinoffice|M|53|2012-06-28|2015-06-27|0|0|0|0|
|YuBo|Chiefengineer|Currentlyinoffice|M|42|2014-10-23|2015-06-27|0|0|0|0|
|LiQing’en|DeputyGM|Officeleaving|M|60|2012-06-28|2014-11-07|0|0|0|0|
|XiongJianbo|DeputyGM|Officeleaving|M|50|2013-10-28|2014-03-25|0|0|0|0|
|Total|--|--|--|--|--|--|0|0|0|0|

 II. Post-holding
Majorworkingexperienceofdirectors,supervisorsandseniorexecutiveatthepresentinlatestfiveyears
|||
|-|-|
|Name|Mainworkingexperience|
|YuHaitian|2003.03-2011.03 DeputyGMoftheCompany2011.03-2014.03 GMoftheCompany2012.06-2014.03 DirectoroftheCompany|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||
|-|-|
||2014.03-present ChairmanoftheCompany|
|Ma ChongXian|2006.07-2009.06 GMandCPCdeputysecretaryofZhejiangBranchofAirChina2009.06-2010.04 GMandCPCdeputysecretaryofHubeiBranchofAirChina2010.04-present MemberofCPCandVicePresidentofAirChina,andChairman,PresidentandCPCViceSecretaryofShandongAirlinesGroup2010.04-present DeputyChairmanoftheCompany|
|ZhangXingfu|2006.03-2014.03 ChairmanoftheCompany2005.12-present PartySecretaryanddeputypresidentofSDA2014.03-present DirectoroftheCompany|
|SunXiujiang|2005.05-2011.07 Director of Hualu Holdings Co., Ltd, Deputy GM and Member of CPC Committee of HualuHoldingsCo.,Ltd.andChairmanofShandongHualuLihuaRealEstateCo.,Ltd.2011.07-2013.08 Director,DeputyGMandMemberofCPCCommitteeofHualuHoldingsCo.,Ltd.,Chairmanof Shandong Hualu Lihua Real Estate Co., Ltd. and Director of Shandong Hualu HengshengGroupCo.,Ltd.2013.08-present Deputy Party Secretary and Secretary of Committee for Discipline Inspection of SDA2013.10-present DirectoroftheCompany|
|XuGuojian|2007.10-2010.01 General Manager of Financial Dividend in Engineer Technology Branch of Air China2010.01-present DeputyGMandChiefAccountantoftheCompany2010.04-present Director,DeputyGMandchiefaccountantoftheCompany|
|WangMingyuan|2008.07-2011.02 DirectorofCommerceCommissionofAirChina2011.02-present MemberofthePartyCommitteeandDeputyChairmanofAirChina2006.03-present DirectoroftheCompany|
|WangJieming|2003.02-present DirectorofPlanningFinancialDepartmentofShandongEconomicDevelopmentandInvestmentCompany2006.03-present DirectoroftheCompany|
|LiXiuqing|2010.03-present Director of Assets Management Department of Shandong Economic Development andInvestmentCompany2012.06-present DirectoroftheCompany|
|WangKaiyuan|He successively served as vice director of secretariat of political dept. ofCivil Aviation, vice political commissarandpoliticalcommissarof22ndfighterGroupofCivilAviation,CPCsecretaryofCivilAviationShenyangRepairShop, director of political dept. of Civil Aviation Administration of Shenyang, director of ShenyangAdministration,General Manager of ChinaNorthernAirlines,vice directorofCAAC, PresidentofAir ChinaandGeneralManagerofChinaNationalAviationHoldingCompany.2012.06-present IndependentdirectoroftheCompany|
|PingXiaofeng|HesuccessivelyservedascadreandvicedirectorofOfficeinJiananFarmToolsPlant,secretary,vicedirectoranddirector of Office in Jinan Engineering Bureau, vice director of General Office of Jinan Municipal GovernmentvicesecretaryofJinanPeople’sGovernment,CPCsecretaryanddirectorofLocalTaxationBureauofJinanCity.2012.06-present IndependentdirectoroftheCompany|
|LiChun|HewasChairmanofShenzhenLawyersAssociation;NowheisVice-directorofDevelopmentStrategyCommitteeof Chinese National Lawyers Association; Chief Researcher of Venture Investment Law Research Center; ChieJuristandexecutivedirectorofGrandallInstitution;ExecutivePartnerofGrandallLawsFirm.2009.06-present IndependentdirectoroftheCompany|
|QuWenzhou|He successively served as Manager of Investment Bank Department of Xiamen Jianfa Investment Trust|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||
|-|-|
||Corporation,GMofXiamenBoyiInvestmentConsultancyCo.,Ltd.;researcherofShenzhenStockExchange. His teaches in Xiamen University since 2005; taking the positions of professor of management institution, XiamenUniversity; doctorial tutor andvice director of financial dept.; vice dean offinancial management andaccountininstitutionanddirectorofresearchcenterofChinesecapitalmarket.2009.06-present IndependentdirectoroftheCompany|
|WangWuping|2009.02-2013.09 GMofFinancialDept.oftheCompany2013.09-present ChiefAccountantandGMofFinancialDeptofSDA2013.10-present ChairmanofSupervisoryCommitteeoftheCompany|
|XueRuitao|2009.03-2013.09 GMofFinancialDeptofSDA2013.09-present GMofPlanning&InvestmentManagementDept.ofSDA2009.06-present SupervisoroftheCompany|
|ZhangKai|2006.01-present SeniorManagerofAssetsManagementDept.ofAirChina2009.06-present SupervisoroftheCompany|
|DongJianmin|2007.08-2012.05 DeputyGMofFlightDept.oftheCompany2012.05-present GMofFlightDept.oftheCompany2012.06-present EmployeesupervisoroftheCompany|
|ZhouQiaoyan|2003.03-2012.05 DeputyGMofCabinServiceDept.oftheCompany2012.05-present SecretaryofPartyGeneralBranchofCabinDept.oftheCompany2006.03-present EmployeesupervisoroftheCompany|
|MiaoLiubin|2007.08-2011.03 GMofFlightDept.oftheCompany2011.03-2014.03 DeputyGMoftheCompany2013.10-2014.03 SafetyDirectoroftheCompany2014.03-present GMoftheCompany|
|ZhangQingshe|2001.10-present ChiefPilotoftheCompany2013.10-present DeputyGMoftheCompany|
|WangXianlin|2009.02-2013.10 SafetyDirectoroftheCompany2013.10-present DeputyGMoftheCompany2014.03-present SafetyDirectoroftheCompany|
|ZhouLixin|2007.11-2013.07 Deputy GM of Centralized Purchasing Dept. of Air China and Member of the PartyCommittee2013.07-present DeputyGMoftheCompany|
|DongQiantang|2003.01-2009.02 MinisterofEnterprisePlanningandDevelopmentDepartmentofSDA2009.02-2011.03 GeneralManagerofEnterpriseManagementoftheCompany2011.03-present DirectoroftheGeneralOfficeoftheCompany2009.06-present SecretaryoftheBoardoftheCompany|
|YuBo|2013.09-2014.10 Vicechiefengineer2010.01-present GMofEngineeringTechnologyenterpriseoftheCompany2014.10-present ChiefengineeroftheCompany|

Post-holdinginshareholder’sunit
|||||
|-|-|-|-|
|Name|Nameofshareholder’sunits|Position|Receivingremunerationfromshareholder’sunits(Y/N)|
|MaChongXian|AirChina|MemberofthePartyCommittee,Deputy|Y|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||||
|-|-|-|-|
|||President||
||SDA|Chairman,PresidentandDeputyPartySecretary|Y|
|ZhangXingfu|SDA|PartySecretary,DeputyPresident|Y|
|YuHaitian|SDA|DeputyPartySecretary|N|
|SunXiujiang|SDA|DeputyPartySecretary,SecretaryofCommitteeforDisciplineInspection|Y|
|WangWuping|SDA|MemberofthePartyCommittee,ChiefAccountant|Y|
|XueRuitao|SDA|GMofPlanning&InvestmentManagementDept.|Y|
|WangMingyuan|AirChina|MemberofthePartyCommittee,DeputyPresident|Y|
|ZhangKai|AirChina|SeniorManagerofAssetsManagementDept.ofInvestmentEnterpriseManagement|Y|

Post-holdinginotherunit
|||||||
|-|-|-|-|-|-|
|Name|Nameofotherunits|Position|Officeturnfrom|Officeturnended|Receivingremunerationfromotherunits(Y/N)|
|WangJieming|ShandongEconomicDevelopmentInvestmentCompany|Directoroffinance&accountingdivision|||Y|
|LiXiuqing|ShandongEconomicDevelopmentInvestmentCompany|DirectorofAssetsManagementDept.|||Y|

III. Remuneration fordirectors, supervisors and seniorexecutives
Theremunerationfordirectors,supervisorsandseniormanagementispaidaccordingtorelevantrulesontime,andtheremuneration of directors and supervisors holding a post in shareholder units or other units is paid by relevant units; allowances standard forindependentdirectorsisdeliberatedandapprovedbyshareholders’generalmeetingandwilldeterminebasedonactualworkingdays; Remunerationof thesenior managementisapproved bytheremunerationandappraisal committeeof theboard, theCompanywill pay to senior management with their owned working situation and performance appraisal results based on the evaluation on individualperformancefrominternal“temporarymethodofperformanceappraisal”oftheCompany.
DirectorMr.ZhangXingfu,Mr.SunXiujiang,ChairmanofSupervisoryCommitteeMr.WangWupingtogetherwithSupervisorMr. XueRuitaodrewtheirremunerationsfromShandongAviationGroup(SDA),thecontrollingshareholderoftheCompany,notfrom
theCompany;DeputyChairmanMr.MaChongXian,DirectorMr.WangMingyuanandSupervisorMr.ZhangKaireceived
remunerationfromAirChinainsteadoftheCompany;DirectorMs.WangJieming,Ms.LiXiuqingdrewtheirremunerationsfrom
ShandongEconomicDevelopmentInvestmentCompanyinsteadoftheCompany.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Remunerationfordirectors,supervisorsandseniorexecutivesinreportingperiod
IntenthousandYuan
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Title|Sex|Age|Post-holdingstatus|TotalremunerationobtainedfromtheCompany|Totalremunerationobtainedfromshareholder’sunit|Remunerationactuallyobtainedatperiod-end|
|YuHaitian|Chairman|M|46|Currentlyinoffice|92.54|0|92.54|
|XuGuojian|Director,DeputyGMandChiefAccountant|M|51|Currentlyinoffice|74.24|0|74.24|
|LiChun|Independentdirector|M|58|Currentlyinoffice|7.1|0|7.1|
|QuWenzhou|Independentdirector|M|43|Currentlyinoffice|7.1|0|7.1|
|DongJianmin|Employeesupervisor|M|46|Currentlyinoffice|50.27|0|50.27|
|ZhouQiaoyan|Employeesupervisor|F|40|Currentlyinoffice|39.81|0|39.81|
|MiaoLiubin|GM|M|44|Currentlyinoffice|92.05|0|92.05|
|ZhangQingshe|DeputyGM,ChiefPilot|M|57|Currentlyinoffice|92.92|0|92.92|
|WangXianlin|DeputyGM,SafetyDirector|M|50|Currentlyinoffice|80.59|0|80.59|
|ZhouLixin|DeputyGM|M|51|Currentlyinoffice|70.72|0|70.72|
|DongQiantang|SecretaryoftheBoard|M|53|Currentlyinoffice|63.65|0|63.65|
|YuBo|Chiefengineer|M|42|Currentlyinoffice|51|0|51|
|LiQing’en|DeputyGM|M|60|Officeleaving|84.09|0|84.09|
|XiongJianbo|DeputyGM|M|50|Officeleaving|19.71|0|19.71|
|Total|--|--|--|--|825.79|0|825.79|

Delegatedequityincentivefordirectors,supervisorsandseniorexecutivesinreportingperiod
□Applicable√Notapplicable
ShandongAirlinesCo.,Ltd.AnnualReport2014 IV.Position changes for Directors, Supervisor andSeniorExecutives
||||||
|-|-|-|-|-|
|Name|Title|Type|Date|Reasons|
|ZhangXingfu|Chairman|Officeleaving|2014-03-20|Age|
|YuHaitian|Chairman|Appointandremove|2014-03-20|Jobturnover|
|MiaoLiubin|GM|Appointandremove|2014-03-20|Jobturnover|
|WangXianlin|SafetyDirector|Appointment|2014-03-20|Jobturnover|
|XiongJianbo|DeputyGM|Dismissal|2014-03-25|Workunitschanged|
|YuBo|Chiefengineer|Appointment|2014-10-23|Jobturnover|
|LiQing’en|DeputyGM|Dismissal|2014-11-07|Age|

V. Employees of theCompany
Bytheendofthisreportperiod,theCompanyhad7860employeesintotal,including241personsofpostgraduates(MasterDegree andDoctorDegree)orabove,6870personsgraduatedfrom3-yearsregularcollegeorabove.Endedasreportperiod,therewere113 retireesintheCompany.
Thestaffstructureisasfollows:
Type Number Ratiointotalemployees
Flightpersonnel 1006 12.8%
Steward 1656 21.1%
Securityguard 323 4.1%
Maintenancepersonnel 790 10.1%
Transportcontrolpersonnel 100 1.3%
Salesman 871 11.1%
Freightpersonnel 297 3.8%
Groundattendant 434 5.5%
Financialpersonnel 160 2.0%
Others 2223 23.2%
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section IX. Corporate Governance
I.Corporate governance ofthe Company
Duringthereportperiod,theCompanyconstantlycompletesthecorporategovernancestructure,standardizethecompanyoperation in accordance with “Corporation Law”, “Security Law”, “Governance Principles of Listed Company”, “Listing Rules of Shenzhen StockExchange”,“BasicNormsofEnterpriseinternalcontrol”andrequirementsofotherrelatedlawsandregulations,feasiblygives play to guidance and supervisory role of “Three meetings” in corporate governance and information disclosure so as to further improvethecorporategovernancelevel.
(I)Shareholdersandgeneralmeeting
In reportingperiod, the Annual General Meeting 2013 held by the Company for deliberating 50 Boeing 737 airplanes purchased proposal and other nineproposals, andall theproposalssubmitted inthemeetings arebeingpassed.The Company strictlyfollows theproceduresruledbytheArticlesofAssociationandRulesofProcedurefor General Meetingtoconvenethegeneral meetingof stockholders,deliberatethemotionandmakepolicy,andensureallshareholders,especiallythemediumandsmallshareholders,can enjoyequalstatusandfullyexercisetheirrights.Andattorneywasappointedbygeneral meetingtowitnessthemeetingandissued legalopinionforitsvalidity.
(II)Directorsandtheboardofdirectors(BOD)
During the report period, BOD convoked regular and interim meetings to deliberate thecompany’s major issues by taking the principles of being responsible for the stockholders' meeting and actively maintaining theshareholders’ benefits and strictly followingtherelevantlawsandregulationsandtheproceduresruledbytheArticlesofAssociationandRulesofProcedureforBoard ofDirectors.In2014,thecompanytotallyconvoked6boardmeetings,deliberated21motionsintotalincludingtherelevantfinancial reports, the profit distribution, the related transactions, top management turnover, of which the convening, holding and voting procedureswerelegitimateandeffective,andtimelymadeannouncementoftheresolutionoftheBOD,protectedtherightstoknow andtosuperviseoftheCompany'sshareholders,andpromotedtheCompany'sstandardoperation.
(III)Supervisorsandboardofsupervisors
Duringthereportperiod,theboardofsupervisorsoftheCompanyconvokedtwomeetingsandattendedallthegeneralmeetingsof stockholders and board meetings the Company convoked in 2014. The convening, convoking and motion consideration and decision-making of the supervisor meeting were implemented in strict accordance with the procedures ruled by the Articles of AssociationandRulesofProcedureforBoardofSupervisors,allsupervisorsattendedtheboardofsupervisorsasrequired,seriously performedtheirduties,supervisedandmadeopinionsonthemajorevents,relatedtransactionandfinancialsituationoftheCompany, andmaintainedthelegitimaterightsandinterestsoftheCompanyandtheshareholders.
(IV)Systemconstruction
To ensure smoothly production and management, promote institutionalization and standardization of the business management, improvescientificdecision-makingandmanagerial&administrativeexpertise, enhancegovernanceproceduresoftheCompany, in accordancewithregulationofCompanyLawandArticleofAssociation,theCompanyrevisedthe“WorkingInstructionofGeneral Manager”linkingwithrealsitutationoftheCompany.
(V)Informationdisclosuremanagment
The Company attached great importance to the information disclosure, strictly supervised all layers to disclose information timely
ShandongAirlinesCo.,Ltd.AnnualReport2014 and fairly as required so as to ensure that the disclosure is true, accurate and complete, the Company totally disclosed 4 regular reportsand18interimannouncements.TheCompanyisthefirsttrainunitsforinformationdisclosureofShenzhenStockExchange, continued to maintain the good information disclosure quality, and successfully completed the information disclosure of 2014 withoutanyviolationdisclosureoccurred.
(VI) The development of special activities for corporate governance, and establishment and implementation of registration and managementsystemforinsideinformationinsider
In accordance with the “Rules about establishing registration and management system for inside information insider in listed companies” issued bytheChina SecuritiesRegulatory Commission in October 2011and the requirements of “Regulatory circulars about furtheraccomplishing theregistrationandmanagement system for insideinformationinsider”issuedbyShandongSecurities RegulatoryBureauinNovember2011,andcombiningwithactualsituationoftheCompany,theCompanyformulated“Management systemforreportofinsideinformationinsiderandsubmissionofexternalinformation”.TheboardofdirectorsoftheCompanyfully realizedtheseriousnessandcomplexityofpreventinginsidertrading,tookvariousmeasurestoimplementtheregulatoryrequirement, comprehensivelystrengthenedthemanagementtoinsideinformation,completedtheregistrationandmanagementsystem forinside information,andfeasiblyandeffectivelypreventedrelevantpersonnelfrominsidertradingattheverybeginning.Inreportingperiod, theCompanyrecordinglistsofpersonwithknowledgeofinsideinformationcompletelyasitstandsandrelevantfileofthetimefor knowing inside information etc., relevant lists of person with knowledge of inside information are reported to Shandong Security RegulatoryBureauofCSRCandShenzhenStockExchangefortherecord.Nopersonwithknowledgeofinsideinformationconduct insidertradingwithsuchinformationoradviseothersconductsuchinsidertrading;noinsideinformationbeingdisclosedandcaused the Company and investor a bad influence or damage; and no situation of a regulatory approach by supervision department being found.
II. Annual General Meeting (AGM) and extraordinary general meeting held in reporting period
1.AGM
|||||||
|-|-|-|-|-|-|
|Sessionofmeeting|Date|Nameofmeetingmotion|Situation|Dateofdisclosure|Indexofdisclosure|
|AnnualGeneralMetingforyearof2013|2014-06-27|1.“WorkReportoftheBoardforyearof2013”2.“DebriefingReportofIndependentDirectorsforyearof2013”3.’”WorkReportofSupervisoryCommitteeforyearof2013”4.“AnnualReportof2013”anditsSummary5.“FinancialResultforyearof2013”6.”ProfitDistributionPlanforyearof2013”7.”DailyRelatedTransactionforyearof2014”8.”AircraftAcquisitionPlanforyearof2014”9.“Purchasing50Boeing737Airplanes”10. “Re-engagement of Accounting Firm and theirRemuneration”|Allhasbeendeliberatedandpassed|2014-06-28|No.:2014-15|

III. Responsibility performance ofindependentdirectors inreport period
1.TheattendanceofBoardmeetingsandgeneralmeetingforindependentdirectors
ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|AttendanceofBoardmeetingsforindependentdirectors|||||||
|Independentdirector|TimesofBoardmeetingsupposedtoattendinthereportperiod|Timesofpresentinperson|Times ofattendingbycommunication|Times ofentrustedpresence|TimesofAbsence|AbsenttheMeetingforthesecondtimeinarow(Y/N)|
|WangKaiyuan|6|0|0|0|6|Y|
|PingXiaofeng|6|1|5|0|0|N|
|LiChun|6|1|5|0|0|N|
|QuWenzhou|6|1|5|0|0|N|
|Timespresentedingeneralmeetingbyindependentdirectors||1|||||

ExplanationonabsenttheMeetingforthesecondtimeinarow
IndependentdirectorMr.WangKaiyuanhasappliedforhisresignationinMarch2014先
2.Objectionforrelevanteventsfromindependentdirectors
Independentdirectorshavenoobjectionaboutcompany’srelevantmattersinreportingperiod
3.Otherexplanationaboutresponsibilityperformanceofindependentdirectors
Duringthereportingperiod,fourindependentdirectorsofthecompanyconscientiouslyfulfilledtheresponsibilitiesgivenbythelaws and regulations, "Articles of Association" and the " Working System of the Independent Directors", checked and guided thecompany’sproductionandoperation,attendedtheboardmeetingsthegeneralmeetingofstockholders,madeindependentopinionon therelevantmotionssuchastherelatedtransactions,changesinaccountingpolicies,andtheimpairmentofassets,diligentlyfulfilled theirdutiesinthedailyworkandimportantdecision-makingoftheboardofdirectors,dutifullyandearnestlymaintainedtheinterests ofthecompanyandallshareholders.
IV. Responsibility performance of subordinate special committee of the Board in reporting period
The5thsessionoftheBoardsetupthreespecializedcommittees:theAuditCommittee,theRemunerationandAppraisalCommittee, andtheStrategyandNominationCommittee.In2014,allspecializedcommitteesheldsevenmeetings,thereinto,fourmeetingsofthe Audit Committee, one meeting of the Remuneration and Appraisal Committee, and two meetings of the Strategy and Nomination Committee. The specialized committees of the board of directors performed their duties by strictly following the requirements of ChinaSecuritiesRegulatoryCommissionandShenzhenStockExchange,the"ArticlesofAssociation",andtherulesofprocedureof thecommittees,andplayedanimportantroleinthescientificdecision-makingoftheboardofdirectors.
(I)Dutyperformingoftheauditcommitteeoftheboard
Duringthereportingperiod,theauditcommitteeoftheboardpaidcloseattentiontotheinternalcontrolsystemconstructionandthe
related transaction; made opinion on changing and reappointing the accounting firm; regularly checked the financial report of the
company; the audit committee of the board of directors effectively performed the responsibilities, diligently did their duties in the
annualfinancialreportauditwork,gavefullplaytothesupervisoryrole,andmaintainedtheindependenceofauditinauditingofthe
ShandongAirlinesCo.,Ltd.AnnualReport2014 2014annualfinancialreport.
(II)Dutyperformingoftheremunerationandappraisalcommitteeoftheboard
During the reporting period, the remuneration and appraisal committee of the board investigated the remuneration policy and program for thedirectorsand senior management, did annual performance appraisal to the dutyperforming of directorsand senior management according to related assessment criterion; checked and approved the 2014 annual report about the remuneration disclosureofthedirectorsandtheseniormanagement, andthoughttheremunerationamount ofrelevantpersonneldisclosedinthe 2014annualreportwastrueandaccurate.
(III)Dutyperformingofthestrategyandnominationcommitteeoftheboard
During the reporting period, the strategy and nomination committee of the board made opinions on changes of the directors and senior executive members, verified the qualification of related personnel, and did not find directors or senior management whosequalificationsdon’tcomplywithlaws,regulationsorrequirementsoftheArticlesofAssociation.
V.WorksfromSupervisory Committee
WhethertheCompanyhasrisksornotinreportingperiodthatfoundinsupervisoryactivityfromsupervisorycommittee
□Yes√No
Supervisorycommitteehasnoobjectionsforthesupervisemattersinreportingperiod
VI. Independency of the Company relative to controllingshareholders’in aspect of businesses, personnel, assets, institutionand finance
The company and its controlling shareholders ShandongAviation Group has been separated totally in business, personnel, assets, institutionandfinance,possessingindependentcompletebusinessandindependentoperationability.
(I) In business aspect: TheCompany’s business has difference with its controllingshareholder’s. The Company engaged in manufacturingmanagementindependentlywithoutdependencywithcontrollingshareholdersandotherrelatedenterprise.
(II) In personnel aspect: The Company is totally independent with its controlling shareholders in labor, personnel and salary management. Directors, supervisors and senior management in accordance with theArticles ofAssociation and relevant laws and regulations,andthroughthelegal procedures ofelectionoremployment, nosituationofthecontrollingshareholdersinaccordancewithlegalproceduresinterventionCompany’spersonnelappointmentandremoving.Theseniormanagementisnotindoubleoffice performanceinthelistedcompanyandthecontrollingshareholdersandtheyallgetsalariesfromtheCompany.
(III)Inassetaspect:ThepropertyrightrelationshipbetweentheCompanyandcontrollingshareholdersisclearandtheassetsofa corporationaretotallyindependentofthecontrollingshareholders.TheCompanyhasfullcontrolanddominationwithoutassetsand fundsoccupiedbycontrollingshareholdersandinterestsoftheCompanybeingdamaged.
(IV)Ininstitutionaspect:TheCompanyestablishedanorganizationtotallyindependentwiththecontrollingshareholders,theboard of directors and the supervisory committee operated independently without superior and subordinate relationship with the organizationestablishedincontrollingshareholdersandaffiliateenterprises.Controllingshareholderhasnointerventioninoperation activitiesoftheCompany.
(V)Infinanceaspect:TheCompanyhasanindependentfinancialdepartmentandindependentfinancial accountingsystem. Owns standard and independent accounting mechanism and financial management system as well as independent bank account, furthermore,payingtaxinaccordancewiththelaw.
ShandongAirlinesCo.,Ltd.AnnualReport2014 VII. Horizontal competition
ThereisnohorizontalcompetitionbetweentheCompanyandcontrollingshareholder
VIII.Appraisalandincentivemechanism forseniorexecutives
Inaccordancewiththe“temporarymethodofperformanceappraisal”,theCompanychecksandevaluatedtheindividualperformance, andpaidmeritbasedonappraisalresultstoenhancetheincentiveefficiency.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section X. Internal control
I.TheConstruction ofInternal Control (“IC”)
TheCompanystartedtheICsystemconstructioninMarch2012,systemizedwholebusinessprocessesrelatedtotheinternalcontrol, identifiedtherisks,constructedthecontrolmatrix,raisedspecificcontrolmeasures,establishedinternalcontrolmanualbytakingrisk control as guidance and responsibility process as principal line. Established an internal control system, supervised system and file system, rectified and eliminated relevant defects via rectification notice and system meeting, comprehensively evaluated the operation of theCompany’s whole IC system, issued self-evaluation report of internal control and obtained a standard and unqualifiedopinionfromauditinginstitutionoutsideinfirstICauditingoftheCompany.
In 2014, the Company further improved the organization system of internal control management and the functional distribution of internalcontrolbytakingtheelaboration,perfectionandeffectivenessofimplementationasthegoal,andgraduallydeepenedtherisk management and the elaboration of the internal control system at the headquarters level after elaborating and clarifying the responsibilities of the board of directors, the board of supervisors and all functional departments, the rules of procedure and the workingproceduresintheinternalcontrolconstruction.
II. Statementof theBoard ofDirectors onResponsibility ofInternal Control
Inaccordancewiththeprovisionstothenormativesystemofinternalcontrol,itistheresponsibilityoftheBoardofDirectorsofthe Company to establish and improve and effectively implement the internal control, and evaluate its effectiveness and truthfully disclosetheinternal controlevaluation report.The Board of Supervisorssupervises theestablishment of theboard ofdirectorsand theimplementationofinternalcontrol.Themanagerstakeresponsiblefor organizingandleadingthedailyoperationoftheinternal control.The Board of Supervisors and Directors, the directors, supervisors and senior management ensure that the contents of this reportdonotcontainanyfalserecords,misleadingstatementsormaterialomissions,andtakeindividualandjointlegalresponsibility fortheauthenticity,accuracyandcompletenessofthecontentsofthereport.
TargetoftheCompany’sinternalcontrolisreasonablyguaranteethevalidityandlegalityofoperation,assetssafetyandauthenticity andcompletenessoffinancialreportandtherelevantinformation,improvetheoperatingefficiencyandeffects,promoteandachieve thestrategyofdevelopment.
III. Basisof establishinginternal control forfinancial report
In accordance with “Basic Norms of Enterprise Internal Control” jointly issued by five ministries and commissions including ministry of finance and the requirements of supporting guidelines, and in premise of carrying out “Accounting Standards for BusinessEnterprises”andotherrules,theCompanyhasestablishedaseriesofprovisionsforfinancialmanagementsystemandhas effectivelyimplementedtheminthepracticalwork,sothattheCompanyhascompletedandstrengthenedthefunctionandauthority of financial accounting and financial management. Regarding to the job setting, manning and major accounting procedures, the Company has established independent accounting department, the personnel in accounting department faithfully implement the nationalfinancialpoliciesandalllawsandregulations,andmanagetheaccountingeventsbystrictlyfollowingrelevantregulations ofthe“AccountingLaw”and“AccountingStandardsforBusinessEnterprises”
IV.Evaluationreportof internal control
Detailsofmajordefectsinevaluationreportthatfoundinreportingperiod
ShandongAirlinesCo.,Ltd.AnnualReport2014
|||
|-|-|
|According to theidentification to the significant defects about the internal control over thecompany's financial reporting, on thebasedayoftheevaluationreportover internal control,thereisnosignificant defectsexisted intheinternal controlover financialreporting,theCompanyhaskepteffectiveinternalcontroloverfinancialreportinginallthesignificantaspectsinaccordancewiththerequirementsofthenormativesystemofenterpriseinternalcontrolsystemandtherelevantprovisions.Accordingtotheidentificationtothesignificantdefectsabouttheinternalcontroloverthecompany'snon-financialreporting,onthebasedayoftheevaluationreportoverinternalcontrol,theCompanyfoundnosignificantdefectsintheinternalcontrolovernon-financialreporting||
|Dateofevaluationreportofinternalcontrol(full-text)disclosed|2015-03-21|
|Indexofevaluationreportofinternalcontrol(full-text)disclosed|PublishedonJuchaoWebsite(http://www.cninfo.com.cn)dated21March2015|

V. Auditingreport andauthenticationreport ofinternal control
AuditingreportofIC
||
|-|
|DeliberationsectionofauditingreportofIC|
|TotheShareholdersofShandongAirlinesCo.,Ltd.:We have audited the effectiveness of internal control of financial report under the name of Shandong Airlines Co., Ltd. (“theCompany”) dated 31 December 2014 in accordance with relevant requirements of “Internal Control Audit Guideline forEnterprises”andChinaStandardsonAuditingandQualityControlI.Company'sresponsibilityforinternalcontrolThe Company is responsible for the establishment & perfection and efficiency implementation of internal control as well asevaluated itseffectiveness, regulated by “Basic Standard of Internal Control for Enterprises”, “Application Guidelinesof InternalControlforEnterprises”and“EvaluationGuidelinesofInternalControlforEnterprises”.II.Auditor'sresponsibilityOur responsibility is to express an audit opinion on effectiveness of internal control of financial report based on our audit.Anddisclosedthemajordefectsnotedininternalcontrolofnon-financialreport.III.InherentlimitationsofinternalcontrolInternalcontrolhasaninherentlimitations,andthereispossibilityofin-preventionandfalsereported.Furthermore,internalcontrolwillcomes toinappropriatedueto thechanges ofcircumstances, or thecontrollingpolicy andproceduremaintenancewill fail inimplementation; there has a certain risk in presuming the efficiency of future internal control based on internal control’s auditresults.IV.AuditopinionsoninternalcontroloffinancialreportInouropinion,ShandongAirlinesCo.,Ltd.maintainanefficiencyofinternalcontroloffinancialreport,inallmajoraspects,asof31December2014basedonrelevantregulationsand“BasicStandardofInternalControlforEnterprises”.RuihuaCPAs(LLP) ChineseCPA:YangGanlinBeijing·China ChineseCPA:WuXiaolei|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||
|-|-|
|19March2015||
|Dateofauditreportofinternalcontrol(full-text)disclosed|2015-03-21|
|Indexofauditreportofinternalcontrol(full-text)disclosed|PublishedonJuchaoWebsite(http://www.cninfo.com.cn)dated21March2015|

WhetherCPAcarriesoutqualifiedopinionforauditreportofinternalcontrolornot
□Yes√No
WhethertheopinionsareconsistentinauditreportofinternalcontrolcarryingoutbyCPAandtheself-evaluationreportoftheBoard√Yes□No
VI.Establishment and enforcement of Accountability Mechanism for Major Errors in Annual Report
In accordance with the laws, regulations and normative documents such as “Company Law”, “Accounting Law”, “Management method of listed company for information disclosure”, etc., the Company has formulated “Accountability system for significant errors in information disclosure”, defined the confirmation of responsibility and accountability of significant errors in information disclosurefortheperiodicalreports,andstipulatedthattheCompanywillseriouslyhandlethepersoninchargeinaccordancewith this system once there are significant accounting errors or information disclosure omission. During the report period, there is no correction for significant accounting errors, supplement for significant information omission or revision for earnings preannouncement.
ShandongAirlinesCo.,Ltd.AnnualReport2014 Section XI. Financial Report
I.Auditreport
|||
|-|-|
|Typeofauditopinion|Standardunqualified|
|Dateforauditedreportsigned|2015-03-19|
|Nameofauditinstitution|RuihuaCertifiedPublicAccountants(LLP)|
|Referencenumber|RuihuaShenZi[2015]No.48390004|
|CPA|YangGanlin,WuXiaolei|

Auditor’sReport
TotheShareholdersofShandongAirlinesCo.,Ltd.:
We have audited the accompanying financial statements of Shandong Airlines Co., Ltd. (hereinafter as “the Group”), including balance sheet as of 31st December 2014 and the related consolidated balance sheet, profit statement of 2014 and related consolidated profit statement, cash flow statement and related consolidated cash flow statement, statement on changes ofowners’ equity and related consolidated statement on changes ofshareholders’equityandotherexplanatorynotes.
I.Management’sresponsibilityforthefinancialstatements
Management of the Company is responsible for prepare and present financial statement of the Company, which including:
(1)PreparefinancialstatementswithfairpresentationinlinewithAccountingStandardsforBusinessEnterprises; (2) Designing, executed and maintaining necessary internal control in order to prevent fundamental miscarrying infinancialstatementfromfraudulentorerrors.
II.Auditor'sresponsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed our audit in accordance with the Standards on Accounting for Certified Public Accountants. Those standards require that we comply with ethical requirements, and to plan and perform our audit so as to obtain reasonable assurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements.The procedures selected dependonauditor's judgment, includingthe assessment ofthe risks of material misstatement of the financial statements, whether due to frauds or errors. In making those risk
assessments, the CPA will take relevant internal control into consideration which has concerned with the
preparation andfair presentation of financialstatements, in order to design auditprocedures thatare appropriated
ShandongAirlinesCo.,Ltd.AnnualReport2014 inthecircumstances.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesadoptedandthe reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation ofthefinancialstatements.
Webelieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
III.Auditingopinion
In our opinion, the aforesaid financial statements, in major aspects, give a fair presentation of consolidated financial status and consolidated operation results and consolidated cash flow of Shandong Airlines Co., Ltd. endedas31December2014
RuihuaCPAs(LLP) ChineseCPA:YangGanlin
Beijing·China ChineseCPA:WuXiaolei
19March2015
II. FinancialStatement
StatementinFinancialNotesarecarriedinRMB/CNY
1.ConsolidatedBalanceSheet
PreparedbyShandongAirlinesCo.,Ltd
2014-12-31
InRMB
||||
|-|-|-|
|Item|Closingbalance|Openingbalance|
|Currentassets:|||
|Monetaryfunds|460,741,336.35|444,522,271.21|
|Settlementprovisions|||
|Capitallent|||
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|||
|Derivativefinancialliability|||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Notesreceivable|||
|Accountsreceivable|217,039,947.40|250,524,757.67|
|Accountspaidinadvance|138,893,259.40|88,182,040.98|
|Insurancereceivable|||
|Reinsurancereceivables|||
|Contract reserve of reinsurancereceivable|||
|Interestreceivable|||
|Dividendreceivable|1,826,370.00|14,325,586.06|
|Otherreceivables|239,160,662.84|236,105,804.44|
|Purchaserestitutedfinanceasset|||
|Inventories|112,151,772.45|107,973,473.35|
|Dividedintoassetsheldforsale|91,522,334.40||
|Non-current asset due within oneyear|||
|Othercurrentassets|108,805,651.21|71,828,962.65|
|Totalcurrentassets|1,370,141,334.05|1,213,462,896.36|
|Non-currentassets:|||
|Loansandpaymentsonbehalf|||
|Financeassetavailableforsales|167,905,665.68|160,126,340.51|
|Held-to-maturityinvestment|||
|Long-termaccountreceivable|||
|Long-termequityinvestment|173,410,020.12||
|Investmentproperty|||
|Fixedassets|6,923,262,003.49|7,564,658,140.23|
|Constructioninprogress|2,437,585,905.29|1,647,915,995.78|
|Engineeringmaterial|||
|Disposaloffixedasset|||
|Productivebiologicalasset|||
|Oilandgasasset|||
|Intangibleassets|120,544,428.04|101,127,636.82|
|Expense on Research andDevelopment|||
|Goodwill|||
|Long-term expenses to beapportioned|397,258,983.43|347,945,540.61|
|Deferredincometaxasset|470,104,638.00|439,662,119.02|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Othernon-currentasset|58,654,642.41||
|Totalnon-currentasset|10,748,726,286.46|10,261,435,772.97|
|Totalassets|12,118,867,620.51|11,474,898,669.33|
|Currentliabilities:|||
|Short-termloans||434,137,220.00|
|Loanfromcentralbank|||
|Absorbing deposit and interbankdeposit|||
|Capitalborrowed|||
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|1,559,710.77|296,902.47|
|Derivativefinancialliability|||
|Notespayable|58,412,417.22||
|Accountspayable|890,345,747.24|1,132,126,690.25|
|Accountsreceivedinadvance|278,057,859.34|343,468,052.97|
|Selling financial asset ofrepurchase|||
|Commission charge andcommissionpayable|||
|Wagepayable|393,428,573.70|338,866,981.54|
|Taxespayable|88,141,153.44|110,064,437.61|
|Interestpayable|15,379,074.56|16,064,294.43|
|Dividendpayable|11,940.00|11,940.00|
|Otheraccountspayable|367,285,868.35|193,868,858.34|
|Reinsurancepayables|||
|Insurancecontractreserve|||
|Securitytradingofagency|||
|Securitysalesofagency|||
|Dividedintoliabilityheldforsale|||
|Non-currentliabilitiesduewithin1year|1,741,517,725.20|538,030,658.42|
|Othercurrentliabilities|||
|Totalcurrentliabilities|3,834,140,069.82|3,106,936,036.03|
|Non-currentliabilities:|||
|Long-termloans|3,219,443,999.28|3,525,047,206.06|
|Bondspayable||500,000,000.00|
|Including:preferredstock|||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Perpetualcapitalsecurities|||
|Long-termaccountpayable|2,079,557,697.82|1,542,515,998.39|
|Long-termwagespayable|70,445,557.60|64,571,000.00|
|Specialaccountspayable|||
|Projectedliabilities|||
|Deferredincome|17,271,524.22|25,367,524.34|
|Deferredincometaxliabilities|19,888,391.42|17,943,560.13|
|Othernon-currentliabilities|||
|Totalnon-currentliabilities|5,406,607,170.34|5,675,445,288.92|
|Totalliabilities|9,240,747,240.16|8,782,381,324.95|
|Owner’sequity:|||
|Sharecapital|400,000,000.00|400,000,000.00|
|Otherequityinstrument|||
|Including:preferredstock|||
|Perpetualcapitalsecurities|||
|Capitalpublicreserve|75,410,363.70|75,410,363.70|
|Less:Inventoryshares|||
|Othercomprehensiveincome|58,923,174.26|61,171,680.38|
|Reasonablereserve|||
|Surpluspublicreserve|318,250,857.40|289,670,385.70|
|Provisionofgeneralrisk|||
|Retainedprofit|2,025,535,984.99|1,866,264,914.60|
|Total owner’s equity attributable toparentcompany|2,878,120,380.35|2,692,517,344.38|
|Minorityinterests|||
|Totalowner’sequity|2,878,120,380.35|2,692,517,344.38|
|Totalliabilitiesandowner’sequity|12,118,867,620.51|11,474,898,669.33|

 Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
2.BalanceSheetofParentCompany
InRMB
||||
|-|-|-|
|Item|Closingbalance|Openingbalance|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Currentassets:|||
|Monetaryfunds|444,628,245.82|421,826,370.62|
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|||
|Derivativefinancialliability|||
|Notesreceivable|||
|Accountsreceivable|215,447,973.81|243,767,591.18|
|Accountpaidinadvance|137,871,249.15|87,961,234.82|
|Interestreceivable|||
|Dividendsreceivable|1,826,370.00|14,325,586.06|
|Otherreceivables|281,409,048.94|278,365,290.97|
|Inventories|112,151,772.45|107,972,423.35|
|Dividedintoassetsheldforsale|91,522,334.40||
|Non-currentassetsmaturingwithinoneyear|||
|Othercurrentassets|107,929,044.49|71,828,962.65|
|Totalcurrentassets|1,392,786,039.06|1,226,047,459.65|
|Non-currentassets:|||
|Available-for-salefinancialassets|167,905,665.68|160,126,340.51|
|Held-to-maturityinvestments|||
|Long-termreceivables|||
|Long-termequityinvestments|279,410,705.55|106,000,685.43|
|Investmentproperty|||
|Fixedassets|6,817,495,030.89|7,454,288,584.97|
|Constructioninprogress|2,434,596,341.61|1,647,839,995.78|
|Projectmaterials|||
|Disposaloffixedassets|||
|Productivebiologicalassets|||
|Oilandnaturalgasassets|||
|Intangibleassets|105,836,196.37|86,384,749.30|
|Researchanddevelopmentcosts|||
|Goodwill|||
|Long-termdeferredexpenses|397,258,983.43|347,945,540.61|
|Deferredincometaxassets|469,311,960.57|439,209,204.04|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Othernon-currentassets|58,654,642.41||
|Totalnon-currentassets|10,730,469,526.51|10,241,795,100.64|
|Totalassets|12,123,255,565.57|11,467,842,560.29|
|Currentliabilities:|||
|Short-termborrowings||434,137,220.00|
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|1,559,710.77|296,902.47|
|Derivativefinancialliability|||
|Notespayable|58,412,417.22||
|Accountspayable|893,928,672.81|1,130,120,671.84|
|Accountsreceivedinadvance|269,901,234.14|338,572,262.93|
|Wagepayable|389,889,657.63|338,104,603.04|
|Taxespayable|87,579,618.94|109,369,269.33|
|Interestpayable|15,379,074.56|16,064,294.43|
|Dividendpayable|11,940.00|11,940.00|
|Otheraccountspayable|382,237,985.57|195,015,301.41|
|Dividedintoliabilityheldforsale|||
|Non-currentliabilitiesduewithin1year|1,741,517,725.20|538,030,658.42|
|Othercurrentliabilities|||
|Totalcurrentliabilities|3,840,418,036.84|3,099,723,123.87|
|Non-currentliabilities:|||
|Long-termloans|3,219,443,999.28|3,525,047,206.06|
|Bondspayable||500,000,000.00|
|Including:preferredstock|||
|Perpetualcapitalsecurities|||
|Long-termaccountpayable|2,079,557,697.82|1,542,515,998.39|
|Long-termwagespayable|70,445,557.60|64,571,000.00|
|Specialaccountspayable|||
|Projectedliabilities|||
|Deferredincome|17,271,524.22|25,367,524.34|
|Deferredincometaxliabilities|19,888,391.42|17,943,560.13|
|Othernon-currentliabilities|||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Totalnon-currentliabilities|5,406,607,170.34|5,675,445,288.92|
|Totalliabilities|9,247,025,207.18|8,775,168,412.79|
|Owners’equity:|||
|Sharecapita|400,000,000.00|400,000,000.00|
|Otherequityinstrument|||
|Including:preferredstock|||
|Perpetualcapitalsecurities|||
|Capitalpublicreserve|86,911,168.71|86,911,168.71|
|Less:Inventoryshares|||
|Othercomprehensiveincome|58,923,174.26|61,171,680.38|
|Reasonablereserve|||
|Surplusreserve|317,590,152.87|289,009,681.17|
|Retainedprofit|2,012,805,862.55|1,855,581,617.24|
|Totalowner’sequity|2,876,230,358.39|2,692,674,147.50|
|Totalliabilitiesandowner’sequity|12,123,255,565.57|11,467,842,560.29|

 Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
3.ConsolidatedProfitStatement
InRMB
||||
|-|-|-|
|Item|CurrentPeriod|LastPeriod|
|I.Totaloperatingincome|11,570,296,757.48|11,427,157,933.15|
|Including:Operatingincome|11,570,296,757.48|11,427,157,933.15|
|Interestincome|||
|Insurancegained|||
|Commissionchargeandcommissionincome|||
|II.Totaloperatingcost|11,336,738,980.62|11,173,194,367.33|
|Including:Operatingcost|10,079,128,803.74|9,709,865,647.38|
|Interestexpense|||
|Commissionchargeandcommissionexpense|||
|Cashsurrendervalue|||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Netamountofexpenseofcompensation|||
|Netamountofwithdrawalofinsurancecontractreserve|||
|Bonusexpenseofguaranteeslip|||
|Reinsuranceexpense|||
|Operatingtaxandextras|31,770,430.48|238,665,537.66|
|Salesexpenses|789,909,342.97|775,204,419.75|
|Administrationexpenses|234,028,777.30|221,433,947.49|
|Financialexpenses|200,729,150.28|145,665,611.58|
|Lossesofdevaluationofasset|1,172,475.85|82,359,203.47|
|Add:Changingincomeoffairvalue(Lossislistedwith“-”)|-1,262,808.30|6,901,881.12|
|Investmentincome(Lossislistedwith“-”)|-26,040,504.73|14,163,176.50|
|Including:Investmentincomeonaffiliatedcompanyandjointventure|-26,589,979.88||
|Exchangeincome(Lossislistedwith“-”)|||
|III.Operatingprofit (Lossislistedwith“-”)|206,254,463.83|275,028,623.44|
|Add:Non-operatingincome|207,191,726.99|270,407,969.61|
|Including:Disposalgainsofnon-currentasset|9,115,183.68|78,847,533.50|
|Less:Non-operatingexpense|15,079,971.87|13,449,762.40|
|Including:Disposallossofnon-currentasset|14,507,221.07|9,856,591.93|
|IV.TotalProfit (Lossislistedwith“-”)|398,366,218.95|531,986,830.65|
|Less:Incometaxexpense|110,514,676.86|141,865,018.93|
|V.Netprofit(Netlossislistedwith“-”)|287,851,542.09|390,121,811.72|
|Netprofitattributabletoowner’sofparentcompany|287,851,542.09|390,121,811.72|
|Minorityshareholders’gainsandlosses|||
|VI.Netafter-taxofothercomprehensiveincome|-2,248,506.12|33,344,665.27|
|Netafter-taxofothercomprehensive|-2,248,506.12|33,344,665.27|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|incomeattributabletoownersofparentcompany|||
|(I)Othercomprehensiveincomeitemswhichwillnotbereclassifiedsubsequentlytoprofitofloss|-8,083,000.00|7,341,000.00|
|1.Changesasaresultofre-measurementofnetdefinedbenefitplanliabilityorasset|-8,083,000.00|7,341,000.00|
|2.Shareoftheothercomprehensiveincomeoftheinvesteeaccountedforusingequitymethodwhichwillnotbereclassifiedsubsequentlytoprofitandloss|||
|(II)Othercomprehensiveincomeitemswhichwillbereclassifiedsubsequentlytoprofitorloss|5,834,493.88|26,003,665.27|
|1.Shareoftheothercomprehensiveincomeoftheinvesteeaccountedforusingequitymethodwhichwillbereclassifiedsubsequentlytoprofitorloss|||
|2.Gainsorlossesarisingfromchangesinfairvalueofavailable-for-salefinancialassets|5,834,493.88|26,003,665.27|
|3.Gainsorlossesarisingfromreclassificationofheld-to-maturityinvestmentasavailable-for-salefinancialassets|||
|4.Theeffecthedgingportionofgainsorlossesarisingfromcashflowhedginginstruments|||
|5.Translationdifferencesarisingontranslationofforeigncurrencyfinancialstatements|||
|6.Other|||
|Netafter-taxofothercomprehensiveincomeattributabletominorityshareholders|||
|VII.Totalcomprehensiveincome|285,603,035.97|423,466,476.99|
|TotalcomprehensiveincomeattributabletoownersofparentCompany|285,603,035.97|423,466,476.99|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Totalcomprehensiveincomeattributabletominorityshareholders|||
|VIII.Earningspershare:|||
|(i)Basicearningspershare|0.72|0.98|
|(ii)Dilutedearningspershare|0.72|0.98|

 Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
4.ProfitStatementofParentCompany
InRMB
||||
|-|-|-|
|Item|CurrentPeriod|LastPeriod|
|I.Operatingincome|11,550,383,115.23|11,411,894,387.57|
|Less:Operatingcost|10,071,516,012.48|9,701,412,394.23|
|Operatingtaxandextras|31,611,429.24|238,106,240.18|
|Salesexpenses|789,909,342.97|780,085,329.96|
|Administrationexpenses|226,098,278.90|214,597,884.21|
|Financialexpenses|200,786,373.33|145,719,515.27|
|Lossesofdevaluationofasset|-734,192.83|70,348,934.03|
|Add:Changingincomeoffairvalue(Lossislistedwith“-”)|-1,262,808.30|6,901,881.12|
|Investmentincome(Lossislistedwith“-”)|-26,040,504.73|14,163,176.50|
|Including:Investmentincomeonaffiliatedcompanyandjointventure|-26,589,979.88||
|II.Operatingprofit (Lossislistedwith“-”)|203,892,558.11|282,689,147.31|
|Add:Non-operatingincome|207,191,526.94|270,405,947.11|
|Less:Non-operatingexpense|15,079,971.87|13,435,099.03|
|Including:Disposallossofnon-currentasset|14,507,221.07|9,841,928.56|
|III.TotalProfit (Lossislistedwith“-”)|396,004,113.18|539,659,995.39|
|Less:Incometaxexpense|110,199,396.17|141,552,131.44|
|IV.Netprofit(Netlossislistedwith“-”)|285,804,717.01|398,107,863.95|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|V.Netafter-taxofothercomprehensiveincome|-2,248,506.12|33,344,665.27|
|(I)Othercomprehensiveincomeitemswhichwillnotbereclassifiedsubsequentlytoprofitofloss|-8,083,000.00|7,341,000.00|
|1.Changesasaresultofre-measurementofnetdefinedbenefitplanliabilityorasset|-8,083,000.00|7,341,000.00|
|2.Shareoftheothercomprehensiveincomeoftheinvesteeaccountedforusingequitymethodwhichwillnotbereclassifiedsubsequentlytoprofitandloss|||
|(II)Othercomprehensiveincomeitemswhichwillbereclassifiedsubsequentlytoprofitorloss|5,834,493.88|26,003,665.27|
|1.Shareoftheothercomprehensiveincomeoftheinvesteeaccountedforusingequitymethodwhichwillbereclassifiedsubsequentlytoprofitorloss|||
|2.Gainsorlossesarisingfromchangesinfairvalueofavailable-for-salefinancialassets|5,834,493.88|26,003,665.27|
|3.Gainsorlossesarisingfromreclassificationofheld-to-maturityinvestmentasavailable-for-salefinancialassets|||
|4.Theeffecthedgingportionofgainsorlossesarisingfromcashflowhedginginstruments|||
|5.Translationdifferencesarisingontranslationofforeigncurrencyfinancialstatements|||
|6.Other|||
|VI.Totalcomprehensiveincome|283,556,210.89|431,452,529.22|
|VII.Earningspershare:|||
|(i)Basicearningspershare|||
|(ii)Dilutedearningspershare|||

Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian
ShandongAirlinesCo.,Ltd.AnnualReport2014 PersoninchargeofAccountingInstitution:SunJingping
5.ConsolidatedCashFlowStatement
InRMB
||||
|-|-|-|
|Item|CurrentPeriod|LastPeriod|
|I.Cashflowsarisingfromoperatingactivities:|||
|Cashreceivedfromsellingcommoditiesandprovidinglaborservices|12,710,297,864.57|11,821,940,861.03|
|Netincreaseofcustomerdepositandinterbankdeposit|||
|Netincreaseofloanfromcentralbank|||
|Netincreaseofcapitalborrowedfromotherfinancialinstitution|||
|Cashreceivedfromoriginalinsurancecontractfee|||
|Netcashreceivedfromreinsurancebusiness|||
|Netincreaseofinsuredsavingsandinvestment|||
|Netincreaseofamountfromdisposalfinancialassetsthatmeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|||
|Cashreceivedfrominterest,commissionchargeandcommission|||
|Netincreaseofcapitalborrowed|||
|Net increase of returned businesscapital|||
|Write-backoftaxreceived|||
|Other cash received concerningoperatingactivities|373,940,604.72|298,723,497.82|
|Subtotal of cash inflow arising fromoperatingactivities|13,084,238,469.29|12,120,664,358.85|
|Cash paid for purchasingcommodities and receiving laborservice|9,517,670,026.99|8,296,965,395.58|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|Netincreaseofcustomerloansandadvances|||
|Netincreaseofdepositsincentralbankandinterbank|||
|Cash paid for original insurancecontractcompensation|||
|Cashpaidforinterest,commissionchargeandcommission|||
|Cash paid for bonus of guaranteeslip|||
|Cashpaidto/forstaffandworkers|1,410,482,218.24|1,491,076,519.28|
|Taxespaid|416,630,299.89|687,341,028.75|
|Other cash paid concerningoperatingactivities|279,627,708.86|234,094,893.09|
|Subtotal of cash outflow arising fromoperatingactivities|11,624,410,253.98|10,709,477,836.70|
|Netcashflowsarisingfromoperatingactivities|1,459,828,215.31|1,411,186,522.15|
|II.Cashflowsarisingfrominvestingactivities:|||
|Cashreceivedfromrecoveringinvestment|||
|Cashreceivedfrominvestmentincome|15,149,770.75|2,447,115.15|
|Netcashreceivedfromdisposaloffixed,intangibleandotherlong-termassets|74,201,380.68|174,681,542.77|
|Netcashreceivedfromdisposalofsubsidiariesandotherunits|||
|Other cash received concerninginvestingactivities|||
|Subtotalofcashinflowfrominvestingactivities|89,351,151.43|177,128,657.92|
|Cash paid for purchasing fixed,intangibleandotherlong-termassets|1,854,363,565.04|1,723,086,948.06|
|Cashpaidforinvestment|||
|Netincreaseofmortgagedloans|||
|Netcashreceivedfrom|26,000,000.00||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|subsidiariesandotherunitsobtained|||
|Other cash paid concerninginvestingactivities|2,101,079.54|2,609,524.71|
|Subtotalofcashoutflowfrominvestingactivities|1,882,464,644.58|1,725,696,472.77|
|Netcashflowsarisingfrominvestingactivities|-1,793,113,493.15|-1,548,567,814.85|
|III.Cashflowsarisingfromfinancingactivities|||
|Cash received from absorbinginvestment|||
|Including: Cash received fromabsorbing minority shareholders’investmentbysubsidiaries|||
|Cashreceivedfromloans|1,415,568,000.00|1,707,943,187.26|
|Cashreceivedfromissuingbonds|||
|Other cash received concerningfinancingactivities|876,880,748.00|903,064,822.94|
|Subtotalofcashinflowfromfinancingactivities|2,292,448,748.00|2,611,008,010.20|
|Cashpaidforsettlingdebts|1,493,180,860.91|1,664,222,540.40|
|Cash paid for dividend and profitdistributingorinterestpaying|270,771,019.31|343,574,678.36|
|Including:Dividendandprofitofminorityshareholderpaidbysubsidiaries|||
|Other cash paid concerningfinancingactivities|181,035,632.75|175,939,104.72|
|Subtotalofcashoutflowfromfinancingactivities|1,944,987,512.97|2,183,736,323.48|
|Netcashflowsarisingfromfinancingactivities|347,461,235.03|427,271,686.72|
|IV.Influenceoncashandcashequivalentsduetofluctuationinexchangerate|2,043,107.95|-755,865.78|
|V. Net increase of cash and cashequivalents|16,219,065.14|289,134,528.24|
|Add: Balance of cash and cash|444,522,271.21|155,387,742.97|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|equivalentsattheperiod-begin|||
|VI.Balanceofcashandcashequivalentsattheperiod-end|460,741,336.35|444,522,271.21|

Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
6.CashFlowStatementofParentCompany
InRMB
||||
|-|-|-|
|Item|CurrentPeriod|LastPeriod|
|I.Cashflowsarisingfromoperatingactivities:|||
|Cashreceivedfromsellingcommoditiesandprovidinglaborservices|12,681,462,417.76|11,804,162,169.30|
|Write-backoftaxreceived|||
|Othercashreceivedconcerningoperatingactivities|387,683,169.97|284,668,066.98|
|Subtotalofcashinflowarisingfromoperatingactivities|13,069,145,587.73|12,088,830,236.28|
|Cashpaidforpurchasingcommoditiesandreceivinglaborservice|9,517,170,943.75|8,294,746,672.13|
|Cashpaidto/forstaffandworkers|1,401,684,370.73|1,486,359,737.00|
|Taxespaid|412,690,376.73|685,735,029.36|
|Other cash paid concerningoperatingactivities|277,261,323.97|237,896,956.32|
|Subtotal of cash outflow arising fromoperatingactivities|11,608,807,015.18|10,704,738,394.81|
|Netcashflowsarisingfromoperatingactivities|1,460,338,572.55|1,384,091,841.47|
|II.Cashflowsarisingfrominvestingactivities:|||
|Cashreceivedfromrecoveringinvestment|||
|Cashreceivedfrominvestmentincome|15,149,770.75|2,447,115.15|
|Netcashreceivedfromdisposalof|74,200,980.68|174,669,237.27|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|fixed,intangibleandotherlong-termassets|||
|Netcashreceivedfromdisposalofsubsidiariesandotherunits|||
|Other cash received concerninginvestingactivities|||
|Subtotalofcashinflowfrominvestingactivities|89,350,751.43|177,116,352.42|
|Cash paid for purchasing fixed,intangibleandotherlong-termassets|1,848,290,712.22|1,706,500,870.09|
|Cashpaidforinvestment|||
|Net cash received fromsubsidiariesandotherunits|26,000,000.00||
|Other cash paid concerninginvestingactivities|2,101,079.54|2,609,524.71|
|Subtotalofcashoutflowfrominvestingactivities|1,876,391,791.76|1,709,110,394.80|
|Netcashflowsarisingfrominvestingactivities|-1,787,041,040.33|-1,531,994,042.38|
|III.Cashflowsarisingfromfinancingactivities|||
|Cashreceivedfromabsorbinginvestment|||
|Cashreceivedfromloans|1,415,568,000.00|1,707,943,187.26|
|Cashreceivedfromissuingbonds|||
|Other cash received concerningfinancingactivities|876,880,748.00|903,064,822.94|
|Subtotalofcashinflowfromfinancingactivities|2,292,448,748.00|2,611,008,010.20|
|Cashpaidforsettlingdebts|1,493,180,860.91|1,664,222,540.40|
|Cash paid for dividend and profitdistributingorinterestpaying|270,771,019.31|343,574,678.36|
|Other cash paid concerningfinancingactivities|181,035,632.75|175,939,104.72|
|Subtotalofcashoutflowfromfinancingactivities|1,944,987,512.97|2,183,736,323.48|
|Netcashflowsarisingfromfinancingactivities|347,461,235.03|427,271,686.72|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||
|-|-|-|
|IV.Influenceoncashandcashequivalentsduetofluctuationinexchangerate|2,043,107.95|-755,865.78|
|V. Net increase of cash and cashequivalents|22,801,875.20|278,613,620.03|
|Add: Balance of cash and cashequivalentsattheperiod-begin|421,826,370.62|143,212,750.59|
|VI.Balanceofcashandcashequivalentsattheperiod-end|444,628,245.82|421,826,370.62|

Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
7.StatementofChangesinOwners’Equity(Consolidated)
ThisPeriod
InRMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|ThisPeriod|||||||||||||
||Owners’equityattributabletoparentcompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstrument|||Capitalreserve|Less:Inventoryshares|Othercomprehensiveincome|Reasonablereserve|Surplusreserve|Provision ofgeneralrisk|Retainedprofit|||
|||Preferredstock|Perpetualcapitalsecurities|Other||||||||||
|I.Balanceattheendofthelastyear|400,000,000.00||||75,410,363.70||61,171,680.38||289,670,385.70||1,866,264,914.60||2,692,517,344.38|
|Add:Changes ofaccountingpolicy||||||||||||||
|Errorcorrection of thelastperiod||||||||||||||
|Enterprisecombine underthesamecontrol||||||||||||||
|Other||||||||||||||
|II. Balance at thebeginning of thisyear|400,000,000.00||||75,410,363.70||61,171,680.38||289,670,385.70||1,866,264,914.60||2,692,517,344.38|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||
|-|-|-|-|-|
|III. Increase/Decrease in thisyear (Decrease islistedwith“-”)|-2,248,506.12|28,580,471.70|159,271,070.39|185,603,035.97|
|(i) Totalcomprehensiveincome|-2,248,506.12||287,851,542.09|285,603,035.97|
|(ii) Owners’devoted anddecreasedcapital|||||
|1.Common sharesinvested byshareholders|||||
|2. Capital investedbyholdersofotherequityinstruments|||||
|3. Amountreckoned intoownersequitywithshare-basedpayment|||||
|4.Other|||||
|(III) Profitdistribution||28,580,471.70|-128,580,471.70|-100,000,000.00|
|1. Withdrawal ofsurplusreserves||28,580,471.70|-28,580,471.70||
|2. Withdrawal ofgeneral riskprovisions|||||
|3. Distribution forowners (orshareholders)|||-100,000,000.00|-100,000,000.00|
|4.Other|||||
|(IV) Carryingforward internalowners’equity|||||
|1. Capital reservesconversed tocapital (sharecapital)|||||
|2.Surplusreservesconversed tocapital (sharecapital)|||||
|3. Remedying losswith surplusreserve|||||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|4.Other|||||||
|(V) Reasonablereserve|||||||
|1. Withdrawal inthereportperiod|||||||
|2. Usage in thereportperiod|||||||
|(VI)Others|||||||
|IV. Balance at theend of the reportperiod|400,000,000.00|75,410,363.70|58,923,174.26|318,250,857.40|2,025,535,984.99|2,878,120,380.35|

 LastPeriod
InRMB
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|LastPeriod|||||||||||||
||Owners’equityattributabletotheparentCompany|||||||||||Minorityinterests|Totalowners’equity|
||Sharecapital|Otherequityinstrument|||Capitalreserve|Less:Inventoryshares|Othercomprehensiveincome|Reasonablereserve|Surplusreserve|Provision ofgeneralrisk|Retainedprofit|||
|||Preferredstock|Perpetualcapitalsecurities|Other||||||||||
|I. Balance at theendofthelastyear|400,000,000.00||||75,410,363.70||27,827,015.11||249,859,599.31||1,675,953,889.27||2,429,050,867.39|
|Add:Changes ofaccountingpolicy||||||||||||||
|Errorcorrection of thelastperiod||||||||||||||
|Enterprisecombine under thesamecontrol||||||||||||||
|Other||||||||||||||
|II. Balance at thebeginning of thisyear|400,000,000.00||||75,410,363.70||27,827,015.11||249,859,599.31||1,675,953,889.27||2,429,050,867.39|
|III. Increase/Decrease in thisyear (Decrease islistedwith“-”)|||||||33,344,665.27||39,810,786.39||190,311,025.33||263,466,476.99|

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||
|-|-|-|-|-|
|(i) Totalcomprehensiveincome|33,344,665.27||390,121,811.72|423,466,476.99|
|(ii) Owners’devoted anddecreasedcapital|||||
|1.Common sharesinvested byshareholders|||||
|2. Capital investedbyholdersofotherequityinstruments|||||
|3. Amountreckoned intoownersequitywithshare-basedpayment|||||
|4Other|||||
|(III) Profitdistribution||39,810,786.39|-199,810,786.39|-160,000,000.00|
|1. Withdrawal ofsurplusreserves||39,810,786.39|-39,810,786.39||
|2. Withdrawal ofgeneral riskprovisions|||||
|3. Distribution forowners (orshareholders)|||-160,000,000.00|-160,000,000.00|
|4.Other|||||
|(IV) Carryingforward internalowners’equity|||||
|1. Capital reservesconversed tocapital (sharecapital)|||||
|2.Surplusreservesconversed tocapital (sharecapital)|||||
|3. Remedying losswith surplusreserve|||||
|4.Other|||||
|(V)Reasonablereserve|||||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|1. Withdrawal inthereportperiod|||||||
|2. Usage in thereportperiod|||||||
|(VI)Others|||||||
|IV. Balance at theend of the reportperiod|400,000,000.00|75,410,363.70|61,171,680.38|289,670,385.70|1,866,264,914.60|2,692,517,344.38|

 Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
8.StatementofChangesinOwners’Equity(ParentCompany)
ThisPeriod
InRMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|ThisPeriod|||||||||||
||Sharecapital|Otherequityinstrument|||Capitalreserve|Less:Inventoryshares|Othercomprehensiveincome|Reasonablereserve|Surplusreserve|Retainedprofit|Totalowners’equity|
|||Preferredstock|Perpetualcapitalsecurities|Other||||||||
|I. Balance at theendofthelastyear|400,000,000.00||||86,911,168.71||61,171,680.38||289,009,681.17|1,855,581,617.24|2,692,674,147.50|
|Add:Changesof accountingpolicy||||||||||||
|Errorcorrectionofthelastperiod||||||||||||
|Other||||||||||||
|II. Balance at thebeginning of thisyear|400,000,000.00||||86,911,168.71||61,171,680.38||289,009,681.17|1,855,581,617.24|2,692,674,147.50|
|III. Increase/Decrease in thisyear (Decrease islistedwith“-”)|||||||-2,248,506.12||28,580,471.70|157,224,245.31|183,556,210.89|
|(i) Totalcomprehensiveincome|||||||-2,248,506.12|||285,804,717.01|283,556,210.89|

ShandongAirlinesCo.,Ltd.AnnualReport2014
|||||
|-|-|-|-|
|(ii) Owners’devoted anddecreasedcapital||||
|1.Common sharesinvested byshareholders||||
|2. Capital investedbyholdersofotherequityinstruments||||
|3. Amountreckoned intoownersequitywithshare-basedpayment||||
|4.Other||||
|(III) Profitdistribution|28,580,471.70|-128,580,471.70|-100,000,000.00|
|1. Withdrawal ofsurplusreserves|28,580,471.70|-28,580,471.70||
|2.Distributionforowners(orshareholders)||-100,000,000.00|-100,000,000.00|
|3.Other||||
|(IV) Carryingforward internalowners’equity||||
|1. Capital reservesconversed tocapital (sharecapital)||||
|2.Surplusreservesconversed tocapital (sharecapital)||||
|3. Remedying losswith surplusreserve||||
|4.Other||||
|(V) Reasonablereserve||||
|1. Withdrawal inthereportperiod||||
|2. Usage in thereportperiod||||
|(VI)Others||||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|IV. Balance at theend of the reportperiod|400,000,000.00|86,911,168.71|58,923,174.26|317,590,152.87|2,012,805,862.55|2,876,230,358.39|

Lastperiod
InRMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Item|Lastperiod|||||||||||
||Sharecapital|Otherequityinstrument|||Capitalreserve|Less:Inventoryshares|Othercomprehensiveincome|Reasonablereserve|Surplusreserve|Retainedprofit|Totalowners’equity|
|||Preferredstock|Perpetualcapitalsecurities|Other||||||||
|I. Balance at theendofthelastyear|400,000,000.00||||86,911,168.71||27,827,015.11||249,198,894.78|1,657,284,539.68|2,421,221,618.28|
|Add:Changesof accountingpolicy||||||||||||
|Errorcorrectionofthelastperiod||||||||||||
|Other||||||||||||
|II. Balance at thebeginning of thisyear|400,000,000.00||||86,911,168.71||27,827,015.11||249,198,894.78|1,657,284,539.68|2,421,221,618.28|
|III. Increase/Decrease in thisyear (Decrease islistedwith“-”)|||||||33,344,665.27||39,810,786.39|198,297,077.56|271,452,529.22|
|(i) Totalcomprehensiveincome|||||||33,344,665.27|||398,107,863.95|431,452,529.22|
|(ii) Owners’devoted anddecreasedcapital||||||||||||
|1.Common sharesinvested byshareholders||||||||||||
|2. Capital investedbyholdersofotherequityinstruments||||||||||||
|3. Amountreckoned intoownersequitywithshare-based||||||||||||

ShandongAirlinesCo.,Ltd.AnnualReport2014
||||||||
|-|-|-|-|-|-|-|
|payment|||||||
|4.Other|||||||
|(III) Profitdistribution||||39,810,786.39|-199,810,786.39|-160,000,000.00|
|1. Withdrawal ofsurplusreserves||||39,810,786.39|-39,810,786.39||
|2.Distributionforowners(orshareholders)|||||-160,000,000.00|-160,000,000.00|
|3.Other|||||||
|(IV) Carryingforward internalowners’equity|||||||
|1. Capital reservesconversed tocapital (sharecapital)|||||||
|2.Surplusreservesconversed tocapital (sharecapital)|||||||
|3. Remedying losswith surplusreserve|||||||
|4.Other|||||||
|(V) Reasonablereserve|||||||
|1. Withdrawal inthereportperiod|||||||
|2. Usage in thereportperiod|||||||
|(VI)Others|||||||
|IV. Balance at theend of the reportperiod|400,000,000.00|86,911,168.71|61,171,680.38|289,009,681.17|1,855,581,617.24|2,692,674,147.50|

Legal Representative: Yu Haitian Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
Shandong Airlines Co., Ltd. Annual Report2014
ShandongAirlines Co., Ltd.
Notes to the Financial Statements
for theYear Ended 31 December 2014
(All amounts are expressed in CNY unless otherwise stated)
Note1Corporationprofile
ShandongAirlinesCo.,Ltd.(hereafter,theCompany)isaforeign-investedlimitedliabilitycompanyincorporatedinthePeople’sRepublic of China. The Company was incorporated through the restructuring project jointly initiated by Shandong Airlines Group Co., Ltd.(hereafter,SDAGroup),InspurCo.,Ltd.(previouslyknownasInspurElectronicInformationIndustryGroupCompany(浪潮电子信息产业集团公司),ShandongHualuGroupCo.,Ltd,ShandongGroupCorp.ofFisheriesEnterprisesandLuyinInvestmentGroup(鲁银投资集团股份有限公司)followingtheapproval(LuTiGaiQiZi(1999)No.88(鲁体改企字(1999)第88号))grantedbytheEconomicReformCommissionofShandongProvince(山东省经济体制改革委员会)onJuly29th,1999.
ShandongAirlinesGroupCo.,Ltd.acquired259,204,000state-ownedcorporateshares(国有法人股),withCNY1.00atpar,ofthe CompanybytransferringitsairtransportationoperationandtherelatedassetsandliabilitiestotheCompanyonNovember25th,1999. Inspur Co., Ltd., Shandong Hualu Group Co., Ltd. and Shandong Group Corp. of Fisheries Enterprises each acquired 199,000 state-owned corporate shares, with CNY 1.00 at par, by cash investment of CNY 200,000.00 each on November 26th, 1999. Luyin Investment Group acquired 199,000 domestic corporate shares(国内法人股), with CNY 1.00 at par, by cash investment of CNY 200,000.00onNovember26th,1999.
The Company issued 140,000,000 domestically listed shares denominated in foreign currency(境内上市外资股) (hereafter, B share(s)), with par value at CNY 1.00 each and issue price at HKD 1.58 each, on August 28th, 2000 upon the approval(ZhengJianFaXingZi[2000]No.116(证监发行字[2000]116号))grantedbytheChinaSecuritiesRegulatoryCommissiononAugust22nd, 2000;and,theCompanywaslistedontheShenzhenStockExchangeonSeptember12th,2000.ImmediatelyaftertheissuanceoftheB shares,thecapitaloftheCompanyincreasedtoCNY400,000,000.00.
TheAgreementofShareTransfer(《股份转让协议》)signedbySDAGroupandChinaNationalAviationHoldingCompany(hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of 91,200,000 shares of the Company, equal to22.8%shareholding,fromSDAGrouptoChinaAviationGroup.Immediatelyafterthesharetransfer,SDAGroup’sshareholdingintheCompanywas42.00%.InNovember2004,theBoardofDirectorsoftheCompany,inaccordancewiththeapproval(GuoZiChanQuan[2004]No.956(国资产权[2004]956号：《关于中国航空集团公司将受让山东航空股份有限公司国有股的合同实施转让有关问题的批复》))issuedbytheState-ownedAssetsSupervisionandAdministrationCommissionoftheStateCouncil,authorisedChinaAviation Group to transfer the state-owned corporate shares received from SDA Group to Air China Co., Ltd. (hereafter, Air China). As soprovidedinGuoZiChanQuan[2004]No.956,therightsandobligationattributabletoChinaAviationGroupasspecifiedintheAgreementof ShareTransfershallbeaffordedbyAirChina.Thechangeofshareownershipwas registeredattheChinaSecuritiesDepositoryand Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on December 3rd, 2004; And, 91,200,000 shares of the
Shandong Airlines Co., Ltd. Annual Report2014
CompanythenbecameheldbyAirChina.
LegalrepresentativeoftheCompany:YU,Haitian
Placeofregistration:ShandongJinanYaoqiangInternationalAirport
Addressofheadquarter:ShandongAirlinesCentre,5746–East2ndRingRoad,Jinan,Shandong
The Company is permitted to undertake international and domestic passenger and cargo transportation, hotel and beverage related operation(limitedtooperationthroughbranch);provisionofaircraftmaintenance,trainingofcivilaviationpilotsandaircrew,insurance brokerage(limitedtoairaccidentinsurance,withperiodofoperationvaliduntilSeptember3rd,2015);inter-airlineagenting,andprincipal operation related ground services; sales of airborne material and equipments, non-food grocery, art work, souvenir, etc.; retailing of tobacco products (limited to Qingdao Red-Crowned Crane Hotel); lease of airborne material and equipments; business services; conference services;transportation agency; air cargo storage; and aviation pilot provision (for other domestic airlines).The operating activities listedhereindoes notinvolveoperationrelated tocommodity thataresubjecttoStateAdministeredTrading(国营贸易管理),but involve operation related to commodity that are subject to quotas , licence requirements, which are restricted to obtain permissionbeforetheoperation.
ThefinancialstatementsoftheCompanyhasbeenapprovedbytheboardofdirectorson19Mar2015.2subsidiariesoftheCompany are included in the consolidated financial statements in2014, seeNote 8 "The equity in other main entities".No change of scopeof consolidationfromlastyear.
TheCompanyoperatesintheindustryoftransportation.
Note2Basisforpreparationofthefinancialstatements
ThefinancialstatementsofcompanyhavebeenpreparedonbasisofgoingconcerninconformitywithChineseAccountingStandardsfor BusinessEnterprises andtheAccountingSystems forBusiness Enterprises issuedby theMinistryofFinanceofPeople’sRepublicof China(MinistryofFinanceissuedorderNo.33,theMinistryofFinancerevisedorderNo.76)on15February2006,andrevisedAccounting Standards(order41oftheMinistryofFinance)andCompilationRulesforInformationDisclosurebyCompaniesOfferingSecuritiestothePublicNo.15–GeneralProvisionsonFinancialReports(2014Revision)issuedbytheChinaSecuritiesRegulatoryCommission(CSRC). AccordingtotherelevantaccountingregulationsinChineseAccountingStandardsforBusinessEnterprises,thecompanyhasadopted theaccrualbasisofaccounting.Held-for-salenon-currentassetsaremeasuredatthelowerofitsbookvalueatitsclassificationdateand fair value minus expected disposal costs. Where assets are impaired, provisions for asset impairment are made in accordance with relevantrequirements.
Note3StatementofCompliancewithEnterpriseAccountingStandards
Thefinancialstatements ofthecompany arerecognizedandmeasuredinaccordancewiththeregulationsintheChineseAccounting Standards for Business Enterprises and they give a true and fair view of the financial position, business result and cash flow of the Companyasof31December2014.Inaddition,thefinancialstatementsofthecompanycomply,inallmaterialrespects,withtherevised disclosingrequirementsforfinancialstatementsandtheCompilationRulesforInformationDisclosurebyCompaniesOfferingSecurities
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to the PublicNo.15—General Provisions on Financial Reports (2014 Revision) issued by China Securities Regulatory Commission (CSRC)in2014.
Note4ImportantAccountingPrinciplesandAccountingEstimates
TheCompanyandsubsidiariesareprincipallyengagedinairtransportation.TheCompanyandsubsidiariesinaccordancewiththe actualproductionandmanagementfeatures,accordingtotherelevantprovisionsofAccountingStandards,tomakeanumberofspecific accountingpoliciesandaccountingestimatesforothertransactionsandeventsofrevenuerecognition,seeNote4.21“Revenue”forthe description.Fordescription ofsignificantaccounting judgments and estimatesmade​​ by management, seeNote 4.28 “Significant accountingjudgmentsandestimates”.
4.1Accountingperiod
Theaccounting period of the Company is classifiedas interim period and annual period. Interim period refers to the reporting period shorterthanacompleteannualperiod.TheaccountingperiodoftheCompanyisthecalendaryearfromJanuary1toDecember31. 4.2Operatingcycle
Normal business cycleis realizedby the Company incashor cashequivalents from the purchase ofassets for processinguntil.The companyhasa12-monthoperatingcycle,anditsassetsandliabilitiesasliquiditycriteriafortheclassification.
4.3MonetaryUnit
Yuan(CNY)isthecurrencyoftheprimaryeconomicenvironmentinwhichtheCompanyanditsdomesticsubsidiariesoperate.Therefore, theCompanyanditsdomesticsubsidiarieschooseCNYastheirfunctionalcurrency.TheCompanyadoptsCNYtoprepareitsfunctional statements.
4.4Businesscombination
Abusinesscombinationisatransactionoreventthatbringstogethertwoormore separateentitiesintoonereportingentity.Business combinations are classified into business combinations involving enterprises under common control and business combinations not involvingenterprisesundercommoncontrol.
4.4.1Businesscombinationinvolvingentitiesundercommoncontrol
Abusinesscombinationinvolvingenterprisesundercommoncontrolisabusinesscombinationinwhichallofthecombiningenterprises areultimatelycontrolledbythesamepartyorpartiesbothbeforeandafterthecombination,andthatcontrolisnottransitory.
For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of anotherenterpriseparticipatinginthecombinationistheabsorbingparty,whilethatotherenterpriseparticipatinginthecombinationisa partybeingabsorbed.Combinationdateisthedateonwhichtheabsorbingpartyeffectivelyobtainscontrolofthepartybeingabsorbed. The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at the combinationdate.Thedifferencebetweenthecarryingamountofthenetassetsobtainedandthecarryingamountofconsiderationpaid forthecombination(orthetotalfacevalueofsharesissued)isadjustedtothecapitalpremium(orsharepremium)inthecapitalreserve. Ifthebalanceofthecapitalpremium(orsharepremium)isinsufficient,anyexcessisadjustedtoretainedearnings.
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Thecostofacombinationincurredbytheabsorbingpartyincludesanycostsdirectlyattributabletothecombinationshallberecognized asanexpensethroughprofitorlossforthecurrentperiodwhenincurred.
4.4.2Businesscombinationinvolvingentitiesnotundercommoncontrol
A business combination involving enterprises not under common control is a business combination in which all of the combining enterprisesarenotultimatelycontrolledbythesamepartyorpartiesbothbeforeandafterthebusinesscombination.
Forabusinesscombinationnotinvolvingenterprises under commoncontrol,theparty that,ontheacquisitiondate,obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree.Acquisitiondateisthedateonwhichtheacquirereffectivelyobtainscontroloftheacquiree.
Forabusinesscombinationnotinvolvingenterpriseundercommoncontrol,thecombinationcostincludingthesumoffairvalue,atthe acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer inrespect of auditing, legal services,valuation and consultancy services etc and other associated administrativeexpensesattributabletothebusinesscombinationarerecognizedinprofitorlosswhentheyareincurred.
Thetransactioncostarosefromissuingofequitysecuritiesorliabilitysecuritiesshallbeinitiallyrecognizedasequitysecuritiesorliability securities.
Thecontingentconsiderationrelatedtothecombinationshallbebookedascombinationcostatthefairvalueattheacquisitiondate.If, withinthe12monthsafteracquisition,additionalinformationcanprovetheexistenceofrelatedinformationatacquisitiondateandthe contingentconsiderationneedtobeadjusted,goodwillcanbeadjusted.
Combinationcostoftheacquirer’sinterestandidentifiablenetassetsoftheacquireracquiredthroughthebusinesscombinationshallbemeasuredbythefairvalueattheacquisitiondate.Wherethecostofcombinationexceedstheacquirer’sinterestinthefairvalueoftheacquiree’s identifiable net assets, the difference shall be recognized as goodwill. Where the cost of combination is less than theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference shall be accounted for according to thefollowingrequirements:(i)theacquirershallreassessthemeasurementofthefairvaluesoftheacquiree’sidentifiableassets,liabilities andcontingentliabilitiesandmeasurementofthecostofcombination;(ii)ifafterthatreassessment,thecostofcombinationisstillless than theacquirer’s interest in the fair values of theacquiree’s identifiable net assets, the acquirer shall recognize the remaining differenceimmediatelyinprofitorlossforthecurrentperiod.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with the conditions applied for recognitionofdeferred incometax, if,withinthe12 months after acquisition,additional information canprove theexistenceofrelated informationatacquisitiondateandtheexpectedeconomicbenefitsontheacquisitiondatearosefromdeductibletemporarydifferenceby the acquireecan beachieved,relevant incometax assets canbe recognized, andgoodwilloffset.Ifthe goodwill isnot sufficient,the differenceshallberecognizedasprofitofthecurrentperiod.
Apartfromabove,thedifferencesshallbetakenintoprofitorlossofthecurrentperiodiftherecognitionofdeferredincometaxassetsis relatedtothecombination.
Forabusinesscombinationnot involvingenterprise undercommon control, whichachievedinstagesthat involvesmultipleexchange
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transactions,accordingto“ThenoticeoftheMinistryofFinanceontheissuanceofAccountingStandardsInterpretationNo.5”(CaiKuai[2012] No. 19) and Article55 of “Accounting Standards for Business Enterprises No.33 - Consolidated Financial Statements” on the “packagedeal”criterion(seeNote4.5.2),tojudgethemultipleexchangetransationswhethertheyarethe"packagedeal".Ifitbelongto the “package deal” in reference to the preceding paragraphs of this section and the Notes described in 4.13 “long-term investment” accountingtreatment,ifitdoesnotbelongtothe“packagedeal”todistinguishtheindividualfinancialstatementsandtheconsolidated financialstatementsrelatedtotheaccountingtreatment:
Intheindividualfinancialstatements,thetotalvalueofthebookvalueoftheacquiree'sequityinvestmentbeforetheacquisitiondateand the cost of new investment at the acquisition date, as the initial cost of the investment, the acquiree's equity investment before the acquisition date involved in other comprehensive income, in the disposal of the investment will be in other comprehensive income associatedwiththeuseofinfrastructureandtheacquireedirectlyrelatedtothedisposalofassetsorliabilitiesofthesameaccounting treatment (that is,except inaccordance withthe equity method of accounting inthe defined benefit planacquiree is remeasured net changesinnetassetsorliabilitiesotherthaninthecorrespondingshareofthelead,andtherestintothecurrentinvestmentincome). Inthecombinationfinancialstatements,theequityinterestintheacquireepreviouslyheldbeforetheacquisitiondatere-assessedatthe fairvalueattheacquisitiondate,withanydifferencebetweenitsfairvalueanditscarryingamountisrecordedasinvestmentincome.The previously-heldequityinterestintheacquireeinvolvedinothercomprehensiveincomeandothercomprehensiveincomeassociatedwith the purchase of the foundation should be used party directly related to the disposal of assets or liabilities of the same accounting treatment(thatis,exceptinaccordancewiththeequitymethodofaccountingintheacquireeisremeasureddefinedbenefitplansother than changes in net liabilities or net assets due to a corresponding share of the rest of the acquisition date into current investment income).
4.5Preparationoftheconsolidatedfinancialstatements
4.5.1Thescopeofconsolidation
Thescopeofconsolidationfortheconsolidatedfinancialstatementsisdeterminedonthebasisofcontrol.Controlisthepowertogovern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The scope of consolidation includestheCompanyandallofthesubsidiaries.SubsidiaryisanenterpriseorentityunderthecontroloftheCompany.
Oncethechangeintherelevantfactsandcircumstancesleadingtothedefinitionoftherelevantelementsinvolvedinthecontrolofthe change,thecompanywillbere-evaluated.
4.5.2Preparationoftheconsolidatedfinancialstatements
ThesubsidiaryoftheCompanyisincludedintheconsolidatedfinancialstatementsfromthedatewhenthecontroloverthenetassets andbusinessdecisionsofthesubsidiaryiseffectivelyobtained,andexcludedfromthedatewhenthecontrolceases.
ForasubsidiarydisposedofbytheCompany,theoperatingresultsandcashflowsbeforethedateofdisposal(thedatewhencontrolis lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For a subsidiary disposedduringtheperiod,noadjustmentismadetotheopeningbalanceoftheconsolidatedfinancialstatements.
For a subsidiary acquired through a business combination not under common control, the operating results and cash flows from the
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acquisition(thedatewhenthecontrolisobtained)areincludedintheconsolidatedincomestatementandconsolidatedstatementofcash flows,asappropriated;noadjustmentismadetotheopeningbalanceandcomparativefiguresintheconsolidatedfinancialstatements. Whereasubsidiaryandapartybeingabsorbedinamergerbyabsorptionwasacquiredduringthereportingperiod,throughabusiness combination involving enterprises under common control, the financial statements of the subsidiary are included in the consolidated financialstatements.Theresultsofoperationsandcashflowareincludedintheconsolidatedbalancesheetandtheconsolidatedincome statement,respectively,basedontheircarryingamounts,fromthedatethatcommoncontrolwasestablished,andtheopeningbalances andthecomparativefiguresoftheconsolidatedfinancialstatementsarerestated.
When the accounting period or accounting policies of a subsidiary are different from those of the Company, the Company makes necessary adjustments to the financial statements of the subsidiary based on theCompany’s own accounting period or accounting policies.Whereasubsidiarywasacquiredduringthereporting periodthroughabusinesscombinationnotunder commoncontrol,the financial statements was reconciliated on the basis of the fair value of identifiable net assets at the date of acquisition. Intra-Group balances and transactions, and any unrealized profit or loss arising from intra-Group transactions, are eliminated in preparing the consolidatedfinancialstatements.
Minority interestandtheportion inthenetprofitor lossnot attributabletothe Companyare presentedseparately intheconsolidatedbalancesheetwithinshareholders’/owners’equityandnetprofit.Netprofitorlossattributabletominorityshareholdersinthesubsidiaries ispresentedseparatelyasminorityinterestintheconsolidatedincomestatementbelowthenetprofitlineitem.
When the amount of loss for the current period attributable to the minority shareholders of a subsidiary exceeds the minorityshareholders’ portion of the opening balance ofshareholders’/equity of the subsidiary, the excess is allocated against the minority interests.
WhentheCompanylosescontrolofasubsidiaryduetothedisposalofaportionofanequityinvestmentorotherreasons,theremaining equity investment is re-measured at its fair value at the date when control is lost. The difference between 1) the total amount of considerationreceivedfromthetransactionthatresultedinthelossofcontrolandthefairvalueoftheremainingequityinvestmentand2) the carrying amounts of the interest in the formersubsidiary’s net assets immediately before the loss of the control is recognized as investment income for the current period when control is lost. Other comprehensive income related to the former subsidiary's equity investment,usingthefoundationandtheacquireedirectlyrelatedtothedisposalofthesameassetsorliabilitiesareaccountedwhenthe controlislost(ie,inadditiontotheformersubsidiaryisremeasuredatthenetdefinedbenefitplanorchangesinnetassetsandliabilities resultingfrom,therestaretransferredtothecurrentinvestmentincome).Theretainedinterestissubsequentlymeasuredaccordingto therulesstipulatedinthe-“ChineseAccountingStandardsforBusinessEnterprises No.2-Long-termequity investment”or“Chinese Accounting Standards for Business Enterprises No.22 - Determination and measurement of financial instruments”. See Note 4.13 Long-termequityinvestmentsandNote4.9Financialinstrumentsfordetails.
Thecompanythroughmultipletransactionsstepdealwithdisposalofthesubsidiary'sequityinvestmentuntilthelossofcontrol,needto distinguishbetweenequityuntilthedisposalofasubsidiary'slossofcontroloverwhetherthetransactionispackagedeal.Termsofthe transactiondispositionofequityinvestmentinasubsidiary,subjecttothefollowingconditionsandtheeconomicimpactofoneormoreofcases,usuallyindicatesthatseveraltransactionsshouldbeaccountedforasapackagedeal:①thesetransactionsareconsidered
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simultaneously,orinthecaseofmutualinfluencemade,②thesetransactionsasawholeinordertoachieveacompletebusiness
results;③theoccurrenceofatransactiondependsonoccursatleastoneothertransaction;④atransactionlookaloneisnot
economical,butwhenconsideredtogetherwithothertransactioniseconomical.Iftheydoesnotbelongtothepackagedeal,eachof themseparately,asthecaseofatransactioninaccordancewith“withoutlosingcontroloverthedisposalofasubsidiarypartofa
long-termequityinvestments“(seeNote4.10.2,4))and“duetothedisposalofcertainequityinvestmentsorotherreasonslostcontrolof asubsidiaryoftheoriginal”(seepreviousparagraph)principlesapplicableaccountingtreatment.Untilthedisposaloftheequity
investmentlossofcontrolofasubsidiaryofthetransactionsbelongingtothepackagedeal,thetransactionwillbeusedasadisposalof asubsidiaryandthelossofcontrolofthetransaction.However,beforelosingcontrolofthepriceofeachdisposalentitledtoshareinthe netassetsofthesubsidiary'sinvestmentcorrespondingtothedifferencebetweenthedisposal,recognizedintheconsolidatedfinancial statementsasothercomprehensiveincome,lossofcontroloverthetransferredtogetherwiththelossofcontrolorlossintheperiod. 4.6Jointarrangement
Ajointarrangementisanarrangementofwhichtwoormorepartieshavejointcontrol.Ajointarrangementiseitherajointoperationora jointventure,dependingoftherights andobligationoftheCompanyinthejointarrangement.Ajointoperationisajointarrangement whereby theCompany has rights tothe assets, andobligations for the liabilities,relating tothe arrangement.Ajointventure isa joint arrangementwherebytheCompanyhasrightstothenetassetsofthearrangement.
TheCompanyaccountsforjointventuresusingtheequitymethod,seeNote4.13.2.2fordetails.
Thecompany,ajointoperator,recognisesinrelationtoitsinterestinajointoperation:(a)itsassets,includingitsshareofanyassetsheld jointly;(b)itsliabilities,includingitsshareofanyliabilitiesincurredjointly;(c)itsrevenuefromthesaleofitsshareoftheoutputarisingfrom thejointoperation;(d)itsshareoftherevenuefromthesaleoftheoutputbythejointoperation;and(e)itsexpenses,includingitsshareof anyexpensesincurredjointly.
WhentheCompanyentersintoatransactionwithajointoperationinwhichitisajointoperator,suchasasaleorcontributionofassets, theCompany,priortodisposaloftheassetstoathirdpartybythejointoperation,recognisesgainsandlossesresultingfromsucha transactiononlytotheextentoftheotherparties'sinterestsinthejointoperation.Whenthereisevidenceofareductioninthenet
realisablevalueoftheassetstobesoldorcontributedtothejointoperation,orofanimpairmentlossofthoseassetswhichisinlinewith provisionstipulatedbyCAS8,thoselossesarerecognisedfullybytheCompany.Whenthereisevidenceofareductioninthenet
realisablevalueoftheassetstobepurchasedorofanimpairmentlossofthoseassets,theCompanyshallrecogniseitsshareofthose losses.
4.7Cashequivalent
CashandcashequivalentsoftheCompanyincludecashonhand,readyusabledepositsandinvestmentshavingshortholdingterm (normallywillbeduewithinthreemonthsfromthedayofpurchase),withstrongliquidityandeasytobeexchangedintocertainamountof cashthatcanbemeasuredreliablyandhavelowrisksofchange.
4.8Foreignexchange
4.8.1Translationinforeignexchangetransactions
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The foreign currencytransactions are recorded, on initial recognition in the functional currency,by applying[the spot exchangerate on thedate of thetransaction/ an exchange ratethatapproximates the actual spotexchangerate on the date oftransaction]. The exchange of foreign currency and transactions related to the foreign exchange are translatedatthespotexchangerate.
4.8.2Translationofmonetaryforeigncurrencyandnon-monetaryforeigncurrency
At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balancesheetdate.Alltheexchangedifferencesthusresultedaretakentoprofitorloss,exceptfor①thoserelating to foreign currency borrowings specifically for construction and acquisition of qualifying assets, which are capitalized inaccordancewiththeprincipleofcapitalizationof borrowingcosts,②hedgingaccounting,the exchangedifference relatedtohedginginstrumentsforthepurposeofnetoverseaoperatinginvestmentisrecordedinthecomprehensive income till the date of disposal and recognized in profit or loss of the period; exchange difference from changes of otheraccountbalanceofforeigncurrencymonetaryitems,③available-for-tradeisrecordedintoprofitorlossexcept foramortizedcost.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetaryforeigncurrencyitemsmeasuredatfairvaluearetranslatedatthespotexchangerateprevailingatthe date when the fair values are determined. The exchange difference thus resulted are recognized in profit or loss for thecurrentperiodorascapitalreserve.
4.8.3Thetranslationoffinancialstatementinforeigncurrency
When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item constitutinga netinvestment in a foreignoperation,exchangedifference arisingfrom changesin exchangeratesare recognizedas“exchangedifferencesarisingontranslationoffinancialstatementsdenominatedinforeigncurrencies”inowner’sequity,andinprofitorlossfortheperiodupondisposaloftheforeignoperation.
TheGrouptranslatesthefinancialstatementsofitsforeignoperationsintoCNYbyfollowingrules. Assets and liabilitiesinthebalancesheetaretranslatedatthespotexchangerateprevailingatthebalancesheetdate;allequity items exceptforretainedearningsaretranslatedatthespotexchangeratesatthe datesonwhich suchitemsoccur; income and expenses in income statement are translated at the spot exchange rates at the date of transaction; the opening retained earnings is the closing retained earnings of the last period after translation; the closing balance of retainedearningsiscalculatesandpresentedinthebasisofeachtranslatedincomestatementsandprofitdistribution item; the difference arising between the assets and liabilities andshareholders’equity shall be booked as translation difference of foreign currency statements, and shall be presented as a separate component of equity in the balance sheet. On a loss of controloverGroup’s oversea operationdue to disposal, the Company transfers theaccumulated or proportionate share of the accumulated exchange difference arising on translation of financial statements of this oversea operation attributable to theowners’ equity of the Company and presented undershareholders’ equity, to
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profitorlossintheperiodinwhichthedisposaloccurs.
Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange rates on the dateofcashflows.Theeffectofexchangeratechangesoncashisseparatelypresentedasanadjustmentiteminthe cashflowstatement.
Theopeningandactualamountoflastyeararepresentedinthefinancialstatementaftertranslation
At the disposal of all of the company's ownership interestin a foreign operation, or due to the disposal of part of the equity investment or other reasons, the loss of control over a foreign operation, the project owner's equity in the balance sheet listed under the relevant overseas operations attributable to statements of the parent company 's shareholders' equity of foreign currency translation differences, all transferred to the disposal of the income statement.
At the disposal of part of the equity investment or other causes lower hold percentage overseas business interests, but does not lose control over a foreign operation, and disposal of the foreign operation section related to foreign currency translation differences attributable to minority interests, is not transferred to the income statement. At the disposal of a foreign operation as part of the equity joint venture or joint ventures, foreign currency financial statements of the foreign operation and the associated translation difference in proportion to dispose of the foreign operationintothedisposaloftheincomestatement.
4.9Financialinstruments
4.9.1Determinationoffinancialassetsandliabilities’fairvalue
Fairvalueistheamountforwhichanassetcouldbeexchanged,oraliabilitysettled,betweenknowledgeable,willing parties in anarm’s length transaction. For a financial instrument which has an active market, the Company uses quoted price in the active market to establish its fair value. The quoted price in the active market refers to the price that can be regularly obtained from exchange market, agencies, industry associations, pricing authorities; it representsthefairmarkettradingpriceintheactualtransaction.
For a financial instrument which does not have an active market, the Company establishes fair value by using a valuation technique. Valuation techniques include using recentarm’s length market transactions between knowledgeable,willingparties,referencetothecurrentfairvalueofanotherinstrumentthatissubstantiallythesame, discountedcashflowanalysisandoptionpricingmodels.
The Company measures initially and subsequently the fair value of an interest rate swap at the value of acompetitor’sinterestrateswapquotedbyarecognisedfinancialinstitutionasattheCompany’sbalancesheetdatein accordancewiththeprincipleofconsistency.
4.9.2Classification,recognitionandmeasurementoffinancialassets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. On initial recognition, theCompany’s financial assets are classified into one of the four categories, including financial assets at fair value though profit or loss, held-to maturity investments, loans and receivables and available-for-trade
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financial assets. A financial asset is recognized initially at fair value. In the case of financial assets at fair value through profit or loss, relevant transaction costs are immediately charged to the profit and loss of the current period; transactioncostsrelatingtofinancialassetsofothercategoriesareincludedintheamountinitiallyrecognized.
1)Financialassetsatfairvaluethroughprofitorloss:
Includingfinancialassetsheld-for-tradeandfinancialassetsdesignatedatfairvaluethroughprofitorloss.
Financialassetheld-for-tradeisthefinancialassetthatmeetsoneofthefollowingconditions:
A.thefinancialassetisacquiredforthepurposeofsellingitinashortterm;
B. the financial asset is a part of a portfolio of identifiable financial instruments that are collectively managed, and thereis objectiveevidenceindicatingthatthe enterpriserecentlymanages thisportfoliofor thepurposeofshort-term profits;
C. thefinancial assetis a derivative,except for aderivativethat is designatedand effective hedginginstrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. For such kindoffinancialassets,fairvaluesareadoptedforsubsequentmeasurement.
Financialassetisdesignatedoninitialrecognitionasatfairvaluethroughprofitorlossonlywhenitmeetsoneofthe followingconditions:
A.thedesignationeliminatesorsignificantlyreducestheinconsistencyinthemeasurement orrecognitionofrelevant gainsorlossesthatwouldotherwisearisefrommeasuringthefinancialinstrumentsondifferentbases.
B. a Group of financial instruments is managed and its performance is evaluated on a fair value basis, and is reported to theenterprise’s key management personnels. Formal documentation regarding risk management or investmentstrategyhasprepared.
Financial assets at fair value through profit or loss are subsequently measured at the fair value.Any gains or lossesarisingfromchangesinthe fairvalueandanydividendsorinterestincomeearnedonthefinancialassetsare recognizedintheprofitorloss.
2)Investmentheld-tomaturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Such kind of financial assets are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognition,impairmentoramortizationarerecognizedinprofitorlossforthecurrentperiod.
Effective interest rate is the rate that exactly discounted estimated future cash flows through the expected life of the financial asset or financial liability or, where appropriate, a shorter period to the net carrying amount of the financial assetorfinancialliability.
When calculating the effective interest rate, the Company shall estimate future cash flow considering all contractual termsofthefinancialassetorfinancialliabilitywithoutconsideringfuturecreditlosses,andalsoconsiderallfeespaid
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or received between the parties to the contract giving rise to the financial asset and financial liability that are an integralpartoftheeffectiveinterestrate,transactioncosts,andpremiumsordiscounts,etc.
3)Loansandreceivables
Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in an activemarket.FinancialassetsclassifiedasloansandreceivablesbytheCompanyincludenotereceivables,account receivables,interestreceivabledividendsreceivableandotherreceivables.
Loansandreceivablesaresubsequentlymeasuredatamortizedcostusingtheeffectiveinterestmethod.Gainorloss arisingfromderecognition,impairmentoramortizationisrecognizedinprofitorloss.
4)Financialassetsavailable-for-trade
Financialassetsavailable-for-tradeincludenon-derivativefinancialassetsthataredesignatedoninitialrecognitionas available for trade, and financial assets that are not classified as financial assets at fair value through profit or loss, loansandreceivablesorinvestmentheld-to-maturity.
Financial assets available-for-trade are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized asother comprehensiveincome and included in the capital reserve, except thatimpairmentlossesandexchangedifferencesrelatedtoamortizedcostofmonetaryfinancialassetsdenominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, at which time the gainsorlossesarereleasedandrecognizedinprofitorloss.
Interests obtained and dividends declared by the investee during the period in which the financial assets available-for-tradeareheld,arerecognizedininvestmentgains.
4.9.3Impairmentoffinancialassets
The Group assesses at the balance sheet date the carrying amount of every financial asset except for the financial assets that measured by the fair value. If there is objective evidence indicating a financial asset may be impaired, a provisionisprovidedfortheimpairment.
1)Impairmentonheld-tomaturityinvestment,loansandreceivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present valueof futurecash flow.Thedifference is recordedas impairment loss. Ifthere is objective evidence toindicatethe recoveryofvalueoffinancialassetsafterimpairment,anditisrelatedwithsubsequenteventafterrecognitionofloss, the impairment loss recorded originally can be reversed.The carrying value of financial assets after impairment loss reversed shall not exceed the amortized cost of the financial assets without provisions of impairment loss on the reservingdate.
2)Impairmentlossonavailable-for-tradefinancialassets
Where the fair value of the equity instrument investment drops significantly or not contemporarily according to the integratedrelevantfactors,anavailable-for-tradefinancialassetisimpaired.
When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value that
Shandong Airlines Co., Ltd. Annual Report2014
had been recognized in capital reserve shall be removed and recognized in profit or loss. The amount of the cumulative loss that is removed shall be difference between the acquisition cost with deduction of recoverable amount less amortized cost, current fair value and any impairment loss on that financial asset previously recognized inprofitorloss.
If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset is recovered, and it is objectively related to an event occurring after the impairment loss was recognized, the initial impairment loss can be reversed and the reserved impairment loss on available-for-trade equity instrument is recorded in the profit or loss, the reserved impairment loss on available-for-trade debt instrument is recorded in the currentprofitorloss.
The equity instrument where there is no quoted price in an active market, and whose fair value cannot be reliably measured, or impairment loss on a derivative asset that is linked to and must be settled by delivery of such an unquotedequityinstrumentshallnotbereversed.
4.9.4Recognitionandmeasurementoffinancialassetstransfer
TheGroupderecognizesafinancialassetwhenoneofthefollowingconditionsismet:
1)therightstoreceivecashflowsfromtheassethaveexpired;
2) the enterprise has transferred its rights to receive cash flows from the asset to a third party under a pass-through arrangement;or
3) the enterprise has transferred its rights to receive cash flows from the asset and either (a) has transferred substantiallyalltherisksandrewardsoftheasset,or(b)hasneithertransferrednorretainedsubstantiallyalltherisks andrewardsoftheasset,buthastransferredcontroloftheasset.
Iftheenterprisehasneitherretainedallthe risksandrewards fromthefinancialassetnorcontrolovertheasset,the asset is recognized according to the extent it exists as financial asset, and correspondent liabilityis recognized.The extentofexistencerefersthelevelofriskbythefinancialassetchangestheenterpriseisfacing.
Foratransferofafinancialassetinitsentiretythatsatisfiesthederecognitioncriteria,(a).thecarryingamountofthe financialassettransferred;and(b)thesumoftheconsiderationreceivedfromthetransferandanycumulativegainor lossthathadbeenrecognizedinothercomprehensiveincome,isrecognizedinprofitorloss.
If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the relative fair value of those parts.The difference between (a) the carrying amount allocated to the part derecognized; and (b)the sumof theconsideration receivedfor the partderecognized andany cumulative gain orloss allocatedto the part derecognized which has been previously recognized in other comprehensive income, is recognized in profit orloss.
4.9.5Classificationandmeasurementoffinancialliabilities
TheGroup’sfinancialliabilitiesare,oninitialrecognition,classifiedintofinancialliabilitiesatfairvaluethroughprofitor
Shandong Airlines Co., Ltd. Annual Report2014
loss and other financial liabilities. For financial liabilities at fair value through profit or loss, relevant transaction costs are immediately recognized in profit or loss for the current period, and transaction costs relating to other financial liabilitiesareincludedintheinitialrecognitionamounts.
1)Financialliabilitiesmeasuredbythefairvalueandthechangesrecordedinprofitorloss
The classification by which financial liabilities held-for-trade and financial liabilities designed at the initial recognition tobemeasuredbythefairvaluefollowsthesamecriteriaastheclassificationbywhichfinancialassetsheld-for-trade and financial assets designed at the initial recognition to be measured by the fair value and their changes are recordedinthecurrentprofitorloss.
For the financial liabilities measured by the fair value and changes recorded in the profit or loss, fair values are adopted for subsequent measurement. All the gains or losses on the change of fair value and the expenses on dividendsorinterestsrelatedtothesefinancialliabilitiesarerecognizedinprofitorlossforthecurrentperiod.
2)Otherfinancialliabilities
Derivativefinancialliabilitiesthatlinkedwithequityinstruments,whichdonothaveaquotedpriceinanactivemarket and their fair value cannot be measured reliably, is subsequently measured by cost Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Gains or losses arising from derecognitionoramortizationisrecognizedinprofitorlossforthecurrentperiod.
3)Financialguaranteecontracts
For financial guarantee contracts that are not designated as at fair value through profit or loss,they are, after initial recognition, subsequently measured at the higher of: (i) the amount determined according to the principles of Accounting Standards for Business Enterprises No. 13 - Contingencies, and (ii) the amount initially recognized less the accumulated amortization determined according to the principles of Accounting Standards for Business EnterprisesNo.14-Revenue.
4.9.6Derecognitionoffinancialliabilities
The Group derecognizes a financial liability (or part of it) when the underlying present obligation (or part of it) is discharged or cancelled or has expired. An agreement between the Company (an existing borrower) and existing lender to replace original financial liability with a new financial liability with substantially different terms is accounted forasanextinguishmentoftheoriginalfinancialliabilityandtherecognitionofanewliability.
When the Company derecognizes a financial liability or a part of it, it recognizes the difference between the carrying amount of the financial liability (or part of the financial liability) derecognized the consideration paid (including any non-cashassetstransferredornewfinancialliabilitiesassumed)inprofitorloss.
4.9.7Derivativesandembeddedderivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are enteredintoandaresubstantiallyre-measuredatfairvalue.Theresultinggainandlossisrecognizedinprofitorloss.
Anembeddedderivativeisseparatedfromthehybridinstrument,wherethehybridinstrumentisnotdesignatedasafinancialassetor
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financialliabilityatfairvaluethoughprofitorloss,andthetreatedasastandalonederivativeif(a)theeconomiccharacteristicsandrisks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; and (b) a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative. If the Company is unable to measuretheembeddedderivativeseparatelyeitheratacquisitionoratasubsequentbalancesheetdate,itdesignatestheentirehybrid instrumentasafinancialassetorfinancialliabilityatfairvaluethroughprofitorloss.
4.9.8Offsettingfinancialassetsandfinancialliabilities
When the Company has a legal right that is currently enforceable to set off the recognized financial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liabilitysimultaneously,afinancialassetandafinancialliabilityshallbeoffsetandthenetamount ispresentedin the balance sheet. Except for the above circumstances, financial assets and financial liabilities shall be presented separatelyinthebalancesheetandshallnotbeoffset.
4.9.9Equityinstruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.The consideration received from issuing equity instruments, net of transaction costs, are added toshareholders’ equity.All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted fromshareholders’equity.The Group does not recognize any changes in the fair value of equityinstruments.
4.10Receivables
ThereceivablesbytheCompanyincludeaccountreceivables,andotherreceivables.
4.10.1Criteriaforrecognitionofbaddebts:
TheCompanycarriesoutaninspectiononthebalancesheetdate.Wherethereisanyobjectiveevidenceprovingthatthereceivables havebeenimpaired,animpairmentprovisionshallbemade:
1)Aseriousfinancialdifficultyoccurstotheissuerordebtor;
2)Thedebtorbreachesanyofthecontractualstipulations,forexample,failstopayordelaysthepaymentofinterestsortheprincipal, etc.;
3)Thedebtorwillprobablybecomebankruptorcarryoutotherfinancialreorganizations;
4)Otherobjectiveevidencesshowingtheimpairmentofthereceivables.
4.10.2Methodforbaddebtsprovision
1)Provisionsofbaddebtsinaccountreceivablesthatisindividuallysignificant.
Individualreceivablesequaltoorhigherthan5%oftotalreceivablesareclassifiedasreceivablesofindividualsignificance.
For an account receivable that is individually significant, the asset is individually assessed for impairment, the impairment loss is recognizedatthedifferencebetweenthepresentvalueoffuturecashflowlessthecarryingamount,andprovisionismadeaccordingly. 2) Provisions of bad debts in account receivables that individually insignificant items with similar credit risk characteristics that have
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significantrisk:
A.Evidenceofcreditriskcharacteristics
Whetherthefinancialassetisindividuallysignificantornotindividuallysignificant,itisincludedinagroupoffinancialassetswithsimilar creditriskcharacteristicsandcollectivelyassessedforimpairment.Suchcreditriskreflectstherepaymentofalldueamountunderthe contract,andisrelatedtotheestimationoffuturecashflowexpectedtobederivedfromtheassets.
Evidenceofportfolios:
Item Basis
Receivables not individually assessed for impairment are categorised on the basis of creditrisk.Provisionforbaddebtsforeachcategoryofreceivablesisrecognisedatthe Categorisationbynatureofreceivables
actualrateoflossforthepreviousyearofthesameorsimilarcategorybearingsimilar creditriskcharacteristicsafteradjustmentforthecurrentyearcircumstances.
B.Provisionbycreditriskcharacteristics
DuringtheCompanyimpairmenttest,theamountofbaddebtsprovisionsisdeterminedbytheassessedresultfromtheexperienceof historicallossandcurrenteconomic status andtheexistinglossintheestimatedaccountreceivables accordingtothesetofaccount receivablesandcreditriskcharacteristic.
Provisionsfordifferenceportfolios:
Item Provision
Categorisationbynatureofreceivables Percentageofcarryingamount
a. Portfolio1byAginganalysis
||
|-|
|Percentageofcarryingamountforrecognitionofallowanceforbaddebtapplicabletoaccountsreceivable|
|5%|

 3)Provisionsofbaddebtsthatisindividuallyinsignificant.
Fortheaccountreceivablesnotindividuallysignificant,theCompanyassessestheaccountreceivablesindividuallyforimpairmentwhen are of following characteristics: if there is objective evidence indicating the impairment, the impairment loss is recognized at the differencebetween the presentvalue offuture cashflow lessthe carrying amount, andprovision is made accordingly.Forexamples: receivablesofindividualinsignificancebearsdifferingcreditriskcharacteristicstootherreceivablesofindividualinsignificanceaccount receivableswithrelatedparties;accountreceivablesunderlitigationsorarbitrations,oraccountreceivableswithobviousindicationthat debtorcannotfulfilltheobligationofrepayment.
4.10.3Thereversalofbaddebtsprovision
Ifthereisobjectiveevidenceofrecoveryinvalueofaccountreceivables,andtherecoverycanberelatedtoaneventoccurringafterthe
impairmentwasrecognized,thepreviouslyrecognizedimpairmentlossisreversedandrecognizedinprofitorloss.However,thereversal
shallnotresultinacarryingamountthatexceedswhattheamortizedcostwouldhavebeenhadtheimpairmentlossnotbeenrecognized
Shandong Airlines Co., Ltd. Annual Report2014
atthedatetheimpairmentisreversed.
4.11Inventories
4.11.1Classificationofinventory
TheCompany’sinventorymainlyincludeairmaterialsandlow-valueconsumables.。
4.11.2Valuationmethodofinventoriesupondelivery
Inventoriesareinitiallycarriedattheactualcost.Theactualcostofinventoriestransferredoutisassignedbyusingfirst-in,firstout(FIFO) method.
4.11.3Basisfordeterminingnetrealizablevalueofinventoriesandprovisionmethodsfordeclineinvalueofinventories
Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsofcompletion,theestimated costsnecessarytomakethesaleandrelevanttaxes.Netrealizablevalueisdeterminedonthebasisofclearevidenceobtained,and takesintoconsiderationthepurposeofholdinginventoriesandeffectofpostbalancesheetevents.
Atthebalancesheetdate,inventoriesaremeasuredatthelowerofthecostandnetrealizablevalue.Ifthenetrealizablevalueisbelow thecostofinventories,aprovisionfordeclineinvalueofinventoriesismade.Theprovisionforinventoriesdeclineinvalueisdetermined normallybythedifferenceofthecostofindividualitemlessitsrealizablevalue.Forlargequantityandlowvalueitemsofinventories, provision for decline in value is made based on categories of inventories. For items of inventories relating to a product line that are produced and marketed in the same geographical area, have the same or similar end users or purposes, and cannot be practicably evaluatedseparatelyfromotheritemsinthatproductlineprovisionfordeclineinvalueisdeterminedonanaggregatebasis.
Aftertheprovisionfordeclineinvalueofinventoriesismade,ifthecircumstancesthatpreviouslycausedinventoriestobewrittendown belowcostnolongerexistsothatthenetrealizablevalueofinventoriesishigherthantheircost,theoriginalprovisionfordeclineinvalue isreversedandthereversalisincludedinprofitorlossfortheperiod.
4.11.4Theperpetualinventorysystemismaintainedforstocksystem.
4.11.5Amortizationmethodforlowcostandshort-livedconsumableitemsandpackagingmaterials.
Lowcostandshort-livedconsumableitems areamortizedusingimmediate write-offmethod; packagingmaterialsare amortizedusing immediatewrite-offmethod.
4.12Held-for-saleassets
Anon-currentassetisclassifiedasheld-for-saleifallofthefollowingconditionsaresatisfied:
a.theassetisimmediatelysellableatitscurrentconditionperusualsalestermapplicabletothetypeofassetstowhichitbelongs;
b.theCompany'shascompletedofficialdecisiontodisposetheasset;
c.theCompanyhasenteredintoirrevokablesalescontractwiththepurchaser;and
d.thesaleswillbecompletedwithinoneyear.
Amortizationordepreciationoftheheld-for-saleassetceasesatthetimeofclassification.Theassetismeasuredatthelowerofitsbook value and its classification date fair value minus disposal costs upon classification. Held-for-sale non-current assets includeindividual
Shandong Airlines Co., Ltd. Annual Report2014
assets and disposal groups. If a disposal group satisfy the conditions of the asset group defined by CAS 8 -Asset Impairment and includesgoodwillarisingfrombusinesscombinationallocatedinaccordancewithCAS8orthedisposalgroupisanoperationwithan assetgroup,thedisposalgroupincludegoodwillarisingfrombusinesscombination.
Individualnon-currentassetsheldforsaleandassetsofdisposalgroupsheldforsalearecollectivelypresentedonthe(consolidated) statementoffinancialpositionasalineitemofcurrentassets.Liabilitiesofdisposalgroupsheldforsalearecollectivelypresentedonthe (consolidated)statementoffinancialpositionasalineitemofcurrentliabilities.
Aheld-for-saleassetorheld-for-saledisposalgroupisreclassifiedfromheld-for-salewhentheconditionsforclassificationoftheasset (disposal group) as held-for-sale are no longer satisfied and is measured at the lower of its classification date book value minus cumulativedepreciation,amortizationandimpairmentasifithasnotbeenreclassifiedasheld-for-saleanditrecoverableamountasof thedateonwhichtheconditionsforclassificationoftheasset(disposalgroup)asheld-for-salearenolongersatisfied.
4.13Long-termequityinvestments
Long-term equity investments referred to in this section refer to the Company invested entity has control, joint control or significant influenceoverthelong-termequityinvestments.TheCompanyinvesteddoesnothavecontrol,jointcontrolorsignificantinfluenceover thelong-termequityinvestmentsasfinancialassetsavailableforsaleoratfairvalueandthechangesincludedfinancialassetsthrough profitorloss,whichrefertotheaccountingpoliciesinNote4.9“financialInstruments”.
JointcontrolistheCompanycontroloveranarrangementinaccordancewiththerelevantstipulationsarecommon,relatedactivitiesand the arrangement must be after sharing control participants agreed to the decision-making. Significant influence is the Company s financialandoperatingpoliciesoftheentityhastherighttoparticipateindecision-making,butcannotcontrolorwithotherpartiesjoint controloverthosepolicies.
4.13.1DeterminationofInvestmentcost
Thecostofalong-termequityinvestmentacquiredthroughbusinesscombinationundercommoncontrolismeasuredatthe
acquirer'sshareofthecombinationdatebookvalueoftheacquiree'snetequityintheultimatecontroller'sconsolidatedfinancial
statements.Thedifferencebetweenthecostandbookvalueofcashpaid,non-monetaryassetstransferredandliabilitiesassumedis adjustedtocapitalreserves,andtoretainedearningsifcapitalreservesisinsufficient.Iftheconsiderationistransferredbywayofissuing equityinstruments,thefacevalueoftheequityinstrumentsissuedisrecognisedinsharecapitalandthedifferencebetweenthecostof thefacevalueoftheequityinstrumentsissuedisadjustedtocapitalreserves,andtoretainedearningsifcapitalreservesisinsufficient. The cost of a long-term equity investment acquired through business combination not under common control is the fair value of the assetstransferred,liabilitiesincurredorassumedandequityinstrumentsissued.
Allexpensesincurreddirectlyassociatedwiththeacquisitionbytheacquirer,includingexpenditureofaudit,legalservices,valuationand consultancyandotheradministrativeexpenses,arerecognisedinprofitorlossfortheperiodduringwhichtheacquisitionoccurs.
Long-termequityinvestmentsacquirednotthroughbusinesscombinationaremeasuredatcostoninitialrecognition.Dependingonthe wayofacquisition,thecostofacquisitioncanbethetotalcashpaid,thefairvalueofequityinstrumentissued,thecontractprice,thefair valueorbookvalueoftheassetsgivenawayinthecaseofnon-monetaryassetexchange,orthefairvalueoftherelevantlong-term
Shandong Airlines Co., Ltd. Annual Report2014
equityinvestments.Thecostofacquisitionofalong-termequityinvestmentacquirednotthroughbusinesscombinationalsoincludesall directlyassociatedexpenses,applicabletaxesandfees,andothernecessaryexpenses.
4.13.2SubsequentMeasurement
Tobeinvestedjointcontrol(exceptconstitutecommonoperator)orlong-termequityinvestmentssignificantinfluenceareaccountedfor usingtheequitymethod.Inaddition,theCompany'sfinancialstatementsusingthecostmethodofaccountingforlong-termequitycan exercisecontrolovertheinvestee.
1) Costmethodofaccountingforlong-termequityinvestments
Underthecostmethod,along-termequityinvestmentismeasuredatinitialinvestmentcost.Exceptforcashdividendsorprofitsdeclared but not yet paid that are included in the price or consideration actually paid upon acquisition of the long-term equity investment, investmentincomeisrecognizedintheperiodinaccordancewiththeattributableshareofcashdividendsorprofitdistributionsdeclared bytheinvestee.
2) Equitymethodofaccountingforlong-termequityinvestments
Where the initial investment cost of a long-term equity investment exceeds the investingenterprise’s interest inthe fair values of theinvestee’sidentifiablenetassetsatthetimeofacquisition,noadjustmentshallbemadetotheinitialinvestmentcost.
Thecarryingamountofanlong-termequityinvestmentmeasuredusingtheequitymethod isadjustedbytheCompany'sshareofthe investee's net profit and other comprehensive income, which is recognised as investment income and other comprehensive income respectively.Thecarryingamountofanlong-termequityinvestmentmeasuredusingtheequitymethodisreducedbyprofitdistributionor cashdividendsannouncedbytheinvestee.Thecarryingamountofanlong-termequityinvestmentmeasuredusingtheequitymethodis also adjusted by the investee's equity movement other than net profit, other comprehensive income and profit distribution, which is adjusted to capital reserves. The net profit of the investee is adjusted by the fair value of the investee's identifiable assets as at acquistion.The financial statements and hence the net profit and other comprehensive income of an investee which does not adopt accountingpoliciesor accountingperiod uniform with theCompany is adjustedby theCompany's accountingpoliciesand accounting period.TheCompany'sshareofunrealisedprofitorlossarisingfromrelatedpartytransactionsbetweentheCompanyandanassociate orjointventureisdeductedfrominvestmentincome.UnrealisedlossarisingfromrelatedpartytransactionsbetweentheCompanyand anassociateorjointventurewhichisassociatedwithassetimpairmentisnotadjusted.Whereassetstransferredtoanassociateorjoint venturewhichformpartoftheCompany'sinvestmentintheinvesteebutwhichdoesnotenabletheCompanyobtaincontroloverthe investee,thecostoftheadditionalinvestmentacquiredismeasuredatthefairvalueofassetstransferredandthedifferencebetweenthe costoftheadditionalinvestmentandthebookvalueoftheassetstransferredisrecognisedinprofitorloss.Whereassetstransferredto an associate or joint venture form an operation, the difference between the consideration received and the book value of the assets transferredinrecognisedinprofitorloss.Whereassetstransferredfromanassociateorjointventureformanoperation,thetransaction isaccountedforinaccordancewithCAS20-BusinessCombination,anygainorlossisreocgnisedinprofitorloss.
TheCompany'sshareofaninvestee'snetlossislimitedbythesumofthebookvalueofthelong-termequityinvestmentandothernet long-terminvestmentsintheinvestees.Where theCompany hasobligationtoshareadditionalnetlossoftheinvestee,theestimated
Shandong Airlines Co., Ltd. Annual Report2014
shareoflossrecognisedasaccruedliabilitiesandinvestmentloss.WheretheCompanyhasunrecognisedshareoflossoftheinvestee whentheinvesteegeneratesnetprofit,theCompany'sunrecognisedshareoflossisreducedbytheCompany'sshareofnetprofitand when the Company's unrecognised share or loss is eliminated in full, the Company's share of net profit, if any, is recognised as investmentincome.
Forlong-termequityinvestmentsinassociatesandjointventureswhichhadbeenheldbytheCompanybeforeitsfirsttimeadoptionof Accounting Standards for Business Enterprises as of Jan 1 2007, where the initial investment cost of a long-term equity investmentexceedstheCompany’sinterestintheinvestee’snetassetsatthetimeofacquisition,theexcessisamortizedandisrecognizedinprofit orlossonastraightlinebasisovertheoriginalremaininglife.
3) Acquisitionofminorityinterest
Thedifferencebetweennewlyincreasedequityinvestmentduetoacquisitionofminorityinterestsandportionofnetassetcumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserve is not sufficientto absorb the difference, the excessareadjustedagainstreturnedearnings.
4)Disposaloflong-termequityinvestment
Where theparentcompany disposeslong-term investmentinasubsidiarywithout achange incontrol, thedifference inthe netassetbetweentheamountofdisposedlong-terminvestmentandtheamountoftheconsiderationpaidorreceivedisadjustedtotheowner’s equity.Ifthedisposaloflong-terminvestmentinasubsidiaryinvolveslossofcontroloverthesubsidiary,therelatedaccountingpolicies inNote4.5.2applies.Fordisposaloflong-termequityinvestmentsinanysituationotherthanthefore-mentionedsituation,thedifference betweenthebookvalueoftheinvestmentdisposedandtheconsiderationreceivedisrecognisedinprofitorloss.
Wherealong-termequityinvestmentismeasuredbytheequitymethodbothbeforeandafterpartdisposaloftheinvestment,cumulative other comprehensive income relevant to the investment recognised prior to the acquistion is treated in the same manner that the investeedisposes therelevantassets orliabilitiesproportionatetothedisposal.Theinvestee'sequitymovement otherthannetprofit, othercomprehensiveincomeandprofitdistributionisreocgnisedinprofitorlossproportionatetothedisposal.
Where a long-term equity investment is measured at cost both before and after part disposal of the investment, cumulative other comprehensive income relevant to the investment recognised, as a result of accounting by equity method or recognition and measurementprinciplesapplicabletofinancialinstruments,priortotheCompany'sacquisitionofcontrolovertheinvesteeistreatedin thesamemannerthattheinvesteedisposestherelevantassetsorliabilitiesandrecognisedinprofitorlossproportionatetothedisposal. Theinvestee'sequitymovementotherthannetprofit,othercomprehensiveincomeandprofitdistribution,asaresultofaccountingby equitymethod,isreocgnisedinprofitorlossproportionatetothedisposal.
WheretheCompany'scontroloveraninvesteeislostduetopartialdisposalofinvestmentintheinvesteeandtheCompanycontinuesto havesignificantinfluenceovertheinvesteeafterthepartialdisposal,theinvestmentinmeasuredbytheequitymethodintheCompany's separatefinancialstatements;wheretheCompany'scontroloveraninvesteeislostduetopartialdisposalofinvestmentintheinvestee and the Company ceases to have significant influence over the investee after the partial disposal, the investment in measured in accordance with the recognition and measurement principles applicable to financial instruments in the Company's separate financial
Shandong Airlines Co., Ltd. Annual Report2014
statements andthedifferencebetweenthefairvalueand thebook valueoftheremaininginvestmentatthedateoflossofcontrol is recognisedinprofitorloss.Cumulativeothercomprehensiveincomerelevanttotheinvestmentrecognised,asaresultofaccountingby equity method or recognition and measurement principles applicable to financial instruments, prior to the Company's acquisition of controlovertheinvesteeistreatedinthesamemannerthattheinvesteedisposestherelevantassetsorliabilitiesonthedateoflossof control. The investee's equity movement other than net profit, other comprehensive income and profit distribution, as a result of accountingbyequitymethod,isreocgnisedinprofitorlosswhencontrolislost.Wheretheremaininginvestmentismeasuredbyequity method,thefore-mentionedothercomprehensiveincomeandotherequitymovementarerecognisedinprofitorlossproportionatetothe disposal; Where the remaining investment is measured in accordance with the recognition and measurement principles applicable to financialinstruments,thefore-mentionedothercomprehensiveincomeandotherequitymovementarerecognisedinprofitorlossinfull. WheretheCompany'sjointcontrolorsignificantinfluenceoveraninvesteeislostduetopartialdisposalofinvestmentintheinvestee, the remaining investment in the investee is measured in accordance with the recognition and measurement principles applicable to financialinstruments,thedifferencebetweenthefairvalueandthebookvalueoftheremaininginvestmentatthedateoflossofjoint control or significant influence is recognised in profit or loss.Cumulative other comprehensive income relevant to the investment recognised, as a result of accounting by equity method, prior to the partial disposal is treated in the same manner that the investee disposestherelevantassetsorliabilitiesonthedateoflossofjointcontrolorsignificantinfluence.Theinvestee'sequitymovementother thannetprofit,othercomprehensiveincomeandprofitdistributionisreocgnisedinprofitorlosswhenjointcontrolorsignificantinfluence islost.
WheretheCompany'scontroloveraninvesteeislostthroughmultipledisposalsandthemultipledisposalsshallbeviewedasonesingle transaction,themultipledisposalsisaccountedforonesingletransactionwhichresultintheCompany'slossofcontrolovertheinvestee. Each difference between the consideration received and the book value of the investment disposed is recognised in other comprehensiveincomeandreclassifiedinfulltoprofitorlossatthetimewhencontrolovertheinvesteeislost.
4.14Fixedassets
4.14.1Theconditionsofrecognition
Fixed assets refers to the tangible assets that are held for the sake of producing commodities, rendering labor service, renting or businessmanagementandtheirusefullifeisinexcessofonefiscalyear.
4.14.2Themethodfordepreciation
Fixedassetsare statedatcostandconsider theimpactofexpectedcosts ofabandoningthe initialmeasurement.Fromthefollowing monthofstateofintendeduse,depreciationmethodofthestraight-linemethod isusedfordifferentcategoriesoffixedassetstotake depreciation.Therecognitionoftheclassification,usefullifeandestimatedresidualrateareasfollows:
|||
|-|-|
|Expectedusefullife|Estimatedresidualvalue(%)|
|27-33|5.00|
|15-20|5.00|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Expectedusefullife|Estimatedresidualvalue(%)|
|6-8|0.00|
|3-5|0.00|
|4-10|0-5.00|
|15-18|0.00|
|5-10|5.00|

 Expectednet residual valueoffixedassets is the balanceof theCompany currently obtained from the disposal ofthe assetlessthe estimatedcostsofdisposalamount,assumingtheassetisoutofusefullifeandstatetheexpectedservicelifeintheend.
4.14.3Measurementandrecognitionoffixedassets
ImpairmentandprovisionsoffixedassetsaredisclosedonNote4.16.
4.14.4FixedAssetsunderfinanceleases
Afinanceleaseisaleasethattransfersinsubstancealltherisksandrewardsincidenttoownershipofanasset.Titlemayormaynot eventuallybetransferred.
Fixedassetsthatareheldunderfinanceleasesshallbedepreciatedbyapplyingthesamepolicyasthatforthefixedassetsownedby theCompany.Ifitcanbereasonablydeterminedthattheownershipoftheleasedassetscanbeobtainedattheendoftheleaseperiod, theleasedassetsaredepreciatedovertheirusefullives;otherwise,theleasedassetsaredepreciatedovertheshorteroftheleaseterms andtheusefullivesoftheleasedassets.
4.14.5Others
AfixedassetisrecognizedonlywhentheeconomicbenefitsassociatedwiththeassetwillprobablyflowtotheCompanyandthecostof theassetcanbemeasuredreliably.Subsequentexpenditureincurredforafixedassetthatmeettherecognitioncriteriashallbeincluded in the cost of the fixed asset, and the carrying amount of the component of the fixed asset that is replaced shall be derecognized. Otherwise,suchexpenditureshallberecognizedinprofitorlossintheperiodinwhichtheyareincurred.
Therevenuefromsellingortransferring,ordisposingafixedassetisbookedintoprofitandlossafterdeductionofcarryingvalueand relatedtax.
TheCompanyconductsareviewofusefullife,expectednetrealizablevalueanddepreciationmethodsofthefixedassetatleastonan annualbase.Anychangeisregardedaschangeinaccountingestimates.
4.15Constructioninprogress
Construction in progress is measured at its actual cost. The actual costs include various construction expenditures during the constructionperiod,borrowingcostscapitalizedbeforeitisreadyforintendeduseandotherrelevantcosts.Constructioninprogressis transferredtoafixedassetwhenitisreadyforintendeduse.
TestingmethodforprovisionimpairmentofconstructioninprogressandaccruedmethodforprovisionimpairmentpleaserefertoNote
4.19.
Shandong Airlines Co., Ltd. Annual Report2014
4.16Borrowingcosts
Borrowingcostsincludeinterest,amortizationofdiscountsorpremiumsrelatedtoborrowings,ancillarycostsincurredinconnectionwith thearrangementofborrowings,andexchangedifferencesarisingfromforeigncurrencyborrowings.
Theborrowingcoststhataredirectlyattributabletotheacquisition,constructionorproductionofaqualifyingassetarecapitalized.The amountsofotherborrowingcostsincurredarerecognizedasanexpenseintheperiodinwhichtheyareincurred.Qualifyingassetsare asset (fixed assets, investment property and inventories, etc.) that necessarily take a substantial period of time for acquisition, constructionorproductiontogetreadyfortheirintendeduseorsale.
Wherefundsareborrowedforaspecific-purpose,theamountofinteresttobecapitalizedistheactualinterestexpenseincurredonthat borrowing for the period less any bank interest earned from depositing the borrowed funds before being used on the asset or any investmentincomeonthetemporaryinvestmentofthosefunds.
Wherefundsareborrowedforageneral-purpose,theamountofinteresttobecapitalizedonsuchborrowingsisdeterminedbyapplying a weighted average interest rate to the weighted average of the excess amounts of accumulated expenditure on the asset over and abovetheamountsofspecific-purposeborrowings
Duringthecapitalizationperiod,exchangedifferencesrelatedtoaspecific-purposeborrowingdenominatinginforeigncurrencyare all capitalized.Exchangedifferencesinconnectionwithgeneral-purposeborrowingsarerecognizedinprofitorlossintheperiodinwhich theyareincurred.
Assets qualified for capitalizationare the fixed assets,investment properties or inventories whichneed a long timeof construction or productionactivitiesbeforereadyforintendedusedorsale.
Capitalizationofborrowingcostsissuspendedduringperiodsinwhichtheacquisition,constructionorproductionofaqualifyingassetis interrupted by activities other than those necessary to prepare the asset for its intended use or sale, when the interruption is for a continuousperiodofmorethan3months.Borrowingcostsincurredduringtheseperiodsrecognizedasanexpenseforthecurrentperiod untiltheacquisition,constructionorproductionisresumed.
4.17Intangibleassets
4.17.1Intangibleasset
Theterm“intangibleasset”referstotheidentifiablenon-monetaryassetswithoutphysicalshape,possessedorcontrolledbyenterprises. The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the economic benefits related to intangibleassetsarelikelytoflowintotheenterpriseandthecostofintangibleassetscanbemeasuredreliably,shallberecordedas costofintangibleassets.Theexpensesotherthanthisshallbebookedintheprofitorlosswhentheyoccur.
LanduserightsthatarepurchasedbytheCompanyareaccountedforasintangibleassets.Buildings,suchasplantsthataredeveloped andconstructedbytheCompany,andrelevantlanduserightsandbuildings,areaccountedforasintangibleassetsandfixedassets, respectively.Paymentsforthelandandbuildingspurchasedareallocatedbetweenthelanduserightsandthebuildings;iftheycannot bereasonablyallocated,allofthelanduserightsandbuildingsareaccountedforasfixedassets.
When an intangible asset with a definite useful life is available for use, its original cost less net residual value and any accumulate
Shandong Airlines Co., Ltd. Annual Report2014
impairmentlossesisamortizedoveritsestimatedusefullifeusingthestraight-linemethod.Anintangibleassetwithanindefiniteuseful lifeisnotamortized.
Foranintangibleassetwithadefiniteusefullife,theCompanyreviewstheusefullifeandamortizationmethodattheendofthe period, and makes adjustment when necessary..An additional review is also carried out for useful life of the intangible assets with indefiniteuseful life.Ifthere isevidenceshowingthe foreseeablelimitperiod ofeconomic benefits generatedto theenterpriseby the intangibleassets,thenestimateitsusefullifeandamortizeaccordingtothepolicyofintangibleassetswithdefiniteusefullife.
4.17.2theexpenditureofresearchanddevelopment
The expenditures for its internal research and development projects of the Company shall be classified intoresearchexpendituresanddevelopmentexpenditures.
Theresearchexpendituresshallberecordedintotheprofitsandlossesofthecurrentperiodwhentheyareincurred.
Developmentexpendituresininternalresearchanddevelopmentprojectsshallberecognizedasintangibleassetswheretheysatisfyall ofthefollowingconditions:
①Technicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale;
②Intentiontocompletetheintangibleassetanduseorsellit;
③Howtheintangibleassetwillgenerateeconomicbenefits,includingtheabilitytodemonstratetheexistenceofamarketfortheoutput oftheintangibleassetortheintangibleassetitselfor,ifitistobeusedinternally,theusefulnessoftheintangibleasset;
④Availabilityofadequatetechnical,financialandotherresourcestocompletethe developmentandtouseorselltheintangibleasset;⑤Abilitytomeasurereliablytheexpenditurethatisattributabletotheintangibleassetduringitsdevelopment.
Theexpenseswhichcannotbedistinguishedbetweenresearchanddevelopmentstage,shallberecordedintotheprofitorlossforthe currentperiod.
4.17.3Impairmenttestingmethodsandrecognitionofimpairmentprovisionofintangibleassets
ImpairmentandprovisionsofintangibleassetsaredisclosedonNote4.19.
4.18Deferredcharges
Deferredchargesrepresentexpensesincurredthatshouldbeborneandamortizedoverthecurrentandsubsequentperiod(togetherofmorethanoneyear).Deferredchargesareamortizedbyusingstraightlinemethod.Suchasexpensesforpilots’initialtrainings,those expensesareamortizedat10yearsaccordingtotheirbenefitperiodrespectively.WhenapilotistransferredfromtheCompany,thecost oftransferistheunamortizedpartoftheoriginalexpenditure.
4.19Impairmentoflong-termassets
Non-financialassetswithnon-currentnatureincludefixedassets,constructioninprogress,intangibleassetswithdefiniteusefullives, investmentpropertiesmeasuredbycostmethodsandlong-termequityinvestmentonsubsidiaries,jointlyoperations.TheCompany assesseswhetherthereareanyindicatorsofimpairmentforallnon-financialassetsatthebalancesheetdate,andimpairmenttestis carriedoutandrecoverablevalueisestimatedifsuchanindicatorexits.Goodwillandintangibleassetswithindefiniteusefullives,aswell
Shandong Airlines Co., Ltd. Annual Report2014
asintangibleassetsnotreadyforuse,aretestedforimpairmentannuallyregardlessofindicatorsofimpairment.
Impairmentoflossiscalculatedandprovisionstakenbythedifferenceiftherecoverablevalueoftheassetsislowerthanthebookvalue. Therecoverablevalueisthehigherofestimatedpresentvalueofthefutureexpectedcashflowsfromtheassetandnetfairvalueoftheassetlessdisposedcost.Thefairvalueofassetisdeterminedbythesalesagreementpricewithinanarm’slengthtransaction.Incase thereisnosalesagreement,butthereisactivemarketofassets,thefairvaluecanbedeterminedbythesellingprice.Ifthereisneither salesagreementnoractivemarket,thefairvalueoftheassetcanbeestimatedbasedonthebestinformationobtained.
Disposalexpensesincludeexpensesrelatedtothelegislation,taxes,transportationsandthedirectexpensefortheassettobereadyfor sale.WhencalculatingthepresentvalueofexpectedfuturecashflowsfromanassetorassetGroup,themanagementshallestimatethe expectedfuturecashflowsfromtheassetorassetGroupandchooseasuitablediscountrateinordertocalculatethepresentvalueof thosecashflows.
Provisionforassetimpairmentiscalculatedanddeterminedontheindividualbasis.Iftherecoverableofindividualassetishardto
estimate,therecoverableamountcanbedeterminedbytheassetGroupwheresubjectassetbelongs.AssetGroupisthesmallestsetof assetsthatcanhavecashflowinindependently.
TheCompanydetermineswhethergoodwillisimpairedatleastonanannualbasis.Thisrequiresanestimationofthepresentvalueof thefutureexpectedcashflowsfromtheassetGroupsorsetsofassetGroupstowhichthegoodwillisallocated.Estimatingthepresent valuerequirestheCompanytomakeanestimateoftheexpectedfuturecashflowsfromtheassetGroupsorsetsofassetGroupsand alsochooseasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.Oncethelossfromaboveasset
impairmentisrecognized,therecoverablepartcannotbereservedinthesubsequentperiods.
4.20EmployeeBenefits
Theemployeebenefitsofthecompanyincludeshort-termemployeebenefits,post-employmentbenefits,terminationbenefitsandother long-termemployeebenefits:
Short-termemployeebenefitsincludeswages,bonuses,allowancesandsubsidies,welfare,healthinsurance,maternityinsurance,work injuryinsurance,housingfunds,laborunionfunds,employeeeducationfunds,non-monetarybenefitsandetc.Short-termemployee benefitsarerecognisedasliabilitiesandprofitorlossaccountorthecostsassociatedwiththeassetduringtheaccountingperiodwhen employeesactuallyprovideservices,.Thenon-monetarybenefitsaremeasuredatfairvalue.
Post-employmentbenefitsincludedefinedcontributionplansanddefinedbenefitplans.Definedcontributionplanwhichincludesthe basicpension,unemploymentinsuranceandannuitiesshallberecognisedascostofrelatedassetsorprofitorloss.Projectedunitcredit costmethod(“PUC”)wasusedbyindependentactuariesengagedbytheCompanytodeterminethepresentvalueofthedefinedbenefit obligationswithunbiasedandconsistentactuarialassumptionsregardingpopulationvariablesandfinancialvariables.Definedbenefit obligationwaspresentedwiththepresentvalueandtherelatedcurrentservicecostwasaccountedintocurrentprofitorloss.
WhentheCompanyterminatesthelaborrelationshipwithemployeespriortotheemploymentcontracts,or encouragesemployeesto acceptvoluntaryredundancycompensationproposalsinthiscompany,aprovisionshallberecognisedforthecompensationarisingfrom theterminationofemploymentrelationshipwithemployeesatthetimewhentheCompanycannotunilaterallywithdrawlayoffproposal
Shandong Airlines Co., Ltd. Annual Report2014
terminationbenefitsprovidedduetoterminationofemployment,orthecompany ensuresthecostsrelatedtothepaymentfor
terminationbenefitsrelatedtotherestructuring,whichoneisearlytoconfirmemployeebenefitsliabilities,andrecordedasprofitorloss. However,ifterminationbenefitscannotbefullypaidaftertwelvemonthsofthereportingdate,,theliabilityshallbeprocessedin
accordancewithotherlong-termemployeebenefits.
Retirementplanadoptsthesameprinciplesastheterminationbenefits.Thesalariesandinsurancetobepaidfromthedatewhen
employeesstopprovidingservicestothedateofnormalretirementshallberecognisedinprofitorloss(terminationbenefits)when
satisfyingtherequirementsofaprovision..
Otherlong-termemployeebenefitsprovidedbythecompanytoemployeesthatisinlinewithdefinedcontributionplansshalladoptthe accountingtreatmentinaccordancewithdefinedcontributionplans,otherwisetheaccountingtreatmentofdefinedbenefitplans..
4.21Revenue
4.21.1Revenuefromrenderingofservice
① TheCompanyrecogniserevenuefromrenderingofairserviceforcarriageofpassengerswhentheserviceisrenderedorwhenan unusedticketexpires.Thesaleofaticketdoesnotconstituterevenue.Anunusedticketexpiresontheannualanniversaryofitssale. TicketssoldbutofwhichtheserviceisnotyetrenderedarerecognisedincurrentliabilitiesasAdvancesfromcustomers.Ifserviceis renderedthroughcodesharing,revenuearisingfromtheserviceprovisionisapportionedamongstpartiestothecodesharingagreement. Therevenuearisingfromcodesharingisalsorecognisedwhentheserviceisrendered.
② TheCompanycompanyrecogniseaircargorevenuefromrenderingofairserviceforcarriageofcargowhentheserviceisrendered③ Revenuearisingfromotherairservicerenderingisrecognisedwhentheservicerenderingiscompleted.
4.21.2RoyaltyRevenue
Accordingtothecontractoragreement,therevenueisrecognizedonanaccrualbasis.
4.21.3InterestIncome
Theamountofinterestrevenueshouldbemeasuredandconfirmedinaccordancewiththelengthoftimeforwhichtheenterprise'scash isusedbyothersandtheactualinterestrate.
4.22GovernmentGrants
Governmentgrantsaretransferofmonetaryassetsandnon-monetaryassetsfromthegovernmenttotheCompanyatnoconsideration, excludingthecapitalinvestedbythegovernmentasequityowner.Governmentgrantcanbeclassifiedasgrantrelatedtotheassetsand grantsrelatedtotheincome.GovernmentgrantsobtainedbytheCompanywhicharerelevanttoconstructionoracquisitionoflong-term assetsareclassifiedasasset-relatedgovernmentgrants;allothergovernmentgrantsareclassifiedasrevenue-relatedgovernment grants.Forgovernmentgrantswithoutspeficiedbeneficiary,theCompanyperformsclassificationinaccordancewiththefollowing
criteria.
4.22.1Whereagrantisobtainedforaspecifiedproject,thegrantisspittedintoasset-relatedandrevenuerelatedportionsproportionate totheproject'sinvestmenttoexpenseratio;theclassificationisreviewedoneachbalancesheetdateandrevisedifnecessary.
4.22.2Whereagrantisobtainedforgeneralpurpose,thegrantasawholeisclassifiedasarevenue-relatedgovernmentgrant.
Shandong Airlines Co., Ltd. Annual Report2014
Ifagovernmentgrantisintheformofatransferofamonetaryasset,itismeasuredattheamountreceivedorreceivable.Ifa
governmentgrantisintheformofanon-monetaryasset,itismeasuredatfairvalue.Ifthefairvaluecannotbereliablydetermined,itis measuredatanominalamount.Agovernmentgrantmeasuredatanominalamountisrecognizedimmediatelyinprofitorlossforthe period.
Agovernmentgrantrelatedtoanassetisrecognizedasdeferredincome,andevenlyamortizedtoprofitorlossovertheusefullifeofthe relatedasset.Foragovernmentgrantrelatedtoincome,ifthegrantisacompensationforrelatedexpensesorlossestobeincurredin subsequentperiod,thegrantisrecognizedasdeferredincome,andrecognizedinprofitorlossovertheperiodsinwhichtherelated costsarerecognized.Ifthegrantisacompensationforrelatedexpensesorlossesalreadyincurred,thegrantisrecognizedimmediately inprofitorlossfortheperiod.
Forrepaymentofagovernmentgrantalreadyrecognized,ifthereisarelateddeferredincome,therepaymentisoffsetagainstthe
carryingamountofthedeferredincome,andanyexcessisrecognizedinprofitorlossfortheperiod.Ifthereisnorelateddeferred
income,therepaymentisrecognizedimmediatelyinprofitorlossfortheperiod.
4.23Deferredtaxassetsanddeferredtaxliabilities
4.23.1Incometaxforthecurrentperiod
Atthebalancesheetdate,deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplytotheperiodwhen theassetisrealizedortheliabilityissettled,accordingtotherequirementsoftaxlaws.Themeasurementofdeferredtaxassetsand deferredtaxliabilitiesreflectsthetaxconsequencesthatwouldfollowfromthemannerinwhichtheCompanyexpectsatthebalance sheetdate,torecovertheassetsorsettletheliabilities.
Atthebalancesheetdate,currentincometaxliabilitiesorassetsforthecurrentandpriorperiods,aremeasuredattheamountexpected tobepaid(orrecovered)accordingtotherequirementsoftaxlaws.Thecalculationforincometaxexpensesinthecurrentperiodis basedonthetaxableincomeaccordingtotherelatedtaxlawsafteradjustmenttotheaccountingprofitofthereportingperiod.
4.23.2Deferredincometaxassetsandliabilities
Fortemporarydifferencesbetweenthecarryingamountofcertainassetsorliabilitiesandtheirtaxbase,orbetweenthenilcarrying amountofthoseitemsthatarenotrecognizedasassetsorliabilitiesandtheirtaxbasethatcanbedeterminedaccordingtotaxlaws, deferredtaxassetsandliabilitiesarerecognizedusingthebalancesheetliabilitymethod.
Fortemporarydifferencesassociatedwiththeinitialrecognitionofgoodwillandtheinitialrecognitionofanassetorliabilityarisingfroma transaction(notabusinesscombination)thataffectsneithertheaccountingprofitnortaxableprofits(ordeductiblelosses)atthetimeof transaction,nodeferredtaxassetorliabilityisrecognized.
Fortaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiariesandassociates,andinterestsinjointventures,nodeferred incometaxliabilityrelatedisrecognizedexceptwheretheCompanyisabletocontrolthetimingofreversalofthetemporarydifference anditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
Alldeferredincometaxliabilitiesarisingfromtaxabletemporarydifferencesexcepttheonesmentionedabovearerecognized.
Fortemporarydeductibledifferencesassociatedwiththeinitialrecognitionofanassetorliabilityarisingfromatransaction(nota
Shandong Airlines Co., Ltd. Annual Report2014
businesscombination)thataffectsneithertheaccountingprofitnortaxableprofits(ordeductiblelosses)atthetimeoftransaction,no deferredtaxassetisrecognized.
Fortaxabletemporarydeductibledifferencesassociatedwithinvestmentsinsubsidiariesandassociates,andinterestsinjointventures, nodeferredincometaxassetrelatedisrecognizedifitisimpossibletoreversalthetemporarydifferenceintheforeseeablefuture,oritis notprobabletoobtaintaxableincomewhichcanbeusedforthedeductionofthetemporarydifferenceinthefuture.
Exceptmentionedabove,theCompanyrecognizesotherdeferredincometaxassetsthatcandeducttemporarydifferencestotheextent thatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferencescanbeutilized.
Forthedeductiblelossesandtaxcreditthatcanbecarriedforward,deferredtaxassetsfordeductibletemporarydifferencesare
recognizedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthedeductibletemporarydifferencescanbe utilized.
Atthebalancesheetdate,deferredtaxassetsandliabilitiesaremeasuredatthetaxratesaccordingtotaxlaws,thatareexpectedto applyintheperiodinwhichtheassetisrealizedortheliabilityissettled.
Atthebalancesheetdate,theCompanyreviewsthecarryingamountofdeferredtaxassets.Ifitisnolongerprobablethatsufficient taxableprofitwillbeavailableinfutureperiodstoallowthebenefitsofthedeferredtaxassetstobeused,theCompanyreducesthe carryingamountofdeferredtaxassets.Theamountofsuchreductionisreversedwhenitbecomesprobablethatsufficienttaxableprofit willbeavailable
4.23.3Incometaxexpenses
Incometaxexpensesconsistofcurrentincometaxanddeferredincometax.
Theexpensesfromincometaxanddeferredincometax,aswellastherevenue,shallberecordedintoprofitorlossincurrentaccounting period,exceptexpenseforincometaxofthecurrentperiodanddeferredincometaxthatbookedintootherincomeorequityand
adjustedcarryingvalueofdeferredincometaxgoodwillarosefrombusinesscombination.
4.23.4Incometaxoffset
Whenwehavethelegalright,andhaveintendedto,tomakesettlementwithnetamount,orthroughtheassetacquisitionandliability fulfillmentsimultaneously,theCompanyshallpresentthenetvaluefromtheoffsetbetweencurrentincometaxassetandcurrentincome taxliabilityinthefinancialstatement.
WhentheCompanyhasthelegalrighttomakeasettlementwiththecurrentincometaxassetandcurrentincometaxliability,andthe deferredincometaxassetanddeferredincometaxliabilityarerelatedtothesametaxablesubjectunderthesametaxpayer,orrelated todifferenttaxablesubject,buttheintensionofnetvaluesettlementinregardofthecurrentincometaxassetandcurrentincometax liability,theCompanyshallpresentnetvalueaftertheoffsetofdeferredincometaxassetanddeferredincometaxliability.
4.24Leases
Afinanceleaseisaleasethattransfersinsubstancealltherisksandrewardsincidenttoownershipofanasset.Titlemayormaynot eventuallybetransferred.Anoperatingleaseisaleaseotherthanafinancelease.
4.24.1TheCompanyasLesseeunderoperatingLease
Shandong Airlines Co., Ltd. Annual Report2014
Leasepaymentsunderanoperatingleasearerecognizedbyalesseeonastraight-linebasisovertheleaseterm,andeitherincludedin thecostoftherelatedassetorchargedtoprofitorlossforthecurrentperiod.Thecontingentrentsshallberecordedintheprofitorloss oftheperiodinwhichtheyactuallyarise.
4.24.2TheCompanyasLeasorunderoperatingLease
Leaseincomefromoperatingleasesshallberecognizedbytheleasorinprofitorlossonastraight-linebasisovertheleaseterm.Initial directcostofsignificanceinamountshallbecapitalizedwhenincurred.Ifanotherbasisismoresystematicandrational,thatbasismay beused.Contingentrentsarecreditedtoprofitorlossintheperiodinwhichtheyactuallyarise.
4.24.3TheCompanyasLesseeunderfinancingLease
Foranassetthatisheldunderafinancelease,attheleasecommencement,theleasedassetisrecordedatthelowerofitsfairvalueat theleasecommencementandthepresentvalueoftheminimumleasepayments,andtheminimumleasepaymentisrecordedasthe carryingamountofthelong-termpayables;thedifferencebetweentherecordedamountoftheleasedassetandtherecordedamountof thepayableisaccountedforasunrecognizedfinancecharge,Initialdirectcostsincurredbythelesseeduringtheprocessofnegotiating andsecuringtheleaseagreementshallbeaddedtotheamountrecognizedfortheleasedasset.
The net amount of minimum lease payment deducted by the unrecognized finance shall be separated into long-term liabilities and long-termliabilitywithinoneyearforpresentation.
Unrecognizedfinancechargeshallbecomputedbytheeffectiveinterestmethodduringtheleaseterm.Contingentrentshallbebooked intoprofitorlosswhenactuallyincurred.
4.24.4Inthecaseoftheleasorofafinancinglease
Foranassetthatisleasedoutunderafinancelease,theaggregateoftheminimumleasereceiptsattheinceptionoftheleaseandthe initialdirectcostsisrecordedasafinanceleasereceivable,andunguaranteedresidualvalueisrecordedatthesametime;thedifference betweentheaggregateoftheminimumleasereceipt,initialdirectcosts,andunguaranteedresidual value,andtheaggregate oftheir presentvalues,isrecognizedasunearnedfinanceincome,whichisamortizedusingtheeffectiveinterestratemethodovereachperiod duringtheleaseterm.
Financeleasereceivablelessunearnedfinanceincomeshallbeseparatedintolong-termliabilitiesandlong-termliabilitywithinoneyear forpresentation.
Unearnedfinanceincomeshallbecomputedbytheeffectiveinterestmethodduringtheleaseterm.Contingentrentshallbecreditedinto profitorlossinwhichactuallyincurred.
4.25Regularrepairandsubstantialrepair
Regularrepairexpenditureofownaircraftsandaircraftsacquiredunderafinancialleaseisaccountedforthroughprofitorlossforthe 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 underanoperatingleaseincurredbeforetheleaseexpirydateisamortisedonthebasisofairhoursovertheleaseperiod.
4.26Changesinmajoraccountingpoliciesandaccountingestimates
Shandong Airlines Co., Ltd. Annual Report2014
4.26.1changeofaccountingpolicies
(1)Accountingpoliciesduetotheimplementationofnewaccountingstandardsresultinchanges
CAS39-FairValueMeasurement,CAS30-FinancialReporting(Revisedin2014),CAS9-EmploymentBenefits(Revisedin2014), CAS33-ConsolidatedFinancialStatements(Revisedin2014),CAS40-JointArrangement,CAS2-Long-termEquityInvestments(Revisedin2014)andCAS41-InterestsinOtherEntitieswereissuedbytheMinistryofFinanceinearly2014byCaiKuai[2014]6,
CaiKuai[2014]7,CaiKuai[2014]8,CaiKuai[2014]10,CaiKuai[2014]11,CaiKuai[2014]14,andCaiKuai[2014]16whichorderadoptionofthe abovestandardsasfrom1July2014byallentitiescurrentlyadoptingCASwithencouragedearlyadoptionbyentitieswithoverseaslisting.CAS37-FinancialInstrumentDisclosure(Revisedin2014)wasissuedbytheMinistrybyCaiKuai[2014]23whichorders
presentationoffinancialinstrumentsinaccordancewithCAS37asfromtheyearended31December2014.
AsapprovedbythefourthinterimboardmeetingofthefifthsessionoftheBoardofDirectors,whichwasheldon23thOctober,2014,the CompanyadoptedCAS39,CAS30(Revised),CAS9(Revised),CAS33(Revised),CAS40,CAS2(Revised)andCAS41on1July 2014andadoptedCAS37(Revised)duringthepreparationofthefinancialstatementfortheyearended31December2014.The
financialstatementsareadjustedinaccordancewiththerelevanttransitionalprovisionsrequiredbytheneworrevisedCAS.Impactsof adoptiontheneworrevisedCASareasfollow.
|||
|-|-|
|Changeofaccountingpoliciesandtheassociatedimpact||
||Lineitem|
|Based on CAS 2 - Long-term Equity Investments(Revised in 2014), for a long-term equity investmentwhere the investing enterprise does not have commoncontrol orsignificantinfluenceovertheinvesteeshallbeaccounted as financial assets available for sale andretroactive adjustment should be made on the basis ofrelevantpolicies.Cost method was adopted in investment of theshareholdingofTravelSkyTechnologyLimitedfrom2001,SichuanAirlinesfrom 2002,JinanYaoqiangInternationalAirport from 2004.As at 31/12/2004, the equity of stockholdings were not changed. Taking effect of CAS 2(Revised in 2014), the above long-term equity wererecorded as financial assets available for sale. Thechangeofaccountingpolicyisappliedretrospectively.|Long-term equityinvestments|
||Financial assetsavailableforsale|
||Othercomprehensiveincome|
||Deferred taxliabilities|
||Gains and lossesfromchangesinfairvalue of financialassets available forsale|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Changeofaccountingpoliciesandtheassociatedimpact||
||Lineitem|
|Prior to the adoption of CAS 9 - Employee Benefits(revised 2014), post-employment benefits besides socialwelfareprogramwererecordedbyactualoccurrence.Asfrom theadoption of CAS 9(Revised),post-employmentbenefits besides social welfare program belonging todefinedbenefitplan,shouldberecordedintheemployeeservice period. Accounting policy of termination benefitsseeNote4.20.Thechangeofaccountingpolicyisappliedretrospectively.|Non-currentliabilities due withinoneyear|
||Long-termemployee benefitspayable|
||Retainedearnings|
||Surplusreserves|
||Othercomprehensiveincome|
||General andadministrativeexpenses|
||Financialcosts|
||Changes fromremeasurement ofdefined benefitplans net liabilitiesornetassets|
|On the implementation of CAS 30 - Financial Reporting(Revisedin2014),deferredincomeandfinancialliabilitiesmeasured by fair value with changes in fair valuerecognised in profit or loss should be presentedseparately.|Deferredincome|
||Other non-currentliabilities|
||Trading financialliabilities|
||Financial liabilitiesmeasured by fairvalue with changesin fair valuerecognised in profitorloss|

Shandong Airlines Co., Ltd. Annual Report2014
CAS2-Long-termEquityInvestments(Revisedin2014)
PriortotheadoptionofCAS2(Revised),aninvestmentwhichdoesnotenabletheCompanyhasjointcontrolorsignificantinfluence overtheinvesteeandisnotquotedinactivemarketsandofwhichthefairvaluecannotbereliablymeasuredisrecognizedasa
long-termequityinvestmentandmeasuredbycost.AsfromtheadoptionofCAS2(Revised),suchinvestmentsarerecognisedas
financialassetsavailable-for-sale.Thechangeofaccountingpolicyisappliedretrospectively.
PriortotheadoptionofCAS 2(Revised), duetoacceptanceofunilateral capital injectionbyother shareholders ofjointventures and associates,equityratiosharedbytheCompanywasdilutedbutequitysharewasincreased,andtheCompanystillmaintainjointcontrol orsignificantinfluence.Thesituationshouldbedeemedaspartialdisposalofthestakeinthejointventuresandassociatesunderequity method.ThedifferencebetweentheCompany'sincreasedshareinthenetassetsoftheinvesteesproportionatetotheCompany'snew shareholding in the investees and the book value of the long-term equity investments relevant with the decreased shareholding is chargedtoprofitorloss.UpontheadoptionofCAS2(Revised),TheCompany'sincreasedshareinthenetassetsoftheinvesteesis recognised in capital reserves and reclassified to profit or loss proportionately when the Company investments in the investees are partiallyorfullydisposed.Thechangeinaccountingpolicyhasnoimpactonthefinancialstatements.
CAS9-EmployeeBenefits(revised2014)
PriortotheadoptionofCAS9-EmployeeBenefits(revised2014),post-employmentbenefitsbesidessocialwelfareprogramwere
recordedbyactualoccurrence.AsfromtheadoptionofCAS9(Revised),post-employmentbenefitsbesidessocialwelfareprogram belongtodefinedbenefitplanandshouldberecordedintheemployeeserviceperiod.AccountingpolicyofterminationbenefitsseeNote 4.20.Thechangeofaccountingpolicyisappliedretrospectively.
CAS37-FinancialInstrumentDisclosure(Revisedin2014)
CAS37-FinancialInstrumentDisclosure(Revisedin2014)introducesrequirementsanddisclosuresinrelationtoset-off,additional disclosuresinrelationtotransferoffinancialassets,andadditionaldisclosuresinrelationtoduedateanalysisoffinancialassetsand financialliabilities.ChangeinaccountingpolicyhasnoeffectontheCompany.
CAS30-FinancialReporting(Revisedin2014)
CAS30-FinancialReporting(Revisedin2014)distinguishesothercomprehensiveincomeintotwocategories:othercomprehensive incomenotreclassifiabletoprofitorlossinsubsequentperiodsandothercomprehensiveincomereclassifiabletoprofitorlossin
subsequentperiodsuponsatisfactionofspecificconditions;italsostandardisesthedisclosureofheld-for-saleitems.Thefinancial
statementsarepresentedinaccordancewiththeCASanddisclosuresofcomparativeshavebeenadjusted.
CAS39-FairValueMeasurementstandardisesmeasurementanddisclosureoffairvalue.TheadoptionoftheCASdoesnothave materialimpactonthemeasurementofthelineitemsofthefinancialstatements;theadoption,however,resultsinmorecomprehensive disclosureinrelationtofairvalueinthenotestothefinancialstatements.Thefinancialstatementsarepresentedinaccordancewiththe CAS.
CAS41-Interestsinotherentities:
CAS41-InterestsinotherentitiesappliestothedisclosuresinrelationtotheCompany'sinterestsinsubsidiaries,jointarrangements,
Shandong Airlines Co., Ltd. Annual Report2014
associatesandorganisedentitiesnotwithinthescopeconsolidated.TheadoptionoftheCASresultsinmorecomprehensivedisclosure inthenotestothefinancialstatements.ThefinancialstatementsarepresentedinaccordancewiththeCASanddisclosuresof
comparativeshavebeenadjusted.
4.26.2changeofaccountingestimates
Thereisnosignificantchangeofaccountingestimatesforthecompanyduringthereportingperiod.
4.27Correctionofpriorperioderrors
ThereisnosignificantchangeofpreviousaccountingerrorsfortheCompanyduringthereportingperiod.
4.28Significantaccountjudgmentandestimates
TheCompanyisrequiredtomakejudgments,estimatesandassumptionsaboutthecarryingamountsofitemsinthefinancialstatements that cannot be measured accurately, due to the internal uncertainties of operation activities. These judgments, estimates and assumptions are based on historical experiences of theCompany’s management as well as other factors that are considered to be relevant.Thesejudgments,estimates andassumptionsmayaffectvalueofthefinancialstatementsinrevenue,expenses,assetsand liabilitiesandthedisclosureofcontingencyatthebalancesheetdate.However,theresultderivedfromthoseuncertaintiesinestimates mayleadsignificantadjustmentstothecarryingamountsoftheassetsorliabilitiesaffectedinthefuture.
TheCompanyhasreviewedthejudgments,estimatesandassumptionsregularlyonthebasisofgoingconcern.Wherethechangesin accountingestimatesonlyaffecttheperiodwhenchangesoccurred,andtheyarerecognizedwithinthesameperiod.Wherethechanges inaccountingestimatesaffectbothcurrentperiodandfutureperiod,thechangesarerecognizedwithintheperiodofchangeandfuture period.
Atbalancesheetdate,thefollowingsarethesignificantareaswheretheCompanyneedstomakejudgment,estimatesandassumptions overthevalueofitemsinthefinancialstatements:
4.28.1Classificationoflease
TheCompany classifiesleasesas operatingleaseandfinancingleaseaccordingtotherulestipulatedintheAccountingStandardfor BusinessEnterprisesNo.21--Leasing-.Themanagementshallmakeanalysisandjudgmentonwhethertherisksandrewardsrelatedto thetitleofleasedassetshasbeentransferredtotheleaser,orwhethertheCompanyhassubstantiallyheldtherisksandrewardsrelated totheownershipofleasedassets.
4.28.2Allowanceforbaddebt
AccordingtotherelevantaccountingpoliciesoftheCompanyinreceivables,allowancemethodisusedforbaddebt’scalculation.The impairment of receivables is calculated based on the assessment of recoverable of receivables.Assurance of receivable impairment needsjudgmentsandestimationsfromthemanagement.Thedifferencebetweenactualresultsandoriginalestimatesshallhaveimpact onthecarryingamountofreceivablesandreceivablebaddebtprovisionsorthereverseduringthechangeofestimation.
4.28.3Impairmentofinventories
The Company measures inventories by the lower of cost and realizable net value according to the accounting policies in regard of inventoriesandprovisionsfordeclineinvalueofinventoriesismadeifthecostishigherthantheirnetrealizablevalue,andobsoleteand slow-movementinventories. Inventoriesdeclineinvalueto netrealizablevalueistheestimatedselling priceinthe ordinarycourse of
Shandong Airlines Co., Ltd. Annual Report2014
business. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect ofpost balance sheet events.Thedifference between the actual result and the original estimates shall haveimpactonreverseofthecarryingamountoftheinventoriesandtheirdeclineinvalueorprovisionsduringtheperiodofchange. 4.28.4Thefairvalueoffinancialinstruments
Forafinancialinstrumentwhichhasnoactivemarket,theCompanyestablishesfairvaluebyusingvariousvaluationmethods,including ofdiscountedcashflowanalysismodel.TheCompanyneedstoestimatefuturecashflow,creditrisk,volatilityandrelationshipduringthe valuationandchooseappropriatediscountrate.Suchassumptionshaveuncertaintiesandtheirchanges shallhaveimpactonthefair valueoffinancialinstruments.
4.28.5Impairmentofnon-financial,non-currentassets
The Company assesses whether there are any indicators of impairment for all non-current assets other than financial assets at the balancesheetdate.Foranintangibleassetthathasindefiniteusefullife,impairmenttestismadeinadditiontotheannualimpairment testifthereisanyindicationofimpairment.Fornon-currentassetsotherthanfinancialassets,impairmenttestismadewhenthereisany indicationthatitsaccountbalancecannotberecovered.
Impairmentexistswhentherecoverableamountofanassetisthehigherofitsfairvaluelesscostofdisposalandpresentvalueofthe futurecashflowsexpectedtobederivedfromtheasset.
Net value between the difference of fair value and disposal cost is determined by reference of the price of similar product in a saleagreementinanarm’slengthtransactionoranobservablemarketpricelesstheadditionalcostdirectlyattributabletothedisposalofthe asset.
When estimating the present value of future cash flow,significant judgments are made over theasset’s production, selling price and relevantoperatingexpenses,anddiscountrateusedtocalculatepresentvalue.Allavailablematerialsthatareconsideredtoberelevant shall be used in the estimation of recoverable value. These materials include estimations of production, selling price and operating expensesbasedonreasonableandsupportableassumptions.
TheCompanymakesanimpairmenttestforgoodwillatleastateachyearend.Thisrequiresanestimationofpresentvalueoffuture cashflowoftheassetsorassetsgroupwheregoodwillhasbeenallocated.TheCompanyshallmakesestimationonthefuturecashflow derived from assets or assets group and determine an appropriate discount rate for the present value of future cash flow when the estimationofpresentvalueoffuturecashflowismade.
4.28.6Depreciationandamortization
Investmentproperty,fixedassetsandintangibleassets aredepreciatedandamortizedusingthestraight-linemethodovertheiruseful livesaftertakingintoaccountresidualvalue.Theusefullivesareregularlyreviewedtodeterminethedepreciationandamortizationcosts charged ineach reporting period.The useful lives are determined based on historical experience of similar assets and the estimated technicalchanges.Ifthereisanindicationthattherehasbeenachangeinthefactorusedtodeterminethedepreciationoramortization, therateofdepreciationoramortizationisrevised.
4.28.7Deferredtaxassets
Shandong Airlines Co., Ltd. Annual Report2014
TheCompanyshallrecognizeallunusedtaxlossesasdeferredtaxassetstotheextentthatitisprobablethatfuturetaxableprofitwillbe availableagainstwhichtheunusedtaxlossesandunusedtaxcreditscanbeutilized.ThisrequiresthemanagementoftheCompany makealotofjudgmentsovertheestimationoftimeperiod,valueandtaxplanningstrategieswhenfuturetaxableprofitincurssothatthe valueofdeferredtaxassetscanbedetermined.
4.28.8Incometax
Therearesometransactions whereultimatetaxtreatmentsandcalculationshaveuncertaintiesintheCompany’severyday operation. Whether it is possible for some items to make expenditure before tax needs approval from competent tax authorities. If there is any differencebetweenfinalizeddeterminationvalueandtheirinitialestimationsvalue,thedifferenceshallhavetheimpactontheincometax anddeferredincometaxofthecurrentperiodduringthefinaldetermination.
4.28.9Aircraftoperatingleaseandengineoverhaulexpenses
Aircraft operating lease and engine overhaul expenses are accrued and charged to profit or loss in accordance with the expected maintenancecycle,basedonflighthours,flightcyclesoverhaulperiodandtheamountofthecostofrepairswhichmayoccur.These estimatesarelargelybasedonpasthistoricaldataaboutthesameorsimilartypesofaircraftandenginesrepairance.Thewithholding amountandoverhaulcostsmaybeaffectedbydifferentjudgmentsandestimatesandaffectcurrentprofitorloss.
4.28.10Definedbenefitplan
Thedefinedbenefitplanimplemented andmaintainedbytheCompanyincludespost-employmentbenefitsplan.Theprovidedwelfare costs under the above defined benefit plan was calculated by expected cumulative unit credit method according to various actuarial assumptions, and were recognized during the employee service providing period. Actuarial Assumptions include but not limited to discount rate, mortality rate, and etc.. The discount rate is on the basis of management's review of national debt, and mortality rate dependsonthemortalityrateadoptedbytheChinalifeinsuranceindustry.SupplementalinformationofdefinedbenefitplanseeNote 6.31.
Note5 Taxation
5.1Majortaxesandtaxrate
Tax Taxrate(%)
TheVATiscalculatedasthedifferencebetweenoutputtax(11%ofthetaxablerevenue) ValueAddedTax
anddeductibleinputtaxfortheperiod.
BusinessTax Businesstaxiscalculatedas3%-5%oftaxableturnover.
Enterpriseincometax Incometaxiscalculatedas25%oftaxableprofits.
Civilaviationdevelopmentfundshallbecalculatedusingtheratessetoutwithinapplicable CivilAviationDevelopmentFund to the relevant category of flight routes, maximum departure weight and flight distance adoptedbythecivilaviationindustry.
Priorto1August2013,revenuearisingfromairtransportationwastaxableforbusinesstaxattherateof3%.Asfrom 1August 2013, f revenuearising from air transportation become VATtaxable per the Notice of PilotConversion of
Shandong Airlines Co., Ltd. Annual Report2014
Sales-tax-to-VATfortheTransportationSector andCertain Contemporary Service Sectorsby the Ministry of FinanceandStateAdministrationofTaxation(Caishui[2013]37Hao).
5.2Taxincentives
5.2.1. Revenue earned by entities and individuals within the territory of the People's Republic of China (hereafter, theChineseterritory)fortheprovisionofinternationaltransportationservicesisexemptedfrombusinesstaxasfromJanuary1st,2010 pertheNoticeofExemptionofBusinessTaxonInternationTransportationServicebytheMinistryofFinanceandStateAdministrationofTaxation(Caishui[2010]No.8)(财税〔2010〕8号《财政部、国家税务总局关于国际运输劳务免征营业税的通知》).
5.2.2. Zero VATrate applies to entities and individuals withinthe Chinese territory that provide international transportation services, research and development services and designing services provided to foreign entities, roundtrip transportation services between Hongkong, Marcau,and Taiwan, as well as transportion services provided in Hongkong, Marcau, and Taiwan per the Notice of Pilot ConversionofSales-tax-to-VATfortheTransportationSectorandCertainContemporaryServiceSectorsbytheMinistryofFinanceandStateAdministrationofTaxation(Caishui[2013]No.37)(财税[2013]37号《财政部、国家税务总局关于在全国开展交通运输业和部分现代服务业营业税改征增值税试点税收政策的通知》)..
5.2.3.PertheNoticeofContinuousImplementationofTransitionalBusinessTaxExemptionPolicyforCross-boarderLeaseContractsofEquipmentandMachinery(CaiShui[2011]No.48)(财税[2011]48号《关于跨境设备租赁合同继续实行过渡性营业税免税政策的通知》)jointlyissuedbytheMinistryofFinanceandtheStateAdnimistrationofTaxationonJune30,2011andapprovedbytheState Council,thetransitionaloperatingtaxexemptionapplicabletorevenuereceivedbyoverseasleasor(s)toleasecontracts(applicableto both financing lease and operating lease) of machinery and equipment import leasing involving domestic leasee(s) and overseas leasor(s)enteredintopriortoandremaininginforceasatDecember31,2008continuestoapplyfromJanuary1,2010totheexpirydate oftherelevantcontract.
Note6 Notestosignificantelementsoftheconsolidatedfinancialstatements
Unless otherwise stated, the meaning of "B/f","C/f", "Current year", "Prior year" inthe following notes (incl.Notes toelements of the separatefinancialstatements)is"1stJanuary2014","31stDecember2014","theyearended31stDecember2014",and"theyearended 31stDecember2013"respectively.
6.1Monetaryfunds
||
|-|
|C/f|
|241,603.21|
|460,499,733.14|
|460,741,336.35|
|1,289,441.33|

6.2Accountsreceivables
Shandong Airlines Co., Ltd. Annual Report2014
6.2.1Disclosurebycategory
C/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|139,181,872.21|62.23|||
|76,830,269.16|34.35|3,841,513.46|5.00|
|7,635,227.54|3.42|2,765,908.05|36.23|
|223,647,368.91|100.00|6,607,421.51|2.95|

 (Continued)
B/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|179,936,813.57|70.72|||
|60,090,747.20|23.62|3,004,537.36|5.00|
|14,418,242.31|5.66|916,508.05|6.36|
|254,445,803.08|100.00|3,921,045.41|1.54|

① Accountsreceivableofindividualsignificanceandsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|51,318,792.65|||
|48,929,027.68|||

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|38,934,051.88|
|139,181,872.21|

② Accountsreceivablesubjecttoimpairmentassessmentbyportfolio
C/f
Portfolio
|||
|-|-|
|Carryingamount|Allowanceforbaddebt|
|76,830,269.16|3,841,513.46|
|76,830,269.16|3,841,513.46|

③ Accountsreceivableofindividualinsignificancebutsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|2,029,229.24|||
|1,860,556.49|||
|1,849,400.00|1,849,400.00|100.00|
|916,508.05|916,508.05|100.00|
|650,407.70|||
|303,926.06|||
|25,200.00|||
|7,635,227.54|2,765,908.05|36.23|

6.2.2Recognisation,recoveryorreversalofallowanceforbaddebt
TheamountofallowanceforbaddebtsrecognisedduringtheyearisCNY2,686,376.10.
6.2.3Topfiveaccountsreceivablesbydebtors
The total amount of top five accounts receivables summarised by debtors as at the end of current year is CNY 152,664,082.06,
accountingfor68.27%ofthetotalaccountsreceivableasattheendofcurrentyear,thetotalcorrespondingallowanceforbaddebtsis
CNY674,110.49.
Shandong Airlines Co., Ltd. Annual Report2014
6.3Prepayments
6.3.1Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|137,797,577.92|99.21|87,515,232.08|
|572,308.78|0.41|87,000.00|
|12,263.00|0.01|2,315.50|
|511,109.70|0.37|577,493.40|
|138,893,259.40|100.00|88,182,040.98|

 6.3.2Detailsoftopfiveprepayments
ThetotalamountoftopfiveprepaymentsasattheendofcurrentyearisCNY48,423,797.97,accountingfor34.86%ofthetotal advancetosuppliers.
6.4Dividendsreceivable
6.4.1Disclosurebyitem
||
|-|
|C/f|
|1,826,370.00|
|1,826,370.00|

 6.5Otherreceivables
6.5.1Disclosurebycategory
C/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|230,651,294.53|66.89|101,551,717.65|44.03|
|81,969,259.55|23.77|4,098,462.98|5.00|
|32,190,289.39|9.34|||

Shandong Airlines Co., Ltd. Annual Report2014
C/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|344,810,843.47|100.00|105,650,180.63|30.64|

 (Continued)
Category B/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|178,108,064.87|51.89|101,551,717.65|57.02|
|112,247,264.53|32.70|5,612,363.23|5.00|
|52,914,555.92|15.41|||
|343,269,885.32|100.00|107,164,080.88|31.22|

① Otherreceivablesofindividualsignificanceandsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|101,551,717.65|101,551,717.65|100.00|
|46,131,325.25|||
|17,300,360.00|||
|41,354,563.28|||
|24,313,328.35|||
|230,651,294.53|101,551,717.65||

② Otherreceivablessubjecttoimpairmentassessmentbyportfolio
Portfolio C/f
Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Carryingamount|Allowanceforbaddebt|
|81,969,259.55|4,098,462.98|
|81,969,259.55|4,098,462.98|

③ Otherreceivablesofindividualinsignificancebutsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|16,867,219.43|||
|5,932,722.00|||
|5,462,388.20|||
|1,226,900.00|||
|860,829.14|||
|490,736.00|||
|469,581.20|||
|368,454.00|||
|185,361.00|||
|166,824.90|||
|100,000.00|||
|59,273.52|||
|32,190,289.39|||

6.5.2Recognisation,recoveryorreversalofallowanceforbaddebt
TheamountofallowanceforbaddebtsrecoveredorreversedduringthecurrentyearisCNY1,513,900.25.
6.5.3Disclosurebynature
Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|C/f|
|113,601,336.27|
|231,209,507.20|
|344,810,843.47|

 6.5.4Topfiveotherreceivables
|||||
|-|-|-|-|
|Nature|C/f|Aging|%|
|Others|101,551,717.65|Over3years|29.45|
|Others|49,803,933.02|Within1year|14.44|
|Deposits|46,131,325.25|Within1year|13.38|
|Deposits|41,354,563.28|Over3years|11.99|
|Others|24,313,328.35|Within1year|7.05|
||263,154,867.55||76.31|

 6.6Inventories
6.6.1Disclosurebytype
C/f
Type
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|108,651,656.49||
|2,619,600.31||
|880,515.65||
|112,151,772.45||

 (Continued)
B/f
Type
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|104,936,631.52||
|2,075,509.92||
|961,331.91||
|107,973,473.35||

Shandong Airlines Co., Ltd. Annual Report2014
6.7Held-for-saleassets
||||
|-|-|-|
|Netcarryingamount|Fairvalue|Estimateddisposalcosts|
|91,522,334.40|94,278,439.36|1,305,444.92|
|91,522,334.40|94,278,439.36|1,305,444.92|
|91,522,334.40|94,278,439.36|1,305,444.92|

Note: the Company has entered into irrevocable sales contract with the purchaser in December in connection with B-3005, B-3006, B-3007, B-3008, B-3009. The sales will be completed within one year. As a consequence, the above 5 aircrafts and relating air equipmentsareclassifiedasheld-for-saleassets.
6.8Othercurrentassets
||
|-|
|C/f|
|74,727,216.44|
|27,913,022.04|
|6,165,412.73|
|108,805,651.21|

 6.9Financialassetsavailableforsale
6.9.1Generalinformation
||||||
|-|-|-|-|-|
|C/f|||||
|Carryingamount|Impairment|Netcarryingamount|Carryingamount|Impairment|
|86,243,565.68||86,243,565.68|78,464,240.51||
|81,662,100.00||81,662,100.00|81,662,100.00||
|167,905,665.68||167,905,665.68|160,126,340.51||

 6.9.2Financialassetsavailableforsalemeasuredbyfairvalueattheendofcurrentyear
||
|-|
|Availableforsaleequityinstruments|
|6,690,000.00|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Availableforsaleequityinstruments|
|86,243,565.68|
|79,553,565.68|

6.9.3Financialassetsavailableforsalemeasuredbycostattheendofcurrentyear
||||||||||
|-|-|-|-|-|-|-|-|-|
|Carryingamountsasat31/12/2014||||Impairment||||Shareholdingininvestee(%)|
|B/f|Increaseincurrentyear|Decreaseincurrentyear|C/f|B/f|Increaseincurrentyear|Decreaseincurrentyear|C/f||
|35,000,000.00|||35,000,000.00|||||10.00|
|46,662,100.00|||46,662,100.00|||||2.53|
|81,662,100.00|||81,662,100.00||||||

6.10Long-termequityinvestments
|||||||
|-|-|-|-|-|-|
|B/f|Allowanceb/f|||||
|||Additionalinvestment|Investmentreduction|Investmentgainsandlossesrecognisedundertheequitymethod|Othercomprehensiveincomeadjustment|
|22,500,000.00|22,500,000.00|||||
|||200,000,000.00||-26,589,979.88||
|22,500,000.00|22,500,000.00|200,000,000.00||-26,589,979.88||

(Continued)
|||||
|-|-|-|-|
|Currencyyearmovement(+,-)|||C/f|
|Declaredcash|Allowancerecognised|Others||

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|dividendsorprofits||
||22,500,000.00|
||173,410,020.12|
||195,910,020.12|

 6.11Fixedassets
6.11.1Generalinformation
||||||
|-|-|-|-|-|
|Housesandbuildings|Aircraftsandengines|High-valuerotables|Transportationvehicles|Others|
|310,004,180.85|10,906,977,450.41|687,974,621.37|60,759,168.36|160,500,360.31|
|146,000.00|350,418,969.12|56,543,089.00|4,928,372.93|13,210,678.75|
||350,418,969.12|56,543,089.00|4,928,372.93|13,210,678.75|
|146,000.00|||||
|17,874,528.24|1,841,781,421.74|104,881,261.30|1,641,747.00|4,046,794.13|
|1,577,701.50|741,457,586.54|23,474,760.04|1,641,747.00|4,046,794.13|
|16,296,826.74|1,100,323,835.20|81,406,501.26|||
|292,275,652.61|9,415,614,997.79|639,636,449.07|64,045,794.29|169,664,244.93|
|53,776,323.92|3,846,899,823.57|245,237,815.60|27,115,565.84|69,524,872.20|

Shandong Airlines Co., Ltd. Annual Report2014
||||||
|-|-|-|-|-|
|Housesandbuildings|Aircraftsandengines|High-valuerotables|Transportationvehicles|Others|
|9,395,363.00|639,625,051.25|36,993,357.57|6,199,376.41|13,506,455.69|
|9,395,363.00|639,625,051.25|36,993,357.57|6,199,376.41|13,506,455.69|
|2,018,411.58|1,232,392,819.75|65,024,244.38|1,475,826.07|3,380,843.35|
|1,577,701.50|383,783,079.65|11,382,552.39|1,475,826.07|3,380,843.35|
|440,710.08|848,609,740.10|53,641,691.99|||
|61,153,275.34|3,254,132,055.07|217,206,928.79|31,839,116.18|79,650,484.54|
||288,245,487.96|30,757,751.98|||
||288,245,487.96|16,764,476.70|||
||114,710,049.10|2,343,345.59|||
||173,535,438.86|14,421,131.11|||
|||13,993,275.28|||
|231,122,377.27|6,161,482,942.72|408,436,245.00|32,206,678.11|90,013,760.39|
|256,227,856.93|6,771,832,138.88|411,979,053.79|33,643,602.52|90,975,488.11|

 6.11.2Fixedassetsacquiredunderfinancialleases
||||
|-|-|-|
|Cost|AccumulatedDepreciation|Impairmentallowance|

Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|Cost|AccumulatedDepreciation|Impairmentallowance|
|2,094,255,983.89|783,502,957.28||
|2,094,255,983.89|783,502,957.28||

 6.11.3Fixedassetspendingownershipregistration
||
|-|
|Carryingamount|
|13,781,982.69|
|43,441,714.04|
|23,198,201.95|

ImpairmentallowanceoffixedassetsisCNY13,993,275.28asat31/12/2014,withnoadditionalamountofallowanceforfixedassets impairmentrecognisedduringtheyear.
6.12Constructioninprogress
6.12.1Generalinformation
||||||
|-|-|-|-|-|
|C/f|||||
|Carryingamount|Impairmentallowance|Netcarryingamount|Carryingamount|Impairmentallowance|
|118,727,408.52||118,727,408.52|34,532,194.69||
|2,316,606,410.34||2,316,606,410.34|1,611,984,965.18||
|2,252,086.43||2,252,086.43|1,398,835.91||
|2,437,585,905.29||2,437,585,905.29|1,647,915,995.78||

 6.12.2Significantprojects
||||||
|-|-|-|-|-|
|Budget|B/f|Currentyearincrease|Transferredtofixedassetsincurrentyear|Otherdecrease|
|89,590,000.00|28,938,462.61|44,927,012.51|||
|63,270,000.00|807,431.08|34,702,201.66|||

Shandong Airlines Co., Ltd. Annual Report2014
|||||
|-|-|-|-|
|20,944,720,102.00|1,611,984,965.18|1,621,269,672.98|916,648,227.82|
|21,097,580,102.00|1,641,730,858.87|1,700,898,887.15|916,648,227.82|

 (Continued)
|||||||
|-|-|-|-|-|-|
|Weightofcosttodateinbudgetedcost(%)|Stageofcompletion(%)|Cumulativeinterestscapitalised|Including:Transferredintoleasebackassetsduringthecurrentyear|Including:interestscapitalizedduringthecurrentyear|Capitalisationrateapplicabletothecurrentyear(%)|
|82.45|Inprogress|||||
|56.12|Inprogress|||||
|11.06|Notapplicable|17,966,767.14|4,250,299.95|24,182,805.31|2.44-4.04|
|||17,966,767.14|4,250,299.95|24,182,805.31||

Note:Thecumulativeamountofinterests capitalizedas at31/12/2013is-1,965,738.22,whichismainlyaffectedby foreignexchange gainsandlosses,theamountofcurrentyearis24,182,805.31,including￥4,250,299.95transferredintoleasebackassetsduringthe currentyear,thecumulativeamountofinterestscapitalizedasat31/12/2014is17,966,767.14.
6.12.3Recognizationofimpairmentallowanceforconstructioninprogress
NosignofconstructioninprogressimpairmentoccurredasofDecember31,2014,noimpairmentprovisionshallberecognised.
6.13Intangibleassets
6.13.1Generalinformation
|||
|-|-|
|Landrights|Software|
|84,663,933.13|24,196,624.41|
|23,678,530.00||
|23,678,530.00||

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Landrights|Software|
|108,342,463.13|24,196,624.41|
|7,277,301.45|455,619.27|
|1,510,983.08|2,750,755.70|
|1,510,983.08|2,750,755.70|
|8,788,284.53|3,206,374.97|
|99,554,178.60|20,990,249.44|
|77,386,631.68|23,741,005.14|

 6.13.2Landrightswithpendingownershipregistration
Nocaseoflandrightswithpendingownershipregistrationwasidentifiedasof31/12/2014.
6.14Goodwill
6.14.1Generalinformation
||||||
|-|-|-|-|-|
|B/f|Currentyearincrease||Currentyeardecrease||
||Frombusinesscombination|……|Disposal|……|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|10,220,816.22|
|10,220,816.22|

 6.14.1Impairmentallowance
||||||
|-|-|-|-|-|
|B/f|Currentyearincrease||Currentyeardecrease||
||Accrual|……|Disposal|……|
|10,220,816.22|||||
|10,220,816.22|||||

 6.15Deferredcharges
|||||
|-|-|-|-|
|B/f|Currentyearincrease|Currentyearamortization|Otherdecrease|
|333,657,141.80|111,169,326.79|58,722,519.83||
|14,288,398.81|1,427,447.18|4,560,811.32||
|347,945,540.61|112,596,773.97|63,283,331.15||

 6.16Deferredtaxassetsanddeferredtaxliabilities
6.16.1Withoutoffsettingdeferredtaxassets
||||
|-|-|-|
|C/f|||
|Deductibletemporarydifference|Deferredtaxassets|Deductibletemporarydifference|
|112,257,602.14|28,064,400.54|111,085,126.29|
|201,949,845.25|50,487,461.31|319,003,239.94|
|1,559,710.77|389,927.69|296,902.47|
|1,164,590,211.97|291,147,552.99|970,243,460.92|
|382,789,657.63|95,697,414.41|332,104,603.04|
|17,271,524.22|4,317,881.06|25,367,524.34|
|||547,618.90|
|1,880,418,551.98|470,104,638.00|1,758,648,475.90|

6.16.2Withoutoffsettingdeferredtaxliabilities
Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|C/f|||
|Deductibletemporarydifference|Deferredtaxliabilities|Deductibletemporarydifference|
|79,553,565.68|19,888,391.42|71,774,240.51|
|79,553,565.68|19,888,391.42|71,774,240.51|

 6.17Othernon-currentassets
||
|-|
|C/f|
|58,654,642.41|
|58,654,642.41|

6.18Short-termborrowings
6.18.1Disclosurebycategory
||
|-|
|C/f|

 6.19Financialliabilitiesmeasuredbyfairvaluewithchangesinfairvaluerecognisedinprofitorloss
||
|-|
|Fairvaluec/f|
|1,559,710.77|
|1,559,710.77|

 TheimmatureinterestrateswapsheldbytheCompanyhadaprincipalamountofUSD97,924,540.00asatthereportingdate;bankers confirmedthatthereportingdatefairvalueoftheseinterestrateswapsisCNY-1,559,710.77.
6.20Notespayable
||
|-|
|C/f|
|58,412,417.22|
|58,412,417.22|

6.21Accountspayable
6.21.1Generalinformation
Item C/f B/f
Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|C/f|
|86,251,950.81|
|220,563,961.43|
|274,164,827.42|
|134,348,464.33|
|65,643,540.55|
|28,923,595.38|
|3,052,136.16|
|77,397,271.16|
|890,345,747.24|

 6.21.2Nosignificantaccountpayabledueformorethan1yearasatthereportingdate.
6.22Advancefromcustomers
6.22.1Generalinformation
||
|-|
|C/f|
|257,886,010.75|
|7,131,963.14|
|13,039,885.45|
|278,057,859.34|

 6.23Employeebenefitspayable
6.23.1Disclosurebyclassification
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|338,866,981.54|1,537,559,504.70|1,482,997,912.54|
||121,285,235.98|121,285,235.98|
||605,720.33|605,720.33|
|338,866,981.54|1,659,450,461.01|1,604,888,868.85|

 6.23.2Disclosurebyclassificationofshort-termemployeebenefits
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|294,699,755.84|1,361,787,739.20|1,306,398,565.33|

Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
||34,742,576.93|34,742,576.93|
||52,904,383.00|52,904,383.00|
||41,980,836.58|41,980,836.58|
||3,389,859.48|3,389,859.48|
||4,433,873.37|4,433,873.37|
||3,099,813.57|3,099,813.57|
|12,032.40|52,701,741.30|52,522,645.30|
|28,008,193.30|16,363,064.27|20,282,741.98|
|16,147,000.00|19,060,000.00|16,147,000.00|
|338,866,981.54|1,537,559,504.70|1,482,997,912.54|

 6.23.3Disclosurebydefinedcontributionplan
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
||80,092,941.73|80,092,941.73|
||4,553,737.47|4,553,737.47|
||36,638,556.78|36,638,556.78|
||121,285,235.98|121,285,235.98|

Thecompany participated in basicpension and unemployment insurance inaccordance with the regulations. Based on the insurance program,apercentageoftotalwagesofemployeeswerepaidtotheaccountseparately.Exceptforthefeepaid,enterpriseannuitywas depositedtoannuitymanagementinstitutionbyapercentageofmonthlypaymentbase,whichwasdeterminedbysenioritypayandpost salary.
6.24Taxesandfeespayable
Tax(Fee) C/f B/f
Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|C/f|
|20,884.78|
|430,525.03|
|12,681.07|
|9,731.38|
|178,633.46|
|1,326,161.87|
|142,738.11|
|6,573,418.52|
|1,289,143.66|
|75,532,041.96|
|1,377,524.44|
|1,235,557.81|
|12,111.35|
|88,141,153.44|

 6.25Interestspayable
||
|-|
|C/f|
|2,468,241.23|
|12,910,833.33|
|15,379,074.56|

 6.26Otherpayables
6.26.1Disclosurebynature
||
|-|
|C/f|
|22,199,277.52|
|79,372,211.02|
|7,753,134.23|
|38,400,741.17|
|219,560,504.41|
|367,285,868.35|

Shandong Airlines Co., Ltd. Annual Report2014
6.26.2Significantotherpayablesdueformorethan1year
||
|-|
|Amount|
|20,000,000.00|
|20,000,000.00|

6.27Non-currentliabilitiesduewithinoneyear
||
|-|
|C/f|
|1,103,409,047.69|
|500,000,000.00|
|132,716,235.11|
|5,392,442.40|
|1,741,517,725.20|

 6.28Long-termborrowings
||
|-|
|C/f|
|2,906,304,546.97|
|1,416,548,500.00|
|1,103,409,047.69|
|3,219,443,999.28|

 Note:① ClassandamountofmortgageassetsseeNote6.52assetswithimposedrestrictiononownership.
②Interestratesoftheabove-mentionedlong-termborrowingsrangefrom1.0217%-5.8950%.
6.29Bondspayable
6.29.1Generalinformation
||
|-|
|C/f|

6.29.2Movement
Shandong Airlines Co., Ltd. Annual Report2014
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Bond|Facevalue|Issuedate|Term|Amountissued|Balanceatthebeginningofyear|Yearissued|Accruedinterestatpar|Overflowdiscountamortization|Repayment|
|Medium-termbond|500,000,000.00|2012-6-12|3Year|500,000,000.00|500,000,000.00||21,450,000.00||21,450,000.00|
|Subtotal|500,000,000.00|||500,000,000.00|500,000,000.00||21,450,000.00||21,450,000.00|
|ess:Long-termorrowingsdueithinoneyearNote6.27)||||||||||
|Total|500,000,000.00|||500,000,000.00|500,000,000.00||21,450,000.00||21,450,000.00|

 6.30Long-termpayables
||
|-|
|C/f|
|1,103,663,159.96|
|1,164,590,211.97|
|r132,716,235.11|
|55,979,439.00|
|2,079,557,697.82|

 Note:Maintenancepayablesforaircraftsandenginesheldunderoperatingleaseduewithinoneyearhadbeenincludedinaccounts payable.
6.31Long-termemployeebenefitspayable
6.31.1Generalinformation
||
|-|
|C/f|
|75,838,000.00|
|5,392,442.40|
|70,445,557.60|

6.31.2Movements
1 Definedbenefitobligation
Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|C/f|
|69,451,000.00|
|3,184,000.00|
|-8,083,000.00|
|4,880,000.00|
|75,838,000.00|

 2 ActuarialAssumptions
|||
|-|-|
|2012-12-31|2013-12-31|
|3.75%|4.75%|
|ChinaLifeInsuranceMortalityRate2000-2003(Annuity)||
|0.00%||
|0.00%||
|0.00%||

MedicalExpenseInflationRate 7.00%
6.32Deferredincome
Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|6,620,000.00||6,620,000.00|
|2,988,958.34||499,500.00|
|15,758,566.00||976,500.12|
|25,367,524.34||8,096,000.12|

 Detailsofgovernmentgrants:
|||||
|-|-|-|-|
|B/f|Currentyearincrease|theamountincludedinnon-operatingincomeforcurrentyear|Otherchanges|
|6,620,000.00||6,620,000.00||
|2,988,958.34||499,500.00||
|15,758,566.00||976,500.12||
|25,367,524.34||8,096,000.12||

 6.33Sharecapital
|||||||||
|-|-|-|-|-|-|-|-|
|B/f||Currencyyearmovement(+,-)||||||
|Amount|%|Shareissue|Bonusissue|Coversionfromreserves|Others|Subtotal|Amount|
|259,801,000.00|64.95||||||259,801,000.00|
|199,000.00|0.05||||||199,000.00|
|199,000.00|0.05||||||199,000.00|

Shandong Airlines Co., Ltd. Annual Report2014
|||||||||
|-|-|-|-|-|-|-|-|
|B/f||Currencyyearmovement(+,-)||||||
|Amount|%|Shareissue|Bonusissue|Coversionfromreserves|Others|Subtotal|Amount|
|260,000,000.00|65.00||||||260,000,000.00|
|140,000,000.00|35.00||||||140,000,000.00|
|140,000,000.00|35.00||||||140,000,000.00|
|400,000,000.00|100.00||||||400,000,000.00|

6.34Capitalreserves
||||
|-|-|-|
|B/f|Currentyear|Currentyear|

Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
||increase|decrease|
|67,618,282.54|||
|7,792,081.16|||
|75,410,363.70|||

 6.35Othercomprehensiveincome
|||||||
|-|-|-|-|-|-|
|B/f|Totalamountincurrentyear|||||
||Amountfortheyearbeforetax|Less:previouslyrecognisedinothercomprehensiveincometransferredintoprofitorloss|Less:Incometaxexpense|Aftertaxattributabletotheparentcompany|Aftertaxattributabletominorityshareholders|
|7,341,000.00|-8,083,000.00|||-8,083,000.00||
|7,341,000.00|-8,083,000.00|||-8,083,000.00||
|53,830,680.38|7,779,325.17||1,944,831.29|5,834,493.88||
|53,830,680.38|7,779,325.17||1,944,831.29|5,834,493.88||
|61,171,680.38|-303,674.83||1,944,831.29|-2,248,506.12||

6.36Surplusreserves
Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|289,670,385.70|28,580,471.70||
|289,670,385.70|28,580,471.70||

Notes:accordingtotheCompanyLawandtheArticlesofAssociation,10%ofnetprofitwastransferredtostatutorysurplusreserve. Thecompanymaymakeallocationstothediscretionarysurplusreservefromtheafter-taxprofitsaftermakingallocationstothestatutory surplus reserve from the after-tax profits.Approved surplus reserves can be released to recover losses or for conversion into share capital.
6.37Retainedearnings
||
|-|
|Currentyear|
|1,866,264,914.60|
|1,866,264,914.60|
|287,851,542.09|
|28,580,471.70|
|100,000,000.00|
|2,025,535,984.99|

 6.38Operatingrevenuesandcosts
6.38.1Generalinformation
||||
|-|-|-|
|Currentyear|||
|Operatingrevenues|Operatingcosts|Operatingrevenues|
|11,442,363,934.15|10,077,354,810.20|11,293,341,843.56|
|127,932,823.33|1,773,993.54|133,816,089.59|
|11,570,296,757.48|10,079,128,803.74|11,427,157,933.15|

 6.39Businesstaxandsurcharges
||
|-|
|Currentyear|
|7,148,331.96|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|13,286,772.81|
|11,335,325.71|
|31,770,430.48|

 Notes:ApplicableratesforbusinesstaxandsurchargesseeNote5Taxation.
6.40Salesexpenses
||
|-|
|Currentyear|
|451,489,391.04|
|142,485,006.21|
|77,900,227.82|
|28,464,805.79|
|15,972,346.77|
|18,274,913.68|
|6,550,566.36|
|5,541,835.18|
|4,000,474.93|
|10,181,647.75|
|2,568,462.82|
|1,662,419.39|
|24,817,245.23|
|789,909,342.97|

 6.41Generalandadministrativeexpenses
||
|-|
|Currentyear|
|114,177,550.09|
|18,422,232.82|
|8,255,858.90|
|12,263,673.56|
|11,554,770.47|
|9,288,651.11|
|4,924,479.33|
|4,261,738.78|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|50,879,822.24|
|234,028,777.30|

 6.42Financialcosts
||
|-|
|Currentyear|
|180,638,783.36|
|7,116,632.02|
|24,748,406.46|
|2,458,592.48|
|200,729,150.28|

 6.43Lossonassetimpairment
||
|-|
|Currentyear|
|1,172,475.85|
|1,172,475.85|

 6.44Gainfromchangesinfairvalue
||
|-|
|Currentyear|
|-1,262,808.30|
|-1,262,808.30|

 6.45Investmentincome
||
|-|
|Currentyear|
|2,650,554.69|
|-26,589,979.88|
|-2,101,079.54|
|-26,040,504.73|

 6.46Non-operatingincome
|||
|-|-|
|Currentyear|Prioryear|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Currentyear|Prioryear|
|9,115,183.68|78,847,533.50|
|9,115,183.68|78,847,533.50|
|161,105,606.12|175,163,283.77|
|36,970,937.19|16,397,152.34|
|207,191,726.99|270,407,969.61|

 Detailsofgovernmentgrants:
|||
|-|-|
|Currentyear|Prioryear|
|102,611,406.00|154,007,442.00|
|28,000,000.00||
|21,010,000.00||
|6,620,000.00||

Designatedsubsidyforsnowdisaster 499,500.00 499,500.00 relatedtotheassets Designatedsubsidyforcivilaviation 976,500.12 976,500.12 relatedtotheassets energy-savingprogram
|||
|-|-|
||4,709,541.65|
|1,388,200.00|14,970,300.00|
|161,105,606.12|175,163,283.77|

Note:Governmentgrantsaremainlyreferredtosubsidyincomereceivedfromgovernmentdepartments,whichwasusedtosupportthe developmentofaviationbusiness.
6.47Non-operatingexpenses
|||
|-|-|
|Currentyear|Prioryear|
|14,507,221.07|9,856,591.93|
|14,507,221.07|9,856,591.93|
|572,750.80|3,593,170.47|
|15,079,971.87|13,449,762.40|

6.48Incometaxexpenses
6.43.1Incometaxexpenses
Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|140,957,195.84|
|-30,442,518.98|
|110,514,676.86|

 6.43.2Reconciliationofaccountprofitandincometaxexpenses
Items Currentyear
Profitbeforetax 398,366,218.95 Incometaxcomputedinaccordancewiththeapplicabletaxrate 99,591,554.74 Impactofadjustmentforpriorperiodtaxexpenses 2,781,965.96 Impactofnon-taxableincome 5,984,856.30 Impactofnon-deductiblecosts,expensesandlosses 2,156,299.86 Incometaxexpenses 110,514,676.86 6.49Othercomprehensiveincome
PleaseseeNote6.35fordetail.
6.50Notestotheconsolidatedstatementofcashflows
6.50.1Othercashreceiptsrelatingtooperatingactivities
||
|-|
|Currentyear|
|153,009,606.00|
|7,116,632.02|
|36,970,937.19|
|176,843,429.51|
|373,940,604.72|

 6.50.2Othercashpaymentsrelatingtooperatingactivities
||
|-|
|Currentyear|
|30,923,398.27|
|572,750.80|
|66,766,074.58|
|181,365,485.21|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|279,627,708.86|

 6.50.3Othercashpaymentsrelatingtoinvestingactivities
||
|-|
|Currentyear|
|2,101,079.54|
|2,101,079.54|

 6.50.4Othercashreceiptsrelatingtofinancingactivities
||
|-|
|Currentyear|
|876,880,748.00|
|876,880,748.00|

 6.50.5Othercashpaymentsrelatingtofinancingactivities
||
|-|
|Currentyear|
|181,035,632.75|
|181,035,632.75|

 6.51Supplementaryinformationtotheconsolidatedstatementofcashflows
6.51.1Supplementaryinformationtothestatementofcashflows
||
|-|
|Currentyear|
|287,851,542.09|
|1,172,475.85|
|705,719,603.92|
|4,261,738.78|
|63,283,331.15|
|5,392,037.39|
|-|
|-1,262,808.30|
|202,203,189.82|
|26,040,504.73|
|-30,442,518.98|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|-|
|-4,178,299.10|
|-88,491,843.08|
|289,975,261.04|
|-1,696,000.00|
|1,459,828,215.31|
|342,855,221.91|
|460,741,336.35|
|444,522,271.21|
|16,219,065.14|

 6.51.2Compositionofcashandcashequivalents
||
|-|
|Currentyear|
|460,741,336.35|
|241,603.21|
|460,499,733.14|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|460,741,336.35|

Note:Cashandcashequivalentsexcludingrestrictedcashandcashequivalentsinparentcompanyorsubsidiary.
6.52Assetswithimposedrestrictiononownership
||
|-|
|C/f|
|3,154,851,053.22|
|3,154,851,053.22|
|1,310,753,026.61|
|1,310,753,026.61|
|4,465,604,079.83|

6.53Foreigncurrencymonetaryitems
6.53.1Foreigncurrencymonetaryitems
|||
|-|-|
|Originalamountasat31/12/2014|Foreignexchangerate|
|2,069,495.98|6.1190|
|625.00|7.4556|
|208.55|9.5437|
|10.00|5.2755|
|60,422,593.00|0.0057|
|4,832,077.00|0.1961|
|13,685,562.48|6.1190|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Originalamountasat31/12/2014|Foreignexchangerate|
|4,910,220.38|6.1190|
|20,513,867.35|6.1190|
|179,770,045.54|6.1190|
|493,520,603.74|6.1190|
|76,307,821.45|6.1190|

 Note7:Changeofscopeofconsolidation
Nochangeofscopeofconsolidationfromlastyear.
Note8:Theequityinothermainentities
8.1Theequityinsubsidiaries
8.1.1Theconstructionofthegroup
||||||
|-|-|-|-|-|
|Placeofoperation|Placeofregistration|Natureofbusiness|Holdingproportion%||
||||Directly|Indirectly|
|Qingdao,Shandong|Qingdao,Shandong|Logistics andstorage|100.00||
|Qingdao,Shandong|Qingdao,Shandong|Pilottraining|100.00||

Shandong Airlines Co., Ltd. Annual Report2014
||||||
|-|-|-|-|-|
|Placeofoperation|Placeofregistration|Natureofbusiness|Holdingproportion%||
||||Directly|Indirectly|

8.2Theequityinassociates
8.2.1Significantassociates
||||||
|-|-|-|-|-|
|Placeofoperation|Placeofregistration|Natureofbusiness|Holdingproportion%||
||||Directly|Indirectly|
|Jinan,Shandong|Jinan,Shandong|Aerotransportation|45.00||
|Jinan,Shandong|Jinan,Shandong|Aerotransportation|20.00||

8.2.2Keyfinancialinformationofsignificantassociates
||||
|-|-|-|
|2014.12.31/Year2014|||
|QingdaoAirlinesCo.|ShandongRainbowCommercialJetCo.,Ltd.|QingdaoAirlinesCo.|
|335,429,606.46|1,858,246.62|462,367,677.66|
|797,957,369.38|45,602.40|309,904,177.50|
|1,133,386,975.84|1,903,849.02|772,271,855.16|
|116,415,095.26|167,765,813.33|1,431,740.28|
|218,000,000.00|||
|334,415,095.26|167,765,813.33|1,431,740.28|
|798,971,880.58|-165,861,964.31|770,840,114.88|

Shandong Airlines Co., Ltd. Annual Report2014
||||
|-|-|-|
|2014.12.31/Year2014|||
|QingdaoAirlinesCo.|ShandongRainbowCommercialJetCo.,Ltd.|QingdaoAirlinesCo.|
|159,794,376.12|||
|13,615,644.00|||
|173,410,020.12|||
|229,712,981.25|||
|-171,868,234.30|-53,218.82|-29,159,885.12|
|-171,868,234.30||-29,159,885.12|

8.2.3Excesslossoccurredbyassociates
Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Cumulativeunrecognizedlossesofprioryear|Unrecognizedlossesofcurrentyear(Shareofnetprofitofcurrentyear)|
|-74,618,639.77|-19,244.17|

 Note9Theriskassociatedwithfinancialinstruments
ThemainfinancialinstrumentsoftheCompanyincludingequityinvestments,loans,accountsreceivable,accountspayableetc.,please seeNote6fordetailofrelateditems.Theriskassociatedwithfinancialinstruments,andriskmanagementpolicieswhichthecompany usetoreducetheserisksaredescribedbelow.ThemanagementoftheCompanymanagesandsupervisestheriskstoensurethatthe riskscanbecontrolledwithinalimitedrange.
SensitivityanalysistechniquesareadoptedbytheCompanytoanalysetheimpactofreaonsableandpossiblechangesofriskvariables ontheprofitandlossorshareholders'equityforthecurrentperiod.Whileriskvariablesseldomlychangeinisolation,andthecorrelation amongvariableswillhaveasignificanteffectontheultimateimpactofthechangeofoneriskvariable.Therefore,thefollowingcontentis basedontheassumptionthatchangesineachvariableisindependent.
9.1Thetargetsandpoliciesofrisksmanagement
The target of risks management is to obtain the proper balance between the risks and benefits, to reduce the negative impact that causedbytheriskoftheCompanytothelowestlevel,andtomaximizethebenefitsofshareholdersandotherequityinvestors.Basedon the targets of risk management, the basic strategy of theCompany’s risk management is to identify and analyse the risks whichare faced by the Company,establish suitable risk tolerance baseline and proceed the risk management, and supervise a variety of risks timelyandreliably,andcontroltheriskwithinalimitedrange.
9.1.1MarketRisk
(1)Foreignexchangerisk
Foreign exchange risk refers to the risk of loss due to exchange rate fluctuations generally. The company bears the foreign exchangeriskprimarilyconcernedwithUSD,andusesUSDforpricingorsettlementinthefieldofmainfinancingbusiness,operating leases,financingleasing.On31December2014,exceptthefollowingassetsorliabilitiesinNote6.54arerecordedinforeigncurrency, the others are recorded in CNY. Foreign exchange risk of the assets and liabilities in foreign currencies may have an impact on the Company'sperformanceofoperation.
(2)Interestraterisk-theriskofchangesincashflow
The risk of changes in cash flows of a financial instrument due to interest rate is mainly concerned with the floating rate of bank borrowings(seeNote6.28).Thecompany'spolicyistomaintainafloatinginterestrateontheborrowings.
(3)Otherpricerisk
Financial assets available for sale and financial assets held-for-trade held by the company should be measured at fair value on the
balancesheetdate.Forthereasonthat,thecompanybearstheriskofchangesinthestockmarket.
Shandong Airlines Co., Ltd. Annual Report2014
9.1.2.CreditRisk
Asatthestatementdate,themaximumriskthatcouldcausetheCompany’sfinanciallossesmainlycomesfromdefaultoftheotherparty ofthecontract,whichincludes:
The carrying amount of financial assets recognised in the Consolidated statement of financial position; for financial instruments measuredbyfairvalue,thebookvaluereflectsitsriskexposurebutnotthemaximumriskexposure,whichwillvarywithchangesinthe fairvalueinthefuture.
In order to reduce credit risk, the Company set up a team responsible for determination of credit limits, credit approvals and other monitoringprocedurestoensurethatthenecessarymeasuresbetakentorecoveroverduedebts.Inaddition,theCompanyreviewsthe recoverableamountofeachindividualtradedebtateachbalancesheetdatetoensurefullyprovisionforbaddebtsrecognisedforthemoneythatcannotberecovered.ThereforetheCompany'smanagementbelievestheCompany’screditriskhasbeengreatlyreduced. TheCompany'scirculatingfundsweredepositedinbankswithhighcreditratings,sothatthecreditriskofcirculatingfundswaslow. 9.1.3Liquidityrisk
When managing liquidity risk,theCompany’s management believes maintaining adequate cash and cash equivalents, and monitoring thatatsametime,inordertomeettheneedsofoperationoftheCompany,andtoreducetheimpactoffluctuationsincashflows.The managementoftheCompanymonitorstheuseofbankborrowingsandensuretoabidebyloanagreements.
BankloansaremajorsourcesofthefundfortheCompany.Bankborrowinglimitthathasnotbeenusedasof31December2014isCNY 9.8billionyuan.
Note10Disclosureofthefairvalue
10.1Thefairvalueattheendofcurrentyearofassetsandliabilitieswhicharemeasuredbyfairvalue
Thefairvalueattheendofcurrentyear
||||
|-|-|-|
|Thefirstlevelmeasuredbyfairvalue|Thesecondlevelmeasuredbyfairvalue|Thethirdlevelmeasuredbyfairvalue|
|86,243,565.68|||
|86,243,565.68|||
|86,243,565.68|||
||1,559,710.77||

Shandong Airlines Co., Ltd. Annual Report2014
Thefairvalueattheendofcurrentyear
||||
|-|-|-|
|Thefirstlevelmeasuredbyfairvalue|Thesecondlevelmeasuredbyfairvalue|Thethirdlevelmeasuredbyfairvalue|

Interestrateswaps
1,559,710.77 1,559,710.77
||
|-|
|1,559,710.77|

10.2Determinedonthebasisofcontinuousandnoncontinuousfirstlevelforfairvaluemeasurementofthemarketofproject Financialassetsavailableforsaleofcontinuousmeasurementby fairvalueistheinvestmentinTravelSkyTechnologyLimited,whose fairvaluewasdeterminedbasedontheclosingpriceforthestockmarketinHongKongStockExchangeonbalancesheetdate.
10.3 Determined on the basis of continuous and noncontinuous second level for fair value measurement of the market of project
Fairvaluemeasurementbasisofinterestrateswapswhichwascontinuouslymeasuredbyfairvalueisquotesfromcounterpartybanks onthefairvalueofinterestrateswaps.
Note11Relatedpartiesandrelatedpartytransaction
11.1Majorinvestors
|||||
|-|-|-|-|
|Placeofregistration|Natureofoperation|Registeredcapital|ShareholdingintheCompany(%)|
|Jinan|Investmentandmanagementofaerotransportation|580,000,000.00|42.00|
|Beijing|Aerotransportation|13,084,751,004.00|22.80|

 Note: SDA Group and Air China is the first and second largest shareholder of the Company respectively. Air China is the largestshareholderofSDAGroup;AirChina’sshareholdingandvotingrightinSDAGroupis49.406%and49.406%respectively.
11.2Subsidiaries
SeeNote8.1forsubsidiaries.
11.3Associates
SeeNote8.2forassociates.
11.4Otherrelatedparties
Otherrelatedparty RelationshiptotheCompany
Taikoo(Shandong)AircraftEngineeringCompanyLimited Controlledbymajorinvestors
ShandongXiangYuAirTechnologyCo.,Ltd. Controlledbymajorinvestors
Shandong Airlines Co., Ltd. Annual Report2014
ShenzhenAirlinesCo.,Ltd. Controlledbymajorinvestors
AirChinaCargoCo.,Ltd. Controlledbymajorinvestors
ChinaNationalAviationFinanceCo.,Ltd. Controlledbymajorinvestors
SichuanInternationalAeroEngineMaintenanceCo.,Ltd. Controlledbymajorinvestors
Aircraft Maintenance and Engineering Corporation (Ameco
Controlledbymajorinvestors
Beijing)
ChengfuFuKaiAircraftEngineeringCo.,Ltd. Controlledbymajorinvestors
11.5Relatedpartytransactions
11.5.1Purchaseofgoodsandservices
|||
|-|-|
|Transaction|Currentyear|
|Officeleaserentalandcatering|29,085,604.61|
|Aircraftmaintenance|75,512,104.46|
|Repairment|22,747,907.54|
|Groundservice|18,484,871.15|
|Repairment|39,671,050.51|
|Agencyservice|9,167,008.57|
|Trainingservice|2,436,000.00|
|Agencyservice|738,347.76|
|Groundservice|3,208,625.98|
|Repairment|2,468,009.66|
|Groundservice|10,334,412.87|
|Repairment|50,060,087.93|
|Repairment|2,857,811.64|
||266,771,842.68|

 11.5.2Salesofgoodsandvenderingofservices
|||
|-|-|
|Transaction|Currentyear|
|Flightsupport|713,251.80|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Groundservice|394,756.70|
|Agencyservice|3,076,989.28|
|Agencyservice|663,195.48|
|Groundservice|206,400.00|
|Flightsupport|3,616,450.03|
||8,671,043.29|

 11.5.3Leasebetweenrelatedparties
TheCompanyasleasee
|||
|-|-|
|Leasedasset|Leaserentalrecognizedforcurrentyear|
|Engines|1,458,293.72|
|Simulators|829,000.00|
|Aircrafts|16,100,000.00|
||18,387,293.72|

 11.5.4Assettransferbetweenrelatedparties
|||
|-|-|
|Typeoftransaction|Currentyear|
|Aeromaterialssales||

 11.5.5Remunerationtokeymanagementpersonel
||
|-|
|Currentyear|
|CNY 8.2579 million|

 11.5.6Otherrelatedpartytransactions
|||
|-|-|
|Transaction|Currentyear|
|Wetlease|607,814,935.00|
|Codesharing|-1,119,319.06|
|Frequentflyercooperation|35,000,000.00|
|Codesharingforcargo|1,875,601.67|

Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Transaction|Currentyear|
|RewardPointsTransfer||
||643,571,217.61|

 11.6Relatedpartybalances
11.6.1Receivables
||||
|-|-|-|
|C/f|||
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|51,318,792.65||123,439,238.90|
|||3,448,445.83|
|650,407.70||2,585,423.47|
|25,200.00||6,300.00|
|51,994,400.35||129,479,408.20|
|24,313,328.35|||
|5,932,722.00||13,047,895.61|
|2,500.00|125.00|75,900.00|
|101,551,717.65|101,551,717.65|101,551,717.65|
|16,867,219.43||5,862.79|
|105,672.00|283.60||
|860,829.14|||
|149,633,988.57|101,552,126.25|114,681,376.05|

 11.6.2Payables
||
|-|
|C/f|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|C/f|
|66,596.12|
|15,125,622.47|
|72,690,966.64|
|259,067.19|
|1,059,354.42|
|8,871,093.40|
|98,072,700.24|
|20,000,000.00|
|1,983,960.60|
|245,400.00|
|22,229,360.60|

 Note12Commitments
12.1Signifcantcommitments
12.1.1Capitalcommitment
||
|-|
|C/f|
|18,701,359,576.58|
|18,701,359,576.58|

12.1.2Operatinglease
Shandong Airlines Co., Ltd. Annual Report2014
Informationofirrevocableoperatingleasecontractsasatthereportingdate:
||
|-|
|C/f|
|1,368,087,024.48|
|1,347,682,200.48|
|1,245,295,690.02|
|6,864,607,194.13|
|10,825,672,109.11|

 12.1.3Othercommitment
NoothersignificantcommitmentsoftheCompanyneedtobedisclosedasat31/12/2014.
Note13Postbalancesheetdateevents
13.1Postbalancesheetdateprofitappropriation
TheProposal for ProfitAppropriation fortheYear ended31 December 2014 ofdistributingcashdividendofCNY 2.00(gross) per10 sharesforthe400millionsharesoutstandingasatthereportingdate,whichintotalamountstoCNY80million,wasapprovedbythe7th Meetingofthe5thTermofBoardofDirectorsoftheCompanyheldon19March2015;theProposalwas pendingtheapproval ofthe GeneralMeetingofstockholdersoftheCompany.
Note14Othersignificantevents
14.1PensionPlan
Nosignificantchangeoftheannuityprogramoccurredforcurrentyear,seenote6.23,6.31.
Note15Notestoelementsoftheseparatefinancialstatements
15.1Accountsreceivable
15.1.1Disclosurebycategory
C/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|139,181,872.21|63.58|||
|69,032,792.75|31.54|3,451,639.64|5.00|

Shandong Airlines Co., Ltd. Annual Report2014
|||||
|-|-|-|-|
|10,684,948.49|4.88|||
|218,899,613.45|100.00|3,451,639.64|1.58|

 (Continued)
B/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|179,936,813.57|73.02|||
|52,977,940.37|21.50|2,648,897.02|5.00|
|13,501,734.26|5.48|||
|246,416,488.20|100.00|2,648,897.02|1.07|

① Accountsreceivableofindividualsignificanceandsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|51,318,792.65|||
|48,929,027.68|||
|38,934,051.88|||
|139,181,872.21|||

② Accountsreceivablesubjecttoimpairmentassessmentbyportfolio
Portfolio C/f
Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|69,032,792.75|3,451,639.64|
|69,032,792.75|3,451,639.64|

③ Accountsreceivableofindividualinsignificancebutsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|303,926.06|||
|2,029,229.24|||
|1,860,556.49|||
|650,407.70|||
|25,200.00|||
|5,815,629.00|||
|10,684,948.49|||

15.1.2Recognisation,recoveryorreversalofallowanceforbaddebt
TheamountofallowanceforbaddebtsrecognisedduringtheyearisCNY802,742.62.
15.1.3Topfiveaccountsreceivablesbydebtors
The total amount of top five accounts receivables summarized by debtors as at the end of current year is CNY 152,664,082.06,accountingfor69.74%ofthetotalaccountsreceivableasattheendofcurrentyear,thetotalcorrespondingallowanceforbaddebtsis CNY674,110.49.
15.2Otherreceivables
15.2.1Disclosurebycategory
C/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|273,283,309.34|70.61|101,551,717.65|37.16|

Shandong Airlines Co., Ltd. Annual Report2014
|||||
|-|-|-|-|
|81,670,703.01|21.10|4,083,535.15|5.00|
|32,090,289.39|8.29|||
|387,044,301.74|100.00|105,635,252.80|27.29|

 (Continued)
B/f
|||||
|-|-|-|-|
|Carryingamount||Allowanceforbaddebt||
|Amount|%|Amount|%|
|185,011,727.43|47.99|101,551,717.65|54.89|
|112,409,411.93|29.16|5,620,470.60|5.00|
|88,116,339.86|22.86|||
|385,537,479.22|100.00|107,172,188.25|27.80|

① Otherreceivablesofindividualsignificanceandsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|101,551,717.65|101,551,717.65|100.00|
|46,131,325.25|||
|17,300,360.00|||
|41,354,563.28|||

Shandong Airlines Co., Ltd. Annual Report2014
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|24,313,328.35|||
|42,632,014.81|||
|273,283,309.34|101,551,717.65||

② Otherreceivablessubjecttoimpairmentassessmentbyportfolio
C/f
Portfolio
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|81,670,703.01|4,083,535.15|
|81,670,703.01|4,083,535.15|

③ Otherreceivablesofindividualinsignificancebutsubjecttoindividualimpairmentassessment
C/f
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|16,867,219.43|||
|5,932,722.00|||
|5,462,388.20|||
|1,226,900.00|||
|860,829.14|||
|490,736.00|||
|469,581.20|||

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|368,454.00|
|185,361.00|
|166,824.90|
|59,273.52|
|32,090,289.39|

15.5.2Recognisation,recoveryorreversalofallowanceforbaddebt
TheamountofallowanceforbaddebtsrecoveredorreversedduringthecurrentyearisCNY1,536,935.45.
15.5.3Disclosurebynature
||
|-|
|C/f|
|113,297,038.91|
|273,747,262.83|
|387,044,301.74|

 15.5.4Topfiveotherreceivables
|||||
|-|-|-|-|
|Nature|C/f|Aging|%|
|Others|101,551,717.65|Over3years|26.24|
|Others|49,803,933.02|Within1year|12.87|
|Deposits|46,131,325.25|Within1year|11.92|
|Deposits|41,354,563.28|Over3years|10.68|
|Others|24,313,328.35|Within1year|6.28|
||263,154,867.55||67.99|

 15.3Long-termequityinvestments
15.3.1Disclosurebycategory
||||||
|-|-|-|-|-|
|C/f|||||
|Carryingamount|Impairmentallowance|Netcarryingamount|Carryingamount|Impairmentallowance|

Shandong Airlines Co., Ltd. Annual Report2014
||||||
|-|-|-|-|-|
|C/f|||||
|Carryingamount|Impairmentallowance|Netcarryingamount|Carryingamount|Impairmentallowance|
|106,000,685.43||106,000,685.43|106,000,685.43||
|195,910,020.12|22,500,000.00|173,410,020.12|22,500,000.00|22,500,000.00|
|301,910,705.55|22,500,000.00|279,410,705.55|128,500,685.43|22,500,000.00|

 15.3.2Investmentsinsubsidiaries
||||||
|-|-|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|C/f|Allowancerecognized|
|48,323,205.97|||48,323,205.97||
|57,677,479.46|||57,677,479.46||
|106,000,685.43|||106,000,685.43||

15.3.3Investmentsinassociates
||||||
|-|-|-|-|-|
|B/f|||||
||Additionalinvestment|Investmentreduction|Investmentgainsandlossesrecognizedundertheequitymethod|Othercomprehensiveincomeadjustment|
|22,500,000.00|||||
||200,000,000.00||-26,589,979.88||
|22,500,000.00|200,000,000.00||-26,589,979.88||

Shandong Airlines Co., Ltd. Annual Report2014
(Continued)
|||||
|-|-|-|-|
|Currencyyearmovement(+,-)|||C/f|
|Declaredcashdividendsorprofits|Allowancerecognized|Others||
||||22,500,000.00|
||||173,410,020.12|
||||195,910,020.12|

 15.4Operatingrevenuesandcosts
||||
|-|-|-|
|Currentyear|||
|Operatingrevenues|Operatingcosts|Operatingrevenues|
|11,422,450,291.90|10,069,742,018.94|11,278,078,297.98|
|127,932,823.33|1,773,993.54|133,816,089.59|
|11,550,383,115.23|10,071,516,012.48|11,411,894,387.57|

 15.5Investmentincome
||
|-|
|Currentyear|
|2,650,554.69|
|-26,589,979.88|
|-2,101,079.54|
|-26,040,504.73|

 Note16Supplementaryinformation
16.1Non-recurringprofitandloss
||
|-|
|Currentyear|
|-5,392,037.39|
|-|
|161,105,606.12|
|-|

Shandong Airlines Co., Ltd. Annual Report2014
||
|-|
|Currentyear|
|-|
|-|
|-|
|-|
|-|
|-|
|-|
|-|
|-|
|-3,363,887.84|
|-|
|-|
|-|
|-|
|-|
|36,398,186.39|
|-|
|188,747,867.28|
|47,299,368.62|
|-|
|141,448,498.66|

Note:Positiveamountsandnegativeamountsinnon-recurringcategoriesmeanincomeandexpenseorlossrespectively.
TheCompanyrecognisednon-recurringcategoriesofactivitiesinaccodancewiththeExplanatoryAnnouncementregardingInformation
DisclosurebyPubliclyListedCompanyNo.1-Non-recurringProfitandLoss(ZhengjianhuiGonggao[2008]No.43).
16.2Rateofreturnonnetassetsandearningspershare
Shandong Airlines Co., Ltd. Annual Report2014
|||
|-|-|
|WeightedaveragerateofRONA||
||BasicEPS|
|10.33|0.72|
|5.25|0.37|

 16.3Supplementaryinformationrelatedtochangesinaccountingpolicies
Based on changes of accounting policies due to the implementation of 8 accounting standards such as CAS 2 - Long-term Equity Investments(Revisedin2014)issuedbyministryoffinancein2014,comparativefinancialstatementshavebeenretroactivelyrestated. Restatedconsolidatedbalancesheetsasat01/01/2013,31/12/2013areasfollows:
InRMB
|||||
|-|-|-|-|
|Item|2013-1-1|2013-12-31|2014-12-31|
|Currentassets:||||
|Monetaryfunds|155,417,742.97|444,522,271.21|460,741,336.35|
|Accountsreceivable|186,090,177.17|250,524,757.67|217,039,947.40|
|Accountspaidinadvance|56,927,205.61|88,182,040.98|138,893,259.40|
|Dividendreceivable||14,325,586.06|1,826,370.00|
|Otherreceivables|252,147,802.11|236,105,804.44|239,160,662.84|
|Inventories|116,944,913.89|107,973,473.35|112,151,772.45|
|Dividedintoassetsheldforsale|||91,522,334.40|
|Othercurrentassets||71,828,962.65|108,805,651.21|
|Totalcurrentassets|767,527,841.75|1,213,462,896.36|1,370,141,334.05|
|Non-currentassets:||||
|Financeassetavailableforsales|125,454,786.81|160,126,340.51|167,905,665.68|
|Long-termequityinvestment|||173,410,020.12|
|Fixedassets|8,132,786,866.22|7,564,658,140.23|6,923,262,003.49|
|Constructioninprogress|1,430,885,814.11|1,647,915,995.78|2,437,585,905.29|
|Intangibleassets|78,814,771.55|101,127,636.82|120,544,428.04|
|Goodwill|10,220,816.22|||
|Long-termexpensestobe|301,867,908.75|347,945,540.61|397,258,983.43|

Shandong Airlines Co., Ltd. Annual Report2014
|||||
|-|-|-|-|
|apportioned||||
|Deferredincometaxasset|450,885,311.43|439,662,119.02|470,104,638.00|
|Othernon-currentasset|||58,654,642.41|
|Totalnon-currentasset|10,530,916,275.09|10,261,435,772.97|10,748,726,286.46|
|Totalassets|11,298,444,116.84|11,474,898,669.33|12,118,867,620.51|
|Currentliabilities:||||
|Short-termloans|321,378,829.28|434,137,220.00||
|Financialliabilitymeasuredbyfairvalueandwithvariationreckonedintocurrentgains/losses|7,198,783.59|296,902.47|1,559,710.77|
|Notespayable|100,000.00||58,412,417.22|
|Accountspayable|950,968,778.60|1,132,126,690.25|890,345,747.24|
|Accountsreceivedinadvance|215,107,573.13|343,468,052.97|278,057,859.34|
|Wagepayable|343,703,794.71|338,866,981.54|393,428,573.70|
|Taxespayable|229,684,478.03|110,064,437.61|88,141,153.44|
|Interestpayable|16,466,095.25|16,064,294.43|15,379,074.56|
|Dividendpayable|11,940.00|11,940.00|11,940.00|
|Otheraccountspayable|210,075,013.94|193,868,858.34|367,285,868.35|
|Non-currentliabilitiesduewithin1year|396,459,521.87|538,030,658.42|1,741,517,725.20|
|Totalcurrentliabilities|2,691,154,808.40|3,106,936,036.03|3,834,140,069.82|
|Non-currentliabilities:||||
|Long-termloans|3,854,676,638.03|3,525,047,206.06|3,219,443,999.28|
|Bondspayable|500,000,000.00|500,000,000.00||
|Long-termaccountpayable|1,554,204,331.04|1,542,515,998.39|2,079,557,697.82|
|Long-termwagespayable|73,946,000.00|64,571,000.00|70,445,557.60|
|Deferredincome|186,135,800.28|25,367,524.34|17,271,524.22|
|Deferredincometaxliabilities|9,275,671.70|17,943,560.13|19,888,391.42|
|Othernon-currentliabilities|6,178,238,441.05|5,675,445,288.92|5,406,607,170.34|
|Totalliabilities|8,869,393,249.45|8,782,381,324.95|9,240,747,240.16|
|Owner’sequity:||||
|Sharecapital)|400,000,000.00|400,000,000.00|400,000,000.00|

Shandong Airlines Co., Ltd. Annual Report2014
|||||
|-|-|-|-|
|Capitalpublicreserve|75,410,363.70|75,410,363.70|75,410,363.70|
|Othercomprehensiveincome|27,827,015.11|61,171,680.38|58,923,174.26|
|Surpluspublicreserve|249,859,599.31|289,670,385.70|318,250,857.40|
|Retainedprofit|1,675,953,889.27|1,866,264,914.60|2,025,535,984.99|
|Totalowner’sequityattributabletoparentcompany|2,429,050,867.39|2,692,517,344.38|2,878,120,380.35|
|Totalowner’sequity|2,429,050,867.39|2,692,517,344.38|2,878,120,380.35|
|Totalliabilitiesandowner’sequity|11,298,444,116.84|11,474,898,669.33|12,118,867,620.51|

ShandongAirlinesCo.,Ltd.AnnualReport2014 Section XII. Documents available for Reference
1.FinancialstatementscarryingthepersonalsignaturesandsealsofChairmanoftheBoard,ChiefAccountantand PersoninChargeofAccountingDepartment;
2. OriginalofAuditors’Report carrying the seals of Certified Public Accountants as well as personal signatures andsealsofcertifiedpublicaccountants;
3. Originals of all documents and notices publicly disclosed on newspapers designated by CSRC in the report periodin2014;
4. The Company will offer above documents for reference timely provided that CSRC or Stock Exchange demandsorshareholdersrequiresaccordingtotheregulationsandArticlesofAssociation.