SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 ANNUAL REPORT 2013
March 2014
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Contents
Section I Important Notice andParaphrase....................................................................................1 Section II Company Profile...............................................................................................................4 Section IIIAccountingdata and summary offinnaical indexes....................................................6 Section IVReport of theBoard ofDirectors....................................................................................9 SectionVImportantEvents............................................................................................................21 SectionVIChanges insharesand particularaboutshareholders...............................................27 SectionVII Particulars aboutDirectors, Supervisors,SeniorExecutives andEmployees........31 SectionVIIICorporate Governance...............................................................................................40 Section IX Internal Control.............................................................................................................45 Section XFinancial Report..............................................................................................................48 Section XI Documents availableforreference.............................................................................168
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 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. Director Mr. Wang Mingyuan absent the Meeting due to business and authorized Deputy Chairman Mr. Ma Chongxian for voting;independent director Mr.Wang kaiyuan submit his resignation,absent theMeeting；other directors attend the Meeting. The profit distribution plan that deliberated and approved by the Board is: based on total stock issue of the Company dated 31 December 2013, distributed 2.50 Yuan (tax included) bonus in cash for every 10-share hold by all shareholders, 00 shares bonus issued (tax included) and no capitalizing of common reserves carried out.
Zhang Xingfu, 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 2013 Annual Report is authentic, accurate and complete.
Concerning the forward-looking statements of future situation prediction and business planning involved in the Report, they do not constitute a substantial commitment for investors. Investors are advised to exercise caution of investment risks.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Paraphrase
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|-|-|-|
|Items|Refersto|Contents|
|TheCompany,Company|Refersto|ShandongAirlinesCo.,Ltd.|
|SDA|Refersto|ShandongAviationGroup;thefirstlargestshareholderandcontrollingshareholderoftheCompany|
|AirChina|Refersto|AirChinaLimited,thesecondlargestshareholderoftheCompany|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 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. ANNUALREPORT2013 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|ZhangXingfu|||
|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. ANNUALREPORT2013
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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
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|-|-|-|-|-|-|
||Dateforregistration|Placeforregistration|RegistrationNO.forenterpriselegallicense|No.oftaxationregistration|Organizationcode|
|Initialregistration|1999-12-13|ShandongAdministrationforIndustry&Commerce|370000400002351|370112720721201|72072120-1|
|Registrationatendofreportperiod|2013-03-22|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,YangYunhui|

SponsorengagedbytheCompanyforperformingcontinuoussupervisiondutiesinreportingperiod
□Applicable√Notapplicable
FinancialconsultantengagedbytheCompanyforperformingcontinuoussupervisiondutiesinreportingperiod
□Applicable√Notapplicable
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section III. Accounting data and summary of financial indexes I.Main accounting data andfinancialindexes
Whetherithasretroactiveadjustmentorre-statementonpreviousaccountingdataforaccountingpolicychangedandaccounting errorcorrectionornot
□Yes√No
||||||
|-|-|-|-|-|
||2013|2012|Changesoverlastyear(%)|2011|
|Operatingincome(RMB)|11,427,157,933.15|10,993,024,914.41|3.95%|9,666,969,745.20|
|Net profit attributable toshareholders of the listedcompany(RMB)|389,081,811.72|589,810,932.47|-34.03%|771,225,549.05|
|Net profit attributable toshareholdersof thelisted companyafterdeductingnon-recurringgainsandlosses(RMB)|137,850,318.37|490,146,637.15|-71.88%|751,635,820.83|
|Net cash flow arising fromoperatingactivities(RMB)|1,411,186,522.15|1,726,317,500.75|-18.25%|2,245,050,664.90|
|Basicearningspershare(RMB/Share)|0.97|1.47|-34.01%|1.93|
|Dilutedearningspershare(RMB/Share)|0.97|1.47|-34.01%|1.93|
|WeightedaverageROE(%)|15.08%|26.36%|11.28percentagedown|45.05%|
||Endof2013|Endof2012|Changesoverendoflastyear(%)|Endof2011|
|Totalassets(RMB)|11,403,124,428.82|11,261,341,430.03|1.26%|9,772,985,545.97|
|Netassetsattributabletoshareholderoflistedcompany(RMB)|2,708,137,664.00|2,479,055,852.28|9.24%|2,049,244,919.81|

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)
In RMB
|||
|-|-|
|Netprofitattributabletoshareholdersoflisted|Netassetsattributabletoshareholdersoflisted|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
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|-|-|-|-|-|
||company||company||
||Amountinthisperiod|Amountinlastperiod|Amountatperiod-end|Amountatperiod-begin|
|ChineseGAAP|389,081,811.72|589,810,932.47|2,708,137,664.00|2,479,055,852.28|
|ItemsandamountadjustedbyIAS|||||

2. Difference of the net profit and net assets disclosed in financial report, under both foreign accounting rulesandChineseGAAP(GenerallyAcceptedAccountingPrinciples)
InRMB
||||||
|-|-|-|-|-|
||Netprofitattributabletoshareholdersoflistedcompany||Netassetsattributabletoshareholdersoflistedcompany||
||Amountinthisperiod|Amountinlastperiod|Amountatperiod-end|Amountatperiod-begin|
|ChineseGAAP|389,081,811.72|589,810,932.47|2,708,137,664.00|2,479,055,852.28|
|Itemsandamountadjustedbyforeignaccountingrules|||||

III. Items andamounts ofextraordinary profit(gains)/loss
InRMB
||||||
|-|-|-|-|-|
|Item|2013|2012|2011|Note|
|Gains/losses from the disposal ofnon-current asset (including the write-offthataccruedforimpairmentofassets)|68,990,941.57|-6,848,192.53|-9,599,890.07||
|Governmentalsubsidyreckonedintocurrentgains/losses (not including the subsidyenjoyed in quota or ration according tonational standards, which are closelyrelevanttoenterprise’sbusiness)|22,465,841.77|52,137,058.47|21,698,008.50||
|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 financialassets available for sales, excluded effectivehedging business relevant with normaloperationsoftheCompany|4,292,356.41|-6,906,114.54|-10,862,464.69||
|Reversal of impairment reserve for accountreceivablewithseparateimpairmenttesting|7,500,000.00||||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
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|-|-|-|-|-|
|Othernon-operatingincomeandexpenditureexceptfortheaforementioneditems|165,501,423.87|94,505,753.93|24,964,169.47||
|Other gains/losses satisfied definition ofextraordinaryprofit(gains)/loss|67,342,734.17||||
|Less:Impactonincometax|84,861,804.44|33,224,210.01|6,751,319.93||
|Impact on minority shareholders’ equity(post-tax)|||-141,224.94||
|Total|251,231,493.35|99,664,295.32|19,589,728.22|--|

Concerning the extraordinary profit (gain)/loss defined byQ&A Announcement No.1 on Information Disclosure for Companies OfferingTheirSecuritiestothePublic---ExtraordinaryProfit/loss,andtheitemsdefinedasrecurringprofit(gain)/lossaccordingto the lists of extraordinary profit (gain)/loss inQ&A Announcement No.1 on Information Disclosure for Companies Offering Their SecuritiestothePublic---ExtraordinaryProfit/loss,explainreasons
□Applicable√Notapplicable
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section IV. Report of the Board of Directors
I.Introduction
In 2013, the Company calmly coped with the complex and severe situation of safety and benefits, scientifically deliberated the decisions, optimized and enhanced the management, united and worked hard, and overcome the challenges so that the safety, operation, benefits and services have maintained a good momentum, achieved a steady and rapid development, and obtained the hard-wonbusinessperformance.
I.Continuetostrengthenthesafetymanagement,andsafetyproductionsituationisbasicallystable
In 2013, the Companies guaranteed the safety flight of 257,600 hours and138,000 sorties, respectively increased by12.79% and12.41%yearonyear,andnotransportandaviationaccidentpronenesscausedbythecompanyoccurred;furtherclarifiedthesafety leadershipresponsibilities,detailedthesafetyregulatoryresponsibility,implementedthesecuritypostsresponsibility,andcontinued to strengthen the security infrastructure; fully launched the safety production checking and soundly developed the key special renovationinaccordancewiththeprincipleof"fullcoverage,zerotolerance,strictlawenforcement,andpragmatics"andguidingby "fiveasks"and"threechecks".
II.Optimizeandadjustthetransportcontrolsystem,theproductionrunsproperly
In2013,theCompany’saverageflightpunctualityratewas78.17%,rankedthirdinthecivilaviation;establishedthenewoperation and control center, the construction of the transport and control management system has achieved initial success; established and improved the policy standards relevant to the normal flight management, the normal flight management advanced steadily;successfullycompletedtheairtransportguaranteemissionin"twosessions","tenArtsFestival",nationaldefense,andYa’andisaster relief.
III.Activelyandappropriatelyorganizetheproduction,andmaintainapreferableincomelevel
In 2013, the company completed the total transport turnover volume of 1,757,467,100 tons km, the passenger transport volume of 14,035,800 person-time, total mail volume 130,800 tons, respectively increased by10.42%,12.08%, and5.72% year on year; achieved operating income of 11,427,157,933.15 Yuan, increase by3.95% year on year, net profit of 389,081,811.72 Yuan,decreasedby34.03%yearonyear;thepassengerloadfactorwas77.76%,decreasedby1.31%yearonyear,andthecargoandmail load factor was46.69%, decreased by1.78% year on year; the company continued to optimize the flight schedules and the airline network, gradually increased the flight numbers among the three bases so that the synergistic effect has gradually revealed; made progress in product innovation and channel development, and achieved remarkable results in increasing revenue and reducing expenditure.
IV.Continuouslyimprovetheserviceprocess,andtheservicequalityhasbeenimproved
In2013,thecompany'sserviceprocessandstandardoptimizationhavebeenstronglyboosted,theimprovementfortheserviceshort slabmadeprogress;overallpassengersatisfactionsurveyscorereached89.72,increasedby0.34scoresyearonyear,whichwas1.72 scoresmorethanthetargetatthebeginningoftheyear;thevalidcustomercomplaintratewas0.486pertenthousandperson-time, whichcompletedthetargetthecompanymadeatthebeginningoftheyear;thebrandvalueincreasedto15.286billionYuan,ranked 121intherankingofChina's500mostvaluablebrands,andranked15aheadcomparedtothelastyear.
Operationdatasummary:
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Index 2013 2012 Changes
Totalt-kmloadrate(10thousandt-km)175746.71 159165.58 10.42%
Volume of passenger traffic (101403.58 1252.30 12.08%
thousandpassengers)
Cargo& mail traffic volume (1013.08 12.38 5.72%
thousandtons)
Flyingkm(onemillionkm) 145.29 130.80 11.08%
Flyinghours(10thousandhours) 25.76 22.84 12.79%
Numberofflight(10thousandtimes) 13.80 12.28 12.41%
PLF(passengerloadfactor) 77.76% 79.07% 1.31percentagepointsdown
Cargo&MailOLF(overallloadfactor)46.69% 48.47% 1.78percentagepointsdown
InthePeriod,totallyfifthteenB737-800aircraftsareintroducedbytheCompanyandfiveB737-300aircraftsareoutofservices. Upto31December2013,theCompanyoperates72aircraftsintotalandthefleetdistributionbelow
Model Numbers Averageserviceage(Year)
737-300 2
737-700 3
737-800 60 4.66-year
CRJ-200 5
CRJ-700 2
II. Main business analysis
1.Introduction
Reasonsfordifferenceofactualoperationperformancehas20%lowerorhigherthanprofitforecastoftheYeardisclosed
□Applicable√Notapplicable
2.Revenue
Changesofrevenueforyearof2013
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|-|-|-|-|
|Item|2013|2012|+,-(%)|
|Airtransportservice|11,246,302,839.28|10,854,936,532.36|3.61%|
|Logisticsfreightservice|8,642,617.01|6,503,978.44|32.88%|
|Hotel&cateringservice|32,879,987.03|25,811,523.03|27.38%|
|Trainingservice|22,194,939.18|17,978,025.13|23.46%|

 MajorclientsoftheCompanyinsales
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|-|-|
|Totaltopfiveclientsinsales(RMB)|681,700,941.89|
|Proportionintotalannualsalesvolumefortopfiveclients(%)|5.97%|

TopfiveclientsoftheCompany
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|-|-|-|-|
|Serial|Name|Sales(RMB)|Proportionintotalannualsales(%)|
|1|Client1|608,056,192.19|5.32%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
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|-|-|-|-|
|2|Client2|38,080,992.43|0.33%|
|3|Client3|23,320,427.72|0.2%|
|4|Client4|6,439,020.00|0.06%|
|5|Client5|5,804,309.55|0.05%|
|Total|--|681,700,941.89|5.97%|

 3.Cost
Industryclassification
InRMB
||||||||
|-|-|-|-|-|-|-|
|Industryclassification|Item|2013||2012||Y-o-ychanges(%)|
|||Amount|Ratioinoperationcost(%)|Amount|Ratioinoperationcost(%)||
|Airtransportservice|Aviationfuelconsumption|3,854,933,435.85|39.87%|3,687,585,645.45|43.18%|4.54%|
||Take-off&landingfees|1,155,209,250.95|11.95%|999,261,514.62|11.7%|15.61%|
||Employee’ssalary|1,077,378,712.69|11.15%|898,563,294.36|10.52%|19.9%|
||Depreciationofaircraftandengine|723,612,575.70|7.49%|664,835,417.04|7.79%|8.84%|
||Other|2,855,740,816.76|29.54%|2,289,633,555.10|26.81%|24.72%|
||Total|9,666,874,791.95|100%|8,539,879,426.57|100%|13.2%|
|Logisticsfreightservice|Employee’ssalary|2,072,808.90|31.91%|2,367,694.16|73.31%|-12.45%|
||Other|4,423,145.29|68.09%|861,921.02|26.69%|413.17%|
||Total|6,495,954.19|100%|3,229,615.18|100%|101.14%|
|Hotel&cateringservice|Rawmaterials|16,936,712.26|58.01%|12,654,174.46|53.61%|33.84%|
||Employee’ssalary|4,840,025.55|16.58%|4,065,297.58|17.22%|19.06%|
||Depreciation|976,617.70|3.35%|1,946,475.49|8.25%|-49.83%|
||Other|6,438,210.38|22.06%|4,937,432.41|20.92%|30.40%|
||Total|29,191,565.89|100%|23,603,379.94|100%|23.68%|
|Trainingservice|Depreciation|4,849,087.29|69.68%|4,849,008.75|52.78%|0%|
||Other|2,109,547.19|30.32%|4,338,887.30|47.22%|-51.38%|
||Total|6,958,634.48|100%|9,187,896.05|1%|-24.26%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 MainsuppliersoftheCompany
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|-|-|
|Totalpurchaseamountfromtopfivesuppliers(RMB)|2,658,698,047.78|
|Proportionintotalannualpurchaseamountfortopfivesuppliers(%)|39.07%|

TopfivesuppliersoftheCompany
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|-|-|-|-|
|Serial|Name|Purchases(RMB)|Proportionintotalannualpurchase(%)|
|1|EastChinaBranchofChinaAviationFuelCo.,Ltd.|1,501,280,256.35|22.06%|
|2|QingdaoBranchofChinaAviationFuelCo.,Ltd.|597,139,475.37|8.77%|
|3|Xi’anBranchofChinaAviationFuelCo.,Ltd.|208,558,583.66|3.06%|
|4|ChinaNationalAviationFuelYantaiCo.,Ltd.|207,345,975.70|3.05%|
|5|SichuanInternationalAirlinesEnginemaintenanceCo.,Ltd.|144,373,756.70|2.12%|
|Total|--|2,658,698,047.78|39.07%|

 4.Expenses
Changesofexpensesforyearof2013
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|-|-|-|-|-|
|Item|2013|2012|+,-(%)|Reasonforchanges|
|Salesexpenses|775,204,419.75|745,690,102.02|3.96%||
|Administrativeexpenses|225,319,947.49|238,415,387.65|-5.49%||
|Financialexpenses|142,819,611.58|243,510,475.66|-41.35%|ExchangegainincreasedduetotheYuanappreciatedagainsttheU.S.DollarintheYear|

5.Cashflow
InRMB
|||||
|-|-|-|-|
|Item|2013|2012|Y-o-ychanges(%)|
|Subtotalofcashin-flowfromoperationactivity|12,120,664,358.85|11,096,910,018.70|9.23%|
|Subtotalofcashout-flowfromoperationactivity|10,709,477,836.70|9,370,592,517.95|14.29%|
|Netcashflowfromoperation|1,411,186,522.15|1,726,317,500.75|-18.25%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
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|-|-|-|-|
|activity||||
|Subtotalofcashin-flowfrominvestmentactivity|177,128,657.92|16,330,092.70|984.68%|
|Subtotalofcashout-flowfrominvestmentactivity|1,725,696,472.77|2,235,679,998.05|-22.81%|
|Netcashflowfrominvestmentactivity|-1,548,567,814.85|-2,219,349,905.35|-30.22%|
|Subtotalofcashin-flowfromfinancingactivity|2,611,008,010.20|2,184,628,004.62|19.52%|
|Subtotalofcashout-flowfromfinancingactivity|2,183,736,323.48|1,777,690,780.12|22.84%|
|Netcashflowfromfinancingactivity|427,271,686.72|406,937,224.50|5%|
|Netincreasedamountofcashandcashequivalent|289,134,528.24|-84,798,004.51|-440.97%|

Reasonsfory-o-yrelevantdatawithover30%changes
||||||
|-|-|-|-|-|
|Item|2013|2012|+,-(%)|Reasonforchanges|
|Cashreceivedconcernedwithotheroperationactivity|298,723,497.82|138,366,954.40|115.89%|The route subsidies increased andmargincollectedintheyear|
|Cashreceivedfrominvestmentincome|2,447,115.15|16,247,366.84|-84.94%|Thedividendsobtainedfromforeigninvestment enterprise decreasedy-o-y|
|Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets|174,681,542.77|82,725.86|211057.12%|Disposal income for two aircraft of737-300 were collected andinsurance compensation for aircraftB2995obtainedintheyear|
|Cashpaidconcernedwithotherinvestmentactivity|2,609,524.71|1,852,852.05|40.84%|Expenditure of actual delivery ofrate swap contract increased overthatofsameperiodoflastyear|
|Cashreceivedfrombondsissued||500,000,000.00|-100.00%|Mediumtermnoteissuedlastyear|
|Cashreceivedconcernedwithotherfinancingactivity|903,064,822.94|7,470,000.00|11989.22%|Theoriginalpurchasementrightcostof the aircraft that transfer tooperatingleasewasreceived|
|Impactoncashandcashequivalentfromchangesofexchangerate|-755,865.78|1,297,175.59|-158.27%|ExchangerateofRMBagainstforeigncurrencychanged|

ReasonsofmajordifferencebetweenthecashflowofoperationactivityinreportperiodandnetprofitoftheCompany
□Applicable√Notapplicable
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 III. Composition ofmain business
InRMB
||||||||
|-|-|-|-|-|-|-|
||Operatingrevenue|Operatingcost|Grossprofitratio(%)|Increase/decreaseofoperatingrevenuey-o-y(%)|Increase/decreaseofoperatingcosty-o-y(%)|Increase/decreaseofgrossprofitratioy-o-y(%)|
|Accordingtoindustries|||||||
|Airtransportservice|11,232,141,639.73|9,666,874,791.95|13.94%|3.56%|13.2%|-7.32%|
|Hotel&cateringservice|30,362,647.64|27,348,610.96|9.93%|37.27%|40.27%|-1.93%|
|Trainingservice|22,194,939.18|6,958,634.48|68.65%|23.46%|-24.26%|19.76%|
|Logisticsfreightservice|8,642,617.01|6,495,954.19|24.84%|32.88%|101.14%|-25.5%|
|Accordingtoregion|||||||
|InChina|10,932,329,826.34|9,416,947,236.40|13.86%|3.33%|12.82%|-7.25%|
|H.K.,MacaoandTaiwan|209,330,865.91|159,304,843.31|23.9%|10.84%|11.58%|-0.5%|
|International|151,681,151.31|131,425,911.87|13.35%|22.35%|59.8%|-20.31%|

 Undercircumstancesofadjustmentinreportingperiodforstatisticscopeofmainbusinessdata,adjustedmainbusinessbasedonlatestoneyear’sscopeofperiod-end
□Applicable√Notapplicable
IV.Assets andliability analysis
1.Majorchangesofassets
InRMB
||||||||
|-|-|-|-|-|-|-|
||Endof2013||Endof2012||Ratiochanges(%)|Notesofmajorchanges|
||Amount|Ratiointotalassets(%)|Amount|Ratiointotalassets(%)|||
|Monetaryfund|444,522,271.21|3.9%|155,417,742.97|1.38%|2.52%|Cashreceivedwithfinancingactivitiesconcernedincreasedintheyear|
|Accountreceivable|250,524,757.67|2.2%|186,090,177.17|1.65%|0.55%|ReceivableaccountforwetleasefromAirChinaincreasedintheyear|
|Inventory|107,973,473.35|0.95%|116,944,913.89|1.04%|-0.09%||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|Long-termequityinvestment|88,352,100.00|0.77%|88,352,100.00|0.78%|-0.01%|
|Fixassets|7,564,658,140.23|66.34%|8,132,786,866.22|72.22%|-5.88%|
|Constructioninprogress|1,647,915,995.78|14.45%|1,430,885,814.11|12.71%|1.74%|

2.Majorchangesofliability
InRMB
||||||||
|-|-|-|-|-|-|-|
||2013||2012||Ratiochanges(%)|Notesofmajorchanges|
||Amount|Ratiointotalassets(%)|Amount|Ratiointotalassets(%)|||
|Short-termloans|434,137,220.00|3.81%|321,378,829.28|2.85%|0.96%|Newshort-termloanshavenotexpiredintheyearyet|
|Long-termloans|3,525,047,206.06|30.91%|3,854,676,638.03|34.23%|-3.32%||

3.Assetsandliabilitymeasurebyfairvalue
InRMB
|||||||||
|-|-|-|-|-|-|-|-|
|Item|Openingamount|Gains/lossesofchangesinfairvalue|Accumulativechangesinfairvaluereckonedintoequity|Impairmentaccrualinthisperiod|Amountpurchasedinthisperiod|Saleamount|Closingamount|
|Financialassets||||||||
|Financialliability|7,198,783.59|-6,901,881.12|0.00|0.00|0.00|0.00|296,902.47|

WhethertherehavemajorchangesonmeasurementattributesformainassetsoftheCompanyinreportperiodornot
□Yes√No
V. Investmentanalysis
1.Foreignequityinvestment
||||
|-|-|-|
|Investedcompany|||
|Name|Mainbusiness|Proportionofequityininvestedcompanyforlistedcompany(%)|
|QingdaoInternationalAviationLogisticsCenterCo.,Ltd.|Aircargowarehousing,grounddelivery|100%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|QingdaoFeishengInternationalAviationTechnologyDevelopmentTrainingCo.,Ltd.|Pilottraining|100%|
|ShandongRainbowCorporateAircraftCo.,Ltd.|Airtransport|45%|
|TravelSkyTechnologyLimited|Civilaviationinformationtechnologyservice|0.45%|
|SichuanAirlinesCo.,Ltd.|Airtransport|10%|
|JinanInternationalAirportCo.,Ltd.|Civilairport|2.53%|

 2.Useoffundraised
Inreportingperiod,therearenofundsraisedorfundraisedinpreviousthatlasttothisperiod.
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|104,996,495.81|42,548,761.70|13,523,527.22|-504,680.36|-394,691.79|
|QingdaoFeishengInternationalAviationTechnologyDevelopmentTrainingCo.,Ltd.|Subsidiary|Pilottraining|Pilottraining|51,545,500.00|72,424,256.34|70,429,810.65|10,347,822.88|3,346,243.92|2,501,878.24|
|ShandongRainbowCorporateAircraftCo.,Ltd.|Stock-jointlycompany|Airtransportindustry|Airtransport|50,000,000.00|2,119,218.84|-165,812,199.49||-1,129,654.01|-2,321,195.73|

Particularaboutsubsidiariesobtainedordisposedinreportperiod
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013□Applicable√Notapplicable
VI.Special purposevehicle controlled by theCompany
NospecialpurposevehiclecontrolledbytheCompany
VII. Prospect forfuture developmentofthe Company
In2014,theeconomicdevelopmentwillcontinuetomakeprogresswhilemaintainingstability,andthecomprehensiveanddeepened renovationwillbringnewopportunitiestodevelopment. Thecompetitionbothinsideandoutsideoftheindustrywill increase, andthehigh-growthandlowfareswillbecometheindustrynormalcy.Fromthepassengers’demand,themarketspaceisstillthere,but thesourcestructurewill continueto change. Fromtheindustrysupplyside, theintroductionspeed oftheaircraft isstill morethan two-digit number, but the relative surplus of transport capacity will continue. From the external competition perspective, "four vertical and four horizontal" high-speed rail network will fully open, and the passenger diversion effect will further increase. In addition, the fluctuations in international oil prices and exchange rate are difficult to grasp, and the peripheral security situation is complicated.Asitwere,theinternalandexternalcompetitionintheaircraftindustrywillgraduallybecomemorecomplex,thelow fare will continuefor a long time, so thecompany needsto constantly innovateand develop so asto meet the requirements of the marketchanges.
Inordertocopewiththecomplicatedinternalandexternalbusinessenvironmentandensuretherealizationofstrategictargetandthe completionofworktasks,theCompanywilladheretothemainkeytoneofthe"fourunwavering"in2014:First,adheretothestableoperationanddon’twaver.Grasptherelationshipbetweensafetyandefficiency,andsafetyandservices,andfirmlyestablishtheidea of "safety first". Second, adhere to the structural optimization anddon’t waver. Structural optimization is the fundamental aspect related to the promotion of future operation quality and production efficiency, it is required to constantly optimize the aircraft structure, the route structure, the human structure, the asset structure and the capital structure. The third is to adhere to the abilitypromotionanddon’twaver.Themainstartingpointistopromotethequalityofleadershipandkeypositions,startthedevelopmentandimplementationoflearning.Fourth,adheretotheinnovationanddevelopmentanddon’twaver.Itisrequiredtocomprehensively promote the concept innovation, system innovation, management innovation, technology innovation and development pattern innovationsoastorapidlyimprovetheoverallefficiency.
VIII. Explanation from the Board and Supervisory Committee for “Qualified Opinion” from theCPA
Inreportingperiod,theRuihuaCertifiedPublicAccountants(LLP)issuedastandardunqualifiedauditors’reportfortheCompany. IX. Comparing with lastyear’s financial report, explain changes in aspect ofaccounting policy, accounting estimates and calculationmeasures
The “ProposalofInventoryAccountingMethodsChanged”(foundmoreinNoticeNo.:2013-47)was deliberated andapprovedby 4thextraordinarymeetingof5thsessionoftheBoarddated10July2013.
To achieve the integrated management of mechanical and financial and further enhance the company's core competitiveness, the Company has started using SAP software since July 1st, 2013. In order to keep the same as the software, the inventory valuation methodischangedfromthe"FIFO"to"movingweightedaveragemethod."
The business scope involved in the change of accounting policies is the company's inventory and costing businesses, which can
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 reflect thecompany’s financial situation and operating results more objectively and fairly and provide more reliable and accurateaccountinginformation,theaccountingpolicychangeswillnotmakesubstantialimpactsontheowners’equityandnetprofitsofthe Company.
X. Particular about major accounting errors correction that needs retroactive re-statement in reporting period
Nomajoraccountingerrorscorrectionthatneedsretroactivere-statementinreportingperiod.
XI. Compare with lastyear’s financial report, explain changes in consolidationstatement’s scope
Scopeofconsolidationstatementinthisyearisthesameaslastyear’s
XII. 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.
Profitdistributionplanandcapitalizingofcommonreservesplaninlatestthreeyears(includingthereportingperiod):
2011:distributed4Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas31 December2011;
2012:distributed4Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas31 December2012;
2013:distributed2.5 Yuan(taxincluded)bonusforevery10sharesincashbasedontotalstockissued400,000,000sharesendedas 31December2013;
Cashdividendinlatestthreeyears
InRMB
|||||
|-|-|-|-|
|Yearforbonusshares|Amountforcashbonus(taxincluded)|Netprofitattributabletoshareholdersoflistedcompanyinconsolidationstatementforbonusyear|Ratioinnetprofitattributabletoshareholdersoflistedcompanycontainedinconsolidationstatement(%)|
|2013|100,000,000.00|389,081,811.72|25.7%|
|2012|160,000,000.00|589,810,932.47|27.13%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|2011|160,000,000.00|771,225,549.05|20.75%|

 XIII. Profitdistributionplanandcapitalizing ofcommon reserves planforthePeriod
|||
|-|-|
|Bonussharesforevery10-share(Share)|0|
|Dividendsforevery10-share(RMB)(Taxincluded)|2.50|
|Equitybaseofdistributionplan(Share)|400,000,000|
|Totalcashdividend(RMB)(Taxincluded)|100,000,000.00|
|Distributableprofits(RMB)|397,067,863.95|
|Ratioofcashdividendintotalprofitdistribution(%)|100%|
|Cashdividendpolicy:||
|TheCompanyisinadevelopmentstageandhasthearrangementofmajorcapitalexpenses,ratioofcashdividendinprofitdistributionshouldreachaminimumof20%whiletheprofitdistributed||

XIV. 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.
Duringthereportingperiod,theCompanytimelysubmittedtheenergyconsumptiondataandtheenergyconservationandemission reductionsummarytothehigherunitssuchasthemunicipalgovernment,CivilAviationAuthoritymonthly,andregularlysupervised the completion the energy saving index. The Company summarized the energy saving and emission reduction work and compiled “Handbookofenergysavingandemissionreduction”asthecompany-levelmanualformanagement,whichprovidedsupportforthe companytocarryoutthepolicyofenergyconservation.Duringthe"TwelfthFive-Year",thecompanywaslistedinthelow-carbon action organized by hundreds of companies in Jinan City, the overall goal of energy saving and emission reduction was to save 25,000tonsofstandardcoal,andsignedthegoalresponsibilityofenergysavingwithPeople'sGovernmentofJinan.
As thepartner of theTenth China Arts Festival in 2013 andQingdao International Horticultural Expositionin 2014, theCompany took full advantage of "air superiority", strengthened the promotion to "Tenth China Arts Festival ", " International Horticultural Exposition " and the overall image of Shandong, provided safe, accessible and seamless air transport security. Meanwhile, the Company actively developed the social activities such as the donation for education, supporting the poor, etc., and took the social responsibility.
In 2014, the Company will continue to improve the stakeholder participation mechanisms, improve the management level, consolidatethedevelopmentadvantages,andbetterfulfillthesocialresponsibilities.
XV.Inthe reportperiod, reception ofresearch, communication andinterview
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|Time|Place|Way|Type|Reception|Contentsdiscussedandmaterialprovided|
|Jan.-Dec.2013|Jinan|Telephonecommunication|Individual|Individualinvestor|OperationoftheCompanyandnomaterialrequired|
|2013-03-05|Jinan|Fieldresearch|Other|Newsmedia,legalperson’sshareholdersandindividualinvestor|OperationoftheCompanyandnomaterialrequired|
|2013-05-08|Jinan|Fieldresearch|Other|Newsmedia,legalperson’sshareholdersandindividualinvestor|OperationoftheCompanyandannualreportrequired|
|2013-10-28|Jinan|Fieldresearch|Other|Newsmedia,legalperson’sshareholdersandindividualinvestor|OperationoftheCompanyandnomaterialrequired|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 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
Assetssold
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Theotherpartyoftransactionorfinalcontroller|Assetssold|Salesdate|Salesprice(in10thousandYuan)|NetprofitcontributedtothelistedCompanyfromthebeginofthereporting tothesalesdate(in10thousandYuan)|ImpactonCompany(Note3)|Ratioofnetprofitcontributedbythesoldassetsforlistedcompanyintotalnetprofit(%)|Pricingprinciple|Relatedtransaction(Y/N)|Therelatedrelationship(applicableforrelatedtransaction)|Assetsrightswithownershipconcernedfullytransferred(Y/N)|Creditandliabilityfullytransferred(Y/N)|Dateofdisclosure|Indexofdisclosure|
|ChinaPostalAirlines|4aircraftsofB737-3|2013.4.28|13,405.62|-1,239.91|-7,911.48|-20.33%|Basedonmarketsupply|N||N|N|2013-10-08|2013-65|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|00withitsownpropertyrights|anddemandandaircraftconditions|

VI.ImplementationoftheCompany’s equity incentiveandthe effects
EquityincentivehasnotbeenimplementedbytheCompanyinthePeriod
VII. Material related transactions
Relatedtransactionwithroutineoperationconcerned
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Relatedparty|Relatedrelationship|Typeofrelatedtransaction|Contentofrelatedtransaction|Pricingprinciples|Dealingprice|Tradingamount(in10thousandYuan)|Proportionintheamountofthesametransaction(%)|Meansofpayments|Marketpriceofsimilartransactionavailable|Dateofdisclosure|Indexofdisclosure|
|ShandongTaikooAircraftEngineeringCo.,Ltd.|Subsidiaryofcontrollingshareholder|Laborservicereceived|Airplanemaintenancecharge|Marketprice|83,756,980.25|8,375.7|12.46%|Cashsettlement|83,756,980.25|2013-03-19|2013-19|
|SDA|Controllingshareholder|Laborservicereceived|Rentofofficeandboard&lodgingexpenses|Marketprice|28,893,592.73|2,889.36|34.93%|Cashsettlement|28,893,592.73|2013-03-19|2013-19|
|ShandongXiangyuAirTechnologyServiceCo.,ltd|Subsidiaryofcontrollingshareholder|Laborservicereceived|Maintenancecharge|Marketprice|39,708,456.88|3,970.85|5.44%|Cashsettlement|39,708,456.88|2013-03-19|2013-19|
|BeijingAircraftMaintenanceEngine|Subsidiaryof2ndlargestshareholder|Laborservicereceived|Maintenancecharge|Marketprice|11,178,133.31|1,117.81|1.53%|Cashsettlement|11,178,133.31|2013-03-19|2013-19|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Co.,Ltd||||||||||||
|BeijingAircraftMaintenanceEngineCo.,Ltd|Subsidiaryof2ndlargestshareholder|Laborservicereceived|Groundserviceexpenses|Marketprice|17,172,871.84|1,717.29|1.5%|Cashsettlement|17,172,871.84|2013-03-19|2013-19|
|AirChina|2ndlargestshareholder|Laborservicereceived|Groundserviceexpenses|Marketprice|17,077,551.66|1,707.76|1.5%|Cashsettlement|17,077,551.66|2013-03-19|2013-19|
|AirChina|2ndlargestshareholder|Laborservicereceived|Maintenancecharge|Marketprice|38,441,791.87|3,844.18|5.27%|Cashsettlement|38,441,791.87|2013-03-19|2013-19|
|SichuanInternationalAirlinesEnginemaintenanceCo.,Ltd.|Subsidiaryof2ndlargestshareholder|Laborservicereceived|Maintenancecharge|Marketprice|144,373,756.70|14,437.38|19.78%|Cashsettlement|144,373,756.70|2013-03-19|2013-19|
|AirChina|2ndlargestshareholder|Otherrelatedtransaction|Wetlease|Agreementprice|601,828,380.56|60,182.84|100%|Cashsettlement|601,828,380.56|2013-03-19|2013-19|
|AirChina|2ndlargestshareholder|Otherrelatedtransaction|Accruedpointstransfer|Agreementprice|93,860,000.00|9,386|100%|Cashsettlement|93,860,000.00|2013-03-19|2013-19|
|AirChina|2ndlargestshareholder|Otherrelatedtransaction|Frequentpassengercooperation|Agreementprice|29,000,000.00|2,900|100%|Cashsettlement|29,000,000.00|2013-03-19|2013-19|
|Total||||--|--|110,529.17|--|--|--|--|--|
|Detailsofreturnofsalesinsignificantamount||||N/A||||||||
|Necessityandcontinuityofrelatedtransaction,andreasonforenteringinto||||Theabovesaidtransactionsarenecessaryrelatedtransactionwithnormaloperationactivityconcerned;boardofdirectoroftheCompanyguaranteethefairvaluepricing||||||||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|relatedtransactionwithrelatedparties(otherthanotherparticipantsinthemarket)|andreasonablefortherelatedtransactionsfromthepointofprotectinginvestors’interestandtheCompany|
|Affectofrelatedtransactiononindependenceoflistedcompany|NoinfluenceonindependenceoftheCompany;mainbusinessoftheCompanyshowsnodependencywithrelatedparty(orbeingcontrol)|
|DependenceoftheCompanyonrelatedpartyandrelevantmeasures(ifany)|N/A|
|Reporttheactualimplementationofthenormalrelatedtransactionswhichwereprojectedabouttheirtotalamountbytypesduringthereportingperiod(ifany)|Implementedbytheagreement,noamountexceedthebudgetapprovedin generalmeeting|
|Reasonsformajordifferencebetweentradingpriceandmarketreferenceprice(ifapplicable)|N/A|

VIII.Major contract andimplantation
1.Trusteeship,contractandleasing
Notrusteeship,contractandleasingoccurredinreportingperiod
2.Guarantee
Noexternalguaranteeoccurredinreportingperiod
3.Othermaterialcontracts
Noothermaterialcontractsundisclosed
IX.Implementation ofcommitments
CommitmentsmadebytheCompanyorshareholdersholdingabove5%sharesoftheCompanyinreportingperiodorextendingto reportingperiod.
|||||||
|-|-|-|-|-|-|
|Commitments|Accepter|Contents|Commitmenttime|Commitmentperiod|Implementation|
|Commitmentsinreportofacquisitionorequitychange|AirChina|InFebruary2004,ChinaNationalAviationHoldingCompany(CNAHC)enteredintoaequitytransferagreementwithSDA,thatispromise“toavoidinghorizontalcompetitionwiththeCompanythroughreasonablebusinessarrangement”;inDecember,beingapproved,theequityassigneewasreplacedbyAirChina,|2004-12-06|Long-termeffective|Strictlyimplementtimely|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|||andallrightsandobligationsundertheagreementwastransfertoAirChinaasthepartywhoimplementedthecommitments||||
|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)|115|
|Continuouslifeofauditingservicefordomesticaccountingfirm|1|
|NameofdomesticCPA|YangGanlin,YangYunhui|

Whetherre-appointedaccountingfirmsinthisperiodornot
√Yes□No
Whetherre-appointedaccountingfirmsduringauditingperiodornot
√Yes□No
Whethercompletedapprovalprocesswhilechangingaccountingfirmsornot
√Yes□No
Explanationonre-engagementandchangesofaccountingfirms
AsRSMChinaCPAs(LLP)whousedtotakechargeoftheauditingoftheCompanymergedwithCroweHorwathChinaCPAs(LLP)intoRuihuaCPAs(LLP),inordertokeeptheconsistencyofauditservicesandensuretheauditingqualityofthecompany’sfinancial report,thecompanyengagedRuihuaCPAs(LLP)astheauditinstitutionforthe2013annualfinancialreportafterthedeliberationofthecompany’sstockholders'meeting,andthefinancialreportauditingfeewas800,000Yuan.
Appointmentofinternalcontrolauditingaccountingfirm,financialconsultantorsponsor
√Applicable□Notapplicable
Take consistencyintoconsideration,theCompany alsoengagedRuihuaCPAs (LLP)astheauditinstitutionfor internal controlfor yearof2013,andauditingefficiencyofinternalcontrolandissuedtheauditreportofinternalcontrolof2013fortheCompany.The auditingchargeforinternalcontrolwasRMB0.35million.
XI.Penalty and rectification
In the report period, the Company and the Board of Directors have not received check, administrative punishment and notice of
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 criticismfromtheCSRC,andpubliccriticismfromthesecuritiesexchange.
Particularaboutdirectors,supervisors,seniorexecutivesandshareholderswithover5%sharesheldsuspectedillegaldealingsofthe stockoftheCompanyandearningsofillegaldealingstakenbackbytheCompanythatdisclosed
□Applicable√Notapplicable
XII. Explanation onother significantevents
SignificanteventsoftheCompanyandannouncementarepublishedonChinaSecuritiesJournal,SecuritiesTimes,HongKong CommercialDailyandJuchaoWebsite(http://www.cninfo.com.cn),moredetailscanbefoundintheabovesaidmedia
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section VI. Changes in Shares and Particulars about Shareholders
I.Changes inshares
In Share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Beforechange||Increase/decreaseinthistime(+,-)|||||Afterchange||
||Amount|Ratio(%)|Newissue|Bonusshare|Capitalizationofpublicreserve|Other|Subtotal|Amount|Ratio(%)|
|I.Unlistedshares|260,000,000|65%||||||260,000,000|65%|
|1.Sponsor’sshares|168,601,000|42.15%||||||168,601,000|42.15%|
|Including:State-ownedshares|168,402,000|42.1%||||||168,402,000|42.1%|
|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%||||||140,000,000|35%|
|2.Domesticallylistedforeignshares|140,000,000|35%||||||140,000,000|35%|
|III.Totalshares|400,000,000|100%||||||400,000,000|100%|

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
III. Shareholders andactual controller
1.NumberofshareholdersoftheCompanyandshare-holding
In Share
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Totalshareholdersatendoftheperiod||17,064||Totalshareholdersendedasthe5thtradingdaybeforeannualreportdisclosed||||17,034||
|Particularsaboutsharesheldabove5%byshareholdersortop10shareholding||||||||||
|Shareholders|Natureofshareholder|Proportionofsharesheld(%)|SharesheldatendofPeriod|Changesinreportperiod|Amountofun-listedsharesheld|Amountoflistedsharesheld|Numberofsharespledged/frozen|||
||||||||Stateofshare||Amount|
|Shandong|State-ownedlegal|42%|168,004,0|0|168,004,0|0||||
|AviationGroupAirChina|personState-ownedlegal|22.8%|0091,200,00|0|0091,200,00|0||||
|LimitedGUOTAI|personForeignlegal|0.88%|03,537,773|143,045|00|3,537,773||||
|JUNANWANXIANG|personForeignlegal|0.45%|1,805,525|0|0|1,805,525||||
|INTERNATIONChenJinjiang|personDomesticnature|0.36%|1,438,800|58,000|0|1,438,800||||
|OuYanping|personDomesticnature|0.24%|945,043|0|0|945,043||||
|YaoMing|personDomesticnature|0.23%|927,000|-908,679|0|927,000||||
|HUANGLIU|personForeignnature|0.23%|918,917|0|0|918,917||||
|LIAYeQufa|personDomesticnature|0.2%|810,000|0|0|810,000||||
|BaoXiuzhen|personDomesticnature|0.2%|800,000|0|0|800,000||||
|personExplanationonrelatedrelationshiporconcertedactionamongtheabovementionedshareholders||1.ShandongAviationGroup(SDA)isthefirstlargestshareholderoftheCompany,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares;2.AirChinaLimitedisthesecondlargestshareholderoftheCompany,whoholdsthesharesoftheCompanyonbehalfoftheStatewithunlistedshares;3.Amongtheabovetoptenshareholders,AirChinaLimitedisthefirstlargestshareholderofthe SDA, and there exists no associated relationship between SDA and Air China and theother shareholders, and they don’t belong to the consistent actionist regulated by theManagement Regulation of Information Disclosure on Change of Shareholding for ListedCompanieswiththeothershareholders.||||||||
|Shareholdingoftop10circulatedshareholders||||||||||
|Shareholders||AmountoflistedsharesheldatendofthePeriod|||||Typeofshares|||
||||||||Type||Amount|
|GUOTAIJUNANSECURITIES(HONGKONG)LIMITED||3,537,773|||||Domesticallylistedforeignshares||3,537,773|
|WANXIANGINTERNATIONALINVESTMENTCORPORATION||1,805,525|||||Domesticallylistedforeignshares||1,805,525|
|ChenJinjiang||1,438,800|||||Domesticallylistedforeign||1,438,800|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|||shares||
|OuYanping|945,043|Domesticallylistedforeignshares|945,043|
|YaoMing|927,000|Domesticallylistedforeignshares|927,000|
|HUANGLIULIA|918,917|Domesticallylistedforeignshares|918,917|
|YeQufa|810,000|Domesticallylistedforeignshares|810,000|
|BaoXiuzhen|800,000|Domesticallylistedforeignshares|800,000|
|ZhuGuanhong|795,293|Domesticallylistedforeignshares|795,293|
|JOHNPOSS|793,400|Domesticallylistedforeignshares|793,400|
|Explanationonrelatedrelationshiporconcertedactionamongthetoptenshareholderswithun-restrictedsharesheldandbetweenthetoptenshareholderswithun-restrictedsharesheldandtoptenshareholders|TheCompanyisnotawareoftheirassociatedrelationshipamongthetoptenshareholdersofcirculation share, and is unknown whether other circulation shareholders belong to theconsistent actionist regulated by the Management Regulation of Information Disclosure onChangeofShareholdingforListedCompanies.|||

2.ControllingshareholdersandactualcontrolleroftheCompany
|||||||
|-|-|-|-|-|-|
|Controllingshareholders,actualcontroller|Legalrep.|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:|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|lodging, food and beverage services,retail of tobacco products (restrictedtobeoperatedonlybythebranches)|

 Changesofcontrollingshareholdersandactualcontrollerinreportingperiod
□Applicable√Notapplicable
PropertyrightandcontrollingrelationshipbetweentheactualcontrollerandtheCompanyisasfollow:
ShandongAviationGroup
42%
ShandongAirlinesCo.,Ltd.
3.SecondlargestshareholderoftheCompany
|||||||
|-|-|-|-|-|-|
|Corporateshareholder|Legalrep.|Dateoffoundation|Organizationcode|Registercapital|Mainoperationbusinessormanagementactivities|
|AirChinaLimited|WangChangshun|2004-09-30|71787100-6|RMB12.892billion|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. ANNUALREPORT2013 Section VII. 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)|
|ZhangXingfu|Chairman|Currentlyinoffice|M|59|2012-06-28|2015-06-27|0|0|0|0|
|Ma ChongXian|DeputyChairman|Currentlyinoffice|M|49|2012-06-28|2015-06-27|0|0|0|0|
|YuHaitian|Director&GM|Currentlyinoffice|M|45|2012-06-28|2015-06-27|0|0|0|0|
|SunXiujiang|Director|Currentlyinoffice|M|52|2013-10-28|2015-06-27|0|0|0|0|
|XuGuojian|Director&deputyGM&Chiefaccountant|Currentlyinoffice|M|50|2012-06-28|2015-06-27|0|0|0|0|
|WangMingyuan|Director|Currentlyinoffice|M|49|2012-06-28|2015-06-27|0|0|0|0|
|WangJieming|Director|Currentlyinoffice|F|56|2012-06-28|2015-06-27|0|0|0|0|
|LiXiuqing|Director|Currentlyinoffice|F|51|2012-06-28|2015-06-27|0|0|0|0|
|WangKaiyuan|Independentdirector|Currentlyinoffice|M|71|2012-06-28|2015-06-27|0|0|0|0|
|PingXiaofeng|Independentdirector|Currentlyinoffice|M|65|2012-06-28|2015-06-27|0|0|0|0|
|LiChun|Independentdirector|Currentlyinoffice|M|57|2012-06-28|2015-06-27|0|0|0|0|
|QuWenzhou|Independentdirector|Currentlyinoffice|M|42|2012-06-28|2015-06-27|0|0|0|0|
|Wang|Chairman|Currently|M|49|2013-10-2|2015-06-2|0|0|0|0|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Wuping|ofSupervisoryCommittee|inoffice|||8|7|||||
|XueRuitao|Supervisor|Currentlyinoffice|M|53|2012-06-28|2015-06-27|0|0|0|0|
|ZhangKai|Supervisor|Currentlyinoffice|M|49|2012-06-28|2015-06-27|0|0|0|0|
|DongJianmin|Employeesupervisor|Currentlyinoffice|M|45|2012-06-28|2015-06-27|0|0|0|0|
|ZhouQiaoyan|Employeesupervisor|Currentlyinoffice|F|39|2012-06-28|2015-06-27|0|0|0|0|
|MiaoLiubin|DeputyGM,SafetyDirector|Currentlyinoffice|M|43|2013-10-28|2015-06-27|0|0|0|0|
|ZhangQingshe|DeputyGM,ChiefPilot|Currentlyinoffice|M|56|2013-10-28|2015-06-27|0|0|0|0|
|LiQing’en|DeputyGM|Currentlyinoffice|M|59|2012-06-28|2015-06-27|0|0|0|0|
|XiongJianbo|DeputyGM|Currentlyinoffice|M|49|2013-10-28|2015-06-27|0|0|0|0|
|WangXianlin|DeputyGM|Currentlyinoffice|M|49|2013-10-28|2015-06-27|0|0|0|0|
|ZhouLixin|DeputyGM|Currentlyinoffice|M|50|2013-07-31|2015-06-27|0|0|0|0|
|DongQiantang|SecretaryoftheBoard|Currentlyinoffice|M|52|2012-06-28|2015-06-27|0|0|0|0|
|ZengGuoqiang|Director|Officeleaving|M|61|2012-06-28|2013-10-08|0|0|0|0|
|WangFuzhu|ChairmanofSupervisoryCommittee|Officeleaving|M|61|2012-06-28|2013-10-15|0|0|0|0|
|SuZhongmin|StandingDeputyGM|Officeleaving|M|60|2012-06-28|2013-09-17|0|0|0|0|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|JiangChengda|DeputyGM|Officeleaving|M|55|2012-06-28|2013-09-17|0|0|0|0|
|QiuFeng|DeputyGM|Officeleaving|M|47|2012-06-28|2013-07-31|0|0|0|0|
|Total|--|--|--|--|--|--|0|0|0|0|

 II. Post-holding
Majorworkingexperienceofdirectors,supervisorsandseniorexecutiveatthepresentinlatestfiveyears
|||
|-|-|
|Name|Mainworkingexperience|
|ZhangXingfu|2005.12-present CPCsecretaryanddeputyPresidentofShandongAirlinesGroup2006.03-present ChairmanoftheCompany|
|MaChongxian|2006.07-2009.06 GMandCPCdeputysecretaryofZhejiangBranchofAirChina2009.06-2010.04 GMandCPCdeputysecretaryofHubeiBranchofAirChina2010.04-present MemberofCPCandVicePresidentofAirChina,andChairman,PresidentandCPCViceSecretaryofShandongAirlinesGroup2010.04-present VicePresidentoftheCompany|
|YuHaitian|2003.03-2011.03 DeputyGeneralManageroftheCompany2011.03-2012.06 GeneralManageroftheCompany2012.06-present DirectorandGeneralManageroftheCompany|
|SunXiujiang|2005.05-2011.07 DirectorofHualuHoldingsCo.,Ltd, DeputyGM andMember ofCPC Committee ofHualuHoldingsCo.,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 DeputyPartySecretaryandSecretaryofCommitteeforDisciplineInspectionofSDA2013.10-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 Director of Planning Financial Department of Shandong Economic Development andInvestmentCompany2006.03-present DirectoroftheCompany|
|LiXiuqin|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 Shenyang|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
||Administration,General Manager of ChinaNorthernAirlines,vice directorofCAAC, PresidentofAir ChinaandGeneralManagerofChinaNationalAviationHoldingCompany.NowheservesasoutsidedirectorofCinotrans&CSC Holdings Co., Ltd., independent director of Commercial Aircraft Corporation of China Ltd., DongFengAutomobileCo.,Ltd.,ChinaInternationalTravelServiceCorp.Lt.,andXi’anAircraftInternationalCorporation.2012.06-present IndependentdirectoroftheCompany|
|PingXiaofeng|HesuccessivelyservedascadreandvicedirectorofOfficeinJiananFarmToolsPlant,secretary,vicedirectoranddirector of Office in Jinan Engineering Bureau, vice director of General Office of Jinan Municipal Governmentvice secretary ofJinanPeople’sGovernment,CPCsecretary anddirectorofLocal TaxationBureauofJinanCityNow he serves as standing director of China International Taxation Research Institute (CITRI), president ofInternationalTaxationResearchInstituteofJinanCity,independentdirectorofShandongIron&SteelCo.,LtdandShandongJinanRunfengRuralCooperativeBank2012.06-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 TrustCorporation,GMofXiamenBoyiInvestmentConsultancyCo.,Ltd.;researcherofShenzhenStockExchange. Heis 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 andaccountinginstitutionanddirectorofresearchcenterofChinesecapitalmarket.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.oftheCompany2009.06-2011.03 EmployeesupervisoroftheCompany2011.03-2013.10 DeputyGMoftheCompany2013.10-present DeputyGMandSafetyDirectoroftheCompany|
|ZhangQingshe|2001.10-2013.10 ChiefPilotoftheCompany2013.10-present DeputyGMandChiefPilotoftheCompany|
|LiQing’en|2005.01-2009.03 DeputyGMandSecretaryoftheBoardoftheCompany|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
||2009.03-2011.12 DeputyGMoftheCompany2011.12-present DeputyGMoftheCompanyandPartySecretaryofQingdaoBranchoftheCompany|
|XiongJianbo|2008.05-2009.12 GMofEngineeringTechnologyCompanyoftheCompany2009.12-2011.03 ChiefEngineeroftheCompany2011.03-2013.10 ChiefEngineeroftheCompanyandGeneralManagerofQingdaoBranchoftheCompany2013.10-present DeputyGMoftheCompanyandGMofQingdaoBranchoftheCompany|
|WangXianlin|2009.02-2013.10 SafetyDirectoroftheCompany2013.10-present DeputyGMoftheCompany|
|ZhouLixin|2007.11-2013.07 DeputyGMofCentralizedPurchasingDept.ofAirChinaandMemberofthePartyCommittee2013.07-present DeputyGMoftheCompany|
|DongQiantang|2003.01-2009.02 MinisterofEnterprisePlanningandDevelopmentDepartmentofSDA2009.02-2011.03 GeneralManagerofEnterpriseManagementoftheCompany2011.03-present DirectoroftheGeneralOfficeoftheCompany2009.06-present SecretaryoftheBoardoftheCompany|

Post-holdinginshareholder’sunit
|||||
|-|-|-|-|
|Name|Nameofshareholder’sunits|Position|Receivingremunerationfromshareholder’sunits(Y/N)|
|MaChongxian|AirChina|MemberofthePartyCommittee,DeputyPresident|Y|
||SDA|Chairman,PresidentandDeputyPartySecretary|Y|
|ZhangXingfu|SDA|PartySecretary,DeputyPresident|Y|
|YuHaitian|SDA|DeputyPartySecretary|N|
|SunXiujiang|SDA|DeputyPartySecretary,SecretaryofCommitteeforDisciplineInspection|Y|
|WangWuping|SDA|ChiefAccountant|Y|
|XueRuitao|SDA|GMofPlanning&InvestmentManagementDept.|Y|
|WangMingyuan|AirChina|MemberofthePartyCommittee,DeputyPresident|Y|
|ZhangKai|AirChina|SeniorManagerofAssetsManagementDept.ofInvestmentEnterpriseManagement|Y|

Post-holdinginotherunit
|||||
|-|-|-|-|
|Name|Nameofotherunits|Position|Receivingremunerationfromotherunits(Y/N)|
|WangJieming|ShandongEconomicDevelopmentInvestmentCompany|Directoroffinance&accountingdivision|Y|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|LiXiuqin|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.
Chairman Mr. Zhang Xingfu, Director Mr. Sun Xiujiang, Chairman of Supervisory Committee Mr. Wang Wuping together with Supervisor Mr. Xue Ruitao drew their remunerations from Shandong Aviation Group (SDA), the controlling shareholder of the Company, not from the Company; (Mr. Sun Xiujiang and Mr. Wang Wuping received remuneration from SDA since September 2013)ChairmanMr.MaChongxian,DirectorMr.WangMingyuanandSupervisorMr.ZhangKaidrewtheirremunerationsfromAir Chinanotfrom theCompanyandDirectorMs.WangJiemingandMs.Li XiuqinreceivedremunerationfromShandongEconomic DevelopmentInvestmentCompanynotformtheCompany.
Remunerationfordirectors,supervisorsandseniorexecutivesinreportingperiod Intenthousandyuan
|||||||||
|-|-|-|-|-|-|-|-|
|Name|Title|Sex|Age|Post-holdingstatus|TotalremunerationobtainedfromtheCompany|Totalremunerationobtainedfromshareholder’sunit|Remunerationactuallyobtainedatperiod-end|
|YuHaitian|Director,GM|M|45|Currentlyinoffice|87.2|0|87.2|
|XuGuojian|Director,DeputyGMandChiefAccountant|M|50|Currentlyinoffice|69.17|0|69.17|
|WangKaiyuan|Independentdirector|M|71|Currentlyinoffice|7.4|0|7.4|
|PingXiaofeng|Independentdirector|M|65|Currentlyinoffice|7.4|0|7.4|
|LiChun|Independentdirector|M|57|Currentlyinoffice|7.4|0|7.4|
|QuWenzhou|Independentdirector|M|42|Currentlyinoffice|7.4|0|7.4|
|DongJianmin|Employee|M|45|Currentlyin|43.32|0|43.32|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||||
|-|-|-|-|-|-|-|-|
||supervisor|||office||||
|ZhouQiaoyan|Employeesupervisor|F|39|Currentlyinoffice|37.42|0|37.42|
|MiaoLiubin|DeputyGM,SafetyDirector|M|43|Currentlyinoffice|77.04|0|77.04|
|ZhangQingshe|DeputyGM,ChiefPilot|M|56|Currentlyinoffice|88.11|0|88.11|
|LiQing’en|DeputyGM|M|59|Currentlyinoffice|80.6|0|80.6|
|XiongJianbo|DeputyGM|M|49|Currentlyinoffice|69.06|0|69.06|
|WangXianlin|DeputyGM|M|49|Currentlyinoffice|75.8|0|75.8|
|ZhouLixin|DeputyGM(sinceSeptember2013)|M|50|Currentlyinoffice|22.41|0|22.41|
|DongQiantang|SecretaryoftheBoard|M|52|Currentlyinoffice|41.06|0|41.06|
|ZengGuoqiang|Director|M|61|Officeleaving|102.1|0|102.1|
|SuZhongmin|StandingDeputyGM|M|60|Officeleaving|81.68|0|81.68|
|JiangChengda|DeputyGM|M|55|Officeleaving|68.61|0|68.61|
|QiuFeng|DeputyGM|M|47|Officeleaving|41.87|0|41.87|
|Total|--|--|--|--|1,015.05|0|1,015.05|

 Delegatedequityincentivefordirectors,supervisorsandseniorexecutivesinreportingperiod
□Applicable√Notapplicable
IV.Position changes for Directors, Supervisor andSeniorExecutives
||||||
|-|-|-|-|-|
|Name|Title|Type|Date|Reasons|
|ZengGuoqiang|Director|Officeleaving|2013-10-08|Retirement|
|SunXiujiang|Director|Candidateofanelection|2013-10-28|GeneralMeetingElection|
|WangFuzhu|ChairmanofSupervisoryCommittee|Officeleaving|2013-10-15|Retirement|
|WangWuping|Chairmanof|Candidateof|2013-10-28|GeneralMeetingElection,Supervisory|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||||
|-|-|-|-|-|
||SupervisoryCommittee|anelection||CommitteeElection|
|QiuFeng|DeputyGM|Officeleaving|2013-07-31|Occupationmobility|
|ZhouLixin|DeputyGM|Appointment|2013-07-31|AppointedbytheBoard|
|SuZhongmin|StandingDeputyGM|Officeleaving|2013-09-17|Retirement|
|JiangChengda|DeputyGM|Officeleaving|2013-09-17|Occupationmobility|
|MiaoLiubin|DeputyGM,SafetyDirector|Appointment|2013-10-28|Occupationmobility|
|ZhangQingshe|DeputyGM,ChiefPilot|Appointment|2013-10-28|Occupationmobility|
|XiongJianbo|DeputyGM|Appointment|2013-10-28|Occupationmobility|
|WangXianlin|DeputyGM|Appointment|2013-10-28|Occupationmobility|

V. Employees of theCompany
Bytheendofthisreportperiod,theCompanyhad6,975employeesintotal,including207personsofpostgraduates(MasterDegree andDoctorDegree)orabove,6380personsgraduatedfrom3-yearsregularcollegeorabove.Endedasreportperiod,therewere105 retireesintheCompany.
Thestaffstructureisasfollows:
||||
|-|-|-|
|Typeofemployee|Number|Proportionintotalemployees|
|Flightpersonnel|913|13.09%|
|Steward|1621|23.24%|
|Securityguard|296|4.24%|
|Maintenancepersonnel|1072|15.37%|
|Transport controlpersonnel|241|3.46%|
|Salesman|826|11.84%|
|Freightpersonnel|291|4.17%|
|Groundattendant|529|7.58%|
|Financialpersonnel|161|2.31%|
|Others|1025|14.70%|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section VIII. 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 reporting period, totally three general meetings are held by the Company, including one annual general meeting and two extraordinarygeneralmeeting.Alltheproposalssubmittedinthemeetingsarebeingdeliberatedandpassed,totally14proposalsas Article of Association Amendments and Aircraft Introduction Plan are deliberated. The Company strictly follows the procedures ruledbytheArticlesofAssociationandRulesofProcedureforGeneralMeetingofShareholderstoconvenethegeneralmeetingof stockholders,deliberatethemotionandmakepolicy,andensureallshareholders,especiallythemediumandsmallshareholders,can enjoyequalstatusandfullyexercisetheirrights.
(II)Directorsandtheboardofdirectors
Duringthereportperiod,theboardofdirectorsconvokedregularandinterimmeetingstodeliberatethecompany’smajorissuesbytakingtheprinciplesofbeingresponsibleforthestockholders'meetingandactivelymaintainingtheshareholders’benefitsand strictlyfollowingtherelevantlawsandregulationsandtheproceduresruledbytheArticlesofAssociationandRulesofProcedure forBoardofDirectors.In2013,thecompanytotallyconvoked11boardmeetings,deliberated32motionsincludingtherelevant financialreports,theprofitdistribution,therelatedtransactions,topmanagementturnover,ofwhichtheconvening,holdingand votingprocedureswerelegitimateandeffective,andtimelymadeannouncementoftheresolutionoftheboardofdirectors,protected therightstoknowandtosuperviseofthecompany'sshareholders,andpromotedthecompany'sstandardoperation.
(III)Supervisorsandboardofsupervisors
Duringthereportperiod,theboardofsupervisorsoftheCompanyconvokedfivemeetingsandattendedallthegeneralmeetingsof stockholdersandboardmeetingstheCompanyconvokedin2013.Theconvening,convokingandmotionconsiderationand decision-makingofthesupervisormeetingwereimplementedinstrictaccordancewiththeproceduresruledbytheArticlesof AssociationandRulesofProcedureforBoardofSupervisors,allsupervisorsattendedtheboardofsupervisorsasrequired,seriously performedtheirduties,supervisedandmadeopinionsonthemajorevents,relatedtransactionandfinancialsituationoftheCompany, andmaintainedthelegitimaterightsandinterestsoftheCompanyandtheshareholders.
(IV)Systemconstruction
Inordertofurtherstandardizeandimprovethecomplianceandscientificoftheboardmeeting’sconsiderationanddecision-making,thecompany’sboard of directorspassed four systems in2013, including “Management System ofrelated Transactions”, “Rulesof ProcedureoftheAuditCommittee”,“RulesofProcedureoftheRemunerationandAppraisalCommittee”and“RulesofProcedureof the Strategy and Nomination Committee” in accordance with relevant laws and regulations of "Company Law", “Governance Principles of Listed Company”, "Stock Listing Rules" and the "Articles of Association", etc., the system basis of thecompany’s governancehasbeenfurtherimproved.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (V)Informationdisclosuremanagment
Thecompanyattachedgreatimportancetotheinformationdisclosure,strictlysupervisedalllayerstodiscloseinformationtimelyand fairly as required so as to ensurethat thedisclosureis true, accurate andcomplete, thecompany totally disclosed 4 regular reports and 75 interim announcements. The company is the first train units for information disclosure of Shenzhen Stock Exchange, continued to maintain the good information disclosure quality, and successfully completed the information disclosure of 2013 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 Regulatory Bureau in November 2011, and combining with actual situation of the Company, the Company further completed the revisionanddisclosedthe“Managementsystemforreportofinsideinformationinsiderandsubmissionofexternalinformation”.The boardofdirectorsoftheCompanyfullyrealizedtheseriousnessandcomplexityofpreventinginsidertrading,tookvariousmeasures to implement the regulatory requirement, comprehensively strengthened the management to inside information, completed the registration and management system for inside information, and feasibly and effectively prevented relevant personnel from insider tradingatthevery beginning.Atpresent,theCompanyhasdrafted asetofcontrolprogramfor insideinformation,whichinvolved informationcollection,delivery,verificationandreleaseandcoveredthemanagementandcontrolforallinformationtobedisclosed. II. Annual General Meeting (AGM) and extraordinary general meeting held in reporting period
1.AGM
|||||||
|-|-|-|-|-|-|
|Sessionofmeeting|Date|Nameofmeetingmotion|Situation|Dateofdisclosure|Indexofdisclosure|
|AnnualGeneralMetingforyearof2012|2013-05-08|1.“WorkReportoftheBoardforyearof2012”2.“DebriefingReportofIndependentDirectorsforyearof2012”3.’”WorkReportofSupervisoryCommitteeforyearof2012”4.“AnnualReportof2012”anditsSummary5.“FinancialResultforyearof2012”6.”ProfitDistributionPlanforyearof2012”7.”DailyRelatedTransactionforyearof2013”8.”AircraftAcquisitionPlanforyearof2013”9.“Re-engagementofAccountingFirm”|Allhasbeendeliberatedandpassed|2013-05-09|No.:2013-34|

2.Extraordinarygeneralmeeting
|||||||
|-|-|-|-|-|-|
|Sessionofmeeting|Date|Nameofmeetingmotion|Situation|Dateofdisclosure|Indexofdisclosure|
|FirstExtraordinaryGeneral|2013-03-05|1.“ChangeoftheFinancialAuditingInstitutionforyearof2012andAuditingInstitutionofInternalControlAppointment”|Allhasbeendeliberated|2013-03-06|No.:2013-15|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|meetingof2013||2.“ModificationtoArticleofAssociationofShandongAirlinesCo.,Ltd.”|andpassed|||
|SecondExtraordinaryGeneralmeetingof2013|2013-10-28|1.“ChangeofMembersinDirectors”2.“ChangeofMembersSupervisors”3.“ChangeoftheFinancialAuditingInstitutionforyearof2013andAuditingInstitutionofInternalControl”|Allhasbeendeliberatedandpassed|2013-10-29|No.:2013-72|

III. Responsibility performance ofindependentdirectors inreport period
1.TheattendanceofBoardmeetingsand generalmeetingforindependentdirectors
||||||||
|-|-|-|-|-|-|-|
|AttendanceofBoardmeetingsforindependentdirectors|||||||
|Independentdirector|TimesofBoardmeetingsupposedtoattendinthereportperiod|Timesofpresentinperson|Timesofattendingbycommunication|Timesofentrustedpresence|TimesofAbsence|AbsenttheMeetingforthesecondtimeinarow(Y/N)|
|WangKaiyuan|11|1|9|1|0|N|
|PingXiaofeng|11|2|9|0|0|N|
|LiChun|11|1|9|1|0|N|
|QuWenzhou|11|2|9|0|0|N|
|Timespresentedingeneralmeetingbyindependentdirectors||3|||||

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 report period
The5thsessionoftheBoardsetupthreespecializedcommittees:theAuditCommittee,theRemunerationandAppraisalCommittee, andtheStrategyandNominationCommittee.In2013,allspecializedcommitteesheldninemeetings,thereinto,fivemeetingsofthe
Audit Committee, onemeeting oftheRemunerationandAppraisal Committee, and three meetingsoftheStrategy andNomination
Committee. The specialized committees of the board of directors performed their duties by strictly following the requirements of
ChinaSecuritiesRegulatoryCommissionandShenzhenStockExchange,the"ArticlesofAssociation",andtherulesofprocedureof
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 thecommittees,andplayedanimportantroleinthescientificdecision-makingoftheboardofdirectors.
(I)Dutyperformingoftheauditcommitteeoftheboard
Duringthereportingperiod,theauditcommitteeoftheboardpaidcloseattentiontotheinternalcontrolsystemconstructionandthe relatedtransaction;madeopiniononchangingandreappointingtheaccountingfirm;regularlycheckedthefinancialreportofthe company;theauditcommitteeoftheboardofdirectorseffectivelyperformedtheresponsibilities,diligentlydidtheirdutiesinthe annualfinancialreportauditwork,gavefullplaytothesupervisoryrole,andmaintainedtheindependenceofauditinauditingofthe 2013annualfinancialreport.
(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 2013 annual report about the remuneration disclosureofthedirectorsandtheseniormanagement, andthoughttheremunerationamount ofrelevantpersonneldisclosedinthe 2013annualreportwastrueandaccurate.
(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
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 standard and independent accounting mechanism and financial management system as well as independent bank account, furthermore,payingtaxinaccordancewiththelaw.
VII. Horizontal competition
ThereisnohorizontalcompetitionbetweentheCompanyandcontrollingshareholder
VIII.Appraisalandincentivemechanism forseniorexecutives
Inaccordancewiththe“temporarymethodofperformanceappraisal”,theCompanychecksandevaluatedtheindividualperformance, andpaidmeritbasedonappraisalresultstoenhancetheincentiveefficiency.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section IX. 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 2013, 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|
|According to theidentification to the significant defects about the internal control over thecompany's financial reporting, on the|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|basedayoftheevaluationreportover internal control,thereisnosignificant defectsexisted intheinternal controlover financialreporting,thecompanyhaskepteffectiveinternalcontroloverfinancial reportinginallthesignificantaspectsinaccordancewiththerequirementsofthenormativesystemofenterpriseinternalcontrolsystemandtherelevantprovisions.Accordingtotheidentificationtothesignificantdefectsabout theinternal controlover thecompany's non-financial reporting, onthe base day of the evaluation report over internal control, the company found no significant defects in the internal control overnon-financialreporting||
|Dateofevaluationreportofinternalcontrol(full-text)disclosed|2014-03-22|
|Indexofevaluationreportofinternalcontrol(full-text)disclosed|PublishedonJuchaoWebsite(http://www.cninfo.com.cn)dated22March2014|

V. Auditingreport ofinternal control
√Applicable□Notapplicable
|||
|-|-|
|Auditingcommentssectioninauditreportofinternalcontrol||
|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 2013 in accordance with relevant requirements of “Internal Control Audit Guideline forEnterprises”andChinaStandardsonAuditingandQualityControl,I.Company'sresponsibilityforinternalcontrolTheCompanyisresponsiblefortheestablishment&perfectionandefficiencyimplementationofinternalcontrolaswellasevaluateditseffectiveness,regulatedby“BasicStandardofInternalControlforEnterprises”,“ApplicationGuidelinesofInternalControlforEnterprises”and“EvaluationGuidelinesofInternalControlforEnterprises”.II.Auditor'sresponsibilityOurresponsibilityistoexpressanauditopiniononeffectivenessofinternalcontroloffinancialreportbasedonouraudit.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,asof31December2013basedonrelevantregulationsand“BasicStandardofInternalControlforEnterprises”.RuihuaCPAs(LLP) ChineseCPA:YangGanlinBeijing·China ChineseCPA:YangYunhui20March2014||
|Date of audit report of internalcontrol(full-text)disclosed|2014-03-22|
|Index of audit report of internal|PublishedonJuchaoWebsite(http://www.cninfo.com.cn)dated22March2014|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|control(full-text)disclosed|

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. ANNUALREPORT2013 Section X. Financial Report
I.Auditorreport
|||
|-|-|
|Typeofauditopinion|Standardunqualified|
|Dateforauditedreportsigned|2014-03-20|
|Nameofauditinstitution|RuihuaCPAs(LLP)|
|Referencenumber|RuihuaShenZi[2014]No.48390002|
|CPA|YangGanlin,YangYunhui|

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 2013 and the related consolidated balance sheet, profit statement of 2013 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 proceduresselected dependonauditor's judgment,including theassessment 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 in the circumstances. An audit also includes evaluating the appropriateness of accounting policies adopted and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentationofthefinancialstatements.
We believe that the auditevidence 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. endedas31December2013
RuihuaCPAs(LLP) ChineseCPA:YangGanlin
Beijing·China ChineseCPA:YangYunhui
20March2014
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 II. FinancialStatement
StatementinFinancialNotesarecarriedinRMB/CNY
1.ConsolidatedBalanceSheet
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|Closingbalance|Openingbalance|
|Currentassets:|||
|Monetaryfunds|444,522,271.21|155,417,742.97|
|Settlementprovisions|||
|Capitallent|||
|Transactionfinanceasset|||
|Notesreceivable|||
|Accountsreceivable|250,524,757.67|186,090,177.17|
|Accountspaidinadvance|88,182,040.98|56,927,205.61|
|Insurancereceivable|||
|Reinsurancereceivables|||
|Contract reserve of reinsurancereceivable|||
|Interestreceivable|||
|Dividendreceivable|14,325,586.06||
|Otherreceivables|236,105,804.44|252,147,802.11|
|Purchaserestitutedfinanceasset|||
|Inventories|107,973,473.35|116,944,913.89|
|Non-current asset due within oneyear|||
|Othercurrentassets|71,828,962.65||
|Totalcurrentassets|1,213,462,896.36|767,527,841.75|
|Non-currentassets:|||
|Grantedloansandadvances|||
|Financeassetavailableforsales|||
|Held-to-maturityinvestment|||
|Long-termaccountreceivable|||
|Long-termequityinvestment|88,352,100.00|88,352,100.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Investmentproperty|||
|Fixedassets|7,564,658,140.23|8,132,786,866.22|
|Constructioninprogress|1,647,915,995.78|1,430,885,814.11|
|Engineeringmaterial|||
|Disposaloffixedasset|||
|Productivebiologicalasset|||
|Oilandgasasset|||
|Intangibleassets|101,127,636.82|78,814,771.55|
|Expense on Research andDevelopment|||
|Goodwill||10,220,816.22|
|Long-term expenses to beapportioned|347,945,540.61|301,867,908.75|
|Deferredincometaxasset|439,662,119.02|450,885,311.43|
|Othernon-currentasset|||
|Totalnon-currentasset|10,189,661,532.46|10,493,813,588.28|
|Totalassets|11,403,124,428.82|11,261,341,430.03|
|Currentliabilities:|||
|Short-termloans|434,137,220.00|321,378,829.28|
|Loanfromcentralbank|||
|Absorbing deposit and interbankdeposit|||
|Capitalborrowed|||
|Transactionfinancialliabilities|296,902.47|7,198,783.59|
|Notespayable||100,000.00|
|Accountspayable|1,132,126,690.25|950,968,778.60|
|Accountsreceivedinadvance|343,468,052.97|215,107,573.13|
|Selling financial asset ofrepurchase|||
|Commission charge andcommissionpayable|||
|Wagepayable|338,866,981.54|343,703,794.71|
|Taxespayable|110,064,437.61|229,684,478.03|
|Interestpayable|16,064,294.43|16,466,095.25|
|Dividendpayable|11,940.00|11,940.00|
|Otheraccountspayable|193,868,858.34|210,075,013.94|
|Reinsurancepayables|||
|Insurancecontractreserve|||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Securitytradingofagency|||
|Securitysalesofagency|||
|Non-currentliabilitiesduewithin1year|533,150,658.42|392,573,521.87|
|Othercurrentliabilities|||
|Totalcurrentliabilities|3,102,056,036.03|2,687,268,808.40|
|Non-currentliabilities:|||
|Long-termloans|3,525,047,206.06|3,854,676,638.03|
|Bondspayable|500,000,000.00|500,000,000.00|
|Long-termaccountpayable|1,542,515,998.39|1,554,204,331.04|
|Specialaccountspayable|||
|Projectedliabilities|||
|Deferredincometaxliabilities|||
|Othernon-currentliabilities|25,367,524.34|186,135,800.28|
|Totalnon-currentliabilities|5,592,930,728.79|6,095,016,769.35|
|Totalliabilities|8,694,986,764.82|8,782,285,577.75|
|Owner’s equity (or shareholders’equity):|||
|Paid-incapital(orsharecapital)|400,000,000.00|400,000,000.00|
|Capitalpublicreserve|75,410,363.70|75,410,363.70|
|Less:Inventoryshares|||
|Reasonablereserve|||
|Surpluspublicreserve|297,349,585.70|257,642,799.31|
|Provisionofgeneralrisk|||
|Retainedprofit|1,935,377,714.60|1,746,002,689.27|
|Balancedifferenceofforeigncurrencytranslation|||
|Total owner’s equity attributable toparentcompany|2,708,137,664.00|2,479,055,852.28|
|Minorityinterests|||
|Totalowner’sequity(orshareholders’equity)|2,708,137,664.00|2,479,055,852.28|
|Totalliabilitiesandowner’sequity(orshareholders’equity)|11,403,124,428.82|11,261,341,430.03|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian
PersoninchargeofAccountingInstitution:SunJingping
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 2.BalanceSheetofParentCompany
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|Closingbalance|Openingbalance|
|Currentassets:|||
|Monetaryfunds|421,826,370.62|143,242,750.59|
|Transactionfinanceasset|||
|Notesreceivable|||
|Accountsreceivable|243,767,591.18|178,623,467.86|
|Accountspaidinadvance|87,961,234.82|56,697,404.55|
|Interestreceivable|||
|Dividendreceivable|14,325,586.06||
|Otherreceivables|278,365,290.97|287,010,996.18|
|Inventories|107,972,423.35|116,944,913.89|
|Non-current asset due within oneyear|||
|Othercurrentassets|71,828,962.65||
|Totalcurrentassets|1,226,047,459.65|782,519,533.07|
|Non-currentassets:|||
|Financeassetavailableforsales|||
|Held-to-maturityinvestment|||
|Long-termaccountreceivable|||
|Long-termequityinvestment|194,352,785.43|194,352,785.43|
|Investmentproperty|||
|Fixedassets|7,454,288,584.97|8,016,147,993.09|
|Constructioninprogress|1,647,839,995.78|1,430,885,814.11|
|Engineeringmaterial|||
|Disposaloffixedasset|||
|Productivebiologicalasset|||
|Oilandgasasset|||
|Intangibleassets|86,384,749.30|64,037,228.25|
|Expense on Research andDevelopment|||
|Goodwill|||
|Long-termexpensestobeapportioned|347,945,540.61|301,798,566.81|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Deferredincometaxasset|439,209,204.04|450,970,591.69|
|Othernon-currentasset|||
|Totalnon-currentasset|10,170,020,860.13|10,458,192,979.38|
|Totalassets|11,396,068,319.78|11,240,712,512.45|
|Currentliabilities:|||
|Short-termloans|434,137,220.00|321,378,829.28|
|Transactionfinancialliabilities|296,902.47|7,198,783.59|
|Notespayable||100,000.00|
|Accountspayable|1,130,120,671.84|947,683,544.83|
|Accountsreceivedinadvance|338,572,262.93|211,382,526.62|
|Wagepayable|338,104,603.04|343,449,526.33|
|Taxespayable|109,369,269.33|229,290,824.09|
|Interestpayable|16,064,294.43|16,466,095.25|
|Dividendpayable|11,940.00|11,940.00|
|Otheraccountspayable|195,015,301.41|204,933,548.07|
|Non-currentliabilitiesduewithin1year|533,150,658.42|392,573,521.87|
|Othercurrentliabilities|||
|Totalcurrentliabilities|3,094,843,123.87|2,674,469,139.93|
|Non-currentliabilities:|||
|Long-termloans|3,525,047,206.06|3,854,676,638.03|
|Bondspayable|500,000,000.00|500,000,000.00|
|Long-termaccountpayable|1,542,515,998.39|1,554,204,331.04|
|Specialaccountspayable|||
|Projectedliabilities|||
|Deferredincometaxliabilities|||
|Othernon-currentliabilities|25,367,524.34|186,135,800.28|
|Totalnon-currentliabilities|5,592,930,728.79|6,095,016,769.35|
|Totalliabilities|8,687,773,852.66|8,769,485,909.28|
|Owner’s equity (or shareholders’equity):|||
|Paid-incapital(orsharecapital)|400,000,000.00|400,000,000.00|
|Capitalpublicreserve|86,911,168.71|86,911,168.71|
|Less:Inventoryshares|||
|Reasonablereserve|||
|Surpluspublicreserve|296,688,881.17|256,982,094.78|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Provisionofgeneralrisk|||
|Retainedprofit|1,924,694,417.24|1,727,333,339.68|
|Balancedifferenceofforeigncurrencytranslation|||
|Totalowner’sequity(orshareholders’equity)|2,708,294,467.12|2,471,226,603.17|
|Totalliabilitiesandowner’sequity(orshareholders’equity)|11,396,068,319.78|11,240,712,512.45|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
3.ConsolidatedProfitStatement
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|ThisPeriod|LastPeriod|
|I.Totaloperatingincome|11,427,157,933.15|10,993,024,914.41|
|Including:Operatingincome|11,427,157,933.15|10,993,024,914.41|
|Interestincome|||
|Insurancegained|||
|Commission charge andcommissionincome|||
|II.Totaloperatingcost|11,174,234,367.33|10,361,111,969.46|
|Including:Operatingcost|9,709,865,647.38|8,576,272,368.85|
|Interestexpense|||
|Commission charge andcommissionexpense|||
|Cashsurrendervalue|||
|Netamountofexpenseofcompensation|||
|Netamountofwithdrawalofinsurancecontractreserve|||
|Bonusexpenseofguaranteeslip|||
|Reinsuranceexpense|||
|Operatingtaxandextras|238,665,537.66|363,292,935.61|
|Salesexpenses|775,204,419.75|745,690,102.02|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Administrationexpenses|225,319,947.49|238,415,387.65|
|Financialexpenses|142,819,611.58|243,510,475.66|
|Lossesofdevaluationofasset|82,359,203.47|193,930,699.67|
|Add:Changingincomeoffairvalue(Lossislistedwith“-”)|6,901,881.12|-5,053,262.49|
|Investmentincome(Lossislistedwith“-”)|14,163,176.50|14,394,514.79|
|Including:Investmentincomeonaffiliatedcompanyandjointventure|||
|Exchangeincome(Lossislistedwith“-”)|||
|III.Operatingprofit (Lossislistedwith“-”)|273,988,623.44|641,254,197.25|
|Add:Non-operatingincome|270,407,969.61|147,187,472.57|
|Less:Non-operatingexpense|13,449,762.40|7,392,852.70|
|Including:Disposallossofnon-currentasset|9,856,591.93|6,908,093.55|
|IV.TotalProfit (Lossislistedwith“-”)|530,946,830.65|781,048,817.12|
|Less:Incometaxexpense|141,865,018.93|191,237,884.65|
|V.Netprofit(Netlossislistedwith“-”)|389,081,811.72|589,810,932.47|
|Including:Netprofitofcombinedpartyrealizedbeforecombination|||
|Netprofitattributabletoowner’sofparentcompany|389,081,811.72|589,810,932.47|
|Minorityshareholders’gainsandlosses|||
|VI.Earningspershare|--|--|
|i.Basicearningspershare|0.97|1.47|
|ii.Dilutedearningspershare|0.97|1.47|
|VII.Otherconsolidatedincome|||
|VIII.Totalconsolidatedincome|389,081,811.72|589,810,932.47|
|Total consolidated incomeattributable to owners of parentcompany|389,081,811.72|589,810,932.47|
|Totalconsolidatedincomeattributabletominorityshareholders|||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
4.ProfitStatementofParentCompany
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|ThisPeriod|LastPeriod|
|I.Operatingincome|11,411,894,387.57|10,975,580,616.97|
|Less:Operatingcost|9,701,412,394.23|8,570,545,554.82|
|Operatingtaxandextras|238,106,240.18|362,295,788.73|
|Salesexpenses|780,085,329.96|748,222,436.40|
|Administrationexpenses|218,483,884.21|233,679,178.89|
|Financialexpenses|142,873,515.27|243,533,200.81|
|Lossesofdevaluationofasset|70,348,934.03|194,946,539.59|
|Add:Changingincomeoffairvalue(Lossislistedwith“-”)|6,901,881.12|-5,053,262.49|
|Investmentincome(Lossislistedwith“-”)|14,163,176.50|14,394,514.79|
|Including:Investmentincomeonaffiliatedcompanyandjointventure|||
|II.Operatingprofit (Lossislistedwith“-”)|281,649,147.31|631,699,170.03|
|Add:Non-operatingincome|270,405,947.11|147,181,559.72|
|Less:Non-operatingexpense|13,435,099.03|7,382,942.99|
|Including:Disposallossofnon-currentasset|9,841,928.56|6,905,518.55|
|III.TotalProfit (Lossislistedwith“-”)|538,619,995.39|771,497,786.76|
|Less:Incometaxexpense|141,552,131.44|189,210,011.19|
|IV.Netprofit(Netlossislistedwith“-”)|397,067,863.95|582,287,775.57|
|V.Earningspershare|--|--|
|i.Basicearningspershare|||
|ii.Dilutedearningspershare|||
|VI.Otherconsolidatedincome|||
|VII.Totalconsolidatedincome|397,067,863.95|582,287,775.57|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
5.ConsolidatedCashFlowStatement
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|ThisPeriod|LastPeriod|
|I.Cashflowsarisingfromoperatingactivities:|||
|Cashreceivedfromsellingcommoditiesandprovidinglaborservices|11,821,940,861.03|10,958,543,064.30|
|Netincreaseofcustomerdepositandinterbankdeposit|||
|Netincreaseofloanfromcentralbank|||
|Netincreaseofcapitalborrowedfromotherfinancialinstitution|||
|Cashreceivedfromoriginalinsurancecontractfee|||
|Netcashreceivedfromreinsurancebusiness|||
|Netincreaseofinsuredsavingsandinvestment|||
|Netincreaseofdisposaloftransactionfinancialasset|||
|Cashreceivedfrominterest,commissionchargeandcommission|||
|Netincreaseofcapitalborrowed|||
|Net increase of returned businesscapital|||
|Write-backoftaxreceived|||
|Other cash received concerningoperatingactivities|298,723,497.82|138,366,954.40|
|Subtotal of cash inflow arising fromoperatingactivities|12,120,664,358.85|11,096,910,018.70|
|Cash paid for purchasingcommodities and receiving labor|8,296,965,395.58|7,134,742,062.38|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|service|||
|Netincreaseofcustomerloansandadvances|||
|Netincreaseofdepositsincentralbankandinterbank|||
|Cash paid for original insurancecontractcompensation|||
|Cashpaidforinterest,commissionchargeandcommission|||
|Cash paid for bonus of guaranteeslip|||
|Cashpaidto/forstaffandworkers|1,491,076,519.28|1,280,713,318.55|
|Taxespaid|687,341,028.75|706,663,961.17|
|Other cash paid concerningoperatingactivities|234,094,893.09|248,473,175.85|
|Subtotal of cash outflow arising fromoperatingactivities|10,709,477,836.70|9,370,592,517.95|
|Netcashflowsarisingfromoperatingactivities|1,411,186,522.15|1,726,317,500.75|
|II.Cashflowsarisingfrominvestingactivities:|||
|Cashreceivedfromrecoveringinvestment|||
|Cashreceivedfrominvestmentincome|2,447,115.15|16,247,366.84|
|Netcashreceivedfromdisposaloffixed,intangibleandotherlong-termassets|174,681,542.77|82,725.86|
|Netcashreceivedfromdisposalofsubsidiariesandotherunits|||
|Other cash received concerninginvestingactivities|||
|Subtotalofcashinflowfrominvestingactivities|177,128,657.92|16,330,092.70|
|Cash paid for purchasing fixed,intangibleandotherlong-termassets|1,723,086,948.06|2,233,827,146.00|
|Cashpaidforinvestment|||
|Netincreaseofmortgagedloans|||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Net cash received fromsubsidiariesandotherunits|||
|Other cash paid concerninginvestingactivities|2,609,524.71|1,852,852.05|
|Subtotalofcashoutflowfrominvestingactivities|1,725,696,472.77|2,235,679,998.05|
|Netcashflowsarisingfrominvestingactivities|-1,548,567,814.85|-2,219,349,905.35|
|III.Cashflowsarisingfromfinancingactivities|||
|Cash received from absorbinginvestment|||
|Including: Cash received fromabsorbing minority shareholders’investmentbysubsidiaries|||
|Cashreceivedfromloans|1,707,943,187.26|1,677,158,004.62|
|Cashreceivedfromissuingbonds||500,000,000.00|
|Other cash received concerningfinancingactivities|903,064,822.94|7,470,000.00|
|Subtotalofcashinflowfromfinancingactivities|2,611,008,010.20|2,184,628,004.62|
|Cashpaidforsettlingdebts|1,664,222,540.40|1,243,570,158.09|
|Cash paid for dividend and profitdistributingorinterestpaying|343,574,678.36|326,407,154.44|
|Including:Dividendandprofitofminorityshareholderpaidbysubsidiaries|||
|Other cash paid concerningfinancingactivities|175,939,104.72|207,713,467.59|
|Subtotalofcashoutflowfromfinancingactivities|2,183,736,323.48|1,777,690,780.12|
|Netcashflowsarisingfromfinancingactivities|427,271,686.72|406,937,224.50|
|IV.Influenceoncashandcashequivalentsduetofluctuationinexchangerate|-755,865.78|1,297,175.59|
|V. Net increase of cash and cashequivalents|289,134,528.24|-84,798,004.51|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Add: Balance of cash and cashequivalentsattheperiod-begin|155,387,742.97|240,185,747.48|
|VI.Balanceofcashandcashequivalentsattheperiod-end|444,522,271.21|155,387,742.97|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
6.CashFlowStatementofParentCompany
PreparedbyShandongAirlinesCo.,Ltd
InRMB
||||
|-|-|-|
|Item|ThisPeriod|LastPeriod|
|I.Cashflowsarisingfromoperatingactivities:|||
|Cashreceivedfromsellingcommoditiesandprovidinglaborservices|11,804,162,169.30|10,940,139,794.93|
|Write-backoftaxreceived|||
|Othercashreceivedconcerningoperatingactivities|284,668,066.98|142,167,899.49|
|Subtotalofcashinflowarisingfromoperatingactivities|12,088,830,236.28|11,082,307,694.42|
|Cashpaidforpurchasingcommoditiesandreceivinglaborservice|8,294,746,672.13|7,140,620,035.20|
|Cashpaidto/forstaffandworkers|1,486,359,737.00|1,276,278,315.90|
|Taxespaid|685,735,029.36|702,281,591.79|
|Other cash paid concerningoperatingactivities|237,896,956.32|269,198,909.75|
|Subtotal of cash outflow arising fromoperatingactivities|10,704,738,394.81|9,388,378,852.64|
|Netcashflowsarisingfromoperatingactivities|1,384,091,841.47|1,693,928,841.78|
|II.Cashflowsarisingfrominvestingactivities:|||
|Cashreceivedfromrecoveringinvestment|||
|Cashreceivedfrominvestment|2,447,115.15|16,247,366.84|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|income|||
|Netcashreceivedfromdisposaloffixed,intangibleandotherlong-termassets|174,669,237.27|64,695.86|
|Netcashreceivedfromdisposalofsubsidiariesandotherunits|||
|Other cash received concerninginvestingactivities|||
|Subtotalofcashinflowfrominvestingactivities|177,116,352.42|16,312,062.70|
|Cash paid for purchasing fixed,intangibleandotherlong-termassets|1,706,500,870.09|2,209,331,003.27|
|Cashpaidforinvestment|||
|Net cash received fromsubsidiariesandotherunits|||
|Other cash paid concerninginvestingactivities|2,609,524.71|1,852,852.05|
|Subtotalofcashoutflowfrominvestingactivities|1,709,110,394.80|2,211,183,855.32|
|Netcashflowsarisingfrominvestingactivities|-1,531,994,042.38|-2,194,871,792.62|
|III.Cashflowsarisingfromfinancingactivities|||
|Cashreceivedfromabsorbinginvestment|||
|Cashreceivedfromloans|1,707,943,187.26|1,677,158,004.62|
|Cashreceivedfromissuingbonds||500,000,000.00|
|Other cash received concerningfinancingactivities|903,064,822.94|7,470,000.00|
|Subtotalofcashinflowfromfinancingactivities|2,611,008,010.20|2,184,628,004.62|
|Cashpaidforsettlingdebts|1,664,222,540.40|1,243,570,158.09|
|Cash paid for dividend and profitdistributingorinterestpaying|343,574,678.36|326,407,154.44|
|Other cash paid concerningfinancingactivities|175,939,104.72|207,713,467.59|
|Subtotalofcashoutflowfromfinancingactivities|2,183,736,323.48|1,777,690,780.12|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Netcashflowsarisingfromfinancingactivities|427,271,686.72|406,937,224.50|
|IV.Influenceoncashandcashequivalentsduetofluctuationinexchangerate|-755,865.78|1,297,175.59|
|V. Net increase of cash and cashequivalents|278,613,620.03|-92,708,550.75|
|Add: Balance of cash and cashequivalentsattheperiod-begin|143,212,750.59|235,921,301.34|
|VI.Balanceofcashandcashequivalentsattheperiod-end|421,826,370.62|143,212,750.59|

Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
7.StatementofChangesinOwners’Equity(Consolidated)
PreparedbyShandongAirlinesCo.,Ltd
ThisPeriod
InRMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Item|ThisPeriod||||||||||
||Owners’equityattributabletoparentcompany||||||||Minorshareholders’equity|Totalowners’equity|
||Paid-upcapital(orsharecapital)|Capitalreserves|Less:inventoryshares|Reasonablereserve|Surplusreserves|Provisionofgeneralrisk|Retainedprofit|Other|||
|I.Balanceattheendoflastyear|400,000,000.00|75,410,363.70|||257,642,799.31||1,746,002,689.27|||2,479,055,852.28|
|Add:Changeofaccountingpolicy|||||||||||
|Correctingofpreviouserrors|||||||||||
|Other|||||||||||
|II.Balanceatthebeginningofcurrentyear|400,000,000.00|75,410,363.70|||257,642,799.31||1,746,002,689.27|||2,479,055,852.28|
|III.Changedincurrentterm(Lossislistedwith“-”)|||||39,706,786.39||189,375,025.33|||229,081,811.72|
|(I)Netprofit|||||||389,081,811.72|||389,081,811.72|
|(II)Otherconsolidatedincome|||||||||||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|Subtotalof(I)and(II)||||389,081,811.72|389,081,811.72|
|(III)Owners’inputandwithdrawofsharecapital||||||
|1.Capitalinputbyowners||||||
|2.Sharepaymentaccountedintoowners’equity||||||
|3.Others||||||
|(IV)Profitdistribution|||39,706,786.39|-199,706,786.39|-160,000,000.00|
|1.Providingofsurplusreserves|||39,706,786.39|-39,706,786.39||
|2.Commonriskprovision||||||
|3.Dividendtoowners’(orshareholders)||||-160,000,000.00|-160,000,000.00|
|4.Others||||||
|(V)Internalsettlementofowners’equity||||||
|1.Capitalreservestransferredtosharecapital||||||
|2.Surplusreservestransferredtosharecapital||||||
|3.Makinguplossesbysurplusreserves||||||
|4.Others||||||
|(VI)Reasonablereserve||||||
|1. Withdrawal in the reportperiod||||||
|2.Usageinthereportperiod||||||
|(VII)Other||||||
|IV.Balanceattheendofthisterm|400,000,000.00|75,410,363.70|297,349,585.70|1,935,377,714.60|2,708,137,664.00|

 Lastyear
InRMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Item|Lastyear||||||||||
||Owners’equityattributabletoparentcompany||||||||Minorshareholders’equity|Totalowners’equity|
||Paid-upcapital(orsharecapital)|Capitalreserves|Less:inventoryshares|Reasonablereserve|Surplusreserves|Provisionofgeneralrisk|Retainedprofit|Other|||
|I.Balanceattheendoflastyear|400,000,000.00|75,410,363.70|||199,414,021.75||1,374,420,534.36|||2,049,244,919.81|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|Add:retroactiveadjustmentarisingfromenterprisecombinationundersamecontrol||||||
|Add:Changeofaccountingpolicy||||||
|Correctingofpreviouserrors||||||
|Other||||||
|II.Balanceatthebeginningofcurrentyear|400,000,000.00|75,410,363.70|199,414,021.75|1,374,420,534.36|2,049,244,919.81|
|III.Changedincurrentterm(Lossislistedwith“-”)|||58,228,777.56|371,582,154.91|429,810,932.47|
|(I)Netprofit||||589,810,932.47|589,810,932.47|
|(II)Otherconsolidatedincome||||||
|Subtotalof(I)and(II)||||589,810,932.47|589,810,932.47|
|(III)Owners’inputandwithdrawofsharecapital||||||
|1.Capitalinputbyowners||||||
|2.Sharepaymentaccountedintoowners’equity||||||
|3.Others||||||
|(IV)Profitdistribution|||58,228,777.56|-218,228,777.56|-160,000,000.00|
|1.Providingofsurplusreserves|||58,228,777.56|-58,228,777.56||
|2.Commonriskprovision||||||
|3.Dividendtoowners’(orshareholders)||||-160,000,000.00|-160,000,000.00|
|4.Others||||||
|(V)Internalsettlementofowners’equity||||||
|1.Capitalreservestransferredtosharecapital||||||
|2.Surplusreservestransferredtosharecapital||||||
|3.Makinguplossesbysurplusreserves||||||
|4.Others||||||
|(VI)Reasonablereserve||||||
|1. Withdrawal in the report||||||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|period||||||
|2.Usageinthereportperiod||||||
|(VII)Other||||||
|IV.Balanceattheendofthisterm|400,000,000.00|75,410,363.70|257,642,799.31|1,746,002,689.27|2,479,055,852.28|

 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
8.StatementofChangesinOwners’Equity(ParentCompany)
PreparedbyShandongAirlinesCo.,Ltd
ThisPeriod
InRMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|ThisPeriod||||||||
||Paid-upcapital(orsharecapital)|Capitalreserves|Less:inventoryshares|Reasonablereserve|Surplusreserves|Provisionofgeneralrisk|Retainedprofit|Totalowners’equity|
|I.Balanceattheendoflastyear|400,000,000.00|86,911,168.71|||256,982,094.78||1,727,333,339.68|2,471,226,603.17|
|Plus:Changeofaccountingpolicy|||||||||
|Correctingofpreviouserrors|||||||||
|Other|||||||||
|II.Balanceatthebeginningofcurrentyear|400,000,000.00|86,911,168.71|||256,982,094.78||1,727,333,339.68|2,471,226,603.17|
|III.Changedincurrentterm(Lossislistedwith“-”)|||||39,706,786.39||197,361,077.56|237,067,863.95|
|(I)Netprofit|||||||397,067,863.95|397,067,863.95|
|(II)Otherconsolidatedincome|||||||||
|Subtotalof(I)and(II)|||||||397,067,863.95|397,067,863.95|
|(III)Owners’inputandwithdrawofsharecapital|||||||||
|1.Capitalinputbyowners|||||||||
|2.Sharepaymentaccountedintoowners’equity|||||||||
|3.Others|||||||||

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|(IV)Profitdistribution|||39,706,786.39|-199,706,786.39|-160,000,000.00|
|1.Providingofsurplusreserves|||39,706,786.39|-39,706,786.39||
|2.Commonriskprovision||||||
|3.Dividendtoowners’(orshareholders)||||-160,000,000.00|-160,000,000.00|
|4.Others||||||
|(V)Internalsettlementofowners’equity||||||
|1.Capitalreservestransferredtosharecapital||||||
|2.Surplusreservestransferredtosharecapital||||||
|3.Makinguplossesbysurplusreserves||||||
|4.Others||||||
|(VI)Reasonablereserve||||||
|1. Withdrawal in the reportperiod||||||
|2.Usageinthereportperiod||||||
|(VII)Other||||||
|IV.Balanceattheendofthisterm|400,000,000.00|86,911,168.71|296,688,881.17|1,924,694,417.24|2,708,294,467.12|

 Lastyear
InRMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|Lastyear||||||||
||Paid-upcapital(orsharecapital)|Capitalreserves|Less:inventoryshares|Reasonablereserve|Surplusreserves|Provisionofgeneralrisk|Retainedprofit|Totalowners’equity|
|I.Balanceattheendoflastyear|400,000,000.00|86,911,168.71|||198,753,317.22||1,363,274,341.67|2,048,938,827.60|
|Add:Changeofaccountingpolicy|||||||||
|Correctingofpreviouserrors|||||||||
|Other|||||||||
|II.Balanceatthebeginningofcurrentyear|400,000,000.00|86,911,168.71|||198,753,317.22||1,363,274,341.67|2,048,938,827.60|
|III.Changedincurrentterm(Lossislistedwith“-”)|||||58,228,777.56||364,058,998.01|422,287,775.57|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||||
|-|-|-|-|-|-|
|(I)Netprofit||||582,287,775.57|582,287,775.57|
|(II)Otherconsolidatedincome||||||
|Subtotalof(I)and(II)||||582,287,775.57|582,287,775.57|
|(III)Owners’inputandwithdrawofsharecapital||||||
|1.Capitalinputbyowners||||||
|2.Sharepaymentaccountedintoowners’equity||||||
|3.Others||||||
|(IV)Profitdistribution|||58,228,777.56|-218,228,777.56|-160,000,000.00|
|1.Providingofsurplusreserves|||58,228,777.56|-58,228,777.56||
|2.Commonriskprovision||||||
|3.Dividendtoowners’(orshareholders)||||-160,000,000.00|-160,000,000.00|
|4.Others||||||
|(V)Internalsettlementofowners’equity||||||
|1.Capitalreservestransferredtosharecapital||||||
|2.Surplusreservestransferredtosharecapital||||||
|3.Makinguplossesbysurplusreserves||||||
|4.Others||||||
|(VI)Reasonablereserve||||||
|1. Withdrawal in the reportperiod||||||
|2.Usageinthereportperiod||||||
|(VII)Other||||||
|IV.Balanceattheendofthisterm|400,000,000.00|86,911,168.71|256,982,094.78|1,727,333,339.68|2,471,226,603.17|

 Legal Representative: Zhang Xingfu Person in charge of Accounting Works: Xu Guojian PersoninchargeofAccountingInstitution:SunJingping
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 ShandongAirlines Co., Ltd.
Notes to the Financial Statements
for theYear Ended 31 December 2013
(AllamountsareexpressedinCNYunlessotherwisestated)
Note1Corporationprofile
1.1Company’shistory
Shandong Airlines Co., Ltd. (hereafter, the Company) is a foreign-invested limited liability company incorporated in thePeople’s Republic of China. The Company was incorporated through the restructuring project jointly initiated by Shandong Airlines Group Co., Ltd. (hereafter, SDA Group), Inspur Co., Ltd. (previously known as Inspur Electronic Information Industry Group Company(浪潮电子信息产业集团公司), Shandong Hualu Group Co., Ltd, Shandong Group Corp. of Fisheries Enterprises and Luyin Investment Group(鲁银投资集团股份有限公司) following the approval (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.
Shandong Airlines Group Co., Ltd. acquired 259,204,000 state-owned corporate shares(国有法人股), with CNY 1.00 at par, of the Company by transferring its air transportation operation and the related assets and liabilities to the Company on November 25th, 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 Groupacquired199,000domesticcorporate shares(国内法人股), withCNY 1.00atpar,bycashinvestment ofCNY200,000.00onNovember26th,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)) granted by the China Securities Regulatory Commission on August 22nd, 2000; and, the Company was listed on the Shenzhen Stock Exchange on September 12th, 2000. Immediately after the issuance of the B shares, the capitaloftheCompanyincreasedtoCNY400,000,000.00.
The Agreement of Share Transfer(《股份转让协议》) signed by SDA Group and China National Aviation Holding Company (hereafter, China Aviation Group) on February 28th, 2004 authorised the transfer of 91,200,000 shares of the Company, equal to22.8% shareholding, from SDA Group to China Aviation Group. Immediately after the share transfer, SDAGroup’s shareholding in the Company was42.00%. In November 2004, the Board of Directors of the Company, in accordance with the approval(GuoZiChanQuan[2004]No.956
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013(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》)) issued by the State-owned Assets Supervision and Administration Commission of the State Council, authorised China Aviation Group to transfer the state-owned corporate shares received from SDA Group to Air China Co., Ltd. (hereafter, Air China). As so provided inGuoZiChanQuan[2004]No.956, the rights and obligation attributable to China Aviation Group as specified in the Agreement of Share Transfer shall be afforded by Air China. The change of share ownership was registered at the China Securities Depository and Clearing Corporation Limited Shenzhen Office by SDA Group and Air China on December 3rd, 2004; And, 91,200,000 shares of the Company then became held by AirChina.
LegalrepresentativeoftheCompany:ZHANG,Xingfu
Placeofregistration:ShandongJinanYaoqiangInternationalAirport
Addressofheadquarter:ShandongAirlinesCentre,5746–East2ndRingRoad,Jinan,Shandong
1.2Industryofoperation
TheCompanyoperatesintheindustryoftransportation.
1.3Operatingcapacity
The Company is permitted to undertake international and domestic passenger and cargo transportation, hotel and beverage related operation (limited to operation through branch); provision of aircraft maintenance, training of civil aviation pilots and air crew, insurance brokerage (limited to air accident insurance, with period of operation valid until September 3rd, 2015); inter-airline agenting, and principal 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 listed herein does not involve operation related to commodity that are subject to State Administered Trading(国营贸易管理),but involve operation related to commodity that are subject to quotas , licence requirements, which are restricted to obtain permission before theoperation.
1.4Principalproductsservices
TheprincipalservicesuppliedbytheCompanyisdomesticairtransportation.
1.5 The financial statements of the Company has been approved by the board of directors on 20 Mar 2014
Note2BasisofPreparation
The financialstatements ofthe Company havebeen preparedon thebasisof goingconcern in conformity with Enterprise Accounting Standard - General Standard and 38 specific standards issued by the Ministry of
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Finance ofPeople’s Republic of China on 15 February 2006, and the application guidance, explanation and relevant regulations subsequently issued (hereafter,collectively as EnterpriseAccounting Standards or CASs); and Compilation Rules for Information Disclosure by Companies Offering Securities to the PublicNo.15—General Provisions on Financial Reports (2010 Revision) issued by the China Securities Regulatory Commission(CSRC).
According to the relevant accounting regulations in Chinese Accounting Standards for Business Enterprises, the Company has adopted the accrual basis of accounting. Except for certain financial instruments which are measured by at fair value, the Company adopts the historical cost as the principle of measurement in the financial statements. Where assets are impaired, provisions forasset impairment are made in accordance with relevantrequirements.
Note3StatementofCompliancewithEnterpriseAccountingStandards
The financial statements of the Company are prepared in accordance with the requirements of the Enterprise AccountingStandards andgive atrue andcomplete viewof the consolidatedandseparatefinancial position of the Company as at 31 December 2013, and the consolidated and separate business result and cash flows for the year then ended. In addition, the consolidated and separate financial statements of the Company comply, in all material respects, with the revised disclosing requirements for financial statements and the notes ” Compilation Rules for Information Disclosure by Companies Offering Securities to the PublicNo.15—General Provisions on Financial Reports (2010 Revision) issued by China Securities Regulatory Commission (CSRC) in2010.
Note4ImportantAccountingPrinciplesandAccountingEstimates
4.1Accountingperiod
The accounting period of the Company is classified as interim period and annual period. Interim period refers tothereportingperiodshorterthanacompleteannualperiod.Acompleteaccountingperiod ofthe Companyis thecalendaryearfromJanuary1toDecember31.
4.2MonetaryUnit
Yuan (CNY) is the currency of the primary economic environment in which the Company and its domestic subsidiaries operate. Therefore, the Company and its domestic subsidiaries choose CNY as their functional currency.TheCompanyadoptsCNYasthefunctionalcurrencytoprepareitsfinancialstatements.
4.3Businesscombination
A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations are classified into business combinations involving enterprises under commoncontrolandbusinesscombinationsnotinvolvingenterprisesundercommoncontrol.
(1)Businesscombinationinvolvingentitiesundercommoncontrol
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 A business combination involving enterprises under common control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or parties both before and after the combination,andthatcontrolisnottransitory.
For a business combination involving enterprises under common control, the party that, on the combination date, obtains control of another enterprise participating in the combination is the absorbing party, while that other enterprise participating in the combination is a party being absorbed. Combination date is the date on whichtheabsorbingpartyeffectivelyobtainscontrolofthepartybeingabsorbed.
The assets and liabilities obtained are measured at the carrying amounts as recorded by the enterprise being combined at thecombination date.The difference betweenthecarrying amount of the netassets obtained and the carrying amount of consideration paid for the combination (or the total face value of shares issued) is adjustedtothecapitalpremium(orsharepremium)in thecapitalreserve.If thebalanceof thecapitalpremium (orsharepremium)isinsufficient,anyexcessisadjustedtoretainedearnings.
The cost of a combination incurred by the absorbing party includes any costs directly attributable to the combinationshallberecognizedasanexpensethroughprofitorlossforthecurrentperiodwhenincurred. (2)Businesscombinationinvolvingentitiesnotundercommoncontrol
Abusiness combination involving enterprises not under common control is a business combination in which all of the combining enterprises are not ultimately controlled by the same party or parties both before and after thebusinesscombination.
For a business combination not involving enterprises under common control, the party that, on the acquisition date, obtains control of another enterprise participating in the combination is the acquirer, while that other enterprise participating in the combination is the acquiree. Acquisition date is the date on which the acquirer effectivelyobtainscontroloftheacquiree.
For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributabletothebusinesscombinationarerecognizedinprofitorlosswhentheyareincurred.
The transaction cost arose from issuing of equity securities or liability securities shall be initially recognized as equitysecuritiesorliabilitysecurities.
The contingent consideration related to the combination shall be booked as combination cost at the fair value at the acquisition date. If, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the contingent consideration need to be adjusted, goodwill can beoffset.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Combination cost of theacquirer’s interest and identifiable net assets of the acquirer acquired through the business combination shall be measured by the fair value at the acquisition date. Where the cost of combination exceeds theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the differenceshallbe recognized asgoodwill. Where thecost of combinationis less thantheacquirer’sinterestin the fair value of theacquiree’s identifiable net assets, the difference shall be accounted for according to the following requirements: (i) the acquirer shall reassess the measurement of the fair values of theacquiree’s identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination; (ii) if after that reassessment, the cost of combination is still less than theacquirer’s interest in the fair values of theacquiree’s identifiable net assets, the acquirer shall recognize the remaining difference immediately in profit or lossforthecurrentperiod.
Where the temporary difference obtained by the acquirer was not recognized due to inconformity with the conditions applied for recognition of deferred income tax, if, within the 12 months after acquisition, additional information can prove the existence of related information at acquisition date and the expected economic benefits on the acquisition date arose from deductible temporary difference by the acquiree can be achieved, relevant income tax assets can be recognized, and goodwill offset. If the goodwill is not sufficient, the differenceshallberecognizedasprofitofthecurrentperiod.
Apart from above, the differences shall be taken into profit or loss of the current period if the recognition of deferredincometaxassetsisrelatedtothecombination.
For business combination involving entities not under common control achieved through multiple transactions (acquistion in stages), the multiple agreements are assessed to determine whether they should be viewed as a whole with reference the conditions stipulated by the Notice of the Ministry of Finance on the No. 5 Explanation of Enterprise Accounting Standards (Cai Kuai[2012] No. 19) (see Note 4.4.2 for details). Where multipleagreements ofanacquisitionin stagesare viewedasa whole,theaccountingtreatmentforthe multiple agreements shall be performed in accordance with the previous paragraphs and Note 4.10; and, where multiple agreements of an acquistion in stages fail the conditions ofCaiKuai[2012]19Hao, the accountingtreatmentsshallbeperfomedasfollow.
For the purpose of the separate financial statements, the cost of acquistion is measured as the sum of the carrying amount of investment in the investee immediately prior to the acquistion and the consideration for the addition investment. Cumulative other comprehensive income relevant to the investment recognised prior to theacquistionisreclassfiedtoprofitorlossasinvestmentincomeatthetimeofacquistion.
For the purpose of the consolidated financial statements, the investment in the investee prior to the acquistion is remeasured by fair value, difference between the acquistion date fair value of the investment in the investee prior to the acquisition and its carrying amount is recognised in profit or loss as investment income at the time of acquistion. Cumulative other comprehensive income relevant to the investment recognised prior to the
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 acquistionisreclassfiedtoprofitorlossasinvestmentincomeatthetimeofacquistion.
4.4Preparationoftheconsolidatedfinancialstatements
(1)Thescopeofconsolidation
The scope of consolidation for the consolidated financial statements is determined on the basis of control. Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its operating activities. The scope of consolidation includes the Company and all of the subsidiaries. SubsidiaryisanenterpriseorentityunderthecontroloftheCompany.
(2)Preparationoftheconsolidatedfinancialstatements
The subsidiary of the Company is included in the consolidated financial statements from the date when the control over the net assets and business decisions of the subsidiary is effectively obtained, and excluded from thedatewhenthecontrolceases.
For a subsidiary disposed of bythe Company, the operating results and cash flows before the date of disposal (the date when control is lost) are included in the consolidated income statement and consolidated statement of cash flows, as appropriate. For a subsidiary disposed during the period, no adjustment is made to the openingbalanceoftheconsolidatedfinancialstatements.
For a subsidiary acquired through a business combination not under common control, the operating results and cash flows from the acquisition (the date when the control is obtained) are included in the consolidated income statement and consolidated statement of cash flows, as appropriated; no adjustment is made to the openingbalanceandcomparativefiguresintheconsolidatedfinancialstatements.
Where a subsidiary was acquired during the reporting period, through a business combination involving enterprises under common control, the financial statements of the subsidiary are included in the consolidated financial statements. The results of operations and cash flow are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts, from the date that common control was established, and the opening balances and the comparative figures of the consolidated financialstatementsarerestated.
Whentheaccountingperiodoraccountingpoliciesofa subsidiaryare differentfromthoseoftheCompany,the Company makes necessary adjustments to thefinancial statements ofthe subsidiary based ontheCompany’s own accounting period or accounting policies. Where a subsidiary was acquired during the reporting period through a business combination not under common control, 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 preparingtheconsolidatedfinancialstatements.
Minority interest and the portion in the net profit or loss not attributable to the Company are presented
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 separately in the consolidated balance sheet withinshareholders’/owners’ equity and net profit. Net profit or loss attributable to minority shareholders in the subsidiaries is presented separately as minority interest in the consolidatedincomestatementbelowthenetprofitlineitem.
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 of[shareholders’][owners’] equity of the subsidiary,theexcessisallocatedagainsttheminorityinterests.
When the Company loses control of a subsidiary due to the disposal of a portion of an equity investment or other reasons, the remaining equity investment is re-measured at its fair value at the date when control is lost. The difference between 1) the total amount of consideration received from the transaction that resulted in the loss of control and thefair valueof the remainingequity investment and2) thecarrying amounts of theinterest 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. The amount recognized in other comprehensive income in relation to the formersubsidiary’s equity investment is reclassified as investment income for the current period when control is lost. The retained interest is subsequently measured according to the rules stipulated in the “Chinese Accounting Standards for Business EnterprisesNo.2—Long-term equity investment” or “Chinese Accounting Standards for Business EnterprisesNo.22—Determination and measurement of financial instruments”.SeeNote4.10Long-termequityinvestmentsandNote4.7Financialinstrumentsfordetails. Where loss of control over a subsidiary results from multiple transactions (agreements), asssessment shall be made as to whether the multiple agreements shall be viewed as a whole as a single transaction. Multiple agreements giving rise to loss of control over a subsidiary is generally viewed as a whole as a single transaction if the terms, conditions and economic implications of the multiple agreements satisfy one or more of the following conditions: 1) the agreements are entered into simultaneously or taking into account the implicationofeachother;2)thebusinessobjectivecannotbeachievedwithoutsuccessfulcompletionofallthe agreements; the occurrance of one agreement is dependent on the result of at least another one agreement; and/or 4) any one single agreement is not recognised as economic and the agreements as a whole is economic. Where multiple agreements do not satisfy the conditions of being viewed as a single transaction, each agreement shall be treated and accounted for in accordance with the provisions of disposal of long-term equity investments not resulting loss of control(see Note 4.10.2.2)) orloss of control dueto disposal of shares or other events (see the previous paragraph). Where nultiple agreements satisfy the conditions of being viewed as a single transaction, each agreement shall be treated and accounted for as a transaction which results inloss ofcontrol; differences between theconsiderationfordisposalspriortoloss ofcontrolandthenet assets proportionate to the shares disposed prior to loss of control are recognised as other comprehensive incomeintheconsolidatedfinancialstatementsandtransferedtoprofitorlossatthetimeoflossofcontrol. 4.5Cashequivalent
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Cash and cash equivalents of the Company include cash on hand, ready usable deposits and investments having short holding term (normally will be due within three months from the day of purchase), with strong liquidity and easy to be exchanged into certain amount of cash that can be measured reliably and have low risksofchange.
4.6Foreignexchange
(1)Translationinforeignexchangetransactions
The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying[the spot exchange rate on the date of the transaction / an exchange rate that approximates the actual spot exchange rate on the date oftransaction]. The exchange of foreign currency and transactions related to the foreignexchangearetranslatedatthespotexchangerate.
(2)Translationofmonetaryforeigncurrencyandnon-monetaryforeigncurrency
At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate at the balance sheet date. All the exchange differences thus resulted are taken to profit or loss, except forthose relating to foreign currency borrowings specifically for construction and acquisition of qualifying assets, which arecapitalized inaccordancewiththeprincipleofcapitalizationofborrowingcosts;②hedgingaccounting, the exchange difference related to hedging instruments for the purpose of net oversea operating investment is recorded in the comprehensive income till the date of disposal and recognized in profit or loss of theperiod; exchange difference from changes of other account balance of foreign currency monetary items available-for-tradeisrecordedintoprofitorlossexceptforamortizedcost.
Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailingon the transactiondate, and theamount denominated in thefunctional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date when the fair values are determined. The exchange difference thus resulted are recognizedinprofitorlossforthecurrentperiodorascapitalreserve.
(3)Thetranslationoffinancialstatementinforeigncurrency
When the consolidated financial statements include foreign operation(s), if there is a foreign currency monetary item constituting a net investment in a foreign operation, exchange difference arising from changes in exchange rates are recognized as “exchange differences arising on translation of financial statements denominated in foreign currencies” inowner’s equity, and in profit or loss for the period upon disposal of the foreignoperation.
TheGrouptranslatesthefinancialstatementsofitsforeignoperationsintoCNYbyfollowingrules. Assets and liabilities in the balance sheet are translated at the spot exchange rate prevailing at the balance sheet date; all equity items except for retained earnings are translated at the spot exchange rates at the dates on
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 which such items occur; income and expenses in income statement are translated at the spot exchange rates at thedateof transaction;theopeningretained earningsis theclosingretainedearnings ofthelast periodafter translation; theclosingbalance of retainedearnings is calculates andpresentedin thebasis of eachtranslated income statements and profit distribution 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 control overGroup’s oversea operation due to disposal, the Company transfers the accumulated 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 profit or loss in the period in whichthedisposaloccurs.
Foreign currency cash flows and cash flow of oversea subsidiaries are translated at the spot exchange rates on the date of cash flows.The effect of exchange rate changes on cash is separately presented as an adjustmentiteminthecashflowstatement.
Theopeningandactualamountoflastyeararepresentedinthefinancialstatementaftertranslation
4.7Financialinstruments
(1)Determinationoffinancialassetsandliabilities’fairvalue
Fair value is the amount for which an asset could be exchanged, ora liability settled, between knowledgeable, 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,pricingauthorities;itrepresentsthefairmarkettradingpriceintheactualtransaction.
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, willing parties, reference to the current fair value of another instrument that is substantially the same,discountedcashflowanalysisandoptionpricingmodels.
(2)Classification,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-sale 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; transaction costs relating to financial assets of other categories are included in the amountinitiallyrecognized.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 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 there is objective evidence indicating that the enterprise recently manages this portfolio for the purpose of short-termprofits;
C.thefinancialassetisaderivative,exceptforaderivativethatisdesignatedandeffectivehedginginstrument, 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.Forsuchkindoffinancialassets,fairvaluesareadoptedforsubsequentmeasurement.
Financial asset is designated oninitial recognition as at fair valuethrough profit orloss only whenit meets one ofthefollowingconditions:
A. the designation eliminates or significantly reduces the inconsistency in the measurement or recognition of relevant gains or losses that would otherwise arise from measuring the financial instruments on different bases.
B. a Groupof financialinstrumentsis managedanditsperformance is evaluatedona fairvaluebasis,andis reported to theenterprise’s key management personnels. Formal documentation regarding risk management orinvestmentstrategyhasprepared.
Financial assets at fairvaluethroughprofit orloss are subsequently measuredatthe fairvalue.Any gains or losses arising from changes in the fair value and any dividends or interest income earned on the financial assetsarerecognizedintheprofitorloss.
2)Investmentheld-tomaturity
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity that anentity has thepositive intention and ability to hold tomaturity. Such kind of financialassets 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 thefinancialassetorfinancialliability.
When calculating the effective interest rate, the Company shall estimate future cash flow considering all contractual terms of the financial asset or financial liability without considering future credit losses, and also consider all fees paid or received between the parties to the contract giving rise to the financial asset and
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 financial liability that are an integral part of the effective interest rate, transaction costs, and premiums or discounts,etc.
3)Loansandreceivables
Loans and receivables are non-derivative financial assets with fixed determinable payment that are not quoted in an active market. Financial assets classified as loans and receivables by the Company include note receivables,accountreceivables,interestreceivabledividendsreceivableandotherreceivables.
Loans and receivables are subsequently measured at amortized cost using the effective interest method. Gain orlossarisingfromderecognition,impairmentoramortizationisrecognizedinprofitorloss.
4)Financialassetsavailable-for-sale
Financial assets available-for-sale include non-derivative financial assets that are designated on initial recognition as available for trade, and financial assets that are not classified as financial assets at fair value throughprofitorloss,loansandreceivablesorinvestmentheld-to-maturity.
The cost of an available-for-sale debt instrument at each balance sheet date is determined by the amortised cost,ie.theresidualamountafteradjustmentonthecostuponinitialrecognitionforthefollowingitems: a.repaidprincipal(negativeadjustment);
b. cumulative amortisation of the difference between the amount upon expiry and the amount upon initial recognition using teh effective interest rate method (positive adjustment if expiry amount higher than amount uponinitialrecognitionandviceversa);
c.cumulativeimpairment.
Thecostofanavailable-for-saleinstrumentateachbalancesheetdateisitscostuponinitialrecognition. Financial assets available-for-sale are subsequently measured at fair value, and gains or losses arising from changes in the fair value are recognized as other comprehensive income and included in the capital reserve, except thatimpairment losses andexchangedifferences related toamortized costof monetary financial assets denominated in foreign currencies are recognized in profit or loss, until the financial assets are derecognized, atwhichtimethegainsorlossesarereleasedandrecognizedinprofitorloss.
Interests obtained and dividends declared by the investee during the period in which the financial assets available-for-saleareheld,arerecognizedininvestmentgains.
(3)Impairmentoffinancialassets
The Company 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 beimpaired,aprovisionisprovidedfortheimpairment.
Animpairmenttestshallbemadeonthefinancialassetswithsignificantsingleamounts.Thefinancialassets whichsingleamountisnotsignificantshallbetestedforassetimpairmentorbeincludedinanycombinationof
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 financialassetswithsimilarriskfeaturesforanyimpairmenttest.Where,uponindependenttest,thefinancial assets(includingthosefinancialassetswithsignificantsingleamountsandthosewithinsignificantamounts) hasnotbeenimpaired,itshallbeincludedinacombinationoffinancialassetswithsimilarriskfeaturessoas toconductanotherimpairmenttest.Thefinancialassetswhichhavesufferedfromanimpairmentlossinany singleamountshallnotbeincludedinanycombinationoffinancialassetswithsimilarriskfeaturesforany impairmenttest.
1)Impairmentonheld-tomaturityinvestment,loansandreceivables
The financial assets measured by cost or amortized cost write down their carrying value by the estimated present value of future cash flow. The difference is recorded as impairment loss. If there is objective evidence to indicate the recovery of value of financial assets after impairment, and it is related with subsequent event after recognition of loss, 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 withoutprovisionsofimpairmentlossonthereservingdate.
2)Impairmentlossonavailable-for-salefinancialassets
Where the fair value of the equity instrument investment drops significantly or not contemporarily according to theintegratedrelevantfactors,anavailable-for-tradefinancialassetisimpaired.
When an available-for-trade financial asset is impaired, the cumulative loss arising from declining in fair value that 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 previouslyrecognizedinprofitorloss.
If, after an impairment loss has been recognized, there is objective evidence that the value of the financial asset is recovered, andit is objectively relatedto anevent occurring afterthe 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 isrecordedinthecurrentprofitorloss.
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 suchanunquotedequityinstrumentshallnotbereversed.
(4)Recognitionandmeasurementoffinancialassetstransfer
TheCompanyderecognizesafinancialassetwhenoneofthefollowingconditionsismet:
1)therightstoreceivecashflowsfromtheassethaveexpired;
2)theenterprisehastransferreditsrightstoreceivecashflowsfromtheassettoathirdpartyundera
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 “pass-through”arrangement;or
3)theenterprisehastransferreditsrightstoreceivecashflowsfromtheassetandeither(a)hastransferred substantiallyalltherisksandrewardsoftheasset,or(b)hasneithertransferrednorretainedsubstantiallyall therisksandrewardsoftheasset,buthastransferredcontroloftheasset.
If the enterprise has neither retained all the risks and rewards from the financial asset nor control over the asset, the asset is recognized according to the extent it exists as financial asset, and correspondent liability is recognized. The extent of existence refers the level of risk by the financial asset changes the enterprise is facing.
For a transfer of a financialasset in its entirety that satisfies the derecognition criteria, (a). the carrying amount of the financial asset transferred; and (b) the sum of the consideration received from the transfer and any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.
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 therelative fairvalue of those parts.The differencebetween (a) the carrying amount allocated to the partderecognized;and(b)thesumoftheconsiderationreceivedforthepartderecognizedandanycumulative gain or loss allocated to the part derecognized which has been previously recognized in other comprehensive income,isrecognizedinprofitorloss.
For financial assets transferred in which the Company has continued involvement, the financial assets are accountedforinaccordancewiththefollowingcriteria:
a. if the risks and rewards associated with the ownership of the financial assets are transferred to the transferee,theCompanyde-recognisesthefinancialassets;
b. if the risks and rewards associated with the ownership of the financial assets are retained by the Company, theCompanycontinuetorecognisethefinancialassets;
c. if the Company neither retain nor transfer the risks and rewards associated with the ownership of the financial assets, the Company accounts for the financial assets in accordance with the provisions present in previousparagraphwithreferencetowhethertheCompanyretainscontrolofthefinancialassets.
(5)Classificationandmeasurementoffinancialliabilities
TheCompany’s financial liabilities are, on initial recognition, classified into financial liabilities at fair value through profit or 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 costsrelatingtootherfinancialliabilitiesareincludedintheinitialrecognitionamounts.
1)Financialliabilitiesmeasuredbythefairvalueandthechangesrecordedinprofitorloss
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 The classification by which financial liabilities held-for-trade and financial liabilities designed at the initial recognition to be measured by the fair value follows the same criteria as the classification by which financial assets held-for-trade and financial assets designed at the initial recognition to be measured by the fair value andtheirchangesarerecordedinthecurrentprofitorloss.
Forthe financialliabilities measuredby the fairvalueandchanges recordedin theprofit orloss,fair values are adopted forsubsequent measurement.Allthegainsorlosses onthechangeof fairvalueandtheexpenseson dividendsorinterestsrelatedtothesefinancialliabilitiesarerecognizedinprofitorlossforthecurrentperiod. 2)Otherfinancialliabilities
Derivative financial liabilities that linked with equity instruments, which do not have a quoted price in an active market 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 arisingfromderecognitionoramortizationarerecognizedinprofitorlossforthecurrentperiod.
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 StandardsforBusinessEnterprisesNo.14-Revenue.
(6)Derecognition
The Company 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 isaccountedforasanextinguishmentoftheoriginalfinancialliabilityandtherecognitionofanewliability. 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 (includinganynon-cashassetstransferredornewfinancialliabilitiesassumed)inprofitorloss.
(7)Derivativesandembeddedderivatives
Derivative financial instruments include derivatives are initially measured at fair value at the date when the derivative contracts are entered into and are substantially re-measured at fair value. The resulting gain and lossisrecognizedinprofitorloss.
An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or financial liability at fair value though profit or loss, and the treated as a standalone derivative if (a) the economic characteristics and risks of the embedded derivative are not closely
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 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 measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or loss.
(8)Offsettingfinancialassetsandfinancialliabilities
When theCompany has a legalright thatis currently enforceable to setoffthe recognizedfinancial assets and financial liabilities, and intends either to settle on a net basis, or to realize the financial asset and settle the financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities shallbepresentedseparatelyinthebalancesheetandshallnotbeoffset.
(9)Equityinstruments
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 transactioncosts,areaddedto[shareholders’/owners’]equity.
All types of distribution (excluding stock dividends) made by the Company to holders of equity instruments are deducted from[shareholders’/owners’] equity. The Group does not recognize any changes in the fair value of equityinstruments.
4.8Accountsreceivable
ThereceivablesbytheCompanyincludesaccountreceivables,andotherreceivables.
(1)Criteriaforrecognitionofbaddebts:
The Company carries out an inspection on the balance sheet date. Where there is any objective evidence provingthatthereceivableshavebeenimpaired,animpairmentprovisionshallbemade:
1)Aseriousfinancialdifficultyoccurstotheissuerordebtor;
2)Thedebtorbreachesanyofthecontractualstipulations,forexample,failstopayordelaysthepaymentof interestsortheprincipal,etc.;
3)Thedebtorwillprobablybecomebankruptorcarryoutotherfinancialreorganizations;
4)Otherobjectiveevidencesshowingtheimpairmentofthereceivables.
(2)Methodforbaddebtsprovision
1)Provisionsofbaddebtsinaccountreceivablesthatisindividuallysignificant.
Individual receivables equal to or higher than5% of total receivables are classified as receivables of individual significance.
For an account receivable that is individually significant, the asset is individually assessed for impairment, the
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount,andprovisionismadeaccordingly.
2)Provisionsofbaddebtsinaccountreceivablesthatindividuallyinsignificantitemswithsimilarcreditrisk characteristicsthathavesignificantrisk:
A.Evidenceofcreditriskcharacteristics
Whether the financial asset is individually significant or not individually significant, it is included in a group of financialassetswith similar credit risk characteristics andcollectively assessed forimpairment.Suchcredit risk reflects therepayment ofalldueamount underthecontract, and is relatedto the estimationof future cashflow expectedtobederivedfromtheassets.
Evidenceofportfolios:
Item Basis
Receivablesnotindividuallyassessedforimpairmentarecategorisedonthebasisof
creditrisk.Provisionfor baddebts foreachcategory ofreceivables is recognisedat
Categorisationbynatureofreceivables
theactual rate of lossfor the previous year ofthe sameor similar category bearing
similarcreditriskcharacteristicsafteradjustmentforthecurrentyearcircumstances.
B.Provisionbycreditriskcharacteristics
DuringtheCompanyimpairment test,theamountofbaddebtsprovisionsis determinedbytheassessedresult from the experience of historical loss and current economic status and the existing loss in the estimated accountreceivablesaccordingtothesetofaccountreceivablesandcreditriskcharacteristic.
Provisionsfordifferenceportfolios:
Item Provision
Categorisationbynatureofreceivables Percentageofcarryingamount
a. Portfolio1byAginganalysis
||
|-|
|Percentageofcarryingamountforrecognitionofallowanceforbaddebtapplicabletoaccountsreceivable|
|5%|

3)Provisionsofbaddebtsthatisindividuallyinsignificant.
For the account receivables not individually significant, the Company assesses the account receivables
individually for impairment when are of following characteristics: if there is objective evidence indicating the
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 impairment, the impairment loss is recognized at the difference between the present value of future cash flow less the carrying amount, and provision is made accordingly. For examples: receivables of individual insignificance bears differing credit risk characteristics to other receivables of individual insignificance account receivables with related parties; account receivables under litigations or arbitrations, or account receivables withobviousindicationthatdebtorcannotfulfilltheobligationofrepayment.
(3)Thereversalofbaddebtsprovision
Ifthereis objectiveevidenceofrecoveryinvalueofaccountreceivables,andtherecoverycanberelatedtoan event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and recognized in profit or loss. However, the reversal shall not result in a carrying amount that exceeds what the amortized cost would have been had the impairment loss not been recognized at the date the impairment isreversed.
4.9Inventories
(1)Classificationofinventory
TheCompany’sinventorymainlyincludeairmaterialsandlow-valueconsumables.。
(2)Valuationmethodofinventoriesupondelivery
Inventories are initially carried at the actual cost. The actual cost of inventories transferred out is assigned by usingfirst-in,firstout(FIFO)method.
(3) Basis for determining net realizable value of inventories and provision methods for decline in value of inventories
Net realizablevalueis theestimatedsellingpriceintheordinary courseofbusinessless theestimatedcostsof completion, the estimated costs necessary to make the sale and relevant taxes. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purpose of holding inventoriesandeffectofpostbalancesheetevents.
At thebalancesheet date,inventoriesaremeasuredatthelowerofthe costandnetrealizablevalue.If thenet realizable value is below the cost of inventories, a provision for decline in value of inventories is made. The provision for inventories decline in value is determined normally by the difference of the cost of individual item less its realizable value. For large quantity and low value items of inventories, 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 evaluated separately from other items in that product line provision for decline in value is determinedonanaggregatebasis.
After the provision for decline in value of inventories is made, if the circumstances that previously caused inventories to be written down below cost no longer exist so that the net realizable value of inventories is
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 higherthantheircost,theoriginalprovisionfordeclinein valueis reversedandthereversalis includedinprofit orlossfortheperiod.
(4)Theperpetualinventorysystemismaintainedforstocksystem.
(5)Amortizationmethodforlowcostandshort-livedconsumableitemsandpackagingmaterials.
Low cost and short-lived consumable items are amortized using immediate write-off method; packaging materialsareamortizedusingimmediatewrite-offmethod.
4.10Long-termequityinvestments
(1)DeterminationofInvestmentcost
For a business combination involving enterprises under common control, the initial investment cost of the long-term equity investment shall be carrying value of the absorbingparty’s share of theshareholder’s equity ofthepartybeingabsorbedatthedateofcombination.
For a business combination not involving enterprise under common control, the combination cost including the sum of fair value, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity securitiesissuedbytheacquirer.Theintermediaryexpensesincurredby theacquirerinrespectofauditing, legal services, valuation and consultancy services etc and other associated administrative expenses attributabletothebusinesscombinationarerecognizedinprofitorlosswhentheyareincurred.
The transaction cost for the equity securities or liability securities issued by the acquirer in the business combinationshallberecognizedasinitialamountofequitysecurityorliability.
Theequityinvestments otherthanthelong-termequitythroughcombinationshallbeinitiallymeasuredbycost. The cost shall be recognized to the difference in the way of acquisition of long-term equity investment. Theses ways includethe cash purchase price theCompanythe Company actually paid, the fair valueof equity security issuedby theCompanytheCompany,value specifiedin theinvestment contractoragreement,thefairvalueor carrying value of the asset out in the transaction of non-monetary asset exchanges, and the fair value of the long-termequityinvestment.
Expenses, taxes and other necessary expenditures directly attributable to the acquisition of long-term equity investmentaretakenintoinvestmentcost.
(2)SubsequentMeasurement
Cost method shall be adopted in a long-term equity investment where the investing enterprise does not have common controlorsignificant influenceovertheinvestee, theinvestment is not quotedin anactivemarket and itsfairvaluecannotbemeasuredreliably.
Where an investing enterprise can exercise common control or significant influence over the investee, a long-terminvestmentshallbeaccountedforusingtheequitymethod.
When an investing enterprise can no longer exercise joint control or common control nor significant influence
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 over the investee, and its fair value cannot be measured reliably, a long-term investment shall be counted as financialassetready-fortrade.
A long-term equity investment where cost method is adopted in theCompany’s financial statements can exercisecontrolsovertheinvestee.
1) Costmethodofaccountingforlong-termequityinvestments
Under the cost method, a long-term equity investment is measured at initial investment cost. Except for cash dividends or profits declared but not yet paid that are included in the price or consideration actually paid upon acquisition of the long-term equity investment, investment income is recognized in the period in accordance withtheattributableshareofcashdividendsorprofitdistributionsdeclaredbytheinvestee.
2) Equitymethodofaccountingforlong-termequityinvestments
Where theinitialinvestment cost of along-term equity investment exceedstheinvestingenterprise’s interestin the fair values of theinvestee’s identifiable net assets at the time of acquisition, no adjustment shall be made totheinitialinvestmentcost.
Where the initial investment cost of a long-term equity investment is less than the investingenterprise’s interest in the fair values ofinvestee’s identifiable net assets at the time of acquisition, the difference shall be charged to profit or loss for the current period, and the cost of the long-term equity investment shall adjusted accordingly.
Under the equity method, the Company recognizes its share of the net profit or loss of the investee for theperiodasinvestmentincomeorlossfortheperiod.TheGrouprecognizesitshareoftheinvestee’snetprofitor loss based on the fair value of theinvestee’s individual separately indentible assets, etc at the acquisition date after making appropriate adjustments to confirm with theCompany’s accounting policies and accounting period. Unrealized profits or losses resulting from theCompany’s transactions with its associates and joint ventures are recognized as investment income or loss to the extent that those attributable to theCompany’s equity interest are eliminated. However, unrealized losses resulting from theCompany’s transactions with its investees on the transferred assets, in accordance with "Accounting Standards for Enterprises No. 8 - Impairment of Assets", are not eliminated. Changes inowners’ equity of the investee other than net profit or loss are correspondingly adjusted to the carrying amount of the long-term equity investment, and recognized asothercompressiveincomewhichisincludedinthecapitalreserve.
When the investee is recognized net losses, reduce the carrying value of long-term equity investments and long-term equity of net investment (in substance) in investee to zero. In addition, the Company has the obligations on additional losses, then the expected obligation as estimated liabilities and included in the current investment losses. Where the net profit from investee units, restoration confirm the amount of revenue sharingafteroffsettheamountofunrecognizedlosssharing.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Forlong-termequityinvestmentsin associatesandjointventureswhich hadbeenheldbytheCompany before its first time adoption ofAccounting Standards for Business Enterprises, where the initial investment cost of a long-term equity investment exceeds theCompany’s interest in theinvestee’s net assets at the time of acquisition, the excess is amortized and is recognized in profit or loss on a straight line basis over the original remaininglife.
3) Acquisitionofminorityinterest
The difference between newly increased equity investment due to acquisition of minority interests and portion of net asset cumulatively calculated from the acquisition date is adjusted as capital reserve. If the capital reserveisnotsufficienttoabsorbthedifference,theexcessareadjustedagainstreturnedearnings.
4) Disposaloflong-termequityinvestment
Where the parent company disposes long-term investment in a subsidiary without a change in control, the difference in the net asset between the amount of disposed long-term investment and the amount of the consideration paid or received is adjusted to theowner’s equity. If the disposal of long-term investment in a subsidiaryinvolveslossofcontroloverthesubsidiary,therelatedaccountingpoliciesinNote4.2(2)applies. On disposal of a long-term equity investment, the difference between the proceeds actually received and receivable and the carrying amount is recognized in profit or loss for the period. For along-term equity investment accounted for using the equity method, the amount included in theowners’ equity attributable to thepercentageinterestdisposedistransferredtoprofitorlossfortheperiod.
For any retained interest, it shall be subsequently measured according to the related accounting policies in regard of long-term equity investments or financial assets as described above if its carrying amount is recognized as long-term equity investments or other related financial assets. Retroactive adjustment is made onthebasisofrelevantpoliciesiftheretainedinterestsaresettledfromcostmethodtoequitymethod. (3)Recognitionofinvesteeundercommoncontrolorsignificantinfluence
Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits fromitsoperatingactivities.
Common control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the partiessharingcontrol.
Significant influence is the power to participate in the financial and operating policy decisions of the investee butisnotcontrolorjointcontroloverthosepolicies.
When determining whether an investing enterprise is able to exercise control or significant influence over an investee, the effect of potential voting rights of the investee held be the investing enterprise or other parties thatarecurrentlyexercisableorconvertibleshallbeconsidered.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (4)Impairmenttestingmethodsandrecognitionofimpairmentprovision
The company assesses the long-term equity investment at the balance sheet date whether there is any indicationof impairment.Ifanyindicationexiststhatanassetmaybeimpaired,theenterpriseshallestimate its recoverable value of the asset. If the recoverable value of the asset is less than its carrying amount, a provisionforimpairmentlossoftheassetisrecognizedaccordingly.
Onceanimpairmentlossisrecognized,itshallnotbereversedinasubsequentperiod.
4.11Fixedassets
(1)Theconditionsofrecognition
Fixed assets refers to the tangible assets that are held for the sake of producing commodities, rendering labor service,rentingorbusinessmanagementandtheirusefullifeisinexcessofonefiscalyear.
(2)Themethodfordepreciation
Fixed assets are stated at cost and consider the impact of expected costs of abandoning the initial measurement. From the following month of state of intended use, depreciation method of the straight-line methodisusedfordifferentcategoriesoffixedassetstotakedepreciation.Therecognitionoftheclassification, usefullifeandestimatedresidualrateareasfollows:
|||
|-|-|
|Expectedusefullife|Estimatedresidualvalue(%)|
|27-33|5.00|
|15-20|5.00|
|6-8|0.00|
|3-5|0.00|
|4-10|0-5.00|
|15-18|0.00|
|5-10|5.00|

Expectednetresidualvalueof fixedassets isthe balanceof theCompany currentlyobtainedfromthedisposal of the asset less the estimated costs of disposal amount, assuming the asset is out of useful life and state the expectedservicelifeintheend.
(3)Measurementandrecognitionoffixedassets
ImpairmentandprovisionsoffixedassetsaredisclosedonNote4.16.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (4)FixedAssetsunderfinanceleases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset.Titlemayormaynoteventuallybetransferred.
Fixed assets that are held under finance leases shall be depreciated by applying the same policy as that for the fixed assets owned by the Company. If it can be reasonably determined that the ownership of the leased assets canbeobtainedattheendoftheleaseperiod,theleasedassets aredepreciatedovertheirusefullives; otherwise, the leased assets are depreciated over the shorter of the lease terms and the useful lives of the leasedassets.
(5)Others
Afixed asset is recognized only when theeconomic benefits associated with theasset will probably flowto the Company and the cost of the asset can be measured reliably. Subsequent expenditure incurred for a fixed asset that meet therecognition criteria shallbe includedin thecost of thefixed asset, andthe carrying amount of the component of the fixed asset that is replaced shall be derecognized. Otherwise, such expenditure shall berecognizedinprofitorlossintheperiodinwhichtheyareincurred.
The revenue from selling or transferring, or disposing a fixed asset is booked into profit and loss after deductionofcarryingvalueandrelatedtax.
The Company conducts a review of useful life, expected net realizable value and depreciation methods of the fixedassetatleastonanannualbase.Anychangeisregardedaschangeinaccountingestimates.
4.12Constructioninprogress
Construction in progress is measured at its actual cost. The actual costs include various construction expenditures duringthe constructionperiod, borrowing costs capitalized beforeit is ready forintended use and otherrelevantcosts.Constructioninprogressistransferredtoafixedassetwhenitisreadyforintendeduse. Testing method for provision impairment of construction in progress and accrued method for provision impairmentpleaserefertoNote4.16.
4.13Borrowingcosts
Borrowing costs include interest, amortization of discounts or premiums related to borrowings, ancillary costs incurred in connection with the arrangement of borrowings, and exchange differences arising from foreign currencyborrowings.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized. The amounts of other borrowing costs incurred are recognized as an expense in the period in which they are incurred. Qualifying assets are asset (fixed assets, investment property and inventories, etc.) that necessarily take a substantial period of time for acquisition, construction or production to getreadyfortheirintendeduseorsale.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Where funds are borrowed for a specific-purpose, the amount of interest to be capitalized is the actual interest expense incurred on that borrowing for the period less any bank interest earned from depositing the borrowed fundsbeforebeingusedontheassetoranyinvestmentincomeonthetemporaryinvestmentofthosefunds. Where funds are borrowed for a general-purpose, the amount of interest to be capitalized on such borrowings is determined by applying a weighted average interest rate to the weighted average of the excess amounts of accumulatedexpenditureontheassetoverandabovetheamountsofspecific-purposeborrowings
During the capitalization period, exchange differences related to a specific-purpose borrowing denominating in foreign currency are all capitalized. Exchange differences in connection with general-purpose borrowings are recognizedinprofitorlossintheperiodinwhichtheyareincurred.
Assets qualified for capitalization are the fixed assets, investment properties or inventories which need a long timeofconstructionorproductionactivitiesbeforereadyforintendedusedorsale.
Capitalization of borrowing costs is suspended during periods in which the acquisition, construction or production of a qualifying asset is interrupted by activities other than those necessary to prepare the asset for its intended use or sale, when the interruption is for a continuous period of more than 3 months. Borrowing costs incurred during these periods recognized as an expense for the current period until the acquisition, constructionorproductionisresumed.
4.14Intangibleassets
(1)Intangibleasset
The term “intangible asset” refers to the identifiable non-monetary assets without physical shape, possessed orcontrolledbyenterprises.
The intangible assets are initially measured by its cost. Expenses related to intangible assets, if the economic benefits related to intangible assets are likely to flow into the enterprise and the cost of intangible assets can be measured reliably, shall be recorded as cost of intangible assets. The expenses other than this shall be bookedintheprofitorlosswhentheyoccur.
Land userights thatare purchasedbytheCompany areaccounted foras intangibleassets.Buildings, such as plants that are developed and constructed by the Company, and relevant land use rights and buildings, are accounted for as intangible assets and fixed assets, respectively. Payments for the land and buildings purchased are allocated between the land use rights and the buildings; if they cannot be reasonably allocated, allofthelanduserightsandbuildingsareaccountedforasfixedassets.
When an intangible asset with a definite useful life is available for use, its original cost less net residual value and any accumulate impairment losses is amortized over its estimated useful life using the straight-line method.Anintangibleassetwithanindefiniteusefullifeisnotamortized.
For an intangible asset with a definite useful life, the Company reviews the useful life and amortization
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 method at the end of the period, and makes adjustment when necessary..An additional review is also carried out foruseful life of theintangible assets with indefinite usefullife. If there is evidence showingtheforeseeable limit period of economic benefits generated to the enterprise by the intangible assets, then estimate its useful lifeandamortizeaccordingtothepolicyofintangibleassetswithdefiniteusefullife.
(2)theexpenditureofresearchanddevelopment
The expenditures for its internal research and development projects of the Company shall be classified intoresearchexpendituresanddevelopmentexpenditures.
The research expenditures shall be recorded into the profits and losses of the current period when they are incurred.
Development expenditures in internal research and development projects shall be recognized as intangible assetswheretheysatisfyallofthefollowingconditions:
①Technicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale;
②Intentiontocompletetheintangibleassetanduseorsellit;
③How the intangible asset will generate economic benefits, including the ability to demonstrate the existence of a market fortheoutput ofthe intangible assetorthe intangible assetitself or,if it is to beusedinternally,the usefulnessoftheintangibleasset;
④Availability of adequate technical, financial and other resources to complete the development and to use orselltheintangibleasset;
⑤Abilitytomeasurereliablytheexpenditurethatisattributabletotheintangibleassetduringitsdevelopment. The expenses which can not be distinguished between research and development stage, shallberecordedintotheprofitorlossforthecurrentperiod.
(3)Impairmenttestingmethodsandrecognitionofimpairmentprovisionofintangibleassets
ImpairmentandprovisionsofintangibleassetsaredisclosedonNote4.16.
4.15Deferredcharges
Deferred charges represent expenses incurred that should be borne and amortized over the current and subsequent period (together of more than one year). Deferred charges are amortized by using straight line method. Such as expenses forpilots’ initial trainings, those expenses are amortized at 10 years according to their benefit period respectively. When a pilot is transferred from the Company, the cost of transfer is the unamortizedpartoftheoriginalexpenditure.
4.16Impairmentofnon-currentnon-financialassets
Non-financial assets with non-current nature include fixed assets, construction in progress, intangible assets with definite usefullives, investment properties measured by cost methods and long-term equity investment on subsidiaries, jointly operations. The Company assesses whether there are any indicators of impairment for all
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 non-financial assets at the balance sheet date, and impairment test is carried out and recoverable value is estimated if such an indicator exits. Goodwill and intangible assets with indefinite useful lives, as well as intangibleassetsnotreadyforuse,aretestedforimpairmentannuallyregardlessofindicatorsofimpairment. Impairment of loss is calculated and provisions taken by the difference if the recoverable value of the assets is lower than the book value. The recoverable value is the higher of estimated present value of the future expectedcashflows fromtheassetandnetfairvalueoftheassetlessdisposedcost.Thefairvalueofassetis determined by the sales agreement price within anarm’s length transaction. In case there is no sales agreement,butthereis activemarketofassets,thefairvaluecanbedeterminedbytheselling price.Ifthereis neither sales agreement nor active market, the fair value of the asset can be estimated based on the best informationobtained.
Disposal expenses include expenses related to the legislation, taxes, transportations and the direct expense for the asset to be ready for sale. When calculating the present value of expected future cash flows from an asset or asset Group, the management shall estimate the expected future cash flows from the asset or asset Groupandchooseasuitablediscountrateinordertocalculatethepresentvalueofthosecashflows.
Provision for asset impairment is calculated and determined on the individual basis. If the recoverable of individual asset is hard to estimate, the recoverable amount can be determined by the asset Group where subjectassetbelongs.AssetGroupisthesmallestsetofassetsthatcanhavecashflowinindependently. The Company determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the present value of the future expected cash flows from the asset Groups or sets of asset Groups to which the goodwill is allocated. Estimating the present value requires the Company to make an estimate of the expected future cash flows from the asset Groups or sets of asset Groups and also choose a suitablediscountrateinordertocalculatethepresentvalueofthosecashflows.
Once the loss from above asset impairment is recognized, the recoverable part cannot be reserved in the subsequentperiods.
4.17Revenue
(1)Revenuefromrenderingofservice
① The Company company recognise revenue from rendering of air service for carriage of passengers when the service is rendered or when an unused ticket expires. The sale of a ticket does not constitute revenue.An unused ticket expires on the annual anniversary of its sale. Tickets sold but of which the service is not yet rendered are recognised in current liabilities asAdvances from customers. If service is rendered through code sharing, revenue arising from the service provision is apportioned amongst parties to the code sharing agreement.Therevenuearisingfromcodesharingisalsorecognisedwhentheserviceisrendered.
② The Company company recognise air cargo revenue from rendering of air service for carriage of cargo
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 whentheserviceisrendered
③Revenuearisingfromotherairservicerenderingisrecognisedwhentheservicerenderingiscompleted. (2)RoyaltyRevenue
Accordingtothecontractoragreement,therevenueisrecognizedonanaccrualbasis.
(3)InterestIncome
The amount of interest revenue should be measured and confirmed in accordance with the length of time for whichtheenterprise'scashisusedbyothersandtheactualinterestrate.
4.18GovernmentGrants
Government grants are transfer of monetary assets and non-monetary assets from the government to the Company at no consideration, excluding the capital invested by the government as equity owner. Government grant can be classified as grant related to the assets and grants related to the income. Government grants obtained by the Company which are relevant to construction or acquisition of long-term assets are classified as asset-related government grants; all other government grants are classified as revenue-related government grants. For government grants without speficied beneficiary, the Company performs classification in accordancewiththefollowingcriteria.
(1) Where a grant is obtained fora specified project, the grant is spitted into asset-related and revenue related portions proportionate to the project's investment to expense ratio; the classification is reviewed on each balancesheetdateandrevisedifnecessary.
(2) Where a grant is obtained for general purpose, the grant as a whole is classified as a revenue-related governmentgrant.
If a government grantis in the formof a transfer of a monetary asset,it is measured at theamount receivedor receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a nominalamountisrecognizedimmediatelyinprofitorlossfortheperiod.
A government grant related to an asset is recognized as deferred income, and evenly amortized to profit or loss over the useful life of the related asset. For a government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent period, the grant is recognized as deferred income, and recognized in profit or loss over the periods in which the related costs are recognized. If the grant is a compensation for related expenses or losses already incurred, the grant is recognized immediatelyinprofitorlossfortheperiod.
For repayment of a government grant already recognized, if there is a related deferred income, the repayment is offset against the carrying amount of the deferred income, and any excess is recognized in profit or loss for the period. If there is no related deferred income, the repayment is recognized immediately in profit or loss for
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 theperiod.
4.19Deferredtaxassetsanddeferredtaxliabilities
(1)Incometaxforthecurrentperiod
At thebalancesheetdate,deferredtaxassetsandliabilitiesaremeasuredat thetaxratesthatare expectedto apply to the period when the asset is realized or the liability is settled, according to the requirements of tax laws. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects at the balance sheet date, to recover the assets orsettletheliabilities.
At the balance sheet date, current income tax liabilities or assets for the current and prior periods, are measured at the amount expected to be paid (or recovered) according to the requirements of tax laws. The calculation for income tax expenses in the current period is based on the taxable income according to the relatedtaxlawsafteradjustmenttotheaccountingprofitofthereportingperiod.
(2)Deferredincometaxassetsandliabilities
For temporary differences between the carrying amount of certain assets or liabilities and their tax base, or between the nil carrying amount of those items that are not recognized as assets or liabilities and their tax base that can be determined according to tax laws, deferred tax assets and liabilities are recognized using the balancesheetliabilitymethod.
For temporary differences associated with the initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of transaction, no deferred tax asset or liability is recognized.
For taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax liability related is recognized except where the Company is able to control the timing of reversal of the temporary difference and it is probable that the temporary difference will notreverseintheforeseeablefuture.
All deferred income tax liabilities arising from taxable temporary differences except the ones mentioned above arerecognized.
For temporary deductible differences associated with the initialrecognition of anasset or liability arising from a transaction (not a business combination) that affects neither the accounting profit nor taxable profits (or deductiblelosses)atthetimeoftransaction,nodeferredtaxassetisrecognized.
For taxable temporary deductible differences associated with investments in subsidiaries and associates, and interests in joint ventures, no deferred income tax asset related is recognized if it is impossible to reversal the temporary differenceintheforeseeablefuture,oritis notprobabletoobtaintaxableincomewhichcanbeused
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 forthedeductionofthetemporarydifferenceinthefuture.
Except mentioned above, the Company recognizes other deferred income tax assets that can deduct temporary differences to the extent that it is probable that taxable profits will be available against which the deductibletemporarydifferencescanbeutilized.
For the deductible losses and tax credit that can be carried forward, deferred tax assets for deductible temporary differences are recognized to the extent that it is probable that taxable profits will be available againstwhichthedeductibletemporarydifferencescanbeutilized.
At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates according to tax laws,thatareexpectedtoapplyintheperiodinwhichtheassetisrealizedortheliabilityissettled.
At the balance sheet date, the Company reviews the carrying amount of deferred tax assets. If it is no longer probable that sufficient taxable profit will be available in future periods to allow the benefits of the deferred tax assets to be used, the Company reduces the carrying amount of deferred tax assets. The amount of such reductionisreversedwhenitbecomesprobablethatsufficienttaxableprofitwillbeavailable
(3)Incometaxexpenses
Incometaxexpensesconsistofcurrentincometaxanddeferredincometax.
The expenses from income tax and deferred income tax, as well as the revenue, shall be recorded into profit or loss in current accounting period, except expense for income tax of the current period and deferred income tax that booked into other income or equity and adjusted carrying value of deferred income tax goodwill arose frombusinesscombination.
(4)Incometaxoffset
When we have thelegalright, and have intended to, to make settlement with net amount, or through theasset acquisition and liability fulfillment simultaneously, the Company shall present the net value from the offset betweencurrentincometaxassetandcurrentincometaxliabilityinthefinancialstatement.
When the Company has the legal right to make a settlement with the current income tax asset and current income tax liability,and the deferred income tax asset and deferred income tax liability are related to the same taxable subject under the same tax payer, or related to different taxable subject, but the intension of net value settlementin regardof thecurrentincometaxassetandcurrentincome taxliability,theCompanyshallpresent netvalueaftertheoffsetofdeferredincometaxassetanddeferredincometaxliability.
4.20Leases
A finance lease is a lease that transfers in substance all the risks and rewards incident to ownership of an asset.Titlemayormaynoteventuallybetransferred.Anoperatingleaseisaleaseotherthanafinancelease. (1) TheCompanyasLesseeunderoperatingLease
Lease payments under an operating lease are recognized by a lessee on a straight-line basis over the lease
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 term, and either included in the cost of the related asset or charged to profit or loss for the current period. The contingentrentsshallberecordedintheprofitorlossoftheperiodinwhichtheyactuallyarise.
(2) TheCompanyasLeasorunderoperatingLease
Lease income from operating leases shall be recognized by the leasor in profit or loss on a straight-line basis over the lease term. Initial direct cost of significance in amount shall be capitalized when incurred. If another basis is more systematic andrational, that basis may be used. Contingent rents are credited to profit or loss in theperiodinwhichtheyactuallyarise.
(3) TheCompanyasLesseeunderfinancingLease
For an asset that is held under a finance lease, at the lease commencement, the leased asset is recorded at the lower of its fair value at the lease commencement and the present value of the minimum lease payments, and the minimum lease payment is recorded as the carrying amount of the long-term payables; the difference between therecorded amount of the leased asset and therecorded amount of thepayable is accounted foras unrecognized finance charge, Initial direct costs incurred by the lessee during the process of negotiating and securingtheleaseagreementshallbeaddedtotheamountrecognizedfortheleasedasset.
The net amount of minimum lease payment deducted by the unrecognized finance shall be separated into long-termliabilitiesandlong-termliabilitywithinoneyearforpresentation.
Unrecognized finance charge shall be computed by the effective interest method during the lease term. Contingentrentshallbebookedintoprofitorlosswhenactuallyincurred.
(4) Inthecaseoftheleasorofafinancinglease
For an asset that is leased out under a finance lease, the aggregate of the minimum lease receipts at the inception of the lease and the initial direct costs is recorded as a finance lease receivable, and unguaranteed residual value is recorded at the same time; the difference between the aggregate of the minimum lease receipt, initial direct costs, and unguaranteed residual value, and the aggregate of their present values, is recognized as unearned finance income, which is amortized using the effective interest rate method over each periodduringtheleaseterm.
Finance lease receivable less unearned finance income shall be separated into long-term liabilities and long-termliabilitywithinoneyearforpresentation.
Unearned finance income shall be computed by the effective interest method during the lease term. Contingentrentshallbecreditedintoprofitorlossinwhichactuallyincurred.
4.21Assetsheld-for-sale
The Company has made decision on disposal of some non-current assets, and signed irrecoverable transferring agreements with buyers. The transaction is probably to be completed with one year. If so, the non-current asset shall be counted as an asset ready-for-sale, not depreciated or amortized, and shall be
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 measured by the lower of carrying amount and faire value less net value of disposal expenses. Non-current assets ready-for-sale includes individual asset and disposal group. If disposal group is an asset group, and has allocated goodwill acquired during the combination according to the Accounting Standard for Business Enterprises No. 8 - Impairment, or. the disposal Group is an operation in the asset group, the disposal group includesgoodwillinthebusinesscombination.
Where an asset or a disposal group is classified as held-for-trade, but cannot satisfy the condition of non-current asset ready-for-trade, the Company shall derecognize it as held-for-trade, and measure it by the lowerofthefollowings:
(1) the carrying amount of the asset or disposal Group before it is classified as held-for-trade, the value after the adjustment of depreciation, amortization or impairment recognized under the assumption that it is not classifiedasheld-for-trade;
(2)therecoverablevalueonthedatewhendecidednottotradeanymore.
4.22EmployeeBenefits
Duringtheaccountingperiodofanemployee’providingservices totheCompany,theCompanyrecognizesthe compensationpayableasliabilities.
The Company participates in the employees social security system set up by government agencies, including pensions, medical insurance, housing fund and other social security system, and the corresponding expendituresareincludedinthecostofrelatedassetsortheprofitorloss.
When anenterprise terminates theemployment relationship with employees beforethe end oftheemployment contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, a provision shall be recognized for the compensation arising from termination of employment relationship with employees, with a corresponding charge to the profit or loss for the current period. The enterprise cannot unilaterallywithdrawfromtheterminationplanortheredundancyoffer.
The early retirement plan adopts the same principles of termination benefits. Salaries and social insurance (from the date of ceasing services to the date of normal retirement) are paid by the Company, subject to the conditionstoberecognizedinprofitorloss(terminationbenefits).
4.23Regularrepairandsubstantialrepair
Regular repair expenditure of own aircrafts and aircrafts acquired under a financial lease is accounted for through profit or loss for the period in which it is incurred. Substantial repair expenditure eligible for capitalisation is capitalised when incurred and recognised as replacement cost of non-current assets and depreciated over a reasonable length of time. Substantial repair expenditure of aircrafts under an operating leaseincurredbeforetheleaseexpirydateisamortisedonthebasisofairhoursovertheleaseperiod.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 4.24Changesinmajoraccountingpoliciesandaccountingestimates
(1) Changeofaccountingpolicies
Monetaryunit:CNY
||||
|-|-|-|
|approvalprocedure|Thenamesoftheaffecteditems|Theaffectedamounts|
|DecisionsshalltakeeffectuponapprovalbythefourthinterimboardmeetingofthefifthsessionoftheBoardofDirectors,whichwasheldon10thJuly,2013.|Duetovarietywithintheinventory,andfrequentsendingandreceivingfactors,itisnotfeasibletodeterminethecumulativeeffectsresultingfromchangesinaccountingprinciples.Accordingto《AccountingStandardsforEnterprises-ChangesofAccountingPoliciesandAccountingEstimatesandErrorCorrection》,theprospectiveapproachwillbeimplementedbeginningonJuly1,2013.|N/A|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (2) Changeofaccountingestimates
ThereisnosignificantchangeofaccountingestimatesfortheCompanyduringthereportingperiod.
4.25Correctionofpriorperioderrors
ThereisnosignificantchangeofpreviousaccountingerrorsfortheCompanyduringthereportingperiod. 4.26Significantaccountingjudgmentsandestimates
The Company is required to makejudgments, estimates andassumptions about thecarrying amounts of items in the financial statements 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. These judgments, estimates and assumptions may affect value of the financial statements in revenue, expenses, assets and liabilities and the disclosure of contingency at the balance sheet date. However, the result derived from those uncertainties in estimates may lead significant adjustments to the carrying amounts of the assets or liabilities affected in the future.
The Company hasreviews thejudgments, estimates andassumptionsregularly on thebasis ofgoingconcern. Where the changes in accounting estimates only affect the period when changes occurred, and they are recognized within the same period. Where the changes in accounting estimates affect both current period and futureperiod,thechangesarerecognizedwithintheperiodofchangeandfutureperiod.
At balance sheet date, the followings are the significant areas where the Company needs to make judgment, estimatesandassumptionsoverthevalueofitemsinthefinancialstatements:
(1) Classificationoflease
The Company classifies leases as operating lease and financing lease according to the rule stipulated in the Accounting Standard for Business Enterprises No. 21--Leasing-. The management shall make analysis and judgment on whether the risks and rewards related to the title of leased assets has been transferred to the leaser, or whether the Company has substantially held the risks and rewards related to the ownership of leasedassets.
(2) Allowanceforbaddebt
According to the relevant accounting policies of the Company in receivables, allowance method is used for baddebt’s calculation.The impairment of receivables is calculated based on theassessment of recoverable of receivables.Assuranceof receivable impairmentneeds judgmentsand estimationsfromthemanagement.The difference between actual results and original estimates shall have impact on the carrying amount of receivablesandreceivablebaddebtprovisionsorthereverseduringthechangeofestimation.
(3) Impairmentofinventories
The Company measures inventories by the lower of cost and realizable net value according to the accounting
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 policies in regard of inventories and provisions for decline in value of inventories is made if the cost is higher than their net realizable value, and obsolete and slow-movement inventories. Inventories decline in value to net realizable value is the estimated selling price in the ordinary course of business. Net realizable value is determined on the basis of clear evidence obtained, and takes into consideration the purposes of holding inventories and effect of post balance sheet events. The difference between the actual result and the original estimates shall have impact on reverse of the carrying amount of the inventories and their decline in value or provisionsduringtheperiodofchange.
(4) Thefairvalueoffinancialinstruments
For a financial instrument which has no active market, the Company establishes fair value by using various valuation methods, including of discounted cash flow analysis model. The Company needs to estimate future cash flow, credit risk, volatility and relationship during the valuation and choose appropriate discount rate. Such assumptions have uncertainties and their changes shall have impact on the fair value of financial instruments.
(5) Impairmentofnon-financial,non-currentassets
The Company assesses whether there are any indicators of impairment for all non-current assets other than financial assets at the balance sheet date. For an intangible asset that has indefinite useful life, impairment test is made in addition to the annual impairment test if there is any indication of impairment. For non-current assets other than financial assets, impairment test is made when there is any indication that its account balancecannotberecovered.
Impairment exists when the recoverable amount of an asset is the higher of its fair value less cost of disposal andpresentvalueofthefuturecashflowsexpectedtobederivedfromtheasset.
Net value between the difference of fair value and disposal cost is determined by reference of the price of similar product in a sale agreement in anarm’s length transaction or an observable market price less the additionalcostdirectlyattributabletothedisposaloftheasset.
When estimating the present value of future cash flow, significant judgments are made over theasset’s production, selling price and relevant operating expenses, and discount rate used to calculate present value. All available materials that are considered to be relevant shall be used in the estimation of recoverable value. These materials include estimations of production, selling price and operating expenses based on reasonable andsupportableassumptions.
The Company makes an impairment test for goodwill at least at each year end. This requires an estimation of present value of future cash flow of the assets or assets group where goodwill has been allocated. The Company shall makes estimation on the future cash flow derived from assets or assets group and determine an appropriate discount rate for the present value of future cash flow when the estimation of present value of futurecashflowismade.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (6) Depreciationandamortization
Investment property, fixed assets and intangible assets are depreciated and amortized using the straight-line method over their useful lives after taking into account residual value. The useful lives are regularly reviewed to determine the depreciation and amortization costs charged in each reporting period. The useful lives are determined based onhistoricalexperienceof similar assetsandtheestimated technicalchanges.If thereis an indication that there has been a change in the factor used to determine the depreciation or amortization, the rateofdepreciationoramortizationisrevised.
(7) Deferredtaxassets
The Company shall recognize all unused tax losses as deferred tax assets to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. This requires the management of the Company make a lot of judgments over the estimation of time period, value and tax planning strategies when future taxable profit incurs so that the value of deferred tax assetscanbedetermined.
(8) Incometax
There are some transactions where ultimate tax treatments and calculations have uncertainties in theCompany’s everyday operation. Whether it is possible for some items to make expenditure before tax needs approval from competent tax authorities. If there is any difference between finalized determination value and their initial estimations value, the difference shall have the impact on the income tax and deferred income tax ofthecurrentperiodduringthefinaldetermination.
(9) Aircraftoperatingleaseandengineoverhaulexpenses
Aircraft operatingleaseandengineoverhaulexpensesare accruedandchargedtoprofitorlossinaccordance with the expected maintenance cycle, based on flight hours, flight cycles overhaul period and the amount of the cost of repairs which may occur.These estimates are largely based on past historical data about thesame or similar types of aircraft and engines repairance. The withholding amount and overhaul costs may be affectedbydifferentjudgmentsandestimatesandaffectcurrentprofitorloss.
Note5 Taxation
5.1Majortaxesandtaxrate
Tax Taxrate(%)
The Company pays the value-added tax based on value-added amount from sale of ValueAddedTax goodsorrenderingofservices,whichwillbesubjecttodeductionoftheinputtaxcredit,andtherateofvalue-addedtaxofthemaingoodsis11%.
BusinessTax Businesstaxrateisthe3%-5%oftaxableincome
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Tax Taxrate(%)
Enterpriseincometax Incometaxiscalculatedwiththeratioof25%.
Civil aviation development fund shall be calculated using the rates set out within CivilAviationDevelopmentFund applicabletotherelevantcategoryofflightroutes,maximumdepartureweightandflight distanceadoptedbythecivilaviationindustry.
Priorto1August2013,revenuearisingfromairtransportationwastaxableforbusinesstaxattherateof3%.Asfrom 1 August 2013, value added tax, instead of business tax, became chargeable on such revenue at the rate of11% in accordance with the Tax Policy Concerning Nationwide Implementation of VAT Pilot Program for Transport andModernServicesSectors(CaiShui[2013]No.37).
5.2Taxincentives
5.2.1. Revenue earned by domestic individuals and incorporation domiciled in the PRC for the provision of international transportation services is exempted for operating tax purposes as from January 1st, 2010 asprovidedbyCaishui[2010]No.8(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. According to CAI SHUI[2013] No. 37 (Circular 37) Notice on Tax Policy Concerning Nationwide Implementation of VAT Pilot Program for Transport and Modern Services Sectors, as from 1 August 2013, the zero VAT rate applies to international transport services provided by any entity or individual within the territory of the people's republic of china (hereinafter referred to as within chinese territory), foreign research and develop services, roundtrip transportation services between Hongkong, Marcau,and Taiwan, as wellastransportservicesprovidedinHongkong,Marcau,andTaiwan.
5.2.3.AsprovidedbyCaiShui[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》)jointlyissuedbytheMinistryofFinanceandtheStateAdnimistrationofTaxation on June 30, 2011 and approved by the State Council, the transitional operating tax exemption applicable to revenue received by overseas leasor(s) to lease contracts (applicable to both financing lease and operating lease) of machinery and equipment import leasing involving domestic leasee(s) and overseas leasor(s) entered into prior to and remaining in force as at December 31, 2008 continues to apply from January 1, 2010 totheexpirydateoftherelevantcontract.
5.2.4. Notice of the General Administration of Customs. CAAC on issuing thepolicies[2004]No.43(财关税[2004]43号《财政部国家税务总局关于调整国内航空公司进口飞机有关增值税政策的通知》), upon the approval of the State Council on October 01, 2004, import VAT of only4% will be levied on passenger and freight planes with an unladen weight of 25 tons or more (hereinafter referred to as “planes”)importedbydomesticairlinecompanies. As provided byCaiShui[2013]No.53, the tax rate ofimportedplanes,whichwereobligatedtobeleviedatareducedtaxrateof4%,shallbeadjustedto5%. Note6Businesscombinationandconsolidatedfinancialstatements
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 6.1Subsidiaries
6.1.1Subsidiariesacquiredthroughestablishmentorinvestment
Unit:CNYtenthousandyuan
|||||
|-|-|-|-|
|Typeofsubsidiary|Placeofregistration|Natureofoperation|Registeredcapital|
|Wholly-ownedSubsidiary|Qingdao,Shandong|Logisticsandstorage|3,000.00|

(Continued)
|||||
|-|-|-|-|
|Typeofincorporation|Legalrepresentative|Institutioncode|Acutalinvestmentasatthereportingdate|
|Limitedliabilitycompany|SU,Zhongmin|73349654-1|4,832.32|

(Continued)
||||||
|-|-|-|-|-|
|Shareholding(%)|Votingright(%)|Consolidation|Minorityinterests|Equityattributabletominorityinterstforset-offofprofitorlossattributabletominorityintterest|
|100.00|100.00|Yes|0.00|0.00|

6.1.2Subsidiariesacquiredthroughbusinesscombinationnotundercommoncontrol
Unit:CNYtenthousandyuan
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|Typeofsubsidiary|Placeofregistration|Natureofoperation|Registeredcapital|
|Wholly-ownedSubsidiary|Qingdao,Shandong|Pilottraining|5,154.55|

(Continued)
|||||
|-|-|-|-|
|Typeofincorporation|Legalrepresentative|Institutioncode|Acutalinvestmentasatthereportingdate|
|Limitedliabilitycompany|SONG,Yuxia|72557262-0|5,767.75|

(Continued)
||||||
|-|-|-|-|-|
|Shareholding(%)|Votingright(%)|Consolidation|Minorityinterests|Equityattributabletominorityinterstforset-offofprofitorlossattributabletominorityintterest|
|100.00|100.00|Yes|0.00|0.00|

6.2Changeofscopeofconsolidation
Nochangeofscopeofconsolidationfromlastyear.
Note7 Notestosignificantelementsofthefinancialstatements
Unless otherwise stated, the meaning of "B/f", "C/f", "Current year", "Prior year" in the following notes (incl. notes to significant elements of the financial statements is "1st January 2013", "31st December 2013", "the year
ended31stDecember2013",and"theyearended31stDecember2012"respectively.
7.1Monetaryfunds
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||||
|-|-|-|-|-|
|C/f|||||
|Currencyamount|Exchangerate|CNYamount|Currencyamount|Exchangerate|
|||348,205.99|||
|—|—|258,386.68|—|—|
|13,137.00|6.0969|80,094.98|4,881.63|6.2855|
|308.55|10.0556|3,102.66|1,658.55|10.1611|
|—|—|6,621.67|—|—|
|||444,168,730.31|||
|—|—|441,037,854.80|—|—|
|444,224.11|6.0969|2,708,389.97|1,424,159.60|6.2855|
|—|—|422,485.54|—|—|
|||5,334.91|||
|—|—|—|—|—|
|875.02|6.0969|5,334.91|—|—|
|||444,522,271.21|||

 7.2Accountsreceivables
7.2.1Disclosurebycategory
C/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|179,936,813.57|70.72|0.00|
|60,090,747.20|23.62|3,004,537.36|
|60,090,747.20|23.62|3,004,537.36|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|14,418,242.31|5.66|916,508.05|
|254,445,803.08|100.00|3,921,045.41|

 (Continued)
B/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|137,210,577.33|72.52|0.00|
|43,875,679.81|23.19|2,193,763.64|
|43,875,679.81|23.19|2,193,763.64|
|8,114,191.72|4.29|916,508.05|
|189,200,448.86|100.00|3,110,271.69|

 7.2.2Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|240,499,205.27|94.52|181,367,393.86|
|7,722,963.06|3.04|3,699,462.88|
|2,163,566.48|0.85|1,121,571.85|
|4,060,068.27|1.59|3,012,020.27|
|254,445,803.08|100.00|189,200,448.86|

7.2.3Allowanceforbaddebt
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013①Accountsreceivableofindividualsignificanceandsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|123,439,238.90|0.00|0.00|
|56,497,574.67|0.00|0.00|
|179,936,813.57|0.00|0.00|

②Accountsreceivablesubjecttoimpairmentassessmentbyportfolio
Allowancebypercentageofremainingbalance
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|60,090,747.20|5.00|
|60,090,747.20|5.00|

③Accountsreceivableofindividualinsignificancebutsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|320,905.02|0.00|0.00|
|2,149,104.94|0.00|0.00|
|1,770,413.66|0.00|0.00|
|9,261,310.64|0.00|0.00|
|916,508.05|100.00|916,508.05|
|14,418,242.31|6.36|916,508.05|

7.2.4Accountsreceivableowedbyinvestorsholding5%ormoreofthesharesoftheCompany
Investor C/f B/f
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|123,439,238.90|0.00|54,927,044.11|
|123,439,238.90|0.00|54,927,044.11|

 7.2.5Topfiveaccountsreceivable
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Relatedparty|123,439,238.90|Within1year|
|Thirdparty|56,497,574.67|Within1year|
|Thirdparty|9,261,310.64|Within1year|
|Relatedparty|2,585,423.47|Within1year|
|Thirdparty|2,360,400.00|Within1year|
||194,143,947.68||

 7.2.6Relatedpartybalances
SeeNote8.6Relatedpartybalancesfordetails.
7.3Prepayments
7.3.1Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|87,515,232.08|99.24|56,117,454.43|
|87,000.00|0.10|163,289.18|
|2,315.50|0.00|159,468.60|
|577,493.40|0.66|486,993.40|
|88,182,040.98|100.00|56,927,205.61|

 7.3.2Topfiveprepaidsuppliers
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Thirdparty|22,053,240.02|Within1year|
|Thirdparty|7,112,809.59|Within1year|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Thirdparty|6,835,033.31|Within1year|
|Thirdparty|5,542,565.51|Within1year|
|Thirdparty|5,355,323.68|Within1year|
||46,898,972.11||

7.3.3Noprepaymentwasowedbyinvestorsholding5%ormoreofthesharesoftheCompany.
7.4Dividendsreceivable
||||||
|-|-|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|C/f|Reasonforunsettlement|
|0.00|16,772,701.21|2,447,115.15|14,325,586.06||
|0.00|1,735,051.50|1,735,051.50|0.00||
|0.00|14,325,586.06|0.00|14,325,586.06|Paymentpending|
|0.00|712,063.65|712,063.65|0.00||
|0.00|16,772,701.21|2,447,115.15|14,325,586.06||

7.5Otherreceivables
7.5.1Disclosurebycategory
C/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|178,108,064.87|51.89|101,551,717.65|
|112,247,264.53|32.70|5,612,363.23|
|112,247,264.53|32.70|5,612,363.23|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 C/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|52,914,555.92|15.41|0.00|
|343,269,885.32|100.00|107,164,080.88|

 (Continued)
B/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|170,529,977.31|46.45|109,051,717.65|
|117,991,367.19|32.14|5,899,568.36|
|117,991,367.19|32.14|5,899,568.36|
|78,577,743.62|21.41|0.00|
|367,099,088.12|100.00|114,951,286.01|

 7.5.2Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|139,365,183.80|40.60|156,252,301.80|
|23,296,453.58|6.79|9,668,933.94|
|5,178,629.05|1.51|15,390,105.67|
|175,429,618.89|51.10|185,787,746.71|
|343,269,885.32|100.00|367,099,088.12|

7.5.3Allowanceforbaddebt
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013① Otherreceivablesofindividualsignificanceandsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|101,551,717.65|101,551,717.65|100.00|
|41,354,563.28|0.00|0.00|
|17,901,423.94|0.00|0.00|
|17,300,360.00|0.00|0.00|
|178,108,064.87|101,551,717.65|57.02|

② Otherreceivablessubjecttoimpairmentassessmentbyportfolio
Allowancebypercentageofremainingbalance
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|112,247,264.53|5.00|
|112,247,264.53|5.00|

③ Otherreceivablesofindividualinsignificancebutsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|13,047,895.61|0.00|0.00|
|185,361.00|0.00|0.00|
|166,824.90|0.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|469,581.20|0.00|0.00|
|490,736.00|0.00|0.00|
|617,870.00|0.00|0.00|
|4,942,960.00|0.00|0.00|
|3,262,353.60|0.00|0.00|
|4,238,588.20|0.00|0.00|
|11,472,711.51|0.00|0.00|
|14,019,673.90|0.00|0.00|
|52,914,555.92|0.00|0.00|

7.5.4Otherreceivablesowedbyinvestorsholding5%ormoreofthesharesoftheCompany
||||
|-|-|-|
|C/f|||
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|13,047,895.61|0.00|9,336,264.20|
|13,047,895.61|0.00|9,336,264.20|

 7.5.5Topfiveotherreceivables
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Relatedparty|101,551,717.65|Over3years|
|Thirdparty|61,213,069.70|Within1year|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Thirdparty|41,354,563.28|Over3years|
|Thirdparty|17,901,423.94|Over3years|
|Thirdparty|17,300,360.00|Over3years|
||239,321,134.57||

 7.5.6Relatedpartybalances
SeeNote8.6Relatedpartybalancesfordetails.
7.5.7Otherreceivablesdenominatedinforeigncurrenciesandtherelevantratefortranslation
||||||
|-|-|-|-|-|
|C/f|||||
|Currencyamount|Exchangerate|CNYamount|Currencyamount|Exchangerate|
|20,080,940.89|6.0969|122,431,488.54|13,821,767.06|6.2855|

 7.6Inventories
Disclosurebytype
C/f
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|104,936,631.52|0.00|
|2,075,509.92|0.00|
|961,331.91|0.00|
|107,973,473.35|0.00|

 (Continued)
B/f
Type
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|110,802,491.47|0.00|
|5,405,045.57|0.00|
|737,376.85|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|116,944,913.89|0.00|

 7.7Othercurrentassets
||
|-|
|C/f|
|13,184,687.03|
|58,644,275.62|
|71,828,962.65|

 7.8Long-termequityinvestments
7.8.1Disclosurebycategory
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|22,500,000.00|0.00|0.00|
|88,352,100.00|0.00|0.00|
|22,500,000.00|0.00|0.00|
|88,352,100.00|0.00|0.00|

 7.8.2Detailsoflong-termequityinvestments
||
|-|
|Measurementmethod|
|Costmethod|
|Costmethod|
|Costmethod|
|Equitymethod|

 (Continued)
|||
|-|-|
|B/f|Currentyearmovement|
|6,690,000.00|0.00|
|35,000,000.00|0.00|
|46,662,100.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|B/f|Currentyearmovement|
|22,500,000.00|0.00|
|110,852,100.00|0.00|

 (Continued)
|||
|-|-|
|Shareholding(%)|Votingright(%)|
|0.45|0.45|
|10.00|10.00|
|2.53|2.53|
|45.00|45.00|

(Continued)
|||
|-|-|
|Impairmentallowance|Impairmentallowancerecognisedincurrentyear|
|0.00|0.00|
|0.00|0.00|
|0.00|0.00|
|22,500,000.00|0.00|
|22,500,000.00||

 7.8.3Detailsoflong-termequityinvestmentsinassociates
||||
|-|-|-|
|Typeofincorporation|Placeofregistration|Legalrepresentative|
|Limitedliabilitycompany|Jinan,Shandong|ZHAO,Hong|

 (Continued)
|||
|-|-|
|Registeredcapital|Shareholding(%)|
|50.00million|45.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (Continued)
|||
|-|-|
|Totalassetsc/f|Totalliabilitiesc/f|
|2,119,218.84|167,931,418.33|

(Continued)
||||
|-|-|-|
|Revenueforcurrentyear|Netprofitforcurrentyear|Relationshiptothecompany|
|0.00|-2,321,195.73|Associate|

7.8.4Detailsofimpairmentallowanceforlong-termequityinvestments
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|22,500,000.00|0.00|0.00|
|22,500,000.00|0.00|0.00|

7.9Fixedassets
7.9.1Generalinformation
|||||
|-|-|-|-|
|B/f|Currentyearincrease||Currentyeardecrease|
|12,502,314,115.70|400,162,087.51||776,260,421.91|
|283,494,370.54|26,509,810.31||0.00|
|11,425,420,286.95|220,065,472.81||738,508,309.35|
|620,652,258.77|94,411,502.28||27,089,139.68|
|57,414,226.49|5,455,103.39||2,110,161.52|
|115,332,972.95|53,720,198.72||8,552,811.36|
||Addition|Recognition||
|3,985,755,426.26||787,573,958.19|530,774,983.32|
|44,880,915.72||8,895,408.20|0.00|
|3,635,313,040.46||728,461,662.99|516,874,879.88|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|B/f|Currentyearincrease||Currentyeardecrease|
|218,256,536.65||32,667,613.39|5,686,334.44|
|24,348,244.01||4,617,873.62|1,850,551.79|
|62,956,689.42||12,931,399.99|6,363,217.21|
|8,516,558,689.44||||
|238,613,454.82||||
|7,790,107,246.49||||
|402,395,722.12||||
|33,065,982.48||||
|52,376,283.53||||
|383,771,823.22|79,114,818.66||143,883,401.94|
|0.00|0.00||0.00|
|351,887,855.38|79,114,818.66||142,757,186.08|
|31,883,967.84|0.00||1,126,215.86|
|0.00|0.00||0.00|
|0.00|0.00||0.00|
|8,132,786,866.22||||
|238,613,454.82||||
|7,438,219,391.11||||
|370,511,754.28||||
|33,065,982.48||||
|52,376,283.53||||

 Note: Depreciation recognised during the current year amounted to 787,573,958.19; historical cost of fixed assetstransferredfromconstructioninprogressduringthecurrentyearamountedto71,852,227.56.
7.9.2Fixedassetswithimposedrestrictiononownership
As at reporting date, aircrafts and engines with NBV amounting to 4,970,849,215.75 (historical cost amounting
to 6,882,550,190.06; 2012 comparative: NBV and historical cost amounting to 5,290,960,014.07 and
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 6,784,301,763.02 respectively) were pledged as security for long-term borrowings amounting to 3,218,251,198.06 (2012 comparative: 3,854,676,638.03, see Note 7.27) and long-term borrowings due within one year amounting to 283,870,512.12 (2012 comparative: 283,051,698.10, see Note 7.26); ownership of aircrafts and engines with NBV amountig to 1,069,241,837.97 (historical cost amounting to 1,737,112,531.96; 2012 comparative: NBV and historical cost amounting to 1,191,901,011.49 and 1,737,224,257.96 respectively) wasrestrictedasthefactthattheywereacquiredunderfinancialleases.
7.9.3Fixedassetsacquiredunderfinancialleases
||
|-|
|C/f|
|1,737,112,531.96|
|1,737,112,531.96|
|667,870,693.99|
|667,870,693.99|
|1,069,241,837.97|
|1,069,241,837.97|
|0.00|
|0.00|
|1,069,241,837.97|
|1,069,241,837.97|

 7.9.4Fixedassetspendingownershipregistration
|||
|-|-|
|Reasonforpending|Estimatedregistration|
|LandrentedfromJinanAirControl,noteligibleforownershipregistration|——|
|Ownershipregistrationinprocess|2014|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|Ownershipregistrationinprocess|2014|

 7.9.5Impairmentoffixedassets
Impairment allowance amountingto 79,114,818.66 forfive 737-300 aircrafts was recognised during the current yearwithreferencetothedisposalplansignedwithChinaPostAirforthesaidaircrafts.
7.10.Constructioninprogress
7.10.1Generalinformation
C/f
Project
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|1,611,984,965.18|0.00|
|35,931,030.60|0.00|
|1,647,915,995.78|0.00|

(Continued)
B/f
Project
|||
|-|-|
|Grosscarryingamount|Impairmentallowance|
|1,414,569,228.22|0.00|
|16,316,585.89|0.00|
|1,430,885,814.11|0.00|

7.10.2Significantprojects
|||
|-|-|
|Budget|B/f|
|5,939,797,500.00|1,414,569,228.22|
|192,431,000.00|16,316,585.89|
|6,132,228,500.00|1,430,885,814.11|

(Continued)
|||
|-|-|
|Transferredtofixedassetsincurrentyear|Otherdecrease|
|68,723,658.56|903,064,822.94|
|3,128,569.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|71,852,227.56|903,064,822.94|

(Continued)
|||
|-|-|
|Cumulativeborrowingcostscapitalised|Borrowingcostscapitalisedinthecurrentyear|
|-1,965,738.22|-522,887.25|
|0.00|0.00|
|-1,965,738.22|-522,887.25|

(Continued)
|||
|-|-|
|%ofinvestment:budget|Percentageofcompletion|
|27.14|27.14|
|18.67|18.67|
|—|—|

7.10.3Impairmentofconstructioninprogress
No indication of impairment on construction in progress was present as at the reporting date, therefore no impairmentallowancewasrecognised.
7.11Intangibleassets
7.11.1Generalinformation
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|84,663,933.13|24,196,624.41|0.00|
|84,663,933.13|0.00|0.00|
|0.00|24,196,624.41|0.00|
|5,849,161.58|1,883,759.14|0.00|
|5,849,161.58|1,428,139.77|0.00|
|0.00|455,619.27|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|0.00|0.00|0.00|
|0.00|0.00|0.00|
|0.00|0.00|0.00|
|78,814,771.55|||
|78,814,771.55|||
|0.00|||

Amortisationrecognisedduringthecurrentyearamountedto1,883,759.14.
7.11.2Impairmentofintangibleassets
No indication of impairment on intangible assets was present as at the reporting date, therefore no impairment allowancewasrecognised.
7.12Goodwill
7.12.1Generalinformation
|||||
|-|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|C/f|
|10,220,816.22|0.00|0.00|10,220,816.22|
|10,220,816.22|0.00|0.00|10,220,816.22|

 7.12.2Impairmentandprovisionsofgoodwill
Management concluded that impairment on goodwil arising from Qingdao Feisheng was present, and the full provisions of goodwill shall be taken as at the reporting date after assessment made on the basis of the current operation assets of Qingdao Feisheng and with reference to the audited operating results of Qingdao Feishengforthecurrentyearandthevaluationreportasatthereportingdate.
7.13Deferredcharges
||||||
|-|-|-|-|-|
|B/f|Currentyearincrease|Currentyearamortisation|Otherdecrease|C/f|
|283,833,279.68|97,907,569.95|48,083,707.83|0.00|333,657,141.80|
|18,034,629.07|419,244.00|4,165,474.26|0.00|14,288,398.81|
|301,867,908.75|98,326,813.95|52,249,182.09|0.00|347,945,540.61|

7.14Deferredtaxassets
Category C/f B/f
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Deferredtaxassets|Deductibletemporarydifferenceandtaxlosscarriedforwards|Deferredtaxassets|
|27,771,281.57|111,085,126.29|29,515,389.43|
|79,750,809.99|319,003,239.94|95,942,955.81|
|74,225.62|296,902.47|1,799,695.90|
|242,560,865.24|970,243,460.92|198,150,745.16|
|83,026,150.77|332,104,603.04|85,129,768.80|
|6,341,881.10|25,367,524.34|40,300,683.54|
|136,904.73|547,618.90|46,072.79|
|439,662,119.02|1,758,648,475.90|450,885,311.43|

 7.15Allowanceforassetimpairment
|||||
|-|-|-|-|
|B/f|Currentyearrecognition|Currentdecrease||
|||Reversal|Expanded|
|118,061,557.70|523,568.59|7,500,000.00|0.00|
|22,500,000.00|0.00|0.00|0.00|
|383,771,823.22|79,114,818.66|0.00|143,883,401.94|
|0.00|10,220,816.22|0.00|0.00|
|524,333,380.92|89,859,203.47|7,500,000.00|143,883,401.94|

 7.16Assetswithimposedrestrictiononownership
||
|-|
|C/f|
|4,970,849,215.75|
|1,069,241,837.97|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|C/f|
|6,040,091,053.72|

7.17Short-termborrowings
||
|-|
|C/f|
|434,137,220.00|
|434,137,220.00|

 7.18Financialliabilitiesheldfortrading
||
|-|
|Fairvaluec/f|
|296,902.47|
|296,902.47|

 The immature interest rate swaps held by the Company had a principal amount of USD 117,018,877.60 as at the reporting date; bankers confirmed that the reporting date fair value of these interest rate swaps is -296,902.47(USD-48,697.28).
7.19Notespayable
||
|-|
|C/f|
|0.00|
|0.00|
|0.00|

 7.20Accountspayable
7.20.1Generalinformation
||
|-|
|C/f|
|370,702,424.44|
|281,866,639.72|
|225,666,680.33|
|81,971,026.18|
|61,129,425.69|
|42,333,567.66|
|3,950,584.37|
|64,506,341.86|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Total 1,132,126,690.25 950,968,778.60 7.20.2 See Note 8.6 Related party balances for accounts payable owed to investors investors holding5% or moreofthesharesoftheCompany.
7.20.3Nosignificantaccountpayabledueformorethan1yearasatthereportingdate.
7.21Advancefromcustomers
7.21.1Generalinformation
||
|-|
|C/f|
|318,907,952.74|
|15,493,312.51|
|9,066,787.72|
|343,468,052.97|

 7.21.2 See Note 8.6 Related party balances for advance from customers owed to investors investors holding5%ormoreofthesharesoftheCompany.
7.21.3Nosignificantadvancefromcustomersdueformorethan1yearasatthereportingdate.
7.22Employmentbenefitspayable
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|306,610,783.99|1,214,713,527.13|1,210,477,555.28|
|0.00|54,961,766.22|54,961,766.22|
|2,930,451.14|153,708,791.26|156,639,242.40|
|0.00|35,423,544.34|35,423,544.34|
|0.00|68,325,064.96|68,325,064.96|
|2,930,451.14|38,268,275.24|41,198,726.38|
|0.00|2,833,257.50|2,833,257.50|
|0.00|2,793,774.26|2,793,774.26|
|0.00|3,770,453.16|3,770,453.16|
|0.00|2,294,421.80|2,294,421.80|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|18,808.40|45,480,722.96|45,487,498.96|
|34,143,751.18|17,668,385.46|23,803,943.34|
|0.00|0.00|0.00|
|0.00|139,823.46|139,823.46|
|0.00|8,815.38|8,815.38|
|343,703,794.71|1,486,681,831.87|1,491,518,645.04|

 7.23Taxesandfeespayable
||
|-|
|C/f|
|23,173,422.56|
|517,483.64|
|1,131,299.11|
|799,023.02|
|321,144.21|
|1,313,944.58|
|142,738.11|
|5,178,599.23|
|4,456,114.47|
|70,197,348.09|
|1,886,243.81|
|779,876.14|
|167,200.64|
|110,064,437.61|

 7.24Interestspayable
Item C/f B/f
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|3,538,461.10|
|12,035,833.33|
|490,000.00|
|16,064,294.43|

 7.25Otherpayables
7.25.1Generalinformation
||
|-|
|C/f|
|19,941,754.75|
|68,715,061.67|
|3,949,505.02|
|36,330,461.25|
|64,932,075.65|
|193,868,858.34|

 7.25.2SeeNote8.6Relatedpartybalancesforotherpayables owedtoinvestorsinvestorsholding5%ormore ofthesharesoftheCompany.
7.25.3Significantotherpayablesdueformorethan1year
|||
|-|-|
|Amount|Reasonforpendingsettlement|
|20,000,000.00|Margindeposittobesettleduponexpiryofimmaturewetlease|
|20,000,000.00||

7.25.4Significantotherpayables
||
|-|
|C/f|
|20,000,000.00|
|20,000,000.00|

7.26Non-currentliabilitiesduewithinoneyear
7.26.1Generalinformation
||
|-|
|C/f|
|443,609,292.12|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|89,541,366.30|
|533,150,658.42|

 7.26.2Long-termborrowingsduewithinoneyear
① Generalinformation
||
|-|
|C/f|
|283,870,512.12|
|159,738,780.00|
|443,609,292.12|

② Topfivelong-termborrowingsduewithinoneyear
|||
|-|-|
|Startdate|Expirydate|
|2013-10-31|Steprepayment|
|2005-10-19|Steprepayment|
|2013-11-29|Steprepayment|
|2005-4-7|Steprepayment|
|2008-9-26|Steprepayment|

(Continued)
||||
|-|-|-|
|C/f|||
|Currencyamount|CNYamount|CurrencyAmount|
|17,200,000.00|104,866,680.00|—|
|11,200,000.00|68,285,280.00|11,200,000.00|
|9,000,000.00|54,872,100.00|—|
|—|50,000,000.00|—|
|4,455,150.00|27,162,604.04|4,000,000.00|
||305,186,664.04||

Notes:Interest rates of theabove-mentionedlong-termborrowings duewithinoneyearrangefrom1.0441% to
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT20136.55%.
7.26.3Long-termpayablesduewithinoneyear
|||
|-|-|
|Term|Principalamount|
|2005.6-2020.6|1,440,000,000.00|
|2011.8-2026.8|284,290,146.39|
||1,724,290,146.39|

(Continued)
|||
|-|-|
|Accruedinterest|C/f|
|44,296,895.25|73,629,868.84|
|15,789,212.15|15,911,497.46|
|60,086,107.40|89,541,366.30|

7.27Long-termborrowings
① Disclosurebycategory
||
|-|
|C/f|
|3,502,121,710.18|
|466,534,788.00|
|443,609,292.12|
|3,525,047,206.06|

② Topfivelong-termborrowings
|||
|-|-|
|Startdate|Expirydate|
|2012/5/7|Repaymentonexpiry|
|2012/11/30|Repaymentonexpiry|
|2012/12/27|Repaymentonexpiry|
|2005/12/21|Steprepayment|
|2012/10/9|Steprepayment|

(Continued)
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|C/f|||
|Currencyamount|CNYamount|Currencyamount|
|35,180,000.00|214,488,942.00|50,000,000.00|
|31,000,000.00|189,003,900.00|31,000,000.00|
|28,500,000.00|173,761,650.00|28,500,000.00|
|26,213,260.00|159,819,624.89|26,213,260.00|
|25,000,000.00|152,422,500.00|25,000,000.00|
|145,893,260.00|889,496,616.89|160,713,260.00|

Notes:Interestratesoftheabove-mentionedlong-termborrowingsrangefrom1.0441%to5.8950%.
7.28Bondspayable
||||
|-|-|-|
|Facevalue|Issuedate|Term|
|500,000,000.00|2012/6/12|Threeyears|
|500,000,000.00|||

(Continued)
|||||
|-|-|-|-|
|Interestpayableb/f|Interestaccruedincurrentyear|Interestpaidincurrentyear|Interestpayablec/f|
|12,035,833.33|21,450,000.00|21,450,000.00|12,035,833.33|
|12,035,833.33|21,450,000.00|21,450,000.00|12,035,833.33|

7.29.Long-termpayables
7.29.1Disclosurebycategory
||
|-|
|C/f|
|890,403,647.93|
|961,121,308.95|
|89,541,366.30|
|219,467,592.19|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Total 1,542,515,998.39 1,554,204,331.04 Note : Maintenance payables for aircrafts and engines held under operating lease due within one year had beenincludedinaccountspayable.
7.29.2Topfivefinancialleaserentalpayables
|||
|-|-|
|Term|Principalamount|
|2005.6-2020.6|1,440,000,000.00|
|2011.8-2026.8|284,290,146.39|
||1,724,290,146.39|

(Continue)
|||
|-|-|
|Accruedinterest|C/f|
|137,626,412.99|582,970,789.53|
|93,928,215.18|217,891,492.10|
|231,554,628.17|800,862,281.63|

7.30Othernon-currentliabilities
||
|-|
|C/f|
|2,988,958.34|
|0.00|
|0.00|
|15,758,566.00|
|6,620,000.00|
|25,367,524.34|

 Detailsofdeferredrevenue:
|||||
|-|-|-|-|
|B/f|Subsidyincreasedincurentyear|Transfertonon-operatingincomeincurrentyear|Othermovements|
|3,488,458.34|0.00|499,500.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|4,709,541.65|0.00|4,709,541.65|0.00|
|0.00|6,620,000.00|0.00|0.00|
|16,735,066.12|0.00|976,500.12|0.00|
|24,933,066.11|6,620,000.00|6,185,541.77|0.00|

 7.31Sharecapital
B/f
Category
||
|-|
|Amount|
|0.00|
|259,801,000.00|
|199,000.00|
|199,000.00|
|0.00|
|0.00|
|0.00|
|0.00|
|260,000,000.00|
|0.00|
|140,000,000.00|
|0.00|
|0.00|
|140,000,000.00|
|400,000,000.00|

(Continued)
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Category Currencyyearmovement(+,-)
|||||
|-|-|-|-|
|Shareissue|Bonusissue|Coversionfromreserves|Others|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|
|0.00|0.00|0.00|0.00|

 (Continue)
Category C/f
||
|-|
|Amount|
|0.00|
|259,801,000.00|
|199,000.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Category C/f
||
|-|
|Amount|
|199,000.00|
|0.00|
|0.00|
|0.00|
|0.00|
|260,000,000.00|
|0.00|
|140,000,000.00|
|0.00|
|0.00|
|140,000,000.00|
|400,000,000.00|

 7.32Capitalreserves
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|67,618,282.54|0.00|0.00|
|7,792,081.16|0.00|0.00|
|75,410,363.70|0.00|0.00|

 7.33Surplusreserves
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|257,642,799.31|39,706,786.39|0.00|
|257,642,799.31|39,706,786.39|0.00|

 Notes: according to the Company Law and the Articles of Association,10% of net profit was transferred to statutorysurplusreserve.
The company may make allocations to the discretionary common reserve from the after-tax profits after
making allocations to thestatutory surplus reserve fromthe after-tax profits.Approvedsurplus reserves canbe
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 releasedtorecoverlossesorforconversionintosharecapital.
7.34.Retainedearnings
Movementofretainedearnings
|||
|-|-|
|Currentyear|Prioryear|
|1,746,002,689.27|1,374,420,534.36|
|0.00|0.00|
|1,746,002,689.27|1,374,420,534.36|
|389,081,811.72|589,810,932.47|
|0.00|0.00|
|0.00|0.00|
|39,706,786.39|58,228,777.56|
|0.00|0.00|
|160,000,000.00|160,000,000.00|
|0.00|0.00|
|1,935,377,714.60|1,746,002,689.27|

7.35Revenueandoperatingcosts
7.35.1Generalinformation
||
|-|
|Currentyear|
|11,293,341,843.56|
|133,816,089.59|
|11,427,157,933.15|
|9,707,677,991.58|
|2,187,655.80|
|9,709,865,647.38|

 7.35.2Disclosurebyserviceline
||||
|-|-|-|
|Currentyear|||
|Operatingincome|Operatingcost|Operatingincome|
|11,232,141,639.73|9,666,874,791.95|10,845,887,973.75|
|30,362,647.64|27,348,610.96|22,119,064.02|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Currentyear|||
|Operatingincome|Operatingcost|Operatingincome|
|22,194,939.18|6,958,634.48|17,978,025.13|
|8,642,617.01|6,495,954.19|6,503,978.44|
|11,293,341,843.56|9,707,677,991.58|10,892,489,041.34|

 7.35.3Operatingincomefromtopfivecustomers
||
|-|
|Operatingincome|
|681,700,941.89|
|701,094,111.08|

 7.36Businesstaxandsurcharges
||
|-|
|Currentyear|
|198,024,183.56|
|22,330,168.35|
|18,311,185.75|
|238,665,537.66|

 Notes:ApplicableratesforbusinesstaxandsurchargesseeNote5Taxation.
7.37Salesexpenses
||
|-|
|Currentyear|
|440,471,809.02|
|129,956,447.17|
|76,514,767.74|
|27,857,792.92|
|27,304,337.80|
|15,777,216.30|
|13,358,997.77|
|7,658,213.49|
|4,804,272.39|
|4,457,230.85|
|2,124,907.23|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|1,923,549.14|
|22,994,877.93|
|775,204,419.75|

 7.38Generalandadministrativeexpenses
||
|-|
|Currentyear|
|116,426,147.20|
|16,265,877.85|
|12,185,173.59|
|10,294,628.87|
|9,157,436.31|
|9,073,671.10|
|3,342,852.73|
|1,883,759.21|
|1,684,856.05|
|45,005,544.58|
|225,319,947.49|

 7.39Financialcosts
||
|-|
|Currentyear|
|254,190,451.00|
|4,362,149.98|
|-109,295,243.48|
|2,286,554.04|
|142,819,611.58|

 7.40Lossonassetimpairment
||
|-|
|Currentyear|
|-6,976,431.41|
|79,114,818.66|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|10,220,816.22|
|82,359,203.47|

 7.41Gainfromchangesinfairvalue
||
|-|
|Currentyear|
|6,901,881.12|
|6,901,881.12|

 7.42Investmentincome
7.42.1Disclosurebycategory
||
|-|
|Currentyear|
|16,772,701.21|
|-2,609,524.71|
|14,163,176.50|

 7.42.2Incomefromlong-termequityinvestmentsmeasuredatcost
||
|-|
|Currentyear|
|1,735,051.50|
|14,325,586.06|
|712,063.65|
|16,772,701.21|

 7.43Non-operatingincome
|||
|-|-|
|Currentyear|Prioryear|
|78,847,533.50|59,901.02|
|78,847,533.50|59,901.02|
|22,465,841.77|52,137,058.47|
|152,697,442.00|64,962,684.00|
|16,397,152.34|30,027,829.08|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|Currentyear|Prioryear|
|270,407,969.61|147,187,472.57|

 Detailsofgovernmentgrants:
|||
|-|-|
|Currentyear|Prioryear|
|1,310,000.00|7,330,000.00|
|499,500.00|499,500.00|
|976,500.12|976,500.12|
|4,709,541.65|5,290,458.35|
|0.00|1,000,000.00|
|14,970,300.00|37,040,600.00|
|22,465,841.77|52,137,058.47|

7.44Non-operatingexpenses
|||
|-|-|
|Currentyear|Prioryear|
|9,856,591.93|6,908,093.55|
|9,856,591.93|6,908,093.55|
|0.00|15,000.00|
|0.00|8,334.71|
|3,593,170.47|461,424.44|
|13,449,762.40|7,392,852.70|

 7.45Incometaxexpenses
||
|-|
|Currentyear|
|130,641,826.52|
|11,223,192.41|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|141,865,018.93|

 7.46Computationofbasicearningspershareanddilutedearningspershare
Basic earngings per share is calculated by dividing net profit attributable to shareholders of the parent by the weighted average number of issued shares. The start date of ordinary shares issued in the period for the purpose of calculation of basic earnings per share is the date on which subscription becomes receivable per contractofissuance.
Diluted earnings per share is calculated by dividing the results of adjustment of net profit attributable to shareholders of the parent for the interest expense for the dilutive convertible instruments, the expected gain or expense at the time of conversion and their related income tax implication by the sum of the weighted average number of issued shares for calculation of baisc earnings per shares and the weighted average numberofpotentialsharesfromconvertibleinstruments.
For the purpose of calculation of the weighted average number of potential shares from convertible instruments, the conversion date for dilutive conventible instruments issued in prior period and dilutive convertibleinstrumentsissuedintheperiodisthethe1stdateoftheperiodandtheissuedaterespectively. 7.46.1Generaldisclosure
||||
|-|-|-|
|Currentyear|||
|BasicEPS|DilutedEPS|BasicEPS|
|0.97|0.97|1.47|
|0.34|0.34|1.23|

7.46.2Calculation
①NetprofitattributableforordinaryshareholdersforthecalculationofbasicEPS
||
|-|
|Currentyear|
|389,081,811.72|
|389,081,811.72|
|0.00|
|137,850,318.37|
|137,850,318.37|
|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013②When calculating the basic earnings per share, the denominator is the weighted average number of outstandingordinaryshares,calculatedasfollows
||
|-|
|Currentyear|
|400,000,000.00|
|0.00|
|0.00|
|400,000,000.00|

 7.47Notestotheconsolidatedstatementofcashflows
7.47.1Othercashreceiptsrelatingtooperatingactivities
||
|-|
|Currentyear|
|22,900,300.00|
|4,362,149.98|
|152,647,494.34|
|118,813,553.50|
|0.00|
|298,723,497.82|

 7.47.2Othercashpaymentsrelatingtooperatingactivities
||
|-|
|Currentyear|
|30,144,346.96|
|3,593,170.47|
|17,260,954.51|
|183,096,421.15|
|234,094,893.09|

 7.47.3Othercashpaymentsrelatingtoinvestingactivities
||
|-|
|Currentyear|
|2,609,524.71|
|2,609,524.71|

7.47.4Othercashreceiptsrelatingtofinancingactivities
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|0.00|
|903,064,822.94|
|903,064,822.94|

 7.47.5Othercashpaymentsrelatingtofinancingactivities
||
|-|
|Currentyear|
|175,939,104.72|
|0.00|
|175,939,104.72|

 7.48Supplementaryinformationtotheconsolidatedstatementofcashflows
7.48.1Reconciliationofcashflowsfromoperatingactivitiestonetprofit
||
|-|
|Currentyear|
|389,081,811.72|
|82,359,203.47|
|787,573,958.19|
|1,883,759.14|
|52,249,182.09|
|-71,764,546.71|
|2,773,605.14|
|-6,901,881.12|
|148,244,330.64|
|-14,163,176.50|
|11,223,192.41|
|0.00|
|8,971,440.54|
|-114,011,884.25|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|133,667,527.39|
|0.00|
|1,411,186,522.15|
|0.00|
|0.00|
|0.00|
|444,522,271.21|
|155,387,742.97|
|0.00|
|0.00|
|289,134,528.24|

 7.48.2Compostionofcashandcashequivalents
||
|-|
|Currentyear|
|444,522,271.21|
|348,205.99|
|444,168,730.31|
|5,334.91|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|444,522,271.21|

Note8Relatedpartiesandrelatedpartytransaction
8.1Majorinvestors
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|RelationshiptotheCompany|Typeofincorporation|Placeofregistration|Legalrepresentative|
|Largestshareholder|Limitedliabilitycompany|Jinan|MA,Chongxian|
|2ndlargestshareholder|Jointstockcompany|Beijing|WANG,Changshun|

(Continued)
|||||
|-|-|-|-|
|Registeredcapital|ShareholdingintheCompany(%)|VotingrightintheCompany(%)|UltimatecontrolleroftheCompany|
|580,000,000.00|42.00|42.00|Note|
|12,891,954,673.00|22.80|22.80|Note|

 Note: SDA Group and Air China is the first and second largest shareholder of the Company respectively. Air China is the largest shareholder of SDA Group; AirChina’s shareholding and voting right in SDA Group is49.406%and49.406%respectively.
8.2Subsidiaries
SeeNote6.1Subsidiaries.
8.3Associatesandjointventures
SeeNote7.8.3.
8.4Otherrelatedparties
||
|-|
|RelationshiptotheCompany|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|
|Controlledbymajorinvestors|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 8.5Relatedpartytransactions
8.5.1Purchaseofgoodsandservices
||
|-|
|Transaction|
|Aircraftmaintenance|
|Officeleaserentalandcatering|
|Repairment|
|Repairment|
|Groundservice|
|Groundservice|
|Repairment|
|Agencyservice|
|Agencyservice|
|Groundservice|
|Repairment|
|Repairment|

(Continue)
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|83,756,980.25|12.46|79,492,346.10|
|28,893,592.73|34.93|22,369,102.37|
|39,708,456.88|5.44|32,057,124.35|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|11,178,133.31|1.53|5,572,650.35|
|17,172,871.84|1.50|9,244,562.66|
|17,077,551.66|1.50|21,580,926.14|
|38,441,791.87|5.27|767,471.77|
|8,517,578.17|74.09|6,448,583.78|
|726,162.08|6.32|774,279.40|
|2,140,251.90|0.19|2,468,814.84|
|144,373,756.70|19.78|146,045,495.96|
|3,970,264.20|0.54|3,292,316.90|
|395,957,391.59||330,113,674.62|

8.5.2Salesofgoodsandvenderingofservices
||
|-|
|Transaction|
|Flightsupport|
|Groundservice|
|Agencyservice|
|Agencyservice|
|Groundservice|
|Training|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 (Continued)
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|6,899,922.00|99.48|10,323,343.20|
|230,332.10|11.92|820,994.80|
|1,783,584.94|36.73|1,954,422.08|
|721,460.00|14.86|827,854.78|
|215,482.08|11.15|308,220.00|
|0.00|0.00|280,775.00|
|9,850,781.12||14,515,609.86|

8.5.3Leasebetweenrelatedparties
TheCompanyasleasee
||||||
|-|-|-|-|-|
|Leasee|Leasedasset|Startdate|Expirydate|Pricingprinciple|
|TheCompany|Engines|2013-1-1|2013-12-31|Byagreement|
|TheCompany|Simulators|2013-1-1|2013-12-31|Byagreement|

 8.5.4Lendingbetweenrelatedparties
||||
|-|-|-|
|Amount|Startdate|Expirydate|
|50,000,000.00|2012/3/21|2013/3/21|
|100,000,000.00|2013/6/25|2013/8/12|
|100,000,000.00|2013/11/28|2014/5/27|

8.5.5Assettransferbetweenrelatedparties
|||
|-|-|
|Typeoftransaction|Transaction|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|Sales|Aeromaterials|

 (Continued)
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|102,732.90|7.10|0.00|

 8.5.6Remunerationtokeymanagementpersonel
||
|-|
|Currentyear|
|10.1505million|
|10Officers|
|5Officers|
|4Officers|

 8.5.7Otherrelatedpartytransactions
||
|-|
|Transaction|
|Wetlease|
|Codesharing|
|Codesharingforcargo|
|RewardPointsTransfer|
|Frequentflyercooperation|

(Continued)
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|601,828,380.56|100.00|643,189,241.11|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Currentyear|||
|Amount|%intotaltransactionofthesamecategory|Amount|
|-1,538,289.97|100.00|-907,911.39|
|3,098,201.89|100.00|3,576,765.21|
|93,860,000.00|100.00|0.00|
|29,000,000.00|100.00|0.00|
|726,248,292.48||645,858,094.93|

8.6Relatedpartybalances
8.6.1Receivablesowedbyandprepaymentstorelatedparties
||||
|-|-|-|
|C/f|||
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|123,439,238.90|0.00|54,927,044.11|
|3,448,445.83|172,422.29|1,849,400.00|
|2,585,423.47|129,271.17|0.00|
|6,300.00|315.00|11,100.00|
|129,479,408.20|302,008.46|56,787,544.11|
|0.00|0.00|252,000.00|
|0.00|0.00|252,000.00|
|13,047,895.61|0.00|9,336,264.20|
|5,862.79|293.14|0.00|
|101,551,717.65|101,551,717.65|109,051,717.65|
|75,900.00|3,795.00|55,400.00|
|114,681,376.05|101,555,805.79|118,443,381.85|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 8.6.2Payablesowedtoandadvancesreceivedfromrelatedparties
||
|-|
|C/f|
|2,415,571.68|
|275,714.73|
|42,636,103.76|
|22,893,378.90|
|5,868,612.81|
|2,571.66|
|460,000.00|
|5,360.12|
|74,557,313.66|
|0.00|
|0.00|
|20,000,000.00|
|898,021.66|
|245,400.00|
|1,850,144.00|
|22,993,565.66|

 Note9Contingencies
Nocontingencyissubjecttodisclosureasatthereportingdate.
Note10Commitments
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 10.1Signifcantcommitments
10.1.1Capitalcommitment
CNY
||
|-|
|C/f|
|4,362,887,276.54|
|4,362,887,276.54|

 10.1.2Operatinglease
Informationofirrevocableoperatingleasecontractsasatthereportingdate:
CNY
||
|-|
|C/f|
|1,072,181,014.56|
|1,059,880,518.81|
|1,059,880,518.81|
|5,552,796,027.63|
|8,744,738,079.81|

 Note11Postbalancesheetdateevents
11.1Postbalancesheetdateprofitappropriation
The Proposal for Profit Appropriation for the Year ended 31 December 2013 proposing cash dividend amounting to CNY 2.50 (gross) per 10 shares for the 400 million shares outstanding as at the reporting date which in total amounts to CNY 100 million was approved by the 5th Meeting of the 5th Term of Board of Directors of the Company held on 20 March 2014; the Proposal was pending the approval of the General MeetingoftheCompany.
11.2 Impact of the accounting standards published or revised by the Ministry of Finance which are to beadoptedasfrom1July2014
Caikuai[2014]No.6,Caikuai[2014]No.7,Caikuai[2014]No.8,Caikuai[2014]No.10 andCaikuai[2014]No.11 were
issued by the Ministry of Finance in early 2014 for CAS No. 39 - Fair Value Measurement, CAS No.30 -
Presentation of Financial Statement (revised in 2014), CAS No.9 - Employee benefits (revised in 2014), CAS
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 No. 33 - Consolidated Financial Statements (revised in 2014) and CAS No. 40 - Joint Arrangements respectively. The standards issued thereupon shall be adopted as from 1 July 2013 by the entities adopting CASs;thoughearlyadoptionbyentitieswithoversealistingisencouraged.
The Company is going to adopt the said standards as from 1 July 2014 and the accounting policies are to be revisedaccordingly.
11.2.1 The Enterprise Accounting Standards No.9 - Employee benefits (revised in 2014) stipulates comprehensive accounting treatments for post-employment benefits by distinguishing such benefits into Defined Contribution Plan (hereafter, DCP) and Defined Benefit Plan (hereafter, DBP). Under a DCP, the employer is not responsible for payment for post-employment benefits once it makes fixed payment to the independent fund(s). A DBP is any post-employment benefit plan that is not a DCP. For a DCP, the payable calculated per the plan shall be recognised as a liability and an equal amount is either charged to the profit or loss for the relevant period or capitalised in the relevant assets. For a DBP, the obligation for the plan shall be calculated based on appropriate actuarial assumptions using the estimated cumulative number of beneficiary units; the calculated obligation shall be allocated over the periods in which services are obtained from employees using the formula applicable to the plan; any gain or loss arising from re-measurement of the net assetsornetliabilitiesoftheplanshallberecognisedinothercomprehensiveincomefortherelevantperiod. The revised standard stipulates comprehensive accounting treatments for employment benefits by the introduction of enhanced accounting treatments for short-term employment benefits, enhanced accounting treatmentsfordismissalbeneifts,andotherlong-termemploymentbenefits.
11.2.2 The Enterprise Accounting Standards No.30 - Presentation of Financial Statements (revised in 2014) provides enhanced standardisation on presentation of financia statements; improves requirements for going concern assessment, normal operation cycle, and note disclosure; and stipulates that it is mandatory to present supplementary information to the income statement in the form of presentation expenses by nature. The standard also stipulates that other comprehensive income presented on the face of the income statement shall be distinguished into 1) other comprehensive income not reclassifiable to profit or loss in subsequent periods and 2) other comprehensive income reclassifiable to profit or loss in subsequent periods upon satisfactionofrelevantconditions.
11.2.3 The Enterprise Accounting Standards No.33 - Consolidated Financial Statements (revised in 2014) stipulates that the scope of consolidation shall be determined on the basis of control presence. The standard provides the single model for control presence assessment. For an investor's control over an investee to be present,thefollowingcriteriamustbesatisfied:
a.theinvestorhaspowerovertheinvestee;and
b.theinvestorisabletoobtainvariableeconomicreturnthroughparticipationintheinvestee'sactivities;and c. the investor has the ability to affect the economic return from the investee through the application of its
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 poweroftheinvestee.
The standard also provides more comprehensive guidance for determination of control presence in comparison with the previous version. In accordance with the standard, management of the Company shall exercisesignificantamountofjudgementintheassessmentofcontrolpresenceoverinvestees.
11.2.4 As represented in the the Enterprise Accounting Standards No. 40 - Joint Arrangements , the classification of a joint arrangement as a joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement.Ajoint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets of the arrangement. The equity method shall be used in accounting forinvestments in joint ventures.Asfor jointoperation, a joint operatorshall recognize in relationto its interest in a joint operation: (1) its assets, including its share of any assets held jointly; (2) its liabilities, including its share of any liabilities incurred jointly; (3) its revenue from the sale of its share of the output arisingfromthejointoperation;(4)itsexpenses,includingitsshareofanyexpensesincurredjointly.
11.2.5The EnterpriseAccounting Standards No. 39 - Fair Value Measurement standardise the definition of fair value, stipulates measurement of fair value by distinguishing fair value measurement into three hierarchies with reference for inputs used, and stipulates disclosure requirements for information relevant to measurement of fair value. The standard, however, does not amend the provisions of other CASs as to the circumstances whenfairvaluemeasurementisapplicable.
Note12Othersignificantevents
12.1Assetsandliabilitiesmeasuredbyfairvalue
|||||
|-|-|-|-|
|B/f|Currentyearfairvaluemovement|Cumulativefairvaluemovementrecognisedinequity|Currentyearimpairment|
|7,198,783.59|-6,901,881.12|0.00|0.00|
|7,198,783.59|-6,901,881.12|0.00|0.00|

 12.2Financialassetsandliabilitiesdenominatedinforeigncurrencies
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|B/f|Currentyearfairvaluemovement|Cumulativefairvaluemovementrecognisedinequity|Currentyearimpairment|
|7,198,783.59|-6,901,881.12|0.00|0.00|
|7,198,783.59|-6,901,881.12|0.00|0.00|

 Note13Notestotheseparatefinancialstatements
13.1Accountsreceivable
13.1.1Disclosurebycategory
C/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|179,936,813.57|73.02|0.00|
|52,977,940.37|21.50|2,648,897.02|
|52,977,940.37|21.50|2,648,897.02|
|13,501,734.26|5.48|0.00|
|246,416,488.20|100.00|2,648,897.02|

 (Continued)
B/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|137,210,577.33|76.05|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|36,015,985.80|19.96|1,800,778.94|
|36,015,985.80|19.96|1,800,778.94|
|7,197,683.67|3.99|0.00|
|180,424,246.80|100.00|1,800,778.94|

 13.1.2Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|246,299,519.24|99.95|180,029,268.67|
|25,803.14|0.01|252,427.26|
|13,173.40|0.01|107,775.05|
|77,992.42|0.03|34,775.82|
|246,416,488.20|100.00|180,424,246.80|

 13.1.3Allowanceforbaddebt
①Accountsreceivableofindividualsignificanceandsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|123,439,238.90|0.00|0.00|
|56,497,574.67|0.00|0.00|
|179,936,813.57|||

②Accountsreceivablesubjecttoimpairmentassessmentbyportfolio
Allowancebypercentageofremainingbalance
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|52,977,940.37|5.00|
|52,977,940.37|5.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013③Accountsreceivableofindividualinsignificancebutsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|320,905.02|0.00|0.00|
|2,149,104.94|0.00|0.00|
|1,770,413.66|0.00|0.00|
|9,261,310.64|0.00|0.00|
|13,501,734.26|0.00|0.00|

13.1.4Accountsreceivableowedbyinvestorsholding5%ormoreofthesharesoftheCompany
||||
|-|-|-|
|C/f|||
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|123,439,238.90|0.00|54,927,044.11|
|123,439,238.90|0.00|54,927,044.11|

 13.1.5Topfiveaccountsreceivable
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Relatedparty|123,439,238.90|Within1year|
|Thirdparty|56,497,574.67|Within1year|
|Thirdparty|9,261,310.64|Within1year|
|Relatedparty|2,585,423.47|Within1year|
|Thirdparty|2,360,400.00|Within1year|
||194,143,947.68||

 13.1.6Relatedpartybalances
|||
|-|-|
|RelationshiptotheCompany|Amount|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||
|-|-|
|Majorinvestor|123,439,238.90|
|Controlledbythemaininvestor|1,599,045.83|
|Thesubsidiaryofthecompany|1,479,640.16|
|Controlledbythemaininvestor|2,585,423.47|
|Controlledbythemaininvestor|6,300.00|
||129,109,648.36|

 13.2Otherreceivables
13.2.1Disclosurebycategory
C/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|
|185,011,727.43|47.99|101,551,717.65|
|112,409,411.93|29.16|5,620,470.60|
|112,409,411.93|29.16|5,620,470.60|
|88,116,339.86|22.86|0.00|
|385,537,479.22|100.00|107,172,188.25|

 (Continued)
B/f
||||
|-|-|-|
|Carryingamount|||
|Amount|%|Amount|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|150,406,280.93|37.25|109,051,717.65|
|154,689,466.21|38.31|7,734,473.31|
|154,689,466.21|38.31|7,734,473.31|
|98,701,440.00|24.44|0.00|
|403,797,187.14|100.00|116,786,190.96|

 13.2.2Disclosurebyage
||||
|-|-|-|
|C/f|||
|Amount|%|Amount|
|145,558,853.12|37.76|181,310,421.00|
|47,973,303.18|12.44|21,442,689.76|
|16,699,480.03|4.33|15,259,329.67|
|175,305,842.89|45.47|185,784,746.71|
|385,537,479.22|100.00|403,797,187.14|

 13.2.3Allowanceforbaddebt
①Otherreceivablesofindividualsignificanceandsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|101,551,717.65|101,551,717.65|100.00|
|42,105,446.50|0.00|0.00|
|41,354,563.28|0.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|185,011,727.43|101,551,717.65|54.89|

②Otherreceivablessubjecttoimpairmentassessmentbyportfolio
A.Allowancebypercentageofremainingbalance
|||
|-|-|
|Carryingamount|Rateofallowance(%)|
|112,409,411.93|5.00|
|112,409,411.93|5.00|

③Otherreceivablesofindividualinsignificancebutsubjecttoindividualimpairmentassessment
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|13,047,895.61|0.00|0.00|
|17,901,423.94|0.00|0.00|
|17,300,360.00|0.00|0.00|
|185,361.00|0.00|0.00|
|166,824.90|0.00|0.00|
|469,581.20|0.00|0.00|
|490,736.00|0.00|0.00|
|617,870.00|0.00|0.00|
|4,942,960.00|0.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||||
|-|-|-|
|Carryingamount|Allowanceforbaddebt|Rateofallowance(%)|
|3,262,353.60|0.00|0.00|
|4,238,588.20|0.00|0.00|
|11,472,711.51|0.00|0.00|
|14,019,673.90|0.00|0.00|
|88,116,339.86|0.00|0.00|

13.2.4Otherreceivablesowedbyinvestorsholding5%ormoreofthesharesoftheCompany
||||
|-|-|-|
|C/f|||
|Carryingamount|Allowanceforbaddebt|Carryingamount|
|13,047,895.61|0.00|9,336,264.20|
|13,047,895.61|0.00|9,336,264.20|

 13.2.5Topfiveotherreceivables
||||
|-|-|-|
|RelationshiptotheCompany|Amount|Age|
|Relatedparty|101,551,717.65|Over3years|
|Thirdparty|61,213,069.70|Within1year|
|Relatedparty|42,105,446.50|Within3year|
|Thirdparty|41,354,563.28|Over3years|
|Thirdparty|17,901,423.94|Over3years|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|264,126,221.07|

 13.2.6Relatedpartybalances
|||
|-|-|
|RelationshiptotheCompany|Amount|
|Associate|101,551,717.65|
|Whollyownedsubsidiary|42,105,446.50|
|Majorinvestor|13,047,895.61|
|Whollyownedsubsidiary|1,503,226.70|
|Controlledbymajorinvestor|75,900.00|
||158,284,186.46|

 13.2.7Otherreceivablesdenominatedinforeigncurrenciesandtherelevantratefortranslation
||||||
|-|-|-|-|-|
|C/f|||||
|Currencyamount|Exchangerate|CNYamount|Currencyamount|Exchangerate|
|20,080,940.89|6.0969|122,431,488.54|13,821,767.06|6.2855|

 13.3Long-termequityinvestments
13.3.1Disclosurebycategory
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|106,000,685.43|0.00|0.00|
|22,500,000.00|0.00|0.00|
|88,352,100.00|0.00|0.00|
|22,500,000.00|0.00|0.00|
|194,352,785.43|0.00|0.00|

 13.3.2Detailsoflong-termequityinvestments
|||||
|-|-|-|-|
|Measurementmethod|Costofinvestment|B/f|Currentyearmovement|
|Costmethod|6,690,000.00|6,690,000.00|0.00|
|Costmethod|35,000,000.00|35,000,000.00|0.00|
|Costmethod|46,662,100.00|46,662,100.00|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
|||||
|-|-|-|-|
|Measurementmethod|Costofinvestment|B/f|Currentyearmovement|
|Costmethod|48,323,205.97|48,323,205.97|0.00|
|Costmethod|57,677,479.46|57,677,479.46|0.00|
|Equitymethod|22,500,000.00|22,500,000.00|0.00|
||216,852,785.43|216,852,785.43|0.00|

 (Continued)
||||||
|-|-|-|-|-|
|Shareholding(%)|Votingright(%)|Reasonfordisagreementbetweenshareholdingandvotingright|Impairmentallowance|Impairmentallowancerecognisedincurrentyear|
|0.45|0.45|Inagreement|0.00|0.00|
|10.00|10.00|Inagreement|0.00|0.00|
|2.53|2.53|Inagreement|0.00|0.00|
|100.00|100.00|Inagreement|0.00|0.00|
|100.00|100.00|Inagreement|0.00|0.00|
|45.00|45.00|Inagreement|22,500,000.00|0.00|
||||22,500,000.00|0.00|

 13.3.3Detailsofimpairmentallowanceforlong-termequityinvestments
||||
|-|-|-|
|B/f|Currentyearincrease|Currentyeardecrease|
|22,500,000.00|0.00|0.00|
|22,500,000.00|0.00|0.00|

13.4Revenueandoperatingcosts
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 13.4.1Generalinformation
||
|-|
|Currentyear|
|11,278,078,297.98|
|133,816,089.59|
|11,411,894,387.57|
|9,699,224,738.43|
|2,187,655.80|
|9,701,412,394.23|

 13.4.2Disclosurebyserviceline
||||
|-|-|-|
|Currentyear|||
|Operatingincome|Operatingcost|Operatingincome|
|11,232,141,639.73|9,666,874,791.95|10,845,887,973.75|
|30,362,647.64|27,348,610.96|22,119,064.02|
|15,574,010.61|5,001,335.52|7,037,706.13|
|11,278,078,297.98|9,699,224,738.43|10,875,044,743.90|

 13.4.3Operatingincomefromtopfivecustomers
||
|-|
|Operatingincome|
|681,700,941.89|
|701,094,111.08|

 13.5Investmentincome
13.5.1Disclosurebycategory
||
|-|
|Currentyear|
|16,772,701.21|
|-2,609,524.71|
|14,163,176.50|

 13.5.2Incomefromlong-termequityinvestmentsmeasuredatcost
||
|-|
|Currentyear|
|1,735,051.50|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|14,325,586.06|
|712,063.65|
|16,772,701.21|

 13.6Supplementaryinformationtothestatementofcashflows
||
|-|
|Currentyear|
|397,067,863.95|
|70,348,934.03|
|780,197,846.67|
|1,849,103.36|
|52,123,842.15|
|-71,758,688.71|
|2,758,941.77|
|-6,901,881.12|
|148,244,330.64|
|-14,163,176.50|
|11,761,387.65|
|0.00|
|8,972,490.54|
|-120,338,644.44|
|123,929,491.48|
|0.00|
|1,384,091,841.47|
|0.00|
|0.00|
|0.00|
|421,826,370.62|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|143,212,750.59|
|0.00|
|0.00|
|278,613,620.03|

 Note14Supplementaryinformation
14.1Non-recurringprofitandloss
||
|-|
|Currentyear|
|68,990,941.57|
|0.00|
|22,465,841.77|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|
|0.00|

SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013
||
|-|
|Currentyear|
|4,292,356.41|
|7,500,000.00|
|0.00|
|0.00|
|0.00|
|0.00|
|165,501,423.87|
|67,342,734.17|
|336,093,297.79|
|84,861,804.44|
|0.00|
|251,231,493.35|

 Note:Positiveamountsandnegativeamountsinnon-recurringcategoriesmeanincomeandexpenseorloss respectively.
The Company recognised non-recurring categories of activities in accodance with the Explanatory Announcement regarding Information Disclosure by Publicly Listed Company No. 1 - Non-recurring Profit andLoss(ZhengjianhuiGonggao[2008]No.43).
14.2Rateofreturnonnetassetsandearningspershare
|||
|-|-|
|WeightedaveragerateofRONA||
||BasicEPS|
|15.08%|0.97|
|5.34%|0.34|

Notes:ComputationofbasicearningspershareanddilutedearningspershareNote7.46.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 14.3Significantchangeofmajorelementoftheconsolidatedfinancialstatements
14.3.1Elementsoftheconsolidatedstatementoffinancialposition
①Monetaryfundsamountingto444,522,271.21asatthereportingdate:186.02%increasefrom
lastyearmainlyresultedfromothercashreceiptsrelatingtofinancingactivities.
②Accountsreceivablesamountingto250,524,757.67asatthereportingdate:34.63%increase
fromlastyearmainlyresultedfromincraseofwetleasereceivablesasfromAirChina
③ Prepayments amounting to 88,182,040.98 as at the reporting date:54.90% increase from last year mainly resultedfromincreaseofprepaidaircraftleaserentalduetoincreasednumberofleasedaircrafts.
④ Goodwill amountingto0.00as at thereporting date100.00% decrease fromlast yearmainly resulted from recognitionofgoodwillimpairment.
⑤ Short-term borrowings amounting to 434,137,220.00 as at the reporting date:35.09% increase from last year mainly resulted from short-term borrowings obtained in the current year were yet to expire as at the reportingdate.
⑥ Financial liabilities held for trading amounting to 296,902.47 as at the reporting date:95.88% decrease fromlastyearmainlyresultedfromchangesoffairvalueofinterestrateswapsheld.
⑦ Advances from customers amounting to 343,468,052.97 as at the reporting date:59.67% increase from lastyearmainlyresultedfromincreaseofairticketsoldinadvance.
⑧ Taxes and fees payable amounting to 110,064,437.61 as at the reporting date:52.08% decrease from last year mainly resulted from decrease in enterprise income tax due to the payment of prior year income tax liabilityanddecreaseoftaxableprofitinthecurrentyear.
⑨ Non-current liabilities due within one year amounting to 533,150,658.42 as at the reporting date:35.81% increasefromlastyearmainlyresultedfromincreaseoflong-termborrowingsdueinnextyear.
⑩ Other non-current liabilities amounting to 25,367,524.34 as at the reporting date:86.37% decrease from lastyearmainlyresultedfromdisposeofaccumulatedrewardpoints
14.3.2Elementsoftheconsolidatedstatementcomprehensiveincome
①Businesstaxandsurchargesamountingto238,665,537.66fortheperiod:34.30%decreasefrom
lastyearmainlyresultedfrombusiness-tax-to-value-added-taxconversionasfromAugust2013.
② Financial costs amounting to 142,819,611.58 for the period:41.35% decrease from last year mainly resultedfromincreasedgainfromexchangedifferenceduetoCNY'sappreciationagainstUSD.
③ Loss on asset impairment amounting to 82,359,203.47 for the period:57.53% decrease from last year mainly resulted from reversal of allowance for bad debts and decrease in impairment provisions for fixed assets.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013④ Changes in the fair value of derivatives amounting to 6,901,881.12 for the period (2012 comparative: -5,053,262.49)mainlyresultedfromchangesoffairvalueofinterestrateswapsheld
⑤ Non-operating income amounting to 270,407,969.61 for the period:83.72% increase from last year mainly resultedfromgainondisposaloffixedassetsandincreaseinreceiptsofairroutesubsidy.
1 Non-operating expenses amounting to 13,449,762.40 for the period:81.93% increase from last year mainlyresultedfromlossondisposaloffixedassets.
14.3.3Elementsofthestatementofcashflows
① Other cash receipts relating to operating activities amounting to 298,723,497.82 for the period:115.89% increasefromlastyearmainlyresultedfromincreaseinreceiptsofairroutesubsidyandcurrentaccounts.② Cash received from investment income amounting to 2,447,115.15 for the period:84.94% decrease from lastyearmainlyresultedfromthependingaccountsdividendreceivablefromSichuanAirlines.
③The net cash receipt from disposal of fixed assets, intangible assets and other long-term assets amounting to 174,681,542.77 for the period: 2,110.57 times increase from last year mainly resulted from increase in receiptsofaircraftassetsdisposal.
④ Other cash payments relating to investing activities amounting to 2,609,524.71 for the period:40.84% increase from last year mainly resulted from decrease in Income from holding of financial assets held for trading
⑤ Cash received from issuing bonds amounting to 0.00 for the period100.00% decrease from last year mainlyresultedfromnobondissueinthecurrentyear.
⑥ Other cash receipts relating to financing activities amounting to 903,064,822.94 for the period 119.89 times increase from last year mainly resulted from receipt of consideration for disposed purchase rights on aircraft whichbecameacquiredunderoperatinglease.
⑦Thecashpaymentsrelatingtodebtredemptionamountingto1,664,222,540.40fortheperiod
33.83%increasefromlastyearmainlyresultedfromtheincreasedamountofdebtrepayment.
SHANDONGAIRLINESCO.,LTD. ANNUALREPORT2013 Section XI. 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 periodin2013;
4. The Company will offer above documents for reference timely provided that CSRC or Stock Exchange demandsorshareholdersrequiresaccordingtotheregulationsandArticlesofAssociation.
BoardofDirectorsof ShandongAirlinesCo.,Ltd. 20 March 2014