Basic Information of the Company H Listing stock exchange: The Stock Exchange of Hong Kong Limi

Transcription

1 股份代號

2 Basic Information of the Company H Listing stock exchange: The Stock Exchange of Hong Kong Limited Stock short name: AVIC IHL Stock Code: Website: EXECUTIVE DIRECTORS Mr. Wu Guang Quan, chairman Mr. You Lei, vice chairman (appointed as the vice chairman on 23 August 2013) Mr. Pan Lin Wu Mr. Chen Hong Liang Mr. Liu Jun INDEPENDENT NON-EXECUTIVE DIRECTORS Ms. Wong Wai Ling Mr. Wu Wei Mr. Zhang Ping SUPERVISORS Mr. Huang Bin, chairman Ms. Wang Xin Mr. Deng Bo Song COMPANY SECRETARY Mr. Huang Yong Feng AUDIT COMMITTEE Ms. Wong Wai Ling, chairman Mr. Wu Wei Mr. Zhang Ping REMUNERATION COMMITTEE Mr. Zhang Ping, chairman Mr. Wu Guang Quan Mr. Chen Hong Liang Ms. Wong Wai Ling Mr. Wu Wei NOMINATION COMMITTEE Mr. Wu Wei, chairman Mr. Wu Guang Quan Mr. Chen Hong Liang Ms. Wong Wai Ling Mr. Zhang Ping LEGAL ADDRESS OF THE COMPANY Level 25, Hangdu Building, Catic Zone, Shennan Road Central, Futian Dist., Shenzhen, China PRINCIPAL PLACE OF BUSINESS IN HONG KONG Suites , 20/F, Jardine House, 1 Connaught Place, Central, Hong Kong STOCK-H SHARE REGISTRAR (FOR STOCK TRANSFER) Hong Kong Registrars Limited Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong INDEPENDENT AUDITOR PricewaterhouseCoopers Certified Public Accountants Hong Kong LEGAL ADVISER AS TO HONG KONG LAWS LOONG & YEUNG PRINCIPAL BANKS Bank of China Agricultural Bank of China Industrial and Commercial Bank of China Industrial Bank Co., Ltd.

3 Contents Financial Highlights 75 Chairman s Statement 77 Management Discussion and Analysis Corporate Organization Chart 79 Business Review 80 Financial Review 88 Business Prospects 90 Social Responsibilities 93 Corporate Governance Profile of Directors and Supervisors 98 Corporate Governance Report 101 Report of the Directors 113 Reports of the Board s Subcommittees 143 Report of the Supervisory Committee 146 Independent Auditor s Report 148 Financial Statements

4 33,437,688 31,252,572 27,817,178 6,964,551 5,092,883 1,444,722 1,448,543 1,181, ,888 (288,849) 1,164,675 1,266, , ,590 (288,780) 796, , , ,561 (165,566) 368, , , ,029 (123,214) (0.25) (0.25) ,001,335 40,085,513 36,857,120 17,267,413 13,626,354 34,283,715 28,526,744 26,142,255 12,318,964 9,802,017 12,717,620 11,558,769 10,714,865 4,948,449 3,824,337 8,317,817 7,569,692 6,636,143 1,977,482 1,698,513 4,399,803 3,989,077 4,078,722 2,970,967 2,125, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

5 35,000,000 31,252,572 33,437,688 28,000,000 27,817,178 21,000,000 14,000,000 7,000,000 5,092,883 6,964,551 0,000, () 1,000, , , , , , , , ,561 0, , , ()

6 33,437,688,000 31,252,572,0007% 796,334, ,702,00018% PCB4G (EPC) 4 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

7 2013 5

8 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT % 35.63% 39.37% 14.31% 62.52% 8.86% 14.31% 41.49% 100% 100% 90% 100% 51% 60% 45.62% 93% 100% 10% 22.35% KHD Humboldt Wedag International AG ( KHD ) 42.05% 47.12% 100% 75% 100% 100% % 62.52% 2 KHD20.00%KHD 42.05%

9 45.62% LCD 93% PCB 100% 41.49% 90% 60% 51% 100% 75%

10 100% 100% 100% 97.5% 100% 100% % 1% 22% 12% 9% 8 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

11 33,437,688,00031,252,572,000 7%796,334,000970,702,000 18% PCB 4G (EPC) PCB 7,235,578,000 6,779,206,0007%498,017,000337,638,000 48%

12 (LCD)(LCM) 70% 40%90% 100% 100% PCB PCB PCB4G 4GPCB AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

13 3,041,122,000 2,987,857,0002%142,964,0002%

14 4,187,299,0002,769,814,000 51%537,398,000550,233,0002% 378,342, ,279, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

15 33 A09 18,600,479,000 17,656,704,0005%318,454,000501,352,000 36%

16 (EPC) EPC % 373,210,0001,058,991, ,473,00050,206, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

17 20,090,596 16,661,917 34,283,715 28,526,744 4,399,803 3,989,077 8,317,817 7,569,692 47,001,335 40,085, % % % % = = 4,802,843,000 4,038,225,

18 20,090,596,000 16,661,917, % 12.15% 1.26% 12.5% 18,933,887,00014,606,566, ,000,0001,190,000,000216,709, ,351,000 1,957,069,000 14,830 96,760 HD 58, ,000 37,716 7,120 47, , ,793 16,150 31,324 26, , , ,976 19, ,971 58, ,331 1,957, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

19 3,008,600, , ,000 80, , , , ,290 60,000 93, ,060 73,270 3,008,

20 PCB PCB4G PCB 18 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

21 + EPCEPC

22 ISO9000 1) 2) AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

23 1) EAP 2) Cirrus Wind 1CW1CW ,

24 ,409,00021 A A AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

25

26 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

27

28 JC Group Holdings Limited AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

29 EMBA

30 A.2.1 A AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

31 8 5 3 * * * * * 1/5 13/17 76% 1/1 2/2 1/5 11/17 65% 3/5 17/17 100% 3/5 15/17 88% 1/1 2/2 1/5 17/17 100% 1/5 17/17 100% 2/2 1/1 2/2 1/5 17/17 100% 2/2 1/1 2/2 1/5 17/17 100% 2/2 1/1 2/2 *

32 (1) (2) (3) (4) (5) (6) (7) (8) (9) 30 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

33 (10) (11) (12) (13) (14) 3.10(1) (2)3.10A

34 ( ) A AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

35 (1)(2) (3)(4) (5)

36 2 (1) (2) B.1.2(c)(ii) (1) (2) (3); (4). 34 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

37 3 14 (1) (2) 4 (a) (b) (c) (d) (e)

38 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

39

40 CATIC Shenzhen Holdings Limited 2 AVIC International Holdings Limited (3) (3) (3) (3) AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

41

42 ,380,401, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

43 10% 50% 8.47% 94, % 70, ,575,654, %6.60% 15.52% 27.90%3.80%10.79% 10% 5%

44 ,083,307,000 1,904,343,000 54,164 35, , ,952 1,426,288 1,444,472 16,361 1,200,649 1,141, ,629 6,540 3,548,186 3,120, % 42 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

45 XV23 10% 1,634,608, ,329,499, ,774, ,109, % % % % 51.60% 38.70% 36.62% 27.47% H 29,644,000 H 2 29,644,000 H 2 Li Ka-Shing Unity Trustee 29,644,000 H Corporation Limited 2 Li Ka-Shing Unity 29,644,000 H Trustcorp Limited 2 Li Ka-Shing Unity Trustee 29,644,000 H Company Limited 2 Cheung Kong Investment 14,823,000 H Company Limited 2 Empire Grand Limited 14,823,000 H 2 Hutchison International 14,821,000 H Limited 2 14,821,000 H 2 18,210,000 H 3 18,210,000 H % 2.67% 10.67% 2.67% 10.67% 2.67% 10.67% 2.67% 10.67% 2.67% 5.34% 1.33% 5.34% 1.33% 5.33% 1.33% 5.33% 1.33% 6.56% 1.64% 6.56% 1.64%

46 % 62.52%100% 60% 100% (1) (A) 437,264, %(B) 1,604,736, ,460,084 (2) (A) 395,709, %(B) 118,207, ,065,483 (3) 1,058,729, ,109, ,644,000 H (A) (B) Empire Grand LimitedEmpire Grand 14,823,000 HEmpire Grand Cheung Kong Investment Company Limited Cheung Kong Investment Company Limited Hutchison International LimitedHIL 14,821,000 HHIL Li Ka-Shing Unity Holdings LimitedLi Ka-Shing Unity Trustee Company LimitedTUT1TUT1 The Li Ka-Shing Unity TrustTUT1 The Li Ka-Shing Unity Trust Li Ka-Shing Unity Holdings LimitedLi Ka-Shing Unity Trustee Corporation LimitedTDT1The Li Ka-Shing Unity Discretionary TrustDT1Li Ka-Shing Unity Trustcorp LimitedTDT2 DT2TDT1 TDT2The Li Ka-Shing Unity Trust DT1 DT2 TUT1 TDT1 TDT2Empire Grand HIL29,644,000 H % 44 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

47

48 XV XV ,33825,516 2,413,047,0001,804,807, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

49 30,000, % 14.7% 6% 64% 58.77%100%14A

50 ,000,000 18,000,000 22,000,000 3,450,000 2,750,000 2,750, ,000,000 7,000,000 7,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 3,500,000 4,000,000 4,500,000 9,000,000 9,000,000 9,000, ,000,000 20,000,000 20,000, ,000 1,000,000 10,000, ,000,000 45,000,000 60,000,000 1,500,000 3,000,000 4,000,000 44,000,000 44,000,000 80,000, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

51 52.5% 16.27% 31.23% 62.52% 100% 14A 0.1%5% 14A 80,000,000 49% 14A.13(3) 0.1%5%14A 49% 14A.65(4)

52 NLT NLT TFTNLT 104,000,000 3,452,000 NLT 21% 30%NLT 70%51% 49% 58.77% 100%14A 0.1%5%14A.34 14A A 50 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

53 12 (1) ,000, ,000, ,000,000 (2) 1 24,000,000 32,000,000 35,000,000 2 (3) 1 450,000, ,000, ,000,000 2 (4) 1 2,000,000,000 3,600,000,000 3,800,000,000 2 (5) 1 64,000, ,000, ,000,000 2 (6) 1 81,000, ,000, ,000,000 2 (7) 1 23,500,000 65,000,000 72,000,000 2 (8) 1 20,000,000 24,000,000 27,000,000 2 (9) 1 5,000,000 11,000,000 13,000,000 2 (10) 1 11,000,000 15,600,000 15,600,000 2 (11) 1 6,650,000,000 8,450,000,000 9,200,000,000 (a) 2 (b) 650,000, ,000, ,000,000 (12) 1 11,700,000,000 22,000,000,000 29,000,000,000 (a) 2 (b) 357,200, ,000, ,000,000 (13) 1 100,000, ,000,000 2 (14) ,000, ,000,

54 ,000,000 5,000,000 60% 500,000 2,100,000 7,100, % 35.63%118,207,225 14A 52 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

55 14,000,000 12,000,000 17,000, %1,604,736, %35.63% 118,207,225 1,058,729,021 60% 14A 12, ,000, % 35.63%118,207,225 14A

56 2,000,000,000 2,300,000,000 2,500,000,000 8,00010,00015,000 14A 5%14A 300,000, ,000,000 1,700,000,000 1,000,000,000 14A 5% 14A 54 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

57 30,000,000 30% 42.8% 27.2% 14A 30% 14A 0.1% 5% 9,100, % 14A 14A0.1% 5% 30% 40,775,000 14A0.1%5% 14A

58 87,709, ,997, ,560, ,353,882 14A 0.1%5%14A 14A 5% 5%49,230,000 5% 14A 56 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

59 40%42,000,000 60%42,000,000 10,500,000 10,500,000 5%14A 44,628,728 9,901,891 43,427,180 14A 5%14A 51 14A 14A

60 14A (a) (b) (c) (d) 600,000, ,000,000 60% 60%47.12% % 14A 58 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

61 (CATIC Shenzhen Holdings Limited)(AVIC International Holdings Limited) HCATIC SHENZHEN AVIC IHL 32XI ,000, %0.01% 1% 45% 60,000,000 5%25% H H20%HH H55,531,599 H H

62 1,311,110, %50%90% 100% 1,311,110, ,289, %1 552,814,600552,814, ,285,000 5%25% 14A AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

63 1552,814,600 36,328,302,570 KHD AVIC International Engineering Holdings Pte. Ltd. 9,456,353 KHD Humboldt Wedag International AGKHDKHD KHD19.03%61,000,000 Europe Project Management Pte. Ltd. Europe Technology Investment Pte. Ltd. Europe Engineering Holdings Pte. Ltd.Yap Lian Seng 6.45KHD KHD Golden Prosperity Group LimitedGolden Prosperity Golden Prosperity

64 KHD 24,847,045 KHD 1,500,000 KHDKHD 3.0% 9,675,000101,100,00023,347,045 KHD 150,588, ,573,600, %100% A ,264, %395,709, % 5 A (A) 70% (B) 40% (C) 90% (D) (E) 62 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

65 5 A A 12.69A20 20A A 101,670,40048,038,700135,361,600138,272,30025,971,900 A ,290,197, ,611,100 1,717,738,700 1,754,675, ,583,400 30% 40% 30% 6.5 1,200,000,000523,800,000 30%600,000,000 A A AA25%A

66 5 A A12.69A 1,900,602,000149,771,631 A A A %100% 14 14A AA 14.29A 75% 14.06A 14A 4 64 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

67 607,960,00044,530, ,000,000 Radiance Catico Offshore Pte. Ltd. 162,022,000 60,000,000 19,600,000 25,370,000 35,000,00040,000,000 45,000,000 (i) 5,000,000 5,000,000 5,000,000(ii)75,000,000 80,000,000 85,000,000 (i)5,000,000 5,000,000 5,000,000(ii)60,000,000 60,000,000 60,000,

68 (i)(ii) (iii) 14A 0.1%5%14A 45%105,000,000 47,250,000 5%25% ,800,000,000 23,800,000, ,000,000 5,200,000, ,000, ,000,000 8,000, ,000,000 5% 14A 66 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

69 5,000,000 40% 20% 40% 40% 20% 40%398,000, ,000, ,000, ,000,000 60,000,000120,000, ,000, ,000, ,000,000 25% 120,000 40% 20%14A 100,000,000 14A 5%25%

70 15,000,000 15,000, % 14.7% 14A 14A 45% 216,000, ,000,000 5%25% A AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

71

72 14 70 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

73

74 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

75

76 74 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

77 Independent Auditor s Report INDEPENDENT AUDITOR S REPORT TO THE SHAREHOLDERS OF AVIC INTERNATIONAL HOLDINGS LIMITED (Established in the People s Republic of China with limited liability) We have audited the consolidated financial statements of AVIC International Holdings Limited (the Company ) and its subsidiaries (together, the Group ) set out on pages 150 to 364, which comprise the consolidated and company balance sheets as at 31 December 2013, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. DIRECTORS RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. 148 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

78 Independent Auditor s Report An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OPINION In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2013, and of the Group s profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. OTHER MATTERS This report, including the opinion, has been prepared for and only for you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 28 March

79 Consolidated Balance Sheet As at 31 December As at 1 January Note RMB 000 RMB 000 RMB 000 (Restated) (Restated) ASSETS Non-current assets Land use rights 7 1,438,645 1,293,452 1,214,682 Exploration and extraction rights 8 836, , ,906 Goodwill 9 385, , ,236 Intangible assets , , ,236 Property, plant and equipment 11 8,536,709 8,673,372 9,659,889 Investment properties 12 2,153,150 2,099,314 2,030,986 Construction-in-progress 13 1,879,385 1,252,051 1,128,005 Investments accounted for using the equity method 15 4,386,692 4,298,291 3,738,157 Trade and other receivables , , ,772 Available-for-sale financial assets , , ,046 Deferred income tax assets , , ,369 Other non-current assets 21 2,046, , ,120 22,758,020 19,765,761 19,625,404 Current assets Inventories 22 4,614,870 3,825,057 3,802,532 Properties under development 23 2,317,086 1,256, ,427 Trade and other receivables 24 10,368,510 9,525,525 8,309,786 Held-to-maturity financial assets 15,000 Amounts due from customers for contract work 25 1,493,175 1,161, ,666 Derivative financial instruments 26 5,405 3,110 Pledged bank deposits , , ,414 Cash and cash equivalents 28 4,802,843 4,038,225 3,249,891 24,243,315 20,319,752 17,231,716 Total assets 47,001,335 40,085,513 36,857,120 EQUITY Capital and reserves attributable to owners of the Company Share capital 29 1,110,632 1,110, ,367 Share premium 29 1,294,633 1,294, ,513 Other reserves 30 (404,201) (380,075) 3,816,137 Perpetual subordinated convertible securities 31 2,781,674 2,781,674 Retained earnings 3,535,079 2,762,828 1,792,126 8,317,817 7,569,692 6,636,143 Non-controlling interests 4,399,803 3,989,077 4,078,722 Total equity 12,717,620 11,558,769 10,714, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements. 150 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

80 Consolidated Balance Sheet As at 31 December As at 1 January Note RMB 000 RMB 000 RMB 000 (Restated) (Restated) LIABILITIES Non-current liabilities Borrowings 32 6,182,333 4,044,826 4,962,303 Deferred income tax liabilities , , ,800 Deferred income on government grants , , ,231 Provisions 10,360 Trade and other payables 36 44,871 46,128 24,335 Retirement and other supplemental benefit obligations 34 42,869 49,276 49,222 Other non-current liabilities ,152 1,202, ,363 8,421,561 6,420,889 6,302,614 Current liabilities Trade and other payables 36 12,697,401 11,232,783 10,500,403 Amounts due to customers for contract work , , ,180 Borrowings 32 12,751,554 10,561,740 8,205,377 Derivative financial instruments 441 Current income tax liabilities 214, , ,043 Retirement and other supplemental benefit obligations 34 4,664 4,372 4,197 25,862,154 22,105,855 19,839,641 Total liabilities 34,283,715 28,526,744 26,142,255 Total equity and liabilities 47,001,335 40,085,513 36,857,120 Net current liabilities (1,618,839) (1,786,103) (2,607,925) Total assets less current liabilities 21,139,181 17,979,658 17,017, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements. Director: Wu Guang Quan Director: You Lei The financial statements on page 150 to 364 were approved by the Board of Directors on 28 March 2014 and were signed on its behalf

81 Company Balance Sheet As at 31 December Note RMB 000 RMB 000 ASSETS Non-current assets Property, plant and equipment 11 7,277 7,131 Investments in subsidiaries 14 4,585,828 4,515,652 Investments in associates , ,198 Investments in joint ventures 17 2,371,409 2,385,857 Available-for-sale financial assets 19 15,224 1,400 Other non-current assets 21 40,000 7,277,936 7,248,238 Current assets Trade and other receivables , ,609 Cash and cash equivalents ,467 81,117 1,004, ,726 Total assets 8,282,165 7,995,964 EQUITY Capital and reserves attributable to owners of the Company Share capital 29 1,110,632 1,110,632 Share premium 29 1,294,633 1,294,633 Other reserves 30 94,084 70,001 Perpetual subordinated convertible securities 31 2,781,674 2,781,674 Retained earnings/(accumulated losses) 30 29,873 (395,981) Total equity 5,310,896 4,860, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements. 152 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

82 Company Balance Sheet As at 31 December Note RMB 000 RMB 000 LIABILITIES Non-current liabilities Borrowings 32 1,075,000 Other non-current liabilities ,000 1,050,000 1,875,000 1,050,000 Current liabilities Trade and other payables , ,005 Borrowings ,000 1,800,000 1,096,269 2,085,005 Total liabilities 2,971,269 3,135,005 Total equity and liabilities 8,282,165 7,995,964 Net current liabilities (92,040) (1,337,279) Total assets less current liabilities 7,185,896 5,910, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements. Director: Wu Guang Quan Director: You Lei The financial statements on page 150 to 364 were approved by the Board of Directors on 28 March 2014 and were signed on its behalf

83 Consolidated Income Statement Year ended 31 December Note RMB 000 RMB 000 (Restated) Revenue 6 33,437,688 31,252,572 Cost of sales 39 (29,186,281) (27,343,668) Gross profit 4,251,407 3,908,904 Distribution costs 39 (1,303,959) (1,191,380) Administrative expenses 39 (2,157,959) (1,742,505) Fair value gain on investment properties 12 56, ,332 Other income , ,367 Other gains net ,538 37,038 Operating profit 1,700,425 1,801,756 Finance income , ,328 Finance costs 41 (960,719) (973,586) Finance costs net (782,076) (830,258) Share of profit of investments accounted for using the equity method , ,045 Profit before income tax 1,444,722 1,448,543 Income tax expense 43 (280,047) (182,302) Profit for the year 1,164,675 1,266,241 Profit attributable to: Owners of the Company 796, ,702 Non-controlling interests 368, ,539 1,164,675 1,266,241 Earnings per share attributable to the owners of the Company during the year (RMB per share) basic diluted Dividends The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements. 154 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

84 Consolidated Statement of Comprehensive Income Year ended 31 December Note RMB 000 RMB 000 (Restated) Profit for the year 1,164,675 1,266,241 Other comprehensive income: Items that will not be reclassified to profit or loss Remeasurements of post-employment benefit obligations, gross of tax 34 3,476 (1,564) Remeasurements of post-employment benefit obligations, tax (515) 405 Gain on transfer of owner-occupied property to investment property, gross of tax 12(d) 11,773 6,831 Gain on transfer of owner-occupied property to investment property, tax 12(d) (2,943) (1,708) Items that may be subsequently reclassified to profit or loss Fair value gains on available-for-sale financial assets, gross of tax 19 10, Fair value gains on available-for-sale financial assets, tax (2,716) (46) Recycle of fair value gains on available-for-sale financial assets, gross of tax 47(d) (5,430) Recycle of fair value gains on available-for-sale financial assets, tax 1,357 Share of an associate s other comprehensive income (325) Currency translation differences (20,403) 24,267 Other comprehensive income for the year, net of tax (4,862) 28,368 Total comprehensive income for the year, net of tax 1,159,813 1,294,609 Attributable to: Owners of the Company 775, ,841 Non-controlling interests 384, ,768 Total comprehensive income for the year 1,159,813 1,294, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements

85 Consolidated Statement of Changes in Equity Share capital Share premium Attributable to owners of the Company Perpetual subordinated convertible securities Other reserves Retained earnings Total Noncontrolling interests Total equity 29 (Note 29) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Group Balance as at 1 January 2012 (as previously reported) 673, ,513 3,816,137 1,794,760 6,638,777 4,078,716 10,717,493 Effect of changes in accounting policies (2,634) (2,634) 6 (2,628) Balance as at 1 January 2012, as restated 673, ,513 3,816,137 1,792,126 6,636,143 4,078,722 10,714,865 Comprehensive income Profit for the year 970, , ,539 1,266,241 Other comprehensive income 25,139 25,139 3,229 28,368 Total comprehensive income 25, , , ,768 1,294,609 Transactions with owners Transactions with non-controlling interests (4,892) (4,892) (9,650) (14,542) Share of reserves of an associate arising from its transactions with noncontrolling interests (5,196) (5,196) (5,196) Merger reserve (4,211,263) (4,211,263) (4,211,263) Issue of domestic shares related to business combination 437, ,120 1,377,385 1,377,385 Issue of perpetual subordinated convertible securities related to business combination 2,781,674 2,781,674 2,781,674 Disposals of subsidiaries (338,643) (338,643) Capital contributed by non-controlling interests 4,170 4,170 Dividends for 2012 (44,290) (44,290) Total transactions with owners 437, ,120 2,781,674 (4,221,351) (62,292) (388,413) (450,705) Balance as at 31 December 2012, as restated 1,110,632 1,294,633 2,781,674 (380,075) 2,762,828 7,569,692 3,989,077 11,558, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

86 Consolidated Statement of Changes in Equity Share capital Share premium Attributable to owners of the Company Perpetual subordinated convertible securities Other reserves Retained earnings Total Noncontrolling interests Total equity 29 (Note 29) Note RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Balance as at 1 January 2013, as restated 1,110,632 1,294,633 2,781,674 (380,075) 2,762,828 7,569,692 3,989,077 11,558,769 Comprehensive income Profit for the year 796, , ,341 1,164,675 Other comprehensive income (20,523) (20,523) 15,661 (4,862) Total comprehensive income (20,523) 796, , ,002 1,159,813 Transactions with owners Transactions with non-controlling interests 30 (10,387) (10,387) (38,079) (48,466) Share of reserve of an associate arising from its transactions with noncontrolling interests 15(a) (17,299) (17,299) (17,299) Acquisition of subsidiaries 50(b) 41,438 41,438 Disposals of subsidiaries 47(e) (23,010) (23,010) Capital contributed by non-controlling interests 123, ,912 Appropriation to statutory general reserve fund 30 24,083 (24,083) Dividends for 2013 (77,537) (77,537) Total transactions with owners (3,603) (24,083) (27,686) 26,724 (962) Balance as at 31 December ,110,632 1,294,633 2,781,674 (404,201) 3,535,079 8,317,817 4,399,803 12,717, The accompanying notes on page 160 to 364 are an integral part of these consolidated financial statements

87 Consolidated Statement of Cash Flows Year ended 31 December Note RMB 000 RMB 000 (Restated) Cash flows from operating activities Cash generated from operations 47 1,305,102 2,045,397 Interest paid (973,474) (976,632) Income tax paid (202,010) (252,849) Net cash generated from operating activities 129, ,916 Cash flows from investing activities Payment for the addition of construction-in-progress (1,372,461) (574,935) Purchase of property, plant and equipment (416,167) (1,046,173) Purchase of land use rights 7 (178,358) (244,465) Purchase of intangible assets 10 (14,085) (18,988) Payment for the additions of other non-current assets (145,632) (135,796) Acquisition of subsidiaries, net of cash acquired (167,514) (2,246) Capital injection to associates 15 (8,890) (73,730) Capital injection to joint ventures 15 (25,904) (19,204) Cash outflow from disposals of subsidiaries 47(e) (7,979) (537,393) Guarantee deposits for acquisition of a subsidiary (216,618) Release of guarantee deposits for acquisition of a subsidiary 216,618 Prepayment for the establishment of subsidiaries 21 (6,192) (120,756) Prepayment for the acquisition of subsidiaries 21 (1,876,460) Purchase of available-for-sale financial assets 19 (14,891) (85,633) Proceeds from disposals of property, plant and equipment 47(b) 17,283 97,580 Proceeds from disposals of investment properties 41,942 Proceeds from disposals of intangible assets Proceeds from disposals of available-forsale financial assets 47(d) 50,035 45,476 Proceeds from disposals of held-tomaturity financial assets 15,000 Proceeds from disposals of associates 9,746 Proceeds from disposals of joint venture 47(c) 151,863 Government grants received 243, ,670 Interest received 78,238 81,377 Loan to related parties (104,772) (467,136) Repayments of loan to related parties 235, ,549 Dividends received 397, ,056 Net cash used in investing activities (2,948,886) (2,474,642) 158 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

88 Consolidated Statement of Cash Flows Year ended 31 December Note RMB 000 RMB 000 (Restated) Cash flows from financing activities Proceeds from bank borrowings 18,435,984 11,956,045 Repayments of bank borrowings (14,108,663) (10,517,159) Borrowings from related parties 719,422 2,239,196 Repayments of borrowings from related parties (1,368,064) (1,310,031) Capital contribution to subsidiaries from non-controlling interests 47(a) 69,305 4,170 Dividends paid to non-controlling interests of subsidiaries (81,344) (44,290) Release of collateral for bank borrowings 120,069 Transactions with non-controlling interests (48,466) Net cash generated from financing activities 3,618,174 2,448,000 Net increase in cash and cash equivalents 798, ,274 Cash and cash equivalents at beginning of year 4,038,225 3,249,891 Currency translation differences (34,288) (940) Cash and cash equivalents at end of year 4,802,843 4,038, The accompanying notes on 160 to 364 are an integral part of these consolidated financial statements

89 1 1 GENERAL INFORMATION AVIC International Holdings Limited (the Company ) was established as a joint stock limited company in the People s Republic of China (the PRC ) and its shares have been listed on the Main Board of The Stock Exchange of Hong Kong Limited. The Company and its subsidiaries (hereinafter collectively referred to as the Group ) are principally engaged in the manufacturing and sales of liquid crystal displays, printed circuit boards and watches, property development, international engineering, trading and logistic services and development mining resources in the PRC. 25 The office address of the Company is 25/F, Hangdu Building, CATIC Zone, Shennan Road Central, Futian District, Shenzhen, the PRC. 2 (2006)2006 The consolidated financial statements have been approved for issue on 28 March BASIS OF PREPARATION The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and IFRS Interpretations Committee applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, available-for-sale financial assets and derivative financial instruments at fair value through profit or loss. The accounting policies and bases adopted in the preparation of these financial statements differ from those used in the statutory accounts of the Group which are prepared in accordance with the Accounting Standards for Business Enterprises (2006) of the People s Republic of China ( CAS 2006 ). 5 The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

90 2 1,618,839,000 12,751,554,000 13,093,000,000 2 BASIS OF PREPARATION (continued) As at 31 December 2013, the Group s current liabilities exceeded its current assets by approximately RMB1,618,839,000 and it had outstanding short term borrowings of approximately RMB12,751,554,000 which are due for repayment within the next twelve months. The Group s ability to continue as a going concern and to fulfill its financial obligations depends on the Group s operating cash flows and the continuing support of its lending banks to provide financing. The Group has been servicing its principal and interest payment obligations according to the terms and schedules of the respective agreements for its borrowings and it has maintained a good credit history. The directors of the Company are confident that the Company will be able to roll over its outstanding bank borrowings when they are due for repayment in As at 31 December 2013, the Group had undrawn bank credit facilities of approximately RMB13,093,000,000 which can be drawn down when required. Furthermore, the directors will continue to implement measures to improve the working capital and cash flows of the Group including closely monitoring daily operating expenses and ensuring capital expenditures are funded by specific bank borrowings. They will also arrange to convert certain short term borrowings into long term borrowings whenever possible. The directors consider that it is appropriate to prepare the financial statements on the going concern basis

91 2 2 BASIS OF PREPARATION (continued) Changes in accounting policy and disclosures: (a) (a) The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2013: 1 Amendment to IAS 1, Financial statements presentation regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to Group items presented in other comprehensive income on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The adoption of this newly effective standard does not have significant impact to the Group. 7 Amendment to IFRS 7, Financial instruments: Disclosures, on asset and liability offsetting. The amendments require new disclosure requirements which focus on quantitative information about recognised financial instruments that are offset in the statement of financial position, as well as those recognised financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset. The adoption of this amended standard does not have significant impact to the Group. 10 IFRS 10, Consolidated financial statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The adoption of this newly effective standard does not have significant impact to the Group. 162 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

92 2 (a) BASIS OF PREPARATION (continued) (a) (continued) IFRS 11, Joint arrangements focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. The adoption of this newly effective standard does not have significant impact to the Group. IFRS 12, Disclosures of interests in other entities includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles. The adoption of this newly effective standard does not have significant impact to the Group. IAS 19, Employee benefits, was amended in June The impact on the Group will be as follows: to immediately recognise all past service costs; and to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability/asset. See Note 53 for the impact on the financial statement

93 2 (b) 2 BASIS OF PREPARATION (continued) (b) The following new standards, amendments and interpretations have been issued but are not effective for the financial year beginning 1 January 2013, and have not been early adopted by the Group. None of these is expected to have a significant effect on the consolidated financial statements of the Group. Effective for annual periods beginning on or after 32 IAS 32 Financial instruments: Presentation offsetting financial assets 1 January 2014 and financial liabilities amendment Amendments to IFRS 10, IFRS 12 (revised 2011) and 1 January 2014 IAS 27 (amendment) Investment entities 36 Amendments to IAS 36 Recoverable amounts disclosures for 1 January 2014 non-financial assets 21 IFRIC Int 21 Levies 1 January Amendments to IAS39 Novation of Derivatives and Continuation of 1 January 2014 Hedge Accounting 9 IFRS9 Financial instruments 1 January IFRS7 and IFRS9 (amendments) Mandatory effective date and 1 January 2015 transition disclosures There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. 164 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

94 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 3.1 Consolidation Subsidiaries Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Except for business combinations applying business combination involving entities under common control as detailed in Note 3.1.1(a) below, subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. De-facto control may arise in circumstances where the size of the Group s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc. Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group

95 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Subsidiaries (continued) (a) Business combination involving entities under common control For business combination involving entities under common control, the consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties perspective. No amount is recognised in consideration for goodwill or excess of acquirers interest in the net fair value of acquiree s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party s interest. The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless of the date of the common control combination. 166 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

96 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Subsidiaries (continued) (a) Business combination involving entities under common control (continued) The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is shorter. A uniform set of accounting policies is adopted by those entities. All intra-group transactions, balances and unrealised gains on transactions between combining entities or businesses are eliminated on consolidation. (b) (b) Business combination other than involving entities under common control The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any noncontrolling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest s proportionate share of the recognised amounts of acquiree s identifiable net assets

97 (b) 39 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Subsidiaries (continued) (b) Business combination other than involving entities under common control (continued) Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. 168 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

98 (b) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Subsidiaries (continued) (b) Business combination other than involving entities under common control (continued) The excess of the consideration transferred, the amount of any noncontrolling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, noncontrolling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement. (c) (c) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity

99 (d) % 50% 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Subsidiaries (continued) (d) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor s share of the profit or loss of the investee after the date of acquisition. The Group s investment in associates includes goodwill identified on acquisition. 170 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

100 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Associates (continued) If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The Group s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of profit/(loss) of investment accounted for using the equity method in the income statement

101 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Associates (continued) Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group s financial statements only to the extent of unrelated investor s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Gains and losses on dilution arising in investments in associates are recognised in the income statement Joint arrangements The Group has applied IFRS 11 to all joint arrangements as of 1 January Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group s share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. 172 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

102 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Consolidation (continued) Joint arrangements (continued) Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. The change in accounting policy has been applied as from 1 January There are no material effects of the change in accounting policies on the financial position, comprehensive income and the cash flows of the Group at 1 January 2012 and 31 December The change in accounting policy has had no impact on earnings per share Separate financial statements Investments in subsidiaries are accounted for at cost less impairment. Cost also includes direct attributable costs of investment. The results of subsidiaries are accounted for by the company on the basis of dividend and receivable. Impairment testing of the investments in subsidiaries is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee s net assets including goodwill

103 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.2 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors that makes strategic decisions. 3.3 Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). The consolidated financial statements are presented in Renminbi ( RMB ), which is the company s functional currency and the Group s presentation currency. (b) (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges. Foreign exchange gains and losses that related to borrowings and cash and cash equivalents are presented in the income statement within finance income or cost. All other foreign exchange gains and losses are presented in the income statement within other gains/(losses) net. 174 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

104 3 3.3 (b) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.3 Foreign currency translation (continued) (b) Transactions and balances (continued) Changes in the fair value of debt securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised as part of the fair value gain or loss. Translation difference on nonmonetary financial assets, such as equities classified as available for sale, are included in other comprehensive income. (c) (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

105 3 3.3 (c) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.3 Foreign currency translation (continued) (c) Group companies (continued) Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and All resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Currency transaction differences arising are recognised in other comprehensive income. (d) (d) Disposal of foreign operation and partial disposal On the disposal of a foreign operation (that is, a disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the currency transaction differences accumulated in equity in respect of that operation attributable to the owners of the company are reclassified to profit or loss. 176 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

106 3 3.3 (d) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.3 Foreign currency translation (continued) (d) Disposal of foreign operation and partial disposal (continued) In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group s ownership interest in associates or joint ventures that do not result in the Group losing significant influence or joint control) the proportionate share of the accumulated exchange difference is reclassified to profit or loss. 3.4 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred

107 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.4 Property, plant and equipment (continued) Depreciation of property, plant and equipment is provided using the straight-line method over their estimated useful lives, after deducting the estimated residual value. The estimated useful lives are as follows: Buildings Leasehold improvement Machinery and equipment Motor vehicles Computer and electronic equipment 10 to 50 years 3 to 5 years 5 to 30 years 5 to 18 years 3 to 10 years * Mining structures* Other equipment 10 to 20 years 5 to 13 years * * Mining structures comprise the main and auxiliary mine shafts and underground tunnels. The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting period An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount (Note 3.10). Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognised within Other gains/(losses) net in the income statement. 178 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

108 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.5 Investment property Investment property, principally comprising leasehold land and buildings, is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the Group. It also includes properties that are being constructed or developed for future use as investment properties. Land held under operating leases are accounted for as investment properties when the rest of the definition of an investment property is met. In such cases, the operating leases concerned are accounted for as if they were finance leases. Investment property is initially measured at cost, including related transaction costs and where applicable borrowing costs. After initial recognition, investment properties are carried at fair value, representing open market value determined at each reporting date by external valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If the information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. Changes in fair values are recorded in the income statement as part of a valuation gain or loss in fair value gain on investment properties. Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by: (a) (a) commencement of owner-occupation, for a transfer from investment property to owner-occupied property; (b) (b) commencement of development with a view to sale, for a transfer from investment property to properties under development; (c) (c) end of owner-occupation, for a transfer from owner-occupied property to investment property; or

109 3 3.5 (d) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.5 Investment property (continued) (d) commencement of an operating lease to another party, for a transfer from inventories to investment property. When an owner-occupied property becomes an investment property, which is measured as fair value, (a) (a) Any resulting decrease in the carrying amount of the property is recognised in profit or loss. (b) (b) Any resulting increase in the carrying amount is treated as follows: (i) (i) To the extent that the increase reverses a previous impairment loss for that property, the increase is recognised in profit or loss. The amount recognised in profit or loss does not exceed the amount needed to restore the carrying amount to the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised. (ii) (ii) Any remaining part of the increase is recognised in other comprehensive income and increases the revaluation surplus within equity. On subsequent disposal of the investment property, the revaluation surplus included in equity may be transferred to retained earnings. The transfer from revaluation surplus to retained earnings is not made through profit or loss. For a transfer from investment property carried at fair value to owner-occupied property, the property s deemed cost is its fair value at the date of change in use. 180 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

110 3 3.6 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.6 Intangible assets (a) Goodwill Goodwill arises on the acquisition of subsidiaries and associates and represents the excess of the consideration transferred over the Group s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units ( CGUs ), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed

111 3 3.6 (b) 10 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.6 Intangible assets (continued) (b) Trademarks and licenses (continued) Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of 10 years. (c) 5 10 (c) Computer software Acquired computer software programmes are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over the estimated useful lives of 5 to 10 years on a straight-line basis. Cost associated with developing or maintaining computer software programmes which do not generate economic benefits are recognised as expense as incurred. (d) 10 (d) Patents Patents are amortised on a straight-line basis over the estimated useful lives of 10 years. (e) (e) Maritime rights of use Maritime rights of use are amortised on a straight-line basis over the period of years. 182 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

112 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.7 Exploration and extraction rights Exploration and extraction rights are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation of exploration and extraction rights is calculated on unit of production method basis. 3.8 Land use rights All land in the PRC is stated-owned and no individual ownership right exists. The Group acquired the rights to use certain land and the premiums paid for such rights are recorded as land use rights. Land use rights which are held for self-use are stated at cost and amortised over the remaining period of the leases on a straight-line basis. Land use rights which are held for development for sale are inventories and measured at lower of cost and net realisable value. Land use rights are transferred to properties under development upon commencement of development. 3.9 Construction-in-progress Construction-in-progress represents plant and other property, machinery and equipment under construction and is stated at cost. This includes the costs of construction, the costs of plant and machinery, and interest charges arising from borrowings used to finance these assets during the period of construction or installation and testing. When the assets concerned are available for use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policies as stated above

113 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.10 Impairment of non-financial assets Assets that have an indefinite useful life for example, goodwill or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Nonfinancial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date Financial assets Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivable and available-for-sale. The classification depends on the purposes for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. (a) 12 (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. 184 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

114 (b) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.11 Financial assets (continued) Classification (continued) (b) Loans and receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period, these are classified as non-current assets. The Group s loans and other receivables comprise trade and other receivables and pledged bank deposit and cash and cash equivalents in the balance sheet (Note 24 and Note 27 and Note 28). (c) 12 (c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period

115 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.11 Financial assets (continued) Recognition and measurement Regular way purchases and sales of financial assets are recognised on the trade-date the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-forsale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as gains and losses from investment securities. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statement as part of other income when the Group s right to receive payments is established. 186 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

116 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.12 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously Impairment of financial assets (a) Assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults

117 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13 Impairment of financial assets (continued) (a) Assets carried at amortised cost (continued) For loans and receivables category, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-tomaturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement. 188 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

118 (b) (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13 Impairment of financial assets (continued) (b) Assets classified as available for sale The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group uses the criteria referred to in (a) above. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated income statement

119 (c) 12 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13 Impairment of financial assets (continued) (c) Assets classified as held-to-maturity financial assets Held-to-maturity financial assets are nonderivative financial assets with fixed or determinable payment and fixed maturities that the Group s management has the position intention and ability to hold it maturity. If the Group were to sell other than an insignificant amount of heldto-maturity financial assets, the whole category would be tainted and reclassified as available for sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets. (d) (d) Assets classified as derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The Group s derivative instruments do not qualify for hedge accounting, and are accounted for at fair value through profit or loss. Changes in the fair value of the Group s derivative instruments that do not qualify for hedge accounting are recognised immediately in profit or loss. Trading derivative are defined as a current asset and liability. 190 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

120 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.14 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses Properties under development Properties under development are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to the sale proceeds of properties in the ordinary course of business, less applicable variable selling expense and the anticipated costs to completion, or by management estimates based on prevailing marketing conditions. Development cost of property comprises land use rights, construction costs, capitalised finance costs and professional fees incurred during the development period of a normal operating cycle. On completion, the properties are transferred to completed properties held for sale. If a property under development becomes owneroccupied, it is reclassified as property, plant and equipment. Property under development for future use as investment property is classified as investment property under construction. Cost is determined using the weighted average cost method

121 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.16 Trade and other receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other receivables is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand and deposits held at call with banks Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to owners of the Company until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included in equity attributable to the Company s owners. 192 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

122 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.19 Perpetual subordinated convertible securities Perpetual convertible securities issued by the Group gives the right to the holder to convert those securities into a fixed number of the Company s shares at any time at a fixed exercise price per share. The perpetual convertible securities have no maturity date and are not redeemable. These securities are equity instruments Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date

123 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.22 Borrowing costs The borrowing costs that are directly attributable to the acquisition and construction of a property, plant and equipment that needs a substantially long period of time of acquisition and construction for its intended use commence to be capitalised and recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have been incurred, and the activities relating to the acquisition and construction that are necessary to prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases when the asset under acquisition or construction becomes ready for its intended use, the borrowing costs incurred thereafter are recognised in income statement. Capitalisation of borrowing costs is suspended when the acquisition or construction of a property, plant and equipment is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed. For a borrowing that is specifically for the purpose of obtaining a qualifying asset, the amounts of borrowing costs eligible for capitalisation are the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of these borrowings. For the other borrowings related to acquisition, construction and production of a qualifying asset, the amount of borrowing costs eligible for capitalisation shall be the lower of the actual borrowing costs incurred and the amount of qualifying asset not financed by specific borrowings multiplying capitalisation rate. The capitalisation rate is the weighted average interest rate of these borrowings. All other borrowing costs are expensed. 194 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

124 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.23 Construction contracts Contract costs are recognised when incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be profitable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Variations in contract work, claims and incentive payments are included in contract revenue to the extent that they have been agreed with the customer and are capable of being reliably measured. The Group uses the percentage of completion method to determine the appropriate amount to be recognised in a given period. The stage of completion is determined based on the completion of a physical proportion of the contract work by reference to the cost incurred up to the balance sheet date as a percentage of total estimated budgeted cost for each contract. The Group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within trade receivables. The Group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses)

125 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.24 Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. (a) (a) Current income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. (b) (b) Deferred income tax Inside basis differences Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. 196 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

126 (b) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.24 Current and deferred income tax (continued) (b) Deferred income tax (continued) Inside basis differences (continued) Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Outside basis differences Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. (c) (c) Offsetting Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis

127 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.25 Employee benefit The Group operates various post-employment schemes, including both defined benefit and defined contribution pension plans and postemployment medical plans. (a) (a) Pension obligations A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used. 198 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

128 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.25 Employee benefit (continued) (a) Pension obligations (continued) Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income. For defined contribution plans, the Group pays contribution to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the further payments is available. (b) (b) Other post-employment obligations Some group companies provide postretirement healthcare benefits to their retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. These obligations are valued annually by independent qualified actuaries

129 (c) (i) (ii) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.25 Employee benefit (continued) (c) Termination benefits and early retirement benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits at the earlier of the following dates: (i) when the Group can no longer withdraw the offer of those benefits; and (ii) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to their present value. 200 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

130 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.26 Research and development Research expenditures is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new and improved products) are recognised as intangible assets when the following criteria are met: it is technically feasible to complete the intangible asset so that it will be available for use; management intends to complete the intangible asset and use or sell it; there is an ability to use or sell the intangible asset; it can be demonstrated how the intangible asset will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and the expenditure attributable to the intangible asset during its development can be reliably measured. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development cost previously recognised as an expense is not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over their estimated useful lives

131 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.27 Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 202 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

132 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.28 Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods supplied, stated net of discounts returns and value added taxes. The Group recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group s activities, as described below. The Group bases its estimates of return on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (a) (a) Sale of goods Sale of goods are recognised when a Group entity has delivered products to the customer. The customer has accepted the products and collectability of the related receivables is reasonably assured. (b) 3.23 (b) Contract revenue Revenue from individual construction contracts is recognised by using the percentage of completion method (Note 3.23). (c) (c) Rental income Rental income from investment properties leased out under an operating lease is recognised in the income statement on a straight-line basis over the term of the lease. (d) (d) Services income Revenue from rendering of services is recognised in the accounting period in which the services are rendered. (e) (e) Interest income Interest income is recognised on a timeproportion basis using the effective interest method

133 (f) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.28 Revenue recognition(continued) (f) Dividend income Dividend income is recognised when the right to receive payment is established Dividend distribution Dividend distribution to the Company s shareholders is recognised as a liability in the Group s and in the Company s financial statements in the period in which the dividends are approved by the Company s shareholders, where appropriate Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs they are intended to compensate. Government grants relating to property, plant and equipment are included in non-current liabilities as deferred income on government grants and are credited to the income statement on a straight-line basis over the expected lives of the related assets Financial guarantee A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. After initial recognition, an issuer of such a contract shall measure it at the higher of the best estimate of the obligation and the amount initially recognized less, when appropriate, cumulative amortisation calculated to recognise the fee income earned on a straight line basis over the life of the guarantee contract. 204 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

134 (a) (a) (b) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.32 Leases (a) Where the Group is the lessor Finance lease A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. At the commencement of the lease term, the Group recognises the minimum lease payments receivable by the Group as a finance lease receivable and records the unguaranteed residual value as an asset at the same time. The difference between (a) the aggregate of the minimum lease payments and the unguaranteed residual value and (b) their present value (presented in the balance sheet as finance lease receivable, net) is recognised as unearned finance income. Minimum lease payments are the payments over the lease term that the lessee is or can be required to make plus any residual value guaranteed to the lessor by the lessee, or a party related or unrelated to the lessee. Unearned financial income is allocated to each period during the lease term using actuarial method that allocates rentals between finance income and repayment of capital in each accounting period in such a way that finance income is recognised as a constant periodic rate of return (implicit effective interest rate) on the lessor s net investment in the lease. Lease agreements for which the base rent is based on floating interest rates are included in minimum lease payments based on the floating interest rate existing at the commencement of the lease; any increase or decrease in lease payments that result from subsequent changes in floating interest rate are contingent rentals and are recorded as an increase or a decrease in lease revenue in the period of the interest rate change

135 (a) 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.32 Leases (continued) (a) Where the Group is the lessor (continued) Operating lease Leases in which a significant portion of the risks and rewards of ownership are retained by the Group are classified as operating leases. Payments received from lessees under operating leases (net of any incentives grant to the lessee) are recognised in the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. (b) (b) Where the Group is the lessee Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease. 4 4 FINANCIAL RISK MANAGEMENT The Group s activities expose it to a variety of financial risks: market risk (including currency risk, price risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. (a) (i) (a) Market risk (i) Foreign exchange risk The Group s activities are principally conducted in RMB. Although majority of the Group s assets and liabilities are denominated in RMB, the Group is still subject to foreign exchange risk arising from future commercial transactions and recognised assets and liabilities which are denominated in non-rmb, including US dollars ( USD ), European dollars ( EUR ), Sri Lankan rupee ( LKR ), Algerian dinar ( DZD ), Hong Kong dollars ( HKD ), Arab Emir. dirham ( AED ) etc. The Group currently does not have a foreign currency hedging policy. In addition, the conversion of RMB into foreign currencies is subject to the rules and regulations of foreign exchange controls promulgated by the PRC government. 206 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

136 4 (a) (i) 4 FINANCIAL RISK MANAGEMENT (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) The carrying amount of the Group s foreign currency denominated monetary assets and monetary liabilities at the respective balance sheet dates are as follows: 31 December 2013 RMB December 2012 RMB 000 Assets USD 2,509,950 3,386,632 EUR 765, ,447 LKR 404, ,383 AED 130, ,823 DZD 72,903 29,234 HKD 48,419 39,399 Others 186, ,928 4,117,779 4,373, December 2013 RMB December 2012 RMB 000 Liabilities USD 3,784,598 2,600,850 EUR 1,313, ,440 LKR 741, ,856 HKD 257, ,389 AED 169, ,355 DZD 61,964 58,866 Others 176, ,518 6,504,460 4,063,

137 4 (a) (i) 5% 4 FINANCIAL RISK MANAGEMENT (continued) (a) Market risk (continued) (i) Foreign exchange risk (continued) The following table shows the sensitivity analysis on profit before tax of a 5% increase in RMB against the relevant foreign currencies. The sensitivity analysis includes only foreign currency denominated monetary items and adjusts their translation at the year end for the respective changes in rate RMB 000 RMB 000 (Restated) 5% 5% 5% 5% 5% 5% 5% appreciation in exchange rate against USD Increase/(Decrease) in the profit before tax for the year 63,732 (39,289) 5% appreciation in exchange rate against EUR Increase/(Decrease) in the profit before tax for the year 27,412 (500) 5% appreciation in exchange rate against LKR Increase in the profit before tax for the year 16,839 12,324 5% appreciation in exchange rate against HKD Increase in the profit before tax for the year 10,449 13,450 5% appreciation in exchange rate against AED Increase in the profit before tax for the year 1,949 4,327 5% appreciation in exchange rate against DZD (Decrease)/Increase in the profit before tax for the year (547) 1, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

138 4 (a) (ii) A 19 4 FINANCIAL RISK MANAGEMENT (continued) (a) Market risk (continued) (ii) Price risk The Group is exposed to equity securities price risk of its A share investments in the Shenzhen Stock Exchange which are classified on the consolidated balance sheet as available-for-sale financial assets (Note 19). The exposure of the price risk of available-for-sale financial assets is not material to the Group. (iii) (iii) Cash flow and fair value interest rate risk The Group s interest-rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group currently has not used any interest rate swap arrangements but will consider hedging interest rate risk should the need arise. The table below summaries the impact of changes in interest rate at 31 December 2013 with all other variables held at constant on the Group s profit for the year. Interest rate 10% 10% 10% higher 10% lower (Decrease)/increase in profit for the year RMB 000 RMB 000 Borrowings at variable rates (Charged)/credited to finance costs (41,688) 41, The interest rates and terms of repayment of borrowings of the Group are disclosed in Note

139 4 (b) 19% 28% 24 4 FINANCIAL RISK MANAGEMENT (continued) (b) Credit risk The Group is exposed to credit risk in relation to its cash and cash equivalents, term deposits with initial term of over three months, restricted cash, and trade and other receivables. Substantially all of the Group s cash and cash equivalents are held in state-owned financial institutions and reputable banks which are all high-credit-quality financial institutions. None of cash at bank, bank deposits and restricted cash of the Group that were fully performing has been renegotiated during the year. The carrying amounts of trade and other receivables represent the Group s maximum exposure to credit risk in relation to financial assets. The top 5 customers accounted for more than 19% of the balance of trade and other receivables as at 31 December 2013 (2012: 28%). The Group normally grants credit terms of not more than 1 year to existing customers without collaterals. Aging analysis of the Group s trade receivables is disclosed in Note 24. Management makes periodic collective assessment as well as individual assessment on the recoverability of trade and other receivables based on historical payment records, the length of the overdue period, the financial strength of the debtors and whether there are any disputes with the relevant debtors. The Group s historical experience in collection of trade and other receivables falls within the recorded allowances and the directors are of the opinion that adequate provision for uncollectible receivables has been made. 210 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

140 4 (b) 4 FINANCIAL RISK MANAGEMENT (continued) (b) Credit risk (continued) Maximum exposure to credit risk before collateral held or other credit enhancements: Credit risk exposure relating to offbalance sheet items: Group Maximum exposure RMB 000 RMB 000 Financial guarantees 1,070, ,018 (c) (c) Liquidity risk The board of directors of the Group manage the liquidity risk by maintaining sufficient cash to meet the normal operating commitments and sourcing adequate funding through banking credit facilities, including short-term and long-term bank loans

141 4 (c) 4 FINANCIAL RISK MANAGEMENT (continued) (c) Liquidity risk (continued) The table below analyses the Group s and Company s non-derivative financial liabilities into relevant maturity grouping based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. 1 Less than 1 year 1 2 Between 1 and 2 years 2 5 Between 2 and 5 years 5 Over 5 years Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Group At 31 December 2013 Borrowings 13,422,456 2,206,519 2,442,694 1,093,494 19,165,163 Trade and other payables (excluded non-financial liabilities) 7,810,398 44,871 7,855,269 Other non-current liabilities 128, ,361 30,869 14,209 1,028,873 Financial guarantee contracts 345,130 70, , ,022 1,070,112 Total 21,706,418 3,176,751 2,826,523 1,409,725 29,119,417 1 Less than 1 year 1 2 Between 1 and 2 years 2 5 Between 2 and 5 years 5 Over 5 years Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 31 December 2012 Borrowings 11,098,384 1,304,205 2,699, ,405 15,579,043 Trade and other payables (excluded non-financial liabilities) 7,097,751 46,128 7,143,879 Other non-current liabilities 71, ,625 1,196,643 1,180 1,402,497 Financial guarantee contracts 458, , , ,018 Total 18,725,202 1,618,958 3,895, ,585 24,858, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

142 4 (d) 4 FINANCIAL RISK MANAGEMENT (continued) (d) Fair value estimation The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). 12 The following table presents the Group s assets that are measured at fair value at 31 December See Note 12 for disclosures of investment properties that are measured at fair value. Level 1 Level 2 Level 3 Total RMB 000 RMB 000 RMB 000 RMB 000 Assets Derivative financial instruments 5,405 5,405 Available-for-sale financial assets 26, , ,090 Total assets 26,958 5, , ,

143 4 (d) 4 FINANCIAL RISK MANAGEMENT (continued) (d) Fair value estimation (continued) The following table presents the Group s assets and liabilities that are measured at fair value at 31 December Level 1 Level 2 Level 3 Total RMB 000 RMB 000 RMB 000 RMB 000 Assets Derivative financial instruments 3,110 3,110 Available-for-sale financial assets 23, , ,819 Total assets 23,449 3, , ,929 There were no transfers between Levels 1 and 2 during the year. (i) A (i) Financial instruments in Level 1 The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise equity investments in listed A shares of companies listed on Shenzhen or Shanghai Stock Exchange. 214 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

144 4 (d) (ii) 4 FINANCIAL RISK MANAGEMENT (continued) (d) Fair value estimation (continued) (ii) Financial instruments in Level 2 The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. Specific valuation techniques used to value financial instruments include: Quoted market prices or dealer quotes for similar instruments; The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value; Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. Note that all of the resulting fair value estimates are included in Level 2 except for certain forward foreign exchange contracts explained below

145 4 (d) (iii) 4 FINANCIAL RISK MANAGEMENT (continued) (d) Fair value estimation (continued) (iii) Financial instruments in Level 3 The following table presents the changes in Level 3 instruments for the year ended 31 December Availablefor-sale financial assets Opening balance 236,370 Additions 17,204 15(a) Transfer from investments accounted for using the equity method (Note 15(a)) 15,000 Disposals (4,442) Closing balance 264,132 The following table presents the changes in Level 3 instruments for the year ended 31 December Availablefor-sale financial assets Opening balance 181,070 Additions 84,066 15(b) Transfer to investments accounted for using the equity method (Note 15(b)) (640) Disposals (28,126) Closing balance 236, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

146 4 (e) 4 FINANCIAL RISK MANAGEMENT (continued) (e) Capital risk management The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the consolidated balance sheet plus net debt. The gearing ratios at 31 December 2013 and 2012 are as follows: RMB 000 RMB 000 (Restated) (i) Total borrowings (i) 20,090,596 16,661,917 Less: cash and cash equivalents 28 (Note 28) (4,802,843) (4,038,225) Net debt 15,287,753 12,623,692 Total equity 12,717,620 11,558,769 Total capital 28,005,373 24,182,461 Gearing ratio 55% 52% (i) 18,933,887,000 14,606,566, ,000,000 1,190,000, ,709, ,351, (i) Total borrowings comprised borrowings of RMB18,933,887,000 (2012: RMB14,606,566,000) (Note 32), borrowings included in other noncurrent liabilities of RMB940,000,000 (2012: RMB1,190,000,000) (Note 35), and borrowings included in trade and other payables of RMB216,709,000 (2012: RMB865,351,000) (Note 36)

147 4 (f) 4 FINANCIAL RISK MANAGEMENT (continued) (f) Offsetting financial assets and financial liabilities The following financial assets are subject to offsetting, enforceable master netting arrangements and similar agreements. As at 31 December 2013 Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet RMB 000 RMB 000 RMB 000 Derivative financial instruments 5,405 5,405 As at 31 December 2012 Gross amounts of recognised financial assets Gross amounts of recognised financial liabilities set off in the balance sheet Net amounts of financial assets presented in the balance sheet RMB 000 RMB 000 RMB 000 Derivative financial instruments 3,130 (20) 3, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

148 4 (f) FINANCIAL RISK MANAGEMENT (continued) (f) Offsetting financial assets and financial liabilities (continued) For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and liabilities will be settled on a gross basis, however, each party to the master netting agreement or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the other party. Per the terms of each agreement, an event of default includes failure by a party to make payment when due; failure by a party to perform any obligation required by the agreement (other than payment) if such failure is not remedied within periods of 30 to 60 days after notice of such failure is given to the party; or bankruptcy

149 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 5.1 Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) (a) Impairment of receivables The Group makes provision for impairment of receivables based on an assessment of the recoverability of trade and other receivables with reference to the extent and duration that the amount will be recovered. Provisions are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of potential impairment requires the use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of trade and other receivables and doubtful debt expenses in the period in which such estimate has been changed. 220 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

150 5 5.1 (b) 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) 5.1 Critical accounting estimates and assumptions (continued) (b) Mineral resources reserves Mineral resources reserves and the amortisation method are key factors in the calculation of amortisation of extraction rights. Mineral resources reserves are also an important element in testing for impairment. Changes in mineral resources reserves will affect amortisation recorded in the financial statements for extraction rights. A reduction in proven developed reserves will increase amortisation charges. Proven reserve estimates are subject to revision, either upward or downward, based on new information, such as from changes in economic factors, including product prices, contract terms, evolution of technology or development plans. (c) (c) Impairment of exploration and extraction rights and property, plant and equipment Exploration and extraction rights and property, plant and equipment are carried at cost less accumulated amortisation and depreciation. These carrying amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. In estimating the recoverable amounts of assets, various assumptions, including future cash flows to be associated with the mining rights and depreciation and discount rates, are made. If future events do not correspond to such assumptions, the recoverable amounts will need to be revised, and this may have an impact on the Group s results of operations or financial position. Management considered that there was no impairment charge required to be made to the carrying value of the exploration and extraction rights and property, plant and equipment as at 31 December

151 5 5.1 (d) 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) 5.1 Critical accounting estimates and assumptions (continued) (d) Investment property valuation The Group s certain investment properties are located in areas where there are no active property market, in such cases, the fair value is estimated by discounted cash flow method, which involves a number of key assumptions, including market rents, occupancy rates, discounts rates. The assumptions require the use of judgment and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of investment and fair value gain/loss on investment property in the period in which such estimate has been changed. (e) (e) Recognition of deferred income tax assets Significant judgment is required in determining the provision for income tax. There are many transactions and calculations for which the ultimate determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such difference will impact the income tax and deferred tax provision in the period in which such determination is made. Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers to be probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. The outcome of their actual utilisation may be different. 222 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

152 5 5.1 (f) CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) 5.1 Critical accounting estimates and assumptions (continued) (f) Impairment of goodwill The Group tests whether goodwill has suffered any impairment annually or, whenever there is an indication of impairment, in accordance with the accounting policy stated in Note The recoverable amounts of cash-generating units have been determined based on the higher of an asset s fair value less costs to sell and value in use. These calculations require the use of estimates (Note 9). (g) (g) Construction contracts The Group uses the percentage-ofcompletion method to account for its contract revenue. The stage of completion is measured by reference to the contract costs incurred to date compared to the estimated total costs for the contract. Significant assumptions are required to estimate the total contract costs and in making these estimates, management has relied on past experience and industry knowledge. Management monitors the progress of the construction and reviews periodically the estimated total costs for each contract as the contract progresses. If the actual costs differ from management s estimates, the revenue, cost of sales and provision for foreseeable losses would be adjusted

153 5 5.2 (a) 50% 45.62% 41.49% 50% 30% 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued) 5.2 Critical judgments (a) Consolidation of entities in which the Group holds less than 50% The Group s equity interests held in two listed subsidiaries, Tianma Microelectronics Co. Ltd. (the Tianma ) and Fiyta Holdings Limited (the Fiyta ), were 45.62% and 41.49% respectively, other equity interests are widely held by public interests. The Group s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies. As such, the directors of the Company considered that the Group has maintained de facto control of these subsidiaries despite its equity interests in these two subsidiaries are below 50% and the Group continued to report them as subsidiaries. The Group s equity interests held in Chengdu Tianma Microelectronics Co., Ltd. (the Chengdu Tianma ) was 30%. The Company has reached the agreement with non-controlling shareholders of Chengdu Tianma to act in concert with the Company when casting votes in shareholder and board of director s meeting, pursuant to which the Company is able to control Chengdu Tianma and the Group continued to report Chengdu Tianma as a subsidiary. (b) (b) Joint arrangements The Group has joint control over this arrangement as under the contractual agreements, unanimous consent is required from all parties to the agreements for all relevant activities. The Group s joint arrangement is structured as a limited company and provides the Group and the parties to the agreements with rights to the net assets of the limited company under the arrangements. Therefore, this arrangement is classified as a joint venture. 224 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

154 6 6 SEGMENT INFORMATION The chief operating decision-makers have been identified as the board of directors of the Company. Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. The board considers the business from a product perspective. The Group is organised into five business segments: High-tech Electronic Products manufacture and sales of liquid crystal displays, printed circuit boards and standard parts Retails and High-end Consumer Products manufacture and sales of mechanical and branded quartz timepieces Real Estate and Hotel providing construction services, real estate development and hotel operation Trading and Logistics trading of commodities, ship building and providing logistic services Resources Investment and Development mining and sales of minerals The board assesses the performance of the operating segments based on the profit. Segment assets consist primarily of land use rights, exploration and extraction rights, property, plant and equipment, investment properties, construction-inprogress, inventories, properties under development, trade and other receivables and cash and equivalents. Inter-segment revenue are carried out according to the terms and conditions agreed by both parties. The segment information provided to the board of directors for the reportable segments for the year ended 31 December 2013 is as follows:

155 6 6 SEGMENT INFORMATION (continued) An analysis of the Group s segment information is as follows: High-tech Electronic Products Retails and High-end Consumer Products Year ended 31 December 2013 Resources Real Investment Estate Trading and and and Hotel Logistics Development Unallocated Total Segment results Revenue from external customers 7,235,578 3,041,122 4,187,299 18,600, ,210 33,437,688 Inter-segment revenue ,624 25,151 Results Segment results 400, , ,847 88,189 (89,203) (46,662) 789, Other income (Note 37) 294,388 22, ,357 36,938 1, ,456 Other gains/(losses)-net (Note 38) 38 (1,945) , , , Fair value gain on investment properties (Note 12) 3,263 7,268 23,791 22, ,942 Operating profit/(loss) 696, , , ,548 (52,157) (9,501) 1,700, Finance costs, net (Note 41) (146,426) (85,286) (51,719) (232,519) (86,207) (179,919) (782,076) 15 Share of profit of investments accounted for using the equity method (Note 15) 5,515 1, ,996 90, , Income tax charge (Note 43) (57,443) (25,455) (77,927) (114,113) (5,109) - (280,047) Profit/(loss) for the year 498, , , ,454 (143,473) (188,685) 1,164,675 Other segment items are as follows: Segment assets 11,474,600 3,546,498 8,212,830 15,628,158 2,782, ,145 42,614, Investments accounted for using the equity method (Note 15) 190,925 43,238 3,314, ,039-35,955 4,386,692 Total assets 11,665,525 3,589,736 11,527,365 16,430,197 2,782,412 1,006,100 47,001,335 Total liabilities 6,825,045 1,989,246 7,307,649 12,894,320 2,349,845 2,917,610 34,283,715 Capital expenditure 602,924 17,946 96, , ,349 1,333 1,957,069 Non-cash expenses 39 Depreciation of property, plant and equipment (Note 39) 758,053 21,102 72,329 80,147 56,967 1, , Amortisation of land use rights (Note 39) 15,315 11,540 1, , Amortisation of exploration and extraction rights (Note 39) 15,716 15, Amortisation of intangible assets (Note 39) 6,250 1, ,444 1,366 18, Amortisation of other non-current assets (Note 39) 12,266 6,989 3, , Provision for bad debts (Note 39) 8,897 2,257 5, ,326 2, ,126 Provision for inventory obsolescence (Note 39) 58,001 6,466 6,954 71,421 Provision for amounts due from customers for contract work (Note 39) 38,276 38, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

156 6 6 SEGMENT INFORMATION (continued) High-tech Electronic Products Retails and High-end Consumer Products Year ended 31 December 2012 (Restated) Real Estate and Hotel Trading and Logistics Resources Investment and Development Unallocated Total Segment results Revenue from external customers 6,779,206 2,987,857 2,769,814 17,656,704 1,058,991 31,252,572 Inter-segment revenue 1,106 4,008 5,114 Segment results 321, ,404 99, ,305 (18,575) (51,279) 975, Other income (Note 37) 301,818 25,209 1, ,196 70,661 3, ,367 Other gains/(losses)-net (Note 38) 38 (7,053) 299 1,243 66,825 (23,971) (305) 37, Fair value gain on investment properties (Note 12) 1,015 7,387 51,342 41, ,332 Operating profit/(loss) 617, , , ,914 28,115 (48,229) 1,801, Finance costs, net (Note 41) (227,341) (99,033) (65,178) (201,571) (72,884) (164,251) (830,258) Share of profit/(losses) of investments 15 accounted for using the equity method (Note 15) (9,179) 1, ,189 (12,077) (620) 477, Income tax charge (Note 43) (42,867) (22,674) (35,410) (75,914) (5,437) (182,302) Profit/(loss) for the year 337, , , ,352 (50,206) (213,100) 1,266,241 Other segment items are as follows: Segment assets 10,710,815 3,318,344 5,845,920 12,654,527 2,501, ,302 35,787, Investments accounted for using the equity method (Note 15) 191,520 41,649 3,188, ,998 82,409 4,298,291 Total assets 10,902,335 3,359,993 9,034,635 13,448,525 2,501, ,711 40,085,513 Total liabilities 6,404,481 1,853,582 4,991,515 10,204,318 1,981,117 3,091,731 28,526,744 Capital expenditure 585, ,245 89, , ,720 1,421,774 Non-cash expenses 39 Depreciation of property, plant and equipment (Note 39) 723,530 11,010 51,534 75,856 51,544 1, , Amortisation of land use rights (Note 39) 7,756 11,480 9, , Amortisation of exploration and extraction rights (Note 39) 14,589 14, Amortisation of intangible assets (Note 39) 4,604 1, , , Amortisation of other non-current assets (Note 39) 2,692 2,043 3,671 4,693 1,284 14, Provision for/(reversal of) bad debts (Note 39) 12,280 2,335 6,897 43,212 (7,143) 57,581 Provision for inventory obsolescence (Note 39) 40,297 4, ,376 Provision for amounts due from customers for contract work (Note 39) 2,808 2,

157 6 6 SEGMENT INFORMATION (continued) The investment income from AVIC Real Estate Company Limited ( AVIC Real Estate ) and AVIC Vanke Company Limited ( AVIC Vanke ) were included in Unallocated segment in In 2013, it was reclassified to Real Estate and Hotel segment for better assessing segment performance and allocating resources, comparative figures are also restated. The Group entities are principally domiciled in the PRC. The result of its revenue from external customers in PRC and other countries and districts are disclosed as follows: RMB 000 RMB 000 Revenue Mainland China 23,775,579 22,376,960 Hong Kong 1,864,894 1,812,764 Europe and America 2,566,156 2,139,626 East Asia and Southeast Asia 3,298,170 2,981,482 Others 1,932,889 1,941,740 Total revenue per income statement 33,437,688 31,252,572 10% Revenue is allocated based on the country in which customers are located. No revenue derived from a single external customer has exceeded 10% of the total revenue. Total of non-current assets other than financial instruments and deferred tax assets RMB 000 RMB 000 Mainland China 16,402,787 14,420,247 Hong Kong 538,384 86,605 Europe and America 58,166 6,148 East Asia and Southeast Asia 243,521 23,564 Others 277,705 17,687 17,520,563 14,554,251 Investments accounted for using the equity method 4,386,692 4,298,291 21,907,255 18,852, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

158 6 6 SEGMENT INFORMATION (continued) RMB 000 RMB 000 Capital expenditure Mainland China 1,947,897 1,399,860 Hong Kong ,805 Europe and America 2,456 3,688 East Asia and Southeast Asia 3, Others 2,297 2,425 1,957,069 1,421,774 Capital expenditure is allocated based on where the assets are located. Revenue consists of the following: RMB 000 RMB 000 Analysis of revenue by category Sale of goods 29,463,762 24,950,855 Construction contracts 3,369,404 5,768,383 Rental income 245, ,260 Services income 189, ,073 Others 169, ,001 Total revenue per income statement 33,437,688 31,252,

159 7 7 LAND USE RIGHTS Group RMB 000 RMB 000 Net book value at 1 January 1,293,452 1,214,682 Additions 178, ,465 Amortisation (33,165) (30,503) Disposals of subsidiaries (135,192) Net book value at 31 December 1,438,645 1,293,452 Group RMB 000 RMB Outside Hong Kong, held on leases of 30 to 50 years 1,438,645 1,293, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

160 7 28,801,000 29,853, ,364, ,000 7 LAND USE RIGHTS (continued) Amortisation charges of RMB28,801,000 (2012: RMB29,853,000) (Note 39) and RMB4,364,000 (2012: RMB650,000) were included in the administrative expenses and capitalised in construction in progress for the year respectively The Group s land use rights are in the mainland China, the respective land use rights in mainland China were granted by the Town Planning and Land Administration Bureau for periods of years from the date of grant. 504,031, ,952, As at 31 December 2013, certain bank borrowings were secured by the land use rights of the Group with net book value totalling RMB504,031,000 (2012: RMB517,952,000). Details of the secured borrowings are in Note EXPLORATION AND EXTRACTION RIGHTS Group RMB 000 RMB 000 Net book value at 1 January 505, ,906 Additions 106,282 50(b) Acquisition of a subsidiary (Note 50(b)) 240,660 Amortisation (15,716) (14,589) Net book value at 31 December 836, ,

161 8 15,716,000 14,589, EXPLORATION AND EXTRACTION RIGHTS (continued) Amortisation charges of RMB15,716,000 (2012: RMB14,589,000) (Note 39) were included in the cost of goods sold in the consolidated income statement for the year. As of 31 December 2013, the exploration and extraction rights of the Group comprised the following: 213,074, ,212, the extraction rights of a phosphorus mine of net book value of RMB213,074,000 (2012: RMB219,212,000) has a site area of approximately sq. km. It is located in Dongchuan District, Kunming City of Yunnan Province, the PRC. 210,226, ,250, ,526 the extraction rights of a potassium mine of net book value of RMB210,226,000 (2012: RMB220,250,000) has a site area of approximately 284,526 sq. km. It is located in Lenghu District, Haixi Prefecture of Qinghai Province, the PRC. 66,301,000 65,855, the extraction rights of a phosphorus mine of net book value of RMB66,301,000 (2012: RMB65,855,000) has a site area of approximately 6.85 sq. km. It is located in Dongchuan District, Kunming City of Yunnan Province, the PRC. 346,942,000 1,020 Mboukoumassi, Kouilou Province, the Republic of the Congo the exploration rights of a potassium mine of net book value of RMB346,942,000 (2012: Nil) has a site area of approximately 1,020 sq. km. It is located in Mboukoumassi, Kouilou Province, the Republic of the Congo The remaining useful life of the exploration and extraction rights is 5-10 years. Management expects to be able to renew the exploration and extraction rights without significant cost. 6,540, As at 31 December 2013, certain bank borrowings were secured by the exploration and extraction rights of the Group with net book value totalling RMB6,540,000 (2012: Nil). Details of the secured borrowings are in Note AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

162 9 9 GOODWILL Group RMB 000 Year ended 31 December 2012 As at January ,236 Acquisition of a subsidiary 4,308 As at December ,544 Year ended 31 December 2013 As at January ,544 50(a) Acquisition of a subsidiary (Note 50(a)) 120,891 As at December ,435 60% 69.77% 100% 70% 100% Goodwill arose from the acquisition of 60% interest of Qinghai CATIC AVIC Resources Limited ( Qinghai CATIC Resources ), 69.77% interest of AVIC Weihai Shipyard Company Limited ( Weihai Shipyard ) ( ), 100% interest of Superior Metal Hardware Products (Shanghai) Company Limited ( Superior Metal ) (), 70% interest of CATIC Huatai Liankemao (Beijing) Company Limited ( Huatai ) () and 100% interest of Deltamarin Oy ( Deltamarin ) in 2008, 2011, 2011, 2012 and 2013 respectively. The recoverable amount of the CGU related to Weihai Shipyard is determined based on fair value less costs to sell calculation, the recoverable amount of other CGUs is determined based on value-in-use calculations. Those calculations use pre-tax cash flow projections based on financial forecasts prepared by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below

163 9 9 GOODWILL (continued) The key assumptions used for fair value less costs to sell and value-in-use calculations are as follows: Qinghai CATIC Resources Weihai Shipyard Superior Metal Huatai Deltamarin Net book value 5, ,107 27,889 4, ,891 Gross margin 28.89% 13.87% 25% 30% 10.6% Growth rate 5% 3% 3% 3% 3.5% Discount rate 8% 14.50% 8.42% 12% 12.59% 10% 2% These assumptions have been used for the analysis of each CGU within the operating segment. Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments. The directors of the Company consider that no impairment charge was required after performing the impairment assessment. If the estimated future cash flows had been 10% lower than management s estimates as at 31 December 2013 and 2012, the Group would have recognized no impairment loss on the goodwill (2012: Nil). If the discount rate had increased 2% as at 31 December 2013 and 2012, the Group would have recognised no impairment loss on the goodwill (2012: Nil). 234 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

164 10 10 INTANGIBLE ASSETS Computer software Capitalised development costs Trademark and licenses Maritime rights of use Patents Others Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January 2013 Cost 94, ,086 25,670 66,947 5, ,755 Accumulated amortisation and impairment (35,188) (727) (4,722) (1,619) (2,213) (44,469) Net book amount 58, ,359 20,948 65,328 3, ,286 Year ended 31 December 2013 Opening net book amount 58, ,359 20,948 65,328 3, ,286 Exchange differences (a) Acquisition of subsidiaries (Note 50)(a) 2,391 55,175 40,651 98,217 Additions 12, ,000 14,085 Disposals (58) (58) Amortisation charge (12,615) (1,465) (10,208) (322) (24,610) Closing net book amount 61,886 1,448 61,534 19,483 96,771 3, ,530 At 31 December 2013 Cost 114,642 1,448 62,261 25, ,598 5, ,562 Accumulated amortisation and impairment (52,756) (727) (6,187) (11,827) (2,535) (74,032) Net book amount 61,886 1,448 61,534 19,483 96,771 3, ,

165 10 10 INTANGIBLE ASSETS (continued) Computer software Capitalised development costs Trademark and licenses Maritime rights of use Patents Others Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January 2012 Cost 85,142 57,973 7,086 25,670 5, ,926 Accumulated amortisation and impairment (24,331) (715) (3,649) (1,883) (30,690) Net book amount 60,811 57,973 6,371 22,021 4, ,236 Year ended 31 December 2012 Opening net book amount 60,811 57,973 6,371 22,021 4, ,236 Additions 9,066 9,922 18,988 Transfer to patents (66,947) 66,947 Disposals (35) (35) Amortisation charge (10,869) (12) (1,073) (1,619) (330) (13,903) Closing net book amount 58, ,359 20,948 65,328 3, ,286 At 31 December 2012 Cost 94, ,086 25,670 66,947 5, ,755 Accumulated amortisation and impairment (35,188) (727) (4,722) (1,619) (2,213) (44,469) Net book amount 58, ,359 20,948 65,328 3, ,286 18,561,000 10,441, ,049,000 3,462,000 Amortisation charges of RMB18,561,000 (2012: RMB10,441,000) (Note 39) and RMB6,049,000 (2012: RMB3,462,000) were included in the administrative expenses and capitalised in construction-in-progress for the year respectively. 236 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

166 11 11 PROPERTY, PLANT AND EQUIPMENT Group Leasehold improvement Machinery and equipment Motor vehicles 2013 Computer and electronic equipment Mining structures Other equipment Buildings Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Year ended 31 December 2013 Cost At beginning of year 4,530, ,707 6,463, , , , ,653 12,066, Transfer from construction-inprogress (Note 13) 330, , , Acquisition of subsidiaries (Note 50) ,395 4, ,680 Additions 47,567 77, ,394 21,437 36,980 7, , Transfer to investment properties (Note 12) (22,869) (22,869) 47(e) Disposals of subsidiaries (Note 47(e)) (62) (1,900) (423) (2,385) 13 Transfer to construction-in-progress (Note 13) (7,062) (7,062) 47(b) Other disposals (Note 47(b)) (2,544) (59,551) (13,977) (11,083) (87,155) Exchange differences (4,299) (1,711) (735) (414) (146) (7,305) At end of year 4,872, ,371 6,773, , , , ,230 12,838,862 Accumulated depreciation At beginning of year 601, ,257 2,280,103 94, ,968 48,810 76,433 3,377,517 Charge for the year 178,134 73, ,418 32,999 31,777 20,963 12, , Transfer to investment properties (Note 12) (8,794) (8,794) 47(e) Disposals of subsidiaries (Note 47(e)) (7) (1,602) (362) (1,971) 13 Transfer to construction-in-progress (Note 13) (1,977) (1,977) 47(b) Other disposals (Note 47(b)) (2,009) (56,777) (9,967) (5,462) (1) (74,216) At end of year 766, ,170 2,867, , ,921 69,773 89,395 4,285,726 Impairment At beginning and end of year 5,524 9, ,716 Charge for the year At end of year 5,524 10, ,427 Net book amount At end of year 4,099, ,201 3,895,166 80, , ,464 31,825 8,536,709 At beginning of year 3,923, ,450 4,173,947 95, , ,427 37,220 8,673,

167 11 11 PROPERTY, PLANT AND EQUIPMENT (continued) Group (continued) Buildings Leasehold improvement Machinery and equipment Motor vehicles 2012 Computer and electronic equipment Mining structures Other equipment Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Year ended 31 December 2012 Cost At beginning of year 5,076, ,290 6,385, , , , ,242 12,412,265 Transfer from construction-inprogress 91, , , ,745 Acquisition of a subsidiary Additions 103,094 77, ,554 36,878 23,989 5,333 9, ,118 Transfer from investment properties 35,494 35,494 Transfer to investment properties (17,227) (17,227) Disposals of subsidiaries (714,537) (360,500) (16,687) (4,058) (3,169) (1,098,951) Other disposals (42,937) (129,365) (10,683) (8,658) (2,015) (193,658) Exchange differences (1,408) (514) (612) 359 (258) (2,433) At end of year 4,530, ,707 6,463, , , , ,653 12,066,605 Accumulated depreciation At beginning of year 535,034 36,871 1,860,789 82, ,329 27,847 61,351 2,736,660 Charge for the year 157,891 68, ,912 22,775 47,845 20,963 17, ,004 Transfer to investment properties (1,519) (1,519) Disposals of subsidiaries (80,035) (71,975) (3,307) (1,449) (900) (157,666) Other disposals (9,817) (107,623) (7,515) (7,757) (1,250) (133,962) At end of year 601, ,257 2,280,103 94, ,968 48,810 76,433 3,377,517 Impairment At beginning and end of year 5,524 9, ,716 Net book amount At end of year 3,923, ,450 4,173,947 95, , ,427 37,220 8,673,372 At beginning of year 4,536, ,419 4,515,198 98, , ,259 47,891 9,659, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

168 11 11 PROPERTY, PLANT AND EQUIPMENT (continued) Company Buildings Machinery and equipment 2013 Motor vehicles Total RMB 000 RMB 000 RMB 000 RMB 000 Year ended 31 December 2013 Cost At beginning and end of year 19,000 1,646 4,327 24,973 Additions 1,333 1,333 At end of year 19,000 2,979 4,327 26,306 Accumulated depreciation At beginning of year 12, ,134 17,842 Charge for the year ,187 At end of year 13,656 1,197 4,176 19,029 Net book amount At end of year 5,344 1, ,277 At beginning of year 6, ,

169 11 11 PROPERTY, PLANT AND EQUIPMENT (continued) Company (continued) Buildings Machinery and equipment 2012 Motor vehicles Total RMB 000 RMB 000 RMB 000 RMB 000 Year ended 31 December 2012 Cost At beginning and end of year 19,000 1,646 4,327 24,973 Accumulated depreciation At beginning of year 11, ,092 16,636 Charge for the year ,206 At end of year 12, ,134 17,842 Net book amount At end of year 6, ,131 At beginning of year 7,054 1, ,337 The property, plant and equipment of the Group were stated at historical cost. 240 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

170 11 11 PROPERTY, PLANT AND EQUIPMENT (continued) Company (continued) Depreciation charge was capitalised or expensed in the following categories: RMB 000 RMB 000 Cost of goods sold 831, ,991 Administrative expenses 141, ,254 Distribution costs 16,623 14,435 Construction in progress 5,382 19, , ,004 The Group s buildings are mainly situated in the mainland China. 32(a) As at 31 December 2013, certain bank borrowings were secured by the property, plant and equipment (Notes 32(a))as follows: RMB 000 RMB 000 Net book value Buildings 1,426,288 1,444, ,103, ,879,000 As at 31 December 2013, the Group was still in the progress of obtaining title certificates of buildings with a net book value of RMB278,103,000 (2012: RMB619,879,000)

171 12 12 INVESTMENT PROPERTIES Group RMB 000 RMB 000 At fair value Opening balance at 1 January 2,099,314 2,030,986 (d) Transfer from property, plant and equipment (d) 25,848 22,539 Net gain from fair value adjustment 56, ,332 Transfer to property, plant and equipment (35,494) Disposals (28,954) (20,049) Closing balance at 31 December 2,153,150 2,099,314 (a) (a) Amounts recognised in profit and loss for investment properties were as follows: RMB 000 RMB 000 Rental income 196, ,621 Direct operating expenses from properties that generated rental income (46,462) (52,885) Direct operating expenses from properties that did not generate rental income (9,144) (3,629) 140, ,107 As at 31 December 2013, the Group had no unprovided contractual obligations for future repairs and maintenance (2012: Nil) 242 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

172 12 (b) 881,372, ,700, ,242, ,956,000 31,035, INVESTMENT PROPERTIES (continued) (b) Investment properties pledged as security As at 31 December 2013, certain bank borrowings were secured by the investment properties of the Guangdong International Building Industrial Co., Ltd. ( GIB Company ) at the fair value of approximately RMB881,372,000 (2012: RMB857,700,000). Certain bank borrowings were secured by the investment properties of China National Aero-Technology Beijing Company Limited ( Beijing Company ) at the fair value of approximately RMB288,242,000 (2012: RMB283,956,000). Certain bank borrowings were secured by the investment properties of Beijing Zhonghang Rixin Management and Investment Company Limited ( Beijing Ruixin ) at the fair value of approximately RMB31,035,000 (2012: Nil). GIB Company, Beijing Company and Beijing Ruixin are subsidiaries of the Group. Details of the secured borrowings are in Note 32. (c) (c) Leasing arrangements Certain investment properties have been leased to tenants under long-term operating leases with rentals payable monthly. Minimum lease receivables under non-cancellable operating leases of investment properties not recognised in the financial statements are as follows: RMB 000 RMB 000 Not later than one year 213, ,461 Later than one year and not later than five years 472, ,305 Later than five years 286, , , ,751 The investment properties of the Group are situated in the PRC

173 12 (d) 14,075,000 15,708,000 25,848,000 22,539,000 8,830,000 5,123, INVESTMENT PROPERTIES (continued) (d) In 2013, owner-occupied property of buildings with net book values of RMB14,075,000 (2012: RMB15,708,000) were transferred to investment properties. As at the date of transfer, the fair value of these investment properties amounted to RMB25,848,000 (2012: RMB22,539,000). The difference between the fair value and net book value, net of deferred tax liability at the transfer date amounting to RMB8,830,000 (2012: RMB5,123,000), was recorded in other comprehensive income. (e) (e) Fair values of investment properties An independent valuation of the Group s investment properties has been performed by valuer, China United Assets Appraisal Company Limited, to determine the fair value of the investment properties as at 31 December 2013 and The revaluation gain is included in fair value gain on investment properties. The following table analyses the investment properties carried at fair value, by valuation method. The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). 244 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

174 12 (e) 12 INVESTMENT PROPERTIES (continued) (e) Fair values of investment properties (continued) Fair value measurements at 31 December 2013 using Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) (RMB 000) (RMB 000) (RMB 000) Recurring fair value measurements Investment properties Office buildings PRC 301,464 1,337,472 Manufacturing sites PRC 462,755 Dwelling house PRC 18,261 33,198 The Group s policy is to recognise transfer into and transfer out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. There were no transfers between Level 1, 2 and 3 during the year

175 12 (e) 12 INVESTMENT PROPERTIES (continued) (e) Fair values of investment properties (continued) Fair value measurements using significant unobservable inputs (Level 3) Office buildings Manufacturing sites Dwelling house (RMB 000) (RMB 000) (RMB 000) Opening balance 1,309, ,376 32,459 Net gains from fair value adjustment 28,368 10, Closing balance 1,337, ,755 33,198 Total gains for the year included in profit for assets held at the end of the year, under fair value gain on investment properties 28,368 10, Change in unrealised gains for the year included in profit for assets held at the end of the year 28,368 10, Valuation processes of the Group The Group s investment properties were valued at 31 December 2013 by independent professionally qualified valuers who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investments properties valued. For all investment properties, their current use equates to the highest and best use. The Group s finance department includes a team that reviews the valuations performed by the independent valuers for financial reporting purposes. This team reports directly to the board of directors. As at 31 December 2013, the fair values of the properties have been determined by China United Assets Appraisal Company Limited. 246 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

176 12 (e) 12 INVESTMENT PROPERTIES (continued) (e) Fair values of investment properties (continued) Valuation techniques For investment properties which fair value hierarchy level is Level 2, the valuation was determined using the sale comparison approach. Sales prices of comparable properties in close proximity are adjusted for differences in key attributes such as property size. The most significant input into this valuation approach is price per square meter. For investment properties which fair value hierarchy level is Level 3, the valuations were determined using discounted cash flow ( DCF ) projections based on significant unobservable inputs. These input include: Future rental cash inflows Based on the actual location, type and quality of the properties and supported by the terms of any existence lease, other contracts and external evidence such as current market rents for similar properties; Discount rates Reflecting current market assessment of the uncertainty in the amount and timing of cash flows; Estimated vacancy rates Based on current and expected future market conditions after expiry of any current lease; Maintenance costs Including necessary investments to maintain functionality of the property for its expected useful life;

177 12 (e) 12 INVESTMENT PROPERTIES (continued) (e) Fair values of investment properties (continued) Capitalisation rates Based on actual location, size and quality of the properties and taking into account market data at the valuation date; Terminal value Taking into account assumptions regarding maintenance costs, vacancy rates and market rents. There were no changes to the valuation techniques during the year CONSTRUCTION-IN-PROGRESS Group RMB 000 RMB 000 At beginning of year 1,252,051 1,128, Transfer from property, plant and equipment (Note 11) 5,085 (a) Additions (Note (a)) 1,098, , Transfer to property, plant and equipment (Note 11) (476,186) (452,745) Transfer to other non-current assets (890) 1,879,385 1,252,051 (a) (a) Included in the additions were mainly costs incurred for the construction of production plants, modernisation and renovation projects. (b) 53,904,000 10,457, %5.66% (b) Bank loan interest capitalised-in-the construction in progress in 2013 amounting to RMB53,904,000 (2012: RMB10,457,000) and the capitalised interest rate was 6.73% (2012: 5.66%). 248 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

178 13 (c) 16,361, CONSTRUCTION-IN-PROGRESS (continued) (c) As at 31 December 2013, no bank borrowings were secured by the construction-in-progress (2012: RMB16,361,000). Details of the secured borrowings are in Note INVESTMENTS IN SUBSIDIARIES Company RMB 000 RMB 000 Investments at cost: shares in listed companies 432, ,838 unlisted equity interests 4,152,990 4,082,814 4,585,828 4,515,652 3,829,647,000 3,005,864,000 As at 31 December 2013, the market value of shares in listed companies approximated RMB3,829,647,000 (2012: RMB3,005,864,000). As at 31 December 2013, the Company had equity interests in the following major subsidiaries which, in the opinion of the directors, materially contributed to the net results of the Group or constituted a material portion of the assets or liabilities of the Group

179 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Name of subsidiary Particulars of issued share capital/ Registered capital Type of legal entity Country of incorporation and Nature of business Proportion of ordinary shares directly held by the Company Proportion of ordinary shares held by the Group Proportion of ordinary shares directly held by noncontrolling interests Tianma 574,237, ,237,500 Ordinary shares of RMB1 each Joint stock company (listed on the Shenzhen Stock Exchange) Shenzhen, PRC Manufacture and sales of liquid crystal displays 45.62% 45.62% 54.38% Shennan Circuit Co., Ltd. ( SCC ) 139,800,000 RMB139,800,000 Limited Liability company Shenzhen, PRC Manufacture and sales of printed circuit boards 93% 93% 7% Fiyta 392,767, ,767,870 Ordinary shares of RMB1 each Joint stock company (listed on the Shenzhen Stock Exchange) Shenzhen, PRC Manufacture and sales of watches and clocks 41.49% 41.49% 58.51% Shenzhen AVIC Resources Co., Ltd. ( AVIC Resources ) 500,000,000 RMB500,000,000 Wholly owned company Shenzhen, PRC Investment and development of agriculture-related resources business 100% 100% GIB Company 416,429,288 RMB416,429,288 Limited liability company Guangzhou, PRC Hotel and property operations 75% 75% 25% 250 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

180 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Name of subsidiary Particulars of issued share capital/ Registered capital Type of legal entity Country of incorporation and Nature of business Proportion of ordinary shares directly held by the Company Proportion of ordinary shares held by the Group Proportion of ordinary shares directly held by noncontrolling interests Shenzhen Aero Fasteners AFM Company Limited ( AFM Company ) 120,000,000 RMB120,000,000 Wholly owned company Shenzhen, PRC Manufacture and sales of standard parts 100% 100% Beijing Company 800,000,000 RMB800,000,000 Wholly owned company Beijing, PRC Trading activities and shipbuilding 100% 100% China National Aero-Technology Trade and Economy Development Company Limited ( TED Company ) 60,000,000 RMB60,000,000 Limited liability company Beijing, PRC Trading of electronic and computer equipment and tender management 97.5% 97.5% 2.5% China National Aero-Technology Guangzhou Company Limited ( Guangzhou Company ) 300,000,000 RMB300,000,000 Wholly owned company Guangzhou, PRC Trading and logistics of machinery vehicles, medical facilities and bitumen engineering 100% 100% China National Aero-Technology Xiamen Corporation ( Xiamen Company ) 550,000,000 RMB550,000,000 Wholly owned company Xiamen, PRC Trading and logistics of shipping, stone materials 100% 100%

181 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Name of subsidiary Particulars of issued share capital/ Registered capital Type of legal entity Country of incorporation and Nature of business Proportion of ordinary shares directly held by the Company Proportion of ordinary shares held by the Group Proportion of ordinary shares directly held by noncontrolling interests China National Aero-Technology Engineering Company Limited ( Engineering Company ) 400,000,000 RMB400,000,000 Wholly owned company Beijing, PRC Construction activities, project management, Real estate development, construction material trade and rendering of labour service 100% 100% Beijing AVIC Ruixin Investment Management Company Limited ( Beijing Ruixin ) 60,000,000 RMB60,000,000 Limited liability company Beijing, PRC Real estate development 90% 90% 10% Xi an AVIC Raise XiKong Real Estate Company Limited ( Xi an Raise ) 30,000,000 RMB30,000,000 Limited liability company Xi an, PRC Real estate development 51% 51% 49% Chengdu AVIC Raise Real Estate Company Limited ( Chengdu Raise ) 120,000,000 RMB120,000,000 Limited liability company Chengdu, PRC Real estate development 60% 60% 40% AVIC International Renewable Energy Development Co., Ltd ( RED Company ) 100,000,000 RMB100,000,000 Wholly owned company Beijing, PRC Trading of renewable energy equipment 100% 100% 252 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

182 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Name of subsidiary Particulars of issued share capital/ Registered capital Type of legal entity Country of incorporation and Nature of business Proportion of ordinary shares directly held by the Company Proportion of ordinary shares held by the Group Proportion of ordinary shares directly held by noncontrolling interests Shanghai Tianma Microelectronics Co., Ltd. ( Shanghai Tianma ) 1,030,000,000 RMB1,030,000,000 Limited liability company Shanghai, PRC Manufacture and sales of liquid crystal displays 21% 51% 49% Qinghai CATIC Resources Co., Ltd. ( Qinghai CATIC Resources ) 550,000,000 RMB550,000,000 Wholly owned company Delingha, PRC Potassium resources business 100% Chengdu Tianma 1,200,000,000 RMB1,200,000,000 Limited liability company Chengdu, PRC Manufacture and sales of liquid crystal displays 30% 70% AVIC International Maritime Holdings Limited ( AVIC Maritime ) 285,576, ,576,000 Ordinary shares and no par value Joint stock company (listed on Singapore Exchange Ltd.) Singapore Ship building 73.87% 26.13%

183 14 14 INVESTMENTS IN SUBSIDIARIES (continued) The non-controlling interests comprised as follows: Group RMB 000 RMB 000 (Restated) Tianma 2,367,199 2,204,962 Fiyta 1,032, ,024 AVIC Resources 227, ,731 Guangzhou Company 204, ,166 TED Company 109,966 79,308 Beijing Company 86,721 16,512 SCC 84,839 76,359 Xi an Raise 83,255 84,166 Chengdu Raise 82,215 45,658 GIB Company 61,746 70,720 RED Company 43,263 61,222 Beijing Ruixin 8,695 10,584 Xiamen Company 7,822 4,168 Engineering Company Wuxi AVIC Raise Real Estate Company Limited ( Wuxi Raise ) 20,928 4,399,803 3,989, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

184 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Summarised balance sheet Set out below are the summarised financial information of each subsidiary that has non-controlling interests that are material to the Group. Tianma RMB 000 RMB 000 Current Assets 2,814,162 2,191,280 Liabilities (2,853,270) (2,536,634) Total current net liabilities (39,108) (345,354) Non-current Assets 5,175,937 5,621,424 Liabilities (1,840,765) (2,212,945) Total non-current net assets 3,335,172 3,408,479 Net assets 3,296,064 3,063,125 Summarised statement of comprehensive income Tianma RMB 000 RMB 000 Revenue 4,411,602 4,247,596 Profit before income tax 312, ,794 Income tax charge (32,230) (12,343) Other comprehensive income 9,507 4,765 Total comprehensive income 289, ,216 Total comprehensive income allocated to non-controlling interests 225, ,123 Dividends paid to non-controlling interests 43,

185 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Summarised statement of cash flows Tianma RMB 000 RMB 000 Cash flows from operating activities Cash generated from operations 1,572,946 1,032,154 Interests paid (139,522) (180,133) Income tax paid (11,737) (35,075) Net cash generated from operating activities 1,421, ,946 Net cash used in investing activities (248,355) (433,101) Net cash used in financing activities (674,218) (525,116) Net increase/(decrease) in cash and cash equivalents 499,114 (141,271) Cash, cash equivalents at beginning of the year 459, ,195 Exchange losses on cash and cash equivalents (3,561) (289) Cash and cash equivalents at end of the year 955, , AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

186 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Summarised balance sheet Fiyta RMB 000 RMB 000 Current Assets 2,677,251 2,494,571 Liabilities (1,445,929) (1,827,578) Total current net assets 1,231, ,993 Non-current Assets 926, ,441 Liabilities (579,904) (51,947) Total non-current net assets 346, ,494 Net assets 1,577,530 1,475,487 Summarised statement of comprehensive income Fiyta RMB 000 RMB 000 Revenue 3,065,746 2,991,865 Profit before income tax 167, ,382 Income tax charge (25,455) (22,674) Other comprehensive income (1,091) 186 Total comprehensive income 141, ,894 Total comprehensive income allocated to non-controlling interests 84,753 83,248 Dividends paid to non-controlling interests 22,981 22,

187 14 14 INVESTMENTS IN SUBSIDIARIES (continued) Summarised statement of cash flows Fiyta RMB 000 RMB 000 Cash flows from operating activities Cash generated from operations 195, ,448 Interests paid (88,456) (100,017) Income tax paid (28,095) (44,584) Net cash generated from operating activities 79,047 45,847 Net cash used in investing activities (118,283) (115,540) Net cash generated from financing activities 7,031 29,895 Net decrease in cash and cash equivalents (32,205) (39,798) Cash, cash equivalents at beginning of the year 140, ,972 Exchange (losses)/gains on cash and cash equivalents (553) 247 Cash and cash equivalents at end of the year 107, , INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD The amounts recognised in the balance sheet are as follows: Group RMB 000 RMB 000 Associates 2,076,063 1,887,517 Joint ventures 2,310,629 2,410,774 At 31 December 4,386,692 4,298, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

188 15 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) The amounts recognised in the income statement are as follows: Group RMB 000 RMB 000 Associates 245, ,873 Joint ventures 280, ,172 At 31 December 526, ,045 (a) (a) Investment in associates Group RMB 000 RMB 000 At beginning of year 1,887,517 1,521,992 Capital injection 8,890 73,730 Transfer from prepayment 40,300 Transfer from subsidiaries 248,923 Dividends received (34,464) (127,079) 19 Transfer to available-for-sale financial assets (Note 19) (15,000) 30 Share of reserve of an associate arising from its transactions with noncontrolling interests (Note 30) (17,299) (5,196) Share of currency translation differences 1,241 9,268 Disposals (6,294) 30 Share of an associate s other comprehensive income (Note 30) (325) Share of profit of associates 245, ,873 At end of year 2,076,063 1,887,

189 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Set out below are the associates of the Group as at 31 December 2013, which, in the opinion of the directors, are material to the Group. The associates as listed below have share capital consisting solely of ordinary shares, which are held directly by the Group; the country of incorporation or registration is also their principal place of business. Nature of material investment in associates in 2013 and 2012: Name of entity Place of business/ country of incorporation Type of legal entity % of ownership interest Nature of the relationship Measurement method Wuhan Tianma PRC Limited liability company 10% 1 Note 1 Equity AVIC Real Estate PRC Joint stock company (listed on the Shenzhen Stock Exchange) 22.35% 2 Note 2 Equity KHD Humboldt Wedag International AG KHD KHD Humboldt Wedag International AG ( KHD ) Germany Joint stock company (listed on the Frankfurt Stock Exchange) 20% 3 Note 3 Equity 1 20% 2 3 KHD KHD EPC Note 1: Wuhan Tianma is principally engaged in manufacturing and sale of liquid crystal displays ( LCD ) and liquid crystal modules ( LCM ). Wuhan Tianma is a limited liability company incorporated in the People s Republic of China (the PRC ). Although the Group holds less than 20% of the equity interest in Wuhan Tianma, the Group exercises significant influence by virtue of its contractual right to appoint two directors to the board of directors of Wuhan Tianma and has the power to participate in the financial and operating policy decisions of Wuhan Tianma. Consequently, this investment has been classified as an associate. Note 2: AVIC Real Estate provides real estate development and property management services. It develops its business in China s southwest, northwest, centralsouth, the Yangtze River Delta and Huan Bohai region. Note 3: KHD is an equipment supplier and service company for cement industry. Investment in KHD is strategic for the Group s expanding the cement engineering project contracting ( EPC ) services in the European and the America market and provides an access to overseas cement businesses. 260 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

190 15 (a) 904,963, ,397,000 KHD 538,963, ,782, INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) As at 31 December 2013, the fair value of the Group s interest in AVIC Real Estate Co., Ltd, which is listed on the Shenzhen Stock Exchange, was RMB904,963,000 (2012: RMB997,397,000). As at 31 December 2013, the fair value of the Group s interest in KHD, which is listed on the Frankfurt Stock Exchange, was RMB538,963,000 (2012: RMB387,782,000). Other companies are private company and there is no quoted market price available for their shares. There are no contingent liabilities relating to the Group s interest in the associates. Summarised financial information for associates Set out below is the summarised financial information of Wuhan Tianma which is accounted for using the equity method

191 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised balance sheet Wuhan Tianma RMB 000 RMB 000 Current Cash and cash equivalents 199, ,194 Other current assets (excluding cash) 2,390,440 1,470,560 Total current assets 2,589,640 1,657,754 Financial liabilities (excluding trade payables) 399,980 30,910 Other current liabilities (including trade payables) 1,642,406 1,373,998 Total current Liabilities 2,042,386 1,404,908 Non-current Assets 3,342,082 3,721,455 Financial liabilities 2,210,020 2,400,000 Other non-current liabilities 103, ,690 Total non-current liabilities 2,313,143 2,540, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

192 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised statement of comprehensive income Wuhan Tianma RMB 000 RMB 000 Revenue 5,118,364 2,462,098 Depreciation and amortisation 14,082 8,297 Finance income 3,277 4,292 Finance expense (164,235) (168,810) Profit/(loss) before income tax 121,185 (144,767) Income tax (charge)/credit (47,493) 39,558 Profit/(loss) for the year 73,692 (105,209) Other comprehensive income Total comprehensive income 73,692 (105,209) Dividends received from Wuhan Tianma Reconciliation of the summarised financial information presented to the carrying amount of the Group s interest in Wuhan Tianma: Wuhan Tianma RMB 000 RMB 000 Net assets at beginning of the year 1,433,611 1,427,710 Profit/(Loss) for the year 73,692 (105,209) Capital injection 68, ,110 Closing net assets 1,576,193 1,433,611 10% 10% Interest in Wuhan Tianma (2013: 10%; 2012: 10%) 157, ,361 Carrying value 157, ,

193 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Set out below is the summarised financial information of AVIC Real Estate which is accounted for using the equity method. Summarised balance sheet AVIC Real Estate RMB 000 RMB 000 Current Cash and cash equivalents 1,393,211 1,436,049 Other current assets (excluding cash) 11,326,179 8,309,031 Total current assets 12,719,390 9,745,080 Financial liabilities (excluding trade payables) 1,964,700 1,840,000 Other current liabilities (including trade payables) 6,209,421 5,485,932 Total current Liabilities 8,174,121 7,325,932 Non-current Assets 4,998,657 4,681,064 Financial liabilities 4,923,127 2,593,621 Other non-current liabilities 508, ,031 Total non-current liabilities 5,431,163 3,064, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

194 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised statement of comprehensive income AVIC Real Estate RMB 000 RMB 000 Revenue 6,224,574 4,073,868 Depreciation and amortisation 28,007 19,433 Finance income 6,654 7,119 Finance expense (271,329) (220,939) Profit before income tax 740, ,886 Income tax charge (241,570) (242,390) Profit for the year 499, ,496 Other comprehensive loss (1,452) (111) Total comprehensive income 497, ,385 Dividends received from AVIC Real Estate 14,909 16,

195 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised statement of comprehensive income (continued) Reconciliation of the summarised financial information presented to the carrying amount of the Group s interest in AVIC Real Estate: RMB 000 RMB 000 Net assets at beginning of the year 4,035,560 3,399,817 Profit for the year 499, ,496 Other comprehensive loss (1,452) (111) Capital injection 245, ,777 Transaction with non-controlling interests (480,764) (129,776) Special fund 1,687 2,377 Dividends (187,194) (75,020) Closing net assets 4,112,763 4,035,560 Less: non-controlling interests (871,197) (1,115,513) Net assets attributable to owners of AVIC Real Estate 3,241,566 2,920,047 Interest in AVIC Real Estate 22.35% (2013: 22.35%; 2012: 22.35%) 22.35% 724, ,631 Carrying value 724, , AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

196 15 (a) KHD 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Set out below is the summarised financial information of KHD which is accounted for using the equity method. Summarised balance sheet KHD KHD RMB 000 RMB 000 Current Cash and cash equivalents 1,920,932 2,350,845 Other current assets (excluding cash) 1,469,856 1,127,758 Total current assets 3,390,788 3,478,603 Total current liabilities 1,349,760 1,348,333 Non-current Assets 129, ,259 Total non-current liabilities 297, ,

197 15 (a) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised statement of comprehensive income KHD KHD RMB 000 RMB 000 Revenue 2,088,916 1,759,630 Depreciation and amortisation 8,133 8,584 Finance income 22,527 39,371 Finance expense (12,092) (19,891) Profit before income tax 20,293 72,455 Income tax charge (14,134) (14,544) Profit for the year 6,159 57,911 Other comprehensive income (2,646) (7,797) Total comprehensive income 3,513 50,114 KHD Dividends received from KHD 7,487 9, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

198 15 (a) KHD 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (a) Investment in associates (continued) Summarised statement of comprehensive income (continued) Reconciliation of the summarised financial information presented to the carrying amount of the Group s interest in KHD: RMB 000 RMB 000 Net assets at beginning of the year 1,907,143 1,906,205 Profit for the year 6,159 57,911 Other comprehensive income (2,646) (7,797) Transaction with non-controlling interests (321) (346) Dividends (37,550) (48,831) Closing net assets 1,872,785 1,907,142 Less: non-controlling interests (865) (25) KHD Net assets attributable to owners of KHD 1,871,920 1,907,117 KHD 20% 20% Interest in KHD (2013: 20%; 2012: 20%) 374, ,423 Goodwill 6,860 6,860 Carrying value 381, ,

199 15 (b) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures Group RMB 000 RMB 000 At beginning of year 2,410,774 2,216,165 Capital injection 25,904 19,204 Transfer from available-for-sale financial assets Acquisition of a subsidiary (Note 50) 3,232 Dividends received (339,052) (168,541) Share of currency translation differences 1,175 (23) Transfer to subsidiaries (2,309) (882) 47 Disposals (Note 47) (101,732) (i) Increase in the share of net assets of AVIC Vanke (i) 31,767 Elimination of unrealised profit from downstream transaction (961) Share of profit of joint ventures 280, ,172 At end of year 2,310,629 2,410,774 (i) 60% 40% (i) The Group originally held 60% equity interests in AVIC Vanke and is able to nominate 4 directors in the board of directors. Vanke Enterprise Company Limited ( Vanke ), the other shareholder, originally held 40% equity interest and is entitled to nominate 3 directors in the board of directors. According to the article of association of AVIC Vanke, its financial and operating policies shall be approved by shareholders representing at least two thirds of the voting rights. Therefore, AVIC Vanke is jointly controlled by the Group and Vanke, and is accounted for as a joint venture by the Group. 270 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

200 15 (b) 600,000, ,000,000 3,820,030, % 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures (continued) On 12 April 2013, AVIC International Holding Corporation ( ) ( AVIC International ) and Vanke increased the investment capital to AVIC Vanke with RMB600,000,000 and RMB400,000,000, respectively (the Capital Injection ). After the Capital Injection, the AVIC Vanke had an enlarged registered capital of RMB3,820,030,000, and its equity interest was owned as to 47.12% by the Group, which allowed the Group to nominate 2 directors in the Board of Directors, followed by 3 nominations for Vanke and 2 nominations for AVCI International. Pursuant to the new articles of association of AVIC Vanke, its financial and operating policies shall be approved by shareholders representing at least two thirds of the voting rights. Therefore, AVIC Vanke is jointly controlled by the Group, AVIC International and Vanke, and continues to be accounted for as a joint venture by the Group. The dilution gain is calculated as follows: 2013 RMB 000 Net assets attributable to owners of AVIC Vanke before the Capital Injection 3,411,744 The Group s equity interests in AVIC Vanke before the Capital Injection 60% 2,047,046 Net assets attributable to owners of AVIC Vanke after the Capital Injection 4,411,744 The Group s equity interests in AVIC Vanke after the Capital Injection 47.12% 2,078,813 Dilution gain 31,

201 15 (b) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures (continued) Set out below is the joint venture of the Group as at 31 December 2013, which, in the opinion of the directors, is material to the Group. The joint venture as listed below has share capital consisting solely of ordinary shares, which is held directly by the Group; the country of incorporation or registration is also its principal place of business. Nature material of investment in joint venture in 2013 and 2012: Name of entity Place of business/ country of incorporation Type of legal entity % of ownership interest Nature of the relationship Measurement method AVIC Vanke PRC Contractual jointly controlled entities 47.12% 60% 1 Note 1 Equity 1 Note 1: AVIC Vanke is a limited liability company principally engaged in real estate development and operation, land development, construction, hotel and property management, investment and consultation services etc. All joint ventures are private companies and there is no quoted market price available for their shares. The Group has the following commitments relating to its joint ventures. As at 31 December RMB 000 RMB 000 Guarantees in respect of mortgage facilities for certain purchasers 60,879 54, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

202 15 (b) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures (continued) There are no contingent liabilities relating to the Group s interest in the joint venture. Set out below is the summarised financial information of AVIC Vanke which is accounted for using the equity method. Summarised balance sheet RMB 000 RMB 000 Current Cash and cash equivalents 2,218,226 1,528,296 Other current assets (excluding cash) 16,476,865 5,620,798 Total current assets 18,695,091 7,149,094 Financial liabilities (excluding trade payables) 2,377,960 1,852,000 Other current liabilities (including trade payables) 9,554,158 6,207,142 Total current Liabilities 11,932,118 8,059,142 Non-current Assets 253,165 6,600,603 Financial liabilities 1,250, ,800 Other non-current liabilities 3,433 6,463 Total non-current liabilities 1,253, ,

203 15 (b) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures (continued) Summarised statement of comprehensive income RMB 000 RMB 000 Revenue 6,770,615 6,081,334 Depreciation and amortisation 762 1,439 Finance income 35, ,797 Finance expense (18,772) (193,187) Profit before income tax 1,195,580 1,433,578 Income tax charge (386,141) (553,355) Profit for the year 809, ,223 Other comprehensive income Total comprehensive income 809, ,223 Dividends received from AVIC Vanke 299, ,000 Reconciliation of the summarised financial information presented to the carrying amount of the Group s interest in AVIC Vanke: 274 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

204 15 (b) 15 INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (continued) (b) Investments in joint ventures (continued) Summarised statement of comprehensive income (Continued) RMB 000 RMB 000 Net assets at beginning of the year 4,795,292 4,604,910 Profit for the year 809, ,223 Repayment of capital to owners of subsidiaries (17,400) (360,084) Capital injection 1,000,000 Dividends (824,626) (329,757) Closing net assets 5,762,705 4,795,292 Less: non-controlling interests (920,937) (1,001,549) Net assets attributable to owners of AVIC Vanke 4,841,768 3,793,743 Interest in joint venture 47.12% (2013: 47.12%; 2012: 60%) 60% 2,281,441 2,276,246 Carrying value 2,281,441 2,276, INVESTMENTS IN ASSOCIATES COMPANY Company RMB 000 RMB 000 Investments at cost: shares in listed companies 288, ,087 unlisted equity interests 10,111 10, , , ,963, ,397,000 As at 31 December 2013, the market value of shares in listed associates approximated RMB904,963,000 (2012: RMB997,397,000)

205 16 16 INVESTMENTS IN ASSOCIATES COMPANY (continued) As at 31 December 2013, the Company had direct interests in the following associates: Name of associate Date of incorporation/ establishment Attributable equity interest Type of legal entity Principal activities/ place of incorporation and operation CASTIC-SMP Machinery Corporation Limited 15 November % 50% Limited liability company Manufacture and sales of dry cleaning machines, PRC Shenzhen Shenrong Engineering Plastics Co., Ltd. Shenzhen CAERO Digital Display Inc. ( CAERO ) 17 January February % 30% Limited liability company 39.51% 39.51% Limited liability company Manufacture and sales of plastic casings, PRC Research and development and sales of digital displays, PRC AVIC Real Estate 29 May % 22.35% Joint Stock Company (Listed on the Shenzhen Stock Exchange) Property developing and construction, investment, retailing and hotel operation, PRC 276 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

206 17 17 INVESTMENTS IN JOINT VENTURES COMPANY Company RMB 000 RMB 000 Investments at cost: At beginning of year 2,385,857 Acquisition 2,385,857 Disposals (14,448) At end of year 2,371,409 2,385,857 As at 31 December 2013, the Company had direct interests in the following joint venture: Name of joint venture Date of incorporation/ establishment Attributable equity interest Registered Capital Type of legal entity Principal activities/ place of incorporation and operation AVIC Vanke 15 March % 60% 3,820,030,000 RMB3,820,030,000 Contractual jointly controlled entities Property development and construction, PRC

207 18 18 FINANCIAL INSTRUMENTS BY CATEGORY The Group: At 31 December 2013 Assets as per consolidated balance sheet Loans and receivables Derivative financial instruments Availablefor-sale financial assets Total RMB 000 RMB 000 RMB 000 RMB 000 Available-for-sale financial assets (Note 19) 291, ,090 Derivative financial instruments (Note 26) 5,405 5,405 Trade and other receivables excluding non-financial assets 7,146,256 7,146, Pledged bank deposits (Note 27) 641, ,426 Cash and cash equivalents (Note 28) 28 4,802,843 4,802,843 Total 12,590,525 5, ,090 12,887,020 Liabilities as per consolidated balance sheet Other financial liabilities at amortised cost 32 Borrowings (Note 32) 18,933,887 Trade and other payables excluding non-financial liabilities 7,855, Other non-current liabilities (Note 35) 956,152 Total 27,745, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

208 18 18 FINANCIAL INSTRUMENTS BY CATEGORY (continued) The Group: (continued) At 31 December 2012 Assets as per consolidated balance sheet Loans and receivables Derivative financial instruments Availablefor-sale financial assets Total RMB 000 RMB 000 RMB 000 RMB 000 Available-for-sale financial assets 259, ,819 Derivative financial instruments 3,110 3,110 Trade and other receivables excluding non-financial assets 7,658,804 7,658,804 Pledged bank deposits 510, ,563 Cash and cash equivalents 4,038,225 4,038,225 Total 12,207,592 3, ,819 12,470,521 Liabilities as per consolidated balance sheet Other financial liabilities at amortised cost RMB 000 Borrowings 14,606,566 Trade and other payables excluding non-financial liabilities 7,143,879 Other non-current liabilities 1,202,424 Total 22,952,

209 18 18 FINANCIAL INSTRUMENTS BY CATEGORY (continued) The Company: At 31 December 2013 Assets as per balance sheet Loans and receivables Availablefor-sale financial assets Total RMB 000 RMB 000 RMB Available-for-sale financial assets (Note 19) 15,224 15,224 Other receivables and dividend receivables (Note 24) 797, ,762 Cash and cash equivalents (Note 28) 206, ,467 Total 1,004,229 15,224 1,019,453 Liabilities as per balance sheet Other financial liabilities at amortised cost RMB Borrowings (Note 32) 2,048,000 Trade and other payables excluding non-financial liabilities 118, Other non-current liabilities (Note 35) 800,000 Total 2,966, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

210 18 18 FINANCIAL INSTRUMENTS BY CATEGORY (continued) The Company: (continued) At 31 December 2012 Assets as per balance sheet Loans and receivables Availablefor-sale financial assets Total RMB 000 RMB 000 RMB 000 Available-for-sale financial assets 1,400 1,400 Other receivables and dividend receivables 666, ,609 Cash and cash equivalents 81,117 81,117 Total 747,726 1, ,126 Liabilities as per balance sheet Other financial liabilities at amortised cost RMB 000 Borrowings 1,800,000 Trade and other payables excluding non-financial liabilities 278,396 Other non-current liabilities 1,050,000 Total 3,128,

211 19 19 AVAILABLE-FOR-SALE FINANCIAL ASSETS Group Company RMB 000 RMB 000 RMB 000 RMB 000 A Investments in listed A shares of companies listed on Shenzhen or Shanghai Stock Exchange 26,958 23,449 Investments in shares of unlisted companies 264, ,370 15,224 1, , ,819 15,224 1,400 All available-for-sale financial assets are all denominated in RMB. The movements of available-for-sale financial assets during the year are as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 At beginning of year 259, ,046 1,400 1, Transfer to investments accounted for using the equity method (640) Transfer from investments accounted for using the equity method (Note 15) 15,000 Additions 14,891 85,633 13,824 47(d) Disposals (Note 47(d)) (9,484) (30,403) Fair value change charged to equity, gross of tax 10, At end of year 291, ,819 15,224 1, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

212 20 20 DEFERRED INCOME TAX Group Company RMB 000 RMB 000 RMB 000 RMB 000 (Restated) Deferred tax assets: to be recovered after more than 12 months (306,126) (249,871) to be recovered within 12 months (5,509) (14,928) (311,635) (264,799) Deferred tax liabilities: to be settled after more than 12 months 624, ,245 Deferred tax liabilities net 313, ,446 The net movements on the deferred income tax account are as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 (Restated) At beginning of year 274, , Credited to income statement (Note 43) (37,822) (22,635) Tax charged directly to other comprehensive income 6,174 1,349 Disposals of subsidiaries 3, Acquisition of subsidiaries (Note 50) 70,327 (104) At end of year 313, , The income tax charge is detailed in Note

213 20 20 DEFERRED INCOME TAX (continued) The movements in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, are as follows: Deferred tax assets: Provision for impairment losses on trade and other receivables Provision for inventory obsolescence Provisions Tax losses Government grants Group Unrealised profits Salaries payable and retirement and other supplemental benefit obligations Accrued expenses Interest payable Others RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January 2012, as restated (37,863) (27,552) (2,070) (34,694) (14,899) (30,486) (17,822) (27,369) (3,684) (38,644) (235,083) (Credited)/charged to the income statement (13,545) 7,202 (220) (31,520) (24,873) (21,517) (5,022) 22,996 1,518 23,716 (41,265) Tax credited directly to other comprehensive income (405) (405) Acquisition of a subsidiary (104) (104) Disposals of subsidiaries 6,989 2,290 2,166 11,445 Total At 31 December 2012 (44,523) (20,350) (66,214) (39,772) (52,003) (23,249) (4,373) (14,928) (265,412) (Credited)/charged to the income statement (23,163) (14,532) 4,872 1,015 (17,473) 292 (1,136) 1,752 (48,373) Tax credited directly to other comprehensive income Acquisition of subsidiaries (Note 50) (243) (243) At 31 December 2013 (67,929) (34,882) (61,342) (38,757) (69,476) (22,442) (5,509) (13,176) (313,513) 284 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

214 20 20 DEFERRED INCOME TAX (continued) Deferred tax liabilities: Accelerated tax depreciation Fair value gains of available-forsale financial assets Fair value gain on assets acquired from business acquisition Group Fair value change on investment properties Transfer of owneroccupied property to investment properties Unrecognised financial cost Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 At 1 January 2012, as restated 128 1, , ,303 34, ,514 (Credited)/charged to income statement (128) 580 (5,515) 23,693 18,630 Tax charged directly to other comprehensive income 46 1,708 1,754 Disposals of subsidiaries (8,040) (8,040) At 31 December , , ,996 36, ,858 Credited/(charged) to income statement (3,792) (5,117) 15,792 3,668 10,551 Tax charged directly to other comprehensive income 2,716 2,943 5, Acquisition of subsidiaries (Note 50) 70,570 70,570 At 31 December , , ,788 39,235 4, ,638 The potential deferred tax assets not recognised in the accounts were related to: RMB 000 RMB 000 Tax losses carried forward 1,691,242 1,424,

215 20 20 DEFERRED INCOME TAX (continued) Deferred tax liabilities: (continued) According to the new Corporate Income Tax Law, tax losses of the PRC companies can be carried forward to offset future assessable profit for a period of 5 years. Deferred income tax assets had not been recognised as it is not probable that taxable profit will be made available to utilise the deductible tax losses and temporary differences in the foreseeable future. 1,878, ,000 As at 31 December 2013, deferred tax assets and deferred tax liabilities balances of RMB1,878,000 (2012: RMB613,000) were related to the same company and were offset against each other. The expiry date of deferred tax assets not accounted for in respect of tax losses carried forward is as follows: RMB 000 RMB 000 Expire within 1 year 336,743 87,461 Expire in 1 2 years 223, ,743 Expire in 2 3 years 487, ,216 Expire in 3 4 years 135, ,923 Expire in 4 5 years 508, ,082 1,691,242 1,424, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

216 21 21 OTHER NON-CURRENT ASSETS Group Company RMB 000 RMB 000 RMB 000 RMB 000 (a) Prepayment for acquisition a subsidiary (a) 1,876,460 40,000 Prepayment for the establishment of subsidiaries 6, ,756 Prepayment for purchase of equipments 97, ,850 Prepaid for advertisement fee 15,296 6,801 Others 50,904 66,509 2,046, ,916 40,000 (a) AVIC International Engineering Holdings Pte. Ltd.AVIC Engineering Europe Engineering Holdings Pte. Ltd. Europe Project Management Pte. Ltd. Europe Technology Investment Pte. Ltd. KHD KHD (a) On 11 October 2013, AVIC International Engineering Holdings Pte. Ltd. ( AVIC Engineering ), a indirectly wholly owned subsidiary of the Company, together with the Singapore Companies (essentially affiliated entities of the Company, named Europe Engineering Holdings Pte. Ltd., Europe Project Management Pte. Ltd., Europe Technology Investment Pte. Ltd.) had decided to launch an offer to acquire shares of KHD from the then shareholders. The amount represent the prepayment for purchasing of KHD shares

217 22 22 INVENTORIES Group RMB 000 RMB 000 Inventories cost Raw materials 634, ,091 Work-in-progress 394, ,045 Finished goods 3,751,169 3,099,566 4,780,409 3,941,702 Less: provision for write-down of inventories Raw materials (50,786) (34,965) Work-in-progress (9,800) (6,122) Finished goods (104,953) (75,558) (165,539) (116,645) Inventories net 4,614,870 3,825,057 26,537,685,000 25,123,249,000 The cost of inventories recognised as expense and included in cost of sales amounted to RMB26,537,685,000 (2012: RMB25,123,249,000). 22,527,000 29,559,000 The Group had written-off provision of RMB22,527,000 in 2013 (2012: RMB29,559,000) that was made in prior years. The Group has sold all the related goods and the amount has been included in cost of sales in the income statement. 288 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

218 23 23 PROPERTIES UNDER DEVELOPMENT Group RMB 000 RMB 000 Properties under development expected to be completed: Within the normal operating cycle included under current assets 2,317,086 1,256,078 Balance comprises: Construction cost 1,839, ,373 Land use rights 395, ,460 Interest capitalised 82,490 30,245 2,317,086 1,256,078 Group RMB 000 RMB To be recovered within 12 months 590, To be recovered after more than 12 months 1,726,283 1,256,078 2,317,086 1,256, ,629, As at 31 December 2013, certain bank borrowings were secured by the properties under development of the Group with net book value totalling RMB320,629,000 (2012: Nil). Details of the secured borrowings are in Note % 10.8% The capitalisation rate used to determine the amount of interest incurred eligible for capitalisation in 2013 was 10.99% (2012: 10.8%). The properties under development are all located in the PRC

219 24 24 TRADE AND OTHER RECEIVABLES Group Company RMB 000 RMB 000 RMB 000 RMB 000 Trade receivables 5,034,247 4,843,417 (a) Less: provision for impairment of receivables (a) (158,970) (91,076) Trade receivables net 4,875,277 4,752,341 (b) Other receivables (b) 1,364,613 2,195, , ,709 (c) Note receivable (c) 529, ,993 Prepayments to suppliers 2,989,918 1,789,545 Excess of input over output value added tax 480, ,776 Interest receivables 21,255 7,365 Dividend receivables 79,892 85,578 54,395 5,900 Deposits 247, ,709 (d) Financial lease receivables (d) 28,072 10,616,550 9,914, , ,609 Less: non-current portion Excess of input over output value added tax (106,074) (205,860) Deposits (84,942) (133,036) Trade receivables (25,975) (45,975) (d) Financial lease receivables (d) (28,072) Others (2,977) (3,729) (248,040) (388,600) Current portion 10,368,510 9,525, , ,609 35,885, As at 31 December 2013, certain bank borrowings were secured by notes receivable with book value of RMB35,885,000 (31 December 2012: Nil). Details of the secured borrowings are in Note AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

220 24 24 TRADE AND OTHER RECEIVABLES (continued) The Group s credit term on sale of goods is from 1 month to 12 months. The aging analysis of trade receivables is as follows: Group RMB 000 RMB 000 Within 1 year 4,295,360 4,642,022 Between 1 and 2 years 626, ,377 Between 2 and 3 years 63,893 30,101 Over 3 years 48,862 42,917 5,034,247 4,843,417 Less: provision for impairment losses (158,970) (91,076) 4,875,277 4,752,341 The carrying amounts of the Group s trade receivables are denominated in the following currencies: Group RMB 000 RMB 000 RMB 3,320,832 2,810,927 USD 1,069,936 1,733,426 LKR 249, ,506 EUR 222,670 16,523 AED 96, ,348 HKD 20,688 8,269 Others 53,975 47,418 5,034,247 4,843,

221 24 (a) 24 TRADE AND OTHER RECEIVABLES (continued) (a) Movements on the provision for impairment of trade receivables are as follows: RMB 000 RMB 000 At 1 January 91, ,215 Provision for receivable impairment 136,108 30,591 Uncollectible receivables written off during the year (60,232) (126,572) Reversals during the year (7,982) (14,158) At 31 December 158,970 91, ,205,000 14,164, ,894,0008 As at 31 December 2013, trade receivables of RMB312,205,000 (2012: RMB14,164,000) were past due but not impaired. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. Among these balances, trade receivables of RMB107,894,000 are collateralised by 8 sets of turbine equipments. The aging analysis of these uncollateralised trade receivables is as follows: RMB 000 RMB 000 Between 1 and 2 years 197,273 14,111 Between 2 and 3 years 6, Over 3 years ,311 14, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

222 24 (a) 426,682, ,231, ,970,000 91,076, TRADE AND OTHER RECEIVABLES (continued) (a) (continued) As at 31 December 2013, trade receivables of RMB426,682,000 (2012: RMB187,231,000) were impaired. The amount of the provision was RMB158,970,000 as of 31 December 2013 (2012: RMB91,076,000). The aging of these receivables is as follows: RMB 000 RMB 000 Between 1 and 2 years 320, ,266 Between 2 and 3 years 56,908 30,048 Over 3 years 48,809 42, , ,231 The addition and reversal of provisions for impaired receivables have been included in administrative expenses. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the carrying value of receivable mentioned above. The Group does not hold any collateral as security. (b) 51(d) 229,822, ,191,000 0% 5% (b) Included in other receivables were loans of RMB229,822,000 to related parties as disclosed in Note 51(d) (2012: RMB360,191,000). These amounts were unsecured, bearing annual interest rate from 0%~5% and are payable on demand

223 24 (c) 24 TRADE AND OTHER RECEIVABLES (continued) (c) Notes receivable include bank acceptance bills and commercial acceptance bills which are analysed as follows: Group RMB 000 RMB 000 Bank acceptance bills 511, ,338 Commercial acceptance bills 18,513 82, , ,993 The carrying amount of current trade receivables and other receivables approximated their fair values. (d) (d) Financial lease receivables Reconciliation between the gross investment in leases and the present value of minimum lease payments receivable is set out below. Group RMB 000 RMB 000 Gross investment in leases 52,684 Less: Unguaranteed residual values Minimum lease payments receivables 52,684 Less: Unearned finance income related to minimum lease payments receivables (24,612) Present value of minimum lease payments receivables 28, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

224 24 (d) 24 TRADE AND OTHER RECEIVABLES (continued) (d) Financial lease receivables (continued) The table below analyses the Group s gross investment in leases by relevant maturity groupings: RMB 000 RMB 000 Not later than 1 year 2,184 Later than 1 year and not later than 5 years 8,736 Later than 5 years 41,764 52, CONSTRUCTION CONTRACTS Group Company RMB 000 RMB 000 RMB 000 RMB 000 Contract costs incurred plus attributable profits 11,830,949 8,461,545 Less: progress billings to date (10,508,310) (7,497,977) Less: provision (23,644) (2,808) Net balance sheet position for ongoing contracts 1,298, ,760 Presented as: Amounts due from customers for contract work 1,493,175 1,161,194 Amounts due to customers for contract work (194,180) (200,434) 1,298, ,760 17,440,000 51,298,000 The Group had written-off provisions of RMB17,440,000 (2012: RMB51,298,000) that was made in prior years. The amount has been included in cost of sales in the income statement

225 26 26 DERIVATIVE FINANCIAL INSTRUMENTS Group Company RMB 000 RMB 000 RMB 000 RMB 000 (a) Foreign exchange contracts (a) 5,405 3,110 (a) (a) The notional principal amounts of the outstanding forward foreign exchange contracts are as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Foreign exchange contracts Selling USD for RMB 31,400 38,400 Buying USD with RMB 84 Selling EUR for RMB 101 Buying EUR with RMB ,948 38, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

226 27 27 PLEDGED BANK DEPOSITS Certain bank balances were pledged deposits which will be released upon the settlement of the repayment of the bank loans and the use of credit amount RMB 000 RMB Collateral for bank borrowings (Note 32) 54,164 Guarantee deposits for issuance of letters of credit 311,054 87,978 Guarantee deposits for issuance of bank acceptance bill 124, ,193 Guarantee deposits for performance security of construction contract 6,975 22,975 Guarantee deposits for construction of pre-sale properties 140,600 Guarantee deposits for acquisition of a subsidiary 216,618 Others 4,091 17, , , CASH AND CASH EQUIVALENTS The balance of the Group s cash and cash equivalents with an annual interest rate from 0.35% to 3.33% are analysed as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Cash at bank and on hand 4,802,843 4,038, ,467 81,

227 28 28 CASH AND CASH EQUIVALENTS (continued) The carrying amounts of the Group s cash and cash equivalents are denominated in the following currencies: Group Company RMB 000 RMB 000 RMB 000 RMB 000 RMB 3,082,790 2,551, ,681 74,855 USD 994, ,019 EUR 504,637 62,126 LKR 26,566 16,877 AED 25,199 45,475 HKD 21,705 24,410 5,786 6,262 Others 147, ,795 4,802,843 4,038, ,467 81, SHARE CAPITAL AND SHARE PREMIUM Domestic Shares Number of share H H Shares Group and Company Total Number of shares Ordinary shares Capital Share premium Total (thousands) (thousands) (thousands) (RMB 000) (RMB 000) (RMB 000) As at 1 January , , , , ,513 1,027,880 Issuance of shares for acquisition of subsidiaries 437, , , ,120 1,377,385 As at 31 December 2012 and 31 December , ,658 1,110,632 1,110,632 1,294,633 2,405, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

228 30 30 OTHER RESERVES Capital reserve Statutory general reserve fund Availablefor-sale financial assets revaluation reserve Revaluation gain on transfer of owneroccupied property to investment property Re-measurements of post employment benefit obligations Currency translation differences Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Group Balance as at 1 January 2012, as restated 3,676,292 70,001 15, ,957 (62,498) 3,816,137 Fair value gain on available-for-sale financial assets Revaluation gain on transfer of owner-occupied property to investment property 2,337 2,337 Re-measurements of post -employment benefit obligations (1,151) (1,151) Currency translation differences 23,505 23,505 Transactions with non-controlling interests (4,892) (4,892) Share of reserve of an associate arising from its transactions with non-controlling interests (5,196) (5,196) Merger reserve (4,211,263) (4,211,263) Balance as at 31 December 2012, as restated (545,059) 70,001 15, ,294 (1,151) (38,993) (380,075) Balance as at 1 January 2013 as per above (545,059) 70,001 15, ,294 (1,151) (38,993) (380,075) Re-measurements of post -employment benefit obligations 2,953 2,953 Revaluation gain on transfer of owner-occupied property to investment property 4,028 4,028 Fair value gain on available-for-sale financial assets 5,607 5,607 Recycle of fair value gains on available-for-sale financial assets (5,430) (5,430) Currency translation differences (27,356) (27,356) Share of an associate s other comprehensive income (325) (325) (a) Transactions with non-controlling interests (Note (a)) (10,387) (10,387) Share of reserve of an associate arising from its transactions with non-controlling interests (17,299) (17,299) Appropriation to statutory general reserve fund 24,083 24,083 Balance as at 31 December 2013 (573,070) 94,084 16, ,322 1,802 (66,349) (404,201)

229 30 30 OTHER RESERVES (continued) Statutory general reserve fund RMB 000 (Accumulated losses)/ Retained earnings RMB 000 Company Balance as at 1 January ,001 (591,858) Profit for the year 195,877 Balance as at 31 December ,001 (395,981) Profit for the year 449,937 Appropriation to statutory general reserve fund 24,083 (24,083) Balance as at 31 December ,084 29,873 10% 50% According to the Company Law of the PRC and the Articles of Association of the Company, when distributing net profit each year, the Company shall set aside 10% of its net profit as reported in the PRC statutory accounts for the statutory general reserve fund (except where the fund has reached 50% of the Company s registered share capital). This reserve cannot be used for purposes other than those for which they are created and are not distributable as cash dividend. 10% 50% Statutory general reserve fund In accordance with relevant laws and regulations of the PRC, the PRC subsidiaries of the Group should make appropriations from the net profit to the reserve fund, discretionary surplus reserve and the enterprise expansion fund, after offsetting accumulated losses from prior years, and before profit distributions to the shareholders. The appropriations to the reserve fund are made at 10% of the net profit until the balance of the fund reaches 50% of their registered capital. The amounts of appropriations to the discretionary surplus reserve and the enterprise expansion fund are determined by the directors of the PRC subsidiaries. 300 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

230 30 30 OTHER RESERVES (continued) Statutory general reserve fund (continued) Upon approval from the board of directors, the reserve fund can be used to offset accumulated losses or to increase capital; the enterprise expansion fund can be used to expand production or to increase capital. (a) (i) 1,678,000 Tianma Microelectronics Korea Company Limited Korea Tianma10% Korea Tianma (a) Transaction with non-controlling interests (i) On 30 June 2013, Tianma purchased 10% shares in its subsidiary, Tianma Microelectronics Korea Company Limited ( Korea Tianma ), at a consideration of RMB1,678,000. The effect of change in the ownership interests of Korea Tianma on the equity attributable to owners of the Company during the year is as follows: RMB 000 Consideration paid to non-controlling interests 1,678 Less: Carrying amount of non-controlling interests acquired (1,324) Excess of consideration paid recognised within equity 354 (ii) 10% 1,615,000 (ii) On 29 September 2013, Engineering Company purchased 10% shares in its subsidiary, AVIC Tanzania Real Estate Company Limited ( ) ( Tanzania Company ), at a consideration of RMB1,615,000. The effect of change in the ownership interests of Tanzania Company on the equity attributable to owners of the Company during the year is as follows: RMB 000 Consideration paid to non-controlling interests 1,615 Less: Carrying amount of non-controlling interests acquired 69 Excess of consideration paid recognised within equity 1,

231 30 (a) (iii) 30% 3,123, OTHER RESERVES (continued) Statutory general reserve fund (continued) (a) Transaction with non-controlling interests (continued) (iii) On 12 October 2013, AVIC Lutong Company Limited purchased 30% shares in its subsidiary, Hunan Lutong Machinery Equipment Company Limited ( ) ( Hunan Lutong ), at a consideration of RMB3,123,000. The effect of change in the ownership interests of Hunan Lutong on the equity attributable to owners of the Company during the year is as follows: RMB 000 Consideration paid to non-controlling interests 3,123 Less: Carrying amount of non-controlling interests acquired (3,123) Excess of consideration paid recognised within equity (iv) 40% 42,000,000 (iv) On 12 December 2013, the Company purchased 40% shares in its subsidiary, RED Company, at a consideration of RMB42,000,000. The effect of change in the ownership interests of RED Company on the equity attributable to owners of the Company during the year is as follows: RMB 000 Consideration paid to non-controlling interests 42,000 Less: Carrying amount of non-controlling interests acquired (33,642) Excess of consideration paid recognised within equity 8, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

232 30 (a) (v) 4% 50, OTHER RESERVES (continued) Statutory general reserve fund (continued) (a) Transaction with non-controlling interests (continued) (v) On 25 July 2013, Beijing Company purchased 4% shares in its subsidiary, Beijing Kaijiu Technological Development Co., Ltd. () ( Kaijiu ), at a consideration of RMB50,000. The effect of change in the ownership interests of Kaijiu on the equity attributable to owners of the Company during the year is as follows: RMB 000 Consideration paid to non-controlling interests 50 Less: Carrying amount of non-controlling interests acquired (59) Excess of consideration paid recognised within equity (9) (vi) (vi) T h e excess of consideration paid recognised within equity were summarised as follows: RMB 000 Consideration paid to non-controlling interests 48,466 Less: Carrying amount of non-controlling interests acquired (38,079) Excess of consideration paid recognised within equity 10,

233 31 2,781,674, % ,634,000 (i) (ii) (iii) 31 PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES The Company issued an aggregate principal amount of RMB2,781,674,000 perpetual subordinated convertible securities ( PSCS ) on 5 September 2012 to AVIC International, the holding company, AVIC International Shenzhen Company Limited ( ) ( AVIC Shenzhen ), the Company s shareholder holding 35.63% of the equity interests of the Company and Beijing Raise Technology Company Limited ( ) ( Beijing Raise ), respectively as part of the purchase consideration for acquisition of subsidiaries. These PSCS being convertible into 801,634,000 domestic shares of the Company at an initial conversion price of RMB3.47 per share. The PSCS constitutes direct, unsecured and subordinated obligations of the Company and rank pari passu without any preference or priority among themselves. In the event of the winding-up of the Company, the rights and claims of the PSCS holder(s) would; (i) rank ahead of those persons whose claims are in respect of any class of share capital of the Company, (ii) be subordinated in right of payment to the claims of all other present and future preference creditors of the Company, and (iii) pari passu with each other. 304 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

234 (i) (ii) PERPETUAL SUBORDINATED CONVERTIBLE SECURITIES (continued) The PSCS have no maturity date and conferred a right to receive distributions from and including the date of issue of the PSCS at 1% per annum on any outstanding principal amount of distribution payable annually in arrears on 31 July each year, subject to the terms of the PSCS. The Company was entitled to elect to defer a distribution pursuant to the terms of the PSCS. Any arrears of distributions due in respect of the PSCS would be extinguished by the Company in full through the delivery by the Company of its domestic shares issuable by it upon the exercise of the PCSC holder s conversion right. The PSCS holders can convert PSCS into domestic shares at any time from the date of issue of the PSCS, subject to relevant terms as provided in the terms of the PSCS, at conversion price of RMB3.47. The conversion price will be subject to adjustment for bonus issue, conversion of capital reserve and other dilutive events. The PSCS Holders may convert such portion of the PSCS on condition that: (i) the conversion would not cause the Company to contravene provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ( Listing Rules ) including but not limited to the minimum public float requirement under the Listing Rules; and (ii) conversion would comply with all applicable laws and regulations (including but not limited to the Listing Rules and the Hong Kong Code on Takeovers and Mergers). On or at any time after 12 months after the date of issue of the PSCS, the Company may, at its sole discretion and pursuant to the terms of the PSCS, elect to convert the PSCS in whole (but not in part) into domestic shares, subject to the provisions of restriction on conversion set out in the terms of the PSCS. The PSCS holder(s) were not entitled to receive notice of, attend or vote at general meetings of the Company by reason only of its being a PSCS holder

235 32 32 BORROWINGS Borrowings include bank borrowings and other borrowings which are analysed as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Non-current Bank borrowings (a) pledged (a) 1,799,922 1,656,343 (b) guaranteed (b) 1,504,110 1,840, ,000 unsecured 3,391,518 1,817, ,000 (c) Medium term notes (c) 600, ,000 (c) Debentures (c) 397, ,000 51(c) Related party borrowings (Note 51(c)) 303, ,767 Less: current portion of non-current borrowings (1,814,622) (1,833,027) (17,000) (186,000) 6,182,333 4,044,826 1,075,000 Current Bank borrowings (a) pledged (a) 283, ,000 (b) guaranteed (b) 473, , ,000 unsecured 9,056,852 6,819, ,000 1,414,000 Debentures 100,000 51(c) Related party borrowings (Note 51(c)) 1,122, ,000 Current portion of non-current borrowings 1,814,622 1,833,027 17, ,000 12,751,554 10,561, ,000 1,800,000 18,933,887 14,606,566 2,048,000 1,800, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

236 32 (a) 2,083,307,000 1,904,343, BORROWINGS (continued) (a) A t 3 1 December 2013, bank loans of RMB2,083,307,000 (2012: RMB1,904,343,000) of the Group were secured by the following: Group Company RMB 000 RMB 000 RMB 000 RMB Pledged bank deposits (Note 27) 54, Pledged notes receivable (Note 24) 35,885 7 Land use rights (Note 7) 504, , Buildings (Note 11) 1,426,288 1,444,472 Construction-in-progress 16,361 12(b) Investment properties (Note 12(b)) 1,200,649 1,141, Properties under development (Note 23) 320,629 8 Exploration and extraction rights (Note 8) 6,540 3,548,186 3,120,

237 32 (b) 2,975,689,000 2,813,613, BORROWINGS (continued) (b) At 31 December 2013, bank loans, mediumterm notes and debenture of RMB2,975,689,000 (2012: RMB2,813,613,000) of the Group were supported by the following guarantees: Group Company RMB 000 RMB 000 RMB 000 RMB 000 AVIC Shenzhen 397, , ,000 AVIC International 600, ,000 Other related parties 633, ,971 Third Parties 1,344,110 1,645,642 2,975,689 2,813, , ,000 (c) 600,000, % (c) The Company obtained the registration with China Government Securities Depository Trust & Clearing Co., Ltd. on 17 April 2013 and issued 4.78% medium-term notes at a total nominal value of RMB600,000,000 to institutional investors in interbank market on 6 May The maturity date of the bonds shall be five years from the issue date at approximate nominal value. The fair value of the liability was determined at issuance of the bond and it was equal to the nominal value. AVIC International, the Company s holding company, provides a full unconditional irrevocable joint and several liability guarantee for the medium-term notes. 308 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

238 32 (c) 400,000, % 100% % 35.63% 397,729, BORROWINGS (continued) (c) (continued) Fiyta issued corporate debenture amounted to RMB400,000,000 on 27 February The corporate debenture will mature on 26 February 2018 and carry fixed annual interest rate of 5.04%. Fiyta may redeem the corporate debenture on 27 February 2016, in whole, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the redemption date. Fiyta may, at its option, choose to increase the interest rate of the corporate debenture from 1 point basis to 100 point basis by notifying the corporate debenture holders 30 days before 27 February If Fiyta does not exercise the option, the interest rate of the corporate debenture will remain unchanged in the remaining period before maturity. After the issuance of notification to corporate debenture holders on whether to increase the interest rate, the corporate debenture holders may choose to require Fiyta to redeem the corporate debenture, in whole or in part, at a redemption price equal to 100% of principal amount plus accrued and unpaid interest. The corporate debenture of Fiyta is guaranteed by AVIC Shenzhen, the Company s shareholder holding 35.63% of the equity interests of the Company. As at 31 December 2013, the amortised cost of the corporate debenture is RMB397,729,

239 32 (d) 32 BORROWINGS (continued) (d) The carrying amounts of the borrowings are denominated in the following currencies: Group Company RMB 000 RMB 000 RMB 000 RMB 000 RMB 14,233,147 12,339,429 2,048,000 1,800,000 USD 3,221,610 1,821,022 EUR 1,229, ,406 HKD 241, ,887 Others 8,317 6,822 18,933,887 14,606,566 2,048,000 1,800,000 The exposure of the borrowings to interest-rate changes and the contractual repricing dates at the balance sheet dates are as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Within 1 year 12,751,554 10,561, ,000 1,800,000 Between 1 and 2 years 1,968,180 1,236, ,000 Between 2 and 5 years 3,105,549 2,331, ,000 Wholly repayable within 5 years 17,825,283 14,130,362 2,048,000 1,800,000 Over 5 years 1,108, ,204 18,933,887 14,606,566 2,048,000 1,800, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

240 32 (d) 32 BORROWINGS (continued) (d) (continued) The maturity of bank and other borrowings is as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Wholly repayable within 5 years 17,539,874 14,130,362 2,048,000 1,800,000 Not wholly repayable within 5 years 1,394, ,204 18,933,887 14,606,566 2,048,000 1,800,000 (e) (e) The effective interest rates at the balance sheet dates are as follows: Group RMB USD EUR HKD RMB USD EUR HKD Bank borrowings 6.00% 3.52% 3.25% 3.05% 6.08% 3.30% 3.00% 3.14%

241 32 (e) 32 BORROWINGS (continued) (e) (continued) Company RMB RMB Bank borrowings 5.73% 6.40% (f) (f) The interest rate exposure of the borrowings of the Group and the Company are as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Borrowings at floating rates 9,018,334 6,991,980 1,148, ,000 Borrowings at fixed rates 9,915,553 7,614, ,000 1,440,000 Total 18,933,887 14,606,566 2,048,000 1,800, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

242 32 (g) 32 BORROWINGS (continued) (g) The carrying amounts and fair value of the noncurrent borrowings carried at fixed interest rate are as follows: Carrying amount Fair value RMB 000 RMB 000 RMB 000 RMB 000 Bank borrowings 2,033,467 1,544,906 1,989,667 1,474,949 Medium-term notes 600, ,302 Debentures 397, ,001 3,031,196 1,544,906 2,956,970 1,474, DEFERRED INCOME ON GOVERNMENT GRANTS The amounts represented various subsidies granted by and received from local government authorities in the PRC. The movements are as follows: At 31 December 2012 Receipt of grants Credited to income statement during the year At 31 December 2013 Government grant related to assets 515, ,634 (193,567) 565,386 Government grant related to costs 23,671 52,210 (70,691) 5, , ,844 (264,258) 570,

243 34 34 RETIREMENT AND OTHER SUPPLEMENTAL BENEFIT OBLIGATIONS The table below outlines where the Group s postemployment amounts and activity are include in the financial statements. Group (Restated) Balance sheet obligations for: Supplemental retirement benefits plan 46,660 52,279 Early retirement benefit plan 873 1,369 Liability in the balance sheet 47,533 53,648 Income statement charge/(credit) included in operating profit for: Supplemental retirement benefits plan 1,811 2,901 Early retirement benefit plan (78) (38) 1,733 2,863 Remeasurements for: Supplemental retirement benefits plan (3,476) 1,564 Early retirement benefit plan (3,476) 1, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

244 34 34 RETIREMENT AND OTHER SUPPLEMENTAL BENEFIT OBLIGATIONS (continued) The amounts of early retirement and supplemental benefit obligations recognised in the consolidated balance sheet are determined as follows: Group (Restated) Present value of defined benefits obligations 47,533 53,648 Less: current portion (4,664) (4,372) Non-current portion 42,869 49,276 The movements of Group s early retirement benefit and supplemental benefit obligations are as follows: Group (Restated) At beginning of the year 53,648 53,419 For the year Interest expense 1,846 1,824 Past service cost (113) 1,039 55,381 56,282 Remeasurements: (Gain)/losses from change in financial assumptions (4,044) 2,041 Experience losses/(gains) 568 (477) (3,476) 1,564 Payments from plans: Benefit payments (4,372) (4,198) 47,533 53,

245 34 34 RETIREMENT AND OTHER SUPPLEMENTAL BENEFIT OBLIGATIONS (continued) The above obligations were determined based on actuarial valuations performed by an independent qualified actuarial firm, Mercer Consulting (Shanghai) Company Limited (member of the Society of Actuaries and the China Association of Actuaries), using the projected unit credit actuarial cost method. The material actuarial assumptions used in valuing these obligations are as follows: Group (Restated) Discount rates (per annum) Supplemental retirement benefits plan 4.60% 3.60% Early retirement benefit plan 4.30% 3.00% Growth rate 8.00% 8.00% Mortality: A verage life expectancy of residents Supplemental retirement benefit plan Mortality: A verage life expectancy of residents Early retirement benefit plan AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

246 34 34 RETIREMENT AND OTHER SUPPLEMENTAL BENEFIT OBLIGATIONS (continued) The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: Impact on defined benefit obligation Change in assumption Increase in assumption Decrease in assumption Discount rate 0.5% Decrease by 3.8% 3.8% Pension growth rate 0.25% Increase by 4.2% 4.2% Increase by 8.7% 8.7% Decrease by 3.9% 3.9% To increase by 1 year in assumption To decrease by 1 year in assumption Life expectancy Increase by 3.8% 3.8% Decrease by 3.4% 3.4% The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognised within the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period

247 34 34 RETIREMENT AND OTHER SUPPLEMENTAL BENEFIT OBLIGATIONS (continued) Through its fundamental retirement plan and defined pension benefits, the Group is exposed to a number of risks, the most significant of which are detailed below: Inflation risk The majority of the plans benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The majority of the plan s assets are either unaffected by (fixed interest bonds) or loosely correlated with (equities) inflation, meaning that an increase in inflation will also increase the deficit. Life expectancy The majority of the plans obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans liabilities. Expected maturity analysis of undiscounted defined pension benefits: Less than a year Between 1-2 years Between 2-5 years Over 5 years Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Supplement retirement benefits plan 4,271 4,172 11, ,991 Early retirement benefit plan ,664 4,512 12,058 51,681 72, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

248 35 35 OTHER NON-CURRENT LIABILITIES Group Company RMB 000 RMB 000 RMB 000 RMB 000 (a) Payable to holding company (a) 800,000 1,050, ,000 1,050,000 (b) Payable to AVIC Shenzhen (b) 100, ,000 (c) Payable to Weihai Economic and Technological Development Zone State-owned Assets Management Co., Ltd ( ) (c) 40,000 40,000 Others 16,152 12, ,152 1,202, ,000 1,050,000 (a) 1,050,000, % 250,000,000 (a) The Company borrowed RMB1,050,000,000 from the holding company in April The amounts are unsecured, bearing annual interest rate of 4.94% and repayable in April In 2013, the Company repaid RMB250,000,000 during the year. (b) 25,000,000 75,000, % 4.70% (b) SCC, a subsidiary of the Group, borrowed RMB25,000,000 and RMB75,000,000 from AVIC Shenzhen in October The amounts are unsecured, interest bearing at a rate of 3 month SHIBOR plus 1.7% and 4.70% and repayable in October 2016 and October 2019, respectively. (c) 40,000,000 (c) Shandong New Shipbuilding Co., Ltd., a subsidiary of the Group, borrowed RMB40,000,000 from Weihai Economic and Technological Development Zone State-owned Assets Management Co., Ltd, in June The amounts are unsecured, bearing interest rate at the benchmark interest rate prescribed by The People s Bank of China and repayable in June The fair value of other non-current liabilities approximated the carrying amount

249 36 36 TRADE AND OTHER PAYABLES Group Company RMB 000 RMB 000 RMB 000 RMB 000 Trade payables 5,359,733 3,892,317 Salaries and staff welfare payable 440, ,591 4,931 6,476 Notes payable 545, ,930 Advances from customers 4,295,782 3,688,730 Interest payable 81,989 34,758 38,031 3,230 Dividend payable 6,892 10,699 Other taxes payable 151, , (a) Accruals and other payables (a) 1,732,908 2,357,673 80, ,166 (b) Borrowings from a third party (b) 18,000 18,000 Deposits 110,217 74,502 12,742,272 11,278, , ,005 Less: non-current portion Deposits (44,871) (46,128) Current portion 12,697,401 11,232, , ,005 (a) 198,709,000 51(c) 847,351,000 0%-12.5% (a) Included in accruals and other payables were RMB198,709,000 due to related parties as disclosed in Note 51(c) (2012: RMB847,351,000). These amounts were unsecured, bearing annual interest rate from 0%~12.5% and are payable on demand. (b) 18,000,000 18,000, % (b) Weihai Shipyard, a subsidiary of the Group, borrowed RMB18,000,000 (2012: RMB18,000,000) from Weihai Industrial Developing Investment Co., Ltd. ( ) in January The amounts are unsecured, bearing annual interest of 7.872% and are payable on demand. 320 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

250 36 (b) 36 TRADE AND OTHER PAYABLES (continued) (b) (continued) At 31 December 2013, the ageing analysis of the trade payables is as follows: Group Company RMB 000 RMB 000 RMB 000 RMB 000 Within 1 year 5,086,778 3,380,058 Between 1 and 2 years 151, ,124 Between 2 and 3 years 25, ,647 Over 3 years 96,261 64,488 5,359,733 3,892,317 The carrying amounts of the Group s trade payables are denominated in the following currencies: Group Company RMB 000 RMB 000 RMB 000 RMB 000 RMB 3,839,077 2,768,863 LKR 598, ,712 USD 534, ,622 AED 167, ,818 EUR 41,987 61,420 HKD 5,699 13,069 Others 171, ,813 5,359,733 3,892,

251 37 37 OTHER INCOME RMB 000 RMB 000 Government subsidies 298, , Amortisation of deferred income on government grants (Note 33) 264, ,644 Service and maintenance income 77,817 61,876 Sales of by-products 49,530 53,969 Dividend income 18,346 47,289 Financial subsidy 12,178 33,563 Default income 9,323 26,937 Compensation income 878 4,521 Guarantee fee income 550 Others 9,497 6, , , AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

252 38 38 OTHER GAINS NET RMB 000 RMB 000 Gain on disposals of property, plant and equipment (Note 47) 4,344 37, Gain on disposals of investment properties (Note 47) ,893 Gain on disposals of derivative financial instruments 6,070 2,346 Gain on disposals of associates 3, Gain on disposals of joint ventures (Note 47) 50,131 Gain on disposals of available-for-sale financial assets (Note 47) 45,981 15,073 (Loss)/Gain on disposals of subsidiaries (Note 47) (500) 38 Fair value changes on derivative financial instruments (Note 47) 2,295 3,550 Losses from discounting bank acceptance bills (Note 47) (2,407) (25,368) Losses from derecognition of trade receivables (24,557) 47 Others (Note 47) 7,259 2, ,538 37,

253 39 39 EXPENSES BY NATURE RMB 000 RMB 000 (Restated) Changes in inventories of finished goods and work in progress 730, ,266 Changes in amounts due from customers for contract work 331, ,528 Raw materials and consumables used 25,736,125 24,756, Employee benefits expenses (Note 42) 2,413,047 1,804,807 Repairs and maintenance expenditure 162,992 76,710 Provision for inventory obsolescence 71,421 45,376 Provision for bad debts 128,126 57,581 Provision for amounts due from customers for contract work 38,276 2, Depreciation of property, plant and equipment (Note 11) 989, ,680 7 Amortisation of land use rights (Note 7) 28,801 29,853 8 Amortisation of exploration and extraction rights (Note 8) 15,716 14, Amortisation of intangible assets (Note 10) 18,561 10,441 Amortisation of other non-current assets 23,432 14,383 Operating lease rentals 214, ,057 Business tax and other levies 256, ,489 Auditors remuneration 8,600 9,700 Utility expenses 302, ,682 Transportation 210, ,609 Travelling expenses 93,603 94,095 Entertainment 60,740 71,555 Professional fees 88,030 85,067 Bank charges 100,828 75,571 Other expenses 623, ,006 Total cost of sales, distribution expenses and administrative expenses 32,648,199 30,277, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

254 40 (a) 40 DIRECTORS EMOLUMENTS (a) Directors emoluments The Company did not appoint any chief executive in 2013 and The remunerations of the directors for the year ended 31 December 2013 are set out below, Fee Salaries Discretionary bonuses Employer s contribution to pension schemes Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Name of directors: * Mr. Wu Guang Quan* * Mr. You Lei* * Mr. Pan Lin Wu* * Mr. Liu Jun* * Mr. Chen Hong Liang* Mr. Wu Wei Ms. Wong Wai Ling Mr. Zhang Ping

255 40 (a) 40 DIRECTORS EMOLUMENTS (continued) (a) Directors emoluments (continued) The remunerations of the directors for the year ended 31 December 2012 are set out below: Fee Salaries Discretionary bonuses Employer s contribution to pension schemes Total RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Name of directors: * Mr. Wu Guang Quan* * Mr. You Lei* * Mr. Pan Lin Wu* * Mr. Chen Hong Liang* * Mr. Liu Jun* * Mr. Lai Wei Xuan* * Mr. Sui Yong* * Mr. Liu Rui Lin* * Mr. Cheng Bao Zhong* * Mr. Qiu Shen Qian* * Mr. Wang Bin Bin* * Mr. Li Cheng Ning* * Mr. Xu Dong Sheng* Ms. Wong Wai Ling Mr. Wu Wei Mr. Zhang Ping * Mr. Liu Xian Fa* * 35.63% * These directors received emoluments from AVIC International, the holding company or AVIC Shenzhen, the Company s shareholder holding 35.63% of the equity interests of the Company, for their services to the Company. No apportionment has been made for emoluments from the holding company, as the directors consider that it is impracticable to apportion this amount between their services to the Group and their services to the Company s holding company. 326 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

256 40 (a) 440, , DIRECTORS EMOLUMENTS (continued) (a) Directors emoluments (continued) Directors fees disclosed above included RMB440,000 (2012: RMB379,000) paid to independent non-executive directors. None of the directors waived any emoluments during the year (2012: Nil). (b) (b) Five highest paid individuals The five individuals whose emoluments were the highest in the Group for the year 2013 do not include any directors (2012: Nil) whose emoluments are reflected in the analysis presented above. The emoluments payable to these five individuals (2012: 5) during the year are as follows: RMB 000 RMB 000 Basic salaries, housing allowance, other allowances and benefits in kind 9,683,000 8,658,000 The emoluments fell within the following bands: Emolument bands 1,500,001 HKD1,500,001-HKD2,000,000 2,000, ,000,001 HKD2,000,001-HKD3,000,000 3,000, ,000,000 Over HKD3,000,

257 41 41 FINANCE COSTS NET RMB 000 RMB 000 (Restated) Interest expenses bank borrowings 880, ,112 borrowings from related party repayable on demand 92, ,555 medium-term notes 23,979 debentures 27,529 9,900 Less: interest capitalised (106,149) (29,750) 917, ,817 Foreign exchange loss on financing activities 43,132 38,769 Finance costs 960, ,586 Foreign exchange gain on financing activities (86,515) (59,030) Interest income (92,128) (84,298) Finance income (178,643) (143,382) Net finance costs 782, ,258 53,904,000 10,457, %5.66% Bank loan interest capitalised in the constructionin-progress amounted to RMB53,904,000 (2012: RMB10,457,000) during The capitalised interest rate was 6.73% (2012: 5.66%). 52,245,000 19,293, %10.8% Bank loan interest capitalised in the properties under development amounted to RMB52,245,000 (2012: RMB19,293,000) during The capitalised interest rate was 10.99% (2012: 10.8%). 328 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

258 42 42 EMPLOYEE BENEFIT EXPENSES RMB 000 RMB 000 (Restated) Wages, salaries and bonus 2,056,617 1,476,874 Welfare, medical and other expenses 137, ,150 Social security costs 217, ,920 Early retirement and supplemental pension benefits 1,733 2,863 2,413,047 1,804,807 19% 9% 14% 7% The Group has participated in employee social security plans enacted in the PRC, which cover pension, medical and other welfare benefits. The plans are organised and administered by the governmental authorities. Pursuant to the relevant provisions, the Group is required to make monthly contributions in respect of retirement insurance and health insurance to governmental authorities, equivalent to 19% and 9% respectively based on the monthly salaries of its employees, of which, the Group bears 14% and 7% respectively, and the employees bear the rest. The Group has no further obligation beyond the contribution

259 43 25% 43 INCOME TAX CHARGE Pursuant to the relevant income tax law of PRC, the subsidiaries of the Group established in the PRC were subject to income tax at a rate of 25% unless preferential rates were applicable. 15% 15% Qinghai CATIC Resources was established in Haixi Prefecture of Qinghai Province. It was eligible for preferential tax policies applicable for the development of western regions in the PRC, and was entitled to a preferential income tax rate of 15% in 2013 (2012: 15%). 15% 15% Tianma and its subsidiaries Shanghai Tianma and Chengdu Tianma, SCC, AVIC Wang Xin (Beijing) Science and Technology Co., Ltd. and Shenzhen Fiyta Chronometer Manufacture Co., Ltd. were qualified as High and New Technology Enterprises in the PRC and were entitled to a preferential income tax rate of 15% in 2013 (2012: 15%). Income tax charged for the year represents: RMB 000 RMB 000 (Restated) Current tax on profits for the year 279, ,902 Adjustments in respect of prior year 17,999 9,035 Total current tax 297, , Deferred tax (Note 20) (37,822) (22,635) PRC land appreciation tax 20,622 Income tax charged 280, , AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

260 43 43 INCOME TAX CHARGE (continued) The tax on the Group s profit before taxation differs from the theoretical amount that would arise using the tax rates of the home country of the Company and its subsidiaries as follows: RMB 000 RMB 000 (Restated) Profit before income tax 1,444,722 1,448,543 25% 25% Tax calculated at the tax rates applicable to the Company of 25% (2012: 25%) 361, ,136 Deferred income taxes resulting from change in the tax rates 920 (5,748) Tax effect on unrecognised tax losses 127,025 72,271 Utilisation of previously unrecognised tax losses (38,455) (42,258) Expenses not deductible for tax purpose 20,861 5,210 Income not subject to tax (150,415) (134,882) Research and development expenses eligible for additional deduction (16,191) (15,712) Adjustment in respect of prior year 17,999 9,035 Use of tax effect of temporary differences for which no deferred income tax assets was recognised in the previous year (8,722) (727) Tax effect on unrecognised temporary differences 4,953 6,260 Effect of tax concessions from lower tax rate (57,893) (71,603) Tax credit for purchasing environmental protection equipment (1,837) (1,668) The salary deduction of disabled employees (12) PRC land appreciation tax 20,622 Tax charge 280, ,

261 44 449,937, ,877, (a) 44 PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY The profit attributable to owners of the Company is dealt with in the financial statements of the Company to the extent of RMB449,937,000 (2012: RMB195,877,000). 45 EARNINGS PER SHARE (a) Basic Basic and diluted earnings per share are calculated by dividing the profit attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year (Restated) Profit attributable to owners of the Company (RMB 000) 796, ,702 Less: Profit attributable to PSCS holders (RMB 000) (27,817) (27,817) Profit attributable to ordinary shares holders of the Company (RMB 000) 768, ,885 Weighted average number of ordinary shares in issue (thousands) 1,110,632 1,110,632 Basic earnings per share (RMB per share) AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

262 45 (b) 45 EARNINGS PER SHARE (continued) (b) Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has one category of dilutive potential ordinary shares: perpetual subordinated convertible securities. The perpetual subordinated convertible securities are assumed to have been converted into ordinary shares (Restated) Profit attributable to owners of the Company (RMB 000) 796, ,702 Weighted average number of ordinary shares in issue (thousands) 1,110,632 1,110,632 Adjustments for: Perpetual subordinated convertible securities (thousands) (Note 31) 801, ,634 Weighted average number of ordinary shares for diluted earnings per share (thousands) 1,912,266 1,912,266 Diluted earnings per share (RMB per share) DIVIDENDS At the board of directors meeting held on 28 March 2014, the board did not propose a final dividend for the year ended 31 December 2013 (2012: Nil). The board has not declared interim dividend (2012: Nil)

263 47 47 CASH GENERATED FROM OPERATIONS Reconciliation of profit for the year to cash generated from operations: Note RMB 000 RMB 000 (Restated) Profit before income tax 1,444,722 1,448,543 Adjustments for Losses from derecognition of financial assets 38 24,557 Losses from discounting bank acceptance bills 38 2,407 25,368 Provision for inventory obsolescence 71,421 45,376 Provision for bad debts 128,126 57,581 Provision for amounts due from customers for contract work 38,276 2,808 Depreciation of property, plant and equipment , ,680 Amortisation of exploration and extraction rights 8 15,716 14,589 Amortisation of land use rights 7 28,801 29,853 Amortisation of intangible assets 10 18,561 10,441 Other amortisation charges 23,432 14,383 Fair value gain on investment property 12 (56,942) (101,332) Gain on disposals of associates (3,452) Gain on disposals of joint ventures 38 (50,131) Gain on disposals of available-forsale financial assets 38 (45,981) (15,073) Loss/(Gain) on disposals of subsidiaries (38) Fair value changes on derivative financial instruments 38 (2,295) (3,550) Amortisation of deferred income on government grants 37 (264,258) (237,644) Gain on disposals of property, plant and equipment 38 (4,344) (37,884) Gain on disposals of investment properties 38 (365) (21,893) Interest income 41 (178,643) (143,328) Interest expense , ,586 Share of profit of associates 15 (245,503) (131,873) Share of profit of jointly controlled entities 15 (280,870) (345,172) Elimination of unrealised profit from downstream transaction with jointly controlled entities 961 2,593,134 2,521, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

264 47 47 CASH GENERATED FROM OPERATIONS (continued) Note RMB 000 RMB 000 (Restated) Changes in working capital Increase in inventories (838,707) (38,342) Increase in properties under development (1,061,008) (761,651) Increase in amounts due from customers for contract work (331,981) (358,528) Increase in amounts due to customers for contract work (6,254) (763,746) (Increase)/Decrease in trade and other receivables (702,425) 628,401 Increase in trade and other payables 1,652, ,776 Cash generated from operations 1,305,102 2,045,397 (a) (a) In the consolidated statement of cash flows for the year ended 31 December 2013, capital contribution to subsidiaries from non-controlling interests comprises: RMB 000 RMB 000 Guangzhou Company 19,675 AVIC Resources 18,000 RED Company 14,700 1,690 TED Company 13,130 Xiamen Company 3,800 1,135 Engineering Company 1,000 Beijing Company 195 Beijing Ruixin ,305 4,

265 47 (b) 47 CASH GENERATED FROM OPERATIONS (continued) (b) In the consolidated statement of cash flows for the year ended 31 December 2013, proceeds from sales of property, plant and equipment: RMB 000 RMB Net book value of property, plant and equipment disposed of (Note 11) 12,939 59,696 Profit from disposals of property, plant and equipment 4,344 37,884 Proceeds from disposal of property, plant and equipment 17,283 97,580 (c) (c) In the consolidated statement of cash flows for the year ended 31 December 2013, proceeds from disposals of joint ventures: RMB 000 RMB Net book value of joint ventures disposed of (Note 15) 101,732 Gain on disposals of joint ventures 50,131 Proceeds from disposals of joint ventures 151, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

266 47 (d) 47 CASH GENERATED FROM OPERATIONS (continued) (d) In the consolidated statement of cash flows for the year ended 31 December 2013, proceeds from disposals of available-for-sale financial assets: RMB 000 RMB Carrying amount of available-for-sale financial assets disposed of (Note 19) 9,484 30,403 Gain on disposals of available-for-sale financial assets 45,981 15,073 Less: Recycle of the fair value gain on available-for-sale financial assets, gross of tax (5,430) Proceeds from disposals of available-for-sale financial assets 50,035 45,476 (e) (e) In the consolidated statement of cash flows for the year ended 31 December 2013, proceeds from disposals of subsidiaries comprise: (i) 40% 66.67% (i) TED Company originally held 40% equity interests in AVIC (Beijing) Engineering Management Co., Ltd. ( ) ( AVIC Engineering ). In 2009, TED Company reached an agreement with non-controlling interests of AVIC Engineering pursuant to which TED Company had 66.67% voting rights in AVIC Engineering and accounted for it as a subsidiary

267 47 (e) (i) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (i) (continued) The validity of the agreement to act in concert between TED Company and the non-controlling interests of AVIC Engineering expired in January The Group then lost the control over AVIC Engineering. The cash flows from the disposal are as follows: RMB 000 Consideration received Cash consideration Less: Cash and cash equivalents held by AVIC Engineering (47) Net cash paid on disposals (47) The net assets of AVIC Engineering are as follows: On disposal date RMB 000 Cash 47 Trade and other receivables 106 Trade and other payables (762) Net assets (609) Attributable to: Owners of AVIC Engineering (244) Non-controlling interests (365) 338 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

268 47 (e) (ii) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (ii) On 31 May 2013, Wuxi Raise commenced its liquidation procedures, the Company lost control over Wuxi Raise thereafter. The cash flows from the disposal are as follows: RMB 000 Consideration received Cash consideration Less: Cash and cash equivalents held by Wuxi Raise (4,853) Net cash paid on disposals (4,853) The net assets of Wuxi Raise are as follows: On disposal date RMB 000 Cash 4,853 Trade and other receivables 30,000 Trade and other payables (111) Net assets 34,742 Attributable to: Owners of Wuxi Raise 13,897 Non-controlling interests 20,

269 47 (e) (iii) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (iii) On 14 August 2013, Zunhua Raise Real Estate Company Limited ( ) ( Zunhua Raise ) commenced its liquidation procedures, the Company lost control over Zunhua Raise thereafter. The cash flows from the disposal are as follows: RMB 000 Consideration received * Cash consideration* 7,787 Less: Cash and cash equivalents held by Zunhua Raise (9,787) Net cash paid on disposals (2,000) * * Cash consideration represents the settlement amounts received from the liquidation. The net assets of Zunhua Raise are as follows: On disposal date RMB 000 Cash 9,787 Trade and other receivables 226 Trade and other payables (13) Net assets 10,000 Attributable to: Owners of Zunhua Raise 8,000 Non-controlling interests 2, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

270 47 (e) (iv) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (iv) On 29 September 2013, Xiamen AVIC Property Management Company Limited () ( Property Management Company ) commenced its liquidation procedures, the Company lost control over Property Management Company thereafter. The cash flows from the disposal are as follows: RMB 000 Consideration received * Cash consideration* 2,099 Less: Cash and cash equivalents held by Property Management Company (2,099) Net cash paid on disposals * * Cash consideration represents the settlement amounts received from the liquidation. The net assets of Property Management Company are as follows: On disposal date RMB 000 Cash 2,099 Net assets 2,099 Attributable to: Owners of Property Management Company 2,099 Non-controlling interests

271 47 (e) (v) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (v) On 26 November 2013, CATIC Oceanographic Engineering (Xiamen) Company Limited ( ) ( Oceanographic Engineering Company ) commenced its liquidation procedures, the Company lost control over Oceanographic Engineering Company thereafter. The cash flows from the disposal are as follows: RMB 000 Consideration received Cash consideration Less: Cash and cash equivalents held by Oceanographic Engineering Company (673) Net cash paid on disposals (673) The net assets of Oceanographic Engineering Company are as follows: On disposal date RMB 000 Cash 673 Trade and other receivables 1,301 Property, plant and equipment 117 Net assets 2,091 Attributable to: Owners of Oceanographic Engineering Company 1,568 Non-controlling interests AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

272 47 (e) (vi) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (vi) On 28 November 2013, Xiamen Hangyi Stone Material Company Limited ( ) ( Hangyi ) commenced its liquidation procedures, the Company lost control over Hangyi thereafter. The cash flows from the disposal are as follows: RMB 000 Consideration received Cash consideration Less: Cash and cash equivalents held by Hangyi (406) Net cash paid on disposals (406) The net assets of Hangyi are as follows: On disposal date RMB 000 Cash 406 Trade and other receivables 1,364 Property, plant and equipment 297 Trade and other payables (2,048) Net assets 19 Attributable to: Owners of Hangyi 12 Non-controlling interests

273 47 (e) (vi) 47 CASH GENERATED FROM OPERATIONS (continued) (e) (continued) (vi) (continued) The cash flows from above disposals are summarised as follows: RMB 000 Consideration received Cash consideration 9,886 Less: Cash and cash equivalents held by the subsidiaries disposed of (17,865) Net cash paid on disposals (7,979) The net assets of the subsidiaries disposed of are summarised as follows: RMB 000 Cash 17,865 Trade and other receivables 32, Property, plant and equipment (Note 11) 414 Trade and other payables (2,934) Net assets 48,342 Attributable to: Owners of the subsidiaries disposed 25,332 Non-controlling interests 23, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

274 48 48 CONTINGENCIES As at 31 December 2013, the Group had the following financial guarantees outstanding: Guarantor Guarantor s relationship with the Group Guarantee Guarantee s relationship Outstanding with the Group amounts guaranteed RMB ,960 Beijing Company Subsidiary of the Group Taizhou AVIC Shipbuilding Heavy Industry Limited ( ) Associated Company 6% Xiamen Company Subsidiary of the Group Xiamen Tianma Microelectronics The guarantor holds 6% Company Limited equity interests in the () guarantee 176,000 Radiance Catico Offshore Pte. Ltd Xiamen Company Subsidiary of the Group Radiance Catico Offshore Pte. Ltd 162,022 Associated Company 60,000 Xiamen Company Subsidiary of the Group Xiamen Zijing CATIC Company Limited ( ) Associated Company 44,530 Beijing Company Subsidiary of the Group Zhengli Ocean Engineering Company Limited () Third party 19,600 Engineering Company Subsidiary of the Group CATIC Construction Engineering Company Limited () Associated Company 1,070,

275 48 48 CONTINGENCIES (continued) As at 31 December 2012, the Group had the following financial guaranties outstanding: Guarantor Guarantor s relationship with the Group Guarantee Guarantee s relationship Outstanding with the Group amounts guaranteed RMB ,000 Weihai Shipyard Subsidiary of the Group Weihai Port Co.,Ltd. Under common control of () PRC Government 150,000 Weihai Shipyard Subsidiary of the Group Weihai Port Group Co.,Ltd. Under common control of ( ) PRC Government Shandong New Shipbuilding Subsidiary of the Group Shandong New Shipbuilding Co., Ltd. Ship Steel Outfitting Co., Ltd. ( ) Shandong New Shipbuilding Subsidiary of the Group Shandong New Shipbuilding Co., Ltd. Pipe Outfitting Production Co., Ltd.( ) 10% The guarantor holds 10% equity interest in the guarantee 10% The guarantor holds 10% equity interest in the guarantee 37,000 10,000 55,000 Shandong New Shipbuilding Co., Ltd. Subsidiary of the Group Weihai Port Co., Ltd. Under common control of ( ) PRC Government 55,000 Shandong New Shipbuilding Co., Ltd. Subsidiary of the Group Weihai Port Group Co., Ltd. Under common control of ( ) PRC Government 6% Xiamen Company Subsidiary of the Group Xiamen Tianma Microelectronics The guarantor holds 6% Co., Ltd. equity interest in the guarantee 140,000 CATICO Investments Pte. Ltd. Radiance Catico Offshore Pte. Ltd. CATICO Investments Pte. Ltd. Subsidiary of the Group Radiance Catico Offshore Pte. Ltd. 166,018 Associate company of the guarantor 733, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

276 49 (a) 49 COMMITMENTS (a) Capital commitments Capital commitments at the balance sheet date but not yet incurred are as follows: Group RMB 000 RMB 000 Contracted but not provided for Property, plant and equipment 90, ,412 Properties under development 1,088, ,970 1,179, ,382 Group RMB 000 RMB 000 Authorised but not contracted for Property, plant and equipment 4,005,583 2,497,

277 49 (b) 49 COMMITMENTS (continued) (b) Operating lease commitments The Group has commitments under noncancellable operating leases in respect of office premises as follows: RMB 000 RMB 000 Not later than one year 103,860 88,263 Later than one year and not later than five years 191, , , , (a) 100% (i)214,866,000 25,980,000 (ii) 950 AVIC International Marine Engineering Pte. Ltd. AIME 50,691,000 6,129,000AIME 120,891, BUSINESS COMBINATIONS (a) On 4 January 2013, AVIC International Maritime Holdings Limited (formerly known as AVIC International Investments Limited), a non-wholly owned subsidiary of the Group, completed the acquisition of 100% of the equity interests of Deltamarin for an aggregated consideration satisfied as follows: (i) cash consideration of RMB214,866,000 (EUR25,980,000), and (ii) the allotment and issuance of an aggregate of 950 new shares of AVIC International Marine Engineering Pte. Ltd. ( AIME ), an indirect wholly-owned subsidiary of the Group, as share consideration to the shareholders of Deltamarin amounting to an aggregated issue price of RMB50,691,000 (EUR6,129,000). Goodwill of RMB120,891,000 arising from the acquisition was attributable to economies of scale expected from combining the operations of the Group and Deltamarin. 348 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

278 50 (b) 50 BUSINESS COMBINATIONS (continued) (b) Operating lease commitments (continued) Consideration: At 4 January 2013 RMB 000 Cash 214,866 AIME Issuing new shares of AIME 50, ,557 Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents 44,347 Trade and other receivables 79, Intangible assets (Note 10) 98, Property, plant and equipment (Note 11) 4,413 15(b) Investments accounted for using the equity method (Note 15(b)) 3, Deferred income tax assets (Note 20) 243 Trade and other payables (59,596) 20 Deferred tax liabilities (Note 20) (25,887) Total identifiable net assets 144,666 9 Goodwill (Note 9) 120, , ,347,000 27,009,000 Revenue of RMB288,347,000 included in the consolidated income statement from 4 January 2013 to 31 December 2013 was contributed by Deltamarin. Deltamarin contributed profit of RMB27,009,000 over the same period

279 50 (b) 96,690,000 70% 50 BUSINESS COMBINATIONS (continued) (b) On 30 June 2013, AVIC Resources, a wholly owned subsidiary of the Group, completed the acquisition of 70% of the equity interests of Shandong Luyuan Mining Investment Co., Ltd. ( ) ( Shandong Luyuan ) at a consideration of RMB96,690,000. The following table summarises the consideration paid for Shandong Luyuan, fair value of the assets acquired and liabilities assumed at the acquisition date. Consideration: At 30 June 2013 RMB 000 * Cash* 96,690 Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents 3,005 Trade and other receivables 62,812 8 Exploration and extraction rights (Note 8) 240, Property, plant and equipment (Note 11) 2,267 Trade and other payables (125,933) 20 Deferred tax liabilities (Note 20) (44,683) Total identifiable net assets 138,128 Non-controlling interests (41,438) 96,690 * * Consideration has been paid in ,050,000 No revenue included in the consolidated income statement since 1 July 2013 was contributed by Shandong Luyuan. Shandong Luyuan contributed losses of RMB2,050,000 over the same period. 350 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

280 51 75% 25% 51 SIGNIFICANT RELATED PARTY TRANSACTIONS The Group is controlled by AVIC International, a statecontrolled company established in the PRC which directly and indirectly hold 75% of the Company s shares. The remaining 25% of the shares are widely held. The directors regard AVIC International and Aviation Industry Corporation of China ( Aviation Industry ) as the holding company and ultimate holding company of the Group respectively. Save as disclosed elsewhere in the financial statements, the following is a summary of significant related party transactions entered into in the ordinary course of business between the Group and its related parties and the balances arising from related party transactions: (a) (a) Transactions with related parties Group RMB 000 RMB 000 Revenue: Sale of goods Associates 895, ,355 Fellow subsidiaries of Aviation Industry 385,380 90,787 Jointly controlled entities 48, ,195 Non-controlling interests 21, ,960 Ultimate holding company ,804 Holding company 290 1,442 1,351,125 1,577,543 Rental income Fellow subsidiaries of Aviation Industry 12,055 10,421 Associates 1,509 1,657 13,564 12,

281 51 (a) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (a) Transactions with related parties (continued) Group RMB 000 RMB 000 Engineering and management income Fellow subsidiaries of Aviation Industry 16, ,393 Holding company 55 3,299 Associates 1,800 16, ,492 Other service income Fellow subsidiaries of Aviation Industry 46,062 19,670 AVIC Shenzhen 2,830 Associates 9,396 4,096 Jointly controlled entities Holding company ,103 Ultimate holding company ,687 46,558 Purchase of goods and services: Purchases of goods Fellow subsidiaries of Aviation Industry 364, ,477 Associates 448, ,321 Non-controlling interests 1,793, ,117 2,637, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

282 51 (a) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (a) Transactions with related parties (continued) Group RMB 000 RMB 000 Purchases of engineering and management services Fellow subsidiaries of Aviation Industry 64,043 25,639 Associates 23,786 Non-controlling interests 227 Jointly controlled entities 4,375 88,056 30,014 Rental fee and property management fee Fellow subsidiaries of Aviation Industry 3,267 6,275 Other service costs Fellow subsidiaries of Aviation Industry 40,185 44,729 AVIC Shenzhen 8 40,185 44,737 Interest expenses Fellow subsidiaries of Aviation Industry 93,104 82,009 Holding company 46,478 47,075 AVIC Shenzhen 21,369 24, , ,

283 51 (a) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (a) Transactions with related parties (continued) Group RMB 000 RMB 000 Acquisition of investment (i) Holding company (i) 42,000 (ii) Disposed of investment Fellow subsidiaries of Aviation Industry (ii) 49,230 41,890 (i) 40% 42,000,000 30(a) (iv) (i) On 12 December 2013, the Company purchased from AVIC International 40% shares in its subsidiary, RED Company, at a consideration of RMB42,000,000 (Note 30(a)(iv)). (ii) 5% 49,230,000 (ii) Beijing Company entered into a share transfer agreement with Tianjin Tianli Aviation Electro-mechanical Co., Ltd. ( Tianjin Tianli ) ( ) on 7 November, As at 31 December 2013, Beijing Company had disposed of all its 5% share in Shanghai Schneider Low Voltage Terminal Electric Co., Ltd. ( ) with the consideration RMB49,230,000 to Tianjin Tianli. 354 AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

284 51 (a) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (a) Transactions with related parties (continued) Transactions with government related entities: The Company is a state-owned enterprise ultimately controlled by the PRC government. The PRC government controls a significant portion of the productive assets and entities in the PRC. The transactions between the Company and other PRC government controlled entities are related party transactions. These transactions mainly include depositing cash in and obtaining borrowings from certain stated-owned banks. Nearly all of the Company s cash were deposited in and all of the borrowings were borrowed from state-owned banks during the year. (b) (b) Balances with related parties The balances with related parties companies are unsecured, non-interest bearing and repayable on demand. Group RMB 000 RMB 000 Other receivables Associates 217, ,435 Fellow subsidiaries of Aviation Industry 214, ,314 Holding company 89, ,265 AVIC Shenzhen 11,500 11,700 Jointly controlled entities 5 5,882 Non-controlling interests 387, ,202 1,324,885 Interest receivables Associates 14,041 6,

285 51 (b) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (b) Balances with related parties (continued) Group RMB 000 RMB 000 Accounts receivable Fellow subsidiaries of Aviation Industry 254, ,083 Associates 211, ,126 Jointly controlled entities 27,579 31,816 Holding company 10,569 17,737 Ultimate holding company Non-controlling interests 285, , ,769 Prepayments Associates 53,255 2,489 Fellow subsidiaries of Aviation Industry 2,356 5,107 Holding company 1,969 Non-controlling interests 169,024 57, ,620 Accrual and other payables Fellow subsidiaries of Aviation Industry 54, ,398 Holding company 42, ,272 AVIC Shenzhen 8,280 8,377 Associates 437 7,326 Non-controlling interests 21,000 Joint ventures 3, , , AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

286 51 (b) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (b) Balances with related parties (continued) Group RMB 000 RMB 000 Accounts payable Associates 457, ,933 Fellow subsidiaries of Aviation Industry 51,733 38,161 Holding company Non-controlling interests 209,561 Jointly controlled entities 1, , ,945 Advance from customers Fellow subsidiaries of Aviation Industry 137, ,193 Associates 61, ,302 Holding company 4,398 3,864 Non-controlling interests 49,368 Jointly controlled entities 27, , ,165 Interest payables Holding company 10,479 Fellow subsidiaries of Aviation Industry 1, AVIC Shenzhen Non-controlling interests 1,435 12,990 3,279 Other non-current liabilities Holding company 800,000 1,050,000 AVIC Shenzhen 100, , ,000 1,150,

287 51 (c) 51 SIGNIFICANT RELATED PARTY TRANSACTIONS (continued) (c) Borrowings from related parties Group 2012 Additions Repayment 2013 RMB 000 RMB 000 RMB 000 RMB (a) Included in other payables (Note 36(a)) Fellow subsidiaries of Aviation Industry 472, ,433 (761,027) 104,554 Non-controlling interests 4,280 14,875 19,155 AVIC Shenzhen 353,345 3,692 (357,037) Holding company 17, ,422 (250,000) 75, , ,422 (1,368,064) 198, Included in borrowings (Note 32) Fellow subsidiaries of Aviation Industry 951,767 1,462,845 (988,091) 1,426,521 (d) (d) Loan to related parties Group 2012 Additions Repayment 2013 RMB 000 RMB 000 RMB 000 RMB (b) Included in other receivables (Note 24(b)) Associates 342,136 96,772 (217,086) 221,822 Non-controlling interests 8,000 8,000 AVIC Shenzhen 18,055 (18,055) 360, ,772 (235,141) 229, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

288 52 KHD 20% AVIC Engineering KHD KHD19.93% AVIC Engineering KHD 89.02% KHD KHD 52 EVENTS AFTER THE REPORTING PERIOD Max Glory Industries Limited ( Max Glory ), an indirect wholly-owned subsidiary of the Company incorporated in Hong Kong with limited liability, originally held 20% issued share capital of KHD. On 11 October 2013, AVIC Engineering entered into twelve agreements each with a original shareholder of KHD to acquire altogether 19.93% of the issued share capital of KHD ( Agreement Purchasing ). Following the Agreements Purchasing, AVIC Engineering launched an offer to acquire the remaining shares together with Singapore Companies which are essentially affiliated to the Company ( Offer Purchasing ). As at 13 January 2014, the Agreements Purchasing and the Offer Purchasing have been completed, the Group and the Singapore Company shareholding in KHD increased to 89.02%. The Group will obtain control over KHD when it appoints the majority members of the supervisory board and management board of KHD CHANGES IN ACCOUNTING POLICIES The Group has adopted IAS 19 (Revised 2011), Employee benefits on 1 January The new accounting policy has had the following impact on the financial statements. (a) 19 (a) Adoption of IAS 19 (revised 2011) The revised employee benefit standard introduces changes to the recognition, measurement, presentation and disclosure of post-employment benefits. The standard also requires net interest expense/income to be calculated as the product of the net defined benefit liability/assets and the discount rate as determined at the beginning of the year. The effect of this is to remove the previous concept of recognising an expected return on plan assets. The effect of the changes to the accounting policy is shown in the following tables

289 53 53 CHANGES IN ACCOUNTING POLICIES (continued) Impact of change in accounting policy on consolidated balance sheet As at 31 December Adopt IAS 19 (revised 2011) As at 31 December 2013 as presented As at 31 December 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 31 December 2012 as presented (restated) As at 1 January 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 1 January 2012 (restated) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 ASSETS Non-current assets Land use rights 1,438,645 1,438,645 1,293,452 1,293,452 1,214,682 1,214,682 Exploration and extraction rights 836, , , , , ,906 Goodwill 385, , , , , ,236 Intangible assets 244, , , , , ,236 Property, plant and equipment 8,536,709 8,536,709 8,673,372 8,673,372 9,659,889 9,659,889 Investment properties 2,153,150 2,153,150 2,099,314 2,099,314 2,030,986 2,030,986 Construction-in-progress 1,879,385 1,879,385 1,252,051 1,252,051 1,128,005 1,128,005 Investments accounted for using the equity method 4,386,692 4,386,692 4,298,291 4,298,291 3,738,157 3,738,157 Trade and other receivables 248, , , , , ,772 Available-for-sale financial assets 291, , , , , ,046 Deferred income tax assets 311, , , , , ,369 Other non-current assets 2,046,166 2,046, , , , ,120 22,757, ,758,020 19,765, ,765,761 19,625, ,625,404 Current assets Inventories 4,614,870 4,614,870 3,825,057 3,825,057 3,802,532 3,802,532 Properties under development 2,317,086 2,317,086 1,256,078 1,256, , ,427 Trade and other receivables 10,368,510 10,368,510 9,525,525 9,525,525 8,309,786 8,309,786 Held-to-maturity financial assets 15,000 15,000 Amounts due from customers for contract work 1,493,175 1,493,175 1,161,194 1,161, , ,666 Derivative financial instruments 5,405 5,405 3,110 3,110 Pledged bank deposits 641, , , , , ,414 Cash and cash equivalents 4,802,843 4,802,843 4,038,225 4,038,225 3,249,891 3,249,891 24,243,315 24,243,315 20,319,752 20,319,752 17,231,716 17,231,716 Total assets 47,000, ,001,335 40,085, ,085,513 36,856, ,857, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

290 53 53 CHANGES IN ACCOUNTING POLICIES (continued) As at 31 December Adopt IAS 19 (revised 2011) As at 31 December 2013 as presented As at 31 December 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 31 December 2012 as presented (restated) As at 1 January 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 1 January 2012 (restated) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 EQUITY Capital and reserves attributable to owners of the Company Share capital 1,110,632 1,110,632 1,110,632 1,110, , ,367 Share premium 1,294,633 1,294,633 1,294,633 1,294, , ,513 Perpetual subordinated convertible securities 2,781,674 2,781,674 2,781,674 2,781,674 Other reserves (402,391) (1,810) (404,201) (378,924) (1,151) (380,075) 3,816,137 3,816,137 Retained earnings 3,532,315 2,764 3,535,079 2,764,599 (1,771) 2,762,828 1,794,760 (2,634) 1,792,126 8,316, ,317,817 7,572,614 (2,922) 7,569,692 6,638,777 (2,634) 6,636,143 Non-controlling interests 4,399, ,399,803 3,989,079 (2) 3,989,077 4,078, ,078,722 Total equity 12,716, ,717,620 11,561,693 (2,924) 11,558,769 10,717,493 (2,628) 10,714,865 LIABILITIES Non-current liabilities Borrowings 6,182,333 6,182,333 4,044,826 4,044,826 4,962,303 4,962,303 Deferred income tax liabilities 624, , , , , ,800 Deferred income on government grants 570, , , , , ,231 Provisions 10,360 10,360 Trade and other payables 44,871 44,871 46,128 46,128 24,335 24,335 Retirement and other supplemental benefit obligations 43,323 (454) 42,869 48,064 1,212 49,276 46,595 2,627 49,222 Other non-current liabilities 956, ,152 1,202,424 1,202, , ,363 8,422,015 (454) 8,421,561 6,419,677 1,212 6,420,889 6,299,987 2,627 6,302,

291 53 53 CHANGES IN ACCOUNTING POLICIES (continued) As at 31 December Adopt IAS 19 (revised 2011) As at 31 December 2013 as presented As at 31 December 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 31 December 2012 as presented (restated) As at 1 January 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) As at 1 January 2012 (restated) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Current liabilities Trade and other payables 12,697,401 12,697,401 11,232,783 11,232,783 10,500,403 10,500,403 Amounts due to customers for contract work 194, , , , , ,180 Borrowings 12,751,554 12,751,554 10,561,740 10,561,740 8,205,377 8,205,377 Derivative financial instruments Current income tax liabilities 214, , , , , ,043 Retirement and other supplemental benefit obligations 4,664 4,664 2,192 2,180 4,372 3, ,197 25,862,154 25,862,154 22,103,675 2,180 22,105,855 19,839, ,839,641 Total liabilities 34,284,169 (454) 34,283,715 28,523,352 3,392 28,526,744 26,139,276 2,979 26,142,255 Total equity and liabilities 47,000, ,001,335 40,085, ,085,513 36,856, ,857, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013

292 53 53 CHANGES IN ACCOUNTING POLICIES (continued) Impact of change in accounting policy on the consolidated income statement For the year ended 31 December Adopt IAS 19 (revised 2011) For the year ended 31 December 2013 as presented 19 For the year ended 31 December 2012 (previously stated) Adopt IAS 19 (revised 2011) For the year ended 31 December 2012 as presented (restated) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Revenue 33,437,688 33,437,688 31,252,572 31,252,572 Cost of sales (29,186,281) (29,186,281) (27,343,668) (27,343,668) Gross profit 4,251,407 4,251,407 3,908,904 3,908,904 Distribution costs (1,303,959) (1,303,959) (1,191,380) (1,191,380) Administrative expenses (2,158,496) 537 (2,157,959) (1,743,656) 1,151 (1,742,505) Fair value gain on investment properties 56,942 56, , ,332 Other income 740, , , ,367 Other gains net 113, ,538 37,038 37,038 Operating profit 1,699, ,700,425 1,800,605 1,151 1,801,756 Finance income 178, , , ,328 Finance costs (960,719) (960,719) (973,586) (973,586) Finance costs net (782,076) (782,076) (830,258) (830,258) Share of profit of investments accounted for using the equity method 526, , , ,045 Profit before income tax 1,444, ,444,722 1,447,392 1,151 1,448,543 Income tax (charge)/credited (280,502) 455 (280,047) (182,014) (288) (182,302) Profit for the year 1,163, ,164,675 1,265, ,266,

293 53 53 CHANGES IN ACCOUNTING POLICIES (continued) Impact of change in accounting policy on the consolidated statement of comprehensive income For the year ended 31 December Adopt IAS 19 (revised 2011) For the year ended 31 December 2013 as presented For the year ended 31 December 2012 (previously stated) 19 Adopt IAS 19 (revised 2011) For the year ended 31 December 2012 as presented (restated) RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 RMB 000 Profit for the year 1,163, ,164,675 1,265, ,266,241 Other comprehensive income: Items that will not be reclassified to profit or loss Remeasurements of post-employment benefit obligations, gross of tax 3,476 3,476 (1,564) (1,564) Remeasurements of post-employment benefit obligations, tax (515) (515) Gain on transfer of owner-occupied property to investment property, gross of tax 11,773 11,773 6,831 6,831 Gain on transfer of owner-occupied property to investment property, tax (2,943) (2,943) (1,708) (1,708) Items that may be subsequently reclassified to profit or loss Fair value gains on available-for-sale financial assets, gross of tax 10,864 10, Fair value gains on available-for-sale financial assets, tax (2,716) (2,716) (46) (46) Recycle of fair value gains on availablefor-sale financial assets, gross of tax (5,430) (5,430) Recycle of fair value gains on availablefor-sale financial assets, tax 1,357 1,357 Share of an associate s other comprehensive income (325) (325) Currency translation differences (20,403) (20,403) 24,267 24,267 Other comprehensive income for the year, net of tax (7,823) 2,961 (4,862) 29,527 (1,159) 28,368 Total comprehensive income for the year, net of tax 1,155,860 3,953 1,159,813 1,294,905 (296) 1,294, AVIC INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 2013