Hong Kong Aircraft Engineering Company Limited Annual Report 2003 ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ Group Profile එ྆ᓯʍ
يHong Kong Aircraft Engineering Company Limited, ࠗಋࠔዀɮೡτࠉʔ̇ȽͲଈ˚߬ॾ one of the world’s leading aeronautical ɮೡඑ྆ɾȹcพ৻ᆲ˳ܢၐ࠳dҝ engineering groups, is engaged in the d࠳ଉၤɣ࠳ਆ͂ࠔዀʥࠔዀͧe maintenance, modification, repair and overhaul of commercial aircraft and their components. ʔ̇˚߬˞ࠗಋਝዀݯਥΔcЎ̯
ʥࠗಋپɻਝʑΔ෨כIt is principally based at Hong Kong’s International ͛༦ͳઁʔ̇ ৻eרAirport, but through jointly controlled companies ዀ˞̔ΔʿొԜ also provides services in Xiamen, Mainland China and at off airport locations in Hong Kong. يࠗಋਝዀτʒɊॾכʔ̯̇ ʔ۪̇ʸcτȹॶਪొԜ၃ࠔዀၐ At Hong Kong’s International Airport, where it has ॾዀ༦ྊʥҌֲܢ˳cܪ৻ؿஉרabout sixty airline customers, it is the only aircraft ࠳ ؿʻeܪ৻cԎͲࠍొԜዀஉר maintenance facility able to offer a comprehensive package covering transit and technical services with full hangar support. ዀ˿ࢀढ़ɍܼͲࠍສᏎ࠳ܼؿᄤ ࠔዀc˞ʥ̊̔ԭܼࠔዀؿዀʗe The hangar has the capacity to accommodate ዀஉτȹዟऋؿݠ৽βዀѮᙶຫc three wide-bodied aircraft fully docked and an additional two nose-in, with a unique mobile tail ొԜͲࠍؿርᇖʥᏎ࠳ɮАܼe̯ʔ̇ ৻cרɾࠔዀొԜێenclosure to provide full cover and access staging. Ᏽႏ˿ݯΛိᗘ ɻʱيࠔዀ˞ϭؐࠑ777dێIt has the necessary approvals to handle a wide ؐͅࠑ747 ೩ณȹˤێvariety of aircraft types from Boeing 747 to new ɡA320/321dA330A340 generation aircraft such as B777 and the Airbus ͛˿൬Ϸؐࠑܪࠔዀɺ೩e̯ʔ̇ؿஉ A320/321, A330 and A340. The facility also ஒԭ͂ዀؿҝஒዀɮೡe۪ێ747-200 undertakes B747-200 combi to freighter SHANDONG ɬ conversions. • ܪʔ̇உௐѧഁؿͧʥॾཋɣ࠳உ̯ ࠗಋੀ߶ዌc୮͛உτࠗͅಋॾ CHINA ɻਝכThe extensive component and avionics overhaul Ͻ ৻τࠉʔ̇Ꮺ༜ؿרೕ৽ዀၐ࠳ي facilities are situated at Tseung Kwan O in Hong پKong, as is the Rolls-Royce engine service centre XIAMEN ෨ • ৻ɻʶeרഠʵᎽ operated by Hong Kong Aero Engine Services • HONG KONG ࠗಋ Limited. پɻਝ෨כʪ̀ࠔዀɮೡτࠉʔ̇پ෨ ɻʱɡࠔዀ൬ϷيTaikoo (Xiamen) Aircraft Engineering Company ዀᏪ༜cݯؐࠑʥ ၐ࠳ɮೡcԎొԜȹඖݯؐࠑ747-ێLimited operates at Xiamen’s airport, where it ɣ ዀҝஒዀؿི߮eʔ۪ێprovides heavy maintenance on Boeing and 200/300 Airbus aircraft and offers a B747-200/300 passenger ɻਝʑΔɺΔᒨొԜ̔ඵၐ࠳כ͛̇ to freighter conversion programme. It also offers ৻eר line maintenance services at various locations in Mainland China. Highlights ࿂߬
2003 2002 Change ᛰఝ (in HK$ Million) ಋྫྷϛຒʏ
Turnover 1,987 2,078 -4.4% Ꮺพᐢᔾ
Net operating profit 104 276 -62.3% Ꮺพ૱ึС
Share of after tax results of material ᎶЌ˚߬ͳઁʔ̇ jointly controlled companies: ೢ܃พᐜi ೕ৽ዀيHong Kong Aero Engine Ðࠗಋॾ – ৻τࠉʔ̇רServices Limited 158 141 12.1% ၐ࠳
ʪ̀ࠔዀɮೡپTaikoo (Xiamen) Aircraft Ð෨– Engineering Company Limited 81 71 14.1% τࠉʔ̇
Profit attributable to shareholders 345 465 -25.8% ٖᎶЌึС
Dividends 306 539 -43.2% ٖࢠ
Shareholders’ equity 2,983 3,177 -6.1% ٖٖᚬ
number of shares in ’000) ٖͫᅕ͌˞ɝٖ߮)
Average number of shares in issue 166,325 166,330 0.0% ̡яɰೕϷٖͫᅕ͌
(in HK$) ಋʏ
СޔEarnings per share 2.07 2.80 -26.1% Ұٖ
Dividends per share 0.84 0.74 13.5% Ұٖٖࢠ
Special dividend per share 1.00 2.50 -60.0% ҰٖऋПٖࢠ
Shareholders’ equity per share 17.93 19.10 -6.1% Ұٖٖٖᚬ
Contents ͌፣
Ten year financial summary 2Ɋαল৻ล߬ Chairman’s statement 4˚ంй࣊ Corporate governance 15ʔ̇ဳ؝ Directors 17໎ԑ Executive officers 19ϷܧɁࡗ Corporate information 20ʔ̇༅ࢿ Report of the directors 21໎ԑѫంй Consolidated profit and loss account 28၃ฌऩሏ ٲConsolidated balance sheet 29၃༅ଐ߲ඦ ٲCompany balance sheet 30ʔ̇༅ଐ߲ඦ ٲݚ൴ټConsolidated cash flow statement 31၃ଊ ٲConsolidated statement of changes in equity 32၃ٖᚬᛰ৽ ഽڃNotes to the accounts 33ሏ͌ ᙔʔ̇ͳઁʔ̇ڃPrincipal subsidiary and jointly controlled companies 51˚߬ Auditors’ report 52࣏ᅕంй࣊
Grateful thanks to the Employees’ Welfare Society Photography Club for supplying the pictures in this annual report. სᑢࡗɮါСผᙘᄧୂݯ̯ంй࣊ొԜ྇ːe Turnover Profit attributable to shareholders Ꮺพᐢᔾ ٖᎶЌึС Total HK$M / ᐢ߮ಋྫྷϛຒʏ Total HK$M / ᐢ߮ಋྫྷϛຒʏ
2,500 500
2,000 400
1,500 300
1,000 200
500 100
0 0 94 95 96 97 98 99 00 01 02 03 94 95 96 97 98 99 00 01 02 03
Ten Year Financial Summary Ɋαল৻ล߬
2003 2002 2001 2000 1999 (in HK$ Million)
Turnover 1,987 2,078 1,994 1,821 1,959 Net operating profit 104 276 127 262 – Share of after tax results of jointly controlled companies 263 227 197 134 61 Profit attributable to shareholders 345 465 312 400 59 Dividends 306 539 108 106 81
Funds employed: Fixed assets 1,513 1,597 1,636 1,708 1,773 Other assets 1,923 2,083 1,549 1,229 1,137 3,436 3,680 3,185 2,937 2,910 Less : current liabilities 348 394 360 313 288 3,088 3,286 2,825 2,624 2,622
Financed by: Shareholders’ equity 2,983 3,177 2,713 2,509 2,504 Minority interest 5 5555 Long term loan 100 104 107 110 113 3,088 3,286 2,825 2,624 2,622
(in HK$)
Earnings per share 2.07 2.80 1.87 2.40 0.32 Dividends per share 0.84 0.74 0.65 0.61 0.57 Special dividend per share 1.00 2.50 – – – Shareholders’ equity per share 17.93 19.10 16.30 15.02 13.53
Dividend cover – times 2.46 3.78 2.88 3.79 0.73
Note: The presentation of certain figures for prior years has been changed to conform with that used for the current year.
2 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Earnings and dividends per share Shareholders’ equity per share СʥҰٖٖࢠ ҰٖٖٖᚬޔҰٖ
Total HK$ / ᐢ߮ಋྫྷʏ Total HK$ / ᐢ߮ಋྫྷʏ Earnings ޔС Dividends ٖࢠ 20 3.00
2.50 15 2.00
1.50 10
1.00 5 0.50
0 0 94 95 96 97 98 99 00 01 02 03 94 95 96 97 98 99 00 01 02 03
1998 1997 1996 1995 1994 ಋྫྷϛຒʏ
2,028 2,375 2,462 2,391 2,418 Ꮺพᐢᔾ 117 323 573 397 500 Ꮺพ૱ึС
43 40 (6) 8 (2) ᎶЌͳઁʔ̇ೢ܃พᐜ ᎶЌึСٖ 414 331 495 320 146 ࢠٖ 174 148 148 148 111
༜͂iټ༅ 1,895 1,057 401 324 367 ՞ց༅ଐ 1,426 1,940 2,428 2,068 1,913 ԯˢ༅ଐ 3,321 2,997 2,829 2,392 2,280 ಕiݚ৽߲ඦ 433 364 455 455 659 2,662 2,542 2,374 2,028 1,847
༅̯Ԟi ٖᚬٖ 1,842 2,023 2,369 2,537 2,541 5555ʭᅕٖᚬऩ 5 ౨ࠥಁٽ – – – – 116 2,662 2,542 2,374 2,028 1,847
ಋʏ
СޔҰٖ 2.41 2.23 2.67 1.73 0.79 Ұٖٖࢠ 0.94 0.80 0.80 0.60 0.44 ҰٖऋПٖࢠ––––– Ұٖٖٖᚬ 9.95 10.93 12.79 13.70 13.72
Сྦྷٖࢠˈଅࠛᅕޔ 2.38 2.24 3.34 2.16 1.31
ȹߎeؒ͐ٲɰʀҡҝcԚɾၤ̯α۹ֺઔ͂ɾؒ͐ٲഽi༦֡α۹ߗɳᅕΥɾڃ
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 3 พᐜ Сݯಋྫྷɍึ܃α۹ɾٖᎶЌೢ̯ ყ̒ɝʄϛຒʏcϊพᐜ༖ɐα۹Ɏࠌ ϛʗɾɀɊʒe
ᅸcɀཌྷཌྷދاْێڈʑᕶೕਂכͅ พϤӰܰ˨يɍαྦྷ̯ʔ̇ʥࠗಋॾ ൬ˮࠗܮChairman’s Statement ϣؿȹαe̯α۹ɾพᐜʦ ంй࣊ ಋਝዀɾॾऒᅕ͌τֺɎࠌc˞ʥ˚ ਥΔၐ࠳ᚋ۪ᅗࣂੀʗࠔዀؠcኒ ၐ࠳ɮೡ֝౨൬Ϸeϊ̔cɀཌྷێߎɣ αܧੀ༦˾ᅕলܢ˳Results ཌྷɀα۹ɾพᐜ ۹ݯֶ̰ॶ੪ᅕνሏɾᎶν۪ʸಁඖʥ Profit after tax attributable to shareholders for the year was ΦஒంᄠɾๅௐಋྫྷȼɝຒʏΑᅆeɀ HK$345 million, which represented a decrease of 26% from ݯๅௐʻಋྫྷڬᎶᅕΥޚཌྷཌྷɍαɾ the previous year. ȹϛຒʏe
2003 was a challenging year for the Company and the ɀཌྷཌྷɍαכԞϬͳઁʔ̇ɾพᐜᘆ aviation industry in Hong Kong as a result of the SARS outbreak Сึ܃cΈͳઁʔ̇ɾೢٽංᘗᙩᄈ in the region, and the result for the year reflects the drop in ͅಋྫྷɀყɀɝȼϛຒʏᄈ˱ϭಋྫྷɀ aircraft movements through Hong Kong International Airport ʪ̀ࠔዀɮپყʒɝɍϛຒʏeԞϬ෨ and the deferral of heavy maintenance due to base ʪ̀ࠔዀɮೡʔ̇ɾپೡτࠉʔ̇෨ customers temporarily grounding some of their aircraft. In พᐜᘆͅಋྫྷȼɝȹϛຒʏᄈ˱ϭಋ addition, the 2002 result included an amount of HK$70 million ྫྷɄɝȹϛຒʏcԯɻ˳ܢԞϬˮਕ comprising the release of provisions made in previous financial τࠉʔ̇͂پ৻෨רཋࣩೕ৽ዀ͂ periods to cover potential problems in collecting full amounts ڈ৻ʔ̇ᚬऩֺɾרཋࣩೕ৽ዀ due from customers and stock obsolescence. The يСಋྫྷȹɝɀϛຒʏhϤࠗಋॾึֲ corresponding figure in 2003 was a charge of HK$1 million. ೕ৽ي৻τࠉʔ̇ࠗಋॾרೕ৽ዀၐ࠳ ݯಋྫྷȹڬ৻ʔ̇ɾพᐜᘆרዀၐ࠳ The contribution from jointly controlled companies continued ყʄɝɄϛຒʏɀཌྷཌྷɀαݯಋྫྷȹყ to grow in 2003, with their combined share of profits after tax ̒ɝȹϛຒʏe increasing from HK$227 million to HK$263 million. The contribution from Taikoo (Xiamen) Aircraft Engineering Company Limited (“TAECO”) increased from HK$71 million to HK$81 million, including a non-recurring profit of HK$12 million from its sale of an interest in GE Engine Services (Xiamen) Company Limited (“GEES”), while that from Hong Kong Aero Engine Services Limited (“HAESL”) was HK$158 million (2002: HK$141 million).
4 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Aircraft washing at Chek Lap Kok, Hong Kong ࠗಋӵ㣂ӯ൬Ϸࠔዀݟכ
พ৻Αᚋ Review of Operations ̯ʔ̇ܰȹΕࠗಋਝዀొԜͲࠍ The Company is the sole provider of comprehensive aircraft maintenance at Hong Kong International Airport. The ˳ܪ৻ɾʔ̇e̯ʔ̇ɾஉרࠔዀၐ࠳ ܢȹ˿ѧͲࢀढ़ɍܼᄤࠔዀɾ௰ȹ Company’s premises comprise a single hangar capable of ᗐɾၐ࠳ɮʥፒʔ۩cʥϽ fully enclosing three wide-bodied aircraft, together withޚዀ ੀ߶ዌȹᄝஉτͧၤॾཋɣ࠳ɮ associated workshops and offices, and a five-storey buildingכ at Tseung Kwan O housing component and avionic overhaul כፒʔ۩ɾʄᄙঢ়ᅢΧe̯ʔ̇ܧϷ ዀɣᅢ͛τЌ͂ᅢࠍe workshops and administration offices. The Company also occupies space at the airport terminal.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 5 Chairman’s Statement ˚ంй࣊
Line Maintenance The line maintenance division employs around 1,600 people ̔ඵၐ࠳ (2002: 1,550) who provide a comprehensive range of technical ̔ඵၐ࠳͂ࡗɮȹɝʒϛɁɀཌྷ ࠗಋਝכand non-technical services to airlines operating through Hong ཌྷɀαݯȹɝʄϛʄɊɁcݯ ʔ̇ొԜͲࠍɾيKong International Airport. The Company is the main provider ዀᏪ༜ॾऒɾॾ ৻eΕࠗಋc̯ʔרҌֲڈof such services in Hong Kong and hence the division’s Ҍֲʥ ৻ɾ˚߬ԜᎶਆcΐϊרperformance is primarily related to the number of flights ̇ܰొԜϊᗘ ଊ˚߬Շ൬ˮዀɾॾऒٲɾพᐜپthrough the airport. In 2002, the average number of aircraft handled daily was 200, and this level of activity continued ᅕ͌ᄧᚊeΕɀཌྷཌྷɀαc̡яҰˀ୮ ᙩϭܛinto early 2003. However, due to SARS this number dropped ଉࠔዀᅕ͌ݯɀϛܼcϊɮೡ൴ ᅸދاْێڈeಳϤcٱto 107 in May, before gradually returning to a normal level by ɀཌྷཌྷɍα ʄ˂ͫɎൡϭȹϛཌྷכabout the end of September. The average number of aircraft ᕶೕኒߎϊᅕΥ handled daily during the last quarter of the year was 212, a ȼܼcϭȾ˂֛̞́նΑనϭ̳ 6% increase compared with 2002. This level of activity is ˋ̡e̯α܃ȹտ̡яҰˀ୮ଉࠔዀ ˈexpected to continue into 2004, although this market in Hong ᅕ͌ݯɀϛȹɊɀܼcၤɀཌྷཌྷɀα Kong continues to be price-sensitive, with consequent pressure ༖ᄈ˱ϛʗɾʒeᒖಳΕࠗಋcძࣟʋ Շ̟ؐ৽ᄧᚊcϤྦྷᖾСᅼמon margins. ࢀ ࿚ιᎦɈcЎད౨ϊɮೡ൴˿ܛᙩϭɀ ཌྷཌྷ̒αe
Heavy maintenance at Chek Lap Kok, Hong Kong ၐ࠳ɮೡێࠗಋӵ㣂ӯ൬Ϸɣכ
6 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ਥΔၐ࠳ ਥΔၐ࠳͂ࡗɮȹɝཌྷɀɊɁɀ ཌྷཌྷɀαݯȹɝȹϛɍɊɁcݯԗፆ̯ ৻ɾ۪ʸ൬ϷͲࠍ Base Maintenanceרʔ̇ొԜ၃ʻ ɾࠔዀ The base maintenance division employs around 1,020 peopleێɾց౨ၐ࠳Ꮞ݅cԎݯɺᗘ who provide customers that rely on the Company (1,130 :2002) پ൬Ϸց౨Ꮞ݅dҝʥɣ࠳ɮೡe ൬Ϸɾɮೡɻcϛʗɾ̒Ɋ̒ȽԞϬ for comprehensive support with a full range of scheduled ʔ̇cʗ maintenance checks and in addition undertake periodicيɍࡼᏪ༜ց౨ॾऒɾࠗಋॾ ʔ̇ checks, modifications and overhaul work on a wide variety ofيʔ̇dࠗಋജ̵ॾيПݯਝ࣮ॾ ಲሃΕძࣟdዀ aircraft types. Approximately 44% of the division’s work is forپʔ̇eيʥಋ᎘ॾ :ංd՚ᔝࣂංʥɮᖚሔॖɐӷ the three scheduled airlines operating out of Hong Kongي͂˿ Cathay Pacific Airways, Air Hong Kong and Dragonair. It ک֛˂eዀΕȾجЄพᘏͨވ˖ၤ Ԛ͂൴ɺ competes on price, availability of space, turnround time andڬȹտ܃Ԛ͂൴ᐥΛcЎΕ ੀΣ˞֡ঁ quality of workmanship with other Maintenance and Repairܪӷeད౨ɀཌྷཌྷ̒αංஉ Է˨ͫԚ͂eɀཌྷཌྷɍαਕˮɾɮࣂ Organisations worldwide. The hangar was busy until the end ݯȹϛɍɊʄຒɩࣂc༖ɀཌྷཌྷɀαಕ of September, but has been under-utilised during the last ʭϛʗɾɀeΕଊࣂɾረࠤᇁԹɎc quarter. It is expected that the facility will return to full utilisation ঢ়˿͂ɮࣂݯȹϛ̒Ɋຒɩࣂcԯɻ˳ in 2004. Man-hours sold in 2003 were 1.35 million, a 2% decrease ܢɍɊຒɩࣂ˱ऒɮࣂe when compared with 2002. Operating with the existing shift patterns, the maximum available man-hours is 1.4 million, ͧʥॾཋɣ࠳ which includes 0.3 million man-hours of overtime. ੀ߶ዌȹᄝʄᄙঢ়ᅢΧcኟכɣ࠳Ͻ ංcԎ Component and Avionics Overhaulيτ༩ȼɝ̡ʿϝɾଊˤʝɮ ͂ࡗɮɀϛɀɊɁe፭ട̔ඵၐ࠳ The overhaul division occupies more than 7,000 square metres ɀཌྷཌྷɍαංֺ൬Ϸ of modern workshop space in a five-storey building at TseungכʥਥΔၐ࠳ ֺ࠳ଉɾͧᅕ Kwan O and employs around 220 people. With reduced workپɾɮೡ൴ಕʭcϊ ൴͛τֺɎࠌcྦྷᏪพึСɾᘆΐϤ being undertaken by both line and base maintenance during ಕʭϛʗɾʄɊȼeϊ̔cိိ༌ോᛷ 2003, this division experienced a drop in the number of ৻̟ components to be repaired, and a 57% decrease inר܃ࡈͧ́ଐਆቀ෮ొʠԯΕਕ͐ ɾЌτଅcܨϊ͚̯ͅʔ̇୮ଉɾ contribution to operating profit. In addition, it is becoming ͧᅕ൴ੀ፭ϤɎࠌe apparent that Original Equipment Manufacturers have decided to increase their presence in the after-sales service market, with a consequent drop in volume of the number of components coming to the Company.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 7 Chairman’s Statement ˚ంй࣊
Jointly Controlled Companies TAECO opened its third hangar on 24th March 2003. Each of ͳઁʔ̇ the hangars is capable of fully enclosing two wide-bodied ɀכʪ̀ࠔዀɮೡʔ̇ɍዀپ෨ aircraft. Most of TAECO’s capacity has been taken up by ཌྷཌྷɍαɍ˂ɀɊ̒ˀઢ͂eҰዀ shareholder customers or their affiliates, but with the increased ʪ̀پя˿ѧͲࢀढ़ԭܼᄤࠔዀe෨ capacity provided by the third hangar, there will be a need ɣʗݯٖܪࠔዀɮೡʔ̇ɾዀஉ to find additional third-party customers. As with base ʸֶԯᐲᖎዀ࿚Ԛ͂cЎ፭ടɍ۪ maintenance in Hong Kong, customers deferred heavy ዀໃιϤొԜҡΛஉܪcੀτ߬˾ maintenance checks planned for the second half of the year ఖҒɍʿ۪ʸe̳ΣࠗಋਥΔၐ࠳ɾ into 2004 and this adversely affected TAECO’s result for the ˸ɎכؗȹᅚcΛ۪ʸੀࡈི̯߮ੱ year. On the other hand, while still only representing about 1% ၐ࠳Ꮞ݅ɮೡઐፖϭɀཌྷێα൬Ϸɾɣ of turnover, line maintenance operations continued to expand ʪ̀ࠔዀɮೡʔ̇پཌྷ̒αcΐϤྦྷ෨ and an office was opened in Beijing late in the year. In α۹พᐜιɺСᄧᚊe̊ȹʿࠍc̯ December 2003, the line maintenance operations handled ቱဳ̔ඵၐ࠳พ৻ʋಳ̋ЌᏪพᐢᔾ about 500 flights in Beijing, Xiamen and Shanghai, almost ̯כcԎٽᙩᄈܛϛʗɾȹcЎϊพ৻ double the average number of flights handled per month in α֛Ε˵ԕஉȹֺፒԑ୮eɀཌྷཌྷɍ 2002. پԕd෨˵כαɊɀ˂c̔ඵၐ࠳พ৻ ʥɐࣵ୮ଉʄϛऒॾऒcడݯɀཌྷཌྷ In October 2003, Boeing announced that it was initiating a ɀαҰ˂̡я୮ଉɾॾऒᅕ͌ɾԭࠛe programme to convert Boeing 747-400 passenger aircraft to freighters, and that the first three such conversions would be ɀཌྷཌྷɍαɊ˂cؐࠑʔ̇ۧЗടʹ൬ done by TAECO, with work starting in 2005. There have been ዀҝ۪ێϷȹඖི߮cੀؐࠑ747-400 subsequent announcements that Cathay Pacific Airways ʪ̀پݯஒዀcࠖɍඖҝɮೡੀͅ෨ Limited will be the launch customer for this programme, and ɀཌྷཌྷʄαࢄכࠔዀɮೡʔ̇൬Ϸc that it will convert at least six, and possibly as many as twelve, АˮΛඖۧЗcᐰီ܃ɮೡeʔ̇፭ passenger aircraft into freighters. The sixth such conversion is τࠉʔ̇ੀιݯඖི߮ɾࠖيਝ࣮ॾ due for delivery by the end of 2007. Ͻᚋ۪c˘ੀҝʭʒܼ۪ዀݯஒ ዀcᅕ͌Ԏτ˿ॶΛϭɊɀܼeʒܼ The number of engine arisings in GEES since it opened had ɀཌྷཌྷȼα֛͚כҝѧιɾஒዀད౨ been disappointing compared to the initial business plan and ˟e projections by the General Electric Company (“GE”) indicated that losses would continue for at least another 5 years; in view ৻ʔ̇Ϭઢ͂˞Ԟֺר͂ཋࣩೕ৽ዀ of this, GE offered to buy out the other shareholders for a price ɾพ৻ི߮ٱ୮ଉɾೕ৽ዀᅕ͌cၤ equating to their original investment. ޚˈ˥Ɂ̖શcϤ͂ཋࣩʔ̇͂ཋ ֺࣩАɾདಡᛷ͐c̰Ԟʭʄαੀᘗ ᙩ፣ᑋฌhτӮʥϊc͂ཋࣩొˮ ࡈԞҙ༅ᔾؿძࣟcΉԯˢٖכ೩ޚ˞ ͲᅕൕɃԯٖᚬe
8 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ̯ʔ̇ܛτϛʗɾ̒Ɋʄᚬऩɾࠗಋॾ ৻ʔ̇cݯԯ˚߬ᚋ۪רೕ৽ዀၐ࠳ي
ʔ̇୮ଉɾೕ৽ዀᅕ͌͛τɎ While HAESL, in which the Company has a 45% interest, alsoيਝ࣮ॾ experienced a reduction in engine arisings from Cathay Pacific ێڈࠌcЎʔ̇ݯԯˢพ৻Ԏ̰Շ ᅸᄧᚊɾᚋ۪୮ଉɾೕ৽ዀᅕ͌ Airways, its main customer, it was able to replace most of thisދاْ ሻɣʗؿɺӷ൴e shortfall by additional arisings from customers whoseא˿ᄈ˱cӷ νऩʥึСଅяτֺొঢ়c̯αʹωτ operations were not affected by SARS. Consequently it has ֺ୮ଉ had another good year, with increased revenue and improvedܪଊeɀཌྷཌྷɍαԯஉٲӪΡɾ ɾೕ৽ዀᅕ͌ݯȹϛȼɊȾ̎c༖ɀཌྷ profitability. The number of engines put through its facility in ཌྷɀαɾɮೡ൴ᄈ˱ϛʗɾɊeʔ̇ 2003 was 179, a 10% increase on throughput in 2002. In addition ʔ̇൬ to work performed for Cathay Pacific Airways, whichيɍιɄɾνऩԞϬݯਝ࣮ॾ Ϸɾɮೡcϊ̔͛ݯഠʔ̇dԓ accounted for about 38% of revenue, significant engine work ʔ̇d was also carried out for Rolls-Royce plc, Emirates Airlines, Thaiيʔ̇d࣮ਝਝॾيᐲࠅॾ .ʔ̇ొ International, Malaysian Airlines and China Southern Airlinesيʿॾڲʔ̇ʥɻਝيԞϹԓॾ ೕ The result for Singapore Aero Engine Services Pte. Limited, inي৻eࠗಋॾרԜࠇɣɾೕ৽ዀɮೡ ৻ʔ̇ኟτɀιᚬऩɾณ˱ which HAESL has a 20% interest, was in line with expectationsר৽ዀၐ࠳ .৻τࠉʔ̇พᐜၤ and increased profitability is expected in 2004רೕ৽ዀၐ࠳يգॾ ད౨ޚߗcད౨ɀཌྷཌྷ̒αɾึСଅੀ τֺొঢ়e
Components testing at Tseung Kwan O, Hong Kong ࠗಋੀ߶ዌАͧಡכ
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 9 Chairman’s Statement ˚ంй࣊
ࠗಋכGoodrich Asia-Pacific Limited ॑Ꮀԑဧሔీ৽ːኬ࠳ʥረᑴɣ࠳พ The Company owns 49% of Goodrich Asia-Pacific Limited, ৻c̯ʔ̇ܛτԯɻ̒ιȾᚬऩeʔ ݯਥΔɾپଊe˞෨ٲwhich refurbishes carbon brakes and overhauls wheel hubs ̇ᘗᙩτӪΡɾ پႚఒʪ̀Χॾτࠉʔ̇cԯɻ෨پat Fanling, in Hong Kong. It continued to perform well. The ෨ Xiamen based Goodrich TAECO Aeronautical Systems Limited, ʪ̀ࠔዀɮೡʔ̇ܛτɍιʄᚬऩc ޔ৻ұτֺᄈ˱cԎ፣רin which TAECO has a 35% interest, had an increase in demand ʔ̇ɾ for its services and was profitable. Сe
Taikoo (Shandong) Aircraft Engineering Company Limited ɬʪ̀ࠔዀɮೡτࠉʔ̯̇ͅʔ̇ʥ τԯɻɍܛʪ̀ࠔዀɮೡʔ̇ͳپformerly Shandong TAECO Aircraft Engineering Company ෨) ێ Limited), in which the Company and TAECO have a combined ιᚬऩcݯऍࠔዀऋПܰؐࠑ 737 ৻eʔ̳̇ߎɈרၐ࠳ێinterest of 30%, provides a heavy maintenance service for ࠔዀొԜɣ narrow-bodied aircraft and in particular B737 aircraft. It is ᒷࢄԯɮೡॶɈၤஃᅡc˞Ꮆ˟۪ʸ̰ ɀཌྷཌྷɍαʄכexpanding its capacity and capabilities to meet customers’ Ԟɾұeɀዀ projected needs. A second hangar was opened in May 2003. ˂ໃιઢ͂eʔ̇፣ޔСe This company is profitable.
In-Services Asia LimitedȽȹࡼͳઁʔ In-Services Asia Limited, a jointly controlled company in which ̇c̯ʔ̇ܛτԯɻɍιʄᚬऩeʔ the Company has a 35% interest, sells Intertechnique ̇ˮਕ Intertechnique ͧcԎݯ۪ʸ ɀཌྷཌྷɍαכ৻eԯרʥ࠳ଉ͂ړcomponents, and provides a warranty and repair service to ొԜ СeޔcԎ፣ٽcustomers. Its revenue has grown in 2003 and the company is ɾνऩτֺᄈ profitable.
EADS SOGERMA HAECO Services EADS SOGERMA HAECO Services Company Limited, a jointly Company LimitedȽȹࡼͳઁʔ̇c̯ controlled company in which the Company has a 50% interest, ʔ̇ܛτԯɻʄιᚬऩeʔ̇ొԜཋ ৻eࠍྦྷ̟шᗒcרprovides computerised testing of components. In a difficult ʝͧಡ market, it has not met volume expectations, but is expecting ʔ̇ɾᏪพᔾ̰τ༠Էད౨ˋ̡cЎɀ an improvement in 2004. ཌྷཌྷ̒α˿શτֺҝഁe
፳̛ࠏဍʪ̀Χॾτࠉʔ̇ȽȹࡼپHoneywell TAECO Aerospace (Xiamen) Company Limited, a ෨ jointly controlled company in which the Group has an ͳઁʔ̇c̯එ྆ܛτԯɻɍιᎶЌᚬ cνऩʥึڰଊੜٲattributable 30% interest, had a strong year, with increased ऩeʔ̯̇α۹ eٽrevenue and profitability. Сଅяτֺᄈ
10 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Engine service facility at HAESL, Tseung Kwan O, Hong Kong ܪࠗಋੀ߶ዌؿೕ৽ዀၐ࠳உכ৻ʔ̇Ͻרೕ৽ዀၐ࠳يࠗಋॾ
Financial Review ল৻Αᚋ
Turnover Ꮺพᐢᔾ
Note Change ഽ 2003 2002 ᛰఝڃ (in HK$ Million) ಋྫྷϛຒʏ
The Company and its subsidiary ᙔʔ̇ڃcompany 1 1,987 2,078 -4% ̯ʔ̇ʥԯ ৻ʔ̇רೕ৽ዀၐ࠳يHAESL 3,636 3,356 8% ࠗಋॾ ʪ̀ࠔዀɮೡʔ̇پTAECO 607 583 4% ෨ Other jointly controlled companies 316 272 16% ԯˢͳઁʔ̇ Total 6,546 6,289 4% ᐢ߮
ฌऩሏʑֺׄᚉeכࠗಋαంஃցܘഽi1 Σڃ Notes: 1 As disclosed on the face of the profit and loss account in accordance with ʑeٲΕ̯ܢ˳reporting requirements in Hong Kong. 2 ͳઁʔ̇ᏪพᐢᔾͲᅕ 2 The whole of the turnover for the jointly controlled companies is included in this table.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 11 Chairman’s Statement ˚ంй࣊
ࢠٖ ɀཌྷཌྷɍכɻ౨ٖࢠҰٖಋྫྷ0.28ʏɰ ᘪݢೕۺαȾ˂ɀɊɀˀݢೕe໎ԑѫ Dividend ɀཌྷཌྷɍα۹̱౨ٖࢠҰٖಋྫྷ0.56 An interim dividend of HK$0.28 per share was paid on 22nd ʏcҰٖᏃݢɾౝٖٖࢠᐢ߮ˈɀཌྷ СٖޔSeptember 2003. Your Directors have recommended a final ཌྷɀαɾݢࢠᄈ˱ϛʗɾɊ̒e dividend for 2003 of HK$0.56 per share and the proposed total ࢠˈଅݯ2.46ࠛe ordinary distribution per share represents an increase of 14%
ᘪட̱౨ٖࢠݢೕऋПٖۺover that declared for 2002. This distribution is covered ໎ԑѫ͛ times. ࢠҰٖಋྫྷ1.00ʏɀཌྷཌྷɀαݯಋྫྷ 2.46 2.50ʏe The Directors have also recommended a special dividend of
HK$1.00 per share (2002: HK$2.50), which would be payable ɀཌྷཌྷɍα۹ɾɰ˟ʥᏃݢٖࢠᐢ߮ݯ with the final dividend. ಋྫྷɍყཌྷʒϛຒʏe
The total dividends paid and proposed in respect of 2003 ༅ଐ૱ࠤ amount to HK$306 million. αʑ༅ଐ૱ࠤͅಋྫྷɍɊɀყɄɝʒϛ ຒʏಕʭϭಋྫྷɍɊყɄɝɄϛຒʏe Net Assets ༅̯ʻᐢ߮ಋྫྷ̒ɝȼϛຒʏcɣ ዀԚ͂ɾཋӡdɮԮʥӁכNet assets decreased during the year from HK$3,286 million to ʗ͂ ಋྫྷʄყʏಕʭϭಋྫྷͅټHK$3,088 million. Capital expenditure amounted to HK$47 ӹeᏪ༜༅ million, mostly on computer systems, tooling and vehicles used ɍყɄɝɍϛຒʏc˚߬ࡈΐȽʻ˟ऋ at the airport. Working capital decreased from HK$500 million Пٖࢠe to HK$383 million primarily because of the special dividend ࠤʥጪ༅૱ټpayment. ݚ৽༅ ʥ౨Φಁಕذ೩ძټdଊټαʑɾଊ Net Liquid Funds and Financing ʭಋྫྷȹყɀɝȼϛຒʏϭಋྫྷ̒ყɀ eڰଊੜٲݚɃ૱ᔾټCash, cash equivalents and short term deposits decreased ɝຒʏcᏪพଊ by HK$127 million to HK$420 million during the year, with strong ԞϬͳઁʔ̇ɾٖࢠʥٖࠥಁᑹᅕ net operating cash flow. Dividends and shareholder loan ᔾݯಋྫྷɀყɀɝȹϛຒʏcϤɰ˟ऋ repayments from the jointly controlled companies amounted Пٖࢠݯಋྫྷ̒ყȹɝʒϛຒʏe̯ʔ ɀཌྷཌྷ̒αʑ˿Ԟɾݚ৽༅כto HK$221 million, while the special dividend paid was HK$416 ̇ད߮ ʥད့༅ֲ̯ټ൚༦ԯᏪพdᏪ༜༅ټ million. The Company is expected to generate liquid funds ൘Ϊڌduring 2004 that will exceed its operating, working capital and ʻ߬eϊ̔c̯ʔ̇ᘪΡɾ ಋྫྷ̒ყʄɝ̒ϛຒʏcԯɻכޚbudgeted capital expenditure requirements. In addition, it has ખ ɀཌྷཌྷ̒αʑᙩ౨eכnegotiated loan facilities equivalent to HK$454 million, of which ಋྫྷȹყʏ HK$100 million is subject to renewal during 2004.
12 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ஒྫྷࣺ৽ එ྆ɾνɃ˞ಋྫྷֶʏݯ˚e̯ʔ Currency Fluctuations̯ .ʥԯ˞ࠗಋݯਥΔɾͳઁʔ̇ɾᏪ༜ The Group’s income is substantially in HK dollars or US dollarṡ ι̯ʥ༅ֲ̯ʻя˞ᗘஒྫྷݯ˚c Operating costs and capital expenditure of the Company and its Hong Kong based jointly controlled companies is ڬϤԯΕɻਝʑΔɾΈͳઁʔ̇ɾʻ ˞Ɂ̵ྫྷ့߮e substantially in the same currencies as are those of its jointly controlled companies in Mainland China, which also use .ᙶ Renminbiړྊ ʔ̇ȿԯพ৻ผྦྷֺΕɾྊι̯ ᄧᚊcΐϊߎɈဟઁԎಕГԯᄧᚊɾೡ Environment ੀ The Company recognises that its operations could impact theכሰ֡ӵ㣂ӯࠗಋਝዀʥכ۹e ࣂc̯ʔ̇உສȿΛࡨ environment in which it operates, and it endeavours to monitorܪณஉۺ߶ዌጙ ӡc৻ұಕГϔˋʥᄠࣩྦྷྊ and to reduce the extent to which they do so. When it movedړ ιɾᄧᚊeϬϊc̯ʔ̇ɰᆢցȿΛ to Hong Kong International Airport at Chek Lap Kok and built ඖི߮˞ұ൬ȹүಕʭॶʥ༅ɾԚ its new facilities in Tseung Kwan O, the Company incorporated .൴cԎΕ˿ϷɾੱؗɎʹ͂ᄠ systems to minimise the effect of effluents on the environment͂ ࢿeΕɀཌྷཌྷɍαc̯ʔ̇৽͂ಋྫྷɍ Since then, it has initiated projects to further reduce energy .ϛຒʏɀཌྷཌྷɀαݯಋྫྷ̒ϛຒʏА and resource usage, and to recycle waste where practicable (ݯ༅ֲ̯ʥֲʻ˞༠Էϊ೩͌ In 2003, the Company spent HK$3 million (2002: HK$4 million ᅟcԎི߮ɀཌྷཌྷ̒αੀಁᔾᄈ˱ϭಋ on capital and recurring expenditure to achieve those ྫྷ̒ϛຒʏe objectives, and plans to increase this to HK$4 million in 2004.
Maintenance facility at TAECO, Xiamen, Mainland China ܪؿၐ࠳உپɻਝʑΔ෨כʪ̀ࠔዀɮೡʔ̇Ͻپ෨
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 13 Chairman’s Statement ˚ంй࣊
ࡗɮ ɀཌྷཌྷɍᾶ֛ࡗɮɍɝ̒כʔ̯̇ ϛ̒ɊʄɁc༖ɀཌྷཌྷɀα֛ݯಕ ʪ̀ࠔዀɮೡپԞϬ෨ܢ˳Staff ʭeϊᅕΥ The Company employed 3,445 staff at the end of 2003, a small ʔ̇અՇফɾɄɊʄΊҌɮʥɮೡነ decrease from the end of 2002. This number included 85 c˞ʥȹϛ̒ɊɄΊࠥሁ֡ʔ̇ɾ craftsmen and engineering apprentice trainees for TAECO and ಋዀɮೡͲᓻࡗe 148 full-time HAECO employees who have been seconded to ʪ̀ࠔዀɮೡʔ̇͂ȹɝپTAECO. ϊ̔c෨ ೕ৽يȼϛȼɊȾΊΔࡗɮcࠗಋॾ ͂ʒϛȼɊɄΊࡗڬ৻ʔ̇רIn addition, TAECO employed 1,779 local staff and HAESL 678 ዀၐ࠳ staff. ɮe
In what has been a difficult year, the result reflects the hard ΕΣϊшᗒؿȹαcॶτϊพᐜྡྷȽͲ ৻ɾιe̯רwork and commitment of all the staff, and on behalf of the ࡗɮӺඵЦɈʥ֦ʶ Ԟɾ˞قটʶᑢˢࠨȹٖٲshareholders, I should like to thank them for their continuing ᔑˤ support. ʻܛe
Outlook ࢄશ̰Ԟ The Interim Report indicated that the outlook for the second ɻ౨ంйܞˮ̯αɎ˸αɾพᐜࢄશԎ ࣍c൬ˮࠗಋɾॾऒᅕ͌ᒖτֺΑעhalf of the year was uncertain, with the number of flights ɺ ၐێˮผੀʗɣܞthrough Hong Kong picking up but with indications that major ʠcЎ˚۪߬ʸя يcustomers would defer some heavy maintenance into 2004. ࠳ɮೡઐፖϭɀཌྷཌྷ̒αeࠗಋॾ ৻ʔ̇̔cȹʘగΣֺרWith the exception of HAESL, this has proved to be the case. ೕ৽ዀၐ࠳ ࢿe However, by the end of the year, line maintenance operations ̳ٶwere close to normal and some growth is expected in 2004 as ಳϤԷα֛c̔ඵၐ࠳พ৻ɰઅ ʶɰΑనcΐϊད౨ڌʑਂכconfidence returns to the region. In addition, the heavy ˋ̡cͅ ɀכeϊ̔cͅٽmaintenance work deferred from 2003 has resulted in good ɀཌྷཌྷ̒αผτֺᄈ ˥ၐ࠳ɮೡ֝౨൬Ϸcێforward bookings for 2004 and the hangar and engine ཌྷཌྷɍαɾɣ ౨ད߯ੱؗӪΡcད౨کoverhaul facilities are expected to be working at effectively ɀཌྷཌྷ̒αɾ full capacity during the first half of the year. ዀʥೕ৽ዀɣ࠳உܪΕɐ˸αංੀᏵ ˨ʗԚ͂e
David Turnbull Chairman ˚
Hong Kong, 9th March 2004 ࡌᗸᜃ ࠗಋcɀཌྷཌྷ̒αɍ˂Ⱦˀ
14 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Corporate Governance ʔ̇ဳ؝
໎ԑѫߎɈ༠ߎঢ়ˋ̡ɾʔ̇ဳ؝c̯ The Board is committed to a high standard of corporate ʑɾԙᎶ͂ governance and throughout the year the Company hasڬʔ̇ͲαяፓΨɐ̟ஃ ʔ̇Σ complied with the provisions of the Code of Best Practice as̯עֺͶɾஃցeɎʼ႓ڬΨ ֺͶɾΈඖๅ set out in the Listing Rules. The following describes how theڬЄᎶ͂ԙᎶ͂Ψ .e principles set out in the Code have been appliedڬ
໎ԑѫ The Board of Directors ໎ԑѫଊࣂͳτɊȹϽιࡗc˳ܢȼϽ The Board currently has eleven members, comprising seven ৻໎ Non-Executive Directors, three of whom are independent, andڈ৻໎ԑcԯɻɍϽݯዟ͓ڈ ԑc˞ʥ˳ܢ˚Εʑͳ̒Ͻ৻໎ four Executive Directors, including the Chairman. Biographies .ɊȼࠒͶ߸e of all the Directors are presented on page 17כԑeΈ໎ԑɾᓯዃ
ԯ The Board meets formally six times a year and Board papersכ໎ԑѫҰα̂ʒω̳βผᘪc̊ ˢࣂංඨቇࣹʥࠇ߬ԑඖɾ໎ԑѫʼͧ dealing with important matters are circulated for approval at .Ԝғ࣏eɀཌྷཌྷɍαɾ̡яˮଅݯ other times. The average attendance in 2003 was 90%˞ ϛʗɾȾɊe The Directors are responsible to the shareholders, employees ሏ͌भ and other stakeholders for the long-term development of theړႩೕࢄʥᆢٽΈ໎ԑగඑ྆ɾ ᗐ Group and for ensuring that the accounts show a true andޚʔ̡ϤྦྷٖdࡗʥԯˢСऩྡྷ जᚬɈྦྷߗɳ fair view. To this end, certain matters are reserved for theړ߲ஐeݯϊc໎ԑѫّ ֺτ˚߬ decision of the Board including all major strategic and financialܢ˳ԑփАˮҺ೪cϊ೩ԑփ ɾ೪ʥল৻Һ೪eݯԚ໎ԑѫॶਨϷ decisions. To enable the Board to perform its duties, all Directors ᓻஐcΈ໎ԑя˿ʥࣂϤͲࠍΔᏵొ have full and timely access to all relevant information. Non- ৻໎ԑ͛ར Executive Directors are encouraged to visit the Group’sڈԜֺττᗐ༅ࢿe ᜮඑ྆ɾพ৻༜Аe operations.
ɍ։ٖ൪ Each Director is required to retire at the third annual generalכcя܃Έ໎ԑΕᏵፕ αɣผɐйঽe meeting following his election.
ਨϷկࡗผ Executive Committee ਨϷկࡗผɾιࡗ˳ܢ৻໎ԑʔ̇˚ The Executive Committee comprises the Executive Directors, ৻໎ԑԯɻȹϽ˚ (excluding the Company Chairman), two Non-Executiveڈ̔dԭϽ ܛҰ˂ɾผᘪc˞ʥɍϽԞϬ̯ʔ̇d Directors, one of whom chairs the monthly meetings, and three Ɂࡗeਨ senior executives from the Company, its jointly controlledܧԯͳઁʔ̇ʥ۪ʸɾঢ়ज़Ϸ Ϸկࡗผ߲ஐဟྦ̯ʔ̇ɾˀ༜Аc companies and customers. It is responsible to the Board for Ԏྦྷ໎ԑѫ߲ஐe overseeing the day to day operation of the Company.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 15 Corporate Governance ʔ̇ဳ؝
Audit Committee ᄗ࣏կࡗผ The Board has established an Audit Committee comprising ໎ԑѫι͓ȿȹᄗ࣏կࡗผcԯιࡗ ң˚ܢ˳৻໎ԑcɻڈɍϽܢ˳ three Non-Executive Directors, two of whom, including the ৻໎ԑeᄗڈΕʑɾԭϽݯዟ͓ڌChairman, Dinty Dickson Leach, are independent Non- ᄨ ɀཌྷཌྷɍαͳ̂ɍωผכExecutive Directors. In 2003, the Committee met three times ࣏կࡗผ with 100% attendance. It reviews and reports to the Board on ᘪcˮଅяݯϛʗϛeᄗ࣏կࡗผᄗ the published financial information and the internal controls ቇ̯ʔ̇ʥԯဳଉɾͳઁʔֺ̇ʔЗɾ and risk management procedures of the Company and its ল৻༅ࢿcᏎদԯʑဟઁʥࠓ፮ဳ managed jointly controlled companies. The external auditors ଉೡѵcԎΉ໎ԑѫంйe̔າ࣏ᅕ attend these meetings, parts of which are held without any ˮϊ೩ผᘪcϤϊ೩ผᘪʗຝΕ management of the Company being present. At the invitation Ӏτ̯ʔ̇ဳଉᄙͶɾੱؗɎ൬Ϸe of the Committee, the Finance Director regularly attends ল৻໎ԑᎶᄗ࣏կࡗผɾᑼᇼcց౨ˮ meetings of the Committee, as do the Swire Group Internal ᄗ࣏կࡗผɾผᘪcʪ̀එ྆ʑ࣏ ᖬଉړሔۂAuditor, the Management Information Department manager ᅕd༅ဳଉଉʥ and the Quality Assurance manager as appropriate. ͛ผΕሬࣂ࠰ˮᄗ࣏կࡗผɾผ ᘪe Remuneration Committee կࡗผټAt its meeting in November 2003, the Board established a ༭ Remuneration Committee comprising three Non-Executive ΕɀཌྷཌྷɍαɊȹ˂ɾผᘪɐc໎ԑѫ ɍܢ˳կࡗผcԯιࡗټDirectors, two of whom are independent Non-Executive ι͓ȿȹ༭ ৻ڈ৻໎ԑcԯɻԭϽݯዟ͓ڈDirectors. The Committee is chaired by Peter Johansen and Ͻ կࡗผͅࢀณˮͨ˚cټwill meet at least once a year. The principal role of the ໎ԑe༭ Committee is to determine and review the Company’s policy Ұαʭ̂ȹωผᘪeկࡗผɾ˚ ᑀ༭ʀיfor remunerating its Executive Directors and the remuneration ߬ᓻஐݯᔤցʥᏎদ̯ʔ̇ೕ packages of individual Executive Directors. At its meeting in ৻໎ԑɾܧ೪cʥП৻໎ԑɾᑀ December, after due consideration by reference to relevant ༭ါСeΕၤޚߗʔ̇ˈ༖Ԏ༦ࠇ comparator companies, the Committee approved the ϣᄬ܃cկࡗผΕɊɀ˂̂ɾผᘪ remuneration packages for those individual Directors. ɐ༦ғϊ೩П໎ԑɾᑀ༭ါСe
Internal Audit ʑᄗ࣏ In order to review the system of internal control and to assess ݯᏎদʑဟઁԹ۹ʥിЅࠓ፮ဳଉೡ the effectiveness of risk management procedures, the ѵɾιࢽc̯ʔ̇ၤʪ̀එ྆ʑᄗ࣏ רԜʑᄗ࣏ొپCompany contracts with the Swire Group Internal Audit ߯ցcͅ Department for the provision of internal audit services, and ৻c̯ʔ̇͛Ϭາȹɩୂ࣏ᅕ߲ஐଲ also has a small team of its own auditors who undertake ֲᄗ࣏ɾɮАeʪ̀එ྆ʑ࣏ᅕ compliance audits. The Swire Group Internal Auditor reports Ή̯ʔ̇˚ʥᄗ࣏կࡗผంйcϤ̯ ༦ল৻໎ԑΉᄗ࣏կڬto the Company’s Chairman and the Audit Committee, while ʔ̇ɾ࣏ᅕ the Company’s internal auditors report to the Audit Committee ࡗผంйe through the Finance Director.
16 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Directors ໎ԑ
৻໎ԑ Executive Directors ࡌᗸᜃ†cଊα̒ɊɄัcϬȹȾȾʄα David Turnbull†, aged 48, has been Chairman of the Board ȹȾȾཌྷ since September 1995. He was Director and Managing DirectorכȾ˂ˮͨ໎ԑѫ˚e֤ αȹ˂ϭȹȾȾɍαɊɀ˂౨ංˮ̯ͨ of the Company from January 1990 to December 1993 and ȹȾȾʄכʔ̇໎ԑ࠹໎ԑᐢଉcԎ rejoined the Board in March 1995. He is also Deputy Chairman αɍ˂ʹω˱Ƀ໎ԑѫe֤͛ݯਝ࣮ॾ and Chief Executive of Cathay Pacific Airways Limited and a ᐢസcԎݯʪܧτࠉʔ̇৹˚࠹Ϸي (.τࠉʔ̇ʥࠗಋʪ̀එ྆τࠉʔ Director of Swire Pacific Limited and John Swire & Sons (H.Kٖͫ̀ .ȹȾȼʒα˱Ƀʪ̀එ Limited. He joined the Swire group in 1976כ໎ԑė֤ ྆e Chan Ping Kit, aged 58, was appointed Deputy Chairman and ɀཌྷཌྷȹα Chief Executive Officer on 8th August 2001. He first joined theכஹݰcଊαʄɊɄัc ᐢസeܧɄ˂ɄˀᏵկͨݯ৹˚࠹Ϸ Company in 1966 and resigned as Deputy Chief Engineer ȹכȹȾʒʒαࠖω˱Ƀ̯ʔ̇cכ֤ (Maintenance) in June 1990. He rejoined in December 1992 ȾȾཌྷαʒ˂ᔴᓻcࣂݯ৹ᐢɮೡ (ȹȾȾɀαɊɀ˂ʹω˱ as General Manager (Base Maintenance & China Operationsכၐ࠳e֤ Ƀ̯ʔ̇ݯᐢଉਥΔၐ࠳ʥɻਝพ and was appointed a Director in November 1993 and .ȹȾȾɍαɊȹ˂Ᏽկͨݯ໎ Managing Director in July 1998כ৻c ԑcȹȾȾɄαȼ˂Ᏽկͨݯ໎ԑᐢ
ଉe Marven Bowles†, aged 53, has been Finance Director since October 2000. He was Company Secretary from August 1991 ʼtcଊαʄɊɍัcϬɀཌྷཌྷཌྷα to October 1997. He joined the Swire group in 1981. ȹȾȾȹαכɊ˂ˮͨল৻໎ԑe֤ Ʉ˂ϭȹȾȾȼαɊ˂౨ංˮͨʔ̇ो ȹȾɄȹα˱Ƀʪ̀එ྆e Mark Hayman, aged 43, joined the Company in October 2001כ࣊e֤ and was appointed Director (Engineering) on 1st February ɀཌྷཌྷȹα 2002. He was previously General Manager Engineeringכࣵʼcଊα̒Ɋɍัc ɀཌྷཌྷɀαɀ˂ Planning and Technical Supplies of Cathay Pacific AirwaysכɊ˂˱Ƀ̯ʔ̇cԎ .ȹˀᏵկͨݯ໎ԑɮೡe֤౦ݯਝ࣮ Limited. He joined the Swire group in 1987 τࠉʔ̇ɮೡ೪ིʥҌԜᎶᐢيॾ ȹȾɄȼα˱Ƀʪ̀එ྆e Non-Executive Directorsכଉe֤ ৻໎ԑ Derek Cridland, aged 58, has been a Director of the Companyڈ ષᄨਥcଊαʄɊɄัcϬȹȾȾɄα since May 1998. He is also Engineering Director of Cathay Pacific Airways Limited and a Director of Hong Kong Aero يʄ˂ˮ̯ͨʔ̇໎ԑe֤ݯਝ࣮ॾ ೕ৽ Engine Services Limited and Associated Engineers Limited. Heيτࠉʔ̇ɮ৻໎ԑcԎݯࠗಋॾ .৻τࠉʔ̇ʥᐲᇷɮೡτࠉʔ is an employee of Cathay Pacific Airways Limitedרዀၐ࠳ τࠉʔ̇ɾي໎ԑe֤Ƚਝ࣮ॾ̇ Alternate: Chris Gibbs ࡗe ˤ໎ԑiᓯ݇ਥ
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 17 Directors ໎ԑ
ȹȾȾȾαכDavy Ho Cho Ying†, aged 56, was appointed a Director in Єीߜ†cଊαʄɊʒัc ˱ȹȾȼཌྷαכSeptember 1999. He joined the Swire group in 1970 and has Ⱦ˂Ᏽկͨݯ໎ԑe֤ worked with the group in Hong Kong and Taiwan. He is also a Ƀʪ̀එ྆c౦Εඑ྆ɾࠗಋʥ̎ᜪፒ Director of Swire Pacific Limited and John Swire & Sons (H.K.) ԑ୮ɮАe֤͛ݯʪٖ̀ͫτࠉʔ̇ʥ Limited. ࠗಋʪ̀එ྆τࠉʔ̇໎ԑe
#*†cଊαʒɊȹัcϬȹȾɄ̒ Peter Johansen#*†, aged 61, has been a Director since July ࢀณ ˚կࡗผټαȼ˂ˮͨ໎ԑcݯ༭ 1984 and is Chairman of the Remuneration Committee. He ȹȾȼɍα˱Ƀʪ̀එ྆c౦כe֤ joined the Swire group in 1973 and has worked with the group Εඑ྆ɾࠗಋʥˀ̯ፒԑ୮ɮАe֤͛ in Hong Kong and Japan. He is also a Director of John Swire ݯߜਝʪ̀එ྆τࠉʔ̇ʥʪٖ̀ͫτ and Sons Limited and Swire Pacific Limited. ࠉʔ̇໎ԑe
† ᜃ†cଊα̒ɊɄัcϬȹȾȾʒα۽Tony Tyler , aged 48, has been a Director of the Company ಝ ȹȾȼכsince December 1996. He joined the Swire group in 1977 and Ɋɀ˂ˮ̯ͨʔ̇໎ԑe֤ has worked with the group in Australia, the Philippines, ȼα˱Ƀʪ̀එ྆c౦Εඑ྆ɾዌݘd ႝd˱ࢬɣdˀ̯ʥᅩݘፒԑ୮ɮ܁Canada, Japan and Europe. He is a Director of John Swire & ഥ Sons (H.K.) Limited, Director Corporate Development of Аe֤ݯࠗಋʪ̀එ྆τࠉʔ̇໎ԑd τࠉʔ̇ͬพೕࢄ໎ԑdࠗಋيCathay Pacific Airways Limited, Chairman of AHK Air Hong ਝ࣮ॾ τࠉيτࠉʔ̇˚ʥಋ᎘ॾيKong Limited and a Director of Hong Kong Dragon Airlines ജ̵ॾ Limited. ʔ̇໎ԑe
৻໎ԑڈIndependent Non-Executive Directors ዟ͓ cଊαʄɊɄัcϬȹȾɄʒα*#ڌңᄨ Dinty Dickson Leach#*, aged 58, has been a Director of the ȼ˂ˮ̯ͨʔ̇໎ԑcݯᄗ࣏կࡗผ Company since July 1986 and is Chairman of the Audit ˚e֤͛ݯɻཋઁٖτࠉʔ̇৹˚ Committee. He is also Vice Chairman of CLP Holdings Limited, dʪ̡ΔᏙਝτࠉʔ̇˚dࠗಋ Chairman of Tai Ping Carpets International Limited, a Director ˎɐࣵৈ֙τࠉʔ̇໎ԑc˞ʥཽ༞ଉ of The Hongkong & Shanghai Hotels, Limited and Chairman ɥτࠉʔ̇˚e of Sir Elly Kadoorie & Sons Limited. ˤ໎ԑiϝঢ়ཽ༞ଉ Alternate: The Hon. Michael Kadoorie
дኹዓɡ#cCBE, LLD, JPcଊαɄɊ Dr. Alex Wu Shu Chih#, CBE, LLD, JP, aged 83, has been a ɍัcϬȹȾɄɍαȹ˂ˮ̯ͨʔ̇ ˚ɮਆᚋਐτࠉʔ̇ڌDirector of the Company since January 1983. He is also ໎ԑe֤͛ݯ̳ Chairman of Fidelity Management Limited and a Non- ʥΛංɐ̟ʔ̇˳ܢࠗಋɩረτࠉʔ ৻໎ԑeڈExecutive Director of a number of listed companies including ̇ɾ Hong Kong Ferry Co. Limited. ɀཌྷཌྷɍαכષਝᚬ*cଊα̒Ɋɍัc ɍ˂Ᏽկͨݯ໎ԑe֤͛ݯΔᚁτࠉʔ Lincoln Leong Kwok Kuen*, aged 43, was appointed a Director ̇ল৻໎ԑʥʪ̡ΔᏙਝτࠉʔ̇໎ of the Company in March 2003. He is also Finance Director of ԑe MTR Corporation Limited and a Director of Tai Ping Carpets
ഽڃ .International Limited # ᄗ࣏կࡗผιࡗ կࡗผιࡗټ༭ * Notes † ϊ೩໎ԑȽߜਝʪ̀එ྆ࡗ # Member of the Audit Committee * Member of the Remuneration Committee † These Directors are employees of the John Swire & Sons Limited group.
18 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Executive Officers ϷܧɁࡗ
ʔ̇ो࣊ Secretary ЕஹӞcଊαʄɊɄัcϬɀཌྷཌྷɀ Margaret Yu Chan Sau Mui, aged 58, has been Company ȹȾȼɄ Secretary since September 2002. She joined the Swire groupכαȾ˂ˮͨʔ̇ो࣊e֤ α˱Ƀʪ̀එ྆e in 1978.
ϷܧɁࡗ Executive Officers ȹȾʒȼα Fred Chan Chi Hung, aged 55, joined the Company in 1967כஹౣඐcଊαʄɊʄัc ȹȾȾʒαɊɀ˂Ᏽկ and was appointed General Manager Component & AvionicsכɃ̯ʔ̇c˱ ݯཌྷͧʥॾཋɣ࠳ᐢଉe֤͛ݯͨ Overhaul in December 1996. He is also Director and General Goodrich Asia-Pacific Limited ໎ԑ࠹ Manager of Goodrich Asia-Pacific Limited. ᐢଉe
Mak Chung Yu, aged 36, joined the Company from Cathay ɀཌྷཌྷɀαכோրተcଊαɍɊʒัc Pacific Airways Limited in September 2002 as General Manager Ⱦ˂˱Ƀ̯ʔ̇ˮͨͬพ೪ིᐢଉe Corporate Planning. τࠉʔ̇eيᓻਝ࣮ॾͨکɾ֤
ȹȾɄȼα Thomas Ng Sze Ho, aged 50, first joined the Company in 1987כႚcଊαʄɊัc౦܆д ȹȾȾȹαᔴᓻe and resigned in 1991. He rejoined the Company in 1995 andכࠖω˱Ƀ̯ʔ̇c was appointed General Manager Personnel in November כȹȾȾʄαʹω˱Ƀ̯ʔ̇cԎכ֤ .ɀཌྷཌྷɀαɊȹ˂ᏵկͨݯɁԑᐢ 2002 ଉe Ashok Sathianathan, aged 56, first joined the Company in 1987 ȹȾɄȼ and resigned in 1989. He rejoined the Company in 1992, wasכҳഒඏcଊαʄɊʒัc౦ ȹȾɄȾαᔴᓻe֤ appointed a General Manager in August 1998 and is currentlyכα˱Ƀ̯ʔ̇c ȹ General Manager Commercial with responsibility for materialכȹȾȾɀαʹω˱Ƀ̯ʔ̇cԎכ ȾȾɄαɄ˂Ᏽկͨݯᐢଉcଊݯਆ management and commercial functions. ༅ဳଉʥਆพᓻ৻eذ৻ᐢଉc߲ஐ
Woo Hung Kwong, aged 52, joined the Company in 1981 and ȹȾɄȹαכ߈ඐͮcଊαʄɊɀัc was appointed General Manager Finance in August 2000. ɀཌྷཌྷཌྷαɄ˂ᏵկכɃ̯ʔ̇cԎ˱ ݯল৻ᐢଉeͨ Paul Yu Kam Lam, aged 56, first joined the Company in 1967 and resigned in 1990. He rejoined as General Manager Base ȹȾʒȼכcଊαʄɊʒัc౦׳ټ໒ ȹȾȾཌྷαᔴ Maintenance in September 1997 and was appointed Generalכαࠖω˱Ƀ̯ʔ̇c .ȹȾȾȼαȾ˂ʹω˱Ƀ̯ʔ Manager Maintenance in December 1999כᓻe֤ ȹȾȾȾכˮͨਥΔၐ࠳ᐢଉeԎ̇ αɊɀ˂Ᏽկͨݯၐ࠳ᐢଉe
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 19 Corporate Information ʔ̇༅ࢿ
Registered Office Principal Banker ഽ˫ፒԑ୮ ᘸ༞ɄɊɄ໔ټ35th Floor, Two Pacific Place The Hongkong and Shanghai ࠗಋ 88 Queensway Banking Corporation Limited ʪ̀ᄤɀ౨ɍɊʄΥᅢ Hong Kong ࣏ᅕ Registrars ༞ผ߮ԑ৻̷ֺڻᖓМ Auditors Computershare Hong Kong PricewaterhouseCoopers Investor Services Limited ٖμဳ୮ 19th Floor, Hopewell Centre The Bank of New York Depositary 183 Queen’s Road East, ADR Division The Bank of New York Hong Kong 101 Barclay Street 22nd Floor ADR Division New York, NY 10286 101 Barclay Street Website: http://www.computershare.com.hk U.S.A. 22nd Floor
New York, NY10286 ਝྊʑЛཋ1-888-BNY-ADRs For further information about Hong U.S.A. ඨभi (212) 571-3050 Kong Aircraft Engineering Company Limited, please contact: ཋ൯i [email protected] (Toll free) 1-888-BNY-ADRs ၉эi http://www.adrbny.com Manager Fax: (212) 571-3050 Group Public Affairs ˚߬֡ԞႺϷ E-mail: [email protected] Hong Kong Aircraft Engineering ࠗಋɐࣵමᔔႺϷτࠉʔ̇ Website: Company Limited 35th Floor, Two Pacific Place http://www.adrbny.com 88 Queensway ٖͫত୮ Hong Kong ࠗಋɻ̕ᖬԴতτࠉʔ̇ Tel: (852) 2840-8098 ɣ༞ȹɄɍ໔ޒFax: (852) 2526-9365 ࠗಋ Website: http://www.haeco.com ɻʶɊȾᅢ
၉эi http://www.computershare.com.hk
݅τᗐࠗಋࠔዀɮೡτࠉʔ̇ɾੱcᇼᐲ i
ࠗಋࠔዀɮೡτࠉʔ̇ ʔͳԑ৻ଉ ᘸ༞ɄɊɄ໔ټࠗಋ ʪ̀ᄤɀ౨ɍɊʄΥᅢ ཋi(852) 2840-8098 ඨभi(852) 2526-9365 ၉эihttp://www.haeco.com
20 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Report of the Directors ໎ԑѫంй
໎ԑѫᔑొе࿀ϭɀཌྷཌྷɍαɊɀ˂ɍ The Directors submit their report and the audited accounts for Ɋȹˀ˅α۹ɾంй࣊ʥᄗ࣏ሏ͌e the year ended 31st December 2003 which are set out on .ɀɊɄࠒϭʄɊȹ pages 28 to 51כ೩ሏ͌Ͷ ࠒe Principal activity and results ˚߬พ৻ʥพᐜ The Hong Kong Aircraft Engineering Company Limited Group ࠗಋࠔዀɮೡτࠉʔ̇එ྆˚߬พ৻ݯ is primarily engaged in the business of commercial aircraft Ꮺਆ͂ࠔዀɾɣ࠳ʥၐ࠳พ৻eԯพ overhaul and maintenance. Its operations are carried out ৻˚߬Εࠗಋ൬Ϸe̯එ྆ɾพᐜͶ principally in Hong Kong. The results of the Group are set out .ɀɊɄࠒɾ၃ฌऩሏʑe in the consolidated profit and loss account on page 28כ
Ɋαল৻ล߬ Ten year financial summary ̯එ྆ɾพᐜd༅ଐʥ߲ඦɾɊαল৻ A ten year financial summary of the results and of the assets .ɀࠒʥɍࠒe and liabilities of the Group is shown on pages 2 and 3כล߬༗
ࢠ Dividendsٖ ᘪݢೕ࿀ϭɀཌྷཌྷɍαɊɀ˂ The Directors recommend the payment of a final dividend ofۺ໎ԑѫ ɍɊȹˀ˅α۹ɾ̱౨ٖࢠҰౝٖ HK$0.56 and a special dividend of HK$1.00 per ordinary share ಋྫྷ0.56ʏʥऋПٖࢠҰౝٖಋྫྷ for the year ended 31st December 2003 which, together with ɀཌྷཌྷɍαȾ˂ɀɊɀ the interim dividend of HK$0.28 per ordinary share paid onכ1.00ʏcட ˀɰݢೕɾɻ౨ٖࢠҰౝٖಋྫྷ 22nd September 2003 makes a total dividend for the year of 0.28ʏcͲαݢࢠݯҰౝٖಋྫྷ1.84 HK$1.84 per ordinary share. This represents a total distribution ʏeͲαݢࢠᐢᔾݯಋྫྷɍყཌྷʒϛຒ for the year of HK$306 million. Subject to the approval of the ʏeɀཌྷཌྷɍα̱౨ٖࢠʥऋПٖࢠτ 2003 final dividend and special dividend by the shareholders ɀཌྷཌྷ̒αʄ˂Ɋȹˀ̂ɾ at the Annual General Meeting on 11th May 2004, it isכٖۿ ɀཌྷཌྷ expected that the dividends will be paid on 20th May 2004 toכ൪αɣผ༦cٖࢠད౨ٖ ’ɀཌྷཌྷ̒αʄ shareholders registered on 11th May 2004. The shareholdersכαʄ˂ɀɊˀݢೕʀ̒ ,ɊȹˀΊͶٖΊ˫ʑɾٖeٖ register will be closed from 3rd May 2004 to 11th May 2004˂ .ɀཌྷཌྷ̒αʄ˂ɍˀϭɀ both dates inclusiveכ༦ʸʹᙩੀ ཌྷཌྷ̒αʄ˂Ɋȹˀ˳ܢࠖѮԭʨᅗ ፒଉe Reserves Movements in the reserves of the Company and the Group ௐሏ during the year are set out in note 18 to the accounts. ̯ʔ̇ʥ̯එ྆αʑɾௐሏᛰ৽Ӯሏ ഽ18ૈeڃ͌
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 21 Report of the Directors ໎ԑѫంй
Bank and other borrowings ႺϷʥԯˢࠥ൘ αα֛ԎಲႺ̯כᙔʔ̇ڃThe Company and its subsidiary have no bank loans at the ̯ʔ̇ʥԯ ഽ19ڃሏ͌כend of the year. The details of other borrowings are shown in Ϸࠥ൘eԯˢࠥ൘Ͷ note 19 to the accounts. ૈe
Interest Сࢠ ഽ5ૈeڃሏ͌כThe details of interest are included in note 5 to the accounts. СࢠͶ
Accounting policies ผ߮ܧ೪ ഽ2ڃ೪Ӯሏ͌ܧThe principal accounting policies of the Group are set out in ̯එ྆ɾ˚߬ผ߮ note 2 to the accounts. ૈe
Donations ࢶಁ ᙔʔ̇ɾ෯ഁڃDuring the year the Company and its subsidiary made ̯α۹ʑc̯ʔ̇ʥԯ donations for charitable purposes totalling HK$1 million. ࢶಁͳ༠ಋྫྷȹϛຒʏe
Fixed assets ՞ց༅ଐ ഽ10ڃMovements of fixed assets are shown in note 10 to the ՞ց༅ଐᄈಕੱcӮሏ͌ accounts. ૈe
̯ٖ Share capital ᙔʔ̇ڃDuring the year under review, no purchase, sale or redemption ΕΑᚋɾα۹ʑc̯ʔֶ̇ԯ of the shares of the Company has been effected by the ԎಲᑪΑdˮਕֶᚿΑ̯ʔ̇ɾٖͫɀ Company or its subsidiary company (2002 : 126,600 shares were ཌྷཌྷɀαͳτ126,600ٖٖͫᑪΑԎഽ purchased and cancelled). ሻe
৻Ծᘪר Agreement for services ᙔʔڃThere is an agreement for services, in respect of which John గߜਝʪ̀එ྆τࠉʔ̇ɾͲ༅ Swire & Sons (H.K.) Limited, a wholly-owned subsidiary of John ̇ࠗಋʪ̀එ྆τࠉʔ̇ݯࠗಋࠔዀɮ ˞৻cרᙔʔ̇ొԜڃSwire & Sons Limited, provides services to Hong Kong Aircraft ೡτࠉʔ̇ʥԯ ৻ι̯ʥ͂೩ԑփcᔶר˟Engineering Company Limited and its subsidiary and under ʥτᗐʻ ˿৻ԾᘪeԾᘪͨЄȹʿяרwhich costs are reimbursed and a fee is payable. The ʿɰ͓߯ ɀཌྷཌྷʄαכكɊɀ˂כagreement can be terminated by either party giving not less ʀɺʭ ЄαͫɾɊɀͨ܃than twelve months’ notice of termination expiring on 31st Ɋɀ˂ɍɊȹˀֶϊ December 2005 or any subsequent 31st December. ˂ɍɊȹˀୄ˅Ծᘪe
Peter Johansen as a Director and shareholder of John Swire & ࢀณАݯߜਝʪ̀එ྆τࠉʔ̇ɾ໎ eڝSons Limited is interested in this agreement. Marven Bowles, ԑ࠹ٖcΕԾᘪɻτСऩᗐ ᜃяݯߜ۽Davy Ho Cho Ying, David Turnbull and Tony Tyler being ʼdЄीߜdࡌᗸᜃʥಝ
22 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ਝʪ̀එ྆໎ԑʥࡗcΕϊԾᘪɻ͛ Directors and employees of the John Swire & Sons Limited .e group are also interested in this agreementڝτСऩᗐ
τᗐ࿀ϭɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ˅ Particulars of the fees paid and the expenses reimbursed for α۹ɾɰ˟͂ʥˤʻ͂cੱӮሏ the year ended 31st December 2003 are given in note 23 to .ഽɀɊɍૈe the accountsڃ͌
߬ᚋ۪ʥԜᎶਆ Major customers and suppliers˚ ࠇ߬ (significant contracts) αʑc̯එ྆ɾʄɣᚋ۪ʥԜᎶਆʗП 70% of sales and 45% of purchases during the year were Ќ̯ʔ̇ሻਕᔾϛʗɾȼɊʥઔᑪᔾϛ attributable to the Group’s five largest customers and suppliers ʗɾ̒Ɋʄe̯එ྆ɾɣᚋ۪ਝ࣮ॾ respectively. 41% of sales were made to the Group’s largest τࠉʔ̇Ќ̯ʔ̇ሻਕᔾϛʗɾ̒Ɋ customer, Cathay Pacific Airways Limited while 23% ofي ȹcϤɣԜᎶਆAero Inventory (U.K.) purchases were made from the largest supplier, Aero Inventory .Ќ̯ʔ̇ઔᑪᔾϛʗɾɀɊ (U.K.) LimitedڬLimited ɍe No Director, their associates or any shareholder who to the cԎಲ໎ԑd֤೩ɾᐲᖎ knowledge of the Directors owns more than 5% of theكኣ໎ԑѫֺ ɁɡֶͨЄኟτϛʗɾʄ˞ɐ̯ʔ̇ɰ Company’s issued share capital (other than in respect to τࠉʔ̇ Cathay Pacific Airways Limited) has an interest in the customersيೕϷٖ̯ɾٖਝ࣮ॾ .τΕɐʼׄᚉɾᚋֶ۪ԜᎶਆɾ or suppliers disclosed aboveܛc̔ ᚬऩe Connected transactions During the year under review, the Company has placed .1 מᗐட͚ ,(”ΕΑᚋɾα۹ʑc̯ʔ̇ੀԯͫ part of its insurance through Spaciom Limited (“SPACIOM .1 ࠓ፮ΉSpaciom Limited a captive insurance company incorporated in the Isle of eʔ̇Ƚʪ̀ Man and wholly-owned by Swire Pacific Limited. The policiesړSPACIOMҙ placed by the Company with SPACIOM (“the Policies”) are ړړτࠉʔ̇Ͳ༅ኟτɾਿᙔϬٖͫ .࢟ࢌഽ˫ι͓e̯ʔ̇ continuing connected transactionsכ፮ʔ̇c ௰ړ௰ړၤSPACIOM͓߯ɾ e The premium paid by the Company in respect of the Policiesמᙩɾᗐட͚ܛݯ for the period 1st April 2003 to 31st March 2004 was ௰ͅɀཌྷཌྷɍα̒˂ȹ HK$4,375,295 and it is expected that the yearly premiumړʔ̇గ̯ ˀϭɀཌྷཌྷ̒αɍ˂ɍɊȹˀτࢽ౨ payable by the Company to SPACIOM will exceed 0.03% .ݯಋྫྷ̒ϛɍɊȼຒʄ but be below 3% of the net consolidated tangible assetsړֺᖔ˟ɾ ɝɀϛȾɊʄʏcད౨̯ʔ̇ʀ ੀ൚༩၃ړ˟SPACIOMɾҰαᎶ τѼ༅ଐ૱ᔾϛʗɾཌྷᒨཌྷɍcЎ ϊ૱ᔾϛʗɾɍeכ͛ʭ
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 23 Report of the Directors ໎ԑѫంй
ֺτࠉʔ̇ࠗಋᐲמThe Stock Exchange of Hong Kong Limited (the “Stock ࠗಋᐲ͚ ֺɰᑥЛ̯ʔ̇ΕҰω͓߯מExchange”) has granted the Company a waiver from strict ͚ ֺᖬמ௰ࣂᗲࣟፓΨࠗಋᐲ͚ړcompliance with the disclosure requirements under Chapter ೩ (14.25(1ڬɐ̟ஃڬof the Rules Governing the Listing of Securities on Դɐ̟ஃ (1)14.25 the Stock Exchange (the “Listing Rules”) in connection with ૈɾׄᚉஃցcՇߗɳૈͧஃࠉe the Policies on each occasion they arise subject to certain ڈconditions. ઁ๑ϊ೩ૈͧஃցc̯ʔ̇ɾዟ͓ ௰cԎᆢႏړ৻໎ԑɰᄗቇ೩ ௰iړIn accordance with these conditions, the Independent Non- ೩ Executive Directors of the Company have reviewed the i) ̯ͅʔ̇ઁ๑ȹঁ̳ਆพ༜А Policies and confirmed that they were: ༦ೡ͓߯h ਆพૈಁᖋ߯cֶ(2)ၤ̳(1)ܘ (i) taken out by the Company in the usual and ordinary ii כڴcourse of its business; SPACIOMᖋ߯ɾૈಁɺ ii) written either (1) on normal commercial terms or (2) on ዟ͓ɍّᖋ߯ɾૈಁ͓߯hʥ terms no more favourable to SPACIOM than terms with iii) ˞ྦྷ̯ʔٖ̇ϤӰʔ̡ଉɾ independent third parties; and ૈಁᖋ߯e iii) entered into on terms that are fair and reasonable insofar ௰cړas the shareholders of the Company are concerned. ̯ʔ̇ɾ࣏ᅕ͛ɰᄗቇ೩ Ɏݯ࣏ᅕߎ໎ԑѫԲɾ࿂፣i˞ The Auditors of the Company have also reviewed the ๑ᑥЛԲֺͧ߸ɾ߬ұc̯࣏ᅕܘ Policies and the following is an extract from their letter to ൬Ϸמαʑ༠ιɾᗐட͚כthe Board: ɰగɐ߸ ߗɳᄗቇೡѵe̯࣏ᅕɾᄗቇೡѵ “As requested in the waiver letter, we have carried out ˳ܢΣɎΈඖi ௰̯ͅʔ̇໎ԑѫሬړ೩ړcertain review procedures in connection with the i) ᆢ abovementioned connected transaction entered into Δғ࣏h ɀཌྷཌྷכ௰ړduring the year. Our review procedures included the ii) ࣏̯݅ʔ̇గ೩ Ɏԭ˞כʭړ˟following: ɍαɾҰαᎶ i) Ensured the Policies were properly approved by the ّɻᅕᔾ༖ঢ়ّiಋྫྷȹɝຒʏ ࿀ϭɀཌྷཌྷɍαɊɀכBoard of Directors of the Company; ֶ̯ʔ̇ ii) Checked that the yearly premium payable by the ˂ɍɊȹˀ˅α۹ంйֺ࣊ʔЗ Company in 2003 in respect of the Policies is less than ɾ၃τѼ༅ଐ૱ᔾϛʗɾɍh ፮ᚋਐMarshᄗቇړthe higher of HK$10 million or 3% of the Company’s iii) ༦̯ʔ̇ɾ ፮ʔ̇ొԜɾంძcϤړވ̔ͅ consolidated net tangible assets as published in the ړ௰ɾړˮcɐ߸ܞ፮ᚋਐړ ;annual report for the year ended 31st December 2003 ڏɈc˘ݯသ˿ॶجiii) Reviewed external quotations provided by external ᐢᔾԮᘏ ௰ړinsurance companies via the Company’s insurance փɾૈಁe࣓ኣϊᒨc೩ ዟ͓ɍّᖋ߯ɾכڴconsultant, Marsh, which indicated that overall premium ˞ɺ for the abovementioned Policies were competitive and ૈಁ͓߯e
24 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 τࠉʔ̇ᖋ߯Λඖ were the cheapest terms available. On this basis, theيඑ྆ၤਝ࣮ॾ̯ .2 එ྆ɀཌྷ Policies have been entered into on terms no more̯כޚᐢᅕᕡɣɾc ཌྷɍαᏪพᐢᔾϛʗɾ̒Ɋȹcϊ favourable than terms with independent third parties.” τࠉʔ̇ɾࠔيਝ࣮ॾכ೩Ƚᗐ ዀʥτᗐஉௐɾၐ࠳ʥɣ࠳eϊ೩ 2. Various contracts in relation to the maintenance and τࠉʔ̇˞ overhaul of Cathay Pacific Airways Limited’s aircraft andيяΕ̯එ྆ʥਝ࣮ॾ ܘȹঁਆพૈͧ˞ʥ̳พ৻ೡѵɎ related equipment, which in total are significant and Ϥᖋ߯e represented approximately 41% of the Group’s turnover in 2003, exist between the Group and Cathay Pacific Airways ໎ԑ Limited. These contracts have all been concluded on ɊȼࠒʥɊɄࠒɾଊͨ໎ԑ normal commercial terms in the ordinary and usual courseכΊͶ .ɀཌྷཌྷɍαɍ˂̒ˀᏵկ of business of the Group and Cathay Pacific Airways Limitedכɻcષਝᚬ ϭɀཌྷཌྷɍقeϊ̔cᎏʨབˮͨ໎ԑͨ αɊɀ˂ɍɊȹˀᔴͨݯ˅eԯֺτ໎ Directors ంй࣊ʔЗ Of the present Directors whose names are listed on pages 17̯כαʑͲαͨᓻcԎכޑԑ ɾˀʋಳΕͨe and 18, Lincoln Leong Kwok Kuen was appointed on 4th March 2003. In addition, John Paterson served as a Director until his α۹ʑɾɺࣂංcᓯ݇ਥʥϝঢ়ཽ resignation on 31st December 2003. All the remaining Directors̯כ ༞ଉˮͨˤ໎ԑe served throughout the year and still hold office at the date of this report. ࣓ኣ̯ʔ̇ೡ93ૈcֺτ໎ԑΕ ɍ։ٖ At various times during the year, Chris Gibbs and The Honכcя܃༦ౝҺᘪ࣐Ᏽፕ ൪αɣผɐйঽe࣓ኣɐ߸ஃցcʼ Michael Kadoorie served as alternate Directors. αረࠤйঽcЎ̯כdࢀณʥࡌᗸᜃ ΐଲ༅ࣟяᗙ࠰ፕடͨe Article 93 of the Company’s Articles of Association provides for all Directors to retire at the third Annual General Meeting Έ໎ԑяಲၤ̯ʔ̇߯τɺ˿ͅ˚Л˟ following their election by ordinary resolution. In accordance ȹαʑୄ therewith Marven Bowles, Peter Johansen and David Turnbullכ̔Ϥټցɾላؒټላ -৻e retire this year and being eligible, offer themselves for reרɾ˅ election. ഽ4ૈeڃੱӮሏ͌ټ໎ԑ༭ None of the Directors has a service contract with the Company that is not determinable by the employer within one year without payment of compensation (other than statutory compensation).
Details of Directors’ remuneration are provided in note 4 to the Accounts.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 25 Report of the Directors ໎ԑѫంй
ڬCode of Best Practice ԙᎶ͂Ψ ፣14ʑֺڃڬThe Company has complied throughout the year with the ̯ʔ̇ͲαяፓΨɐ̟ஃ eڬCode of Best Practice as set out in Appendix 14 to the Listing ͶɾԙᎶ͂Ψ Rules. ໎ԑᚬऩ ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀc࣓ኣᖬכ Directors’ interests At 31st December 2003, the register maintained under Section Դʥ౨ஒૈԝ352ૈஉ͓ɾΊ˫ʑֺ 352 of the Securities and Futures Ordinance (“SFO”) showed তc˞Ɏ໎ԑΕࠗಋࠔዀɮೡτࠉʔ τྡྷऩiܛthat the following Directors held beneficial interests in the ̇ɾٖͫɻ shares of Hong Kong Aircraft Engineering Company Limited:
Percentage of Personal Other Total Issued Capital (%) (%)ˈɁᚬऩ ԯˢᚬऩ ᐢ߮ ɰೕϷٖ̯ϛʗ The Hon Michael Kadoorie (alternate Director) – 3,782,886 * 3,782,886 2.27 ϝঢ়ཽ༞ଉˤ໎ԑ ڌDinty Dickson Leach 112,000 – 112,000 0.07 ңᄨ
পɾՇऩɁeڌτϊ೩ٖͫɾͲᚬܛThe Hon Michael Kadoorie is a beneficiary of discretionary trusts which hold these * ϝঢ়ཽ༞ଉܰ * shares.
ᐢസԎܧOther than as stated above, no Director or Chief Executive of ɐ߸̔c̯ʔ̇ɾ໎ԑֶϷ ᐲؒ྆Στcցޚthe Company had any interest or short position, whether ಲΕ̯ʔֶ̇ԯͨЄ ޚbeneficial or non-beneficial, in the shares or underlying shares ຮӮᖬԴʥ౨ஒૈԝXVɾֶٖͫ ऩྡྷڈand debentures of the Company or any of its associated ᗐٖͫʥඦԴɻኟτͨЄྡྷऩֶ corporations, if any (within the meaning of Part XV of the SFO). ɾᚬऩֶ࠸e c̯ʔ̇ɾͨЄ໎ԑکNeither during nor prior to the year under review has any right Ε̯α۹ʑֶɾ been granted to, or exercised by, any Director of the ֶ֤೩ɾ৫ֶ̰ιαɥɤԎಲᏵᚬ Company, or to or by the spouse or minor child of any Director, ֶϷԚᚬСc˞ႏᑪ̯ʔٖ̇ͫdႏٖ to subscribe for shares, warrants or debentures of the ᚬᖬֶඦԴe Company. Ε̯α۹ͨЄ౨ංʑcΕϊంйʑֺ ᗐֺؒ྆ᖋ߯ɾޚAt no time during the year did any Director, other than as ߸̔c̯ʔֶ̇ͨЄ અֶංઅقstated in this report, have a beneficial interest, whether directly ࠇ߬cลಲ໎ԑΕԯɻ or indirectly, in a contract to which the Company, or any of its ኟτࠇɣྡྷऩe associated corporations was a party, which was of significance and in which the director’s interest was material. Ε̯α۹ͨЄ౨ංʑc̯ʔֶ̇ԯͨЄ ᐲؒ྆cลಲͨЄΪખcԚʔ̇໎ԑޚ At no time during the year was the Company, or any of its ˞ᑪൕ̯ʔֶ̇ԯˢؒɁ྆ɾٖͫ associated corporations, a party to any arrangements to ֶඦԴϤᏵСe enable the Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
26 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ٖ߬ʥԯˢᚬऩ Substantial shareholders’ and other˚ ࣓ኣᖬԴʥ౨ஒૈԝ336ૈஉ͓ɾٖ interests ɀཌྷཌྷɍα The register of interests in shares and short positions maintainedכʥ࠸ᚬऩΊ˫ֺ༗cͫ ߬ under Section 336 of the SFO shows that at 31st December˚كɊɀ˂ɍɊȹˀc̯ʔ̇ɰᏵ τ˞Ɏᚬऩցຮ 2003 the Company had been notified of the following interestsܛʔ̇ɾٖ̯ͫכٖ cͲяݯྡྷऩi in the shares of the Company held by substantial shareholdersڬӮɐ̟ஃ (as defined in the Listing Rules), all being beneficial interests:
Number Percentage of of Shares Issued Capital (%) Remarks ᅕ͌ ɰೕϷٖ̯ϛʗˈ(%) ௐഽٖͫ John Swire & Sons Limited ߜਝʪ̀එ྆τࠉʔ̇ 99,649,103 59.91 Swire Pacific Limited ) Duplication of John Swire (ʪٖ̀ͫτࠉʔ̇ 99,649,103 59.91 ) & Sons Limited’s holding (see Note Cathay Pacific Airways Limited ) ၤߜਝʪ̀එ྆ ഽڃ൴ࠇᇲӮٖܛτࠉʔ̇ 45,649,686 27.45 ) τࠉʔ̇ɾيਝ࣮ॾ
ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀcߜਝʪ̀ Note: At 31st December 2003, the John Swire & Sons Limited group owned directly orכ ഽiڃ અֶංઅኟτɾʪٖ̀ͫτࠉʔ̇ indirectly interests in shares of Swire Pacific Limited representing 29.37% of theقඑ྆ ᚬऩcݯϛʗɾɀɊȾᒨɍȼɰೕϷ issued share capital and 52.82% of the voting rights; Swire Pacific Limited in turnٖͫ .ʥϛʗɾʄɊɀᒨɄɀҙᚬhʪ̀ controlled 46.36% of Cathay Pacific Airways Limited̯ٖ τࠉʔ̇ϛيτਝ࣮ॾܛڬτࠉʔٖ̇ͫ ʗɾ̒Ɋʒᒨɍʒઁٖᚬe
ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀc In addition, at 31st December 2003 the register of interests inכϊ̔c ࣓ኣٖͫʥ࠸ᚬऩΊ˫ֺ༗c˞ҙ༅ shares and short positions showed the following interest in the τɾ̯ʔٖ̇ͫᚬऩΣ shares of the Company held in the capacity of investmentܛଉɁΊຮ Ɏi manager:
Percentage of Number of Shares Issued Capital (%) (%)ˈᅕ͌ ɰೕϷٖ̯ϛʗٖͫ Marathon Asset Management Limited 14,985,730 9.01
࣏ᅕ Auditors ΕЩੀᐾϷɾٖ൪αɣผɐੀ৽ᘪ A resolution for the re-appointment of PricewaterhouseCoopers ༞ผ߮ԑ৻ֺݯ̯ as Auditors of the Company is to be proposed at the̷ڻ༦ʹາᇼᖓМ ʔ࣏̇ᅕɾҺᘪ࣐e forthcoming Annual General Meeting.
໎ԑѫ՜ By order of the Boardֻ
˚ David Turnbull
ࡌᗸᜃ Chairman ࠗಋcɀཌྷཌྷ̒αɍ˂Ⱦˀ Hong Kong, 9th March 2004
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 27 Consolidated profit and loss account ၃ฌऩሏ for the year ended 31st December 2003 ࿀ϭɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ˅α۹
ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ Turnover 2(l) 1,987 2,078 Ꮺพᐢᔾ
Operating expenses: Ꮺพʻi Staff remuneration 3 (1,045) (1,040) ᓻࡗᑀ༭ અҥࢿ͂þɮАʻق (Cost of direct material/job expenses (480) (367 Depreciation 10 (129) (126) җᓿ zɠΔʥᅢΧټOperating lease rentals – land & buildings (50) (55) Ꮺพै༉ै ټAuditors’ remuneration (1) (1) ࣏ᅕ༭ Changes in work in progress 1 (50) ̰ѧɮೡᛰ৽ Other operating expenses (174) (236) ԯˢᏪพʻ Movements in doubtful debt and stock obsolescence provisions (1) 70 вሏʥΦஒంᄠๅௐᛰ৽
Operating profit 108 273 ᏪพึС
Net finance (charges)/income 5 (4) 3 ল৻ʻˮ þνɃ૱ᔾ
Net operating profit 104 276 Ꮺพ૱ึС Share of results of jointly controlled companies 12 307 262 ᎶЌͳઁʔ̇พᐜ
СึکProfit before taxation 411 538 ೢ Taxation 6 (66) (73) ೢඖ
Profit after taxation 345 465 ೢ܃ึС Minority interest – – ʭᅕٖᚬऩ
Profit attributable to shareholders 7 345 465 ٖᎶЌึС
Dividends ٖࢠ Interim – paid 47 47 ɻ౨zɰ˟ Final – proposed 93 76 ̱౨zᏃݢ Special – proposed 166 416 ऋПzᏃݢ 8 306 539
СޔEarnings per share 9 HK$2.07 HK$2.80 Ұٖ
Dividends per share 8 Ұٖٖࢠ Interim HK$0.28 HK$0.28 ɻ౨ Final HK$0.56 HK$0.46 ̱౨ Special HK$1.00 HK$2.50 ऋП Total HK$1.84 HK$3.24 ͳ
ഽяڃThe notes on pages 33 to 51 form part of these accounts. ͅɍɊɍࠒϭʄɊȹࠒɾ ᙔϊሏ͌ɾȹͫe
28 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ٲConsolidated balance sheet ၃༅ଐ߲ඦ at 31st December 2003 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ Fixed assets 10 1,513 1,597 ՞ց༅ଐ Investment in jointly controlled companies 12 1,122 1,070 Εͳઁʔ̇ɾҙ༅
Deferred items Ⴎ֝ඖ͌ Staff loans 5 5 ᓻࡗࠥಁ Promissory note 16 – 2 ౨ ༅ଐټRetirement benefit asset 13 196 156 ঽͤ Deferred taxation 14 (140) (118) Ⴎ֝ೢඖ 61 45 Current assets ݚ৽༅ଐ Stocks of aircraft parts 15 33 68 ࠔዀཌྷͧΦஒ Work in progress 15 70 69 ̰ѧɮೡ Debtors and prepayments 16 202 273 Ꮆνʥད˟ሏඖ Amounts due from jointly controlled companies 15 11 Ꮆνͳઁʔ̇ಁඖ Deposits and bank balances 20(d) 420 547 ΦಁʥႺϷΦ 740 968 Current liabilities ݚ৽߲ඦ Creditors and accruals 16 329 385 Ꮆ˟ʥᎶ߮ሏඖ ౨ࠥಁٽTerm loan due within one year 19 4 3 ȹαʑ౨ɾ Amount due to jointly controlled companies 15 6 Ꮆ˟ͳઁʔ̇ಁඖ 348 394 Net current assets 392 574 ݚ৽༅ଐ૱ࠤ
3,088 3,286
Financed by: ༅̯Ԟi
̯ٖ Share capital 17 166 166 Reserves 18 2,817 3,011 ௐ
Shareholders’ equity 2,983 3,177 ٖٖᚬ Minority interest 5 5 ʭᅕٖᚬऩ ౨ࠥಁٽ Long term loan 19 100 104
3,088 3,286
David Turnbull ໎ԑ Dinty Dickson Leach ࡌᗸᜃ ڌDirectors ңᄨ
Hong Kong, 9th March 2004 ࠗಋcɀཌྷཌྷ̒αɍ˂Ⱦˀ
ഽяڃThe notes on pages 33 to 51 form part of these accounts. ͅɍɊɍࠒϭʄɊȹࠒɾ ᙔϊሏ͌ɾȹͫe
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 29 ٲCompany balance sheet ʔ̇༅ଐ߲ඦ
at 31st December 2003 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ Fixed assets 10 1,513 1,597 ՞ց༅ଐ ᙔʔ̇ڃ – – Subsidiary company 11 Investment in jointly controlled companies 12 322 499 Εͳઁʔ̇ɾҙ༅
Deferred items Ⴎ֝ඖ͌ Staff loans 5 5 ᓻࡗࠥಁ Promissory note 16 – 2 ౨ ༅ଐټRetirement benefit asset 13 196 156 ঽͤ Deferred taxation 14 (140) (118) Ⴎ֝ೢඖ 61 45 Current assets ݚ৽༅ଐ Stocks of aircraft parts 15 33 68 ࠔዀཌྷͧΦஒ Work in progress 15 70 69 ̰ѧɮೡ Debtors and prepayments 16 202 273 Ꮆνʥད˟ሏඖ Amounts due from jointly controlled companies 15 11 Ꮆνͳઁʔ̇ಁඖ Deposits and bank balances 407 534 ΦಁʥႺϷΦ 727 955 Current liabilities ݚ৽߲ඦ Creditors and accruals 16 325 380 Ꮆ˟ʥᎶ߮ሏඖ ౨ࠥಁٽTerm loan due within one year 19 4 3 ȹαʑ౨ɾ Amount due to jointly controlled companies 15 6 Ꮆ˟ͳઁʔ̇ಁඖ 344 389 Net current assets 383 566 ݚ৽༅ଐ૱ࠤ
2,279 2,707
Financed by: ༅̯Ԟi
̯ٖ Share capital 17 166 166 Reserves 18 2,013 2,437 ௐ
Shareholders’ equity 2,179 2,603 ٖٖᚬ ౨ࠥಁٽ Long term loan 19 100 104
2,279 2,707
David Turnbull ໎ԑ Dinty Dickson Leach ࡌᗸᜃ ڌDirectors ңᄨ
Hong Kong, 9th March 2004 ࠗಋcɀཌྷཌྷ̒αɍ˂Ⱦˀ
ഽяڃThe notes on pages 33 to 51 form part of these accounts. ͅɍɊɍࠒϭʄɊȹࠒɾ ᙔϊሏ͌ɾȹͫe
30 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ٲݚ൴ټConsolidated cash flow statement ၃ଊ for the year ended 31st December 2003 ࿀ϭɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ˅α۹
ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ Operating activities Ꮺ༜พ৻ ټCash generated from operations 20(a) 253 400 Ꮺพଐ́ɾଊ Interest paid (9) (9) ɰ˟Сࢠ Interest received 6 49 ɰνСࢠ ݚɃ૱ᔾټNet cash inflow from operating activities 250 440 Ꮺ༜พ৻ɾଊ
Investing activities ҙ༅พ৻ Purchase of fixed assets (47) (87) ᑪൕ՞ց༅ଐ Sale of fixed assets 2 – ˮਕ՞ց༅ଐ Investment in jointly controlled companies – (1) Εͳઁʔ̇ɾҙ༅ Loans advanced to jointly controlled companies (11) (20) ʀͳઁʔ̇ࠥಁ Loans repaid by jointly controlled companies 188 – ͳઁʔ̇ᑹࠥಁ Dividends received from jointly controlled companies 33 40 ɰνͳઁʔ̇ɾٖࢠ Net decrease in staff loans – 171 ᓻࡗࠥಁಕʭ૱ᔾ Net decrease/(increase) in short-term deposits ༩ɍ˂ց౨ɾ౨Φಁಕʭ maturing after three months 60 (60) bþᄈ˱૱ᔾ ݚɃ૱ᔾټNet cash inflow from investing activities 225 43 ҙ༅พ৻ɾଊ
Financing activities ጪ༅พ৻ ౨ࠥಁٽRepayment of term loan (3) (3) ᑹ Repurchase of Company’s shares – (1) ᑪΑ̯ʔٖ̇ͫ Dividends paid to shareholders (539) (117) ɰ˟ʀٖɾٖࢠ ݚˮ૱ᔾټNet cash outflow from financing activities (542) (121) ጪ༅พ৻ɾଊ
˱ಕʭþᄈذ೩ძټʥଊټDecrease)/increase in cash and cash equivalents (67) 362 ଊ) ೩ټʥଊټȹ˂ȹˀ့ɾଊ ذCash and cash equivalents at 1st January 475 113 ძ ʥټɊɀ˂ɍɊȹˀ့ɾଊ ذ೩ძټCash and cash equivalents at 31st December 20(c) 408 475 ଊ
ഽяڃThe notes on pages 33 to 51 form part of these accounts. ͅɍɊɍࠒϭʄɊȹࠒɾ ᙔϊሏ͌ɾȹͫe
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 31 ٲConsolidated statement of changes in equity ၃ٖᚬᛰ৽ for the year ended 31st December 2003࿀ϭɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ˅α۹
ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ Total equity at 1st January 3,177 2,830 ȹ˂ȹˀ့ɾٖᚬᐢ߮ Profit attributable to shareholders 18 345 465 ٖᎶЌึС Repurchase of own shares ᑪΑ̯ʔٖ̇ͫ – premium paid on repurchase 18 – (1) zᑪΑึძ Dividends paid 18 (539) (117) ɰ˟ٖࢠ Total equity at 31st December 2,983 3,177 Ɋɀ˂ɍɊȹˀ့ɾٖᚬᐢ߮
ഽяڃThe notes on pages 33 to 51 form part of these accounts. ͅɍɊɍࠒϭʄɊȹࠒɾ ᙔϊሏ͌ɾȹͫe
32 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ഽڃNotes to the accounts ሏ͌
1. Principal activities 1. ˚߬พ৻ The Hong Kong Aircraft Engineering Company Limited Group is primarily engaged ࠗಋࠔዀɮೡτࠉʔ̇˚߬Εࠗಋԑਆ͂ࠔ in the business of commercial aircraft overhaul and maintenance in Hong Kong. ዀɣ࠳ʥၐ࠳พ৻e̯එ྆ɾͳઁʔ̇ɾ˚߬ The principal activities of the Group’s jointly controlled companies are set out พ৻ӮʄɊȹࠒe on page 51. ̯ʔ̇Εࠗಋԑਆ͂ࠔዀၐ࠳dҝʥ࠳ଉ The Company is engaged in the business of maintenance, modification and พ৻cΐϊԎಲంй൬ȹүɾพᐜʗඖ༅ࢿe repair of commercial aircraft in Hong Kong. No further business segmental information has therefore been reported. එ྆ɾͳઁʔ̇ͲޑᏪၤ̯ʔ̇ޚɾพ ࠗಋʥࣵ̔Ꮺ༜eͳઁʔ̇ɾল৻ล߬כ৻c ഽ12Ͷ߸eڃכ The Group’s jointly controlled companies, all of which are engaged in the same business as the Company, operate both in Hong Kong and overseas. Financial ע೪႓ܧsummaries of the jointly controlled companies are provided under note 12. 2. ˚߬ผ߮ ڬa) ᇁႇࡈ) ๑ࠗಋౝ༧અढ़ɾผ߮ࡈܘȽٲStatement of principal accounting policies Έল৻ం .2 ᇁႇcԎଲࠗಋผ߮ʔผཕЗɾผڬ a) Basis of preparation) ֺτࠉʔמc˞ʥࠗಋᐲ͚ڬThe financial statements have been prepared in accordance with the ߮ྡྷ৻ๅ ፣16ֺͶɾׄᚉ߬ұeڃڬaccounting principles generally accepted in Hong Kong and comply with ̇ɐ̟ஃ Statements of Standard Accounting Practice (“SSAP”) issued by the Hong Kong Society of Accountants (“HKSA”) and the disclosure requirements set ɀཌྷཌྷɍαΕผ߮ܧ೪ʿࠍɾȹ˚߬ҝ out in Appendix 16 of the Listing Rules of The Stock Exchange of Hong Kong ᛰcȽઔ͂ࠗͅಋผ߮ʔผཕЗɾผ߮ ༦֡α۹כ12໔νऩೢeͅڬLimited. ྡྷ৻ๅ яઔ͂ᗘЍɾʿؒcΐϊࠇͶʗႮ֝ 12໔ڬThe only major change in accounting policies for 2003 is the adoption of ೢඖɾˈ༖ᅕὙcผ߮ྡྷ৻ๅ SSAP 12 “Income Taxes” issued by the HKSA. The impact of SSAP 12 on the ྦྷ̯එ྆พᐜɾᄧᚊޅ෬e Group’s result is minimal other than restating some comparatives for deferred ڬtaxation as a similar method was used in previous years. (b) ၃ࡈ ၃ሏ͌˳ܢࠗಋࠔዀɮೡτࠉʔ̇ʥԯ ᙔʔ့̇ϭɊɀ˂ɍɊȹˀɾሏ͌eڃ b) Basis of consolidation) The consolidated accounts incorporate the accounts of Hong Kong Aircraft ၃ฌऩሏʑcכܢ˳ᙔʔ̇ɾพᐜɰڃ Engineering Company Limited and its subsidiary company made up to 31st ၃ึСκ܃ϬೢڬDecember. ԯɻʭᅕٖᚬऩ e The results of the subsidiary company are included in the consolidated profit ɾ̰מdΦʥඑ྆ʔ̇ං͚מand loss account and the minority interest therein is deducted from the ʔ̇ං͚ ԡࣂҿሻeכconsolidated profit after taxation. ᛰଊСऩcя
ᙔʔ̇ڃ (Intercompany transactions, balances and unrealised gains on transactions (c τ༩˸ᅕҙᚬɾܛඑ̯྆ܞᙔʔ̇Ƚڃ .between Group companies are eliminated upon consolidation ೪ɾʔܧᚬऩֶτᚬဳ؝ԯল৻ʥᏪพ (c) Subsidiary company ̇e A subsidiary is a company in which the Group has an interest of more than one half of the voting powers or otherwise has the power to govern the (d) ͳઁʔ̇ financial and operating policies. ༅ᐲᏪȽȹඖΪખcͅඑ྆ʥԯˢ Ђ൬ϷȹඖᏜݠ৽cϤඖᏜݠ৽ྑ d) Jointly controlled companies ݯͳઁԹcӀτȹΊၤɾྑЂॶྦྷ) A joint venture is a contractual arrangement whereby the Group and other ྡྷɾᏜݠ৽൬Ϸ௰ʿࠍઁԹe parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity of the entity.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 33 ഽڃNotes to the accounts ሏ͌
The consolidated profit and loss account includes the Group’s share of results ၃ฌऩሏ˳ܢ̯එ྆ᎶЌͳઁʔ̇ɾพ ɐcΕͳઁʔ̇ɾٲof jointly controlled companies. In the consolidated balance sheet, the ᐜeΕ၃༅ଐ߲ඦ එ྆ᎶЌ༅ଐ૱ࠤeΕ̯ʔ̯כ೩ޚinvestment in jointly controlled companies represents the Group’s share of ҙ༅ ιܘʑcΕͳઁʔ̇ɾҙ༅ٲnet assets. In the Company’s balance sheet, investments in jointly controlled ̇༅ଐ߲ඦ companies are stated at cost less provision for permanent diminution in ̯κ̷ɔɾಕࠤๅௐΣτͶሏe value, if any. (e) ਆᙷࠤ ᙔʔڃe) Goodwill ၃ሏֺ͌ଐ́ɾਆᙷࠤcЩνᑪ) Goodwill arising on consolidation represents the excess of cost of acquisition ̇ʥͳઁʔ̇ɾι̯൚༦Ενᑪʨ̯එ of subsidiary and jointly controlled companies over the Group’s share of ྆Ε˿ʗ༅ଐ૱ࠤɻᎶЌɾʔ̡ძࠤeֺ ଐ́ɾਆᙷࠤکɀཌྷཌྷȹαȹ˂ȹˀכthe fair value ascribed to the separable net assets at the date of acquisition. τ νऩௐɻ࿁ሻeɀཌྷཌྷȹαȹ˂ȹכAll goodwill arising before 1st January 2001 was eliminated against revenue ɰ ʑ༅ٲ༅ଐ߲ඦכଐ́ɾਆᙷࠤя܃reserve. Goodwill incurred after 1st January 2001 is capitalised in the balance ˀ ᇃᚫሻق˞sheet and is amortised to the profit and loss account on a straight-line base ̯ʝcʥ࣓ኣԯЅ߮ɾτࢽ౨ over its estimated useful economic life. ؒ߮Ƀฌऩሏɻe
ฌऩሏɻכਆᙷࠤଐ́ɾಕࠤЩࣂכAny impairment arising on goodwill is recognised in the profit and loss ͨЄ account immediately. ᆢႏe
(f) Foreign currencies (f) ̔ྫྷ Foreign currency denominated monetary assets and liabilities and the ˞̔ྫྷݯ௰Ͻɾஒྫྷ༅ଐʥ߲ඦʥ༅ଐ߲ ့ˀɾЙଅʝٲ༅ଐ߲ඦܘcٲbalance sheets, are translated into Hong Kong dollars at the rates of ඦ ˀɾ̟מ͚˞מexchange ruling at the balance sheet date. Foreign currency transactions ݯಋʏeαʑɾ̔ྫྷ͚ during the year are translated at the market exchange rates ruling at the මЙଅ့eЙޔᑋɰͶɃฌऩሏcЎ ਝͳઁʔ̇ɾҙ༅૱ᔾɾ̰ᛰଊᔾ̔כ transaction dates. Exchange differences are reflected in the profit and loss અ߮Ƀνऩௐʑeق̔c೩ᔾڬ account except for unrealised differences on net investments in foreign jointly controlled companies which are taken directly to revenue reserve. αʑc˞̔ྫྷ߮ࠤɾ̔ਝͳઁʔ̇ɾ༅כ ့ˀɾЙଅҗٲ༅ଐ߲ඦ˞ٲThe balance sheet of foreign jointly controlled companies denominated in ଐ߲ඦ ᚬ̡яමଅҗ့e˱˞ڬforeign currencies are translated at the rates of exchange ruling at the ့cϤฌऩሏ balance sheet date whilst the profit and loss accounts are translated at the weighted average exchange rates during the year. (g) Ꮺพै༉༅ଐ ɣʗ༅ଐɾΑంʥࠓ፮ኟτᚬݯै τcै༉АᏪพै༉Ƀሏeܛg) Assets under operating leases ༉ʔֺ̇) Leases where substantially all the rewards and risks of ownership of assets Ꮺพै༉Ծᘪʻ˟ֶᎶ˟ɾै༉͂cܘ .remain with the leasing company are accounted for as operating leases ԡ့߮ܘै༉౨̡яͶɃᏪพึСሏ Payments made and due under operating lease agreements are ɻʻሻe aggregated and charged to operating profit evenly over the periods of the respective leases. (h) ՞ց༅ଐʥҗᓿ ՞ց༅ଐܘι̯ಕҗᓿͶሏe (h) Fixed assets and depreciation bb Fixed assets are carried at cost less depreciation. җᓿଅܘ՞ց༅ଐɾЅ߮˿ԜԚ͂α౨࿁ ሻԯι့̯߮e Rates of depreciation are calculated to write off the cost of fixed assets over the estimated useful lives of the assets.
34 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Any land premium payable on acquisition of leasehold land is depreciated ͨЄᑪൕै༉ɠΔᎶ˟ɾɠΔึძͅЌ͂ Ɏɾै༉౨ʑҗᓿe࣓ኣၤዀכfrom the date of occupation over the remaining lease period. Buildings ʨ associated with the activities carried out under the franchise agreement ဳଉѫֺ߯ਿᏪᚬԾᘪԑτᗐพ৻ɾ with the Airport Authority are amortised over the period of that franchise, ᅢΧܘਿᏪᚬα౨ЩɀɊαᚫሻcԯ Ќ͂ʨͅܪʗ̒Ɋαᚫሻeஉڬthat is, 20 years. Other buildings are amortised over 40 years. Facilities are ˢᅢΧ ɻᄥָʥᅢΧɺʀۺdepreciated over 20 years from the date of occupation. Plant and buildings ʗɀɊαҗᓿeጙ under construction are not depreciated. җᓿe
ڬԯЅ߮˿νΑࠤcכWhere the carrying amount of an asset is greater than its estimated Σ༅ଐɾሏࠍࠤঢ় recoverable amount, an impairment loss is recognised to reduce the asset Ͷ့ȹඖ༅̯ᑋฌ˞ੀ༅ଐࠤಕϭԯ˿ν to its recoverable amount. Αࠤe
The depreciation rates in use for other assets are as follows: ԯˢ༅ଐԚ͂ɾҗᓿଅΣɎ:
Equipment, plant and machinery 10% to 33% உௐdᄥָʥዀኂ 10%ϭ33% Motor vehicles, computer software 20% Ӂӹdཋசͧ 20%
The gain or loss on disposal of a fixed asset represents the difference between ˮਕ՞ց༅ଐฌऩȽܞˮਕ૱νɃၤ༅ଐ the net sales proceeds and the carrying amount of the asset, and is ሏࠍࠤɾᔾcԎɰͶɃฌऩሏɻe recognised in the profit and loss account. (i) Φஒʥ̰ѧɮೡ (i) Stocks and work in progress Φஒʥ̰ѧɮೡܘ˞˱ᚬ̡яਥๅ့߮ɾ Stocks and work in progress are stated at the lower of cost, calculated on a ι̯ၤ˿ᛰଊ૱ࠤԭّɻɾ༖ГّɃሏe weighted average basis, and net realisable value. Net realisable value is ˿ᛰଊ૱ࠤȽܘད౨ˮਕνɃಕЅ߮ሻਕ determined on the basis of anticipated sales proceeds less estimated selling ʻϤᔤցe expenses. ذ೩ძټʥଊټj) ଊ) ٲι̯তɃ༅ଐ߲ඦܘj) Cash and cash equivalents ΦಁʥႺϷΦɰ) Deposits and bank balances are carried in the balance sheet at cost. ɻe
˳ذ೩ძټʥଊټcଊٲݚ൴ټFor the purposes of the cash flow statement, cash and cash equivalents ݯᇁႇଊ dႺϷʥল৻ዀ࿚ණᖔࣂټΦଊܢ comprise cash in hand, amounts repayable on demand from banks and ᑪɃࣂɍ˂ʑ౨ɾ౨כfinancial institutions and short-term liquid investments which were within three ᑹɾಁඖʥ months of maturity when acquired. ݚ৽ҙ༅e k) Deferred taxation (k) Ⴎ֝ೢඖ) 12໔cႮ֝ೢඖȽઔڬUnder SSAP 12, deferred taxation is provided in full, using the liability method, ࣓ኣผ߮ྡྷ৻ๅ on temporary differences arising between the tax bases of assets and ߲͂ඦؒగ༅ଐʥ߲ඦɾിೢਥๅၤԯΕ liabilities and their carrying amounts in the accounts. Taxation rates enacted ሏ͌ɻɾࠍࠤʵɾᅗࣂଔАˮͲᅕ ့ˀٲor substantively enacted by the balance sheet date are used to determine ๅௐeႮ֝ೢඖઔ͂Ε༅ଐ߲ඦ ɰཕЗֶྡྷሔཕЗɾೢଅᔤցeک .deferred taxation
Deferred tax assets are recognised to the extent that it is probable that Ⴎ֝ೢඖ༅ଐȽగτ˿ॶੀ̰ԞᎶᇾೢึ ሻϤᆢႏeאfuture taxable profit will be available against which the temporary Сၤ˿༜͂ɾᅗࣂଔ differences can be utilised. ᙔʥͳઁʔ̇ҙ༅ଐ́ɾڃႮ֝ೢඖȽగ Deferred taxation is provided on temporary differences arising on ᅗࣂଔϤАˮๅௐcЎΣ˿˞ઁԹᅗࣂ investments in subsidiaries and jointly controlled companies, except where ଔɾᅆΑࣂංcԎτ˿ॶΕ˿དӮੀԞ ̔eڬthe timing of the reversal of the temporary difference can be controlled ɺผᅆΑ and it is probable that the temporary difference will not reverse in the foreseeable future.
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 35 ഽڃNotes to the accounts ሏ͌
In prior year, deferred taxation was accounted for at the current taxation ֡α۹cႮ֝ೢඖȽΐᎶగᇾೢϤ့߮ɾ СԭّɾࣂංଔcޔСၤሏֺ͌͐ɾޔ rate in respect of timing differences between profit as computed for taxation དӮੀԞʻ˟ֶ˿νΑɾ߲˿כpurposes and profit as stated in the accounts to the extent that a liability or ࣓ኣད౨ ଊϷೢଅ့߮eܘan asset was expected to be payable or recoverable in the foreseeable ඦֶ༅ଐϤ future. (l) Ꮺพᐢᔾʥνऩႏ့ ᔾᐢᅕeೕټl) Turnover and revenue recognition Ꮺพᐢᔾݯᚋ۪ೕɾ) ѧܘֶ܃ɮೡѧଓכTurnover is the aggregate of amounts invoiced to customers. Invoices are ࣓ኣПૈಁ כ೩ޚraised either on completion or on stage completion depending on the terms ιආݒˮḛѧɮೡɾႏ့νɃ of individual contracts. For incomplete contract work, revenue recognised ܘɮೡЅࠤਥๅ့߮ɾɮೡι̯eѧι ټrepresents cost of work incurred which is valued on the same basis as work ɮೡɾᐢႏ့νɃݯగˮೕ Ꮆ߮ਥๅႏ့eٖࢠܘin progress. Total revenue recognised for the completed contract is equal ᔾᐢᅕeল৻νɃ ႏ့e܃ᆢցτᚬઅՇಁඖכto the aggregate of amounts invoiced for the contract. Finance income is νɃ recognised on an accrual basis. Dividend income is recognised when the right to receive payment is established. (m) ࡗါС (i) ঽͤါС m) Staff benefits ̯ʔ̇ᜑԯࡗፕእ˱ੜԹֲʔዶ) ցঽͤါСི߮ވԭඖֶټੜዶټ i) Retirement benefits) ڌ˞ցঽͤါСི߮ވThe Company offers either the Mandatory Provident Fund (“MPF”) or ԯɻȹඖeԭඖ one of two defined benefit retirement schemes to staff. The latter পԾᘪܛτcց౨߬ұ၀့˞ད౨၀ schemes are held under trust arrangements and actuarially valued as ့ɾЅࠤʿؒʀ˞Ѕࠤeϊ೩ི߮Ƚ࣓ ᘪԜಁeۺrequired on a regular basis using a prospective actuarial valuation ኣ၀့ method. They are funded in accordance with the actuarial ԜಁᘗᙩΣᅕতɃฌټrecommendation. ̯ʔ̇ɾੜዶ ད߮͂ڬցါСི߮ވऩሏʑeϤԭඖ The Company’s contributions to the MPF continue to be charged to the ௰Ͻ൘তؒЅ൴ɾঽͤါС͂Ƀሏe ʔ̡ࠤጫ൴cϤܘ๑ϊؒcི߮༅ଐܘ ,profit and loss account as incurred. For the two defined benefit schemes ټϣ౨ࠉၤ̔මਥڬretirement benefit costs, which are assessed using the projected unit ঽͤါСஐͨ credit method, are charged to the profit and loss account. Under this ኣɾޚߗ߲ඦɾ̟ఏࢠଅc˞ད߮ԯ ޔݚ൴cʹҗ့ݯଊࠤe၀့ټmethod, plan assets are measured at fair value; retirement benefit ̰Ԟଊ obligations are measured as the present value of the estimated future ᑋ˞ི߮ஐͨଊࠤֶི߮༅ଐʔ̡ࠤԭ cash flows by reference to market yields on Exchange Fund Notes, which ّɾං༖ɣّϛʗɾɊݯࠉc൚༦ϊɐ ၤɾࡗɾད౨̡яܘᔾੀټhave terms to maturity approximating the terms of the related liability. ࠉɾ ৻α౨ංcΕ၃ฌऩሏɻႏ့eרActuarial gains and losses to the extent of the amount in excess of 10% Ɏ of the greater of the present value of the plan obligations and the fair value of plan assets are recognised in the consolidated profit and loss (ii)ࡗ˿Ԕτɾ౨ ᗐɾ͂Ᏽႏ့ݯࡗޚaccount over the expected average remaining service lives of the ၤࡗα participating employees. Ꮆ߮౨e
(ii) Staff leave entitlements (n) τᗐடɁɡ ᙔʔ̇ڃܢ˳Ɂʥʔ̇cܞCosts related to staff annual leave are recognised as the leave accrues τᗐடɁɡ to staff. ʥͳઁʔ̇cԯɁdʔֶ̇එ྆τॶɈ અֶංઅઁԹ̊ȹʿcֶ˿Εল৻ʥᏪق (n) Related parties ༜Һ೪ɐྦྷ̊ȹʿϷԚࠇɣᄧᚊɈe Related parties are individuals and companies, including subsidiaries and jointly controlled companies, where the individual, company, or group has the ability, directly or indirectly, to control the other party or exercise significant influence over the party in making financial and operating decisions.
36 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 3. Staff remuneration 3. ᓻࡗᑀ༭ Total staff remuneration for 2003 was HK$1,045 million (2002: HK$1,040 million). ɀཌྷཌྷɍαɾᓻࡗᑀ༭ͳಋྫྷɊყ̒ɝʄϛ The five highest paid employees included four (2002: four) directors whose ຒʏɀཌྷཌྷɀαݯಋྫྷɊყ̒ɝຒʏeʄΊ Ίɀཌྷཌྷɀαݯ̒Ί໎̒ܢ˳remuneration is shown in note 4. The remuneration of the remaining one (2002: ঢ়ᑀᓻࡗɻ ഽ4eɎȹΊɀཌྷཌྷɀαݯڃone) highest paid employee comprises: ԑcԯᑀ༭Ӯ ȹΊঢ়ᑀᓻࡗɾᑀ༭˳ܢi 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ СऩذdݛൎʥྡྷټSalaries, allowances and benefits in kind 3 3 ᑀ
ټDirectors’ remuneration 4. ໎ԑ༭ .4 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ ི߮ԜಁټPension scheme contributions 2 3 ঽͤ СऩذdݛൎʥྡྷټSalaries, allowances and benefits in kind 21 21 ᑀ 23 24
Number of directors ໎ԑɁᅕ ʗiټDistribution of Directors’ remuneration: ໎ԑ༭ HK$0.0M – HK$1.0M 9 8 ಋྫྷཌྷʏϭಋྫྷȹϛຒʏ Over HK$1.0M – HK$1.5M 1 2 ಋྫྷȹϛຒʏ˞ɐϭಋྫྷȹϛʄɊຒʏ Over HK$1.5M – HK$2.0M – – ಋྫྷȹϛʄɊຒʏ˞ɐϭಋྫྷɀϛຒʏ Over HK$2.0M – HK$2.5M – 1 ಋྫྷɀϛຒʏ˞ɐϭಋྫྷɀϛʄɊຒʏ Over HK$2.5M – HK$3.0M – 1 ಋྫྷɀϛʄɊຒʏ˞ɐϭಋྫྷɍϛຒʏ Over HK$3.0M – HK$3.5M 1 – ಋྫྷɍϛຒʏ˞ɐϭಋྫྷɍϛʄɊຒʏ Over HK$3.5M – HK$4.0M – – ಋྫྷɍϛʄɊຒʏ˞ɐϭಋྫྷ̒ϛຒʏ Over HK$4.0M – HK$4.5M – 1 ಋྫྷ̒ϛຒʏ˞ɐϭಋྫྷ̒ϛʄɊຒʏ Over HK$4.5M – HK$5.0M – – ಋྫྷ̒ϛʄɊຒʏ˞ɐϭಋྫྷʄϛຒʏ Over HK$5.0M – HK$5.5M 1 – ಋྫྷʄϛຒʏ˞ɐϭಋྫྷʄϛʄɊຒʏ Over HK$5.5M – HK$6.0M 1 1 ಋྫྷʄϛʄɊຒʏ˞ɐϭಋྫྷʒϛຒʏ Over HK$6.0M – HK$6.5M – 1 ಋྫྷʒϛຒʏ˞ɐϭಋྫྷʒϛʄɊຒʏ Over HK$6.5M – HK$7.0M 1 – ಋྫྷʒϛʄɊຒʏ˞ɐϭಋྫྷȼϛຒʏ 14 15
ᐢ߮ಋټ৻໎ԑɾڈDirectors’ fees paid to the independent Non-Executive Directors during the year ̯α۹ʑʻ˟ʀዟ͓ totalled HK$0.3 million (2002: HK$0.1 million); they received no other emoluments ྫྷɍɊຒʏɀཌྷཌྷɀαݯಋྫྷɊຒʏh֤೩ eټᙔʔ̇νՅԯˢ༭ڃfrom the Company or its subsidiary company. ԎಲΉ̯ʔֶ̇ԯ
5. Net finance (charges)/income 5. ল৻ʻˮþνɃ૱ᔾ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Finance income 5 12 ল৻νɃ ౨ࠥಁСࢠٽʄαʑͲᑹɾכInterest on long term loan not wholly repayable ˇ ഽ19ڃ (within five years (note 19) (9) (9 (4) 3
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 37 ഽڃNotes to the accounts ሏ͌
6. Taxation 6. ೢඖ ഽ 2003 2002ڃ Note (in HK$ Million) ಋྫྷϛຒʏ The taxation charge comprises: ೢඖʻˮ˳ܢi ᙔʔ̇iڃThe Company and its subsidiary company: ̯ʔ̇ʥԯ Deferred taxation 14 (22) (38) Ⴎ֝ೢඖ
Share of taxation attributable to jointly controlled companies: ᎶЌͳઁʔ̇ɾೢඖi Hong Kong taxation (38) (32) ࠗಋೢඖ Overseas taxation (6) (3) ࣵ̔ೢඖ (44) (35)
Group total (66) (73) එ྆ᐢ߮
౨ೢඖᑋฌکNo provision for Hong Kong profits tax has been made for the year as the ΐ̯ʔ̇ɾᎶᇾೢึСɰѧͲݯ ሻcֺ˞̰τݯ̯α۹ࠗಋСೢАˮๅאCompany’s assessable profit is wholly absorbed by the tax losses brought forward. ֺ α۹ɾСೢܧɀཌྷཌྷɍϭཌྷ̒αলכHong Kong profits tax is calculated at 17.5% (2002: 16%) as a result of an increase ௐeͅ in profits tax rate in respect of the fiscal year 2003/04. Overseas taxation is ೢଅొঢ়cࠗಋСೢȽܘೢଅϛʗɾɊȼᒨ calculated at tax rates prevailing in the respective jurisdictions. ʄ့߮ɀཌྷཌྷɀαݯϛʗɾɊʒeࣵ̔ೢඖ Έ̇ؒဳᑲਂֺઔ͂ɾೢଅ့߮eܘڬ
Provision has been made for all deferred tax liabilities and assets. ɰݯֺτႮ֝ೢඖ߲ඦʥ༅ଐАˮๅௐe
Reconciliation between tax charges and tax at the applicable tax rate: ೢ৻ʻˮၤሬ͂ೢଅɾೢඖྦྷሏi
2003 2002 (in HK$ Million) ಋྫྷϛຒʏ СึکProfit before taxation 411 538 ೢ
ࠗಋСೢଅϛʗɾɊȼᒨʄɀཌྷཌྷɀαݯܘ Nominal amount at Hong Kong profits tax rate of 17.5% (2002 : 16%) (72) (86) ϛʗɾɊʒ့߮ɾࠍᔾ Effect of different tax rates in local jurisdiction 9 9 Δ̇ؒဳᑲਂɺೢଅɾᄧᚊ Net non-taxable income/non-deductible expenses not ಲᇾೢɾνɃþ subject to taxation 9 4 ɺ˿͂Аκೢɾʻˮ૱ᔾ Utilisation of previously unrecognised tax losses 1 – ༜͂༦֡α۹̰ᆢႏɾೢ৻ᑋฌ Over provisions in prior years 1 – ༦֡α۹ๅௐᅆΑ༦Λ Effect of changes in tax rates (14) – ೢଅҝᛰɾᄧᚊ Total tax charges per accounts (66) (73) ܘሏ͌ɾೢ৻ʻˮᐢ߮
Profit attributable to shareholders 7. ٖᎶЌึС .7 ʔ̇ሏඖʑݯಋ̯כOf the profit attributable to shareholders, HK$115 million (2002: HK$277 million) is ٖᎶЌึСɻcɰ့߮ dealt with in the accounts of the Company. ྫྷȹყȹɝʄϛຒʏɀཌྷཌྷɀαݯಋྫྷɀყȼ ɝȼϛຒʏe
38 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Dividends 8. ٖࢠ .8 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ ɀཌྷཌྷɍαȾ˂ɀɊɀˀɰݢೕɾɻ౨כ Interim, paid on 22nd September 2003, ٖࢠcҰٖಋྫྷ0.28ʏɀཌྷཌྷɀαݯ of HK$0.28 per share (2002: HK$0.28) 47 47 ಋྫྷ0.28ʏe Ꮓݢ̱౨ٖࢠҰٖಋྫྷ0.56ʏ Final, proposed, of HK$0.56 per share (2002: HK$0.46) 93 76 ɀཌྷཌྷɀαݯಋྫྷ0.46ʏe ᏃݢऋПٖࢠҰٖಋྫྷ1.00ʏ Special, proposed, of HK$1.00 per share (2002: HK$2.50) 166 416 ɀཌྷཌྷɀαݯಋྫྷ2.50ʏe 306 539
ɀཌྷཌྷ̒αɍ˂ȾˀᐾϷɾ໎ԑѫɣผכAt a Board meeting held on 9th March 2004, Directors recommended a final ໎ԑѫ ᘪݢೕ̱౨ٖࢠʥऋПٖࢠʗПݯҰٖಋۺdividend and a special dividend of HK$0.56 and HK$1.00 per share respectively. ɐc The proposed dividends are not reflected as dividend payables in these ྫྷ0.56ʏʥಋྫྷ1.00ʏeᏃݢٖࢠɺΕϊ೩ሏ͌ɻ ݯᎶ˟ٖࢠcЎੀͶݯ࿀ϭɀཌྷཌྷ̒αɊɀܮaccounts, but will be accounted for as an appropriation of the revenue reserve ʦ for the year ending 31st December 2004. ˂ɍɊȹˀ˅α۹ɾνऩௐొᅆe
СޔEarnings per share 9. Ұٖ .9 СȽ࣓ኣٖᎶЌึСಋྫྷɍყ̒ɝʄޔEarnings per share are calculated by reference to the profit attributable to Ұٖ shareholders of HK$345 million (2002: HK$465 million) and to the weighted average ϛຒʏɀཌྷཌྷɀαݯಋྫྷ̒ყʒɝʄϛຒʏ of 166,324,850 (2002: 166,329,738) ordinary shares in issue. ʥɰೕϷɾ˱ᚬ̡яٖͫᅕ͌166,324,850ٖ ɀཌྷཌྷɀαݯ166,329,738ٖౝ့ٖ߮e
10. Fixed assets 10. ՞ց༅ଐ Group and Company එ྆ʥʔ̇ Land held in Hong Kong – Total held on medium Plant, Equipment by Group term lease machinery and and Εࠗಋܛτ and tools Motor furniture Company ɾɠΔÐ Buildings ᄥָdዀኂ vehicles உௐʥ එ྆ʥʔ̇ ɻ౨ै ᅢΧ ʥɮԮ ᦅӹ ்ᯫ ኟτᐢᔾ (in HK$ Million) ಋྫྷϛຒʏ Cost ࡈძ At 31st December 2002 21 1,067 1,003 116 66 2,273 ɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့ Additions and transfers – – 39 1 7 47 ᄈສʥᔝᅆ Disposals – – (12) (3) (1) (16) ˮਕ At 31st December 2003 21 1,067 1,030 114 72 2,304 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
Depreciation җᓿ At 31st December 2002 2 147 379 91 57 676 ɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့ Charge for the year – 54 59 11 5 129 ̯α۹җᓿ Disposals – – (10) (3) (1) (14) ˮਕ At 31st December 2003 2 201 428 99 61 791 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
Net book value ሏࠍ૱ࠤ At 31st December 2003 19 866 602 15 11 1,513 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
At 31st December 2002 19 920 624 25 9 1,597 ɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 39 ഽڃNotes to the accounts ሏ͌
ᙔʔ̇ڃ .Subsidiary company 11 .11 Ҍτࠉʔ̇يॾڲᙔʔ̇ജڃThe Company holds 60% of the 500,000 issued and paid ordinary shares of ̯ʔ̇ኟτԯ HK$1.00 each, totalling HK$300,000 (2002: HK$300,000) in South China Aero ɰೕϷʥɰͲᖔҰٖࠍࠤಋྫྷȹʏɾʄɊຒٖ Technology Limited (“SCAT”). ౝٖɻϛʗɾʒɊٖᚬcᐢ߮ಋྫྷɍɊຒʏ ɀཌྷཌྷɀαݯಋྫྷɍɊຒʏe Principal activity of the subsidiary is set out on page 51. ʄɊȹࠒeכᙔʔ̇ɾ˚߬พ৻Ͷڃ
12. Jointly controlled companies 12. ͳઁʔ̇ Group Company එ྆ ʔ̇ 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ ɐ̟ࡈٖࠤڈ Unlisted shares at cost 237 237 237 237 Attributable post-acquisition profits 829 600 – – νᑪ܃ᎶЌึС 1,066 837 237 237 Goodwill (29) (29) ਆᙷ Share of net assets 1,037 808 ᎶЌ༅ଐ૱ࠤ Loans due from jointly controlled companies 86 263 86 263 ͳઁʔ̰̇ᑹ൘ಁ Loans due to jointly controlled companies (1) (1) (1) (1) ̰ᑹͳઁʔ̇ࠥಁ 1,122 1,070 322 499
Dividends received and receivable from jointly controlled companies 33 40 ɰνʥᎶνͳઁʔٖ̇ࢠ
พᐜԯɻಋྫྷȾɝ̒کHK$94 million or 31% of the Group’s share of the pre-tax results of the jointly එ྆ᎶЌͳઁʔ̇ೢ controlled companies (2002: HK$76 million or 29%) was contributed by companies ϛຒʏֶϛʗɾɍɊȹɀཌྷཌྷɀαݯಋྫྷȼɝ ɻਝʑΔᏪ༜כoperating in Mainland China while the remaining amounts were contributed by ʒϛຒʏֶϛʗɾɀɊȾԞϬ ࠗಋᏪ༜ɾʔ̇eכcompanies operating in Hong Kong. ɾʔ̇cɎؿԞϬ
ʄɊȹࠒeכThe principal jointly controlled companies are shown on page 51. ˚߬ͳઁʔ̇Ͷ
40 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 12. Jointly controlled companies (cont’d) 12. ͳઁʔ̇ᙩ Ɋɀ˂ɍɊȹˀɾল৻พᐜΣɎiכThe financial results of the jointly controlled companies at 31st December are as ͳઁʔ̇ follows: HAESL TAECO ʪ̀ Others Totalپೕ৽ዀ ෨يࠗಋॾ ৻ʔ̇ ࠔዀɮೡʔ̇ ԯˢ ᐢ߮רၐ࠳ 2003 2002 2003 2002 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Turnover 3,636 3,356 607 583 316 272 4,559 4,211 Ꮺพᐢᔾ
Operating profit 437 403 149 160 73 49 659 612 ᏪพึС Profit on disposal of a jointly controlled company – – 25 – – – 25 – ˮਕȹࡼͳઁʔ̇ึС Net finance (charges)/income (7) (20) 1 – (1) (2) (7) (22) ল৻ʻˮþνɃ૱ᔾ Share of results of jointly controlled companies 1 (8) – (11) – – 1 (19) ᎶЌͳઁʔ̇พᐜ СึکProfit before taxation 431 375 175 149 72 47 678 571 ೢ Taxation (80) (62) (12) (7) (8) (7) (100) (76) ೢඖ Profit attributable to shareholders 351 313 163 142 64 40 578 495 ٖᎶЌึС Dividends – – (37) (39) (29) (43) (66) (82) ٖࢠ Surplus/(deficit) retained þޔजړfor the year 351 313 126 103 35 (3) 512 413 ̯α۹
༜͂iټFunds employed: ༅ ౨༅ଐٽ Long-term assets 857 819 841 838 177 141 1,875 1,798 Current assets 1,157 1,211 206 187 170 138 1,533 1,536 ݚ৽༅ଐ 2,014 2,030 1,047 1,025 347 279 3,408 3,334 Less: current liabilities 622 666 77 103 151 151 850 920 ಕiݚ৽߲ඦ 1,392 1,364 970 922 196 128 2,558 2,414
Financed by: ༅̯Ԟi Shareholders’ equity and loans 1,320 1,307 956 908 177 111 2,453 2,326 ٖٖᚬʥࠥಁ ౨߲ඦٽ Long-term liabilities 72 57 14 14 19 17 105 88 1,392 1,364 970 922 196 128 2,558 2,414
α۹ɾ˱ᚬ̡я̯כGroup’s weighted average % එ྆ shareholding in the year 45.0% 45.0% 49.6% 49.6% ᚬऩϛʗଅ
Group’s attributable Сึکpre-tax profits 194 169 87 74 26 19 307 262 එ྆ᎶЌೢ Less: share of taxation thereon (36) (28) (6) (3) (2) (4) (44) (35) ಕiԯᎶЌɾೢඖ
Group’s share of profit attributable to shareholders 158 141 81 71 24 15 263 227 එ྆ᎶЌٖึС
Group’s share of funds Ɋɀ˂ɍɊȹˀ့එ྆ ༜͂ټemployed at 31st December 594 588 474 447 54 35 1,122 1,070 ᎶЌ༅
αʑ੪ᅕˮਕԯ෨כܞThe profit on disposal of a jointly controlled company is the profit on the disposal ˮਕȹࡼͳઁʔ̇ึС ৻෨ר͂ཋࣩೕ৽ዀכʪ̀ࠔዀɮೡʔ̇پ of TAECO’s entire shareholding in GE Engine Services (Xiamen) Company Limited ɾͲֺٖͫɾึСeܛτࠉʔֺ̇پ .during the year
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 41 ഽڃNotes to the accounts ሏ͌
13. Retirement benefits 13. ঽͤါС (a) Overall (a) ᐢ߸ Ᏽ̯ʔ̇າ͂کɀཌྷཌྷཌྷαɊɀ˂ȹˀכ Staff employed by the Company before 1st December 2000 were offered ټa choice between Hong Kong’s Mandatory Provident Fund (“MPF”) and ɾࡗc˿ፕእ˱ࠗಋؿੜԹֲʔዶ ցঽͤ⮲С߮ވֶི߮Ɏ߸ɾټthe defined benefit retirement schemes as described below. Since 1st ੜዶ December 2000, all new staff employed unless specially approved by the ིeϬɀཌྷཌྷཌྷαɊɀ˂ȹˀcֺτณ ڬᏵ̯ʔ̇ऋПғ૰cЯڈCompany have been enrolled in the MPF. Ƀᓻؿࡗ ི߮eټɰ˱Ƀੜዶ The Hong Kong Aircraft Engineering Company Local Staff Retirement Benefits Scheme provides resignation and retirement benefits to its members upon ࠗಋࠔዀɮೡτࠉʔ̇ɾ̯Δࡗঽͤါ their cessation of service with the Company. The Company meets the full Сི߮cݯԯࡗɮᔴᓻࣂొԜঽͤါСe cost of all benefits due by the Scheme to members, who are not required to ʔֻ̇ኪᓻࡗ࣓ኣֺི߮Ԕτɾȹʘ⮲ contribute to the Scheme. СɾͲ͂cᓻࡗˇΉི߮Ԝಁe
Similarly, the Hong Kong Aircraft Engineering Company Staff Retirement ᅚΔcࠗಋࠔዀɮೡτࠉʔ̇ᓻࡗঽͤ ࣵ̔ඥૈಁ͂ɾᓻࡗܘBenefits Scheme is for staff employed on expatriate terms. However, both ⮲Сི߮Ƚݯ members and the Company contribute to the Scheme. Ϥஉeɺ༦cᓻࡗʥʔ̇яΉི߮Ԝ ಁe Actuarial valuations of the two defined benefit schemes are performed annually by Watson Wyatt Hong Kong Limited, an independent qualified ԭඖވցঽͤ⮲Сི߮ɾ၀့Ѕࠤcͅ యࢧᚋਐڌactuary, using the projected unit credit method. ȹංዟ͓༅ࣟɾ၀့ʔ̇ജ ད߮௰Ͻ൘ত့ؒ߮eܘτࠉʔ̇Ұα The retirement benefits costs recognised in the profit and loss account were as follows: ɰΕฌऩሏɻᆢႏɾঽͤ⮲С͂ΣɎi 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Local Staff Retirement Benefits Scheme 90 47 ̯ΔࡗঽͤါСི߮ Expatriate Staff Retirement Benefits Scheme 4 1 ࣵ̔ࡗঽͤါСི߮ ི߮ԜಁᔾݯࡗτᗐνɃټMPF Scheme (@5% of staff’s relevant income ੜዶ capped at HK$1,000/month) 3 3 ϛʗɾʄcɐࠉݯҰ˂ಋྫྷȹɝʏ 97 51
42 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 13. Retirement benefits (cont’d) 13. ঽͤါСᙩ (b) Defined benefits retirement schemes (b) ވցঽͤါСི߮ The amount recognised in the profit and loss account was made up as ߮Ƀฌऩሏɾᅕᔾ့ΣɎi follows: Local Scheme Expatriate Scheme Total ̯Δࡗི߮ ࣵ̔ࡗི߮ ᐢ߮ 2003 2002 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ ৻͂רCurrent service cost 80 71 6 5 86 76 ̯౨ Interest cost 72 86 4 5 76 91 Сࢠ͂ Expected return on plan assets (75) (110) (7) (9) (82) (119) ི߮༅ଐད౨Αం Net actuarial losses recognised in current year 13 – 1 – 14 – ̯αᆢႏɾ၀့ᑋฌ૱ᔾ Total 90 47 4 1 94 48 ᐢᔾ
Actual gain/(loss) on plan assets 400 (110) 36 (10) 436 (120) ི߮༅ଐɾྡྷνऩþᑋฌ
ɻᆢႏɾᅕᔾΣɎiٲ༅ଐ߲ඦכ :The amount recognised in the balance sheet was determined as follows
Group and Company එ྆ʥʔ̇ Local Scheme Expatriate Scheme Total ̯Δࡗི߮ ࣵ̔ࡗི߮ ᐢ߮ 2003 2002 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ At 31st December: Ɋɀ˂ɍɊȹˀ့i Present value of obligations 1,574 1,460 104 95 1,678 1,555 ஐͨɾଊࠤ Fair value of plan assets (1,756) (1,244) (150) (112) (1,906) (1,356) ི߮༅ଐɾʔ̡ࠤ Net (asset)/liability (182) 216 (46) (17) (228) 199 ༅ଐþ߲ඦ૱ᔾ Unrecognised actuarial gains/(losses) 24 (333) 8 (22) 32 (355) ̰ᆢႏ၀့νऩþᑋฌ ɻᆢႏɾ༅ଐٲ༅ଐ߲ඦכAsset recognised in the balance sheet (158) (117) (38) (39) (196) (156) ɰ
ɻᆢႏɾ༅ଐᛰٲ༅ଐ߲ඦכMovement in the asset recognised in the balance sheet: ɰ ৽i Group and Company එ྆ʥʔ̇ Local Scheme Expatriate Scheme Total ̯Δࡗི߮ ࣵ̔ࡗི߮ ᐢ߮ 2003 2002 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Asset at 1st January (117) (99) (39) (40) (156) (139) ȹ˂ȹˀ့༅ଐ (Increase)/decrease due to: ᄈ˱þಕʭࡈΐi Total expense – as shown above 90 47 4 1 94 48 ᐢʻ z ΣɐͶ Contributions paid (131) (65) (3) – (134) (65) ɰ˟Ԝಁ Asset at 31st December (158) (117) (38) (39) (196) (156) Ɋɀ˂ɍɊȹˀ့༅ଐ
Principal actuarial assumptions for the year: ̯α۹˚߬၀့உi
2003 2002 Discount rate 5% 5% ൎଊଅ Assumed rate of return on plan assets 6% 6% உི߮༅ଐΑంଅ Assumed rate of future salary increases 4% 2% for 2004 and உ̰Ԟᄈᑀଅ 4% thereafter ݯ 4%܃αݯ 2% cɾ 2004
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 43 ഽڃNotes to the accounts ሏ͌
Deferred taxation 14. Ⴎ֝ೢඖ .14
Group and Company එ྆ʥʔ̇ Net Deferred Deferred Tax Tax Liability Deferred Tax Liability Asset Ⴎ֝ೢඖ߲ඦ Ⴎ֝ೢඖ߲ඦ Ⴎ֝ೢඖ༅ଐ ૱ᔾ Accelerated Tax Retirement Tax Depreciation Benefit Asset Others Losses ༅ଐ ԯˢ ೢ৻ᑋฌټೢඖҗᓿ ঽͤ˱ (in HK$ Million) ಋྫྷϛຒʏ At 1st January 2002 147 22 – 89 80 ɀཌྷཌྷɀαȹ˂ȹˀ့ Charge/(credited) to ฌऩሏɻʻሻþতሏכ profit and loss – 3 (3) (38) 38 At 31st December 2002 147 25 (3) 51 118 ɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့ Charge/(credited) to ฌऩሏɻʻሻþতሏכ profit and loss 8 9 (6) (11) 22
At 31st December 2003 155 34 (9) 40 140 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
߬ೢଅ˚ܘDeferred taxation is calculated in full on temporary differences under the liability Ⴎ֝ೢඖȽઔ߲͂ඦؒగᅗࣂଔ method using a principal taxation rate of 17.5% (2002: 16%). ϛʗɾɊȼᒨʄɀཌྷཌྷɀαݯϛʗɾɊʒͲ ᅕ့߮e
15. Stocks and work in progress 15. Φஒʥ̰ѧɮೡ Stocks and work in progress are stated at the lower of cost, calculated on a Φஒʥ̰ѧɮೡܘ˞˱ᚬ̡яਥๅ့߮ɾι̯ α֛̯כweighted average basis, and net realisable value. The carrying amount of stocks ၤ˿ᛰଊ૱ࠤԭّɻɾ༖ГّɃሏe and work in progress at year end carried at net realisable value is HK$28 million ့c˞˿ᛰଊ૱ࠤЅࠤɾΦஒʥ̰ѧɮೡሏ HK$40 million) and HK$2 million (2002: HK$7 million) respectively. The ࠍࠤʗПݯಋྫྷɀɝɄϛຒʏɀཌྷཌྷɀαݯಋ :2002) remaining balance is carried at cost. ྫྷ̒ɝຒʏʥಋྫྷɀϛຒʏɀཌྷཌྷɀαݯಋ ྫྷȼϛຒʏeɎ˞ι̯Ƀሏe
44 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 16. Debtors and creditors 16. ᎶνʥᎶ˟ሏඖ cȹঁ഼˝ԯޚ൘ૈͧΈɺڌThe credit terms given to customers vary and are generally based on their ʀᚋ۪ؿ ͂ڌindividual financial strengths. Credit evaluations of debtors are performed Пؿল৻ྡྷɈϤցe̯ʔ̇ց౨ྦྷඦ৻ɁА ൘ࠓ፮eڌperiodically to minimise any credit risk associated with receivables. ിЅc˞သ൴ಕГၤᎶνಁඖτᗐؿ
ȹඖԞϬɍّɾɺ˿࿄ΑʥЛܢ˳Debtors included a promissory note from a third party, the final repayment date Ꮆνሏඖ ɀཌྷཌྷ̒αeכᑹˀ౨ց܃of which is in 2004, and which is irrevocable and interest-free. ࢠ౨cԯ
Group and Company එ྆ʥʔ̇ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Amount due within one year included under ȹαʑᑹಁඖכcurrent assets 2 2 ͶɃݚ৽༅ଐඖɎ Amount due over one year included under ȹα˞ɐᑹಁඖכdeferred items – 2 ͶɃႮ֝ඖ͌Ɏ 2 4
As at 31st December 2003, 98% of debtors (97% as at 31st December 2002) and ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့cϛʗɾȾɊ of creditors (99% as at 31st December 2002) were aged under six months. ɄᎶνሏඖɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့ݯ 98% ϛʗɾȾɊȼʥϛʗɾȾɊɄᎶ˟ሏඖɀཌྷ ཌྷɀαɊɀ˂ɍɊȹˀ့ݯϛʗɾȾɊȾɾ ʒ˂eכሏᙍяГ
̯ٖ .Share capital 17 .17
Company ʔ̇ 2003 2002 Number Number of shares HK$M of shares HK$M ᅕ͌ ಋྫྷϛຒʏ ٖͫᅕ͌ ಋྫྷϛຒʏٖͫ Authorised: ؒցٖ̯i Ordinary shares of HK$1.00 each Ұٖࠍࠤಋྫྷ1.00ʏౝٖ At 31st December 210,000,000 210 210,000,000 210 Ɋɀ˂ɍɊȹˀ့
Issued and fully paid: ೕϷʥᖔӷٖ̯i Ordinary shares of HK$1.00 each Ұٖࠍࠤಋྫྷ1.00ʏౝٖ At 1st January 166,324,850 166 166,451,450 166 ȹ˂ȹˀ့ Shares repurchased and cancelled ––(126,600) – ᑪΑʥഽሻٖͫ
At 31st December 166,324,850 166 166,324,850 166 Ɋɀ˂ɍɊȹˀ့
מDuring the year under review, no purchase, sale or redemption of the shares of ΕΑᚋɾα۹ʑc̯ʔ̇ԎಲΕࠗಋᐲ͚ the Company has been effected by the Company on the Hong Kong Stock ֺᑪΑdˮਕֶᚿΑ̯ʔ̇ɾٖͫeΕɀཌྷཌྷ Exchange. In 2002, 126,600 shares were repurchased at an aggregate ɀαcͳτ126,600ٖٖͫ˞ᐢˤძಋྫྷȹϛʄ consideration of HK$1.5 million and subsequently cancelled. ɊຒʏᑪΑcԎ፭Щഽሻe
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 45 ഽڃNotes to the accounts ሏ͌
18. Reserves 18. ௐ Capital Revenue reserve redemption reserve Total νऩௐ ༅̯ᚿΑௐ ᐢ߮ 2003 2002 2003 2002 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Group එ྆ At 1st January 2,992 2,645 19 19 3,011 2,664 ȹ˂ȹˀ့ Profit attributable to shareholders 345 465 – – 345 465 ٖᎶЌึС Repurchase of own shares ᑪΑ̯ʔٖ̇ͫ – premium paid on repurchase – (1) – – – (1) zᑪΑึძ Previous year’s final dividend paid (76) (70) – – (76) (70) ɰ˟ɐα۹̱౨ٖࢠ Previous year’s special dividend paid (416) – – – (416) – ɰ˟ɐα۹ऋПٖࢠ Current year’s interim dividend paid (47) (47) – – (47) (47) ɰ˟̯α۹ɻ౨ٖࢠ At 31st December 2,798 2,992 19 19 2,817 3,011 Ɋɀ˂ɍɊȹˀ့
The Company 1,961 2,384 19 19 1,980 2,403 ̯ʔ̇ ᙔʔ̇ڃ Subsidiary company 8 8 – – 8 8 Jointly controlled companies 829 600 – – 829 600 ͳઁʔ̇ 2,798 2,992 19 19 2,817 3,011
Company ʔ̇ At 1st January 2,418 2,259 19 19 2,437 2,278 ȹ˂ȹˀ့ Profit attributable to shareholders 115 277 – – 115 277 ٖᎶЌึС Repurchase of own shares ᑪΑ̯ʔٖ̇ͫ – premium paid on repurchase – (1) – – – (1) zᑪΑึძ Previous year’s final dividend paid (76) (70) – – (76) (70) ɰ˟ɐα۹̱౨ٖࢠ Previous year’s special dividend paid (416) – – – (416) – ɰ˟ɐα۹ऋПٖࢠ Current year’s interim dividend paid (47) (47) – – (47) (47) ɰ˟̯α۹ɻ౨ٖࢠ At 31st December 1,994 2,418 19 19 2,013 2,437 Ɋɀ˂ɍɊȹˀ့
ɀཌྷכDistributable reserves of the Company at 31st December 2003, calculated under ࣓ኣࠗಋʔ̇ૈԝ79Bૈ့߮c̯ʔ̇ section 79B of the Hong Kong Companies Ordinance, amounted to HK$1,994 ཌྷɍαɊɀ˂ɍɊȹˀ˿ʗɾௐݯಋྫྷɊ million (2002: HK$2,418 million). ȾყȾɝ̒ϛຒʏɀཌྷཌྷɀαݯಋྫྷɀɊ̒ყ ȹɝɄϛຒʏe The revenue reserve includes HK$259 million (2002: HK$492 million) representing ᘪɾ̱౨ٖࢠʥऋПٖۺα۹̯ܢ˳the recommended final dividend and special dividend for the year under review νऩௐ ഽ8ಋྫྷɀყʄɝȾϛຒʏɀཌྷཌྷɀαڃnote 8). ࢠ) ݯಋྫྷ̒ყȾɝɀϛຒʏe
46 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ౨ࠥಁٽ .Long term loan 19 .19 Group and Company එ྆ʥʔ̇ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ At 1st January 107 110 ȹ˂ȹˀ့ αʑᑹ̯כ (Repayment during the year (3) (3 At 31st December 104 107 Ɋɀ˂ɍɊȹˀ့
Maturity profile: ᑹಁ౨ࠉi ȹαʑᑹכ Repayable within one year 4 3 ȹαϭԭαʑᑹכ Repayable between one and two years 4 4 ԭαϭʄαʑᑹכ Repayable between two and five years 15 14 ᑹ܃ʄαכ Repayable after five years 81 86 104 107 Amount due within one year included under ȹαʑᑹಁඖכcurrent liabilities (4) (3) ͶɃݚ৽߲ඦඖɎ 100 104
ᙔʔ̇ڃτࠉʔ̇ɾȹࡼيThe loan is provided by a subsidiary of Cathay Pacific Airways Limited, is ඖࠥಁͅਝ࣮ॾ cαСଅݯϛʗɾɄᒨɍʄcאunsecured, interest bearing at 8.35% per annum and is repayable by equal semi- ొԜcԎಲ annual instalments to June 2018. ϭɀཌྷȹɄαʒ˂˞ޚ೩ɾ˸α౨ಁᔾᑹe
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 47 ഽڃNotes to the accounts ሏ͌
ഽڃٲݚ൴ټNotes to the consolidated cash flow statement 20. ၃ଊ .20 ሏྦྷټa) Reconciliation of operating profit to cash generated from operations (a) ᏪพึСၤᏪพଐ́ɾଊ)
2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Operating profit 108 273 ᏪพึС Depreciation 129 126 җᓿ Receipt on sale of business to a jointly controlled company – 7 ˮਕพ৻ʀȹࡼͳઁʔ̇νɃ Decrease in promissory note 2 2 ౨ಕʭ Increase in retirement benefits asset (40) (17) ঽͤါС༅ଐᄈ˱ Decrease in stocks and work in progress 34 52 Φஒʥ̰ѧɮೡಕʭ Decrease/(increase) in debtors and prepayments 74 (83) Ꮆνʥད˟ሏඖಕʭþᄈ˱ (Decrease)/increase in creditors and accruals (54) 40 Ꮆ˟ʥᎶ߮ሏඖಕʭþᄈ˱ ᔾ૱ټNet cash generated from operations 253 400 Ꮺพଐ́ɾଊ
b) Analysis of changes in financing (b) ጪ༅ᛰ৽ʗ)
Long-term Minority loan interest Total ౨ࠥಁ ʭᅕٖᚬऩ ᐢ߮ٽ (in HK$ Million) ಋྫྷϛຒʏ At 31st December 2001 110 5 115 ɀཌྷཌྷȹαɊɀ˂ɍɊȹˀ့ ౨ࠥಁٽRepayment of term loan (3) – (3) ᑹ At 31st December 2002 107 5 112 ɀཌྷཌྷɀαɊɀ˂ɍɊȹˀ့ ౨ࠥಁٽRepayment of term loan (3) – (3) ᑹ At 31st December 2003 104 5 109 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
ᛰ৽ʗذ೩ძټʥଊټc) Analysis of changes in cash and cash equivalents (c) ଊ)
2003 2002 (in HK$ Million) ಋྫྷϛຒʏ At 1st January 475 113 ȹ˂ȹˀ့ ˱ಕʭþᄈذ೩ძټʥଊټDecrease)/increase in cash and cash equivalents (67) 362 ଊ) At 31st December 408 475 Ɋɀ˂ɍɊȹˀ့
(d) Analysis of deposits and bank balances at (d) Ɋɀ˂ɍɊȹˀ့ɾΦಁʥႺϷΦ 31st December ʗ ذ೩ძټʥଊټCash and cash equivalents ଊ – Short term deposits and bank balances 408 475 bz ౨ΦಁʥႺϷΦ Deposits maturing after three months 12 72 ༩ɍ˂ց౨Φಁ 420 547
48 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 Capital commitments 21. ༅ֲֻ̯ኪ .21 Group and Company එ྆ʥʔ̇ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Contracted for but not provided in the accounts 21 23 ߯Ў̰ΕሏඖɻАๅௐ Authorised by Directors but not contracted for 13 18 ໎ԑѫғЎ̰߯
එ྆ᎶЌͳઁʔ̇ɾ༅ֲֻ̯ኪ̯ܢ˳The Group’s share of capital commitments of jointly ɐ߸ɺ controlled companies not included above: ΣɎi Contracted for but not provided in the accounts 13 95 ߯Ў̰ΕሏඖɻАๅௐ Authorised by Directors but not contracted for 5 10 ໎ԑѫғЎ̰߯
Lease commitments 22. ै༉ֻኪ .22 כAt 31st December 2003, the Group had future aggregate minimum lease ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့cඑ̰྆Ԟ payments under non-cancellable operating leases as follows: ɺ˿࿄ሻᏪพै༉ඖɾГै༉ʻˮᐢᔾΣ Ɏi
Group and Company එ྆ʥʔ̇ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ Land and buildings: ɠΔʥᅢΧi Leases expiring: ै౨ࣂංi – Within one year 49 53 zȹαʑ – After one year but within five years 193 205 zȹα܃ʄαʑ – After five years 456 538 zʄα܃ 698 796
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 49 ഽڃNotes to the accounts ሏ͌
מRelated Party Transactions 23. τᗐடɁɡ͚ .23 ܘяמeֺτ͚מThe Group has a number of transactions with its related parties. All trading ̯එ྆τߗɳτᗐடɁɡ͚ transactions are conducted on normal commercial terms in the ordinary and ๑ȹঁਆพૈͧ˞ʥΕ̳พ৻ೡѵɎ൬Ϸe usual course of business. The aggregated transactions and balances which are ̯එ྆ɾࠇɣʥ̰τΕϊαంԯˢຝׄᚉɾ ᐢࠤʥαୄ࿂߬ΣɎiמmaterial to the Group and which have not been disclosed elsewhere in the ͚ annual report are summarised below:
Jointly Other Controlled Related Companies Parties Total Note ͳઁʔ̇ ԯˢτᗐடɁɡ ᐢ߮ ഽ 2003 2002 2003 2002 2003 2002ڃ (in HK$ Million) ಋྫྷϛຒʏ Revenue from provision ৻ֺɾνɃרof services a 234 177 1,034 1,083 1,268 1,260 ొԜ ৻רPurchase of services b 1 3 49 76 50 79 ᑪൕ
Debtors at 31st December c 163 166 Ɋɀ˂ɍɊȹˀ့Ꮆνሏඖ Creditors at 31st December c 10 28 Ɋɀ˂ɍɊȹˀ့Ꮆ˟ሏඖ
ഽiڃ :Note ݯࠗಋॾܢ˳৻ֺɾνɃ˚߬רa. Revenue from the provision of services to jointly controlled companies comprised mainly a. Ήͳઁʔ̇ొԜ ʪ̀ࠔዀɮೡʔ̇ొپ৻ʔ̇ʥ෨רೕ৽ዀၐ࠳ي services to HAESL and TAECO. Services provided to HAESL included engine component ৻ʔ̇ొԜɾרೕ৽ዀၐ࠳ي৻eݯࠗಋॾרrepairs charged at normal commercial rates and the provision of certain administrative Ԝɾ ȹঁਆพძࣟνɾೕ৽ዀͧ࠳ଉcܘܢ˳৻ר services charged at cost based on the agreement with Rolls-Royce plc concerning the ೕ৽ዀၐ࠳يformation of HAESL. Services provided to TAECO related principally to charges at ʥ࣓ኣၤഠʔ̇గι͓ࠗಋॾ רܧι̯νొԜɾߗɳϷܘ৻ʔֺ̇߯ɾԾᘪר commercial rates covering the stationing of a working team of 148 people on average ৻˚߬ݯΕרʪ̀ࠔዀɮೡʔ̇ొԜɾپin TAECO and management services. Services provided to other jointly controlled ৻eݯ෨ ʪ̀ࠔዀɮೡʔ̇ݢȹ̡яȹϛ̒ɊɄɁپcompanies included component and other operational support charged at normal ෨ ৻eרਆพძࣟνՅɾ͂ʥဳଉܘcommercial rates. ؿɮАɩୂ ȹঁਆพძࣟνܘܢ˳৻רΉԯˢͳઁʔ̇ొԜɾ Revenue from the provision of services to other related parties comprised maintenance ɾͧʥԯˢ༜Аʻe charges for the Cathay Pacific Airways, Dragonair and Air Hong Kong fleets as well as Ήਝ࣮ܢ˳৻ֺɾνɃרlogistic support and storage charges for Cathay Pacific Airways. ΉԯˢτᗐடɁɡొԜ ʔ̇ዀඅνՅيʔ̇ʥജ̵ॾيʔ̇dಋ᎘ॾيॾ ඵʻʥΦ܃ʔ̇νՅɾيb. Purchases of services from jointly controlled companies comprised mainly overhaul ɾၐ࠳ʥΉਝ࣮ॾ charges for work carried out on aircraft components by HAESL. ʻe
ೕ৽ዀيΉࠗಋॾܢ˳৻˚߬רPurchases of services from other related parties comprised: b. Ϭͳઁʔ̇ᑪൕɾ ৻ʔ̇ʻ˟ɾࠔዀͧɣ࠳͂eרၐ࠳ iܢ˳৻רΉԯˢτᗐடɁɡᑪൕɾ 2003 2002 (in HK$ Million) ಋྫྷϛຒʏ ʔ̇ᑪൕௐͧيSpares purchased from Cathay Pacific Airways Limited 30 55 Ήਝ࣮ॾ Property insurance placed through SPACIOM, ړa captive insurance company wholly owned by Ήȹࡼͅʪٖ̀ͫτࠉʔ̇Ͳ༅ኟτɾਿᙔϬ ፮ړɾলଐړ፮ʔ̇SPACIOMҙړ – Swire Pacific Limited 3 ৻רServices fee payable to John Swire & Sons (H.K.) Limited 3 8 Ήࠗಋʪ̀එ྆τࠉʔ̇ʻ˟ɾ Reimbursement, at cost, of expenses incurred, payable to John Swire & Sons (H.K.) Limited 13 13 Ήࠗಋʪ̀එ྆τࠉʔ̇ʻ˟ɾܘι̯ˤʻ͂ 49 76
ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့ᎶνþᎶ˟ԯˢכ .c. The outstanding amounts at 31st December 2003 due from/to other related parties are c ʥʔٲ၃༅ଐ߲ඦכcontained respectively in “debtors and prepayments” and “creditors and accruals” in τᗐடɁɡሏඖʗПͶ༗ ɾᎶνʥད˟ሏඖʥᎶ˟ʥᎶ߮ሏٲthe consolidated and company balance sheet. ̇༅ଐ߲ඦ ඖʑe With the exception of the insurance premium payable to SPACIOM and the services fee ʥΉࠗಋʪ̀එړഽbֺ߸ΉSPACIOMʻ˟ɾڃכpayable to John Swire & Sons (H.K.) Limited Group as described in note b, none of the Ԏɺ࿚מ৻̔cɐ߸τᗐடɁɡ͚רabove related party transactions constitute a discloseable connected transaction as defined ྆τࠉʔ̇ʻ˟ɾ eמցɾʀׄᚉᗐட͚ވֺڬin the Listing Rules. ιɐ̟ஃ
50 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ᙔʔ̇ͳઁʔ̇ڃPrincipal Subsidiary and Jointly Controlled Companies ˚߬ at 31st December 2003 ɀཌྷཌྷɍαɊɀ˂ɍɊȹˀ့
Owned by Place of jointly incorporation controlled Attributable and operation Owned companies to the ഽ˫ι͓ʥ Principal activities directly ͳઁʔ̇ Group અኟτ ኟτ එ྆Ќτق ᏪΔᒨ ˚߬พ৻ Subsidiary Company: ᙔʔ̇iڃ South China Aero Technology Limited Hong Kong Aviation products trading 60% – 60% מൗۂଐيҌτࠉʔ̇ ࠗಋ ॾيॾڲജ
Jointly Controlled Companies: ͳઁʔ̇i EADS SOGERMA HAECO Services Hong Kong Aircraft component repair 50% – 50% Company Limited ࠗಋ services ৻רࠔዀͧ࠳ଉ Goodrich Asia-Pacific Limited Hong Kong Carbon brake machining and 49% – 49% ࠗಋ wheel hub overhaul ʥረᑴɣ࠳ڨဧሔీ৽ːʘ Goodrich TAECO Aeronautical Systems Xiamen Aircraft fuel control, flight – 35% 17.3% control and electrical پXiamen) Company Limited ෨) ႚఒʪ̀Χॾτࠉʔ̇ component repairsپ෨ ԹშʥઁيࠔዀዝؖઁԹშdॾ ཋኂͧ࠳ଉ Honeywell TAECO Aerospace (Xiamen) Xiamen Aircraft hydraulic, pneumatic, 25% 10% 30% avionic component and other پCompany Limited ෨ ፳̛ࠏဍʪ̀Χॾτࠉʔ̇ aviation equipment repairsپ෨ ࠔዀᎦdࣩᎦdॾཋͧʥ ৻רஉௐ࠳ଉيԯˢॾ Hong Kong Aero Engine Services Limited Hong Kong Commercial aero engine 45% – 45% ৻τࠉʔ̇ ࠗಋ overhaul servicesרೕ৽ዀၐ࠳يࠗಋॾ ৻רਆ͂ࠔዀʵᎽɣ࠳ In-Services Asia Limited Hong Kong Aircraft component trading 35% – 35% ࠗಋ and repair services ৻רʥ࠳ଉמࠔዀͧൗ Singapore Aero Engine Services Pte. Limited Singapore Trent engine overhaul services – 20% 9% ৻ר৻τࠉʔ̇ ณ˱գ ऋ࠷ऋʵᎽɣ࠳רೕ৽ዀၐ࠳يณ˱գॾ Taikoo (Shandong) Aircraft Engineering Shandong Heavy maintenance services 20% 10% 25% Company Limited (formerly named ɬ for B737 aircraft ৻רၐ࠳ێࠔዀɣێ Shandong TAECO Aircraft Engineering B737 Company Limited) ɬʪ̀ࠔዀɮೡτࠉʔ̇ Taikoo (Xiamen) Aircraft Engineering Xiamen Aircraft heavy maintenance 49.6% – 49.6% ৻רၐ࠳ێࠔዀɣ پCompany Limited ෨ ʪ̀ࠔዀɮೡτࠉʔ̇پ෨
එ྆ྦྷܞᙔʔ̇ʥͳઁʔ̇ڃPrincipal subsidiary and jointly controlled companies are those which, in the opinion ໎ԑѫႏݯ˚߬ of the Directors, materially affect the result or assets of the Group. ɾพᐜʥ༅ଐτࠇ߬ᄧᚊɾʔ̇e
ࠗಋࠔዀɮೡτࠉʔ̇ɀཌྷཌྷɍαంй࣊ 51 Auditors’ report ࣏ᅕంй࣊
Auditors’ report to the shareholders of ߎࠗಋࠔዀɮೡτࠉʔ̇ ࠗಋഽ˫ι͓ɾτࠉʔ̇כ Hong Kong Aircraft Engineering Company Limited Incorporated in Hong Kong with limited liability) Ͳٖ)
We have audited the accounts on pages 28 to 51 which have been ̯࣏ᅕɰѧιᄗ࣏ɀɊɄࠒϭʄɊȹࠒɾ prepared in accordance with accounting principles generally accepted ሏ͌c೩ሏ͌Ƚܘ๑ࠗಋౝ༧ઔढ़ɾผ߮ࡈ ᇁႇeڬ .in Hong Kong
Respective responsibilities of directors and auditors ໎ԑʥ࣏ᅕΈϬɾஐͨ The Hong Kong Companies Ordinance requires the directors to prepare ࠗಋʔ̇ૈԝஃց໎ԑᇁႇभྡྷ࠹ʔ̡ɾሏ accounts which give a true and fair view. In preparing accounts which ͌eΕᇁႇ೩भྡྷ࠹ʔ̡ɾሏ͌ࣂc໎ԑ̦ give a true and fair view it is fundamental that appropriate accounting ઔ͂ሬɾผ߮ܧ೪cԎ˘ྵᎶ͂೩ผ policies are selected and applied consistently. ߮ܧ೪e
It is our responsibility to form an independent opinion, based on our audit, ̯࣏ᅕɾஐ࣓ͨܰኣᄗ࣏ɾcྦྷ೩ሏ on those accounts and to report our opinion solely to you, as a body, in ͌Аˮዟ͓෮ӮcԎܘ๑ࠗಋʔ̇ૈԝ141ૈ accordance with section 141 of the Hong Kong Companies Ordinance, ɾஃցc̋ΉАݯؒɁ྆ɾٖంйcɺА and for no other purpose. We do not assume responsibility towards or ԯˢ͂பe̯࣏ᅕลɺగ̯ంй࣊ɾʑࢀc ஐͨe܁accept liability to any other person for the contents of this report. ΉͨЄԯˢɁɡ߲ஐֶֻኪؒ
Basis of opinion ෮Ӯɾਥᓣ ๑ࠗಋผ߮ʔผֺཕЗɾ࣏ᅕܘWe conducted our audit in accordance with Statements of Auditing ̯࣏ᅕɰ ݅ʿβ˞ܢ˳൬Ϸᄗ࣏ɮАeᄗ࣏ᆲڬStandards issued by the Hong Kong Society of Accountants. An audit ๅ includes examination, on a test basis, of evidence relevant to the amounts ࣏݅ၤሏֺ͌༗ᅕᔾʥׄᚉԑඖτᗐɾንᖬc ᇁႇሏ͌ࣂֺАɾࠇɣЅכിᄗ໎ԑܢ˳and disclosures in the accounts. It also includes an assessment of the ͛ ೪ܰЯሬ ൔʔ̇ܧsignificant estimates and judgements made by the directors in the ߮Рᒾcֺઔ͂ɾผ߮ preparation of the accounts and of whether the accounting policies are ၤ ൔඑ྆ɾԮੱؗcʥτЯྵᎶ͂Ԏӷਪ ೪eܧappropriate to the circumstances of the Company and the Group, ׄᚉ೩ผ߮ consistently applied and adequately disclosed. ̯࣏ᅕΕ೪ི൬Ϸᄗ࣏ɮАࣂcя˞Յ We planned and performed our audit so as to obtain all the information ֺτ̯࣏ᅕႏݯ̦ɾ༅ࢿʥᘷݯ͌ᅟc Ᏽ˨ʗንᖬcగ೩ሏ͌ܰЯΦτࠇɣڏ˞ and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the ፟႒ஹ߸cАˮଉɾᆢցeΕАˮ෮Ӯࣂc accounts are free from material misstatement. In forming our opinion we ̯࣏ᅕ͛ɰിЅ೩ሏֺ͌༗ɾ༅ࢿΕኬ ࠨɾᄗ࣏ɮАɰ҈ڌޚalso evaluated the overall adequacy of the presentation of information ɐܰЯӷਪe̯࣏ᅕ in the accounts. We believe that our audit provides a reasonable basis ݯɎͶ෮ӮొԜଉɾਥᓣe for our opinion. ෮Ӯ Opinion ̯࣏ᅕႏݯcɐ߸ɾሏ͌ӷ˞भྡྷ࠹ʔ̡Δ ˂ɀཌྷཌྷɍαɊɀכIn our opinion, the accounts give a true and fair view of the state of affairs ᛷ͐bൔʔ̇ၤbൔඑ྆ ؗcʥbൔඑ྆࿀ϭرof the Company and the Group as at 31st December 2003 and of the ɍɊȹˀ့ࣂɾল৻ ๑ࠗಋʔܘݚ൴cԎټprofit and cash flows of the Group for the year then ended and have ˀ˅α۹ɾึСʥଊ been properly prepared in accordance with the Hong Kong Companies ̇ૈԝѢݯᇁႇe Ordinance.
༞ผ߮ԑ৻̷ֺڻᖓМ PricewaterhouseCoopers ࠗಋਨพผ߮ Certified Public Accountants ࠗಋcɀཌྷཌྷ̒αɍ˂Ⱦˀ Hong Kong, 9th March 2004
52 HONG KONG AIRCRAFT ENGINEERING COMPANY LIMITED Annual Report 2003 ͿԵiࠗಋ
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