C h i na Air c ra f t L ea si n g G r o u p Ho l d i n gs Li mite d FULL VALUE-CHAIN AIRCRAFT SOLUTION PROVIDER www.calc.com.hk ANNUAL REPORT 2015 ANNUAL REPORT 2015 REPORT ANNUAL (Incorporated under the laws of the Cayman Islands with limited liability) Stock code : 01848 ck.ng 04832_E01_IFC+Content_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited CALC AT A GLANCE 65 107 172 Aircraft fleet Aircraft on order with Aircraft in 2022 (as at 22 Mar 2016) Airbus (as at 22 Mar 2016) 3.5yrs 10yrs Over 20% Average fleet age Average remaining Market share of Airbus (as at 31 Dec 2015) lease term A320 series aircraft deliveries in China market in 2015 A constituent stock of the HK$23.9b 1st MSCI Listed aircraft lessor China Small Cap Total assets in Asia (as at 31 Dec 2015) Index A constituent stock of the Hang Seng Over 110 Global Composite Index Staff with 9 offices and the Hang Seng worldwide Composite Index 2 ck.ng 04832_E01_IFC+Content_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 CONTENTS 13 Company Profile 14 Financial Highlights and Five-Year Financial Summary 16 Major Achievements 18 Chairman Statement 21 Management Discussion and Analysis 29 Environmental, Social and Governance Report 49 Corporate Governance Report 59 Report of the Directors 74 Profile of the Directors and Senior Management 81 Independent Auditor's Report 83 Consolidated Balance Sheet 84 Consolidated Statement of Income 85 Consolidated Statement of Comprehensive Income 86 Consolidated Statement of Changes in Equity 88 Consolidated Statement of Cash Flows 89 Notes to the Consolidated Financial Statements 163 Corporate Information 1 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited LEADING THE WAY CALC is a pioneer and a market leader in China’s aircraft leasing industry. It has also successfully established and expanded its presence in global markets. 2 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 3 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited FULL VALUE- CHAIN AIRCRAFT SOLUTIONS PROVIDER CALC offers aircraft full-life solutions, covering aircraft operating leasing, sale-and-leaseback, structured finance, aircraft replacement and assets management. It is establishing the most sizeable aircraft disassembly facility in China to extend the value chain. 4 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 5 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited EXPERIENCED MANAGEMENT TEAM CALC is led by a highly-experienced management team with decades of collective experience in global aviation and finance industries. 6 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 7 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited GLOBAL FINANCING NETWORK CALC’s diversified financing channels cover onshore and offshore banks, insurance companies, capital and debt markets, as well as export credit agencies (ECAs). It also introduced into China the first batch of aircraft lease realisations. 8 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 9 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited SOUND RISK MANAGEMENT CALC’s strong assets management capability is coupled with a comprehensive risk management model covering asset risk, business operation risk, counterparty risk, corporate risk and in particular, financial market risk. 10 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 11 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited Shanghai, China Tianjin, China Harbin, China Dublin, Ireland Beijing, China Toulouse, France Hong Kong, China (HQ) Shenzhen, China Head Office Office Labuan, Malaysia 12 ck.ng 04832_E02_All Divider+company profile_4C Time/date: 08-04-2016_06:18:53 Annual Report 2015 COMPANY PROFILE China Aircraft Leasing Group Holdings Limited (“the Group”) is the largest independent aircraft operating lessor in China, in terms of the total number of aircraft under ownership and new aircraft order book. The Group was founded in 2006. Over this relatively short history, it has developed into a full value-chain aircraft solution provider thanks to its dedicated team who provides a combination of aviation, financial and technical expertise. In addition to aircraft operating leasing, we offer airline customers sale-and-leaseback arrangements, aircraft replacement, aircraft disassembly, asset management and other value-added fleet management solutions. Moreover, we are establishing our own purpose-built disassembly facility, the first in Asia. Our capability in providing full life-cycle solutions to airlines distinguishes us from other established lessors. The Group started to lease and deliver to carriers outside China in 2015. Our strong clientele currently includes top-tier Chinese and Asian airlines as well as regional operators, and we have started expansion to Europe and other parts of the world. As at 31 December 2015, the Group had 63 aircraft delivered and leased with average lease terms of around 12 years (excluding 4 old aircraft). The Group’s fleet is currently on schedule to expand to 172 aircraft by 2022. The Group has strong relationships with major Chinese and international financial institutions. We have also established other financing channels in the capital markets and debt markets, as well as obtaining UK export credit agency support for our aircraft financing. In 2013, we introduced the first batch of aircraft lease receivables realisations to Chinese investors as part of our strategy for financial product development. The model highlights our business innovation capability and further enhances our financial resources. Listed on the main board of the Stock Exchange of Hong Kong on 11 July 2014, the Group is the first listed aircraft lessor in Asia. We are currently a constituent stock of the Hang Seng Global Composite Index, the Hang Seng Composite Index and MSCI China Small Cap Index. The Group was named “Aircraft Lessor of the Year” 2015 by Global Transport Finance — the first ever Chinese lessor to obtain this international accreditation. 13 ck.ng 04832_E03_Financial Highlight_4C Time/date: 08-04-2016_06:18:53 China Aircraft Leasing Group Holdings Limited FINANCIAL HIGHLIGHTS AND FIVE-YEAR FINANCIAL SUMMARY REVENUE AND OTHER INCOME AIRCRAFT DELIVERED (HK$ million) 1,600 1,549 70 63 310 60 1,200 1,145 50 44 248 40 54 A330 series 800 687 64 30 25 35 897 1,239 448 20 16 16 400 623 Lease Income Boeing B737 223 10 448 10 10 223 9 4 5 5 5 0 0 1 2 4 4 4 2011 2012 2013 2014 2015 Other Income 2011 2012 2013 2014 2015 A320 series PROFIT FOR THE YEAR GEARING (HK$ million) 400 1.0 0.90 0.9 0.88 0.87 0.87 300 0.79 0.8 200 380 303 0.7 173 100 0.6 95 51 0 0.5 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 RETURN ON EQUITY TOTAL ASSETS (HK$ billion) 25% 25 23.9 20% 20 18.3 15% 15 12.8 21.8% 20.5% 21.1% 22.4% 19.2% 10% 10 6.9 5% 5 3.3 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 14 ck.ng 04832_E04_Five year_4C Time/date: 08-04-2016_06:18:52 Annual Report 2015 CONSOLIDATED RESULTS Year ended 31 December 2011 2012 2013 2014 2015 HK$’m HK$’m HK$’m HK$’m HK$’m Revenue and other income 223 448 687 1,145 1,549 Profit before income tax 78 128 210 381 480 Income tax (27) (33) (37) (78) (100) Profit attributable to owners of the Company 51 95 173 303 380 CONSOLIDATED BALANCE SHEET As at 31 December 2011 2012 2013 2014 2015 HK$’m HK$’m HK$’m HK$’m HK$’m ASSETS Property, plant and equipment 1 1,541 1,487 1,707 2,413 Finance lease receivables – net 3,136 4,388 7,679 11,443 16,473 Derivative financial assets – – 14 15 19 Prepayments and other receivables 106 808 2,183 3,503 3,444 Cash and bank balances 97 152 1,470 1,645 1,598 Total assets 3,340 6,889 12,833 18,313 23,947 LIABILITIES Total borrowings 2,623 6,087 11,592 15,985 20,767 Other liabilities 482 107 283 547 972 Total liabilities 3,105 6,194 11,875 16,532 21,739 Net assets 235 695 958 1,781 2,208 Per-Share-Basis 2011 2012 2013 2014 2015 Basic earnings per share (HK cents) 15.3 25.3 37.6 57.7 63.6 Net asset value per share (HK$) (Note 1) 0.70 1.85 2.09 3.04 3.64 Financial Ratios 2011 2012 2013 2014 2015 Gearing ratio (borrowings vs total assets) 79% 88% 90% 87% 87% Return on average shareholders’ equity 21.79% 20.47% 21.12% 22.42% 19.25% Interest coverage (Note 2) 163% 164% 180% 187% 176% Note: (1) Per-share-basis calculation is based on the adjusted number of shares equivalent to Post-IPO’s number of shares (in million of shares) 2011: 336; 2012: 376; 2013: 459; 2014: 586; 2015: 606. (2) Interest coverage = EBITDA/Interest expense. 15 ck.ng 04832_E05_MAJOR_ACHIEVEMENTS Time/date: 08-04-2016_06:18:52 China Aircraft Leasing Group Holdings Limited MAJOR ACHIEVEMENTS MAR Issued HK$892.2 million Convertible Bonds Obtained first export credit agencies (ECAs) 2015 financing Expanded into Europe - Signed a Letter of Intent JUN with Pegasus Airlines for the lease of two new Airbus 2015 A320 aircraft Commencement of construction of Asia's first aircraft JUL disassembly facility 2015 Issued the first