Interim Financial Statements
The Board of Directors of China Eastern
Airlines Corporation Limited (the "Company") is pleased
to announce the unaudited consolidated results of the Company
and its subsidiaries (the "Group") for the six months
ended 30 June 1997 prepared under International Accounting Standards
together with the comparative figures for the corresponding period
of 1996 as follows:-
1. Restructuring and basis of preparation
The Company was established in China
on 14 April 1995 as a company limited by shares to hold the assets
and liabilities of the core airline business units of China Eastern
Airlines, the Company's predecessor ("CEA"). Simultaneously
with the establishment of the Company, those business units and
assets and liabilities that were not part of CEA's core airlines
business were transferred to Eastern Air Group Company ("EA
Group"), the entity established for the purpose of holding
such non-core business units and assets and liabilities and the
issued shares of the Company. The consolidated profit and loss
account for the six months ended 30 June 1996 presented for comparative
purpose has been prepared as if the current group structure had
been in existence throughout the period from 1 January 1996 to
30 June 1996.
The accompanying unaudited consolidated
profit and loss account is prepared in conformity with International
Accounting Standards ("IAS"). This basis of
accounting differs from generally accepted accounting principles
in the United States of America ("U.S. GAAP"). Effects
of significant differences between IAS and U.S. GAAP on consolidated
profit attributable to shareholders for the six months ended 30
June 1997 and on the consolidated net assets at 30 June 1997 are
set out in Note 8.
2. Turnover
Turnover comprises revenue from airline
services and other services and is net of domestic aviation infrastructure
levies and sales tax.
The Group conducts passenger, cargo
and mail operations in domestic, international and regional markets. Traffic revenues by geographic region
are analysed as follows: -
3. Taxation
PRC income tax is calculated at the rate
of 33% (1996: 33%) on the estimated assessable profits of the
Group.
The Group operates international flights
to certain overseas destinations. There was no material overseas
taxation for the six months ended 30 June 1997 as there exists
double taxation relief between China and the corresponding jurisdictions.
With respect to the Group's regional flights from Hong Kong, the
related traffic revenue is subject to Hong Kong profits tax. No
provision for Hong Kong profits tax has been made as the Group
has no taxable profits for the six months ended 30 June 1997.
Deferred taxation is provided using
the liability method which requires recognition of all significant
temporary differences arising from the inclusion of items of income
and expenditure in tax computations in periods different from
those in which they are included in the financial statements.
4. Earnings per share
The calculation of earnings per share
is based on the unaudited consolidated profit attributable to
shareholders of RMB305,995,000 (1996: audited RMB257,303,000)
and the weighted average number of 4,252,663,388 (1996: 3,000,000,000)
ordinary shares in issue during the period.
5. Profit appropriation
No appropriations from retained earnings
were made to the statutory reserves during the six months ended
30 June 1997. Such appropriations will be made at the year end
in accordance with the PRC Company Law and the Articles of Association
of the Company.
6. Interim dividend
The Board of Directors do not recommend
the payment of an interim dividend for the six months ended 30
June 1997 (1996: NIL).
7. Convenient translation
For the convenience of the readers,
amounts in Renminbi have been translated into United States dollars
at the rate of US$1.00 = RMB8.2907, being the rate quoted by the
People's Bank of China at 28 June 1997. No representation is made
that the Renminbi amounts could have been or could be, converted
into United States dollars at that rate.
8. Supplementary information for North American Shareholders (Unaudited)
Consolidated Profit and Loss Account
Effects on consolidated profit attributable
to shareholders and consolidated net assets of significant differences
between lAS and U.S. GAAP are summarised below. The U.S. GAAP
adjustments shown below have been prepared by management and have
not been subject to independent audit.
Note:-
The calculation of earnings per share
and per equivalent ADS for the six months ended 30 June 1997 is
based on the unaudited consolidated profit attributable to shareholders
under U.S. GAAP of RMB361,332,000 and the weighted average number
of ordinary shares of 4,252,663,388 shares and equivalent ADSs
of 42,526,634 shares in issue during the period respectively.
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