(6)	Advances to and Investments in Foreign Joint Ventures’ Operations

The Company has a foreign joint venture agreement and holds a 40% interest in a Chinese company, BOMAY, which builds electrical systems for sale in China. The majority partner in this foreign joint venture is a subsidiary of a major Chinese oil company. M&I made an initial investment of $1.0 million in 2006 and made an additional $1.0 million investment in 2007. The Company’s equity in the income of the foreign joint venture was $2.1 million and $2.6 million for the years ended December 31, 2013 and 2012, respectively. Sales made to the foreign joint venture were $325,000 and $415,000 for the years ended December 31, 2013 and 2012, respectively. Accounts receivable from BOMAY were $119,000 and $73,000 at December 31, 2013 and 2012.

The Company owns a 41% interest in MIEFE which provides additional sales and technical support in Asia. The Company’s equity in the income of the foreign joint venture was $115,000 and $16,000 for the years ended December 31, 2013 and 2012, respectively. Sales made to the foreign joint venture were $225,000 and $65,000 for the years ended December 31, 2013 and 2012, respectively. Accounts receivable from MIEFE was none and $25,000 at December 31, 2013 and 2012, respectively.

The company owns a 49% interest in AAG, a Brazilian Limited Liability Company, formed in 2010. The Company’s equity in the income of the foreign joint venture was $843,000 and $503,000 for the years ended December 31, 2013 and 2012, respectively. Sales made to the foreign joint venture were $4,000 and $49,000 for the years ended December 31, 2013 and 2012. Accounts receivable from AAG was $8,000 at December 31, 2013 and 2012.

The Company’s equity in income of the foreign joint ventures before our foreign operations expenses, totaled $3.0 million and $3.1 million for the years ended December 31, 2013 and 2012, respectively.

During 2013 and 2012, the Company also recognized approximately $267,000 and $343,000, respectively, for employee related expenses directly attributable to the foreign joint ventures.

Sales to foreign joint ventures’ operations are made on an arm’s length basis and intercompany profits, if any, are eliminated in consolidation. Summary financial information of BOMAY, MIEFE and AAG in U.S. dollars was as follows at December 31, 2013 and 2012:

	BOMAY				MIEFE				AAG
	2013		2012		2013		2012		2013		2012
	(in thousands)
Assets:
Total current assets	$	94,220	$	91,926	$	3,855	$	3,894	$	2,572	$	2,241
Total non-current assets		5,122		5,116		114		116		1,550		776
Total assets	$	99,342	$	97,042	$	3,969	$	4,010	$	4,122	$	3,017
Liabilities and equity:
Total liabilities	$	72,644	$	73,293	$	1,197	$	1,422	$	1,291	$	1,511
Total joint ventures equity		26,698		23,749		2,772		2,588		2,831		1,505
Total liabilities and equity	$	99,342	$	97,042	$	3,969	$	4,010	$	4,122	$	3,016
Gross sales	$	86,332	$	84,639	$	7,997	$	6,996	$	10,658	$	7,625
Gross profit		12,130		14,348		2,066		1,547		4,282		2,965
Net income		5,165		6,422		279		39		1,721		1,104

The Company’s investments in and advances to its foreign joint ventures’ operations were as follows as of December 31, 2013 and 2012:

	2013												2012
	BOMAY*			MEIFE			AAG			**TOTAL			BOMAY*			MIEFE		AAG			TOTAL
	(in thousands)												(in thousands)
Investment in joint ventures:
Balance, beginning of year	$	2,033		$	14		$	234		$	2,281		$	2,033		$	14	$	284		$	2,331
Additional amounts invested and advanced		—			—			(180	)		(180	)		—			—		(50	)		(50	)
Balance, end of year		2,033			14			54			2,101			2,033			14		234			2,281
Undistributed earnings:
Balance, beginning of year	$	6,400		$	755		$	661		$	7,816		$	4,839		$	739	$	158		$	5,736
Equity in earnings (loss)		2,066			115			843			3,024			2,569			16		503			3,088
Dividend distributions		(1,321	)		—			(23	)		(1,344	)		(1,008	)		—		—			(1,008	)
Balance, end of year		7,145			870			1,481			9,496			6,400			755		661			7,816
Foreign currency translation:
Balance, beginning of year	$	1,098		$	294		$	(81	)	$	1,311		$	1,040		$	233	$	(32	)	$	1,240
Change during the year		333			(40	)		(168	)		125			58			61		(49	)		70
Balance, end of year		1,431			254			(249	)		1,436			1,098			294		(81	)		1,311
Investments, end of year	$	10,609		$	1,138		$	1,286		$	13,033		$	9,531		$	1,063	$	814		$	11,408

Accumulated statutory reserves in equity method investments of $1,857,000 and $1,620,000 at December 31, 2013 and 2012, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

The Company accounts for its investments in foreign joint ventures’ operations using the equity method of accounting. Under the equity method, the Company’s share of the joint ventures’ operations’ earnings or loss is recognized in the consolidated statements of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint ventures and joint venture losses reduce the carrying value. Dividends received from the joint ventures reduce the carrying value. Each reporting period, the Company evaluates the carrying value of these equity method investments as to whether an impairment adjustment may be necessary. In making this evaluation, a variety of quantitative and qualitative factors are considered including national and local economic, political and market conditions, industry trends and prospects, liquidity and capital resources and other pertinent factors. Based on this evaluation for this reporting period, the Company does not believe an impairment adjustment is necessary.

**	See Note 17 for dividends from AAG in 2014.