Nanfang Communication Holdings Limited - Proxy Solicitation & Information Statement 2021

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in BEIJING CAPITAL INTERNATIONAL AIRPORT CO., LTD. , you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed “Definitions” in this circular.

A letter from the Board is set out on pages 6 to 25 of this circular. A letter from the Independent Board Committee is set out on pages 26 to 27 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 28 to 52 of this circular.

The Company will convene the EGM at 9:00 a.m. on Thursday, 28 October 2021 at the Conference Room, Room 112, the Office Building of the Company, No. 9 Siwei Road, Capital Airport, Beijing, the PRC. The notice convening the EGM was despatched to the Shareholders on 2021.

The Company has despatched the reply slips for the EGM on Friday, 10 September 2021. Shareholders who intend to attend the EGM are required to complete and return the reply slips in accordance with the instructions printed thereon as soon as possible and in any event by not later than Thursday, 7 October 2021.

Whether or not you are able to attend the meeting, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 24 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

8 October 2021

		Pages
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Letter from	the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Appendix –	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context otherwise requires:

“Adjusted F&B Resources”

the parts of the Allocated Retail Resources which have been adjusted for use by Beijing Airport Food Management under the Flexible Retail and F&B Resources Usage Agreement as resources for food and beverage

“Adjusted F&B Resources Usage Fee”
the fee in respect of the use of the Adjusted F&B Resources by Beijing Airport Food Management
“Adjusted Fees”
the Adjusted F&B Resources Usage Fee and/or the Adjusted Retail Resources Usage Fee, as the case may be
“Adjusted Retail Resources”
the parts of the Allocated F&B Resources which have been adjusted for use by Beijing Airport Commercial and Trading under the Flexible Retail and F&B Resources Usage Agreement as resources for retail
“Adjusted Retail Resources Usage Fee”
the fee in respect of the use of the Adjusted Retail Resources by Beijing Airport Commercial and Trading
“Adjusted Resources”
the Adjusted F&B Resources and/or the Adjusted Retail Resources, as the case may be
“Agreements”
collectively, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), the Food and Beverage Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) and the Flexible Retail and F&B Resources Usage Agreement
“Allocated F&B Resources”
the designated food and beverage resources in Terminal One, Terminal Two and Terminal Three allocated to Beijing Airport Food Management under the Food and Beverage Resources Usage Agreement
“Allocated Retail Resources”

the commercial retail resources and the resources of taxable domestically manufactured goods situated in the domestic isolated area and public area in Terminal One, Terminal Two and Terminal Three allocated to Beijing Airport Commercial and Trading under the Domestic Retail Resources Usage Agreement

“Allocated Resources” the Allocated F&B Resources and/or the Allocated Retail Resources, as the case may be
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DEFINITIONS

“Articles” the articles of association of the Company, as amended from time to time “associate(s)” has the same meaning as ascribed to it in the Listing Rules “Beijing Airport Commercial and Beijing Capital Airport Commercial and Trading Company Trading” Limited (北京首都機場商貿有限公司), a limited liability company incorporated in the PRC and a wholly-owned subsidiary of the Parent Company “Beijing Airport Food Management” Beijing Capital Airport Food Management Company Limited (北京首都機場餐飲發展有限公司), a sino-foreign joint stock limited company incorporated in the PRC, which is principally engaged in restaurant and other food and beverage businesses, and is a whollyowned subsidiary of the Parent Company “Beijing Capital Airport” Beijing Capital International Airport “Board” the board of Directors “Company” Beijing Capital International Airport Co., Ltd. (北京首都國際機場股份有限公司), a sino-foreign joint stock limited company incorporated in the PRC with limited liability, and the H Shares of which are listed on the Stock Exchange “connected person(s)” has the same meaning as ascribed to it in the Listing Rules “controlling shareholder” has the same meaning as ascribed to it in the Listing Rules “Covid-19” novel coronavirus “Director(s)” the director(s) of the Company “Domestic Retail Resources Usage the domestic retail resources usage agreement dated 28 December Agreement” 2020 entered into between the Company and Beijing Airport Commercial and Trading, pursuant to which the Company permitted Beijing Airport Commercial and Trading to use the commercial retail resources and the resources of taxable domestically manufactured goods in domestic isolated area and public area in Beijing Capital Airport and where the context requires, as varied by the Flexible Retail and F&B Resources Usage Agreement

“Domestic Retail Resources Usage the announcement of the Company dated 28 December 2020 in Announcement” respect of the Domestic Retail Resources Usage Agreement

DEFINITIONS

“Domestic Share(s)” ordinary domestic share(s) of nominal value of RMB1.00 each in the registered share capital of the Company
“Effective Date” the effective date of the Flexible Retail and F&B Resources Usage Agreement
“EGM” the extraordinary general meeting of the Company to be held at 9:00 a.m. on Thursday, 28 October 2021 for the consideration and the approval of, among other things, the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps
“F&B Announcement” the announcement of the Company dated 29 December 2020 in respect of, among others, the Food and Beverage Resources Usage Agreement
“Flexible Retail and F&B Resources the tripartite domestic retail and food and beverage resources usage Usage Agreement” agreement dated 13 August 2021 entered into among the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management
“Food and Beverage Resources Usage Agreement”
the food and beverage resources usage agreement dated 29 December 2020 entered into between the Company and Beijing Airport Food Management, pursuant to which the Company agreed to permit Beijing Airport Food Management to use the designed food and beverages resources in Beijing Capital Airport and where the context requires, as varied by the Flexible Retail and F&B Resources Usage Agreement
“H Share(s)”
overseas listed foreign share(s) of nominal value of RMB1.00 each in the registered share capital of the Company
“Independent Board Committee”
an independent board committee of the Company comprising all of the independent non-executive Directors, established to advise the Independent Shareholders in respect of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps
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DEFINITIONS

“Independent Financial Adviser” or Opus Capital Limited, a licensed corporation to carry on Type 1 “Opus Capital” (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps
“Independent Shareholder(s)”
the Shareholders other than the Parent Company, its associates and any other Shareholder who has a material interest in the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement) and the transactions contemplated thereunder
“Latest Practicable Date” 28 September 2021, being the latest practicable date prior to printing of this circular for the purpose of ascertaining certain information referred to in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“Parent Company” Capital Airports Holdings Limited (首都機場集團有限公司) (formerly known as Capital Airports Holding Company（首都機場集團公司）), an enterprise established in the PRC and the controlling shareholder of the Company
“Parties” the parties to the Flexible Retail and F&B Resources Usage Agreement, namely the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management
“PRC” the People’s Republic of China
“RMB” Renminbi, the lawful currency of the PRC
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of RMB1.00 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)
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DEFINITIONS

“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Terminal One”	the passenger terminal numbered one which forms part of the
	Beijing Capital Airport
“Terminal Three”	the passenger terminal numbered three which forms part of the
	Beijing Capital Airport
“Terminal Two”	the passenger terminal numbered two which forms part of the
	Beijing Capital Airport
“%”	per cent

For identification purposes only
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LETTER FROM THE BOARD

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Executive Directors: Mr. Liu Xuesong Mr. Han Zhiliang Mr. Zhang Guoliang

Non-executive Directors:

Mr. Gao Shiqing Mr. Jia Jianqing Mr. Song Kun

Registered office: Capital Airport, Beijing The PRC

Principal place of business in Hong Kong: 37/F, One Taikoo Place Taikoo Place 979 King’s Road Hong Kong

Independent Non-executive Directors:

Mr. Jiang Ruiming Mr. Liu Guibin Mr. Zhang Jiali Mr. Stanley Hui Hon-chung

8 October 2021

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

(I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

INTRODUCTION

Reference is made to the Domestic Retail Resources Usage Announcement, the F&B Announcement and the announcement of the Company dated 13 August 2021.

LETTER FROM THE BOARD

Due to the negative impact on international travel brought about by the Covid-19 pandemic, passenger throughput at the Beijing Capital Airport has been severely affected. The passenger throughput for the six months ended 30 June 2021, while increased by approximately 40% when compared to the six months ended 30 June 2020, decreased by approximately 63% when compared to the six months ended 30 June 2019 (i.e. before the Covid-19 pandemic). The decrease in passenger throughput has led to lower demand for retail as well as food and beverage services, with approximately 65% of the retail stores and 40% of the food and beverage outlets at the Beijing Capital Airport opening for business as at 30 June 2021. Prior to the Covid-19 pandemic, the store-opening rates for retail as well as food and beverage businesses at the Beijing Capital Airport were, on average, approximately 85% and 90%, respectively, in 2019.

As disclosed in the Domestic Retail Resources Usage Announcement and the F&B Announcement, the resources usage fee payable by each of Beijing Airport Commercial and Trading and Beijing Airport Food Management to the Company under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, respectively, comprises a guaranteed component (which is calculated with reference to the resources usage fee of the preceding year) and a variable component (which is calculated with reference to the difference in rental income between the current year and the preceding year). With lower store-opening rate, it is anticipated that the variable components in respect of (a) the resources usage fee payable by Beijing Airport Commercial and Trading to the Company under the Domestic Retail Resources Usage Agreement; and (b) the resources usage fee payable by Beijing Airport Food Management to the Company under the Food and Beverage Resources Usage Agreement, are likely to be low.

In order to improve the overall business performances of the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management, the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management entered into the Flexible Retail and F&B Resources Usage Agreement to provide flexibility relating to the allocation of resources under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement. It was noted that while sales volume of retail as well as food and beverage businesses decreased by more than 50% for the six months ended 30 June 2021 when compared to the six months ended 30 June 2019, sales volume of retail business for the six months ended 30 June 2021 increased by approximately 50% when compared to the six months ended 30 June 2020 whereas sales volume of food and beverage business for the six months ended 30 June 2021 increased by approximately only 5% when compared to the six months ended 30 June 2020. Having the flexibility to allocate resources between retail as well as food and beverage businesses in response to market demands during this pandemic would help to optimize the utilisation of these resources and hence enhance the efficiency of resources usage. It is hoped that such flexible arrangement will improve the business performances of the parties and hence increase their incomes.

Pursuant to the Flexible Retail and F&B Resources Usage Agreement, the terms of the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement are subject to certain modifications and variations.

In view of the variations to the terms of the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement brought about by the Flexible Retail and F&B Resources Usage Agreement, the original annual caps contemplated under the Domestic Retail Resources Usage Agreement shall be revised while the original annual caps contemplated under the Food and Beverage Resources Usage Agreement remain unchanged.

LETTER FROM THE BOARD

The purpose of this circular is to provide you with (i) details of the Flexible Retail and F&B Resources Usage Agreement and the transactions contemplated thereunder; (ii) details of the variations to the terms of the Domestic Retail Resources Usage Agreement and the revisions to the annual caps thereunder brought about by the Flexible Retail and F&B Resources Usage Agreement; (iii) the letter of recommendation from the Independent Board Committee in connection with the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps; and (iv) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in connection with the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps.

I. FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT

Material terms of the Flexible Retail and F&B Resources Usage Agreement

Date

13 August 2021

Parties

(1) The Company;
(2) the Beijing Airport Commercial and Trading; and
(3) Beijing Airport Food Management

Effective Date

The Flexible Retail and F&B Resources Usage Agreement shall become effective on the date of approval by the Shareholders at the EGM.

Term

From the Effective Date to 31 December 2023, subject to early termination (if applicable) by mutual agreement of the Parties in writing.

Flexible Resources Usage Adjustment Arrangement

Subject to prior consent by the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management may agree among themselves that certain parts of the Allocated Retail Resources may be used by Beijing Airport Food Management as Adjusted F&B Resources and certain parts of the Allocated F&B Resources may be used by Beijing Airport Commercial and Trading as Adjusted Retail Resources.

LETTER FROM THE BOARD

The use of the Adjusted Retail Resources by Beijing Airport Commercial and Trading shall comply with the Domestic Retail Resources Usage Agreement while the use of the Adjusted F&B Resources by Beijing Airport Food Management shall comply with the Food and Beverage Resources Usage Agreement.

Flexible Resources Usage Adjustment Fees

Under the Flexible Retail and F&B Resources Usage Agreement, the Adjusted Fees are payable to the Company in respect of the Adjusted Resources with reference to formulae as set out below.

Adjusted Retail Resources Usage Fee

Adjusted Retail Resources Usage Fee for a given year = A + B

where

“A” = Guaranteed resources usage fee in respect of the Adjusted Retail Resources, which is calculated with reference to the guaranteed resources usage fee under the Food and Beverage Resources Usage Agreement.

Before the flexible adjustment contemplated under the Flexible Retail and F&B Resources Usage Agreement, under the Food and Beverage Resources Usage Agreement, the guaranteed resources usage fee in respect of the Adjusted Retail Resources is:

(i) originally payable by Beijing Airport Food Management to the Company; and
(ii) calculated with reference to the resources usage fee of the preceding year paid by Beijing Airport Food Management to the Company. As disclosed in the F&B Announcement, in principle, the actual amount of resources usage fee of the preceding year is used as the base of guaranteed resources usage fee. Further, the guaranteed resources usage fee is related to the actual area for store operation. Due to the exceptional circumstances in 2020 under the influence of the Covid-19 pandemic, the guaranteed resources usage fee for 2021 will be calculated based on the rental payable by Beijing Airport Food Management in 2019, the change of passengers throughput between 2021 and 2019 and the change of actual operating area between 2021 and 2019. The guaranteed resources usage fees for 2022 and 2023 under the Food and Beverage Resources Usage Agreement are calculated with reference to the actual rental to be paid by Beijing Airport Food Management to the Company in 2021 and 2022, respectively.
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LETTER FROM THE BOARD

Under the Flexible Retail and F&B Resources Usage Agreement:

(a) this fee “A” shall be payable by Beijing Airport Commercial and Trading in lieu of Beijing Airport Food Management to the Company; and
(b) “A” for each of the three years of 2021, 2022 and 2023 shall be calculated based on (i) the actual rental paid by Beijing Airport Food Management to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources usage fee per square meter, actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Commercial and Trading, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (ie. from 2021 to 2023).
“B” = Usage fee in respect of the Adjusted Retail Resources, which is calculated as follows:

“B” = (total rental income in respect of the Adjusted Retail Resources received by Beijing Airport Commercial and Trading from third party – operators “A”)/3

The amount equivalent to “B” shall be payable by Beijing Airport Commercial and Trading to each of the Company and Beijing Airport Food Management.

Adjusted F&B Resources Usage Fee

Adjusted F&B Resources Usage Fee for a given year = C + D

where

“C” = Guaranteed resources usage fee in respect of the Adjusted F&B Resources, which is calculated with reference to the guaranteed resources usage fee under the Domestic Retail Resources Usage Agreement.

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LETTER FROM THE BOARD

Before the flexible adjustment contemplated under the Flexible Retail and F&B Resources Usage Agreement, under the Domestic Retail Resources Usage Agreement, the guaranteed resources usage fee in respect of the Adjusted F&B Resources is:

(i) originally payable by Beijing Airport Commercial and Trading to the Company; and
(ii) calculated with reference to the resources usage fee of the preceding year paid by Beijing Airport Commercial and Trading to the Company. As disclosed in the Domestic Retail Resources Usage Announcement, in principle, the actual amount of resources usage fee of the preceding year is used as the base of guaranteed resources usage fee. Further, the guaranteed resources usage fee is related to the base of guaranteed unit resources usage fee per square meter, actual number of days for store operation, and size of the operation area. Due to the exceptional circumstances in 2020 under the influence of the Covid-19 pandemic, the base of guaranteed resources usage fee for 2021 will be calculated based on the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 and the change of domestic passengers throughput between 2021 and 2019. This is the basis on which the base of guaranteed unit resources usage fee per square meter for 2021 is calculated, and the operating area is based on the actual operating area in 2019. The final guaranteed resources usage fee for 2021 is calculated based on the actual area of operation for the year. The guaranteed resources usage fees for 2022 and 2023 under the Domestic Retail Resources Usage Agreement are calculated with reference to the actual rental to be paid by Beijing Airport Commercial and Trading to the Company in 2021 and 2022, respectively.

Under the Flexible Retail and F&B Resources Usage Agreement:

(a) this fee “C” shall be payable by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading to the Company; and
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LETTER FROM THE BOARD

(b) “C” for each of the three years of 2021, 2022 and 2023 shall be calculated based on (i) the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources usage fee per square meter, actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Food Management, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (ie. from 2021 to 2023).
“D” = Usage fee in respect of the Adjusted F&B Resources, which is calculated as follows:

“D” = (total rental income in respect of the Adjusted F&B Resources received by Beijing Airport Food Management from third party operators – “C”)/3

The amount equivalent to “D” shall be payable by Beijing Airport Food Management to each of the Company and Beijing Airport Commercial and Trading.

Payment Intervals

Beijing Airport Commercial and Trading and Beijing Airport Food Management shall pay the guaranteed resources usage fee in respect of the Adjusted Retail Resources and the Adjusted F&B Resources (i.e. “A” and “C”), respectively, for the year ending 31 December 2021 within 15 business days upon written confirmation of the respective term of use of the Adjusted Resources.

For the subsequent years commencing from 1 January 2022, Beijing Airport Commercial and Trading and Beijing Airport Food Management shall pay the guaranteed resources usage fee in respect of the Adjusted Retail Resources and the Adjusted F&B Resources (i.e. “A” and “C”), respectively, for the year in question within 15 business days of the first month of that year.

Starting from the second year after the Effective Date (i.e. 2022), the Company and Beijing Airport Commercial and Trading (in the case of the Adjusted Retail Resources) and Beijing Airport Food Management (in the case of the Adjusted F&B Resources) shall, within the first month of that year, ascertain the actual income of Beijing Airport Commercial and Trading and Beijing Airport Food Management under the Flexible Retail and F&B Resources Usage Agreement (i.e. “B” and “D”), respectively, in the preceding year. Beijing Airport Commercial and Trading and Beijing Airport Food Management shall, within seven business days of the second month of the year, pay the ascertained Adjusted Retail Resources Fees (i.e. “A” + “B”) and Adjusted F&B Resources Fee (i.e. “C” + “D”), respectively, for the preceding year to the Company and the other party, with any overpayment refunded or any underpayment being made up.

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LETTER FROM THE BOARD

Other Major Terms

The relevant terms of the Domestic Retail Resources Usage Agreement and Food and Beverage Resources Usage Agreement shall be modified and varied by the relevant terms of the Flexible Retail and F&B Resources Usage Agreement, to the extent applicable. Save as disclosed above, all other terms of the Domestic Retail Resources Usage Agreement as disclosed in the Domestic Retail Resources Usage Announcement and all other terms of the Food and Beverage Resources Usage Agreement as disclosed in the F&B Announcement remain unchanged.

Illustration

For the avoidance of doubt, the Adjusted Retail Resources Usage Fee is only payable in respect of the Adjusted Retail Resources, and does not affect the payment of resources usage fee in accordance with the terms of the Food and Beverage Resources Usage Agreement for Allocated F&B Resources which are not adjusted as Adjusted Retail Resources. Similarly, the Adjusted F&B Resources Usage Fee is only payable in respect of the Adjusted F&B Resources, and does not affect the payment of resources usage fee in accordance with the terms of the Domestic Retail Resources Usage Agreement for Allocated Retail Resources which are not adjusted as Adjusted F&B Resources.

For illustration purposes only, using Allocated F&B Resources of 433.79 square metres under the Food and Beverage Resources Usage Agreement which may be adjusted as Adjusted Retail Resources under the Flexible Retail and F&B Resources Usage Agreement as an example, the table below sets out the calculation of resources usage fee payable under the Food and Beverage Resources Usage Agreement (i.e. before adjustment) and the Flexible Retail and F&B Resources Usage Agreement (i.e. after adjustment) for the year 2021:

Resources Usage Adjusted Retail Resources Fee under the Food and Usage Fee under the Beverage Resources Usage Flexible Retail and F&B Agreement Resources Usage Agreement Formula Guaranteed resources usage fee + Guaranteed resources usage fee + Commission for increase in Usage fee resources usage fee Resources 433.79 square metres 433.79 square metres Base of the guaranteed RMB370 per month per square RMB370 per month per square unit usage fee for 2019 metre metre (per square metre)

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LETTER FROM THE BOARD

Resources Usage Fee under the Food and Beverage Resources Usage Agreement

Adjusted Retail Resources Usage Fee under the Flexible Retail and F&B Resources Usage Agreement

Guaranteed Resources The guaranteed resources usage fee Usage Fee for 2021 for 2021 is calculated based on:

The guaranteed resources usage fee for 2021 is calculated based on:

(i) the actual rental paid by Beijing Airport Food M a n a g e m e n t t o t h e Company in 2019; and
(i) the rental payable by Beijing Airport Food Management in 2019;
(ii) the passengers throughput in 2021 decreased by 49% as compared with 2019; and
(ii) the actual number of days of use by Beijing Airport Commercial and Trading (assuming 365 days)
(iii) the ratio of the estimated (assuming 365 operating area in 2021 to the actual operating area in Result = RMB1,926,027.6 2019 (i.e. 81.38%)

Result = RMB981,441.20

C o m m i s s i o n f o r The commission for increase in N/A increase in resources resources usage fee = (total rental usage fee (under the income of Beijing Airport Food Food and Beverage Management for the current year – R e s o u r c e s U s a g e total rental income of Beijing Agreement) Airport Food Management for the preceding year) x 40%

Result = RMB0

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LETTER FROM THE BOARD

Resources Usage Adjusted Retail Resources Fee under the Food and Usage Fee under the Beverage Resources Usage Flexible Retail and F&B Agreement Resources Usage Agreement Usage Fee (under the N/A Usage fee = (total rental income in Flexible Retail and respect of the Adjusted Retail F&B Resources Usage Resources received by Beijing Agreement) Airport Commercial and Trading from third party operators - Guaranteed resources usage fee under the Flexible Retail and F&B Resources Usage Agreement) / 3

Result = (RMB36,976,224 (estimated rental from third party store operators) - RMB1,926,027.6) / 3 = RMB11,683,399 Total Amount RMB981,441.20 + RMB0 = RMB1,926,027.6 + RMB981,441.20 RMB11,683,399 = RMB13,609,426.6

Annual Caps

As this is the first time the Company has entered into the Flexible Retail and F&B Resources Usage Agreement, and the Company has never entered into similar arrangements before, there are no historical annual caps available.

The Company expects that the annual caps of the proposed transactions under the Flexible Retail and F&B Resources Usage Agreement are as follows:

From the From From Effective Date 1 January 2022 to 1 January 2023 to to 31 December 2021 31 December 2022 31 December 2023 (RMB million) (RMB million) (RMB million) Annual caps 6 20 30

Basis for Annual Caps

The Annual Caps are determined with reference to the following factors:

(i) the possible changes in guaranteed resources usage fee in relation to the areas of the Adjusted Retail Resources and the Adjusted F&B Resources in the future;
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LETTER FROM THE BOARD

(ii) the estimated rental income to be received from third party operating merchants of the relevant Adjusted Resources in the future; and
(iii) the estimated growth in resources usage fee due to the increase in sales income from the stores of relevant resources in the future.

Pricing policies

Given that the Company has not entered agreements similar to the Flexible Retail and F&B Resources Usage Agreement before and is not aware of any similar or equivalent resources usage model for direct comparison, in determining the unit price per square metre for calculation of the resources usage fees in respect of the Adjusted Resources, the Company, has applied the pricing policies considered under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement for the Adjusted Retail Resources and the Adjusted F&B Resources.

As disclosed in the Domestic Retail Resources Usage Agreement, the unit rental of shopping malls in Beijing similar to those in Beijing Capital Airport ranges from RMB3,600 to RMB18,000 per square metre per year. As disclosed in the F&B Announcement, the unit rental for food and beverage outlets in shopping malls in Beijing which are similar to those in Beijing Capital Airport ranges from approximately RMB3,600 to RMB8,400 per square metre per year.

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LETTER FROM THE BOARD

The table below sets out the pricing policies in respect of the Adjusted Resources for reference:

Adjusted Retail Resources

Adjusted F& B Resources

Unit rental for guaranteed Follows the pricing policy under Follows the pricing policy under resources usage fee the Food and Beverage Resources the Domestic Retail Resources Usage Agreement Usage Agreement i.e. RMB3,600 – RMB8,400 per i.e. RMB3,600 – RMB18,000 per square metre per year square metre per year Unit rental for usage fee Follows the pricing policy under Follows the pricing policy under (under the Flexible Retail the Domestic Retail Resources the Food and Beverage Resources and F&B Resources Usage Usage Agreement Usage Agreement Agreement) i.e. RMB3,600 – RMB18,000 per i.e. RMB3,600 – RMB8,400 per square metre per year square metre per year

The Flexible Retail and F&B Resources Usage Agreement is a tripartite arrangement among the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management, pursuant to which the parties may agree the flexible allocation of resources which are otherwise governed by the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement. Without the flexible arrangements contemplated under the Flexible Retail and F&B Resources Usage Agreement, the Adjusted Resources would not be adjusted and would remain as parts of the Allocated Retail Resources and Allocated F&B Resources and be governed by the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement. The Company would not be able to enter into arrangements in respect of the Adjusted Resources with any other third parties. Hence, the pricing policies and the related internal control for the transaction contemplated under the Flexible Retail and F&B Resources Usage Agreement follow those under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement.

Internal Control on Pricing Policies

As set out above, the internal control for the pricing policies in respect of the Adjusted Resources follows that set out in the Domestic Retail Resources Usage Announcement and the F&B Announcement. Such internal control measures are similar and set out below is a summary of the measures involved:

The commercial development department is responsible for gathering information on the historical rentals in respect of such Adjusted Resources and conducting assessment on the fairness of the transaction terms and pricing terms.
Prior to the implementation of the relevant transactions in respect of the Adjusted Resources, there would be an internal review process involving different functions of various departments of the Company.
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LETTER FROM THE BOARD

The commercial development department is responsible for the monitoring, assessment and ratings of the transactions in respect of such Adjusted Resources.
The finance department and the secretariat to the Board are responsible for gathering information on connected transactions and monitoring the implementation of connected transactions.
The independent non-executive Directors are responsible for reviewing whether the relevant connected transactions are conducted on normal commercial terms, fair and reasonable and carried out pursuant to contractual terms.
The auditors of the Company are responsible for conducting annual review in relation to the pricing policies and annual caps in accordance with the Listing Rules.

Internal Control on Review of Annual Caps

The Company has implemented the following internal control measures to ensure that the annual caps for the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement will not be exceeded:

The finance department of the Company provides the secretariat to the Board with information in relation to the actual transaction amounts on a monthly basis.
The secretariat to the Board is responsible for monitoring such transactions to ensure that the total amount of transactions does not exceed the annual caps.
If such amount of transactions is estimated to exceed the relevant annual cap, the person-in-charge of the relevant department of the Company will be notified so that the scale of transactions in the future may be re-estimated and arrangements may be made to issue announcements and/or to obtain the relevant approvals from the Board and the Independent Shareholders in accordance with the requirements of the Listing Rules.

II. VARIATIONS TO THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

Pursuant to the Flexible Retail and F&B Resources Usage Agreement, the terms of the Domestic Retail Resources Usage Agreement are subject to the following modifications and variations:

(a) the guaranteed resources usage fee in respect of that parts of the Allocated Retail Resources which have been adjusted for use by Beijing Airport Food Management (i.e. the Adjusted F&B Resources) shall be paid by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading; and
(b) the guaranteed resources usage fee in respect to the Adjusted F&B Resources shall be calculated based on (i) the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources
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LETTER FROM THE BOARD

usage fee per square meter, actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Food Management, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (i.e. from 2021 to 2023), instead of based on, among others, (i) the actual amount of resources usage fee for the preceding year (save for the year 2021 which is with reference to the actual amount of resources usage fee for 2019); (ii) the base of guaranteed unit resources usage fee per square meter; (iii) the actual number of days for store operation; and (iv) the size of the operation area.

Save as disclosed above, all other terms of the Domestic Retail Resources Usage Agreement as disclosed in the Domestic Retail Resources Usage Announcement remain unchanged.

In view of the variations to the terms of the Domestic Retail Resources Usage Agreement brought about by the Flexible Retail and F&B Resources Usage Agreement, the original annual caps contemplated under the Domestic Retail Resources Usage Agreement shall be revised as follows:

				For	ending	31 December
				2021		2022	2023
			_(RMB _	million)	_(RMB _	million)	(RMB million)
Original	annual	caps		150		180	200
Revised	annual	caps		156		200	230

The revised annual caps contemplated under the Domestic Retail Resources Usage Agreement are arrived by adding the estimated total amounts (i.e. the estimated annual caps) for the proposed transactions under the Flexible Retail and F&B Resources Usage Agreement onto the original annual caps contemplated under the Domestic Retail Resources Usage Agreement. The above revised annual caps under the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement) are calculated with reference to the following factors:

(i) the possible changes in guaranteed resources usage fee in relation to the areas of the Adjusted Retail Resources and the Adjusted F&B Resources in the future;
(ii) the estimated rental income to be received from third party operating merchants of the Adjusted Retail Resources in the future; and
(iii) the estimated growth in resources usage fee due to the increase in sales income from the stores of relevant resources in the future.

III. NO REVISIONS TO THE ANNUAL CAPS CONTEMPLATED UNDER THE FOOD AND BEVERAGE RESOURCES USAGE AGREEMENT (AS VARIED BY THE FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT)

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LETTER FROM THE BOARD

resources. As such, it is estimated that the possible increase in the Adjusted F&B Resources Usage Fee in the future will be lower than the decrease in guaranteed resources usage fee as a result of the adjustment of the Allocated F&B Resources for use as Adjusted Retail Resources in the future. Therefore, no adjustment is made to the original annual caps contemplated under the Food and Beverage Resources Usage Agreement at this stage.

IV. REASONS FOR AND BENEFITS OF THE FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT

Since the Covid-19 pandemic hits the world in the beginning of 2020, passenger throughput at the Beijing Capital Airport has been severely affected, leading to lower demand for food and beverages as well as retail services. Not only has there been a drop in passenger throughput at the Beijing Capital Airport, Beijing Capital Airport has been losing its business operators as well as there has been difficulties securing replacement business operators.

The business operations of the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management have been very difficult.

The Flexible Retail and F&B Resources Usage Agreement is an attempt by the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management to try to enhance the efficiency of resources usage. In contemplating and implementing such flexible arrangement, the parties had taken into account the fact that at the Beijing Capital Airport, retail businesses generally performed better than food and beverage businesses during this Covid-19 pandemic. While sales volume of retail as well as food and beverage businesses decreased by more than 50% for the six months ended 30 June 2021 when compared to the six months ended 30 June 2019, it was noted that sales volume of retail as well as food and beverage businesses for the six months ended 30 June 2021 increased by approximately 50% and 5%, respectively, when compared to the six months ended 30 June 2020. Having the flexibility to allocate resources between retail as well as food and beverage businesses in response to market demands during this pandemic would help to optimize the utilisation of these resources and hence enhance the efficiency of resources usage. It is hoped that such flexible arrangement will improve the business performances of the parties and hence increase their incomes.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Flexible Retail and F&B Resources Usage Agreement and the consequent variations to the Domestic Retail Resources Usage Agreement are fair and reasonable, have been entered into after arm’s length negotiations and determined on normal commercial terms and in the ordinary and usual course of business of the Company, and are in the interests of the Company and the Shareholders as a whole.

V. BOARD’S APPROVAL

The Agreements and the transactions contemplated thereunder, including the relevant annual caps, have been approved by the Board.

As at the Latest Practicable Date, there are no overlapping directors between the Company on one hand, and the Parent Company, Beijing Airport Commercial and Trading or Beijing Airport Food Management on the other hand.

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LETTER FROM THE BOARD

Certain executive and non-executive Directors concurrently serve as the general manager and deputy general managers of the Parent Company only, and there is no overlapping senior management between the Company on one hand, and Beijing Airport Commercial and Trading or Beijing Airport Food Management on the other hand.

Moreover, none of the Directors personally has any material interest in the transactions contemplated under any of the Agreements.

Therefore, none of the Directors has abstained from voting at the Board meeting to approve any of the Agreements and the transactions contemplated thereunder, including the relevant annual caps.

VI. INFORMATION ON THE PARTIES

The Company

The Company is principally engaged in the operation of the Beijing Capital Airport. It is a non-wholly owned subsidiary of the Parent Company.

Beijing Airport Commercial and Trading

Beijing Airport Commercial and Trading is principally engaged in conducting trading and retail business. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, it is a wholly-owned subsidiary of the Parent Company.

Beijing Airport Food Management

Beijing Airport Food Management is principally engaged in restaurant and other food and beverage businesses. To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, it is a wholly-owned subsidiary of the Parent Company.

The Parent Company

The Parent Company is principally engaged in the provision of ground support services for domestic and international aviation enterprises and the provision of operation and management services, counter and premises rental services, car parking management, housing rental, property management, advertising agency services and other businesses to its subsidiaries. The ultimate beneficial owner of the Parent Company is the Civil Aviation Administration of China, which is a state bureau administered by the Ministry of Transport of the PRC.

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LETTER FROM THE BOARD

VII. LISTING RULES IMPLICATIONS

Continuing Connected Transactions

Both Beijing Airport Commercial and Trading and Beijing Airport Food Management are wholly-owned subsidiaries of the Parent Company, hence connected persons of the Company.

Accordingly, the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement) and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Aggregation in respect of the Flexible Retail and F&B Resources Usage Agreement

Pursuant to Rule 14A.81 of the Listing Rules, the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement are aggregated with the transactions contemplated under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement and treated as if they were one transaction.

Since the highest of the applicable percentage ratio (as defined in Rule 14.07 of the Listing Rules) in respect of the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement, when aggregated with the transactions contemplated under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, is more than 5%, the Flexible Retail and F&B Resources Usage Agreement and the transactions contemplated thereunder are subject to the reporting, annual review, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Re-compliance with Listing Rules Requirements in respect of the Domestic Retail Resources Usage Agreement

As the terms of the Domestic Retail Resources Usage Agreement are varied by the terms of the Flexible Retail and F&B Resources Usage Agreement, and the annual caps under the Domestic Retail Resources Usage Agreement are consequently revised, according to Rule 14A.54 of the Listing Rules, the Company is required to re-comply with the relevant requirements of the Listing Rules.

Given that the highest applicable percentage ratio (as defined under Rule 14.07 of the Listing Rules) in respect of the revised annual caps under the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) is more than 5%, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) and the transactions contemplated thereunder are subject to the reporting, annual review, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

VIII. EGM

The EGM will be convened at 9:00 a.m. on Thursday, 28 October 2021 at the Conference Room, Room 112, the Office Building of the Company, No. 9 Siwei Road, Capital Airport, Beijing, the PRC to consider and, if thought fit, pass resolutions to approve the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps. The relevant resolutions will be proposed by way of ordinary resolutions at the EGM for approval by the Independent Shareholders.

The notice convening the EGM and the proxy forms and reply slips for the EGM were despatched to the Shareholders on Friday, 10 September 2021.

Whether or not you are able to attend the meeting, please complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s H Share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person in the EGM or any adjournment thereof if you so desire.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll.

IX. APPOINTMENT OF INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

Pursuant to the Listing Rules, the Independent Board Committee (comprising all the independent nonexecutive Directors) has been formed to advise the Independent Shareholders and Opus Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on (i) whether the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) whether the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms or better and in the ordinary and usual course of business of the Company, and whether they are in the interest of the Company and the Shareholders as a whole; and (iii) how to vote on the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps.

A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 26 to 27 of this circular.

A letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 28 to 52 of this circular.

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LETTER FROM THE BOARD

X. CONNECTED PERSONS WHO ARE REQUIRED TO ABSTAIN FROM VOTING ON THE RESOLUTIONS

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) and the respective transactions contemplated thereunder is required to abstain from voting on the relevant resolutions at the EGM.

As at the Latest Practicable Date, the Parent Company is the controlling shareholder of the Company, holding 2,699,814,977 Domestic Shares, representing approximately 58.96% of the issued share capital of the Company, and both Beijing Airport Commercial and Trading and Beijing Airport Food Management are wholly-owned subsidiaries of the Parent Company. As such, the Parent Company and its associates must abstain from voting at the EGM on the resolutions approving the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps.

As at the Latest Practicable Date and to the best knowledge and belief of the Directors, save as disclosed in this circular, none of the other Shareholders must abstain from voting on the relevant resolutions.

XI. BOOK CLOSURE PERIOD

The register of Shareholders will be temporarily closed from Monday, 27 September 2021 to Thursday, 28 October 2021 (both days inclusive), during which period no transfer of Shares will be registered. Shareholders of the Company whose names appear on the register of Shareholders on Thursday, 28 October 2021 are entitled to attend and vote at the EGM.

In order to qualify for the entitlement to attend and vote at the EGM, holders of H Shares whose transfers have not been registered shall deposit the transfer documents together with the relevant share certificates at the Company’s H Share registrar, Hong Kong Registrars Limited at Shops 1712-1716, 17/F Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong at or before 4:30 p.m. on Friday, 24 September 2021.

XII. RECOMMENDATIONS

The Board (including independent non-executive Directors) considers that the resolutions to be proposed at the EGM, as disclosed in the notice of the EGM dated 10 September 2021, are in the interest of the Company and the Shareholders as a whole, and accordingly, recommends the Shareholders to vote in favour of the resolutions to be proposed at the EGM.

Your attention is also drawn to the recommendation of the Independent Board Committee as set out on pages 26 to 27 of this circular and the letter of advice from the Independent Financial Adviser as set out on pages 28 to 52 of this circular.

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LETTER FROM THE BOARD

XIII. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendix to this circular.

Yours faithfully, By Order of the Board of

Beijing Capital International Airport Co., Ltd. Meng Xianwei

Secretary to the Board

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [423 x 89] intentionally omitted <==

8 October 2021

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

We refer to the circular issued by the Company to the Shareholders dated 8 October 2021 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders on (i) whether the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) whether the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms or better and in the ordinary and usual course of business of the Company, and whether they are in the interest of the Company and the Shareholders as a whole; and (iii) how to vote on the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps. Opus Capital has been appointed as the Independent Financial Adviser to advise the Independent Shareholders and us in this respect.

We wish to draw your attention to the letter from the Board as set out on pages 6 to 25 of the Circular and the letter from the Independent Financial Adviser as set out on pages 28 to 52 of the Circular, which contain, among other things, their advice and recommendations on (i) whether the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) whether the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms or better and in the ordinary and usual course of business of the Company, and whether they are in the interest of the Company and the Shareholders as a whole; and (iii) how to vote on the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps.

Having considered the terms of the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) and the transactions contemplated thereunder, including the relevant annual caps, and the advice and recommendation of the Independent Financial Adviser, we are of the view that (i) the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms or better and in the ordinary and usual course of business of the Company, and in the interest of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolutions to approve the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps.

Yours faithfully,

For and on behalf of the Independent Board Committee Beijing Capital International Airport Co., Ltd. Mr. Jiang Ruiming, Mr. Liu Guibin, Mr. Zhang Jiali and Mr. Stanley Hui Hon-chung Independent non-executive Directors

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps, which has been prepared for the purpose of inclusion in this circular.

==> picture [214 x 39] intentionally omitted <==

18th Floor, Fung House Connaught Road Central Central, Hong Kong

8 October 2021

To: the Independent Board Committee and the Independent Shareholders Beijing Capital International Airport Co., Ltd.

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps (collectively, the “ Continuing Connected Transactions ”), details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 8 October 2021 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise defined or the context requires otherwise.

Domestic Retail Resources Usage Agreement

As stated in the Domestic Retail Resources Usage Announcement, the Domestic Retail Resources Usage Agreement dated 28 December 2020 was entered into between the Company and Beijing Airport Commercial and Trading, pursuant to which the Company permitted Beijing Airport Commercial and

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Trading to use the commercial retail resources and the resources of taxable domestically manufactured goods in domestic isolated area and public area in Beijing Capital Airport. For further details, please refer to the Domestic Retail Resources Usage Announcement.

Food and Beverage Resources Usage Agreement

As stated in the F&B Announcement, the Food and Beverage Resources Usage Agreement dated 29 December 2020 was entered into between the Company and Beijing Airport Food Management, pursuant to which the Company agreed to permit Beijing Airport Food Management to use the designed food and beverages resources in Beijing Capital Airport. For further details, please refer to the F&B Announcement.

Flexible Retail and F&B Resources Usage Agreement

On 13 August 2021, the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management entered into the Flexible Retail and F&B Resources Usage Agreement to provide flexibility relating to the allocation of resources under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement for a term from the Effective Date to 31 December 2023 (the “ Proposed Annual Caps Period ”).

Variations to the terms of and revisions to annual caps under the Domestic Retail Resources Usage Agreement

On 28 December 2020, the Company entered into the Domestic Retail Resources Usage Agreement with Beijing Airport Commercial and Trading, pursuant to which the Company permitted Beijing Airport Commercial and Trading to use the commercial retail resources and the resources of taxable domestically manufactured goods situated in the domestic isolated area and public area in Beijing Capital Airport. Pursuant to the Flexible Retail and F&B Resources Usage Agreement, the terms of the Domestic Retail Resources Usage Agreement are subject to modifications and variations. In view of the variations to the terms of the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement brought about by the Flexible Retail and F&B Resources Usage Agreement, the original annual caps contemplated under the Domestic Retail Resources Usage Agreement are revised for three years ending 31 December 2021 to 2023 (the “ Revised Annual Caps Period ”) while the original annual caps contemplated under the Food and Beverage Resources Usage Agreement remain unchanged.

Both Beijing Airport Commercial and Trading and Beijing Airport Food Management are whollyowned subsidiaries of the Parent Company, hence connected persons of the Company.

Accordingly, the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement), and the transactions contemplated thereunder constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Aggregation in respect of the Flexible Retail and F&B Resources Usage Agreement

Re-compliance with Listing Rules Requirements in respect of the Domestic Retail Resources Usage Agreement

The Agreements and the transactions contemplated thereunder, including the relevant annual caps, have been approved by the Board.

Moreover, none of the Directors personally has any material interest in the transactions contemplated under any of the Agreements.

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Therefore, none of the Directors has abstained from voting at the Board meeting to approve any of the Agreements and the transactions contemplated thereunder, including the relevant annual caps.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Jiang Ruiming, Mr. Liu Guibin, Mr. Zhang Jiali and Mr. Stanley Hui Hon-chung, has been established to advise the Independent Shareholders on: (i) whether the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) whether the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms or better and in the ordinary and usual course of business of the Company, and whether they are in the interest of the Company and the Shareholders as a whole; and (iii) how to vote on the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps. Our appointment as the Independent Financial Adviser in this respect has been approved by the Independent Board Committee.

OUR INDEPENDENCE

We were appointed as the Independent Financial Adviser to advise the independent shareholders of the Company in respect of the continuing connected transactions contemplated under the supply of power and energy agreement and the international retail management agreement and their respective annual caps, details of which are set out in the circular of the Company dated 4 December 2020 (the “ Past Appointment ”). The Past Appointment is completed and independent to our current appointment.

As at the Latest Practicable Date, save for the Past Appointment, we did not have any relationship with, or interest in, the Company, Beijing Airport Commercial and Trading, Beijing Airport Food Management, the Parent Company or other parties that could reasonably be regarded as relevant to our independence. During the two years immediately prior to this letter, save for the Past Appointment, we have not acted as an Independent Financial Adviser to the Company. Apart from the normal professional fees paid or payable to us in connection with the Past Appointment and the current appointment as the Independent Financial Advisor, no arrangements exist whereby we had received or will receive any fees or benefits from the Company, Beijing Airport Commercial and Trading, Beijing Airport Food Management, the Parent Company or other parties that could reasonably be regarded as relevant to our independence. Accordingly, we consider that we are independent pursuant to Rule 13.84 of the Listing Rules.

BASIS OF OUR OPINION

In formulating our advice and recommendation to the Independent Board Committee and the Independent Shareholders, we have reviewed, amongst other things:

(i) the Flexible Retail and F&B Resources Usage Agreement;
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement);
(iii) the annual report of the Company for the year ended 31 December (“ FY ”) 2020 (the “ 2020 Annual Report ”); and
(iv) other information as set out in the Circular.

We have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations made to us by the Company, the Directors and the management of the Group (collectively, the “ Management ”). We have assumed that all information and representations contained or referred to in the Circular and provided to us by the Management, for which they are solely and wholly responsible, are true, accurate and complete in all material respects and not misleading or deceptive at the time when they were provided or made and continued to be so up to the Latest Practicable Date.

We have also assumed that all statements of belief, opinion, expectation and intention made by the Management in the Circular were reasonably made after due enquiries and careful consideration and there are no other facts not contained in the Circular, the omission of which make any such statement contained in the Circular misleading. We have no reason to suspect that any relevant information has been withheld, or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Management, which have been provided to us.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. However, we have not carried out any independent verification of the information provided to us by the Management, nor have we conducted any independent investigation into the business, financial conditions and affairs of the Group or its future prospects.

The Directors jointly and severally accept full responsibility for the Circular and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular misleading.

This letter is issued to the Independent Board Committee and the Independent Shareholders solely in connection for their consideration of the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), the Continuing Connected Transactions and their respective annual caps, and except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the terms of the Continuing Connected Transactions, we have taken into consideration the following principal factors and reasons:

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1. Information on the Parties

1.1. The Company

The Company is principally engaged in the operation of the Beijing Capital Airport. It is a non-wholly owned subsidiary of the Parent Company.

1.2. Beijing Airport Commercial and Trading

1.3. Beijing Airport Food Management

1.4. The Parent Company

The Parent Company is principally engaged in the provision of ground support services for domestic and international aviation enterprises, including supply of water, electricity, steam and energy, airport management services and counter services. The ultimate beneficial owner of the Parent Company is the Civil Aviation Administration of China, which is a state bureau administered by the Ministry of Transport of the PRC.

2. Flexible Retail and F&B Resources Usage Agreement

2.1. Background of Flexible Retail and F&B Resources Usage Agreement

As stated in the Letter from the Board, due to the negative impact on international travel brought about by the Covid-19 pandemic, passenger throughput at the Beijing Capital Airport has been severely affected. The passenger throughput for the six months ended 30 June 2021, while increased by approximately 40% when compared to the six months ended 30 June 2020, decreased by approximately 63% when compared to the six months ended 30 June 2019 (i.e. before the Covid-19 pandemic). The decrease in passenger throughput has led to lower demand for retail as well as food and beverage services, with approximately 65% of the retail stores and 40% of the food and beverage outlets at the Beijing Capital Airport opening for business as at 30 June 2021. Prior to the Covid-19 pandemic, the store-opening rates for retail as well as food and beverage businesses at the Beijing Capital Airport were, on average, approximately 85% and 90%, respectively, in 2019.

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2.2. Reasons for and benefits of the Flexible Retail and F&B Resources Usage Agreement

As stated in the Letter from the Board, since the Covid-19 pandemic hits the world in the beginning of 2020, passenger throughput at Beijing Capital Airport has been severely affected, leading to lower demand for food and beverages as well as retail services. Not only has there been a drop in passenger throughput at the Beijing Capital Airport, Beijing Capital Airport has been losing its business operators as well as there has been difficulties securing replacement business operators.

The business operations of the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management have been very difficult.

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sales volume of retail as well as food and beverage businesses for the six months ended 30 June 2021 increased by approximately 50% and 5%, respectively, when compared to the six months ended 30 June 2020. Having the flexibility to allocate resources between retail as well as food and beverage businesses in response to market demands during this pandemic would help to optimize the utilisation of these resources and hence enhance the efficiency of resources usage. It is hoped that such flexible arrangement will improve the business performances of the parties and hence increase their incomes.

As disclosed in the 2020 Annual Report, the passenger throughput decreased from approximately 100.0 million person-times in FY2019 to approximately 34.5 million person-times in FY2020, representing a significant decrease of approximately 65.5%. The significant decrease in passenger throughput would resulted in the decrease in demand for airport services such as, among others, food and beverage and retail services. As such, we consider that the entering into of the Flexible Retail and F&B Resources Usage Agreement provides the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management with the flexibility of resources usage and, in turn, improve their business performances and the entering into of the Flexible Retail and F&B Resources Usage Agreement is in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole.

2.3. Material terms of the Flexible Retail and F&B Resources Usage Agreement

Date

13 August 2021

Parties

(1) The Company;
(2) the Beijing Airport Commercial and Trading; and
(3) Beijing Airport Food Management

Effective Date

The Flexible Retail and F&B Resources Usage Agreement shall become effective on the date of approval by the Shareholders at the EGM.

Term

From the Effective Date to 31 December 2023, subject to early termination (if applicable) by mutual agreement of the Parties in writing.

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Flexible Resources Usage Adjustment Arrangement

Flexible Resources Usage Adjustment Fees

Under the Flexible Retail and F&B Resources Usage Agreement, the Adjusted Fees are payable to the Company in respect of the Adjusted Resources with reference to formulae as set out below.

Adjusted Retail Resources Usage Fee for a given year = A + B

Where

“A” = Guaranteed resources usage fee in respect of the Adjusted Retail Resources, which is calculated with reference to the guaranteed resources usage fee under the Food and Beverage Resources Usage Agreement (the “ Retail Fee Fixed Portion ”).

(i) originally payable by Beijing Airport Food Management to the Company; and
(ii) calculated with reference to the resources usage fee of the preceding year paid by Beijing Airport Food Management to the Company. As disclosed in the F&B Announcement, in principle, the actual amount of resources usage fee of the preceding year is used as the base of guaranteed resources usage fee. Further, the guaranteed resources usage fee is related to the actual area for store operation. Due to the exceptional circumstances in 2020 under the influence of the Covid19 pandemic, the guaranteed resources usage fee for 2021 will be calculated based on the rental payable by Beijing Airport Food Management in 2019, the change of passengers throughput between 2021 and 2019 and the change of actual operating area between 2021 and 2019. The guaranteed resources usage fees for 2022 and 2023 under the Food and Beverage Resources Usage Agreement are calculated with reference to the actual rental to be paid by Beijing Airport Food Management to the Company in 2021 and 2022, respectively.
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Under the Flexible Retail and F&B Resources Usage Agreement:

(a) this fee “A” shall be payable by Beijing Airport Commercial and Trading in lieu of Beijing Airport Food Management to the Company; and
(b) “A” for each of the three years of 2021, 2022 and 2023 shall be calculated based on (i) the actual rental paid by Beijing Airport Food Management to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources usage fee per square meter (“ sq. m. ”), actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Commercial and Trading, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (ie. from 2021 to 2023).

“B” = Usage fee in respect of the Adjusted Retail Resources which is calculated as follows:

“B” = (total rental income in respect of the Adjusted Retail Resources received by Beijing Airport Commercial and Trading from third party operators – “A”)/3 (the “ Retail Fee Variable Portion ”)

The amount equivalent to “B” shall be payable by Beijing Airport Commercial and Trading to each of the Company and Beijing Airport Food Management.

Adjusted F&B Resources Usage Fee

Adjusted F&B Resources Usage Fee for a given year = C + D

Where

“C” = Guaranteed resources usage fee in respect of the Adjusted F&B Resources which is calculated with reference to the guaranteed resources usage fee under the Domestic Retail Resources Usage Agreement (the “ F&B Fee Fixed Portion ”).

(i) originally payable by Beijing Airport Commercial and Trading to the Company; and
(ii) calculated with reference to the resources usage fee of the preceding year paid by Beijing Airport Commercial and Trading to the Company. As disclosed in the Domestic Retail Resources Usage Announcement, in principle, the actual amount of resources usage fee of the preceding year is used as the base of guaranteed resources usage fee. Further, the guaranteed resources usage fee is related to the
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

base of guaranteed unit resources usage fee per square meter, actual number of days for store operation, and size of the operation area. Due to the exceptional circumstances in 2020 under the influence of the Covid-19 pandemic, the base of guaranteed resources usage fee for 2021 will be calculated based on the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 and the change of domestic passengers throughput between 2021 and 2019. This is the basis on which the base of guaranteed unit resources usage fee per square meter for 2021 is calculated, and the operating area is based on the actual operating area in 2019. The final guaranteed resources usage fee for 2021 is calculated based on the actual area of operation for the year. The guaranteed resources usage fees for 2022 and 2023 under the Domestic Retail Resources Usage Agreement are calculated with reference to the actual rental to be paid by Beijing Airport Commercial and Trading to the Company in 2021 and 2022, respectively.

Under the Flexible Retail and F&B Resources Usage Agreement:

(a) this fee “C” shall be payable by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading to the Company; and
(b) “C” for each of the three years of 2021, 2022 and 2023 shall be calculated based on (i) the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources usage fee per sq. m., actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Food Management, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (ie. from 2021 to 2023).

“D” = Usage fee in respect of the Adjusted F&B Resources which is calculated as follows:

“D” = (total rental income in respect of the Adjusted F&B Resources received by Beijing Airport Food Management from third party operators – “C”)/3 (the “ F&B Fee Variable Portion ”)

The amount equivalent to “D” shall be payable by Beijing Airport Food Management to each of the Company and Beijing Airport Commercial and Trading.

Assessment

In view of:

(i) the Retail Fee Fixed Portion and F&B Fee Fixed Portion provide the Company with a stable and certain source of income;
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(ii) the Retail Fee Fixed Portion and F&B Fee Fixed Portion were calculated with reference to the resources usage fee of the preceding year under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, respectively. As such, the rental level in 2020 would be the reference for the Retail Fee Fixed Portion and F&B Fee Fixed Portion in 2021. However, the rental level in 2020 was adversely affected by the Covid-19 pandemic as mentioned above resulted from the difficult business operations of the Company, Beijing Airport Commercial and Trading and Beijing Airport Food Management in 2020. Under the Flexible Retail and F&B Resources Usage Agreement, the Retail Fee Fixed Portion and F&B Fee Fixed Portion will be calculated based on the actual rental paid by Beijing Airport Food Management and Beijing Airport Commercial and Trading to the Company, respectively, in 2019 throughout the term of the Flexible Retail and F&B Resources Usage Agreement instead of the preceding year. As 2019 was a normal year (without the outbreak of Covid-19 pandemic), the rental level in 2019 reflected the normal rental level. As such, the adoption of 2019 as the base year for reference for the Retail Fee Fixed Portion and the F&B Fee Fixed Portion is favourable to the Company; and
(iii) the Retail Fee Variable Portion and F&B Fee Variable Portion enable the Company to enjoy a potential additional income, we consider that the aforementioned calculations of Adjusted Retail Resources Usage Fee and Adjusted F&B Resources Usage Fee are fair and reasonable.

Payment Intervals

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“A”+“B”) and Adjusted F&B Resources Fee (i.e. “C”+“D”), respectively, for the preceding year to the Company and the other party, with any overpayment refunded or any underpayment being made up.

Other Major Terms

Illustration

There is an illustration of the calculation of resources usage fee payable under the Food and Beverage Resources Usage Agreement (i.e. before adjustment) and the Flexible Retail and F&B Resources Usage Agreement (i.e. after adjustment) for the year 2021. For further details, please refer to the paragraph headed “Illustration” under section headed “I. Flexible Retail and F&B Resources Usage Agreement” in the Letter from the Board.

2.4. Pricing Policies

As set out in the Letter from the Board, given that the Company has not entered agreements similar to the Flexible Retail and F&B Resources Usage Agreement before and is not aware of any similar or equivalent resources usage model for direct comparison, in determining the unit price per sq. m. for calculation of the resources usage fees in respect of the Adjusted Resources, the Company, has applied the pricing policies considered under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement for the Adjusted Retail Resources and the Adjusted F&B Resources.

As disclosed in the Domestic Retail Resources Usage Agreement, the unit rental of shopping malls in Beijing similar to those in Beijing Capital Airport ranges from RMB3,600 to RMB18,000 per sq. m. per year (the “ Retail Market Reference ”), and is used for considering the guaranteed resources usage fee in respect of the Adjusted F&B Resources. As disclosed in the F&B

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Announcement, the unit rental for food and beverage outlets in shopping malls in Beijing which are similar to those in Beijing Capital Airport ranges from approximately RMB3,600 to RMB8,400 per sq. m. per year (the “ F&B Market Reference ”).

The table below sets out the pricing policies in respect of the Adjusted Resources for reference:

Adjusted Retail Resources Adjusted F&B Resources Unit rental for guaranteed Follows the pricing policy Follows the pricing policy resources usage fee under the Food and Beverage under the Domestic Retail Resources Usage Agreement Resources Usage Agreement i.e. RMB3,600 – RMB8,400 i.e. RMB3,600 – RMB18,000 per sq. m. per year per sq. m. per year Unit rental for commission for Follows the pricing policy N/A increase in resources usage fee under the Domestic Retail (under the Food and Beverage Resources Usage Agreement Resources Usage Agreement) i.e. RMB3,600 – RMB18,000 per sq. m. per year Unit rental for usage fee N/A Follows the pricing policy (under the Flexible Retail and under the Food and Beverage F&B Resources Usage Resources Usage Agreement Agreement) i.e. RMB3,600 – RMB8,400 per sq. m. per year

Assessment

In assessing the pricing policy for the Adjusted F&B Resources, we first consider the original usage of the subject resources. As the Adjusted F&B Resources are the parts of the Allocated Retail Resources which have been adjusted for use by Beijing Airport Food

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Management under the Flexible Retail and F&B Resources Usage Agreement, the original usage of the Adjusted F&B Resources is for retail. As such, we consider that the Company determines the guaranteed resources usage fee in respect of the Adjusted F&B Resource by making reference to the Retail Market Reference instead of the F&B Market Reference is appropriate.

We then obtained and reviewed the supporting documents from the Company for the Retail Market Reference. After our discussion with the Company and our review of the supporting documents provided, we noted that the Company made reference to the unit rental of retail shops selected from several mid to high-end shopping malls located in shopping areas in Beijing with a distance within 35 kilometres from the Beijing Capital Airport which the Company considers as comparable to Beijing Capital Airport.

We, on a best effort basis, conducted desktop research on the unit rental with the adoption of the following criteria: (i) the shops are inside mid to high-end shopping malls instead of street-level shops as the Adjusted F&B Resources are inside Beijing Capital Airport instead of situated at street-level; (ii) the shops can be used for retail and/or food and beverage which are comparable to: (a) the original usage of the Adjusted F&B Resources was retail; and (b) the adjusted usage of the Adjusted F&B Resources will be food and beverage; (iii) the sizes of the shops are within 100 sq. m. and 400 sq. m. by making reference to the sizes of the areas of the Adjusted Retail Resources as there is currently no Adjusted F&B Resources as at the Latest Practicable Date; and (iv) the shops are in shopping malls in Sanlitun area, Wangjing area and Yansha area which are all located in the North-East of Beijing after considering the Beijing Capital Airport is situated in North-East of Beijing (collectively, the “ Adjusted F&B Selection Criteria ”). We consider the Adjust F&B Selection Criteria are fair and representative as the original usage of shops, the adjusted usage of shops and location of shops are comparable to those of the Adjusted F&B Resources. Based on the above, we noted that the unit rental of our search results ranges from RMB3,650 to RMB16,450 per sq. m. per year. After considering: (i) the difference in the minimum unit rental between our research (RMB3,650) and the Retail Market Reference (RMB3,600) are less than 5%; and (ii) the difference in the maximum unit rental between our research (RMB16,450) and the Retail Market Reference (RMB18,000) are less than 10%, our research results of the unit rental is considered to be comparable to the range of the Retail Market Reference.

In assessing the pricing policy for the Adjusted Retail Resources, we first consider the original usage of the subject resources. As the Adjusted Retail Resources are the parts of the Allocated R& B Resources which have been adjusted for use by Beijing Airport Commercial and Trading under the Flexible Retail and F&B Resources Usage Agreement as resources for retail, the original usage of the Adjusted Retail Resources is for food and beverage. As such, we consider that the Company determines the guaranteed resources usage fee in respect of the Adjusted Retail Resource by making reference to the F&B Market Reference instead of the Retail Market Reference is appropriate. We then obtained and reviewed the supporting documents from the Company regarding the unit rental ranging from approximately RMB3,600 to RMB8,400 per sq. m. per year for the F&B Market Reference. After our discussion with the Company and our review of the supporting documents provided, we noted that the Company made reference to the unit rental of food and beverage outlets selected from several mid to

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high-end shopping malls located in shopping areas in Beijing with a distance within 30 kilometres from the Beijing Capital Airport which the Company considers as comparable to Beijing Capital Airport.

We, on a best effort basis, conducted desktop research on the unit rental with the adoption of the following criteria: (i) the shops are inside mid to high-end shopping malls instead of street-level shops as the Adjusted Retail Resources are inside Beijing Capital Airport instead of situated at street-level; (ii) the shops can be used for retail and/or food and beverage which are comparable to: (a) the original usage of the Adjusted Retail Resources was food and beverage; and (b) the adjusted usage of the Adjusted Retail Resources will be retail; (iii) the sizes of the shops are within 100 sq. m. and 400 sq. m. which are comparable to the sizes of the areas of the Adjusted Retail Resources; and (iv) the shops are in shopping malls in Sanlitun area, Wangjing area and Yansha area which are all located in the North-East of Beijing after considering the Beijing Capital Airport is situated in North-East of Beijing (collectively, the “ Adjusted Retail Selection Criteria ”). We consider the Adjusted Retail Selection Criteria are fair and representative as the original usage of shops, the adjusted usage of shops, the sizes of shops and location of shops are comparable to those of the Adjusted Retail Resources. Based on the above, we noted that the unit rental of our search results ranges from RMB3,600 to RMB8,550 per sq. m. per year. After considering that range of unit rental of our research covers the range of the F&B Market Reference, our research results of the unit rental is considered to be comparable to the range of the F&B Market Reference.

In view of the above, we consider the Flexible Retail and F&B Resources Usage Agreement are of normal commercial terms.

2.5. Proposed annual caps and basis of determination for annual caps

Annual Caps

As stated in the Letter from the Board, this is the first time the Company has entered into the Flexible Retail and F&B Resources Usage Agreement, and the Company has never entered into similar arrangements before, there are no historical annual caps available.

The Company expects that the annual caps of the proposed transactions under the Flexible Retail and F&B Resources Usage Agreement (the “ Proposed Annual Caps ”) are as follows:

		From the	From 1 January	From 1 January
		Effective Date to	2022 to	2023 to
		31 December	31 December	31 December
		2021	2022	2023
		(RMB million)	(RMB million)	(RMB million)
Annual	Caps	6	20	30

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Basis for Annual Caps

The Annual Caps are determined with reference to the following factors:

(i) the possible changes in guaranteed resources usage fee in relation to the areas of the Adjusted Retail Resources and the Adjusted F&B Resources in the future;
(ii) the estimated rental income to be received from third party operating merchants of the relevant Adjusted Resources in the future; and
(iii) the estimated growth in resources usage fee due to the increase in sales income from the stores of relevant resources in the future.

Assessment

In assessing the fairness and reasonableness of the Proposed Annual Caps, we have obtained from the Management and reviewed a calculation working paper (the “ Proposed Annual Caps Calculation ”) and the relevant supporting documents which set out the calculation of the Proposed Annual Caps for each period/year of the Proposed Annual Caps Period. The Proposed Annual Caps Calculation includes, among others, the major information as below:

(i) the floor area and location information of the Adjusted Resources under the Flexible Retail and F&B Resources Usage Agreement;
(ii) the guaranteed resources usage fee in relation to the areas of the Adjusted Resources; and
(iii) the estimated rental income to be received from third party operating merchants of the relevant Adjusted Resources during the Proposed Annual Caps Period.

As mentioned above, the Adjusted Retail Resources Usage Fee for a given year consists of two factors: (i) the guaranteed resources usage fee in respect of the Adjusted Retail Resources which is calculated with reference to the guaranteed resources usage fee under the Food and Beverage Resources Usage Agreement (the “ Guaranteed Portion ”); and (ii) the total rental income in respect of the Adjusted Retail Resources received by Beijing Airport Commercial and Trading from third party operators (the “ Rental Portion ”). As advised by the Management, there are currently two Adjusted Retail Resources and no Adjusted F&B Resources.

For the Guaranteed Portion, the base of the Guaranteed Portion throughout the Proposed Annual Caps Period is calculated with reference to the actual rental paid by Beijing Airport Food Management to the Company in 2019 which, in turn, related to the actual area for store operation. The Guaranteed Portion for a given year is calculated by multiplying the size of the operation area of the two Adjusted Retail Resources by the corresponding monthly rental per sq. m. in 2019 and the actual number of days of use by Beijing Airport Commercial and

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Trading. We have obtained and reviewed the actual rental paid by Beijing Airport Food Management to the Company in 2019 and cross-checked with the amount adopted in the Proposed Annual Caps Calculation and noted they are consistent with each other. Further, we have cross-checked the floor area of the Adjusted Resources adopted in the Proposed Annual Caps Calculation with the supporting information provided and noted that the information is consistent. As such, the calculation of the Guaranteed Portion is accurate.

For the Rental Portion, it is related to the estimation of rental income to be received from third party operating merchants of the relevant Adjusted Retail Resources during the Proposed Annual Caps Period. As advised by the Company, it is currently in a negotiation stage with two independent retail merchants for the two Adjusted Retail Resources. After our enquiry, we understand that one merchant is currently operating at Beijing Daxing International Airport (“ Merchant 1 ”) and the other merchant is currently operating at Beijing Capital International Airport (“ Merchant 2 ”). After our discussion with the Management and the review of the Proposed Annual Caps Calculation, we understand that the Company estimates the Rental Portion by making reference to: (i) the historical sales amount in 2020 at Beijing Daxing International Airport for Merchant 1; and (ii) the current rental income derived from Merchant 2. As Merchant 1 does not currently operates at Beijing Capital International Airport, the Rental Portion for Merchant 1 will be a mutually-agreed portion of the monthly sales amount of Merchant 1. After considering that Beijing Daxing International Airport is the only international airport in Beijing except Beijing Capital International Airport, we consider that making reference to the historical sales amount of Merchant 1 in 2020 at Beijing Daxing International Airport is representative. As Merchant 2 currently operates at Beijing Capital International Airport, the Rental Portion for Merchant 2 will be referred to the rental paid by Merchant 2 in 2020 which is considered to be fair and reasonable.

It is noted that the Rental Portion will be divided by three as set out in the calculation “ (total rental income in respect of the Adjusted Retail Resources received by Beijing Airport Commercial and Trading from third party operators – “A”)/3” as mentioned under the section headed “Flexible Resources Usage Adjustment Fees”. We have also enquired the rationale of dividing the Rental Portion by three and we understand that calculation of dividing the Rental Portion by three refers to three entities will be entitled to share the rental income received which are: (i) Beijing Airport Commercial and Trading; (ii) Beijing Airport Food Management; and (iii) the Company. If it is the case of the Adjusted Retail Resources, it is the parts of the Allocated F&B Resources which have been adjusted for use by Beijing Airport Commercial and Trading under the Flexible Retail and F&B Resources Usage Agreement as resources for retail. Beijing Airport Commercial and Trading is entitled to receive rental income as the relevant parts of the Allocated F&B Resources are adjusted as Adjusted Retail Resources. Beijing Airport Food Management is entitle to receive rental income as the resources are part of the Allocated F&B Resources. Finally, the Company is entitled to receive rental income as the resources usage fee is payable to the Company. As such, the aforementioned three entities, namely, Beijing Airport Commercial and Trading, Beijing Airport Food Management and the Company (collectively, the “ Resources Companies ”) are all entitled to receive rental income under the Flexible Retail and F&B Resources Usage Agreement. Therefore, the Rental Portion will be fairly and equally shared by each of the Resources Companies by dividing by three.

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In view of the above, in particular: (i) the Guaranteed Portion is determined by making reference to historical and actual rental paid by Beijing Airport Food Management to the Company in 2019; (ii) the calculation of the Guaranteed Portion is accurate; (iii) the Rental Portion is determined by making reference to historical sales and rental amount (as the case may be); and (iv) the Rental Portion is fairly and equally shared by each of the Resources Companies, we consider the Proposed Annual Caps are fair and reasonable.

2.6. Internal control on pricing policies

As stated in the Letter from the Board, the internal control for the pricing policies in respect of the Adjusted Resources follows that set out in the Domestic Retail Resources Usage Announcement and the F&B Announcement. Such internal control measures are similar and set out below is a summary of the measures involved:

The commercial development department is responsible for gathering information on the historical rentals in respect of such Adjusted Resources and conducting assessment on the fairness of the transaction terms and pricing terms.
Prior to the implementation of the relevant transactions in respect of the Adjusted Resources, there would be an internal review process involving different functions of various departments of the Company.
The commercial development department is responsible for the monitoring, assessment and ratings of the transactions in respect of such Adjusted Resources.
The finance department and the secretariat to the Board are responsible for gathering information on connected transactions and monitoring the implementation of connected transactions.
The independent non-executive Directors are responsible for reviewing whether the relevant connected transactions are conducted on normal commercial terms, fair and reasonable and carried out pursuant to contractual terms.
The auditors of the Company are responsible for conducting annual review in relation to the pricing policies and annual caps in accordance with the Listing Rules.

Regarding the effectiveness of the aforementioned internal control procedures to safeguard the Continuing Connected Transactions, we have obtained and reviewed four sets of walkthrough documents conducted by the relevant departments of the Company, of which, two sets were for the transactions contemplated under the Domestic Retail Resources Usage Agreement and two sets of were for the transactions contemplated under the Food and Beverage Resources Usage Agreement which included the historical rental record and the monthly assessment and monitoring record conducted by commercial development department during the period from 2019 to 2020 under Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement respectively, and we noted that before entering into of the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, the commercial

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development gathered the information of the historical rental figures and continuously monitor the transactions contemplated under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement. Further, the principal officers in the commercial development department who handled the relevant matters prepared an application and reported the application to the finance department, the legal department and the secretariat to the Board for their approval. Upon passing the internal review process, the application was submitted to the Board for final review and approval.

Further, we have randomly selected, obtained and reviewed six samples of historical transactions, given that the samples: (i) covered each of the year/period throughout the period from FY2019 to FY2021; and (ii) covered the transactions conducted under both the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, we consider that the sample size is sufficient and representative. From the review of the samples of historical transactions, it is noted that the review and approval records conducted by the commercial development department, the finance department, the legal department and the secretariat to the Board provided by the Company are in line with the abovementioned internal control procedures. As such, we consider that there are effective internal control procedures.

Furthermore, we have obtained and reviewed the internal correspondence records in relation to the internal approval of the Flexible Retail and F&B Resources Usage Agreement, and we noted that the Flexible Retail and F&B Resources Usage Agreement has been reviewed by the independent nonexecutive Directors to ensure the terms under the Flexible Retail and F&B Resources Usage Agreement are on normal commercial terms. We have also obtained and reviewed two annual review records of the auditors of the Company for FY2019 and FY2020. It is noted that the auditors of the Company conducted annual review on the transactions contemplated under the Domestic Retail Resources Usage Agreement and Food and Beverage Resources Usage Agreement and the corresponding pricing policies and annual caps were in compliance with the relevant Listing Rules.

As such, we consider that the Company has effective internal control procedures in place to monitor the pricing policies and ensure such pricing policies are fair, reasonable and on normal commercial terms.

2.7. Internal control on review of annual caps

the finance department of the Company provides the secretariat to the Board with information in relation to the actual transaction amounts on a monthly basis.
the secretariat to the Board is responsible for monitoring such transactions to ensure that the total amount of transactions does not exceed the annual caps.
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if such amount of transactions is estimated to exceed the relevant annual cap, the person-in-charge of the relevant department of the Company will be notified so that the scale of transactions in the future may be re-estimated and arrangements may be made to issue announcements and/or to obtain the relevant approvals from the Board and the Independent Shareholders in accordance with the requirements of the Listing Rules.

We have obtained and reviewed the continuing connected transactions breakdown in relation to the monthly transaction amount conducted under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement from January 2019 to June 2021. After our discussion with the Company, we understand that the monthly transaction amount breakdown was prepared by the finance department as the finance department would report the actual transaction amount to the secretariat to the Board on a monthly basis. We have also obtained and reviewed internal approval records of commercial development department, the finance department, the legal department and the secretariat to the Board provided by the Company for the transactions contemplated under the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement, and we noted that the secretariat to the Board took appropriate steps to monitor the utilisation of the annual caps. Therefore, we consider that the Company has implemented sufficient internal procedures to ensure the transaction amounts under the Flexible Retail and F&B Resources Usage Agreement will not exceed the Proposed Annual Caps.

As such, we are of the view that the aforementioned internal control measures are properly implemented so far as the Independent Shareholders are concerned.

3. Domestic Retail Resources Usage Agreement

3.1. Background

In view of the variations to the terms of the Domestic Retail Resources Usage Agreement and the Food and Beverage Resources Usage Agreement brought about by the Flexible Retail and F&B Resources Usage Agreement, the original annual caps contemplated under the Domestic Retail Resources Usage Agreement are revised while the original annual caps contemplated under the Food and Beverage Resources Usage Agreement remain unchanged.

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3.2. Variation of the terms of the Domestic Retail Resources Usage Agreement

Pursuant to the Flexible Retail and F&B Resources Usage Agreement, the terms of the Domestic Retail Resources Usage Agreement are subject to the following modifications and variations:

(a) the guaranteed resources usage fee in respect of that parts of the Allocated Retail Resources which have been adjusted for use by Beijing Airport Food Management (i.e. the Adjusted F&B Resources) shall be paid by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading; and
(b) the guaranteed resources usage fee in respect to the Adjusted F&B Resources shall be calculated based on (i) the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 (i.e. the rental calculated by using the base of guaranteed unit resources usage fee per sq. m., actual number of days for store operation, and size of the operation area in 2019); and (ii) the actual number of days of use by Beijing Airport Food Management, throughout the term of the Flexible Retail and F&B Resources Usage Agreement (i.e. from 2021 to 2023), instead of based on, among others, (i) the actual amount of resources usage fee for the preceding year (save for the year 2021 which is with reference to the actual amount of resources usage fee for 2019); (ii) the base of guaranteed unit resources usage fee per sq. m.; (iii) the actual number of days for store operation; and (iv) the size of the operation area.

Save as disclosed above, all other terms of the Domestic Retail Resources Usage Agreement as disclosed in the Domestic Retail Resources Usage Announcement remain unchanged.

Assessment

For the first variation as mentioned above, in the case of the Adjusted F&B Resources, the guaranteed resources usage fee in respect of that parts of the Allocated Retail Resources which have been adjusted for use by Beijing Airport Food Management (i.e. the Adjusted F&B Resources) shall be paid by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading. As the relevant parts of the Allocated Retail Resources will be adjusted for used for food and beverage instead of retail, we consider that it is fair and reasonable for the guaranteed resources usage fee in respect of the Adjusted F&B Resources to be paid by Beijing Airport Food Management in lieu of Beijing Airport Commercial and Trading.

For the second variation as mentioned above, it is noted that the guaranteed resources usage fee in respect to the Adjusted F&B Resources during the Proposed Annual Caps Period shall be calculated with reference to the relevant information such as, among others, the actual rental paid by Beijing Airport Commercial and Trading to the Company in 2019 instead of the preceding year. In view of: (i) the outbreak of Covid-19 pandemic in the beginning of 2020; (ii) passenger throughput at Beijing Capital Airport has been severely affected in 2020; and

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(iii) the passenger throughput at Beijing Capital Airport in 2019 reflected the normal condition before the outbreak of Covid-19 pandemic, we consider that the adoption of 2019 instead of the preceding year as the reference year is fair and reasonable.

3.3. Revised annual caps and basis of determination for the revised annual caps

				For the	year ending 31 December	year ending 31 December
				2021	2022		2023
			_(RMB _	million)	(RMB million)	_(RMB _	million)
Original	annual	caps		150	180		200
Revised	annual	caps		156	200		230

(i) the possible changes in guaranteed resources usage fee in relation to the areas of the Adjusted Retail Resources and the adjusted F&B Resources in the future;
(ii) the estimated rental income to be received from third party operating merchants of the Adjusted Retail Resources in the future; and
(iii) the estimated growth in resources usage fee due to the increase in sales income from the stores of relevant retail resources in the future.

Assessment

After our enquiry and discussion with the Management, we understand that the differences between the original annual caps and the revised annual caps of RMB6 million, RMB20 million and RMB30 million during each period/year of the Revised Annual Caps Period are of the same amount of the Proposed Annual Caps during each period/year of the Proposed Annual Caps Period.

As mentioned under the assessment of the Proposed Annual Caps, the Proposed Annual Caps are for the Adjusted Retail Resources Usage Fee. As parts of the Allocated F&B Resources will be adjusted for use by Beijing Airport Commercial and Trading under the Flexible Retail and F&B Resources Usage Agreement as the Adjusted Retail Resources,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

additional resources usage fee for such Adjusted Retail Resources, i.e. the Proposed Annual Caps, will be payable by Beijing Airport Commercial and Trading in lieu of Beijing Airport Food Management to the Company under the Domestic Retail Resources Usage Agreement. Therefore, the increase from the original annual caps to the revised annual caps under the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement) is equivalent to the amount of the Proposed Annual Caps.

As we consider the Proposed Annual Caps are fair and reasonable, we consider the revised annual caps under the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement) are fair and reasonable.

3.4. No revisions to the annual caps contemplated under the Food and Beverage Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement)

As more stringent control measures are imposed on the food and beverage sector as compared to the retail sector as a result of the Covid-19 outbreak, the guaranteed resources usage fee and the rental income from third party operating merchants of F&B resources were significantly lower than those of retail resources. As such, it is estimated that the possible increase in the Adjusted F&B Resources Usage Fee in the future will be lower than the decrease in guaranteed resources usage fee as a result of the adjustment of the Allocated F&B Resources for use as Adjusted Retail Resources in the future. Therefore, no adjustment is made to the original annual caps contemplated under the Food and Beverage Resources Usage Agreement at this stage.

3.5. Pricing Policy

As stated in the Domestic Retail Resources Usage Announcement, since the Company is not aware of any similar or equivalent resources usage model for direct comparison, in determining the unit price of resources usage fee per sq. m. for calculation of the guaranteed resources usage fee under the Domestic Retail Resources Usage Agreement (as varied by the terms of the Flexible Retail and F&B Resources Usage Agreement), the Company compared against the rental of retail outlets in other similar shopping malls in Beijing and the unit rental of such shopping malls ranges from RMB3,600 to RMB18,000 per sq. m. per year.

We noted that the aforementioned range of unit rental is consistent with the Retail Market Reference. Our analysis of justifying the Retail Market Reference are set out under section headed “2.4 Pricing Policies”.

RECOMMENDATION

We have considered the above principal factors and reasons and, in particular, having taken into account the following in arriving at our opinion:

(i) the entering into of the Continuing Connected Transactions are in the ordinary and usual course of business of the Company;
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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) the terms of the Continuing Connected Transactions are fair and reasonable and in the interests of the Company and Shareholders as a whole;
(iii) the determination of the Proposed Annual Caps and the Revised Annual Caps are fair and reasonable;
(iv) the pricing mechanism under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are fair and reasonable; and
(v) the Company has implemented stringent internal control measures to govern the Continuing Connected Transactions.

Having considered the above, we are of the view that; (i) the terms of the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps are fair and reasonable; (ii) the transactions contemplated under the Flexible Retail and F&B Resources Usage Agreement and the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement) are on normal commercial terms and in the ordinary and usual course of business of the Company, and are in the interest of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the resolutions to approve the Flexible Retail and F&B Resources Usage Agreement, the Domestic Retail Resources Usage Agreement (as varied by the Flexible Retail and F&B Resources Usage Agreement), as well as the transactions contemplated thereunder, including the relevant annual caps to be proposed at the EGM.

Yours faithfully, For and on behalf of Opus Capital Limited Li Lan Executive Director

Mr. Li Lan is an Executive Director of Opus Capital Limited and is licensed under the SFO as a Responsible Officer to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Mr. Li has over 15 years of experience in the corporate finance industry.

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests and short positions of Directors, supervisors and chief executives in the Shares, underlying Shares or debentures of the Company and its associated corporations

To the best knowledge of the Directors, supervisors and chief executives of the Company, as at the Latest Practicable Date, none of the Directors, supervisors or chief executives of the Company had interests and short positions in the Shares, underlying Shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which any such Directors, supervisors or chief executives is taken or deemed to have under such provisions of the SFO) or which were required to be entered into the register required to be kept by the Company under section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.

(b) Interests and short positions of substantial shareholders in the Shares, underlying Shares or debentures of the Company and its associated corporations

To the best knowledge of the Directors, supervisors and chief executives of the Company, as at the Latest Practicable Date, the interest and short positions of the substantial shareholders in the issued share capital of the Company which will be required, pursuant to section 336 of the SFO, to be entered into the register referred to therein, or holding 5% or above in the issued share capital of the Company which will be required to be notified to the Company were as follows:

					Approximate	Approximate
					percentage of	percentage of
					the relevant	the total
Name of		Class of		Number of	class of	issued Shares
Shareholder	Notes	Shares	Capacity	Shares	Shares (%)	(%)
Capital Airports	1	Domestic	Beneficial owner	(L) 2,699,814,977	100	58.96
Holdings Limited
T. Rowe Price		H	Beneficial owner	(L) 210,726,000	11.21	4.60
Associates, Inc.
and its Affiliates

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APPENDIX

GENERAL INFORMATION

					Approximate	Approximate
					percentage of	percentage of
					the relevant	the total
Name of		Class of		Number of	class of	issued Shares
Shareholder	Notes	Shares	Capacity	Shares	Shares (%)	(%)
Causeway Capital	2	H	Investment manager	(L) 169,842,937	9.04	3.71
Management LLC
Citigroup Inc.		H	Interest of corporation	(L) 156,234,474	8.31	3.41
			controlled by
			substantial	(S) 4,905,151	0.26	0.11
			shareholder
				(P) 150,426,361	8.00	3.29
Blackrock, Inc.		H	Interest of corporation	(L) 139,019,110	7.40	3.04
			controlled by
			substantial	(S) 18,238,000	0.97	0.40
			shareholder
Aberdeen Asset	2	H	Investment manager	(L) 114,868,000	6.11	2.51
Management PLC
and its associates
Mr. Jiang Jinzhi	3	H	Interest of corporation	(L) 105,602,000	5.62	2.31
(蔣錦志)			controlled by
			substantial
			shareholder
The Bank of New		H	Interest of corporation	(L) 101,684,470	5.41	2.22
York Mellon			controlled by
Corporation			substantial	(P) 99,992,300	5.32	2.18
			shareholder
Hermes Investment		H	Beneficial owner	(L) 94,613,662	5.03	2.07
Funds PLC
Brown Brothers		H	Agent	(L) 94,393,357	5.02	2.06
Harriman & Co.
				(P) 94,393,357	5.02	2.06

(L): Long Position

(S): Short Position

(P): Lending Pool

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GENERAL INFORMATION

APPENDIX

Notes:

Capital Airports Holdings Limited was incorporated in the PRC and is the controlling shareholder of the Company. Mr. Liu Xuesong, the chairman of the Board and an executive Director, is the Chairman of the Supervisory Committee of Capital Airports Holdings Limited. Mr. Han Zhiliang, an executive Director and the general manager of the Company, is the deputy general manager of Capital Airports Holdings Limited. Mr. Gao Shiqing, a non-executive Director, is the deputy general manager of Capital Airports Holdings Limited. Mr. Jia Jianqing, a non-executive Director, is the deputy general manager of Capital Airports Holdings Limited. Mr. Song Kun, a non-executive Director, is the deputy general manager of Capital Airports Holdings Limited.
These Shares are held in the capacity of investment manager.
Based on the disclosure form dated 24 February 2021 of Mr. Jiang Jinzhi (being the latest disclosure form filed up to the Latest Practicable Date), as at 24 February 2021, among his interests in the Shares of the Company, (i) 90,476,000 Shares in total were held by Greenwoods China Alpha Master Fund and Golden China Master Fund; and (ii) 15,126,000 Shares were held by Shanghai Greenwoods Asset Management Company Limited. Each of Greenwoods China Alpha Master Fund and Golden China Master Fund was indirectly wholly-owned by Invest Partner Group Limited through Greenwoods Asset Management Hong Kong Limited. Invest Partner Group Limited was directly held as to 84.5% by Mr. Jiang Jinzhi. Shanghai Greenwoods Asset Management Company Limited was wholly-owned by Xizang Jingning Corporate Management Company Limited, which was directly held as to 84.5% by Mr. Jiang Jinzhi.
The information in the above table is based on information publicly available to the Company as at the Latest Practicable Date.
The numbers in the above table have been subject to rounding adjustments. Any discrepancies in the numbers are due to roundings.

As at the Latest Practicable Date, save as disclosed above and to the best knowledge of the Directors, supervisors and chief executives of the Company, (i) no person had any interests or short positions in the Shares or underlying Shares of the Company which were required, pursuant to Section 336 of the SFO, to be entered into the register referred to therein, or holding 5% or above in the issued share capital of the Company which would be required to be notified to the Company; and (ii) none of the Directors, supervisors and chief executives of the Company was also a director or employee of a company which has an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any existing or proposed service contract with the Company, which does not expire or is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX

4. MATERIAL ADVERSE CHANGES

Reference is made to the profit warning announcement of the Company dated 4 August 2021 and the interim results announcement and the interim report of the Company for the six months ended 30 June 2021 published on 25 August 2021 and 10 September 2021, respectively. The Company recorded a net loss after tax of RMB840,935,000, representing an increase of 13.9% as compared with the net loss after tax of RMB737,998,000 for the same period of the previous year. The net loss for the six months ended 30 June 2021 was mainly attributable to the continuous impact of the COVID-19 pandemic, which caused uncertainty in respect of the rebound of the international passenger throughput at the Beijing Capital Airport. As the impact of the pandemic on international passenger throughput was minimal in January 2020, the international passenger throughput at the Beijing Capital Airport for the six months ended 30 June 2021 still showed a trend of sharp decline as compared with the same period of the previous year, which in turn resulted in a significant decrease in the related non-aeronautical revenue as compared with the same period of the previous year.

Save as disclosed above, as at the Latest Practicable Date, there was no other material adverse change in the financial or trading position of the Company since 31 December 2020, being the date to which the latest published audited financial statements of the Company were made up.

5. INTEREST IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Director or supervisors of the Company had any interest, direct or indirect, in any asset which have been acquired or disposed of by or leased to the Company or are proposed to be acquired or disposed of by or leased to the Company since 31 December 2020, being the date to which the latest published audited financial statements of the Company were made up.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement subsisting as at the date of this circular, which was significant in relation to the business of the Company.

6. COMPETING INTEREST

As disclosed in section 2(b) of this appendix, as at the Latest Practicable Date, two executive Directors and three non-executive Directors concurrently held the position of general manager or deputy general manager in the Parent Company, which is the controlling shareholder of the Company. As such, these Directors are deemed to have interests in the Parent Company pursuant to Rule 8.10 of the Listing Rules.

The Parent Company is currently engaged in the aeronautical and non-aeronautical businesses of Daxing Airport as a result of the approval in writing on 28 June 2018 by the Company which has retained the option to purchase the assets of Daxing Airport in accordance with the requirements set out in the deed of non-competition dated 26 October 1999 entered into between the Company and the Parent Company. Therefore, the Parent Company is competing with the Company which is engaged in the operation of the

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GENERAL INFORMATION

APPENDIX

aeronautical and non-aeronautical businesses of Beijing Capital Airport. For further details, please refer to the inside information announcement of the Company dated 28 June 2018 and pages 36 to 37 of the annual report of the Company for the year ended 31 December 2020 published on 28 April 2021.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or their respective close associates had any competing interest (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder of the Company for the purpose of the Listing Rules).

7. EXPERT AND CONSENT

The following sets out the qualification of the expert which has given its opinion or advice as contained in this circular:

Name

Qualification

Opus Capital a corporation licensed by the SFC to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name, opinion, logo and qualification, in the form and context in which they are included.

As at the Latest Practicable Date, the above expert:

(a) did not have any shareholding, direct or indirect, in the Company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company; and
(b) did not have any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to the Company, or which were proposed to be acquired or disposed of by or leased to the Company, since 31 December 2020, being the date to which the latest published audited financial statements of the Company were made up.

8. DOCUMENTS ON DISPLAY

Copies of the following documents are available for inspection on the Stock Exchange's website and the Company’s website for 14 days from the date of this circular:

(a) the Flexible Retail and F&B Resources Usage Agreement;
(b) the Domestic Retail Resources Usage Agreement;
(c) Food and Beverage Resources Usage Agreement;
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GENERAL INFORMATION

APPENDIX

(d) the letter of advice from Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders;
(e) the consent letter from the Independent Financial Adviser referred to in the paragraph headed “Expert and Consent” in this appendix; and
(f) this circular.
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AI assistant

Nanfang Communication Holdings Limited — Proxy Solicitation & Information Statement 2021

50041_rns_2021-10-08_c3c4f834-d3ee-4955-9a23-ba1057f18037.pdf

CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CONTINUING CONNECTED TRANSACTIONS

(I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

I. FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT

Material terms of the Flexible Retail and F&B Resources Usage Agreement

Date

Parties

Effective Date

Term

Flexible Resources Usage Adjustment Arrangement

LETTER FROM THE BOARD

Flexible Resources Usage Adjustment Fees

Adjusted Retail Resources Usage Fee

LETTER FROM THE BOARD

Adjusted F&B Resources Usage Fee

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Payment Intervals

LETTER FROM THE BOARD

Other Major Terms

Illustration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Annual Caps

Basis for Annual Caps

LETTER FROM THE BOARD

Pricing policies

LETTER FROM THE BOARD

Adjusted Retail Resources

Adjusted F& B Resources

Internal Control on Pricing Policies

Internal Control on Review of Annual Caps

II. VARIATIONS TO THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

LETTER FROM THE BOARD

III. NO REVISIONS TO THE ANNUAL CAPS CONTEMPLATED UNDER THE FOOD AND BEVERAGE RESOURCES USAGE AGREEMENT (AS VARIED BY THE FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT)

IV. REASONS FOR AND BENEFITS OF THE FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT

V. BOARD’S APPROVAL

LETTER FROM THE BOARD

VI. INFORMATION ON THE PARTIES

The Company

Beijing Airport Commercial and Trading

Beijing Airport Food Management

The Parent Company

VII. LISTING RULES IMPLICATIONS

Continuing Connected Transactions

Aggregation in respect of the Flexible Retail and F&B Resources Usage Agreement

Re-compliance with Listing Rules Requirements in respect of the Domestic Retail Resources Usage Agreement

VIII. EGM

IX. APPOINTMENT OF INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

X. CONNECTED PERSONS WHO ARE REQUIRED TO ABSTAIN FROM VOTING ON THE RESOLUTIONS

XI. BOOK CLOSURE PERIOD

XII. RECOMMENDATIONS

LETTER FROM THE BOARD

XIII. ADDITIONAL INFORMATION

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CONTINUING CONNECTED TRANSACTIONS (I) FLEXIBLE RETAIL AND F&B RESOURCES USAGE AGREEMENT AND

(II) VARIATION OF THE TERMS OF THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT AND

(III) REVISION TO ANNUAL CAPS UNDER THE DOMESTIC RETAIL RESOURCES USAGE AGREEMENT

INTRODUCTION

Domestic Retail Resources Usage Agreement

Nanfang Communication Holdings Limited Proxy Solicitation & Information Statement 2021