TravelSky Technology Limited - Proxy Solicitation & Information Statement 2003

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 a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in TravelSky Technology Limited , you should at once hand this circular to the purchaser or to the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims 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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(A joint stock company limited by shares incorporated in the People’s Republic of China)

ONGOING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee

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A letter from the Independent Board Committee is set out on page 15 of this circular. A letter from Quam Capital Limited, the independent financial adviser, containing its advice to the Independent Board Committee is set out on pages 16 to 22 of this circular.

An extraordinary general meeting of TravelSky Technology Limited is to be held at the Conference Room, 2nd Floor, Prime Hotel, 2 Wangfujing Da Jie, Dong Cheng District, Beijing, People’s Republic of China on 5 December 2003 at 9:00 a.m..

A copy of the notice convening such extraordinary general meeting (as supplemented by a supplemental notice dispatched on 31 October 2003), which was dispatched on 20 October 2003, is set out on pages 29 to 37 of this circular for ease of reference. Whether or not you are able to attend the meeting, you are requested to complete and return the form of proxy, dispatched together with the said notice, in accordance with the instructions printed thereon to the registered office of TravelSky Technology Limited at 5/F Raycom Info Tech Park, No. 2 Ke Xue Yuan South Road, Haidian District, Beijing 100080, People’s Republic of China as soon as possible and in any event not less than 24 hours before the time appointed for holding of the meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting should you so desire. You should also complete and return the reply slip dispatched together with the said notice in accordance with the instructions printed thereon to the registered office of TravelSky Technology Limited on or before Friday, 14 November 2003, in person, by mail or by fax should you intend to attend the meeting.

10 November 2003

Page

Definitions ............................................................................................................................................................. 1 Letter from the Board ........................................................................................................................................... 5 Letter from the Independent Board Committee ................................................................................................ 15 Letter from Quam Capital Limited .................................................................................................................... 16 Appendix I - General Information ..................................................................................................................... 23 Appendix II - Notice of Extraordinary General Meeting ................................................................................. 29 Appendix III - Supplemental Notice of Extraordinary General Meeting ....................................................... 38

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DEFINITIONS

In this circular, the following	expressions have the following meaning unless the context requires otherwise:
“APP”	Airport Passenger Processing System
“CAAC”	Civil Aviation Administration of China, the regulator for the PRC
	civil aviation industry
“Cargo Services”	certain cargo integrated services, consultancy and management
	services
“Company” or “TravelSky”	TravelSky Technology Limited, a company incorporated under the
	laws of the People’s Republic of China whose shares are listed on
	the Stock Exchange and whose American depositary shares are
	traded on the over-the-counter market in the United States
“Connected Transactions”	the continuing connected transactions of the Group in respect of
	which a waiver application has been made to the Stock Exchange
“CRS”	Computerised Reservation System
“CTHC”	China TravelSky Holding Company, which name was changed from
	Civil Aviation Computer Information Centre following an industry-
	wide restructuring outlined in an announcement of the Company
	dated 10 October 2002, a PRC state-owned enterprise incorporated
	under the laws of the PRC, being a substantial shareholder of the
	Company holding 22.3 per cent of the entire issued share capital of
	the Company
“Directors”	the directors of the Company
“EGM”	the extraordinary general meeting of the Company to be held on 5
	December 2003
“Existing Waivers”	the waivers previously granted by the Stock Exchange in relation to
	the Connected Transactions
“Group”	the Company and its subsidiaries
“ICS”	Inventory Control System

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DEFINITIONS

“Independent Board Committee”
an independent board committee constituted by the independent non-executive Directors of the Company, comprising of Messrs. Wu Jiapei and Chow Kwok Wah, James, for the purpose of considering and advising the Shareholders in connection with the Promoters Connected Transactions
“Independent Shareholders” the shareholders of the Company other than the Promoters (not including CTHC)
“InfoSky”
�� (the English name being InfoSky Technology Company Limited), a sino-foreign joint venture company incorporated in the PRC on 20 September 2000 which is a 51% subsidiary of the Company
“Latest Practicable Date”
7 November 2003, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular
“Listing Rules”
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“PRC” or “China”

The People’s Republic of China

“Promoters”
the promoters of the Company at the time of the Company’s establishment (including, where the context requires, their successor entities following the restructuring of the civil aviation industry as disclosed in the Company’s announcement dated 10 October 2002) which, in connection with the entering into of contracts, agreements and arrangements of an ongoing nature, include their subsidiaries and associates as defined in the Listing Rules
“Promoters Connected Transactions” the class of connected transactions described in section 2 of the Letter From the Board contained in this circular
“RMB”

Renminbi, the lawful currency of the PRC

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��

DEFINITIONS

“Service Associates” (previously referred to as the “Cares Associates”)

Shanghai Civil Aviation East China Service System Integration Company Limited, Aviation Cares of Southwest Chengdu Limited and Shenyang Civil Aviation Cares of Northeast China Limited, being associated companies of the Company in which the Company holds 47%, 44% and 46% of the equity interests respectively, and in which China Eastern Air Holding Company, China Southwest Airlines Co. and China Northern Airlines Co., who are Promoters of the Company, hold 37%, 35% and 42% respectively, and together with any other connected person of the Company which would perform similar functions and/or carry out similar business as such Service Associates in the future

“Service Companies” (previously Service Subsidiaries and Service Associates referred to as the “Cares Companies”)

“Service Subsidiaries” (previously Hainan Civil Aviation Cares Company Limited (owned as to referred to as the “Cares Subsidiaries”) 55.63%), Cares Shenzhen Company Limited (owned as to 61.47%), Cares Hubei Company Limited (owned as to 50%), Cares Chongqing Information Technology Company Limited (owned as to 51%), Aviation Cares of Yunnan Information Company Limited (owned as to 50%), Civil Aviation Cares of Xiamen Limited (owned as to 51%), Civil Aviation Cares of Qingdao Limited (owned as to 51%), Xian Kaiya Civil Aviation Science Company Limited (owned as to 51%) and Civil Aviation Cares Technology of Xinjiang Limited (owned as to 51%), being enterprises in which the Company holds, directly or indirectly, more than 50% of the equity interests and/or otherwise has the power to control the composition of a majority of the board of directors of the enterprises, and together with any subsidiaries of the Company which would perform similar functions and/or carry out similar business as such Service Subsidiaries in the future

“Share(s)”

H share(s) of RMB1.00 each in the capital of the Company

“Shareholders”

shareholders of the Company

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DEFINITIONS

“SITA”	Sociètè Internationale de Tèlècommunications Aeronautiques S.C.,
	a co-operative, non-profit-making organisation founded in Belgium
“SITA INC.”	Sociètè Internationale de Tèlècommunications Aeronautiques
	Information, Networking and Computing N.V. (including its
	subsidiaries)
“SITA Services”	global telecommunications and information services
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Technology Services and	the technology services and ancillary support agreement entered
Ancillary Support Agreement”	into with each of the Promoters (except CTHC)

For the purpose of this circular, unless otherwise indicated, the exchange rates at HK$1.00 = RMB$1.06 have been used, where applicable, for purpose of illustration only and not constitute a representation that any amount have been, could have been or may be exchanged.

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LETTER FROM THE BOARD

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(A joint stock company limited by shares incorporated in the People’s Republic of China)

Directors Ma Tiesheng Hu Yunqi Cao Jianxiong Zhang Xueren Zhu Yong Rong Gang Li Xiaojun Feng Gang Li Xiaoguang Shi Dinghao Huang Yuanchang Xiao Yinhong Ding Weiping Wu Jiapei Chow Kwok Wah, James

Registered office 5/F Raycom Info Tech Park No. 2 Ke Xue Yuan South Road Haidian District, Beijing 100080 People’s Republic of China

Independent non-executive Directors

10 November 2003

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONS

1 INTRODUCTION

The Company and its subsidiaries and associated companies have in the past entered into a number of transactions of a recurrent nature with certain connected persons. The Stock Exchange has previously granted waivers to the Company from strict compliance with the relevant requirements of the Listing Rules in relation to these connected transactions.

The Existing Waivers will expire on 31 December 2003. The Company has applied to the Stock Exchange for a waiver from strict compliance with the relevant requirements of the Listing Rules in relation to the Connected Transactions.

The Connected Transactions are as follows:

(i) provision of technology services and ancillary support by the Company and the Service Subsidiaries to the Promoters (i.e., the Promoters Connected Transactions);

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LETTER FROM THE BOARD

(ii) provision of Cargo Services by SITA INC. to InfoSky;
(iii) provision of SITA Services by SITA to the Company;
(iv) transactions between the Company and the Service Companies; and
(v) lease of properties by the Company from CTHC.

In respect of the Promoters Connected Transactions, the granting of a waiver by the Stock Exchange to the Company from it having to issue further press announcements and obtain independent shareholders’ approval as required by Chapter 14 of the Listing Rules is conditional upon, among other things, (i) the approval of the Independent Shareholders at the EGM; and (ii) the Company complying with the conditions stated in section 2 below. Shareholders’ approval is not required with respect to the other categories of Connected Transactions listed above.

The main purposes of this circular are (i) to provide you with detailed information relating to the Promoters Connected Transactions; (ii) to set out the letter of advice from Quam Capital Limited to the Independent Board Committee and recommendation and opinion of the Independent Board Committee as advised by Quam Capital Limited in relation to the Promoters Connected Transactions; and (iii) to seek your approval at the EGM, to be held on 5 December 2003, of the ordinary resolution in relation to the Promoters Connected Transactions.

2 CONNECTED TRANSACTIONS

Provision of Technology Services and Ancillary Support by the Company to the Promoters

The Company entered into a Technology Services and Ancillary Support Agreement with each of the Promoters (except CTHC) with a term of five years from the date of signing (the earliest date being 18 October 2000). Pursuant to each agreement, the Company provides to these Promoters various technology services and ancillary support, including (but not limited to):

(a) electronic travel distribution services, which provide real-time flight seat control and flight reservation;
(b) airport passenger processing services, which provides check-in, boarding and flight allocation services;
(c) data networks (including data network services, commercial data services and internet-based platform); and
(d) air cargo system services (including provision and sale of air cargo information management system services for air cargo operations).

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LETTER FROM THE BOARD

In addition, the Company also sells equipment related to the use of the Company’s systems to the Promoters (except CTHC), and licenses or sells software and new products from time to time to these Promoters (except CTHC). Under each of the Technology Services and Ancillary Support Agreements, reference to the Promoters and the Company include their respective subsidiaries and associated companies. The Technology Services and Ancillary Support Agreements also set out the general terms and conditions under which the Company, the Service Companies and Infosky provide services to these Promoters.

The Existing Waiver for the Promoters Connected Transactions was granted to the Company at the time of listing. Disclosures were made in the Company’s prospectus dated 29 January 2001. The reasons for entering into these transactions and the terms and conditions (including pricing policy) remain unchanged.

Transactions Between the Service Companies and the Promoters

The Company has eleven Service Subsidiaries and three Service Associates which are domestic joint ventures with other parties. The Service Companies construct, operate and maintain regional network nodes, facilities to the network and systems of the Company in their regions. They also provide local services and technical support to the Promoters and other users in the PRC.

The Service Companies provide services and technical support to the Promoters (and to other users) in respect of the Company’s nation wide network. These services and technical support include serving as local service centres for the Company’s data, network operations, such as connection to the network’s nodes, data transmission equipment, terminals and printers, the installation of equipment, maintenance, training, technical support and other network services.

Transactions between the Service Subsidiaries and the Promoters are connected transactions of the Company whereas transactions between the Service Associates and the Promoters are not connected transactions of the Company. The transactions between the Service Subsidiaries and the Promoters, being conducted in accordance with the general principles (including the pricing policy) set out in the Technology Services and Ancillary Support Agreements, fall within the Promoters Connected Transactions.

Pricing policy

The Technology Services and Ancillary Support Agreements incorporate the following general pricing policies:-

(i) Government Prescribed Price

Generally, services and technical support are provided in accordance with the pricing schedule set by CAAC. Currently, fees for operation, maintenance and installation services provided in relation to ICS, CRS, APP and data network are in accordance with the pricing schedule set by the government.

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LETTER FROM THE BOARD

(ii) Government Guidance Price

Where there is a guidance price suggested by CAAC, the Company may choose to charge at such guidance price or at market price.

(iii) Where there is no government price

In relation to services where there is currently no government prescribed or guidance price, services are to be provided at market price or (if a market price is not available) at a price equal to costs plus a reasonable profit margin (which in relation to the Company is usually 17%). If the government subsequently introduces price regulations, then the government price will apply.

(iv) Where prices are newly de-regulated

If, for any reason, the government prescribed or guidance price for a particular product or service is cancelled, relaxed or ceases to be applicable, the Company shall, in the first instance, charge the market price if there is an established market for such products or services. If there is no established market, both parties agree to discuss a new pricing schedule based upon the original government prescribed price.

The Company may choose to charge less than the original government prescribed or guidance price for products and services, subject to approvals of the board of Directors for reductions which meet the following criteria: (a) the reduction must be in accordance with the internal guidelines adopted by the board of Directors (which guidelines may only be amended with the consent of a majority of the independent non-executive Directors); and (b) in any financial year, the aggregate of all such reductions shall not exceed 10% of the pricing schedule as at the beginning of the relevant financial year.

In case the government prescribed or guidance price for a particular product or service is cancelled or ceases to be applicable for any reason (e.g. a deregulation of the industry takes place) and there is no established market price, both parties may agree to discuss a new pricing schedule. The Company shall comply with all relevant requirements of the Listing Rules in relation to further transactions with any of its connected persons for the relevant product(s) or service(s) affected.

Implementation Agreements

It is envisaged that from time to time and as required, individual implementation agreements will be entered into between the Company (or the subsidiaries of the Company, as appropriate) and the relevant Promoters in relation to the provision of products or services. Each implementation agreement will set out the specific products and services requested by the Promoter and any detailed technical and other specifications, that may be relevant to those products, services and technical support. The implementation agreements shall contain provisions that are in all material respects consistent with the general principles, guidelines, terms and conditions contained in the Technology Services and Ancillary Support Agreements.

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LETTER FROM THE BOARD

Under certain conditions, the Company may offer alternative pricing arrangements in an implementation agreement with a Promoter who qualifies as a high volume user for certain products and services that would otherwise be subject to the government prescribed price and government guidance price. Under such arrangements, the Company may offer high volume users either a certain percentage (historically less than 25%) discount according to the actual volume of transactions or a fixed annual fee. The alternative pricing arrangements are equally available to any high volume user whose annual volume reaches certain value levels.

As the implementation agreements are supplements to the Technology Services and Ancillary Support Agreements, the implementation agreements do not constitute a new category of connected transactions.

Historical Figures

For each of the two financial years ended 31 December 2002 and the six months ended 30 June 2003, the revenues derived under the Promoters Connected Transactions are as set out below:

For the year 2001: RMB617 million (equivalent to HK$582 million) or 25% of the audited consolidated net tangible assets of the Group as at 31 December 2001, or 74.27% of the total revenues for the year ended 31 December 2001.

For the year 2002: RMB653 million (equivalent to HK$616 million) or 23% of the audited consolidated net tangible assets of the Group as at 31 December 2002, or 66.81% of the total revenues for the year ended 31 December 2002.

For the six months ended 30 June 2003: RMB258 million (equivalent to HK$243 million) or 9% of the relevant unaudited consolidated net tangible assets of the Group as at 30 June 2003, or 62.65% of the total revenues for the six months ended 30 June 2003.

Waiver Sought

The Company has requested a waiver from the Stock Exchange from issuing further press announcements and obtaining independent shareholders’ approval as required by Chapter 14 of the Listing Rules for the period from 1 January 2004 to 17 October 2005 (being the earliest expiry date of the Technology Services and Ancillary Support Agreements) subject to the conditions stated below. The Company hereby seeks the approval of the Independent Shareholders at the EGM for these Promoters Connected Transaction to be conducted on the basis described above.

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LETTER FROM THE BOARD

Conditions of the Waivers

As noted above, the granting of the Waiver in respect of the Promoters Connected Transactions is subject to the conditions set out in paragraphs (a) to (g) below.

(a) arm’s length basis: The transactions as well as the respective agreements governing such transaction shall be:
(i) entered into by the Group in the ordinary and usual course of its business;
(ii) conducted either
- (a) on normal commercial terms (which expression shall be applied by reference to transactions of a similar nature and to be made by similar entities); or
- (b) (where there is no available comparison) on terms that are fair and reasonable so far as the Independent Shareholders are concerned; and
(iii) entered into either
- (a) in accordance with the terms of the agreements governing such transactions; or
- (b) (where there are no such agreements) on terms no less favorable than those available to or from independent third parties.
(b) disclosure: The Company shall disclose in its annual report and accounts for the relevant year, details of the transactions in each financial year as required by Rules 14.25(1)(A) to (D) of the Listing Rules together with a statement of the opinion of the independent non-executive Directors of the Company referred to in paragraph (c) below.
(c) independent directors’ review: The independent non-executive Directors shall review annually the transactions and confirm, in the Company’s annual report and accounts for the year in question, that such transactions have been conducted in the manner as stated in paragraph (a) above.
(d) auditors’ review: The auditors of the Company shall review annually the transactions and shall provide the Directors with a letter, stating whether:
(i) the transactions received the approval of the board of Directors;

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LETTER FROM THE BOARD

(ii) the transactions are in accordance with the pricing policies as stated in the Company’s financial statements; and
(iii) the transactions were entered into in accordance with the terms of the respective agreements and documents governing those transactions or if there are no such agreements, on terms no less favorable than those available to or from independent third parties.

The letter of the auditors is to be addressed to the directors of the Company and a copy of which is to be provided to the Stock Exchange. Where for whatever reason, the auditors declined to accept the engagement or are unable to provide that letter, the directors of the Company shall contact the Stock Exchange immediately.

(e) undertaking: The Company and each party to the Connected Transactions have undertaken to provide sufficient facility for the Company’s auditors to inspect their respective accounts and records, thus enabling the auditors to assess the Promoters Connected Transactions and make the relevant reports.
(f) further compliance: If any material terms of the transactions as mentioned above are altered (unless as provided for herein or under the terms of the relevant agreement or arrangement) or if the Company enters into any new agreements with any connected persons (within the meaning of the Listing Rules) in the future, the Company will comply with the provisions of Chapter 14 of the Listing Rules governing connected transactions unless it applies for and obtains a separate waiver from the Stock Exchange.

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LETTER FROM THE BOARD

3 REASONS FOR AND BENEFIT OF THE PROMOTERS CONNECTED TRANSACTIONS

The Promoters Connected Transactions have been entered into and will be conducted in the ordinary and usual course of business and on normal commercial terms and are expected to occur on a regular and continuous basis. Pursuant to the Listing Rules, the Promoters Connected Transactions would require full disclosure under Rule 14.25 and prior approval by independent shareholders of the Company under Rule 14.26. As the Promoters Connected Transactions are expected to continue in the normal course of business, the Directors consider that disclosure and/or approval of them in full compliance with the Listing Rules would not be practicable. However, the Directors believe the Company should continue to conduct the Promoters Connected Transactions as significant opportunities exist for the continued implementation of technology solutions in China’s air travel and tourism industries, and being the leading information technology provider to China’s air travel industry, the Company is also a prime beneficiary of the expected rapid increase in air travel in China. Given the historical relationship between the Group (including Service Companies) and the Promoters, the latter rely exclusively on the Group’s information technology solutions and services for their inventory management, seat reservation, passenger processing, air cargo and data network functions. Since the Promoters (except CTHC) are major airlines in China, the Company expects to capitalise in the expected growth in air travel in China through the Promoters Connected Transactions.

No cap was sought from the Stock Exchange as a condition of the waiver as any cap on the amounts of such Promoters Connected Transactions could potentially limit the ability of the Company to seize business opportunities in its ordinary and usual course, as well as the Company’s revenue (revenues derived from provisions of such services constitute a major component of its revenues), and thus its financial performance, development and expansion. Moreover, it is anticipated that the pricing policy of CAAC may change from government prescribed/guidance pricing to market pricing, therefore, any cap on the amount of such Promoters Connected Transactions would restrict the flexibility of the Company to increase prices and hence the revenues of the Company.

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LETTER FROM THE BOARD

4 EGM

The Promoters Connected Transactions constitute connected transactions of the Company under the Listing Rules and are subject to approval from the Independent Shareholders.

The Notice (as supplemented by a supplemental notice dispatched on 31 October 2003) convening the EGM to be held at the Conference Room, 2nd Floor, Prime Hotel, 2 Wangfujing Da Jie, Dong Cheng District, Beijing, People’s Republic of China on 5 December 2003 at 9:00 a.m. was published and dispatched to shareholders of the Company on 20 October 2003 pursuant to the Articles of Association of the Company. The EGM will be held for the purpose of, among other things, considering and, if deemed appropriate, approving, among others, the Promoters Connected Transactions.

A form of proxy for use at the EGM was dispatched together with the said notice. Whether or not you are able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon to the registered office of the Company at 5/F Raycom Info Tech Park No. 2 Ke Xue Yuan South Road, Haidian District Beijing 100080, People’s Republic of China, as soon as possible and in any event no later than 24 hours before the time appointed for the holding of EGM. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM should you wish to do so. You should also complete and return the reply slip dispatched together with the said notice in accordance with the instructions printed thereon to the registered office of TravelSky Technology Limited on or before Friday, 14 November 2003, in person, by mail or by fax should you intend to attend the meeting.

The Promoters (except CTHC, as it is neither interested in the Promoters Connected Transactions nor connected with any of the Promoters) will abstain from voting on the resolution to be proposed at the EGM to approve the Promoters Connected Transactions.

5 RECOMMENDATION

The text of a letter to the Shareholders from the Independent Board Committee, containing their recommendation in relation to the Promoters Connected Transactions, is set out on page 15 of this circular. The Independent Board Committee is of the opinion that the Promoters Connected Transactions are in the interests of the Company and the Shareholders as a whole and that the terms of the Promoters Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, the Independent Board Committee recommends that the Independent Shareholders vote in favour of the ordinary resolutions approving the Promoters Connected Transactions to be proposed at the Extraordinary General Meeting.

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LETTER FROM THE BOARD

6 ADDITIONAL INFORMATION

Your attention is drawn to the information set out in the following sections of this circular:

(i) Letter from the Independent Board Committee (page 15);
(ii) Letter from Quam Capital Limited (pages 16 to 22);
(iii) General information (pages 23 to 28);
(iv) EGM notice (pages 29 to 37); and
(v) Supplemental EGM notice (pages 38 to 39).

Yours faithfully,

By order of the Board TravelSky Technology Limited Ma Tiesheng Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(A joint stock company limited by shares incorporated in the People’s Republic of China)

Independent Board Committee

Wu Jiapei Chow Kwok Wah, James

10 November 2003

To the Independent Shareholders

Dear Sir or Madam,

RENEWAL OF WAIVER FOR ONGOING CONNECTED TRANSACTIONS

We refer to the circular dated 10 November 2003 of the Company (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context requires otherwise.

The Promoters Connected Transactions between the Company and its subsidiaries with the Promoters as described in section 2 of the letter from the Board contained in the Circular constitute connected transactions for the Company under the Listing Rules and are subject to approval from the Independent Shareholders.

In view of the interest of the Independent Shareholders, we have been appointed by the Board to constitute the Independent Board Committee to consider and advise the Independent Shareholders as to the fairness and reasonableness in relation to the Promoters Connected Transactions. Quam Capital Limited has been retained as the independent financial adviser to advise the Independent Board Committee in this respect. We wish to draw your attention to the letter from Quam Capital Limited as set out on pages 16 to page 22 of this Circular.

Having taken into account the information set out in the letter from the Board, and the principal factors, reasons and recommendations set out in the letter from Quam Capital Limited, we consider the terms of the Promoters Connected Transactions to be fair and reasonable so far as the Independent Shareholders are concerned and believe that the Promoters Connected Transactions are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend that the Independent Shareholders vote in favour of the ordinary resolution to be proposed at the EGM to approve the Promoters Connected Transactions.

Yours faithfully, Wu Jiapei Chow Kwok Wah, James Independent Board Committee

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LETTER FROM OUAM CAPITAL LIMITED

The following is the text of a letter of advice from Quam Capital, the independent financial adviser to the Independent Board Committee, which has been prepared for the purpose of incorporation into this circular, setting out its advice to the Independent Board Committee in connection with the Promoters Connection Transactions.

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��16-20��2301-2302� 2301-2302, Alexandra House, 16-20 Chater Road, Central, Hong Kong

10 November 2003

The Independent Board Committee of TravelSky Technology Limited 5/F Raycom Infotech Park No. 2, Ke Xue Yuan South Road Haidian District Beijing 100080 The PRC

Dear Sirs,

PROMOTERS CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee in respect of the Promoters Connected Transactions. Details of the Promoters Connected Transactions are set out in the Letter from the Board contained in the circular issued by the Company to the Shareholders dated 10 November 2003 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

As the independent financial adviser, our role is to provide the Independent Board Committee with an independent opinion as to whether the terms and conditions of the Promoters Connected Transactions are, or are not, fair and reasonable so far as the independent shareholders are concerned and whether the granting of the waiver from issuing further press announcements and obtaining Independent Shareholders’ approval as required by Chapter 14 of the Listing Rules for the period from 1 January 2004 to 17 October 2005 (being the earliest expiry date of the Technology Services and Ancillary Support Agreements) in respect of the Promoters Connected Transactions (the “Waiver”) is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM OUAM CAPITAL LIMITED

In formulating our opinion, we have relied on the information and facts supplied to us by the Company and its advisers. We have assumed that all the information and representations contained or referred in the Circular concerning the Group, which has been provided by the Directors and for which they are wholly responsible, were true and accurate in all respect at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular were true at the time they were made and continue to be true at the date of the Circular. We have no reason to doubt the truth, accuracy and completeness of the information provided, and representations made, to us by the Company. The Directors have confirmed, having made all reasonable enquires, that to the best of their knowledge and belief that there are no other material facts the omission of which would make any statement in the Circular, including this letter, misleading.

We consider that we have reviewed all currently available information and documents which are available under the present circumstances to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis of our opinions. We have not, however, carried out any independent verification of the information, nor have we conducted any form of independent investigation into the business and affairs of the Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation, we have considered the following principal factors and reasons:

1. Nature of the Promoters Connected Transactions and reasons for the waiver application

The Group is the dominant provider of information technology solutions for China’s air travel and tourism industries. Core businesses of the Group include the provision of electronic travel distribution systems, airport passenger processing systems, data network, air cargo system and internet-based travel platform (together, the “IT Services”).

The Company entered into a Technology Services and Ancillary Support Agreement with each of the Promoters (except CTHC), with a term of five years from the date of signing (the earliest being 18 October 2000). Pursuant to each of these agreements, the Company agrees to provide the relevant Promoter with the IT services. The Company also sells equipment related to the use of the Company’s systems to the Promoters (except CTHC), and licenses or sells software and related new products (together, the “Related Products”) from time to time to these Promoters. In addition, the Service Subsidiaries provide services and technical support to the Promoters in respect of the Company’s nation wide network. The Technology Services and Ancillary Support Agreements set out the general terms and conditions under which the Company provides the IT Services and Related Products to the these Promoters.

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LETTER FROM OUAM CAPITAL LIMITED

For the provision of the specific IT Services and Related Products, the Company (or its subsidiaries, as the case may be) will enter into an individual implementation agreement (the “Implementation Agreement”) with the relevant Promoter from time to time and as required. The Implementation Agreements shall contain provisions that are in all material respects consistent with the general principles, guidelines, terms and conditions contained in the Technology Services and Ancillary Support Agreements.

The Group’s revenue primarily comprises fees earned from its provision of the IT Services and currently all its operations are conducted in the PRC. For each of the two financial years ended 31 December 2002 and the six months ended 30 June 2003, the revenues derived from the Group’s provision of the IT Services and the Related Products to the Promoters (except CTHC) were as follows: -

For the year 2001: around RMB617 million (equivalent to approximately HK$582 million), which accounted for about 25% of the Group’s audited consolidated net tangible assets (“NTV”) at the year end and around 74% of its total revenue for that year;
For the year 2002: around RMB653 million (equivalent to approximately HK$616 million), which accounted for about 23% of the Group’s audited consolidated NTV at the year end and around 67% of its total revenue for that year; and
For the six months ended 30 June 2003: around RMB258 million (equivalent to approximately HK$243 million), which accounted for about 9% of the Group’s unaudited consolidated NTV at the end of the period and around 63% of its total revenue for the said period.

The provision of the IT Services and the Related Products by the Group under the Technology Services and Ancillary Support Agreements and the entry into of Implementation Agreements between the Group and the relevant Promoters constitute “connected transactions” for the Company under the Listing Rules and are subject to the disclosure and independent shareholders’ approval requirement under the Listing Rules (the “Connected Transaction Requirements”).

The Stock Exchange granted a 3-year conditional waiver to the Company from strict compliance with the relevant requirements of the Listing Rules in relation to these on-going connected transactions at the time of the listing of the Shares on the Stock Exchange in 2001. Given the Group’s business nature and the fact that the Promoters (except CTHC) are the major commercial airlines in China, it is reasonable to expect that the Promoters Connected Transactions will continue to take place on a regular basis in the Group’s ordinary and usual course of business in future. The Existing Waiver will expire on 31 December 2003 and accordingly, the Company has applied to the Stock Exchange for a new waiver. The Company has confirmed that it will comply with all the relevant provisions of the Listing Rules when the Waiver is due to expire on 17 October 2005 unless it applies for and obtains a new waiver from the Stock Exchange. As such, we concur with the

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LETTER FROM OUAM CAPITAL LIMITED

Director’s view that it would not be practical for the Company to strictly comply with the Connected Transaction Requirements on each occasion when the Promoters Connected Transactions take place and that the granting of the Waiver will help to facilitate the smooth operations of the Group. Hence, we are of the view that the granting of the Waiver is in the interest of the Company and the Shareholders as a whole.

2. The pricing arrangements for the Promoters Connected Transactions

For the provision of the IT Services and the Related Products, the Technology Services and Ancillary Support Agreements have incorporated the following general policies: -

Generally, services and technical support are provided in accordance with the pricing schedule set by CAAC;
Where there is a guidance price suggested by CAAC, the Company may choose to charge at such guidance price or at market prices;
Where there is no government prescribed or guidance price, services are to be provided at market price or (if a market price is not available) at a price equal to costs plus a reasonable profit margin (which in relation to the Company is usually 17%). If the government subsequently introduces price regulations, the government price will apply; and
Where prices are newly de-regulated, the Company shall, in the first instance, charge the market price if there is an established market for such products or services. If there is no established market, both parties agree to discuss a new pricing schedule based upon the original government prescribed price.

It should be noted that the Company may choose to charge less than the original government prescribed or guidance price for products or services, subject to the approvals of the board of Directors for reductions. Nevertheless, in such cases, the interests of the Independent Shareholders are protected as (i) the reduction must be in accordance with the internal guidelines adopted by the board of Directors which may only be amended with the consent of a majority of the independent non-executive Directors; and (ii) in any financial year, the aggregate of all such reductions shall not exceed 10% of the pricing schedule as at the beginning of the relevant financial year.

In case where the government prescribed or guidance price for particular products or services is cancelled or ceases to be applicable for any reason and there is no established market price, both parties may agree to discuss a new pricing schedule. The Company shall comply with all relevant requirements of the Listing Rules in relation to further transactions with any of its connected persons for the relevant product(s) or service(s) affected.

—19 —

LETTER FROM OUAM CAPITAL LIMITED

It is noted that under certain conditions, the Company may offer a Promoter who qualifies as a high volume user for certain products and services which would otherwise be subject to the government prescribed or guidance price, either a percentage (historically less than 25%) discount to the actual volume of transactions or a fixed annual fee (the “Discretionary Discount Policy”) in an Implementation Agreement.

As discussed above, the products and services provided by the Group under the Promoters Connected Transactions are in general charged at the government prescribed/guidance prices or at the market prices or in the absence of both, at a price equal to costs plus a reasonable profit margin. As such, we consider the Technology Services and Ancillary Support Agreements have provided a fair and reasonable basis for the pricing arrangements for the Promoters Connected Transactions. Also, it is noted that in cases where the Company deviates from these general bases, there are sufficient provisions stipulated in the said agreements and/or arrangements in place to safeguard the interests of the Independent Shareholders. Furthermore, we are of the view that the Discretionary Discount Policy offered by the Group to certain Promoters who are high volume users, is a common commercial practice; and it should be noted that similar arrangements are equally available to other customers of the Group whose annual volume reaches a certain value level.

In view of the foregoing, we consider that the proposed pricing arrangements for the Promoters Connected Transactions are fair and reasonable as far as the Independent Shareholders are concerned.

3. Annual cap for the Promoters Connected Transactions

It is noted that no cap will be set for aggregate annual transaction amount for the Promoters Connected Transactions for the next financial year ending 31 December 2004 and the following period from 1 January 2005 to 17 October 2005 (the “Annual Cap”). We are of the view that such arrangement is appropriate in case of the Company and the Promoters Connected Transactions for the following reasons: -

Given the Group’s dominant position in the provision of information technology solutions and services in China’s air travel and tourism industries, there are significant potential opportunities for further expansion and development of the Group’s business and operations in the PRC. Setting a pre-determined Annual Cap would limit the ability of the Company to seize business opportunities in its ordinary and usual course, and therefore, may have adverse impact on the Group’s potential growth.
The Directors anticipate that the pricing policy of CAAC may change from government prescribed/guidance pricing to market oriented system. Therefore setting a pre-determined Annual Cap would restrict the Company’s flexibility to change its pricing policies under such circumstances and hence restrict the potential increase in the Group’s total revenue. The Company shall comply with all relevant requirements of the Listing Rules in relation to further transactions with any of its connected persons for the relevant product(s) or service(s) affected in the event of such price deregulation.

—20 —

LETTER FROM OUAM CAPITAL LIMITED

As such, we consider that, in the context of the Waiver, the lack of the Annual Cap for the Promoters Connected Transactions is in the interests of the Independent Shareholders; and that terms of the Promoters Connected Transactions in this respect are fair and reasonable so far as the Independent Shareholders are concerned.

4. Conditions of the granting of the Waiver

The Stock Exchange has indicated that the granting of the Waiver is conditional upon the Independent shareholders’ approval and the Company complying with the conditions as stated in the Letter from the Board contained in the Circular. The Company shall implement a number of procedures for the continuous monitoring of the Promoters Connected Transactions which include, among others, the following:-

The Promoters Connected Transactions as well as the Implementation Agreements shall be: -

entered into by the Group in the ordinary and usual course of its business;
conducted either (A) on normal commercial terms (which expression shall be applied by reference to transactions of a similar nature and to be made by similar entities); or (B) (where there is no available comparison) on terms that are fair and reasonable so far as the Independent Shareholders are concerned; and
entered into in accordance with the terms of the Technology Services and Ancillary Support Agreements and/or the relevant Implementation Agreements (as the case may be).

Other conditions include that relevant disclosure of the details of the Promoters Connected Transactions shall be made in the Company’s annual report, and annual review shall be conducted by the Company’s independent non-executive directors and auditors of the Company.

Furthermore, the Company has confirmed that if any material terms of the Promoters Connected Transactions are altered (unless as provided for under the terms of the Technology Services and Ancillary Support Agreements and the relevant Implementation Agreements) or if the Company enters into any new agreement with any “connected person” in the future, the Company will comply with all the relevant provisions of the Listing Rules unless it applies for and obtains a separate waiver from the Stock Exchange.

Given the above, we are of the opinion that there will be sufficient procedures and arrangements in place to ensure that any Promoters Connected Transactions will be conducted on terms that are fair and reasonable so far as the Independent Shareholders are concerned.

—21 —

LETTER FROM OUAM CAPITAL LIMITED

RECOMMENDATION

Having taken into account the principal factors and reasons as discussed above, and in particular the following: -

the nature of the Promoters Connected Transactions and reasons for the Waiver application;
the pricing arrangements for the Promoters Connected Transactions; and
the conditions for granting of the Waiver

we consider that the terms and conditions of the Promoters Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned and the granting of the Waiver to be in the interests of the Company and the Shareholders as a whole.

Accordingly, we advise the Independent Board Committee to recommend the Independent shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Promoters Connected Transactions.

Yours faithfully,

For and on behalf of

Quam Capital Limited Richard D. Winter Karen C. Wong Managing Director Director

—22 —

GENERAL INFORMATION

APPENDIX I

1 RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2 DISCLOSURE OF INTEREST

(a) As at the Latest Practicable Date, none of the Directors, supervisors or chief executives had any interest or short position in any shares, underlying shares and debentures of the Company or any of its associated corporations that is required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the Securities and Futures Ordinance (the “Ordinance”), any interest required to be recorded and kept in the register in accordance with Section 352 of the Ordinance, or any interest required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.
(b) So far as is known to any Director or chief executive of the Company, at the Latest Practicable Date, the interests of every person, other than a Director or chief executive of the Company, in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the Ordinance were as follows:

			Percentage of	Percentage of
			respective class	total issued
		No. of shares	of share capital	share capital
Name of shareholder	Class	interested	(per cent.)	(per cent.)
J.P. Morgan Chase & Co.	H Shares	30,593,600	9.8	3.4
Templeton Asset
Management Limited	H Shares	21,738,000	7.0	2.4
China TravelSky
Holding Co.	Domestic	198,496,500	34.4	22.3
China Southern
Air Holding Co. (1)	Domestic	116,460,500	20.2	13.2
China Eastern
Air Holding Co. (2)	Domestic	109,414,500	19.0	12.3
China National Aviation
Holding Co. (3)	Domestic	89,433,500	15.5	10.1

— 23 —

GENERAL INFORMATION

APPENDIX I

Note:

(1) China Southern Air Holding Company directly held approximately 9.4 per cent. of the total issued share capital of the Company and also owned, among other things: (i) a 100 per cent. interest in China Northern Airlines Co.; and (ii) a 100 per cent. interest in Xinjiang Airlines Co. Since China Northern Airlines Co. and Xinjiang Airlines Co. held approximately 2.8 per cent. and 1.0 per cent. of the total issued share capital of the Company respectively, China Southern Air Holding Company effectively had an aggregate interest of approximately 13.2 per cent. in the total share capital of the Company.
(2) China Eastern Air Holding Company directly held approximately 7.7 per cent. of the total issued share capital of the Company and also owned, among other things: (i) a 100 per cent. interest in China Northwest Airlines Co.; and (ii) a 100 per cent. interest in Yunnan Airlines Co. Since China Northwest Airlines Co. and Yunnan Airlines Co. held approximately 2.6 per cent. and 2.0 per cent. of the total issued share capital of the Company respectively, China Eastern Air Holding Company effectively had an aggregate interest of approximately 12.3 per cent. in the total issued share capital of the Company.
(3) China National Aviation Holding Company owned, among other things: (i) a 100 per cent. interest in Air China, which in turn owned a 100 per cent. interest in China Southwest Airlines Co.; and (ii) a 100 per cent. interest in China National Aviation Corporation. Since Air China, China Southwest Airlines Co. and China National Aviation Corporation held approximately 6.5 per cent., 2.9 per cent. and 0.7 per cent. of the total issued share capital of the Company respectively, China National Aviation Holding Company effectively had an aggregate interest of approximately 10.1 per cent. in the total issued share capital of the Company.

Save as disclosed herein, as at the Latest Practicable Date, no persons had any interest or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the Ordinance.

(c) So far as is known to any Director or chief executive of the Company and save as otherwise disclosed in this circular, as at the Latest Practicable Date, the persons (other than members of the Group), directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group (other than the Company) were as follows.

— 24 —

GENERAL INFORMATION

APPENDIX I

Subsidiary	Shareholder	Shareholding
��	��	12.47%
(Hainan Civil Aviation	(China Southern Air Holding Co.)
Cares Corporation Limited)
	��	9.15%
	(Civil Aviation Hainan Management Bureau)
	��	5.29%
	(China Northern Airlines Sanya Co., Ltd.)
��	��	5.59%
(Shenzhen Civil Aviation	(China Northern Airlines Co.)
Cares Co., Ltd.)
	��	5.59%
	(China Southwest Airlines Co.)
	��	5.59%
	(China Xinhua Airlines Co.)
	��	5.59%
	(Shenzhen Airlines Co.)
	��	5.59%
	(Shenzhen Airport Co., Ltd.)
	��	5.59%
	(China Southern Airlines Co. Shenzhen Branch)
��	��	24.50%
(Cares Chongqing Information	(Air China Chongqing Management Bureau)
Co., Ltd.)
	��	24.50%
	(China Southwest Airlines Co. Chongqing Branch)
��	��	49.00%
(Aviation Cares of Yunnan	(Yunan Airlines Co.)
Information Co., Ltd.)

— 25 —

GENERAL INFORMATION

APPENDIX I

��	��	28.50%
(Civil Aviation Cares of Xiamen Ltd.)	(Xiamen Airlines Co.)
	��	20.50%
	(Xiamen Airport Development
	Company Limited)
��	��	36.00%
(Civil Aviation Cares of Qingdao Ltd.)	(Civil Aviation Qingdao Liuting Airport)
	��	13.00%
	(Shanghai Airlines Huadong Cares Limited)
��	��	32.00%
(Xi’an Kaiya Civil Aviation	(China Northwest Airlines Co.)
Science Co., Ltd)
	��	32.00%
	(China Eastern Air Holding Co.)	(indirect)
	��	17.00%
	(Xi’an Yianyang International Airport)
��	��	24.50%
��
(Civil Aviation Cares Technology	(China Civil Aviation Urumgi Management
of Xinjiang Ltd.)	Bureau)
	��	24.50%
	(Xinjiang Airlines Co.)
	��	24.50%
	(China Southern Air Holding Co.)	(indirect)
��	SITAGCH	49.00%
(InfoSky Technology Co., Ltd)
	SITA INC.	49.00%
		(indirect)

— 26 —

GENERAL INFORMATION

APPENDIX I

(d) None of the Directors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group.
(e) As at the Latest Practicable Date, Quam Capital Limited does not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
(f) As at the Latest Practicable Date, none of the Directors or Quam Capital Limited had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, since 31 December 2002, the date to which the latest published audited financial statements of the Group were made up.

3 SERVICE CONTRACT

As at the Latest Practicable Date, none of the Directors had entered into any service contract with the Company or any member of the Group which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

4 EXPERT’S QUALIFICATION AND CONSENT

Quam Capital Limited is deemed to be licensed under the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong and has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its letter, in the form and context in which it appears.

5 MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading positions of the Company since 31 December 2002, the date to which the latest published audited financial statement of the Company were made up.

— 27 —

GENERAL INFORMATION

APPENDIX I

6 GENERAL

(a) The secretary of the Company is Mr. Ding Weiping.
(b) The registered office of the Company is at 5/F Raycom Info Tech Park, No.2 Ke Xue Yuan South Road, Haidian District, Beijing 100080, the People’s Republic of China.
(c) The H share register and transfer office is Hong Kong Registrars Limited, Room 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(d) In the event of inconsistency, the English language text of this circular shall prevail over the Chinese language text.

7 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the offices of Linklaters at 10th Floor, Alexandra House, Chater Road, Hong Kong from the date of this circular up to and including 24 November 2003:

(i) the Technology Services and Ancillary Support Agreement entered into with each of the Promoters (except CTHC);
(ii) the letter of recommendation from the Independent Board Committee as set out in this circular;
(iii) the letter from Quam Capital Limited as set out in this circular; and
(iv) the written consent referred to in section 4 of this appendix.

— 28 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

==> picture [440 x 66] intentionally omitted <==

NOTICE OF EXTRAORDINARY GENERAL MEETING

The board of directors (the “Board”) of TravelSky Technology Limited (the “Company”) is pleased to announce that an Extraordinary General Meeting shall be held according to the resolutions passed at a board meeting convened on October 17, 2003, and NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the Company will be held at 9:00a.m. on Friday, December 5, 2003 at the Conference Room, 2nd Floor, Prime Hotel, 2 Wangfujing Da Jie, Dong Cheng District, Beijing, the People’s Republic of China for the following purposes:

ORDINARY RESOLUTIONS

To elect 15 persons as directors for the second Board of the Company for a term of three years, commencing from the date on which the resolutions of the Extraordinary General Meeting become effective, and to authorize the Board to enter into the Service Contract for Director and the Director’s Undertakings with each of the elected directors and to fix the remuneration thereof.

The biographies of the 15 candidates for directors (including three candidates for independent nonexecutive directors) are as follows:

DIRECTORS

Ma Tiesheng , age 57, is a senior accountant. He is currently the General Manager of China TravelSky Holding Company. He graduated from the Beijing Institute of Linguistics and has around 30 years of management experience in China’s civil aviation industry.He has been the Chairman of the first Board since December 2002

Wang Quanhua , aged 49, is currently the Deputy General Manager of China Southern Air Holding Company and the director of China Southern Airlines Co., Ltd. Mr. Wang is a university graduate and has 30 years of management experience in China’s civil aviation industry.

Cao Jianxiong , aged 44, is currently the Deputy General Manager of China Eastern Air Holding Company and one of the Vice Chairmen of the first Board. He has a master’s degree in economics and nearly 20 years of experience in China’s civil aviation industry.

Zhang Xueren , aged 50, is currently the Vice President of Air China and one of the Vice Chairmen of the first Board. Mr. Zhang is a senior economist. He graduated from Sichuan Foreign Languages University and has almost 25 years of experience in China’s aviation industry.

— 29 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

Zhu Yong , age 40, is currently the Deputy General Manager of China TravelSky Holding Company. Mr. Zhu is a senior engineer and received a master’s degree in engineering from the Beijing University of Aeronautics and Astronautics. He was a member of the first Board and acted as the General Manager of the Company.

Rong Gang , age 41, is currently the Deputy General Manager of China TravelSky Holding Company. Mr. Rong is a senior engineer. He holds an MBA from the Guanghua Management school of the Beijing University and has nearly 20 years of experience in China’s aviation industry. He was a member of the first Board.

Yang Yatie , aged 59, is currently the Chief Accountant of China TravelSky Holding Company and Accounting Centre of China Aviation. Mr. Yang is a senior accountant and has nearly 40 years of experience in financial management in China’s civil aviation industry.

Ding Weiping , age 52, graduated from Beijing Industry Technology University and has over 20 years of management experience in China’s aviation industry. He was a member of the first Board and is the Company Secretary and Deputy Chief Engineer and the General Manager of the Strategic Planning Department of the Company.

Song Jinxiang , age 55, graduated from the Beijing University of Aeronautics and Astronautics and has over 20 years of management experience in China’s aviation industry. He was a member of the first Supervisory Committee and is the Deputy Chief Economist of the Company.

Chen Zhenyou , aged 51, is currently in charge of the planning and investment department of China Southern Air Holding Company. Mr. Chen holds an MBA from Murdoch University in Australia and has nearly 30 years of management experience in China’s civil aviation industry.

Si Yupei , aged 50, is currently the Deputy Secretary of Party Committee to China Eastern Airlines Northwestern Company, a senior economist, graduated from the Northwest University of Industries and has about 30 years of management experience in China’s civil aviation industry.

Song Jian , aged 42, is currently Deputy General Manager of the Information Technology Centre of Air China. Mr. Song is a postgraduate of Nanjing University of Aeronautics and Astronautics in management science and engineering, and has over 20 years of management experience in China’s civil aviation industry.

— 30 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

INDEPENDENT NON-EXECUTIVE DIRECTORS

Wu Jiapei , aged 71, is a leading economist in China. Mr. Wu is now a consultant of the Experts Committee of China State Information Center, the Vice President of the Chinese Information Industry Association, Honorary Dean of the Economics and Management College of Huaqiao University and a part-time professor of more than 20 universities in China. Mr Wu was an independent non-executive director of the first Board.

Chow Kwok Wah, James , aged 57, graduated from the Faculty of Commerce in Regent Institute, London, in 1966. Mr. Chow was a member and licensee of both the Far East Exchange Ltd. and The Stock Exchange of Hong Kong Limited. He is the Chairman of the Consco Group, which major businesses include property investment and the production of raw materials for the telecommunications industry in China. He was an independent non-executive director of the first Board.

Lee Kwok Ming, aged 45, is a consultant to Tom.com Limited (“Tom.com”), the shares of which are listed on the Growth Enterprise Market of the Stock Exchange. Mr. Lee is also an independent director of Lianhua Supermarket Holdings Co., Ltd. (980) and the Financial Controller of Beijing Beida Jade Bird Universal Sci-Tech Company Limited (8095). Mr. Lee is a fellow of the Hong Kong Society of Accountants, a member of the Association of Chartered Management Accountants and a chartered management accountant in Australia. He holds an MBA from the University of Bath. He has over 20 years of financial management experience and extensive experience in mergers and acquisitions as well as corporate finance.

To elect eight persons as supervisors for the second Supervisory Committee of the Company for a term of three years, commencing from the date on which the resolutions of the Extraordinary General Meeting become effective, and to authorize the Board to enter into the Service Contract for Supervisor and the Supervisor’s Undertakings with each of the elected supervisors and to fix the remuneration thereof.

The biographies of the eight candidates for supervisors (including one candidate for independent supervisor) are as follows:

— 31 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

SUPERVISORS

Li Xiaojun , aged 47, is currently the Deputy General Manager of China TravelSky Holding Company. Ms. Li is a senior economist. She graduated from Renmin University of China and has nearly 20 years of management experience in China’s aviation industry. She was a member of the first Board.

Wu Yingxiang , aged 30, is currently an assistant to the finance chief of China Southern Air Holding Company. Ms. Wu graduated from the Central South University and has nearly ten years of financial control experience in China’s civil aviation industry.

Du Hongying , aged 44, is currently the Deputy General Manager of the Planning and Finance Department of Xiamen Airlines. She was the Chairperson of the first Supervisory Committee. Ms. Du is a senior accountant. She graduated from Xiamen University and has 17 years of accounting and finance experience in China’s aviation industry.

Zhang Yakun , aged 45, is currently the General Manager of the information technology department of China Eastern Airlines Yunnan Company. Mr. Zhang graduated from the Xian University of Communications with a master’s degree and has nearly 20 years of professional experience in China’s aviation industry.

Wang Yongqiang , aged 33, is currently the senior assistant to the executive president of HNA Group Co., Ltd. and the chairman and chief executive officer of HNA Systems Co., Ltd.. He was a member of the first Supervisory Committee. He graduated from the Institute of Civil Aviation of China and has nearly ten years of experience in China’s aviation industry.

Tan Xiaoxi , aged 56, is a senior engineer graduated from the Institute of Foreign Languages of Beijing Army Zone and has nearly 20 years of technical support experience in China’s aviation industry. Mr. Tan is working as a secretary to the Party branch in the network and operation department of the Company and was a member of the first Supervisory Committee.

Zhang Xin , aged 41, has nearly 20 years of technical experience in China’s aviation industry. Mr. Zhang works in the engineering department of the Company and was a member of the first Supervisory Committee.

— 32 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

INDEPENDENT SUPERVISOR:

Rao Geping , aged 55, is currently a professor of the law school of the University of Beijing, the director of the Institute of International Law of the University of Beijing, a part-time professor in a number of universities in China and specializes in areas such as laws of Hong Kong, Macau and Taiwan as well as international law, etc.

That the ongoing connected transactions as described in paragraph 1 of the announcement made by the Company dated 17 October 2003, which the Company expects to occur on a regular and continuous basis in the ordinary and usual course of business of the Company and its subsidiaries, as the case may be, be and are hereby generally and unconditionally approved and the directors of the Company are hereby authorised to do all such further acts and things and execute all such further documents and take all such steps which in their opinion may be necessary, desirable or expedient to implement and/or give effect to terms of such connected transactions.

SPECIAL RESOLUTION

The Company’s promoters Air Greatwall Co., Wuhan Airlines Co. and China Southwest Airlines Co. have assigned their equity interests in TravelSky as a result of their restructuring, details of which are as follows:
(1) Since Shareholder 17, Air Greatwall Co., has assigned its entire assets to China Eastern Airlines Co., Ltd., its 2,658,500 shares in TravelSky representing a 0.3% of the equity interest shall be held by China Eastern Airlines Co., Ltd. accordingly.
(2) The assets of Shareholder 19, Wuhan Airlines Co., which include Wuhan Airlines Co.’s 1,300,000 shares in TravelSky representing a 0.1% equity interest, have been recovered by its shareholder Wuhan State-owned Assets Management Commission and invested in China Eastern Airlines Wuhan Co., Ltd..
(3) Shareholder 5, China Southwest Airlines Co.’s, 25,415,000 shares in TravelSky representing a 2.9% equity interest have been allocated to Shareholder 4 Air China. Upon completion of the allocation, the total number of shares held by Air China in TravelSky shall be the sum of the 58,123,000 shares originally held by it and the 25,415,000 shares originally held by China Southwest Airlines Co., i.e. 83,538,000 shares. Accordingly, the number of shares held by Shareholder 4, Air China, as recorded in the Articles of Association of TravelSky shall be changed from 58,123,000 shares to 83,538,000 shares. Shareholder 5, China Southwest Airlines Co., shall no longer be a shareholder of TravelSky. Its record of the number of shares in the Articles of Association shall be deleted. Accordingly, since the number of promoters of TravelSky decreases from 21 to 20, each of the shareholders counting from Shareholder 6 stated in Articles 1 and 21 of the Articles of Association of TravelSky shall move up one place in chronological order.

— 33 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

In accordance with the aforesaid, the relevant details of Articles 1 and 21 of the Articles of Association of the Company shall be amended as follows:

(1) In Article 1 of the Articles of Association of the Company,

“Shareholder	5:	China Southwest Airlines Co.” shall be deleted;
“Shareholder	6:	China Northern Airlines Co., Ltd.” shall be amended as “Shareholder 5:
		China Northern Airlines Co., Ltd.”;
“Shareholder	7:	China Eastern Airlines Northwestern Co.” shall be amended as “Shareholder 6:
		China Eastern Airlines Northwestern Co.”;
“Shareholder	8:	Xiamen Airlines Co., Ltd.” shall be amended as “Shareholder 7:
		Xiamen Airlines Co., Ltd.”;
“Shareholder	9:	China Eastern Airlines Yunnan Co.” shall be amended as “Shareholder 8:
		China Eastern Airlines Yunnan Co.”;
“Shareholder	10:	Hainan Airlines Co., Ltd.” shall be amended as “Shareholder 9:
		Hainan Airlines Co., Ltd.”;
“Shareholder	11:	Xinjiang Airlines” shall be amended as “Shareholder 10:
		Xinjiang Airlines”;
“Shareholder	12:	China Xinhua Airlines Co., Ltd.” shall be amended as “Shareholder 11:
		China Xinhua Airlines Co., Ltd.”;
“Shareholder	13:	Shenzhen Airlines Co., Ltd.” shall be amended as “Shareholder 12:
		Shenzhen Airlines Co., Ltd.”;
“Shareholder	14:	China National Aviation Corp” shall be amended as “Shareholder 13:
		China National Aviation Corp”;
“Shareholder	15:	Shanghai Airlines Co., Ltd.” shall be amended as “Shareholder 14:
		Shanghai Airlines Co., Ltd.”;
“Shareholder	16:	Shandong Airlines Co., Ltd.” shall be amended as “Shareholder 15:
		Shandong Airlines Co., Ltd.”;

— 34 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

“Shareholder 17: Air Greatwall Co.” shall be amended as “Shareholder 16: China Eastern Airlines Co., Ltd.”; “Shareholder 18: Sichuan Air Group Co.” shall be amended as “Shareholder 17: Sichuan Air Group Co.”; “Shareholder 19: Wuhan Airlines Co.” shall be amended as “Shareholder 18: China Eastern Airlines Wuhan Co., Ltd.”; “Shareholder 20: Changan Air Industrial Co.” shall be amended as “Shareholder 19: Changan Air Industrial Co.”; and “Shareholder 21: Shanxi Air Industrial Co.” shall be amended as “Shareholder 20: Shanxi Air Industrial Co.”.

(2) In the second paragraph of Article 21 of the Articles of Association of the Company,

“Shareholder 4 holds 58,123,000 shares; Shareholder 5 holds 25,415,000 shares; Shareholder 6 holds 24,667,500 shares; Shareholder 7 holds 23,224,500 shares; Shareholder 8 holds 17,504,500 shares; Shareholder 9 holds 8,606,000 shares; Shareholder 10 holds 5,895,500 shares; Shareholder 11 holds 2,658,500 shares; Shareholder 12 holds 21,924,500 shares; Shareholder 13 holds 11,050 , 000 shares; Shareholder 14 holds 7,559,500 shares; Shareholder 15 holds 6,240,000 shares; Shareholder 16 holds 5,726,500 shares; Shareholder 17 holds 4,348,500 shares; Shareholder 18 holds 1,722,500 shares; Shareholder 19 holds 1,300,000 shares; Shareholder 20 holds 799,500 shares; and Shareholder 21 holds 169,000 shares.”

shall be amended as:

“Shareholder 4 holds 83,538,000 shares; Shareholder 5 holds 24,667,500 shares; Shareholder 6 holds 23,224,500 shares; Shareholder 7 holds 17,504,500 shares; Shareholder 8 holds 8,606,000 shares; Shareholder 9 holds 5,895,500 shares; Shareholder 10 holds 2,658,500 shares; Shareholder 11 holds 21,924,500 shares; Shareholder 12 holds 11,050,000 shares; Shareholder 13 holds 7,559,500 shares; Shareholder 14 holds 6,240,000 shares; Shareholder 15 holds 5,726,500 shares; Shareholder 16 holds 4,348,500 shares; Shareholder 17 holds 1,722,500 shares; Shareholder 18 holds 1,300,000 shares; Shareholder 19 holds 799,500 shares; and Shareholder 20 holds 169,000 shares.”

— 35 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

The above amendments to the Articles of Association of the Company shall become effective upon approval and registration by the State Administration for Industry and Commerce.

By Order of the Board Ma Tiesheng Chairman

October 17, 2003.

Notes:

The Register of Members of the Company will be closed from Wednesday, November 5 to Friday, December 5, 2003 (both days inclusive), during which time no share transfers will be effected. Holders of the Company’s H shares and domestic shares whose names appear on the Register of Members of the Company at the close of business on Tuseday, November 4, 2003 are entitled to attend the Extraordinary General Meeting. Transfers of H shares must be lodged with the share registrar of the Company’s H shares by 4:00 p.m. on Tuesday, November 4, 2003 in order to entitle the transferee to attend the Extraordinary General Meeting.

The address of the share registrar of the Company’s H shares is:

Hong Kong Registrars Limited Room 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong

Each Shareholder entitled to attend and vote at the Extraordinary General Meeting may appoint one or more proxies (whether a Shareholder or not) to attend and vote on his or her behalf at the Extraordinary General Meeting. A proxy need not be a Shareholder.
Shareholders or their proxies should produce proof of identity and other documents as required under the Articles of Association of the Company when attending the Extraordinary General Meeting. A proxy of a Shareholder who has appointed more than one proxy may only vote on a poll.
The instrument appointing a proxy must be in writing under the hand of the appointer or his attorney duly authorised in writing, or in the case of a legal person, must either be executed under its seal or under the hand of a legal representative or other attorney duly authorised to sign the same. If that instrument is signed by an attorney of the appointer, the power of attorney authorising that attorney to sign, or other document of authorisation, must be notarially certified. To be valid, for holders of domestic shares, the notarially certified power of attorney, or other document of authorisation, and the form of proxy must be delivered to the registered address of the Company not less than 24 hours before the time appointed for the holding of the Extraordinary General Meeting. In order to be valid, for holders of H shares, the above documents must be delivered to Hong Kong Registrars Limited within the same period of time.

— 36 —

NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX II

Shareholders who intend to attend the Extraordinary General Meeting in person or by proxy should return the reply slip for attending the Extraordinary General Meeting to the registered address of the Company on or before Friday, 14 November 2003 personally or by mail or fax.
The Extraordinary General Meeting is expected to last for half a day. Shareholders (or their proxies) attending the Extraordinary General Meeting are responsible for their own transportation and accommodation expenses.
The registered address of the Company is as follows:

TravelSky Technology Limited 5/F, Raycom Info Tech Park No.2 Ke Xue Yuan South Road Haidian District Beijing 100080, PRC Contact person:

Ding Weiping Tel: 8610 - 8401 9073 Fax: 8610 - 8401 9340 Post-office box: No. 638 Beijing, PRC

— 37 —

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX III

==> picture [440 x 66] intentionally omitted <==

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT pursuant to the resolution passed at a meeting of the board of directors (the “Board”) dated 29 October 2003, the Notice of Extraordinary General Meeting of the Company (the “Notice”) published in Sing Tao Daily and The Standard on 17 October 2003 is amended as follows:

Upon approval of the Board of the Company, the information regarding one of the candidates for directors in item 1 under Ordinary Resolutions:

“ Chen Zhenyou , aged 51, is currently in charge of the planning and investment department of China Southern Air Holding Company. Mr. Chen holds an MBA from Murdoch University in Australia and has nearly 30 years of management experience in China’s civil aviation industry.”

shall be replaced by the following:

“ Li Xiaoguang , aged 44, is currently the Deputy General Manager of China Northern Airlines Co., Ltd.. Mr. Li holds a master degree in management from the Beijing University of Aeronautics and Astronautics and has 20 years of management and technology experience in China’s aviation industry. He was also a member of the first Board.”

Upon approval of the board of supervisors of the Company, the information regarding one of the candidates for supervisors in item 2 under Ordinary Resolutions:

“ Wu, Yingxiang , aged 30, is currently an assistant to the finance chief of China Southern Air Holding Company. Ms. Wu graduated from the Central South University and has nearly ten years of financial control experience in China’s civil aviation industry.”

shall be replaced by the following:

“ Chen Lihong , aged 40, is currently the Finance Chief of Xinjiang Airlines Co. Mr. Chen is a senior accountant with over 20 years of financial management experience in China’s aviation industry. He was also a member of the first board of supervisors.”

— 38 —

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

APPENDIX III

Due to errors in the printing process of the Notice, “Shareholder 17, Air Greatwall Co.,” in item 4 (1) under Special Resolution should have been “Shareholder 11, Air Greatwall Co.,”, and the ranking order of Shareholders 8 to 17 prior to the amendment to Article 1 of the Articles of Association of the Company and the ranking order of Shareholders 7 to 16 after the amendment shall be as follows:

“Shareholder 8: China Eastern Airlines Yunnan Co.” shall be amended as “Shareholder 7: China Eastern Airlines Yunnan Co.”;

“Shareholder 9: Xinjiang Airlines” shall be amended as by “Shareholder 8: Xinjiang Airlines”;

“Shareholder 10: China National Aviation Corp” shall be amended as “Shareholder 9: China National Aviation Corp”;

“Shareholder 11: Air Greatwall Co.” shall be amended as “Shareholder 10: China Eastern Airlines Co., Ltd.”;

“Shareholder 12: Xiamen Airlines Co., Ltd.” shall be amended as “Shareholder 11: Xiamen Airlines Co., Ltd.”;

“Shareholder 13: Hainan Airlines Co., Ltd.” shall be amended as “Shareholder 12: Hainan Airlines Co., Ltd.”;

“Shareholder 14: China Xinhua Airlines Co., Ltd.” shall be amended as “Shareholder 13: China Xinhua Airlines Co., Ltd.”;

“Shareholder 15: Shenzhen Airlines Co., Ltd.” shall be amended as “Shareholder 14: Shenzhen Airlines Co., Ltd.”;

“Shareholder 16: Shanghai Airlines Co., Ltd.” shall be amended as “Shareholder 15: Shanghai Airlines Co., Ltd.”; and

“Shareholder 17: Shandong Airlines Co., Ltd.” shall be amended as “Shareholder 16: Shandong Airlines Co., Ltd.”.

By Order of the Board

Ding Weiping

Director and Company Secretary

30 October 2003

— 39 —

AI assistant

TravelSky Technology Limited — Proxy Solicitation & Information Statement 2003

49402_rns_2003-11-11_6bf635f4-ff77-440b-80c4-88480ac471a9.pdf

ONGOING CONNECTED TRANSACTIONS

Independent Financial Adviser to the Independent Board Committee

Page

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CONNECTED TRANSACTIONS

1 INTRODUCTION

LETTER FROM THE BOARD

2 CONNECTED TRANSACTIONS

Provision of Technology Services and Ancillary Support by the Company to the Promoters

LETTER FROM THE BOARD

Transactions Between the Service Companies and the Promoters

Pricing policy

LETTER FROM THE BOARD

(ii) Government Guidance Price

Implementation Agreements

Historical Figures

Waiver Sought

LETTER FROM THE BOARD

Conditions of the Waivers

3 REASONS FOR AND BENEFIT OF THE PROMOTERS CONNECTED TRANSACTIONS

4 EGM

5 RECOMMENDATION

6 ADDITIONAL INFORMATION

Independent Board Committee

RENEWAL OF WAIVER FOR ONGOING CONNECTED TRANSACTIONS

PROMOTERS CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM OUAM CAPITAL LIMITED

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Nature of the Promoters Connected Transactions and reasons for the waiver application

2. The pricing arrangements for the Promoters Connected Transactions

3. Annual cap for the Promoters Connected Transactions

4. Conditions of the granting of the Waiver

RECOMMENDATION

1 RESPONSIBILITY STATEMENT

2 DISCLOSURE OF INTEREST

APPENDIX I

3 SERVICE CONTRACT

4 EXPERT’S QUALIFICATION AND CONSENT

5 MATERIAL ADVERSE CHANGE

6 GENERAL

7 DOCUMENTS AVAILABLE FOR INSPECTION

NOTICE OF EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTIONS

DIRECTORS

INDEPENDENT NON-EXECUTIVE DIRECTORS

SUPERVISORS

INDEPENDENT SUPERVISOR:

SPECIAL RESOLUTION

SUPPLEMENTAL NOTICE OF EXTRAORDINARY GENERAL MEETING

More from TravelSky Technology Limited

TravelSky Technology Limited Proxy Solicitation & Information Statement 2003