TravelSky Technology Limited — Proxy Solicitation & Information Statement 2005

Jun 28, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular, you should consult your 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 transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or 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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(Stock Code: 696)

DISCLOSEABLE TRANSACTION ACQUISITION OF HARDWARES AND SOFTWARES

28 June 2005

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
The Acquisition Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	2
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Discloseable Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Effect on the Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix - General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5

— i —

DEFINITIONS

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

“Acquisition”	the acquisition of the Products by the Company pursuant to the Acquisition
	Agreement
“Acquisition Agreement”	the acquisition agreements dated 15 June 2005 and entered into between the
	Company (through its agent, an import and export company) and UNISYS in
	relation to the Acquisition
“associates”	has the meaning as ascribed thereto under the Listing Rules
“Board”	the board of directors of the Company
“Company”	TravelSky Technology Limited, a company established in the PRC, whose H
	Shares are listed on The Stock Exchange of Hong Kong Limited and whose
	American depositary shares are traded on the over-the-counter market in the
	United States
“Directors”	the directors of the Company
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”	24 June 2005, the latest practicable date prior to the printing of this circular, for
	purpose of ascertaining certain information in this circular
“Listing Rules”	Rules Governing the Listing of Securities on the Stock Exchange
“Percentage Ratios”	the percentage ratios under Rule 14.07 of the Listing Rules, other than the profits
	ratio, revenue ratio and equity capital ratio
“PRC”	the People’s Republic of China which, for the purpose of this circular, excludes
	Hong Kong, Taiwan and the Macau Special Administrative Region
“Products”	Dorado 280 mainframes and related hardwares and softwares
“SF Ordinance”	the Securities and Futures Ordinance, Cap. 571 of the Laws of Hong Kong

— ii —

	DEFINITIONS
“Supervisors”	the supervisor(s) of the Company
“UNISYS”	Unisys China Limited, a company incorporated in Hong Kong
“United States”	United States of America
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC (unless otherwise specified, the currency
	in this announcement is Renminbi)
“US$”	United States dollars, the lawful currency of the United States

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LETTER FROM THE BOARD

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(Stock Code: 696)

Chairman: Mr Zhu Yong

Executive Directors:

Mr Zhu Xiaoxing Mr Ding Weiping Mr Song Jinxiang

Registered Office: Floor 18-20, South Wing, Park C Raycom InfoTech Park No. 2, Ke Xue Yuan South Road Haidian District, Beijing 100080 PRC

Non-executive Directors:

Mr Wang Quanhua Mr Cao Jianxiong Mr Zhang Xueren Mr Rong Gang Mr Yang Yatie Mr Li Xiaoguang Ms Si Yupei Mr Song Jian

Independent non-executive Directors:

Mr Wu Jiapei Mr Chow Kwok Wah, James Mr Lee Kwok Ming, Don

Head office and principal place of business in Hong Kong: Room 3005-3007, 30/F Great Eagle Centre 23 Harbour Road Wanchai, Hong Kong

28 June 2005

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION ACQUISITION OF HARDWARES AND SOFTWARES

INTRODUCTION

On 15 June 2005, the Board announced that on the same date, the Company (through its agent, an import and export company), entered into the Acquisition Agreement with UNISYS, in relation to the Acquisition of the Products. The principal terms of the Acquisition Agreement are set out in the paragraph headed “Acquisition Agreement” below.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information regarding the Acquisition and the Acquisition Agreement and other relevant information.

ACQUISITION AGREEMENT

Date: 15 June 2005

Parties:

• (i) the Company (through its agent, an import and export company), as purchaser; and

• (ii) UNISYS, as vendor, who, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, is a third party independent of the Company and connected persons (within the meaning of the Listing Rules) of the Company

The Acquisition

Under the Acquisition Agreement, the Company has agreed to acquire from UNISYS the Products, which include Dorado 280 mainframes and related hardwares and softwares.

Consideration

The total consideration for the Products is US$33,920,000 (equivalent to approximately RMB281,536,000 or HK$264,576,000) in cash which was arrived at after arm’s length negotiation between the parties and is, to the best knowledge of the Directors, in line with the prices of similar transactions made between UNISYS and its other customers. The consideration is to be paid from the Company’s internal resources. It will be paid by instalments according to the implementation schedule of the Products (with the last instalment being payable upon full commercial operation of all the Products, which is expected to be in December 2005). The Directors are of the view that the Acquisition will not have a material adverse impact on the working capital of the Group.

UNISYS

UNISYS is principally engaged in the provision of information technology services and solutions. The Directors confirm that, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, UNISYS is a third party independent of the Company and connected persons (within the meaning of the Listing Rules) of the Company. UNISYS is a wholly-owned subsidiary of Unisys Corporation (trading symbol “VIS”), a company listed on New York Stock Exchange, Inc.. Unisys Corporation is a worldwide information technology service and solutions company and provides services and technology to commercial businesses and governments throughout the world. Besides, the Group’s existing mainframe, which will be replaced by the Dorado 280 mainframes as part of the Products and will be used as a backup and/or research facility, was also provided by UNISYS. The Directors believe that the Products provided by UNISYS have the handling capability and quality which can satisfy the needs of the Group.

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LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

The fast-growing national economy and booming tourism industry have been a driving force to the considerable growth in the air and travel industry in the PRC in recent years. To satisfy the demand for information technology systems with greater handling capability, arising from the growing market scale of the PRC civil aviation industry and the increasing demand for information technology solutions in the industry, the Group has been continuously improving operating reliability and enhanced capabilities of its infrastructure, including inventory control system, computerised reservation system and airport passenger processing system. The Board believes that the Acquisition will assist the Group to achieve the above objectives. In particular, the Dorado 280 mainframes (being part of the Products) have larger data-storage and processing capacities. They are designed for mission-critical operations with high-volume demand such as airline reservation and can support more application softwares used in the Company’s information technology systems. Accordingly, the Directors are of view that the Products can improve the operating reliability and enhance capabilities of the Group’s infrastructure. The Directors (including the independent non-executive Directors) are of the view that the terms of the Acquisition Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Information on the Group

The Group is principally engaged in providing information technology solutions for China’s air travel and tourism industries and inventory management solutions for Chinese commercial airlines.

DISCLOSEABLE TRANSACTION

The total consideration for the Products amounted to about US$33,920,000 (equivalent to RMB281,536,000 or HK$264,576,000). The relevant Percentage Ratios, calculated in accordance with Rule 14.07 of the Listing Rules, in connection with the Acquisition of the Listing Rules) are either less than 5%, or more than 5% but less than 25%. Accordingly, under Rule 14.08 of the Listing Rules, the Acquisition constitutes a discloseable transaction for the Company. The Acquisition is only subject to the reporting, announcement and issue of circulars to shareholders requirements under Rules 14.34 to 14.39 of the Listing Rules, and is exempt from shareholders’ or independent shareholders’ approval requirements.

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LETTER FROM THE BOARD

EFFECT OF THE ACQUISITION

After completion of the Acquisition, the assets of the Group will be increased by an amount equal to the value of the Products (i.w. the amount equivalent to Consideration) and on the other hand, the Group will pay the Consideration by way of cash. Accordingly, the Acquisition will not have any significant effect on the asset value of the Group. In addition, the Acquisition will not have any significant effect on the liabilities of the Group as the Company plans that the entire Consideration will be funded from the Company’s internal resources. The Directors are also of the view that the Acquisition will not have any immediate impact on the earnings of the Group.

ADDITIONAL INFORMATION

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

In this circular, for information purposes only, unless otherwise stated, conversion of Renminbi into United States dollars (or vice versa) has been calculated by using an exchange rate of US$1.00 = RMB8.3 and conversion of United States dollars into Hong Kong dollars (or vice versa) has been calculated by using an exchange rate of US$1.00 = HK$7.8.

By order of the Board TravelSky Technology Limited

Zhu Yong Chairman

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GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. 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 INTERESTS BY DIRECTORS AND SUPERVISORS

• (a) As at the Latest Practicable Date, none of the Directors, the Supervisors and the chief executive of the Company had any interest and short positions in the shares, underlying shares or as the case may be, the equity interest and debentures of the Company or its associated corporations (within the meaning of the SF Ordinance) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SF Ordinance (including interests and short positions which he was taken or deemed to have under such provisions of the SF Ordinance), or which were required, pursuant to section 352 of the SF Ordinance, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

• (b) Service contracts of the Directors

Each existing member of the Board has entered into a service agreement with the Company. All existing Directors will serve a term up to 4 December 2006. The Directors may serve consecutive terms of three years each if re-elected at general meetings.

None of the Directors has a service contract with the Company or its subsidiaries which is not determinable by the Company or its subsidiaries within one year without payment of compensation, other than statutory compensation.

• (c) Competing interest of the Directors

As at the Latest Practicable Date, none of the Directors was interested in any business, apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with that of the Group.

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GENERAL INFORMATION

APPENDIX

(d) Others

As at the Latest Practicable Date, (i) each of Mr Zhu Yong, the Chairman of the Company, and Mr Rong Gang, a non-executive Director, is the Deputy General Manager of China TravelSky Holding Company, (ii) Mr Wang Quanhua, a non-executive Director, is the Deputy General Manager of China Southern Air Holding Company, (iii) Mr Cao Jianxiong, a non executive Director, is the Vice President of China Eastern Air Holding Company, and (iv) Ms Li Xiaojun, the Chairperson of the Supervisory Committee of the Company, is the Deputy Secretary to the Communist Party Committee in China TravelSky Holding Company.

3. DISCLOSABLE INTEREST UNDER DIVISIONS 2 AND 3 OF PART XV OF THE SF ORDINANCE AND SUBSTANTIAL SHAREHOLDERS

• (a) As at the Latest Practicable Date and so far as is known to the Directors, the Supervisors or chief executive of the Company, the following persons (other than a Director, a Supervisors or chief executive of the Company) had an interest or short position in the Shares or underlying shares in the Company (including interest in options, if any) which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SF Ordinance, or was directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group:

			Percentage of
			respective	Percentage
			class of share	of total
		Class and no.	capital	share
Name of shareholder	Capacity	of Securities	(Note 1)	capital
Templeton Asset	Investment manager	37,663,000 H shares of	12.12%	4.24%
Management Limited		RMB1 each (L)
Matthews International	Investment manager	25,327,000 H shares of	8.15%	2.85%
Capital Management, LLC		RMB1 each (L)
J.P. Morgan Chase & Co.	Beneficial owner	154,000 H shares of	0.05%	0.02%
		RMB1 each (L)
	Investment manager	27,083,000 H shares of	8.71%	3.05%
		RMB1 each (L)
	Other	6,958,600 H shares of	2.24%	0.78%
		RMB1 each (L)
	(Note 2)	6,958,600 H shares of	2.24%	0.78%
		RMB1 each (lending pool)

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GENERAL INFORMATION

APPENDIX

			Percentage of
			respective	Percentage
			class of share	of total
		Class and no.	capital	share
Name of shareholder	Capacity	of Securities	(Note 1)	capital
Platinum Asset	Investment manager	7,202,000 H shares of	2.32%	0.81%
Management Limited		RMB1 each (L)
	Trustee	11,635,000 H shares of	3.74%	1.28%
		RMB1 each (L)
JPMorgan Chase & Co.	Beneficial owner	478,000 H shares of	0.15%	0.05%
		RMB1 each (L)
	Investment manager	16,829,000 H shares of	5.41%	1.89%
		RMB1 each (L)
	Custodian	4,158,000 H shares of	1.32%	0.47%
		RMB1 each (L)
	(Note 3)	4,158,000 H shares of	1.32%	0.47%
		RMB1 each (lending pool)
Shanghai Industrial	Controlled	28,475,249 H shares of	9.16%	3.21%
Investment (Holdings)	corporation	RMB1 each (L)
Company Limited
J.P. Morgan Fleming Asset	Investment manager	22,199,000 H shares of	7.14%	2.50%
Management (Asia) Inc.		RMB1 each (L)
J.P. Morgan Fleming Asset	Investment manager	22,199,000 H shares of	7.14%	2.50%
Management Holdings Inc.		RMB1 each (L)
JF Asset Management Limited	Investment manager	22,199,000 H shares of	7.14%	2.50%
		RMB1 each (L)
China TravelSky	Beneficial owner	198,496,500 Domestic	34.4%	22.35%
Holding Company		shares of RMB1 each (L)
China Southern Air	Beneficial owner	116,460,500 Domestic	20.2%	13.11%
Holding Company		shares of RMB1 each (L)

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GENERAL INFORMATION

APPENDIX

			Percentage of
			respective	Percentage
			class of share	of total
		Class and no.	capital	share
Name of shareholder	Capacity	of Securities	(Note 1)	capital
China Eastern Air	Beneficial owner	109,414,500 Domestic	19.0%	12.32%
Holding Company		shares of RMB1 each (L)
China National Aviation	Beneficial owner	89,433,500 Domestic	15.5%	10.06%
Holding Company		shares of RMB1 each (L)

Notes: 1. The Letter “L” represents the entity’s interests in the securities.

2. The capacity in which the securities are held was not stated in the corporate substantial notice of J.P. Morgan Chase & Co..

3. The capacity in which the securities are held was not stated in the corporate substantial notice of JPMorgan Chase & Co..

• (b) So far as is known to the Directors, the following entities are, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the subsidiaries of the Company as at the Latest Practicable Date:

			Approximate
			percentage
Name of subsidiary	Name of shareholder	Registered Capital	of interest
海南民航凱亞有限公司	中國南方航空集團公司	RMB825,000	12.47%
(Hainan Civil Aviation Cares Co., Ltd.)	(China Southern Air Holding Co.)
湖北民航凱亞有限公司	武漢天河機場有限責任公司	RMB625,000	12.50%
(Cares Hubei Co., Ltd.)	(Wuhan Tinhe Airport Company Limited)
	中國南方航空股份有限公司
湖北民航凱亞有限公司	湖北分公司工會委員會	RMB625,000	12.50%
(Cares Hubei Co., Ltd.)	(Union Committee of Wubei Branch
	of China Southern Air Company Limited)
湖北民航凱亞有限公司	中國東方航空武漢有限責任公司	RMB625,000	12.50%
(Cares Hubei Co., Ltd.)	(China Eastern Air Wuhan
	Company Limited)

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GENERAL INFORMATION

APPENDIX

			Approximate
			percentage
Name of subsidiary	Name of shareholder	Registered Capital	of interest
重慶民航凱亞信息技術有限公司	中國國際航空股份有限公司	RMB2,401,000	24.50%
(Cares Chongqing Information	(China International Aviation
Technology Co., Ltd.)	Company Limited)
重慶民航凱亞信息技術有限公司	重慶機場(集團)有限責任公司	RMB2,401,000	24.50%
(Cares Chongqing Information	(Chongqing Airport (Group)
Technology Co., Ltd.)	Company Limited)
雲南民航凱亞信息有限公司	中國東方航空雲南公司	RMB980,000	49.00%
(Aviation Cares of Yunnan	(China Eastern Air - Yunnan
Information Co., Ltd.)	Airlines Company)
天信達信息技術有限公司	Societe Internationale de	US$1,225,000	49.00%
(InfoSky Technology Co., Ltd.)	Telecommunications Aeronautiques
	Greater China Holdings Limited
廈門民航凱亞有限公司	廈門航空有限公司	RMB570,000	28.50%
(Civil Aviation Cares of Xiamen Ltd.)	(Xiamen Airlines Co.)
廈門民航凱亞有限公司	廈門機場發展股份有限公司	RMB410,000	20.50%
(Civil Aviation Cares of Xiamen Ltd.)	(Xiamen Airport Development
	Company Limited)
青島民航凱亞系統集成有限公司	民航青島流亭機場	RMB720,000	36%
(Civil Aviation Cares of Qingdao Ltd.)	(Civil Aviation Qingdao Liuting Airport)
青島民航凱亞系統集成有限公司	上海民航華東凱亞系統集成有限公司	RMB260,000	13%
(Civil Aviation Cares of Qingdao Ltd.)	(Huadong Civil Aviation Cares of
	Shanghai Ltd.)
西安民航凱亞科技有限公司	陝西省機場管理集團	RMB340,000	17%
(Civil Aviation Cares of Xi’an Ltd.)	(Shanxi Airport Management Group)
西安民航凱亞科技有限公司	中國東方航空西北公司	RMB640,000	32%
(Civil Aviation Cares of Xi’an Ltd.)	(China Eastern Air - Northwest
	Airlines Company)
新疆民航凱亞信息網絡有限責任公司	中國民用航空烏魯木齊管理局	RMB735,000	24.50%
(Civil Aviation Cares Technology	(China Civil Aviation
of Xinjiang Ltd.)	Urnmqi Maangement Bureau)
新疆民航凱亞信息網絡有限責任公司	新疆航空公司	RMB735,000	24.50%
(Civil Aviation Cares Technology	(Xinjiang Airlines Co.)
of Xinjiang Ltd.)

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GENERAL INFORMATION

APPENDIX

• (c) Save as disclosed in this circular, as at the Latest Practicable Date and so far as is known to the Directors, the Supervisors or chief executive of the Company, there was no other person (other than a Director or chief executive of the Company) who had an interest or short position in the Shares or underlying shares in the Company (including interest in options, if any) which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SF Ordinance, or was directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

4. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Group.

5. GENERAL

• (a) The secretary of the Company is Mr Ding Weiping.

• (b) As at the Latest Practicable Date, the Company has not yet appointed a qualified accountant. The Company has identified suitable candidate and the Company will issue a separate announcement upon appointment of the qualified accountant.

• (c) The registered office of the Company is located at Floor 18-20, South Wing, Park C, Raycom InfoTech Park, No. 2, Ke Xue Yuan South Road, Haidian District, Beijing 100080, PRC. The principal place of business of the Company is Room 3005-3007, 30/F., Great Eagle Centre, 23 Harbour Road, Wanchai, Hong Kong.

• (d) The H share register and transfer office of the Company is Hong Kong Registrars Limited of Room 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (e) The English text of this circular shall prevail over the Chinese text in case of inconsistency.

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