TravelSky Technology Limited - Proxy Solicitation & Information Statement 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, stock broker, solicitor, professional accountant or other appropriate independent advisers.

If you have sold or transferred all your shares in TravelSky Technology Limited , you should at once hand this circular together with the accompanying form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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

(Stock Code: 0696)

MAJOR TRANSACTION

ACQUISITION OF LAND IN BEIJING

A letter from the Board is set out on pages 4 to 8 of this circular.

2 March 2010

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			4
APPENDIX I	—	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . .	I-1
APPENDIX II	—	FINANCIAL INFORMATION OF THE ACCA GROUP . . . . . . . . . .	II-1
APPENDIX III	—	VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	—	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1

— i —

DEFINITIONS

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

“ACCA”

Accounting Centre of China Aviation Limited Company (中國航空結算有限責任公司), a wholly-owned subsidiary of China TravelSky Holding Company (中國民航信息集團公司)

“ACCA Acquisition”
the Company’s acquisition of the entire registered capital of ACCA for a consideration of RMB788 million pursuant to the sale and purchase agreement dated 5 May 2008 entered into between the Company and CTHC as disclosed in the ACCA Acquisition Circular
“ACCA Acquisition Circular”
the Company’s circular to the Shareholders dated 16 June 2008 relating to, inter alia, the ACCA Acquisition
“ACCA Group”
ACCA and its subsidiaries
“Acquisition”
the acquisition of the land use right of the Land by the Company pursuant to the Contracts
“associate(s)”
“Beijing Land Bureau”
have the same meaning ascribed to it under Chapters 1 and 19A of the Listing Rules
北京市國土資源局 Beijing Municipal Bureau of Land and Resources
“Beijing Shunyi Land Reserve Centre”
“Bid Confirmation”
北京市土地整理儲備中心順義區分中心 (Shunyi District Branch of Beijing Land Consolidation and Reserve Center)
a letter issued by 北京市土地整理儲備中心 (Beijing Land Consolidation and Reserve Center) on 14 January 2010 to the Company confirming its successful bid for the land use right of the Land at the Land Transfer Price at an open auction held on the same date
“Board”
the board of Directors of the Company
“Company”
TravelSky Technology Limited, a company incorporated under the laws of the PRC whose shares are listed on the Main Board of the Stock Exchange and whose American depositary shares are traded on the over-the-counter market in the United States of America
“connected person(s)”
has the same meaning as ascribed to it under the Listing Rules
“Contracts”
“CTHC”
the Land Transfer Contract and the Development Compensation Contract
China TravelSky Holding Company (中國民航信息集團公司), a promoter and a substantial Shareholder of the Company

— 1 —

DEFINITIONS

“Development Compensation 土地開發建設補償協議 (contract(s) for the compensation on Contract” land development and construction) to be entered into between the Company and Beijing Shunyi Land Reserve Center in respect of the Land

“Directors” the directors of the Company
“Earnest Money” RMB41 million (equivalent to approximately HK$46.59 million), being the earnest money paid by the Company in order to participate in the open auction for bidding the Land pursuant to the requirement set out in a notice dated 11 December 2009 on transfer of land use right for construction in Beijing issued by Beijing Land Bureau
“Eastern Holding” China Eastern Air Holding Limited（中國東方航空集團公司）
“Group” the Company and its subsidiaries
“Group of Shareholders” CTHC, Southern Holding, Eastern Holding and National Aviation Holding
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Land” parcels of State-owned land for construction located at 08, 09, 19 and 21 blocks at Xincheng 19 Street, Shunyi District, Beijing
“Land Transfer Contract” 國有建設用地使用權出讓合同 (contract(s) for the transfer of the land use right of State-owned land for construction) to be entered into between the Company and Beijing Land Bureau in respect of the Land
“Land Transfer Price” a land transfer price of RMB1,910 million (equivalent to approximately HK$2,170 million)
“Latest Practicable Date” 26 February 2010, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular
“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange
“National Aviation Holding” China National Aviation Holding Company（中國航空集團公司）

“Percentage Ratio” each percentage ratio for the purpose of Rule 14.07 of the Listing Rules applicable to the Acquisition

— 2 —

DEFINITIONS

“PRC”	the People’s Republic of China and, for the purpose of this
	circular, excludes the Macau Special Administrative Region
	and the Hong Kong Special Administrative Region
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Shares”	H shares of RMB1.00 each in the capital of the Company
“Shareholder(s)”	shareholder(s) of the Company
“Sichuan Airlines”	Sichuan Airlines Company Limited（四川航空股份有限公司）
“Southern Holding”	China Southern Air Holding Company（中國南方航空集團公
	司）
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“substantial shareholder”	has the same meaning as ascribed to it under the Listing Rules
“Supervisor(s)”	the supervisor(s) of the Company
“%”	per cent.

For the purpose of this circular, unless otherwise indicated, the exchange rate at HK$1 = RMB0.88 has been used, where applicable, for the purpose of illustration only and not constitute a representation that any amount have been, could have been or may be exchanged.

— 3 —

LETTER FROM THE BOARD

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

(Stock Code: 0696)

Directors: Xu Qiang (Chairman) Cui Zhixiong Xiao Yinhong Wang Quanhua[#] Luo Chaogeng[#] Cao Guangfu[#] Yick Wing Fat, Simon[##] Yuan Yaohui[##] Chua Keng Kim[##]

Registered office: Floor 18-20, South Wing, Park C Raycom InfoTech Park No. 2 Ke Xue Yuan South Road Haidian District, Beijing 100190 the PRC

# Non-executive Directors

## Independent non-executive Directors

2 March 2010

To the Shareholders

Dear Sir/Madam

MAJOR TRANSACTION

ACQUISITION OF LAND IN BEIJING

INTRODUCTION

As set out in the Company’s announcement dated 26 January 2010, the Company made a successful bid for the land use right of the Land at the Land Transfer Price at an open auction held on 14 January 2010, as confirmed by the Bid Confirmation.

As set out in the Company’s announcement dated 26 February 2010, the Company obtained the necessary written Shareholders’ approval for the Acquisition for the purpose of Rule 14.44 of the Listing Rules and therefore on 24 February 2010, the Company signed the Contracts and delivered the same to Beijing Land Bureau and Beijing Shunyi Land Reserve Centre for their signing of the Contracts. As at the Latest Practicable Date, the Contracts have not yet been signed by Beijing Land Bureau and Beijing Shunyi Land Reserve Centre.

This circular provides you with further information of the Acquisition.

— 4 —

LETTER FROM THE BOARD

PARTICULARS OF THE LAND

Location: 08, 09, 19 and 21 blocks at Xincheng 19 Street, Shunyi District, Beijing

Site area : Approximately 327,011 sq.m., of which approximately 188,109 sq.m. are for construction Total gross floor area: Not exceeding 376,218 sq.m. Usage: Multifunction (including commercial and comprehensive) Term of the grant of land use 40 years for commercial purpose and 50 years for right: comprehensive purposes

CONSIDERATION

Pursuant to the terms of the Contracts signed by the Company, the Land Transfer Price of RMB1,910 million (equivalent to approximately HK$2,170 million) comprises:

(a) RMB1,648,332,200 (equivalent to approximately HK$1,873.10 million), being the transfer price for the land use right of the Land (the “ Government Land Premium ”); and
(b) RMB261,667,800 (equivalent to approximately HK$297.35 million), being development compensation amount of the Land (the “ Development Compensation Amount ”).

The Government Land Premium will be payable by the Company within three working days after the date of the Land Transfer Contract duly executed by all parties thereto. The Earnest Money of RMB41 million (equivalent to approximately HK$46.59 million) already paid by the Company for participating in the open auction will form part of the payment of the Government Land Premium.

The Development Compensation Amount will be payable by the Company in the following manner:-

(i) 20% of the Development Compensation Amount will be payable within three working days after the date of the Development Compensation Contract duly executed by all parties thereto; and
(ii) 80% of the Development Compensation Amount will be payable within three working days after the delivery of the Land by Shunyi District Branch of Beijing Land Consolidation and Reserve Centre to the Company within three working days after the payment of 20% of the Development Compensation Amount by the Company as mentioned in (i) above. Beijing Shunyi Land Reserve Centre is required to carry out and complete such works as necessary for making available temporary water and electricity supply for the Land and completion of the leveling of the Land before delivering the Land to the Company.

— 5 —

LETTER FROM THE BOARD

The Government Land Premium and the Development Compensation Amount shall be paid by the Company into a designated account of 北京市財政局 (the Finance Bureau of Beijing).

The Company will make further announcement if and when there is any material variation of the terms of the Contracts mentioned above or the respective counterparties fail to sign the Contracts.

The Land Transfer Price of RMB1,910 million (equivalent to approximately HK$2,170 million) was arrived at as a result of a successful bid by the Company at an open auction. Such price was determined after having taken into account the location of the Land and the prevailing property market conditions in Beijing.

INFORMATION ON COUNTERPARTIES

Beijing Land Bureau is a unit under Beijing Municipal Government of the PRC responsible for the administrative management on land and mineral resources of BeijingCity. Beijing Shunyi Land Reserve Center is a unit under Beijing Land Bureau responsible for the consolidation, requisition, purchase, recovery, exchanges, reserves and supply of State-owned land in BeijingCity. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Beijing Land Bureau (including Beijing Shunyi Land Reserve Center) is a third party independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in provision of aviation information technology services in the PRC as well as provision of accounting, settlement and clearing services and information system development and support services to domestic and worldwide airline companies.

The Company intends to build a new operating centre comprising database centre and the headquarters office building of the Company on the Land, which would benefit the development of the Group in the long run.

The Directors (including the independent non-executive Directors) consider that the terms of the Acquisition are normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

The Land Transfer Price will be funded by the Group’s internal resources. The Directors consider that there will not be any material impact on the Group’s operations as a result of the Acquisition.

As the Land Transfer Price will be funded by the Group’s internal resources, no additional liabilities will be incurred and hence there will not be any change in the asset-liability ratio as a result of the Acquisition.

— 6 —

LETTER FROM THE BOARD

The land use right of the Land will be amortised during the term of grant and hence the depreciation and amortisation expenses of the Group will increase as a result of the Acquisition.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

After the completion of the Acquisition, the Company will commence the construction of the new operating centre on the Land. The Company will also adjust and optimise the overall allocation of the Group’s resources in order to enhance its ability of sustainable development. At the same time, the Group will continue focusing on the development of its core business by means of technological innovation to satisfy the development needs of the industry. Looking forward, with the continuous growth of the aviation industry in the PRC, the Acquisition will benefit the long-term development of the Group and enhance its earning capacity and the competitiveness of its core business.

IMPLICATIONS UNDER THE LISTING RULES

Since the assets ratio exceeds 25% but is less than 100% (but the other Percentage Ratio is less than 25%), the Acquisition constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. It is therefore subject to Shareholders’ approval requirement under Rule 14.40 of the Listing Rules.

As at the Latest Practicable Date, each of CTHC, Southern Holding, Eastern Holding and National Aviation Holding held 571,484,393 domestic shares, 232,921,000 domestic shares, 218,829,000 domestic shares and 178,867,000 domestic shares of the Company respectively, representing approximately 29.29%, 11.94%, 11.22% and 9.17% of the total issued share capital of the Company.

Each of CTHC, Southern Holding, Eastern Holding and National Aviation Holding is a promoter of the Company. Further, each of them had voted in an affirmative way (save and except for such events where any of them was required to abstain from voting under the Listing Rules) on Shareholders’ resolutions at each of the extraordinary general meetings of the Company convened for the year 2009. Although they are not parties acting in concert within the meaning of the Hong Kong Code on Takeovers and Mergers, the Group of Shareholders has been closely allied and coordinated so far as the Acquisition is concerned and they have shown support to the Acquisition on the same basis (i.e. they agreed with the Company’s long-term need for the Land to build a new operating centre to service the PRC aviation industry) through the involvement of their senior management which are also members of the Board in considering and approving the Acquisition. Therefore, the Group of Shareholders should be considered as a closely allied group of Shareholders for the purpose of approving the Acquisition.

— 7 —

LETTER FROM THE BOARD

Since no Shareholder is required to abstain from voting if the Company were to convene a general meeting to approve the Acquisition and the Company has obtained a written confirmation approval for the Acquisition from each of CTHC, Southern Holding and Eastern Holding, which together held an aggregate of 1,023,234,393 domestic shares of the Company representing approximately 52.45% of the total issued share capital of the Company as at the Latest Practicable Date, the Shareholders’ approval requirement under Rule 14.40 of the Listing Rules has therefore been satisfied by means of written Shareholders’ approval pursuant to Rule 14.44 of the Listing Rules. National Aviation Holding has also given a written confirmation to the effect that it would take positive and supportive attitude if the Company were to convene a general meeting for approving the resolution for the Acquisition. Accordingly, a general meeting of the Company will not be held for approving the Acquisition.

GENERAL

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

Yours faithfully, By order of the Board TravelSky Technology Limited Xu Qiang Chairman

— 8 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008

The following is a summary of the financial information of the Group (for the purpose of this section, any reference to the “Group” does not include the ACCA Group) for the three years ended 31 December 2006, 31 December 2007 and 31 December 2008 with unqualified opinion, as extracted from the annual reports of the Company for each of the year ended 31 December 2006, 31 December 2007 and 31 December 2008 respectively.

The ACCA Acqusition was completed on 3 March 2009, no retrospective adjustments for ACCA Acquisition were made on the following summary of financial information of the Group for the three years ended 31 December 2006, 31 December 2007 and 31 December 2008. Please refer to the Appendix II “FINANCIAL INFORMATION OF ACCA GROUP” for the financial information of the ACCA Group for the three years ended 31 December 2005, 31 December 2006 and 31 December 2007.

CONSOLIDATED INCOME STATEMENT

(Amounts expressed in thousands of Renminbi (“RMB”), except per share data)

Revenues
Aviation information technology service
Data network and others
Total revenue
Operating expenses
Business taxes and other surcharges
Depreciation and amortisation
Network usage fees
Personnel expenses
Operating lease payments
Technical support and maintenance fees
Commission and promotion expenses
Other operating expenses
Total operating expenses
Operating profit
Financial income, net
Share of results of associated companies
Profit before taxation
Taxation
Profit after taxation
Attributable to
Equity holders of the Company
Minority interest

Year ended December 31
2006
2007
2008
1,395,172
1,601,160
1,609,115
316,533
400,743
396,053
1,711,705
2,001,903
2,005,168
(56,358)
(65,795)
(66,957)
(229,178)
(243,111)
(312,947)
(76,529)
(83,562)
(94,410)
(239,743)
(271,689)
(316,821)
(63,658)
(68,607)
(71,890)
(99,801)
(154,459)
(178,323)
(194,095)
(248,075)
(239,570)
(188,534)
(209,701)
(201,879)
(1,147,896)
(1,344,999)
(1,482,797)
563,809
656,904
522,371
52,406
48,696
77,705
11,727
12,991
17,969
627,942
718,591
618,045
(98,421)
(69,941)
(41,280)
529,521
648,650
576,765
515,587
630,989
560,109
13,934
17,661
16,656
529,521
648,650
576,765

— I-1 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Earnings per share for profit attributable to the equity holders of the Company Basic and diluted (RMB) (Note 1) Cash Dividends	Year ended December 31 2006 2007 2008 0.29 0.36 0.32 195,395 230,921 362,850	Year ended December 31 2006 2007 2008 0.29 0.36 0.32 195,395 230,921 362,850
		362,850

Note 1:

Due to the bonus issue of 888,157,500 new ordinary shares at par value of RMB1 per share to the equity holders of the Company on basis of one bonus share for one existing share by conversion of reserve amounting to RMB 888,157,500 into paid in capital in 2007, the number of ordinary shares increased from 888,157,500 to 1,776,315,000. As a result, the number of ordinary shares for the years ended December 31, 2006 for the purpose of calculating earnings per share has been adjusted retrospectively for the increase of ordinary shares.

Earnings per share for the years ended December 31, 2008, 2007 and 2006 have been computed by dividing the profit attributable to the equity holders of the Company, of RMB 560,109,000, RMB 630,989,000, and RMB 515,587,000 respectively, by 1,776,315,000 ordinary shares issued and outstanding.

There were no potential dilutive ordinary shares outstanding during the years ended December 31, 2008, 2007 and 2006.

— I-2 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

(Amounts expressed in thousands of Renminbi)

ASSETS Non-current assets Property, plant and equipment, net Intangible assets, net Investments in associated companies Held-to-maturity financial assets Other long-term assets Deferred income tax assets Current assets Inventories Accounts receivable, net Due from associated companies Due from related parties, net Income tax receivable Prepayments and other current assets Held-to-maturity financial assets Short-term bank deposits Cash and cash equivalents Total assets EQUITY Capital and reserves attributable to equity holders of the Company Paid-In capital Reserves Retained earnings — Proposed cash dividend — Others Minority interests Total equity LIABILITIES Non-Current liabilities Deferred income tax liabilities Current liabilities Accounts payable and accrual liabilities Due to related parties Income tax payable Deferred revenue Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at December 31 2006 2007 2008 661,149 1,033,148 875,874 9,969 11,824 11,952 68,343 85,996 103,665 100,000 — — 17,000 8,881 8,962 — 9,229 6,769 856,461 1,149,078 1,007,222 4,498 9,241 9,877 84,882 141,565 160,735 273 6,308 6,556 300,070 389,561 740,610 — — 45,104 62,064 102,399 155,642 — 100,000 — 1,884,604 1,843,949 2,274,728 1,233,166 1,209,152 840,733 3,569,557 3,802,175 4,233,985 4,426,018 4,951,253 5,241,207 888,158 1,776,315 1,776,315 2,066,112 1,296,834 1,466,952 195,395 230,921 362,850 749,137 1,028,659 1,053,829 3,898,802 4,332,729 4,659,946 72,523 85,997 98,810 3,971,325 4,418,726 4,758,756 — 129 180 359,200 470,212 430,973 85,442 39,960 44,548 7,605 17,054 3,690 2,446 5,172 3,060 454,693 532,398 482,271 454,693 532,527 482,451 4,426,018 4,951,253 5,241,207 3,114,864 3,269,777 3,751,714 3,971,325 4,418,855 4,758,936	As at December 31 2006 2007 2008 661,149 1,033,148 875,874 9,969 11,824 11,952 68,343 85,996 103,665 100,000 — — 17,000 8,881 8,962 — 9,229 6,769 856,461 1,149,078 1,007,222 4,498 9,241 9,877 84,882 141,565 160,735 273 6,308 6,556 300,070 389,561 740,610 — — 45,104 62,064 102,399 155,642 — 100,000 — 1,884,604 1,843,949 2,274,728 1,233,166 1,209,152 840,733 3,569,557 3,802,175 4,233,985 4,426,018 4,951,253 5,241,207 888,158 1,776,315 1,776,315 2,066,112 1,296,834 1,466,952 195,395 230,921 362,850 749,137 1,028,659 1,053,829 3,898,802 4,332,729 4,659,946 72,523 85,997 98,810 3,971,325 4,418,726 4,758,756 — 129 180 359,200 470,212 430,973 85,442 39,960 44,548 7,605 17,054 3,690 2,446 5,172 3,060 454,693 532,398 482,271 454,693 532,527 482,451 4,426,018 4,951,253 5,241,207 3,114,864 3,269,777 3,751,714 3,971,325 4,418,855 4,758,936
		1,007,222
		9,877 160,735 6,556 740,610 45,104 155,642 — 2,274,728 840,733
		4,233,985
		5,241,207
		1,776,315 1,466,952 362,850 1,053,829
		4,659,946 98,810
		4,758,756
		180
		430,973 44,548 3,690 3,060
		482,271
		482,451
		5,241,207
		3,751,714
		4,758,936

— I-3 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

The following is an extract of the latest published audited consolidated financial statements of the Group (for the purpose of this section, any reference to the “Group” does not include the ACCA Group) for the year ended 31 December 2008 together with the notes therein, from the 2008 annual report of the Company.

The ACCA Acqusition was completed on 3 March 2009, no retrospective adjustments for ACCA Acquisition were made on the consolidated financial statement of the Group for the year ended 31 December 2008. The retrospective adjustments for ACCA acquisition has been made on in the unaudited condensed consolidated financial statements of the Group for the six months ended 30 June 2009. Please refer to “SUMMARY OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED JUNE 30, 2009” for more details.

CONSOLIDATED INCOME STATEMENT

(Amounts expressed in thousands of Renminbi (“RMB”), except per share data)

		Year ended	December 31
	Note	2008	2007
Revenues
Aviation information technology service		1,609,115	1,601,160
Data network and others		396,053	400,743
Total revenue	5	2,005,168	2,001,903
Operating expenses
Business taxes and other surcharges		(66,957)	(65,795)
Depreciation and amortisation		(312,947)	(243,111)
Network usage fees		(94,410)	(83,562)
Personnel expenses		(316,821)	(271,689)
Operating lease payments		(71,890)	(68,607)
Technical support and maintenance fees		(178,323)	(154,459)
Commission and promotion expenses		(239,570)	(248,075)
Other operating expenses		(201,879)	(209,701)
Total operating expenses		(1,482,797)	(1,344,999)
Operating profit		522,371	656,904
Financial income, net		77,705	48,696
Share of results of associated companies		17,969	12,991
Profit before taxation	6	618,045	718,591
Taxation	10	(41,280)	(69,941)
Profit after taxation		576,765	648,650
Attributable to
Equity holders of the Company		560,109	630,989
Minority interest		16,656	17,661
		576,765	648,650
Earnings per share for profit attributable to
the equity holders of the Company
Basic and diluted (RMB)	12	0.32	0.36
Cash Dividends	11	362,850	230,921

— I-4 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

(Amounts expressed in thousands of Renminbi)

Note ASSETS Non-current assets Property, plant and equipment, net 13 Intangible assets, net 14 Investments in associated companies 16 Other long-term assets 20 Deferred income tax assets 18 Current assets Inventories 21 Accounts receivable, net 22 Due from associated companies 25 Due from related parties, net 23, 38(3) Income tax receivable Prepayments and other current assets 26 Held-to-maturity financial assets 19 Short-term bank deposits 27 Cash and cash equivalents 28 Total assets EQUITY Capital and reserves attributable to equity holders of the Company Paid-In capital 31 Reserves 32 Retained earnings 33 — Proposed cash dividend 11 — Others Minority interests Total equity LIABILITIES Non-Current liabilities Deferred income tax liabilities 18 Current liabilities Accounts payable and accrual liabilities 29 Due to related parties 30 Income tax payable Deferred revenue Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As at December 31 2008 2007 875,874 1,033,148 11,952 11,824 103,665 85,996 8,962 8,881 6,769 9,229 1,007,222 1,149,078 9,877 9,241 160,735 141,565 6,556 6,308 740,610 389,561 45,104 — 155,642 102,399 — 100,000 2,274,728 1,843,949 840,733 1,209,152 4,233,985 3,802,175 5,241,207 4,951,253 1,776,315 1,776,315 1,466,952 1,296,834 362,850 230,921 1,053,829 1,028,659 4,659,946 4,332,729 98,810 85,997 4,758,756 4,418,726 180 129 430,973 470,212 44,548 39,960 3,690 17,054 3,060 5,172 482,271 532,398 482,451 532,527 5,241,207 4,951,253 3,751,714 3,269,777 4,758,936 4,418,855	As at December 31 2008 2007 875,874 1,033,148 11,952 11,824 103,665 85,996 8,962 8,881 6,769 9,229 1,007,222 1,149,078 9,877 9,241 160,735 141,565 6,556 6,308 740,610 389,561 45,104 — 155,642 102,399 — 100,000 2,274,728 1,843,949 840,733 1,209,152 4,233,985 3,802,175 5,241,207 4,951,253 1,776,315 1,776,315 1,466,952 1,296,834 362,850 230,921 1,053,829 1,028,659 4,659,946 4,332,729 98,810 85,997 4,758,756 4,418,726 180 129 430,973 470,212 44,548 39,960 3,690 17,054 3,060 5,172 482,271 532,398 482,451 532,527 5,241,207 4,951,253 3,751,714 3,269,777 4,758,936 4,418,855
		1,149,078
		9,241 141,565 6,308 389,561 — 102,399 100,000 1,843,949 1,209,152
		3,802,175
		4,951,253
		1,776,315 1,296,834 230,921 1,028,659
		4,332,729
		85,997
		4,418,726
		129
		470,212 39,960 17,054 5,172
		532,398
		532,527
		4,951,253
		3,269,777
		4,418,855

— I-5 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

(Amounts expressed in thousands of Renminbi)

Note ASSETS Non-current assets Property, plant and equipment, net 13 Intangible assets, net 14 Investments in subsidiaries 15 Investments in associated companies 16 Other long-term assets 20 Deferred income tax assets 18 Current assets Inventories 21 Accounts receivable, net 22 Due from subsidiaries, net 24 Due from associated companies 25 Due from related parties, net 23, 38(3) Income tax receivable Prepayments and other current assets 26 Held-to-maturity financial assets 19 Short-term bank deposits 27 Cash and cash equivalents 28 Total assets EQUITY Capital and reserves attributable to equity holders of the Company Paid-In capital 31 Reserves 32 Retained earnings 33 — Proposed cash dividend 11 — Others Total equity LIABILITIES Current liabilities Accounts payable and accrual liabilities 29 Due to related parties 30 Due to subsidiaries Income tax payable Total equity and liabilities Net current assets Total assets less current liabilities	As at December 31 2008 2007 821,951 980,578 10,129 10,016 53,709 37,507 27,290 27,290 8,881 8,881 5,974 8,062 927,934 1,072,334 — 2,632 118,402 110,242 20,290 24,982 4,291 6,308 731,227 381,573 45,104 — 142,503 88,640 — 100,000 2,168,228 1,757,949 737,985 1,111,519 3,968,030 3,583,845 4,895,964 4,656,179 1,776,315 1,776,315 1,471,741 1,299,652 362,850 230,921 837,888 852,988 4,448,794 4,159,876 401,642 442,499 34,628 30,533 10,900 10,789 — 12,482 447,170 496,303 4,895,964 4,656,179 3,520,860 3,087,542 4,448,794 4,159,876	As at December 31 2008 2007 821,951 980,578 10,129 10,016 53,709 37,507 27,290 27,290 8,881 8,881 5,974 8,062 927,934 1,072,334 — 2,632 118,402 110,242 20,290 24,982 4,291 6,308 731,227 381,573 45,104 — 142,503 88,640 — 100,000 2,168,228 1,757,949 737,985 1,111,519 3,968,030 3,583,845 4,895,964 4,656,179 1,776,315 1,776,315 1,471,741 1,299,652 362,850 230,921 837,888 852,988 4,448,794 4,159,876 401,642 442,499 34,628 30,533 10,900 10,789 — 12,482 447,170 496,303 4,895,964 4,656,179 3,520,860 3,087,542 4,448,794 4,159,876
		1,072,334
		2,632 110,242 24,982 6,308 381,573 — 88,640 100,000 1,757,949 1,111,519
		3,583,845
		4,656,179
		1,776,315 1,299,652 230,921 852,988
		4,159,876
		442,499 30,533 10,789 12,482
		496,303
		4,656,179
		3,087,542
		4,159,876

— I-6 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts expressed in thousands of Renminbi)

Note Balance at January 1, 2007 Transfer from reserves 32 Profit for the year Dividend relating to year 2006 Dividends payable to minority shareholders of subsidiaries Currency translation differences 32 Appropriation to reserves 32, 33 Balance at December 31, 2007 Note Balance at January 1, 2008 Profit for the year Dividend relating to year 2007 11 Dividends payable to minority shareholders of subsidiaries Currency translation differences 32 Appropriation to reserves 32, 33 Balance at December 31, 2008	Attributable to equity holders of the Company Paid-In capital Reserves Retained earnings 888,158 2,066,112 944,532 888,157 (888,157) — — — 630,989 — — (195,395) — — — — (1,667) — — 120,546 (120,546) 1,776,315 1,296,834 1,259,580 Attributable to equity holders of the Company Paid-In capital Reserves Retained earnings 1,776,315 1,296,834 1,259,580 — — 560,109 — — (230,921) — — — — (1,971) — — 172,089 (172,089) 1,776,315 1,466,952 1,416,679	Minority Interest 72,523 — 17,661 — (4,187) — — 85,997 Minority Interest 85,997 16,656 — (3,843) — — 98,810	Total 3,971,325 — 648,650 (195,395) (4,187) (1,667) — 4,418,726 Total 4,418,726 576,765 (230,921) (3,843) (1,971) — 4,758,756

— I-7 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

(Amounts expressed in thousands of Renminbi)

		Year ended	December 31
	Note	2008	2007
Cash flows from operating activities
Cash generated from operations	34	526,372	790,232
Refund of enterprise income tax		30,114	30,180
Enterprise income tax paid		(127,351)	(99,772)
Net cash generated from operating activities		429,135	720,640
Cash flows from investing activities
Purchases of property, plant, equipment and
intangible assets		(320,436)	(568,074)
Maturities of short-term bank deposits		1,923,320	1,743,036
Placements of short-term bank deposits		(2,354,099)	(1,702,381)
Interest received		94,194	64,359
Dividends received from associated companies		300	838
Proceeds from disposal of property,
plant and equipment		482	661
Maturities of held-to-maturity treasury bonds		100,000	—
Investments in associated companies		—	(5,500)
Net cash used in investing activities		(556,239)	(467,061)
Cash flows from financing activities
Dividend paid to group shareholders		(230,921)	(252,813)
Dividend paid to minority shareholders of subsidiaries		(3,519)	(3,964)
Net cash used in financing activities		(234,440)	(256,777)
Effect of foreign exchange rate changes
on cash and cash equivalents		(6,875)	(20,816)
Net decrease in cash and cash equivalents		(368,419)	(24,014)
Cash and cash equivalents at beginning of the year		1,209,152	1,233,166
Cash and cash equivalents at end of the year	28	840,733	1,209,152

— I-8 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts expressed in thousands of Renminbi (“RMB”) unless otherwise stated)

1. COMPANY ORGANISATION AND PRINCIPAL ACTIVITIES

The Company was listed on The Stock Exchange of Hong Kong Limited on February 7, 2001. The address of its registered office is Floor 18-20, South Wing, Park C, Raycom InfoTech Park, No.2, Ke Xue Yuan South Road, Haidian District, Beijing 100190, PRC.

As at December 31, 2008, the Company had direct or indirect interests in the following subsidiaries and associated companies. All of these subsidiaries and associated companies are limited liability companies incorporated and operated in the PRC except for TravelSky Technology (Hong Kong) Limited, TravelSky Technology (Singapore) Limited, TravelSky Technology (Korea) Limited and TravelSky Technology (Japan) Limited, which are limited liability companies incorporated and operated in Hong Kong, Singapore, Korea and Japan respectively.

		Percentage	Percentage	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held		capital	Principal activities
		Direct	Indirect	RMB
Subsidiaries
Hainan Civil Aviation	March 2, 1994	64.78%	—	6,615,000	Provision of electronic
Cares Co., Ltd.					travel distribution and
(“Hainan Cares”)					cargo management
					services; and sale and
					installation of the
					related information
					systems
Cares Shenzhen Co.,	April 14, 1995	61.47%	—	11,000,000	Provision of electronic
Ltd. (“Shenzhen					travel distribution and
Cares”)					cargo management
					services; and sale and
					installation of the
					related information
					systems

— I-9 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Percentage	Percentage	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held		capital	Principal activities
		Direct	Indirect	RMB
Cares Hubei Co., Ltd.	July 25, 1997	50%	12.5%	5,000,000	Provision of electronic
(“Hubei Cares”)					travel distribution,
					airport passenger
					processing and cargo
					management services;
					and sale and
					installation of the
					related information
					systems
Cares Chongqing	December 1,	51%	—	9,800,000	Provision of electronic
Information	1998				travel distribution,
Technology Co., Ltd.					airport passenger
(“Chongqing Cares”)					processing and cargo
					management services;
					and sale and
					installation of the
					related information
					systems
Aviation Cares of	June 15, 2000	51%	—	2,000,000	Computer hardware and
Yunnan Information					software development
Co., Ltd. (“Yunnan					and data network
Cares”)					services
InfoSky Technology	September 20,	51%	—	23,149,285	Provision of cargo
Co., Ltd. (“InfoSky”)	2000				management services
					and related software
					and technology
					development; and
					provision of technical
					support, training and
					consulting services
TravelSky Technology	December 13,	100%	—	11,385,233	Commercial services
(Hong Kong) Limited	2000
(“Hong Kong
Company”)

— I-10 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Percentage	Percentage	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held		capital	Principal activities
		Direct	Indirect	RMB
Civil Aviation Cares of	September 14,	51%	—	4,000,000	Computer hardware and
Xiamen Ltd.	2001				software development
(“Xiamen Cares”)					and data network
					services
Civil Aviation Cares of	January 11,2002	51%	—	2,000,000	Computer hardware and
Qingdao Ltd.					software development
(“Qingdao Cares”)					and data network
					services
Civil Aviation Cares	July 9, 2002	51%	—	5,000,000	Computer hardware and
Technology of Xi’an					software development
Ltd. (“Xi’an Cares”)					and data network
					services
Civil Aviation Cares	August 16, 2002	51%	—	5,000,000	Computer hardware and
Technology of					software development
Xinjiang Ltd.					and data network
(“Xinjiang Cares”)					services
TravelSky Technology	October 21, 2005	100%	—	481,568	Computer hardware and
(Singapore) Limited					system consulting
(“Singapore					services
Company”)
TravelSky Technology	December 28,	100%	—	403,677	Computer hardware and
(Korea) Limited	2005				software development
(“Korea Company”)					and data network
					services
TravelSky Technology	December 16,	100%	—	670,121	Software development
(Japan) Limited	2005				and computer
(“Japan Company”)					equipment maintenance
					services

— I-11 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Percentage	Percentage	Issued and	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held			capital	Principal activities
		Direct	Indirect		RMB
Shanghai TravelSky	July 1, 2008	100%	—	4,000,000		Computer hardware and
Information						software development
Technology Limited						and data network
(“Shanghai						services
Company”)
Guangzhou TravelSky	September	100%	—	4,000,000		Computer hardware and
Information	28,2008					software development
Technology Limited						and data network
(“Guangzhou						services
Company”)

During the year, the Company had set up two wholly owned subsidiaries, namely Shanghai Company and Guangzhou Company.

Hong Kong Company had received additional capital contributions in cash from the Company amounting to HKD 9,360,000 (equivalent to approximately RMB 8,202,360) in 2008. As a result, its share capital was increased from HKD 3,000,000 (equivalent to approximately RMB 3,182,873) to HKD 12,360,000 (equivalent to approximately RMB 11,385,233).

The Company and its subsidiaries are hereinafter collectively referred to as the “Group”.

		Percentage	Percentage	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held		capital	Principal activities
		Direct	Indirect	RMB
Associated Companies
Shanghai Civil Aviation	May 21, 1999	41%	—	10,000,000	Computer hardware and
East China Cares					software development
System Integration					and data network
Co., Ltd. (“Huadong					services
Cares”)
Shenyang Civil Aviation	November 2,	46%	—	2,000,000	Computer hardware and
Cares of Northeast	1999				software development
China, Ltd. (“Dongbei					and data network
Cares”)					services

— I-12 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Percentage	Percentage	Issued and
	Date of	of	equity	fully paid
Name	incorporation	interest held		capital	Principal activities
		Direct	Indirect	RMB
Aviation Cares of	November 28,	44%	—	2,000,000	Computer hardware and
Southwest	1999				software development
Chengdu,Ltd.					and data network
(“Xinan Cares”)					services
Yunnan TravelSky	April 1, 2003	40%	—	6,000,000	Computer hardware and
Airport Technology					software development
Limited (“Yunnan					and technical
Cares”)					consulting services
Heilongjiang TravelSky	April 30, 2003	50%	—	6,000,000	Computer hardware and
Airport Technology					software development
Limited					and technical
(“Heilongjiang					consulting services
Cares”)
Shanghai Dongmei	September 28,	50%	—	24,800,000	E-commerce, Sales of
Aviation Tourism	2003				computers and related
Online Co., Limited					parts and provision of
(“Shanghai Cares”)					network, technical
					services and economic
					consulting services
Dalian TravelSky	January 28, 2005	50%	—	6,000,000	Computer hardware and
Airport Technology					software development
Limited (“Dalian					and technical
Cares”)					consulting services
Hebei TravelSky Airport	April 5, 2007	50%	—	3,000,000	Computer hardware and
Technology Limited					software development
(“Hebei Cares”)					and technical
					consulting services
Guangzhou Airport	December 24,	20%	—	20,000,000	Computer hardware and
AirSpan Information	2007				software development
Technology Co. Ltd.					and technical
(“Guangzhou Cares”)					consulting services

— I-13 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. BASIS OF PRESENTATION

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(a) Amendments effective in 2008

The IAS 39, ‘Financial instruments: Recognition and measurement’, amendment on reclassification of financial assets permits reclassification of certain financial assets out of the held-for-trading and available-for-sale categories if specified conditions are met. The related amendment to IFRS 7, ‘Financial instruments: Disclosures’, introduces disclosure requirements with respect to financial assets reclassified out of the held-for-trading and available-for-sale categories. The amendment is effective prospectively from July 1, 2008. This amendment does not have any impact on the Group’s financial statements, as the Group has not reclassified any financial assets.
(b) Interpretations effective in 2008 but not relevant for the Group’s operation in 2008
IFRIC - Int 11, ‘IFRS 2 — Group and treasury share transactions’;
IFRIC - Int 12, ‘Service Concession arrangements’; and
IFRIC - Int 14, ‘IAS 19 — The limit on a defined benefit asset, minimum funding requirements and their interaction’.
(c) Standards, amendments and interpretations to existing standards that are relevant for the Group’s existing operations but are not yet effective and have not been early adopted by the Group

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after January 1, 2009 or later periods and have not been early adopted by the Group:

IFRS 8, ‘Operating segments’, (effective from January 1, 2009). IFRS 8 replaces IAS 14, ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply IFRS 8 from January 1, 2009;

— I-14 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

IAS 1 (Revised), ‘Presentation of financial statements’ (effective from January 1, 2009). The revised standard will prohibit the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the consolidated income statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to present balance sheets at the end of the current period and comparative period. The Group will apply IAS 1 (Revised) from January 1, 2009;
IAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective from July 1, 2009).The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The Group will apply IAS 27 (Revised) from January 1, 2010;
IFRS 1 (Amendment), ‘First time adoption of IFRS’ and IAS 27 ‘Consolidated and separate financial statements’ (effective from July 1, 2009). The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The Company will apply IAS 27 (Amendment) prospectively from January 1, 2010 in its separate financial statements;
IFRS 3 (Revised), ‘Business combinations’ (effective from July 1, 2009). The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the consolidated income statement. There is a choice on an acquisition by acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group will apply IFRS 3 (Revised) prospectively to all business combinations from January 1, 2010; and
IASB’s annual improvements project published in May 2008
IAS 1 (Amendment), ‘Presentation of financial statements’ (effective from January 1, 2009). The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, ‘Financial instruments: Recognition and measurement’ are examples of current assets and liabilities respectively. The Group will apply the IAS 1 (Amendment) from January 1, 2009;

— I-15 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32, ‘Financial Instruments: Presentation’ and IFRS 7, ‘Financial instruments: Disclosures’) (effective from January 1, 2009). An investment in associate is treated as a single asset for the purposes of impairment testing and any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The Group will apply the IAS 28 (Amendment) to impairment tests related to investment in associates and any related impairment losses from January 1, 2009;
IAS 36 (Amendment), ‘Impairment of assets’ (effective from January 1, 2009). Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The Group will apply the IAS 36 (Amendment) and provide the required disclosure where applicable for impairment tests from January 1, 2009;
IAS 38 (Amendment), ‘Intangible assets’ (effective from January 1, 2009). A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. The Group will apply the IAS 38 (Amendment) from January 1, 2009;
There are a number of minor amendments to IFRS 7, ‘Financial instruments: Disclosures’, IAS 8, ‘Accounting policies, changes in accounting estimates and errors’, IAS 10, ‘Events after the balance sheet date’, IAS 18, ‘Revenue’ and IAS 34, ‘Interim financial reporting’ which are not addressed above.

The Group will assess the impact of these standards, amendments and interpretations on the consolidated financial statements.

3. PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted in preparing the financial statements of the Company and its subsidiaries are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to December 31.

(i) Merger accounting for common control combination

The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

— I-16 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net assets of the combining entities or businesses are combined using the existing book values from the controlling parties’ perspective. No amount is recognised in consideration for goodwill or excess of acquirers’ interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless of the date of the common control combination.

The comparative amounts in the consolidated financial statements are presented as if the entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is shorter.

Transaction costs, including professional fees, registration fees, costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses, etc., incurred in relation to the common control combination that is to be accounted for by using merger accounting are recognised as expense in the year in which they are incurred.

(ii) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The purchase method of accounting is used for acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

— I-17 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses (Note 3(f)). The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivables.

(iii) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the consolidated income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

(iv) Associated companies

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated income statement, and its share of postacquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in companies are recognized in the consolidated income statement.

In the Company’s balance sheet, the investments in associated companies are stated at cost less provision for impairment losses (Note 3(f)). The results of associated companies are accounted for by the Company on the basis of dividends received and receivables.

(b) Foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Renminbi, which is the Company’s functional and presentation currency.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Foreign exchange gains and losses are presented in the consolidated income statement within ‘finance income or cost’.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in profit or loss, and other changes in the carrying amount are recognised in equity.

(iii) Group companies

The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment loss. Historical cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to expense in the year in which they are incurred. When the expenditure results in increase in the future economic benefits expected to be obtained from the use of the asset and the cost of the asset can be measured reliably, the expenditure is capitalized.

Depreciation of property, plant and equipment is provided using the straight-line method over their estimated useful lives, after taking into consideration their estimated residual value. The estimated useful lives of property, plant and equipment are as follows:

Buildings	20 years
Computer systems and software	3-11 years
Motor vehicles	6 years
Furniture, fixtures and other equipment	5-9 years
Leasehold improvements	Over the lease term

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 3(f)).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.

Assets under construction are stated at cost. Costs include construction and acquisition costs, and interest charges arising from borrowings used to finance the assets during the period of construction or installation and testing. No provision for depreciation is made on assets under construction until such time as the relevant assets are completed and ready for use.

(d) Intangible assets

Intangible assets mainly represent purchased computer software.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized on a straight line basis over 3 years.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(e) Research and development costs

Expenditures for research and development are charged against income in the period incurred except for software development costs which comply strictly with the following criteria:

It is technically feasible to complete the intangible asset so that it will be available for use or sale;
Management intends to complete the intangible asset and use or sell it;
There is an ability to use or sell the intangible asset;
It can be demonstrated how the intangible asset will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and
The expenditure attributable to the intangible asset during its development can be reliably measured.

Capitalized development costs are amortized on a straight-line basis over their expected useful lives. The period of amortization does not normally exceed 5 years. During the year ended December 31, 2008, no development costs were capitalized as they did not meet all the criteria listed above (2007: nil).

(f) Impairment of investments in subsidiaries, associates and non-financial assets

Assets that have an indefinite useful life or have not yet available for use are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

(g) Financial assets

The group classifies its financial assets in the following categories: at fair value through profit or loss, held-to-maturity financial assets, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at their initial recognition.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets.

(ii) Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted for two full annual reporting periods and reclassified as available-for-sale. Held-to-maturity financial assets are included in noncurrent assets, except for those with maturities less than 12 months from the balance sheet date, which are classified as current assets. Held-to-maturity investments are carried at amortised cost using the effective interest rate method.

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the balance sheet.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statements. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statements in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statements when the Group’s right to receive payments is established.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss, while translation differences on non-monetary securities are recognised in equity. Changes in the fair value of monetary and nonmonetary securities classified as available-for-sale are recognised in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in income statements.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statements as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statements as part of other income when the Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in income statements - is removed from equity and recognised in the income statements. Impairment losses recognised in the income statements on equity instruments are not reversed through the income statements. Impairment testing of accounts receivable is described in Note 3(j).

(h) Operating leases (as the lessee)

Leases where substantially all the rewards and risks of ownership of the assets remain with the lessor are accounted for as operating leases. Rental payments under operating leases (net of any incentives received from the lessor) are charged to expense based on the straight-line method over the period of the leases.

(i) Inventories

Inventories, which principally comprise equipment for sale, spare parts and consumable items, are carried at lower of cost and net realizable value. Cost is determined based on the first-in, first-out (“FIFO”) method and comprises all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated costs necessary to make the sale.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(j) Accounts receivable

Accounts receivable is recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of accounts receivable is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the accounts receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the assets is reduced through the use of an allowance account, and the amount of the provision is recognized in the income statement. When an accounts receivable is uncollectible, it is written off against the allowance account for account receivables. Subsequent recoveries of amounts previously written off are credited against expenses in the income statement.

(k) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.

(l) Accounts payables

Accounts payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

(m) Taxation

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(ii) Deferred income taxation

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of an asset or liability and its carrying amount in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

deductible temporary differences can be utilized. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

(iii) Other tax

Other tax liabilities are provided in accordance with the regulations issued by the government authorities.

(n) Employee benefits

(i) Pension

The full-time employees of the Group are covered by government-sponsored pension plan under which the employees are entitled to a monthly pension based on certain formulas. The relevant government agencies are responsible for the pension liability to these retired employees. The Group contributes on a monthly basis to these pension plans.

Starting from January 1, 2007, the Company implemented an additional supplementary pension scheme, which is funded through the insurance company.

Under these plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

(ii) Other employee benefits

All Chinese employees of the Group participate in employee social security plans, including medical, housing and other welfare benefits, organized and administered by the government authorities. Other than the welfare benefits provided by these social security plans as disclosed, the Group has no material commitments to employees.

According to the relevant regulations, the premiums and welfare benefit contributions that should be borne by the Group are calculated based on percentages of the total salary of employees, subject to a certain ceiling, and are paid to the labor and social welfare authorities. Contributions to the plans are expensed as incurred.

(o) Provisions

A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimation can be made for the amount of the obligation. Provisions are not recognized for future operating losses.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provision reflecting the passage of time is recognized as interest expense.

(p) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the rendering of services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, sales discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue for aviation information technology services is recognized when the services are rendered;
Revenue for data network services is recognized when the services are rendered;
Sale of equipment is recognized when the significant risks and rewards of ownership of the goods have been transferred to the buyer;
Revenue for equipment installation project is recognized by reference to the stage of completion when this can be measured reliably. The stage of completion is determined in the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of expenses recognized that are recoverable. In the period in which it is determined that a loss will result from the performance of the contract, the entire amount of the estimated ultimate loss is charged against income;
Interest income is recognized on a time-proportion basis, taking into account the principal amounts outstanding and the applicable interest rates; and
Dividend income is recognized when the right to receive payment is established.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(q) Dividend distribution

Dividend distribution to the Company’s equity holders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

(r) Share Capital

Ordinary shares are classified as equity. Mandatory redeemable preference shares are classified as liabilities.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes,) is deducted from equity attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such shares are subsequently reissued, any consideration received (net of any directly attributable incremental transaction costs and the related income tax effects) is included in equity attributable to the Company’s equity holders.

(s) Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Depreciation of property, plant and equipment

The property, plant and equipment of the Group are depreciated at rates sufficient to write off their costs less accumulated impairment losses and estimated residual values over their estimated useful lives on a straight-line basis. The Group reviewed the useful lives periodically to ensure that

— I-27 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

the method and rates of depreciation are consistent with the expected pattern of economic benefits from the property, plant and equipment. The Group estimates the useful lives of the property, plant and equipment as set out in Note 3(c) based on the historical experience with similar assets, taking into account anticipated technological changes. The depreciation expenses in the future periods will change if there are significant changes to these estimates.

(b) Impairment of assets

At each balance sheet date, the Group considers both internal and external sources of information to assess whether there is any indication that assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and an impairment loss is recognized to reduce the carrying amount of the asset to its recoverable amount. Accordingly, there will be an impact to the future results if there is a significant change in the recoverable amounts of the assets.

(c) Fair value

The Group estimates the fair value of its financial assets and financial liabilities including accounts receivable, prepayments, other current assets, accounts payable, accrued liabilities and other current liabilities by discounting its future contractual cash flows at the estimated current market interest rate that is available to the Group for similar financial instruments. The future values will change if there are changes in the estimated market interest rate.

(d) Income taxes

The Group is subject to income taxes in both PRC and other jurisdictions. Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

5. REVENUES

Revenues primarily comprise the service fees earned by the Group for the provision of the Group’s aviation information technology services and related data network services. A substantial portion of these revenues was generated from the shareholders of the Company.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. PROFIT BEFORE TAXATION

Profit before taxation is arrived at after charging (crediting) the following:

	2008	2007
	RMB’000	RMB’000
After charging:
Depreciation	299,282	229,510
Amortization of intangible assets	6,775	7,427
Amortization of leasehold improvements	6,890	6,174
Loss on disposal of property, plant and equipment	384	6,039
Provision for impairment of receivables	6,291	1,747
Cost of equipment sold	27,761	53,093
Contributions to defined contribution pension scheme	38,311	40,963
Auditors’ remuneration	1,938	2,616
Exchange loss	4,904	20,816
Contribution to housing fund	16,129	12,439
Research and development expenses	295,725	264,024
After crediting:
Interest income	(82,609)	(69,512)

— I-29 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. DIRECTORS’, SUPERVISORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

(1) Directors’ and supervisors’ emoluments

The following table sets out the emoluments paid to the Company’s directors and supervisors during the year ended December 31, 2008 (tax inclusive):

Name of Director and Supervisor Remuneration for Director RMB’000 Executive directors Mr. Xu Qiang * (Chairman) (i) — Mr. Cui Zhixiong * (ii) — Mr. Xiao Yinhong (ii) — Mr. Zhu Xiaoxing — Mr. Ding Weiping (iv) — Mr. Song Jinxiang (iv) — Non-Executive Directors Mr. Wang Quanhua — Mr. Luo Chaogeng — Mr. Gong Guokui — Mr. Rong Gang — Mr. Sun Yongtao — Mr. Liu Dejun — Mr. Xia Yi — Mr. Song Jian — Mr. Zhu Yong * (iii) — Independent Non-Executive directors Mr. Yick Wing Fat, Simon 120 Mr. Chua Keng Kim 120 Mr. Yuan Yaohui 120 Supervisors Ms. Li Xiaojun — Ms. Du Hongying — Mr. Jing Gongbin — Mr. Zhang Yakun — Mr. Yu Yanbin * — Ms. Gao Jingping (Staff Representative Supervisor) — Ms. Wang Xiaomin (Staff Representative Supervisor) — Mr. Zhang Xin (Staff Representative Supervisor) — Mr. Rao Geping (Independent Supervisor) 50	Year ended December 31, 2008 Bonus for Director Salary of employee, Allowances and Benefits (employer’s contribution inclusive) Employees’ Discretionary bonuses Employer’s contribution to pension scheme for employee RMB’000 RMB’000 RMB’000 RMB’000 — — — — — — — — — 199 255 41 — 206 266 44 — 101 315 41 — 92 305 38 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 191 244 42 — 93 269 39 — 77 131 32 — — — —	Total RMB’000 — — 495 516 457 435
		— — — — — — — — —
		120 120 120
		— — — — — 477 401 240 50

— I-30 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following table sets out the emoluments paid to the Company’s directors and supervisors during the year ended December 31, 2007 (tax inclusive):

Name of Director and Supervisor Remuneration for Director RMB’000 Chairman of the Board Mr. Zhu Yong — Executive directors Mr. Zhu Xiaoxing — Mr. Ding Weiping — Mr. Song Jinxiang — Non-Executive Directors Mr. Wang Quanhua — Mr. Cao Jianxiong — Mr. Luo Chaogeng * (v) — Mr. Gong Guokui — Mr. Rong Gang — Mr. Sun Yongtao — Mr. Liu Dejun — Mr. Xia Yi — Mr. Song Jian — Independent Non-Executive directors Mr. Yick Wing Fat, Simon 120 Mr. Chow Kwok Wah, James 50 Mr. Chua Keng Kim (v) 70 Mr. Yuan Yaohui 120 Supervisors Ms. Li Xiaojun — Ms. Du Hongying — Mr. Jing Gongbin — Mr. Zhang Yakun — Mr. Yu Yanbin — Ms. Gao Jingping (Staff Representative Supervisor) (iv) — Ms. Wang Xiaomin (Staff Representative Supervisor) (iv) — Mr. Zhang Xin (Staff Representative Supervisor) — Mr. Rao Geping (Independent Supervisor) 50	Year ended December 31, 2007 Bonus for Director Salary of employee, Allowances and Benefits (employer’s contribution inclusive) Employees’ Discretionary bonuses Employer’s contribution to pension scheme for employee RMB’000 RMB’000 RMB’000 RMB’000 — — — — — 210 277 21 — 96 385 21 — 96 385 21 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 188 244 21 — 88 333 21 — 72 182 21 — — — —	Total RMB’000 — 508 502 502
		— — — — — — — — —
		120 50 70 120
		— — — — — 453 442 275 50

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

These directors and supervisors are employees of the shareholders of the Company or their subsidiaries, and obtain emoluments from them. No appropriation has been made as the directors of the Company considered it is impracticable to apportion this amount between their services to the Group and the parent of the Company or their subsidiaries.
(i) Appointed on May 20, 2008
(ii) Appointed on October 17, 2008
(iii) Resigned on May 20, 2008
(iv) Resigned on October 17, 2008
(v) Appointed on June 5, 2007

During the year ended December 31, 2008, no director had waived or agreed to waive any emolument (2007: nil). No emolument was paid to any of the directors as an inducement to join or upon joining the Company or as compensation for loss of office (2007: nil).

(2) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include two (2007: three) directors whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining three (2007: two) individuals during the year are as follows:

	2008	2007
	RMB’000	RMB’000
Basic salaries and allowances	574	281
Bonuses	732	629
Retirement benefits	125	42
	1,431	952

The annual emoluments paid during the year ended December 31, 2008 to each of the directors (included in the five highest paid employees) fell within the band from RMB nil to RMB 1 million (2007: from RMB nil to RMB 1 million).

8. RETIREMENT BENEFITS

All the full time employees of the Group are covered by state-sponsored pension scheme under which the employees are entitled to an annual pension equal to their basic salaries at their retirement dates. The PRC government is responsible for the pension liability to these retired employees. The Group was required to make specified contributions to the state-sponsored pension scheme at the rate

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

of 20% of the employees’ basic salaries subject to certain ceiling for the year ended December 31, 2008 (2007: 20%). The contributions to the pension scheme made by the Group for the year ended December 31, 2008 amounted to approximately RMB 25,233,000 (2007: RMB 21,173,000). This amount was recorded in personnel expenses.

In addition, starting from January 1, 2007, a supplementary defined contribution pension plan managed by an insurance company was established. The one time entrance contribution and the annual contributions to this plan made by the Group for the year ended December 31, 2007 amounted to approximately RMB 14,000,000 and RMB 5,790,000 respectively. The annual contributions to this plan made by the Group for the year ended December 31, 2008 amounted to approximately RMB 13,078,000. These amounts were recorded in personnel expenses.

Under these schemes, the Group has no obligation for post-retirement benefits beyond the annual contributions made.

9. HOUSING FUND

All the full-time employees of the Group are entitled to participate in a state-sponsored housing fund. The fund can be used by the employees for housing purchases, or may be withdrawn upon their retirement. The Group is required to make annual contributions to this state-sponsored housing fund equivalent to a certain percentage of each employee’s salary. The contributions made by the Group to the housing fund for the year ended December 31, 2008 amounted to approximately RMB 16,129,000 (2007: RMB 12,439,000). This amount was recorded in personnel expenses.

As of December 31, 2008, the total number of employees of the Group was 2,940 (2007: 2,629).

10. TAXATION

Income Tax

	2008	2007
	RMB’000	RMB’000
Current tax
— PRC enterprise income tax expenses	37,900	77,692
— Overseas income tax expenses	869	1,349
Deferred tax	2,511	(9,100)
	41,280	69,941

Taxation of the Group except for Hong Kong Company, Singapore Company, Japan Company, and Korea Company is provided based on the tax laws and regulations applicable to PRC enterprises.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group provides for PRC enterprise income tax on the basis of its income for statutory financial reporting purposes, adjusted for income and expense items that are not assessable or deductible for tax purposes. Taxation on overseas profit has been calculated on the assessable profit for the year at the rates of taxation prevailing in the locations in which the Group operates.

Enterprises recognized as “High and New Technology Enterprises” are entitled to a favorable statutory tax rate of 15% under the new CIT Law. In December 2008, the Company was approved and certified by relevant authorities as a “High and New Technology Enterprise” under the new CIT Law, and was entitled to the preferential tax rate of 15% from 2008 to 2010.

The Company’s subsidiaries in PRC are entitled to different tax rates, ranging from 15% to 25% under the new CIT Law.

The reconciliation between the Group’s actual tax charge and the amount which is calculated based on the weighted average statutory tax rate is as follows:

2008 RMB’000 Profit before taxation 618,045 Weighted average statutory tax rate 25% Tax calculated at domestic tax rates applicable to profits in the respective countries 154,031 Non-taxable income (300) Tax refund (i) (30,114) Non-deductible expense 4,395 Effect of preferential tax rates (86,732) Tax charge 41,280	2007 RMB’000 718,591 33% 237,135 (450) (30,180) 2,830 (139,394) 69,941

(i) Tax refund

In addition to being approved as a “High and New Technology Enterprise”, the Company was also approved and certified by relevant authorities as an “Important Software Enterprise” for the year 2006, 2007 and 2008 which allows the Company to enjoy a preferential income tax rate of 10%. According to the relevant regulations, the differences that resulted from the enterprise income tax paid by the Company at the rate of 15% over this preferential income tax rate of 10% should be recognised in the year which the Company obtained its “Important Software Enterprise” certification.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company obtained its “Important Software Enterprise” approval and certification from the relevant authorities for 2006 and 2007 in 2007 and 2008 respectively and hence had recognised the corresponding tax refund of approximately RMB 30,180,000 and RMB 30,114,000 in 2007 and 2008 respectively.

The Company obtained its “Important Software Enterprise” approval and certification from the relevant authorities for 2008 in December 2008. Accordingly, the Company had accrued its income tax expenses for 2008 based on this preferential income tax rate of 10% in the current year’s financial statements.

Business Taxes

The Group is subject to business taxes on its service revenues:

Aviation information technology service and data network services 3% Technical support services 5%

Value-Added Tax (“VAT”)

The Group’s sales of equipment are subject to Value Added Tax (VAT). The Company and one of its subsidiaries, InfoSky are certified by the tax authorities as general tax payers, and other subsidiaries of the Company are small-scale VAT tax payers. The applicable tax rate is 17% for general tax payers, and 4%-6% for small-scale VAT tax payers.

For general tax payers, input VAT from purchase of equipment for sale can be netted off against output VAT from sales.

VAT payable or receivable is the net difference between periodic output and deductible input VAT.

11. DIVIDENDS DISTRIBUTION

The shareholders in the annual general meeting on May 20, 2008 approved the final dividend in respect of 2007 of RMB 0.13 per share amounting to a total of RMB 230,920,950. The amount was accounted for in shareholders’ equity as an appropriation of retained earnings in 2008.

As at March 27, 2009, the Board recommended the distribution of a final dividend of RMB 206,850,000 and a special dividend of RMB 156,000,000 cash, aggregating to RMB 362,850,000 (RMB0.186 per share) for Year 2008. The total number of shares in issue which entitle the receipt of those dividends are 1,950,806,393 shares. The proposed final dividend and special dividend distribution is subject to shareholders’ approval in their next annual general meeting of the Company and will be recorded in the Group’s financial statements for the year ending December 31, 2009.

12. EARNINGS PER SHARE

Earnings per share for the year ended December 31, 2008 and December 31, 2007 have been computed by dividing the profit attributable to the equity holders of the Company, of RMB 560,109,000 and RMB 630,989,000, by 1,776,315,000 ordinary shares issued and outstanding.

— I-35 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

There were no potential dilutive ordinary shares outstanding during the years ended December 31, 2008 and 2007.

13. PROPERTY, PLANT AND EQUIPMENT, NET

At December 31, property, plant and equipment comprised:

The Group:

Cost As at January 1, 2007 Purchases Disposals/write off As at December 31, 2007 Transfer upon completion Purchases Disposals/write off As at December 31, 2008 Accumulated depreciation As at January 1, 2007 Charge for the year Disposals/write off As at December 31, 2007 Charge for the year Disposals/write off As at December 31, 2008 Net book value As at December 31, 2007 As at December 31, 2008	Buildings Computer systems and software RMB’000 RMB’000 61,206 1,638,637 49,989 545,872 — (167,023) 111,195 2,017,486 3,000 — 1,920 131,408 — (12,514) 116,115 2,136,380 (12,226) (1,074,527) (3,162) (212,761) — 160,474 (15,388) (1,126,814) (5,705) (273,983) — 11,998 (21,093) (1,388,799) 95,807 890,672 95,022 747,581	Motor vehicles Furniture, fixtures and other equipment Assets under construction Leasehold improvement RMB’000 RMB’000 RMB’000 RMB’000 37,655 38,485 3,161 14,044 7,876 5,201 — 5,605 (491) (542) (161) — 45,040 43,144 3,000 19,649 — — (3,000) — 4,350 8,889 — 3,197 (3,431) (1,661) — — 45,959 50,372 — 22,846 (21,460) (21,154) — (2,672) (4,725) (8,862) — (6,174) 433 450 — — (25,752) (29,566) — (8,846) (5,523) (14,071) — (6,890) 3,161 1,581 — — (28,114) (42,056) — (15,736) 19,288 13,578 3,000 10,803 17,845 8,316 — 7,110	Total RMB’000 1,793,188 614,543 (168,217)
			2,239,514 — 149,764 (17,606)
			2,371,672
			(1,132,039) (235,684) 161,357
			(1,206,366) (306,172) 16,740
			(1,495,798)
			1,033,148
			875,874

— I-36 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Company:

Buildings Computer systems and software RMB’000 RMB’000 Cost As at January 1, 2007 32,893 1,625,438 Purchases 33,590 544,509 Disposals/write off — (164,442) As at December 31, 2007 66,483 2,005,505 Purchases — 129,010 Disposals/write off — (9,637) As at December 31, 2008 66,483 2,124,878 Accumulated depreciation As at January 1, 2007 (5,311) (1,064,429) Charge for the year (1,595) (211,812) Disposals/write off — 157,978 As at December 31, 2007 (6,906) (1,118,263) Charge for the year (3,224) (272,872) Disposals/write off — 9,334 As at December 31, 2008 (10,130) (1,381,801) Net book value As at December 31, 2007 59,577 887,242 As at December 31, 2008 56,353 743,077	Motor vehicles Furniture, fixtures and other equipment Leasehold improvement RMB’000 RMB’000 RMB’000 23,211 28,328 12,443 6,758 2,912 5,140 — — — 29,969 31,240 17,583 1,805 6,239 3,112 (2,333) — — 29,441 37,479 20,695 (12,651) (14,973) (2,045) (2,814) (7,284) (5,266) — — — (15,465) (22,257) (7,311) (3,653) (12,079) (6,592) 2,263 — — (16,855) (34,336) (13,903) 14,504 8,983 10,272 12,586 3,143 6,792	Total RMB’000 1,722,313 592,909 (164,442) 2,150,780 140,166 (11,970) 2,278,976 (1,099,409) (228,771) 157,978 (1,170,202) (298,420) 11,597 (1,457,025) 980,578 821,951

— I-37 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. INTANGIBLE ASSETS, NET

	The	Group	The Company	The Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Cost
As at January 1	62,696	53,414	56,441	47,586
Additions	6,903	9,282	6,152	8,855
As at December 31	69,599	62,696	62,593	56,441
Accumulated amortization
As at January 1	(50,872)	(43,445)	(46,425)	(39,678)
Amortization for the year	(6,775)	(7,427)	(6,039)	(6,747)
As at December 31	(57,647)	(50,872)	(52,464)	(46,425)
Net book value
As at December 31	11,952	11,824	10,129	10,016

The intangible assets of the Group and the Company represent computer software acquired.

15. INVESTMENTS IN SUBSIDIARIES

			The	Group	The	Company
			2008	2007	2008	2007
			RMB’000	RMB’000	RMB’000	RMB’000
Investments,	at	cost:	—	—	53,709	37,507

A list of the Company’s subsidiaries is shown in Note 1.

— I-38 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. INVESTMENTS IN ASSOCIATED COMPANIES

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Beginning of the year	85,996	68,343	27,290	21,790
Share of profit	17,969	12,991	—	—
Dividend received from associated
companies	(300)	(838)	—	—
Additional capital contribution	—	5,500	—	5,500
End of the year	103,665	85,996	27,290	27,290

A list of the Group’s associates is shown in Note 1. The Group’s interest in its principal associates, all of which are unlisted, were as follows:

				Profit
				attributable
		Total		to equity
	Total assets	liabilities	Revenues	holders
	RMB’000	RMB’000	RMB’000	RMB’000
2007	111,321	25,325	346,305	12,991
2008	135,009	31,344	306,681	17,969

— I-39 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. FINANCIAL INSTRUMENTS BY CATEGORY

The accounting policies for financial instruments have been applied to the line items below:

Assets as per balance sheet: Accounts receivable (Note 22) Due from related parties (Note 23) Due from subsidiaries, net (Note 24) Due from associated companies (Note 25) Interest receivable and other current assets (Note 26) Short-term bank deposits (Note 27) Cash and cash equivalents (Note 28) Loans and receivables Held-to-maturity financial assets (Note 19) Total 18. DEFERRED INCOME TAX Deferred tax assets: — Deferred tax assets to be recovered after more than 12 months — Deferred tax assets to be recovered within 12 months Deferred tax liabilities: — Deferred tax liabilities to be settled within 12 months	The Group 2008 2007 RMB’000 RMB’000 160,735 141,565 740,610 389,561 — — 6,556 6,308 37,227 47,916 2,274,728 1,843,949 840,733 1,209,152 4,060,589 3,638,451 — 100,000 4,060,589 3,738,451 The Group 2008 2007 RMB’000 RMB’000 4,780 6,539 1,989 2,690 6,769 9,229 (180) (129) (180) (129)	The Company 2008 2007 RMB’000 RMB’000 118,402 110,242 731,227 381,573 20,290 24,982 4,291 6,308 28,321 37,519 2,168,228 1,757,949 737,985 1,111,519 3,808,744 3,430,092 — 100,000 3,808,744 3,530,092 The Company 2008 2007 RMB’000 RMB’000 4,780 6,539 1,194 1,523 5,974 8,062 — — — —	The Company 2008 2007 RMB’000 RMB’000 118,402 110,242 731,227 381,573 20,290 24,982 4,291 6,308 28,321 37,519 2,168,228 1,757,949 737,985 1,111,519 3,808,744 3,430,092 — 100,000 3,808,744 3,530,092 The Company 2008 2007 RMB’000 RMB’000 4,780 6,539 1,194 1,523 5,974 8,062 — — — —
			8,062
			—
			—

— I-40 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The net movement on the deferred income tax accounts is as follow:

The Group:

	Depreciation
	and	Provision
	Amortization	and Others	Total
	RMB’000	RMB’000	RMB’000
As at January 1, 2007	—	—	—
Recognised in the income statement	7,647	1,453	9,100
As at December 31, 2007	7,647	1,453	9,100
Recognised in the income statement	(1,583)	(928)	(2,511)
As at December 31, 2008	6,064	525	6,589
The Company:
	Depreciation
	and	Provision
	Amortization	and Others	Total
	RMB’000	RMB’000	RMB’000
As at January 1, 2007	—	—	—
Recognised in the income statement	7,614	448	8,062
As at December 31, 2007	7,614	448	8,062
Recognised in the income statement	(1,640)	(448)	(2,088)
As at December 31, 2008	5,974	—	5,974

19. HELD-TO-MATURITY FINANCIAL ASSETS

At December 31, the Company and the Group had the following held-to-maturity financial assets:

		Interest rate and maturity	2008	2007
			RMB’000	RMB’000
Treasury	bonds	3% per annum with matured and realised	—	100,000
		in December 2008

— I-41 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. OTHER LONG-TERM ASSETS

At December 31, other long-term assets of the Company and the Group mainly comprised long-term rental deposits.

21. INVENTORIES

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Equipment for sale	9,390	9,009	—	2,632
Spare parts	9	77	—	—
Others	584	261	—	—
Total	9,983	9,347	—	2,632
Provision for impairment of inventories
(Equipment for sale)	(106)	(106)	—	—
	9,877	9,241	—	2,632

No inventories have been pledged as security for borrowings by the Group or the Company.

22. ACCOUNTS RECEIVABLE, NET

		The	Group	The Company	The Company
		2008	2007	2008	2007
		RMB’000	RMB’000	RMB’000	RMB’000
Accounts	receivable	171,851	146,390	128,027	113,797
Provision	for impairment of receivables	(11,116)	(4,825)	(9,625)	(3,555)
Accounts	receivable, net	160,735	141,565	118,402	110,242

The payment period is normally within six months after the services are rendered.

The carrying amounts of the Group’s accounts receivable approximated its fair value as at December 31, 2008 because of the short-term maturities of these receivables.

The maximum exposure to credit risk at the reporting date is the fair value of accounts receivable. The Group does not hold any collateral as security.

— I-42 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As of December 31, 2008 and 2007, the ageing analysis of the accounts receivable was as follows:

	The	Group	The Company	The Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Within 6 months	126,295	126,837	105,638	108,850
Over 6 months but within 1 year	21,426	6,390	10,781	1,490
Over 1 year but within 2 years	15,878	4,578	9,358	1,008
Over 2 years but within 3 years	868	1,247	285	1,062
Over 3 years	7,384	7,338	1,965	1,387
Accounts receivable	171,851	146,390	128,027	113,797
Provision for impairment of receivables	(11,116)	(4,825)	(9,625)	(3,555)
Accounts receivable, net	160,735	141,565	118,402	110,242

As of December 31, 2008, accounts receivable of RMB 17,747,000 (2007: RMB 8,656,000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these accounts receivable is as follows:

			The	Group	The	Company
			2008	2007	2008	2007
			RMB’000	RMB’000	RMB’000	RMB’000
Over	6	months but within 1 year	10,645	4,900	—	—
Over	1	year but within 2 years	6,519	3,571	—	—
Over	2	years but within 3 years	583	185	—	—
			17,747	8,656	—	—

— I-43 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As of December 31, 2008, accounts receivable of RMB 27,809,000 (2007: RMB 10,897,000) were impaired. The amount of the provision was RMB 11,116,000 as of December 31, 2008 (2007: RMB 4,825,000). It was assessed that a portion of the receivables is expected to be recovered. The ageing analysis of these receivables is as follows:

			The	Group	The	Company
			2008	2007	2008	2007
			RMB’000	RMB’000	RMB’000	RMB’000
Over	6	months but within 1 year	10,781	1,490	10,781	1,490
Over	1	year but within 2 years	9,359	1,007	9,358	1,008
Over	2	years but within 3 years	285	1,062	285	1,062
Over	3	years	7,384	7,338	1,965	1,387
			27,809	10,897	22,389	4,947

The movement of provision for impairment of receivables is as follows:

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Balance at beginning of year	4,825	3,078	3,555	2,872
Provision	6,291	1,747	6,070	683
Balance at end of year	11,116	4,825	9,625	3,555

The carrying amounts of the accounts receivable are denominated in the following currencies:

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
RMB	80,772	47,353	52,541	26,946
HKD denominated	17,587	7,430	11,485	4,629
USD denominated	70,267	87,502	60,862	78,159
Others	3,225	4,105	3,139	4,063
	171,851	146,390	128,027	113,797

— I-44 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. DUE FROM RELATED PARTIES, NET

	The	Group	The Company	The Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Within 6 months	587,667	377,452	579,699	370,852
Over 6 months but within 1 year	151,166	10,796	151,020	10,721
Over 1 year but within 2 years	1,739	7,055	508	5,779
Over 2 years but within 3 years	5,799	1,895	5,779	1,858
Over 3 years	8,904	7,028	8,886	7,028
Due from related parties	755,275	404,226	745,892	396,238
Provision for impairment of receivables	(14,665)	(14,665)	(14,665)	(14,665)
Due from related parties, net	740,610	389,561	731,227	381,573

These balances are trade related, interest free, unsecured and generally repayable within six months.

As of December 31, 2008, due from related parties of RMB 152,943,000 (2007: RMB 12,109,000) were past due but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of these receivables are as follows:

			The	Group	The	Company
			2008	2007	2008	2007
			RMB’000	RMB’000	RMB’000	RMB’000
Over	6	months but within 1 year	151,166	10,796	151,020	10,721
Over	1	year but within 2 years	1,739	1,276	508	—
Over	2	years but within 3 years	20	37	—	—
Over	3	years	18	—	—	—
			152,943	12,109	151,528	10,721

— I-45 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As of December 31, 2008, due from related parties of RMB 14,665,000 (2007: RMB 14,665,000) were impaired. The amount of the provision was RMB 14,665,000 as of December 31, 2008 (2007: RMB 14,665,000) for the estimated losses resulting from the disagreement on services and payments. The ageing analysis of the receivable is as follows:

			The	Group	The	Company
			2008	2007	2008	2007
			RMB’000	RMB’000	RMB’000	RMB’000
Over	6	months but within 1 year	—	—	—	—
Over	1	year but within 2 years	—	5,779	—	5,779
Over	2	years but within 3 years	5,779	1,858	5,779	1,858
Over	3	years	8,886	7,028	8,886	7,028
			14,665	14,665	14,665	14,665

24. DUE FROM SUBSIDIARIES, NET

	The	Group	The Company	The Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Within 6 months	—	—	9,193	7,111
Over 6 months but within 1 year	—	—	645	3,210
Over 1 year but within 2 years	—	—	1,044	5,751
Over 2 years but within 3 years	—	—	5,716	2,293
Over 3 years	—	—	11,503	14,428
Total	—	—	28,101	32,793
Provision for impairment of receivables	—	—	(7,811)	(7,811)
Due from subsidiaries, net	—	—	20,290	24,982

These balances are trade related, interest free, unsecured and generally repayable on demand.

25. DUE FROM ASSOCIATED COMPANIES

These balances are trade related, interest free, unsecured and generally repayable within one year.

— I-46 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. PREPAYMENTS AND OTHER CURRENT ASSETS

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Advance payments	105,515	35,822	101,282	32,460
Interest receivable	22,461	34,046	22,255	34,046
Prepaid expenses	12,900	18,661	12,900	18,661
Other current assets	14,766	13,870	6,066	3,473
Total	155,642	102,399	142,503	88,640

27. SHORT-TERM BANK DEPOSITS

RMB HKD denominated	The 2008 RMB’000 2,186,500 88,228 2,274,728	Group 2007 RMB’000 1,666,000 177,949 1,843,949	The Company 2008 2007 RMB’000 RMB’000 2,080,000 1,580,000 88,228 177,949 2,168,228 1,757,949	The Company 2008 2007 RMB’000 RMB’000 2,080,000 1,580,000 88,228 177,949 2,168,228 1,757,949
				1,757,949

The annual interest rate on short-term bank deposits ranges from 1.98% to 4.14% (2007: 2.52% to 4.80%) and these deposits have a maturity period ranging from 6 to 12 months (2007: 6 to 24 months).

— I-47 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

28. CASH AND CASH EQUIVALENTS

The 2008 RMB’000 Cash RMB 512 HKD denominated 32 Others 39 583 Demand deposits RMB 765,019 USD denominated 47,227 HKD denominated 22,469 Others 5,435 840,150 Total cash and cash equivalents 840,733	Group The Company 2007 2008 2007 RMB’000 RMB’000 RMB’000 60 293 20 34 — — 5 — — 99 293 20 1,094,216 717,896 1,051,485 78,280 14,618 45,797 31,640 5,178 14,217 4,917 — — 1,209,053 737,692 1,111,499 1,209,152 737,985 1,111,519	Group The Company 2007 2008 2007 RMB’000 RMB’000 RMB’000 60 293 20 34 — — 5 — — 99 293 20 1,094,216 717,896 1,051,485 78,280 14,618 45,797 31,640 5,178 14,217 4,917 — — 1,209,053 737,692 1,111,499 1,209,152 737,985 1,111,519
		20
		1,051,485 45,797 14,217 —
		1,111,499
		1,111,519

29. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Accounts payable	91,565	180,255	71,781	163,835
Accrued departure technology support
fees	192,435	100,443	192,435	100,442
Accrued technical support fees	10,124	17,245	9,323	15,902
Accrued network usage fees	35,669	45,113	35,669	45,113
Accrued bonuses and staff cost	30,043	49,189	28,001	46,060
Other taxes payable (i)	7,769	30,459	7,131	29,935
Other liabilities	63,368	47,508	57,302	41,212
Total	430,973	470,212	401,642	442,499

At December 31, 2008, approximately RMB 92,825,000 of the above balances were denominated in US dollars (2007: RMB 141,607,000).

— I-48 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The ageing analysis of accounts payable and accrued liabilities are as follows:

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Within 6 months	14,019	133,228	5,314	124,746
Over 6 months but within 1 year	18,900	13,078	14,029	11,231
Over 1 year but within 2 years	41,845	7,884	39,133	4,630
Over 2 years but within 3 years	6,677	17,481	3,181	14,644
Over 3 years	10,124	8,584	10,124	8,584
Total accounts payable	91,565	180,255	71,781	163,835
Accrued liabilities and other liabilities	339,408	289,957	329,861	278,664
Total	430,973	470,212	401,642	442,499

(i) Other taxes payables

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Business tax payable	5,595	24,959	4,738	24,034
VAT payable	(693)	(977)	(70)	(73)
Other	2,867	6,477	2,463	5,974
Total	7,769	30,459	7,131	29,935

— I-49 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. DUE TO RELATED PARTIES

	The	Group	The	Company
	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
Within 6 months	15,000	14,069	14,453	14,069
Over 6 months but within 1 year	—	—	—	—
Over 1 year but within 2 years	3,711	—	3,711	—
Over 2 years but within 3 years	—	5,424	—	4,934
Over 3 years	25,837	20,467	16,464	11,530
Total	44,548	39,960	34,628	30,533

These balances comprised mainly dividend payables and service fee payable.

31. PAID-IN CAPITAL

As of December 31, 2008, all issued shares are registered and fully paid, divided into 1,776,315,000 shares (2007: 1,776,315,000 shares) of RMB 1.00 each, comprised of 1,154,607,000 Domestic Shares and 621,708,000 H Shares (2007:1,154,607,000 Domestic Shares and 621,708,000 H Shares).

Number Authorized: Domestic Shares of RMB 1 each H Shares of RMB 1 each Total shares of RMB 1 each Issued and fully paid: Domestic Shares of RMB 1 each H Shares of RMB 1 each Total shares of RMB 1 each	2008 of shares ’000 1,154,607 621,708 1,776,315 1,154,607 621,708 1,776,315	2008 Amount RMB’000 1,154,607 621,708
		1,776,315
		1,154,607 621,708
		1,776,315

— I-50 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32. RESERVES

Capital
Surplus
Statutory
Surplus
Reserve
Fund
Discretionary
Surplus
Reserve Fund
Currency
translation
differences
RMB’000
RMB’000
RMB’000
RMB’000
The Group
Balance as at January 1, 2007
1,194,956
477,582
394,725
(1,151)
Transfer to paid-in capital (i)
(888,157)
—
—
—
Transfer from retained
earnings
—
36,847
83,699
—
Currency translation
differences
—
—
—
(1,667)
Balance as at December 31,
2007
306,799
514,429
478,424
(2,818)
Transfer from retained
earnings
—
53,732
118,357
—
Currency translation
differences
—
—
—
(1,971)
Balance as at December 31,
2008
306,799
568,161
596,781
(4,789)
Capital
Surplus
Statutory
Surplus
Reserve
Fund
Discretionary
Surplus
Reserve Fund
RMB’000
RMB’000
RMB’000
The Company
Balance as at January 1, 2007
1,194,956
472,960
394,307
Transfer to paid-in capital (i)
(888,157)
—
—
Transfer from retained earnings
—
41,469
84,117
Balance as at December 31, 2007
306,799
514,429
478,424
Transfer from retained earnings
—
53,732
118,357
Balance as at December 31, 2008
306,799
568,161
596,781

Total
RMB’000
2,066,112
(888,157)
120,546
(1,667)
1,296,834
172,089
(1,971)
1,466,952
Total
RMB’000
2,062,223
(888,157)
125,586
1,299,652
172,089
1,471,741

— I-51 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(i) At the annual general meeting and class meetings of the Company held on June 5, 2007, a resolution was passed for the bonus issue of 888,157,500 new ordinary shares at par value of RMB 1 per share to the equity holders of the Company on the basis of one bonus share for one existing share, by conversion of reserve amounting to RMB 888,157,500 into paid in capital. As a result, the number of ordinary shares increased from 888,157,500 to 1,776,315,000. The new shares rank pari passu in all respect with the existing shares.

33. APPROPRIATIONS AND DISTRIBUTION OF PROFIT

In the year ended December 31, 2008, according to the Company Law of PRC, related regulations, and the Articles of Association of the Company, the distributable net profit after taxation and minority interest is distributed in the following order:

(i) making up cumulative prior years’ losses, if any;
(ii) appropriation to the statutory surplus reserve fund;
(iii) appropriation to the discretionary surplus reserve fund;
(iv) appropriation to the distribution of dividends for ordinary shares.

The Company is required to allocate at least 10% of its net profit to statutory surplus reserve fund until the cumulative amounts reach 50% of the paid in capital under the Company Law of PRC.

The appropriation to the discretionary surplus reserve fund for the year ended December 31, 2007 was approved in the annual general meeting held on May 20, 2008. The amount was accounted for in shareholder’s equity as a distribution of retained earnings in the year ended December 31, 2008.

The proposed appropriation of RMB 103,967,000 to the discretionary surplus reserve fund for the year ended December 31, 2008 is subject to shareholders’ approval at the forthcoming annual general meeting. Therefore, the amount will be recorded in the Group’s financial statements for year ending December 31, 2009.

After the appropriations mentioned above, the retained earnings available for dividend distribution as at December 31, 2008 was approximately RMB 1,108,252,000 (2007: RMB 959,553,000).

The profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of RMB 519,837,000 (2007: RMB 591,783,000) for the year ended December 31, 2008.

— I-52 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

34. CASH GENERATED FROM OPERATING ACTIVITIES

Profit before taxation
Adjustments for:
Depreciation and amortization
Loss on disposal of property, plant and equipment
Interest income
Provision for impairment of receivables
Share of results from associated companies
Foreign exchange loss
Decrease (increase) in current assets:
Accounts receivable
Inventories
Prepayments and other current assets
Due from related parties/associated companies
Increase (decrease) in current liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Due to related parties
Cash generated from operations

2008
2007
RMB’000
RMB’000
618,045
718,591
312,947
243,111
384
6,039
(82,609)
(69,512)
6,291
1,747
(17,969)
(12,991)
4,904
19,149
(25,461)
(58,430)
(636)
(4,743)
4,782
(5,370)
(351,297)
(95,526)
54,838
33,728
(2,112)
2,726
4,265
11,713
526,372
790,232

35. FINANCIAL RISK MANAGEMENT

• Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk, and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance.

Financial risk management is carried out by the Group’s finance department, following the overall directions determined by the Board of Directors. The Group’s finance department identifies and evaluates financial risks in close co-operation with the Group’s operating units.

(i) Foreign currency risk

The Group’s functional currency is RMB. Majority of transactions are conducted in RMB except for certain commercial transactions with foreign airlines and purchases of machinery and equipment from overseas suppliers. The Group manages the foreign exchange risks by performing regular reviews of the Group’s net foreign exchange exposure.

— I-53 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s exposure to foreign exchange risk relates principally to its accounts receivables, cash and cash equivalents, short-term bank deposits and accounts payables denominated in foreign currencies. Analysis of these assets and liabilities by currency are disclosed in Notes 22, 28, 27, and 29 respectively.

As at December 31, 2008, if RMB had strengthened/weakened by 5% against US$ and HK$ with all other variables held constant, which were considered reasonably possible at each of the dates by management, the profit for the years ended 31 December 2008 would have been approximately RMB 7,282,000 lower/higher, mainly as a result of foreign exchange differences on translation of US$ and HK$ denominated accounts receivables, cash and cash equivalents, short-term bank deposits and accounts payables.

(ii) Interest rate risk

The Group’s interest-bearing assets are mainly represented by cash and cash equivalents, bank deposits and treasury bonds. Interest income is approximately RMB 82,609,000 (2007: RMB 69,512,000). Apart from this, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. The interest rates and maturities of the Group’s short-term bank deposits and treasury bonds are disclosed in Notes 27 and Note 19.

The Group has no significant borrowing and non-current liabilities at December 31, 2008 and do not has significant exposure to changes in interest rates.

(iii) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, short-term deposits, accounts receivables, and due from related parties. The carrying amounts of these current assets represent the Group’s maximum exposure to credit risk in relation to financial assets.

As a substantial portion of these revenues was generated from the shareholders of the Company, the amount due from related parties balances are trade related, and the counterparties mainly comprise the domestic airlines. Most of these domestic airlines are stated-owned enterprises with good repayment history. There was no material default of the balances in the past. Approximately 71% (2007: 62%) of the total amount due from related parties was due from the top 3 customers of the Group: China Southern Airlines Company Limited, China Eastern Airlines Corporation Limited, and Air China Limited.

The Group has policies to ensure that the bank balances are placed with the banks with good reputation and credit quality. The Group also performs evaluation of credit quality of the banks periodically. Approximately 64% (2007: 67%) of the total bank balances were concentrated with 4 stated-owned banks as at December 31, 2008.

— I-54 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) Liquidity risk

The Group maintains cash and bank deposits to hedge its liquidity risks. At December 31, 2008, approximately 60% of the Group’s total assets are in cash and cash equivalents, or short-term deposits (2007: 62%). Directors believe the Group has sufficient cash balances to meet its daily operations requirements and has no significant exposure to liquidity risk.

• Capital risk management

The Group’s objective is to maintain an optimal capital structure and reduce the cost of capital.

The Group reviews and manages its capital structure actively and regularly to ensure optimal capital structure and shareholder returns, taking into account the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.

• Fair value estimation

The Group’s financial instruments mainly consist of cash and cash equivalents, shortterm bank deposits, accounts receivables, prepayments, due from associated and related parties, treasury bonds, accounts payables, and due to related parties.

The carrying amounts of the Group’s financial instruments approximated their fair values as at December 31, 2008 because of the short-term maturities of these instruments.

36. SEGMENT REPORTING

The Group conducts its business within one business segment - the business of providing aviation information technology and related services in the PRC. The Group’s chief decision maker for operation is the Group’s general manager. The information reviewed by the general manager is identical to the information presented in the consolidated income statement. No segment income statement has been prepared by the Group for the year ended December 31, 2008 and 2007. The Group also operates within one geographical segment because its revenues are primarily generated in the PRC and its assets are located in the PRC. Accordingly, no geographical segment data is presented.

— I-55 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. COMMITMENTS

(a) Capital commitments

At December 31, the Group had the following capital commitments:

Authorized and contracted for — Computer System — Building Authorized but not contracted for — Computer System and others — Land use right and Building Total	2008 RMB’000 15,854 — 456,294 685,000 1,157,148	2007 RMB’000 55,720 63,437 661,692 628,962
		1,409,811

The above capital commitments primarily relate to the development of the new generation aviation passenger service system and the construction of new operating centre in Beijing.

At December 31, 2008, approximately RMB 14,431,000 of the above balance were denominated in US dollars (2007: approximately RMB 694,000).

(b) Operating lease commitments

As at December 31, the Group had the following commitments under operating leases:

	2008	2007
	RMB’000	RMB’000
Within one year	39,940	58,581
Later than one year but not later than five years	10,877	68,264
Total	50,817	126,845

(c) Equipment maintenance fee commitments

As at December 31, 2008, the Group had equipment maintenance fee commitments of approximately RMB 6,663,000 (2007: RMB 14,417,000).

— I-56 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. RELATED PARTY TRANSACTIONS

Entities are considered to be related if one has the ability to control the other, directly or indirectly, or has the ability to exercise significant influence over the financial and operating decisions of the other. Entities are also considered to be related if they are subject to common control or common significant influence.

Management believes that meaningful information relative to related party disclosures has been adequately disclosed.

(1) Related parties

The major related parties of the Company and the Group are as follows:

Name

Relationship with the Company

China TravelSky Holding Company (“CTHC”) China Southern Air Holding Company China Southern Airlines Company Limited China Eastern Air Holding Company China Eastern Airlines Corporation Limited

China National Aviation Holding Company Air China Limited Xiamen Airlines Company Limited China Eastern Airlines Wuhan Company Limited

Hainan Airlines Company Limited Shenzhen Airlines Company Limited Shanghai Airlines Company Limited Sichuan Airlines Holding Company Sichuan Airlines Company Limited Yunnan Lucky Airlines Company Limited Shandong Airlines Company Limited Asia Technology Development Company Limited (“Asia Technology”) Accounting Center of China Aviation Company Limited (“ACCA”)

Shareholder of the Company

Shareholder of the Company Subsidiary of a shareholder of the Company Shareholder of the Company Subsidiary of a shareholder of the Company

Shareholder of the Company

Subsidiary of a shareholder of the Company Shareholder of the Company Shareholder of the Company

Shareholder of the Company Shareholder of the Company Shareholder of the Company Shareholder of the Company Subsidiary of a shareholder of the Company Subsidiary of a shareholder of the Company Shareholder of the Company Indirect wholly owned subsidiary of a shareholder of the Company

Subsidiary of a shareholder of the Company

— I-57 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Related party transactions

The following is a summary of significant recurring transactions carried out with the Group’s related parties:

(i) Revenue for aviation information technology and data network services, the pricing of which was based on either contractual arrangements or negotiated prices with these related parties with reference to the pricing standards prescribed by Civil Aviation Administration of China (“CAAC”) where applicable.

Name	2008	2007
	RMB’000	RMB’000
China Southern Airlines Company Limited (a)	336,495	347,507
China Eastern Airlines Corporation Limited	253,306	258,585
Air China Limited	239,727	241,469
Hainan Airlines Company Limited	151,594	146,464
Shenzhen Airlines Company Limited (b)	122,233	101,128
China Eastern Airlines Wuhan Company Limited	11,366	14,753
Sichuan Airlines Company Limited	68,071	68,420
Shandong Airlines Company Limited	33,427	33,668
Shanghai Airlines Company Limited	107,714	99,295
Yunnan Lucky Airlines Company Limited	8,679	—

a. Included the transaction amount of its subsidiary, Xiamen Airlines Company Limited.
b. Included the transaction amount of its subsidiary, Kunpeng Airlines Company Limited.

In the Directors’ opinion, these transactions were carried out with related parties in the ordinary course of business and on normal commercial terms.

(ii) Lease of properties from CTHC

For the year ended December 31, 2008, operating lease rentals for lease of properties from CTHC amounted to RMB 38,608,608 (2007: RMB 38,608,608). The pricing of operating lease rentals for buildings is based on agreed rates with CTHC.

(iii) Computer software development services provided by Asia Technology.

For the year ended December 31, 2008, computer software development services provided by Asia Technology amounted to RMB 18,800,000 (2007: RMB 18,800,000). Asia Technology is an indirect wholly owned subsidiary of CTHC. The pricing of computer software development service fee is based on contractual arrangement with Asia Technology.

— I-58 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(3) Balances with related parties

Balances due from the related parties mainly comprised:

	The	Group	The	Company
Name	2008	2007	2008	2007
	RMB’000	RMB’000	RMB’000	RMB’000
China Southern Airlines Company Limited (a)	281,960	129,108	279,400	126,854
China Eastern Airlines Corporation Limited	125,871	66,214	123,284	63,394
Air China Limited	127,592	52,680	127,330	52,667
Hainan Airlines Company Limited	83,708	45,009	83,707	44,973
Shenzhen Airlines Company Limited (b)	42,019	25,482	38,541	23,314
China Eastern Airlines Wuhan Company
Limited	3,274	1,629	3,274	1,290
Sichuan Airlines Company Limited	34,725	45,487	34,495	45,587

a. Included the transaction balance of its subsidiary, Xiamen Airlines Company Limited.
b. Included the transaction balance of its subsidiary, Kunpeng Airlines Company Limited.

The balances with related parties were unsecured, non-interest bearing and generally repayable within six months.

The balances with related parties primarily arose from the above related party transactions.

(4) Amounts due from other major state-owned enterprises

The balances with other major state-owned banks are as follows:

		The	Group	The	Company
		2008	2007	2008	2007
		RMB’000	RMB’000	RMB’000	RMB’000
Bank	balances	2,001,089	2,058,932	1,794,435	1,880,290

The Group is a state-owned enterprise. In accordance with the revised IAS 24, “Related Party Disclosures”, state-owned enterprises and their subsidiaries, other than entities under the Group, directly or indirectly controlled by the PRC government are also defined as related parties of the Company and its subsidiaries.

The majority of the business activities of the Company and its subsidiaries are conducted with state-owned enterprises. For the purpose of the related party transactions disclosure in accordance with IAS 24, the Company and its subsidiaries have established procedures to determine, to the extent possible, the identification of the ownership structure of its customers and suppliers as to whether they

— I-59 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

are state-owned enterprises. However, many state-owned enterprises have a multi-layered corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Nevertheless, management believes that all material related party balances and transactions have been adequately disclosed.

39. ULTIMATE HOLDING COMPANY

The Directors regard CTHC established in the PRC as being the ultimate holding company.

40. EVENTS AFTER THE BALANCE SHEET DATE

(a) Significant acquisition completed after the year end

As set out in the circular of the Company dated June 16, 2008 and the announcements dated May 26, 2008 and July 31, 2008, the Company would acquire from CTHC 100% equity interest in ACCA and the property located in Dongxing Li, Chaoyang District, Beijing, the People’s Republic of China (“PRC”) at an aggregate consideration of RMB1 billion. Such acquisition proceeded to completion on March 3, 2009 and the consideration was satisfied by the issue and allotment to CTHC 174,491,393 new domestic shares of the Company at a price of HK$6.39 (approximately RMB5.73) per such consideration share upon completion. The related financial impact of the acquisition will be reflected in the financial statements for the year ending December 31, 2009. Management of ACCA is in the process to compile the financial statements prepared in accordance with IFRS.

At present, the total number of issued shares of the Company is 1,950,806,393 shares, comprising 1,329,098,393 domestic shares and 621,708,000 H shares.

As both the Company and ACCA are under common control of CTHC before and after the acquisition, the acquisition of ACCA will be accounted for as a common control business combination (Note 3(a) (i)).

(b) Share repurchase plan

At the extraordinary general meeting and class meetings of the Company held on March 3, 2009, a general mandate to repurchase shares of the Company was approved to be granted to the Directors.

Under the above share repurchase mandate, the Board was authorized to exercise, whether by a single exercise or otherwise, all the powers of the Company to repurchase the overseas listed foreign shares of RMB1 each in issue in the share capital of the Company (“H Shares”) on The Stock Exchange of Hong Kong Limited.

The aggregate nominal value of H Shares authorized to be repurchased pursuant to the above mandate shall not exceed 10% of the aggregate nominal value of H Shares in issue of the Company as at the date of passing of the resolutions at the above extraordinary general meeting.

The exercise of the authority was subject to the approvals of PRC related regulations and laws.

— I-60 —

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The above share repurchase mandate will expire at the forthcoming annual general meeting of the Company.

41. RECLASSIFICATION

Certain comparative figures have been reclassified to conform to the current year presentation.

42. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on March 27, 2009.

— I-61 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SUMMARY OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED JUNE 30, 2009

The following is a summary of the financial information of the Group for the six months ended June 30, 2009 as extracted from the interim report of the Company for the six months ended June 30, 2009. The ACCA Acquisition was completed on March 3, 2009, and its related financial impact has already been reflected in the interim financial information.

CONDENSED CONSOLIDATED BALANCE SHEET

(Amounts expressed in thousands of Renminbi)

		As at	As at
		June 30,	December 31,
		2009	2008
	Note	Unaudited
			(Note 4)
ASSETS
Non-current assets
Property, plant and equipment, net Intangible assets, net Lease prepayment for land use right, net Investments in associated companies Other long-term assets Deferred income tax assets	10 10	989,821 102,336 110,584 105,016 8,961 6,768	1,004,445 17,070 19,314 103,665 8,962 6,810
		1,323,486	1,160,266
Current assets
Inventories		4,923	9,877
Accounts receivable, net	11	188,758	164,400
Due from associated companies Due from related parties, net Income tax receivable	12	10,457 1,070,894 69,553	6,556 944,759 45,104
Prepayments and other current assets Short-term bank deposits Cash and cash equivalents		235,701 2,012,538 1,941,764	313,368 2,324,728 1,326,473
		5,534,588	5,135,265
Total assets		6,858,074	6,295,531
EQUITY Capital and reserves attributable to equity holders Paid in capital Reserves	8	1,950,806 2,302,400	1,776,315 2,171,729
Retained earnings — Proposed final cash dividend — Others	9	— 1,386,428	362,850 1,126,290
		5,639,634	5,437,184
Minority interest		104,612	98,810
Total equity		5,744,246	5,535,994
LIABILITIES
Non-current liabilities
Deferred income tax liabilities		180	180
Current liabilities
Accounts payable and accrued liabilities Due to related parties Income tax payable Deferred revenue	13	811,248 293,261 6,637 2,502	696,607 47,428 12,138 3,184
		1,113,648	759,357
Total liabilities		1,113,828	759,537
Total equity and liabilities		6,858,074	6,295,531
Net current assets		4,420,940	4,375,908
Total assets less current liabilities		5,744,426	5,536,174

— I-62 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Amounts expressed in thousands of Renminbi, except per share data)

Six
Note
Revenues
Aviation information technology services
Accounting, settlement and clearing services
Data network and others
Total revenues
3
Operating expenses
Business taxes and other surcharges
Depreciation and amortisation
Network usage
Personnel
Operating lease rentals
Technical support and maintenance fees
Commission and promotion expenses
Other operating expenses
Total operating expenses
Operating profit
Financial income, net
Share of results of associated companies
Profit before taxation
5
Income tax
6
Profit after taxation
Other Comprehensive income:
Currency translation differences
Other Comprehensive income for the period, net of tax
Total comprehensive income for the period
Profit attributable to:
Equity holders of the Company
Minority interest
Total comprehensive income attributable to:
Equity holders of the Company
Minority interest
Earnings per share for profit attributable to the equity
holders of the Company
Basic and diluted (RMB)
7

Unaudited
months ended June 30,
2009
2008
(Note 4)
847,409
795,640
122,893
133,150
221,264
197,128
1,191,566
1,125,918
(42,204)
(40,287)
(169,951)
(168,778)
(45,384)
(39,522)
(197,442)
(182,221)
(32,072)
(38,617)
(71,868)
(70,154)
(127,868)
(144,067)
(110,544)
(100,752)
(797,333)
(784,398)
394,233
341,520
46,768
43,164
5,911
6,907
446,912
391,591
(73,817)
(64,236)
373,095
327,355
(247)
(2,957)
(247)
(2,957)
372,848
324,398
364,106
316,590
8,989
10,765
373,095
327,355
363,859
313,633
8,989
10,765
372,848
324,398
0.19
0.17

— I-63 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Amounts expressed in thousands of Renminbi)

Balance at January 1, 2008 (as previously reported) Adjustment for 2009 business combination under common control Balance at January 1, 2008 (as restated) *(Note 4)* Profit for the period Other comprehensive income: Currency translation differences Total comprehensive income for the period ended June 30, 2008 Dividends relating to 2007 Dividends paid to minority shareholders of subsidiaries Appropriation to reserves Balance at June 30, 2008 (as restated)		Unaudited	Unaudited	Total 4,418,726 699,374 5,118,100 327,355 (2,957) 324,398 (230,921) (2,125) — 5,209,452
		Attributable to equity holders of the Company Paid in capital Reserves Retained earnings Minority Interest 1,776,315 1,296,834 1,259,580 85,997 — 697,496 1,878 — 1,776,315 1,994,330 1,261,458 85,997 — — 316,590 10,765 — (2,957) — — — (2,957) 316,590 10,765 — — (230,921) — — — — (2,125) — 118,358 (118,358) — 1,776,315 2,109,731 1,228,769 94,637
		Paid in capital 1,776,315 — 1,776,315 — — — — — — 1,776,315	Reserves 1,296,834 697,496 1,994,330 — (2,957) (2,957) — — 118,358 2,109,731

— I-64 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Balance at January 1, 2009 (as previously reported) Adjustment for 2009 business combination under common control Balance at January 1, 2009 (as restated) *(Note 4)* Profit for the period Other comprehensive income: Currency translation differences Total comprehensive income for the period ended June 30, 2009 Issurance of shares for acquisition of property Issurance of shares for business combination under common control in 2009 Dividend relating to 2008 9 Dividends paid to minority shareholders of subsidiaries Appropriation to reserves 8 Balance at June 30, 2009		Unaudited	Unaudited	Total 4,758,756 777,238 5,535,994 373,095 (247) 372,848 201,441 — (362,850) (3,187) — 5,744,246
		Attributable to equity holders of the Company Paid in capital Reserves Retained earnings Minority Interest 1,776,315 1,466,952 1,416,679 98,810 — 704,777 72,461 — 1,776,315 2,171,729 1,489,140 98,810 — — 364,106 8,989 — (247) — — — (247) 364,106 8,989 36,992 164,449 — — 137,499 (137,499) — — — — (362,850) — — — — (3,187) — 103,968 (103,968) — 1,950,806 2,302,400 1,386,428 104,612
		Paid in capital 1,776,315 — 1,776,315 — — — 36,992 137,499 — — — 1,950,806	Reserves 1,466,952 704,777 2,171,729 — (247) (247) 164,449 (137,499) — — 103,968 2,302,400

— I-65 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Amounts expressed in thousands of Renminbi)

Six
Note
Cash flows from operating activities
Cash generated from operations
14
Enterprise income tax paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property, plant, equipment and intangible
assets
Maturities of short-term bank deposits
Placements of short-term bank deposits
Interest received
Dividends received from associated companies
Proceeds from disposal of property, plant and equipment
Net cash provided by investing activities
Cash flows from financing activities
Dividends paid
Net cash used in financing activities
Effect of foreign exchange rate changes on cash and
cash equivalents
Net Increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period

Unaudited
months ended June 30,
2009
2008
(Note 4)
482,975
413,151
(103,725)
(98,147)
379,250
315,004
(122,785)
(170,273)
1,199,228
1,306,030
(887,038)
(885,538)
44,897
47,897
4,560
300
(41)
172
238,821
298,588
(3,187)
(232,541)
(3,187)
(232,541)
407
(7,174)
615,291
373,877
1,326,473
1,736,758
1,941,764
2,110,635

— I-66 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General Information

TravelSky Technology Limited (the “Company”) was incorporated in the People’s Republic of China (the “PRC”) on October 18, 2000 to engage in the provision of aviation information technology service and related services in the PRC. The Company was listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on February 7, 2001.

The address of its registered office is Floor 18-20, South Wing, Pack C, Raycom InfoTech Park,
No. 2, Ke Xue Yuan South Road, Haidian District, Beijing, the PRC.
Principal accounting policies and basis of presentation

The unaudited condensed consolidated financial statements have been prepared under the historical cost convention and in accordance with International Accounting Standard 34 “Interim Financial Reporting”, and have been reviewed by the Audit Committee of the Company.

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended December 31, 2008, as described in those annual financial statements.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning January 1, 2009.

IAS 1 (revised), ‘Presentation of Financial Statements’. The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity. All ‘non-owner changes in equity’ are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

The Group has elected to present one statement: the statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.

IFRS 8, ‘Operating Segments’. IFRS 8 replaces IAS/HKAS 14, ‘Segment Reporting’. It requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the general manager of the Company.

— I-67 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IFRS 1 (Amendment), ‘First Time Adoption of IFRS’ and IAS 27 ‘Consolidated and Separate Financial Statements’. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor.

The following new amendments to standards and interpretations are mandatory for the first time for the financial year beginning January 1, 2009, but are not relevant to the Group for the six months ended June 30, 2009.

IAS 23 (amendment), ‘Borrowing Costs’;
IFRS 2 (amendment), ‘Share-based Payment’. IAS 32 (amendment), ‘Financial Instruments: Presentation’;
IFRIC 9 (amendment), ‘Reassessment of Embedded Derivatives’ and IAS 39 (amendment), ‘Financial Instruments: Recognition and Measurement’;
IFRIC 13, ‘Customer Loyalty Programmes’;
IFRIC 15, ‘Agreements for The Construction of Real Estate’;
IFRIC 16, ‘Hedges of A Net Investment In A Foreign Operation’ and;
IAS 39 (amendment), ‘Financial Instruments: Recognition and Measurement’.

3. Revenue

Revenue mainly comprises the fees earned by the Group for the provision of the Group’s aviation information technology services and related services. A substantial portion of these fees was generated from the shareholders of the Company.

4. Business combination

As set out in the circular of the Company dated June 16, 2008 and the announcements dated May 26, 2008 and July 31, 2008, the Company would acquire from China TravelSky Holding Company (“CTHC”) 100% equity interest in Accounting Center of China Aviation Company Limited (“ACCA”) and the property located in Dongxing Li, Chaoyang District, Beijing, the People’s Republic of China (“PRC”) (“Property”). ACCA is engaged in the provision of accounting, settlement and clearing services, and related information system development and support services to commercial airlines and other aviation companies. The acquisition was completed on March 3, 2009 and the consideration was satisfied by the issue and allotment of 174,491,393 new domestic shares of the Company to CTHC (137,499,218 shares for the acquisition of ACCA, while 36,992,175 shares for the acquisition of the Property).

— I-68 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As both the Company and ACCA are under common control of CTHC before and after the acquisition, the acquisition of ACCA will be accounted for as a common control business combination. The Company adopted merger accounting for common control combination. Hence, the comparative amounts in the consolidated financial statement are presented as if ACCA had been acquired at the earlist period presented. Below is the impact of the acquisition to the condensed financial statement.

June 30, 2009

The Group before acquiring ACCA RMB’000 ASSETS Non-current assets 1,503,499 Current assets 4,661,598 Total assets 6,165,097 EQUITY Paid in capital 1,950,806 Reserve 1,925,806 Retained earnings 1,272,069 Minority interest 104,612 Total equity 5,253,293 LIABILITY Non-current liabilities 180 Current liabilities 911,624 Total liabilities 911,804 Total equity and liabilities 6,165,097	ACCA Adjustments (Note) Consolidated RMB’000 RMB’000 RMB’000 148,170 (328,183) 1,323,486 877,890 (4,900) 5,534,588 1,026,060 (333,083) 6,858,074 759,785 (759,785) 1,950,806 (55,008) 431,602 2,302,400 114,359 — 1,386,428 — — 104,612 819,136 (328,183) 5,744,246 — — 180 206,924 (4,900) 1,113,648 206,924 (4,900) 1,113,828 1,026,060 (333,083) 6,858,074	ACCA Adjustments (Note) Consolidated RMB’000 RMB’000 RMB’000 148,170 (328,183) 1,323,486 877,890 (4,900) 5,534,588 1,026,060 (333,083) 6,858,074 759,785 (759,785) 1,950,806 (55,008) 431,602 2,302,400 114,359 — 1,386,428 — — 104,612 819,136 (328,183) 5,744,246 — — 180 206,924 (4,900) 1,113,648 206,924 (4,900) 1,113,828 1,026,060 (333,083) 6,858,074
		6,858,074
		1,950,806 2,302,400 1,386,428 104,612
		5,744,246
		180 1,113,648
		1,113,828
		6,858,074

Note: The above adjustments were i) the adjustment to eliminate the inter-group balance of current assets and liabilities between the Company and ACCA; ii) the adjustment to offset the long-term investment between the Company and ACCA.

— I-69 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

December 31, 2008

The Group before acquiring ACCA RMB’000 ASSETS Non-current assets 1,007,222 Current assets 4,233,985 Total assets 5,241,207 EQUITY Paid in capital 1,776,315 Reserve 1,466,952 Retained earnings 1,416,679 Minority interest 98,810 Total equity 4,758,756 LIABILITY Non-current liabilities 180 Current liabilities 482,271 Total liabilities 482,451 Total equity and liabilities 5,241,207	ACCA Adjustments (Note) Consolidated RMB’000 RMB’000 RMB’000 153,044 — 1,160,266 906,180 (4,900) 5,135,265 1,059,224 (4,900) 6,295,531 759,785 (759,785) 1,776,315 (55,008) 759,785 2,171,729 72,461 — 1,489,140 — — 98,810 777,238 — 5,535,994 — — 180 281,986 (4,900) 759,357 281,986 (4,900) 759,537 1,059,224 (4,900) 6,295,531	ACCA Adjustments (Note) Consolidated RMB’000 RMB’000 RMB’000 153,044 — 1,160,266 906,180 (4,900) 5,135,265 1,059,224 (4,900) 6,295,531 759,785 (759,785) 1,776,315 (55,008) 759,785 2,171,729 72,461 — 1,489,140 — — 98,810 777,238 — 5,535,994 — — 180 281,986 (4,900) 759,357 281,986 (4,900) 759,537 1,059,224 (4,900) 6,295,531
		6,295,531
		1,776,315 2,171,729 1,489,140 98,810
		5,535,994
		180 759,357
		759,537
		6,295,531

Note: The above adjustments were i) the adjustment to eliminate the inter-group balance of current assets and liabilities between the Company and ACCA; ii) the adjustment to the increase in the reserve of the Company as a result of the acquisition of ACCA.

— I-70 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. Profit before taxation

Profit before taxation is arrived at after charging and crediting the following:

	Unaudited	Unaudited
	Six months ended	June 30,
	2009	2008
	RMB’000	RMB’000
After charging:
Depreciation	150,687	161,465
Amortisation of intangible assets	15,190	4,067
Amortisation of leasehold improvements	2,917	3,044
Amortisation of lease prepayments for land use right	1,157	202
Loss on disposal of property, plant and equipment	37	95
Provision for impairment of receivables	15,444	—
Cost of equipment sold	7,078	15,003
Contributions to defined contribution pension scheme	24,158	20,965
Auditor’s remuneration	1,100	1,139
Exchange loss/(gain)	(1,871)	4,732
Contribution to housing fund	12,718	10,391
Research and development expenses	119,374	116,207
After crediting:
Interest income	44,897	47,896

6. Taxation

The Corporate Income Tax Law of the People’s Republic of China (“new CIT Law”) was implemented since January 1, 2008 as approved by the National People’s Congress on March 16, 2007, pursuant to which, the new CIT Law unified the income tax rate of enterprises in China to 25%, starting from January 1, 2008. Pursuant to relevant requirements, enterprises recognized as “High and New Technology Enterprises” are entitled to a favorable statutory tax rate of 15% under the new CIT Law. In December 2008, the Company was again approved and certified by relevant authorities as a “High and New Technology Enterprise” under the new CIT Law, and was entitled to the preferential tax rate of 15% from 2008 to 2010.

In addition to being approved as a “High and New Technology Enterprise”, the Company was also approved and certified by relevant authorities as an “Important Software Enterprise” for the year 2006, 2007 and 2008 which allows the Company to enjoy a preferential income tax rate of 10%. According to the relevant regulations, the differences that resulted from the enterprise income tax paid by the Company at the rate of 15% over this preferential income tax rate of 10% should be recognized in the period which the Company obtained its “Important Software Enterprise” certification.

— I-71 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Earnings per share

The calculation of the basic and diluted earnings per share attributable to the equity holders of the Company is based on the following:

	Unaudited	Unaudited
	Six months ended	June 30,
	2009	2008
Earnings *(RMB’000)*	364,106	316,590
Earnings for the purpose of calculating the basic
and dilutive earnings per share
Numbers of shares *(’000)*	1,938,476	1,913,814
Weighted average number of ordinary shares in issue (Note)
Earnings per share *(RMB)*	0.19	0.17
Basic and dilutive

Note: The number of shares in issue for the six months ended June 30, 2009 and 2008 have been adjusted for the 137,499,218 share issued to CTHC on March 3, 2009 (Note 4) for the acquisition of ACCA as if these shares were issued for all periods presented.

8. Reserve

The appropriation to the discretionary surplus reserve fund for the year 2008 was approved in the annual general meeting held on June 5, 2009.

RMB103,967,000, representing 20% of the Company’s net profit of year 2008, was transferred to the discretionary surplus reserve fund for the six months ended June 30, 2009.

9. Dividend Distribution

The equity holders in the annual general meeting of the Company held on June 5, 2009 approved the distribution of a final dividend of RMB206,850,000 and a special dividend of RMB156,000,000 in cash, aggregating to RMB362,850,000 (RMB0.186 per share) for Year 2008. The dividends are related to the undistributed profit generated before January 1, 2008. The amount was accounted for in shareholders’ equity as an appropriation of retained earnings for the six months ended June 30, 2009.

10. Property, plant and equipment and lease prepayment for land use right, net

As descripted in Note 4, the building element of the Property is recognised as a property, plant and equipment amounting to RMB109,000,000, and the land element of the Property is recognised as lease prepayment for land use right amounting to RMB92,000,000.

— I-72 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the six months ended June 30, 2009, the Group acquired property, plant and equipment amounting to approximately RMB135,463,000 in total.

11. Accounts Receivable, net

The credit period for accounts receivable is generally six months after services are rendered.

The ageing analysis of accounts receivable is as follows:

	June 30,	December 31,
	2009	2008
	Unaudited
	RMB’000	RMB’000
Within 6 months	150,388	130,562
Over 6 months but within 1 year	34,857	22,285
Over 1 year but within 2 years	22,776	15,952
Over 2 years but within 3 years	1,661	868
Over 3 years	7,171	7,384
Accounts receivable	216,853	177,051
Provision for impairment of receivables	(28,095)	(12,651)
Accounts receivable, net	188,758	164,400

12. Due from related parties, net

These balances are trade related, unsecured, interest free and generally repayable within six months.

The ageing analysis of the amount due from related parties is as follows:

Within 6 months Over 6 months but within 1 year Over 1 year but within 2 years Over 2 years but within 3 years Over 3 years Due from related parties Provision for impairment of receivables Due from related parties, net	June 30, 2009 December 31, 2008 Unaudited RMB’000 RMB’000 832,231 791,559 233,567 151,166 5,052 1,996 7 5,799 37 8,904 1,070,894 959,424 — (14,665) 1,070,894 944,759

— I-73 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Accounts payable and accrued liabilities

The ageing analysis of accounts payable is as follows:

	June 30,	December 31,
	2009	2008
	Unaudited
	RMB’000	RMB’000
Within 6 months	9,423	20,882
Over 6 months but within 1 year	12,516	20,018
Over 1 year but within 2 years	34,790	41,845
Over 2 years but within 3 years	4,616	6,677
Over 3 years	9,920	10,124
Total accounts payable	71,265	99,546
Accrued liabilities and other liabilities	739,983	597,061
Total accounts payable and accrued liabilities	811,248	696,607

14. Cash generated from operations

Six Profit before taxation Adjustments for: Depreciation and amortization Loss on disposal of property, plant and equipment Interest income Provision for impairment of receivables Share of results of associated companies Exchange loss Decrease/(increase) in current assets: Accounts receivable Inventories Prepayments and other current assets Due from related parties and associated companies Increase/(decrease) in current liabilities: Accounts payable and accrued liabilities Deferred revenue Due to related parties Cash generated from operating activities	Unaudited months ended June 30, 2009 2008 RMB’000 RMB’000 446,912 391,591 169,951 168,778 37 95 (44,897) (47,897) (15,444) — (5,911) (6,907) (654) 4,218 (8,914) (19,713) 4,954 903 7,750 188,502 (130,036) (207,178) 176,927 (91,894) (682) (291) (117,018) 32,944 482,975 413,151	Unaudited months ended June 30, 2009 2008 RMB’000 RMB’000 446,912 391,591 169,951 168,778 37 95 (44,897) (47,897) (15,444) — (5,911) (6,907) (654) 4,218 (8,914) (19,713) 4,954 903 7,750 188,502 (130,036) (207,178) 176,927 (91,894) (682) (291) (117,018) 32,944 482,975 413,151
		413,151

— I-74 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Commitments

(a) Capital Commitments

At the balance sheet date, the Group had the following capital commitments:

Authorized and contracted for — Computer System — Building Authorized but not contracted for — Computer System — Land use right and Building Total	June 30, 2009 December 31, 2008 Unaudited RMB’000 RMB’000 34,486 15,854 — — 299,023 456,294 685,000 685,000 1,018,509 1,157,148	June 30, 2009 December 31, 2008 Unaudited RMB’000 RMB’000 34,486 15,854 — — 299,023 456,294 685,000 685,000 1,018,509 1,157,148
		1,157,148

The above capital commitments primarily relate to the construction of new operating centre in Beijing, development and upgrade of the new generation aviation passenger service information system and other new businesses.

An amount of approximately RMB17,843,000 of capital commitments outstanding at June 30, 2009 was denominated in U.S. dollars.

(b) Operating lease commitments

At the balance sheet date, the Group had the following commitments under operating leases:

	June 30,	December 31,
	2009	2008
	Unaudited
	RMB’000	RMB’000
Within one year	35,695	39,940
Over 1 year but within 5 years	14,073	10,877
Total	49,768	50,817

— I-75 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Segment Reporting

The Group conducts its business within one business segment — the business of providing aviation information technology and related services in the PRC. The Group’s chief operating decision maker is the Group’s general manager. The information reviewed by the general manager is identical to the information presented in the consolidated income statement. No segment profitable report has been prepared by the Group for six months ended June 30, 2009 and 2008.

The Group operates within one geographical segment because its revenues are primarily generated in the PRC and its assets are located in the PRC.

In the periods set out below, certain customers, accounted for greater than 10% of the Group’s total revenues:

		Unaudited	Unaudited
	Six months ended June 30,
Main customers	2009		2008
	RMB’000	%	RMB’000	%
Air China Limited	146,781	12%	145,543	13%
China Southern Airlines Company Limited	197,910	17%	190,059	17%
China Eastern Airlines Corporation Limited	162,065	14%	155,493	14%

— I-76 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS OF THE GROUP

Borrowings

As at the close of business on 31 December 2009, being the latest practicable date for the purpose of ascertaining certain information relating to this indebtedness statement prior to the printing of this circular, the Group did not have any outstanding bank loans.

Contingent liabilities

At the close of business on 31 December 2009, the Group did not have any contingent liability.

Disclaimer

Save as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables, the Group did not, at the close of business on 31 December 2009, have any loans capital issued and outstanding, and authorised or otherwise created but unissued or agreed to be issued, bank overdrafts, charges or debentures, mortgages, loans, or other similar indebtedness or any finance lease commitment, hire purchase commitment, liabilities under acceptance (other than normal trade bills and payables), acceptance credits or any guarantees or other material contingent liabilities.

5. WORKING CAPITAL SUFFICIENCY

Taking into account the expected completion of the Acquisition and the internal resources available to the Group, the Directors are of the opinion that the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular in the absence of unforeseen circumstances.

6. MATERIAL ADVERSE CHANGES

The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2008, the date to which the latest published audited annual financial statements of the Group were made up.

— I-77 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

1. INTRODUCTION

As set out in the ACCA Acquisition Circular, the Company would acquire from CTHC 100% equity interest in ACCA at a consideration of RMB788 million (equivalent to approximately HK$895.45 million). The acquisition was completed on 3 March 2009 and the consideration was satisfied by the issue and allotment of 137,499,218 new domestic shares of the Company to CTHC.

ACCA is engaged in the provision of accounting, settlement and clearing services, and related information system development and support services to commercial airlines and other aviation companies. Apart from being the second largest service provider of IATA BSP Data Processing in the world, ACCA is also the largest provider of outsourced services and system products in revenue settlement and clearing in the air transportation industry in the PRC. Its major customers include domestic passenger and cargo airlines, overseas and regional commercial airlines, domestic airports, government organizations and IATA.

The aggregate of the remuneration payable to and benefits in kind receivable by the directors of ACCA did not vary in consequence of the ACCA Acquisition.

— II-1 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

2. FINANCIAL INFORMATION OF ACCA GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2005, 31 DECEMBER 2006 AND 31 DECEMBER 2007

The following is the financial information of the ACCA Group for the three years ended 31 December 2005, 31 December 2006 and 31 December 2007, as extracted from Appendix II — “Accountant’s Report of the ACCA Group” to the ACCA Acquisition Circular. ACCA and ACCA Group are referred to in the following financial information as the “Target Company” and “Target Group” respectively.

I. FINANCIAL INFORMATION OF THE TARGET GROUP

CONSOLIDATED INCOME STATEMENTS

Note
Revenues
6
Personnel expenses
9
Business taxes and other surcharges
Depreciation and amortisation
Technical support and maintenance fees
Property management fees
Other income
Other operating expenses
Operating profit
Financial income
Reversal of provision for financial guarantee
obligation
12
Profit before taxation
7
Taxation
11
Profit after taxation and attributable to equity
holder of the Target Company

Year ended December 31,
2005
2006
2007
RMB’000
RMB’000
RMB’000
245,707
255,926
273,485
(108,187)
(97,612)
(109,212)
(13,262)
(13,536)
(14,216)
(25,068)
(24,785)
(16,661)
(8,579)
(9,919)
(9,043)
(9,197)
(9,974)
(10,530)
3,236
—
—
(21,647)
(28,738)
(22,618)
63,003
71,362
91,205
20,775
25,078
11,649
67,676
—
—
151,454
96,440
102,854
(28,264)
(31,217)
(38,956)
123,190
65,223
63,898

— II-2 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEETS

Note ASSETS Non-current assets Property, plant and equipment, net 13 Intangible assets, net 14 Lease prepayments for land use rights, net 15 Deferred tax assets 17 Total non-current assets Current assets Accounts receivable, net 18 Due from holding company and fellow subsidiaries 19 Other receivables and other current assets, net 21 Cash and cash equivalents 22 Total current assets Total assets EQUITY Capital and reserves attributable to equity holders of the Target Company Paid-in capital 23 Reserves Retained earnings Owner’s equity before Reorganisation Total equity 24	As 2005 RMB’000 116,799 1,311 — 3,944 122,054 12,264 588,965 463,049 17,893 1,082,171 1,204,225 — — — 348,452 348,452	at December 31, 2006 2007 RMB’000 RMB’000 108,845 104,775 3,675 4,604 20,122 19,718 8,089 2,947 140,731 132,044 8,081 10,765 540,675 20,803 316,779 423,252 28,173 527,606 893,708 982,426 1,034,439 1,114,470 — 759,785 — (62,289) — 1,878 416,053 — 416,053 699,374

— II-3 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

Note LIABILITIES Non-current liabilities Supplemental retirement benefits obligations 10 Total non-current liabilities Current liabilities Accounts payable 25 Other payables and other current liabilities 26 Supplemental retirement benefits obligations 10 Income tax payable Total current liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As 2005 RMB’000 11,410 11,410 250 767,447 540 76,126 844,363 855,773 1,204,225 237,808 359,862	at December 31, 2006 2007 RMB’000 RMB’000 13,360 — 13,360 — 1,513 2,957 544,849 346,213 560 — 58,104 65,926 605,026 415,096 618,386 415,096 1,034,439 1,114,470 288,682 567,330 429,413 699,374	at December 31, 2006 2007 RMB’000 RMB’000 13,360 — 13,360 — 1,513 2,957 544,849 346,213 560 — 58,104 65,926 605,026 415,096 618,386 415,096 1,034,439 1,114,470 288,682 567,330 429,413 699,374
			—
			2,957 346,213 — 65,926
			415,096
			415,096
			1,114,470
			567,330
			699,374

— II-4 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

BALANCE SHEETS

Note ASSETS Non-current assets Property, plant and equipment, net 13 Intangible assets, net 14 Lease prepayments for land use rights, net 15 Investments in subsidiaries 16 Deferred tax assets 17 Total non-current assets Current assets Accounts receivable, net 18 Due from holding company and fellow subsidiaries 19 Due from subsidiary 20 Other receivables and other current assets, net 21 Cash and cash equivalents 22 Total current assets Total assets EQUITY Capital and reserves attributable to equity holders of the Target Company Paid-in capital 23 Reserves Retained earnings Owner’s equity before Reorganisation Total equity 24	As 2005 RMB’000 113,783 1,232 — 6,500 3,944 125,459 9,074 580,347 5,441 462,949 12,786 1,070,597 1,196,056 — — — 340,390 340,390	at December 31, 2006 2007 RMB’000 RMB’000 106,522 103,370 3,675 4,604 20,122 19,718 6,500 7,728 8,089 2,947 144,908 138,367 5,842 9,404 530,795 11,003 1,768 — 316,366 423,068 18,120 521,585 872,891 965,060 1,017,799 1,103,427 — 759,785 — (73,104) — 4,816 409,295 — 409,295 691,497

— II-5 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

Note LIABILITIES Non-current liabilities Supplemental retirement benefits obligations 10 Total non-current liabilities Current liabilities Accounts payable 25 Due to subsidiary Other payables and other current liabilities 26 Supplemental retirement benefits obligations 10 Income tax payable Total current liabilities Total liabilities Total equity and liabilities Net current assets Total assets less current liabilities	As 2005 RMB’000 11,410 11,410 80 10,715 761,867 540 71,054 844,256 855,666 1,196,056 226,341 351,800	at December 31, 2006 2007 RMB’000 RMB’000 13,360 — 13,360 — 577 2,756 — 4,008 538,154 339,799 560 — 55,853 65,367 595,144 411,930 608,504 411,930 1,017,799 1,103,427 277,747 553,130 422,655 691,497	at December 31, 2006 2007 RMB’000 RMB’000 13,360 — 13,360 — 577 2,756 — 4,008 538,154 339,799 560 — 55,853 65,367 595,144 411,930 608,504 411,930 1,017,799 1,103,427 277,747 553,130 422,655 691,497
			—
			2,756 4,008 339,799 — 65,367
			411,930
			411,930
			1,103,427
			553,130
			691,497

— II-6 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN OWNER’S EQUITY

Owner’s equity after Reorganisation

					Owner’s
		Paid-in		Retained	equity before	Total
		capital	Reserves	earnings	Reorganisation	equity
		(Note 24)	(Note 24)		(Note 24)
	Note	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Balance at January 1, 2005		—	—	—	198,482	198,482
Profit for the year		—	—	—	123,190	123,190
Contributions from equity
holder of the Target
Company	24 (c)	—	—	—	26,780	26,780
Balance at December 31,
2005		—	—	—	348,452	348,452
Balance at January 1, 2006		—	—	—	348,452	348,452
Profit for the year		—	—	—	65,223	65,223
Contributions from equity
holder of the Target
Company	24 (c)	—	—	—	2,378	2,378
Balance at December 31,
2006		—	—	—	416,053	416,053
Balance at January 1, 2007		—	—	—	416,053	416,053
Profit for the year		—	—	1,878	62,020	63,898
Contributions from equity
holder of the Target
Company	24 (c)	—	—	—	219,423	219,423
Transfer to paid-in capital
upon establishment of the
Target Company		759,785	(62,289)	—	(697,496)	—
Balance at December 31,
2007		759,785	(62,289)	1,878	—	699,374

— II-7 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

CONSOLIDATED CASH FLOW STATEMENTS

		Year	ended December 31,	ended December 31,
		2005	2006	2007
	Note	RMB’000	RMB’000	RMB’000
Cash flows from operating activities
Cash generated from operations	27	241	90,992	510,803
Income tax paid		(24,637)	(53,384)	(29,708)
Net cash generated from/(used in) operating
activities		(24,396)	37,608	481,095
Cash flows from investing activities
Purchases of property, plant, equipment,
intangible assets and lease prepayments for
land use rights		(6,551)	(38,655)	(12,287)
Interest received		9,824	8,780	8,035
Proceeds from disposal of property, plant and
equipment		26	169	—
Net cash provided/(used) in investing activities		3,299	(29,706)	(4,252)
Cash flows from financing activities
Contributions from equity holder of the Target
Company	24(c)	26,780	2,378	22,590
Net cash provided in investing activities		26,780	2,378	22,590
Net increase in cash and cash equivalents		5,683	10,280	499,433
Cash and cash equivalents at beginning of the
year		12,210	17,893	28,173
Cash and cash equivalents at end of the year		17,893	28,173	527,606

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

II. NOTES TO THE FINANCIAL INFORMATION

1 The Target Group, its reorganisation and principal activities

(a) Background of the Target Group

The Target Company was established in the PRC on October 26, 2007 as a limited liability company under the Company Law of the PRC pursuant to the Reorganisation as set out in Note 1(b) below. The Target Group is engaged in the provision of accounting, settlement and clearing services, and related information system development and support services to commercial airlines and other aviation companies (the “Core Operations”). The Directors of the Target Company regard China TravelSky Holding Company 中國民航信息集團公司 (“CTHC”), a state-owned enterprise established in the PRC as its parent company and ultimate holding company. The address of the Target Company’s registered office is Building 12 Xibahe Beili, Chaoyang District, Beijing, the People’s Republic of China.

As at December 31, 2007, the Target Company has direct interests in the following subsidiaries that were also established in the PRC as limited liability companies under the Company Law of PRC:

		Place of	Percentage
	Date of	establishment/	of equity	Paid-In	Principal
Name	establishment	operation	interest held	capital	activities	Auditor
				RMB
Directly held:
Beijing Asia Technology	October 30, 2007	Beijing,	100%	16,121,600	Provision of	Zhongrui Yuehua
Development Company		PRC			information	CPAs Co., Ltd.
Limited (“ATDC”, 北京亞					system	中瑞岳華會計師
科技術開發有限責任公司)					development and	事務所
					related services
Beijing HangYuan Air Service	October 31, 2007	Beijing,	100%	1,500,000	Provision of	Zhongrui Yuehua
Limited Company		PRC			booking services	CPAs Co., Ltd.
(“BHYC”, 北京航遠航空服					for travellings	中瑞岳華會計師
務有限責任公司)					and hotels	事務所

Note: As part of the Reorganisation, ATDC and BHYC were established on October 30, 2007 and October 31, 2007, respectively as limited liability companies under the Company Law of the PRC.

The Target Group operates mainly in the PRC.

(b) Reorganisation of the Target Group

Prior to the Reorganisation, the Core Operations were carried out by the Accounting Centre of China Aviation 中國航空結算中心 (the “Accounting Centre”), Beijing Asia Technology Development Centre 北京亞科技術開發中心 (the “Development Centre”), and Beijing Hang Yuan Air Service Centre 北京航遠航空服務中心 (the “Service Centre”) (collectively the “Precedent Entities”), all of them being state-owned enterprises owned and are controlled by CTHC under the supervision and regulation of State-owned Assets Supervision and Administration Commission of the State Council.

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APPENDIX II FINANCIAL INFORMATION OF ACCA GROUP

Pursuant to the Reorganisation, the Target Company and its subsidiaries were established and continue to engage in the Core Operations.

As part of the Reorganisation, CTHC or its subsidiary retained the following assets that were unrelated to the Core Operations:

(i) The ownership of certain properties, including car parks and residential properties; and
(ii) Equity investments and marketable securities.

In additions, the following liabilities arising from the Core Operations were assumed by the CTHC upon the completion of the Reorganisation:

(i) Certain long outstanding other payables of approximately RMB174,115,000; and
(ii) The supplemental retirement benefits obligations for retired employees of approximately RMB15,550,000 net of the related tax effect of approximately RMB3,888,000.

After excluding certain assets and liabilities as set out above, the net assets of the Precedent Entities are undertaken by the respective entities of the Target Group.

The Reorganisation was completed on October 31, 2007. Accordingly, the Target Company became the holding company of the companies now comprising the Target Group.

2 Basis of presentation

Following the Reorganisation, the Core Operations that had been carried out by the Accounting Centre, the Development Centre and the Service Centre are carried out by the Target Company and its respective subsidiaries. As the Core Operations and all of these entities comprising the Target Group are wholly-owned and controlled by CTHC, the Reorganisation has been accounted for as a reorganisation of businesses under common control in a manner similar to a uniting of interests.

The Financial Information of the Target Group for the Relevant Periods, have been prepared on the merger basis as if the Target Company had been the holding company of those companies comprising the Target Group throughout the Relevant Periods.

The financial information of those assets and liabilities unrelated to the Core Operations as set out in Note 1(b) above, has not been included in the Financial Information throughout the Relevant Periods, as they have distinct and separate management responsible for these assets and their daily operations, maintained separate accounting records or have been financed historically as if they were autonomous and they were in dissimilar business and operations as compared with the Core Operations, and were retained by CTHC or its subsidiaries pursuant to the Reorganisation.

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APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The Financial Information includes certain other payables and supplemental retirement benefits obligations as set out in Note 1(b) above, which were historically associated with the Core Operations. These liabilities were assumed by CTHC and were not transferred to the Target Company. As these liabilities are directly related to the Core Operations, they were included in Financial Information during the Relevant Periods and were reflected as a contribution from equity holder upon the completion of the Reorganisation.

3 Summary of principal accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

3.1 Basis of preparation

The Financial Information of the Target Group has been prepared in accordance with disclosure requirement for the first time adoption of IFRS. The Financial Information has been prepared under the historical cost convention. IFRS 1, “First-time Adoption of International Financial Reporting Standards”, has been applied in preparing this Financial Information. The Financial Information is the first set of the Target Group’s financial statements in accordance with IFRS.

The directors of the Target Company have prepared the consolidated financial statements of the Target Company for the year ended December 31, 2007 in accordance with PRC GAAP. PRC GAAP differs in certain aspects from IFRS. Reconciliations and descriptions of the effect of the conversion from PRC GAAP to IFRS on the Target Group’s equity and its profit after tax are as following:

		Profit after
		tax for the
	Total equity as	year ended
	at December	December 31,
	31, 2007	2007
Amounts per PRC GAAP	767,347	60,741
GAAP Adjustments:
Reversal of revaluation of nun-current assets	(63,569)	2,468
Recognition of supplemental retirement benefit obligations	—	(2,336)
Others	—	601
Revenue and expenses cut-off adjustment and related tax
impact	(4,404)	2,424
Amounts per IFRS	699,374	63,898

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Target Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

At the date of this report, the International Accounting Standards Board (“IASB”) has issued the following new/revised standards or interpretations that are not yet effective. The Target Group has not early adopted these standards or interpretations.

(a) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Target Group

The following standards, amendments and interpretations to existing standards have been published and are mandatory for the Target Group’s accounting periods beginning on or after January 1, 2008 or later periods and have not been early adopted by the Target Group:

IFRS 8, ‘Operating segments’ (effective from January 1, 2009). IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’. The new standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The Target Group will apply IFRS 8 beginning January 1, 2009; and
IAS 1 (Revised), ‘Presentation of Financial Statements’ (effective from January 1, 2009). IAS 1 (Revised) requires all owner changes in equity to be presented in a statement of changes in equity. All comprehensive income is presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). It requires presenting a statement of financial position as at the beginning of the earliest comparative period in a complete set of financial statements when there are retrospective adjustments or reclassification adjustments. However, it does not change the recognition, measurement or disclosure of specific transactions and other events required by other IFRSs. The Target Group will apply IAS 1 (Revised) beginning January 1, 2009.
(b) Standards, amendments and Interpretations to existing standards that are not yet effective and not relevant for the Target Group’s operations in 2007
IAS 23 (Amendment), ‘Borrowing costs’ (effective from January 1, 2009);
IAS 27 (Revised), ‘Consolidated and separate financial statements’ (effective for the first annual reporting period beginning on or after July 1, 2009);
IAS 32 and IAS 1 Amendments, ‘Puttable Financial Instruments and Obligations Arising on Liquidation’ (effective from January 1, 2009);
IFRIC 11, ‘IFRS 2, Group and treasury share transactions’ (effective from March 1, 2007);
IFRIC 12, ‘Service concession arrangements’ (effective from January 1, 2008);
IFRIC 13, ‘Customer loyalty programmes’ (effective from July 1, 2008);

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

IFRS 3 (Revised), ‘Business Combination’ (effective for business combinations with acquisition date on or after the beginning of the first annual reporting period beginning on or after July 1, 2009);
IFRIC 14, ‘IAS 19, The limit on a defined benefit asset, minimum funding requirements and their interaction’ (effective from January 1, 2008); and
IFRS 2 (Amendment), ‘Share-based payment vesting condition and cancelations’ (effective from January 1, 2009).

3.2 Consolidation

The consolidated financial statements include the financial statements of the Target Company and all its subsidiaries made up to the same year end.

Subsidiaries are all entities over which the Target Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Target Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Target Group. They are de-consolidated from the date that control ceases.

Except for the Reorganisation which is regarded as common control transaction and is accounted for in accordance with the basis set out in Note 2, the purchase method of accounting is used to account for the acquisition of subsidiaries by the Target Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Target Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statements.

Intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Target Group.

In the Target Company’s balance sheets, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Target Company on the basis of dividends received and receivables.

3.3 Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those segments operating in other economic environments.

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

3.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Target Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Renminbi, which is the Target Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statements, except when deferred in equity as qualifying cash flow hedges or qualifying net investment hedges.

Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in the amortised cost are recognised in income statements, and other changes in the carrying amount are recognised in equity.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation difference on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in income statements as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity.

3.5 Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment loss. Historical cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Target Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statements during the financial period in which they are incurred.

— II-14 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Buildings	30 years
Motor vehicles	6 years
Office equipment	4-8years
Electronic equipment	4-5years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 3.8).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statements.

3.6 Intangible assets

Intangible assets mainly represent purchased computer software.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Software is amortized on a straight line basis over 5 years.

Costs incurred in order to restore or maintain the future economic benefits that an enterprise can expect from the originally assessed standard of performance of existing software systems are recognised as an expense when the restoration or maintenance work is carried out.

3.7 Lease prepayments for land use rights

Lease prepayments for land use rights represent purchase cost of land use rights in the PRC and are stated at cost less accumulated amortisation and impairment losses. Cost represents consideration paid for the rights to use the land in the PRC. Amortisation of lease prepayments for land use rights is calculated on a straight-line basis over the period of the lease.

3.8 Impairment of non-financial assets

— II-15 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

3.9 Financial assets

The Target Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition date.

(a) Financial assets at fair value through profit or loss

(b) Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. If the Target Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be reclassified as available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the balance sheet date, which are classified as current assets. Held-to-maturity investments are carried at amortised cost using the effective interest rate method.

(c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date, which are classified as non-current assets. Loans and receivables are carried at amortised cost using the effective interest method.

(d) Available-for-sale financial assets

— II-16 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Regular purchases and sales of financial assets are recognised on the trade-date-the date on which the Target Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the income statements. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Target Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.

Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the income statements in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statements as part of other income when the Target Group’s right to receive payments is established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss; translation differences on non-monetary securities are recognised in equity.

Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in equity.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statements as ‘gains and losses from investment securities’.

Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statements as part of other income. Dividends on available-for-sale equity instruments are recognised in the income statements as part of other income when the Target Group’s right to receive payments is established.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Target Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Target Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference

— II-17 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in income statements - is removed from equity and recognised in the income statements. Impairment losses recognised in the income statements on equity instruments are not reversed through the income statements. Impairment testing of accounts receivable is described in Note 3.10.

3.10 Accounts receivable and other receivables

Accounts receivable and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of accounts receivables or other receivables is established when there is objective evidence that the Target Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the accounts receivable or other receivables is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statements. When an accounts receivable or other receivables is uncollectible, it is written off against the allowance account for accounts receivable or other receivables. Subsequent recoveries of amounts previously written off are credited in the income statements.

3.11 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call.

3.12 Accounts payables and other payables

Accounts payables and other payables are recognised initially at fair value and subsequently measured at amortized cost using the effective interest method.

3.13 Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantially enacted at the balance sheet date in the countries where the Target Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognision of an asset or liability in a transaction other than a business combination that at the time

— II-18 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Target Group and it is probable that the temporary difference will not reverse in the foreseeable future.

3.14 Employee benefits

(i) Retirement benefits

(a) Defined contribution plan

The full-time employees of the Target Group are covered by government-sponsored pension plan and supplementary pension scheme managed by insurance company under which the employees are entitled to a monthly pension based on certain formulas. The relevant government agencies and insurance company are responsible for the pension liability to these retired employees. The Target Group contributes on a monthly basis to these pension plans.

Under these plans, the Target Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Target Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due.

(b) Defined benefit plan

Prior to October 31, 2007, the Target Group had at its own discretion offered certain supplemental retirement benefits to employees who had retired between 1994 and 2007. These discretionary supplemental benefits were only considered and offered to these employees at the point of their retirement. These supplemental retirement benefits that an employee would receive on retirement were usually dependent on one or more factors such as age, year of services and compensation. These supplemental retirement benefits were accounted for as a defined benefit pension plan.

The net present value of the future payment regarding these benefits were fully provided for when the Target Group committed such benefits to its retiring employees upon their retirement.

— II-19 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The liability recognised in the balance sheet in respect of these supplemental retirement benefits was the present value of the defined benefit obligations at each balance sheet date together with adjustments for unrecognised past-service costs and unrecognised actuarial gains/losses. The defined benefit obligations are calculated by independent actuaries using the projected unit credit method. The present value of the defined benefit obligations are determined by discounting the estimated future cash outflows using interest rates of government securities which have maturity approximating to the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of 10% of the defined benefit obligations are charged to the income statements immediately. Past-service costs are recognised immediately in the income statement.

These supplemental retirement benefits obligations were assumed by CTHC upon the completion of the Reorganisation (Note 1(b)). The Target Group will no longer consider and offer any discretionary supplemental retirement benefits to its employees after October 31, 2007.

(ii) Housing funds

Full-time employees of the Target Group are entitled to participate in government-sponsored housing funds in China. The Target Group contributes on a monthly basis to these funds based on certain percentages of the salaries of the employees. The Target Group’s liability in respect of this fund is limited to the contributions payable in each period.

3.15 Provisions

Provisions for legal claims are recognised when: the Target Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax interest rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provision reflecting the passage of time is recognised as interest expense.

3.16 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the rendering of services in the ordinary course of the Target Group’s activities. Revenue is shown net of value-added tax, sales discounts and after eliminating sales within the Target Group.

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APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The Target Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Target Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies have been resolved. The Target Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Revenue from the provision of accounting supports, settlement and clearing services is recognised when the services are rendered;
Non-proprietary customer’s information system development project revenue is recognised by reference to the stage of completion when this can be measured reliably. The stage of completion is determined in the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of the transaction involving the rendering of these services cannot be estimated reliably, revenue is recognised only to the extent of expenses recognised that are recoverable. In the period in which it is determined that a loss will result from the performance of the contract, the entire amount of the estimated ultimate loss is recognised in the income statements;
Interest income is recognised on a time-proportion basis, taking into account the principal amounts outstanding and the applicable interest rates; and
Dividend income is recognised when the right to receive payment is established.

3.17 Government grants

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Target Group will comply with all attached conditions. Government grants relating to specific costs are deferred and recognised in the income statements over the period necessary to match them with the costs that they are intended to compensate.

3.18 Dividend distribution

Dividend distribution to the Target Company’s equity holders is recognised as a liability in the Target Group’s financial statements in the period in which the dividends are approved by the Target Company’s directors.

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

4 Critical accounting estimates and judgements

The Target Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Depreciation of property, plant and equipment

The property, plant and equipment of the Target Group are depreciated at rates sufficient to write off their costs less accumulated impairment losses and estimated residual values over their estimated useful lives on a straight-line basis. The Target Group reviewed the useful lives periodically to ensure that the method and rates of depreciation are consistent with the expected pattern of economic benefits from the property, plant and equipment. The Target Group estimates the useful lives of the property, plant and equipment as set out in Note 3.5 based on the historical experience with similar assets, taking into account anticipated technological changes. The depreciation expenses in the future periods will change if there are significant changes to these estimates.

(b) Impairment of assets

At each balance sheet date, the Target Group considers both internal and external sources of information to assess whether there is any indication that assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and an impairment loss is recognised to reduce the carrying amount of the asset to its recoverable amount. Accordingly, there will be an impact to the future results if there is a significant change in the recoverable amounts of the assets.

(c) Fair value

The Target Group estimates the fair value of its financial assets and financial liabilities including accounts receivable, due from parent company and fellow subsidiaries, other receivables and other current assets, accounts payable, other payables and other current liabilities by discounting its future contractual cash flows at the estimated current market interest rate that is available to the Target Group for similar financial instruments. The future values will change if there are material changes in the estimated market interest rate.

(d) Income taxes and deferred tax

The Target Group is subject to income taxes in PRC jurisdictions. Significant judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Target Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

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FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

(e) Pension benefits

The present value of the pension obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations.

The Target Group determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Target Group considers the interest rates of Chinese government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of related pension liabilities.

Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in Note 10.

5 Segmental reporting

The Target Group conducts its businesses within one business segment - the business of providing accounting, settlement and clearing services, and related information system development and support services to commercial airlines and other aviation companies in the PRC. The Target Group’s chief decision maker for operation is the Chairman to the Board. The information reviewed by the Chairman to the Board is identical to the information presented in the consolidated financial statements. Therefore, no business segment information has been prepared by the Target Group for the years ended December 31, 2005, 2006 and 2007. The Target Group also operates within one geographical segment because its revenues are primarily generated in the PRC and its assets are located in the PRC. Accordingly, no geographical segment data is presented.

6 Revenues

Revenues primarily comprise the service fees earned by the Target Group for the provision of accounting, settlement and clearing services, and related information system development and support services to commercial airlines and other aviation companies.

— II-23 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

7 Profit before taxation

Profit before taxation of the Target Group is arrived at after charging/(crediting) the following:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
After charging:
Depreciation	23,095	23,671	15,062
Amortisation of intangible assets	1,079	1,047	1,195
Amortisation of lease prepayments for land
use rights	894	67	404
Loss on disposal of property, plant and
equipment	56	205	204
Personnel expenses (Note 9)	108,187	97,612	109,212
Auditors’ remuneration	112	112	112
After crediting:
Interest income	(9,824)	(8,780)	(8,035)
Exchange gain, net	(10,951)	(16,298)	(3,614)
Reversal for impairment of accounts
receivable, other receivables and other
current assets	(3,937)	(929)	(2,606)
Reversal of financial guarantee obligation
(Note 12)	(67,676)	—	—

— II-24 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

8 Directors’, supervisors’ and senior management’s emoluments

(1) Directors’ and supervisors’ emoluments

The following tables set out the emoluments paid to the Target Company’s directors and supervisors during the years ended December 31, 2005, 2006 and 2007 (tax inclusive):

Name of Director and Supervisor Remuneration for Director RMB’000 Chairman of the Board Yongtao Sun — Executive directors Guohong Du — Xiaochun Yu — Changyuan Huang — Qian Li — Supervisors Jinsong Li — Shensheng Xu — Qian Liu* — Jinsheng Yu — Yanzhou Hu —	Year ended December 31, 2005 Bonus for Director Salary of employee, Allowances and Benefits (employer’s contribution inclusive) Employees’ Discretionary bonuses Employer’s contribution to pension scheme for employee RMB’000 RMB’000 RMB’000 RMB’000 — — — — — 145 221 15 — — — — — — — — — 57 194 14 — — — — — 145 221 15 — — — — — 131 199 15 — 60 188 15	Total RMB’000 —
		381 — — 265
		— 381 — 345 263

— II-25 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Name of Director and Supervisor Remuneration for Director RMB’000 Chairman of the Board Yongtao Sun — Executive directors Guohong Du — Xiaochun Yu — Changyuan Huang — Qian Li — Supervisors Jinsong Li — Shensheng Xu — Qian Liu* — Jinsheng Yu — Yanzhou Hu —	Year ended December 31, 2006 Bonus for Director Salary of employee, Allowances and Benefits (employer’s contribution inclusive) Employees’ Discretionary bonuses Employer’s contribution to pension scheme for employee RMB’000 RMB’000 RMB’000 RMB’000 — — — — — 184 344 19 — — — — — — — — — 57 215 19 — — — — — 184 344 19 — — — — — 162 303 19 — 61 204 19	Total RMB’000 —
		547 — — 291
		— 547 — 484 284

— II-26 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Name of Director and Supervisor Remuneration for Director RMB’000 Chairman of the Board Yongtao Sun — Executive directors Guohong Du(i) — Xiaochun Yu — Changyuan Huang — Qian Li — Supervisors Jinsong Li — Shensheng Xu(i) — Qian Liu* — Jinsheng Yu(i) — Yanzhou Hu —	Year ended December 31, 2007 Bonus for Director Salary of employee, Allowances and Benefits (employer’s contribution inclusive) Employees’ Discretionary bonuses Employer’s contribution to pension scheme for employee RMB’000 RMB’000 RMB’000 RMB’000 — — — — — 184 266 21 — — — — — — — — — 55 227 21 — — — — — 184 266 21 — — — — — 162 234 21 — 59 217 21	Total RMB’000 —
		471 — — 303
		— 471 — 417 297

These directors and supervisors are employees of CTHC and receive emoluments from CTHC. No appropriation has been made as the directors of the Target Company considered it is impracticable to apportion this amount between their services to the Target Group and CTHC.
(i) The employee’s discretionary bonus to these directors and supervisors for year ended December 31, 2007 are subject to the relevant authority’s final approval.

During the Relevant Periods, no director had waived or agreed to waive any emolument. No director received any compensation for loss of office during the Relevant Periods.

— II-27 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

(2) Five highest paid individuals

The emoluments for three, three and three of the Directors and supervisors listed in Note 8(1) above were included in the emoluments paid to the five highest paid individuals for the years ended December 31, 2005, 2006 and 2007, respectively. The amounts paid to the remaining two, two and two individuals whose emoluments were the highest in the Target Group during the Relevant Periods are as follows:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Basic salaries and allowances	660	930	792
Retirement benefits	28	38	42
	688	968	834

The annual emoluments paid during the Relevant Periods to each director (included in the five highest paid employees) fell within the band from HKD nil to HKD 1 million (approximately RMB nil to RMB0.9 million).

During the Relevant Periods, no emolument was paid to the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Target Company or as compensation for loss of office.

9 Personnel expenses

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Wages, salaries and welfare	90,213	79,912	86,495
Pension costs — defined contribution plans	8,523	9,551	15,201
Supplemental retirement benefit obligations
(Note 10)	3,650	2,510	1,940
Contribution to housing fund	5,801	5,639	5,576
	108,187	97,612	109,212
Number of employees	772	761	775

— II-28 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

10 Supplemental retirement benefits obligations

Prior to October 31, 2007, the Target Group paid, at its management discretion, supplemental pension and medical benefits to its employees who retired between 1994 and 2007. On October 31, 2007, CTHC, the holding company of the Target Company has assumed the aforementioned supplemental retirement benefits obligation. The assumption of the retirement benefits obligations and the related tax effect was recognised as contribution from equity owner. The Target Group will no longer consider and offer any discretionary supplemental retirement benefits to its employees after October 31, 2007.

The amounts of supplemental retirement benefits obligations recognised in the balance sheets are determined as follows:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Present value of defined benefit obligations	13,280	15,470	—
Unrecognised actuarial loss	(1,330)	(1,550)	—
Liability on the balance sheet	11,950	13,920	—
Less: current portion	(540)	(560)	—
	11,410	13,360	—

The movements of supplemental retirement benefits obligations for the years ended December 31, 2005, 2006 and 2007 are as follows:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
At beginning of the year	8,840	11,950	13,920
For the year
— Past service cost	2,830	1,660	1,560
— Interest cost	380	460	420
— Payment	(540)	(540)	(310)
— Actuarial loss/(gain)	440	390	(40)
— Assumed by CTHC (Note 24(c))	—	—	(15,550)
At end of the year	11,950	13,920	—

— II-29 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

The amounts of supplemental retirement benefits recognised in income statements are as follows:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Past service cost	2,830	1,660	1,560
Interest cost	380	460	420
Actuarial loss/(gain)	440	390	(40)
Total expenses, included in personnel expenses
(Note 9)	3,650	2,510	1,940

The above obligations were determined based on actuarial valuations performed by an independent actuary, using the projected unit credit method.

The material actuarial assumptions used in valuing these obligations are as follows:

(a) Discount rates adopted (per annum):

			Year	ended December 31,
			2005	2006	2007
Discount	rates	adopted	3.50%	3.25%	4.50%

(b) Retirees’ supplemental pension benefit inflation rate: 0%. The amount of the supplemental pension benefits were determined and offered to the retired employees at the point of retirement.

Retirees’ supplemental medical benefit inflation rate: 8%. This estimated inflation rate took into account estimated future changes in the cost of medical services.

(c) Average life expectancy of residents in the PRC: 24.6 years after the retirement age which is between 50-60 years old.
(d) These supplemental pension benefit and medical benefit paid to retirees are assumed to continue until the death of the retirees.

— II-30 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

11 Taxation

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Current income tax expenses (“EIT”)	27,993	35,362	37,702
Deferred taxation (Note 17)	271	(4,145)	1,254
Taxation charge	28,264	31,217	38,956

The Target Group is subject to PRC enterprise income tax rate of 33%. The Target Group provides PRC enterprise income tax based on tax law and regulations applicable to PRC enterprises.

Effective from January 1, 2008, the Target Company and its subsidiaries located in the PRC shall determine and pay the corporate income tax in accordance with the Corporate Income Tax Law of the People’s Congress on China (the new “CIT Law”) as approved by the National People’s Congress on March 16, 2007. Under the new CIT Law, the corporate income tax rate applicable to the Target Company and its subsidiaries will be 25%.

The reconciliation between the Target Group’s actual tax charge and the amount which is calculated based on the statutory tax rate is as follows:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Profit before taxation	151,454	96,440	102,854
Statutory tax rate	33%	33%	33%
Tax calculated at domestic tax rates applicable
to profits	49,980	31,825	33,942
Effect of change in tax rate	—	—	2,187
Income not subject to tax	(22,333)	(1,194)	—
Expenses not deductible for tax purpose	617	586	2,827
Tax charge	28,264	31,217	38,956

— II-31 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

12 Reversal for financial guarantee obligation

In 1993, the Accounting Centre provided a guarantee to Shandong International Trustee Investment Company (“SDITIC”) for the borrowings of China Kai Li Industrial Limited Company (“CKLC”) amounted to approximately RMB72,681,000. In 1995, SDITIC commenced legal proceedings against CKLC and the Target Company after CKLC has defaulted on its loan repayments. In 2002, the court in the PRC ruled in favour of SDITIC and that the Target Company was liable for the outstanding loan balance and the related interest and penalty charges. In connection with the court order, the following assets of the Target Company were frozen:

An office building located in Xibahe Beili in Beijing in the PRC, with carrying value of approximately RMB85,350,000 as at December 31, 2004.
19 vehicles with carrying value of approximately RMB1,371,000 as at December 31, 2004.
The equity investment in Beijing Vantong Real Estate Co., Ltd. with carrying value of RMB15,000,000 as at December 31, 2004.
The equity investment in Beijing Jingrui Real Estate Co., Ltd, with carrying value of RMB49,600,000 as at December 31, 2004.
The lease prepayment for a piece of land in Guangdong province, with net book value of approximately RMB44,816,000 as at December 31, 2004.

At December 31, 2004, the Target Company’s liability arising from this guarantee was approximately RMB177,423,000 representing the outstanding loan balance of CKLC and the related interest and penalty charges.

In 2005, SDITIC, CKLC and the Target Company entered into a settlement agreement to settle the above liability at RMB60,000,000 which resulted in a reduction of the provision for guarantee loss of approximately RMB117,423,000. The Target Company had subsequently settled the agreed settlement amount by transferring (i) the equity investments in Beijing Vantong Real Estate Co., Ltd. and Beijing Jingrui Real Estate Co., Ltd (ii) the land use right in Guangdong in 2005, and a cash payment of RMB1,225,000. The settlement was subsequently approved by State-owned Assets Supervision and Administration Commission.

The net impact of the settlement of this guarantee obligation of approximately Rmb 67,676,000 was charged to the consolidated income statement for the year ended December 31, 2005, representing the net impact of the reduction of the provision for guarantee loss and the transfer of assets as set out above.

In 2007, court issued an order to release the remaining frozen assets of the Target Company upon the settlement and closure of the litigation case.

— II-32 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

13 Property, plant and equipment, net

The Target Group:

		Motor	Office	Electronic
	Building	vehicles	equipment	equipment	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Cost
As at January 1, 2005	115,418	11,444	28,221	101,279	256,362
Purchases	—	595	2,146	3,184	5,925
Disposals/write off	—	(1,350)	(311)	—	(1,661)
As at December 31, 2005	115,418	10,689	30,056	104,463	260,626
Purchases	—	1,086	3,123	11,882	16,091
Disposals/write off	—	—	(3,530)	(4,209)	(7,739)
As at December 31, 2006	115,418	11,775	29,649	112,136	268,978
Purchases	—	464	838	9,832	11,134
Disposals/write off	—	(2,165)	(994)	(46)	(3,205)
As at December 31, 2007	115,418	10,074	29,493	121,922	276,907
Accumulated depreciation
As at January 1, 2005	(30,094)	(9,646)	(20,596)	(61,975)	(122,311)
Charge for the year	(3,915)	(353)	(3,525)	(15,302)	(23,095)
Disposals/write off	—	1,310	269	—	1,579
As at December 31, 2005	(34,009)	(8,689)	(23,852)	(77,277)	(143,827)
Charge for the year	(3,915)	(428)	(3,719)	(15,609)	(23,671)
Disposals/write off	—	—	3,332	4,033	7,365
As at December 31, 2006	(37,924)	(9,117)	(24,239)	(88,853)	(160,133)
Charge for the year	(3,915)	(493)	(2,729)	(7,925)	(15,062)
Disposals/write off	—	2,178	841	44	3,063
As at December 31, 2007	(41,839)	(7,432)	(26,127)	(96,734)	(172,132)
Net book value
As at December 31, 2005	81,409	2,000	6,204	27,186	116,799
As at December 31, 2006	77,494	2,658	5,410	23,283	108,845
As at December 31, 2007	73,579	2,642	3,366	25,188	104,775

— II-33 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The Target Company:

Building
Motor
vehicles
Office
equipment
Electronic
equipment
RMB’000
RMB’000
RMB’000
RMB’000
Cost
As at January 1, 2005
115,418
10,558
23,783
101,103
Purchases
—
595
1,680
3,144
Disposals/write off
—
(1,282)
(224)
—
As at December 31, 2005
115,418
9,871
25,239
104,247
Purchases
—
831
3,123
11,879
Disposals/write off
—
—
(3,530)
(4,209)
As at December 31, 2006
115,418
10,702
24,832
111,917
Purchases
—
472
838
9,826
Disposals/write off
—
(2,305)
(566)
(46)
As at December 31, 2007
115,418
8,869
25,104
121,697
Accumulated depreciation
As at January 1, 2005
(30,094)
(9,316)
(19,050)
(61,806)
Charge for the year
(3,915)
(262)
(2,711)
(15,300)
Disposals/write off
—
1,245
217
—
As at December 31, 2005
(34,009)
(8,333)
(21,544)
(77,106)
Charge for the year
(3,915)
(337)
(2,863)
(15,605)
Disposals/write off
—
—
3,332
4,033
As at December 31, 2006
(37,924)
(8,670)
(21,075)
(88,678)
Charge for the year
(3,915)
(315)
(1,999)
(7,910)
Disposals/write off
—
2,178
546
44
As at December 31, 2007
(41,839)
(6,807)
(22,528)
(96,544)
Net book value
As at December 31, 2005
81,409
1,538
3,695
27,141
As at December 31, 2006
77,494
2,032
3,757
23,239
As at December 31, 2007
73,579
2,062
2,576
25,153

Total
RMB’000
250,862
5,419
(1,506)
254,775
15,833
(7,739)
262,869
11,136
(2,917)
271,088
(120,266)
(22,188)
1,462
(140,992)
(22,720)
7,365
(156,347)
(14,139)
2,768
(167,718)
113,783
106,522
103,370

— II-34 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

At December 31, 2005, the building and certain motor vehicles of the Target Company at a carrying value of approximately RMB81,419,000 and RMB1,028,000 respectively were frozen by the court in the PRC. The restriction on these assets was subsequently removed in 2007 in accordance with the order issued by the court upon the settlement and closure of the related litigation case. Please refer to Note 12 for more details.

14 Intangible assets, net

The intangible assets of the Target Group and the Target Company represent the cost of computer software acquired. The movements are as follows:

The Target Group:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Cost
At beginning of the year	45,799	46,354	49,765
Additions	555	3,411	2,221
Disposals/write off	—	—	(2,522)
At end of the year	46,354	49,765	49,464
Accumulated amortisation
At beginning of the year	(43,964)	(45,043)	(46,090)
Amortisation for the year	(1,079)	(1,047)	(1,195)
Disposals/write off	—	—	2,425
At end of the year	(45,043)	(46,090)	(44,860)
Net book value
At beginning of the year	1,835	1,311	3,675
At end of the year	1,311	3,675	4,604

— II-35 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

The Target Company:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Cost
At beginning of the year	45,799	46,235	49,646
Additions	436	3,411	2,221
Disposals/write off	—	—	(2,522)
At end of the year	46,235	49,646	49,345
Accumulated amortisation
At beginning of the year	(43,964)	(45,003)	(45,971)
Amortisation for the year	(1,039)	(968)	(1,195)
Disposals/write off	—	—	2,425
At end of the year	(45,003)	(45,971)	(44,741)
Net book value
At beginning of the year	1,835	1,232	3,675
At end of the year	1,232	3,675	4,604

— II-36 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

15 Lease prepayments for land use rights, net

The Target Group and the Target Company:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Cost
At beginning of the year	52,070	—	20,189
Additions	—	20,189	—
Disposals/write off	(52,070)	—	—
At end of the year	—	20,189	20,189
Accumulated amortisation
At beginning of the year	(7,254)	—	(67)
Amortisation for the year	(894)	(67)	(404)
Disposals/write off	8,148	—	—
At end of the year	—	(67)	(471)
Net book value
At beginning of the year	44,816	—	20,122
At end of the year	—	20,122	19,718

Land in the PRC mainland is state-owned or collectively-owned and no individual land ownership right exists. Lease prepayments for land use rights represent the Target Group’s interests in land which is held on lease with a term of 50 years.

In 2005, the Target Company transferred its land use right to SDITIC. Please refer to Note 12 for more details.

As at the date of this report, the Target Group is in the process of changing registration of the title certificates for its land use right. The carrying value of the land use right of the Target Group as at December 31, 2007 was approximately RMB19,718,000. Management of the Target Group are of the opinion that the Target Group is entitled to lawfully and validly use the land.

— II-37 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

16 Investments in subsidiaries

The Target Company

				at December 31,
			2005	2006	2007
			RMB’000	RMB’000	RMB’000
Investments,	at	cost:	6,500	6,500	7,728

The Target Company made an additional capital investment in cash of RMB1,228,000 in its subsidiary BHYC (Note 1(a)) on October 26, 2007.

Details of the subsidiaries are set out in Note 1 of this section.

17 Deferred tax assets

The Target Group and the Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Deferred tax assets:
— Deferred tax assets to be recovered
within 12 months	178	3,680	2,947
— Deferred tax assets to be recovered over
12 months	3,766	4,409	—
	3,944	8,089	2,947

— II-38 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The movement of deferred tax assets is as follows:

		Retirement
		benefits	Impairment	Accrued
		obligations	of receivables	expense	Total
		RMB’000	RMB’000	RMB’000	RMB’000
	Balance as at January 1, 2005	2,917	1,298	—	4,215
	Charged/(credited) to the income
	statement	1,027	(1,298)	—	(271)
	Balance as at December 31, 2005	3,944	—	—	3,944
	Charged/(credited) to the income
	statement	650	—	3,495	4,145
	Balance as at December 31, 2006	4,594	—	3,495	8,089
	Charged/(credited) to the income
	statement	(706)	—	(548)	(1,254)
	Charged/(credited) to equity
	(Note 24(c))	(3,888)	—	—	(3,888)
	Balance as at December 31, 2007	—	—	2,947	2,947
18	Accounts receivable, net
	The Target Group

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Within 6 months	12,434	8,176	10,453
Over 6 months but within 1 year	—	—	366
Accounts receivable	12,434	8,176	10,819
Provision for impairment	(170)	(95)	(54)
Accounts receivable, net	12,264	8,081	10,765

— II-39 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

The Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Within 6 months	9,140	5,871	9,085
Over 6 months but within 1 year	—	—	366
Accounts receivable	9,140	5,871	9,451
Provision for impairment	(66)	(29)	(47)
Accounts receivable, net	9,074	5,842	9,404

The payment period is normally within six months after the services are rendered.

The carrying amounts of the Target Group’s accounts receivable approximated its fair value at each balance sheet date because of the short-term maturities of these receivables.

The maximum exposure of accounts receivable to credit risk at the reporting date is the carrying amounts of the accounts receivable. The Target Group does not hold any collateral as security.

At each balance sheet date, the accounts receivable were mainly denominated in RMB.

The movement of provision for impairment of receivables was as follows:

The Target Group

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
At beginning of the year	136	170	95
Provision/(reversal)	34	(75)	(41)
At end of the year	170	95	54

— II-40 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

The Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
At beginning of the year	56	66	29
Provision/(reversal)	10	(37)	18
At end of the year	66	29	47

19 Due from holding company and fellow subsidiaries

The Target Group

			As at December 31,
		2005	2006	2007
		RMB’000	RMB’000	RMB’000
Due	from holding company (a)	579,559	530,206	11,002
Due	from fellow subsidiaries (b)	9,406	10,469	9,801
		588,965	540,675	20,803
The	Target Company
			As at December 31,
		2005	2006	2007
		RMB’000	RMB’000	RMB’000
Due	from holding company (a)	579,559	530,206	11,002
Due	from fellow subsidiaries (b)	788	589	1
		580,347	530,795	11,003

(a) Due from holding company comprises mainly bank balances transferred from the Target Group to CTHC for the purpose of a centralised management of the group’s treasury function by CTHC. These balances were interest bearing at the prevailing bank rate. This centralised management of the treasury function was subsequently terminated in October 2007.
(b) Due from fellow subsidiaries represents trade balances arising from provision of services. These balances are unsecured, interest free and generally repayable within six months.

— II-41 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

At each balance sheet date, these balances were denominated in RMB.

These balances approximated its fair value at each balance sheet date because of their short-term maturities. The maximum exposure to credit risk at the reporting date is the carrying amount of the receivables. The Target Group does not hold any collateral as security.

20 Due from subsidiary

These balances mainly comprised dividends receivable from a subsidiary.

21 Other receivables and other current assets, net

The Target Group

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Other receivables (a)	464,870	300,278	422,929
Other current assets	3,244	20,712	1,969
Other receivables and other current assets
	468,114	320,990	424,898
Provision for impairment (b)	(5,065)	(4,211)	(1,646)
Other receivables and other current assets, net
	463,049	316,779	423,252

— II-42 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Other receivables (a)	464,870	300,278	422,929
Other current assets	3,142	20,297	1,783
Other receivables and other current assets
	468,012	320,575	424,712
Provision for impairment (b)	(5,063)	(4,209)	(1,644)
Other receivables and other current assets, net
	462,949	316,366	423,068

(a) Other receivables

Other receivables represent the payments made on behalf of the customer airlines which are part of the Target Company’s settlement and clearing services.

i) At each balance sheet date, the aging analysis of other receivables was as follows:

The Target Group and the Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Within 6 months	463,212	296,843	420,450
Over 6 months but within 1 year	1,581	1,720	1,825
Over 1 year but within 2 years	77	1,692	349
Over 2 years	—	23	305
Other receivables	464,870	300,278	422,929

— II-43 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

ii) Other receivables were denominated in the following currencies:

The Target Group and the Target Company

		at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
RMB	257,164	208,088	294,020
USD	205,707	90,235	127,216
Others	1,999	1,955	1,693
	464,870	300,278	422,929

These balances are trade related, interest free, unsecured and generally repayable within six months.

The carrying amounts of other receivables approximated its fair value at each balance sheet date because of the short-term maturities of these receivables. The maximum exposure of other receivables to credit risk at the reporting date is the carrying amount of the receivables. The Target Group does not hold any collateral as security.

(b) Provision for impairment

The Target Group

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
At beginning of the year	5,103	5,065	4,211
Reversal	(38)	(854)	(2,565)
At end of the year	5,065	4,211	1,646

— II-44 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

The Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
At beginning of the year	5,072	5,063	4,209
Reversal	(9)	(854)	(2,565)
At end of the year	5,063	4,209	1,644
Cash and cash equivalents
The Target Group
		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Cash on hand	25	7	1
Cash at bank	17,868	28,166	527,605
Cash and cash equivalents	17,893	28,173	527,606
The Target Company
		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Cash on hand	1	1	1
Cash at bank	12,785	18,119	521,584
Cash and cash equivalents	12,786	18,120	521,585

22 Cash and cash equivalents

At each balance sheet date, all cash and cash equivalents were denominated in RMB.

The annual interest rate on current deposits ranged from 0.72% to 1.71% during the Relevant Periods.

— II-45 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

23 Paid-In capital

On October 26, 2007, the Target Company was registered as a limited liability company under the Company Law of the PRC with a registered and fully paid capital of RMB759,785,200.

No dividend was declared by the Target Group during the Relevant Periods.

24 Owner’s equity

(a) As detailed in Note 1(b), upon the establishment of the Target Company on October 26, 2007, the Core Operations and relevant assets and liabilities originally owned by the Accounting Centre were transferred into the Target Company at a value of RMB759,785,200 as paid-in capital. Pursuant to the Reorganisation, all the then existing capital and reserves of the Accounting Centre were capitalised and the resulting difference was charged to capital reserve. In view of the above changes in form and nature of the capital reserves of the Accounting Centre, separate classes of reserves, including retained profits, statutory surplus reserve and statutory public welfare fund of the Accounting Centre prior to the establishment of the Target Company have not been separately disclosed in the Financial Information.
(b) As described in Note 2, the Financial Information has been prepared as if the current group structure had been in existence throughout the Relevant Periods. Owner’s equity during the Relevant Periods represents the combined equities of the Core Operation owned and operated by the companies now comprising the Target Group, after elimination of the effect of unrealised profit on inter-company transactions.
(c) During the Relevant Periods, the contributions from/distribution to equity owner mainly comprise the followings:
(i) As detailed in the Note 2, the Non-core Operations were not injected into the Target Company and have not been included in the Financial Information throughout the Relevant Periods.

During the Relevant Periods, cash received from the Non-core Operations was reflected as contributions from equity owner because such cash received formed an integral part of the working capital of the Core Operations, and the Target Company has no obligation to repay the amount back to the Non-core Operations. The transactions with the Non-core Operations have ceased upon the completion of Reorganisation.

(ii) As detailed in Note 1(b), the assumption of the other payables of approximately RMB174,115,000 by CTHC was recognised as a contribution from equity owner.
(iii) As detailed in Note 1(b) and Note 10, the assumption of the supplemental retirement benefits obligations of approximately RMB15,550,000 net of related tax effect of approximately RMB3,880,000 by CTHC was recognised as a contribution from equity owner.

— II-46 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

25 Accounts payable

At each balance sheet date, the aging of the accounts payable balance was within one year and all the accounts payable were denominated in Renminbi.

26 Other payables and other current liabilities

The Target Group

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Other payables (a)	697,579	507,353	302,817
Accrued payroll	27,338	31,422	37,319
Others	42,530	6,074	6,077
	767,447	544,849	346,213
The Target Company
		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Other payables (a)	697,579	507,353	302,817
Accrued payroll	24,595	27,018	31,778
Others	39,693	3,783	5,204
	761,867	538,154	339,799

— II-47 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

(a) Other payables represent the amounts collected on behalf of the customer airlines which are part of the Target Company’s settlement and clearing services.
i) At each balance sheet date, the aging analysis of other payables is as follows:

The Target Group and the Target Company

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Within 6 months	355,215	143,561	183,047
Over 6 months but within 1 year	14,929	16,920	10,908
Over 1 year but within 2 years	24,381	19,443	11,108
Over 2 years but within 3 years	11,817	24,378	13,957
Over 3 years	291,237	303,051	83,797
	697,579	507,353	302,817

ii) Other payables were denominated in the following currencies:

The Target Group and the Target Company

		at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
RMB	654,129	422,530	173,677
USD	43,416	84,773	105,242
Others	34	50	23,898
	697,579	507,353	302,817

— II-48 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

27 Cash generated from operations

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Profit before taxation	151,454	96,440	102,854
Adjustments for:
Depreciation and amortisation	25,068	24,785	16,661
Net loss on disposal of property, plant and
equipment	56	205	204
Interest income	(9,824)	(8,780)	(8,035)
Exchange gain	(10,951)	(16,298)	(3,614)
Reversal for impairment of receivables	(3,937)	(929)	(2,606)
Reversal for financial guarantee obligation,
net	(67,676)	—	—
Decrease/(increase) in current assets:
Accounts receivable	6,873	4,258	(2,643)
Due from holding company and fellow
subsidiaries	811	48,290	530,872
Other receivables and other current assets	(42,610)	147,124	(103,908)
Increase/(decrease) in liabilities:
Other payables and other liabilities	(52,133)	(206,073)	(20,612)
Supplemental retirement benefits	3,110	1,970	1,630
Cash generated from operations	241	90,992	510,803

28 Earnings per share

No earnings per share is presented as the Target Company is not a company registered with share capital and the calculation of earnings per share is not applicable.

29 Financial risk management

Financial risk factors

The Target Group’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk, and liquidity risk. The Target Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Target Group’s financial performance.

Financial risk management is carried out by the Target Group’s finance department, following the overall directions determined by the Board of Directors. The Target Group’s finance department identifies and evaluates financial risks in close co-operation with the Target Group’s operating departments.

— II-49 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

Credit risk

The credit risk of the Target Group arises mainly from the collectability of its accounts and other receivables, and cash and cash equivalents. The carrying amounts of these balances represent the Target Group’s maximum exposure to credit risk.

The counterparties of these accounts and other receivables are mainly domestic airlines, other aviation related companies and foreign airlines. During the Relevant Periods, the top 3 customers namely Air China Limited, China Southern Airlines Company Limited and China Eastern Airlines Corporation Limited accounted for approximately 66%, 50% and 51% of the total other receivables balances at December 31, 2005, 2006 and 2007 respectively. These other receivables balances arise mainly from the accounting, settlement and clearing services whereby the Target Company made payments on behalf of these airlines customers. These domestic airlines are state-owned enterprises and there was no recent history of defaults by them that have resulted into material bad debts expenses.

The Target Group has policies to ensure that the bank balances are placed with banks with good reputation and credit quality. During the Relevant Periods, approximately 97%, 98% and 99% of the Target Group’s bank balances at December 31, 2005, 2006 and 2007 respectively were placed with the 4 state-owned banks, and other local banks including China CITIC Bank and Shanghai Pudong Development Bank.

Foreign currency risk

The Target Group’s exposure to foreign exchange risk mainly arises from its settlement and clearing services whereby the Target Company made payments or collections in foreign currencies on behalf of its customers. An analysis of the assets and liabilities by currency are disclosed in Note 18, 21 and 26 respectively.

At December 31, 2007, December 31, 2006 and December 31 2005, if RMB had weakened/strengthened by 5% against the USD with all other variable held constant, profit before tax for the year would have been RMB 8.1 million, RMB 0.2 million and RMB 1.1 million higher/lower respectively, mainly as a result of foreign exchange gains/losses on translation of USD denominated other receivables and other payables.

The Target Group performs regular review of its foreign exchange exposure.

Liquidity risk

The Target Group maintains cash and bank balances that are adequate to meet its daily operations requirements. During the Relevant Periods, the cash and bank balances together with bank balances managed by CTHC represented approximately 50%, 54% and 47% of its total assets at December 31, 2005, 2006 and 2007 respectively. The management of the Target Group believe that the Target Group has sufficient cash and balances during Relevant Periods to meet its operations requirement and has no significant exposure to liquidity risk.

— II-50 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

Interest rate risk

The Target Group’s interest-bearing assets are mainly represented by cash and cash equivalents and bank balances managed by CTHC. Interest income for the years ended December 31, 2005, 2006 and 2007 was approximately RMB9,825,000, RMB8,780,000 and RMB8,035,000. Apart from this, the Target Group’s income and operating cash flows are substantially independent of changes in market interest rates. The interest rates of the Target Group’s interest-bearing assets are disclosed in Notes 19 and 22.

Capital risk management

The Target Group defines owner’s equity as the Capital.

The Target Group reviews its capital structure regularly to ensure acceptable returns to its equity owner and assesses its future capital requirements, if necessary.

Fair value estimation

The Target Group’s financial instruments mainly consist of cash and cash equivalents, accounts receivables, other receivables, due from holding company and fellow subsidiaries, accounts payable, and other payables.

The carrying amounts of financial instruments approximated their fair values at December 31, 2005, 2006 and 2007 because of the short-term maturities of these financial assets and financial liabilities.

30 Commitments

(a) Capital commitments

At each balance sheet date, the Target Group had the following capital commitments:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Computer system and others Contracted but
not provided for	1,019	2,492	1,383

At each balance sheet date, none of the above commitment balance was dominated in foreign currencies.

— II-51 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

(b) Operating lease commitments

At each balance sheet date, the Target Group had the following commitments under operating lease:

					at December 31,
				2005	2006	2007
				RMB’000	RMB’000	RMB’000
Less	than	1	year	—	—	3,225

31 Related party transactions

Management believes that meaningful information relative to related party disclosures has been adequately disclosed.

(a) Related parties

The major related parties of the Target Company and the Target Group are as follows:

Name Relationship with the Target Company CTHC Parent of the Target Company TravelSky Subsidiary of CTHC, parent of the Target Company Beijing Yaka Jingcheng Property Subsidiary of CTHC, parent of the Target Company Management Centre (“Yaka”)

(b) Related party transactions

The following is a summary of significant recurring transactions carried out with the Target Group’s related parties.

(i) Property management service received from Yaka:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Yaka	8,408	8,256	8,343

— II-52 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

(ii) Rendering computer software development and maintenance service to TravelSky:

	Year	ended December	31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
TravelSky	15,900	18,800	18,800

The service fees are based on contracted agreements with related parties.

(c) Balances with related parties

Balances with related parties mainly comprised:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Receivables from related parties (Note 19):
— TravelSky (a)	8,815	9,917	9,801
— CTHC (b)	579,559	530,206	11,002
	588,374	540,123	20,803

(a) The balances with related parties primarily arose from the above related party transactions.
(b) The details of the balance are set out in Note 19.

(d) Key management compensations

The key management personnel are the Directors of the Target Company. Their compensations and remunerations are set out in Note 8.

— II-53 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

(e) Balances and transactions with other major state-owned enterprises
i) The balances with other major state-owned enterprises comprising mainly state-owned banks and state-owned aviation companies and airports are as follows:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Bank balances	17,248	27,719	331,492
Accounts receivable	8,140	4,750	3,462
Other receivables	384,752	207,588	270,210
Other payables	(372,126)	(277,779)	(85,630)

ii) The transactions carried out with other major stated-owned enterprises:

		As at December 31,
	2005	2006	2007
	RMB’000	RMB’000	RMB’000
Services provided to state-owned aviation
companies and airports	200,589	208,886	228,152

iii) The Target Company provided a guarantee to SDITIC, a state-owned enterprise in 1993. Please refer to Note 12 for details

The Target Group is a state-owned enterprise. In accordance with the revised IAS 24, “Related Party Disclosures”, state-owned enterprises and their subsidiaries, other than entities under the Target Group, directly or indirectly controlled by the PRC government are also defined as related parties of the Target Company and its subsidiaries.

The majority of the business activities of the Target Company and its subsidiaries are conducted with state-owned enterprises. For the purpose of the related party transactions disclosure in accordance with IAS 24, the Target Company and its subsidiaries have established procedures to determine, to the extent possible, the identification of the ownership structure of its customers and suppliers as to whether they are state-owned enterprises. However, many state-owned enterprises have a multi-layered corporate structure and the ownership structures change over time as a result of transfers and privatization programs. Nevertheless, management believes that all material related party balances and transactions have been adequately disclosed.

— II-54 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

3. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE GROUP

The following unaudited pro forma statement of assets and liabilities of the Group was extracted from Appendix III to the ACCA Acquisition Circular. The effect of the acquisition of the Land has not been taken into account in this unaudited pro forma statement of assets and liabilities.

The Company and its subsidiaries after completion of the acquisition of ACCA Group and a piece of land and a building situated on No. 11 Dongxing Li, Chaoyang District, Beijing, the PRC, are referred to in the following unaudited pro forma statement of assets and liabilities as the “Enlarged Group”. The ACCA Acquisition Circular is referred to in the following unaudited pro forma statement of assets and liabilities as the “Circular”.

This circular contains an unaudited pro forma statement of assets and liabilities of the Enlarged Group as at 31 December 2007 only, which was extracted from Appendix III to the ACCA Acquisition Circular, but does not contain: (i) a pro forma statement of the profits or losses of the Group (including ACCA Group) for the year ended 31 December 2007; and (ii) a pro forma statement combining the assets and liabilities and profits or losses of the Group (including ACCA Group) for the year ended 31 December 2008 (collectively, the “ Outstanding Information ”).

The Company considered that it would be unduly burdensome and costly for the Company to compile the Outstanding Information for the purpose of this circular for the following reasons:-

The ACCA Acquisition is not the subject matter of the transaction as referred to in this circular. The absence of the Outstanding Information would not prejudice the Shareholders in their making of a properly informed decision in respect of the Acquisition.
Completion of the ACCA Acquisition took place in March 2009. Its related financial impact has already been reflected in the financial information of the Group for the six months ended 30 June 2009 as extracted from the interim report of the Company for the six months ended 30 June 2009 as set out in section 3 of Appendix I to this circular.
As the Land for the purpose of building a new operating centre is not a revenue-generating asset, a pro forma statement of the assets and liabilities of the Group (including ACCA Group) for the purpose of illustrating the effect of the Acquisition is not required.
There is no subsisting published audited financial information of ACCA Group for the year ended 31 December 2008 which is available for the purpose of preparing a pro forma statement combining the assets and liabilities and profits or losses of the Group (including ACCA Group) for the year ended 31 December 2008. Given the reasons as set out in sub-paragraphs above, it does not seem to worth incurring extra time and costs for the preparation of the financial information of ACCA Group for the year ended 31 December 2008 merely for the purpose of preparing a pro forma statement combining the assets and liabilities and profits or losses of the Group (including ACCA Group) for the year ended 31 December 2008 for the strict compliance with paragraph 31(3)(b) of Appendix 1, Part B of the Listing Rules.

— II-55 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Although there is published audited financial information of ACCA Group for the year ended 31 December 2007 which is available for the purpose of preparing a pro forma statement of the profits or losses of the Group (including ACCA Group) for the year ended 31 December 2007, it does not seem to worth incurring extra time and costs for the preparation of such information back to 2007, which are outdated as of the date of this circular, merely for the purpose of the strict compliance with paragraph 31(3)(b) of Appendix 1, Part B of the Listing Rules.

Therefore, the Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with paragraph 31(3)(b) of Appendix 1, Part B of the Listing Rules such that other than setting out in this circular the unaudited pro forma statement of assets and liabilities of the “Enlarged Group” as at 31 December 2007 as extracted from Appendix III to the ACCA Acquisition Circular in the following text, this circular is not required to contain the Outstanding Information.

UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The following is an illustrative and unaudited pro forma statement of assets and liabilities of the Enlarged Group, which have been prepared on the basis of the notes set out below for the purpose of illustrating the effect of the proposed acquisition of the entire equity interest in Accounting Center of China Aviation Limited Company and a piece of land and a building situated on No. 11 Dongxing Li, Chaoyang District, Beijing, the PRC, (the “Property”) (collectively, the “Proposed Acquisition”) as if it had taken place on December 31, 2007. This unaudited pro forma statement of assets and liabilities has been prepared for illustrative purpose only and because of its hypothetical nature, it may not give a true picture of the financial positions of the Group had the Proposed Acquisition been completed as at December 31, 2007 or any future dates.

— II-56 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group

		Pro	forma adjustments
	Statement of	Statement of			Unaudited
	assets and	assets and			pro forma
	liabilities of	liabilities of			statement of
	the Group as	the Target			assets and
	at December	Group as at	Other		liabilities of
	31,	December 31,	pro forma		the Enlarged
	2007	2007	adjustments		Group
	Note (2)	Note (3)		Note
	RMB’000	RMB’000	RMB’000		RMB’000
ASSETS
Non-current assets
Property, plant and equipment, net	1,033,148	104,775	114,579	(4)	1,252,502
Intangible assets, net	11,824	4,604	—		16,428
Lease prepayments for land use rights, net	—	19,718	93,746	(4)	113,464
Investments in associated companies	85,996	—	—		85,996
Deferred income tax asset	9,229	2,947	—		12,176
Other long-term assets	8,881	—	—		8,881
Total non-current assets	1,149,078				1,489,447
Current assets
Inventories	9,241	—	—		9,241
Accounts receivable, net	141,565	10,765	—		152,330
Due from associated companies	6,308	—	—		6,308
Due from related parties, net	389,561	—	—		389,561
Due from holding companies and
fellow subsidiaries	—	20,803	(9,800)	(5)	11,003
Prepayments and other current assets	102,399	423,252	—		525,651
Held-to-maturity financial assets	100,000	—	—		100,000
Short-term bank deposits	1,843,949	—	—		1,843,949
Cash and cash equivalents	1,209,152	527,606	—		1,736,758
Total current assets	3,802,175				4,774,801
Total assets	4,951,253				6,264,248

— II-57 —

APPENDIX II

FINANCIAL INFORMATION OF ACCA GROUP

		Pro	forma adjustments
	Statement of	Statement of			Unaudited
	assets and	assets and			pro forma
	liabilities of	liabilities of			statement of
	the Group as	the Target			assets and
	at December	Group as at	Other		liabilities of
	31,	December 31,	pro forma		the Enlarged
	2007	2007	adjustments		Group
	Note (2)	Note (3)		Note
	RMB’000	RMB’000	RMB’000		RMB’000
LIABILITIES
Non-current liabilities
Deferred income tax liabilities	129	—	—		129
Total non-current liabilities	129				129
Current liabilities
Accounts payable and accrued liabilities	470,212	349,170	10,855	(6)	830,237
Due to related parties	39,960	—	(9,800)	(5)	30,160
Income tax payable	17,054	65,926	—		82,980
Deferred revenue	5,172	—	—		5,172
Total current liabilities	532,398				948,549
Total liabilities	532,527				948,678
Net current assets	3,269,777				3,826,252
Total assets less current liabilities	4,418,855				5,315,699

— II-58 —

FINANCIAL INFORMATION OF ACCA GROUP

APPENDIX II

NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES

(1) Prior to the Proposed Acquisition, the Target Company was wholly-owned and controlled by China TravelSky Holding Company (“CTHC”) under the supervision and regulation of Stated-owned Assets Supervision and Administration Commission of the State Council. The directors of the Company also regard CTHC as its ultimately holding company. As the Target Company and the Company are ultimate controlled by CTHC before and after the Proposed Acquisition, for accounting purposes, the proposed acquisition of the entire equity interests in the Target Company by the Group will be treated as “combination of entities under common control” and has been accounted for on the basis of uniting of interest method which is in consistent with the Group’s accounting policy. The consideration for the Proposed Acquisition will be satisfied by the issue of 174,491,393 new domestic shares of the Company at a price of HK$6.39 (RMB5.73) per share, totalling approximately RMB1 billion.
(2) The statement of assets and liabilities of the Group is prepared based on the audited consolidated balance sheet of the Group as at December 31, 2007 extracted from the published annual report of the Company.
(3) The adjustment represents the inclusion of the assets and liabilities of the Target Group as at December 31, 2007 extracted from accountant’s report as set out in the Appendix II to the Circular.
(4) The adjustment represents acquisition of the Property from CTHC at an aggregate consideration of RMB208,325,000. The consideration is allocated into building element and land element with amount of RMB114,579,000 and RMB93,746,000 respectively, by the directors of the Company with reference to their relative fair values according to the valuation reports issued by Jones Lang LaSalle Sallmanns Limited. The building element is recognised as a property, plant and equipment and the land element is recognised as lease prepayment for land use right.
(5) The adjustment represents elimination of the inter-company balances between the Group and the Target Group as at December 31, 2007.
(6) The adjustment represents accrual of estimated transaction costs of approximately RMB10,855,000. The transaction costs, including lawyer fees, cost of furnishing information to shareholders, other professional fees, and related tax charges, are directly attributable to the Proposed Acquisition.
(7) Other than those adjustments mentioned above, no other adjustment has been made to reflect any trading position or other transactions of the Group and the Target Group entered into subsequent to December 31, 2007.

— II-59 —

APPENDIX III

VALUATION REPORT

The following is the text of a letter and valuation certificate, prepared for inclusion in this circular, received from Savills Valuation and Professional Services Limited, an independent valuer, in connection with their valuation as of 1 February 2010 of the property of Travelsky Technology Limited.

==> picture [72 x 71] intentionally omitted <==

==> picture [119 x 93] intentionally omitted <==

Travelsky Technology Limited Floor 18-20, South Wing, Park C Raycom InfoTech Park No. 2 Ke Xue Yuan South Road Haidian District, Beijing 100190 PRC

2 March 2010

Dear Sirs

RE: A PARECL OF LAND LOCATED AT 08, 09, 19 AND 21 BLOCKS, XINCHENG 19 STREET, SHUNYI DISTRICT, BEIJING, THE PEOPLE’S REPUBLIC OF CHINA (THE “PROPERTY”)

In accordance with your instructions for us to value the Property to be acquired by Travelsky Technology Limited (the “Company”) in the People’s Republic of China (“PRC”), we confirm that we have carried out an inspection, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the Property as at 1 February 2010 for inclusion in a circular issued by the Company.

Our valuation of the Property is our opinion of its market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller on an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

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APPENDIX III

VALUATION REPORT

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, joint venture, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

In the course of our valuation, we have valued the Property which is to be acquired for future development, by using direct comparison approach by making reference to the comparable market transactions as available in the market assuming sale with the benefit of vacant possession.

We have been provided with copies of extracts of Confirmation Letter and Contract Draft relating to the Property. However, we have not inspected the original documents to ascertain the existence of any amendments which do not appear on the copies handed to us. We have relied to a very considerable extent on information given by the Company and its PRC legal advisers, Jingtian & Gongcheng, regarding the title to the Property.

We have relied to a very considerable extent on information given by the Company and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, ownership, identification of the Property, site area and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been made. We have had no reason to doubt the truth and accuracy of the information provided to us by the Company which is material to our valuation. We have also advised by the Company that no material facts have been omitted from the information provided.

We have inspected the Property. However, we have not carried out investigations on site to determine the suitability of the ground conditions and the services for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the Property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

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VALUATION REPORT

APPENDIX III

In valuing the Property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited and Valuation Standards on Properties (First Edition) published by the Hong Kong Institute of Surveyors.

Unless otherwise stated, all monetary amounts stated are in Renminbi.

We enclose herewith our valuation certificate.

Yours faithfully For and on behalf of Savills Valuation and Professional Services Limited Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Managing Director

Note: Charles C K Chan is a qualified valuer and has about 25 years’ experience in the valuation of properties in Hong Kong and has about 20 years’ experience in the valuation of properties in the PRC.

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VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Property to be acquired for future development

Property

Description and tenure

Particulars of occupancy

Market value in existing state as at 1 February 2010

A parcel of land located at The Property comprises a The Property is currently a No commercial value 08, 09, 19 and 21 blocks, parcel of formed vacant land cleared and levelled site. Xincheng 19 Street, with a site area of Shunyi District, approximately 188,109.07 Beijing, sq.m. (2,024,806 sq.ft.). PRC The land use right of the Property will be granted for 40 years for commercial and 50 years for comprehensive uses respectively.

Notes:

Pursuant to 北京市國有建設用地使用權掛牌出讓成交確認書 (Confirmation Letter for the auction transfer of Land Use Right of State-owned Land for Construction in Beijing No. Jing Tu Zheng Chu Gua Han (Shun) [2009] 132) (“Confirmation Letter”) issued by 北京市土地整理儲備中心 (Beijing Land Consolidation and Reserve Center) on 14 January 2010, the Company made a successful bid at a public auction for the land use right of the Property at a consideration of RMB1,910,000,000.
Pursuant to the Listing-for-bidding Document No. Jing Tu Zheng Chu Gua (Shun) [2009] 132 dated in November 2009, the Company is allowed to develop the Property subject to the following criteria:

Site area : 188,109.0671 sq.m. Plot ratio : 2 Gross floor area : 376,218 sq.m. (above ground) Maximum construction height : 30m Green ratio : 30% Development period : 3 years

We have attributed no commercial value to the Property as the Company have not obtained relevant title certificates. For reference purpose, we are of the opinion that the market value of the Property as at the date of valuation would be RMB1,918,000,000 assuming that all relevant title certificates have been obtained, all land premium was settled in full and it was transferrable.
We have been provided with a legal opinion on the title to the Property issued by the Company’s PRC legal adviser, which contains, inter alia, the following information:
(i) pursuant to the Confirmation Letter as stated in note (1), the Company won the auction for the land use right of a parcel of land with a site area of 188,109.0671 sq.m. for multifunction purpose, including commercial and comprehensive uses;
(ii) as advised by the Company, the Company intends to build a new operating centre comprising database centre and the headquarters office building of the Company on the Property;

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VALUATION REPORT

APPENDIX III

(iii) the procedures for the listing-for-bidding and the intended use of the Property in building a new operating centre have complied with the relevant laws, regulations and rules;
(iv) there is no legal impediment for the Company and 北京市國土資資局 (Beijing Municipal Bureau of Land and Resources) to sign the Contract(s) for transfer of land use right of State-owned land for construction; and
(v) there is no legal impediment for the Company to obtain the land use right for state-owned land construction of the Property in accordance with the relevant documents of land auctions, laws, regulations and rules.

— III-5 —

GENERAL INFORMATION

APPENDIX IV

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.

INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVES IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS

As at the Latest Practicable Date, the interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) held by the Directors, Supervisors or chief executives of the Company which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or are required to be entered in the register maintained in accordance with Section 352 of the SFO, or are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules are as follow:

				Approximate	Approximate
				percentage of	percentage to
		Number and class		respective class	the total share
Name	of Director	of shares (Note 1)	Capacity	of share capital	capital (Note 2)
Chua	Keng Kim	417,000 H shares (L)	Interest of	0.07%	0.02%
		of RMB1 each	spouse

Notes:

(L) - Long position
The percentage to the total share capital is calculated based on the total number of 1,950,806,393 shares in issue of the Company as at the Latest Practicable Date.

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APPENDIX IV

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, Supervisors or chief executives of the Company had any interests or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (as defined in Part XV of the SFO) which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or are required to be entered in the register maintained in accordance with Section 352 of the SFO, or are required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules.

As at the Latest Practicable Date, each of CTHC, Southern Holding Eastern Holding and National Aviation Holding had interest in the shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date,

(a) each of Mr Xu Qiang (Chairman of the Company and an executive Director) is an employee of CTHC;
(b) Mr Cao Guangfu (a non-executive Director) is an employee of National Aviation Holding;
(c) Mr Wang Quanhua (a non-executive Director) is an employee of Southern Holding;
(d) Mr Luo Chaogeng (a non-executive Director) is an employee of Eastern Holding; and
(e) Mr Sun Yude (a proposed non-executive Director) is an employee of National Aviation Holding.

Save as disclosed above, as at the Latest Practicable Date, none of the existing and proposed Directors or Supervisors of the Company is a director, supervisor or employee of a company which had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

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GENERAL INFORMATION

APPENDIX IV

LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claims 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 any member of the Group.

SERVICE CONTRACTS

As at the Latest Practicable Date, none of the existing and proposed Directors or Supervisors had entered or proposed to enter into a service contract with 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)).

INTEREST IN ASSETS

As at the Latest Practicable Date, none of the existing and proposed Directors or Supervisors had any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, being the date to which the latest published audited accounts of the Group were made up.

MATERIAL INTEREST IN CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors was materially interested in any contracts or arrangement subsisting as at the date hereof which was significant in relation to the business of the Group.

COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or their respective associates had any interest in any business apart from the Company’s business which competes or is likely to compete, either directly or indirectly, with the Company’s business.

EXPERTS AND CONSENTS

The followings are the qualifications of the experts who have given their opinions or advices on the information contained in this circular:

Name	Qualification
Savills Valuation and Professional	Property Valuer
Services Limited
Jingtian and Gongcheng	PRC legal advisers

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GENERAL INFORMATION

APPENDIX IV

Savills Valuation and Professional Services Limited and Jingtian and Gongcheng have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their respective letters and references to their names in the form and context in which they appear.

EXPERTS’ INTEREST

As at the Latest Practicable Date, Savills Valuation and Professional Services Limited and Jingtian and Gongcheng:

(a) were not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2008, being the date to which the latest published audited accounts of the Company were made up; and
(b) did not have any shareholding interest 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.

MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) entered into by the Group during the period of two years prior to the Latest Practicable Date :

(a) the sale and purchase agreement dated 5 May 2008 entered into between the Company and CTHC, pursuant to which CTHC agreed to sell and the Company agreed to purchase (i) the entire registered capital of ACCA for a consideration of RMB788 million; and (ii) a state-owned land use right with a site area of 5,332.54 sq.m. and 8 buildings erected thereon with a total gross floor area of 12,003.74 sq.m. located at No. 11 Dongxing Li, Chaoyang District, Beijing, the PRC, for a consideration of RMB212 million, amounting to an aggregate consideration of RMB1 billion; and
(b) the acquisition agreement dated 13 May 2009 entered into between TravelSky Technology (Hong Kong) Limited (中國民航信息網絡股份(香港)有限公司) (“ Hong Kong Subsidiary ”) (a wholly owned subsidiary of the Company) and Sociètè Internationale de Tèlècommunications Aeronautiques Greater China Holdings Pte Limited (“ SITAGCH ”), pursuant to which Hong Kong Subsidiary would acquire from SITAGCH 49% equity interest in InfoSky Technology Company Limited (天信達信息技術有限公司) ) at a cash consideration of US$1,100,000, subject to the terms and conditions thereof.

— IV-4 —

GENERAL INFORMATION

APPENDIX IV

GENERAL

(a) The registered office of the Company is located at 18-20th Floors, South Wing, Park C, Raycom InfoTech Park, No. 2, Ke Xue Yuan South Road, Haidian District, Beijing 100190, PRC and the place of business of the Company in Hong Kong is located at Area L, 49/F A & 50/F, Office Tower, Convention Plaza, 1 Harbour Road, Wanchai, Hong Kong.
(b) The branch share registrar and transfer office of the Company in Hong Kong is Hong Kong Registrars Limited, Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The company secretary is Mr. Ding Weiping.
(d) The English text of this circular shall prevail over the Chinese text thereof.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of JSM, 16th-19th Floors, Prince’s Building, 10 Chater Road, Central, Hong Kong during normal business hours from the date of this circular up to and including 16 March 2010:

(a) the articles of association of the Company;
(b) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(c) the annual reports of the Company for the financial years ended 31 December 2007 and 31 December 2008 respectively and the interim report of the Company for the six months ended 30 June 2009;
(d) the ACCA Acquisition Circular;
(e) the valuation report from Savills Valuation and Professional Services Limited on the Land, the text of which is set out in Appendix III to this circular;
(f) the PRC legal opinion in relation to the Land prepared by Jingtian and Gongcheng;
(g) the written consents referred to in paragraph headed “Experts and Consents” of this appendix;
(h) continuing connected transactions circular dated 12 January 2009 in relation to an airline services agreement entered into between the Company and Shanghai Airlines Company Limited (上海航空股份有限公司), and the renewal of airline services agreements entered into between the Company and Sichuan Airlines and Air China Limited (中國國際航空股份有限公司) respectively;

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GENERAL INFORMATION

APPENDIX IV

(i) continuing connected transactions circular dated 4 February 2009 in relation to an airline services agreement entered into between the Company and Hainan Airlines Company Limited (海南航空股份有限公司);
(j) continuing connected transactions circular dated 25 May 2009 in relation to an airline services agreement entered into between the Company and China Southern Airlines Company Limited (中國南方航空股份有限公司); and
(k) continuing connected transactions circular dated 13 November 2009 in relation to a network services agreement entered into between the Company and 25 companies, the renewal of an airline services agreement entered into between the Company and Sichuan Airlines, and the grant of a three-year general mandate to carry out certain continuing connected transactions for the Group for which a waiver is granted from strict compliance with the requirements of having written agreements under the Listing Rules.

— IV-6 —

AI assistant

TravelSky Technology Limited — Proxy Solicitation & Information Statement 2010

49402_rns_2010-03-01_a8e11a47-3432-4cbc-814b-84ab5119186a.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR TRANSACTION

ACQUISITION OF LAND IN BEIJING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 0696)

MAJOR TRANSACTION

ACQUISITION OF LAND IN BEIJING

INTRODUCTION

LETTER FROM THE BOARD

PARTICULARS OF THE LAND

CONSIDERATION

LETTER FROM THE BOARD

INFORMATION ON COUNTERPARTIES

REASONS FOR AND BENEFITS OF THE ACQUISITION

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

IMPLICATIONS UNDER THE LISTING RULES

LETTER FROM THE BOARD

GENERAL

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2006, 31 DECEMBER 2007 AND 31 DECEMBER 2008

CONSOLIDATED INCOME STATEMENT

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY ORGANISATION AND PRINCIPAL ACTIVITIES

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. BASIS OF PRESENTATION

(a) Amendments effective in 2008

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. PRINCIPAL ACCOUNTING POLICIES

(a) Consolidation

(i) Merger accounting for common control combination

FINANCIAL INFORMATION OF THE GROUP

(ii) Subsidiaries

(iii) Transactions with minority interests

(iv) Associated companies

(b) Foreign currencies

(i) Functional and presentation currency

(iii) Group companies

(c) Property, plant and equipment

(d) Intangible assets

(e) Research and development costs

(f) Impairment of investments in subsidiaries, associates and non-financial assets

(g) Financial assets

(i) Financial assets at fair value through profit or loss

(ii) Held-to-maturity financial assets

(iii) Loans and receivables

(iv) Available-for-sale financial assets

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

TravelSky Technology Limited Proxy Solicitation & Information Statement 2010