TravelSky Technology Limited — Proxy Solicitation & Information Statement 2015

Oct 22, 2015

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: 00696)

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS; PROPOSED CHANGE OF DIRECTORS; AND NOTICE OF EGM

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 4 to 15 of this circular. A letter from the Independent Board Committee is set out on page 16 of this circular. A letter from RHB OSK Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 28 of this circular.

A notice convening the EGM to be held at Conference Room, Prime Hotel, 2 Wangfujing Ave., Dongcheng District, Beijing, the PRC at 10 a.m. on Thursday, 10 December 2015, is set out on pages 32 to 33 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you wish to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong (in case of holders of H Shares) or the liaison office of the Company in Beijing at No. 157, Dongsi West Street, Dongcheng District, Beijing 100010, the PRC (in case of holders of Domestic Shares), no later than 24 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and delivery of the form of proxy will not prevent you from attending, and voting at, the EGM or any adjournment thereof if you so wish.

If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to the liaison office of the Company in Beijing, on or before Thursday, 19 November 2015.

23 October 2015

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
**LETTER FROM **	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	16
**LETTER FROM **	RHB OSK CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .	29
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		32

– i –

DEFINITIONS

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

• “associate(s)” have the same meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

• “CAAC” 中國民用航空局 (Civil Aviation Administration of China)

• “Chongqing Airlines” 重慶航空有限責任公司(Chongqing Airlines Company Limited*), which is owned as to 60% of its equity interest by Southern Airlines, and a subsidiary of Southern Holding as at the Latest Practicable Date

• “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

• “Director(s)” the director(s) of the Company

• “Domestic Share(s)” domestic share(s) with a nominal value of RMB1.00 each in the share capital of the Company

• “Eastern Holding” 中國東方航空集團公司 (China Eastern Air Holding Company*), which has a shareholding of 11.22% in the Company and is a substantial shareholder of the Company as at the Latest Practicable Date

• “EGM” the extraordinary general meeting of the Company to be convened at 10:00 a.m. on Thursday, 10 December 2015, and the notice of which set out in this circular

• “Group” the Company and its subsidiaries

• “H Share(s)”

• overseas listed foreign invested share(s) with a nominal value of RMB1.00 each in the share capital of the Company which are listed on the Stock Exchange and are traded in HK dollars (Stock Code: 696)

– 1 –

DEFINITIONS

• “HK$”

• “Independent Board Committee”

• “Independent Shareholders”

• “Latest Practicable Date”

• “Listing Rules”

• “PRC”

• “Proposed Annual Caps”

• “RHB OSK Capital”

• “RMB”

• “SFO”

• “Shareholder(s)”

• Hong Kong dollars, the lawful currency of Hong Kong Special Administrative Region

• the independent board committee of the Company formed by the Company to advise the Independent Shareholders in respect of the Southern Airlines Transactions and the Proposed Annual Caps as set out in this circular

• the shareholders of the Company who are not required to abstain from voting in respect of the Southern Airlines Transactions and the Proposed Annual Caps at the EGM

• 20 October 2015, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• the People’s Republic of China and, for the purpose of this circular, excludes the Hong Kong Special Administrative Region and the Macau Special Administrative Region

• the proposed maximum aggregate annual amounts of the Southern Airlines Transactions for each of the two years ending 31 December 2016

• RHB OSK Capital Hong Kong Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Southern Airlines Transactions and the Proposed Annual Caps, and a licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

• Renminbi, the lawful currency of the PRC

• Securities and Futures Ordinance

• the shareholder(s) of the Company

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DEFINITIONS

• “Southern Airlines”

• 中國南方航空股份有限公司 (China Southern Airlines Company Limited*), a subsidiary of Southern Holding as at the Latest Practicable Date, and reference to Southern Airlines in this circular shall exclude its subsidiaries and associates unless the context otherwise requires

• “Southern Airlines Transactions”

• the continuing connected transactions between the Company and Southern Airlines in relation to the provision of the technology services by the Company to Southern Airlines and its certain subsidiaries as set out in this circular

• “Southern Holding”

• 中國南方航空集團公司 (China Southern Air Holding Company*) which has a shareholding of 11.94% in the Company and is a substantial shareholder of the Company as at the Latest Practicable Date

• “Southern Renewal Agreement”

• the renewal written agreement dated 21 September 2015 entered into between the Company and Southern Airlines in respect of the Southern Airlines Transactions for a term of two years from 1 January 2015 to 31 December 2016

• “Stock Exchange”

• The Stock Exchange of Hong Kong Limited

• “Waiver”

• a waiver from strict compliance with the requirement of having written agreements under the Listing Rules with respect to, among others, the Southern Airlines Transactions. Such waiver is for a three-year term commencing from 1 January 2013 and ending on 31 December 2015

• “Xiamen Airlines”

• 廈門航空有限公司 (Xiamen Airlines Company Limited*), which is owned as to 55% of its equity interest by Southern Airlines, and a subsidiary of Southern Holding as at the Latest Practicable Date

• “%” per cent

For the purpose of this circular, unless otherwise indicated, the exchange rate at RMB1 = HK$1.26 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.

* For identification purpose only

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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: 00696)

Executive Directors: Mr. Cui Zhixiong Mr. Xiao Yinhong

Non-executive Director: Mr. Wang Quanhua Mr. Cao Jianxiong

Independent non-executive Directors: Mr. Cheung Yuk Ming Mr. Pan Chongyi Mr. Zhang Hainan

Registered Office: 7 Yu Min Da Street Houshayu Town Shunyi District Beijing 101308 the PRC

Principal place of business in Hong Kong: Room 3606, 36/F China Resources Building 26 Harbour Road Wan Chai Hong Kong

23 October 2015

To the Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS; PROPOSED CHANGE OF DIRECTORS; AND NOTICE OF EGM

1. INTRODUCTION

References are made to the announcements of the Company dated 16 June 2015 and 25 June 2015, in relation to the change of directorships. The Company proposed to appoint Mr. Li Yangmin and Mr. Yuan Xin’an as the non-executive Directors to replace Mr. Cai Kevin Yang and Mr. Wang Quanhua, respectively, which is subject to the approvals of the Shareholders at the EGM.

Reference is made to the announcement of the Company dated 21 September 2015 in relation to the Southern Renewal Agreement between the Company and Southern Airlines in respect of the Southern Airlines Transactions for a term of two years, commencing from 1 January 2015 to 31 December 2016.

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LETTER FROM THE BOARD

References are also made to the announcement of the Company dated 30 November 2012 and the circular of the Company dated 21 December 2012 in relation to, among other things, the Southern Airlines Transactions and the Waiver in relation to the Southern Airlines Transactions. The Stock Exchange has granted the Company the Waiver from strict compliance with the requirement of having written agreements under the Listing Rules. A general mandate has been approved by the independent shareholders of the Company at the extraordinary general meeting of the Company held on 16 January 2013 with a three-year term to carry out the Southern Airlines Transactions under the Waiver, commencing from 1 January 2013 to 31 December 2015.

The purposes of this circular are to provide you with, among other things, (i) further details of the proposed change of Directors and the Southern Airlines Transactions; (ii) a letter from RHB OSK Capital containing its advice to the Independent Board Committee and the Independent Shareholders on the Southern Airlines Transactions and the Proposed Annual Caps; and (iii) the recommendation of the Independent Board Committee regarding the Southern Airlines Transactions and the Proposed Annual Caps to the Independent Shareholders.

2. PROPOSED CHANGE OF DIRECTORS

As proposed by Eastern Holding, a substantial shareholder of the Company, Mr. Cai, Kevin Yang (“ Mr. Cai ”) shall cease to be the non-executive Director and the member of the Strategic Committee of the Company due to other work commitment; and that Mr. Li Yangmin (“ Mr. Li ”) shall be nominated to fill the vacancy of non-executive Director. The resignation of Mr. Cai became effective from 16 June 2015. As proposed by Southern Holding, a substantial shareholder of the Company, Mr. Wang Quanhua (“ Mr. Wang ”) shall cease to be the non-executive Director and the member of the Remuneration and Evaluation Committee and the Strategic Committee of the Company; and that Mr. Yuan Xin’an (“ Mr. Yuan ”) shall be nominated to fill the vacancy of non-executive Director. As far as the Board is aware of, Mr. Wang has retired from Southern Holding due to his age. The Board also resolved that Mr. Li will be the member of the Strategic Committee of the Company, and Mr. Yuan will be the member of the Remuneration and Evaluation Committee and the Strategic Committee of the Company, subject to the effectiveness of their appointments as non-executive Directors, respectively.

Mr. Cai and Mr. Wang have confirmed that they have no disagreement with the Board, and there are no matters relating to their resignation that need to be brought to the attention of the Shareholders and the Stock Exchange.

The Board would like to take this opportunity to express its appreciation for the valuable contribution of Mr. Cai and Mr. Wang towards the Company during their tenure of service.

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LETTER FROM THE BOARD

The biographical details of Mr. Li and Mr. Yuan are as follows:

Mr. Li Yangmin , aged 52, a professor-level senior engineer, graduated from the Civil Aviation University of China and obtained a master’s degree from Northwestern Polytechnical University and an Executive Master of Business Administration (EMBA) degree from Fudan University. Mr. Li is currently a director, party secretary and deputy general manager of the China Eastern Airlines Corporation Limited (a subsidiary of China Eastern Air Holding Company, a promoter and a substantial shareholder of the Company; whose shares are listed on the Main Board of the Hong Kong Stock Exchange, stock code: 0670 (Hong Kong Stock Exchange); 600115 (Shanghai Stock Exchange); CEA (New York Stock Exchange)) and a party member of China Eastern Air Holding Company. Mr. Li joined the civil aviation industry in 1985. He previously served as the deputy general manager of the aircraft maintenance base and the manager of air route department (航線部) of Northwest Airlines Company (西北航空公司), general manager of the aircraft maintenance base of China Eastern Airlines Northwest Branch (中國東方航空西北分公司), deputy general manager of China Eastern Airlines Northwest Branch and general manager of China Eastern Airlines Yunnan Branch (中國東方航空雲南分公司). Mr. Li has been served as the deputy general manager of China Eastern Airlines Corporation Limited from October 2005, and concurrently served as the safety director of China Eastern Airlines Corporation Limited from July 2010 to December 2012. He has become a party member of China Eastern Air Holding Company since May 2011. Mr. Li has been served as the party secretary and director of China Eastern Airlines Corporation Limited since June 2011. He concurrently served as the chairman of China Cargo Airlines from February 2012 to January 2013.

Mr. Yuan Xin’an , aged 58, a senior engineer, graduated from Xi’an Air Force Engineering University with a bachelor degree in Aerospace Machinery. Mr. Yuan currently serves as a director of China Southern Airlines Company Limited (a company whose shares are listed on the Main Board of the Hong Kong Stock Exchange, stock code: 1055 (Hong Kong Stock Exchange); 600029 (Shanghai Stock Exchange); a subsidiary of China Southern Air Holding Company (a promoter and a substantial shareholder of the Company)). Mr. Yuan concurrently serves as the chairman of MTU Maintenance Zhuhai Co., Ltd. (珠海保稅區摩天宇航空發動機維修有限公司), Guangzhou Southern Airline Construction Company Limited (廣州南航建設有限公司) and Shenzhen Air Catering Co., Ltd. (深圳航空食品有限公司), as well as a director of China Aircraft Services Limited (中國 飛機服務有限公司). Mr. Yuan began his career in December 1976 and previously served as the quality control manager, the deputy director and the deputy general manager of Guangzhou Aircraft Maintenance Engineering Co., Ltd. (民航廣州飛機維修公司), the deputy general manager of the engineering department of China Southern Airlines Company Limited, the chief engineer and the general manager of engineering department of China Southern Airlines Company Limited. Mr. Yuan served as the deputy general manager and a member of the standing committee of the Communist Party Committee of China Southern Airlines Company Limited from April 2002 to September 2007, and concurrently served as the assistant to the general manager of China Southern Air Holding Company from February to September 2007. Mr. Yuan has served as the deputy general manager and a party member of China Southern Air Holding Company since September 2007, and has concurrently served as the general council of China Southern Air Holding Company since July 2008.

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LETTER FROM THE BOARD

Save as disclosed above, the Board is not aware of any other matter in respect of the proposed appointments of Mr. Li and Mr. Yuan that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules or any other matter that needs to be brought to the attention of the Stock Exchange and the Shareholders.

Each of the proposed appointments of Mr. Li and Mr. Yuan will become effective subject to the Shareholders’ approval at the EGM. The proposed resignation of Mr. Wang will become effective upon the conclusion of the EGM after the approval granted at the EGM.

The terms of the office of Mr. Li and Mr. Yuan as the non-executive Directors will commence from the approval of the Shareholders and end upon expiry of the term of the current session of the Board. The Company will enter into service contracts with Mr. Li and Mr. Yuan respectively after each of their proposed appointments is approved by the Shareholders. The remuneration of Mr. Li and Mr. Yuan will be determined in accordance with applicable laws, regulations and regulatory provisions as well as relevant remuneration policies of the Company.

3. SOUTHERN AIRLINES TRANSACTIONS

3.1 DETAILS OF THE SOUTHERN AIRLINES TRANSACTIONS

The principal terms of the Southern Renewal Agreement are set out below:

Parties: Service provider: The Company

Service recipient: Southern Airlines

Terms: 1 January 2015 to 31 December 2016

Services: The scope of technology services consists of the following:

• (i) flight control system services which include, among others, the provision of consolidated information, flight formation, flight control, flight tickets sales, automatic tickets sales and announcement of freight price;

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LETTER FROM THE BOARD

• (ii) computer distribution system services which include, among others, the provision of flight information display, real-time flight reservation, automatic tickets sales, tickets price display and other travel-related services;

• (iii) reservation system extended services and departure system services, which include the provision of check-in, boarding and load planning services; and

• (iv) civil aviation and commercial data network services which include, among others, the provision of the network transmission services and connection services.

Service fees:

The fees for the technology services are as follows:

• (1) the “flight control system services” as mentioned in (i) above and the “computer distribution system services” as mentioned in (ii) above are generally referred to as the “airlines passenger booking system services”. The pricing of the airlines passenger booking system services is subject to the maximum guidance prices prescribed by CAAC, being the progressive per segment booking fee ranging from RMB4.5 to RMB6.5 for domestic flights and RMB6.5 to RMB7 for international flights (depending on the monthly booking volume). The Company may also determine the actual prices for airlines passenger booking system services through arm’s length negotiation with Southern Airlines, having taken into account its booking volume, and in any event the prices shall not exceed the above maximum guidance prices prescribed by CAAC;

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LETTER FROM THE BOARD

• (2) the pricing of the “reservation system extended services and departure system services” as mentioned in (iii) above is also subject to the maximum guidance prices prescribed by CAAC, being (a) RMB7 per segment for international and regional flights and RMB4 per segment for domestic flights; and (b) RMB500 per aircraft for load balancing services. The Company may also determine the actual prices for reservation system extended services and departure system services through arm’s length negotiation with Southern Airlines, having taken into account a number of factors such as types of the flights, transportation volume, level of services and size of the aircraft, and in any event the prices shall not exceed the above maximum guidance prices prescribed by CAAC;

• (3) for the services as mentioned in (i), (ii) and (iii) above, the maximum fee shall not be more than RMB9.9 per segment when charged on an aggregate basis;

• (4) The pricing of physical identified device (“PID”) connection and maintenance services under the aforementioned type (iv) the “civil aviation and commercial data network services” is subject to the maximum guidance price prescribed by CAAC of RMB200 per PID per month; and

• (5) The pricing of other types of services under the aforementioned type (iv) the “civil aviation and commercial data network services” (other than PID connection and maintenance services) is not governed by the guidelines of CAAC or the framework of any other PRC airlines regulatory body but is subject to reasonable mutual negotiation between the parties and with reference to market conditions after taking into account factors including but not limited to: (i) the costs of provision of such products or services; (ii) the processing volume and complexity of such products or services; and (iii) the price quoted by at least two independent third parties providing products or services of similar nature if available.

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LETTER FROM THE BOARD

The service fees shall be calculated on a monthly basis and the monthly bill and breakdowns shall be mailed by the 20th of next month. The service fees shall be paid on a quarterly basis.

The Directors are of the view that the basis of determination of the service fees mentioned above is fair and reasonable.

Xiamen Airlines and Chongqing Airlines, both subsidiaries of Southern Airlines, will enter into written confirmation letters with the Company respectively to undertake that they will be bound by the same terms of the Southern Renewal Agreement with respect to the provision of South Airlines Transactions by the Company to them.

3.2 INTERNAL CONTROL AND MECHANISM TO REGULATE THE SOUTHERN AIRLINES TRANSACTIONS

To ensure that the Southern Airlines Transactions are carried out in accordance with relevant regulatory guidelines and terms as disclosed herein and those to be agreed in the Southern Renewal Agreement, the Company has in place the following internal control procedures and mechanism:

• (1) With respect to the aforementioned type (i), (ii), (iii) and (iv) services under the Southern Airlines Transactions are provided and carried out through the Company’s large scale computerized automated system with pre-set technology parameters based on the pricing terms as agreed under the Southern Renewal Agreement. Such parameters mainly include, if applicable, the business processing volume, unit price and customer value of certain type of services. For the services as mentioned in (i), (ii) and (iii) above, the maximum fee shall not be more than RMB9.9 per segment when charged on an aggregate basis.

Changes of such pre-set technology specifications and pricing terms can only be made after receiving joint approvals from various internal departments of the Company, which include the aviation business sales department, the market management department and the finance department, thus to ensure that the terms of the Southern Airlines Transactions are adherent and strictly followed; and

• (2) With respect to other types of services under the aforementioned type (iv) civil aviation and commercial data network services (other than PID connection and maintenance services) under the Southern Airlines Transactions where separate service agreements may be entered into, the entering into of such individual agreements will be scrutinized by a number of internal departments of the Company, which include the aviation business sales department, the market management department and the finance department, to ensure that the terms of such agreements will be in compliance

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LETTER FROM THE BOARD

with relevant regulatory guidelines, where applicable, and the market practice, and will not deviate from the terms of the Southern Airlines Transactions as disclosed herein. The pricing policies for those type of services are determined by the Company taking into account factors including but not limited to: (i) the costs of provision of such products or services; (ii) the processing volume and complexity of such products or services; and (iii) the price quoted by at least two independent third parties providing products or services of similar nature if available. And such pricings are not more favourable than those applied by the Company to independent third parties in respect of transactions of similar kind under same conditions.

Further, the auditors of the Company will conduct annual review of the Southern Airlines Transactions to confirm that, among other things, such transactions are in accordance with the pricing policies of the Company and have been entered into in accordance with the relevant agreements (if have been entered into) governing the transactions in accordance with Rule 14A.56 of the Listing Rules. The auditors will also carry out annual system auditing on the Company’s computerized automated system to, among other things, verify the system’s reliability and stability, and evaluate the internal control procedures for the authorization of making changes to the system parameters and programme.

As such, the Company is of the view that it possesses adequate mechanism, internal control procedures and external supervision in place to ensure the terms of the Southern Airlines Transactions are adherent and strictly followed in accordance with relevant regulatory guidelines and the Southern Renewal Agreement.

3.3 HISTORICAL TRANSACTION AMOUNTS UNDER THE SOUTHERN AIRLINES TRANSACTIONS

Set out below is a summary of the aggregated amounts of the Southern Airlines Transactions provided to Southern Airlines, Xiamen Airlines and Chongqing Airlines for the three years ended 31 December 2014 and the six months ended 30 June 2015:

				Six months
	Years ended 31 December			ended 30 June
	2012	2013	2014	2015
	(RMB)	(RMB)	(RMB)	(RMB)
				(unaudited)
Southern Airlines	427,074,270	465,458,180	500,811,140	261,311,200
Transactions	(approximately	(approximately	(approximately	(approximately
	HK$538,113,580)	HK$586,477,307)	HK$631,022,036)	HK$329,252,112)

Note:

The historical transaction amount for the six months ended 30 June 2015 has not exceeded the existing annual cap for 2015 as set out in the circular of the Company dated 21 December 2012.

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LETTER FROM THE BOARD

3.4 PROPOSED ANNUAL CAPS AND BASIS FOR THE PROPOSED ANNUAL CAPS

A. Proposed Annual Caps

Set out below is a summary of the Proposed Annual Caps for the Southern Airlines Transactions provided to Southern Airlines, Xiamen Airlines and Chongqing Airlines for the two years ending 31 December 2016:

		**Years ending **	31 December
		2015	2016
		(RMB)	(RMB)
Southern Airlines	Transactions	550,892,250	605,981,480
		(approximately	(approximately
		HK$694,124,235)	HK$763,536,665)

B. Basis of the Proposed Annual Caps for the Southern Airlines Transactions

The existing annual cap for the Southern Airlines Transactions for the year ending 31 December 2015 as set out in the circular of the Company dated 21 December 2012 is RMB735,398,000. The Proposed Annual Caps for the Southern Airlines Transactions for the two years ending 31 December 2016 represents an estimated annual growth rate of 10% in the transaction volume calculated based on the Company’s full year transaction amount of 2014. The Proposed Annual Caps and the estimated 10% annual transaction volume growth rate are determined with reference to (i) the highest annual growth rate of 8.99% in the historical transaction amounts of such type of transactions between the Group and Southern Airlines and its subsidiaries for the preceding three years ended 31 December 2014; (ii) the actual growth rate of approximately 12.3% of the PRC’s gross passenger transportation volume for the first quarter of 2015 as compared with the corresponding period in the previous year; (iii) the anticipated annual growth of approximately 10.0% of the PRC’s gross passenger transportation volume for the year 2015 as estimated by CAAC; (iv) the increasing demand of the civil aviation transportation market as influenced by various factors such as the “One Belt and One Road” strategy; and (v) the expansion of the Southern Airlines’ businesses from time to time through acquisition of other airlines or establishing more branches.

3.5 REASONS FOR AND BENEFITS OF THE SOUTHERN AIRLINES TRANSACTIONS

The provision of the Southern Airlines Transactions by the Group to Southern Airlines and its certain subsidiaries (including Xiamen Airlines and Chongqing Airlines) under the Southern Airlines Agreement and confirmation letters is in the ordinary and usual course of business of the Group. The Group will receive service fees for provision of such services and thus such transactions will increase the total revenue of the Group.

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LETTER FROM THE BOARD

The Directors (including the independent non-executive Directors) are of the view that the Southern Airlines Transactions are conducted in the ordinary and usual course of business of the Group and are on normal commercial terms, and the terms of the Southern Airlines Transactions and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3.6 IMPLICATIONS UNDER THE LISTING RULES

Southern Holding is a substantial shareholder of the Company. Southern Airlines, being a subsidiary of Southern Holding, is an associate of Southern Holding. Therefore, Southern Airlines is a connected person of the Company pursuant to Rule 14A.07(4) of the Listing Rules. In addition, Xiamen Airlines and Chongqing Airlines, both being subsidiaries of Southern Airlines, are also connected persons of the Company under the Listing Rules. As such, the Southern Airlines Transactions constitute continuing connected transactions of the Company.

Since the highest applicable percentage ratio (as defined under Rule 14A.06 of the Listing Rules) in respect of the Southern Airlines Transactions exceeds 5%, the Southern Airlines Transactions are subject to the reporting, announcement and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Wang Quanhua has abstained from voting on the relevant Board resolution in relation to the Southern Airlines Transactions as he is an employee of Southern Holding. Save as disclosed above, none of the Directors has a material interest in the Southern Airlines Transactions and none of them has abstained from voting on the relevant Board resolution.

3.7 GENERAL INFORMATION

Information on the Group

The Group is principally engaged in the 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.

Information on Southern Airlines

Southern Airlines is principally engaged in the provision of domestic, Hong Kong and Macau and international passenger, cargo and mail airline services. It is also a company listed on the Main Board of the Stock Exchange.

Information on Xiamen Airlines

Xiamen Airlines is principally engaged in airline operation in the PRC.

Information on Chongqing Airlines

Chongqing Airlines is principally engaged in airline operation in the PRC.

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LETTER FROM THE BOARD

4. EGM

The EGM will be held at Conference Room, Prime Hotel, 2 Wangfujing Ave., Dongcheng District, Beijing, the PRC at 10:00 a.m. on Thursday, 10 December 2015 to consider and, if thought fit, approve, among other matters, (i) the Southern Airlines Transactions; (ii) the Proposed Annual Caps; and (iii) the proposed change of Directors. Notice of the EGM is set out on pages 32 to 33 of this circular.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you wish to attend the EGM personally, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong (in case of holders of H Shares) or the liaison office of the Company in Beijing at No. 157, Dongsi West Street, Dongcheng District, Beijing 100010, the PRC (in case of holders of Domestic Shares), no later than 24 hours before the time fixed for holding the EGM or any adjournment thereof. Completion and delivery of the form of proxy will not prevent you from attending, and voting at, the EGM or any adjournment thereof if you so wish.

If you intend to attend the EGM in person or by proxy, you are required to complete and return the reply slip to the liaison office of the Company in Beijing at No. 157, Dongsi West Street, Dongcheng District, Beijing 100010, the PRC, on or before Thursday, 19 November 2015.

Pursuant to the Listing Rules, shareholders with a material interest in a transaction and their respective associates shall abstain from voting on the relevant resolution(s). As such, Southern Holding and its associates, holding an aggregate of 415,155,000 Domestic Shares, will abstain from voting on the resolution in respect of the Southern Airlines Transactions and the Proposed Annual Caps.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes of the Shareholders at the EGM must be taken by poll. The chairman of the EGM will demand a poll for the resolutions to be proposed at the EGM in accordance with the articles of association of the Company. The results of the voting will be announced in accordance with Rule 2.07C of the Listing Rules after the EGM.

5. RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on page 16 of this circular in connection with the Southern Airlines Transactions and the Proposed Annual Caps. Your attention is also drawn to the letter of advice from RHB OSK Capital to the Independent Board Committee and the Independent Shareholders in connection with the Southern Airlines Transactions and the Proposed Annual Caps and the principal factors and reasons considered by it in arriving at such advice set out on pages 17 to 28 of this circular.

– 14 –

LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the advice of RHB OSK Capital, considers that (i) the Southern Airlines Transactions are in the ordinary and usual course of business of the Group, (ii) the terms of the Southern Airlines Transactions are on normal commercial terms and (iii) the terms of the Southern Airlines Transactions and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution for approving the Southern Airlines Transactions and the Proposed Annual Caps at the EGM.

The Directors (including the independent non-executive Directors) consider that the resolutions as set out in the notices of the EGM are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of such resolutions at the EGM.

6. GENERAL

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

Yours faithfully, By order of the Board TravelSky Technology Limited Yu Xiaochun Company Secretary

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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

(Stock Code: 00696)

To the Independent Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS

We refer to the circular issued by the Company to its shareholders dated 23 October 2015 (the “ Circular ”) of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed by the Board to consider the Southern Airlines Transactions and the Proposed Annual Caps. RHB OSK Capital has been appointed as the independent financial adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from RHB OSK Capital set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, RHB OSK Capital set out in its letter of advice as contained in the Circular, we consider that (i) the Southern Airlines Transactions are in the ordinary and usual course of business of the Group, (ii) the terms of the Southern Airlines Transactions are on normal commercial terms and (iii) the terms of the Southern Airlines Transactions and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution approving the Southern Airlines Transactions and the Proposed Annual Caps at the EGM.

Yours faithfully, For and on behalf of the

Independent Board Committee Cheung Yuk Ming Pan Chongyi Zhang Hainan Independent Non-executive Directors

– 16 –

LETTER FROM RHB OSK CAPITAL

The following is the text of the letter of advise from RHB OSK Capital to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

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12/F., World-Wide House 19 Des Voeux Road Central Hong Kong 23 October 2015

TravelSky Technology Limited 7 Yu Min Da Street, Houshayu Town, Shunyi District, Beijing 101308, PRC

• To: the Independent Board Committee and the Independent Shareholders of TravelSky Technology Limited

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Southern Airlines Transactions, being the continuing connected transactions between the Company and Southern Airlines in relation to the provision of the technology services by the Company to Southern Airlines and its subsidiaries, and the Proposed Annual Caps, details of which are contained in the letter from the Board (the “ Letter from the Board ”) of the circular dated 23 October 2015 (the “ Circular ”) issued by the Company to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

As referred to in the Letter from the Board, Southern Holding is a substantial shareholder of the Company. Southern Airlines, being a subsidiary of Southern Holding, is an associate of Southern Holding. Therefore, Southern Airlines is a connected person of the Company pursuant to Rule 14A.07(4) of the Listing Rules. In addition, Xiamen Airlines and Chongqing Airlines, both being subsidiaries of Southern Airlines, are also connected persons of the Company under the Listing Rules. As such, the Southern Airlines Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

– 17 –

LETTER FROM RHB OSK CAPITAL

The Southern Airlines Transactions are subject to approval by the Independent Shareholders at the EGM. Pursuant to the Listing Rules, shareholders with a material interest in a transaction and their respective associates shall abstain from voting on the relevant resolution(s). As such, Southern Holding and its associate, holding an aggregate of 415,155,000 Domestic Shares, will abstain from voting on the resolution in respect of the Southern Airlines Transactions and the Proposed Annual Caps.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to provide you with an independent opinion and recommendation as to whether (1) the Southern Airlines Transactions are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole; and (2) whether the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Group and the Shareholders as a whole.

As at the Latest Practicable Date, we did not have any relationships or interests with the Company or any other parties that could reasonably be regarded as relevant to our independence. For the last two years up to the Latest Practicable Date, we acted as an independent financial adviser to the independent board committee and the independent shareholders of the Company in relation to its non-exempt continuing connected transactions (details of which were set out in the circular of the Company dated 7 November 2014). Apart from normal professional fee paid to us in connection with such appointment, no arrangements exist whereby we had received any fees or benefits from the Company or any other party related to the aforesaid transactions, and therefore we consider such prior relationship would not affect our independence.

BASIS OF OUR OPINION

In formulating our advice and recommendation, we have relied on the accuracy of the information and facts supplied, and the opinions expressed by the Group, the Directors and the Group’s management to us. We have assumed that all statements of belief and intention made by the Directors in the Circular were made after due and careful enquiries. We have also assumed that all information, representations and opinion made or referred to in the Circular were true, accurate and complete at the time they were made and will continue to be true at the date of the EGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Group, the Directors and the Group’s management, and have been advised by the Directors that no material facts have been omitted from the information provided by or referred to in the Circular.

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LETTER FROM RHB OSK CAPITAL

In rendering our opinion, we have researched, analyzed and relied on information in relation to the Group, the Southern Airlines Transactions and the Proposed Annual Caps as set out below:

• (i) the annual report of the Company for the year ended 31 December 2013 (the “ Annual Report 2013 ”);

• (ii) the annual report of the Company for the year ended 31 December 2014 (the “ Annual Report 2014 ”);

• (iii) the official website of the Company;

• (iv) the circular dated 21 December 2012 issued by the Company;

• (v) the Southern Renewal Agreement; and

• (vi) the Circular.

We have also researched, analyzed and relied on information as set out below:

• (i) China Statistical Yearbook 2014 《中國統計年鑑－( 2014年》) published by the National Bureau of Statistics of China (中華人民共和國國家統計局) (the “ 2014 China Statistical Yearbook ”);

• (ii) the report headed “Production statistics report for nationwide airports in 2012” 《( 2012年全國機場生產統計公報》) published on the official website of CAAC on 25 March 2013 (the “ 2012 Production Statistics Report for Nationwide Airports ”);

• (iii) the report headed “Production statistics report for nationwide airports in 2013” 《( 2013年全國機場生產統計公報》) published on the official website of CAAC on 24 March 2014 (the “ 2013 Production Statistics Report for Nationwide Airports ”);

• (iv) the report headed “Production statistics report for nationwide airports in 2014” 《( 2014年全國機場生產統計公報》) published on the official website of CAAC on 3 April 2015 (the “ 2014 Production Statistics Report for Nationwide Airports ”); and

• (v) the statistics published on the official website of Southern Airlines.

We have assumed such information to be accurate and reliable and have not carried out any independent verification on the accuracy of such information. Such relevant information provides us with a basis on which we have been able to formulate our independent opinion.

– 19 –

LETTER FROM RHB OSK CAPITAL

We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We also consider that we have performed all reasonable steps as required under Rule 13.80 of the Listing Rules (including the notes thereto) to formulate our opinion and recommendation. We have not, however, conducted any form of in-depth investigations into the business affairs, financial position and future prospects of the Group and the parties to the Southern Airlines Transactions, nor carried out any independent verification of the information supplied, representations made or opinions expressed by the Group, the Directors and the Group’s management.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation regarding the Southern Airlines Transactions and the Proposed Annual Caps, we have taken into account the following principal factors and reasons:

I. BACKGROUND

1. Information on the Group

The Group is principally engaged in provision of aviation information technology services in the PRC. As referred to in the Annual Report 2014, the Group has been devoted to developing leading products and services that satisfy the needs of all the industry participants (ranging from commercial airlines, airports and air travel products and services suppliers to travel agencies, corporate clients, travelers and cargo shippers) to conduct electronic transactions and manage travel-related information. The core businesses of the Company include aviation information technology service, distribution information technology service, clearing and accounting and settlement service for aviation industry, etc.

The Group’s total revenues for the three years ended 31 December 2014 is set out below:

			Year ended 31 December	Year ended 31 December
		2012	2013	2014	CAGR
		(RMB’000)	(RMB’000)	(RMB’000)
		(Audited)	(Audited)	(Audited)
Total	revenues	4,060,518	4,509,311	5,336,412	14.6%

Source: The Annual Report 2013 and The Annual Report 2014

– 20 –

LETTER FROM RHB OSK CAPITAL

The Group’s information in respect of the total number of bookings of seats of PRC commercial flights for the three years ended 31 December 2014 is set out below:

		Year ended 31 December	Year ended 31 December
	2012	2013	2014	CAGR
	(’000)	(’000)	(’000)
Number of bookings
of seats	330,670	366,045	405,156	10.7%

Source: The website of the Company

From the year ended 31 December 2012 to the year ended 31 December 2014, (i) the Group’s audited total revenues achieved a compound annual growth rate (“ CAGR ”) of approximately 14.6%; and (ii) the Group’s total number of bookings of seats of PRC commercial flights achieved a CAGR of approximately 10.7%. As advised by the Directors, the growth in the Group’s total revenues and total number of bookings of seats of PRC commercial flights was attributable to (i) the rapid economic growth in the PRC; (ii) the increase of international trade between the PRC and other countries; and (iii) the growing aviation and travel industries in the PRC.

2. Information on Southern Airlines

Southern Airlines is a company listed on the Main Board of the Stock Exchange (stock code: 1055) and is principally engaged in the provision of domestic, Hong Kong and Macau and international passenger, cargo and mail airline services.

The table below sets out the information on the number of passengers carried by Southern Airlines and the information on the revenue passenger kilometers (the “ RPK ”, being a measure of passengers, which is expressed as the product of the number of paying passengers and kilometers flown) by Southern Airlines from 2012 to 2014:

		**Year ended **	31 December
	2012	2013	2014	CAGR
	(in	(in	(in
	approximate	approximate	approximate
	million)	million)	million)
The number of paying
passengers	86	92	101	8.0%
RPK	135,535	148,417	166,629	10.9%

Source: The annual reports of Southern Airlines for the years ended 31 December 2013 and 31 December 2014, respectively

– 21 –

LETTER FROM RHB OSK CAPITAL

Based on the above, we noted that, from the year ended 31 December 2012 to the year ended 31 December 2014, (i) the CAGR of the number of passengers carried by Southern Airlines was approximately 8.0%; and (ii) the CAGR of the RPK of Southern Airlines was approximately 10.9%. We consider that the aforesaid increases in the number of passengers carried by and RPK of the Southern Airlines demonstrated the growth of the business of the airlines.

3. The PRC economy and aviation industry

Based on (i) the 2014 Production Statistics Report for Nationwide Airports; (ii) the 2013 Production Statistics Report for Nationwide Airports; and (iii) the 2012 Production Statistics Report for Nationwide Airports, the number of passenger traffic of the PRC airports (measured by number of passengers) in the PRC increased from approximately 679.8 million for the year ended 31 December 2012 to approximately 831.5 million for the year ended 31 December 2014, representing a CAGR of approximately 10.6%.

Based on 2014 China Statistical Yearbook, from 2000 to 2013, the PRC’s gross domestic product increased from approximately RMB9,921 billion to approximately RMB56,885 billion, representing a CAGR of approximately 14.4%.

Taking into account (i) the robust growth in the passenger traffic of the aviation industry in the PRC; (ii) the steady growth of the gross domestic product in the PRC; and (iii) the CAGR of the Group’s total revenues of approximately 14.6% from the year ended 31 December 2012 to the year ended 31 December 2014, the Directors expect that the Group’s total revenues will continue to achieve a stable growth in the coming years.

II. THE SOUTHERN AIRLINES TRANSACTIONS

1. Background of the Southern Airlines Transactions

The details on the Southern Airlines Transactions are set out in the Letter from the Board. The provision of the various services are described in the paragraph headed “Details of the Southern Airlines Transactions” of the Letter from the Board. The Group will receive service fees for provision of such services and thus such transactions will increase the total revenues of the Group.

Similar transactions entered into between the Group and Southern Airlines for the three years ending 31 December 2015 were duly approved by the independent shareholders of the Company on 16 January 2013. The Southern Airlines Transactions are a renewal of similar transactions to be entered into between the Group and Southern Airlines for the two years ending 31 December 2016.

The Directors are of the view that the Southern Airlines Transactions are conducted in the ordinary and usual course of business of the Group and on normal commercial terms, and the terms of the Southern Airlines Transactions and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 22 –

LETTER FROM RHB OSK CAPITAL

2. The terms of the Southern Airlines Transactions

As stated to in the Letter from the Board, the service fees for the technology services are determined in accordance with the existing pricing schedules prescribed by CAAC. We have discussed with the Directors and were informed that the services fees to be charged by the Group are governed by the aforesaid pricing schedules prescribed by CAAC.

The pricing of the “airlines passenger booking system services” is subject to the maximum guidance prices prescribed by CAAC, being the progressive per segment booking fee ranging from RMB4.5 to RMB6.5 for domestic flights and RMB6.5 to RMB7 for international flights (depending on the monthly booking volume). The Company may also determine the actual prices for airlines passenger booking system services through arm’s length negotiation with Southern Airlines, having taken into account its booking volume, and in any event the prices shall not exceed the above maximum guidance prices prescribed by CAAC.

The pricing of the “reservation system extended services and departure system services” is subject to the maximum guidance prices prescribed by CAAC, being (i) RMB7 per segment for international and regional flights and RMB4 per segment for domestic flights; and (ii) RMB500 per aircraft for load balancing services. The Company may also determine the actual prices for reservation system extended services and departure system services through arm’s length negotiation with Southern Airlines, having taken into account a number of factors such as types of the flights, transportation volume, level of services and size of the aircraft, as long as the prices do not exceed the above maximum guidance prices prescribed by CAAC.

Regarding to the “airlines passenger booking system services” and the “reservation system extended services and departure system services”, the maximum fee would not be more than RMB9.9 per segment after combination.

The pricing of physical identified device (“PID”) connection and maintenance services under the “civil aviation and commercial data network services” is subject to the maximum guidance price prescribed by CAAC of RMB200 per PID per month. The pricing of other types of services under the “civil aviation and commercial data network services” (other than PID connection and maintenance services) is not governed by the guidelines of CAAC or the framework of any other PRC airlines regulatory body but is subject to reasonable mutual negotiation between the parties and with reference to market conditions after taking into account factors including but not limited to: (i) the costs of provision of such products or services; (ii) the processing volume and complexity of such products or services; and (iii) the price quoted by at least two independent third parties providing products or services of similar nature if available.

– 23 –

LETTER FROM RHB OSK CAPITAL

With regard to the pricing of the “airlines passenger booking system services” and the “reservation system extended services and departure system services” provided by the Company to Southern Airlines, we have reviewed relevant contracts entered into between the Company and independent third parties, mainly other airline companies in the PRC, in which the Company provides similar services as mentioned above to those independent third parties. We have also compared the actual fees, which was determined based on the agreed price stated in the contracts (including adjustments due to booking volume), charged by the Group to Southern Airlines and to an independent third party for the three years ended 31 December 2014. We noted that the services fees charged by the Company for the provision of such services to Southern Airlines are no less favorable than the services fees charged by the Company to those independent third parties.

With regard to the pricing of the “civil aviation and commercial data network services” provided by the Company to Southern Airlines, we have also reviewed relevant contracts entered into between the Company and independent third parties, mainly other airline companies in the PRC, in which the Company provides similar services as mentioned above to those independent third parties. We noted that the services fees charged by the Company for the provision of such services to Southern Airlines are no less favorable than the services fees charged by the Company to those independent third parties.

After reviewing the internal control procedures and mechanism regarding to the pricing policy of “civil aviation and commercial data network services” stated in the section headed “Internal control and mechanism to regulate the Southern Airlines Transactions” in the Circular, we are of the view that such internal control procedures and mechanism are adequate to ensure the pricing policy is fair and reasonable taken into consideration that:

• (i) such procedures and mechanism have ensured that pricing decisions have considered relevant service costs in order to guarantee reasonable profit margins for service provided and the transactions are conducted on normal commercial terms;

• (ii) relevant departmental approvals, i.e. aviation business sales department, market management department and finance department, must be obtained for cost control purpose and to ensure the pricing policy should be matched with the overall business and marketing strategies of the Company;

• (iii) it is commercially reasonable to determine the pricing according to the processing volume of the customers and complexity of products or services offered; and

• (iv) such procedures and mechanism have ensured that the pricing offered to Southern Airlines are determined based on the terms of the Southern Renewal Agreement and they are no more favorable than those offered to independent third parties.

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LETTER FROM RHB OSK CAPITAL

Overall, we consider that the terms of the Southern Airlines Transactions are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Group and the Shareholders as a whole.

III. THE PROPOSED ANNUAL CAPS

1. The Proposed Annual Caps for the Southern Airlines Transactions

Table below sets out summary of the Proposed Annual Caps for the Southern Airlines Transactions provided to Southern Airlines, Xiamen Airlines and Chongqing Airlines for the two years ending 31 December 2016:

		Proposed Annual Caps for	Proposed Annual Caps for
		the year ending 31 December
		2015	2016
		(RMB)	(RMB)
Southern Airlines Transactions		550,892,250	605,981,480
Source:	Letter from the Board

2. The historical transaction amounts of the Southern Airlines Transactions

Table below sets out summary of the historical transaction amounts of the Southern Airlines Transactions provided to Southern Airlines, Xiamen Airlines and Chongqing Airlines for the three years ended 31 December 2014 and the six months ended 30 June 2015:

Historical transaction amounts

				for the
				six months
				ended
	**for the **	**year ended 31 **	December	30 June
	2012	2013	2014	2015
	(RMB)	(RMB)	(RMB)	(RMB)
Southern Airlines
Transactions	427,074,270	465,458,180	500,811,140	261,311,200

Source: Letter from the Board

– 25 –

LETTER FROM RHB OSK CAPITAL

3. The comparison of historical transaction amount of the Southern Airlines Transactions for the year ended 31 December 2014 and the Proposed Annual Cap for the year ending 31 December 2015

Based on the above, we noted that the Proposed Annual Cap for the Southern Airlines Transactions for the year ending 31 December 2015 is higher than the historical transaction amount of the same services for the year ended 31 December 2014 by 10%.

4. The comparison of annualized transaction amount of the Southern Airlines Transactions for the year ended 31 December 2015 and the Proposed Annual Cap for the year ending 31 December 2015

The transaction amount for the Southern Airlines Transactions for the six months ended 30 June 2015 were approximately RMB261,311,000. The annualized transaction amount of such transaction is approximately RMB522,622,000.

Based on the above, we noted that the Proposed Annual Cap for the Southern Airlines Transactions for the year ending 31 December 2015 of approximately RMB550,892,000 is higher than the annualized transaction amount of the Southern Airlines Transactions for the year ending 31 December 2015 by approximately 5.4%.

5. Basis of the growth in the Proposed Annual Caps

The Proposed Annual Caps for the Southern Airlines Transactions for the two years ending 31 December 2016 represents an estimated annual growth rate of 10% in the transaction volume calculated based on the Company’s full year transaction amount of 2014. The Proposed Annual Caps and the estimated 10% annual transaction volume growth rate are determined with reference to (i) the highest annual growth rate of 8.99% in the historical transaction amounts of such type of transactions between the Group and Southern Airlines and its subsidiaries for the preceding three years ended 31 December 2014; (ii) the actual growth rate of approximately 12.3% of the PRC’s gross passenger transportation volume for the first quarter of 2015 as compared with the corresponding period in the previous year; (iii) the anticipated annual growth of approximately 10% of the PRC’s gross passenger transportation volume for the year 2015 as estimated by CAAC; (iv) the increasing demand of the civil aviation transportation market as influenced by various factors such as the “One Belt, One Road” strategy; and (v) the expansion of the Southern Airlines’ businesses from time to time through acquisition of other airlines or establishing more branches.

Based on the aforesaid, we consider that the annual growth rate of the Proposed Annual Caps is fair and reasonable, taking into account of (i) the Group’s business growth during the three years ended 31 December 2014, as reflected by a CAGR of approximately 14.6% for the Group’s audited total revenues and a CAGR of approximately 10.7% for the Group’s total number of bookings of seats of PRC commercial flights; (ii) the increase in number of paying passengers carried by

– 26 –

LETTER FROM RHB OSK CAPITAL

Southern Airlines during the three years ended 31 December 2014 with a CAGR of approximately 8.0%; (iii) the increase in RPK of Southern Airlines during the three years ended 31 December 2014 with a CAGR of approximately 10.9%; and (iv) the steady growth of the gross domestic product in the PRC, with a CAGR of approximately 14.4% from 2000 to 2013 according to the 2014 China Statistical Yearbook.

We consider that the Proposed Annual Caps for the two years ending 31 December 2016 are fair and reasonable so far as the Independent Shareholders are concerned, taking into account of:

• (i) the Proposed Annual Cap for the year ending 31 December 2015 is based on the historical transaction amounts for the year ended 31 December 2014 and the six months ended 30 June 2015;

• (ii) the positive outlook of the aviation industry in the PRC;

• (iii) the historical growth in the Group’s total revenues and the total number of bookings of seats of PRC commercial flights; and

• (iv) the Proposed Annual Caps would provide an adequate buffer for the Group to accommodate any unanticipated revenue from the Southern Airlines Transactions. Such, in turn, would facilitate the Group’s business growth for the two years ending 31 December 2016. The average growth rate of 10% is consistent with (1) the growth of the Group, with a CAGR of approximately 14.6% for the Group’s audited total revenues and a CAGR of approximately 10.7% for the Group’s total number of bookings of seats of PRC commercial flights during the three years ended 31 December 2014; (2) the robust growth in the passenger traffic of the aviation industry in the PRC; (3) the steady growth of the gross domestic product in the PRC from 2000 to 2013 with a CAGR of approximately 14.4%; (4) the CAGR of 10% during 2014 to 2016 based on the comparison between the applicable Proposed Annual Cap for the year ending 31 December 2015 and the applicable historical transaction amount for the year ended 31 December 2014.

Based on the aforesaid, we consider that the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned, and are in the interests of the Group and the Shareholders as a whole.

RECOMMENDATION

Having considered the above principal factors and reasons, we consider that the Southern Airlines Transactions are (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms; and (iii) fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Group and the Shareholders as a whole, and the Proposed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Group and the Shareholders as a whole.

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LETTER FROM RHB OSK CAPITAL

Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to (i) vote in favour of the proposed resolutions to approve the Southern Airlines Transactions and the Proposed Annual Caps at the EGM. We also advise the Independent Shareholders to vote in favour of the proposed resolutions to approve the Southern Airlines Transactions and the Proposed Annual Caps at the EGM.

Yours faithfully, For and on behalf of RHB OSK Capital Hong Kong Limited Patrick Wong Director Corporate Finance

Note: Mr. Patrick Wong is a licensed person registered with the Securities and Futures Commission and is a responsible officer of RHB OSK Capital Hong Kong Limited to carry on Type 6 (advising on corporate finance) regulated activity under the SFO. Mr. Patrick Wong has around 13 years of experience in the corporate finance industry and has participated in the provision of independent financial advisory services for connected transactions involving companies listed in Hong Kong.

– 28 –

APPENDIX

GENERAL INFORMATION

RESPONSIBILITY STATEMENT

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

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

As at the Latest Practicable Date, none of the Directors, supervisors or chief executive 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 China TravelSky Holding Company (中國 民航信息集團公司), China National Aviation Holding Company (中國航空集團公司), Southern Holding and Eastern Holding had interest in the Shares 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) Mr. Wang Quanhua (a non-executive Director) and Mr. Yuan Xin’an (a proposed non-executive Director) are employees of Southern Holding;

• (b) Mr. Cao Jianxiong (a non-executive Director) is an employee of China National Aviation Holding Company;

• (c) Mr. Li Yangmin (a proposed non-executive Director) is an employee of Eastern Holding.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, proposed Director 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.

– 29 –

APPENDIX

GENERAL INFORMATION

2. SERVICE AGREEMENT

As at the Latest Practicable Date, none of the Directors or supervisors had entered or proposed to enter into a service agreement 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)).

3. MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2014, being the date to which the latest published audited financial statements of the Group were made up.

4. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Directors, the proposed Directors, or supervisors had any interest, direct or indirect, in any assets which had been since 31 December 2014, being the date to which the latest published audited accounts of the Group were made up, 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.

5. 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.

6. 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.

7. EXPERT

• (a) RHB OSK Capital is a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. Its letter of advice to the Independent Board Committee and the Independent Shareholders in respect of the Southern Airlines Transactions and the Proposed Annual Caps dated as of the date of this circular was given for the purpose of incorporation herein.

• (b) As at the Latest Practicable Date, RHB OSK Capital did not have any shareholding, directly or indirectly, in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

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APPENDIX

GENERAL INFORMATION

• (c) As at the Latest Practicable Date, RHB OSK Capital did not have any interest, direct or indirect, in any assets which had been since 31 December 2014, being the date to which the latest published audited accounts of the Group were made up, 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.

• (d) RHB OSK Capital has given and has not withdrawn its written consent to the issue of this circular with copy of its letter and the reference to its name and its advice included in this circular in the form and context in which they respectively appear.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following agreements will be available for inspection at the office of Baker & McKenzie at 14th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong during normal business hours (public holidays excepted) from the date of this circular up to and including the date of the EGM:

• (a) the agreements between the Company and Southern Airlines in relation to the Southern Airlines Transactions from 1 January 2013 to 31 December 2014;

• (b) the Southern Renewal Agreement between the Company and Southern Airlines in relation to the Southern Airlines Transactions for the two years commencing from 1 January 2015 to 31 December 2016.

9. GENERAL

The English text of this circular shall prevail over the Chinese text in case of inconsistency.

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NOTICE OF EGM

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(A joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 00696)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of TravelSky Technology Limited (the “ Company ”) will be held at Conference Room, Prime Hotel, 2 Wangfujing Ave., Dongcheng District, Beijing, the PRC, at 10 a.m. on Thursday, 10 December 2015 to consider and, if thought fit, approve the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. To consider and approve the resolution in relation to the appointment of Mr. Li Yangmin as a non-executive director of the fifth session of the Board of the Company for the same term as other members of the fifth session of the Board commencing from the conclusion of the EGM, and the authorization to Board to determine his remuneration;

2. To consider and approve the resolution in relation to the appointment of Mr. Yuan Xin’an as a non-executive director of the fifth session of the Board of the Company for the same term as other members of the fifth session of the Board commencing from the conclusion of the EGM, and the authorization to Board to determine his remuneration; and the termination of the office of Mr. Wang Quanhua as a non-executive director of the Company, with effect from the approval granted at the EGM;

3. To consider and, if thought fit, approve the following resolution as an ordinary resolution:

“ THAT :

• (a) the form and substance of the Southern Renewal Agreement (as defined in this circular) of the Company dated 21 September 2015 in relation to the provision of the technology services by the Company to Southern Airlines and its certain subsidiaries for a period of two years ending 31 December 2016; and

• (b) the Proposed Annual Caps for the Southern Airlines Transactions for the two years ending 31 December 2016,

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NOTICE OF EGM

be and are hereby approved and that the Directors be and are hereby authorized to take any step as they consider necessary, desirable or expedient in connection with the Southern Airlines Transactions and the transactions contemplated thereunder.”

By order of the Board TravelSky Technology Limited Yu Xiaochun Company Secretary

Beijing, the PRC 23 October 2015

Liaison office of the Company in Beijing: No. 157, Dongsi West Street, Dongcheng District, Beijing 100010, the PRC

Notes:

1. Details of the above resolutions are set out in the circular of the Company dated 23 October 2015.

2. For the purpose of determining Shareholders’ entitlement to attend the EGM, the H Share register of members of the Company will be closed from Tuesday, 10 November 2015 to Thursday, 10 December 2015 (both days inclusive), during which period no transfer of H Shares will be registered. In order to attend the EGM, all share transfers, accompanied by the relevant share certificates, must be lodged for registration with the Company’s Registrar, Hong Kong Registrars Limited, at Shops 1712–1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, no later than 4:30 p.m. on Monday, 9 November 2015. The holders of H Shares whose name appear on the Register of Members of the Company maintained by Hong Kong Registrars Limited on or before the above date will be eligible to attend the EGM.

3. Each shareholder who is entitled to attend and vote at the EGM may appoint one or more proxies to attend and vote on behalf of him/her. A proxy needs not to be a Shareholder of the Company.

4. In order to be valid, the instrument appointing a proxy together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power of attorney or authority, should be completed and deposited at the liaison office of the Company in Beijing (for holders of Domestic Shares) or the Registrar of the Company (for holders of H Shares), at least 24 hours before the EGM or any adjourned meeting thereof. Completion and return of the proxy form will not preclude a Shareholder from attending in person and voting at the EGM or any adjournment thereof should he/she so wish.

5. In case of joint shareholdings and the shareholder or the proxy attending the EGM is more than one person, the vote of the senior joint shareholder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint shareholder(s) and for this purpose seniority will be determined by the order in which the names appear in the register of members of the Company in respect of the joint shareholdings.

6. Shareholders who intend to attend the EGM in person or by proxy should return the reply slip to the liaison office of the Company in Beijing on or before Thursday, 19 November 2015 in person, by mail or by fax.

7. The EGM is expected to last for half a day. Shareholders (or their proxies) attending the EGM shall bear their own travelling and accommodation expenses. Shareholders or their proxies shall produce their identity documents when they attend the EGM.

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