TravelSky Technology Limited - Proxy Solicitation & Information Statement 2016

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 and reply slip 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 AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS; 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 5 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 Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 29 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, 19 January 2017, is set out on pages 37 to 38 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, 29 December 2016.

25 November 2016

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	16
LETTER FROM	RHB CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .	30
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		37

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DEFINITIONS

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

“associate(s)” has 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), the administrative authority in the civil aviation industry in the PRC
“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
“EGM”
the extraordinary general meeting of the Company to be convened at 10 a.m. on Thursday, 19 January 2017, and the notice of which is 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 Hong Kong dollars (Stock Code: 00696)
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong Special Administrative Region

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DEFINITIONS

“Independent Board Committee”
“Independent Shareholders”
“Latest Practicable Date”
“Listing Rules”
“PRC” or “China”
“Previous Waiver”
“Proposed Annual Cap(s)”
“RHB Capital”
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
22 November 2016, 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 (as amended from time to time)
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 and Taiwan
the previous waiver from strict compliance with the requirement of having written agreements under Rule 14A.34 (the then applicable Rule 14A.35(1)) of the Listing Rules granted by the Stock Exchange in November 2012 in relation to, among others, the provision of technology services by the Company to Southern Airlines and its subsidiaries for a term of three years from 1 January 2013 to 31 December 2015
the proposed maximum aggregate annual amounts of the Southern Airlines Transactions for each of the three years ending 31 December 2019

RHB 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

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DEFINITIONS

“RMB” Renminbi, the lawful currency of the PRC

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Shareholder(s)” the shareholder(s) of the Company
“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 Company Group”
Southern Airlines and all of its subsidiaries
“Southern Airlines Group”
Southern Airlines, Xiamen Airlines and Chongqing Airlines
“Southern Airlines Services Agreement”
the 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
“Southern Airlines Transactions”
the continuing connected transactions between the Company and the Southern Airlines Group in relation to the provision of the technology services by the Group to the Southern Airlines Group 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 in respect of the Southern Airlines Transactions for 2017 and onwards
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiary(ies)”
has the same meaning ascribed to it under the Listing Rules

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DEFINITIONS

“Waiver” a waiver from strict compliance with the requirement of having written agreements under Rules 14A.34 and 14A.51 of the Listing Rules with respect to the Southern Airlines Transactions. Such waiver is for a three-year term from 1 January 2017 to 31 December 2019

“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$1.16 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 (Chairman) Mr. Xiao Yinhong

Non-executive Director:

Mr. Cao Jianxiong Mr. Li Yangmin Mr. Yuan Xin’an

Independent non-executive Directors: Mr. Cao Shiqing Dr. Ngai Wai Fung Mr. Liu Xiangqun

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

25 November 2016

To the Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS; AND NOTICE OF EGM

1. INTRODUCTION

Reference is made to the Company’s announcement dated 10 November 2016 in relation to the Southern Airlines Transactions and the Waiver. The Stock Exchange has granted the Waiver from strict compliance with the requirement of having written agreements under Rules 14A.34 and 14A.51 of the Listing Rules with respect to the renewal of the Southern Airlines Transactions for a three-year term from 1 January 2017 to 31 December 2019. The Company proposes to seek a general mandate with a three-year term ending 31 December 2019 from the Independent Shareholders to carry out the Southern Airlines Transactions under the Waiver. In the event that the terms of the Southern Renewal Agreement to be subsequently entered into between the Company and the Southern Airlines Group are materially different from those being approved by the

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LETTER FROM THE BOARD

Independent Shareholders, the Company will re-comply with the reporting, announcement and/or independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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

2. SOUTHERN AIRLINES TRANSACTIONS

2.1 BACKGROUND AND REASONS FOR APPLICATION FOR THE WAIVER

References are 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 Previous Waiver. References are also made to the announcement of the Company dated 21 September 2015 and the circular of the Company dated 23 October 2015 in relation to the entering into the Southern Airlines Services Agreement between the Company and Southern Airlines with respect to the Southern Airlines Transactions for a term of two years from 1 January 2015 to 31 December 2016. Two subsidiaries of Southern Airlines, namely, Xiamen Airlines and Chongqing Airlines, had entered into written confirmation letters with the Company respectively to undertake that they would be bound by the same terms of the Southern Airlines Services Agreement with respect to the provision of the Southern Airlines Transactions by the Company to them. The aforementioned existing written agreement between the Company and the Southern Airlines Group in relation to the Southern Airlines Transactions will expire on 31 December 2016. The Company will continue such Southern Airlines Transactions after such date. However, the Company expects that the Southern Renewal Agreement between the Company and the Southern Airlines Group may not be entered into on or before 31 December 2016.

The Group plays a strategic and critical role in the proper functioning of civil aviation in the PRC and the services provided by the Group are akin to public services. It is in no position to stop or even partially cease providing its services to the commercial airlines simply for the absence of written agreements with them, as any such interruption would bring insufferable inconvenience and financial loss to all market participants including related industries such as tourism and hospitality sectors. It also constitutes a breach of its public service covenant with CAAC to provide stable, reliable and zero-interruption booking services for the PRC airline industry.

The Group has been actively procuring the renewal of Southern Airlines Services Agreement with the Southern Airlines Group since July 2016. However, each service provided by the Company under the Southern Airlines Transactions includes numerous and complicated specific technical requirements and services standards, which require: (i) Southern Airlines to collect, sort out and unify their needs for such specific technical requirements and services standards of the Southern Airlines Transactions internally; and

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LETTER FROM THE BOARD

(ii) the Company and Southern Airlines to mutually negotiate the above specific technical requirements and services standards to see if they are acceptable or not. At the current stage, Southern Airlines is in the process of collecting and sorting out their needs for the specific technical requirements and services standards in relation to the Southern Airlines Transactions internally. The Company and Southern Airlines have already negotiated part of the specific technical requirements which had been collected by Southern Airlines internally. The remaining specific technical requirements and services standards are still subject to further collection by Southern Airlines internally and negotiation between the parties thereafter.

In addition, the internal review and approval process of Southern Airlines is relatively long and complicated which may also create genuine practical difficulties in the Company’s attempt to enter into the Southern Renewal Agreement by the end of 2016 in compliance with Rules 14A.34 and 14A.51 of the Listing Rules.

Taking into account the negotiation, internal review and approval procedures of Southern Airlines as mentioned above, the Company reasonably expects that additional time is required to enter into the Southern Renewal Agreement.

In view of the foregoing, the Company has applied to the Stock Exchange for and the Stock Exchange has granted the Waiver from strict compliance with the requirement of having written agreements under Rules 14A.34 and 14A.51 of the Listing Rules with respect to the renewal of the Southern Airlines Transactions. The Waiver is for a three-year term from 1 January 2017 to 31 December 2019. The Waiver has been granted on the condition that the Company publishes an announcement regarding the Waiver and in the event that the terms of the Southern Renewal Agreement to be subsequently entered into with the Southern Airlines Group are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement and/or independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

2.2 CONTINUING CONNECTED TRANSACTIONS UNDER THE WAIVER

A. Details of the Southern Airlines Transactions under the Waiver

Parties: Service provider: The Company

Service recipient: The Southern Airlines Group Terms: 1 January 2017 to 31 December 2019

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LETTER FROM THE BOARD

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 information, flight control, flight tickets sales, automatic tickets sales and announcement of freight price;
(ii) computer distribution system services which include, among others, the provision of flight information display, real-time flight reservation, automatic tickets sale, 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:

(i) 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 such 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

(ii) 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;
(iii) 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. The actual aggregate service fees charged will be subject to several-tier pricing which is linked to the total processing volume of Southern Airlines per month (i.e. the higher the processing volume per month, the lower the amount charged by the Company);
(iv) 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 determined with reference to the guidance price prescribed by CAAC of RMB200 per PID per month; and

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LETTER FROM THE BOARD

(v) 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.

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.

B. Internal Control and Mechanism to Regulate the Southern Airlines Transactions

To ensure that the provision of the Southern Airlines Transactions by the Group to the Southern Airlines Group are carried out in accordance with relevant regulatory guidelines and terms as disclosed herein, or, those to be agreed in the Southern Renewal Agreement (if entered into), the Company has in place the following internal control procedures and mechanism:

(1) for 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 and pricing policies as agreed under the Southern Renewal Agreement, or, if the Southern Renewal Agreement has not yet been entered into, the terms as disclosed herein. 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

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LETTER FROM THE BOARD

(2) for 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 with relevant regulatory guidelines, where applicable, and the market practice, and will not deviate from the terms of the Southern Renewal Agreement, or, if the Southern Renewal Agreement has not yet been entered into, the terms 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 provision of the Southern Airlines Transactions by the Group to the Southern Airlines Group are adherent and strictly followed in accordance with relevant regulatory guidelines and the Southern Renewal Agreement, or, if the Southern Renewal Agreement has not yet been entered into, the terms as disclosed herein.

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LETTER FROM THE BOARD

2.3 HISTORICAL TRANSACTION RECORDS

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 2015 and the eight months ended 31 August 2016:

			Eight months
			ended
Year ended 31 December			31 August
2013	2014	2015	2016
(RMB)	(RMB)	(RMB)	(RMB)
			(unaudited)
465,458,180	500,811,140	518,047,460	374,967,000
(approximately	(approximately	(approximately	(approximately
HK$539,931,489)	HK$580,940,922)	HK$600,935,054)	HK$434,961,720)

Note: The historical transaction figures for the years ended 2013, 2014 and 2015 are audited figures of the Group and the figure for the eight months ended 31 August 2016 is internal management account figure.

2.4 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 three years ending 31 December 2019:

Year	ending 31 December	ending 31 December
2017	2018	2019
(RMB)	(RMB)	(RMB)
660,519,000	719,966,000	784,763,000
(approximately	(approximately	(approximately
HK$766,202,040)	HK$835,160,560)	HK$910,325,080)

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

The Proposed Annual Caps represent an estimated annual growth rate of 9% in the transaction volume calculated based on the existing annual cap for the Southern Airlines Transactions for the year of 2016 (i.e. RMB605,981,480). The Proposed Annual Caps and the estimated 9% annual transaction volume growth rate are determined with reference to (i) the highest annual growth rate of approximately 8% in the historical transaction amounts of such type of transactions between the Group and the Southern Airlines Group for the preceding three years ended 31 December 2015; (ii) the actual growth rate of approximately 10.8% of the PRC’s gross passenger transportation volume for the first half of 2016 as compared with the corresponding period in the previous year; (iii) the average yearly

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LETTER FROM THE BOARD

increment of at least 10% of the PRC’s gross passenger transportation volume from 2016 to 2020 as estimated by the Company based on the publicly available information of 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 Group’ businesses from time to time through acquisition of other airlines or establishing more branches.

2.5 REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS

The provision of the various services by the Group to the Southern Airlines Group under the Southern Airlines Transactions 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.

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 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.

2.6 IMPLICATIONS UNDER THE LISTING RULES

Southern Holding is a substantial shareholder of the Company. Southern Airlines, being a subsidiary of Southern Holding, is therefore a connected person of the Company pursuant to Rule 14A.07(4) of the Listing Rules. 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 14.07 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. Yuan Xin’an has abstained from voting on relevant Board resolution(s) in respect of the Southern Airlines Transactions as he is a director of Southern Airlines and 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(s).

The Company proposes to seek a general mandate for a term of three years ending 31 December 2019 from the Independent Shareholders in order to continue the Southern Airlines Transactions under the Waiver. In the event that the terms of the Southern Renewal Agreement to be subsequently entered into with the Southern Airlines Group are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement and/or independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

2.7 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.

3. EGM

The EGM will be held at Conference Room, Prime Hotel, 2 Wangfujing Ave., Dongcheng District, Beijing, the PRC at 10 a.m. on Thursday, 19 January 2017 to consider and, if thought fit, approve, among other matters, (i) the Southern Airlines Transactions; and (ii) the Proposed Annual Caps. Notice of the EGM is set out on pages 37 to 38 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, 29 December 2016.

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LETTER FROM THE BOARD

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 resolution 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.

4. 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 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 29 of this circular.

The Independent Board Committee, having taken into account the advice of RHB 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 resolution as set out in the notices of the EGM is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of such resolution at the EGM.

5. 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 Cui Zhixiong Chairman

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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)

25 November 2016

To the Independent Shareholders

Dear Sir/Madam,

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS

We refer to the circular issued by the Company to its shareholders dated 25 November 2016 (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 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 Capital set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, RHB 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 Cao Shiqing Ngai Wai Fung Liu Xiangqun Independent Non-executive Directors

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LETTER FROM RHB CAPITAL

The following is the text of the letter of advice from RHB Capital Hong Kong Limited to the Independent Board Committee and the Independent Shareholders in respect of the Southern Airlines Transactions, which has been prepared for the purpose of inclusion in this circular.

==> picture [94 x 35] intentionally omitted <==

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

25 November 2016

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 25 November 2016 (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 Chapter 14A of the Listing Rules. As such, the Southern Airlines Transactions constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.

The Southern Airlines Transactions are subject to approval by the Independent Shareholders at the EGM. Pursuant to the Listing Rules, shareholders with a material

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LETTER FROM RHB CAPITAL

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 addition, Mr. Yuan Xin’an has abstained from voting on relevant Board resolution(s) in respect of the Southern Airlines Transactions as he is a director of Southern Airlines and 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(s).

The Independent Board Committee, comprising Mr. Cao Shiqing, Dr. Ngai Wai Fung, and Mr. Liu Xianqun, has been established to advise the Independent Shareholders as to whether (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.

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 circulars of the Company dated 23 October 2015 and 7 November 2014). Apart from normal professional fee paid to us in connection with such appointments, 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,

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LETTER FROM RHB CAPITAL

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.

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 2014 (the “ Annual Report 2014 ”);
(ii) the annual report of the Company for the year ended 31 December 2015 (the “ Annual Report 2015 ”);
(iii) the annual reports of Southern Airlines for the two years ended 31 December 2015;
(iv) the official website of the Company;
(v) the circular dated 23 October 2015 issued by the Company;
(vi) the Southern Airlines Services Agreement; and
(vii) the Circular.

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

(i) China Statistical Yearbook 2015 (中國統計年鑒2015) published by the National Bureau of Statistics of China (中華人民共和國國家統計局) (the “ 2015 China Statistical Yearbook ”);
(ii) 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 ”);
(iii) 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 ”);
(iv) the report headed “Production statistics report for nationwide airports in 2015” (2015年全國機場生產統計公報) published on the official website of CAAC on 31 March 2016 (the “ 2015 Production Statistics Report for Nationwide Airports ”); and
(v) the statistics published on the official website of Southern Airlines.

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LETTER FROM RHB CAPITAL

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.

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 independent 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’s total revenues for the three years ended 31 December 2015 is set out below:

		Year ended 31	Year ended 31	December
		2013	2014	2015	CAGR
		(RMB’000)	(RMB’000)	(RMB’000)
		(Audited)	(Audited)	(Audited)
Total	revenues	4,509,311	5,336,412	5,471,831	10.2%

Source: The Annual Report 2014 and the Annual Report 2015

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LETTER FROM RHB CAPITAL

The Group’s total number of bookings of seats of PRC commercial flights for the three years ended 31 December 2015 is set out below:

	Year	ended 31	December
	2013	2014	2015	CAGR
	(’000)	(’000)	(’000)
Number of bookings
of seats	366,045	405,156	449,170	10.8%

Source: The website of the Company

From the year ended 31 December 2013 to the year ended 31 December 2015, (i) the Group’s audited total revenues achieved a compound annual growth rate (“ CAGR ”) of approximately 10.2%; and (ii) the Group’s total number of bookings of seats of PRC commercial flights achieved a CAGR of approximately 10.8%. As advised by the Company, 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; (iii) the growing aviation and travel industries in the PRC; and (iv) steady growth in the number of air travelers.

2. Information on Southern Airlines

According to the annual report 2015 of Southern Airlines, Southern Airlines Company Group are principally engaged in airline operations. Southern Airlines Company Group also operate certain airline related businesses, including provision of aircraft maintenance and air catering services. Southern Airlines Company Group is one of the largest airlines in China. In 2015, Southern Airlines Company Group ranked the first among all Chinese airlines in terms of number of passengers carried, number of scheduled flights per week, number of hours flown, number of routes and size of aircraft fleet. Southern Airlines is also a company listed on the Main Board of the Stock Exchange.

The table below sets out the total number of passengers carried and the revenue passenger kilometers (the “ RPK ”, being a measure of passengers traffic volume, which is expressed as the product of the number of passengers carried multiplied by the kilometers flown) by Southern Airlines Company Group from the year ended 31 December 2013 to the year ended 31 December 2015.

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LETTER FROM RHB CAPITAL

	Year	ended 31	December
	2013	2014	2015	CAGR
	(million)	(million)	(million)
The total number of
passengers	92	101	109	9.2%
RPK	148,417	166,629	189,588	13.0%

Source: The annual reports of Southern Airlines for the year ended 31 December 2014 and for the year ended 31 December 2015 respectively.

Based on the above, we noted that, from the year ended 31 December 2013 to the year ended 31 December 2015, (i) the CAGR of the number of passengers carried by Southern Airlines Company Group was approximately 9.2%; and (ii) the CAGR of the RPK of Southern Airlines Company Group was approximately 13.0%. We consider that the aforesaid increases in the number of passengers carried by and RPK of the Southern Airlines Company Group demonstrated the steady growth of the business of airlines.

3. The PRC economy and aviation industry

Based on (i) the 2013 Production Statistics Report for Nationwide Airports; (ii) the 2014 Production Statistics Report for Nationwide Airports; and (iii) the 2015 Production Statistics Report for Nationwide Airports, the passenger traffic of the PRC airports (measured by number of passengers) increased from approximately 754.3 million for the year ended 31 December 2013 to approximately 914.8 million for the year ended 31 December 2015, representing a CAGR of approximately 10.1%.

Based on 2015 China Statistical Yearbook, from 2000 to 2014, the PRC’s gross domestic product increased from approximately RMB9,978 billion to approximately RMB63,614 billion, representing a CAGR of approximately 14.1%.

Taking into account (i) the steady growth in the passenger traffic of the aviation industry in the PRC; (ii) the growth of the gross domestic product in the PRC; and (iii) the CAGR of the Group’s total revenues of approximately 10.2% from the year ended 31 December 2013 to the year ended 31 December 2015, we are of the view that the PRC aviation industry would maintain 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

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LETTER FROM RHB CAPITAL

the paragraph headed “Details of the Southern Airlines Transactions under the Waiver” 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 revenue of the Group.

As stated in the Letter from the Board, the Group plays a strategic and critical role in the proper functioning of civil aviation in the PRC and the services provided by the Group are akin to public services. It is in no position to stop or even partially cease providing its services to the commercial airlines, as any such interruption would bring insufferable inconvenience and financial loss to all market participants including related industries such as tourism and hospitality sectors.

As such, the Southern Airlines Transactions have been continuously renewed and the most recent similar transaction which was the Southern Airlines Services Agreement was duly approved by the independent shareholders of the Company on 22 December 2015. The Southern Airlines Transactions are a renewal of similar transactions covering the term for the three years ending 31 December 2019.

We concur with the Directors’ view that the Southern Airlines Transactions are conducted in the ordinary and usual course of business of the Group.

2. The terms of the Southern Airlines Transactions

The scope of technology services under the Southern Airlines Transactions consists of the following:

(i) flight control system services which include, among others, the provision of consolidated information, flight information, flight control, flight tickets sales, automatic tickets sales and announcement of freight price;
(ii) computer distribution system services which include, among others, the provision of flight information display, real-time flight reservation, automatic tickets sale, 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.

As stated in the Letter from the Board, the service fees for the technology services are determined with reference to and governed by the

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LETTER FROM RHB CAPITAL

existing pricing guidance prescribed by CAAC. We have reviewed and discussed with the Company on the aforesaid pricing guidance and the details are as follows.

Airlines passenger booking system services

The pricing of the “airlines passenger booking system services”, which comprises of flight control system services and computer distribution system services as stated in (i) and (ii) above, 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 RMB7.0 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 abovementioned maximum guidance prices prescribed by CAAC.

Reservation system extended services and departure system services

The pricing of the “reservation system extended services and departure system services” is subject to the maximum guidance prices prescribed by CAAC, being (a) RMB7.0 per segment for international and regional flights and RMB4.0 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 flights, transportation volume, quality level of services and size of the aircraft, as long as the prices do not exceed the abovementioned 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 when charged on an aggregate basis.

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 until 31 December 2016. We have compared the actual fees, which were determined based on the agreed prices stated in the contracts (including adjustments on discounts based on booking volume), charged by the

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LETTER FROM RHB CAPITAL

Group to Southern Airlines and to other 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 and all fees paid by Southern Airlines and independent third parties bounded within the pricing guidance prescribed by CAAC.

Civil aviation and commercial data network services

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.

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 airlines 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.

According to our independent analyses on the historical price charged to Southern Airlines Group in respect of the provision of technology services, we noted that, being one of the largest airlines in the PRC, Southern Airlines is always entitled to maximum discount level in aggregate service charges in accordance with the progressive pricing schedule based on transaction volume.

3. Internal control and mechanism to regulate the Southern Airlines Transactions

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 Letter of the Board in this

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LETTER FROM RHB CAPITAL

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 costs of provision of such services and products in order to guarantee reasonable profit margins for services provided and the transactions are conducted on normal commercial terms;
(ii) relevant departmental approvals from, among others, 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 Group are determined based on relevant regulatory guidelines, where applicable and the market practice so that they are no less favorable than those offered to independent third parties.

As such, we concur with the Directors’ view that the Company possesses adequate mechanism, internal control procedures and external regulatory guidelines in place to ensure the terms of the provision of the Southern Airlines Transactions by the Group to Southern Airlines Group are adherent and strictly followed in accordance with the relevant regulatory guidelines and market practice.

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.

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LETTER FROM RHB CAPITAL

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 to be provided to Southern Airlines, Xiamen Airlines and Chongqing Airlines on an aggregate basis for the three years ending 31 December 2019:

For the	year ending 31 December	year ending 31 December
2017	2018	2019
(RMB)	(RMB)	(RMB)
660,519,000	719,966,000	784,763,000
(approximately	(approximately	(approximately
HK$766,202,040)	HK$835,160,560)	HK$910,325,080)

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 on an aggregate basis for the three years ended 31 December 2015 and the eight months ended 31 August 2016:

			For the eight
			months ended
For the	year ended 31 December		31 August
2013	2014	2015	2016
(RMB)	(RMB)	(RMB)	(RMB’000)
465,458,180	500,811,140	518,047,460	374,967,000
(approximately	(approximately	(approximately	(approximately
HK$539,931,489)	HK$580,940,922)	HK$600,935,054)	HK$434,961,720)

Source: Letter from the Board

3. The comparison of annualized transaction amount of the Southern Airlines Transactions for the year ended 31 December 2016 and the Proposed Annual Cap for the year ending 31 December 2016

The transaction amount for the Southern Airlines Transactions for the eight months ended 31 August 2016 were approximately RMB374,967,000. Based on the above figure, the hypothetical annualized transaction amount of such transaction is approximately RMB562,451,000.

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LETTER FROM RHB CAPITAL

Based on the above, we noted that the Proposed Annual Cap for the Southern Airlines Transactions for the year ending 31 December 2016 of approximately RMB605,981,480 is higher than the annualized transaction amount of the Southern Airlines Transactions for the year ending 31 December 2016 by approximately 7.7%.

4. Basis of the growth in the Proposed Annual Caps

The Proposed Annual Caps represents an estimated annual growth rate of 9% in the transaction amount calculated based on the existing annual cap for the Southern Airlines Transactions for the year of 2016 (i.e. RMB605,981,480).

As stated in the Letter of the Board, the Proposed Annual Caps and the estimated 9% annual transaction amount growth rate are determined with reference to (i) the highest annual growth rate of approximately 8% in the historical transaction amounts of such type of transactions between the Group and Southern Airlines Group for the preceding three years ended 31 December 2015; (ii) the actual growth rate of approximately 10.8% of the PRC’s gross passenger transportation volume for the first half of 2016 as compared with the corresponding period in the previous year; (iii) the anticipated average yearly increment of at least 10% of the PRC’s gross passenger transportation volume from 2016 to 2020 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 Group’s 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 9% of the Proposed Annual Caps is fair and reasonable, taking into account of our abovementioned analysis, which indicates (i) the Group’s business growth from the year ended 31 December 2013 to the year ended 31 December 2015, as reflected by a CAGR of approximately 10.2% for the Group’s audited total revenues and a CAGR of approximately 10.8% for the Group’s total number of bookings of seats of PRC commercial flights; (ii) the increase in total number of passengers carried by Southern Airlines Company Group from the year ended 31 December 2013 to the year ended 31 December 2015 with a CAGR of approximately 9.2%; and (iii) the increase in RPK of Southern Airlines Company Group from the year ended 31 December 2013 to the year ended 31 December 2015 with a CAGR of approximately 13.0%.

We consider that the Proposed Annual Caps for the three years ending 31 December 2019 are fair and reasonable so far as the Independent Shareholders are concerned, taking into account of:

(i) the positive outlook of the aviation industry and economy in the PRC;
(ii) Given the annual cap for the Southern Airlines Transactions for the year ending 31 December 2016, on which the Proposed Annual Cap are based, is higher than the annualized transaction amount of the Southern Airlines Transactions for the year ending 31 December 2016 by approximately 7.7%, it would provide an

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LETTER FROM RHB CAPITAL

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 three years ending 31 December 2019; and

(iii) The annual growth rate of the Proposed Annual Caps of 9% is consistent with (a) the recent growth of the Group, in total revenue and total number of bookings of seats of PRC commercial flights; (b) the recent growth in total numbers of passengers carried by Southern Airlines Company Group; and (c) the recent growth in the passenger traffic of the aviation industry in the PRC, (measured by number of passengers) of the PRC airports, from the year ended 31 December 2013 to the year ended 31 December 2015.

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.

Accordingly, we advise the Independent Board Committee to recommend 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. 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 CAPITAL HONG KONG LIMITED Derek Cheng Managing Director and

Head of Investment Banking

Note: Mr. Derek Cheng is a licensed person registered with the Securities and Futures Commission and is a responsible officer of RHB Capital Hong Kong Limited to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. Mr. Derek Cheng has more than 10 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.

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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 China Eastern Air Holding Company (中國東方航空集團公司) 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. Cui Zhixiong (an executive Director) is a senior management of China TravelSky Holding Company;
(b) Mr. Cao Jianxiong (a non-executive Director) is a senior management of China National Aviation Holding Company;
(c) Mr. Li Yangmin (a non-executive Director) is a senior management of China Eastern Air Holding Company; and
(d) Mr. Yuan Xin’an (a non-executive Director) is a senior management of Southern Holding.

Save as disclosed above, as at the Latest Practicable Date, none of the 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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APPENDIX

GENERAL INFORMATION

2. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors, chief executive and supervisors of the Company, the interests and short positions of the following persons (other than the Directors, chief executive or supervisors of the Company) in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO are set out below:

			Approximate	Approximate
			percentage	percentage
			of respective	of total
	Number and class of		class of	share
Name of shareholder	shares	Capacity	share capital	capital
	(Note 1)		(Note 2)	(Note 2)
Templeton Asset	55,763,491 H shares	Investment manager	5.98%	1.91%
Management Ltd.	of RMB1 each (L)
JPMorgan Chase & Co.	75,417,055 H shares	Custodian-corporation/	8.08%	2.58%
	of RMB1 each (P)	approved lending agent
	91,861,711 H shares		9.85%	3.14%
	of RMB1 each (L):
	75,417,055 H shares (L)	Custodian-corporation/
		approved lending agent
	2,361,656 H shares (L)	Beneficial owner
	14,083,000 H shares (L)	Investment manager
	(Note 3)
	658,180 H shares	Beneficial owner	0.07%	0.02%
	of RMB1 each (S)
Platinum International Fund	43,293,433 H shares	Beneficial owner	6.96%	1.48%
	of RMB1 each (L)
	(Note 4)
Norges Bank	61,383,460 H shares of	Beneficial owner	6.58%	2.10%
	RMB1 each (L)

– 31 –

APPENDIX

GENERAL INFORMATION

			Approximate	Approximate
			percentage	percentage
			of respective	of total
	Number and class of		class of	share
Name of shareholder	shares	Capacity	share capital	capital
	(Note 1)		(Note 2)	(Note 2)
Citigroup Inc.	61,945,724 H shares of	Custodian-corporation/	6.64%	2.12%
	RMB1 each (P)	approved lending agent
	61,983,298 H shares		6.65%	2.12%
	of RMB1 each (L):
	61,945,724 H shares (L)	Custodian-corporation/
		approved lending agent
	37,574 H shares (L)	Interest of corporation
	(Note 5)	controlled by the
		substantial shareholder
BlackRock, Inc.	53,994,812 H shares	Interest of corporation	5.79%	1.85%
	of RMB1 each (L)	controlled by the
	(Note 6)	substantial shareholder
	864,000 H shares	Interest of corporation	0.09%	0.03%
	of RMB1 each (S)	controlled by the
	(Note 6)	substantial shareholder
China TravelSky Holding	857,226,589 domestic	Beneficial owner	43.00%	29.29%
Company	shares of RMB1
	each (L)
China Southern Air Holding	349,381,500 domestic	Beneficial owner	17.52%	11.94%
Company	shares of RMB1
	each (L)
	65,773,500 domestic	Interest of controlled	3.30%	2.25%
	shares of RMB1	corporation
	each (L)(Note 7)
China Eastern Air Holding	328,243,500 domestic	Beneficial owner	16.46%	11.22%
Company	shares of RMB1
	each (L)
	25,155,000 domestic	Interest of controlled	1.26%	0.86%
	shares of RMB1	corporation
	each (L)(Note 8)

– 32 –

APPENDIX

GENERAL INFORMATION

			Approximate	Approximate
			percentage	percentage
			of respective	of total
	Number and class of		class of	share
Name of shareholder	shares	Capacity	share capital	capital
	(Note 1)		(Note 2)	(Note 2)
	3,900,000 domestic	Interest of controlled	0.20%	0.13%
	shares of RMB1	corporation
	each (L)(Note 9)
China National Aviation	268,300,500 domestic	Beneficial owner	13.46%	9.17%
Holding Company	shares of RMB1
	each (L)
	18,720,000 domestic	Interest of controlled	0.94%	0.64%
	shares of RMB1	corporation
	each (L)(Note 10)

Notes:

1) (L) – Long position; (S) – Short position; (P) – Lending pool.
2) The percentage is calculated by the amount of shares held by relevant person/the amount of relevant types of shares issued as at the Latest Practicable Date. Percentage of total share capital is based on 2,926,209,589 shares of the total issued share capital of the Company as at the Latest Practicable Date; percentage of respective class of share capital is based on 1,993,647,589 domestic shares and 932,562,000 H shares of the Company as at the Latest Practicable Date.
3) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by JPMorgan Chase & Co. on 14 October 2016, JPMorgan Chase & Co. was deemed to be interested in 91,861,711 H shares (L) and 75,417,055 H shares (L)(P) and 658,180 H shares (S). These shares were held by J.P. Morgan Securities LLC, JPMorgan Asset Management (Taiwan) Limited, J.P. Morgan Investment Management Inc., J.P. Morgan Whitefriars Inc., J.P. Morgan Securities plc, JPMorgan Chase Bank, N.A., JPMorgan Asset Management (UK) Limited, Bank One International Holdings Corporation, J.P. Morgan International Inc., J.P. Morgan Chase International Holdings, J.P. Morgan Capital Financing Limited, J.P. Morgan Broker-Dealer Holdings Inc, J.P. Morgan Capital Holdings Limited, JPMorgan Asset Management Holdings Inc, JPMorgan Asset Management (Asia) Inc., J.P. Morgan Chase (UK) Holdings Limited, JPMorgan Asset Management Holdings (UK) Limited, J.P. Morgan Overseas Capital Corporation, JPMorgan Asset Management International Limited, JPMorgan Chase Bank, N.A., J.P. Morgan International Finance Limited, which were directly or indirectly controlled by JPMorgan Chase & Co. JPMorgan Chase & Co. was deemed to be interested in the shares held by such companies by virtue of the SFO.
4) As the latest filing date of Platinum International Fund was 12 November 2010, which was prior to the date of the distribution of bonus shares of the Company, the number of H shares held and the percentage of shareholding filed by it did not reflect the impact of the distribution of bonus shares of the Company in 2011, and its number of shares and percentage of shareholding as at the Latest Practicable Date is uncertain. The number of shares and the approximate percentage of respective class of share capital of Platinum International Fund stated in the above table were based on the disclosure of information on 12 November 2010.
5) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by Citigroup Inc. on 11 October 2016, Citigroup Inc. was deemed to be interested in 61,983,298 H shares (L) and 61,945,724 H shares (P). These shares were held by Citigroup Global Markets Hong Kong Limited, Citigroup Global Markets Limited, Citigroup Global Markets Inc., Morgan Stanley

– 33 –

APPENDIX

GENERAL INFORMATION

Smith Barney Holdings LLC, Citibank N.A., Citigroup Alternative Investments LLC, Automated Trading Desk Financial Services, LLC, Citigroup Trust - Delaware, National Association, Citicorp Trust, National Association, Citicorp Trust South Dakota, Citigroup Global Markets Asia Limited, Cititrust (Bahamas) Limited, Cititrust (Switzerland) Limited, Citigroup Global Markets Deutschland AG, Citigroup Derivatives Markets Inc., Citigroup First Investment Management Limited, Cititrust Jersey Limited, Citibank (Switzerland) AG, Citigroup Global Markets Funding Luxembourg SCA, Impulsora de Fondos Banamex S.A. de C.V., Acciones y Valores, S.A. de C.V., Citigroup Financial Products Inc., Citigroup Global Markets Holdings Inc., Citigroup Global Markets Europe Limited, Citigroup Global Markets (International) Finance AG, Citigroup Global Markets International LLC, Citigroup Global Markets Inc., Citicorp Holdings Inc., Citigroup Investments Inc., Automated Trading Desk, LLC, Automated Trading Desk Holdings, Inc., Citigroup Acquisition LLC, Citibank N.A., Citigroup Global Markets Hong Kong Holdings Ltd, Citigroup Global Markets Overseas Finance Limited, Citigroup Global Markets Switzerland Holding GmbH, Citigroup Participation Luxembourg Limited, Citigroup International Luxembourg Limited, Citigroup Overseas Investments Bahamas Inc., Citibank Overseas Investment Corporation, Citigroup Global Markets Hong Kong Holdings Limited, Grupo Financiero Banamex, S.A. de C.V., Citicorp (Mexico) Holdings LLC, NAMGK Mexico Holding, S. de R.L. de C.V., Citigroup Capital Partners Mexico, S. de R.L. de C.V., Citicorp Global Holdings, Inc., Citicorp Banking Corporation, Citigroup Global Markets Finance Corporation & Co. beschrankt haftende KG, Citigroup Global Markets Finance LLC, Acciones y Valores, S.A. de C.V., Citibank N.A., Citibank Canada, Citigroup Trust - Delaware, National Association, which were directly or indirectly controlled by Citigroup Inc. Citigroup Inc. was deemed to be interested in the shares held by such companies by virtue of the SFO.

6) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by BlackRock, Inc. on 16 November 2016, BlackRock, Inc. was deemed to be interested in 53,994,812 H shares (L) and 864,000 H shares (S). These shares were held by Trident Merger, LLC, BlackRock Investment Management, LLC, BlackRock Holdco 2, Inc., BlackRock Financial Management, Inc., BlackRock Holdco 4, LLC, BlackRock Holdco 6, LLC, BlackRock Delaware Holdings Inc., BlackRock Institutional Trust Company, National Association, BlackRock Fund Advisors, BlackRock Capital Holdings, Inc., BlackRock Advisors, LLC, BlackRock International Holdings, Inc., BR Jersey International Holdings L.P., BlackRock Cayco Limited, BlackRock Trident Holding Company Limited, BlackRock Japan Holdings GK, BlackRock Japan Co., Ltd., BlackRock Canada Holdings LP, BlackRock Canada Holdings ULC, BlackRock Asset Management Canada Limited, BlackRock Australia Holdco Pty. Ltd., BlackRock Investment Management (Australia) Limited, BlackRock (Singapore) Holdco Pte. Ltd., BlackRock Asia-Pac Holdco, LLC, BlackRock HK Holdco Limited, BlackRock Asset Management North Asia Limited, BlackRock Group Limited, BlackRock (Netherlands) B.V., BlackRock Advisors (UK) Limited, BlackRock International Limited, BlackRock Luxembourg Holdco S.à r.l., BlackRock Investment Management Ireland Holdings Limited, BlackRock Asset Management Ireland Limited, BLACKROCK (Luxembourg) S.A., BlackRock Investment Management (UK) Limited, BlackRock Investment Management (UK) Limited, BlackRock Fund Managers Limited, which were directly or indirectly controlled by BlackRock, Inc. BlackRock, Inc. was deemed to be interested in the shares held by such companies by virtue of the SFO.
7) These shares were held by Xiamen Airlines Company Limited, a subsidiary of China Southern Air Holding Company. China Southern Air Holding Company was deemed to be interested in the shares held by Xiamen Airlines Company Limited by virtue of the SFO.
8) These shares were held by China Eastern Airlines Corporation Limited, a subsidiary of China Eastern Air Holding Company. China Eastern Air Holding Company was deemed to be interested in the shares held by China Eastern Airlines Corporation Limited by virtue of the SFO.
9) These shares were held by China Eastern Airlines Wuhan Company Limited, a subsidiary of China Eastern Air Holding Company. China Eastern Air Holding Company was deemed to be interested in the shares held by China Eastern Airlines Wuhan Company Limited by virtue of the SFO.
10) These shares were held by Shenzhen Airlines Company Limited, a subsidiary of China National Aviation Holding Company. China National Aviation Holding Company was deemed to be interested in the shares held by Shenzhen Airlines Company Limited by virtue of the SFO.

– 34 –

APPENDIX

GENERAL INFORMATION

11) For the latest disclosure of interests filings of the substantial shareholders of the Company’s H shares, please refer to the “Disclosure of Interests” section on the website of Hong Kong Exchanges and Clearing Limited (“HKEx”) (www.hkexnews.hk).

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors, chief executive and supervisors of the Company, no other person (other than the Directors, chief executive or supervisors of the Company) had an interest or short position in the Shares or underlying Shares under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. 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)).

4. MATERIAL CHANGES

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2015, being the date to which the latest published audited financial statements of the Group were made up.

5. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Directors, or supervisors had any interest, direct or indirect, in any assets which had been since 31 December 2015, 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.

6. 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.

7. 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.

– 35 –

APPENDIX

GENERAL INFORMATION

8. EXPERT

(a) RHB 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 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.
(c) As at the Latest Practicable Date, RHB Capital did not have any interest, direct or indirect, in any assets which had been since 31 December 2015, 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 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.

9. 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 Southern Airlines Services Agreement between the Company and Southern Airlines in relation to the Southern Airlines Transactions from 1 January 2015 to 31 December 2016; and
(b) the written confirmation letters between the Company and Xiamen Airlines and Chongqing Airlines respectively in relation to the Southern Airlines Transactions from 1 January 2015 to 31 December 2016.

10. GENERAL

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

– 36 –

NOTICE OF EGM

==> picture [418 x 50] intentionally omitted <==

(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, 19 January 2017 to consider and, if thought fit, approve the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

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

“ THAT :

(a) the grant of a general mandate for a period of three years ending 31 December 2019 to the Directors to carry out the Southern Airlines Transactions and all the transactions contemplated thereunder; and
(b) the Proposed Annual Caps for the Southern Airlines Transactions for the three years ending 31 December 2019,

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 Cui Zhixiong Chairman

Beijing, the PRC 25 November 2016

– 37 –

NOTICE OF EGM

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

Notes:

Details of the above resolution are set out in the circular of the Company dated 25 November 2016.
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, 20 December 2016 to Thursday, 19 January 2017 (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, 19 December 2016. The holders of H Shares whose names 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.
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.
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.
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.
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 at No. 157, Dongsi West Street, Dongcheng District, Beijing 100010, the PRC, on or before Thursday, 29 December 2016 in person, by mail or by fax.
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.

– 38 –

AI assistant

TravelSky Technology Limited — Proxy Solicitation & Information Statement 2016

49402_rns_2016-11-24_6ec5090c-cdd6-4418-a3d0-1c2d8651cefc.pdf

(Stock Code: 00696)

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS; AND NOTICE OF EGM

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS; AND NOTICE OF EGM

1. INTRODUCTION

2. SOUTHERN AIRLINES TRANSACTIONS

2.1 BACKGROUND AND REASONS FOR APPLICATION FOR THE WAIVER

LETTER FROM THE BOARD

2.2 CONTINUING CONNECTED TRANSACTIONS UNDER THE WAIVER

A. Details of the Southern Airlines Transactions under the Waiver

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

2.3 HISTORICAL TRANSACTION RECORDS

2.4 PROPOSED ANNUAL CAPS AND BASIS FOR THE PROPOSED ANNUAL CAPS

A. Proposed Annual Caps

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

2.5 REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS

2.6 IMPLICATIONS UNDER THE LISTING RULES

2.7 GENERAL INFORMATION

Information on the Group

Information on Southern Airlines

Information on Xiamen Airlines

Information on Chongqing Airlines

3. EGM

4. RECOMMENDATIONS

5. GENERAL

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO SOUTHERN AIRLINES TRANSACTIONS

CONTINUING CONNECTED TRANSACTIONS: SOUTHERN AIRLINES TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. BACKGROUND

1. Information on the Group

2. Information on Southern Airlines

3. The PRC economy and aviation industry

II. THE SOUTHERN AIRLINES TRANSACTIONS

1. Background of the Southern Airlines Transactions

2. The terms of the Southern Airlines Transactions

Airlines passenger booking system services

Reservation system extended services and departure system services

Civil aviation and commercial data network services

3. Internal control and mechanism to regulate the Southern Airlines Transactions

III. THE PROPOSED ANNUAL CAPS

1. The Proposed Annual Caps for the Southern Airlines Transactions

4. Basis of the growth in the Proposed Annual Caps

RECOMMENDATION

RESPONSIBILITY STATEMENT

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

2. SUBSTANTIAL SHAREHOLDERS

GENERAL INFORMATION

3. SERVICE AGREEMENT

4. MATERIAL CHANGES

5. INTEREST IN ASSETS

6. MATERIAL INTEREST IN CONTRACTS

7. COMPETING INTEREST

8. EXPERT

9. DOCUMENTS AVAILABLE FOR INSPECTION

10. GENERAL

NOTICE OF EXTRAORDINARY GENERAL MEETING

ORDINARY RESOLUTION

“ THAT :

More from TravelSky Technology Limited

TravelSky Technology Limited Proxy Solicitation & Information Statement 2016