TravelSky Technology Limited - Proxy Solicitation & Information Statement 2017

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: EASTERN AIRLINES TRANSACTIONS AND WAIVER IN RELATION TO

EASTERN AIRLINES TRANSACTIONS; PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; 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 32 of this circular.

A notice convening the EGM to be held at Heyuan Royal Garden Hotel, District 2, Courtyard 57, Bianhe Road, Houshayu, Shunyi District, Beijing, the PRC at 10 a.m. on Tuesday, 30 January 2018, is set out on pages 51 to 52 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.7, Yumin Street, Houshayu, Shunyi District, Beijing 101318, 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 Tuesday, 9 January 2018.

13 December 2017

CONTENTS

		Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .	16
LETTER FROM	RHB CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX I	– PROPOSED AMENDMENTS TO ARTICLES OF
	ASSOCIATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33
APPENDIX II	– GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .	44
NOTICE OF EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		51

– i –

DEFINITIONS

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

“Articles of Association”
the Articles of Association of TravelSky Technology Limited
“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
“CAGR”

Compound Annual Growth Rate

“Company”
TravelSky Technology Limited, a company incorporated under the laws of the PRC whose shares are listed on the Main Board of the Stock Exchange and whose American depositary shares are traded on the over-the-counter market in the United States of America
“connected person(s)” has the same meaning as ascribed to it under the Listing Rules
“Director(s)” the director(s) of the Company
“Domestic Share(s)”
domestic share(s) with a nominal value of RMB1.00 each in the share capital of the Company
“Eastern Airlines”
中國東方航空股份有限公司 (China Eastern Airlines Corporation Limited*), a subsidiary of Eastern Holding as at the Latest Practicable Date, and reference to Eastern Airlines in this circular shall exclude its subsidiaries and associates unless the context otherwise requires
“Eastern Airlines Group”

Eastern Airlines and its subsidiaries, excludes its associates

– 1 –

DEFINITIONS

“Eastern Airlines Services Agreement”
“Eastern Airlines Transactions”
“Eastern Holding”
“Eastern Renewal Agreement”
“EGM”
“Group”
“H Share(s)”
“HK$”
“Independent Board Committee”
“Independent Shareholders”
the written agreement dated 11 December 2015 entered into between the Company and Eastern Airlines in respect of the Eastern Airlines Transactions for a term of two years from 1 January 2015 to 31 December 2016
the continuing connected transactions between the Company and Eastern Airlines in relation to the provision of the technology services by the Company to the Eastern Airlines Group as set out in this circular
中國東方航空集團公司 (China Eastern Air Holding Limited*) which has a shareholding of 11.22% in the Company and is a substantial shareholder of the Company as at the Latest Practicable Date
the renewal written agreement in respect of the Eastern Airlines Transactions for 2018 and onwards
the extraordinary general meeting of the Company to be convened at 10 a.m. on Tuesday, 30 January 2018, and the notice of which is set out in this circular
the Company and its subsidiaries
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)
Hong Kong dollars, the lawful currency of Hong Kong Special Administrative Region
the independent board committee of the Company formed by the Company to advise the Independent Shareholders in respect of the Eastern 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 Eastern Airlines Transactions and the Proposed Annual Caps at the EGM

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DEFINITIONS

“Latest Practicable Date”
“Listing Rules”
“PRC” or “China”
“Previous Waiver”
“Proposed Annual Cap(s)”
“RHB Capital”
“RMB”
“SFO”
“Shareholder(s)”
“Stock Exchange”
6 December 2017, 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 October 2014 in relation to, among others, the provision of technology services by the Company to Eastern Airlines and its subsidiaries for a term of three years from 1 January 2015 to 31 December 2017
the proposed maximum aggregate annual amount(s) of the Eastern Airlines Transactions for each of the three years ending 31 December 2020, as set out in section 2.4 headed “Proposed Annual Caps and Basis for the Proposed Annual Caps” in this circular
RHB Capital Hong Kong Limited, the independent financial adviser to the Independent Board Committee and Independent Shareholders in respect of the Eastern Airlines Transactions and the Proposed Annual Caps, and a licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO
Renminbi, the lawful currency of the PRC
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
the shareholder(s) of the Company

The Stock Exchange of Hong Kong Limited

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DEFINITIONS

“subsidiary(ies)”	has the same meaning ascribed to it under the Listing
	Rules
“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 Eastern
	Airlines Transactions. Such waiver is for a three-year
	term from 1 January 2018 to 31 December 2020
“%”	per cent

For the purpose of this circular, unless otherwise indicated, the exchange rate at RMB1 = HK$1.17 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 Directors: 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: No. 7, Yumin Street, Houshayu, 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 13 December 2017

To the Shareholders

Dear Sir/Madam,

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

EASTERN AIRLINES TRANSACTIONS; PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; AND NOTICE OF EGM

1. INTRODUCTION

Reference is made to the Company’s announcement dated 8 November 2017 in relation to the Eastern 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 Eastern Airlines Transactions for a three-year term from 1 January 2018 to 31 December 2020. The Company proposes to seek a general mandate with a three-year term ending 31 December 2020 from the Independent Shareholders to carry out the Eastern Airlines Transactions under the Waiver. In the event that the terms of the Eastern Renewal Agreement to be subsequently entered into between the Group and the Eastern Airlines Group are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

Reference is also made to the Company’s announcement dated 23 November 2017 in relation to the proposed amendments to the Articles of Association.

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

2. EASTERN AIRLINES TRANSACTIONS

2.1 BACKGROUND AND REASONS FOR APPLICATION FOR THE WAIVER

References are made to the announcement of the Company dated 17 October 2014 and the circular of the Company dated 7 November 2014 in relation to, among other things, the Eastern Airlines Transactions and the Previous Waiver. The latest agreement entered into between the Company and Eastern Airlines in relation to the Eastern Airlines Transactions was for a term of two years from 1 January 2015 to 31 December 2016 and there is no signed written agreement governing the ongoing Eastern Airlines Transactions at the current stage. The Previous Waiver will expire on 31 December 2017. The Company will continue such Eastern Airlines Transactions after such date. However, the Company expects that the Eastern Renewal Agreement between the Group and the Eastern Airlines Group may not be entered into on or before 31 December 2017.

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 Eastern Airlines Services Agreement with the Eastern Airlines Group since July 2016. At the current stage, the Company has initiated several rounds of discussions at the working level with the Eastern Airlines Group to go through relevant technical issues in relation to the renewal of the Eastern Airlines Services Agreement. The Eastern Airlines Group, as a large scaled airline enterprise, has adopted relatively long, complicated and stringent internal procedures for the signing of agreements at the parent level, i.e. Eastern Airlines. The negotiation, internal review and approval procedures of Eastern Airlines as mentioned above may also create genuine practical difficulties in the Company’s attempt to enter into the Eastern Renewal Agreement by the end of 2017 in compliance with Rules 14A.34 and 14A.51 of the Listing Rules.

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

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LETTER FROM THE BOARD

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 requirements of having written agreements under Rules 14A.34 and 14A.51 of the Listing Rules with respect to the renewal of the Eastern Airlines Transactions. The Waiver is for a three-year period from 1 January 2018 to 31 December 2020. Pursuant to the Waiver, the Company shall publish an announcement in relation to the Waiver. In the event that the terms of the Eastern Renewal Agreement to be subsequently entered into with Eastern Airlines are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

2.2 CONTINUING CONNECTED TRANSACTIONS UNDER THE WAIVER

A DETAILS OF THE EASTERN AIRLINES TRANSACTIONS UNDER THE WAIVER

Parties: Service provider: The Group

Service recipient: The Eastern Airlines Group

Terms: 1 January 2018 to 31 December 2020

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, and relevant products (if applicable);
(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, and relevant products (if applicable);
(iii) airport passenger processing system services which include, among others, the provision of check-in, departure control and load planning services, and relevant products (if applicable); and
(iv) civil aviation and commercial data network services which include, among others, the provision of network transmission services and connection services, and relevant products (if applicable).

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LETTER FROM THE BOARD

Service fees:

The fees for the technology services are as follows:

(i) the “flight control system services” as mentioned in (i) under the sub-section “Services” and the “computer distribution system services” as mentioned in (ii) under the sub-section “Services” 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 and regional flights (depending on the monthly booking volume).

The Company has a tiered pricing mechanism in place for the provision of the flight control system services by the Group, which is universally applicable to all airlines companies (including Eastern Airlines). The tiered pricing mechanism is linked to the processing volume. The more processing volume purchased by an airlines company, the lower unit price that it will enjoy. The highest unit price under such tiered pricing mechanism does not exceed the maximum amount prescribed by CAAC. As such, even the processing volume of such services provided by the Group to the airlines group is very small, the highest unit price applies which is not more than maximum amount prescribed by CAAC. The Company strictly follows such tiered pricing mechanism when charging relevant services fees with the airlines companies. For the avoidance of doubt, the tiered pricing mechanism is independently determined by the Company and no individual airlines company has influence over such pricing mechanism;

(ii) the pricing of the “airport passenger processing system services” as mentioned in (iii) under the sub-section “Services” 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 planning services. The Company may also determine the actual prices for airport passenger processing system services through arm’s-length negotiation with Eastern 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;

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LETTER FROM THE BOARD

(iii) for the services as mentioned in (i), (ii) and (iii) under the sub-section “Services” 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 Eastern Airlines per month (i.e. the more 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 “civil aviation and commercial data network services” as mentioned in (iv) under the sub-section “Services” above is determined with reference to the guidance price prescribed by CAAC of RMB200 per PID per month; and
(v) the pricing of the provision of relevant products associated with the technical services and other types of services under the aforementioned type (iv) the “civil aviation and commercial data network services” (other than PID connection and maintenance services) as mentioned in (iv) under the sub-section “Services” above is not governed by the guidelines of CAAC or the framework of any other PRC airlines regulatory body. The pricing policies of such services or products will be mutually negotiated by both parties, and are mainly determined by the Company after taking into account two factors: (i) the costs of provision of such products or services; and (ii) the processing volume and complexity of such products or services.

The service fees shall be calculated on a monthly basis and shall be paid within 30 days after receipt of the invoice by cash.

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

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LETTER FROM THE BOARD

B INTERNAL CONTROL AND MECHANISM TO REGULATE THE EASTERN AIRLINES TRANSACTIONS

To ensure that the provision of the Eastern Airlines Transactions are carried out in accordance with relevant regulatory guidelines and terms as disclosed herein, or, those to be agreed in the Eastern 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 Eastern 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 Eastern Renewal Agreement, or, if the Eastern 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 Eastern Airlines Transactions are adherent and strictly followed; and
(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) and relevant products provided associated with the technical services under the Eastern 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 will not deviate from the terms of the Eastern Renewal Agreement, or, if the Eastern Renewal Agreement has not yet been entered into, the terms as disclosed herein. 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 Eastern 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.

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LETTER FROM THE BOARD

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 Eastern Airlines Transactions are adherent and strictly followed in accordance with relevant regulatory guidelines and the Eastern Renewal Agreement, or, if the Eastern Renewal Agreement has not yet been entered into, the terms as disclosed herein.

2.3 HISTORICAL TRANSACTION RECORDS

Set out below is a summary of the aggregated amounts of the Eastern Airlines Transactions for the three years ended 31 December 2016 and the ten months ended 31 October 2017:

			Ten months ended
	Year ended 31 December		31 October
2014	2015	2016	2017
(RMB)	(RMB)	(RMB)	(RMB)
			(unaudited)
559,408,120	596,597,360	639,891,210	620,367,490
(equivalent to	(equivalent to	(equivalent to	(equivalent to
approximately	approximately	approximately	approximately
HK$654,507,500.4)	HK$698,018,911.2)	HK$748,672,715.7)	HK$725,829,963.3)

Note: The historical transaction figures for the years ended 2014, 2015 and 2016 are audited figures of the Group and the figure for the ten months ended 31 October 2017 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 Eastern Airlines Transactions provided to the Eastern Airlines Group for the three years ending 31 December 2020:

	Year ending 31 December
2018	2019	2020
(RMB)	(RMB)	(RMB)
925,139,000	1,045,407,000	1,181,310,000
(equivalent to	(equivalent to	(equivalent to
approximately	approximately	approximately
HK$1,082,412,630)	HK$1,223,126,190)	HK$1,382,132,700)

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

The Proposed Annual Caps represent an estimated annual growth rate of 13% in the transaction volume calculated based on the existing annual cap for the Eastern Airlines Transactions for the year of 2017 (i.e. RMB818,707,158). The Proposed Annual Caps and the estimated 13% annual transaction volume growth

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LETTER FROM THE BOARD

rate are determined with reference to (i) the CAGR of approximate 12% of the historical transaction amount for the two years ended 31 December 2016 and the annualized amount for the ten months ended 31 October 2017, the historical estimated annual growth rate of 12% for the existing annual cap for the three years ended 31 December 2017; (ii) the utilization rate of around 90% of annual caps under the Eastern Airlines Transactions for each of the year ended 31 December 2014, 2015 and 2016, respectively; (iii) the anticipated growth rate of approximately 10.8% of the PRC’s gross passenger transportation volume for the year of 2017 as compared with the previous year based on the projections of CAAC, which is set out in the news published by CAAC on its official website (link: http://www.caac.gov.cn/ XWZX/MHYW/201612/t20161223_41338.html), and the actual growth rate of approximately 13.4% of the PRC’s gross passenger transportation volume for the first half of 2017 as compared with the corresponding period in the previous year; (iv) the anticipated average yearly increment of approximately 10.4% of the PRC’s gross passenger transportation volume from 2016 to 2020 under the 13th Five-Year Plan based on the projections of CAAC; (v) the estimated increase in demand of the civil aviation transportation market as influenced by various factors such as the “One Belt and One Road” strategy; (vi) the expansion of Eastern Airlines’ businesses from time to time through acquisition of other airlines or establishing more branches; (vii) the promising aviation market in China in the near future which will replace the United States to become the largest civil aviation transportation market in the year of 2024 as anticipated by IATA (International Air Transport Association); and (viii) the Proposed Annual Caps would provide an adequate buffer for the Group to accommodate any unanticipated revenue from the Eastern Airlines Transactions and thus avoid unnecessary administrative costs associated with obtaining further approvals from Shareholders for those unanticipated revenue which exceeds the Proposed Annual Caps.

2.5 REASONS FOR AND BENEFITS OF THE CONTINUING CONNECTED TRANSACTIONS

The provision of the various services as described in the section 2.2 headed “Continuing Connected Transactions under the Waiver” 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. In addition, it is the Group’s obligation to fulfill its public service covenant with CAAC by renewing the Eastern Airlines Transactions in providing stable, reliable and zero-interruption booking services for the PRC airline industry.

The Directors are of the view that the Eastern 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 Eastern Airlines Transactions and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

2.6 IMPLICATIONS UNDER THE LISTING RULES

Eastern Holding is a substantial shareholder of the Company as at the Latest Practicable Date. Eastern Airlines, being a subsidiary of Eastern Holding, is therefore a connected person of the Company pursuant to Rule 14A.07(4) of the Listing Rules. As such, the Eastern 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 Proposed Annual Caps exceeds 5%, the Eastern Airlines Transactions are subject to the reporting, announcement, annual review and the independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Li Yangmin has abstained from voting on relevant Board resolution(s) in respect of the Eastern Airlines Transactions as he is a director of Eastern Airlines and an employee of Eastern Holding. Save as disclosed above, none of the Directors has a material interest in the Eastern 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 period of three years ending 31 December 2020 from the Independent Shareholders in order to continue the Eastern Airlines Transactions under the Waiver. In the event that the terms of the Eastern Renewal Agreement to be subsequently entered into with Eastern Airlines are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

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 Eastern Airlines

Eastern Airlines is a company listed on the Main Board of the Stock Exchange (Stock Code: 00670) and is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery and other extended transportation services.

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LETTER FROM THE BOARD

3. PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

Reference is made to the Company’s announcement dated 23 November 2017 in relation to proposed amendments to Articles of Association. In order to further enhance the corporate governance, improve the corporate governance level to promote the long-term development of the Company, subject to the Company’s actual situation, the Board of the Company proposes to amend relevant articles in the Articles of Association. Please refer to Appendix I - Proposed Amendments to Articles of Association of this circular for the details of proposed amendments.

The Board confirmed that the proposed amendments to Articles of Association will not have any material adverse impact on the functions and the decision-making capacity of the Board. The Board considers such amendments are beneficial to the Company in respect of promoting its corporate governance, improving the standard operation level and operation efficiency of the Company, and are consistent with the Company’s actual situation.

Therefore, the Board considers that the proposed amendments to the Articles of Association are in the interests of the Company and the shareholders of the Company. The proposed amendments to the Articles of Association are subject to consideration and approval by the shareholders of the Company at the EGM.

4. EGM

The EGM will be held at Heyuan Royal Garden Hotel, District 2, Courtyard 57, Bianhe Road, Houshayu, Shunyi District, Beijing, the PRC at 10:00 a.m. on Tuesday, 30 January 2018 to consider and, if thought fit, approve, among other matters, (i) the Eastern Airlines Transactions and the Proposed Annual Caps; and (ii) the proposed amendments to the Articles of Association. Notice of the EGM is set out on pages 51 to 52 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.7, Yumin Street, Houshayu, Shunyi District, Beijing 101318, 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.7, Yumin Street, Houshayu, Shunyi District, Beijing 101318, the PRC, on or before Tuesday, 9 January 2018.

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, Eastern Holding and its associates, holding an aggregate of 357,298,500 Domestic Shares, will abstain from voting on the resolution in respect of the Eastern Airlines Transactions and the Proposed Annual Caps.

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LETTER FROM THE BOARD

Pursuant to Rule 13.39(4) of the Listing Rules, all votes of the Shareholders at the EGM must be taken by poll. The chairman of the EGM will demand a poll for the resolutions to be proposed at the EGM in accordance with the Articles of Association. 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 Eastern 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 Eastern 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 32 of this circular.

The Independent Board Committee, having taken into account the advice of RHB Capital, considers that (i) the Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group and (ii) the terms of the Eastern 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 Eastern Airlines Transactions and the Proposed Annual Caps at the EGM.

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

5. GENERAL

Your attention is also drawn to the information set out in the appendices 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)

13 December 2017

To the Independent Shareholders

Dear Sir/Madam,

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

We refer to the circular issued by the Company to its shareholders dated 13 December 2017 (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 Eastern 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 Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group and (ii) the terms of the Eastern 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 Eastern 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, among other things, the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder, which has been prepared for the purpose of inclusion in this circular.

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

13 December 2017

TravelSky Technology Limited No. 7, Yumin Street, Houshayu, Shunyi District, Beijing 101308, the PRC

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

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS: EASTERN 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 Eastern Airlines Transactions, being the continuing connected transactions between the Company and Eastern Airlines in relation to the provision of the technology services by the Group to the Eastern Airlines Group, 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 13 December 2017 (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.

References are made to the announcement of the Company dated 17 October 2014 and the circular of the Company dated 7 November 2014 in relation to, among other things, the Eastern Airlines Transactions and the Previous Waiver. The latest agreement entered into between the Company and Eastern Airlines in relation to the Eastern Airlines Transactions was for a term of two years from 1 January 2015 to 31 December 2016. Such agreement was signed by Eastern Airlines on 11 December 2015, which was almost one year after the expiration of the previous agreement and there is no signed written agreement governing the ongoing Eastern Airlines Transactions at the current stage. The Previous Waiver will expire on 31 December 2017. The Company will continue the Eastern

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LETTER FROM RHB CAPITAL

Airlines Transactions after such date for the reasons and benefits as further elaborated under the section headed “Reasons for and benefits of entering into the Eastern Airlines Transactions” of this letter. Nonetheless, the Company expects that the Eastern Renewal Agreement between the Group and Eastern Airlines Group may not be entered into on or before 31 December 2017. In view of such, the Company applied to the Stock Exchange for a waiver from strict compliance with the requirement of having written agreement under Rules 14A.34 and 14A.51 of the Listing Rules with respect to the renewal of the Eastern Airlines Transactions for the period of three years commencing from 1 January 2018 to 31 December 2020 which the Stock Exchange has subsequently granted such waiver.

As referred to in the Letter from the Board, Eastern Holding is a substantial Shareholder as at the Latest Practicable Date. Eastern Airlines, being a subsidiary of Eastern Holding, is an associate of Eastern Holding. Therefore, Eastern Airlines is a connected person of the Company pursuant to Rule 14A.07(4) of the Listing Rules and the highest applicable percentage ratio in respect of the Proposed Annual Caps exceeds 5%, the Eastern Airlines Transactions constitute non-exempt continuing connected transactions of the Company and subject to the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Mr. Li Yangmin, a non-executive Director, has abstained from voting on relevant Board resolution(s) in respect of the Eastern Airlines Transactions as he is a director of Eastern Airlines and an employee of Eastern Holding. Save as disclosed above, none of the Directors has a material interest in the Eastern 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 period of three years ending 31 December 2020 from the Independent Shareholders in order to continue the Eastern Airlines Transactions under the Waiver. In the event that the terms of agreement to be subsequently entered into with Eastern Airlines are materially different from those being approved by the Independent Shareholders, the Company will re-comply with the reporting, announcement, annual review and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Eastern Airlines Transactions are subject to approval by the Independent Shareholders at the EGM. Pursuant to the Listing Rules, shareholders with a material interest in a transaction and their respective associates shall abstain from voting on the relevant resolution(s). As such, Eastern Holding and its associates, holding an aggregate of 357,298,500 Domestic Shares as at the Latest Practicable Date, will abstain from voting on the resolution(s) to consider and approve the general mandate in respect of the Eastern Airlines Transactions under the Waiver, the Eastern Airlines Transactions and the Proposed Annual Caps. Save for aforementioned, to the best knowledge, information and belief of the Directors with reasonable enquiries, as at the Latest Practicable Date, no other Shareholder is required to abstain from voting on the relevant resolution(s) approving the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder at the EGM.

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LETTER FROM RHB CAPITAL

The Independent Board Committee, comprising all independent non-executive Directors namely, Mr. Cao Shiqing, Dr. Ngai Wai Fung, and Mr. Liu Xianqun, has been established to advise the Independent Shareholders as to (i) whether the Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group, (ii) whether the terms of the Eastern 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 and (iii) how to vote on the relevant resolution(s) in respect of the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder at the EGM. We have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

OUR INDEPENDENCE

As at the Latest Practicable Date, we were independent from and not connected with the Company pursuant to Rule 13.84 of the Listing Rules and accordingly qualified to give independent advice on the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder. 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 at the material time in relation to its non-exempt continuing connected transactions (details of which were set out in the circular of the Company dated 25 November 2016). Apart from normal professional fee payable to us in connection with our appointment as the independent financial adviser, no arrangement exists whereby we shall receive any fees or benefits from the Company or any other party related to the aforesaid transactions.

BASIS OF OUR OPINION

In formulating our advice and recommendation, we have relied solely on the information, facts and representations contained or referred to in the Circular as well as the information, facts and representations provided by, opinions expressed by, and statements made by the Directors, the Company and its management. Furthermore, we have assumed that all statements of belief and intention made by the Directors in the Circular were made after due and careful enquiries. The Company will notify the Shareholders and the general public of any material changes to such information, facts, representations, opinions and statements as soon as possible. We have also assumed that all information, facts, representations, opinions and statements made or referred to in the Circular were true, accurate and complete at the time they were made and will continue to be true up to the date of the EGM. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us, or to believe that any material information has been omitted or withheld.

All the Directors are jointly and severally accept full responsibility for the accuracy of the information, facts and representations contained in the Circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed as well as statements made in the Circular have been arrived at after due and careful consideration and that there are no other facts not contained in the Circular the omission of which would make any statement in the Circular misleading.

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LETTER FROM RHB CAPITAL

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

(i) the annual report of the Company for the year ended 31 December 2015 (the “ Annual Report 2015 ”);
(ii) the annual report of the Company for the year ended 31 December 2016 (the “ Annual Report 2016 ”);
(iii) the interim report of the Company for the six months ended 30 June 2017;
(iv) the official website of the Company;
(v) the circular dated 7 November 2014 issued by the Company (the “ 2014 Circular ”); and
(vi) the Circular.

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

(i) China Statistical Yearbook 2016 《中國統計年鑑－( 2016》) published by the National Bureau of Statistics of China (中華人民共和國國家統計局) (the “ 2016 China Statistical Yearbook ”);
(ii) “Statistical Bulletin of Civil Aviation Industry Development in 2014” extracted from China Civil Aviation Annual Report 2014 《( 2014年中國民航年刊》) published by CAAC;
(iii) “Statistical Bulletin of Civil Aviation Industry Development in 2015” extracted from China Civil Aviation Annual Report 2015 《( 2015年中國民航年刊》) published by CAAC;
(iv) “Statistical Bulletin of Civil Aviation Industry Development in 2016” extracted from China Civil Aviation Annual Report 2016 《( 2016年中國民航年刊》) published by CAAC;
(v) the statistics published on the official website of Eastern Airlines; and
(vi) the official website of CAAC.

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,

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LETTER FROM RHB CAPITAL

however, conducted any form of in-depth investigation into the business affairs, financial position or future prospects of the Group and parties to the Eastern Airlines Transactions, nor carried out any independent verification of the information supplied, representations made or opinions expressed by the Directors, the Company and its management. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion stated hereinunder.

This letter is issued as our advice and recommendation to the Independent Board Committee and the Independent Shareholders which is solely for their consideration of whether to approve of the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder, and save for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purpose, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation regarding the Eastern 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

As referred to the Annual Report 2016, the Group is the dominant provider of information technology solutions for China’s aviation and travel industry. The core businesses of the Group include aviation information technology service, distribution of information technology service, clearing and accounting and settlement service for aviation industry, etc.

The Group’s total revenues for each of the three years ended 31 December 2016 is set out below:

	Year	ended 31 December	ended 31 December	2014-2016
	2014	2015	2016	CAGR
	(Audited)	(Audited)	(Audited)
	Approximately	Approximately	Approximately	Approximately
	RMB’000	RMB’000	RMB’000
The Group’s total
revenues	5,336,400	5,471,800	6,223,200	8.0%

Source: The Annual Report 2015 and the Annual Report 2016

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LETTER FROM RHB CAPITAL

According to the information from the Company’s website, the total number of bookings of seats on Chinese commercial airlines for the three years ended 31 December 2016 is set out below:

	Year	ended 31 December	ended 31 December	2014-2016
	2014	2015	2016	CAGR
	Approximately	Approximately	Approximately	Approximately
	in ’000	in ’000	in ’000
Number of bookings of
seats on Chinese
commercial airlines	405,156	449,170	502,090	11.3%

Source: The website of the Company

Based on the information above, we noted that from the year ended 31 December 2014 to the year ended 31 December 2016, (i) the Group’s total revenue has a CAGR of approximately 8.0%; and (ii) the Group’s total number of bookings of seats on Chinese commercial airlines has a CAGR of approximately 11.3%. As advised by the Directors, the growth in the Group’s total revenues and total number of bookings of seats on Chinese commercial airlines were mainly attributable to (i) the economic growth in the PRC; (ii) the increase of international trade between the PRC and other countries; (iii) the increase of certified PRC airports; and (iv) the growing aviation and travel industry in the PRC.

2. Information on Eastern Airlines

Eastern Airlines is a company listed on the Main Board of the Stock Exchange (stock code: 670). The Eastern Airlines Group is principally engaged in the operation of civil aviation, including the provision of passenger, cargo, mail delivery, tour operations and other extended transportation services.

Set out below are the number of passengers carried by Eastern Airlines and the revenue passenger kilometers (the “ RPK ”, a measure of the volume of passengers carried by an airline which is the sum of the number of passengers carried multiplied by the distance flown for every route).

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LETTER FROM RHB CAPITAL

	Year	ended 31 December	ended 31 December	2014-2016
	2014	2015	2016	CAGR
	Approximately	Approximately	Approximately	Approximately
	in million	in million	in million
The number of passengers
carried	83.81	93.78	101.74	10.2%
RPK	127,750	146,342	167,529	14.5%

Source: The annual reports of Eastern Airlines for the years ended 31 December 2015 and 31 December 2016

In light of the above, we noted that, from the year ended 31 December 2014 to the year ended 31 December 2016, (i) the CAGR of the number of passengers carried by Eastern Airlines was approximately 10.2%; and (ii) the CAGR of the RPK of Eastern Airlines was approximately 14.5%. It suggests that the passenger traffic of Eastern Airlines exhibited a relatively high growth of over 10% over the period.

3. The PRC economy and aviation industry

Based on (i) the Statistical Bulletin of Civil Aviation Industry Development in 2014; (ii) the Statistical Bulletin of Civil Aviation Industry Development in 2015; and (iii) the Statistical Bulletin of Civil Aviation Industry Development in 2016, the number of passenger traffic of the PRC airports (measured by number of passengers) increased from approximately 832 million for the year ended 31 December 2014 to approximately 1,016 million for the year ended 31 December 2016, representing a CAGR of approximately 10.5%. By the end of 2016, the number of certified PRC airports has increased from 202 to 218, representing an aggregate increase of approximately 8% from the end of 2014.

Based on the 2016 China Statistical Yearbook and the website of National Bureau of Statistics of China, the PRC’s Gross Domestic Product increased from approximately RMB21,944 billion in 2006 to approximately RMB74,413 billion in 2016, representing a CAGR of approximately 13.0%.

Taking into account (i) the robust growth in the passenger traffic of the aviation industry in the PRC; (ii) the increasing number of certified PRC airports; and (iii) the steady growth of the Gross Domestic Product in the PRC over the last ten years, the Directors expect that the Group’s total revenue will continue to sustain a steady growth amid a stable macro environment in the coming years.

II. The Eastern Airlines Transactions

1. Background of the Eastern Airlines Transactions

The details on the Eastern Airlines Transactions are set out in the Letter from the Board and the provision of the various services are described in the

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LETTER FROM RHB CAPITAL

paragraph headed “Continuing Connected Transactions under the Waiver” under the Letter from the Board. The Group will receive service fees for provision of such services which will give contributions to the Group’s total revenue.

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 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 Eastern Airlines Transactions are a continuity of the transactions entered into between the Group and Eastern Airlines Group for the three years ending 31 December 2017 as the nature and terms (including the scopes of services) of both transactions are substantially the same.

In light of the above, we concur with the Directors that the Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group which is in the interest of the Company and Shareholders as a whole.

2. The terms of the Eastern Airlines Transactions under the Waiver

Parties:

Service provider: The Group Service recipient: The Eastern Airlines Group Term: 1 January 2018 to 31 December 2020

Scope of technology services to be provided by the Company:

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

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LETTER FROM RHB CAPITAL

(iii) airport passenger processing system services which include, among others, the provision of check-in, departure control and load planning services, and relevant products (if applicable); and
(iv) civil aviation and commercial data network services which include, among others, the provision of the network transmission services and connection services, and relevant products (if applicable).

Service fees:

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

the “flight control system services” as mentioned in (i) above and the “computer distribution system services” as mentioned in (ii) above are generally referred to as the “airlines passenger booking system services”. The pricing of the airlines passenger booking system services is subject to the maximum guidance prices prescribed by CAAC, being the progressive per segment booking fee ranging from RMB4.5 to RMB6.5 for domestic flights and RMB6.5 to RMB7.0 for international and regional flights (depending on the monthly booking volume).

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LETTER FROM RHB CAPITAL

the pricing of the “airport passenger processing system services” in (iii) above 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 planning services. The Company may also determine the actual prices for airport passenger processing system services through arm’s length negotiation with Eastern Airlines, having taken into account a number of factors such as the 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;
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 Eastern Airlines per month (i.e. the higher the processing volume per month, the lower the amount charged by the Company);
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
the pricing of the provision of relevant products associated with the technical services and 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 mutual negotiation between the parties and are mainly determined by the Company after taking into account two factors: (a) the costs of provision of such products or services; and (b) the processing volume and complexity of such products or services.

The service fees shall be calculated on a monthly basis and shall be paid within 30 days after receipt of the invoice by cash.

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

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LETTER FROM RHB CAPITAL

We have, on a sampling basis, reviewed the agreements entered by the Group and other independent airlines in relation to the provision of technology services by the Group which are similar to the Eastern Airlines Transactions and noted that pricing basis, the unit prices and the payment terms were comparable and the service fees charged by the Group are within the respective price ranges prescribed by CAAC as mentioned above.

As advised by the Directors, the pricing schedules prescribed by CAAC are applicable to all airlines operating in the PRC, and all relevant service fees are charged within the respective price ranges. Thus, the aforesaid price schedules are the prevailing market prices which the service fees charged for the relevant services are normal commercial terms. Based on the foregoing, we consider that the service fees for the Eastern Airlines Transactions, which are based on the pricing schedules prescribed by CAAC, are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

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

After reviewing the internal control procedures and mechanism stated in the paragraph headed “Internal control and mechanism to regulate the Eastern Airlines Transactions” in the Letter of the Board, 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 determination have considered relevant costs of provision of such services and products in order to guarantee reasonable profit margins for the provision of services and the transactions are 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 the Eastern Airlines Group are determined based on relevant regulatory guidelines so that they are no less favorable than those offered to independent third parties.

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LETTER FROM RHB CAPITAL

As such, we concur with the Directors’ view that the Company possesses adequate mechanism, internal control procedures and external supervision in place to ensure the terms of the provision of the Eastern Airlines Transactions by the Group to the Eastern Airlines Group are adherent and strictly followed in accordance with the relevant regulatory guidelines and the Eastern Renewal Agreement, or, if the Eastern Renewal Agreement has not yet been entered into, the terms as disclosed herein.

Overall, we consider that the terms of the Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group which is 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.

III. The Proposed Annual Caps

1. The Proposed Annual Caps

Set out below is a summary of the Proposed Annual Caps in respect of the Eastern Airlines Transactions provided to the Eastern Airlines Group for the three years ending 31 December 2020:

	Proposed Annual Caps	Proposed Annual Caps
	for the year ending 31 December
	2018	2019	2020
	RMB’000	RMB’000	RMB’000
Eastern Airlines
Transactions	925,139	1,045,407	1,181,310

2. The historical transaction amounts of existing Eastern Airlines Transactions

Set out below is a summary of the historical transaction amounts of the Eastern Airlines Transactions for the two years ended 31 December 2016 and for the ten months ended 31 October 2017:

	For the year ended	For the year ended	31 December
	2015	2016	2017
	RMB’000	RMB’000	RMB’000
Transaction Amount			620,367_(Note 1)_
(approximately) (Note 3)	596,597	639,891	(Annualized=744,441)
Annual cap	652,668	730,989	818,707
Utilization rate (approximately)	91.4%	87.5%	90.9%(Note 2)

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LETTER FROM RHB CAPITAL

Note:

For the ten months ended 31 October 2017
Calculated based on annualized transaction amount for the ten months ended 31 October 2017
The historical transaction amounts of the Eastern Airlines Transactions for the two years ended 31 December 2016 are reviewed and extracted from the audited figures of the Annual Report 2015 and Annual Report 2016.

The transaction amount for the Eastern Airlines Transactions for the ten months ended 31 October 2017 were approximately RMB620,367,000. The annualized transaction amount of such transaction is approximately RMB744,441,000.

Based on the above, we noted that the Proposed Annual Cap for the Eastern Airlines Transactions for the year ending 31 December 2017 of approximately RMB818,707,000 is only slightly higher than the annualized transaction amount of the existing Eastern Airlines Transactions for the corresponding period by approximately 9.98% and the related utilization rate is expected to be high, at around 90%.

3. Basis of the determination of the Proposed Annual Caps

As stated in the Letter from the Board, the Proposed Annual Caps represents an estimated annual growth rate of 13% in the transaction volume calculated based on the existing annual cap for the Eastern Airlines Transactions for the year of 2017 (i.e. RMB818,707,158) which are determined with reference to (i) the CAGR of approximately 12% of the historical transaction amount for the two years ended 31 December 2016 and the annualized amount for the ten months ended 31 October 2017 and the historical estimated annual growth rate of 12% for the existing annual cap for the three years ended 31 December 2017; (ii) the utilization rate of around 90% of annual caps under the Eastern Airlines Transactions for each of the year ended 31 December 2014, 2015 and 2016, respectively; (iii) the anticipated growth rate of approximately 10.8% in respect of the PRC’s gross passenger transportation volume for the year of 2017 as compared to the year of 2016 based on the projections of CAAC as published on the official website of CAAC and the actual growth rate of approximately 13.4% of the PRC’s gross passenger transportation volume for the first half of 2017 as compared to the same in corresponding period in 2016; (iv) the anticipated average yearly increment of approximately 10.4% in respect of the PRC’s gross passenger transportation volume from 2016 to 2020 under the “13th Five-Year Plan” (十三五規劃) based on the projections of CAAC; (v) the estimated increase in demand of the civil aviation transportation market as influenced by various factors such as “One Belt and One Road” (「一帶一路」) strategy; (vi) the expansion of Eastern Airlines’ business from time to time through acquisition of other airlines or establishing more branches; (vii) the promising aviation market in the China in near future which will replace the United States to become the largest civil aviation transportation market by 2024 anticipated by the International Air Transport Association; and (viii) the Proposed Annual Caps would provide an adequate buffer for the Group to accommodate any unanticipated revenue from the Eastern Airlines Transactions and thus avoid unnecessary administrative costs associated with obtaining further approvals from Shareholders for the unanticipated revenue which exceeds the Proposed Annual Caps.

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LETTER FROM RHB CAPITAL

We consider that the growth rate and the amount of the Proposed Annual Caps for the three years ending 31 December 2020 are fair and reasonable so far as the Independent Shareholders are concerned, taking into account of:

(i) the Proposed Annual Cap for the year ending 31 December 2018 is based on (a) the CAGR of approximately 12% of the historical transaction amount for the two years ended 31 December 2016 and the annualized amount for the ten months ended 31 October 2017; and (b) the historical estimated annual growth rate of 12% for the existing annual cap for the three years ended 31 December 2017 as disclosed in the 2014 Circular, with the respective annual cap utilization rate at around 90%;
(ii) the historical growth in the Group’s total revenues and total number of bookings of seats on Chinese commercial airlines with respective CAGR of approximately 8.0% and 11.3% for the period between 2014 and 2016;
(iii) the strong growth in the passenger traffic of Eastern Airlines with a CAGR of approximately 14.5% in RPK and a CAGR of approximately 10.2% in number of passengers carried for the three years ended 31 December 2016;
(iv) the steady growth of the Gross Domestic Product in the PRC with a CAGR of approximately 13% from 2006 to 2016 based on the 2016 China Statistical Yearbook and the website of National Bureau of Statistics of China;
(v) the positive outlook of the aviation industry in the PRC supported by various national policies (i.e. “13th Five-Year Plan” and “One Belt and One Road” strategy);
(vi) that from the comparison between the actual transaction amount (with annualized figures for the year ended 31 December 2017) and the existing annual caps for the three years ended 31 December 2017, the Proposed Annual Caps would continue to provide an adequate buffer for the Group to accommodate any unanticipated revenue from the Eastern Airlines Transactions and thus avoid unnecessary administrative costs associated with obtaining further approvals from Shareholders in case the unanticipated revenue exceeds the Proposed Annual Caps; and
(vii) no cost will be incurred to the Group in respect of the unutilized amount of the Proposed Annual Caps as confirmed by the Company.

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 Company and the Shareholders as a whole.

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LETTER FROM RHB CAPITAL

4. Reasons for and benefits of entering into the Eastern Airlines Transactions

As stated in the paragraph headed “Reasons for and benefits of the Continuing Connected Transactions” under the Letter from the Board, the provision of the technology services by the Group to the Eastern Airlines Group under the Eastern 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. In addition, it is the Group’s obligation to fulfill its public service covenant with CAAC by renewing the Eastern Airlines Transactions in providing stable, reliable and zero-interruption booking services for the PRC airline industry.

In light of the above, we concur with the Directors that the Eastern Airlines Transactions are in the ordinary and usual course of business of the Group and on normal commercial terms and the terms of the Eastern Airlines Transactions and the Proposed Annual Caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

Apart from reporting, announcement and Independent Shareholders’ approval requirements as required pursuant to the Listing Rules, the Eastern Airlines Transactions and the Proposed Annual Caps are subject to the annual review requirements under the Rules 14A.55 to 14A.59 of the Listing Rules, in particular:

(i) the independent non-executive Directors must review the Eastern Airlines Transactions every year and confirm in the annual report of the Company whether the Eastern Airlines Transactions have been entered into:
(1) in the ordinary and usual course of business of the Group;
(2) are fair and reasonable and on normal commercial terms; and
(3) in the interests of the Shareholders as a whole;
(ii) the Company must engage its auditors to report on the Eastern Airlines Transactions every year. The auditors must provide a letter to the Board confirming whether anything has come to their attention that causes them to believe that the Eastern Airlines Transactions:
(1) have not been approved by the Board;
(2) were not, in all material respects, in accordance with the pricing policies of the Group;

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LETTER FROM RHB CAPITAL

(3) were not entered into, in all material respects, in accordance with the terms of the Eastern Airlines Transactions to be approved by the Independent Shareholders at the EGM; and
(4) have exceeded the Proposed Annual Caps; and
(iii) the Company will comply with all other relevant requirements under the Listing Rules.

RECOMMENDATION

Having considered the above principal factors and reasons, we consider that (i) the Eastern Airlines Transactions are on normal commercial terms and conducted in the ordinary and usual course of business of the Group and (ii) the terms of the Eastern 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 advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the proposed resolution(s) to approve the Eastern Airlines Transactions, the Proposed Annual Caps and the transactions contemplated thereunder at the EGM. We also advise the Independent Shareholders to vote in favour of the proposed resolution(s) to approve the same at the EGM.

Yours faithfully, For and on behalf of

RHB Capital Hong Kong Limited

Derek Cheng	Kevin Choi
Head of Investment Banking	Responsible Officer
and	Vice President
Managing Director	Corporate Finance

Note: Mr. Derek Cheng (i) is a licensed person registered with the Securities and Futures Commission and as a responsible officer of RHB Capital Hong Kong Limited to carry on Type 6 (advising on corporate finance) regulated activities under the SFO and (ii) has over 11 years of experience in investment banking industry.

Mr. Kevin Choi (i) is a licensed person registered with the Securities and Futures Commission and as a responsible officer of RHB Capital Hong Kong Limited to carry on Type 6 (advising on corporate finance) regulated activities under the SFO and (ii) has over 6 years of experience in corporate finance industry.

– 32 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article		Before amendment	Before amendment	After amendment
1	Article	1	TravelSky Technology Limited (hereinafter		TravelSky Technology Limited (hereinafter
			referred to as the “Company”) is a joint stock		referred to as the “Company”) is a joint stock
			limited company duly incorporated in		limited company duly incorporated in
			accordance with the Company Law of the		accordance with the Company Law of the
			People’s Republic of China (hereinafter referred		People’s Republic of China (hereinafter referred
			to as the “Company Law”),Special Regulations		to as the “Company Law”),Special Regulations
			_of _	the State Council concerning the Offering and	of the State Council concerning the Offering and
			Listing of Shares Overseas by Joint Stock Limited		Listing of Shares Overseas by Joint Stock Limited
			Companies (hereinafter referred to as the		Companies (hereinafter referred to as the
			“Special Regulations”) as well as other		“Special Regulations”) as well as other
			relevant laws and administrative regulations		relevant laws and administrative regulations
			and rules.		and rules.
			The Company was established by way of		The Company was established by way of
			promotion with the approval of [2000] No. 874		promotion with the approval of [2000] No. 874
			document issued by the State Economic and		document issued by the State Economic and
			Trade Commission. The Company has		Trade Commission. The Company has
			undertaken registration with the State		undertaken registration with the State
			Administration for Industry and Commerce of		Administration for Industry and Commerce of
			the People’s Republic of China and obtained		the People’s Republic of China and obtained
			its business license with the license number of		its business license with unified social credit
			100000000034410 on 18 October 2000.		code ~~the~~ ~~license~~ ~~number~~ of
					9111000071092729XP ~~100000000034410 ~~on 18
			The promoters of the Company are:		October 2000.
			......		The promoters of the Company are:
			Shareholder Seven: Hainan Airlines Company		......
			Limited
					Shareholder Seven: Hainan Airlines Holding
			......		Company Limited
					......
2	Article	7	The Original Articles came into force on the		~~The Original Articles came into force on the~~
			date when the company was registered.		~~date when the company was registered.~~
			The Articles shall come into force upon the		The Articles shall come into force upon the
			approval by special resolution at the general		approval by special resolution at the general
			meeting of shareholders of the Company and		meeting of shareholders of the Company and
			the approval by the examination and approval		the approval by the examination and approval
			department as authorized by the State		department as authorized by the State Council
			Council. The Original Articles shall be		(if necessary).~~The Original Articles shall be~~
			replaced by the Company’s Articles from the		~~replaced by the Company’s Articles from the~~
			date when the Articles become effective.		~~date when the Articles become effective~~.

– 33 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No. Article Before amendment	After amendment
3 Article 10 The Company may invest in other limited liability companies and joint stock limited companies and shall assume responsibilities to an invested company with limitation to its capital contribution. The Company shall not become a shareholder that shall bear unlimited liabilities for the debts of other profit-making organizations in which it invests. Upon the approval by the examination and approval department as authorized by the State Council, the Company may be operated based on the needs of operation and management in accordance with a holding company as prescribed in Article 12 (2) of the Company Law.	~~The Company may invest in other limited~~ ~~liability companies and joint stock limited~~ ~~companies and shall assume responsibilities~~ ~~to an invested company with limitation to its~~ ~~capital contribution.~~ ~~The~~ ~~Company~~ ~~shall~~ ~~not~~ ~~become~~ ~~a~~ ~~shareholder that shall bear unlimited~~ ~~liabilities~~ ~~for~~ ~~the~~ ~~debts~~ ~~of~~ ~~other~~ ~~profit-making organizations in which it~~ ~~invests.~~ ~~Upon the approval by the examination and~~ ~~approval department as authorized by the~~ ~~State Council, the Company may be operated~~ ~~based on the needs of operation and~~ ~~management in accordance with a holding~~ ~~company as prescribed in Article 12 (2) of the~~ ~~Company Law.~~ The Company may invest in other enterprises. However, unless the law stipulates otherwise, it shall not become a capital contributor that shall bear several and joint liabilities for the debts of the enterprises in which it invests.
4 Article 28 The Company must prepare a balance sheet and an inventory of assets when it reduces its registered capital. The Company shall notify its creditors within ten (10) days of adopting the resolution to reduce its registered capital and shall publish an announcement at least three (3) times in newspaper within thirty (30) days. A creditor shall have the right within thirty (30) days of receiving a written notice or, for those who have not received a written notice, within ninety (90) days since the date of the first public announcement, to require the Company to repay its debts or to provide a corresponding guarantee for such debt. The Company’s registered capital shall not, after the reduction in capital, be less than the minimum amount as prescribed by law.	The Company must prepare a balance sheet and an inventory of assets when it reduces its registered capital. The Company shall notify its creditors within ten (10) days of adopting the resolution to reduce its registered capital and shall publish an announcement at least three (3) times in newspaper within thirty (30) days. A creditor shall have the right within thirty (30) days of receiving a written notice or, for those who have not received a written notice, within ~~ninety (90)~~forty-five (45)days since the date of the first public announcement, to require the Company to repay its debts or to provide a corresponding guarantee for such debt. The Company’s registered capital shall not, after the reduction in capital, be less than the minimum amount as prescribed by law.

No.
Article
Before amendment

After amendment

3
Article 10
The Company may invest in other limited
liability companies and joint stock limited
companies and shall assume responsibilities
to an invested company with limitation to its
capital contribution.
The Company shall not become a shareholder
that shall bear unlimited liabilities for the
debts of other profit-making organizations in
which it invests.
Upon the approval by the examination and
approval department as authorized by the
State Council, the Company may be operated
based on the needs of operation and
management in accordance with a holding
company as prescribed in Article 12 (2) of the
Company Law.

~~The Company may invest in other limited~~
~~liability companies and joint stock limited~~
~~companies and shall assume responsibilities~~
~~to an invested company with limitation to its~~
~~capital contribution.~~
~~The~~
~~Company~~
~~shall~~
~~not~~
~~become~~
~~a~~
~~shareholder that shall bear unlimited~~
~~liabilities~~
~~for~~
~~the~~
~~debts~~
~~of~~
~~other~~
~~profit-making organizations in which it~~
~~invests.~~
~~Upon the approval by the examination and~~
~~approval department as authorized by the~~
~~State Council, the Company may be operated~~
~~based on the needs of operation and~~
~~management in accordance with a holding~~
~~company as prescribed in Article 12 (2) of the~~
~~Company Law.~~
The
Company
may
invest
in
other
enterprises. However, unless the law
stipulates otherwise, it shall not become a
capital contributor that shall bear several
and joint liabilities for the debts of the
enterprises in which it invests.

4
Article 28
The Company must prepare a balance sheet
and an inventory of assets when it reduces its
registered capital.
The Company shall notify its creditors within
ten (10) days of adopting the resolution to
reduce its registered capital and shall publish
an announcement at least three (3) times in
newspaper within thirty (30) days. A creditor
shall have the right within thirty (30) days of
receiving a written notice or, for those who
have not received a written notice, within
ninety (90) days since the date of the first
public
announcement,
to
require
the
Company to repay its debts or to provide a
corresponding guarantee for such debt.
The Company’s registered capital shall not,
after the reduction in capital, be less than the
minimum amount as prescribed by law.

The Company must prepare a balance sheet
and an inventory of assets when it reduces its
registered capital.
The Company shall notify its creditors within
ten (10) days of adopting the resolution to
reduce its registered capital and shall publish
an announcement at least three (3) times in
newspaper within thirty (30) days. A creditor
shall have the right within thirty (30) days of
receiving a written notice or, for those who
have not received a written notice, within
~~ninety (90)~~forty-five (45)days since the date
of the first public announcement, to require
the Company to repay its debts or to provide a
corresponding guarantee for such debt.
The Company’s registered capital shall not,
after the reduction in capital, be less than the
minimum amount as prescribed by law.

– 34 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article		Before amendment			After amendment	After amendment
5	Article	39	The share certificates shall be signed by the			The share certificates shall be signed by the
			chairman of the board. Where the stock			chairman of the board. Where the stock
			exchange on which shares of the Company are			exchange on	which shares of the Company are
			listed requires other senior management			listed requires other senior management
			personnel of the Company to sign on the share			personnel of	the Company to sign on the share
			certificates, the share certificates	shall also be		certificates, the share certificates shall also be
			signed by such personnel.	The share		signed by	such personnel. The share
			certificates shall take effect after being affixed			certificates shall take effect after being affixed
			with the seal of the Company (or the			with the seal of the Company (or the
			Company’s chop for securities). The share			Company’s	chop for securities). The share
			certificates shall only be sealed		with the	certificates	shall only be sealed with the
			Company’s seal or securities chop		under the	Company’s seal or securities chop under the
			authorization of the board of directors. The			authorization of the board of directors. The
			signature of the chairman of the		board or	Company’s	seal or securities chop, t~~T~~he
			other senior management personnel of the			signature of the chairman of the board or
			Company may be printed in printed form.			other senior management personnel of the
						Company may be printed in printed form.
6	Article	81	The general meetings of shareholders shall be			The general meetings of shareholders shall be
			convened by the board of directors and			convened by the board of directors and
			presided over by the chairman of the board.			presided over by the chairman of the board.
			Where the chairman is unable or fails to			Where the chairman is unable or fails to
			perform his/her duties, the vice-chairman of			perform his/her duties,~~the vice-chairman of~~
			the board shall chair the meeting. If the			~~the board shall chair the meeting. If the~~
			vice-chairman is unable or fails to perform			~~vice-chairman is unable or fails to perform~~
			his/her duties, then a director elected jointly			~~his/her duties, then ~~a director elected jointly
			by more than half (1/2) of the directors shall			by more than half (1/2) of the directors shall
			chair the meeting.			chair the meeting.
			......			......

– 35 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article		Before amendment	After amendment
7	Article	84	If votes are counted at a general meeting of	If votes are counted at a general meeting of
			shareholders, the result of the count shall be	shareholders, the result of the count shall be
			recorded in the minutes.	recorded in the minutes.
			The minutes of the general meeting of	The minutes of the general meeting of
			shareholders shall be recorded by the	shareholders shall be recorded by the
			secretary and signed by the directors present	secretary of the board of directors andsigned
			at the meeting.	by the directors present at the meeting.
			The resolutions passed at the general meeting	The resolutions passed at the general meeting
			of shareholders shall be treated as the minutes	of shareholders shall be treated as the minutes
			of the meeting. The records and minutes of the	of the meeting. The records and minutes of the
			meeting shall be written in Chinese. The	meeting shall be written in Chinese. The
			meeting records, together with the	meeting records, together with the
			shareholders’ attendance lists and proxy	shareholders’ attendance lists and proxy
			forms, shall be kept at the domicile of the	forms, shall be kept at the domicile of the
			Company.	Company.
8	Article	94	The Company shall have a board of directors	The Company shall have a board of directors
			consisting of nine (9) directors. External	consisting of nine (9) directors.	External
			directors (directors who do not assume an	directors (directors who do not assume an
			internal position of the Company, hereinafter	internal position of the Company, hereinafter
			the same) shall account for more than half	the same) shall account for more	than half
			(1/2) of the total number of directors in the	(1/2) of the total number of directors in the
			board, of which at least three (3) shall be	board, of which at least three (3) shall be
			independent (non-executive) directors	independent (non-executive)	directors
			(directors who are independent from the	(directors who are independent	from the
			Company and do not assume an internal	Company and do not assume an internal
			position of the Company, hereinafter the	position of the Company, hereinafter the
			same).	same), and at least one-third (1/3) of the
				members in the board of directors must be
			There shall be one chairman in the board of	independent directors.
			directors.
				There shall be one chairman in the board of
			The board of directors shall set up special	directors.
			committees in respect of strategic decisions,
			audit, remuneration and other areas	The board of directors shall set up special
			according to its needs.	committees in respect of strategic ~~decisions~~,
				audit and risk management, remuneration
				and evaluation, nomination and other areas
				according to its needs.

– 36 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article		Before amendment	After amendment
9	Article	96	The board of directors shall be accountable to	The board of directors shall be accountable to
			the general meeting of shareholders and shall	the general meeting of shareholders and shall
			assume the following functions and powers:	assume the following functions and powers:
			......	......
			(9) to appoint or remove the Company’s	(9) to appoint or remove the Company’s
			president and to appoint or remove	president and to appoint or remove
			vice-presidents and Chief Financial Officer of	vice-presidents, ~~and ~~Chief Financial Officer
			the Company according to the	(or chief accountant) and general counsel of
			recommendations of the president; to appoint	the Company according to the
			or remove the secretary of the board of	recommendations of the president and decide
			directors and decide on their remuneration	on their remuneration matters; to appoint or
			matters;	remove the secretary of the board of directors
				and/or company secretaryand decide on their
			to appoint or replace the members of the	remuneration matters;
			board of director and the supervisory
			committee of its wholly-owned subsidiaries;	~~to appoint or replace the members of the~~
			to appoint, replace or recommend	~~board of director and the supervisory~~
			shareholders’ proxies, directors and	~~committee of its wholly-owned subsidiaries;~~
			supervisors of its subsidiaries which are	~~to~~ ~~appoint,~~ ~~replace~~ ~~or~~ ~~recommend~~
			controlled or invested by the Company.	~~shareholders’~~ ~~proxies,~~ ~~directors~~ ~~and~~
				~~supervisors of its subsidiaries which are~~
			......	~~controlled or invested by the Company.~~
			(14) other functions and powers as conferred	......
			by the general meeting of shareholders and
			the Articles.	(14) other functions and powers as conferred
				by the general meeting of shareholders and
			......	the Articles.
				The Board shallseek opinions from the Party
				committee of the Company before making
				decisions on the material issues of the
				Company.
				......

– 37 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article		Before amendment		After amendment
10	Article	106	The Company shall have one secretary of the		The Company shall have one secretary of the
			board of directors, being a senior management		board of directors, being a senior management
			personnel.		personnel, whom shall be nominated by the
					chairman, and shallbe elected, appointed or
			The board of directors may	establish its	dismissed by the board of directors. Such
			secretarial department when necessary.		appointment or dismissal shall not be dealt
					by written resolutions. The secretary of the
					board of directors of the Company shall be
					served as “company secretary” (if
					applicable) at the same time.
					The board of directors may establish its
					secretarial department when necessary.
11	Article	111	The president shall be accountable to the		The president shall be accountable to the
			board of directors and exercise	the following	board of directors and exercise the following
			functions and powers:		functions and powers:
			......		......
			(6) to formulate basic rules and the Company;	regulations of	(6) to formulate ~~basic ~~the specific rules and regulations of the Company;
			(7) to propose the appointment or dismissal of		(7) to propose the appointment or dismissal of
			the Company’s vice-presidents and Chief		the Company’s vice-presidents, ~~and ~~Chief
			Financial Officer;		Financial Officer and general counsel;
			......		......

– 38 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No. Article Before amendment After amendment 12 Article 117 The supervisory committee shall comprise The supervisory committee shall comprise five (5) supervisors. External supervisors five (5) supervisors. External supervisors (supervisors who do not assume an internal (supervisors who do not assume an internal position of the Company, hereinafter the position of the Company, hereinafter the same) shall account for more than half (1/2) of same) shall account for more than half (1/2) of the total number of supervisors in the the total number of supervisors in the committee, of which at least one (1) shall be committee, of which at least one (1) shall be independent supervisor (a supervisor who is independent supervisor (a supervisor who is independent from the Company shareholders independent from the Company shareholders and do not assume an internal position of the and do not assume an internal position of the Company, hereinafter the same). The Company, hereinafter the same). The proportion of staff supervisors shall not be proportion of staff supervisors shall not be less than one-third (1/3) of the total number less than one-third (1/3) of the total number of supervisors. of supervisors. The supervisory committee shall have a term The supervisory committee shall have a term of three (3) years and the term is renewable of three (3) years and the term is renewable upon re-election. Where a supervisor has not upon re-election. Where a supervisor has not been timely re-elected at the expiry of the been timely re-elected at the expiry of the term of office or a supervisor has resigned term of office or a supervisor has resigned during the term of office as a result of which during the term of office as a result of which the number of members in the supervisory the number of members in the supervisory committee falls below the quorum, the committee falls below the quorum, the original supervisor shall perform his/her original supervisor shall perform his/her duties as a supervisor, prior to the assumption duties as a supervisor, prior to the assumption by the re-elected supervisor, in accordance by the re-elected supervisor, in accordance with the laws, administrative regulations and with the laws, administrative regulations and rules as well as the provisions of the Articles. rules as well as the provisions of the Articles. There shall be one (1) chairman and one (1) There shall be one (1) chairman and one (1) vice-chairman in the supervisory committee. vice-chairman in the supervisory committee. The chairman and vice-chairman of the The appointment and removal of ~~The~~ supervisory committee shall be appointed and chairman and vice-chairman of the removed through election by more than half supervisory committee shall be ~~appointed~~ (1/2) of all the supervisors. ~~and removed through election by more than half (1/2) of all the supervisors.~~ passed by ...... not less than two-third (2/3) (inclusive) of members of the supervisory committee. ......

After amendment The supervisory committee shall comprise five (5) supervisors. External supervisors (supervisors who do not assume an internal position of the Company, hereinafter the same) shall account for more than half (1/2) of the total number of supervisors in the committee, of which at least one (1) shall be independent supervisor (a supervisor who is independent from the Company shareholders and do not assume an internal position of the Company, hereinafter the same). The proportion of staff supervisors shall not be less than one-third (1/3) of the total number of supervisors.

– 39 –

APPENDIX I PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

	No. Article Before amendment	After amendment Resolutions of the supervisory committee shall be passed by more than two-third (2/3) (inclusive)of all of its members. Minutes shall be taken for all supervisors’ meetings and be signed by all attending supervisors.
	13 Article 122 Resolutions of the supervisory committee shall be passed by more than two-third (2/3) of all of its members. Minutes shall be taken for all supervisors’ meetings and be signed by all attending supervisors.

– 40 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article	Before amendment	After amendment
		New Chapter 15 Labour Protection and Staff Democratic Management
14	New		The Company must protect the legal rights of
	Article 143		its employees, conclude employment
			contracts with the employees, buy social
			insurances, reinforce labour protection and
			implement safe production in accordance
			with the law.
			The Company shall provide various career
			education and training programs for its
			employees so as to enhance theirquality.
15	New Article		The employees of the Company have the
	144		right to form a trade union for organization
			of union activities and protection of legal
			rights of the employees (in accordance with
			*theTrade Union Law of the People’s Republic***
			of China). The Company shall provide
			necessary convenience for the trade union to
			organize activities. The trade union of the
			Company shall represent the employees in
			entering into collective agreement with the
			Company in relation to issues including
			wages, working hours, benefits, insurance,
			and labour safety and health in accordance
			with the law.

16	New Article		According to the Constitution and other
	145		relevant laws, the Company exercises
			democratic management through employees’
			representatives meeting or other means.
			The Company shall seek advice from the
			trade union of the Company before making
			any material decision on its reform and
			operation and formulation of material
			regulations and shall convene employees
			representatives’ meeting or by other means
			to collect opinions and suggestions of the
			employees.

– 41 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article	Before amendment	After amendment
		New Chapter 16 Party Organization
17	New Article		In accordance with the relevant regulations
	146		of the *Constitution of the Communist Party*
			of China, organization of the Communist
			Party of China shall be established. The
			Party organization shall play a core role in
			leadership and politics, and shall carry out
			the works by holding the general direction,
			controlling the general situation and
			ensuring implementation. The Company
			shall set up a working organ for the Party,
			allocate sufficient staff to deal with Party
			affairs and guarantee sufficient funds to
			operate the Party organisation.
18	New Article		The Company shall establish the Party
	147		committee consisting of one (1) secretary and
			several other members. The chairman of the
			board of directors and the secretary of the
			Party committee shall be assumed by the
			same person, and one (1) deputy secretary
			shall be designated to assist the secretary in
			carrying out the Party building work.
			Eligible members of the Party committee
			may take seats in the board of directors, the
			supervisory committee and the senior
			management through legal procedures,
			while eligible Party members of the board of
			directors, the supervisory committee and the
			senior management may take seats in the
			Party committee inaccordance with relevant
			rules and procedures. Meanwhile, a
			discipline inspection committee shall be
			established in accordance with relevant
			requirements.

– 42 –

APPENDIX I

PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

No.	Article	Before amendment	Before amendment	After amendment
19	New Article			The Party committee of the Company shall
	148			perform its duties in accordance with the
				internal laws and regulations of the Party
				including the *Constitution of the Communist*
				*Party of China.*
				(1) To ensure and supervise the Company’s
				implementation of policies and guidelines
				of the Party and the State, and implement
				major strategic decisions of the Central
				Committee of the Party and the State
				Council, as well as important work
				arrangements of Party committee of
				State-owned Assets Supervision and
				Administration Commission and the Party
				organizations of higher levels.
				(2) To adhere to the principle of the Party
				exercising leadership over the cadres, the
				principle of the legitimate selection of
				operators by the Board, and the exercise of
				power as regards the right of cadres’
				appointment by the operators in accordance
				with laws. The Party committee shall
				deliberate and give opinions on the
				proposed candidates nominated by the
				Board or the general manager or recommend
				candidates to be nominated to the Board or
				the general manager as well as assess the
				proposed candidates and give opinions
				collectively upon inspection over such
				candidates with the Board.
				(3) To research and discuss the stable reform
				and development of the Company, major
				operational and management issues and
				major issues concerning employees’
				interests, and provide comments and
				suggestions.
				(4) To undertake the main responsibility of
				comprehensive and strict Party management;
				to lead the Company’s ideological and
				political work, the united front work, the
				spiritual civilization construction, the
				corporate culture cultivation as well as the
				work of groups such as the trade union and
				the Communist Youth League; to lead the
				construction of the Party’s working style and
				its clean and honest administration, and
				support the discipline inspection committee
				in earnestly performing its supervisory
				responsibilities.
Note:	As there are additions to		certain articles and clauses, there would	be corresponding adjustments in the number
	_of articles and _	clauses in the existing Articles of Association.

Note: In the Articles of Association, the Chinese version shall prevail and the English translation is for reference only.

– 43 –

APPENDIX II

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), China Southern Air Holding Company (中國南方航空集團公司) and Eastern Holding had interest in the Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date,

(a) Mr. 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 Eastern Holding; and
(d) Mr. Yuan Xin’an (a non-executive Director) is a senior management of China Southern Air Holding Company.

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.

– 44 –

APPENDIX II

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
			percentage	Approximate
			of respective	percentage
	Number and class of		class of	of total share
Name of shareholder	shares	Capacity	share capital	capital
	(Note 1)		(Note 2)	(Note 2)
JPMorgan Chase & Co.	93,081,102 H shares of		9.98%	3.18%
	RMB1 each (L)
	(Note 3):
	4,408,666 H shares (L)	Beneficial owner
	3,720,000 H shares (L)	Investment manager
	84,952,436 H shares (L)	Custodian-corporation/
		approved lending agent
	1,390,990 H shares of	Beneficial owner	0.14%	0.05%
	RMB1 each (S)
	(Note 3)
	84,952,436 H shares of	Custodian-corporation/	9.10%	2.90%
	RMB1 each (P)	approved lending agent
	(Note 3)
The Capital Group	84,862,456 H shares of	Interest of corporation	9.10%	2.90%
Companies, Inc.	RMB1 each (L)	controlled by the
	(Note 4)	substantial shareholder
Platinum International	43,293,433 H shares of	Beneficial owner	6.96%	1.48%
Fund	RMB1 each (L)
	(Note 5)
Citigroup Inc.	59,259,053 H shares of		6.35%	2.03%
	RMB1 each (L)
	(Note 6):
	3,651,876 H shares (L)	Interest of corporation
		controlled by the
		substantial shareholder
	55,607,177 H shares (L)	Custodian-corporation/
		approved lending agent
	1,298,262 H shares of	Interest of corporation	0.14%	0.04%
	RMB1 each (S)	controlled by the
	(Note 6)	substantial shareholder
	55,607,177 H shares of	Custodian-corporation/	5.96%	1.90%
	RMB1 each (P)	approved lending agent
	(Note 6)

– 45 –

APPENDIX II

GENERAL INFORMATION

			Approximate
			percentage	Approximate
			of respective	percentage
	Number and class of		class of	of total share
Name of shareholder	shares	Capacity	share capital	capital
	(Note 1)		(Note 2)	(Note 2)
Norges Bank	62,058,420 H shares of	Beneficial owner	6.65%	2.12%
	RMB1 each (L)
BlackRock, Inc.	56,996,710 H shares of	Interest of corporation	6.11%	1.95%
	RMB1 each (L)(Note 7)	controlled by the
		substantial shareholder
China TravelSky Holding	857,226,589 domestic	Beneficial owner	43.00%	29.29%
Company	shares of RMB1 each (L)
China Southern Air	349,381,500 domestic	Beneficial owner	17.52%	11.94%
Holding Company	shares of RMB1 each (L)
	65,773,500 domestic shares	Interest of controlled	3.30%	2.25%
	of RMB1 each (L)	corporation
	(Note 8)
Eastern Holding	328,243,500 domestic	Beneficial owner	16.46%	11.22%
	shares of RMB1 each (L)
	25,155,000 domestic shares	Interest of controlled	1.26%	0.86%
	of RMB1 each (L)	corporation
	(Note 9)
	3,900,000 domestic shares	Interest of controlled	0.20%	0.13%
	of RMB1 each (L)	corporation
	(Note 10)
China National Aviation	268,300,500 domestic	Beneficial owner	13.46%	9.17%
Holding Company	shares of RMB1 each (L)
	18,720,000 domestic shares	Interest of controlled	0.94%	0.64%
	of RMB1 each (L)	corporation
	(Note 11)

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.

– 46 –

APPENDIX II

GENERAL INFORMATION

(3) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by JPMorgan Chase & Co. on 18 October 2017, JPMorgan Chase & Co. was deemed to be interested in 93,081,102 H shares (L), 1,390,990 H shares (S) and 84,952,436 H shares (P). 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 LLC, 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 LLC, JPMorgan Asset Management International Limited, JPMorgan Chase Bank, N.A. and 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) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by The Capital Group Companies, Inc. on 28 October 2017, The Capital Group Companies, Inc. was deemed to be interested in 84,862,456 H shares (L). These shares were held by Capital Research and Management Company, which was directly controlled by The Capital Group Companies, Inc. The Capital Group Companies, Inc. was deemed to be interested in the shares held by such company by virtue of the SFO.
(5) 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 of 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 November 12, 2010.
(6) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by Citigroup Inc. on 13 October 2017, Citigroup Inc. was deemed to be interested in 59,259,053 H shares (L), 1,298,262 H shares (S) and 55,607,177 H shares (P). These shares were held by Citigroup LLC, Citibank, N.A., Citigroup Global Markets Holdings Inc., Citigroup Financial Products Inc., Citigroup Global Markets Inc., Citigroup Global Markets (International) Finance AG, Citigroup Global Markets Europe Limited, Citigroup Global Markets Limited, Citicorp Banking Corporation, Citibank (Switzerland) AG and Citicorp 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.
(7) Based on the Disclosure of the Interest of Corporate Substantial Shareholder Notice filed by BlackRock, Inc. on 17 November 2017, BlackRock, Inc. was deemed to be interested in 55,938,298 H shares (L). 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 Fund Managers Limited, BlackRock Life Limited, BlackRock (Singapore) Limited, BlackRock UK Holdco Limited, BlackRock Asset Management (Schweiz) AG, and BlackRock Investment Management (Taiwan) 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.

– 47 –

APPENDIX II

GENERAL INFORMATION

(8) 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.
(9) These shares were held by Eastern Airlines, a subsidiary of Eastern Holding. Eastern Holding was deemed to be interested in the shares held by Eastern Airlines by virtue of the SFO.
(10) These shares were held by China Eastern Airlines Wuhan Company Limited, a subsidiary of Eastern Holding. Eastern Holding was deemed to be interested in the shares held by China Eastern Airlines Wuhan Company Limited by virtue of the SFO.
(11) 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.
(12) 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 2016, 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 2016, 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.

– 48 –

APPENDIX II

GENERAL INFORMATION

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.

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 Eastern 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 2016, 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.

– 49 –

APPENDIX II

GENERAL INFORMATION

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 agreement between the Company and Eastern Airlines in relation to the Eastern 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.

– 50 –

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 Heyuan Royal Garden Hotel, District 2, Courtyard 57, Bianhe Road, Houshayu, Shunyi District, Beijing, the PRC, at 10 a.m. on Tuesday, 30 January 2018 to consider and, if thought fit, approve the following resolutions 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 2020 to the Directors to carry out the Eastern Airlines Transactions and all the transactions contemplated thereunder; and
(b) the Proposed Annual Caps for the Eastern Airlines Transactions for the three years ending 31 December 2020,

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

SPECIAL RESOLUTION

To consider and approve the proposed amendments to the Articles of Association, details of which are more particularly described in the circular to the shareholders of the Company dated 13 December 2017.

By order of the Board TravelSky Technology Limited Cui Zhixiong Chairman

Beijing, the PRC

13 December 2017

– 51 –

NOTICE OF EGM

Liaison office of the Company in Beijing: No.7, Yumin Street,

Houshayu, Shunyi District, Beijing 101318, the PRC

Notes:

Details of the above resolutions are set out in the circular of the Company dated 13 December 2017.
For the purpose of determining Shareholders’ entitlement to attend the EGM, the H Share register of members of the Company will be closed from Sunday, 31 December 2017 to Tuesday, 30 January 2018 (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 Friday, 29 December 2017. 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.7, Yumin Street, Houshayu, Shunyi District, Beijing 101318, the PRC, on or before Tuesday, 9 January 2018 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.

– 52 –

AI assistant

TravelSky Technology Limited — Proxy Solicitation & Information Statement 2017

49402_rns_2017-12-12_fe0c6477-d0f8-4fea-a360-5d9dd704962c.pdf

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

EASTERN AIRLINES TRANSACTIONS; PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; AND NOTICE OF EGM

DEFINITIONS

EASTERN AIRLINES TRANSACTIONS; PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION; AND NOTICE OF EGM

1. INTRODUCTION

2. EASTERN 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 EASTERN AIRLINES TRANSACTIONS UNDER THE WAIVER

LETTER FROM THE BOARD

B INTERNAL CONTROL AND MECHANISM TO REGULATE THE EASTERN AIRLINES TRANSACTIONS

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 Eastern 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 Eastern Airlines

3. PROPOSED AMENDMENTS TO ARTICLES OF ASSOCIATION

4. EGM

4. RECOMMENDATIONS

5. GENERAL

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

CONTINUING CONNECTED TRANSACTIONS: EASTERN AIRLINES TRANSACTIONS

INTRODUCTION

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

I. Background

1. Information on the Group

2. Information on Eastern Airlines

3. The PRC economy and aviation industry

II. The Eastern Airlines Transactions

1. Background of the Eastern Airlines Transactions

III. The Proposed Annual Caps

1. The Proposed Annual Caps

2. The historical transaction amounts of existing Eastern Airlines Transactions

3. Basis of the determination of the Proposed Annual Caps

4. Reasons for and benefits of entering into the Eastern Airlines Transactions

LISTING RULES IMPLICATIONS

RECOMMENDATION

Yours faithfully, For and on behalf of

RHB Capital Hong Kong Limited

RESPONSIBILITY STATEMENT

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

SPECIAL RESOLUTION

More from TravelSky Technology Limited

TravelSky Technology Limited Proxy Solicitation & Information Statement 2017