BEIJING CAPITAL INTERNATIONAL AIRPORT COMPANY LIMITED

Beijing Capital International Airport Company Limited

694 CNE100000221

Airport Services

Market Closed - Hong Kong S.E. Other stock markets 04:09:09 2024-04-25 am EDT			5-day change	1st Jan Change
2.42 ^HKD	-0.41%		+2.54%	+5.68%

Mar. 29	Beijing Capital International Airport's Losses Shrink 52% in 2023 as Revenue Soars 104%	MT
Mar. 27	Beijing Capital International Airport Company Limited Reports Earnings Results for the Full Year Ended December 31, 2023	CI

Beijing Capital International Airport : (1) CONTINUING CONNECTED TRANSACTIONS SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT AND (2) PROFIT DISTRIBUTION ADJUSTMENT PROPOSAL

December 03, 2019 at 09:08 am EST

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, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in BEIJING CAPITAL INTERNATIONAL AIRPORT CO., LTD., you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer 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.

CONTINUING CONNECTED TRANSACTIONS SUPPLY OF AVIATION SAFETY AND

SECURITY GUARD SERVICES AGREEMENT

AND

(2) PROFIT DISTRIBUTION ADJUSTMENT PROPOSAL

Independent Financial Adviser to the Independent Board Committee and

the Independent Shareholders

Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed "Definitions" in this circular.

A letter from the Board is set out on pages 4 to 16 of this circular. A letter from the Independent Board Committee is set out on pages 17 to 18 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 36 of this circular.

The Company will convene the EGM at 9:00 a.m. on Thursday, 19 December 2019 at the Conference Room, Room 112, the Office Building of the Company, No. 9 Siwei Road, Capital Airport, Beijing, the PRC. The notice and supplemental notice convening the EGM have been despatched to the Shareholders on Friday, 1 November 2019 and Friday, 22 November 2019, respectively.

The Company has despatched the reply slips for the EGM on Friday, 1 November 2019. Shareholders who intend to attend the EGM are requested to complete and return the reply slips in accordance with the instructions printed thereon as soon as possible and in any event by not later than Thursday, 28 November 2019.

Whether or not you are able to attend the meeting, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 24 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

3 December 2019

CONTENTS
	Pages
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix - General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37

- i -

DEFINITIONS

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

"associate(s)"	has the same meaning as ascribed to it in the Listing Rules
"Aviation Security Company"	Capital Airport Aviation Security Co., Ltd., a limited liability
	company incorporated in the PRC which is a wholly-owned
	subsidiary of the Parent Company
"Beijing Capital Airport"	Beijing Capital International Airport
"Board"	the board of Directors
"Company"	Beijing Capital International Airport Co., Ltd.* (北京首都國際機場
	股份有限公司), a sino-foreign joint stock limited company
	incorporated in the PRC with limited liability, and the H Shares
	of which are listed on the Stock Exchange
"connected person(s)"	has the same meaning as ascribed to it in the Listing Rules
"connected transaction"	has the same meaning as ascribed to it in the Listing Rules
"controlling shareholder"	has the same meaning as ascribed to it in the Listing Rules
"Daxing Airport"	Beijing Daxing International Airport
"Director(s)"	the director(s) of the Company
"EGM"	the extraordinary general meeting of the Company to be held at
	9:00 a.m. on Thursday, 19 December 2019 for the consideration
	and the approval of, among other things, the Supply of Aviation
	Safety and Security Guard Services Agreement, the transactions
	contemplated thereunder and its annual caps, and the profit
	distribution adjustment proposal of the Company
"Former Supply of Aviation Safety	the supply of aviation safety and security guard services agreement
and Security Guard Services	entered into between the Company and Aviation Security Company
Agreement"	on 25 October 2017, details of which were disclosed in the
	announcement of the Company dated 25 October 2017 and the
	circular of the Company dated 15 November 2017
"H Share(s)"	the overseas listed foreign share(s) of the Company with a nominal
	value of RMB1.00 each in the share capital of the Company, listed
	on the Main Board of the Stock Exchange and traded in Hong Kong
	dollars

- 1 -

	DEFINITIONS
"Independent Board Committee"	an independent committee of the Board comprising all independent
	non-executive Directors, namely Mr. Japhet Sebastian Law, Mr.
	Jiang Ruiming, Mr. Liu Guibin and Mr. Zhang Jiali, established to
	advise the Independent Shareholders in respect of the Supply of
	Aviation Safety and Security Guard Services Agreement and the
	transactions contemplated thereunder
"Independent Financial Adviser"	Platinum Securities Company Limited, a licensed corporation under
	the SFO to carry on Type 1 (dealing in securities) and Type 6
	(advising on corporate finance) regulated activities under the SFO,
	being the independent financial adviser appointed by the Company
	to advise the Independent Board Committee and the Independent
	Shareholders in respect of the Supply of Aviation Safety and
	Security Guard Services Agreement and the transactions
	contemplated thereunder
"Independent Shareholder(s)"	Shareholders other than the Parent Company, its associates and any
	Shareholder who has a material interest in the Supply of Aviation
	Safety and Security Guard Services Agreement and the transactions
	contemplated thereunder
"Inside Information Announcement"	the inside information announcement of the Company dated 15
	November 2019 in respect of the profit distribution adjustment
	proposal of the Company
"Latest Practicable Date"	28 November 2019, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information referred to in this circular
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock
	Exchange
"Parent Company"	Capital Airports Holding Company* (首都機場集團公司), an
	enterprise established in the PRC and the controlling shareholder
	of the Company
"PRC"	the People's Republic of China
"RMB"	Renminbi, the lawful currency of the PRC
"SFO"	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
"Share(s)"	ordinary share(s) of RMB1.00 each in the share capital of the
	Company, comprising domestic shares and H Shares

- 2 -

	DEFINITIONS
"Shareholder(s)"	holder(s) of Shares
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Supply of Aviation Safety and	the supply of aviation safety and security guard services agreement
Security Guard Services	dated 30 October 2019 entered into between the Company and
Agreement"	Aviation Security Company
"Transaction Announcement"	the announcement of the Company dated 30 October 2019 in
	respect of the Supply of Aviation Safety and Security Guard
	Services Agreement, the transactions contemplated thereunder and
	its annual caps
"%"	per cent
* For identification purposes only

- 3 -

LETTER FROM THE BOARD

Executive Directors:	Registered office:
Mr. Liu Xuesong	Capital Airport, Beijing
Mr. Han Zhiliang	The PRC
Ms. Gao Lijia
	Principal place of business in Hong Kong:
Non-executive Directors:	37/F, One Taikoo Place
Mr. Gao Shiqing	Taikoo Place
Mr. Yao Yabo	979 King's Road
Mr. Ma Zheng	Hong Kong
Independent Non-executive Directors:
Mr. Japhet Sebastian Law
Mr. Jiang Ruiming
Mr. Liu Guibin
Mr. Zhang Jiali
	3 December 2019
To the Shareholders
Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS SUPPLY OF AVIATION SAFETY AND

SECURITY GUARD SERVICES AGREEMENT

AND

(2) PROFIT DISTRIBUTION ADJUSTMENT PROPOSAL

INTRODUCTION

Reference is made to the Transaction Announcement and the Inside Information Announcement.

As disclosed in the Transaction Announcement, on 30 October 2019, the Company entered into the Supply of Aviation Safety and Security Guard Services Agreement with Aviation Security Company, pursuant to which Aviation Security Company agreed to provide aviation safety and security guard services to Beijing Capital Airport for a term of three years commencing from 1 January 2020 to 31 December 2022.

- 4 -

LETTER FROM THE BOARD

As disclosed in the Inside Information Announcement, on 15 November 2019, the Board approved and adopted the adjustment proposal to the profit distribution policy of the Company, which is subject to approval by the Shareholders.

The purpose of this circular is to (i) provide you with details of the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder; (ii) provide you with details of the profit distribution adjustment proposal of the Company; and (iii) set out the letters of advice from the Independent Board Committee and the Independent Financial Adviser.

SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT
Background

Reference is made to the announcement of the Company dated 25 October 2017 and the circular of the Company dated 15 November 2017 in respect of, among other things, the Former Supply of Aviation Safety and Security Guard Services Agreement. The Former Supply of Aviation Safety and Security Guard Services Agreement will expire on 31 December 2019. As the parties intend to continue to carry out transactions of a similar nature from time to time after 31 December 2019, the Company entered into the Supply of Aviation Safety and Security Guard Services Agreement as a renewal agreement.

Material Terms of the Supply of Aviation Safety and Security Guard Services Agreement

Date

30 October 2019

Parties

The Company; and
Aviation Security Company.

Services

Pursuant to the Supply of Aviation Safety and Security Guard Services Agreement, Aviation Security Company agreed to provide aviation safety and security guard services to the Company at Beijing Capital Airport, which include carrying out (i) security inspection on persons and goods, such as travellers, baggage, air cargoes, staff members and vehicles; (ii) maintenance and safeguard of aircrafts; (iii) control of passageways; (iv) explosion protection in front of terminals; (v) maintenance and repair of security inspection equipment; and (vi) other works related to aviation safety and security guard business in designated areas, and Aviation Security Company also agreed to make corresponding arrangement for work in relation to logistics support.

- 5 -

LETTER FROM THE BOARD

Term

The Supply of Aviation Safety and Security Guard Services Agreement is for a term of three years commencing from 1 January 2020 to 31 December 2022.

Condition precedent

The transactions under the Supply of Aviation Safety and Security Guard Services Agreement are subject to the approval by the Independent Shareholders at the EGM.

Consideration and payment

The annual service fees payable by the Company to Aviation Security Company for the provision of aviation safety and security guard services in a particular year are determined with reference to the actual fees paid by the Company to Aviation Security Company for the provision of aviation safety and security guard services for the preceding year and taking into account the following factors and their impact on the amount of annual fees:

the growth rate of passenger throughput at Beijing Capital Airport: the changes in passenger throughput would lead to adjustments to the scope of safety and security guard business directly involving passenger procedures and, as a result, may correspondingly increase or decrease the costs of such services; and
the increase in the scope of aviation safety and security guard services to be provided by Aviation Security Company: this factor is not directly related to the changes in passenger throughput. The scope of aviation safety and security guard services may need to be adjusted due to business needs of Beijing Capital Airport or the need to adjust the mode of inspection or revamp the security inspection measures in view of the requirements based on the overall situation for safeguard of national security. As a result, additional relevant fees may be incurred.

As disclosed in the section headed "Pricing policy" below, the service fees are based on actual cost without any profit margin.

The above service fees are payable by the Company on a monthly basis by way of transfer and remittance.

- 6 -

LETTER FROM THE BOARD

Historical figures

The following table shows the historical figures of total service fees payable by the Company to Aviation Security Company in respect of the provision of the aviation safety and security guard services:

	For the year	For the year
	ended 31	ending 31
	December 2018	December 2019
	(RMB'000)	(RMB'000)
Service fees for the provision of aviation safety and	713,985	759,430
security guard services		(Note 1)
Annual caps	766,042	806,042

Note 1: The service fee payable by the Company for the provision of aviation safety and security guard services for the ten months ended 31 October 2019 is approximately RMB546,000,000. Since the audited figures for the service fee payable by the Company for the provision of aviation safety and security guard services for the year ending 31 December 2019 are not yet available, it is an estimated figure only. The Company expects that the relevant service fee payable for the year ending 31 December 2019 will not exceed its annual cap.

Annual caps

It is expected that the maximum aggregate annual fees payable by the Company to Aviation Security Company under the Supply of Aviation Safety and Security Guard Services Agreement for the three years ending 31 December 2020, 31 December 2021 and 31 December 2022 shall not exceed RMB703,490,000, RMB673,140,000 and RMB733,530,000, respectively.

The above annual caps are determined with reference to (i) the historical service fees payable by the Company to Aviation Security Company; (ii) the expected adjustments to the scope of the safety and security guard services to be provided in the next three years; (iii) the anticipated growth in labour costs for the provision of aviation safety and security guard services at Beijing Capital Airport in the next three years; and (iv) the anticipated changes of the passengers throughput in the next three years.

The proposed annual cap of RMB703,490,000 for the year ending 31 December 2020 represents a decrease of approximately 7.37% as compared with the estimated amount of service fees of RMB759,430,000 for the year ending 31 December 2019 because (i) on the one hand, in view of the diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughput and the proposals for flight slots resources allocation for the year ending 31 December 2020 set out in the "Plan on the Airlines Transfer, Commencement of Operations of Beijing Daxing International Airport, and the "One City, Two Airports" Allocation of Flight Slots Resources" (《北京大興國際機場轉場投運及"一市兩場"航班時刻資源配置方案》) issued by CAAC (the "CAAC Plan"), it is expected that the annual service fee for the year of 2020 will decrease by 10%; and (ii) on the other hand, in view of the adjustments of the scope of safety and security guard

- 7 -

LETTER FROM THE BOARD

services at Beijing Capital Airport and the reasonable increase in labour costs based on the internal estimates conducted by the quality and safety department of the Company in respect of the increase in demand for aviation safety and security guard services and the investment needed to revamp the provision of such services at Beijing Capital Airport for the year ending 31 December 2020, taking into account the increasingly stressful circumstances of air defence and anti-terrorism and the need to provide support for important events held in Beijing (the "Internal Estimates"), the service fee for the year of 2020 is expected to increase by approximately 2.63%.

The proposed annual cap of RMB673,140,000 for the year ending 31 December 2021 represents a decrease of approximately 4.31% as compared with the proposed annual cap of RMB703,490,000 for the preceding year (i.e. the year ending 31 December 2020) because (i) on the one hand, in view of the diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughput and the proposals for flight slots resources allocation for the year ending 31 December 2021 set out in the CAAC Plan, it is expected that the annual service fee for the year of 2021 will decrease by 10%; and (ii) on the other hand, in view of the adjustments of the scope of safety and security guard services at Beijing Capital Airport and the reasonable increase in labour costs based on the Internal Estimates for the year ending 31 December 2021, the service fee for the year of 2021 is expected to increase by approximately 5.69%.

The proposed annual cap of RMB733,530,000 for the year ending 31 December 2022 represents an increase of approximately 8.97% as compared with the proposed annual cap of RMB673,140,000 for the preceding year (i.e. for the year ending 31 December 2021) because (i) in view of the improvement of diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughput and the proposals for flight slots resources allocation for the year ending 31 December 2022 set out in the CAAC Plan, it is expected that the annual service fee for the year of 2022 will increase by 6%; and (ii) in view of the adjustments of the scope of safety and security guard services at Beijing Capital Airport and the reasonable increase in labour costs based on the Internal Estimates for the year ending 31 December 2022, the service fee for the year of 2022 is expected to further increase by approximately 2.97%.

In particular, the increase of costs incurred due to the adjustments of scope of safety and security guard services (i.e. 5.69%) for the year of 2021 is larger than the increments for the years of 2020 and 2022 (i.e. 2.63% and 2.97%) as a result of the anticipated increase in demand for investment in aviation security for the 2022 Winter Olympics (such as innovation for business management, explosion-proof inspection and security control) with such investment expected to commence from the second half of 2021. The diversion effect from the commencement of operation of Daxing Airport is expected to be improved and contribute to a 6% increase in the annual service fee for the year ending 31 December 2022 in view of the measures set out in the CAAC Plan, pursuant to which the flight slots resources at Beijing Capital Airport are expected to recover and the business volume of aviation safety and security guard services at Beijing Capital Airport is expected to rebound for the same period.

- 8 -

LETTER FROM THE BOARD

Pricing policy

Since Aviation Security Company is the only company which can provide security inspection services to tourists in the Beijing Capital Airport area and it has the expertise and experience in the provision of aviation safety and security guard services at Beijing Capital Airport, there are no comparable quotes from independent third parties available in the market. The services under the Supply of Aviation Safety and Security Guard Services Agreement are at cost basis without any profit margin charged by Aviation Security Company.

Given that the provision of aviation safety and security guard services essentially involves labour procurement, both parties agreed to use labour costs and expenses as the basis for determining the annual fees for the provision of such services in line with the Former Supply of Aviation Safety and Security Guard Services Agreement, such that the labour costs and expenses equals to the aggregate amount of operating personnel costs, management personnel costs, daily costs and expenses, and related taxes as follow:

operating personnel costs refer to the costs for employing various types of operating personnel, namely (i) security inspection personnel (who operate security inspection machines), (ii) security inspection personnel (who do not operate security inspection machines) and (iii) non-security inspectors. The operating personnel costs equal to the unit cost for operating personnel multiplied by the number of operating personnel required. The unit cost for operating personnel is determined with reference to, and shall not be higher than, the yearly average wages of employees in Beijing as announced by the Beijing Municipal Bureau of Statistics, and the number of operating personnel shall be determined by the need to take into account the increasingly stressful circumstances of air defence and anti-terrorism at Beijing Capital Airport and the need to provide support for important events held in Beijing;
management personnel costs equal to the unit cost for employing management personnel multiplied by the number of management personnel required. The unit cost for management personnel is higher than the unit cost for operating staff given the management expertise of management personnel, but it is determined with reference to, and shall not be higher than, the yearly average wages of employees in Beijing as announced by the Beijing Municipal Bureau of Statistics. The number of management personnel required is also determined on the basis of the need for air-defence and anti- terrorism at Beijing Capital Airport taking into account the support for important events held in Beijing;
daily costs and expenses refer to the overhead costs for the provision of aviation safety and security guard services (including the costs of consumables, materials and equipment, equipment maintenance and repair, and energy consumption) which correspond to the total number of operating personnel and management personnel required, and
related taxes are calculated according to national regulations.

- 9 -

LETTER FROM THE BOARD

Furthermore, according to the standards of passengers' waiting time for security inspection as recommended by the CAAC, the Company and the Aviation Security Company agreed to implement a reward and punishment mechanism, pursuant to which if the Aviation Security Company fails to meet the recommended standards of passengers' waiting time for security inspection, the Aviation Security Company shall pay penalties to the Company; but if the Aviation Security Company outperforms the recommended standards of passengers' waiting time for security inspection, the Aviation Security Company is entitled to receive monetary rewards from the Company. The amount of rewards and penalties shall be calculated with reference to a sliding scale of the extent to which the Aviation Security Company has out-performed or under-performed the recommended standards of passengers' waiting time, and the rewards and penalties shall be settled by the Company or the Aviation Security Company (as the case may be) on a monthly basis.

Internal control on pricing

The Company has implemented a management system to monitor the pricing standards for the transactions under the Supply of Aviation Safety and Security Guard Services Agreement to ensure that the terms are on normal commercial terms as follows:

1. Prior to the entering into of the Supply of Aviation Safety and Security Guard Services Agreement, the quality and safety department of the Company verified the unit labour costs (which are initially determined in line with the historical amount of unit labor costs under the Former Supply of Aviation Safety and Security Guard Services Agreement, followed by cross-checks against the fees charged by Aviation Security Company to other independent third parties for similar services, as well as site visits to various airports in the PRC for comparison of the service fees charged by the aviation security providers to other airports against that charged by the Aviation Security Company to the Company), and attended to the negotiation, signing and execution of the Supply of Aviation Safety and Security Guard Services Agreement. Thereafter, the quality and safety department of the Company is also responsible for the subsequent monitoring and ratings in respect of the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement. The finance department of the

- 10 -

LETTER FROM THE BOARD

Company and the secretariat to the Board are responsible for gathering information of connected transactions and monitoring the implementation of connected transactions, with a view to conducting assessment of the fairness of the transaction terms and pricing terms.

Prior to the signing of the definitive agreements and the implementation of the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement, the principal officers in the quality and safety department of the Company who are responsible for handling the above-mentioned matters shall lodge applications with the quality and safety department, the finance department, legal services department and the secretariat to the Board. Such applications would only be approved upon a preliminary review conducted by the managers of the above respective departments of the Company, followed by a final review at the general manager office meeting in accordance with the relevant internal control policies of the Company. After the above internal review process based on different functions of various departments of the Company has been completed, the relevant definitive agreements will be considered and approved by the Board.
The independent non-executive Directors of the Company have reviewed and would continue to review the transactions under the Supply of Aviation Safety and Security Guard Services Agreement in accordance with the Listing Rules to ensure that such transactions are entered into on normal commercial terms, are fair and reasonable, and are carried out pursuant to its contractual terms.
The auditors of the Company will conduct annual review on the transactions under the Supply of Aviation Safety and Security Guard Services Agreement in relation to the pricing policies and annual caps contemplated thereunder in accordance with the Listing Rules.

Reasons for and benefits of entering into the Supply of Aviation Safety and Security Guard

Services Agreement

Aviation Security Company is the only company which can provide security inspection services on tourists in the Beijing Capital Airport area and has the expertise and experience in the provision of aviation safety and security guard services at Beijing Capital Airport. In previous years, the Company established satisfactory cooperation record with Aviation Security Company. The provision of aviation safety and security guard services by Aviation Security Company at Beijing Capital Airport is able to ensure the safety of the tourists, aircrafts and other personnel at Beijing Capital Airport.

In light of the above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Supply of Aviation Safety and Security Guard Services Agreement are on normal commercial terms and are fair and reasonable, and the transactions under the Supply of Aviation Safety and Security Guard Services Agreement are in the ordinary and usual course of business of the Company and in the interest of the Company and the Shareholders as a whole.

- 11 -

LETTER FROM THE BOARD

Internal Control Measures on Review of Annual Caps

In respect of the Supply of Aviation Safety and Security Guard Services Agreement, the Company has the following internal control measures in place to ensure that the annual caps will not be exceeded:

The finance department of the Company provides the secretariat to the Board with information in relation to the actual transaction amounts on a monthly basis.
The secretariat to the Board is responsible for monitoring such transactions to ensure that the total amount of transactions does not exceed the annual caps.
If such amount of transactions is estimated to exceed the relevant annual cap, the person-in-charge of the relevant department of the Company will be notified so that the scale of transactions in the future may be re-estimated and arrangements may be made to issue announcements and/or to obtain the relevant approvals from the Board and the Independent Shareholders in accordance with the requirements of the Listing Rules.

General

The Company is principally engaged in the operation of Beijing Capital Airport.

The Parent Company is principally engaged in the provision of ground handling services for domestic and international aviation enterprises, including supply of water, electricity, steam and energy; airport management services and counter services.

Aviation Security Company is principally engaged in the provision of aviation safety and security guard services to airports in China, which include, among other things, security inspection on passengers, baggage, air cargoes, air mails and passageways; field inspections for special and chartered aircrafts; safeguard on passageways in terminal areas, explosion-proof inspection in front of the terminals, and aircraft safeguard.

Board's Approval

The Supply of Aviation Safety and Security Guard Services Agreement was approved by the

Board.

As at the Latest Practicable Date, there is no overlapping directors between the Company and the Parent Company or the Aviation Security Company. Certain executive and non-executive Directors concurrently serve as the general manager and deputy general managers of the Parent Company only, and there is no overlapping senior management between the Company and the Aviation Security Company. Moreover, none of the Directors personally has any material interest in the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement. Therefore, none of the Directors has abstained from voting at the Board meeting to approve the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder.

- 12 -

LETTER FROM THE BOARD

Listing Rules Implications

The Parent Company is the controlling shareholder of the Company, holding approximately 58.96% of the issued share capital of the Company as at the Latest Practicable Date. Since Aviation Security Company is a subsidiary of the Parent Company, Aviation Security Company is therefore a connected person of the Company. Accordingly, the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Given that the highest of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Supply of Aviation Safety and Security Guard Services Agreement is more than 5%, the transactions under the Supply of Aviation Safety and Security Guard Services Agreement are subject to the reporting, announcement and Independent Shareholders'approval requirements under Chapter 14A of the Listing Rules.

Independent Board Committee

Pursuant to the Listing Rules, the Independent Board Committee (comprising all the independent non-executive Directors) has been formed to advise the Independent Shareholders on the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder.

A letter from the Independent Board Committee to the Independent Shareholders is set out on pages 17 to 18 of this circular.

Appointment of Independent Financial Adviser

The Company has appointed Platinum Securities Company Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder.

A letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 19 to 36 of this circular.

THE PROFIT DISTRIBUTION ADJUSTMENT PROPOSAL

On 15 November 2019, the Board approved and adopted the following adjustment proposal to the profit distribution policy, which is subject to approval by the Shareholders.

The annual cash dividend ratio of the Company will be not less than 45% of the net profit of that year for the four financial years from 2019 to 2022. The amount of annual dividend of the Company will be not less than RMB700 million for each of the financial years from 2020 to 2022. Subsequent to 2022, the Company may re-assess and adjust the profit distribution plan based on the actual circumstances at an appropriate time.

- 13 -

LETTER FROM THE BOARD

Reasons for Adjustment to the Profit Distribution Plan

Following the official commencement of operations of the Daxing Airport on 25 September 2019, the Company anticipated that, during the period from 2019 to 2022, the diversion effect of the Daxing Airport will have certain impact on the air traffic volume of Beijing Capital Airport, with the Company's net profit expected to decrease to a certain extent when compared with that of 2018.

The Company attaches great importance to the return for the Shareholders. After taking into account factors such as the above-mentioned diversion effect, together with the actual circumstances of the Company, the Company has carried out adequate research and analysis of the feasibility of the adjustment proposal to the profit distribution policy. To reflect the investment value, the Company proposes to increase the dividend ratio to an appropriate level and determine a minimum amount of dividend to be distributed, so as to give back to the market, enhance the confidence of investors and ensure stable investment return for the Shareholders during a period of fluctuations in the profit of the Company.

THE EGM

The EGM will be convened at 9 a.m. on Thursday, 19 December 2019 at the Conference Room, Room 112, the Office Building of the Company, No. 9 Siwei Road, Capital Airport, Beijing, the PRC to consider and, if thought fit, pass resolutions to approve, among other things, the Supply of Aviation Safety and Security Guard Services Agreement, the transactions contemplated thereunder and its annual caps, and the profit distribution adjustment proposal of the Company.

The relevant resolution in respect of the Supply of Aviation Safety and Security Guard Services Agreement, the transactions contemplated thereunder and its annual caps will be proposed by way of ordinary resolution at the EGM for approval by the Independent Shareholders.

The relevant resolution in respect of the profit distribution adjustment proposal of the Company will be proposed by way of ordinary resolution at the EGM for approval by the Shareholders.

The notice convening the EGM and the proxy forms and reply slips for the EGM were despatched to the Shareholders on Friday, 1 November 2019. The supplemental notice convening the EGM and the revised proxy forms for the EGM were despatched to the Shareholders on Friday, 22 November 2019.

Whether or not you are able to attend the meeting, please complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company's H Share registrar, Hong Kong Registrars Limited at 17M Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong, not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person in the EGM or any adjournment thereof if you so desire.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll.

- 14 -

LETTER FROM THE BOARD

IV. CONNECTED PERSONS WHO ARE REQUIRED TO ABSTAIN FROM VOTING ON THE

RESOLUTIONS

Pursuant to Rule 14A.36 of the Listing Rules, any Shareholder with a material interest in the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder is required to abstain from voting on the relevant resolutions at the EGM.

Since the Parent Company is the controlling shareholder of the Company, holding approximately 58.96% of the issued share capital of the Company as at the Latest Practicable Date, and Aviation Security Company is a subsidiary of the Parent Company, the Parent Company and its associates must abstain from voting on the resolution approving the Supply of Aviation Safety and Security Guard Services Agreement at the EGM. As at the Latest Practicable Date and to the best knowledge, information and belief of the Directors, save as disclosed in this circular, none of the other Shareholders must abstain from voting on the relevant resolutions.

BOOK CLOSURE PERIOD

The register of members of the Company will be temporarily closed from Tuesday, 19 November 2019 to Thursday, 19 December 2019 (both days inclusive), during which period no transfer of Shares will be registered. Shareholders of the Company whose names appear on the register of members of the Company on Thursday, 19 December 2019 are entitled to attend and vote at the EGM.

In order to qualify for the entitlement to attend and vote at the EGM, holders of H Shares whose transfers have not been registered shall deposit all transfer documents together with the relevant share certificates at the Company's H Share registrar, Hong Kong Registrars Limited at Shops 1712-1716, 17/F Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong on or before 4:30 p.m. on Monday, 18 November 2019.

VI. RECOMMENDATION

The Board (including independent non-executive Directors) considers that the resolutions to be proposed at the EGM, as disclosed in the notice of the EGM dated 1 November 2019 and the supplemental notice of the EGM dated 22 November 2019, is in the interest of the Company and the Shareholders as a whole, and accordingly, recommends the Shareholders to vote in favour of all resolutions to be proposed at the EGM.

Your attention is also drawn to the recommendation of the Independent Board Committee as set out on pages 17 to 18 to this circular and the letter from the Independent Financial Adviser as set out on pages 19 to 36 to this circular.

- 15 -

LETTER FROM THE BOARD

VII. ADDITIONAL INFORMATION

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

Yours faithfully,

By Order of the Board of

Beijing Capital International Airport Co., Ltd.

Meng Xianwei

Secretary to the Board

- 16 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

3 December 2019

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

SUPPLY OF AVIATION SAFETY AND

SECURITY GUARD SERVICES AGREEMENT

We refer to the circular issued by the Company to the Shareholders of the Company dated 3 December 2019 (the "Circular") of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as the Independent Board Committee to advise the Independent Shareholders as to whether, in our opinion, the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Shareholders as a whole. Platinum Securities Company Limited has been appointed as the Independent Financial Adviser to advise the Independent Shareholders and us in this respect.

We wish to draw your attention to the letter from the Board as set out on pages 4 to 16 of the Circular and the letter from the Independent Financial Adviser as set out on pages 19 to 36 of the Circular, which contain, among other things, their advice and recommendations regarding the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder.

Having considered the terms of the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder, and the advice and recommendation of the Independent Financial Adviser, we are of the view that the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Shareholders as a whole.

- 17 -

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to approve the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the Independent Board Committee

Beijing Capital International Airport Co., Ltd.

Mr. Japhet Sebastian Law, Mr. Jiang Ruiming,

Mr. Liu Guibin and Mr. Zhang Jiali

Independent non-executive Directors

- 18 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder, which has been prepared for the purpose of incorporation into this circular.

	21/F LHT Tower
	31 Queen's Road Central
	Hong Kong
Telephone	(852) 2841 7000
Facsimile	(852) 2522 2700
Website	www.platinum-asia.com

3 December 2019

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTION

SUPPLY OF AVIATION SAFETY AND

SECURITY GUARD SERVICES AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Supply of Aviation Safety and Security Guard Services Agreement and the transactions contemplated thereunder (the "Transactions"). Details of the Supply of Aviation Safety and Security Guard Services Agreement are contained in the circular of the Company dated 3 December 2019 (the "Circular"). Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

In our capacity as the Independent Financial Adviser, our role is to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Supply of Aviation Safety and Security Guard Services Agreement and the proposed annual caps are fair and reasonable and are in the interests of the Company and the Shareholders as a whole and to give independent advice to the Independent Board Committee and the Independent Shareholders.

In formulating our opinion, we have relied on the information and facts supplied by, the opinions expressed by and the representations of, the management of the Company, including those facts, opinions and representations set out in the Supply of Aviation Safety and Security Guard Services Agreement. We have also reviewed, among other things, the followings:

the announcements of the Company dated 25 October 2017 (the "Previous Announcement") and 30 October 2019 (the "Announcement");
the Supply of Aviation Safety and Security Guard Services Agreement;

- 19 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the audited annual report of the Company for the year ended 31 December 2018 (the "2018 Annual Report"); and
the unaudited interim report of the Company for the six months ended 30 June 2019 (the "2019 Interim Report").

We have assumed that all information, facts, opinions and representations contained in the Transactions are true, complete and accurate in all material respects and we have relied on the same. The Directors have confirmed that they take full responsibility for the contents of the Supply of Aviation Safety and Security Guard Services Agreement and have made all reasonable inquiries that no material facts have been omitted from the information supplied to us.

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

We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy or completeness of the information and representations provided to us by the Company. Furthermore, we have no reason to suspect the reasonableness of the opinions and representations expressed by the Directors and/or management of the Company which have been provided to us. In line with normal practice, we have not, however, conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the Company. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our opinion regarding the Transactions.

During the past two years, Mr. Li Lan, for and on behalf of Platinum, had signed the opinion letters from the Independent Financial Adviser contained in the Company's circulars dated (i) 20 June 2019 in respect of the connected transaction in connection with the non-public issuance by way of capitalisation of capital reserve (exclusively state-owned) and the specific mandates, (ii) 7 August 2018 in respect of the discloseable and connected transaction in relation to the GTC assets transfer agreement, (iii) 5 December 2017 in respect of the continuing connected transactions and (iv) 15 November 2017 in respect of the continuing connected transactions. The past engagements were limited to providing independent advisory services to the Independent Board Committee and the Independent Shareholders pursuant to the Listing Rules. Under the past engagements, Platinum received normal professional fees from the Company. Notwithstanding the past engagement during the past two years, as at the Latest Practicable Date, we were independent from, and were not associated with the Company or any other party to the Transactions. We will receive a fee from the Company for our role as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Transactions. Apart from this normal professional fee payable to us in connection with this appointment, no arrangement exist whereby we will receive any fees or benefits from the Company or any other parties to the Transactions or their respective substantial shareholder(s) or connected person(s), as defined under the Listing Rules.

- 20 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising Mr. Japhet Sebastian Law, Mr. Jiang Ruiming, Mr. Liu Guibin and Mr. Zhang Jiali, has been formed to advise the Independent Shareholders as to whether the terms of the Supply of Aviation Safety and Security Guard Services Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion as to whether the terms of the Transactions are fair and reasonable and in the interests of the Company and the Shareholders as a whole, we have considered the following principal factors:

1. Background of the Transactions

Reference is made to the Previous Announcement and the circular of the Company dated 15 November 2017 in respect of, among other things, the Former Supply of Aviation Safety and Security Guard Services Agreement. The Former Supply of Aviation Safety and Security Guard Services Agreement will expire on 31 December 2019. As the parties intend to continue to carry out transactions of a similar nature from time to time after 31 December 2019, the Company entered into the Supply of Aviation Safety and Security Guard Services Agreement as a renewal agreement.

On 30 October 2019, the Board announced that the Company entered into the Supply of Aviation Safety and Security Guard Services Agreement with Aviation Security Company, pursuant to which Aviation Security Company agreed to provide aviation safety and security guard services to Beijing Capital Airport for a term of three years commencing from 1 January 2020 to 31 December 2022.

Given that the highest of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Supply of Aviation Safety and Security Guard Services Agreement is more than 5%, the transactions under the Supply of Aviation Safety and Security Guard Services Agreement are subject to the reporting, announcement and Independent Shareholders' approval requirements under Chapter 14A of the Listing Rules.

2. Information on the Company, the Parent Company and the Aviation Security Company

2.1. The Company

The Company is a company incorporated as a joint stock company with limited liability in Beijing, the PRC on 15 October 1999 and is listed on the Stock Exchange on 1 February 2000.

- 21 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Company is principally engaged in the operating and managing aeronautical and nonaeronautical businesses and certain ancillary commercial businesses at the Beijing Capital Airport. Aeronautical business includes provision of aircraft landings and take-offs and passenger service facilities, ground support services and firefighting services for domestic and foreign air transportation enterprises. In respect of the Company's nonaeronautical business, it includes the franchise-based operation, entrusted management or licensing other parties for operation of ground handling agent services supplied for domestic and foreign airliners; in-flight catering services, duty free and other retail shops in the terminals; restaurants and other catering businesses in the terminals; leasing of advertising spaces inside and outside the terminals and other businesses at the Beijing Capital Airport. In addition, it also includes the self-operation of leasing properties in the terminals, provision of car parking services; and the provision of ground handling facilities for ground handling agent companies.

2.2. The Parent Company

As at the date of this letter, the Parent Company is holding approximately 58.96% of the issued share capital of the Company.

2.3. The Aviation Security Company

The Aviation Security Company is principally engaged in the provision of aviation safety and security guard services to airports in the PRC, which include security inspection on passengers, baggages, air cargoes, air mails and passageways; field inspections for special and chartered aircrafts; safeguard on passageways in terminal areas, aircraft safeguard, etc.

3. The Supply of Aviation Safety and Security Guard Services Agreement

3.1 Principal terms of the Supply of Aviation Safety and Security Guard Services Agreement

The principal terms of the Supply of Aviation Safety and Security Guard Services Agreement are set out as follows:

Date

30 October 2019

Parties

The Company; and
Aviation Security Company

- 22 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Services

Pursuant to the Supply of Aviation Safety and Security Guard Services Agreement, Aviation Security Company agreed to provide aviation safety and security guard services to the Company at Beijing Capital Airport, which include carrying out (i) security inspection on persons and goods, such as travellers, baggages, air cargoes, staff members and vehicles; (ii) maintenance and safeguard of aircrafts; (iii) control of passageways; (iv) explosion protection in front of terminals; (v) maintenance and repair of security inspection equipment; and (vi) other works related to aviation safety and security guard business in designated areas, and Aviation Security Company also agreed to make corresponding arrangement for work in relation to logistics support.

Term

The Supply of Aviation Safety and Security Guard Services Agreement is for a term of three years commencing from 1 January 2020 to 31 December 2022.

Condition precedent

The transactions under the Supply of Aviation Safety and Security Guard Services Agreement are subject to the approval by the Independent Shareholders at the EGM.

Consideration and payment

the growth rate of passenger throughput at Beijing Capital Airport: the changes in passenger throughput would lead to adjustments to the scope of safety and security guard business directly involving passenger procedures and, as a result, may correspondingly increase or decrease the costs of such services; and
the increase in the scope of aviation safety and security guard services to be provided by Aviation Security Company: this factor is not directly related to the changes in passenger throughput. The scope of aviation safety and security guard services may need to be adjusted due to business needs of the Beijing Capital Airport or the need to adjust the mode of inspection or revamp the security inspection measures in view of the requirements based on the overall situation for safeguard of national security. As a result, additional relevant fees would be incurred.

As disclosed in the section headed "Pricing policy" below, the service fees are based on actual cost without any profit margins.

- 23 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The above service fees are payable by the Company on a monthly basis by way of transfer and remittance.

We understand from the management of the Company that the Aviation Security Company undertook to the Company in the Supply of Aviation Safety and Security Guard Services Agreement that the fee charged by Aviation Security Company for the provision of aviation safety and security guard services in the Beijing Capital Airport shall not be higher than the fees it charges to other independent third parties (including certain airlines, private jet companies and logistic companies) in the Beijing Capital Airport. Regarding the pricing mechanism and procedures to approve the prices, we have reviewed the historical transaction record during the period from 2018 to the six months ended 30 June 2019 and note that the Company followed the abovementioned mechanism to determine the price of aviation safety and security guard services for the historical continuing connected transaction. It should be noted that the provision of aviation and safety and security guard services by the Aviation Security Company would be largely dependent on its manpower. The increase or decrease in the manpower resources provided by the Aviation Security Company to the Company is directly correlated to the passenger throughput in the Beijing Capital Airport and will correspondingly increase or decrease the costs of such services to the Company, while it is subject to the adjustment and special requirements on the mode of inspection or revamp the security inspection measures based on safeguard of national security level, taking into account that Beijing is the capital city of China and will hold national leaders meeting from time to time, as well as those of the national forum or events. In any case, the parties agreed to use the unit labour cost basis which refers to the amount of personnel expenses to provide the aviation safety and security guard services as to determine the annual transactions amounts under the Aviation Safety and Security Guard Services Agreement, which is in line with the historical practice to the pricing terms that the Company has entered into with the Aviation Security Company under the existing supply of aviation safety and security guard services agreement. Regarding accounting treatment, all the costs incurred in connection with the aviation safety and security guard costs would be classified as operating expenses of the Company. Moreover, we think that the related service fees are payable by the Company on a monthly basis is on normal commercial term which is more flexible to the Company to pay on the cost incurred instead of a prepayment. Therefore, we consider such pricing mechanism is effective, which ensures all transactions are conducted in accordance with the Supply of Aviation Safety and Security Guard Services Agreement and fees charged by Aviation Security Company is no less favourable to the Company and are on normal commercial terms. We are of the view that the pricing mechanism is on normal commercial terms, and fair and reasonable as far as the Independent Shareholders are concerned.

3.2 Reasons for and benefits of entering into of the Supply of Aviation Safety and Security Guard Services Agreement

We have discussed with the management of the Company in relation to the reasons for and benefits of obtaining aviation safety and security guard services from the Aviation Security Company and understand that Aviation Security Company has been providing aviation safety and security guard services to the Company for over a decade, and the Company is satisfied with the quality of services provided by the Aviation Security Company.

- 24 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As discussed in the "Letter from the Board" in the Circular, Aviation Security Company is the only company which can provide security inspection services on tourists in the Beijing Capital Airport area and has the expertise and experience in the provision of aviation safety and security guard services at Beijing Capital Airport. In previous years, the Company established satisfactory cooperation record with Aviation Security Company. The provision of aviation safety and security guard services by Aviation Security Company at Beijing Capital Airport is able to ensure the safety of the tourists, aircrafts and other personnel at Beijing Capital Airport.

We are of the view that the entering into the Supply of Aviation Safety and Security Guard Services Agreement is necessary for the operation of the Group and in the ordinary and usual course of business of the Company, and in the interests of the Company and the Shareholders as a whole.

3.3 Historical transaction amounts

Set out below the historical transaction amounts paid by the Company to Aviation Security Company in respect of the provision of the aviation safety and security guard services for the year ended 31 December 2018 and the estimated transaction amounts for the year ending 31 December 2019, and the relevant previous annual caps.

	For the	For the
	year ended	year ending
	31 December	31 December
	2018	2019
	(RMB'000)	(RMB'000)
Service fees for the provision of aviation	713,985	759,430
safety and security guard services		(Note 1)
Historical annual caps for provision of
aviation safety and security guard services	766,042	806,042
Utilisation rate (Note 2)	93.2%	94.2%

Notes:

The service fee payable by the Company for the provision of aviation safety and security guard services for the ten months ended 31 October 2019 is approximately RMB546,000,000. Since the audited figures for the service fee payable by the Company for the provision of aviation safety and security guard services for the year ending 31 December 2019 are not yet available, it is an estimated figure only. The Company expects that the relevant service fee payable for the year ending 31 December 2019 will not exceed its annual cap.
The historical utilisation rate for provision of aviation safety and security guard services is calculated based on the historical services fees for provision of aviation safety and security guard services divided by the historical annual caps for provision of aviation safety and security guard services.

- 25 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We note that the estimated transaction amounts will be increased by approximately 6.4% for the year ending 31 December 2019 which was mainly attributable to (i) the change in passenger throughput; (ii) the increased in labour costs in PRC, particularly in Beijing; (iii) the rise in costs due to the reinforcement of explosion-proof inspection conducted in front of the terminals of the Beijing Airport in response to the increasingly stressful circumstances of air defence and anti-terrorism; and (iv) special funds for adjustment of the management model and improvement of assessment, etc.

We consider that the increase in the transaction amounts is consistent with the performance of the Company's business and note that the annual caps for the year ended/ending 31 December 2018 and 31 December 2019 were substantially utilised or is expected to be substantially utilised, respectively.

3.4 Proposed annual caps and basis of determination for annual caps

The following table sets out the proposed annual caps of the expected maximum aggregate annual fee payable by the Company under the Supply of Aviation Safety and Security Guard Services Agreement for the years ending 31 December 2020, 2021 and 2022.

	For the year ending 31 December
	2020	2021	2022
	(RMB'000)	(RMB'000)	(RMB'000)
Proposed annual caps under the Supply of
Aviation Safety and Security Guard
Services Agreement	703,490	673,140	733,530

The management of the Company expected that the maximum aggregate annual fees payable by the Company to Aviation Security Company under the Supply of Aviation Safety and Security Guard Services Agreement for the three years ending 31 December 2020, 31 December 2021 and 31 December 2022 shall not exceed RMB703,490,000, RMB673,140,000 and RMB733,530,000, respectively.

We note that the proposed annual cap of RMB703,490,000 for the year ending 31 December

2020 represents a decrease of approximately 7.37% as compared with the estimated fees of RMB759,430,000 for the year ending 31 December 2019 because (i) on the one hand, in view of the diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughout and the proposals of flight slots resources allocation for the year ending 31 December 2020 set out in the "Plan on the Commencement of Operations of the Beijing Daxing International Airport, Airlines Transfer and the "One City, Two Airports" Allocation of Flight Slots

- 26 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Resources" 《( 北京大興國際機場轉場投運及「一市兩場」航班時刻資源配置方案》) issued by CAAC (the "CAAC Plan"), it is expected that the annual service fee for the year of 2020 will decrease by 10% and (ii) on the other hand, in view of the adjustments of the scope of safety and security guard services at Beijing Capital Airport and the reasonable increase in labour costs based on the internal estimates conducted by the quality and safety department of the Company in respect of the increase in demand for aviation safety and security guard services and the need for investment to revamp the provision of such services at the Beijing Capital Airport, taking into account the increasingly stressful circumstances of air defence and anti-terrorism and the need to provide support for important events held in Beijing (the "Internal Estimates") for the year ending 31 December 2020, the service fee for the year of 2020 is expected to increase by approximately 2.63%.

The proposed annual cap of RMB673,140,000 for the year ending 31 December 2021 represents a decrease of approximately 4.31% compared with the proposed annual cap of RMB703,490,000 for the preceding year (i.e. the year ending 31 December 2020) because (i) on the one hand, in view of the diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughout and the proposals of flight slots resources allocation for the year ending 31 December 2021 set out in the CAAC Plan, it is expected that the annual service fee for the year of 2021 will decrease by 10% and (ii) on the other hand, in view of the adjustments of the scope of safety and security guard services at Beijing Capital Airport and the reasonable increase in labour costs based on the Internal Estimates for the year ending 31 December 2021, the service fee for the year of 2021 is expected to increase by approximately 5.69%.

The proposed annual cap of RMB733,530,000 for the year ending 31 December 2022 represents an increase of approximately 8.97% compared with the proposed annual cap of RMB673,140,000 for the preceding year (i.e. for the year ending 31 December 2021) because (i) in view of the improvement of diversion effect from the commencement of operation of Daxing Airport based on the targets of passenger throughout and the proposals of flight slots resources allocation for the year ending 31 December 2022 set out in the CAAC Plan, it is expected that the annual service fee for the year of 2022 will increase by 6% and (ii) in view of the adjustments of the scope of safety and security guard services at Beijing Capital Airport and the reasonable increase in labour costs based on the Internal Estimates for the year ending 31 December 2022, the service fee for the year of 2022 is expected to further increase by approximately 2.97%.

In particular, the increase of costs in respect of the adjustments of scope of safety and security guard services (i.e. 5.69%) for the year of 2021 is larger than the increments for the years of 2020 and 2022 (i.e. 2.63% and 2.97%) as a result of the anticipated increase in demand for investment in aviation security for the 2022 Winter Olympics (such as innovation for business management, explosion-proof inspection and security control) with such investment expected to commence from the second half of 2021. The diversion effect from the commencement of operation of Daxing Airport is expected to be improved and contribute to a 6% increase in the annual service fee for the year ending 31 December 2022 in view of the measures set out in the CAAC Plan, pursuant to which the flight slots resources at the Beijing Capital Airport are expected to recover and the business volume of aviation safety and security guard services at the Beijing Capital Airport is expected to rebound for the same period.

- 27 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Pricing policy

Given that the provision of aviation safety and security guard services essentially involves labour procurement, both parties agreed to use labour costs and expenses as the basis for determining the annual fees for the provision of such services which is in line with the Former Supply of Aviation Safety and Security Guard Services Agreement, such that the labour costs and expenses equals to the aggregate amount of operating personnel costs, management personnel costs, daily costs and expenses, and related taxes as follow:

operating personnel costs refer to the costs for employing various types of operating personnel, namely (i) security inspection personnel (who operate security inspection machines), (ii) security inspection personnel (who do not operate security inspection machines) and (iii) non-security inspectors. The operating personnel costs equal to the unit cost for operating personnel multiplied by the number of operating personnel required. The unit cost for operating personnel is determined with reference to, and shall not be higher than the yearly average wages of employees in Beijing as announced by the Beijing Municipal Bureau of Statistics, and the number of operating personnel shall be determined by the need to take into account of increasingly stressful circumstances of air defence and anti-terrorism at Beijing Capital Airport and the need to provide support for important events held in Beijing;
management personnel costs equal to the unit cost for employing management personnel multiplied by the number of management personnel required. The unit cost for management personnel is higher than that of the unit cost for operating staff given the management expertise of management personnel, but it is determined with reference to, and shall not be higher than the yearly average wages of employees in Beijing as announced by the Beijing Municipal Bureau of Statistics. The number of management personnel required is also determined on the basis of the need for air-defense and anti-terrorism at Beijing Capital Airport taking into account the support for important events held in Beijing;
daily costs and expenses refer to the overhead costs for the provision of aviation safety and security guard services (including the costs of consumables, materials and equipment, equipment maintenance and repair, and energy consumption) which correspond to the total number of operating personnel and management personnel; and
related taxes are calculated according to national regulations.

- 28 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have calculated the historical monthly average cost of operating personnel and management personnel based on (i) unit cost of the operating personnel multiplied by the number of operating personnel required monthly; and (ii) unit cost of the management personnel multiplied by the number of management personnel required monthly of the Aviation Security Company under the Former Supply of Aviation Safety and Security Guard Services Agreement. We note that the unit cost of operating personnel and management personnel determined under the Supply of Aviation Safety and Security Guard Services Agreement are used same basis as those of under the Former Supply of Aviation Safety and Security Guard Services Agreement with reference to its historical amounts and the consideration of the need for air-defense and anti-terrorism at Beijing Capital Airport as well as the enhancement on the security level in connection with various important events and meetings to be held in Beijing which such security inspections request the national security level, however, the unit cost of operating personnel and the management personnel shall not be higher than the yearly average wages of employees in Beijing. The daily costs and expenses were calculated based on 5% and 14% of the total cost of operating personnel and management personnel by the Company which is in line with the Former Supply of Aviation Safety and Security Guard Services Agreement, while the related taxes are included for the calculation based on the PRC standard value-added tax rate. Taking into account of the consistency on such pricing policy which has been applied by the Company over decade and the high utilization rate (over 90%) under the Former Supply of Aviation Safety and Security Guard Services, we think that the basis to determine the relevant costs is always in line with Company's historical practice which is solid and reliable, as well as fair and reasonable.

Besides, Aviation Security Company also provides similar services as that under the Supply of Aviation Safety and Security Guard Services Agreement to other independent third parties. Under the Supply of Aviation Safety and Security Guard Services Agreement, Aviation Security Company undertook to the Company that it will not charge a higher level of fees to the Company than that charged to other independent third parties (including airlines, private jet companies and logistic companies) at Beijing Capital Airport. The Aviation Security Company has issued a written confirmation to the Company that the fees charged by it to other independent third parties for similar services are not higher than that charged by it to the Company. The quality and safety department of the Company has also conducted site visits to various airports in other cities of the PRC, such as Shanghai, Qingdao and Xiamen, and compared the pricing of service fee charged by the aviation security service providers to such airports against that charged by the Aviation Security Company to the Company. The results of the survey show that the service fee charged by the Aviation Security Company is relatively low compared with that charged by the other aviation security service providers to other airports. We have enquired the management of the Company and reviewed the related survey report and acknowledged that the quality and safety department of the Company conducts such market survey from time to time to understand the prevailing market price on such service fee (unit labour cost basis) charged by the aviation security service providers. We understand that the Company has a better pricing term in the sense of unit labour cost charged by the Aviation Security Company as compared with other aviation security service providers charged on other airports. Together with the cross-checks against the costs charged by Aviation Security Company to other independent third parties for similar services in Beijing as to compare the costs charged by it to the Company, we are of the view that the costs incurred by the Aviation

- 29 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Security Company is fair and reasonable and it has been guaranteed that it would not be higher than that of other independent third parties which is in favor of the Shareholders and Company as a whole.

Furthermore, according to the standards of passengers' waiting time for security inspection as recommended by the CAAC, the Company and the Aviation Security Company agreed to implement a reward and punishment mechanism, pursuant to which if the Aviation Security Company fails to meet the recommended standards of passengers' waiting time for security inspection, the Aviation Security Company shall pay penalties to the Company; but if the Aviation Security Company outperforms the recommended standards of passengers' waiting time for security inspection, the Aviation Security Company is entitled to receive monetary rewards from the Company. The amount of rewards and penalties shall be calculated with reference to a sliding scale of the extent to which the Aviation Security Company has outperformed or under-performed the recommended standards of passengers' waiting time, and the rewards and penalties shall be settled by the Company or the Aviation Security Company (as the case may be) on a monthly basis.

We understand from the Company that the proposed annual caps were determined after taking into account (i) the diversion effect from the commencement of operation of Daxing Airport and the annual passenger throughput of Beijing Airport is expected to be decreased by approximately 10% over the 2020 and 2021, and subsequently rebound by approximately 6% over the previous year in 2022; and (ii) the adjustments of the scope of security service at Beijing Airport in the next three years, combined with the increased demand for investment in aviation security for the 2022 Winter Olympics and the reasonable increase in labour costs, while it is anticipated that the adjustment to relevant fees in relation to the cost of provision of the aviation safety and security guard services by the Aviation Security Company for each year will account for 2.63% to 5.69% of the estimated annual cap for the previous year.

In order to access the fairness and reasonableness of the proposed annual caps, we have reviewed the calculation of the annual caps for the Transactions and have also discussed with the management of the Company in relation to the factors that affect the proposed annual caps.

Daxing Airport, the second large-scale international air transport hub of Beijing along with Beijing Airport, officially opened to public on 25 September 2019. It is expected to fulfil the commencement target of achieving a passenger throughput of 45 million and 72 million person-times in 2022 and 2025, respectively. There are currently four runways and is expected to expand to seven runways in the future. We consider that under the combined pressure from supporting for important events held in Beijing and diversion effect following the commencement of operation of Daxing Airport, the air traffic volumes of Beijing Capital Airport will be facing challenges. As disclosed in the 2019 Interim Report, it is currently confirmed that domestic airlines such as China Southern Airlines, China Eastern Airlines and Capital Airlines as well as overseas airlines such as Finnair, Polish Airlines and British Airways will start operating at Daxing Airport successively. Among them, China Southern Airlines, China Eastern Airlines (excluding Beijing-Shanghai Express), Capital Airlines and British Airways will all transfer their operations to Daxing Airport, while Finnair and Polish Airlines will operate at both Beijing Capital Airport and Daxing Airport simultaneously. As

- 30 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

disclosed in the 2018 Annual Report, the passenger throughput of Beijing Capital Airport exceeded 100 million for the year ended 31 December 2018, Beijing Capital Airport has became the world's second busiest aviation hub according to the statistics of Airports Council International. Given the Beijing Capital Airport has almost hit the full capacity, we consider that the commencement of the operation of Daxing Airport will absorb the passenger throughput from Beijing Capital Airport for the next three years and thus it is reasonable to anticipate that the passenger throughput of Beijing Capital Airport will decrease in overall for the next three years.

We understand from the management of the Company that in response to the increasingly stressful circumstances of air-defense and anti-terrorism, it is necessary to adjust the scope of security service at Beijing Capital Airport in the next three years based on the actual demand, combined with the increased demand for investment in aviation security for the 2022 Winter Olympics, including innovation of customs management model and control for terminal two, the explosion-proof inspection model conducted in front of the terminals of the Beijing Capital Airport would be adjusted by front-line inspection, and establishing security patrol. In addition, the additional funds need to be reserved for importing new security equipment system for 2022 Winter Olympics which is anticipated by the quality safety department of the Company, we consider such arrangements aim for enhancing the security level of the Beijing Capital Airport are justifiable.

Regarding the labour costs, the provision of aviation safety and security guard services provided by Aviation Security Company includes but not limited to security inspection on bodies, baggages, air cargoes, air mails and passageways; field inspections for special and chartered aircrafts; safeguard on passageways in terminal area, aircraft safeguard, inspection of explosion protection security for the area in front of terminals, etc, which requires human monitoring. We have discussed with the management of the Company and understand that the aviation safety and security guard services are labour intensive, and the labour costs contributed a significant part of the total cost of the Aviation Security Company for the provision of aviation safety and security guard services. We have reviewed the statistics published by the Beijing Municipal Bureau of Statistics and understand that the average salary of population in Beijing increased by approximately 9.9% in 2017 and the growth rate on salary increase that has decreased by approximately 7.2% in 2018 due to the unstable global and domestic economy that were affected by China-U.S trade friction, however, it has been increased by approximately 8.9% in the first half of 2019. According to "the Notification of related issues regarding Beijing Enterprise Remuneration Guideline" 《( 北京市2019年企業工資指導線有關問題的通知》) issued by Beijing Municipal Human Resources and Social Security Bureau, the basic rate for increasing the salary of the labour shall be ranged between 8.0% to 8.5% while the minimum increasing rate of the salary of the labour shall be not less than 3.5%. Moreover, according to the Beijing Municipal Human Resources and Social Security Bureau, the growth rate on salary of the labour in Beijing for the past ten years was averaged 10%. Given the growth rate of labour costs estimated by the management of the Company under the Supply of Aviation Safety and Security Guard Services Agreement was 5% to 8%, we consider that it is justifiable and in line with the prevailing market salary growth rate and consistent with government's policies, taking into account that the movement in the average salary growth rate in 2018 shall be a temporary impact affected by the current China-

- 31 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

U.S. trade friction, we are of the view that the amount of growth rate of labour costs estimated by the management of the Company to determine the proposed annual caps is fair and reasonable.

The 2022 Winter Olympics would be held in Beijing and is scheduled to take place from 4 to 20 February 2022 tourists over the world will attend such sports events. We think that the passenger throughput of the Beijing Capital Airport will experience a huge growth during that month. As China's No.1 Gateway, Beijing Capital Airport is responsible for the provision of satisfactory, efficient and safe services to all parties, thereby, certainly, strengthening the safety management system. The services include additional security inspection personnel, resources and related equipment. Therefore, we consider that an increase in the proposed annual cap of 2022 over the previous year is fair and reasonable. Furthermore, we understand from the management of the Company that funds are considered for other factors including incentive funds reserved for the rewarding and punishment mechanism set up in the improvement of assessment in respect of security inspection efficiency and the expense paid to Aviation Security Company for the logistics support work (including offering of office and accommodation). We have reviewed the detailed terms of the rewarding and punishment mechanism and understand that it is calculated with reference to a sliding scale of the extent to which the Aviation Security Company has out-performed or under-performed based on the standards of passengers' waiting time for security inspection as recommended by the CAAC, and the relevant rewards and penalties shall be settled by the Company or the Aviation Security Company (as the case may be) on a monthly basis. Given such mechanism is fully complied to the standard as required by the CAAC, and the related rewarding and punishment, in monetary amounts that might be incurred, were arrived based on arm's length negotiation between the Company and the Aviation Security Company, we are of the view that it is on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned. Moreover, we consider that the rewarding and punishment mechanism could encourage the Aviation Security Company to deliver effective and efficient works and its related services to the Company under the Supply of Aviation Safety and Security Guard Services Agreement, which, we believe it is in the interests of the Company and the Shareholders as a whole.

In light of the above, we are of the view that the proposed annual caps under the Supply of Aviation Safety and Security Guard Services Agreement are justifiable, fair and reasonable.

4. Internal control on pricing

Prior to the entering into of the Supply of Aviation Safety and Security Guard Services Agreement, the quality safety department of the Company verified the unit labour costs, (which are initially determined in line with the historical amount of unit labour costs under the Former Supply of Aviation Safety and Security Guard Services Agreement, followed by cross- checks against the costs charged by Aviation Security Company to other independent third

- 32 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

parties for similar services as well as site-visits to various airports in the PRC for comparison of the service fees charged by the aviation security providers to other airports against that charged by the Aviation Security Company to the Company), and attended to the negotiation, signing and execution of the Supply of Aviatino Safety and Security Guard Services Agreement. Thereafter, the quality and safety department of the Company is also responsible for the subsequent monitoring and ratings in respect of the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement. The finance department of the Company and the secretariat to the Board are responsible for gathering information of connected transactions and monitoring the implementation of connected transactions, with a view to conducting assessment of the fairness of the transaction terms and pricing terms.

Prior to the signing of the definitive agreements and the implementation of the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement, the principal officers in the quality and safety department of the Company who are responsible for handling the above-mentioned matters shall lodge applications with the quality and safety department, the finance department, legal services department and the secretariat to the Board. Such applications would only be approved upon a preliminary review conducted by the managers of the above respective departments of the Company, followed by a final review conducted by the general manager office meeting in accordance with the relevant internal control policies of the Company. After the above internal review process based on different functions of various departments of the Company has been completed, the relevant definitive agreements will be considered and approved by the Board. We understand that the quality and safety department of the Company will (i) review the actual business demand of the security services in the Beijing Capital Airport during the year, (ii) analyze the number of all the necessary staff with different position to be assigned by the Aviation Security Company and
1. calculate the cost to be incurred during the year with reference to the prevailing market price and fees charged by the Aviation Security Company to other independent third parties to ensure the cost to be paid to the Aviation Security Company is fair and reasonable. The finance department will re-examine the calculations made by the quality and safety department and check the transaction amounts with reference to the historical transaction amounts under the Former Supply of Aviation Safety and Security Guard Services Agreement and the management accounts of the Company to confirm that the transaction amounts would not be materially different from that of the management had anticipated, and then to arrive on mutually agreed on the pricing terms of the related agreement with the quality and safety department. Legal services department will go through an assessment process in relation to the legal terms and subsequently, the secretariat to the Board will submit the applications after review by various department to the Board for approval. We are of the view that the entire internal control process based on different functions of various departments that contribute to the reviewing process prior to enter into the definitive agreement are strictly decent to ensure the relevant terms contained in the Supply of Aviation Safety and Security Guard Services Agreement are fair and reasonable.

- 33 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The independent non-executive Directors of the Company have reviewed and would continue to review the transactions under the Supply of Aviation Safety and Security Guard Services Agreement in accordance with the Listing Rules to ensure that such transactions are entered into on normal commercial terms, are fair and reasonable, and are carried out pursuant to its contractual terms.
The auditors of the Company will conduct annual review on the transactions under the Supply of Aviation Safety and Security Guard Services Agreement in relation to the pricing policies and annual caps contemplated thereunder in accordance with the Listing Rules.

In assessing the implementation of the internal control procedures of the Company, we have enquired the Company for three samples transactions in the past five years in relation to the provision of aviation safety and security guard services by the Aviation Security Company on a random basis, and noted that the service fees were determined with reference to (i) actual fees paid by the Company to the Aviation Security Company for the provision of aviation safety and security guard services for the preceding year and make reference to the growth rate of passenger throughput in the Beijing Airport; and (ii) the actual cost incurred by Aviation Securities Company plus labor costs and management staff costs incurred for new scope of services, other related costs and related taxes. The samples were selected on a random basis taking into consideration the contract size and that the contracts were entered into in different years, while considering the each transaction entered annually between the Company and the Aviation Security Company are on same business nature in relation to the provision of aviation safety and security guard services by the Aviation Security Company, we consider the selected samples (three transaction agreements out of total five transaction agreements in the past five years) are sufficient and fair to provide a comprehensive view of the implementation of the internal control system of the Company.

We noted from our review of the selected samples that before the implementation of aviation safety and security guard services, the principal officers who handle the relevant matters would prepare an application which includes the determination of the service fees, the summary of the scope of aviation safety and security guard services to be provided by Aviation Security Company and the reasons for the changes/ upgrade in aviation safety and security guard services. Second, the application was reviewed by the quality safety department and the management of the Company. Upon passing the internal review process, the application was submitted to the Board for review and approval.

Furthermore, the transactions under the Former Supply of Aviation Safety and Security Guard Services Agreement was reviewed by the independent non-executive Directors twice per year in particular, reviewing the transaction amounts incurred whether they were in line with the management's expectation on the proposed annual caps, together with the Company's auditors, to ensure the fairness and reasonableness of such transactions. The Company will facilitate the provision of necessary information to its independent non-executive Directors and auditor for the purpose of such review and monitor the working arrangements involved in the Company's continuing connected transactions. We consider it is a generally common practice in terms of the reviewing process conducted by the independent non-executive Directors regarding the continuing connected transactions which is in accordance with the Listing Rules.

In respect of the monitoring of annual caps not being exceeded, the finance department provides the secretariat to the Board with information in relation to the actual transaction amounts on a monthly basis. The secretariat to the Board is responsible for monitoring such transactions to ensure that the total amount of

- 34 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

transaction does not exceed the annual caps. If such amounts of transaction are estimated to exceed the relevant annual caps, the person-in-charge of the relevant department of the Company will be notified so that the scale of transactions in the future may be re-estimated and arrangements may be made to issue announcements and/or to obtain the relevant approvals from the Board and the Independent Shareholders in accordance with the requirements of the Listing Rules. We have reviewed the internal verification documents of the Company in relation to the aforementioned monitoring procedures of annual caps and noted that the secretariat to the Board has taken appropriate steps as mentioned above to monitor the utilisation of the annual caps, and we consider the Company has implemented sufficient internal procedures to ensure the transaction amounts under the Supply of Aviation Safety and Security Guard Services Agreement will not exceed the respective annual caps.

In light of the above, we consider the Company has carried out appropriate internal procedures to ensure the pricing mechanism has been implemented and such pricing mechanism is fair and reasonable, and we are of the view that the internal control measures are properly implemented by the Company so far as the Independent Shareholders are concerned.

CONCLUSION

In summary, we have considered the above principal factors and reasons, in particular, having taken into account the following in arriving at our opinion:

the entering into the Supply of Aviation Safety and Security Guard Services Agreement is in the ordinary course of business of the Company;
the terms of the Supply of Aviation Safety and Security Guard Services Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole;
the determination of the proposed annual caps under the Supply of Aviation Safety and Security Guard Services Agreement are fair and reasonable; and
the Company has implemented stringent internal control measures to govern the continuing connected transactions of the Group.

Having considered the above, we are of the view that the Supply of Aviation Safety and Security Guard Services Agreement is entered into in the ordinary and usual course of business of the Company on normal commercial terms, the terms of the Supply of Aviation Safety and Security Guard Services Agreement and the relevant proposed annual caps are fair and reasonable, and in the interest of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the resolutions in relation to the Transactions to be proposed at the EGM.

Yours faithfully,

For and on behalf of

Platinum Securities Company Limited

Lenny Li

Director and Co-Head of Corporate Finance

- 35 -

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Mr. Li Lan is a licensed person registered with the Securities and Futures Commission and as responsible officer of Platinum Securities Company Limited to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO. Mr. Li Lan has over thirteen years of experience in corporate finance industry.

- 36 -

APPENDIX

GENERAL INFORMATION

1. 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 document misleading.

2. DISCLOSURE OF INTERESTS

Interests and short positions of the Directors, supervisors and chief executives in the Shares, underlying shares or debentures of the Company and its associated corporations

To the knowledge of the Directors, supervisors and chief executives of the Company, as at the Latest Practicable Date, none of the Directors, supervisors and chief executives of the Company had interests and short positions in the Shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of the SFO) which were 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 any such Director or chief executive is taken or deemed to have under such provisions of the SFO) or which were required to be entered into the register required to be kept by the Company under section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.

- 37 -

APPENDIX

GENERAL INFORMATION

Interests and short positions of substantial shareholders in the Shares, underlying shares or debentures of the Company and its associated corporations

To the best knowledge of the Directors, supervisors and chief executives of the Company, as at the Latest Practicable Date, the interest and short positions of the substantial shareholders in the issued share capital of the Company which will be required, pursuant to section 336 of the SFO, to be entered into the register referred to therein, or holding 5% or above in the issued share capital of the Company which will be required to be notified to the Company are as follows:

					Approximate % of Approximate % of
					the relevant class	the total issued
Name of Shareholder	Notes	Class of Shares	Capacity	Number of Shares	of Shares	Shares
					(%)	(%)
Capital Airports Holding Company	1	Domestic	Beneficial owner	2,699,814,977	100	58.96
Citigroup Inc.		H	Interest of	(L) 225,936,773	12.02	4.93
			corporation	(S) 1,489,093
			controlled by	(P) 219,496,746
			substantial
			shareholder
BlackRock, Inc.		H	Interest of	(L) 131,546,429	6.99	2.87
			corporation	(S) 860,000
			controlled by
			substantial
			shareholder
Aberdeen Asset Management PLC	2	H	Investment	(L) 114,868,000	6.11	2.51
and its associates			manager
Matthews International Capital	2	H	Investment	(L) 113,114,000	6.01	2.47
Management, LLC			manager
Hermes Investment Management	2	H	Investment	(L)112,230,537	5.97	2.45
Ltd			manager
GIC Private Limited	2	H	Investment	(L) 95,072,914	5.06	2.08
			manager
Hermes Investment Funds PLC		H	Beneficial owner	(L) 94,613,662	5.03	2.07

(L): Long Position

(S): Short Position

(P): Lending Pool

Notes:

1. Capital Airports Holding Company was incorporated in the PRC, and is the controlling shareholder of the Company. Mr. Liu Xuesong, an executive Director and the chairman of the Board, is the general manager and deputy party secretary of Capital Airports Holding Company. Mr. Han Zhiliang, an executive Director and the general manager, is the deputy general manager of Capital Airports Holding Company. Mr. Gao Shiqing, a non-executive Director, is the deputy general manager of Capital Airports Holding Company. Mr. Yao Yabo, a non-executive Director, is the deputy general manager

- 38 -

APPENDIX

GENERAL INFORMATION

(general manager level) of Capital Airports Holding Company. Mr. Ma Zheng, a non-executive Director, is the general legal counsel and the chairman of labor union of Capital Airports Holding Company.

These Shares are held in the capacity of investment manager.
The information in the above table is based on information publicly available to the Company as at the Latest Practicable Date.
The numbers in the above table have been subject to rounding adjustments. Any discrepancies in the numbers are due to roundings.

As at the Latest Practicable Date, save as disclosed above and to the best knowledge of the Directors, supervisors and senior management of the Company, (i) no person had any interests or short positions in the Shares or underlying shares of the Company which were required, pursuant to Section 336 of the SFO, to be entered into the register referred to therein, or holding 5% or above in the issued share capital of the Company which will be required to be notified to the Company; and

none of the Directors, supervisors or chief executives of the Company was also a director or employee of a company which has an interest or short position in the Shares or underlying shares which would fall to be disclosed to the Company pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS' AND SUPERVISORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had any

existing or proposed service contract with the Company (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

4. MATERIAL CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company since 31 December 2018, being the date to which the latest published audited financial statements of the Company were made up.

5. INTEREST IN ASSETS AND CONTRACTS

As at the Latest Practicable Date, none of the Director or supervisors of the Company had any interest, direct or indirect, in any asset which has been acquired or disposed of by or leased to the Company or are proposed to be acquired or disposed of by or leased to the Company since 31 December 2018, being the date to which the latest published audited financial statements of the Company were made up.

As at the Latest Practicable Date, none of the Directors or supervisors of the Company was materially interested in any contract or arrangement entered into by the Company, which was significant in relation to the business of the Company, since 31 December 2018, being the date to which the latest published audited financial statements of the Company were made up.

- 39 -

APPENDIX

GENERAL INFORMATION

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors or their respective close associates had any competing interest (as would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them were a controlling shareholder of the Company for the purpose of the Listing Rules).

7. EXPERT AND CONSENT

The following sets out the qualification of the expert which has given its opinion or advice as contained in this circular:

Name	Qualification
Platinum Securities Company	a licensed corporation under the SFO to carry on Type 1
Limited	(dealing	in securities) and Type 6 (advising on corporate
	finance)	regulated activities under the SFO

As at the Latest Practicable Date, the above expert:

did not have any shareholding, direct or indirect, in the Company or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company;
did not have any interest, direct or indirect, in any assets which have been acquired or disposed of by or leased to the Company, or which are proposed to be acquired or disposed of by or leased to the Company since 31 December 2018, the date to which the latest published audited financial statements of the Company were made up; and
has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they are included.

The letter and recommendation from the above expert is given as of the date of this circular for incorporation herein.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business in Hong Kong of the Company at 37/F, One Taikoo Place, Taikoo Place, 979 King's Road, Quarry Bay, Hong Kong during normal business hours for 14 days from the date of this circular:

the Supply of Aviation Safety and Security Guard Services Agreement;
the letter of advice from Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders;

- 40 -

APPENDIX

GENERAL INFORMATION

the consent letter from the Independent Financial Adviser referred to in the paragraph headed "Expert and Consent" in this appendix; and
this circular.

- 41 -

Attachments

Original document
Permalink

Disclaimer

Beijing Capital International Airport Co. Ltd. published this content on 03 December 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 December 2019 14:07:02 UTC

Latest news about Beijing Capital International Airport Company Limited

Beijing Capital International Airport's Losses Shrink 52% in 2023 as Revenue Soars 104%	Mar. 29	MT
Beijing Capital International Airport Company Limited Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 27	CI
Beijing Capital International Airport Forecasts Slimmer Loss in 2023	Mar. 01	MT
Beijing Capital International Airport Company Limited Provides Earnings Guidance for the Year Ended 31 December 2023	Mar. 01	CI
Beijing's Airports Launch Payment Facilities for Foreign Travelers	Feb. 06	MT
Beijing Capital International Airport’s Deputy General Manager Retires	Feb. 01	MT
Beijing Capital International Airport Company Limited Announces Resignation of Wang Weiyu as Deputy General Manager	Feb. 01	CI
Beijing Capital International Inks Deal to Manage Parent's IT Systems	Jan. 22	MT
Beijing Capital Airport to Purchase Security Equipment	Jan. 08	MT
Beijing Capital International Airport Avails of Airside Bus Services	Jan. 03	MT
Beijing Capital International Airport Renews Services Agreement With Controlling Shareholder's Unit Until 2025	Jan. 02	MT
Beijing Airport Renews Financial Services Agreement for One Year	Dec. 28	MT
Beijing Capital International Airport Company Limited Announces Premises Leasing Agreement with Capital Airport Holdings Media Company Limited	Dec. 28	CI
China Tourism Group Duty Free Shares Rise Sharply After Agreement to Lower Airport Fees	Dec. 28	DJ
Beijing Capital International Airport Company Limited Announces Executive Changes	Dec. 28	CI
Beijing Capital International Airport Renews Food, Beverage Resources Usage With Beijing Capital Airport Food Management	Dec. 26	MT
Beijing Capital International Airport Company Limited Announces Food and Beverage Resources Usage Agreement	Dec. 22	CI
Beijing Capital International Airport to Receive Maintenance Services from Controlling Shareholder's Subsidiary for 11 Million Yuan	Dec. 04	MT
Beijing Airport Signs De-Icing Lease Deal with Ground Services Provider	Nov. 20	MT
Beijing Capital International Airport Company Limited and Beijing Aviation Ground Services Co., Ltd Enter the De-Icing Services Cooperation Agreement	Nov. 17	CI
Beijing Airport to Lease Office, Storage Facilities in Terminals 2, 3	Nov. 06	MT
Beijing Capital International Airport Company Limited Enters into Leasing Agreement with BACT	Nov. 03	CI
Beijing Capital International Airport Trims Loss in January-September Period	Nov. 01	MT
Beijing Capital International Airport Company Limited Reports Earnings Results for the Nine Months Ended September 30, 2023	23-10-31	CI
Putin lands in China to boost 'no-limits' partnership	23-10-17	RE

Chart Beijing Capital International Airport Company Limited

Duration

Period

Chart Beijing Capital International Airport Company Limited

More charts

Company Profile

Beijing Capital International Airport Company Limited is a Hong Kong-based investment holding company principally engaged in airport and related businesses. The Company is mainly engaged in the operation and management of Beijing Capital Airport and the provision of related services in China. Its aeronautical businesses include the provision of aircraft landings and take-offs and passenger service facilities, ground support services and fire-fighting services for domestic and foreign air transportation enterprises. Its non-aeronautical businesses include the provision of ground handling agency services, the provision of in-flight catering services, the operation of duty free and other retail shops in the terminals, the operation of restaurants in the terminals and the leasing of advertizing spaces inside and outside the terminals, among others.

Sector

Airport Services

Calendar

2024-08-26 - Q2 2024 Earnings Release (Projected)

More about the company

Income Statement Evolution

More financial data

Ratings for Beijing Capital International Airport Company Limited

Trading Rating

Investor Rating

ESG Refinitiv

More Ratings

Analysts' Consensus

Sell

Buy

Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

2.248 CNY

Average target price

2.847 CNY

Spread / Average Target

+26.66%

Consensus

EPS Revisions

Estimates Revisions

Annual profits - Rate of surprise

Company calendar

Sector Airport Operators

	1st Jan change	Capi.
BEIJING CAPITAL INTERNATIONAL AIRPORT COMPANY LIMITED	+5.68%	1.42B
AIRPORTS OF THAILAND	+8.37%	24.98B
KØBENHAVNS LUFTHAVNE A/S	+5.17%	5.47B
FRAPORT AG	-13.99%	4.61B
FLUGHAFEN WIEN AG	-1.96%	4.52B
GRUPO AEROPORTUARIO DEL CENTRO NORTE, S.A.B. DE C.V.	-3.62%	3.92B
JAPAN AIRPORT TERMINAL CO., LTD.	-13.22%	3.3B
GUANGZHOU BAIYUN INTERNATIONAL AIRPORT COMPANY LIMITED	+5.42%	3.37B
ATHENS INTERNATIONAL AIRPORT S.A.	0.00%	2.71B
ENAV S.P.A.	+11.87%	2.2B

Airport Operators

Beijing Capital International Airport Company Limited

Equities

694

CNE100000221

Airport Services

Beijing Capital International Airport : (1) CONTINUING CONNECTED TRANSACTIONS SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT AND (2) PROFIT DISTRIBUTION ADJUSTMENT PROPOSAL

Latest news about Beijing Capital International Airport Company Limited

Chart Beijing Capital International Airport Company Limited

Company Profile

Income Statement Evolution

Ratings for Beijing Capital International Airport Company Limited

Analysts' Consensus

EPS Revisions

Annual profits - Rate of surprise

Sector Airport Operators