Beijing Capital International Airport : ANNOUNCEMENT CONTINUING CONNECTED TRANSACTIONS SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT

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ANNOUNCEMENT

CONTINUING CONNECTED TRANSACTIONS

SUPPLY OF AVIATION SAFETY AND

SECURITY GUARD SERVICES AGREEMENT

SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT

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.

The Board announces that 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 Airport for a term of three years commencing from 1 January 2020 to 31 December 2022.

LISTING RULES IMPLICATIONS

The Parent Company is the controlling shareholder of the Company, holding approximately 56.61% of the issued share capital of the Company as at the date of this announcement. 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.

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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.

APPOINTMENT OF INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

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

The Company has appointed Platinum Securities Company Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the Supply of Aviation Safety and Security Guard Services Agreement and the proposed annual caps are fair and reasonable, and whether they are in the interest of the Company and the Shareholders as a whole.

DESPATCH OF CIRCULAR

The Circular will be despatched to the Shareholders in compliance with the Listing Rules. As additional time is required by the Company to prepare the information to be included in the Circular, it is expected that the Circular will be despatched to the Shareholders on or before 3 December 2019. If it is expected that there will be a delay to the despatch of the Circular, a further announcement will be published in accordance with the Listing Rules stating the reason for the delay and the new expected date of despatch of the Circular.

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.

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SUPPLY OF AVIATION SAFETY AND SECURITY GUARD SERVICES AGREEMENT

Date

30 October 2019

Parties

1. The Company; and
2. 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 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 annual 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 growth rate of passenger throughput at Beijing Airport and the increase in the scope of aviation safety and security guard services to be provided by Aviation Security Company. The annual fees are also determined after taking into account the labour costs of relevant service staff, management costs, other related costs (including the

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costs of consumables, materials and equipment, equipment maintenance and repair, and energy consumption) and related taxes. The above service fees are payable by the Company on a monthly basis by way of transfer and remittance.

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	ending
	31 December	31 December
	2018	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 ending 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.

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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, which are determined in accordance with (i) the historical service fees payable by the Company to Aviation Security Company; (ii) the expected adjustments to the scope in 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 Airport in the next three years; and (iv) the anticipated changes of the passengers throughput in the next three years.

The Company confirms 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 anticipated fees of RMB759,430,000 for the year ending 31 December 2019, while the proposed annual cap of RMB673,140,000 for the year ending 31 December 2021 represents a decrease of approximately 4.31% over the proposed annual cap of the previous year of RMB703,490,000 and the proposed annual cap of RMB733,530,000 for the year ending 31 December 2022 represents an increase of approximately 8.97% over the proposed annual cap of the previous year of RMB673,140,000. The changes in proposed annual caps are determined based on the following factors: (i) in view of the diversion effect from the commencement of operation of Daxing Airport, it is estimated that the passenger throughput of Beijing Airport will decrease gradually in the next two years and rebound in 2022. In this connection, the annual caps will decrease by approximately 10% over the previous years in 2020 and 2021, while the annual cap will increase by approximately 6% over the previous year in 2022; and (ii) in view of 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, it is anticipated that the adjustment to relevant fees for each year will account for 3% to 6% of the estimated annual cap for the previous year.

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Internal control on pricing

Since Aviation Security Company is the only company which can provide security inspection services to tourists in the Beijing Airport area and it has the expertise and experience in the provision of aviation safety and security guard services at Beijing 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. Under the Supply of Aviation Safety and Security Guard Services Agreement, Aviation Security Company also 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 Airport. Furthermore, 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. The quality safety department of the Company is responsible for gathering information on the transactions and conducting evaluation on the fairness of the transaction terms and pricing terms. The secretariat to the Board and the financial department are responsible for monitoring the amounts of transactions;
2. The principal officers who are responsible for handling the relevant matters shall lodge applications with the quality safety department of the Company before the transactions under the Supply of Aviation Safety and Security Guard Services Agreement are carried out, and such applications would only be approved upon preliminary review and final review conducted respectively by the manager of the quality safety department of the Company and the deputy general manager of the Company who is responsible for handling the relevant matters; and
3. 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 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.

Furthermore, the independent non-executive Directors and the auditors of the Company will conduct annual review on the transactions under the Supply of Aviation Safety and Security Guard Services Agreement 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 Airport area and has the expertise and experience in the provision of aviation safety and security guard services at Beijing Airport. In previous years, the Company established

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satisfactory cooperation record with Aviation Security Company. The provision of aviation safety and security guard services by Aviation Security Company at Beijing Airport is able to ensure the safety of the tourists, aircrafts and other personnel at Beijing Airport.

In light of the above, the Directors (excluding the independent non-executive Directors whose views will be contained in the Circular to be despatched to the Shareholders after considering the views of the Independent Financial Adviser on the terms of the Supply of Aviation Safety and Security Guard Services Agreement) 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.

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:

1. 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.
2. 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.
3. 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 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, baggages, air cargoes, air mails and passageways; field inspections for special and chartered aircrafts; safeguard on passageways in terminal areas, and aircraft safeguard.

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BOARD'S APPROVAL

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

Since no Director has material interest in the transactions contemplated under the Supply of Aviation Safety and Security Guard Services Agreement, 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.

LISTING RULES IMPLICATIONS

The Parent Company is the controlling shareholder of the Company, holding approximately 56.61% of the issued share capital of the Company as at the date of this announcement. 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.

APPOINTMENT OF INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

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

The Company has appointed Platinum Securities Company Limited as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on whether the terms of the Supply of Aviation Safety and Security Guard Services Agreement and the proposed annual caps are fair and reasonable, and whether they are in the interest of the Company and the Shareholders as a whole.

DESPATCH OF CIRCULAR

The Circular will be despatched to the Shareholders in compliance with the Listing Rules. As additional time is required by the Company to prepare the information to be included in the Circular, it is expected that the Circular will be despatched to the Shareholders on or before 3 December 2019.

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If it is expected that there will be a delay to the despatch of the Circular, a further announcement will be published in accordance with the Listing Rules stating the reason for the delay and the new expected date of despatch of the Circular.

DEFINITIONS
"associates"	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 established in the PRC which is a wholly-owned
	subsidiary of the Parent Company
"Beijing Airport"	Beijing Capital International Airport
"Board"	the board of Directors
"Circular"	a circular of the Company containing, among other matters, details
	of the Supply of Aviation Safety and Security Guard Services
	Agreement, the letter from the Independent Board Committee to the
	Independent Shareholders, and the letter of advice from the
	Independent Financial Adviser to the Independent Board
	Committee and the Independent Shareholders
"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"	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
"Director(s)"	the director(s) of the Company
"EGM"	the extraordinary general meeting to be convened by the Company
	for the consideration and the approval of, among other things, the
	Supply of Aviation Safety and Security Guard Services Agreement
	and the transactions contemplated thereunder and its annual caps

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"Former Supply of Aviation	the supply of aviation safety and security guard services agreement
Safety and Security Guard	entered into between the Company and Aviation Security Company
Services Agreement"	on 25 October 2017, details of which were disclosed in the
	announcement of the Company dated 25 October 2017 and circular
	of the Company dated 15 November 2017
"H Share(s)"	overseas listed foreign shares of nominal value of RMB1.00 each in
	the registered capital of the Company
"Independent Board	an independent board committee of the Company comprising all of
Committee"	the independent non-executive Directors, 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	Platinum Securities Company Limited, a licensed corporation to
Adviser"	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 Shareholders"	the Shareholders other than the Parent Company, its associates and
	any Shareholder with a material interest in the Supply of Aviation
	Safety and Security Guard Services Agreement and the transactions
	contemplated thereunder
"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)"	share(s) of RMB1.00 each in the capital of the Company

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"Shareholders"	holders of the Shares
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Supply of Aviation Safety	the supply of aviation safety and security guard services agreement
and Security Guard	dated 30 October 2019 entered into between the Company and
Services Agreement"	Aviation Security Company
"%"	per cent.
	By order of the Board
	Meng Xianwei
	Secretary to the Board
Beijing, the PRC
30 October 2019

As at the date of this announcement, the Directors of the Company are:

Executive Directors:	Mr. Liu Xuesong, Mr. Han Zhiliang and Ms. Gao Lijia
Non-executive Directors:	Mr. Gao Shiqing, Mr. Yao Yabo and Mr. Ma Zheng
Independent Non-executive	Mr. Japhet Sebastian Law, Mr. Jiang Ruiming, Mr. Liu Guibin and
Directors:	Mr. Zhang Jiali

An announcement containing details of the matter is available for viewing on the website of Hong Kong Exchanges and Clearing Limited at http://www.hkex.com.hk under "Latest Listed Company Information", the website of the Company at http://www.bcia.cm.cn and the website of Irasia.com at http://www.irasia.com/listco/hk/bcia.

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