09:23 CHINA SOUTH AIR<01055> - Announcement (2) 15 B737-800 aircraft. Consideration According to the information provided by Boeing, the market price of a B737-700 aircraft is in the range of US$50.5 million to US$59 million, and the market price of a B737-800 aircraft is in the range of US$61.5 million to US$69.5 million. The aggregate consideration for the Boeing Aircraft, which is payable wholly in cash and determined after arm's length negotiation between the parties, is lower than the market price as provided by Boeing. Payment and delivery terms The aggregate consideration for the acquisition of Boeing Aircraft is payable by cash in installments. The Boeing Aircraft will be delivered in stages to the Company through the years 2006 to 2008. Source of funding The Transaction will be wholly funded through commercial loans by commercial banks. Such commercial banks are not and will not be connected persons (as defined in the Listing Rules) of the Company. As of the date hereof, neither the Company nor Xiamen Airlines has entered into any agreement with any of these commercial banks for financing the Transaction. Implications under the Listing Rules As the relevant percentage ratio for the Transaction with regards to the Consideration Test under Rule 14.07 of the Listing Rules is above 100%, the Transaction constitutes a very substantial acquisition under the Listing Rules and is therefore subject to approval by the Company's shareholders under Rule 14.49 of the Listing Rules. None of the shareholders of the Company is required to abstain from voting in respect of the proposed resolution to approve the Transaction. The Transaction is also required to be disclosed pursuant to the relevant rules and regulations of the Shanghai Stock Exchange. The announcement disclosing the Transaction could only be cleared by the Shanghai Stock Exchange on the date hereof because it was closed for public holidays from April 30, 2005 to May 8, 2005. The Listing Rules of the Shanghai Stock Exchange require that information relating to the Company must be released simultaneously in the market in mainland China as it is released to the markets in Hong Kong and the United States of America, where the securities of the Company are also listed. As a result, the Company could only publish this announcement in Hong Kong when it is cleared by the Shanghai Stock Exchange. Under the Listing Rules, the Company is required to inform the Stock Exchange as soon as reasonably practicable of the Transaction, and to issue an announcement disclosing the details of the Transaction after the execution of the Boeing Aircraft Acquisition Agreement. The Stock Exchange is looking into the matter of whether the Company had complied with such requirements of the Listing Rules. REASONS FOR THE TRANSACTION The Directors believe that the acquisition of the Boeing Aircraft will further increase the transportation capacity of the aircraft fleet of the Company, as a result of which the ATK of the fleet will be raised by 15%. This will in turn improve the operating capacity of the Company, and enhance its abilities to provide premium services to its customers and to compete significantly in the industry. Therefore, the Directors believe that the terms of the Boeing Aircraft Acquisition Agreement are fair and reasonable and in the interests of the shareholders of the Company as a whole. FURTHER INFORMATION The Company will send a circular containing the information required under the Listing Rules in relation to the Transaction within 21 days after the publication of this announcement. A notice to shareholders of the Company convening a general meeting of the shareholders to approve, among other things, the Transaction will be dispatched to the shareholders of the Company as soon as practicable. DEFINITIONS In this announcement, unless the context requires otherwise, the following terms shall have the following meanings: