Major Shareholder:

• Haikou Meilan Airport Company Ltd ¡V 53.01% interest
• Copenhagen Airport A/S ¡V 20.0% interest

The Company, a joint stock company incorporated in the PRC with limited liability, was established on December 28, 2000 to operate the Meilan Airport.

Occupying approximately 560 hectares of land, the Meilan Airport is located in the southeast of Haikou, the capital city of Hainan Province, and approximately 25 kilometres away from the city centre of Haikou. The Meilan Airport commenced commercial operation on May 25, 1999 and was ranked the eighth largest airport in China in terms of passenger throughput, the ninth largest in terms of aircraft movement, and the thirteenth largest in terms of cargo throughput in 2001, according to CAAC Journal 2002. During 2001, passenger departures and arrivals at the Meilan Airport reached approximately 5.08 million and aircraft takeoffs and landings reached approximately 53,800.

The Meilan Airport has one runway, one Terminal, and one cargo centre. The runway has been constructed in accordance with ICAO category 4E standards and is capable of accommodating landing and takeoff of Boeing 747-400 aircraft, the largest commercial airliner. The Terminal has an annual handling capacity of approximately six million passenger arrivals and departures. The cargo centre has an annual capacity of approximately 54,000 tonnes of cargo.

The Group is engaged in both aeronautical and non-aeronautical businesses at the Meilan Airport. The Group's aeronautical business consists of the provision of airfield services, through a revenue sharing agreement with the Parent Company, and the provision of terminal facilities, ground handling services, and passenger and cargo handling services. Its non-aeronautical business includes leasing of commercial and retail spaces at the Meilan Airport, airport-related business franchising, advertising, car parking, tourism services, and sales of duty-free and consumable goods.

The Directors believe that the Group has the following competitive advantages:

• Air traffic volume has been growing rapidly in China due to its strong economic and real income growth, increased mobility, and rising popularity of tourism in the past 20 years.

• Its well-known beaches and other tourist attractions have made Hainan Island one of the top tourist destinations in China, attracting both domestic and international visitors. I

• Currently, the only other mode of transportation to Hainan Island from the mainland is via sea transportation; however, with a population of 7.7 million and Hainan's increasing popularity as a holiday destination, aviation is a sensible transport solution of connecting Hainan Island with the rest of China.

• Situated approximately 25 kilometres away from Haikou, the capital city of Hainan Province, Meilan Airport is well situated to capture the economic benefits of Haikou's status. It is a gateway airport for people travelling to and from Hainan Province.

• The management team has been involved in the management of the Parent Company and the Group since the inception of Meilan Airport. The management is comprised of both young professionals who are familiar with modern corporate management and senior professionals with considerable experience in the civil aviation industry in China.

• In 2001, out of all airports in China, the Meilan Airport was one of five airports that won the ¡§Consumer Satisfaction Award¡¨ organised by the CAAC.

• The terrain where the Meilan Airport is located is flat and wide, and there is adequate land supply for future extension. The runway was designed according to ICAO category 4E standards and is capable of accommodating landing and takeoff of Boeing 747-400 aircraft. The runway's precision uinstrument markings, lighting, and taxiways are all also constructed to ICAO category 4E standards.

• The Group has a limited operating history on which prospective investors may base an investment decision;
• Results of operation is dependent on factors beyond the Group's control;
• Dependence on Hainan as a tourist destination;
• Competition with other modes of transport to and from Hainan;
• Competition with other airports;
• Dependence on domestic and regional economic growth;

The Group's strategy is to maintain and capitalise on the position of Meilan Airport as the main gateway to Hainan and to seek sustainable long-term growth in its aeronautical and non-aeronautical related businesses.

For aeronautical businesses, the Group plans to expand and improve the existing facilities at the Meilan Airport, including the Terminal and apron, and to build new facilities, including a new cargo centre, a new cargo aircraft parking apron, and a new customs and inspection joint operation building in anticipation of future air traffic increase and the attainment of international airport status.

The Group will seek to increase its non-aeronautical business, which contributed approximately 28.6%, 26.1%, 28.1%, 19.1% of the total revenue in each of the three years ended December 31, 2001 and the first five months of 2002. The Group will explore opportunities to further increase the advertising spaces and commercial areas for leasing Meilan Airport. Further, the Group will seek to increase the utilisation rate of the available advertising spaces and of commercial areas, in conjunction with the expected growth of passenger traffic.

In addition, the Group is committed to improving quality service by developing more training programmes for its management and staff. The Group also plans to stregthen communications and cooperation with other governmental and business entities that operate at the Meilan Airport.

Parent Company has granted the Company an option to acquire from Parent Company aeronautical and non-aeronautical businesses and assets owned by it from time to time. The Group plans to take advantage of such opportunities to achieve revenue and earnings growth, as well as economies in planning, procurement, and services. The Group intends to fund the cost of possible acquisitions and capital expenditures with its internal resources, loan financing, and possible future issues of shares.

The net proceeds from the offerings after deducting the related expenses are estimated to amount to approximately HK$642.0 million (based on mid point of the offer price HK$3.47 per shares). The Group at present intends to apply the net proceeds as follows: