Computer And Technologies Holdings Limited - Proxy Solicitation & Information Statement 2006

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Aerospace International Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Stock Code: 0031)

CONNECTED AND DISCLOSEABLE TRANSACTION ACQUISITION OF TWO PROPERTY INVESTMENT COMPANIES AND SETTING-OFF OF SHAREHOLDER’S LOAN

Independent Financial Adviser to the Independent Board Committee of the Company and the Independent Shareholders

SOMERLEY LIMITED

A letter from the board of directors of the Company is set out on pages 3 to 13 of this circular.

A letter from the Independent Board Committee is set out on page 14 of this circular.

A letter from Somerley Limited, being the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 15 to 27 of this circular.

A notice convening the Extraordinary General Meeting of the Company to be held at 17th Floor, China Aerospace Centre, 143 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong at 11:00 a.m. on 26 April 2006 is set out on page 47 of this circular. Whether or not you are able to attend the Extraordinary General Meeting, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the Extraordinary General Meeting. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the Extraordinary General Meeting or any adjourned meeting should you so wish.

10 April 2006

Page

Definitions . . . . . . .	Definitions . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		3
Appendix I	–	Letter from the Independent Board Committee . . . . . . . .	14
Appendix II	–	Letter from the Independent Financial Adviser . . . . . . . .	15
Appendix III	–	Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Appendix IV	–	General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	42
Appendix V	–	Notice of Extraordinary General Meeting . . . . . . . . . . . . .	47

– i –

DEFINITIONS

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

“business day”	Day on which the banks in Hong Kong operates and
	provide normal services (excluding Saturday);
“CAD” “CASC”	Canadian dollars, legal currency of Canada; (China Aerospace Science & Technology Corporation), a state-owned enterprise
	established in the PRC;
“CASIL Clearing”	CASIL Clearing Limited, a wholly-owned subsidiary of
	the Company incorporated in Hong Kong;
“Company”	China Aerospace International Holdings Limited, a
	company incorporated under the laws of Hong Kong with
	limited liability and the shares of which are listed on the
	Stock Exchange;
“Completion”	Completion of the Sale and Purchase Agreement;
“Extraordinary General Meeting”	The extraordinary general meeting to be convened by the
	Company for the purpose of approving the connected and
	discloseable transaction;
“Group”	The Company and its subsidiaries;
“Huadun”	(Dongguan Huadun
	Enterprises Limited*), a limited liability company
	established in Guangdong, the PRC;
“HK$”	Hong Kong dollars, the legal currency of the Hong Kong
	Special Administrative Region of the PRC;
“Independent Board Committee”	An independent committee of the board of directors of
	the Company comprising Mr. Lee Hung Sang, Mr. Chow
	Chan Lum, Charles and Mr. Luo Zhenbang, being all the
	independent non-executive directors;

– 1 –

DEFINITIONS

“Independent Financial Adviser”	Somerley Limited, a corporation licensed under the
	Securities and Futures Ordinance to conduct types 1
	(dealing in securities), 4 (advising on securities), 6
	(advising on corporate finance) and 9 (asset management)
	regulated activities and the Independent Financial
	Adviser to the Independent Board Committee and the
	Independent Shareholders in relation to the Sale and
	Purchase Agreement;
“Independent Shareholders”	All shareholders of the Company excluding CASC and its
	associates;
“Latest Practicable Date”	4 April 2006, being the latest practicable date prior to the
	printing of this circular for ascertaining certain
	information contained herein;
“Listing Rules”	The Rules Governing the Listing of Securities on the
	Stock Exchange;
“PRC”	The People’s Republic of China;
“RMB”	Renminbi, the legal currency of the PRC;
“Sale and Purchase Agreement”	The sale and purchase agreement dated 20 March 2006
	and entered into between CASC and CASIL Clearing;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Vanbao”	Vanbao Development (Canada) Ltd.;
“Vanbao Shareholder’s Loan”	The loan due from Vanbao to Wan Yuen, as at the date of
	Completion; and
“Wan Yuen”	(Beijing Wan Yuan Industry
	Corporation*), a limited liability company established in
	Beijing, the PRC.

For the purpose of this announcement, the exchange rate of RMB:HK$ is RMB1.04:HK$1.00 and the exchange rate of CAD:HK$ is CAD1.00:HK$6.80.

These companies do not have English names. The English name is inserted herein for identification purpose only.

– 2 –

LETTER FROM THE BOARD

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(Stock Code: 0031)

Executive Directors:

Mr. Zhao Liqiang Mr. Zhou Qingquan Mr. Zhao Yuanchang Mr. Wu Hongju Mr. Guo Xianpeng

Registered Office: 17th Floor China Aerospace Centre 143 Hoi Bun Road Kwun Tong Kowloon Hong Kong

Non-Executive Directors:

Mr. Rui Xiaowu (Chairman) Mr. Gong Bo Mr. Chen Dingyi Ms. Chan Ching Har, Eliza Mr. Wang Yujun

Independent Non-executive Directors:

Mr. Lee Hung Sang Mr. Chow Chan Lum, Charles Mr. Luo Zhenbang

10 April 2006

To the shareholders of the Company

Dear Sir or Madam,

CONNECTED AND DISCLOSEABLE TRANSACTION ACQUISITION OF TWO PROPERTY INVESTMENT COMPANIES AND SETTING-OFF OF SHAREHOLDER’S LOAN

On 20 March 2006, the Company announced the entering into of the Sale and Purchase Agreement.

This circular sets out the details of the transactions contemplated under the Sale and Purchase Agreement, the letter from the Independent Financial Adviser, the recommendation of the Independent Board Committee, the valuation reports on the properties of Vanbao and Huadun and the notice of the Extraordinary General Meeting.

– 3 –

LETTER FROM THE BOARD

THE SALE AND PURCHASE AGREEMENT DATED 20 MARCH 2006

Parties:

Vendor: CASC, the controlling shareholder of the Company Purchaser: CASIL Clearing, a wholly-owned subsidiary of the Company

Assets to be acquired by CASIL Clearing from CASC:

(1) 79.25% of the issued share capital of Vanbao and the Vanbao Shareholder’s Loan (being unsecured, non-interest bearing and does not have any repayment term); and

252 shares, representing approximately 79.25% of the issued share capital of Vanbao were held by Wan Yuen, a wholly-owned entity of CASC. The balance of approximately 20.75% were held by two independent third parties. As at 31 December 2005, the amount of shareholder’s loan outstanding from Vanbao to Wan Yuen, was CAD3,089,091 (approximately HK$21,005,819).

(2) 100% of the registered capital of Huadun

RMB3,000,000, representing 100% of the registered capital of Huadun currently registered as to RMB2,700,000 in the name of (Beijing Aerospace Satellite Application Corporation) and RMB300,000 in the name of (Beijing Yinshida Trading Development Co., Ltd.). Both of the shareholders are beneficially owned subsidiaries of CASC.

Consideration:

An aggregate consideration of HK$92,884,290, being

(1) HK$30,935,614 for the approximately 79.25% of the issued share capital of Vanbao and HK$1 for the Vanbao Shareholder’s Loan;
(2) HK$61,948,675 for the 100% of the registered capital of Huadun,

having regard to the expected market value of the properties of Vanbao and Huadun as at 11 January 2006 and 31 December 2005 based on preliminary valuation by independent valuers and after arm’s length negotiation between the parties.

Payment:

Completion shall be the third business day after fulfilment of all conditions precedent.

The consideration payable by CASIL Clearing in settlement of the consideration will be by way of assignment of two loans receivable of approximately HK$188 million (without recourse) due from third parties who are not connected persons of the Company to CASC or its nominee.

– 4 –

LETTER FROM THE BOARD

The difference between the loans receivable and the aggregate consideration will be set off against the loan due from the Group to CASC at the completion date (up to a maximum of HK$80,000,000) and the balance in cash from CASC to CASIL Clearing. As at 30 June 2005, the amount due from the Group to CASC was HK$180,619,000, which was advanced to the Group for the repayment of the floating interest notes and bank loans.

Assuming that there is no repayment from the date of this Circular to the date of completion, it is expected that not less than HK$14.9 million in cash will be received from CASC by CASIL Clearing. These two loans receivable have been selected after arm’s length negotiation between CASC and CASIL Clearing.

The Group agreed to share half of the capital gains tax (if any) payable by CASC to the Canadian government as a result of disposal of Vanbao, subject to a ceiling that such amount shall not exceed HK$1.25 million.

Conditions precedent and Completion:

Completion of the Sale and Purchase Agreement is conditional upon, inter alia, the following conditions being fulfilled:

(1) Relevant approvals from the relevant government authorities, including any approval which may be required from the State Administration of Industry and Commerce; and
(2) Independent Shareholders’ approval of the transaction contemplated under the Sale and Purchase Agreement.

The parties shall use their endeavour to ensure fulfilment of all conditions on or before 30 September 2006 or such later date as the parties may agree in writing.

REASONS FOR AND BENEFIT OF ENTERING INTO OF THE SALE AND PURCHASE AGREEMENT

The Group is principally engaged in the manufacturing of electronic products including liquid crystal display, plastic moulds, printed circuit boards, intelligent chargers and security systems.

The principal activities of the Group will change subject to factors such as market demand and emergence of development opportunities. The Company believes that property investment by the Company in the past had been successful, particularly in relation to that of the industrial park. The sale of the Hong Kong properties by the Company earlier on is a necessary step towards debt structuring. Since this year, the management sector of the Company has investigated various factors, and the future directions for the Company is refined to technological engineering, property investment and advanced technology-related manufacturing.

– 5 –

LETTER FROM THE BOARD

The directors considered that the Company would benefit from the entering into of the transaction as this will reduce the loans receivable of the Group (as at 30 June 2005, the book value of the loans receivable was HK$258,878,000) and improve the assets portfolio of the Group. Given the recent positive prospects of developing industrial zone, technology zone and related property in mainland China and the vigorous property market in Canada, the assets to be acquired under the transaction is quality land and/or land use rights in these two countries, with strong capital appreciation potential and liquidity.

As set out in notes to the annual reports and accounts of the Company for the year ended 31 December 2004, according to business segmentation, of the consolidated total assets of HK$2,541,678,000 as at 31 December 2004, property amounted to HK$623,712,000 whilst liabilities related to property amounted to HK$88,232,000. Gross rental income for the year ended 31 December 2004 amounted to HK$24,528,000, of which rental income from investment properties amounted to HK$18,311,000. As at 31 December 2004, the book value of investment properties amounted to HK$267,750,000.

With the aggregate valuation of the properties of Vanbao and properties of Huadun (which legal title documentation have been received or which the PRC legal adviser to the Company has advised that there is no legal impediment to the issue of title documents) amounted to approximately HK$81,500,000. It is expected that the transaction will strengthen the Group’s overall property investment portfolio and investment mix.

The terms of the Sale and Purchase Agreement are negotiated after arm’s length negotiation. The directors (including the independent non-executive directors having considered the content of the Letter from the Independent Financial Adviser) of the Company considers that the transaction was entered into on normal commercial terms and the terms of the Sale and Purchase Agreement (together with the subsequent arrangement to set-off the shareholder’s loan due to CASC by the Group as well as the assignment of the Vanbao Shareholder’s Loan) are fair and reasonable and in the interests of the shareholders of the Company as a whole.

INFORMATION ON VANBAO

Vanbao is a company incorporated in Alberta, Canada with total issued share capital of CAD1,080,000 (approximately HK$7,344,000). Vanbao is engaged in property investment holding. The major assets of Vanbao is a parcel of high density residential development site in Calgary, Alberta, Canada. The total acquisition cost of CASC of the approximately 79.25% interest in Vanbao is CAD3,944,991 (approximately HK$26,825,939) (including the shareholder’s loan of CAD3,089,091 (approximately HK$21,005,819)).

– 6 –

LETTER FROM THE BOARD

According to the audited accounts of Vanbao prepared in accordance with Canadian generally accepted auditing standards, the net assets value of Vanbao as at 31 December 2004 and 2005 were CAD1,125,024 (approximately HK$7,650,163) and CAD1,144,655 (approximately HK$7,783,654) respectively. Vanbao’s net profit before and after taxation and extraordinary items for the two years ended 31 December 2004 and 2005 were as follows:

For the year ended For the year ended 31 December 2004 31 December 2005 Net profit (loss) before taxation CAD(19,784) CAD29,839 and extraordinary items (approximately (approximately HK$(134,531)) HK$202,905) Net profit (loss) after taxation CAD(12,933) CAD19,631 and extraordinary items (approximately (approximately HK$(87,944)) HK$133,490)

Income of Vanbao mainly derived from rental of property. For the two years ended 31 December 2004 and 2005, the rental income amounted to CAD140,651 (approximately HK$956,456) and CAD135,000 (approximately HK$918,000) respectively.

As at the Latest Practicable Date, the amount of Vanbao Shareholder’s Loan outstanding was CAD3,089,091 and was advanced by Wan Yuen to Vanbao.

The audited accounts for the two years ended 31 December 2005 were not qualified and have been prepared by Starr Wang Certified General Accountant, auditors of Vanbao (is an independent third party and not being a connected person of the Company) for the two years ended 31 December 2005.

The current board members of Vanbao are: Fong J Ming, Zhao Liqiang, Wu Hongju, Chi Keung and Yuan Kewen. Fong J Ming, Zhao Liqiang, Wu Hongju, Chi Keung and Yuan Kewen are directors nominated by Wan Yuen. Fong J Ming is an independent third party and not being a connected person. Despite the common directorship (Mr Zhao Liqiang and Mr. Wu Hongju are directors of the Company), the Company has not been involved in the control or management of Vanbao. It is intended that upon completion of the sale and purchase, all Wan Yuen’s nominated directors will resign and CASIL Clearing will nominate directors (who may or may not be directors or employees of the Company or its subsidiaries) to the board.

INFORMATION ON HUADUN

Huadun is a company established in Dongguan, the PRC with total registered capital of RMB3,000,000 (approximately HK$2,884,615). Huadun is principally engaged in investment, property management, sales of construction material and decoration material. The major assets of Huadun are parcels of industrial land and the related buildings situate at Dongguan, the PRC. The total investment of CASC in Huadun was RMB31,300,000 (approximately HK$30,096,154).

– 7 –

LETTER FROM THE BOARD

According to the audited accounts of Huadun prepared in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, the net assets value of Huadun as at 31 December 2004 and 2005 were RMB11,006,922 (approximately HK$10,583,579) and RMB48,575,623 (approximately HK$46,707,330) respectively. Huadun’s net profit before and after taxation and extraordinary items for the two years ended 31 December 2004 and 2005 were as follows:

For the year ended For the year ended 31 December 2004 31 December 2005

Net profit before taxation and extraordinary items

RMB9,917,992 RMB12,248,741 (approximately (approximately HK$9,536,531) HK$11,777,636)

Net profit after taxation and RMB8,037,217 RMB11,224,872 extraordinary items (approximately (approximately HK$7,728,093) HK$10,793,146)

Income of Huadun mainly derived from rental of property. For the two years ended 31 December 2004 and 2005, the rental income amounted to RMB2,340,967 (approximately HK$2,250,930) and RMB1,677,936 (approximately HK$1,613,400) respectively.

The audited accounts for the two years ended 31 December 2005 were prepared in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants were qualified as the results of a subsidiary (which was disposed of in February 2006) was not consolidated pursuant to SSAP 27 issued by Hong Kong Institute of Certified Public Accountants and due to lack of title documents for some of the properties. The relevant subsidiary was disposed of in February 2006 and that the carrying value of the properties without title documents are insignificant. Such factors had been fully considered when determining the Consideration of the transaction.

The current board members of Huadun are Zheng Yongjin, Yuan Kewen, Gao Yuda. Zheng Yongjin, Yuan Kewen and Gao Yuda are directors nominated by the existing shareholders of Huadun. Yuan Kewen and Gao Yuda are staffs of the Company. Despite the above relationship, the Company has not been involved in the control or management of Huadun. It is intended that upon completion of the sale and purchase, CASIL Clearing will nominate directors (who may or may not be directors or employees of the Company or its subsidiaries) to the board.

Due to Yuan Kewen’s legal background and proficiency in English, he was nominated as a director of Huadan in July 2004 and of Vanbao in July 2005.

– 8 –

LETTER FROM THE BOARD

INTENTION OF THE COMPANY IN RESPECT OF THE PROPERTIES OF VANBAO AND HUADUN

Properties of Vanbao

The property owned by Vanbao comprises an assembled development site formed by 9 smaller sites located in the Beltline area of City of Calgary. The combined site is rectangular in shape with a total site area of approximately 4,234.11 sq.m. Certain part of the properties held by Vanbao are currently leased to 7 independent third parties with the latest tenancy expires in September 2006. The gross annual rent of these 7 tenancies amounts to C$96,720 (equivalent to approximately HK$657,696). The land use guidelines (DC Direct Control Land Use Guidelines approved by the Calgary City Council) indicate that the property is eligible to be developed with a high density residential development. Given the property will virtually be vacant shortly after completion of the sale and purchase, the parties to the Sale and Purchase Agreement agreed that the property be valued on the basis that the property is a vacant property and is eligible to be developed with a high density residential development. Atkinson Appraisal Consultants Limited, an independent valuer, valued the property at C$5,695,000 (equivalent to approximately HK$38,726,000) as at 11 January 2006. The property was acquired more than 5 years of the date of valuation and has not been pledged. Details of which are set out in Appendix III to this circular.

Given that the property is eligible to be developed with a high density residential development, the Company would, upon completion of the Sale and Purchase Agreement, decide whether the Company would sell the property in the market to third party developer, subject to the then market condition.

Properties of Huadun

Pursuant to the books and accounts of Huadun, there are a total of 3 parcels of land, namely, (i) Huadun Industrial City, (ii) a piece of land adjoining Huadun Industrial City at Dong Feng Road South and (iii) a piece of land at Xie Kang Cun, Qing Feng Road, all in Dongguan City, Guangdong Province, the PRC. Details of the properties are set out in Appendix III to this circular.

The properties concerned were transferred to an affiliate of Huadun pursuant to a loan settlement agreement without proper title documentation. These properties were assigned by such affiliate to Huadun in 2003. Huadun was acquired by the subordinates of CASC on 15 July 2004 at a consideration of approximately RMB31,301,000. Subsequently, such affiliate was dissolved and Huadun began to encounter difficulties in obtaining title documents in respect of the properties. Most of the buildings were completed prior to such acquisition. In the event that Huadun is not able to negotiate for the issue of the title documents, Huadun may surrender the property and the PRC government will reimburse Huadun for the amount it had incurred on the property.

– 9 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, Huadun has obtained land use right certificate in respect of 24,001 sq.m. out of total site area of 36,000 sq.m. in respect of the Huadun Industrial City. It is expected that Huadun will obtain land use right certificate of 109,000 sq.m. out of the 197,226.95 sq.m. site adjoining the Huadun Industrial City upon payment of the final instalment of the land premium. It is confirmed that the final land premium will be approximately RMB3,367,500 (HK$3,237,981) (Note) . As to the piece of land at Xie Kang Cun, Huadun has yet to obtain the land use right certificate. Huadun will negotiate with the relevant authority in respect of its title to such properties and the buildings thereon. Pursuant to a PRC legal opinion obtained by Huadun, (a) the loan settlement agreements are legally binding and enforceable; (b) given the winding up of the affiliate of Huadun (the transferor of the properties) and more than 2 years (being limitation period to initiate claims in the PRC) have passed without any claim against Huadun in respect of the properties, Huadun has obtained the rights to the properties transferred to it. Nevertheless, Huadun has to obtain approval from the Bureau of Land Resources of Dongguan ( ) in order to obtain title documents.

Note: In determining the value for the properties of Huadun as consideration for the Sale and Purchase Agreement, it was agreed that a sum of RMB3,369,000 should be deducted as the properties are still subject to payment of the outstanding land premium. It is now confirmed that the oustanding land premium will be approximately RMB3,367,500.

During the course of negotiating the Sale and Purchase Agreement, CASC and CASIL Clearing agreed that no value be attached to land and buildings which have yet to obtain title document save for the 109,000 sq.m. site referred to above. Based on the information provided by the Company and CASC (being a contolling shareholder and connected person of the Company), Knight Frank Hong Kong Limited has valued the properties of Huadun at RMB44,500,000 (approximately HK$42,788,462) as at 28 February 2006.

Huadun Industrial City comprises 3 contiguous parcel of industrial land having a total site area of approximately 36,000 sq.m. Currently the property is physically subdivided into 3 industrial complexes namely Zone 1, Zone 2 and Zone 3 let under three tenancies each for a term of 5 years with the latest tenancy expiring in December 2010 with monthly rental RMB104,988, RMB97,457 and RMB51,102 respectively. It is the current intention of the Company to hold the property as investment properties.

In respect of the other properties held by Huadun (being properties numbered 2 and 3 in the valuation report as set out in paragraph B of Appendix III to this Circular), the Company intends to hold such property as properties for future development.

INFORMATION ON LOANS RECEIVABLE

Details of the loans receivable are as follows:

	Rich Echo	East Pioneer
	Investments	International
Borrower	Limited	Limited
Date of loan agreement	5 June 1997	5 June 1997
Original principal	HK$150,000,000	HK$150,000,000
Balance as at 31 December 2004	HK$91,102,000	HK$100,000,000
Balance as at 30 June 2005	HK$88,609,000	HK$100,000,000
Balance as at the Latest Practicable	HK$87,808,400	HK$100,000,000
Date
Provisions made	Nil	Nil
Security	A corporate	A corporate
	guarantee and a	guarantee and a
	personal guarantee	personal guarantee

– 10 –

LETTER FROM THE BOARD

There are a total of three loans receivable recorded in the books of CASIL Clearing carrying a book value. For a number of years, CASC had provided undertaking in respect of those loans receivable. As one of these three loans receivable is currently subject to a Hong Kong legal proceeding (as more particularly set out in the paragraph headed “Litigation” in Appendix IV to this circular) and was not considered as appropriate for assignment to CASC under the Sale and Purchase Agreement, the loans to Rich Echo Investments Limited and East Pioneer International Limited were agreed by CASC and CASIL Clearing as the consideration for the purpose of the Sale and Purchase Agreement. As for the remaining loans receivable, the Company and CASC have been in discussion broadly the measures to enhance recoverability. Further disclosure will be made pending results of the discussions.

INFORMATION ON CASC

The principal activities of CASC include the investment and operation of state-owned assets; the research, manufacturing and sale of various kinds of launch vehicles, satellites, satellite related system products, satellite ground systems and equipments, radars, digital control equipments, industrial automation control systems and equipments, security equipments, chemical materials, construction materials, metallic products, mechanical equipments, electronic and telecommunication equipments, medical equipments, and automotive and its parts; the development and technical consultation of aerospace technology; and international satellite launching services and etc.

USE OF PROCEEDS

Assuming that no repayment are received from the loans receivable from the date of this circular until the date of Completion, CASIL Clearing is expected to receive not less than HK$14.9 million in cash from CASC. The Company intends to use the proceeds as working capital.

FINANCIAL EFFECTS OF THE TRANSACTION

The transactions contemplated under the Sale and Purchase Agreement involved a swap of the loans receivable due from third parties for interests in Vanbao, Huadun and set off of amount due from the Company to CASC (up to a maximum of HK$80,000,000) and injection of cash. Given the dollar-to-dollar set off among the consideration, the loans receivable and the shareholder’s loan due to CASC, it is expected by the Company that the Company will not have any material effect on the profit and loss account as a result of the asset swap except for certain professional and legal fees incurred.

Although the amount of loans receivable may be further reduced if the third parties make repayments before the date of Completion, assuming there is no repayment of the loans receivable until the date of Completion, not less than HK$14.9 million will be received in cash by the Group. Hence, the liquidity of the Group will be improved.

– 11 –

LETTER FROM THE BOARD

Upon completion, Vanbao will become a 79.25% owned subsidiary of the Company and Huadun will be wholly-owned by the Company. Based on the information set out above in respect of the audited profits of Vanbao and Huadun, it is expected that these two subsidiaries will have positive contribution toward the Company’s consolidated profits for the year ending 31 December 2006.

With the cancellation of certain portion of the shareholders loan due from the Company to CASC, the gearing ratio of the Company will also be improved.

CONNECTED AND DISCLOSEABLE TRANSACTION

CASC, being a controlling shareholder of the Company, is a connected person of the Company under the Listing Rules. Accordingly, the entering into of the Sale and Purchase Agreement between CASIL Clearing and CASC constitutes a connected transaction of the Company under the Listing Rules. Given the loans receivable to be assigned by the Group as consideration under the Sale and Purchase Agreement amounted to HK$188 million represents approximately 8.00% of the latest published consolidated total assets of the Group as at 30 June 2005 and 16.23% of the market captialization of the Company. The aggregate net profits before taxation and minority interests of Vanbao and Huadun and the aggregate turnover of Vanbao and Huadun for the year ended 31 December 2005 of approximately HK$11,980,541 and HK$2,531,400 represent 21.35 % and 0.18 % of the audited consolidated net profits before taxation and minority interests and total turnover of the Company for the year ended 31 December 2004. Accordingly, the Sale and Purchase Agreement is subject to the approval of the Independent Shareholders of the Company (being shareholders of the Company excluding CASC and its associates) voting at the Extraordinary General Meeting. The entering into of the Sale and Purchase Agreement also constitutes a discloseable transaction for the Company under the Listing Rules.

EXTRAORDINARY GENERAL MEETING

The notice of the Extraordinary General Meeting is set out on page 47 of this circular. The ordinary resolution to be proposed will be voted by way of poll.

A form of proxy is enclosed with this document for use at the Extraordinary General Meeting. Whether or not you intend to be present at the meeting, you are requested to complete and return the enclosed form of proxy to the share registrar of the Company, the Standard Registrars Limited, at Ground Floor, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time appointed for the holding of the meeting. Completion of a form of proxy will not preclude you from attending and voting at the Extraordinary General Meeting in person if you so wish.

– 12 –

LETTER FROM THE BOARD

The six wholly-owned subsidiaries of CASC, namely, Jetcote Investments Limited, Burhill Company Limited, Sin King Enterprises Company Limited, Jet Square Developments International Limited, Star River Assets Limited and Full Power International Limited (which together hold approximately 41.91% equity interest in the Company as at the Latest Practicable Date), and their respective associates (as defined under the Listing Rules) shall abstain from voting at the Extraordinary General Meeting.

RECOMMENDATION

The Directors are of the opinion that the transactions contemplated under the Sale and Purchase Agreement is in the best interests of the Company and recommend that Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the forthcoming Extraordinary General Meeting.

An Independent Board Committee comprising all the independent non-executive directors of the Company has been appointed to consider the terms of the Sale and Purchase Agreement and the connected and discloseable transaction. Somerley Limited has been appointed by the Independent Board Committee as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders on the terms of the Sale and Purchase Agreement.

The Independent Board Committee having reviewed the advice given by Somerley Limited, has recommended Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the forthcoming Extraordinary General Meeting.

FURTHER INFORMATION

Your attention is drawn to the letter from the Independent Financial Adviser, the recommendation of the Independent Board Committee, the valuation reports on the properties of Vanbao and Huadun and information set out in Appendices to this circular.

By order of the board of directors of China Aerospace International Holdings Limited Rui Xiaowu Chairman

– 13 –

APPENDIX I LETTER FROM THE INDEPENDENT BOARD COMMITTEE

10 April 2006

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(Stock Code: 0031)

To the Independent Shareholders,

CONNECTED AND DISCLOSEABLE TRANSACTION ACQUISITION OF TWO PROPERTY INVESTMENT COMPANIES AND SETTING-OFF OF SHAREHOLDER’S LOAN

We refer to the circular of the Company dated 10 April 2006 (the “Circular”) of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed by the board to advise the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement pursuant to which CASIL Clearing, a wholly-owned subsidiary of the Company, agreed to purchase 79.25% of the issued share capital of Vanbao, the related shareholder’s loan and 100% of the registered capital of Huadun from CASC, the controlling shareholder of the Company. Details of the Sale and Purchase Agreement are contained in the Letter from the Board as set out on pages 3 to 13 of the Circular.

We have considered the various details of the Sale and Purchase Agreement, in particular, the reasons and benefits of the transaction and the effect thereof. We have also reviewed the advice given by Somerley Limited, the independent financial advisor, on the terms of the Sale and Purchase Agreement as set out in their letter reproduced on pages 15 to 27 of the Circular.

Having considered the information set out in the Letter from the Board and taking into account the advice from Somerley Limited, we consider that the terms of the Sale and Purchase Agreement (and the arrangement to set-off the loans as well as the assignment of the Vanbao Shareholder’s Loan) are on normal commercial terms and are fair and reasonable and in the interests of the shareholders of the Company as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution as set out in the notice of the Extraordinary General Meeting.

Yours faithfully,

Lee Hung Sang Chow Chan Lum, Charles Luo Zhenbang Independent Board Committee

– 14 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice from Somerley Limited, the Independent Financial Adviser, to the Independent Board Committee and the Independent Shareholders regarding the Sale and Purchase Agreement for inclusion in this circular.

==> picture [36 x 37] intentionally omitted <==

Somerley Limited

Suite 2201, 22nd Floor Two International Finance Centre 8 Finance Street Central Hong Kong

10 April 2006

To: The Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONNECTED AND DISCLOSEABLE TRANSACTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the Sale and Purchase Agreement regarding principally the Group’s disposal to CASC, the controlling shareholder of the Company, of two overdue loans in consideration for (i) 79.25% of the issued share capital of Vanbao, (ii) the Vanbao Shareholder’s Loan, (iii) the entire registered capital of Huadun, (iv) the set-off of a shareholder’s loan due by the Group to CASC (up to HK$80 million) and (v) cash payment of not less than HK$14.9 million from CASC. As at the Latest Practicable Date, Vanbao and Huadun did not have any material assets other than holding an investment property in Canada and the PRC respectively. Details of the Sale and Purchase Agreement entered into between CASIL Clearing, a wholly owned subsidiary of the Company, and CASC are contained in the circular to the shareholders of the Company (the “Shareholders”) dated 10 April 2006 (the “Circular”), of which this letter forms part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as defined in the Circular.

As CASC is the controlling shareholder of the Company, the entering into of the Sale and Purchase Agreement between CASIL Clearing and CASC constitutes a connected transaction of the Company under the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the Extraordinary General Meeting.

The Independent Board Committee comprising Messrs Lee Hung Sang, Chow Chan Lum, Charles and Luo Zhenbang, the independent non-executive directors of the Company, has been formed to advise the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement. We, Somerley Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

– 15 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In formulating our advice, we have relied on the information and facts supplied, and the opinions expressed, by the directors of the Company (the “Directors”) which we have assumed to be true, accurate and complete. We have sought and received confirmation from the Directors that all material relevant information has been supplied to us and that to the best knowledge of the Directors, no material facts have been omitted from the information supplied and opinions expressed by them. We consider that the information we have received is sufficient for us to reach our advice and recommendation as set out in this letter and to justify our reliance on such information. We have no reason to doubt the truth and accuracy of the information provided to us, or to believe that any material information has been omitted or withheld. However, we have not conducted any independent investigation into the business and affairs of the Group or Vanbao or Huadun. We have assumed that all information and representations contained or referred to in the Circular are true at the date of the Circular and will remain true up to the time of the holding of the Extraordinary General Meeting.

INTRODUCTION

Pursuant to the Sale and Purchase Agreement, the Group will assign to CASC or its nominee the following loans, the aggregate outstanding amount of which as at the Latest Practicable Date was approximately HK$187.8 million:

		Approximate
		amount
		(HK$ million)
(i)	loan due from Rich Echo Investments Limited	87.8
	(“Rich Echo”), (“Rich Echo Loan”)
(ii)	loan due from East Pioneer International Limited	100.0
	(“East Pioneer”), (“East Pioneer Loan”)
		187.8

The borrowers of the Rich Echo Loan and East Pioneer Loan are not connected persons of the Company (as defined under the Listing Rules). The two loans were made by CASIL Clearing, a wholly owned subsidiary of the Company, as part of its money lending business. CASIL Clearing has ceased extending new loans since 1998.

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APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The consideration that the Group will receive for the assignment of the above two loans pursuant to the Sale and Purchase Agreement includes:

(i) 79.25% of the issued shares of Vanbao held by Wan Yuen, a wholly owned entity of CASC, together with a shareholder’s loan extended by Wan Yuen to Vanbao (ii) 100% registered capital of Huadun, which is currently held by two wholly owned subsidiaries of CASC (iii) set-off of a loan due from the Group to CASC (iv) cash (note)	Approximate amount (HK$ million) 30.9 62.0 up to 80.0 not less than 14.9
	187.8

Note: Assuming there is no further repayment of the Rich Echo Loan and East Pioneer Loan since the Latest Practicable Date.

PRINCIPAL FACTORS AND REASONS TAKEN INTO ACCOUNT

In arriving at our opinion and recommendation, we have taken into account the following principal factors and reasons:

1. Reasons for and benefits of entering into the Sale and Purchase Agreement

The Group is principally engaged in the manufacturing of electronic products including liquid crystal display, plastic moulds, printed circuit boards, intelligent chargers and security systems. The Group was also engaged in the money lending business in Hong Kong between 1996 and 1998 through CASIL Clearing which is a wholly owned subsidiary of the Company.

As set out in the Company’s previous announcement and financial reports, the Group still carries in its books a substantial amount of loan receivables arising from its money lending business. As at 30 June 2005, the book value of the loan receivables amounted to approximately HK$258.9 million, which comprised three loans receivables including the Rich Echo Loan and East Pioneer Loan. As at 30 June 2005, the aggregate book value of the Rich Echo Loan and East Pioneer Loan amounted to approximately HK$188.6 million. Following a repayment of part of the Rich Echo Loan in the sum of approximately HK$0.8 million, the aggregate outstanding amount of the two loans was reduced to approximately HK$187.8 million as at the Latest Practicable Date. The other loan receivable is secured by a piece of land in Hong Kong and a personal guarantee. The Group has instituted legal proceeding in Hong Kong in respect of that loan receivable, details of which is set out in the paragraph headed “Litigation” in Appendix IV to the Circular.

– 17 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Rich Echo Loan and East Pioneer Loan were made in 1997 by CASIL Clearing to two independent companies which have the same beneficial owners. Despite continuous efforts (as detailed below), the Group has not been able to obtain full repayment of the outstanding balances of the two loans.

As part of the Group’s exercise to streamline its business and reorganise its assets through disposal of non-core businesses and lesser quality assets, CASIL Clearing has agreed to assign (without recourse) the Rich Echo Loan and East Pioneer Loan, in respect of which repayment is slow and full recovery is in doubt, to CASC or its nominee pursuant to the Sale and Purchase Agreement.

The Directors consider the assets owned by Vanbao and Huadun to be acquired pursuant to the Sale and Purchase Agreement are better quality assets than the Rich Echo Loan and East Pioneer Loan. We concur with the view of the Directors that the disposal of the two overdue loans arising from the discontinued money lending business is in line with the Group’s business strategy to streamline its business and improve the quality of its asset portfolio. The Group will also benefit from a reduction in net debt as a result of up to HK$80.0 million set-off of a shareholder’s loan due by the Group to CASC and receipt of a cash payment of not less than HK$14.9 million from CASC upon Completion (assuming no further repayment of the two loans subsequent to the Latest Practicable Date).

2. Information on the Rich Echo Loan and the East Pioneer Loan

Both the Rich Echo Loan and East Pioneer Loan were made by CASIL Clearing in 1997 as part of its money lending business. Rich Echo and East Pioneer have the same beneficial owners and no significant assets or business of their own.

The principal terms of the Rich Echo Loan and East Pioneer Loan are the same and they are set out as follows:

(a) Time of borrowing: mid 1997 (b) Maturity: one year (c) Principal amount: HK$150 million

(d) Interest rate: 12.5% per annum

– 18 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(e) Security:

a personal guarantee provided by one of the two beneficial owners of the corporate borrowers; a corporate guarantee provided by a Taiwan company owned by the personal guarantor and his family members; and post dated cheques issued by the corporate guarantor for the principal amount of the respective loans in favour of CASIL Clearing.

(f) Outstanding loan amounts as at the Latest Practicable Date:

(i) Rich Echo Loan HK$87.8 million (ii) East Pioneer Loan HK$100.0 million

(g) Repayment record of the principal loan amount:

(i) Rich Echo Loan HK$62.2 million from 1999 to 2005 (ii) East Pioneer Loan HK$50.0 million in 1998

(h) Payment record of interest:

(i) Rich Echo Loan HK$18.8 million in 1999 (ii) East Pioneer Loan HK$62.9 million from1997 to 2001

When the Rich Echo Loan and East Pioneer Loan became overdue, CASIL Clearing presented the above cheques with the relevant bank for clearance but the cheques bounced. Accordingly, CASIL Clearing filed a claim (the “Claim”) in the court of Taiwan against the drawer of the cheques, which is a Taiwan company, and has successfully obtained a court order in its favour. However, as at the Latest Practicable Date, CASIL Clearing has not succeeded in recovering any amount in respect of the Claim.

– 19 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Information on Vanbao

Vanbao is principally engaged in leasing of an investment property in Canada (the “Vanbao Property”).

Set out below is a summary of financial information of Vanbao for the two years ended 31 December 2005, based on its audited accounts which are prepared under generally accepted accounting standards in Canada:

Year ended 31 December 2004 2005 CAD HK$ CAD HK$ 140,651 956,427 135,000 918,000 (9,178) (62,410) 29,831 202,851 (19,784) (134,531) 29,839 202,905 (12,933) (87,944) 19,631 133,491 4,175,527 28,393,584 4,188,235 28,479,998 68,637 466,732 60,367 410,496 4,244,164 28,860,316 4,248,602 28,890,494 (30,049) (204,333) (14,856) (101,021) (3,089,091) (21,005,819) (3,089,091) (21,005,819) (3,119,140) (21,210,152) (3,103,947) (21,106,840) 1,125,024 7,650,164 1,144,655 7,783,654	Year ended 31 December 2004 2005 CAD HK$ CAD HK$ 140,651 956,427 135,000 918,000 (9,178) (62,410) 29,831 202,851 (19,784) (134,531) 29,839 202,905 (12,933) (87,944) 19,631 133,491 4,175,527 28,393,584 4,188,235 28,479,998 68,637 466,732 60,367 410,496 4,244,164 28,860,316 4,248,602 28,890,494 (30,049) (204,333) (14,856) (101,021) (3,089,091) (21,005,819) (3,089,091) (21,005,819) (3,119,140) (21,210,152) (3,103,947) (21,106,840) 1,125,024 7,650,164 1,144,655 7,783,654	Year ended 31 December 2004 2005 CAD HK$ CAD HK$ 140,651 956,427 135,000 918,000 (9,178) (62,410) 29,831 202,851 (19,784) (134,531) 29,839 202,905 (12,933) (87,944) 19,631 133,491 4,175,527 28,393,584 4,188,235 28,479,998 68,637 466,732 60,367 410,496 4,244,164 28,860,316 4,248,602 28,890,494 (30,049) (204,333) (14,856) (101,021) (3,089,091) (21,005,819) (3,089,091) (21,005,819) (3,119,140) (21,210,152) (3,103,947) (21,106,840) 1,125,024 7,650,164 1,144,655 7,783,654	Year ended 31 December 2004 2005 CAD HK$ CAD HK$ 140,651 956,427 135,000 918,000 (9,178) (62,410) 29,831 202,851 (19,784) (134,531) 29,839 202,905 (12,933) (87,944) 19,631 133,491 4,175,527 28,393,584 4,188,235 28,479,998 68,637 466,732 60,367 410,496 4,244,164 28,860,316 4,248,602 28,890,494 (30,049) (204,333) (14,856) (101,021) (3,089,091) (21,005,819) (3,089,091) (21,005,819) (3,119,140) (21,210,152) (3,103,947) (21,106,840) 1,125,024 7,650,164 1,144,655 7,783,654
4,244,164 (30,049) (3,089,091) (3,119,140)	28,860,316 (204,333) (21,005,819) (21,210,152)	4,248,602 (14,856) (3,089,091) (3,103,947)	28,890,494 (101,021 (21,005,819
			(21,106,840
1,125,024	7,650,164	1,144,655

Note: The above non-current liabilities represented the Vanbao Shareholder’s Loan which is unsecured, non-interest bearing and does not have any repayment terms.

Currently, Vanbao has leased out a portion of the Vanbao Properties to tenants who are independent third parties not connected with the Company and its connected person (as defined in the Listing Rules). The turnover of Vanbao during the two years ended 31 December 2005 was mainly attributable to the rental income generated from the Vanbao Properties.

The major assets of Vanbao are the Vanbao Properties located in Calgary, Alberta, Canada with a total site area of approximately 45,600 sq.ft.. The Vanbao Properties comprise a commercial building which is currently rented to a fitness club, a bungalow and two apartment buildings which are wholly or partly rented out to independent third parties. The current rental yield is low, but the Vanbao Properties can be redeveloped into a high density residential property, which the independent valuer regards as the best use of the site. After Completion, the Company would consider disposing of the Vanbao Properties in the market to a third party developer, with reference to the then market condition.

– 20 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Information on Huadun

Huadun is a property investment company.

Set out below is a summary of the key financial information of Huadun (prepared on an unconsolidated basis) for the two years ended 31 December 2005, based on its audited accounts prepared under the accounting standards generally accepted in Hong Kong:

Year ended 31 December 2004 2005 RMB’000 HK$’000 RMB’000 HK$’000 2,341 2,251 1,678 1,613 9,929 9,547 12,401 11,924 9,919 9,538 12,260 11,788 9,918 9,537 12,249 11,778 8,037 7,728 11,225 10,793 62,425 60,024 49,869 47,951 4,752 4,569 8,721 8,386 67,177 64,593 58,590 56,337 (56,170) (54,010) (10,015) (9,630) – – – – (56,170) (54,010) (10,015) (9,630) 11,007 10,583 48,575 46,707	Year ended 31 December 2004 2005 RMB’000 HK$’000 RMB’000 HK$’000 2,341 2,251 1,678 1,613 9,929 9,547 12,401 11,924 9,919 9,538 12,260 11,788 9,918 9,537 12,249 11,778 8,037 7,728 11,225 10,793 62,425 60,024 49,869 47,951 4,752 4,569 8,721 8,386 67,177 64,593 58,590 56,337 (56,170) (54,010) (10,015) (9,630) – – – – (56,170) (54,010) (10,015) (9,630) 11,007 10,583 48,575 46,707	Year ended 31 December 2004 2005 RMB’000 HK$’000 RMB’000 HK$’000 2,341 2,251 1,678 1,613 9,929 9,547 12,401 11,924 9,919 9,538 12,260 11,788 9,918 9,537 12,249 11,778 8,037 7,728 11,225 10,793 62,425 60,024 49,869 47,951 4,752 4,569 8,721 8,386 67,177 64,593 58,590 56,337 (56,170) (54,010) (10,015) (9,630) – – – – (56,170) (54,010) (10,015) (9,630) 11,007 10,583 48,575 46,707	Year ended 31 December 2004 2005 RMB’000 HK$’000 RMB’000 HK$’000 2,341 2,251 1,678 1,613 9,929 9,547 12,401 11,924 9,919 9,538 12,260 11,788 9,918 9,537 12,249 11,778 8,037 7,728 11,225 10,793 62,425 60,024 49,869 47,951 4,752 4,569 8,721 8,386 67,177 64,593 58,590 56,337 (56,170) (54,010) (10,015) (9,630) – – – – (56,170) (54,010) (10,015) (9,630) 11,007 10,583 48,575 46,707
67,177 (56,170) – (56,170)	64,593 (54,010) – (54,010)	58,590 (10,015) – (10,015)	56,337 (9,630 –
			(9,630
11,007	10,583	48,575

Notes:

(1) Huadun held an interest in a subsidiary between June 2001 and February 2006. Financial statements of the subsidiary company are not available and accordingly, the consolidated financial statements could not be prepared and the post-acquisition result of the subsidiary company attributable to Huadun is not included in its income statement.
(2) Other revenue represented net profits arising from disposal of interests in joint property development projects.

Currently, Huadun has leased out a portion of its investment properties (the “Huadun Properties”) to tenants who are independent third parties not connected with the Company and its connected persons (as defined in the Listing Rules). The turnover of Huadun during the two years ended 31 December 2005 was mainly attributable to the rental income generated from the Huadun Properties.

The major asset of Huadun is the Huadun Properties which are parcels of industrial land with a total site area of approximately 312,000 sq.m. and related buildings with a total gross floor area of approximately 37,000 sq.m. situated at Dongguan, the PRC.

– 21 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Basis of consideration for Vanbao and Huadun

Both Vanbao and Huadun are priced largely on the basis of audited net asset value, as adjusted for the market values of their respective properties as appraised by the independent valuers. In the case of Huadun, the pricing is further adjusted by RMB3,369,000 in view of the fact that a portion of the Huadun Properties is still subject to payment of the outstanding land premium.

(i) Vanbao

Market value of the Vanbao Properties Add Other assets and liabilities as at 31 December 2005, including Cash Other receivables Accounts and other payables Attributable 79.25%	CAD’000 43.5 16.9	CAD’000 5,695.0
	60.4 (14.9)	45.5
		5,740.5
	4,549.3 (or HK$30.9 million)	4,549.3

Vanbao’s other assets and liabilities mainly relate to its property rental business.

– 22 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Huadun

RMB’000 17,829.5 17,334.9 26.4 35,190.8 (9,059.5) (3,324.6) (12,384.1)	RMB’000 17,829.5 17,334.9 26.4 35,190.8 (9,059.5) (3,324.6) (12,384.1)	RMB’000 17,829.5 17,334.9 26.4 35,190.8 (9,059.5) (3,324.6) (12,384.1)
	) ) )	41,131.0 488.9 22,806.7
35,190.8 (9,059.5 (3,324.6
(12,384.1

Notes:

(1) RMB44.5 million represents the market value of portion of Huadun Properties for which land use rights certificates have been obtained. In determining the consideration for Huadun, no value is ascribed to the portion of the Huadun Properties for which land use rights certificates have not been obtained, which we consider fair and reasonable to the Company.
(2) In determining the value for the Huadun Properties, it was agreed that a sum of RMB3,369,000 shall be deducted as the properties are still subject to payment of the outstanding land premium. It is now confirmed that the outstanding land premium will be approximately RMB3,367,500.
(3) Comprising motor vehicles, furniture and fixtures and office equipment.

A substantial portion of Huadun’s other receivables and other payables was due to or from the partner of a joint property development project (the “JV Partner”) who is not a connected person of the Company. As mentioned above, the joint property development project has been disposed of by Huadun.

– 23 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the management of the Company, of the approximately RMB17.3 million other receivables, approximately RMB14.6 million has been received. As at the Latest Practicable Date, the outstanding balance of the other receivables was approximately RMB2.7 million, of which approximately RMB1.7 million was due from associates of CASC. The management of the Company expects that the outstanding balance of the other receivables due from the associates of CASC will be settled in full prior to Completion. The remaining other receivables of approximately RMB1.0 million were largely due from the JV Partner.

Pursuant to the terms of the Sale and Purchase Agreement, CASC has warranted that since 31 December 2005, there has been no material adverse change in the business, assets and liabilities of Vanbao and Huadun.

Pursuant to the terms of the Sale and Purchase Agreement, the Group agreed to share half of the tax (if any) payable by CASC to the Canadian Government as a result of disposal of Vanbao, subject to a ceiling that such amount shall not exceed HK$1.25 million. This represents approximately 0.67% of the aggregate amount of the Rich Echo Loan and East Pioneer Loan, which we consider not significant in the context of the Sale and Purchase Agreement.

6. Valuation of Vanbao Properties

The Vanbao Properties have been valued by Atkinson Appraisal Consultants Limited (the “Vanbao Valuer”) as a vacant site being eligible to be redeveloped into a high density residential property at CAD 5,695,000 as at 11 January 2006. The text of the valuation letter and certificate in relation to the Vanbao Properties is set out in Appendix III to the Circular.

In assessing the consideration for Vanbao, we have reviewed and discussed with the Vanbao Valuer the methodology of, and basis and assumptions adopted for, the valuation of the Vanbao Properties as contained in the valuation report. The Vanbao Valuer has adopted the comparison method to value the Vanbao Properties which, in our opinion, is a normal approach in establishing the market value of the Vanbao Properties. In assessing the market value of the Vanbao Properties, the Vanbao Valuer has made reference to the actual sales of comparable properties with similar size, character and location as the Vanbao Properties and made adjustments to account for certain variances.

7. Valuation of Huadun Properties

The Huadun Properties for which valid land use rights have been obtained were valued by Knight Frank Hong Kong Limited (the “Huadun Valuer”) at RMB44,500,000 or approximately HK$ 42,800,000 as at 28 February 2006. The Huadun Valuer has ascribed no value to the portion of the Huadun Properties for which valid land use right certificates have not been obtained. The text of the valuation letter and certificate in relation to the Huadun Properties is set out in Appendix III to the Circular.

– 24 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the consideration for Huadun, we have reviewed and discussed with the Huadun Valuer the methodology of, and basis and assumptions adopted for, the valuation of the Huadun Properties as contained in the valuation report. The built portion of the Huadun Properties is rented out as industrial buildings and the Huadun Valuer has valued it using the investment method, which involved capitalising market rental at a rate of 10%. We understand from the Huadun Valuer that 10% is a market discount rate for PRC industrial buildings. This is, in our opinion, a normal approach for establishing the market value of the properties held for investment purpose. The remaining portion of the Huadun Properties is held for future development purpose and the Huadun Valuer has valued it with reference to the standard land prices issued by Dongguan City State-owned Land Resources Department.

As Vanbao and Huadun are property investment companies with their principal assets being their interests in the Vanbao Properties and Huadun Properties respectively, we consider the above basis in arriving at the consideration is fair and reasonable.

8. The shareholder’s loan and cash payment by CASC

CASC has provided unsecured and non-interest bearing financing to the Group since 1998. On 9 September 2005, CASC and the Company agreed to modify the terms of the shareholder’s loan granted by CASC so that it carries interest at 4.5% per annum with retrospective effect from 1 January 2005.

As disclosed in the 2005 interim report of the Company, the aggregate amount due by the Group to CASC as at 30 June 2005 amounted to approximately HK$180.6 million. Pursuant to the Sale and Purchase Agreement, after the above set-off, the outstanding balance of the amount due by the Group to CASC will be reduced significantly by up to HK$80 million. Interest payable by the Company in future will decrease accordingly.

As mentioned in the paragraph headed “Introduction” above, the remaining balance of the consideration payable by CASC for acquiring the Rich Echo Loan and East Pioneer Loan will be satisfied by cash payment of not less than HK$14.9 million made by CASC to the Group (assuming no further repayment of the two loans subsequent to the Latest Practicable Date). The combined effect of the set-off of the shareholder’s loan due to CSAC and the cash payment made by CSAC to the Group will reduce the Group’s net debt by HK$94.9 million. This represents approximately 69.1% of the Group’s net debt as at 30 June 2005.

9. Financial effect on the Group

(a) Net asset value

Given the dollar-to-dollar swap of assets between the Group and CASC pursuant to the Sale and Purchase Agreement, there will not be any material effect on the net asset value of the Group upon Completion.

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APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Earnings and cash flow

The Rich Echo Loan and East Pioneer Loan do not currently generate any interest income for the Group. On the other hand, Vanbao and Huadun are earning rental income. On this basis, completion of the Sale and Purchase Agreement will have a positive effect on the earnings and cash flow of the Group, though such effect is not expected to be material.

There will also be a reduction in interest expense as a result of the set-off of the shareholder’s loan due to CASC upon Completion.

(c) Reduction in net debt

The combined effect of the set-off of the shareholder’s loan due to CASC and the cash payment made by CSAC to the Group will reduce the Group’s net debt by approximately HK$94.9 million. This represents approximately 69.1% of the Group’s net debt as at 30 June 2005.

DISCUSSION

Vanbao and Huadun are property investment companies, with their principal assets being interests in the Vanbao Properties and Huadun Properties respectively. The consideration under the Sale and Purchase Agreement is based on audited net assets of those companies adjusted for valuations of the Vanbao Properties and the Huadun Properties carried out by independent valuers; and further adjusted in the case of Vanbao, for the Vanbao Shareholder’s Loan, and in the case of Huadun, for an agreed sum for payment of the outstanding land premium. We consider this a fair and reasonable basis for determining the consideration for the Sale and Purchase Agreement.

The principal amounts of the Rich Echo Loan and East Pioneer Loan are taken to be their fair values in determining the consideration for the Sale and Purchase Agreement. However, the repayment of the Rich Echo Loan and East Pioneer Loan is slow and their full recovery is, in our opinion, in doubt. On this basis, we consider the transactions contemplated under the Sale and Purchase Agreement involving the effective receipt of tangible properties and other good consideration in exchange for doubtful loans will improve the quality of the assets of the Group. Taking into account the combined effect of the set-off of the shareholder’s loan due to CASC and the cash receivable from CASC, we consider the payment terms of the Sale and Purchase Agreement will also improve the net debt position of the Group.

– 26 –

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Based on the above principal factors and reasons, we consider that the Sale and Purchase Agreement and the related transactions are on normal commercial terms which are fair and reasonable to the Independent Shareholders. We further consider that the entering into of the Sale and Purchase Agreement is in the interests of the Company and the Shareholders as a whole. We therefore advise, and recommend that the Independent Board Committee advise, the Independent Shareholders to vote in favour of the ordinary resolution to approve the Sale and Purchase Agreement and the related transactions contemplated thereunder to be proposed at the Extraordinary General Meeting.

Yours faithfully, for and on behalf of SOMERLEY LIMITED M.N. Sabine Chairman

– 27 –

APPENDIX III

VALUATION REPORT

A. The following is the text of a valuation report, summary of values and valuation certificates received from Atkinson Appraisal Consultants Ltd., prepared in accordance with Chapter 5 of the Listing Rules for the purposes of incorporation in this circular, in connection with its valuation as at 11 January 2006 for the property interests of Vanbao in Canada.

Atkinson Appraisal Consultants Ltd.

Real Estate Analysts

10 April 2006 Suite 204, 5920 Macleod Trail South The Board of Directors Calgary, Alberta China Aerospace International Holdings Limited T2H 0K2 China Aerospace Centre 143 Hoi Bun Road (Phone) Kwun Tong (403) 212-1103 Kowloon Hong Kong (Fax) (403) 212-1139 (E-mail) [email protected]

Dear Sirs,

Re: Assembled Development Site at 1111-11 Street S.W. and 1202-12, 1208-12, 1212-12, 1216-12, 1218-12, 1220-12, 1222-12 & 1226-12 Avenue S.W., Calgary, Alberta, Canada (“the Property”)

In accordance with your instruction for us to value the Property, we confirm that we have carried out title searches, inspections, made relevant enquiries and obtained such further information as we consider necessary of providing with our opinion of value of the Property as at 11 January 2006 (the “Valuation Date”).

BASIS OF VALUATION

Our valuation of the Property is our opinion of the market value of the Property concerned which we would define as intended to mean “the highest price in terms of money which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a purchaser, who buys with knowledge of all the uses to which it can be adapted and for which it is capable of being used and assuming the price is not adversely affected by undue stimulus

A. Buyer and Seller typically motivated.
B. Both parties are well informed, or well advised, and each acting in what he considers to be his own best interest.

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VALUATION REPORT

APPENDIX III

C. A reasonable amount of time allowed for exposure in the open market.
D. Payment is made in cash, or its equivalent.
E. Financing, if any, is on terms generally available in the community at the specified time, at the specified date, and typical for the type of property in its locale;
F. The price represents a normal consideration for the property sold, unaffected by special financing amounts, and/or terms, services, fees, costs or credits incurred in the transaction.

Our valuation has been prepared in accordance the relevant provisions in the Companies Ordinance and the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited (Main Board) and in conformity with the Uniform Standards of Professional Appraisal Practice published by Appraisal Institute of Canada.

VALUATION METHODOLOGIES

The Property is valued by the comparison method of valuation on the assumption that the Property can be sold with the benefit of vacant possession. The property is valued with consideration to our highest and best use analysis and is valued as a vacant site which is considered as being eligible for development to a high density residential use. Comparisons based on prices realised on actual sales of comparable properties have been made. Comparable properties with similar sizes, character, locations and so on are analyzed and carefully weighted against all respective advantages and disadvantages of the Property in order to arrive at fair comparison of values.

TITLE INVESTIGATIONS

We have not been given copies of relevant title documents but we have caused title searches at the South Alberta Land Registration District Office. Moreover we are not qualified legal council and therefore are not able to comment upon the property titles or registrations or verify the ownership nor to verify any lease amendments which may not appear on the titles or other such documentation.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the Property is sold in the market without any effect of deferred term contract, leaseback, joint venture, management agreement or any other similar arrangement which might serve to affect the value of the Property. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the Property.

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APPENDIX III

VALUATION REPORT

In valuing the Property concerned, we have assumed that the owner of the Property have free and uninterrupted rights to use and assign the property.

No site investigation has been carried out to determine the suitability of the ground conditions or the services for any property development to be erected thereon. Our valuation is carried out on the assumption that these aspects are satisfactory. We have also assumed that all consents, approvals and licenses from relevant government authorities for the development proposals will be granted without onerous conditions or delay.

Other special assumptions of the Property, if any, have been stated in the footnotes of the valuation certificate for the Property.

VALUATION CONSIDERATION

We have inspected the exterior and wherever possible, the interior of the Property included in the attached valuation certificate. During the course of our inspection, we noted that the bungalow residence (1216-12 Avenue SW) and the two apartment structures (1222 & 1226-12 Avenue SW) are in below average/fair to poor condition generally. However, no structural survey has been made and we are therefore unable to report as to whether the Property is free from rot, infestation or other defects. No tests were carried out on any of the services.

Having examined all relevant documentation, we have relied to a considerable extent on the information given to us, particularly in respect of easements, tenure, site areas, gross floor areas and rentable areas.

Unless otherwise stated, all dimensions, measurements and areas included in our valuation certificate are based on the information contained in the documents provided by the Group and are therefore approximations. We have no reason to doubt the truth and accuracy of the information provided to us and we have been advised by the Group that no material facts have been omitted from the information provided.

We have not carried out on-site measurements to verify the correctness of the site area in respect of the Property concerned but we have assumed that the site areas and measurements taken from the land titles documents and from the information supplied by the City of Calgary are correct.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the Property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, we have assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

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APPENDIX III

REMARKS

Unless otherwise stated, all money amounts stated herein are in Canadian Dollar (“C$”).

Our Valuation Certificate is enclosed herewith.

Yours faithfully,

For and on behalf of

Atkinson Appraisal Consultants Limited James Hampton

AACI P. App. MRICS

Note: Mr. James Hampton is a Chartered Estate Surveyor with over 19 years’ valuation experience on properties in England and Canada.

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VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

General description

Property

Assembled Development The property comprises an Site at 1111-11 Street assembled development site S.W. and 1202-12, formed by 9 smaller sites located 1208-12, 1212-12, in the Beltline area of City of 1216-12, 1218-12, Calgary. The combined site is 1220-12, 1222-12 rectangular in shape. and 1226-12 Avenue S.W., Calgary, The total site area is Alberta, Canada approximately 45,576 sq. ft. (4,234.11 sq. m.)

Market value on a vacant site Particulars of basis as at occupancy 11 January 2006 As at the Valuation C$5,695,000 Date, the Property is subject to various tenancies. However, we are instructed to value the Property subject to vacant possession.

Plan A1 Calgary, Block 77, Lots 21 to 34 There are structures currently inclusive. erected on the subject site However, we are instructed to value the Property as a vacant site which is eligible for high density residential development. (please also refer to Note 4)

The property is a Fee Simple Estate.

Notes:

The current registered owner of the property is Vanbao Development (Canada) Limited.
As shown on the copies of the respective Land Title Certificates, the Property is subject to the following encumbrances:
(i) Easement dated 6 November 1990 vide Registration No. 901 277 033;
(ii) Encroachment Agreement dated 3 August 1994 vide Registration No. 941 200 554;
(iii) Document dated 8 June 1998 vide Registration No. 981 165 891; and
(iv) Builders Lien dated 9 March 1999 Registration No. 991 063 412.
The uses and development of the Property is governed by the Land Use Bylaw 2P80, approved by City Council on March 1980 and Amended Byelaw #4Z2002, LOC #2001/022 approved by City Council on 21 January 2002, which contains the DC Direct Control Land Use Guidelines and the land use of Home occupations -Class I is always permitted. The land use guidelines indicate that the property is eligible to be developed with a high density residential development.
The assembled subject site is currently improved with a 11/2 storey commercial building, with rentable area of approximately 13,819 sq. ft., a bungalow residence completed in about 1944 with gross floor area of approximately 750 sq.ft. and two 2-storeys apartment buildings completed in about 1909 and 1948 with gross floor areas of approximately 2,202 sq.ft. and 1,964 sq.ft. respectively. However, we are instructed to value the Property assuming it is a vacant site which is eligible to be developed to a high density residential use. No allowance has been made for the demolition of the present on site buildings.
The Property is subject to a total of 7 tenancies for terms from monthly to 1 year term at a gross annual rent of C$96,720. However, we are instructed to value the Property subject to vacant possession, and as being eligible for high density residential development.
In arriving at our opinion of value of the property, we have analyzed its redevelopment potential and concluded that the highest and best use of the subject as a vacant site is as a High Rise/High Density residential development use in accordance with the present Direct Control District land use classification.

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B. The following is the text of a valuation report, summary of values and valuation certificates received from Knight Frank Hong Kong Limited, prepared in accordance with Chapter 5 and Practice Note 12 of the Listing Rules for the purposes of incorporation in this circular, in connection with its valuation as at 28 February 2006 for the property interests of Huadun in the PRC.

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10 April, 2006

The Directors

China Aerospace International Holdings Limited 17/F., China Aerospace Centre No. 143 Hoi Bun Road Kwun Tong Kowloon Hong Kong

Dear Sirs,

In accordance with your instructions for us to value those property interests in the People’s Republic of China (the “PRC”) held by (Dongguan Huadun Enterprises Limited*) (“Huadun”) which are intended to be injected into China Aerospace International Holdings Limited (the “Company”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of respective market values of the property interests as at 28 February 2006.

Our valuations are our opinion of the market values and here we would define market value as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”

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APPENDIX III

VALUATION REPORT

According to the Company, the properties were transferred from an affiliate of Huadun in 2003. In July 2004, CASC acquired Huadun at a consideration of approximately RMB31,301,000.

For property in Group I which is held for investment, we have valued the property by capitalizing the market rent of the property with the market yield for this type of property. The current market rent of the property is assessed through comparable lettings in the locality and then such market rent is capitalized using a market yield to derive the market value of the property. This valuation method does not constitute a profit forecast.

For properties in Group II which is held for future development, the properties are valued by reference to standard land prices in the locality issued by Dongguan City State-owned Land Resources Department.

We have relied to a considerable extent on the information provided by the Company and CASC (being a controlling shareholder and connected person of the Company) and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupancy, lettings, identification of properties, site and floor areas. We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the properties but have assumed that the site areas as advised by the Company are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

We have inspected the exterior and, where possible, the interior of the property. However, no structural survey, investigation or examinations have been made, but in the course of our inspections we did not note any serious defects. We are not, however, able to report whether the properties are free from rot, infestation or any other structural defects. No tests were carried out to any of the services.

We have not carried out investigations on site to determine the suitability of the ground conditions and the services etc. for the developments. Our valuations are prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

No allowance has been made in our report for any charges, mortgages or amounts owing on the properties. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

In valuing the properties which are all situated in the PRC, we have relied on the opinion dated 8 March 2006 of the Company’s PRC legal adviser, Guangdong Li Guo Lawyers Office, regarding the titles to the properties held by Huadun which also confirms that the title of the properties is capable of being sold to the Company. For portion of Property No. 1, we have assumed that the transferable land use rights in respect of the property for a specific term at nominal annual land use fees have been granted and that any premium payable has already been fully paid. We have also assumed that the grantee of the property has free and uninterrupted right to occupy, use and assign the property interest for the whole of the unexpired terms as granted.

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APPENDIX III

VALUATION REPORT

We have had no reason to doubt the authenticity and accuracy of the information provided to us by the Company. We have also sought and received confirmation from the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

The property valuation complies with the requirements set out in Chapter 5 and Practice Note 12 of the Listing Rules of Hong Kong Stock Exchange and Clearing Company Limited and Valuation Standards on Properties (First Edition 2005) of The Hong Kong Institute of Surveyors.

Unless otherwise stated, all sums stated in this report are in Renminbi.

We enclose herein our summary of valuation and valuation certificate.

Yours faithfully, For and on behalf of KNIGHT FRANK HONG KONG LIMITED Catherine Cheung MHKIS MRICS RPS(GP) Director

Note: Ms. Cathering Cheung is a member of The Hong Kong Institute of Surveyors, a member of Royal Institution of Chartered Surveyors and a Registered Professional Surveyor (General Practice). She has over ten years of experience in valuation of properties in Hong Kong and the PRC.

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VALUATION REPORT

APPENDIX III

SUMMARY OF VALUATION

Group I – Property held by Huadun for investment

Property 1. Huadun Industrial City at Dong Feng Road South Qing Xi Town Dongguan City Guangdong Province the PRC Sub-total: Group II – Properties held by Huadun for future development 2. A piece of land adjoining Huadun Industrial City at Dong Feng Road South Qing Xi Town Dongguan City Guangdong Province the PRC 3. A piece of land at Xie Kang Cun Qing Feng Road Dongguan City Guangdong Province the PRC Sub-total: Total:	Market value in existing state as at 28 February 2006 RMB22,700,000
	RMB22,700,000 RMB21,800,000 No commercial value
	RMB21,800,000
	RMB44,500,000

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VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Group I – Property held by Huadun for investment

Property Description and tenure

Market value in Particulars of existing state as at occupancy 28 February 2006

Huadun Industrial The property comprises 3 City at Dong Feng contiguous parcels of industrial Road South land having a total site area of Qing Xi Town approximately 36,000 sq.m. Dongguan City Currently the property is Guangdong physically subdivided into 3 Province industrial complexes namely the PRC Zone 1, Zone 2 and Zone 3. A number of buildings are erected on each Zones aging from 2001 to 2003 and the particulars of which are summarized as follows:

Zone 1:

Building No. of Storey Workshop 3 Staff quarters 5 Management quarters 4 Godown 1 Canteen 2 Office 3 Guard House 1 Electricity Room 1 Total Zone 2: Building No. of Storey Workshop 3 2 blocks of staff quarters 5 Management quarters 3 Office 3 Electricity Room 1 Guard House 1 Total	Gross Floor Area (sq.m.) 6,760 3,027.4 1,571 1,100 794 661 13 72
	13,998.4

	Gross Floor Area (sq.m.) 6,245 6,054.8 661 1,865 144.5 23.1
	14,993.4

The property is let under three tenancies each for a term of 5 years with the latest tenancy expiring in December 2010 with monthly rents as follows:

Zone 1: RMB104,988 Zone 2: RMB 97,457 Zone 3: RMB 51,102

All the above rents are inclusive of management fees.

RMB22,700,000

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VALUATION REPORT

APPENDIX III

Property

Description and tenure

Market value in Particulars of existing state as at occupancy 28 February 2006

Zone 3:

Zone 3:
Building No. of Storey Workshop 3 Staff quarters 1 Office 3 Guard House 1 Total	Gross Floor Area (sq.m.) 6,760 652 1,003 15.3
	8,430.3

Another 4-storey management quarters is being constructed in Zone 1, without subject to any substantial outstanding construction cost, it will provide a total gross floor area of approximately 1,293.5 sq.m. Among the total of 36,000 sq.m. site area of the property, only about 24,000 sq.m. site area is granted under two State-owned Land Use Right Certificates each for a term expiring on 4 January 2054.

Notes:

(1) Pursuant to State-owned Land Use Rights Certificate No. (2004) (107) ( ) dated 8 March 2004 and issued by Municipal Government of Dongguan City, about 12,000.7 sq.m. of site area of the property was granted to Huadun (“Party A”) for a land use term up to 4 January 2054 for industrial uses.
(2) Pursuant to State-owned Land Use Rights Certificate No. (2004) (108) ( ) dated 8 March 2004 and issued by Municipal Government of Dongguan City, another plot of land having a site area of about 12,000.3 sq.m. was granted to Huadun (“Party A”) for a land use term up to 4 January 2054 for industrial uses.
(3) The above valuation only reflects the market value of the 24,001 sq.m. site which is held under the aforesaid Land Use Rights Certificates together with about 15,291.9 sq.m. buildings in Zone 1 and 9,933.4 sq.m. buildings in Zone 2 erected on such portion of site. The remaining site and buildings which possess no proper title documents have been assigned no commercial value. If on the assumption that proper title documents could be obtained for these portions, the market value of such portion of site and buildings would be about RMB12,140,000.

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VALUATION REPORT

(4) The current status of the property regarding major approvals, consents or licences required in the PRC are as follows:

Document	Approval
State-owned Land Use Rights Grant Contract	No
State-owned Land Use Rights Certificate	Yes (Portion)
Certificate for Construction Commencement	Yes (Portion)
Certificate for Construction Engineering and Planning	Yes (Portion)
Realty Title Certificate	No

(5) The opinion of the Company’s legal adviser on PRC laws states in its legal opinion dated 8 March 2006 that:
(i) Party A has legally obtained the land use rights of 24,001 sq.m site of the property; and
(ii) There is no legal impediment for the grant of Building Ownership Certificate for buildings of about 15,291.9 sq.m. in Zone 1 and 9,933.4 sq.m. buildings in Zone 2, which are erected on the portion of land with land use rights granted and have been their building proposal sent to the Building Authority for approval beforehand, to Party A upon the final certification of the completion of the buildings from the relevant Government Authority.
(6) Based on the legal opinion prepared by the Company’s legal adviser on PRC laws dated 8 March 2006, in the course of our valuation, we have relied on the following assumption:
(i) Huadun is able to assign, transfer, lease and dispose of the 24,001 sq.m. site together with the buildings erected thereabove, having total gross floor areas of approximately15,291.9 sq.m. in Zone 1 and 9,933.4 sq.m. buildings in Zone 2 which building ownership certificates are likely to be granted.
(7) The land and buildings were transferred to Huadun by its affiliates between August and November of 2003. Affiliates of CASC acquired Huadun in July 2004 for a total consideration of approximately RMB31,301,000.

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VALUATION REPORT

APPENDIX III

Group II – Property held by Huadun for future development

				Market value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	28 February 2006
2.	A piece of land	The property comprises a parcel	The property is a	RMB21,800,000
	adjoining Huadun	of irregular shaped land having a	piece of vacant site.
	Industrial City at	site area of approximately
	Dong Feng Road	197,226.95 sq.m.. Portion of the
	South	property is levelled whilst
	Qing Xi Town	portion of it is a small knoll.
	Dongguan City
	Guangdong
	Province
	the PRC

Notes:

(1) We are advised by Huadun that the Land Use Rights Certificate for approximately 109,000 sq.m. site will be granted to Huadun subject to the final payment of the land premium (which is expected to be RMB3,367,500 (HK$3,237,981) to the Government Authority whilst the remaining portion of the property possesses no proper title documents nor document indicating the possessing of the application of the Land Use Rights Certificate. In this case, the market value shown above only reflects the market value of those 109,000 sq.m. site and the remaining portion of the property which possesses no proper title documents have been assigned no commercial value. If on the assumption that proper title documents could be obtained for the remaining portion, the market value of such portion of site would be about RMB17,650,000.

(2)	Document	Approval
	State-owned Land Use Rights Grant Contract	No
	State-owned Land Use Rights Certificate	No
	Certificate for Construction Land Usage and Planning	Yes (Portion)
	Realty Title Certificate	No

(3) The opinion of the Company’s legal adviser on PRC laws dated 8 March 2006 states that:
(i) Portion of the property, having a site area of about 109,000 sq.m., is in the final stage of obtaining the State-owned Land Use Rights Certificate and there is no legal impediment for the grant of the Stated-owned Land Use Rights Certificate of such portion of property to Huadun. The remaining site of the property has not yet applied for the State-owned Land Use Rights Certificate.
(4) Based on the legal opinion prepared by the Company’s legal adviser on PRC laws dated 8 March 2006, in the course of our valuation, we have relied on the following assumptions.:
(i) Huadun has obtained the State-owned Land Use Rights Certificate for the 109,000 sq.m. site of the property and is able to assign, transfer, lease and dispose of such portion of the property in the open market.

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VALUATION REPORT

APPENDIX III

Market value in Particulars of existing state as at Property Description and tenure occupancy 28 February 2006 3. A piece of land at The property comprises a parcel The property is a No commercial value Xie Kang Cun, of irregular shaped land having a piece of vacant site. Qing Feng Road site area of approximately 78,417 Dongguan City sq.m. The property is mainly Guangdong leveled. Province the PRC

Notes:

(1) The property possesses no proper title documents nor document indicating the possessing of the application of the Land Use Rights Certificate. In this case, we have assigned no commercial value to the property. If on the assumption that proper title documents could be obtained for the remaining, the market value of the site would be about RMB17,650,000.
(2) The current status of the property regarding major approvals, consents or licences required in the PRC are as follows:

Document	Approval
State-owned Land Use Rights Grant Contract	No
State-owned Land Use Rights Certificate	No
Certificate for Construction Land Usage and Planning	No
Realty Title Certificate	No

(3) The opinion of the Company’s legal adviser on PRC laws dated 8 March 2006 states that:
(i) Huadun has not obtained any state-owned land use rights certificate and is not in possession of proper legal title of the property.

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GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES

As at the Latest Practicable Date, none of the Directors and chief executive of the Company or their respective associates had any interest or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or to be recorded in the register required to be maintained pursuant to Section 352 of the SFO, or otherwise to be notified to the Company or the Stock Exchange pursuant to the Model Code for Securities Transaction by Directors of Listed Issuers in the Listing Rules.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the register of substantial shareholders maintained by the Company pursuant to section 336 of the SFO shows that the following shareholders had notified the Company of relevant interests of 5% or more in the issued share capital of the Company.

Name of shareholder Capacity China Aerospace Science & Technology Corporation Held by a controlled corporation Jetcote Investments Limited Beneficial owner Held by a controlled corporation (Note b)	Number of shares held for long positions 898,021,064 (Note a) 5,490,456 892,530,608 898,021,064	Percentage of issued share capital of the Company 41.91% 0.26% 41.66%
		41.91

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GENERAL INFORMATION

APPENDIX IV

		Number of	Percentage of
		shares held	issued share
		for long	capital of the
Name of shareholder	Capacity	positions	Company
Burhill Company Limited	Beneficial owner	394,883,980	18.43%
	(Note b)
Sin King Enterprises	Beneficial owner	393,272,908	18.36%
Company Limited	(Note b)
Jet Square Developments	Beneficial owner	61,706,700	2.88%
International Limited	(Note b)
Star River Assets Limited	Beneficial owner	32,165,100	1.50%
	(Note b)
Full Power International	Beneficial owner	10,501,920	0.49%
Limited	(Note b)

Notes:

(a) These 898,021,064 Shares are duplicated in the interests held by Jetcote Investments Limited, a wholly-owned subsidiary of China Aerospace Science & Technology Corporation, and its subsidiaries.
(b) All the five companies are wholly-owned subsidiaries of Jetcote Investments Limited. The Shares held by them form part of the total number of Shares held by Jetcote Investments Limited.

Save as disclosed herein, as at the Latest Practicable Date, the Directors or chief executive of the Company are not aware of any other person who has an interest or short position in the Shares and underlying Shares of the Company which would be required to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 5% or more in the issued share capital of the members of the Group.

As at the Latest Practicable Date, there were no outstanding securities, options or warrants which were convertible into new Shares.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into, or was proposing to enter into any service contract with the Company or any member of the Group (except those expiring or determinable by the Company within a year without payment of compensation other than statutory compensation).

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GENERAL INFORMATION

APPENDIX IV

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material change in the financial or trading position of the Company since 30 June 2005, the date to which the latest published audited consolidated financial statements of the Company were made up.

6. EXPERT

(a) The following are the qualifications of the experts who have given their opinion or advice which is contained in this Circular:

Name

Qualifications

Somerley Limited a corporation licensed under the Securities and Futures Ordinance to conduct types 1 (dealing in securities), 4 (advising on securities), 6 (advising on corporate finance) and 9 (asset management) regulated activities Atkinson Appraisal Consultants Limited Chartered Estate Surveyor Knight Frank Hong Kong Limited Chartered professional surveyors and valuers

(b) As at the Latest Practicable Date, each of the experts mentioned in paragraph (a) above did not have any shareholding in the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Group.
(c) Eash expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which they are included in this circular.

7. PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

In accordance with the Company’s Articles of Association, the following categories may demand the vote in respect of the resolutions to be put to at any general meeting should be taken on a poll:

(a) the chairman of the meeting; or
(b) at least three members present in person or by proxy for the time being entitled to vote at the meeting; or

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GENERAL INFORMATION

APPENDIX IV

(c) any member or members present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or
(d) any member or members present in person or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

8. COMPETING INTEREST OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, none of the Directors and their respective associates were considered to have interests in any business which competes or is likely to compete, either directly or indirectly, with the businesses of the Group pursuant to the Listing Rules.

9. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been, since the date to which the latest published audited accounts of the Company was made up, acquired or disposed of by or leased to the Group, or were proposed to be acquired or disposed of by or leased to the Group.

10. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the registered office of the Company within 14 days from the date of this circular:

(a) the sale and purchase agreement dated 22 January 2005 between the Company and China Academy of Launch Vehicle Technology (“CALT”) in respect of the proposed transfer of the Company’s entire 100% equity interest in Astrotech (which, in turn, holds approximately 44.17% equity interest in CASIL Telecommunications Holdings Limited) and the entire shareholder’s loan due from Astrotech Group Limited to CALT;
(b) the Sale and Purchase Agreement;
(c) the letter from the experts as set out in this circular; and
(d) the written consent from the experts referred to in the section headed “Expert” in this appendix.

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GENERAL INFORMATION

APPENDIX IV

11. LITIGATION

Save as disclosed below, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration or claim of material importance and, so far as the Directors were aware, no litigation or claims of material importance are pending or threatened by or against any member of the Group.

CASIL Clearing was named as a defendant in a litigation in respect of an alleged breach of a loan agreement (the “Loan Agreement”) in failing to advance the full amount of HK$330,000,000 to an independent third party company (the “Borrower”) in 1997. Concurrently, CASIL Clearing resisted the claim and counterclaimed against the Borrower and sued against its guarantor upon default on, including but not limited to, interest and payment under the loan amount advanced under the Loan Agreement and the mortgage (the “CASIL Clearing’s Litigation”).

On 30 July 2004, the Court judged that the Borrower was entitled to damages consequent upon CASIL Clearing’s breach of the Loan Agreement. However, CASIL Clearing was also entitled to repayment of principal outstanding under the Loan Agreement and interest thereon according to the terms of the Loan Agreement and to the judgment against both the owners of the pledged assets under the mortgage and the guarantor under the guarantee. As at the Latest Practicable Date, CASIL Clearing and the Borrower have not yet arranged for a date for further directions as to the assessment of damages. The aforesaid information had been disclosed in the Company’s 2004 annual report.

As advised by the Company’s legal advisers, CASIL Clearing will probably be entitled to substantive judgment on its claim against the Borrower. The compensation to be made to the Borrower and the loan principal and interest to be received by CASIL Clearing has not yet been concluded by the Borrower as at the Latest Practicable Date.

The Borrower, its directors, and its substantial shareholder and chairman are all independent third parties.

12. GENERAL

(a) The former Company secretary of the Company resigned with effect from 15 March 2005, the Company has yet to appoint a new secretary.
(b) The qualified accountant of the Company is Mr. Luk Chi Keung. Mr. Luk is an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants.
(c) The share registrar of the Company is Standard Registrars Limited, G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(d) None of the directors of the Company is materially interested in any contract or arrangement subsisting at the date of the Latest Practicable Date and which is significant in relation to the business of the Group.
(e) The English text of this circular shall prevail over the Chinese text.

– 46 –

APPENDIX V NOTICE OF EXTRAORDINARY GENERAL MEETING

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(Stock Code: 0031)

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of China Aerospace International Holdings Limited (the “Company”) will be held at 17th Floor, China Aerospace Centre, 143 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong at 11:00 a.m. on Wednesday, 26 April 2006 (or any adjournment thereof), for the purpose of considering and, if thought fit, passing the ordinary resolution set out as follows:

ORDINARY RESOLUTION

“ THAT :

(a) the sale and purchase agreement (“ Sale and Purchase Agreement ”) entered into between CASIL Clearing Limited (“ CASIL Clearing ”) and China Aerospace Science & Technology Corporation (“ CASC ”) dated 20 March 2006 in relation to the purchase by CASIL Clearing of approximately 79.25% of the issued share capital of Vanbao Development (Canada) Ltd., the related shareholder’s loan and 100% of the registered capital of Dongguan Huadun Enterprises Limited from CASC, the assignment of two loans receivable of approximately HK$188 million by CASIL Clearing to CASC or its nominee, the set-off of shareholder’s loan due from the Company to CASC (up to the maximum of HK$80,00,000) and the settlement of the balance of the difference of the above in cash by CASC to CASIL Clearing, the particulars of which are described in the circular dated 10 April 2006 despatched to the shareholders of the Company, be and is hereby approved; and
(b) the board of directors of the Company be and is hereby authorised to take all such actions and steps and execute all documents or deeds as it may consider necessary or desirable to give full effect to this resolution, and to implement the Sale and Purchase Agreement.

By order of the board Guo Xianpeng

Director

Hong Kong, 10 April 2006

– 47 –

APPENDIX V NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

A member entitled to attend and vote at the meeting convened by this notice is entitled to appoint a proxy (or proxies) to attend and vote in his stead. A proxy need not be a member of the Company.
To be valid, a form of proxy, together with the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority must be deposited at the share registrar of the Company, the Standard Registrars Limited, at Ground Floor, BEA Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for the holding of the meeting or any adjourned meeting.

– 48 –

AI assistant

Computer And Technologies Holdings Limited — Proxy Solicitation & Information Statement 2006

48900_rns_2006-04-11_8f5ab8e3-b808-482c-bcc5-f807978c0196.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CONTENTS

DEFINITIONS

CONNECTED AND DISCLOSEABLE TRANSACTION ACQUISITION OF TWO PROPERTY INVESTMENT COMPANIES AND SETTING-OFF OF SHAREHOLDER’S LOAN

THE SALE AND PURCHASE AGREEMENT DATED 20 MARCH 2006

Parties:

Assets to be acquired by CASIL Clearing from CASC:

Consideration:

Payment:

LETTER FROM THE BOARD

Conditions precedent and Completion:

REASONS FOR AND BENEFIT OF ENTERING INTO OF THE SALE AND PURCHASE AGREEMENT

LETTER FROM THE BOARD

INFORMATION ON VANBAO

LETTER FROM THE BOARD

INFORMATION ON HUADUN

LETTER FROM THE BOARD

INTENTION OF THE COMPANY IN RESPECT OF THE PROPERTIES OF VANBAO AND HUADUN

Properties of Vanbao

Properties of Huadun

LETTER FROM THE BOARD

INFORMATION ON LOANS RECEIVABLE

LETTER FROM THE BOARD

INFORMATION ON CASC

USE OF PROCEEDS

FINANCIAL EFFECTS OF THE TRANSACTION

LETTER FROM THE BOARD

CONNECTED AND DISCLOSEABLE TRANSACTION

EXTRAORDINARY GENERAL MEETING

LETTER FROM THE BOARD

RECOMMENDATION

FURTHER INFORMATION

(Stock Code: 0031)

CONNECTED AND DISCLOSEABLE TRANSACTION ACQUISITION OF TWO PROPERTY INVESTMENT COMPANIES AND SETTING-OFF OF SHAREHOLDER’S LOAN

Somerley Limited

CONNECTED AND DISCLOSEABLE TRANSACTION

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

INTRODUCTION

PRINCIPAL FACTORS AND REASONS TAKEN INTO ACCOUNT

1. Reasons for and benefits of entering into the Sale and Purchase Agreement

2. Information on the Rich Echo Loan and the East Pioneer Loan

3. Information on Vanbao

4. Information on Huadun

5. Basis of consideration for Vanbao and Huadun

(i) Vanbao

6. Valuation of Vanbao Properties

7. Valuation of Huadun Properties

APPENDIX II LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

8. The shareholder’s loan and cash payment by CASC

9. Financial effect on the Group

(a) Net asset value

DISCUSSION

RECOMMENDATION

APPENDIX III

VALUATION REPORT

Atkinson Appraisal Consultants Ltd.

BASIS OF VALUATION

VALUATION METHODOLOGIES

TITLE INVESTIGATIONS

VALUATION ASSUMPTIONS

VALUATION REPORT

VALUATION CONSIDERATION

REMARKS

VALUATION CERTIFICATE

General description

Property

APPENDIX III

VALUATION REPORT

APPENDIX III

VALUATION REPORT

SUMMARY OF VALUATION

Group I – Property held by Huadun for investment

VALUATION CERTIFICATE

Group I – Property held by Huadun for investment

Property Description and tenure

Property

VALUATION REPORT

Computer And Technologies Holdings Limited Proxy Solicitation & Information Statement 2006