Continental Aerospace Technologies Holding Limited — Proxy Solicitation & Information Statement 2006

Jan 26, 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your 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 CATIC International Holdings Limited, you should at once hand this circular and the accompanying form of proxy 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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CATIC INTERNATIONAL HOLDINGS LIMITED

*

(Incorporated in Bermuda with limited liability)

(Stock Code: 232)

DISCLOSEABLE AND CONNECTED TRANSACTION ESTABLISHMENT OF A JOINT VENTURE

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

A notice convening a special general meeting of CATIC International Holdings Limited to be held at Unit B, 15/F., United Centre, 95 Queensway, Hong Kong on 28 February 2006 at 10:00 a.m. is set out on pages 26 to 27 of this circular. Whether or not you are able to attend the 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 by no later than 48 hours before the time appointed for the holding of the meeting. Completion of the form of proxy shall not preclude you from attending and voting at the meeting or any adjournment thereof should you so wish.

* For identification purpose only

26 January 2006

CONTENT

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The JV Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Reasons for and benefit of entering into the JV Agreement . . . . . . . . . . . . . . .	8
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Procedures for demanding a poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from Baron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Notice of SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Accompanying document – Form of proxy for use at the special general meeting

– i –

DEFINITIONS

Capitalised terms used in this circular shall have the following meanings unless the context requires otherwise:

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----- Start of picture text -----

||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|“associate(s)”|has|the|meaning|ascribed|to|it|under|the|Listing|Rules|
|“AVIC|I”|China|Aviation|Industry|
|Corporation|I,|a|state-owned|enterprise|in|the|PRC|which|
|directly|holds|the|entire|issued|share|capital|of|Chengdu|
|Aircraft|and|50%|of|the|entire|issued|share|capital|of|
|CATIC|Beijing|respectively|
|“AVIC|II”|China|Aviation|Industry|
|Corporation|II,|a|state-owned|enterprise|in|the|PRC|
|which|directly|holds|50%|of|the|entire|issued|share|
|capital|of|CATIC|Beijing|
|“Board”|the|board|of|Directors|
|“CATIC|Beijing”|China|National|Aero-|
|Technology|Import|&|Export|Corporation,|a|state-owned|
|enterprise|in|the|PRC|which|through|its|subsidiaries|
|indirectly|holds|an|aggregate|49.3%|equity|interest|in|the|
|Company|
|“Chengdu|Aircraft”|Chengdu|Aircraft|
|Industry|(Group)|Corporation|Limited,|a|wholly|owned|
|subsidiary|of|AVIC|I|
|“Company”|CATIC|International|Holdings|Limited,|a|company|
|incorporated|in|Bermuda|with|limited|liability,|the|issued|
|shares|of|which|are|listed|on|The|Stock|Exchange|of|
|Hong|Kong|Limited|
|“Directors”|the director(s) of the Company, including the independent|
|non-executive|directors|of|the|Company|
|“Group”|the|Company|and|its|subsidiaries|
|“HK$”|Hong|Kong|dollars,|the|lawful|currency|of|Hong|Kong|

----- End of picture text -----

– 1 –

DEFINITIONS

“Independent Board Committee” an independent committee of the Board comprising the independent non-executive Directors of the Company, namely Mr. Chu Yu Lin, David, Mr. Li Ka Cheung, Eric and Mr. Li Zhaoxi, to consider and advise the Independent Shareholders with regard to the terms of JV Agreement and the transactions contemplated thereunder

• “Independent Financial Adviser” Baron Capital Limited, a licensed corporation to carry on or “Baron” Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activity for the purpose of the SFO and the independent financial adviser to the Independent Board Committee and Independent Shareholders

• “Independent Shareholders” Shareholders of the Company except CATIC Beijing and its associates

• “JV Agreement” the agreement entered into between Sino-Aviation

• “JV Agreement” the agreement entered into between Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing on 4 January 2006 for the establishment of the JV Company

• “JV Company” Cac-commercial Manufacturing Ltd. ( ), the joint venture company to be established

• pursuant to the JV Agreement

• “JV Parties” Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing

• “Latest Practicable Date” 24 January 2006, being the latest practicable date prior to the printing of this circular for the propose of ascertaining certain information contained in this circular

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “PRC” the People’s Republic of China and for the purpose of this announcement, excluding Hong Kong SAR, Macau SAR and Taiwan

• “R&D” research and development “RMB” Renminbi, the lawful currency of the PRC

– 2 –

DEFINITIONS

“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
“SGM”	a special general meeting of the Company convened to
	approve the JV Agreement and the transactions
	contemplated thereunder
“Shares”	ordinary share(s) of HK$0.10 each in the issued share
	capital of the Company
“Shareholders”	shareholders of the Company
“Sino-Aviation Investments”	Sino-Aviation Investments Limited, a wholly owned
	subsidiary of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary(ies)”	has the meaning ascribed thereto in section 2 of the
	Companies Ordinance (Chapter 32 of the Laws of Hong
	Kong)

Translation of RMB into HK$ is based on the exchange rate of RMB1.04 to HK$1.00 for information purpose only. Such translation should not be construed as a representation that the relevant amounts have been, could have been, or could be, converted at that or any other rate or at all.

– 3 –

LETTER FROM THE BOARD

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CATIC INTERNATIONAL HOLDINGS LIMITED

---

(Incorporated in Bermuda with limited liability)

(Stock Code: 232)

Executive Directors: Mr. Fu Shula (Chairman) Mr. Wang Xinkuo Mr. Ji Guirong Mr. Ma Zhiping Mr. Diao Weicheng Mr. Liu Rongchun Mr. Ren Haifeng

Non-executive Director:

Mr. Ip Tak Chuen, Edmond

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal Office in Hong Kong: Unit B 15/F United Centre 95 Queensway Hong Kong

Independent Non-executive Directors:

Mr. Chu Yu Lin, David Mr. Li Ka Cheung, Eric Mr. Li Zhaoxi

26 January 2006

To the Shareholders

Dear Sirs and Madams,

DISCLOSEABLE AND CONNECTED TRANSACTION ESTABLISHMENT OF A JOINT VENTURE

INTRODUCTION

By an announcement dated 4 January 2006, the Company announced that on 4 January 2006, Sino-Aviation Investments, a wholly owned subsidiary of the Company, entered into the JV Agreement with Chengdu Aircraft and CATIC Beijing for the establishment of the JV Company to engage in the R&D, design and manufacture of, and provision of technical services for, commercial aircraft and relevant parts and components.

* For identification purpose only

– 4 –

LETTER FROM THE BOARD

Based on the portion of registered capital of the JV Company of RMB40 million (approximately HK$38.5 million) to be contributed by Sino-Aviation Investments pursuant to the JV Agreement, the relevant percentage ratios calculated under Chapter 14.07 of the Listing Rules exceed 5% but are less than 25%. As such, the entering into of the JV Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

CATIC Beijing is a connected person of the Company by reason of its being a substantial shareholder of the Company. Chengdu Aircraft is a connected person of the Company by reason of its being an associate of CATIC Beijing. As such, the entering into of the JV Agreement also constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to the approval by the Independent Shareholders at the SGM.

The purpose of this circular is to provide the Shareholders with further information on the JV Agreement, the recommendation of the Independent Board Committee, a letter of advice from the Independent Financial Adviser and a notice of the SGM to be held on 28 February 2006 at which resolution to approve, confirm and ratify the JV Agreement and the transactions contemplated thereunder will be considered and voted upon as required by the Listing Rules.

THE JV AGREEMENT

Date

4 January 2006

JV Parties

1. Sino-Aviation Investments;

2. Chengdu Aircraft; and

3. CATIC Beijing

Sino-Aviation Investments is established as an investment vehicle of the Group. CATIC Beijing is a leading trading company of diversified businesses in the PRC focusing on the trading of aviation products. Chengdu Aircraft is a reputable aircraft and other aviation products manufacturing enterprise in the PRC. Currently, Chengdu Aircraft is engaged in the manufacturing of parts and components for commercial aircraft.

Proposed name of the JV Company

Cac-commercial Manufacturing Ltd. ( )

Scope of business of the JV Company

The proposed scope of business of the JV Company will be R&D, design and manufacture of, and provision of technical services for, commercial aircraft and relevant parts and

– 5 –

LETTER FROM THE BOARD

components. As confirmed by the Directors, the JV Company is not proposed to carry out import and export agency services. However, it may need to engage the services of import and export agents in its ordinary course of business unless it obtains the relevant import or export licence.

Total Investment, Registered Capital and Capital Contribution of the JV Company

The total investment of the JV Company is RMB200 million (or equivalent to HK$192 million). The total registered capital of the JV Company is RMB100 million (equivalent to approximately HK$96 million), which will be contributed as follows:

JV Parties Sino-Aviation Investments Chengdu Aircraft CATIC Beijing Total	% 40 45 15 100	RMB million 40 45 15
		100

Chengdu Aircraft shall satisfy its required capital contribution by way of cash or transfer of operational assets (comprising machinery for production of parts and components for commercial aircraft) and, if the contribution is to be by way of transfer of operational assets, such assets have to be agreed and assessed by Sino-Aviation Investments, Chengdu Aircraft, CATIC Beijing and the local State Administration for Industry & Commerce. As advised by the Directors and the PRC legal advisers to the Company, in case state-owned assets are to be contributed as capital, evaluation of the assets involved according to the relevant PRC laws and regulations will be required. The method of capital contribution has not been finalized yet as at the Latest Practicable Date. Sino-Aviation Investments and CATIC Beijing shall satisfy their respective capital contributions by way of cash.

According to the JV Agreement, and as confirmed by the Directors and the PRC legal advisers to the Company, none of the JV Parties has obligation to contribute to the total investment (other than the registered capital) and there is no specific date on which nor any provision in the JV Agreement on how the difference between the total investment and the registered capital shall be financed. The JV Parties at present have no specific plan on the timing and method of financing such amount which shall be determined at the time when such fund is needed and based on the then market conditions. In addition, none of the JV Parties has commitment to contribute to the difference between the total investment and the total registered capital of the JV Company

Under the JV Agreement, Chengdu Aircraft shall pay the capital contribution or transfer its operational assets to the JV Company within the six months from the effective date of the JV Agreement. The cash contribution of Sino-Aviation Investments and CATIC Beijing shall be paid within the six months from the effective date of the JV Agreement. The capital contribution of Sino-Aviation Investments will be paid out of the internal resources of the Group.

– 6 –

LETTER FROM THE BOARD

Upon its establishment, the JV Company will be accounted for as an associated company of the Company.

Duration

The duration of the JV Company is 30 years commencing from the date of issue of the business license of the JV Company.

Conditions precedent and effective date of the JV Agreement

The JV Agreement is effective conditional upon, among other things, (1) internal approval having been obtained by each of Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing and, in respect of Sino-Aviation Investments, the approvals by the Board and the Independent Shareholders of the Company having been obtained; and (2) the obtaining of the relevant approvals from the relevant PRC authorities. None of the above conditions can be waived or has been fulfilled as at the Latest Practicable Date.

Other key terms of the JV Agreement

• (A) Profit distribution and board composition

Each of Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing shall share the profit or loss of the JV Company in proportion to its capital contribution to the JV Company. The board of directors of the JV Company will comprise five directors, out of which two directors shall be nominated by Sino-Aviation Investments, two directors shall be nominated by Chengdu Aircraft and in which one shall be the chairman, and one director shall be nominated by CATIC Beijing.

• (B) Other duties and responsibilities

• Sino-Aviation Investments shall, among other things, assist the JV Company in obtaining financing from international sources. As confirmed by the Directors, no specific plan, investment or project has been identified yet which require the JV Company to finance from international sources.

• Chengdu Aircraft shall, among other things, arrange for, and assist, the JV Company to take up the commercial aircraft parts and components manufacturing business now undertaken by Chengdu Aircraft, including but not limited to and subject to the prior consents of the relevant customers, the transfer of all the existing production orders received by Chengdu Aircraft to the JV Company.

• CATIC Beijing shall, among other things, assist the JV Company in exploring international markets and import and export agency services.

– 7 –

LETTER FROM THE BOARD

• (C) Non-competition undertakings

Unless prior written consent is obtained from all the other parties of the JV Company, each of Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing (except those projects engaged or invested in by CATIC Beijing as at the date of the JV Agreement) has undertaken to each other not to invest or engage, direct or indirectly, in any project relating to the manufacturing of parts and components for commercial aircraft by itself or jointly with others from the date of the JV Agreement.

Termination of the JV Agreement

Termination of the JV Agreement will be subject to the agreement among the JV Parties. If the JV Agreement is terminated in the future, the Company will make an announcement as soon as practicable.

REASONS FOR AND BENEFIT OF ENTERING INTO THE JV AGREEMENT

It is the long term strategy of the Group to further develop and diversify its aero-technology related business. The Board considers that the future of the aero-technology related business will benefit from the expected continuous growth in the world aviation market, in particular the PRC market. According to the market analysis published by a globally recognized commercial aircraft maker in September 2005, the world fleet is expected to more than double by 2024, growing to 35,300 airplanes from 16,800 airplanes in 2004. Out of these 35,300 airplanes, 25,700 new airplanes are expected to be delivered during the forecast period. It is expected that with the expected growth in GDP of PRC and the comparative low operating cost in terms of labour cost and land cost which favour manufacturing base located in the PRC, the growth of PRC’s aviation sector will significantly outpace growth of the other world regions. The Board believes that with its competitive cost advantage and increasingly sophisticated technology, the PRC is well positioned to capture such enormous opportunities in the world aviation market.

The formation of the JV Company provides an opportunity to further expand into the aero-technology related business for commercial aircraft. The commercial aircraft market is dominated by international aircraft manufacturers. The Directors understand that most of the existing production demand orders received by Chengdu Aircraft are from overseas commercial aircraft manufacturers. The Board is of the opinion that the investment in the JV Company will enable the Group to enter into the market and pave the way for establishing an international subcontracting center for the manufacture of commercial aircraft parts and components in the long run. This is consistent with the Group’s long term strategy and will mark a significant strategic move by the Group to establish a strong foothold in the manufacturing sector of parts and components for commercial aircraft in PRC by capitalizing on the strengths of the JV Parties and will further broaden the earnings base of the Group in this sector that offers great potential for growth. The Board is further of the view that, subject to the relevant customers’ consents, the proposed transfer of the existing production orders undertaken by Chengdu Aircraft to the JV Company will provide the JV Company with an immediate opportunity to grow on the existing business of Chengdu Aircraft.

– 8 –

LETTER FROM THE BOARD

The capital contribution by the Group to the JV Company will be settled in full by cash and financed by the Group’s internal resources. The Directors expect that the Group’s interest in the JV company will be recorded as “investment in associate” in the Group’s accounts which is expected to be the amount of the Group’s capital contribution as at the date of the completion of capital contribution and the Group will share the results of the JV Company in proportion to its equity interest in the JV Company. The Directors expect that the establishment of the JV Company will not have a material impact on the earnings and net assets of the Group. The Directors (excluding the independent non-executive Directors whose views will be given after taking into account the advice from an independent financial adviser) believe that the terms of the JV Agreement are fair and reasonable and on normal commercial terms and that the entering into of the JV Agreement is in the interest of the Shareholders as a whole.

GENERAL

The Group is principally engaged in the undertaking of building facade projects, generation and sale of electricity and steam power, and investments in aero-technology based businesses including helicopter manufacturing and aero-photographic operations. SinoAviation Investments is established as an investment vehicle of the Group.

CATIC Beijing is jointly held by AVIC I and AVIC II. CATIC Beijing through it subsidiaries holds an aggregate 49.3% indirect equity interest in the Company. CATIC Beijing is a connected person of the Company by reason of its being a substantial shareholder of the Company. Chengdu Aircraft is wholly owned by AVIC I. Chengdu Aircraft and CATIC Beijing are fellow subsidiaries of AVIC I. Hence, Chengdu Aircraft is a connected person of the Company by reason of its being an associate of CATIC Beijing. In addition, as the relevant percentage ratios calculated under Chapter 14 of the Listing Rules in respect of the JV Agreement exceed 5% but are less than 25%, the entering into of the JV Agreement constitutes a discloseable and connected transaction for the Company under Chapters 14 and 14A of the Listing Rules and is subject to the approval by the Independent Shareholders at the SGM.

According to Rule 14A.18 of the Listing Rules, CATIC Beijing, being a substantial shareholder holding an indirect equity interest of 49.3% of the total issued share capital of the Company, and its associates are required to abstain from voting in the SGM convened for the purpose of approving the JV Agreement and the transactions contemplated thereunder. Chengdu Aircraft is not a shareholder of the Company and thus will not be entitled to vote in the SGM.

SGM

Set out on pages 26 to 27 of this circular is a notice of the SGM to be held on 28 February 2006. In accordance with the requirement of the Listing Rules, resolution will be voted on by poll by the Independent Shareholders.

A form of proxy for use at the SGM is herewith enclosed. Whether or not you are able to attend the meeting in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return to the Company’s principal

– 9 –

LETTER FROM THE BOARD

office at Unit B, 15/F., United Centre, 95 Queensway, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof. You are urged to complete and return the form of proxy enclosed, whether or not you intend to attend the SGM. Completion and return of the form of proxy shall not preclude you from attending and voting at the SGM or any adjourned meeting thereof should you desire.

Shareholders whose names appeared on the register of members of the Company at the close of business on 23 February 2006 are entitled to attend and vote at the SGM. The register of members of the Company will be closed from 24 February 2006 to 28 February 2006, both days inclusive, during which period no share transfer will be registered.

PROCEDURES FOR DEMANDING A POLL

Pursuant to Article 70 of the Bye-laws of the Company, a poll (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) may be demanded by the Chairman of the meeting or:

• (i) by at least three Shareholders present in person or by a duly authorized corporate representative or by proxy for the time being entitled to vote at the meeting;

• (ii) by any Shareholder present in person or by a duly authorized corporate representative or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (iii) by any Shareholder present in person or by a duly authorized corporate representative 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.

The demand for a poll may be withdrawn, with the consent of the Chairman of the meeting, at any time before the close of the meeting or the taking of the poll, whichever is the earlier. According to Rule 14A.52 of the Listing Rules, the votes taken at the SGM to seek approval of the JV Agreement and the transactions contemplated thereunder will be taken by poll.

RECOMMENDATIONS

The Independent Board Committee has been established to advise the Independent Shareholders on whether or not the terms of the JV Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interests of the Independent Shareholders and the Company as a whole. The Independent Financial Adviser has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

– 10 –

LETTER FROM THE BOARD

Your attention is drawn to (a) the letter from the Independent Board Committee set out on page 12 of this circular which contains the recommendation of the Independent Board Committee to the Independent Shareholders regarding the terms of the JV Agreement and the transactions contemplated thereunder and (b) the letter from the Independent Financial Adviser set out on pages 13 to 20 of this circular which contains its recommendations to the Independent Board Committee in relation to the JV Agreement, the principal factors and reasons considered by the Independent Financial Adviser in arriving at its recommendations.

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considered that the terms of the JV Agreement and the transactions contemplated thereunder are fair and reasonable and are in the interest of the Independent Shareholders and the Company as a whole.

ADDITIONAL INFORMATION

Your attention is drawn to the general information set out in the appendix in this circular.

Your faithfully, By order of the Board

CATIC International Holdings Limited Fu Shula Chairman

– 11 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CATIC INTERNATIONAL HOLDINGS LIMITED

---

(Incorporated in Bermuda with limited liability)

(Stock Code: 232)

26 January 2006

To the Independent Shareholders

Dear Sirs or Madams,

DISCLOSEABLE AND CONNECTED TRANSACTION ESTABLISHMENT OF A JOINT VENTURE

We refer to the circular of the Company dated 26 January 2006 of which this letter forms part (the “Circular”). Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

As independent non-executive Directors, we have been appointed by the Board to advise you as to whether the terms of the JV Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shares are concerned.

We wish to draw your attention to the advice of the Independent Financial Adviser in respect of the JV Agreement as set out in the letter from the Independent Financial Adviser in the Circular.

Having considered the JV Agreement and the advice and opinion of the Independent Financial Adviser in relation thereto, we are of the opinion that the terms of the JV Agreement and the transactions contemplated thereunder are fair and reasonable and in the interest of the Independent Shareholders and the Company as a whole. We therefore recommend that the Independent Shareholders vote in favour of the ordinary resolution to be proposed at the SGM to approve, confirm and ratify the JV Agreement and the transactions contemplated thereunder.

Your faithfully, For and on behalf of The Independent Board Committee Mr. Chu Yu Lin, David Mr. Li Ka Cheung, Eric Mr. Li Zhaoxi

Independent Non-executive Directors

* For identification purpose only

– 12 –

LETTER FROM BARON

The following is the text of a letter of advice to the Independent Board Committee and the Independent Shareholders from Baron dated 26 January 2006 prepared for the purpose of incorporation in this circular:

4/F, Aon China Building 29 Queen’s Road Central Central, Hong Kong

26 January 2006

To the Independent Board Committee and the Independent Shareholders of CATIC International Holdings Limited

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION ESTABLISHMENT OF A JOINT VENTURE

INTRODUCTION

We refer to our appointment by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the terms and conditions of the JV Agreement and the establishment of the JV Company with Chengdu Aircraft and CATIC Beijing, details of which are set out in the “Letter from the Board” contained in the circular of the Company dated 26 January 2006 (the “Circular”), of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

Our role as the independent financial adviser is to advise the Independent Board Committee and the Independent Shareholders on whether the terms and conditions of the JV Agreement are fair and reasonable so far as the Independent Shareholders are concerned and the entering into of the JV Agreement in the interests of the Company and the Independent Shareholders as a whole and to advise how the Independent Shareholders should vote in respect of the resolution to approve the JV Agreement at the SGM.

The Board announced that on 4 January 2006, Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing entered into the JV Agreement for the establishment of the JV Company. CATIC Beijing is jointly held by AVIC I and AVIC II. CATIC Beijing through its subsidiaries holds an aggregate 49.3% indirect equity interest in the Company. CATIC Beijing is regarded as a connected person of the Company by reason of its being a substantial shareholder of the Company. Also, Chengdu Aircraft is wholly owned by AVIC I and Chengdu

– 13 –

LETTER FROM BARON

Aircraft and CATIC Beijing are fellow subsidiaries of AVIC I. In this regard, Chengdu Aircraft is a connected person of the Company by reason of its being an associate of CATIC Beijing. Accordingly, the establishment of the JV Company also constitutes connected transaction of the Company under Chapter 14A of the Listing Rules. CATIC Beijing and its associates will abstain from voting on the ordinary resolution proposed at the SGM. As Chengdu Aircraft is not a Shareholder thus is not entitled to vote at the SGM.

The Independent Board Committee, comprising Mr. Chu Yu Lin, David, Mr. Li Ka Cheung, Eric and Mr. Li Zhaoxi, has been established by the Company to advise the Independent Shareholders in respect of the terms and conditions of the JV Agreement and to give a recommendation to the Independent Shareholders in relation to the voting of the relevant resolution at the SGM.

BASIS OF OUR OPINION

In arriving at our opinion and recommendation, we have relied on the information supplied and the opinion expressed by the Directors and the management of the Company. We have also assumed that the information contained and representations made to us or referred to in the Circular are true, accurate and complete at the time they were made and continue to be so at the date of the Circular.

We consider that we have been provided with sufficient information to form a reasonable basis of our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and further confirmed that, to their best knowledge, they believe there are no other facts or representations the omission of which would make any statement in the Circular, including this letter, misleading.

We have not, however, carried out any independent verification on the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company and nor have we considered the taxation implication on the Group or the Shareholders as a result of the establishment of the JV Company.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the establishment of the JV Company, we have taken the following principal factors and reasons into consideration:

A. Background of the Group

The principal activities of the Group are engaged in the undertaking of building facade projects, generation and sale of electricity and steam power, and investments in aero-technology based business including helicopter manufacturing and aero-photographic operations.

– 14 –

LETTER FROM BARON

B. Background to and reasons of entering into the JV Agreement with Chengdu Aircraft and CATIC Beijing

• (i) Consistent with the business strategies of the Group

As stated in the “Letter from the Board”, the proposed scope of business of the JV Company will include R&D, design and manufacture of, and provision of technical services for, commercial aircraft and relevant parts and components. Pursuant to the JV Agreement, Sino-Aviation Investments, Chengdu Aircraft and CATIC Beijing agreed to contribute 40%, 45% and 15%, respectively, of the registered capital of the JV Company.

As advised by the Directors, the long-term strategy of the Group is to further develop and diversify its aero-technology related business and to establish a platform for manufacture of parts and components for commercial aircraft. The commercial aircraft market is dominated by international aircraft manufacturers. As advised by the Directors, the investment in the JV Company provides the Group with the business opportunities from international commercial aircraft manufacturers through the transfer of the existing production orders by Chengdu Aircraft. With reference to the section headed “C. Principal terms of the JV Agreement” below, we are of the view that the establishment of the JV Company enables the Group to achieve vertical integration in the manufacturing of commercial aircraft parts and components by separating the duties and responsibilities among the JV Parties. In addition, as the JV Parties are engaged in the business relating to the commercial aircraft, we are also of the view that the formation of the JV Company may create synergies for the Group to become an international subcontracting center in the PRC.

Moreover, as mentioned in the “Chairman’s statement” in the interim report of the Company for the six months ended 30 June 2005, the Group intends to focus on and to develop the aero-technology related business as a core business of the Group in the future. We are of the view that the establishment of the JV Company is an opportunity for the Group to further expand the aero-technology related sector in the PRC. Accordingly, we concur with the Directors’ view that the establishment of the JV Company could provide with the Group an excellent opportunity to further develop the aero-technology related business, and we are also of the view that the formation of the JV Company is consistent with the expansion strategy of the Group.

(ii) Growth potentials

As mentioned in the “Letter from the Board”, the Board considers that the future of the aero-technology related business will be benefited from the expected continuous growth in the world aviation market, in particular the PRC market. The Directors believed that with the expected growth in gross domestic product (“GDP”) of the PRC and the growth of the aviation sector in the PRC will significantly outpace growth of the other world regions. In recent years, the real GDP in the PRC is in an increasing trend at a compound annual growth rate of approximately 9.14%

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LETTER FROM BARON

between 1994 and 2004. The following chart illustrates the development of the growth of number of the civil aircrafts in the PRC from 1993 to 2004:

Growth of Civil Aircraft

==> picture [311 x 191] intentionally omitted <==

----- Start of picture text -----

1,400
1,200
1,000
800
600
400
200
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Year
Number of Civil Aircraft
----- End of picture text -----

Source: Website of National Bureau of Statistics of China

As shown from the above chart, the number of civil aircrafts in the PRC is in an increasing trend. Together with the continuous growth of GDP in the PRC and the growth potentials for the aviation sector, we are of the view that the JV Company will provide the Group with enormous opportunities in the world aviation market in the PRC. It is also worth to note that, according to an article extracted from the website of (for English translation purpose, CAAC News) released in December 2005, to speed up the development of the aviation industry in the PRC, CAAC plans to increase 142 fleet and expand the infrastructure of the airports and the routes in the PRC in 2006.

We have also reviewed a market analysis published by a globally recognized commercial aircraft maker in September 2005 provided by the Company. With the liberalization of the aviation in the PRC and more partnerships between PRC local airlines and foreign operators, the world fleet is expected to increase more than double by 2024 and growing to 35,300 airplanes from 16,800 airplanes in 2004. In view of the growth potential of the aviation sector in the PRC, we concur with the Directors’ view that the growth of the aviation sector in the PRC will significantly outpace the growth of the other world regions and the demand for the manufacture of commercial aircraft parts and components from international aircraft manufacturers will be increased. As confirmed with the Directors, most of the existing production demand orders received by Chengdu Aircraft are from overseas commercial aircraft manufacturers, we believe that the investment in the JV Company can enable the Company to capture the opportunity to establish an international subcontracting center for the manufacture of commercial aircraft parts and components in the long run.

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LETTER FROM BARON

• (iii) Advantage of establishment of the JV Company with Chengdu Aircraft and CATIC Beijing

As mentioned in the “Letter from the Board”, Sino-Aviation Investments is established as an investment vehicle of the Group. CATIC Beijing is a leading trading company ranked within 20 over the top 500 import and export agency corporations in the PRC and is focusing on the trading of aviation products. Chengdu Aircraft is an enterprise in the PRC which engaged in the manufacturing of parts and components for commercial aircraft. The Directors consider that the proposed transfer of the existing production orders received by Chengdu Aircraft to the JV Company will provide the JV Company an immediate opportunity to grow on the existing business of Chengdu Aircraft. With the participation of Chengdu Aircraft and CATIC Beijing, we are of the view that the Group can save the marketing costs to promote the new business of the JV Company and explore international markets in import and export agency services and save the start-up costs to establish a new company for manufacture the commercial aircraft and relevant parts and components. The JV Company can also benefit from the know-how and management skills brought by Chengdu Aircraft and CATIC Beijing in the future.

Also, with the renowed brand of Chengdu Aircraft and the leading position of CATIC Beijing in the aviation sector, we are of the view that the Group is in a beneficial position to capture the market share of aero-technology related business in the PRC by allying with Chengdu Aircraft and CATIC Beijing. Accordingly, we are of the view that it is reasonable for the Group to form the JV Company with Chengdu Aircraft and CATIC Beijing as the joint venture partners.

Having taken into account of the above, in particular the establishment of the JV Company (i) can provide the Group an opportunity to further develop the aero-technology related business and is in line with the Group’s principal activities and business strategies; (ii) will enable the Group achieve cost savings; (iii) will capture the market share of the aero-technology related business by allying with Chengdu Aircraft and CATIC Beijing; and (iv) may benefit from future growth prospects of aero-technology related business in the world aviation market, we are of the view that the establishment of the JV Company is in the interests of the Company and the Independent Shareholders as a whole.

C. Principal terms of the JV Agreement

• (i) Total investment and registered capital

According to the JV Agreement, the total investment of the JV Company is RMB200 million (equivalent to approximately HK$192 million) and the total registered capital of the JV Company is RMB100 million (equivalent to approximately HK$96 million). The JV Parties will contribute their respective share

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LETTER FROM BARON

of registered capital of the JV Company in proportion to their registered shareholdings. Chengdu Aircraft shall satisfy its required capital contribution by way of cash or transfer of operational assets which will comprise of machinery for production of parts and components for commercial aircraft. As stated in the JV Agreement, should the contribution satisfied by way of transfer of operational assets, such assets have to be agreed and assessed by Sino-Aviation Investments, Chengdu Aircraft, CATIC Beijing and the local State Administration for Industry & Commerce. Sino-Aviation Investments and CATIC Beijing shall satisfy its respective capital contribution by way of cash.

Chengdu Aircraft shall pay the capital contribution or transfer its operational assets to the JV Company within six months from the effective date of the JV Agreement. Also, Sino-Aviation Investments shall satisfy its capital contribution by way of its internal resources of the Group. Each of the JV Parties is not obliged to contribute the difference between the total investment and the total registered capital of the JV Company. We are of the view that the capital contribution in proportion to their respective shareholdings of the JV Company is fair and reasonable and is in the interests of the Company and the Independent Shareholders as a whole.

(ii) Profit distribution and board composition of the JV Company

The JV Parties shall share the profit or loss of the JV Company in proportion to their respective capital contribution to the JV Company. The board of directors of the JV Company comprise five directors and is proportionate to the shareholding percentage of each of the JV Parties. Each of Sino-Aviation Investments and Chengdu Aircraft is entitled to nominate two directors in the board of the JV Company. CATIC Beijing shall also nominate one director into the board of directors of the JV Company. We are of the view that the profit/loss distribution and the board composition of the JV Company are fair and reasonable and are in the interests of the Company and the Independent Shareholders as a whole.

(iii) Duties and responsibilities among the JV Parties

As mentioned in the “Letter from the Board”, Sino-Aviation Investments is responsible to assist the JV Company to obtain financing from international sources. Chengdu Aircraft is responsible to arrange for, and assist the JV Company to take up the commercial aircraft parts and components manufacturing business which is now undertaken by Chengdu Aircraft and CATIC Beijing will responsible for assisting the JV Company in exploring international markets and import and export agency services. As mentioned in the section headed “A. Background to and reasons of entering into the JV Agreement with Chengdu Aircraft and CATIC Beijing” above, we are of the view that the establishment of the JV Company with Chengdu Aircraft and CATIC Beijing not only can save the marketing and start-up costs, but also can capture the market share of the aero-technology related business with Chengdu Aircraft and CATIC Beijing. Accordingly, we are of the view that such arrangement of the duties and responsibilities of the JV Company is fair and reasonable.

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LETTER FROM BARON

(iv) Non-competition undertakings

Pursuant to the JV Agreement, the JV Parties have undertaken to each other not to invest or engage, direct or indirectly, in any project relating to the manufacturing of parts and components for commercial aircraft by itself or jointly with others from the date of the JV Agreement. We are of the view that such arrangement is on commercial terms and we believe that the Group can properly safeguard the interests of the JV Company.

(v) Duration of the JV Company

According to the “Letter from the Board”, the duration of the JV Company is 30 years effective from the issue date of the business license of the JV Company.

After considering the (i) profit/loss distribution among the JV Parties in the JV Company; (ii) board composition of the JV Company; (iii) the respective duties and responsibilities to be contributed by the JV Parties; and (iv) the non-competition undertakings undertaken by the JV Parties, we are of the view that terms of the JV Agreement are fair and reasonable and are interests of the Company and the Independent Shareholders as a whole.

D. Financial effects on the establishment of the JV Company on the Group

As mentioned in the “Letter from the Board”, the registered capital of the JV Company shall be fully paid by the JV Parties within the six months from the effective date of the JV Agreement. Sino-Aviation Investments shall satisfy its capital contribution by way of its internal resources of the Group.

(i) Net Assets Value

As the JV Company is a newly established company and each of the JV Parties shall contribute the registered capital of the JV Company in proportion to its respective shareholding, the net assets value of the Group will not affected by the Group’s investment in the JV Company.

(ii) Working capital

According to the interim report of the Company for the six months ended 30 June 2005, the total cash and cash equivalents of the Group are approximately HK$84.03 million and the Group has net current assets of approximately HK$67.44 million. As confirmed by the Directors, the requirement for the Group to contribute RMB40 million (equivalent to approximately HK$38.5 million) as capital contribution to the JV Company would not have any adverse effect on the working capital position of the Group upon the establishment of the JV Company. On the basis that the cash position as at 30 June 2005, we are of the view that the Group has sufficient internal resources for the payment of the registered capital of the JV Company.

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LETTER FROM BARON

(iii) Earnings

The Group recorded an unaudited consolidated net profit attributable to Shareholders of approximately HK$9.61 million for the six months ended 30 June 2005. According to the “Letter from the Board”, upon the establishment of the JV Company, the JV Company will be accounted for as an associated company of the Company and recorded as “investment in associate” in the Group’s accounts which is expected to be the amount of the Group’s capital contribution as at the date of the completion of capital contribution. The financial results of the JV Company will be included in the consolidated financial statements of the Group in proportion to its equity interest in the JV Company from the establishment of the JV Company. As discussed with the Directors, there are no concrete timetables by which all the conditions precedent in the JV Agreement have to be fulfilled. In this regard, we are not in a position to estimate and quantify the effects on the future results of the Group after the establishment of the JV Company.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the opinion that the establishment of the JV Company is in the interests of the Company and the Independent Shareholders as a whole and that the terms of the JV Agreement are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders as well as the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the JV Agreement.

Yours faithfully, For and on behalf of Baron Capital Limited Chiu Sui Keung, Thomas Managing Director

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GENERAL INFORMATION

APPENDIX

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 in this circular misleading.

DISCLOSURE OF INTERESTS

• (a) As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company 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 were taken or deemed to have under such provisions of the SFO) or which are required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange were as follows:

				Percentage
Name of	Interests in Shares/		Type of	of issued
Executive Director	underlying Shares	Capacity	interest	capital
Mr. Ren Haifeng	11,282,000 Shares	Beneficial	Personal	0.30%
	(L)	owner
Mr. Ji Guirong	20,000,000 share	Beneficial	Personal	0.53%
	options (L)	owner

• Note: The letter “L” stands for long position. The above-mentioned share options are granted by the Company pursuant to its share option schemes.

Certain directors have nominee shares in certain subsidiaries held for the benefit of the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests 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 were taken or deemed to have under such provisions of the SFO) or which are required, pursuant to section 352 of the SFO to be entered in the register referred to therein

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GENERAL INFORMATION

APPENDIX

or which are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange.

Substantial Shareholders

As at the Latest Practicable Date, as far as is known to the Directors and the chief executive of the Company, the following person (not being a Director or chief executive of the Company) had an interest or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO:

	Percentage
	of issued	Number of
Shareholders	capital	Shares held
Tacko International Limited (“Tacko”)	35.7%	1,335,767,000
		(Note 1)
CATIC (H.K.) Limited (“CATIC H.K.”)	35.7%	1,335,767,000
		(Note 1)
Speed Profit Enterprises Limited	13.6%	508,616,000
		(Note 2)
Catic International Finance Limited	13.6%	508,616,000
(“Catic Finance”)		(Note 2)
CATIC Beijing	49.3%	1,844,383,000
		(Notes 1, 2 & 3)
AVIC I	49.3%	1,844,383,000
		(Notes 1, 2 & 3)
AVIC II	49.3%	1,844,383,000
		(Notes 1, 2 & 3)

Notes:

1. Tacko is a wholly-owned subsidiary of CATIC H.K., which is in turn a wholly-owned subsidiary of CATIC Beijing. Under the SFO, both CATIC H.K. and CATIC Beijing are deemed to be interested in the 1,335,767,000 Shares held by Tacko.

2. Speed Profit Enterprises Limited is a wholly-owned subsidiary of Catic Finance, which is in turn a wholly-owned subsidiary of CATIC Beijing. Under the SFO, both Catic Finance and CATIC Beijing are deemed to be interested in the 508,616,000 Shares held by Speed Profit Enterprises Limited.

3. CATIC Beijing is owned as to 50% by AVIC I and as to 50% by AVIC II. Under the SFO, each of AVIC I and AVIC II is deemed to be interested in the aggregate of the Shares stated in notes (1) and (2) above (i.e. an aggregate of 1,844,383,000 Shares held by Tacko and Speed Profit Enterprises Limited).

Saved as disclosed above, the Directors and the chief executive of the Company are not aware of any person (other than a Director or chief executive of the Company) who, as at the Latest Practicable Date, had any interest or short

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GENERAL INFORMATION

APPENDIX

position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Interest in other members of the Group

Save as disclosed below, as at the Latest Practicable Date, so far as is known to the Directors and the chief executive of the Company, no other person was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of other members of the Group or has any option in respect of such capital:

		% of
Name of Owner	Name of subsidiary	shares held
Asia Capital Financial	Hangzhou Sealand Electric	30%
Group Limited	Power Company Limited

• Note: Asia Capital Financial Group Limited is an independent third party not related to the Company.

• (b) As at the Latest Practicable Date, none of the Directors has any existing or proposed service contract with any member of the Group which is not terminable by the employer within one year without payment of compensation other than statutory compensation.

• (c) None of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group taken as a whole.

• (d) None of the Directors has any direct and indirect interest in any assets acquired or disposed of by or leased to any member of the Group or is proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2004, being the date to which the latest published audited accounts of the Group were made up.

LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was involved in any litigation or claim of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against the Company and any of its subsidiaries.

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GENERAL INFORMATION

APPENDIX

QUALIFICATION

The following is a qualification of the expert who has given opinion or advice which is contained in this circular:

Name

Qualification

Baron A licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activity for the purpose of the SFO

As at the Latest Practicable Date, Baron, an independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in connection with the establishment of the JV Company, is not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group and does not have any interest, either directly or indirectly, in any assets which have been, since the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

CONSENT

Baron has given and has not withdrawn its written consent to the issue of this circular with inclusion of its letter and references to its names in the form and context in which it is included.

MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2004 (the date to which the latest published audited consolidated accounts of the Group were made up).

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors or their respective associates has any beneficial interest in other businesses which compete or are likely to compete with business of the Group.

MISCELLANEOUS

• (i) The principal place of business of the Company is Unit B, 15/F., United Centre, 95 Queensway, Hong Kong.

• (ii) The qualified accountant of the Company is Ms. Wong, Anne (associate member of the Hong Kong Institute of Certified Public Accountants).

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GENERAL INFORMATION

APPENDIX

• (iii) The secretary of the Company is Ms. Leung Yuen Chee, Sara (associate member of The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators).

• (iv) The transfer office of the Company is situated at the office of its branch share registrars, Computershare Hong Kong Investor Services Limited at 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (v) The English text of this document shall prevail over the Chinese text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the offices of Baker & Mckenzie at 14/F, Hutchison House, 10 Harcourt Road, Hong Kong up to and including 14 February 2006:

• (a) the memorandum of association and bye-laws of the Company;

• (b) the 2003 and 2004 annual reports of the Company for the financial years ended 31 December 2003 and 2004 respectively;

• (c) the letter of advice from Baron to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 13 to 20 of this circular;

• (d) the letter of consent from Baron referred to in the section headed “CONSENT” in this appendix;

• (e) the letter addressed to the Independent Shareholders from the Independent Board Committee, the text of which is set out on page 12 of this circular; and

• (f) the JV Agreement.

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NOTICE OF SGM

==> picture [78 x 64] intentionally omitted <==

CATIC INTERNATIONAL HOLDINGS LIMITED

*

(Incorporated in Bermuda with limited liability)

(Stock Code: 232)

NOTICE IS HEREBY GIVEN that a special general meeting of the holders of ordinary shares of HK$0.10 each (the “Shares” and the holders of such Shares, the “Shareholders”) in the issued share capital of CATIC International Holdings Limited (the “Company”) will be held on Tuesday, 28 February 2006 at Unit B, 15/F., United Centre, 95 Queensway, Hong Kong at 10:00 a.m. (or after any adjournment thereof) for the purpose of considering and, if thought fit, passing the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“THAT:

• (a) a joint venture agreement (the “ JV Agreement ”) entered into between Sino-Aviation Investments Limited, a wholly-owned subsidiary of the Company, and Chengdu Aircraft Industry (Group) Corporation

• Limited and China National Aero-Technology Import & Export Corporation on 4 January 2006 for the establishment of Cac-commerical Manufacturing Ltd ( ), a copy of which has been produced to the meeting marked “A” and signed by the Chairman of the meeting for identification purposes, be and is hereby approved, confirmed and ratified and the transactions contemplated under the JV Agreement be and are hereby approved, confirmed and ratified.

• (b) the directors of the Company be and are hereby authorized to do all such acts and things and to sign, seal and/or deliver all documents and to take any steps which in their absolute discretion, considered to be necessary, desirable or expedient for the purpose of implementing and/or giving effect to the JV Agreement and the transactions contemplated under the JV Agreement.”

By order of the Board

CATIC International Holdings Limited Fu Shula

Chairman

Hong Kong, 26 January 2006

• For identification purpose only

– 26 –

NOTICE OF SGM

Notes:

1. A shareholder of the Company entitled to attend and vote at the meeting is entitled to appoint another person as his/her/its proxy to attend and vote in his/her/its stead in accordance with the bye-laws of the Company. A proxy need not be a shareholder of the Company.

2. A form of proxy for use at the meeting is enclosed.

3. The register of members of the Company will close from 24 February 2006 to 28 February 2006, both days inclusive, during which period no transfers of shares will be effected. To be valid, the form of proxy, together with the power of attorney or other authority, if any, under which it is signed or a certified true copy of that power of attorney or authority must be deposited at the Company’s principal office at Unit B, 15/F., United Centre, 95 Queensway, Hong Kong not less than 48 hours before the time for holding the meeting (or any adjourned meeting thereof) and in default the form of proxy shall not be treated as valid. Completion and return of the form of proxy will not preclude shareholders of the Company from attending and voting in person at the meeting (or any adjourned meeting thereof) should they so wish.

4. In the case of joint holders of a share, any one of such holder may vote at the meeting either personally or by proxy in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the meeting personally or by proxy, that one of such holders so present whose name stands first on the register of members of the Company in respect of such joint holdings shall alone be entitled to vote in respect thereof.

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