Continental Aerospace Technologies Holding Limited — Proxy Solicitation & Information Statement 2024

Nov 12, 2024

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 licensed securities dealer, bank manager, solicitors, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Continental Aerospace Technologies Holding Limited (the ‘‘Company’’), you should at once hand this circular together with the enclosed form of proxy to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any losses howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

Continental Aerospace Technologies Holding Limited ������������

(Incorporated in Bermuda with limited liability)

(Stock code: 232)

(I) CONTINUING CONNECTED TRANSACTIONS FOR THE YEARS ENDING 31 DECEMBER 2025 AND 2026; AND (II) NOTICE OF SPECIAL GENERAL MEETING

Independent financial adviser to

the Independent Board Committee and the Independent Shareholders

SOMERLEY CAPITAL LIMITED

A notice convening the special general meeting (the ‘‘SGM’’) of the Company to be held at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 6 December 2024 at 11 a.m. is set out on pages SGM-1 to SGM-2 of this circular. A form of proxy for use at the SGM is also enclosed with this circular.

A letter from the Board is set out on pages 5 to 13 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 14 to 15 of this circular. A letter from the Independent Financial Adviser containing its advice and recommendation to the Independent Board Committee and the Independent Shareholders is set out on pages 16 to 27 of this circular.

Whether or not you are able to attend the SGM, please complete and sign the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event no later than 48 hours before the time appointed for holding the SGM (i.e. Wednesday, 4 December 2024 at 11 a.m. (Hong Kong time)) or any adjournment thereof. Completion and return of the enclosed form of proxy will not preclude Shareholders from attending and voting in person at the SGM or any adjournment thereof if they so wish.

13 November 2024

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . .	14
LETTER FROM INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . . . . . . . . .	16
APPENDIX I – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
NOTICE OF SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

• ‘‘2021 Sale Framework Agreement’’

the agreement dated 25 October 2021 and entered into between the Company and CAIGA in relation to the sale of engines, engines parts and related services to CAIGA and/ or its associates (excluding the Group) for use in new aircraft manufacture and the sale of parts into the aftermarket for maintenance, repair and overhaul

• ‘‘2024 Sale Framework Agreement’’

the agreement dated 18 October 2024 and entered into between the Company and CAIGA in relation to the sale of engines, engine parts and related services to CAIGA and/or its associates (excluding the Group)

• ‘‘associates’’

has the meaning ascribed to it under the Listing Rules

• ‘‘AVIC’’

Aviation Industry Corporation of China, Ltd.（中國航空工 業集團有限公司）, a company established in the PRC with limited liability and holds 100% of the equity interest in AVIC International, a controlling shareholder of the Company, and holds approximately 73.39% of the equity interest in CAIGA

• ‘‘AVIC International’’

AVIC International Holding Corporation（中國航空技術國 際控股有限公司）, a company established in the PRC with limited liability and indirectly owns approximately 46.40% of the issued share capital of the Company

• ‘‘Board’’

• the board of Directors

• ‘‘CAIGA’’

China Aviation Industry General Aircraft Co., Ltd.（中航通 用飛機有限責任公司）, a company established with limited liability in the PRC

• ‘‘Cirrus Aircraft’’

Cirrus Aircraft Limited, a company incorporated under the laws of the Cayman Islands with limited liability and listed on the main board of the Stock Exchange (stock code: 2507) and is indirectly held as to approximately 85% of its entire share capital by CAIGA and therefore a connected person of the Company

– 1 –

DEFINITIONS

‘‘Cirrus Design’’ Cirrus Design Corporation, a company incorporated under the laws of Wisconsin and an indirect wholly-owned subsidiary of Cirrus Aircraft and therefore a connected person of the Company ‘‘Company’’ Continental Aerospace Technologies Holding Limited, a company incorporated in Bermuda with limited liability and the issued Shares of which are listed on the main board of the Stock Exchange (stock code: 232)

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘controlling shareholder(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Director(s)’’ director(s) of the Company ‘‘Group’’ the Company and its subsidiaries ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Board Committee’’

an independent committee of the Board comprising all the independent non-executive Directors established for the purpose of advising the Independent Shareholders on the 2024 Sale Framework Agreement and the transactions contemplated thereunder

• ‘‘Independent Financial Adviser’’

Somerley Capital Limited, a corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders on the 2024 Sale Framework Agreement and the transactions contemplated thereunder

• ‘‘Independent Shareholder(s)’’

Shareholder(s) other than AVIC and Mr. Yu Xiaodong, its/ his associates and all other Shareholders who are interested in the 2024 Sale Framework Agreement and the transactions contemplated thereunder

• ‘‘Independent Third Party(ies)’’

the independent third Party(ies) who is/are, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, independent of and not connected with the Company and the connected person(s) of the Company

– 2 –

DEFINITIONS

• ‘‘Latest Practicable Date’’

• 8 November 2024, 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

• ‘‘Original Annual Cap’’

• ‘‘PRC’’

• the annual cap amount in respect of the sale of engine, engine parts and related services to CAIGA and its associates by the Group under the 2021 Sale Framework Agreement for the years ending 31 December 2023 and 2024 the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region and Taiwan

• ‘‘Proposed Annual Cap(s)’’

• the annual cap amount in respect of the sale of engines, engine parts and related services to CAIGA and/or its associates (excluding the Group) by the Group for the two years ending 31 December 2026

• ‘‘Revised Annual Cap’’

the revised annual cap amount in respect of the sale engine, engine parts and related services to CAIGA and its associates by the Group under the 2021 Sale Framework Agreement for the years ending 31 December 2023 and 2024

• ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘SGM’’

• the special general meeting of the Company to be convened and held on Friday, 6 December 2024 at 11 a.m. for the Independent Shareholders to consider and, if thought fit, approve, among other things, the 2024 Sale Framework Agreement and the transactions contemplated thereunder

• ‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the issued capital of the Company

• ‘‘Shareholder(s)’’ holder(s) of issued Share(s)

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

– 3 –

DEFINITIONS

‘‘Supplemental 2021 Sale the supplemental sale framework agreement dated 25 Framework Agreement’’ September 2023 and entered into between the Company and CAIGA in relation to the revision of the Original Annual Cap ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong ‘‘US$’’ United States dollars, the lawful currency of the United States of America ‘‘%’’ per cent.

– 4 –

LETTER FROM THE BOARD

Continental Aerospace Technologies Holding Limited ������������

(Incorporated in Bermuda with limited liability)

(Stock code: 232)

Executive Directors: Mr. Huang Yongfeng Mr. Yu Xiaodong Ms. Jiao Yan Mr. Zhang Zhibiao Mr. Li Peiyin

Non-executive Director: Mr. Chow Wai Kam

Independent non-executive Directors: Mr. Chu Yu Lin, David Mr. Li Ka Fai, David Mr. Zhang Ping

Registered office: Victoria Place, 5th Floor 31 Victoria Street Hamilton HM 10 Bermuda

Head office and principal place of business in Hong Kong: Unit B, 15th Floor United Centre 95 Queensway Hong Kong

13 November 2024

To the Independent Shareholders

Dear Sir or Madam,

(I) CONTINUING CONNECTED TRANSACTIONS FOR THE YEARS ENDING 31 DECEMBER 2025 AND 2026; AND (II) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

References are made to the announcement of the Company dated 25 October 2021 and the circular of the Company dated 18 November 2021 in relation to, among others, the 2021 Sale Framework Agreement, the announcement of the Company dated 25 September 2023 in respect of the Supplemental 2021 Sale Framework Agreement, and the announcement dated 18 October 2024 in relation to the 2024 Sale Framework Agreement and the transactions contemplated thereunder.

On 25 October 2021, the Company entered into the 2021 Sale Framework Agreement with CAIGA, pursuant to which the Group will sell engines, engine parts and related services to CAIGA and/or its associates (excluding the Group) for use in new aircraft manufacture and the sale of parts into the aftermarket for maintenance, repair and overhaul.

– 5 –

LETTER FROM THE BOARD

On 25 September 2023, the Company and CAIGA entered into the Supplemental 2021 Sale Framework Agreement to revise the Original Annual Cap from US$38.7 million to US$44.9 million for the year ending 31 December 2023 and from US$39.2 million to US$50.4 million for the year ending 31 December 2024.

On 18 October 2024, the Company entered into the 2024 Sale Framework Agreement with CAIGA, pursuant to which the Group will sell engines, engine parts and related services to CAIGA and/or its associates (excluding the Group) for use in new aircraft manufacture and for the sale of parts into the aftermarket for maintenance, repair and overhaul for a term commencing from 1 January 2025 to 31 December 2026.

The purpose of this circular is to provide you with, among other things, (i) further details of the 2024 Sale Framework Agreement and the transactions contemplated thereunder; (ii) a letter of recommendation from the Independent Board Committee; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the 2024 Sale Framework Agreement and the transactions contemplated thereunder; and (iv) a notice of the SGM.

2024 SALE FRAMEWORK AGREEMENT

Principal terms of the 2024 Sale Framework Agreement

Date: 18 October 2024 Parties: CAIGA and the Company Subject: The Group will sell engines, engine parts and related services to CAIGA and/or its associates (excluding the Group) for use in new aircraft manufacture and the sale of parts into the aftermarket for maintenance, repair and overhaul. Term: From 1 January 2025 up to 31 December 2026 Pricing: To be determined on a fair and reasonable basis based on the negotiated price, product specifications, configurations, competitiveness, general market conditions and any other factors including, but not limited to, volume levels, strategic relationship and new product introduction strategies

– 6 –

LETTER FROM THE BOARD

The Company has adopted and implemented its standard pricing procedure on both the transactions with connected and Independent Third Party customers, to ensure the terms of transactions contemplated in the 2024 Sale Framework Agreement are fair and reasonable, on the normal commercial terms and in the interests of the Company and its Shareholders. According to the standard pricing procedure, (i) all pricings must be analysed and reviewed annually; (ii) negotiated discounts are allowed on a customer-by-customer volume and business development evaluation, while all discounts must be approved by the vice president of sales, president/chief executive officer and chief financial officer; (iii) all customers determined to be directly or indirectly owned by a related party must be approved by the vice president of sales and the chief executive officer. Related party pricing will remain under standard pricing guidelines. Additional discounts or price changes are strictly prohibited; and (iv) the pricing of the engines of the Company produced as an original equipment manufacturer is based on an average of the producer price index against the consumer price index of identical customer agreed periods of the current and previous years, while aftermarket equipment pricing is based on a formal review of the historical versus the current pricing schedules, current standard cost and the product demand history.

In light of the application of the standard pricing procedure, the selling prices for the goods or services under the transactions contemplated in the 2024 Sale Framework Agreement are no less favorable than those offered to Independent Third Parties.

With the uniform pricing policy in place, the prices of the products or services offered to both connected and Independent Third Party customers are determined on the same basis. Therefore, the Board (including the independent non-executive Directors) is of the view that the pricing policy is fair and reasonable, on the normal commercial terms and in the interest of the Company and the Shareholders.

Conditions precedent: The 2024 Sale Framework Agreement is conditional upon:

• (a) the due execution of the 2024 Sale Framework Agreement by the Company and CAIGA;

– 7 –

LETTER FROM THE BOARD

• (b) the 2024 Sale Framework Agreement and the transactions contemplated thereunder having been approved by the Board and having obtained all necessary authorisations and approvals (including, if necessary, approval from Independent Shareholders at the SGM) from the Stock Exchange and other relevant laws, regulations and rules (including the Listing Rules).

Proposed Annual Caps and basis of determination

The Group has been selling engines, engine parts and related services for use in new aircraft manufacture and the sale of parts into the aftermarket for maintenance, repair and overhaul to CAIGA and/or its associates (excluding the Group). The actual historical transaction amounts for such sales to CAIGA and/or its associates for each of the two financial years ended 31 December 2023 and for the nine months ended 30 September 2024 are set out as follows:

			For the nine
			months ended
	For the year ended	31 December	30 September
	2022	2023	2024
	US$ million	US$ million	US$ million
Actual historical transaction
amount	32.78	43.45	30.41

Pursuant to the 2024 Sale Framework Agreement, it is proposed that the annual cap amounts for the sale of engine, engine parts and related services to CAIGA and its associates (excluding the Group) for each of the two financial years ending 31 December 2025 and 2026 shall not exceed the following:

		For	the year ending	31 December
			2025	2026
			US$ million	US$ million
Annual	cap		54.2	57.0

– 8 –

LETTER FROM THE BOARD

The above annual caps were determined mainly by reference to: (i) the estimated number of engines, engine parts and related services to be purchased by CAIGA and/or its associates (excluding the Group) for the two financial years ending 31 December 2026; and (ii) an adequate buffer for a potential increase in demand by CAIGA and/or its associates (excluding the Group).

In determining the estimated number of engine sales for the two years ending 31 December 2026, the Company has considered the expected sales quantity based on the order indication provided by Cirrus Design in January 2024 (the ‘‘Order Indication’’). For the estimated sales price of engines for the years ending 31 December 2026, the Company has taken into account the increasing cost of sales of the engines in previous years and the projected future economic situation.

With respect to the estimated transaction amounts attributable to the provision of engine parts and related services, the Company has based its estimates on (i) the revenue generated from this segment in previous years; (ii) the increasing needs for the engine parts and related services; and (iii) the slowdown in demand from Cirrus Design.

In arriving at the adequate buffer for a potential increase in demand by CAIGA and/or its associates (excluding the Group), the Company has mainly considered (i) the unexpected changes in economy; (ii) unexpected changes in market trends; (iii) customer relations; and (iv) other unforeseeable circumstances.

The increment of the proposed annual cap for the year ending 31 December 2026 is mainly attributable to the increase in estimated number of engine sales as indicated in the Order Indication and the corresponding increase in the expected transaction amount related to the provision of engine parts and related services.

After taking into consideration that the proposed annual caps are based on the Order Indication, cost of sales of the Company and other factors as discussed above, the Board (including the independent non-executive Directors) is of the view that the proposed annual caps are fair and reasonable.

Reasons for and benefits of the 2024 Sale Framework Agreement

The Group has been selling engines, engine parts and related services to AVIC and/or its associates (excluding the Group), such as Cirrus Design, for use in new aircraft manufacture and for the sale of parts into the aftermarket for maintenance, repair and overhaul and will continue to do so on an ongoing basis. Such transactions are conducted in the ordinary and usual course of business of the Group and agreed on an arm’s length basis with terms that are fair and reasonable to the Company. Cirrus Design is the world’s largest producer of piston-powered aircraft located in the United States of America. Also, with the growth in the PRC general aviation industry in recent years and the intentions of the PRC government in encouraging the development of such industry, the Company shall continue to seize the potential business opportunities available in such industry and benefit from the industrial development in future years.

– 9 –

LETTER FROM THE BOARD

Despite that the products sold by the Group to CAIGA and/or its associates were not directly comparable to those sold to other Independent Third Parties and the Group did not sell/ provide related parts and services to other Independent Third Parties, the basis of determining such selling prices for both connected and Independent Third Party customers are subject to the same pricing policy. Such prices are determined with reference to the standard pricing procedure and a number of factors, including a negotiated price for different products, the specifications and configurations of the products to be sold, the competitiveness of the Group in producing such products, purchase volume, strategic relationship, new introduction strategies and market conditions. As such, the Company considers it is in its best interest to continue the business relationship between the Group and CAIGA and/or its associates, provided that such parties shall purchase from the Group at prices that are considered to be fair and reasonable to the Group. The Company therefore entered into the 2024 Sale Framework Agreement with CAIGA to govern such sales.

In addition, the Company’s external auditor along with the independent non-executive Directors will perform annual review of the continuing connected transactions for the preceding financial year in accordance with the Listing Rules to ensure the fairness and reasonableness of the relevant transactions and the relevant terms under the 2024 Sale Framework Agreement are no less favorable than those available to Independent Third Parties and the proposed annual caps of the transactions are not exceeded.

With the application of a uniform pricing policy for both connected and Independent Third Party customers, the Directors (including the independent non-executive Directors after considering the advice from the Independent Financial Adviser) consider that the 2024 Sale Framework Agreement has been entered into on normal commercial terms and in the ordinary and usual course of business of the Group, and the terms of the 2024 Sale Framework Agreement and its Proposed Annual Caps are fair and reasonable and in the interests of the Group and the Shareholders as a whole.

INFORMATION OF THE GROUP

The Company is a company incorporated in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange (stock code: 232). The Group is principally engaged in general aviation aircraft piston engine business.

INFORMATION OF AVIC

AVIC is established in the PRC and is wholly-owned by SASAC. AVIC’s core businesses consist of defense, transport aircraft, helicopter, avionics and systems, general aviation, aviation research and development, flight testing, trade and logistics, assets management, finance services, engineering and construction, automobile, etc.

– 10 –

LETTER FROM THE BOARD

INFORMATION OF CAIGA

CAIGA is a company established in the PRC and is owned as to approximately 73.39% by AVIC. AVIC holds 100% of the equity interest in AVIC International, a controlling shareholder of the Company that indirectly owns as to approximately 46.40% of the entire issued share capital of the Company. CAIGA indirectly holds as to approximately 85% of the entire share capital of Cirrus Aircraft and Cirrus Design. CAIGA’s core businesses consist of general aircraft development, general aviation operations and services, aviation parts and non-aerospace manufacturing.

LISTING RULES IMPLICATIONS

To the best of the knowledge, information and belief of the Directors and having made all reasonable enquiries, AVIC is interested in (i) approximately 73.39% of the equity interest in CAIGA; and (ii) 100% of the equity interest in AVIC International, a controlling shareholder of the Company as at the date of this circular.

As CAIGA and its associates (including but not limited to Cirrus Aircraft and Cirrus Design) are connected persons of the Company under Chapter 14A of the Listing Rules, the transactions contemplated under the 2024 Sale Framework Agreement constitutes continuing connected transactions on the part of the Company under Chapter 14A of the Listing Rules.

As the annual caps under the 2024 Sale Framework Agreement exceed HK$10,000,000 and the relevant applicable percentage ratios calculated under Rule 14.07 of the Listing Rules exceed 5%, the 2024 Sale Framework Agreement constitutes non-exempt continuing connected transactions for the Company under Chapter 14A of the Listing Rules and is therefore subject to reporting, announcement and independent shareholders’ approval requirements.

As Mr. Huang Yongfeng, Mr. Yu Xiaodong, Ms. Jiao Yan, Mr. Zhang Zhibiao and Mr. Li Peiyin are directors of subsidiaries of AVIC International, each of Mr. Huang Yongfeng, Mr. Yu Xiaodong, Ms. Jiao Yan, Mr. Zhang Zhibiao and Mr. Li Peiyin had abstained from voting on the resolutions at the meeting of the Board for approving the 2024 Sale Framework Agreement.

– 11 –

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors has been formed to advise the Independent Shareholders as to whether the 2024 Sale Framework Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole, and as to how to vote on the proposed resolution to approve the 2024 Sale Framework Agreement and the transactions contemplated thereunder at the SGM. Somerley Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

SGM

The notice convening the SGM is set out on pages SGM-1 to SGM-2 of this circular. The SGM will be convened and held at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 6 December 2024 at 11 a.m. for the Independent Shareholders to consider and, if thought fit, pass the resolution to approve, among others, the 2024 Sale Framework Agreement and the transactions contemplated thereunder. The voting at the SGM will be taken by way of poll.

In view of the interests of AVIC and Mr. Yu Xiaodong, who held 1,258,000 Shares as at the Latest Practicable Date (representing approximately 0.01% of the issued share capital of the Company), in the 2024 Sale Framework Agreement, each of AVIC and Mr. Yu Xiaodong and its/ his associates will be required to abstain from voting in relation to the 2024 Sale Framework Agreement and the transactions contemplated thereunder at the SGM. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, save and except for AVIC and Mr. Yu Xiaodong and its/his associates, no other Shareholder has a material interest in the 2024 Sale Framework Agreement and the transactions contemplated thereunder and therefore, no other Shareholder will be required to abstain from voting at the SGM.

Whether or not you are able to attend the SGM, please complete and sign the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event no later than 48 hours before the time appointed for holding the SGM (i.e. Wednesday, 4 December 2024 at 11 a.m. (Hong Kong time)) or any adjournment thereof. Completion and return of the enclosed form of proxy will not preclude Shareholders from attending and voting in person at the SGM or any adjournment thereof if they so wish.

– 12 –

LETTER FROM THE BOARD

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on pages 14 to 15 of the circular. The Independent Board Committee, having taken into account the advice from the Independent Financial Adviser, the text of which is set out on pages 16 to 27 of this circular, considers that the 2024 Sale Framework Agreement was entered into on normal commercial terms following arm’s length negotiations between the parties thereto and in the ordinary and usual course of business of the Group, and that the terms of the 2024 Sale Framework Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM to approve the 2024 Sale Framework Agreement and the transactions contemplated thereunder.

The Board considers that the 2024 Sale Framework Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and its Shareholders as a whole and therefore recommends that the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the SGM.

ADDITIONAL INFORMATION

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

Yours faithfully, For and on behalf of the Board Continental Aerospace Technologies Holding Limited Huang Yongfeng Chairman

– 13 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Continental Aerospace Technologies Holding Limited ������������

(Incorporated in Bermuda with limited liability)

(Stock code: 232)

13 November 2024

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 13 November 2024 (the ‘‘Circular’’) of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee to consider the 2024 Sale Framework Agreement and the transactions contemplated thereunder and to advise the Independent Shareholders as to whether the 2024 Sale Framework Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms or better, in the ordinary and usual course of business of the Group and in the interests of the Company and its Shareholders as a whole, and as to how the Independent Shareholders should vote on the proposed resolution to approve the 2024 Sale Framework Agreement and the transactions contemplated thereunder at the SGM. Somerley Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. Details of the letter of advice from the Independent Financial Adviser, together with the principal factors taken into consideration in arriving at such advice, are set out on pages 16 to 27 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 5 to 13 of the Circular and the additional information set out in the Appendix I to the Circular.

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the 2024 Sale Framework Agreement and the transactions contemplated thereunder, and the factors and reasons considered by, and the opinion of the Independent Financial Adviser as stated in its letter of advice, we consider that the 2024 Sale Framework Agreement was entered into on normal commercial terms following arm’s length negotiations between the parties thereto and in the ordinary and usual course of business of the Group, and that the terms of the 2024 Sale Framework Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned, and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution at the SGM to approve the 2024 Sale Framework Agreement and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of

the Independent Board Committee

Mr. Chu Yu Lin, David Mr. Li Ka Fai, David Mr. Zhang Ping Independent non-executive Independent non-executive Independent non-executive Director Director Director

– 15 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the letter of advice from Somerley Capital Limited to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

SOMERLEY CAPITAL LIMITED 20th Floor China Building 29 Queen’s Road Central Hong Kong

13 November 2024

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS FOR THE YEARS ENDING 31 DECEMBER 2025 AND 2026

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the independent board committee and the independent shareholders of Continental Aerospace Technologies Holding Limited (the ‘‘Company’’) in relation to the entering into of a sale framework agreement (the ‘‘2024 Sale Framework Agreement’’) with China Aviation Industry General Aircraft Co., Ltd. Details of the 2024 Sale Framework Agreement are set out in the ‘‘Letter from the Board’’ (the ‘‘Board Letter’’) contained in the circular of the Company dated 13 November 2024 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise defined herein.

On 18 October 2024, the Company entered into the 2024 Sale Framework Agreement with CAIGA, pursuant to which the Group will sell engines, engine parts and related services to CAIGA and/or its associates (excluding the Group) for use in new aircraft manufacture and for the sale of parts into the aftermarket for maintenance, repair and overhaul for a term from 1 January 2025 to 31 December 2026 (the ‘‘Transactions’’).

As mentioned in the Board Letter, AVIC is interested in (i) approximately 73.39% of the equity interest in CAIGA; and (ii) 100% of the equity interest in AVIC International, a controlling shareholder of the Company as at the Latest Practicable Date. Therefore, CAIGA and its associates (including but not limited to Cirrus Aircraft and Cirrus Design) are connected persons of the Company under Chapter 14A of the Listing Rules, and the Transactions constitute continuing connected transactions on the part of the Company under Chapter 14A of the Listing Rules. As the annual caps under the 2024 Sale Framework Agreement exceed HK$10,000,000 and the relevant applicable percentage ratios calculated under Rule 14.07 of the Listing Rules exceed 5%, the Transactions constitute non-exempt continuing connected transactions for the Company under Chapter 14A of the Listing Rules and are therefore subject to reporting, announcement and independent shareholders’ approval requirements.

– 16 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Chu Yu Lin, David, Mr. Li Ka Fai, David and Mr. Zhang Ping, has been established to advise the Independent Shareholders in relation to the Transactions. We, Somerley Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard (the ‘‘Engagement’’).

During the past two years, Somerley Capital Limited has acted as the independent financial adviser to the independent board committee and independent shareholders of the Company in relation to the revision of annual cap of continuing connected transactions (details of which are set out in the Company’s circular dated 18 October 2023). The past engagement was limited to providing independent advisory services to the independent board committee and independent shareholders of the Company pursuant to the Listing Rules. Under the past engagement, Somerley Capital Limited received normal professional fees from the Company. Having considered the independent advisory nature of the past engagement, as at the Latest Practicable Date, there were no relationships or interests between (a) Somerley Capital Limited and (b) the Group and CAIGA that could reasonably be regarded as a hindrance to our independence as defined under Rule 13.84 of the Listing Rules to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders with respect to the Engagement.

In formulating our opinion, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and management of the Company (the ‘‘Management’’) and we have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material aspects. We have also sought and received confirmation from the Directors that all material relevant information has been supplied to us and that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to doubt the truth or accuracy of the information provided to us, or to believe that any material information has been omitted or withheld. We have relied on such information and consider that the information we have received is sufficient for us to reach our advice and recommendation as set out in this letter. However, we have not conducted any independent investigation into the business and affairs of the Group or CAIGA, nor have we carried out any independent verification of the information supplied.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion with respect to the Transactions, we have taken into account the principal factors and reasons set out below.

1. Information of the Group

Based on the Company’s 2023 annual report, the Group is engaged in the design, development and production of general aviation aircraft piston engines and spare parts as well as the provision of aftermarket services and support for piston engines.

2. Information of AVIC

As mentioned in the Board Letter, AVIC is established in the PRC and is wholly-owned by SASAC. AVIC’s core businesses consist of defense, transport aircraft, helicopter, avionics and systems, general aviation, aviation research and development, flight testing, trade and logistics, assets management, finance services, engineering and construction, automobile, etc.

3. Information of CAIGA

As mentioned in the Board Letter, CAIGA is a company established in the PRC and is owned as to approximately 73.39% by AVIC. AVIC holds 100% of the equity interest in AVIC International, a controlling shareholder of the Company that indirectly owns approximately 46.40% of the entire issued share capital of the Company. CAIGA indirectly holds approximately 85% of the entire share capital of Cirrus Aircraft and Cirrus Design. CAIGA’s core businesses consist of general aircraft development, general aviation operations and services, aviation parts and non-aerospace manufacturing.

4. Reasons for and benefits of the Transactions

As disclosed in the Board Letter, the 2024 Sale Framework Agreement relates to the sale of engines, engine parts and related services to CAIGA and/or its associates (excluding the Group). The 2024 Sale Framework Agreement represents a continuation of the 2021 Sale Framework Agreement, and to ensure the continuity of the business operations.

As advised by the Management, the transactions contemplated under the 2021 Sale Framework Agreement (as supplemented by the Supplemental 2021 Sale Framework Agreement) represent the sale of engines, engine parts and related services by the Group to Cirrus Design, which is indirectly owned approximately 85% by CAIGA.

As disclosed in the Board Letter, the Group has been selling engines, engine parts and related services to AVIC and/or its associates (excluding the Group), such as Cirrus Design, for use in new aircraft manufacture and for the sale of parts into the aftermarket for maintenance, repair and overhaul. Cirrus Design is the world’s largest producer of piston-powered aircraft located in the United States of America.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the Management that the Group has maintained good business relationship with Cirrus Design with no major disputes in the past few years. Also, with the growth in the PRC general aviation industry in recent years and the intentions of the PRC government in encouraging the development of such industry, the Company will be able to seize the potential business opportunities available in such industry and benefit from the industrial development in future years. The Management considers that the past transactions between the Group and Cirrus Design were conducted under fair and reasonable terms and it is appropriate to continue the business relationship with Cirrus Design so as to maintain a stable revenue stream of the Group. The Company therefore entered into the 2024 Sale Framework Agreement with CAIGA (which is the holding company of Cirrus Design) to govern such sales.

Taking into account that (i) the Transactions is in line with the Group’s principal business; and (ii) the Group has been conducting transactions with Cirrus Design over the past few years and the 2024 Sale Framework Agreement represents a continuation of such business relationship, we concur with the Directors’ view that the Transactions are in the interests of the Company and the Shareholders as a whole and are in the ordinary and usual course of business of the Group.

5. Principal terms of the Transactions

Set out below is a summary of the principal terms of the 2024 Sale Framework Agreement, details of which are set out in the sub-section headed ‘‘Principal terms of the 2024 Sale Framework Agreement’’ under the section headed ‘‘2024 SALE FRAMEWORK AGREEMENT’’ of the Board Letter.

Date: 18 October 2024 Parties: CAIGA and the Company Subject: The Group will sell engines, engine parts and related services to CAIGA and/ or its associates (excluding the Group) for use in new aircraft manufacture and the sale of parts into the aftermarket for maintenance, repair and overhaul. Term: From 1 January 2025 up to 31 December 2026 Pricing: To be determined on a fair and reasonable basis based on the negotiated price, product specifications, configurations, competitiveness, general market conditions and any other factors including, but not limited to, volume levels, strategic relationship and new product introduction strategies.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Assessment of the pricing terms of the 2024 Sale Framework Agreement

As advised by the Management, the products sold/to be sold by the Group to CAIGA and/or its associates are mainly engines to be produced as an original equipment manufacturer (‘‘OEM’’), the products are usually unique in nature and involve different specifications and configuration. During the term of the 2021 Sale Framework Agreement (i.e., from the years of 2022 to 2024), the engines sold by the Group to CAIGA and/or its associates were not directly comparable to those sold to other Independent Third Party customers, while the Group did not sell/provide related parts and services to other Independent Third Parties.

Despite that the products sold by the Group to CAIGA and/or its associates were not directly comparable to those sold to other Independent Third Parties from 2022 to 2024, we have enquired with the Management into the basis of determining the selling prices of the Group’s sales and were advised that both connected customers and Independent Third Party customers are subject to the same pricing policy. The prices of the products are determined with reference to a number of factors, including a negotiated price for different products, the specifications and configurations of the products to be sold, the competitiveness of the Group in producing such products, purchase volume, strategic relationship, new introduction strategies and market conditions.

We have also discussed with the Management and understand that the products sold by the Group to Cirrus Design under the 2021 Sale Framework Agreement during the financial years ended 31 December 2022 and 2023, and the eight months ended 31 August 2024 (the ‘‘Relevant Period’’) represent two types of engines. In relation to the pricing policy mentioned above, for our due diligence purposes, we have obtained and reviewed details of the transactions (such as base prices, unit costs and sales prices) between the Group and (a) Cirrus Design and (b) Independent Third Party customers throughout the Relevant Period. In this respect, for each of (a) the year ended 31 December 2022, (b) the year ended 31 December 2023, and (c) the eight months ended 31 August 2024, we have selected, on a sampling basis, one transaction for each type of OEM products sold to Cirrus Design. For each transaction selected, we have selected, on a sampling basis, two transactions of relatively comparable engines with Independent Third Party customers (save for the exception below). We have obtained and reviewed the relevant transaction details of each of the transactions above (save for the exception mentioned below), which included the related profitability information and the factors that the Management considered when determining the respective selling prices. We have also discussed with the Management the details of factors taken into consideration when determining the selling prices. Based on our discussion with the Management and review of the information, we noted that the Group adopted a consistent approach when determining the selling prices of the OEM products for Cirrus Design and the Independent Third Party customers (i.e. the Group took into account the same key factors such as the Group’s competitiveness in the segment, market condition, purchase volume of the customer, strategic relationship, competition in the market, complexity of products, etc.). During the review, we understand from the Management that

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the Group did not make any sales with Independent Third Party customers for one of the engine types sold to Cirrus Design during the year ended 31 December 2022. We have enquired with the Management and reviewed the transactions details of the sales of such type of engine to Cirrus Design during the year ended 31 December 2022. We note that the Group has considered the consistent factors and approaches compared to both Cirrus Design and Independent Third Party customers for the year ended 31 December 2023 and eight months ended 31 August 2024.

Therefore, based on the abovementioned selection criteria and considered that the Group did not make any sales with Independent Third Party customers for one of the engine types sold to Cirrus Design during the year ended 31 December 2022, we have reviewed a total of 6 transaction details that the Group entered into with Cirrus Design during the Relevant Period, and a total of 10 transaction details that the Group entered into with Independent Third Party customers during the Relevant Period.

As such, based on the above, we are satisfied that the pricing terms of the transactions with Cirrus Design are consistent with the pricing policy of the Group as mentioned above (‘‘Our Findings on the Transaction Pricing’’).

In addition, we have also obtained and reviewed the standard pricing procedure (the ‘‘Standard Pricing Procedure’’) of Continental Aerospace Technologies, Inc. (formerly known as Continental Motors, Inc.), which is the key operating subsidiary of the Group in the USA and conducts transactions with Cirrus Design. We noted from the Standard Pricing Procedure that (i) the procedure applies to pricing of all commercial goods and services sold by Continental Aerospace Technologies, Inc.; and (ii) the basis of pricing as set out in the procedure is uniform with both related and non-related party customers.

According to the Standard Pricing Procedure:

• I. All pricings must be analyzed and reviewed annually.

• II. Negotiated discounts are allowed on a customer-by-customer volume and business development evaluation. All discounts must be approved by the vice president of sales, president/chief executive officer and chief financial officer.

• III. All customers determined to be directly or indirectly owned by a related party must be approved by the vice president of sales and the chief executive officer. Related party pricing will remain under standard pricing guidelines. Additional discounts or price changes are strictly prohibited.

• IV. OEM pricing is based on an average of the producer price index against the consumer price index of identical customer agreed periods of the current and previous years, while aftermarket equipment pricing is based on a formal review of the historical versus the current pricing schedules, current standard cost and the product demand history.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the Company’s 2023 annual report, the independent non-executive Directors have reviewed relevant continuing connected transactions of the Company (including the transactions contemplated under the 2021 Sale Framework Agreement (as supplemented by the Supplemental 2021 Sale Framework Agreement)) during the year ended 31 December 2023 and confirmed that such continuing connected transactions had been entered into (i) in the ordinary and usual course of business of the Group; (ii) on normal commercial terms or better; and (iii) according to the terms of the relevant agreements governing the transactions on terms that are fair and reasonable and in the interests of the Shareholders as a whole (the ‘‘INEDs’ Confirmation’’).

The auditors of the Company (the ‘‘Auditors’’) have performed a review of the continuing connected transactions of the Group, including among other things, the transactions contemplated under the 2021 Sale Framework Agreement (as supplemented by the Supplemental 2021 Sale Framework Agreement) for the year ended 31 December 2023. We noted from the Company’s 2023 annual report that the Auditors were engaged to report in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information, and with reference to Practice Note 740 Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules issued by the Hong Kong Institute of Certified Public Accountants. The Auditors have issued their unqualified letter in respect of the non-exempt continuing connected transactions in accordance with Rule 14A.56 of the Listing Rules confirming that (i) nothing has come to their attention that causes them to believe that the continuing connected transactions have not been approved by the Board; (ii) for transactions involving the provisions of goods or services by the Group, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Group; (iii) nothing has come to their attention that causes them to believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and (iv) with respect to the aggregate amount of each of the continuing connected transactions, nothing has come to their attention that causes them to believe that the continuing connected transactions have exceeded the annual cap as set by the Company (the ‘‘Auditors’ Confirmation’’).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the above (including (i) that the products sold/to be sold by the Group to CAIGA and/or its associates are mainly engines to be produced as an OEM products which are unique in nature; (ii) our enquiry with the Management into the basis of determining the Group’s sales where prices of products sold to connected and Independent Third Party customers are both determined by the same key factors; (iii) Our Findings on the Transaction Pricing; (iv) the Standard Pricing Procedure which is applicable to both connected and Independent Third Party customers; (v) the INEDs’ Confirmation; and (vi) the Auditors’ Confirmation), we are of the view that the terms of the 2024 Sale Framework Agreement are on normal commercial terms and are fair and reasonable.

6. Proposed annual caps

Pursuant to the 2024 Sale Framework Agreement, the amounts of the annual cap for the sale of engine, engine parts and related services to CAIGA and/or its associates (excluding the Group) for each of the two financial years ending 31 December 2025 and 2026 shall not exceed US$54.2 million and US$57.0 million, respectively (the ‘‘Proposed Annual Cap(s)’’)

As mentioned in the sub-section headed ‘‘Proposed annual caps and basis of determination’’ under the section headed ‘‘2024 SALE FRAMEWORK AGREEMENT’’ of the Board Letter, the Proposed Annual Caps were determined mainly by reference to: (i) the estimated number of engines, engine parts and related services to be purchased by CAIGA and/or its associates (excluding the Group) for the two financial years ending 31 December 2026; and (ii) an adequate buffer for a potential increase in demand by CAIGA and/or its associates (excluding the Group).

For the purpose of our due diligence, we have obtained and reviewed the calculation of the Proposed Annual Caps prepared by the Management (the ‘‘Proposed Annual Caps Calculation’’). We have also discussed with the Management to understand the rationale behind the Proposed Annual Caps Calculation. We noted that the Proposed Annual Caps are determined based on: (i) the estimated transaction amounts for each of the financial years ending 31 December 2025 and 2026; and (ii) a buffer of approximately 4% and 6% of the estimated transaction amount for the financial years ending 31 December 2025 and 2026, respectively. The estimated transaction amount for the year ending 31 December 2025 is approximately US$51.1 million. We noted that such amount was determined based on: (i) the total estimated engine sales amount (of which the Management has considered (a) the estimated engine selling prices and (b) the estimated number of engine sales for the year ending 31 December 2025); and (ii) the estimated transaction amount attributed to the provision of engine parts and related services (representing 4% of the total estimated engine sales amount).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In determining the estimated engine selling prices for the year ending 31 December 2025, the Management has estimated an approximate by 8.4% increase in the selling prices of engine model to be supplied to CAIGA and/or its associates compared to 2024. As discussed with the Management, the Management has estimated such increase after considering the expected increase in costs of engine sales for the year. For our due diligence purpose, we have reviewed the Company’s 2022 and 2023 annual reports. We noted that the cost of sales of the Group for the years ending 31 December 2021, 2022 and 2023 were approximately HK$1,093.8 million, HK$1,157.0 million and HK$1,262.6 million, respectively. This represents an increase of approximately 5.8% from 2021 to 2022, and approximately 9.1% from 2022 to 2023. Therefore, the estimated increase of the engine selling prices of approximately 8.4% falls within the Group’s historical increments of the cost of sales. The Management also advised that the increase in costs of engines sales from 2022 to 2023 was more significant as compared to that from 2021 to 2022 which was mainly due to inflation and other relevant market conditions. The Management considered that cost of sales of the engines will still be affected by inflation in 2025, and therefore they estimated a relatively higher growth rate of 8.4% for the year ending 31 December 2025. Accordingly, we consider that the increment of the engine selling prices of approximately 8.4% for the year ending 31 December 2025 is justifiable.

When determining the estimated number of engine sales for the year ending 31 December 2025, the Management has taken into account the quantity of engine sales expected to be made to Cirrus Design. Such estimation was guided by the order indication provided by Cirrus Design in January 2024 (such order indication demonstrates the estimated number of engines that Cirrus Design would potentially order for the years between 2024 and 2027, based on their production estimation) (the ‘‘Order Indications’’). For our due diligence purpose, we obtained the relevant email correspondence between the Group and Cirrus Design, and we noted from the email correspondence that Cirrus Design provided their estimation of number of engines that they would potentially order for the years between 2024 and 2027. We also noted that the estimated number of engine sales used in the Proposed Annual Cap Calculation is consistent with the Order Indications. Therefore, taking into account of the above, we consider that such estimated number of engine sales for the year ending 31 December 2025 is fair and reasonable.

In addition to engine sales, the Group would also provide engine parts and related services under the 2024 Sale Framework Agreement. In determining the Proposed Annual Caps, the Management also took into account the estimated transaction amount attributable to the provision of engine parts and related services, which represents 4% of the total estimated engine sales amount. In this regard, based on the historical transaction amount under the 2021 Sale Framework Agreement (as supplemented by the Supplemental 2021 Sale Framework Agreement) that we obtained from the Company, we noted that revenue generated from engines parts sales and related services represented approximately 2.3% and 3.8% of total transaction amounts for the financial years ended 31 December 2022 and 2023, respectively. Based on the discussion with the Management, we understand that such increase was due to an increasing needs for the provision of engine parts and related services, but the Management considers the growth in demand will slow down based on the recent demand for engines parts and related services from Cirrus Design

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(‘‘Considerations for Engines Parts’’). Accordingly, we consider that the estimated transaction amount attributed to the provision of engine parts and related services of 4% of the total estimated engine sales amount is justifiable.

For the year ending 31 December 2026, we noted from the Proposed Annual Caps Calculation that the estimated engine selling prices are the same as the estimated engine selling prices in 2025. We have discussed with the Management and understand that when they estimated the engine selling prices for the year ending 31 December 2026, they have considered (i) their strategic selling plans; and (ii) the general economy situation in 2026 (which the Management expected to be more stable after the high inflation environment in previous years). Therefore, the Management estimated no adjustments to the engine selling prices for the year ending 31 December 2026. Additionally, to determine the Proposed Annual Cap for the year ending 31 December 2026, the Management has also considered the Order Indications, and we noted that the estimated number of engine sales used in the Proposed Annual Cap Calculation is consistent with the Order Indications for the year ending 31 December 2026. For the estimated transaction amount attributed to the provision of engine parts and related services, the Company has also considered the Considerations for Engines Parts and estimated on amount based on 4% of the total estimated engine sales amount for the year ending 31 December 2026.

To determine the Proposed Annual Caps, the Company also applied buffers of approximately 6.1% and 4.4% to the estimated transaction amount for the years ending 31 December 2025 and 2026, respectively. As advised by the Management, such buffers were determined by after taking into account, among other things, the unexpected changes in economy, unexpected changes in market trends, customer relationships and other unforeseeable circumstances such as (a) the unexpected increase in demand of products; and (b) the unexpected changes in price of the products. Taking into account that (i) the transactions would be based on demand of CAIGA and/or its associates and the supply capability of the Group; and (ii) in case of costs increase from the supply side, the Group may further adjust its sales price under the transactions, we consider such buffers to be justifiable.

Taking into account the above, we consider that the Proposed Annual Caps are fair and reasonable.

1. Review and conditions of the transactions contemplated under the 2024 Sale Framework Agreement

In compliance with the Listing Rules, the Transactions are subject to a number of conditions which include, among other things:

• I. the Proposed Annual Caps will not be exceeded;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

• II. the independent non-executive Directors must, in accordance with the Listing Rules, review annually the transactions contemplated under the 2024 Sale Framework Agreement and confirm in the Company’s annual report whether the transactions contemplated under the 2024 Sale Framework Agreement have been entered into (a) in the ordinary and usual course of business of the Group; (b) on normal commercial terms or better; and (c) according to the agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;

• III. the Auditors must, in accordance with the Listing Rules, review annually the transactions contemplated under the 2024 Sale Framework Agreement and they must confirm in a letter to the Board whether anything has come to their attention that causes them to believe that the transactions:

• (a) have not been approved by the Board;

• (b) were not, in all material respects, in accordance with the pricing policies of the Group if the transactions involve the provision of goods or services by the Group;

• (c) were not entered into, in all material respects, in accordance with the relevant agreement(s) governing the transactions; and

• (d) have exceeded the Proposed Annual Caps;

• IV. the Company must promptly notify the Stock Exchange and publish an announcement if the independent non-executive Directors and/or the Auditors cannot confirm the matters as required;

• V. the Company must allow, and ensure that CAIGA allow, the Auditors sufficient access to their records of the transactions for the purpose of the auditors’ reporting on the transactions contemplated under the 2024 Sale Framework Agreement. The Board must state in the annual report whether the auditors of the Company have confirmed the matters set out in Rule 14A.56 of the Listing Rules; and

• VI. the Company must comply with the applicable provisions of the Listing Rules governing continuing connected transactions in the event that the total amount of the transactions contemplated under the 2024 Sale Framework Agreement exceeds the relevant Proposed Annual Cap(s), or that there is any material amendment to the terms of the 2024 Sale Framework Agreement.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In light of the conditions imposed on the continuing connected transactions, in particular, (1) the limit of the value of the transactions by way of the Proposed Annual Caps; (2) the ongoing review by the independent non-executive Directors and the Auditors regarding the terms of the transactions under the 2024 Sale Framework Agreement; and (3) the on-going review by the Auditors confirming the Proposed Annual Caps not being exceeded, we are of the view that appropriate measures will be in place to govern the conduct of the transactions contemplated under the 2024 Sale Framework Agreement and safeguard the interests of the Independent Shareholders.

OPINION AND RECOMMENDATION

Having taken into account the above principal factors, we consider that (i) the Transactions are in the ordinary and usual course of business of the Group and are in the interests of the Company and the Shareholders as a whole; (ii) the terms of the Transactions are on normal commercial terms and are fair and reasonable; and (iii) the Proposed Annual Caps are fair and reasonable. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves recommend, the Independent Shareholders to vote in favour of the relevant ordinary resolution(s) to be proposed at the SGM to approve the Transactions.

Yours faithfully, for and on behalf of SOMERLEY CAPITAL LIMITED Clifford Cheng Director

Mr. Clifford Cheng is a licensed person registered with the Securities and Futures Commission and a responsible officer of Somerley Capital Limited, which is licensed under the SFO to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. He has over ten years of experience in the corporate finance industry

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GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particular given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and is not misleading or deceptive and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company in the Shares, underlying shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which were 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 he/she was deemed or taken to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:-

			Approximate
		Number of	percentage of
Name of Director	Capacity	Shares(1)	shareholding(2)
Mr. Yu Xiaodong	Beneficial owner	1,258,000(L)	0.01
Notes:

(1) The letter ‘‘L’’ denotes the Director’s long position in such securities.

• (2) The calculation is based on the total number of 9,303,374,783 Shares in issue as of the Latest Practicable Date.

As at the Latest Practicable Date, so far as the Directors were aware, each of Mr. Huang Yongfeng, Mr. Yu Xiaodong, Ms. Jiao Yan, Mr. Zhang Zhibiao and Mr. Li Peiyin is an employee of the AVIC International, which indirectly owns as to approximately 46.40% of the entire issued share capital of the Company and is deemed to be interested in such Shares under the provisions of Divisions 2 and 3 of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or proposed Directors is a director or employee of a company which has an interest or short position in the shares and underlying shares of the issuer which would fall to be disclosed to the issuer under the provisions of Divisions 2 and 3 of Part XV of the SFO.

I – 1

GENERAL INFORMATION

APPENDIX I

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not determinable by the Company within one year without payment of compensation (other than statutory compensation).

4. COMPETING INTERESTS

None of the Directors or their respective associate(s) are considered to have interests in business which compete or are likely to compete, either directly or indirectly, with the business of the Group which require disclosure under the Listing Rules. In any event, such Directors will be subject to the usual requirement to abstain from voting on resolutions of the Board approving any proposal in which any Director or his associate has a material interest, such that the decision making of the Board should not be affected by such material interest.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 December 2023, being the date to which the latest published audited financial statements of the Group was made up.

6. INTERESTS IN CONTRACTS, ASSETS AND ARRANGEMENT OF SIGNIFICANCE

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

As at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any asset which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 December 2023, the date to which the latest published audited financial statements of the Group were made up.

7. EXPERT AND CONSENT

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

Name Qualification

Somerley Capital Limited A licensed corporation to carry on Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

I – 2

GENERAL INFORMATION

APPENDIX I

Somerley Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its reports and reference to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, Somerley Capital Limited did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Somerley Capital Limited did not have any direct or indirect interests in any assets which have been acquired or disposed of by or leased to, any member of the Group, or which are proposed to be acquired or disposed of by or leased to, any member of the Group.

8. DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.cath.com.hk) for a period not less than 14 days from the date of this circular:

• (a) the 2024 Sale Framework Agreement; and

• (b) the written consent referred to in the section headed ‘‘7. Expert and consent’’ in this Appendix.

I – 3

NOTICE OF SGM

Continental Aerospace Technologies Holding Limited ������������

(Incorporated in Bermuda with limited liability)

(Stock code: 232)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘Meeting’’) of Continental Aerospace Technologies Holding Limited (the ‘‘Company’’, together with its subsidiaries, the ‘‘Group’’) will be held at Monaco Room, Basement 1, Regal Hongkong Hotel, 88 Yee Wo Street, Causeway Bay, Hong Kong on Friday, 6 December 2024 at 11 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution to be proposed as ordinary resolution of the Company:

ORDINARY RESOLUTION

1. ‘‘THAT

• (a) the sale framework agreement dated 18 October 2024 (the ‘‘2024 Sale Framework Agreement’’) and entered into between the Company and China Aviation Industry General Aircraft Co., Ltd. (‘‘CAIGA’’) (a copy of which is marked ‘‘A’’ and produced to the Meeting and signed by the chairman of the Meeting for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;

• (b) the respective annual cap for the transactions contemplated under the 2024 Sale Framework Agreement for the years ending 31 December 2025 and 2026 be and is hereby approved, confirmed and ratified; and

• (c) any one or more of the directors of the Company (the ‘‘Directors’’) be and is/are hereby authorised to do all such acts and things and execute all such documents which he/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the 2024 Sale Framework Agreement and the transactions contemplated thereunder.’’

By Order of the Board

Continental Aerospace Technologies Holding Limited Huang Yongfeng

Chairman

Hong Kong, 13 November 2024

SGM – 1

NOTICE OF SGM

Notes:

1. Any member of the Company entitled to attend and vote at the meeting shall be entitled to appoint one or, if he is the holder of two or more shares, more than one person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share of the Company, any one of such persons 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 the said persons whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.

3. Completion and return of the form of proxy will not preclude a member from attending and voting at the above meeting or any adjournment thereof if he so wishes. In that event, his form of proxy will be deemed to have been revoked.

4. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, no later than 11 a.m. (Hong Kong time) on Wednesday, 4 December 2024.

5. The record date for determining the entitlement of the shareholders of the Company to attend and vote at the Meeting will be Friday, 6 December 2024. For the purposes of holding the SGM, the register of members of the Company will be closed from Tuesday, 3 December 2024 to Friday, 6 December 2024, both days inclusive, during which period no transfer of shares of the Company will be registered, in order to determine the entitlement to attend and vote at the SGM. All transfers of shares of the Company accompanied by the relevant share certificates must be lodged with the Hong Kong branch share registrar and transfer office of the Company, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, for registration no later than 4:30 p.m. on Monday, 2 December 2024.

SGM – 2