Star Plus Legend Holdings Limited - Proxy Solicitation & Information Statement 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt about any of the contents of this circular or as to what action to take in relation to this circular, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in AviChina Industry & Technology Company Limited , you should at once hand this circular and the enclosed revised proxy form to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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 loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2357)

MAJOR TRANSACTION AND CONNECTED TRANSACTIONS:

DISPOSAL OF EQUITY INTERESTS IN HARBIN AUTOMOBILE GROUP AND CHANGHE SUZUKI

Independent financial adviser to the Independent Board Committee and Independent Shareholders

SOMERLEY LIMITED

A letter from the Independent Board Committee is set out on page 14 of this circular. A letter from Somerley to the Independent Board Committee and the Independent Shareholders is set out on pages 15 to 27 of this circular.

A supplemental notice relating to the annual general meeting (“AGM”) of AviChina Industry & Technology Company Limited to be held at 9:00 a.m. on Tuesday, 9 June 2009 at Avic Hotel, No. 10 Yi, Central East Third Ring Road, Chaoyang District, Beijing, the People’s Republic of China is set out on pages 43 to 44 of this circular.

A revised form of proxy for use at the AGM is enclosed and is also published on the website of the Stock Exchange (www.hkex.com.hk). Shareholders who intend to appoint a proxy to attend the AGM shall complete and return the enclosed revised form of proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for the holding of AGM or any adjournment thereof (as the case may be). Completion and return of the revised form of proxy will not preclude you from attending the AGM and voting in person if you so wish.

For identification purpose only.

6 May 2009

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from Somerley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Appendix I — Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	28
Appendix II — General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	30
Appendix III — Valuation Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	37
Supplemental Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43

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DEFINITIONS

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

“Acquisition Agreement”

the Acquisition Agreement dated 9 October 2008 between Changhe Auto and AVIC Organizing Unit, pursuant to which Changhe Auto agreed to acquire certain aviation assets from AVIC Organizing Unit for a consideration of RMB 793,177,100. The consideration will be partially satisfied by Changhe Auto by transferring 41% equity interest in Changhe Suzuki. The Acquisition Agreement dated 9 October 2008 was approved by the Independent Shareholders on 15 December 2008 and is now pending the approval by the relevant PRC authorities. Details of the transaction can be referred to in the announcement and circular of the Company dated 13 October 2008 and 3 November 2008, respectively

“AGM”

the annual general meeting of the Company to be held on Tuesday, 9 June 2009 for the purpose of, among other matters, considering, ratifying, approving and confirming the entering into of the Share Transfer Agreements and the transactions contemplated thereunder

“AVIC”

Aviation Industry Corporation of China (中國航空工業集團公司), a controlling shareholder of the Company holding 61.06% equity interest in the Company

“AVIC Automobile”
AVIC Automobile Industry Co., Ltd. (中國航空汽車工業總公司), a wholly-owned subsidiary of AVIC
“AVIC Organizing Unit” the organizing unit of AVIC, which was established by the State Council of the PRC for the purpose of the merger and reorganization of China Aviation Industry Corporation I and China Aviation Industry Corporation II and was replaced by AVIC on 6 November 2008
“Board”
the board of Directors of the Company
“CEA”
China Enterprise Appraisals Company, a qualified PRC valuer whose ultimate beneficial owner(s) are third parties independent of the Company and the connected parties of the Company

“Changhe Auto” Jiangxi Changhe Automobile Co., Ltd. (江西昌河汽車股份有限公司), a joint stock limited liability company whose shares are listed on the Shanghai Stock Exchange with 59.02% of its interest being held by the Company

— 1 —

DEFINITIONS

“Changhe Suzuki” Jiangxi Changhe Suzuki Automobile Co., Ltd. (江西昌河鈴木汽車有限責任公司), a joint venture with 41%, 10%, 25.1%, 20.9% and 3% of its equity interests being held by Changhe Auto, the Company, Suzuki Motor Corporation, Suzuki (China) Investment Co., Ltd. and OKAYA & Co., Ltd., respectively “Closing Time” 24 hours before the time appointed for holding the AGM, i.e. 9:00 a.m. on Monday, 8 June 2009 “Company” AviChina Industry & Technology Company Limited (中國航空科技工業股份有限公司) “Completion” completion of the transactions contemplated under the Share Transfer Agreements “Consideration” the consideration to be paid by AVIC Automobile to the Company for the Disposal pursuant to the Share Transfer Agreements “CSRC” China Securities Regulatory Commission (中國證券監督管理委員會) “Directors” the director(s) of the Company “Disposal” the disposal of 100% equity interest in Harbin Automobile Group and 10% equity interest in Changhe Suzuki by the Company to AVIC Automobile pursuant to the Share Transfer Agreements “Domestic Shares” ordinary shares in the share capital of the Company, with a nominal value of RMB1.00 each, which are subscribed for in RMB by PRC nationals and/or PRC incorporated entities “First Proxy Form” the proxy form sent together with the circular of the Company dated 27 April 2009 to the Shareholders “Group” the Company and its subsidiaries “H Shares” overseas listed foreign invested shares with a nominal value of RMB1.00 each in the ordinary share capital of the Company, which are traded on the Stock Exchange in HK dollars “Hafei Auto” Hafei Motor Co., Ltd. (哈飛汽車股份有限公司), a joint stock limited liability company with foreign investment which is held as to 74.81% by Harbin Automobile Group

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DEFINITIONS

“Harbin Automobile Group” Harbin Hafei Automobile Industry Group Co., Ltd. (哈爾濱哈飛汽車工業集團有限公司), a wholly-owned subsidiary of the Company “HK$” or “HK dollars” Hong Kong dollar, the lawful currency of Hong Kong “Hong Kong” Hong Kong Special Administrative Region, the PRC “Hongdu Aviation” Jiangxi Hongdu Aviation Industry Co., Ltd., a joint stock limited company whose shares are listed on the Shanghai Stock Exchange “Hongdu Group” Jiangxi Hongdu Aviation Industrial Group Corporation, a wholly-owned subsidiary of AVIC “Independent Board Committee” an independent board committee comprising independent non-executive Directors, namely, Mr. Guo Chongqing, Mr. Li Xianzong and Mr. Lau Chung Man, Louis “Independent Shareholders” shareholders of the Company who are not required to abstain from voting on the resolutions to be proposed at the AGM to approve the Share Transfer Agreements under the Listing Rules “Latest Practicable Date” 29 April 2009, 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 of Hong Kong Limited (as amended from time to time)

“Ministry of Commerce” Ministry of Commerce of the PRC “PRC” the People’s Republic of China

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC “SASAC” Stated-owned Assets Supervision and Administration Commission of the State Council of the PRC (中國國務院國有資產監督管理委員會) “SFO” Securities and Futures Ordinance (Cap 571) “Share Transfer Agreement I” the share transfer agreement entered into between the Company and AVIC Automobile on 16 April 2009, pursuant to which the Company conditionally agreed to sell and AVIC Automobile conditionally agreed to purchase from the Company 100% equity interest in Harbin Automobile Group

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DEFINITIONS

“Share Transfer Agreement II” the share transfer agreement entered into between the Company and AVIC Automobile on 16 April 2009, pursuant to which the Company conditionally agreed to sell and AVIC Automobile conditionally agreed to purchase from the Company 10% equity interest in Changhe Suzuki “Share Transfer Agreements” Share Transfer Agreement I and Share Transfer Agreement II “Shareholders” holders of Domestic Shares and holders of H Shares “Somerley” Somerley Limited, a corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO, is the independent financial adviser to the Independent Board Committee and the Independent Shareholders “Stock Exchange” The Stock Exchange of Hong Kong Limited “Valuation Date” 31 December 2008, being the base date on which the Company’s equity interests in Harbin Automobile Group and Changhe Suzuki were evaluated

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LETTER FROM THE BOARD

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中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2357)

Executive Directors:

Mr. Lin Zuoming Mr. Tan Ruisong Mr. Wu Xiandong

Non-executive Directors:

Mr. Gu Huizhong Mr. Xu Zhanbin Mr. Geng Ruguang Mr. Zhang Xinguo Mr. Li Fangyong Mr. Wang Yong Mr. Maurice Savart

Registered Office: 8th Floor, Tower 2 No. 5A Rongchang East Street Beijing Economic-Technological Development Area Beijing, PRC

Principal place of business in Hong Kong: Unit B, 15/F, United Centre Queensway 95, Hong Kong

Independent non-executive Directors:

Mr. Guo Chongqing Mr. Li Xianzong Mr. Lau Chung Man, Louis

6 May 2009

To the Shareholders:

Dear Sir or Madam,

MAJOR TRANSACTION AND CONNECTED TRANSACTIONS:

DISPOSAL OF EQUITY INTERESTS IN HARBIN AUTOMOBILE GROUP AND CHANGHE SUZUKI

INTRODUCTION

Reference is made to the announcement of the Company dated 16 April 2009.

* For identification purpose only.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with more information relating to, among other things, (1) further details of the transactions contemplated under the Share Transfer Agreements; (2) the letter from the Independent Board Committee; and (3) the recommendation from the independent financial adviser on the connected transactions which will be constituted by the transactions contemplated under the Share Transfer Agreements.

A. BACKGROUND

On 16 April 2009, the Company and AVIC Automobile entered into the Share Transfer Agreements. Pursuant to the Share Transfer Agreements, the Company conditionally agreed to sell and AVIC Automobile conditionally agreed to purchase from the Company 100% equity interest in Harbin Automobile Group and 10% equity interest in Changhe Suzuki for an aggregate Consideration of RMB 110.4 million, which shall be satisfied by AVIC Automobile in cash. Share Transfer Agreement I and Share Transfer Agreement II are not inter-conditional on each other.

B. SHARE TRANSFER AGREEMENTS

Share Transfer Agreement I

Date:

16 April 2009

2. Parties:

The Company (Vendor); and

AVIC Automobile (Purchaser)

3. 100% equity interest in Harbin Automobile Group to be disposed of:

The Company currently holds 100% equity interest in Harbin Automobile Group. Harbin Automobile Group has no other principal asset other than its 74.81% equity interest in Hafei Auto. The aggregate net liabilities value of Hafei Auto was RMB 672 million as at 31 December 2008.

4. Consideration:

Subject to the final figure endorsed by SASAC, the consideration for the sale of 100% equity interest in Harbin Automobile Group shall be RMB 1 million, which is determined with reference to the valuation conducted by CEA, an independent valuer, and after negotiations between the Company and AVIC Automobile. The consideration will be satisfied by AVIC Automobile in cash within 15 days after Share Transfer Agreement I is effective.

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LETTER FROM THE BOARD

5. Conditions Precedent:

Completion of the Share Transfer Agreement I is conditional upon, among other things, fulfillment of the following conditions:

(1) the Share Transfer Agreement I having been executed by the legal representatives or authorized person(s) of the parties;
(2) the Company having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association and fully complied with the requirements under the Listing Rules;
(3) AVIC Automobile having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association; and
(4) the Share Transfer Agreement I having fully complied with the requirements under the relevant PRC laws and regulations including, without limitation, obtaining the approval(s) by the relevant PRC authorities such as SASAC.
Completion:

Completion shall take place upon the above conditions having been fulfilled or waived and that the transfer of 100% equity interest in Harbin Automobile Group to AVIC Automobile has been registered with the relevant PRC authorities.

Share Transfer Agreement II

Date:

16 April 2009

Parties:

The Company (Vendor); and

AVIC Automobile (Purchaser)

10% equity interest in Changhe Suzuki to be disposed of:

The Company currently holds 10% equity interest in Changhe Suzuki. As at the date of 31 December 2008, the aggregate net asset value of Changhe Suzuki was RMB 1,069.56 million.

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LETTER FROM THE BOARD

4. Consideration:

The consideration for the sale of 10% equity interest in Changhe Suzuki shall be RMB 109.4 million, which is determined based on the net asset value of Changhe Suzuki evaluated by CEA using asset-based valuation method as at the Valuation Date, and must be subject to any adjustment upon the final valuation figure is confirmed by SASAC. The consideration will be satisfied by AVIC Automobile in cash within 15 days after Share Transfer Agreement II is effective.

5. Conditions Precedent:

Completion of the Share Transfer Agreement II is conditional upon, among other things, fulfillment of the following conditions:

(1) the Share Transfer Agreement II having been executed by the legal representatives or authorized person(s) of the parties;
(2) the Company having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association and fully complied with the requirements under the Listing Rules;
(3) AVIC Automobile having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association;
(4) Changhe Suzuki having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association; and
(5) the Share Transfer Agreement II having fully complied with the requirements under the relevant PRC laws and regulations including, without limitation, obtaining the approval(s) by the relevant PRC authorities such as SASAC and Ministry of Commerce.
Completion:

Completion shall take place upon the above conditions having been fulfilled or waived and that the transfer of 10% equity interest in Changhe Suzuki to AVIC Automobile has been registered with the relevant PRC authorities.

The Directors currently do not anticipate that there will be any material changes to the valuations of the equity interests to be disposed of under the Share Transfer Agreements, which are subject to confirmation by the relevant PRC government authorities such as SASAC. However, as the parties to the Share Transfer Agreements are owned by the State Council of the PRC, the Directors believe that the relevant PRC government authorities would require that pricing to the equity transfers as contemplated under the Share Transfer Agreements shall be at valuations, which are fair to both parties. On this basis, the Directors expect that the final consideration for the Share Transfer Agreement I to be confirmed by the relevant PRC government authorities would be in the range of zero to RMB 1 million.

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LETTER FROM THE BOARD

As far as the valuation reports in relation to each of Harbin Automobile Group and Changhe Suzuki are concerned, the Company applied to the Stock Exchange on 24 April 2009 for a waiver from the strict compliance with Rule 14A.59(6) of the Listing Rules for inclusion of the full valuation reports in the circular on the bases, among others, that the valuation reports are prepared by a qualified PRC valuer in Chinese language, it would be costly and overly burdensome for the Company to have the full valuation reports translated into English for inclusion in this circular, taking into account the two full valuation reports altogether have over 1,000 pages including the relevant appendices and attachments. The Stock Exchange considered the waiver application and granted a waiver from strict compliance with Rule 14A.59(6) of the Listing Rules to the Company on 29 April 2009 such that extracts of the valuation reports in respect of each of Harbin Automobile Group and Changhe Suzuki will be included in this circular on the conditions that (i) the full valuation reports in Chinese will be made available on the Stock Exchange’s website and proper reference to the Stock Exchange’s website will be included in this circular; and (ii) the full valuation reports in Chinese will also be made available for public inspection.

Extracts of the full valuation reports, which contain, among other things, key information such as a description of the valuation undertaken by an independent valuer, namely, CEA, the valuation methods adopted by CEA, summaries of the valuation results and professional qualification of CEA are set out in Appendix III to this circular. The Company is of the view that the information set out in the relevant extracts will provide the Shareholders with the key information relating to the valuation of Harbin Automobile Group and Changhe Suzuki. As the full valuation reports in Chinese will be made available on the Stock Exchange’s website and the Company’s website, and will also be made available for public inspection, the Company is of the view that notwithstanding the full valuation reports are not included in this circular, the Shareholders are still provided with sufficient information relating to the valuation of Harbin Automobile Group and Changhe Suzuki, which will enable them to assess the impact of the subject transactions and make informed decisions at the AGM. The Company also confirms that the information contained in this circular is accurate and complete in all material aspects, and is not misleading pursuant to Rule 2.13(2) of the Listing Rules.

C. INFORMATION RELATING TO THE DISPOSAL

The equity interests to be disposed of comprise (i) 100% equity interest in Harbin Automobile Group and (ii) 10% equity interest in Changhe Suzuki. As at the date of 31 December 2008, the net liabilities value of Hafei Auto, being the principal asset of Harbin Automobile Group, was RMB 672 million, and 10% of the net asset value of Changhe Suzuki is RMB 107 million.

The aggregate Consideration for the Disposal shall be RMB 110.4 million, which will be satisfied by AVIC Automobile in cash.

The valuations of the equity interests to be disposed of are subject to the confirmation of SASAC. Should there be any change to these figures, the Company will make an announcement accordingly to report such change.

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LETTER FROM THE BOARD

Information on Harbin Automobile Group

Harbin Automobile Group was incorporated in the PRC in 2006. As at the Latest Practicable Date, Harbin Automobile Group was wholly-owned by the Company, and was principally engaged in the development, manufacture and sales of Hafei, Lobo, Saima and Saibao series automobile. Harbin Automobile Group had no other principal asset other than its 74.81% equity interest in Hafei Auto.

According to the financial statements of Hafei Auto prepared by Zhongrui Yuehua China Certified Public Accountants, a qualified PRC auditor, based on the Generally Accepted Accounting Principles in the PRC, as at 31 December 2008, the total assets and net liabilities of Hafei Auto amounted to RMB 5,297 million and RMB 672 million, respectively. For the financial year ended 31 December 2008, the revenue and the net loss (before and after tax) of Hafei Auto amounted to RMB5,681 million and RMB 894 million, respectively.

Based on the valuation by CEA as at the Valuation Date, the net liabilities value of Harbin Automobile Group amounts to RMB 0.1352 million.

The loss before tax and extraordinary items and loss after tax and extraordinary items of Hafei Auto were RMB 798 million and RMB 798 million, respectively, as set out in the financial statements of Hafei Auto for the financial year ended 31 December 2007 prepared in accordance with the Generally Accepted Accounting Principles in the PRC. The loss before tax and extraordinary items and loss after tax and extraordinary items of Hafei Auto were RMB246 million and RMB246 million, respectively, as set out in the financial statements of Hafei Auto for the financial year ended 31 December 2006 prepared in accordance with the Generally Accepted Accounting Principles in the PRC.

Information on Changhe Suzuki

Changhe Suzuki is a joint venture established by the Company through its subsidiaries, namely, Changhe Auto and Suzuki Motor Corporation in the PRC in 1995. Except for the 41% equity interest to be transferred to AVIC pursuant to the Acquisition Agreement, as at the Latest Practicable Date, Changhe Suzuki was owned as to 10% by the Company. Changhe Suzuki was principally engaged in the manufacture and sales of Liana, Beidouxing and Landy series automobile.

According to the financial statements of Changhe Suzuki prepared by Zhongrui Yuehua China Certified Public Accountants, a qualified PRC auditor, based on the Generally Accepted Accounting Principles in the PRC, as at 31 December 2008, the total assets and net assets of Changhe Suzuki amounted to RMB 3,478.23 million and RMB 1,069.56 million, respectively. For the financial year ended 31 December 2008, the revenue and net loss (before and after tax) of Changhe Suzuki amounted to RMB 2,534 million and RMB 393 million, respectively.

Based on the valuation by CEA as at the Valuation Date, the net asset value of Changhe Suzuki amounts to RMB 1,094 million.

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LETTER FROM THE BOARD

The loss before tax and extraordinary items and loss after tax and extraordinary items of Changhe Suzuki were RMB 768 million and RMB 768 million, respectively, as set out in the financial statements of Changhe Suzuki for the financial year ended 31 December 2007 prepared in accordance with the Generally Accepted Accounting Principles in the PRC. The loss before tax and extraordinary items and loss after tax and extraordinary items of Changhe Suzuki were RMB392 million and RMB392 million, respectively, as set out in the financial statements of Changhe Suzuki for the financial year ended 31 December 2006 prepared in accordance with the Generally Accepted Accounting Principles in the PRC.

D. EFFECTS AND FINANCIAL IMPLICATIONS OF THE DISPOSAL

Upon Completion, Harbin Automobile Group will no longer be a subsidiary of the Company and the Company will no longer have any equity interest in Changhe Suzuki. Accordingly, the financial results of these entities will not be consolidated in the accounts of the Group. The Group’s assets and liabilities will both decrease as a result of de-consolidation of the financial results of Harbin Automobile Group and Changhe Suzuki. It is expected that the earnings of the Group would be enhanced as a result of de-consolidation of the results of Harbin Automobile Group and Changhe Suzuki, which are loss-making entities of the Group. The gain arising from the Disposal is expected to be approximately RMB 700 million, which represents the difference between the Consideration and the net assets value of the 100% equity interest in Harbin Automobile Group and the 10% equity interest in Changhe Suzuki, as set out in the financial statements of Harbin Automobile Group and Changhe Suzuki for the financial year ended 31 December 2008 prepared in accordance with the Generally Accepted Accounting Principles in the PRC. The Disposal gain will be accounted for as an addition to equity of the Group in the consolidated financial statements.

E. USE OF PROCEEDS

The sale proceeds from the Disposal will be applied as general working capital of the Company after Completion.

F. REASONS FOR AND BENEFITS OF THE DISPOSAL

Both Harbin Automobile Group and Changhe Suzuki are entire vehicle manufacturers. As affected by the unfavorable factors such as strong competition in the PRC automobile market and increase in the price of raw materials, Harbin Automobile Group and Changhe Suzuki have been suffering from severe losses, which adversely affected the annual results and the market performance of the Company. Upon Completion, the Company will focus on the aviation business. The Company will no longer hold any equity interest in Harbin Automobile Group and Changhe Suzuki and will no longer engage in entire vehicle business. The Directors consider that the Disposal contemplated under the Share Transfer Agreements can improve the financial situation of the Company and enhance its profit-making capability so as to increase the investment value of the Company. The Directors also consider that the Disposal will enable the Group to focus on its aviation business and thereby strengthen its market position in the PRC aviation industry. The Directors (excluding the independent non-executive Directors) are of the opinion that the terms of the Share Transfer Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

G. LISTING RULES IMPLICATIONS

The Disposal will constitute a major transaction of the Company pursuant to Chapter 14 of the Listing Rules. In addition, as AVIC is the controlling shareholder of the Company holding 61.06% equity interest in the Company and AVIC Automobile is a wholly-owned subsidiary of AVIC, pursuant to Chapter 14A of the Listing Rules, AVIC is a connected person of the Company and AVIC Automobile is an associate of AVIC, the Disposal will therefore constitute connected transactions of the Company, which will be subject to approval by the Independent Shareholders. As AVIC has material interest in the Disposal, AVIC and its associates, which together held 61.06% equity interest in the Company as at the Latest Practicable Date, will abstain from voting for the relevant resolutions at the general meeting of the Company.

H. GENERAL

Information on Parties

Information on the Company

The Company is mainly engaged in the research, development, manufacture and sales of vehicles and aviation products. The Company is held as to 61.06% by AVIC, being the controlling shareholder of the Company.

Information on AVIC

AVIC is held and controlled by the State Council of the PRC, and is mainly engaged in the development and manufacture of aviation products and non-aviation products such as automobile engine and parts and components. AVIC is the controlling shareholder of the Company holding 61.06% equity interest in the Company.

Information on AVIC Automobile

AVIC Automobile is a wholly-owned subsidiary of AVIC, and is mainly engaged in the development, manufacture and sales of automobile.

Information on Changhe Suzuki

Except for the 41% equity interest to be transferred to AVIC pursuant to the Acquisition Agreement, as at the Latest Practicable Date, Changhe Suzuki is owned as to 10% by the Company. Changhe Suzuki is principally engaged in the manufacture and sales of Liana, Beidouxing and Landy series automobile.

Information on Harbin Automobile Group

Harbin Automobile Group is a wholly-owned subsidiary of the Company, and is mainly engaged in the development, manufacture and sales of Hafei, Lobo, Saima and Saibao series automobile.

— 12 —

LETTER FROM THE BOARD

AGM

The supplemental notice of the AGM to be held at 9:00 a.m., on Tuesday, 9 June 2009, at Avic Hotel, No. 10 Yi, Central East Third Ring Road, Chaoyang District, Beijing, the People’s Republic of China is set out on pages 43 to 44 of this circular, at which two ordinary resolutions will be proposed to approve the terms and conditions of the Share Transfer Agreements, which include, among other matters, the Disposal for an aggregate consideration of RMB 110.4 million, which will be satisfied by AVIC Automobile in cash.

As AVIC Automobile is a wholly-owned subsidiary of AVIC and AVIC has material interest in the Disposal, AVIC and its associate(s), if any, are connected persons of the Company as defined under Chapter 14A of the Listing Rules and they will abstain from voting at the AGM in respect of the ordinary resolutions regarding the transactions contemplated under the Share Transfer Agreements in which they are respectively interested.

REVISED PROXY FORM

Since the First Proxy Form sent together with the circular of the Company dated 27 April 2009 to the Shareholders does not contain the proposed resolutions as set out in the supplemental notice of the AGM, a revised proxy form has been prepared and is enclosed with this circular.

You are requested to complete and return the revised proxy form in accordance with the instructions printed thereon to the registrar of the Company (with address shown on the cover page of this circular) as soon as possible and in any event before the Closing Time. Special arrangements about the completion and submission of the revised proxy form are also set out in the Appendix II to this circular. Shareholders who have appointed or intend to appoint proxies to attend the AGM are requested to pay particular attention to the special arrangements set out therein.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee which is set out on page 14 of this circular. The Directors and the Independent Board Committee, having taken into account the advice of Somerley, consider that the terms of the Share Transfer Agreements are fair and reasonable and the transactions contemplated under the Share Transfer Agreements are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors and the Independent Board Committee recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the AGM.

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

Yours faithfully, By Order of the Board Lin Zuoming Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2357)

6 May 2009

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular (the “Circular”) dated 6 May 2009 despatched to the Shareholders of which this letter forms a part. Unless the context requires otherwise, terms and expressions defined in the Circular shall have the same meanings in this letter.

We have been appointed to advise the Independent Shareholders on whether the terms of the Share Transfer Agreements are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Somerley has been appointed to advise the Independent Board Committee and Independent Shareholders in respect of the terms of the Share Transfer Agreements.

We wish to draw your attention to the letter from the Board set out on pages 5 to 13 of the Circular and the letter from Somerley set out on pages 15 to 27 of the Circular.

Having considered the advice given by Somerley, we are of the opinion that the Share Transfer Agreements are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned. We also consider the entering into of the Share Transfer Agreements is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the AGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

**AviChina Industry & Technology Company Limited* Guo Chongqing, Li Xianzong, Lau Chung Man, Louis** Independent Non-executive Directors

* For identification purpose only.

— 14 —

LETTER FROM SOMERLEY

SOMERLEY LIMITED 10th Floor The Hong Kong Club Building 3A Chater Road Central Hong Kong 6 May 2009

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

MAJOR AND CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the Share Transfer Agreements entered into between the Company and AVIC Automobile on 16 April 2009. Details of the Share Transfer Agreements are contained in the circular to the Shareholders dated 6 May 2009 (the “Circular”), of which this letter forms part. Unless the context otherwise requires, capitalized terms used in this letter shall have the same meanings as those defined in the Circular.

The Company is owned as to approximately 61.06% by AVIC, which is the holding company of AVIC Automobile. Therefore, the transactions as contemplated under the Share Transfer Agreements between the Company and AVIC Automobile will constitute connected transactions of the Company and be subject to approval by Independent Shareholders by way of poll pursuant to the Listing Rules.

The Independent Board Committee comprising all the three independent non-executive Directors, namely Mr. Guo Chongqing, Mr. Li Xianzong and Mr. Lau Chung Man, Louis, has been formed to advise the Independent Shareholders in respect of the terms of the Share Transfer Agreements. We, Somerley Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

In formulating our advice, we have relied on the information and facts supplied, and the opinions expressed, by the Directors and the management of the Group and have assumed that they are true, accurate and complete at the date of the Circular and will remain so up to the time of the AGM. 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 has 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

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and recommendation as set out in this letter and to justify our reliance on such information. However, we have not conducted any independent investigation into the business and affairs of the Group (including Harbin Automobile Group and Changhe Suzuki which are subject matters of the Share Transfer Agreements), AVIC Automobile and AVIC.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the terms of the Share Transfer Agreements are fair and reasonable in so far as the Independent Shareholders are concerned, we have taken into account the principal factors and reasons set out below:

1. Background to and reasons for entering into the Share Transfer Agreements

The Group is currently engaged in two industry segments, being the aviation and the automobile industries. As discussed in the section headed “Business and financial information of the Group” below, the aviation segment has consistently been contributing positively to the results of the Group; but, on the other hand, the automobile segment is still incurring losses.

Set out below is the current shareholding structure of the Company’s automobile segment:

==> picture [407 x 181] intentionally omitted <==

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

The Company
(Note 2)
100% 58.77% 59.02%
Dongan Motor Changhe Auto
Harbin Auto Group
(Note 3) (Note 3 and 4)
74.81% 36% 100% 41% 10%
Harbin Dongan
Hefei Changhe
Hafei Auto Automotive Engine Changhe Suzuki
Automobile Co., Ltd.
Manufacturing Co., Ltd.
----- End of picture text -----

Note:

(1) For the purpose of this letter, the aviation segment of the Group was not shown in the above group chart.
(2) Shares of the Company are listed on the Stock Exchange.
(3) Shares of Dongan Motor and Changhe Auto are listed on Shanghai Stock Exchange.
(4) The operating assets of Changhe Auto, including its 41% equity interest in Changhe Suzuki, would be transferred to AVIC pursuant to the Asset Swap (which would be further discussed below).

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(5) The financial results and assets and liabilities of the above companies are all consolidated into the accounts of the Company, except for Changhe Suzuki which is proportionately consolidated into the accounts of the Group based on the Group’s 51% interest in Changhe Suzuki (comprising 41% equity interest held through Changhe Auto and 10% equity interest held directly by the Company).

As a result of strong competition in the PRC automobile market and the increase in raw material costs, the automobile segment of the Group has suffered severe losses since 2006, which in turn adversely affected the overall performance and financial results of the Group. The Company has been taking steps to reduce its involvement in the automobile segment and to focus on its aviation segment. In December 2008, the Company obtained approval from its independent shareholders of a transaction which involves swapping its automobile assets held through Changhe Auto, a subsidiary of the Company and shares of which are listed on the Shanghai Stock Exchange, for aviation assets held by companies controlled by AVIC (the “Asset Swap”). Details of the Asset Swap are contained in the Company’s circular to Shareholders dated 3 November 2008. The Asset Swap is expected to be completed within this year.

To further implement its above stated strategy, the Company has on 16 April 2009 entered into Share Transfer Agreement I and Share Transfer Agreement II with AVIC Automobile, whereby:

(i) Share Transfer Agreement I

the Group agreed to sell to AVIC Automobile its entire equity interest in Harbin Automobile Group at a consideration of RMB1 million in cash and;

(ii) Share Transfer Agreement II

the Group agreed to sell to AVIC Automobile its remaining 10% equity interest in Changhe Suzuki at a consideration of RMB109.4 million in cash. Apart from the 10% equity interest which is the subject matter of the Share Transfer Agreement II, the Group also holds a 41% equity interest in Changhe Suzuki which would be transferred to AVIC pursuant to the Asset Swap.

Harbin Automobile Group and Changhe Suzuki are both engaged in vehicle manufacturing business. The business and financial information of the above companies will be discussed in the sections headed “Business and financial information of Harbin Automobile Group” and “Business and financial information of Changhe Suzuki” below.

Following completion of the Asset Swap and the Share Transfer Agreements, the Group would no longer be engaged in vehicle manufacturing business. The Group would, however, continue to be engaged in development and production of vehicle engines and parts and components through Harbin Dongan Auto Engine Co., Ltd. (“Dongan Motor”), which is a non-wholly owned subsidiary of the Company and its shares are listed on the Shanghai Stock Exchange.

The Disposal as contemplated under the Share Transfer Agreements is in line within the Group’s stated strategy of focusing on the aviation business. Since Harbin Automobile Group and Changhe Suzuki are suffering losses, the Director consider that the Disposal contemplated under the Share Transfer Agreements can improve the financial situation of the Company and enhance its profit-making capability, thereby increasing the investment value of the Company. This is, in our view, in the interest of the Company.

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2. Principal terms of the Share Transfer Agreements

(i) Subject matters and Consideration

Pursuant to the Share Transfer Agreements, the Company would dispose of a 100% equity interest in Harbin Automobile Group and a 10% equity interest in Changhe Suzuki to AVIC Automobile. The consideration for the sale of 100% equity interest in Harbin Automobile Group and the 10% equity interest in Changhe Suzuki is RMB1 million and RMB109.4 million respectively, which are determined with reference to the valuations of Harbin Automobile Group and Changhe Suzuki (the “Valuations”) as at 31 December 2008 prepared by CEA, an independent valuer, and after negotiations between the Company and AVIC Automobile. CEA is a licensed PRC valuer whose ultimate beneficial owners are third parties independent of the Company and its connected parties.

The PRC rules require that the pricing of transfer of state assets must be determined with reference to valuations and is subject to the confirmation of, among others, SASAC. The Directors do not currently anticipate any material changes to the Valuations as confirmed by, among others, SASAC. However, since both parties to the Share Transfer Agreements are either wholly or majority owned by the State Council of the PRC, the Directors believe the relevant PRC authorities would require that pricing to the asset transfers as contemplated under the above agreements shall be at valuations, which is fair to both of them. On this basis, the Directors expect that the final consideration for the Share Transfer Agreement I to be confirmed by, among others, SASAC would be in the range of zero to RMB1 million. We have therefore presented our analysis throughout this letter on the basis that the there would be no adjustments to the Valuations as confirmed by, among others, SASAC; and the consideration for the Share Transfer Agreement I is in the range of zero to RMB1 million.

The Consideration will be satisfied by AVIC Automobile in cash within 15 days after the Share Transfer Agreements becoming effective.

The Share Transfer Agreement I and Share Transfer Agreement II are not inter-conditional on each other.

(ii) Conditions precedent

Completion of the Share Transfer Agreements is conditional upon, among other things, fulfilment of the following conditions:

the Share Transfer Agreement I or Share Transfer Agreement II (as the case may be) having been executed by the legal representatives or authorized person(s) of the parties;
the Company having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association and fully complied with the requirements under the Listing Rules;

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AVIC Automobile having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association;
in the case of Share Transfer Agreement II, Changhe Suzuki having completed and satisfied all the necessary corporate procedures in accordance with the requirements of its articles of association; and
the Share Transfer Agreements having fully complied with the requirements under the relevant PRC laws and regulations including, without limitation, obtaining the approval(s) by the relevant PRC authorities such as SASAC and/or Ministry of Commerce.

3. Business and financial information of the Group

The Company is a joint stock limited company incorporated in the PRC whose shares have been listing on the Stock Exchange since 2003. The Company is principally engaged in the development, manufacture and sale of aviation and automobile products and related components, with most of its turnovers coming from the PRC market. AVIC currently has an approximately 61.06% equity interest in the Company.

Set out below is the condensed segment information of the Group for each of the three years ended 31 December 2008 as extracted from the Group’s 2007 and 2008 annual reports:

	Aviation	Automobiles	Total
	RMB’000	RMB’000	RMB’000
For the year ended 31December 2008
(audited)
Turnover	4,596,140	11,788,744	16,384,884
Segment results	248,542	(633,359)	(384,817)
Segment assets	8,809,718	12,266,867	21,076,585
Interests in associates	302,750	27,219	329,969
Segment liabilities	(6,239,889)	(10,099,320)	(16,339,209)
Capital expenditures	177,278	868,458	1,045,736
Depreciation	104,042	1,173,456	1,277,498
Provision/(reversal of provision) for
impairments	23,989	(6,370)	17,619

Note: The Group recorded a loss for the year amounting to approximately RMB910 million for the year ended 31 December 2008. Net assets of the Group as at 31 December 2008 was approximately RMB5,574 million.

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	Aviation	Automobiles	Total
	RMB’000	RMB’000	RMB’000
For the year ended 31 December 2007
(audited)
Turnover	5,327,408	11,213,237	16,540,645
Segment results	306,241	(852,840)	(546,599)
Segment assets	8,855,603	12,812,702	21,668,305
Interests in associates	240,552	57,369	297,921
Segment liabilities	(5,968,467)	(9,499,652)	(15,468,119)
Capital expenditures	217,461	702,851	920,312
Depreciation	89,145	936,147	1,025,292
Provision for impairments	24,549	359,772	384,321

Note: The Group recorded a loss for the year amounting to approximately RMB848 million for the year ended 31 December 2007. Net assets of the Group as at 31 December 2007 was approximately RMB6,658 million.

For the year ended 31 December 2006
(audited)
Turnover	4,427,598	12,682,910	17,110,508
Segment results	375,063	(650,755)	(275,692)
Segment assets	7,720,276	15,976,945	23,697,221
Interests in associates	192,339	55,628	247,967
Segment liabilities	(5,119,222)	(11,051,521)	(16,170,743)
Capital expenditures	157,655	1,045,909	1,203,564
Depreciation	70,266	857,847	928,113
Provision for impairments	30,248	75,706	105,954

Note: The Group recorded a loss for the year amounting to approximately RMB487 million for the year ended 31 December 2006. Net assets of the Group as at 31 December 2006 was approximately RMB8,122 million.

As shown in the condensed segment analysis above, although sales contributed by the automobile segment represent a majority of the total sales of the Group, the automobile segment made losses for the three years ended 31 December 2008. On the other hand, the aviation segment was able to make a positive contribution to the results of the Group during the same period. For the years ended 31 December 2006, 2007 and 2008, the losses of the automobile segment amounted to approximately RMB651 million, RMB853 million and RMB633 million respectively. These results were significantly affected by the results of Harbin Automobile Group.

Shareholders may note from the above table that the requirement for capital expenditures, the charge for depreciation and the provisions for impairment related to the automobile segment are in general significantly higher than that for the aviation segment.

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4. Business and financial information of Harbin Automobile Group

Harbin Automobile Group is wholly owned by the Company. Harbin Automobile Group has no principal asset other than its 74.81% equity interest in Hafei Auto. Hafei Auto is principally engaged in the manufacture and sale of “Hafei”, “Lobo”, “Saima” and “Saibao” series automobiles.

For the years ended 31 December 2006, 2007 and 2008, Harbin Automobile Group recorded turnover of approximately RMB6,595 million, RMB5,732 million and RMB5,681 million respectively. Loss after tax amounted to approximately RMB246 million, RMB798 million and RMB894 million respectively for the years ended 31 December 2006, 2007 and 2008.

Harbin Automobile Group suffered three consecutive years of operating losses from 2006 to 2008, as a result of fierce competition in the PRC automobile market, which led to price competition and hence reduced revenue and profitability. At the same time, increase in costs of raw materials in recent years has further pushed up the direct cost of manufacturing. The combination of the above two factors significantly affected the operating results of Harbin Automobile Group. Accordingly, loss after tax also increased from approximately RMB246 million in 2006 to approximately RMB798 million in 2007, and further increased to approximately RMB894 million in 2008.

Non-current assets of Harbin Automobile Group amounted to approximately RMB3,200 million and included primarily fixed assets (mainly plant and equipments for manufacturing of automobiles and parts) with carrying value of approximately RMB2,900 million as at 31 December 2008. Current assets as at 31 December 2008 totalled approximately RMB2,083 million and comprised principally cash balances of approximately RMB339 million, accounts receivable of approximately RMB520 million and inventories of approximately RMB976 million. Non-current liabilities of Harbin Automobile totalled approximately RMB48 million as at 31 December 2008 and included primarily long-term borrowings of approximately RMB45 million. Current liabilities of Harbin Automobile Group amounted to approximately RMB5,906 million and included mainly accounts payable of approximately RMB2,435 million and borrowings (short-term borrowings and current portion of long-term borrowings) of approximately RMB2,303 million as at 31 December 2008. As at 31 December 2008, Harbin Automobile Group had net current liabilities of approximately RMB3,824 million and net liabilities of approximately RMB672 million.

As at 31 December 2006, Harbin Automobile Group still had positive net assets, which decreased from approximately RMB1,040 million to approximately RMB223 million as at 31 December 2007, and further worsened to a net liability position of approximately RMB672 million as at 31 December 2008. This was mainly attributable to the continuing net losses having been suffered by Harbin Automobile Group and Hafei Auto from 2006 to 2008.

For the years ended 31 December 2006, 2007 and 2008, Harbin Automobile Group recorded net cash (used in)/generated from operating activities of approximately RMB(18) million, RMB323 million and RMB9 million respectively. Harbin Automobile Group recorded net cash generated from/(used in) investing activities of approximately RMB117 million, RMB(201) million and RMB(104) million respectively for the years ended 31 December 2006, 2007 and 2008. Net cash generated from/(used in) financing activities of Harbin Automobile Group amounted to approximately RMB464 million, RMB(279) million and RMB34 million respectively for the years ended 31

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December 2006, 2007 and 2008. Taking into account the above and the exchange adjustments, net increase/(decrease) in cash and cash equivalents of Harbin Automobile Group amounted to approximately RMB557 million, RMB(160) million and RMB(60) million respectively for the years ended 31 December 2006, 2007 and 2008.

Positive cash flows generated from operating activities by Harbin Automobile Group have been decreasing from 2007 to 2008. There were cash outflows as a result of investment in fixed assets. As a result, Harbin Automobile Group recorded net decreases in cash and cash equivalents during the period.

5. Business and financial information of Changhe Suzuki

Changhe Suzuki is owned as to 41.0% by Changhe Auto (which would be transferred to AVIC pursuant to the Asset Swap), 10.0% by the Company (which is the subject matter of the Share Transfer Agreement II), 25.1% by Suzuki Motor Corporation, 20.9% by Suzuki (China) Investment Co., Ltd. and 3.0% by Okaya & Co., Ltd. Changhe Suzuki is principally engaged in the manufacture and sales of “Liana”, “Beidouxing” and “Landy” series automobiles.

For the years ended 31 December 2006, 2007 and 2008, Changhe Suzuki recorded turnover of approximately RMB2,539 million, RMB2,615 million and RMB2,534 million respectively. Loss after tax amounted to approximately RMB392 million, RMB768 million and RMB393 million respectively for the years ended 31 December 2006, 2007 and 2008.

Turnovers for the financial years under review were maintained at approximately the same level. This was due to the fact that Changhe Suzuki had launched a number of new vehicle models to the market and had enhanced its marketing effort, which helped maintaining its sales level during the period.

Even though the turnovers of Changhe Suzuki were maintained at approximately the same level, Changhe Suzuki suffered three consecutive years of losses from 2006 to 2008, primarily as a result of increase in raw material costs, which pushed up the direct cost of manufacturing. In particular, Changhe Suzuki recorded a relatively higher loss after tax of approximately RMB768 million in 2007, compared to that recorded for 2006 of approximately RMB392 million. This was attributable to the launch of “Liana” and other branded vehicles in the end of 2006, which required a significant purchase of imported materials at relatively higher costs during its start-up stage. In 2008, as the production of “Liana” branded vehicles became mature and more parts and components were purchased locally, the cost of material decreased and therefore the loss after tax narrowed to approximately RMB393 million in 2008.

Non-current assets of Changhe Suzuki amounted to approximately RMB2,082 million and included mainly fixed assets (mainly plant and equipments for development and manufacturing of automobiles and parts) with carrying value of approximately RMB1,984 million as at 31 December 2008. Current assets as at 31 December 2008 totalled approximately RMB1,396 million and comprised principally accounts receivable of approximately RMB347 million, cash balances of approximately RMB94 million and inventories of approximately RMB733 million. Current liabilities of Changhe

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Suzuki amounted to approximately RMB2,409 million and included mainly accounts payable of approximately RMB1,490 million and short-term borrowings of RMB815 million as at 31 December 2008. As at 31 December 2008, Changhe Auto had net current liabilities of approximately RMB1,012 million and net assets of approximately RMB1,070 million.

Net assets of Changhe Suzuki decreased from approximately RMB1,867 million as at 31 December 2006 to approximately RMB1,462 million as at 31 December 2007, and further down to approximately RMB1,070 million as at 31 December 2008. This was mainly attributable to the continuing net losses having been suffered by Changhe Suzuki from 2006 to 2008.

For the years ended 31 December 2006, 2007 and 2008, Changhe Suzuki recorded net cash generated from/(used in) operating activities of approximately RMB72 million, RMB(285) million and RMB153 million respectively. Changhe Suzuki recorded net cash used in investing activities of approximately RMB519 million, RMB181 million and RMB57 million respectively for the years ended 31 December 2006, 2007 and 2008. Net cash generated from/(used in) financing activities of Changhe Suzuki amounted to approximately RMB432 million, RMB317 million and RMB(137) million respectively for the years ended 31 December 2006, 2007 and 2008. Taking into account the above and the exchange adjustments, net decrease in cash and cash equivalents of Changhe Suzuki amounted to approximately RMB17 million, RMB151 million and RMB40 million respectively for the years ended 31 December 2006, 2007 and 2008.

Even though Changhe Suzuki generated positive cash flows from operating activities (except in 2007), Changhe Suzuki’s cash position was decreasing for the years ended 31 December 2006, 2007 and 2008. This was due to the cash outflow from investing activities in 2006 and 2007, which principally arose from investment in fixed assets, and cash outflow from financing activities in 2008 which principally represented repayment of borrowings.

6. Evaluation of the Consideration

Since Harbin Automobile Group and Changhe Suzuki have made losses for the three years ended 31 December 2008, we do not consider an analysis on the price to earnings ratio practicable. In the circumstances, we agree with the Directors that fixing the Consideration for the disposal of Harbin Automobile Group and Changhe Suzuki by reference to their appraised net asset values is an appropriate basis.

Harbin Automobile Group and Changhe Suzuki have been valued by CEA, a licensed PRC valuer and an independent third party. An extract of the valuation reports are contained in Appendix III of the Circular. As referred to in paragraph 12 of Appendix II to the Circular (of which our letter of advice forms part), the full report is available for inspection at the Company’s principal place of business in Hong Kong, the Company’s website and the Stock Exchange’s website.

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Valuation of Harbin Auto Group

As mentioned above, Harbin Automobile Group has no principal asset other than its 74.81% equity interest in Hafei Auto. CEA valued Hafei Auto and its subsidiaries as having a negative value of approximately RMB189.27 million as at 31 December 2008. However, as Hafei Auto is itself a limited liability company, Harbin Automobile Group as its shareholder is not liable to contribute further funding to satisfy all outstanding liabilities of Hafei Auto.

CEA valued the other assets and liabilities of the Harbin Automobile Group as having a negative value of approximately RMB135,200 as at 31 December 2008.

The following table sets out the analysis of the valuation and audited net asset value of Harbin Automobile Group as at 31 December 2008:

		Audited	Audited
	Valuation of net	company level	consolidated
	liabilities by CEA	net book value	net book value
	as at 31 December	as at 31 December	as at 31 December
	2008	2008	2008
	(RMB million)	(RMB million)	(RMB million)
Harbin Automobile Group	(0.14)	(0.14)	(671.67)
Hafei Auto and its subsidiaries	(189.27)	(672.92)	(671.54)

Note: The financial statements of Harbin Automobile Group and Hafei Auto were audited by Zhongrui Yuehua China Certified Public Accountants, a qualified PRC auditor, based on the Generally Accepted Accounting Principles in the PRC.

CEA valued the other assets and liabilities of Harbin Automobile Group at approximately RMB(0.14) million as at 31 December 2008, which was the same as its then audited net liabilities.

As for Hafei Auto, CEA valued the assets and liabilities of Hafei Auto as having a negative value of approximately RMB190 million as at 31 December 2008, which exceeded their then audited net book values by approximately RMB480 million. This difference was mainly attributable to the following:

Land use rights currently included in Hafei Auto are booked at historical costs less amortization over the land lease terms, while they are included at market values, which are much higher than the net book values, in the valuation report prepared by CEA; and
Valuation of manufacturing plants are based on current costs of construction which has taken into account the inflation factor, while the book values of the manufacturing plants are carried at historical costs less depreciation over their useful lives in the accounts;

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Valuation of Changhe Suzuki

According to the financial statements of Changhe Suzuki, the net book value of Changhe Suzuki amounted to approximately RMB1,069.56 million as at 31 December 2008, and its then valuation as assessed by CEA was approximately RMB1,093.57 million. The consideration for 10% equity interest in Changhe Suzuki of RMB109.4 million equals to approximately 10% of the above valuation.

The following table sets out the valuation and audited net asset value of Changhe Suzuki as at 31 December 2008:

Audited Valuation of net company level assets by CEA net book value as at 31 December as at 31 December 2008 2008 (RMB million) (RMB million) Changhe Suzuki 1,093.57 1,069.56

Note:

(1) Changhe Suzuki did not hold any investment in subsidiary as at 31 December 2008. As such, there is no consolidated balance sheet prepared for Changhe Suzuki as at 31 December 2008.
(2) The financial statements of Changhe Suzuki were audited by Zhongrui Yuehua China Certified Public Accountants, a qualified PRC auditor, based on the Generally Accepted Accounting Principles in the PRC.

CEA valued the net assets of Changhe Suzuki at approximately RMB1,093.57 million as at 31 December 2008, as compared to their then audited net book value of approximately RMB1,069.56 million. The increase in amount is mainly attributable to the valuation of manufacturing plants that are based on current costs of construction (i.e. having taken into account of the inflation factor), while the book values of the manufacturing plants are carried at historical costs less depreciation over their useful lives in the accounts. The book value of land use rights held by Changhe Suzuki amounted to approximately RMB12.6 million as at 31 December 2008, which is much lower than the book value of land use rights held by Harbin Automobile Group of approximately RMB159.8 million as at 31 December 2008. As such, the valuation adjustment to the land use rights held by Changhe Suzuki was insignificant when compared with Harbin Automobile Group.

According to CEA, Harbin Automobile Group and Changhe Suzuki were principally valued using asset-based valuation method, which refers to the cost of replacement based on comparable material and quality at current market prices. CEA has also performed work to verify the existence and amount of the assets and liabilities attributable to Harbin Automobile Group and Changhe Suzuki. We have reviewed and discussed with CEA the basis and assumptions adopted for the valuations of Harbin

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Automobile Group and Changhe Suzuki. We consider that the assumptions adopted by CEA are fair and reasonable and the basis used is a normal one for valuing assets and liabilities. We have also performed work as required under note (1)(d) to the Listing Rule 13.80 in relation to CEA and its work as regards the valuations of Harbin Automobile Group and Changhe Suzuki.

Taking into account of the above, we consider it fair and reasonable for the Company to price the disposal of Changhe Suzuki and Harbin Automobile Group on the basis of their appraised net asset values.

7. Financial effects on the Group

As discussed in above section headed “Background to and reasons for entering into the Share Transfer Agreements”, the financial results and assets and liabilities of Harbin Automobile Group is currently consolidated into the accounts of the Group, while 51% of the financial results and assets and liabilities of Changhe Suzuki (being owned as to 41.0% by Changhe Auto, which would be transferred to AVIC pursuant to the Asset Swap; and 10.0% by the Company, which is the subject matter of the Share Transfer Agreement II) are currently proportionately consolidated into the accounts of the Group. We have prepared the following analyses assuming that the Asset Swap and the Disposal would be completed simultaneously.

(i) Earnings and net asset value

Following Completion, Harbin Automobile Group and Hafei Auto will no longer be subsidiaries of the Company and the Company will no longer have any equity interest in Changhe Suzuki. Accordingly, the financial results of these entities will not be included in the accounts of the Group and it is expected that there will be a substantial decrease in turnover of the Group following the Completion. However, earnings would be enhanced as a result of the exclusion of results of the loss-making entities of the Group.

Completion of the Share Transfer Agreements is expected to result in gains and the sum would be calculated by subtracting the net cash to be received from the respective disposal pursuant to the Share Transfer Agreement I and Share Transfer Agreement II from the related companies’ carrying values in the Group’s accounts. As at 31 December 2008, Harbin Automobile Group had consolidated net liabilities of approximately RMB672 million, as compared to a gross sales proceed of zero to RMB1 million to be received pursuant to the Share Transfer Agreement I. The net book value of the 10% equity interest in Changhe Suzuki was approximately RMB107 million, as compared to a gross sales proceed of RMB109.4 million. Assuming both the Share Transfer Agreement I and Share Transfer Agreement II are completed, the gain accrued to the Group arising from the Disposal is expected to be approximately RMB700 million. Since the counterparty to the Disposal is the controlling shareholder of the Company, the gain from the Disposal pursuant to each of the Share Transfer Agreement I and Share Transfer Agreement II will not be included in the profit and loss account, but would be credited to capital reserve account in the consolidated financial statements of the Group upon Completion. The consolidated net asset value of the Group is expected to be increased by the same amounts of the gain(s) on Disposal resulting from completion of the Share Transfer Agreement I and/or Share Transfer Agreement II.

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The exact amount of the gain on Disposal and the increase in net asset value to the Group would be calculated on the basis of the relevant figures as at the date of Completion, and therefore would be different from the above estimated amount of approximately RMB700 million.

(ii) Gearing ratio

Following Completion, as there is an expected increase in net asset value of the Group (as discussed in previous sub-section headed “Earnings and net asset value”), and a decrease in net debt of the Group because the amounts of net debts in Harbin Automobile Group and Changhe Suzuki would no longer be included into the accounts of the Group, gearing ratio (as calculated by dividing net debt by total equity) of the Group is expected to decrease.

(iii) Working capital

The Consideration for the disposal of Harbin Automobile Group and Changhe Suzuki under the Share Transfer Agreement I and Share Transfer Agreement II would be satisfied by cash, which is expected to be zero to RMB1 million and RMB109.4 million respectively. On the other hand, the consolidated cash balances of Harbin Auto Group and Changhe Suzuki, which amounted to approximately RMB338.9 million RMB93.9 million (or approximately RMB9.4 million attributable to a 10% equity interest) respectively as at 31 December 2008, would be excluded from the Group’s accounts upon Completion. However, this would not bring any material impact on the working capital position of the Group post-Completion as the cash balances of Harbin Automobile Group and Changhe Suzuki had in the past been used by the entities themselves.

RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that the Share Transfer Agreements are on normal commercial terms which are fair and reasonable so far as the Independent Shareholders are concerned. We also consider the entering into of the Share Transfer Agreements is in the interests of the Company and its Shareholders as a whole. We therefore advise the Independent Board Committee to recommend, and ourselves recommend, the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the AGM to approve, among others, the entering into of the Share Transfer Agreements.

Yours faithfully, for and on behalf of

SOMERLEY LIMITED Sylvia Leung Director

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The PRC aviation manufacturing industry is encountering historical opportunity, the market demand is extremely broad. According to the overseas forecast for the PRC aerial transportation in the next 20 years, the total volume of the PRC aerial transportation will achieve an increase of above 7% per year, which will be the world’s biggest aviation market apart from the United States. The Board is of the view that, through the transactions contemplated under the Share Transfer Agreements, the Group will be able to dispose of its loss-making entire vehicle business, which will substantially improve the financial situation of the Group. In the future, the Group will focus on the aviation business, and will, with the support by the controlling shareholder through its strong capability in the aviation industry, endeavor to become a flagship company in the PRC civil aviation products manufacturing industry.

2. INDEBTEDNESS STATEMENT OF THE GROUP

Borrowings

As at 31 March 2009, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding borrowings of approximately RMB 6,619 million, comprising secured borrowings of approximately RMB5,289 million, and unsecured borrowings of approximately RMB1,330 million. Among the secured borrowings, borrowings of approximately RMB2,291 million was guaranteed by related parties, and RMB2,697 million was cross-guaranteed amongst the subsidiaries of the Group.

Contingent liabilities

As at 31 March 2009, the Group had no significant contingent liabilities.

Pledge of assets

As at 31 March 2009, the Group’s secured borrowings pledged by assets amounted to approximately RMB301 million. These borrowings were secured by property, plant and equipment and certificate of deposits with an aggregate book value of approximately RMB598 million.

Save as aforesaid and apart from intra-group liabilities and normal accounts payable in the ordinary course of business of the Group, the Group did not have any outstanding indebtedness in respect of any mortgages, charges or debentures, loan capital, bank loans and overdrafts, loans, debt securities or other similar indebtedness, or hire purchase commitments, finance lease commitments, guarantees or other material contingent liabilities as at the close of business on 31 March 2009.

The Directors have confirmed that there has not been any material change in the indebtedness or the contingent liabilities of the Group since 31 March 2009.

— 28 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that after taking into account available banking facilities and internal resources of the Group, the Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular, in the absence of any unforeseen circumstances.

— 29 —

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. 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 contained herein misleading.

2. (a) THE INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE IN THE SECURITIES OF THE COMPANY

As at the Latest Practicable Date, none of the Directors, supervisors and chief executive of the Company has any interests and short positions in the Shares, underlying Shares and debentures of the Company (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 they were taken or deemed 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 kept by the Company, or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules to be notified to the Company and the Stock Exchange.

(b) THE INTERESTS OF DIRECTORS, SUPERVISORS AND CHIEF EXECUTIVE IN THE SECURITIES OF THE COMPANY’S ASSOCIATED CORPORATIONS

As at the Latest Practicable Date, none of the Directors, supervisors and chief executive of the Company has any interests and short positions in the Shares, underlying Shares and debentures of any associated corporations of the Company (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 they were taken or deemed 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 kept by the Company, or which were required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies of the Listing Rules to be notified to the Company and the Stock Exchange.

— 30 —

GENERAL INFORMATION

APPENDIX II

3. THE INTERESTS OF SUBSTANTIAL SHAREHOLDERS IN THE SECURITIES OF THE COMPANY

As at the Latest Practicable Date, so far as is known to any Directors, chief executive or supervisors of the Company, the following persons (not being a Director, chief executive or a supervisor of the Company) had interests or short positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of the Divisions 2 and 3 of Part XV of the SFO, or, who 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 any other member of the Group.

				Approximate	Approximate	Approximate
				percentage of		percentage of
				shareholdings		shareholdings
				to the same		to share	Nature of
Name of	Class of		Number of		class of	capital in	shares
Shareholders	shares	Capacity	shares		shares	issue	held
AVIC	Domestic	Beneficial owner	2,835,305,636		95.66%	61.06%	Long
	shares						position
European Aeronautic	H Shares	Interests of a party	232,180,425		13.82%	5%	Long
Defence and		to an agreement to					position
Space Company		acquire interests in
— EADS N.V.		a listed corporation
		under s.317(1)(a)
		and s.318
The Hamon	H Shares	Investment	164,278,000		9.78%	3.54%	Long
Investment Group		manager	(Note)				position
Pte Limited
The Dreyfus	H Shares	Investment	105,226,000		6.26%	2.27%	Long
Corporation		Manager					position

Note: These shares are held directly by various controlled corporations of The Hamon Investment Group Pte Limited, of which 35,572,000 shares were held by Hamon Asset Management Limited, 101,690,000 shares were held by Hamon U.S. Investment Advisors Limited and 27,016,000 shares were held by Hamon Investment Management Limited.

Save as disclosed above, as at the Latest Practicable Date, the Company had not been notified of any interests and short positions in 5% or more than 5% of shares and underlying shares of the Company which had been recorded in the register kept by the Company under section 336 of the SFO.

4. 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 will not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

— 31 —

GENERAL INFORMATION

APPENDIX II

5. DIRECTORS’ INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2008, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group which was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

6. CONSENT AND QUALIFICATION OF EXPERTS

The following are the qualifications of the professional advisers who have given the Company an opinion or provided advice referred to or contained in this circular:

Name Qualifications CEA A qualified PRC valuer licensed to undertake assets appraisal business by the Ministry of Finance of the PRC and CSRC Somerley A corporation licensed to carry out type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO.

As at the Latest Practicable Date, each of CEA and Somerley did not have shareholding interest in any member of the Group or any right to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of CEA and Somerley did not have any direct or indirect interest in any assets which has been, since 31 December 2008, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Group.

Each of CEA and Somerley has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter, report and references to its name included in this circular in the form and context in which it is included.

— 32 —

GENERAL INFORMATION

APPENDIX II

7. MATERIAL CONTRACTS

The particulars of material contracts (not being contracts entered into in the ordinary course of business) entered into by the member of the Group within the two years immediately preceding the issue of this circular are set out as follows:

(a) The joint venture agreement entered into between the Company and China Aviation Industry Corporation II and its associates and other non-connected persons on 19 October 2007 regarding the establishment of a joint venture to invest in the manufacture and sale of wind power generation equipment in China. Pursuant to the joint venture agreement, the Company agrees to contribute RMB 30 million cash to the registered capital of the joint venture for a 20% equity interest in the joint venture. Details of the agreement are set out in the announcement of the Company dated 22 October 2007.
(b) The agreement entered into between Hongdu Aviation and Hongdu Group on 24 September 2007 regarding the acquisition of Hongdu Group’s property rights in the Science Building by Hongdu Aviation from Hongdu Group for a cash consideration of RMB 10,618,600. Details of the agreement are set out in the announcement of the Company dated 27 September 2007.
(c) The subscription agreement entered into between the Company and Hongdu Aviation on 29 December 2007, as amended by the supplemental agreement on 22 February 2008, whereby the Company undertakes to subscribe, subject to conditions and adjustment, for approximately 9,842,520 new Hongdu Shares for a total consideration of approximately RMB 250 million. Details of the subscription agreement and the supplemental agreement are set out in the announcements of the Company dated 9 January 2008 and 22 February 2008, respectively.
(d) The subscription agreement entered into between Hongdu Group and Hongdu Aviation on 29 December 2007, as amended by the supplemental agreement on 22 February 2008, whereby Hongdu Group undertakes to subscribe, subject to conditions and adjustment, for approximately 13,779,527 new Hongdu Shares for a total consideration of approximately RMB 350 million. Details of the subscription agreement and the supplemental agreement are set out in the announcements of the Company dated 9 January 2008 and 22 February 2008, respectively.
(e) The capital injection agreement entered into between Hongdu Aviation, China Aviation Industry Corporation II and its associates, China Huarong Asset Management Corporation, AviChina Undercarriage Limited Liability Company and an independent third party on 26 March 2008. Pursuant to the capital injection agreement, Hongdu Aviation agrees to make a capital injection of RMB100 million in AviChina Undercarriage Limited Liability Company. Details of the agreement are set out in the announcement of the Company dated 27 March 2008.

— 33 —

GENERAL INFORMATION

APPENDIX II

(f) The capital injection agreement entered into between Hongdu Aviation, Hongdu Group and Jiangxi Changjiang General Aviation Company Limited on 26 March 2008. Pursuant to the capital injection agreement, Hongdu Aviation agrees to make a capital injection of RMB49,960,000 in Jiangxi Changjiang General Aviation Company Limited. Details of the agreement are set out in the announcement of the Company dated 27 March 2008.
(g) The Acquisition Agreement.
(h) The joint venture agreement entered into between the Company, Harbin Aircraft Industry Group Co., Ltd., Airbus China Limited, Hafei Aviation Industry Co., Ltd. and Harbin Development Zone Heli Infrastructure Development Co., Ltd. on 30 January 2009 to set up a joint venture company to engage in the business of manufacturing of composite material parts and components for the Airbus A350 XWB and Airbus A320 aircraft series. Pursuant to the joint venture agreement, the Group agrees to contribute USD 30 million cash to the registered capital of the joint venture for a 20% equity interest in the joint venture, amongst which 10% equity interest is directly held by the Company and the remaining 10% is indirectly held by the Company through its non wholly-owned subsidiary Hafei Aviation Industry Co., Ltd.. Details of the agreement are set out in the announcement of the Company dated 3 February 2009.
(i) The Share Transfer Agreements.

8. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates have any interests in a business which competes or may compete with the business of the Group.

9. NO MATERIAL ADVERSE CHANGE

The Directors are of the opinion that since 31 December 2008, being the date to which the latest published audited accounts of the Group have been made up, there have been no material adverse changes in the financial or trading position of the Group.

10. MATERIAL LITIGATION

As at the Latest Practicable Date, so far as known to the Directors, there is no litigation or claim of material importance pending or threatened against any member of the Group.

11. MISCELLANEOUS

(a) Mr. Yan Lingxi and Mr. Ip Kun Wan, Kiril are the company secretaries of the Company. Mr. Ip Kun Wan, Kiril is a solicitor of the High Court of Hong Kong.

— 34 —

GENERAL INFORMATION

APPENDIX II

(b) The registered address of the Company is situated at 8th Floor, Tower 2, No. 5A Rongchang East Street, Beijing Economic-Technological Development Area, Beijing, PRC. The registrar of the Company is Computershare Hong Kong Investor Services Limited, whose address is at Room 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The principal place of business of the Company in Hong Kong is at Unit B, 15/F, United Center, Queensway 95, Hong Kong.
(d) The English text of this circular and the revised proxy form shall prevail over their respective Chinese text in the case of inconsistency.

12. REVISED PROXY FORM

A Shareholder who has not yet lodged the First Proxy Form with the Company’s registrar is requested to lodge the revised proxy form if he or she wishes to appoint proxies to attend the AGM on his or her behalf. In this case, the First Proxy Form should not be lodged with the Company’s registrar.

A Shareholder who has already lodged the First Proxy Form with the Company’s registrar should note that:

(i) If no revised proxy form is lodged with the Company’s registrar, the First Proxy Form will be treated as a valid proxy form lodged by him or her if correctly completed.

The proxy so appointed by the Shareholders will be entitled to vote at his or her discretion or to abstain on any resolution properly put to the AGM other than those referred to in the notice convening the AGM and the First Proxy Form, including the proposed additional resolution relating to the Major Transaction and Connected Transactions set out in this circular.

(ii) If the revised proxy form is lodged with the Company’s registrar before the Closing Time, the revised proxy form will revoke and supersede the First Proxy Form previously lodged by him or her. The revised proxy form will be treated as a valid proxy form lodged by the Shareholder if correctly completed.

Shareholders are reminded that completion and return of the First Proxy Form and/or the revised proxy form will not preclude Shareholders from attending and voting in person at the AGM or any adjourned meeting should they so wish.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company up to and including 9 June 2009:

(a) the Share Transfer Agreement I;

— 35 —

GENERAL INFORMATION

APPENDIX II

(b) the Share Transfer Agreement II;
(c) the letter dated 6 May 2009 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 14 of this circular;
(d) the letter of advice dated 6 May 2009 from Somerley to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 15 to 27 of this circular;
(e) the full valuation reports prepared by CEA in Chinese language in respect of Harbin Automobile Group and Changhe Suzuki;
(f) the written consent of each of CEA and Somerley referred to in paragraph 6 of this Appendix;
(g) the material contracts of the Company referred to in paragraph 7 of this Appendix;
(h) the articles of association of the Company; and
(i) the annual reports of the Company for the two financial years ended 31 December 2008.

— 36 —

VALUATION REPORTS

APPENDIX III

Appraisal Project on Harbin Hafei Automobile Industry Group Co., Ltd. for the purpose of the Proposed Transfer of Shares in Harbin Hafei Automobile Industry Group Co., Ltd. by AviChina Industry & Technology Company Limited

EXTRACT OF ASSETS APPRAISAL REPORT

Zhongqihua Ping Bao Zi [2009] No. 101-01

Attention

The following contents are extracted from the full Assets Appraisal Report. Any users of the Report, who would like to understand the full-scale situation of the appraisal project, should make a careful study on the full contents of the Report.

Pursuant to the “Letter related to the agreement on appraisal of automobile assets controlled by AviChina” ( AVIC Zihan 2009 No.10), AviChina Industry & Technology Company Limited proposed to transfer 100% equity interest in Harbin Hafei Automobile Industry Group Co., Ltd. to AVIC Automobile Industry Co., Ltd.. As instructed by AviChina Industry & Technology Company Limited, we, China Enterprise Appraisals Company, have conducted an appraisal on the values of all the equity interests of Harbin Hafei Automobile Industry Group Co., Ltd. involved in the above transfer activities to provide value basis for the share transfer.

According to the relevant PRC laws and regulations on assets appraisal and based on the principles of independence, objectiveness and fairness and necessary procedures on assets appraisal, the appraisers assigned by China Enterprise Appraisals Company conducted on-the-spot verification, market investigation and inquiry and other necessary valuation procedures.

Considering the objectives of the appraisal and conditions of the assets under appraisal, the value type of the appraisal is market value.

Based on appraisal work mentioned above and by asset-based method, it is concluded that:

Based on the precondition of continuing utilization, as of the Appraisal Date (31 December 2008), the book value of the total assets proposed to be sold amounted to RMB31,000, RMB31,000 after adjustment and RMB31,000 after appraisal. The total liabilities amounted to RMB166,200, RMB166,200 after adjustment and RMB166,200 after appraisal. The net assets amounted to RMB-135,200, RMB-135,200 after adjustment and RMB-135,200 after appraisal. The appraisal value represented a decrease of RMB 0. Details of the appraisal results are set out in the summary of assets appraisal results and detailed appraisal lists.

— 37 —

VALUATION REPORTS

APPENDIX III

Summary of Assets Appraisal Results

Appraisal Date: 31 December 2008 Unit:

RMB10,000

			Adjusted	Adjusted	Appraisal	Appreciation/	Appreciation/
Items		Book value	book value		value	Impairment	Impairment %
		A		B	C	D=C-B	*E=D/B100**
Current assets	1	3.10		3.10	3.10	0.00	0.00
Non-current assets	2
Financial assets
available-for-sale	3
Held-to-maturity Investment	4	—		—
Long-term receivables	5
Long-term equity
investment	6	97,081.56	97,081.56		0.00	-97,081.56	-100.00
Less: Impairment provision	7	97,081.56	97,081.56		0.00
Net balance of long-term
equity investment	8	0.00		0.00	0.00
Investment Properties	9	—			—	—
Fixed assets	10
Intangible assets	11
Other assets	12
Total Assets	13	3.10		3.10	3.10	0.00	0.00
Current Liabilities	14	16.62		16.62	16.62	0.00	0.00
Non-current liabilities	15
Total Liabilities	16	16.62		16.62	16.62	0.00	0.00
Net Assets	17	-13.52		-13.52	-13.52	0.00	0.00

The appraisal conclusion is only valid for the purpose of the proposed transfer of 100% equity interest in Harbin Hafei Automobile Industry Group Co., Ltd. by AviChina Industry & Technology Company Limited for a period of one year commencing from 31 December 2008. If the period exceeds one year, the appraisal should be re-conducted.

Users of the report should take notice of the impact caused by special matters.

PROFESSIONAL QUALIFICATION OF CHINA ENTERPRISE APPRAISALS COMPANY

China Enterprise Appraisals Company was established on 16 December 1996 (Business License Registration No. 110000005092155). It is a qualified assets appraisal company for securities-related business as recognized by the Ministry of Finance of the PRC and China Securities Regulatory Commission (Certificate No. 0100011004).

— 38 —

APPENDIX III

VALUATION REPORTS

Valuers participated in the appraisal project, who are registered valuers as approved by and registered with the Ministry of Finance of the PRC, are as follows:

Name	Certificate no.	Certificate issuance date	Registered since
Shi Laiyue	11001116	27 December 2006	31 December 1997
Wang Fenggen	23020041	8 January 2007	28 November 2002

Legal Representative：Sun Yuehuan

China Enterprise Appraisals Company 17 April 2009

— 39 —

VALUATION REPORTS

APPENDIX III

Appraisal Project on Jiangxi Changhe Suzuki Automobile Co., Ltd. for the purpose of the Proposed Transfer of Shares in Jiangxi Changhe Suzuki Automobile Co., Ltd. by AviChina Industry & Technology Company Limited

EXTRACT OF ASSETS APPRAISAL

REPORT Zhongqihua Ping Bao Zi [2009] No. 101-02

Attention

Pursuant to the “Letter related to the agreement on appraisal of automobile assets controlled by AviChina” (AVIC Zihan 2009 No.10), AviChina Industry & Technology Company Limited proposed to transfer 10% equity interest to AVIC Automobile Industry Co., Ltd.. As instructed by AviChina Industry & Technology Company Limited, we, China Enterprise Appraisals Company, have conducted an appraisal on the values of all the equity interests of Jiangxi Changhe Suzuki Automobile Co., Ltd. involved in the above transfer activities to provide value basis for the share transfer.

Considering the objectives of the appraisal and conditions of the assets under appraisal, the value type of the appraisal is market value.

Based on the appraisal work mentioned above and by asset-based method, it is concluded that:

Based on the precondition of continuing utilization, as of the Appraisal Date (31 December 2008), the audited book value of the total assets proposed to be sold amounted to RMB3,478,233,700, RMB3,478,233,700 after adjustment and RMB3,502,246,300 after appraisal. The audited total liabilities amounted to RMB2,408,671,500, RMB2,408,671,500 after adjustment and RMB2,408,671,500 after appraisal. The audited net assets amounted to RMB1,069,562,200, RMB1,069,562,200 after adjustment and RMB1,093,574,800 after appraisal. The appraisal value represented an increase of RMB24,012,600, or 2.25%. Details of the appraisal results are set out in the summary of assets appraisal results and detailed appraisal lists.

— 40 —

VALUATION REPORTS

APPENDIX III

Summary of Assets Appraisal Results

Appraisal Date: 31 December 2008	Appraisal Date: 31 December 2008	Appraisal Date: 31 December 2008			Unit: RMB10,000	Unit: RMB10,000
			Adjusted	Appraisal	Appreciation/	Appreciation/
Items		Book value	book value	value	Impairment	Impairment %
		A	B	C	D=C-B	*E=D/B100%**
Current assets	1	139,642.15	139,642.15	138,935.84	706.31	-0.51
Non-current assets	2	208,181.22	208,181.22	211,288.79	3,107.57	1.49
Financial assets
available-for- sale	3
Held-to-maturity Investment	4	—	—
Long-term receivables	5
Long-term equity
investment	6		—	—	—
Investment Properties	7	—		—	—
Fixed assets	8	198,364.13	198,364.13	200,837.98	2,473.85	1.25
Project materials	9	—	—	—	—
Construction-in-progressess	10	2,974.12	2,974.12	3,004.90	30.78	1.03
Intangible assets	11	6,062.15	6,062.15	6,665.09	602.94	9.95
Other assets	12	780.82	780.82	780.82	—
Total Assets	13	347,823.37	347,823.37	350,224.63	2,401.26	0.69
Current Liabilities	14	240,867.15	240,867.15	240,867.15
Non-current liabilities	15
Total Liabilities	16	240,867.15	240,867.15	240,867.15		—
Net Assets	17	106,956.22	106,956.22	109,357.48	2,401.26	2.25

The appraisal conclusion is only valid for the purpose of the proposed transfer of 10% equity interest in Jiangxi Changhe Suzuki Automobile Co., Ltd. by AviChina Industry & Technology Company Limited for a period of one year commencing from 31 December 2008. If the period exceeds one year, the appraisal should be re-conducted.

Users of the report should take notice of the impact caused by special matters.

PROFESSIONAL QUALIFICATION OF CHINA ENTERPRISE APPRAISALS COMPANY

— 41 —

APPENDIX III

VALUATION REPORTS

Valuers participated in the appraisal project, who are registered valuers as approved by and registered with the Ministry of Finance of the PRC, are as follows:

Name	Certificate no.	Certificate issuance date	Registered since
Shi Laiyue	11001116	27 December 2006	31 December 1997
Wang Fenggen	23020041	8 January 2007	28 November 2002

Legal Representative：Sun Yuehuan

China Enterprise Appraisals Company 17 April 2009

— 42 —

SUPPLEMENTAL NOTICE OF ANNUAL GENERAL MEETING

==> picture [172 x 55] intentionally omitted <==

中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(A joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock Code: 2357)

SUPPLEMENTAL NOTICE OF ANNUAL GENERAL MEETING

Reference is made to the Notice of Annual General Meeting (“AGM”) of AviChina Industry & Technology Company Limited (the “Company”) on 27 April 2009, the AGM of the Company will be held at 9:00 a.m. on Tuesday, 9 June 2009, at Avic Hotel, No. 10 Yi, Central East Third Ring Road, Chaoyang District, Beijing, the People’s Republic of China. Unless otherwise indicated, capitalized terms used in this supplemental notice and the following resolutions shall have the same meanings as those defined in the circular of the Company dated 6 May 2009, as well as the AGM circular of the Company dated 27 April 2009.

The Board resolved that the following additional ordinary resolutions shall be tabled before the forthcoming AGM for approval by the Independent Shareholders.

SUPPLEMENTAL NOTICE IS HEREBY GIVEN that the AGM will be held as originally scheduled and venued, to consider, ratify, approve and confirm the following resolutions as ordinary resolutions of the Company, in addition to the resolutions set out in the Notice of AGM issued by the Company on 27 April 2009.

ORDINARY RESOLUTIONS

“ THAT :
(a) the terms and conditions of the Share Transfer Agreement I (a copy of which has been produced to this meeting marked “A” and initialed by the Chairman of the meeting), which provide, among other matters, the transfer of 100% equity interest in Harbin Automobile Group by the Company to AVIC Automobile for a cash consideration of RMB 1 million, subject to the final figure endorsed by SASAC, be and are hereby approved, ratified and confirmed; and
(b) the Directors (or any one of them) be and are hereby authorized to implement and take all steps and to do all acts and things as may be necessary or desirable to give effect and/or to complete or in connection with the transactions contemplated under the Share Transfer Agreement I, including, without limitation, to confirm the final consideration with the
For identification purpose only.

— 43 —

SUPPLEMENTAL NOTICE OF ANNUAL GENERAL MEETING

relevant PRC government authorities and obtain the necessary approval from the relevant PRC government authorities, and to sign and execute such further documents or to do any other matters incidental thereto and/or as contemplated thereunder and to make changes or amendments to the Share Transfer Agreement I as the Directors (or any one of them) may in their absolute discretion deem fit.”

“ THAT :
(a) the terms and conditions of the Share Transfer Agreement II (a copy of which has been produced to this meeting marked “B” and initialed by the Chairman of the meeting), which provide, among other matters, the transfer of 10% equity interest in Changhe Suzuki by the Company to AVIC Automobile for a cash consideration of RMB109.4 million, subject to any adjustment upon the final valuation figure is confirmed by SASAC, be and are hereby approved, ratified and confirmed; and
(b) the Directors (or any one of them) be and are hereby authorized to implement and take all steps and to do all acts and things as may be necessary or desirable to give effect and/or to complete or in connection with the transactions contemplated under the Share Transfer Agreement II, including, without limitation, to confirm the final consideration with the relevant PRC government authorities and obtain the necessary approval from the relevant PRC government authorities, and to sign and execute such further documents or to do any other matters incidental thereto and/or as contemplated thereunder and to make changes or amendments to the Share Transfer Agreement II as the Directors (or any one of them) may in their absolute discretion deem fit.”

By Order of the Board **AviChina Industry & Technology Company Limited* Yan Lingxi** Company Secretary

Hong Kong, 6 May 2009

Note: Please refer to the Notice of AGM dated 27 April 2009 for details of other resolutions to be proposed at the AGM, the eligibility for attending the AGM, proxy, registration procedures, closure of register of members and other relevant matters.

As at the date of this notice, the Board comprises executive directors Mr. Lin Zuoming, Mr. Tan Ruisong and Mr. Wu Xiandong and non-executive directors Mr. Gu Huizhong, Mr. Xu Zhanbin, Mr. Geng Ruguang, Mr. Zhang Xinguo, Mr. Li Fangyang, Mr. Wang Yong, Mr. Maurice Savart as well as independent non-executive directors Mr. Guo Chongqing, Mr. Li Xianzong and Mr. Lau Chung Man, Louis.

— 44 —

AI assistant

Star Plus Legend Holdings Limited — Proxy Solicitation & Information Statement 2009

51032_rns_2009-05-06_e47dab71-89c3-4f32-aa7a-2d201ef978b6.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

MAJOR TRANSACTION AND CONNECTED TRANSACTIONS:

DISPOSAL OF EQUITY INTERESTS IN HARBIN AUTOMOBILE GROUP AND CHANGHE SUZUKI

SOMERLEY LIMITED

CONTENTS

DEFINITIONS

“Acquisition Agreement”

DEFINITIONS

DEFINITIONS

DEFINITIONS

中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(Stock Code: 2357)

Executive Directors:

Non-executive Directors:

Independent non-executive Directors:

MAJOR TRANSACTION AND CONNECTED TRANSACTIONS:

DISPOSAL OF EQUITY INTERESTS IN HARBIN AUTOMOBILE GROUP AND CHANGHE SUZUKI

INTRODUCTION

LETTER FROM THE BOARD

A. BACKGROUND

B. SHARE TRANSFER AGREEMENTS

Share Transfer Agreement I

2. Parties:

3. 100% equity interest in Harbin Automobile Group to be disposed of:

4. Consideration:

LETTER FROM THE BOARD

5. Conditions Precedent:

Share Transfer Agreement II

LETTER FROM THE BOARD

4. Consideration:

5. Conditions Precedent:

LETTER FROM THE BOARD

C. INFORMATION RELATING TO THE DISPOSAL

LETTER FROM THE BOARD

Information on Harbin Automobile Group

Information on Changhe Suzuki

LETTER FROM THE BOARD

D. EFFECTS AND FINANCIAL IMPLICATIONS OF THE DISPOSAL

E. USE OF PROCEEDS

F. REASONS FOR AND BENEFITS OF THE DISPOSAL

LETTER FROM THE BOARD

G. LISTING RULES IMPLICATIONS

H. GENERAL

Information on Parties

Information on the Company

Information on AVIC

Information on AVIC Automobile

Information on Changhe Suzuki

Information on Harbin Automobile Group

LETTER FROM THE BOARD

AGM

REVISED PROXY FORM

RECOMMENDATION

中國航空科技工業股份有限公司 AviChina Industry & Technology Company Limited*

(Stock Code: 2357)

Dear Sir or Madam,

Yours faithfully,

AviChina Industry & Technology Company Limited* Guo Chongqing, Li Xianzong, Lau Chung Man, Louis Independent Non-executive Directors

LETTER FROM SOMERLEY

MAJOR AND CONNECTED TRANSACTIONS

INTRODUCTION

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PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background to and reasons for entering into the Share Transfer Agreements

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(i) Share Transfer Agreement I

(ii) Share Transfer Agreement II

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2. Principal terms of the Share Transfer Agreements

(i) Subject matters and Consideration

(ii) Conditions precedent

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3. Business and financial information of the Group

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4. Business and financial information of Harbin Automobile Group

Star Plus Legend Holdings Limited Proxy Solicitation & Information Statement 2009

**AviChina Industry & Technology Company Limited* Guo Chongqing, Li Xianzong, Lau Chung Man, Louis** Independent Non-executive Directors

By Order of the Board **AviChina Industry & Technology Company Limited* Yan Lingxi** Company Secretary