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

Feb 19, 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 proxy form and reply slip 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)

CONNECTED TRANSACTION:

ESTABLISHMENT OF A JOINT VENTURE BETWEEN HARBIN AIRCRAFT GROUP, AIRBUS CHINA, THE COMPANY, HAFEI AVIATION AND HARBIN HELI

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 9 of this circular. A letter from Somerley to the Independent Board Committee and the Independent Shareholders is set out on pages 10 to 16 of this circular.

A notice convening an extraordinary general meeting (“EGM”) of AviChina Industry & Technology Company Limited to be held at 9:00 a.m. on Thursday, 9 April 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 21 to 23 of this circular.

A reply slip and a form of proxy for use at the EGM are enclosed and are also published on the website of the Stock Exchange (www.hkex.com.hk). Shareholders who intend to attend the EGM shall complete and return the reply slip in accordance with the instructions printed thereon before Friday, 20 March 2009. Shareholders who intend to appoint a proxy to attend the EGM shall complete and return the enclosed form of proxy in accordance with the instructions printed thereon not less than 24 hours before the time fixed for the holding of EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending the EGM and voting in person if you so wish.

*For identification purpose only.

20 February 2009

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Letter from Somerley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21

— i —

DEFINITIONS

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

“Airbus China” Airbus China Limited, a company wholly-owned by Airbus S.A.S.

“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% interest in the Company “Board” the board of Directors

• “Company” AviChina Industry & Technology Company Limited

“Directors” the director(s) of the Company

“EGM” an extraordinary general meeting of the Company to be held on Thursday, 9 April 2009 to consider, ratify, approve and confirm the entering into of the Joint Venture Agreement and the transactions contemplated thereunder

“Group” the Company and its subsidiaries

“Hafei Aviation” Hafei Aviation Industry Co., Ltd. (哈飛航空工業股份有限公 司), a joint stock limited company whose shares are listed on the Shanghai Stock Exchange with 50.05% of its interest being held by the Company through its wholly-owned subsidiary

“Harbin Aircraft Group” Harbin Aircraft Industry Group Co., Ltd. (哈爾濱飛機工業集 團有限公司), a controlling subsidiary of AVIC with 81.12% interest being held by AVIC

“Harbin Heli” Harbin Development Zone Heli Infrastructure Development Co., Ltd. (哈爾濱開發區合力基礎設施發展有限公司), a third party independent from the Company and its connected persons (as defined under the Listing Rules)

“Hong Kong”

Hong Kong Special Administrative Region, the PRC

“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 (other than AVIC and its associates) of the Company who are not required to abstain from voting on the resolution(s) to be proposed at the EGM of the Company to approve the Joint Venture Agreement under the Listing Rules

— 1 —

DEFINITIONS

“Joint Venture Agreement”	the joint venture agreement entered into between Harbin
	Aircraft Group, Airbus China, the Company, Hafei Aviation
	and Harbin Heli on 30 January 2009
“Joint Venture Company”	Harbin Hafei Airbus Composite Manufacturing Centre
	Company Limited (哈爾濱哈飛空客複合材料製造中心有限公
	司), a joint venture company to be established as a limited
	liability company in Harbin, the PRC pursuant to the Joint
	Venture Agreement
“Latest Practicable Date”	17 February 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)
“PRC”	People’s Republic of China
“RMB”	Renminbi, the lawful currency of the PRC
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the laws
	of Hong Kong) as amended from time to time
“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
“USD”	the lawful currency of the United States of America

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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

20 February 2009

To the Shareholders:

Dear Sir or Madam,

CONNECTED TRANSACTION:

ESTABLISHMENT OF A JOINT VENTURE BETWEEN HARBIN AIRCRAFT GROUP, AIRBUS CHINA, THE COMPANY, HAFEI AVIATION AND HARBIN HELI

* For identification purpose only.

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LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the announcement of the Company dated 3 February 2009.

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 Joint Venture Agreement; (2) the letter from the Independent Board Committee; and (3) the recommendation from the independent financial adviser on the connected transaction which will be constituted by the establishment of the Joint Venture Company by the Company with, among others, Harbin Aircraft Group, an associate of AVIC.

BACKGROUND

The Company entered into the Joint Venture Agreement on 30 January 2009, pursuant to which Harbin Aircraft Group, Airbus China, the Company, Hafei Aviation and Harbin Heli agreed to establish the Joint Venture Company in China to engage in the business of manufacturing of composite material parts and components for the Airbus A350 XWB and Airbus A320 aircraft series.

THE JOINT VENTURE AGREEMENT

Date:

30 January 2009

Parties:

Harbin Aircraft Group; Airbus China; the Company; Hafei Aviation; and Harbin Heli.

Term:

The Joint Venture Agreement shall have a term of 50 years commencing from the date of establishment of the Joint Venture Company, unless the parties agree otherwise pursuant to the terms of the Joint Venture Agreement.

Objective:

The Joint Venture Company will principally engage in the business of manufacturing of composite material parts and components for the Airbus A350 XWB and Airbus A320 aircraft series in Harbin, the PRC and participate in the manufacturing business of other existing and future aircraft projects of Airbus S.A.S..

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LETTER FROM THE BOARD

Registered Capital:

The registered capital of the Joint Venture Company shall be USD 150,000,000, which will be contributed by the parties in the following manner:

1. Harbin Aircraft Group will contribute USD 75,000,000 in cash and/or assets, representing 50% of the registered capital;

2. Airbus China will contribute USD 30,000,000 in cash, representing 20% of the registered capital;

3. The Company will contribute USD 15,000,000 in cash, representing 10% of the registered capital;

4. Hafei Aviation will contribute USD 15,000,000 in cash, representing 10% of the registered capital; and

5. Harbin Heli will contribute USD 15,000,000 in cash and/or assets, representing 10% of the registered capital.

The registered capital is determined based on the investment amount required for operating the Joint Venture Company. The registered capital to be contributed by the parties are determined based on their respective shareholdings held in the Joint Venture Company and will be funded by their own resources. As at the date of the Joint Venture Agreement, the relevant assets to be contributed by Harbin Aircraft Group and Harbin Heli to the Joint Venture Company have not yet been determined by the parties. However, pursuant to the Joint Venture Agreement, any shortfall between the required capital contribution amount and the appraised value of the assets to be injected to the Joint Venture Company will be made up by cash by Harbin Aircraft Group and Harbin Heli, respectively.

According to the Joint Venture Agreement, the registered capital of the Joint Venture Company shall be paid by each of the parties in the following manner, subject to obtaining certain necessary approvals by the PRC government authorities: (i) 15% of their respective capital contribution shall be paid within two (2) months after the date of issuance of the business license of the Joint Venture Company; (ii) the remaining 85% of their respective capital contribution shall be paid in installments in accordance with the specific timetable to be approved by the board of directors of the Joint Venture Company within twenty four (24) months after the date of issuance of the business license of the Joint Venture Company. The total capital commitment of the Group (including the capital commitment of the Company and Hafei Aviation) in respect of the Joint Venture Company amounts to USD 30,000,000. Except for the registered capital of USD 30,000,000, as at the Latest Practicable Date, the Group has no other capital commitment to the Joint Venture Company.

Upon making capital contributions to the Joint Venture Company, Harbin Aircraft Group, Airbus China, the Company, Hafei Aviation and Harbin Heli will hold 50%, 20%, 10%, 10% and 10% interest in the Joint Venture Company, respectively. The Joint Venture Company will be treated as an interest in associate in the Group’s accounts.

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LETTER FROM THE BOARD

The board of directors of the Joint Venture Company:

The Joint Venture Company will comprise seven directors, of whom two shall be appointed by Harbin Aircraft Group, two shall be appointed by Airbus China, one (1) shall be appointed by the Company, one shall be appointed by Hafei Aviation and one shall be appointed by Harbin Heli. Each director shall be appointed for a term of four years, commencing from the date of establishment of the board of directors of the Joint Venture Company. The chairman of the board of directors of the Joint Venture Company shall be appointed by Harbin Aircraft Group.

Profit Distribution:

Profits derived from the Joint Venture Company shall be distributed among the shareholders based on their equity interests held in the Joint Venture Company, unless otherwise agreed by the parties in writing and subject to the requirements of any applicable laws.

REASONS FOR ENTERING INTO THE JOINT VENTURE AGREEMENT

Through the participation in the business and operational activities of the Joint Venture Company, the Board considers that the Company will enhance its communication and cooperation with Airbus China in respect of aircraft production technology and expand its market share in aircraft subcontracting services at international level. The Board considers that the Company’s investment in the Joint Venture Company will enable the Group to further strengthen its aviation business. The Directors consider that the Joint Venture Agreement was entered into on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

AVIC is the controlling shareholder of the Company holding 61.06% interest in the Company. Harbin Aircraft Group is a controlling subsidiary of AVIC with 81.12% interest being held by AVIC. As AVIC is a connected person of the Company and Harbin Aircraft Group is a controlling subsidiary of AVIC, pursuant to Chapter 14A of the Listing Rules, Harbin Aircraft Group is an associate of AVIC. Therefore, the establishment of the Joint Venture Company by the Company with, among others, Harbin Aircraft Group constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and will be subject to the approval of the Independent Shareholders.

INFORMATION ON THE PARTIES

Harbin Aircraft Group is a controlling subsidiary of AVIC with 81.12% interest being held by AVIC and is mainly engaged in the manufacture, assembly and sale of aviation products.

Airbus China is a limited liability company incorporated under the laws of Hong Kong and wholly-owned by Airbus S.A.S.. Airbus China is principally engaged in the business of promotion of Airbus airline activities, training and technical support in China.

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LETTER FROM THE BOARD

The Company is mainly engaged in the research, development, manufacture and sale of vehicles and civil aviation products.

Hafei Aviation is a subsidiary of the Company with 50.05% interest being held by the Company through a wholly-owned subsidiary of the Company and is mainly engaged in the manufacture and sale of aviation products.

Harbin Heli, a third party independent from the Company and its connected persons (as defined under the Listing Rules), and is an investment company engaging in investment business.

EGM

The notice of the EGM to be held at 9:00 a.m., on Thursday, 9 April 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 21 to 23 of this circular, at which an ordinary resolution will be proposed to approve, among other matters, the terms and conditions of the Joint Venture Agreeement.

A reply slip and a form of proxy for use at the EGM is enclosed herewith. Shareholders who intend to attend the EGM shall complete and return the reply slip in accordance with the instructions printed thereon before Friday, 20 March 2009. Shareholders who intend to appoint a proxy to attend the EGM shall complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event no later than 24 hours before the time fixed for the holding of EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you wish.

AVIC and its respective associate(s), if any, are connected persons of the Company as defined under the Listing Rules and they will abstain from voting at the EGM in respect of the ordinary resolution to be proposed at the EGM. As at the Latest Practicable Date, AVIC directly owned 2,835,305,636 shares, representing approximately 61.06% of the total issued share capital of the Company. AVIC was entitled to control all voting rights in respect of such shares. Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the EGM will be taken by poll. The Company will announce the results of the poll in accordance with the Listing Rules following the EGM.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that the terms of the Joint Venture Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that the Shareholders vote in favour of the ordinary resolution to be proposed at the EGM.

Somerley has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Joint Venture Agreement. Having considered the advice given by Somerley, the Independent Board Committee is of the opinion that the terms of the Joint Venture Agreement are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

Your attention is also drawn to the letter from the Independent Board Committee set out on page 9, the letter from Somerley set out on pages 10 to 16 and the other information set out in the Appendix 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)

20 February 2009

To the Independent Shareholders

Dear Sir or Madam,

We refer to the circular of the Company (the “Circular”) dated 20 February 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 Joint Venture Agreement 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 Joint Venture Agreement.

We wish to draw your attention to the letter from the Board set out on pages 3 to 8 of the Circular and the letter from Somerley set out on pages 10 to 16 of the Circular.

Having considered the advice given by Somerley, we are of the opinion that the terms of the Joint Venture Agreement are fair and reasonable and the entering into of the Joint Venture Agreement 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 resolution to be proposed at the EGM.

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.

— 9 —

LETTER FROM SOMERLEY

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

20 February 2009

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs,

THE JOINT VENTURE AGREEMENT

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in connection with the Joint Venture Agreement entered into among the Company, Hafei Aviation (a non-wholly owned subsidiary of the Company), Harbin Aircraft Group, Harbin Heli and Airbus China on 30 January 2009. Details of the Joint Venture Agreement are contained in the circular to the Shareholders dated 20 February 2009 (the “Circular”), of which this letter forms a 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 also holds approximately 81.12% in Harbin Aircraft Group. The Group’s establishment of the Joint Venture Company with, among other parties, Harbin Aircraft Group therefore constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the EGM.

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 Joint Venture Agreement which governs the establishment of the Joint Venture Company. 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 time they were made and will remain so up to the time of the EGM. We have also sought and received confirmation from the Directors that all material relevant information has been supplied to us and that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to doubt the truth or accuracy of the information provided to us, or to believe that any material information has been omitted or withheld. We have

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LETTER FROM SOMERLEY

relied on such information and consider that the information we have received is sufficient for us to reach our advice and recommendation as set out in this letter. However, we have not conducted any independent investigation into the business and affairs of the Group (including Hafei Aviation), Harbin Aircraft Group, Harbin Heli and Airbus China.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the terms of the Joint Venture Agreement 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 establishment of the Joint Venture Company

The Company is a joint stock limited company incorporated in the PRC and, through its subsidiaries, is principally engaged in the research, development, manufacture and sales of civil aviation products and vehicles.

As disclosed in the Group’s previous annual reports, the aviation segment continues to contribute positively to the results of the Group while the automobile segment has been making losses since 2006. The Board continues to hold a positive view on the PRC aviation market. In December 2008, the Company obtained approval from its independent shareholders of a transaction which involves swapping its automobile assets held through Jiangxi Changhe Automobile Co., Ltd., a subsidiary of the Company, for aviation assets held by companies controlled by AVIC. Details of the above transaction are contained in the Company’s circular to Shareholders dated 3 November 2008. The Board has stated in the above circular that the Group would like to focus on the aviation segment and strengthen its market position in the PRC aviation industry.

The entering into of the Joint Venture Agreement represents one step forward taken by the Group to achieve its stated strategy. The establishment of the Joint Venture Company has other strategic values. It is intended that a manufacturing base will be set up by the Joint Venture Company in Harbin, the PRC to perform aircraft parts and components subcontracting services for Airbus S.A.S. Airbus S.A.S. is the holding company of Airbus China. Through the participation in the business and operational activities of the Joint Venture Company, the Board considers that the Company will enhance its communication and co-operation with Airbus China in respect of aircraft production technology and expand its market share in aircraft subcontracting services at international level.

As mentioned above, Airbus China is a member company of Airbus S.A.S., which is one of the leading aircraft manufacturers in the world. Airbus S.A.S. is headquartered in Europe and has final assembly lines in France and the PRC. The Company has long established relationship with Airbus S.A.S. The holding company of Airbus S.A.S., namely European Aeronautic Defence and Space Company EADS N.V. (“EADS”), has been a significant shareholder of the Company since listing of the Company’s shares on the Main Board of the Stock Exchange in 2003. EADS currently holds approximately 13.82% of total issued H shares of the Company, and approximately 5.00% of total

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LETTER FROM SOMERLEY

issued share capital of the Company. A representative of EADS, Mr. Maurice Savart, is serving on the Board as a non-executive Director. The proposed co-operation with Airbus China through the establishment of the Joint Venture Company would further foster the Group’s relationship with Airbus S.A.S.

Taking into account the above, we agree with the Directors that the entering into of the Joint Venture Agreement is in the interest of the Company and its shareholders as a whole.

2. Principal terms of the Joint Venture Agreement

Shareholding structure of the Joint Venture Company

The Joint Venture Company shall be formed as a Sino-foreign equity joint venture company. The shareholding structure of the Joint Venture Company is illustrated as follows:

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

AVIC
61.06% 81.12%
Harbin Aircraft
The Company Airbus China Harbin Heli
Group
50.05%
Hafei Aviation
10% 50% 20% 10%
10%
Joint Venture Company
----- End of picture text -----

Term

The Joint Venture Agreement shall have a term of 50 years commencing from the date of establishment of the Joint Venture Company, unless the parties agree otherwise pursuant to the terms of the Joint Venture Agreement.

Business scope of the Joint Venture Company

It is intended that the Joint Venture Company would utilize its manufacturing facilities in Harbin, PRC to manufacture composite material parts and components for the Airbus A350 XWB and Airbus A320 aircraft series for Airbus S.A.S. The Joint Venture Company would also participate in the manufacturing business of other existing and future aircraft projects of Airbus S.A.S..

— 12 —

LETTER FROM SOMERLEY

According to the information contained in the website of Airbus S.A.S. as at the Latest Practicable Date, Airbus A320 aircraft series was the one of the best selling models in the single-aisle jetliner marketplace with more than 6,300 aircraft ordered and more than 3,700 aircraft delivered worldwide. Airbus A350 XWB was still under development with approximately 480 orders on hand. It was expected to be a new-generation aircraft well suited to the market’s requirements, for example, in terms of size, revenue generation and passenger comfort.

Registered capital and funding arrangements

The total amount of the registered capital of the Joint Venture Company is USD150,000,000 (or approximately RMB1,025,280,000), which is determined based on the investment amount required for operating the Joint Venture Company and will be contributed by the parties in the following manner:

1. Harbin Aircraft Group will contribute USD75,000,000 (or approximately RMB512,640,000) in cash and/or assets, representing 50% of the registered capital;

2. Airbus China will contribute USD30,000,000 (or approximately RMB205,056,000) in cash, representing 20% of the registered capital;

3. The Company will contribute USD15,000,000 (or approximately RMB102,528,000) in cash, representing 10% of the registered capital;

4. Hafei Aviation will contribute USD15,000,000 (or approximately RMB102,528,000) in cash, representing 10% of the registered capital;

5. Harbin Heli will contribute USD15,000,000 (or approximately RMB102,528,000) in cash and/or assets, representing 10% of the registered capital.

The registered capital to be contributed by the parties is determined based on their respective shareholdings held in the Joint Venture Company and will be funded by their own resources. We consider the above capital contribution formula fair and reasonable.

It is expected that the total investment amount required by the Joint Venture Company would exceed USD150,000,000. It is agreed under the Joint Venture Agreement that any excess would be financed by bank borrowings to be taken out by the Joint Venture Company.

First installment of the registered capital, being 15% of the registered capital, will need to be made within two months after the date of issue of the business licence of the Joint Venture Company and the second installment, being the remaining 85% of their respective capital contribution, will need to be made in accordance with the specific time-table to be approved by the board of directors of the Joint Venture Company (“Joint Venture Board”) within 24 months after the date of issue of the business licence of the Joint Venture Company.

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LETTER FROM SOMERLEY

Of the five joint venture partners, Airbus China, the Company and its approximately 50.05% held A share listed subsidiary, Hafei Aviation, would contribute their respective share of registered capital in the form of cash. Harbin Heli and Harbin Aircraft Group would contribute their shares of registered capital in the form of cash and/or assets. As at the Latest Practicable Date, the relevant assets to be contributed by Harbin Heli and Harbin Aircraft Group to the Joint Venture Company were yet to be determined. In any event, any assets to be contributed by both parties will be subject to the approval by Airbus China and their values will be appraised by an independent PRC accounting firm. Any short fall between the required capital contribution amount and the appraised value of the assets to be injected to the Joint Venture Company will be made up by cash by Harbin Aircraft Group and Harbin Heli respectively.

It is agreed under the Joint Venture Agreement that before completion of construction of its own manufacturing plant, the Joint Venture Company would rent an existing manufacturing plant situated in Harbin, PRC and certain machinery from Harbin Aircraft Group at agreed rental charges. The Directors expect that the charges arising therefrom would not be material.

Profit and losses

Under the terms of the Joint Venture Agreement, any future economic return to be generated by the Joint Venture Company will be shared by the joint venture partners on a pro-rata basis according to their respective equity interest in the Joint Venture Company.

Management of the Joint Venture Company

The Joint Venture Company will comprise seven directors, of whom two shall be appointed by Harbin Aircraft Group, two shall be appointed by Airbus China, one shall be appointed by the Company, one shall be appointed by Hafei Aviation and one shall be appointed by Harbin Heli. Each director shall be appointed for a term of four years commencing from the date of establishment of the Joint Venture Board. The chairman of the Joint Venture Board shall be appointed by Harbin Aircraft Group.

To form a quorum for a meeting of the Joint Venture Board, at least one director appointed by Airbus China and four directors appointed by the other joint venture partners shall be present.

The Board of Directors is the governing body of the Joint Venture Company. Usual business requires approval by a simple majority of directors present at meetings. However, more important matters would require more stringent approval procedures. For example, approval of annual financial reports would require approval by all the Airbus China’s appointed director(s) present, and a majority of the other directors present, at the relevant meeting of the Joint Venture Board; while changes in registered capital and dissolution of the Joint Venture Company would require unanimous votes by all directors present at meetings.

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LETTER FROM SOMERLEY

Shareholders’ approval

The entering into of the Joint Venture Agreement by the Company and Hafei Aviation is subject to approval by their respective shareholders. Pursuant to the Listing Rules, AVIC and its associates shall abstain from voting on the Joint Venture Agreement. The Company proposes to seek approval from the Independent Shareholders of the Joint Venture Agreement at the EGM.

The Joint Venture Agreement sets out the major terms which regulate the rights and obligations of the parties to the Joint Venture Company. We note that those terms are based on normal commercial terms and the economic risk and return are distributed among the joint venture partners on a pro-rata basis, which we consider fair and reasonable.

3. Financial effects

(i) Net assets and earnings

The investment into the Joint Venture Company by the Company and Hafei Aviation will be treated as an interest in associate in the Group’s accounts. Any future economic return from the Joint Venture Company will also be equity accounted for as share of profit or loss from an associate in the Group’s financial statements.

(ii) Cash flow

Based on the terms of the Joint Venture Agreement, the Company and Hafei Aviation shall contribute in aggregate USD30,000,000 (or approximately RMB205,056,000) as capital to the Joint Venture Company. That sum is intended to be financed by internal resources of the Group and would be contributed to the Joint Venture Company in accordance with the time-table as set out in detail in the above paragraph headed “Principal terms of the Joint Venture Agreement”. According to the latest published interim report of the Group, the Group had consolidated cash, cash equivalents and short-term deposits totalling approximately RMB3,343,362,000 as at 30 June 2008. As at 30 June 2008, the Group had consolidated net current liabilities of approximately RMB651,144,000. However, the Group has a material amount of undrawn committed borrowing facilities and on this basis, the Directors are of the view that the capital contribution to be made by the Group pursuant to the Joint Venture Agreement over a period of time is manageable. The latest disclosed figure of the Group’s total undrawn committed borrowing facilities as contained in the 2007 annual report of the Group was approximately RMB1,476,567,000 as at 31 December 2007.

Based on the above, we agree with the Directors that the Group would have adequate cash flow to finance the capital contribution to be made to the Joint Venture Company over a period of time.

RECOMMENDATION

Having taken into account the above principal factors, we consider that the Joint Venture Agreement is 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 Joint Venture Agreement is in

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LETTER FROM SOMERLEY

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 resolution to be proposed at the EGM to approve the entering into of the Joint Venture Agreement.

Yours faithfully, for and on behalf of SOMERLEY LIMITED Sylvia Leung Director

For illustation purpose, amounts denominated in USD in this letter were converted into RMB at the rate of USD1.00 = RMB6.8352 as published at the website of the People’s Bank of China as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX

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.

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GENERAL INFORMATION

APPENDIX

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, supervisors or chief executive of the Company, the following persons (not being a Director, supervisor or chief executive 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
				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

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 Mangement 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.

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GENERAL INFORMATION

APPENDIX

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).

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 2007, 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 EXPERT

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

Name Qualifications 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, 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, Somerley did not have any direct or indirect interest in any assets which has been, since 31 December 2007, 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.

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.

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GENERAL INFORMATION

APPENDIX

7. COMPETING INTERESTS

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

8. NO MATERIAL ADVERSE CHANGE

Since 31 December 2007, being the date to which the latest published audited accounts of the Company have been made up, there have been no material adverse changes in the financial and trading position of the Group.

9. 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.

• (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 proxy form shall prevail over their respective Chinese text in the case of inconsistency.

10. 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 in Hong Kong up to and including 9 April 2009:

• (a) the Joint Venture Agreement;

• (b) the letter dated 20 February 2009 from the Independent Board Committee to the Independent Shareholders, the text of which is set out on page 9 of this circular;

• (c) the letter of advice dated 20 February 2009 from Somerley to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 10 to 16 of this circular;

• (d) the written consent of Somerley referred to in paragraph 6 of this Appendix.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

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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)

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting (“EGM”) of AviChina Industry & Technology Company Limited (the “Company”) will be held at 9:00 a.m. on Thursday, 9 April 2009, at Avic Hotel, No. 10 Yi, Central East Third Ring Road, Chaoyang District, Beijing, the People’s Republic of China to consider, approve, ratify and confirm the following resolution. Unless otherwise indicated, capitalized terms used in this notice and the following resolution shall have the same meanings as those defined in the circular of the Company dated 20 February 2009:

ORDINARY RESOLUTION

1. “ THAT :

2. (a) the terms and conditions of the Joint Venture Agreement (a copy of which has been produced to this meeting marked “A” and initialed by the Chairman of the meeting) be and are hereby approved, ratified and confirmed; and

3. (b) that 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 all matters in connection with the transactions contemplated under the Joint Venture Agreement, 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 Joint Venture Agreement and the supplemental agreement thereto 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, 20 February 2009

Notes:

• (1) Closure of register of members and eligibility to attend the EGM

Pursuant to Article 38 of the Articles of Association of the Company, the H Share register of the Company will be closed from Friday, 20 March 2009 to Thursday, 9 April 2009 (both days inclusive), during which period no transfer of H shares will be effected. Holders of the Company’s H Shares and Domestic Shares whose names appear on the Company’s Register of Members on Thursday, 9 April 2009 are entitled to attend the EGM and to vote in the EGM.

* For identification purpose only.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

In order to qualify to attend and vote in the EGM, holders of the Company’s H shares shall lodge all transfers together with the relevant share certificates to Computershare Hong Kong Investor Services Limited, the Company’s H Shares Registrar, not later than 4:30 p.m. on Thursday, 19 March 2009 at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queens’ Road East, Wanchai, Hong Kong.

• (2) Registration procedures for attending the EGM

• (a) The shareholder or its proxies shall produce his identification proof. If a corporation shareholder’s legal representative or any other person authorized by the board of directors or other governing body of such corporate shareholder attends the EGM, such legal representative or other person shall produce his proof of identity, and proof of designation as legal representative and the valid authorization document of the board of directors or other governing body of such corporate shareholder (as the case may be) to prove the identity and authorisation of that legal representative or other person.

• (b) Holders of H Shares or Domestic Shares who wish to attend the EGM must complete the reply slip to confirm the attendance, and return the same to the correspondence address designated by the Company not later than 20 days before the date of the EGM, i.e. before Friday, 20 March 2009.

• (c) Shareholders may deliver the reply slip by post or facsimile to the correspondence address designated by the Company.

• (3) Proxies

• (a) Any shareholder who is entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend and vote on his behalf at the EGM. A proxy need not be a shareholder of the Company. Any shareholder who wishes to appoint a proxy should first review the form of proxy for use in the EGM.

• (b) Any shareholder shall appoint its proxy in writing. The instrument appointing a proxy must be in writing signed under the hand of the appointer or his attorney duly authorized in writing. If the appointer is a body corporate, the instrument shall be affixed with the seal of the body corporate or shall be signed by the directors of the board of the body corporate or by attorneys duly authorized. If the instrument is signed by an attorney of the appointer, the power of attorney authorizing the attorney to sign or other documents of authorization must be notarially certified. In order to be valid, the form of proxy, and a notarially certified copy of the power of attorney or other documents of authorization, where appropriate, must be delivered in the case of holders of domestic shares, to the correspondence address designated by the Company, and in the case of holders of H Shares, to Computershare Hong Kong Investor Services Limited at the address stated in note 1 above not less than 24 hours before the time for holding the EGM and return of a form of proxy will not preclude a shareholder from attending in person and voting at the EGM if he or she so wishes.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

• (4) The EGM is expected to last for half a day. Shareholders attending the meeting are responsible for their own transportation and accommodation expenses.

Designated address of the P.O. Box 1655, Beijing, the PRC (Postal code: 100009) Company: Telephone No.: 86-10-64094835/06 Facsimile No.: 86-10-64094826 Attention: Mr. Xu Bin/Mr. Wang Yongzhi

• (5) The ordinary resolution will be voted by poll by the Independent Shareholders.

As at the date of this notice, the Board of the Company 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 Fangyong, 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.

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