China Aerospace International Holdings

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION 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. If you have sold all your shares in China Aerospace International Holdings Limited, you should at once hand this Circular and the accompanying form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser. If you are in any doubt as to any aspect of this Circular or as to any action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers. CHINA AEROSPACE INTERNATIONAL HOLDINGS LIMITED 中國航天國際控股有限公司 (Incorporated in Hong Kong with limited liability) (Stock code: 31) MAJOR TRANSACTION MAIN CONTRACTOR CONTRACT REGARDING THE CONSTRUCTION OF THE SHENZHEN AEROSPACE SCIENCE & TECHNOLOGY PLAZA AND CONNECTED TRANSACTION PROVISION OF LAND MORTGAGE UNDER THE FACILITY AGREEMENT WITH A SYNDICATE OF FINANCIAL INSTITUTIONS AND RE-ELECTION OF DIRECTOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING Independent Financial Adviser to the Independent Board Committee of the Company and the Independent Shareholders A notice convening the Extraordinary General Meeting of China Aerospace International Holdings Limited to be held at the Salon One, First Floor, Harbour Grand Kowloon, 20 Tak Fung Street, Hung Hom, Kowloon, Hong Kong, on Friday, 25 March 2011 at 10 a.m. is set out on pages 45 to 46 of this Circular. Whether or not you are able to attend the Extraordinary General Meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the share registrar of the Company, Tricor Standard Limited, of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the Extraordinary General Meeting. Completion and return of a form of proxy will not preclude you from attending and voting at the Extraordinary General Meeting in person if you so wish. 25 January 2011 CONTENTS Page Definitions ......................................................................... 1 Letter from the Board .............................................................. 4 Letter from the Independent Board Committee ...................................... 19 Letter from the Independent Financial Adviser ...................................... 20 Appendix I — General Information ............................................... 30 Appendix II — Financial Information related to the Company and its subsidiaries .............................................. 44 Notice of Extraordinary General Meeting ........................................... 45 –i– DEFINITIONS In this circular, the following expressions shall have the following meanings, unless the context otherwise requires: ‘‘Aerospace Finance’’ 航天科技財務有限責任公司 (Aerospace Science & Technology Finance Company Limited)#, a subsidiary of CASC and its subsidiaries established in the PRC as a limited liability company and whose business activities are subject to the supervision of the China Banking Regulatory Commission; ‘‘Board’’ the Board of Directors of the Company; ‘‘BOC Shenzhen’’ 中國銀行股份有限公司深圳南頭支行 (Bank of China, Shenzhen Nantou Sub-branch); ‘‘CASC’’ China Aerospace Science & Technology Corporation, a state- owned enterprise established in the PRC. As of the Latest Practicable Date, it held a 37.06% shareholding in the Company and is a controlling shareholder of the Company; ‘‘Company’’ China Aerospace International Holdings Limited, a company incorporated in Hong Kong with limited liability, the Shares of which are listed on the Stock Exchange; ‘‘Construction Period’’ the 30-month period from the commencement of the overall construction work as described in the section headed ‘‘The Shenzhen Aerospace Science & Technology Plaza’’; ‘‘Directors’’ the Directors of the Company; ‘‘Extraordinary General the extraordinary general meeting to be convened by the Meeting’’ Company on Friday, 25 March 2011 at 10: 00 a.m. at the Salon One, First Floor, Harbour Grand Kowloon, 20 Tak Fung Street, Hung Hom, Kowloon, Hong Kong for the purpose of approving the Main Contractor Contract, the Facilities and the provision of the Land Mortgage and re-election of Director; ‘‘Facilities’’ the RMB1,500,000,000 facility for a period of 5 years, which will include a bank guarantee of up to RMB150,000,000 and advances of up to RMB1,350,000,000 pursuant to the syndicate loan agreement dated 14 January 2011 with Aerospace Finance, ICBC Shenzhen and BOC Shenzhen, being members of the Finance Syndicate; ‘‘Finance Syndicate’’ Aerospace Finance, ICBC Shenzhen and BOC Shenzhen; ‘‘Group’’ the Company and its subsidiaries; –1– DEFINITIONS ‘‘HK$’’ Hong Kong dollars, the legal currency of the Hong Kong Special Administrative Region of the PRC; ‘‘ICBC Shenzhen’’ 中國工商銀行股份有限公司深圳深圳灣支行 (Industrial and Commercial Bank of China, Shenzhen Shenzhen Bay Sub- branch); ‘‘Independent Board an independent committee of the Board comprising Mr Chow Committee’’ Chan Lum, Charles, Mr Luo Zhenbang and Mr Wang Junyan, being all the independent non-executive Directors; ‘‘Independent Financial Somerley Limited, a corporation licensed under the SFO to Adviser’’ conduct type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Facilities; ‘‘Independent all Shareholders excluding CASC and its associates; Shareholders’’ ‘‘Land Mortgage’’ the mortgage of the land use right in respect of the parcel of land located in Shenzhen, on which the Shenzhen Aerospace Science & Technology Plaza is to be erected, in favour of the Finance Syndicate as security for the performance of the obligations by Shenzhen Aerospace under the Facilities; ‘‘Latest Practicable 24 January 2011, being the latest practicable date for Date’’ ascertaining information for inclusion in this Circular; ‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange; ‘‘Main Contractor’’ 中國建築股份有限公司 (China State Construction Engineering Corporation Limited); ‘‘Main Contractor the main contractor contract dated 23 January 2011 between Contract’’ Shenzhen Aerospace and the Main Contractor; ‘‘PRC’’ The People’s Republic of China (for the purpose of this announcement, excluding the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan); ‘‘RMB’’ Renminbi, the legal currency of the PRC; ‘‘SFO’’ the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong); –2– DEFINITIONS ‘‘Share(s)’’ the ordinary share(s) of par value of HK$0.10 each in the share capital of the Company; ‘‘Shareholders’’ shareholders of the Company; ‘‘Shenzhen Aerospace’’ 深圳市航天高科投資管理有限公司 (Shenzhen Aerospace Technology Investment Company Limited)# (in the announcement of the Company dated 30 November 2007, it was originally proposed that the name of Shenzhen Aerospace be 深圳航天高科技投資管理有限公司 (Shenzhen Aerospace Technology Investment Company Limited)#); and ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited. For the purpose of this Circular, the exchange rate of RMB:HK$ is RMB0.84754: HK$1.00 (being the mid-rate quoted by the People’s Bank of China on 14 January 2011). # These PRC entities do not have English names, the English names set out herein are for identification purpose only. –3– LETTER FROM THE BOARD CHINA AEROSPACE INTERNATIONAL HOLDINGS LIMITED 中國航天國際控股有限公司 (Incorporated in Hong Kong with limited liability) (Stock code: 31) Executive Directors: Registered Office: Mr Li Hongjun (President) Room 1103–1107A Mr Jin Xuesheng 11th Floor, One Harbourfront 18 Tak Fung Street, Hung Hom Non-executive Directors: Kowloon Mr Rui Xiaowu (Chairman) Hong Kong Mr Wu Zhuo (Vice Chairman) Mr Chen Xuechuan Mr Shi Weiguo Dr Chan Ching Har, Eliza Mr Zhou Qingquan Independent Non-Executive Directors: Mr Chow Chan Lum, Charles Mr Luo Zhenbang Mr Wang Junyan 25 January 2011 To the Shareholders of the Company, Dear Sir or Madam, MAJOR TRANSACTION MAIN CONTRACTOR CONTRACT REGARDING THE CONSTRUCTION OF THE SHENZHEN AEROSPACE SCIENCE & TECHNOLOGY PLAZA AND CONNECTED TRANSACTION PROVISION OF LAND MORTGAGE UNDER THE FACILITY AGREEMENT WITH A SYNDICATE OF FINANCIAL INSTITUTIONS AND RE-ELECTION OF DIRECTOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING –4– LETTER FROM THE BOARD INTRODUCTION Further to the announcement and the circular dated 30 November 2007 and 18 December 2007 respectively in respect of the formation of Shenzhen Aerospace, an indirect 60% owned subsidiary of the Company and the announcement dated 14 March 2008 in respect of the acquisition by Shenzhen Aerospace in a public auction of a land use right of a parcel of land in Shenzhen, the PRC, the Board published announcements on 14 and 23 January 2011, respectively, that: (a) Shenzhen Aerospace has adopted a construction plan and budget cost as recommended by a professional project development consultant in respect of the Shenzhen

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