09:28 AVICHINA<02357> - Announcement (1) The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. * 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 The Directors of AviChina Industry & Technology Company Limited (the `Company') hereby announces that its wholly-owned subsidiary entered into an equity interest transfer agreement (the `Agreement') on 14 October 2004 with a connected party (as defined in the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the `Listing Rules')). The transaction shall constitute a connected transaction of the Company under the Listing Rules. However, as the applicable percentage ratios referred to in Rule 14.07 of the Listing Rules are lower than 2.5% (asset ratio: 1.46%, profits test: 0.88%, revenue ratio: 2.28%, consideration ratio: 2.40%), the transaction shall therefore not be subject to approval by independent shareholders under Rule 14A.32 of the Listing Rules. Details of the Agreement will be disclosed in the Company's next annual report and accounts. SUMMARY Jiangxi Changhe Automobile Co., Ltd. (`Changhe Auto') is a joint stock limited company, whose shares are listed on the Shanghai Stock Exchange on 6 July 2001 with a total of 410,000,000 shares, and is mainly engaged in the design, manufacture and sales of sedans and mini-cars. The shares of Changhe Auto are held as to 63.88% and 7.7% by Jiangxi Changhe Aviation Industry Company Limited (`Changhe Industry Company') and Hefei Changhe Automobile Company Limited (`Hefei Changhe') respectively as promoters since 2001, 1.59% by the other four promoters while the remaining 26.83% are held by public shareholders. When the Company was promoted and established on 5 March 2003, Changhe Industry Company, including 63.88% shares in Changhe Auto held by it, was injected into the Company. The unaudited financial information of Changhe Auto for 2002 and 2003 years calculated according to the International Accounting Standards and the interim financial information for 2004 are as follows: For the year For the six ended 31 months ended December 30 June 2002 2003 2004 RMB (HK$) RMB (HK$) RMB (HK$) Profit after 81,739,135 72,904,313 27,345,626 taxation and (77,112,392) (68,777,654) (25,797,760) extraordinary items Profit before 109,609,794 87,847,082 34,710,376 taxation and (103,405,466) (82,874,606) (32,745,638) extraordinary items 31st December 2003 30th June 2004 RMB (HK$) RMB (HK$) Total assets 3,905,241,188 3,992,313,467 (3,684,189,800) (3,766,333,459) Net assets 1,357,115,920 1,377,536,682 (1,280,298,038) (1,299,562,908) The Company is mainly engaged in the research and development, manufacture and sales of vehicles and civilian aircraft. Changhe Industry Company is mainly engaged in the manufacture and sales of helicopters, automobiles and automobile spare parts. Hefei Changhe is mainly engaged in the development, manufacture and sales of mini-car spare parts. In order to increase its interests in Changhe Auto, Changhe Industry Company entered into the Agreement with Hefei Changhe in respect of the acquisition of the 7.70% shares in Changhe Auto held by Hefei Changhe on 14 October 2004. Upon the completion of the transaction, Changhe Industry Company will hold 71.58% shares in Changhe Auto.