09:35 CHINA SOUTH AIR<01055> - Announcement (2) the import and export of aircraft and aviation equipment. SAIETC is wholly owned by CSAHC, the controlling shareholder of the Company holding approximately 50.30% equity interest in the Company. SAIETC is therefore a connected person of the Company under the Listing Rules. (iii) Airbus SNC, a company incorporated in Toulouse, as the vendor. The principal business activity of Airbus is that of aircraft manufacturing. To the best of the Directors' knowledge, information and belief having made all reasonable enquiry, each of Airbus and its ultimate beneficial owners is a third party independent of the Company and its connected persons (as defined in the Listing Rules) of the Company, and is not a connected person of the Company. Aircraft to be acquired Five Airbus A380 aircraft Consideration According to the information provided by Airbus, the market price of an A380 aircraft is approximately US$272.6 million. The aggregate consideration for the Airbus Aircraft, which is payable wholly in cash by the Company to Airbus and determined after arm's length negotiation between the parties, is lower than the market price as provided by Airbus. No consideration is payable under the Airbus Aircraft Acquisition Agreement by the Company to SAIETC. Payment and delivery terms The aggregate consideration for the acquisition of Airbus Aircraft is payable by cash in instalments. The Airbus Aircraft will be delivered in stages to the Company through the years 2007 to 2010. Source of funding The Transaction will be wholly funded through commercial loans by commercial banks. Such commercial banks are not and will not be connected persons (as defined in the Listing Rules) of the Company. As of the date hereof, the Company has not entered into any agreement with any of these commercial banks for financing the Transaction. Implications under the Listing Rules As the relevant percentage ratio for the Transaction with regards to the Consideration Test under Rule 14.07 of the Listing Rules is above 25%, but less than 100%, the Transaction constitutes a major transaction under the Listing Rules and is therefore subject to approval by the Company's shareholders under Rule 14.40 of the Listing Rules. CSAHC and its associates are required to abstain from voting in respect of the proposed resolution to approve the Transaction. The Transaction is also required to be disclosed pursuant to the relevant rules and regulations of the Shanghai Stock Exchange. REASONS FOR THE TRANSACTION The Directors believe that the acquisition of the Airbus Aircraft will further improve the operating capacity of the Company, enhance its abilities to provide premium services to its customers, and raise its ability to compete significantly in the industry. Therefore, the Directors believe that the terms of the Airbus Acquisition Agreement are fair and reasonable and in the interests of the shareholders of the Company as a whole. FURTHER INFORMATION The Company will send a circular containing the information required under the Listing Rules in relation to the Transaction within 21 days after the publication of this announcement. A notice to shareholders of the Company convening a general meeting of the shareholders to approve, among other things, the Transaction will be dispatched to the shareholders of the Company as soon as practicable. DEFINITIONS In this announcement, unless the context requires otherwise, the following terms shall have the following meanings: "Airbus" Airbus SNC, a company incorporated in Toulouse "Airbus Aircraft" five A380 aircraft