BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) *

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION Important: If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Brilliance China Automotive Holdings Limited, you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, 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 circular. BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) * (Incorporated in Bermuda with limited liability) MAJOR TRANSACTION: FORMATION OF THE JOINT VENTURE WITH BMW, CONNECTED TRANSACTIONS: PROVISION OF GUARANTEE AND ACQUISITION OF FURTHER INTERESTS IN SJAI Independent Financial Adviser to the Independent Board Committee A letter from the independent board committee of Brilliance China Automotive Holdings Limited is set out on page 12 of this circular. A letter from the Asia Investment Capital Limited, the independent financial adviser, containing its advice to the independent board committee of Brilliance China Automotive Holdings Limited is set out on pages 13 to 18 of this circular. A notice convening an special general meeting to be held at Salon III and IV, Mezzanine Floor, Grand Hyatt, 1 Harbour Road, Wanchai, Hong Kong at 8: 30 a.m. on Monday, 26 May, 2003 is set out on pages 68 to 69 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the office of the share registrars of Brilliance China Automotive Holdings Limited in Hong Kong, Computershare Hong Kong Investor Services Limited at Shops , 17th Floor, Hopewell Centre, 183 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 special general meeting or any adjourned meeting (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 special general meeting or any adjourned meeting (as the case may be) should you so wish. * for identification purposes only 9May,2003

2 CONTENTS Pages Definitions... 1 Letter from the Board Introduction... 4 TheJointVenture... 5 TheGuarantee... 6 The Acquisition... 7 Reasonsforandbenefitsofthetransactions... 9 FinancialandtradingprospectsoftheGroup... 9 FinancialeffectsofthetransactionsontheGroup SpecialGeneralMeeting Recommendation Additional information Letter from the Independent Board Committee Letter from Independent Financial Adviser Appendix I Financial information relating to the Group Appendix II General Information Notice of Special General Meeting i

3 DEFINITIONS In this circular, unless otherwise defined, terms used herein shall have the following meaning: Acquisition Acquisition Agreement associates BMW Board China or PRC Company Consideration Date of Establishment Directors Group Guarantee Hong Kong the acquisition of the 9% interests in SJAI by SXID from Shenyang JinBei Automobile Industry pursuant to the Acquisition Agreement; the agreement dated 28 April, 2003 entered into between SXID and Shenyang JinBei Automobile Industry relation to the Acquisition; has the meaning ascribed thereto in the Listing Rules; BMW Holding BV, a wholly owned subsidiary of BMW AG and an independent third party not connected with the directors, chief executives and substantial shareholders of the Company and its subsidiaries and their respective associates; the board of Directors; The People s Republic of China; Brilliance China Automotive Holdings Limited, an exempted company incorporated in Bermuda with limited liability, whose securities are listed on the Stock Exchange and the New York Stock Exchange, Inc., respectively; the consideration in the amount of RMB135 million, which is equivalent to 9% of the registered capital of SJAI of RMB1,500 million; the date on which the business licence for the Joint Venture is issued; the directors of the Company; the Company and its subsidiaries; the guarantee to be provided by the Company to BMW guaranteeing the performance of SJAI of its obligations under the Joint Venture Contract; The Hong Kong Special Administrative Region of the PRC; Huachen (Huachen Automotive Group Holdings Company Limited)*; Indemnities Independent Board Committee the indemnity to be given by each of the Other Shareholders in favour of the Company for an aggregate of 10.9% of the claim by BMW against the Company under the JV Guarantee; the independent committee of Board, comprising of Messrs. Wei Sheng Hong, Huang Anjiang and Yi Min Li, all of whom are independent nonexecutive Directors, formed to advise the Shareholders on the terms of the Guarantee and the Acquisition; * for identification purposes only 1

4 DEFINITIONS Independent Financial Adviser Asia Investment Capital Limited, a deemed licensed corporation under transitional arrangement to carry on types 1, 4, 6 and 9 regulated activities under the SFO; Joint Venture BMW Brilliance Automotive Ltd. ( ), a joint venture to be established in the PRC with each of SJAI and BMW holding 50% of its equity interests; Joint Venture Contract JV Guarantee Latest Practicable Date Listing Rules Mr. He Mr. Wu Mr. Su Ordinary Resolutions Other Shareholders RMB SFO Shareholder(s) Shares the joint venture contract dated 27 March, 2003 entered into between SJAI and BMW for the establishment of the Joint Venture, which is subject to approval by PRC Government authorities; the guarantee to be provided by the Company to BMW guaranteeing the performance of SJAI of its obligations under the Joint Venture Contract; 6 May, 2003, the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular; The Rules Governing the Listing of Securities on the Stock Exchange; Mr. He Tao, also known as Mr. Ho To, an executive Director; Mr. Wu Xiao An, also known as Mr. Ng Siu On, an executive Director; Mr. Su Qiang, also known as Mr. So Keung, an executive Director; the ordinary resolutions to be proposed at the Special General Meeting for considering the approval of the formation of the Joint Venture and the provision of the Guarantee and the Acquisition. An Ordinary Resolution shall refer to any of the ordinary resolutions to be proposed at the Special General Meeting; Shenyang Automobile Industry Asset Management Company Limited and Shenyang JinBei Automobile Industry, which in aggregate are interested directly or indirectly in 19% and 10.9% of SJAI before and after completion of the Acquisition, respectively, all of which are wholly owned by the Shenyang government and are independent third parties not connected with the directors, chief executives and substantial shareholders of the Company and its subsidiaries or their respective associates; Renminbi, the lawful currency of the PRC; Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong); holder(s) of shares of the Company; shares of US$0.01 each; 2

5 DEFINITIONS Shenyang Automotive Shenyang JinBei Automobile Industry (Shenyang Brilliance JinBei Automotive Co., Ltd.) (formerly known as (Shenyang JinBei Passenger Vehicle Manufacturing Company Limited)), a Sino-foreign joint venture whose equity interest is owned as to 51% by the Company; Shenyang JinBei Automobile Industry Company Limited ( ), a company established in the PRC and is interested in 10% of SJAI before completion of the Acquisition and 1% of SJAI after completion of the Acquisition; SJAI Shenyang JinBei Automotive Industry Holdings Company Limited ( ), which is indirectly owned as to 81% by the Company and as to 19% by the Other Shareholders before completion of the Acquisition and as to 89.1% by the Company and as to 10.9% by the Other Shareholders after completion of the Acquisition; Special General Meeting Stock Exchange the special general meeting of the Company to be held at Salon III and IV, Mezzanine Floor, Grand Hyatt, 1 Harbour Road, Waichai, Hong Kong at 8: 30 a.m. on Monday, 26 May, 2003 to consider and, if appropriate, to approve the Ordinary Resolutions, the notice of which is set out on pages 68 to 69 of this circular, or any adjournment thereof; The Stock Exchange of Hong Kong Limited; SXID Shenyang Xinjinbei Investment and Development Co., Ltd. ( ), a company established in the PRC, which is owned as to 90% by Shenyang Xing Yuan Dong Automobile Component Co., Ltd. ( ), a wholly owned subsidiary of the Company and as to 10% by Shenyang Automobile Industry Asset Management Company Limited ( ); and US$ United States dollars, the lawful currency of the United States of America. For the purpose of this circular, the following conversion rates are adopted: Euro 1.00 = RMB9.116 HK$1.00 = RMB1.06 The conversion rates are for the purpose of illustration only and do not constitute a representation that any amounts have been, could have been, or may be exchanged at the above or any other rates. 3

6 LETTER FROM THE BOARD BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) * (Incorporated in Bermuda with limited liability) Executive Directors: Wu Xiao An (also known as Ng Siu On) (Chairman) SuQiang(alsoknownasSoKeung) Hong Xing HeTao(alsoknownasHoTo) Yang Mao Zeng Independent Non-executive Directors: Wei Sheng Hong Huang Anjiang Yi Min Li Registered Office: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda Principal place of business in Hong Kong: Suites , 23rd Floor Great Eagle Centre 23 Harbour Road Wanchai, Hong Kong 9 May 2003 To the Shareholders Dear Sir or Madam, INTRODUCTION MAJOR TRANSACTION: FORMATION OF THE JOINT VENTURE WITH BMW, CONNECTED TRANSACTIONS: PROVISION OF GUARANTEE AND ACQUISITION OF FURTHER INTERESTS IN SJAI On 28 March, 2003, it was announced that SJAI, an indirectly 81%-owned subsidiary of the Company, has on 27 March, 2003 entered into the JV Contract with BMW in relation to the establishment of the Joint Venture in the PRC. It is proposed that prior to the establishment of the Joint Venture, the Company will provide a guarantee to BMW guaranteeing the performance by SJAI of its obligations under the Joint Venture Contract. A reciprocal guarantee will be provided by BMW AG to SJAI in respect of the obligations of BMW under the Joint Venture Contract. On 29 April, 2003, it was announced that the Company intends to acquire further interests in SJAI from Shenyang JinBei Automobile Industry and thereby increasing its effective interests in the Joint Venture. * for identification purposes only 4

7 LETTER FROM THE BOARD An Independent Board Committee, comprising Messrs. Wei Sheng Hong, Huang Anjiang and Yi Min Li, all of whom are independent non-executive Directors, has been formed to advise the Shareholders on the terms of the Guarantee and the Acquisition. Asia Investment Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee on the terms of the Guarantee and the Acquisition. The purpose of this circular is to set out: (a) the terms of the Joint Venture, the Guarantee and the Acquisition; (b) the recommendation of the Independent Board Committee in respect of the provision of the Guarantee and the Acquisition; (c) the advice of the Independent Financial Adviser to the Independent Board Committee in respect of the provision of the Guarantee and the Acquisition; and (d) the notice of the Special General Meeting in respect of the Special General Meeting to be convened at which Ordinary Resolutions will be proposed to consider, and if thought fit, approving the formation of the Joint Venture, the provision of the Guarantee and the Acquisition. THE JOINT VENTURE The Joint Venture Contract On 27 March, 2003, SJAI, an indirect 81%-owned subsidiary of the Company, has entered into the JV Contract with BMW in relation to the establishment of the Joint Venture in the PRC. The JV Contract is subject to the approval by the PRC Government authorities. Upon completion of the Acquisition, SJAI will become an indirectly 89.1%-owned subsidiary of the Company. The Joint Venture The principal terms of the Joint Venture which are set out in the Joint Venture Agreement are as follows: Parties : BMW Holding BV, a wholly owned subsidiary of BMW AG and an independent third party not connected with the directors, chief executives and substantial shareholders of the Company and its subsidiaries or their respective associates. Shenyang JinBei Automotive Industry Holdings Company Limited, an indirectly 81%-owned subsidiary of the Company. Upon completion of the Acquisition, SJAI will become an indirectly 89.1%-owned subsidiary of the Company. Date of establishment : The date on which the business licence for the Joint Venture is issued. Term : 15 years from the Date of Establishment, which may be extended by the mutual consent of the parties to the Joint Venture. 5

8 LETTER FROM THE BOARD Registered capital : Euro 150,000,000, 50% of which, being the sum of Euro 75,000,000 (approximately RMB683,700,000) is to be contributed by SJAI in cash. SJAI s share of registered capital will be contributed as to Euro 60,750,000 (approximately RMB553,797,000) by the Company and as to Euro 14,250,000 (approximately RMB129,903,000) by the Other Shareholders. Upon completion of the Acquisition, SJAI s share of registered capital will be contributed as to Euro 66,825,000 (approximately RMB609,176,700) by the Company and as to Euro 8,175,000 (approximately RMB74,523,300) by the Other Shareholders. The Company s share of the registered capital of SJAI will be contributed in cash and funded from its internal resources. The parties to the Joint Venture have to make their contributions to the registered capital within 90 days from the Date of Establishment. Total investment costs : Euro 450,000,000. The total investment costs in excess of the registered capital, will be raised by the Joint Venture by way of loans from the parties to the Joint Venture or financial institutions pursuant to the approval of the board of the Joint Venture and in accordance with the working capital requirement of the Joint Venture. Scope of business : The business scope of the Joint Venture is to produce and sell BMW passenger cars, engines, parts and components and to provide after-sales services (including repair and maintenance and spare parts) relating to its products. Profit sharing ratio : Profits of the Joint Venture will be shared as to 50% by each of SJAI and BMW, in proportion to their respective proportionate contribution to the registered capital of the Joint Venture. Board of directors : The board of directors of the Joint Venture will comprise of 13 directors, with each of SJAI and BMW appointing six directors and one independent director first nominated by BMW and then by mutual agreement between SJAI and BMW. The establishment of the Joint Venture is subject to the approval of the Chinese Government authorities. The Joint Venture will commence production of BMW-designed sedans in the second half of this year and the level of production of the Joint Venture will depend on the market condition when the Joint Venture commences production. Upon approval of the establishment of the Joint Venture and the issue of the business licence, the Joint Venture will acquire the requisite production equipment and facilities for the purpose of setting up production lines with an expected maximum annual production capacity of 30,000 passenger sedans, in Shenyang, the PRC. THE GUARANTEE It is proposed that prior to the establishment of the Joint Venture, the Company will provide the Guarantee to BMW guaranteeing the performance by SJAI of its obligations under the Joint Venture Contract, including the obligations of SJAI to contribute its proportionate share of registered capital. No fee will be payable to the Company for the provision of the Guarantee. A reciprocal guarantee will be provided by BMW AG, the holding company of BMW, to SJAI in respect of the obligations of BMW under the Joint Venture Contract. 6

9 LETTER FROM THE BOARD Given that the guarantee provided by the Company under the Guarantee will exceed its proportionate interests in the Joint Venture, each of the Other Shareholders will provide the Company with an indemnity indemnifying the Company for up to 10.9% of its liabilities under the Guarantee, representing the percentage of the aggregate interests of the Other Shareholders in SJAI after completion of the Acquisition. As securities, each of Shenyang Automobile Industry Asset Management Company Limited and Shenyang JinBei Automobile Industry will by way of a first legal charge charge 10% interests in the registered capital of SXID and 1% interests in the registered capital of SJAI, representing their respective entire interests in SXID and SJAI after completion of the Acquisition, to the Company, to secure the performance of their obligations under the Indemnities. THE ACQUISITION On 28 April, 2003, SXID has entered into the Acquisition Agreement, the principal terms are as follows: Parties : Shenyang JinBei Automobile Industry, one of the Other Shareholders, as the Vendor and is interested in 10% of the registered capital of SJAI prior to the completion of the Acquisition. Shenyang JinBei Automobile Industry is a substantial shareholder of SJAI, a subsidiary of the Company and is accordingly a connected person of the Company. SXID, a 90% indirectly owned subsidiary of the Company, as the purchaser. Consideration : RMB135 million payable within 60 days of the Acquisition Agreement and will be funded by internal resources of SXID. The Consideration is equivalent to 9% of the registered capital of SJAI of RMB1,500 million. The registered capital of SJAI has not been paid and it is intended that the Consideration will be paid by SXID directly to SJAI as its capital contribution for the 9% interests in the registered capital in one lump sum by cash. Subject matter of the Acquisition : 9% of the registered capital of SJAI. Prior to completion of the Acquisition, SJAI is owned as to 90% by SXID and as to 10% by Shenyang JinBei Automobile Industry. Upon completion of the Acquisition, SJAI will be owned as to 99% by SXID and as to 1% by Shenyang JinBei Automobile Industry. SJAI is an investment holding company formed for the purpose of holding the 50% interests in the Joint Venture. Completion : The Acquisition will be completed upon the registration of the transfer of the 9% interests from Shenyang JinBei Automobile Industry to SXID with the Shenyang City Industry and Commerce Administration Bureau within 30 days of the date of the Acquisition Agreement. 7

10 LETTER FROM THE BOARD The following chart shows the interests of the Company in SXID, SJAI and the Joint Venture before and after the completion of the Acquisition: Before completion of the Acquisition: After completion of the Acquisition: 8

11 LETTER FROM THE BOARD REASONS FOR AND BENEFITS OF THE TRANSACTIONS The Group is engaged in the manufacture and sale of automobiles, including minibuses and Zhonghua sedans and automotive components in China. The Directors are of the view that the establishment of the Joint Venture represents an important strategic move by the Group to strengthen its position as one of the important players in the sedan industry in China and also enables the Group to successfully capture business opportunities in the fast growing automobile industry in China. Upon completion of the Acquisition, the Company will increase its effective interests in the Joint Venture which will enable the Company to increase its share of benefits from the business of Joint Venture. The Guarantee is a mutual arrangement under which both the Company and BMW AG will guarantee the performance of their respective subsidiaries under the Joint Venture Contract. The Directors are of the view that the provision of the Guarantee is in the interest of the Company as this will ensure performance of the obligations of the parties to the Joint Venture. Given that the Company will be indemnified of its liabilities under the Guarantee in respect of the portion representing the interests of the Other Shareholders under the Indemnities, the Directors are of the view that the provision of the Guarantee will not expose the Company to liabilities in excess of its equity interests in the Joint Venture. FINANCIAL AND TRADING PROSPECTS OF THE GROUP Looking back to 2002, the Directors are confident that the Group has pursued an appropriate business strategy by both maintaining the leading position in the Chinese minibus industry and entering into the sedan industry in China. In face of challenging market conditions in the minibus industry during the first quarter of 2002, the Group managed a significant recovery in the unit sales of the Group s minibuses during the last three quarters of 2002 and sold a total of over 65,000 minibuses in The Zhonghua sedan has also received positive market response since its formal launch in August 2002 and sold over 8,800 sedans in By focusing on market trends and launching new products, the Group achieved better operating results in the second half of 2002 compared to the first half. The year 2002 was an important milestone year for the Group. With the formal launch of the Zhonghua sedan and the approval for the project proposal for the joint venture with BMW, the Group has successfully laid the foundation to transform from a leading niche minibus manufacturer to a fully-fledged automobile manufacturer in China. The approval for the production and sale of the Zhonghua sedan May 2002 paved the way for the Company to enter into the sedan market. The Zhonghua sedan was not only well received by the market but also highly regarded within the automobile industry. The Directors believe that being named Car of the Year 2003 in China reflects the high quality workmanship of the Zhonghau sedan. The joint venture with BMW also reaffirms the Company as a market pioneer and leader in China s automotive industry. With the partnership and the solid market presence and experience, the Directors are confident that the Group is well-positioned to capture the growing premium sedan market opportunities in China. Looking ahead to 2003, the Group will continue to strengthen its competitive position in the Chinese automotive industry by implementing focused growth strategies and introducing new products. In particular, the Group will focus on (i) maintaining the leading position in the minibus industry; (ii) building up the brand image and the market share of the Zhonghua sedan; and (iii) establishing the Joint Venture and its related domestic components and distribution networks. The Group will continue to introduce more new versions and models of the minibus and Zhonghua sedan to the market in order to sustain the Group s market share and solidify its competitive edge. The Group will launch new versions of the current model of minibus in the second quarter of 2003 and the domestic version of the Toyota GRANVIA (known as 9

12 LETTER FROM THE BOARD GRACE in China) by end of the year. As for the Zhonghua sedan, the 2.0L and 2.4L automatic transmission versions will be launched in May and October 2003, respectively. The Directors also expected the production of the BMW 3-series sedan by the Joint Venture will commence by the end of FINANCIAL EFFECTS OF THE TRANSACTIONS ON THE GROUP The formation of the Joint Venture, the provision of the Guarantee and the Acquisition will have minimal immediate effect on the Group s earnings, after taking into account of the short-term earnings effect of the Joint Venture and the foregone interest income associated with the contribution of registered capital to be financed by internal resources. Assuming all of the total investment costs in excess of the registered capital of the Joint Venture are financed by way of bank loans to the Joint Venture, the formation of the Joint Venture, the provision of the Guarantee and the Acquisition would have reduced the cash flow of the Group for the financial year ending 31 December, 2003 by approximately RMB632 million, assuming the contribution to the registered capital of the Joint Venture was made at the beginning of second quarter of the current financial year. The above has also taken into consideration of the related foregone interest income and tax effects. Based on the pro forma statement of unaudited adjusted consolidated net tangible assets of the Group as set out in section 3 of Appendix I to this circular, the formation of the Joint Venture, the provision of the Guarantee and the Acquisition will have no impact on both the net assets and the net tangible assets of the Group. SPECIAL GENERAL MEETING The formation of the Joint Venture constitutes a major transaction and the provision of the Guarantee and the Acquisition constitute connected transactions for the Company under the Listing Rules, respectively, and are subject to approval of the Shareholders. A notice convening the Special General Meeting of the Company to be held at Salon III and IV, Mezzanine Floor, Grand Hyatt, 1 Harbour Road, Wanchai, Hong Kong at 8: 30 a.m. on Monday, 26 May, 2003 for the purpose of considering, and if thought fit, the passing of the Ordinary Resolutions. The notice of the Special General Meeting is set out on pages 68 to 69 of this circular. As no Shareholder is interested in the transactions, all Shareholders are eligible to vote on all the Ordinary Resolutions at the Special General Meeting. There is enclosed a form of proxy for use at the Special General Meeting. Whether or not the Shareholders intend to be present at the Special General Meeting, they are requested to complete the form of proxy and return it to the office of share registrars of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shop , 17th Floor, Hopewell Centre, 183 Queen s Road East, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time fixed for holding of the Special General Meeting. Completion and delivery of the form of proxy will not prevent the Shareholders from attending, and voting at the Special General Meeting if they so wish. RECOMMENDATION Having considered the reasons set out herein, the Directors are of the opinion that the terms of the Joint Venture, the Guarantee and the Acquisition are fair and reasonable and the formation of the Joint Venture, the provision of the Guarantee and the Acquisition are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors therefore recommend the Shareholders to vote in favour of the Ordinary Resolutions. 10

13 LETTER FROM THE BOARD ADDITIONAL INFORMATION Your attention is drawn to the additional information set out in the appendices to this circular. Yours faithfully, For and on behalf of the Board Wu Xiao An (also known as Ng Siu On) Chairman 11

14 LETTER FROM THE INDEPENDENT BOARD COMMITTEE BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) * To the Shareholders Dear Sir or Madam, (Incorporated in Bermuda with limited liability) CONNECTED TRANSACTIONS: PROVISION OF GUARANTEE AND ACQUISITION OF FURTHER INTERESTS IN SJAI 9May,2003 We have been appointed as the Independent Board Committee to advise you in connection with the provision of the Guarantee and the Acquisition details of which are set out in the Letter from the Board set out in the circular to Shareholders dated 9 May, 2003 (the Circular ), of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires. Having taken into account the terms of the Guarantee and the Acquisition the principal factors and reasons considered by the Independent Financial Adviser and its advice in relation thereto as set out on pages 13 to 18 of the Circular, we are of the opinion that the provision of the Guarantee and the Acquisition are in the interest of the Company and the Shareholders as a whole and that the terms of the Guarantee and the Acquisition are fair and reasonable so far as the Shareholders are concerned. We therefore recommend that you vote in favour of the Ordinary Resolutions to be proposed at the Special General Meeting to approve the provision of the Guarantee and the Acquisition. Yours faithfully, Wei Sheng Hong Independent non-executive Director Huang Anjiang Independent non-executive Director Yi Min Li Independent non-executive Director * for identification purposes only 12

15 LETTER FROM INDEPENDENT FINANCIAL ADVISER The following is the text of a letter received from the Independent Financial Adviser setting out its opinion to the Independent Board Committee in respect of the provision of the Guarantee and the Acquisition for inclusion in this circular. To the Independent Board Committee of Brilliance China Automotive Holdings Limited Dear Sirs, INTRODUCTION Asia Investment Capital Limited Units , 14th Floor China Merchants Tower Shun Tak Centre Connaught Road Central Hong Kong 9May,2003 CONNECTED TRANSACTIONS: PROVISION OF GUARANTEE AND ACQUISITION OF FURTHER INTEREST IN SJAI We refer to our appointment to advise the Independent Board Committee in relation to the provision of the Guarantee and the terms of the Acquisition, details of which are set out in the circular dated 9 May, 2003 issued by the Company (the Circular ) to the Shareholders in which this letter is reproduced. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular. The provision of the Guarantee and the Acquisition constitute connected transactions under Rule of the Listing Rules and are accordingly subject to the approval of the Shareholders. As such, the Company will convene the Special General Meeting to approve the provision of the Guarantee and the Acquisition by the Shareholders. The Circular containing, amongst other things, the information relating to the provision of the Guarantee and the Acquisition, the recommendation from the Independent Board Committee and this advice letter, is despatched to the Shareholders. Asia Investment Capital Limited is independent from and not connected with the Group, Huachen, SJAI, BMW, the Other Shareholders or their respective associates and is accordingly considered suitable to give independent advice. In formulating our opinion, we have relied on the accuracy of the information, representations contained in the Circular and have assumed that all information and representations made or referred to in the Circular were true at the time they were made and continue to be true as at the date of the Circular. We have also relied on our discussion with the Directors regarding the information and representations contained in the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify relying on the accuracy of the information containedinthecircularandtoprovideareasonablebasisforouradvice.wehavenoreasontosuspectthat any material facts have been omitted or withheld from the information contained or opinions expressed in the Circular nor to doubt the truth, accuracy and completeness of the information and representations 13

16 LETTER FROM INDEPENDENT FINANCIAL ADVISER provided to us by the Directors. Our appointment to advise the Independent Board Committee is limited to the provision of the Guarantee and the terms of the Acquisition and we have not conducted an independent in-depth investigation into the business and affairs (including any legal proceedings) of the Group, Huachen, SJAI, BMW, the Other Shareholders and their respective associates nor have we carried out any independent verification of the information supplied. PRINCIPAL FACTORS AND REASONS CONSIDERED FOR THE PROVISION OF THE GUARANTEE In arriving at our opinion regarding the provision of the Guarantee, we have considered the following principal factors and reasons: 1. Rationale of the provision of the Guarantee by the Company The Group is engaged in the manufacture and sale of automobiles, including minibuses and Zhonghua sedans and automotive components in China. According to a research report recently issued by an international securities firm, the China automobiles industry is expected to record an encouraging growth of 35% in terms of annual unit sales of sedan for the year ending 31st December, Given that the Joint Venture is established for the purpose of producing BMW-designed sedans which are targeted for sale in the China market, we concur with the Directors view that the establishment of the Joint Venture represents an important strategic move by the Group to strengthen its position as one of the important players in the sedan industry in China and to capture business opportunities in the fast growing automobile industry in China. Given further that the Guarantee forms part of the reciprocal agreement under which both the Company and BMW AG will guarantee the performance of their respective subsidiaries under the Joint Venture Contract, we consider that there is a commercial rationale to provide the Guarantee in the context of the Joint Venture Contract and it is a crucial step to the Group s strategy to establish the Joint Venture with BMW. As set out in the letter from the Board (the Letter from the Board ), it is proposed that prior to the establishment of the Joint Venture, the Company will provide the Guarantee to BMW guaranteeing the performance of SJAI in relation to its obligations under the Joint Venture Contract, including the obligations of SJAI to contribute its proportionate share of registered capital. No fee will be payable to the Company for the provision of the Guarantee. In addition, a reciprocal guarantee will be provided by BMW AG, the holding company of BMW, to SJAI in respect of the obligations of BMW under the Joint Venture Contract. The guarantee provided by the Company under the Guarantee will exceed its proportionate interests in the Joint Venture. Notwithstanding that, the Directors have taken steps to mitigate the exposure of the Company by requesting the Other Shareholders to provide indemnities to the Company indemnifying the Company of its liabilities under the Guarantee for the portion representing their respective interests in SJAI. The creditability of the Other Shareholders to provide the Indemnities is further discussed under the paragraph headed the Indemnities below. In fact, we noted from our discussion with the management that there is underlying commercial rationale for the Company to provide the Guarantee in its sole capacity for reasons that: (i) the Other Shareholders, which are wholly-owned subsidiaries of Shenyang municipal government, have been assisting the Group in the course of application of approvals for the establishment of the Joint Venture with the relevant Chinese governmental authorities; and 14

17 LETTER FROM INDEPENDENT FINANCIAL ADVISER (ii) the Company is the controlling shareholder of SJAI holding 81% (or 89.1% immediately after the completion of the Acquisition) attributable interest therein and hence it is reasonable for the Company (rather than the Other Shareholders) which possesses the overriding control of SJAI in terms of management and operation to be responsible in shouldering the obligations of SJAI. On the above basis, we consider that the provision of the Guarantee is, on balance, in the interests of the Company after taking into account a broader perspective, in particular the intangible benefits that the Company has enjoyed and are expected to enjoy from the close relationship between the Other Shareholders and the PRC governmental authorities in relation to the establishment and the future operation of the Joint Venture. 2. SJAI s obligations to be guaranteed We have reviewed the terms of the Joint Venture Contract in so far as they relate to SJAI s obligations thereunder and for which performance the Company has to guarantee to BMW under the Guarantee. We noted that SJAI is obliged under the Joint Venture Contract, amongst other things, to (i) contribute its share of the registered capital of the Joint Venture and meet any financial commitment in relation to the Joint Venture (such as providing its share of the shareholders loans to the Joint Venture or the possible contribution of any future increase in registered capital of the Joint Venture subject to relevant approvals); (ii) assist in the establishment of the Joint Venture, provide administration support to the business operation and activities of the Joint Venture and ensure the Joint Venture to lease or acquire necessary land site, factory buildings, plant/office premises and equipment with title documents subject to relevant contracts to be entered into and all necessary approvals; and (iii) undertake not to engage in competing business cooperation (through itself or its affiliates) with the products of the Joint Venture or any business of the Joint Venture without written consent from BMW and not to use technology and know-how or other intellectual properties obtained from BMW without approval from BMW during or after the term of the Joint Venture or early termination of the Joint Venture Contract. We were confirmed by the Directors that all obligations of SJAI under the Joint Venture Contract (i) are to be and can be fulfilled out of SJAI s proportionate share of the registered capital of the Joint Venture of Euro75,000,000; and (ii) are in line with those of the Group s obligations under similar joint venture contracts entered into between the Group and other independent third parties. Based on such confirmation, we consider that the obligations to be guaranteed by the Company to its subsidiaries under the Guarantee are in line with the normal practice of the Group. We are not aware of any abnormal or unusual obligations to be guaranteed by the Company other than providing the Guarantee in excess of its proportionate interests in the Joint Venture (which is to be indemnified under the Indemnities). 3. The Indemnities Pursuant to the Indemnities, the Company will be compensated on a dollar-to-dollar basis by the Other Shareholders. The Indemnities will be secured by a first legal charge over the entire interests in the SJAI and SXID to be held by the Other Shareholders before completion of the Acquisition with an aggregate worth of RMB285 million (approximately HK$269 million), equivalent to the worth of the attributable interests of 19.0% of the Other Shareholders in SJAI (or RMB163.5 million (approximately HK$154 million), equivalent to the worth of the attributable interests of 10.9% of the Other Shareholders in SJAI immediately after the Acquisition), and the Company is entitled to enforce its right under the Indemnities. Under the Indemnities, each of the Other Shareholders shall undertake not to dispose of or transfer the secured assets during the term of the Indemnities. In 15

18 LETTER FROM INDEPENDENT FINANCIAL ADVISER addition to the non-disposal undertaking, each of the Other Shareholders shall also undertake to take all necessary actions to assist the Company in enforcing the security in the event they fail to indemnify the Company after being notified. Whilst the Guarantee shall be confined to be effective within the term of the Joint Venture, we noted that the obligations of the Other Shareholders under the Indemnities shall survive even after the expiry of the term of the Joint Venture so as to ensure that the Company is covered under the Indemnities. Upon further enquiry, the Directors confirmed that (i) the total assets and (ii) the cash and cash equivalent of the Other Shareholders as at 31 December 2002 were (i) approximately RMB13 billion (approximately HK$12 billion) and (ii) approximately RMB35 million (approximately HK$33 million) respectively based on audited accounts of the Other Shareholders. In addition, based on the latest unaudited management accounts of the Other Shareholders, the cash and cash equivalent of the Other Shareholders amounted to around RMB190 million (approximately HK$179 million) as at 30 April, Furthermore, the Directors confirmed that the Other Shareholders are wholly owned by the Shenyang municipal government and therefore the Directors are confident that the Other Shareholders will be capable to fully indemnify the Group under the Indemnities. Based on a report from the National Bureau Statistics of Shenyang ( ), the Gross Domestic Product of Shenyang city for the year 2002 was approximately RMB140 billion (approximately HK$132 billion) and domestic financial income for Shenyang municipal government was approximately RMB11 billion (approximately HK$10 billion). On the above basis, we concur with the Directors view that the default risk of the Other Shareholders is low. Notwithstanding that the Other Shareholders have provided the Indemnities to the Company in association with the relevant assets to secure the Indemnities, there is a potential risk that the Other Shareholders may default under the Joint Venture Contract and fail to indemnify fully the Company on its obligation under the Joint Venture Contract. However, as the Company will be beneficially interested in 81% (or 89.1% immediately upon the completion of the Acquisition) shareholding of SJAI and is in a position to control SJAI control in terms of its management and operation, it is understandable that the Company has to proactively take up the obligations of SJAI in order to avoid any disruption to the business operation of the Joint Venture. RECOMMENDATION FOR THE GUARANTEE Having considered the above factors, in particular the commercial rationale behind the provision of the Guarantee and that the Group s risk exposure is to be mitigated by the Indemnities from the Other Shareholders, we consider that the provision of the Guarantee is, on balance, fair and reasonable so far as the Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Shareholders to vote in favour of the Ordinary Resolution approving the Guarantee to be proposed at the Special General Meeting. PRINCIPAL FACTORS AND REASONS CONSIDERED FOR THE ACQUISITION In arriving at our opinion regarding the Acquisition, we have considered the following principal factors and reasons: 1. Rationale of the Acquisition As set out in the Letter from the Board, the Acquisition will enable the Company to increase its interest in SJAI which would in turn increase its share of benefits from the Joint Venture. We concur with the Directors view that the Acquisition would enable the Company to capture further upside potential from the business of the Joint Venture. However, that the Acquisition may also expose the Company to a greater degree of business risk from the Joint Venture. 16

19 LETTER FROM INDEPENDENT FINANCIAL ADVISER Notwithstanding such risk, we consider that there is a commercial rationale to put forward the Acquisition given that (i) (ii) the Company will, with or without the Acquisition, be possessing an absolute control in SJAI (which in turn is one of the two partners of the Joint Venture); and the Acquisition serves to increase the indirect interest of the Company in the Joint Venture and the Group s underlying strategy is to set up the Joint Venture which represents an important strategic move by the Group to strengthen its position as one of the important players in the sedan industry in China and to capture business opportunities in the fast growing automobile industry in China. 2. Terms of the Acquisition (a) Consideration Pursuant to the Acquisition Agreement, SXID has agreed to purchase a 9% shareholding interests in SJAI from Shenyang JinBei Automobile Industry for the consideration of RMB135 million (approximately HK$127 million), equivalent to the corresponding 9% of the registered capital of SJAI. As set out in the Letter from the Board, the Consideration was determined with reference to the registered capital of SJAI of RMB1,500 million (approximately HK$1,415 million). Upon enquiry, the Directors confirm that SJAI is an investment holding company formed for the purpose of holding the interests in the Joint Venture and the registered capital of SJAI has not been paid and therefore, the Consideration is equivalent to the proportionate cost of investment of Shenyang JinBei Automobile Industry in SJAI. On the above basis, we consider that the level of the Consideration is fair and acceptable as far as the Shareholders are concerned. (b) Settlement of the Consideration Pursuant to the Acquisition Agreement, the Consideration will be funded from the internal resources of the Group and is payable within 60 days of the date of the Acquisition Agreement in one lump sum by cash. Based on the annual report of the Company for the year ended 31st December, 2002, the Group has available liquid internal resources of approximately RMB1,040 million (approximately HK$981 million), based on the aggregate of (i) the cash and cash equivalents of approximately RMB1,289 million (approximately HK$1,216 million) and shortterm bank deposits of RMB773 million (approximately HK$729 million); and (ii) the capital commitments and operating leases commitment of the Group totalled approximately RMB1,022 million (approximately HK$964 million). On such basis, the Consideration represents approximately 13% of the then available liquid internal resources of the Group as at 31st December, In view that the registered capital of SJAI has not been paid and as a result of the Acquisition, the Directors confirmed that the Consideration payable by the Company, together with its original share of the registered capital of RMB1,350 million (i.e. 90% of RMB1,500 million of the registered capital of SJAI), will be directly contributed to the registered capital of SJAI. Assuming the present available liquid internal resources of the Group is staying at similar level as those as at 31st December, 2002, we consider that the Company will have sufficient internal resources to settle the Consideration and the manner of settlement of the Consideration is acceptable. 17

20 LETTER FROM INDEPENDENT FINANCIAL ADVISER 3. Financial effects arising from the Acquisition on the Group As set out in the Letter from the Board and the pro forma statement of net tangible asset of unaudited adjusted consolidated net tangible assets of the Group in paragraph 3 to Appendix I, immediately upon completion of the Acquisition, there will be no financial impact on the levels of earning, net asset value, gearing and liquidity of the Company. RECOMMENDATION FOR THE ACQUISITION Having considered the above factors, we consider that the terms of the Acquisition are fair and reasonable so far as the Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to advise the Shareholders to vote in favour of the Ordinary Resolution approving the Acquisition to be proposed at the Special General Meeting. Yours faithfully, For and on behalf of Asia Investment Capital Limited Alan Fung Managing Director 18

21 1. SUMMARY OF FINANCIAL INFORMATION The following is a summary of the audited consolidated profit and loss accounts of the Group under the HKGAAP for the three years ended 31 December, 2002: Year Ended and as of 31st December, 2000 RMB RMB RMB (Amounts in thousands except earnings per share) Profit and Loss Account Data: Turnover 7,319,455 6,218,436 6,306,430 Cost of Sales (5,411,134) (4,307,988) (4,436,155) Selling and Administrative Expenses (989,511) (657,931) (575,657) Net Profit 650, , ,629 Basic earnings per share RMB RMB RMB Balance Sheet Data: Total Assets 13,876,753 11,676,823 10,537,104 Current Assets 8,262,951 6,127,118 6,076,716 Current Liabilities 7,332,746 5,741,741 6,177,693 Shareholders Equity 6,028,255 5,412,703 3,831,474 19

22 2. AUDITED CONSOLIDATED ACCOUNTS Set out below are the audited consolidated profit and loss accounts for the two years ended 31 December, 2002, the audited consolidated balance sheets as at 31 December, 2001 and as at 31 December, 2002 and the audited consolidated cash flow statements for the two years ended 31 December, 2002 together with the relevant notes, including the principal accounting policies, as extracted from the annual report of the Company for the year 2002: Consolidated Profit and Loss Account Note(s) RMB 000 RMB 000 Turnover 3, 35a 7,319,455 6,218,436 Cost of sales 35a (5,411,134) (4,307,988) Gross profit 1,908,321 1,910,448 Other revenue 3 51,296 38,863 Selling expenses 35a (364,491) (275,872) General and administrative expenses 35a, f (625,020) (382,059) Other operating expenses (50,286) (35,405) Operating profit 4 919,820 1,255,975 Interest income 3, 5, 35f 43, ,285 Interest expense 6 (171,286) (178,028) Share of profits less losses of associated companies 113,428 45,448 Profit before taxation 905,579 1,229,680 Taxation 7 (146,610) (121,655) Profit after taxation 758,969 1,108,025 Minority interests (108,122) (207,756) Profit attributable to shareholders 9 650, ,269 Dividends declared 10 35,295 35,306 Basic earnings per share 13 RMB RMB Diluted earnings per share 13 N/A N/A 20