BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION 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 licensed securities dealer or other registered institution 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, together with the accompanying form of proxy 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. BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) * (Incorporated in Bermuda with limited liability) (Stock Code: 1114) (1) CONNECTED AND MAJOR TRANSACTION ACQUISITION OF 39.1% EQUITY INTEREST IN SHENYANG BRILLIANCE JINBEI AUTOMOBILE CO., LTD. AND (2) MAJOR TRANSACTION DISPOSAL OF 49% EQUITY INTEREST IN SHENYANG BRILLIANCE JINBEI AUTOMOBILE CO., LTD. Financial Adviser to the Company Rothschild (Hong Kong) Limited A letter from the Board is set out on pages 5 to 16 of this circular. A notice convening a special general meeting of Brilliance China Automotive Holdings Limited to be held at Tian & Di Function Room, 7th Floor, The Landmark Mandarin Oriental, The Landmark, 15 Queen s Road Central, Central, Hong Kong on Friday, October 20, 2017 at 9:00 a.m. is set out on pages N-1 to N-3 of this circular. Whether or not you are able to attend the special general meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the office of the branch registrar of Brilliance China Automotive Holdings Limited in Hong Kong, Computershare Hong Kong Investor Services Limited at 17M 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 (i.e. at or before 9:00 a.m. on Wednesday, October 18, 2017 (Hong Kong time)) 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 thereof (as the case may be) if you so wish. * For identification purposes only September 18, 2017

2 CONTENTS Page Definitions... 1 Letter from the Board... 5 Appendix I Financial Information of the Group... I-1 Appendix II Accountants Report of the Target Company... II-1 Appendix III Unaudited Pro Forma Financial Information of the Group... III-1 Appendix IV Management Discussion and Analysis of the Target Company... IV-1 Appendix V General Information... V-1 Notice of Special General Meeting... N-1

3 DEFINITIONS In this circular, unless the context otherwise requires, the following expressions shall have the following respective meanings: Acquisition the proposed acquisition of 39.1% equity interest in the Target Company by JBIH from JBC in accordance with the terms and conditions of the Acquisition Agreement Acquisition Agreement the equity interest transfer agreement dated June 23, 2017, entered into by and between JBIH and JBC in relation to the Acquisition AIC applicable percentage ratios Approvals associate(s) Board Bye-laws Administration of Industry and Commerce of the PRC the five ratios as set out in the Rule of the Listing Rules to be applied for determining the classification of a transaction under the Listing Rules all the necessary government and other approvals in the PRC and Hong Kong including: (i) project approval by Liaoning Provincial Development and Reform Commission of the PRC; (ii) State-owned assets related approval from State-owned Assets Supervision and Administration Commission of Liaoning Provincial Government with respect to the Disposal; (iii) compliance with the requirements under the applicable Listing Rules by the Company for and in connection with the Framework Cooperation Agreement and the transactions contemplated thereunder (including, but not limited to, obtaining the necessary shareholders approvals, if required); (iv) merger control clearance by MOFCOM; and (v) local MOFCOM and AIC approval and registration formalities has the meaning ascribed thereto under the Listing Rules the board of Directors the bye-laws adopted by the Company and as amended from time to time 1

4 DEFINITIONS Capital Increase Plan Company Completion connected persons controlling shareholder Director(s) Disposal Framework Cooperation Agreement Group HK$ Hong Kong the registered capital of the Target Company has been increased from its current registered capital by the sum of: (i) an amount of approximately RMB2,600,000,000 through conversion of certain intragroup debts in the same amount owed to the Company by the Target Company; (ii) an amount of approximately RMB1,000,000,000 which will be paid into the registered capital of the Target Company in cash by the Company; and (iii) an amount equal to the lower of either: (1) the estimated net loss of the Target Company (including any potential impairment) as agreed by the parties for the full year of 2017, or (2) RMB1,400,000,000, subject to any adjustment which may be mutually agreed by the parties Brilliance China Automotive Holdings Limited ( *), an exempted company incorporated in Bermuda with limited liability on June 9, 1992, whose shares are listed on the main board of the Stock Exchange (stock code: 1114) completion of the Disposal as evidenced by Renault having been duly registered as a 49% shareholder of the Target Company pursuant to the terms of the Framework Cooperation Agreement has the meaning ascribed thereto under the Listing Rules has the meaning ascribed thereto under the Listing Rules the director(s) of the Company the proposed disposal of 49% equity interest in the Target Company by the Group to Renault in accordance with the terms and conditions of the Framework Cooperation Agreement the framework cooperation agreement dated July 4, 2017 entered into by and between the Company and Renault in relation to, among others, the transfer of 49% equity interest in the Target Company from the Group to Renault the Company and its subsidiaries Hong Kong dollars, the lawful currency of Hong Kong the Hong Kong Special Administrative Region of the PRC 2

5 DEFINITIONS Huachen independent third party(ies) INEDs JBC JBC Group JBIH Latest Practicable Date LCV Listing Rules Long-stop Date MIIT MOFCOM MPV NEV Huachen Automotive Group Holdings Company Limited* ( ), the controlling shareholder of the Company which was interested in approximately 42.32% of the issued share capital of the Company as at the Latest Practicable Date a person or company which is not considered a connected person or an associate of a connected person of the Company under the Listing Rules the independent non-executive Directors of the Company Shenyang JinBei Automotive Co., Ltd.* ( ), a company incorporated in the PRC on May 14, 1984, whose shares are listed on the Shanghai Stock Exchange (stock code: ) JBC and its subsidiaries Shenyang JinBei Automotive Industry Holdings Co., Ltd. ( ), a limited liability company established in the PRC on July 5, 2002 and an indirectly wholly-owned subsidiary of the Company September 13, 2017, being the latest practicable date prior to the printing of this circular to ascertain certain information contained herein light commercial vehicles the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended from time to time the date falling 12 months from the date of the Framework Cooperation Agreement (or any other date mutually agreed by the Group and Renault) Ministry of Industry and Information Technology of the PRC Ministry of Commerce of the PRC multi-purpose vehicles new energy vehicles 3

6 DEFINITIONS PRC PRC GAAP PRC Governmental Body Renault RMB SFO SGM Share(s) Shareholder(s) Stock Exchange Target Company US$ the People s Republic of China (for the purpose of this circular, excluding Hong Kong, the Macao Special Administrative Region of the PRC and Taiwan) the generally accepted accounting principles in the PRC has the meaning ascribed thereto under the Listing Rules Renault SAS, a company incorporated under the laws of France whose registered office is at 13/15 quai Alphonse le Gallo, Boulogne Billancourt, France Renminbi yuan, the lawful currency of the PRC the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended from time to time the special general meeting of the Company to be convened at Tian & Di Function Room, 7th Floor, The Landmark Mandarin Oriental, The Landmark, 15 Queen s Road Central, Central, Hong Kong at 9:00 a.m. on Friday, October 20, 2017 for the purpose of considering, and if thought fit, approving the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder shares at par value of US$0.01 each in the share capital of the Company holder(s) of the Share(s) The Stock Exchange of Hong Kong Limited Shenyang Brilliance JinBei Automobile Co., Ltd.* ( ), a sino-foreign equity joint venture established in the PRC on July 19, 1991 and a subsidiary of the Company whose effective equity interest is owned as to 60.9% by the Company and as to 39.1% by JBC as at the Latest Practicable Date United States dollars, the lawful currency of the United States % per cent * Denotes English translation of the name of a Chinese company or entity or vice versa and is provided for identification purposes only. 4

7 LETTER FROM THE BOARD BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED ( ) * (Incorporated in Bermuda with limited liability) (Stock Code: 1114) Executive Directors: Mr. Wu Xiao An (also known as Mr. Ng Siu On) (chairman) Mr. Qi Yumin (chief executive officer) Mr. Qian Zuming (chief financial officer) Mr. Zhang Wei Independent Non-executive Directors: Mr. Xu Bingjin Mr. Song Jian Mr. Jiang Bo Registered Office: Canon s Court 22 Victoria Street Hamilton HM12 Bermuda Head office and principal place of business: Suites Chater House 8 Connaught Road Central Hong Kong September 18, 2017 To the Shareholders Dear Sir or Madam, (1) CONNECTED AND MAJOR TRANSACTION ACQUISITION OF 39.1% EQUITY INTEREST IN SHENYANG BRILLIANCE JINBEI AUTOMOBILE CO., LTD. AND (2) MAJOR TRANSACTION DISPOSAL OF 49% EQUITY INTEREST IN SHENYANG BRILLIANCE JINBEI AUTOMOBILE CO., LTD. INTRODUCTION We refer to the announcements of the Company dated June 23 and July 4, 2017, respectively, in relation to (i) the Acquisition Agreement, pursuant to which JBIH has agreed to acquire, and JBC has agreed to dispose of, 39.1% equity interest in the Target Company for a cash consideration of RMB1.0, subject to the terms and conditions thereof; and (ii) the Framework Cooperation Agreement, pursuant to which Renault has agreed to acquire, and the Company has agreed to dispose of, the 49% equity interest in the Target Company for a cash consideration of RMB1.0, subject to the terms and conditions thereof. * For identification purposes only 5

8 LETTER FROM THE BOARD At the forthcoming SGM, ordinary resolutions will be proposed to seek the Shareholders approval for, among other things, the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder. The purpose of this circular is to provide you with, among other things, (i) details of the Acquisition Agreement and the Framework Cooperation Agreement; (ii) the financial information of the Group and the Target Company; (iii) other information as required to be disclosed under the Listing Rules; and (iv) a notice convening the SGM for considering and, if thought fit, approving, confirming and ratifying the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder. THE ACQUISITION AGREEMENT On June 23, 2017, JBIH and JBC entered into the Acquisition Agreement, pursuant to which JBIH has agreed to acquire, and JBC has agreed to dispose of, 39.1% equity interest in the Target Company for a cash consideration of RMB1.0, subject to the terms and conditions of the Acquisition Agreement, which are described in more details below. 1. Date June 23, Parties (a) (b) JBIH (as purchaser) JBC (as vendor) As at the Latest Practicable Date, JBC is interested in 39.1% equity interest in the Target Company, while the remaining 60.9% is owned by the Group. According to the interim report issued by JBC on August 24, 2017, none of its shareholders held 30% or more shareholding interest in JBC and its single largest shareholder was Shenyang Automobile Industry Asset Management Company Limited ( ) ( SAIAM ), holding approximately 24.38% shareholding interest in JBC as at June 30, To the best of the Directors knowledge, SAIAM is beneficially wholly owned by the State-owned Assets Supervision and Administration Commission of Shenyang Municipal Government ( ), which is an institution established under Shenyang Municipal Government ( ) immediately under Liaoning Provincial Government ( ). Hence, the ultimate beneficial owner of SAIAM is a PRC Governmental Body and is not regarded as a connected person of the Company pursuant to Rule 14A.10 of the Listing Rules. To the best of the Directors information, knowledge and belief, having made all reasonable enquiries, save as disclosed above, both JBC and SAIAM are independent of the Company and its connected persons. Accordingly, JBC is a connected person of the Company only by virtue of being a substantial shareholder of the Company s non-wholly owned subsidiary under Chapter 14A of the Listing Rules. 3. Interests to be acquired The 39.1% equity interest in the Target Company held by JBC 6

9 LETTER FROM THE BOARD 4. Consideration The consideration for the transfer of 39.1% equity interest in the Target Company from JBC to JBIH is RMB1.0. The consideration was determined after arm s length negotiations between the parties pursuant to the Acquisition Agreement, after taking into account the net liabilities attributable to parent of the Target Company of RMB3.61 billion as at December 31, 2016, as well as losses incurred from the operations of the Target Company in the past years. 5. Payment Terms The consideration for the Acquisition will be settled by cash on the date of completion of the Acquisition. 6. Conditions precedent The Acquisition shall be conditional on the following conditions having been satisfied: (i) the Company, JBIH and JBC having obtained their respective internal corporate approvals and authorizations; (ii) the Company and JBC having complied with all applicable requirements under the Listing Rules and the listing rules of Shanghai Stock Exchange, respectively, in relation to the Acquisition Agreement and the transactions contemplated thereunder; and (iii) the Acquisition having been approved by the competent PRC government authorities (including, without limitation, the competent State-owned assets supervision and administration authority). To the best of the Directors information, knowledge and belief, none of the above conditions precedent had been fulfilled as at the Latest Practicable Date. There is no long stop date for satisfaction of the conditions precedent of the Acquisition Agreement. 7. Completion The completion of the Acquisition will take place upon the registration of the transfer of 39.1% equity interest in the Target Company with the competent AIC, which will occur within 90 days after satisfaction of the conditions precedent set out under the Acquisition Agreement. Upon completion of the Acquisition, JBC will cease to own any equity interest in the Target Company, and the Target Company will become a wholly-owned subsidiary of the Company. 7

10 LETTER FROM THE BOARD THE FRAMEWORK COOPERATION AGREEMENT On July 4, 2017, the Company and Renault entered into the Framework Cooperation Agreement, pursuant to which Renault has agreed to acquire, and the Company has agreed to dispose of, 49% equity interest in the Target Company for a cash consideration of RMB1.0, subject to the terms and conditions of the Framework Cooperation Agreement, which are described in more details below. 1. Date July 4, Parties (a) The Company (as vendor) (b) Renault (as purchaser) To the best of the Directors information, knowledge and belief, having made all reasonable enquiry, Renault and its ultimate beneficial owners are independent of the Company and its connected persons. 3. Interests to be disposed of The 49% equity interest in the Target Company held by the Group 4. Consideration The consideration for the transfer of the 49% equity interest in the Target Company from the Group to Renault is RMB1.0. The consideration was determined after arm s length negotiations between the parties pursuant to the Framework Cooperation Agreement, after taking into account the net liabilities attributable to parent of the Target Company of approximately RMB3.61 billion as at December 31, 2016, the consideration for the Acquisition as well as losses incurred from the operations of the Target Company in the past years. 5. Payment Terms The consideration for the Disposal will be settled by cash on the date of the Completion. 8

11 LETTER FROM THE BOARD 6. Conditions precedent The Company and Renault shall have no obligation to complete the transactions under the Framework Cooperation Agreement until all of the following conditions precedent set out in the Framework Cooperation Agreement shall have been satisfied or otherwise waived (to be waived by the parties jointly in case of conditions to be jointly fulfilled by the parties, by Renault in case of conditions to be fulfilled by the Company, or by Company in case of the conditions to be fulfilled by Renault): all the Approvals having been obtained; the right of the Target Company to use the JinBei and the Renault trademarks having been secured for the term of the Target Company; the Target Company having been a wholly-owned subsidiary of the Company; the registered capital of the Target Company having been increased pursuant to the Capital Increase Plan, and the business plans of the Target Company having been formulated by the Company and Renault; agreements relating to, among others, technology licence, parts and components supply and services having been entered into between the Target Company and Huachen or Renault as mutually agreed by the Company and Renault; completion of an environmental due diligence jointly conducted by the Company and Renault to identify all existing and material environmental conditions due to, or caused by, the Target Company s manufacturing facilities which are in violation of currently applicable PRC laws and regulations. The cost to conduct such environmental due diligence shall be shared equally by the Company and Renault; and completion of a technical due diligence jointly conducted by the Company and Renault to identify all existing and material conditions: (i) relating to the structural integrity of buildings and conformity of the equipment and technical installations to anticipated operational needs; or (ii) which may pose a risk to worker health and safety (including the areas as specified in the Framework Cooperation Agreement which will be subject to further review by the Company and Renault) of, in or around the Target Company s manufacturing facilities. The cost to conduct such technical due diligence shall be shared equally by the Company and Renault. To the best of the Directors information, knowledge and belief, none of the above conditions precedent had been fulfilled, waived or intended to be waived by the parties as at the Latest Practicable Date. The Company intends to finance the capital injection of approximately RMB1 billion into the Target Company pursuant to the Capital Increase Plan by the internal resources of the Group. 9

12 LETTER FROM THE BOARD 7. Completion The Completion will take place upon the registration of Renault as a 49% shareholder of the Target Company pursuant to the terms of the Framework Cooperation Agreement. If any of the above conditions precedent is not fulfilled (or, if applicable, otherwise waived) by the Long-stop Date, either the Company or Renault may forthwith by written notice terminate the Framework Cooperation Agreement. 8. Further Capital Increase Following the Completion, the Company and Renault will complete an increase of the registered capital of the Target Company in proportion to their then respective shareholding interests in the Target Company in an aggregate amount of RMB1,500,000,000, of which: (i) RMB1,000,000,000 will be paid in, upon completion of the procedures for such capital increase and issuance of a new business license of the Target Company reflecting such capital increase; and (ii) RMB500,000,000 will be paid in, within 12 months after the Completion. The Company intends to finance the aforesaid capital injection in proportion to its shareholding interest in the Target Company amounted to RMB765 million by the internal resources of the Group. 9. The board of directors and performance of the Target Company After the Completion, the board of directors of the Target Company shall be the highest authority of the Target Company and shall consist of nine directors, with five appointed by the Company and four appointed by Renault. The board of directors of the Target Company shall have a chairman and a vice chairman selected from among the directors and appointed by the board of directors of the Target Company. The directors of the Target Company shall approve the chairman recommended by the Company and the vice chairman recommended by Renault. All meetings of the board of directors of the Target Company shall require a quorum of at least four directors attending in person or by proxy; provided that the quorum must include at least two directors appointed by each of the Company and Renault, respectively. It is agreed that the Target Company and its board of directors and management shall operate the Target Company in order to achieve and maintain efficient performance and maximize the Target Company s return to its shareholders. As such, the Target Company shall, among other things: develop sourcing plans and contracts with suppliers following the principle of competitive sourcing with reference to the Renault purchasing process and utilizing the support of the global Renault purchasing organization; 10

13 LETTER FROM THE BOARD enhance its dealership network for JinBei and Renault products (including vehicles and parts) and after-sales parts and services solely for its own benefit and directly invoice its dealers for the same; work on a turnaround of the existing minibus operation, introduce local production of new Renault LCV products, and develop new JinBei products utilizing Renault s technology; and develop new NEV products on existing or new products. 10. Restriction on transfer After the Completion, no shareholder of the Target Company may assign or otherwise dispose of its equity interest in the Target Company without the prior written approval of another shareholder. INFORMATION OF THE PARTIES 1. Information on the Group The Group is engaged in the manufacture and sale of minibuses and automotive components through its major operating subsidiaries. The manufacture and sale of minibuses by the Group are carried out by the Target Company, a 60.9% owned subsidiary of the Company as at the Latest Practicable Date. The other subsidiaries of the Company are mainly engaged in the manufacture and sale of automotive components in the PRC, and some of such automotive components are sold to the Target Company for use in its assembly process as an automobile manufacturer. In addition to its minibus and automotive components businesses, the Group also owns a 50% equity interest in its major joint venture BMW Brilliance Automotive Ltd. which is engaged in the manufacture and sale of BMW vehicles in the PRC. 2. Information on JBC JBC is a company listed on the Shanghai Stock Exchange (stock code: ) and the JBC Group is principally engaged in the manufacture and sale of light trucks and automotive components. 3. Information on Renault Renault group has been making cars since Today it is an international multibrand group, selling close to 3.2 million vehicles in 127 countries in 2016, with 36 manufacturing sites, 12,700 points of sales and employing more than 120,000 people. To meet the major technological challenges of the future, including the development and sale of electric vehicles, and to continue its strategy of profitable growth, Renault group is harnessing international expansion and the complementary synergies of its five brands, Renault, Dacia, Renault Samsung Motors, Alpine and LADA. 11

14 LETTER FROM THE BOARD Renault group also has strong experience and a proven track record of establishing partnerships with other automotive makers in the LCV segment, including Nissan, Daimler Europe, General Motors Europe and Fiat Europe. 4. Information on the Target Company The Target Company is mainly engaged in the manufacture and sale of minibuses and automotive components in the PRC. Following the Completion, the Target Company will manufacture and distribute a variety of LCV products under the JinBei, Huasong and Renault brands. The financial information of the Target Company for the three financial years ended December 31, 2016 and the four months ended 2017, which are prepared in accordance with Hong Kong Financial Reporting Standards, is set out in Appendix II to this circular. The management discussion and analysis of the Target Company are set out in Appendix IV to this circular. Set out below is a summary of the audited consolidated financial information of the Target Company for the two financial years ended December 31, 2015 and December 31, 2016 and for the four months ended 2017, and unaudited consolidated financial information of the Target Company for the four months ended 2016, prepared in accordance with the Hong Kong Financial Reporting Standards: For the year ended December 31, For the four months ended RMB 000 RMB 000 RMB 000 RMB 000 (audited) (audited) (unaudited) (audited) Net loss before taxation (493,796) (693,193) (224,206) (457,016) Net loss after taxation (494,827) (693,907) (224,280) (457,151) Total assets 8,059,516 7,863,319 8,222,886 7,847,724 Net liabilities (2,739,396) (3,483,303) (2,963,677) (3,940,454) Currently, the Target Company is beneficially owned as to 60.9% by the Company and thus, a non-wholly owned subsidiary of the Company. After the completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Company. Following the Completion, the Target Company will be beneficially owned as to 51% by the Group, and thus, a non-wholly owned subsidiary of the Company. The Target Company has been and will continue to be consolidated into the consolidated financial statements of the Company. 12

15 LETTER FROM THE BOARD REASONS FOR AND BENEFITS FROM THE ACQUISITION AND THE DISPOSAL The Target Company is principally engaged in the manufacture and sale of minibuses in China. As reported in the Company s annual reports over the last few years, the minibus business has been challenging despite the Company s efforts to produce facelift versions of the existing minibus and launch new MPV models. The Company s management believes that the poor performance of the minibus business was mainly attributable to the lack of new models. As a result of the weak demand, the sales volume of the minibus and MPV (excluding the new MPV model Huasong launched in March 2015) has decreased from the peak of 95,180 units in 2010 to 58,159 units in 2016, representing a decrease of approximately 38.9%. In addition, the segment of the manufacture and sale of minibuses and automotive components as disclosed in the Company s annual reports (the Segment ) has also shown a decrease in profitability over the same period. The Segment results had decreased from a profit of approximately RMB568.5 million in 2010 to a loss of approximately RMB730.2 million in Notwithstanding the challenges as described above, the Board continues to see potential upside in the light vehicle market in China and the Company has been considering various options or strategic moves, including but not limited to, potential cooperation with new business partners to turnaround the minibus operation over time both from an operational angle and a strategic perspective. Upon the Completion, Renault will become the Company s joint venture partner in the LCV segment in China. The Board believes that the Disposal together with the cooperation with Renault will mark a crucial strategic move and an important step for the Company to turn around its existing minibus operation as well as cultivate the full potential of the LCV market in China by utilising the expertise and knowhow of the two shareholders. Renault is one of the world s leading automobile manufacturers, and a leader in the European LCV market with a 15.9% market share in It has differentiated itself with advanced technologies, well recognized products and strong product pipeline. Renault also has strong experience and a proven track record of establishing partnerships with other automotive makers in the LCV segment, such as Nissan, Daimler and General Motors Europe, etc. In terms of NEV, Renault is also a leading player in the market, capable of bringing new NEV to the Target Company s product line-up. Going forward, the Target Company will be jointly managed by the Group and Renault. It has been the objective of the parties to enhance the Target Company s performance by leveraging on Renault s advanced technologies, products depth and management expertise in the LCV segment. In particular, the Company plans to enrich the Target Company s product line up by introducing new models from Renault s product pipeline (including NEV) and to jointly develop new vehicle models or to adapt existing products for the Chinese market. The parties will also step up the sales and marketing efforts in China by jointly developing their marketing strategy. On the purchasing front, Renault will assist the Target Company to develop sourcing plans and contracts with suppliers following the principle of competitive sourcing with reference to the Renault purchasing process and utilizing the support of the global Renault purchasing organization. It is expected that the Target Company will be able to upraise the competitiveness of its existing business while developing new growth with both JinBei and Renault products. Combined with the Company s knowledge in the local market, production expertise, extensive network and sales force, the Board believes that the cooperation will bring substantial value addition to the Company. 13

16 LETTER FROM THE BOARD In light of the foregoing, the Board has approved the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder and the Directors (including the INEDs) have confirmed that the terms of the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole. None of the Directors has a material interest in the Acquisition Agreement, the Framework Cooperation Agreement or the transactions contemplated thereunder. Accordingly, none of the Directors is required to abstain from voting on the board resolution approving the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder. LISTING RULES IMPLICATIONS The Acquisition Agreement As at the Latest Practicable Date, JBC owns 39.1% equity interest in the Target Company, while the remaining 60.9% equity interest is owned by the Group. According to the interim report issued by JBC on August 24, 2017, none of its shareholders held 30% or more shareholding interest in JBC and its single largest shareholder was SAIAM, holding approximately 24.38% shareholding interest in JBC as at June 30, To the best of the Directors knowledge, SAIAM is beneficially wholly owned by the State-owned Assets Supervision and Administration Commission of Shenyang Municipal Government ( ), which is an institution established under Shenyang Municipal Government ( ) immediately under Liaoning Provincial Government ( ). Hence, the ultimate beneficial owner of SAIAM is a PRC Governmental Body and is not regarded as a connected person of the Company pursuant to Rule 14A.10 of the Listing Rules. To the best of the Directors information, knowledge and belief, having made all reasonable enquiries, save as disclosed above, both JBC and SAIAM are independent of the Company and its connected persons. Accordingly, JBC is a connected person of the Company only by virtue of being a substantial shareholder of the Company s non-wholly owned subsidiary and the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. As mentioned above, the Board has approved the Acquisition and the INEDs have confirmed that the terms of the Acquisition are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole. As a result, the Acquisition is exempt from circular (including independent financial advice) and shareholders approval requirements pursuant to Rule 14A.101 of the Listing Rules. Nevertheless, as one or more of the applicable percentage ratios under Chapter 14 of the Listing Rules is more than 25% but less than 100%, the Acquisition constitutes a major transaction of the Company and therefore, is subject to the reporting, announcement and shareholders approval requirements under Chapter 14 of the Listing Rules. The Framework Cooperation Agreement To the best of the Directors information, knowledge and belief, after having made all reasonable enquiries, Renault is an independent third party. As one or more of the applicable percentage ratios under Chapter 14 of the Listing Rules is more than 25% but less than 75%, the Framework Cooperation Agreement and the transactions contemplated thereunder constitute a major transaction of the Company and therefore, are subject to the reporting, announcement and shareholders approval requirements under Chapter 14 of the Listing Rules. 14

17 LETTER FROM THE BOARD The Company will convene the SGM to obtain the approval of the Shareholders for the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder. To the best of the Directors information, knowledge and belief, after having made all reasonable enquiries, neither any Shareholder nor any of their respective close associates has any material interest in the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder. As such, no Shareholder nor its close associates would be required to abstain from voting at the SGM. Possible Connected Transactions As one of the conditions precedent of the Framework Cooperation Agreement, the Target Company will enter into certain agreements relating to, among others, technology licence, parts and components supply and services with Huachen as mutually agreed by the Company and Renault. As Huachen is a controlling shareholder of the Company, the aforesaid agreements between the Target Company and Huachen may constitute continuing connected transactions of the Company under the Listing Rules and the Company will comply in full with the applicable requirements under Chapter 14A of the Listing Rules for such agreements to be entered into with Huachen as and when appropriate. FINANCIAL EFFECTS OF THE ACQUISITION AND THE DISPOSAL The Target Company is currently accounted for as a subsidiary of the Company on a consolidated basis in the financial statements of the Group and will continue to be accounted for as a subsidiary of the Company on a consolidated basis in the financial statements of the Group following the Completion. As such, the financial information of the Target Company has been and will continue to be consolidated into the financial statements of the Group. As the Disposal does not result in any change of control of the Target Company, it will not result in any gain or loss in the Company s income statement. Other than the change in carrying amounts of reserves and non-controlling interests, the Acquisition Agreement and the Framework Cooperation Agreement will not have any impact on the earnings and assets and liabilities of the Group. The unaudited pro forma financial information of the Group is set out in Appendix III to this circular. SGM A notice convening the SGM to be held at Tian & Di Function Room, 7th Floor, The Landmark Mandarin Oriental, The Landmark, 15 Queen s Road Central, Central, Hong Kong on Friday, October 20, 2017 at 9:00 a.m. is set out on pages N-1 to N-3 of this circular. A form of proxy for use at the SGM is enclosed with this circular. Whether or not you intend to be present at the SGM, you are requested to complete the form of proxy and return it to the office of the branch registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible but in any event not less than 48 hours before the time fixed for holding of the SGM (i.e. at or before 9:00 a.m. on Wednesday, October 18, 2017 (Hong Kong time)) or any adjourned meeting (as the case may be). Completion and delivery of the form of proxy will not prevent you from attending and voting at the SGM or adjourned meeting (as the case may be) if you so wish. 15

18 LETTER FROM THE BOARD In accordance with the requirements of the Listing Rules, the resolutions to be put forward at the SGM approving the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder will be voted on by the Shareholders by way of poll. RECOMMENDATION The Directors (including the INEDs) are of the view that the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder are fair and reasonable, on normal commercial terms and in the interests of the Company and its Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favor of the resolutions approving the Acquisition Agreement, the Framework Cooperation Agreement and the transactions contemplated thereunder at the SGM. ADDITIONAL INFORMATION Your attention is also drawn to the additional information set out in the Appendices to this circular. Yours faithfully, For and on behalf of the Board of Brilliance China Automotive Holdings Limited Wu Xiao An (also known as Ng Siu On) Chairman 16

19 APPENDIX I FINANCIAL INFORMATION OF THE GROUP 1. FINANCIAL INFORMATION OF THE GROUP Details of the financial information of the Group for each of the three years ended December 31, 2014, 2015 and 2016 are disclosed in the following annual reports of the Company for the years ended December 31, 2014, 2015 and 2016, respectively, which have been published and are available on the website of the Stock Exchange ( and the website of the Company ( the Annual Report 2014 of the Company for the year ended December 31, 2014 published on April 21, 2015 (available on: listconews/sehk/2015/0421/ltn pdf), please refer to pages 41 to 112 in particular; the Annual Report 2015 of the Company for the year ended December 31, 2015 published on April 26, 2016 (available on: listconews/sehk/2016/0426/ltn pdf), please refer to pages 47 to 122 in particular; and the Annual Report 2016 of the Company for the year ended December 31, 2016 published on April 27, 2017 (available on: listconews/sehk/2017/0427/ltn pdf), please refer to pages 64 to 144 in particular. 2. STATEMENT OF INDEBTEDNESS The Target Company is currently accounted for as a subsidiary of the Company on a consolidated basis in the financial statements of the Group and will continue to be accounted for as a subsidiary of the Company on a consolidated basis in the financial statements of the Group following the completion of each of the Acquisition and the Disposal. As at the close of business on July 31, 2017, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had aggregate outstanding borrowings of approximately RMB2,052 million comprising: (a) outstanding bank borrowings of approximately RMB345 million among which approximately RMB145 million were secured by property, plant and equipment and land lease prepayments, approximately RMB200 million were secured by notes receivable; and (b) unsecured loan of approximately RMB1,707 million. I-1

20 APPENDIX I FINANCIAL INFORMATION OF THE GROUP On November 4, 2016, Shenyang XingYuanDong Automobile Component Co., Ltd.* ( ) ( Xing Yuan Dong ), a wholly-owned subsidiary of the Company and JBC entered into an agreement for the provision of cross guarantees in respect of each other s banking facilities up to the amount of RMB600 million for the period from January 1, 2017 to December 31, As at July 31, 2017, pursuant to the aforesaid agreement, JBC and its subsidiaries had outstanding bank loans of RMB200 million, which were supported by the Group s bank deposits pledged to the banks. Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have at the close of business on July 31, 2017 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities. 3. WORKING CAPITAL The Directors, after due and careful enquiry, are of the opinion that, after taking into account the financial resources available to the Group, including internally generated funds and the available banking facilities, the Group has sufficient working capital for its present requirements for at least the next 12 months from the date of this circular, in the absence of unforeseeable circumstances. 4. FINANCIAL AND TRADING PROSPECTS The year 2017 continues to be a very challenging year for the Group. The Group will continue to identify new business opportunities as well as ways to further streamline its existing operation and corporate structure as its business continues to grow. In response to a changing market environment for automobiles and intensifying competition, the Group will be customer-focused and market-oriented, and strive to develop products that meet customer demand and are competitive in the automobile market. The Target Company plans to leverage on the JinBei brand to develop the JinBei New Express ( ) and the F50 small MPV models into star products, in an attempt to retain its existing customers and attract new buyers. The brand will also continue to maintain its competitive edge in the commercial and business segment, commit its efforts to solidify the urban logistics customer base, expand the reach of small and medium-sized MPVs which are suitable for both household and business use and develop the G13/Grand Haise model ( ) into a key product. Rising resident income levels and the release of spending power will drive the growth of entry-level vehicles. As for the JinBei brand, the Group will capture the opportunities of a growing third-tier market by developing a small MPV model (F50) (a product fit for both households and businesses) at the appropriate time, so as to meet customer demand and bring growth opportunities for the Target Company. * For identification purpose only I-2

21 APPENDIX I FINANCIAL INFORMATION OF THE GROUP Under the JinBei brand, the Group will be proactive in developing the JinBei New Express, Grand Haise Logistics ( ) and New Haise Logistics ( ) models to meet the market demand for vehicles suitable for logistics business. The Target Company will cater to the special demands of different sectors by developing vehicles for medical, police and other special purposes, based on the models of Granse ( ) and Grand Haise. Upon the Completion, Renault will become the Company s joint venture partner in the LCV segment in China. The Board believes that the above transactions together with the cooperation with Renault will mark a crucial strategic move and an important step for the Company to turn around its existing minibus operation as well as cultivate the full potential of the LCV market in China by utilising the expertise and knowhow of the two shareholders. Renault is one of the world s leading automobile manufacturers, and a leader in the European LCV market with a 15.9% market share in It has differentiated itself with advanced technologies, well recognized products and strong product pipeline. Renault also has strong experience and a proven track record of establishing partnerships with other automotive makers in the LCV segment, such as Nissan, Daimler and General Motors Europe, etc. Leveraging on Renault s advanced technologies, products depth and management expertise in the LCV segment, it is expected that the Target Company will be able to upraise the competitiveness of its existing business while developing new growth with both JinBei and Renault products. In terms of NEV, Renault is also a leading player in the market, capable of bringing new NEV to the Target Company s product line-up. Combined with the Company s knowledge in the local market, production expertise, extensive network and sales force, the Board believes that the cooperation will bring substantial value addition to the Company. As at the Latest Practicable Date, save and except the Acquisition and the Disposal, the Company does not have any intention or has not entered into any negotiation, agreement, arrangement or understanding (finalized or concluded) in relation to (a) the acquisition of any new business; (b) any disposal, scaling-down and/or termination of the Group s existing business and/or major operating assets; and (c) the injection of any new business to the Group. I-3

22 The following is the text of a report, prepared for the purpose of incorporation in this circular, received from the reporting accountants of the Company, Grant Thornton Hong Kong Limited, Certified Public Accountants, Hong Kong. ACCOUNTANTS REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED Introduction We report on the historical financial information of Shenyang Brilliance JinBei Automobile Co., Ltd. (the Target Company ) and its subsidiaries (collectively referred to as the Target Group ) set out on pages II-4 to II-49, which comprises the consolidated statements of financial position of the Target Group as at December 31, 2014, 2015 and 2016 and 30 April 2017, and the consolidated statement of profit or loss and other comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Target Group for each of the years ended December 31, 2014, 2015 and 2016 and the four months ended 2017 (the Track Record Period ), and a summary of significant accounting policies and other explanatory information (the Historical Financial Information ). The Historical Financial Information set out on pages II-4 to II-49 forms an integral part of this report, which has been prepared for inclusion in the circular of Brilliance China Automotive Holdings Limited (the Company ) dated September 18, 2017 (the Circular ) in connection with the proposed acquisition of the remaining 39.1% equity interest in the Target Company by the Company and the proposed disposal of 49% equity interest in the Target Company by the Company. Directors Responsibility for the Historical Financial Information The directors of the Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in notes 2.1 and 2.2 respectively to the Historical Financial Information, and for such internal control as the directors determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error. Reporting Accountants Responsibility Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement. II-1

23 Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants judgment, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and preparation set out in notes 2.1 and 2.2 respectively to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion the Historical Financial Information gives, for the purposes of the accountants report, a true and fair view of the Target Group s financial position as at December 31, 2014, 2015 and 2016 and 2017 and of the its financial performance and its cash flows for the Track Record Period in accordance with the basis of preparation set out in notes 2.1 and 2.2 respectively to the Historical Financial Information. Review of Stub Period Comparative Financial Information We have reviewed the stub period comparative financial information of the Target Group which comprises the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the four months ended 2016 and other explanatory information (the Stub Period Comparative Financial Information ). The directors of the Company are responsible for the presentation and preparation of the Stub Period Comparative Financial Information in accordance with the basis of presentation and preparation set out in notes 2.1 and 2.2 respectively to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountants report, is not prepared, in all material respects, in accordance with the basis of presentation and preparation set out in notes 2.1 and 2.2 respectively to the Historical Financial Information. II-2