(1) REVISION OF CAPS FOR RELEVANT CONTINUING CONNECTED
TRANSACTIONS, (2) ADDITIONAL CONTINUING CONNECTED TRANSACTIONS, (3)
CONNECTED AND MAJOR TRANSACTION - PROVISION OF FINANCIAL ASSISTANCE
TO/BY CONNECTED PERSONS, (4) INCREASE IN AUTHORISED SHARE CAPITAL
AND (5) AMENDMENT TO BYE-LAWS HONG KONG, Dec. 15
/Xinhua-PRNewswire/ -- Revision of Caps for the Relevant Continuing
Connected Transactions Reference is made to the Continuing
Connected Transactions and the Caps which were approved by the
Shareholders at the 2006 SGM. The Directors expected the actual
monetary value of the following transactions carried out and to be
carried out under the Continuing Connected Transactions for the
financial year ending 31 December 2006 and/or one or both of the
two financial years ending 31 December 2008 will exceed the
relevant Caps: -- purchases of materials and automotive components
by each of Shenyang Automotive, Xing Yuan Dong, Dongxing, Ningbo
Yuming and ChenFa from JinBei and its subsidiaries and associates
(other than Shenyang Automotive); -- purchases of materials and
automotive components by each of ChenFa, Dongxing and Shenyang
Brilliance Power from Shenyang Automotive; -- sale of automobiles
and automotive components by Shenyang Automotive to JinBei and its
subsidiaries and associates (other than Shenyang Automotive); and
-- sale of materials and automotive components by each of Dongxing,
Xing Yuan Dong, ChenFa and Shenyang Brilliance Power to Shenyang
Automotive. Particulars of the above Relevant Continuing Connected
Transactions, including the expected monetary value of the
transactions carried out and to be carried out in the financial
year ending 31 December 2006 and the Revised Caps for one or both
of the two financial years ending 31 December 2008 are set out in
the paragraph headed "The Revised Caps" in this announcement.
Additional Continuing Connected Transactions For the two financial
years ending 31 December 2008, members of the Group will carry out
the following Additional Continuing Connected Transactions: --
purchases of materials and automotive components by Xing Yuan Dong
and Shenyang Jindong from Shenyang Automotive; -- sale of materials
and automotive components by Shenyang Jindong to JinBei and its
subsidiaries and associates (other than Shenyang Automotive); and
-- sale of materials and automotive components by Ningbo Ruixing,
Shanghai Hidea, Mianyang Ruian and Shenyang Jindong to Shenyang
Automotive. Particulars of the Additional Continuing Connected
Transactions and the New Caps are set out in the sub-paragraphs
headed "The Additional Continuing Connected Transactions" and "The
New Caps" in this announcement. Financial assistance to/by
connected persons Shenyang Automotive and Xing Yuan Dong will
provide cross guarantees to each other's banking facilities in the
amount of RMB1.5 billion and Xing Yuan Dong and JinBei will provide
cross guarantees to each other's banking facilities in the amount
of RMB500 million for a period of one year commencing from 1
January 2007 to 31 December 2007. Increase in authorised share
capital and amendment to the Bye-Laws The Board proposed to
increase the authorised share capital of the Company from
US$50,000,000 to US$80,000,000 by the creation of an additional
3,000,000,000 Shares of US$0.01 each. The Board also proposed that
subject to the approval of the Shareholders to be obtained at the
Special General Meeting on the increase in authorised share capital
of the Company from US$50,000,000 to US$80,000,000, the bye-law
6.(A) of the Bye-Laws of the Company be updated to reflect the
increased authorised share capital of the Company. General Each of
JinBei, its subsidiaries and associates (other than Shenyang
Automotive) and Shenyang Automotive are connected persons of the
Company within the meaning of the Listing Rules. Accordingly, the
purchases of materials and automotive components, the sale of
automobiles, materials and automotive components and the provision
of financial assistance by/to the Group to/by JinBei, its
subsidiaries and associates (other than Shenyang Automotive) and
Shenyang Automotive constitute connected transactions under Chapter
14A of the Listing Rules. As the percentage ratios for the
Financial Assistance is more than 25% but less than 100%, the
Financial Assistance therefore also constitutes a major transaction
under Chapter 14 of the Listing Rules. An Independent Board
Committee has been established to advise the Shareholders as to (i)
the Revised Caps; (ii) the Additional Continuing Connected
Transactions and the New Caps and (iii) the Financial Assistance.
An independent financial adviser will be appointed to advise the
Independent Board Committee and the Shareholders in respect of the
Revised Caps, the Additional Continuing Connected Transactions and
the New Caps and the Financial Assistance. Given that no connected
person which is a party to the Relevant Continuing Connected
Transactions, the Additional Continuing Connected Transactions and
Financial Assistance is a Shareholder, all Shareholders are
eligible to vote on the ordinary resolutions to be proposed at the
Special General Meeting in respect of the Revised Caps, the
Additional Continuing Connected Transactions and the New Caps and
the Financial Assistance. A circular containing, amongst other
things, details of the Relevant Continuing Connected Transactions,
the Revised Caps, the Additional Continuing Connected Transactions,
the New Caps, the Financial Assistance and the proposed increase in
authorised share capital and amendment to the Bye-Laws, letters
from the Independent Board Committee and from the Independent
Financial Adviser and a notice to Shareholders convening the
Special General Meeting to approve (i) the Revised Caps; (ii) the
Additional Continuing Connected Transactions and the New Caps;
(iii) the Financial Assistance; (iv) the proposed increase in
authorised share capital; and (v) the proposed amendment to the
Bye-Laws, will be dispatched to Shareholders as soon as
practicable. I. THE CONTINUING CONNECTED TRANSACTIONS 1. The
Continuing Connected Transactions Reference is made to the
Announcement and the circular issued by the Company dated 23
January 2006 in relation to, among others, the Continuing Connected
Transactions and the Caps. The Group is engaged in the manufacture
and sale of minibuses and automotive components and sedans. During
the course of its business, the Group acquires materials and
automotive components from certain connected persons and sells
automobiles, materials and automotive components to certain
connected persons, on an ongoing basis. At the 2006 SGM, the
Shareholders approved the Continuing Connected Transactions and the
Caps. The Directors expected the actual monetary value of the
Relevant Continuing Connected Transactions for the financial year
ending 31 December 2006 and/or one or both of the two financial
years ending 31 December 2008 will exceed the relevant Caps. As the
Relevant Continuing Connected Transactions will be carried out
under respective framework agreements entered into on 16 December
2005, no new agreements will be entered into for the Relevant
Continuing Connected Transactions as a result of the Revised Caps.
2. The Relevant Continuing Connected Transactions The Relevant
Continuing Connected Transactions have been and will be carried out
for the three financial years ending 31 December 2008 pursuant to
the principal terms of the framework agreements dated 16 December
2005. Particulars of the framework agreements for the Relevant
Continuing Connected Transactions are set out in the sub-paragraphs
A1 to A5, B1 to B3 and C1, C4 to C7 in the paragraph headed "The
Continuing Connected Transactions" in the Announcement. Pursuant to
the framework agreements, the Relevant Continuing Connected
Transactions have been and will be carried out on terms which are
no less favourable than the terms which can be obtained by the
relevant members of the Group from independent third parties for
products of comparable quality and quantity. The following are the
Relevant Continuing Connected Transactions and the actual value of
the transactions entered into between the parties for the six
months ended 30 June 2006: Actual amounts in RMB'000 for the six
Relevant Continuing Connected Transaction months ended 30 June 2006
(a) Purchases of materials and automotive components by members of
the Group (including Shenyang Automotive) from JinBei and its
subsidiaries and associates (other than Shenyang Automotive) i
Purchases of materials and automotive components 248,215 by
Shenyang Automotive from JinBei and its subsidiaries and associates
(other than Shenyang Automotive) ii Purchases of materials and
automotive components 76,814 by Xing Yuan Dong from JinBei and its
subsidiaries and associates (other than Shenyang Automotive) iii
Purchases of materials and automotive components 9,554 by Dongxing
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) iv Purchases of materials and automotive
components 3,126 by Ningbo Yuming from JinBei and its subsidiaries
and associates (other than Shenyang Automotive) v Purchases of
materials and automotive components by 1,216 ChenFa from JinBei and
its subsidiaries and associates (other than Shenyang Automotive)
(b) Purchases of materials and automotive components by members of
the Group (other than Shenyang Automotive) from Shenyang Automotive
i Purchases of materials and automotive components 39,345 by ChenFa
from Shenyang Automotive ii Purchases of materials and automotive
components 20,325 by Dongxing from Shenyang Automotive iii
Purchases of materials and automotive components Nil by Shenyang
Brilliance Power from Shenyang Automotive (c) Sale of automobiles,
materials and automotive components by members of the Group to
connected persons i Sale of automobiles and automotive components
by 39,724 Shenyang Automotive to JinBei and its subsidiaries and
associates (other than Shenyang Automotive) ii Sale of materials
and automotive components by 111,924 Dongxing to Shenyang
Automotive iii Sale of materials and automotive components by
1,027,100 Xing Yuan Dong to Shenyang Automotive iv Sale of
materials and automotive components by 372,497 ChenFa to Shenyang
Automotive v Sale of materials and automotive components by Nil
Shenyang Brilliance Power to Shenyang Automotive As at 30 June
2006, the monetary value of the transactions occurred between the
parties in respect of the following Relevant Continuing Connected
transactions have exceeded the Caps for the financial year ending
31 December 2006 as approved by the Shareholders at the 2006 SGM:
Approved Actual amounts amounts in in RMB'000 Relevant Continuing
RMB'000 for the six Connected Transactions for the year months
ended 30 ending 31 June 2006 December 2006 (a)(i) Purchases of
materials 230,000 248,215 and automotive components by Shenyang
Automotive from JinBei and its subsidiaries and associates (other
than Shenyang Automotive) (a)(iii) Purchases of materials 4,000
9,554 and automotive components by Dongxing from JinBei and its
subsidiaries and associates (other than Shenyang Automotive) (a)(v)
Purchases of materials 500 1,216 and automotive components by
ChenFa from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) (b)(i) Purchases of materials and automotive
components by ChenFa from Shenyang Automotive 25,000 39,345 At the
time of the preparation of the 2006 Interim Results in the third
quarter of 2006, it was brought to the attention of the Company
that the monetary value of the transactions occurred between the
parties in respect of Relevant Continuing Connected Transactions
(a)(i), (a)(iii), (a)(v) and (b)(i) set out in the above table may
exceed the Caps for the financial year ending 31 December 2006 as
approved by the Shareholders at the 2006 SGM. Action was
immediately taken after the finalization of 2006 Interim Results in
late September 2006 to ascertain whether the Caps for the
Continuing Connected Transactions for the financial year ending 31
December 2006 will be exceeded and to ensure compliance of the
Caps, as well as to re-evaluate the sufficiency of the Caps for the
two financial years ending 31 December 2008 in light of the actual
monetary value of the transactions for the six months ended 30 June
2006 and the performance of the Company in 2006. Due to the volume
of the transactions and the number of parties involved, a lengthy
period was required to complete the review. Upon completion of the
lengthy review process, it was then noted that for the reasons set
out in the sub- paragraph headed "Basis of the Revised Caps and the
New Caps" below, particularly the unforeseen significant increase
in the demand for the new model of the sedans of the Group since
the second quarter of 2006, the Caps for the Relevant Continuing
Connected Transactions other than Relevant Continuing Connected
Transactions (a)(ii), (b)(iii), (c)(iii) and (c)(v) have been or
will be exceeded for the financial year ending 31 December 2006.
The Company therefore took immediate action to remedy the
situation. Estimated amounts of the transactions in respect of the
Relevant Continuing Connected Transactions for the year ending 31
December 2006 set out in the sub-paragraph headed "The Revised
Caps" below are for information purposes and Shareholders' approval
will not be sought for the estimated amounts for the year ending 31
December 2006. Shareholders' approval will be sought for the
Revised Caps for the two financial years ending 31 December 2008
set out in the sub-paragraph headed "The Revised Caps" below at the
Special General Meeting. 3. The Additional Continuing Connected
Transactions The following are the principal terms of the framework
agreements dated 15 December 2006 pursuant to which the Additional
Continuing Connected Transactions will be carried out for the two
financial years ending 31 December 2008. (a) Purchases of materials
and automotive components by members of the Group (other than
Shenyang Automotive) from Shenyang Automotive (i) Purchases of
materials and automotive components by Xing Yuan Dong from Shenyang
Automotive Vendor : Shenyang Automotive, a 51% owned subsidiary of
the Company Purchaser : Xing Yuan Dong, a wholly-owned subsidiary
of the Company Agreement : On 15 December 2006, Shenyang Automotive
and Xing Yuan Dong entered into a framework agreement in relation
to the purchases of materials and automotive components by Xing
Yuan Dong from Shenyang Automotive Pricing policy : The materials
and automotive components are to be provided to Xing Yuan Dong by
Shenyang Automotive on terms which are no less favourable than the
terms which can be obtained by Xing Yuan Dong from independent
third parties for purchase of materials and automotive components
of comparable quality and quantity. The price will be agreed upon
between the parties for each transaction by reference to the
aforementioned pricing policy through arm's length negotiations
(ii) Purchases of materials and automotive components by Shenyang
Jindong from Shenyang Automotive Vendor : Shenyang Automotive, a
51% owned subsidiary of the Company Purchaser : Shenyang Jindong, a
75.50% owned subsidiary of the Company Agreement : On 15 December
2006, Shenyang Automotive and Shenyang Jindong entered into a
framework agreement in relation to the purchases of materials and
automotive components by Shenyang Jindong from Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Jindong by Shenyang Automotive on terms which
are no less favourable than the terms which can be obtained by
Shenyang Jindong from independent third parties for purchase of
materials and automotive components of comparable quality and
quantity. The price will be agreed upon between the parties for
each transaction by reference to the aforementioned pricing policy
through arm's length negotiations (b) Sale of materials and
automotive components by members of the Group to connected persons
(i) Sale of materials and automotive components by Shenyang Jindong
to JinBei and its subsidiaries and associates (other than Shenyang
Automotive) Vendor : Shenyang Jindong, a 75.50% owned subsidiary of
the Company Purchaser : JinBei and its subsidiaries and associates
(other than Shenyang Automotive), including but not limited to
Tieling Brilliance Rubber Products Company Limited Agreement: : On
15 December 2006, Shenyang Jindong and JinBei entered into a
framework agreement in relation to the sale of materials and
automotive components by Shenyang Jindong to JinBei and its
subsidiaries and associates (other than Shenyang Automotive)
Pricing policy : The materials and automotive components are to be
provided to JinBei and its subsidiaries and associates (other than
Shenyang Automotive) by Shenyang Jindong on terms which are no less
favourable than the terms which can be obtained by Shenyang Jindong
from independent third parties for sale of materials and automotive
components of comparable quality and quantity. The price will be
agreed upon between the parties for each transaction by reference
to the aforementioned pricing policy through arm\'s length
negotiations (ii) Sale of materials and automotive components by
Ningbo Ruixing to Shenyang Automotive Vendor : Ningbo Ruixing, a
wholly-owned subsidiary of the Company Purchaser : Shenyang
Automotive, a 51% owned subsidiary of the Company Agreement: : On
15 December 2006, Ningbo Ruixing and Shenyang Automotive entered
into a framework agreement in relation to the sale of materials and
automotive components by Ningbo Ruixing to Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Automotive by Ningbo Ruixing on terms which
are no less favourable than the terms which can be obtained by
Ningbo Ruixing from independent third parties for sale of materials
and automotive components of comparable quality and quantity. The
price will be agreed upon between the parties for each transaction
by reference to the aforementioned pricing policy through arm's
length negotiations (iii) Sale of materials and automotive
components by Shanghai Hidea to Shenyang Automotive Vendor :
Shanghai Hidea, a 63.25% owned subsidiary of the Company Purchaser
: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: : On 15 December 2006, Shanghai Hidea and Shenyang
Automotive entered into a framework agreement in relation to the
sale of materials and automotive components by Shanghai Hidea to
Shenyang Automotive Pricing policy : The materials and automotive
components are to be provided to Shenyang Automotive by Shanghai
Hidea on terms which are no less favourable than the terms which
can be obtained by Shanghai Hidea from independent third parties
for sale of materials and automotive components of comparable
quality and quantity. The price will be agreed upon between the
parties for each transaction by reference to the aforementioned
pricing policy through arm's length negotiations (iv) Sale of
materials and automotive components by Mianyang Ruian to Shenyang
Automotive Vendor : Mianyang Ruian, a wholly-owned subsidiary of
the Company Purchaser : Shenyang Automotive, a 51% owned subsidiary
of the Company Agreement: : On 15 December 2006, Mianyang Ruian and
Shenyang Automotive entered into a framework agreement in relation
to the sale of materials and automotive components by Mianyang
Ruian to Shenyang Automotive Pricing policy : The materials and
automotive components are to be provided to Shenyang Automotive by
Mianyang Ruian on terms which are no less favourable than the terms
which can be obtained by Mianyang Ruian from independent third
parties for sale of materials and automotive components of
comparable quality and quantity. The price will be agreed upon
between the parties for each transaction by reference to the
aforementioned pricing policy through arm's length negotiations (v)
Sale of materials and automotive components by Shenyang Jindong to
Shenyang Automotive Vendor : Shenyang Jindong, a 75.50% owned
subsidiary of the Company Purchaser : Shenyang Automotive, a 51%
owned subsidiary of the Company Agreement: : On 15 December 2006,
Shenyang Jindong and Shenyang Automotive entered into a framework
agreement in relation to the sale of materials and automotive
components by Shenyang Jindong to Shenyang Automotive Pricing
policy : The materials and automotive components are to be provided
to Shenyang Automotive by Shenyang Jindong on terms which are no
less favourable than the terms which can be obtained by Shenyang
Jindong from independent third parties for sale of materials and
automotive components of comparable quality and quantity. The price
will be agreed upon between the parties for each transaction by
reference to the aforementioned pricing policy through arm's length
negotiations II. THE REVISED CAPS AND THE NEW CAPS 1. The Caps The
following table sets out the Caps for the Relevant Continuing
Connected Transactions as approved by the Shareholders at 2006 SGM:
Approved amounts in RMB '000 for the financial years Relevant
Continuing Major type of ending 31 December Connected Transactions
products 2006 2007 2008 (a) Purchases of materials and automotive
components by members of the Group (including Shenyang Automotive)
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) i Purchases of materials Seats, steering
230,000 280,000 350,000 and automotive systems, fuel components by
Shenyang pumps and Automotive from JinBei driving shafts and its
subsidiaries and associates (other than Shenyang Automotive) ii
Purchases of materials Axles, torsion 280,000 300,000 330,000 and
automotive bars, gear components by Xing boxes, seats Yuan Dong
from JinBei and rubber and its subsidiaries products associates
(other than Shenyang Automotive) iii Purchases of materials Rubber
products 4,000 4,800 7,000 and automotive components by Dongxing
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) iv Purchases of materials Inside cutting,
5,000 6,000 7,000 and automotive outside cutting components by
Ningbo and moulding Yuming from JinBei and its subsidiaries and
associates (other than Shenyang Automotive) v Purchases of
materials Driving shafts 500 600 700 and automotive components by
ChenFa from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) (b) Purchases of materials and automotive
components by members of the Group (other than Shenyang Automotive)
from Shenyang Automotive i Purchases of materials Gear boxes 25,000
25,000 25,000 and automotive components by ChenFa from Shenyang
Automotive ii Purchases of materials Component parts 35,000 40,000
48,000 and automotive for rear axles components by Dongxing and
steel panels from Shenyang Automotive iii Purchases of materials
Engine assembly 104,000 260,000 420,000 and automotive and gear
boxes components by Shenyang Brilliance Power from Shenyang
Automotive (c) Sale of automobiles, materials and automotive
components by members of the Group to connected persons i Sale of
automobiles and Press parts 85,000 100,000 120,000 automotive
components by Shenyang Automotive to JinBei and its subsidiaries
and associates (other than Shenyang Automotive) ii Sale of
materials and Rear axles, 150,000 160,000 170,000 automotive
components by press parts, Dongxing to Shenyang welding parts,
Automotive paints and special vehicle modification iii Sale of
materials and Power trains, 2,600,000 2,800,000 3,600,000
automotive components by driving axle Xing Yuan Dong to assembly,
rear Shenyang Automotive heaters and water tank assembly iv Sale of
materials and Power trains 560,000 610,000 720,000 automotive
components by ChenFa to Shenyang Automotive v Sale of materials and
Power trains 106,000 265,000 424,000 automotive components by
Shenyang Brilliance Power to Shenyang Automotive 2. The Revised
Caps The following table sets out the proposed Revised Caps for the
Relevant Continuing Connected Transactions: Revised estimated
amounts in RMB '000 Relevant Continuing Major type of for the
financial years Connected Transactions products ending 31 December
2006 2007 2008 (Note 1) (a) Purchases of materials and automotive
components by members of the Group (including Shenyang Automotive)
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive) i. Purchases of materials Seats, steering
740,000 1,300,000 1,900,000 and automotive systems, fuel components
by Shenyang pumps and Automotive from JinBei driving shafts and its
subsidiaries and associates (other than Shenyang Automotive) ii
Purchases of materials Axles, torsion 280,000 320,000 420,000 and
automotive bars, gear (Note 2) components by Xing Yuan boxes, seats
Dong from JinBei and and rubber its subsidiaries and products
associates (other than Shenyang Automotive) iii Purchases of
materials Rubber products 18,000 18,000 18,000 and automotive
components by Dongxing from JinBei and its subsidiaries and
associates (other than Shenyang Automotive) iv Purchases of
materials Inside cutting, 12,000 16,000 19,000 and automotive
outside cutting components by Ningbo and moulding Yuming from
JinBei and its subsidiaries and associates (other than Shenyang
Automotive) v Purchases of materials Driving shafts 3,600 5,600
6,900 and automotive components by ChenFa from JinBei and its
subsidiaries and associates (other than Shenyang Automotive) (b)
Purchases of materials and automotive components by members of the
Group (other than Shenyang Automotive) from Shenyang Automotive i
Purchases of materials Gear boxes 83,000 83,000 83,000 and
automotive components by ChenFa from Shenyang Automotive ii
Purchases of materials Component parts 48,000 60,000 87,000 and
automotive for rear axles components by Dongxing and steel panels
from Shenyang Automotive iii Purchases of materials Engine assembly
104,000 880,000 1,130,000 and automotive and gear boxes (Note 2)
components by Shenyang Brilliance Power from Shenyang Automotive
(c) Sale of automobiles, materials and automotive components by
members of the Group to connected persons i Sale of automobiles and
Press parts 162,000 280,000 387,000 automotive components by
Shenyang Automotive to JinBei and its subsidiaries and associates
(other than Shenyang Automotive) ii Sale of materials and Rear
axles, 252,000 410,000 560,000 automotive components press parts,
by Dongxing to Shenyang welding parts, Automotive paints and
special vehicle modification iii Sale of materials and Power
trains, 2,600,000 3,800,000 5,200,000 automotive components by
driving axle (Note 2) Xing Yuan Dong to assembly, rear Shenyang
Automotive heaters and water tank assembly iv Sale of materials and
Power trains 1,200,000 1,900,000 2,400,000 automotive components by
ChenFa to Shenyang Automotive v Sale of materials and Power trains
106,000 900,000 1,150,000 automotive components by Shenyang
Brilliance Power to Shenyang Automotive Notes: 1. The amounts for
the financial year ending 31 December 2006 are set out in the above
table for information purposes. 2. The caps for the Relevant
Continuing Connected Transactions for the year ending 31 December
2006 remained the same as the amounts approved by the Shareholders
at the 2006 SGM. 3. The New Caps The following table sets out the
proposed annual caps for the Additional Continuing Connected
Transactions for the two financial years ending 31 December 2008:
Estimated amounts in RMB '000 for the financial years Additional
Continuing Major type of ending 31 December Connected Transaction
products 2007 2008 (a) Purchases of materials and automotive
components by members of the Group (other than Shenyang Automotive)
from Shenyang Automotive i Purchases of materials and Engine
assembly 350,000 530,000 automotive components by Xing Yuan Dong
from Shenyang Automotive ii Purchases of materials and Automotive
1,500 1,700 automotive components by fitting, Shenyang Jindong from
including center Shenyang Automotive control locks, gear oil, core
of front heaters (b)Sale of materials and automotive components by
members of the Group to connected persons i Sale of materials and
Matching 1,100 1,100 automotive components by components Shenyang
Jindong to JinBei including and its subsidiaries and reinforcement
associates (other than panel of right Shenyang Automotive) hand
side front wheel mudguide wing ii Sale of materials and Front axle,
view 138,000 145,000 automotive components by mirror, Ningbo
Ruixing to Shenyang suspension, Automotive carpet and roof pad iii
Sale of materials and Product design 6,700 7,300 automotive
components by Shanghai Hidea to Shenyang Automotive iv Sale of
materials and Cylinder heads 8,500 9,600 automotive components by
of engines, Mianyang Ruian to Shenyang camshafts Automotive v Sale
of materials and Matching 43,000 47,000 automotive components by
components, Shenyang Jindong to including Shenyang Automotive
anti-impact beam sub-assembly of slide door, back-plate of
anti-impact beam of slide door, mounting plate of antenna,
anti-impact beam assembly of left hand side front door 4. Basis of
the Revised Caps and the New Caps As stated in the circular issued
by the Company dated 23 January 2006, in determining the value of
the caps for the Relevant Continuing Connected Transactions for the
three financial years ending 31 December 2008, the Board had taken
into account the following factors: -- the anticipated growth of
the automobile industry in the PRC in the three financial years
ending 31 December 2008, which will lead to an increase in demand
for the existing models of minibuses and sedans manufactured by the
Group; -- the scheduled launch of new models of minibuses and
sedans and new range of automobiles in the three financial years;
and -- the anticipated sales of minibuses and sedans in the three
financial years, particularly the marketing strategy of the Group
to increase its market share in the domestic sedan market in the
PRC. In addition to the abovementioned factors, the Directors have
taken into account the following factors in arriving at the Revised
Caps and the New Caps: -- the substantial growth experienced in
2006 and the anticipated continuous growth of the automobile
industry in the PRC in the two financial years ending 31 December
2008, which will lead to an increase in demand for products of the
Group; -- the favorable reception of the series of new models of
Zhonghua sedans and Granse minibuses by the market has led to a
substantial revision of the anticipated sales and accordingly the
volume of materials and automotive components required to meet the
expected demand. As stated in the 2006 Interim Report, Shenyang
Automotive sold 37,571 minibuses and 19,398 Zhonghua sedans in the
first half of 2006, representing an increase of 27.50% and 321.90%
from the corresponding period in 2005, with the growth of Zhonghua
sedans sales expected to further accelerate subsequent to the first
half of 2006; -- the continued launch of new models of Zhonghua
sedans and minibuses in 2007 and 2008 will require new components
which necessitate the entering into of the Additional Continuing
Connected Transactions; -- the intended increase in the export of
minibuses and sedans to overseas markets such as Europe and Egypt
in the financial years 2007 and 2008 which will lead to increase in
the purchases and sales volume of materials and automotive
components between the members of the Group and the connected
parties; -- changes in product mix in response to market demand
resulted in changes in the types of materials and automotive
components used and the monetary value of the purchases of such
materials and automotive components from the connected parties
(Relevant Continuing Connected Transaction (b)(i)); -- Shen Yang
Saic Brilliance Automobile Transmission Co., Ltd., one of the
suppliers of main decelerator assemblies became a member of the
JinBei Group in December 2005. As the Caps were calculated by
reference to historical information up to 30 June 2005, purchases
from Shen Yang Saic Brilliance Automobile Transmission Co., Ltd.
were not included in the Cap for Relevant Continuing Connected
Transaction (a)(iii). However, as a result of the said
restructuring, the Revised Caps will include these purchases from
Shen Yang Saic Brilliance Automobile Transmission Co., Ltd.; and --
as Shenyang Brilliance Power only commenced production in the
second half of 2006, accordingly, the Caps for the Relevant
Continuing Connected Transactions (b)(iii) and (c)(v) have to be
revised. It is also anticipated that with the expected increase in
sales of minibuses and sedans, the financial years 2007 and 2008
will experience a great rise in demand for the power trains
produced by Shenyang Brilliance Power leading to a significant
increase in the monetary value for the Revised Caps for the years
ending 31 December 2007 and 2008. III. THE FINANCIAL ASSISTANCE On
15 December 2006, (a) an agreement for the provision of cross
guarantee in respect of banking facilities in the amount of RMB1.5
billion is entered into between Shenyang Automotive and Xing Yuan
Dong; and (b) an agreement for provision of cross guarantee in
respect of banking facilities in the amount of RMB500 million is
entered into between Xing Yuan Dong and JinBei. The banking
facilities, that will be granted to each of Shenyang Automotive,
Xing Yuan Dong and JinBei, will be for a term of one year
commencing from 1 January 2007 to 31 December 2007. In the event of
the cross guarantees are to be extended for more than one year
along with the renewal of the banking facilities, the Company has
to comply with all the relevant requirements under Chapter 14A of
the Listing Rules. No fee is payable or charged and no securities
will be taken or provided in relation to the provision of the cross
guarantees. Pursuant to such agreements, Shenyang Automotive and
Xing Yuan Dong will provide cross guarantees to each other's
banking facilities in the amount of RMB1.5 billion and Xing Yuan
Dong and JinBei will provide cross guarantees to each other's
banking facilities in the amount of RMB500 million. Each of JinBei
and Shenyang Automotive are connected persons of the Company. The
provision of the cross guarantees between Shenyang Automotive and
Xing Yuan Dong and the cross guarantees between Xing Yuan Dong and
JinBei constitute connected transactions under Rule
14A.13(2)(a)(i), Rule 14A.13(b)(ii) and Rule 14A.14(3) of the
Listing Rules and are subject to the reporting, announcement and
independent shareholders' approval requirements under Rule 14A.63
of the Listing Rules. As the percentage ratios for the Financial
Assistance is more than 25% but less than 100%, the Financial
Assistance also constitutes a major transaction under Chapter 14 of
the Listing Rules and has to be subject to the approval of the
Shareholders. Given that no connected person which is a party to
the Financial Assistance is a Shareholder, all Shareholders are
eligible to vote on the ordinary resolution to be proposed at the
Special General Meeting in respect of the Financial Assistance. IV.
REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS, THE ADDITIONAL
CONTINUING CONNECTED TRANSACTIONS AND THE FINANCIAL ASSISTANCE
Reasons for the Continuing Connected Transactions and the
Additional Continuing Connected Transactions The Group is engaged
in the manufacture and sale of minibuses and automotive components
and sedans. The manufacture and sale of minibuses and sedans by the
Group is carried out by Shenyang Automotive, a 51% owned subsidiary
of the Company. 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 Shenyang
Automotive for use in its assembly process as an automobile
manufacturer. The Continuing Connected Transactions and the
Additional Continuing Connected Transactions are carried out in the
ordinary and usual course of business of the Group. The Group
purchases raw materials and basic automotive components in its
ordinary and usual course of business to be used in the
manufacturing of automotive components and for processing into core
automotive components for use in automobile manufacturing. The
Group will purchase raw materials and automotive components from
the JinBei Group and Shenyang Automotive where the price offered by
such companies are more favourable than other suppliers in order to
control the costs of production of automobiles produced by the
Group. In addition, the Group also purchases engines and other core
automotive components from the connected persons so as to ensure
the quality of the core automotive components, and also to ensure
the technology used in the production of such core automotive
components remained within the control of the Group. It is believed
that control over such core automotive components will enable the
Group to exercise more effective control over the quality of the
automobiles produced by the Group. As stated in the Announcement,
the Continuing Connected Transactions are entered into to enable
the Group (i) to have more control over quality and technology of
automotive components used in its production; (ii) to purchase
materials and automotive components from manufacturers within close
proximity to the production facilities to reduce cost and to
enhance competitiveness of the Group; and (iii) to centralize the
purchases of materials and automotive parts to enjoy better pricing
of bulk purchases. As a result of the various changes in the market
conditions explained in the sub-paragraph headed "Basis of the
Revised Caps and the New Caps" above, particularly encouraging
sales performance of the Group's minibuses and Zhonghua sedans in
the first half of 2006, which has recorded an increase of
approximately 28% and 322%, respectively from the corresponding
period in 2005, the Board considered it necessary to revise the
Caps for the Relevant Continuing Connected Transactions. In
addition, the Group has plans to launch new models of its minibuses
and Zhonghua sedans in 2007 and 2008 which will require new
components and suppliers. Therefore, for the same underlying
reasons for the Continuing Connected Transactions, it is beneficial
for the Group to enter into the Additional Continuing Connected
Transactions. In the premises, the Directors (including the
independent non-executive Directors) consider the Relevant
Continuing Connected Transactions and the Additional Continuing
Connected Transactions to be entered into in the ordinary and usual
course of business and the terms of such transactions as governed
by the framework agreements, the Revised Caps and the New Caps to
be fair and reasonable in so far as the Shareholders are concerned.
Reasons for the Financial Assistance With the tightening of the
lending regulations of the banks in the PRC, it is becoming a
common practice for banks in the PRC to request for either a
guarantee or securities from a third party to secure banking
facilities granted to borrowers. Shenyang Automotive is the
subsidiary within the Group principally engaged in the
manufacturing of automobiles and automotive components. Shenyang
Automotive will utilize its banking facilities to finance the
increase in demand for newly introduced model of sedans, the
expansion of its production capacity in anticipation of the
scheduled launch of new models of minibuses and sedans and the
business strategy of increasing the market share of the Group in
the domestic sedan market in the PRC. JinBei's banking facilities
will be utilized by JinBei as working capital to improve the
quality and volume of the automotive components currently produced
by the JinBei Group and the expansion of its product range and
production facilities. Since members of the JinBei Group are
suppliers of the Group, the Directors believe that the Group will
be able to benefit from the improved quality of the automotive
components manufactured by the JinBei Group and with the
anticipated launch of the new models of minibuses and sedans, the
Group will also be able to benefit from the improvement in
production facilities and increase in product range of the JinBei
Group. Xing Yuan Dong is one of the subsidiaries of Group engaged
in the manufacturing of automotive components. Xing Yuan Dong's
banking facilities secured by the guarantees provided by JinBei and
Shenyang Automotive will be utilized by Xing Yuan Dong to improve
its production facilities in order to support the substantial
increase in production volume and the future launch of new models
of minibuses and sedans. In the premises, the Directors consider
the provision of the financial assistance to and from the connected
persons of the Company to be in the interest of the Group and that
the terms of the agreements in relation to the provision of the
cross guarantees to be fair and reasonable in so far as the
Shareholders are concerned. V. INCREASE IN AUTHORISED SHARE CAPITAL
AND AMENDMENT TO BYE-LAWS References is made to the announcement
made by the Company dated 9 May 2006 and the circular issued by the
Company dated 30 May 2006 in relation to the issue of the
Convertible Bonds 2011 in an aggregate amount of approximately
US$183 million by Brilliance China Finance Limited, a wholly- owned
subsidiary of the Company. It is one of the terms of the
Convertible Bonds 2011 that the Conversion Price shall be adjusted
on the First Reset Date and the Second Reset Date if the Average
Market Price per Share for 20 consecutive days on which the Stock
Exchange is open for trading immediately prior to the First Reset
Date and the Second Reset Date is less than the conversion price on
the relevant reset date, provided that the adjusted conversion
price shall not be less than 68% and 75%, respectively, of the
conversion price prevailing at the First Reset Date and the Second
Reset Date. Based on the initial Conversion Price of HK$1.93 and
the maximum reset rate, the lowest possible conversion price will
be reset to HK$0.9843 and the maximum number of Shares to be issued
by the Company upon full conversion of the Convertible Bonds 2011
at the lowest possible conversion price will be approximately
1,438,600,000 Shares. As at the date of this announcement, the
Company has an authorised share capital of US$50,000,000 divided
into 5,000,000,000 Shares and a total of 3,668,390,900 Shares in
issue. Taking into account approximately 1,438,600,000 Shares that
may be issued upon full conversion of the Convertible Bonds 2011 at
the lowest possible conversion price of HK$0.9843 per Share, the
Company will have an issued share capital of about US$51,069,909.
In the event of a full exercise of the conversion rights attaching
to the outstanding Convertible Bonds 2011 at the lowest possible
conversion price of HK$0.9843 per Share, the Company will not have
sufficient authorised share capital for the issue and allotment of
the additional Shares. As such, the Board proposed to increase the
authorised share capital of the Company from US$50,000,000 to
US$80,000,000 by the creation of an additional 3,000,000,000 Shares
of US$0.01 each. The proposed increase of authorised share capital
of the Company is subject to Shareholders' approval by way of an
ordinary resolution to be proposed at the Special General Meeting.
Subject to the approval of the increase in authorised share capital
by the Shareholders, the Board proposed to amend bye-law 6.(A) of
the Bye-Laws of the Company to reflect the increased authorised
share capital of the Company. The proposed amendment to the
Bye-Laws is subject to the approval of the Shareholders by way of a
special resolution to be proposed at the Special General Meeting.
VI. GENERAL Each of JinBei, its subsidiaries and associates (other
than Shenyang Automotive) and Shenyang Automotive are connected
persons of the Company within the meaning of the Listing Rules.
Accordingly, the purchases of materials and automotive components,
the sale of automobiles, materials and automotive components and
the provision of financial assistance by/to the Group to/by JinBei,
its subsidiaries and associates (other than Shenyang Automotive)
and Shenyang Automotive constitute connected transactions under
Chapter 14A of the Listing Rules. The Financial Assistance also
constitutes a major transaction under Chapter 14 of the Listing
Rules. An Independent Board Committee has been established to
advise the Shareholders as to (i) the Revised Caps; (ii) the
Additional Continuing Connected Transactions and the New Caps; and
(iii) the Financial Assistance. An independent financial adviser
will be appointed to advise the Independent Board Committee and the
Shareholders in respect of the Revised Caps, the Additional
Continuing Connected Transactions and the New Caps and the
Financial Assistance. Given that no connected person which is a
party to the Relevant Continuing Connected Transactions, the
Additional Continuing Connected Transactions and Financial
Assistance is a Shareholder, all Shareholders are eligible to vote
on the ordinary resolutions to be proposed at the Special General
Meeting in respect of the Revised Caps, the Additional Connected
Transactions and the New Caps and the Financial Assistance. A
circular containing, amongst other things, details of the Relevant
Continuing Connected Transactions, the Revised Caps, the Additional
Continuing Connected Transactions, the New Caps, the Financial
Assistance and the proposed increase in authorised share capital
and amendment to the Bye-Laws, letters from the Independent Board
Committee and from the Independent Financial Adviser and a notice
to Shareholders convening the Special General Meeting to approve
(i) the Revised Caps; (ii) the Additional Continuing Connected
Transactions and the New Caps; (iii) the Financial Assistance; (iv)
the proposed increase in authorised share capital; and (v) the
proposed amendment to the Bye-Laws will be dispatched to
Shareholders as soon as practicable. VII. DEFINITIONS In this
announcement, unless otherwise defined, terms used herein shall
have the following meanings: "2006 Interim Report" the unaudited
consolidated interim financial statements of the Group for the six
months ended 30 June 2006; "2006 Interim Results" the results of
the Group for the six months ended 30 June 2006; "2006 SGM" a
special general meeting held on 10 February 2006 to approve, among
others, the Continuing Connected Transactions and the Caps;
"Additional Continuing the transactions between members of the
Connected Transactions" Group and the connected persons as set out
in the sub- paragraph headed "The Continuing Connected Transactions
- The Additional Continuing Connected Transactions" in this
announcement; "Announcement" the announcement made by the Company
dated 16 December 2005 in relation to, among others, the Continuing
Connected Transactions and the Caps; "associates" has the meaning
ascribed thereto in the Listing Rules; "Average Market Price" the
average of the closing price of the Shares on the Stock Exchange;
"Board" the board of Directors; "Bye-Laws" the bye-laws of the
Company; "Caps" the estimated annual monetary value of the
Continuing Connected Transactions for the three financial years
ending 31 December 2008 as set out in the sub-paragraph headed "The
Caps - Proposed annual caps" in the Announcement and approved by
the Shareholders at the 2006 SGM; "ChenFa" Shenyang ChenFa
Automobile Component Co., Ltd., a wholly foreign owned enterprise
established in the PRC on 19 June 2003 and a wholly-owned
subsidiary of the Company. The principal activities of ChenFa are
the development, manufacture and sale of power trains in the PRC;
"Company" 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.; "connected persons" has the meaning ascribed
thereto in the Listing Rules; "Continuing Connected the
transactions between members of the Transactions" Group and the
connected persons as set out in the paragraph headed "The
Continuing Connected Transactions" in the Announcement; "Conversion
Price" HK$1.93 per Share (subject to adjustment); " Convertible
Bonds 2011" convertible bonds in an aggregate principal amount of
approximately US$183 million issued by Brilliance China Finance
Limited on 7 June 2006 and maturing on 7 June 2011; "Directors" the
directors of the Company; "Dongxing" Shenyang Brilliance Dongxing
Automotive Component Co., Ltd., a wholly foreign owned enterprise
established in the PRC on 17 March 1999 and a wholly-owned
subsidiary of the Company. The principal activities of Dongxing are
the manufacture and trading of automotive components and
remodelling minibuses and sedans in the PRC; "Financial Assistance"
the financial assistance provided to/by the Group by/to connected
persons as set out in the paragraph headed "The Financial
Assistance" in this announcement; "First Reset Date" 10 March 2007;
"Group" the Company and its subsidiaries; "Independent Board the
independent committee of Board, Committee" comprising of Mr. Xu
Bingjin, Mr. Song Jian and Mr. Jiang Bo, all of whom are
independent non-executive Directors, formed to advise the
Shareholders as to (i) the Revised Caps; (ii) the Additional
Continuing Connected Transactions and the New Caps; and (iii) the
Financial Assistance; "Independent Financial an independent
financial adviser to be Adviser" appointed for the purpose of
advising the Independent Board Committee and the Shareholders as to
(i) the Revised Caps; (ii) the Additional Continuing Connected
Transactions and the New Caps; and (iii) the Financial Assistance;
"JinBei" Shenyang JinBei Automotive Company Limited, a company
incorporated in the PRC on 14 May 1984 whose shares are listed on
the Shanghai Stock Exchange and holder of the 49% equity interests
in Shenyang Automotive; "JinBei Group" JinBei and its subsidiaries
and associates, other than Shenyang Automotive; "Listing Rules" the
Rules Governing the Listing of Securities on the Stock Exchange;
"Mianyang Ruian" Mianyang Brilliance Ruian Automotive Components
Co., Ltd., a wholly foreign owned enterprise established in the PRC
on 3 July 2000 and a wholly-owned subsidiary of the Company. The
principal activities of Mianyang Ruian are manufacture and trading
of automotive components; "New Caps" the estimated annual monetary
value of the Additional Continuing Connected Transactions for the
two financial years ending 31 December 2008 as set out in the
sub-paragraph headed "The New Caps" in this announcement; "Ningbo
Ruixing" Ningbo Brilliance Ruixing Auto Components Co., Ltd., a
wholly foreign owned enterprise established in the PRC on 9 June
2000 and a wholly-owned subsidiary of the Company. The principal
activities of Ningbo Ruixing are the manufacture and trading of
automotive components; "Ningbo Yuming" Ningbo Yuming Machinery
Industrial Co., Ltd., a wholly foreign owned joint venture
established in the PRC on 14 August 1993. Ningbo Yuming is
currently a wholly foreign owned enterprise in the PRC and a wholly
owned subsidiary of the Company. The principal activities of Ningbo
Yuming are the manufacture and sale of automotive components in the
PRC; "PRC" The People's Republic of China and for the sole purpose
of this announcement shall exclude Hong Kong, Macau Special
Administrative Region and Taiwan; "RMB" renminbi, the lawful
currency of the PRC; "Relevant Continuing the transactions between
members of the Connected Transactions" Group and the connected
persons as set out in the paragraph headed "The Relevant Continuing
Connected Transactions" in this announcement; "Revised Caps" the
revised estimated annual monetary value of the Relevant Continuing
Connected Transactions for the two financial years ending 31
December 2008 as set out in the sub-paragraph headed "The Revised
Caps" in this announcement; "Second Reset Date" 10 March 2008;
"Shanghai Hidea" Shanghai Hidea Auto Design Co., Ltd., an equity
joint venture enterprise established in the PRC on 16 April 2004
and in which the Company has an effective equity interests of
63.25%. The principal activities of Shanghai Hidea are design of
automobiles; "Shareholder(s)" holder(s) of Shares of the Company;
"Shares" shares of US$0.01 each of the Company; "Shenyang
Automotive" Shenyang Brilliance JinBei Automobile Co., Ltd., a
sino-foreign equity joint venture established in the PRC on 19 July
1991 and whose equity interests are owned as to 51% by the Company
and as to 49% by JinBei. The principal activities of Shenyang
Automotive are the manufacture, assembly and sale of minibuses and
sedans as well as automotive components in the PRC; "Shenyang
Brilliance Shenyang Brilliance Power Train Machinery Power" Co.,
Ltd.), an equity joint venture established in the PRC on 13
December 2004 in which the Company has an effective equity interest
of 75.01%. The principal activities of Shenyang Brilliance Power
are the manufacture and sale of power trains in the PRC; "Shenyang
Jindong" Shenyang Jindong Development Co., Ltd., an equity joint
venture established in the PRC on 18 April 2002 in which the
Company has an effective equity interest of 75.50%. The principal
activities of Shenyang Jindong are trading of automotive
components; "Special General Meeting" the special general meeting
of the Company to be convened for the purpose of considering, and
if thought fit, approving (i) the Revised Caps; (ii) the Additional
Continuing Connected Transactions and the New Caps; (iii) the
Financial Assistance; (iv) the proposed increased in authorised
share capital; and (v) the proposed amendment to the Bye-Laws;
"Stock Exchange" The Stock Exchange of Hong Kong Limited; "US$"
United States dollars, the lawful currency of the United States of
America; and "Xing Yuan Dong" Shenyang XingYuanDong Automobile
Component Co., Ltd., a wholly foreign owned enterprise established
in the PRC on 12 October 1998 and a wholly-owned subsidiary of the
Company. The principal activities of Xing Yuan Dong are the
manufacture and trading of automotive components in the PRC. As at
the date of this announcement, the Board comprises five executive
Directors, Mr. Wu Xiao An (also known as Mr. Ng Siu On) (Chairman),
Mr. Qi Yumin (Chief Executive Officer), Mr. He Guohua, Mr. Wang
Shiping and Mr. Lei Xiaoyang (Chief Financial Officer); and three
independent non-executive Directors, Mr. Xu Bingjin, Mr. Song Jian
and Mr. Jiang Bo. By order of the Board Brilliance China Automotive
Holdings Limited Wu Xiao An (also known as Ng Siu On) Chairman Hong
Kong, 15 December 2006 The Stock Exchange of Hong Kong Limited
takes no responsibility for the contents of this announcement,
makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever
arising from or in reliance upon the whole or any part of the
contents of this announcement. CONTACTS: Lisa Ng Brilliance China
Automotive Holdings Limited t: +852 2523 7227 Carol Lau Weber
Shandwick in Hong Kong t: +852 2533 9981 DATASOURCE: Brilliance
China Automotive Holdings Limited CONTACT: Lisa Ng, Brilliance
China Automotive Holdings Limited, +852-2523-7227; Carol Lau, Weber
Shandwick in Hong Kong, +852-2533-9981
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