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<TITLE>Brilliance China Automotive Holdings Limited</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, DC 20549</B>
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<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 20-F</B>
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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934</B></TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

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    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
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</TABLE>
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<DIV align="left" style="font-size: 10pt; margin-top: 0pt; margin-left: 12%"><B><B>For the fiscal year ended: December&nbsp;31, 2005</B>
</B>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
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</TABLE>
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<DIV align="left" style="font-size: 10pt; margin-top: 0pt; margin-left: 12%"><B><B>For the transition period
from </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> <B>to </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><U
>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</B></TD>
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</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number: 1-11412</B></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED</B></DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Exact name of Registrant as specified in its charter)</DIV>

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    <TD align="center" valign="top"><B>Not Applicable</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Bermuda</B></TD>
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<TR valign="bottom">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">(Translation of Registrant&#146;s name into English)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">(Jurisdiction of Incorporation or Organization)</TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong</B></DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 52%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Address of Principal Executive Offices)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act:</DIV>

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<TR valign="bottom">
    <TD align="center" valign="top"><B>Title of each class</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Exchange on which registered</B></TD>
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<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
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    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
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    <TD align="center" valign="top">American Depositary Shares<BR>
Ordinary Shares, par value US$0.01 per share
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">New York Stock Exchange, Inc.<BR>
The Stock Exchange of Hong Kong Limited</TD>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act: None</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act: None</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Number of outstanding shares of each of the issuer&#146;s classes of capital or common stock as of December&nbsp;31, 2005:</B></DIV>

<DIV align="center" style="font-size: 10pt">3,668,390,900 Ordinary Shares, par value US$0.01 per share</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">2,222,556 American Depositary Shares, each representing 100 Ordinary Shares</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section&nbsp;13 or (15)(d) of the Securities Exchange Act of
1934.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Large
Accelerated Filer <FONT face="Wingdings">&#111;</FONT> Accelerated Filer <FONT face="Wingdings">&#254;</FONT> Non-Accelerated Filer <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow.
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Item&nbsp;17 <FONT face="Wingdings">&#111;</FONT> Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule&nbsp;12b-2 of the Exchange Act).
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT></DIV>


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<A name="tocpage"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B>
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    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px"><A href="#101"> <B>Part I</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">ITEM 3. KEY INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">ITEM 4. INFORMATION ON THE COMPANY</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">ITEM 8. FINANCIAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">ITEM 9. THE OFFER AND LISTING</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">ITEM 10. ADDITIONAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px"><A href="#114"> <B>Part II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">ITEM 16. &#091;RESERVED&#093;</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">ITEM 16B. CODE OF ETHICS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px"><A href="#124"><B>Part III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">ITEM 17. FINANCIAL STATEMENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#126">ITEM 18. FINANCIAL STATEMENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#127">ITEM 19. EXHIBITS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
</TR>
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<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv2w1.txt">EX-2.1 Trust Deed, dated June 7, 2006</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv4w2.txt">EX-4.2 Form of Service Agreement for Executive Director</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv4w3.txt">EX-4.3 Purchase Agreement, dated May 8, 2006</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv7w1.txt">EX-7.1 Statement explaining how certain ratios were calculated in the annual report</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv8w1.txt">EX-8.1 List of significant subsidiaries</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv12w1.txt">EX-12.1 Section 302 Certification of the Chief Executive Officer</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv12w2.txt">EX-12.2 Section 302 Certification of the Chief Financial Officer</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00606exv13w1.txt">EX-13.1 Section 906 Certification of the CEO and CFO</A></FONT></TD></TR>
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<P align="center" style="font-size: 10pt">i
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CONVENTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, references in this annual report to &#147;we,&#148; &#147;us,&#148; &#147;our,&#148;
the &#147;Company&#148; or &#147;Brilliance China Automotive&#148; are to Brilliance China Automotive Holdings Limited
and its consolidated subsidiaries and their respective operations. References to &#147;China&#148; or &#147;PRC&#148;
are to the People&#146;s Republic of China, but do not apply to Hong Kong, Macau or Taiwan for purposes
of this annual report.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information contained in this annual report that does not relate to historical
financial information may be deemed to constitute forward-looking statements. The words or phrases
&#147;will likely result&#148;, &#147;are expected to&#148;, &#147;will continue&#148;, &#147;is anticipated&#148;, &#147;estimate&#148;, &#147;project&#148;,
&#147;believe&#148; or similar expressions identify &#147;forward-looking statements&#148; within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from historical results and
those presently anticipated or projected. Brilliance China Automotive wishes to caution readers not
to place undue reliance on any these forward-looking statements, which speak only as of the date
made. Among the factors that could cause Brilliance China Automotive&#146;s actual results in the future
to differ materially from any opinions or statements expressed with respect to future periods
include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unexpected adverse effects on the economy of the People&#146;s Republic of China, or
China, and China&#146;s automobile sector in particular;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased competition from other domestic and international automobile manufacturers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our relative inexperience in manufacturing and selling sedans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased costs for raw materials and components;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>possible further revaluation of the Renminbi against foreign currencies; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in foreign exchange rates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When considering these forward-looking statements, you should keep in mind the factors
described in &#147;Item&nbsp;3 &#151; Key Information &#151; Risk Factors&#148; and other cautionary statements appearing in
&#147;Item&nbsp;5 &#151; Operating and Financial Review and Prospects&#148; of this annual report. These risk factors
and statements describe circumstances that could cause actual results to differ materially from
those contained in any forward-looking statement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CURRENCY TRANSLATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specified, all references in this annual report to &#147;U.S. dollars&#148; or &#147;US$&#148;
are to United States dollars; all references to &#147;Renminbi&#148; or &#147;Rmb&#148; are to Renminbi, which is the
legal tender currency of China; all references to &#147;H.K. dollars&#148; or &#147;HK$&#148; are to Hong Kong dollars,
which is the legal tender currency of Hong Kong and all references to &#147;Euro&#148; and &#147;Euros&#148; are to the
legal tender currency of the European Monetary Union. On December&nbsp;30, 2005, the noon buying rates
in New York City for cable transfers of Renminbi, Hong Kong dollars and Euros, as certified for
customs purposes by the Federal Reserve Bank of New York was US$1.00 = Rmb 8.0702, US$1.00 =
HK$7.7533 and Euro 1.00 = US$1.1842. Unless otherwise specified, translations of amounts from
Renminbi, Hong Kong dollars and Euros to U.S. dollars for the convenience of the reader have been
made at those rates. No representation is made that the Renminbi, Hong Kong dollar or Euro amounts
could have been, or could be converted into U.S. dollars at those rates or at any other rates. In
addition, all financial information presented herein has been prepared in accordance with United
States generally accepted accounting principles, or U.S. GAAP.
</DIV>


<P align="center" style="font-size: 10pt">ii
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3. KEY INFORMATION</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Selected Financial Data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Historical Financial Information of Brilliance China Automotive</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the selected consolidated financial information of Brilliance
China Automotive and its subsidiaries as of and for the years ended December&nbsp;31, 2001, 2002, 2003,
2004 and 2005, which have been derived from our audited consolidated financial statements. The
selected financial information for the years ended December&nbsp;31, 2003, 2004 and 2005 and as of
December&nbsp;31, 2004 and 2005 should be read in conjunction with, and is qualified in its entirety by
reference to, the financial statements, prepared in accordance with U.S. GAAP, included elsewhere
in this annual report, the accompanying notes thereto and &#147;Item&nbsp;5 &#151; Operating and Financial Review
and Prospects&#148;. The financial statements and footnotes for the years ended December&nbsp;31, 2001 and
2002 and as of December&nbsp;31, 2001, 2002 and 2003 are not included in this annual report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(Amounts in millions,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>As of and for the years ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>except per share/ADS and operating data)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(Rmb, except operating data)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,218.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,319.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,109.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,542.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,469.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">677.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,308.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,411.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,491.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,012.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">621.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross Profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,910.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,382.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,067.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,410.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,510.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,195.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(671.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,696.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,853.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,288.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,776.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,692.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,820.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,127.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,263.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,286.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,428.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,110.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">881.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,741.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,332.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,031.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,187.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,059.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,419.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,005.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,886.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,857.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,139.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">760.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flow Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment for capital expenditure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">798.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">999.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">677.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">603.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">616.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows (used in) provided by
operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,913.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(719.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">896.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows (used in) provided by
investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,398.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,209.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,491.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(722.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows (used in) provided by
financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(45.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,281.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">853.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,622.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(201.1</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>(Amounts in millions,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>As of and for the years ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>except per share/ADS and operating data)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(Rmb, except operating data)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Per Share/ADS Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1830</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.0227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic earnings (loss)&nbsp;per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1830</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.0227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted earnings (loss)&nbsp;per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.27</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash dividends declared per ADS<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">n/a</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">n/a</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Production volume (<I>units</I>)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minibus &#151; Deluxe model</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minibus &#151; Mid-priced model</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Subtotal &#151; Minibuses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Zhonghua Sedans<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales volume (<I>units</I>)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minibus &#151; Deluxe model</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minibus &#151; Mid-priced model</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Subtotal &#151; Minibuses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Zhonghua Sedans<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Calculated using the respective U.S. dollar to Renminbi year-end noon
buying rates for the years presented. Brilliance China Automotive
declared cash dividends per ordinary share in H.K. dollars in each of
2004, 2003, 2002 and 2001.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Commercial production of Zhonghua sedans began in August&nbsp;2002.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange Rate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information concerning exchange rates between Renminbi
and U.S. dollars for the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Noon Buying Rate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Period End</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Average</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2761</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.1826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0415</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;2006 (through June&nbsp;20, 2006)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.0225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.9969</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">Source:</TD>
    <TD>&nbsp;</TD>
    <TD>The noon buying rate in New York for cable transfers
payable in foreign currencies as certified for
customs purposes by the Federal Reserve Bank of New
York.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Determined by averaging the rates on the last business day of each
month during the respective year and on the last business day of each
week during the respective month.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive is subject to various changing competitive, economic, political
and social conditions in China, as well as special concerns and significant risks not usually
encountered by a United States company. These include the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to Brilliance China Automotive Minibus and Sedan Businesses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Brilliance China Automotive experienced a net loss of Rmb 671.3&nbsp;million in 2005 and may not be
profitable in 2006 or in subsequent years.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive recorded a net loss of Rmb 671.3&nbsp;million (US$83.2&nbsp;million) in 2005
as compared with a net income of Rmb 1.2&nbsp;million (US$0.14&nbsp;million) in 2004. During the same
period, total sales of Brilliance China Automotive were Rmb 5,469.0&nbsp;million (US$677.7&nbsp;million),
representing a 16.4% decrease from Rmb 6,542.0&nbsp;million (US$790.4&nbsp;million) in 2004. The decrease in
total sales was primarily due to the decrease in the sales volumes of minibuses and the Zhonghua
sedan and the decrease in average unit selling prices due to the intensified price competition of
the Chinese automobile industry during 2005. There is no assurance that sales of vehicles by
Brilliance China Automotive will not be affected by the highly competitive automobile market in
China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Brilliance China Automotive also recognized a provision for impairment of intangible
assets of Rmb 173.0&nbsp;million, as compared with Rmb 50.0&nbsp;million in 2004, in respect of the design
and development costs of the Zhonghua sedans. Provision for impairment of goodwill increased from
Rmb 47.3&nbsp;million in 2004 to Rmb 257.7&nbsp;million in 2005, primarily due to impairment loss in relation
to one of Brilliance China Automotive&#146;s jointly controlled entities and a subsidiary. Provision
for impairment of property, plant and equipment increased from Rmb 10.0&nbsp;million in 2004 to Rmb
48.3&nbsp;million in 2005, primarily due to the retirement from use and the change in use &#150; from
production to rental &#150; of certain property, plant and equipment of the minibus and automotive
components segment. There can be no assurance that Brilliance China Automotive will not be
required to recognize a provision for impairment of intangible assets, an impairment loss on
goodwill or a provision for impairment of the property, plant and equipment in 2006 or in
subsequent years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of these factors, Brilliance China Automotive experienced a net loss in 2005, and
may incur losses in 2006 and in subsequent years, which could impact Brilliance China Automotive&#146;s
ability to implement its business strategy and adversely affect its financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If demand for minibuses and sedans in China does not increase, and if Shenyang Automotive does not
increase its market share, the ability of Shenyang Automotive to increase its sales volume will be
adversely impacted.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The success of Brilliance China Automotive&#146;s business strategy will depend on the ability of
its 51.0%-owned subsidiary, Shenyang Brilliance JinBei Automobile Co., Ltd., or Shenyang
Automotive, to increase substantially its sales volume. Such an increase can only be achieved if
Shenyang Automotive increases its market share or if there is an overall increase in the size of
the minibus and sedan markets in China. Although the overall unit sales of minibuses and sedans in
China increased between 2000 and 2003 and we have experienced increased sales of our minibuses and
Zhonghua sedans in 2003, the implementation of macro-economic policies and austerity measures in
China has resulted in a significant slowdown in growth in domestic demand for automobiles since the
second half of 2004. After a decrease of 17.4% from 74,618 units in 2003 to 61,618 units in 2004,
Shenyang Automotive&#146;s sales volume of minibuses decreased by 2.6% from 2004 to approximately 60,000
units in 2005. Sales volume of Zhonghua sedans decreased 57.1% from 25,600 units in 2003 to 10,982
units in 2004, and to approximately 9,000 units in 2005, representing an 18.0% decrease from 2004. The pace and
strength of the recovery in the automotive industry in China remain difficult to predict. In light
of this industry-wide decline in demand, as well as other factors, there can be no assurance that
demand for Shenyang Automotive&#146;s minibuses and sedans will return to previous levels. If overall
demand for domestic minibuses and sedans does not increase in the future, the ability of Shenyang
Automotive to increase its sales volume or market share could be adversely affected.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Delays in the development of new products, lack of consumer acceptance of new products and
unforeseen shifts in consumer preferences may have a negative effect on Brilliance China
Automotive&#146;s financial results.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meeting consumer demand with new vehicles developed over increasingly shorter product
development cycle times is critical to Brilliance China Automotive&#146;s continued success. Brilliance
China Automotive&#146;s ability to strengthen its position within its traditional minibus segment while
continue to expand into additional market segments with new products, such as sedans, will play a
key role in determining its future success. In order to compete successfully within its traditional
markets, as well as to enter new markets with new product offerings, Brilliance China Automotive
must assess trends in consumer preferences, modify existing products or develop new products to
match those trends and deliver to market these newly developed or modified products before such
preferences change. Delays in the development of new products, lack of consumer acceptance of new
products and unforeseen shifts in consumer preferences may have a negative effect on Brilliance
China Automotive&#146;s financial results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive has experienced a management turnover and could continue to have
problems retaining and recruiting key personnel in the future.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive had a turnover of its directors and executive officers in 2004,
2005 and 2006, and this trend of management changes may continue in the future. In 2004, three of
its directors had either resigned or retired. Of the three directors who resigned or retired in
2004, one was an executive director and two
were independent non-executive directors. In 2005, three executive directors had resigned. Of the<BR>
three directors who resigned in 2005, one was the President and Chief Executive Officer, another
was the Vice President and Chief Financial Officer, and the third was the Vice Chairman, Executive
Vice President and Company Secretary. In 2006, an executive director, who was appointed in 2004 as
President and Chief Executive Officer to fill the then vacant positions, resigned and a
non-executive director retired. While Brilliance China Automotive appointed a new President and
Chief Executive Officer, a new Chief Financial Officer and new executive directors and independent
non-executive directors between 2004 and now, there can be no assurance that this relatively new
management team will be as effective in implementing Brilliance China Automotive&#146;s business
strategies or that any of the new strategies that the new management team may decide to implement
will achieve its intended objectives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s success depends to a large degree upon the continued
contributions of key management and other personnel, some of whom could be difficult to replace.
There can be no assurance that Brilliance China Automotive will be able to recruit suitable
candidates, and high turnover of senior management can adversely impact Brilliance China
Automotive&#146;s stock price and customer relationships as well as make recruiting for future
management positions more difficult. In addition, Brilliance China Automotive must successfully
integrate any new management personnel that it recruits in order to achieve its operating
objectives, and changes in other key management positions may temporarily affect its financial
performance and results of operations as new management may need time to become familiar with its
business. Accordingly, Brilliance China Automotive&#146;s future financial performance will depend to a
great extent on its ability to motivate and retain key management personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>There are significant risks involved in Brilliance China Automotive&#146;s joint venture with BMW to
produce BMW sedans in China.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;27, 2003, Brilliance China Automotive, through its indirect subsidiary, Shenyang
JinBei Automotive Industry Holdings Company Limited, or SJAI, entered into a joint venture contract
with BMW Holding BV, or BMW Holding, to assemble, produce and sell BMW designed and branded sedans
in China. Production began in September&nbsp;2003 and the 3-Series and 5-Series sedans were formally
launched in China in October and November&nbsp;2003, respectively. There are significant risks involved
in this joint venture, including, but not limited to, the ability of the joint venture to obtain
adequate financing as and when necessary, obtain timely delivery of imported components and parts,
source necessary components at competitive prices, successfully develop, manufacture, market and
sell BMW sedans in China, and obtain appropriate approvals for its new products from governmental
authorities in China. Brilliance China Automotive currently has a 49.0% effective interest in the
joint venture and provides guarantees for the performance of all obligations of SJAI, including
required capital contributions.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The ownership of Brilliance China Automotive by its largest shareholder is currently the subject of
litigation.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2003, a writ dated January&nbsp;21, 2003, or the Writ, brought by Broadsino Finance
Company Limited, or Broadsino, as the Plaintiff, was filed with the Supreme Court of Bermuda which alleged
that the interest of the Chinese Financial Education Development Foundation, or the Foundation, in
1,446,121,500 shares of Brilliance China Automotive, or the Sale Shares, was held in trust for
Broadsino and was improperly transferred to Huachen Automotive Group Holdings Company Limited, or
Huachen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the course of legal proceedings with Broadsino, Brilliance China Automotive achieved the
following: (i)&nbsp;overturning on February&nbsp;11, 2003 an ex parte Court Order dated January&nbsp;22, 2003 which had
restrained Brilliance China Automotive from, amongst other things, registering the transfer of the
Sale Shares by the Foundation to Huachen and/or Huachen to certain directors of Brilliance China
Automotive; (ii)&nbsp;initiating on March&nbsp;10, 2003, a Strikeout Summons at the Supreme Court to have the
Writ and the statement of claim struck out, which proceedings were duly heard before the Supreme
Court, and which resulted on December&nbsp;31, 2003 in that court issuing a judgment to strike-out the
Writ; (iii)&nbsp;challenging Broadsino&#146;s attempts for appeal to the Court of Appeal of Bermuda, Civil
Appellant jurisdiction which appeal was then dismissed by that court&#146;s judgment of March&nbsp;14, 2005
which ruled in Brilliance China Automotive&#146;s favor; (iv)&nbsp;challenging at all stages Broadsino&#146;s
further attempts for leave to appeal to the Privy Council in the United Kingdom with respect to the
Court of Appeal&#146;s judgment; and (v)&nbsp;being awarded costs in Broadsino&#146;s seeking of a grant of leave
on November&nbsp;10, 2005 in the Court of Appeal in Bermuda to withdraw its leave to appeal to the Privy
Council.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;7, 2003, a lawsuit was filed in the United States District Court for the District of
Columbia by the former Chairman of Brilliance China Automotive and others against the Liaoning
Provincial Government relating to Huachen&#146;s ownership of certain shares of Brilliance China
Automotive. On March&nbsp;3, 2005, a motion to dismiss the claim in favor of Liaoning Provincial
Government was granted by the District Court for lack of subject matter jurisdiction. The
plaintiffs appealed to the United States Court of Appeal of the District of Columbia and a decision
is pending. Brilliance China Automotive has never been named as a party to this lawsuit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors of Brilliance China Automotive do not believe the recent litigation in Bermuda
or any other litigation in other jurisdictions described above have had or will have a significant
impact on the financial position of Brilliance China Automotive. See &#147;Item&nbsp;8 &#151; Financial
Information &#151; Legal Proceedings&#148; for further details of these litigation proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Failure by Brilliance China Automotive to continue to form and maintain alliances with foreign
automobile manufacturers could adversely affect its competitiveness.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order for Brilliance China Automotive to remain competitive and obtain additional
technology and financing, it is crucial that it enters into and maintains alliances with foreign
motor vehicle manufacturers. This is particularly true since China&#146;s accession to the World Trade
Organization, or the WTO, in November&nbsp;2001. As a result of the reduction in import restrictions,
more automobile manufacturers have been and will be entering China&#146;s motor vehicle market. If
Brilliance China Automotive cannot maintain its existing alliances with Toyota and BMW or form
strategic alliances with other foreign automobile manufacturers regarding the establishment of
joint ventures and the procurement of necessary components on commercially beneficial terms, its
competitive position will be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The inability of Shenyang Automotive to access Toyota&#146;s technical resources to upgrade Shenyang
Automotive&#146;s products, or Toyota&#146;s provision of assistance to any of Shenyang Automotive&#146;s
competitors could negatively impact Shenyang Automotive&#146;s sales and competitive position.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive has historically relied to a significant extent on Toyota for technical
assistance for its minibuses. On December&nbsp;17, 2001, Shenyang Automotive entered into an agreement
with Toyota for the technology transfer of the fifth generation of the Toyota minibus &#151; the Granvia
&#151; for which production based upon semi-knockdown kits from Toyota commenced in 2003. In the first
half of 2004, the Granvia, which is marketed under the brand name &#147;Granse&#148; (known as &#147;Grace&#148; before
February&nbsp;2004) when sold in China by Brilliance China Automotive, entered into commercial
production, with more than 60% of its parts and components from domestic sources. Although Shenyang
Automotive has introduced new products, including its successful
mid-priced minibus, incorporating styling and engineering refinements and modifications without assistance from Toyota,
lack of access to Toyota&#146;s technical resources may limit Shenyang Automotive&#146;s ability to upgrade
significantly its existing Toyota-designed products. Failure to update its existing models could
eventually result in Shenyang Automotive&#146;s products becoming technologically inferior to its
competitors&#146; products, which could have an adverse impact on Shenyang Automotive&#146;s sales. Although
Brilliance China Automotive has no knowledge of any intention of Toyota to produce, or assist a
current or potential competitor in the production of, minibuses similar to those of Shenyang
Automotive in China, neither Brilliance China Automotive nor Shenyang Automotive could prohibit
Toyota from doing so.
</DIV>



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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Any delay or disruption in Shenyang Automotive&#146;s ability to obtain engines from Toyota could limit
Shenyang Automotive&#146;s ability to produce its deluxe minibuses.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While Shenyang Automotive is currently in the process of replacing the Toyota engines used in
some of its minibus models with Mitsubishi and Mianyang Xinchen engines, currently most of the
engines installed in Shenyang Automotive&#146;s deluxe minibuses are purchased from Toyota on a
commercial basis. Shenyang Automotive generally maintains an inventory of Toyota engines sufficient
to sustain two months of planned production. To date, Shenyang Automotive has not experienced any
material disruption in its supply of engines from Toyota. Changes in regulatory requirements,
tariffs and other trade barriers and price or exchange controls could, however, hinder Shenyang
Automotive&#146;s ability to import engines. An extended disruption or reduction in Shenyang
Automotive&#146;s supply of Toyota engines would consequently limit Shenyang Automotive&#146;s ability to
produce deluxe minibuses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Any delay or disruption in Shenyang Automotive&#146;s ability to obtain engines could limit Shenyang
Automotive&#146;s ability to produce its Zhonghua sedans.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently all of the Mitsubishi engines installed in Brilliance China Automotive&#146;s Zhonghua
sedans are purchased from Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., or
Shenyang Aerospace, and Harbin DongAn Automotive Engine Manufacturing Co. Ltd., or Harbin DongAn,
on a commercial basis. Shenyang Aerospace is an associated company of Brilliance China Automotive,
in which Brilliance China Automotive has currently an indirect 12.8% equity interest. Harbin DongAn
is a joint venture between Harbin DongAn Engine Group, Mitsubishi Group and Malaysia China
Investment Holding Company. See &#147;Item&nbsp;4 &#151; Information on the Company &#151; Business Overview &#151; Other
Significant Subsidiaries, Jointly Controlled Entities and Associated Companies &#151; Shenyang
Aerospace.&#148; Shenyang Automotive is currently in discussions with other domestic and overseas engine
manufacturers, with a view towards broadening its engine sourcing for its Zhonghua sedans, and
considering using foreign designs to produce domestically made engines for sedans and minibuses.
Shenyang Automotive generally maintains an inventory of Mitsubishi and DongAn engines sufficient to
sustain two months of planned production. To date, Shenyang Automotive has not experienced any
material disruption in its supply of engines from Shenyang Aerospace and Harbin DongAn. However,
there can be no assurance that Shenyang Automotive will at all times be able to obtain a steady
supply of Mitsubishi engines from Shenyang Aerospace and Harbin DongAn. An extended disruption or
reduction in Shenyang Aerospace&#146;s and Harbin DongAn&#146;s supply of engines to Shenyang Automotive
would consequently limit Shenyang Automotive&#146;s ability to produce its Zhonghua sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Shenyang Automotive plans to install engines manufactured by its new engine plant
in its Zhonghua sedans. There is no assurance that these new engines will be successful or will not
have quality-related problems. If Shenyang Automotive is not able to timely manufacture these new
engines with the desired quality, Shenyang Automotive&#146;s ability to produce its Zhonghua sedans may
be materially and adversely effected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>If Brilliance China Automotive fails to upgrade its existing production facilities or build new
facilities in a timely and cost-efficient manner, its businesses, financial condition and results
of operation may be negatively affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain its competitive edge, Brilliance China Automotive&#146;s strategy is to
upgrade its production facilities, including molding, welding, painting and assembly facilities and
build new facilities, for example, the construction of its new engine plant. Any failure or delay
in implementing such upgrading or construction plans in a timely and cost-efficient manner could
limit its future growth and have a material adverse effect upon Brilliance China Automotive&#146;s
businesses, financial condition and results of operations.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Shenyang Automotive&#146;s competitors may have access to more advanced technology, greater financial
resources and more substantial support from the Chinese government, which could negatively affect
Shenyang Automotive&#146;s competitive position.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of Shenyang Automotive&#146;s competitors have formed joint ventures with, or licensed
technology from, foreign automobile manufacturers, and others may do so in the future. These
competitors may have access to greater financial resources than Brilliance China Automotive or to
technology and equipment that are more advanced than the technology and equipment utilized by
Brilliance China Automotive. In addition, some of Shenyang Automotive&#146;s potential competitors may
receive substantial support from the Chinese government, including priority access to loans,
favorable import quotas and tariffs, expedited approvals of proposed projects and products and
preferential tax treatment. Such advantages may make it difficult for Shenyang Automotive to
compete with these other automobile manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Huachen, as Brilliance China Automotive&#146;s substantial shareholder, may not always act in the best
interest of other shareholders.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Huachen, a wholly owned subsidiary of the Liaoning Provincial Government, currently owns 39.4%
of the issued and outstanding shares of Brilliance China Automotive, which it acquired from the
Chinese Financial Education Development Foundation in December&nbsp;2002. Accordingly, Huachen is
entitled to cast 39.4% of the votes on all matters voted on by the shareholders of Brilliance China
Automotive (to the extent it is not required to abstain from exercising its voting rights under the
Bye-laws of Brilliance China Automotive and applicable laws and regulations), and therefore is able
to exert substantial influence over the election of Brilliance China Automotive&#146;s directors, the
outcome of actions requiring majority shareholder approval and the business in general of
Brilliance China Automotive. Such influence could preclude the ability of minority shareholders to
influence important business decisions of Brilliance China Automotive, and may result in actions or
omissions by Brilliance China Automotive that are not in the best interest of the minority
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Significant changes in the cost or availability of raw materials or components may have a material
adverse impact on Brilliance China Automotive&#146;s results of operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has established relationships with over 280 suppliers in the PRC
and sources the majority of its important components and raw materials from at least two different
suppliers to ensure availability and increase competition among suppliers. Brilliance China
Automotive has also made significant progress in increasing the domestic component content of its
products. However, certain principal components of BMW sedans continue to be imported from overseas
suppliers. For example, certain components used in sedans produced by BMW Brilliance are imported
from BMW Group and certain other components used in minibuses are imported from Toyota. Because
these components are imported from the BMW Group. Toyota and other suppliers in Europe and Japan,
the costs as well as availability of such components may be affected by exchange rates, import
restrictions, customs clearance, shipment schedules and import duties and consequently drive up
Brilliance China Automotive&#146;s costs of production. In addition, unexpected disruptions in the
supply of certain components, particularly from foreign suppliers, may also require using
alternative suppliers or cause delays in the production process. Furthermore, an increase in the
price of electricity or certain raw materials, such as steel, may result in increased costs of
production. Significant changes in the cost or availability of raw materials or components may have
an adverse impact on Brilliance China Automotive&#146;s results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Product liabilities and recall claims may adversely affect Brilliance China Automotive&#146;s results of
operation.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Manufacturers and sellers of defective products in China may be subject to liability for
losses and injury caused by such defective products under China&#146;s laws. However, there is currently
no compulsory legal requirement under PRC legislation for automobile manufacturers to maintain
insurance coverage in respect of production interruption, product liability or damage to third
party properties. Brilliance China Automotive does not carry product liability insurance or
insurance against losses due to production insurance, product recalls or damage to third party
properties. Brilliance China Automotive cannot guarantee that product liability claims will not be
brought against Brilliance China Automotive or its subsidiaries and affiliates in the future, and,
if such claims are successful, that such claims will not have a material adverse impact upon
Brilliance China Automotive&#146;s results of operations, or that the Chinese government will not impose new requirement for sufficient insurance to be
maintained to cover the risks associated with Brilliance China Automotive&#146;s China operations,
including those of Shenyang Automotive.</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive&#146;s business and future growth depend on availability of funding.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development is capital intensive. Capital costs are funded by Brilliance China
Automotive from operating cash flow and financing. The availability of future borrowings and access
to the capital markets for financing depend on prevailing market conditions and the acceptability
of the financing terms offered. Brilliance China Automotive cannot assure that future financings
will be available on acceptable terms, or in amounts sufficient to fund its needs. If Brilliance
China Automotive fails to obtain sufficient funding, it may be unable to implement its expansion
plans, which may have a material adverse impact upon its business and financial condition.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive is required to comply with increasingly stringent environmental
standards applicable to its vehicles and manufacturing facilities.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s production facilities are subject to government pollution
regulations enforced by the relevant local governments. In addition, the Chinese government has set
vehicle safety, exhaust and performance standards with which Brilliance China Automotive must
comply. Brilliance China Automotive&#146;s operations are sensitive to changes in the Chinese
government&#146;s environmental policies relating to all aspects of the automobile manufacturing. There
is no assurance that changes in such policies would not have an adverse effect on the revenue or
results of operations of Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive may encounter difficulties for compliance with the Sarbanes-Oxley Act
of 2002.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The United States Securities and Exchange Commission, as required by Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to
include a management report on such company&#146;s internal controls over financial reporting in its
annual report, which contains management&#146;s assessment of the effectiveness of the company&#146;s
internal controls over financial reporting. In addition, an independent registered public
accounting firm must attest to and report on management&#146;s assessment of the effectiveness of the
company&#146;s internal controls over financial reporting. These requirements will first apply to our
annual report on Form 20-F for the fiscal year ending December&nbsp;31, 2006. Our management may
conclude that our internal controls over our financial reporting are not effective. Moreover, even
if our management concludes that our internal controls over financial reporting are effective, our
independent registered public accounting firm may still be unable to attest to our management&#146;s
assessment or may issue a report that concludes that our internal controls over financial reporting
are not effective. In preparation for the implementation of the requirements of Section&nbsp;404, we
are undertaking company-wide documentation of internal controls, performing the system and process
evaluation and testing required. During the course of our evaluation, documentation and
attestation, we may identify certain deficiencies that could adversely affect our ability to
record, process, summarize and report financial data consistent with our management&#145;s assertions in
our financial statements. Although we will formulate plans for remedial measures to make necessary
improvements to address any deficiency found, we cannot assure you that we will be able to remedy
the identified deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section&nbsp;404. We are also in the process of conducting further
evaluation of our internal control over financial reporting and may identify other deficiencies
that we may not be able to remedy in time by the deadline for compliance with Section&nbsp;404. If we
fail to achieve and maintain the adequacy of our internal controls, we or our auditors may not be
able to conclude that we have effective internal controls, on an ongoing basis, over financial
reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls,
particularly those related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to help prevent fraud. As a result, our failure to achieve and
maintain effective internal controls over financial reporting could result in the loss of investor
confidence in the reliability of our financial statements, which in turn could harm our business
and negatively impact the trading prices of our ADSs. Furthermore, we have already incurred
considerable costs and spent significant management time and other resources in an effort to comply
with Section&nbsp;404 and other requirements of the Sarbanes-Oxley Act. We anticipate that we will
continue to incur considerable costs and use significant resources for compliance with Section&nbsp;404.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B><I>There is no assurance that the research and development carried out by Brilliance China Automotive
will materialize in products that can achieve market acceptance.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive invests and plans to continue to invest capital and other
resources to develop or acquire proprietary automobile-related technologies. As the development
of proprietary technologies is a highly complex, uncertain and costly process, there is no
assurance that Brilliance China Automotive can successfully develop and commercialize new
products based on its new technologies and innovations (or to do so in a timely manner), or that
any new products that Brilliance China Automotive introduces will achieve market acceptance. For
example, Brilliance China Automotive will begin manufacturing engines at its new engine plant in
late June&nbsp;2006 for installation in its sedans. Brilliance China Automotive has made significant
investments for the development and manufacture of these new engines and there is no assurance
that the engines built at the new engine plant will achieve the desired quality or market
acceptance. If Brilliance China Automotive&#146;s efforts to develop and commercialize new products
based on such technologies are unsuccessful, it may not be able to recover its investment in such
technologies and may suffer losses as a result of the failure of such products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, if Brilliance China Automotive&#146;s research and development capabilities are
impaired, the development of Brilliance China Automotive&#146;s products may be delayed and which, in
turn, may adversely affect its business plans and operations.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive&#146;s intellectual property rights may be infringed by third parties and,
Brilliance China Automotive may also face infringement claims brought by third parties.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has adopted strict policies to protect its existing and future
intellectual property under existing and future patent, copyright, trademark, trade secret and
unfair competition laws. However, policing breaches of its intellectual property rights is
difficult and sometimes impracticable. There is no assurance that the current measures taken by
Brilliance China Automotive will prevent infringement of Brilliance China Automotive&#146;s
intellectual property rights. Counterfeit automobiles and automotive parts that improperly use
Brilliance China Automotive&#146;s brands, technology or designs could cause it to lose sales and
damage its reputation, brands and product images. Even if Brilliance China Automotive succeeds in
establishing infringement claims against third parties, they may be unable to pay damages and
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive may also face infringement claims brought by third parties.
These claims against Brilliance China Automotive could cause it to incur significant legal fees
and other costs, divert its management&#146;s attention and cause significant disruptions to its
businesses and operations. If an infringement claim is successfully asserted against Brilliance
China Automotive, it could also be required to pay substantial monetary damages and be injoined
from further production or sale of certain products, which could have a material adverse effect
on its businesses, results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive has uninsured risks.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s insurance coverage, as of December&nbsp;31, 2005, includes fire,
flood, riot, strike, malicious damage, business interruption, transportation, product and public
liability. However, there are certain types of losses, for instance, losses resulting from acts
of terrorism which are disproportionately expensive or practically infeasible for Brilliance
China Automotive to fully insure against, or to insure at all. Therefore, there may be
circumstances in which Brilliance China Automotive will not be fully insured for losses and
liabilities, which may in turn result in the interruption of its business. These uninsured losses
and liabilities could adversely affect the financial position of Brilliance China Automotive.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Brilliance China Automotive may not succeed under the &#147;Local Branding&#148; approach to maintain and
strengthen the name recognition of its &#147;Zhonghua&#148; brand and may subsequently suffer loss as PRC
consumers give more weight to brand recognition as they make auto purchase decisions.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The &#147;Zhonghua&#148; brand is considered one of PRC&#146;s &#147;Local Brands&#148; of domestically produced
vehicles. This &#147;Local Branding&#148; approach encourages PRC auto companies to establish and grow their
self-established auto name brands and to use domestic technologies, production facilities and
components to build vehicles. Shenyang Automotive&#146;s &#147;Zhonghua&#148; had been recognized as a well-known
&#147;Local Brand&#148; shortly after its launch. However, because PRC customers have associated auto brands with automobile quality, innovation and
reliability, and brand recognition has become an increasingly important factor in consumers&#146;
decisions in purchasing vehicles, certain foreign auto brands still have substantial brand
recognition advantage over these &#147;Local Brands&#148;. Thus although Shenyang Automotive has committed
itself to this branding approach and has made multi-faceted efforts to boost its brand recognition,
there can be no assurance that this approach will be effective in the long run, nor can there be
assurance that &#147;Zhonghua&#148; as well as other brands Brilliance China Automotive may launch in the
future can withstand the severe competition from the long- established foreign auto brands.</DIV>




<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to the Minibus and Sedan Industries in China</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>China&#146;s automobile demands may become more volatile due to macroeconomic factors.</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the rapid growth between 2000 and 2003, China&#146;s sedan industry growth has slowed
significantly in 2004. In particular, the sales volume increased 75% from 2002 to 2003, as compared
to only 16% from 2003 to 2004. China&#146;s sedan industry has however showed significant improvement in
2005. According to China Automotive Technology &#038; Research Center, sedan sales volume increased by
28.0% to 3,131,950 sedan units in 2005, compared to the 2,448,557 sedan units sold in 2004. Sales
performance in China&#146;s sedan market improved further in the first four months of 2006 with a total
of 1,719,032 sedan units being sold, compared to the 1,129,497 sedan units sold in the same period
in 2005, an increase of 52.2% year on year. However, there is no assurance that this growth will
continue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The demand for automobiles in China is affected by various factors beyond Brilliance China
Automotive&#146;s control, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic and monetary policies implemented by the Chinese government;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of automobile consumption loans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of automobile insurance policies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>consumer confidence;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>volatility in petroleum, diesel and other commodity prices; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>development of transportation infrastructure, for example express ways.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the general economy in China slows down or the Chinese government adopts new policies that
adversely affect the automotive industry, the demand for automobiles is also likely to experience a
significant down turn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the years, Brilliance China Automotive has been increasing its production capacities in
anticipation of a significant increase in automobile demand in China. Any slow down in automobile
demand in China may lead to an increase in Brilliance China Automotive&#146;s inventory and could result
in a significant underutilization of its production capacity. As a result, Brilliance China
Automotive&#146;s results of operations and financial condition could be materially and adversely
affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Competition is intense in China&#146;s automobile industry.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive currently faces intense competition mainly from other Chinese
domestic automobile manufacturers. Many of Brilliance China Automotive&#146;s competitors have joint
ventures with leading foreign automobile manufacturers and may have significantly more resources
than Brilliance China Automotive. Any further increase in competition may dilute Brilliance China
Automotive&#146;s market share and reduce its profit margin. The competition that Brilliance China
Automotive faces also requires it to increase its marketing and development costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As Chinese automotive components and parts industry is highly fragmented, Brilliance China
Automotive competes with a large number of manufacturers in this market. Brilliance China
Automotive also competes with other automobile manufacturers and automotive components and parts
manufacturers in the hiring and retention of management and skilled employees. There can be no assurance that Brilliance China Automotive will
be able to compete successfully with its competitors in the automobile and automotive components
and parts industries. If Brilliance China Automotive&#146;s competitors gain a competitive advantage in
terms of value for money, product quality, brand recognition or financial resources, the market
share, profitability and financial position of Brilliance China Automotive may be adversely
affected.</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Reduced tariffs and import restrictions on foreign-made motor vehicles and motor vehicle components
as a result of China&#146;s entry into the WTO may lead to increased competition for Brilliance China
Automotive.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government imposes restrictions, quotas and tariffs on the import of foreign-made
motor vehicles, as well as motor vehicle components. However, as a result of China&#146;s accession to
the WTO, which regulates trading and tariffs among its signatory states, in November&nbsp;2001, China
has committed to reducing its import restrictions on motor vehicles and motor vehicle components.
In addition, China will be required to conform its import tariffs to the uniform tariffs under the
WTO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2002, China reduced its import tariffs on motor vehicles and automotive
components from between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to 50.7%
and between 14% to 31.4%, respectively. This range was lowered further to between 4.8% and 25% for
automotive components in 2003, between 5% and 22.9% in 2004 and between 5% and 18.6% in 2005. In
2006, the import tariffs on automotive components were further reduced to between 5.0% and 14.3%.
In 2004, the average import tariffs on automotive components for the deluxe minibuses (including
Granse minibuses) and Zhonghua sedans were 13.8% and 10.5%, respectively, and in 2005, the average
tariffs became 9.7% and 12.1% for the imported components for deluxe minibuses and Zhonghua sedans,
respectively. In addition, tariffs on vehicles with nine seats or less and engine sizes of three
liters or below fell from 43.9% in 2002 to 38.2% in 2003, while tariffs on vehicles with more than
nine seats and engines of more than three liters decreased from 50.7% in 2002 to 43.0% in 2003. In
2004, tariffs were 34.2% for vehicles with nine seats or less and engine sizes of three liters or
less and 37.6% for vehicles with more than nine seats and engines of more than three liters. In
2005, tariffs were fixed at 30% for all motor vehicles. These tariffs were further reduced to 28%
in January&nbsp;2006 and are scheduled for further reduction to 25% in July&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although lower tariffs and reduced import restrictions may benefit Brilliance China Automotive
in terms of lower cost of imported components, lower tariffs and reduced import restrictions could
also lead to a substantial increase in the number of minibuses, sport utility vehicles, sedans and
other motor vehicles imported into China, thereby significantly increasing competition in
Brilliance China Automotive&#146;s current and proposed markets.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>The automobile industry is heavily regulated in China, and automobile-related regulations may
become even more stringent in the future.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive is subject to various laws, rules and regulations in China
imposed at national, provincial and municipal levels that regulate or affect China automobile
manufacturing industry and automotive components and parts manufacturing industry, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>crash test requirements and other safety standards in relation to automobile and
automotive parts and components;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>emission standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maximum fuel consumption;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>minimum warranty requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>automobile recall requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>noise, waste, discharge and other pollution controls relating to manufacturing of automobiles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>restrictions on road use, including time restriction and segmental restriction; and</TD>
</TR>

</TABLE>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market entry requirements and/or minimum production requirements for automobile and
automotive components and parts</TD>
</TR>
<TR>
<TD colspan="4">
 manufacturers.</TD>
</TR>
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, every new product type must be approved by the Chinese government before it can be
introduced into the market. This approval process can sometimes be lengthy, and can impact the
ability of Brilliance China Automotive to introduce new products in a timely manner. This
regulatory framework may limit the flexibility of Brilliance China Automotive to respond to
market conditions or competition. The cost of complying with these policies and regulations can
also be significant. Brilliance China Automotive&#146;s operations are sensitive to changes in the
Chinese government&#146;s policies relating to all aspects of the automobile industry. There can be no
assurance that changes in such policies would not have an adverse effect on the revenue or
results of operations of Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, China&#146;s regulators may introduce in the future more stringent regulations and
measures which will affect Brilliance China Automotive&#146;s automobile manufacturing and automotive
components and parts manufacturing businesses. In June&nbsp;2006, the regulators have announced that
new measures will be introduced to trim overcapacity in the PRC automobile industry and promote
local brands. For example, annual sales of automobile manufacturers in China must reach certain
levels in order for them to build new manufacturing plants. The imposition of any such more
stringent requirements may require Brilliance China Automotive to incur substantial and costly
changes to its automobile and/or automotive components and parts designs and its business
structure or organization, or restrict its ability to respond to changing market conditions or
competition. Moreover, Brilliance China Automotive&#146;s failure to comply with such laws and
regulations would result in fines, penalties or lawsuits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>China&#146;s automobile industry is significantly dependent upon the economy of China.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The performance of China&#146;s automobile manufacturing industry is highly dependent on general
economic conditions and the purchasing power of Chinese consumers. Thus, the revenue and profits
of Brilliance China Automotive are subject to cyclical fluctuations and may be adversely affected
by any unfavorable changes in the economic conditions in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Increase in fuel prices may adversely affect demand for automobiles.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fuel prices (including prices of petroleum and diesel) in China reached historical heights in
May&nbsp;2006. Any further increase in fuel prices may:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>have an adverse impact on China&#146;s economy and may thereby result in a slow down for
automobile demand;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increase Brilliance China Automotive&#146;s production costs due to increase in costs of
petrochemical products; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discourage customers from purchasing automobiles due to increased running costs.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If fuel prices continue to increase or remain at high levels, Brilliance China Automotive&#146;s
sales and profitability could be materially and adversely affected.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>China&#146;s re-adjustment of consumption taxes on vehicles may cause decline of demand for certain
models Brilliance China Automotive currently manufactures.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;1, 2006, the State Administration of Taxation of China, in an effort to encourage
environmental protection and fuel efficiency, re-adjusted consumption tax rates on passenger
vehicles. Before the re-adjustment, the consumption tax rate for passenger vehicles was a three-
tiered system: 3% for automobiles with engine displacement lower than 1.0-liter; 5% for
automobiles with engine displacements between 1.0 liter and 2.0-liter, and 8% for automobiles with
engine displacements above 2.0-liter. After the re-adjustment, tax
rates on vehicles with smaller engines (under 2.0-liter) either fell or remained unaltered, whereas tax rates
on automobile with larger engines were raised. The new tax rates are: 3% for 0.0-1.5-liter; 5% for
1.51-2.0-liter; 9% for 2.01-2.5-liter; 12% for 2.51-3.0-liter; 15% for 3.01-3.5-liter; and 20% for
4.0-liter and above. Consequently, the tax rates on the BMW 3 and 5 series sedans produced by BMW
Brilliance, as well as the 2.4-liter Zhonghua sedans have been raised by this re-adjustment. As a
result of this new consumption tax regime, the prices of the above-mentioned vehicles have
increased, which may lower demand for these vehicles in 2006 and subsequent years, and therefore
negatively impact Brilliance China Automotive&#146;s businesses and results of operations.</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to China&#146;s Economy and Regulatory System</B>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B><I>China&#146;s economic, political and social conditions, as well as government policies, could affect
Brilliance China Automotive&#146;s businesses.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China&#146;s economy differs from the economies of most developed countries in many respects,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>extent of government involvement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>level of development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>growth rate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>control of foreign exchange; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>allocation of resources.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While China&#146;s economy has experienced significant growth in the past 20&nbsp;years, growth has
been uneven, both geographically and among the various sectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures benefit the overall PRC economy, but may also have a negative
effect on Brilliance China Automotive&#146;s operations. For example, Brilliance China Automotive&#146;s
financial condition and results of operations may be adversely affected by the Chinese
government&#146;s control over capital investments or any changes in tax regulations or foreign
exchange controls that are applicable to it.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China&#146;s economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the Chinese government has implemented measures emphasizing the
utilization of market forces for economic reform, the reduction of state ownership of productive
assets and the establishment of sound corporate governance in business enterprises, a substantial
portion of productive assets in China is still owned by the Chinese government. In addition, the
Chinese government continues to play a significant role in regulating the development of
industries in China by imposing top-down policies. It also exercises significant control over PRC
economic growth through the allocation of resources, controlling the payment of foreign
currency-denominated obligations, setting monetary policy and providing preferential treatment to
particular industries or companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Exchange rates fluctuations may affect the results of operations of Brilliance China Automotive.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s major operations are based in China and a significant
proportion of its turnover is derived from its operations in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Renminbi was revalued on July&nbsp;21, 2005 to Rmb 8.11 per US$1.00 from its previously pegged
rate of Rmb 8.28 per US$1.00. The People&#146;s Bank of China also announced that Renminbi would be
pegged to a basket of foreign currencies, rather than tied solely to the U.S. dollars, and would
trade within a 0.3% band against this basket of currencies, which includes, without limitation,
U.S. dollars, Euro, Japanese yen, South Korean won, British pounds, Thai baht and Russia ruble.
There is no assurance on whether there will be any further revaluation of Renminbi. Any further
revaluation of Renminbi may adversely affect China&#146;s economy and may therefore lead to a down turn
in the automobile demand in China.
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B><I>Budgetary constraints on China&#146;s government entities and state enterprises could affect Shenyang
Automotive&#146;s sales and pricing of products.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive believes that approximately 30% and 35% of Shenyang Automotive&#146;s
2005 revenues from minibuses and sedans, respectively, were derived from sales to governmental
agencies and certain state-run enterprises. Because of Shenyang Automotive&#146;s customer composition,
sales and pricing of its products can be affected by budgetary constraints applicable to
government entities and state enterprises.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Any significant failure or disruption of China&#146;s banking system could materially and adversely
affect Brilliance China Automotive&#146;s ability to obtain credit.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most major banks in China are owned by the Chinese government. Most of these banks have
historically extended significant amounts of loans according to governmental policy rather than
for commercial reasons. As a result, these banks currently have significant loans outstanding to
state-owned enterprises, many of which have incurred recurring and material losses. Consequently,
many banks in China have substantial levels of loans that are not current with respect to payments
of either interest or principal and may not have made adequate provisions to cover potential
losses on these loans. Any significant failure or disruption of China&#146;s banking system could
materially and adversely affect Brilliance China Automotive&#146;s ability to obtain credit and the
economic environment in which it conducts its business and may also affect its customers and
distributors.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>Shenyang Automotive&#146;s ability to obtain sufficient foreign exchange to satisfy its requirements is
dependent on authorization of the State Administration of Foreign Exchange of China.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of the revenues of Shenyang Automotive are denominated in Renminbi, while
some of its operating expenses, purchase costs of components and capital expenditures are
denominated in foreign currencies. The Renminbi currently is not a freely convertible currency.
The State Administration of Foreign Exchange of China, under the authority of the People&#146;s Bank of
China, regulates the conversion of Renminbi into foreign currency. There can be no assurance that
the current authorizations for foreign-invested enterprises, such as Shenyang Automotive, to
retain its foreign exchange to satisfy foreign exchange liabilities or to pay dividends in the
future will not be limited or eliminated or that Shenyang Automotive will be able to obtain
sufficient foreign exchange to pay dividends and to satisfy their other foreign exchange
requirements.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 12pt"><B><I>There are inherent uncertainties in China&#146;s legal system which may affect Brilliance China
Automotive.</I></B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China&#146;s legal system is a civil law system. Unlike the common law system, the civil law
system is based on written statutes in which decided legal cases have little value as precedents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since 1979, the Chinese government has begun to promulgate a comprehensive system of laws and
has introduced many new laws and regulations to provide general guidance on economic and business
practices in China and to regulate foreign investment. Progress has been made in the promulgation
of laws and regulations dealing with economic matters such as corporate organization and
governance, foreign investment, commerce, taxation and trade. The promulgation of new changes to
existing laws and the abrogation of local regulations by national laws could have a negative
impact on the business and prospects of Brilliance China Automotive and its joint ventures. In
addition, as these laws, regulations and legal requirements are relatively recent, their
interpretation and enforcement may involve significant uncertainty. The interpretation of PRC laws
may be subject to policy changes which reflect domestic political changes. As China&#146;s legal system
develops, the promulgation of new laws, changes to existing laws and the preemption of local
regulations by national laws may have an adverse effect on Brilliance China Automotive&#146;s
prospects, financial condition and results of operations.
</DIV>



<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Risks</B>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><B><I>There can be no assurance that there will not be another significant outbreak of a highly
contagious disease.</I></B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, there was an outbreak of Severe Acute Respiratory Syndrome, or SARS, in the PRC,
Singapore, Hong Kong, other Asian countries and Canada. The SARS outbreak had a significant adverse
impact on the economies of the affected countries. Recently, there have been media reports
regarding the spread of the H5N1 virus or &#147;Avian Influenza A&#148; among birds, poultry and in some
isolated cases, transmission of Avian Influenza A virus from animals to human beings. There can be
no assurance that there will not be another significant outbreak of a severe contagious disease. If
such an outbreak were to occur, it may have a material adverse impact on the operations of
Brilliance China Automotive and its results of operations may suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See also &#147;Government Regulation&#148; and &#147;Environmental Matters&#148; in &#147;Item&nbsp;4 &#151; Information on the
Company&#148;, &#147;Item&nbsp;5 &#151; Operating and Financial Review and Prospects,&#148; &#147;Item&nbsp;8 &#151; Financial Information
&#151; Legal Proceedings&#148; and &#147;Item&nbsp;11 &#151; Quantitative and Qualitative Disclosures About Market Risk&#148;.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. INFORMATION ON THE COMPANY</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>History and Development of Brilliance China Automotive</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive Holdings Limited was established as an exempted company with
limited liability under the laws of Bermuda on June&nbsp;9, 1992. Brilliance China Automotive&#146;s
principal place of business is Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong,
telephone number: (852)&nbsp;2523-7227.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive was initially established to hold a 51.0% interest in Shenyang
Brilliance JinBei Automobile Co., Ltd. (formerly known as Shenyang JinBei Passenger Vehicle
Manufacturing Company, Ltd.), or Shenyang Automotive, a Sino-foreign equity joint venture
enterprise established on July&nbsp;22, 1991. The remaining 49.0% interest in Shenyang Automotive was
owned by Shenyang JinBei Automotive Company Limited (formerly Shenyang Brilliance Automotive
Company Limited and FAW-JinBei Automotive Company Limited), or JinBei. In February&nbsp;2003, an
amendment was made to Shenyang Automotive&#146;s joint venture contract and as a result, the term of
Shenyang Automotive became perpetual. Shenyang Automotive is currently the leading manufacturer and
distributor of minibuses in China and also the manufacturer of Zhonghua sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;29, 2003, Brilliance China Automotive, through Shenyang XinJinBei Investment and
Development Co., Ltd., or SXID, and Shenyang JinBei Automotive Industry Holdings Co., Ltd., or
SJAI, its 99.0% and 98.0% indirectly owned subsidiaries, respectively, entered into agreements to
acquire the entire equity interests of Shenyang Automobile Industry Asset Management Company
Limited, or SAIAM, and Shenyang XinJinBei Investment Co., Ltd, or SXI. SAIAM and SXI own 29.9% and
11%, respectively, of the issued share capital of JinBei. Upon the completion of the acquisition
and the receipt of government approvals for the transaction, which is expected by the end of 2006,
Brilliance China Automotive&#146;s effective interest in Shenyang Automotive will increase from 51.0% to
approximately 70.7%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to May&nbsp;1998, Brilliance China Automotive&#146;s sole operating asset was its interest in
Shenyang Automotive. On May&nbsp;18, 1998, Brilliance China Automotive acquired 50% and 51% equity
interests, respectively, in Mianyang Xinchen Engine Co., Ltd., or Mianyang Xinchen, a manufacturer
of gasoline engines for use in passenger vehicles and light duty trucks, and Ningbo Yuming
Machinery Industrial Co., Ltd., or Ningbo Yuming, a producer of automobile windows and window
molding and stripping. Mianyang Xinchen is a Sino-foreign joint venture whose 50-year term will
expire in 2048. Ningbo Yuming is a wholly foreign-owned enterprise with a 50-year term that will
expire in 2043. On October&nbsp;19, 2004, Brilliance China Automotive, through its subsidiary Beston
Asia Investment Limited, entered into an agreement with Ms.&nbsp;Chen Qiuling for the acquisition of her
49% interest in Ningbo Yuming. Approvals of the acquisition were obtained from the relevant Chinese
authorities on November&nbsp;25, 2004 and Ningbo Yuming has thus become a wholly owned subsidiary of
Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the acquisition of interests in Mianyang Xinchen and Ningbo Yuming, Brilliance
China Automotive has also acquired from Brilliance Holdings Limited, an affiliated company, a 50.0%
equity interest in Shenyang Xinguang Brilliance Automobile Engine Co., Ltd., or Shenyang Xinguang
Brilliance, on December&nbsp;11, 2000. Shenyang Xinguang Brilliance is a Sino-foreign equity joint
venture manufacturer of gasoline engines for use in passenger vehicles and light duty trucks.
Shenyang Automotive is a major customer of each of Mianyang Xinchen, Ningbo Yuming and Shenyang Xinguang Brilliance. Brilliance China Automotive believes that
the acquisition of these components suppliers has enabled it to maintain the quality, and ensure a
stable supply, of certain key components required for the production needs of Shenyang Automotive.</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;12, 1998, June&nbsp;9, 2000 and July&nbsp;3, 2000, Brilliance China Automotive established
wholly owned subsidiaries (1)&nbsp;Shenyang XingYuanDong Automobile Component Co., Ltd., or Xing Yuan
Dong, (2)&nbsp;Ningbo Brilliance Ruixing Auto Components Co., Ltd., or Ningbo Brilliance Ruixing, and
(3)&nbsp;Mianyang Brilliance Ruian Automotive Components Co., Ltd., or Mianyang Brilliance Ruian,
respectively, to centralize and consolidate the sourcing of automotive parts and components for
Shenyang Automotive, Ningbo Yuming, and Mianyang Xinchen, respectively. In order to maintain their
preferential tax treatment from the Chinese government, Xing Yuan Dong, Ningbo Brilliance Ruixing
and Mianyang Brilliance Ruian all began manufacturing automotive components in 2001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under an acquisition agreement dated April&nbsp;25, 1998 between Shenyang Automotive and Shenyang
State Assets Administration Bureau, Shenyang Automotive was to acquire a 21.0% indirect interest
in Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., or Shenyang Aerospace, a
Sino-foreign equity joint venture. A revised agreement was subsequently signed on August&nbsp;15, 1999
among Shenyang Automotive, Shenyang State Assets Administration Bureau, Shanghai Brilliance
Industrial Company Limited and Xing Yuan Dong, under which Shenyang Automotive&#146;s effective
interest in Shenyang Aerospace was reduced to 16.8% in exchange for cash consideration and the
remaining 4.2% effective interest was transferred to Xing Yuan Dong at cost. At the completion of
the transfer on May&nbsp;25, 2000, Brilliance China Automotive&#146;s indirect effective interest in
Shenyang Aerospace was 12.8% with Mitsubishi Motors Corporation, or MMC, Mitsubishi Corporate,
China Aerospace Automotive Industry Group Co., MCIC Holdings Sdn. Bhd. and Shenyang Jianhua
Motors Engine Co., Ltd., or Shenyang Jianhua, owning equity interests of 25.0%, 9.3%, 30.0%,
14.7% and 21.0%, respectively. Pursuant to a share transfer agreement dated September&nbsp;29, 2005,
Shenyang Jianhua agreed to sell to MMC 2% interest in Shenyang Aerospace. The transfer has yet to
be approved by the relevant authorities in China. Upon completion of the transfer, each of
Shenyang Jianhua and MMC will own an equity interests of 19.0% and 27.0% in Shenyang Aerospace,
respectively. Upon completion of the acquisition of additional shares in JinBei and the receipt
of approvals from relevant PRC authorities for the transfer, which is expected by the end of
2006, Brilliance China Automotive&#146;s effective interest in Shenyang Aerospace will increase to
approximately 14.6%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the end of 1998, Shenyang Automotive began to construct new production lines for the
manufacture of sedans and multi-purpose vehicles, or MPVs. These new production lines were
completed in mid-2002 and reached a total annual production capacity of 100,000 sedans or MPVs as
at the end of 2002. Beginning in 1999, Shenyang Automotive implemented an expansion of its minibus
facilities that resulted in an increase in its annual production capacity for deluxe and mid-priced
minibuses from 40,000 units to 70,000 units in 2002 (based on two shifts per day). The stamping and
assembly workshops currently have annual production capacities of 80,000 and 90,000 units,
respectively, based on two shifts of workers, and can be increased to 120,000 units based on three
shifts. In 2003, Shenyang Automotive constructed a new painting facility with a capacity of 120,000
units per year. In June&nbsp;2005, Shenyang Automotive invested and built a new engine plant with an
initial planned capacity of 50,000 engines per year. The new engine plant is expected to commence
commercial production in late June&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;17, 2001, Shenyang Automotive entered into an agreement with Toyota Motor
Corporation for the transfer of technology relating to the fifth generation of the Toyota minibus,
the Granvia, which Shenyang Automotive markets under the brand name &#147;Granse&#148; (known as &#147;Grace&#148;
before February&nbsp;2004) in China. Production of this minibus model based on semi-knockdown kits from
Toyota began in the second half of 2002 and commercial production using domestic parts and
components commenced in the second half of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Zhonghua sedan, designed by the world-renowned Italdesign, was launched to the market in
China in August&nbsp;2002, after approval for production and sale of the Zhonghua sedan was obtained
from the Chinese government in May&nbsp;2002. The latest model, Junjie, was launched in March&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;27, 2003, Brilliance China Automotive, through its indirect subsidiary, SJAI, entered
into a joint venture contract with BMW Holding to produce and sell BMW sedans in China. On April
28, 2003, Brilliance China Automotive increased its effective interest in SJAI from 81% to 89.1%
and thereby increased its effective interest in the joint venture with BMW Holding BV from 40.5% to
44.6%. On December&nbsp;16, 2003, Brilliance China Automotive further increased its effective interest in the joint venture to 49.0% by further
increasing its interest in SJAI from 89.1% to 98.0%. BMW Brilliance received its business license
on May&nbsp;22, 2003 and introduced the BMW designed and branded 3-Series and 5-Series sedans in China
in October and November of 2003, respectively, based on knockdown kits supplied by BMW. BMW
Brilliance also launched the new 3-Series sedans in China in September&nbsp;2005. Since the first half
of 2004, BMW Brilliance had begun to incorporate domestically produced components in its 3-Series
and 5-Series sedans.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive currently has no material acquisitions or divestitures planned or
pending.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For additional information see &#147;Item&nbsp;5 &#151; Operating and Financial Review and Prospects &#151;
Liquidity and Capital Resources &#151; Capital Expenditures&#148;.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Business Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s core businesses are the manufacture and sale of minibuses and
Zhonghua sedans in China through its subsidiary, Shenyang Automotive. Brilliance China Automotive
also has a joint venture with BMW Holding to produce and sell 3-Series and 5-Series sedans in
China. In 2005, Shenyang Automotive sold a total of approximately 60,000 minibuses and 9,000
Zhonghua sedans. In the year ended December&nbsp;31, 2005, a total of 17,501 of the BMW sedans were
sold. Currently, Shenyang Automotive has an annual production capacity of 80,000 units of deluxe
and mid-priced minibuses (based on two shifts per day), 120,000 units of deluxe and mid-priced
minibuses (based on three shifts per day), and 70,000 units of Zhonghua sedans (based on two shifts
per day). BMW Brilliance currently has an annual production capacity of 30,000 units (based on two
shifts per day). In addition, Brilliance China Automotive has also established strategic
partnerships or working relationships with various other leading global automotive companies,
including Toyota, Mitsubishi, FEV Motorentechnik Gmbh, Porshe and Italdesign S.p.A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s production facilities are located in the industrial city of Shenyang,
the capital of Liaoning Province in northeastern China. Shenyang Automotive&#146;s principal products
are the deluxe minibus, the mid-priced minibus and the Zhonghua sedan. Mid-priced minibuses
accounted for approximately 54.7% of the total sales revenue of Brilliance China Automotive in
2005. The deluxe and mid-priced minibuses are 8 to 15-seat minibuses adapted from Toyota&#146;s Hiace
minibus (marketed under the name of &#147;Hiase&#148; in China) and Granvia minibuses (marketed under the
name of &#147;Granse&#148; in China).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, Shenyang Automotive began to install multiple electronic fuel injection engines,
which are currently used in all of Shenyang Automotive&#146;s mid-priced minibuses. With the
installation of this engine in the mid-priced minibus, currently all of Shenyang Automotive&#146;s
minibuses meet European II emission standards. Since 2004, the Chinese government has been
encouraging its automobile manufacturers to meet the European III emission standards. Currently,
most of the minibuses and Zhonghua sedans with manual transmissions have complied with the European
III emission standards. It is expected that all remaining minibuses and Zhonghua sedans will meet
the European III emission standards by the end of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;22, 2003, BMW Brilliance received its business license issued by the Shenyang City
Administration for Industry and Commerce. Commercial production of BMW-designed and branded sedans
commenced in September&nbsp;2003 based on knockdown kits supplied by BMW Group. The 3-Series&nbsp;BMW sedans
were launched in the market in October&nbsp;2003 and the 5-Series were launched in November&nbsp;2003. BMW
Brilliance launched new versions of the 3-Series in September&nbsp;2005. Since the first half of 2004,
BMW Brilliance had begun to incorporate domestically produced components in its 3- and 5-Series
sedans. However, a large portion of the production of these vehicles, especially the newly
introduced sedans, is still primarily based upon complete knockdown parts supplied by BMW Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Shenyang Automotive&#146;s sales volume decreased 5.0% from approximately 72,600 units in
2004 to approximately 69,000 units in 2005. The 2005 sales figure comprises approximately 60,000
minibuses and approximately 9,000 Zhonghua sedans. The decrease in overall sales was primarily due
to the decrease in the sales volume of minibuses and the significant decrease in the sales volume
of the Zhonghua sedans due to general production overcapacity and intensified price competition in
China&#146;s automobile industry. Our joint venture, BMW Brilliance sold 17,501 BMW-branded sedans in
2005, compared to 8,708 in 2004. Shenyang Automotive&#146;s sales in China has been supported by a substantial network of approximately 200 minibus distributors,
including approximately 100 exclusive minibus distributors, and approximately 120 sedan
distributors, as well as approximately 380 after-sales service centers for minibuses and
approximately 190 for sedans. Shenyang Automotive also continued to implement its &#147;4S&#148; sales center
system, with sales, after-sales service, spare parts and surveys offered by the same dealership
outlet. As of the end of 2005, Shenyang Automotive had approximately 70 4S dealership outlets for
minibuses and approximately 70 4S dealership outlets for Zhonghua sedans nationwide.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2005, Brilliance China Automotive reported sales of Rmb
5,469.0&nbsp;million (US$677.7&nbsp;million), representing a decrease of approximately 16.4% compared to
2004 and net loss of Rmb 671.3&nbsp;million (US$83.2&nbsp;million) compared with a net income of Rmb 1.2
million (US$0.14&nbsp;million) in 2004. The decrease in sales and net loss was primarily due to the
decrease in sales volume of Shenyang Automotive, especially for the Zhonghua sedans, and the
decrease in average unit selling prices, resulting from general production overcapacity and
intensified price competition faced by the PRC automobile manufacturers in 2005 that were
exacerbated by rising global fuel prices, which led to an increase in petrol prices in the PRC.
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Principal Products</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s principal products are minibuses and the Zhonghua sedans. Our joint
venture with BMW, BMW Brilliance, also produces BMW 3- and 5-Series sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s principal minibus products are the deluxe minibus and the mid-priced
minibus, which constituted approximately 17.5% and 54.7% of Brilliance China Automotive&#146;s total
sales revenue in 2005, respectively. These vehicles are used primarily for passenger transportation
but can also be modified for use as police vans, ambulances or other specialty vehicles. Shenyang
Automotive sells all of its minibuses under the JinBei brand name in a variety of models designed
to meet the requirements of particular market segments. Brilliance China Automotive believes that
Shenyang Automotive&#146;s minibuses have established a reputation in China for high quality and
reliability that has enabled Shenyang Automotive to maintain its market-leading position in recent
years. Shenyang Automotive commenced production of the high-end Granse model in 2002 based on
semi-knockdown kits from Toyota and started production of the domestic version of the Granse model
using domestic parts and components in the first half of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s Zhonghua sedan was introduced to the commercial market in China in
August&nbsp;2002 and constituted approximately 20.2% and 15.8% of Brilliance China Automotive&#146;s total
sales revenue in 2004 and 2005, respectively. The initial model was a five-seat manual transmission
sedan with a 4-cylinder, 2.0-liter Mitsubishi engine. Shenyang Automotive now also produces manual
transmission Zhonghua sedans with 2.4-liter engines and automatic transmission versions with both
2.0-liter and 2.4-liter engines. In December&nbsp;2004, the &#147;facelift&#148; version of the Zhonghua model,
known as &#147;Zunchi&#148;, was launched. In March&nbsp;2006, Shenyang Automotive launched another Zhonghua
model, Junjie, which features a 1.6-liter, 1.8-liter or 2.0-liter engine with manual or automatic
transmission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to Shenyang Automotive&#146;s
principal products as of the date of this annual report.
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Deluxe</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Minibus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Deluxe</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Mid-priced</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Zhonghua</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Zhonghua</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>(Granvia or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Minibus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Minibus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Sedan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Sedan</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>&#147;Granse&#148; Model</B><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>(Hiase Model)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>(Hiase Model)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Zunchi</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Junjie</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Maximum number<BR>
of passengers</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7-8
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">15
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Engine type</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Toyota 4-cylinder<BR>
2.7 liter gasoline<BR>
engine and<BR>
Mianyang<BR>
Xinchen 2.7 liter<BR>
gasoline engine
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Toyota 4-cylinder<BR>
2.4 liter gasoline<BR>
engine and<BR>
Mitsubishi 2.4<BR>
liter gasoline<BR>
engine
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Mianyang Xinchen<BR>
and Shenyang<BR>
Xinguang<BR>
4-cylinder<BR>
2.2 liter gasoline<BR>
engine
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Mitsubishi<BR>
4-cylinder<BR>
2.0 and 2.4 liter<BR>
gasoline<BR>
engine
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Mitsubishi<BR>
4-cylinder<BR>
1.8 and 2.0 liter<BR>
and Mitsubishi<BR>
DongAn 1.6 liter<BR>
gasoline<BR>
engine</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Horsepower</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">105
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100.6
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">92.5
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">122-130
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">134-173</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Price Range in <BR>Rmb</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2)</B></SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">119,800-239,800
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">121,800-156,800
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">64,800-101,800
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">105,800-209,800
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">85,800-128,800</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top" nowrap><B>Fuel Consumption<BR>
(Liters/100 km)</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(3)(4)</B></SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">9.8
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">6.8(MT)/<BR>
7.6(AT)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10.1 (MT)/<BR>
10.7 (AT)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Maximum speed</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(4)</B></SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">158 km/hr
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">130 km/hr
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">130 km/hr
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">195 km/hr (MT)/<BR>
185 km/hr (AT)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">185 km/hr (MT)/<BR>
180 km/hr (AT)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Domestic <BR>component <BR>content</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#062; 80%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#062; 85%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">92-100%
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">90-99%</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Length</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.7 m
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.8 m
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.8 m
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.88 m
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.65 m</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Known as &#147;Grace&#148; before February&nbsp;2004.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Actual price depends on specific model.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Based on an average speed of 50-55 kilometers per hour for minibuses
and 80 kilometers per hour for sedans.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>MT denotes manual transmission and AT denotes automatic transmission.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information with respect to BMW Brilliance&#146;s principal
products as of the date of this annual report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>BMW Brilliance</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>BMW Brilliance</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>3-Series Sedan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>5-Series Sedan</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Models</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Series&nbsp;320 and 325
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Series&nbsp;520, 525 and 530</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Maximum number of<BR>
passengers</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">5</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Engine types</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BMW 4 and 6-cylinder<BR>
1.9 liter and 2.5 liter<BR>
gasoline engines
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BMW 6-cylinder<BR>
2.0 liter, 2.5 liter<BR>
and 3.0 liter<BR>
gasoline engines</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Horsepower</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">150 &#150; 218 bhp
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">170 &#151; 231 bhp</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>



<TR valign="bottom">
    <TD align="center" valign="top"><B>Price range in Rmb</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">338,000 &#151; 454,200
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">484,300 &#151; 648,800</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Fuel Consumption<BR>
(Liters/100 km)</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2)</B></SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">7.4 &#151; 8.4
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">9.8 &#151; 9.9</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Maximum speed</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">220 &#151; 245 km/hr
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">230 &#151; 250 km/hr</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Length</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.52 m
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4.84 m</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Actual price depends on specific model.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Based on an average speed of 80 kilometers per hour.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deluxe minibus</I>. The deluxe minibus has historically been Shenyang Automotive&#146;s flagship
product and is among the highest quality, most technologically advanced minibuses currently
produced in China. The deluxe minibus is used primarily as a passenger vehicle and features air
conditioning, optional power steering, power windows, automatic locks, a rear window wiper, full
interior carpeting and alternative interior configurations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s high-end products have been further improved to incorporate more
user-friendly features to meet diversified customer demands. In the deluxe line, Shenyang
Automotive has introduced a locally developed model, based on the Toyota 441N, which is equipped
with an anti-lock braking system, improved helix rear suspension and refined interior trim. It has
the highest technical content among Shenyang Automotive&#146;s product lines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;17, 2001, Shenyang Automotive entered into an agreement with Toyota for the
technology transfer of the fifth generation of the Toyota minibus &#151; the Granvia &#151; for which
production based upon semi-knockdown kits from Toyota commenced in 2002. Shenyang Automotive began
producing the Granvia using domestic parts in the first half of 2004. The Granvia is marketed under
the brand name Granse (known as &#147;Grace&#148; before February&nbsp;2004) when sold in China by Shenyang
Automotive. The Granse minibus exhibits several improvements over the fourth generation minibus,
including more responsive performance when carrying heavy loads, better handling, better
maneuverability, 360-degree interior moveable seats and a more luxurious and comfortable interior.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mid-priced minibus</I>. The mid-priced minibus was developed by Shenyang Automotive and was
commercially introduced in the second half of 1996. Shenyang Automotive produces two principal
mid-priced minibus models, both of which are based on the deluxe minibus and share the same styling
and body of the deluxe minibus, with the principal difference being the engine. By equipping the
majority of these models with a domestically manufactured Mianyang Xinchen or Shenyang Xinguang
engine, Shenyang Automotive is able to sell
them for significantly less than the deluxe minibus, yet still maintain function and quality
standards for these models that are only slightly lower than the deluxe minibus. This has allowed
the mid-priced minibus models to compete more effectively in terms of price with other domestically
produced products. See &#147;&#151; Competition&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, Shenyang Automotive introduced three new minibus models to the market, including
mid-priced minibuses that utilize Mitsubishi engines and in 2003 Shenyang Automotive launched the
updated versions of these minibus models. In 2004, Shenyang Automotive launched lower-priced models
with more limited features in response to market demand and in the first half of 2005, a
lower-priced domestic version of the Granse was launched. Early 2006, Shenyang Automotive launched
the manual transmission model of the minibuses meeting the European III emission standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the end of 2003, Shenyang Automotive&#146;s minibus capacity has been 80,000 units per year
(based on two shifts) and 120,000 units per year (based on three shifts). Brilliance China
Automotive believes that its long-term interests require that Shenyang Automotive continue to
expand its production capacity. Any increase in Shenyang Automotive&#146;s future revenue will depend on
its ability to continue to expand in a similar manner. Realization of its production and sales
goals is also contingent upon other factors, including the development of new vehicle models, the
ability to continue to achieve overall cost reductions, ongoing
access to high-quality raw materials and domestic component manufacturers and maintenance of a large well-trained labor force,
an effective distribution network and after-sales service capabilities.
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Zhonghua sedan</I>. The Zhonghua sedan was designed by Italdesign and was commercially introduced
by Shenyang Automotive in August&nbsp;2002 after receiving approval from the Chinese government in May
2002. This sedan is designed to target the mid-priced sedan market segment, including governmental
institutions, businesses and individual users in China. This sedan model was specifically designed
for the Chinese market and utilizes a high degree of domestic component content, thereby offering
cost advantages to consumers. In 2003, Shenyang Automotive spent approximately Rmb 200.0&nbsp;million on
upgrading the Zhonghua production facilities and related dies and tools.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;27, 2001, Brilliance China Automotive entered into a three-year technical assistance
agreement with BMW Group under which BMW engineers provide consulting services to help in the
initial stages of production of Zhonghua sedans at Shenyang Automotive&#146;s sedan production
facilities in Shenyang, including assistance in achieving and maintaining the desired level of
production quality. A similar agreement entered into in early 2006 between Shenyang Automotive and
BMW Group regarding the technical support program for the Junjie sedan will expire in July&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth Brilliance China Automotive&#146;s revenues by category, for the
years 2003 through 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minibus sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deluxe minibus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Mid-priced minibus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhonghua
sedan sales<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Subtotal</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other sources of income<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Commercial launch of the Zhonghua sedan occurred in August&nbsp;2002.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Including sales of components and scrap metal.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the geographic breakdown of Shenyang Automotive&#146;s minibus and
Zhonghua sedan sales revenue throughout China for the years 2003 through 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Province/</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Municipality</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Rmb million)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Beijing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guangdong</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liaoning</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shanghai</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jiangsu</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">389</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Zhejiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shandong</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Tianjin</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Heilongjiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hebei</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hubei</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hunan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shaanxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Henan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sichuan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shanxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Fujian</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jilin</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Chongqing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Xinjiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Yunnan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Anhui</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guangxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jiangxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Inner Mongolia</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guizhou</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hainan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,591</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,081</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Gansu, Ningxia, Qinghai and Tibet as well as export to other countries.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>BMW Brilliance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;14, 2003, Brilliance China Automotive received formal approval from the Chinese
government with respect to the feasibility study for the establishment of a joint venture between
BMW Holding, a wholly owned subsidiary of BMW AG, and SJAI, an indirect subsidiary of Brilliance
China Automotive. On March&nbsp;27, 2003, SJAI entered into a joint venture contract with BMW Holding in
relation to the establishment of the joint venture in China. On April&nbsp;28, 2003, Brilliance China
Automotive, through its indirectly 90%-owned subsidiary, SXID, entered into an agreement with the
10% shareholder of SJAI to acquire an additional 9% interest in SJAI,
thereby increasing its effective interest from 40.5% to 44.6%. On December&nbsp;16, 2003, by increasing its
indirect interest in SJAI from 89.1% to 98.0%, Brilliance China Automotive effectively further
increased its interest in BMW Brilliance to 49.0%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registered capital and total investment cost of the joint venture is Euro 150&nbsp;million and
Euro 450&nbsp;million, respectively. As of December&nbsp;31, 2005, Brilliance China Automotive had injected
approximately Rmb 688.5&nbsp;million into the joint venture. The joint venture is 50%-owned by each of
SJAI and BMW Holding and has a term of 15&nbsp;years starting from May&nbsp;22, 2003, the date of issuance of
the joint venture&#146;s business license, which may be extended by mutual consent of the parties to the
joint venture. The business scope of the joint venture is to produce and sell BMW-designed and
branded passenger cars, engines, parts and components and to provide after-sales services
(including repair, maintenance and spare parts) relating to its products. Profits of the joint
venture are shared equally by SJAI and BMW Holding, in proportion to their respective contributions
to the registered capital of the joint venture. This joint venture contract prohibits Brilliance
China Automotive from entering into similar ventures with other automobile manufacturers for the
manufacture and sale of premium sedans in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has agreed to provide a guarantee to BMW Holding in relation to
the performance by SJAI of its obligations under the joint venture contract. A reciprocal guarantee
has been provided by BMW AG to SJAI in respect of the obligations of BMW Holding under the joint
venture contract. In addition, Brilliance China Automotive has been indemnified by SAIAM and
Shenyang JinBei Automobile Industry Company Limited with respect to its liabilities under this
guarantee to BMW Holding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;22, 2003, the business license for the joint venture was issued by the Shenyang City
Administration for Industry and Commerce. BMW Brilliance started the production of the 3-Series&nbsp;BMW
sedans in September&nbsp;2003 and the 5-Series&nbsp;BMW sedans in November&nbsp;2003 based on semiknockdown kits
supplied by BMW Group. In September&nbsp;2005, BMW Brilliance launched a new model of the 3-Series&nbsp;BMW
sedans. Since the first half of 2004, BMW Brilliance had begun to incorporate domestically produced
components in its 3-Series and 5-Series sedans. However, a large portion of the production of these
sedans, especially the newly introduced sedans, is still primarily based on complete knockdown
parts supplied by BMW Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Production Process</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Minibus Production Process and Equipment</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Stamping</I>. Shenyang Automotive produces its own semi-finished steel sheets for
stamping on a &#147;roll, drop and stack&#148; production line. Stamping is carried out at nine
production stations that utilize 36 domestic and imported presses, the largest of which
is calibrated at 3,200 tons and is used to stamp roofs and side panels for the deluxe
and mid-priced minibuses. The 198 and 277 dies used for stamping and cutting body
components for the Hiase and Granse minibuses, respectively, were purchased from
Toyota. Substantially all of the stamped metal vehicle components utilized in Shenyang
Automotive&#146;s minibuses are produced in this stamping workshop.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Welding</I>. The welding workshop consists of 2 production lines and 13 process
conveying lines, among which the Hiase has 6 lines and the Granse has 7 lines. Each
line is focused on a different section of the minibus. These lines were manufactured
with Toyota technology and utilize a combination of manual welding and automatic
robotic welding, the latter of which is utilized for the more difficult welding points.
Each welding station is equipped with a domestically manufactured testing machine. The
annual production capacity based on two shifts is 120,000 units among which 80,000
units are dedicated to the existing minibuses and 40,000 units to the Granse.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Painting</I>. Shenyang Automotive currently operates a 50,000 square foot painting
workshop that was set up at the beginning of 2004 to enhance the production capacity.
The new painting workshop has three floors, each with its own function. The new
workshop has an annual production capacity of 120,000 units, with space reserved for
expansion up to an annual production capacity of 150,000. The new workshop uses a
painting method that combines the use of a conveyor, automated machine and robotic
machine. Steps taken to prepare the vehicle body for painting include de-greasing,
rinsing, phosphatization and electrophoretic coating. Using the &#147;3C1B&#148; process, each of
three coats of paint is applied by a sprayer to the minibus body and dried in a heated drying chamber. The
specialized pre-painting preparation of the vehicle allows the frame to withstand
corrosion for eight years. Also, the high standard of cleanliness in the painting
workshop and the advanced paint sprayers used allow Shenyang Automotive to reduce
environmental pollution, provide better working conditions for the painting workshop
employees, conserve raw materials and ensure that each minibus receives three
consistent, high-quality coats of paint. Finally, various quality control tests are
conducted, including measurement of the luster and thickness of the paint on each
vehicle.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Assembly</I>. Shenyang Automotive&#146;s final assembly workshop is equipped with a
combination single slot, hanging and double slot conveyor. The conveyor is 570 meters
long, has 86 separate workstations and is capable of producing minibuses at the rate of
one every 160 seconds. Shenyang Automotive also developed jointly with the Shenyang
Automation Research Center of the China Science Institute an automated lifting system
that is used in the assembly of the power train, rear chassis and crank case, as well
as a computerized hydraulic machine for carrying out the transfer from a single rail
conveyor onto a hanging line conveyor &#151; the first of its kind to be developed in
China.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Testing</I>. Shenyang Automotive employs an advanced comprehensive vehicle testing
system to ensure that each vehicle conforms to specifications, including wheel
alignment, exhaust emissions, steering, braking and engine performance and testing, and
windshield leakage testing. All of these final testing procedures are also supported by
a comprehensive quality control staff that monitors each step of the production
process. See &#147;&#151; Business Overview &#151; Quality Control&#148; below.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Zhonghua Sedan Production Process and Equipment</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Stamping</I>. At present, 147 pieces for 206 types of large and medium parts of the
Zhonghua sedan (including Zunchi and Junjie) are produced in the stamping (or pressing)
workshop. There are 593 imported and domestically produced moulds, five large and
medium pressing lines, among which the line producing large (2,300 ton) parts was
imported from Schuler of Germany and is equipped with robots to handle automated
production. There is also an uncoiling and blanking line from Schuler, which can supply
parts for up to seven production lines, as well as a 100-ton molding press imported
from Kawasaki of Japan. The other pressing lines were purchased from a domestic
equipment manufacturer.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Welding</I>. The welding workshop is required to assemble and weld 394 separate panels,
30 machined parts, 10 roll-pressed parts and 30 standard parts. This line was designed,
manufactured and installed by Kuka of Germany. The welding line consists of 24 zones
and 331 stations, and is capable of spot-welding, carbon dioxide welding, project
welding, T-stud welding, sealing, brazing and hemming. At present, there are 43 working
robots in this workshop, which are used to weld, seal and inspect at the most important
stations on the line. The SKID apparatus that transports components both on the ground
and overhead adds speed and efficiency to the welding process.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Painting</I>. Zhonghua sedans and the BMW-branded sedans share the same painting line.
All of the equipment used in the painting line is provided by Durr of Germany, and the
paint supply system was imported from Graco of the United States. Steps involved in the
body painting process include pre-treatment, E-coat, sealing, PVC, primer, top-coat and
cavity wax. The painting line is highly mechanized and automated, with a central
control system imported from Siemens. The painting line may switch paints of different
colors within 10 seconds and 15 paints of different colors may be used in the same
painting line. All of the paints and other materials utilized in paint workshop are
high quality products sourced both from within China and abroad.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Assembly and Testing</I>. The performance of the assembly and testing workshop is guided
by an information system based on bar code technology. The layout of the final assembly
shop is designed by Schenck Engineering of Germany and consists of the body buffer
line, main production line, test line, water proof line, finishing line and marriage
line, as well as various sub-lines and a rework area. The assembly line utilizes a
double-track conveyer system for transporting the vehicles through each process.
</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Instrument Production. </I>The instrument panel workshop, occupying an area of 3,700
square meters, produces Zhonghua instrument panels. The processes include vacuum
shaping, foaming, hydrocutting and welding, and use seven different machines. The
workshop has a high production capacity for the production of parts and assembly of
instrument panels.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>BMW Sedan Production Process</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The automotive production process employed by BMW Brilliance is generally divided into four
stages: welding, painting, assembly and testing. In each stage, BMW Brilliance utilizes equipment
primarily imported from Germany. Each stage of the manufacturing process is also carefully
monitored both by quality control engineers and through specialized testing equipment to ensure
that the final product achieves the specified BMW Group&#146;s quality standards.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Welding</I>. The manufacturing and welding process in the welding workshop is performed
according to the BMW Group&#146;s global standard. The dimensional quality is checked with a
CMM Machine from Wenzel Company of Germany. The sourced welding equipment is from
standard suppliers in Germany. The welding workshop contains stud welding, spot
welding, mig welding and sealing operations. The line operators have been trained by
the BMW Group&#146;s specialists and the process is controlled by the BMW Group&#146;s
specialists from Germany. The quality checks and audits are consistent with those
performed at other BMW Group plants.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Painting</I>. All of the equipment used in the painting line is provided by Durr of
Germany, and the paint supply system was imported from Graco of the United States.
Steps involved in the body painting process are highly mechanized and automated, with a
central control system imported from Siemens. All of the paints and other materials
utilized in the paint workshop are high quality products sourced both from within China
and abroad.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Assembly</I>. The assembly workshop consists of two areas, both using conveyor systems
designed by the German supplier AFT with 58 line stations in total, as well as handling
devices for heavy parts from Dalmec Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Testing</I>. The finishing and testing equipment is located in the second area of the
assembly workshop. A wide range of special equipment used in BMW Group&#146;s plants
worldwide is used to test 100% of the cars produced.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Raw Materials and Components</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Raw Materials</I>. To ensure its supply of high-quality domestic raw materials, components and
spare parts, Shenyang Automotive has established stable relationships with over 280 suppliers in
China as of December&nbsp;2005. Shenyang Automotive sources the majority of its important components and
raw materials from at least two different suppliers to ensure availability and increase competition
among suppliers. In 2005, approximately 62.1% of Shenyang Automotive&#146;s components sourcing was
handled through Brilliance China Automotive&#146;s subsidiaries and associated companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Steel is the principal raw material for Brilliance China Automotive&#146;s products. Shenyang
Automotive purchases steel predominantly through the use of supply contracts. Since steel
represented only approximately 7.2%, 6.2% and 6.1% of the total cost of goods sold for the Hiase
minibus, Granse minibus and the Zhonghua sedans in 2005, respectively, the impact of rising steel
prices on Shenyang Automotive&#146;s overall production costs was not significant. Furthermore, this
increase in the costs for steel was offset by decreases in the costs of components due to a
decrease in prices of the minibus components used in the minibuses and an increase in the ratio
of domestically produced components used in the Zhonghua sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Components</I>. Shenyang Automotive has adopted a system that regularly evaluates its existing
suppliers. These suppliers range from well-known international suppliers to domestic suppliers with
special technology and know-how. Shenyang Automotive has conducted a comprehensive survey of its
suppliers against an array of criteria, such as quality problem feedback ratio, production
capacity, quality assurance systems and after-sales services. Implementing this process has enabled Shenyang Automotive to build a stronger supplier network as
the foundation for future growth.
</DIV>


<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The domestic component content of the deluxe minibuses is currently 85% for the Hiase model
and over 80% for the Granse model. The principal components of the Hiase deluxe model that we
continue to import from Toyota are the engines and the rear axles. Shenyang Automotive has
developed deluxe minibuses that would utilize Mitsubishi engines made by Shenyang Aerospace in
order to offer a greater variety of products to its customers. These new models have a higher
domestic component ratio. Mitsubishi engines have already been installed in some of the deluxe
minibus (Hiase model) units.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The mid-priced minibus uses almost 100% domestic parts and the domestic component content of
the Zhonghua sedan is over 90%. Brilliance China Automotive calculates domestic component content
by &#147;looking through&#148; larger components, such as engines, produced by domestic Chinese entities to
determine the percentage of such component&#146;s own components that were manufactured outside China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because certain components are imported from Toyota and other suppliers in Japan and Europe,
the availability of foreign exchange, exchange rates, import restrictions and the level of import
duties may affect the availability of certain components and Shenyang Automotive&#146;s costs of
production. See &#147;Item&nbsp;5 &#151; Operating and Financial Review and Prospects &#151; Liquidity and Capital
Resources&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive is required to pay import duties on imported automobile components.
Shenyang Automotive was subject to an average tariff rate of 9.7% and 12.1% on imported components
used in its deluxe minibuses (including Granse minibuses) and Zhonghua sedans, respectively, in
2005. During 2005, imported components comprised approximately 2.2% of the total costs of all
minibuses. In addition, imported components comprised 3.6% of the total costs of the Zhonghua sedan
during 2005. Changes in foreign currency exchange rates also affect the cost of
foreign-manufactured components imported by China&#146;s domestic manufacturers to make larger
components, such as engines, which we purchase domestically. The total aggregate import tariffs
paid by Shenyang Automotive for 2005 were approximately Rmb 15.2&nbsp;million (US$1.9&nbsp;million). However,
as a result of China&#146;s accession to the WTO, import tariffs on motor vehicle components decreased
to between 4.8% and 25% effective January&nbsp;1, 2003. In 2004, the import tariff on motor vehicle
components ranged between 5.0% and 22.9% and in 2005, between 5.0% and 18.6%. In January&nbsp;2006, the
import tariffs on automotive components were further reduced to between 5.0% and 14.3%. A decrease
in import tariffs will result in a decrease in the percentage of the total cost of minibuses and
sedans that imported components comprise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive intends to continue its efforts to increase domestic component
content for both deluxe minibuses and sedans, while at the same time emphasizing quality. See &#147;Item
5 &#151; Operating and Financial Review and Prospects&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Significant Subsidiaries, Jointly Controlled Entities and Associated Companies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive believes that the acquisition of interests in strategic components
suppliers has and will continue to broaden its revenue base, increase the reliability of the supply
of certain core components of Shenyang Automotive&#146;s and BMW Brilliance&#146;s minibuses and sedans,
enhance their ability to monitor component quality and facilitate greater coordination among the
management and engineering personnel and their respective principal suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Mianyang Xinchen</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mianyang Xinchen, directly and indirectly through Xing Yuan Dong (described below), accounted
for 5.4% of Shenyang Automotive&#146;s purchases of parts and components in 2005. Mianyang Xinchen&#146;s
principal product is the 2.2 liter 491Q gasoline engine. In 2000, Mianyang Xinchen also began
producing the 491QE electronic fuel injection engine on a mass production basis to satisfy the
market&#146;s demand for products that can meet new higher emission standards. In 2001, Mianyang Xinchen
developed three additional passenger vehicle gasoline engines. As a result, Shenyang Automotive has
access to engines suited to a full range of light-duty passenger vehicles. Mianyang Xinchen had
annual sales of Rmb 485.3&nbsp;million in 2005. Shenyang Automotive, which installs Mianyang Xinchen&#146;s
491Q engine in most of its mid-priced minibuses, accounted for 56.1% of Mianyang Xinchen&#146;s sales in
2005. Mianyang Xinchen currently manufactured 491Q, 4G24, 495QF and 4R engines. It sold over 55,000
engines in 2005. Mianyang Xinchen&#146;s overall annual sales of gasoline engines in 2005 decreased by
21.0% from 2004. Mianyang Xinchen&#146;s current annual production capacity is 180,000 gasoline engines
and 20,000 diesel engines. Mianyang Xinchen is planning to upgrade its existing engines and
introduce new diesel engines by 2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the technology center of Mianyang Xinchen was designated by the PRC
governmental authorities as a State-class enterprise technology center, becoming only the second
State-class enterprise technology center in the PRC automotive gasoline engine industry.
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Ningbo Yuming</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ningbo Yuming, directly and indirectly through Xing Yuan Dong and Ningbo Brilliance Ruixing
(described below), accounted for 4.1% of Shenyang Automotive&#146;s purchases of parts and components in
2005. Ningbo Yuming&#146;s principal products are automobile window molding, anti-collusion strips,
stripping, as well as a front independent suspension system (including a high performance front
axle) for use in light passenger vehicles. Ningbo Yuming had annual sales of Rmb 199.1&nbsp;million in
2005. Ningbo Yuming intends to further develop front axles for use in different types of light duty
vehicles to enlarge its market share in the safety components market. Ningbo Yuming received
ISO-9002 accreditation in December&nbsp;1999. Shenyang Automotive, which uses Ningbo Yuming&#146;s products
in all of its deluxe minibuses, mid-priced minibuses and Zhonghua sedans, accounted for
approximately 93.4% of Ningbo Yuming&#146;s sales in 2005. Shenyang Automotive also granted Ningbo
Yuming the status of Class&nbsp;A Supplier in 1999, which it continues to hold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Shenyang Xinguang</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Xinguang is principally engaged in the manufacture and sale of gasoline engines for
use in passenger vehicles and light duty trucks. In 2005, engine purchases by Shenyang Automotive
for use in mid-priced minibuses accounted for 42.6% of Shenyang Xinguang&#146;s total sales revenue,
which amounted to Rmb 247.7&nbsp;million. Shenyang Xinguang currently produces 491Q, 4G20 and 4G22
engines and has a production capacity of 60,000 engines per year. It sold over 30,900 engines in
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Xinguang started to further develop upgraded versions of the 491Q engine in 2005.
These new 16-valve engines 4G20 and 4G22 have greater power and are designed to satisfy European
III and IV emission standards. They are suitable for use in JinBei minibuses and Zhonghua sedans.
Shenyang Xinguang produces this new engine by using part of its existing 491Q facilities, together
with a new production line. Capacity for these 4G20 and 4G22 engines is 40,000 units per year.
Shenyang Xinguang sold over 200 new engines in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Xing Yuan Dong, Ningbo Brilliance Ruixing and Mianyang Brilliance Ruian</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Xing Yuan Dong assists Shenyang Automotive in obtaining and developing a reliable supply of
domestically produced parts and components. Xing Yuan Dong also facilitates development of locally
produced automotive parts and components and acts to improve the quality of these components. When
a customized component is needed, Xing Yuan Dong provides potential suppliers with designs and
specifications for the customized parts and components required by Shenyang Automotive. These
potential suppliers liaise with Xing Yuan Dong and negotiate with Xing Yuan Dong about the details
of production. Xing Yuan Dong then selects appropriate suppliers and offers technical assistance
and cost evaluations. Xing Yuan Dong continuously strives to reduce the number of Shenyang
Automotive&#146;s suppliers, lower costs, increase the efficiency and commitment of the remaining
suppliers, streamline the component purchasing process and ensure a steady supply of high quality
components. In 2001, Xing Yuan Dong, in order to maintain its preferential tax treatment from the
PRC government, also began manufacturing automotive components for Shenyang Automotive. In 2005,
99.3% of Xing Yuan Dong&#146;s sales were to Shenyang Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ningbo Brilliance Ruixing was established on June&nbsp;9, 2000 as a wholly owned subsidiary of
Brilliance China Automotive to facilitate the trading and development of automotive components
between Ningbo Yuming and Shenyang Automotive. In 2005, 99.3% of Ningbo Brilliance Ruixing&#146;s sales
were made to Shenyang Automotive through Xing Yuan Dong and 74.1% of Ningbo Brilliance Ruixing&#146;s
purchases were from Ningbo Yuming. Beginning in 2001, Ningbo Brilliance Ruixing also began manufacturing automotive components
for Shenyang Automotive. Ningbo Brilliance Ruixing&#146;s principal products are automatic mirrors and
front axles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mianyang Brilliance Ruian was established on July&nbsp;3, 2000 as a wholly owned subsidiary of
Brilliance China Automotive to facilitate the trading and development of automotive components for
Mianyang Xinchen. In 2005, 7.7% of Mianyang Brilliance Ruian&#146;s sales were made to Mianyang Xinchen
and 90.6% of Mianyang Brilliance Ruian&#146;s sales of its manufactured automotive components were made
to Shenyang Automotive through Xing Yuan Dong. In 2001, Mianyang Brilliance Ruian also began
manufacturing automotive components for Shenyang Automotive.
</DIV>


<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Shenyang Aerospace</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Aerospace was formed for the purpose of manufacturing the 2.0-liter, 122 horsepower
and the 2.4-liter, 130 horsepower Mitsubishi gasoline engines. Shenyang Aerospace commenced trial
operation in March&nbsp;1999. Shenyang Automotive uses these engines in its deluxe minibuses and in the
Zhonghua sedans. In addition, Shenyang Aerospace&#146;s engines are also sold domestically to other
passenger vehicle producers. Mitsubishi Motors Corporation, or MMC, Mitsubishi Corporation, China
Aerospace Automotive Industry Group Co., MCIC Holdings Sdn. Bhd. and Shenyang Jianhua Motors Engine
Co. Ltd., or Shenyang Jianhua, own equity interests of 25.0%, 9.3%, 30.0%, 14.7% and 21.0%,
respectively, in Shenyang Aerospace. Pursuant to a share transfer agreement dated September&nbsp;29,
2005, Shenyang Jianhua agreed to sell to MMC 2% interests in Shenyang Aerospace. The transfer was
yet to be approved by the relevant authorities in the PRC. Upon the completion of the transfer,
each of Shenyang Jianhua and MMC will own equity interests of 19.0% and 27.0% in Shenyang
Aerospace, respectively. Upon completion of the acquisition of additional shares of JinBei and the
receipt of approvals from relevant PRC authorities for the transfer, which are expected to be by
the end of 2006, Brilliance China Automotive&#146;s effective interest in Shenyang Jianhua will increase
to 76.6% and consequently Brilliance China Automotive&#146;s effective interest in Shenyang Aerospace
will increase to approximately 14.6%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Brilliance Dongxing and Xingchen Automotive Seats</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, Brilliance China Automotive entered into an agreement with Brilliance
Holdings Limited for the acquisition of the entire issued share capital of Key Choices Group
Limited, or Key Choices, at a consideration of approximately Rmb 278.2&nbsp;million. Key Choices is an
investment holding company and its principal assets are the 100% equity interest in the registered
capital of Brilliance Dongxing and a 90% equity interest in the registered capital of Shenyang
Xingchen Automotive Seats Co., Ltd., or Xingchen Automotive Seats. Brilliance Dongxing is a
foreign-invested enterprise established in the PRC whose principal products are automotive
components for use in passenger vehicles. In 2005, Brilliance Dongxing had annual sales of
approximately Rmb 137.6&nbsp;million and all of its sales were to Shenyang Automotive and other group
companies. Xingchen Automotive Seats is a Sino-foreign equity joint venture established in the PRC
in December&nbsp;2001 that formerly was principally engaged in the manufacturing of automotive seats.
However, Xingchen Automotive Seats ceased its operations in the second half of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Brilliance JinBei Engine Plant</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, Shenyang Brilliance Jinbei Automobile Co., Ltd., or JinBei invested in a new engine
plant located in the Shenyang Economic and Trade Development Zone. Construction on this plant was
completed in December&nbsp;2004 and the plant occupies 280,000 square meters of land, with a building
size of approximately 64,000 square meters and a main workshop area of 52,000 square meters. FEV
Motorentechnik GmbH provided certain technologies relating to engine production, and most of the
required equipment was imported from Germany.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The first product currently under development at this plant is a four-cylinder, 16-valve
multiple injection 1.8TCI turbo-charged engine for sedans. This engine will form the core of the
new Brilliance China Automotive family of engine products and serve as the basis for expanding the
size of engines used in Shenyang Automotive sedans from 1.6 liters to 2.0 liters. The development
of 1.8 liter engines began in 2005, and these engines are expected to be offered to the market in
the second half of 2008, with trial production commenced in 2006.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The engines will be mainly manufactured for use in Zhonghua sedans and the minibuses, but will
also be open for sale to third party automotive manufacturers both domestically and abroad. The
targeted capacity for the first phase of development is 50,000 engines per year, with two
subsequent phases having targeted capacity of 100,000 and 200,000 engines per year, respectively.
The first phase will require Rmb 1.13&nbsp;billion in investment for completion. The intellectual
property rights over the engines developed are owned by Brilliance China Automotive.
</DIV>

<P align="center" style="font-size: 10pt">28
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Shenyang Brilliance Power Train Machinery Co., Ltd.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Brilliance Power Train Machinery Co., Ltd. is a PRC joint venture that was
established in December&nbsp;2004 by Shenyang Automotive and Brilliance China Automotive with registered
capital of US$22.9&nbsp;million. Shenyang Automotive holds a 51% equity interest and Brilliance China
Automotive holds a 49% equity interest. Brilliance China Automotive is established to purchase
engines, manual and automatic transmissions and other components from various suppliers, including
the Brilliance JinBei Engine Plant, to assemble completed powertrains for the engines made by
Brilliance JinBei Engine Plant that can be used in automobiles, in particular Zhonghua sedans. The
plant was in operation from the end of 2005. In addition to use in Zhonghua sedans, the powertrain
products will also be sold to the external market. The target customers are automobile makers that
have no powertrain manufacturing capacity of their own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Shenyang Chenfa Automobile Component Co., Ltd.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Chenfa Automobile Component Co., Ltd., or Shenyang Chenfa, is a wholly foreign-owned
enterprise held by Brilliance China Automotive, with a registered capital of US$8.0&nbsp;million and a
total investment of US$8.4&nbsp;million. Its scope of business is the production and sale of powertrains
and automotive components. Shenyang Chenfa was established in June&nbsp;2003 and currently has over 50
employees. The main product of Shenyang Chenfa is powertrains for Mitsubishi engines used in the
Zhonghua sedan, of which it is capable of producing 40,000 units per year. This line has been in
operation for more than one year. It also has an engine manifold production line and a cam bearing
frame production line with a capacity of 50,000 units per year. Shenyang Chenfa is also responsible
for purchasing engine management systems and other automotive components for Brilliance China
Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales and Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables set forth by vehicle model for the years 2003 through 2005 the number of
Shenyang Automotive minibuses and sedans sold and BMW Brilliance sedans sold and the percentage of
unit sales represented by each model:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Shenyang Automotive</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units Sold</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units Sold</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units Sold</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shenyang Automotive</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deluxe minibus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mid-priced minibus</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Zhonghua sedan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>




<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>BMW Brilliance</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BMW sedans<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Commercial launch of the BMW sedans was in the fourth quarter of 2003.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s marketing efforts are supervised by its general manager and are
conducted primarily through a regionalized sales program under which Shenyang Automotive has
divided China into six major sales regions and three &#147;sales belts&#148;, each headed by an experienced
senior executive. These regions are further subdivided into 30 provincial sales regions for
minibuses and 26 provincial sales regions for sedans. Each of these sales regions corresponds to a separate province in China. These units are responsible for meeting
defined sales targets, with the executives&#146; compensation linked to performance. In addition,
Shenyang Automotive implements a commission compensation package for its sales personnel and
rewards with bonuses its non-sales personnel who develop customer leads that result in minibus
sales. The retail prices and commission scales are both nationally unified by Shenyang Automotive,
thereby preventing cross-regional sales and counter-productive price wars. Shenyang Automotive&#146;s
minibuses and Zhonghua sedans are marketed through its nationwide sales network as well as annual
automobile industry trade shows and at special sales shows sponsored by JinBei and Shenyang
Automotive. Approximately 95% and 68% of Shenyang Automotive&#146;s 2005 unit sales of minibuses and
sedans, respectively were made to its distributors and approximately 5% and 32%, respectively, were
made directly to customers.
</DIV>


<P align="center" style="font-size: 10pt">29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s sales in China has been supported by a substantial network of
approximately 100 exclusive minibus distributors and approximately 120 sedan distributors, as well
as approximately 380 after-sales service centers for minibuses and approximately 190 for sedans.
Shenyang Automotive also continued to implement its 4S sales center system, with sales, service,
spare parts and surveys offered by the same dealership outlet. As of December&nbsp;31, 2005, Shenyang
Automotive had approximately 70 dealership outlets for minibuses and approximately 70 dealership
outlets for sedans, which had achieved the 4S dealership standard.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s minibus and sedan sales were generally made on a cash basis in 2005.
However, credit is offered to a few large customers following a financial assessment and an
established payment record. Credit terms are generally between 30 to 90&nbsp;days and security in the
form of guarantees or bank notes is obtained from major customers. Designated staff monitors
accounts receivable and follow up collection with the customers. Customers considered to be of high
credit risk are traded on a cash basis. In addition, in order to incentivize customers and
facilitate sales, Shenyang Automotive also accepts three-month to six-month bank-endorsed notes as
payment for its minibuses and sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive has 5 regional distribution centers in order to shorten delivery
lead-times and to increase cost efficiencies. Also, by utilizing transportation methods such as
trucking, rail and shipping, Shenyang Automotive ensures that most vehicles are not driven until
they reach the end users. In 2005, all finished products were delivered to customers with zero
mileage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the geographic breakdown of Shenyang Automotive&#146;s minibus and
sedan unit sales throughout China for the years 2003 through 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Minibuses</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Minibuses</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Minibuses</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Sedans</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Province/Municipality</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Beijing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guangdong</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liaoning</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shanghai</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jiangsu</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Zhejiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shandong</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">812</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Tianjin</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Heilongjiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hebei</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hubei</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hunan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shaanxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Henan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sichuan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shanxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Fujian</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jilin</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Chongqing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Xinjiang</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Yunnan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Anhui</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guangxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jiangxi</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Inner Mongolia</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Guizhou</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Hainan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>74,618</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>25,600</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>61,618</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,982</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>60,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100.0</B></TD>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>



<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Gansu, Ningxia, Qinghai and Tibet as well as export to other countries.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, Shenyang Automotive&#146;s sales are the highest in the second and fourth quarters of
the year.
</DIV>

<P align="center" style="font-size: 10pt">30
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government continues to encourage the development of the relatively
underdeveloped, resource-rich western provinces of China and significant government resources have
been allocated in the past to develop the infrastructure of the western provinces. Brilliance China
Automotive believes the government&#146;s policy regarding western China will be conducive to the
development of the local automotive markets. Although Brilliance China Automotive&#146;s largest market
today remains in the eastern coastal provinces, Brilliance China Automotive believes that the
market in the western provinces of China represent substantial upward growth potential in the
future. Brilliance China Automotive will continue to expand its dealership system in that region to
tap into this potential growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately 26.9 % of consolidated revenues in 2005 were generated from Shanghai Shenhua
Holdings Co., Ltd. (formerly known as Shanghai Brilliance Group Co., Ltd. and Shanghai Shenhua
Industrial Co., Ltd.) or Shanghai Shenhua. Shanghai Shenhua is an affiliate of Brilliance China
Automotive that serves as the principal distributor of Shenyang Automotive&#146;s products. Shanghai
Shenhua operates under substantially the same commercial terms and arrangements with Shenyang
Automotive as its other third party distribution agents. However, in southern China, where it sells
solely to distributors on an exclusive basis, Shanghai Shenhua receives additional compensation for
operating after-sales service centers, which was a 1% commission on sales until January&nbsp;2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive uses a computerized sales monitoring system to accurately identify
customer demographics, determine which products and options are most in demand and improve
inventory control. As Shenyang Automotive brings more product options to market, Brilliance China
Automotive believes that this computer system will provide Shenyang Automotive with the ability to
track customer preferences in various regions and adjust its production and distribution efforts
accordingly.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Shenyang Automotive spent approximately Rmb 177.0&nbsp;million (US$21.9&nbsp;million) on
overall advertising, consisting primarily of Internet, television and print advertising.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese minibus manufacturing industry is highly fragmented and competitive.
According to the Chinese Automotive Technology &#038; Research Center, in 2005, approximately 40
manufacturers sold an aggregate of 137,873 minibuses. The top five manufacturers sold an
aggregate of 112,798 minibuses during the same period. Significant competitive factors in the
industry include price, quality, reliability and customer service. Brilliance China Automotive
believes that Shenyang Automotive is competitive in all of these respects, and particularly in
terms of quality, although Shenyang Automotive has experienced competition in recent years from
other manufacturers producing lower priced, mid-range minibuses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese sedan manufacturing industry is also very competitive and fragmented. The top five
brands account for 40.9% of the overall market based on unit sales volume. The market shares of the
three leading manufacturers have been decreasing over the past several years. New models are being
introduced on an increasingly rapid basis as the number of new entrants into the market has also
increased. Unit sales of domestically produced sedans totaled 3,131,950 units in 2005, making
sedans the largest segment of the Chinese automotive market, accounting for 51.5% of the overall
market. Due to the implementation of macro-economic polices and austerity measures, the domestic
demand for automobiles in China has declined significantly since the second half of 2004.
Nevertheless, sedans are widely expected to continue to be the fastest growing segment of the
Chinese automobile market over the next few years. However, while vehicle ownership is expected to
continue to increase steadily in China as a result of increasing individual disposable income,
there is also expected to be increasing pricing pressure as tariff rates decline and competition
continues to grow from domestic, foreign and foreign-invested sedan manufacturers.
</DIV>



<P align="center" style="font-size: 10pt">31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, Chinese motor vehicle producers have been exposed to little competition from
non-Chinese enterprises, partly as a result of import restrictions on foreign-made components and
motor vehicles. However, as a result of China&#146;s accession to the WTO, which regulates trading and
tariffs among its signatory states, in November&nbsp;2001, China committed to reducing its import
restrictions on motor vehicles and motor vehicle components. In addition, China will be required to
conform its import tariffs to the uniform tariffs under the WTO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2002, China reduced its import tariffs on motor vehicles and automotive
components from between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to 50.7%
and between 14.0% to 31.4%, respectively. This range was lowered further to between 4.8% and 25%
for automotive components in 2003, between 5.0% and 22.9% in 2004 and between 5.0% and 18.6% in
2005. In January&nbsp;2006, the import tariffs on automotive components were further reduced to between
5.0% and 14.3%. Tariffs on vehicles with nine seats or less and engine sizes of three liters or
below fell from 43.9% in 2002 to 38.2% in 2003, while tariffs on vehicles with more than nine seats
and engines of more than three liters decreased from 50.7% in 2002 to 43.0% in 2003. In 2004,
tariffs were 34.2% for vehicles with nine seats or less and engine sizes of three liters or less
and 37.6% for vehicles with more than nine seats and engines of more than three liters. In 2005
tariffs have been fixed at 30% of all motor vehicles. These tariffs levels were reduced to 28% in
January&nbsp;2006 and are scheduled to be further to 25% in July&nbsp;2006. Such reductions in tariffs and
import restrictions could potentially increase the competition Brilliance China Automotive will
face from foreign manufacturers.
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Listed below are Shenyang Automotive&#146;s current main competitors in the Chinese minibus and
sedan market. The data listed for each is based on information published by the China Automotive
Technology &#038; Research Centre for the year ended December&nbsp;31, 2005 regarding the Chinese automotive
industry:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Minibus</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Southeast Motors</I>. Southeast Motors is currently 25% owned by Taiwan China Motors,
50% owned by Fujian Provincial Automobile Industry Company and 25% owned by Mitsubishi.
Southeast Motors has launched over thirty different models of light passenger vehicles
(including minibuses) under the Delica and Freeca brand names and also launched the MPV
in 2004. Southeast Motors has an annual production capacity of 60,000 minibuses in
2005. Its sales volume in 2005 was 12,827 minibuses, representing a 32.8% decrease from
19,080 minibuses in 2004. Delica series includes seven-, eight- and eleven-seat
ordinary, luxury and super luxury models and is currently priced between Rmb 79,800 to
Rmb 199,800.</TD>
</TR>




<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Nanjing Iveco. </I>In 1995, Italy&#146;s Fiat Auto Company and Yuejin Group established
Nanjing Iveco Automotive Company, Ltd., a 50-50 equity joint venture, for the
manufacture of 33 models of five-ton passenger, goods and off-road vehicles in the
Iveco S series. Models currently in production include the A30, A40 and A49 passenger
vehicles, as well as a separate series of goods vehicles. Nanjing Iveco has an annual
production capacity of 60,000 vehicles. In 2005, Nanjing Iveco sold 12,885 vehicles,
representing a 23.8% increase from 10,407 minibuses in 2004. Its minibuses are
currently priced between Rmb 112,900 to Rmb 206,900.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Jiangling Motors. </I>Jiangling Motors Corp. of Jiangxi Province is currently 50% owned
by the Ford Motor Company and 50% owned by the Changan Group. Jiangling Motors produced
China Transit, a Ford brand minibus, light trucks and pick-ups. At present, China
Transit is available in 15-seat, 12-seat and 9-seat versions. In 2005, Jiangling Motors
sold a total of 18,887 minibuses, representing a 37.3% increase from 13,752 vehicles in
2003. Production capacity was approximately 100,000 per year by the end of 2005. Its
minibuses are currently priced between Rmb 118,800 to Rmb 193,600.</TD>
</TR>

</TABLE>
</DIV>



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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Zhonghua Sedan</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive considers the following companies to be its main competitors in
the market for sedans with engine size between 1.8 liter to 2.0 liter and priced between Rmb
100,000 and Rmb 200,000, which includes the Zhonghua sedan:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>First Auto Works Group of the PRC</I>. First Auto Works is one of the largest automotive
companies in the PRC. First Auto Works&#146; Hongqi sedan was launched in 2001 and is
considered one of the PRC government&#146;s showcase PRC-made sedans. Its latest model is
known as the Hongqi Mingshi, was launched in 2004, and has a 1.8-liter engine with four
doors. It is priced at approximately Rmb 159,800 to Rmb 198,800, similar to the
Zhonghua sedan. First Auto Works sold 6,664 Honqi Mingshi sedans in 2005, representing
a 3.8% decrease from 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Shanghai Volkswagen Automotive</I>. Shanghai Volkswagen Automotive was one of the
original state-designed automobile manufacturers in the PRC. It is currently 50% owned
by Volkswagen AG of Germany and 50% owned by Shanghai Automotive Industry Corp. It
still holds a dominant share of the PRC sedan market and competes with the Zhonghua
sedan through the Santana 3000 sedans. The Santana 3000 has a 1.78-liter engine and
sells for between Rmb 118,000 to Rmb 149,000. In 2005, Shanghai Volkswagen Automotive
sold 56,953 units of Santana 3000 sedans representing a 36.9% decrease from 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Beijing Hyundai</I>. Beijing Hyundai was established in 2002 as a 50-50 joint venture
between Beijing Auto Investment and Hyundai Motor Co. of South Korea. It currently
produces and sells the Sonata 2.0-liter, Sonata 2.5-liter and Sonata 2.7-liter, and the
newly-introduced Elantra 1.6-liter and 1.8-liter models. The Sonata 2.0-liter sells for
approximately Rmb 149,800 to Rmb 228,000. The Elantra 1.8 liter sedan sells for
approximately Rmb 112,800 to Rmb 151,800. In 2005, Beijing Hyundai sold 45,006 units
and 176,589 units of the Sonata 2.0 liter and the Elantra, respectively, representing
an increase of 14.7% and 71.9%, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>BMW Sedans</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive currently considers the Audi and Mercedes-Benz sedans produced by
FAW Volkswagen and Beijing Benz Daimler Chrysler Auto Co. Ltd., respectively to be its closest
competitors in the domestic market for high-end luxury cars produced in the PRC in terms of
quality, craftsmanship, price, performance and technology.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>FAW Volkswagen</I>. FAW Volkswagen is 10% owned by Audi AG, 30% by Volkswagen AG and 60%
by First Auto Works of China. FAW Volkswagen produces and sells the Audi A4 and A6
sedans and the Volkswagen Jetta and Bora sedans in the PRC. FAW Volkswagen&#146;s Audi
sedans have a dominant share of the PRC&#146;s premium sedan market. FAW Volkswagen sold
46,177 and 42,331 units of Audi A6 sedans in 2004 and 2005, respectively. The Audi A4
sedan was formally launched in the PRC&#146;s market in 2003 and had a total sales volume of
15,841 and 7,770 in 2004 and 2005, respectively. A new Audi A6 was launched in June&nbsp;2005. The Audi A4 sedan currently sells for between Rmb
275,400 to Rmb 479,500, and the new Audi A6 sedan sells for between Rmb 349,800 to Rmb
674,900.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Beijing Benz. </I>Beijing Benz Daimler Chrysler Auto Co Ltd., or Beijing Benz, a 50-50
joint venture between Daimler Chrysler and Beijing Automotive Industry Holding Company,
obtained a license to produce the Mercedes-Benz C-Class and E-Class sedans in the PRC
in August&nbsp;2005. Beijing Benz launched its domestically produced models of E280 and
E200K in December&nbsp;2005. These E-Class sedans currently are sold between Rmb 525,000 and
Rmb 639,800 in the PRC. The vehicles are produced in a new facility in Beijing with an
initial production capacity of 20,000 units per year.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive does not consider current foreign importers of luxury cars with
similar quality, craftsmanship, performance and technology to be direct competitors for the BMW
sedans as they are subject to import tariffs and restrictions and cannot be priced competitively
with BMW Brilliance&#146;s locally produced BMW sedans.
</DIV>



<P align="center" style="font-size: 10pt">33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Governmental Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The automobile industry in the PRC is controlled at the central government level by the
National Development and Reform Commission, or NDRC and the Ministry of Commerce. These entities
were created as a result of the governmental restructuring that commenced in March&nbsp;2003. The NDRC
generally oversees and regulates the automobile industry in the PRC and any new product or new
automobile production facility must obtain the prior approval of this body before entering the
market. Similarly, approval from the Ministry of Commerce must be obtained prior to any changes to
existing products or the expansion of existing facilities. Both of these entities must also approve
any Sino-foreign joint venture for the production of automobiles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;1, 2004, the NDRC issued a new automobile policy to replace the one that had been in
place since 1994. Two of the policy&#146;s stated goals are industry consolidation and enhancement of
corporate capacity for research and development. To further these goals, the new policy sets
minimum levels of investment for new plants and research and development. Engine plant investments
are required to be over Rmb 1.5&nbsp;billion and new automobile manufacturing projects must be over Rmb
2.0&nbsp;billion. New automobile projects must also include a product research and development
investment of at least Rmb 500&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In contrast to the old regulations, foreign investors in the automobile and motorcycle market
will now be allowed to control more than 50% of a joint venture with the PRC partners if the joint
venture is located in an export processing zone and plans to sell its products in overseas markets.
The new policy will also allow foreign investors to establish more than two joint venture plants in
the PRC to produce the same categories of vehicles if they do so with their existing PRC partners
through acquisitions of other companies in the PRC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The new policy acknowledges the success of the PRC&#146;s automobile industry and seeks to
encourage this &#147;pillar industry&#148; to foster further growth, particularly of domestically produced
and branded products and research and development, through consolidation of smaller, less-efficient
manufacturers and increased foreign and domestic investment. In addition, the policy aims to
centralize or reorganize certain automobile-related sectors, such as consumer loan services, to
reduce overhead and administrative burdens on the industry and allowing industry participants to
focus on their core businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By encouraging industry consolidation and establishing clearer guidelines for foreign
investment, the policy, in the opinion of Brilliance China Automotive, encourages existing players
in the industry to grow and provides incentives for targeted investment from both domestic and
foreign sources. Certain implementing regulations have and more such regulations are expected to be
promulgated by the NDRC in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;28, 2005, the General Administration of Customs, the NDRC, the Ministry of Finance
and the Ministry of Commerce jointly issued the Administrative Measures on the Import of Automobile
Parts with Complete Vehicle Characteristics. This measure sets up detailed standards and procedures
of the identification of automobile parts with complete vehicle characteristics and treats
automobile parts with complete vehicle characteristics, which include semi-knocked down kits, as
complete vehicle imports and imposes vehicle import tariffs instead
of component tariffs on them. Current vehicle import tariff level is 28% (scheduled to fall to 25% by
July&nbsp;2006) whereas current component tariff levels are between 5% and 14.3%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;1, 2006, the State Administration of Taxation of the PRC, in an effort to encourage
environmental protection and fuel efficiency, re-adjusted consumption tax rates on passenger
vehicles. Before the re-adjustment, the consumption tax rate for passenger vehicles was a
three-tiered system: 3% for automobiles with engine displacement lower than 1.0-liter; 5% for
automobiles with engine displacements between 1.0 liter and 2.0-liter, and 8% for automobiles with
engine displacements above 2.0-liter. After the re-adjustment, tax rates on vehicles with smaller
engines (under 2.0-liter) either fell or remained unaltered, whereas tax rates on automobile with
larger engines were raised. The new tax rates are: 3% for 0.0-1.5-liter; 5% for 1.51-2.0-liter; 9%
for 2.01-2.5-liter; 12% for 2.51-3.0-liter; 15% for 3.01-3.5-liter; and 20% for 4.0-liter and
above.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Quality Control</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of technical and managerial training from Toyota and technical assistance from
BMW, Shenyang Automotive has adopted a highly regimented production quality management system for
its minibuses and sedans. This two-fold system concentrates both on the quality of the raw
materials and other production inputs and on the production process itself. In the production
process, the focal point of quality control is the production line worker, who undergoes extensive
training and testing to ensure that he or she performs the assigned task to the highest quality
standards and is qualified and able to determine on his or her own whether or not the product meets
the required specifications. In addition, Shenyang Automotive&#146;s specialized quality control
engineers are present at each step of the production process, with 16, 16 and 12 separate quality
inspection points for Hiase minibuses, the Granse minibuses and Zhonghua sedans, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Shenyang Automotive has established a quality improvement unit to supervise and
monitor after-sales service centers in major regional sales bases, such as Guangzhou, Shanghai and
Beijing, which also serve as channels for information feedback on product quality. Designated
personnel are assigned to follow-up on finding remedies for recurring quality issues in a timely
manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive was granted the internationally recognized ISO-9001-94 quality system
certificate in October&nbsp;1995, making it the first major automobile manufacturer in China to be
awarded such certificate. Shenyang Automotive has successfully obtained recertification in each
subsequent year by demonstrating a continued commitment to upholding among the highest quality
standards in China&#146;s automobile industry. To date, approximately 149, 85 and 34 of Shenyang
Automotive&#146;s over 280 component suppliers achieved TS16949, QS-9000 and VDA 6.1 quality system
certification, respectively, and approximately 40 are accredited by ISO-9000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>After-Sales Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Shenyang Automotive&#146;s minibuses are sold with a 24-month or 50,000 kilometers
(18-month or 30,000 kilometers for minibuses sold in 2002 and 2001) first-to-occur limited
warranty. The Zhonghua sedans were sold with a 36-month or 60,000 kilometers (24-month or 40,000
kilometers for sedans sold in 2002) first-to-occur limited warranty. In addition to these basic
limited warranties, during 2003 Shenyang Automotive also offered customers a broader warranty for
its Zhonghua sedans. During the warranty period, Shenyang Automotive pays service stations for
parts and labor covered by the warranty; thereafter, customers must pay for all parts and labor. In
December&nbsp;2004, Zunchi sedans were sold with a 10-year or 200,000 kilometers first-to-occur limited
warranty on key components. In 2005, total warranty costs for minibuses and sedans sold during the
year were approximately Rmb 26.0&nbsp;million (US$3.2&nbsp;million) and Rmb 6.4&nbsp;million (US$0.8&nbsp;million),
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are approximately 380 and approximately 190 service centers for Shenyang Automotive
minibuses and sedans, respectively, throughout China, with centers clustered in areas that match
distribution patterns of the vehicles. Such centers have been granted authority by Shenyang
Automotive to service its minibuses and sedans, including the provision of repair services and the
sale of spare parts. This extensive service network has enabled Shenyang Automotive to adopt its
current policy of resolving routine customer complaints in all provincial capitals and major cities
within 24 hours and major problems within three days.
</DIV>
 <DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To improve customer service, Shenyang Automotive continually reevaluates its existing
distributors based on certain criteria, including financial soundness, customer service
capabilities and customer complaint record. Shenyang Automotive has also implemented a more
advanced &#147;4S&#148; sales center system, with sales, service, spare parts and survey offered by the same
dealership outlet. As of the end of 2005, Shenyang Automotive had approximately 70 and
approximately 70 4S dealership outlets for its minibuses and sedans, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BMW Brilliance currently has approximately 60 distributors, which are mainly located in first
tier cities in China. The number of distributors is expected to increase to over 80 by the end of
2006. Like Shenyang Automotive, BMW Brilliance implemented the more advanced 4S sales center
system.
</DIV>

<P align="center" style="font-size: 10pt">35
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Environmental Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government has set vehicle safety, exhaust and performance standards with which
Shenyang Automotive and BMW Brilliance must comply. Brilliance China Automotive believes that
Shenyang Automotive&#146;s and BMW Brilliance&#146;s minibuses and sedans currently meet the standards
imposed by the government. Their respective facilities are subject to government pollution
regulations enforced by the Shenyang municipal government. If operations are found to be in
violation, the government will allow a period of time to remedy the problem. If it should fail to
do so, the government can force a shut-down of Shenyang Automotive&#146;s or BMW Brilliance&#146;s operations
until such time as the violator complies with the regulations. To date, neither Shenyang Automotive
nor BMW Brilliance has been cited as violating a government pollution regulation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 2000, the cities of Beijing and Tianjin, as well as Yunnan Province, put into
effect emission standards that were significantly stricter than the then prevailing gasoline
vehicle emission standards. Since then, these emission standards have been adopted nationwide.
Shenyang Automotive&#146;s electronic fuel injection minibus, introduced in 1999, passed the emission
standards tests at the China National Automobile Testing Center in Tianjin in October&nbsp;1999. This
engine not only produces cleaner emissions, but also achieved up to an 8% increase in fuel economy
and a 3% increase in horsepower. In 2001, Shenyang Automotive began to install multiple electronic
fuel injection engines, which are currently used in all of Shenyang Automotive&#146;s mid-priced
minibuses. With the installation of this new engine in the mid-priced minibus, currently all of
Shenyang Automotives minibuses meet European II emission standards. All Zhonghua and BMW sedans
also meet these emission standards. In 2004, the Chinese government began to encourage its vehicle
manufacturers to meet the European III standards. Shenyang Automotive expects all of its minibuses
and Zhonghua sedans to meet European III emission standards by the end of 2007. Currently, all
minibuses and Zhonghua sedans with manual transmissions have complied with the European III
emission standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Insurance</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive currently hold insurance policies that Brilliance China Automotive
believes are customary and standard for companies of comparable size in comparable industries in
China. Shenyang Automotive does not carry product liability insurance, and Brilliance China
Automotive believes it is customary and standard in the Chinese automobile industry for
manufacturers not to carry product liability insurance. BMW Brilliance has elected to purchase
product liability and other insurance in order to conform with BMW&#146;s worldwide standards.
Brilliance China Automotive does not carry any business interruption insurance.
</DIV>


<P align="center" style="font-size: 10pt">36
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Organizational Structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table lists information concerning the subsidiaries, jointly controlled entities
and associated companies of Brilliance China Automotive as of December&nbsp;31, 2005:
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Effective</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Interest held by</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Jurisdiction of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Brilliance China</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Subsidiaries</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Automotive</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Brilliance JinBei Automobile Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">51.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ningbo Yuming Machinery Industrial Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang XingYuanDong Automobile Component Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Jianhua Motors Engine Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">60.8</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ningbo Brilliance Ruixing Auto Components Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mianyang Brilliance Ruian Automotive Components Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang JinBei Automotive Industry Holdings Company Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">98.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang XinJinBei Investment and Development Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">99.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Brilliance Dongxing Automotive Component Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang JinDong Development Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">75.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang ChenFa Automobile Component Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shanghai Hidea Auto Design Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">63.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Brilliance Power Train Machinery Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">75.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">China Brilliance Automotive Components Group Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Bermuda</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Southern State Investment Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beston Asia Investment Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pure Shine Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Key Choices Group Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brilliance China Automotive Finance Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">BVI</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Jointly Controlled Entities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mianyang Xinchen Engine Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Xinguang Brilliance Automobile Engine Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BMW Brilliance Automotive Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">49.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Associated Companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing FuHua Automotive Sales Service Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Baosheng Automotive Sale and Service Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29.4</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Property, Production Facilities and Equipment</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Shenyang municipal government granted to Shenyang Automotive the right to use three
parcels of land situated in the northern, eastern and western sectors of Shenyang with a total area
of approximately 960,000 square meters, approximately 90% of which is currently utilized by
Shenyang Automotive and BMW Brilliance. These land use rights will expire in 2021.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The western parcel consists of 66,000 square meters, 40,000 square meters of which is occupied
by a mid-priced minibus production facility that is capable of producing 12,000 vehicles per year.
This facility is currently utilized to produce a small number of special purpose minibuses and can
also be used to produce components as well.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The northern parcel covers 40,000 square meters and is used by Shenyang Automotive primarily
as a technical training facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The eastern parcel covers 850,000 square meters, including Shenyang Automotive&#146;s and BMW
Brilliance&#146;s production facilities. Shenyang Automotive&#146;s minibus facility currently has a
production capacity of 80,000 minibuses per year (based on two shifts) and 120,000 minibuses (based
on three shifts). This facility is specially designed for the manufacture and assembly of minibuses
and consists of four workshops. The stamping and assembly workshops currently have annual
production capacities of 80,000 and 90,000 units, respectively, based on two shifts of workers, and
can be increased to 120,000 units based on three shifts. The painting workshop currently has an
annual production capacity of 120,000, based on two shifts of workers.
</DIV>

<P align="center" style="font-size: 10pt">37
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, Shenyang Automotive completed the construction of new manufacturing facilities for
sedans (including the Zhonghua sedan), which has a production capacity of 100,000 units, based on
two shifts per day. The new manufacturing facilities are located adjacent to Shenyang Automotive&#146;s
previously existing minibus production facilities in the eastern parcel and include new pressing,
welding, painting and final assembly lines. Dies and other key production equipment were purchased
from leading European equipment manufacturers for the Zhonghua sedan. The total costs for
completion of this expansion project were approximately US$250.0&nbsp;million, including new equipment,
construction costs and other expenditures, but excluding the design costs for the sedans. See &#147;Item
5 &#151; Operating and Financial Review and Prospects &#151; Liquidity and Capital Resources&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain workshops in these new sedan manufacturing facilities are currently shared with BMW
Brilliance, including part of a welding workshop for the BMW sedans, all of the painting
facilities, and part of the Zhonghua sedan assembly shop, which is currently used by BMW Brilliance
to test BMW sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive has transferred legal titles and ownership of certain buildings in its
eastern parcel to BMW Brilliance for use in the production of BMW sedans. The agreement also states
that BMW Brilliance will lease back a substantial portion of those buildings to Shenyang
Automotive. BMW Brilliance also has the option to require Shenyang Automotive to purchase back such
buildings at the purchase price less depreciation upon the occurrence of certain events, including
the passing of a valid resolution pursuant to the joint venture contract by the board of directors
of BMW Brilliance. For financial reporting purposes, the buildings were retained as fixed assets on
the balance sheet of Brilliance China Automotive and the portion of consideration received from BMW
Brilliance is treated as a financing and will be partially offset against the lease rental payable
in future years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, BMW Brilliance purchased certain machinery and equipment from Shenyang
Automotive for use in the production of BMW sedans. The agreement of sale includes an option for
BMW Brilliance to require Shenyang Automotive to purchase back such machinery and equipment at the
purchase price less depreciation upon the occurrence of certain events, including the passing of a
valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. This machinery and equipment is maintained by BMW Brilliance for the manufacturing of
its products, as well as to provide certain services to Shenyang Automotive upon the payment of a
service fee, which is a predetermined fixed charge per unit based on the number of Zhonghua sedans
produced by Shenyang Automotive using this machinery and equipment.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The following discussion should be read in conjunction with the rest of this annual report,
including the consolidated financial statements and notes thereto contained elsewhere in this
annual report. The results discussed below are not necessarily indicative of the results to be
expected in any future periods.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive is a holding company. Prior to 2002, Brilliance China Automotive&#146;s
operating segment consisted solely of the manufacture and sale of minibuses and automotive
components through its subsidiaries and associated companies within China. No separate financial
information and segment information was disclosed. In 2002 and 2003, Brilliance China Automotive
began manufacturing and selling Zhonghua sedans and BMW sedans through Shenyang Automotive and BMW
Brilliance, respectively, which are managed separately because each of them represents a strategic
business unit that serves a different market in the PRC automobile industry. Therefore, Brilliance
China Automotive&#146;s reportable operating segments consist of (1)&nbsp;the manufacture and sale of
minibuses and automotive components, (2)&nbsp;the manufacture and sale of Zhonghua sedans and (3)&nbsp;the
manufacture and sale of BMW sedans. The accounting policies of each operating segment are the same.
Brilliance China Automotive evaluates performance based on stand-alone operating segment net income
and generally accounts for intersegment sales and transfers as if the sales or transfers were to
third parties, that is, at current market prices. Brilliance China Automotive&#146;s activities are
conducted predominantly in China. Accordingly, no geographical segmentation analysis is provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to May&nbsp;1998, Brilliance China Automotive&#146;s sole operating asset was its interest in
Shenyang Automotive. As a result, Brilliance China Automotive&#146;s historical results of operations
had been primarily driven by the sales price, sales volume and cost of production of Shenyang Automotive&#146;s minibuses. With a
view to maintaining quality, ensuring a stable supply of certain key components and developing new
businesses and products, Brilliance China Automotive acquired interests in various suppliers of
components and established joint ventures in China since May&nbsp;1998. As a result of these additional
investments and joint ventures, Brilliance China Automotive&#146;s income base has been broadened and
its future financial performance will differ from that of Shenyang Automotive.
</DIV>



<P align="center" style="font-size: 10pt">38
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;1998, Brilliance China Automotive acquired indirect interests in two components
suppliers: (1)&nbsp;a 51% equity interest in Ningbo Yuming Machinery Industrial Co., Ltd., a wholly
foreign-owned Chinese enterprise primarily engaged in the production of automobile window molding,
stripping and other auto components; and (2)&nbsp;a 50% equity interest in Mianyang Xinchen Engine Co.,
Ltd., a Sino-foreign joint venture manufacturer of gasoline engines for use in passenger vehicles
and light duty trucks. On October&nbsp;19, 2004, Brilliance China Automotive, through a subsidiary,
entered into an agreement to acquire the remaining 49% interest in Ningbo Yuming. With the approval
of the acquisition by the government on November&nbsp;25, 2004, Ningbo Yuming became a wholly owned
subsidiary of Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;1998, June&nbsp;2000 and July&nbsp;2000, Brilliance China Automotive established Shenyang
XingYuanDong Automobile Component Co., Ltd., Ningbo Brilliance Ruixing Auto Components Co., Ltd.
and Mianyang Brilliance Ruian Automotive Components Co., Ltd., respectively, as its wholly owned
subsidiaries to centralize and consolidate the sourcing of auto parts and components for Shenyang
Automotive. In 2001, all three companies, in order to maintain their preferential tax treatment
from the Chinese government, began manufacturing automotive components as well.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2000, Brilliance China Automotive acquired a 50% equity interest in Shenyang
Xinguang Brilliance Automobile Engine Co., Ltd., a Sino-foreign equity joint venture manufacturer
of gasoline engines for use in passenger vehicles. In December&nbsp;2001, Brilliance China Automotive
acquired a 100% equity interest in Shenyang Brilliance Dongxing Automotive Component Co., Ltd., a
foreign-invested manufacturer of automotive components in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2002, Shenyang Automotive obtained the approval from the Chinese government to produce
and sell its Zhonghua sedans in China. The Zhonghua sedans were launched in the market in August
2002. In March&nbsp;2006, a new model of the Zhonghua sedan, Junjie, was launched in the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;27, 2003, Brilliance China Automotive, through its indirect subsidiary, Shenyang
JinBei Automotive Industry Holdings Co., Ltd., or SJAI, entered into a joint venture contract with
BMW Holding to produce and sell BMW-designed and branded sedans in China. The registered capital
and total investment cost of the joint venture was Euro 150&nbsp;million and Euro 450&nbsp;million,
respectively. At that time, Brilliance China Automotive&#146;s effective interests in SJAI and the joint
venture with BMW were 81% and 40.5%, respectively. On April&nbsp;28, 2003, Brilliance China Automotive
increased its effective interest in SJAI from 81% to 89.1% and thereby increased its effective
interest in the joint venture with BMW from 40.5% to 44.6%. On December&nbsp;16, 2003, Brilliance China
Automotive further increased its effective interest in SJAI from 89.1% to 98.0% and thereby
increased its effective interest in the joint venture with BMW from 44.55% to 49.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;29, 2003, Brilliance China Automotive entered into agreements in relation to the
proposed acquisition of an indirect 40.1% interest in Shenyang JinBei Automotive Company Limited,
the joint venture partner of Shenyang Automotive and a supplier of automotive components for
Brilliance China Automotive&#146;s minibuses and sedans. Upon receipt of the necessary governmental
approvals for this transaction, which is expected by the end of 2006, Brilliance China Automotive&#146;s
effective interest in Shenyang Automotive will increase from 51% to approximately 70.7%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;28, 2003, Brilliance China Automotive, through its wholly owned subsidiary,
Brilliance China Automotive Finance Ltd., issued an aggregate principal amount of US$200.0&nbsp;million
zero coupon convertible bonds due 2008. These bonds are guaranteed by Brilliance China Automotive
and are convertible into fully paid ordinary shares with a par value of US$0.01 of Brilliance China
Automotive at an initial conversion price of HK$4.60 per share at any time from January&nbsp;8, 2004 to
November&nbsp;14, 2008, unless the bonds have previously been redeemed or matured. Brilliance China
Automotive Finance Ltd. may redeem a portion of the convertible bonds
in certain circumstances at 100% of their outstanding principal amount during the period from November
28, 2005 to November&nbsp;14, 2008. In addition, all or some of the bonds may be redeemed at the option
of the holder at 102.27% of their principal amount on November&nbsp;28, 2006 and upon certain events,
such as the change of control of Brilliance China Automotive or the shares of Brilliance China
Automotive ceasing to be listed on The Stock Exchange of Hong Kong Limited, the bonds may be
redeemed at the option of the holder at 100% of their outstanding principal amount. These bonds
rank equally with all of Brilliance China Automotive&#146;s senior, unsecured and unsubordinated
obligations. As of December&nbsp;31, 2005, none of the bonds had been converted into the ordinary shares
of Brilliance China Automotive<B>. </B>The net proceeds of the convertible bond offering were advanced to
Brilliance China Automotive and were then loaned to certain subsidiaries of Brilliance China
Automotive for their operating use.
</DIV>


<P align="center" style="font-size: 10pt">39
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;7, 2006, Brilliance China Automotive, through its wholly owned subsidiary, Brilliance
China Finance Limited (formerly known as Goldcosmos Investments Limited), issued zero coupon
guaranteed convertible bonds due 2011 with an aggregate principal amount of approximately US$183.0
million (equivalent to approximately Rmb 1,467.1&nbsp;million at the time of issue). These bonds are
guaranteed by Brilliance China Automotive and are convertible by the
holders into fully paid ordinary shares with
a par value of US$0.01 of Brilliance China Automotive at an initial
conversion price of HK$1.93 per
share at any time from July&nbsp;6, 2006 to May&nbsp;8, 2011, unless the bonds have previously been redeemed
or matured. Brilliance China Finance Limited may redeem the convertible bonds in whole but not in
part in certain circumstances at the early redemption amount (as
defined in the Trust Deed constituting the bonds and filed as an
exhibit to this annual report) during the period from June&nbsp;7,
2008 to May&nbsp;8, 2011. In addition, each holder will have
the right, at the option of the holder, to redeem in whole but not in part the convertible bonds at
122.926% of their principal amount on June&nbsp;7, 2009. Unless previously redeemed, converted or purchased and
cancelled, the convertible bonds will be redeemed at 141.060% of
their outstanding principal amount on June&nbsp;7, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Production Volumes and Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive derives its revenues from the sale of minibuses, sedans and
automotive components in China. Total sales for the years ended December&nbsp;31, 2005 and 2004 was Rmb
5,469.0&nbsp;million and Rmb 6,542.0&nbsp;million, respectively. The decrease in sales was primarily due to
the decrease in sales volume of Shenyang Automotive, especially for the Zhonghua sedans, and the
decrease in average unit selling prices, resulting from general production overcapacity and
intensified price competition faced by the Chinese automobile manufacturers in 2005 that were
exacerbated by rising global fuel prices which led to an increase in petrol prices in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The mid-priced minibus has proven to be Brilliance China Automotive&#146;s most popular and
competitive product. Despite the general slowdown of automobile industry, Brilliance China was able
to maintain its position as the market leader in the minibus market in 2005. Sales of deluxe
minibuses, mid-priced minibuses, Zhonghua sedans and components represented 17.5%, 54.7%, 15.8% and
12.0%, respectively, of Brilliance China Automotive&#146;s total sales revenue in 2005. Brilliance China
Automotive expects that the minibuses, together with the Zhonghua sedans, will continue to
represent a significant proportion of its total revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Costs and Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The major elements of Shenyang Automotive&#146;s production costs in recent years have been the
purchase of automotive components, labor and depreciation and amortization. Shenyang Automotive has
significantly lowered its per unit production costs by improving operating efficiency, increasing
production volume and increasing the domestic component content ratios of its deluxe and mid-priced
models. As a result, average per unit production costs (including depreciation and amortization)
for the deluxe model have been steadily decreasing over the past several years. The domestic
component ratio of the Zhonghua sedans also increased from 60% in August&nbsp;2002 to its current level
between 90% to 100%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, per unit production costs for minibuses remained relatively stable. The average per
unit production costs for the Zhonghua sedans decreased by approximately 5.6% mainly due to the
implementation of the cost reduction program and the increase in domestic component contents in
2005. Due to the intensified price competition brought about by the significantly weakened market
and the change in product mix, prices of minibuses and Zhonghua sedans decreased in 2005 by an
average of 9.0% and 20.0% respectively, compared to those in 2004. Gross profit decreased
significantly from Rmb 1,050.7&nbsp;million (US $130.2&nbsp;million)
in 2004 to Rmb 457.0&nbsp;million (US $56.6&nbsp;million) in 2005 as a result of intensified price competition
resulting from overcapacity, continued rising prices of raw materials and weakened market
sentiments.
</DIV>

<P align="center" style="font-size: 10pt">40
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Imported components are generally more expensive than domestically produced components and
were subject to import duties that have ranged as high as 120% since January&nbsp;1992. However, as a
result of China&#146;s accession to the WTO in November&nbsp;2001, import duties on automotive components
decreased to between 14% and 31.4% in 2002, between 4.8% and 25% in 2003, between 5% and 22.9% in
2004 and between 5% and 18.6% in 2005. In 2006, the import duties on automotive components was
further reduced to between 5% and 14.3%. In 2004, Shenyang Automotive paid an average tariff of
13.8% and 10.5% on its minibus (including Granse minibus) and sedan components, respectively. In
2005, Shenyang Automotive was subject to an average tariff rate of 9.7% and 12.1% on imported
components used in its deluxe minibuses (including Granse minibuses) and Zhonghua sedans,
respectively. Shenyang Automotive intends to continue its efforts to increase the domestic
component content of its products, while at the same time maintaining quality. However, Brilliance
China Automotive expects that future improvements in domestic component content for its existing
mid-priced and deluxe minibuses (other than the Granse model) will be at a rate slower than in
prior years due to an already high domestic component content ratio, and the extent and rate of any
corresponding price reductions are expected to be lower than in prior years. Brilliance China
Automotive expects to increase the ratio of domestic components in the Granse minibus and the
Zhonghua sedan. Brilliance China Automotive also expects BMW Brilliance to increase the domestic
components ratio in its BMW sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="10"><B>(Thousands of Rmb)</B></TD>

    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to third parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,859,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,402,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,797,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,312,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,468,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,541,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,109,557</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,011,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,491,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,727,125</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,382,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,195,336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,510,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,410,067</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,354</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,111</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in earnings of associated companies and
jointly controlled entities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subsidy income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on intangible assets<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on goodwill<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(257,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">(Loss) income before taxation and minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,195,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,887</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,094,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Provision) benefit for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,140</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>In 2005, a provision for impairment of intangible assets of Rmb 173.0
million in respect of the design and development costs of the Zhonghua
sedans was recognized.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>In 2005, an impairment loss on goodwill of Rmb 257.7&nbsp;million in
relation to one of Brilliance China Automotive&#146;s jointly controlled entities and a subsidiary was recognized.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">41
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>


</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Year Ended December&nbsp;31, 2005 Compared to Year Ended December&nbsp;31, 2004</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total sales of Brilliance China Automotive in the year ended December&nbsp;31, 2005 were Rmb
5,469.0&nbsp;million (US$677.7&nbsp;million), representing a 16.4% decrease from Rmb 6,542.0&nbsp;million in 2004.
The decrease in total sales from 2005 to 2004 was primarily due to the decrease in sales volume of
Shenyang Automotive&#146;s minibuses and Zhonghua sedans and the decrease in average unit selling prices
due to the intensified price competition of the Chinese automobile industry during 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
sales of the minibuses and automotive components segment were Rmb
4,605.9&nbsp;million
(US$570.7 million) in the year ended December&nbsp;31, 2005, representing a 11.7% decrease from Rmb 5,217.4
million in 2004. Sales of the Zhonghua sedans were Rmb 863.1&nbsp;million (US$107.0&nbsp;million) in the
year ended December&nbsp;31, 2005, representing a 34.8% decrease from Rmb 1,324.6&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive sold approximately 60,000 minibuses in 2005, representing a 2.6% decrease
from approximately 61,618 minibuses sold in 2004. Of these vehicles sold, approximately 50,060 were
mid priced minibuses, representing a 9.0% decrease from approximately 54,992 units sold in 2004.
Unit sales of deluxe minibuses, however, increased by 50.0% from approximately 6,626 units in 2004
to approximately 9,940 units in 2005. Shenyang Automotive sold approximately 9,000 Zhonghua sedans
in 2005, representing a 18.0% decrease from approximately 10,982 sedans sold in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales decreased 8.7% from Rmb 5,491.3&nbsp;million in 2004 to Rmb 5,012.0&nbsp;million (US$621.1
million) in 2005. The decrease was primarily due to the decrease in the unit sales of minibuses and
Zhonghua sedans in 2005. Furthermore, the unit production costs of minibuses have decreased as a
result of the reduction of materials and component costs in 2005. The overall gross profit margin
of Brilliance China Automotive decreased from 16.1% in 2004 to 8.4% in 2005. The decrease in gross
profit margin resulted mainly from the decrease in gross profit margin of both Zhonghua sedans and
mid-priced minibuses due to the lower sales volume and decrease in average unit selling prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses decreased 20.9% from Rmb 1,510.4&nbsp;million,
representing 23.1% of sales in 2004, to Rmb 1,195.3&nbsp;million (US$148.1&nbsp;million), representing 21.9%
of sales in 2005. The decrease was primarily due to the reduction in advertising, promotion and
marketing expenses resulting from the decrease in sales volume of Zhonghua sedans and minibuses in
2005 and the reduction in research and development costs as compared to 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense net of interest income amounted to Rmb 122.2&nbsp;million (US$15.1&nbsp;million) in
2005, compared to Rmb 123.7&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net equity in earnings of associated companies and jointly controlled entities decreased 61.2%
from Rmb 126.3&nbsp;million in 2004 to Rmb 49.0&nbsp;million (US$6.1&nbsp;million) in 2005. The decrease was
mainly due to the decrease in profit contributed by jointly controlled entities and associated
companies and the losses of a jointly controlled engine company in 2005. However, the decrease was
partly offset by the increase in contribution of profit from BMW Brilliance Automotive Ltd. in
2005. Net profits contributed by BMW Brilliance Automotive Ltd., the Group&#146;s 49% indirectly owned
jointly controlled entity, increased 45.0% from Rmb 21.8&nbsp;million in 2004 to Rmb 31.6&nbsp;million in
2005. The BMW joint venture achieved sales of 17,501 BMW sedans in 2005, an increase of 101.0% as
compared to 8,708 BMW sedans in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsidy income increased from Rmb 1.8&nbsp;million in 2004 to Rmb 3.1&nbsp;million in 2005. The increase
was mainly due to recognition of a government grant to a subsidiary in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income net of expenses increased from Rmb 25.7&nbsp;million in 2004 to Rmb 43.7&nbsp;million
(US$5.4&nbsp;million) in 2005. The increase was primarily due to service income received from a jointly
controlled entity in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss on intangible assets increased from Rmb 50.0&nbsp;million in 2004 to Rmb 173.0
million in 2005. The impairment loss was related to the design and development costs of the
Zhonghua sedans. The increase was mainly related to the lower sales volume and decrease in average unit selling prices of
Zhonghua sedans in 2005.
</DIV>

<P align="center" style="font-size: 10pt">42
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment loss on goodwill increased from Rmb 47.3&nbsp;million in 2004 to Rmb 257.7&nbsp;million in
2005. The increase was mainly due to impairment loss in relation to one of the jointly controlled
entities and a subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss before taxation and minority interests increased 126.9% from Rmb 526.9&nbsp;million in 2004 to
Rmb 1,195.4&nbsp;million in 2005. Brilliance China Automotive recorded a tax expense of Rmb 101.9
million in 2005 as compared to a net tax credit of Rmb 63.1&nbsp;million in 2004, resulting mainly from
the additional valuation allowance of deferred tax assets in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, Brilliance China Automotive recorded a net loss of Rmb 671.3&nbsp;million (US$83.2
million) in 2005, compared with net income of Rmb 1.2&nbsp;million in 2004. Basic loss per ADS amounted
to Rmb 18.3 (US$2.3) in 2005 as compared to the basic earnings per ADS of Rmb 0.03 (US$0.0036) in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Year Ended December&nbsp;31, 2004 Compared to Year Ended December&nbsp;31, 2003</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total sales of Brilliance China Automotive in the year ended December&nbsp;31, 2004 were Rmb
6,542.0&nbsp;million (US$790.4&nbsp;million), representing a 35.3% decrease from Rmb 10,109.6&nbsp;million in
2003. The decrease in total sales from 2003 to 2004 was primarily due to the decrease in the sales
volume of minibuses and, especially, the Zhonghua sedans and the decrease in average unit selling
prices due to the changes in product mix, resulting from the significant slowdown in growth in the
domestic demand for automobiles in China and the intensified price competition during 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total sales of the minibuses and automotive components segment were Rmb 5,217.4&nbsp;million
(US$630.4&nbsp;million) in the year ended December&nbsp;31, 2004, representing a 22.9% decrease from Rmb
6,764.2&nbsp;million in 2003. Sales of the Zhonghua sedans were more significantly affected by the
weakened Chinese automobile industry in 2004, with total sales amounting to Rmb 1,324.6&nbsp;million
(US$160.0&nbsp;million) in the year ended December&nbsp;31, 2004, representing a 60.4% decrease from Rmb
3,345.3&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive sold a total of 61,618 minibuses in 2004, representing a 17.4% decrease
over the 74,618 minibuses sold in 2003. Of these vehicles sold, 54,992 were mid-priced minibuses,
representing a 16.2% decrease over the 65,614 mid-priced minibuses sold in 2003. Unit sales of the
deluxe minibuses decreased 26.4% from 9,004 units in 2003 to 6,626 units in 2004. Shenyang
Automotive also sold 10,982 Zhonghua sedans in 2004, compared to 25,600 sedans sold in 2003. In
addition to these sales, Brilliance China Automotive&#146;s 49% indirectly owned BMW Brilliance also
sold a total of 8,708 BMW sedans in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of sales decreased 28.9% from Rmb 7,727.1&nbsp;million in 2003 to Rmb 5,491.3&nbsp;million
(US$663.5&nbsp;million) in 2004. The decrease was primarily due to the decrease in the unit sales of
minibuses and Zhonghua sedans in 2004. Cost of sales as a percentage of sales was 83.9% in 2004,
compared to 76.4% in 2003. The overall gross profit margin of Brilliance China Automotive decreased
from 23.6% in 2003 to 16.1% in 2004, as a result of lower gross profit margin in respect of
minibuses and Zhonghua sedans. The decrease in gross margin of the minibuses was mainly due to the
decrease in sales volume and the decrease in average selling prices resulting from the changes in
product mix. The decrease in gross margin of the Zhonghua sedans and the loss-making position of
this product segment was mainly due to the significant decrease in sales volume of these sedans
compared to 2003 that prevented Brilliance China Automotive from benefiting from economies of scale
in production and caused the per unit costs of Zhonghua sedans to rise above the breakeven level.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses increased 7.1% from Rmb 1,410.1&nbsp;million,
representing 13.9% of sales in 2003, to Rmb 1,510.4&nbsp;million (US$182.5&nbsp;million), representing 23.1%
of sales in 2004. The decrease in selling expenses primarily due to the decrease in warranty costs
and sales volume of the Zhonghua sedans and the decrease in marketing staff costs, was offset by
the increase in general and administrative expenses resulting from the increase in research and
development expenses incurred with respect to the Granse minibus and the Zhonghua sedans, the
increase in provision for inventories and provision for and write-off of bad and doubtful debts in
2004.
</DIV>

<P align="center" style="font-size: 10pt">43
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense net of interest income increased by 8.1% from Rmb 114.4&nbsp;million in 2003
to Rmb 123.7&nbsp;million (US$14.9&nbsp;million) in 2004 due to the increase in interest income from notes
payable and the convertible bonds issued in November&nbsp;2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net equity in earnings of associated companies and jointly controlled entities increased by
15.3% from Rmb 109.5&nbsp;million in 2003 to Rmb 126.3&nbsp;million (US$15.3&nbsp;million) in 2004. The increase
was mainly due to the contribution of profit from BMW Brilliance in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsidy income decreased 96.3% from Rmb 48.5&nbsp;million in 2003 to Rmb 1.8&nbsp;million in 2004. The
decrease was mainly due to a tax refund of Rmb 48.5&nbsp;million in 2003 in relation to Brilliance China
Automotive&#146;s reinvestment of the dividends from certain subsidiaries as additional capital
contribution. There was no such tax refund in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income net of expenses decreased from Rmb 78.3&nbsp;million in 2003 to Rmb 25.7&nbsp;million
(US$3.1&nbsp;million) in 2004. The decrease was primarily due to the decrease in income from the sale of
scrap metals in 2004 and a provision for impairment of the property, plant and equipment of Rmb 10
million in one of Brilliance China Automotive&#146;s subsidiaries in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, Brilliance China Automotive also recognized a provision for impairment of intangible
assets of Rmb 50.0&nbsp;million in respect of the design and development costs of the Zhonghua sedans
and impairment loss on goodwill of Rmb 47.3&nbsp;million in relation to one of Brilliance China
Automotive&#146;s jointly controlled entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive recorded a loss before taxation and minority interests of Rmb
526.9&nbsp;million in 2004 as compared to an income before taxation and minority interests of Rmb
1,094.2&nbsp;million in 2003. Brilliance China Automotive recorded net tax credit of Rmb 63.1&nbsp;million in
2004 as compared to tax expenses of Rmb 144.1&nbsp;million in 2003, resulting from the decrease in the
taxable income of Brilliance China Automotive and the effect of deferred taxation in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result, net income decreased 99.8% to Rmb 1.2&nbsp;million (US$0.14&nbsp;million) in 2004 from Rmb
780.8&nbsp;million in 2003. Basic earnings per ADS were Rmb 0.03 (US$0.0036) in 2004, representing a
99.9% decrease from Rmb 21.30 in 2003. Diluted earnings per ADS were Rmb 0.03 (US$0.0036) in 2004,
representing a 99.9% decrease from Rmb 21.16 in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contingent Liabilities and Outstanding Guarantees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive and its subsidiaries had endorsed or discounted bank notes which
were not yet honored by the issuers as of December&nbsp;31, 2005 and 2004 of approximately Rmb 1,128
million (US$139.8&nbsp;million) and Rmb 1,345&nbsp;million, respectively. These bank notes were used as a
financing tool primarily by Shenyang Automotive for the purchase of components from affiliated
companies and third parties and for other capital expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, Brilliance China Automotive and its subsidiaries had provided the
following guarantees:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate guarantees of approximately Rmb 120&nbsp;million (US$14.9&nbsp;million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua
Holdings Co., Ltd., or Shanghai Shenhua. The guarantee arose from the mutual
negotiation between Shenyang Automotive and Shanghai Shenhua. Associated with the
corporate guarantee, Shanghai Shenhua also provided a cross guarantee for the bank
facilities of Shenyang Automotive. The guarantee was for revolving activities of
Shanghai Shenhua and will be terminated upon mutual agreements between Shenyang
Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the repayment of its
bank loans or notes when they fall due, Shenyang Automotive is required to repay the
outstanding balance. There is no recourse or collateralization provision in the
guarantee. Default by Shanghai Shenhua and its affiliated companies is considered
remote by management and therefore no liability for the guarantor&#146;s obligation under
the guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">44
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A joint and several proportional corporate guarantee with a joint venture
partner of Shenyang Aerospace on a long-term bank loan of approximately Rmb 111&nbsp;million
(US$13.8&nbsp;million) drawn by Shenyang Aerospace which will expire in 2008. The guarantee
was provided by the Group and a joint venture partner of Shenyang Aerospace for its
long-term loan financing needs during its start-up period. If Shenyang Aerospace
defaults on the repayment of its bank loan when it falls due, the Group and the joint
venture partners are jointly and severally liable to repay the outstanding balance.
There is no recourse or collateralization provision in the guarantee. Default by
Shenyang Aerospace is considered remote by management and therefore no liability for
the guarantor&#146;s obligation under the guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate guarantees of bank loans amounting to Rmb 295&nbsp;million (US$36.6&nbsp;million),
which is also the maximum potential amount of future payments under the guarantee as of
December&nbsp;31, 2005, drawn by JinBei. Bank deposits of Rmb 311&nbsp;million (US$38.5&nbsp;million)
were pledged as a collateral for the corporate guarantees. However, default by JinBei
is considered remote by management and therefore no liability for the guarantor&#146;s
obligation under the guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, subsidiaries of Brilliance China Automotive had issued letters of
credit amounting to Rmb 42.8&nbsp;million (US$5.3&nbsp;million), compared to Rmb 11&nbsp;million in 2004. None of
the issued letters of credit were secured by any pledged bank accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See also &#147;Item&nbsp;8 &#151; Financial Information &#151; Legal Proceedings&#148; for a discussion of potential
contingent liabilities relating to legal proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table set forth our outstanding contractual and commercial commitments as of
December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>Payment due by period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>(In thousands of Rmb)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Less than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>4-5</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>More than 5</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>years</B></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,026,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,026,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable to affiliated companies (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible bonds (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,650,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing from BMW Brilliance (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations (relating to
offices and property)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,944</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unconditional purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,182,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,123,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,290</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,944</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Approximately Rmb 2.7&nbsp;billion of the Rmb 3.0&nbsp;billion notes payable had effective interest
rates of 3% to 4%. The remaining Rmb 0.3&nbsp;billion notes payable were interest free.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Notes payable to affiliated companies are non-interest bearing.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in the amount is a total accreted redemption premium payable on November&nbsp;28, 2006 of
approximately Rmb 36.6&nbsp;million. The accreted redemption premium as of December&nbsp;31, 2005 of
approximately Rmb 25.4&nbsp;million was calculated based on the outstanding principal of the
convertible bonds using the effective interest method.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Accrued interest of approximately Rmb 35.2&nbsp;million was calculated on the outstanding
principal using the compound interest method at an effective annual rate of 11.127% on a
quarterly basis.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">45
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cash Flows</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, Brilliance China Automotive and its subsidiaries had Rmb 843.4
million in cash and cash equivalents, Rmb 1,053.8&nbsp;million in short-term bank deposits and Rmb
1,932.6&nbsp;million in pledged short-term bank deposits, a decrease of Rmb 401.1&nbsp;million, an increase
of Rmb 45.2&nbsp;million and a decrease of Rmb 844.6&nbsp;million from its positions as of December&nbsp;31, 2004.
The decrease in cash and cash equivalents during that period was mainly due an increase in cash
used in financing activities, which offset increased cash inflows from operating and investing
activities in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive had bank notes payable of Rmb 3,101.0&nbsp;million and outstanding
short-term bank borrowings of Rmb 496.5&nbsp;million, but had no long-term bank borrowings outstanding
as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2005, Brilliance China Automotive recorded net cash provided
by operating activities of Rmb 896.3&nbsp;million (US$111.1&nbsp;million), an increase from the amount of Rmb
719.3&nbsp;million net cash used in operating activities in 2004. The change in cash flows used
in/provided by operating activities was primarily due to the inter-year changes in the following
current assets and current liabilities:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>decreases in notes receivable from third parties and from affiliated companies in
the amounts of Rmb 243.4&nbsp;million and Rmb 306.2&nbsp;million, respectively, for the year
ended December&nbsp;31, 2005, as compared to a decrease of Rmb 206.6&nbsp;million and an increase
of Rmb 118.0&nbsp;million for the year ended December&nbsp;31, 2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a decrease in inventory of Rmb 569.5&nbsp;million (US$70.6&nbsp;million) for the year ended
December&nbsp;31, 2005, as compared to an increase in inventory of Rmb 328.2&nbsp;million for the
year ended December&nbsp;31, 2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a decrease in notes and accounts payable of Rmb 333.3&nbsp;million (US$41.3&nbsp;million) for
the year ended December&nbsp;31, 2005, as compared to a decrease of Rmb 391.1&nbsp;million for
the year ended December&nbsp;31, 2004; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an increase in amounts due to affiliated companies of Rmb 171.9&nbsp;million (US$21.3
million) for the year ended December&nbsp;31, 2005, as compared to a decrease in such
amounts due of Rmb 162.1&nbsp;million for the year ended December&nbsp;31, 2004.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities amounted to Rmb 325.6&nbsp;million (US$40.3&nbsp;million) in
2005, an increase of Rmb 1,048.0&nbsp;million from the amount of Rmb 722.4&nbsp;million net cash used in
investing activities in 2004. The increase was primarily attributable to the decrease in pledged
short-term bank deposits of Rmb 844.5&nbsp;million (US$104.6&nbsp;million), a decrease in interests in
associated companies and jointly controlled entities of Rmb 11.5&nbsp;million (US$1.4&nbsp;million),
dividends received from an associate and from jointly controlled entities in the amounts of Rmb
42.0&nbsp;million (US$5.2&nbsp;million) and Rmb 30.0&nbsp;million (US$3.7&nbsp;million), respectively, and proceeds of
Rmb 9.5&nbsp;million (US$1.2&nbsp;million). The increase in cash provided by investing activities was
partially offset by a Rmb 45.2&nbsp;million (US$5.6&nbsp;million) increase in short-term bank deposits, a Rmb
8.7&nbsp;million (US$1.1&nbsp;million) increase in advances to affiliated companies and cash paid for capital
expenditures of Rmb 558.0&nbsp;million (US$69.1&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities amounted to Rmb 1,622.9&nbsp;million (US$201.1&nbsp;million) in
2005, as compared to net cash provided by financing activities in the amount of Rmb 853.9&nbsp;million
in 2004. This increase in cash used in financing activities is primarily attributable to a decrease
in proceeds from short term loans and issuances of notes payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Debt Changes</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;28, 2003, Brilliance China Automotive, through its wholly owned subsidiary,
Brilliance China Automotive Finance Ltd., issued zero coupon guaranteed convertible bonds due 2008
with an aggregate principal amount of US$200.0&nbsp;million. These bonds are guaranteed by Brilliance
China Automotive and are convertible into fully paid ordinary shares of par value US$0.01 of
Brilliance China Automotive at an initial conversion price of HK$4.60 per share at any time from January&nbsp;8, 2004 to November&nbsp;14, 2008, unless
the bonds have previously been redeemed or matured. Brilliance China Automotive Finance Ltd. may
redeem a portion of the convertible bonds in certain circumstances at 100% of their outstanding
principal amount during the period from November&nbsp;28, 2005 to November&nbsp;14, 2008. In addition, all or
some of the bonds may be redeemed at the option of the holder at 102.27% of their principal amount
on November&nbsp;28, 2006 and upon certain events, such as the change of control of Brilliance China
Automotive or its shares ceasing to be listed on the Hong Kong Stock Exchange, the bonds may be
redeemed at the option of the holder at 100% of their outstanding principal amount. These bonds
rank equally with all of Brilliance China Automotive&#146;s senior, unsecured and unsubordinated
obligations. As of December&nbsp;31, 2005, none of the bonds had been converted.
</DIV>

<P align="center" style="font-size: 10pt">46
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;7, 2006, Brilliance China Automotive, through its wholly owned subsidiary, Brilliance
China Finance Limited (formerly known as Goldcosmos Investments Limited), issued zero coupon
guaranteed convertible bonds due 2011 with an aggregate principal amount of approximately US$183.0
million (equivalent to approximately Rmb 1,467.1&nbsp;million at the time of issue). These bonds are
guaranteed by Brilliance China Automotive and are convertible by the
holders into fully paid ordinary shares of
par value US$0.01 of Brilliance China Automotive at an initial
conversion price of HK$1.93 per
share at any time from July&nbsp;6, 2006 to May&nbsp;8, 2011, unless the bonds have previously been redeemed
or matured. Brilliance China Finance Limited may redeem the convertible bonds in whole but not in
part in certain circumstances at the early redemption amount (as
defined in the Trust Deed constituting the bonds and filed as an
exhibit to this annual report) during the period from June&nbsp;7,
2008 to May&nbsp;8, 2011. In addition, each holder will have
the right, at the option of the holder, to redeem in whole but not in part the convertible bonds at
122.926% of their principal amount on June&nbsp;7, 2009. Unless previously redeemed, converted or purchased and
cancelled, the convertible bonds will be redeemed at 141.060% of
their outstanding principal amount on June&nbsp;7, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Brilliance China Automotive continued to maintain credit facilities with banks to
finance its working capital needs. As of December&nbsp;31, 2005, direct bank borrowings and bank notes
payable decreased by 38.5% to Rmb 3,523.5&nbsp;million
(US$436.6&nbsp;million), a decrease of Rmb 2,203.7
million from Rmb 5,727.2&nbsp;million as of December&nbsp;31, 2004. The bank loans and bank notes payable
were either secured by pledged short-term bank deposits or notes receivables, or unsecured, with
maturity periods of less than one year. Brilliance China Automotive believes that it will continue
to have access to sufficient bank facilities to meet its working capital requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Capital Expenditures</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures and operating expenses are funded by internal resources, loans and notes
payable borrowed by Shenyang Automotive from third parties. Brilliance China Automotive&#146;s capital
expenditures were Rmb 585.7&nbsp;million in 2005, a decrease of Rmb 335.2&nbsp;million from that in 2004.
Major items of expenditure included facilities upgrades relating to the production of new versions
of the Granse deluxe minibus and Zhonghua sedans and acquisition of new facilities for engine
businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currency Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive together with its subsidiaries, associated companies and jointly
controlled entities expect to require an aggregate of approximately Japanese Yen 6,000.0&nbsp;million,
US$10.0&nbsp;million and Euro 320.0&nbsp;million to purchase imported equipment and components from Toyota of
Japan, BMW of Germany and other overseas suppliers for its minibuses and sedans in 2006. This
estimate is based upon the 2006 production plans of Brilliance China Automotive and its
subsidiaries, associated companies and jointly controlled entities and the level of domestic
content expected for its minibuses and sedans in 2006. Brilliance China Automotive believes that it
will be able to obtain adequate amounts of foreign currency to meet its planned requirements for
2006. In 2005, Brilliance China Automotive received approximately Rmb 80.0&nbsp;million from its sale of
products to the Middle East, Russia and Europe. Under the Chinese law, Brilliance China Automotive
and its associated companies and jointly controlled entities in China are able to obtain necessary
foreign exchange in exchange for Renminbi upon approval from the State Administration of Foreign
Exchange, based on executed purchase contracts, joint venture agreements, feasibility studies and
other documents evidencing the needs and proposed usage of such foreign exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive does not consider exchange rate fluctuations to have any material
effect on the overall financial performance of Brilliance China Automotive, but may consider
entering into hedging transactions through exchange contracts in order to minimize foreign exchange
risks, if and when necessary. There were no outstanding hedging transactions as of December&nbsp;31,
2005.
</DIV>

<P align="center" style="font-size: 10pt">47
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research and Development, Patents and Licenses, etc.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, 2004 and 2005, Brilliance China Automotive spent Rmb 191.4&nbsp;million, Rmb 479.9
million and Rmb 235.2&nbsp;million, respectively, on research and development activities. In 2003, these
amounts were used for the development of improved versions of existing minibus models, the
development of an improved version of the Zhonghua sedan and the development of new engines, airbag
systems and other components. In 2004, these amounts were primarily used for the development of new
models of minibus, the development of the &#147;facelift&#148; version of the Zhonghua sedan and the
development of a new 1.8 liter turbo engine with the technical assistance of FEV Motorentechnik
GmbH. In 2005, these amounts were primarily used for the development of the new Zhonghua sedan,
Junjie and the new 1.8 liter turbo engine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Trend information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General trends that Brilliance China Automotive expects will have a significant impact on its
results of operations in the near future include the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Increased Demand for Motor Vehicles</I>. The rate of increase in China&#146;s gross domestic
product has been one of the highest in the world over the past decade, and this growth
has fueled demand for automobiles. In fact, demand in the Chinese automobile industry
has been growing over the past several years at a faster rate than the growth in
China&#146;s gross domestic product. This trend is expected to have a favorable impact on
Brilliance China Automotive&#146;s sales volume for both minibuses and sedans. However, due
to the implementation of macro-economic policies and austerity measures, there was a
significant slowdown in growth in domestic demand for automobiles since the second half
of 2004. Therefore, while growth in demand for automobiles is expected to continue, it
is likely to increase at a slower rate than in prior years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Competition</I>. As a result of China&#146;s accession to the WTO, domestic production of
automobiles (including minibuses and sedans) is expected to increase, particularly
through Sino-foreign joint ventures that are being established for this purpose.
Formation of new Sino-foreign joint ventures and further investments by foreign auto
makers to increase the capacity of existing operations could result in overcapacity and
increased domestic competition for Brilliance China Automotive and greater downward
pressure on vehicle prices as competitors begin to employ a higher ratio of
domestically produced components and as more competitors achieve economies of scale due
to increased volume of production.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Price</I>. Retail prices in the automotive market are expected to continue to fall as a
result of the localization of production and sourcing of components as described
immediately above as well as increased competition. A decrease in average selling
prices may lower margins and cause industry-wide deterioration of profitability. This
expected decline in vehicle prices will likely have an adverse effect on Brilliance
China Automotive&#146;s gross income and profits.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Growth, Consolidation and Development</I>. On June&nbsp;2, 2004, the NDRC issued a new
automotive policy for China, which will likely result in consolidation in the industry
and further the development and sophistication of the automobile industry in areas such
as consumer financing and research and development. The new policy sets minimum levels
of investment for new plants and research and development, imposes vehicle import
tariffs instead of component tariffs on semi-knocked down imports and, under certain
conditions, allows foreign investors to control more than 50% of a joint venture with
Chinese partners and open more than two joint venture plants in China to produce the
same categories of vehicles. The new policy acknowledges the success of China&#146;s
automobile industry and seeks to encourage this &#147;pillar industry&#148; to foster further
growth, particularly of domestically produced and branded products and research and
development, through consolidation of smaller, less-efficient manufacturers and
increased foreign and domestic investment. In addition, the policy aims to centralize
or reorganize certain automobile-related sectors, such as consumer loan services, to
reduce overhead and administrative burdens on the industry and allow industry
participants to focus on their core businesses. By encouraging industry consolidation
and establishing clearer guidelines for foreign investment, the policy encourages existing players in the industry to grow and provides
incentives for targeted investment from both domestic and foreign sources. However, the
ultimate impact of the new policy on Brilliance China Automotive is still uncertain and
subject to more detailed guidance and implementing regulations that are expected to be
promulgated by the NDRC in the future.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Improvements in China&#146;s Infrastructure</I>. China continues to improve and expand its
roadway system. By making automobile travel a more practical and accessible mode of
transportation for motorists in China, such improvements in China&#146;s infrastructure will
likely add to demand for automobiles.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Rising Fuel Prices. </I>China&#146;s fuel prices reached historical heights in May&nbsp;2006 and
may continue to increase. Such increases will likely have a negative influence on
Brilliance China Automotive&#146;s sales volume.</TD>
</TR>



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">48
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Critical accounting policies are defined as those that are reflective of significant judgments
and uncertainties and potentially result in materially different results under different
assumptions and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s consolidated financial statements have been prepared in
accordance with US GAAP. Brilliance China Automotive&#146;s principal accounting policies are set forth
in note 3 to its consolidated financial statements. US GAAP requires that Brilliance China
Automotive adopt the accounting policies and make estimates that its directors believe are most
appropriate in the circumstances for the purposes of giving a true and fair view of its results of
operations and financial condition. However, different policies, estimates and assumptions in
critical areas could lead to materially different results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive considers certain accounting policies, including those related to
revenue recognition, warranties, inventories, investment in jointly controlled entities and
associated companies, taxation, related party transactions and impairment of long-lived assets, to
be critical accounting policies due to the estimation processes involved in each.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Revenue Recognition</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive recognizes revenue in accordance with SEC Staff Accounting
Bulletin No.&nbsp;101, Revenue Recognition in Financial Statements (SAB 101) (as amended by Staff
Accounting Bulletin No.&nbsp;104, Revenue Recognition (SAB 104)). SAB 101 and SAB 104 require that four
basic criteria must be met before revenue can be recognized: (1)&nbsp;persuasive evidence of an
arrangement exists; (2)&nbsp;delivery has occurred or services have been rendered; (3)&nbsp;the fee is fixed
and determinable; and (4)&nbsp;collectibility is reasonably assured. Determination of criteria (3)&nbsp;and
(4)&nbsp;is based on management&#146;s judgments regarding the fixed nature of the fee charged for services
rendered and products delivered, and the collectibility of those fees. Should changes in conditions
cause management to determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales represent the invoiced value of goods, net of consumption tax, discounts and returns.
Sales are recognized when goods are delivered to customers and the significant risks and rewards of
ownership of the goods have been transferred to customers. Provisions for sales allowances and
rebates are made at the time of the sales of goods and are recognized as a reduction of sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Warranties</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive&#146;s minibuses are sold with a 24-month or 50,000 kilometers first-to-occur
limited warranty. The &#147;Zhonghua&#148; sedans are sold with a 36-month or 60,000 kilometers
first-to-occur limited warranty. &#147;Zunchi&#148; sedans are sold with a 10-year or 200,000 kilometers
first-to-occur limited warranty. During the warranty period, Shenyang Automotive pays service
stations for parts and labor covered by the warranty. The costs of the warranty obligation are
accrued as selling expenses at the time the sales are recognized, based on the estimated costs of
fulfilling the total obligations, including handling and transportation costs. The factors used to
estimate warranty expenses are reevaluated periodically in light of actual experience. Actual warranty expense may be
different from our estimates.
</DIV>

<P align="center" style="font-size: 10pt">49
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Inventories</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are carried at the lower of cost or market. Cost comprises all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to their present location
and condition. Cost is calculated on the moving-average basis, except for costs of work-in-progress
and finished goods of sedans and minibuses, which are calculated by the specific identification
basis. Brilliance China Automotive provides allowance for excess, slow moving and obsolete
inventory by specific identification and reduces the carrying value of its inventory to the lower
of cost or market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Impairment of long-lived assets</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Long-lived assets, such as property, plant and equipment and purchased intangible assets with
finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable from its undiscounted future cash flow. If
such assets are considered to be impaired, the impairment to be recognized is measured as the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Deferred Taxation</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax is provided using the liability method, in which deferred income taxes are
recognized for temporary differences between the tax and financial statement bases of assets and
liabilities. The tax consequences of those differences expected to occur in subsequent years are
recorded as assets and liabilities on the balance sheet. Estimates may differ from actual results.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of, the deferred tax assets will not be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Transactions with affiliated companies</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An affiliated company is a company in which one or more of the directors or substantial
shareholders of Brilliance China Automotive have direct or indirect beneficial interests in the
company or are in a position to exercise significant influence over the company. Parties are also
considered to be affiliated if they are subject to common control or common significant influence.
The accounting treatment for transactions with these affiliated companies, including sales and
revenue recognition policies, is similar to that for transactions with third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2006, the FASB issued SFAS No.&nbsp;156, &#145;&#145;Accounting for Servicing of Financial Assets &#151;
An Amendment of FASB Statement No.&nbsp;140&#146;&#146; (&#145;&#145;SFAS&#146;&#146;) No.&nbsp;156. SFAS No.&nbsp;156 requires that all
separately recognized servicing assets and servicing liabilities be initially measured at fair
value, if practicable. The statement permits, but does not require, the subsequent measurement of
servicing assets and servicing liabilities at fair value. SFAS No.&nbsp;156 is effective as of the
beginning of an entity&#146;s first fiscal year that begins after September&nbsp;15, 2006, which for the
Group will be as of the beginning of fiscal 2007. The Company does not believe that the adoption of
SFAS No.&nbsp;156 will have a significant effect on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155, &#145;&#145;Accounting for Certain Hybrid Financial
Instruments.&#146;&#146; SFAS No.&nbsp;155 permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require bifurcation. As of March&nbsp;2, 2006,
the Company did not have any hybrid financial instruments subject to the fair value election under
SFAS No.&nbsp;155. The Group is required to adopt SFAS No.&nbsp;155 effective at the beginning of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2005, the FASB issued Staff Position (FSP)&nbsp;FAS115-1 and FAS 124-1, which nullifies
certain provisions of EITF Issue 03-1, &#145;&#145;The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments&#146;&#146;, and completely supersedes EITF Topic D-44, &#145;&#145;Recognition of
Other Than Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value&#146;&#146;, addresses (1)
determining when an investment should be considered impaired, (2)&nbsp;determining whether an impairment
should be deemed other than temporary, and (3)&nbsp;measuring impairment loss. Combined FSP Nos. FAS
115-1 and FAS 124-1 were applied as discussed in Notes 3(j) and 14 to the Group&#146;s consolidated
financial statements.
</DIV>

<P align="center" style="font-size: 10pt">50
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154, &#145;&#145;Accounting Changes and Error Corrections.&#146;&#146; SFAS
No.&nbsp;154 changes the requirements for the accounting for and reporting of a change in accounting
principle. The Group is required to adopt SFAS No.&nbsp;154 for accounting changes and error corrections
that occur after the beginning of 2007. The Group&#146;s results of operations and financial condition
will only be impacted following the adoption of SFAS No.&nbsp;154 if it implements changes in accounting
principle that are addressed by the standard or corrects accounting errors
in future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123 (Revised 2004), &#145;&#145;Share Based Payment&#146;&#146; (SFAS
123(R)). SFAS 123(R) is a revision of SFAS No.&nbsp;123, &#145;&#145;Accounting for Stock-Based Compensation,&#146;&#146;
which supersedes Accounting Principles Board (APB)&nbsp;No.&nbsp;25, &#145;&#145;Accounting for Stock Issued to
Employees,&#146;&#146; and amends SFAS No.&nbsp;95, &#145;&#145;Statement of Cash Flows.&#146;&#146; SFAS 123(R) requires companies to
recognize compensation expense in the income statement for an amount equal to the fair value of the
share-based payment issued. This applies to all transactions involving the issuance of equity by a
company in exchange for goods and services, including employees. In March&nbsp;2005, the SEC issued
Staff Accounting Bulletin No.&nbsp;107 (SAB 107) outlining the SEC Staff&#146;s interpretation of SFAS
123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and
certain SEC rules and regulations and provides interpretations of the valuation of share-based
payments for public companies. Subsequently in August, October and November&nbsp;2005, the FASB released
FSP 123(R)-1, &#145;&#145;Classification and Measurement of Freestanding Financial Instruments Originally
Issued in Exchange for Employee Services under FASB Statement No.&nbsp;123(R),&#146;&#146; FSP123(R)-2,
&#145;&#145;Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No.
123(R)&#146;&#146; and FSP 123(R)-3, &#145;&#145;Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards.&#146;&#146; Additionally, on February&nbsp;1, 2006, the FASB issued FSP 123(R)-4,
&#145;&#145;Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for
Cash Settlement upon the Occurrence of a Contingent Event.&#146;&#146; The FSPs clarify certain accounting
provisions set forth in SFAS 123(R). The requirements and guidance prescribed in SFAS 123(R), SAB
107 and the FSPs is effective in 2006. The Group considers that the adoption of SFAS 123R will not
have significant impact on its financial statements.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Directors and Senior Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;16, 2005, Mr.&nbsp;He Guohua and Mr.&nbsp;Wang Shiping were appointed as executive
directors. On January&nbsp;6, 2006, Mr.&nbsp;Lin Xiaogang resigned as the President, Chief Executive Officer
and an executive director and on June&nbsp;23, 2006, Mr.&nbsp;Wu Yong Cun retired as a non-executive
director. Effective January&nbsp;6, 2006, Mr.&nbsp;Qi Yumin was appointed as the President, Chief Executive
Officer and an executive director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors and senior executive officers of Brilliance China Automotive as of the date of
this annual report are identified below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Year First</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Elected or Appointed</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Director or Officer</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px"><B>Executive Directors</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wu Xiao An
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board and Executive Vice President
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1994</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Qi Yumin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2006</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">He Guohua
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wang Shiping
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lei Xiaoyang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2003</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left"><B>Independent Non-Executive Directors</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Xu Bingjin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">66</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2003</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Song Jian
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jiang Bo
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Others</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zha Jianping
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2005</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Zhang Ruiping
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Qualified Accountant
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2004</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">51
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;WU Xiao An (also known as Mr.&nbsp;Ng Siu On), age 44, has been the Chairman of the Board of
Brilliance China Automotive since June&nbsp;2002, and an executive director since 1994. He is
responsible for the overall management and strategy of Brilliance China Automotive. He was the
Vice Chairman and the Chief Financial Officer of the Company from 1994 to June&nbsp;2002. He is also a
director of Huachen and Shenyang Automotive. Mr.&nbsp;Wu holds a Bachelor of Arts Degree from Beijing
Foreign Languages Institute and a Master of Business Administration Degree from Fordham University
in New York. He served from 1988 to 1993 as Deputy Manager of the Bank of China, New York Branch.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;QI Yumin, age 46, has been an executive Director, the President and the Chief Executive
Officer of Brilliance China Automotive since January&nbsp;2006. He is a senior engineer. Since
December&nbsp;2005, Mr.&nbsp;Qi has been the Chairman and President of Huachen. Prior to joining Huachen,
Mr.&nbsp;Qi has been the Chairman and the general manager of Dalian Heavy Industries Co., Ltd. and as
the Chairman and the President of DHI<B>&#149;</B>DCW Group Co., Ltd. He was the Vice Mayor of Dalian
Municipal Government from October&nbsp;2004 to December&nbsp;2005. Mr.&nbsp;Qi is currently a member of the
National People&#146;s Congress of the PRC Dalian Committee and a member of the Chinese People&#146;s
Political Consultative Conference Liaoning Provincial Committee. Mr.&nbsp;Qi holds a Bachelor Degree in
Engineering Science from Xi&#146;an University of Technology and a Master Degree of Business
Administration from Dalian University of Technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;HE Guohua, age 55, has been an executive Director of Brilliance China Automotive since
September&nbsp;2005. Mr.&nbsp;He is currently a director and the Vice President of Huachen and the Vice
Chairman and a director of Shenyang Automotive. He is also a director and the Chairman of JinBei
(an A-share listed company in the PRC). Mr.&nbsp;He previously worked as an engineer of Shenyang First
Machine Tools Factory and was a director of Shenyang Planning &#038; Economic Commission, a director of
the Shenyang Economic &#038; Trade Commission, a deputy director of the Shenyang Automotive Development
Office and the Chairman and General Manager of Shenyang Automotive Assets Operation Corporation.
Mr.&nbsp;He is a PRC Senior Engineer in electrical engineering. He graduated from Hefei University of
Technology, majoring in Micro Computer Science in 1984.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;WANG Shiping, age 49, has been an executive Director of Brilliance China Automotive since
September&nbsp;2005. Mr.&nbsp;Wang is currently a director and the Vice President of Huachen and a director
of Shenyang Automotive. He is a director and the Chairman of Shanghai Shenhua. Mr.&nbsp;Wang was
previously the Deputy Head Engineer of Radiator Branch Company of China First Automobile Group
Corporation, the General Manager of FAW-ZEXEL Air-Condition Branch Company, the Deputy General
Manager and Director of Strategic Planning of Fawer Automobile Part&nbsp;Co., Ltd. Mr.&nbsp;Wang is a Senior
Engineer (Researcher) in corporate management. He graduated from Anshan Iron &#038; Steel University in
1983 with a Bachelor of Engineering Degree. He also received a Master of Business Economics Degree
from the Graduate School of the Chinese Academy of Social Sciences in 1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;LEI Xiaoyang, age 49, was a non-executive Director of Brilliance China Automotive from
June&nbsp;2003 to June&nbsp;2005 and was redesignated as an executive Director of the Company effective in
June&nbsp;2005. Mr.&nbsp;Lei has been the Deputy Chief Economist as well as the General Manager of the
Department of Asset Operations in Huachen since January&nbsp;2003. He was the Assistant President of
Liaoning International Trust and Investment Corporation from June&nbsp;1996 to September&nbsp;2002, and was
in charge of the Financing Department, the Accounting Department, the Strategic Planning Department
and the Securities Department. Mr.&nbsp;Lei holds a Bachelor of Engineering Degree from the Shenyang
Polytechnic University and a Master of Finance Degree from Liaoning University as well as a Master
of Business Administration Degree from Roosevelt University.
</DIV>

<P align="center" style="font-size: 10pt">52
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Independent Non-Executive Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Xu Bingjin, age 66, has been an independent non-executive Director of Brilliance China
Automotive since June&nbsp;2003. Mr.&nbsp;Xu is currently the Chairman of the Association of Sino-European
Economic and Technical Cooperation. He was formerly an assistant minister of the Ministry of
Foreign Trade and Economic Cooperation, a director of the Office of National Mechanic and
Electronic Products Importation and Exportation and a Senior Consultant at the World Trade
Organization Research Association. Mr.&nbsp;Xu received a Bachelor of Science Degree in Engineering
Economics from Jilin University of Technology in 1964 and holds the title of Senior Engineer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;SONG Jian, age 49, has been an independent non-executive Director of Brilliance China
Automotive since September&nbsp;2004. Mr.&nbsp;Song is currently the Executive Vice President of the
Tsinghua Automotive Engineering Institute, the Deputy Dean of the Automotive Engineering Department
at Tsinghua University, the Vice Director of the National Laboratory in Automotive Safety and
Energy and an advisor to the Beijing Government in Science and Technology. In 1998, Mr.&nbsp;Song
received the Award for Outstanding Science and Technology Persons in the China Automotive Industry.
In 2005, he was ranked first in the Class&nbsp;One China Automotive Industry and Technology Advancement
Award. Mr.&nbsp;Song holds a Bachelor Degree and a Doctorate Degree, both in Engineering Science, from
Tsinghua University. He is currently a professor of Automotive Dynamics and Control Engineering at
Tsinghua University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;JIANG Bo, age 46, has been an independent non-executive Director of Brilliance China
Automotive since September&nbsp;2004. Mr.&nbsp;Jiang is an accountant, a certified public accountant and a
certified public valuer in the PRC. He has been the general manager of Liaoning Reanda Certified
Public Accountants in the PRC since 1999 and was a director of Dandong Zhongpeng Accounting Firm
from 1993 to 1999. Mr.&nbsp;Jiang has over 10&nbsp;years of experience in auditing financial statements of
companies listed on the PRC stock exchanges. Mr.&nbsp;Jiang has been a Certified Public Valuer since
1998 and has been involved in asset appraisals of companies in preparation for listing in the PRC.
He has participated in various listing projects of state-owned enterprises in the PRC and overseas
and has gained experience in reviewing and analyzing the audited financial statements of companies
listed in the PRC. Mr.&nbsp;Jiang has worked with one of the &#147;Big-4&#148; international accounting firms in
the auditing of a state-owned enterprise. Mr.&nbsp;Jiang holds a Bachelor of Science Degree in
Mathematics from Liaoning University and a diploma in Accounting from the Central Finance and
Economics University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Others</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;ZHA Jianping, age 35, has been the Chief Financial Officer of Brilliance China Automotive
since January&nbsp;2005. Mr.&nbsp;Zha is a qualified accountant in the PRC. He was awarded a Bachelor
Degree in Economics from the University of Finance and Economics in Shanghai in 1993. Mr.&nbsp;Zha has
more than eleven years of financial management experience with extensive experience in corporate
finance and strategic planning. He was in charge of the acquisition and corporate restructuring of
JinBei. Currently, Mr.&nbsp;Zha is the Vice President of JinBei and the Chief Financial Officer of Xing
Yuan Dong as well as a director of Shenyang Automotive. Mr.&nbsp;Zha was formerly the Chief Financial
Officer of Shenyang Automotive. Prior to joining Brilliance China Automotive, Mr.&nbsp;Zha worked and
handled finance-related matters in Nam Kwong Group Company Limited, a conglomerate with operation
in the PRC, Macau and overseas for seven years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ms.&nbsp;ZHANG Ruiping, age 35, has been the qualified accountant of Brilliance China Automotive
since November&nbsp;2004. Ms.&nbsp;Zhang is the head of the financial department of Brilliance China
Automotive and its subsidiaries. She graduated from Shanghai University of Finance and Economics.
She is a qualified PRC accountant and also a PRC certified pubic accountant registered as an
individual member with the Shanghai Institute of Certified Public Accountants. She worked at the
financial department of China Merchants Group, Hong Kong from 1996 to 1999 and was the manager of
the finance department of Shanghai Shenhua Holdings Co., Ltd from 1999 to 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no family relationship between any director or executive officer of Brilliance China
Automotive and any other director or executive officer.
</DIV>



<P align="center" style="font-size: 10pt">53
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate amount of compensation, consisting of salary, allowances and benefits in kind,
paid by Brilliance China Automotive to its directors and executive officers during 2005 was
approximately Rmb 12.9&nbsp;million (US$1.6&nbsp;million).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Board Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors of Brilliance China Automotive currently consists of eight members,
one-third of whom are required to retire from office by rotation at each annual general meeting in
accordance with the terms of its By-laws. Those directors that retire from office, however, may be
immediately re-elected as directors by the shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Service Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;1, 2006, Brilliance China Automotive entered into a service agreement with Mr.&nbsp;Wu
Xiao An, an executive director of the Company for a term of three years beginning March&nbsp;1, 2006. On
March&nbsp;1, 2006, Brilliance China Automotive entered into a service agreement with Mr.&nbsp;Qi Yumin, an
executive director of the Company for a term of three years beginning January&nbsp;6, 2006. Save as
disclosed herein, no director has a service contract with Brilliance China Automotive that is not
determinable by the employer within one year without payment of compensation, other than statutory
compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has established an audit committee whose primary duties consist of
reviewing and supervising the financial reporting process of Brilliance China Automotive. The audit
committee currently consists of three independent non-executive directors, Mr.&nbsp;Xu Bingjin, Mr.&nbsp;Song
Jian and Mr.&nbsp;Jiang Bo, and Mr.&nbsp;Xu is the chairman of the committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Meetings</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of the audit committee shall be held at least twice per year, and Brilliance China
Automotive&#146;s external auditors may request a meeting if they consider that one is necessary. A
quorum for a meeting of the audit committee shall be two members. Brilliance China Automotive&#146;s
secretary shall serve as secretary of the audit committee and shall (i)&nbsp;circulate to members of the
committee the draft and final versions of minutes of audit committee meetings and (ii)&nbsp;circulate to
the board reports of the audit committee. Brilliance China Automotive&#146;s Chief Financial Officer,
the Head of Internal Audit and a representative of its external auditors shall normally attend
audit committee meetings as well. The audit committee shall meet with Brilliance China Automotive&#146;s
external auditors at least once per year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Authority and Duties</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit committee is authorized by the board to investigate any activity within its scope of
duty. It is authorized to seek any information it requires from any employee and all employees are
directed to cooperate with any request made by the audit committee. The audit committee is
authorized by the board to obtain outside legal or other independent professional advice and to
secure the attendance of outsiders with relevant experience and expertise if it considers this
necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The duties of the audit committee are to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>be primarily responsible for the appointment, re-appointment and removal of the
external auditor, the remuneration and terms of the engagement of the external auditor,
and the resignation or dismissal of the external auditor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review and monitor the external auditor&#146;s independence and objectivity and the
effectiveness of the audit process in accordance with applicable standards, and to
oversee the work of external auditor (including resolution of disagreements between
management and the external auditor regarding financial reporting). The committee should establish with the external auditor the
nature and scope of the audit and reporting obligations before the audit commences;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>











</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">54
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>develop and implement policy on the engagement of an external auditor to supply
non-audit services. For this purpose, &#147;external auditor&#148; shall include any entity that
is under common control, ownership or management with the audit firm or any entity that
a reasonable and informed third party having knowledge of all relevant information
would reasonably conclude as part of the audit firm nationally or internationally. The
committee should identify to the Board any matters in respect of which it considers
that action or improvement is needed and make recommendations as to the steps to be
taken;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>monitor the integrity of financial statements of Brilliance China Automotive and
Brilliance China Automotive&#146;s annual reports and accounts, interim reports and, if
prepared for publication, quarterly reports, and to review significant financial
reporting judgments contained in them. In this regard, in reviewing Brilliance China
Automotive&#146;s reports and accounts before submission to the board, the committee should
focus particularly on:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in accounting policies and practices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>accounting policies which require difficult, subjective or complex judgments
(also known as critical accounting policies);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>significant adjustments resulting from audits;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>going concern assumptions and any qualifications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compliance with accounting standards; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compliance with listing rules of stock exchange(s) and other applicable legal
and regulatory requirements and guidance in relation to financial reporting;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In regard to the review of financial information:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>members of the committee must liaise with the Board, senior management and the
person appointed as Brilliance China Automotive&#146;s qualified accountant;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the committee must meet at least once a year with the external auditor; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the committee should consider any significant or unusual items that are, or may
need to be, reflected in such reports and accounts and must give due consideration
to any matters that have been raised by Brilliance China Automotive&#146;s qualified
accountant, compliance officer (if any) or auditor;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>establish procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters, including
procedures for the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review Brilliance China Automotive&#146;s financial controls, internal control and risk
management systems;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discuss with the management the system of internal control and ensure that
management has discharged its duty to establish and maintain an effective internal
control system;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discuss policies with respect to risk assessment and risk management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>consider the findings of investigations of internal control matters as delegated by
the board, or on the committee&#146;s own initiative, and review management&#146;s response;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">55
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>where an internal audit function exists, to ensure co-ordination between the
internal and external auditors, to ensure that the internal audit function is
adequately resourced and has appropriate standing within Brilliance China Automotive,
and to review and monitor the effectiveness of the internal audit function;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>where an internal audit function exists, to meet separately, periodically, with
management, with internal auditors (or other personnel responsible for the internal
audit function) and with external auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review the group&#146;s financial and accounting policies and practices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review the external auditor&#146;s management letter, any material queries raised by the
external auditor to management in respect of the accounting records, financial accounts
or systems of control, and management&#146;s response;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review with the external auditor any audit problems or difficulties and management&#146;s
response;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensure that the board provides a timely response to the issues raised in the
external auditor&#146;s management letter;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>report to the board on the matters set out in the code provision of Rule&nbsp;C.3 of
Appendix&nbsp;14 to the Rules&nbsp;Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>give pre-approval of other services and fees of the external auditor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>set clear hiring policies for employees or former employees of the external auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>report regularly to the board of the result of their review of the financial
reporting system and internal control procedures and recommendations (if any) thereon;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>consider other topics, as determined from time to time by the board.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audit committee met in April, 2003, 2004, 2005 and 2006, September&nbsp;2003, 2004 and 2005,
and also December&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Remuneration Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has established a remuneration committee. The remuneration
committee shall consist of not less than three members, a majority of whom should be independent
non-executive directors. The remuneration committee currently consists of three independent
non-executive directors, Mr.&nbsp;Xu Bingjin, Mr.&nbsp;Song Jian and Mr.&nbsp;Jiang Bo, and two executive
directors, Mr.&nbsp;Wu Xiao An and Mr.&nbsp;Qi Yumin. Mr.&nbsp;Xu Bingjin is the chairman of the committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Meetings</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of the remuneration committee shall be held at least once a year. Meetings will be
held at the request of any member of the board. A quorum for a meeting of the remuneration
committee shall be two members. Brilliance China Automotive&#146;s secretary shall serve as the
secretary of the remuneration committee and shall (i)&nbsp;circulate to members of the committee the
draft and final versions of minutes of remuneration committee meetings and (ii)&nbsp;circulate to the
board reports of the remuneration committee.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Authority and Duties</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The remuneration committee is authorized by the board to carry out any activity within its
scope of duty. It may request from the management information relating to the compensation and
remuneration packages of employees as appropriate to enable members of the committee to perform
their duties set out herein. The remuneration committee may consult the chairman and/or chief
executive officer of Brilliance China Automotive regarding any proposed remuneration or compensation in respect of any executive director of
Brilliance China Automotive, as appropriate. The remuneration committee is also authorized by the
board to obtain outside legal or other independent professional advice and to secure the attendance
of other persons with relevant experience and expertise, at the expense of Brilliance China
Automotive.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The duties of the remuneration committee are to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>make recommendations to the board on the policy and structure for all remuneration
of the directors and senior management of Brilliance China Automotive and its
subsidiaries and on the establishment of a formal and transparent procedure for
developing the policy of Brilliance China Automotive and its subsidiaries on such
remuneration;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>determine the specific remuneration packages of all executive directors and senior
management, including benefits in kind, pension rights and compensation payments,
including any compensation payable for loss or termination of their office or
appointment, and make recommendations to the board on the remuneration of non-executive
directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review and approve performance-based remuneration in accordance with corporate goals
and objectives resolved by the board from time to time;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review and approve the compensation payable to executive directors and senior
management in connection with any loss or termination of their office or appointment in
order to ensure that such compensation is determined in accordance with relevant
contractual terms and that such compensation is otherwise fair and not excessive for
Brilliance China Automotive and its subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>review and approve compensation arrangements relating to dismissal or removal of
directors for misconduct to ensure that such arrangements are determined in accordance
with relevant contractual terms and that any compensation payment is otherwise
reasonable and appropriate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ensure that no director or any of his associates is involved, directly or
indirectly, in deciding such director&#146;s remuneration; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in respect of any service agreement to be entered into between Brilliance China
Automotive/its subsidiaries and its respective director or proposed director, the prior
approval of which by the shareholders of Brilliance China Automotive in general meeting
is required pursuant to the Rules&nbsp;Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the &#147;Listing Rules&#148;), to review and provide
recommendations to the shareholders of Brilliance China Automotive (other than the
shareholders who are directors with a material interest in the relevant service
agreements and their respective associates (as defined in the Listing Rules)) as to
whether the terms of the service agreements are fair and reasonable and whether such
service agreements are in the interests of Brilliance China Automotive and the
shareholders as a whole, and to advise shareholders on how to vote.</TD>
</TR>

</TABLE>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Summary Corporate Governance Differences</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are significant differences between Brilliance China Automotive&#146;s corporate governance
practices and those of domestic companies listed on the New York Stock Exchange. Pursuant to
Section&nbsp;303A.11 of the New York Stock Exchange Listing Manual, these differences are set forth in
the table below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">NYSE</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Brilliance China Automotive</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Listed companies must have
a majority of independent
directors. Companies must
identify which directors are
independent and disclose the
basis for that determination.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brilliance China Automotive is not
required to have a majority of
independent directors. Under the rules
of The Stock Exchange of Hong Kong
Limited, Brilliance China Automotive is
required to have at least three independent non-executive directors.
Brilliance China Automotive identifies
the status of each director based on
standards set forth by The Stock
Exchange of Hong Kong Limited. Under
those standards, the board of directors
need not affirmatively determine that a
director has no material relationship
with the listed company (either
directly or as a partner, shareholder
or officer of an organization that has
a relationship with the company) for
that director to be deemed independent.
It is for the independent non-executive
directors to make the relevant
declaration. Every independent
non-executive director has to declare
his independency at the time of his
appointment and on an annual basis.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Non-management directors must
meet at executive sessions
without management.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-management directors are not
required to meet at executive sessions
without management.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Listed companies must have a
nominating/corporate governance
committee composed entirely of
independent directors.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brilliance China Automotive is not
required to have a nominating/corporate
governance committee composed entirely
of independent directors and does not
have such a committee.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Listed companies must have a
compensation committee composed
entirely of independent
directors.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brilliance China Automotive has
established a remuneration committee.
The remuneration committee must consist
of not less than three members, a
majority of whom must be independent
non-executive directors.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Listed companies must adopt and
disclose a code of business
conduct and ethics for
directors, officers and
employees, and promptly disclose
any waivers of the code for
directors or executive officers.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brilliance China Automotive is not
required to adopt a code of business
conduct and ethics for directors,
officers and employees and is not
required to promptly disclose any
waivers of any such code for directors
or executive officers. Brilliance China
Automotive has adopted a Model Code for
Securities Transactions by Directors
and a Code for Securities Transactions
by Employees that, among other things,
sets forth a policy for compliance with
securities laws, primarily insider
trading, and has also adopted an
Employee Handbook that, among other
things, contains procedures for
compliance with securities laws, a
policy on confidential information and
a code of conduct.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">58
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, Brilliance China Automotive had 9 employees located in Hong Kong,
compared with 9 as of both December&nbsp;31, 2004 and December&nbsp;31, 2003. These employees are primarily
responsible for overseeing the financial management and operations and for developing strategic
business plans, preparing financial statements and coordinating investor relations for Brilliance
China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, Brilliance China Automotive and its subsidiaries had a total of 8,911
employees, compared with 9,112 as of December&nbsp;31, 2004 and 9,000 as of December&nbsp;31, 2003. As of
December&nbsp;31, 2005, Shenyang Automotive had a total of 6,470 employees, compared with 6,731 as of
December&nbsp;31, 2004 and 6,704 as of December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following chart sets forth the number of the Group&#146;s employees by functional area as of
December&nbsp;31, 2005:
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Functional Area</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Number of Employees</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Administrative personnel </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,448</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technical personnel </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production workers </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total </B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,911</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially all of Brilliance China Automotive and its subsidiaries&#146; employees are based in
Shenyang, Liaoning Province, China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive and its subsidiaries have not experienced any strikes or other
labor disputes that materially affected their business activities. Brilliance China Automotive
considers its labor relations to be good.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Share Ownership</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this annual report, no directors or executive officers own any shares in
Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employee Share Option Schemes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The 1999 Share Option Scheme</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;18, 1999, Brilliance China Automotive approved a share option scheme, or the
Original Scheme, under which the directors may, at their discretion, at any time during the ten
years from the date of approval of the scheme, invite employees of any member company of the Group,
including executive directors, to take up share options of Brilliance China Automotive. The maximum
number of shares on which options may be granted may not exceed 10% of the issued share capital of
Brilliance China Automotive excluding any shares issued on the exercise of options from time to
time. The exercise price in relation to each option offer shall be determined by the directors at
their absolute discretion, but in any event shall not be less than the greater of (i)&nbsp;80&nbsp;percent of
the average of the official closing price of the shares on The Stock Exchange of Hong Kong for the
five trading days immediately preceding the relevant offer date or (ii)&nbsp;the nominal value of the
shares. The directors may determine and adjust the period within which the relevant grantee may
exercise his or her option and the proportion of the options to be exercised in each period, so
long as the period within which the option must be exercised is not more than ten years from the
date of grant of the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of the movements of outstanding share options granted under the Original Scheme
during the year is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Number of share options</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At January&nbsp;1, </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,490,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,490,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled/Lapsed during the year </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,690,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">At December&nbsp;31, </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,490,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The outstanding share options under the Original Scheme entitle the holder to subscribe for
each ordinary share of Brilliance China Automotive at HK$1.896 for each outstanding share option,
exercisable from June&nbsp;2, 2001 to June&nbsp;1, 2011.
</DIV>

<P align="center" style="font-size: 10pt">59
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>New Share Option Scheme</I>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;28, 2002, Brilliance China Automotive adopted a new share option scheme, or the New
Scheme in compliance with the amendments to the listing rules and regulations of The Stock Exchange
of Hong Kong Limited that became effective on September&nbsp;1, 2001. The New Scheme became effective on
July&nbsp;15, 2002 and the Original Scheme was terminated. Pursuant to the Original Scheme, all the
share options granted prior to its termination shall continue to be valid and exercisable in
accordance with its terms. Share options granted after July&nbsp;15, 2002 are subject to the terms of
the New Scheme. Pursuant to the New Scheme, Brilliance China Automotive&#146;s Board of Directors may
grant options to the participants (including Brilliance China Automotive&#146;s employees, non-executive
directors, suppliers and customers, etc.) to subscribe for Brilliance China Automotive&#146;s common
stock at a price that shall not be lower than the higher of:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the closing price of the common stock on the relevant stock exchange as stated
in such stock exchange&#146;s quotation sheet on the date of the offer of grant, which must
be a trading date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the average closing price of the common stock on the relevant stock exchange as
stated in such stock exchange&#146;s quotation sheets for the five trading days immediately
preceding the date of the offer of grant; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the nominal value of the common stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The New Scheme allows Brilliance China Automotive to grant options to a wider category of
participants. Under the New Scheme, the board would also have the discretion to set a minimum
period for which an option must be held before the exercise of the subscription rights attached to
that option, as well as any performance targets it considers appropriate before an option can be
exercised. The purpose of the New Scheme is to provide incentives or rewards to participants under
the scheme for their contribution to Brilliance China Automotive and its subsidiaries and to enable
Brilliance China Automotive and its subsidiaries to recruit and retain skilled employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During (a)&nbsp;the year ended December&nbsp;31, 2002, 13,972,000 share options granted to a former
Director and certain former employees have been cancelled or lapsed; (b)&nbsp;the year ended December
31, 2003, 2,338,000 share options granted to a former employee have been exercised; (c)&nbsp;the year
ended December&nbsp;31, 2004, 1,000,000 share options granted to a former employee have been cancelled
or lapsed; and (d)&nbsp;the year ended December&nbsp;31, 2005, 11,690,000 share options granted to certain
former Directors and a former employee have been cancelled or lapsed in accordance with the terms
of the Original Scheme.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005, no share option has been granted under the New Scheme.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Call Option Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2002, Huachen Automotive Group Holdings Company Limited, or Huachen entered
into a principal agreement, or the Principal Agreement, with the Chinese Financial Education
Development Foundation, or the Foundation, the then substantial shareholder, to purchase from the
Foundation a total of 1,446,121,500 ordinary shares, representing approximately 39.446% of the then
issued share capital of Brilliance China Automotive and the Foundation&#146;s entire shareholding
interests in Brilliance China Automotive. Completion of the Principal Agreement took place upon
signing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2002, each of Mr.&nbsp;Wu Xiao An (also known as Mr.&nbsp;Ng Siu On), Mr.&nbsp;Su Qiang (also
known as Mr.&nbsp;So Keung), Mr.&nbsp;Hong Xing and Mr.&nbsp;He Tao (also known as Mr.&nbsp;Ho To), or the Management
Directors, entered into a call option agreement, or the Call Option Agreements with Huachen,
immediately after the Principal Agreement was entered into and after completion of the sale and
purchase of the ordinary shares pursuant thereto. Pursuant to the terms of the Call Option
Agreements, Huachen granted to each of the Management Directors a call option in respect of a
specified number of ordinary shares, totaling 346,305,630 shares in aggregate and representing
approximately 9.446% of the then issued share capital of Brilliance China Automotive, at an
exercise price of HK$0.95 per share. Each call option is exercisable in whole or in part at any
time during the period of 3&nbsp;years commencing from the date falling 6&nbsp;months after the earlier of:
(a)&nbsp;the end of the general offer made to the remaining shareholders by Huachen and the Management
Directors dated December&nbsp;18, 2002, or the Offer; and (b)&nbsp;the close of the Offer in accordance with
the offer document issued by the offerors in respect of the Offer as required under the Hong Kong
Code on Takeovers and Mergers. The Offer closed on February&nbsp;6, 2003.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the Call Option Agreements, each of the Management Directors may elect to
pay the exercise price in full or to pay 10% of the exercise price at the time of exercise of the
option. If the Management Directors elect the latter payment option, the balance of the exercise
price will be payable within a 3-year period after the date of completion of the purchase of the
relevant shares pursuant to the exercise of such option, and the share will be pledged as security
in favor of Huachen until full payment of the exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of the call options were exercised in 2005.
</DIV>

<P align="center" style="font-size: 10pt">60
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Major Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information regarding ownership of Brilliance China
Automotive&#146;s capital stock as of December&nbsp;31, 2005 by all persons who are known to Brilliance China
Automotive to own more than 5% of Brilliance China Automotive&#146;s shares or ADSs. The voting rights
of Brilliance China Automotive&#146;s major shareholders are identical to those of its other
shareholders.
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Title of Class</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Identity of Person or Group</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Capital Stock</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ordinary Shares
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Huachen Automotive Group Holdings Company Limited<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,446,121,500</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">39.42</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ordinary Shares
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Templeton Asset Management Ltd.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">215,388,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5.87</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ordinary Shares
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Brandes Investment Partners, L.P.
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">306,052,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8.34</TD>
    <TD nowrap valign="bottom">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Huachen Automotive Group Holdings Company Limited is a
wholly owned subsidiary of the Liaoning Provincial
Government.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2002, Huachen, a wholly owned subsidiary of the Liaoning Provincial
Government, entered into a principal agreement with the Chinese Financial Education Development
Foundation, the then substantial shareholder of Brilliance China Automotive, for the purchase from
the Chinese Financial Education Development Foundation of a total of 1,446,121,500 ordinary shares,
representing approximately 39.45% of the then issued share capital of Brilliance China Automotive
and the Chinese Financial Education Development Foundation&#146;s entire shareholding interest in
Brilliance China Automotive. Completion of the principal agreement took place at signing on
December&nbsp;18, 2002. Accordingly, as of December&nbsp;31, 2003, Huachen is entitled to cast 39.42%
(diluted from the initial 39.45% due to the exercise of certain share options during 2003) of the
votes on all matters to be voted on by the shareholders of Brilliance China Automotive (to the
extent it is not required to abstain from exercising its voting rights under the applicable laws
and regulations), and will therefore exert substantial influence over the election of Brilliance
China Automotive&#146;s directors, the outcome of actions requiring majority shareholder approval and
the business in general of Brilliance China Automotive. See &#147;Item&nbsp;8 &#151; Financial Information &#151; Legal
Proceedings&#148; for a description of the litigation relating to this purchase.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;JinBei holds a 49% equity interest in Shenyang Automotive. Shenyang Automotive began operating
as a separate legal entity from JinBei in January&nbsp;1992. Shenyang Automotive and JinBei are parties
to a trademark license agreement under which JinBei has granted to Shenyang Automotive the license
to use indefinitely the JinBei trademark on its products and marketing materials. On December&nbsp;29,
2003, Brilliance China Automotive, through Shenyang JinBei Automotive Industry Holdings Co., Ltd.,
or SJAI, and Shenyang XinJinBei Investment and Development Co., Ltd., or SXID, its 98.0% and 99.0%
indirectly owned subsidiaries, respectively, entered into agreements to acquire the entire equity
interests of Shenyang Automobile Industry Asset Management Company Limited, or SAIAM, and Shenyang
XinJinBei Investment Co., Ltd, or SXI, which own 29.9% and 11%, respectively, of the issued share
capital of JinBei. Upon receipt of the necessary governmental approvals for this transaction,
Brilliance China Automotive&#146;s effective interest in Shenyang Automotive will increase from its
initial 51.0% to approximately 70.7%. This acquisition is expected to be completed by the end of
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, Brilliance China Automotive purchased Rmb 1,062.5&nbsp;million of its component parts from
various affiliated companies and paid a Rmb 112.2&nbsp;million subcontracting charge to a jointly
controlled entity. These figures represented a decrease of 47.1% from Rmb 2,006.7&nbsp;million and a
decrease of 37.2% from Rmb 178.7&nbsp;million, respectively, from 2004 to 2005. Brilliance China
Automotive believes that its purchases of such parts have been on terms as favorable to Brilliance
China Automotive as it could have obtained from unrelated third parties on an arm&#146;s-length basis.
</DIV>


<P align="center" style="font-size: 10pt">61
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant transactions between Brilliance China Automotive or its subsidiaries and
affiliated companies in the ordinary course of business during 2003, 2004 and 2005 are set forth
below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(Rmb &#145;000)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">986,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,469,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,895,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,984,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to other affiliated companies of Brilliance Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from a joint venture partner of Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subcontracting charges to BMW Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from other affiliated companies of Brilliance Holdings
Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">524,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,597,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to affiliated companies of the joint venture partner of Ningbo
Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases from affiliated companies of the joint venture partner of
Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,512</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consideration paid to the joint venture partner of Ningbo Yuming for
acquisition of further interests in Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of intangible asset from an affiliated company of the joint
venture partner of Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance charge to a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease rental on machineries and equipment charged by a
jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease rental from a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales of property, plant and equipment to JinBei and its affiliated
companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales of property, plant and equipment to a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of machinery from JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service income from a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The above transactions were carried out after negotiations between Brilliance China Automotive
and its subsidiaries and the affiliated companies in the ordinary course of business and on the
basis of estimated market value as determined by the directors of Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended December&nbsp;31, 2002, JinBei allowed Shenyang Automotive to use certain
components-related technology in the manufacturing of the Zhonghua sedan. This technology was
transferred from JinBei to Shenyang Automotive in the form of an increase in the registered capital
of Shenyang Automotive in January&nbsp;2003, and Shenyang Automotive thereby became the legal owner of
this components-related technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option for
BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the purchase price
less depreciation upon the occurrence of certain events, including the passing of a valid
resolution pursuant to the joint venture contract by the board of directors of BMW Brilliance. For
financial reporting purposes, as of December&nbsp;31, 2005 and 2004, the net book value of the buildings
amounting to approximately Rmb 142.6&nbsp;million and Rmb 150.8&nbsp;million, respectively were retained as
assets on the consolidated balance sheet of Brilliance China Automotive and the portion of
consideration received from BMW Brilliance up to December&nbsp;31, 2005 and 2004 amounting to
approximately Rmb 74.6&nbsp;million was treated as a financing and will be partially offset against the
lease rental payable in future years. The remaining balance of approximately Rmb 99.8&nbsp;million will
be received from BMW Brilliance and will be accounted for as additional financing.
</DIV>

<P align="center" style="font-size: 10pt">62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2003, BMW Brilliance purchased certain machineries and equipment from Shenyang
Automotive at their net book value mutually agreed by both parties for use in the production of BMW
sedans. The agreement of sale includes an option for BMW Brilliance to require Shenyang Automotive
to purchase back such machineries and equipment at the purchase price less depreciation over a
specified period upon the occurrence of certain events, including the passing of a valid resolution
pursuant to the joint venture contract by the board of directors of BMW Brilliance. These
machineries and equipment are maintained by BMW Brilliance for the manufacturing of its products
and is also used by Shenyang Automotive for a service fee based on the number of Zhonghua sedans
produced by Shenyang Automotive using these machineries and equipment. As of December&nbsp;31, 2005 and
2004, service fees of approximately Rmb 308.3&nbsp;million and Rmb 196.1&nbsp;million had accrued,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operating subsidiaries of Brilliance China Automotive have provided the following
outstanding guarantees to affiliated companies as of December&nbsp;31, 2005:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a corporate guarantee of approximately Rmb 120&nbsp;million (US$14.9&nbsp;million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua.
However, default by Shanghai Shenhua and its affiliated companies is considered remote
by management and therefore no liability for the guarantor&#146;s obligation under the
guarantee existed as of December&nbsp;31, 2005;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a joint and several proportional guarantee with all the initial joint venture
partners of Shenyang Aerospace on a long-term bank loan of approximately Rmb 111
million (US$13.8&nbsp;million) drawn by Shenyang Aerospace that will expire in 2008.
However, default by Shanghai Aerospace is considered remote by management and therefore
no liability for the guarantor&#146;s obligation under the guarantee existed as of December
31, 2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>corporate guarantees for bank loans amounting to Rmb 295&nbsp;million (US$36.6&nbsp;million)
drawn by JinBei. Bank deposits of Rmb 311&nbsp;million were pledged as a collateral for the
corporate guarantee. However, However, default by JinBei is considered remote by
management and therefore no liability for the guarantor&#146;s obligation under the
guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information on amounts due from affiliated companies to Brilliance China
Automotive and its subsidiaries arising from trading activities as of December&nbsp;31, 2005, 2004 and
2003:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(Rmb &#145;000)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Notes receivable from affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable from affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable from Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable from associated companies and jointly
controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes receivable from an affiliated company of the joint
venture partner of Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>338,970</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>645,143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>527,175</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Amounts due from affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,967</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from Shanghai Yuantong<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from affiliated companies of the joint venture partner
of Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from affiliated companies of Brilliance Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due from a joint venture partner of Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">Receivable arising from the disposal of machineries and
equipment to BMW Brilliance<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,720</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>840,215</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>765,411</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>774,188</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The notes receivable from affiliated companies are guaranteed by banks
in China and have maturities of six months or less. The fair value of
the notes receivable approximates their carrying value.</TD>
</TR>
 <TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The amounts due from Shanghai Yuantong as of December&nbsp;31, 2003 were
non-interest bearing. Subsequent to December&nbsp;31, 2003, Rmb 350&nbsp;million
of endorsed bank notes were received from Shanghai Yuantong.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The outstanding balance is unsecured, non-interest bearing and will be
settled by BMW Brilliance when certain conditions specified in the
agreement of sale are fulfilled.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>


</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information on advances from Brilliance China Automotive and its
subsidiaries to affiliated companies as of December&nbsp;31, 2005, 2004 and 2003:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(Rmb &#145;000)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Advances to affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,748</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to Brilliance Holdings Limited and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to other affiliated companies (non-interest bearing)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,931</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,477</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>243,482</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information on advances from affiliated companies to Brilliance China
Automotive and its subsidiaries as of December&nbsp;31, 2005, 2004 and 2003.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(Rmb &#145;000)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Advances from affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from affiliated companies of Brilliance Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from an associated company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from an affiliated company of Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from affiliated companies of the joint venture partner
of Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances from other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing received from BMW Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>105,094</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>90,481</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>92,642</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aside from the financing received from BMW Brilliance, the other advances from affiliated
companies are unsecured, non-interest bearing and have no fixed repayment terms.
</DIV>

<P align="center" style="font-size: 10pt">64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts due to affiliated companies arising from trading activities consisted of the
following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10"><B>(Rmb &#145;000)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Notes payable to affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable to affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable to associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,059</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable to other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable to affiliated companies of Brilliance Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes payable to Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,431</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Amounts due to affiliated companies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,559</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to other affiliated companies of Brilliance Holdings Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to affiliated companies of the joint venture partner of Ningbo
Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to affiliated companies of the joint venture partner of Xinguang
Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,967</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,396</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Due to other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>633,807</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>522,722</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>684,854</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amounts due to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004, included in prepayments and other current assets were approximately
Rmb 9.5&nbsp;million of prepayment for purchases of raw materials made to an affiliated company of
Brilliance Holdings Limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, included in other receivables was Rmb 20&nbsp;million of outstanding
proceeds from the disposal of an associated company to an affiliated company.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 8. FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements and Other Financial Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;18 &#151; Financial Statements&#148; for a list of the financial statements filed with this
document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Broadsino Litigation</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;21, 2003, a writ dated January&nbsp;21, 2003, or the Writ, brought by Broadsino Finance
Company
Limited, or Broadsino, as the Plaintiff, was filed with the Supreme Court of Bermuda which alleged
that the interest of the Chinese Financial Education Development Foundation, or the Foundation, in
1,446,121,500 shares of Brilliance China Automotive, or the Sale Shares, was held in trust for
Broadsino and was improperly transferred to Huachen Automotive Group Holdings Company Limited, or
Huachen.
</DIV>

<P align="center" style="font-size: 10pt">65
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the course of legal proceedings with Broadsino, Brilliance China Automotive achieved the
following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overturning on February&nbsp;11, 2003 an ex parte Court Order dated January&nbsp;22, 2003
which had restrained Brilliance China Automotive from, amongst other things,
registering the transfer of the Sale Shares by the Foundation to Huachen and/or Huachen
to certain directors of Brilliance China Automotive;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>initiating on March&nbsp;10, 2003, a Strikeout Summons at the Supreme Court to have
the Writ and the statement of claim struck out, which proceedings were duly heard
before the Supreme Court, and which resulted on December&nbsp;31, 2003 in that court issuing
a judgment to strike-out the Writ;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>challenging Broadsino&#146;s attempts for appeal to the Court of Appeal of Bermuda,
Civil Appellant jurisdiction which appeal was then dismissed by that court&#146;s judgment
of March&nbsp;14, 2005 which ruled in Brilliance China Automotive&#146;s favor;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>challenging at all stages Broadsino&#146;s further attempts for leave to appeal to
the Privy Council in the United Kingdom with respect to the Court of Appeal&#146;s judgment;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(v)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>being awarded costs in Broadsino&#146;s seeking of a grant of leave on November&nbsp;10,
2005 in the Court of Appeal in Bermuda to withdraw its leave to appeal to the Privy
Council.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors of Brilliance China Automotive do not believe the proceedings with Broadsino
will have any significant impact on the financial position of Brilliance China Automotive and of
the Group.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Yang Rong Employment Proceedings</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On or about October&nbsp;25, 2002, Brilliance China Automotive was served with a claim lodged by
Mr.&nbsp;Yang Rong in the Labour Tribunal in Hong Kong against Brilliance China Automotive for alleged
wrongful repudiation and/or breach of his employment contract. The claim was for approximately
US$4.3&nbsp;million (equivalent to approximately Rmb 35.6&nbsp;million) with respect to loss of salary. In
addition, Mr.&nbsp;Yang claimed unspecified damages in respect of bonuses and share options. The claim
was dismissed by the Labour Tribunal in Hong Kong on January&nbsp;28, 2003. Mr.&nbsp;Yang subsequently
applied for a review of this decision. At the review hearing on July&nbsp;4, 2003, the Labour Tribunal
ordered the case to be transferred to the High Court in Hong Kong. The claim has therefore been
transferred to the High Court and registered as High Court Action No.&nbsp;2701 of 2003. On September
16, 2003, a Statement of Claim was served on Brilliance China Automotive. On November&nbsp;4, 2003,
Brilliance China Automotive filed a Defence and Counterclaim with the High Court. Mr.&nbsp;Yang filed a
Reply to Defence and Defence to Counterclaim on April&nbsp;26, 2004. On July&nbsp;21, 2004, Mr.&nbsp;Yang obtained
leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim. Brilliance
China Automotive filed and served a Reply to Defence to Counterclaim on September&nbsp;4, 2004.
Pleadings closed on September&nbsp;18, 2004. The parties filed and served Lists of Documents on October
26, 2004 and witness statements were exchanged on February&nbsp;28, 2005. The parties applied by consent
to adjourn sine die a checklist hearing fixed for April&nbsp;20, 2005, as the respective parties
anticipated that they would be filing supplemental evidence and amending their pleadings. The Court
approved the application and made an Order on April&nbsp;19, 2005 that the checklist hearing be vacated
and adjourned sine die with liberty to restore. Pursuant to a request made by Mr.&nbsp;Yang on June&nbsp;2,
2005 for further and better particulars of the Defence and Counterclaim, Brilliance China
Automotive filed and served its Answer to Mr.&nbsp;Yang&#146;s request on July&nbsp;4, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;17, 2005, in compliance with its continuing discovery obligations, Brilliance China
Automotive filed and served a Supplemental List of Documents. Subsequently, on September&nbsp;5, 2005,
Mr.&nbsp;Yang also filed and served a Supplemental List of Documents. Further interlocutory steps are in
progress. There have been no other material developments in the litigation. The directors of
Brilliance China Automotive do not believe the action will have any significant impact on the
financial position of Brilliance China Automotive and of the Group. The directors of Brilliance
China Automotive intend to continue vigorously defending the action.
</DIV>


<P align="center" style="font-size: 10pt">66
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All dividends to holders of ADSs are declared and paid in U.S. dollars. Interim dividends may
be paid at the discretion of Brilliance China Automotive&#146;s board of directors based on its
evaluation of the financial condition of Brilliance China Automotive, while final dividends are
subject to the approval of the shareholders at a general meeting. Historically, Brilliance China
Automotive has paid a quarterly dividend at the rate of US$0.02 per share in each quarter,
commencing in the first quarter of 1993. Brilliance China Automotive
began to pay dividends on a semi-annual basis in the second half of 1996. The amount of these dividend payments have been
adjusted on a pro rata basis to reflect Brilliance China Automotive&#146;s 1999 and 2000 bonus share
issuances as well as the increase in earnings per share. No dividends were declared or paid for
2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Section&nbsp;54 of the Companies Act 1981 of Bermuda (as amended), a company shall not
declare or pay a dividend, or make a distribution out of contributed surplus, if there are
reasonable grounds for believing that
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Brilliance China Automotive is, or would after payment be, unable to pay its
liabilities as they become due; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the realizable value of Brilliance China Automotive&#146;s assets would thereby be less
than the aggregate of its liabilities and its issued share capital and share premium
account. As a Bermuda company, Brilliance China Automotive must abide by these criteria
in formulating its dividend policy.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Applicable Chinese laws and regulations require that before a foreign-invested enterprise
distributes profits to investors it must:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>satisfy all tax liabilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide for losses in previous years;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of a Sino-foreign joint venture, also make appropriation, in proportions
determined at the sole discretion of the board of directors of the joint venture, to a
general reserve fund, an enterprise expansion fund and a staff welfare and employee
bonus fund. During the year ended December&nbsp;31, 2005, Shenyang Automotive was not
required to and therefore did not make any additional contributions into these funds.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of profits to investors are required to be in proportion to each party&#146;s
shareholdings in the joint venture; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the case of a wholly foreign owned enterprise, appropriate 10% of profit after
providing for taxes and losses in previous years to a general reserve fund until the
balance of the fund reaches 50% of its share capital. Any further appropriation
thereafter is optional. The appropriation to an enterprise expansion fund and a staff
welfare fund is at the sole discretion of the board of directors of the wholly foreign
owned enterprise. During the year ended December&nbsp;31, 2005, Xing Yuan Dong and Mianyang
Brilliance Ruian made an additional Rmb 9.3&nbsp;million (US$1.2&nbsp;million) to the general
reserve fund, enterprise expansion fund and staff welfare fund.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Significant Changes</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes since December&nbsp;31, 2005, the date of the annual
financial statements in this annual report.
</DIV>


<P align="center" style="font-size: 10pt">67
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 9. THE OFFER AND LISTING</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s ordinary shares are listed on The Stock Exchange of Hong Kong
Limited under the stock code &#147;1114&#148;, and Brilliance China Automotive&#146;s ADSs are listed on the New
York Stock Exchange, Inc. under the symbol &#147;CBA&#148;. The following table sets forth for the periods
indicated the reported high and low sales prices for the ordinary shares and the ADSs on The Stock
Exchange of Hong Kong Limited and the New York Stock Exchange, Inc., respectively:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
<TD width="5%" nowrap>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>

    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>The New York Stock Exchange, Inc.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>The Stock Exchange of Hong Kong Limited</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>(HK$)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>ADSs</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Ordinary Shares</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001: 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002: 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003: 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004: 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005: 1<SUP style="font-size: 85%; vertical-align: text-top">st</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006: January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:47px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:47px; text-indent:-15px">June (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>





<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the best of Brilliance China Automotive&#146;s knowledge, as of June&nbsp;20, 2006, Brilliance China
Automotive had 2,424,556 ADSs outstanding, which were held by 83 registered holders of record in
the United States (including 2,366,366 ADSs held by two nominee holders). One ADS is equivalent to
100 ordinary shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading of Brilliance China Automotive&#146;s shares in Hong Kong was suspended from January&nbsp;24,
2003 through January&nbsp;27, 2003 and trading of Brilliance China Automotive&#146;s ADSs in New York was
also suspended on January&nbsp;24, 2003 to allow Brilliance China Automotive to clarify the impact of
the court order obtained by Broadsino Finance Company Limited against Brilliance China Automotive,
the Executive Directors, the Chinese Financial Education Development Foundation and Huachen
Automotive Group Holdings Company Limited restraining the registration of any sale or transfer of
shares of Brilliance China Automotive.
</DIV>

<P align="center" style="font-size: 10pt">68
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading of Brilliance China Automotive&#146;s shares in Hong Kong was suspended from 2:36 p.m. Hong
Kong time October&nbsp;2, 2003 through October&nbsp;3, 2003 and trading of Brilliance China Automotive&#146;s ADSs
in New York was suspended on October&nbsp;2, 2003 pending the release of an announcement in relation to
the placement of an aggregate of 113,640,000 shares of Brilliance China Automotive by certain
directors of Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading of Brilliance China Automotive&#146;s shares in Hong Kong was suspended on December&nbsp;31,
2003 pending the release of an announcement in relation to the acquisition by Brilliance China
Automotive, through its indirectly owned subsidiaries SJAI and SXID, of the entire equity interests
of SAIAM and SXI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trading of Brilliance China Automotive&#146;s shares in Hong Kong was suspended from 9:37 a.m. Hong
Kong time May&nbsp;8, 2006 through May&nbsp;9, 2006 and trading of Brilliance China Automotive&#146;s ADSs in New
York was suspended on May&nbsp;8, 2006, pending the release of an announcement in relation to the
issuance by Brilliance China Finance Limited (formerly known as Goldcosmos Investments Limited) of
zero coupon guaranteed convertible bonds due 2011 with an aggregate principal amount of
approximately US$183.0&nbsp;million.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 10. ADDITIONAL INFORMATION</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Memorandum of Association and Bye-laws</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Described below is a summary of certain provisions of Brilliance China Automotive&#146;s memorandum
of association and Bye-laws, as currently in effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive was incorporated in Bermuda under the Companies Act as an exempted
company with limited liability on June&nbsp;9, 1992. Its headquarters are located at Suites 1602-05,
Chater House, 8 Connaught Road Central, Hong Kong and it is registered with the Registrar of
Companies in Hong Kong as an overseas company under Part&nbsp;XI of the Companies Ordinance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive&#146;s memorandum of association also sets out its objects, including
acting as a holding and investment company, and its powers, including the powers set out in the
First Schedule of the Companies Act. As an exempted company, Brilliance China Automotive will be
carrying on business outside Bermuda, although it maintains a registered office in Bermuda.
Brilliance China Automotive&#146;s Bye-laws were conditionally adopted on September&nbsp;18, 1999.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Disclosure of interests in contracts with Brilliance China Automotive or its subsidiaries</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A director may not vote or be counted in the quorum on any resolution of the board of
directors concerning his own appointment as the holder of any office or place of profit with
Brilliance China Automotive or any other company in which Brilliance China Automotive is
interested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A director who to his knowledge is in any way, whether directly or indirectly, interested in a
contract or arrangement or proposed contract or arrangement with Brilliance China Automotive must
declare the nature of his interest at the meeting of the board of directors at which the question
of entering into the contract or arrangement is first taken into consideration, if he knows his
interest then exists, or in any other case at the first meeting of the board of directors after he
knows that he is or has become so interested.
</DIV>

<P align="center" style="font-size: 10pt">69
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Save as otherwise provided by the Bye-laws, a director may not vote (nor be counted in the
quorum) on any resolution of the board of directors in respect of any contract, proposal or
arrangement in which he or any of his associates are materially interested, and if he does so his
vote may not be counted (nor shall he be counted in the quorum), but this prohibition will not
apply to any of the following matters:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any contract or arrangement for the giving by Brilliance China Automotive of any
security or indemnity to the director or his associates in respect of money lent by him
or any of his associates or obligations incurred or undertaken by him or his associates
at the request of or for the benefit of Brilliance China Automotive or any of its
subsidiaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any contract or arrangement for the giving by Brilliance China Automotive of any
security to a third party in respect of a debt or obligation of Brilliance China
Automotive, or any of its subsidiaries, for which the director or his associates have
assumed responsibility or guaranteed or secured in whole or in part whether solely or
jointly;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any contract or arrangement concerning an offer of the shares, debentures or other
securities of or by Brilliance China Automotive or any other company which Brilliance
China Automotive may promote or be interested in for subscription or purchase where the
director or his associates are interested as a participant in the underwriting or
sub-underwriting of the offer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any contract or arrangement concerning any other company in which the director or
his associates are interested whether directly or indirectly, as an officer or
executive or shareholder or in which the director or his associates are beneficially
interested in shares of that company, other than a company in which the director
together with any of his associates beneficially own 5% or more of the issued shares of
any class of shares of such company (or of any third company through which his interest
is derived) or of the voting rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any proposal or arrangement concerning the adoption, modification or operation of
any employees&#146; share scheme under which the director or his associates may benefit;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any proposal or arrangement for the benefit of employees of Brilliance China
Automotive or its subsidiaries including the adoption, modification or operation of a
pension fund or retirement, death or disability benefit scheme which relates both to
directors and employees of Brilliance China Automotive or any of its subsidiaries and
does not give the director any privilege not generally accorded to the class of persons
to whom such scheme or fund relates; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any contract or arrangement in which the director or his associates are interested
in the same manner as other holders of shares or debentures or securities of Brilliance
China Automotive by virtue only of their interest in shares or debentures or other
securities of Brilliance China Automotive.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Remuneration</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors are entitled to receive remuneration for their services a sum determined by
Brilliance China Automotive in general meeting, such sum (unless otherwise directed by the
resolution by which it is voted) to be divided amongst the directors in such proportions and in
such manner as the board of directors may agree, or failing agreement, equally, except that in such
event any director holding office for less than the whole of the relevant period in respect of
which the remuneration is paid shall only rank in such division in proportion to the time during
the period for which he has held office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Borrowing powers</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the Companies Act, the board of directors may exercise all the
powers of Brilliance China Automotive to raise or borrow or to secure the payment of any sum or
sums of money for the purposes of Brilliance China Automotive and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof. The board of directors may raise or
secure the payment or repayment of such sum or sums in such manner and upon such terms and
conditions in all respects as it thinks fit and in particular by the issue of debentures, debenture
stock, bonds or other securities of Brilliance China Automotive, whether outright or as collateral
security for any debt, liability or obligation of Brilliance China Automotive or of any third
party.
</DIV>

<P align="center" style="font-size: 10pt">70
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Alterations to constitutional documents</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The memorandum of association of Brilliance China Automotive may, with the consent of the
Minister of Finance of Bermuda, be altered by Brilliance China Automotive in general meeting. The
Bye-laws may be amended by the directors subject to the approval of Brilliance China Automotive in
general meeting. The Bye-laws state that a special resolution is required to alter the memorandum
of association on to approve any amendment of the Bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Variation of rights of existing shares or classes of shares</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at any time the capital is divided into different classes of shares, all or any of the
special rights (unless otherwise provided for by the terms of issue of that class) attached to any
class may, subject to the provisions of the Companies Act, be varied or abrogated either with the
consent in writing of the holders of not less than three-fourths in nominal value of the issued
shares of that class or with the sanction of a special resolution passed at a separate general
meeting of the holders of the shares of that class. To every separate general meeting the
provisions of the Bye-laws relating to general meetings will apply, but so that the necessary
quorum is not less than two persons holding or representing by proxy one-third in nominal value of
the issued shares of the class, and that any holder of shares of the class present in person or by
proxy or by a duly authorized corporate representative may demand a poll.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Special resolutions &#151; majority required</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A special resolution of Brilliance China Automotive must be passed by a majority of not less
than three-fourths of the votes cast of such members as, being entitled so to do, vote in person,
or by a duly authorized corporate representative, or where proxies are allowed, by proxy at a
general meeting of which not less than 21&nbsp;days&#146; notice, specifying the intention to propose the
resolution as a special resolution, has been duly given. However, if it is so agreed by a majority
in number of the members having a right to attend and vote at such meeting, being a majority
together holding not less than 95% in nominal value of the shares giving that right, a resolution
may be proposed and passed as a special resolution at a meeting of which less than 21&nbsp;days&#146; notice
has been given.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Voting rights and right to demand a poll</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to any special rights, privileges or restrictions as to voting attached to any class
or classes of shares, at any general meeting on a show of hands every member who is present in
person or by a duly authorized corporate representative shall have one vote and on a poll, every
member present in person or by a duly authorized corporate representative or by proxy shall have
one vote for every share of which he is the holder which is fully paid up or credited as fully paid
(but so that no amount paid up or credited as paid up on a share in advance of calls or
installments is treated for the foregoing purposes as paid up on the share). On a poll, a member
entitled to more than one vote need not use all his votes or cast all the votes in the same way.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At any general meeting a resolution put to the vote of the meeting shall be decided on a show
of hands unless a poll is required under The Rules governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited or demanded (before or at the declaration of the result of the show
of hands or on the withdrawal of any other demand for a poll):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by the chairman of the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by at least three members present in person, or by a duly authorized corporate
representative, or by proxy for the time being entitled to vote at the meeting;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by any member or members present in person, or by a duly authorized corporate
representative, or by proxy, and representing not less than one-tenth of the total
voting rights of all the members having the right to attend and vote at the meeting; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by any member or members present in person, or by a duly authorized corporate
representative, or by proxy having the right to attend and vote at the meeting, and in
respect of whose shares, sums have been paid up in the aggregate equal to not less than one-tenth of the total sum paid up
on all the shares having that right.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">71
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Requirements for annual general meetings</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An annual general meeting must be held once in every year and within not more than fifteen
months after the last preceding annual general meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notices of annual general meetings</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An annual general meeting and any special general meeting at which it is proposed to pass a
special resolution must be called by at least 21&nbsp;days&#146; notice in writing and any other special
general meeting shall be called by at least 14&nbsp;days&#146; notice in writing (in each case exclusive of
the day on which the notice is served or deemed to be served and of the day for which it is given).
The notice shall specify the place, the day and the hour of meeting and, in the case of special
business, the general nature of that business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Quorum for meetings and separate class meetings</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For all purposes the quorum for a general meeting shall be two members present in person or by
a duly authorized corporate representative or by proxy and entitled to vote. In respect of a
separate class meeting convened to sanction the modification of class rights, the necessary quorum
shall not be less than two persons holding or representing by proxy or by a duly authorized
corporate representative one-third in nominal value of the issued shares of that class and that any
holder of shares of the class present in person by proxy or by a duly authorized corporate
representative may demand a poll.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive in general meeting may declare dividends in any currency but no
dividends may exceed the amount recommended by the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless and to the extent that the rights attached to any shares or its terms of issue
otherwise provide, all dividends will be apportioned and paid pro rata according to the amounts
paid or credited as paid up on the shares during any portion or portions of the period in respect
of which the dividend is paid. No amount paid upon a share in advance of calls will for this
purpose be treated as paid up on the shares. The board of directors may retain any dividends or
other moneys payable on or in respect of a share upon which Brilliance China Automotive has a lien,
and may apply the same in or towards satisfaction of the debts, liabilities or engagements in
respect of which the lien exists. The board of directors may deduct from any dividend or bonus
payable to any member all sums of money, if any, presently payable by him to Brilliance China
Automotive on account of calls, installments or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whenever the board of directors or Brilliance China Automotive in general meeting has resolved
that a dividend be paid or declared, the board of directors may further resolve either:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that such dividend be satisfied wholly or in part in the form of an allotment of
shares credited as fully paid up, on the basis that the shares so allotted shall be of
the same class or classes as the class or classes of shares already held by the
allottee, provided that the members will be entitled to elect to receive such dividend
(or part of it) in cash in lieu of such allotment; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that the members entitled to such dividend will be entitled to elect to receive an
allotment of shares credited as fully paid up in lieu of the whole or such part of the
dividend as the board of directors may think fit, on the basis that the shares so
allotted shall be of the same class or classes as the class or classes of shares
already held by the allottee.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive may also, upon the recommendation of the board of directors, by a
special resolution resolve in respect of any one particular dividend of Brilliance China Automotive
that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up
without offering any right to members to elect to receive a dividend in cash in lieu of an
allotment.
</DIV>

<P align="center" style="font-size: 10pt">72
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whenever the board of directors or Brilliance China Automotive in general meeting has resolved
that a dividend be paid or declared the board of directors may further resolve that such dividend
be satisfied wholly or in part by the distribution of specific assets of any kind.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All dividends or bonuses unclaimed for one year after having been declared may be invested or
otherwise made use of by the board of directors for the benefit of Brilliance China Automotive
until claimed and Brilliance China Automotive may not be constituted a trustee. All dividends or
bonuses unclaimed for six years after having been declared may be forfeited by the board of
directors and must revert to Brilliance China Automotive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Procedures on liquidation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A resolution that Brilliance China Automotive be wound up by the court or be wound up
voluntarily must be a special resolution. If Brilliance China Automotive is wound up, the surplus
assets remaining after payment to all creditors are to be divided among the members in proportion
to the capital paid up on the shares held by them respectively, and if the surplus assets are
insufficient to repay the whole of the paid up capital, they are to be distributed so that, as
nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on
the shares held by them respectively, all subject to the rights of any shares issued on special
terms and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Brilliance China Automotive is wound up (whether the liquidation is voluntary or by the
court) the liquidator may, with the sanction of a special resolution, divide among the members in
specie or kind the whole or any part of the assets of Brilliance China Automotive and whether the
assets consist of property of one kind or consists of properties of different kinds and the
liquidator may, for such purposes, set such value as he deems fair upon any one or more class or
classes of property to be divided and may determine how such division is to be carried out as
between the members or different classes of members and the members within each class. With the
like sanction, the liquidator may vest any part of the assets in trustees upon such trusts for the
benefit of members as the liquidator but so that no member shall be compelled to accept any shares
or other assets upon which there is a liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer of shares</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the Companies Act, all transfers of shares must be effected by transfer in writing
in the usual or common form or in any other form acceptable to the board of directors and may be
under hand or by means of mechanically imprinted signatures or such other manner as the board of
directors may approve. An instrument of transfer must be executed by or on behalf of the transferor
and by or on behalf of the transferee and the transferor, providing that the board may dispense
with the execution of the instrument of transfer by the transferee in any case in which it thinks
fit, in its absolute discretion to do so, shall be deemed to remain the holder of the share until
the name of the transferee is entered in the register of members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may, in its absolute discretion, transfer any share upon the principal
register to any branch register or any share on any branch register to the principal register or
any other branch register.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the board of directors otherwise agrees, no shares on the principal register shall be
transferred to any branch register nor shall shares on any branch register be transferred to the
principal register or another branch register. All transfers and other documents of title must be
lodged for registration and registered, in the case of shares on a branch register, at the relevant
registration office and, in the case of shares on the principal register, at the transfer office in
Bermuda.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may in its absolute discretion and without assigning any reason, refuse
to register any transfer of any shares (not being fully paid shares) to a person of whom it does
not approve, or any share issued under any share option scheme for employees upon which a restraint
on transfer still applies, and it may refuse to register the transfer of any shares (not being
fully paid shares) on which Brilliance China Automotive has a lien. The board of directors may also
refuse to register a transfer of shares (whether fully paid or not) in favor of more than four
persons jointly. If the board of directors refuses to register a transfer, it will within two
months after the date on which the transfer was lodged with Brilliance China Automotive send to the
transferor and transferee notice of the refusal.
</DIV>

<P align="center" style="font-size: 10pt">73
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors may decline to recognize any instrument of transfer unless:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the sum, if any, as the board of directors shall determine to be paid to Brilliance
China Automotive has been paid;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the shares are free of any lien in favor of Brilliance China Automotive;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the instrument of transfer is properly stamped, is in respect of only one class of
share and is lodged at the relevant registration or transfer office accompanied by the
relevant share certificate(s);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>other evidence as the board of directors may reasonably require to show the right of
the transferor to make the transfer has been presented (particularly if the instrument
of transfer is executed by some other person on his behalf); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in some circumstances, the permission of the Bermuda Monetary Authority has been
obtained.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registration of transfers may, on giving notice by advertisement in an appointed newspaper
in Bermuda and in one or more newspapers circulating in Hong Kong, be suspended at times and for
periods as the board of directors may determine and either generally or in respect of any class of
shares. The register of members must not be closed for more than thirty days in any year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recent Amendments to the Bye-laws</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, the Companies Act 1981 of Bermuda (as amended) was amended to permit companies to
offer their shareholders a summary financial report in place of the complete annual report and
accounts. On February&nbsp;17, 2002, The Stock Exchange of Hong Kong Limited announced amendments to the
Rules&nbsp;Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, or the
Listing Rules, which will allow companies to distribute to their shareholders a summary financial
report instead of the longer report. On February&nbsp;5, 2002, The Stock Exchange of Hong Kong Limited
also announced amendments to its Listing Rules that allow companies to distribute corporate
communications to their shareholders via electronic means. As a result of these amendments, the
board of directors of Brilliance China Automotive amended the Bye-laws of Brilliance China
Automotive to permit Brilliance China Automotive to take advantage of these changes to the Listing
Rules by allowing shareholders to choose to receive a summary financial report in place of the
longer, complete annual report and to receive copies of corporate communications by electronic
means or by relying on the versions of those documents published on Brilliance China Automotive&#146;s
website instead of printed copies of such documents. These amendments were approved by the
shareholders of Brilliance China Automotive by way of a special resolution at the special general
meeting held on June&nbsp;28, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual general meeting held on June&nbsp;25, 2004, the shareholders of Brilliance China
Automotive approved amendments to the Bye-laws in order to reflect certain recent amendments to the
Listing Rules, which came into effect on March&nbsp;31, 2004. A brief description of these amendments to
the Bye-laws is as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 1(A): To amend the existing definition of &#147;associates&#148; and &#147;Clearing House&#148;
and to add a new definition for &#147;subsidiaries&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 70: To reflect the requirement of voting by poll in respect of certain
transactions under the Listing Rules</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 76: To provide for circumstances under which shareholders are required to
abstain from voting or restricted to vote for or against any particular resolution as
required by the revised Appendix&nbsp;3 to the Listing Rules</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-laws 98(E), 98(H) and 98(K): To be consistent with the provisions of the revised
Appendix&nbsp;3 to the Listing Rules so that, subject to certain exceptions, a director
shall abstain from voting at the board meeting on any contract or arrangement in which he and/or any of his associates has/have
a material interest nor shall he be counted towards the quorum of the relevant board
meeting</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 103: To be consistent with the revised Appendix&nbsp;3 to the Listing Rules which
stipulates the minimum seven-day period for lodgment by a shareholder of the notice to
nominate a director and the nomination shall commence no earlier than the day after the
despatch of the notice of the general meeting appointed for such election and end no
later than seven days before the date of such general meeting</TD>
</TR>


</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In light of the numerous changes listed above as well as those from prior amendments, the
shareholders adopted at the same annual general meeting a fully restated and consolidated set of
the Bye-laws incorporating all previous amendments thereto passed at the special general meeting
held on June&nbsp;28, 2002 and the amendments approved at the annual general meeting on June&nbsp;25, 2004,
in substitution for the existing Bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the annual general meeting held on June&nbsp;24, 2005, Brilliance China Automotive amended the
Bye-laws in order to reflect certain amendments to the Listing Rules of The Stock Exchange of Hong
Kong Limited, which came into effect on January&nbsp;1, 2005. A brief description of the amendments is
as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 6(A): To reflect the existing authorized share capital of Brilliance China Automotive</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 70: To facilitate the process for demanding a poll at general meetings</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 99: To provide for retirement by rotation of every director at annual
general meetings of Brilliance China Automotive in compliance with code provision A.4.2
of the Code on Corporate Governance Practices issued by The Stock Exchange of Hong Kong
Limited</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bye-law 102 (A)&nbsp;and (B): To specify that any director of Brilliance China Automotive
appointed to fill a casual vacancy shall hold office until the next following general
meeting, instead of the next following annual general meeting</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 12pt"><B>Material Contracts</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following contracts, not being contracts in the ordinary course of business, have been
entered into by Brilliance China Automotive and/or its subsidiaries within the two years preceding
the date of this annual report and are or may be material.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Equity Interest Transfer Agreement dated October&nbsp;19, 2004 between Ms.&nbsp;Chen
Qiuling and Beston Asia Investment Limited in relation to the transfer of Ms.&nbsp;Chen&#146;s
49% interest in Ningbo Yuming Machinery Industrial Co., Ltd. to Beston Asia Investment
Limited;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Service Agreement for Executive Director dated March&nbsp;1, 2006 between Brilliance
China Automotive and Mr.&nbsp;Wu Xiao An;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Service Agreement for Executive Director dated March&nbsp;1, 2006 between Brilliance
China Automotive and Mr.&nbsp;Qi Yumin;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Purchase Agreement, dated May&nbsp;8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trust Deed, dated June&nbsp;7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Exchange Controls</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, whose permission was obtained and is in force for the
issue of the ordinary shares and ADSs of Brilliance China Automotive to persons not resident in
Bermuda for exchange control purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer of shares between persons regarded as residents outside Bermuda for exchange
control purposes and the issue of shares to or by such persons may be effected without specific
consent under the Exchange Control Act 1972 of Bermuda (as amended) and regulations thereunder.
Issues and transfers of shares involving any person regarded as resident in Bermuda for exchange
control purposes require specific prior approval under the Exchange Control Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no limitations on the rights of non-Bermuda owners of Brilliance China Automotive&#146;s
capital stock to hold or vote their shares. Because Brilliance China Automotive has been designated
as a non-resident for Bermuda exchange control purposes, there are no restrictions on its ability
to transfer funds in and out of Bermuda or to pay dividends to United States residents who are
holders of Brilliance China Automotive&#146;s ordinary shares, other than in respect of local Bermuda
currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Bermuda law, share certificates are only issued in the names of
corporations or individuals. In the case of an applicant acting in a special capacity (for example,
as an executor or trustee), certificates may, at the request of the applicant, record the capacity
in which the applicant is acting. Notwithstanding the recording of any such special capacity,
Brilliance China Automotive is not bound to investigate further or incur any responsibility in
respect of the proper administration of any such estate or trust.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive will take no notice of any trust applicable to any of its shares
whether or not it had notice of such trust.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an &#147;exempted company&#148;, Brilliance China Automotive is exempted from Bermuda laws that
restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted
company, Brilliance China Automotive may not participate in certain business transactions,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acquisition or holding of land in Bermuda (except that required for its business
and held by way of lease or tenancy for terms of not more than 50&nbsp;years) without the
express authorization of the Bermuda legislature;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the taking of mortgages on land in Bermuda to secure an amount in excess of
BD$50,000 without the consent of the Minister of Finance of Bermuda;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acquisition of securities secured on any land in Bermuda, other than certain
types of Bermuda government securities; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the carrying on of business of any kind in Bermuda, except in furtherance of the
business of Brilliance China Automotive carried on outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bermuda government actively encourages foreign investment in &#147;exempted&#148; entities such as
Brilliance China Automotive that are based in Bermuda but do not operate in competition with local
business. In addition to having no restrictions on the degree of foreign ownership, Brilliance
China Automotive is subject neither to taxes on its income or dividends nor to any foreign exchange
controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by Brilliance China Automotive, as required, without limitation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government imposes control over its foreign currency reserves in part through
direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on
foreign trade. Effective January&nbsp;1, 1994, the dual foreign exchange system in China was abolished
in accordance with the notice of the People&#146;s Bank of China concerning future reform of the foreign
currency control system issued December&nbsp;1993. The conversion of Renminbi into U.S. dollars in China
currently must be based on the People&#146;s Bank of China rate. The People&#146;s Bank of China rate is set based on the previous day&#146;s Chinese interbank foreign exchange
market rate and with reference to current exchange rates on the world financial markets.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Taxation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Income tax</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive was incorporated under the laws of Bermuda and has received an
undertaking from the Ministry of Finance in Bermuda pursuant to the provisions of the Exempted
Undertakings Tax Protection Act, 1966, which exempts Brilliance China Automotive and its
shareholders, other than shareholders ordinarily residing in Bermuda, from any Bermuda taxes
computed on profit, income or any capital asset gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, at least until year 2016.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No provision for Hong Kong profits tax has been made to Brilliance China Automotive as it has
no estimated assessable profits for the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The subsidiaries are subject to state and local income taxes in the PRC at their respective
tax rates, based on the taxable income reported in their statutory financial statements in
accordance with the relevant state and local income tax laws applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Automotive is subject to state and local income taxes in the PRC at standard rates of
15% and 3% respectively in accordance with enterprise income tax laws applicable to Sino-foreign
equity joint venture enterprises. Shenyang Automotive is exempted from local income tax of 3% as it
was designated as &#147;Technologically-Advanced Enterprise&#148;. As a result, the effective enterprise
income tax rate for Shenyang Automotive was 15% for the years ended 2005, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ningbo Yuming Machinery Industrial Co., Ltd., or Ningbo Yuming and Ningbo Brilliance Ruixing
are subject to state and local income taxes in the PRC at standard rates of 30% and 3% respectively
in accordance with enterprise income tax laws applicable. Pursuant to the relevant income tax laws
in the PRC, the applicable state and local income tax rates were reduced to 15% and 1.5%,
respectively. As a result, the effective enterprise income tax rate for Ningbo Yuming and Ningbo
Brilliance Ruixing was 16.5% for the years ended 2005, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang Xing Yuan Dong Automobile Component Co., Ltd., or Xing Yuan Dong and Brilliance
Dongxing are subject to state and local income taxes in the PRC at standard rates of 30% and 3%
respectively in accordance with enterprise income tax laws applicable. Xing Yuan Dong and
Brilliance Dongxing received official designation by the local tax authority as a &#147;New and
Technologically-Advanced Enterprise&#148; and a foreign-invested enterprise engaged in manufacturing
activities. As a result, the effective enterprise income tax rate for Xing Yuan Dong and Brilliance
Dongxing were 16.5% for the years ended 2005 and 2004, and 7.5% for the year ended 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mianyang Brilliance Ruian is subject to state and local income taxes in the PRC at standard
rates of 30% and 3% respectively in accordance with enterprise income tax laws applicable. During
2001, Mianyang Brilliance Ruian received official designation by the local tax authority as a
foreign-invested enterprise engaged in manufacturing activities. In 2004, Mianyang Brilliance Ruian
was also designated as an &#147;encouraged industries under Catalogue for the Guidance of Foreign
Investment Industries&#148; and located in the Western area of the PRC. As a result, the applicable
state income tax rate for Mianyang Brilliance Ruian is 15% from 2004 to 2010. In addition, Mianyang
Brilliance Ruian is also exempted from state and local enterprise income taxes for two years
starting from the first profitable year in 2001 followed by a 50% reduction of enterprise income
tax for the next three years. Mianyang Brilliance Ruian is also exempted from local enterprise
income tax for the same five-year period. As a result, the effective tax rate for Mianyang
Brilliance Ruian was 7.5% for the years ended 2005 and 2004, and 15% for the year ended 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shenyang ChenFa is subject to state and local income taxes in the PRC at standard rates of 30%
and 3% respectively in accordance with enterprise income tax laws applicable. In current year,
Shenyang ChenFa received official designation by the local tax authority as a foreign-invested
enterprise engaged in manufacturing activities. Pursuant to the relevant income tax laws in the
PRC, Shenyang ChenFa is exempted from state enterprise income tax for two years starting from the
first profitable year in 2004 followed by 50% reduction of state
enterprise income tax for the next three years. In addition, Shenyang ChenFa is also exempted from local enterprise
income tax for the same five-year period. As a result, the effective tax rate for Shenyang ChenFa
was 0% for the years ended 2005 and 2004.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other subsidiaries in China are subject to state and local income taxes within China at
standard rates of 30% and 3%, respectively, based on the taxable income reported in their statutory
financial statements in accordance with the relevant state and local income tax laws applicable to
foreign-invested enterprises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Value Added Tax and Consumption Tax</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the &#147;Provisional Regulations on Value Added Tax in the People&#146;s Republic of China&#148;,
which came into effect on January&nbsp;1, 1994, all subsidiaries are subject to value added tax, which
is the principal indirect tax on the sale of tangible goods. The general value added tax rate
applicable to sales and purchases of minibuses, sedans and automotive components in China is 17%.
Sales of minibuses and sedans are also subject to consumption tax at standard rates ranging from 5%
to 8% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Customs Duties</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;11 &#151; Quantitative and Qualitative Disclosures About Market Risk &#151; Tariff Reductions&#148;
for a discussion of the import tariffs that generally apply to Brilliance China Automotive and its
subsidiaries. Brilliance China Automotive and its subsidiaries paid approximately Rmb 15.2&nbsp;million
as custom duty in 2005.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Documents on Display</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive is subject to the informational requirements of the U.S.
Securities and Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance with the
Exchange Act, Brilliance China Automotive files annual reports on Form 20-F within six months of
its fiscal year end, and submit other reports and information under cover of Form 6-K with the SEC.
You may read and copy this information at the SEC&#146;s public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Recent filings and reports are also available free of charge through
the EDGAR electronic filing system at www.sec.gov. You can also request copies of the documents,
upon payment of a duplicating fee, by writing to the public reference section of the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference
room or accessing documents through EDGAR. As a foreign private issuer, Brilliance China Automotive
is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy
statements to shareholders.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Exchange Rates</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the year ended December&nbsp;31, 2005, approximately 2.1%, 1.3% and 0.5% of Shenyang
Automotive&#146;s costs of sales were denominated in Japanese Yen, U.S. dollars and Euros, respectively.
These costs related primarily to the purchase and importation of equipment and components from
foreign suppliers. Shenyang Automotive pays a Japanese Yen price for the components and spare parts
imported from Toyota through Japanese Yen-denominated letters of credit issued by the Bank of China
and other Chinese banks. Because the Renminbi is not directly convertible into Japanese Yen, these
letters of credit are funded by Shenyang Automotive in U.S. dollars. However, because Shenyang
Automotive&#146;s products are sold in China primarily in Renminbi transactions, its revenues and
profits are predominantly in Renminbi, requiring Shenyang Automotive to convert a portion of its
Renminbi earnings into U.S. dollars and Euros. Accordingly, Shenyang Automotive is exposed to
Renminbi/U.S. dollar exchange rate risk, U.S. dollar/Japanese Yen exchange rate risk and U.S.
dollar/Euro exchange rate risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value of Renminbi to the U.S. dollar increased by approximately 2.5% in 2005 as a result
of the loosening of the peg to the U.S. dollar on July&nbsp;21, 2005. The appreciation of the Renminbi
versus the Japanese Yen, U.S. dollar or Euro has made purchases of foreign-produced components and
payments denominated in foreign currency less expensive for Shenyang Automotive in Renminbi terms,
thereby marginally improving its results of operations. A devaluation of the Renminbi would have
the opposite effect. While there can be no assurance that the exchange rates will continue their current trends or that a devaluation or continued appreciation
of the Renminbi will not occur, Brilliance China Automotive does not believe that such occurrences
would, in any event, have any material adverse effect on Brilliance China Automotive&#146;s earnings.
</DIV>


<P align="center" style="font-size: 10pt">78
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than US$200&nbsp;million zero coupon convertible bonds issued in 2003 and US$183&nbsp;million zero
coupon guaranteed convertible bonds issued in 2006, Brilliance China Automotive and its
subsidiaries currently have no foreign currency-denominated borrowings from third parties, but have
outstanding letters of credit of Yen 193.0&nbsp;million and US$2.9&nbsp;million and Euro 0.6&nbsp;million from
local banks. Brilliance China Automotive also advanced shareholder&#146;s loans to its subsidiaries in
the amounts of approximately HK$266.2&nbsp;million, Rmb 1,708.1&nbsp;million and US$193.3&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since Brilliance China Automotive does not believe that exchange rate fluctuations have any
material effect on the overall financial performance of Brilliance China Automotive, and the amount
of foreign currency that it requires is not significant, Brilliance China Automotive does not enter
into any hedging transactions with respect to its exposure to foreign currency movements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest Rates</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Funds not required by Brilliance China Automotive in the short term are kept as temporary
demand or time deposits in commercial banks. Brilliance China Automotive does not hold any market
risk-sensitive instruments for trading purposes. As of December&nbsp;31, 2005, Brilliance China
Automotive had short-term bank loans outstanding in the amount of Rmb 496.5&nbsp;million. The average
annual rate for discounting notes receivables with banks in 2005 ranged from 3% to 4% per annum,
which rate is fixed separately for each transaction. Brilliance China Automotive did not have any
variable rate loans or commitments outstanding as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended December&nbsp;31, 2005, Brilliance China Automotive&#146;s interest income was Rmb
60.2&nbsp;million (US$7.5&nbsp;million) and its interest expense was Rmb 182.4&nbsp;million (US$22.6&nbsp;million). A
10% change in interest rates would result in a change in interest income of approximately Rmb 6.0
million (US$0.7&nbsp;million) and a change in interest expense of approximately Rmb 18.2&nbsp;million (US$2.3
million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tariff Reductions</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The PRC government imposes restrictions, quotas and tariffs on the import of foreign-made
motor vehicles, as well as motor vehicle components. However, as a result of the PRC&#146;s accession
to the WTO, which regulates trading and tariffs among its signatory states, in November&nbsp;2001, the
PRC has committed to reducing its import restrictions on motor vehicles and motor vehicle
components. In addition, the PRC will be required to conform its import tariffs to the uniform
tariffs under the WTO.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2002, the PRC reduced its import tariffs on motor vehicles and
automotive components from between 80% to 100% and between 18% to 40%, respectively, to between
43.8% to 50.7% and between 14% to 31.4%, respectively. This range was lowered further to between
4.8% and 25% for automotive components in 2003, between 5% and 22.9% in 2004 and between 5% and
18.6% in 2005. In 2006, the import tariffs on automotive components were further reduced to
between 5.0% and 14.3%. In 2004, the average import tariffs on automotive components for the
deluxe minibuses (including Granse minibuses) and Zhonghua sedans were 13.8% and 10.5%,
respectively, and in 2005, the average tariffs became 9.7% and 12.1% for the imported components
for deluxe minibuses and Zhonghua sedans, respectively. In addition, tariffs on vehicles with nine
seats or less and engine sizes of three liters or below fell from 43.9% in 2002 to 38.2% in 2003,
while tariffs on vehicles with more than nine seats and engines of more than three liters
decreased from 50.7% in 2002 to 43.0% in 2003. In 2004, tariffs were 34.2% for vehicles with nine
seats or less and engine sizes of three liters or less and 37.6% for vehicles with more than nine
seats and engines of more than three liters. In 2005, tariffs were fixed at 30% for all motor
vehicles. These tariffs were further reduced to 28% in January&nbsp;2006 and are scheduled for further
reduction to 25% in July&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although lower tariffs and reduced import restrictions may benefit Brilliance China Automotive
in terms of lower cost of imported components, lower tariffs and reduced import restrictions could
also lead to a substantial increase in the number of minibuses, sport utility vehicles, sedans and other motor vehicles
imported into China, thereby significantly increasing competition in Brilliance China Automotive&#146;s
current and proposed markets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described above, Brilliance China Automotive&#146;s management believes that at present
and in its normal course of business, Brilliance China Automotive is not subject to any other
market-related risks.
</DIV>

<P align="center" style="font-size: 10pt">79
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Material Modifications to the Rights of Security Holders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Use of Proceeds</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chief Executive Officer and Chief Financial Officer of Brilliance China Automotive are
responsible for establishing and maintaining disclosure controls and procedures (as defined in the
Exchange Act Rules&nbsp;13a-14(c) and 15d-14(c)). Within 90&nbsp;days prior to the date of this annual
report, the management of Brilliance China Automotive carried out an evaluation, under the
supervision and with the participation of its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of Brilliance China Automotive&#146;s disclosure controls and procedures pursuant
to Exchange Act Rule&nbsp;13a-14. Based on that evaluation, they have concluded that these disclosure
controls and procedures are effective to ensure that material information required to be included
in our periodic SEC reports relating to Brilliance China Automotive is made known to them.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no significant changes in internal controls, or in factors that could
significantly affect internal controls, subsequent to the date the Chief Executive Officer and
Chief Financial Officer completed their evaluation.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16. &#091;RESERVED&#093;</B>
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of Brilliance China Automotive has determined that Brilliance China
Automotive does not have an audit committee financial expert, as defined by the SEC, serving on its
audit committee. Brilliance China Automotive is seeking to appoint a director who would serve as the audit committee
financial expert on the audit committee. However as of the date of this annual report, no suitable
candidate has been identified.
</DIV>
<P align="center" style="font-size: 10pt">80
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16B. CODE OF ETHICS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has not adopted a code of ethics that applies to the principal
executive officer, the principal financial officer and the principal accounting officer or
controller. However, the board of directors of Brilliance China Automotive has adopted or follows
the following written standards for purposes of corporate governance:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Rules&nbsp;Governing the Listing of Securities on The Stock Exchange of Hong Kong,
including the Model Code for Securities Transactions by Directors of Listed Issuers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Non-Statutory Guidelines on Directors&#146; Duties issued by the Hong Kong Companies
Registry in January&nbsp;2004;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Guide for Independent Non-Executive Directors issued by The Hong Kong Institute of
Directors in 2000;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Guidelines for Directors issued by The Hong Kong Institute of Directors in 2005; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Code for Securities Transactions by Employees.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PricewaterhouseCoopers acted as Brilliance China Automotive&#146;s independent auditors for the
fiscal year ended December&nbsp;31, 2003 and Moores Rowland Mazars has acted as Brilliance China
Automotive&#146;s independent auditors for the fiscal years ended December&nbsp;31, 2004 and 2005. The chart
below sets forth the total amount billed to us by PricewaterhouseCoopers and Moores Rowland Mazars.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Fees</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Rmb&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Rmb&#146;000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Rmb&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-related fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,869</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,114</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,728</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit fees are the aggregate fees billed by the auditors for the annual financial statement
audit and other procedures required to be performed by the auditors so as to form an opinion on
Brilliance China Automotive&#146;s annual financial statements. Audit fees also include fees billed in
connection with the issuance of comfort letters.
</DIV>

<P align="center" style="font-size: 10pt">81
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit-Related Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit-related fees are the aggregate fees billed by the auditors in relation to agreed-upon
procedures performed on Brilliance China Automotive&#146;s interim financial statements and internal
control reviews.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tax Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax fees are the aggregate fees billed by the auditors for tax compliance on Hong Kong profits
tax matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other fees are the aggregate fees billed by the auditors in relation to the delivery of a
training session to Brilliance China Automotive on high-level risk and control assessment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval Policies and Procedures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its duties, the Audit Committee considers the appointment of the external auditor
and the audit fee and discusses with the external auditor, before the audit commences, the nature
and scope of the audit. The Audit Committee pre-approves the fees and services provided by the
external auditor through meetings or written resolutions circulated to members of the Audit
Committee.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 17. FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brilliance China Automotive has elected to provide the financial statements and related
information specified in Item&nbsp;18 in lieu of Item&nbsp;17.
</DIV>
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 18. FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See pages F-1 to F-52 following Item&nbsp;19.
</DIV>
<P align="center" style="font-size: 10pt">82
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 19. EXHIBITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following exhibits are furnished along with annual report or are incorporated by reference
as indicated.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amended and Restated Bye-Laws of Brilliance China Automotive, dated June&nbsp;25,
2004.*</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Trust Deed, dated June&nbsp;7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible bonds due 2011
issued by Brilliance China Finance Limited.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>English translation of Equity Interest Transfer Agreement dated October&nbsp;19,
2004 between Ms.&nbsp;Chen Qiuling and Beston Asia Investment Limited in relation to the
transfer of Ms.&nbsp;Chen&#146;s 49% interest in Ningbo Yuming Machinery Industrial Co., Ltd. to
Beston Asia Investment Limited.*</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form of Service Agreement for Executive Director.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.3</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Purchase Agreement, dated May&nbsp;8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">7.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Statement explaining how certain ratios were calculated in the annual report.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">8.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>List of significant subsidiaries, jointly controlled entities and associated
companies of Brilliance China Automotive as of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">12.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;302 Certification of the Chief Executive Officer.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">12.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;302 Certification of the Chief Financial Officer.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">13.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Section&nbsp;906 Certification of the Chief Executive Officer and Chief Financial Officer.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Incorporated by reference from the Registrant&#146;s annual report on Form 20-F
filed with the SEC on June&nbsp;28, 2005.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">83
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><FONT style="white-space: nowrap">BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED</FONT><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Wu Xiao An
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">WU Xiao An&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Chairman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: June&nbsp;26, 2006

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED AND SUBSIDIARIES</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="95%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Page</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm of Moores Rowland Mazars, dated April&nbsp;21, 2006</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers, dated April&nbsp;22, 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Income and Comprehensive Income for the years ended December&nbsp;31, 2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Balance Sheets as of December&nbsp;31, 2005 and 2004</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Consolidated Statements of Changes in Shareholders&#146; Equity for the years ended December&nbsp;31, 2005, 2004 and 2003</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-11</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="300"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Report of Independent Registered Public Accounting Firm of Moores Rowland Mazars, dated April&nbsp;21,
2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>To the Shareholders of<BR>
Brilliance China Automotive Holdings Limited</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Brilliance China Automotive
Holdings Limited (a Bermuda corporation) and its subsidiaries (the &#147;Group&#148;) as of December&nbsp;31, 2005
and 2004, and the related consolidated statements of income and comprehensive income, cash flows
and changes in shareholders&#146; equity for the years ended December&nbsp;31, 2005 and 2004. These financial
statements are the responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the 2005 and 2004 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Brilliance China Automotive Holdings
Limited and its subsidiaries as of December&nbsp;31, 2005 and 2004, and the results of their operations
and their cash flows for the years ended December&nbsp;31, 2005 and 2004, in conformity with U.S.
generally accepted accounting principles.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Moores Rowland Mazars</B><BR>
<B><I>Chartered Accountants<BR>
Certified Public Accountants</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hong Kong, April&nbsp;21, 2006

</DIV>

<P align="center" style="font-size: 10pt">F-2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="301"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers, dated April&nbsp;22,
2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The following report is a copy of a report previously issued by PricewaterhouseCoopers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>To the Shareholders of<BR>
Brilliance China Automotive Holdings Limited</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated statements of income and comprehensive income, cash
flows and changes in shareholders&#146; equity of Brilliance China Automotive Holdings Limited (a
Bermuda corporation) and its subsidiaries (the &#147;Group&#148;) for the year ended December&nbsp;31, 2003. These
financial statements are the responsibility of the Company&#146;s management. Our responsibility is to
express an opinion on these financial statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the 2003 consolidated financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Brilliance China Automotive Holdings
Limited and its subsidiaries for the year ended December&nbsp;31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>PricewaterhouseCoopers</B><BR>
<B><I>Certified Public Accountants</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hong Kong, April&nbsp;22, 2004

</DIV>

<P align="center" style="font-size: 10pt">F-3
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="302"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements of Income and Comprehensive Income</B><BR>
<I>For the years ended December&nbsp;31, 2005, 2004 and 2003</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(except for share and ADS data)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to third parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,859,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,402,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,797,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,312,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,468,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,541,998</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,109,557</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales (include purchase of goods and
subcontracting charges from affiliated companies)
(2005: RMB1,174,732,000, 2004: RMB2,185,428,000,
2003: RMB2,934,331,000)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,011,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,491,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,727,125</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,050,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,382,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,195,336</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,510,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,410,067</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,354</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(167,111</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in earnings of associated companies and jointly
controlled entities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subsidy income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(257,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Loss) income before taxation and minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,195,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,887</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,094,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Provision) benefit for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,140</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">625,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169,205</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value adjustment for securities available-for-sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(698,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic (loss)&nbsp;earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB(0.1830)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB0.0003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">RMB0.2130</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic (loss)&nbsp;earnings per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB(18.30)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">RMB21.30</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted (loss)&nbsp;earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB(0.1830)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB 0.0003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">RMB0.2116</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted (loss)&nbsp;earnings per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB(18.30)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB 0.03</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD colspan="2" align="right">RMB21.16</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,666,539,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ADSs outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,665,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income adjusted for the dilutive effect of
convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">783,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of shares outstanding adjusted
for dilutive effect of stock options and convertible
bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,683,795,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,702,398,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ADSs outstanding adjusted
for dilutive effect of stock options and convertible
bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,837,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,023,983</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated statements of income and
comprehensive income.
</DIV>


<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="303"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Balance Sheets</B><BR>
<I>As of December&nbsp;31, 2005 and 2004</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 0px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,244,499</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,053,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,008,602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pledged short-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,932,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,777,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred expenses &#151; current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620,899</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">645,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">840,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">765,411</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,046,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,577,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474,617</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax recoverable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,285</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other taxes recoverable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,477</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,110,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,428,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,362,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,295,576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">584,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">952,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interests in associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,792,590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,911</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayment for a long-term investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred expenses &#151; non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,273</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term land lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,692,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,776,426</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Balance Sheets (Continued)</B><BR>
<I>As of December&nbsp;31, 2005 and 2004</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="5" style="border-bottom: 0px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,026,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,727,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,162</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">928,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">732,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,478</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses and other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,183</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,391</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,059,834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,187,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,888</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies (Note 21)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,139,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,855,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interests</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,063,226</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock (5,000,000,000 shares of US$0.01
each authorized and 3,668,390,900 shares of
US$0.01 each issued and outstanding as of
December&nbsp;31, 2005 and 2004)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,388</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dedicated capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,352</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,182,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,882,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,139,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,857,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,692,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,776,426</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated balance sheets.
</DIV>


<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="304"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements of Cash Flows</B><BR>
<I>For the years ended December&nbsp;31, 2005, 2004 and 2003</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net (loss)&nbsp;income to net cash provided by
(used in) operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,450</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,514</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of long-term land lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests in net (loss)&nbsp;income of consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(625,998</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(464,991</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,205</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for doubtful debts and write off of bad debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write back of provision for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,459</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,679</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of investment in a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of goodwill in a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write back of provision for inventories sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,638</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Gain) loss on disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(341</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,004</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,098</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred compensation expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government grant recognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(941</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized exchange gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,829</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in earnings of associated companies and jointly controlled
entities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(126,261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(109,471</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accreted redemption premium on convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements of Cash Flows (Continued)</B><BR>
<I>For the years ended December&nbsp;31, 2005, 2004 and 2003</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>(Increase) decrease in operating assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,974</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73,888</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(357,708</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(117,968</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(314,190</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,804</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,157</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,881</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(328,154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(460,040</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,307</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,612</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease (increase)&nbsp;in non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,786</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase (decrease)&nbsp;in operating liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes and accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(333,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(391,075</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,461</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(162,132</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,516</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,431</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer advances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85,206</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(121,962</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses and other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,277</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,474</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Import tariff and taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,871</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">896,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(719,257</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(558,028</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(999,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(955,887</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,301</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in short-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(45,230</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(897,207</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in pledged short-term bank deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">844,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(512,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(914,584</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(Increase) decrease in advances to affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,729</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,061,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in long term investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in other long-term assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,523</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(874</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in other receivables arising from short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease (increase)&nbsp;in interests in associated companies and
jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(702,278</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend received from associated companies and jointly controlled
entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment for acquisition of further interest in a subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayment for a long-term investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(600,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase in other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(300,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds received from disposal of investment in an associated
company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to a joint venture partner of a non-wholly owned subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,156</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(722,401</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,491,315</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements of Cash Flows (Continued)</B><BR>
<I>For the years ended December&nbsp;31, 2005, 2004 and 2003</I>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from short-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">501,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of short-term bank loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,702</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(900,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of bank notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,934,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,405,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,674,563</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repayment of bank notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,106,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,376,454</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,828,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in advances from affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,434</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,383</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing received from a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,450</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88,974</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,634</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid to joint venture partners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(83,987</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(113,284</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from issuance of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,654,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of direct expenses incurred in connection
with the issuance of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,599</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital contributions from joint venture partners</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receipts of government grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash (used in) provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,622,941</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">853,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,281,095</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(401,099</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(587,799</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">543,148</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,244,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,244,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832,298</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated statements of cash flows.
</DIV>



<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="305"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Consolidated Statements of Changes in Shareholders&#146; Equity</B>
</DIV>


<DIV align="left" style="font-size: 10pt"><I>For the years ended December&nbsp;31, 2005, 2004 and 2003</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #ffffff"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Accumulated other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Deferred stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Dedicated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>shares issued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>reserve</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>income</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 8pt" valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">RMB&#146;000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,666,052,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,321,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173,213</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,382,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,005,302</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of
deferred
compensation
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to
dedicated capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capitalization of
dedicated capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,751</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,751</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,985,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,886,307</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to
dedicated capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net realized gain
on marketable
equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58,335</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58,335</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,882,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,857,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer to
dedicated capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,279</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized loss
on marketable
equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,450</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,450</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,325,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,182,559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,139,688</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated statements of changes in
shareholders&#146; equity.
</DIV>

<P align="center" style="font-size: 10pt">F-10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="306"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1. ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Brilliance China Automotive Holdings Limited (the &#147;Company&#148;) was incorporated in Bermuda on June&nbsp;9,
1992 with limited liability. The Company&#146;s ADSs and shares are traded on The New York Stock
Exchange Inc. and The Stock Exchange of Hong Kong Limited (&#147;SEHK&#148;), respectively. The Company is an
investment holding company. The principal activities of the Company&#146;s subsidiaries are the
manufacture and sale of minibuses, sedans and automotive components in the People&#146;s Republic of
China (the &#147;PRC&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Details of the Company&#146;s principal subsidiaries as of December&nbsp;31, 2005 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Percentage of equity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>interest/voting right</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>attributable to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Place of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #ffffff"><B>the Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #ffffff"><B>establishment/incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><B>Directly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff"><B>Indirectly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #ffffff"><B>Principal activities</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent: -10px">Shenyang Brilliance
JinBei Automobile
Co., Ltd.
(&#147;Shenyang
Automotive&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">51</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture,
assembly and sale
of minibuses and
sedans</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Ningbo Yuming
Machinery
Industrial Co.,
Ltd. (&#147;Ningbo
Yuming&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Ningbo, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture and
sale of automotive
components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Shenyang
XingYuanDong
Automobile
Component Co., Ltd.
(&#147;Xing Yuan Dong&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture and
trading of
automotive
components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Ningbo Brilliance
Ruixing Auto
Components Co.,
Ltd. (&#147;Ningbo
Ruixing&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Ningbo, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture and
trading of
automotive
components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Mianyang Brilliance
Ruian Automotive
Components Co.,
Ltd. (&#147;Mianyang
Ruian&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Mianyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture and
trading of
automotive
components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Shenyang Brilliance
Dongxing Automotive
Component Co., Ltd.
(&#147;Dongxing
Automotive&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Manufacture and
trading of
automotive
components and
remodeling
minibuses and
sedans</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Brilliance China
Automotive Finance
Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">British Virgin Islands
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Financing</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Shenyang ChenFa
Automobile
Component Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">100</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Development,
manufacture and
sale of engines
components</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Shenyang XinJinBei
Investment and
Development Co.,
Ltd. (&#147;SXID&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">99</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Investment holding</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:10px; text-indent:-10px">Shenyang JinBei
Automotive Industry
Holdings Co., Ltd.
(&#147;SJAI&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Shenyang, the PRC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">&#151;</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">98.01</TD>
    <TD nowrap valign="bottom">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Investment holding</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Details of the Group&#146;s interests in associated companies and jointly controlled entities are
included in Note 13.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;31, 2005, 2004 and 2003, approximately 27%, 29% and 20% of the
consolidated revenue was generated from sales of goods to Shanghai Shenhua Holdings Co., Ltd.
(&#147;Shanghai Shenhua&#148;), an affiliated company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2. BASIS OF PRESENTATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial statements are prepared in accordance with generally accepted accounting principles
in the United States of America (&#147;U.S. GAAP&#148;). The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. This basis of accounting
differs from that used in the statutory financial statements of the Company&#146;s subsidiaries, which
were prepared in accordance with the relevant accounting principles and financial reporting
regulations applicable to foreign investment enterprises as established by the Ministry of Finance
in the PRC. Certain accounting principles stipulated under U.S. GAAP are not applicable in the PRC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The principal adjustments made to conform the statutory financial statements to U.S. GAAP included
the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reclassification of certain items, designated as &#147;construction-in-progress&#148; in the statutory financial statements, as
property, plant and equipment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reclassification of certain items, designated as &#147;long-term land lease prepayments&#148; from property, plant and equipment in
the statutory financial statements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reclassification of certain items, designated as &#147;reserves appropriated from net income&#148; in the statutory financial
statements, as charges to income;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognition of deferred income taxes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognition of provision for impairment loss of long-lived assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amortization and recognition of provision for impairment loss of intangible assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognition of research and development expenditures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recognition of stock-based compensation.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(a)&nbsp;Basis of consolidation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements of the Group include the financial statements of the Company
and the enterprises that it controls. This control is normally evidenced when the Group has the
power to govern the financial and operating policies of an enterprise so as to benefit from its
activities. The results of subsidiaries acquired or disposed of during the period are consolidated
from or to their effective dates of acquisition or disposal. The equity and net income attributable
to minority shareholders&#146; interests are shown separately in the Group&#146;s balance sheet and income
statement respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2004, the Group adopted Financial Accounting Standards Board (&#147;FASB&#148;) Interpretation No.&nbsp;46
(revised December&nbsp;2003), &#147;Consolidation of Variable Interest Entities, an interpretation of ARB No.
51&#148;
</DIV>

<P align="center" style="font-size: 10pt">F-12
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(&#147;FIN 46R&#148;). FIN 46R addresses the consolidation of an entity whose equity holders either (a)&nbsp;have
not provided sufficient equity at risk to allow the entity to finance its own activities or (b)&nbsp;do
not possess certain characteristics of a controlling financial interest. FIN 46R requires the
consolidation of such an entity, known as a variable interest entity (&#147;VIE&#148;), by the primary
beneficiary of the entity. The primary beneficiary is the entity, if any, that is obligated to
absorb a majority of the risk of loss from the VIE&#146;s activities entitled to receive a majority of
the VIE&#146;s residual returns, or both. FIN 46R excludes from its scope businesses (as defined by FIN
46R) unless certain conditions exist.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with adopting FIN 46R, the Group has identified a supplier to which the Group had
provided a guarantee of approximately RMB300&nbsp;million, which expired in the first quarter of 2005.
The annual purchase from the supplier was approximately RMB92&nbsp;million in 2005. The Group made and
continues to make exhaustive but so far unsuccessful efforts to obtain information necessary to
apply the FIN 46R&#146;s provision as the Group does not have the contractual or legal right to obtain
such information. The Group&#146;s maximum exposure to loss as a result of its involvement with this
supplier is approximately RMB300&nbsp;million, representing the guarantee to the supplier in the event
of its liquidation. Except the above, the adoption of FIN 46R did not have a material impact on the
Group&#146;s financial position or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intragroup balances and transactions, including sales to companies within the Group and resulting
unrealized profits, are eliminated in full. Unrealized losses resulting from intragroup
transactions are eliminated unless the cost cannot be recovered. Consolidated financial statements
are prepared using uniform accounting policies for like transactions and other events in similar
circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(b)&nbsp;Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales represent the invoiced value of goods, net of consumption tax, discounts and returns, and are
recognized when goods are delivered to the customers and the significant risks and rewards of
ownership of the goods have been transferred to customers. Provisions for sales allowances and
rebates are made at the time of sales of goods and are recognized as a reduction of sales. Costs
related to shipping and handling are included in selling, general and administrative expenses for
all periods presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(c)&nbsp;Cash, cash equivalents and short-term bank deposits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash represents cash on hand and deposits with financial institutions which are repayable on
demand. Cash equivalents represent short-term, highly liquid investments which are readily
convertible into known amounts of cash and which are subject to an insignificant risk of changes in
value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Bank deposits with original maturity between three and twelve months are classified as short-term
deposits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(d)&nbsp;Inventories</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories are carried at the lower of cost or market. Cost comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories to their present location and
condition. Cost is calculated on the moving-average basis, except for costs of work-in-progress and
finished goods of sedans and minibuses, which are calculated by the specific identification basis.
The Group provides allowance for excess, slow moving and obsolete inventory by specific
identification and reduces the carrying value of its inventory to the lower of cost or market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When inventories are sold, the carrying amount of those inventories is recognized as an expense in
the period in which the related revenue is recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(e)&nbsp;Property, plant and equipment and long-term land lease prepayments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss.
The cost of an asset comprises its purchase price and any directly attributable costs of bringing
the asset to its working condition and location for its intended use. Expenditure incurred after the assets have
been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to
the income statement in the period in which it is incurred. In situations where it can be clearly
demonstrated that the expenditure has resulted in an increase in the future economic benefits
expected to be obtained from the use of the assets beyond its originally assessed standard of
performance, the expenditure is capitalized as an additional cost of the assets.
</DIV>
<P align="center" style="font-size: 10pt">F-13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation is calculated on a straight-line basis, at annual rates estimated to write off the
cost less estimated residual value of 10% of each asset over its expected useful life. The annual
rates are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment (excluding special tools and moulds)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, fixtures and office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Motor vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The costs of special tools and moulds included in machinery and equipment are amortized over their
estimated productive volume.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When property, plant and equipment are sold or retired, their cost and accumulated depreciation are
eliminated from the accounts and any gain or loss resulting from their disposal is included in the
income statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Construction-in-progress consists of factories and office buildings under construction and
machinery pending installation and includes the costs of construction, machinery and equipment, and
any interest charges arising from borrowings used to finance these assets during the period of
construction or installation. No provision for depreciation is made on construction-in-progress
until such time as the relevant assets are completed and ready for their intended use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term land lease prepayments is amortized on a straight-line basis over the term of lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(f)&nbsp;Intangible assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Purchased intangible assets with finite lives are amortized using the straight-line method over the
estimated economic lives of the assets of 7&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(g)&nbsp;Impairment of long-lived assets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets, such as property, plant and equipment and purchased intangible assets with
finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable from its undiscounted future cash flow. If
such assets are considered to be impaired, the impairment to be recognized is measured as the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(h)&nbsp;Goodwill</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Goodwill represents the excess of the purchase price over the fair value of the net assets
resulting from the Company&#146;s acquisitions of interests in its subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets,&#148; which was effective for the Group for year 2002, prohibits the amortization of goodwill
and purchased intangible assets with indefinite useful lives. The Group reviews goodwill for
impairment annually at the year end and whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable in accordance with SFAS No.&nbsp;142.
</DIV>

<P align="center" style="font-size: 10pt">F-14
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group performs a two-step impairment test. In the first step, the Group compares the fair value
of each reporting unit to its carrying value. The Group determines the fair value of its reporting
units based on the present value of estimated future cash flows. If the fair value of the reporting
unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired
and no further testing is performed. If the carrying value of the net assets assigned to the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second
step impairment test in order to determine the implied fair value of the reporting unit&#146;s goodwill.
If the carrying value of a reporting unit&#146;s goodwill exceeds its implied fair value, the Group
records an impairment loss equal to the difference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(i)&nbsp;Investments in associated companies and jointly controlled entities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An associated company is a company in which the Group has significant influence, but not control or
joint control, and thereby has the ability to participate in the investees&#146; financial and operating
policy decisions. A jointly controlled entity is a company in which the Group has joint control
with the other joint venture partners. Investments in associated companies and jointly controlled
entities are accounted for using the equity method (&#147;equity method investment&#148;). Goodwill arising
on the acquisition of interests in associated companies and jointly controlled entities (&#147;equity
method goodwill&#148;) is included in the carrying cost of the investment. The Group considers whether
the fair values of any of its equity method investments have declined below their carrying value
whenever adverse events or changes in circumstances indicate that recorded values may not be
recoverable. In assessing the recoverability of equity method investments (including equity method
goodwill), the Group uses discounted cash flow models. If the fair value of the equity investee is
determined to be lower than carrying value, an impairment is recognized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(j)&nbsp;Investment securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s investment securities consist of marketable available-for-sale securities and
investments in unlisted equity securities. Securities classified as available-for-sale under,
&#147;Accounting for Certain Investments in Debt and Equity Securities,&#148; SFAS No.&nbsp;115 are carried at
fair value, with unrealized gains and losses, net of income taxes, recorded in the accumulated
other comprehensive income (loss), a separate component of statement of changes in shareholders&#146;
equity, until realized. The fair values of individual investments in marketable securities are
determined based on market quotations. Gains or losses on securities sold are based on the specific
identification method. Equity securities that are restricted for more than one year or not publicly
traded are recorded at cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group periodically reviews to assess whether its investments in non-marketable equity
securities and available-for-sale securities are impaired and if any impairment is other than
temporary. Factors considered by us in assessing whether an impairment is other than temporary
include the credit quality of the investment, the duration of the impairment, our ability and
intent to hold the investment until recovery and overall economic conditions. A decline in value of
these securities below cost that is deemed to be other than temporary results in an impairment
charge to earnings that reduces the carrying amount of the securities to fair value establishing a
new cost basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(k)&nbsp;Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Income Tax</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company was incorporated under the laws of Bermuda and has received an undertaking from the
Ministry of Finance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax
Protection Act, 1966, which exempts the Company and its shareholders, other than shareholders
ordinarily residing in Bermuda, from any Bermuda taxes computed on profit, income or any capital
asset gain or appreciation, or any tax in the nature of estate duty or inheritance tax, at least
until year 2016.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No provision for Hong Kong profits tax has been made to the Company as the Company has no estimated
assessable profit for the year.
</DIV>

<P align="center" style="font-size: 10pt">F-15
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The subsidiaries are subject to state and local income taxes in the PRC at their respective tax
rates, based on the taxable income reported in their statutory financial statements in accordance
with the relevant state and local income tax laws applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shenyang Automotive is subject to state and local income taxes in the PRC at standard rates of 15%
and 3%, respectively, in accordance with enterprise income tax laws applicable to Sino-foreign
equity joint venture enterprises. Shenyang Automotive is exempted from local income tax of 3% as it
was designated as a &#147;Technologically-Advanced Enterprise&#148;. As a result, the effective enterprise
income tax rate for Shenyang Automotive was 15% for the years ended December&nbsp;31, 2005, 2004 and
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ningbo Yuming and Ningbo Ruixing are subject to state and local income taxes in the PRC at standard
rates of 30% and 3%, respectively, in accordance with enterprise income tax laws applicable.
Pursuant to the relevant income tax laws in the PRC, the applicable state and local income tax
rates were reduced to 15% and 1.5%, respectively. As a result, the effective enterprise income tax
rate for Ningbo Yuming and Ningbo Ruixing was 16.5% for the years ended December&nbsp;31, 2005, 2004 and
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Xing Yuan Dong and Dongxing Automotive are subject to state and local income taxes in the PRC at
standard rates of 30% and 3%, respectively, in accordance with enterprise income tax laws
applicable. Xing Yuan Dong and Dongxing Automotive received official designation by the local tax
authority as a &#147;New and Technologically-Advanced Enterprise&#148; and a foreign-invested enterprise
engaged in manufacturing activities. As a result, the effective enterprise income tax rates for
Xing Yuan Dong and Dongxing Automotive were 16.5%, 16.5% and 7.5% for the years ended December&nbsp;31,
2005, 2004 and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mianyang Ruian is subject to state and local income taxes in the PRC at standard rates of 30% and
3%, respectively, in accordance with enterprise income tax laws applicable. During 2001, Mianyang
Ruian received official designation by the local tax authority as a foreign-invested enterprise
engaged in manufacturing activities. In 2004, Mianyang Ruian was also designated as an &#147;encouraged
industries under Catalogue for the Guidance of Foreign Investment Industries&#148; and located in the
Western area of the PRC. As a result, the applicable state income tax rate for Mianyang Ruian is
15% from 2004 to 2010. In addition, Mianyang Ruian is also exempted from state and local enterprise
income taxes for two years starting from the first profitable year in 2001 followed by a 50%
reduction of enterprise income tax for the next three years. Mianyang Ruian is also exempted from
local enterprise income tax for the same five-year period. As a result, the effective tax rate for
Mianyang Ruian was 7.5%, 7.5% and 15% for the years ended December&nbsp;31, 2005, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shenyang ChenFa is subject to state and local income taxes in the PRC at standard rates of 30% and
3%, respectively, in accordance with enterprise income tax laws applicable. In the current year,
Shenyang ChenFa received official designation by the local tax authority as a foreign-invested
enterprise engaged in manufacturing activities and is confirmed by the local tax authority that it
is exempted from state enterprise income tax for the two years starting from the first profitable
year in 2004 followed by a 50% reduction of state enterprise income tax for the next three years.
In addition, Shenyang ChenFa is also exempted from local enterprise income tax for the same
five-year period. As a result, the effective tax rate for Shenyang ChenFa was 0% for the years
ended December&nbsp;31, 2005 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other principal subsidiaries operating in the PRC are subject to state and local income taxes in
the PRC at standard rates of 30% and 3%, respectively, based on the respective taxable income
reported in their statutory financial statements in accordance with the relevant state and local
income tax laws applicable to foreign-invested enterprises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Value Added Tax (&#147;VAT&#148;) and Consumption Tax</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The general VAT rate applicable to sales and purchases of minibuses, sedans and automotive
components in the PRC is 17%.
</DIV>

<P align="center" style="font-size: 10pt">F-16
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sale of minibuses and sedans is also subject to consumption tax at standard rates of 5% to 8%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(l)&nbsp;Deferred taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income taxes are provided using the liability method in which deferred income taxes are
recognized for temporary differences between the tax and financial statement bases of assets and
liabilities. The tax consequences of those differences expected to occur in subsequent years are
recorded as assets and liabilities on the balance sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of, the deferred tax assets will not be realized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(m)&nbsp;Foreign currency translation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The functional currency of the Company and its subsidiaries is RMB. Transactions denominated in
foreign currencies are translated into RMB at exchange rates prevailing at the date of
transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated
into RMB at exchange rates prevailing at the balance sheet dates. The resulting exchange
differences are included in the determination of income. Non-monetary assets and liabilities
denominated in foreign currencies are translated into RMB using the applicable exchange rates
prevailing at the time of transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Foreign currency translation adjustments in other comprehensive income arose from the Company&#146;s
change in functional currency in previous years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(n)&nbsp;Warranty</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A provision is recognized when an enterprise has a present obligation (legal or constructive) as a
result of a past event and it is probable (i.e. more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate can
be made of the amount of the obligations. Provisions are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. Where the effect of the time value of money is
material, the amount of a provision is the present value of the expenditures expected to be
required to settle the obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Shenyang Automotive&#146;s minibuses are sold with a 24-month or 50,000 kilometers (2004 and 2003: same)
first-to-occur limited warranty. The &#147;Zhonghua&#148; sedans are sold with a 36-month or 60,000
kilometers (2004 and 2003: same) first-to-occur limited warranty. &#147;Zunchi&#148; sedans are sold with a
10-year or 200,000 kilometers (2004 and 2003: N/A) first-to-occur limited warranty. During the
warranty period, Shenyang Automotive pays service stations for parts and labor covered by the
warranty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The costs of the warranty obligation are accrued at the time the sales are recognized, based on the
estimated costs of fulfilling the total obligations, including handling and transportation costs.
The factors used to estimate warranty expenses are reevaluated periodically in light of actual
experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconciliation of the changes in the warranty obligation is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual for warranties issued during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Settlement made during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,994</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,673</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,058</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-17
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(o)&nbsp;Advertising expenses</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Advertising expenses are expended as incurred. For the years ended December&nbsp;31, 2005, 2004 and
2003, advertising expenses of approximately RMB177.0&nbsp;million, RMB206.9&nbsp;million and RMB201.1
million, respectively, have been charged to selling, general and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(p)&nbsp;Research and development expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and development expenses are expended as incurred. For the years ended December&nbsp;31, 2005,
2004 and 2003, research and development expenses of approximately RMB235.2&nbsp;million, RMB479.9
million and RMB191.4&nbsp;million, respectively, have been charged to selling, general and
administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(q)&nbsp;Operating leases</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Leases where substantially all the rewards and risks of ownership remain with the lessor are
accounted for as operating leases. Payment made under operating leases net of any incentives
received from the lessor are charged to the income statement on a straight-line basis over the
period of the relevant leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assets leased out under operating leases are included in property, plant and equipment in the
balance sheet. They are depreciated over the expected useful lives on a basis consistent with
similar owned fixed assets. Rental income (net of any incentives given to lessees) is recognized on
a straight-line basis over the lease terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(r)&nbsp;Stock based compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board (&#147;APB&#148;) Opinion No.&nbsp;25 &#147;Accounting for Stock Issued to
Employee&#148;, which states that compensation expense related to employee stock options is recorded if,
on the date of grant, the quoted market value of the underlying stock exceeds the exercise price.
The Company adopted the disclosure-only requirements of SFAS No.&nbsp;123 &#147;Accounting for Stock-Based
Compensation&#148; and the related amendments under the provisions of SFAS No.&nbsp;148 &#147;Accounting for
Stock-Based Compensation, Transition and Disclosure&#148; which allows entities to continue to apply the
provisions of APB Opinion No.&nbsp;25 and provide pro-forma net income or loss and pro-forma earnings or
loss per share disclosures for employee stock grants as if the fair-value-based method of
accounting as prescribed in SFAS No.&nbsp;123 and SFAS No.&nbsp;148 was adopted. No stock options have been
granted by the Company under the Plan during the year 2005 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Had compensation cost for the Company&#146;s stock options granted been determined based on the fair
value of the stock options at the grant date, consistent with the provisions of SFAS No.&nbsp;123 and
SFAS No.&nbsp;148, the Company&#146;s net income and earnings per share for the year ended December&nbsp;31, 2003
would have been adjusted to the pro-forma amounts indicated below:
</DIV>

<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Year ended December 31, 2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Adjustments for APB Opinion No.&nbsp;25</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Fair value of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(210,711</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">743,344</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per ADS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per ADS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2015</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(s) (Loss) earnings per share and (loss)&nbsp;earnings per ADS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The calculation of basic (loss)&nbsp;earnings per share is based on the net (loss)&nbsp;income for the year
and the weighted average number of shares of common stock outstanding during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The calculation of diluted (loss)&nbsp;earnings per share is based on the net (loss)&nbsp;income for the year
and the weighted average number of shares of common stock and adjusted for the effects of all
dilutive potential shares of common stock outstanding during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the net (loss)&nbsp;income used in calculation of basic and diluted (loss)&nbsp;earnings
per share/ADS is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income during the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">780,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: accreted redemption premium related to the convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (loss)&nbsp;income during the year adjusted for accreted
redemption premium related to the convertible bonds and
amortization of deferred expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">783,515</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the weighted average number of shares of common stock used in calculation of
basic and diluted (loss)&nbsp;earnings per share is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of shares
of common stock used in calculation
of basic (loss)&nbsp;earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,666,539,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,405,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,338,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,519,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of shares
of common stock adjusted for
dilutive effect of stock options
and convertible bonds used in
calculation of diluted (loss)
earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,390,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,683,795,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,702,398,310</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As the Company was in loss position for 2005, 336,956,522 and 6,258,959 potentially dilutive stocks
for the year ended December&nbsp;31, 2005 from conversion of the convertible bonds and outstanding share
options respectively, were excluded from the calculation of diluted loss per share because to do so
would be anti-dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The diluted earnings per share/ADS calculation for the year ended December&nbsp;31, 2004 is based on
weighted average number of common stocks/ADSs outstanding plus the weighted average number of
shares/ADSs deemed to be issued as if all outstanding share options granted had been exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended December&nbsp;2004, 336,956,522 potentially dilutive stocks from conversion of the
convertible bonds were not included in the computation of diluted earnings per share because the
effect would have been anti-dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The diluted earnings per share/ADS calculation for the year ended December&nbsp;31, 2003 includes the
impact of shares that would result from the conversion of convertible bonds. In addition, the
related accreted redemption premium on convertible bonds is added back to net income, since these
would not be paid if the bonds were converted to shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The calculation of (loss)&nbsp;earnings per ADS is based on the weighted average number of ADSs
outstanding during the years presented. The weighted average number of ADS outstanding is
calculated based on the assumption that all of the outstanding ordinary shares were held in the
form of ADSs (at the ratio of 100 shares for each ADS).
</DIV>

<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the weighted average number of ADSs for calculation of basic and diluted (loss)
earnings per ADS is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ADSs
used in calculation of basic (loss)
earnings per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,665,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of ADSs
adjusted for dilutive effect of
stock options and convertible bonds
used in calculation of diluted
(loss)&nbsp;earnings per ADS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,683,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,837,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,023,983</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(t)&nbsp;Segmental information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Segmental information is presented in accordance with SFAS No.&nbsp;131 &#147;Disclosures about Segments of
an Enterprise and Related Information&#148; which establishes standards for reporting information about
operating segments on a basis consistent with the Company&#146;s internal organization structure as well
as information about geographic areas and major customers. Disclosure of segmental information in
accordance with SFAS No.&nbsp;131 is made in Note 30.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(u)&nbsp;Comprehensive income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;130 &#147;Reporting Comprehensive Income&#148; requires the components of comprehensive income to be
disclosed in the financial statements. Comprehensive income consists of net income, the net
unrealized gains or losses on available-for-sale marketable securities, foreign currency
translation adjustments, minimum pension liability adjustments and unrealized gains and losses on
financial instruments qualifying for hedge accounting. For the Group, such items consist primarily
of unrealized gains and losses on marketable equity investments and foreign currency translation
adjustments. The Group has disclosed comprehensive income, which encompasses net (loss)&nbsp;income in
the statement of income and comprehensive income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was no other comprehensive income or loss for the year ended December&nbsp;31, 2003 other than net
income for the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(v)&nbsp;Convertible bonds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Convertible bonds were issued at par and are stated in the balance sheet at face value plus
accreted redemption premium which was calculated based on the outstanding principal of the
convertible bonds using effective interest method so that the carrying value of the bonds equal the
redemption price at 102.27% on November&nbsp;28, 2006. Direct expenses in connection with the issuance
of convertible bonds are capitalized as deferred expenses on the balance sheet and are amortized
over the life of the convertible bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(w)&nbsp;Guarantees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Guarantee issued by the Group are initially recognized on the balance sheet as a liability at the
fair value, or market value, of the obligations the Group assumed under that guarantee in
accordance with FASB FIN 45, &#147;Guarantor&#146;s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others&#148;. FIN 45 is applicable on a prospective
basis to guarantees issued or modified after December&nbsp;31, 2002. FIN 45 also contains disclosure
provisions surrounding existing guarantees, which are effective for financial statements with
periods ended after December&nbsp;15, 2002. As of December&nbsp;31,
2005 and 2004, the fair values of the guarantees the Group have entered into since December&nbsp;31, 2002 are
not material to the Group&#146;s financial position. Please refer to Notes 3(n) and 21(c) for details.
</DIV>


<P align="center" style="font-size: 10pt">F-21
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(x)&nbsp;Allowance for doubtful accounts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts receivable are stated at the amount billed to customers. The Group recognizes allowance
for doubtful accounts to ensure trade and other receivables are not overstated due to
uncollectibility. The Group&#146;s estimate is based on a variety of factors, including historical
collection experience, existing economic conditions and a review of the current status of the
receivable. Accounts past due more than the Group&#146;s general credit period are considered
delinquent. Delinquent receivables are written off based on individual credit evaluation and
specific circumstances of the customer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(y)&nbsp;Fair value of financial instruments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The estimated fair values for financial instruments under SFAS No.&nbsp;107, &#147;Disclosures about Fair
Value of Financial Instruments&#148;, are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of the Group&#146;s financial instruments, which include cash, accounts
receivable, intercompany receivables and payables and other payables, approximate their carrying
values in the financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(z)&nbsp;Other new accounting pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2006, the FASB issued SFAS No.&nbsp;156, &#147;Accounting for Servicing of Financial Assets &#151; An
Amendment of FASB Statement No.&nbsp;140&#148; (&#147;SFAS&#148;) No.&nbsp;156. SFAS No.&nbsp;156 requires that all separately
recognized servicing assets and servicing liabilities be initially measured at fair value, if
practicable. The statement permits, but does not require, the subsequent measurement of servicing
assets and servicing liabilities at fair value. SFAS No.&nbsp;156 is effective as of the beginning of an
entity&#146;s first fiscal year that begins after September&nbsp;15, 2006, which for the Group will be as of
the beginning of fiscal 2007. The Company does not believe that the adoption of SFAS No.&nbsp;156 will
have a significant effect on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155, &#147;Accounting for Certain Hybrid Financial
Instruments.&#148; SFAS No.&nbsp;155 permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require bifurcation. As of March&nbsp;2, 2006,
the Company did not have any hybrid financial instruments subject to the fair value election under
SFAS No.&nbsp;155. The Group is required to adopt SFAS No.&nbsp;155 effective at the beginning of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In November&nbsp;2005, the FASB issued Staff Position (FSP)&nbsp;FAS115-1 and FAS 124-1, which nullifies
certain provisions of EITF Issue 03-1, &#147;The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments&#148;, and completely supersedes EITF Topic D-44, &#147;Recognition of
Other Than Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value&#148;,
addresses (1)&nbsp;determining when an investment should be considered impaired, (2)&nbsp;determining whether
an impairment should be deemed other than temporary, and (3)&nbsp;measuring impairment loss. Combined
FSP Nos. FAS 115-1 and FAS 124-1 were applied as discussed in Notes 3(j) and 14 to the Group&#146;s
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154, &#147;Accounting Changes and Error Corrections.&#148; SFAS No.&nbsp;154
changes the requirements for the accounting for and reporting of a change in accounting principle.
The Group is required to adopt SFAS No.&nbsp;154 for accounting changes and error corrections that occur
after the beginning of 2007. The Group&#146;s results of operations and financial condition will only be
impacted following the adoption of SFAS No.&nbsp;154 if it implements changes in accounting principle
that are addressed by the standard or corrects accounting errors in future periods.
</DIV>


<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123 (Revised 2004), &#147;Share Based Payment&#148; (SFAS 123(R)).
SFAS 123(R) is a revision of SFAS No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation,&#148; which supersedes Accounting Principles Board (APB)&nbsp;No.&nbsp;25, &#147;Accounting for Stock Issued to Employees,&#148;
and amends SFAS No.&nbsp;95, &#147;Statement of Cash Flows.&#148; SFAS 123(R) requires companies to recognize
compensation expense in the income statement for an amount equal to the fair value of the
share-based payment issued. This applies to all transactions involving the issuance of equity by a
company in exchange for goods and services, including employees. In March&nbsp;2005, the SEC issued
Staff Accounting Bulletin No.&nbsp;107 (SAB 107) outlining the SEC Staff&#146;s interpretation of SFAS
123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and
certain SEC rules and regulations and provides interpretations of the valuation of share-based
payments for public companies. Subsequently in August, October and November&nbsp;2005, the FASB released
FSP 123(R)-1, &#147;Classification and Measurement of Freestanding Financial Instruments Originally
Issued in Exchange for Employee Services under FASB Statement No.&nbsp;123(R),&#148; FSP123(R)-2, &#147;Practical
Accommodation to the Application of Grant Date as Defined in FASB Statement No.&nbsp;123(R)&#148; and FSP
123(R)-3, &#147;Transition Election Related to Accounting for the Tax Effects of Share-Based Payment
Awards.&#148; Additionally, on February&nbsp;1, 2006, the FASB issued FSP 123(R)-4, &#147;Classification of
Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon
the Occurrence of a Contingent Event.&#148; The FSPs clarify certain accounting provisions set forth in
SFAS 123(R). The requirements and guidance prescribed in SFAS 123(R), SAB 107 and the FSPs is
effective in 2006. The Group considers that the adoption of SFAS 123R will not have significant
impact on its financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4. SUBSIDY INCOME</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;2005 and 2004, the Company&#146;s subsidiaries were granted government
subsidies of RMB3,139,000 and RMB1,815,000 respectively. For the year ended December&nbsp;31, 2003, the
Company was granted subsidies in the form of &#147;tax refunds on re-investments&#148; amounting to
approximately RMB48,497,000 in relation to the Company&#146;s re-investment of the dividends declared by
certain subsidiaries of the Company to those subsidiaries as additional capital contributions by
foreign investors. Such subsidies were approved by the relevant local tax bureaus in accordance
with the relevant income tax laws in the PRC. All of the approved subsidies were received by the
Group during the year and were recorded as income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. INCOME TAXES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;31, 2005, 2004 and 2003, certain of the Company&#146;s subsidiaries were
subject to income taxes in the PRC at the applicable statutory tax rates on allowable losses or
taxable income as reported in the statutory financial statements adjusted for the reduced tax rates
and exemptions described in Note 3(k).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amount of (provision)&nbsp;benefit for income taxes in the consolidated income statement represents:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145,654</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred taxation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(114,005</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,514</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,140</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconciliation of the Group&#146;s effective income tax rate, based on (loss)&nbsp;income before taxes
and minority interests, to its statutory income tax rate for years ended December&nbsp;31, 2005, 2004
and 2003 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">%</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average statutory tax rate (including state and local income tax)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of statutory tax holiday</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12.66</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of non-deductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.62</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of valuation allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22.93</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.11</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others, not individually significant</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective tax rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8.52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.17</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The average statutory tax rates for the relevant periods represented the weighted average tax rates
of the Company&#146;s subsidiaries calculated on the basis of the relative amount of (loss)&nbsp;income
before taxes and the applicable statutory tax rate of each subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Components of deferred tax assets were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax asset:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provisions and accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairment of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization and provision for impairment of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,942</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax losses carry forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,469</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance (Note)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(399,930</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(102,464</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,005</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Note: </I>At December&nbsp;31, 2005, valuation allowances of approximately RMB185.9&nbsp;million (2004: RMB61.5
million) and RMB214&nbsp;million (2004: RMB41&nbsp;million) were made for deferred tax assets recognized in
respect of the unused tax losses and deductible temporary differences because it is more likely
than not that the tax benefit will be not be realized in the foreseeable future. The net change in
valuation allowances for the year ended December&nbsp;31, 2005 of approximately RMB297.4&nbsp;million (2004:
RMB79.4&nbsp;million) represented valuation allowances provision of approximately RMB114&nbsp;million (2004:
Nil) made for deferred tax assets previously recognized with reference to a forecast of taxable
profits of a subsidiary for next five years and the increase in deferred tax assets of
approximately RMB183.4&nbsp;million (2004: RMB79.4&nbsp;million). The temporary differences do not expire
under current legislation but the unrecognized tax losses of RMB565.9&nbsp;million (2004: RMB409.7
million) and RMB673.2&nbsp;million (2004: Nil) will expire in 2009 and 2010, respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PLEDGED SHORT-TERM BANK DEPOSITS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005 and 2004, approximately RMB1,932.6&nbsp;million and RMB2,777.2&nbsp;million,
respectively, of the short-term bank deposits were pledged as security for banking facilities,
corporate guarantees for bank loans drawn by affiliated companies and bank guaranteed notes issued
(Notes 19 and 21).
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>ACCOUNTS RECEIVABLE, NET</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts receivable consist of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,367</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,718</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,632</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Movements of allowance for doubtful debts during the years ended December&nbsp;31, 2005 and 2004 were:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-back of provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(528</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Written off against accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(80</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,718</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES RECEIVABLE</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notes receivable are primarily notes received from customers for the settlement of trade receivable
balances. As of December&nbsp;31, 2005 and 2004, all notes receivable were guaranteed by established
banks in the PRC and have maturities of six months or less. The fair value of the notes receivable
approximated their carrying value. Approximately RMB238&nbsp;million (2004: RMB614&nbsp;million) of the notes
receivable both from third parties and affiliated companies were pledged for the issuance of notes
payable (Note 19).
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>OTHER RECEIVABLES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Included in other receivables as of December&nbsp;31, 2005 and 2004 was an amount of RMB300&nbsp;million
advanced to Shenyang Automobile Industry Asset Management Company Limited (&#147;SAIAM&#148;) which will
become a subsidiary of the Group after the completion of the proposed acquisition of SAIAM as
detailed in Note 16.
</DIV>


<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INVENTORIES, NET</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventories consist of:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">888,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work-in-progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,362</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">591,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,046,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,577,048</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PROPERTY, PLANT AND EQUIPMENT AND LONG-TERM LAND LEASE PREPAYMENTS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property, plant and equipment consist of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,260,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,126,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machineries and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,136,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,450,089</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Motor vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture, fixtures and office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390,197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction-in-progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">454,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">789,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,350,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,857,219</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated provision for impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(95,868</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,949</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,254,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,809,270</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,891,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,513,694</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net book value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,362,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,295,576</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>During the years ended December&nbsp;31, 2005, 2004 and 2003, capitalized interest expenses
amounted to approximately RMB23.9&nbsp;million, RMB18.4&nbsp;million and RMB Nil, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Buildings amounting to approximately RMB41,022,000 and long-term land lease prepayments
amounting to approximately RMB64,405,000 were injected by Shenyang JinBei Automotive Company
Limited (&#147;JinBei&#148;), the joint venture partner of Shenyang Automotive, as part of its
additional capital contributions to Shenyang Automotive during the year ended December&nbsp;31,
2003 (see Note 28).</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2003, Shenyang Automotive disposed of certain machineries and equipment at their
net book value to the Group&#146;s jointly controlled entity, BMW Brilliance Automotive Ltd (&#147;BMW
Brilliance&#148;), at a consideration mutually agreed by both parties. The agreement of sale
includes an option for BMW Brilliance to require Shenyang Automotive to purchase back such
machineries and equipment at the purchase price less depreciation over a specified period upon the occurrence
of certain events, including the passing of a valid resolution pursuant to the joint venture
contract by the board of directors of BMW Brilliance. These machineries and equipment are
maintained and operated by BMW Brilliance for the manufacturing of its products. BMW
Brilliance will provide certain services to Shenyang Automotive upon the payment of a service
fee which is determined based on the number of Zhonghua sedans produced by Shenyang Automotive
using these machineries and equipment at a predetermined formulated unit charge. As of the
date of approval of 2005 financial statements, the basis of service fees has not yet been
finalized and service fees of approximately RMB308,283,000, RMB196,125,000 and RMB17,438,000
have been accrued as of December&nbsp;31, 2005, 2004 and 2003, respectively.
</TD>
</TR>
</TABLE>

</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option
for BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the
purchase price less depreciation upon the occurrence of certain events, including the passing
of a valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. For financial reporting purposes, as of December&nbsp;31, 2005 and 2004, the net book
value of the buildings, amounting to approximately RMB142,556,000 and RMB150,763,000,
respectively, were retained as assets on the balance sheet of the Group and the portion of
consideration received from BMW Brilliance up to December&nbsp;31, 2005 and 2004, amounting to
approximately RMB74,605,000, was treated as a financing and will be partially offset against
the lease rental payable in future years. The remaining balance of approximately RMB99,768,000
(2004: RMB99,768,000) will be received from BMW Brilliance and will be accounted for as
additional financing.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As a result of the retirement from use and the change in use &#151; from production to rental &#151; of
certain property, plant and equipment of the Group&#146;s minibus and automotive components
segment, the Group assessed the recoverability of the carrying value of these long-lived
assets, which resulted in impairment losses of approximately RMB48.3&nbsp;million, RMB10.0&nbsp;million
and RMB6.0&nbsp;million for the years ended December&nbsp;31, 2005, 2004 and 2003 respectively. These
losses reflect the amounts by which the carrying values of these assets exceeded their
estimated fair values determined by their estimated discounted future cash flows. The
impairment loss was recorded as a component of &#147;Selling, general and administrative expenses&#148;
in the Consolidated Statement of Income and Comprehensive Income for the years.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INTANGIBLE ASSETS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,512,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504,337</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,521,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,512,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated amortization</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(509,902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(283,861</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(204,009</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(226,041</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(713,911</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(509,902</TD>
    <TD nowrap>)</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Accumulated impairment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss provision for
the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(173,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(223,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net book value</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">584,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">952,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">952,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,220,476</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was a group of intangible assets that were similar in their use in the operations of the
Group as they related to a specific model of Zhonghua sedans. The Group assessed the future
economic benefit of this group as a whole based on net future cash flow from the manufacture and
sale of that specific model of Zhonghua sedans. Included in the group of intangible assets were
primarily:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Sedan design rights, which include rights, titles and interests in certain design and
engineering agreements and a technical assistance agreement related to Zhonghua sedans; and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Components and parts technology rights, which include rights, titles and interests in the
design of the components and spare parts for Zhonghua sedans contributed by Shenyang JinBei
Automotive Company Limited (&#147;JinBei&#148;), a joint venture partner, as capital into Shenyang
Brilliance JinBei Automobile Co. Ltd., a subsidiary of the Company in 2003 (see note 28).</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since the operations in the manufacture and sale of Zhonghua sedans had resulted in loss in 2005,
the Group critically assessed the future economic benefit of the intangible assets in relation to
Zhonghua sedans mentioned in (a)&nbsp;to (b)&nbsp;by assessing the net cash inflow the manufacture and sale
of Zhonghua sedans will bring to the Group in the future. Accordingly, for the year ended December
31, 2005 impairment loss provision of RMB173&nbsp;million (2004: RMB50&nbsp;million) was provided for these
intangible assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For each of the five years ending December&nbsp;31, 2010, the estimated amortization expense of the
intangible assets in existence as of December&nbsp;31, 2005 will be approximately RMB171.1&nbsp;million.
</DIV>


<P align="center" style="font-size: 10pt">F-28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interests in associated companies and jointly controlled entities as of December&nbsp;31, 2005 consist
of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage of equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Place of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>interest held indirectly</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Name of company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>establishment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>by the Company</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Principal activities</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Associated companies:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shenyang Aerospace
Mitsubishi Motors Engine
Manufacturing Co., Ltd.
(&#147;Shenyang Aerospace&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shenyang, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.77</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of automotive engines</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Chongqing FuHua Automotive
Sales Service Co., Ltd.
(&#147;Chongqing Fuhua&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chongqing, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29.403</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Trading of sedans and minibuses</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Chongqing Baosheng
Automotive Sale and Service
Co., Ltd. (&#147;Chongqing
Baosheng)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chongqing, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">29.403</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Trading of BMW sedans</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Jointly controlled entities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Mianyang Xinchen Engine
Co., Ltd. (&#147;Mianyang
Xinchen&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mianyang, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of automotive engines for minibuses and light duty trucks</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">Shenyang Xinguang
Brilliance Automobile
Engine Co., Ltd. (&#147;Xinguang
Brilliance&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shenyang, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of automotive engines for minibuses and light duty trucks</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px">BMW Brilliance Automotive
Ltd. (&#147;BMW Brilliance&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Shenyang, the PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49.005</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacture and sale of BMW sedans</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Note: </I>During the year, two jointly controlled entities, Shenyang HuaBao Automotive Sales Service
Co. Ltd. (&#147;Huabao&#148;) and Shanghai Kowin Automobile Company Co., Ltd. (&#147;Kowin&#148;) were disposed of.
</DIV>


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying values of interests in associated companies and jointly controlled entities are:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interests in associated companies:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Fuhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Baosheng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">377,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interests in jointly controlled entities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mianyang Xinchen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Xinguang Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447,823</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Huabao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,922</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BMW Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">570,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kowin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,157,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,415,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,520,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,792,590</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The acquisitions of associated companies and jointly controlled entities have been accounted for
using the purchase method of accounting. The tangible assets were valued in the acquisitions at
their estimated fair values. The excess of the purchase price over the fair values of the net
assets acquired has been accounted for as goodwill. The carrying values of goodwill of the acquired
associated companies and jointly controlled entities, which are included in the carrying amount of
interests in associated companies and jointly controlled entities are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mianyang Xinchen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,410</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Xinguang Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">252,373</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,766</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the carrying amount of equity-method goodwill for the year ended December&nbsp;31, 2005,
are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and sale of minibuses and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and sale of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>automotive components</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Zhonghua sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,766</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(179,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(179,030</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of
December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,736</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At of December&nbsp;31, 2005, the Group recorded an impairment charge of RMB179.0&nbsp;million (2004: RMB47.3
million) for equity method goodwill associated with its minibuses and automotive components
operations due to lower than expected projected operating profits and cash flows. The fair value of
the equity method investments was estimated using the expected present value of future cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The equity shares in the income (loss)&nbsp;of the associated companies and jointly controlled entities
for the years ended December&nbsp;31, 2005 and 2004 were:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Associated companies:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,854</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Fuhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Baosheng</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(860</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jointly controlled entities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mianyang Xinchen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Xinguang Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,173</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Huabao</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,334</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BMW Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kowin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(659</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,275</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,261</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Combined unaudited financial information of the associated companies is summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,807,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,221,460</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit before taxation, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,213</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31, </B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">908,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135,531</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,020,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,509,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,928,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,645,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(940,641</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(743,600</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(470,967</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(396,927</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,411,608</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,140,527</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,517,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,504,531</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Combined unaudited financial information of the jointly controlled entities is summarized as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,597,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,070,023</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Profit before taxation, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128,882</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,983,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,686,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,727,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,277,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,711,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,964,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,579,826</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,934,842</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(420,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(320,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,999,826</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,254,842</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,711,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,709,570</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-32
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>INVESTMENT SECURITIES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate cost, gross unrealized gain and fair value pertaining to available-for-sale
securities are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross unrealized gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross unrealized loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,773</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unlisted securities at cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,911</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The change in net unrealized gain reported as a separate component of accumulated other
comprehensive income was RMB1.2&nbsp;million and RMB28.5&nbsp;million as of December&nbsp;31, 2005 and 2004,
respectively. At December&nbsp;31, 2005, the Group determined that the decline in value of securities
with unrealized losses shown in the above table is not other-than-temporary in nature.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments with an aggregate cost of RMB4.1&nbsp;million (2004: RMB4.1&nbsp;million) were not evaluated for
impairment because (a)&nbsp;the Group did not estimate the fair value of those investments in accordance
with paragraphs 14 and 15 of SFAS No.&nbsp;107 and (b)&nbsp;the Group did not identify any events or changes
in circumstances that may have had a significant adverse effect on the fair value of those
investments.
</DIV>


<P align="center" style="font-size: 10pt">F-33
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>15.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>GOODWILL</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the carrying amount of goodwill associated with the manufacture and sale of
minibuses and automotive components operations for the year ended December&nbsp;31, 2005, were as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January&nbsp;1, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(78,690</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,710</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At of December&nbsp;31, 2005, the Group recorded an impairment charge of RMB79&nbsp;million (2004: Nil) for
goodwill associated with its manufacture and sale of minibuses and automotive components operations
due to lower than expected projected operating profits and cash flows. The fair value of that
reporting unit was estimated using the expected present value of future cash flows.
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>16.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>PREPAYMENT FOR A LONG-TERM INVESTMENT</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;29, 2003, SJAI (a 98.01% indirectly-owned subsidiary of the Company) and SXID (a 99.0%
indirectly-owned subsidiary of the Company) entered into agreements with the respective sellers in
relation to the acquisition of the entire equity interests of Shenyang Automobile Industry Asset
Management Company Limited (&#147;SAIAM&#148;) and Shenyang XinJinBei Investment Co., Ltd. (&#147;SXI&#148;),
respectively. SAIAM is interested in 29.9% and SXI interested in 11% of the equity interest in
Shenyang JinBei Automotive Company Limited (&#147;JinBei&#148;), a company listed on the Shanghai Stock
Exchange. The consideration for the acquisitions was RMB600&nbsp;million and was determined after arm&#146;s
length negotiations between the parties taking into account the respective financial position of
SAIAM and SXI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Although the acquisition has approved by State-Owned Assets Supervision and Administration
Commission of Liaoning Provincial Government and State-owned Assets Supervision and Administration
Commission of the State Council of the PRC, the transfer of the entire interest of SAIAM and SXI is
subject to the granting of a waiver to SXID and SJAI from making an offer for all of the shares of
JinBei under the Regulation on Acquisitions of Listed Companies by the China Securities Regulatory
Commission. Upon completion of the acquisitions, the Group will be effectively interested in an
aggregate of approximately 40.13% of the equity interests of JinBei.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005 and 2004, the consideration RMB600&nbsp;million paid to the shareholders of SAIAM
and SXI and the amount was recorded as prepayments for a long-term investment by the Group. The
directors have assessed the fair value of the underlying shares in JinBei and are satisfied that
the carrying amount of the prepayments is supported by the fair value of the underlying shares by
reference to a valuation conducted by an investment bank.
</DIV>


<P align="center" style="font-size: 10pt">F-34
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>17.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>DEFERRED EXPENSES</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct expenses incurred in connection
with the issuance of convertible bonds
(Note 18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,599</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of deferred expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,406</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,273</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,193</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>18.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>CONVERTIBLE BONDS</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible bonds issued at par</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,654,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,654,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accreted redemption premium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,588</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,758</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,888</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;28, 2003, the Company, through its wholly owned subsidiary, Brilliance China Automotive
Finance Ltd., issued Zero Coupon Guaranteed Convertible Bonds due 2008 (the &#147;Bonds&#148;) with principal
amount of US$200,000,000 (equivalent to approximately RMB1,654.3&nbsp;million). The Bonds are listed on
the Luxembourg Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Bonds are convertible into fully paid common stocks of US$0.01 each of the Company at an
initial conversion price of HK$4.60 per share and the total potential number of shares was
336,956,522, subject to the following two events, at any time on or after January&nbsp;8, 2004, and up to and including November
14, 2008, unless the Bonds previously have been redeemed or previously have matured.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Bonds will mature on November&nbsp;28, 2008. At any time from November&nbsp;28, 2005 through
November&nbsp;14, 2008, all, or from time to time, some of the aggregate outstanding principal
amount of the Bonds is redeemable at the option of Brilliance China Automotive Finance Ltd. at
the early redemption amount if the closing price of the shares on the SEHK for each of the
last 20 consecutive trading days has been at least 130% of the conversion price or if at least
90% in principal amount of the Bonds has been converted, redeemed or purchased and cancelled.
Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed
at 100% of their outstanding principal amount on November&nbsp;28, 2008.</TD>
</TR>

</TABLE>
</DIV>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All or some of the Bonds may be redeemed at the option of the relevant holder on November&nbsp;28,
2006 at 102.27% of their principal amount. The Bonds may also be redeemed, in whole or in
part, at the option of the holders at the Early Redemption Amount (2.27% of principal amount)
on the occurrence of a change of control of the Company. The Bonds may also be redeemed at the
option of the holders if the shares of the Company cease to be listed or admitted for trading
on the SEHK.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, none of the Bonds had been converted into the common stock of the Company.
</DIV>



<P align="center" style="font-size: 10pt">F-35
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>19.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>NOTES PAYABLE</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, approximately RMB2,703&nbsp;million (2004: RMB4,874&nbsp;million) of notes payable
had effective interest rates of 3% to 4%, the remaining RMB324&nbsp;million (2004: RMB853&nbsp;million) of
notes payable were interest free. All notes payable were guaranteed by banks, repayable within one
year, secured by short-term bank deposits of approximately RMB1,450&nbsp;million (2004: RMB2,375
million) and bank guaranteed notes received from third parties and affiliated companies of
approximately RMB238&nbsp;million (2004: RMB614&nbsp;million).
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>20.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>TAXES PAYABLE</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Taxes payable consist of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,974</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VAT payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,249</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,391</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,365</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>21.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>COMMITMENTS AND CONTINGENCIES</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(a)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Commitments</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the Group had approximately RMB1,781.0&nbsp;million in outstanding capital and
purchases commitments of which certain items are denominated in Deutsch Marks, Japanese Yen, U.S.
Dollars and Euros. The amount included contracted but not provided for capital commitment for
construction projects, purchase of equipment, and others amounting to approximately RMB248.3
million and authorized but not contracted for capital commitment amounting to approximately
RMB1,532.7&nbsp;million.
</DIV>



<P align="center" style="font-size: 10pt">F-36
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the future aggregate minimum lease payments under non-cancellable
operating leases are detailed as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Operating lease</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">One to two years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Two to three years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three to four years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,585</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Four to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,706</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Over five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,944</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,441</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(b)&nbsp;Operating lease income</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating leases arise from the leases for certain buildings to BMW Brilliance (see also Note
25(f)). The lease terms are generally 180&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation expense for assets subject to operating leases is provided primarily on the
straight-line method over the estimated useful life of the assets. Depreciation expense relating to
the buildings held as investments in operating leases was RMB4.2&nbsp;million and RMB4.7&nbsp;million for the
years ended December&nbsp;31, 2005 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments in operating leases are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">As of December 31, 2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,358</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,780</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net investment in operating leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,578</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future minimum rental payments to be received on non-cancellable operating leases are contractually
due as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">As of December 31, 2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Within one year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">One to two years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Two to three years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three to four years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Four to five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Over five years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,719</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no contingent rentals under the respective lease contracts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(c)&nbsp;Contingent liabilities</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Group had endorsed or discounted bank notes which were not yet honored by the issuers as
of December&nbsp;31, 2005 and 2004 amounting to approximately RMB1,128&nbsp;million and RMB1,345
million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, the Group had provided the following guarantees:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate guarantees of approximately RMB120&nbsp;million (2004: RMB296&nbsp;million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua Holdings
Co., Ltd. (&#147;Shanghai Shenhua&#148;):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The guarantee arose from the mutual negotiation between Shenyang Automotive and Shanghai
Shenhua. Associated with the corporate guarantee, Shanghai Shenhua also provided a cross
guarantee for the bank facilities of Shenyang Automotive. The guarantee was for
revolving activities of Shanghai Shenhua and will be terminated upon mutual agreements
between Shenyang Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the
repayment of its bank loans or notes when they fall due, Shenyang Automotive is required
to repay the outstanding balance. There is no recourse or collateralization provision in
the guarantee. As of December&nbsp;31, 2005, the guarantee provided for the bank loans and
notes drawn by affiliated companies of Shanghai Shenhua was approximately RMB120&nbsp;million
(2004: RMB296&nbsp;million), which is also the maximum potential amount of future payments
under the guarantee as of December&nbsp;31, 2005. However, default by Shanghai Shenhua and
its affiliated companies is considered remote by management and therefore no liability
for the guarantor&#146;s obligation under the guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A joint and several proportional corporate guarantee with a joint venture partner
of Shenyang Aerospace on a long-term bank loan of approximately RMB111&nbsp;million (2004:
RMB221&nbsp;million) drawn by Shenyang Aerospace which will expire in 2008:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The guarantee was provided by the Group and a joint venture partner of Shenyang
Aerospace for its long-term loan financing needs during its start-up period. If Shenyang
Aerospace defaults on the repayment of its bank loan when it falls due, the Group and
the joint venture partners are jointly and severally liable to repay the outstanding
balance. There is no recourse or collateralization provision in the
guarantee. As of December&nbsp;31, 2005, the guarantee provided for the outstanding bank loan of Shenyang Aerospace was RMB111&nbsp;million (2004:
RMB221&nbsp;million), which is also the maximum potential amount of future payments under the
guarantee as of December&nbsp;31, 2005. However, default by Shenyang Aerospace is considered
remote by management and therefore no liability for the guarantor&#146;s obligation under the
guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Corporate guarantees of bank loans amounting to RMB295&nbsp;million (2004: RMB100
million), which is also the maximum potential amount of future payments under the
guarantee as of December&nbsp;31, 2005, drawn by JinBei. Bank deposits of RMB311&nbsp;million
(2004: RMB102&nbsp;million) were pledged as a collateral for the corporate guarantees.
However, default by JinBei is considered remote by management and therefore no liability
for the guarantor&#146;s obligation under the guarantee existed as of December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-38
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;21, 2003, a writ dated January&nbsp;21, 2003 (the &#147;Writ&#148;) brought by Broadsino Finance
Company Limited (&#147;Broadsino&#148;), as the Plaintiff, was filed with the Supreme Court of Bermuda
(the &#147;Supreme Court&#148;) which alleged that the interest of the Chinese Financial Education
Development Foundation (the &#147;Foundation&#148;) in 1,446,121,500 shares of the Company (the &#147;Sale
Shares&#148;) was held in trust for Broadsino and was improperly transferred to Huachen Automotive
Group Holdings Company Limited (&#147;Huachen&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the course of legal proceedings with Broadsino, the Company achieved the following:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(i)&nbsp;overturning on February&nbsp;11, 2003 an ex parte Court Order dated January&nbsp;22, 2003 which had
restrained the Company from, amongst other things, registering the transfer of the Sale Shares
by the Foundation to Huachen and/or Huachen to certain directors of the Company; (ii)
initiating on March&nbsp;10, 2003, a Strikeout Summons at the Supreme Court to have the Writ and
the statement of claim struck out, which proceedings were duly heard before the Supreme Court,
and which resulted on December&nbsp;31, 2003 in that court issuing a judgement to strike-out the
Writ; (iii)&nbsp;challenging Broadsino&#146;s attempts for appeal to the Court of Appeal of Bermuda,
Civil Appellant jurisdiction which appeal was then dismissed by that court&#146;s judgement of
March&nbsp;14, 2005 which ruled in the Company&#146;s favour; (iv)&nbsp;Broadsino&#146;s further attempts for
leave to appeal to the Privy Council in the United Kingdom with respect to the Court of
Appeal&#146;s judgement being challenged at all stages by the Company; and (v)&nbsp;Broadsino seeking a
grant of leave on November&nbsp;10, 2005 in the Court of Appeal in Bermuda to withdraw its leave to
appeal to the Privy Council and the Company being awarded its costs of the leave application.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The directors of the Company do not believe the proceedings with Broadsino will have any
significant impact on the financial position of the Company and of the Group.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On or about October&nbsp;25, 2002, the Company was served with a claim lodged by Mr.&nbsp;Yang Rong
(&#147;Mr.&nbsp;Yang&#148;) in the Labour Tribunal in Hong Kong against the Company for alleged wrongful
repudiation and/or breach of his employment contract. The claim was for approximately US$4.3
million (equivalent to approximately RMB35.6&nbsp;million) with respect to loss of salary. In
addition, Mr.&nbsp;Yang claimed unspecified damages in respect of bonuses and share options. The
claim was dismissed by the Labour Tribunal in Hong Kong on January&nbsp;28, 2003. Mr.&nbsp;Yang
subsequently applied for a review of this decision. At the review hearing on July&nbsp;4, 2003, the
Labour Tribunal ordered the case to be transferred to the High Court in Hong Kong. The claim
has therefore been transferred to the High Court and registered as High Court Action No.&nbsp;2701
of 2003 (the &#147;Action&#148;).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On September&nbsp;16, 2003, a Statement of Claim was served on the Company. On November&nbsp;4, 2003,
the Company filed a Defence and Counterclaim with the High Court. Mr.&nbsp;Yang filed a Reply to
Defence and Defence to Counterclaim on April&nbsp;26, 2004. On July&nbsp;21, 2004, Mr.&nbsp;Yang obtained
leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim. The
Company filed and served a Reply to Defence to Counterclaim on September&nbsp;4, 2004. Pleadings
closed on
September&nbsp;18, 2004. The parties filed and served Lists of Documents on October&nbsp;26, 2004 and
witness statements were exchanged on February&nbsp;28, 2005.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-39
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The parties applied by consent to adjourn <I>sine die </I>a checklist hearing fixed for April&nbsp;20,
2005, as the respective parties anticipated that they would be filing supplemental evidence
and amending their pleadings. The Court approved the application and made an Order on April
19, 2005 that the checklist hearing be vacated and adjourned <I>sine die </I>with liberty to restore.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Pursuant to a request made by Mr.&nbsp;Yang on June&nbsp;2, 2005 for further and better particulars of
the Defence and Counterclaim, the Company filed and served its Answer to Mr.&nbsp;Yang&#146;s request on
July&nbsp;4, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On August&nbsp;17, 2005, in compliance with its continuing discovery obligations, the Company filed
and served a Supplemental List of Documents. Subsequently, on September&nbsp;5, 2005, Mr.&nbsp;Yang also
filed and served a Supplemental List of Documents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Further interlocutory steps are in progress. There have been no other material developments in
the litigation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The directors of the Company do not believe the action will have any significant impact on the
financial position of the Company and of the Group. The directors of the Company intend to
continue vigorously defending the action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>22. CAPITAL STOCK</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Authorized:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock of
US$0.01 each</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">US$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">US$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">US$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issued and fully paid:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common stock of
US$0.01 each</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">RMB303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">RMB303,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">RMB303,388</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2003, an employee of the Group exercised certain of his stock options and as a result
2,338,000 shares of common stock of US$0.01 each were issued at a price of HK$1.896 per share (Note
23). These new shares ranked pari passu with existing shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>23. STOCK OPTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Original share option scheme approved in 1999</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Upon the listing on the Company&#146;s shares on the SEHK, the Company adopted an employee share option
scheme (the &#147;Scheme&#148;). Pursuant to the Scheme, the Company&#146;s Board of Directors may grant options
to employees of the Group to subscribe for the Company&#146;s common stock at a price which shall be the
higher of:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a price being not less than 80%, of the average closing price of the common stock on the
relevant stock exchange as stated in such stock exchange&#146;s quotation sheets for the five
trading days immediately preceding the relevant date in respect of such options; and</TD>
</TR>

</TABLE>
</DIV>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the nominal value of the common stock.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The maximum number of shares on which options may be granted may not exceed 10% of the issued share
capital of the Company excluding any shares issued on the exercise of the option from time to time.
</DIV>

<P align="center" style="font-size: 10pt">F-40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;2, 2001, share options were granted to certain directors and employees of the Group,
entitling them to subscribe for a total of 31,800,000 shares of the Company&#146;s common stock at
HK$1.896 per share. The exercisable period of these options is from June&nbsp;2, 2001 to June&nbsp;1, 2011.
The compensation expense associated with these grants was fully vested and was charged to income
during the year ended December&nbsp;31, 2001. During the year ended December&nbsp;31, 2003, 2,338,000 shares
of the above share options were exercised. Accordingly, the common stock and additional paid-in
capital were increased by approximately RMB194,000 and RMB4,507,000, respectively. No option was
granted under this scheme in 2005 and 2004.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>No. of stock options</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>&#146;000</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As of January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled/lapsed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As of December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,490</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled/lapsed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,690</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,800</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>New share option scheme approved in 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On June&nbsp;28, 2002, the Company adopted a new share option scheme (the &#147;New Scheme&#148;) in compliance
with the amendments to the listing rules and regulations of SEHK which came into effect on
September&nbsp;1, 2001. The New Scheme has come into effect on July&nbsp;15, 2002 and the original share
option scheme adopted by the Company on September&nbsp;18, 1999 (as described above) was terminated. Any
new share option granted after July&nbsp;15, 2002 will be in accordance with the terms of the New
Scheme, but the outstanding share options granted in 2001 will not be affected. Pursuant to the New
Scheme, the Company&#146;s board of directors may grant options to the participants (include the Group&#146;s
employees, non-executive directors, suppliers and customers, etc.) to subscribe for the Company&#146;s
common stock at a price which shall not be lower than the higher of:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the closing price of the common stocks on the relevant stock exchange as stated in such stock
exchange&#146;s quotation sheet on the date of the offer of grant, which must be a trading date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the average closing price of the common stocks on the relevant stock exchange as stated in
such stock exchange&#146;s quotation sheets for the five trading days immediately preceding the
date of the offer of grant; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the nominal value of the common stock.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, no share option was granted under the New Scheme.
</DIV>


<P align="center" style="font-size: 10pt">F-41
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Call Option Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;18, 2002, Huachen entered into a principal agreement (the &#147;Principal Agreement&#148;) with
the Foundation to purchase from the Foundation a total of 1,446,121,500 shares of common stock,
representing approximately 39.446% of the then issued share capital of the Company and the
Foundation&#146;s entire shareholding interest in the Company. Completion of the Principal Agreement
took place upon signing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On December&nbsp;18, 2002, each of Mr.&nbsp;Wu Xiao An, Mr.&nbsp;Su Qiang, Mr.&nbsp;Hong Xing and Mr.&nbsp;He Tao (the
&#147;Management Directors&#148;) entered into a call option agreement (&#147;Call Option Agreements&#148;) with
Huachen, immediately after the Principal Agreement was entered into and after completion of the
sale and purchase of the common stocks pursuant thereto. Pursuant to the terms of the Call Option
Agreements, Huachen granted to each of the Management Directors a call option in respect of a
specified number of shares of common stock, totaling 346,305,630 shares in aggregate and
representing approximately 9.446% of the then issued share capital of the Company, at an exercise
price of HK$0.95 per share. Each call option is exercisable in whole or in part at any time during
the period of 3&nbsp;years commencing from the date falling 6&nbsp;months after February&nbsp;6, 2003, the closing
date of the general offer made to the remaining shareholders by Huachen and the Management
Directors dated December&nbsp;18, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the terms of the Call Option Agreements, the Management Directors may elect to pay the
exercise price in full or to pay 10% of the exercise price at the time of exercise of the option.
If the Management Directors elect the latter payment option, the balance of the exercise price will
be payable, without interest, within a 3-year period after the date of completion of the purchase
of the relevant common stock, and the shares will be pledged as security in favor of Huachen until
full payment of the exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of the Call Option Agreements entered into between Huachen and the Management
Directors, compensation expense associated with these call options is being recognized by the
Company on a straight-line basis from December&nbsp;18, 2002 to August&nbsp;6, 2003, the date that the call
options became fully vested. Accordingly, compensation expenses of approximately RMB173.2&nbsp;million
and RMB10.3&nbsp;million were charged to the income statements for the years ended December&nbsp;31, 2003 and
2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, none of the call options had been exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pro-forma disclosures setting forth compensation expense assuming the Company had determined it
based on the fair value of the stock options in accordance with SFAS No.&nbsp;123 and No.&nbsp;148 are
presented in Note 3(r).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of each option granted is estimated using the Black-Scholes option pricing model.
The weighted average assumptions used for grants of share options and fair value of share option
made in 2002 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.96</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected option life
&#151; Issued on December&nbsp;18, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="right">1 year</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48.01</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>24. DISTRIBUTION OF PROFIT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As stipulated by the relevant laws and regulations for foreign-invested enterprises in the PRC, the
Company&#146;s subsidiaries are required to maintain discretionary dedicated capital, which includes a
general reserve fund, an enterprise expansion fund and a staff welfare and incentive bonus fund.
The dedicated capital is to be appropriated from statutory net income as stipulated by statute or
by the board of directors of respective subsidiaries and recorded as a component of shareholders&#146;
equity. For the years ended
December&nbsp;31, 2005, 2004 and 2003, the subsidiaries of the Company appropriated approximately RMB9.3
million, RMB46.2&nbsp;million and RMB100.0&nbsp;million,
respectively, to the general reserve fund. No appropriation to the enterprise expansion fund was made by the subsidiaries for the years ended
December&nbsp;31, 2005, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2003, as approved by the board of directors of Xing Yuan Dong in accordance with the relevant
laws and regulations, dedicated capital of Xing Yuan Dong amounting to RMB120&nbsp;million was released
for capitalization as paid-in capital of Xing Yuan Dong. Such release was credited to the capital
reserve, which represents the capitalization of the retained earnings of Xing Yuan Dong and is a
non-distributable reserve of the Group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s share of undistributed earnings retained in the associated companies and jointly
controlled entities amounted to approximately RMB107.20&nbsp;million and RMB110.8&nbsp;million as of December
31, 2005 and 2004, respectively.
</DIV>



<P align="center" style="font-size: 10pt">F-42
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dividends declared by the Company during 2005 and 2004 consisted of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004 and 2003 final dividends of HK$0.005
and HK$0.01 per share, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,885</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005 and 2004 interim dividends of HK$Nil
and HK$0.005 per share, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,335</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;21, 2006 the directors of the Company did not recommend the payment of final dividend for
the year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>25. RELATED PARTY TRANSACTIONS</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Name and relationship</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Relationship</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Shenyang JinBei Automotive Company<BR>
Limited (&#147;JinBei&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A shareholder of Shenyang Automotive</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shanghai Shenhua Holdings Co., Ltd.
(&#147;Shanghai Shenhua&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common directorship of certain
directors of the Company</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:30px; text-indent:-15px">Brilliance Holdings Limited (&#147;BHL&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common directorship of certain
directors of the Company</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">An affiliated company is a company in which one or more of the directors or substantial
shareholders of the Company have direct or indirect beneficial interest in the Company or are in a
position to exercise significant influence over the Company. Parties are also considered to be
affiliated if they are subject to common control or common significant influence.
</DIV>

<P align="center" style="font-size: 10pt">F-43
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Save as disclosed elsewhere in the financial statements, particulars of significant transactions
with affiliated companies (these affiliated companies and the Company have certain directors in
common and/or other relationships as specified) are summarized below:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amounts due from affiliated companies arising from trading activities consisted of the
following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due from related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">386,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; A joint venture partner of Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; BMW Brilliance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,581</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&#151; Consideration receivable arising from
the disposal of machinery and equipment
(note (i))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">269,003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">869,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790,131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Provision for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,720</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">840,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">765,411</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(i)</TD>
    <TD>&nbsp;</TD>
    <TD>The outstanding balance is unsecured, non-interest bearing and will be settled by BMW
Brilliance when certain conditions specified in the agreement of sale are fulfilled (See also
Note 11(c)).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(ii)</TD>
    <TD>&nbsp;</TD>
    <TD>Except for (i)&nbsp;above, the amounts due from affiliated companies are unsecured, non-interest
bearing and have no fixed repayment terms.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Notes receivable from affiliated companies arising from trading activities consisted of the
following:</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable from related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">328,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,295</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">645,143</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All the notes receivable from affiliated companies are guaranteed by banks in the PRC and have
maturities of six months or less. The fair value of the notes receivable approximates their
carrying value.
</DIV>


<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amounts due to affiliated companies arising from trading activities consisted of the
following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Due to related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,951</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,570</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">633,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,722</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amounts due to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notes payable to affiliated companies arising from trading activities consisted of the
following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes payable to related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,116</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,229</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,491</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,892</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,162</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Save as disclosed elsewhere in the financial statements, significant transactions with
affiliated companies consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales of goods:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,469,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,895,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,984,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,512</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of the joint venture partner of Ningbo
Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,609,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,139,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,312,503</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of goods:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">986,828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,940</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,498</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">524,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">898,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,597,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of the joint venture partner of Ningbo
Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of the joint venture partner of Xinguang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">761</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; A joint venture partner of Shenyang Aerospace</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subcontracting charges to a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,438</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,174,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,185,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,934,331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consideration paid to the joint venture partner of Ningbo
Yuming for acquisition of further interests in Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of intangible asset from an affiliated company of the
joint venture partner of Ningbo Yuming</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance charge to a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease rental on machinery and equipment charged by a
jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease rental from a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from sale of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; JinBei and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; A jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of machinery from affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service income from a jointly controlled entity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The above transactions were carried out after negotiations between the Group and the affiliated
companies in the ordinary course of business and on the basis of estimated market value as
determined by the directors.
</DIV>



<P align="center" style="font-size: 10pt">F-46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other significant transactions with affiliated companies consisted of:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>i. Trademark license</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to a trademark license agreement, JinBei granted Shenyang Automotive the right to use the
JinBei trademark on its products and marketing materials indefinitely.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ii. Guarantees provided to affiliated companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Please refer to Note 21 (c) (ii)&nbsp;for details of the guarantees provided to affiliated companies.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Advances to affiliated companies consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances to related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies and jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,528</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; BHL and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: provision for doubtful debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,250</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,975</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,477</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The advances to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms (2004: same except an advance to a jointly controlled entity of RMB6.5&nbsp;million
which was interest bearing at 5.841% per annum).
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(h)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Advances from affiliated companies consisted of the following:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advances from related parties:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Associated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of BHL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; An affiliated company of Shanghai Shenhua</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Affiliated companies of JinBei</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Financing received from BMW Brilliance (Note 11(d))</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&#151; Other affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,481</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Save for the financing received from BMW Brilliance as detailed in Note 11(d), other advances from
affiliated companies are unsecured, non-interest bearing and have no fixed repayment terms.
</DIV>


<P align="center" style="font-size: 10pt">F-47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>26. RETIREMENT PLAN AND EMPLOYEES&#146; BENEFIT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As stipulated by the regulations of the PRC government, the Company&#146;s subsidiaries in the PRC have
defined contribution retirement plans for their employees. The PRC government is responsible for
the pension liability to these retired employees. The Company&#146;s subsidiaries are required to make
specified contributions for the state-sponsored retirement plan at 20% of the basic salary costs of
their staff for 2005 (2004: 20% to 23.5%; 2003: 22% to 23.5%) payable to Labor and Social Security
Bureaus of the PRC government. The retirement plan contributions payable for the years ended
December&nbsp;31, 2005, 2004 and 2003 were approximately RMB33.1&nbsp;million, RMB37.5&nbsp;million and RMB50.4
million, respectively. In addition to the pension contributions, pursuant to the relevant laws and
regulations of the PRC, the Company&#146;s subsidiaries are required to provide benefits such as housing
funds, medical insurance and unemployment insurance for their PRC employees. These provisions,
which were approximately RMB29.6&nbsp;million, RMB35&nbsp;million and RMB46.5&nbsp;million for the years ended
December&nbsp;31, 2005, 2004 and 2003, respectively, were calculated at a certain percentage
(approximately 15.4% to 25.4% in 2005, 14.8% to 23.4% in 2004 and 13% to 18% in 2003) of the
employees&#146; basic salaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s Hong Kong employees are covered by the mandatory provident fund which is managed by an
independent trustee. The Group and its Hong Kong employees each makes monthly contribution to the
scheme at 5% of the employees&#146; salary with maximum contributions by each of the Group and the
employees limited to HK$1,000 per month. The retirement benefit scheme cost charged to the
consolidated statement of income represents contributions payable by the Group to the fund. During
the years ended December&nbsp;31, 2005, 2004 and 2003, contributions amounting to approximately
HK$122,000, HK$147,000 and HK$150,000, respectively, were made.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>27. EXECUTIVE BONUS PLAN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain officers of the Company are participants in the Executive Bonus Plan (the &#147;Plan&#148;). The Plan
provides that up to 5% of the Company&#146;s net income be set aside each year for distribution among
plan participants based upon performance as determined by the Company&#146;s board of directors. The
allocation of bonuses among participants is determined at the discretion of the President of the
Company. For the years ended December&nbsp;31, 2005 and 2004 , no performance bonus was allocated. For
the year ended December&nbsp;31, 2003, the Company accrued RMB34.4&nbsp;million under the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>28. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash paid for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest
(net of amount capitalized: 2005: RMB23,875,000; 2004: RMB
18,369,000; 2003: RMBNil)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,687</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the years ended December&nbsp;31, 2005, 2004 and 2003, major non-cash transactions included:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2003, as approved by the joint venture partners of Shenyang Automotive, the registered capital
and total investment of Shenyang Automotive was increased by approximately RMB2,260&nbsp;million, which
was contributed by the Company and JinBei in proportion to their original equity interests in
Shenyang Automotive. The Company contributed 51% of the increase in paid-in capital of Shenyang
Automotive by way of capitalization of its dividend receivable from a subsidiary amounting to
approximately RMB1,152.6
million. JinBei contributed the remaining 49% of the paid-in capital of Shenyang Automotive by
injecting buildings amounting to approximately RMB41.0&nbsp;million (Note 11(b)), long-term land lease
prepayments amounting to approximately RMB64.4&nbsp;million (Note 11(b)), components and parts technology right
amounting to RMB820&nbsp;million (Note 12(b)) and approximately RMB182&nbsp;million in cash.
</DIV>


<P align="center" style="font-size: 10pt">F-48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>29. OTHER SUPPLEMENTAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following items are charged (credited)&nbsp;to the consolidated statements of income and
comprehensive income:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Import tariffs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235,177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange (gains)&nbsp;losses, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,487</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for impairments of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for doubtful debts and write off of bad debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,825</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>30. SEGMENT INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;131 establishes standards for reporting information about operating segments in financial
statements. Operating segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker, or decision making group, in deciding how to allocate resources and in assessing
performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group began manufacturing and selling Zhonghua sedans and BMW sedans, respectively, which are
managed separately because each of them represents a strategic business unit that serves a
different market in the automobile industry. Therefore, the Group&#146;s reportable operating segments
consist of i) manufacture and sale of minibuses and automotive components; ii) manufacture and sale
of Zhonghua sedans; and iii) manufacture and sale of BMW sedans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accounting policies of each operating segment are the same as those described in the summary of
significant accounting policies. The Group evaluates performance based on stand-alone operating
segment net income and generally accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices. The Group&#146;s activities are
conducted predominantly in the PRC. Accordingly, no geographical segmentation analysis is provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Group&#146;s credit risk primarily consists of receivables from a variety of customers including
state and local agencies, municipalities and private industries. The Group had one customer and its
affiliates (see Note 25(f)) that accounted for more than ten percent of revenues. The Group reviews
its accounts receivable and provides estimates of allowances as deemed necessary.
</DIV>


<P align="center" style="font-size: 10pt">F-49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Business segments &#151; 2005</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and sale of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>minibuses and automotive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sale of Zhonghua and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sale of BMW</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>components</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total revenues from reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,837,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,700,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Elimination of intersegment revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,529</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,529</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues from external customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,605,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">863,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,468,990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment (loss)&nbsp;income before taxation
and minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(980,264</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,138,121</TD>
    <TD nowrap>)</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated amounts &#151; corporate expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,281</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxation and minority
interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,195,402</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment assets as of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,207,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,531,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">615,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,354,369</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated amounts &#151; corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets as of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,692,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other disclosures:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of long-term land lease
prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,886</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization on intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of equity method goodwill
(Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of goodwill in a subsidiary
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">585,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in earnings of associated
companies and jointly controlled
entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,642</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity method goodwill (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,710</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Business segments &#151; 2004</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and sale of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Manufacture and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>minibuses and automotive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sale of Zhonghuaand</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sale of BMW</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>components</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>sedans</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total revenues from
reportable segments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,546,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,324,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,870,835</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Elimination of intersegment
revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(328,837</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(328,837</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues from external
customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,217,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,324,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,541,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment income (loss)
before taxation and
minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">423,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(882,174</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(439,646</TD>
    <TD nowrap>)</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated amounts &#151;
corporate expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,241</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxation and
minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(526,887</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Segment assets as of
December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,848,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,268,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,705,284</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unallocated amounts &#151;
corporate assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets as of December
31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,776,426</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other disclosures:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of long-term
land lease prepayments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,369</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization on intangible
assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of equity method
goodwill (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">699,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">920,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in earnings of
associated companies and
jointly controlled entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity method goodwill
(Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,766</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">418,400</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Notes to Consolidated Financial Statements (Continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>31. ACCUMULATED OTHER COMPREHENSIVE INCOME</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;130 requires the components of comprehensive income to be disclosed in the financial
statements. Comprehensive income consists of net (loss)&nbsp;income and other gains and losses affecting
shareholders&#146; equity that, under generally accepted accounting principles, are excluded from net
income. For the Group, comprehensive income consists primarily of unrealized gains and losses on
marketable equity investments and foreign currency translation adjustments for the years ended
December&nbsp;31, 2005, 2004 and 2003.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Unrealized gain (loss) on</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>marketable available-for-sale</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Foreign currency</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Accumulative other</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>translation adjustments</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>comprehensive income</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">RMB&#146;000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of January&nbsp;1, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current year change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31,
2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,647</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current year change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31,
2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,420</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>32. COMPARATIVE FIGURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain comparative figures in previous years have been reclassified to confirm to the fiscal 2005
presentation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>33. APPROVAL OF FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The financial statements were approved by the board of directors on April&nbsp;21, 2006.
</DIV>



<P align="center" style="font-size: 10pt">F-52
</DIV>

</BODY>
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Brilliance China Automotive Holdings Limited
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period
from
to
OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission file number: 1-11412
BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
Bermuda
(Translation of Registrant's name into English)
(Jurisdiction of Incorporation or Organization)
Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Exchange on which registered
American Depositary Shares
Ordinary Shares, par value US$0.01 per share
New York Stock Exchange, Inc.
The Stock Exchange of Hong Kong Limited
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2005:
3,668,390,900 Ordinary Shares, par value US$0.01 per share
2,222,556 American Depositary Shares, each representing 100 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
Yes
o
No
þ
If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or (15)(d) of the Securities Exchange Act of
1934.
Yes
o
No
þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer
o
Accelerated Filer
þ
Non-Accelerated Filer
o
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes
o
No
þ
Table of Contents
Page
Part I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3. KEY INFORMATION
1
ITEM 4. INFORMATION ON THE COMPANY
15
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
38
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
51
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
61
ITEM 8. FINANCIAL INFORMATION
65
ITEM 9. THE OFFER AND LISTING
68
ITEM 10. ADDITIONAL INFORMATION
69
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
78
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
80
Part II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
80
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
80
ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES
80
ITEM 16. [RESERVED]
80
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
80
ITEM 16B. CODE OF ETHICS
81
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
81
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
82
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
82
Part III
ITEM 17. FINANCIAL STATEMENTS
82
ITEM 18. FINANCIAL STATEMENTS
82
ITEM 19. EXHIBITS
83
EX-2.1 Trust Deed, dated June 7, 2006
EX-4.2 Form of Service Agreement for Executive Director
EX-4.3 Purchase Agreement, dated May 8, 2006
EX-7.1 Statement explaining how certain ratios were calculated in the annual report
EX-8.1 List of significant subsidiaries
EX-12.1 Section 302 Certification of the Chief Executive Officer
EX-12.2 Section 302 Certification of the Chief Financial Officer
EX-13.1 Section 906 Certification of the CEO and CFO
i
Table of Contents
CONVENTIONS
Unless the context otherwise requires, references in this annual report to "we," "us," "our,"
the "Company" or "Brilliance China Automotive" are to Brilliance China Automotive Holdings Limited
and its consolidated subsidiaries and their respective operations. References to "China" or "PRC"
are to the People's Republic of China, but do not apply to Hong Kong, Macau or Taiwan for purposes
of this annual report.
FORWARD-LOOKING STATEMENTS
Certain information contained in this annual report that does not relate to historical
financial information may be deemed to constitute forward-looking statements. The words or phrases
"will likely result", "are expected to", "will continue", "is anticipated", "estimate", "project",
"believe" or similar expressions identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from historical results and
those presently anticipated or projected. Brilliance China Automotive wishes to caution readers not
to place undue reliance on any these forward-looking statements, which speak only as of the date
made. Among the factors that could cause Brilliance China Automotive's actual results in the future
to differ materially from any opinions or statements expressed with respect to future periods
include:
•
unexpected adverse effects on the economy of the People's Republic of China, or
China, and China's automobile sector in particular;
•
increased competition from other domestic and international automobile manufacturers;
•
our relative inexperience in manufacturing and selling sedans;
•
increased costs for raw materials and components;
•
possible further revaluation of the Renminbi against foreign currencies; and
•
fluctuations in foreign exchange rates.
When considering these forward-looking statements, you should keep in mind the factors
described in "Item 3 — Key Information — Risk Factors" and other cautionary statements appearing in
"Item 5 — Operating and Financial Review and Prospects" of this annual report. These risk factors
and statements describe circumstances that could cause actual results to differ materially from
those contained in any forward-looking statement.
CURRENCY TRANSLATION
Unless otherwise specified, all references in this annual report to "U.S. dollars" or "US$"
are to United States dollars; all references to "Renminbi" or "Rmb" are to Renminbi, which is the
legal tender currency of China; all references to "H.K. dollars" or "HK$" are to Hong Kong dollars,
which is the legal tender currency of Hong Kong and all references to "Euro" and "Euros" are to the
legal tender currency of the European Monetary Union. On December 30, 2005, the noon buying rates
in New York City for cable transfers of Renminbi, Hong Kong dollars and Euros, as certified for
customs purposes by the Federal Reserve Bank of New York was US$1.00 = Rmb 8.0702, US$1.00 =
HK$7.7533 and Euro 1.00 = US$1.1842. Unless otherwise specified, translations of amounts from
Renminbi, Hong Kong dollars and Euros to U.S. dollars for the convenience of the reader have been
made at those rates. No representation is made that the Renminbi, Hong Kong dollar or Euro amounts
could have been, or could be converted into U.S. dollars at those rates or at any other rates. In
addition, all financial information presented herein has been prepared in accordance with United
States generally accepted accounting principles, or U.S. GAAP.
ii
Table of Contents
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
Selected Financial Data
Historical Financial Information of Brilliance China Automotive
The following table presents the selected consolidated financial information of Brilliance
China Automotive and its subsidiaries as of and for the years ended December 31, 2001, 2002, 2003,
2004 and 2005, which have been derived from our audited consolidated financial statements. The
selected financial information for the years ended December 31, 2003, 2004 and 2005 and as of
December 31, 2004 and 2005 should be read in conjunction with, and is qualified in its entirety by
reference to, the financial statements, prepared in accordance with U.S. GAAP, included elsewhere
in this annual report, the accompanying notes thereto and "Item 5 — Operating and Financial Review
and Prospects". The financial statements and footnotes for the years ended December 31, 2001 and
2002 and as of December 31, 2001, 2002 and 2003 are not included in this annual report.
(Amounts in millions,
As of and for the years ended December 31,
except per share/ADS and operating data)
2001
2002
2003
2004
2005
2005
(Rmb, except operating data)
(US$)
Income Statement Data:
Total Sales
6,218.4
7,319.5
10,109.6
6,542.0
5,469.0
677.7
Cost of sales
4,308.0
5,411.3
7,727.1
5,491.3
5,012.0
621.1
Gross Profit
1,910.4
1,908.1
2,382.4
1,050.7
457.0
56.6
Selling, general and administrative
expenses
673.4
1,067.2
1,410.1
1,510.4
1,195.3
148.1
Net income (loss)
887.1
610.5
780.8
1.2
(671.3
)
(83.2
)
Balance Sheet Data:
Total assets
11,696.5
13,853.7
18,288.2
17,776.4
14,692.3
1,820.6
Current assets
6,127.1
8,263.0
10,286.5
9,428.3
7,110.2
881.1
Current liabilities
5,741.7
7,332.7
8,031.0
8,187.7
8,059.8
998.7
Capital stock
303.2
303.2
303.4
303.4
303.4
37.6
Total shareholders' equity
5,419.8
6,005.3
6,886.3
6,857.7
6,139.7
760.8
Cash Flow Statement Data:
Payment for capital expenditure
782.5
798.8
955.9
999.1
558.0
69.1
Depreciation and amortization
118.1
270.6
677.8
603.0
616.6
76.4
Net cash flows (used in) provided by
operating activities
1,326.8
1,913.0
753.4
(719.3
)
896.3
111.1
Net cash flows (used in) provided by
investing activities
(1,398.8
)
(2,209.9
)
(2,491.3
)
(722.4
)
325.6
40.3
Net cash flows (used in) provided by
financing activities
(45.8
)
365.9
2,281.1
853.9
(1,622.9
)
(201.1
)
1
Table of Contents
(Amounts in millions,
As of and for the years ended December 31,
except per share/ADS and operating data)
2001
2002
2003
2004
2005
2005
(Rmb, except operating data)
(US$)
Per Share/ADS Data:
Basic earnings (loss) per share
0.25
0.17
0.21
0.0003
(0.1830
)
(0.0227
)
Basic earnings (loss) per ADS
25.10
16.65
21.30
0.03
(18.30
)
(2.27
)
Diluted earnings (loss) per share
0.25
0.17
0.21
0.0003
(0.1830
)
(0.0227
)
Diluted earnings (loss) per ADS
25.10
16.65
21.16
0.03
(18.30
)
(2.27
)
Cash dividends declared per ADS
(1)
0.96
1.48
2.12
1.07
n/a
n/a
Operating Data:
Production volume (
units
)
Minibus — Deluxe model
9,413
8,620
9,291
7,682
8,752
Minibus — Mid-priced model
51,423
56,959
65,734
56,215
48,131
Subtotal — Minibuses
60,836
65,579
75,025
63,897
56,883
Zhonghua Sedans
(2)
—
8,890
27,054
11,806
6,854
Total
60,836
74,469
102,079
75,703
63,737
Sales volume (
units
)
Minibus — Deluxe model
9,653
9,017
9,004
6,626
9,940
Minibus — Mid-priced model
53,356
56,121
65,614
54,992
50,060
Subtotal — Minibuses
63,009
65,138
74,618
61,618
60,000
Zhonghua Sedans
(2)
—
8,816
25,600
10,982
9,000
Total
63,009
73,954
100,218
72,600
69,000
(1)
Calculated using the respective U.S. dollar to Renminbi year-end noon
buying rates for the years presented. Brilliance China Automotive
declared cash dividends per ordinary share in H.K. dollars in each of
2004, 2003, 2002 and 2001.
(2)
Commercial production of Zhonghua sedans began in August 2002.
Exchange Rate Information
The following table sets forth certain information concerning exchange rates between Renminbi
and U.S. dollars for the periods indicated:
Noon Buying Rate
Period
Period End
Average
(1)
High
Low
2001
8.2761
8.2769
8.2776
8.2761
2002
8.2800
8.2772
8.2800
8.2765
2003
8.2767
8.2771
8.2800
8.2765
2004
8.2765
8.2768
8.2774
8.2764
2005
8.0702
8.1826
8.2765
8.0702
January 2006
8.0608
8.0641
8.0702
8.0596
February 2006
8.0415
8.0514
8.0616
8.0415
March 2006
8.0167
8.0333
8.0505
8.0167
April 2006
8.0165
8.0159
8.0248
8.0040
May 2006
8.0215
8.0148
8.0300
8.0005
June 2006 (through June 20, 2006)
7.9969
8.0110
8.0225
7.9969
Source:
The noon buying rate in New York for cable transfers
payable in foreign currencies as certified for
customs purposes by the Federal Reserve Bank of New
York.
(1)
Determined by averaging the rates on the last business day of each
month during the respective year and on the last business day of each
week during the respective month.
2
Table of Contents
Risk Factors
Brilliance China Automotive is subject to various changing competitive, economic, political
and social conditions in China, as well as special concerns and significant risks not usually
encountered by a United States company. These include the following:
Risks Relating to Brilliance China Automotive Minibus and Sedan Businesses
Brilliance China Automotive experienced a net loss of Rmb 671.3 million in 2005 and may not be
profitable in 2006 or in subsequent years.
Brilliance China Automotive recorded a net loss of Rmb 671.3 million (US$83.2 million) in 2005
as compared with a net income of Rmb 1.2 million (US$0.14 million) in 2004. During the same
period, total sales of Brilliance China Automotive were Rmb 5,469.0 million (US$677.7 million),
representing a 16.4% decrease from Rmb 6,542.0 million (US$790.4 million) in 2004. The decrease in
total sales was primarily due to the decrease in the sales volumes of minibuses and the Zhonghua
sedan and the decrease in average unit selling prices due to the intensified price competition of
the Chinese automobile industry during 2005. There is no assurance that sales of vehicles by
Brilliance China Automotive will not be affected by the highly competitive automobile market in
China.
In 2005, Brilliance China Automotive also recognized a provision for impairment of intangible
assets of Rmb 173.0 million, as compared with Rmb 50.0 million in 2004, in respect of the design
and development costs of the Zhonghua sedans. Provision for impairment of goodwill increased from
Rmb 47.3 million in 2004 to Rmb 257.7 million in 2005, primarily due to impairment loss in relation
to one of Brilliance China Automotive's jointly controlled entities and a subsidiary. Provision
for impairment of property, plant and equipment increased from Rmb 10.0 million in 2004 to Rmb
48.3 million in 2005, primarily due to the retirement from use and the change in use – from
production to rental – of certain property, plant and equipment of the minibus and automotive
components segment. There can be no assurance that Brilliance China Automotive will not be
required to recognize a provision for impairment of intangible assets, an impairment loss on
goodwill or a provision for impairment of the property, plant and equipment in 2006 or in
subsequent years.
As a result of these factors, Brilliance China Automotive experienced a net loss in 2005, and
may incur losses in 2006 and in subsequent years, which could impact Brilliance China Automotive's
ability to implement its business strategy and adversely affect its financial condition.
If demand for minibuses and sedans in China does not increase, and if Shenyang Automotive does not
increase its market share, the ability of Shenyang Automotive to increase its sales volume will be
adversely impacted.
The success of Brilliance China Automotive's business strategy will depend on the ability of
its 51.0%-owned subsidiary, Shenyang Brilliance JinBei Automobile Co., Ltd., or Shenyang
Automotive, to increase substantially its sales volume. Such an increase can only be achieved if
Shenyang Automotive increases its market share or if there is an overall increase in the size of
the minibus and sedan markets in China. Although the overall unit sales of minibuses and sedans in
China increased between 2000 and 2003 and we have experienced increased sales of our minibuses and
Zhonghua sedans in 2003, the implementation of macro-economic policies and austerity measures in
China has resulted in a significant slowdown in growth in domestic demand for automobiles since the
second half of 2004. After a decrease of 17.4% from 74,618 units in 2003 to 61,618 units in 2004,
Shenyang Automotive's sales volume of minibuses decreased by 2.6% from 2004 to approximately 60,000
units in 2005. Sales volume of Zhonghua sedans decreased 57.1% from 25,600 units in 2003 to 10,982
units in 2004, and to approximately 9,000 units in 2005, representing an 18.0% decrease from 2004. The pace and
strength of the recovery in the automotive industry in China remain difficult to predict. In light
of this industry-wide decline in demand, as well as other factors, there can be no assurance that
demand for Shenyang Automotive's minibuses and sedans will return to previous levels. If overall
demand for domestic minibuses and sedans does not increase in the future, the ability of Shenyang
Automotive to increase its sales volume or market share could be adversely affected.
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Delays in the development of new products, lack of consumer acceptance of new products and
unforeseen shifts in consumer preferences may have a negative effect on Brilliance China
Automotive's financial results.
Meeting consumer demand with new vehicles developed over increasingly shorter product
development cycle times is critical to Brilliance China Automotive's continued success. Brilliance
China Automotive's ability to strengthen its position within its traditional minibus segment while
continue to expand into additional market segments with new products, such as sedans, will play a
key role in determining its future success. In order to compete successfully within its traditional
markets, as well as to enter new markets with new product offerings, Brilliance China Automotive
must assess trends in consumer preferences, modify existing products or develop new products to
match those trends and deliver to market these newly developed or modified products before such
preferences change. Delays in the development of new products, lack of consumer acceptance of new
products and unforeseen shifts in consumer preferences may have a negative effect on Brilliance
China Automotive's financial results.
Brilliance China Automotive has experienced a management turnover and could continue to have
problems retaining and recruiting key personnel in the future.
Brilliance China Automotive had a turnover of its directors and executive officers in 2004,
2005 and 2006, and this trend of management changes may continue in the future. In 2004, three of
its directors had either resigned or retired. Of the three directors who resigned or retired in
2004, one was an executive director and two
were independent non-executive directors. In 2005, three executive directors had resigned. Of the
three directors who resigned in 2005, one was the President and Chief Executive Officer, another
was the Vice President and Chief Financial Officer, and the third was the Vice Chairman, Executive
Vice President and Company Secretary. In 2006, an executive director, who was appointed in 2004 as
President and Chief Executive Officer to fill the then vacant positions, resigned and a
non-executive director retired. While Brilliance China Automotive appointed a new President and
Chief Executive Officer, a new Chief Financial Officer and new executive directors and independent
non-executive directors between 2004 and now, there can be no assurance that this relatively new
management team will be as effective in implementing Brilliance China Automotive's business
strategies or that any of the new strategies that the new management team may decide to implement
will achieve its intended objectives.
Brilliance China Automotive's success depends to a large degree upon the continued
contributions of key management and other personnel, some of whom could be difficult to replace.
There can be no assurance that Brilliance China Automotive will be able to recruit suitable
candidates, and high turnover of senior management can adversely impact Brilliance China
Automotive's stock price and customer relationships as well as make recruiting for future
management positions more difficult. In addition, Brilliance China Automotive must successfully
integrate any new management personnel that it recruits in order to achieve its operating
objectives, and changes in other key management positions may temporarily affect its financial
performance and results of operations as new management may need time to become familiar with its
business. Accordingly, Brilliance China Automotive's future financial performance will depend to a
great extent on its ability to motivate and retain key management personnel.
There are significant risks involved in Brilliance China Automotive's joint venture with BMW to
produce BMW sedans in China.
On March 27, 2003, Brilliance China Automotive, through its indirect subsidiary, Shenyang
JinBei Automotive Industry Holdings Company Limited, or SJAI, entered into a joint venture contract
with BMW Holding BV, or BMW Holding, to assemble, produce and sell BMW designed and branded sedans
in China. Production began in September 2003 and the 3-Series and 5-Series sedans were formally
launched in China in October and November 2003, respectively. There are significant risks involved
in this joint venture, including, but not limited to, the ability of the joint venture to obtain
adequate financing as and when necessary, obtain timely delivery of imported components and parts,
source necessary components at competitive prices, successfully develop, manufacture, market and
sell BMW sedans in China, and obtain appropriate approvals for its new products from governmental
authorities in China. Brilliance China Automotive currently has a 49.0% effective interest in the
joint venture and provides guarantees for the performance of all obligations of SJAI, including
required capital contributions.
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The ownership of Brilliance China Automotive by its largest shareholder is currently the subject of
litigation.
On January 21, 2003, a writ dated January 21, 2003, or the Writ, brought by Broadsino Finance
Company Limited, or Broadsino, as the Plaintiff, was filed with the Supreme Court of Bermuda which alleged
that the interest of the Chinese Financial Education Development Foundation, or the Foundation, in
1,446,121,500 shares of Brilliance China Automotive, or the Sale Shares, was held in trust for
Broadsino and was improperly transferred to Huachen Automotive Group Holdings Company Limited, or
Huachen.
In the course of legal proceedings with Broadsino, Brilliance China Automotive achieved the
following: (i) overturning on February 11, 2003 an ex parte Court Order dated January 22, 2003 which had
restrained Brilliance China Automotive from, amongst other things, registering the transfer of the
Sale Shares by the Foundation to Huachen and/or Huachen to certain directors of Brilliance China
Automotive; (ii) initiating on March 10, 2003, a Strikeout Summons at the Supreme Court to have the
Writ and the statement of claim struck out, which proceedings were duly heard before the Supreme
Court, and which resulted on December 31, 2003 in that court issuing a judgment to strike-out the
Writ; (iii) challenging Broadsino's attempts for appeal to the Court of Appeal of Bermuda, Civil
Appellant jurisdiction which appeal was then dismissed by that court's judgment of March 14, 2005
which ruled in Brilliance China Automotive's favor; (iv) challenging at all stages Broadsino's
further attempts for leave to appeal to the Privy Council in the United Kingdom with respect to the
Court of Appeal's judgment; and (v) being awarded costs in Broadsino's seeking of a grant of leave
on November 10, 2005 in the Court of Appeal in Bermuda to withdraw its leave to appeal to the Privy
Council.
On August 7, 2003, a lawsuit was filed in the United States District Court for the District of
Columbia by the former Chairman of Brilliance China Automotive and others against the Liaoning
Provincial Government relating to Huachen's ownership of certain shares of Brilliance China
Automotive. On March 3, 2005, a motion to dismiss the claim in favor of Liaoning Provincial
Government was granted by the District Court for lack of subject matter jurisdiction. The
plaintiffs appealed to the United States Court of Appeal of the District of Columbia and a decision
is pending. Brilliance China Automotive has never been named as a party to this lawsuit.
The directors of Brilliance China Automotive do not believe the recent litigation in Bermuda
or any other litigation in other jurisdictions described above have had or will have a significant
impact on the financial position of Brilliance China Automotive. See "Item 8 — Financial
Information — Legal Proceedings" for further details of these litigation proceedings.
Failure by Brilliance China Automotive to continue to form and maintain alliances with foreign
automobile manufacturers could adversely affect its competitiveness.
In order for Brilliance China Automotive to remain competitive and obtain additional
technology and financing, it is crucial that it enters into and maintains alliances with foreign
motor vehicle manufacturers. This is particularly true since China's accession to the World Trade
Organization, or the WTO, in November 2001. As a result of the reduction in import restrictions,
more automobile manufacturers have been and will be entering China's motor vehicle market. If
Brilliance China Automotive cannot maintain its existing alliances with Toyota and BMW or form
strategic alliances with other foreign automobile manufacturers regarding the establishment of
joint ventures and the procurement of necessary components on commercially beneficial terms, its
competitive position will be adversely affected.
The inability of Shenyang Automotive to access Toyota's technical resources to upgrade Shenyang
Automotive's products, or Toyota's provision of assistance to any of Shenyang Automotive's
competitors could negatively impact Shenyang Automotive's sales and competitive position.
Shenyang Automotive has historically relied to a significant extent on Toyota for technical
assistance for its minibuses. On December 17, 2001, Shenyang Automotive entered into an agreement
with Toyota for the technology transfer of the fifth generation of the Toyota minibus — the Granvia
— for which production based upon semi-knockdown kits from Toyota commenced in 2003. In the first
half of 2004, the Granvia, which is marketed under the brand name "Granse" (known as "Grace" before
February 2004) when sold in China by Brilliance China Automotive, entered into commercial
production, with more than 60% of its parts and components from domestic sources. Although Shenyang
Automotive has introduced new products, including its successful
mid-priced minibus, incorporating styling and engineering refinements and modifications without assistance from Toyota,
lack of access to Toyota's technical resources may limit Shenyang Automotive's ability to upgrade
significantly its existing Toyota-designed products. Failure to update its existing models could
eventually result in Shenyang Automotive's products becoming technologically inferior to its
competitors' products, which could have an adverse impact on Shenyang Automotive's sales. Although
Brilliance China Automotive has no knowledge of any intention of Toyota to produce, or assist a
current or potential competitor in the production of, minibuses similar to those of Shenyang
Automotive in China, neither Brilliance China Automotive nor Shenyang Automotive could prohibit
Toyota from doing so.
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Any delay or disruption in Shenyang Automotive's ability to obtain engines from Toyota could limit
Shenyang Automotive's ability to produce its deluxe minibuses.
While Shenyang Automotive is currently in the process of replacing the Toyota engines used in
some of its minibus models with Mitsubishi and Mianyang Xinchen engines, currently most of the
engines installed in Shenyang Automotive's deluxe minibuses are purchased from Toyota on a
commercial basis. Shenyang Automotive generally maintains an inventory of Toyota engines sufficient
to sustain two months of planned production. To date, Shenyang Automotive has not experienced any
material disruption in its supply of engines from Toyota. Changes in regulatory requirements,
tariffs and other trade barriers and price or exchange controls could, however, hinder Shenyang
Automotive's ability to import engines. An extended disruption or reduction in Shenyang
Automotive's supply of Toyota engines would consequently limit Shenyang Automotive's ability to
produce deluxe minibuses.
Any delay or disruption in Shenyang Automotive's ability to obtain engines could limit Shenyang
Automotive's ability to produce its Zhonghua sedans.
Currently all of the Mitsubishi engines installed in Brilliance China Automotive's Zhonghua
sedans are purchased from Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., or
Shenyang Aerospace, and Harbin DongAn Automotive Engine Manufacturing Co. Ltd., or Harbin DongAn,
on a commercial basis. Shenyang Aerospace is an associated company of Brilliance China Automotive,
in which Brilliance China Automotive has currently an indirect 12.8% equity interest. Harbin DongAn
is a joint venture between Harbin DongAn Engine Group, Mitsubishi Group and Malaysia China
Investment Holding Company. See "Item 4 — Information on the Company — Business Overview — Other
Significant Subsidiaries, Jointly Controlled Entities and Associated Companies — Shenyang
Aerospace." Shenyang Automotive is currently in discussions with other domestic and overseas engine
manufacturers, with a view towards broadening its engine sourcing for its Zhonghua sedans, and
considering using foreign designs to produce domestically made engines for sedans and minibuses.
Shenyang Automotive generally maintains an inventory of Mitsubishi and DongAn engines sufficient to
sustain two months of planned production. To date, Shenyang Automotive has not experienced any
material disruption in its supply of engines from Shenyang Aerospace and Harbin DongAn. However,
there can be no assurance that Shenyang Automotive will at all times be able to obtain a steady
supply of Mitsubishi engines from Shenyang Aerospace and Harbin DongAn. An extended disruption or
reduction in Shenyang Aerospace's and Harbin DongAn's supply of engines to Shenyang Automotive
would consequently limit Shenyang Automotive's ability to produce its Zhonghua sedans.
In addition, Shenyang Automotive plans to install engines manufactured by its new engine plant
in its Zhonghua sedans. There is no assurance that these new engines will be successful or will not
have quality-related problems. If Shenyang Automotive is not able to timely manufacture these new
engines with the desired quality, Shenyang Automotive's ability to produce its Zhonghua sedans may
be materially and adversely effected.
If Brilliance China Automotive fails to upgrade its existing production facilities or build new
facilities in a timely and cost-efficient manner, its businesses, financial condition and results
of operation may be negatively affected.
In order to maintain its competitive edge, Brilliance China Automotive's strategy is to
upgrade its production facilities, including molding, welding, painting and assembly facilities and
build new facilities, for example, the construction of its new engine plant. Any failure or delay
in implementing such upgrading or construction plans in a timely and cost-efficient manner could
limit its future growth and have a material adverse effect upon Brilliance China Automotive's
businesses, financial condition and results of operations.
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Shenyang Automotive's competitors may have access to more advanced technology, greater financial
resources and more substantial support from the Chinese government, which could negatively affect
Shenyang Automotive's competitive position.
Some of Shenyang Automotive's competitors have formed joint ventures with, or licensed
technology from, foreign automobile manufacturers, and others may do so in the future. These
competitors may have access to greater financial resources than Brilliance China Automotive or to
technology and equipment that are more advanced than the technology and equipment utilized by
Brilliance China Automotive. In addition, some of Shenyang Automotive's potential competitors may
receive substantial support from the Chinese government, including priority access to loans,
favorable import quotas and tariffs, expedited approvals of proposed projects and products and
preferential tax treatment. Such advantages may make it difficult for Shenyang Automotive to
compete with these other automobile manufacturers.
Huachen, as Brilliance China Automotive's substantial shareholder, may not always act in the best
interest of other shareholders.
Huachen, a wholly owned subsidiary of the Liaoning Provincial Government, currently owns 39.4%
of the issued and outstanding shares of Brilliance China Automotive, which it acquired from the
Chinese Financial Education Development Foundation in December 2002. Accordingly, Huachen is
entitled to cast 39.4% of the votes on all matters voted on by the shareholders of Brilliance China
Automotive (to the extent it is not required to abstain from exercising its voting rights under the
Bye-laws of Brilliance China Automotive and applicable laws and regulations), and therefore is able
to exert substantial influence over the election of Brilliance China Automotive's directors, the
outcome of actions requiring majority shareholder approval and the business in general of
Brilliance China Automotive. Such influence could preclude the ability of minority shareholders to
influence important business decisions of Brilliance China Automotive, and may result in actions or
omissions by Brilliance China Automotive that are not in the best interest of the minority
shareholders.
Significant changes in the cost or availability of raw materials or components may have a material
adverse impact on Brilliance China Automotive's results of operations.
Brilliance China Automotive has established relationships with over 280 suppliers in the PRC
and sources the majority of its important components and raw materials from at least two different
suppliers to ensure availability and increase competition among suppliers. Brilliance China
Automotive has also made significant progress in increasing the domestic component content of its
products. However, certain principal components of BMW sedans continue to be imported from overseas
suppliers. For example, certain components used in sedans produced by BMW Brilliance are imported
from BMW Group and certain other components used in minibuses are imported from Toyota. Because
these components are imported from the BMW Group. Toyota and other suppliers in Europe and Japan,
the costs as well as availability of such components may be affected by exchange rates, import
restrictions, customs clearance, shipment schedules and import duties and consequently drive up
Brilliance China Automotive's costs of production. In addition, unexpected disruptions in the
supply of certain components, particularly from foreign suppliers, may also require using
alternative suppliers or cause delays in the production process. Furthermore, an increase in the
price of electricity or certain raw materials, such as steel, may result in increased costs of
production. Significant changes in the cost or availability of raw materials or components may have
an adverse impact on Brilliance China Automotive's results of operations.
Product liabilities and recall claims may adversely affect Brilliance China Automotive's results of
operation.
Manufacturers and sellers of defective products in China may be subject to liability for
losses and injury caused by such defective products under China's laws. However, there is currently
no compulsory legal requirement under PRC legislation for automobile manufacturers to maintain
insurance coverage in respect of production interruption, product liability or damage to third
party properties. Brilliance China Automotive does not carry product liability insurance or
insurance against losses due to production insurance, product recalls or damage to third party
properties. Brilliance China Automotive cannot guarantee that product liability claims will not be
brought against Brilliance China Automotive or its subsidiaries and affiliates in the future, and,
if such claims are successful, that such claims will not have a material adverse impact upon
Brilliance China Automotive's results of operations, or that the Chinese government will not impose new requirement for sufficient insurance to be
maintained to cover the risks associated with Brilliance China Automotive's China operations,
including those of Shenyang Automotive.
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Brilliance China Automotive's business and future growth depend on availability of funding.
Research and development is capital intensive. Capital costs are funded by Brilliance China
Automotive from operating cash flow and financing. The availability of future borrowings and access
to the capital markets for financing depend on prevailing market conditions and the acceptability
of the financing terms offered. Brilliance China Automotive cannot assure that future financings
will be available on acceptable terms, or in amounts sufficient to fund its needs. If Brilliance
China Automotive fails to obtain sufficient funding, it may be unable to implement its expansion
plans, which may have a material adverse impact upon its business and financial condition.
Brilliance China Automotive is required to comply with increasingly stringent environmental
standards applicable to its vehicles and manufacturing facilities.
Brilliance China Automotive's production facilities are subject to government pollution
regulations enforced by the relevant local governments. In addition, the Chinese government has set
vehicle safety, exhaust and performance standards with which Brilliance China Automotive must
comply. Brilliance China Automotive's operations are sensitive to changes in the Chinese
government's environmental policies relating to all aspects of the automobile manufacturing. There
is no assurance that changes in such policies would not have an adverse effect on the revenue or
results of operations of Brilliance China Automotive.
Brilliance China Automotive may encounter difficulties for compliance with the Sarbanes-Oxley Act
of 2002.
The United States Securities and Exchange Commission, as required by Section 404 of the
Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to
include a management report on such company's internal controls over financial reporting in its
annual report, which contains management's assessment of the effectiveness of the company's
internal controls over financial reporting. In addition, an independent registered public
accounting firm must attest to and report on management's assessment of the effectiveness of the
company's internal controls over financial reporting. These requirements will first apply to our
annual report on Form 20-F for the fiscal year ending December 31, 2006. Our management may
conclude that our internal controls over our financial reporting are not effective. Moreover, even
if our management concludes that our internal controls over financial reporting are effective, our
independent registered public accounting firm may still be unable to attest to our management's
assessment or may issue a report that concludes that our internal controls over financial reporting
are not effective. In preparation for the implementation of the requirements of Section 404, we
are undertaking company-wide documentation of internal controls, performing the system and process
evaluation and testing required. During the course of our evaluation, documentation and
attestation, we may identify certain deficiencies that could adversely affect our ability to
record, process, summarize and report financial data consistent with our management's assertions in
our financial statements. Although we will formulate plans for remedial measures to make necessary
improvements to address any deficiency found, we cannot assure you that we will be able to remedy
the identified deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section 404. We are also in the process of conducting further
evaluation of our internal control over financial reporting and may identify other deficiencies
that we may not be able to remedy in time by the deadline for compliance with Section 404. If we
fail to achieve and maintain the adequacy of our internal controls, we or our auditors may not be
able to conclude that we have effective internal controls, on an ongoing basis, over financial
reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls,
particularly those related to revenue recognition, are necessary for us to produce reliable
financial reports and are important to help prevent fraud. As a result, our failure to achieve and
maintain effective internal controls over financial reporting could result in the loss of investor
confidence in the reliability of our financial statements, which in turn could harm our business
and negatively impact the trading prices of our ADSs. Furthermore, we have already incurred
considerable costs and spent significant management time and other resources in an effort to comply
with Section 404 and other requirements of the Sarbanes-Oxley Act. We anticipate that we will
continue to incur considerable costs and use significant resources for compliance with Section 404.
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There is no assurance that the research and development carried out by Brilliance China Automotive
will materialize in products that can achieve market acceptance.
Brilliance China Automotive invests and plans to continue to invest capital and other
resources to develop or acquire proprietary automobile-related technologies. As the development
of proprietary technologies is a highly complex, uncertain and costly process, there is no
assurance that Brilliance China Automotive can successfully develop and commercialize new
products based on its new technologies and innovations (or to do so in a timely manner), or that
any new products that Brilliance China Automotive introduces will achieve market acceptance. For
example, Brilliance China Automotive will begin manufacturing engines at its new engine plant in
late June 2006 for installation in its sedans. Brilliance China Automotive has made significant
investments for the development and manufacture of these new engines and there is no assurance
that the engines built at the new engine plant will achieve the desired quality or market
acceptance. If Brilliance China Automotive's efforts to develop and commercialize new products
based on such technologies are unsuccessful, it may not be able to recover its investment in such
technologies and may suffer losses as a result of the failure of such products.
Moreover, if Brilliance China Automotive's research and development capabilities are
impaired, the development of Brilliance China Automotive's products may be delayed and which, in
turn, may adversely affect its business plans and operations.
Brilliance China Automotive's intellectual property rights may be infringed by third parties and,
Brilliance China Automotive may also face infringement claims brought by third parties.
Brilliance China Automotive has adopted strict policies to protect its existing and future
intellectual property under existing and future patent, copyright, trademark, trade secret and
unfair competition laws. However, policing breaches of its intellectual property rights is
difficult and sometimes impracticable. There is no assurance that the current measures taken by
Brilliance China Automotive will prevent infringement of Brilliance China Automotive's
intellectual property rights. Counterfeit automobiles and automotive parts that improperly use
Brilliance China Automotive's brands, technology or designs could cause it to lose sales and
damage its reputation, brands and product images. Even if Brilliance China Automotive succeeds in
establishing infringement claims against third parties, they may be unable to pay damages and
expenses.
Brilliance China Automotive may also face infringement claims brought by third parties.
These claims against Brilliance China Automotive could cause it to incur significant legal fees
and other costs, divert its management's attention and cause significant disruptions to its
businesses and operations. If an infringement claim is successfully asserted against Brilliance
China Automotive, it could also be required to pay substantial monetary damages and be injoined
from further production or sale of certain products, which could have a material adverse effect
on its businesses, results of operations and financial condition.
Brilliance China Automotive has uninsured risks.
Brilliance China Automotive's insurance coverage, as of December 31, 2005, includes fire,
flood, riot, strike, malicious damage, business interruption, transportation, product and public
liability. However, there are certain types of losses, for instance, losses resulting from acts
of terrorism which are disproportionately expensive or practically infeasible for Brilliance
China Automotive to fully insure against, or to insure at all. Therefore, there may be
circumstances in which Brilliance China Automotive will not be fully insured for losses and
liabilities, which may in turn result in the interruption of its business. These uninsured losses
and liabilities could adversely affect the financial position of Brilliance China Automotive.
Brilliance China Automotive may not succeed under the "Local Branding" approach to maintain and
strengthen the name recognition of its "Zhonghua" brand and may subsequently suffer loss as PRC
consumers give more weight to brand recognition as they make auto purchase decisions.
The "Zhonghua" brand is considered one of PRC's "Local Brands" of domestically produced
vehicles. This "Local Branding" approach encourages PRC auto companies to establish and grow their
self-established auto name brands and to use domestic technologies, production facilities and
components to build vehicles. Shenyang Automotive's "Zhonghua" had been recognized as a well-known
"Local Brand" shortly after its launch. However, because PRC customers have associated auto brands with automobile quality, innovation and
reliability, and brand recognition has become an increasingly important factor in consumers'
decisions in purchasing vehicles, certain foreign auto brands still have substantial brand
recognition advantage over these "Local Brands". Thus although Shenyang Automotive has committed
itself to this branding approach and has made multi-faceted efforts to boost its brand recognition,
there can be no assurance that this approach will be effective in the long run, nor can there be
assurance that "Zhonghua" as well as other brands Brilliance China Automotive may launch in the
future can withstand the severe competition from the long- established foreign auto brands.
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Risks Relating to the Minibus and Sedan Industries in China
China's automobile demands may become more volatile due to macroeconomic factors.
After the rapid growth between 2000 and 2003, China's sedan industry growth has slowed
significantly in 2004. In particular, the sales volume increased 75% from 2002 to 2003, as compared
to only 16% from 2003 to 2004. China's sedan industry has however showed significant improvement in
2005. According to China Automotive Technology & Research Center, sedan sales volume increased by
28.0% to 3,131,950 sedan units in 2005, compared to the 2,448,557 sedan units sold in 2004. Sales
performance in China's sedan market improved further in the first four months of 2006 with a total
of 1,719,032 sedan units being sold, compared to the 1,129,497 sedan units sold in the same period
in 2005, an increase of 52.2% year on year. However, there is no assurance that this growth will
continue.
The demand for automobiles in China is affected by various factors beyond Brilliance China
Automotive's control, including:
•
economic and monetary policies implemented by the Chinese government;
•
availability of automobile consumption loans;
•
availability of automobile insurance policies;
•
consumer confidence;
•
volatility in petroleum, diesel and other commodity prices; and
•
development of transportation infrastructure, for example express ways.
If the general economy in China slows down or the Chinese government adopts new policies that
adversely affect the automotive industry, the demand for automobiles is also likely to experience a
significant down turn.
Over the years, Brilliance China Automotive has been increasing its production capacities in
anticipation of a significant increase in automobile demand in China. Any slow down in automobile
demand in China may lead to an increase in Brilliance China Automotive's inventory and could result
in a significant underutilization of its production capacity. As a result, Brilliance China
Automotive's results of operations and financial condition could be materially and adversely
affected.
Competition is intense in China's automobile industry.
Brilliance China Automotive currently faces intense competition mainly from other Chinese
domestic automobile manufacturers. Many of Brilliance China Automotive's competitors have joint
ventures with leading foreign automobile manufacturers and may have significantly more resources
than Brilliance China Automotive. Any further increase in competition may dilute Brilliance China
Automotive's market share and reduce its profit margin. The competition that Brilliance China
Automotive faces also requires it to increase its marketing and development costs.
As Chinese automotive components and parts industry is highly fragmented, Brilliance China
Automotive competes with a large number of manufacturers in this market. Brilliance China
Automotive also competes with other automobile manufacturers and automotive components and parts
manufacturers in the hiring and retention of management and skilled employees. There can be no assurance that Brilliance China Automotive will
be able to compete successfully with its competitors in the automobile and automotive components
and parts industries. If Brilliance China Automotive's competitors gain a competitive advantage in
terms of value for money, product quality, brand recognition or financial resources, the market
share, profitability and financial position of Brilliance China Automotive may be adversely
affected.
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Reduced tariffs and import restrictions on foreign-made motor vehicles and motor vehicle components
as a result of China's entry into the WTO may lead to increased competition for Brilliance China
Automotive.
The Chinese government imposes restrictions, quotas and tariffs on the import of foreign-made
motor vehicles, as well as motor vehicle components. However, as a result of China's accession to
the WTO, which regulates trading and tariffs among its signatory states, in November 2001, China
has committed to reducing its import restrictions on motor vehicles and motor vehicle components.
In addition, China will be required to conform its import tariffs to the uniform tariffs under the
WTO.
Effective January 1, 2002, China reduced its import tariffs on motor vehicles and automotive
components from between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to 50.7%
and between 14% to 31.4%, respectively. This range was lowered further to between 4.8% and 25% for
automotive components in 2003, between 5% and 22.9% in 2004 and between 5% and 18.6% in 2005. In
2006, the import tariffs on automotive components were further reduced to between 5.0% and 14.3%.
In 2004, the average import tariffs on automotive components for the deluxe minibuses (including
Granse minibuses) and Zhonghua sedans were 13.8% and 10.5%, respectively, and in 2005, the average
tariffs became 9.7% and 12.1% for the imported components for deluxe minibuses and Zhonghua sedans,
respectively. In addition, tariffs on vehicles with nine seats or less and engine sizes of three
liters or below fell from 43.9% in 2002 to 38.2% in 2003, while tariffs on vehicles with more than
nine seats and engines of more than three liters decreased from 50.7% in 2002 to 43.0% in 2003. In
2004, tariffs were 34.2% for vehicles with nine seats or less and engine sizes of three liters or
less and 37.6% for vehicles with more than nine seats and engines of more than three liters. In
2005, tariffs were fixed at 30% for all motor vehicles. These tariffs were further reduced to 28%
in January 2006 and are scheduled for further reduction to 25% in July 2006.
Although lower tariffs and reduced import restrictions may benefit Brilliance China Automotive
in terms of lower cost of imported components, lower tariffs and reduced import restrictions could
also lead to a substantial increase in the number of minibuses, sport utility vehicles, sedans and
other motor vehicles imported into China, thereby significantly increasing competition in
Brilliance China Automotive's current and proposed markets.
The automobile industry is heavily regulated in China, and automobile-related regulations may
become even more stringent in the future.
Brilliance China Automotive is subject to various laws, rules and regulations in China
imposed at national, provincial and municipal levels that regulate or affect China automobile
manufacturing industry and automotive components and parts manufacturing industry, including:
•
crash test requirements and other safety standards in relation to automobile and
automotive parts and components;
•
emission standards;
•
maximum fuel consumption;
•
minimum warranty requirements;
•
automobile recall requirements;
•
noise, waste, discharge and other pollution controls relating to manufacturing of automobiles;
•
restrictions on road use, including time restriction and segmental restriction; and
•
market entry requirements and/or minimum production requirements for automobile and
automotive components and parts
manufacturers.
11
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Moreover, every new product type must be approved by the Chinese government before it can be
introduced into the market. This approval process can sometimes be lengthy, and can impact the
ability of Brilliance China Automotive to introduce new products in a timely manner. This
regulatory framework may limit the flexibility of Brilliance China Automotive to respond to
market conditions or competition. The cost of complying with these policies and regulations can
also be significant. Brilliance China Automotive's operations are sensitive to changes in the
Chinese government's policies relating to all aspects of the automobile industry. There can be no
assurance that changes in such policies would not have an adverse effect on the revenue or
results of operations of Brilliance China Automotive.
In addition, China's regulators may introduce in the future more stringent regulations and
measures which will affect Brilliance China Automotive's automobile manufacturing and automotive
components and parts manufacturing businesses. In June 2006, the regulators have announced that
new measures will be introduced to trim overcapacity in the PRC automobile industry and promote
local brands. For example, annual sales of automobile manufacturers in China must reach certain
levels in order for them to build new manufacturing plants. The imposition of any such more
stringent requirements may require Brilliance China Automotive to incur substantial and costly
changes to its automobile and/or automotive components and parts designs and its business
structure or organization, or restrict its ability to respond to changing market conditions or
competition. Moreover, Brilliance China Automotive's failure to comply with such laws and
regulations would result in fines, penalties or lawsuits.
China's automobile industry is significantly dependent upon the economy of China.
The performance of China's automobile manufacturing industry is highly dependent on general
economic conditions and the purchasing power of Chinese consumers. Thus, the revenue and profits
of Brilliance China Automotive are subject to cyclical fluctuations and may be adversely affected
by any unfavorable changes in the economic conditions in China.
Increase in fuel prices may adversely affect demand for automobiles.
Fuel prices (including prices of petroleum and diesel) in China reached historical heights in
May 2006. Any further increase in fuel prices may:
•
have an adverse impact on China's economy and may thereby result in a slow down for
automobile demand;
•
increase Brilliance China Automotive's production costs due to increase in costs of
petrochemical products; and
•
discourage customers from purchasing automobiles due to increased running costs.
If fuel prices continue to increase or remain at high levels, Brilliance China Automotive's
sales and profitability could be materially and adversely affected.
China's re-adjustment of consumption taxes on vehicles may cause decline of demand for certain
models Brilliance China Automotive currently manufactures.
On April 1, 2006, the State Administration of Taxation of China, in an effort to encourage
environmental protection and fuel efficiency, re-adjusted consumption tax rates on passenger
vehicles. Before the re-adjustment, the consumption tax rate for passenger vehicles was a three-
tiered system: 3% for automobiles with engine displacement lower than 1.0-liter; 5% for
automobiles with engine displacements between 1.0 liter and 2.0-liter, and 8% for automobiles with
engine displacements above 2.0-liter. After the re-adjustment, tax
rates on vehicles with smaller engines (under 2.0-liter) either fell or remained unaltered, whereas tax rates
on automobile with larger engines were raised. The new tax rates are: 3% for 0.0-1.5-liter; 5% for
1.51-2.0-liter; 9% for 2.01-2.5-liter; 12% for 2.51-3.0-liter; 15% for 3.01-3.5-liter; and 20% for
4.0-liter and above. Consequently, the tax rates on the BMW 3 and 5 series sedans produced by BMW
Brilliance, as well as the 2.4-liter Zhonghua sedans have been raised by this re-adjustment. As a
result of this new consumption tax regime, the prices of the above-mentioned vehicles have
increased, which may lower demand for these vehicles in 2006 and subsequent years, and therefore
negatively impact Brilliance China Automotive's businesses and results of operations.
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Risks Relating to China's Economy and Regulatory System
China's economic, political and social conditions, as well as government policies, could affect
Brilliance China Automotive's businesses.
China's economy differs from the economies of most developed countries in many respects,
including:
•
extent of government involvement;
•
level of development;
•
growth rate;
•
control of foreign exchange; and
•
allocation of resources.
While China's economy has experienced significant growth in the past 20 years, growth has
been uneven, both geographically and among the various sectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures benefit the overall PRC economy, but may also have a negative
effect on Brilliance China Automotive's operations. For example, Brilliance China Automotive's
financial condition and results of operations may be adversely affected by the Chinese
government's control over capital investments or any changes in tax regulations or foreign
exchange controls that are applicable to it.
China's economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the Chinese government has implemented measures emphasizing the
utilization of market forces for economic reform, the reduction of state ownership of productive
assets and the establishment of sound corporate governance in business enterprises, a substantial
portion of productive assets in China is still owned by the Chinese government. In addition, the
Chinese government continues to play a significant role in regulating the development of
industries in China by imposing top-down policies. It also exercises significant control over PRC
economic growth through the allocation of resources, controlling the payment of foreign
currency-denominated obligations, setting monetary policy and providing preferential treatment to
particular industries or companies.
Exchange rates fluctuations may affect the results of operations of Brilliance China Automotive.
Brilliance China Automotive's major operations are based in China and a significant
proportion of its turnover is derived from its operations in China.
Renminbi was revalued on July 21, 2005 to Rmb 8.11 per US$1.00 from its previously pegged
rate of Rmb 8.28 per US$1.00. The People's Bank of China also announced that Renminbi would be
pegged to a basket of foreign currencies, rather than tied solely to the U.S. dollars, and would
trade within a 0.3% band against this basket of currencies, which includes, without limitation,
U.S. dollars, Euro, Japanese yen, South Korean won, British pounds, Thai baht and Russia ruble.
There is no assurance on whether there will be any further revaluation of Renminbi. Any further
revaluation of Renminbi may adversely affect China's economy and may therefore lead to a down turn
in the automobile demand in China.
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Budgetary constraints on China's government entities and state enterprises could affect Shenyang
Automotive's sales and pricing of products.
Brilliance China Automotive believes that approximately 30% and 35% of Shenyang Automotive's
2005 revenues from minibuses and sedans, respectively, were derived from sales to governmental
agencies and certain state-run enterprises. Because of Shenyang Automotive's customer composition,
sales and pricing of its products can be affected by budgetary constraints applicable to
government entities and state enterprises.
Any significant failure or disruption of China's banking system could materially and adversely
affect Brilliance China Automotive's ability to obtain credit.
Most major banks in China are owned by the Chinese government. Most of these banks have
historically extended significant amounts of loans according to governmental policy rather than
for commercial reasons. As a result, these banks currently have significant loans outstanding to
state-owned enterprises, many of which have incurred recurring and material losses. Consequently,
many banks in China have substantial levels of loans that are not current with respect to payments
of either interest or principal and may not have made adequate provisions to cover potential
losses on these loans. Any significant failure or disruption of China's banking system could
materially and adversely affect Brilliance China Automotive's ability to obtain credit and the
economic environment in which it conducts its business and may also affect its customers and
distributors.
Shenyang Automotive's ability to obtain sufficient foreign exchange to satisfy its requirements is
dependent on authorization of the State Administration of Foreign Exchange of China.
Substantially all of the revenues of Shenyang Automotive are denominated in Renminbi, while
some of its operating expenses, purchase costs of components and capital expenditures are
denominated in foreign currencies. The Renminbi currently is not a freely convertible currency.
The State Administration of Foreign Exchange of China, under the authority of the People's Bank of
China, regulates the conversion of Renminbi into foreign currency. There can be no assurance that
the current authorizations for foreign-invested enterprises, such as Shenyang Automotive, to
retain its foreign exchange to satisfy foreign exchange liabilities or to pay dividends in the
future will not be limited or eliminated or that Shenyang Automotive will be able to obtain
sufficient foreign exchange to pay dividends and to satisfy their other foreign exchange
requirements.
There are inherent uncertainties in China's legal system which may affect Brilliance China
Automotive.
China's legal system is a civil law system. Unlike the common law system, the civil law
system is based on written statutes in which decided legal cases have little value as precedents.
Since 1979, the Chinese government has begun to promulgate a comprehensive system of laws and
has introduced many new laws and regulations to provide general guidance on economic and business
practices in China and to regulate foreign investment. Progress has been made in the promulgation
of laws and regulations dealing with economic matters such as corporate organization and
governance, foreign investment, commerce, taxation and trade. The promulgation of new changes to
existing laws and the abrogation of local regulations by national laws could have a negative
impact on the business and prospects of Brilliance China Automotive and its joint ventures. In
addition, as these laws, regulations and legal requirements are relatively recent, their
interpretation and enforcement may involve significant uncertainty. The interpretation of PRC laws
may be subject to policy changes which reflect domestic political changes. As China's legal system
develops, the promulgation of new laws, changes to existing laws and the preemption of local
regulations by national laws may have an adverse effect on Brilliance China Automotive's
prospects, financial condition and results of operations.
14
Table of Contents
Other Risks
There can be no assurance that there will not be another significant outbreak of a highly
contagious disease.
In 2003, there was an outbreak of Severe Acute Respiratory Syndrome, or SARS, in the PRC,
Singapore, Hong Kong, other Asian countries and Canada. The SARS outbreak had a significant adverse
impact on the economies of the affected countries. Recently, there have been media reports
regarding the spread of the H5N1 virus or "Avian Influenza A" among birds, poultry and in some
isolated cases, transmission of Avian Influenza A virus from animals to human beings. There can be
no assurance that there will not be another significant outbreak of a severe contagious disease. If
such an outbreak were to occur, it may have a material adverse impact on the operations of
Brilliance China Automotive and its results of operations may suffer.
See also "Government Regulation" and "Environmental Matters" in "Item 4 — Information on the
Company", "Item 5 — Operating and Financial Review and Prospects," "Item 8 — Financial Information
— Legal Proceedings" and "Item 11 — Quantitative and Qualitative Disclosures About Market Risk".
ITEM 4. INFORMATION ON THE COMPANY
History and Development of Brilliance China Automotive
Brilliance China Automotive Holdings Limited was established as an exempted company with
limited liability under the laws of Bermuda on June 9, 1992. Brilliance China Automotive's
principal place of business is Suites 1602-05, Chater House, 8 Connaught Road Central, Hong Kong,
telephone number: (852) 2523-7227.
Brilliance China Automotive was initially established to hold a 51.0% interest in Shenyang
Brilliance JinBei Automobile Co., Ltd. (formerly known as Shenyang JinBei Passenger Vehicle
Manufacturing Company, Ltd.), or Shenyang Automotive, a Sino-foreign equity joint venture
enterprise established on July 22, 1991. The remaining 49.0% interest in Shenyang Automotive was
owned by Shenyang JinBei Automotive Company Limited (formerly Shenyang Brilliance Automotive
Company Limited and FAW-JinBei Automotive Company Limited), or JinBei. In February 2003, an
amendment was made to Shenyang Automotive's joint venture contract and as a result, the term of
Shenyang Automotive became perpetual. Shenyang Automotive is currently the leading manufacturer and
distributor of minibuses in China and also the manufacturer of Zhonghua sedans.
On December 29, 2003, Brilliance China Automotive, through Shenyang XinJinBei Investment and
Development Co., Ltd., or SXID, and Shenyang JinBei Automotive Industry Holdings Co., Ltd., or
SJAI, its 99.0% and 98.0% indirectly owned subsidiaries, respectively, entered into agreements to
acquire the entire equity interests of Shenyang Automobile Industry Asset Management Company
Limited, or SAIAM, and Shenyang XinJinBei Investment Co., Ltd, or SXI. SAIAM and SXI own 29.9% and
11%, respectively, of the issued share capital of JinBei. Upon the completion of the acquisition
and the receipt of government approvals for the transaction, which is expected by the end of 2006,
Brilliance China Automotive's effective interest in Shenyang Automotive will increase from 51.0% to
approximately 70.7%.
Prior to May 1998, Brilliance China Automotive's sole operating asset was its interest in
Shenyang Automotive. On May 18, 1998, Brilliance China Automotive acquired 50% and 51% equity
interests, respectively, in Mianyang Xinchen Engine Co., Ltd., or Mianyang Xinchen, a manufacturer
of gasoline engines for use in passenger vehicles and light duty trucks, and Ningbo Yuming
Machinery Industrial Co., Ltd., or Ningbo Yuming, a producer of automobile windows and window
molding and stripping. Mianyang Xinchen is a Sino-foreign joint venture whose 50-year term will
expire in 2048. Ningbo Yuming is a wholly foreign-owned enterprise with a 50-year term that will
expire in 2043. On October 19, 2004, Brilliance China Automotive, through its subsidiary Beston
Asia Investment Limited, entered into an agreement with Ms. Chen Qiuling for the acquisition of her
49% interest in Ningbo Yuming. Approvals of the acquisition were obtained from the relevant Chinese
authorities on November 25, 2004 and Ningbo Yuming has thus become a wholly owned subsidiary of
Brilliance China Automotive.
In addition to the acquisition of interests in Mianyang Xinchen and Ningbo Yuming, Brilliance
China Automotive has also acquired from Brilliance Holdings Limited, an affiliated company, a 50.0%
equity interest in Shenyang Xinguang Brilliance Automobile Engine Co., Ltd., or Shenyang Xinguang
Brilliance, on December 11, 2000. Shenyang Xinguang Brilliance is a Sino-foreign equity joint
venture manufacturer of gasoline engines for use in passenger vehicles and light duty trucks.
Shenyang Automotive is a major customer of each of Mianyang Xinchen, Ningbo Yuming and Shenyang Xinguang Brilliance. Brilliance China Automotive believes that
the acquisition of these components suppliers has enabled it to maintain the quality, and ensure a
stable supply, of certain key components required for the production needs of Shenyang Automotive.
15
Table of Contents
On October 12, 1998, June 9, 2000 and July 3, 2000, Brilliance China Automotive established
wholly owned subsidiaries (1) Shenyang XingYuanDong Automobile Component Co., Ltd., or Xing Yuan
Dong, (2) Ningbo Brilliance Ruixing Auto Components Co., Ltd., or Ningbo Brilliance Ruixing, and
(3) Mianyang Brilliance Ruian Automotive Components Co., Ltd., or Mianyang Brilliance Ruian,
respectively, to centralize and consolidate the sourcing of automotive parts and components for
Shenyang Automotive, Ningbo Yuming, and Mianyang Xinchen, respectively. In order to maintain their
preferential tax treatment from the Chinese government, Xing Yuan Dong, Ningbo Brilliance Ruixing
and Mianyang Brilliance Ruian all began manufacturing automotive components in 2001.
Under an acquisition agreement dated April 25, 1998 between Shenyang Automotive and Shenyang
State Assets Administration Bureau, Shenyang Automotive was to acquire a 21.0% indirect interest
in Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., or Shenyang Aerospace, a
Sino-foreign equity joint venture. A revised agreement was subsequently signed on August 15, 1999
among Shenyang Automotive, Shenyang State Assets Administration Bureau, Shanghai Brilliance
Industrial Company Limited and Xing Yuan Dong, under which Shenyang Automotive's effective
interest in Shenyang Aerospace was reduced to 16.8% in exchange for cash consideration and the
remaining 4.2% effective interest was transferred to Xing Yuan Dong at cost. At the completion of
the transfer on May 25, 2000, Brilliance China Automotive's indirect effective interest in
Shenyang Aerospace was 12.8% with Mitsubishi Motors Corporation, or MMC, Mitsubishi Corporate,
China Aerospace Automotive Industry Group Co., MCIC Holdings Sdn. Bhd. and Shenyang Jianhua
Motors Engine Co., Ltd., or Shenyang Jianhua, owning equity interests of 25.0%, 9.3%, 30.0%,
14.7% and 21.0%, respectively. Pursuant to a share transfer agreement dated September 29, 2005,
Shenyang Jianhua agreed to sell to MMC 2% interest in Shenyang Aerospace. The transfer has yet to
be approved by the relevant authorities in China. Upon completion of the transfer, each of
Shenyang Jianhua and MMC will own an equity interests of 19.0% and 27.0% in Shenyang Aerospace,
respectively. Upon completion of the acquisition of additional shares in JinBei and the receipt
of approvals from relevant PRC authorities for the transfer, which is expected by the end of
2006, Brilliance China Automotive's effective interest in Shenyang Aerospace will increase to
approximately 14.6%.
At the end of 1998, Shenyang Automotive began to construct new production lines for the
manufacture of sedans and multi-purpose vehicles, or MPVs. These new production lines were
completed in mid-2002 and reached a total annual production capacity of 100,000 sedans or MPVs as
at the end of 2002. Beginning in 1999, Shenyang Automotive implemented an expansion of its minibus
facilities that resulted in an increase in its annual production capacity for deluxe and mid-priced
minibuses from 40,000 units to 70,000 units in 2002 (based on two shifts per day). The stamping and
assembly workshops currently have annual production capacities of 80,000 and 90,000 units,
respectively, based on two shifts of workers, and can be increased to 120,000 units based on three
shifts. In 2003, Shenyang Automotive constructed a new painting facility with a capacity of 120,000
units per year. In June 2005, Shenyang Automotive invested and built a new engine plant with an
initial planned capacity of 50,000 engines per year. The new engine plant is expected to commence
commercial production in late June 2006.
On December 17, 2001, Shenyang Automotive entered into an agreement with Toyota Motor
Corporation for the transfer of technology relating to the fifth generation of the Toyota minibus,
the Granvia, which Shenyang Automotive markets under the brand name "Granse" (known as "Grace"
before February 2004) in China. Production of this minibus model based on semi-knockdown kits from
Toyota began in the second half of 2002 and commercial production using domestic parts and
components commenced in the second half of 2004.
The Zhonghua sedan, designed by the world-renowned Italdesign, was launched to the market in
China in August 2002, after approval for production and sale of the Zhonghua sedan was obtained
from the Chinese government in May 2002. The latest model, Junjie, was launched in March 2006.
On March 27, 2003, Brilliance China Automotive, through its indirect subsidiary, SJAI, entered
into a joint venture contract with BMW Holding to produce and sell BMW sedans in China. On April
28, 2003, Brilliance China Automotive increased its effective interest in SJAI from 81% to 89.1%
and thereby increased its effective interest in the joint venture with BMW Holding BV from 40.5% to
44.6%. On December 16, 2003, Brilliance China Automotive further increased its effective interest in the joint venture to 49.0% by further
increasing its interest in SJAI from 89.1% to 98.0%. BMW Brilliance received its business license
on May 22, 2003 and introduced the BMW designed and branded 3-Series and 5-Series sedans in China
in October and November of 2003, respectively, based on knockdown kits supplied by BMW. BMW
Brilliance also launched the new 3-Series sedans in China in September 2005. Since the first half
of 2004, BMW Brilliance had begun to incorporate domestically produced components in its 3-Series
and 5-Series sedans.
Brilliance China Automotive currently has no material acquisitions or divestitures planned or
pending.
For additional information see "Item 5 — Operating and Financial Review and Prospects —
Liquidity and Capital Resources — Capital Expenditures".
16
Table of Contents
Business Overview
Brilliance China Automotive's core businesses are the manufacture and sale of minibuses and
Zhonghua sedans in China through its subsidiary, Shenyang Automotive. Brilliance China Automotive
also has a joint venture with BMW Holding to produce and sell 3-Series and 5-Series sedans in
China. In 2005, Shenyang Automotive sold a total of approximately 60,000 minibuses and 9,000
Zhonghua sedans. In the year ended December 31, 2005, a total of 17,501 of the BMW sedans were
sold. Currently, Shenyang Automotive has an annual production capacity of 80,000 units of deluxe
and mid-priced minibuses (based on two shifts per day), 120,000 units of deluxe and mid-priced
minibuses (based on three shifts per day), and 70,000 units of Zhonghua sedans (based on two shifts
per day). BMW Brilliance currently has an annual production capacity of 30,000 units (based on two
shifts per day). In addition, Brilliance China Automotive has also established strategic
partnerships or working relationships with various other leading global automotive companies,
including Toyota, Mitsubishi, FEV Motorentechnik Gmbh, Porshe and Italdesign S.p.A.
Shenyang Automotive's production facilities are located in the industrial city of Shenyang,
the capital of Liaoning Province in northeastern China. Shenyang Automotive's principal products
are the deluxe minibus, the mid-priced minibus and the Zhonghua sedan. Mid-priced minibuses
accounted for approximately 54.7% of the total sales revenue of Brilliance China Automotive in
2005. The deluxe and mid-priced minibuses are 8 to 15-seat minibuses adapted from Toyota's Hiace
minibus (marketed under the name of "Hiase" in China) and Granvia minibuses (marketed under the
name of "Granse" in China).
In 2001, Shenyang Automotive began to install multiple electronic fuel injection engines,
which are currently used in all of Shenyang Automotive's mid-priced minibuses. With the
installation of this engine in the mid-priced minibus, currently all of Shenyang Automotive's
minibuses meet European II emission standards. Since 2004, the Chinese government has been
encouraging its automobile manufacturers to meet the European III emission standards. Currently,
most of the minibuses and Zhonghua sedans with manual transmissions have complied with the European
III emission standards. It is expected that all remaining minibuses and Zhonghua sedans will meet
the European III emission standards by the end of 2007.
On May 22, 2003, BMW Brilliance received its business license issued by the Shenyang City
Administration for Industry and Commerce. Commercial production of BMW-designed and branded sedans
commenced in September 2003 based on knockdown kits supplied by BMW Group. The 3-Series BMW sedans
were launched in the market in October 2003 and the 5-Series were launched in November 2003. BMW
Brilliance launched new versions of the 3-Series in September 2005. Since the first half of 2004,
BMW Brilliance had begun to incorporate domestically produced components in its 3- and 5-Series
sedans. However, a large portion of the production of these vehicles, especially the newly
introduced sedans, is still primarily based upon complete knockdown parts supplied by BMW Group.
In 2005, Shenyang Automotive's sales volume decreased 5.0% from approximately 72,600 units in
2004 to approximately 69,000 units in 2005. The 2005 sales figure comprises approximately 60,000
minibuses and approximately 9,000 Zhonghua sedans. The decrease in overall sales was primarily due
to the decrease in the sales volume of minibuses and the significant decrease in the sales volume
of the Zhonghua sedans due to general production overcapacity and intensified price competition in
China's automobile industry. Our joint venture, BMW Brilliance sold 17,501 BMW-branded sedans in
2005, compared to 8,708 in 2004. Shenyang Automotive's sales in China has been supported by a substantial network of approximately 200 minibus distributors,
including approximately 100 exclusive minibus distributors, and approximately 120 sedan
distributors, as well as approximately 380 after-sales service centers for minibuses and
approximately 190 for sedans. Shenyang Automotive also continued to implement its "4S" sales center
system, with sales, after-sales service, spare parts and surveys offered by the same dealership
outlet. As of the end of 2005, Shenyang Automotive had approximately 70 4S dealership outlets for
minibuses and approximately 70 4S dealership outlets for Zhonghua sedans nationwide.
For the year ended December 31, 2005, Brilliance China Automotive reported sales of Rmb
5,469.0 million (US$677.7 million), representing a decrease of approximately 16.4% compared to
2004 and net loss of Rmb 671.3 million (US$83.2 million) compared with a net income of Rmb 1.2
million (US$0.14 million) in 2004. The decrease in sales and net loss was primarily due to the
decrease in sales volume of Shenyang Automotive, especially for the Zhonghua sedans, and the
decrease in average unit selling prices, resulting from general production overcapacity and
intensified price competition faced by the PRC automobile manufacturers in 2005 that were
exacerbated by rising global fuel prices, which led to an increase in petrol prices in the PRC.
17
Table of Contents
Principal Products
Shenyang Automotive's principal products are minibuses and the Zhonghua sedans. Our joint
venture with BMW, BMW Brilliance, also produces BMW 3- and 5-Series sedans.
Shenyang Automotive's principal minibus products are the deluxe minibus and the mid-priced
minibus, which constituted approximately 17.5% and 54.7% of Brilliance China Automotive's total
sales revenue in 2005, respectively. These vehicles are used primarily for passenger transportation
but can also be modified for use as police vans, ambulances or other specialty vehicles. Shenyang
Automotive sells all of its minibuses under the JinBei brand name in a variety of models designed
to meet the requirements of particular market segments. Brilliance China Automotive believes that
Shenyang Automotive's minibuses have established a reputation in China for high quality and
reliability that has enabled Shenyang Automotive to maintain its market-leading position in recent
years. Shenyang Automotive commenced production of the high-end Granse model in 2002 based on
semi-knockdown kits from Toyota and started production of the domestic version of the Granse model
using domestic parts and components in the first half of 2004.
Shenyang Automotive's Zhonghua sedan was introduced to the commercial market in China in
August 2002 and constituted approximately 20.2% and 15.8% of Brilliance China Automotive's total
sales revenue in 2004 and 2005, respectively. The initial model was a five-seat manual transmission
sedan with a 4-cylinder, 2.0-liter Mitsubishi engine. Shenyang Automotive now also produces manual
transmission Zhonghua sedans with 2.4-liter engines and automatic transmission versions with both
2.0-liter and 2.4-liter engines. In December 2004, the "facelift" version of the Zhonghua model,
known as "Zunchi", was launched. In March 2006, Shenyang Automotive launched another Zhonghua
model, Junjie, which features a 1.6-liter, 1.8-liter or 2.0-liter engine with manual or automatic
transmission.
The following table sets forth certain information with respect to Shenyang Automotive's
principal products as of the date of this annual report.
18
Table of Contents
Deluxe
Minibus
Deluxe
Mid-priced
Zhonghua
Zhonghua
(Granvia or
Minibus
Minibus
Sedan
Sedan
"Granse" Model
(1)
)
(Hiase Model)
(Hiase Model)
Zunchi
Junjie
Maximum number
of passengers
7-8
15
15
5
5
Engine type
Toyota 4-cylinder
2.7 liter gasoline
engine and
Mianyang
Xinchen 2.7 liter
gasoline engine
Toyota 4-cylinder
2.4 liter gasoline
engine and
Mitsubishi 2.4
liter gasoline
engine
Mianyang Xinchen
and Shenyang
Xinguang
4-cylinder
2.2 liter gasoline
engine
Mitsubishi
4-cylinder
2.0 and 2.4 liter
gasoline
engine
Mitsubishi
4-cylinder
1.8 and 2.0 liter
and Mitsubishi
DongAn 1.6 liter
gasoline
engine
Horsepower
105
100.6
92.5
122-130
134-173
Price Range in
Rmb
(2)
119,800-239,800
121,800-156,800
64,800-101,800
105,800-209,800
85,800-128,800
Fuel Consumption
(Liters/100 km)
(3)(4)
10
10
9.8
6.8(MT)/
7.6(AT)
10.1 (MT)/
10.7 (AT)
Maximum speed
(4)
158 km/hr
130 km/hr
130 km/hr
195 km/hr (MT)/
185 km/hr (AT)
185 km/hr (MT)/
180 km/hr (AT)
Domestic
component
content
> 80%
> 85%
100%
92-100%
90-99%
Length
4.7 m
4.8 m
4.8 m
4.88 m
4.65 m
(1)
Known as "Grace" before February 2004.
(2)
Actual price depends on specific model.
(3)
Based on an average speed of 50-55 kilometers per hour for minibuses
and 80 kilometers per hour for sedans.
(4)
MT denotes manual transmission and AT denotes automatic transmission.
The following table sets forth certain information with respect to BMW Brilliance's principal
products as of the date of this annual report.
BMW Brilliance
BMW Brilliance
3-Series Sedan
5-Series Sedan
Models
Series 320 and 325
Series 520, 525 and 530
Maximum number of
passengers
5
5
Engine types
BMW 4 and 6-cylinder
1.9 liter and 2.5 liter
gasoline engines
BMW 6-cylinder
2.0 liter, 2.5 liter
and 3.0 liter
gasoline engines
Horsepower
150 – 218 bhp
170 — 231 bhp
Price range in Rmb
(1)
338,000 — 454,200
484,300 — 648,800
Fuel Consumption
(Liters/100 km)
(2)
7.4 — 8.4
9.8 — 9.9
Maximum speed
220 — 245 km/hr
230 — 250 km/hr
Length
4.52 m
4.84 m
(1)
Actual price depends on specific model.
(2)
Based on an average speed of 80 kilometers per hour.
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Table of Contents
Deluxe minibus
. The deluxe minibus has historically been Shenyang Automotive's flagship
product and is among the highest quality, most technologically advanced minibuses currently
produced in China. The deluxe minibus is used primarily as a passenger vehicle and features air
conditioning, optional power steering, power windows, automatic locks, a rear window wiper, full
interior carpeting and alternative interior configurations.
Shenyang Automotive's high-end products have been further improved to incorporate more
user-friendly features to meet diversified customer demands. In the deluxe line, Shenyang
Automotive has introduced a locally developed model, based on the Toyota 441N, which is equipped
with an anti-lock braking system, improved helix rear suspension and refined interior trim. It has
the highest technical content among Shenyang Automotive's product lines.
On December 17, 2001, Shenyang Automotive entered into an agreement with Toyota for the
technology transfer of the fifth generation of the Toyota minibus — the Granvia — for which
production based upon semi-knockdown kits from Toyota commenced in 2002. Shenyang Automotive began
producing the Granvia using domestic parts in the first half of 2004. The Granvia is marketed under
the brand name Granse (known as "Grace" before February 2004) when sold in China by Shenyang
Automotive. The Granse minibus exhibits several improvements over the fourth generation minibus,
including more responsive performance when carrying heavy loads, better handling, better
maneuverability, 360-degree interior moveable seats and a more luxurious and comfortable interior.
Mid-priced minibus
. The mid-priced minibus was developed by Shenyang Automotive and was
commercially introduced in the second half of 1996. Shenyang Automotive produces two principal
mid-priced minibus models, both of which are based on the deluxe minibus and share the same styling
and body of the deluxe minibus, with the principal difference being the engine. By equipping the
majority of these models with a domestically manufactured Mianyang Xinchen or Shenyang Xinguang
engine, Shenyang Automotive is able to sell
them for significantly less than the deluxe minibus, yet still maintain function and quality
standards for these models that are only slightly lower than the deluxe minibus. This has allowed
the mid-priced minibus models to compete more effectively in terms of price with other domestically
produced products. See "— Competition" below.
In 2002, Shenyang Automotive introduced three new minibus models to the market, including
mid-priced minibuses that utilize Mitsubishi engines and in 2003 Shenyang Automotive launched the
updated versions of these minibus models. In 2004, Shenyang Automotive launched lower-priced models
with more limited features in response to market demand and in the first half of 2005, a
lower-priced domestic version of the Granse was launched. Early 2006, Shenyang Automotive launched
the manual transmission model of the minibuses meeting the European III emission standards.
Since the end of 2003, Shenyang Automotive's minibus capacity has been 80,000 units per year
(based on two shifts) and 120,000 units per year (based on three shifts). Brilliance China
Automotive believes that its long-term interests require that Shenyang Automotive continue to
expand its production capacity. Any increase in Shenyang Automotive's future revenue will depend on
its ability to continue to expand in a similar manner. Realization of its production and sales
goals is also contingent upon other factors, including the development of new vehicle models, the
ability to continue to achieve overall cost reductions, ongoing
access to high-quality raw materials and domestic component manufacturers and maintenance of a large well-trained labor force,
an effective distribution network and after-sales service capabilities.
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Table of Contents
Zhonghua sedan
. The Zhonghua sedan was designed by Italdesign and was commercially introduced
by Shenyang Automotive in August 2002 after receiving approval from the Chinese government in May
2002. This sedan is designed to target the mid-priced sedan market segment, including governmental
institutions, businesses and individual users in China. This sedan model was specifically designed
for the Chinese market and utilizes a high degree of domestic component content, thereby offering
cost advantages to consumers. In 2003, Shenyang Automotive spent approximately Rmb 200.0 million on
upgrading the Zhonghua production facilities and related dies and tools.
On March 27, 2001, Brilliance China Automotive entered into a three-year technical assistance
agreement with BMW Group under which BMW engineers provide consulting services to help in the
initial stages of production of Zhonghua sedans at Shenyang Automotive's sedan production
facilities in Shenyang, including assistance in achieving and maintaining the desired level of
production quality. A similar agreement entered into in early 2006 between Shenyang Automotive and
BMW Group regarding the technical support program for the Junjie sedan will expire in July 2006.
The following table sets forth Brilliance China Automotive's revenues by category, for the
years 2003 through 2005:
2003
2004
2005
Revenue
Revenue
Revenue
(Rmb million)
%
(Rmb million)
%
(Rmb million)
%
Minibus sales
Deluxe minibus
1,284
12.7
960
14.7
958
17.5
Mid-priced minibus
4,962
49.1
3,797
58.1
2,989
54.7
Zhonghua
sedan sales
(1)
3,345
33.1
1,324
20.2
863
15.8
Subtotal
9,591
94.9
6,081
93.0
4,810
88.0
Other sources of income
(2)
519
5.1
461
7.0
659
12.0
Total
10,110
100.0
6,542
100.0
5,469
100.0
(1)
Commercial launch of the Zhonghua sedan occurred in August 2002.
(2)
Including sales of components and scrap metal.
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The following table sets forth the geographic breakdown of Shenyang Automotive's minibus and
Zhonghua sedan sales revenue throughout China for the years 2003 through 2005:
2003
2004
2005
Province/
Revenue
Revenue
Revenue
Municipality
(Rmb million)
%
(Rmb million)
%
(Rmb million)
%
Beijing
1,686
17.6
1,131
18.6
755
15.7
Guangdong
1,502
15.7
821
13.5
529
11.0
Liaoning
964
10.1
644
10.6
567
11.8
Shanghai
720
7.5
566
9.3
452
9.4
Jiangsu
660
6.9
389
6.4
283
5.9
Zhejiang
686
7.1
328
5.4
188
3.9
Shandong
465
4.8
237
3.9
183
3.8
Tianjin
257
2.7
183
3.0
115
2.4
Heilongjiang
212
2.2
134
2.2
82
1.7
Hebei
226
2.4
128
2.1
87
1.8
Hubei
189
2.0
128
2.1
82
1.7
Hunan
180
1.9
128
2.1
96
2.0
Shaanxi
165
1.7
128
2.1
77
1.6
Henan
168
1.7
110
1.8
106
2.2
Sichuan
240
2.5
103
1.7
115
2.4
Shanxi
106
1.1
103
1.7
72
1.5
Fujian
184
1.9
91
1.5
63
1.3
Jilin
136
1.4
85
1.4
72
1.5
Chongqing
145
1.5
85
1.4
48
1.0
Xinjiang
117
1.2
79
1.3
63
1.3
Yunnan
89
0.9
79
1.3
43
0.9
Anhui
102
1.1
79
1.3
53
1.1
Guangxi
96
1.0
73
1.2
34
0.7
Jiangxi
77
0.8
55
0.9
34
0.7
Inner Mongolia
44
0.5
49
0.8
34
0.7
Guizhou
52
0.5
30
0.5
19
0.4
Hainan
—
—
18
0.3
106
2.2
Other
(1)
123
1.3
97
1.6
452
9.4
Total
9,591
100.0
6,081
100.0
4,810
100.0
(1)
Gansu, Ningxia, Qinghai and Tibet as well as export to other countries.
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Table of Contents
BMW Brilliance
On March 14, 2003, Brilliance China Automotive received formal approval from the Chinese
government with respect to the feasibility study for the establishment of a joint venture between
BMW Holding, a wholly owned subsidiary of BMW AG, and SJAI, an indirect subsidiary of Brilliance
China Automotive. On March 27, 2003, SJAI entered into a joint venture contract with BMW Holding in
relation to the establishment of the joint venture in China. On April 28, 2003, Brilliance China
Automotive, through its indirectly 90%-owned subsidiary, SXID, entered into an agreement with the
10% shareholder of SJAI to acquire an additional 9% interest in SJAI,
thereby increasing its effective interest from 40.5% to 44.6%. On December 16, 2003, by increasing its
indirect interest in SJAI from 89.1% to 98.0%, Brilliance China Automotive effectively further
increased its interest in BMW Brilliance to 49.0%.
The registered capital and total investment cost of the joint venture is Euro 150 million and
Euro 450 million, respectively. As of December 31, 2005, Brilliance China Automotive had injected
approximately Rmb 688.5 million into the joint venture. The joint venture is 50%-owned by each of
SJAI and BMW Holding and has a term of 15 years starting from May 22, 2003, the date of issuance of
the joint venture's business license, which may be extended by mutual consent of the parties to the
joint venture. The business scope of the joint venture is to produce and sell BMW-designed and
branded passenger cars, engines, parts and components and to provide after-sales services
(including repair, maintenance and spare parts) relating to its products. Profits of the joint
venture are shared equally by SJAI and BMW Holding, in proportion to their respective contributions
to the registered capital of the joint venture. This joint venture contract prohibits Brilliance
China Automotive from entering into similar ventures with other automobile manufacturers for the
manufacture and sale of premium sedans in China.
Brilliance China Automotive has agreed to provide a guarantee to BMW Holding in relation to
the performance by SJAI of its obligations under the joint venture contract. A reciprocal guarantee
has been provided by BMW AG to SJAI in respect of the obligations of BMW Holding under the joint
venture contract. In addition, Brilliance China Automotive has been indemnified by SAIAM and
Shenyang JinBei Automobile Industry Company Limited with respect to its liabilities under this
guarantee to BMW Holding.
On May 22, 2003, the business license for the joint venture was issued by the Shenyang City
Administration for Industry and Commerce. BMW Brilliance started the production of the 3-Series BMW
sedans in September 2003 and the 5-Series BMW sedans in November 2003 based on semiknockdown kits
supplied by BMW Group. In September 2005, BMW Brilliance launched a new model of the 3-Series BMW
sedans. Since the first half of 2004, BMW Brilliance had begun to incorporate domestically produced
components in its 3-Series and 5-Series sedans. However, a large portion of the production of these
sedans, especially the newly introduced sedans, is still primarily based on complete knockdown
parts supplied by BMW Group.
Production Process
Minibus Production Process and Equipment
•
Stamping
. Shenyang Automotive produces its own semi-finished steel sheets for
stamping on a "roll, drop and stack" production line. Stamping is carried out at nine
production stations that utilize 36 domestic and imported presses, the largest of which
is calibrated at 3,200 tons and is used to stamp roofs and side panels for the deluxe
and mid-priced minibuses. The 198 and 277 dies used for stamping and cutting body
components for the Hiase and Granse minibuses, respectively, were purchased from
Toyota. Substantially all of the stamped metal vehicle components utilized in Shenyang
Automotive's minibuses are produced in this stamping workshop.
•
Welding
. The welding workshop consists of 2 production lines and 13 process
conveying lines, among which the Hiase has 6 lines and the Granse has 7 lines. Each
line is focused on a different section of the minibus. These lines were manufactured
with Toyota technology and utilize a combination of manual welding and automatic
robotic welding, the latter of which is utilized for the more difficult welding points.
Each welding station is equipped with a domestically manufactured testing machine. The
annual production capacity based on two shifts is 120,000 units among which 80,000
units are dedicated to the existing minibuses and 40,000 units to the Granse.
•
Painting
. Shenyang Automotive currently operates a 50,000 square foot painting
workshop that was set up at the beginning of 2004 to enhance the production capacity.
The new painting workshop has three floors, each with its own function. The new
workshop has an annual production capacity of 120,000 units, with space reserved for
expansion up to an annual production capacity of 150,000. The new workshop uses a
painting method that combines the use of a conveyor, automated machine and robotic
machine. Steps taken to prepare the vehicle body for painting include de-greasing,
rinsing, phosphatization and electrophoretic coating. Using the "3C1B" process, each of
three coats of paint is applied by a sprayer to the minibus body and dried in a heated drying chamber. The
specialized pre-painting preparation of the vehicle allows the frame to withstand
corrosion for eight years. Also, the high standard of cleanliness in the painting
workshop and the advanced paint sprayers used allow Shenyang Automotive to reduce
environmental pollution, provide better working conditions for the painting workshop
employees, conserve raw materials and ensure that each minibus receives three
consistent, high-quality coats of paint. Finally, various quality control tests are
conducted, including measurement of the luster and thickness of the paint on each
vehicle.
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Table of Contents
•
Assembly
. Shenyang Automotive's final assembly workshop is equipped with a
combination single slot, hanging and double slot conveyor. The conveyor is 570 meters
long, has 86 separate workstations and is capable of producing minibuses at the rate of
one every 160 seconds. Shenyang Automotive also developed jointly with the Shenyang
Automation Research Center of the China Science Institute an automated lifting system
that is used in the assembly of the power train, rear chassis and crank case, as well
as a computerized hydraulic machine for carrying out the transfer from a single rail
conveyor onto a hanging line conveyor — the first of its kind to be developed in
China.
•
Testing
. Shenyang Automotive employs an advanced comprehensive vehicle testing
system to ensure that each vehicle conforms to specifications, including wheel
alignment, exhaust emissions, steering, braking and engine performance and testing, and
windshield leakage testing. All of these final testing procedures are also supported by
a comprehensive quality control staff that monitors each step of the production
process. See "— Business Overview — Quality Control" below.
Zhonghua Sedan Production Process and Equipment
•
Stamping
. At present, 147 pieces for 206 types of large and medium parts of the
Zhonghua sedan (including Zunchi and Junjie) are produced in the stamping (or pressing)
workshop. There are 593 imported and domestically produced moulds, five large and
medium pressing lines, among which the line producing large (2,300 ton) parts was
imported from Schuler of Germany and is equipped with robots to handle automated
production. There is also an uncoiling and blanking line from Schuler, which can supply
parts for up to seven production lines, as well as a 100-ton molding press imported
from Kawasaki of Japan. The other pressing lines were purchased from a domestic
equipment manufacturer.
•
Welding
. The welding workshop is required to assemble and weld 394 separate panels,
30 machined parts, 10 roll-pressed parts and 30 standard parts. This line was designed,
manufactured and installed by Kuka of Germany. The welding line consists of 24 zones
and 331 stations, and is capable of spot-welding, carbon dioxide welding, project
welding, T-stud welding, sealing, brazing and hemming. At present, there are 43 working
robots in this workshop, which are used to weld, seal and inspect at the most important
stations on the line. The SKID apparatus that transports components both on the ground
and overhead adds speed and efficiency to the welding process.
•
Painting
. Zhonghua sedans and the BMW-branded sedans share the same painting line.
All of the equipment used in the painting line is provided by Durr of Germany, and the
paint supply system was imported from Graco of the United States. Steps involved in the
body painting process include pre-treatment, E-coat, sealing, PVC, primer, top-coat and
cavity wax. The painting line is highly mechanized and automated, with a central
control system imported from Siemens. The painting line may switch paints of different
colors within 10 seconds and 15 paints of different colors may be used in the same
painting line. All of the paints and other materials utilized in paint workshop are
high quality products sourced both from within China and abroad.
•
Assembly and Testing
. The performance of the assembly and testing workshop is guided
by an information system based on bar code technology. The layout of the final assembly
shop is designed by Schenck Engineering of Germany and consists of the body buffer
line, main production line, test line, water proof line, finishing line and marriage
line, as well as various sub-lines and a rework area. The assembly line utilizes a
double-track conveyer system for transporting the vehicles through each process.
•
Instrument Production.
The instrument panel workshop, occupying an area of 3,700
square meters, produces Zhonghua instrument panels. The processes include vacuum
shaping, foaming, hydrocutting and welding, and use seven different machines. The
workshop has a high production capacity for the production of parts and assembly of
instrument panels.
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Table of Contents
BMW Sedan Production Process
The automotive production process employed by BMW Brilliance is generally divided into four
stages: welding, painting, assembly and testing. In each stage, BMW Brilliance utilizes equipment
primarily imported from Germany. Each stage of the manufacturing process is also carefully
monitored both by quality control engineers and through specialized testing equipment to ensure
that the final product achieves the specified BMW Group's quality standards.
•
Welding
. The manufacturing and welding process in the welding workshop is performed
according to the BMW Group's global standard. The dimensional quality is checked with a
CMM Machine from Wenzel Company of Germany. The sourced welding equipment is from
standard suppliers in Germany. The welding workshop contains stud welding, spot
welding, mig welding and sealing operations. The line operators have been trained by
the BMW Group's specialists and the process is controlled by the BMW Group's
specialists from Germany. The quality checks and audits are consistent with those
performed at other BMW Group plants.
•
Painting
. All of the equipment used in the painting line is provided by Durr of
Germany, and the paint supply system was imported from Graco of the United States.
Steps involved in the body painting process are highly mechanized and automated, with a
central control system imported from Siemens. All of the paints and other materials
utilized in the paint workshop are high quality products sourced both from within China
and abroad.
•
Assembly
. The assembly workshop consists of two areas, both using conveyor systems
designed by the German supplier AFT with 58 line stations in total, as well as handling
devices for heavy parts from Dalmec Company.
•
Testing
. The finishing and testing equipment is located in the second area of the
assembly workshop. A wide range of special equipment used in BMW Group's plants
worldwide is used to test 100% of the cars produced.
Raw Materials and Components
Raw Materials
. To ensure its supply of high-quality domestic raw materials, components and
spare parts, Shenyang Automotive has established stable relationships with over 280 suppliers in
China as of December 2005. Shenyang Automotive sources the majority of its important components and
raw materials from at least two different suppliers to ensure availability and increase competition
among suppliers. In 2005, approximately 62.1% of Shenyang Automotive's components sourcing was
handled through Brilliance China Automotive's subsidiaries and associated companies.
Steel is the principal raw material for Brilliance China Automotive's products. Shenyang
Automotive purchases steel predominantly through the use of supply contracts. Since steel
represented only approximately 7.2%, 6.2% and 6.1% of the total cost of goods sold for the Hiase
minibus, Granse minibus and the Zhonghua sedans in 2005, respectively, the impact of rising steel
prices on Shenyang Automotive's overall production costs was not significant. Furthermore, this
increase in the costs for steel was offset by decreases in the costs of components due to a
decrease in prices of the minibus components used in the minibuses and an increase in the ratio
of domestically produced components used in the Zhonghua sedans.
Components
. Shenyang Automotive has adopted a system that regularly evaluates its existing
suppliers. These suppliers range from well-known international suppliers to domestic suppliers with
special technology and know-how. Shenyang Automotive has conducted a comprehensive survey of its
suppliers against an array of criteria, such as quality problem feedback ratio, production
capacity, quality assurance systems and after-sales services. Implementing this process has enabled Shenyang Automotive to build a stronger supplier network as
the foundation for future growth.
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Table of Contents
The domestic component content of the deluxe minibuses is currently 85% for the Hiase model
and over 80% for the Granse model. The principal components of the Hiase deluxe model that we
continue to import from Toyota are the engines and the rear axles. Shenyang Automotive has
developed deluxe minibuses that would utilize Mitsubishi engines made by Shenyang Aerospace in
order to offer a greater variety of products to its customers. These new models have a higher
domestic component ratio. Mitsubishi engines have already been installed in some of the deluxe
minibus (Hiase model) units.
The mid-priced minibus uses almost 100% domestic parts and the domestic component content of
the Zhonghua sedan is over 90%. Brilliance China Automotive calculates domestic component content
by "looking through" larger components, such as engines, produced by domestic Chinese entities to
determine the percentage of such component's own components that were manufactured outside China.
Because certain components are imported from Toyota and other suppliers in Japan and Europe,
the availability of foreign exchange, exchange rates, import restrictions and the level of import
duties may affect the availability of certain components and Shenyang Automotive's costs of
production. See "Item 5 — Operating and Financial Review and Prospects — Liquidity and Capital
Resources".
Shenyang Automotive is required to pay import duties on imported automobile components.
Shenyang Automotive was subject to an average tariff rate of 9.7% and 12.1% on imported components
used in its deluxe minibuses (including Granse minibuses) and Zhonghua sedans, respectively, in
2005. During 2005, imported components comprised approximately 2.2% of the total costs of all
minibuses. In addition, imported components comprised 3.6% of the total costs of the Zhonghua sedan
during 2005. Changes in foreign currency exchange rates also affect the cost of
foreign-manufactured components imported by China's domestic manufacturers to make larger
components, such as engines, which we purchase domestically. The total aggregate import tariffs
paid by Shenyang Automotive for 2005 were approximately Rmb 15.2 million (US$1.9 million). However,
as a result of China's accession to the WTO, import tariffs on motor vehicle components decreased
to between 4.8% and 25% effective January 1, 2003. In 2004, the import tariff on motor vehicle
components ranged between 5.0% and 22.9% and in 2005, between 5.0% and 18.6%. In January 2006, the
import tariffs on automotive components were further reduced to between 5.0% and 14.3%. A decrease
in import tariffs will result in a decrease in the percentage of the total cost of minibuses and
sedans that imported components comprise.
Brilliance China Automotive intends to continue its efforts to increase domestic component
content for both deluxe minibuses and sedans, while at the same time emphasizing quality. See "Item
5 — Operating and Financial Review and Prospects".
Other Significant Subsidiaries, Jointly Controlled Entities and Associated Companies
Brilliance China Automotive believes that the acquisition of interests in strategic components
suppliers has and will continue to broaden its revenue base, increase the reliability of the supply
of certain core components of Shenyang Automotive's and BMW Brilliance's minibuses and sedans,
enhance their ability to monitor component quality and facilitate greater coordination among the
management and engineering personnel and their respective principal suppliers.
Mianyang Xinchen
Mianyang Xinchen, directly and indirectly through Xing Yuan Dong (described below), accounted
for 5.4% of Shenyang Automotive's purchases of parts and components in 2005. Mianyang Xinchen's
principal product is the 2.2 liter 491Q gasoline engine. In 2000, Mianyang Xinchen also began
producing the 491QE electronic fuel injection engine on a mass production basis to satisfy the
market's demand for products that can meet new higher emission standards. In 2001, Mianyang Xinchen
developed three additional passenger vehicle gasoline engines. As a result, Shenyang Automotive has
access to engines suited to a full range of light-duty passenger vehicles. Mianyang Xinchen had
annual sales of Rmb 485.3 million in 2005. Shenyang Automotive, which installs Mianyang Xinchen's
491Q engine in most of its mid-priced minibuses, accounted for 56.1% of Mianyang Xinchen's sales in
2005. Mianyang Xinchen currently manufactured 491Q, 4G24, 495QF and 4R engines. It sold over 55,000
engines in 2005. Mianyang Xinchen's overall annual sales of gasoline engines in 2005 decreased by
21.0% from 2004. Mianyang Xinchen's current annual production capacity is 180,000 gasoline engines
and 20,000 diesel engines. Mianyang Xinchen is planning to upgrade its existing engines and
introduce new diesel engines by 2007.
In March 2004, the technology center of Mianyang Xinchen was designated by the PRC
governmental authorities as a State-class enterprise technology center, becoming only the second
State-class enterprise technology center in the PRC automotive gasoline engine industry.
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Table of Contents
Ningbo Yuming
Ningbo Yuming, directly and indirectly through Xing Yuan Dong and Ningbo Brilliance Ruixing
(described below), accounted for 4.1% of Shenyang Automotive's purchases of parts and components in
2005. Ningbo Yuming's principal products are automobile window molding, anti-collusion strips,
stripping, as well as a front independent suspension system (including a high performance front
axle) for use in light passenger vehicles. Ningbo Yuming had annual sales of Rmb 199.1 million in
2005. Ningbo Yuming intends to further develop front axles for use in different types of light duty
vehicles to enlarge its market share in the safety components market. Ningbo Yuming received
ISO-9002 accreditation in December 1999. Shenyang Automotive, which uses Ningbo Yuming's products
in all of its deluxe minibuses, mid-priced minibuses and Zhonghua sedans, accounted for
approximately 93.4% of Ningbo Yuming's sales in 2005. Shenyang Automotive also granted Ningbo
Yuming the status of Class A Supplier in 1999, which it continues to hold.
Shenyang Xinguang
Shenyang Xinguang is principally engaged in the manufacture and sale of gasoline engines for
use in passenger vehicles and light duty trucks. In 2005, engine purchases by Shenyang Automotive
for use in mid-priced minibuses accounted for 42.6% of Shenyang Xinguang's total sales revenue,
which amounted to Rmb 247.7 million. Shenyang Xinguang currently produces 491Q, 4G20 and 4G22
engines and has a production capacity of 60,000 engines per year. It sold over 30,900 engines in
2005.
Shenyang Xinguang started to further develop upgraded versions of the 491Q engine in 2005.
These new 16-valve engines 4G20 and 4G22 have greater power and are designed to satisfy European
III and IV emission standards. They are suitable for use in JinBei minibuses and Zhonghua sedans.
Shenyang Xinguang produces this new engine by using part of its existing 491Q facilities, together
with a new production line. Capacity for these 4G20 and 4G22 engines is 40,000 units per year.
Shenyang Xinguang sold over 200 new engines in 2005.
Xing Yuan Dong, Ningbo Brilliance Ruixing and Mianyang Brilliance Ruian
Xing Yuan Dong assists Shenyang Automotive in obtaining and developing a reliable supply of
domestically produced parts and components. Xing Yuan Dong also facilitates development of locally
produced automotive parts and components and acts to improve the quality of these components. When
a customized component is needed, Xing Yuan Dong provides potential suppliers with designs and
specifications for the customized parts and components required by Shenyang Automotive. These
potential suppliers liaise with Xing Yuan Dong and negotiate with Xing Yuan Dong about the details
of production. Xing Yuan Dong then selects appropriate suppliers and offers technical assistance
and cost evaluations. Xing Yuan Dong continuously strives to reduce the number of Shenyang
Automotive's suppliers, lower costs, increase the efficiency and commitment of the remaining
suppliers, streamline the component purchasing process and ensure a steady supply of high quality
components. In 2001, Xing Yuan Dong, in order to maintain its preferential tax treatment from the
PRC government, also began manufacturing automotive components for Shenyang Automotive. In 2005,
99.3% of Xing Yuan Dong's sales were to Shenyang Automotive.
Ningbo Brilliance Ruixing was established on June 9, 2000 as a wholly owned subsidiary of
Brilliance China Automotive to facilitate the trading and development of automotive components
between Ningbo Yuming and Shenyang Automotive. In 2005, 99.3% of Ningbo Brilliance Ruixing's sales
were made to Shenyang Automotive through Xing Yuan Dong and 74.1% of Ningbo Brilliance Ruixing's
purchases were from Ningbo Yuming. Beginning in 2001, Ningbo Brilliance Ruixing also began manufacturing automotive components
for Shenyang Automotive. Ningbo Brilliance Ruixing's principal products are automatic mirrors and
front axles.
Mianyang Brilliance Ruian was established on July 3, 2000 as a wholly owned subsidiary of
Brilliance China Automotive to facilitate the trading and development of automotive components for
Mianyang Xinchen. In 2005, 7.7% of Mianyang Brilliance Ruian's sales were made to Mianyang Xinchen
and 90.6% of Mianyang Brilliance Ruian's sales of its manufactured automotive components were made
to Shenyang Automotive through Xing Yuan Dong. In 2001, Mianyang Brilliance Ruian also began
manufacturing automotive components for Shenyang Automotive.
27
Table of Contents
Shenyang Aerospace
Shenyang Aerospace was formed for the purpose of manufacturing the 2.0-liter, 122 horsepower
and the 2.4-liter, 130 horsepower Mitsubishi gasoline engines. Shenyang Aerospace commenced trial
operation in March 1999. Shenyang Automotive uses these engines in its deluxe minibuses and in the
Zhonghua sedans. In addition, Shenyang Aerospace's engines are also sold domestically to other
passenger vehicle producers. Mitsubishi Motors Corporation, or MMC, Mitsubishi Corporation, China
Aerospace Automotive Industry Group Co., MCIC Holdings Sdn. Bhd. and Shenyang Jianhua Motors Engine
Co. Ltd., or Shenyang Jianhua, own equity interests of 25.0%, 9.3%, 30.0%, 14.7% and 21.0%,
respectively, in Shenyang Aerospace. Pursuant to a share transfer agreement dated September 29,
2005, Shenyang Jianhua agreed to sell to MMC 2% interests in Shenyang Aerospace. The transfer was
yet to be approved by the relevant authorities in the PRC. Upon the completion of the transfer,
each of Shenyang Jianhua and MMC will own equity interests of 19.0% and 27.0% in Shenyang
Aerospace, respectively. Upon completion of the acquisition of additional shares of JinBei and the
receipt of approvals from relevant PRC authorities for the transfer, which are expected to be by
the end of 2006, Brilliance China Automotive's effective interest in Shenyang Jianhua will increase
to 76.6% and consequently Brilliance China Automotive's effective interest in Shenyang Aerospace
will increase to approximately 14.6%.
Brilliance Dongxing and Xingchen Automotive Seats
In December 2001, Brilliance China Automotive entered into an agreement with Brilliance
Holdings Limited for the acquisition of the entire issued share capital of Key Choices Group
Limited, or Key Choices, at a consideration of approximately Rmb 278.2 million. Key Choices is an
investment holding company and its principal assets are the 100% equity interest in the registered
capital of Brilliance Dongxing and a 90% equity interest in the registered capital of Shenyang
Xingchen Automotive Seats Co., Ltd., or Xingchen Automotive Seats. Brilliance Dongxing is a
foreign-invested enterprise established in the PRC whose principal products are automotive
components for use in passenger vehicles. In 2005, Brilliance Dongxing had annual sales of
approximately Rmb 137.6 million and all of its sales were to Shenyang Automotive and other group
companies. Xingchen Automotive Seats is a Sino-foreign equity joint venture established in the PRC
in December 2001 that formerly was principally engaged in the manufacturing of automotive seats.
However, Xingchen Automotive Seats ceased its operations in the second half of 2002.
Brilliance JinBei Engine Plant
In 2004, Shenyang Brilliance Jinbei Automobile Co., Ltd., or JinBei invested in a new engine
plant located in the Shenyang Economic and Trade Development Zone. Construction on this plant was
completed in December 2004 and the plant occupies 280,000 square meters of land, with a building
size of approximately 64,000 square meters and a main workshop area of 52,000 square meters. FEV
Motorentechnik GmbH provided certain technologies relating to engine production, and most of the
required equipment was imported from Germany.
The first product currently under development at this plant is a four-cylinder, 16-valve
multiple injection 1.8TCI turbo-charged engine for sedans. This engine will form the core of the
new Brilliance China Automotive family of engine products and serve as the basis for expanding the
size of engines used in Shenyang Automotive sedans from 1.6 liters to 2.0 liters. The development
of 1.8 liter engines began in 2005, and these engines are expected to be offered to the market in
the second half of 2008, with trial production commenced in 2006.
The engines will be mainly manufactured for use in Zhonghua sedans and the minibuses, but will
also be open for sale to third party automotive manufacturers both domestically and abroad. The
targeted capacity for the first phase of development is 50,000 engines per year, with two
subsequent phases having targeted capacity of 100,000 and 200,000 engines per year, respectively.
The first phase will require Rmb 1.13 billion in investment for completion. The intellectual
property rights over the engines developed are owned by Brilliance China Automotive.
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Shenyang Brilliance Power Train Machinery Co., Ltd.
Shenyang Brilliance Power Train Machinery Co., Ltd. is a PRC joint venture that was
established in December 2004 by Shenyang Automotive and Brilliance China Automotive with registered
capital of US$22.9 million. Shenyang Automotive holds a 51% equity interest and Brilliance China
Automotive holds a 49% equity interest. Brilliance China Automotive is established to purchase
engines, manual and automatic transmissions and other components from various suppliers, including
the Brilliance JinBei Engine Plant, to assemble completed powertrains for the engines made by
Brilliance JinBei Engine Plant that can be used in automobiles, in particular Zhonghua sedans. The
plant was in operation from the end of 2005. In addition to use in Zhonghua sedans, the powertrain
products will also be sold to the external market. The target customers are automobile makers that
have no powertrain manufacturing capacity of their own.
Shenyang Chenfa Automobile Component Co., Ltd.
Shenyang Chenfa Automobile Component Co., Ltd., or Shenyang Chenfa, is a wholly foreign-owned
enterprise held by Brilliance China Automotive, with a registered capital of US$8.0 million and a
total investment of US$8.4 million. Its scope of business is the production and sale of powertrains
and automotive components. Shenyang Chenfa was established in June 2003 and currently has over 50
employees. The main product of Shenyang Chenfa is powertrains for Mitsubishi engines used in the
Zhonghua sedan, of which it is capable of producing 40,000 units per year. This line has been in
operation for more than one year. It also has an engine manifold production line and a cam bearing
frame production line with a capacity of 50,000 units per year. Shenyang Chenfa is also responsible
for purchasing engine management systems and other automotive components for Brilliance China
Automotive.
Sales and Marketing
The following tables set forth by vehicle model for the years 2003 through 2005 the number of
Shenyang Automotive minibuses and sedans sold and BMW Brilliance sedans sold and the percentage of
unit sales represented by each model:
Shenyang Automotive
2003
2004
2005
Units Sold
%
Units Sold
%
Units Sold
%
Shenyang Automotive
Deluxe minibus
9,004
9.0
6,626
9.1
9,940
14.4
Mid-priced minibus
65,614
65.5
54,992
75.8
50,060
72.6
Zhonghua sedan
25,600
25.5
10,982
15.1
9,000
13.0
Total
100,218
100.0
72,600
100.0
69,000
100.0
BMW Brilliance
BMW sedans
(1)
4,359
100.0
8,708
100.0
17,501
100.0
(1)
Commercial launch of the BMW sedans was in the fourth quarter of 2003.
Shenyang Automotive's marketing efforts are supervised by its general manager and are
conducted primarily through a regionalized sales program under which Shenyang Automotive has
divided China into six major sales regions and three "sales belts", each headed by an experienced
senior executive. These regions are further subdivided into 30 provincial sales regions for
minibuses and 26 provincial sales regions for sedans. Each of these sales regions corresponds to a separate province in China. These units are responsible for meeting
defined sales targets, with the executives' compensation linked to performance. In addition,
Shenyang Automotive implements a commission compensation package for its sales personnel and
rewards with bonuses its non-sales personnel who develop customer leads that result in minibus
sales. The retail prices and commission scales are both nationally unified by Shenyang Automotive,
thereby preventing cross-regional sales and counter-productive price wars. Shenyang Automotive's
minibuses and Zhonghua sedans are marketed through its nationwide sales network as well as annual
automobile industry trade shows and at special sales shows sponsored by JinBei and Shenyang
Automotive. Approximately 95% and 68% of Shenyang Automotive's 2005 unit sales of minibuses and
sedans, respectively were made to its distributors and approximately 5% and 32%, respectively, were
made directly to customers.
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Shenyang Automotive's sales in China has been supported by a substantial network of
approximately 100 exclusive minibus distributors and approximately 120 sedan distributors, as well
as approximately 380 after-sales service centers for minibuses and approximately 190 for sedans.
Shenyang Automotive also continued to implement its 4S sales center system, with sales, service,
spare parts and surveys offered by the same dealership outlet. As of December 31, 2005, Shenyang
Automotive had approximately 70 dealership outlets for minibuses and approximately 70 dealership
outlets for sedans, which had achieved the 4S dealership standard.
Shenyang Automotive's minibus and sedan sales were generally made on a cash basis in 2005.
However, credit is offered to a few large customers following a financial assessment and an
established payment record. Credit terms are generally between 30 to 90 days and security in the
form of guarantees or bank notes is obtained from major customers. Designated staff monitors
accounts receivable and follow up collection with the customers. Customers considered to be of high
credit risk are traded on a cash basis. In addition, in order to incentivize customers and
facilitate sales, Shenyang Automotive also accepts three-month to six-month bank-endorsed notes as
payment for its minibuses and sedans.
Shenyang Automotive has 5 regional distribution centers in order to shorten delivery
lead-times and to increase cost efficiencies. Also, by utilizing transportation methods such as
trucking, rail and shipping, Shenyang Automotive ensures that most vehicles are not driven until
they reach the end users. In 2005, all finished products were delivered to customers with zero
mileage.
The following table sets forth the geographic breakdown of Shenyang Automotive's minibus and
sedan unit sales throughout China for the years 2003 through 2005:
2003
2004
2005
Minibuses
Sedans
Minibuses
Sedans
Minibuses
Sedans
Province/Municipality
Units
%
Units
%
Units
%
Units
%
Units
%
Units
%
Beijing
15,679
21.0
2,876
11.2
13,031
21.1
1,002
9.1
10,395
17.3
453
5.0
Guangdong
13,000
17.4
3,158
12.3
9,385
15.2
825
7.5
7,107
11.8
467
5.2
Liaoning
7,780
10.4
2,408
9.4
6,173
10.0
1,145
10.4
6,461
10.8
1,650
18.3
Shanghai
6,571
8.8
1,301
5.1
6,933
11.3
296
2.7
6,347
10.6
141
1.6
Jiangsu
5,415
7.3
1,550
6.1
4,254
6.9
569
5.2
3,915
6.5
138
1.5
Zhejiang
5,071
6.8
2,002
7.8
3,534
5.7
505
4.6
2,578
4.3
88
1.0
Shandong
2,221
3.0
2,114
8.3
1,927
3.1
812
7.4
2,313
3.9
296
3.3
Tianjin
1,683
2.3
870
3.4
1,512
2.5
552
5.0
1,468
2.4
185
2.1
Heilongjiang
1,542
2.1
614
2.4
1,094
1.8
334
3.0
1,079
1.8
94
1.0
Hebei
1,351
1.8
862
3.4
1,089
1.8
361
3.3
1,187
2.0
44
0.5
Hubei
1,343
1.8
595
2.3
1,104
1.8
373
3.4
1,136
1.9
53
0.6
Hunan
1,274
1.7
572
2.2
1,006
1.6
408
3.7
1,125
1.9
275
3.1
Shaanxi
998
1.3
651
2.5
993
1.6
447
4.1
958
1.6
126
1.4
Henan
1,013
1.4
614
2.4
937
1.5
299
2.7
1,285
2.1
207
2.3
Sichuan
1,063
1.4
1,161
4.5
751
1.2
386
3.5
1,007
1.7
623
7.0
Shanxi
806
1.1
274
1.1
815
1.3
323
3.0
922
1.5
143
1.6
Fujian
1,184
1.6
637
2.5
811
1.3
229
2.1
824
1.3
98
1.1
Jilin
848
1.1
523
2.0
845
1.4
146
1.3
950
1.6
55
0.6
Chongqing
882
1.2
541
2.1
549
0.9
351
3.2
476
0.8
232
2.6
Xinjiang
1,080
1.5
237
0.9
764
1.3
166
1.5
830
1.4
90
1.0
Yunnan
301
0.4
482
1.9
674
1.1
244
2.2
551
0.9
90
1.0
Anhui
776
1.0
317
1.2
748
1.2
201
1.8
663
1.1
101
1.1
Guangxi
662
0.9
299
1.2
681
1.1
161
1.5
478
0.8
30
0.3
Jiangxi
446
0.6
301
1.2
440
0.7
193
1.8
396
0.7
120
1.3
Inner Mongolia
373
0.5
99
0.4
355
0.6
203
1.9
414
0.7
92
1.0
Guizhou
231
0.3
246
1.0
139
0.2
166
1.5
161
0.3
110
1.2
Hainan
8
—
—
—
175
0.3
39
0.4
1,519
2.5
31
0.3
Other
(1)
1,017
1.3
296
1.2
899
1.5
246
2.2
3,455
5.8
2,968
33.0
Total
74,618
100.0
25,600
100.0
61,618
100.0
10,982
100.0
60,000
100.0
9,000
100.0
(1)
Gansu, Ningxia, Qinghai and Tibet as well as export to other countries.
Generally, Shenyang Automotive's sales are the highest in the second and fourth quarters of
the year.
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The Chinese government continues to encourage the development of the relatively
underdeveloped, resource-rich western provinces of China and significant government resources have
been allocated in the past to develop the infrastructure of the western provinces. Brilliance China
Automotive believes the government's policy regarding western China will be conducive to the
development of the local automotive markets. Although Brilliance China Automotive's largest market
today remains in the eastern coastal provinces, Brilliance China Automotive believes that the
market in the western provinces of China represent substantial upward growth potential in the
future. Brilliance China Automotive will continue to expand its dealership system in that region to
tap into this potential growth.
Approximately 26.9 % of consolidated revenues in 2005 were generated from Shanghai Shenhua
Holdings Co., Ltd. (formerly known as Shanghai Brilliance Group Co., Ltd. and Shanghai Shenhua
Industrial Co., Ltd.) or Shanghai Shenhua. Shanghai Shenhua is an affiliate of Brilliance China
Automotive that serves as the principal distributor of Shenyang Automotive's products. Shanghai
Shenhua operates under substantially the same commercial terms and arrangements with Shenyang
Automotive as its other third party distribution agents. However, in southern China, where it sells
solely to distributors on an exclusive basis, Shanghai Shenhua receives additional compensation for
operating after-sales service centers, which was a 1% commission on sales until January 2003.
Shenyang Automotive uses a computerized sales monitoring system to accurately identify
customer demographics, determine which products and options are most in demand and improve
inventory control. As Shenyang Automotive brings more product options to market, Brilliance China
Automotive believes that this computer system will provide Shenyang Automotive with the ability to
track customer preferences in various regions and adjust its production and distribution efforts
accordingly.
In 2005, Shenyang Automotive spent approximately Rmb 177.0 million (US$21.9 million) on
overall advertising, consisting primarily of Internet, television and print advertising.
Competition
The Chinese minibus manufacturing industry is highly fragmented and competitive.
According to the Chinese Automotive Technology & Research Center, in 2005, approximately 40
manufacturers sold an aggregate of 137,873 minibuses. The top five manufacturers sold an
aggregate of 112,798 minibuses during the same period. Significant competitive factors in the
industry include price, quality, reliability and customer service. Brilliance China Automotive
believes that Shenyang Automotive is competitive in all of these respects, and particularly in
terms of quality, although Shenyang Automotive has experienced competition in recent years from
other manufacturers producing lower priced, mid-range minibuses.
The Chinese sedan manufacturing industry is also very competitive and fragmented. The top five
brands account for 40.9% of the overall market based on unit sales volume. The market shares of the
three leading manufacturers have been decreasing over the past several years. New models are being
introduced on an increasingly rapid basis as the number of new entrants into the market has also
increased. Unit sales of domestically produced sedans totaled 3,131,950 units in 2005, making
sedans the largest segment of the Chinese automotive market, accounting for 51.5% of the overall
market. Due to the implementation of macro-economic polices and austerity measures, the domestic
demand for automobiles in China has declined significantly since the second half of 2004.
Nevertheless, sedans are widely expected to continue to be the fastest growing segment of the
Chinese automobile market over the next few years. However, while vehicle ownership is expected to
continue to increase steadily in China as a result of increasing individual disposable income,
there is also expected to be increasing pricing pressure as tariff rates decline and competition
continues to grow from domestic, foreign and foreign-invested sedan manufacturers.
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Historically, Chinese motor vehicle producers have been exposed to little competition from
non-Chinese enterprises, partly as a result of import restrictions on foreign-made components and
motor vehicles. However, as a result of China's accession to the WTO, which regulates trading and
tariffs among its signatory states, in November 2001, China committed to reducing its import
restrictions on motor vehicles and motor vehicle components. In addition, China will be required to
conform its import tariffs to the uniform tariffs under the WTO.
Effective January 1, 2002, China reduced its import tariffs on motor vehicles and automotive
components from between 80% to 100% and between 18% to 40%, respectively, to between 43.8% to 50.7%
and between 14.0% to 31.4%, respectively. This range was lowered further to between 4.8% and 25%
for automotive components in 2003, between 5.0% and 22.9% in 2004 and between 5.0% and 18.6% in
2005. In January 2006, the import tariffs on automotive components were further reduced to between
5.0% and 14.3%. Tariffs on vehicles with nine seats or less and engine sizes of three liters or
below fell from 43.9% in 2002 to 38.2% in 2003, while tariffs on vehicles with more than nine seats
and engines of more than three liters decreased from 50.7% in 2002 to 43.0% in 2003. In 2004,
tariffs were 34.2% for vehicles with nine seats or less and engine sizes of three liters or less
and 37.6% for vehicles with more than nine seats and engines of more than three liters. In 2005
tariffs have been fixed at 30% of all motor vehicles. These tariffs levels were reduced to 28% in
January 2006 and are scheduled to be further to 25% in July 2006. Such reductions in tariffs and
import restrictions could potentially increase the competition Brilliance China Automotive will
face from foreign manufacturers.
Listed below are Shenyang Automotive's current main competitors in the Chinese minibus and
sedan market. The data listed for each is based on information published by the China Automotive
Technology & Research Centre for the year ended December 31, 2005 regarding the Chinese automotive
industry:
Minibus
•
Southeast Motors
. Southeast Motors is currently 25% owned by Taiwan China Motors,
50% owned by Fujian Provincial Automobile Industry Company and 25% owned by Mitsubishi.
Southeast Motors has launched over thirty different models of light passenger vehicles
(including minibuses) under the Delica and Freeca brand names and also launched the MPV
in 2004. Southeast Motors has an annual production capacity of 60,000 minibuses in
2005. Its sales volume in 2005 was 12,827 minibuses, representing a 32.8% decrease from
19,080 minibuses in 2004. Delica series includes seven-, eight- and eleven-seat
ordinary, luxury and super luxury models and is currently priced between Rmb 79,800 to
Rmb 199,800.
•
Nanjing Iveco.
In 1995, Italy's Fiat Auto Company and Yuejin Group established
Nanjing Iveco Automotive Company, Ltd., a 50-50 equity joint venture, for the
manufacture of 33 models of five-ton passenger, goods and off-road vehicles in the
Iveco S series. Models currently in production include the A30, A40 and A49 passenger
vehicles, as well as a separate series of goods vehicles. Nanjing Iveco has an annual
production capacity of 60,000 vehicles. In 2005, Nanjing Iveco sold 12,885 vehicles,
representing a 23.8% increase from 10,407 minibuses in 2004. Its minibuses are
currently priced between Rmb 112,900 to Rmb 206,900.
•
Jiangling Motors.
Jiangling Motors Corp. of Jiangxi Province is currently 50% owned
by the Ford Motor Company and 50% owned by the Changan Group. Jiangling Motors produced
China Transit, a Ford brand minibus, light trucks and pick-ups. At present, China
Transit is available in 15-seat, 12-seat and 9-seat versions. In 2005, Jiangling Motors
sold a total of 18,887 minibuses, representing a 37.3% increase from 13,752 vehicles in
2003. Production capacity was approximately 100,000 per year by the end of 2005. Its
minibuses are currently priced between Rmb 118,800 to Rmb 193,600.
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Zhonghua Sedan
Brilliance China Automotive considers the following companies to be its main competitors in
the market for sedans with engine size between 1.8 liter to 2.0 liter and priced between Rmb
100,000 and Rmb 200,000, which includes the Zhonghua sedan:
•
First Auto Works Group of the PRC
. First Auto Works is one of the largest automotive
companies in the PRC. First Auto Works' Hongqi sedan was launched in 2001 and is
considered one of the PRC government's showcase PRC-made sedans. Its latest model is
known as the Hongqi Mingshi, was launched in 2004, and has a 1.8-liter engine with four
doors. It is priced at approximately Rmb 159,800 to Rmb 198,800, similar to the
Zhonghua sedan. First Auto Works sold 6,664 Honqi Mingshi sedans in 2005, representing
a 3.8% decrease from 2004.
•
Shanghai Volkswagen Automotive
. Shanghai Volkswagen Automotive was one of the
original state-designed automobile manufacturers in the PRC. It is currently 50% owned
by Volkswagen AG of Germany and 50% owned by Shanghai Automotive Industry Corp. It
still holds a dominant share of the PRC sedan market and competes with the Zhonghua
sedan through the Santana 3000 sedans. The Santana 3000 has a 1.78-liter engine and
sells for between Rmb 118,000 to Rmb 149,000. In 2005, Shanghai Volkswagen Automotive
sold 56,953 units of Santana 3000 sedans representing a 36.9% decrease from 2004.
•
Beijing Hyundai
. Beijing Hyundai was established in 2002 as a 50-50 joint venture
between Beijing Auto Investment and Hyundai Motor Co. of South Korea. It currently
produces and sells the Sonata 2.0-liter, Sonata 2.5-liter and Sonata 2.7-liter, and the
newly-introduced Elantra 1.6-liter and 1.8-liter models. The Sonata 2.0-liter sells for
approximately Rmb 149,800 to Rmb 228,000. The Elantra 1.8 liter sedan sells for
approximately Rmb 112,800 to Rmb 151,800. In 2005, Beijing Hyundai sold 45,006 units
and 176,589 units of the Sonata 2.0 liter and the Elantra, respectively, representing
an increase of 14.7% and 71.9%, respectively.
BMW Sedans
Brilliance China Automotive currently considers the Audi and Mercedes-Benz sedans produced by
FAW Volkswagen and Beijing Benz Daimler Chrysler Auto Co. Ltd., respectively to be its closest
competitors in the domestic market for high-end luxury cars produced in the PRC in terms of
quality, craftsmanship, price, performance and technology.
•
FAW Volkswagen
. FAW Volkswagen is 10% owned by Audi AG, 30% by Volkswagen AG and 60%
by First Auto Works of China. FAW Volkswagen produces and sells the Audi A4 and A6
sedans and the Volkswagen Jetta and Bora sedans in the PRC. FAW Volkswagen's Audi
sedans have a dominant share of the PRC's premium sedan market. FAW Volkswagen sold
46,177 and 42,331 units of Audi A6 sedans in 2004 and 2005, respectively. The Audi A4
sedan was formally launched in the PRC's market in 2003 and had a total sales volume of
15,841 and 7,770 in 2004 and 2005, respectively. A new Audi A6 was launched in June 2005. The Audi A4 sedan currently sells for between Rmb
275,400 to Rmb 479,500, and the new Audi A6 sedan sells for between Rmb 349,800 to Rmb
674,900.
•
Beijing Benz.
Beijing Benz Daimler Chrysler Auto Co Ltd., or Beijing Benz, a 50-50
joint venture between Daimler Chrysler and Beijing Automotive Industry Holding Company,
obtained a license to produce the Mercedes-Benz C-Class and E-Class sedans in the PRC
in August 2005. Beijing Benz launched its domestically produced models of E280 and
E200K in December 2005. These E-Class sedans currently are sold between Rmb 525,000 and
Rmb 639,800 in the PRC. The vehicles are produced in a new facility in Beijing with an
initial production capacity of 20,000 units per year.
Brilliance China Automotive does not consider current foreign importers of luxury cars with
similar quality, craftsmanship, performance and technology to be direct competitors for the BMW
sedans as they are subject to import tariffs and restrictions and cannot be priced competitively
with BMW Brilliance's locally produced BMW sedans.
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Governmental Regulation
The automobile industry in the PRC is controlled at the central government level by the
National Development and Reform Commission, or NDRC and the Ministry of Commerce. These entities
were created as a result of the governmental restructuring that commenced in March 2003. The NDRC
generally oversees and regulates the automobile industry in the PRC and any new product or new
automobile production facility must obtain the prior approval of this body before entering the
market. Similarly, approval from the Ministry of Commerce must be obtained prior to any changes to
existing products or the expansion of existing facilities. Both of these entities must also approve
any Sino-foreign joint venture for the production of automobiles.
On June 1, 2004, the NDRC issued a new automobile policy to replace the one that had been in
place since 1994. Two of the policy's stated goals are industry consolidation and enhancement of
corporate capacity for research and development. To further these goals, the new policy sets
minimum levels of investment for new plants and research and development. Engine plant investments
are required to be over Rmb 1.5 billion and new automobile manufacturing projects must be over Rmb
2.0 billion. New automobile projects must also include a product research and development
investment of at least Rmb 500 million.
In contrast to the old regulations, foreign investors in the automobile and motorcycle market
will now be allowed to control more than 50% of a joint venture with the PRC partners if the joint
venture is located in an export processing zone and plans to sell its products in overseas markets.
The new policy will also allow foreign investors to establish more than two joint venture plants in
the PRC to produce the same categories of vehicles if they do so with their existing PRC partners
through acquisitions of other companies in the PRC.
The new policy acknowledges the success of the PRC's automobile industry and seeks to
encourage this "pillar industry" to foster further growth, particularly of domestically produced
and branded products and research and development, through consolidation of smaller, less-efficient
manufacturers and increased foreign and domestic investment. In addition, the policy aims to
centralize or reorganize certain automobile-related sectors, such as consumer loan services, to
reduce overhead and administrative burdens on the industry and allowing industry participants to
focus on their core businesses.
By encouraging industry consolidation and establishing clearer guidelines for foreign
investment, the policy, in the opinion of Brilliance China Automotive, encourages existing players
in the industry to grow and provides incentives for targeted investment from both domestic and
foreign sources. Certain implementing regulations have and more such regulations are expected to be
promulgated by the NDRC in the future.
On February 28, 2005, the General Administration of Customs, the NDRC, the Ministry of Finance
and the Ministry of Commerce jointly issued the Administrative Measures on the Import of Automobile
Parts with Complete Vehicle Characteristics. This measure sets up detailed standards and procedures
of the identification of automobile parts with complete vehicle characteristics and treats
automobile parts with complete vehicle characteristics, which include semi-knocked down kits, as
complete vehicle imports and imposes vehicle import tariffs instead
of component tariffs on them. Current vehicle import tariff level is 28% (scheduled to fall to 25% by
July 2006) whereas current component tariff levels are between 5% and 14.3%.
On April 1, 2006, the State Administration of Taxation of the PRC, in an effort to encourage
environmental protection and fuel efficiency, re-adjusted consumption tax rates on passenger
vehicles. Before the re-adjustment, the consumption tax rate for passenger vehicles was a
three-tiered system: 3% for automobiles with engine displacement lower than 1.0-liter; 5% for
automobiles with engine displacements between 1.0 liter and 2.0-liter, and 8% for automobiles with
engine displacements above 2.0-liter. After the re-adjustment, tax rates on vehicles with smaller
engines (under 2.0-liter) either fell or remained unaltered, whereas tax rates on automobile with
larger engines were raised. The new tax rates are: 3% for 0.0-1.5-liter; 5% for 1.51-2.0-liter; 9%
for 2.01-2.5-liter; 12% for 2.51-3.0-liter; 15% for 3.01-3.5-liter; and 20% for 4.0-liter and
above.
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Quality Control
As a result of technical and managerial training from Toyota and technical assistance from
BMW, Shenyang Automotive has adopted a highly regimented production quality management system for
its minibuses and sedans. This two-fold system concentrates both on the quality of the raw
materials and other production inputs and on the production process itself. In the production
process, the focal point of quality control is the production line worker, who undergoes extensive
training and testing to ensure that he or she performs the assigned task to the highest quality
standards and is qualified and able to determine on his or her own whether or not the product meets
the required specifications. In addition, Shenyang Automotive's specialized quality control
engineers are present at each step of the production process, with 16, 16 and 12 separate quality
inspection points for Hiase minibuses, the Granse minibuses and Zhonghua sedans, respectively.
In addition, Shenyang Automotive has established a quality improvement unit to supervise and
monitor after-sales service centers in major regional sales bases, such as Guangzhou, Shanghai and
Beijing, which also serve as channels for information feedback on product quality. Designated
personnel are assigned to follow-up on finding remedies for recurring quality issues in a timely
manner.
Shenyang Automotive was granted the internationally recognized ISO-9001-94 quality system
certificate in October 1995, making it the first major automobile manufacturer in China to be
awarded such certificate. Shenyang Automotive has successfully obtained recertification in each
subsequent year by demonstrating a continued commitment to upholding among the highest quality
standards in China's automobile industry. To date, approximately 149, 85 and 34 of Shenyang
Automotive's over 280 component suppliers achieved TS16949, QS-9000 and VDA 6.1 quality system
certification, respectively, and approximately 40 are accredited by ISO-9000.
After-Sales Service
In 2005, Shenyang Automotive's minibuses are sold with a 24-month or 50,000 kilometers
(18-month or 30,000 kilometers for minibuses sold in 2002 and 2001) first-to-occur limited
warranty. The Zhonghua sedans were sold with a 36-month or 60,000 kilometers (24-month or 40,000
kilometers for sedans sold in 2002) first-to-occur limited warranty. In addition to these basic
limited warranties, during 2003 Shenyang Automotive also offered customers a broader warranty for
its Zhonghua sedans. During the warranty period, Shenyang Automotive pays service stations for
parts and labor covered by the warranty; thereafter, customers must pay for all parts and labor. In
December 2004, Zunchi sedans were sold with a 10-year or 200,000 kilometers first-to-occur limited
warranty on key components. In 2005, total warranty costs for minibuses and sedans sold during the
year were approximately Rmb 26.0 million (US$3.2 million) and Rmb 6.4 million (US$0.8 million),
respectively.
There are approximately 380 and approximately 190 service centers for Shenyang Automotive
minibuses and sedans, respectively, throughout China, with centers clustered in areas that match
distribution patterns of the vehicles. Such centers have been granted authority by Shenyang
Automotive to service its minibuses and sedans, including the provision of repair services and the
sale of spare parts. This extensive service network has enabled Shenyang Automotive to adopt its
current policy of resolving routine customer complaints in all provincial capitals and major cities
within 24 hours and major problems within three days.
To improve customer service, Shenyang Automotive continually reevaluates its existing
distributors based on certain criteria, including financial soundness, customer service
capabilities and customer complaint record. Shenyang Automotive has also implemented a more
advanced "4S" sales center system, with sales, service, spare parts and survey offered by the same
dealership outlet. As of the end of 2005, Shenyang Automotive had approximately 70 and
approximately 70 4S dealership outlets for its minibuses and sedans, respectively.
BMW Brilliance currently has approximately 60 distributors, which are mainly located in first
tier cities in China. The number of distributors is expected to increase to over 80 by the end of
2006. Like Shenyang Automotive, BMW Brilliance implemented the more advanced 4S sales center
system.
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Environmental Matters
The Chinese government has set vehicle safety, exhaust and performance standards with which
Shenyang Automotive and BMW Brilliance must comply. Brilliance China Automotive believes that
Shenyang Automotive's and BMW Brilliance's minibuses and sedans currently meet the standards
imposed by the government. Their respective facilities are subject to government pollution
regulations enforced by the Shenyang municipal government. If operations are found to be in
violation, the government will allow a period of time to remedy the problem. If it should fail to
do so, the government can force a shut-down of Shenyang Automotive's or BMW Brilliance's operations
until such time as the violator complies with the regulations. To date, neither Shenyang Automotive
nor BMW Brilliance has been cited as violating a government pollution regulation.
On January 1, 2000, the cities of Beijing and Tianjin, as well as Yunnan Province, put into
effect emission standards that were significantly stricter than the then prevailing gasoline
vehicle emission standards. Since then, these emission standards have been adopted nationwide.
Shenyang Automotive's electronic fuel injection minibus, introduced in 1999, passed the emission
standards tests at the China National Automobile Testing Center in Tianjin in October 1999. This
engine not only produces cleaner emissions, but also achieved up to an 8% increase in fuel economy
and a 3% increase in horsepower. In 2001, Shenyang Automotive began to install multiple electronic
fuel injection engines, which are currently used in all of Shenyang Automotive's mid-priced
minibuses. With the installation of this new engine in the mid-priced minibus, currently all of
Shenyang Automotives minibuses meet European II emission standards. All Zhonghua and BMW sedans
also meet these emission standards. In 2004, the Chinese government began to encourage its vehicle
manufacturers to meet the European III standards. Shenyang Automotive expects all of its minibuses
and Zhonghua sedans to meet European III emission standards by the end of 2007. Currently, all
minibuses and Zhonghua sedans with manual transmissions have complied with the European III
emission standards.
Insurance
Shenyang Automotive currently hold insurance policies that Brilliance China Automotive
believes are customary and standard for companies of comparable size in comparable industries in
China. Shenyang Automotive does not carry product liability insurance, and Brilliance China
Automotive believes it is customary and standard in the Chinese automobile industry for
manufacturers not to carry product liability insurance. BMW Brilliance has elected to purchase
product liability and other insurance in order to conform with BMW's worldwide standards.
Brilliance China Automotive does not carry any business interruption insurance.
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Organizational Structure
The following table lists information concerning the subsidiaries, jointly controlled entities
and associated companies of Brilliance China Automotive as of December 31, 2005:
Effective
Interest held by
Jurisdiction of
Brilliance China
Subsidiaries
Incorporation
Automotive
Shenyang Brilliance JinBei Automobile Co., Ltd.
China
51.0
%
Ningbo Yuming Machinery Industrial Co., Ltd.
China
100.0
%
Shenyang XingYuanDong Automobile Component Co., Ltd.
China
100.0
%
Shenyang Jianhua Motors Engine Co., Ltd.
China
60.8
%
Ningbo Brilliance Ruixing Auto Components Co., Ltd.
China
100.0
%
Mianyang Brilliance Ruian Automotive Components Co., Ltd.
China
100.0
%
Shenyang JinBei Automotive Industry Holdings Company Ltd.
China
98.0
%
Shenyang XinJinBei Investment and Development Co., Ltd.
China
99.0
%
Shenyang Brilliance Dongxing Automotive Component Co., Ltd.
China
100.0
%
Shenyang JinDong Development Co., Ltd.
China
75.5
%
Shenyang ChenFa Automobile Component Co., Ltd.
China
100.0
%
Shanghai Hidea Auto Design Co., Ltd.
China
63.3
%
Shenyang Brilliance Power Train Machinery Co., Ltd.
China
75.0
%
China Brilliance Automotive Components Group Limited
Bermuda
100.0
%
Southern State Investment Limited
BVI
100.0
%
Beston Asia Investment Limited
BVI
100.0
%
Pure Shine Limited
BVI
100.0
%
Key Choices Group Limited
BVI
100.0
%
Brilliance China Automotive Finance Ltd.
BVI
100.0
%
Jointly Controlled Entities
Mianyang Xinchen Engine Co., Ltd.
China
50.0
%
Shenyang Xinguang Brilliance Automobile Engine Co., Ltd.
China
50.0
%
BMW Brilliance Automotive Ltd.
China
49.0
%
Associated Companies
Chongqing FuHua Automotive Sales Service Co., Ltd.
China
29.4
%
Chongqing Baosheng Automotive Sale and Service Co., Ltd.
China
29.4
%
Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.
China
12.8
%
Property, Production Facilities and Equipment
The Shenyang municipal government granted to Shenyang Automotive the right to use three
parcels of land situated in the northern, eastern and western sectors of Shenyang with a total area
of approximately 960,000 square meters, approximately 90% of which is currently utilized by
Shenyang Automotive and BMW Brilliance. These land use rights will expire in 2021.
The western parcel consists of 66,000 square meters, 40,000 square meters of which is occupied
by a mid-priced minibus production facility that is capable of producing 12,000 vehicles per year.
This facility is currently utilized to produce a small number of special purpose minibuses and can
also be used to produce components as well.
The northern parcel covers 40,000 square meters and is used by Shenyang Automotive primarily
as a technical training facility.
The eastern parcel covers 850,000 square meters, including Shenyang Automotive's and BMW
Brilliance's production facilities. Shenyang Automotive's minibus facility currently has a
production capacity of 80,000 minibuses per year (based on two shifts) and 120,000 minibuses (based
on three shifts). This facility is specially designed for the manufacture and assembly of minibuses
and consists of four workshops. The stamping and assembly workshops currently have annual
production capacities of 80,000 and 90,000 units, respectively, based on two shifts of workers, and
can be increased to 120,000 units based on three shifts. The painting workshop currently has an
annual production capacity of 120,000, based on two shifts of workers.
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In 2003, Shenyang Automotive completed the construction of new manufacturing facilities for
sedans (including the Zhonghua sedan), which has a production capacity of 100,000 units, based on
two shifts per day. The new manufacturing facilities are located adjacent to Shenyang Automotive's
previously existing minibus production facilities in the eastern parcel and include new pressing,
welding, painting and final assembly lines. Dies and other key production equipment were purchased
from leading European equipment manufacturers for the Zhonghua sedan. The total costs for
completion of this expansion project were approximately US$250.0 million, including new equipment,
construction costs and other expenditures, but excluding the design costs for the sedans. See "Item
5 — Operating and Financial Review and Prospects — Liquidity and Capital Resources".
Certain workshops in these new sedan manufacturing facilities are currently shared with BMW
Brilliance, including part of a welding workshop for the BMW sedans, all of the painting
facilities, and part of the Zhonghua sedan assembly shop, which is currently used by BMW Brilliance
to test BMW sedans.
Shenyang Automotive has transferred legal titles and ownership of certain buildings in its
eastern parcel to BMW Brilliance for use in the production of BMW sedans. The agreement also states
that BMW Brilliance will lease back a substantial portion of those buildings to Shenyang
Automotive. BMW Brilliance also has the option to require Shenyang Automotive to purchase back such
buildings at the purchase price less depreciation upon the occurrence of certain events, including
the passing of a valid resolution pursuant to the joint venture contract by the board of directors
of BMW Brilliance. For financial reporting purposes, the buildings were retained as fixed assets on
the balance sheet of Brilliance China Automotive and the portion of consideration received from BMW
Brilliance is treated as a financing and will be partially offset against the lease rental payable
in future years.
In December 2003, BMW Brilliance purchased certain machinery and equipment from Shenyang
Automotive for use in the production of BMW sedans. The agreement of sale includes an option for
BMW Brilliance to require Shenyang Automotive to purchase back such machinery and equipment at the
purchase price less depreciation upon the occurrence of certain events, including the passing of a
valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. This machinery and equipment is maintained by BMW Brilliance for the manufacturing of
its products, as well as to provide certain services to Shenyang Automotive upon the payment of a
service fee, which is a predetermined fixed charge per unit based on the number of Zhonghua sedans
produced by Shenyang Automotive using this machinery and equipment.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion should be read in conjunction with the rest of this annual report,
including the consolidated financial statements and notes thereto contained elsewhere in this
annual report. The results discussed below are not necessarily indicative of the results to be
expected in any future periods.
Overview
Brilliance China Automotive is a holding company. Prior to 2002, Brilliance China Automotive's
operating segment consisted solely of the manufacture and sale of minibuses and automotive
components through its subsidiaries and associated companies within China. No separate financial
information and segment information was disclosed. In 2002 and 2003, Brilliance China Automotive
began manufacturing and selling Zhonghua sedans and BMW sedans through Shenyang Automotive and BMW
Brilliance, respectively, which are managed separately because each of them represents a strategic
business unit that serves a different market in the PRC automobile industry. Therefore, Brilliance
China Automotive's reportable operating segments consist of (1) the manufacture and sale of
minibuses and automotive components, (2) the manufacture and sale of Zhonghua sedans and (3) the
manufacture and sale of BMW sedans. The accounting policies of each operating segment are the same.
Brilliance China Automotive evaluates performance based on stand-alone operating segment net income
and generally accounts for intersegment sales and transfers as if the sales or transfers were to
third parties, that is, at current market prices. Brilliance China Automotive's activities are
conducted predominantly in China. Accordingly, no geographical segmentation analysis is provided.
Prior to May 1998, Brilliance China Automotive's sole operating asset was its interest in
Shenyang Automotive. As a result, Brilliance China Automotive's historical results of operations
had been primarily driven by the sales price, sales volume and cost of production of Shenyang Automotive's minibuses. With a
view to maintaining quality, ensuring a stable supply of certain key components and developing new
businesses and products, Brilliance China Automotive acquired interests in various suppliers of
components and established joint ventures in China since May 1998. As a result of these additional
investments and joint ventures, Brilliance China Automotive's income base has been broadened and
its future financial performance will differ from that of Shenyang Automotive.
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In May 1998, Brilliance China Automotive acquired indirect interests in two components
suppliers: (1) a 51% equity interest in Ningbo Yuming Machinery Industrial Co., Ltd., a wholly
foreign-owned Chinese enterprise primarily engaged in the production of automobile window molding,
stripping and other auto components; and (2) a 50% equity interest in Mianyang Xinchen Engine Co.,
Ltd., a Sino-foreign joint venture manufacturer of gasoline engines for use in passenger vehicles
and light duty trucks. On October 19, 2004, Brilliance China Automotive, through a subsidiary,
entered into an agreement to acquire the remaining 49% interest in Ningbo Yuming. With the approval
of the acquisition by the government on November 25, 2004, Ningbo Yuming became a wholly owned
subsidiary of Brilliance China Automotive.
In October 1998, June 2000 and July 2000, Brilliance China Automotive established Shenyang
XingYuanDong Automobile Component Co., Ltd., Ningbo Brilliance Ruixing Auto Components Co., Ltd.
and Mianyang Brilliance Ruian Automotive Components Co., Ltd., respectively, as its wholly owned
subsidiaries to centralize and consolidate the sourcing of auto parts and components for Shenyang
Automotive. In 2001, all three companies, in order to maintain their preferential tax treatment
from the Chinese government, began manufacturing automotive components as well.
In December 2000, Brilliance China Automotive acquired a 50% equity interest in Shenyang
Xinguang Brilliance Automobile Engine Co., Ltd., a Sino-foreign equity joint venture manufacturer
of gasoline engines for use in passenger vehicles. In December 2001, Brilliance China Automotive
acquired a 100% equity interest in Shenyang Brilliance Dongxing Automotive Component Co., Ltd., a
foreign-invested manufacturer of automotive components in China.
In May 2002, Shenyang Automotive obtained the approval from the Chinese government to produce
and sell its Zhonghua sedans in China. The Zhonghua sedans were launched in the market in August
2002. In March 2006, a new model of the Zhonghua sedan, Junjie, was launched in the market.
On March 27, 2003, Brilliance China Automotive, through its indirect subsidiary, Shenyang
JinBei Automotive Industry Holdings Co., Ltd., or SJAI, entered into a joint venture contract with
BMW Holding to produce and sell BMW-designed and branded sedans in China. The registered capital
and total investment cost of the joint venture was Euro 150 million and Euro 450 million,
respectively. At that time, Brilliance China Automotive's effective interests in SJAI and the joint
venture with BMW were 81% and 40.5%, respectively. On April 28, 2003, Brilliance China Automotive
increased its effective interest in SJAI from 81% to 89.1% and thereby increased its effective
interest in the joint venture with BMW from 40.5% to 44.6%. On December 16, 2003, Brilliance China
Automotive further increased its effective interest in SJAI from 89.1% to 98.0% and thereby
increased its effective interest in the joint venture with BMW from 44.55% to 49.0%.
On December 29, 2003, Brilliance China Automotive entered into agreements in relation to the
proposed acquisition of an indirect 40.1% interest in Shenyang JinBei Automotive Company Limited,
the joint venture partner of Shenyang Automotive and a supplier of automotive components for
Brilliance China Automotive's minibuses and sedans. Upon receipt of the necessary governmental
approvals for this transaction, which is expected by the end of 2006, Brilliance China Automotive's
effective interest in Shenyang Automotive will increase from 51% to approximately 70.7%.
On November 28, 2003, Brilliance China Automotive, through its wholly owned subsidiary,
Brilliance China Automotive Finance Ltd., issued an aggregate principal amount of US$200.0 million
zero coupon convertible bonds due 2008. These bonds are guaranteed by Brilliance China Automotive
and are convertible into fully paid ordinary shares with a par value of US$0.01 of Brilliance China
Automotive at an initial conversion price of HK$4.60 per share at any time from January 8, 2004 to
November 14, 2008, unless the bonds have previously been redeemed or matured. Brilliance China
Automotive Finance Ltd. may redeem a portion of the convertible bonds
in certain circumstances at 100% of their outstanding principal amount during the period from November
28, 2005 to November 14, 2008. In addition, all or some of the bonds may be redeemed at the option
of the holder at 102.27% of their principal amount on November 28, 2006 and upon certain events,
such as the change of control of Brilliance China Automotive or the shares of Brilliance China
Automotive ceasing to be listed on The Stock Exchange of Hong Kong Limited, the bonds may be
redeemed at the option of the holder at 100% of their outstanding principal amount. These bonds
rank equally with all of Brilliance China Automotive's senior, unsecured and unsubordinated
obligations. As of December 31, 2005, none of the bonds had been converted into the ordinary shares
of Brilliance China Automotive
.
The net proceeds of the convertible bond offering were advanced to
Brilliance China Automotive and were then loaned to certain subsidiaries of Brilliance China
Automotive for their operating use.
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Table of Contents
On June 7, 2006, Brilliance China Automotive, through its wholly owned subsidiary, Brilliance
China Finance Limited (formerly known as Goldcosmos Investments Limited), issued zero coupon
guaranteed convertible bonds due 2011 with an aggregate principal amount of approximately US$183.0
million (equivalent to approximately Rmb 1,467.1 million at the time of issue). These bonds are
guaranteed by Brilliance China Automotive and are convertible by the
holders into fully paid ordinary shares with
a par value of US$0.01 of Brilliance China Automotive at an initial
conversion price of HK$1.93 per
share at any time from July 6, 2006 to May 8, 2011, unless the bonds have previously been redeemed
or matured. Brilliance China Finance Limited may redeem the convertible bonds in whole but not in
part in certain circumstances at the early redemption amount (as
defined in the Trust Deed constituting the bonds and filed as an
exhibit to this annual report) during the period from June 7,
2008 to May 8, 2011. In addition, each holder will have
the right, at the option of the holder, to redeem in whole but not in part the convertible bonds at
122.926% of their principal amount on June 7, 2009. Unless previously redeemed, converted or purchased and
cancelled, the convertible bonds will be redeemed at 141.060% of
their outstanding principal amount on June 7, 2011.
Production Volumes and Sales
Brilliance China Automotive derives its revenues from the sale of minibuses, sedans and
automotive components in China. Total sales for the years ended December 31, 2005 and 2004 was Rmb
5,469.0 million and Rmb 6,542.0 million, respectively. The decrease in sales was primarily due to
the decrease in sales volume of Shenyang Automotive, especially for the Zhonghua sedans, and the
decrease in average unit selling prices, resulting from general production overcapacity and
intensified price competition faced by the Chinese automobile manufacturers in 2005 that were
exacerbated by rising global fuel prices which led to an increase in petrol prices in China.
The mid-priced minibus has proven to be Brilliance China Automotive's most popular and
competitive product. Despite the general slowdown of automobile industry, Brilliance China was able
to maintain its position as the market leader in the minibus market in 2005. Sales of deluxe
minibuses, mid-priced minibuses, Zhonghua sedans and components represented 17.5%, 54.7%, 15.8% and
12.0%, respectively, of Brilliance China Automotive's total sales revenue in 2005. Brilliance China
Automotive expects that the minibuses, together with the Zhonghua sedans, will continue to
represent a significant proportion of its total revenue.
Costs and Expenses
The major elements of Shenyang Automotive's production costs in recent years have been the
purchase of automotive components, labor and depreciation and amortization. Shenyang Automotive has
significantly lowered its per unit production costs by improving operating efficiency, increasing
production volume and increasing the domestic component content ratios of its deluxe and mid-priced
models. As a result, average per unit production costs (including depreciation and amortization)
for the deluxe model have been steadily decreasing over the past several years. The domestic
component ratio of the Zhonghua sedans also increased from 60% in August 2002 to its current level
between 90% to 100%.
In 2005, per unit production costs for minibuses remained relatively stable. The average per
unit production costs for the Zhonghua sedans decreased by approximately 5.6% mainly due to the
implementation of the cost reduction program and the increase in domestic component contents in
2005. Due to the intensified price competition brought about by the significantly weakened market
and the change in product mix, prices of minibuses and Zhonghua sedans decreased in 2005 by an
average of 9.0% and 20.0% respectively, compared to those in 2004. Gross profit decreased
significantly from Rmb 1,050.7 million (US $130.2 million)
in 2004 to Rmb 457.0 million (US $56.6 million) in 2005 as a result of intensified price competition
resulting from overcapacity, continued rising prices of raw materials and weakened market
sentiments.
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Imported components are generally more expensive than domestically produced components and
were subject to import duties that have ranged as high as 120% since January 1992. However, as a
result of China's accession to the WTO in November 2001, import duties on automotive components
decreased to between 14% and 31.4% in 2002, between 4.8% and 25% in 2003, between 5% and 22.9% in
2004 and between 5% and 18.6% in 2005. In 2006, the import duties on automotive components was
further reduced to between 5% and 14.3%. In 2004, Shenyang Automotive paid an average tariff of
13.8% and 10.5% on its minibus (including Granse minibus) and sedan components, respectively. In
2005, Shenyang Automotive was subject to an average tariff rate of 9.7% and 12.1% on imported
components used in its deluxe minibuses (including Granse minibuses) and Zhonghua sedans,
respectively. Shenyang Automotive intends to continue its efforts to increase the domestic
component content of its products, while at the same time maintaining quality. However, Brilliance
China Automotive expects that future improvements in domestic component content for its existing
mid-priced and deluxe minibuses (other than the Granse model) will be at a rate slower than in
prior years due to an already high domestic component content ratio, and the extent and rate of any
corresponding price reductions are expected to be lower than in prior years. Brilliance China
Automotive expects to increase the ratio of domestic components in the Granse minibus and the
Zhonghua sedan. Brilliance China Automotive also expects BMW Brilliance to increase the domestic
components ratio in its BMW sedans.
Results of Operations
Year ended December 31,
2005
2004
2003
(Thousands of Rmb)
Sales to third parties
3,859,151
4,402,141
7,797,054
Sales to affiliated companies
1,609,839
2,139,857
2,312,503
Total sales
5,468,990
6,541,998
10,109,557
Cost of sales
(5,011,955
)
(5,491,250
)
(7,727,125
)
Gross profit
457,035
1,050,748
2,382,432
Selling, general and administrative expenses
(1,195,336
)
(1,510,442
)
(1,410,067
)
Interest expense
(182,354
)
(182,458
)
(167,111
)
Interest income
60,189
58,800
52,672
Equity in earnings of associated companies and
jointly controlled entities, net
48,995
126,261
109,471
Subsidy income
3,139
1,815
48,497
Other income, net
43,650
25,709
78,293
Impairment loss on intangible assets
(1)
(173,000
)
(50,000
)
—
Impairment loss on goodwill
(2)
(257,720
)
(47,320
)
—
(Loss) income before taxation and minority interests
(1,195,402
)
(526,887
)
1,094,187
(Provision) benefit for income taxes
(101,884
)
63,110
(144,140
)
Minority interests
625,997
464,991
(169,205
)
Net (loss) income
(671,289
)
1,214
780,842
(1)
In 2005, a provision for impairment of intangible assets of Rmb 173.0
million in respect of the design and development costs of the Zhonghua
sedans was recognized.
(2)
In 2005, an impairment loss on goodwill of Rmb 257.7 million in
relation to one of Brilliance China Automotive's jointly controlled entities and a subsidiary was recognized.
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Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Total sales of Brilliance China Automotive in the year ended December 31, 2005 were Rmb
5,469.0 million (US$677.7 million), representing a 16.4% decrease from Rmb 6,542.0 million in 2004.
The decrease in total sales from 2005 to 2004 was primarily due to the decrease in sales volume of
Shenyang Automotive's minibuses and Zhonghua sedans and the decrease in average unit selling prices
due to the intensified price competition of the Chinese automobile industry during 2005.
Total
sales of the minibuses and automotive components segment were Rmb
4,605.9 million
(US$570.7 million) in the year ended December 31, 2005, representing a 11.7% decrease from Rmb 5,217.4
million in 2004. Sales of the Zhonghua sedans were Rmb 863.1 million (US$107.0 million) in the
year ended December 31, 2005, representing a 34.8% decrease from Rmb 1,324.6 million in 2004.
Shenyang Automotive sold approximately 60,000 minibuses in 2005, representing a 2.6% decrease
from approximately 61,618 minibuses sold in 2004. Of these vehicles sold, approximately 50,060 were
mid priced minibuses, representing a 9.0% decrease from approximately 54,992 units sold in 2004.
Unit sales of deluxe minibuses, however, increased by 50.0% from approximately 6,626 units in 2004
to approximately 9,940 units in 2005. Shenyang Automotive sold approximately 9,000 Zhonghua sedans
in 2005, representing a 18.0% decrease from approximately 10,982 sedans sold in 2004.
Cost of sales decreased 8.7% from Rmb 5,491.3 million in 2004 to Rmb 5,012.0 million (US$621.1
million) in 2005. The decrease was primarily due to the decrease in the unit sales of minibuses and
Zhonghua sedans in 2005. Furthermore, the unit production costs of minibuses have decreased as a
result of the reduction of materials and component costs in 2005. The overall gross profit margin
of Brilliance China Automotive decreased from 16.1% in 2004 to 8.4% in 2005. The decrease in gross
profit margin resulted mainly from the decrease in gross profit margin of both Zhonghua sedans and
mid-priced minibuses due to the lower sales volume and decrease in average unit selling prices.
Selling, general and administrative expenses decreased 20.9% from Rmb 1,510.4 million,
representing 23.1% of sales in 2004, to Rmb 1,195.3 million (US$148.1 million), representing 21.9%
of sales in 2005. The decrease was primarily due to the reduction in advertising, promotion and
marketing expenses resulting from the decrease in sales volume of Zhonghua sedans and minibuses in
2005 and the reduction in research and development costs as compared to 2004.
Interest expense net of interest income amounted to Rmb 122.2 million (US$15.1 million) in
2005, compared to Rmb 123.7 million in 2004.
Net equity in earnings of associated companies and jointly controlled entities decreased 61.2%
from Rmb 126.3 million in 2004 to Rmb 49.0 million (US$6.1 million) in 2005. The decrease was
mainly due to the decrease in profit contributed by jointly controlled entities and associated
companies and the losses of a jointly controlled engine company in 2005. However, the decrease was
partly offset by the increase in contribution of profit from BMW Brilliance Automotive Ltd. in
2005. Net profits contributed by BMW Brilliance Automotive Ltd., the Group's 49% indirectly owned
jointly controlled entity, increased 45.0% from Rmb 21.8 million in 2004 to Rmb 31.6 million in
2005. The BMW joint venture achieved sales of 17,501 BMW sedans in 2005, an increase of 101.0% as
compared to 8,708 BMW sedans in 2004.
Subsidy income increased from Rmb 1.8 million in 2004 to Rmb 3.1 million in 2005. The increase
was mainly due to recognition of a government grant to a subsidiary in 2005.
Other income net of expenses increased from Rmb 25.7 million in 2004 to Rmb 43.7 million
(US$5.4 million) in 2005. The increase was primarily due to service income received from a jointly
controlled entity in 2005.
Impairment loss on intangible assets increased from Rmb 50.0 million in 2004 to Rmb 173.0
million in 2005. The impairment loss was related to the design and development costs of the
Zhonghua sedans. The increase was mainly related to the lower sales volume and decrease in average unit selling prices of
Zhonghua sedans in 2005.
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Impairment loss on goodwill increased from Rmb 47.3 million in 2004 to Rmb 257.7 million in
2005. The increase was mainly due to impairment loss in relation to one of the jointly controlled
entities and a subsidiary.
Loss before taxation and minority interests increased 126.9% from Rmb 526.9 million in 2004 to
Rmb 1,195.4 million in 2005. Brilliance China Automotive recorded a tax expense of Rmb 101.9
million in 2005 as compared to a net tax credit of Rmb 63.1 million in 2004, resulting mainly from
the additional valuation allowance of deferred tax assets in 2005.
As a result, Brilliance China Automotive recorded a net loss of Rmb 671.3 million (US$83.2
million) in 2005, compared with net income of Rmb 1.2 million in 2004. Basic loss per ADS amounted
to Rmb 18.3 (US$2.3) in 2005 as compared to the basic earnings per ADS of Rmb 0.03 (US$0.0036) in
2004.
Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
Total sales of Brilliance China Automotive in the year ended December 31, 2004 were Rmb
6,542.0 million (US$790.4 million), representing a 35.3% decrease from Rmb 10,109.6 million in
2003. The decrease in total sales from 2003 to 2004 was primarily due to the decrease in the sales
volume of minibuses and, especially, the Zhonghua sedans and the decrease in average unit selling
prices due to the changes in product mix, resulting from the significant slowdown in growth in the
domestic demand for automobiles in China and the intensified price competition during 2004.
Total sales of the minibuses and automotive components segment were Rmb 5,217.4 million
(US$630.4 million) in the year ended December 31, 2004, representing a 22.9% decrease from Rmb
6,764.2 million in 2003. Sales of the Zhonghua sedans were more significantly affected by the
weakened Chinese automobile industry in 2004, with total sales amounting to Rmb 1,324.6 million
(US$160.0 million) in the year ended December 31, 2004, representing a 60.4% decrease from Rmb
3,345.3 million in 2003.
Shenyang Automotive sold a total of 61,618 minibuses in 2004, representing a 17.4% decrease
over the 74,618 minibuses sold in 2003. Of these vehicles sold, 54,992 were mid-priced minibuses,
representing a 16.2% decrease over the 65,614 mid-priced minibuses sold in 2003. Unit sales of the
deluxe minibuses decreased 26.4% from 9,004 units in 2003 to 6,626 units in 2004. Shenyang
Automotive also sold 10,982 Zhonghua sedans in 2004, compared to 25,600 sedans sold in 2003. In
addition to these sales, Brilliance China Automotive's 49% indirectly owned BMW Brilliance also
sold a total of 8,708 BMW sedans in 2004.
Cost of sales decreased 28.9% from Rmb 7,727.1 million in 2003 to Rmb 5,491.3 million
(US$663.5 million) in 2004. The decrease was primarily due to the decrease in the unit sales of
minibuses and Zhonghua sedans in 2004. Cost of sales as a percentage of sales was 83.9% in 2004,
compared to 76.4% in 2003. The overall gross profit margin of Brilliance China Automotive decreased
from 23.6% in 2003 to 16.1% in 2004, as a result of lower gross profit margin in respect of
minibuses and Zhonghua sedans. The decrease in gross margin of the minibuses was mainly due to the
decrease in sales volume and the decrease in average selling prices resulting from the changes in
product mix. The decrease in gross margin of the Zhonghua sedans and the loss-making position of
this product segment was mainly due to the significant decrease in sales volume of these sedans
compared to 2003 that prevented Brilliance China Automotive from benefiting from economies of scale
in production and caused the per unit costs of Zhonghua sedans to rise above the breakeven level.
Selling, general and administrative expenses increased 7.1% from Rmb 1,410.1 million,
representing 13.9% of sales in 2003, to Rmb 1,510.4 million (US$182.5 million), representing 23.1%
of sales in 2004. The decrease in selling expenses primarily due to the decrease in warranty costs
and sales volume of the Zhonghua sedans and the decrease in marketing staff costs, was offset by
the increase in general and administrative expenses resulting from the increase in research and
development expenses incurred with respect to the Granse minibus and the Zhonghua sedans, the
increase in provision for inventories and provision for and write-off of bad and doubtful debts in
2004.
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Interest expense net of interest income increased by 8.1% from Rmb 114.4 million in 2003
to Rmb 123.7 million (US$14.9 million) in 2004 due to the increase in interest income from notes
payable and the convertible bonds issued in November 2003.
Net equity in earnings of associated companies and jointly controlled entities increased by
15.3% from Rmb 109.5 million in 2003 to Rmb 126.3 million (US$15.3 million) in 2004. The increase
was mainly due to the contribution of profit from BMW Brilliance in 2004.
Subsidy income decreased 96.3% from Rmb 48.5 million in 2003 to Rmb 1.8 million in 2004. The
decrease was mainly due to a tax refund of Rmb 48.5 million in 2003 in relation to Brilliance China
Automotive's reinvestment of the dividends from certain subsidiaries as additional capital
contribution. There was no such tax refund in 2004.
Other income net of expenses decreased from Rmb 78.3 million in 2003 to Rmb 25.7 million
(US$3.1 million) in 2004. The decrease was primarily due to the decrease in income from the sale of
scrap metals in 2004 and a provision for impairment of the property, plant and equipment of Rmb 10
million in one of Brilliance China Automotive's subsidiaries in 2004.
In 2004, Brilliance China Automotive also recognized a provision for impairment of intangible
assets of Rmb 50.0 million in respect of the design and development costs of the Zhonghua sedans
and impairment loss on goodwill of Rmb 47.3 million in relation to one of Brilliance China
Automotive's jointly controlled entities.
Brilliance China Automotive recorded a loss before taxation and minority interests of Rmb
526.9 million in 2004 as compared to an income before taxation and minority interests of Rmb
1,094.2 million in 2003. Brilliance China Automotive recorded net tax credit of Rmb 63.1 million in
2004 as compared to tax expenses of Rmb 144.1 million in 2003, resulting from the decrease in the
taxable income of Brilliance China Automotive and the effect of deferred taxation in 2004.
As a result, net income decreased 99.8% to Rmb 1.2 million (US$0.14 million) in 2004 from Rmb
780.8 million in 2003. Basic earnings per ADS were Rmb 0.03 (US$0.0036) in 2004, representing a
99.9% decrease from Rmb 21.30 in 2003. Diluted earnings per ADS were Rmb 0.03 (US$0.0036) in 2004,
representing a 99.9% decrease from Rmb 21.16 in 2003.
Contingent Liabilities and Outstanding Guarantees
Brilliance China Automotive and its subsidiaries had endorsed or discounted bank notes which
were not yet honored by the issuers as of December 31, 2005 and 2004 of approximately Rmb 1,128
million (US$139.8 million) and Rmb 1,345 million, respectively. These bank notes were used as a
financing tool primarily by Shenyang Automotive for the purchase of components from affiliated
companies and third parties and for other capital expenditures.
As of December 31, 2005, Brilliance China Automotive and its subsidiaries had provided the
following guarantees:
•
Corporate guarantees of approximately Rmb 120 million (US$14.9 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua
Holdings Co., Ltd., or Shanghai Shenhua. The guarantee arose from the mutual
negotiation between Shenyang Automotive and Shanghai Shenhua. Associated with the
corporate guarantee, Shanghai Shenhua also provided a cross guarantee for the bank
facilities of Shenyang Automotive. The guarantee was for revolving activities of
Shanghai Shenhua and will be terminated upon mutual agreements between Shenyang
Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the repayment of its
bank loans or notes when they fall due, Shenyang Automotive is required to repay the
outstanding balance. There is no recourse or collateralization provision in the
guarantee. Default by Shanghai Shenhua and its affiliated companies is considered
remote by management and therefore no liability for the guarantor's obligation under
the guarantee existed as of December 31, 2005.
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•
A joint and several proportional corporate guarantee with a joint venture
partner of Shenyang Aerospace on a long-term bank loan of approximately Rmb 111 million
(US$13.8 million) drawn by Shenyang Aerospace which will expire in 2008. The guarantee
was provided by the Group and a joint venture partner of Shenyang Aerospace for its
long-term loan financing needs during its start-up period. If Shenyang Aerospace
defaults on the repayment of its bank loan when it falls due, the Group and the joint
venture partners are jointly and severally liable to repay the outstanding balance.
There is no recourse or collateralization provision in the guarantee. Default by
Shenyang Aerospace is considered remote by management and therefore no liability for
the guarantor's obligation under the guarantee existed as of December 31, 2005.
•
Corporate guarantees of bank loans amounting to Rmb 295 million (US$36.6 million),
which is also the maximum potential amount of future payments under the guarantee as of
December 31, 2005, drawn by JinBei. Bank deposits of Rmb 311 million (US$38.5 million)
were pledged as a collateral for the corporate guarantees. However, default by JinBei
is considered remote by management and therefore no liability for the guarantor's
obligation under the guarantee existed as of December 31, 2005.
As of December 31, 2005, subsidiaries of Brilliance China Automotive had issued letters of
credit amounting to Rmb 42.8 million (US$5.3 million), compared to Rmb 11 million in 2004. None of
the issued letters of credit were secured by any pledged bank accounts.
See also "Item 8 — Financial Information — Legal Proceedings" for a discussion of potential
contingent liabilities relating to legal proceedings.
Liquidity and Capital Resources
The following table set forth our outstanding contractual and commercial commitments as of
December 31, 2005:
Payment due by period
(In thousands of Rmb)
Less than 1
1-3
4-5
More than 5
Contractual Obligations
Total
year
years
years
years
Notes payable (1)
3,026,952
3,026,952
—
—
—
Notes payable to affiliated companies (2)
74,092
74,092
—
—
—
Convertible bonds (3)
1,650,637
1,650,637
—
—
—
Financing from BMW Brilliance (4)
109,784
109,784
—
—
—
Operating lease obligations (relating to
offices and property)
72,441
13,501
19,290
3,706
35,944
Unconditional purchase obligations
248,258
248,258
—
—
—
Total
5,182,164
5,123,224
19,290
3,706
35,944
(1)
Approximately Rmb 2.7 billion of the Rmb 3.0 billion notes payable had effective interest
rates of 3% to 4%. The remaining Rmb 0.3 billion notes payable were interest free.
(2)
Notes payable to affiliated companies are non-interest bearing.
(3)
Included in the amount is a total accreted redemption premium payable on November 28, 2006 of
approximately Rmb 36.6 million. The accreted redemption premium as of December 31, 2005 of
approximately Rmb 25.4 million was calculated based on the outstanding principal of the
convertible bonds using the effective interest method.
(4)
Accrued interest of approximately Rmb 35.2 million was calculated on the outstanding
principal using the compound interest method at an effective annual rate of 11.127% on a
quarterly basis.
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Cash Flows
As of December 31, 2005, Brilliance China Automotive and its subsidiaries had Rmb 843.4
million in cash and cash equivalents, Rmb 1,053.8 million in short-term bank deposits and Rmb
1,932.6 million in pledged short-term bank deposits, a decrease of Rmb 401.1 million, an increase
of Rmb 45.2 million and a decrease of Rmb 844.6 million from its positions as of December 31, 2004.
The decrease in cash and cash equivalents during that period was mainly due an increase in cash
used in financing activities, which offset increased cash inflows from operating and investing
activities in 2005.
Brilliance China Automotive had bank notes payable of Rmb 3,101.0 million and outstanding
short-term bank borrowings of Rmb 496.5 million, but had no long-term bank borrowings outstanding
as of December 31, 2005.
For the year ended December 31, 2005, Brilliance China Automotive recorded net cash provided
by operating activities of Rmb 896.3 million (US$111.1 million), an increase from the amount of Rmb
719.3 million net cash used in operating activities in 2004. The change in cash flows used
in/provided by operating activities was primarily due to the inter-year changes in the following
current assets and current liabilities:
•
decreases in notes receivable from third parties and from affiliated companies in
the amounts of Rmb 243.4 million and Rmb 306.2 million, respectively, for the year
ended December 31, 2005, as compared to a decrease of Rmb 206.6 million and an increase
of Rmb 118.0 million for the year ended December 31, 2004;
•
a decrease in inventory of Rmb 569.5 million (US$70.6 million) for the year ended
December 31, 2005, as compared to an increase in inventory of Rmb 328.2 million for the
year ended December 31, 2004;
•
a decrease in notes and accounts payable of Rmb 333.3 million (US$41.3 million) for
the year ended December 31, 2005, as compared to a decrease of Rmb 391.1 million for
the year ended December 31, 2004; and
•
an increase in amounts due to affiliated companies of Rmb 171.9 million (US$21.3
million) for the year ended December 31, 2005, as compared to a decrease in such
amounts due of Rmb 162.1 million for the year ended December 31, 2004.
Net cash provided by investing activities amounted to Rmb 325.6 million (US$40.3 million) in
2005, an increase of Rmb 1,048.0 million from the amount of Rmb 722.4 million net cash used in
investing activities in 2004. The increase was primarily attributable to the decrease in pledged
short-term bank deposits of Rmb 844.5 million (US$104.6 million), a decrease in interests in
associated companies and jointly controlled entities of Rmb 11.5 million (US$1.4 million),
dividends received from an associate and from jointly controlled entities in the amounts of Rmb
42.0 million (US$5.2 million) and Rmb 30.0 million (US$3.7 million), respectively, and proceeds of
Rmb 9.5 million (US$1.2 million). The increase in cash provided by investing activities was
partially offset by a Rmb 45.2 million (US$5.6 million) increase in short-term bank deposits, a Rmb
8.7 million (US$1.1 million) increase in advances to affiliated companies and cash paid for capital
expenditures of Rmb 558.0 million (US$69.1 million).
Net cash used in financing activities amounted to Rmb 1,622.9 million (US$201.1 million) in
2005, as compared to net cash provided by financing activities in the amount of Rmb 853.9 million
in 2004. This increase in cash used in financing activities is primarily attributable to a decrease
in proceeds from short term loans and issuances of notes payable.
Debt Changes
On November 28, 2003, Brilliance China Automotive, through its wholly owned subsidiary,
Brilliance China Automotive Finance Ltd., issued zero coupon guaranteed convertible bonds due 2008
with an aggregate principal amount of US$200.0 million. These bonds are guaranteed by Brilliance
China Automotive and are convertible into fully paid ordinary shares of par value US$0.01 of
Brilliance China Automotive at an initial conversion price of HK$4.60 per share at any time from January 8, 2004 to November 14, 2008, unless
the bonds have previously been redeemed or matured. Brilliance China Automotive Finance Ltd. may
redeem a portion of the convertible bonds in certain circumstances at 100% of their outstanding
principal amount during the period from November 28, 2005 to November 14, 2008. In addition, all or
some of the bonds may be redeemed at the option of the holder at 102.27% of their principal amount
on November 28, 2006 and upon certain events, such as the change of control of Brilliance China
Automotive or its shares ceasing to be listed on the Hong Kong Stock Exchange, the bonds may be
redeemed at the option of the holder at 100% of their outstanding principal amount. These bonds
rank equally with all of Brilliance China Automotive's senior, unsecured and unsubordinated
obligations. As of December 31, 2005, none of the bonds had been converted.
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On June 7, 2006, Brilliance China Automotive, through its wholly owned subsidiary, Brilliance
China Finance Limited (formerly known as Goldcosmos Investments Limited), issued zero coupon
guaranteed convertible bonds due 2011 with an aggregate principal amount of approximately US$183.0
million (equivalent to approximately Rmb 1,467.1 million at the time of issue). These bonds are
guaranteed by Brilliance China Automotive and are convertible by the
holders into fully paid ordinary shares of
par value US$0.01 of Brilliance China Automotive at an initial
conversion price of HK$1.93 per
share at any time from July 6, 2006 to May 8, 2011, unless the bonds have previously been redeemed
or matured. Brilliance China Finance Limited may redeem the convertible bonds in whole but not in
part in certain circumstances at the early redemption amount (as
defined in the Trust Deed constituting the bonds and filed as an
exhibit to this annual report) during the period from June 7,
2008 to May 8, 2011. In addition, each holder will have
the right, at the option of the holder, to redeem in whole but not in part the convertible bonds at
122.926% of their principal amount on June 7, 2009. Unless previously redeemed, converted or purchased and
cancelled, the convertible bonds will be redeemed at 141.060% of
their outstanding principal amount on June 7, 2011.
In 2005, Brilliance China Automotive continued to maintain credit facilities with banks to
finance its working capital needs. As of December 31, 2005, direct bank borrowings and bank notes
payable decreased by 38.5% to Rmb 3,523.5 million
(US$436.6 million), a decrease of Rmb 2,203.7
million from Rmb 5,727.2 million as of December 31, 2004. The bank loans and bank notes payable
were either secured by pledged short-term bank deposits or notes receivables, or unsecured, with
maturity periods of less than one year. Brilliance China Automotive believes that it will continue
to have access to sufficient bank facilities to meet its working capital requirements.
Capital Expenditures
Capital expenditures and operating expenses are funded by internal resources, loans and notes
payable borrowed by Shenyang Automotive from third parties. Brilliance China Automotive's capital
expenditures were Rmb 585.7 million in 2005, a decrease of Rmb 335.2 million from that in 2004.
Major items of expenditure included facilities upgrades relating to the production of new versions
of the Granse deluxe minibus and Zhonghua sedans and acquisition of new facilities for engine
businesses.
Foreign Currency Requirements
Brilliance China Automotive together with its subsidiaries, associated companies and jointly
controlled entities expect to require an aggregate of approximately Japanese Yen 6,000.0 million,
US$10.0 million and Euro 320.0 million to purchase imported equipment and components from Toyota of
Japan, BMW of Germany and other overseas suppliers for its minibuses and sedans in 2006. This
estimate is based upon the 2006 production plans of Brilliance China Automotive and its
subsidiaries, associated companies and jointly controlled entities and the level of domestic
content expected for its minibuses and sedans in 2006. Brilliance China Automotive believes that it
will be able to obtain adequate amounts of foreign currency to meet its planned requirements for
2006. In 2005, Brilliance China Automotive received approximately Rmb 80.0 million from its sale of
products to the Middle East, Russia and Europe. Under the Chinese law, Brilliance China Automotive
and its associated companies and jointly controlled entities in China are able to obtain necessary
foreign exchange in exchange for Renminbi upon approval from the State Administration of Foreign
Exchange, based on executed purchase contracts, joint venture agreements, feasibility studies and
other documents evidencing the needs and proposed usage of such foreign exchange.
Brilliance China Automotive does not consider exchange rate fluctuations to have any material
effect on the overall financial performance of Brilliance China Automotive, but may consider
entering into hedging transactions through exchange contracts in order to minimize foreign exchange
risks, if and when necessary. There were no outstanding hedging transactions as of December 31,
2005.
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Research and Development, Patents and Licenses, etc.
During 2003, 2004 and 2005, Brilliance China Automotive spent Rmb 191.4 million, Rmb 479.9
million and Rmb 235.2 million, respectively, on research and development activities. In 2003, these
amounts were used for the development of improved versions of existing minibus models, the
development of an improved version of the Zhonghua sedan and the development of new engines, airbag
systems and other components. In 2004, these amounts were primarily used for the development of new
models of minibus, the development of the "facelift" version of the Zhonghua sedan and the
development of a new 1.8 liter turbo engine with the technical assistance of FEV Motorentechnik
GmbH. In 2005, these amounts were primarily used for the development of the new Zhonghua sedan,
Junjie and the new 1.8 liter turbo engine.
Trend information
General trends that Brilliance China Automotive expects will have a significant impact on its
results of operations in the near future include the following:
•
Increased Demand for Motor Vehicles
. The rate of increase in China's gross domestic
product has been one of the highest in the world over the past decade, and this growth
has fueled demand for automobiles. In fact, demand in the Chinese automobile industry
has been growing over the past several years at a faster rate than the growth in
China's gross domestic product. This trend is expected to have a favorable impact on
Brilliance China Automotive's sales volume for both minibuses and sedans. However, due
to the implementation of macro-economic policies and austerity measures, there was a
significant slowdown in growth in domestic demand for automobiles since the second half
of 2004. Therefore, while growth in demand for automobiles is expected to continue, it
is likely to increase at a slower rate than in prior years.
•
Competition
. As a result of China's accession to the WTO, domestic production of
automobiles (including minibuses and sedans) is expected to increase, particularly
through Sino-foreign joint ventures that are being established for this purpose.
Formation of new Sino-foreign joint ventures and further investments by foreign auto
makers to increase the capacity of existing operations could result in overcapacity and
increased domestic competition for Brilliance China Automotive and greater downward
pressure on vehicle prices as competitors begin to employ a higher ratio of
domestically produced components and as more competitors achieve economies of scale due
to increased volume of production.
•
Price
. Retail prices in the automotive market are expected to continue to fall as a
result of the localization of production and sourcing of components as described
immediately above as well as increased competition. A decrease in average selling
prices may lower margins and cause industry-wide deterioration of profitability. This
expected decline in vehicle prices will likely have an adverse effect on Brilliance
China Automotive's gross income and profits.
•
Growth, Consolidation and Development
. On June 2, 2004, the NDRC issued a new
automotive policy for China, which will likely result in consolidation in the industry
and further the development and sophistication of the automobile industry in areas such
as consumer financing and research and development. The new policy sets minimum levels
of investment for new plants and research and development, imposes vehicle import
tariffs instead of component tariffs on semi-knocked down imports and, under certain
conditions, allows foreign investors to control more than 50% of a joint venture with
Chinese partners and open more than two joint venture plants in China to produce the
same categories of vehicles. The new policy acknowledges the success of China's
automobile industry and seeks to encourage this "pillar industry" to foster further
growth, particularly of domestically produced and branded products and research and
development, through consolidation of smaller, less-efficient manufacturers and
increased foreign and domestic investment. In addition, the policy aims to centralize
or reorganize certain automobile-related sectors, such as consumer loan services, to
reduce overhead and administrative burdens on the industry and allow industry
participants to focus on their core businesses. By encouraging industry consolidation
and establishing clearer guidelines for foreign investment, the policy encourages existing players in the industry to grow and provides
incentives for targeted investment from both domestic and foreign sources. However, the
ultimate impact of the new policy on Brilliance China Automotive is still uncertain and
subject to more detailed guidance and implementing regulations that are expected to be
promulgated by the NDRC in the future.
•
Improvements in China's Infrastructure
. China continues to improve and expand its
roadway system. By making automobile travel a more practical and accessible mode of
transportation for motorists in China, such improvements in China's infrastructure will
likely add to demand for automobiles.
•
Rising Fuel Prices.
China's fuel prices reached historical heights in May 2006 and
may continue to increase. Such increases will likely have a negative influence on
Brilliance China Automotive's sales volume.
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Critical Accounting Policies
Critical accounting policies are defined as those that are reflective of significant judgments
and uncertainties and potentially result in materially different results under different
assumptions and conditions.
Brilliance China Automotive's consolidated financial statements have been prepared in
accordance with US GAAP. Brilliance China Automotive's principal accounting policies are set forth
in note 3 to its consolidated financial statements. US GAAP requires that Brilliance China
Automotive adopt the accounting policies and make estimates that its directors believe are most
appropriate in the circumstances for the purposes of giving a true and fair view of its results of
operations and financial condition. However, different policies, estimates and assumptions in
critical areas could lead to materially different results.
Brilliance China Automotive considers certain accounting policies, including those related to
revenue recognition, warranties, inventories, investment in jointly controlled entities and
associated companies, taxation, related party transactions and impairment of long-lived assets, to
be critical accounting policies due to the estimation processes involved in each.
Revenue Recognition
Brilliance China Automotive recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101) (as amended by Staff
Accounting Bulletin No. 104, Revenue Recognition (SAB 104)). SAB 101 and SAB 104 require that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed
and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and
(4) is based on management's judgments regarding the fixed nature of the fee charged for services
rendered and products delivered, and the collectibility of those fees. Should changes in conditions
cause management to determine these criteria are not met for certain future transactions, revenue
recognized for any reporting period could be adversely affected.
Sales represent the invoiced value of goods, net of consumption tax, discounts and returns.
Sales are recognized when goods are delivered to customers and the significant risks and rewards of
ownership of the goods have been transferred to customers. Provisions for sales allowances and
rebates are made at the time of the sales of goods and are recognized as a reduction of sales.
Warranties
Shenyang Automotive's minibuses are sold with a 24-month or 50,000 kilometers first-to-occur
limited warranty. The "Zhonghua" sedans are sold with a 36-month or 60,000 kilometers
first-to-occur limited warranty. "Zunchi" sedans are sold with a 10-year or 200,000 kilometers
first-to-occur limited warranty. During the warranty period, Shenyang Automotive pays service
stations for parts and labor covered by the warranty. The costs of the warranty obligation are
accrued as selling expenses at the time the sales are recognized, based on the estimated costs of
fulfilling the total obligations, including handling and transportation costs. The factors used to
estimate warranty expenses are reevaluated periodically in light of actual experience. Actual warranty expense may be
different from our estimates.
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Inventories
Inventories are carried at the lower of cost or market. Cost comprises all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to their present location
and condition. Cost is calculated on the moving-average basis, except for costs of work-in-progress
and finished goods of sedans and minibuses, which are calculated by the specific identification
basis. Brilliance China Automotive provides allowance for excess, slow moving and obsolete
inventory by specific identification and reduces the carrying value of its inventory to the lower
of cost or market.
Impairment of long-lived assets
Long-lived assets, such as property, plant and equipment and purchased intangible assets with
finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable from its undiscounted future cash flow. If
such assets are considered to be impaired, the impairment to be recognized is measured as the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
Deferred Taxation
Deferred income tax is provided using the liability method, in which deferred income taxes are
recognized for temporary differences between the tax and financial statement bases of assets and
liabilities. The tax consequences of those differences expected to occur in subsequent years are
recorded as assets and liabilities on the balance sheet. Estimates may differ from actual results.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of, the deferred tax assets will not be realized.
Transactions with affiliated companies
An affiliated company is a company in which one or more of the directors or substantial
shareholders of Brilliance China Automotive have direct or indirect beneficial interests in the
company or are in a position to exercise significant influence over the company. Parties are also
considered to be affiliated if they are subject to common control or common significant influence.
The accounting treatment for transactions with these affiliated companies, including sales and
revenue recognition policies, is similar to that for transactions with third parties.
Recent Accounting Pronouncements
In March 2006, the FASB issued SFAS No. 156, ''Accounting for Servicing of Financial Assets —
An Amendment of FASB Statement No. 140'' (''SFAS'') No. 156. SFAS No. 156 requires that all
separately recognized servicing assets and servicing liabilities be initially measured at fair
value, if practicable. The statement permits, but does not require, the subsequent measurement of
servicing assets and servicing liabilities at fair value. SFAS No. 156 is effective as of the
beginning of an entity's first fiscal year that begins after September 15, 2006, which for the
Group will be as of the beginning of fiscal 2007. The Company does not believe that the adoption of
SFAS No. 156 will have a significant effect on its financial statements.
In February 2006, the FASB issued SFAS No. 155, ''Accounting for Certain Hybrid Financial
Instruments.'' SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require bifurcation. As of March 2, 2006,
the Company did not have any hybrid financial instruments subject to the fair value election under
SFAS No. 155. The Group is required to adopt SFAS No. 155 effective at the beginning of 2008.
In November 2005, the FASB issued Staff Position (FSP) FAS115-1 and FAS 124-1, which nullifies
certain provisions of EITF Issue 03-1, ''The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments'', and completely supersedes EITF Topic D-44, ''Recognition of
Other Than Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value'', addresses (1)
determining when an investment should be considered impaired, (2) determining whether an impairment
should be deemed other than temporary, and (3) measuring impairment loss. Combined FSP Nos. FAS
115-1 and FAS 124-1 were applied as discussed in Notes 3(j) and 14 to the Group's consolidated
financial statements.
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In May 2005, the FASB issued SFAS No. 154, ''Accounting Changes and Error Corrections.'' SFAS
No. 154 changes the requirements for the accounting for and reporting of a change in accounting
principle. The Group is required to adopt SFAS No. 154 for accounting changes and error corrections
that occur after the beginning of 2007. The Group's results of operations and financial condition
will only be impacted following the adoption of SFAS No. 154 if it implements changes in accounting
principle that are addressed by the standard or corrects accounting errors
in future periods.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), ''Share Based Payment'' (SFAS
123(R)). SFAS 123(R) is a revision of SFAS No. 123, ''Accounting for Stock-Based Compensation,''
which supersedes Accounting Principles Board (APB) No. 25, ''Accounting for Stock Issued to
Employees,'' and amends SFAS No. 95, ''Statement of Cash Flows.'' SFAS 123(R) requires companies to
recognize compensation expense in the income statement for an amount equal to the fair value of the
share-based payment issued. This applies to all transactions involving the issuance of equity by a
company in exchange for goods and services, including employees. In March 2005, the SEC issued
Staff Accounting Bulletin No. 107 (SAB 107) outlining the SEC Staff's interpretation of SFAS
123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and
certain SEC rules and regulations and provides interpretations of the valuation of share-based
payments for public companies. Subsequently in August, October and November 2005, the FASB released
FSP 123(R)-1, ''Classification and Measurement of Freestanding Financial Instruments Originally
Issued in Exchange for Employee Services under FASB Statement No. 123(R),'' FSP123(R)-2,
''Practical Accommodation to the Application of Grant Date as Defined in FASB Statement No.
123(R)'' and FSP 123(R)-3, ''Transition Election Related to Accounting for the Tax Effects of
Share-Based Payment Awards.'' Additionally, on February 1, 2006, the FASB issued FSP 123(R)-4,
''Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for
Cash Settlement upon the Occurrence of a Contingent Event.'' The FSPs clarify certain accounting
provisions set forth in SFAS 123(R). The requirements and guidance prescribed in SFAS 123(R), SAB
107 and the FSPs is effective in 2006. The Group considers that the adoption of SFAS 123R will not
have significant impact on its financial statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors and Senior Management
On September 16, 2005, Mr. He Guohua and Mr. Wang Shiping were appointed as executive
directors. On January 6, 2006, Mr. Lin Xiaogang resigned as the President, Chief Executive Officer
and an executive director and on June 23, 2006, Mr. Wu Yong Cun retired as a non-executive
director. Effective January 6, 2006, Mr. Qi Yumin was appointed as the President, Chief Executive
Officer and an executive director.
The directors and senior executive officers of Brilliance China Automotive as of the date of
this annual report are identified below.
Year First
Elected or Appointed
Name
Age
Position
Director or Officer
Executive Directors
Wu Xiao An
44
Chairman of the Board and Executive Vice President
1994
Qi Yumin
46
President and Chief Executive Officer
2006
He Guohua
55
Director
2005
Wang Shiping
49
Director
2005
Lei Xiaoyang
49
Director
2003
Independent Non-Executive Directors
Xu Bingjin
66
Director
2003
Song Jian
49
Director
2004
Jiang Bo
46
Director
2004
Others
Zha Jianping
35
Chief Financial Officer
2005
Zhang Ruiping
35
Qualified Accountant
2004
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Executive Directors
Mr. WU Xiao An (also known as Mr. Ng Siu On), age 44, has been the Chairman of the Board of
Brilliance China Automotive since June 2002, and an executive director since 1994. He is
responsible for the overall management and strategy of Brilliance China Automotive. He was the
Vice Chairman and the Chief Financial Officer of the Company from 1994 to June 2002. He is also a
director of Huachen and Shenyang Automotive. Mr. Wu holds a Bachelor of Arts Degree from Beijing
Foreign Languages Institute and a Master of Business Administration Degree from Fordham University
in New York. He served from 1988 to 1993 as Deputy Manager of the Bank of China, New York Branch.
Mr. QI Yumin, age 46, has been an executive Director, the President and the Chief Executive
Officer of Brilliance China Automotive since January 2006. He is a senior engineer. Since
December 2005, Mr. Qi has been the Chairman and President of Huachen. Prior to joining Huachen,
Mr. Qi has been the Chairman and the general manager of Dalian Heavy Industries Co., Ltd. and as
the Chairman and the President of DHI
•
DCW Group Co., Ltd. He was the Vice Mayor of Dalian
Municipal Government from October 2004 to December 2005. Mr. Qi is currently a member of the
National People's Congress of the PRC Dalian Committee and a member of the Chinese People's
Political Consultative Conference Liaoning Provincial Committee. Mr. Qi holds a Bachelor Degree in
Engineering Science from Xi'an University of Technology and a Master Degree of Business
Administration from Dalian University of Technology.
Mr. HE Guohua, age 55, has been an executive Director of Brilliance China Automotive since
September 2005. Mr. He is currently a director and the Vice President of Huachen and the Vice
Chairman and a director of Shenyang Automotive. He is also a director and the Chairman of JinBei
(an A-share listed company in the PRC). Mr. He previously worked as an engineer of Shenyang First
Machine Tools Factory and was a director of Shenyang Planning & Economic Commission, a director of
the Shenyang Economic & Trade Commission, a deputy director of the Shenyang Automotive Development
Office and the Chairman and General Manager of Shenyang Automotive Assets Operation Corporation.
Mr. He is a PRC Senior Engineer in electrical engineering. He graduated from Hefei University of
Technology, majoring in Micro Computer Science in 1984.
Mr. WANG Shiping, age 49, has been an executive Director of Brilliance China Automotive since
September 2005. Mr. Wang is currently a director and the Vice President of Huachen and a director
of Shenyang Automotive. He is a director and the Chairman of Shanghai Shenhua. Mr. Wang was
previously the Deputy Head Engineer of Radiator Branch Company of China First Automobile Group
Corporation, the General Manager of FAW-ZEXEL Air-Condition Branch Company, the Deputy General
Manager and Director of Strategic Planning of Fawer Automobile Part Co., Ltd. Mr. Wang is a Senior
Engineer (Researcher) in corporate management. He graduated from Anshan Iron & Steel University in
1983 with a Bachelor of Engineering Degree. He also received a Master of Business Economics Degree
from the Graduate School of the Chinese Academy of Social Sciences in 1998.
Mr. LEI Xiaoyang, age 49, was a non-executive Director of Brilliance China Automotive from
June 2003 to June 2005 and was redesignated as an executive Director of the Company effective in
June 2005. Mr. Lei has been the Deputy Chief Economist as well as the General Manager of the
Department of Asset Operations in Huachen since January 2003. He was the Assistant President of
Liaoning International Trust and Investment Corporation from June 1996 to September 2002, and was
in charge of the Financing Department, the Accounting Department, the Strategic Planning Department
and the Securities Department. Mr. Lei holds a Bachelor of Engineering Degree from the Shenyang
Polytechnic University and a Master of Finance Degree from Liaoning University as well as a Master
of Business Administration Degree from Roosevelt University.
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Independent Non-Executive Directors
Mr. Xu Bingjin, age 66, has been an independent non-executive Director of Brilliance China
Automotive since June 2003. Mr. Xu is currently the Chairman of the Association of Sino-European
Economic and Technical Cooperation. He was formerly an assistant minister of the Ministry of
Foreign Trade and Economic Cooperation, a director of the Office of National Mechanic and
Electronic Products Importation and Exportation and a Senior Consultant at the World Trade
Organization Research Association. Mr. Xu received a Bachelor of Science Degree in Engineering
Economics from Jilin University of Technology in 1964 and holds the title of Senior Engineer.
Mr. SONG Jian, age 49, has been an independent non-executive Director of Brilliance China
Automotive since September 2004. Mr. Song is currently the Executive Vice President of the
Tsinghua Automotive Engineering Institute, the Deputy Dean of the Automotive Engineering Department
at Tsinghua University, the Vice Director of the National Laboratory in Automotive Safety and
Energy and an advisor to the Beijing Government in Science and Technology. In 1998, Mr. Song
received the Award for Outstanding Science and Technology Persons in the China Automotive Industry.
In 2005, he was ranked first in the Class One China Automotive Industry and Technology Advancement
Award. Mr. Song holds a Bachelor Degree and a Doctorate Degree, both in Engineering Science, from
Tsinghua University. He is currently a professor of Automotive Dynamics and Control Engineering at
Tsinghua University.
Mr. JIANG Bo, age 46, has been an independent non-executive Director of Brilliance China
Automotive since September 2004. Mr. Jiang is an accountant, a certified public accountant and a
certified public valuer in the PRC. He has been the general manager of Liaoning Reanda Certified
Public Accountants in the PRC since 1999 and was a director of Dandong Zhongpeng Accounting Firm
from 1993 to 1999. Mr. Jiang has over 10 years of experience in auditing financial statements of
companies listed on the PRC stock exchanges. Mr. Jiang has been a Certified Public Valuer since
1998 and has been involved in asset appraisals of companies in preparation for listing in the PRC.
He has participated in various listing projects of state-owned enterprises in the PRC and overseas
and has gained experience in reviewing and analyzing the audited financial statements of companies
listed in the PRC. Mr. Jiang has worked with one of the "Big-4" international accounting firms in
the auditing of a state-owned enterprise. Mr. Jiang holds a Bachelor of Science Degree in
Mathematics from Liaoning University and a diploma in Accounting from the Central Finance and
Economics University.
Others
Mr. ZHA Jianping, age 35, has been the Chief Financial Officer of Brilliance China Automotive
since January 2005. Mr. Zha is a qualified accountant in the PRC. He was awarded a Bachelor
Degree in Economics from the University of Finance and Economics in Shanghai in 1993. Mr. Zha has
more than eleven years of financial management experience with extensive experience in corporate
finance and strategic planning. He was in charge of the acquisition and corporate restructuring of
JinBei. Currently, Mr. Zha is the Vice President of JinBei and the Chief Financial Officer of Xing
Yuan Dong as well as a director of Shenyang Automotive. Mr. Zha was formerly the Chief Financial
Officer of Shenyang Automotive. Prior to joining Brilliance China Automotive, Mr. Zha worked and
handled finance-related matters in Nam Kwong Group Company Limited, a conglomerate with operation
in the PRC, Macau and overseas for seven years.
Ms. ZHANG Ruiping, age 35, has been the qualified accountant of Brilliance China Automotive
since November 2004. Ms. Zhang is the head of the financial department of Brilliance China
Automotive and its subsidiaries. She graduated from Shanghai University of Finance and Economics.
She is a qualified PRC accountant and also a PRC certified pubic accountant registered as an
individual member with the Shanghai Institute of Certified Public Accountants. She worked at the
financial department of China Merchants Group, Hong Kong from 1996 to 1999 and was the manager of
the finance department of Shanghai Shenhua Holdings Co., Ltd from 1999 to 2003.
There is no family relationship between any director or executive officer of Brilliance China
Automotive and any other director or executive officer.
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Compensation
The aggregate amount of compensation, consisting of salary, allowances and benefits in kind,
paid by Brilliance China Automotive to its directors and executive officers during 2005 was
approximately Rmb 12.9 million (US$1.6 million).
Board Practices
The board of directors of Brilliance China Automotive currently consists of eight members,
one-third of whom are required to retire from office by rotation at each annual general meeting in
accordance with the terms of its By-laws. Those directors that retire from office, however, may be
immediately re-elected as directors by the shareholders.
Service Agreements
On March 1, 2006, Brilliance China Automotive entered into a service agreement with Mr. Wu
Xiao An, an executive director of the Company for a term of three years beginning March 1, 2006. On
March 1, 2006, Brilliance China Automotive entered into a service agreement with Mr. Qi Yumin, an
executive director of the Company for a term of three years beginning January 6, 2006. Save as
disclosed herein, no director has a service contract with Brilliance China Automotive that is not
determinable by the employer within one year without payment of compensation, other than statutory
compensation.
Audit Committee
Brilliance China Automotive has established an audit committee whose primary duties consist of
reviewing and supervising the financial reporting process of Brilliance China Automotive. The audit
committee currently consists of three independent non-executive directors, Mr. Xu Bingjin, Mr. Song
Jian and Mr. Jiang Bo, and Mr. Xu is the chairman of the committee.
Meetings
Meetings of the audit committee shall be held at least twice per year, and Brilliance China
Automotive's external auditors may request a meeting if they consider that one is necessary. A
quorum for a meeting of the audit committee shall be two members. Brilliance China Automotive's
secretary shall serve as secretary of the audit committee and shall (i) circulate to members of the
committee the draft and final versions of minutes of audit committee meetings and (ii) circulate to
the board reports of the audit committee. Brilliance China Automotive's Chief Financial Officer,
the Head of Internal Audit and a representative of its external auditors shall normally attend
audit committee meetings as well. The audit committee shall meet with Brilliance China Automotive's
external auditors at least once per year.
Authority and Duties
The audit committee is authorized by the board to investigate any activity within its scope of
duty. It is authorized to seek any information it requires from any employee and all employees are
directed to cooperate with any request made by the audit committee. The audit committee is
authorized by the board to obtain outside legal or other independent professional advice and to
secure the attendance of outsiders with relevant experience and expertise if it considers this
necessary.
The duties of the audit committee are to:
•
be primarily responsible for the appointment, re-appointment and removal of the
external auditor, the remuneration and terms of the engagement of the external auditor,
and the resignation or dismissal of the external auditor;
•
review and monitor the external auditor's independence and objectivity and the
effectiveness of the audit process in accordance with applicable standards, and to
oversee the work of external auditor (including resolution of disagreements between
management and the external auditor regarding financial reporting). The committee should establish with the external auditor the
nature and scope of the audit and reporting obligations before the audit commences;
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•
develop and implement policy on the engagement of an external auditor to supply
non-audit services. For this purpose, "external auditor" shall include any entity that
is under common control, ownership or management with the audit firm or any entity that
a reasonable and informed third party having knowledge of all relevant information
would reasonably conclude as part of the audit firm nationally or internationally. The
committee should identify to the Board any matters in respect of which it considers
that action or improvement is needed and make recommendations as to the steps to be
taken;
•
monitor the integrity of financial statements of Brilliance China Automotive and
Brilliance China Automotive's annual reports and accounts, interim reports and, if
prepared for publication, quarterly reports, and to review significant financial
reporting judgments contained in them. In this regard, in reviewing Brilliance China
Automotive's reports and accounts before submission to the board, the committee should
focus particularly on:
•
changes in accounting policies and practices;
•
accounting policies which require difficult, subjective or complex judgments
(also known as critical accounting policies);
•
significant adjustments resulting from audits;
•
going concern assumptions and any qualifications;
•
compliance with accounting standards; and
•
compliance with listing rules of stock exchange(s) and other applicable legal
and regulatory requirements and guidance in relation to financial reporting;
•
In regard to the review of financial information:
•
members of the committee must liaise with the Board, senior management and the
person appointed as Brilliance China Automotive's qualified accountant;
•
the committee must meet at least once a year with the external auditor; and
•
the committee should consider any significant or unusual items that are, or may
need to be, reflected in such reports and accounts and must give due consideration
to any matters that have been raised by Brilliance China Automotive's qualified
accountant, compliance officer (if any) or auditor;
•
establish procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters, including
procedures for the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters;
•
review Brilliance China Automotive's financial controls, internal control and risk
management systems;
•
discuss with the management the system of internal control and ensure that
management has discharged its duty to establish and maintain an effective internal
control system;
•
discuss policies with respect to risk assessment and risk management;
•
consider the findings of investigations of internal control matters as delegated by
the board, or on the committee's own initiative, and review management's response;
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•
where an internal audit function exists, to ensure co-ordination between the
internal and external auditors, to ensure that the internal audit function is
adequately resourced and has appropriate standing within Brilliance China Automotive,
and to review and monitor the effectiveness of the internal audit function;
•
where an internal audit function exists, to meet separately, periodically, with
management, with internal auditors (or other personnel responsible for the internal
audit function) and with external auditors;
•
review the group's financial and accounting policies and practices;
•
review the external auditor's management letter, any material queries raised by the
external auditor to management in respect of the accounting records, financial accounts
or systems of control, and management's response;
•
review with the external auditor any audit problems or difficulties and management's
response;
•
ensure that the board provides a timely response to the issues raised in the
external auditor's management letter;
•
report to the board on the matters set out in the code provision of Rule C.3 of
Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited;
•
give pre-approval of other services and fees of the external auditor;
•
set clear hiring policies for employees or former employees of the external auditors;
•
report regularly to the board of the result of their review of the financial
reporting system and internal control procedures and recommendations (if any) thereon;
and
•
consider other topics, as determined from time to time by the board.
The audit committee met in April, 2003, 2004, 2005 and 2006, September 2003, 2004 and 2005,
and also December 2004.
Remuneration Committee
Brilliance China Automotive has established a remuneration committee. The remuneration
committee shall consist of not less than three members, a majority of whom should be independent
non-executive directors. The remuneration committee currently consists of three independent
non-executive directors, Mr. Xu Bingjin, Mr. Song Jian and Mr. Jiang Bo, and two executive
directors, Mr. Wu Xiao An and Mr. Qi Yumin. Mr. Xu Bingjin is the chairman of the committee.
Meetings
Meetings of the remuneration committee shall be held at least once a year. Meetings will be
held at the request of any member of the board. A quorum for a meeting of the remuneration
committee shall be two members. Brilliance China Automotive's secretary shall serve as the
secretary of the remuneration committee and shall (i) circulate to members of the committee the
draft and final versions of minutes of remuneration committee meetings and (ii) circulate to the
board reports of the remuneration committee.
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Authority and Duties
The remuneration committee is authorized by the board to carry out any activity within its
scope of duty. It may request from the management information relating to the compensation and
remuneration packages of employees as appropriate to enable members of the committee to perform
their duties set out herein. The remuneration committee may consult the chairman and/or chief
executive officer of Brilliance China Automotive regarding any proposed remuneration or compensation in respect of any executive director of
Brilliance China Automotive, as appropriate. The remuneration committee is also authorized by the
board to obtain outside legal or other independent professional advice and to secure the attendance
of other persons with relevant experience and expertise, at the expense of Brilliance China
Automotive.
The duties of the remuneration committee are to:
•
make recommendations to the board on the policy and structure for all remuneration
of the directors and senior management of Brilliance China Automotive and its
subsidiaries and on the establishment of a formal and transparent procedure for
developing the policy of Brilliance China Automotive and its subsidiaries on such
remuneration;
•
determine the specific remuneration packages of all executive directors and senior
management, including benefits in kind, pension rights and compensation payments,
including any compensation payable for loss or termination of their office or
appointment, and make recommendations to the board on the remuneration of non-executive
directors;
•
review and approve performance-based remuneration in accordance with corporate goals
and objectives resolved by the board from time to time;
•
review and approve the compensation payable to executive directors and senior
management in connection with any loss or termination of their office or appointment in
order to ensure that such compensation is determined in accordance with relevant
contractual terms and that such compensation is otherwise fair and not excessive for
Brilliance China Automotive and its subsidiaries;
•
review and approve compensation arrangements relating to dismissal or removal of
directors for misconduct to ensure that such arrangements are determined in accordance
with relevant contractual terms and that any compensation payment is otherwise
reasonable and appropriate;
•
ensure that no director or any of his associates is involved, directly or
indirectly, in deciding such director's remuneration; and
•
in respect of any service agreement to be entered into between Brilliance China
Automotive/its subsidiaries and its respective director or proposed director, the prior
approval of which by the shareholders of Brilliance China Automotive in general meeting
is required pursuant to the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the "Listing Rules"), to review and provide
recommendations to the shareholders of Brilliance China Automotive (other than the
shareholders who are directors with a material interest in the relevant service
agreements and their respective associates (as defined in the Listing Rules)) as to
whether the terms of the service agreements are fair and reasonable and whether such
service agreements are in the interests of Brilliance China Automotive and the
shareholders as a whole, and to advise shareholders on how to vote.
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Summary Corporate Governance Differences
There are significant differences between Brilliance China Automotive's corporate governance
practices and those of domestic companies listed on the New York Stock Exchange. Pursuant to
Section 303A.11 of the New York Stock Exchange Listing Manual, these differences are set forth in
the table below:
NYSE
Brilliance China Automotive
Listed companies must have
a majority of independent
directors. Companies must
identify which directors are
independent and disclose the
basis for that determination.
Brilliance China Automotive is not
required to have a majority of
independent directors. Under the rules
of The Stock Exchange of Hong Kong
Limited, Brilliance China Automotive is
required to have at least three independent non-executive directors.
Brilliance China Automotive identifies
the status of each director based on
standards set forth by The Stock
Exchange of Hong Kong Limited. Under
those standards, the board of directors
need not affirmatively determine that a
director has no material relationship
with the listed company (either
directly or as a partner, shareholder
or officer of an organization that has
a relationship with the company) for
that director to be deemed independent.
It is for the independent non-executive
directors to make the relevant
declaration. Every independent
non-executive director has to declare
his independency at the time of his
appointment and on an annual basis.
Non-management directors must
meet at executive sessions
without management.
Non-management directors are not
required to meet at executive sessions
without management.
Listed companies must have a
nominating/corporate governance
committee composed entirely of
independent directors.
Brilliance China Automotive is not
required to have a nominating/corporate
governance committee composed entirely
of independent directors and does not
have such a committee.
Listed companies must have a
compensation committee composed
entirely of independent
directors.
Brilliance China Automotive has
established a remuneration committee.
The remuneration committee must consist
of not less than three members, a
majority of whom must be independent
non-executive directors.
Listed companies must adopt and
disclose a code of business
conduct and ethics for
directors, officers and
employees, and promptly disclose
any waivers of the code for
directors or executive officers.
Brilliance China Automotive is not
required to adopt a code of business
conduct and ethics for directors,
officers and employees and is not
required to promptly disclose any
waivers of any such code for directors
or executive officers. Brilliance China
Automotive has adopted a Model Code for
Securities Transactions by Directors
and a Code for Securities Transactions
by Employees that, among other things,
sets forth a policy for compliance with
securities laws, primarily insider
trading, and has also adopted an
Employee Handbook that, among other
things, contains procedures for
compliance with securities laws, a
policy on confidential information and
a code of conduct.
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Employees
As of December 31, 2005, Brilliance China Automotive had 9 employees located in Hong Kong,
compared with 9 as of both December 31, 2004 and December 31, 2003. These employees are primarily
responsible for overseeing the financial management and operations and for developing strategic
business plans, preparing financial statements and coordinating investor relations for Brilliance
China Automotive.
As of December 31, 2005, Brilliance China Automotive and its subsidiaries had a total of 8,911
employees, compared with 9,112 as of December 31, 2004 and 9,000 as of December 31, 2003. As of
December 31, 2005, Shenyang Automotive had a total of 6,470 employees, compared with 6,731 as of
December 31, 2004 and 6,704 as of December 31, 2003.
The following chart sets forth the number of the Group's employees by functional area as of
December 31, 2005:
Functional Area
Number of Employees
Administrative personnel
1,448
Technical personnel
1,336
Production workers
6,127
Total
8,911
Substantially all of Brilliance China Automotive and its subsidiaries' employees are based in
Shenyang, Liaoning Province, China.
Brilliance China Automotive and its subsidiaries have not experienced any strikes or other
labor disputes that materially affected their business activities. Brilliance China Automotive
considers its labor relations to be good.
Share Ownership
As of the date of this annual report, no directors or executive officers own any shares in
Brilliance China Automotive.
Employee Share Option Schemes
The 1999 Share Option Scheme
On September 18, 1999, Brilliance China Automotive approved a share option scheme, or the
Original Scheme, under which the directors may, at their discretion, at any time during the ten
years from the date of approval of the scheme, invite employees of any member company of the Group,
including executive directors, to take up share options of Brilliance China Automotive. The maximum
number of shares on which options may be granted may not exceed 10% of the issued share capital of
Brilliance China Automotive excluding any shares issued on the exercise of options from time to
time. The exercise price in relation to each option offer shall be determined by the directors at
their absolute discretion, but in any event shall not be less than the greater of (i) 80 percent of
the average of the official closing price of the shares on The Stock Exchange of Hong Kong for the
five trading days immediately preceding the relevant offer date or (ii) the nominal value of the
shares. The directors may determine and adjust the period within which the relevant grantee may
exercise his or her option and the proportion of the options to be exercised in each period, so
long as the period within which the option must be exercised is not more than ten years from the
date of grant of the option.
A summary of the movements of outstanding share options granted under the Original Scheme
during the year is as follows:
Number of share options
2005
2004
At January 1,
14,490,000
15,490,000
Cancelled/Lapsed during the year
(11,690,000
)
(1,000,000
)
At December 31,
2,800,000
14,490,000
The outstanding share options under the Original Scheme entitle the holder to subscribe for
each ordinary share of Brilliance China Automotive at HK$1.896 for each outstanding share option,
exercisable from June 2, 2001 to June 1, 2011.
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New Share Option Scheme
On June 28, 2002, Brilliance China Automotive adopted a new share option scheme, or the New
Scheme in compliance with the amendments to the listing rules and regulations of The Stock Exchange
of Hong Kong Limited that became effective on September 1, 2001. The New Scheme became effective on
July 15, 2002 and the Original Scheme was terminated. Pursuant to the Original Scheme, all the
share options granted prior to its termination shall continue to be valid and exercisable in
accordance with its terms. Share options granted after July 15, 2002 are subject to the terms of
the New Scheme. Pursuant to the New Scheme, Brilliance China Automotive's Board of Directors may
grant options to the participants (including Brilliance China Automotive's employees, non-executive
directors, suppliers and customers, etc.) to subscribe for Brilliance China Automotive's common
stock at a price that shall not be lower than the higher of:
(a)
the closing price of the common stock on the relevant stock exchange as stated
in such stock exchange's quotation sheet on the date of the offer of grant, which must
be a trading date;
(b)
the average closing price of the common stock on the relevant stock exchange as
stated in such stock exchange's quotation sheets for the five trading days immediately
preceding the date of the offer of grant; or
(c)
the nominal value of the common stock.
The New Scheme allows Brilliance China Automotive to grant options to a wider category of
participants. Under the New Scheme, the board would also have the discretion to set a minimum
period for which an option must be held before the exercise of the subscription rights attached to
that option, as well as any performance targets it considers appropriate before an option can be
exercised. The purpose of the New Scheme is to provide incentives or rewards to participants under
the scheme for their contribution to Brilliance China Automotive and its subsidiaries and to enable
Brilliance China Automotive and its subsidiaries to recruit and retain skilled employees.
During (a) the year ended December 31, 2002, 13,972,000 share options granted to a former
Director and certain former employees have been cancelled or lapsed; (b) the year ended December
31, 2003, 2,338,000 share options granted to a former employee have been exercised; (c) the year
ended December 31, 2004, 1,000,000 share options granted to a former employee have been cancelled
or lapsed; and (d) the year ended December 31, 2005, 11,690,000 share options granted to certain
former Directors and a former employee have been cancelled or lapsed in accordance with the terms
of the Original Scheme.
At December 31, 2005, no share option has been granted under the New Scheme.
Call Option Agreements
On December 18, 2002, Huachen Automotive Group Holdings Company Limited, or Huachen entered
into a principal agreement, or the Principal Agreement, with the Chinese Financial Education
Development Foundation, or the Foundation, the then substantial shareholder, to purchase from the
Foundation a total of 1,446,121,500 ordinary shares, representing approximately 39.446% of the then
issued share capital of Brilliance China Automotive and the Foundation's entire shareholding
interests in Brilliance China Automotive. Completion of the Principal Agreement took place upon
signing.
On December 18, 2002, each of Mr. Wu Xiao An (also known as Mr. Ng Siu On), Mr. Su Qiang (also
known as Mr. So Keung), Mr. Hong Xing and Mr. He Tao (also known as Mr. Ho To), or the Management
Directors, entered into a call option agreement, or the Call Option Agreements with Huachen,
immediately after the Principal Agreement was entered into and after completion of the sale and
purchase of the ordinary shares pursuant thereto. Pursuant to the terms of the Call Option
Agreements, Huachen granted to each of the Management Directors a call option in respect of a
specified number of ordinary shares, totaling 346,305,630 shares in aggregate and representing
approximately 9.446% of the then issued share capital of Brilliance China Automotive, at an
exercise price of HK$0.95 per share. Each call option is exercisable in whole or in part at any
time during the period of 3 years commencing from the date falling 6 months after the earlier of:
(a) the end of the general offer made to the remaining shareholders by Huachen and the Management
Directors dated December 18, 2002, or the Offer; and (b) the close of the Offer in accordance with
the offer document issued by the offerors in respect of the Offer as required under the Hong Kong
Code on Takeovers and Mergers. The Offer closed on February 6, 2003.
Under the terms of the Call Option Agreements, each of the Management Directors may elect to
pay the exercise price in full or to pay 10% of the exercise price at the time of exercise of the
option. If the Management Directors elect the latter payment option, the balance of the exercise
price will be payable within a 3-year period after the date of completion of the purchase of the
relevant shares pursuant to the exercise of such option, and the share will be pledged as security
in favor of Huachen until full payment of the exercise price.
None of the call options were exercised in 2005.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
The following table sets forth certain information regarding ownership of Brilliance China
Automotive's capital stock as of December 31, 2005 by all persons who are known to Brilliance China
Automotive to own more than 5% of Brilliance China Automotive's shares or ADSs. The voting rights
of Brilliance China Automotive's major shareholders are identical to those of its other
shareholders.
Number of Shares
Percent of
Title of Class
Identity of Person or Group
Owned
Capital Stock
Ordinary Shares
Huachen Automotive Group Holdings Company Limited
(1)
1,446,121,500
39.42
%
Ordinary Shares
Templeton Asset Management Ltd.
215,388,000
5.87
%
Ordinary Shares
Brandes Investment Partners, L.P.
306,052,000
8.34
%
(1)
Huachen Automotive Group Holdings Company Limited is a
wholly owned subsidiary of the Liaoning Provincial
Government.
On December 18, 2002, Huachen, a wholly owned subsidiary of the Liaoning Provincial
Government, entered into a principal agreement with the Chinese Financial Education Development
Foundation, the then substantial shareholder of Brilliance China Automotive, for the purchase from
the Chinese Financial Education Development Foundation of a total of 1,446,121,500 ordinary shares,
representing approximately 39.45% of the then issued share capital of Brilliance China Automotive
and the Chinese Financial Education Development Foundation's entire shareholding interest in
Brilliance China Automotive. Completion of the principal agreement took place at signing on
December 18, 2002. Accordingly, as of December 31, 2003, Huachen is entitled to cast 39.42%
(diluted from the initial 39.45% due to the exercise of certain share options during 2003) of the
votes on all matters to be voted on by the shareholders of Brilliance China Automotive (to the
extent it is not required to abstain from exercising its voting rights under the applicable laws
and regulations), and will therefore exert substantial influence over the election of Brilliance
China Automotive's directors, the outcome of actions requiring majority shareholder approval and
the business in general of Brilliance China Automotive. See "Item 8 — Financial Information — Legal
Proceedings" for a description of the litigation relating to this purchase.
Related Party Transactions
JinBei holds a 49% equity interest in Shenyang Automotive. Shenyang Automotive began operating
as a separate legal entity from JinBei in January 1992. Shenyang Automotive and JinBei are parties
to a trademark license agreement under which JinBei has granted to Shenyang Automotive the license
to use indefinitely the JinBei trademark on its products and marketing materials. On December 29,
2003, Brilliance China Automotive, through Shenyang JinBei Automotive Industry Holdings Co., Ltd.,
or SJAI, and Shenyang XinJinBei Investment and Development Co., Ltd., or SXID, its 98.0% and 99.0%
indirectly owned subsidiaries, respectively, entered into agreements to acquire the entire equity
interests of Shenyang Automobile Industry Asset Management Company Limited, or SAIAM, and Shenyang
XinJinBei Investment Co., Ltd, or SXI, which own 29.9% and 11%, respectively, of the issued share
capital of JinBei. Upon receipt of the necessary governmental approvals for this transaction,
Brilliance China Automotive's effective interest in Shenyang Automotive will increase from its
initial 51.0% to approximately 70.7%. This acquisition is expected to be completed by the end of
2006.
In 2005, Brilliance China Automotive purchased Rmb 1,062.5 million of its component parts from
various affiliated companies and paid a Rmb 112.2 million subcontracting charge to a jointly
controlled entity. These figures represented a decrease of 47.1% from Rmb 2,006.7 million and a
decrease of 37.2% from Rmb 178.7 million, respectively, from 2004 to 2005. Brilliance China
Automotive believes that its purchases of such parts have been on terms as favorable to Brilliance
China Automotive as it could have obtained from unrelated third parties on an arm's-length basis.
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Significant transactions between Brilliance China Automotive or its subsidiaries and
affiliated companies in the ordinary course of business during 2003, 2004 and 2005 are set forth
below:
2005
2004
2003
(Rmb '000)
Sales to JinBei and its affiliated companies
69,432
38,127
150,637
Purchases from JinBei and its affiliated companies
383,808
764,311
986,828
Sales to Shanghai Shenhua and its affiliated companies
1,469,402
1,895,881
1,984,715
Purchases from Shanghai Shenhua and its affiliated companies
85,354
214,467
222,940
Sales to other affiliated companies of Brilliance Holdings Limited
—
—
504
Purchases from a joint venture partner of Shenyang Aerospace
1,987
39,019
—
Subcontracting charges to BMW Brilliance
112,160
178,685
17,438
Purchases from other affiliated companies of Brilliance Holdings
Limited
66,441
89,690
93,498
Purchases from associated companies and jointly controlled entities
524,221
898,914
1,597,289
Sales to affiliated companies of the joint venture partner of Ningbo
Yuming
—
—
5,135
Purchases from affiliated companies of the joint venture partner of
Ningbo Yuming
—
342
16,338
Sales to associated companies and jointly controlled entities
71,005
205,849
171,512
Consideration paid to the joint venture partner of Ningbo Yuming for
acquisition of further interests in Ningbo Yuming
—
10,000
—
Purchase of intangible asset from an affiliated company of the joint
venture partner of Ningbo Yuming
—
6,940
—
Finance charge to a jointly controlled entity
17,329
17,850
—
Operating lease rental on machineries and equipment charged by a
jointly controlled entity
2,260
12,840
12,000
Operating lease rental from a jointly controlled entity
15,078
15,364
—
Sales of property, plant and equipment to JinBei and its affiliated
companies
—
4,407
—
Sales of property, plant and equipment to a jointly controlled entity
263
1,105
—
Purchase of machinery from JinBei and its affiliated companies
—
58,089
—
Service income from a jointly controlled entity
43,671
—
—
The above transactions were carried out after negotiations between Brilliance China Automotive
and its subsidiaries and the affiliated companies in the ordinary course of business and on the
basis of estimated market value as determined by the directors of Brilliance China Automotive.
During the year ended December 31, 2002, JinBei allowed Shenyang Automotive to use certain
components-related technology in the manufacturing of the Zhonghua sedan. This technology was
transferred from JinBei to Shenyang Automotive in the form of an increase in the registered capital
of Shenyang Automotive in January 2003, and Shenyang Automotive thereby became the legal owner of
this components-related technology.
In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option for
BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the purchase price
less depreciation upon the occurrence of certain events, including the passing of a valid
resolution pursuant to the joint venture contract by the board of directors of BMW Brilliance. For
financial reporting purposes, as of December 31, 2005 and 2004, the net book value of the buildings
amounting to approximately Rmb 142.6 million and Rmb 150.8 million, respectively were retained as
assets on the consolidated balance sheet of Brilliance China Automotive and the portion of
consideration received from BMW Brilliance up to December 31, 2005 and 2004 amounting to
approximately Rmb 74.6 million was treated as a financing and will be partially offset against the
lease rental payable in future years. The remaining balance of approximately Rmb 99.8 million will
be received from BMW Brilliance and will be accounted for as additional financing.
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In December 2003, BMW Brilliance purchased certain machineries and equipment from Shenyang
Automotive at their net book value mutually agreed by both parties for use in the production of BMW
sedans. The agreement of sale includes an option for BMW Brilliance to require Shenyang Automotive
to purchase back such machineries and equipment at the purchase price less depreciation over a
specified period upon the occurrence of certain events, including the passing of a valid resolution
pursuant to the joint venture contract by the board of directors of BMW Brilliance. These
machineries and equipment are maintained by BMW Brilliance for the manufacturing of its products
and is also used by Shenyang Automotive for a service fee based on the number of Zhonghua sedans
produced by Shenyang Automotive using these machineries and equipment. As of December 31, 2005 and
2004, service fees of approximately Rmb 308.3 million and Rmb 196.1 million had accrued,
respectively.
The operating subsidiaries of Brilliance China Automotive have provided the following
outstanding guarantees to affiliated companies as of December 31, 2005:
•
a corporate guarantee of approximately Rmb 120 million (US$14.9 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua.
However, default by Shanghai Shenhua and its affiliated companies is considered remote
by management and therefore no liability for the guarantor's obligation under the
guarantee existed as of December 31, 2005;
•
a joint and several proportional guarantee with all the initial joint venture
partners of Shenyang Aerospace on a long-term bank loan of approximately Rmb 111
million (US$13.8 million) drawn by Shenyang Aerospace that will expire in 2008.
However, default by Shanghai Aerospace is considered remote by management and therefore
no liability for the guarantor's obligation under the guarantee existed as of December
31, 2005; and
•
corporate guarantees for bank loans amounting to Rmb 295 million (US$36.6 million)
drawn by JinBei. Bank deposits of Rmb 311 million were pledged as a collateral for the
corporate guarantee. However, However, default by JinBei is considered remote by
management and therefore no liability for the guarantor's obligation under the
guarantee existed as of December 31, 2005.
Set forth below is information on amounts due from affiliated companies to Brilliance China
Automotive and its subsidiaries arising from trading activities as of December 31, 2005, 2004 and
2003:
2005
2004
2003
(Rmb '000)
Notes receivable from affiliated companies
Notes receivable from affiliated companies of JinBei
9,446
22,500
4,505
Notes receivable from Shanghai Shenhua
328,482
601,348
487,770
Notes receivable from associated companies and jointly
controlled entities
1,042
21,295
31,900
Notes receivable from an affiliated company of the joint
venture partner of Ningbo Yuming
—
—
3,000
Total
(1)
338,970
645,143
527,175
Amounts due from affiliated companies
Due from Shanghai Shenhua and its affiliated companies
276,763
386,710
54,967
Due from Shanghai Yuantong
(2)
—
—
355,835
Due from affiliated companies of the joint venture partner
of Ningbo Yuming
—
—
4,408
Due from affiliated companies of JinBei
62,877
58,312
53,242
Due from affiliated companies of Brilliance Holdings Limited
54,222
—
—
Due from associated companies and jointly controlled entities
205,565
75,224
46,453
Due from a joint venture partner of Shenyang Aerospace
1,505
882
—
Receivable arising from the disposal of machineries and
equipment to BMW Brilliance
(3)
269,003
269,003
269,003
Provision for doubtful debts
(29,720
)
(24,720
)
(9,720
)
Total
840,215
765,411
774,188
(1)
The notes receivable from affiliated companies are guaranteed by banks
in China and have maturities of six months or less. The fair value of
the notes receivable approximates their carrying value.
(2)
The amounts due from Shanghai Yuantong as of December 31, 2003 were
non-interest bearing. Subsequent to December 31, 2003, Rmb 350 million
of endorsed bank notes were received from Shanghai Yuantong.
(3)
The outstanding balance is unsecured, non-interest bearing and will be
settled by BMW Brilliance when certain conditions specified in the
agreement of sale are fulfilled.
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Set forth below is information on advances from Brilliance China Automotive and its
subsidiaries to affiliated companies as of December 31, 2005, 2004 and 2003:
2005
2004
2003
(Rmb '000)
Advances to affiliated companies
Advances to JinBei and its affiliated companies
16,185
16,786
69,748
Advances to associated companies and jointly controlled entities
7,226
22,528
—
Advances to Shanghai Shenhua
9,045
—
—
Advances to Brilliance Holdings Limited and its affiliated companies
15,273
—
172,955
Advances to other affiliated companies (non-interest bearing)
452
138
779
Provision for doubtful debts
(9,250
)
(1,975
)
—
Total
38,931
37,477
243,482
Set forth below is information on advances from affiliated companies to Brilliance China
Automotive and its subsidiaries as of December 31, 2005, 2004 and 2003.
2005
2004
2003
(Rmb '000)
Advances from affiliated companies
Advances from affiliated companies of Brilliance Holdings Limited
28,558
14,319
15,294
Advances from an associated company
607
—
—
Advances from an affiliated company of Shanghai Shenhua
236
230
—
Advances from affiliated companies of JinBei
1,088
945
516
Advances from affiliated companies of the joint venture partner
of Ningbo Yuming
—
—
1,845
Advances from other affiliated companies
—
382
382
Financing received from BMW Brilliance
74,605
74,605
74,605
Total
105,094
90,481
92,642
Aside from the financing received from BMW Brilliance, the other advances from affiliated
companies are unsecured, non-interest bearing and have no fixed repayment terms.
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Amounts due to affiliated companies arising from trading activities consisted of the
following:
2005
2004
2003
(Rmb '000)
Notes payable to affiliated companies
Notes payable to affiliated companies of JinBei
8,139
24,229
27,272
Notes payable to associated companies and jointly controlled entities
22,491
91,892
8,059
Notes payable to other affiliated companies
—
925
100
Notes payable to affiliated companies of Brilliance Holdings Limited
43,462
—
—
Notes payable to Shanghai Shenhua
—
4,116
—
Total
74,092
121,162
35,431
Amounts due to affiliated companies
Due to JinBei and its affiliated companies
142,438
195,166
216,559
Due to other affiliated companies of Brilliance Holdings Limited
22,025
8,705
2,478
Due to Shanghai Shenhua and its affiliated companies
4,191
40,570
84,417
Due to affiliated companies of the joint venture partner of Ningbo
Yuming
—
—
1,037
Due to affiliated companies of the joint venture partner of Xinguang
Brilliance
—
—
4,967
Due to associated companies and jointly controlled entities
465,023
276,951
375,396
Due to other affiliated companies
130
1,330
—
Total
633,807
522,722
684,854
The amounts due to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms.
As of December 31, 2004, included in prepayments and other current assets were approximately
Rmb 9.5 million of prepayment for purchases of raw materials made to an affiliated company of
Brilliance Holdings Limited.
As of December 31, 2003, included in other receivables was Rmb 20 million of outstanding
proceeds from the disposal of an associated company to an affiliated company.
ITEM 8. FINANCIAL INFORMATION
Consolidated Statements and Other Financial Information
See "Item 18 — Financial Statements" for a list of the financial statements filed with this
document.
Legal Proceedings
Broadsino Litigation
On January 21, 2003, a writ dated January 21, 2003, or the Writ, brought by Broadsino Finance
Company
Limited, or Broadsino, as the Plaintiff, was filed with the Supreme Court of Bermuda which alleged
that the interest of the Chinese Financial Education Development Foundation, or the Foundation, in
1,446,121,500 shares of Brilliance China Automotive, or the Sale Shares, was held in trust for
Broadsino and was improperly transferred to Huachen Automotive Group Holdings Company Limited, or
Huachen.
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In the course of legal proceedings with Broadsino, Brilliance China Automotive achieved the
following:
(i)
overturning on February 11, 2003 an ex parte Court Order dated January 22, 2003
which had restrained Brilliance China Automotive from, amongst other things,
registering the transfer of the Sale Shares by the Foundation to Huachen and/or Huachen
to certain directors of Brilliance China Automotive;
(ii)
initiating on March 10, 2003, a Strikeout Summons at the Supreme Court to have
the Writ and the statement of claim struck out, which proceedings were duly heard
before the Supreme Court, and which resulted on December 31, 2003 in that court issuing
a judgment to strike-out the Writ;
(iii)
challenging Broadsino's attempts for appeal to the Court of Appeal of Bermuda,
Civil Appellant jurisdiction which appeal was then dismissed by that court's judgment
of March 14, 2005 which ruled in Brilliance China Automotive's favor;
(iv)
challenging at all stages Broadsino's further attempts for leave to appeal to
the Privy Council in the United Kingdom with respect to the Court of Appeal's judgment;
and
(v)
being awarded costs in Broadsino's seeking of a grant of leave on November 10,
2005 in the Court of Appeal in Bermuda to withdraw its leave to appeal to the Privy
Council.
The directors of Brilliance China Automotive do not believe the proceedings with Broadsino
will have any significant impact on the financial position of Brilliance China Automotive and of
the Group.
Yang Rong Employment Proceedings
On or about October 25, 2002, Brilliance China Automotive was served with a claim lodged by
Mr. Yang Rong in the Labour Tribunal in Hong Kong against Brilliance China Automotive for alleged
wrongful repudiation and/or breach of his employment contract. The claim was for approximately
US$4.3 million (equivalent to approximately Rmb 35.6 million) with respect to loss of salary. In
addition, Mr. Yang claimed unspecified damages in respect of bonuses and share options. The claim
was dismissed by the Labour Tribunal in Hong Kong on January 28, 2003. Mr. Yang subsequently
applied for a review of this decision. At the review hearing on July 4, 2003, the Labour Tribunal
ordered the case to be transferred to the High Court in Hong Kong. The claim has therefore been
transferred to the High Court and registered as High Court Action No. 2701 of 2003. On September
16, 2003, a Statement of Claim was served on Brilliance China Automotive. On November 4, 2003,
Brilliance China Automotive filed a Defence and Counterclaim with the High Court. Mr. Yang filed a
Reply to Defence and Defence to Counterclaim on April 26, 2004. On July 21, 2004, Mr. Yang obtained
leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim. Brilliance
China Automotive filed and served a Reply to Defence to Counterclaim on September 4, 2004.
Pleadings closed on September 18, 2004. The parties filed and served Lists of Documents on October
26, 2004 and witness statements were exchanged on February 28, 2005. The parties applied by consent
to adjourn sine die a checklist hearing fixed for April 20, 2005, as the respective parties
anticipated that they would be filing supplemental evidence and amending their pleadings. The Court
approved the application and made an Order on April 19, 2005 that the checklist hearing be vacated
and adjourned sine die with liberty to restore. Pursuant to a request made by Mr. Yang on June 2,
2005 for further and better particulars of the Defence and Counterclaim, Brilliance China
Automotive filed and served its Answer to Mr. Yang's request on July 4, 2005.
On August 17, 2005, in compliance with its continuing discovery obligations, Brilliance China
Automotive filed and served a Supplemental List of Documents. Subsequently, on September 5, 2005,
Mr. Yang also filed and served a Supplemental List of Documents. Further interlocutory steps are in
progress. There have been no other material developments in the litigation. The directors of
Brilliance China Automotive do not believe the action will have any significant impact on the
financial position of Brilliance China Automotive and of the Group. The directors of Brilliance
China Automotive intend to continue vigorously defending the action.
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Dividends
All dividends to holders of ADSs are declared and paid in U.S. dollars. Interim dividends may
be paid at the discretion of Brilliance China Automotive's board of directors based on its
evaluation of the financial condition of Brilliance China Automotive, while final dividends are
subject to the approval of the shareholders at a general meeting. Historically, Brilliance China
Automotive has paid a quarterly dividend at the rate of US$0.02 per share in each quarter,
commencing in the first quarter of 1993. Brilliance China Automotive
began to pay dividends on a semi-annual basis in the second half of 1996. The amount of these dividend payments have been
adjusted on a pro rata basis to reflect Brilliance China Automotive's 1999 and 2000 bonus share
issuances as well as the increase in earnings per share. No dividends were declared or paid for
2005.
Under Section 54 of the Companies Act 1981 of Bermuda (as amended), a company shall not
declare or pay a dividend, or make a distribution out of contributed surplus, if there are
reasonable grounds for believing that
•
Brilliance China Automotive is, or would after payment be, unable to pay its
liabilities as they become due; or
•
the realizable value of Brilliance China Automotive's assets would thereby be less
than the aggregate of its liabilities and its issued share capital and share premium
account. As a Bermuda company, Brilliance China Automotive must abide by these criteria
in formulating its dividend policy.
Applicable Chinese laws and regulations require that before a foreign-invested enterprise
distributes profits to investors it must:
•
satisfy all tax liabilities;
•
provide for losses in previous years;
•
in the case of a Sino-foreign joint venture, also make appropriation, in proportions
determined at the sole discretion of the board of directors of the joint venture, to a
general reserve fund, an enterprise expansion fund and a staff welfare and employee
bonus fund. During the year ended December 31, 2005, Shenyang Automotive was not
required to and therefore did not make any additional contributions into these funds.
Distributions of profits to investors are required to be in proportion to each party's
shareholdings in the joint venture; and
•
in the case of a wholly foreign owned enterprise, appropriate 10% of profit after
providing for taxes and losses in previous years to a general reserve fund until the
balance of the fund reaches 50% of its share capital. Any further appropriation
thereafter is optional. The appropriation to an enterprise expansion fund and a staff
welfare fund is at the sole discretion of the board of directors of the wholly foreign
owned enterprise. During the year ended December 31, 2005, Xing Yuan Dong and Mianyang
Brilliance Ruian made an additional Rmb 9.3 million (US$1.2 million) to the general
reserve fund, enterprise expansion fund and staff welfare fund.
Significant Changes
There have been no significant changes since December 31, 2005, the date of the annual
financial statements in this annual report.
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ITEM 9. THE OFFER AND LISTING
Brilliance China Automotive's ordinary shares are listed on The Stock Exchange of Hong Kong
Limited under the stock code "1114", and Brilliance China Automotive's ADSs are listed on the New
York Stock Exchange, Inc. under the symbol "CBA". The following table sets forth for the periods
indicated the reported high and low sales prices for the ordinary shares and the ADSs on The Stock
Exchange of Hong Kong Limited and the New York Stock Exchange, Inc., respectively:
The New York Stock Exchange, Inc.
The Stock Exchange of Hong Kong Limited
(US$)
(HK$)
ADSs
Ordinary Shares
High
Low
High
Low
2001: 1
st
quarter
31.55
22.88
2.78
1.60
2
nd
quarter
33.85
23.15
2.75
1.76
3
rd
quarter
24.38
11.51
1.96
0.82
4
th
quarter
22.70
14.69
1.76
1.11
2002: 1
st
quarter
21.48
16.00
1.70
1.26
2
nd
quarter
18.50
12.34
1.49
0.98
3
rd
quarter
15.15
12.10
1.22
0.98
4
th
quarter
19.00
10.65
1.49
0.80
2003: 1
st
quarter
25.49
18.11
2.03
1.42
2
nd
quarter
29.29
20.48
2.28
1.56
3
rd
quarter
34.49
26.80
2.73
2.10
4
th
quarter
61.30
34.20
4.75
2.65
2004: 1
st
quarter
62.75
39.52
4.85
3.85
2
nd
quarter
48.25
28.55
3.73
2.15
3
rd
quarter
32.20
19.21
2.53
1.52
4
th
quarter
24.40
17.75
1.93
1.40
2005: 1
st
quarter
22.73
14.76
1.78
1.22
2
nd
quarter
20.00
15.75
1.61
1.26
3
rd
quarter
19.10
13.41
1.50
0.98
4
th
quarter
15.25
12.56
1.18
0.97
2006: January
17.80
14.91
1.40
1.12
February
23.66
16.51
1.57
1.26
March
17.48
14.52
1.36
1.12
April
19.25
14.84
1.55
1.14
May
18.70
15.44
1.47
1.18
June (through June 20)
16.40
14.05
1.27
1.10
To the best of Brilliance China Automotive's knowledge, as of June 20, 2006, Brilliance China
Automotive had 2,424,556 ADSs outstanding, which were held by 83 registered holders of record in
the United States (including 2,366,366 ADSs held by two nominee holders). One ADS is equivalent to
100 ordinary shares.
Trading of Brilliance China Automotive's shares in Hong Kong was suspended from January 24,
2003 through January 27, 2003 and trading of Brilliance China Automotive's ADSs in New York was
also suspended on January 24, 2003 to allow Brilliance China Automotive to clarify the impact of
the court order obtained by Broadsino Finance Company Limited against Brilliance China Automotive,
the Executive Directors, the Chinese Financial Education Development Foundation and Huachen
Automotive Group Holdings Company Limited restraining the registration of any sale or transfer of
shares of Brilliance China Automotive.
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Trading of Brilliance China Automotive's shares in Hong Kong was suspended from 2:36 p.m. Hong
Kong time October 2, 2003 through October 3, 2003 and trading of Brilliance China Automotive's ADSs
in New York was suspended on October 2, 2003 pending the release of an announcement in relation to
the placement of an aggregate of 113,640,000 shares of Brilliance China Automotive by certain
directors of Brilliance China Automotive.
Trading of Brilliance China Automotive's shares in Hong Kong was suspended on December 31,
2003 pending the release of an announcement in relation to the acquisition by Brilliance China
Automotive, through its indirectly owned subsidiaries SJAI and SXID, of the entire equity interests
of SAIAM and SXI.
Trading of Brilliance China Automotive's shares in Hong Kong was suspended from 9:37 a.m. Hong
Kong time May 8, 2006 through May 9, 2006 and trading of Brilliance China Automotive's ADSs in New
York was suspended on May 8, 2006, pending the release of an announcement in relation to the
issuance by Brilliance China Finance Limited (formerly known as Goldcosmos Investments Limited) of
zero coupon guaranteed convertible bonds due 2011 with an aggregate principal amount of
approximately US$183.0 million.
ITEM 10. ADDITIONAL INFORMATION
Memorandum of Association and Bye-laws
Described below is a summary of certain provisions of Brilliance China Automotive's memorandum
of association and Bye-laws, as currently in effect.
General
Brilliance China Automotive was incorporated in Bermuda under the Companies Act as an exempted
company with limited liability on June 9, 1992. Its headquarters are located at Suites 1602-05,
Chater House, 8 Connaught Road Central, Hong Kong and it is registered with the Registrar of
Companies in Hong Kong as an overseas company under Part XI of the Companies Ordinance.
Brilliance China Automotive's memorandum of association also sets out its objects, including
acting as a holding and investment company, and its powers, including the powers set out in the
First Schedule of the Companies Act. As an exempted company, Brilliance China Automotive will be
carrying on business outside Bermuda, although it maintains a registered office in Bermuda.
Brilliance China Automotive's Bye-laws were conditionally adopted on September 18, 1999.
Directors
Disclosure of interests in contracts with Brilliance China Automotive or its subsidiaries
A director may not vote or be counted in the quorum on any resolution of the board of
directors concerning his own appointment as the holder of any office or place of profit with
Brilliance China Automotive or any other company in which Brilliance China Automotive is
interested.
A director who to his knowledge is in any way, whether directly or indirectly, interested in a
contract or arrangement or proposed contract or arrangement with Brilliance China Automotive must
declare the nature of his interest at the meeting of the board of directors at which the question
of entering into the contract or arrangement is first taken into consideration, if he knows his
interest then exists, or in any other case at the first meeting of the board of directors after he
knows that he is or has become so interested.
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Save as otherwise provided by the Bye-laws, a director may not vote (nor be counted in the
quorum) on any resolution of the board of directors in respect of any contract, proposal or
arrangement in which he or any of his associates are materially interested, and if he does so his
vote may not be counted (nor shall he be counted in the quorum), but this prohibition will not
apply to any of the following matters:
•
any contract or arrangement for the giving by Brilliance China Automotive of any
security or indemnity to the director or his associates in respect of money lent by him
or any of his associates or obligations incurred or undertaken by him or his associates
at the request of or for the benefit of Brilliance China Automotive or any of its
subsidiaries;
•
any contract or arrangement for the giving by Brilliance China Automotive of any
security to a third party in respect of a debt or obligation of Brilliance China
Automotive, or any of its subsidiaries, for which the director or his associates have
assumed responsibility or guaranteed or secured in whole or in part whether solely or
jointly;
•
any contract or arrangement concerning an offer of the shares, debentures or other
securities of or by Brilliance China Automotive or any other company which Brilliance
China Automotive may promote or be interested in for subscription or purchase where the
director or his associates are interested as a participant in the underwriting or
sub-underwriting of the offer;
•
any contract or arrangement concerning any other company in which the director or
his associates are interested whether directly or indirectly, as an officer or
executive or shareholder or in which the director or his associates are beneficially
interested in shares of that company, other than a company in which the director
together with any of his associates beneficially own 5% or more of the issued shares of
any class of shares of such company (or of any third company through which his interest
is derived) or of the voting rights;
•
any proposal or arrangement concerning the adoption, modification or operation of
any employees' share scheme under which the director or his associates may benefit;
•
any proposal or arrangement for the benefit of employees of Brilliance China
Automotive or its subsidiaries including the adoption, modification or operation of a
pension fund or retirement, death or disability benefit scheme which relates both to
directors and employees of Brilliance China Automotive or any of its subsidiaries and
does not give the director any privilege not generally accorded to the class of persons
to whom such scheme or fund relates; and
•
any contract or arrangement in which the director or his associates are interested
in the same manner as other holders of shares or debentures or securities of Brilliance
China Automotive by virtue only of their interest in shares or debentures or other
securities of Brilliance China Automotive.
Remuneration
The directors are entitled to receive remuneration for their services a sum determined by
Brilliance China Automotive in general meeting, such sum (unless otherwise directed by the
resolution by which it is voted) to be divided amongst the directors in such proportions and in
such manner as the board of directors may agree, or failing agreement, equally, except that in such
event any director holding office for less than the whole of the relevant period in respect of
which the remuneration is paid shall only rank in such division in proportion to the time during
the period for which he has held office.
Borrowing powers
Subject to the provisions of the Companies Act, the board of directors may exercise all the
powers of Brilliance China Automotive to raise or borrow or to secure the payment of any sum or
sums of money for the purposes of Brilliance China Automotive and to mortgage or charge its
undertaking, property and uncalled capital or any part thereof. The board of directors may raise or
secure the payment or repayment of such sum or sums in such manner and upon such terms and
conditions in all respects as it thinks fit and in particular by the issue of debentures, debenture
stock, bonds or other securities of Brilliance China Automotive, whether outright or as collateral
security for any debt, liability or obligation of Brilliance China Automotive or of any third
party.
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Alterations to constitutional documents
The memorandum of association of Brilliance China Automotive may, with the consent of the
Minister of Finance of Bermuda, be altered by Brilliance China Automotive in general meeting. The
Bye-laws may be amended by the directors subject to the approval of Brilliance China Automotive in
general meeting. The Bye-laws state that a special resolution is required to alter the memorandum
of association on to approve any amendment of the Bye-laws.
Variation of rights of existing shares or classes of shares
If at any time the capital is divided into different classes of shares, all or any of the
special rights (unless otherwise provided for by the terms of issue of that class) attached to any
class may, subject to the provisions of the Companies Act, be varied or abrogated either with the
consent in writing of the holders of not less than three-fourths in nominal value of the issued
shares of that class or with the sanction of a special resolution passed at a separate general
meeting of the holders of the shares of that class. To every separate general meeting the
provisions of the Bye-laws relating to general meetings will apply, but so that the necessary
quorum is not less than two persons holding or representing by proxy one-third in nominal value of
the issued shares of the class, and that any holder of shares of the class present in person or by
proxy or by a duly authorized corporate representative may demand a poll.
Special resolutions — majority required
A special resolution of Brilliance China Automotive must be passed by a majority of not less
than three-fourths of the votes cast of such members as, being entitled so to do, vote in person,
or by a duly authorized corporate representative, or where proxies are allowed, by proxy at a
general meeting of which not less than 21 days' notice, specifying the intention to propose the
resolution as a special resolution, has been duly given. However, if it is so agreed by a majority
in number of the members having a right to attend and vote at such meeting, being a majority
together holding not less than 95% in nominal value of the shares giving that right, a resolution
may be proposed and passed as a special resolution at a meeting of which less than 21 days' notice
has been given.
Voting rights and right to demand a poll
Subject to any special rights, privileges or restrictions as to voting attached to any class
or classes of shares, at any general meeting on a show of hands every member who is present in
person or by a duly authorized corporate representative shall have one vote and on a poll, every
member present in person or by a duly authorized corporate representative or by proxy shall have
one vote for every share of which he is the holder which is fully paid up or credited as fully paid
(but so that no amount paid up or credited as paid up on a share in advance of calls or
installments is treated for the foregoing purposes as paid up on the share). On a poll, a member
entitled to more than one vote need not use all his votes or cast all the votes in the same way.
At any general meeting a resolution put to the vote of the meeting shall be decided on a show
of hands unless a poll is required under The Rules governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited or demanded (before or at the declaration of the result of the show
of hands or on the withdrawal of any other demand for a poll):
•
by the chairman of the meeting;
•
by at least three members present in person, or by a duly authorized corporate
representative, or by proxy for the time being entitled to vote at the meeting;
•
by any member or members present in person, or by a duly authorized corporate
representative, or by proxy, and representing not less than one-tenth of the total
voting rights of all the members having the right to attend and vote at the meeting; or
•
by any member or members present in person, or by a duly authorized corporate
representative, or by proxy having the right to attend and vote at the meeting, and in
respect of whose shares, sums have been paid up in the aggregate equal to not less than one-tenth of the total sum paid up
on all the shares having that right.
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Requirements for annual general meetings
An annual general meeting must be held once in every year and within not more than fifteen
months after the last preceding annual general meeting.
Notices of annual general meetings
An annual general meeting and any special general meeting at which it is proposed to pass a
special resolution must be called by at least 21 days' notice in writing and any other special
general meeting shall be called by at least 14 days' notice in writing (in each case exclusive of
the day on which the notice is served or deemed to be served and of the day for which it is given).
The notice shall specify the place, the day and the hour of meeting and, in the case of special
business, the general nature of that business.
Quorum for meetings and separate class meetings
For all purposes the quorum for a general meeting shall be two members present in person or by
a duly authorized corporate representative or by proxy and entitled to vote. In respect of a
separate class meeting convened to sanction the modification of class rights, the necessary quorum
shall not be less than two persons holding or representing by proxy or by a duly authorized
corporate representative one-third in nominal value of the issued shares of that class and that any
holder of shares of the class present in person by proxy or by a duly authorized corporate
representative may demand a poll.
Dividends
Brilliance China Automotive in general meeting may declare dividends in any currency but no
dividends may exceed the amount recommended by the board of directors.
Unless and to the extent that the rights attached to any shares or its terms of issue
otherwise provide, all dividends will be apportioned and paid pro rata according to the amounts
paid or credited as paid up on the shares during any portion or portions of the period in respect
of which the dividend is paid. No amount paid upon a share in advance of calls will for this
purpose be treated as paid up on the shares. The board of directors may retain any dividends or
other moneys payable on or in respect of a share upon which Brilliance China Automotive has a lien,
and may apply the same in or towards satisfaction of the debts, liabilities or engagements in
respect of which the lien exists. The board of directors may deduct from any dividend or bonus
payable to any member all sums of money, if any, presently payable by him to Brilliance China
Automotive on account of calls, installments or otherwise.
Whenever the board of directors or Brilliance China Automotive in general meeting has resolved
that a dividend be paid or declared, the board of directors may further resolve either:
•
that such dividend be satisfied wholly or in part in the form of an allotment of
shares credited as fully paid up, on the basis that the shares so allotted shall be of
the same class or classes as the class or classes of shares already held by the
allottee, provided that the members will be entitled to elect to receive such dividend
(or part of it) in cash in lieu of such allotment; or
•
that the members entitled to such dividend will be entitled to elect to receive an
allotment of shares credited as fully paid up in lieu of the whole or such part of the
dividend as the board of directors may think fit, on the basis that the shares so
allotted shall be of the same class or classes as the class or classes of shares
already held by the allottee.
Brilliance China Automotive may also, upon the recommendation of the board of directors, by a
special resolution resolve in respect of any one particular dividend of Brilliance China Automotive
that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up
without offering any right to members to elect to receive a dividend in cash in lieu of an
allotment.
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Whenever the board of directors or Brilliance China Automotive in general meeting has resolved
that a dividend be paid or declared the board of directors may further resolve that such dividend
be satisfied wholly or in part by the distribution of specific assets of any kind.
All dividends or bonuses unclaimed for one year after having been declared may be invested or
otherwise made use of by the board of directors for the benefit of Brilliance China Automotive
until claimed and Brilliance China Automotive may not be constituted a trustee. All dividends or
bonuses unclaimed for six years after having been declared may be forfeited by the board of
directors and must revert to Brilliance China Automotive.
Procedures on liquidation
A resolution that Brilliance China Automotive be wound up by the court or be wound up
voluntarily must be a special resolution. If Brilliance China Automotive is wound up, the surplus
assets remaining after payment to all creditors are to be divided among the members in proportion
to the capital paid up on the shares held by them respectively, and if the surplus assets are
insufficient to repay the whole of the paid up capital, they are to be distributed so that, as
nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on
the shares held by them respectively, all subject to the rights of any shares issued on special
terms and conditions.
If Brilliance China Automotive is wound up (whether the liquidation is voluntary or by the
court) the liquidator may, with the sanction of a special resolution, divide among the members in
specie or kind the whole or any part of the assets of Brilliance China Automotive and whether the
assets consist of property of one kind or consists of properties of different kinds and the
liquidator may, for such purposes, set such value as he deems fair upon any one or more class or
classes of property to be divided and may determine how such division is to be carried out as
between the members or different classes of members and the members within each class. With the
like sanction, the liquidator may vest any part of the assets in trustees upon such trusts for the
benefit of members as the liquidator but so that no member shall be compelled to accept any shares
or other assets upon which there is a liability.
Transfer of shares
Subject to the Companies Act, all transfers of shares must be effected by transfer in writing
in the usual or common form or in any other form acceptable to the board of directors and may be
under hand or by means of mechanically imprinted signatures or such other manner as the board of
directors may approve. An instrument of transfer must be executed by or on behalf of the transferor
and by or on behalf of the transferee and the transferor, providing that the board may dispense
with the execution of the instrument of transfer by the transferee in any case in which it thinks
fit, in its absolute discretion to do so, shall be deemed to remain the holder of the share until
the name of the transferee is entered in the register of members.
The board of directors may, in its absolute discretion, transfer any share upon the principal
register to any branch register or any share on any branch register to the principal register or
any other branch register.
Unless the board of directors otherwise agrees, no shares on the principal register shall be
transferred to any branch register nor shall shares on any branch register be transferred to the
principal register or another branch register. All transfers and other documents of title must be
lodged for registration and registered, in the case of shares on a branch register, at the relevant
registration office and, in the case of shares on the principal register, at the transfer office in
Bermuda.
The board of directors may in its absolute discretion and without assigning any reason, refuse
to register any transfer of any shares (not being fully paid shares) to a person of whom it does
not approve, or any share issued under any share option scheme for employees upon which a restraint
on transfer still applies, and it may refuse to register the transfer of any shares (not being
fully paid shares) on which Brilliance China Automotive has a lien. The board of directors may also
refuse to register a transfer of shares (whether fully paid or not) in favor of more than four
persons jointly. If the board of directors refuses to register a transfer, it will within two
months after the date on which the transfer was lodged with Brilliance China Automotive send to the
transferor and transferee notice of the refusal.
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The board of directors may decline to recognize any instrument of transfer unless:
•
the sum, if any, as the board of directors shall determine to be paid to Brilliance
China Automotive has been paid;
•
the shares are free of any lien in favor of Brilliance China Automotive;
•
the instrument of transfer is properly stamped, is in respect of only one class of
share and is lodged at the relevant registration or transfer office accompanied by the
relevant share certificate(s);
•
other evidence as the board of directors may reasonably require to show the right of
the transferor to make the transfer has been presented (particularly if the instrument
of transfer is executed by some other person on his behalf); and
•
in some circumstances, the permission of the Bermuda Monetary Authority has been
obtained.
The registration of transfers may, on giving notice by advertisement in an appointed newspaper
in Bermuda and in one or more newspapers circulating in Hong Kong, be suspended at times and for
periods as the board of directors may determine and either generally or in respect of any class of
shares. The register of members must not be closed for more than thirty days in any year.
Recent Amendments to the Bye-laws
In 2003, the Companies Act 1981 of Bermuda (as amended) was amended to permit companies to
offer their shareholders a summary financial report in place of the complete annual report and
accounts. On February 17, 2002, The Stock Exchange of Hong Kong Limited announced amendments to the
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, or the
Listing Rules, which will allow companies to distribute to their shareholders a summary financial
report instead of the longer report. On February 5, 2002, The Stock Exchange of Hong Kong Limited
also announced amendments to its Listing Rules that allow companies to distribute corporate
communications to their shareholders via electronic means. As a result of these amendments, the
board of directors of Brilliance China Automotive amended the Bye-laws of Brilliance China
Automotive to permit Brilliance China Automotive to take advantage of these changes to the Listing
Rules by allowing shareholders to choose to receive a summary financial report in place of the
longer, complete annual report and to receive copies of corporate communications by electronic
means or by relying on the versions of those documents published on Brilliance China Automotive's
website instead of printed copies of such documents. These amendments were approved by the
shareholders of Brilliance China Automotive by way of a special resolution at the special general
meeting held on June 28, 2002.
At the annual general meeting held on June 25, 2004, the shareholders of Brilliance China
Automotive approved amendments to the Bye-laws in order to reflect certain recent amendments to the
Listing Rules, which came into effect on March 31, 2004. A brief description of these amendments to
the Bye-laws is as follows:
•
Bye-law 1(A): To amend the existing definition of "associates" and "Clearing House"
and to add a new definition for "subsidiaries"
•
Bye-law 70: To reflect the requirement of voting by poll in respect of certain
transactions under the Listing Rules
•
Bye-law 76: To provide for circumstances under which shareholders are required to
abstain from voting or restricted to vote for or against any particular resolution as
required by the revised Appendix 3 to the Listing Rules
•
Bye-laws 98(E), 98(H) and 98(K): To be consistent with the provisions of the revised
Appendix 3 to the Listing Rules so that, subject to certain exceptions, a director
shall abstain from voting at the board meeting on any contract or arrangement in which he and/or any of his associates has/have
a material interest nor shall he be counted towards the quorum of the relevant board
meeting
•
Bye-law 103: To be consistent with the revised Appendix 3 to the Listing Rules which
stipulates the minimum seven-day period for lodgment by a shareholder of the notice to
nominate a director and the nomination shall commence no earlier than the day after the
despatch of the notice of the general meeting appointed for such election and end no
later than seven days before the date of such general meeting
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In light of the numerous changes listed above as well as those from prior amendments, the
shareholders adopted at the same annual general meeting a fully restated and consolidated set of
the Bye-laws incorporating all previous amendments thereto passed at the special general meeting
held on June 28, 2002 and the amendments approved at the annual general meeting on June 25, 2004,
in substitution for the existing Bye-laws.
At the annual general meeting held on June 24, 2005, Brilliance China Automotive amended the
Bye-laws in order to reflect certain amendments to the Listing Rules of The Stock Exchange of Hong
Kong Limited, which came into effect on January 1, 2005. A brief description of the amendments is
as follows:
•
Bye-law 6(A): To reflect the existing authorized share capital of Brilliance China Automotive
•
Bye-law 70: To facilitate the process for demanding a poll at general meetings
•
Bye-law 99: To provide for retirement by rotation of every director at annual
general meetings of Brilliance China Automotive in compliance with code provision A.4.2
of the Code on Corporate Governance Practices issued by The Stock Exchange of Hong Kong
Limited
•
Bye-law 102 (A) and (B): To specify that any director of Brilliance China Automotive
appointed to fill a casual vacancy shall hold office until the next following general
meeting, instead of the next following annual general meeting
Material Contracts
The following contracts, not being contracts in the ordinary course of business, have been
entered into by Brilliance China Automotive and/or its subsidiaries within the two years preceding
the date of this annual report and are or may be material.
(a)
Equity Interest Transfer Agreement dated October 19, 2004 between Ms. Chen
Qiuling and Beston Asia Investment Limited in relation to the transfer of Ms. Chen's
49% interest in Ningbo Yuming Machinery Industrial Co., Ltd. to Beston Asia Investment
Limited;
(b)
Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Wu Xiao An;
(c)
Service Agreement for Executive Director dated March 1, 2006 between Brilliance
China Automotive and Mr. Qi Yumin;
(d)
Purchase Agreement, dated May 8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited; and
(e)
Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible
bonds due 2011 issued by Brilliance China Finance Limited.
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Exchange Controls
Brilliance China Automotive has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority, whose permission was obtained and is in force for the
issue of the ordinary shares and ADSs of Brilliance China Automotive to persons not resident in
Bermuda for exchange control purposes.
The transfer of shares between persons regarded as residents outside Bermuda for exchange
control purposes and the issue of shares to or by such persons may be effected without specific
consent under the Exchange Control Act 1972 of Bermuda (as amended) and regulations thereunder.
Issues and transfers of shares involving any person regarded as resident in Bermuda for exchange
control purposes require specific prior approval under the Exchange Control Act.
There are no limitations on the rights of non-Bermuda owners of Brilliance China Automotive's
capital stock to hold or vote their shares. Because Brilliance China Automotive has been designated
as a non-resident for Bermuda exchange control purposes, there are no restrictions on its ability
to transfer funds in and out of Bermuda or to pay dividends to United States residents who are
holders of Brilliance China Automotive's ordinary shares, other than in respect of local Bermuda
currency.
In accordance with Bermuda law, share certificates are only issued in the names of
corporations or individuals. In the case of an applicant acting in a special capacity (for example,
as an executor or trustee), certificates may, at the request of the applicant, record the capacity
in which the applicant is acting. Notwithstanding the recording of any such special capacity,
Brilliance China Automotive is not bound to investigate further or incur any responsibility in
respect of the proper administration of any such estate or trust.
Brilliance China Automotive will take no notice of any trust applicable to any of its shares
whether or not it had notice of such trust.
As an "exempted company", Brilliance China Automotive is exempted from Bermuda laws that
restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted
company, Brilliance China Automotive may not participate in certain business transactions,
including:
•
the acquisition or holding of land in Bermuda (except that required for its business
and held by way of lease or tenancy for terms of not more than 50 years) without the
express authorization of the Bermuda legislature;
•
the taking of mortgages on land in Bermuda to secure an amount in excess of
BD$50,000 without the consent of the Minister of Finance of Bermuda;
•
the acquisition of securities secured on any land in Bermuda, other than certain
types of Bermuda government securities; or
•
the carrying on of business of any kind in Bermuda, except in furtherance of the
business of Brilliance China Automotive carried on outside Bermuda or under a license
granted by the Minister of Finance of Bermuda.
The Bermuda government actively encourages foreign investment in "exempted" entities such as
Brilliance China Automotive that are based in Bermuda but do not operate in competition with local
business. In addition to having no restrictions on the degree of foreign ownership, Brilliance
China Automotive is subject neither to taxes on its income or dividends nor to any foreign exchange
controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by Brilliance China Automotive, as required, without limitation.
The Chinese government imposes control over its foreign currency reserves in part through
direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on
foreign trade. Effective January 1, 1994, the dual foreign exchange system in China was abolished
in accordance with the notice of the People's Bank of China concerning future reform of the foreign
currency control system issued December 1993. The conversion of Renminbi into U.S. dollars in China
currently must be based on the People's Bank of China rate. The People's Bank of China rate is set based on the previous day's Chinese interbank foreign exchange
market rate and with reference to current exchange rates on the world financial markets.
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Taxation
Income tax
Brilliance China Automotive was incorporated under the laws of Bermuda and has received an
undertaking from the Ministry of Finance in Bermuda pursuant to the provisions of the Exempted
Undertakings Tax Protection Act, 1966, which exempts Brilliance China Automotive and its
shareholders, other than shareholders ordinarily residing in Bermuda, from any Bermuda taxes
computed on profit, income or any capital asset gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, at least until year 2016.
No provision for Hong Kong profits tax has been made to Brilliance China Automotive as it has
no estimated assessable profits for the year.
The subsidiaries are subject to state and local income taxes in the PRC at their respective
tax rates, based on the taxable income reported in their statutory financial statements in
accordance with the relevant state and local income tax laws applicable.
Shenyang Automotive is subject to state and local income taxes in the PRC at standard rates of
15% and 3% respectively in accordance with enterprise income tax laws applicable to Sino-foreign
equity joint venture enterprises. Shenyang Automotive is exempted from local income tax of 3% as it
was designated as "Technologically-Advanced Enterprise". As a result, the effective enterprise
income tax rate for Shenyang Automotive was 15% for the years ended 2005, 2004 and 2003.
Ningbo Yuming Machinery Industrial Co., Ltd., or Ningbo Yuming and Ningbo Brilliance Ruixing
are subject to state and local income taxes in the PRC at standard rates of 30% and 3% respectively
in accordance with enterprise income tax laws applicable. Pursuant to the relevant income tax laws
in the PRC, the applicable state and local income tax rates were reduced to 15% and 1.5%,
respectively. As a result, the effective enterprise income tax rate for Ningbo Yuming and Ningbo
Brilliance Ruixing was 16.5% for the years ended 2005, 2004 and 2003.
Shenyang Xing Yuan Dong Automobile Component Co., Ltd., or Xing Yuan Dong and Brilliance
Dongxing are subject to state and local income taxes in the PRC at standard rates of 30% and 3%
respectively in accordance with enterprise income tax laws applicable. Xing Yuan Dong and
Brilliance Dongxing received official designation by the local tax authority as a "New and
Technologically-Advanced Enterprise" and a foreign-invested enterprise engaged in manufacturing
activities. As a result, the effective enterprise income tax rate for Xing Yuan Dong and Brilliance
Dongxing were 16.5% for the years ended 2005 and 2004, and 7.5% for the year ended 2003.
Mianyang Brilliance Ruian is subject to state and local income taxes in the PRC at standard
rates of 30% and 3% respectively in accordance with enterprise income tax laws applicable. During
2001, Mianyang Brilliance Ruian received official designation by the local tax authority as a
foreign-invested enterprise engaged in manufacturing activities. In 2004, Mianyang Brilliance Ruian
was also designated as an "encouraged industries under Catalogue for the Guidance of Foreign
Investment Industries" and located in the Western area of the PRC. As a result, the applicable
state income tax rate for Mianyang Brilliance Ruian is 15% from 2004 to 2010. In addition, Mianyang
Brilliance Ruian is also exempted from state and local enterprise income taxes for two years
starting from the first profitable year in 2001 followed by a 50% reduction of enterprise income
tax for the next three years. Mianyang Brilliance Ruian is also exempted from local enterprise
income tax for the same five-year period. As a result, the effective tax rate for Mianyang
Brilliance Ruian was 7.5% for the years ended 2005 and 2004, and 15% for the year ended 2003.
Shenyang ChenFa is subject to state and local income taxes in the PRC at standard rates of 30%
and 3% respectively in accordance with enterprise income tax laws applicable. In current year,
Shenyang ChenFa received official designation by the local tax authority as a foreign-invested
enterprise engaged in manufacturing activities. Pursuant to the relevant income tax laws in the
PRC, Shenyang ChenFa is exempted from state enterprise income tax for two years starting from the
first profitable year in 2004 followed by 50% reduction of state
enterprise income tax for the next three years. In addition, Shenyang ChenFa is also exempted from local enterprise
income tax for the same five-year period. As a result, the effective tax rate for Shenyang ChenFa
was 0% for the years ended 2005 and 2004.
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Other subsidiaries in China are subject to state and local income taxes within China at
standard rates of 30% and 3%, respectively, based on the taxable income reported in their statutory
financial statements in accordance with the relevant state and local income tax laws applicable to
foreign-invested enterprises.
Value Added Tax and Consumption Tax
Under the "Provisional Regulations on Value Added Tax in the People's Republic of China",
which came into effect on January 1, 1994, all subsidiaries are subject to value added tax, which
is the principal indirect tax on the sale of tangible goods. The general value added tax rate
applicable to sales and purchases of minibuses, sedans and automotive components in China is 17%.
Sales of minibuses and sedans are also subject to consumption tax at standard rates ranging from 5%
to 8% in 2005.
Customs Duties
See "Item 11 — Quantitative and Qualitative Disclosures About Market Risk — Tariff Reductions"
for a discussion of the import tariffs that generally apply to Brilliance China Automotive and its
subsidiaries. Brilliance China Automotive and its subsidiaries paid approximately Rmb 15.2 million
as custom duty in 2005.
Documents on Display
Brilliance China Automotive is subject to the informational requirements of the U.S.
Securities and Exchange Act of 1934, as amended, or the Exchange Act, and, in accordance with the
Exchange Act, Brilliance China Automotive files annual reports on Form 20-F within six months of
its fiscal year end, and submit other reports and information under cover of Form 6-K with the SEC.
You may read and copy this information at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Recent filings and reports are also available free of charge through
the EDGAR electronic filing system at www.sec.gov. You can also request copies of the documents,
upon payment of a duplicating fee, by writing to the public reference section of the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference
room or accessing documents through EDGAR. As a foreign private issuer, Brilliance China Automotive
is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy
statements to shareholders.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Exchange Rates
In the year ended December 31, 2005, approximately 2.1%, 1.3% and 0.5% of Shenyang
Automotive's costs of sales were denominated in Japanese Yen, U.S. dollars and Euros, respectively.
These costs related primarily to the purchase and importation of equipment and components from
foreign suppliers. Shenyang Automotive pays a Japanese Yen price for the components and spare parts
imported from Toyota through Japanese Yen-denominated letters of credit issued by the Bank of China
and other Chinese banks. Because the Renminbi is not directly convertible into Japanese Yen, these
letters of credit are funded by Shenyang Automotive in U.S. dollars. However, because Shenyang
Automotive's products are sold in China primarily in Renminbi transactions, its revenues and
profits are predominantly in Renminbi, requiring Shenyang Automotive to convert a portion of its
Renminbi earnings into U.S. dollars and Euros. Accordingly, Shenyang Automotive is exposed to
Renminbi/U.S. dollar exchange rate risk, U.S. dollar/Japanese Yen exchange rate risk and U.S.
dollar/Euro exchange rate risk.
The value of Renminbi to the U.S. dollar increased by approximately 2.5% in 2005 as a result
of the loosening of the peg to the U.S. dollar on July 21, 2005. The appreciation of the Renminbi
versus the Japanese Yen, U.S. dollar or Euro has made purchases of foreign-produced components and
payments denominated in foreign currency less expensive for Shenyang Automotive in Renminbi terms,
thereby marginally improving its results of operations. A devaluation of the Renminbi would have
the opposite effect. While there can be no assurance that the exchange rates will continue their current trends or that a devaluation or continued appreciation
of the Renminbi will not occur, Brilliance China Automotive does not believe that such occurrences
would, in any event, have any material adverse effect on Brilliance China Automotive's earnings.
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Other than US$200 million zero coupon convertible bonds issued in 2003 and US$183 million zero
coupon guaranteed convertible bonds issued in 2006, Brilliance China Automotive and its
subsidiaries currently have no foreign currency-denominated borrowings from third parties, but have
outstanding letters of credit of Yen 193.0 million and US$2.9 million and Euro 0.6 million from
local banks. Brilliance China Automotive also advanced shareholder's loans to its subsidiaries in
the amounts of approximately HK$266.2 million, Rmb 1,708.1 million and US$193.3 million in 2005.
Since Brilliance China Automotive does not believe that exchange rate fluctuations have any
material effect on the overall financial performance of Brilliance China Automotive, and the amount
of foreign currency that it requires is not significant, Brilliance China Automotive does not enter
into any hedging transactions with respect to its exposure to foreign currency movements.
Interest Rates
Funds not required by Brilliance China Automotive in the short term are kept as temporary
demand or time deposits in commercial banks. Brilliance China Automotive does not hold any market
risk-sensitive instruments for trading purposes. As of December 31, 2005, Brilliance China
Automotive had short-term bank loans outstanding in the amount of Rmb 496.5 million. The average
annual rate for discounting notes receivables with banks in 2005 ranged from 3% to 4% per annum,
which rate is fixed separately for each transaction. Brilliance China Automotive did not have any
variable rate loans or commitments outstanding as of December 31, 2005.
For the year ended December 31, 2005, Brilliance China Automotive's interest income was Rmb
60.2 million (US$7.5 million) and its interest expense was Rmb 182.4 million (US$22.6 million). A
10% change in interest rates would result in a change in interest income of approximately Rmb 6.0
million (US$0.7 million) and a change in interest expense of approximately Rmb 18.2 million (US$2.3
million).
Tariff Reductions
The PRC government imposes restrictions, quotas and tariffs on the import of foreign-made
motor vehicles, as well as motor vehicle components. However, as a result of the PRC's accession
to the WTO, which regulates trading and tariffs among its signatory states, in November 2001, the
PRC has committed to reducing its import restrictions on motor vehicles and motor vehicle
components. In addition, the PRC will be required to conform its import tariffs to the uniform
tariffs under the WTO.
Effective January 1, 2002, the PRC reduced its import tariffs on motor vehicles and
automotive components from between 80% to 100% and between 18% to 40%, respectively, to between
43.8% to 50.7% and between 14% to 31.4%, respectively. This range was lowered further to between
4.8% and 25% for automotive components in 2003, between 5% and 22.9% in 2004 and between 5% and
18.6% in 2005. In 2006, the import tariffs on automotive components were further reduced to
between 5.0% and 14.3%. In 2004, the average import tariffs on automotive components for the
deluxe minibuses (including Granse minibuses) and Zhonghua sedans were 13.8% and 10.5%,
respectively, and in 2005, the average tariffs became 9.7% and 12.1% for the imported components
for deluxe minibuses and Zhonghua sedans, respectively. In addition, tariffs on vehicles with nine
seats or less and engine sizes of three liters or below fell from 43.9% in 2002 to 38.2% in 2003,
while tariffs on vehicles with more than nine seats and engines of more than three liters
decreased from 50.7% in 2002 to 43.0% in 2003. In 2004, tariffs were 34.2% for vehicles with nine
seats or less and engine sizes of three liters or less and 37.6% for vehicles with more than nine
seats and engines of more than three liters. In 2005, tariffs were fixed at 30% for all motor
vehicles. These tariffs were further reduced to 28% in January 2006 and are scheduled for further
reduction to 25% in July 2006.
Although lower tariffs and reduced import restrictions may benefit Brilliance China Automotive
in terms of lower cost of imported components, lower tariffs and reduced import restrictions could
also lead to a substantial increase in the number of minibuses, sport utility vehicles, sedans and other motor vehicles
imported into China, thereby significantly increasing competition in Brilliance China Automotive's
current and proposed markets.
Except as described above, Brilliance China Automotive's management believes that at present
and in its normal course of business, Brilliance China Automotive is not subject to any other
market-related risks.
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Table of Contents
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
None.
Use of Proceeds
Not applicable.
ITEM 15. DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial Officer of Brilliance China Automotive are
responsible for establishing and maintaining disclosure controls and procedures (as defined in the
Exchange Act Rules 13a-14(c) and 15d-14(c)). Within 90 days prior to the date of this annual
report, the management of Brilliance China Automotive carried out an evaluation, under the
supervision and with the participation of its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of Brilliance China Automotive's disclosure controls and procedures pursuant
to Exchange Act Rule 13a-14. Based on that evaluation, they have concluded that these disclosure
controls and procedures are effective to ensure that material information required to be included
in our periodic SEC reports relating to Brilliance China Automotive is made known to them.
There have been no significant changes in internal controls, or in factors that could
significantly affect internal controls, subsequent to the date the Chief Executive Officer and
Chief Financial Officer completed their evaluation.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors of Brilliance China Automotive has determined that Brilliance China
Automotive does not have an audit committee financial expert, as defined by the SEC, serving on its
audit committee. Brilliance China Automotive is seeking to appoint a director who would serve as the audit committee
financial expert on the audit committee. However as of the date of this annual report, no suitable
candidate has been identified.
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ITEM 16B. CODE OF ETHICS
Brilliance China Automotive has not adopted a code of ethics that applies to the principal
executive officer, the principal financial officer and the principal accounting officer or
controller. However, the board of directors of Brilliance China Automotive has adopted or follows
the following written standards for purposes of corporate governance:
•
The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong,
including the Model Code for Securities Transactions by Directors of Listed Issuers;
•
Non-Statutory Guidelines on Directors' Duties issued by the Hong Kong Companies
Registry in January 2004;
•
Guide for Independent Non-Executive Directors issued by The Hong Kong Institute of
Directors in 2000;
•
Guidelines for Directors issued by The Hong Kong Institute of Directors in 2005; and
•
Code for Securities Transactions by Employees.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PricewaterhouseCoopers acted as Brilliance China Automotive's independent auditors for the
fiscal year ended December 31, 2003 and Moores Rowland Mazars has acted as Brilliance China
Automotive's independent auditors for the fiscal years ended December 31, 2004 and 2005. The chart
below sets forth the total amount billed to us by PricewaterhouseCoopers and Moores Rowland Mazars.
Total Fees
2005
2004
2003
Rmb'000
Rmb'000
Rmb'000
Audit fees
3,146
4,452
3,807
Audit-related fees
723
662
662
Tax fees
—
—
11
Other fees
—
—
248
Total
3,869
5,114
4,728
Audit Fees
Audit fees are the aggregate fees billed by the auditors for the annual financial statement
audit and other procedures required to be performed by the auditors so as to form an opinion on
Brilliance China Automotive's annual financial statements. Audit fees also include fees billed in
connection with the issuance of comfort letters.
81
Table of Contents
Audit-Related Fees
Audit-related fees are the aggregate fees billed by the auditors in relation to agreed-upon
procedures performed on Brilliance China Automotive's interim financial statements and internal
control reviews.
Tax Fees
Tax fees are the aggregate fees billed by the auditors for tax compliance on Hong Kong profits
tax matters.
Other Fees
Other fees are the aggregate fees billed by the auditors in relation to the delivery of a
training session to Brilliance China Automotive on high-level risk and control assessment.
Pre-Approval Policies and Procedures
As part of its duties, the Audit Committee considers the appointment of the external auditor
and the audit fee and discusses with the external auditor, before the audit commences, the nature
and scope of the audit. The Audit Committee pre-approves the fees and services provided by the
external auditor through meetings or written resolutions circulated to members of the Audit
Committee.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
PART III
ITEM 17. FINANCIAL STATEMENTS
Brilliance China Automotive has elected to provide the financial statements and related
information specified in Item 18 in lieu of Item 17.
ITEM 18. FINANCIAL STATEMENTS
See pages F-1 to F-52 following Item 19.
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ITEM 19. EXHIBITS
The following exhibits are furnished along with annual report or are incorporated by reference
as indicated.
1.1
Amended and Restated Bye-Laws of Brilliance China Automotive, dated June 25,
2004.*
2.1
Trust Deed, dated June 7, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and The
Bank of New York, London Branch relating to the zero coupon guaranteed convertible bonds due 2011
issued by Brilliance China Finance Limited.
4.1
English translation of Equity Interest Transfer Agreement dated October 19,
2004 between Ms. Chen Qiuling and Beston Asia Investment Limited in relation to the
transfer of Ms. Chen's 49% interest in Ningbo Yuming Machinery Industrial Co., Ltd. to
Beston Asia Investment Limited.*
4.2
Form of Service Agreement for Executive Director.
4.3
Purchase Agreement, dated May 8, 2006, between Brilliance China Finance Limited
(formerly known as Goldcosmos Investments Limited), Brilliance China Automotive and
Citigroup Global Markets Limited relating to the sale of zero coupon guaranteed
convertible bonds due 2011 by Brilliance China Finance Limited.
7.1
Statement explaining how certain ratios were calculated in the annual report.
8.1
List of significant subsidiaries, jointly controlled entities and associated
companies of Brilliance China Automotive as of December 31, 2005.
12.1
Section 302 Certification of the Chief Executive Officer.
12.2
Section 302 Certification of the Chief Financial Officer.
13.1
Section 906 Certification of the Chief Executive Officer and Chief Financial Officer.
*
Incorporated by reference from the Registrant's annual report on Form 20-F
filed with the SEC on June 28, 2005.
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Table of Contents
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED
/s/ Wu Xiao An
WU Xiao An
Chairman
Date: June 26, 2006
Table of Contents
INDEX TO FINANCIAL STATEMENTS
BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED AND SUBSIDIARIES
Page
Report of Independent Registered Public Accounting Firm of Moores Rowland Mazars, dated April 21, 2006
F-2
Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers, dated April 22, 2004
F-3
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2005, 2004 and 2003
F-4
Consolidated Balance Sheets as of December 31, 2005 and 2004
F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
F-7
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2005, 2004 and 2003
F-10
Notes to Consolidated Financial Statements
F-11
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm of Moores Rowland Mazars, dated April 21,
2006
To the Shareholders of
Brilliance China Automotive Holdings Limited
We have audited the accompanying consolidated balance sheets of Brilliance China Automotive
Holdings Limited (a Bermuda corporation) and its subsidiaries (the "Group") as of December 31, 2005
and 2004, and the related consolidated statements of income and comprehensive income, cash flows
and changes in shareholders' equity for the years ended December 31, 2005 and 2004. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 2005 and 2004 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Brilliance China Automotive Holdings
Limited and its subsidiaries as of December 31, 2005 and 2004, and the results of their operations
and their cash flows for the years ended December 31, 2005 and 2004, in conformity with U.S.
generally accepted accounting principles.
Moores Rowland Mazars
Chartered Accountants
Certified Public Accountants
Hong Kong, April 21, 2006
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm of PricewaterhouseCoopers, dated April 22,
2004
The following report is a copy of a report previously issued by PricewaterhouseCoopers
To the Shareholders of
Brilliance China Automotive Holdings Limited
We have audited the accompanying consolidated statements of income and comprehensive income, cash
flows and changes in shareholders' equity of Brilliance China Automotive Holdings Limited (a
Bermuda corporation) and its subsidiaries (the "Group") for the year ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 2003 consolidated financial statements referred to above present fairly, in all
material respects, the results of operations and cash flows of Brilliance China Automotive Holdings
Limited and its subsidiaries for the year ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, April 22, 2004
F-3
Table of Contents
Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2005, 2004 and 2003
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
(except for share and ADS data)
Sales to third parties
3,859,151
4,402,141
7,797,054
Sales to affiliated companies
1,609,839
2,139,857
2,312,503
Total sales
5,468,990
6,541,998
10,109,557
Cost of sales (include purchase of goods and
subcontracting charges from affiliated companies)
(2005: RMB1,174,732,000, 2004: RMB2,185,428,000,
2003: RMB2,934,331,000)
(5,011,955
)
(5,491,250
)
(7,727,125
)
Gross profit
457,035
1,050,748
2,382,432
Selling, general and administrative expenses
(1,195,336
)
(1,510,442
)
(1,410,067
)
Interest expense
(182,354
)
(182,458
)
(167,111
)
Interest income
60,189
58,800
52,672
Equity in earnings of associated companies and jointly
controlled entities, net
48,995
126,261
109,471
Subsidy income
3,139
1,815
48,497
Other income, net
43,650
25,709
78,293
Impairment loss on intangible assets
(173,000
)
(50,000
)
—
Impairment loss on goodwill
(257,720
)
(47,320
)
—
(Loss) income before taxation and minority interests
(1,195,402
)
(526,887
)
1,094,187
(Provision) benefit for income taxes
(101,884
)
63,110
(144,140
)
Minority interests
625,997
464,991
(169,205
)
Net (loss) income
(671,289
)
1,214
780,842
Other comprehensive (loss) income
Fair value adjustment for securities available-for-sales
(27,227
)
28,468
—
Comprehensive (loss) income
(698,516
)
29,682
780,842
Basic (loss) earnings per share
RMB(0.1830)
RMB0.0003
RMB0.2130
Basic (loss) earnings per ADS
RMB(18.30)
RMB0.03
RMB21.30
Diluted (loss) earnings per share
RMB(0.1830)
RMB 0.0003
RMB0.2116
Diluted (loss) earnings per ADS
RMB(18.30)
RMB 0.03
RMB21.16
Weighted average number of shares outstanding
3,668,390,900
3,668,390,900
3,666,539,983
Weighted average number of ADSs outstanding
36,683,909
36,683,909
36,665,400
Net income adjusted for the dilutive effect of
convertible bonds
(671,289
)
1,214
783,515
Weighted average number of shares outstanding adjusted
for dilutive effect of stock options and convertible
bonds
3,668,390,900
3,683,795,968
3,702,398,310
Weighted average number of ADSs outstanding adjusted
for dilutive effect of stock options and convertible
bonds
36,683,909
36,837,960
37,023,983
The accompanying notes are an integral part of these consolidated statements of income and
comprehensive income.
F-4
Table of Contents
Consolidated Balance Sheets
As of December 31, 2005 and 2004
As of December 31,
2005
2004
RMB'000
RMB'000
Assets
Current assets
Cash and cash equivalents
843,400
1,244,499
Short-term bank deposits
1,053,832
1,008,602
Pledged short-term bank deposits
1,932,649
2,777,191
Deferred expenses — current portion
8,920
8,920
Notes receivable
377,505
620,899
Notes receivable from affiliated companies
338,970
645,143
Accounts receivable, net
124,958
55,632
Due from affiliated companies
840,215
765,411
Inventories, net
1,046,818
1,577,048
Other receivables
432,019
474,617
Prepayments and other current assets
57,707
127,080
Income tax recoverable
12,476
44,285
Other taxes recoverable
1,766
41,468
Advances to affiliated companies
38,931
37,477
Total current assets
7,110,166
9,428,272
Property, plant and equipment
4,362,762
4,295,576
Intangible assets
584,811
952,440
Interests in associated companies and jointly controlled entities
1,520,696
1,792,590
Investment securities
22,684
49,911
Goodwill
339,710
418,400
Prepayment for a long-term investment
600,000
600,000
Deferred tax assets
—
114,005
Deferred expenses — non-current portion
16,353
25,273
Long-term land lease prepayments
124,157
76,126
Other long-term assets
10,966
23,833
Total assets
14,692,305
17,776,426
F-5
Table of Contents
Consolidated Balance Sheets (Continued)
As of December 31, 2005 and 2004
As of December 31,
2005
2004
RMB'000
RMB'000
Liabilities and shareholders' equity
Current liabilities
Convertible bonds
1,639,550
—
Short-term bank loans
496,500
—
Notes payable
3,026,952
5,727,216
Notes payable to affiliated companies
74,092
121,162
Accounts payable
928,892
732,978
Due to affiliated companies
633,807
522,722
Customer advances
318,978
265,489
Other payables
434,651
363,584
Dividends payable
3,406
3,478
Accrued expenses and other current liabilities
265,908
274,183
Income tax payable
14,309
43,974
Other taxes payable
117,695
42,391
Advances from affiliated companies
105,094
90,481
Total current liabilities
8,059,834
8,187,658
Convertible bonds
—
1,667,888
Deferred income
79,602
—
Commitments and contingencies (Note 21)
—
—
Total liabilities
8,139,436
9,855,546
Minority interests
413,181
1,063,226
Shareholders' equity
Capital stock
Common stock (5,000,000,000 shares of US$0.01
each authorized and 3,668,390,900 shares of
US$0.01 each issued and outstanding as of
December 31, 2005 and 2004)
303,388
303,388
Additional paid-in capital
2,325,690
2,325,690
Accumulated other comprehensive income
40,420
67,647
Dedicated capital
167,631
158,352
Capital reserve
120,000
120,000
Retained earnings
3,182,559
3,882,577
Total shareholders' equity
6,139,688
6,857,654
Total liabilities and shareholders' equity
14,692,305
17,776,426
The accompanying notes are an integral part of these consolidated balance sheets.
F-6
Table of Contents
Consolidated Statements of Cash Flows
For the years ended December 31, 2005, 2004 and 2003
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Cash flows from operating activities:
Net (loss) income
(671,289
)
1,214
780,842
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Deferred income tax
114,005
(74,450
)
(1,514
)
Depreciation of property, plant and equipment
399,744
365,638
447,094
Amortization of long-term land lease prepayments
3,886
2,369
2,153
Amortization of intangible assets
204,009
226,041
227,077
Amortization of deferred expenses
8,920
8,920
1,486
Minority interests in net (loss) income of consolidated subsidiaries
(625,998
)
(464,991
)
169,205
Provision for doubtful debts and write off of bad debts
55,703
55,292
4,825
Write back of provision for doubtful debts
(7,459
)
(1,000
)
(5,679
)
Provision for impairment of intangible assets
173,000
50,000
—
Provision for impairment of property, plant and equipment
48,299
10,000
6,027
Provision for impairment of investment in a jointly controlled entity
179,030
47,320
—
Provision for impairment of goodwill in a subsidiary
78,690
—
—
Write back of provision for inventories sold
(39,638
)
(15,522
)
—
(Gain) loss on disposal of property, plant and equipment
(341
)
12,519
(14,004
)
Gain on disposal of a jointly controlled entity
(2,098
)
—
—
Amortization of deferred compensation expenses
—
—
173,213
Government grant recognized
(941
)
—
—
Unrealized exchange gain
(40,829
)
—
—
Equity in earnings of associated companies and jointly controlled
entities, net
(48,995
)
(126,261
)
(109,471
)
Accreted redemption premium on convertible bonds
12,419
12,401
—
F-7
Table of Contents
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 2005, 2004 and 2003
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
(Increase) decrease in operating assets:
Accounts receivable
(69,974
)
32,858
(73,888
)
Notes receivable
243,394
206,553
(357,708
)
Notes receivable from affiliated companies
306,173
(117,968
)
(314,190
)
Due from affiliated companies
(79,804
)
(10,157
)
268,881
Inventories
569,524
(328,154
)
(460,040
)
Other receivables
7,278
50,625
(40,307
)
Prepayments and other current assets
69,374
191,443
118,612
Decrease (increase) in non-current assets
12,866
(6,843
)
(13,786
)
Increase (decrease) in operating liabilities:
Notes and accounts payable
(333,250
)
(391,075
)
48,461
Due to affiliated companies
171,871
(162,132
)
(29,516
)
Notes payable to affiliated companies
(47,070
)
—
35,431
Customer advances
53,486
48,656
(85,206
)
Other payables
43,423
(121,962
)
81,715
Accrued expenses and other current liabilities
(8,277
)
85,409
(69,474
)
Import tariff and taxes payable
117,152
(306,000
)
(36,871
)
Net cash provided by (used in) operating activities
896,283
(719,257
)
753,368
Cash flows from investing activities:
Capital expenditures
(558,028
)
(999,058
)
(955,887
)
Proceeds from disposal of property, plant and equipment
9,487
18,204
118,301
(Increase) decrease in short-term bank deposits
(45,230
)
661,994
(897,207
)
(Increase) decrease in pledged short-term bank deposits
844,542
(512,607
)
(914,584
)
(Increase) decrease in advances to affiliated companies
(8,729
)
204,030
1,061,214
Increase in long term investment
—
(4,138
)
—
Increase in other long-term assets
—
(6,523
)
(874
)
Decrease in other receivables arising from short-term investments
—
—
500,000
Decrease (increase) in interests in associated companies and
jointly controlled entities
11,517
(12,250
)
(702,278
)
Dividend received from associated companies and jointly controlled
entities
72,000
15,103
—
Payment for acquisition of further interest in a subsidiary
—
(10,000
)
—
Prepayment for a long-term investment
—
—
(600,000
)
Increase in other receivables
—
—
(300,000
)
Proceeds received from disposal of investment in an associated
company
—
20,000
200,000
Advances to a joint venture partner of a non-wholly owned subsidiary
—
(97,156
)
—
Net cash provided by (used in) investing activities
325,559
(722,401
)
(2,491,315
)
F-8
Table of Contents
Consolidated Statements of Cash Flows (Continued)
For the years ended December 31, 2005, 2004 and 2003
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Cash flows from financing activities:
Proceeds from short-term bank loans
501,202
900,000
—
Repayment of short-term bank loans
(4,702
)
(900,000
)
(150,000
)
Issuance of bank notes payable
7,934,900
12,405,435
8,674,563
Repayment of bank notes payable
(10,106,000
)
(11,376,454
)
(7,828,000
)
Decrease in advances from affiliated companies
(9,434
)
(2,161
)
(144,383
)
Financing received from a jointly controlled entity
—
—
74,605
Proceeds from issuance of common stock
—
—
4,701
Dividends paid
(19,450
)
(88,974
)
(43,634
)
Dividends paid to joint venture partners
—
(83,987
)
(113,284
)
Proceeds from issuance of convertible bonds
—
—
1,654,300
Payment of direct expenses incurred in connection
with the issuance of convertible bonds
—
—
(44,599
)
Capital contributions from joint venture partners
—
—
196,826
Receipts of government grants
80,543
—
—
Net cash (used in) provided by financing activities
(1,622,941
)
853,859
2,281,095
Net (decrease) increase in cash and cash equivalents
(401,099
)
(587,799
)
543,148
Cash and cash equivalents, beginning of year
1,244,499
1,832,298
1,289,150
Cash and cash equivalents, end of year
843,400
1,244,499
1,832,298
The accompanying notes are an integral part of these consolidated statements of cash flows.
F-9
Table of Contents
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 2005, 2004 and 2003
Common stock
Additional
Accumulated other
Number of
paid-in
Deferred stock
Dedicated
Capital
comprehensive
Retained
shares issued
Amount
capital
compensation
capital
reserve
income
earnings
Total
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
RMB'000
Balance as of
December 31, 2002
3,666,052,900
303,194
2,321,183
(173,213
)
132,179
—
39,179
3,382,780
6,005,302
Issuance of shares
2,338,000
194
4,507
—
—
—
—
—
4,701
Amortization of
deferred
compensation
expenses
—
—
—
173,213
—
—
—
—
173,213
Net income
—
—
—
—
—
—
—
780,842
780,842
Transfer to
dedicated capital
—
—
—
—
99,989
—
—
(99,989
)
—
Capitalization of
dedicated capital
—
—
—
—
(120,000
)
120,000
—
—
—
Dividends declared
—
—
—
—
—
—
—
(77,751
)
(77,751
)
Balance as of
December 31, 2003
3,668,390,900
303,388
2,325,690
—
112,168
120,000
39,179
3,985,882
6,886,307
Net income
—
—
—
—
—
—
—
1,214
1,214
Transfer to
dedicated capital
—
—
—
—
46,184
—
—
(46,184
)
—
Net realized gain
on marketable
equity securities
—
—
—
—
—
—
28,468
—
28,468
Dividends declared
—
—
—
—
—
—
—
(58,335
)
(58,335
)
Balance as of
December 31, 2004
3,668,390,900
303,388
2,325,690
—
158,352
120,000
67,647
3,882,577
6,857,654
Net loss
—
—
—
—
—
—
—
(671,289
)
(671,289
)
Transfer to
dedicated capital
—
—
—
—
9,279
—
—
(9,279
)
—
Net unrealized loss
on marketable
equity securities
—
—
—
—
—
—
(27,227
)
—
(27,227
)
Dividends declared
—
—
—
—
—
—
—
(19,450
)
(19,450
)
Balance as of
December 31, 2005
3,668,390,900
303,388
2,325,690
—
167,631
120,000
40,420
3,182,559
6,139,688
The accompanying notes are an integral part of these consolidated statements of changes in
shareholders' equity.
F-10
Table of Contents
Notes to Consolidated Financial Statements
1. ORGANIZATION, PRINCIPAL ACTIVITIES AND OPERATING ENVIRONMENT
Brilliance China Automotive Holdings Limited (the "Company") was incorporated in Bermuda on June 9,
1992 with limited liability. The Company's ADSs and shares are traded on The New York Stock
Exchange Inc. and The Stock Exchange of Hong Kong Limited ("SEHK"), respectively. The Company is an
investment holding company. The principal activities of the Company's subsidiaries are the
manufacture and sale of minibuses, sedans and automotive components in the People's Republic of
China (the "PRC").
Details of the Company's principal subsidiaries as of December 31, 2005 are as follows:
Percentage of equity
interest/voting right
attributable to
Place of
the Company
Name
establishment/incorporation
Directly
Indirectly
Principal activities
Shenyang Brilliance
JinBei Automobile
Co., Ltd.
("Shenyang
Automotive")
Shenyang, the PRC
51
%
—
Manufacture,
assembly and sale
of minibuses and
sedans
Ningbo Yuming
Machinery
Industrial Co.,
Ltd. ("Ningbo
Yuming")
Ningbo, the PRC
—
100
%
Manufacture and
sale of automotive
components
Shenyang
XingYuanDong
Automobile
Component Co., Ltd.
("Xing Yuan Dong")
Shenyang, the PRC
100
%
—
Manufacture and
trading of
automotive
components
Ningbo Brilliance
Ruixing Auto
Components Co.,
Ltd. ("Ningbo
Ruixing")
Ningbo, the PRC
100
%
—
Manufacture and
trading of
automotive
components
Mianyang Brilliance
Ruian Automotive
Components Co.,
Ltd. ("Mianyang
Ruian")
Mianyang, the PRC
100
%
—
Manufacture and
trading of
automotive
components
Shenyang Brilliance
Dongxing Automotive
Component Co., Ltd.
("Dongxing
Automotive")
Shenyang, the PRC
—
100
%
Manufacture and
trading of
automotive
components and
remodeling
minibuses and
sedans
Brilliance China
Automotive Finance
Ltd.
British Virgin Islands
100
%
—
Financing
Shenyang ChenFa
Automobile
Component Co., Ltd.
Shenyang, the PRC
100
%
—
Development,
manufacture and
sale of engines
components
Shenyang XinJinBei
Investment and
Development Co.,
Ltd. ("SXID")
Shenyang, the PRC
—
99
%
Investment holding
Shenyang JinBei
Automotive Industry
Holdings Co., Ltd.
("SJAI")
Shenyang, the PRC
—
98.01
%
Investment holding
F-11
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Details of the Group's interests in associated companies and jointly controlled entities are
included in Note 13.
For the years ended December 31, 2005, 2004 and 2003, approximately 27%, 29% and 20% of the
consolidated revenue was generated from sales of goods to Shanghai Shenhua Holdings Co., Ltd.
("Shanghai Shenhua"), an affiliated company.
2. BASIS OF PRESENTATION
The financial statements are prepared in accordance with generally accepted accounting principles
in the United States of America ("U.S. GAAP"). The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. This basis of accounting
differs from that used in the statutory financial statements of the Company's subsidiaries, which
were prepared in accordance with the relevant accounting principles and financial reporting
regulations applicable to foreign investment enterprises as established by the Ministry of Finance
in the PRC. Certain accounting principles stipulated under U.S. GAAP are not applicable in the PRC.
The principal adjustments made to conform the statutory financial statements to U.S. GAAP included
the following:
•
Reclassification of certain items, designated as "construction-in-progress" in the statutory financial statements, as
property, plant and equipment;
•
Reclassification of certain items, designated as "long-term land lease prepayments" from property, plant and equipment in
the statutory financial statements;
•
Reclassification of certain items, designated as "reserves appropriated from net income" in the statutory financial
statements, as charges to income;
•
Recognition of deferred income taxes;
•
Recognition of provision for impairment loss of long-lived assets;
•
Amortization and recognition of provision for impairment loss of intangible assets;
•
Recognition of research and development expenditures; and
•
Recognition of stock-based compensation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of consolidation
The consolidated financial statements of the Group include the financial statements of the Company
and the enterprises that it controls. This control is normally evidenced when the Group has the
power to govern the financial and operating policies of an enterprise so as to benefit from its
activities. The results of subsidiaries acquired or disposed of during the period are consolidated
from or to their effective dates of acquisition or disposal. The equity and net income attributable
to minority shareholders' interests are shown separately in the Group's balance sheet and income
statement respectively.
In 2004, the Group adopted Financial Accounting Standards Board ("FASB") Interpretation No. 46
(revised December 2003), "Consolidation of Variable Interest Entities, an interpretation of ARB No.
51"
F-12
Table of Contents
Notes to Consolidated Financial Statements (Continued)
("FIN 46R"). FIN 46R addresses the consolidation of an entity whose equity holders either (a) have
not provided sufficient equity at risk to allow the entity to finance its own activities or (b) do
not possess certain characteristics of a controlling financial interest. FIN 46R requires the
consolidation of such an entity, known as a variable interest entity ("VIE"), by the primary
beneficiary of the entity. The primary beneficiary is the entity, if any, that is obligated to
absorb a majority of the risk of loss from the VIE's activities entitled to receive a majority of
the VIE's residual returns, or both. FIN 46R excludes from its scope businesses (as defined by FIN
46R) unless certain conditions exist.
In connection with adopting FIN 46R, the Group has identified a supplier to which the Group had
provided a guarantee of approximately RMB300 million, which expired in the first quarter of 2005.
The annual purchase from the supplier was approximately RMB92 million in 2005. The Group made and
continues to make exhaustive but so far unsuccessful efforts to obtain information necessary to
apply the FIN 46R's provision as the Group does not have the contractual or legal right to obtain
such information. The Group's maximum exposure to loss as a result of its involvement with this
supplier is approximately RMB300 million, representing the guarantee to the supplier in the event
of its liquidation. Except the above, the adoption of FIN 46R did not have a material impact on the
Group's financial position or results of operations.
Intragroup balances and transactions, including sales to companies within the Group and resulting
unrealized profits, are eliminated in full. Unrealized losses resulting from intragroup
transactions are eliminated unless the cost cannot be recovered. Consolidated financial statements
are prepared using uniform accounting policies for like transactions and other events in similar
circumstances.
(b) Sales
Sales represent the invoiced value of goods, net of consumption tax, discounts and returns, and are
recognized when goods are delivered to the customers and the significant risks and rewards of
ownership of the goods have been transferred to customers. Provisions for sales allowances and
rebates are made at the time of sales of goods and are recognized as a reduction of sales. Costs
related to shipping and handling are included in selling, general and administrative expenses for
all periods presented.
(c) Cash, cash equivalents and short-term bank deposits
Cash represents cash on hand and deposits with financial institutions which are repayable on
demand. Cash equivalents represent short-term, highly liquid investments which are readily
convertible into known amounts of cash and which are subject to an insignificant risk of changes in
value.
Bank deposits with original maturity between three and twelve months are classified as short-term
deposits.
(d) Inventories
Inventories are carried at the lower of cost or market. Cost comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories to their present location and
condition. Cost is calculated on the moving-average basis, except for costs of work-in-progress and
finished goods of sedans and minibuses, which are calculated by the specific identification basis.
The Group provides allowance for excess, slow moving and obsolete inventory by specific
identification and reduces the carrying value of its inventory to the lower of cost or market.
When inventories are sold, the carrying amount of those inventories is recognized as an expense in
the period in which the related revenue is recognized.
(e) Property, plant and equipment and long-term land lease prepayments
Property, plant and equipment are stated at cost less accumulated depreciation and impairment loss.
The cost of an asset comprises its purchase price and any directly attributable costs of bringing
the asset to its working condition and location for its intended use. Expenditure incurred after the assets have
been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to
the income statement in the period in which it is incurred. In situations where it can be clearly
demonstrated that the expenditure has resulted in an increase in the future economic benefits
expected to be obtained from the use of the assets beyond its originally assessed standard of
performance, the expenditure is capitalized as an additional cost of the assets.
F-13
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Depreciation is calculated on a straight-line basis, at annual rates estimated to write off the
cost less estimated residual value of 10% of each asset over its expected useful life. The annual
rates are as follows:
Buildings
5
%
Machinery and equipment (excluding special tools and moulds)
10
%
Furniture, fixtures and office equipment
20
%
Motor vehicles
20
%
The costs of special tools and moulds included in machinery and equipment are amortized over their
estimated productive volume.
When property, plant and equipment are sold or retired, their cost and accumulated depreciation are
eliminated from the accounts and any gain or loss resulting from their disposal is included in the
income statement.
Construction-in-progress consists of factories and office buildings under construction and
machinery pending installation and includes the costs of construction, machinery and equipment, and
any interest charges arising from borrowings used to finance these assets during the period of
construction or installation. No provision for depreciation is made on construction-in-progress
until such time as the relevant assets are completed and ready for their intended use.
Long-term land lease prepayments is amortized on a straight-line basis over the term of lease.
(f) Intangible assets
Purchased intangible assets with finite lives are amortized using the straight-line method over the
estimated economic lives of the assets of 7 years.
(g) Impairment of long-lived assets
Long-lived assets, such as property, plant and equipment and purchased intangible assets with
finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable from its undiscounted future cash flow. If
such assets are considered to be impaired, the impairment to be recognized is measured as the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
(h) Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets
resulting from the Company's acquisitions of interests in its subsidiaries.
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," which was effective for the Group for year 2002, prohibits the amortization of goodwill
and purchased intangible assets with indefinite useful lives. The Group reviews goodwill for
impairment annually at the year end and whenever events or changes in circumstances indicate the
carrying value of an asset may not be recoverable in accordance with SFAS No. 142.
F-14
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The Group performs a two-step impairment test. In the first step, the Group compares the fair value
of each reporting unit to its carrying value. The Group determines the fair value of its reporting
units based on the present value of estimated future cash flows. If the fair value of the reporting
unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired
and no further testing is performed. If the carrying value of the net assets assigned to the
reporting unit exceeds the fair value of the reporting unit, then the Group must perform the second
step impairment test in order to determine the implied fair value of the reporting unit's goodwill.
If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Group
records an impairment loss equal to the difference.
(i) Investments in associated companies and jointly controlled entities
An associated company is a company in which the Group has significant influence, but not control or
joint control, and thereby has the ability to participate in the investees' financial and operating
policy decisions. A jointly controlled entity is a company in which the Group has joint control
with the other joint venture partners. Investments in associated companies and jointly controlled
entities are accounted for using the equity method ("equity method investment"). Goodwill arising
on the acquisition of interests in associated companies and jointly controlled entities ("equity
method goodwill") is included in the carrying cost of the investment. The Group considers whether
the fair values of any of its equity method investments have declined below their carrying value
whenever adverse events or changes in circumstances indicate that recorded values may not be
recoverable. In assessing the recoverability of equity method investments (including equity method
goodwill), the Group uses discounted cash flow models. If the fair value of the equity investee is
determined to be lower than carrying value, an impairment is recognized.
(j) Investment securities
The Group's investment securities consist of marketable available-for-sale securities and
investments in unlisted equity securities. Securities classified as available-for-sale under,
"Accounting for Certain Investments in Debt and Equity Securities," SFAS No. 115 are carried at
fair value, with unrealized gains and losses, net of income taxes, recorded in the accumulated
other comprehensive income (loss), a separate component of statement of changes in shareholders'
equity, until realized. The fair values of individual investments in marketable securities are
determined based on market quotations. Gains or losses on securities sold are based on the specific
identification method. Equity securities that are restricted for more than one year or not publicly
traded are recorded at cost.
The Group periodically reviews to assess whether its investments in non-marketable equity
securities and available-for-sale securities are impaired and if any impairment is other than
temporary. Factors considered by us in assessing whether an impairment is other than temporary
include the credit quality of the investment, the duration of the impairment, our ability and
intent to hold the investment until recovery and overall economic conditions. A decline in value of
these securities below cost that is deemed to be other than temporary results in an impairment
charge to earnings that reduces the carrying amount of the securities to fair value establishing a
new cost basis.
(k) Taxation
Income Tax
The Company was incorporated under the laws of Bermuda and has received an undertaking from the
Ministry of Finance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax
Protection Act, 1966, which exempts the Company and its shareholders, other than shareholders
ordinarily residing in Bermuda, from any Bermuda taxes computed on profit, income or any capital
asset gain or appreciation, or any tax in the nature of estate duty or inheritance tax, at least
until year 2016.
No provision for Hong Kong profits tax has been made to the Company as the Company has no estimated
assessable profit for the year.
F-15
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The subsidiaries are subject to state and local income taxes in the PRC at their respective tax
rates, based on the taxable income reported in their statutory financial statements in accordance
with the relevant state and local income tax laws applicable.
Shenyang Automotive is subject to state and local income taxes in the PRC at standard rates of 15%
and 3%, respectively, in accordance with enterprise income tax laws applicable to Sino-foreign
equity joint venture enterprises. Shenyang Automotive is exempted from local income tax of 3% as it
was designated as a "Technologically-Advanced Enterprise". As a result, the effective enterprise
income tax rate for Shenyang Automotive was 15% for the years ended December 31, 2005, 2004 and
2003.
Ningbo Yuming and Ningbo Ruixing are subject to state and local income taxes in the PRC at standard
rates of 30% and 3%, respectively, in accordance with enterprise income tax laws applicable.
Pursuant to the relevant income tax laws in the PRC, the applicable state and local income tax
rates were reduced to 15% and 1.5%, respectively. As a result, the effective enterprise income tax
rate for Ningbo Yuming and Ningbo Ruixing was 16.5% for the years ended December 31, 2005, 2004 and
2003.
Xing Yuan Dong and Dongxing Automotive are subject to state and local income taxes in the PRC at
standard rates of 30% and 3%, respectively, in accordance with enterprise income tax laws
applicable. Xing Yuan Dong and Dongxing Automotive received official designation by the local tax
authority as a "New and Technologically-Advanced Enterprise" and a foreign-invested enterprise
engaged in manufacturing activities. As a result, the effective enterprise income tax rates for
Xing Yuan Dong and Dongxing Automotive were 16.5%, 16.5% and 7.5% for the years ended December 31,
2005, 2004 and 2003, respectively.
Mianyang Ruian is subject to state and local income taxes in the PRC at standard rates of 30% and
3%, respectively, in accordance with enterprise income tax laws applicable. During 2001, Mianyang
Ruian received official designation by the local tax authority as a foreign-invested enterprise
engaged in manufacturing activities. In 2004, Mianyang Ruian was also designated as an "encouraged
industries under Catalogue for the Guidance of Foreign Investment Industries" and located in the
Western area of the PRC. As a result, the applicable state income tax rate for Mianyang Ruian is
15% from 2004 to 2010. In addition, Mianyang Ruian is also exempted from state and local enterprise
income taxes for two years starting from the first profitable year in 2001 followed by a 50%
reduction of enterprise income tax for the next three years. Mianyang Ruian is also exempted from
local enterprise income tax for the same five-year period. As a result, the effective tax rate for
Mianyang Ruian was 7.5%, 7.5% and 15% for the years ended December 31, 2005, 2004 and 2003,
respectively.
Shenyang ChenFa is subject to state and local income taxes in the PRC at standard rates of 30% and
3%, respectively, in accordance with enterprise income tax laws applicable. In the current year,
Shenyang ChenFa received official designation by the local tax authority as a foreign-invested
enterprise engaged in manufacturing activities and is confirmed by the local tax authority that it
is exempted from state enterprise income tax for the two years starting from the first profitable
year in 2004 followed by a 50% reduction of state enterprise income tax for the next three years.
In addition, Shenyang ChenFa is also exempted from local enterprise income tax for the same
five-year period. As a result, the effective tax rate for Shenyang ChenFa was 0% for the years
ended December 31, 2005 and 2004.
Other principal subsidiaries operating in the PRC are subject to state and local income taxes in
the PRC at standard rates of 30% and 3%, respectively, based on the respective taxable income
reported in their statutory financial statements in accordance with the relevant state and local
income tax laws applicable to foreign-invested enterprises.
Value Added Tax ("VAT") and Consumption Tax
The general VAT rate applicable to sales and purchases of minibuses, sedans and automotive
components in the PRC is 17%.
F-16
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Sale of minibuses and sedans is also subject to consumption tax at standard rates of 5% to 8%.
(l) Deferred taxation
Deferred income taxes are provided using the liability method in which deferred income taxes are
recognized for temporary differences between the tax and financial statement bases of assets and
liabilities. The tax consequences of those differences expected to occur in subsequent years are
recorded as assets and liabilities on the balance sheet.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of, the deferred tax assets will not be realized.
(m) Foreign currency translation
The functional currency of the Company and its subsidiaries is RMB. Transactions denominated in
foreign currencies are translated into RMB at exchange rates prevailing at the date of
transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated
into RMB at exchange rates prevailing at the balance sheet dates. The resulting exchange
differences are included in the determination of income. Non-monetary assets and liabilities
denominated in foreign currencies are translated into RMB using the applicable exchange rates
prevailing at the time of transaction.
Foreign currency translation adjustments in other comprehensive income arose from the Company's
change in functional currency in previous years.
(n) Warranty
A provision is recognized when an enterprise has a present obligation (legal or constructive) as a
result of a past event and it is probable (i.e. more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a reliable estimate can
be made of the amount of the obligations. Provisions are reviewed at each balance sheet date and
adjusted to reflect the current best estimate. Where the effect of the time value of money is
material, the amount of a provision is the present value of the expenditures expected to be
required to settle the obligation.
Shenyang Automotive's minibuses are sold with a 24-month or 50,000 kilometers (2004 and 2003: same)
first-to-occur limited warranty. The "Zhonghua" sedans are sold with a 36-month or 60,000
kilometers (2004 and 2003: same) first-to-occur limited warranty. "Zunchi" sedans are sold with a
10-year or 200,000 kilometers (2004 and 2003: N/A) first-to-occur limited warranty. During the
warranty period, Shenyang Automotive pays service stations for parts and labor covered by the
warranty.
The costs of the warranty obligation are accrued at the time the sales are recognized, based on the
estimated costs of fulfilling the total obligations, including handling and transportation costs.
The factors used to estimate warranty expenses are reevaluated periodically in light of actual
experience.
The reconciliation of the changes in the warranty obligation is as follows:
2005
2004
RMB'000
RMB'000
Balance as of January 1
21,058
23,643
Accrual for warranties issued during the year
32,396
45,088
Settlement made during the year
(30,994
)
(47,673
)
Balance as of December 31
22,460
21,058
F-17
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(o) Advertising expenses
Advertising expenses are expended as incurred. For the years ended December 31, 2005, 2004 and
2003, advertising expenses of approximately RMB177.0 million, RMB206.9 million and RMB201.1
million, respectively, have been charged to selling, general and administrative expenses.
(p) Research and development expenses
Research and development expenses are expended as incurred. For the years ended December 31, 2005,
2004 and 2003, research and development expenses of approximately RMB235.2 million, RMB479.9
million and RMB191.4 million, respectively, have been charged to selling, general and
administrative expenses.
(q) Operating leases
Leases where substantially all the rewards and risks of ownership remain with the lessor are
accounted for as operating leases. Payment made under operating leases net of any incentives
received from the lessor are charged to the income statement on a straight-line basis over the
period of the relevant leases.
Assets leased out under operating leases are included in property, plant and equipment in the
balance sheet. They are depreciated over the expected useful lives on a basis consistent with
similar owned fixed assets. Rental income (net of any incentives given to lessees) is recognized on
a straight-line basis over the lease terms.
(r) Stock based compensation
The Company accounts for stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to
Employee", which states that compensation expense related to employee stock options is recorded if,
on the date of grant, the quoted market value of the underlying stock exceeds the exercise price.
The Company adopted the disclosure-only requirements of SFAS No. 123 "Accounting for Stock-Based
Compensation" and the related amendments under the provisions of SFAS No. 148 "Accounting for
Stock-Based Compensation, Transition and Disclosure" which allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro-forma net income or loss and pro-forma earnings or
loss per share disclosures for employee stock grants as if the fair-value-based method of
accounting as prescribed in SFAS No. 123 and SFAS No. 148 was adopted. No stock options have been
granted by the Company under the Plan during the year 2005 and 2004.
Had compensation cost for the Company's stock options granted been determined based on the fair
value of the stock options at the grant date, consistent with the provisions of SFAS No. 123 and
SFAS No. 148, the Company's net income and earnings per share for the year ended December 31, 2003
would have been adjusted to the pro-forma amounts indicated below:
F-18
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Year ended December 31, 2003
RMB'000
Net income as reported
780,842
Add: Adjustments for APB Opinion No. 25
173,213
Less: Fair value of stock options
(210,711
)
Pro-forma net income
743,344
Basic earnings per ADS:
As reported
21.30
Pro-forma
20.27
Diluted earnings per ADS:
As reported
21.16
Pro-forma
20.15
Basic earnings per share:
As reported
0.2130
Pro-forma
0.2027
Diluted earnings per share:
As reported
0.2116
Pro-forma
0.2015
(s) (Loss) earnings per share and (loss) earnings per ADS
The calculation of basic (loss) earnings per share is based on the net (loss) income for the year
and the weighted average number of shares of common stock outstanding during the year.
The calculation of diluted (loss) earnings per share is based on the net (loss) income for the year
and the weighted average number of shares of common stock and adjusted for the effects of all
dilutive potential shares of common stock outstanding during the year.
A reconciliation of the net (loss) income used in calculation of basic and diluted (loss) earnings
per share/ADS is as follows:
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Net (loss) income during the year
(671,289
)
1,214
780,842
Add: accreted redemption premium related to the convertible bonds
—
—
1,187
Amortization of deferred expenses
—
—
1,486
Net (loss) income during the year adjusted for accreted
redemption premium related to the convertible bonds and
amortization of deferred expenses
(671,289
)
1,214
783,515
F-19
Table of Contents
Notes to Consolidated Financial Statements (Continued)
A reconciliation of the weighted average number of shares of common stock used in calculation of
basic and diluted (loss) earnings per share is as follows:
Year ended December 31,
2005
2004
2003
Weighted average number of shares
of common stock used in calculation
of basic (loss) earnings per share
3,668,390,900
3,668,390,900
3,666,539,983
Dilutive effect of stock options
—
15,405,068
3,338,970
Dilutive effect of convertible bonds
—
—
32,519,357
Weighted average number of shares
of common stock adjusted for
dilutive effect of stock options
and convertible bonds used in
calculation of diluted (loss)
earnings per share
3,668,390,900
3,683,795,968
3,702,398,310
As the Company was in loss position for 2005, 336,956,522 and 6,258,959 potentially dilutive stocks
for the year ended December 31, 2005 from conversion of the convertible bonds and outstanding share
options respectively, were excluded from the calculation of diluted loss per share because to do so
would be anti-dilutive.
The diluted earnings per share/ADS calculation for the year ended December 31, 2004 is based on
weighted average number of common stocks/ADSs outstanding plus the weighted average number of
shares/ADSs deemed to be issued as if all outstanding share options granted had been exercised.
For the year ended December 2004, 336,956,522 potentially dilutive stocks from conversion of the
convertible bonds were not included in the computation of diluted earnings per share because the
effect would have been anti-dilutive.
The diluted earnings per share/ADS calculation for the year ended December 31, 2003 includes the
impact of shares that would result from the conversion of convertible bonds. In addition, the
related accreted redemption premium on convertible bonds is added back to net income, since these
would not be paid if the bonds were converted to shares.
The calculation of (loss) earnings per ADS is based on the weighted average number of ADSs
outstanding during the years presented. The weighted average number of ADS outstanding is
calculated based on the assumption that all of the outstanding ordinary shares were held in the
form of ADSs (at the ratio of 100 shares for each ADS).
F-20
Table of Contents
Notes to Consolidated Financial Statements (Continued)
A reconciliation of the weighted average number of ADSs for calculation of basic and diluted (loss)
earnings per ADS is as follows:
Year ended December 31,
2005
2004
2003
Weighted average number of ADSs
used in calculation of basic (loss)
earnings per ADS
36,683,909
36,683,909
36,665,400
Dilutive effect of stock options
—
154,051
33,390
Dilutive effect of convertible bonds
—
—
325,193
Weighted average number of ADSs
adjusted for dilutive effect of
stock options and convertible bonds
used in calculation of diluted
(loss) earnings per ADS
36,683,909
36,837,960
37,023,983
(t) Segmental information
Segmental information is presented in accordance with SFAS No. 131 "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for reporting information about
operating segments on a basis consistent with the Company's internal organization structure as well
as information about geographic areas and major customers. Disclosure of segmental information in
accordance with SFAS No. 131 is made in Note 30.
(u) Comprehensive income
SFAS No. 130 "Reporting Comprehensive Income" requires the components of comprehensive income to be
disclosed in the financial statements. Comprehensive income consists of net income, the net
unrealized gains or losses on available-for-sale marketable securities, foreign currency
translation adjustments, minimum pension liability adjustments and unrealized gains and losses on
financial instruments qualifying for hedge accounting. For the Group, such items consist primarily
of unrealized gains and losses on marketable equity investments and foreign currency translation
adjustments. The Group has disclosed comprehensive income, which encompasses net (loss) income in
the statement of income and comprehensive income.
There was no other comprehensive income or loss for the year ended December 31, 2003 other than net
income for the year.
(v) Convertible bonds
Convertible bonds were issued at par and are stated in the balance sheet at face value plus
accreted redemption premium which was calculated based on the outstanding principal of the
convertible bonds using effective interest method so that the carrying value of the bonds equal the
redemption price at 102.27% on November 28, 2006. Direct expenses in connection with the issuance
of convertible bonds are capitalized as deferred expenses on the balance sheet and are amortized
over the life of the convertible bonds.
(w) Guarantees
Guarantee issued by the Group are initially recognized on the balance sheet as a liability at the
fair value, or market value, of the obligations the Group assumed under that guarantee in
accordance with FASB FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others". FIN 45 is applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. FIN 45 also contains disclosure
provisions surrounding existing guarantees, which are effective for financial statements with
periods ended after December 15, 2002. As of December 31,
2005 and 2004, the fair values of the guarantees the Group have entered into since December 31, 2002 are
not material to the Group's financial position. Please refer to Notes 3(n) and 21(c) for details.
F-21
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(x) Allowance for doubtful accounts
Accounts receivable are stated at the amount billed to customers. The Group recognizes allowance
for doubtful accounts to ensure trade and other receivables are not overstated due to
uncollectibility. The Group's estimate is based on a variety of factors, including historical
collection experience, existing economic conditions and a review of the current status of the
receivable. Accounts past due more than the Group's general credit period are considered
delinquent. Delinquent receivables are written off based on individual credit evaluation and
specific circumstances of the customer.
(y) Fair value of financial instruments
The estimated fair values for financial instruments under SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments", are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of the Group's financial instruments, which include cash, accounts
receivable, intercompany receivables and payables and other payables, approximate their carrying
values in the financial statements.
(z) Other new accounting pronouncements
In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets — An
Amendment of FASB Statement No. 140" ("SFAS") No. 156. SFAS No. 156 requires that all separately
recognized servicing assets and servicing liabilities be initially measured at fair value, if
practicable. The statement permits, but does not require, the subsequent measurement of servicing
assets and servicing liabilities at fair value. SFAS No. 156 is effective as of the beginning of an
entity's first fiscal year that begins after September 15, 2006, which for the Group will be as of
the beginning of fiscal 2007. The Company does not believe that the adoption of SFAS No. 156 will
have a significant effect on its financial statements.
In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial
Instruments." SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require bifurcation. As of March 2, 2006,
the Company did not have any hybrid financial instruments subject to the fair value election under
SFAS No. 155. The Group is required to adopt SFAS No. 155 effective at the beginning of 2008.
In November 2005, the FASB issued Staff Position (FSP) FAS115-1 and FAS 124-1, which nullifies
certain provisions of EITF Issue 03-1, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments", and completely supersedes EITF Topic D-44, "Recognition of
Other Than Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value",
addresses (1) determining when an investment should be considered impaired, (2) determining whether
an impairment should be deemed other than temporary, and (3) measuring impairment loss. Combined
FSP Nos. FAS 115-1 and FAS 124-1 were applied as discussed in Notes 3(j) and 14 to the Group's
consolidated financial statements.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." SFAS No. 154
changes the requirements for the accounting for and reporting of a change in accounting principle.
The Group is required to adopt SFAS No. 154 for accounting changes and error corrections that occur
after the beginning of 2007. The Group's results of operations and financial condition will only be
impacted following the adoption of SFAS No. 154 if it implements changes in accounting principle
that are addressed by the standard or corrects accounting errors in future periods.
F-22
Table of Contents
Notes to Consolidated Financial Statements (Continued)
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share Based Payment" (SFAS 123(R)).
SFAS 123(R) is a revision of SFAS No. 123, "Accounting for
Stock-Based Compensation," which supersedes Accounting Principles Board (APB) No. 25, "Accounting for Stock Issued to Employees,"
and amends SFAS No. 95, "Statement of Cash Flows." SFAS 123(R) requires companies to recognize
compensation expense in the income statement for an amount equal to the fair value of the
share-based payment issued. This applies to all transactions involving the issuance of equity by a
company in exchange for goods and services, including employees. In March 2005, the SEC issued
Staff Accounting Bulletin No. 107 (SAB 107) outlining the SEC Staff's interpretation of SFAS
123(R). This interpretation provides their views regarding interactions between SFAS 123(R) and
certain SEC rules and regulations and provides interpretations of the valuation of share-based
payments for public companies. Subsequently in August, October and November 2005, the FASB released
FSP 123(R)-1, "Classification and Measurement of Freestanding Financial Instruments Originally
Issued in Exchange for Employee Services under FASB Statement No. 123(R)," FSP123(R)-2, "Practical
Accommodation to the Application of Grant Date as Defined in FASB Statement No. 123(R)" and FSP
123(R)-3, "Transition Election Related to Accounting for the Tax Effects of Share-Based Payment
Awards." Additionally, on February 1, 2006, the FASB issued FSP 123(R)-4, "Classification of
Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon
the Occurrence of a Contingent Event." The FSPs clarify certain accounting provisions set forth in
SFAS 123(R). The requirements and guidance prescribed in SFAS 123(R), SAB 107 and the FSPs is
effective in 2006. The Group considers that the adoption of SFAS 123R will not have significant
impact on its financial statements.
4. SUBSIDY INCOME
For the years ended December 2005 and 2004, the Company's subsidiaries were granted government
subsidies of RMB3,139,000 and RMB1,815,000 respectively. For the year ended December 31, 2003, the
Company was granted subsidies in the form of "tax refunds on re-investments" amounting to
approximately RMB48,497,000 in relation to the Company's re-investment of the dividends declared by
certain subsidiaries of the Company to those subsidiaries as additional capital contributions by
foreign investors. Such subsidies were approved by the relevant local tax bureaus in accordance
with the relevant income tax laws in the PRC. All of the approved subsidies were received by the
Group during the year and were recorded as income.
5. INCOME TAXES
For the years ended December 31, 2005, 2004 and 2003, certain of the Company's subsidiaries were
subject to income taxes in the PRC at the applicable statutory tax rates on allowable losses or
taxable income as reported in the statutory financial statements adjusted for the reduced tax rates
and exemptions described in Note 3(k).
The amount of (provision) benefit for income taxes in the consolidated income statement represents:
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Current taxation
12,121
(11,340
)
(145,654
)
Deferred taxation
(114,005
)
74,450
1,514
(101,884
)
63,110
(144,140
)
F-23
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The reconciliation of the Group's effective income tax rate, based on (loss) income before taxes
and minority interests, to its statutory income tax rate for years ended December 31, 2005, 2004
and 2003 is as follows:
Year ended December 31,
2005
2004
2003
%
%
%
Average statutory tax rate (including state and local income tax)
10.25
17.44
21.71
Effect of statutory tax holiday
3.07
15.44
(12.66
)
Effect of non-deductible expenses
(2.62
)
(5.38
)
3.29
Effect of valuation allowances
(22.93
)
(15.06
)
(2.11
)
Others, not individually significant
3.71
(0.46
)
2.94
Effective tax rate
(8.52
)
11.98
13.17
The average statutory tax rates for the relevant periods represented the weighted average tax rates
of the Company's subsidiaries calculated on the basis of the relative amount of (loss) income
before taxes and the applicable statutory tax rate of each subsidiary.
Components of deferred tax assets were as follows:
As of December 31,
2005
2004
RMB'000
RMB'000
Deferred tax asset:
Research and development costs
57,519
45,683
Provisions and accruals
46,488
47,633
Provision for impairment of property, plant and equipment
7,619
2,751
Amortization and provision for impairment of intangible assets
102,436
58,942
Tax losses carry forward
185,868
61,460
399,930
216,469
Valuation allowance (Note)
(399,930
)
(102,464
)
Net deferred tax assets
—
114,005
Note:
At December 31, 2005, valuation allowances of approximately RMB185.9 million (2004: RMB61.5
million) and RMB214 million (2004: RMB41 million) were made for deferred tax assets recognized in
respect of the unused tax losses and deductible temporary differences because it is more likely
than not that the tax benefit will be not be realized in the foreseeable future. The net change in
valuation allowances for the year ended December 31, 2005 of approximately RMB297.4 million (2004:
RMB79.4 million) represented valuation allowances provision of approximately RMB114 million (2004:
Nil) made for deferred tax assets previously recognized with reference to a forecast of taxable
profits of a subsidiary for next five years and the increase in deferred tax assets of
approximately RMB183.4 million (2004: RMB79.4 million). The temporary differences do not expire
under current legislation but the unrecognized tax losses of RMB565.9 million (2004: RMB409.7
million) and RMB673.2 million (2004: Nil) will expire in 2009 and 2010, respectively.
F-24
Table of Contents
Notes to Consolidated Financial Statements (Continued)
6.
PLEDGED SHORT-TERM BANK DEPOSITS
As of December 31, 2005 and 2004, approximately RMB1,932.6 million and RMB2,777.2 million,
respectively, of the short-term bank deposits were pledged as security for banking facilities,
corporate guarantees for bank loans drawn by affiliated companies and bank guaranteed notes issued
(Notes 19 and 21).
7.
ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of:
As of December 31,
2005
2004
RMB'000
RMB'000
Accounts receivable
173,325
103,350
Less: Allowance for doubtful debts
(48,367
)
(47,718
)
124,958
55,632
Movements of allowance for doubtful debts during the years ended December 31, 2005 and 2004 were:
2005
2004
RMB'000
RMB'000
Balance as of January 1
47,718
46,272
Additional provision
1,177
2,526
Write-back of provision
(528
)
(1,000
)
Written off against accounts receivable
—
(80
)
Balance as of December 31
48,367
47,718
8.
NOTES RECEIVABLE
Notes receivable are primarily notes received from customers for the settlement of trade receivable
balances. As of December 31, 2005 and 2004, all notes receivable were guaranteed by established
banks in the PRC and have maturities of six months or less. The fair value of the notes receivable
approximated their carrying value. Approximately RMB238 million (2004: RMB614 million) of the notes
receivable both from third parties and affiliated companies were pledged for the issuance of notes
payable (Note 19).
9.
OTHER RECEIVABLES
Included in other receivables as of December 31, 2005 and 2004 was an amount of RMB300 million
advanced to Shenyang Automobile Industry Asset Management Company Limited ("SAIAM") which will
become a subsidiary of the Group after the completion of the proposed acquisition of SAIAM as
detailed in Note 16.
F-25
Table of Contents
Notes to Consolidated Financial Statements (Continued)
10.
INVENTORIES, NET
As of December 31,
2005
2004
RMB'000
RMB'000
Inventories consist of:
Raw materials
564,596
888,378
Work-in-progress
64,025
97,362
Finished goods
418,197
591,308
1,046,818
1,577,048
11.
PROPERTY, PLANT AND EQUIPMENT AND LONG-TERM LAND LEASE PREPAYMENTS
Property, plant and equipment consist of:
As of December 31,
2005
2004
RMB'000
RMB'000
Buildings
1,260,101
1,126,073
Machineries and equipment
4,136,064
3,450,089
Motor vehicles
117,497
101,715
Furniture, fixtures and office equipment
382,017
390,197
Construction-in-progress
454,591
789,145
6,350,270
5,857,219
Less: Accumulated provision for impairment losses
(95,868
)
(47,949
)
6,254,402
5,809,270
Less: Accumulated depreciation
(1,891,640
)
(1,513,694
)
Net book value
4,362,762
4,295,576
(a)
During the years ended December 31, 2005, 2004 and 2003, capitalized interest expenses
amounted to approximately RMB23.9 million, RMB18.4 million and RMB Nil, respectively.
(b)
Buildings amounting to approximately RMB41,022,000 and long-term land lease prepayments
amounting to approximately RMB64,405,000 were injected by Shenyang JinBei Automotive Company
Limited ("JinBei"), the joint venture partner of Shenyang Automotive, as part of its
additional capital contributions to Shenyang Automotive during the year ended December 31,
2003 (see Note 28).
F-26
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(c)
In December 2003, Shenyang Automotive disposed of certain machineries and equipment at their
net book value to the Group's jointly controlled entity, BMW Brilliance Automotive Ltd ("BMW
Brilliance"), at a consideration mutually agreed by both parties. The agreement of sale
includes an option for BMW Brilliance to require Shenyang Automotive to purchase back such
machineries and equipment at the purchase price less depreciation over a specified period upon the occurrence
of certain events, including the passing of a valid resolution pursuant to the joint venture
contract by the board of directors of BMW Brilliance. These machineries and equipment are
maintained and operated by BMW Brilliance for the manufacturing of its products. BMW
Brilliance will provide certain services to Shenyang Automotive upon the payment of a service
fee which is determined based on the number of Zhonghua sedans produced by Shenyang Automotive
using these machineries and equipment at a predetermined formulated unit charge. As of the
date of approval of 2005 financial statements, the basis of service fees has not yet been
finalized and service fees of approximately RMB308,283,000, RMB196,125,000 and RMB17,438,000
have been accrued as of December 31, 2005, 2004 and 2003, respectively.
(d)
In 2003, Shenyang Automotive transferred the legal titles and ownership of certain buildings
at their net book value to BMW Brilliance and entered into an agreement with BMW Brilliance to
lease-back a substantial portion of the buildings. The agreement of sale includes an option
for BMW Brilliance to require Shenyang Automotive to purchase back such buildings at the
purchase price less depreciation upon the occurrence of certain events, including the passing
of a valid resolution pursuant to the joint venture contract by the board of directors of BMW
Brilliance. For financial reporting purposes, as of December 31, 2005 and 2004, the net book
value of the buildings, amounting to approximately RMB142,556,000 and RMB150,763,000,
respectively, were retained as assets on the balance sheet of the Group and the portion of
consideration received from BMW Brilliance up to December 31, 2005 and 2004, amounting to
approximately RMB74,605,000, was treated as a financing and will be partially offset against
the lease rental payable in future years. The remaining balance of approximately RMB99,768,000
(2004: RMB99,768,000) will be received from BMW Brilliance and will be accounted for as
additional financing.
(e)
As a result of the retirement from use and the change in use — from production to rental — of
certain property, plant and equipment of the Group's minibus and automotive components
segment, the Group assessed the recoverability of the carrying value of these long-lived
assets, which resulted in impairment losses of approximately RMB48.3 million, RMB10.0 million
and RMB6.0 million for the years ended December 31, 2005, 2004 and 2003 respectively. These
losses reflect the amounts by which the carrying values of these assets exceeded their
estimated fair values determined by their estimated discounted future cash flows. The
impairment loss was recorded as a component of "Selling, general and administrative expenses"
in the Consolidated Statement of Income and Comprehensive Income for the years.
12.
INTANGIBLE ASSETS
As of December 31,
2005
2004
RMB'000
RMB'000
Cost
Beginning of year
1,512,342
1,504,337
Additions
9,380
8,005
End of year
1,521,722
1,512,342
Accumulated amortization
Beginning of year
(509,902
)
(283,861
)
Amortization for the year
(204,009
)
(226,041
)
End of year
(713,911
)
(509,902
)
Accumulated impairment
Beginning of year
(50,000
)
—
Impairment loss provision for
the year
(173,000
)
(50,000
)
End of year
(223,000
)
(50,000
)
Net book value
End of year
584,811
952,440
Beginning of year
952,440
1,220,476
F-27
Table of Contents
Notes to Consolidated Financial Statements (Continued)
There was a group of intangible assets that were similar in their use in the operations of the
Group as they related to a specific model of Zhonghua sedans. The Group assessed the future
economic benefit of this group as a whole based on net future cash flow from the manufacture and
sale of that specific model of Zhonghua sedans. Included in the group of intangible assets were
primarily:
(a)
Sedan design rights, which include rights, titles and interests in certain design and
engineering agreements and a technical assistance agreement related to Zhonghua sedans; and
(b)
Components and parts technology rights, which include rights, titles and interests in the
design of the components and spare parts for Zhonghua sedans contributed by Shenyang JinBei
Automotive Company Limited ("JinBei"), a joint venture partner, as capital into Shenyang
Brilliance JinBei Automobile Co. Ltd., a subsidiary of the Company in 2003 (see note 28).
Since the operations in the manufacture and sale of Zhonghua sedans had resulted in loss in 2005,
the Group critically assessed the future economic benefit of the intangible assets in relation to
Zhonghua sedans mentioned in (a) to (b) by assessing the net cash inflow the manufacture and sale
of Zhonghua sedans will bring to the Group in the future. Accordingly, for the year ended December
31, 2005 impairment loss provision of RMB173 million (2004: RMB50 million) was provided for these
intangible assets.
For each of the five years ending December 31, 2010, the estimated amortization expense of the
intangible assets in existence as of December 31, 2005 will be approximately RMB171.1 million.
F-28
Table of Contents
Notes to Consolidated Financial Statements (Continued)
13.
INTERESTS IN ASSOCIATED COMPANIES AND JOINTLY CONTROLLED ENTITIES
Interests in associated companies and jointly controlled entities as of December 31, 2005 consist
of:
Percentage of equity
Place of
interest held indirectly
Name of company
establishment
by the Company
Principal activities
Associated companies:
Shenyang Aerospace
Mitsubishi Motors Engine
Manufacturing Co., Ltd.
("Shenyang Aerospace")
Shenyang, the PRC
12.77
%
Manufacture and sale of automotive engines
Chongqing FuHua Automotive
Sales Service Co., Ltd.
("Chongqing Fuhua")
Chongqing, the PRC
29.403
%
Trading of sedans and minibuses
Chongqing Baosheng
Automotive Sale and Service
Co., Ltd. ("Chongqing
Baosheng)
Chongqing, the PRC
29.403
%
Trading of BMW sedans
Jointly controlled entities:
Mianyang Xinchen Engine
Co., Ltd. ("Mianyang
Xinchen")
Mianyang, the PRC
50
%
Manufacture and sale of automotive engines for minibuses and light duty trucks
Shenyang Xinguang
Brilliance Automobile
Engine Co., Ltd. ("Xinguang
Brilliance")
Shenyang, the PRC
50
%
Manufacture and sale of automotive engines for minibuses and light duty trucks
BMW Brilliance Automotive
Ltd. ("BMW Brilliance")
Shenyang, the PRC
49.005
%
Manufacture and sale of BMW sedans
Note:
During the year, two jointly controlled entities, Shenyang HuaBao Automotive Sales Service
Co. Ltd. ("Huabao") and Shanghai Kowin Automobile Company Co., Ltd. ("Kowin") were disposed of.
F-29
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The carrying values of interests in associated companies and jointly controlled entities are:
As of December 31,
2005
2004
RMB'000
RMB'000
Interests in associated companies:
Shenyang Aerospace
349,401
364,158
Chongqing Fuhua
9,709
9,518
Chongqing Baosheng
4,116
3,640
363,226
377,316
Interests in jointly controlled entities:
Mianyang Xinchen
311,102
387,812
Xinguang Brilliance
244,890
447,823
Huabao
—
4,922
BMW Brilliance
601,478
570,375
Kowin
—
4,342
1,157,470
1,415,274
1,520,696
1,792,590
The acquisitions of associated companies and jointly controlled entities have been accounted for
using the purchase method of accounting. The tangible assets were valued in the acquisitions at
their estimated fair values. The excess of the purchase price over the fair values of the net
assets acquired has been accounted for as goodwill. The carrying values of goodwill of the acquired
associated companies and jointly controlled entities, which are included in the carrying amount of
interests in associated companies and jointly controlled entities are as follows:
As of December 31,
2005
2004
RMB'000
RMB'000
Shenyang Aerospace
31,983
31,983
Mianyang Xinchen
91,410
91,410
Xinguang Brilliance
73,343
252,373
196,736
375,766
F-30
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The changes in the carrying amount of equity-method goodwill for the year ended December 31, 2005,
are as follows:
Manufacture and sale of minibuses and
Manufacture and sale of
automotive components
Zhonghua sedans
Total
RMB'000
RMB'000
RMB'000
Balance as of
January 1, 2005
343,783
31,983
375,766
Impairment losses
(179,030
)
—
(179,030
)
Balance as of
December 31, 2005
164,753
31,983
196,736
At of December 31, 2005, the Group recorded an impairment charge of RMB179.0 million (2004: RMB47.3
million) for equity method goodwill associated with its minibuses and automotive components
operations due to lower than expected projected operating profits and cash flows. The fair value of
the equity method investments was estimated using the expected present value of future cash flows.
The equity shares in the income (loss) of the associated companies and jointly controlled entities
for the years ended December 31, 2005 and 2004 were:
Year ended December 31,
2005
2004
RMB'000
RMB'000
Associated companies:
Shenyang Aerospace
28,386
57,854
Chongqing Fuhua
192
(8
)
Chongqing Baosheng
477
(860
)
29,055
56,986
Jointly controlled entities:
Mianyang Xinchen
1,978
33,331
Xinguang Brilliance
(13,296
)
17,173
Huabao
—
(2,334
)
BMW Brilliance
31,582
21,764
Kowin
(324
)
(659
)
19,940
69,275
48,995
126,261
F-31
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Combined unaudited financial information of the associated companies is summarized as follows:
Year ended December 31,
2005
2004
RMB'000
RMB'000
Revenue
1,807,849
2,221,460
Profit before taxation, net
147,361
296,835
Net income
131,955
272,213
As of December 31,
2005
2004
RMB'000
RMB'000
Current assets
908,750
1,135,531
Non-current assets
2,020,235
1,509,527
Total assets
2,928,985
2,645,058
Current liabilities
(940,641
)
(743,600
)
Long-term liabilities
(470,967
)
(396,927
)
Total liabilities
(1,411,608
)
(1,140,527
)
Total shareholders' equity
1,517,377
1,504,531
Combined unaudited financial information of the jointly controlled entities is summarized as
follows:
Year ended December 31,
2005
2004
RMB'000
RMB'000
Revenue
6,597,047
5,070,023
Profit before taxation, net
23,277
135,455
Net income
23,277
128,882
As of December 31,
2005
2004
RMB'000
RMB'000
Current assets
3,983,194
6,686,994
Non-current assets
1,727,924
1,277,418
Total assets
5,711,118
7,964,412
Current liabilities
(3,579,826
)
(5,934,842
)
Long-term liabilities
(420,000
)
(320,000
)
Total liabilities
(3,999,826
)
(6,254,842
)
Total shareholders' equity
1,711,292
1,709,570
F-32
Table of Contents
Notes to Consolidated Financial Statements (Continued)
14.
INVESTMENT SECURITIES
The aggregate cost, gross unrealized gain and fair value pertaining to available-for-sale
securities are as follows:
As of December 31,
2005
2004
RMB'000
RMB'000
Available-for-sale securities
17,305
17,305
Gross unrealized gain
28,468
28,468
Gross unrealized loss
(27,227
)
—
18,546
45,773
Unlisted securities at cost
4,138
4,138
22,684
49,911
The change in net unrealized gain reported as a separate component of accumulated other
comprehensive income was RMB1.2 million and RMB28.5 million as of December 31, 2005 and 2004,
respectively. At December 31, 2005, the Group determined that the decline in value of securities
with unrealized losses shown in the above table is not other-than-temporary in nature.
Investments with an aggregate cost of RMB4.1 million (2004: RMB4.1 million) were not evaluated for
impairment because (a) the Group did not estimate the fair value of those investments in accordance
with paragraphs 14 and 15 of SFAS No. 107 and (b) the Group did not identify any events or changes
in circumstances that may have had a significant adverse effect on the fair value of those
investments.
F-33
Table of Contents
Notes to Consolidated Financial Statements (Continued)
15.
GOODWILL
The changes in the carrying amount of goodwill associated with the manufacture and sale of
minibuses and automotive components operations for the year ended December 31, 2005, were as
follows:
RMB'000
Balance as of January 1, 2005
418,400
Impairment losses
(78,690
)
Balance as of December 31, 2005
339,710
At of December 31, 2005, the Group recorded an impairment charge of RMB79 million (2004: Nil) for
goodwill associated with its manufacture and sale of minibuses and automotive components operations
due to lower than expected projected operating profits and cash flows. The fair value of that
reporting unit was estimated using the expected present value of future cash flows.
16.
PREPAYMENT FOR A LONG-TERM INVESTMENT
On December 29, 2003, SJAI (a 98.01% indirectly-owned subsidiary of the Company) and SXID (a 99.0%
indirectly-owned subsidiary of the Company) entered into agreements with the respective sellers in
relation to the acquisition of the entire equity interests of Shenyang Automobile Industry Asset
Management Company Limited ("SAIAM") and Shenyang XinJinBei Investment Co., Ltd. ("SXI"),
respectively. SAIAM is interested in 29.9% and SXI interested in 11% of the equity interest in
Shenyang JinBei Automotive Company Limited ("JinBei"), a company listed on the Shanghai Stock
Exchange. The consideration for the acquisitions was RMB600 million and was determined after arm's
length negotiations between the parties taking into account the respective financial position of
SAIAM and SXI.
Although the acquisition has approved by State-Owned Assets Supervision and Administration
Commission of Liaoning Provincial Government and State-owned Assets Supervision and Administration
Commission of the State Council of the PRC, the transfer of the entire interest of SAIAM and SXI is
subject to the granting of a waiver to SXID and SJAI from making an offer for all of the shares of
JinBei under the Regulation on Acquisitions of Listed Companies by the China Securities Regulatory
Commission. Upon completion of the acquisitions, the Group will be effectively interested in an
aggregate of approximately 40.13% of the equity interests of JinBei.
At December 31, 2005 and 2004, the consideration RMB600 million paid to the shareholders of SAIAM
and SXI and the amount was recorded as prepayments for a long-term investment by the Group. The
directors have assessed the fair value of the underlying shares in JinBei and are satisfied that
the carrying amount of the prepayments is supported by the fair value of the underlying shares by
reference to a valuation conducted by an investment bank.
F-34
Table of Contents
Notes to Consolidated Financial Statements (Continued)
17.
DEFERRED EXPENSES
As of December 31,
2005
2004
RMB'000
RMB'000
Direct expenses incurred in connection
with the issuance of convertible bonds
(Note 18)
44,599
44,599
Amortization of deferred expenses
(19,326
)
(10,406
)
25,273
34,193
Non-current portion
16,353
25,273
Current portion
8,920
8,920
25,273
34,193
18.
CONVERTIBLE BONDS
As of December 31,
2005
2004
RMB'000
RMB'000
Convertible bonds issued at par
1,654,300
1,654,300
Accreted redemption premium
26,008
13,588
Exchange gain
(40,758
)
—
1,639,550
1,667,888
On November 28, 2003, the Company, through its wholly owned subsidiary, Brilliance China Automotive
Finance Ltd., issued Zero Coupon Guaranteed Convertible Bonds due 2008 (the "Bonds") with principal
amount of US$200,000,000 (equivalent to approximately RMB1,654.3 million). The Bonds are listed on
the Luxembourg Stock Exchange.
The Bonds are convertible into fully paid common stocks of US$0.01 each of the Company at an
initial conversion price of HK$4.60 per share and the total potential number of shares was
336,956,522, subject to the following two events, at any time on or after January 8, 2004, and up to and including November
14, 2008, unless the Bonds previously have been redeemed or previously have matured.
(i)
The Bonds will mature on November 28, 2008. At any time from November 28, 2005 through
November 14, 2008, all, or from time to time, some of the aggregate outstanding principal
amount of the Bonds is redeemable at the option of Brilliance China Automotive Finance Ltd. at
the early redemption amount if the closing price of the shares on the SEHK for each of the
last 20 consecutive trading days has been at least 130% of the conversion price or if at least
90% in principal amount of the Bonds has been converted, redeemed or purchased and cancelled.
Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed
at 100% of their outstanding principal amount on November 28, 2008.
(ii)
All or some of the Bonds may be redeemed at the option of the relevant holder on November 28,
2006 at 102.27% of their principal amount. The Bonds may also be redeemed, in whole or in
part, at the option of the holders at the Early Redemption Amount (2.27% of principal amount)
on the occurrence of a change of control of the Company. The Bonds may also be redeemed at the
option of the holders if the shares of the Company cease to be listed or admitted for trading
on the SEHK.
As of December 31, 2005, none of the Bonds had been converted into the common stock of the Company.
F-35
Table of Contents
Notes to Consolidated Financial Statements (Continued)
19.
NOTES PAYABLE
As of December 31, 2005, approximately RMB2,703 million (2004: RMB4,874 million) of notes payable
had effective interest rates of 3% to 4%, the remaining RMB324 million (2004: RMB853 million) of
notes payable were interest free. All notes payable were guaranteed by banks, repayable within one
year, secured by short-term bank deposits of approximately RMB1,450 million (2004: RMB2,375
million) and bank guaranteed notes received from third parties and affiliated companies of
approximately RMB238 million (2004: RMB614 million).
20.
TAXES PAYABLE
Taxes payable consist of:
As of December 31,
2005
2004
RMB'000
RMB'000
Income tax payable
14,309
43,974
VAT payable
47,087
13,249
Others
70,608
29,142
Other taxes payable
117,695
42,391
132,004
86,365
21.
COMMITMENTS AND CONTINGENCIES
(a)
Commitments
As of December 31, 2005, the Group had approximately RMB1,781.0 million in outstanding capital and
purchases commitments of which certain items are denominated in Deutsch Marks, Japanese Yen, U.S.
Dollars and Euros. The amount included contracted but not provided for capital commitment for
construction projects, purchase of equipment, and others amounting to approximately RMB248.3
million and authorized but not contracted for capital commitment amounting to approximately
RMB1,532.7 million.
F-36
Table of Contents
Notes to Consolidated Financial Statements (Continued)
As of December 31, 2005, the future aggregate minimum lease payments under non-cancellable
operating leases are detailed as follows:
Operating lease
RMB'000
Within one year
13,501
One to two years
7,840
Two to three years
6,865
Three to four years
4,585
Four to five years
3,706
Over five years
35,944
Total minimum lease payment
72,441
(b) Operating lease income
Operating leases arise from the leases for certain buildings to BMW Brilliance (see also Note
25(f)). The lease terms are generally 180 months.
Depreciation expense for assets subject to operating leases is provided primarily on the
straight-line method over the estimated useful life of the assets. Depreciation expense relating to
the buildings held as investments in operating leases was RMB4.2 million and RMB4.7 million for the
years ended December 31, 2005 and 2004, respectively.
Investments in operating leases are as follows:
As of December 31, 2005
RMB'000
Buildings
97,358
Accumulated depreciation
(10,780
)
Net investment in operating leases
86,578
F-37
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Future minimum rental payments to be received on non-cancellable operating leases are contractually
due as follows:
As of December 31, 2005
RMB'000
Within one year
14,152
One to two years
14,152
Two to three years
14,152
Three to four years
14,152
Four to five years
14,152
Over five years
104,959
Total
175,719
There were no contingent rentals under the respective lease contracts.
(c) Contingent liabilities
(i)
The Group had endorsed or discounted bank notes which were not yet honored by the issuers as
of December 31, 2005 and 2004 amounting to approximately RMB1,128 million and RMB1,345
million, respectively.
(ii)
As of December 31, 2005, the Group had provided the following guarantees:
(1)
Corporate guarantees of approximately RMB120 million (2004: RMB296 million) for
revolving bank loans and notes drawn by affiliated companies of Shanghai Shenhua Holdings
Co., Ltd. ("Shanghai Shenhua"):
The guarantee arose from the mutual negotiation between Shenyang Automotive and Shanghai
Shenhua. Associated with the corporate guarantee, Shanghai Shenhua also provided a cross
guarantee for the bank facilities of Shenyang Automotive. The guarantee was for
revolving activities of Shanghai Shenhua and will be terminated upon mutual agreements
between Shenyang Automotive and Shanghai Shenhua. If Shanghai Shenhua defaults on the
repayment of its bank loans or notes when they fall due, Shenyang Automotive is required
to repay the outstanding balance. There is no recourse or collateralization provision in
the guarantee. As of December 31, 2005, the guarantee provided for the bank loans and
notes drawn by affiliated companies of Shanghai Shenhua was approximately RMB120 million
(2004: RMB296 million), which is also the maximum potential amount of future payments
under the guarantee as of December 31, 2005. However, default by Shanghai Shenhua and
its affiliated companies is considered remote by management and therefore no liability
for the guarantor's obligation under the guarantee existed as of December 31, 2005.
(2)
A joint and several proportional corporate guarantee with a joint venture partner
of Shenyang Aerospace on a long-term bank loan of approximately RMB111 million (2004:
RMB221 million) drawn by Shenyang Aerospace which will expire in 2008:
The guarantee was provided by the Group and a joint venture partner of Shenyang
Aerospace for its long-term loan financing needs during its start-up period. If Shenyang
Aerospace defaults on the repayment of its bank loan when it falls due, the Group and
the joint venture partners are jointly and severally liable to repay the outstanding
balance. There is no recourse or collateralization provision in the
guarantee. As of December 31, 2005, the guarantee provided for the outstanding bank loan of Shenyang Aerospace was RMB111 million (2004:
RMB221 million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2005. However, default by Shenyang Aerospace is considered
remote by management and therefore no liability for the guarantor's obligation under the
guarantee existed as of December 31, 2005.
(3)
Corporate guarantees of bank loans amounting to RMB295 million (2004: RMB100
million), which is also the maximum potential amount of future payments under the
guarantee as of December 31, 2005, drawn by JinBei. Bank deposits of RMB311 million
(2004: RMB102 million) were pledged as a collateral for the corporate guarantees.
However, default by JinBei is considered remote by management and therefore no liability
for the guarantor's obligation under the guarantee existed as of December 31, 2005.
F-38
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(iii)
On January 21, 2003, a writ dated January 21, 2003 (the "Writ") brought by Broadsino Finance
Company Limited ("Broadsino"), as the Plaintiff, was filed with the Supreme Court of Bermuda
(the "Supreme Court") which alleged that the interest of the Chinese Financial Education
Development Foundation (the "Foundation") in 1,446,121,500 shares of the Company (the "Sale
Shares") was held in trust for Broadsino and was improperly transferred to Huachen Automotive
Group Holdings Company Limited ("Huachen").
In the course of legal proceedings with Broadsino, the Company achieved the following:
(i) overturning on February 11, 2003 an ex parte Court Order dated January 22, 2003 which had
restrained the Company from, amongst other things, registering the transfer of the Sale Shares
by the Foundation to Huachen and/or Huachen to certain directors of the Company; (ii)
initiating on March 10, 2003, a Strikeout Summons at the Supreme Court to have the Writ and
the statement of claim struck out, which proceedings were duly heard before the Supreme Court,
and which resulted on December 31, 2003 in that court issuing a judgement to strike-out the
Writ; (iii) challenging Broadsino's attempts for appeal to the Court of Appeal of Bermuda,
Civil Appellant jurisdiction which appeal was then dismissed by that court's judgement of
March 14, 2005 which ruled in the Company's favour; (iv) Broadsino's further attempts for
leave to appeal to the Privy Council in the United Kingdom with respect to the Court of
Appeal's judgement being challenged at all stages by the Company; and (v) Broadsino seeking a
grant of leave on November 10, 2005 in the Court of Appeal in Bermuda to withdraw its leave to
appeal to the Privy Council and the Company being awarded its costs of the leave application.
The directors of the Company do not believe the proceedings with Broadsino will have any
significant impact on the financial position of the Company and of the Group.
(iv)
On or about October 25, 2002, the Company was served with a claim lodged by Mr. Yang Rong
("Mr. Yang") in the Labour Tribunal in Hong Kong against the Company for alleged wrongful
repudiation and/or breach of his employment contract. The claim was for approximately US$4.3
million (equivalent to approximately RMB35.6 million) with respect to loss of salary. In
addition, Mr. Yang claimed unspecified damages in respect of bonuses and share options. The
claim was dismissed by the Labour Tribunal in Hong Kong on January 28, 2003. Mr. Yang
subsequently applied for a review of this decision. At the review hearing on July 4, 2003, the
Labour Tribunal ordered the case to be transferred to the High Court in Hong Kong. The claim
has therefore been transferred to the High Court and registered as High Court Action No. 2701
of 2003 (the "Action").
On September 16, 2003, a Statement of Claim was served on the Company. On November 4, 2003,
the Company filed a Defence and Counterclaim with the High Court. Mr. Yang filed a Reply to
Defence and Defence to Counterclaim on April 26, 2004. On July 21, 2004, Mr. Yang obtained
leave from the Court to file an Amended Reply to Defence and Defence to Counterclaim. The
Company filed and served a Reply to Defence to Counterclaim on September 4, 2004. Pleadings
closed on
September 18, 2004. The parties filed and served Lists of Documents on October 26, 2004 and
witness statements were exchanged on February 28, 2005.
F-39
Table of Contents
Notes to Consolidated Financial Statements (Continued)
The parties applied by consent to adjourn
sine die
a checklist hearing fixed for April 20,
2005, as the respective parties anticipated that they would be filing supplemental evidence
and amending their pleadings. The Court approved the application and made an Order on April
19, 2005 that the checklist hearing be vacated and adjourned
sine die
with liberty to restore.
Pursuant to a request made by Mr. Yang on June 2, 2005 for further and better particulars of
the Defence and Counterclaim, the Company filed and served its Answer to Mr. Yang's request on
July 4, 2005.
On August 17, 2005, in compliance with its continuing discovery obligations, the Company filed
and served a Supplemental List of Documents. Subsequently, on September 5, 2005, Mr. Yang also
filed and served a Supplemental List of Documents.
Further interlocutory steps are in progress. There have been no other material developments in
the litigation.
The directors of the Company do not believe the action will have any significant impact on the
financial position of the Company and of the Group. The directors of the Company intend to
continue vigorously defending the action.
22. CAPITAL STOCK
As of December 31,
2005
2004
2003
Number of
Number of
Number of
shares
Amount
shares
Amount
shares
Amount
'000
'000
'000
'000
'000
'000
Authorized:
Common stock of
US$0.01 each
5,000,000
US$
50,000
5,000,000
US$
50,000
5,000,000
US$
50,000
Issued and fully paid:
Common stock of
US$0.01 each
3,668,391
RMB303,388
3,668,391
RMB303,388
3,668,391
RMB303,388
During 2003, an employee of the Group exercised certain of his stock options and as a result
2,338,000 shares of common stock of US$0.01 each were issued at a price of HK$1.896 per share (Note
23). These new shares ranked pari passu with existing shares.
23. STOCK OPTIONS
Original share option scheme approved in 1999
Upon the listing on the Company's shares on the SEHK, the Company adopted an employee share option
scheme (the "Scheme"). Pursuant to the Scheme, the Company's Board of Directors may grant options
to employees of the Group to subscribe for the Company's common stock at a price which shall be the
higher of:
(a)
a price being not less than 80%, of the average closing price of the common stock on the
relevant stock exchange as stated in such stock exchange's quotation sheets for the five
trading days immediately preceding the relevant date in respect of such options; and
(b)
the nominal value of the common stock.
The maximum number of shares on which options may be granted may not exceed 10% of the issued share
capital of the Company excluding any shares issued on the exercise of the option from time to time.
F-40
Table of Contents
Notes to Consolidated Financial Statements (Continued)
On June 2, 2001, share options were granted to certain directors and employees of the Group,
entitling them to subscribe for a total of 31,800,000 shares of the Company's common stock at
HK$1.896 per share. The exercisable period of these options is from June 2, 2001 to June 1, 2011.
The compensation expense associated with these grants was fully vested and was charged to income
during the year ended December 31, 2001. During the year ended December 31, 2003, 2,338,000 shares
of the above share options were exercised. Accordingly, the common stock and additional paid-in
capital were increased by approximately RMB194,000 and RMB4,507,000, respectively. No option was
granted under this scheme in 2005 and 2004.
No. of stock options
'000
As of January 1, 2004
15,490
Granted
—
Exercised
—
Cancelled/lapsed
(1,000
)
As of December 31, 2004
14,490
Granted
—
Exercised
—
Cancelled/lapsed
(11,690
)
As of December 31, 2005
2,800
New share option scheme approved in 2002
On June 28, 2002, the Company adopted a new share option scheme (the "New Scheme") in compliance
with the amendments to the listing rules and regulations of SEHK which came into effect on
September 1, 2001. The New Scheme has come into effect on July 15, 2002 and the original share
option scheme adopted by the Company on September 18, 1999 (as described above) was terminated. Any
new share option granted after July 15, 2002 will be in accordance with the terms of the New
Scheme, but the outstanding share options granted in 2001 will not be affected. Pursuant to the New
Scheme, the Company's board of directors may grant options to the participants (include the Group's
employees, non-executive directors, suppliers and customers, etc.) to subscribe for the Company's
common stock at a price which shall not be lower than the higher of:
(a)
the closing price of the common stocks on the relevant stock exchange as stated in such stock
exchange's quotation sheet on the date of the offer of grant, which must be a trading date;
(b)
the average closing price of the common stocks on the relevant stock exchange as stated in
such stock exchange's quotation sheets for the five trading days immediately preceding the
date of the offer of grant; and
(c)
the nominal value of the common stock.
As of December 31, 2005, no share option was granted under the New Scheme.
F-41
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Call Option Agreements
On December 18, 2002, Huachen entered into a principal agreement (the "Principal Agreement") with
the Foundation to purchase from the Foundation a total of 1,446,121,500 shares of common stock,
representing approximately 39.446% of the then issued share capital of the Company and the
Foundation's entire shareholding interest in the Company. Completion of the Principal Agreement
took place upon signing.
On December 18, 2002, each of Mr. Wu Xiao An, Mr. Su Qiang, Mr. Hong Xing and Mr. He Tao (the
"Management Directors") entered into a call option agreement ("Call Option Agreements") with
Huachen, immediately after the Principal Agreement was entered into and after completion of the
sale and purchase of the common stocks pursuant thereto. Pursuant to the terms of the Call Option
Agreements, Huachen granted to each of the Management Directors a call option in respect of a
specified number of shares of common stock, totaling 346,305,630 shares in aggregate and
representing approximately 9.446% of the then issued share capital of the Company, at an exercise
price of HK$0.95 per share. Each call option is exercisable in whole or in part at any time during
the period of 3 years commencing from the date falling 6 months after February 6, 2003, the closing
date of the general offer made to the remaining shareholders by Huachen and the Management
Directors dated December 18, 2002.
Under the terms of the Call Option Agreements, the Management Directors may elect to pay the
exercise price in full or to pay 10% of the exercise price at the time of exercise of the option.
If the Management Directors elect the latter payment option, the balance of the exercise price will
be payable, without interest, within a 3-year period after the date of completion of the purchase
of the relevant common stock, and the shares will be pledged as security in favor of Huachen until
full payment of the exercise price.
As a result of the Call Option Agreements entered into between Huachen and the Management
Directors, compensation expense associated with these call options is being recognized by the
Company on a straight-line basis from December 18, 2002 to August 6, 2003, the date that the call
options became fully vested. Accordingly, compensation expenses of approximately RMB173.2 million
and RMB10.3 million were charged to the income statements for the years ended December 31, 2003 and
2002, respectively.
As of December 31, 2005, none of the call options had been exercised.
Pro-forma disclosures setting forth compensation expense assuming the Company had determined it
based on the fair value of the stock options in accordance with SFAS No. 123 and No. 148 are
presented in Note 3(r).
The fair value of each option granted is estimated using the Black-Scholes option pricing model.
The weighted average assumptions used for grants of share options and fair value of share option
made in 2002 is as follows:
Risk-free interest rate
4.96
%
Expected option life
— Issued on December 18, 2002
1 year
Expected dividend yield
4.11
%
Volatility
48.01
%
24. DISTRIBUTION OF PROFIT
As stipulated by the relevant laws and regulations for foreign-invested enterprises in the PRC, the
Company's subsidiaries are required to maintain discretionary dedicated capital, which includes a
general reserve fund, an enterprise expansion fund and a staff welfare and incentive bonus fund.
The dedicated capital is to be appropriated from statutory net income as stipulated by statute or
by the board of directors of respective subsidiaries and recorded as a component of shareholders'
equity. For the years ended
December 31, 2005, 2004 and 2003, the subsidiaries of the Company appropriated approximately RMB9.3
million, RMB46.2 million and RMB100.0 million,
respectively, to the general reserve fund. No appropriation to the enterprise expansion fund was made by the subsidiaries for the years ended
December 31, 2005, 2004 and 2003.
In 2003, as approved by the board of directors of Xing Yuan Dong in accordance with the relevant
laws and regulations, dedicated capital of Xing Yuan Dong amounting to RMB120 million was released
for capitalization as paid-in capital of Xing Yuan Dong. Such release was credited to the capital
reserve, which represents the capitalization of the retained earnings of Xing Yuan Dong and is a
non-distributable reserve of the Group.
The Group's share of undistributed earnings retained in the associated companies and jointly
controlled entities amounted to approximately RMB107.20 million and RMB110.8 million as of December
31, 2005 and 2004, respectively.
F-42
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Dividends declared by the Company during 2005 and 2004 consisted of:
Year ended December 31,
2005
2004
RMB'000
RMB'000
2004 and 2003 final dividends of HK$0.005
and HK$0.01 per share, respectively
19,450
38,885
2005 and 2004 interim dividends of HK$Nil
and HK$0.005 per share, respectively
—
19,450
19,450
58,335
On April 21, 2006 the directors of the Company did not recommend the payment of final dividend for
the year.
25. RELATED PARTY TRANSACTIONS
(a)
Name and relationship
Name
Relationship
Shenyang JinBei Automotive Company
Limited ("JinBei")
A shareholder of Shenyang Automotive
Shanghai Shenhua Holdings Co., Ltd.
("Shanghai Shenhua")
Common directorship of certain
directors of the Company
Brilliance Holdings Limited ("BHL")
Common directorship of certain
directors of the Company
An affiliated company is a company in which one or more of the directors or substantial
shareholders of the Company have direct or indirect beneficial interest in the Company or are in a
position to exercise significant influence over the Company. Parties are also considered to be
affiliated if they are subject to common control or common significant influence.
F-43
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Save as disclosed elsewhere in the financial statements, particulars of significant transactions
with affiliated companies (these affiliated companies and the Company have certain directors in
common and/or other relationships as specified) are summarized below:
(b)
Amounts due from affiliated companies arising from trading activities consisted of the
following:
As of December 31,
2005
2004
RMB'000
RMB'000
Due from related parties:
— Shanghai Shenhua and its affiliated companies
276,763
386,710
— Affiliated companies of JinBei
62,877
58,312
— Affiliated companies of BHL
54,222
—
— Jointly controlled entities
13,380
26,643
— A joint venture partner of Shenyang Aerospace
1,505
882
— BMW Brilliance
— Trade receivables
192,185
48,581
— Consideration receivable arising from
the disposal of machinery and equipment
(note (i))
269,003
269,003
869,935
790,131
Less: Provision for doubtful debts
(29,720
)
(24,720
)
840,215
765,411
(i)
The outstanding balance is unsecured, non-interest bearing and will be settled by BMW
Brilliance when certain conditions specified in the agreement of sale are fulfilled (See also
Note 11(c)).
(ii)
Except for (i) above, the amounts due from affiliated companies are unsecured, non-interest
bearing and have no fixed repayment terms.
(c)
Notes receivable from affiliated companies arising from trading activities consisted of the
following:
As of December 31,
2005
2004
RMB'000
RMB'000
Notes receivable from related parties:
— Affiliated companies of JinBei
9,446
22,500
— Shanghai Shenhua
328,482
601,348
— Associated companies and jointly controlled entities
1,042
21,295
338,970
645,143
All the notes receivable from affiliated companies are guaranteed by banks in the PRC and have
maturities of six months or less. The fair value of the notes receivable approximates their
carrying value.
F-44
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(d)
Amounts due to affiliated companies arising from trading activities consisted of the
following:
As of December 31,
2005
2004
RMB'000
RMB'000
Due to related parties:
— Associated companies and jointly controlled entities
465,023
276,951
— Shanghai Shenhua and its affiliated companies
4,191
40,570
— JinBei and its affiliated companies
142,438
195,166
— Affiliated companies of BHL
22,025
8,705
— Other affiliated companies
130
1,330
633,807
522,722
The amounts due to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms.
(e)
Notes payable to affiliated companies arising from trading activities consisted of the
following:
As of December 31,
2005
2004
RMB'000
RMB'000
Notes payable to related parties:
— Shanghai Shenhua
—
4,116
— Affiliated companies of BHL
43,462
—
— Affiliated companies of JinBei
8,139
24,229
— Associated companies and jointly controlled entities
22,491
91,892
— Other affiliated companies
—
925
74,092
121,162
F-45
Table of Contents
Notes to Consolidated Financial Statements (Continued)
(f)
Save as disclosed elsewhere in the financial statements, significant transactions with
affiliated companies consisted of the following:
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Sales of goods:
— JinBei and its affiliated companies
69,432
38,127
150,637
— Shanghai Shenhua and its affiliated companies
1,469,402
1,895,881
1,984,715
— Affiliated companies of BHL
—
—
504
— Jointly controlled entities
71,005
205,849
171,512
— Affiliated companies of the joint venture partner of Ningbo
Yuming
—
—
5,135
1,609,839
2,139,857
2,312,503
Purchase of goods:
— JinBei and its affiliated companies
383,808
764,311
986,828
— Shanghai Shenhua and its affiliated companies
85,354
214,467
222,940
— Affiliated companies of BHL
66,441
89,690
93,498
— Associated companies and jointly controlled entities
524,221
898,914
1,597,289
— Affiliated companies of the joint venture partner of Ningbo
Yuming
—
342
16,338
— Affiliated companies of the joint venture partner of Xinguang
761
—
—
— A joint venture partner of Shenyang Aerospace
1,987
39,019
—
Subcontracting charges to a jointly controlled entity
112,160
178,685
17,438
1,174,732
2,185,428
2,934,331
Consideration paid to the joint venture partner of Ningbo
Yuming for acquisition of further interests in Ningbo Yuming
—
10,000
—
Purchase of intangible asset from an affiliated company of the
joint venture partner of Ningbo Yuming
—
6,940
—
Finance charge to a jointly controlled entity
17,329
17,850
—
Operating lease rental on machinery and equipment charged by a
jointly controlled entity
2,260
12,840
12,000
Operating lease rental from a jointly controlled entity
15,078
15,364
—
Proceeds from sale of property, plant and equipment
— JinBei and its affiliated companies
—
4,407
—
— A jointly controlled entity
263
1,105
—
Purchase of machinery from affiliated companies of JinBei
—
58,089
—
Service income from a jointly controlled entity
43,671
—
—
The above transactions were carried out after negotiations between the Group and the affiliated
companies in the ordinary course of business and on the basis of estimated market value as
determined by the directors.
F-46
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Other significant transactions with affiliated companies consisted of:
i. Trademark license
Pursuant to a trademark license agreement, JinBei granted Shenyang Automotive the right to use the
JinBei trademark on its products and marketing materials indefinitely.
ii. Guarantees provided to affiliated companies
Please refer to Note 21 (c) (ii) for details of the guarantees provided to affiliated companies.
(g)
Advances to affiliated companies consisted of the following:
As of December 31,
2005
2004
RMB'000
RMB'000
Advances to related parties:
— Associated companies and jointly controlled entities
7,226
22,528
— BHL and its affiliated companies
15,273
—
— Shanghai Shenhua
9,045
—
— Affiliated companies of JinBei
16,185
16,786
— Other affiliated companies
452
138
48,181
39,452
Less: provision for doubtful debts
(9,250
)
(1,975
)
38,931
37,477
The advances to affiliated companies are unsecured, non-interest bearing and have no fixed
repayment terms (2004: same except an advance to a jointly controlled entity of RMB6.5 million
which was interest bearing at 5.841% per annum).
(h)
Advances from affiliated companies consisted of the following:
As of December 31,
2005
2004
RMB'000
RMB'000
Advances from related parties:
— Associated companies
607
—
— Affiliated companies of BHL
28,558
14,319
— An affiliated company of Shanghai Shenhua
236
230
— Affiliated companies of JinBei
1,088
945
— Financing received from BMW Brilliance (Note 11(d))
74,605
74,605
— Other affiliated companies
—
382
105,094
90,481
Save for the financing received from BMW Brilliance as detailed in Note 11(d), other advances from
affiliated companies are unsecured, non-interest bearing and have no fixed repayment terms.
F-47
Table of Contents
Notes to Consolidated Financial Statements (Continued)
26. RETIREMENT PLAN AND EMPLOYEES' BENEFIT
As stipulated by the regulations of the PRC government, the Company's subsidiaries in the PRC have
defined contribution retirement plans for their employees. The PRC government is responsible for
the pension liability to these retired employees. The Company's subsidiaries are required to make
specified contributions for the state-sponsored retirement plan at 20% of the basic salary costs of
their staff for 2005 (2004: 20% to 23.5%; 2003: 22% to 23.5%) payable to Labor and Social Security
Bureaus of the PRC government. The retirement plan contributions payable for the years ended
December 31, 2005, 2004 and 2003 were approximately RMB33.1 million, RMB37.5 million and RMB50.4
million, respectively. In addition to the pension contributions, pursuant to the relevant laws and
regulations of the PRC, the Company's subsidiaries are required to provide benefits such as housing
funds, medical insurance and unemployment insurance for their PRC employees. These provisions,
which were approximately RMB29.6 million, RMB35 million and RMB46.5 million for the years ended
December 31, 2005, 2004 and 2003, respectively, were calculated at a certain percentage
(approximately 15.4% to 25.4% in 2005, 14.8% to 23.4% in 2004 and 13% to 18% in 2003) of the
employees' basic salaries.
The Group's Hong Kong employees are covered by the mandatory provident fund which is managed by an
independent trustee. The Group and its Hong Kong employees each makes monthly contribution to the
scheme at 5% of the employees' salary with maximum contributions by each of the Group and the
employees limited to HK$1,000 per month. The retirement benefit scheme cost charged to the
consolidated statement of income represents contributions payable by the Group to the fund. During
the years ended December 31, 2005, 2004 and 2003, contributions amounting to approximately
HK$122,000, HK$147,000 and HK$150,000, respectively, were made.
27. EXECUTIVE BONUS PLAN
Certain officers of the Company are participants in the Executive Bonus Plan (the "Plan"). The Plan
provides that up to 5% of the Company's net income be set aside each year for distribution among
plan participants based upon performance as determined by the Company's board of directors. The
allocation of bonuses among participants is determined at the discretion of the President of the
Company. For the years ended December 31, 2005 and 2004 , no performance bonus was allocated. For
the year ended December 31, 2003, the Company accrued RMB34.4 million under the Plan.
28. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Cash paid for:
Interest
(net of amount capitalized: 2005: RMB23,875,000; 2004: RMB
18,369,000; 2003: RMBNil)
111,303
154,041
165,924
Income taxes
33,975
127,538
163,687
During the years ended December 31, 2005, 2004 and 2003, major non-cash transactions included:
In 2003, as approved by the joint venture partners of Shenyang Automotive, the registered capital
and total investment of Shenyang Automotive was increased by approximately RMB2,260 million, which
was contributed by the Company and JinBei in proportion to their original equity interests in
Shenyang Automotive. The Company contributed 51% of the increase in paid-in capital of Shenyang
Automotive by way of capitalization of its dividend receivable from a subsidiary amounting to
approximately RMB1,152.6
million. JinBei contributed the remaining 49% of the paid-in capital of Shenyang Automotive by
injecting buildings amounting to approximately RMB41.0 million (Note 11(b)), long-term land lease
prepayments amounting to approximately RMB64.4 million (Note 11(b)), components and parts technology right
amounting to RMB820 million (Note 12(b)) and approximately RMB182 million in cash.
F-48
Table of Contents
Notes to Consolidated Financial Statements (Continued)
29. OTHER SUPPLEMENTAL INFORMATION
The following items are charged (credited) to the consolidated statements of income and
comprehensive income:
Year ended December 31,
2005
2004
2003
RMB'000
RMB'000
RMB'000
Import tariffs
15,224
56,857
104,598
Research and development costs
235,177
479,928
191,433
Foreign exchange (gains) losses, net
(21,487
)
6,011
(120
)
Provision for impairments of property, plant and equipment
48,299
10,000
6,027
Provision for doubtful debts and write off of bad debts
55,703
55,292
4,825
30. SEGMENT INFORMATION
SFAS No. 131 establishes standards for reporting information about operating segments in financial
statements. Operating segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker, or decision making group, in deciding how to allocate resources and in assessing
performance.
The Group began manufacturing and selling Zhonghua sedans and BMW sedans, respectively, which are
managed separately because each of them represents a strategic business unit that serves a
different market in the automobile industry. Therefore, the Group's reportable operating segments
consist of i) manufacture and sale of minibuses and automotive components; ii) manufacture and sale
of Zhonghua sedans; and iii) manufacture and sale of BMW sedans.
The accounting policies of each operating segment are the same as those described in the summary of
significant accounting policies. The Group evaluates performance based on stand-alone operating
segment net income and generally accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices. The Group's activities are
conducted predominantly in the PRC. Accordingly, no geographical segmentation analysis is provided.
The Group's credit risk primarily consists of receivables from a variety of customers including
state and local agencies, municipalities and private industries. The Group had one customer and its
affiliates (see Note 25(f)) that accounted for more than ten percent of revenues. The Group reviews
its accounts receivable and provides estimates of allowances as deemed necessary.
F-49
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Business segments — 2005
Manufacture and sale of
Manufacture and
Manufacture and
minibuses and automotive
sale of Zhonghua and
sale of BMW
components
sedans
sedans
Total
RMB'000
RMB'000
RMB'000
RMB'000
Total revenues from reportable segments
4,837,379
863,140
—
5,700,519
Elimination of intersegment revenues
(231,529
)
—
—
(231,529
)
Revenues from external customers
4,605,850
863,140
—
5,468,990
Segment (loss) income before taxation
and minority interests
(190,107
)
(980,264
)
32,250
(1,138,121
)
Unallocated amounts — corporate expenses
(57,281
)
Income before taxation and minority
interests
(1,195,402
)
Segment assets as of December 31, 2005
9,207,757
4,531,308
615,304
14,354,369
Unallocated amounts — corporate assets
337,936
Total assets as of December 31, 2005
14,692,305
Other disclosures:
Depreciation of fixed assets
257,112
142,632
—
399,744
Amortization of long-term land lease
prepayments
3,021
865
—
3,886
Amortization on intangible assets
4,883
199,126
—
204,009
Impairment of equity method goodwill
(Note 13)
179,030
—
—
179,030
Impairment of goodwill in a subsidiary
(Note 15)
78,690
—
—
78,690
Interest income
59,339
850
—
60,189
Interest expense
171,842
10,512
—
182,354
Capital expenditure
183,786
401,886
—
585,672
Equity in earnings of associated
companies and jointly controlled
entities
(11,642
)
28,387
32,250
48,995
Equity method goodwill (Note 13)
164,753
31,983
—
196,736
Goodwill
(Note 15)
339,710
—
—
339,710
F-50
Table of Contents
Notes to Consolidated Financial Statements (Continued)
Business segments — 2004
Manufacture and sale of
Manufacture and
Manufacture and
minibuses and automotive
sale of Zhonghuaand
sale of BMW
components
sedans
sedans
Total
RMB'000
RMB'000
RMB'000
RMB'000
Total revenues from
reportable segments
5,546,263
1,324,572
—
6,870,835
Elimination of intersegment
revenues
(328,837
)
—
—
(328,837
)
Revenues from external
customers
5,217,426
1,324,572
—
6,541,998
Segment income (loss)
before taxation and
minority interests
423,966
(882,174
)
18,562
(439,646
)
Unallocated amounts —
corporate expenses
(87,241
)
Income before taxation and
minority interests
(526,887
)
Segment assets as of
December 31, 2004
11,848,130
5,268,699
588,455
17,705,284
Unallocated amounts —
corporate assets
71,142
Total assets as of December
31, 2004
17,776,426
Other disclosures:
Depreciation of fixed assets
202,731
162,907
—
365,638
Amortization of long-term
land lease prepayments
2,369
—
—
2,369
Amortization on intangible
assets
905
225,136
—
226,041
Impairment of equity method
goodwill (Note 13)
47,320
—
—
47,320
Interest income
56,716
2,084
—
58,800
Interest expense
169,075
13,383
—
182,458
Capital expenditure
221,838
699,031
—
920,869
Equity in earnings of
associated companies and
jointly controlled entities
49,845
57,854
18,562
126,261
Equity method goodwill
(Note 13)
343,783
31,983
—
375,766
Goodwill
(Note 15)
418,400
—
—
418,400
F-51
Table of Contents
Notes to Consolidated Financial Statements (Continued)
31. ACCUMULATED OTHER COMPREHENSIVE INCOME
SFAS No. 130 requires the components of comprehensive income to be disclosed in the financial
statements. Comprehensive income consists of net (loss) income and other gains and losses affecting
shareholders' equity that, under generally accepted accounting principles, are excluded from net
income. For the Group, comprehensive income consists primarily of unrealized gains and losses on
marketable equity investments and foreign currency translation adjustments for the years ended
December 31, 2005, 2004 and 2003.
Unrealized gain (loss) on
marketable available-for-sale
Foreign currency
Accumulative other
securities
translation adjustments
comprehensive income
RMB'000
RMB'000
RMB'000
Balance as of January 1, 2004
—
39,179
39,179
Current year change
28,468
—
28,468
Balance as of December 31,
2004
28,468
39,179
67,647
Current year change
(27,227
)
—
(27,227
)
Balance as of December 31,
2005
1,241
39,179
40,420
32. COMPARATIVE FIGURES
Certain comparative figures in previous years have been reclassified to confirm to the fiscal 2005
presentation.
33. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the board of directors on April 21, 2006.
F-52