HONG KONG, Dec. 15 /Xinhua-PRNewswire/ --
(1) REVISION OF CAPS FOR RELEVANT CONTINUING CONNECTED TRANSACTIONS,
(2) ADDITIONAL CONTINUING CONNECTED TRANSACTIONS,
(3) CONNECTED AND MAJOR TRANSACTION - PROVISION OF FINANCIAL ASSISTANCE
TO/BY CONNECTED PERSONS,
(4) INCREASE IN AUTHORISED SHARE CAPITAL AND
(5) AMENDMENT TO BYE-LAWS
Revision of Caps for the Relevant Continuing Connected Transactions
Reference is made to the Continuing Connected Transactions and the Caps
which were approved by the Shareholders at the 2006 SGM. The Directors
expected the actual monetary value of the following transactions carried out
and to be carried out under the Continuing Connected Transactions for the
financial year ending 31 December 2006 and/or one or both of the two
financial years ending 31 December 2008 will exceed the relevant Caps:
-- purchases of materials and automotive components by each of Shenyang
Automotive, Xing Yuan Dong, Dongxing, Ningbo Yuming and ChenFa from
JinBei and its subsidiaries and associates (other than Shenyang
Automotive);
-- purchases of materials and automotive components by each of ChenFa,
Dongxing and Shenyang Brilliance Power from Shenyang Automotive;
-- sale of automobiles and automotive components by Shenyang Automotive
to JinBei and its subsidiaries and associates (other than Shenyang
Automotive); and
-- sale of materials and automotive components by each of Dongxing, Xing
Yuan Dong, ChenFa and Shenyang Brilliance Power to Shenyang
Automotive.
Particulars of the above Relevant Continuing Connected Transactions,
including the expected monetary value of the transactions carried out and to
be carried out in the financial year ending 31 December 2006 and the Revised
Caps for one or both of the two financial years ending 31 December 2008 are
set out in the paragraph headed "The Revised Caps" in this announcement.
Additional Continuing Connected Transactions
For the two financial years ending 31 December 2008, members of the
Group will carry out the following Additional Continuing Connected
Transactions:
-- purchases of materials and automotive components by Xing Yuan Dong and
Shenyang Jindong from Shenyang Automotive;
-- sale of materials and automotive components by Shenyang Jindong to
JinBei and its subsidiaries and associates (other than Shenyang
Automotive); and
-- sale of materials and automotive components by Ningbo Ruixing,
Shanghai Hidea, Mianyang Ruian and Shenyang Jindong to Shenyang
Automotive.
Particulars of the Additional Continuing Connected Transactions and the
New Caps are set out in the sub-paragraphs headed "The Additional Continuing
Connected Transactions" and "The New Caps" in this announcement.
Financial assistance to/by connected persons
Shenyang Automotive and Xing Yuan Dong will provide cross guarantees to
each other's banking facilities in the amount of RMB1.5 billion and Xing
Yuan Dong and JinBei will provide cross guarantees to each other's banking
facilities in the amount of RMB500 million for a period of one year
commencing from 1 January 2007 to 31 December 2007.
Increase in authorised share capital and amendment to the Bye-Laws
The Board proposed to increase the authorised share capital of the
Company from US$50,000,000 to US$80,000,000 by the creation of an additional
3,000,000,000 Shares of US$0.01 each. The Board also proposed that subject
to the approval of the Shareholders to be obtained at the Special General
Meeting on the increase in authorised share capital of the Company from
US$50,000,000 to US$80,000,000, the bye-law 6.(A) of the Bye-Laws of the
Company be updated to reflect the increased authorised share capital of the
Company.
General
Each of JinBei, its subsidiaries and associates (other than Shenyang
Automotive) and Shenyang Automotive are connected persons of the Company
within the meaning of the Listing Rules. Accordingly, the purchases of
materials and automotive components, the sale of automobiles, materials and
automotive components and the provision of financial assistance by/to the
Group to/by JinBei, its subsidiaries and associates (other than Shenyang
Automotive) and Shenyang Automotive constitute connected transactions under
Chapter 14A of the Listing Rules. As the percentage ratios for the Financial
Assistance is more than 25% but less than 100%, the Financial Assistance
therefore also constitutes a major transaction under Chapter 14 of the
Listing Rules.
An Independent Board Committee has been established to advise the
Shareholders as to (i) the Revised Caps; (ii) the Additional Continuing
Connected Transactions and the New Caps and (iii) the Financial Assistance.
An independent financial adviser will be appointed to advise the
Independent Board Committee and the Shareholders in respect of the Revised
Caps, the Additional Continuing Connected Transactions and the New Caps and
the Financial Assistance. Given that no connected person which is a party to
the Relevant Continuing Connected Transactions, the Additional Continuing
Connected Transactions and Financial Assistance is a Shareholder, all
Shareholders are eligible to vote on the ordinary resolutions to be proposed
at the Special General Meeting in respect of the Revised Caps, the
Additional Continuing Connected Transactions and the New Caps and the
Financial Assistance.
A circular containing, amongst other things, details of the Relevant
Continuing Connected Transactions, the Revised Caps, the Additional
Continuing Connected Transactions, the New Caps, the Financial Assistance
and the proposed increase in authorised share capital and amendment to the
Bye-Laws, letters from the Independent Board Committee and from the
Independent Financial Adviser and a notice to Shareholders convening the
Special General Meeting to approve (i) the Revised Caps; (ii) the Additional
Continuing Connected Transactions and the New Caps; (iii) the Financial
Assistance; (iv) the proposed increase in authorised share capital; and (v)
the proposed amendment to the Bye-Laws, will be dispatched to Shareholders
as soon as practicable.
I. THE CONTINUING CONNECTED TRANSACTIONS
1. The Continuing Connected Transactions
Reference is made to the Announcement and the circular issued by the
Company dated 23 January 2006 in relation to, among others, the Continuing
Connected Transactions and the Caps.
The Group is engaged in the manufacture and sale of minibuses and
automotive components and sedans. During the course of its business, the
Group acquires materials and automotive components from certain connected
persons and sells automobiles, materials and automotive components to
certain connected persons, on an ongoing basis.
At the 2006 SGM, the Shareholders approved the Continuing Connected
Transactions and the Caps.
The Directors expected the actual monetary value of the Relevant
Continuing Connected Transactions for the financial year ending 31 December
2006 and/or one or both of the two financial years ending 31 December 2008
will exceed the relevant Caps. As the Relevant Continuing Connected
Transactions will be carried out under respective framework agreements
entered into on 16 December 2005, no new agreements will be entered into for
the Relevant Continuing Connected Transactions as a result of the Revised
Caps.
2. The Relevant Continuing Connected Transactions
The Relevant Continuing Connected Transactions have been and will be
carried out for the three financial years ending 31 December 2008 pursuant
to the principal terms of the framework agreements dated 16 December 2005.
Particulars of the framework agreements for the Relevant Continuing
Connected Transactions are set out in the sub-paragraphs A1 to A5, B1 to B3
and C1, C4 to C7 in the paragraph headed "The Continuing Connected
Transactions" in the Announcement. Pursuant to the framework agreements, the
Relevant Continuing Connected Transactions have been and will be carried out
on terms which are no less favourable than the terms which can be obtained
by the relevant members of the Group from independent third parties for
products of comparable quality and quantity.
The following are the Relevant Continuing Connected Transactions and the
actual value of the transactions entered into between the parties for the
six months ended 30 June 2006:
Actual amounts
in RMB'000
for the six
Relevant Continuing Connected Transaction months ended 30
June 2006
(a) Purchases of materials and automotive components
by members of the Group (including Shenyang
Automotive) from JinBei and its subsidiaries and
associates (other than Shenyang Automotive)
i Purchases of materials and automotive components 248,215
by Shenyang Automotive from JinBei and its
subsidiaries and associates (other than Shenyang
Automotive)
ii Purchases of materials and automotive components 76,814
by Xing Yuan Dong from JinBei and its subsidiaries
and associates (other than Shenyang Automotive)
iii Purchases of materials and automotive components 9,554
by Dongxing from JinBei and its subsidiaries and
associates (other than Shenyang Automotive)
iv Purchases of materials and automotive components 3,126
by Ningbo Yuming from JinBei and its subsidiaries
and associates (other than Shenyang Automotive)
v Purchases of materials and automotive components by 1,216
ChenFa from JinBei and its subsidiaries and
associates (other than Shenyang Automotive)
(b) Purchases of materials and automotive
components by members of the Group (other than
Shenyang Automotive) from Shenyang Automotive
i Purchases of materials and automotive components 39,345
by ChenFa from Shenyang Automotive
ii Purchases of materials and automotive components 20,325
by Dongxing from Shenyang Automotive
iii Purchases of materials and automotive components Nil
by Shenyang Brilliance Power from Shenyang
Automotive
(c) Sale of automobiles, materials and automotive
components by members of the Group to connected
persons
i Sale of automobiles and automotive components by 39,724
Shenyang Automotive to JinBei and its subsidiaries
and associates (other than Shenyang Automotive)
ii Sale of materials and automotive components by 111,924
Dongxing to Shenyang Automotive
iii Sale of materials and automotive components by 1,027,100
Xing Yuan Dong to Shenyang Automotive
iv Sale of materials and automotive components by 372,497
ChenFa to Shenyang Automotive
v Sale of materials and automotive components by Nil
Shenyang Brilliance Power to Shenyang Automotive
As at 30 June 2006, the monetary value of the transactions occurred
between the parties in respect of the following Relevant Continuing
Connected transactions have exceeded the Caps for the financial year ending
31 December 2006 as approved by the Shareholders at the 2006 SGM:
Approved Actual amounts
amounts in in RMB'000
Relevant Continuing RMB'000 for the six
Connected Transactions for the year months ended 30
ending 31 June 2006
December 2006
(a)(i) Purchases of materials 230,000 248,215
and automotive components
by Shenyang Automotive
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
(a)(iii) Purchases of materials 4,000 9,554
and automotive components
by Dongxing from JinBei
and its subsidiaries and
associates (other than
Shenyang Automotive)
(a)(v) Purchases of materials 500 1,216
and automotive components
by ChenFa from JinBei and
its subsidiaries and
associates (other than
Shenyang Automotive)
(b)(i) Purchases of materials
and automotive components
by ChenFa from Shenyang
Automotive 25,000 39,345
At the time of the preparation of the 2006 Interim Results in the third
quarter of 2006, it was brought to the attention of the Company that the
monetary value of the transactions occurred between the parties in respect
of Relevant Continuing Connected Transactions (a)(i), (a)(iii), (a)(v) and
(b)(i) set out in the above table may exceed the Caps for the financial year
ending 31 December 2006 as approved by the Shareholders at the 2006 SGM.
Action was immediately taken after the finalization of 2006 Interim Results
in late September 2006 to ascertain whether the Caps for the Continuing
Connected Transactions for the financial year ending 31 December 2006 will
be exceeded and to ensure compliance of the Caps, as well as to re-evaluate
the sufficiency of the Caps for the two financial years ending 31 December
2008 in light of the actual monetary value of the transactions for the six
months ended 30 June 2006 and the performance of the Company in 2006. Due to
the volume of the transactions and the number of parties involved, a lengthy
period was required to complete the review. Upon completion of the lengthy
review process, it was then noted that for the reasons set out in the sub-
paragraph headed "Basis of the Revised Caps and the New Caps" below,
particularly the unforeseen significant increase in the demand for the new
model of the sedans of the Group since the second quarter of 2006, the Caps
for the Relevant Continuing Connected Transactions other than Relevant
Continuing Connected Transactions (a)(ii), (b)(iii), (c)(iii) and (c)(v)
have been or will be exceeded for the financial year ending 31 December
2006. The Company therefore took immediate action to remedy the situation.
Estimated amounts of the transactions in respect of the Relevant
Continuing Connected Transactions for the year ending 31 December 2006 set
out in the sub-paragraph headed "The Revised Caps" below are for information
purposes and Shareholders' approval will not be sought for the estimated
amounts for the year ending 31 December 2006. Shareholders' approval will be
sought for the Revised Caps for the two financial years ending 31 December
2008 set out in the sub-paragraph headed "The Revised Caps" below at the
Special General Meeting.
3. The Additional Continuing Connected Transactions
The following are the principal terms of the framework agreements dated
15 December 2006 pursuant to which the Additional Continuing Connected
Transactions will be carried out for the two financial years ending
31 December 2008.
(a) Purchases of materials and automotive components by members of the
Group (other than Shenyang Automotive) from Shenyang Automotive
(i) Purchases of materials and automotive components by Xing Yuan Dong
from Shenyang Automotive
Vendor : Shenyang Automotive, a 51% owned subsidiary of the
Company
Purchaser : Xing Yuan Dong, a wholly-owned subsidiary of the
Company
Agreement : On 15 December 2006, Shenyang Automotive and Xing
Yuan Dong entered into a framework agreement in
relation to the purchases of materials and
automotive components by Xing Yuan Dong from
Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Xing Yuan Dong by Shenyang Automotive on
terms which are no less favourable than the terms
which can be obtained by Xing Yuan Dong from
independent third parties for purchase of materials
and automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
(ii) Purchases of materials and automotive components by Shenyang
Jindong from Shenyang Automotive
Vendor : Shenyang Automotive, a 51% owned subsidiary of the
Company
Purchaser : Shenyang Jindong, a 75.50% owned subsidiary of the
Company
Agreement : On 15 December 2006, Shenyang Automotive and
Shenyang Jindong entered into a framework agreement
in relation to the purchases of materials and
automotive components by Shenyang Jindong from
Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Jindong by Shenyang Automotive
on terms which are no less favourable than the terms
which can be obtained by Shenyang Jindong from
independent third parties for purchase of materials
and automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
(b) Sale of materials and automotive components by members of the Group
to connected persons
(i) Sale of materials and automotive components by Shenyang Jindong to
JinBei and its subsidiaries and associates (other than Shenyang
Automotive)
Vendor : Shenyang Jindong, a 75.50% owned subsidiary of the
Company
Purchaser : JinBei and its subsidiaries and associates (other
than Shenyang Automotive), including but not limited
to Tieling Brilliance Rubber Products Company
Limited
Agreement: : On 15 December 2006, Shenyang Jindong and JinBei
entered into a framework agreement in relation to
the sale of materials and automotive components by
Shenyang Jindong to JinBei and its subsidiaries and
associates (other than Shenyang Automotive)
Pricing policy : The materials and automotive components are to be
provided to JinBei and its subsidiaries and
associates (other than Shenyang Automotive) by
Shenyang Jindong on terms which are no less
favourable than the terms which can be obtained by
Shenyang Jindong from independent third parties for
sale of materials and automotive components of
comparable quality and quantity. The price will be
agreed upon between the parties for each transaction
by reference to the aforementioned pricing policy
through arm's length negotiations
(ii) Sale of materials and automotive components by Ningbo Ruixing to
Shenyang Automotive
Vendor : Ningbo Ruixing, a wholly-owned subsidiary of the
Company
Purchaser : Shenyang Automotive, a 51% owned subsidiary of the
Company
Agreement: : On 15 December 2006, Ningbo Ruixing and Shenyang
Automotive entered into a framework agreement in
relation to the sale of materials and automotive
components by Ningbo Ruixing to Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Automotive by Ningbo Ruixing on
terms which are no less favourable than the terms
which can be obtained by Ningbo Ruixing from
independent third parties for sale of materials and
automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
(iii) Sale of materials and automotive components by Shanghai Hidea to
Shenyang Automotive
Vendor : Shanghai Hidea, a 63.25% owned subsidiary of the
Company
Purchaser : Shenyang Automotive, a 51% owned subsidiary of the
Company
Agreement: : On 15 December 2006, Shanghai Hidea and Shenyang
Automotive entered into a framework agreement in
relation to the sale of materials and automotive
components by Shanghai Hidea to Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Automotive by Shanghai Hidea on
terms which are no less favourable than the terms
which can be obtained by Shanghai Hidea from
independent third parties for sale of materials and
automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
(iv) Sale of materials and automotive components by Mianyang Ruian to
Shenyang Automotive
Vendor : Mianyang Ruian, a wholly-owned subsidiary of the
Company
Purchaser : Shenyang Automotive, a 51% owned subsidiary of the
Company
Agreement: : On 15 December 2006, Mianyang Ruian and Shenyang
Automotive entered into a framework agreement in
relation to the sale of materials and automotive
components by Mianyang Ruian to Shenyang Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Automotive by Mianyang Ruian on
terms which are no less favourable than the terms
which can be obtained by Mianyang Ruian from
independent third parties for sale of materials and
automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
(v) Sale of materials and automotive components by Shenyang Jindong to
Shenyang Automotive
Vendor : Shenyang Jindong, a 75.50% owned subsidiary of the
Company
Purchaser : Shenyang Automotive, a 51% owned subsidiary of the
Company
Agreement: : On 15 December 2006, Shenyang Jindong and Shenyang
Automotive entered into a framework agreement in
relation to the sale of materials and automotive
components by Shenyang Jindong to Shenyang
Automotive
Pricing policy : The materials and automotive components are to be
provided to Shenyang Automotive by Shenyang Jindong
on terms which are no less favourable than the terms
which can be obtained by Shenyang Jindong from
independent third parties for sale of materials and
automotive components of comparable quality and
quantity. The price will be agreed upon between the
parties for each transaction by reference to the
aforementioned pricing policy through arm's length
negotiations
II. THE REVISED CAPS AND THE NEW CAPS
1. The Caps
The following table sets out the Caps for the Relevant Continuing
Connected Transactions as approved by the Shareholders at 2006 SGM:
Approved amounts in
RMB '000
for the financial years
Relevant Continuing Major type of ending 31 December
Connected Transactions products
2006 2007 2008
(a) Purchases of materials and
automotive components by
members of the Group
(including Shenyang
Automotive) from JinBei
and its subsidiaries and
associates (other than
Shenyang Automotive)
i Purchases of materials Seats, steering 230,000 280,000 350,000
and automotive systems, fuel
components by Shenyang pumps and
Automotive from JinBei driving shafts
and its subsidiaries
and associates (other
than Shenyang
Automotive)
ii Purchases of materials Axles, torsion 280,000 300,000 330,000
and automotive bars, gear
components by Xing boxes, seats
Yuan Dong from JinBei and rubber
and its subsidiaries products
associates (other than
Shenyang Automotive)
iii Purchases of materials Rubber products 4,000 4,800 7,000
and automotive
components by Dongxing
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
iv Purchases of materials Inside cutting, 5,000 6,000 7,000
and automotive outside cutting
components by Ningbo and moulding
Yuming from JinBei
and its subsidiaries
and associates (other
than Shenyang
Automotive)
v Purchases of materials Driving shafts 500 600 700
and automotive
components by ChenFa
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
(b) Purchases of materials
and automotive
components by members
of the Group (other than
Shenyang Automotive)
from Shenyang Automotive
i Purchases of materials Gear boxes 25,000 25,000 25,000
and automotive
components by ChenFa
from Shenyang Automotive
ii Purchases of materials Component parts 35,000 40,000 48,000
and automotive for rear axles
components by Dongxing and steel panels
from Shenyang
Automotive
iii Purchases of materials Engine assembly 104,000 260,000 420,000
and automotive and gear boxes
components by Shenyang
Brilliance Power from
Shenyang Automotive
(c) Sale of automobiles,
materials and automotive
components by members of
the Group to connected
persons
i Sale of automobiles and Press parts 85,000 100,000 120,000
automotive components
by Shenyang Automotive
to JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
ii Sale of materials and Rear axles, 150,000 160,000 170,000
automotive components by press parts,
Dongxing to Shenyang welding parts,
Automotive paints and
special vehicle
modification
iii Sale of materials and Power trains, 2,600,000 2,800,000 3,600,000
automotive components by driving axle
Xing Yuan Dong to assembly, rear
Shenyang Automotive heaters and
water tank
assembly
iv Sale of materials and Power trains 560,000 610,000 720,000
automotive components by
ChenFa to Shenyang
Automotive
v Sale of materials and Power trains 106,000 265,000 424,000
automotive components by
Shenyang Brilliance
Power to Shenyang
Automotive
2. The Revised Caps
The following table sets out the proposed Revised Caps for the Relevant
Continuing Connected Transactions:
Revised estimated amounts
in RMB '000
Relevant Continuing Major type of for the financial years
Connected Transactions products ending 31 December
2006 2007 2008
(Note 1)
(a) Purchases of materials
and automotive
components by members
of the Group (including
Shenyang Automotive)
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
i. Purchases of materials Seats, steering 740,000 1,300,000 1,900,000
and automotive systems, fuel
components by Shenyang pumps and
Automotive from JinBei driving shafts
and its subsidiaries
and associates (other
than Shenyang
Automotive)
ii Purchases of materials Axles, torsion 280,000 320,000 420,000
and automotive bars, gear (Note 2)
components by Xing Yuan boxes, seats
Dong from JinBei and and rubber
its subsidiaries and products
associates (other than
Shenyang Automotive)
iii Purchases of materials Rubber products 18,000 18,000 18,000
and automotive
components by Dongxing
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
iv Purchases of materials Inside cutting, 12,000 16,000 19,000
and automotive outside cutting
components by Ningbo and moulding
Yuming from JinBei and
its subsidiaries and
associates (other than
Shenyang Automotive)
v Purchases of materials Driving shafts 3,600 5,600 6,900
and automotive
components by ChenFa
from JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
(b) Purchases of materials
and automotive
components by members of
the Group (other than
Shenyang Automotive)
from Shenyang Automotive
i Purchases of materials Gear boxes 83,000 83,000 83,000
and automotive
components by ChenFa
from Shenyang
Automotive
ii Purchases of materials Component parts 48,000 60,000 87,000
and automotive for rear axles
components by Dongxing and steel panels
from Shenyang
Automotive
iii Purchases of materials Engine assembly 104,000 880,000 1,130,000
and automotive and gear boxes (Note 2)
components by Shenyang
Brilliance Power from
Shenyang Automotive
(c) Sale of automobiles,
materials and
automotive components
by members of the Group
to connected persons
i Sale of automobiles and Press parts 162,000 280,000 387,000
automotive components
by Shenyang Automotive
to JinBei and its
subsidiaries and
associates (other than
Shenyang Automotive)
ii Sale of materials and Rear axles, 252,000 410,000 560,000
automotive components press parts,
by Dongxing to Shenyang welding parts,
Automotive paints and
special vehicle
modification
iii Sale of materials and Power trains, 2,600,000 3,800,000 5,200,000
automotive components by driving axle (Note2)
Xing Yuan Dong to assembly, rear
Shenyang Automotive heaters and
water tank
assembly
iv Sale of materials and Power trains 1,200,000 1,900,000 2,400,000
automotive components
by ChenFa to Shenyang
Automotive
v Sale of materials and Power trains 106,000 900,000 1,150,000
automotive components
by Shenyang Brilliance
Power to Shenyang Automotive
Notes:
1. The amounts for the financial year ending 31 December 2006 are
set out in the above table for information purposes.
2. The caps for the Relevant Continuing Connected Transactions for
the year ending 31 December 2006 remained the same as the
amounts approved by the Shareholders at the 2006 SGM.
3. The New Caps
The following table sets out the proposed annual caps for the Additional
Continuing Connected Transactions for the two financial years ending 31
December 2008:
Estimated amounts in RMB '000
for the financial years
Additional Continuing Major type of ending 31 December
Connected Transaction products 2007 2008
(a) Purchases of materials and
automotive components by
members of the Group (other
than Shenyang Automotive)
from Shenyang Automotive
i Purchases of materials and Engine assembly 350,000 530,000
automotive components by
Xing Yuan Dong from
Shenyang Automotive
ii Purchases of materials and Automotive 1,500 1,700
automotive components by fitting,
Shenyang Jindong from including center
Shenyang Automotive control locks,
gear oil, core
of front heaters
(b)Sale of materials and
automotive components by
members of the Group to
connected persons
i Sale of materials and Matching 1,100 1,100
automotive components by components
Shenyang Jindong to JinBei including
and its subsidiaries and reinforcement
associates (other than panel of right
Shenyang Automotive) hand side front
wheel mudguide
wing
ii Sale of materials and Front axle, view 138,000 145,000
automotive components by mirror,
Ningbo Ruixing to Shenyang suspension,
Automotive carpet and roof
pad
iii Sale of materials and Product design 6,700 7,300
automotive components by
Shanghai Hidea to Shenyang
Automotive
iv Sale of materials and Cylinder heads 8,500 9,600
automotive components by of engines,
Mianyang Ruian to Shenyang camshafts
Automotive
v Sale of materials and Matching 43,000 47,000
automotive components by components,
Shenyang Jindong to including
Shenyang Automotive anti-impact beam
sub-assembly of
slide door,
back-plate of
anti-impact beam
of slide door,
mounting plate
of antenna,
anti-impact beam
assembly of left
hand side front
door
4. Basis of the Revised Caps and the New Caps
As stated in the circular issued by the Company dated 23 January 2006,
in determining the value of the caps for the Relevant Continuing Connected
Transactions for the three financial years ending 31 December 2008, the
Board had taken into account the following factors:
-- the anticipated growth of the automobile industry in the PRC in the
three financial years ending 31 December 2008, which will lead to an
increase in demand for the existing models of minibuses and sedans
manufactured by the Group;
-- the scheduled launch of new models of minibuses and sedans and new
range of automobiles in the three financial years; and
-- the anticipated sales of minibuses and sedans in the three financial
years, particularly the marketing strategy of the Group to increase
its market share in the domestic sedan market in the PRC.
In addition to the abovementioned factors, the Directors have taken into
account the following factors in arriving at the Revised Caps and the New
Caps:
-- the substantial growth experienced in 2006 and the anticipated
continuous growth of the automobile industry in the PRC in the two
financial years ending 31 December 2008, which will lead to an
increase in demand for products of the Group;
-- the favorable reception of the series of new models of Zhonghua
sedans and Granse minibuses by the market has led to a substantial
revision of the anticipated sales and accordingly the volume of
materials and automotive components required to meet the expected
demand. As stated in the 2006 Interim Report, Shenyang Automotive
sold 37,571 minibuses and 19,398 Zhonghua sedans in the first half of
2006, representing an increase of 27.50% and 321.90% from the
corresponding period in 2005, with the growth of Zhonghua sedans
sales expected to further accelerate subsequent to the first half of
2006;
-- the continued launch of new models of Zhonghua sedans and minibuses
in 2007 and 2008 will require new components which necessitate the
entering into of the Additional Continuing Connected Transactions;
-- the intended increase in the export of minibuses and sedans to
overseas markets such as Europe and Egypt in the financial years 2007
and 2008 which will lead to increase in the purchases and sales
volume of materials and automotive components between the members of
the Group and the connected parties;
-- changes in product mix in response to market demand resulted in
changes in the types of materials and automotive components used and
the monetary value of the purchases of such materials and automotive
components from the connected parties (Relevant Continuing Connected
Transaction (b)(i));
-- Shen Yang Saic Brilliance Automobile Transmission Co., Ltd., one of
the suppliers of main decelerator assemblies became a member of the
JinBei Group in December 2005. As the Caps were calculated by
reference to historical information up to 30 June 2005, purchases
from Shen Yang Saic Brilliance Automobile Transmission Co., Ltd. were
not included in the Cap for Relevant Continuing Connected Transaction
(a)(iii). However, as a result of the said restructuring, the Revised
Caps will include these purchases from Shen Yang Saic Brilliance
Automobile Transmission Co., Ltd.; and
-- as Shenyang Brilliance Power only commenced production in the second
half of 2006, accordingly, the Caps for the Relevant Continuing
Connected Transactions (b)(iii) and (c)(v) have to be revised. It is
also anticipated that with the expected increase in sales of
minibuses and sedans, the financial years 2007 and 2008 will
experience a great rise in demand for the power trains produced by
Shenyang Brilliance Power leading to a significant increase in the
monetary value for the Revised Caps for the years ending 31 December
2007 and 2008.
III. THE FINANCIAL ASSISTANCE
On 15 December 2006,
(a) an agreement for the provision of cross guarantee in respect of
banking facilities in the amount of RMB1.5 billion is entered into
between Shenyang Automotive and Xing Yuan Dong; and
(b) an agreement for provision of cross guarantee in respect of banking
facilities in the amount of RMB500 million is entered into between
Xing Yuan Dong and JinBei.
The banking facilities, that will be granted to each of Shenyang
Automotive, Xing Yuan Dong and JinBei, will be for a term of one year
commencing from 1 January 2007 to 31 December 2007. In the event of the
cross guarantees are to be extended for more than one year along with the
renewal of the banking facilities, the Company has to comply with all the
relevant requirements under Chapter 14A of the Listing Rules. No fee is
payable or charged and no securities will be taken or provided in relation
to the provision of the cross guarantees.
Pursuant to such agreements, Shenyang Automotive and Xing Yuan Dong will
provide cross guarantees to each other's banking facilities in the amount of
RMB1.5 billion and Xing Yuan Dong and JinBei will provide cross guarantees
to each other's banking facilities in the amount of RMB500 million.
Each of JinBei and Shenyang Automotive are connected persons of the
Company. The provision of the cross guarantees between Shenyang Automotive
and Xing Yuan Dong and the cross guarantees between Xing Yuan Dong and
JinBei constitute connected transactions under Rule 14A.13(2)(a)(i), Rule
14A.13(b)(ii) and Rule 14A.14(3) of the Listing Rules and are subject to the
reporting, announcement and independent shareholders' approval requirements
under Rule 14A.63 of the Listing Rules. As the percentage ratios for the
Financial Assistance is more than 25% but less than 100%, the Financial
Assistance also constitutes a major transaction under Chapter 14 of the
Listing Rules and has to be subject to the approval of the Shareholders.
Given that no connected person which is a party to the Financial Assistance
is a Shareholder, all Shareholders are eligible to vote on the ordinary
resolution to be proposed at the Special General Meeting in respect of the
Financial Assistance.
IV. REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS, THE ADDITIONAL
CONTINUING CONNECTED TRANSACTIONS AND THE FINANCIAL ASSISTANCE
Reasons for the Continuing Connected Transactions and the Additional
Continuing Connected Transactions
The Group is engaged in the manufacture and sale of minibuses and
automotive components and sedans. The manufacture and sale of minibuses and
sedans by the Group is carried out by Shenyang Automotive, a 51% owned
subsidiary of the Company. The other subsidiaries of the Company are mainly
engaged in the manufacture and sale of automotive components in the PRC, and
some of such automotive components are sold to Shenyang Automotive for use
in its assembly process as an automobile manufacturer. The Continuing
Connected Transactions and the Additional Continuing Connected Transactions
are carried out in the ordinary and usual course of business of the Group.
The Group purchases raw materials and basic automotive components in its
ordinary and usual course of business to be used in the manufacturing of
automotive components and for processing into core automotive components for
use in automobile manufacturing. The Group will purchase raw materials and
automotive components from the JinBei Group and Shenyang Automotive where
the price offered by such companies are more favourable than other suppliers
in order to control the costs of production of automobiles produced by the
Group.
In addition, the Group also purchases engines and other core automotive
components from the connected persons so as to ensure the quality of the
core automotive components, and also to ensure the technology used in the
production of such core automotive components remained within the control of
the Group. It is believed that control over such core automotive components
will enable the Group to exercise more effective control over the quality of
the automobiles produced by the Group.
As stated in the Announcement, the Continuing Connected Transactions are
entered into to enable the Group (i) to have more control over quality and
technology of automotive components used in its production; (ii) to purchase
materials and automotive components from manufacturers within close
proximity to the production facilities to reduce cost and to enhance
competitiveness of the Group; and (iii) to centralize the purchases of
materials and automotive parts to enjoy better pricing of bulk purchases.
As a result of the various changes in the market conditions explained in
the sub-paragraph headed "Basis of the Revised Caps and the New Caps" above,
particularly encouraging sales performance of the Group's minibuses and
Zhonghua sedans in the first half of 2006, which has recorded an increase of
approximately 28% and 322%, respectively from the corresponding period in
2005, the Board considered it necessary to revise the Caps for the Relevant
Continuing Connected Transactions.
In addition, the Group has plans to launch new models of its minibuses
and Zhonghua sedans in 2007 and 2008 which will require new components and
suppliers. Therefore, for the same underlying reasons for the Continuing
Connected Transactions, it is beneficial for the Group to enter into the
Additional Continuing Connected Transactions.
In the premises, the Directors (including the independent non-executive
Directors) consider the Relevant Continuing Connected Transactions and the
Additional Continuing Connected Transactions to be entered into in the
ordinary and usual course of business and the terms of such transactions as
governed by the framework agreements, the Revised Caps and the New Caps to
be fair and reasonable in so far as the Shareholders are concerned.
Reasons for the Financial Assistance
With the tightening of the lending regulations of the banks in the PRC,
it is becoming a common practice for banks in the PRC to request for either
a guarantee or securities from a third party to secure banking facilities
granted to borrowers. Shenyang Automotive is the subsidiary within the Group
principally engaged in the manufacturing of automobiles and automotive
components. Shenyang Automotive will utilize its banking facilities to
finance the increase in demand for newly introduced model of sedans, the
expansion of its production capacity in anticipation of the scheduled launch
of new models of minibuses and sedans and the business strategy of
increasing the market share of the Group in the domestic sedan market in the
PRC.
JinBei's banking facilities will be utilized by JinBei as working
capital to improve the quality and volume of the automotive components
currently produced by the JinBei Group and the expansion of its product
range and production facilities. Since members of the JinBei Group are
suppliers of the Group, the Directors believe that the Group will be able to
benefit from the improved quality of the automotive components manufactured
by the JinBei Group and with the anticipated launch of the new models of
minibuses and sedans, the Group will also be able to benefit from the
improvement in production facilities and increase in product range of the
JinBei Group.
Xing Yuan Dong is one of the subsidiaries of Group engaged in the
manufacturing of automotive components. Xing Yuan Dong's banking facilities
secured by the guarantees provided by JinBei and Shenyang Automotive will be
utilized by Xing Yuan Dong to improve its production facilities in order to
support the substantial increase in production volume and the future launch
of new models of minibuses and sedans.
In the premises, the Directors consider the provision of the financial
assistance to and from the connected persons of the Company to be in the
interest of the Group and that the terms of the agreements in relation to
the provision of the cross guarantees to be fair and reasonable in so far as
the Shareholders are concerned.
V. INCREASE IN AUTHORISED SHARE CAPITAL AND AMENDMENT TO BYE-LAWS
References is made to the announcement made by the Company dated 9 May
2006 and the circular issued by the Company dated 30 May 2006 in relation to
the issue of the Convertible Bonds 2011 in an aggregate amount of
approximately US$183 million by Brilliance China Finance Limited, a wholly-
owned subsidiary of the Company.
It is one of the terms of the Convertible Bonds 2011 that the
Conversion Price shall be adjusted on the First Reset Date and the Second
Reset Date if the Average Market Price per Share for 20 consecutive days on
which the Stock Exchange is open for trading immediately prior to the First
Reset Date and the Second Reset Date is less than the conversion price on
the relevant reset date, provided that the adjusted conversion price shall
not be less than 68% and 75%, respectively, of the conversion price
prevailing at the First Reset Date and the Second Reset Date. Based on the
initial Conversion Price of HK$1.93 and the maximum reset rate, the lowest
possible conversion price will be reset to HK$0.9843 and the maximum number
of Shares to be issued by the Company upon full conversion of the
Convertible Bonds 2011 at the lowest possible conversion price will be
approximately 1,438,600,000 Shares.
As at the date of this announcement, the Company has an authorised share
capital of US$50,000,000 divided into 5,000,000,000 Shares and a total of
3,668,390,900 Shares in issue. Taking into account approximately
1,438,600,000 Shares that may be issued upon full conversion of the
Convertible Bonds 2011 at the lowest possible conversion price of HK$0.9843
per Share, the Company will have an issued share capital of about
US$51,069,909. In the event of a full exercise of the conversion rights
attaching to the outstanding Convertible Bonds 2011 at the lowest possible
conversion price of HK$0.9843 per Share, the Company will not have
sufficient authorised share capital for the issue and allotment of the
additional Shares. As such, the Board proposed to increase the authorised
share capital of the Company from US$50,000,000 to US$80,000,000 by the
creation of an additional 3,000,000,000 Shares of US$0.01 each. The proposed
increase of authorised share capital of the Company is subject to
Shareholders' approval by way of an ordinary resolution to be proposed at
the Special General Meeting.
Subject to the approval of the increase in authorised share capital by
the Shareholders, the Board proposed to amend bye-law 6.(A) of the Bye-Laws
of the Company to reflect the increased authorised share capital of the
Company. The proposed amendment to the Bye-Laws is subject to the approval
of the Shareholders by way of a special resolution to be proposed at the
Special General Meeting.
VI. GENERAL
Each of JinBei, its subsidiaries and associates (other than Shenyang
Automotive) and Shenyang Automotive are connected persons of the Company
within the meaning of the Listing Rules. Accordingly, the purchases of
materials and automotive components, the sale of automobiles, materials and
automotive components and the provision of financial assistance by/to the
Group to/by JinBei, its subsidiaries and associates (other than Shenyang
Automotive) and Shenyang Automotive constitute connected transactions under
Chapter 14A of the Listing Rules. The Financial Assistance also constitutes
a major transaction under Chapter 14 of the Listing Rules.
An Independent Board Committee has been established to advise the
Shareholders as to (i) the Revised Caps; (ii) the Additional Continuing
Connected Transactions and the New Caps; and (iii) the Financial Assistance.
An independent financial adviser will be appointed to advise the
Independent Board Committee and the Shareholders in respect of the Revised
Caps, the Additional Continuing Connected Transactions and the New Caps and
the Financial Assistance. Given that no connected person which is a party to
the Relevant Continuing Connected Transactions, the Additional Continuing
Connected Transactions and Financial Assistance is a Shareholder, all
Shareholders are eligible to vote on the ordinary resolutions to be proposed
at the Special General Meeting in respect of the Revised Caps, the
Additional Connected Transactions and the New Caps and the Financial
Assistance.
A circular containing, amongst other things, details of the Relevant
Continuing Connected Transactions, the Revised Caps, the Additional
Continuing Connected Transactions, the New Caps, the Financial Assistance
and the proposed increase in authorised share capital and amendment to the
Bye-Laws, letters from the Independent Board Committee and from the
Independent Financial Adviser and a notice to Shareholders convening the
Special General Meeting to approve (i) the Revised Caps; (ii) the
Additional Continuing Connected Transactions and the New Caps; (iii) the
Financial Assistance; (iv) the proposed increase in authorised share
capital; and (v) the proposed amendment to the Bye-Laws will be dispatched
to Shareholders as soon as practicable.
VII. DEFINITIONS
In this announcement, unless otherwise defined, terms used herein shall
have the following meanings:
"2006 Interim Report" the unaudited consolidated interim financial
statements of the Group for the six months
ended 30 June 2006;
"2006 Interim Results" the results of the Group for the six months
ended 30 June 2006;
"2006 SGM" a special general meeting held on 10
February 2006 to approve, among others, the
Continuing Connected Transactions and the
Caps;
"Additional Continuing the transactions between members of the
Connected Transactions" Group and the connected persons as set out
in the sub- paragraph headed "The Continuing
Connected Transactions - The Additional
Continuing Connected Transactions" in this
announcement;
"Announcement" the announcement made by the Company dated
16 December 2005 in relation to, among
others, the Continuing Connected
Transactions and the Caps;
"associates" has the meaning ascribed thereto in the
Listing Rules;
"Average Market Price" the average of the closing price of the
Shares on the Stock Exchange;
"Board" the board of Directors;
"Bye-Laws" the bye-laws of the Company;
"Caps" the estimated annual monetary value of the
Continuing Connected Transactions for the
three financial years ending 31 December
2008 as set out in the sub-paragraph headed
"The Caps - Proposed annual caps" in the
Announcement and approved by the
Shareholders at the 2006 SGM;
"ChenFa" Shenyang ChenFa Automobile Component Co.,
Ltd., a wholly foreign owned enterprise
established in the PRC on 19 June 2003 and a
wholly-owned subsidiary of the Company. The
principal activities of ChenFa are the
development, manufacture and sale of power
trains in the PRC;
"Company" Brilliance China Automotive Holdings
Limited, an exempted company incorporated in
Bermuda with limited liability, whose
securities are listed on the Stock Exchange
and the New York Stock Exchange, Inc.;
"connected persons" has the meaning ascribed thereto in the
Listing Rules;
"Continuing Connected the transactions between members of the
Transactions" Group and the connected persons as set out
in the paragraph headed "The Continuing
Connected Transactions" in the Announcement;
"Conversion Price" HK$1.93 per Share (subject to adjustment);
" Convertible Bonds 2011" convertible bonds in an aggregate principal
amount of approximately US$183 million
issued by Brilliance China Finance Limited
on 7 June 2006 and maturing on 7 June 2011;
"Directors" the directors of the Company;
"Dongxing" Shenyang Brilliance Dongxing Automotive
Component Co., Ltd., a wholly foreign owned
enterprise established in the PRC on 17
March 1999 and a wholly-owned subsidiary of
the Company. The principal activities of
Dongxing are the manufacture and trading of
automotive components and remodelling
minibuses and sedans in the PRC;
"Financial Assistance" the financial assistance provided to/by the
Group by/to connected persons as set out in
the paragraph headed "The Financial
Assistance" in this announcement;
"First Reset Date" 10 March 2007;
"Group" the Company and its subsidiaries;
"Independent Board the independent committee of Board,
Committee" comprising of Mr. Xu Bingjin, Mr. Song Jian
and Mr. Jiang Bo, all of whom are
independent non-executive Directors, formed
to advise the Shareholders as to (i) the
Revised Caps; (ii) the Additional Continuing
Connected Transactions and the New Caps; and
(iii) the Financial Assistance;
"Independent Financial an independent financial adviser to be
Adviser" appointed for the purpose of advising the
Independent Board Committee and the
Shareholders as to (i) the Revised Caps;
(ii) the Additional Continuing Connected
Transactions and the New Caps; and (iii) the
Financial Assistance;
"JinBei" Shenyang JinBei Automotive Company Limited,
a company incorporated in the PRC on 14 May
1984 whose shares are listed on the Shanghai
Stock Exchange and holder of the 49% equity
interests in Shenyang Automotive;
"JinBei Group" JinBei and its subsidiaries and associates,
other than Shenyang Automotive;
"Listing Rules" the Rules Governing the Listing of
Securities on the Stock Exchange;
"Mianyang Ruian" Mianyang Brilliance Ruian Automotive
Components Co., Ltd., a wholly foreign owned
enterprise established in the PRC on 3 July
2000 and a wholly-owned subsidiary of the
Company. The principal activities of
Mianyang Ruian are manufacture and trading
of automotive components;
"New Caps" the estimated annual monetary value of the
Additional Continuing Connected Transactions
for the two financial years ending 31
December 2008 as set out in the
sub-paragraph headed "The New Caps" in this
announcement;
"Ningbo Ruixing" Ningbo Brilliance Ruixing Auto Components
Co., Ltd., a wholly foreign owned enterprise
established in the PRC on 9 June 2000 and a
wholly-owned subsidiary of the Company. The
principal activities of Ningbo Ruixing are
the manufacture and trading of automotive
components;
"Ningbo Yuming" Ningbo Yuming Machinery Industrial Co.,
Ltd., a wholly foreign owned joint venture
established in the PRC on 14 August 1993.
Ningbo Yuming is currently a wholly foreign
owned enterprise in the PRC and a wholly
owned subsidiary of the Company. The
principal activities of Ningbo Yuming are
the manufacture and sale of automotive
components in the PRC;
"PRC" The People's Republic of China and for the
sole purpose of this announcement shall
exclude Hong Kong, Macau Special
Administrative Region and Taiwan;
"RMB" renminbi, the lawful currency of the PRC;
"Relevant Continuing the transactions between members of the
Connected Transactions" Group and the connected persons as set out
in the paragraph headed "The Relevant
Continuing Connected Transactions" in this
announcement;
"Revised Caps" the revised estimated annual monetary value
of the Relevant Continuing Connected
Transactions for the two financial years
ending 31 December 2008 as set out in the
sub-paragraph headed "The Revised Caps" in
this announcement;
"Second Reset Date" 10 March 2008;
"Shanghai Hidea" Shanghai Hidea Auto Design Co., Ltd., an
equity joint venture enterprise established
in the PRC on 16 April 2004 and in which the
Company has an effective equity interests of
63.25%. The principal activities of Shanghai
Hidea are design of automobiles;
"Shareholder(s)" holder(s) of Shares of the Company;
"Shares" shares of US$0.01 each of the Company;
"Shenyang Automotive" Shenyang Brilliance JinBei Automobile Co.,
Ltd., a sino-foreign equity joint venture
established in the PRC on 19 July 1991 and
whose equity interests are owned as to 51%
by the Company and as to 49% by JinBei. The
principal activities of Shenyang Automotive
are the manufacture, assembly and sale of
minibuses and sedans as well as automotive
components in the PRC;
"Shenyang Brilliance Shenyang Brilliance Power Train Machinery
Power" Co., Ltd.), an equity joint venture
established in the PRC on 13 December 2004
in which the Company has an effective equity
interest of 75.01%. The principal activities
of Shenyang Brilliance Power are the
manufacture and sale of power trains in the
PRC;
"Shenyang Jindong" Shenyang Jindong Development Co., Ltd., an
equity joint venture established in the PRC
on 18 April 2002 in which the Company has an
effective equity interest of 75.50%. The
principal activities of Shenyang Jindong are
trading of automotive components;
"Special General Meeting" the special general meeting of the Company
to be convened for the purpose of
considering, and if thought fit, approving
(i) the Revised Caps; (ii) the Additional
Continuing Connected Transactions and the
New Caps; (iii) the Financial Assistance;
(iv) the proposed increased in authorised
share capital; and (v) the proposed
amendment to the Bye-Laws;
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"US$" United States dollars, the lawful currency
of the United States of America; and
"Xing Yuan Dong" Shenyang XingYuanDong Automobile Component
Co., Ltd., a wholly foreign owned enterprise
established in the PRC on 12 October 1998
and a wholly-owned subsidiary of the
Company. The principal activities of Xing
Yuan Dong are the manufacture and trading of
automotive components in the PRC.
As at the date of this announcement, the Board comprises five executive
Directors, Mr. Wu Xiao An (also known as Mr. Ng Siu On) (Chairman), Mr. Qi
Yumin (Chief Executive Officer), Mr. He Guohua, Mr. Wang Shiping and Mr. Lei
Xiaoyang (Chief Financial Officer); and three independent non-executive
Directors, Mr. Xu Bingjin, Mr. Song Jian and Mr. Jiang Bo.
By order of the Board
Brilliance China Automotive Holdings Limited
Wu Xiao An
(also known as Ng Siu On)
Chairman
Hong Kong, 15 December 2006
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
CONTACTS:
Lisa Ng
Brilliance China Automotive Holdings Limited
t: +852-2523-7227
Carol Lau
Weber Shandwick in Hong Kong
t: +852-2533-9981