Brilliance China Automotive Holdings Limited Announcement
HONG KONG, Dec. 16, 2005 /Xinhua-PRNewswire/ -- The following was released today by Brilliance China Automotive Holdings Limited :
BRILLIANCE CHINA AUTOMOTIVE HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
(Stock Code: 1114)
CONTINUING CONNECTED TRANSACTIONS
AND
PROVISION OF FINANCIAL ASSISTANCE TO/BY CONNECTED PERSONS
The Waiver in respect of the Continuing Connected Transactions will expire on 31 December 2005. The connected transactions covered by the Waiver are set out in the paragraph headed "The Continuing Connected Transactions - Background of the Continuing Connected Transactions" below. The Directors wish to continue to conduct some of the connected transactions covered by the Waiver and to undertake other continuing connected transactions for the period from 1 January 2006 to 31 December 2008 including:
- 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);
- sale of materials and automotive components by Xing Yuan Dong to
JinBei and its subsidiaries and associates (other than Shenyang
Automotive); and
- sale of materials and automotive components by each of Ningbo Yuming,
Dongxing, Xing Yuan Dong, ChenFa and Shenyang Brilliance Power to
Shenyang Automotive.
Particulars of the materials and automotive components to be purchased from/sold to the connected parties are set out in the paragraph headed "The Caps" below.
Shenyang Automotive and Xing Yuan Dong will provide cross guarantees to each other's banking facilities in the amount of RMB350 million and Xing Yuan Dong and JinBei will provide cross guarantees to each other's banking facilities in the amount of RMB385 million for a period of one year commencing from 1 January 2006 to 31 December 2006.
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 discloseable transaction under Chapter 14 of the Listing Rules.
An Independent Board Committee has been established to advise the Shareholders as to (i) the terms of the Continuing Connected Transactions and the caps on the relevant Continuing Connected Transactions for the three financial years ending 31 December 2008; and (ii) the Financial Assistance.
The Company has appointed Partners Capital International Limited as the independent financial adviser to advise the Independent Board Committee and the Shareholders in respect of the Continuing Connected Transactions and the Financial Assistance. Given that no connected person which is a party to the 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 Continuing Connected Transactions and the relevant caps for the Continuing Connected Transactions for the three financial years ending 31 December 2008 and the Financial Assistance.
A circular containing, amongst other things, details of the terms of the Continuing Connected Transactions and the Financial Assistance, letters from the Independent Board Committee and from the Independent Financial Adviser and a notice to Shareholders convening the Special General Meeting to approve the terms of the Continuing Connected Transactions, the caps for the three financial years ending 31 December 2008 on the relevant Continuing Connected Transactions and the Financial Assistance will be dispatched to Shareholders as soon as practicable.
THE CONTINUING CONNECTED TRANSACTIONS Background of the Continuing Connected Transactions
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.
In 2003, the Company has obtained the Waiver from the Stock Exchange from strict compliance with the requirements of the then Chapter 14 of the Listing Rules in respect of the following transactions for the three financial years ending 31 December 2005:
(1) purchases of materials and automotive components by each of Shenyang
Automotive, Xing Yuan Dong and Dongxing from the JinBei Group;
(2) purchases of materials and automotive components by Ningbo Yuming from
subsidiaries and associates of a third party who is no longer a
connected person of the Company within the meaning of Listing Rules
(the "Third Party");
(3) sale of automobiles and automotive components by Shenyang Automotive
to the JinBei Group; and
(4) sale of automotive components by Dongxing to Tieling Brilliance
Rubber Products Company Limited*.
The Group will continue with the connected transactions referred to in (1), (3) and (4) above in its ordinary course of business for the three financial years ending 31 December 2008. With the completion of the acquisition of the remaining 49% interest in Ningbo Yuming by the Group in November 2004 (details of the acquisition was disclosed in an announcement made by the Company dated 19 October 2004) and the disposal of the interest of the Third Party in the various subsidiaries and associates which the Group had transactions with to the JinBei Group, the transactions referred to in (2) above will continue in the form of transactions between Ningbo Yuming and the JinBei Group (please refer to Continuing Connected Transaction A.4 below). ChenFa which was established in 2003 to develop, manufacture and sell power trains and Shenyang Brilliance Power which was established in 2004 to manufacture and sell power trains will also enter into transactions with the JinBei Group and Shenyang Automotive in the three financial years ending 31 December 2008 (please refer to Continuing Connected Transactions A.5, B.1, B.3, C.6 and C.7 below).
Requirements of the Listing Rules
JinBei owns 49% of the equity interests of Shenyang Automotive, a 51% owned subsidiary of the Company. Being a substantial shareholder of a subsidiary of the Company, JinBei is considered as a connected person of the Company under the Listing Rules. The subsidiaries and associates of JinBei are associates of JinBei within the meaning of the Listing Rules and are accordingly considered as connected persons of the Company. Therefore, transactions between members of the Group (including Shenyang Automotive) on one part and JinBei and its subsidiaries and associates (other than Shenyang Automotive) on the other part constitute connected transactions under the Listing Rules.
Shenyang Automotive is 49% owned by JinBei, a connected person of the Company, and is an associate of a connected person of the Company. Accordingly, Shenyang Automotive is a connected person of the Company under the Listing Rules. Therefore, transactions between members of the Group (other than Shenyang Automotive) on one part and Shenyang Automotive on the other part constitute connected transactions under the Listing Rules.
Transactions between the Group and each of JinBei and Shenyang Automotive constitute connected transactions under Rule 14A.13(1)(a) of the Listing Rules and should be subject to reporting, announcement and shareholders' approval requirements as set out in Rule 14A.35 of the Listing Rules. Given that no connected person which is a party to the Continuing Connected Transactions 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 Continuing Connected Transactions and the relevant caps for the Continuing Connected Transactions for the three financial years ending 31 December 2008. The Continuing Connected Transactions
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)
1. Purchases of materials and automotive components by Shenyang
Automotive from JinBei and its subsidiaries and associates
(other than Shenyang Automotive)
Vendors: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Jin Ya
Drive Shaft Company Limited*, Shenyang JinBei Jiangsen
Automobile Internal Accessories Company Limited*, Shenyang
JinBei Automobile Manufacture Company Limited*, Tieling
Brilliance Rubber Products Company Limited*,Shanghai Minth
Accessories Company Limited*, Ningbo Minth Machines Co. Ltd.*
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, Shenyang Automotive and JinBei entered
into a framework agreement in relation to the purchases of
materials and automotive components by Shenyang Automotive
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive)
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by JinBei and its subsidiaries and
associates (other than Shenyang Automotive) on terms which are
no less favourable than the terms which can be obtained by
Shenyang Automotive 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
2. Purchases of materials and automotive components by Xing Yuan
Dong from JinBei and its subsidiaries and associates (other
than Shenyang Automotive)
Vendors: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Shenyang
JinBei Jiangsen Automobile Internal Accessories Company
Limited*, Jin Ya Drive Shaft Company Limited*,Tieling
Brilliance Rubber Products Company Limited*, Ningbo Minth
Machines Co. Ltd.*
Purchaser: Xing Yuan Dong, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, Xing Yuan Dong and JinBei entered into a
framework agreement in relation to the purchases of materials
and automotive components by Xing Yuan Dong from JinBei and
its subsidiaries and associates (other than Shenyang
Automotive)
Pricing The materials and automotive components are to be provided to
policy: Xing Yuan Dong by JinBei and its subsidiaries and associates
(other than 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
3. Purchases of materials and automotive components by Dongxing
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive)
Vendors: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Shenyang
JinBei Jiangsen Automobile Internal Accessories Company
Limited*, Tieling Brilliance Rubber Products Company Limited*,
Ningbo Minth Machines Co. Ltd.*
Purchaser: Dongxing, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, Dongxing and JinBei entered into a
framework agreement in relation to the purchases of materials
and automotive components by Dongxing from JinBei and its
subsidiaries and associates (other than Shenyang Automotive)
Pricing The materials and automotive components are to be provided to
policy: Dongxing by JinBei and its subsidiaries and associates (other
than Shenyang Automotive) on terms which are no less
favourable than the terms which can be obtained by Dongxing
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
4. Purchases of materials and automotive components by Ningbo
Yuming from JinBei and its subsidiaries and associates (other
than Shenyang Automotive)
Vendors: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Shanghai
Minth Accessories Company Limited*, Ningbo Minth Machines Co.
Ltd.*
Purchaser: Ningbo Yuming, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, Ningbo Yuming and JinBei entered into a
framework agreement in relation to the purchases of materials
and automotive components by Ningbo Yuming from JinBei and its
subsidiaries and associates (other than Shenyang Automotive)
Pricing The materials and automotive components are to be provided to
policy: Ningbo Yuming by JinBei and its subsidiaries and associates
(other than Shenyang Automotive) on terms which are no less
favourable than the terms which can be obtained by Ningbo
Yuming 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
5. Purchases of materials and automotive components by ChenFa
from JinBei and its subsidiaries and associates (other than
Shenyang Automotive)
Vendors: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Shenyang
JinBei Jiangsen Automobile Internal Accessories Company
Limited*, Jin Ya Drive Shaft Company Limited*, Tieling
Brilliance Rubber Products Company Limited*
Purchaser: ChenFa, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, ChenFa and JinBei entered into a
framework agreement in relation to the purchases of materials
and automotive components by ChenFa from JinBei and its
subsidiaries and associates (other than Shenyang Automotive)
Pricing The materials and automotive components are to be provided to
policy: ChenFa by JinBei and its subsidiaries and associates (other
than Shenyang Automotive) on terms which are no less
favourable than the terms which can be obtained by ChenFa 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. Purchases of materials and automotive components by members of the
Group (other than Shenyang Automotive) from Shenyang Automotive
1. Purchases of materials and automotive components by ChenFa
from Shenyang Automotive
Vendor: Shenyang Automotive, a 51% owned subsidiary of the Company
Purchaser: ChenFa, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, Shenyang Automotive and ChenFa entered
into a framework agreement in relation to the purchases of
materials and automotive components by ChenFa from Shenyang
Automotive
Pricing The materials and automotive components are to be provided to
policy: ChenFa by Shenyang Automotive on terms which are no less
favourable than the terms which can be obtained by ChenFa 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
2. Purchases of materials and automotive components by Dongxing
from Shenyang Automotive
Vendor: Shenyang Automotive, a 51% owned subsidiary of the Company
Purchaser: Dongxing, a wholly owned subsidiary of the Company
Agreement: On 16 December 2005, Shenyang Automotive and Dongxing entered
into a framework agreement in relation to the purchases of
materials and automotive components by Dongxing from Shenyang
Automotive
Pricing The materials and automotive components are to be provided to
policy: Dongxing by Shenyang Automotive on terms which are no less
favourable than the terms which can be obtained by Dongxing
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
3. Purchases of materials and automotive components by Shenyang
Brilliance Power from Shenyang Automotive
Vendor: Shenyang Automotive, a 51% owned subsidiary of the Company
Purchaser: Shenyang Brilliance Power, a 75.01% owned subsidiary of the
Company
Agreement: On 16 December 2005, Shenyang Automotive and Shenyang
Brilliance Power entered into a framework agreement in
relation to the purchases of materials and automotive
components by Shenyang Brilliance Power from Shenyang
Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Brilliance Power by Shenyang Automotive on terms
which are no less favourable than the terms which can be
obtained by Shenyang Brilliance Power 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
C. Sale of automobiles, materials and automotive components by members of
the Group to connected persons
1. Sale of automobiles and automotive components by Shenyang
Automotive to JinBei and its subsidiaries and associates
(other than Shenyang Automotive)
Vendor: Shenyang Automotive, a 51% owned subsidiary of the Company
Purchasers: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Shenyang
JinBei Automobile Manufacture Company Limited*, Shenyang
JinBei Jiangsen Automobile Internal Accessories Company
Limited*,Tieling Brilliance Rubber Products Company Limited*
Agreement: On 16 December 2005, Shenyang Automotive and JinBei entered
into a framework agreement in relation to the sale of
automobiles and automotive components by Shenyang Automotive
to JinBei and its subsidiaries and associates (other than
Shenyang Automotive)
Pricing The automobiles and automotive components are to be provided
policy: to JinBei and its subsidiaries and associates (other than
Shenyang Automotive) by Shenyang Automotive on terms which are
no less favourable than the terms which can be obtained by
Shenyang Automotive from independent third parties for sale of
automobiles 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
2. Sale of materials and automotive components by Xing Yuan Dong
to JinBei and its subsidiaries and associates (other than
Shenyang Automotive)
Vendor: Xing Yuan Dong, a wholly owned subsidiary of the Company
Purchasers: JinBei and its subsidiaries and associates (other than
Shenyang Automotive), including but not limited to, Ningbo
Minth Machines Co. Ltd.*
Agreement: On 16 December 2005, Xing Yuan Dong and JinBei entered into a
framework agreement in relation to the sale of materials and
automotive components by Xing Yuan Dong to JinBei and its
subsidiaries and associates (other than Shenyang Automotive)
Pricing The materials and automotive components are to be provided to
policy: JinBei and its subsidiaries and associates (other than
Shenyang Automotive) by Xing Yuan Dong on terms which are no
less favourable than the terms which can be obtained by Xing
Yuan Dong 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
3. Sale of materials and automotive components by Ningbo Yuming
to Shenyang Automotive
Vendor: Ningbo Yuming, a wholly owned subsidiary of the Company
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, Ningbo Yuming and Shenyang Automotive
entered into a framework agreement in relation to the sale of
materials and automotive components by Ningbo Yuming to
Shenyang Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by Ningbo Yuming on terms which are no
less favourable than the terms which can be obtained by Ningbo
Yuming 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
4. Sale of materials and automotive components by Dongxing to
Shenyang Automotive
Vendor: Dongxing, a wholly owned subsidiary of the Company
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, Dongxing and Shenyang Automotive entered
into a framework agreement in relation to the sale of
materials and automotive components by Dongxing to Shenyang
Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by Dongxing on terms which are no less
favourable than the terms which can be obtained by Dongxing
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
5. Sale of materials and automotive components by Xing Yuan Dong
to Shenyang Automotive
Vendor: Xing Yuan Dong, a wholly owned subsidiary of the Company
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, Xing Yuan Dong and Shenyang Automotive
entered into a framework agreement in relation to the sale of
materials and automotive components by Xing Yuan Dong to
Shenyang Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by Xing Yuan Dong on terms which are no
less favourable than the terms which can be obtained by Xing
Yuan Dong 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
6. Sale of materials and automotive components by ChenFa to Shenyang
Automotive
Vendor: ChenFa, a wholly owned subsidiary of the Company
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, ChenFa and Shenyang Automotive entered
into a framework agreement in relation to the sale of
materials and automotive components by ChenFa to Shenyang
Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by ChenFa on terms which are no less
favourable than the terms which can be obtained by ChenFa 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
7. Sale of materials and automotive components by Shenyang
Brilliance Power to Shenyang Automotive
Vendor: Shenyang Brilliance Power, a 75.01% owned subsidiary of the
Company
Purchaser: Shenyang Automotive, a 51% owned subsidiary of the Company
Agreement: On 16 December 2005, Shenyang Brilliance Power and Shenyang
Automotive entered into a framework agreement in relation to
the sale of materials and automotive components by Shenyang
Brilliance Power to Shenyang Automotive
Pricing The materials and automotive components are to be provided to
policy: Shenyang Automotive by Shenyang Brilliance Power on terms
which are no less favourable than the terms which can be
obtained by Shenyang Brilliance Power 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
Caps
Historical figures
Historical figures for
Continuing in RMB the financial years
Connected Major type ended 31 December
Transaction of products 2002 2003 2004
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)
1. Purchases of Seats,
materials and steering systems,
automotive fuel pumps
components by and driving
Shenyang shafts
Automotive
from JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 154,029,308 327,980,732 232,977,626
2. Purchases Axles,
of materials torsion bars,
and automotive gear boxes,
components seats and
by Xing Yuan Dong rubber products
from JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 81,201,548 140,213,262 67,306,264
3. Purchases of Rubber products
materials and
automotive
components by
Dongxing from
JinBei and its
subsidiaries and
associates
(other than
Shenyang Automotive) 1,323,875 2,503,835 2,204,383
4. Purchases of Inside cutting,
materials and outside cutting
automotive and moulding
components by
Ningbo Yuming
from JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 4,773,922 14,336,246 9,782,106
5. Purchases of Driving shafts
materials and
automotive
components by
ChenFa from
JinBei and its
subsidiaries and
associates (other
than Shenyang
Automotive) Nil Nil 23,048,633
B. Purchases of
materials and
automotive
components by
members of the
Group (other than
Shenyang Automotive)
from Shenyang Automotive
1. Purchases of Gear boxes
materials and
automotive
components by
ChenFa from
Shenyang Automotive Nil Nil 31,487,841
2. Purchases of Component parts
materials and for rear axles
automotive and steel panels
components by
Dongxing from
Shenyang Automotive Nil 25,136.50 6,557,520.29
3. Purchases of Nil
materials and
automotive
components by
Shenyang
Brilliance Power
from Shenyang
Automotive Nil Nil Nil
C. Sale of automobiles,
materials and
automotive components
by members of the
Group to connected
persons
1. Sale of Press parts
automobiles and
automotive
components by
Shenyang
Automotive to
JinBei and its
subsidiaries and
associates
(other than
Shenyang
Automotive) 5,633,042 84,027,293 28,863,715
2. Sale of Engines,
materials and gear boxes
automotive and seats
components by
Xing Yuan Dong
to JinBei and
its subsidiaries
and associates
(other than
Shenyang
Automotive) Nil 17,978 Nil
3. Sale of Side windows,
materials and floor depression bars
automotive and moulding
components by
Ningbo Yuming
to Shenyang
Automotive 289,341,374 186,742,791 143,984,688
4. Sale of Rear axles,
materials and press parts,
automotive welding parts,
components by paints and
Dongxing to special vehicle
Shenyang modification
Automotive 164,432,496 171,458,295 124,200,720
5. Sale of Power trains,
materials and driving axle
assembly,
automotive rear heaters
components by and
Xing Yuan Dong water tank
assembly
to Shenyang
Automotive 5,611,925,786 4,857,261,365 2,626,065,816
6. Sale of Power trains
materials and
automotive
components by
ChenFa to
Shenyang
Automotive Nil Nil 370,922,166
7. Sale of Nil
materials
and automotive
components by
Shenyang Brilliance
Power to
Shenyang Automotive Nil Nil Nil
Proposed annual caps
Estimated amounts
Continuing in RMB the financial years
Connected Major type ended 31 December
Transaction of 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)
1. Purchases of Seats,
materials and steering systems,
automotive fuel pumps
components by and
Shenyang driving shafts
Automotive from
JinBei and its
subsidiaries and
associates (other
than Shenyang
Automotive) 230,000,000 280,000,000 350,000,000
2. Purchases of Axles,
materials and torsion bars,
automotive gear boxes,
components by seats and
Xing Yuan Dong rubber products
from JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 280,000,000 300,000,000 330,000,000
3. Purchases of Rubber products
materials and
automotive
components by
Dongxing from
JinBei and its
subsidiaries and
associates (other
than Shenyang
Automotive) 4,000,000 4,800,000 7,000,000
4. Purchases of Inside cutting,
materials and outside cutting
automotive and moulding
components by
Ningbo Yuming
from JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 5,000,0000 6,000,000 7,000,000
5. Purchases of Driving shafts
materials and
automotive
components by
ChenFa from
JinBei and its
subsidiaries and
associates (other
than Shenyang
Automotive) 500,000 600,000 700,000
B. Purchases of
materials and
automotive
components by
members of the
Group (other
than Shenyang
Automotive) from
Shenyang Automotive
1. Purchases of Gear boxes
materials and
automotive
components by
ChenFa from
Shenyang Automotive 25,000,000 25,000,000 25,000,000
2. Purchases of Component parts
materials and for rear axles
automotive and steel panels
components by
Dongxing from
Shenyang Automotive 35,000,000 40,000,000 48,000,000
3. Purchases of Power trains
materials and and gear boxes
automotive
components by
Shenyang Brilliance
Power from
Shenyang Automotive 104,000,000 260,000,000 420,000,000
C. Sale of
automobiles,
materials and
automotive
components by
members of the
Group to
connected persons
1. Sale of Press parts
automobiles and
automotive
components by
Shenyang Automotive
to JinBei and its
subsidiaries and
associates (other
than Shenyang
Automotive) 85,000,000 100,000,000 120,000,000
2. Sale of Engines,
materials and gear boxes
automotive and seats
components by
Xing Yuan Dong
to JinBei and
its subsidiaries
and associates
(other than
Shenyang Automotive) 500,000,000 550,000,000 600,000,000
3. Sale of Side windows,
materials and floor depression bars
automotive and moulding
components by
Ningbo Yuming
to Shenyang
Automotive 145,000,000 155,000,000 175,000,000
4. Sale of Rear axles,
materials and press parts,
automotive welding parts,
components by paints and
Dongxing to special vehicle
Shenyang modification
Automotive 150,000,000 160,000,000 170,000,000
5. Sale of Power trains,
materials and driving axle
automotive assembly,
components by rear heaters
Xing Yuan Dong and water
to Shenyang tank assembly
Automotive 2,600,000,000 2,800,000,000 3,600,000,000
6. Sale of Power trains
materials and
automotive
components by
ChenFa to
Shenyang
Automotive 560,000,000 610,000,000 720,000,000
7. Sale of Power trains
materials and
automotive
components by
Shenyang
Brilliance Power
to Shenyang
Automotive 106,000,000 265,000,000 424,000,000
Basis of the caps
In determining the value of the caps for the Continuing Connected Transactions for the three financial years ending 31 December 2008, the Board has 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 existing minibuses and sedans
and new range of automobiles in the coming three financial years; and
- the anticipated sales of minibuses and sedans in the coming three
financial years, particularly the marketing strategy of the Group to
increase its market share in the domestic sedan market in the PRC in
the year 2006.
It is expected that the launch of the new models of existing products and new range of products and the anticipated increase in sales of minibuses and sedans in the coming three financial years will lead to an increase in production of minibuses and sedans and accordingly, an increase in demand for materials and automotive components, the subject of the Continuing Connected Transactions. Materials purchased will be used to produce automotive components and automotive components purchased will be used for further processing into core automotive components. The automotive components will be used in the production of automobiles by Shenyang Automotive.
ChenFa was established in 2003 to develop, manufacture and sell power trains and Shenyang Brilliance Power was established in 2004 to manufacture power trains. To cater for the anticipated increase in the production of automobiles explained above, more engines and power trains will be required. In determining the caps for Continuing Connected Transactions A.5, B.1, B.3, C.6 and C.7, the Company has taken into account the abovementioned factors and the resulting increase in purchase materials and automotive components for the production of engines and power trains and the sale of engines and power trains to Shenyang Automotive for use in the production of automobiles.
In a move towards centralization of purchases by enterprises in the automobile industry as explained in the sub-paragraph headed "Reasons for the Continuing Connected Transactions - Centralization of purchases" below, purchases of materials and automotive components by the Group via Xing Yuan Dong on behalf of other Group members (please refer to Continuing Connected Transactions A.2 and C.5) and by the Group (including Shenyang Automotive and Xing Yuan Dong) on behalf of the JinBei Group (please refer to Continuing Connected Transactions C.1 and C.2) will increase. In determining the caps for Continuing Connected Transactions A.2, C.1, C.2 and C.5, the Company has taken into account the anticipated increase in automobile production and the trend of centralization of purchases of materials and automotive components.
THE FINANCIAL ASSISTANCE
On 16 December 2005, Shenyang Automotive and Xing Yuan Dong and Xing Yuan Dong and JinBei entered into agreements for the provision of cross guarantees. 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 2006 to 31 December 2006. 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 guarantee.
Pursuant to such agreements, Shenyang Automotive and Xing Yuan Dong will provide cross guarantees to each other's banking facilities in the amount of RMB350 million and Xing Yuan Dong and JinBei will provide cross guarantee to each other's banking facilities in the amount of RMB385 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 guarantee 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. 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. The Financial Assistance also constitutes a discloseable transaction under Chapter 14 of the Listing Rules.
REASONS FOR THE CONTINUING CONNECTED TRANSACTIONS AND THE FINANCIAL ASSISTANCE
Reasons for the 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 are carried out in the ordinary course of business of the Group and will continue to be carried out in the three financial years ending 31 December 2008 after the expiration of the Waiver by 31 December 2005. Accordingly, the Board considers it appropriate to seek Shareholders' approval for the Continuing Connected Transactions and the relevant caps for the respective Continuing Connected Transactions for each of the three financial years ending 31 December 2008.
The Group purchases raw materials and basic automotive components in its ordinary 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 offer by such companies are more favourable than other suppliers in order to control the costs of production of automobiles produced by the Group.
After processing the raw materials and the basic automotive components, the Group sells the processed automotive components to Shenyang Automotive and the JinBei Group which, as automobile manufacturers, will use the processed automotive components in their assembly process.
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.
In light of the manufacturing flow of the Group described above, the Continuing Connected Transactions are entered into for the following reasons:
Control over quality and technology -- Most of the automotive components supplied by the JinBei Group and Shenyang Automotive were specifically designed for use in the manufacture of the Group's minibuses and sedans. Shenyang Automotive is a 51% owned subsidiary of the Company and JinBei is the joint venture partner of the Company in Shenyang Automotive. Upon completion of the acquisition of Shenyang Automobile Industry Asset Management Company Limited* and Shenyang Xinjinbei Investment Co., Ltd.* as announced by the Company in the announcement dated 31 December 2003, the Company will have an effective equity interest of 40.1% in JinBei and an effective equity interest of 70.7% in Shenyang Automotive. The shareholding arrangements enable the Group to control the quality of the products of Shenyang Automotive and JinBei and the technology used in the production of the required automotive components. As such core automotive components will be used in the production of automobiles of the Group, such control will enable the Group to exercise more effective control over the quality of the automobiles produced by the Group. Therefore, the purchases from Shenyang Automotive and the JinBei Group are necessary for the Group to continue to carry out its business of automobile manufacturing.
Proximity -- The JinBei Group has been one of the major suppliers of automotive components to the Group for use in the manufacture of minibuses and sedans. The manufacturing facilities of the JinBei Group and the Group are both located in Shenyang, the PRC. The close proximity of the manufacture facilities of the Group and the JinBei Group means that the Group will be able to obtain the required materials and automotive components at a lower cost in a timely manner in terms of procurement lead time and transportation cost, compared to other suppliers. Based on the experience of the Directors in the industry, the purchases of materials and automotive components from manufacturers closed to the production facilities is a key means of cost reduction in the PRC automotive industry.
Centralization of purchases -- Instead of having each member of the Group purchasing the materials and automotive components required for use in their production, the Group centralized the purchases of materials and automotive components which are purchased in batches. This is because the need of an automotive component manufacturer and automobile manufacturer to purchase materials and automotive components depends on the expected demand for automobiles in the market and also fluctuation in prices for such materials and automotive components. Since it is difficult to predict with any degree of accuracy over a long period of time, in the interest of efficient inventory planning and to avoid incurring unnecessary costs by ordering materials and automotive components which are not in need, the best practice of the automobile industry advocates shorter, rather than longer supply cycles. In line with industrial practice, the Group usually orders materials and automotive components in batches. Centralization of purchases of materials and automotive parts enables the Group to enjoy a better price for bulk purchases. It is believed that centralization of purchases by Xing Yuan Dong for other members of the Group (please refer to Continuing Connected Transactions A.2 and C.5) in the coming years will enable the Group to enjoy a lower price for bulk purchases.
In the premises, the Directors (including the independent non-executive Directors) consider the Continuing Connected Transactions to be in the interest of the Group and that the terms of the framework agreements governing the Continuing Connected Transactions 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 guarantee or securities 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's banking facilities will be utilized to finance the expanded production capacity of Shenyang Automotive 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 of the automotive components currently produced by the JinBei Group and the expansion of its product range and production facilities. Since the JinBei is one of the 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 scheduled 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.
GENERAL
An Independent Board Committee has been established to advise the Shareholders as to (i) the terms of the Continuing Connected Transactions and the caps on the relevant Continuing Connected Transactions for the three financial years ending 31 December 2008; and (ii) the Financial Assistance.
The Company has appointed Partners Capital International Limited as the independent financial adviser to advise the Independent Board Committee and the Shareholders in respect of the Continuing Connected Transactions and the Financial Assistance. A circular containing, amongst other things, details of the terms of the Continuing Connected Transactions and the Financial Assistance, letters from the Independent Board Committee and from the Independent Financial Adviser and a notice to Shareholders convening a special general meeting of the Company to approve the terms of the Continuing Connected Transactions, the caps for the three financial years ending 31 December 2008 on the relevant Continuing Connected Transactions and the Financial Assistance will be dispatched to Shareholders as soon as practicable.
DEFINITIONS
In this announcement, unless otherwise defined, terms used herein shall have the following meanings:
"associates" has the meaning ascribed thereto in the Listing Rules;
"Board" the board of Directors;
"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 train 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 the transactions between members of the Group and the
Connected connected persons as set out in the paragraph headed
Transactions" "The Continuing Connected Transactions" in this
announcement;
"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;
"Group" the Company and its subsidiaries;
"Independent the independent committee of Board, comprising of Mr. Xu
Board Bingjin, Mr. Song Jian and Mr. Jiang Bo, all of whom are
Committee" independent non-executive Directors, formed to advise
the Shareholders as to (i) the terms of the Continuing
Connected Transactions and the caps on the relevant
Continuing Connected Transactions for the three
financial years ending 31 December 2008; and (ii) the
Financial Assistance;
"Independent Partners Capital International Limited, a corporation
Financial licensed to carry out regulated activities type 1
Adviser" (dealing in securities) and type 6 (advising on
corporate finance) under the Securities and Futures
Ordinance (Chapter 571 of the Laws of Hong Kong), the
independent financial adviser appointed for the purpose
of advising the Independent Board Committee and the
Shareholders as to (i) the terms of the Continuing
Connected Transactions and the caps on the relevant
Continuing Connected Transactions for the three
financial years ending 31 December 2008; and (ii) 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;
"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;
"Shares" shares of US$0.01 each;
"Shareholder(s)" holder(s) of shares of the Company;
"Shenyang Shenyang Brilliance JinBei Automobile Co., Ltd.*) a
Automotive" sino-foreign equity joint venture established in the PRC
on 19 July 1991 and whose equity interests are owned as
to 51% by the Company and as to 49% by JinBei. The
principal activities of Shenyang Automotive are the
manufacture, assembly and sale of minibuses and sedans
as well as automotive components in the PRC;
"Shenyang Shenyang Brilliance Power Train Machinery Co., Ltd.*, an
Brilliance equity joint venture established in the PRC on
Power" 13 December 2004 in which the Company has an effective
equity interest of 75.01%. The principal activities of
Shenyang Brilliance Power are the manufacture and sale
of power train in the PRC;
"Special General the special general meeting of the Company to be
Meeting" convened for the purpose of considering, and if thought
fit, approving (i) the terms of the Continuing Connected
Transactions and the caps on the relevant Continuing
Connected Transactions for the three financial years
ending 31 December 2008; and (ii) the Financial
Assistance;
"Stock Exchange" The Stock Exchange of Hong Kong Limited;
"US$" United States dollars, the lawful currency of the United
States of America;
"Waiver" the waiver from the Stock Exchange from strict
compliance with the requirements of the then Chapter 14
of the Listing Rules in respect of the connected
transactions as set out in the paragraph headed "The
Continuing Connected Transactions - Background of the
Continuing Connected Transactions" above; 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), Mr. Lin Xiaogang, Mr. Lei Xiaoyang, Mr. He Guohua and Mr. Wang Shiping; one non-executive Director, Mr. Wu Yong Cun; 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
* for identification purposes only
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.